Fundamentals of Business Administration Canale 1, 1st + 2nd Midterm

FUNDAMENTALS OF BUSINESS ADMINISTRATION

Chapter I - Economic problem, organizations and aziende

All the organizations have stake holders (people that have interest in the company, for example the owner), have to satisfy some needs for different motivations — maximize profit or other aspects — different kind of entrepreneurs — sometimes the profitability become the main and only aim of the organizations, sometimes not so the company care about all the other aspects economic

Human genre has unlimited needs and wants to satisfy but limited resources: problem economic activity: that all the organizations has to face — action that involve the production, distribution and consumption of goods and services at all levels within a society in order to satisfy the needs and wants, we have also to consider how this organizations: production affects people's happiness — entities that carry out the economic activity that have as goal the well being of society

1. systematic activity in the time
2. decision-making autonomy
3. economicità: e cient and e ective (sustainable)

Economic problem capitalist countries planned economy

The states that solves economic problem are and capitalist countries—> in- there is freedom of choice: we can choose what to produce on the basis of market demand ( wants and needs );- individuals are more important than community: individual interest prevails on collective interest ( Adam Smith’s invisible hand ): this hand of market will solve collective problems automatically once that individual are solved

Competition:- strong for the market because of the improving of the goods- weak because there can be a loss of equality, some consumers may not have enough money for the goods or the production can be a damage the environmental aspects and become not sustainable

*The problem of capitalism is that has no limit and

In capitalist countries, the market flourishes with resources because they are placed where they are needed. One of the negative sides of capitalism is that there is no limit to freedom, so entrepreneurs have no limits. Responsibility is fundamental to avoid damages due to freedom without limits.

In a planned economy, there is no freedom because individuals are egoistic and opportunistic. In capitalism, this is seen as an advantage for profit and improving society. The aim is to ensure greater social equality to avoid market failures. Collective interests prevail over individual ones, so the individual practically disappears. The problem is that even those who have power are human beings, so they will take actions that bring to their interests and not to the community's interests.

Result: individuals destroy the collective harmony. Conscious capitalism, the third plan, focuses on introducing human interactions to reach happiness.

1. responsibility toward people
2. responsibility toward community

1. Physiological needs: food... -> basic needs
2. Safety needs -> basic needs
3. Belongingness and love needs: relationships, friends -> psychological needs
4. Esteem needs: prestige and feeling of accomplishment -> psychological needs
5. Self-actualization: reaching full potential including creative activities -> self-fulfillment needs

1. Land: what we receive from nature, we can catch a part of the market by our respect of the environment —> circular economy (take, make, recycle) vs linear economy (take, make, dispose)
2. Capital: investments and resources used to produce the final product
3. Labour: human effort to produce goods and services, it can be physical or mental; according to Marx it will always enter in conflict with the capital (in planned economy we only have labour); human being as an instrument and an end —> they got to be treated well to allow them to have the conditions to grow, the risk of putting social relationships into business is the obstruction of the firm's end and interests;
4. Entrepreneur: he can be the only owner or one of the many, "entrepreneur is someone who takes resources from a lower of productivity level and

"raise them to a higher level",(where you create pro t you solve problems), "entrepreneurs are risk takers, willing toroll the dice with their money or reputation on the line in support an idea or enterprise.They willingly assume responsibility for the success or failure of a venture and areanswerable for all its facets", "an entrepreneur is the ultimate innovator and earns hispro ts, however temporary, from successful innovations".Sometimes rms fail because they don't meet the needs of the market, or because theiractivity is not e cient (earn>spendings) , or because of con icts with governments oramong the ownersThrough the production process inputs are transformed into output, there are di erent kindsof consumers: the nal one or other companies that will reach themInput (resources) —> transformation process —> outputs (goods and services)Transformation process has to be viewed also in the value creation through the transfer

of goods all over the world;

Business model: system of transforming inputs, through its business activities, into outputs and outcomes that aims to fulfill the organization's strategic purposes and create value over the short, medium and long term"

We have to find an equilibrium between profit and sustainability;

Directors are different from managers because they depend only by the law, the most important of the managers is the CEO (Chief Executive Officer), he orients the organization toward the goals to achieve; usually board of directors are controlled by the owners

Productivity: Measures the amount of output produced by a given number of inputs over a period of time, it is increased by the efficient use of production —> cost of production good or service should be as low as possible, this also has a good impact on environment and creates an higher standard of living, anyway there are limits, for example the ones

About Costs

Business Idea -> Organization -> Product -> Needs and wants satisfied

Organization: the term applies correctly to stable associations of persons engaged in concerted activities directed to the attainment of specific objectives. We distinguish two kinds of organizations, both of them solve the economic problem: profit organization and non-profit organization -> both create goods and services to satisfy needs and wants.

Stakeholders: "any group or individual that can affect, or is affected by, the performance of the organization" (Freeman, 1987). There are primary and secondary stakeholders: the primary are the ones who have daily transactions with the firm, which without them would not survive. The secondary stakeholders are represented by the community itself, media.

Owners, lenders, customers, employees, suppliers, and government are stakeholders:

• Owners earn money only when the company has profits and are the only stakeholders who are not protected by a contract.

1. Lenders are the one who finance the company;
2. Suppliers create interests by providing companies what they need to produce their goods or services;
3. Employees must be seen as an end and not an asset, this will also improve their performances;
4. Customers obviously create profits by acquiring goods and services to satisfy their needs, obviously is fundamental to treat them in the best way possible and not see them as only assets;
5. Government receives money from company by taxes and provides services like infrastructure, is in his interest the increase of the company because it causes an increase also of the taxes;
6. Environment has to be considered has a stakeholder because he influences the company's activities

But why is important to create value for stakeholders? In an ethically point of view we must see every person as an end and not an instrument—> There are three kinds of goods:

Extrinsic goods:

1. goods received from an

external agent, they can be material or not-material;

Intrinsic goods:
2) goods that we feel coming from inside of us and that we want egoistically for us;

Transcendent goods:
3) are goods that we want for others, responsibility in taking care for others —> characteristic of a virtuous person, there is always a limit (giving without receiving back) that avoids to destroy your activity for example- Organization must be seen as an other stakeholders that, with all the stakeholders previously written, makes the interest of the governance

Code of ethics: give guidance to employees on how to deal with certain ethical situations, sets out the company’s values, ethics, objective and responsibilities, it should reflect the company’s ethos, values and business style; it can be very short or a large manual a company must create an own culture that distinguishes her from the others —>The intersection between “the equilibrium theory”

“The stakeholders theory” and “the common good theory” is the solution according to professor;

Common interest: survival and growth of the organization, intersection between internal stakeholders particular interests, external stakeholders particular interests and non-stakeholders particular interests

Azienda institution intended to last for an indefinite length of time and

Azienda is an “economic that, with the aim of meeting human needs, manages the production, procurement or consumption of resources in continuous coordination” and always according to the

“as social institution, the company has studies of economia aziendale is a real entity and necessary to contribute to the human being, to promote the development of his personality and to better