In the Business Organization and Business Environment section, an overview of business management, both as a topic of study (what this area of knowledge covers overall) and as a professional practice (what business managers do), will be provided.
So, what do modern managers need in order to be successful?
Studying business management not only requires a theoretical understanding of business content (tools, theories and techniques) and underlying business concepts (e.g. change, innovation, etc.), but also skillful practical application of that knowledge into real-life business situations. The subject focuses mainly on problems that businesses face regarding their past performance and the need for correct future business decisions which managers need to make on daily basis.
These days, managers are expected to have abilities of explaining what happened in the business, analyzing why that problem had happened and evaluating the best course of action for the business to take. Both the content knowledge of business studies and decision-making skills are equally important to manage a business successfully in the modern era.
We will inquire into how and why particular business tools and business models become established as mainstream strategy models that are being used by businesses around the world. Consideration on what basis business managers make decisions in the real world, whether based on reasonable arguments or simple gut feeling, will be given as well.
Business Organization and Business Environment in details
The aim of this first section is to use awareness of business content and concepts to make surefire business decisions and develop plans of actions that would allow a business to react positively to changes in both internal and external environments.
We will consider the role of businesses and responsibilities of managers in combining different resources, so called factors of production, to produce goods and provide services.
Traditional business areas of business management, such as the different types of business organizations or the idea of economies of scale, will be covered of course. Emphasis will be given on the importance of enterprise, business objectives, business structure, business size, stakeholders and business growth. All sizes of businesses will be considered including both local, national and multinational companies.
1. Business Activity
To start with, the underlying ideas and concepts of business will be briefly introduced as this topic area is concerned with understanding the purpose and the nature of business activity, and identifying the structures, functions, cultures and objectives of different business organizations. It also includes the concept of adding value for customers (and how added value can be increased) in the production process by turning inputs into outputs, the problem of choosing between limited factors of production, the concepts of scarcity and opportunity cost.
Needs and wants and importance of specialization will be included as well.
2. Entrepreneurship
The role of entrepreneurship and intrapreneurship in overall business activity will be discussed, and reasons why and how governments support business start-ups will be analyzed.
Also, the distinction between entrepreneurship and intrapreneurship will be introduced. Enterprise and entrepreneurs, and why some businesses grow while others remain small, are further important issues. Qualities and characteristics an entrepreneur needs for success will be highlighted, and the role of entrepreneurs in the development of a country.
This section also includes reasons for starting up a business, what businesses need to be successful, common steps in the process of starting up a business organization, common problems that new businesses face, reasons why many businesses fail early and basic elements of a business plan. Also, an explanation regarding how business plans assist entrepreneurs in achieving their goals, as it is known that new businesses are at a greater risk of failing in the first few years of operation.
The main business functions and their roles will be described, i.e. Finance, Marketing, Human Resources and Production.
3. Classification of Businesses
More contemporary topics such as features of social enterprises, the nature of business activity in each sector of the economy (primary, secondary, tertiary, quaternary and quinary), and the impact on businesses on sectoral changes throughout the history in developing and developed countries will also be introduced.
This section will include knowledge on how businesses can be classified into different types based on various factors, e.g. by sectors, types of products, ownership, size, area of operations and business objectives, etc. Classification of business organization between private and public sector in mixed economy will be provided with distinctions between these two sectors.
Different methods of measuring business size will be described in details together with limitations of those methods.
In regards to social enterprises, the range and aims of social enterprises and the triple bottom line will be brought up.
4. Different Types of Business Organizations
This part includes the main features of different forms of legal structures including for-profit commercial business organizations (i.e. sole traders, partnerships, private limited companies, public limited companies and holding companies) as well as for-profit social business organizations (i.e. cooperatives and microfinance providers).
Main features of different types of legal structures (e.g. the concept of limited liability and unlimited liability, risk, ownership, etc.) and appropriateness of a suitable legal structure for a given organization will be discussed. Additionally, the differences between unincorporated and incorporated businesses, and problems resulting from changing from one legal structure to another.
To finish up, we will look at the main features of non-profit social enterprises such as Non-Governmental Organizations (NGOs) and charities, and business organizations in the public sector which are owned by the government.
5. Business Objectives
How business size can be measured, types of business organization, need for business objectives and stakeholder objectives are all crucial topics in this section. First, different business objectives, and different ways of looking at business objectives such as business objectives in the private section and in the public sector, objectives for for-profit enterprises and social enterprises, business objectives at corporate, as well as at departmental and individual levels.
Emphasis will be given on the recognition of the potential conflict between objectives and the resolution of such conflicts.
Relationship between vision statement, mission statement, objectives, strategies and tactics, and translation of objectives into targets and budgets will be discussed. Additionally, the need for a business organization to change objectives in response to changes in the internal and external environment. Strategy will be considered as a separate part from business functions as strategic decisions permeate the whole business.
6. Stakeholders
Stakeholders are individuals or groups interested in the activities of a business – all internal stakeholders and external stakeholders. As different stakeholder groups have different objectives from one another, their roles, rights and responsibilities have to be clearly considered by managers as stakeholder conflict might arise from stakeholders having different aims. Changing business environment might also affect stakeholders.
On the positive side, there are possible areas of mutual benefit between stakeholders’ interests.
7. Internal and External Environment
Business management will be set in context. In addition to learning to analyze internal environment of a business (e.g. stakeholders, strategic objectives and corporate social responsibility (CSR), etc.), we will also be looking at external environment, for example the impact of technological changes or globalization.
Central to an understanding of business and its internal and external environments is recognition that the world in which businesses operate is in a constant state of change. The impact of political, economic, social, technological, legal, environmental and ethical factors, and how these might influence business activity, will be considered. It is important these days for managers to have knowledge of country specific laws and customs, and the emphasis on understanding how businesses might have to change their behavior when influenced by such constraints.
There should be an appreciation of the nature of the uncertain business environment and the development of business plans of action which aim to respond effectively to the changing business environment. The extent to which businesses can respond and adapt to such change is likely to determine their success.
In order to understand the external environment in details, we will be looking at main concepts of Economics as economic theories directly impact businesses, specifically economic objectives and policies of governments in different countries, as well as business and international economy, mainly the concepts of globalization and international marketing. We will consider a range of international examples, especially in relation to issues of aforementioned globalization, and to address businesses’ ethical, social or environmental obligations of different companies.
Finally, we will apply fundamental strategy models such as The STEEPLE Analysis (Social, Technological, Economic, Environmental, Political, Legal and Ethical factors), as well as The SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) to analyze business environments.
Political environment and legal environment concerns how governments use the law to seek to control employment, working conditions, minimum wage, marketing behavior, location decisions or fight against monopolies. Also, international agreements made by certain governments have an impact on businesses.
Economic environment plays a role when it comes to key macroeconomic objectives (e.g. low inflation, stable interest rates, stable exchange rates, low unemployment, transfer of wealth outside the country, etc.) impacting on business activity. Also, how the state deals with market failure and how much it intervenes to either stimulate small businesses or constrain large multinational corporations.
Social environment deals with demographic changes happening in the societies, the impact of pressure groups and policies toward Corporate Social Responsibility (CSR).
Technological environment mainly includes the development of the Internet, assembly lines for mass production and problems of introducing new technology to the business.
8. Business Growth
This section will include different ways in which businesses can grow, problems linked to businesses growth and how to overcome those difficulties. There are two main ways businesses can grow – either internally or externally.
The following methods of External Growth i.e. mergers, acquisitions and takeovers, and Joint Ventures (JV), Strategic Alliances (SA), as well as franchising, and the differences between those external growth methods will be analyzed.
For Internal Growth, various methods will be analyzed and companies which grow internally will be identified, for example Starbucks.
As the business grows, it will benefit from economies of scale and suffer from diseconomies of scale when it becomes too large. There is also a lot to think about when it comes to impact of mergers and takeovers on the various stakeholders and what happens when companies cannot achieve objectives through external growth.
Reasons why some businesses grow while others remain small, along with reasons why the owners may want to expand their business, will be discussed.
In the contrary, reasons why some business owners want their businesses to remain small will be elaborated on by looking at advantages and disadvantages of small businesses and family businesses. Micro-businesses play an important role in the economy of each country, therefore, their role should not be diminished.
The Fishbone Diagram, The Decision-Tree and The Force Field Analysis can all be utilized to discuss business models, growth strategies and planning for the future.
