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Queen's University
COMM 103
Gregory Libitz

Chapter 1 Business, in its broadest context, is a system of integrated actions designed to ensure that an organization develops and grows a market for its goods and/or services in a manner that creates organizational value/wealth on behalf of stakeholders An efficient operating platform has 3 characteristics: Commercial Endeavors – the markets the organization serves, products and services it offers, needs it professes to meet. Employee Interaction – the value-creating skills an organization’s employees bring to the marketplace (skills of the labour force) Organizational Efficiency and Structure – reflection of complexities of business activities that circulate within organization Business – mission focused activities aimed at identifying needs of particular market and development of a solution to the needs through acquisition and transformation of resources into goods and services that can be delivered to the marketplace at a profit Four core fundamental resource areas of a Business Model/System (operational platform that a business uses to generate revenue and profit): Assets – infrastructure and resource base Labour – human resource requirements Capital – money needed to support expenditutes, operating requirements and invest in new development of products for marketplace Managerial Acumen – foresight, drive, knowledge, ability, decision-making competency, and ingenuity of organization’s key individuals (owners) Strategy and 3C assessment to recognize opportunity to create a product that is unique or important Strategy – specific objectives an organization hopes to achieve during planning cycle 3C’s (capabilities, competencies, capacity) analyze available resources and capabilities and competencies it possesses which defines the capacity of what organization can do. Competitive advantage – advantage an organization has over its competitors which enables it to generate more sales, achieve greater margins, achieve lower cost base, attract or retain more customers Business Planning Cycle: Strategy and 3C Assessment > Business Plan Development > Business Plan Execution > Company Performance and Profitability > Company Growth and Reinvention Businesses grow by executing series of planning cycles over time. Identify objectives to grow – specific, measurable, actionable, controllable objectives Failure to meet objectives of planning cycle can be result of poor positioning, poor operational execution or both. Failure shown by flattening or decline of revenue or reduction of profits – revenue shortfall Planning Cycle Stages - Direction/Positioning - Implementation - Assessment For-profit companies – organizations whose overarching objective is profitability and wealth creation on behalf of shareholders and stakeholders Not-for-profit organizations – overarching objective to deliver services to people, groups, communities via model of collective interest and social goal achievement] Fundamental Goal Objectives of Business - Short-term profit - Long-Term Profit - Social and Environmental Responsibility Profit – needed in the short term to pay bills and reinvest in future, it is the “bottom line” that an organization has realized for an identified, immediate period of time, it is total revenue – total expenses Profitability – new markets and opportunities to further grow scope and focus of organization for the long term. Profitability is how well a company is using its resources over a certain amount of time to generate earnings relative to it competitors. Too much focus on short-term profitability may result in decisions that are detrimental to long-term market opportunities and fall short of social responsibility expectations. Stakeholders – individuals, groups, organizations with relationship with organization such that it can be impacted by decisions, policies, actions. Stockholders – any person, company, organization that owns at least one share of stock in the company Value proposition – statement that summarizes whom a product/service is geared towards and the benefits the purchaser will realize as a result of using the product Companies use it to communicate to customers how their product is different and the benefits they offer Value proposition = service benefits + product benefits + brand benefits + cost benefits + emotional benefits Impact of Price - important to offer more attractive price/quality relationship for target market - the more unique, important and value-driven the product, the greater the opportunity to communicate to potential buyers a value proposition with positive price/quality relationship, which can be compared superior to competitors. Market Segment – portion of the market deemed to possess unique characteristics businesses can target in order to generate preference for their products/services Asset based expenditures and operating expenditures are the two types of expenses Asset-based expenditures – expenditures for purchase of assets required by firm to support company’s business operations, and contribute to firms ability to earn a profit Operating expenditures – expenses incurred as result of company performing its normal business operations EXPENSES must be understood and considered when setting the price of a product/service offering. BUSINESS DECISION-MAKING LANDSCAPE Developing and managing business requires owners/managers to: -create vision of opportunity in marketplace -confirm that market size of customers is large enough to earn profit and sustain profitability - confirm that position in market is feasible and enables company to compete superiorly with competitors - confirm that market situation will stay constant long enough for business plan to be developed and executed - confirm business has resource base and capability to execute strategy - executing strategy in efficient and effective manner, achieving objectives Strategy – development of plans and decisions that will guide direction of firm and determine long term performance Tactics – immediate term actions that a firm executes in order to meet short-term objectives set forth in current planning cycle Business Decision Making Model: - visualize and assess the business opportunity - confirm market size and profitability potential - determine market position, approach, and continuity - assess company resources and capabilities - Determine tactics required to achieve objectives Interdependency of Strategy and Tactics Well-directed and positioned strategy + efficient and effective tactics execution = business growth and profitability Chapter 2 Contributing factors to economic development - Chapter 13 Legal Formation of a Business - Ease of set-up - Degree of control - Magnitude of risk - Financial capacity - Required skills Business Ownership Options Sole Proprietorship – business owned by one person and is initiated without requirement to create separate legal entitiy – key advantageis that has 100 percent control of business in ownership and decision-making and also easy to set up but also is fully accountable and liable for risks and losses, also limited to skills of one owner Partnership – business organization formed by two or more individuals Partnership Agreement – written agreement among partners that outlines expectations of each partner and details how partnership is going to work – so all partners understand Partnerships are easy to set up, more skill sets, more financial capacity, but still full liability and not as much control of proprietorship Joint and Several Liability – liability obligation of partners as a result of a legal contract. Partners can be held individually liable for their share of the obligation (several), or fully liable for full obligation (joint) in event that other parties to agreement are unable to pay their obligations Buy-Sell Agreement – written agreement among partners that details sale of one partner and purchase by another of the business interest of the selling partner Limited Liability Partnership – partnership that is made up of both general partners (at least one) and limited (passive) partners Limited partners pay capital but are not actively involved, also have less liability, common in real estate Corporation – business entity that legally is separate and distinct from owners Corporation is separate legal entity so less risk and liability, also higher financial capacity since can issue stock, also has all skills of all shareholders and/or management team. However, less control as ownership is based on share ownage and harder and expensive to set up Incorporation – legal process of setting up corporation Board of Directors – appointed or elected body of for-profit or not-for-profit corporation that oversees and advises management on issues challenging the organization on behalf of stakeholders and shareholders Private Corporation – ownership is private, stocks private held and not publicly traded Public corporation – stocks are publicly held and are publicly traded on at least one stock exchange or over the counter market Initial Public Offering – initial sale of stock by corporation through public exchange Exchange – organization that facilitates trading of securities, stocks, commodities, and other financial instruments. Exchanges provide platform for selling financial instruments to public at large. Over-the-counter – stocks publicly trader through dealer versus an exchange Capital structure – organization’s mixture of debt, internal cash reserves, external equity-based investments in financial support of operation activities BUSINESS FINANCING Operation - current-year surplus - funded reserves (retained earnings) Credit Facilities (Debt Financing) - Short term (less than a year o a/r credit facilities o trade credit (a/p) o general line of credit (LOC) o short-term notes - long-term (longer than a year) o long-term notes o bonds o lease obligations o mortgages O
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