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3/11/2012

BUSS1001 Understanding Business
Week 2: What is Business? Associate Professor Philip Seltsikas Associate Dean (Undergraduate) THE UNIVERSITY OF SYDNEY

BUSINESS SCHOOL

Preview of today’s lecture

›What is Business? - Narrow view - More complex view ›Assessment 1

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What is business? The narrow view

›‘Any activity that seeks to provide goods and services to others while operating at a profit’ (Nickels, McHugh and M H h 2010 p. G 14) d McHugh 2010, G-14).

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http://images.google.com/imgres?q=henry+fayol&hl=en&gbv=2&tbm=isch&tbnid=L07_nJsWisbAAM:&imgrefurl=http://mariaavilla 4zKAcE9kM&w=131&h=173&ei=rrUvTvP0BJGmizar.blogspot.com/2008/09/henry-fayol-vs-max-weber.html&docid=gigzs4 sAOJ9Lkd&zoom=1&iact=hc&vpx=287&vpy=150&dur=2276&hovh=138&h hovw=104&tx=81&ty=75&page=1&tbnh=128&tbnw=88& start=0&ndsp=35&ved=1t:429,r:1,s:0&biw=1429&bih=723

Total returns on assets must exceed cost of capital required to finance assets http://en.wikipedia.org/wiki/Max_Weber http://en.wikipedia.org/wiki/Scientific_management

Reinvestment Returns

Reinvestment

Returns

Assets
Debt Equity
The Value Creation Equation A ‘model’ of all businesses

Assets

› 1841-1925 Henry Fayol Founder of Classical Management Theory

› 1856 – 1915 Frederick Taylor Developed ‘scientific management’

› 1864 – 1920 Max Weber Studied organizational bureaucracy

Fayol, Weber, and Taylor

All capital is a costly resource

Debt

Equity

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What doesn’t this model show us?

WHAT?

Organizational building blocks
› › › › Mission, Vision, Goal, Purpose Strategy Collection of assets Configuration of Assets - into a structure (s) - to enact business processes Management (decision making & control) - using structure - using policies & procedures - using rewards & punishments DON’T NORMALLY SEE DON’T NORMALLY SEE



Where did these companies come from?

WE SEE SOME OF THESE or ASPECTS OF THEM M

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Someone is at the controls – Keeping it running and navigating the environment

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What is a BUSINESS?

› ‘Structure’ – multiple meanings › This is ‘part of’ understanding Business Structure › Organisational Structure will help us understand: ‘What is a Business’?

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Dimensions of Organizational Structure
› › › › › › Job specialization Departmentalization Span of control Chain of Command (c.f. hierarchy) Line functions and staff functions (front office/back office) Power and authority

› ›

Divisionalization Centralization / Decentralization

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Organization Chart

CEO

CFO

CIO

COO

Marketing Director

IT Manager

Sales Director

Production Manager

Marketing group A

Marketing group B

IT department

Sales region A

Sales region B

Plant workers

French & Raven 1959 5 bases of organizational power

› Coercive Power › Reward Power
http://www.carrollcoaching.com/coaching

› Legitimate Power › Referent Power › Expert Power

Functional Organization Measures of Success?

› Profit › Market Share › KPIs (key performance indicators)

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Inside and Outside Perspectives › Organisations are subject to external forces but may also influence the operation and effect of those same forces. › Key aspects of the capacity of organisations to effectively shape their own destiny include the decisions that they make about: k b t

 Strategy  Structure; and
BUSS1001 Understanding Business

 Behaviour
BUSS1002 The Business Environment

Business: key player in society
• Is a major change agent • Has the potential to be a ‘force for good’ g prosperity • Drives growth and p p y

Society
• Impacts on business • Is constantly changing and so, must business change • Affects what businesses do and how they do it

What is business? A broader perspective

›Transformation of inputs into outputs to produce goods and services that meet needs and wants in the society [adapted from...
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