Maudy Nashira Fuadi - 22/502865/EK/24078

Tugas Summary Chapter 2 How Businesses Produce - Ekonomika Bisnis

2.1 Competing Theories of the Business: Profitability and Other Motives

The decline of marks and spencer

This case study examines the decline in profits and market share of Marks and Spencer (M&S),
particularly in the clothing sector, due to outdated models. It also explores the impact on M&S' sales,
suppliers and overall stock price.
Profitability
Profitability is essential for business survival. Profit, the surplus of revenue over costs, can be
measured in various ways. The economist's consideration of opportunity costs differs from
accountants' historical costs. Profits can be used to distribute dividends to shareholders and manage
cash flow.
Other Target for business operations
UK state-owned industries aimed for break-even (1945-1979), resulting in inefficiencies. Financial
rules shifted in 1961, benefiting community services. By 1978, alignment with private sector practices
began. Thatcher's privatization emphasized profit. Objectives may prioritize sales growth over profit,
driven by bonuses. Managers may expand for personal rewards. Some seek hidden satisfactory profits.
Goals extend to growth and ethics. Public sectors focus on cost efficiency, central planning
discouraged competition.
Conclusions
Aligning managers' incentives with profitability mitigates challenges. Profit remains a primary driver
for business behavior, supported by research.

2.2 Porter’s value chain. Formulating a strategy to meet business objectives

Porter’s value chain

Profitability depends on business success relative to rivals. Porter's concepts of cost and
differentiation advantages stem from the value chain, involving primary and secondary activities.
Value chain optimization and coordination offer competitive advantage for profit maximization and
industry leadership.
Formulating a strategy to meet business objectives
A mission statement encapsulates an organization's rationale, but it should be customer-oriented and
specific for effective guidance. Strategy aligns business goals with resources and environment,
involving aspects like product-market choices, acquisitions, and investments. Objectives set intent,
focus, and control, considering business attributes, industry dynamics, and performance.
Sony-implementing a strategy to challenge microsoft and intel
Sony's electronic games strategy, competition with Sega, diversification, and collaboration with
Toyota for Playstation II are discussed. Short-term operations are vital for long-term profit
maximization goals.

2.3 SWOT analysis; anticipating production-market research and forecasting

SWOT analysis
To set achievable strategic goals, a business should understand its environment and resources. A
SWOT analysis evaluates external opportunities/threats and internal strengths/weaknesses.
The external environment factors affecting a business
PESTLE factors shape business environment with opportunities (technology, market shifts) and
threats (economic crises, currency fluctuations). Addressing these is vital for business success.
The internal resources of a business
Business resources include labor, capital, land, and innovation. Utilizing strengths (R&D, branding)
and addressing weaknesses (e.g., British Gas, Virgin Trains) is crucial for sustained success.
Conclusions
A business must audit its external environment and internal factors to assess resource utilization in
facing external challenges.
Anticipating production: Market research and forecasting
Market research studies markets and customer needs. It uses SWOT for forecasting and understanding
growth, segmentation, and competitors. Qualitative and quantitative methods gather data, guiding
strategic decisions. Marketing research extends to product testing and pricing.

2.4 Flexible management systems; TQM and lean production; just in case and just in time
production; Japanisation

The problem of mass production

Historical business focus on excess production and quality issues shifted due to Japanese imports
promoting TQM and reliability, altering global production philosophy.
Total quality management
TQM, originating from Deming and Juran's ideas, emerged in post-WWII Japan to achieve zero
defects, control costs, and enhance customer satisfaction through efficient, high-quality production
and competitive benchmarking.
Just in time production
JIT (Just-In-Time) production emphasizes flexibility, responsiveness, and waste reduction by
producing goods as needed, minimizing excess stocks. JIT stock control extends to components and
raw materials, while simplified workflows and output-based production enhance focus and quality
control, leading to efficiency gains.
The spread of japanisation
Japanese production methods (TQM, JIT, flexible specialization) influenced Western businesses.
Japanese transplants in the UK adapted methods successfully, while domestic companies faced
challenges in emulation due to site differences and labor resistance.

2.5 Nissan car plant, Sunderland: a case study of Japanisation

Case study on Nissan's Sunderland plant: Examines why Nissan chose the UK, the cultural impact on
the workforce due to Japanese ownership, and the commercial success of the plant.

2.6 Summary of chapter

This chapter explores business motives, focusing on profit maximization. It discusses how businesses
seek competitive advantage through cost efficiency and differentiation. The value chain, including
value activities and margins, is crucial. Business strategy involves both long-term and short-term
objectives, supported by internal and external analysis using tools like SWOT analysis and market
research. The impact of Japanese production methods, like TQM and JIT, on modern business
practices is also examined.