What is Business?

BADM 2001
Introduction to Business
Class 2
Dr. Randa El Bedawy
• Sec 1 - UMTWR: 10:00- 11:15 am - Industry ID : F143865

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 Agenda
Agenda
1. What is a business?
2. Role of business in society
3. Role of business in the economy
4. The sensor Industry
5. Your simulation company

Learning Objectives
6. Define what a business represents and why businesses exist.
2. Define essential business concepts including products, services, profits, and
stakeholders.
3. Describe the major functions of business.
4. Discuss the role of management in business success.
5. Differentiate between performance effectiveness and efficiency.
6. Describe the enterprise system and how it relates to business.
7. Differentiate between internal and external stakeholders.

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 What is a business?
 A business can be defined as any organization that
provides products, services or both to individual
consumers or to other organizations.
 The essential role of a business is to create products
or offer services that satisfy customer needs or
wants.
 Whether is it creating smart phones or offering home
delivery of groceries, businesses could not exist
without someone desiring their products or services.
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 What is a business?
Let us start with some basic definitions of essential concepts:

Business
A business can be defined as any organization that provides
products, services or both to individual consumers or to other
organizations.
Product
A good that has tangible characteristics and that provides
satisfaction or benefits (e.g., an automobile).
Service
An activity that has intangible characteristics and that provides
satisfaction or benefits (e.g., a mechanic performing automotive
repair).
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 What is a business?

 Profit: the basic goal of most businesses. Profit is the difference

between what it costs to make and sell a product or service and what
the customer pays for it.

 Stakeholders: groups of people who have a vested interest (a

“stake”) in the actions a business might take. There are four major
groups of stakeholders: (1) owners, (2) employees, (3) customers, and
(4) society. The specific interests of each of these stakeholder groups
may sometimes conflict with each other.

 Do the interests of these stakeholder groups conflict?

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 Role of business in society
The essential role of a business is to create products or offer
services that satisfy customer needs or wants.
What are other impacts of business on society?
• Creates profits (wealth) for owners/investors
• Creates employment / Provides meaningful jobs
• Ethics and business (CSR)
• Provides strategic goods (e.g. food security)
• Creates flow of money and goods – productive economy /economic growth
• Creates international trade opportunities
• Changes how people live, interact, think …..
Are all impacts of business on society positive?
•Corruption / Pollution

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 Role of business in the economy

Entrepreneurship (the creation of

businesses) is the engine of the
economy

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 Values
Basic convictions
(beliefs) on how to
conduct yourself or
how to live your life
that is personally or
socially preferable –
“How To” live life
properly

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 Skills Managers Need
Technical skills
Knowledge and proficiency in a specific field
Human skills
The ability to work well with other people
Conceptual skills
The ability to think and conceptualize about abstract and
complex situations concerning the organization

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 The enterprise system
 Unlike public enterprises, the simulated company you will run in the
Foundation Simulation is a private enterprise. Sometimes called free
market system.

 Public enterprises provide basic needs of citizens such as defense, roads,

security, judicial system,...
 In enterprise system, all other products and services are produced by
private enterprises. In private enterprise systems, individual citizens
(rather than governments) own and operate the majority of businesses.

 Laws and regulations correct the market/enterprise system when it produces

undesirable results for internal or external stakeholders of business.
 The laws are set by governments elected to act on behalf of the whole society –
and they are designed to protect all stakeholders according to a mutual sense of
justice.
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 Private Enterprise System
 Basic premise of economic theory:
 Private Enterprise is a more efficient economic system. Why???
COMPETITION!

 The theory underlying the private enterprise system is that

competition among businesses will produce an efficient allocation
of resources across the economy.

 Goods and services are desired where they produce the greatest
benefit or are used most productively.

 Throughout this economic process, pressure is exerted from

several areas. For example, there is pressure to lower prices and
pressure to innovateBADM2001through
Introduction to Bustechnological and procedural
Dr Randa El Bedawy
improvements.
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 The business functions
What do businesses need in order to fulfill their role?
Resources!
What kinds of resources do business use?
• People
• Money
• Ideas ……
• Information & Physical Resources

Business put these resources to work to produce products and

services.

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 Resources

 Every business requires basic resources: people,

ideas // INFORMATION, and money – adding to the
physical resources that are configured (arranged)
and reconfigured over and over again to satisfy the
needs and wants of customers.

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 The business functions
The work that has to be done in any business will fall under several
business functions:

1. Marketing
2. Production
3. Accounting
4. Finance
5. R & D - Innovation/product development

What other business functions are there?

MIS, HRM, TQM,…etc…

Business concentrations at AUC teach you different functions!

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 The business functions
More Definitions
Marketing
Marketing is all the activities designed to provide the goods and
services that satisfy customers. These activities include market
research, sales forecast, pricing, promotion, and distribution.
Production/Operations
Production or Operations refers to the activities and processes used in
making products or delivering services. These activities involve
designing the production processes (investments in facilities and
equipment) and the efficient management and operation of those
processes.

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 The business functions
Accounting
Accounting is the process that tracks, summarizes, and analyzes a
company’s financial position.
Finance
Finance is refers to the activities concerned with funding a company
and using resources effectively.
Research & Development
R&D refers to the innovative and creative activities that go into the
invention of novel products or services, as well as the development of
updated or improved ones.

Management brings all of this together!

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 There is no one simple formula for successful
business functioning or performance

 Put simply, ideas (innovation + product development)

+ people (marketing + operations + leadership) +
money (finance + accounting) does not equal a well-
functioning business.

 Business is all about complex interactions – external

interactions with customers, competitors,
communities, and regulators - and internal
interactions between all the people who operate the
functions of the business itself.
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 Good Management

 To be successful, businesses need good

managers who are able to see the big picture and
understand how all the individual business functions
work together.

 Fortunately, we know a lot about what goes into good

management.

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 The business functions

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 Management Functions

 Decisions that shape the marketing, production, and

financial functions of a business are often made in
environments that are specialized, complex,
uncertain, and risky.

 Managing these functions requires planning,

organizing, leading, and controlling all the important
variables.

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Bedawy 20
 What do managers do?
 Management is a complex activity
 Involves making compromises and managing trade-offs
 Balancing among colliding (conflict) stakeholder interests
 Having enough flexibility to yield to changing customer desires
 Keeping up or ahead of the competition
What do managers do?
• Plan (where are we going? What do we need to do to get there?)
• Organize (put everything & everyone in the right place)
• Lead (inspire, motivate, drive, empower)
• Control (take stock of results)

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 Management functions

Definitions

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The Planning–Controlling Link

Copyright © 2010 Pearson Education, 17–23

Inc. Publishing as Prentice Hall
 Success in management
What do we mean by success in managing a business?
Two Es of Performance

Effectiveness
Doing the right things. This means taking the appropriate actions that
allow you to accomplish your goals. Ask Yourself: to what extent have I
achieved my goals?
Efficiency
Doing things right. This means using just enough resources to
accomplish your goals. Ask yourself: How much resources did it cost
me to achieve my goals?
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 The Critical Ingredient – Good Management

 There are many reasons why good businesses go

bad, but compare lists of “why businesses fail” and
the most consistent cause is poor management.

 It may be defined as an inability to manage costs, poor planning,

insufficient marketing, not anticipating shifts in the market – but
who is responsible for all these things? Managers.

 Regardless of the business functions or the types of managerial

decisions to be made, effective and efficient management
cannot be achieved without leadership.

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 THE SIMULATION STORY:
BACKGROUND ON YOUR COMPANY
Started as a single corporation named Sensors, Inc. Sold sensors as main
product. Corporation was shut down by Federal Trade Commission FTC due to
monopolistic operations
Sensors, Inc.
FTC required Sensors, Inc. to be
broken up into separate companies:
Andrews Baldwin Chester Digby Erie Ferris

YOUR JOB
 Operate one of the companies and make it successful

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 Sensors Are Everywhere...

 Sensors are devices that observe physical

conditions. For example, the average cell
phone contains dozens of sensors.

 You are in a business-to-business market, not

a direct-to-consumer market; the sensors
your company manufactures are incorporated
into the products your customers sell.
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 THE START

When Sensor, Inc. breaks up, each of the new

companies start off with the following scenario:

 $40 million in Sales

 1 Product Lines
 2 Market Segments
 Closed Marketplace

Andrews Baldwin Chester Digby Erie Ferris

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 SENSORS: AN OVERVIEW OF
YOUR COMPANY’S PRODUCT
Customers (OEMs/original equipment manufacturers)
need sensors for their products to function.

Used for diverse applications

Customer demands vary

Low Tech Sensors
High Tech Sensors
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 Management Tools

 Here are the tools you need to run your company.

The Rehearsal Tutorial

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 The Rehearsal Tutorial

 Think of the Rehearsal Tutorial as a driving school for the

simulation. The tutorial will show you ways to steer the
company, including how to:

• Invent and revise products;

• Make marketing decisions;

• Schedule production and buy/sell equipment; and

• Ensure your company has the financial resources it needs

for the upcoming year.
 The Rehearsal is available from your simulation
Dashboard. Dr Randa El Bedawy - BADM 2001 –
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 The Industry Conditions Report

 Each simulation industry is unique. As your

simulation starts, the Industry Conditions Report, will
outline the beginning business environment,
including customer buying criteria.

 On the website, log into your simulation and click the

Reports link.

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 The Foundation FastTrack

 In business, knowledge is power. If you want to evaluate your

company’s performance or analyze your competitors, the
FastTrack is the place to start.

 Every round (every year), you and your competitors will have access
to an industry newsletter called the Foundation FastTrack.

 The FastTrack is an extensive year-end report of the sensor industry.

It includes customer buying patterns, product positioning, public
financial records and other information that will help you get ahead.

 Every product’s Customer Survey Score can be found in the

FastTrack’s Segment Analysis pages. These scores determine sales
distribution. In general, the higher the score, the better the sales.

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 The FastTrack Reports
“Last Year’s Results”

 The FastTrack available at the start of Round 1

displays results for Round 0, when all companies
were equal just after the monopoly’s breakup.

 The FastTrack available at the start of Round 2 will

display the results for Round 1.
 As the simulation progresses and strategies are
implemented, results among the competing
companies will begin to vary.
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 FastTrack
 The FastTrack is available from two locations:

 • From the Foundation Spreadsheet, click Reports in

the menu bar; and
 • On the website, log into your simulation and click
the Reports link.

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 The Situation Analysis

 Completing the Situation Analysis will enable you to

understand current market conditions and how the
industry will evolve in the next few years. It will assist
you with your operational planning.

 The Situation Analysis comes in two versions:

• Online interactive

• Downloadable PDF (pen and paper)

 The Situation Analysis is available from your
simulation Dashboard.
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 Proformas & Annual Reports

 Proformas and Annual Reports are specific to your

company.
 Proformas are projections for the upcoming year.

 Annual reports are the results from the previous

year.
 The Proformas will help you envision the impacts
of your pending decisions and sales forecasts.
 The Annual Reports will help you analyze last year’s
results.
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 Proformas: A Look Into the Future

Proformas use The following

decisions made proformas are
in the current Analyzing them available:
year to project is critical for • Balance Sheet
company company • Income Statement
performance success • Cash Flow
for the next Statement
year • Financial Ratios

© 2012 Capsim Management

Unforgettable Business Learning
 The Foundation Spreadsheet

 The Foundation Spreadsheet is the nerve center of

your company where you formulate and finalize
management decisions for every department.
 After you log into your simulation, the spreadsheet is
available from the Decisions link.
 The spreadsheet comes in two versions:

 A Web Version (Notes: use this version only)

• An XLS Version……..xxx

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 Just in Time Information

 In the spreadsheet decision areas, look for the flag symbol shown
to the right. Clicking it will give you detailed information about the
area you are viewing.

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 Homework

 Watch Introductory Video

 download from Foundation website: Menu: Getting Started: Introductory Lesson

 Reading 1: Industry Conditions Report

 download from Foundation website: Menu: Reports: Industry Reports

 Reading 2: Textbook: Module 1 pp.12-18

 download from Foundation website: Menu: Intro to Bus Bundle:

Foundation: A Hands-on Introduction to Business Fundamentals

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