Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Exam tips
*bring an highlighter
*give an example
*when it asks how CSF are related link it both ways
PEST
• Know three points well from each category
• Technology is anything that improves cycle time (ex: Swiffer) (ex: emailing people
improved cycle time on how long it took to receive message vs. memo or letters)
Example Question: select an element from the economic factors of PEST, how can this
represent an opportunity for a business and a threat for another? (3 marks)
Diamond-E
• Management preferences
o Risk tolerance
o Goals
o preference of direction (ex: want to expand, want to make new products?)
o ethics (ex: are you trying to be environmentally friendly or do you not care)
• Organization
o Culture (company feel ex: google slides and games and naps vs bank)
o structure (where are we located, 1 location or 1000 or how do you structure
power/management), capabilities (what are you good at doing), leadership or
organization
• Resources
o human resources (how many, specialties) *ties into capabilities because your
employees determine what you can do
o capital (what money do we have and what can we spend, also machinery and
buildings) *ties into management preferences because you can take more risks
with more money
• Strategy
o Path you take to reach your goals (based on resources, organization and
management preferences)
Example Question: what is the principle logic in the Diamond-E? What is an example of being in
alignment with the Environment? (3 marks)
Environment
• Pest=general
• Porters=industry
Entrepreneurship
• Must be consistent among opportunity, resources and entrepreneur
• Screening process
o Unique
o Adds value
o feasible
• idea generation
o solves a problem and the solution sells itself
o listen to complaints and frustrations
o ask customers what they wish they could get
Criteria High Potential- Good Idea Low potential- Bad idea
Product/ value added Significant Value added; Incremental improvement
unique; recurring revenue only; one-time revenue
Cust./market Reachable; large and growing Loyal to others;
small/declining
Competition/Rivalry Imperfect; fragmented Highly Concentrated, mature,
competition; at capacity under capacity
Suppliers Many; easily switched Few, high switching costs
Substitutes Few, inferior, expensive, high Many, good quality,
switching costs inexpensive, low switching
costs
Barriers to Entry Low, competition slow, you High, competition stiff, hard
have needed networks to tap needed networks
PEST Future and current Conditions will make
conditions favour your profitability difficult or will
product cause declining perf. In
future
o play the mix and match game; combine functions
o offer a lower-priced more convenient version of an existing product
• the difference between a social venture and a charity is that a charity relies on
donations whereas a social venture has a stream of revenue
Example Question: What is the difference between traditional businesses and social ventures?
How do the critical success factors differ when applying them to these two businesses? (5
marks)
Week 7 SI Session
Technology Shifts
• Power
o Electricity
o steam
• Build and Move
o Assembly line
o Trains, planes, cars
• Communication
o Mass media
o telecommunications
• Information
o Computers
o internet
• Smart Tech
o Collect, analyze learn
Sustaining Technology
• improves existing product in expected ways (enhancements in product functionality)
• target: mainstream, high-margin customers
• incumbent (company in market) usually
wins
o ex: Uber
Disruptive Technology
• different performance attributes not
valued by mainstream customers
• starts in low performance segment,
improves rapidly, enters mainstream
market
• disruptive firms usually win
o ex: AirBnB
SOCIAL FACTORS
Elements
• customs
• values
• attitudes
• demographic characteristics
Stakeholders
• groups/ individuals/ organizations affected by the organization
• importance depends on situation and issue
4. Customers
5. Society
Responsibility to Society
Areas:
• Poverty, health, education (look at HDI, Human Development Index)
Why:
• Diffuse ideas of social decay, political chaos, terrorism
• Affect human capabilities
• Societal attitude shift
Actions:
• Social entrepreneurship
• Business and community partnership
• Innovative business models and leveraging business skills contribute to social
entrepreneurship
Responsibility to Customers
Areas:
• Pricing, advertising, rights
Why:
• Avoid adverse actions
• Purchase goods and services therby providing businesses with revenue
• Avoid increased regulation
Customer Rights
• The right to safe products
• The right to information
• The right to voice concerns
• The right to choose
Responsibility to Employees
Areas:
• Hiring, promotion, compensation, training
Why:
• Provide business with talent, skills, labour
Actions:
• Responsible hiring/promotion (no bias/ discrimination)
• Safe work conditions
• Opportunities for advancement
• Respectful treatment
• Protection of whistleblowers
Responsibility to Investors
Areas:
• Financial management, reporting
Agency Problem:
• Shareholders allocate decision making authority to managers
• Conflict of interest shrinking
Why:
• Investors provide businesses with capital
• New regulations due to repeated irresponsibility
Actions:
• Focus on long term ROI (return on investment)
• Responsible management, reporting, transparency
• No insider trading
• Mixed blessing- most dangerous but also most valuable, give them what they want (ex:
government)
• Supportive- want you to succeed (ex: investors, parents)
• Marginal- no voice, unwilling/ unable to threaten (ex: Environment)
Demographics
• Who: ased o Da id Foot’s o k
• What: study of human populations
• Why:
o Powerful predictor of behaviour/trends
o Certainty and simplicity of age data
o Changes significantly impact businesses
Advantages/Disadvantages
Cohort Size Advantages Disadvantages
Small -less competition -not as big of a voice
-easier to find jobs, university,
house
Large -get a lot of attention -competition
-from companies and the
government
ECONOMIC FACTORS
Elements
• Inflation/deflation
• Interest rates
• Employment rates
• Exchange rates
• Balance of trade
• Productivity
GDP- monetary value of all final goods and services produced in a period
GNP- total value of all the final products and services produced in a given period by the means
of production owned by the countries residents
Aggregate Output- total quantity of goods/ services produced in an economy in a given period
Changes in Banking
• Deregulation
• Changes in customer demands
• Competition from foreign banks (due to changes in technology)
Bonds
• Legal, binding agreement
• Fixed rate of return, often paid semi annually (coupon Payment)
• Fixed term-principle repaid at maturity date
• Priority over stockholders
• Assume face value of $1000
Concept of Yield
• Percentage return on any investment
• Helps us compare investments
• Interest rate in economy + risk premium
o Should be the same for all bonds with the same risk
o Risk- return trade-off→ the higher the risk, the higher the return
• Only part of the yield equation we can change is the price we pay
Stocks
• Voting rights (for common stocks on board of directors)
• No fixed term
• Variable return
• Discretionary payment (dividends)
• Risk
Leverage
• Value of initial investment is greater than dollars available to invest
• 2 approaches to leverage
o selling short (if price is falling)
o buying on margin (if price is rising)
Annuities
• multiple equal payments over equal periods of time
• ordinary annuity-payment does not start today
• annuity due- payment starts today/ immediately
Perpetuity
• an annuity that goes on forever (ex: dividend on a preferred share)
What is a Bond
• loan
• receive a series od coupon payments=ANNUITY
• receive a lump sum upon maturity=SINGLE AMOUNT
• PVSA + PVOA
What is a Mortgage
• Long term debt used to buy real estate
• Assume amortization period of 25 years
• PVOA
What is a Lease
• Rental agreement for 3-4 years
• At the end of agreement, you can give up car or pay residual and keep the car
• Price of car= down payment + lease payments + residual
• Assume monthly payments
• Lease payments=ANNUITY *always an annuity due because payments begin right away
• Residual=SINGLE AMOUNT
• PVSA + PVAD
POLITICAL FACTORS
Elements
• Laws, regulations
• Taxes
• Trade agreements/conditions
• Political system
• Political stability
Government Roles
• Taxation agent
o All levels of government collect business and personal taxes
o Progressive, regressive and restrictive tax approaches
• Provider of financial assistance
Trademarks
• Words, designs, symbol or shapes or a combination
• Used to identify goods or services of one person or organization
• Protection for 15 years; renewable
• Legislation= Trade-marks Act
• Ex: Nike swoosh, Golden Hawk
Why:
• Establishes and protects reputation/ brand and can be one of your most valuable assets
• Facilitates licencing your trademark
Copyright
• Any original literary, dramatic, musical or artistic work
• Subject to copyright the moment it is created (no registration necessary)
• Owner=the creator of the work
o If created wile at work owner= employer
• Duration= life of owner + 50 years
• Does ’t o e ideas, o l the fo i hi h the a e e p essed
Why:
• Receive credit and royalties for your work
Patents
• Government grants that give inventors exclusive rights to their inventions
• Must be new, useful, and show ingenuity
• Can be a product, composition, apparatus, process, or improvement on any of these
• Protection=20 years
Why:
• Provides protection for owner
• Can license/ receive royalties
• Provides valuable information/ inspiration for further research/ innovation
Caution:
• Details disclosed to public after 18 months
• Does ’t p ote t ou f o i p o e e t
o Thus some companies (ex: coca cola) chose to not patent their product
Forms of Ownership
• Sole proprietorship
• Partnership (limited or general)
• Corporation (public or private)
Sole Proprietorship
• Owned and operated by one person
• Business and owner = 1 legal entity
• Ease of formation
• Few regulations
• Complete control (over profits and decisions)
• Government support (advice)
• Taxed as personal income (advantage if losing money)
• Unlimited liability
• Lack of continuity/ difficult transfer of ownership
• Difficult to obtain outside financing
Partnership
• Two or more owners (maximum 50)
• Business and owners = 1 legal entity
• Ease of formation
• More managerial and financial resources (than a sole proprietorship)
• Lack of continuity/ difficult to transfer ownership
• Few regulations
• Government support
• Difficult to obtain outside financing
• Taxed as personal income (benefit if losing money)
• Shared profits and decisions (causes conflicts)
• Unlimited liability
Types of Partnerships
• General partnership → each partner has unlimited liability
• Limited Partnership → one person has unlimited liability while the others are general
partners and their liability cannot exceed their financial contribution to the partnership
Joint Liability- together share liability
Several Liability- 1 may be liable for all
Types of Corporations
• Public
• Private
• Crown
Private Corporation
• Shares not publically traded
• Less than 50 shareholders
• Owners and business = separate legal entities
• Relatively flat tax rate
• Potential for limited liability (if personal assets are not used as collateral)
• Continuity/ ease of transferring ownership
• Double taxation
• Moderate complexity of formation
• Relatively low regulation
• Retention of privacy
Public Corporation
• Several owners (unlimited shareholders)
• Shares publically available
• Business and owners = separate legal entities
• Flat tax rate
• Limited liability
• Continuity/ ease of transferring ownership
• Ease of raising money
• Double taxation
• Cost and complexity of formation
• Lots of regulations
• Lack of secrecy
Comparison of Forms
Sole Partnership Private Public
Proprietorship Corporation Corporation
Number of Owners One owner Less than 50 Less than 50 Unlimited
Liability Implications unlimited Unlimited for limited limited
at least one
partner
Taxation Personal Personal Small Corporate Corporate
Government Low Low Low-Medium High
regulations
Outside Financing Most Difficult Moderately Depends Easiest
Difficult
Continuity None None Yes Yes
Transfer of Ownership Difficult More difficult Less difficult Easy
Cost/Complexity of Inexpensive/ Inexpensive/ Relatively Complex/
Formation easy easy inexpensive/ costly
easy
Secrecy Complete Complete Complete None
Major Marketplaces
• Country categorized by income
o High income
o Medium income
o Low income (developing)
• Geographic clusters
o North America
o Europe
o Pacific Asia
Links to CSF
Factor Gov. Effect
Achieving financial -tax policy (ex: tax for small businesses got lowered, which improves
performance financial performance as it lowers expenses)
Distinctive Competitive -extend patent duration, allows you to retain uniqueness of your
Advantage innovation and to maintain a competitive advantage for longer
5 Areas of CSR
• Environment
• Customers
• Employees
• Society
• Investors
CSR: Environment
Why:
• Paradigm shift in management thinking
• Quantification of impact
• Change in societal attitudes
How:
• Corporate greening (not green washing)
CSR: Customers
Why
• Customers=revenue
• Avoid adverse actins
• Avoid increased regulation
How
• Fair pricing
• True advertising
• Consumerism (respect their 6 rights)
Customer rights
• Safe products
• Be informed
• Be heard
• Choose
• Courtesy
• Education
SWOT Analysis
• Strengths, Weaknesses, Opportunities, Threats
o SW is internal organization
o OT is external/ environment
Diamond-E
• Management preferences
o Risk tolerance (ex: conservative or risk taking)
o Goals/vission
o preference of direction (ex: want to expand, want to make new products?)
o ethics (ex: are you trying to be environmentally friendly or do you not care)
• Organization
o Culture (company feel ex: google slides and games and naps vs bank)
o structure (where are we located, 1 location or 1000 or how do you structure
power/management)
o capabilities (what are you good at doing)
• Resources
o human resources (how many, specialties) *ties into capabilities because your
employees determine what you can do
o capital/finance (what money do we have and what can we spend, also
machinery and buildings) *ties into management preferences because you can
take more risks with more money
• Strategy
o Path you take to reach your goals/CSF (based on resources, organization and
management preferences, also determined by environment)
• Uses: assess current strategy, generate new strategic proposals, Evaluate strategic
decisions
Principle Logic
• Consistency and Alignment
• Consistency is internal (diamond-e)and leads to performance
• Alignment is external (with the environment) and ensures the strategy is right for the
given environment
• Examples
o P+G→ inconsistency→ created new products in a recessionary environment and
they did ’t sell
o IKEA→ consistency→ people were moving into smaller homes and needed
inexpensive, modern and easily movable furniture
PEST
• Factors that shape the environment
• Political/Legal
o Laws/regulations
o Taxes
o Trade agreements
o Political system
o Political stability
• Economic
o Exchange rates
o Employment levels
o Inflation/ deflation
o Interest rates
o Balance of trade
o productivity
• Social
o Customs/traditions
o Values
o Attitudes
o Demographic info (age, income, education levels)
• Technological ***not limited to computers, anything that improves cycle time (ex:
Swiffer, or emailing people improved cycle time on how long it took to receive message
vs. memo or letters)
o Internet access/speed
o Information technologies
External Analysis
• Process of scanning and evaluating external environment
• General environment→ scanned with PEST to identify general trends/changes
• Specific environment (industry)→ scanned with Porters Five Forces to analyze
competitive pressure and predict profitability
• Challenges are;
o Forecast imperfect
o Rapid change
o Time consuming
• Benefits are;
o Makes management proactive
o Provides info used in planning = better plans
o Helps organizations get needed resources
o Helps organizations cope with uncertainty
o Improves consistency and performance
• Suppliers
Factor Effect Solution
Few suppliers Suppliers have bargaining -form a strategic alliance
power with your supplier
Few good substitute Suppliers have bargaining -internal supply
suppliers/ inputs power -long run→redesign
High switching costs Supplier has power products needed inputs
Threat of forward integration Suppliers have a cost so you no longer have to
(when suppliers enter advantage rely on your supplier
industry)
• Substitutes
Factor Effect Solution
Many good substitutes Reduces the appeal for the -strong
product and lowers profit marketing/differentiation
Low switching costs Is harder to keep -lock in customers (reward
customers, increases rivalry program)
High buyer propensity to Ex: butter vs margarine, if a
substitutes customer is more likely to
substitute this means less
profit
• Buyers
Factor Effect Solution
Few/concentrated buyers Buyers have the bargaining -form alliance with other
power sellers (illegal)
Discretionary purchase (not Buyers have the bargaining -strong marketing/
necessary) power e ause they do ’t differentiation
need it -create switching costs
Standardized products (ex: Buyers have the bargaining
batteries) power unless the product is
unique
Low switching costs Company has the power if
switching costs are high (ex:
game system, Keurig)
• Competitors
Factor Effect Solution
Many competitors of equal A more intense rivalry -grow (to reduce same
size/ capacity size competition) (ex:
Low industry growth rate/ Same number of firms and less Walmart)
capacity of customers people reduces profit and -acquisition of
increases rivalry/ if producing at competitors (buy out
apa ity you do ’t eed ore businesses)
customers, rivalry goes down -create/increase
Low customer switching When switching costs are low consumer switching
costs rivalry increases costs
Products are commodities/ If products are all the same (ex: -differentiate (be
perishable gas) compete on price, different in a way that
profitability goes down, rivalry is meaningful to
increases customers)
Exit Barriers The harder it is to leave the
industry increase the intensity
Generic Strategies
Entrepreneurship
• Definition→ identifying an opportunity and accessing resources to capitalize on it
o successful only when resources, opportunity and entrepreneur fit
• idea generation
o solve a problem
o combine functions
o simplify a product
• Screening process
o valuable
o feasible
o unique
Criteria High Potential- Good Idea Low potential- Bad idea
Product/ value added Significant Value added; Incremental improvement
unique; recurring revenue only; one-time revenue
Cust./market Reachable; large and growing Loyal to others;
small/declining
Competition/Rivalry Imperfect; fragmented Highly Concentrated, mature,
competition; at capacity under capacity
Suppliers Many; easily switched Few, high switching costs
Substitutes Few, inferior, expensive, high Many, good quality,
switching costs inexpensive, low switching
costs
Barriers to Entry Low, competition slow, you High, competition stiff, hard
have needed networks to tap needed networks
PEST Future and current Conditions will make
conditions favour your profitability difficult or will
product cause declining perf. In
future
• accessing resources
o bootstrapping → doing more with less
o Debt or Equity financing → borrowing $ you have to pay back with interest or
giving up control for $
o Crowdfunding→initiator + backer + platform → getting little amounts of $ from
large amounts of people
Definitions
• Outsourcing→ paying suppliers to perform certain tasks
• Social Media/ Virtual Marketing → word of mouth that spreads not face-to-face but by
relying on the internet
• Business Process Management→ approach by which firms move away from
department-oriented organizations and towards process-oriented team structures
Social Enterprises
• Definition→ generates social value while operating with the financial discipline in order
to overcome market inequalities (ex: hunger, lack of education)
o social value trumps financial value
o management preferences influence if a organization is a social or for profit
enterprise
• similarities and differences
Traditional organization Social Enterprise
Value definition and financial Financial ROI, finances are a Social ROI, financial stability
priority priority only
Social Benefit focus Secondary to profit Primary focus
Who they serve/ Shareholders and customers Those wo provide revenue
Stakeholders and those who receive social
support
Organizational Form For profit Various forms