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Summary Introduction to business administration
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Summary Introduction to Business Administration:Unit 1: Foundations of management and organizations.
1.1The definition of the firm
What is an organization:
It is a deliberate (opzettelijk) arrangement of people to accomplish some specific purpose.
Common characteristics to all organizations
• They have a distinct purpose
• They are composed of people
• They have a deliberate structure within which members do they work
What is a business (or firm)?
― It is an organisation that provides products and services that customers desire and sells them at a
higher price.
― It chooses and combines different types of inputs or resources, which are transformed by using a
specific technology into an output.
― It has been created because there was somebody who thought it was a good idea to develop the
activity and, also, it allowed him/her to attain certain goals.
― It usually comprises (omvat) several people, with their own objectives and interests, which
coordinate to work together and achieve the common objective of the firm.
Tangible Tastbaar
Intangible Ontastbaar
The definition of firm in Business
Administration and other related fields:
Economics:
― The firm as a technical and economic unit:
emphasis (nadruk) on the efficient allocation
(toewijzing) of scarce (schaars) resources.
― The company is studied as an alternative to
the market to allocate resources efficiently.
Sociology / Psychology:
― The firm as a socio-political unit: the firm is
studied to the extent that is made up of groups
of interdependent (onderling afhankelijk)
people with their goals.
― Emphasis on individual and group human
behaviour and its role in achieving business
goals.
,Business Administration:
― The firm as a decisional unit: determination (bepaling, vastelling) of business objectives
― The firm as a technical and economic unit: study of how to improve the internal use of resources
and internal processes to achieve objectives
― The firm as a socioeconomical unit: study of human behaviour as it affects firm’s effectiveness and
efficiency
1.2 The system approach of the firm
System Defined
– A set of interrelated and interdependent parts arranged in a way that produces a unified whole
(verenigd geheel).
Properties of systems:
Sinergy (samenwerking van mensen, als samenwerking effectiever is, dan dat iedereen voor
zichzelf zou werken.)
Decomposition (onderverdelen) in subsystems with the same properties
Basic Types of Systems
– Closed systems: Are not influenced by and do not interact with their environment (all system input
and output is internal).
– Open systems
• Dynamically interact to their environments by taking in inputs and transforming them into outputs
that are distributed into their environments
Functions:
Basic firm functions: R&D, Finance, Marketing, Human Resources, Supply chain/logistics, Operations/
production. In the middle you have management, to manage all the different functions.
Supply chain, logistics, purchasing:
Suppliers selection
Management of purchases
- Order types: frequency, amount etc
- Delivery time
- Stocks
Includes all activities related to procurement, storage and logistics
Operations/production
Definition of the technical characteristics of the product, based on market demand and the
,technical and economic potential of the company
Production System Design
Location and plant design (management of physical means of production)
Service and maintenance of facilities and production capacity
Control of technical and production process, etc.
Responsible for the activities related to the transformation of raw materials into final products of
services.
Finance:
Attracting external funds at the lowest cost
Allocation of funds obtained in terms of the available investment alternatives
Establishment of an appropriate dividend policy and self-financing
Cash management
Responsible for the activities related to the acquisition (verwerving, aankoop, aanwinst) of
financial resources, the allocation (toewijzing, toedeling) of such resources and remuneration or
payment to financial sources.
Marketing:
Research and detection of unsatisfied consumer needs
Product design
Pricing
Place: Selecting distribution channels
Promotion
Research and development (R&D):
Basic research
Applied research
Technological development
Technical adaptation of existing products and processes
It is responsible for researching on materials, processes and products, in order to generate new
knowledge to be applied in new or existing products and services, covering the needs of current and
potential customers
Human Resources:
Recruiting
Selecting
Motivating
People development
Management:
Coordination of subsystems
Firm-environment interaction
This means developing the functions
, Implications of the Systems Approach
• Coordination of the organization’s parts is essential for proper functioning of the entire
organization.
• Decisions and actions taken in one area of the organization will have an effect in other areas of the
organization.
• Organizations are not self-contained and, therefore, must adapt to changes in their external
environment.
1.3 Types of firms:
Why is it relevant for classifying firms:
- There is a high level of heterogeneity (heterogeniteit) among firms
- Existing classification criteria will help us identify specificities of different types of firms that may
affect their management
Which are the main criteria for classifying firms form a management approach?
1. Economic criteria:
- Industrial and economic classification schemes
- Size
- Geographical scope
2. Legal criteria:
- Public/private ownership
- Legal form
1/ Economic criteria
Industrial and economic classification schemes
• There are a number of classification schemes in use, which organise the presentation of statistical
data on industrial and economic activities.
• All such schemes are designed to allow comparison (vergelijking) of data on a year-by-year basis,
or comparison between countries which use the same scheme.
• Used in official publications by national and international statistical offices and also by many
commercial publishers (E.g. company directories such as Dun and Bradstreet)
1.1. Industrial and economic classification schemes
― Data on those organizations which work with, or produce the same product or service, is
gathered together under the same industry heading.
― The classification of activities takes into account the inputs used, the production process and
the output obtained
― The scheme works broadly to a level of four digits (cijfers). The first two digits identify the
major industry group, the third digit identifies the industry group and the fourth digit identifies
the precise industry.
1.2. Classification of firms according to size
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