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Module 1

Perspectives on Business (Week 2)

What is the purpose of a business?


1. Wealth Creation
2. Value
3. Stewardship
Shareholder Theory
Focuses on the firms purpose of creating wealth for its owners while minimizing
both the importance of the firms interactions with its other constituencies in
society.
Main purpose of business lies in generating profits and increasing shareholder
wealth
Limited government intervention (self-regulation)
Invisible hand: Checks illegal activity; the market itself will punish/weed out
firms that engage in illegal or unethical behaviour, therefore Govt.
intervention is unnecessary
If firms work for self-interest by maximizing profits, society will benefit
Milton Friedman the business of business is business. Firms are created to
make money, not oversee the social or moral development of society. When
firms become involved in social or public policy issues, wealth is diverted to
issues outside the core expertise of their managers. This inefficient use of
wealth will negatively affect society in the long run
Transaction Cost Economics (TCE): importance of corporate hierarchies and
monitoring employee behaviour to minimize self-interested behaviour
Agency Theory: Principle vs. Agent (Shareowner vs. Manager) relationship in
public trading firms, and how to best align the competing interests of the two
parties to maximize firm value
TCE and Agency both assume humans are opportunistic, thus, will put their
own interests before the firms
Stakeholder Theory
Broadens Shareholder Theory, recognizing the importance of wealth creation as
well as the firms relationships with its multiple constituent groups, and impact
on society on large.
Stakeholders are all those who affect or are affected by a firms actions
(Pfarrer, 2010)
Companies should have an expanded role and responsibilities to other
stakeholders besides its owners (Pfarrer, 2010, p.88)
Firms can generate competitive advantage and wealth by taking more than
just their shareholders into account (Pfarrer, 2010, p.88)

Archie Carroll (1979) and Ed Freeman (1984) by taking the interests of all of
the firms stakeholders into account, the firm could do better (achieve
greater performance) than by simply focusing on shareholder interests
Carroll corporations have 4 major responsibilities: economic (generate
shareholder wealth), legal (obey laws and regulations), ethical (recognize firm
is part of a community, therefore has obligations and an impact on others),
discretionary (engage in philanthropy)
By creating value for its stakeholders, it will create value for its shareholders
in turn
Stewardship Theory: humans may put the interests of others, including the
organization, above their own self-interest. Positive approach to
organizational dynamics and corporate governance

Business Models
Value creation: customers want to buy products from you
Value capture: customers willingness to pay
Adjusted depending on the purpose, and types of goods/services
Create a balance between Creation and Capture
Keep innovating (new ideas and plans) in order to keep up with the market

Sustainable Business (Week 3)

Sustainable Business
The process of meeting present needs without compromising the ability of future
generations to meet their needs
Why sustainability is important today
- Climate change and potential effects on people, businesses, communities,
and countries
- Lapses of judgement and unethical business practices that have ruined
many peoples lives and the fall of formerly great companies
- Global economic crisis, partly because of changes in key financial policies
in certain parts of the world had grave effects on people, businesses and
communities far removed from the worlds share markets
Three Pillars of Sustainability

Environmental Sustainability
Preservation of environmental resources and biodiversity, creation of sustainable
access to safe drinking water, and enhancement of quality of life among the
most impoverished
There is belief that unless Environmental Sustainability is ensured, both social
and economic sustainability are impossible
Conservation Movement; Reducing Greenhouse Gas Emissions; Problems on
reliance on Fossil Fuels; Green Economy and Green Jobs; Pollution, Waste, Plants,
Animals, and Environmental Sustainability

Social Sustainability
Improvement of daily life for the greatest number of people through improving
fair income distribution; promoting gender equality; ensuring equal access to
land ownership, employment and education; investing in basic health and
education; and enlisting the participation of beneficiaries
It is the way in which natural resources, education, skills and social institutions
build human QoL. Recognition that the conditions of quality, equity, education,
opportunity and protection of all basic human rights are pivotal to the creation of
a truly sustainable global society
Child Labour; Slavery, Safety and Risk at Work

Economic Sustainability
An economys capacity to regularly produce outcomes consistent with long-term
economic development (sustainable development)
Corporate Social Responsibility (CSR)
A form of corporate self-regulation that builds sustainability and public interest
into business decision making and activities. The term used to describe how
businesses and institutions address environmental, social and economic
sustainability
CSR has its roots in corporate philanthropy giving money, time, services or
products in the service of supporting peoples wellbeing
Environmental: Cleaner environment, Environmental stewardship
Social: Contribute to a better society, Consider full scope of impact on
communities
Economic: Contribute to economic development, Preserving profitability while
also thinking about the future
Stakeholder: Many stakeholders to consider, How we interact with our
employees, suppliers, customers, and communities matters a lot
Voluntariness: Engage in CSR because it is the right thing to do, Acting on
values and ethics, beyond legal obligations
How Can Companies Approach CSR
Obstructionist Approach
A firm gives little or no attention to social responsibility. For managers in these
companies, CSR takes a distant backseat to profits and operations.
Obstructionists engage in unethical and sometimes illegal actions in order to
hide their socially irresponsible behaviour
Defensive Approach

The defensive approach to CSR involves engaging in activities or practices that


are legally required and enforceable. Companies adopting this approach wont
necessarily try to hide anything or go to extremes, but it will comply only with
the minimum legal requirements, e.g. food companies that withheld nutritional
information from their packaging until legislation ensured their compliance
reflect the defensive approach
Accommodative Approach
The organisation is more positive in its view of social responsibility. It does
everything that it is legally required to do, but also goes beyond this by
addressing those areas that managers feel are important from an ethical
standpoint
Proactive Approach
Means a company is actively engaging in socially responsible activities and
attempting to set the highest industry standard possible. The goal is for the
company to be the leader in the industry and the epitome of CSR
HRs Role in Sustainability and CSR
HR professionals hold an important role in moving a company toward sustainable
business practices. Can also help organise programs that foster a culture that
supports social sustainability by supporting employees in providing services to
their local communities or through activities that support global citizenship

Module 2
Impact of General and Market Environment (Week 4)
Things that happen outside the business, that is uncontrollable, but has an
impact positive or negative
PESTE Understanding Business Environment
Political, Economic, Social, Technological, Environmental
Porters Five Forces Analyses level of competition within an industry, and
competitive forces that shape an industry

Changes in demographics mean change in markets, so demographic trends are


very important to marketers. Biggest demographic trend the changing age
structure of the population
Companies have to think about what products and services to offer for their
target audience e.g. Baby Boomers unfamiliar with technology, Gen Y were born
with tech. Also, cannot specifically target one age audience, as it could put off
other customers who dont appeal to the P/S

Week 5
Buyer Decision Process
1) Need Recognition Internal Stimuli (hunger, thirst, ran out, etc.); External
Stimuli (advertisement, discussion, etc.)
2) Information Search Amount searched depends on drive for product.
Personal sources (family, friends, etc.); Commercial sources (advertising,
salespeople, etc.); Public sources (internet, mass media, etc.); Experiential
sources (handling, examining, using, etc.). Influence varies with product,
and buyer
3) Evaluation of Alt. Choosing other brands, depends on customer,
sometimes intuition, asking friends, no evaluation, online reviews, etc.
4) Purchase Most of the time, purchase top preferred brand. But 2 factors
can come between Purchase Intention Purchase Decision: attitude of
others, and unexpected situational factors (income, economy change,
competitor price drop, etc.)
5) P.P. Behaviour Satisfied? Dissatisfied? Answer lies between customers
expectations and products perceived performance.
Low Involvement (no excitement/interest in buying the product e.g. toothpaste)
Need Recognition Purchase Post Purchase Evaluation/Behaviour (not all the
time)

High Involvement (more interest in purchase e.g. Car, Computer)


Need Recognition Information Search Evaluation of Alternatives Purchase
P.P. Behaviour
Roles in Buying Process
Initiator, Influencer, Decider, Buyer, User
Market Segmentation and Targeting
Demographics Age, Income, Gender, etc.
Psychographics Interest, Values, Lifestyle
Geographics Where your segments live
Differentiation
Points of difference, separating from competitors, added value (high service,
quality)
Positioning
Telling why its better, consistent brand communication
Creating desired brand perception
Marketing should be embedded throughout the entire business process
Entire business must be viewed as a customer-creating and customer-satisfying
organism
Management needs to think of itself as providing customer-creating value
satisfaction
Just about everyones job impacts the customers experience of a company
(everyones a marketer)
Not just Marketers that influence 5 stages (above) (friends, family, etc.). This is
the Buying Centre