Unemployment rose as troubled companies shed the most jobs in five years, and , Americans marched to the unemployment lines. In fall , even Apple, a company that had enjoyed strong sales growth over the past five years, began to cut production of its popular iPhone. A business is any activity that provides goods or services to consumers for the purpose of making a profit.
Be careful not to confuse the terms revenue and profit. Revenue represents the funds an enterprise receives in exchange for its goods or services. Your bank is a service company, as is your Internet provider. Hotels, airlines, law firms, movie theaters, and hospitals are also service companies.
Many companies provide both goods and services. For example, your local car dealership sells goods cars and also provides services automobile repairs. Second, some organizations are not set up to make profits.
Many are established to provide social or educational services. Most of these organizations, however, function in much the same way as a business. They establish goals and work to meet them in an effective, efficient manner. Thus, most of the business principles introduced in this text also apply to nonprofits. Every business must have one or more owners whose primary role is to invest money in the business.
The owners also hire employees to work for the company and help it reach its goals. Owners and employees depend on a third group of participants— customers. Ultimately, the goal of any business is to satisfy the needs of its customers in order to generate a profit for the owners.
Consider your favorite restaurant. Whether national or local, every business has stakeholders —those with a legitimate interest in the success or failure of the business and the policies it adopts. Stakeholders include customers, vendors, employees, landlords, bankers, and others see Figure 2. All have a keen interest in how the business operates, in most cases for obvious reasons. If the business fails, employees will need new jobs, vendors will need new customers, and banks may have to write off loans they made to the business.
Stakeholders do not always see things the same way—their interests sometimes conflict with each other. For example, lenders are more likely to appreciate high profit margins that ensure the loans they made will be repaid, while customers would probably appreciate the lowest possible prices.
Pleasing stakeholders can be a real balancing act for any company. The activities needed to operate a business can be divided into a number of functional areas. Examples include: management, operations, marketing, accounting, and finance. Managers are responsible for the work performance of other people. Managers plan by setting goals and developing strategies for achieving them.
They organize activities and resources to ensure that company goals are met and staff the organization with qualified employees and managers lead them to accomplish organizational goals. Finally, managers design controls for assessing the success of plans and decisions and take corrective action when needed. All companies must convert resources labor, materials, money, information, and so forth into goods or services.
Some companies, such as Apple, convert resources into tangible products—Macs, iPhones, Apple Watch, etc. Others, such as hospitals, convert resources into intangible products—e.
The person who designs and oversees the transformation of resources into goods or services is called an operations manager. This individual is also responsible for ensuring that products are of high quality. Marketers develop the benefits and features of products, including price and quality. They also decide on the best method of delivering products and the best means of promoting them to attract and keep customers.
Managers need accurate, relevant and timely financial information, which is provided by accountants. Accountants measure, summarize, and communicate financial and managerial information and advise other managers on financial matters.
There are two fields of accounting. Financial accountants prepare financial statements to help users, both inside and outside the organization, assess the financial strength of the company.
Managerial accountants prepare information, such as reports on the cost of materials used in the production process, for internal use only. Financial managers address questions such as the following: How much money does the company need? How and where will it get the necessary money?
How and when will it pay the money back? What investments should be made in plant and equipment? How much should be spent on research and development? Good financial management is particularly important when a company is first formed, because new business owners usually need to borrow money to get started. These include the economy, government, consumer trends, technological developments, public pressure to act as good corporate citizens, and other factors.
Figure 2. A strong economy means people have more money to eat out. Food standards are monitored by a government agency, the Food and Drug Administration. Preferences for certain types of foods are influenced by consumer trends , for example, fast food companies are being pressured to make their menus healthier. Finally, a number of decisions made by the industry result from its desire to be a good corporate citizen. For example, several fast-food chains have responded to environmental concerns by eliminating Styrofoam containers.
Of course, all industries are impacted by external factors, not just the food industry. As people have become more conscious of the environment, they have begun to choose new technologies , like all-electric cars to replace those that burn fossil fuels. Both established companies, like Nissan with its Nissan Leaf, and brand new companies like Tesla have entered the market for all-electric vehicles.
While the market is still small, it is expected to grow at a compound annual growth rate of PESTEL is an acronym, with each of the letters representing an aspect of the macro-environment that a business needs to consider in its planning. These clients are immune to the dire predictions of advisors who seek to help by emphasizing the dire consequences of not adequately planning for the future. In this competition between optimists and doomsters, the optimists often prevail.
Advisors do not have herd immunity when it comes to biases. Our knowledge and experience enable us to remain reasonably objective in client interactions, but not entirely. To think otherwise is an example of bias blind-spot, where we are less likely to detect bias in ourselves than in others. One hopes that by learning more about how biases affect family business consulting, both clients and advisors will become less ignorant, and we can collaborate towards the goal of alleviating the impact that bias has on our joint endeavours.
How long will it be until the current restrictions on individual freedom in many countries end? No one knows, but in the meantime, there are more traditional family business lamentations than bewailing the duration of the current lockdown.
How long, the seniors lament, will it take the next generation to make up their minds about having a role in the family business? Since neither generation wants to put the other under too much pressure, transitions can take a long time to unfold. We could be living through an epochal change, and perhaps in future we will classify time as pre-CV and post-CV. After this virus ebbs, some people may want a return to their pre-CV life.
Anyone who believes that this is likely, rather than just desirable, needs to do little more than wait patiently for normal life to resume. Others will think that the world post-CV will be a very different place.
Some of the changes may be immediately apparent, such as the increased use of video conferencing leading to a decline in discretionary business travel. Other changes will take longer to emerge as society adjusts to coping with the consequences of the economic stimuli being used in many countries. Who knows? But choices still need to be made in times of uncertainty, so the question remains: which generation will be most involved and at risk when dealing with the post-CV era?
The obvious answer is the next generation, because the scale of societal change could take a while to emerge. In which case, it is helpful that the family business world has been awash with next gen programs. But maybe it is time for the next gen to spend less time attending courses and more time getting to grips with the future of their family business, whether that be in the role of leader or owner. The seniors, meanwhile, need to adjust to the possibility that their era is being cut short.
Maybe the challenge of helping them cope with this sudden transition will be addressed through education and networking.
Those in the business of training may need to spend more time helping the senior generation cope with the unexpected dislocation in their lives, while the next gen grapple with the future. We are used to the role of triggers in the transition process—events that motivate a family to start succession planning.
For example:. Covid is a major environmental event, but will it trigger intergenerational transitions in many family businesses? Triggers occur regularly in a family business, but many of them are either ignored or are absorbed, resulting in minor alterations to the existing order rather than radical change.
Family businesses, we are told, prefer evolution to revolution. And why not? If the structures a family business has in place have underpinned their success so far, it makes sense to try to move forward by replicating the past. This habit also means that transitions in a family business are gradual and unfold over time.
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