Economics of the firm few topics

Introduction to economics of the firm. Economic environment of the firm. National

and international market.
Social responsibility and ethics in business.
Entrepreneurship, small business and franchise.
The concept production. Types of production.
Leadership and managerial styles. Communication and group processes.
The importance of the product modernization. The relation marketing-product.
Dimensions and opportunities of modern busineses.
The concept firm
The term firm originates from French word entreprise, being used with the same
meaning in English terminology.
As an economic entity, the firm must apply the maximum efficiency principle in
order to accomplish the objectives established by the management.
The firm has three main characteristics:
1) it is an economic and production entity;
2) it is a basic component of the society;
3) it is an economic decision center.
The organizational environment is very complex, and it is represented by internal and
external factors or elements, including economic, social, political, technological factors that
influence, at national and international level, the relations between the firm and the market
and also its decisions.
When discussing about the environment, the economic theory treats the
microenvironment and macro environment.
A. The microenvironment of the firm is represented by the components that it has
direct relations with on short term, as: the suppliers of production factors, the customers,
the competition and so on.
B. The macro environment of the firm is represented by the general components,
having indirect action on long term over the activity of the firm, as: political environment,
economic environment, social environment, technological environment.
The market
Considering the relation between the firm and the market there must be underlined
the fact that the study of the market is the starting point for the firms activity.
The information about the needs of the customers, the present and potential
customers, the structure and the characteristics of competition, the prices and the
complementary products are absolutely necessarily in order to draw up the decisions
concerning the production and distribution.
Conclusion
The firm is an economic entity using and combining the material and human
resources in order to produce goods and services for selling on the market;
The firm is an economic and production entity, a basic component of the
society and an economic decision centre;
The organizational environment of the firm is represented by: microenvironment
and macro environment;
The economic environment is represented by the economic elements that
compose the economic space that the firm acts on;
Doing business abroad may be done by: license agreements, subsidiaries, buying a
business or making joint ventures.

Chapter 2:Entrepreneurship, small business and franchising

Entrepreneurship
An entrepreneur is a person who takes the risk of starting and managing a business, an
innovator with an idea of a new product/service starting a business to pursue it in order to
make a profit.
The concept entrepreneur is often used in a broad sense to include small-business
owners.
Characteristics of a successful entrepreneur
Successful entrepreneurs are:
independent;
self-starters, who prefer to lead rather than follow;
self-confident;
able to solve problems;
good decision-makers;
creative related to products, marketing and managerial solutions, in order to
compete with larger firms;
totally committed to the firm;
Having your own firm
You can:
A. start from scratch usually a small business;
B. buy an existing business;
C. buy a franchise.
Conclusions
An entrepreneur is a person who takes the risk of starting and managing a
business, an innovator with an idea of a new product/service starting a business to
pursue it in order to make a profit.
There are four basic reasons to start a business: having a chance to make a
profit, being your own boss, feeling personal satisfaction with your work and
building the lifestyle that you prefer.
A successful entrepreneur must have: entrepreneurial personality, managerial
ability and technical knowledge.
If you decide to go into business for yourself, there are at least three possibilities:
starting a small business, buying an existing business or buying a franchise.
The advantages of having a small business are the following: greater flexibility,
greater ability to serve specialized markets, more personal services.
The disadvantages of having a small business are the following: limited
managerial ability, fund-raising difficulties, extreme personal commitment of the
owner.
The advantages of having a franchise are the following: successful product,
company name and operating concept, guidance, training, management assistance
and financial assistance from the franchisor.
The disadvantages of having a franchise are the following: the costs - a minimum
cash investment and royalties- and restricted operating freedom.

Chapter 3 Leadership, managerial styles and communication

Leaders and Leadership
Like management, leadership has been defined in many different ways by many
different people.
Nevertheless, the central theme running through most of the definitions is that
leadership is a process of influencing individual and group activities toward
goal setting and goal achievement.
Leadership vs. Management
Although the two are similar, there are some significant differences.
Leadership is based on a person's ability to influence others to toward achieving
personal and organizational goals.
But management involves much more.
While leadership is part of it, it also includes performing the other functions
planning, organizing, and control.
Keep in mind, though, effective managers must be effective leader!
Classifying managerial styles
There are many ways to classify managerial styles.
The two most important, however, are
1. by the approach used;
2. by the orientation toward getting the job done.
Managerial styles: by approach used
One common way of studying managerial styles is in terms of the basic approaches used
by managers:
a) autocratic,
b) democratic,
c) laissez-faire.
Managerial styles: by the orientation toward getting the job done
Another way to categorize managers is to examine their attitudes toward getting the job
done:
a) some managers emphasize the task;
b) others emphasize subordinates;
c) others a combination.
Power, management and leadership
Power is the ability to influence individuals, groups, decisions and events.
Every manager use power in leading subordinates.
Communication in management
Being a manager means leading, motivating, coaching and communicating.
Communication means transmitting and receiving messages, verbally and
non verbally.

Communication styles and behaviors

Communication specialists identified two main types of manager behaviors and
associated communication styles, used in order to accomplish organizational
goals:
1. Aggressive
2. Assertive
Conclusions
Leadership is a process of influencing individual and group activities toward goal
setting and goal achievement.
A manager plan, organize, forecast, lead, control, and so on.
While leadership is part of it, it also includes performing the other functions
planning, organizing, and control.
The two most important classifications of managers are by the approach used and
by the orientation toward getting the job done.
One common way of studying managerial styles is in terms of the basic
approaches used by managers: autocratic, democratic and laissez-faire.
Another way to categorize managers is to examine their attitudes toward getting the job
done: some managers emphasize the task; others emphasize subordinates; others a
combination.
Chapter 4 Internal organization of the firm. Formal and informal organization.
Organizing
One of the managements functions is to organize the company, the firm.
Organizing is the management task:
- to determine the resources and the activities required to achieve organizational
objectives;
- to combine them into a formal structure;
- to assign responsibilities for achieving the objectives;
- to delegate the employees the authority needed to carry out their assignments.
Major building blocks
The major building blocks that help a manager to design and to organize the formal
structure of the firm in order to accomplish the primary task are:
1. division of labor
2. specialization
3. span of control
4. managerial hierarchy.
Types of organization structure
The main types of organization structure are:
the simple organization structure
the functional organization structure
the departmental organization structure
the matrix organization structure
Informal organization
The informal channels of communication, based on friendship or circumstances,
unrecorded within the organizational chart, are known as informal organization.

Conclusions
The major building blocks that help a manager to design and to organize the
formal structure of the firm in order to accomplish the primary task are: division of
labor, specialization, span of control and managerial hierarchy.
The process of dividing the work and assigning tasks to workers is called division of
labor.
Dividing the firms primary task into subtasks that can be repeated easily and
efficiently is the specialization of work.
Grouping jobs under the authority of one manager for the purposes of planning,
coordination and control is departmentalization.
The managerial hierarchy refers to the levels of management within an organization, most
often top (or executives), middle and supervisory
The main types of organization structure are: the simple organization, the functional
organization, the departmental organization and the matrix organization.
Departmentalization may be done: by product or service, by territory, by
customer, by process.
Chapter 5 Production/ operations management
Operations management
Production/operations management can be defined as the sum of activities that ensure
a product manufacturing or a service performing in a manner both meeting the needs of
the customer and allowing the organization to accomplish its overall goals.
The required activities for production/operations management are:
A. selecting and designing;
B. operating;
C. controlling the production system.
When to reorder?
The timing of inventory levels and flows can be complicated.
The reorder point for inventory can be determined by either the elapsed time period or
the quantity on hand.
These are referred to as:
a) the fixed order period;
b) the fixed order quantity methods.
Conclusions
Since all organizations exist to produce goods and/or services, the production/
operations system is essentially the core function of all organizations.
Planning, organizing, and directing exist to provide support to the productive
system.
How well management integrates these functions in a rational, comprehensive
manner will be a major determinant in the overall survival and success of the
organization.
The selection and design of a production system requires decisions about: what to
produce; how to produce it; how many to produce; who will produce.
Operating the system means scheduling and controlling the inventories.
One of the controlling techniques for production process is trade-off analyze.

Chapter 6 Marketing. The relation marketing-product.

Marketing
Marketing is an organizational function and a set of processes for creating,
communicating, and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders The
American Marketing Association.
Marketing strategy
A company cant succeed unless it has a well-planned marketing strategy. The two main
steps in creating a marketing strategy are:
1. Defining a target market
2. Developing a marketing mix
Developing a marketing mix
A marketing mix is a blend of product offering, pricing, promotional methods and
distribution system that will reach a specific group of consumers.
The 4 Ps of marketing are thus: product, price, promotion and place (distribution).
Every target market requires a unique marketing mix to satisfy the needs of the consumers
and meet the goals of the firm.
New-product development
In order to reduce costs and risks associated with new products, most of the firms use a
product development process:
1. Develop new-product
2. Develop a marketing mix
3. Test market the new product
4. Introduce the product
The product life cycle
After the product reaches the market, it enters the
product life cycle a pattern of sales and profits
over some period.
The cycle typically has four stages:
1. introduction;
2. growth;
3. maturity;
4. decline.
Conclusions
Marketing is an organizational function and a set of processes for creating,
communicating, and delivering value to customers and for managing customer
relationships in ways that benefit the organization and its stakeholders.
Marketing mix means 4P: product, price, promotion and place.
The two main steps in creating a marketing strategy are: Defining a target market
and Developing a marketing mix.
The four stage in a product life cycle are: introduction, growth, maturity and
decline.

Chapter 7 The control in management. Quality management and the success in

business.
Control
Control is the process of monitoring performance and taking action to ensure
intended or desired results.
It requires three basic steps:
1. setting performance standards and objectives;
2. analyzing how well activities and results are, compared with the standards;
3. correcting performance that does not meet expectations, modifying standards
that are not satisfactory or acting to take advantage of opportunities that have been
revealed.
Quality Control Activities
The quality control function involves some or all of the following fundamental steps:
1. Standards and specifications are set to establish the quality objectives to be
measured or evaluated;
2. Materials, parts, products, and services are inspected to compare them to
established standards;
3. Techniques, including sampling and analysis, are used to indicate whether quality
is sufficiently under control;
4. Measuring instruments are used for objective and measurable comparison of
actual quality to the established standards.
Quality management
Quality was once the responsibility of a quality-control department and was
separated from design and production. Management believed that quality and
productivity were two different things.
Today management believes that quality and productivity are linked.
To improve quality must be an issue throughout the production process: in
supplying, production, marketing and all stages of the business.
Finding and correcting problems early in the process saves money!
Designing products for better quality, simpler operation, and easier repair also
reduces the need for customer service after the sale.
Conclusions
The control process is the last from the cycle of processes that a firm accomplish.
Quality means the conformance between customers needs and firms products.
Quality must be planned and improved during all the process of production, not only
at the end.
In order to have the high-quality products, a firm must become concerned both with
the customers but also with their employees.
Chapter 8 Information and computers in business
Information systems

An information system is thus represented by an ensemble of means, flows and methods

for collecting, transfer, processing, and retaining external and internal data and
information, for the organization to act properly.

The information system:

- ensures all the information needed for decision making;
- allows the transferring of information through organization and external
environment.
Management information systems
When the collecting, transfer, processing and retaining data and information are done
with the use of computer, the information system becomes a management information
system.
A management information systems (MIS) is a computer system that collects and
stores key data and produces information needed by managers for analysis, control and
decision making.
A large firms MIS have four components:
1. data-processing system;
2. management reporting system;
3. decision support system;
4. expert systems.
Software applications for business
One of the most complex and useful applications for business nowadays is Enterprise
Resource Planning (ERP).
Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate) all data
and processes of an organization into a unified system.
Customer Relationship Management (CRM)
Is a business philosophy involving identifying, understanding and better providing
for the customers while building a relationship with each customer to improve
customer satisfaction and maximize profits.
It's about understanding, anticipating and responding to customers' needs.
Computers, design and manufacturing
Advances in computer technology have also transformed design and manufacturing.
Some of the most common applications of artificial intelligence in business are:
1. computer-aided design (CAD);
2. computer-aided manufacturing (CAM);
3. robots.
Conclusions
management information systems (MIS) = a computer system that collects and
stores key data and produces information needed by managers for analysis, control
and decision making.
A large firms MIS have four components: data-processing system; management
reporting system; decision support system and expert systems.
Enterprise Resource Planning (ERP) systems integrate (or attempt to integrate)
all data and processes of an organization into a unified system.
Customer relationship management (CRM) is a business philosophy involving
identifying, understanding and better providing for your customers while building a
relationship with each customer to improve customer satisfaction and maximize
profits.
The artificial intelligence means computer logic and it is what lets a computer
system solve a problem more or less like humans do.

Chapter 9 - Social responsibility and ethics in business

The nature and aspects of social responsibility
Social responsibility is the concern of businesses for the welfare of society as a whole,
responsibilities beyond the management of the firm itself.
The firm is expected to act like a citizen, having rights, duties, self-conscious and an
ethical feature.

Firms are expected to show their social responsibility in at least three major areas:
1. protection of the environment
2. protection of consumers
3. relations with the employees
Business ethics
Business ethics represent standards for judging the rightness or wrongness of
conduct in business practices, institutions and actions.
When a company is criticized for discharging too many pollutants, it is being judged
on ethical grounds;
When hiring an ex-convict or a person with former drug problems, it is judged
positively on ethical grounds too, as contributing to the human well being.
Over the time, business ethics were institutionalized, meaning most of the companies
established:
- a formal code of ethics a code describing the general value system and ethical
principles that must guide the employees in everyday behavior;
- ethics committees a group of people within the board of directors that consider the
ethical dimensions of company policies and practices and what social programs to work
on.
Conclusions
Social responsibility is the concern of businesses for the welfare of society as a
whole. It is voluntarily and has a broad application.
Firms are expected to show their social responsibility in at least three major areas:
protection of the environment, protection of consumers and relations with the
employees
Firms response to environmental problems is recycling used materials.
Firms response to consumerism is improving the products and services quality.
Related to the discrimination problems, the firms must act like a human beings,
based on judgment and trust/second chance principles.
Business ethics represent standards for judging the rightness or wrongness of
conduct in business practices, institutions and actions.
Ethics concerns the rules by which social responsibility is carried out, establishing
to whom and for what the firm is responsible.

Chapter 10 Trends in the future, challenges and opportunities for businesses

Trends in the future
There are five trends that will continue to affect businesses within the next decades, and
they are:
1. globalization;
2. shifts in population demographics;
3. changes in resource availability;
4. increasing growth in service economy;
5. development of information technology.
Conclusions
There are five trends that will continue to affect businesses : globalization; shifts in
population demographics; changes in resource availability; increasing growth in
service economy; development of information technology.
Globalization means changing the operation and communications as the world gets
smaller.
As the relation between the needs and resources for businesses is no longer
balanced, the appearance and the development of a new type of resource
knowledge is a reality.
The scientific researchers prediction consists in dramatic changes in climate and
disrupting the human societies.
The balance between manufacturing and services is inclined and will continue to be
inclined for the services.
The challenge and opportunity for the businesses will be to meet the expanding
outsourcing trend.