notes on private enterprises

uni/mmme/2049_engineering_management_1/prviate_enterprises.md

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+---
+author: Akbar Rahman
+date: \today
+title: MMME2049 // Private Enterprises
+tags: [ business ]
+uuid: 1b37fd6a-5255-43a5-b19f-a427880b46aa
+lecture_slides: ./lecture_slides/P002_Presentation_2023.pdf
+---
+
+# What is a Private Enterprise
+
+- fancy word for 'business'
+- they are a means to 'create' wealth
+- it's often helpful to distinguish between manufacturing and service industries, but not always
+  possible
+
+  - manufacturing businesses bring in materials, add value, and sell physical goods at a profit
+  - service enterprises are like hairdressers, bank, and taxis where they do something for you
+
+# Business Models
+
+> a plan for the successful operation of a business,
+> identifying sources of revenue, the intended customer base, products [or services], and details of
+> finance
+
+# Definitions
+
+- sales = financial inflow due to sales
+- cost of goods sold (COGS) = input cost + process cost
+
+  where input cost = cost of raw materials; process cost = cost of converting input into sold goods
+
+- gross profit = sales - cogs
+- added value = sales - input
+- operating profit = gross profit - operating costs
+
+![](./images/vimscrot-2023-02-08T18:02:49,145102193+00:00.png)
+
+# Prices, Costs
+
+$$\text{price} \neq \text{cost}$$
+
+- cost is how much needs to be given up to obtain something
+- price is the amount the market is prepared to pay for it and is determined by interaction between
+  buyer and seller
+- sometimes price and cost are entirely unrelated
+- price is not always greater than cost
+
+
+# This Diagram of 'the financial structure of a business' Doesn't Make Sense to Me
+
+![](./images/vimscrot-2023-02-08T18:02:12,873108922+00:00.png)
+
+# The Value Chain
+
+> A value chain is the set of activities that a business performs with the objective of delivering a
+> valuable product, which can be a good, a service, or both, to its customers.
+
+~ Michael Porter
+
+![](./images/vimscrot-2023-02-08T18:04:39,286950278+00:00.png)
+
+# Legal Form
+
+- every business must select a legal structure to follow - this is the legal form of ownership
+- this decision is made by the founders before the business operates but it can be changed later
+- it determines how resources are structured, management roles are administered, taxes are paid, and
+  financial information is reported
+- legal forms vary from country to country
+
+## Non-exhaustive List of Types
+
+- sole trader
+- partnership
+- limited company
+
+  - private limited company
+  - public limited company
+
+  - day to day management is separated from ownership
+  - liability is limited to the money the owners put in (shareholders are not liable for company debt)
+
+- and more!
+
+## Shares
+
+Limited companies must have at least one owner who owns a fraction of the company called a share.
+Collectively, shares are also known as equity.
+
+This normally gives shareholders the ability to vote on important decision which affect the business.
+
+# Businesses as Organisation of People
+
+- every business is also an organisation comprising people to achieve a collective goal (make the
+  shareholders richer)
+- this perspective of businesses deals with who is and isn't in the organisation and who has authority
+- generally as business gets older it gets bigger:
+
+  - micro --- single individual or small group based locally
+  - small --- has a small management team working nationally
+  - medium --- central organisation with limbs and possibly international
+  - large --- global with large, semi-autonomous groups
+
+  - the micro, small, and medium sizes are known a SMEs (<250 people)
+
+# Lines of Reporting
+
+![](./images/vimscrot-2023-02-08T18:16:39,109473929+00:00.png)
+
+Companies may also be organised by product divisions:
+
+![](./images/vimscrot-2023-02-08T18:17:40,633851867+00:00.png)
+
+# What Do Managers DO
+
+Two types of managers are needed:
+
+- Strategists ---- set objectives and overall strategy
+- Doers --- manage resources to achieve objects and implement strategy
+
+## Management By Objective (MBO)
+
+MBO is a strategic model in which managers and employees agree to a set of objective.
+
+Peter Drucker proposed the eight criteria:
+
+1. market standing
+1. innovation --- there are costs and risks but lack of innovation creates opportunity for competitors
+1. productivity --- all assets must contribute to productivity:
+
+   - labour sales productivity = sales revenue / number of employees
+   - labour profit productivity = operating profit / number of emloyees
+
+1. physical and financial reserves
+1. profitability
+1. worker performance and attitude
+1. manager performance and attitude
+1. public responsibility
+
+## General objectives
+
+- continuous growth
+- profits
+- gain market share
+- show dividend for shareholders
+
+## Market Standing
+
+- a basic measure of this would the market share
+- price competitions squeeze small companies out
+- small companies win in niches that larger companies overlook
+- restrictive regulation
+- complacency
+- inability to react to technological changes
+
+## Physical and Financial Reserves
+
+- possession of necessary resources
+
+
+i give up just read the lecture slides lol