notes/uni/mmme/2049_engineering_management_1/prviate_enterprises.md

author	date	title	tags	uuid	lecture_slides
Akbar Rahman	\today	MMME2049 // Private Enterprises	business	1b37fd6a-5255-43a5-b19f-a427880b46aa	./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

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

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

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

Companies may also be organised by product divisions:

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

2. innovation --- there are costs and risks but lack of innovation creates opportunity for competitors

3. productivity --- all assets must contribute to productivity:

   • labour sales productivity = sales revenue / number of employees
   • labour profit productivity = operating profit / number of emloyees

4. physical and financial reserves

5. profitability

6. worker performance and attitude

7. manager performance and attitude

8. 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