How Businesses Create Value

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How Businesses Create Value
St. Francis Xavier University
Professor Neil Maltby
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Administration

• Seating Plan
• Clickers
• Overview of clickers at Interwrite Learning site
  http//www.interwritelearning.com/products/cricket
  /detail.html
• Use
• Power uses 2 AAA standard alkaline batteries
  with a 26 week typical usage. The Battery LED
  turns green when Cricket is turned on. Remove
  white tab from batteries
• Power on your clicker
• Access code (can vary class to class) and
  connection status. When joined to a class, the
  Connect LED will blink slowly.
• Input access code
• The Received (check) LED will turn green when a
  transmission has been received and the Not
  Received (X) LED will turn red when a
  transmission was not received.
• Students can change their responses for question
  being polled, but only the last response is
  saved. The instructor can set the number of
  chances students can respond to a question.
• Results when the question timer is stopped
  Response Chart is displayed. The Response Chart
  graphs the distribution of the responses to the
  question and the correct response (if applicable)

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Clicker Exercise

• Sample question
• Cricket Clickers are green
• True
• False

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Clicker Exercise

• The four elements of a private enterprise system
  include
• Profit, privacy, competition, choice
• Profit, private enterprise, governance, choice
• Profit, private ownership, competition, choice
• Profit, capital, competition, choice

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Clicker Exercise

• Do you think capitalism is an effective economic
  system?
• Very effective
• Somewhat effective
• Somewhat ineffective
• Very ineffective

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Administration

• Why use Clickers?
• To assess comprehension
• To provide feedback
• Encourage participation
• Encourage discussion
• Enliven a class

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Review

• Businesses are organizations of a capitalist
  economic system
• Capitalism promotes choice
• Businesses are the economic organizational
  facilitators of choice
• How do businesses create value?
• I.e. What do businesses do to deliver products
  and services that is better than you or I could
  do for ourselves?
• What issues do businesses create?

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What value does a business create?

• Effective and Efficient
• Effective As a result of competition products
  are better
• Product innovation, quality, variety, location
• Efficient As a result of competition and the
  profit motive, firms are more productive.
  Productivity is how much is produced relative to
  the resources used to produce it (295) leading
  to better, faster, cheaper production
• Division of labour and specialization of labour
  lead to an efficient process of transforming
  inputs (e.g raw materials) into outputs
  (products)
• Economies of scale
• Reduced transaction costs
• Production innovation

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What value does a business create?

• Efficient (cont)
• Division of labour
• a form of specialization in which the production
  of a product or service is divided into several
  separate tasks
• Expertise develops faster (referred to as
  Learning Curve) from more repetitions which
  increases productivity because training time is
  reduced and the worker is productive in a short
  amount of time.
• Specialized expertise leads to product and
  production improvements
• Little time is spent moving between tasks so
  overall time wasted is reduced.
• Economies of scale
• Decreased cost per unit as output increases
  (which explains why some firms grow)
• Purchasing (bulk buying and long-term contracts),
  
• Manufacturing (production equipment costs are
  spread over more revenue-generating products)
• Financing (larger firms have easier and cheaper
  access to financing)
• Marketing (costs of advertising are spread over
  more revenuegenerating products
• Reduced transaction costs
• The costs associated with completing an exchange
  -- include finding information, agreeing to price
  and terms (volume, quality and features, date and
  place of delivery)
• Firms reduce transaction costs by reducing the
  number of individual transactions undertaken
• Production innovation

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What value does a business create?

• Economies of scale involves
• Distribution of tasks associated with production
  of a product/service
• Reduction of the number of transactions involved
  in an exchange
• Production of products with specialized features
• New, creative approaches to production of
  products
• Decreased costs per unit as output rises

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What value does a business create?

• Demand varies by customer
• Supply (businesses satisfying customer demand)
  varies in a competitive market
• Small firms tend to emphasize customized, quality
  products to smaller niche segments of the market
  willing to pay for quality
• Large firms tend to emphasize efficient
  operations that reduce costs and/or offer a wide
  selection and/or cater to price-sensitive
  customers
• The value a business provides may focus on one or
  several elements

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all that glitters

• The inherent vice of capitalism is the unequal
  sharing of blessings the inherent virtue of
  socialism is the equal sharing of miseries
• It is a socialist idea that making profits is a
  vice. I consider that the real vice is making
  losses.
• Winston Churchill

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Business Issues

• Environmental impact
• Consumers safety (harmful products)
• Employees
• Activity of managers/employees (incompetence,
  criminal activity, unethical behaviour)
• Workers safety (conditions, treatment)
• Protection of investors
• Community impact
• Others?
• Social influence?
• Over-consumption?

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Government and Business

• Government as a
• Customer
• Competitor
• Regulator
• Protecting competition, consumers, environment
• Taxation agent
• Provider of incentives and financial assistance
• Provider of essential services

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Conclusions

• Firms are organizations of a capitalist economic
  system
• Capitalism promotes choice, efficiency and
  effectiveness
• Businesses are the economic organizational
  facilitators of choice that provide value to
  customers and stakeholders profitably
• Firms create value with
• Effective products
• Efficient production
• Firms must maintain sustainable relationships
  with stakeholders like customers, employees,
  investors, community, government to stay in
  business
• The true business of every company is to make
  and keep customers (Drucker, 1954)
• Understanding the value business provides is
  fundamental to the study and delivery of business

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Administration

• Clickers
• Power off
• Bring to next class
• Bring on Wednesday
• Website access password protection
• Username Webfx\x2006xxx
• Password _ _ _ _ _ _ _ _

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