BSAD 101 Introduction to Business

1
BSAD 101 Introduction to Business
St. Francis Xavier University
The Organization, its Marketplace and the Broader
Environment
Professor Neil Maltby
2
Objectives How to study business

• Learning how to think about business
• This class focuses on conceptualizing business.
  Conceptual frameworks provide a means and
  benchmark for learning and making sense of
  concepts and inter-connections
• BSAD 101 and BSAD 102
• We will make use of the reading The
  Organization, Its Marketplace and the Broader
  Environment and Applying this concept to a real
  business scenario via the article Smells Like
  Victory

St. Francis Xavier University
3
The Organization, Its Marketplace and The Broader
Environment
Broader Environment
Marketplace
St. Francis Xavier University
Organization
4
The Organization
General A Common Purpose A Common
Strategy Management
Business Functions Marketing Management Financial
Management Operations Management Human Resource
Management Other Functions
St. Francis Xavier University
Resources People Money/Capital Raw
Materials Equipment Supplies Facilities
Land Intellectual Property Information
5
What is profit?

• A profit is
• The amount of money a firm charges for a product
  or service
• Anything of economic value to the firm
• What remains (if anything) after a businesss
  expenses are subtracted from its sales revenues
• A distribution of money to stockholders

St. Francis Xavier University
6
What is profit?

• What remains (if anything) after a businesss
  expenses are subtracted from its sales revenues

• Reward for taking on risk situations involving
  exposure to danger or loss (i.e. variables that
  may lead a business venture to lose money)
  relative to the opportunities for gains (return).
  Risk may result from uncertainties within
• Firm
• Market
• Broader Environment

St. Francis Xavier University

• Where can a business allocate any profits
  earned?

• Internal
• Reinvest in firm e.g. acquire resources (people,
  equipment, facilities)
• Implement plans for growth (launch new products,
  access new markets)
• Reward management and staff

• External
• Reward investors
• Invest

7
The Marketplace
The Industry
Marketplace
Competitors
St. Francis Xavier University
Intermediaries (e.g. wholesalers, retailers)
Customers
Producers
Suppliers
Investors Financial Intermediaries
Labour Market Intermediaries
Organization
Information Suppliers

• The Devil wears Prada speech

8
The Broader Environment
Domestic Economy
Domestic Government
Global Economy
Technological Changes
St. Francis Xavier University
Natural Forces
Demographic Changes
Socio-cultural Forces
9
Analysis

• Evaluate the components of
• The Firm
• The Marketplace
• The Broader Environment
• Does the business climate appear favourable or
  unfavourable for the firm?
• Why?
• Clearly state the evidence supporting your
  assessment.

St. Francis Xavier University
10
Eco-Logic

• Eco-Logic
• Small Canadian firm, 14 years old
• Destroys Persistent Organic Pesticides (POPs) and
  chemical weapons without using incineration by
  using a heating process that reduces chemicals to
  water and salt
• On the verge of a big order
• Would you invest in this company?
• Yes
• No

St. Francis Xavier University
11
Eco-Logic

• In groups analyze Eco-Logic using the previous
  framework
• Is the business climate favourable or
  unfavourable? Why?

St. Francis Xavier University
12
Eco-Logic Analysis

• Broader Environment
• International U.N Agreement to eliminate
  stockpiled weapons, Stockholm Convention
  agreement re control of POPs World Bank funds
  for developing countries, Japanese regulatory
  approval
• Socio-cultural Public pressure to use
  non-incineration methods, and Greenpeace support
• Government Regulatory impetus, signatory to
  international conventions
• Conclusion?

St. Francis Xavier University
13
Eco-Logic Analysis

• Conclusion
• Is the environment for Eco-Logic favourable?
• Favourable
• Unfavourable

St. Francis Xavier University
14
Eco-Logic Analysis

• Broader Environment
• International U.N Agreement to eliminate
  stockpiled weapons, Stockholm Convention
  agreement re control of POPs World Bank funds
  for developing countries, Japanese regulatory
  approval
• Socio-cultural Public pressure to use
  non-incineration methods, and Greenpeace support
• Government Regulatory impetus, signatory to
  international conventions
• Conclusion
• Favourable environment
• Positive pressure on customers to adopt
  Eco-Logics technology
• International developments

St. Francis Xavier University
15
Eco-Logic Analysis

• Marketplace
• Customers Demand
• U.S Army (Govt)....15 b or 30,000 tons
• Tokyo Bocki (engineering firm) and
• Nippon Sharyo (metal recycler)50 m - 500 m
• Can. Govt (Sydney Tar Ponds)700,000 tons
• Dev. Country Govts / World Bank500 m
• Conclusion
• Favourable demand
• Various types of customers (govt generally
  reliable)
• Demand identified in several ways (, units,
  time, size, growth)
• Big pie

St. Francis Xavier University
16
Eco-Logic Analysis

• Marketplace (cont)
• Competition
• tough competition
• General Atomics partnership (for U.S. army bid)
• European incinerators
• More than one competitor will probably be
  signed up
• Some evidence of collaboration (Eco Logic teamed
  up with 3 engineering firms)
• Big pie means competition dispersed
• Conclusion
• Less Favourable (but not unfavourable)
• Market partners
• Positive access to partners and financial
  suppliers (investors via TSE and U.S. Army)
• Favourable

St. Francis Xavier University
17
Eco-Logic Analysis

• Organization
• Resources
• -- Invested money (equity), reinvested revenue,
  development (army)
• People Hallet (idea) Arnold (management/strategy
  )
• Intellectual Property -- patent
• Facilities, land and equipment (Australia and St.
  Catherines)
• Functions
• e.g. Finance
• Managing revenues/cost/profit/projections
• Year 2000 first profitafter 14 years
• Projected growth in revenue and profits
• Insolvent not able to meet current financial
  obligations
• Raising for operations and growth via stock
  market (e.g. 13.7 million on TSE. Managing
  stock price from 3 share to 22.75 to 0.32

St. Francis Xavier University
18
Eco-Logic Analysis

• Organization (cont)
• Strategy (how well compete in the market)

St. Francis Xavier University
19
Eco-Logic Analysis

• Organization (cont)
• Conclusion
• Favourable Organization
• Switch to licensing has operational, financial
  and market advantages
• Good management team
• Defensible patent
• Investment money in good supply
• though
• burning through cash
• Sound process? Effective? Efficient? Cost
  effective?
• Low stock price suggests market lacks confidence

St. Francis Xavier University
20
Eco-Logic Conclusion

• Favourable
• Environment
• Market
• Organization
• Would you invest?
• Yes
• No

St. Francis Xavier University
21
Eco-Logic Conclusion

• Follow-up
• June 13, 2003 unsuccessful bid for US army
  chemical weapons destruction
• March 12, 2004 revenue decreased 90.8 v. LY to
  315,000 net loss over 1 million
• June 30, 2004 still attempting to secure
  business, but announced it was unsustainable
  w/out revenue
• August 26, 2004 company ceased operations

St. Francis Xavier University
22
Framework Takeaways

• Conceptual model
• Representation of dynamic (changing) interaction
  (relations)
• Environment influences firm and the firm
  influences the environment
• Market and environment formed from the
  interaction of many organizations
• Graduated -- not always clear distinctions when,
  for example, firms outsource labour and research,
  collaborate with partners, or form joint ventures
• Inter-national
• Managerial
• Organization focused entrepreneur, owner,
  manager, consultant, investor
• Provides a means of organizing information, means
  of analysis, and an input for decision-making
• Widely, albeit varyingly, applicable to business
  situations
• Framework should influences a firms success via
  informed decision-making

St. Francis Xavier University
Value comes from conceptual utility
Value comes from managerial utility
23
Administrivia

• The Company Market Report
• This class will focus on your major project for
  the term.
• Read the Company Market Report description on the
  course website on the link Term Project
• Groups will be formed during Mondays class
• Topic signup starts Tuesday at 9am at my office,
  NH 214.

St. Francis Xavier University