OUTLINE

by Paul Nervy
Copyright (c) 2006 by Paul Nervy

Visit www.paulnervy.com.

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BUSINESS

Contents
Business in general.
Management
Finance and accounting
Marketing and advertising.
Production and Operations Management
MIS
History of business. Theory. Practice

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BUSINESS IN GENERAL

What is the role of business in America today?
What is the role of business in the world today?

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What is the role of computers and the Internet in business?

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People
Employees
Customers
Competitiors
Public.

Money
Revuenue.
Expenses. Rent. Wages. Materials.
Profits

Stuff
Raw materials
Finished products.
Machine tools. Office supplies. Computers.

People: Employees. Customers. Competiton.

Money: Revenue. Expenses.

Things: Raw materials. Finished goods, or products and services. Machines and Plant

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Types of business

Cooperatives.

Small business.
Outside lawyer.
Outside accountant
Marketing.
Finances.
Borrow, save, invest

Large business
Legal dept.
Accounting dept.
HR dept.
PR dept.
Finance, Accounting.
Marketing, Advertising, Sales. Account manager.

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Develop products and services.
Better than competitions. Cheaper.
Patent them.

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Problems of business
Fraudulent corporate accounting
Cooking the books.
Mistating earnings.
Keeping double sets of books.
Short term profit focus.
Pump and dump.

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MANAGEMENT

Contents
Management theorists
Motivation
Leadership
Communication

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Management tasks

Forecast
Planning
Monitor
Control
Evaluate

Delegate
Organize
Communicate
Supervise
Administrate
Review

Create a mission statement.
Create objectives
Create strategies and tactics.

Decision making
Problem solving

Coordinate
Administrate
Organize
Designing structures and mechanisms (processes)
Allocate resources

Delegation
Negotiation

Define objectives
assign responsibilities
develop standards of performance
appraise performance

Psychological skills of manager.
Forecast
Plan
Decision making.
Problem solving
Social skills of manager. People skills.
Motivation
Leadership
Communication
Conflict

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Managing time

Managing change.

Managing conflict

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Managing people,
Psychology of individuals
Sociology of groups

Managing money

Managing machines

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Organizational structure

Number of Levels
Flat organizations vs.
Hierarchical organizations

Number of Divisions or Departments
Main departments
Management
Finance and accounting,
Marketing and advertising,
Production and Operation
Other departments
IT
HR
PR
Legal

How many managers to have?
Per worker
Per departments

1 top level manager
10 mid level managers
100 low level managers
1000 workers.

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Motivation

Maslow's hierarchy of needs.

Motivating workers - What motivates people today?

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Leadership

Types of power

Theories of leadership

Techniques of leadership

Leadership styles
democratic
autocratic

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Delegating power and responsibility

Authority and control

Reward. Carrot.

Punishment. Stick.

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Communication

Managing communication flows in an organization

Open communication vs. closed communication

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Conflict management

Conflict viewed as bad vs. viewed as good.

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International management

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Internet business management

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History of Management Theory

Schools,
individuals,
works.
subject, view, theory, principles, techniques

Classical management theory
Organization studies.
bureaucracy studies.
Weber, etc.

Efficiency school of management.
Gilbreths time and motion study.
Good for industrial age assembly lines.

Theory Z.
Japanese. Group decision making.
Ouichi

Hawthorne and Mayo studies.

Quality Management
Edward Demming

Peter Drucker

Behavioral school.
Understand worker psychology and sociology.

Management science.
Operations research.
Mathematical models to design structures and processes.

Contingency school.
Management style depends on leaders, workers, task and situation.

Taylor, Fredrick.
Mayo
Fayol
Drucker, Peter.

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Business ethics.
to self
to fellow workers
to corporation
to industry or profession
to society. Community, nation, world.

Arguments for and against any type of ethical involvement.

Degrees of ethics
obligation: obey laws
responsibility: react to problems
responsiveness: proactive. plan ahead to avoid problems

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Environments

External environment:
Economic.
Political and legal.
Social and cultural.
Science and technology.

Internal environment:
Financial.
Physical.
Human.
Technological.

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Forecasting
Forecasting and planning
Forecast the business environment and plan what to do based on that.
Forecasting based on past trends
Forecasting based on current expert opinion

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Decision making.

Types of decisions: routine decisions and new/novel decisions.

Levels of decisions: Strategic, executive. Administrative, managerial. Operational, line.

Styles of decision making: Problem avoiders. Problem solvers. Problem seekers.

Conditions of decision making: Degree of certainty. Degree of risk.

Decision making process
Situation analysis
Set standards
Generate alternatives
Select alternatives
implement
evaluate

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Planning

Types of planning:
strategic
tactical

Techniques for planning
GAP analysis. Identify, analyze, fill.
SWOT analysis. Strength, weaknesses, opportunities, threats.
Management by objective.

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Control
control the process
setting standards
measuring performance
evaluate performance
take actions to control or steer
phases: input, process, output
areas: financial, people, stuff
techniques: budgets and schedules

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Human resources management
recruit, interview, hire
train, development
quit, layoff, fire
pay and benefits

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FINANCE

Contents
Financial management
Financial statements
Risk analysis
Time value of money
Short term finance
Long term finance
Mergers and Acquisitions
International finance.

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Financial management

Managing money.

Forecast finances,
plan finances,
control,
evaluate finances.

Invest,
save,
borrow,
spend,
dividend

Jobs
Treasurer: credit, inventory, capital budgeting
Controller: accounting. Cost accounting. Financial accounting. Taxes.

Financial planning
break even analysis (bea)
leverage
degree of operating leverage

Financial control
budgets
return on investments (roi)

Cash flows
Revenues
Expenses

Cash flow estimation
expansion projects
replacement projects

Financial Forecasting
forecasting sales
forecasting money needs
percentage of sales method

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Financial analysis

Financial statements

Income statement
Balance sheet

Statement of cash flows
Statement of retained earnings
Statement of changes in financial positions.

Financial ratios
asset management
debt management
profitability
market value

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Time value of money.

Discounted Cash Flow Analysis.

Present value.
Future Value.

Compounding.
Discounting.

Lump sum vs.
annuity

Future value of an annuity.
Future value of an annuity due.

Present value of an annuity.
Present value of an annuity due.

Examples of time value of money

Savings
Interest rates on savings.
Saving with a series of evenly spaced, even amount payments.

Loan
Interest rate on a loan
Paying back a loan with a series of evenly spaced, even amount payments.

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Risk
vs.
Return.

The higher the risk the greater the return.

Risk averse strategies
Risk tolerant strategies

Risk measured in terms of probabilities.

Risk analysis. How much risk are we exposed to?
Risk decisions. What is our desired level of risk?
How to make things less risky.
How to take on more risk.

Risk of the corporation

Portfolio risk.
Stocks
Bonds
Money markets

Volatility.

Beta.
pure play method
accounting beta method

Ratio analysis

Expected rate of return
Required rate of return

corporate risk
sensitivity analysis
scenario analysis
monte carlo simulation

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Leverage.

Use of fixed debt to gain greater EPS.

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Equity

Issuing stock to raise money for the business.
Buying stock to invest the profits of the business.

Stocks.

Stock types

Stock valuation methods
dividend discount method.
Zero growth
normal (constant) growth
super normal (non-constant) growth

DCF method.
WACC method - weighted average cost

Common Stock Financing
Initial Public Offer (IPO)

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Debt

Issuing bonds to raise money for the business.
Buying bonds to invest the profits of the business.

Bonds.

bond types

Bond valuation methods.
Yield to maturity
Yield to call
interest rate risk

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Derivatives
Futures
Options
Warrants

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Capital structure.

Ratio of stocks, bonds, cash

float

baumol model: balance cash and securities

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Cost of capital

cost of debt
cost of preferred stock
cost of newly issued common stock

cost of retained earnings
capm approach
bond yield plus risk premium
discounted cash flow

wacc weighted average cost of capital
marginal cost of capital

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Capital budgeting

Capital Budgeting (long term projects)
types of projects
estimate risks
estimate returns

Capital Budgeting Techniques
payback period
net present value NPV
internal rate of return IRR
average rate of return ARR

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Working Capital.

Current assets
Current liabilities

Short term financing.

Accounts payable.
costs of, effects of
wages and taxes
trade credit
short term bank loans
commercial paper

Accounts receivable.
credit management. credit policies
credit period. 90 days
credit standards: five c's.
collection policy
discounts

Long term financing.
Capital investment.
Cost of capital.
Leverage.

working capital cash flow cycle

alternative investment policies
loose
tight

alternative financing policies
aggressive
moderate
conservative

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International Finance.

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Capital assets pricing model (CAPM)

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Mergers and Acquisitions

mergers
acquisitions
divestitures
hostile takeover
white knight
leveraged buyout
arbitrage
bankruptcy
reorganization
corporate Restructuring
holding companies.

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Other financial topics.

Taxes
Tax strategies.

Depreciation
What gets depreciated?
Physical plant.
Methods of depreciation.

Amortization
What gets amortized?
Loans.
Methods of amortization.

Interest rates factors
pure rate
inflation
default risk
liquidity
maturity

Dividend Policy.
Give a dividend to stock holders or not?
How much dividend to give?
Why give a dividend?

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ACCOUNTING

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Types of accounting

Managerial accounting. For internal use.

Financial accounting. For external use.

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Double entry book keeping.
Credits (+) in one column.
Debits (-) in another column.
Lets you add and subtract more easily.

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Financial Statements

Balance sheet.
Balance sheet lists assets and liabilities

Income statement.
Income statement shows Revenues, Expenditures and Net income.

Statement of Cash Flows

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Journal.

Ledger.

Worksheets.

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enter,
post,
adjusting,

trial balance,
closing

Financial ratios

Short term assets: cash, AR

Current liabilities: payroll, AP

Inventory: perpetual vs. periodic. LIFO, FIFO. LCM.

Depreciation methods

Asset value
Asset cost

Cost of goods sold

Managerial accounting
Budget planning
Cost finding
Process costing
Job costing
Activity based costing
Performance reporting

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MARKETING

contents
Introduction
Marketing environment
Buying behaviors
Market forecasting and planning.
Market research
Market segmentation, targeting and positioning.
New product development
The Four P's
International marketing
Internet marketing

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Introduction

Basic concepts.

Needs, desires.

Value.

Satisfaction.

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Marketing Management Process.

Analyze opportunities.
Research and select projects.
Develop strategies and tactics.
Implement and control.
Evaluate.

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Marketing Environment.

Micro environment.
Suppliers.
Customers.
Competition.

Macro environment.
Demographic.
Economic.
Technological.
Political/legal.
Social/cultural.

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Marketing strategy

Basic marketing decisions.
Marketing strategies for products and services
Marketing strategies in the different stages of the product life cycle (PLC).
Marketing strategies for product leaders and product challengers.
Marketing strategies for the global marketplace.

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Market Measurement and Forecasting.

Estimating current demand.
Estimating future demand.

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Market research

Finding out what is needed.

Find out what people dislike about existing products.

Market research methods.
Survey
Focus groups
Interview.

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Market segmentation, targeting, and positioning.

Segmentation
Segment the market demographically.

Targeting
Target your segments

Positioning
Position your product vs. other products in the same space.

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Consumer behavior. Buying processes.

Types of mindful, thoughtful buying
Big decisions on expensive items.
Small decisions on inexpensive items.

Types of mindless buying
Automatic repeat buying. Loyalty to brands.

Consumer Markets and Buying Behavior.
Small items vs. big items.
Trying new items vs. sticking with old items.

Organizational Markets and Buying Behavior.
The Reseller Market.
The Government Market.

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New Product Development Process.

Generating ideas.
Picking ideas.
Product creation
Test marketing.
Roll out.
Consumer adoption

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Four P's.

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Product.

Develop and manage products
Product development
Product management
Brand management
Product life cycle.
Launch product. Kill product.
BCG grid.

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Promotion.

Advertising.

Sales.
Person to person sales.
Door to door.
Cold calling
Junk mail
Spam

Public Relations.
Telling your side of the story. Telling the good points.

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Price.

Pricing strategies for luxury items vs. necessities.
Big ticket items vs. small price items.

Pricing based on costs. For example, marking up 100%.
Pricing based on the competition. For example, undercutting the competition.
Pricing based on what people will pay. For example, raising price high as people pay.

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Place.

Channels.
Distribution.
Wholesale
Retail.

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Advertising

Media
Labels on the outside of clothes instead of the inside
Billboards
Commercials on radio and television
Advertisements in newspapers
Selling space and time
Reason and emotion in advertising. Copy writing.
Abuses of marketing. Truth in advertising laws.

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International marketing
Evaluate what the name of the company and its products will translate into different languages.

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Internet marketing
Spam is a blight.
No unsolicited emails.
Allow people to opt-in and opt-out of email advertising

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