OUTLINE by Paul Nervy Copyright (c) 2006 by Paul Nervy Visit www.paulnervy.com. wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww BUSINESS Contents Business in general. Management Finance and accounting Marketing and advertising. Production and Operations Management MIS History of business. Theory. Practice wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww BUSINESS IN GENERAL What is the role of business in America today? What is the role of business in the world today? wwwwwwwwww What is the role of computers and the Internet in business? wwwwwwwwww 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 wwwwwwwwww 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. wwwwwwwwww Develop products and services. Better than competitions. Cheaper. Patent them. wwwwwwwwww Problems of business Fraudulent corporate accounting Cooking the books. Mistating earnings. Keeping double sets of books. Short term profit focus. Pump and dump. wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww MANAGEMENT Contents Management theorists Motivation Leadership Communication wwwwwwwwww 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 wwwwwwwwww Managing time Managing change. Managing conflict wwwwwwwwww Managing people, Psychology of individuals Sociology of groups Managing money Managing machines wwwwwwwwww 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. wwwwwwwwww Motivation Maslow's hierarchy of needs. Motivating workers - What motivates people today? wwwwwwwwww Leadership Types of power Theories of leadership Techniques of leadership Leadership styles democratic autocratic wwwwwwwwww Delegating power and responsibility Authority and control Reward. Carrot. Punishment. Stick. wwwwwwwwww Communication Managing communication flows in an organization Open communication vs. closed communication wwwwwwwwww Conflict management Conflict viewed as bad vs. viewed as good. wwwwwwwwww International management wwwwwwwwww Internet business management wwwwwwwwww 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. wwwwwwwwww 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 wwwwwwwwww Environments External environment: Economic. Political and legal. Social and cultural. Science and technology. Internal environment: Financial. Physical. Human. Technological. wwwwwwwwww 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 wwwwwwwwww 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 wwwwwwwwww Planning Types of planning: strategic tactical Techniques for planning GAP analysis. Identify, analyze, fill. SWOT analysis. Strength, weaknesses, opportunities, threats. Management by objective. wwwwwwwwww 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 wwwwwwwwww Human resources management recruit, interview, hire train, development quit, layoff, fire pay and benefits wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww FINANCE Contents Financial management Financial statements Risk analysis Time value of money Short term finance Long term finance Mergers and Acquisitions International finance. wwwwwwwwww 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 wwwwwwwwww 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 wwwwwwwwww 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. wwwwwwwwww 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 wwwwwwwwww Leverage. Use of fixed debt to gain greater EPS. wwwwwwwwww 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) wwwwwwwwww 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 wwwwwwwwww Derivatives Futures Options Warrants wwwwwwwwww Capital structure. Ratio of stocks, bonds, cash float baumol model: balance cash and securities wwwwwwwwww 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 wwwwwwwwww 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 wwwwwwwwww 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 wwwwwwwwww International Finance. wwwwwwwwww Capital assets pricing model (CAPM) wwwwwwwwww Mergers and Acquisitions mergers acquisitions divestitures hostile takeover white knight leveraged buyout arbitrage bankruptcy reorganization corporate Restructuring holding companies. wwwwwwwwww 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? wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww ACCOUNTING wwwwwwwwww Types of accounting Managerial accounting. For internal use. Financial accounting. For external use. wwwwwwwwww Double entry book keeping. Credits (+) in one column. Debits (-) in another column. Lets you add and subtract more easily. wwwwwwwwww Financial Statements Balance sheet. Balance sheet lists assets and liabilities Income statement. Income statement shows Revenues, Expenditures and Net income. Statement of Cash Flows wwwwwwwwww Journal. Ledger. Worksheets. wwwwwwwwww 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 wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww 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 wwwwwwwwww Introduction Basic concepts. Needs, desires. Value. Satisfaction. wwwwwwwwww Marketing Management Process. Analyze opportunities. Research and select projects. Develop strategies and tactics. Implement and control. Evaluate. wwwwwwwwww Marketing Environment. Micro environment. Suppliers. Customers. Competition. Macro environment. Demographic. Economic. Technological. Political/legal. Social/cultural. wwwwwwwwww 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. wwwwwwwwww Market Measurement and Forecasting. Estimating current demand. Estimating future demand. wwwwwwwwww Market research Finding out what is needed. Find out what people dislike about existing products. Market research methods. Survey Focus groups Interview. wwwwwwwwww 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. wwwwwwwwww 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. wwwwwwwwww New Product Development Process. Generating ideas. Picking ideas. Product creation Test marketing. Roll out. Consumer adoption wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww Four P's. wwwwwwwwww Product. Develop and manage products Product development Product management Brand management Product life cycle. Launch product. Kill product. BCG grid. wwwwwwwwww 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. wwwwwwwwww 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. wwwwwwwwww Place. Channels. Distribution. Wholesale Retail. wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww 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. wwwwwwwwww International marketing Evaluate what the name of the company and its products will translate into different languages. wwwwwwwwww Internet marketing Spam is a blight. No unsolicited emails. Allow people to opt-in and opt-out of email advertising wwwwwwwwww Other topics Customer loyalty to companies, brand lines, products, Returns. Refunds. Exchanges. Guarantees. Warranties. Customer relations. Customer service. Customer complaints. 800 numbers wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww OPERATIONS MANAGEMENT Demand forecasting: product, materials, machinery, labor capacity planning Scheduling. budgeting CAD/CAM. inventory. Inventory costs carrying costs ordering, shipping and receiving costs total costs Inventory control systems red line method two bin system computerized abc system just in time. JIT. Materials Requirement Planning. MRP. outsourcing EOQ economic ordering quantity. Optimal amount. purchasing Bottle-necks. systems: custom job, batch, continuous, assembly line project Quality: analysis and improvement Work: standards and improvement facilities and maintenance wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww BUSINESS INFORMATION SYSTEMS wwwwwwwwww What are the types of information systems for business? wwwwwwwwww Qualitative information. Quantitative information. wwwwwwwwww Information about competitors Information about how products and services are doing. Revenues and profits. Market penetration. Information about business environment. wwwwwwwwww Paper and pencil methods. Ledgers Rolodex Day planners. File cabinets Computerized methods. Servers Desktops Laptops PDA's Cellphones wwwwwwwwww Types of computer files Text documents. Spreadsheets. Databases. Powerpoint presentations. Adobe .pdf's. Internet web sites. For employees to use. For customers to use. CMS. Content Management Systems. wwwwwwwwww Types of software CRM software. Customer Relationship Management software. HR software Accounting software. Purchasing software. Supplier relationship management. wwwwwwwwww B to B. Business to business. B to C. Business to customer. wwwwwwwwww What is the current information system? What information do we need? When, what form, who needs it? Make or buy decisions. wwwwwwwwww Systems analysis and design Systems implementation. Systems life cycle. wwwwwwwwww Information systems by functional department: Management Finance, Marketing Production and operations. HR Legal wwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwwww HISTORY OF BUSINESS wwwwwwwwww History of Theory of Business Management. Finance. Marketing. Mass marketing through mass media. E-advertising and e-commerce. wwwwwwwwww History of Practice of Business Barter Money Merchant traders of venice and middle east Guilds Corporations Industrialization. Trusts and monopolies Unions Multinationals Computers. Flat (horizontal), fast (agile), virtual businesses. wwwwwwwwww More to sort Corporate tree. Get a picture of the corporate tree. Which companies own which companies. Which are the biggest companies? How much power do they have? Golden handcuffs. Keeping a job for the money Internet business (1) Internet barter is increasing. Trading without money. (2) Ebay. People are quitting their jobs to trade full time on ebay. (3) There is a huge market for used goods. For example, Amazon.com used books section. Ideally, stocks accurately reflect the value of a company. What makes a stock overvalued? People pay too much for it. The companies prospects are declining. What makes a stock undervalued?