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Business and the Environment1
ESM 210 Fall 2008 Course Objective: Enable MESM
Graduates to work with and within firms to achieve environmental and natural resource objectives. Understand the organization of a firm Factors influencing firm behavior Special problems of externalities and open
access
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Business and the Environment
Debate over the social responsibility of business.
Firm green differentiation strategies Firm innovation, supply chain management,
life cycle analysis, cost control. Business coordination and NGO interaction. Policy interface—tax, regulation, market.
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Business and the Environment
Business and the Economy. Private sector is the dominant share of
overall GNP (output of goods and services in the economy).
Take away: Business structure Business stakeholders Business objectives
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Business and the Environment Firms are the organizational unit for the
production and delivery of goods and services. New—emerge in 18th century. Prior to that mostly piece work and
contracting out. Economies of scale and specialization of
labor
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Business and the Environment
Business Share of GNP, 1929-2006
0.0
2,000.0
4,000.0
6,000.0
8,000.0
10,000.0
12,000.0
14,000.0
1929 1938 1947 1956 1965 1974 1983 1992 2001
Year
Bil
lio
ns
of
$
CURRENT DOLLARS
Gross domestic product
Business
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Business and the Environment
Alternative is market bargaining for inputs (labor, capital, production, delivery) at each segment of production. Transaction costs are generally too high so that firms exist to coordinate production. Ronald Coase, Nobel Prize 1991.
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Business and the Environment
Types of firms: Sole owner. Partnerships. Corporation. Cooperatives.
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Business and the Environment
Corporations. Dominant form. Limited liability. Separate legal entity from owners (as
compared to limited liability partnerships found in law firms, LLP, LLC).
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Business and the Environment Key parties:
Investors (share owners). 30% of the population owns stock or mutual funds. Others’ pension funds are major equity owners.
Employees—firms are the major employers in the economy.
Consumers—firms are the major providers of goods and services.
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Business and the Environment
Society: R&D—firms are the major sources of applied technology and innovation. Entrepreneurship.
Structure Share owners (individuals, mutual funds,
pension funds) Board of Directors (to protect the interest
of share holders).
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Business and the Environment
Senior Management (CEO, COB, CFO) Middle Management Floor or lower level Management Employees Other input supplies Customers Bond and other debt holders
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Business and the Environment Structure varies from manufacturing to
software, financial, services to legal and sole proprietorship.
Typical Organization:
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Business and the EnvironmentNext 9 slides are adapted from www.bized.co.uk
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Business and the Environment
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Business and the Environment
Market Analysis Size Segments
Marketing Strategy Objectives Market segmentation Niche v Mass marketing
Market Research Primary Secondary Elasticity of Demand
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Business and the Environment
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Business and the Environment
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Business and the Environment
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Business and the Environment
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Business and the Environment
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Business and the Environment
Objective Profit maximization
Sum of the discounted residual of expected revenues-expected costs.
Most controversial aspect.
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Business and the Environment What is included in profit maximization?
Revenue considerations across product and service options.
Cost considerations. Short term, long term. R&D Opportunity cost. Within legal and commercial rules
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Business and the Environment
Take Inputs Process/Manufacture Output
Costs – Fixed and Variable Revenue
Profit
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Business and the Environment1
Why is profit maximization key for successful firm performance and survival?
Why is it likely to be demanded by key constituencies—investors, employees, customers?
Business Structure Business Stakeholders Business Objectives