Managerial Economics of Industrial Enterprise : Educational presentations

MANAGERIAL ECONOMICS OF AN INDUSTRIAL ENTERPRISE Kristýna Pustějovská 1 Goals, Functions and Activities of an Industrial Enterprise Company Goals Image source: https://coamplifi.com/wp-content/uploads/2021/07/coamplifi_goals-550x550.jpg •Basic production factors include: •human labor •tangible (physical) capital •financial capital (own and borrowed) •land, or natural resources •Joined by other production factors as technological knowledge, innovations, original solutions etc. •Manufacturing enterprise = Institution ensuring the performance of business activities, planned and managed, which strives to achieve set goals through the most efficient combination of production factors •To achieve company goals, cooperation of all acitivities is necessary Goals Image source: https://digitalleadership.com/blog/business-goals/ •Company goal is a state manufacturing company wants to achieve at a certain time, it is a desired end state that the company is supposed to reach in the future and where its plan is heading Rules for setting goals •S – specific •M – measurable •A – achievable •R – relevant •T – time bound •E – evaluate •R – reward Goals According to period to which they relate: •Short-term goals (operational) •Achievable within 1 year, •Implementation responsibility belongs to lower level managers •Long-term goals (strategic) •Achievable in a time horizon longer than a year •Top management is responsible According to Performance •Short-term targets identified as important for ongoing business Image source: https://digitalleadership.com/blog/business-goals/ Goals Quantitative & Qualitative Goals •Quantitative goals •Require factual data •Often very tangible, numbers or statistics •Provable measurements •Qualitative goals •Build around impressions and degrees •Usually how someone feels about something •or how would they describe an experience •Harder to collect Difference is type of data collected to measure success Image source: https://digitalleadership.com/blog/business-goals/ Goals Outcome & Process-Oriented Goals •Outcome-Oriented Goals •Success determined by how and when the goal is reached •Pass or fail situations •Process-Oriented Goals •Success is less specific •Requires the completion of a set of steps regardless of the outcome •It’s the journey, not the destination that matters •Process-Oriented goals favors the journey •Outcome-Oriented Goals care only about the destination Image source: https://digitalleadership.com/blog/business-goals/ Another Possible Goals Division According the areas they concern: •Economic goals – include profit, sales volume, market share, and financial goals (liquidity, total and ekvity capital, financial investments, market value of the company, receivables etc.) •Technical goals – development and introduction of new products, expansion of production capacities, development of technologies •Social goals – social and working conditions of employees, oportunities for their career advancement and education, employment stability, wage levels, creation of job opportunities, environmental protection,..) According to their hierarchy: •Main goals (superior, primary) •Sub-goals (specify the primary goals) According to relationship between corporate goals •Complementary goals – achieving one goal requires achieving another one •Competing goals – higher fulfillment of one leads to lower fulfillment of another •Indifferent goals – fulfillment of which has no effect on the realization of another goals Business Goals •Company usually wants to combine them •Complementary goals – reducing costs can lead to higher profits •Competing goals – when a company wants to keep costs low, but at the same time shows greater promotional activity, which increases costs. •General primary goal for industrial company is considered to be the maximization of the market value (of company, of owners‘ assets) •In small businesses, where the connection between owner and his business is much closer than in larger companies, ther goals can often prevail, such as: •Feeling of satisfaction from building a successful business •Possibility of independent decision-making •Ensuring permanent work for family members •Maintaining and continuing the family tradition Image source: https://www.ukbusinessmentoring.co.uk/ news/how-an-objective-can-help-abusiness Business Life Cycle •Refers to the evolution of an business through four stages based on their common characteristics •Those four stages are: •Introduction •Growth •Maturity •Decline phase •Mature industries include food and agriculture, mining, and financial services •Useful for investors as they can make better-informed investment decisions Image source: https://www.linkedin.com/pulse/understandingbusiness-life-cycles-navigating-evolving-mgtnf/ Introduction phase •Startup phase involves the development and early marketing of a new product or service •Obtaining information about the products and industry participants is not easy = unclear demand •New suppliers are developing, = buyers of the goods and services need to learn more about them •Business tends to be highly fragmented in this stage •Participants also tend to be unprofitable since expenses are incurred to develop and market the offering, while revenues are still low Image source: https://www.manrajubhi.com/4-stages-of-a-business-life-cycle/ Growth Phase •Consumers have come to understand the value of new offering, business or industry •Demand grows rapidly •Few new business became apparent and compete to establish a share of the new market •Immediate profits are usually not a top priority •Companies spend on research and development or marketing •Business processes are improved •Geographical expansion is common Image source: https://www.manrajubhi.com/4-stages-of-a-business-life-cycle/ Maturity Phase •Begins with a shakeout period, during which sales growth slows, focus shifts toward expense reduction and consolidation occurs •As maturity is achieved, barriers to entry become higher, and the competitive field becomes more clear •Market share, cash flow, and profitability become the primary goals of the remaining companies now that growth is relatively less important. •Price competition becomes much more relevant •Businesses may prolong the maturity phase by repositioning their offerings, investing in new markets and technology, and spurring new growth. Image source: https://www.manrajubhi.com/4-stages-of-a-business-life-cycle/ Decline Phase •Marks the end of an industry‘s ability to support growth •Obsolescence and end users negatively impact demand = declining revenues = margin presure •Further consolidation is common as participants seek synergies and further gains from scale •This phafe often signals the end of viability of business model •Can be delayed with largescela product improvement or repurposing Image source: https://www.manrajubhi.com/4-stages-of-a-business-life-cycle/ Sources JANOVSKÁ, Kamila. Průmyslová ekonomika a management. Online, Studijní opora. Ostrava: VŠB - TUO, 202. https://digitalleadership.com/blog/business-goals/ https://www.investopedia.com/terms/i/industrylifecycle.asp https://www.manrajubhi.com/4-stages-of-a-business-life-cycle/ 20 Thank you for your attention 21 NPO_VŠB-TUO_MSMT-16605/2022 Thank you for your attention [email protected] (A513) This work is licensed under CC BY 4.0