Fundamentals of Business Administration Vorlesung WS 2014/15 an der FH Kamp-Lintfort

1. Fundamentals of Business Administration
Winter 2014/15
Module: Fundamentals of Business Administration
Program: Energy and Environment
3rd Semester
Dr. Thomas Dirksmeyer
14th Lecture
15/01/2015

2. Objectives today
• Students will have reviewed major aspects of taxation
• Students will know the basic types of organisational structures in a
company and the respective considerations for choosing one of them.
• Students will have understood basic aspects of corporate strategy.
Fundamentals of Business Administration • WS 2014/15 • Thomas Dirksmeyer 2

3. Major taxes
• VAT
- broad-based tax on final consumption
- staged collection process (each business in the supply chain involved)
- destination principle (charged in the country of final destination)
• Corporate Tax
- charged on corporate income
- some countries (including Germany) have additional local taxes
- different kinds of treatment of dividend payment
• Role of transfer prices
- important for taxing multinational corporations
- tendency to shift earnings to low-tax countries
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 3

4. Fundamentals of Business Administration • WS 2013/14 • Dr. Thomas Dirksmeyer

5. From task to organisational structure
Organisational structure derived from task analysis
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 5

6. Leadership – what should a boss be like?
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 6
Manager
makes
decision
and
announces
it
Manager
‚sells‘
decision
Manager
presents
ideas
and
invites
ques7ons
Manager
presents
problem,
gets
sugges7ons,
makes
decision
Manager
defines
limits,
asks
group
to
make
decision
Manager
permits
employees
to
func7on
within
defined
limits
Manager
presents
tenta7ve
decision
subject
to
change
autocratic
laissez-faire
employee-
centered
boss-
centered
use of authority by the manager
area of freedom for employees
participative

7. How would you like your boss to be?
• Regarding your daily work
• Solving problems in personal relationships with colleagues
• Protecting your interests towards top management
• Motivating you, creating the feeling everybody is doing something
important
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 7
strong weak

8. How deep should the structure be?
• nobody likes to be at the end of a seemingly endless line of command:
flat hierarchies have a lot of charm
• No manager can efficiently manage dozens of employees:
not too many direct reports per manager
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 8

9. What is the most logical structure?
• The classical functional organisation
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 9

10. What is the most logical structure?
• A branch per product - often gives each division a high level of
independence
• Difficult to make use of synergies in support functions
Fundamentals of Business Administration • WS 2013/14 • Dr. Thomas Dirksmeyer 10

11. What is the most logical structure?
• If the company‘s business is strongly geographically structured, it can
make sense to organise the company structure in a similar way.
Fundamentals of Business Administration • WS 2013/14 • Dr. Thomas Dirksmeyer 11

12. Line authority and chain of command
• Classical line authority includes clear (if possibly lengthy) chains
of command.
Fundamentals of Business Administration • WS 2013/14 • Dr. Thomas Dirksmeyer 12
CEO
President
Vice
President
Vice
PresidentVice President
Region 1 Region 2 Region 3
District A District B District C
Executive
Vice
President
Executive
Vice
President

13. Matrix structure
– a challenging type of organisation
• Functional departments hold and lead groups of experts.
• Daily work, however, is mostly done within project organisations
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 13

14. Laundry
&
Home
Care
Georg
Bara2a-­‐Dragono
Marke7ng
Laundry
Care,
La7n
America,
Western
Europe
Ashraf
El
Afifi
Middle
East/Africa
Pascal
Houdayer
Marke7ng
Home
Care,
Business
Development
Dr.
Marcus
Kuhnert
Financial
&
Business
Controlling
Prof.
Dr.
Thomas
Müller-­‐
Kirschbaum
Research
&
Development,
Supply
Chain
Günter
Thumser
Eastern
Europe
Beauty
Care
Michelle
Cheung
Asia-­‐Pacific
Dr.
Stefan
Huchler
Supply
Chain/Packaging
Thomas
Keller
Eastern
Europe/CIS,
La7n
America,
Middle
East/
Africa
Norbert
Koll*
North
America
Michael
Rauch
Financial
&
Business
Controlling
Marie-­‐Eve
Schröder
SBU
Hair
Jens-­‐MarMn
Schwärzler
SBU
Body/Skin/Oral,
Western
Europe
Stefan
Sudhoff
Professional
Adhesive
Technologies
Prof.
Dr.
Ramón
Bacardit
Research
&
Development
Julian
Colqui2
SBU
General
Industry,
North
America
Jean
Fayolle
SBU
Packaging
Industry,
La7n
America
Enric
Holzbacher
SBU
Consumer/CraTsmen/
Building,
Europe,
Middle
East/
Africa
Paul
Kirsch
SBU
Transporta7on/Metal
Michael
Olosky
Asia-­‐Pacific
Dr.
Ma2hias
Schmidt
Financial
&
Business
Controlling
Alan
Syzdek
SBU
Electronic
Materials
Corporate
FuncMons
Wolfgang
Beynio
Finance/Controlling
Dr.
Andreas
Bruns
Infrastructure
Services
Bertrand
Conquéret
Purchasing
Dr.
Joachim
Jäckle
Financial
Opera7ons
Thomas
Gerd
Kühn
Legal
&
Compliance
Carsten
Tilger
Corporate
Communica7ons
Dr.
Peter
Wroblowski
Informa7on
Technology
Example
Top-level organisation at Henkel

15. Six key elements in organisational design
• Work specialisation
- specialised workers for specialised tasks
• Departmentalisation
- grouping jobs and workers together
• Authority and Responsibility
- rights to issue orders, responsibility to account for results
• Span of control
- how many people can a manager supervise?
• Centralisation and decentralisation
- who buys the pencils for all your company?
• Formalisation
- how standardised and regulated should each job be?
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 15
after Robbins/deCenzo/Coulter

16. Business Strategy
• Strategy is about formulation of major goals of a company.
• Defines scope and direction of a company.
• Aiming at the creation of long-term value (to the owners).
Elements of a corporate strategy
• Analyse competitive environment of your industry (e.g. “Five Forces”)
• Decide how to position your products in the market (e.g. low-cost)
• Decide how to develop your product portfolio in future
• Use analysis of strengths and weaknesses to define your strategy
Fundamentals of Business Administration • WS 2014/15 • Thomas Dirksmeyer 16

17. A company‘s strategy ...
• ... as explained to the public
• Can you imagine what kind of
company this is?

18. ... and some details about that strategy
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 18
OUTPERFORM
• actively managing our portfolio
• strengthening our top brands
• launching powerful innovations
• focusing on our customers and
consumers.
GLOBALIZE
• Leverage strengths in mature
markets and expand in emerging
markets
• Speed and efficiency
SIMPLIFY
• Extending shared services: new
hubs, more
• business processes
• Integrated IT platform
• Increased efficiency: driving value
generation
INSPIRE
• Developing strong leaders
• Talents & Performance
• Managing diversity as a
competitive asset
portfolio innovation expand valueBUZZWORDS
brands
shared
services

19. Business Strategy
Porter‘s Five Forces
Rivalry
among
competitors
Threat of
new
entrants
Bargaining
power of
buyers
Threat of
substitute
products
Bargaining
power of
suppliers
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 19
Supplier Power: Here you assess
how easy it is for suppliers to drive
up prices. This is driven by the
number of suppliers of each key
input, the uniqueness of their
product or service, their strength and
control over you, or the cost of
switching from one to another.
Buyer Power: Here you ask yourself how
easy it is for buyers to drive prices down.
Again, this is driven by the number of
buyers, the importance of each individual
buyer to your business, the cost to them of
switching from your products and services
to those of someone else.
Competitive Rivalry: What is important here
is the number and capability of your
competitors. If you have many competitors,
and they offer equally attractive products and
services, then you'll most likely have little
power in the market.
Threat of Substitution: This is affected by
the ability of your customers to find a different
way of doing what you do. If substitution is
easy and substitution is viable, then this
weakens your power.
Threat of New Entry: Power is also affected
by the ability of potential competitors to enter
your market. If it is easy to enter your market
and compete effectively, or if you have little
protection for your key technologies, then new
competitors can quickly enter your market
and weaken your position.

20. Five generic competitive strategies
• Strategies differ in the way a competitive advantage is pursued and
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 20
overall
low-cost
strategy
broad
differentiation
strategy
focused
low-cost
strategy
focused
differentiation
strategy
best cost
provider
strategy
broad
cross-section
of buyers
narrow
buyer segment /
market niche
low cost differentiation

21. Five generic competitive strategies
• Low-cost provider strategy
- Achieve lower overall costs than rivals, targeting a broad spectrum of
customers - usually by underpricing rivals.
• Broad differentiation strategy
- Seek to differentiate you product against rivals’ in ways that appeal to a
broad spectrum of buyers
• Focused low-cost strategy
- Concentrate on a narrow buyer segment (or market niche), outperform
rivals by having lower costs.
• Focused differentiation strategy
- Concentrate on a narrow buyer segment, outcompete rivals by offering
customized products that better appeal customers.
• Best-cost provider strategy
- Satisfy customers by meeting expectations on product quality and
features while beating their price expectations.
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 21

22. Exercise:
• Find examples for these strategies in
- the German food retail market (Edeka, Rewe, Aldi, Lidl, Penny ... )?
Are there any niche players in this market?
- the market for smart phones
- the European car market
• What would a company need to do to follow a low-cost provider strategy?
• What would a company need to do to follow a focused differentiation
strategy?
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 22

23. How can a low-cost leadership
be established?
• All essential activities in the value chain need to be cost efficient – and
better than others
- capture economies of scale
- take advantage of learning curve effects
- operate at full capacity
- employ advanced production technology
- reduce workforce
- consider outsourcing, but also vertical integration
• Alternative approach
- “revamp the value chain” by eliminating cost-producing activities
- eliminate intermediate sales channels (e.g. by direct sales)
- close cooperation with suppliers (e.g. just in time supply)
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 23

24. How can a focused differentiation
be established?
• Defining and developing product and target group need special care
- carefully designed, unique product
- develop product that is hard to duplicate (innovation, patents)
- well-defined group of buyers
- special attention to buyers’ needs (desires, wishes, ... or costs)
to maintain buyers’ loyalty
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 24

25. Text-book example:
Nespresso
Essential success factors:
• global reputation of the brand
• global brand community
(e.g. club membership)
• exclusive route to market
(flagship stores, internet boutique)
• high quality
• innovation in technology
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer 25
Source: Gamble, Thompson, Peteraf

26. The BCG matrix -
a favourite tool in portfolio analysis
This matrix symbolises
growth potential and the
company’s market share of
individual business products
or segments:
Stars
Products with high market
share in fast growing markets
Cash Cows
Products with high market
share in stagnating, mature
markets
Question Marks
Products with low market
share in fast growing markets
Poor Dogs
Products with low market
share in stagnating markets
Relative market share
Industrygrowthrate
high low
highlow
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer

27. What conclusions result
from the BCG matrix method?
• Stars
- high growth potential, good starting position
- require investment to become the next cash cow
• Question Marks
- high growth potential, but weak starting point
- attractive for investments, have the potential to become stars,
- need close observation concerning progress, risk to become dogs
• Cash Cows
- good position today, but little or no growth potential
- keep investment to minimum level
- use revenues from cash cow to invest into growth areas (stars)
• Dogs
- weak position today, little growth potential
- do not invest, consider desinvestment
27
review
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer

28. SWOT - a technique to identify
a company’s competitive position
internal
analysis
external
analysis
strengths weaknesses opportunities threats
situation
analysis

29. SWOT descriptions
factor description action
strengths
those potential factors that make a firm more
competitive than its direct competitors
maintain, build
& leverage
weaknesses
both potential limitations and defects ingrained in
an organisation and/or weak factors relative to
direct competitors
remedy or exit
opportunities
future factors that allow the organisation to
improve its relative competitive position
prioritise and
optimise
threats
those future factors that reduce the firm’s relative
competitive position
counter

30. SWOT analysis: list key issues
internal strengths internal weaknesses
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
external opportunities external threats
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
9 9
10 10
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer

31. external threat (template)
description
name number
probability: xxxxx impact: xxxxx

32. SWOT analysis: generic answers
internal strengths internal weaknesses
1 access to capital / money 1 lack of capital
2 experienced workforce 2 high labor costs
3 local experience in target market 3 no experience in target market
4 strong range of products 4 small product range
5 essential know how / patents / licenses 5 no core competencies
6 low production costs 6
7 good customer service 7
8 established financial controlling 8
9 9
10 10
external opportunities external threats
1 growing market 1 political intervention / regulation
2 few competitors 2 shrinking markets / economic crisis
3 falling trade barriers 3 strong competitors
4 expand into new product line 4 adverse demographic development
5 expand into new countries 5
6 expand into new customers groups / new market segments 6
7 7
8 8
9 9
10 10
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer

33. OT priority matrix
0
1
2
3
4
5
6
7
8
9
10
0 1 2 3 4 5 6 7 8 9 10
probability
impact
This matrix is used to
identify the most relevant
opportunities and threats:
For each opportunity and
threat, determine the
probability of this to
happen and the impact it
potentially has.
Naturally, the ones with
high probability and high
impact should be
concentrated on.
Fundamentals of Business Administration • WS 2014/15 • Dr. Thomas Dirksmeyer