Planning Business

Copyright © 2004 South-Western. All rights reserved.

Organization of a BusinessOrganization of a Business

Jeff MaduraIntroduction to

Business 3e

Introduction to Business 3e

11Planning A BusinessPlanning A BusinessPlanning A BusinessPlanning A Business

Copyright © 2004 South-Western. All rights reserved. 1–2

Organization of a BusinessOrganization of a Business


Learning GoalsLearning Goals• Identify key business stakeholders.•Describe key business functions.•Explain how to develop a business plan.


Business DefinedBusiness Defined

A business is an enterprise that provides products or services

desired by customers.


Key Business DecisionsKey Business Decisions•Product

– What type of product should be produced?

•Production – How should the product be produced?

•Promotion– How should the product be promoted?

•Financing– How should the company obtain funds to

finance the cost of producing the product?


Business DecisionsBusiness Decisions


Key StakeholdersKey Stakeholders•Owners

– Entrepreneurs– Co-owners– Stockholders

•Creditors•Employees

– Managers

•Suppliers•Customers


Interaction among Owners, Interaction among Owners, Employees, Customers, Suppliers, Employees, Customers, Suppliers,

and Creditorsand Creditors

Exhibit 1.1


Creating a Business IdeaCreating a Business Idea• Identify a competitive advantage.•Differentiate the product or service from competitors.

•Determine necessary resources.•Assess feasibility of the idea.


business onlinebusiness online ee -- businessbusiness


Success StoriesSuccess Stories• Domino’s Pizza

– Managhans bought bankrupt pizza parlor– Started with little funding– Now generates sales of $1 billion per year

• Jeremy’s Micro Batch Ice Cream– Applied microbrewery concept to ice cream– Makes ice cream in small batches, sold in limited

editions• Glow Dog, Inc.

– Sells light-reflective clothing for pets– After two years, average annual sales of $1 million


Lessons to RememberLessons to Remember•Successful businesses do not require a great invention. – Many focus on making life more convenient

for customers.

•Some business ideas will fail—but entrepreneurs can learn from failures and make revisions.


Impact of TechnologyImpact of Technology•Technology defined

– Knowledge or tools used to produce products and services

• Information technology– Represents over 1/3 of the growth in U.S.

output– Reduces cost of producing products– Workers in technology industries earn more

than workers in other industries.


Impact of TechnologyImpact of Technology•E-business or e-commerce

– Use electronic communications to produce or sell products and services Sales to individual customers B2B e-business: transactions between a business

and its suppliers Generates $301 billion in revenue and creates 1.2

million jobs each year


Successful E-BusinessesSuccessful E-Businesses• Started out small• Created to sell a product or service that was not offered by competitors

• Transformed how traditional firms conducted business– Improved communication with customers– Improved information flow– Improved efficiency– Complemented traditional business operations


E-Business ExamplesE-Business Examples• Amazon

– Online seller of books, music and other products– Low overhead costs allow price discounting

• Yahoo!– Internet search engine and the most visited site on

the Web– Offers variety of services - free email, web page

hosting, custom-designed start-up pages– Generates revenue by selling advertising

• eBay– Online auction service


Key Functions of BusinessKey Functions of Business• Management

– Means by which employees and other resources are used by the firm

• Marketing– Means by which products and services are

developed, priced, distributed, and promoted to customers

• Finance– Means by which firms obtain and use funds for their

business operations


Key Functions of BusinessKey Functions of Business•Accounting

– Summary and analysis of the firm’s financial condition

– Used to make various business decisions

• Information systems– Information technology, people, and

procedures that provide appropriate information to make effective decisions


How Business Decisions How Business Decisions Affect a Firm’s EarningsAffect a Firm’s Earnings

Exhibit 1.4


Common Business Common Business DecisionsDecisions

•Management Decisions

– What equipment is needed?

– How many employees should be hired?

– How can employees be motivated to perform well?



•Marketing Decisions

– What price should be charged?

– Should the product be changed to be more appealing to customers?

– Should the firm use advertising or some other strategy to promote its product?



•Finance Decisions

– Should financial support come from the sale of stock or from borrowing money or some combination?

– Should the firm attempt to obtain borrowed funds for a short-term or long-term period?

– Should the firm invest funds in a new business project?


A Business PlanA Business Plan•Detailed description of the proposed business– Description of the product or service– Types of customers the business would

attract– Competition– Facilities needed for production


Developing a Business Developing a Business PlanPlan

•Assess the Business Environment– Economic environment– Industry environment– Global environment

•Develop Management Plan– Organizational Structure– Production– Human Resources


Developing a Business Developing a Business PlanPlan

• Marketing Plan– Target Market– Product Characteristics– Pricing– Distribution– Promotion

• Financial Plan– Financing– Feasibility


Online ResourcesOnline Resources•Advice and basic information

– Yahoo’s Small Business site– American Express– Small Business Administration

•Financing Options– Quicken Small Business– Garage.com– The Elevator

•Business Planning Software


Assessing a Business PlanAssessing a Business Plan•Potential revenue•Potential demand for product or service

•Potential expenses•Profit potential


Expected Monthly Expenses of Expected Monthly Expenses of CHCCHC

Exhibit 1.6


Expected Performance of CHC Expected Performance of CHC in the First Yearin the First Year

Exhibit 1.7

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Planning Business

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