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

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.

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

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

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

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.

Business and the Environment

Types of firms: Sole owner. Partnerships. Corporation. Cooperatives.

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).

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.

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).

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

Business and the Environment Structure varies from manufacturing to

software, financial, services to legal and sole proprietorship.

Typical Organization:

Business and the EnvironmentNext 9 slides are adapted from www.bized.co.uk

Business and the Environment

Business and the Environment

Market Analysis Size Segments

Marketing Strategy Objectives Market segmentation Niche v Mass marketing

Market Research Primary Secondary Elasticity of Demand

Business and the Environment

Business and the Environment

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.

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

Business and the Environment

Take Inputs Process/Manufacture Output

Costs – Fixed and Variable Revenue

Profit

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