Understanding the Role of Entrepreneurs and Firms: Functions, Types, and Co-operatives - P, Exámenes de Administración de Empresas

¡Descarga Understanding the Role of Entrepreneurs and Firms: Functions, Types, and Co-operatives - P y más Exámenes en PDF de Administración de Empresas solo en Docsity! Lesson 1 1. The company as a system: flows Firms are considered as a system. That is to say that all firms are a ser of elements interrelated with each other and linked in with the overall system that aims to achieve certain objectives. In the company as a system, firms have also 4 flows: • Physical: Value movement in physic units among the company’s elements and the environment (materials, machines, etc.) • Economical: Value movement in economic terms among the company’s elements and the environment (the value of goods and services). • Financial: Value movement in monetary units among the company’s elements and the environment (transformation of economic flow into money, financial transactions, etc.). • Informative: Data movement which is transformed in information that can be communicated (Information system, like accounting). The information is in two directions (feedback). 2. Elements of a company Elements of a company: • The human factor.This consists of those people directly linked to a firm, i.e. the workers, the owners of or shareholders in the firm, the managers and executives. Other groups of people also take part in the development of a firm, such as customers, suppliers and so on. • Assets. These are a firm´s resources (tangibles and intangibles). They can be divided into two categories: non-current assets (those that last more than one year: property, plant, equipment…) and current assets (those that are renewed each year and depend on the operating cycle: raw material, finished products, cash…). • Organization. This refers to the formal relationships of authority, coordination and communication between the firm´s members required in order for it to reach its objectives adequately. • The environment. This comprises all those factors externals to a firm (economic, social, cultural, legal, technological…). Both of general nature and specific to the industry in which it operates, that may influence the performance of its activity. • Passive factors (assets): The passive factors are the technical and economic capital. We can differentiated between tangibles and intangibles: ■ Tangibles: Have a physical existence, and therefore capable of being assigned a monetary value. The tangibles elements are financial capital, technical investments, materials and merchandise. ■ Intangibles: Patents, software and intellectual capital (Human, Structural, like building, and relational). • Invisible factors: ■ Organization: Formal relationships of authority, coordination and communication between the firm’s members. There are different levels: CEO, managers, employees,… ■ Objectives: What the company want to reach with its effort. ■ Public image: What the people say or think about the company (marketing, position brand,…). ■ Know How: Technical Knowledge, in Spanish, conocimiento. ■ Culture of the company • Active factors (Human factors): Those people directly linked to a firm. ■ Shareholders: They are the financial investors, and they have control aims. ■ Employees: ■ Organization: Entrepeneur/Managers/CEO 3. Functions of the company The main function of the company is the Value creation. The value id added to resources when they are transformed into goods or services that are worth (value, financialvalue) more than their original cost plus the cost of transformation. Related to the value creation: Value chain (in Spanish, cadena de valor): Divides a firm into the different activities it performs in designing, producing, marketing and distributing its product. It’s the basic tool for diagnosing competitive advantages and finding ways to enhance it (para mejorarlas) The company has 7 specific functions: ■ Discount function or advance the value of the factors. ■ Assumption of technical and economic risk function. ■ Managerial function (coordination and control of the production process). ■ Production functions of goods and services. ■ Interpreter function of consumers desires (marketing). 1. Risk- taking entrepreneur R. Cantillon was the first to use the word entrepreneur. For him, the entrepreneur is the agent who buys raw materials at a known price in order to transform it into products which he can then sell a price which was uncertain at the moment he committed himself to his costs. The idea of the person providing the capital bearing the risk of losing it gave rise to the concept of the risk-taking entrepreneur. The entrepreneur is the person who assumes risk and confronts uncertainly. Knight made one of the most relevant contributions about entrepreneur as a risk- taker. The entrepreneur is who assumes the risk of the economic activity. The entrepreneur estimates the selling price of the products anticipating rents or hypothetical income, so the business profits I the remuneration of risk assumed in this estimation. Risk is what justifies the reward of profit of the entrepreneur. Other of the most important contributions to the conception of the entrepreneur, within the perception of entrepreneur as risk bearer, came from Schumpeter, “Entrepreneur as an innovator”. The function of the entrepreneur is to innovate, not the one thaht bears the risk if the firm founders. The risk bearer is the person that provides the capital. Innovative Leadership justifies the entrepreneur’s benefit. 2. Control entrepreneur (manager or coordinator factors) According to Say, the entrepreneur is the manager of business activity and he highlights the difference between the profit of the firm and the interest of the capital provided by the entrepreneur, allowing us to distinguish between the functions of the entrepreneur and those of the capitalist. Alfred Marshall was the precursor of the control entrepreneur vviewpoint, wich assigns entrepreneurs two functions: to interpret consumers’ needs, and according to their perception of reality, to organize and streamline the factors of production available to them in order to achieve the greatest level of productivity possible as opposed to a situation in which each acts on an individual basis. He attributes features and rewards typical of a qualified worker (manager) to the entrepreneur. These selfsame managerial functions were those addressed by Galbraith when he referred to the role of the entrepreneur through the expression “Technostructure”. He believed that firms could be managed by specialist skills of lawyers, engineers, economists, etc. Entrepreneur as a professional/expert manager, or group of managers, experts in decision-making. It’s a consequence of the separation of ownership and control in large companies. 3. Entrepreneur as a decision-maker, Simon. The entrepreneur is the fourth production factor (natural resources, labour and capital are the other three). The entrepreneur as a decision- maker. The remuneration is the benefit. Several objectives co-exist in the companies and the entrepreneur integrates all of them. 4. Owner entrepreneur Classical economists like Adam Smith, David Ricardo and Stuart Mill, and even Karl Marx, consider the entrepreneur and the capitalist or owner to be one and the same person. An entrepreneur is a capitalist, the sole owner of a business that he personally manages and controls, assuming the risk inherent to ownership. The make no distinction between the profits of the firms and the profits on the capital invested. 5. Entrepreneur as a leader, Shein Businessman as a visionary. Businessman motivates and unites the human group and creates a culture that achieves the objectives of the company successfully, opening new paths of development. 6. Alert entrepreneur (Kirzner, Shane) For Kirzner, the essence of the entrepreneur is their state of alertness, which allows them to discover formerly undetected opportunities in the market. Entrepreneur work with uncertainly and they have a special ability to detect opportunities, to take advantages of the inefficient allocation of resources. For Leibenstein, the entrepreneur is the person responsible for taking advantage of opportunities existing in the economy. Two types of entrepreneurial activity: • Routine activity: work carried out by the managers of firms. • Schumpeterian activity: Activities required in order to create a firm in conditions of innovation and uncertainly. Shane believes that the entrepreneur is the person that discovers, evaluates and exploits business opportunities arising in the economy (assuming risk). The exploitation of the opportunity depends on the characteristics of the entrepreneur, the type of opportunity and the availability of funding.