Marketing and
Business Policy
Lecture 1
Aleš Kubíček
Aleš Kubíček, Ph.D.
• Family Firms, Corporate Governance
• ales.kubicek@vse.cz
• Office hours Fri 9-11 RB352
Business Policy - Course Topics
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Basic Concepts of Business Policy
Time Value of Money
Business Risk Evaluation
Investment Decisions
Production and Inventory Management
Costs and Breakeven Point Analysis
Financial Statements
Capital Structure Optimization
Financial Analysis
• Presentation in INSIS before the class
Requirements
• Mid-term tests (2 x 25 p.) – business policy,
marketing (both week 8)
• Final test (1 x 50 p.) – examination period
• Grading
• 90 – 100 p. 1 (excellent)
• 75 – 89 p. 2 (very good)
• 60 – 74 p. 3 (good)
• 50 – 59 p. 4+ (failed, possibility of correction)
• 0 – 59 p. 4 (failed)
Literature
Machek, O., Machek, M.: Essentials of Business
Economics: Exercises. Prague: Oeconomica
Publishing House, 2013.
Today
• We go home?
OOOOR
• Some theoretical background – for-profit
organizations, goals, organizational structure,
business lifecycle
• Introduction to managerial economics – stock
and flow variables
Why do firms exist?
In economic theory, a firm = an entity
transforming inputs into outputs
INPUT
FIRM
OUTPUT
Firm often regarded as
a black box.
So, what is a company purpose?
No one knows for sure.
…depends on the company.
Paradigm of shareholder vs. stakeholder theory
Classification of firms
• Publicly traded (listed) firms
• Privately-held firms
• Small firms
• Medium-sized firms
• Large firms
• (Family vs. Non-family firms)
• Which are most common? Most important?
Business Goals
• Main and other business goals?
– Shareholder vs. stakeholder theory
– Economic vs. non-economic (any example?)
• Relationships between goals?
– Complementary, conflicting, indifferent
• Characteristics of goals? (vision vs goal)
By Michael Kline
Organizational Structure
In economic theory, a firm = an entity transforming inputs into
outputs
INPUT
Firm is competing in
• market of inputs
• market of outputs
FIRM
OUTPUT
Firm often regarded as a black box,
but a firm has an internal structure
Competitive Forces – Industry Environment
Porter‘s five
forces model
Organizational Structure
• Why do we need a structure?
• A structure depending on its goals
Functional structure
• Groups people with similar skills and tasks
Divisional structure
• Groups people who:
– work on a similar product or service
– serve the same customers
– work in the same geographical location
Matrix structure
• Combines functional and divisional structures
Business Life Cycle
Describes the evolution of businesses through multiple stages
• Birth (seed, start-up)
• Growth (growth, established, expansion)
• Maturity
• Decline (exit)
…always?
Stock and Flow Variables
• Stock variable – state of nature at a given
instance of time
• Flow variable – evolution of the state of nature
during a period
Basic Stock Variables
• Assets
• Equity
• Liabilities
• Accounting equation
All assets must
belong to someone!
Exercise 1
• We are starting entrepreneurs.
• We have savings of $100,000 and we
inherited a building and land suitable for our
business, in the total value of $200,000.
• To start our business, we need to purchase
machines and equipment for $400,000 and
maintain a stock of $100,000.
• What is the total need for capital? What is the
need for debt?
Basic Flow Variables
• Revenue vs. Cash receipts
• Costs vs. Cash expenses
• Profit vs. Cash flow
• Accounting vs. economic profit
• Opportunity costs – the value of the nexthighest-valued alternative use of our resources
Exercise 2
• The gross profit was of $20 million, out of
which one fifth was paid as taxes.
• The revenue was three times greater than the
gross profit. Determine the revenue, the costs,
and the net profit (after taxes).
Exercise 3
• Yearly revenues are $2 million and total yearly
costs are $1.2 million.
• The equity is $500,000. The second best
alternative to use owner’s equity would have
been to purchase a flat and rent it for $10,000
per month.
• Determine the yearly accounting profit and
the economic profit.