People in Organisations

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Adding Value:

Businesses attempt to meet the needs of stakeholders by adding value to inputs. Adding value refers to the way in which a business creates products and services to meet the needs of stakeholders in a profitable way. The cost of producing and selling the goods must be less than the revenue from selling them.

Raw materials go through various stages on their way to reaching the consumer as a finished product. These stages all form part of the supply chain. The supply chain always starts with raw materials and finishes with the consumer, and the intermediate stages usually include suppliers, manufacturing, distribution and retailers. The various steps in the supply chain often happen in different businesses and different places. All businesses are dependent on their suppliers and customers. Value is added at each stage in the supply chain.

Decision Making:

Types of decision making; strategic, management or tactical, operational. Strategic decision making is concerned with long term goals and policies for resource allocation/management to meet defined objectives. Tactical decision making is concerned with the acquisition and efficient utilisation of resources to achieve defined goods. Operational decision making is concerned with the effective and efficient use of resources for execution of specific tasks.

Opportunity Costs:

The cost expressed in terms of the next best alternative sacrificed. Help us view the true cost of decision making. Implies valuing different choices. Prices may increase for what a business wants to buy, time changes things a lot. You could miss out on the opportunity if you wait too long. The idea of cost is due to the fact that all businesses face the problem of limited resources and in particular, limited time and money. 

Stakeholders:

A stakeholder is any individual or group who has an interest in, is affected by or can affect an organisation. All businesses will have a variety of stakeholders each with their own interests. Sometimes these can conflict and so the business needs to manage stakeholder interests carefully.

  • Internal: The owners are the most important stakeholders. They make a profit if the business is successful and decide what happens to the business. In a limited company, the shareholders are the owners. Employees are interested in their job security and promotion prospects. They also want to earn a decent wage and have pleasant working conditions. Managers have extra concerns- they'll probably get some of the blame if the company does badly, and some of the credit if things go well.
  • External: Customers want high quality products an services at low prices. Suppliers are the people and businesses who sell raw materials to the business. The business provides them with their income- if it cant pay quickly enough, the suppliers can have cash flow problems. Most businesses are run on credit. Creditors have a stake in the business. They want to make sure they get paid on time. The local community will gain if the business provides local employment and sponsors local activities. The community will suffer if the business…

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