Spain 2º Bachillerato Business and Business Model Design
Chapters: 4
1. The company and its environment
The entrepreneur: profiles · The company: types, location and size · Business environment and social responsibility · Digitalisation and innovation
- From Ideas to Startups: Entrepreneurship – An entrepreneur turns an idea into a business by bringing together land, labour and capital and taking the risk. New ideas replace old ways, which economists call creative destruction. Startups grow with help from investors, banks, incubators, government schemes such as Startup India and Make in India, and small firms called MSMEs. A business plan maps the idea, costs and customers. The profit and loss statement shows Sales − Costs, and the balance sheet shows Assets = Liabilities + Capital.
- Entrepreneurship Development – Entrepreneurship is starting a new business by spotting a need, putting resources together and taking the risk. India needs entrepreneurs for jobs, new ideas and balanced growth. The process runs from knowing yourself to launching and growing. Start-up India (2016) supports new firms, funding comes from savings, angels, venture capital, banks and crowdfunding, and intellectual property rights protect new ideas, brands and creative work.
- Sole Proprietorship, Partnership and Hindu Undivided Family Business – A sole proprietorship is owned and run by one person who takes all profit and bears unlimited liability. A partnership is run by two or more people who share profit under an agreement; its partners are of many kinds and a written deed and registration protect them. A Hindu Undivided Family business is run by the eldest member, the karta, for all family members, who become members by birth.
- Business Environment: Meaning, Dimensions and Demonetisation – Business environment is the total of all outside forces, people and institutions that can affect a firm but that it cannot control. It is dynamic, uncertain, complex, relative and made of linked specific and general forces. Studying it helps firms spot opportunities, see threats, plan and cope with change. It has five dimensions: economic, social, technological, political and legal. Demonetisation of old ₹500 and ₹1000 notes in November 2016 is a big example of an environment change.
- Innovation in Business – Innovation means turning a new idea into a product or process that is actually used or sold. Firms innovate with small, steady improvements (kaizen) or with research and development (R&D) that is costly and risky but can bring big leaps. Digital tools speed this up. Patents, copyright and trademarks protect ideas so rivals cannot simply copy them.
2. The business and management model
Company and business model · The commercial function · The production function · Human resource management · The financial function · Accounting information in the company
- Business Models – A business model explains how a business creates value, delivers it to customers and captures value back as money. The business model canvas breaks it into 9 blocks: customer segments, value proposition, channels, customer relationships, revenue streams, key activities, key resources, key partners and cost structure. Common types are one-time sale, subscription, freemium, marketplace (platform), advertising, franchise and social enterprise. Technology keeps creating new models. A good model is tested with real customers and changed using feedback.
- Marketing Management – Marketing means finding out what buyers need and meeting that need in exchange for value, at a profit. It has many functions (research, planning, branding, labelling, packaging, pricing, promotion, distribution, service) and five philosophies (production, product, selling, marketing, societal). The marketing mix is the 4Ps: product (with branding, labelling, packaging), price (shaped by cost, demand, competition, government rules, objectives and marketing methods), place (channels and physical distribution) and promotion (advertising, personal selling, sales promotion, public relations).
- Human Resource Management (HRM) – Human resource management is planning, finding, developing, rewarding and keeping the people a business needs. HR objectives include employee engagement, talent development, training, diversity, alignment of values and a right-sized, cost-effective workforce. HR performance is measured with labour turnover (leavers ÷ average staff × 100), retention rate, labour productivity (output ÷ workers), labour cost per unit and employee costs as a percentage of revenue. Hard HRM treats staff as a cost; soft HRM treats them as an asset.
- Financial Management: Raising and Using Money Wisely – Financial management is about getting money at the lowest cost and using it in the best way. Its main objective is to maximise shareholders' wealth, seen in a rising share price. It makes three decisions: investment (where to use money), financing (from where to raise it) and dividend (how much profit to share). Financial planning prepares a money budget in advance. Capital structure is the mix of debt and equity; trading on equity uses cheap debt to raise EPS. Fixed capital buys long-life assets; working capital runs daily work.
- Financial Statements of a Sole Proprietor – At the end of the year, the trial balance is turned into two statements. The trading and profit and loss account uses revenue items to find gross profit, operating profit and net profit. The balance sheet uses capital items to show assets, liabilities and capital on the last day, grouped and arranged in order. Its closing balances open next year's books through the opening entry.
3. Tools to innovate in business and management models
The business model canvas · Customer view: empathy map · Creativity in business model design · Competition and market niches · Visual thinking and idea organisation · Prototyping · Presenting a project: storytelling and pitch · Scenarios and future business models · Other business innovation tools
- Design Thinking: Solving Problems by Starting with People – Design thinking is a way to solve problems by first understanding the people who have them. It has five stages: empathise (watch and listen to users, using tools like an empathy map), define (write a clear problem as a 'How might we…?' question), ideate (create many ideas, including from nature: biomimicry), prototype (make quick, cheap models) and test (try them with users and improve). It is iterative and user-centred, and it opens up and narrows down twice, like a double diamond.
- Creative Thinking, Thought and Language – Creative thinking produces ideas that are new and useful. It passes through preparation, incubation, illumination and verification, and mixes divergent (many ideas) with convergent (one best answer) thinking. Thought and language are closely linked (Whorf, Piaget, Vygotsky). Children develop language in fixed stages, helped by learning and by an inborn readiness.
- Market Structures: From Perfect Competition to Monopoly – A market structure describes how many firms sell, how alike their products are, and how easy it is to enter. Perfect competition: many firms, identical goods, free entry, price takers, normal profit in the long run. Monopolistic competition: many firms, differentiated goods, easy entry, some price power. Oligopoly: a few interdependent firms, high barriers, strategic behaviour (game theory, collusion, price leadership). Monopoly: one firm, no close substitutes, high barriers, price maker with possible supernormal profit and price discrimination. Contestable markets show that the threat of entry also limits power.
- Prototyping: Make It, Test It, Make It Better – A prototype is an early, testable version of a product or idea. Low-fidelity prototypes (sketches, paper, cardboard) are fast and cheap and test the idea; high-fidelity prototypes (3D prints, working models) look and work like the real thing. Rapid prototyping uses machines such as 3D printers (additive: build layer by layer), laser cutters and CNC mills (subtractive: cut material away). Each prototype is tested with a clear goal and fair method, results are recorded, and the design is improved in a loop: build, test, learn, improve. Finally the project is documented and presented.
- Presentation Skills: Speaking to an Audience – A good presentation is planned for its audience and purpose, has a clear opening, body and closing, uses simple slides that support (not replace) the speaker, and is delivered with a clear voice, eye contact and good timing. Practice turns nerves into confidence.
- Business Models – A business model explains how a business creates value, delivers it to customers and captures value back as money. The business model canvas breaks it into 9 blocks: customer segments, value proposition, channels, customer relationships, revenue streams, key activities, key resources, key partners and cost structure. Common types are one-time sale, subscription, freemium, marketplace (platform), advertising, franchise and social enterprise. Technology keeps creating new models. A good model is tested with real customers and changed using feedback.
- Innovation in Business – Innovation means turning a new idea into a product or process that is actually used or sold. Firms innovate with small, steady improvements (kaizen) or with research and development (R&D) that is costly and risky but can bring big leaps. Digital tools speed this up. Patents, copyright and trademarks protect ideas so rivals cannot simply copy them.
4. Business strategy and analysis: case studies and simulation
The business model environment · Evaluating business models beforehand · Validating the business model · Protecting ideas, products and brands · Decision-making and business plans · Analysing results and financial statements
- Business Environment: Meaning, Dimensions and Demonetisation – Business environment is the total of all outside forces, people and institutions that can affect a firm but that it cannot control. It is dynamic, uncertain, complex, relative and made of linked specific and general forces. Studying it helps firms spot opportunities, see threats, plan and cope with change. It has five dimensions: economic, social, technological, political and legal. Demonetisation of old ₹500 and ₹1000 notes in November 2016 is a big example of an environment change.
- Break-Even Analysis – A business breaks even when total revenue equals total cost, so profit is zero. Each unit sold brings a contribution = price − variable cost per unit, which first pays off the fixed costs. Break-even output = fixed costs ÷ contribution per unit. Sales above this make a profit; below it make a loss. Margin of safety = actual sales − break-even sales. To earn a target profit, sell (fixed costs + target profit) ÷ contribution per unit.
- Data Protection and Intellectual Property Rights – Intellectual property (IP) is a creation of the mind, such as a story, song, program, invention or logo. Intellectual Property Rights (IPR) give the creator control over its use. Copyright protects creative works (text, music, art, software code) automatically once created; a patent protects a new, useful invention for about 20 years and must be applied for; a trademark protects brand names, logos and slogans. Plagiarism is presenting someone else's work as your own without credit. Infringement is using protected IP without permission (copyright, patent or trademark infringement). Public licences let creators share on their own terms: Creative Commons (BY, SA, NC, ND) for creative works, and software licences such as GPL (copyleft: modified versions must stay open) and Apache (permissive: can be used in closed products with notices).
- Business Plan: How to Plan a New Business – A business plan is a written document that says what a business will do, who its customers are, how it will reach them, who will run it and how the money will work. Owners use it to think clearly, to spot risks early and to persuade banks or investors to lend or invest. A typical plan has these parts: executive summary, business idea and aims, market research (customers), competitors, marketing (the 4 Ps), operations and team, and a finance section. The finance section uses a few simple sums. Fixed costs stay the same whatever you sell (rent). Variable costs rise with each unit (ingredients). Total cost = fixed + variable. Revenue = price × units sold. Profit = revenue − total cost (a negative answer is a loss). The break-even point is the number of units where revenue equals total cost: fixed costs ÷ (price − variable cost per unit). A plan is a guess about the future, so it should be checked and updated often.
- Tools of Financial Statement Analysis – Analysis means studying financial statements to judge a company's profit, safety and growth. Its main tools are comparative statements (compare two years side by side: change in rupees and %) and common-size statements (show every item as a % of a common base: revenue or total). Analysis has limits: it uses past data, ignores non-money facts and depends on accounting choices.