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 18 th century.  Prior to that mostly piece work and contracting out.  Economies of scale and specialization of labor

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 Environment Next 9 slides are adapted from

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

 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 InputsProcess/ManufactureOutput Costs – Fixed and VariableRevenue 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