Bachelor of Business Administration

The Bachelor of Business Administration (BBA) is a bachelor's degree in business studies. In most universities, the degree is conferred upon a student after four years of full-time study (120 credit hours) in one or more areas of business concentrations. The BBA program usually includes general business courses and advanced courses for specific concentrations. Some colleges and universities call the BBA a BSBA (Bachelor of Science in Business Administration), however, the requirements and course content are the same.

Business Administration programs may be accredited to indicate that the school's educational curriculum meets specific quality standards. The Association to Advance Collegiate Schools of Business (AACSB) is generally regarded by some as being the most well-known business program accreditation, while others hold its own standing and its judgment methods controversial.

Program content

BBA programs expose students to a variety of subjects: accounting, business law and ethics, economics, finance, management information systems, marketing, operations management, organizational behavior and management, operations research, and strategic management.

The Bachelor of Business Administration program allows students to specialize in a specific academic area including:

• Accounting
• Entrepreneurship
• Finance
• Management
• Management information systems
• Marketing
• Operations management
• Supply chain management

Accountancy

Accountancy or accounting is the system of recording, verifying, and reporting of the value of assets, liabilities, income, and expenses in the books of account (ledger) to which debit and credit entries (recognizing transactions) are chronologically posted to record changes in value (see bookkeeping). Such financial information is primarily used by lenders, managers, investors, tax authorities, and other decision makers to make resource allocation decisions between and within companies, organizations, and public agencies. Accounting has been defined by the AICPA as "The art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpreting the results thereof."

Etymology

The English term accountant is derived from accomptant, which was pronounced by dropping the 'p' and over time further changed in pronunciation and spelling. Accomptant was derived from the French compter, itself originating from the Latin computare. From the word accountant the term accountancy is derived.

History

Early history

Accountancy's infancy dates back to the earliest days of human agriculture and civilization (the Sumerians in Mesopotamia, and the Egyptian Old Kingdom). Ancient economic thought of the Near East facilitated the creation of accurate records of the quantities and relative values of agricultural products, methods that were formalized in trading and monetary systems by 2000 B.C. Simple accounting is mentioned in the Christian Bible (New Testament) in the Book of Matthew, in the Parable of the Talents.^[4] The Islamic Quran also mentions simple accounting for trade and credit arrangements.^[5]

In the twelfth-century A.D., the Arab writer, Ibn Taymiyyah, mentioned in his book Hisba (literally, "verification" or "calculation") detailed accounting systems used by Muslims as early as in the mid-seventh century A.D. These accounting practices were influenced by the Roman and the Persian civilizations that Muslims interacted with. The most detailed example Ibn Taymiyyah provides of a complex governmental accounting system is the Divan of Umar, the second Caliph of Islam, in which all revenues and disbursements were recorded. The Divan of Umar has been described in detail by various Islamic historians and was used by Muslim rulers in the Middle East with modifications and enhancements until the fall of the Ottoman Empire.

Luca Pacioli and the birth of modern accountancy

Painting of Luca Pacioli, attributed to Jacopo de' Barbari

Luca Pacioli (1445 - 1517), also known as Friar Luca dal Borgo, is credited for the "birth" of accountancy. His Summa de arithmetica, geometrica, proportioni et proportionalita (Summa on arithmetic, geometry, proportions and proportionality, Venice 1494), was a textbook for use in the abbaco schools of northern Italy, where the sons of merchants and craftsmen were educated. It was a compendium of the mathematical knowledge of his time, and includes the first printed description of the method of keeping accounts that Venetian merchants used at that time, known as the double-entry bookkeeping system.

Double-entry is defined as any bookkeeping system in which there was a debit and credit entry for each transaction, or for which the majority of transactions were intended to be of this form.^[6]

Although Pacioli codified rather than invented this system, he is widely regarded as the "Father of Accounting". The system he published included most of the accounting cycle as it is known today. He described the use of journals and ledgers, and warned that a person should not go to sleep at night until the debits equaled the credits. His ledger had accounts for assets (including receivables and inventories), liabilities, capital (owner's equity), income, and expenses—the account categories that are reported on an organization's balance sheet and income statement, respectively. He demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. His treatise also touches on a wide range of related topics from accounting ethics to cost accounting.

Post-Pacioli

The first known book in the English language on accounting was published in London, England by John Gouge (or Gough) in 1543. It is described as A Profitable Treatyce called the Instrument or Boke to learn to know the good order of the kepyng of the famous reconynge, called in Latin, Dare and Habere, and, in English, debtor and Creditor.^{[citation needed]}

A short book of instructions was also published in 1588 by John Mellis of Southwark, England, in which he says, "I am but the renuer and reviver of an ancient old copies printed here in London the 14 of August 1543: collected, published, made, and set forth by one Hugh Oldcastle, Schoolmaster, who, as reappeared by his treatise, then taught Arithmetics, and this booke in Saint Ollaves parish in Marko Lane." Mellis refers to the fact that the principle of accounts he explains (which is a simple system of double entry) is "after the former of Venice".

A book described as The Merchants Mirrour, or directions for the perfect ordering and keeping of his accounts formed by way of Debitor and Creditor, after the (so termed) Italian manner, by Richard Dafforne, accountant, published in 1635, contains many references to early books on the science of accountancy. In a chapter in this book, headed "Opinion of Book-keeping's Antiquity," the author states, on the authority of another writer, that the form of book-keeping referred to had then been in use in Italy about two hundred years, "but that the same, or one in many parts very like this, was used in the time of Julius Caesar, and in Rome long before." He gives quotations of Latin book-keeping terms in use in ancient times, and refers to "ex Oratione Ciceronis pro Roscio Comaedo"; and he adds:

"That the one side of their booke was used for Debitor, the other for Creditor, is manifest in a certain place, Naturalis Historiae Plinii, lib. 2, cap. 7, where hee, speaking of Fortune, saith thus:

Huic Omnia Expensa.

Huic Omnia Feruntur accepta et in tota Ratione mortalium sola.

Utramque Paginam facit."

An early Dutch writer appears to have suggested that double-entry book-keeping was even in existence among the Greeks, pointing to scientific accountancy having been invented in remote times.

There were several editions of Richard Dafforne's book - the second edition in 1636, the third in 1656, and another in 1684. The book is a very complete treatise on scientific accountancy, beautifully prepared and containing elaborate explanations. The numerous editions tend to prove that the science was highly appreciated in the 17th century. From this time on, there has been a continuous supply of literature on the subject, many of the authors styling themselves accountants and teachers of the art, and thus proving that the professional accountant was then known and employed.

Types of accounting

• Financial accounting is "a major branch of accounting involving the collection, recording and extraction of financial information, and the summary of it in the form of a periodic profit and loss account, a balance sheet and a cash flow statement in accordance with legal, professional, and capital market requirements".^[7]
• Management accounting is another branch of accounting performed within an organization to provide information only accessible to its decision-makers.
• Open-book accounting is an accounting principle that aims to improve accounting transparency of organizations.
• Tax accounting is the accounting needed to comply with jurisdictional tax regulations.
• Accounting scholarship is the academic discipline which studies the theory of accountancy.

The related, but separate financial audit comprises internal audit and external audit. External audit—carried out by independent auditors—examines the financial statements and accounting records in order to express an opinion as to the truth and fairness and adherence to Generally Accepted Accounting Principles (GAAP). Commonly used GAAP include the US Financial Accounting Standards Board (FASB), which issues FASB Pronouncements including Statements of Accounting Standards, and the International Accounting Standards Board (IASB), which issues International Financial Reporting Standards (IFRS). Many other countries have instituted local standards resulting in a local country GAAP. Internal audit aims at providing information for management usage, and is typically carried out by employees.

Entrepreneurship

Entrepreneurship according to Onuoha (2007) is the practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities. Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail. Entrepreneurial activities are substantially different depending on the type of organization that is being started. Entrepreneurship ranges in scale from solo projects (even involving the entrepreneur only part-time) to major undertakings creating many job opportunities. Many "high-profile" entrepreneurial ventures seek venture capital or angel funding in order to raise capital to build the business. Angel investors generally seek returns of 20-30% and more extensive involvement in the business. Many kinds of organizations now exist to support would-be entrepreneurs, including specialized government agencies, business incubators, science parks, and some NGOs.

History of entrepreneurship

The understanding of entrepreneurship owes much to the work of economist Joseph Schumpeter and the Austrian economists such as Ludwig von Mises and Friedrich von Hayek. In Schumpeter (1950), an entrepreneur is a person who is willing and able to convert a new idea or invention into a successful innovation. Entrepreneurship forces "creative destruction" across markets and industries, simultaneously creating new products and business models. In this way, creative destruction is largely responsible for the dynamism of industries and long-run economic growth. Despite Schumpeter's early 20th-century contributions, the traditional microeconomic theory of economics has had little room for entrepreneurs in its theoretical frameworks (instead assuming that resources would find each other through a price system.)

Some notable persons and their works in entrepreneurship history.

For Frank H. Knight (1921) and Peter Drucker (1970) entrepreneurship is about taking risk. The behavior of the entrepreneur reflects a kind of person willing to put his or her career and financial security on the line and take risks in the name of an idea, spending much time as well as capital on an uncertain venture. Knight classified three types of uncertainty.

• Risk, which is measurable statistically (such as the probability of drawing a red colour ball from a jar containing 5 red balls and 5 white balls).
• Ambiguity, which is hard to measure statistically (such as the probability of drawing a red ball from a jar containing 5 red balls but with an unknown number of white balls).
• True Uncertainty or Knightian Uncertainty, which is impossible to estimate or predict statistically (such as the probability of drawing a red ball from a jar whose number of red balls is unknown as well as the number of other coloured balls).

The acts of entrepreneurship is often associated with true uncertainty, particularly when it involves bringing something really novel to the world, whose market never exists. Before the Internet, nobody knew the market for Internet related businesses such as Amazon, Google, YouTube, Yahoo etc. Only after the Internet emerged did people begin to see opportunities and market in that technology. However, even if a market already exists, such as the market for cola drinks (which has been created by Coca Cola), there is no guarantee that a market exists for a particular new player in the cola category. The question is: whether a market exists and if it exists for you.

The place of the disharmony-creating and idiosyncratic entrepreneur in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. William Baumol has added greatly to this area of economic theory and was recently honored for it at the 2006 annual meeting of the American Economic Association.

Entrepreneurship is widely regarded as an integral player in the business culture of American life, and particularly as an engine for job creation and economic growth. Robert Sobel published The Entrepreneurs: Explorations Within the American Business Tradition in 1974. Zoltan Acs and David B. Audrestch have produced an edited volume surveying Entrepreneurship as an academic field of research in the Handbook of Entrepreneurship Research: An Interdisciplinary Survey and Introduction.

Characteristics of an entrepreneur

Entrepreneurs have many of the same character traits as leaders, similar to the early great man theories of leadership; however trait-based theories of entrepreneurship are increasingly being called into question. Entrepreneurs are often contrasted with managers and administrators who are said to be more methodical and less prone to risk-taking. Such person-centric models of entrepreneurship have shown to be of questionable validity, not least as many real-life entrepreneurs operate in teams rather than as single individuals. Still, a vast literature studying the entrepreneurial personality found that certain traits seem to be associated with entrepreneurs:

• David McClelland - primarily motivated by an overwhelming need for achievement and strong urge to build.
• Collins and Moore - tough, pragmatic people driven by needs of independence and achievement. They seldom are willing to submit to authority.
• Bird - mercurial, that is, prone to insights, brainstorms, deceptions, ingeniousness and resourcefulness. they are cunning, opportunistic, creative, and unsentimental.
• Cooper, Woo, & Dunkelberg - argue that entrepreneurs exhibit extreme optimism in their decision-making processes.
• Busenitz and Barney - prone to overconfidence and over generalisations.
• Cole - found there are four types of entrepreneur: the innovator, the calculating inventor, the over-optimistic promoter, and the organization builder. These types are not related to the personality but to the type of opportunity the entrepreneur faces.
• Zhao & Seibert - meta-analysis (a statistical synthesis of previous research) showed that compared to managers, entrepreneurs score higher on Conscientiousness and Openness to Experience and lower on Neuroticism and Agreeableness. No difference was found for Extraversion.
• John Howkins - focused specifically on creative entrepreneurship. He found that entrepreneurs in the creative industries needed a specific set of traits including the ability to prioritise ideas over data, to be nomadic and to learn endlessly. ^[3]

Other characteristics include

• The entrepreneur has an enthusiastic vision, the driving force of an enterprise.
• The entrepreneur's vision is usually supported by an interlocked collection of specific ideas not available to the marketplace.
• The overall blueprint to realize the vision is clear, however details may be incomplete, flexible, and evolving.
• The entrepreneur promotes the vision with enthusiastic passion.
• With persistence and determination, the entrepreneur develops strategies to change the vision into reality.
• The entrepreneur takes the initial responsibility to cause a vision to become a success.
• Entrepreneurs take prudent risks. They assess costs, market/customer needs and persuade others to join and help.
• An entrepreneur is usually a positive thinker and a decision maker.

An entrepreneur has inspiration, motivation and sensibility.

Advantages of entrepreneurship

Every successful entrepreneur brings about benefits not only for himself/ herself but for the municipality, region or country as a whole. The benefits that can be derived from entrepreneurial activities are as follows:

1. Enormous personal financial gain
2. Self-employment, own bossing, offering more job satisfaction and flexibility of the work force
3. Employment for others, often in better jobs
4. Development of more industries, especially in rural areas or regions disadvantaged by economic changes, for example due to globalisation effects
5. Encouragement of the processing of local materials into finished goods for domestic consumption as well as for export
6. Income generation and increased economic growth
7. Healthy competition thus encourages higher quality products
8. More goods and services available
9. Development of new markets
10. Promotion of the use of modern technology in small-scale manufacturing to enhance higher productivity
11. Encouragement of more researches/ studies and development of modern machines and equipment for domestic consumption
12. Development of entrepreneurial qualities and attitudes among potential entrepreneurs to bring about significant changes in the rural areas
13. Freedom from the dependency on the jobs offered by others
14. Ability to have great accomplishments
15. Reduction of the informal economy
16. Emigration of talent may be stopped by a better domestic entrepreneurship climate
17. Serious tax advantages
    

Promotion of entrepreneurship

Given entrepreneurship's potential to support economic growth and social cohesion, it is the policy goal of many governments to develop a culture of entrepreneurial thinking. This can be done in a number of ways: by integrating entrepreneurship into education systems, legislating to encourage risk-taking, and national campaigns. An example of the latter is the United Kingdom's Enterprise Week, which launched in 2004.

Outside of the political world, research has been conducted on the presence of entrepreneurial theories in doctoral economics programs. Dan Johansson, fellow at the Ratio Institute in Sweden, finds such content to be sparse. He fears this will dilute doctoral programs and fail to train young economists to analyze problems in a relevant way.

Many of these initiatives have been brought together under the umbrella of Global Entrepreneurship Week, a worldwide celebration and promotion of youth entrepreneurship, which started in 2008.

Finance

The field of finance refers to the concepts of time, money and risk and how they are interrelated. Banks are the main facilitators of funding through the provision of credit, although private equity, mutual funds, hedge funds, and other organizations have become important. Financial assets, known as investments, are financially managed with careful attention to financial risk management to control financial risk. Financial instruments allow many forms of securitized assets to be traded on securities exchanges such as stock exchanges, including debt such as bonds as well as equity in publicly-traded corporations.

The main techniques and sectors of the financial industry

An entity whose income exceeds their expenditure can lend or invest the excess income. On the other hand, an entity whose income is less than its expenditure can raise capital by borrowing or selling equity claims, decreasing its expenses, or increasing its income. The lender can find a borrower, a financial intermediary such as a bank, or buy notes or bonds in the bond market. The lender receives interest, the borrower pays a higher interest than the lender receives, and the financial intermediary pockets the difference.

A bank aggregates the activities of many borrowers and lenders. A bank accepts deposits from lenders, on which it pays the interest. The bank then lends these deposits to borrowers. Banks allow borrowers and lenders, of different sizes, to coordinate their activity. Banks are thus compensators of money flows in space.

A specific example of corporate finance is the sale of stock by a company to institutional investors like investment banks, who in turn generally sell it to the public. The stock gives whoever owns it part ownership in that company. If you buy one share of XYZ Inc, and they have 100 shares outstanding (held by investors), you are 1/100 owner of that company. Of course, in return for the stock, the company receives cash, which it uses to expand its business; this process is known as "equity financing". Equity financing mixed with the sale of bonds (or any other debt financing) is called the company's capital structure.

Finance is used by individuals (personal finance), by governments (public finance), by businesses (corporate finance), as well as by a wide variety of organizations including schools and non-profit organizations. In general, the goals of each of the above activities are achieved through the use of appropriate financial instruments and methodologies, with consideration to their institutional setting.

Finance is one of the most important aspects of business management. Without proper financial planning a new enterprise is unlikely to be successful. Managing money (a liquid asset) is essential to ensure a secure future, both for the individual and an organization.

Personal finance

Questions in personal finance revolve around

• How much money will be needed by an individual (or by a family), and when?
• Where will this money come from, and how?
• How can people protect themselves against unforeseen personal events, as well as those in the external economy?
• How can family assets best be transferred across generations (bequests and inheritance)?
• How does tax policy (tax subsidies or penalties) affect personal financial decisions?
• How does credit affect an individual's financial standing?
• How can one plan for a secure financial future in an environment of economic instability?

Personal financial decisions may involve paying for education, financing durable goods such as real estate and cars, buying insurance, e.g. health and property insurance, investing and saving for retirement.

Personal financial decisions may also involve paying for a loan, or debt obligations.

Corporate finance

Managerial or corporate finance is the task of providing the funds for a corporation's activities. For small business, this is referred to as SME finance. It generally involves balancing risk and profitability, while attempting to maximize an entity's wealth and the value of its stock.

Long term funds are provided by ownership equity and long-term credit, often in the form of bonds. The balance between these forms the company's capital structure. Short-term funding or working capital is mostly provided by banks extending a line of credit.

Another business decision concerning finance is investment, or fund management. An investment is an acquisition of an asset in the hope that it will maintain or increase its value. In investment management – in choosing a portfolio – one has to decide what, how much and when to invest. To do this, a company must:

• Identify relevant objectives and constraints: institution or individual goals, time horizon, risk aversion and tax considerations;
• Identify the appropriate strategy: active v. passive – hedging strategy
• Measure the portfolio performance

Financial management is duplicate with the financial function of the Accounting profession. However, financial accounting is more concerned with the reporting of historical financial information, while the financial decision is directed toward the future of the firm.

Capital

Capital, in the financial sense, is the money that gives the business the power to buy goods to be used in the production of other goods or the offering of a service.

The desirability of budgeting

Budget is a document which documents the plan of the business. This may include the objective of business, targets set, and results in financial terms, e.g., the target set for sale, resulting cost, growth, required investment to achieve the planned sales, and financing source for the investment. Also budget may be long term or short term. Long term budgets have a time horizon of 5–10 years giving a vision to the company; short term is an annual budget which is drawn to control and operate in that particular year.

Capital budget

This concerns fixed asset requirements for the next five years and how these will be financed.

Cash budget

Working capital requirements of a business should be monitored at all times to ensure that there are sufficient funds available to meet short-term expenses.

The cash budget is basically a detailed plan that shows all expected sources and uses of cash. The cash budget has the following six main sections:

1. Beginning Cash Balance - contains the last period's closing cash balance.
2. Cash collections - includes all expected cash receipts (all sources of cash for the period considered, mainly sales)
3. Cash disbursements - lists all planned cash outflows for the period, excluding interest payments on short-term loans, which appear in the financing section. All expenses that do not affect cash flow are excluded from this list (e.g. depreciation, amortisation, etc)
4. Cash excess or deficiency - a function of the cash needs and cash available. Cash needs are determined by the total cash disbursements plus the minimum cash balance required by company policy. If total cash available is less than cash needs, a deficiency exists.
5. Financing - discloses the planned borrowings and repayments, including interest.
6. Ending Cash balance - simply reveals the planned ending cash balance.
   

Management of current assets

Credit policy

Credit gives the customer the opportunity to buy goods and services, and pay for them at a later date

Advantages of credit trade

• Usually results in more customers than cash trade.
• Can charge more for goods to cover the risk of bad debt.
• Gain goodwill and loyalty of customers.
• People can buy goods and pay for them at a later date.
• Farmers can buy seeds and implements, and pay for them only after the harvest.
• Stimulates agricultural and industrial production and commerce.
• Can be used as a promotional tool.
• Increase the sales.
• Modest rates to be filled.
  

Disadvantages of credit trade

• Risk of bad debt.
• High administration expenses.
• People can buy more than they can afford.
• More working capital needed.
• Risk of Bankruptcy.
  

Forms of credit

• Suppliers credit:
• Credit on ordinary open account
• Installment sales
• Bills of exchange
• Credit cards
• Contractor's credit
• Factoring of debtors
• Cash credit
  

Factors which influence credit conditions

• Nature of the business's activities
• Financial position
• Product durability
• Length of production process
• Competition and competitors' credit conditions
• Country's economic position
• Conditions at financial institutions
• Discount for early payment
• Debtor's type of business and financial positions

Credit collection

Overdue accounts

• Attach a notice of overdue account to statement.
• Send a letter asking for settlement of debt.
• Send a second or third letter if first is ineffectual.
• Threaten legal action.
  

Effective credit control

• Increases sales
• Reduces bad debts
• Increases profits
• Builds customer loyalty
• Builds confidence of financial industry
• increase company capitlisation
  

Sources of information on creditworthiness

• Business references
• Bank references
• credit agencies
• Chambers of commerce
• Employers
• Credit application forms
  

Duties of the credit department

• Legal action
• Taking necessary steps to ensure settlement of account
• Knowing the credit policy and procedures for credit control
• Setting credit limits
• Ensuring that statements of account are sent out
• Ensuring that thorough checks are carried out on credit customers
• Keeping records of all amounts owing
• Ensuring that debts are settled promptly
• Timely reporting to the upper level of management for better management.
  

Stock

Purpose of stock control

• Ensures that enough stock is on hand to satisfy demand.
• Protects and monitors theft.
• Safeguards against having to stockpile.
• Allows for control over selling and cost price.

Stockpiling

This refers to the purchase of stock at the right time, at the right price and in the right quantities.

There are several advantages to the stockpiling, the following are some of the examples:

• Losses due to price fluctuations and stock loss kept to a minimum
• Ensures that goods reach customers timeously; better service
• Saves space and storage cost
• Investment of working capital kept to minimum
• No loss in production due to delays

There are several disadvantages to the stockpiling, the following are some of the examples:

• Obsolescence
• Danger of fire and theft
• Initial working capital investment is very large
• Losses due to price fluctuation

Rate of stock turnover

This refers to the number of times per year that the average level of stock is sold. It may be worked out by dividing the cost price of goods sold by the cost price of the average stock level.

Determining optimum stock levels

• Maximum stock level refers to the maximum stock level that may be maintained to ensure cost effectiveness.
• Minimum stock level refers to the point below which the stock level may not go.
• Standard order refers to the amount of stock generally ordered.
• Order level refers to the stock level which calls for an order to be made.
  

Cash

Reasons for keeping cash

• Cash is usually referred to as the "king" in finance, as it is the most liquid asset.
• The transaction motive refers to the money kept available to pay expenses.
• The precautionary motive refers to the money kept aside for unforeseen expenses.
• The speculative motive refers to the money kept aside to take advantage of suddenly arising opportunities.
  

Advantages of sufficient cash

• Current liabilties may be catered for.
• Cash discounts are given for cash payments.
• Production is kept moving
• Surplus cash may be invested on a short-term basis.
• The business is able to pay its accounts timeously, allowing for easily-obtained credit.
• Liquidity
  

Management of fixed assets

Depreciation

Depreciation is the decrease in the value of an asset due to wear and tear or obsolescence. It is calculated yearly to enforce the matching principle.

Insurance

Insurance is the undertaking of one party to indemnify another, in exchange for a premium, against a certain eventuality.

Uninsured risks

• Bad debt
• Changes in fashion
• Time lapses between ordering and delivery
• New machinery or technology
• Different prices at different places

Requirements of an insurance contract

• Insurable interest
  • The insured must derive a real financial gain from that which he is insuring, or stand to lose if it is destroyed or lost.
  • The item must belong to the insured.
  • One person may take out insurance on the life of another if the second party owes the first money.
  • Must be some person or item which can, legally, be insured.
  • The insured must have a legal claim to that which he is insuring.
• Good faith
  • Uberrimae fidei refers to absolute honesty and must characterise the dealings of both the insurer and the insured.
    

Shared Services

There is currently a move towards converging and consolidating Finance provisions into shared services within an organization. Rather than an organization having a number of separate Finance departments performing the same tasks from different locations a more centralized version can be created.

Finance of states

Country, state, county, city or municipality finance is called public finance. It is concerned with

• Identification of required expenditure of a public sector entity
• Source(s) of that entity's revenue
• The budgeting process
• Debt issuance (municipal bonds) for public works projects
  

Financial economics

Financial economics is the branch of economics studying the interrelation of financial variables, such as prices, interest rates and shares, as opposed to those concerning the real economy. Financial economics concentrates on influences of real economic variables on financial ones, in contrast to pure finance.

It studies:

• Valuation - Determination of the fair value of an asset
  • How risky is the asset? (identification of the asset appropriate discount rate)
  • What cash flows will it produce? (discounting of relevant cash flows)
  • How does the market price compare to similar assets? (relative valuation)
  • Are the cash flows dependent on some other asset or event? (derivatives, contingent claim valuation)

• Financial markets and instruments
  • Commodities - topics
  • Stocks - topics
  • Bonds - topics
  • Money market instruments- topics
  • Derivatives - topics

• Financial institutions and regulation

Financial Econometrics is the branch of Financial Economics that uses econometric techniques to parameterise the relationships.

Financial mathematics

Financial mathematics is a main branch of applied mathematics concerned with the financial markets. Financial mathematics is the study of financial data with the tools of mathematics, mainly statistics. Such data can be movements of securities—stocks and bonds etc.—and their relations. Another large subfield is insurance mathematics.

Experimental finance

Experimental finance aims to establish different market settings and environments to observe experimentally and provide a lens through which science can analyze agents' behavior and the resulting characteristics of trading flows, information diffusion and aggregation, price setting mechanisms, and returns processes. Researchers in experimental finance can study to what extent existing financial economics theory makes valid predictions, and attempt to discover new principles on which such theory can be extended. Research may proceed by conducting trading simulations or by establishing and studying the behaviour of people in artificial competitive market-like settings.

Behavioral finance

Behavioral Finance studies how the psychology of investors or managers affects financial decisions and markets. Behavioral finance has grown over the last few decades to become central to finance.

Behavioral finance includes such topics as:

1. Empirical studies that demonstrate significant deviations from classical theories.
2. Models of how psychology affects trading and prices
3. Forecasting based on these methods.
4. Studies of experimental asset markets and use of models to forecast experiments.

A strand of behavioral finance has been dubbed Quantitative Behavioral Finance, which uses mathematical and statistical methodology to understand behavioral biases in conjunction with valuation. Some of this endeavor has been lead by Gunduz Caginalp (Professor of Mathematics and Editor of Journal of Behavioral Finance during 2001-2004) and collaborators including Vernon Smith (2002 Nobel Laureate in Economics), David Porter, Don Balenovich, Vladimira Ilieva, Ahmet Duran, Huseyin Merdan). Studies by Jeff Madura, Ray Sturm and others have demonstrated significant behavioral effects in stocks and exchange traded funds. Among other topics, quantitative behavioral finance studies behavioral effects together with the non-classical assumption of the finiteness of assets.

Intangible Asset Finance

Intangible asset finance is the area of finance that deals with intangible assets such as patents, trademarks, goodwill, reputation, etc.

Related professional qualifications

There are several related professional qualifications in finance, that can lead to the field:

• Accountancy:
  • Qualified accountant: Chartered Accountant (ACA - UK certification / CA - certification in Commonwealth countries), Chartered Certified Accountant (ACCA, UK certification), Certified Public Accountant (CPA, US certification)
  • Non-statutory qualifications: Chartered Cost Accountant CCA Designation from AAFM
• Business qualifications: Master of Business Administration (MBA), Bachelor of Business Management (BBM), Master of Commerce (M.Comm), Master of Science in Management (MSM), Doctor of Business Administration (DBA)
• Generalist Finance qualifications:
  • Degrees: Masters degree in Finance (MSF), Master of Financial Economics, Master Financial Manager (MFM), Master of Financial Administration (MFA)
  • Certifications: Chartered Financial Analyst (CFA), Certified International Investment Analyst (CIIA), Association of Corporate Treasurers (ACT), Certified Market Analyst (CMA/FAD) Dual Designation, Corporate Finance Qualification (CF)
• Quantitative Finance qualifications: Master of Science in Financial Engineering (MSFE), Master of Quantitative Finance (MQF), Master of Computational Finance (MCF), Master of Financial Mathematics (MFM)

Management topics

Basic functions of management

Management operates through various functions, often classified as planning, organizing, leading/motivating, and controlling.

• Planning: Deciding what needs to happen in the future (today, next week, next month, next year, over the next 5 years, etc.) and generating plans for action.
• Organizing: (Implementation) making optimum use of the resources required to enable the successful carrying out of plans.
• Staffing: Job Analyzing, recruitment, and hiring individuals for appropriate jobs.
• Leading: Determining what needs to be done in a situation and getting people to do it.
• Controlling: Monitoring, checking progress against plans, which may need modification based on feedback.
• Motivating: the process of stimulating an individual to take action that will accomplish a desired goal.
  

Formation of the business policy

• The mission of the business is its most obvious purpose -- which may be, for example, to make soap.
• The vision of the business reflects its aspirations and specifies its intended direction or future destination.
• The objectives of the business refers to the ends or activity at which a certain task is aimed.
• The business's policy is a guide that stipulates rules, regulations and objectives, and may be used in the managers' decision-making. It must be flexible and easily interpreted and understood by all employees.
• The business's strategy refers to the coordinated plan of action that it is going to take, as well as the resources that it will use, to realize its vision and long-term objectives. It is a guideline to managers, stipulating how they ought to allocate and utilize the factors of production to the business's advantage. Initially, it could help the managers decide on what type of business they want to form.
  

How to implement policies and strategies

• All policies and strategies must be discussed with all managerial personnel and staff.
• Managers must understand where and how they can implement their policies and strategies.
• A plan of action must be devised for each department.
• Policies and strategies must be reviewed regularly.
• Contingency plans must be devised in case the environment changes.
• Assessments of progress ought to be carried out regularly by top-level managers.
• A good environment and team spirit is required within the business.

• The missions, objectives, strengths and weaknesses of each department must be analysed to determine their roles in achieving the business's mission.
• The forecasting method develops a reliable picture of the business's future environment.
• A planning unit must be created to ensure that all plans are consistent and that policies and strategies are aimed at achieving the same mission and objectives.
• Contingency plans must be developed, just in case.

All policies must be discussed with all managerial personnel and staff that is required in the execution of any departmental policy.

• Organizational change is strategically achieved through the implementation of the eight-step plan of action established by John P. Kotter: Increase urgency, get the vision right, communicate the buy-in, empower action, create short-term wins, don't let up, and make change stick.
  

Where policies and strategies fit into the planning process

• They give mid- and lower-level managers a good idea of the future plans for each department.
• A framework is created whereby plans and decisions are made.
• Mid- and lower-level management may add their own plans to the business's strategic ones.
  

Managerial levels and hierarchy

The management of a large organization may have three levels:

1. Senior management (or "top management" or "upper management")
2. Middle management
3. Low-level management, such as supervisors or team-leaders
4. Foreman
5. Rank and File

Top-level management

• Require an extensive knowledge of management roles and skills.
• They have to be very aware of external factors such as markets.
• Their decisions are generally of a long-term nature
• Their decisions are made using analytic, directive, conceptual and/or behavioral/participative processes
• They are responsible for strategic decisions.
• They have to chalk out the plan and see that plan may be effective in the future.
• They are executive in nature.

Middle management

• Mid-level managers have a specialized understanding of certain managerial tasks.
• They are responsible for carrying out the decisions made by top-level management.

Lower management

• This level of management ensures that the decisions and plans taken by the other two are carried out.
• Lower-level managers' decisions are generally short-term ones.

Foreman / lead hand

• They are people who have direct supervision over the working force in office factory, sales field or other workgroup or areas of activity.

Rank and File

• The responsibilities of the persons belonging to this group are even more restricted and more specific than those of the foreman.

Management

Management in all business and human organization activity is simply the act of getting people together to accomplish desired goals. Management comprises planning, organizing, staffing, leading or directing, and controlling an organization (a group of one or more people or entities) or effort for the purpose of accomplishing a goal. Resourcing encompasses the deployment and manipulation of human resources, financial resources, technological resources, and natural resources.

Management can also refer to the person or people who perform the act(s) of management.

Overview

The verb manage comes from the Italian maneggiare (to handle — especially a horse), which in turn derives from the Latin manus (hand). The French word mesnagement (later ménagement) influenced the development in meaning of the English word management in the 17th and 18th centuries.

Some definitions of management are:

• Organization and coordination of the activities of an enterprise in accordance with certain policies and in achievement of clearly defined objectives. Management is often included as a factor of production along with machines, materials, and money. According to the management guru Peter Drucker (1909–2005), the basic task of a management is twofold: marketing and innovation. Practice of modern management owes its origin to the 16th century enquiry into low-efficiency and failures of certain enterprises, conducted by the English statesman Sir Thomas More (1478–1535).

• Directors and managers who have the power and responsibility to make decisions to manage an enterprise. As a discipline, management comprises the interlocking functions of formulating corporate policy and organizing, planning, controlling, and directing the firm's resources to achieve the policy's objectives. The size of management can range from one person in a small firm to hundreds or thousands of managers in multinational companies. In large firms the board of directors formulates the policy which is implemented by the chief executive officer. Some business analysts and financiers accord the highest importance to the quality and experience of the managers in evaluating an organization's current and future worth.
  

Theoretical scope

Mary Parker Follett (1868–1933), who wrote on the topic in the early twentieth century, defined management as "the art of getting things done through people". One can also think of management functionally, as the action of measuring a quantity on a regular basis and of adjusting some initial plan; or as the actions taken to reach one's intended goal. This applies even in situations where planning does not take place. From this perspective, Frenchman Henri Fayol^[3] considers management to consist of seven functions:

1. planning
2. organizing
3. leading
4. co-ordinating
5. controlling
6. staffing
7. motivating

Some people, however, find this definition, while useful, far too narrow. The phrase "management is what managers do" occurs widely, suggesting the difficulty of defining management, the shifting nature of definitions, and the connection of managerial practices with the existence of a managerial cadre or class.

One habit of thought regards management as equivalent to "business administration" and thus excludes management in places outside commerce, as for example in charities and in the public sector. More realistically, however, every organization must manage its work, people, processes, technology, etc. in order to maximize its effectiveness. Nonetheless, many people refer to university departments which teach management as "business schools." Some institutions (such as the Harvard Business School) use that name while others (such as the Yale School of Management) employ the more inclusive term "management."

English speakers may also use the term "management" or "the management" as a collective word describing the managers of an organization, for example of a corporation. Historically this use of the term was often contrasted with the term "Labor" referring to those being managed.

Nature of managerial work

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In for-profit work, management has as its primary function the satisfaction of a range of stakeholders. This typically involves making a profit (for the shareholders), creating valued products at a reasonable cost (for customers), and providing rewarding employment opportunities (for employees). In nonprofit management, add the importance of keeping the faith of donors. In most models of management/governance, shareholders vote for the board of directors, and the board then hires senior management. Some organizations have experimented with other methods (such as employee-voting models) of selecting or reviewing managers; but this occurs only very rarely.

In the public sector of countries constituted as representative democracies, voters elect politicians to public office. Such politicians hire many managers and administrators, and in some countries like the United States political appointees lose their jobs on the election of a new president/governor/mayor.

Public, private, and voluntary sectors place different demands on managers, but all must retain the faith of those who select them (if they wish to retain their jobs), retain the faith of those people that fund the organization, and retain the faith of those who work for the organization. If they fail to convince employees of the advantages of staying rather than leaving, they may tip the organization into a downward spiral of hiring, training, firing, and recruiting. Management also has the task of innovating and of improving the functioning of organizations.

Historical development

Difficulties arise in tracing the history of management. Some see it (by definition) as a late modern (in the sense of late modernity) conceptualization. On those terms it cannot have a pre-modern history, only harbingers (such as stewards). Others, however, detect management-like-thought back to Sumerian traders and to the builders of the pyramids of ancient Egypt. Slave-owners through the centuries faced the problems of exploiting/motivating a dependent but sometimes unenthusiastic or recalcitrant workforce, but many pre-industrial enterprises, given their small scale, did not feel compelled to face the issues of management systematically. However, innovations such as the spread of Arabic numerals (5th to 15th centuries) and the codification of double-entry book-keeping (1494) provided tools for management assessment, planning and control.

Given the scale of most commercial operations and the lack of mechanized record-keeping and recording before the industrial revolution, it made sense for most owners of enterprises in those times to carry out management functions by and for themselves. But with growing size and complexity of organizations, the split between owners (individuals, industrial dynasties or groups of shareholders) and day-to-day managers (independent specialists in planning and control) gradually became more common.

Early writing

While management has been present for millennia, several writers have created a background of works that assisted in modern management theories.

Sun Tzu's The Art of War

Written by Chinese general Sun Tzu in the 6th century BC, The Art of War is a military strategy book that, for managerial purposes, recommends being aware of and acting on strengths and weaknesses of both a manager's organization and a foe's.

Niccolò Machiavelli's The Prince

Believing that people were motivated by self-interest, Niccolò Machiavelli wrote The Prince in 1513 as advice for the leadership of Florence, Italy. Machiavelli recommended that leaders use fear—but not hatred—to maintain control.

Adam Smith's The Wealth of Nations

Written in 1776 by Adam Smith, a Scottish moral philosopher, The Wealth of Nations aims for efficient organization of work through Specialization of labor. Smith described how changes in processes could boost productivity in the manufacture of pins. While individuals could produce 200 pins per day, Smith analyzed the steps involved in manufacture and, with 10 specialists, enabled production of 48,000 pins per day.

19th century

Classical economists such as Adam Smith (1723 - 1790) and John Stuart Mill (1806 - 1873) provided a theoretical background to resource-allocation, production, and pricing issues. About the same time, innovators like Eli Whitney (1765 - 1825), James Watt (1736 - 1819), and Matthew Boulton (1728 - 1809) developed elements of technical production such as standardization, quality-control procedures, cost-accounting, interchangeability of parts, and work-planning. Many of these aspects of management existed in the pre-1861 slave-based sector of the US economy. That environment saw 4 million people, as the contemporary usages had it, "managed" in profitable quasi-mass production.

By the late 19th century, marginal economists Alfred Marshall (1842 - 1924), Léon Walras (1834 - 1910), and others introduced a new layer of complexity to the theoretical underpinnings of management. Joseph Wharton offered the first tertiary-level course in management in 1881.

20th century

By about 1900 one finds managers trying to place their theories on what they regarded as a thoroughly scientific basis (see scientism for perceived limitations of this belief). Examples include Henry R. Towne's Science of management in the 1890s, Frederick Winslow Taylor's The Principles of Scientific Management (1911), Frank and Lillian Gilbreth's Applied motion study (1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first college management textbook in 1911. In 1912 Yoichi Ueno introduced Taylorism to Japan and became first management consultant of the "Japanese-management style". His son Ichiro Ueno pioneered Japanese quality assurance.

The first comprehensive theories of management appeared around 1920. The Harvard Business School invented the Master of Business Administration degree (MBA) in 1921. People like Henri Fayol (1841 - 1925) and Alexander Church described the various branches of management and their inter-relationships. In the early 20th century, people like Ordway Tead (1891 - 1973), Walter Scott and J. Mooney applied the principles of psychology to management, while other writers, such as Elton Mayo (1880 - 1949), Mary Parker Follett (1868 - 1933), Chester Barnard (1886 - 1961), Max Weber (1864 - 1920), Rensis Likert (1903 - 1981), and Chris Argyris (1923 - ) approached the phenomenon of management from a sociological perspective.

Peter Drucker (1909 – 2005) wrote one of the earliest books on applied management: Concept of the Corporation (published in 1946). It resulted from Alfred Sloan (chairman of General Motors until 1956) commissioning a study of the organisation. Drucker went on to write 39 books, many in the same vein.

H. Dodge, Ronald Fisher (1890 - 1962), and Thornton C. Fry introduced statistical techniques into management-studies. In the 1940s, Patrick Blackett combined these statistical theories with microeconomic theory and gave birth to the science of operations research. Operations research, sometimes known as "management science" (but distinct from Taylor's scientific management), attempts to take a scientific approach to solving management problems, particularly in the areas of logistics and operations.

Some of the more recent^[update] developments include the Theory of Constraints, management by objectives, reengineering, Six Sigma and various information-technology-driven theories such as agile software development, as well as group management theories such as Cog's Ladder.

As the general recognition of managers as a class solidified during the 20th century and gave perceived practitioners of the art/science of management a certain amount of prestige, so the way opened for popularised systems of management ideas to peddle their wares. In this context many management fads may have had more to do with pop psychology than with scientific theories of management.

Towards the end of the 20th century, business management came to consist of six separate branches, namely:

• Human resource management
• Operations management or production management
• Strategic management
• Marketing management
• Financial management
• Information technology management responsible for management information systems

21st century

In the 21st century observers find it increasingly difficult to subdivide management into functional categories in this way. More and more processes simultaneously involve several categories. Instead, one tends to think in terms of the various processes, tasks, and objects subject to management.

Branches of management theory also exist relating to nonprofits and to government: such as public administration, public management, and educational management. Further, management programs related to civil-society organizations have also spawned programs in nonprofit management and social entrepreneurship.

Note that many of the assumptions made by management have come under attack from business ethics viewpoints, critical management studies, and anti-corporate activism.

As one consequence, workplace democracy has become both more common, and more advocated, in some places distributing all management functions among the workers, each of whom takes on a portion of the work. However, these models predate any current political issue, and may occur more naturally than does a command hierarchy. All management to some degree embraces democratic principles in that in the long term workers must give majority support to management; otherwise they leave to find other work, or go on strike. Despite the move toward workplace democracy, command-and-control organization structures remain commonplace and the de facto organization structure. Indeed, the entrenched nature of command-and-control can be seen in the way that recent layoffs have been conducted with management ranks affected far less than employees at the lower levels of organizations. In some cases, management has even rewarded itself with bonuses when lower level employees have been laid off.

Management information system

A management information system (MIS) is a subset of the overall internal controls of a business covering the application of people, documents, technologies, and procedures by management accountants to solving business problems such as costing a product, service or a business-wide strategy. Management information systems are distinct from regular information systems in that they are used to analyze other information systems applied in operational activities in the organization.^[1] Academically, the term is commonly used to refer to the group of information management methods tied to the automation or support of human decision making, e.g. Decision Support Systems, Expert systems, and Executive information systems.

Overview

At the start, in businesses and other organizations, internal reporting was made manually and only periodically, as a by-product of the accounting system and with some additional statistics, and gave limited and delayed information on management performance.

In their infancy, business computers were used for the practical business of computing the payroll and keeping track of accounts payable and accounts receivable. As applications were developed that provided managers with information about sales, inventories, and other data that would help in managing the enterprise, the term "MIS" arose to describe these kinds of applications. Today, the term is used broadly in a number of contexts and includes (but is not limited to): decision support systems, resource and people management applications, project management and database retrieval application.

Definition

An 'MIS' is a planned system of the collecting, processing, storing and disseminating data in the form of information needed to carry out the functions of management. According to Philip Kotler "A marketing information system consists of people, equipment, and procedures to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to marketing decision makers."

The terms MIS and information system are often confused. Information systems include systems that are not intended for decision making. The area of study called MIS is sometimes referred to, in a restrictive sense, as information technology management. That area of study should not be confused with computer science. IT service management is a practitioner-focused discipline. MIS has also some differences with Enterprise Resource Planning (ERP) as ERP incorporates elements that are not necessarily focused on decision support.

Professor Allen S. Lee states that "...research in the information systems field examines more than the technological system, or just the social system, or even the two side by side; in addition, it investigates the phenomena that emerge when the two interact."

Marketing

Marketing is an integrated communications-based process through which individuals and communities discover that existing and newly-identified needs and wants may be satisfied by the products and services of others.

Marketing is defined by the American Marketing Association as the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. ^[1] The term developed from the original meaning which referred literally to going to market, as in shopping, or going to a market to buy or sell goods or services.

Marketing practice tends to be seen as a creative industry, which includes advertising, distribution and selling. It is also concerned with anticipating the customers' future needs and wants, which are often discovered through market research. Seen from a systems point of view, sales process engineering views marketing as a set of processes that are interconnected and interdependent with other functions, whose methods can be improved using a variety of relatively new approaches.

Marketing is influenced by many of the social sciences, particularly psychology, sociology, and economics. Anthropology and neuroscience are also small but growing influences. Market research underpins these activities. Through advertising, it is also related to many of the creative arts. The marketing literature is also infamous for re-inventing itself and its vocabulary according to the times and the culture.

Four Ps

In the early 1960s, Professor Neil Borden at Harvard Business School identified a number of company performance actions that can influence the consumer decision to purchase goods or services. Borden suggested that all those actions of the company represented a “Marketing Mix”. Professor E. Jerome McCarthy, also at the Harvard Business School in the early 1960s, suggested that the Marketing Mix contained 4 elements: product, price, place and promotion.

• Product: The product aspects of marketing deal with the specifications of the actual goods or services, and how it relates to the end-user's needs and wants. The scope of a product generally includes supporting elements such as warranties, guarantees, and support.
• Pricing: This refers to the process of setting a price for a product, including discounts. The price need not be monetary; it can simply be what is exchanged for the product or services, e.g. time, energy, or attention. Methods of setting prices optimally are in the domain of pricing science.
• Placement (or distribution): refers to how the product gets to the customer; for example, point-of-sale placement or retailing. This third P has also sometimes been called Place, referring to the channel by which a product or service is sold (e.g. online vs. retail), which geographic region or industry, to which segment (young adults, families, business people), etc. also referring to how the environment in which the product is sold in can affect sales.
• Promotion: This includes advertising, sales promotion, publicity, and personal selling. Branding refers to the various methods of promoting the product, brand, or company.

These four elements are often referred to as the marketing mix,^[3] which a marketer can use to craft a marketing plan.

The four Ps model is most useful when marketing low value consumer products. Industrial products, services, high value consumer products require adjustments to this model. Services marketing must account for the unique nature of services.

Industrial or B2B marketing must account for the long term contractual agreements that are typical in supply chain transactions. Relationship marketing attempts to do this by looking at marketing from a long term relationship perspective rather than individual transactions.

As a counter to this, Morgan, in Riding the Waves of Change (Jossey-Bass, 1988), suggests that one of the greatest limitations of the 4 Ps approach "is that it unconsciously emphasizes the inside–out view (looking from the company outwards), whereas the essence of marketing should be the outside–in approach".

Branding

A brand is a name, term, design, symbol, or other feature that distinguishes products and services from competitive offerings. A brand represents the consumers' experience with an organization, product, or service. A brand is more than a name, design or symbol. Brand reflects personality of the company which is organizational culture.

A brand has also been defined as an identifiable entity that makes a specific value based on promises made and kept either actively or passively.

Branding means creating reference of certain products in mind.

Co-branding involves marketing activity involving two or more products.

Marketing communications

Marketing communications breaks down the strategies involved with marketing messages into categories based on the goals of each message. There are distinct stages in converting strangers to customers that govern the communication medium that should be used.

Advertising

• Paid form of public presentation and expressive promotion of ideas
• Aimed at masses
• Manufacturer may determine what goes into advertisement
• Pervasive and impersonal medium
  

Functions and advantages of successful advertising

1. Task of the salesman made easier

• Maximize sales
• Publicity
• Brand building
• Create awareness
• Persuade buyers
• Introduction of new product
• Enable market leadership
• To face competition
• To inform changes
• To counteract to competitors advertisement
• To enhance goodwill
  

Objectives

• Maintain demand for well-known goods
• Introduce new and unknown goods
• Increase demand for well-known goods/products/services
  

Requirements of a good advertisement

The AIDA principle. Attention, Interest, Desire and Action

• Attract attention (awareness)
• Stimulate interest
• Create a desire
• Bring about action (to buy the product)
  

Eight steps in an advertising campaign

• Market research
• Setting out aims
• Budgeting
• Choice of media (television, newspaper/magazines, radio, web, outdoor)
• Choice of actors and players (New Trend)
• Design and wording
• Co-ordination
• Test results
  

Personal sales

Oral presentation given by a salesperson who approaches individuals or a group of potential customers:

• Live, interactive relationship
• Personal interest
• Attention and response
• Interesting presentation
• Clear and thorough.
  

Sales promotion

Short-term incentives to encourage buying of products:

• Instant appeal
• Anxiety to sell

An example is coupons or a sale. People are given an incentive to buy, but this does not build customer loyalty or encourage future repeat buys. A major drawback of sales promotion is that it is easily copied by competition. It cannot be used as a sustainable source of differentiation.

Marketing Public Relations (MPR)

• Stimulation of demand through press release giving a favourable report to a product
• Higher degree of credibility
• Effectively news
• Boosts enterprise's image
  

Customer focus

Many companies today have a customer focus (or market orientation). This implies that the company focuses its activities and products on consumer demands. Generally there are three ways of doing this: the customer-driven approach, the sense of identifying market changes and the product innovation approach.

In the consumer-driven approach, consumer wants are the drivers of all strategic marketing decisions. No strategy is pursued until it passes the test of consumer research. Every aspect of a market offering, including the nature of the product itself, is driven by the needs of potential consumers. The starting point is always the consumer. The rationale for this approach is that there is no point spending R&D funds developing products that people will not buy. History attests to many products that were commercial failures in spite of being technological breakthroughs.

A formal approach to this customer-focused marketing is known as SIVA (Solution, Information, Value, Access). This system is basically the four Ps renamed and reworded to provide a customer focus.

The SIVA Model provides a demand/customer centric version alternative to the well-known 4Ps supply side model (product, price, place, promotion) of marketing management.

Product	→	Solution
Promotion	→	Information
Price	→	Value
Placement	→	Access

The four elements of the SIVA model are:

1. Solution: How appropriate is the solution to the customer's problem/need?
2. Information: Does the customer know about the solution? If so, how and from whom do they know enough to let them make a buying decision?
3. Value: Does the customer know the value of the transaction, what it will cost, what are the benefits, what might they have to sacrifice, what will be their reward?
4. Access: Where can the customer find the solution? How easily/locally/remotely can they buy it and take delivery?

This model was proposed by Chekitan Dev and Don Schultz in the Marketing Management Journal of the American Marketing Association, and presented by them in Market Leader, the journal of the Marketing Society in the UK.

Product focus

In a product innovation approach, the company pursues product innovation, then tries to develop a market for the product. Product innovation drives the process and marketing research is conducted primarily to ensure that profitable market segment(s) exist for the innovation. The rationale is that customers may not know what options will be available to them in the future so we should not expect them to tell us what they will buy in the future. However, marketers can aggressively over-pursue product innovation and try to overcapitalize on a niche. When pursuing a product innovation approach, marketers must ensure that they have a varied and multi-tiered approach to product innovation. It is claimed that if Thomas Edison depended on marketing research he would have produced larger candles rather than inventing light bulbs. Many firms, such as research and development focused companies, successfully focus on product innovation. Many purists doubt whether this is really a form of marketing orientation at all, because of the ex post status of consumer research. Some even question whether it is marketing.

• An emerging area of study and practice concerns internal marketing, or how employees are trained and managed to deliver the brand in a way that positively impacts the acquisition and retention of customers (employer branding).
• Diffusion of innovations research explores how and why people adopt new products, services and ideas.
• A relatively new form of marketing uses the Internet and is called Internet marketing or more generally e-marketing, affiliate marketing, desktop advertising or online marketing. It tries to perfect the segmentation strategy used in traditional marketing. It targets its audience more precisely, and is sometimes called personalized marketing or one-to-one marketing.
• With consumers' eroding attention span and willingness to give time to advertising messages, marketers are turning to forms of permission marketing such as branded content, custom media and reality marketing.
• The use of herd behavior in marketing.

The Economist reported a recent conference in Rome on the subject of the simulation of adaptive human behavior. It shared mechanisms to increase impulse buying and get people "to buy more by playing on the herd instinct." The basic idea is that people will buy more of products that are seen to be popular, and several feedback mechanisms to get product popularity information to consumers are mentioned, including smart-cart technology and the use of Radio Frequency Identification Tag technology. A "swarm-moves" model was introduced by a Princeton researcher, which is appealing to supermarkets because it can "increase sales without the need to give people discounts." Large retailers Wal-Mart in the United States and Tesco in Britain plan to test the technology in spring 2007 .

Marketing is also used to promote business' products and is a great way to promote the business.

Other recent studies on the "power of social influence" include an "artificial music market in which some 14,000 people downloaded previously unknown songs" (Columbia University, New York); a Japanese chain of convenience stores which orders its products based on "sales data from department stores and research companies;" a Massachusetts company exploiting knowledge of social networking to improve sales; and online retailers who are increasingly informing consumers about "which products are popular with like-minded consumers" (e.g., Amazon, eBay).

Areas of marketing specialization

• agricultural marketing
• advertising and branding
• communications
• CRM, Customer Relationship Management
• database marketing
• professional selling
• direct marketing
• event organization
• experiential marketing
• field marketing
• global marketing
• guerilla marketing
• international marketing
• internet marketing
• industrial marketing
• market research
• marketing strategy
• marketing plan
• political marketing
• product marketing
• proximity marketing
• public marketing
• public relations
• retailing
• search engine marketing
• segmentation
• social media marketing
• sponsorship
• strategic management
• wholesale marketing

Operations management

Operations management is an area of business concerned with the production of quality goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It is the management of resources, the distribution of goods and services to customers.

Operations also refers to the production of goods and services, the set of value-added activities that transform inputs into many outputs. Fundamentally, these value-adding creative activities should be aligned with market opportunity (see Marketing) for optimal enterprise performance.

Origins

The origins of operations management can be traced back to the Industrial Revolution, the same as scientific management and operations research. Adam Smith treats the topic of the division of labor when opening his 1776 book: An Inquiry into the Nature and Causes of the Wealth of Nations also commonly known as The Wealth of Nations. The first documented effort to solve operation management issues comes from Eli Whitney in 1798, leading to the birth of the American System of Manufacturers (ASM) by the mid-1800s. It was not until the late 1950s that scholars noted the importance of viewing production operations as systems.

Historically, the body of knowledge stemming from industrial engineering formed the basis of the first MBA programs, and is central to operations management as used across diverse business sectors, industry, consulting and non-profit organizations.

Operations management planning criteria

The task of production and operations management is to manage the efforts and activities of people, capital and equipment resources in changing raw materials into finished goods and services.

Organizations

The following organizations support and promote operations management:

• APICS The Association for Operations Management
• Association for Professionals in Business Management (APBM)
• Chartered Management Institute
• European Operations Management Association (EurOMA) which supports the International Journal of Operations & Production Management
• Institute for Operations Research and the Management Sciences (INFORMS)
• Institute of operations management
• Production and Operations Management Society (POMS)

Supply Chain Management

Supply chain management (SCM) is the management of a network of interconnected businesses involved in the ultimate provision of product and service packages required by end customers (Harland, 1996). Supply Chain Management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (supply chain).

Idea

The definition an American professional association put forward is that Supply Chain Management encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, Supply Chain Management integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise.

Supply Chain Management can also refer to Supply chain management software which are tools or modules used in executing supply chain transactions, managing supplier relationships and controlling associated business processes.

Supply chain event management (abbreviated as SCEM) is a consideration of all possible occurring events and factors that can cause a disruption in a supply chain. With SCEM possible scenarios can be created and solutions can be planned.

Supply Chain Management Problems

Supply chain management must address the following problems:

• Distribution Network Configuration: Number, location and network missions of suppliers, production facilities, distribution centers, warehouses, cross-docks and customers.
• Distribution Strategy: Including questions of operating control (centralized, decentralized or shared); delivery scheme (e.g., direct shipment, pool point shipping, Cross docking, DSD (direct store delivery), closed loop shipping); mode of transportation (e.g., motor carrier, including truckload, LTL, parcel; railroad; intermodal, including TOFC and COFC; ocean freight; airfreight); replenishment strategy (e.g., pull, push or hybrid); and transportation control (e.g., owner-operated, private carrier, common carrier, contract carrier, or 3PL). Trade-Offs in Logistical Activities

The above activities must be coordinated well together in order to achieve the least total logistics cost. Trade-offs exist that increase the total cost if only one of the activities is optimized. For example, full truckload (FTL) rates are more economical on a cost per pallet basis than less than truckload (LTL) shipments. If, however, a full truckload of a product is ordered to reduce transportation costs there will be an increase in inventory holding costs which may increase total logistics costs. It is therefore imperative to take a systems approach when planning logistical activities. These trade-offs are key to developing the most efficient and effective Logistics and SCM strategy.

• Information: Integration of and other processes through the supply chain to share valuable information, including demand signals, forecasts, inventory, transportation, and potential collaboration etc.
• Inventory Management: Quantity and location of inventory including raw materials, work-in-progress (WIP) and finished goods.
• Cash-Flow: Arranging the payment terms and the methodologies for exchanging funds across entities within the supply chain.

Supply chain execution is managing and coordinating the movement of materials, information and funds across the supply chain. The flow is bi-directional.

Activities/functions

Supply chain management is a cross-function approach to manage the movement of raw materials into an organization, certain aspects of the internal processing of materials into finished goods, and then the movement of finished goods out of the organization toward the end-consumer. As organizations strive to focus on core competencies and becoming more flexible, they have reduced their ownership of raw materials sources and distribution channels. These functions are increasingly being outsourced to other entities that can perform the activities better or more cost effectively. The effect is to increase the number of organizations involved in satisfying customer demand, while reducing management control of daily logistics operations. Less control and more supply chain partners led to the creation of supply chain management concepts. The purpose of supply chain management is to improve trust and collaboration among supply chain partners, thus improving inventory visibility and improving inventory velocity.

Several models have been proposed for understanding the activities required to manage material movements across organizational and functional boundaries. SCOR is a supply chain management model promoted by the Supply Chain Council. Another model is the SCM Model proposed by the Global Supply Chain Forum (GSCF). Supply chain activities can be grouped into strategic, tactical, and operational levels of activities.

Strategic

• Strategic network optimization, including the number, location, and size of warehouses, distribution centers, and facilities
• Strategic partnership with suppliers, distributors, and customers, creating communication channels for critical information and operational improvements such as cross docking, direct shipping, and third-party logistics
• Product life cycle management, so that new and existing products can be optimally integrated into the supply chain and capacity management
• Information Technology infrastructure, to support supply chain operations
• Where-to-make and what-to-make-or-buy decisions
• Aligning overall organizational strategy with supply strategy
  

Tactical

• Sourcing contracts and other purchasing decisions.
• Production decisions, including contracting, scheduling, and planning process definition.
• Inventory decisions, including quantity, location, and quality of inventory.
• Transportation strategy, including frequency, routes, and contracting.
• Benchmarking of all operations against competitors and implementation of best practices throughout the enterprise.
• Milestone payments
• Focus on customer demand
  

Operational

• Daily production and distribution planning, including all nodes in the supply chain.
• Production scheduling for each manufacturing facility in the supply chain (minute by minute).
• Demand planning and forecasting, coordinating the demand forecast of all customers and sharing the forecast with all suppliers.
• Sourcing planning, including current inventory and forecast demand, in collaboration with all suppliers.
• Inbound operations, including transportation from suppliers and receiving inventory.
• Production operations, including the consumption of materials and flow of finished goods.
• Outbound operations, including all fulfillment activities, warehousing and transportation to customers.
• Order promising, accounting for all constraints in the supply chain, including all suppliers, manufacturing facilities, distribution centers, and other customers.
  

Supply chain management

Organizations increasingly find that they must rely on effective supply chains, or networks, to successfully compete in the global market and networked economy.^[2] In Peter Drucker's (1998) new management paradigms, this concept of business relationships extends beyond traditional enterprise boundaries and seeks to organize entire business processes throughout a value chain of multiple companies.

During the past decades, globalization, outsourcing and information technology have enabled many organizations, such as Dell and Hewlett Packard, to successfully operate solid collaborative supply networks in which each specialized business partner focuses on only a few key strategic activities (Scott, 1993). This inter-organizational supply network can be acknowledged as a new form of organization. However, with the complicated interactions among the players, the network structure fits neither "market" nor "hierarchy" categories (Powell, 1990). It is not clear what kind of performance impacts different supply network structures could have on firms, and little is known about the coordination conditions and trade-offs that may exist among the players. From a systems perspective, a complex network structure can be decomposed into individual component firms (Zhang and Dilts, 2004). Traditionally, companies in a supply network concentrate on the inputs and outputs of the processes, with little concern for the internal management working of other individual players. Therefore, the choice of an internal management control structure is known to impact local firm performance (Mintzberg, 1979).

In the 21st century, changes in the business environment have contributed to the development of supply chain networks. First, as an outcome of globalization and the proliferation of multinational companies, joint ventures, strategic alliances and business partnerships, there were found to be significant success factors, following the earlier "Just-In-Time", "Lean Manufacturing" and "Agile Manufacturing" practices.^[3] Second, technological changes, particularly the dramatic fall in information communication costs, which are a significant component of transaction costs, have led to changes in coordination among the members of the supply chain network (Coase, 1998).

Many researchers have recognized these kinds of supply network structures as a new organization form, using terms such as "Keiretsu", "Extended Enterprise", "Virtual Corporation", "Global Production Network", and "Next Generation Manufacturing System".^[4] In general, such a structure can be defined as "a group of semi-independent organizations, each with their capabilities, which collaborate in ever-changing constellations to serve one or more markets in order to achieve some business goal specific to that collaboration" (Akkermans, 2001).

The security management system for supply chain is described in ISO/IEC 28000 and ISO/IEC 28001 and related standards published jointly by ISO and IEC.

Developments in Supply Chain Management

Six major movements can be observed in the evolution of supply chain management studies: Creation, Integration, and Globalization (Lavassani et al., 2008^a), Specialization Phases One and Two, and SCM 2.0.

1. Creation Era

The term supply chain management was first coined by an American industry consultant in the early 1980s. However the concept of supply chain in management, was of great importance long before in the early 20th century, especially by the creation of the assembly line. The characteristics of this era of supply chain management include the need for large scale changes, re-engineering, downsizing driven by cost reduction programs, and widespread attention to the Japanese practice of management.

2. Integration Era

This era of supply chain management studies was highlighted with the development of Electronic Data Interchange (EDI) systems in the 1960s and developed through the 1990s by the introduction of Enterprise Resource Planning (ERP) systems. This era has continued to develop into the 21st century with the expansion of internet-based collaborative systems. This era of SC evolution is characterized by both increasing value-added and cost reduction through integration.

3. Globalization Era

The third movement of supply chain management development, globalization era, can be characterized by the attention towards global systems of supplier relations and the expansion of supply chain over national boundaries and into other continents. Although the use of global sources in the supply chain of organizations can be traced back to several decades ago (e.g. the oil industry), it was not until the late 1980s that a considerable number of organizations started to integrate global sources into their core business. This era is characterized by the globalization of supply chain management in organizations with the goal of increasing competitive advantage, creating more value-added, and reducing costs through global sourcing.

4. Specialization Era -- Phase One -- Outsourced Manufacturing and Distribution

In the 1990s industries began to focus on “core competencies” and adopted a specialization model. Companies abandoned vertical integration, sold off non-core operations, and outsourced those functions to other companies. This changed management requirements by extending the supply chain well beyond the four walls and distributing management across specialized supply chain partnerships.

This transition also re-focused the fundamental perspectives of each respective organization. OEMs became brand owners that needed deep visibility into their supply base. They had to control the entire supply chain from above instead of from within. Contract manufacturers had to manage bills of material with different part numbering schemes from multiple OEMs and support customer requests for work -in-process visibility and vendor-managed inventory (VMI).

The specialization model creates manufacturing and distribution networks composed of multiple, individual supply chains specific to products, suppliers, and customers who work together to design, manufacture, distribute, market, sell, and service a product. The set of partners may change according to a given market, region, or channel, resulting in a proliferation of trading partner environments, each with its own unique characteristics and demands.

5. Specialization Era -- Phase Two -- Supply Chain Management as a Service

Specialization within the supply chain began in the 1980s with the inception of transportation brokerages, warehouse management, and non asset based carriers and has matured beyond transportation and logistics into aspects of supply planning, collaboration, execution and performance management.

At any given moment, market forces could demand changes within suppliers, logistics providers, locations, customers and any number of these specialized participants within supply chain networks. This variability has significant effect on the supply chain infrastructure, from the foundation layers of establishing and managing the electronic communication between the trading partners to the more-complex requirements, including the configuration of the processes and work flows that are essential to the management of the network itself.

Supply chain specialization enables companies to improve their overall competencies in the same way that outsourced manufacturing and distribution has done; it allows them to focus on their core competencies and assemble networks of best in class domain specific partners to contribute to the overall value chain itself – thus increasing overall performance and efficiency. The ability to quickly obtain and deploy this domain specific supply chain expertise without developing and maintaining an entirely unique and complex competency in house is the leading reason why supply chain specialization is gaining popularity.

Outsourced technology hosting for supply chain solutions debuted in the late 1990s and has taken root in transportation and collaboration categories most dominantly. This has progressed from the Application Service Provider (ASP) model from approximately 1998 through 2003 to the On-Demand model from approximately 2003-2006 to the Software as a Service (SaaS) model we are currently focused on today.

6. Supply Chain Management 2.0 (SCM 2.0)

Building off of globalization and specialization, SCM 2.0 has been coined to describe both the changes within the supply chain itself as well as the evolution of the processes, methods and tools that manage it in this new "era".

Web 2.0 is defined as a trend in the use of the World Wide Web that is meant to increase creativity, information sharing, and collaboration among users. At its core, the common attribute that Web 2.0 brings is it helps us navigate the vast amount of information available on the web to find what we are looking for. It is the notion of a usable pathway. SCM 2.0 follows this notion into supply chain operations. It is the pathway to SCM results – the combination of the processes, methodologies, tools and delivery options to guide companies to their results quickly as the complexity and speed of the supply chain increase due to the effects of global competition, rapid price fluctuations, surging oil prices, short product life cycles, expanded specialization, near/far and off shoring, and talent scarcity.

SCM 2.0 leverages proven solutions designed to rapidly deliver results with the agility to quickly manage future change for continuous flexibility, value and success. This is delivered through competency networks composed of best of breed supply chain domain expertise to understand which elements, both operationally and organizationally, are the critical few that deliver the results as well as the intimate understanding of how to manage these elements to achieve desired results, finally the solutions are delivered in a variety of options as no-touch via business process outsourcing, mid-touch via managed services and software as a service (SaaS), or high touch in the traditional software deployment model.

Supply chain business process integration

Successful SCM requires a change from managing individual functions to integrating activities into key supply chain processes. An example scenario: the purchasing department places orders as requirements become appropriate. Marketing, responding to customer demand, communicates with several distributors and retailers as it attempts to satisfy this demand. Shared information between supply chain partners can only be fully leveraged through process integration.

Supply chain business process integration involves collaborative work between buyers and suppliers, joint product development, common systems and shared information. According to Lambert and Cooper (2000) operating an integrated supply chain requires continuous information flow. However, in many companies, management has reached the conclusion that optimizing the product flows cannot be accomplished without implementing a process approach to the business. The key supply chain processes stated by Lambert (2004) ^[5] are:

• Customer relationship management
• Customer service management
• Demand management
• Order fulfillment
• Manufacturing flow management
• Supplier relationship management
• Product development and commercialization
• Returns management

Much has been written about demand management. Best in Class companies have similar characteristics. They include the following: a) Internal and external collaboration b) Lead time reduction initiatives c) Tighter feedback from customer and market demand d) Customer level forecasting

One could suggest other key critical supply business processes combining these processes stated by Lambert such as:

1. Customer service management
2. Procurement
3. Product development and commercialization
4. Manufacturing flow management/support
5. Physical distribution
6. Outsourcing/partnerships
7. Performance measurement

a) Customer service management process

Customer Relationship Management concerns the relationship between the organization and its customers. Customer service provides the source of customer information. It also provides the customer with real-time information on promising dates and product availability through interfaces with the company's production and distribution operations. Successful organizations use following steps to build customer relationships:

• determine mutually satisfying goals between organization and customers
• establish and maintain customer rapport
• produce positive feelings in the organization and the customers

b) Procurement process

Strategic plans are developed with suppliers to support the manufacturing flow management process and development of new products. In firms where operations extend globally, sourcing should be managed on a global basis. The desired outcome is a win-win relationship, where both parties benefit, and reduction times in the design cycle and product development are achieved. Also, the purchasing function develops rapid communication systems, such as electronic data interchange (EDI) and Internet linkages to transfer possible requirements more rapidly. Activities related to obtaining products and materials from outside suppliers requires performing resource planning, supply sourcing, negotiation, order placement, inbound transportation, storage, handling and quality assurance, many of which include the responsibility to coordinate with suppliers in scheduling, supply continuity, hedging, and research into new sources or programs.

c) Product development and commercialization

Here, customers and suppliers must be united into the product development process, thus to reduce time to market. As product life cycles shorten, the appropriate products must be developed and successfully launched in ever shorter time-schedules to remain competitive. According to Lambert and Cooper (2000), managers of the product development and commercialization process must:

1. coordinate with customer relationship management to identify customer-articulated needs;
2. select materials and suppliers in conjunction with procurement, and
3. develop production technology in manufacturing flow to manufacture and integrate into the best supply chain flow for the product/market combination.

d) Manufacturing flow management process

The manufacturing process is produced and supplies products to the distribution channels based on past forecasts. Manufacturing processes must be flexible to respond to market changes, and must accommodate mass customization. Orders are processes operating on a just-in-time (JIT) basis in minimum lot sizes. Also, changes in the manufacturing flow process lead to shorter cycle times, meaning improved responsiveness and efficiency of demand to customers. Activities related to planning, scheduling and supporting manufacturing operations, such as work-in-process storage, handling, transportation, and time phasing of components, inventory at manufacturing sites and maximum flexibility in the coordination of geographic and final assemblies postponement of physical distribution operations.

e) Physical distribution

This concerns movement of a finished product/service to customers. In physical distribution, the customer is the final destination of a marketing channel, and the availability of the product/service is a vital part of each channel participant's marketing effort. It is also through the physical distribution process that the time and space of customer service become an integral part of marketing, thus it links a marketing channel with its customers (e.g. links manufacturers, wholesalers, retailers).

f) Outsourcing/partnerships

This is not just outsourcing the procurement of materials and components, but also outsourcing of services that traditionally have been provided in-house. The logic of this trend is that the company will increasingly focus on those activities in the value chain where it has a distinctive advantage and everything else it will outsource. This movement has been particularly evident in logistics where the provision of transport, warehousing and inventory control is increasingly subcontracted to specialists or logistics partners. Also, to manage and control this network of partners and suppliers requires a blend of both central and local involvement. Hence, strategic decisions need to be taken centrally with the monitoring and control of supplier performance and day-to-day liaison with logistics partners being best managed at a local level.

g) Performance measurement

Experts found a strong relationship from the largest arcs of supplier and customer integration to market share and profitability. By taking advantage of supplier capabilities and emphasizing a long-term supply chain perspective in customer relationships can be both correlated with firm performance. As logistics competency becomes a more critical factor in creating and maintaining competitive advantage, logistics measurement becomes increasingly important because the difference between profitable and unprofitable operations becomes more narrow. A.T. Kearney Consultants (1985) noted that firms engaging in comprehensive performance measurement realized improvements in overall productivity. According to experts internal measures are generally collected and analyzed by the firm including

1. Cost
2. Customer Service
3. Productivity measures
4. Asset measurement, and
5. Quality.

External performance measurement is examined through customer perception measures and "best practice" benchmarking, and includes 1) customer perception measurement, and 2) best practice benchmarking. Components of Supply Chain Management are 1. Standardization 2.

Theories of Supply Chain Management

Currently there exists a gap in the literature available in the area of supply chain management studies, on providing theoretical support for explaining the existence and the boundaries of supply chain management. Few authors such as Halldorsson, et al. (2003), Ketchen and Hult (2006) and Lavassani, et al. (2008^b) had tried to provide theoretical foundations for different areas related to supply chain with employing organizational theories. These theories includes:

• Resource-based view (RBV)
• Transaction Cost Analysis (TCA)
• Knowledge-based view (KBV)
• Strategic Choice Theory (SCT)
• Agency theory (AT)
• Institutional theory (InT)
• Systems Theory (ST)
• Network Perspective (NP)
  

Supply chain sustainability

Supply chain sustainability is a business issue affecting an organisation’s supply chain or logistics network and is frequently quantified by comparison with SECH ratings. SECH ratings are defined as social, ethical, cultural and health footprints. Consumers have become more aware of the environmental impact of their purchases and companies’ SECH ratings and, along with non-governmental organisations ([NGO]s), are setting the agenda for transitions to organically-grown foods, anti-sweatshop labour codes and locally-produced goods that support independent and small businesses. Because supply chains frequently account for over 75% of a company’s carbon footprint many organisations are exploring how they can reduce this and thus improve their SECH rating.

Components of Supply Chain Management Integration

The management components of SCM

The SCM components are the third element of the four-square circulation framework. The level of integration and management of a business process link is a function of the number and level, ranging from low to high, of components added to the link (Ellram and Cooper, 1990; Houlihan, 1985). Consequently, adding more management components or increasing the level of each component can increase the level of integration of the business process link. The literature on business process re-engineering,^[7] buyer-supplier relationships,^[8] and SCM^[9] suggests various possible components that must receive managerial attention when managing supply relationships. Lambert and Cooper (2000) identified the following components which are:

• Planning and control
• Work structure
• Organization structure
• Product flow facility structure
• Information flow facility structure
• Management methods
• Power and leadership structure
• Risk and reward structure
• Culture and attitude

However, a more careful examination of the existing literature will lead us to a more comprehensive structure of what should be the key critical supply chain components, the "branches" of the previous identified supply chain business processes, that is, what kind of relationship the components may have that are related with suppliers and customers accordingly. Bowersox and Closs states that the emphasis on cooperation represents the synergism leading to the highest level of joint achievement (Bowersox and Closs, 1996). A primary level channel participant is a business that is willing to participate in the inventory ownership responsibility or assume other aspects of financial risk, thus including primary level components (Bowersox and Closs, 1996). A secondary level participant (specialized), is a business that participates in channel relationships by performing essential services for primary participants, thus including secondary level components, which are in support of primary participants. Third level channel participants and components that will support the primary level channel participants, and which are the fundamental branches of the secondary level components, may also be included.

Consequently, Lambert and Cooper's framework of supply chain components does not lead us to the conclusion about what are the primary or secondary (specialized) level supply chain components (see Bowersox and Closs, 1996, p.g. 93). That is, what supply chain components should be viewed as primary or secondary, how these components should be structured in order to have a more comprehensive supply chain structure, and to examine the supply chain as an integrative one

Reverse Supply Chain Reverse logistics is the process of planning, implementing and controlling the efficient, effective inbound flow and storage of secondary goods and related information opposite to the traditional supply chain direction for the purpose of recovering value or proper disposal. Reverse logistics is also referred to as "Aftermarket Customer Services". In other words, anytime money is taken from a company's Warranty Reserve or Service Logistics budget, that is a Reverse Logistics operation.