Audencia Business School Human Resources.pptx

Audencia Business School Human Resources.pptx

1. audencia .com Economics and Business organisation Daniel EVANS Bachelor ABM1 never stop daring

2. CHAPtEr 1 : Defining the Firm

3. The concept of the organisation A. What is an organisation? B. Different types of organisations C. The enterprise as a unique type of organisation D. The role of enterprises in the economy II. Types of enterprises A. Some vocabulary B. Defining enterprises by their type of activity C. Defining enterprises by their size D. Defining enterprises by their age E. Legal definitions of enterprises 3 Plan du chapitre

4. I. The concept of the organisation

5. A bank A student association A government agency A startup company A large multinational company The Red Cross A tennis club 5 What do the following ALL have in common ?

6. 6 What does it mean ? We are members of an ORGANISATION

7. Organisations are an organized group of people with a particular purpose, (ex. a business or government department) entities (ex. associations, companies, institutions) that are goal-directed (have a particular purpose) are designed as deliberately structured and coordinated (it is “ organised ”) activity systems, and are linked to the external environment 7 These are all organisations Organisations are

8. 8 Interaction of members is critical to attain goals What impacts how interaction takes place? I s interaction the same … … inside an Air France airplane cockpit … between staff in a fast food restaurant … between staff in a fine restaurant … between staff at a hotel …in a start-up …in a large organisation …in a sports team what creates the difference ?

9. To organise is to 9 i. The concept of the organisation A. What is an organisation? We are ORGANIZED

10. 10 A well organized team….

11. To organise is to Fix objectives and measure /control their attainment . Choose the organisational members ( actors ) A llocate roles and appropriate means ( resources ) and Define and put into place structures and processes WHAT, HOW, WHEN, WHO, WHY, WHERE 11 i. The concept of the organisation A. What is an organisation? How do you think the organizational structure of a n SME differs from a very large multinational?

12. The organization is a structured whole , the components of which (people, technology, finance, information, etc.) are in interaction. The 1 st dimension used to describe an organization is its structure. Structural Dimensions : provide labels to describe the internal characteristics of an organization . They create a basis for measuring and comparing organizations. Conditions of interaction . Organizations exist when people interact to perform functions to attain goals. 12 i. The concept of the organisation A. What is an organisation?

13. A critical concern in businesses today is structure. Structure often drives Behaviors which impact Performance 13 i. The concept of the organisation A. What is an organisation? How would you describe the business environment today ? What behaviours or conduct of people is sought ? What structures woud be most appropriate to facilitate this ?

14. A critical concern in businesses today is structure. Structure often drives Behaviors which impact Performance 14 i. The concept of the organisation A. What is an organisation? Decreased «  boundaries  » - increased «  permeability  » - cooperation /collaboration Networked relations Agile teams Horizontal structure – decision proximity with client & rapid decision making

15. A critical concern in businesses today is structure. Structure often drives Behaviors which impact Performance 15 i. The concept of the organisation A. What is an organisation? Structure is driven by the CONTEXT of the organisation

16. The 2 nd dimension used to describe an organization is its context . We structure the organization as a function of the context . Structure = f(Context) Contextual Dimensions : characterize the whole organization, including its size, technology, environment, and goals. They describe the organizational setting that influences and shapes the structural dimensions. 16 i. The concept of the organisation A. What is an organisation? How could changes in technology or culture influence the structure ? If you have operations in many locations, what’s impact on structure?

17. It is an entity that is in (multiple) relationships with its environment. It receives from it resources and signals that it combines to act according to its objectives, thus modifying, in turn, this environment. >> Organizations adapt to and influence a rapidly changing environment. Who/What does a business organization interact with in its environment???? 17 i. The concept of the organisation A. What is an organisation?

18. 18 i. The concept of the organisation But what are some contributions organisations make? Why are they important? Even in the late nineteenth century there were few organisations of any size or importance—no labor unions, no trade associations, and few large businesses, nonprofit organisations , or governmental agencies. The development of large organisations transformed all of society, and, indeed, the modern corporation may be the most significant innovation of the past 100 years .

19. In societies organisations exist to do the following : Bring together resources to achieve desired goals and outcomes Produce goods and services efficiently Facilitate innovation Use modern manufacturing and information technologies Adapt to and influence a changing environment Create value for owners, customers, and employees Accommodate ongoing challenges of diversity, ethics, and the motivation and coordination of employees 19 i. The concept of the organisation

20. 20 Why organise ? i. The concept of the organisation But do we NEED to bring the resources and people together to do this ? Why not just coordinate through the markets ? Why have employees do everything ? Why have my own resources ? Why not just sign contracts with external providers? Markets can coordinate … why not just use them ? Ronald COASE

21. 21 Why organize ? i. The concept of the organisation The Nature of the Firm (1937) If markets are efficient, then contract versus hiring – use external service providers vs hiring people. Don’t do it « in-house ». Coase looked at the «  costs  » of using the market – of making a « transaction » Transactions costs : a transaction cost is a cost in making any economic trade when participating in a market. Transaction costs are the total costs of making a transaction, including the search, bargaining, cost of planning, deciding, changing plans, contract dispute, renegotiation, resolving disputes, and after-sales. This suggests that firms will arise when they can arrange to produce what they need internally, and somehow avoid these costs (transaction cost economies) BUT THERE IS A LIMIT – and we get inefficient as we get bigger. Ronald COASE How is technology impacting transactions costs ???

22. Private , Public and SOE 22

23. The concept of the organisation A. What is an organisation? B. Different types of organisations C. The enterprise as a unique type of organisation D. The role of enterprises in the economy II. Types of enterprises A. Some vocabulary B. Defining enterprises by their type of activity C. Defining enterprises by their size D. Defining enterprises by their age 23 overview

24. 24 Why nationalise EDF?

25. 25 Public or private PollEv.com​/danevans431

26. 10B€ in an OPA ( Offre Public d’Achat ) That the State goes from 84% of the capital, as today, to 100%, what difference does that make? First, it would allow EDF, which is heavily indebted, to finance itself and borrow at moderate cost. Against the background of production difficulties in the nuclear plants, the S&P agency threatened at the end of May to further downgrade its credit rating. EDF’s nuclear production accounted for 69% of France’s electricity supplies in 2021. Stress corrosion in 12 of 56 nuclear plants  output will decrease! Nuclear output downgraded by 15TWh Cost of buying electricity going up (wholesale) 96€ Billion debt EDF will have to spend more than €50 billion by 2030 to extend the life of existing nuclear power plants 6 New 4GEN EPR Plants = 60€ Billion EDF selling energy to others at a loss (current prices) Reassure investors (bond holders) Reorganize (Projet Hercule ) Control energy prices 26 EDF Why nationalize ?

27. 27 Private ? SOE? Public activities ? Private ? National?

28. Should the following be run by the government or private companies ? POLICE ARMY LA POSTE SNCF FRANCE TELEVISION EDF BUS COMPANIES TELEPHONE & INTERNET PROVIDERS BANKS AIRLINES 28 Your opinion http://pollev.com/danevans431

29. 29 The importance of public undertakings

30. Today, some state-owned enterprises (SOEs) are among the largest and fastest expanding multinational companies. They increasingly compete with private firms for resources, ideas and consumers in both domestic and international markets . Ex. Renault and Air France compete with private companies. Looking at the 2000 largest companies in the world (Forbes Global 2000) research found that more than 10% of the world’s largest firms are state-owned (204 firms)(state own directly or indirectly more than 50% of shares) 30 The importance of public undertakings Some of the fastest growing multinationals

31. 31 In France

32. AXA TOTAL BNP PARIBAS CARREFOUR CREDIT AGRICOLE EDF ENGIE PEUGEOT SOCIETE GENERALE RENAULT GROUP BPCE AUCHAN FINATIS (CASINO) CNP CHRISTIAN DIOR ORANGE VINCI SAINT GOBAIN SANOFI BOUYGUES SNCF L’OREAL AIR-FRANCE KLM VEOLIA SCHNEIDER 32 Top companies in France 2018 (revenue) Fin 2017, l’État contrôle 1 751 sociétés françaises , dont 89 directement. Les 767 400 salariés travaillant dans ces sociétés représentent 3,1 % de l’emploi salarié en France. NEXTER;

33. 33

34. 34 The importance of public undertakings

35. 35

36. WHY PUBLIC? 36

37. POE outperform SOE if we look at profit POE profit > SOE profit SOE have problems - corruption, innefficiency … but is profit the only goal? Social outcomes Physical infrastructure Stability in times of crisis 37 Go beyond profit

38. Governments mandate SOEs to pursue a diverse set of policy goals. Correct market failures . One example of market failure is a natural monopoly , (high fixed setup costs, decreasing average cost) Another example is when it is not possible to charge individuals for use of the good (for example, street lighting. 38 Example of Eastern , Central and Southeastern Europe IMF Fiscal Monitor April 2020: https://www.elibrary.imf.org/view/books/089/28929-9781513537511-en/ch03.xml

39. Public goods

40. 40 ARE fire fighters providing a public service?

41. 41 ARE fire fighters providing a public service? In 19 th century England, firefighters were organized and paid for by insurance companies which only responded to fires at addresses that were insured . If a fire occurred at the uninsured neighbor’s, the firefighters would come to protect the insured house.

42. A public good has two key characteristics : it is nonexcludable and nonrivalrous . These characteristics make it difficult for market producers to sell the good to individual consumers. Nonexcludable means that it is costly or impossible for one user to exclude others from using a good . ( I can’t stop you from buying the good ) Non- rivalrous means that when one person uses a good, it does not prevent others from using it ( My consumption does not impact your consumption ) Examples : Defense Police protection Roads (except toll roads) Radio (privately provided…) Firefighting (not always the case !) 42 Public goods When it can make sense

43. When you « consume » education … who benefits ? When you plant flowers in your garden … who benefits ? When you stop smoking … who benefits ? Why would societies underconsume these goods ? When you listen to loud music … who is penalized ? When you pollute or don’t recycle … who is penalized ? When you drive to work … who « pays » the cost ? Why would we might overconsume these ? 43 Positive Externalities often exist for public goods What can we do ?

44. Strategic or social interest

45. 45 Strategic positioning Managing for Profit and Social Impact To get there – management needs Active ownership & management Accountability ( transparency ) Clear purpose and mission Clarity of purpose Adequate capacity ( resources & time) Relevant capabilities Commitment to citizens they serve 92% of the state backed surveyed believe they are expected to address wider stakeholder needs today.

46. Natural monopoly

47. Provide public goods (non excludable , non rivalrous ) Overcome market failures Natural monopolies Offer more than just profit (social impact) Increase consumption to increase benefit ( education , positive externalities ) 47 summary

48. WHY NOT? 48

49. Favourable treatment (conflict of interest) direct subsidies state-backed guarantees preferential regulatory treatment exemptions from antitrust or bankruptcy rules . OK Nationally ??….OK Internationally? I f their effects extend beyond borders, they may undermine the benefits from international trade and investment , which are predicated on the basis of non-discrimination and respect for market principles . 49 Public undertakings – conflict of interests State-owned enterprises in the global economy: Reason for concern? REGULATOR RULE ENFORCER OWNER of ASSETS

50. Commercial & non commercial

51. What’s the nature of the objectives pursued. commercial purpose (for profit ) or non-commercial purpose. 51 i. The concept of the organisation B. Types of organisations

52. 1. Commercial Organisations Their goal is to produce (and or distribute) market goods and services with a view to making a profit : This concerns : Private companies (privately or publicly traded shares) A private company can sell its own, privately held shares to a few willing investors. A public company can sell its registered shares to the general public. State Owned Enterprises (whose capital is majority owned by the State or a public authority ). ( State Owned Enterprises or SOE ) 52 i. The concept of the organisation B. Types of organisations

53. 2. Non-commercial organisations These organizations have the common characteristic of providing services to their members or more generally to the community , by providing their services free of charge or almost free of charge (that is to say at a price lower than their production cost). This includes : National government adminstrations (e.g. ministries) Local government administrations (prefectures, local authorities, town halls, Regional Council, groupings of municipalities, etc.) Social Security Administration 53 i. The concept of the organisation B. Types of organisations

54. Can non-commercial organizations be privately owned ( private administrations)? 54

55. They also include : Private administrations which bring together: charitable, political, trade union, cultural or sports associations . Their role is to be of service to their members, their financial resources coming from membership fees, public subsidies and the sale of related goods or services. 55 i. The concept of the organisation B. Types of organisations

56. IS A BUSINESS FIRM AN ORGANIZATION ? 56 AND THE FIRM ? Organisations are social entities that are goal-directed that are designed as deliberately structured and coordinated activity systems, and that are linked to the external environment

57. In any organization, leadership and management set goals, defines individual tasks, monitors their execution and makes the necessary adjustments. Every enterprise is an organization because it brings together people whose actions must be coordinated to achieve goals. The unique character of the enterprise comes from the commercial nature of its activities: an enterprise is defined by its economic objective : to make profit . 57 i. The concept of the organisation C. The enterprise as a unique type of organisation

58. The enterprise or firm : Is an economic agent that combines raw materials, equipment, financial means and human resources in order to produce goods and / or services These products are intended to be sold in a market such that the selling price is higher than the costs incurred. 58 i. The concept of the organisation C. The enterprise as a unique type of organisation What principal markets ?

59. 59 i. The concept of the organisation C. The enterprise as a unique type of organisation Employment Investment Exports Trade Balance Impact Exchange rate impact Technology change and innovation Entrepreneurs Social Change Community Development Impact on GDP Push Economic Growth Product Markets Goods and Services Payments Resource Markets Productive Resources Factor Payments / Income The Circular Flow

60. The enterprise or firm is driven by a profit motive ( maximization principle ) which leads to The activity of the enterprise involves a number of operations ranging from the search for financing to the marketing of its production. At each stage there are optimization problems that require making choices and implementing them. Example – profit maximization requires what? Quantity choices? Labor choices? Etc. The company is an autonomous decision-making center. Choices are made based on the environment in which it operates and the partners with which it interacts. These choices also depend on the purposes of the business (economic, social and societal ). Profit maximization + Purpose  Optimization and critical choices 60 i. The concept of the organisation C. The enterprise as a unique type of organisation

61. ii. Enterprise diversity and concepts

62. The concept of the organisation A. What is an organisation? B. Different types of organisations C. The enterprise as a unique type of organisation D. The role of enterprises in the economy II. Types of enterprises A. Some vocabulary B. Defining enterprises by their type of activity C. Defining enterprises by their size D. Defining enterprises by their age 62 overview

63. The diversity of companies is evidenced by the great wealth of terminology used as an equivalent of the term “ entreprise ". The closest synonym is the Anglo-Saxon term for “ firm ”. In France, in accordance with legally defined legal statutes, it is customary to speak of a société . 63 ii. Enterprise diversity and concepts A. Some vocabulary

64. 64 What other words are used to instead of «  firm  » Name some companies …. what type of firm are they ?

65. Other terms used refer to degrees or forms of concentration : In the United States the term company is used. In France, the term group is used: which designates a set of distinct companies (subsidiaries) but the majority of whose share capital is held by a common entity (parent company, head of group or even holding company) . We also speak of oligopolies, of monopolies (neoclassical theory of markets of imperfect competition which designates advanced forms of concentration). 65 ii. Enterprise diversity and concepts A. Some vocabulary

66. Conglomerates refer to large firms with very diversified activities . The conglomerate consists of enterprises in different businesses . The companies in a conglomerate have limited business relationships with each other. 66 ii. Enterprise diversity and concepts A. Some vocabulary

67. 67

68. diversification Ansoff’s product/market growth matrix – directions to investigate 68 Products /Services Existing New Markets Existing New A Penetrate / Consolidate Diversifiction Strategies to increase product range or markets served by the company Consolidation Strategy to increase depth in existing market B New Products Same Market C Same Products New Market Related diversification D Conglomerate Diversification ( unrelated )

69. Market Penetration 69 Increase share of current markets with current product range Competitor ( rivals ) response to be considered ( especially in slow growing , flat or declining markets ) In low growth markets - an acquisition of rivals can be considered to reduce rivalry and increase share . Legal constraints (ex. horizontal merger rules ) – concerns of abuse of a dominant position

70. New Product Development 70 Deliver modified or new products to existing markets (ex. iPod, iPhone, iPad are very related products in terms of production, components, skills required to build,etc .) New processes / skills may need to be mastered . (ex. digital transformation of companies to profit from new «  digitalized  » product range) Potential investments to be made – and these may be risky Project risks ( delays , changing specs , etc.) Boeing Dreamliner delayed nearly 2 years

71. New Market Development 71 Potentially less expensive , less risky and faster than product development diversification. New users for the existing product (ex. aluminum to be used in airplanes – was used in cans ) New geographies – internationalisation, expand beyond local market Some development may be needed ( adapt to new market , packaging, ..) ( language , layout , keyboard,..) Make sure you meet CSFs (Critical Success Factors ) of new market ( they may be different ) and if you have the internal capabilities to succeed ( can you effectively market / sell to the new market ?)

72. Conglomerate Diversification 72 Radical change in scope Potential benefits of each business being part of a « group » of differing activities (synergies, scope economies from producing complementary products) Large size may have benefits (access to financing,..) Customer may increase trust or apply brand « value » to new offer ( halo effects ) BUT Customers and others may be skeptical of synergies Bureaucratic costs can result in “conglomerate discount” of share value (1+1< 2) Layers of management Corporate culture issues

73. Bouygues GE Berkshire Hathaway P&G Unilever Johnson & Johnson 73 Examples of conglomerates ?

74. There are also concerns . This term corresponds to the German “ konzerns ”, to the Soviet “ combinats ” or any other centralized and planned economy and to the South Korean “ chaebols ”. The “concern” results from the merger of several legally independent (controlled) companies into a single economic entity under ( controller ) unified management . A concern consists of a controlling enterprise and one or more controlled enterprises. 74 ii. Enterprise diversity and concepts A. Some vocabulary

75. A chaebol often consists of multiple diversified affiliates, controlled by a person or group whose power over the group often exceeds legal authority . Many South Korean family-run chaebols have been criticized for low dividend payouts and other governance practices that favor controlling shareholders at the expense of ordinary investors. Chaebols have also played a significant role in South Korean politics. In 1988, a member of a chaebol family, Chung Mong-joon , president of Hyundai Heavy Industries, successfully ran for the National Assembly of South Korea. In 2014, the largest chaebol, Samsung , composed about 17% of the South Korean economy and held roughly US$17 billion in cash. Huge debts with state banks means the failure of a Chaebol has large consequences. Monopolistic and collusive behaviours exist 75 Chaebol

76. 76 Chaebols Often family run ! Its 59 affiliate companies produce around a fifth of South Korea's total exports.

77. The Anglo-Saxon word of trust designates large organizations which are at the origin of federation of companies defending common interests (which earned them a ban and a dismantling on the part of the American market authorities). 77 ii. Enterprise diversity and concepts A. Some vocabulary

78. The term " antitrust " came from late 19th-century industrialists' practice of using trusts — legal arrangements where people or entities are given ownership of property to hold solely for another's benefit — to consolidate separate companies into large conglomerates. This came about because of what some considered as ruinous or excessive competition (with prices just covering variable costs). Small players started to fail . Remaining players cooperate to control output and price We can see the benefit of having a single coordination to optimize profit when we look at things like the prisoner’s dilemma 78 ii. Enterprise diversity and concepts A. Some vocabulary

79. Standard Oil Co. was an American oil-producing, transporting, refining, and marketing company and was the largest oil refiner in the world at its height. Its history as one of the world's first and largest multinational corporations ended in 1911, when the U.S. Supreme Court ruled that Standard Oil was an illegal monopoly . Standard Oil dominated the oil products market initially through horizontal integration in the refining sector , then, in later years vertical integration ; the company was an innovator in the development of the business trust. 79 Standard Oil ( established in 1807) John D. Rockefeller

80. 80 Standard Oil Using the Sherman Act , Standard Oil was split into 34 separate companies

81. Japanese “ zaïbatsu ” designate an original form of concentration , associating a financial structure, a commercial structure and an industrial structure. By definition, the zaibatsu were large family-controlled vertical monopolies consisting of a holding company on top, with a wholly owned banking subsidiary providing finance, and several industrial subsidiaries dominating specific sectors of a market, either solely, or through a number of subsidiary companies. 81 ii. Enterprise diversity and concepts A. Some vocabulary

82. We must also add the qualifiers related to the degree of internationalization of the company: The multinational firm (MNF), the transnational firm, the global or global company (world company). 82 ii. Enterprise diversity and concepts A. Some vocabulary

83. Behind the word “enterprise” or “firm”, there are therefore very different realities , which leads us to segment companies according to criteria: activity, size, legal form, scope of operation ... 83 ii. Enterprise diversity and concepts A. Some vocabulary

84. activity

85. The first source of business diversity concerns activity. This can be approached by the concepts of: Sector of activity : it brings together all the companies with the same main activity , that is to say the largest contribution to turnover. Sectors describe large segments of the economy. The traditional approach is to distinguish between primary, secondary, tertiary and quaternary sectors . Industry ( Branche ) : an industry is a branch of an economy that produces a closely related set of raw materials, goods, or services. For example, one might refer to the wood industry or the insurance industry . An enterprise which participates in the production of several products belongs to several industries. “Industry” is more specific than “sector” but these words are often interchanged. 85 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity

86. Sectors : Primary : Production and retrieval of raw materials such as coal, iron, and wood. Secondary : Transformation of the raw material into the finished or manufactured goods. Tertiary : The service sector, which involves the giving away direct services to its consumers Quaternary : an improved form of tertiary sector as it involves the services related to the knowledge sector , which includes the demand for the information- based services like taking the consultancy from tax managers, statisticians and software developers. 86 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity

87. The Statistical Classification of Economic Activities in the European Community, commonly referred to as NACE (for the French term “ Nomenclature statistique des Activités économiques dans la Communauté Européenne "), is the industry standard classification system used in the European Union. NACE uses four hierarchical levels:[3] Level 1: 21 sections identified by alphabetical letters A to U; Level 2: 88 divisions identified by two-digit numerical codes (01 to 99); Level 3: 272 groups identified by three-digit numerical codes (01.1 to 99.0); Level 4: 629 classes identified by four-digit numerical codes (01.11 to 99.00). The current version is revision 2 and was established by Regulation (EC) No 1893/2006.[1] It is the European implementation of the UN classification ISIC , revision 4.   87 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity (Europe)

88. 88 ii. Enterprise diversity and concepts

89. 89 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity

90. 90 ii. Enterprise diversity and concepts

91. Why is NACE important? The NACE framework provides a reliable data structure for collecting and presenting a large range of economic statistical data. Allow companies to target sales efforts to specific industries, sub-industries, industry branches, that they might not be familiar with yet . Subsidy assessment – qualifications for assistance by NACE, etc. Gather macro level statistics about your industry or market. 91 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity (Europe)

92. exercise 92

93. 1 computer for 2 people 93

94. 94 eurostat

95. 95 How many companies in France by sector ? 2010-2018 – look at Structural Business Statistics main indicators Accommodation (I55) Food and Beverage Service Activities (I56) Computer programming, consultancy and related activities (J62)

96. 96 How many companies in France 2010-2018 – look at Structural Business Statistics main indicators Accommodation (I55) Food and Beverage Service Activities (I56) Computer programming, consultancy and related activities (J62)

97. For 2020 , calculate the share of gross value added ( current prices ) for the Primary , Secondary and Tertiary sectors of the economy of one of these countries: Czechia Germany Spain France Luxembourg Poland Romania Sweden 97 EUROSTAT? Look it up nama_10_a64 Primary : A+B Secondary = C+D+E + F Tertiary = All others

98. 98 results

99. Session 3 99

100. Finish Chapter 1 Start Chapter 2 Pre-quiz questions Quiz (last 20 minutes) 100 organisation

101. Participation as of Saturday Sept 24 noon (deadline is Friday at 17h00) 101 peerwise Practiced with the questions of others Gave feedback No questions authored Practiced with the questions of others No feedback No questions authored

102. Use the same data table to identify the EU27 member country wth the highest % of total Gross Value Added coming from Primary Sector activities (Agriculture, forestry and fishing + Mining and quarrying ) in 2018 Which country is it and what % of gross value added comes from industries A+B 102 EUROSTAT? Look it up nama_10_a64

103. 103

104. 104 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity

105. Vertical industry structure ( Filière ): it brings together companies in a situation of economic interdependence through customer / supplier relationships. It makes it possible to reframe the action of companies in the context of the organization of the production system. This concept is very useful for understanding the business environment and carrying out the strategic diagnosis of the company: eg : textile industry ... 105 ii. Enterprise diversity and concepts B. Defining enterprises by their type of activity

106. How can a supplier control the behaviour of the distributor ? What are examples of companies that have vertically integrated UPSTREAM/BACKARD ( into the supplier space ) or DOWNSTREAM/FOWARD ( into the buyer / distributor space )? 106 Vertical control and integration Find some examples

107. size

108. What is a LARGE vs SMALL company ? What are size advantages ? 108 question

109. Between a sole proprietorship without employees and a multinational managing several thousand employees of different cultures, the only common point is the objective of profit . Size is an essential factor in the diversity of companies since it will influence: Specialization and division of labor ( enough people to specialize? ) The extent of the customer and partner network Access to financial and technological resources ( easier access if big ?) Reassur investors – risk taking? Access to certain types of assistance ( ex. SME assistance ) Research and development policy ( resources but also Mgmt - Big/Small ?) Under scrutiny (safeguard image) Or access to foreign markets. The size criterion is often favored for statistics and in labor law to define certain obligations. Several criteria are used to measure size: workforce and turnover ... 109 ii. Enterprise diversity and concepts C. Defining enterprises by their size

110. 110 ii. Enterprise diversity and concepts C. Defining enterprises by their size (France) Category Employees Annual Turnover MICRO < 10 < 2 000 000 PETITE ( small size) < 50 < 10 millions € MOYENNE ( average size) < 250 < 50 millions € ETI ( intermediate size) < 5000 < 1,5 milliards € The volume of staff gives an idea of ​​the complexity of the organization and the volume of activities. However, this criterion is insufficient to characterize a company (scope of activities, managerial complexity, product diversity, cultures,..). The number of employees does not have the same meaning in an industrial enterprise (ex. Peugeot 210 000 employees) and in a commercial enterprise (Airbnb 5597, Uber 26000, Paypal 26500) If the employees are numerous, but spread over several sites, it is not the same as if they are concentrated in the same place .

111. 111 ii. Enterprise diversity and concepts C. Defining enterprises by their size (Europe) The definition of an SME is important for access to finance and EU support programmes targeted specifically at these enterprises.

112. exercise 112

113. Use eurostat data to find (for 2018) EU27 % of total persons employed by companies with 250 employees or less % of total number of companies represented by companies with less than 10 employees % of value added by companies (at factor costs ) with 250 employees or less Data : Annual enterprise statistics by size class for special aggregates of activities (NACE Rev. 2) Note : use «  Total business economy; repair of computers, personal and household goods; except financial and insurance activities” 113 Resolve the following Guess first

114. 114 Employed by companies of less than 250 : 65%

115. 115 Less than 10 employees : 93%

116. 116 Value added : 53%

117. Impact of SMEs in 2017 117 ii. Enterprise diversity and concepts C. Defining enterprises by their size Value Added : 57% Employment : 66%

118. In France , there are around 3.9 million businesses ( Insee , 2020). There are : 265 Large companies ( Grandes Entreprises - GE ) which employ 3.4 million full-time equivalent employees (EQTP), or 27% of total jobs . In contrast, 3.7 million microenterprises ( MICs ) employ 2.4 million people, or 18% of the total . Between these two extremes, 5,600 medium-sized enterprises ( ETI ) and 146,000 small and medium-sized enterprises ( PME or SME ) respectively employ 25% and 30% of employees ( EQTP ). 118 ii. Enterprise diversity and concepts C. Defining enterprises by their size

119. Number of employees 119 ii. Enterprise diversity and concepts C. Defining enterprises by their size

120. 2. Turnover (revenue) Turnover is a good indicator of the growth and importance of a business. It makes it possible to estimate the weight of a company in a market compared to its competitors. Some companies generate more money than the states themselves. ( market share ) Ex: The ranking of French companies according to turnover in 2020. 120 ii. Enterprise diversity and concepts C. Defining enterprises by their size

121. Raison sociale CP Ville C.A. PSA AUTOMOBILES SA 78300 POISSY 65 017 506 000 € ELECTRICITE DE FRANCE 75008 PARIS 08 44 315 000 000 € AIRBUS 31700 BLAGNAC 39 036 834 000 € RENAULT SAS 92100 BOULOGNE BILLANCOURT 37 715 000 000 € TOTAL MARKETING FRANCE 92000 NANTERRE 23 963 726 000 € ORANGE 92130 ISSY LES MOULINEAUX 22 602 000 000 € CSF 14120 MONDEVILLE 21 556 793 147 € TOTAL RAFFINAGE FRANCE 92400 COURBEVOIE 19 484 310 100 € ENGIE 92400 COURBEVOIE 19 272 000 000 € LA FRANCAISE DES JEUX 92100 BOULOGNE BILLANCOURT 17 238 000 000 € CMA CGM 13002 Marseille 2e Arrondissement 16 847 000 000 € SNCF MOBILITES 93200 SAINT DENIS 16 247 000 000 € ITM ALIMENTAIRE INTERNATIONAL 75015 PARIS 15 14 927 837 367 € AUTOMOBILES PEUGEOT 78300 POISSY 14 523 715 000 € AIRBUS OPERATIONS 31300 TOULOUSE 14 495 000 000 € ENEDIS 92400 Courbevoie 14 494 000 000 € ESSO SOCIETE ANONYME FRANCAISE 92400 Courbevoie 14 466 531 000 € CARREFOUR HYPERMARCHES 91000 BONDOUFLE 14 322 807 338 € SOCIETE D'IMPORTATION LECLERC 94200 IVRY SUR SEINE 13 021 327 602 € AUCHAN HYPERMARCHE 59650 Villeneuve-d'Ascq 12 351 000 000 € SANOFI WINTHROP INDUSTRIE 92160 ANTONY 11 837 000 000 € SAFRAN AIRCRAFT ENGINES 75015 PARIS 15 11 432 202 000 € SYSTEME U CENTRALE NATIONALE 94150 RUNGIS 11 357 796 794 € SINERGY 94200 IVRY SUR SEINE 10 750 916 551 € LA POSTE 75015 PARIS 15 10 663 000 000 € 121

122. 122 Use concetration ratios C4; C8; Herfindahle-Hirschmann

123. 3. The Value Added It seems preferable to replace the turnover with the criterion of added value . Example: certain activities such as trading or distribution are characterized by a very high turnover and a relatively low VA . In addition, a large number of companies have implemented strategies to outsource their activities (manufacturing, cleaning, security, recruitment, etc.). The comparison of the VA over time therefore makes it possible to take better account of these changes. VA more accurately reflects actual business activity . 123 ii. Enterprise diversity and concepts C. Defining enterprises by their size

124. 4. Other criteria To classify and compare companies we also use: Earnings . It makes it possible to compare the profitability of companies (it is still necessary to know what type of result to take into account (current, operating, exceptional, before or after tax, etc.). This indicator only makes sense when compared to another indicator such as turnover, market capitalization. Surface area : relevant variable for comparing commercial companies. The importance of equity ( fonds propres ) or market capitalization : to assess the autonomy and financial potential of companies. 124 ii. Enterprise diversity and concepts C. Defining Enterprises by their size Market capitalization, defined as the value of all outstanding shares of a corporation. On average, large-cap corporations —those with market capitalizations of US$10 billion and greater—tend to grow more slowly than mid-cap companies. Mid-cap companies are those with capitalization between $2 and $10 billion, while small-cap corporations have between $300 million and $2 billion. S&P 500 vs S&P 600 : S&P 500 index is a gauge of 500 large companies in the USA . The S&P 600, on the other hand, covers the small-cap range of US stocks. Russell 3000 (large cap) and Russell 2000 (small cap)

125. 125 Invest 1000€ at covid low X 2,15 X 1,95

126. The share of exported turnover: to measure the degree of internationalization of companies. The investment rate or % of VA devoted to R&D: to compare the dynamics of development. 126 ii. Enterprise diversity and concepts C. Defining enterprises by their size

127. How old are the oldest companies ? 127 HOW OLD ?

128. 128

129. Japan has by far the oldest companies in the world with some over 1000 years old . Kongo Umi a construction company in Japan that specializes in building temples operated independently from 578 to 2007. Germany, the Netherlands and France have the most businesses over 200 years old . Most are quite small(a bar or hotel). A recent study by McKinsey found that the average life-span of companies listed in Standard & Poor’s 500 was 61 years in 1958 . Today, it is less than 18 years . McKinsey believes that, in 2027, 75% of the companies currently quoted on the S&P 500 will have disappeared from the list. Increase in hybrid industries 129 ii. Enterprise diversity and concepts D. Defining enterprises by their age

130. 130 ii. Enterprise diversity and concepts D. Defining enterprises by their age

131. 131 Birth rates % of active companies that are new (Business Demography , Eurostat)

132. 132 Survival rates Business Demography (Eurostat)