---
# System prepended metadata

title: '2. Value creation: Environment and Competitive Advantage'
tags: [Introduction to business]

---

# 2. Value creation: Environment and Competitive Advantage
###### tags: `Introduction to business`

## Business objectives
Traditionally, the objective of any business has been thought to be the maximization of profit, but focusing only on this aspect leaves much more to ask for in a company.
>Profit is not an strictly quantifiable metric, due to it being dependant on many other variables such as initial inversion, employee expenses, debt, etc.

Nowadays, one of the biggests objectives is to satisfy goals of all of the stakeholders, to help avoid conflict of interests between them and be able to ==**create value**==.

### Stakeholders
A [stakeholder](https://www.investopedia.com/terms/s/stakeholder.asp) is an entity involved in the business that can either *affect* of *be affected by* **financial activity** of the company.
These can be:
- **Shareholders**
- **Labor Unions** <span style="color:gray">Spanish: Sindicatos</span>
- **Banks and finantial agents**
- **Government - Society**
- **Suppliers**

### Survival, profit and growth (slide 7)

#### Equity
What is equity? -> Liquidez? (creo recordar que son activos, pero un tipo de activo específico que no me recuerdo; activos son *assets*)

%%
liquidez es dinero a corto plazo; solvencia dinero a largo plazo [todo en metálico/tarjetas, no propiedades]
(si mi memoría de economía de 4eso no me falla)
%%


## Business strategies and and types
>Companies survive by creating a competitice advantage by offering different products or services.

In order to achive a [[#Business objectives|business objective]] and survive, **a company must define a strategy**.

With a **set strategy**, a company can start ==taking decisions==. These decisions can be classified into either **Corporate strategy** or **Competitive/Business strategy**.

### Corporate Strategy
Corporate strategy -> How are we going to compete.
Business strategy -> How should we compete.
**How do we compete**: Competitive or business stategies.
**Where do we compete**: Corporate stragegies


There are different strategies depending on their area of application, which means that they are conditioned on their goals. We distinguish three of such areas: the **geographical**, the **vertical** and the **product** one.

### Competitive/Business strategy
>GOAL: Be different from the rest 

* Cost leadership
* Differentiation

Companies usually choose one of these strategies. The main European companies that did actually achieve both objectives were *IKEA* (Sweden) and *Inditex* (Spain).


Product scope -> What am I going to offer
Vertical scope -> Processes that take place *inside* the company and others that do not, therefore *outside*.
Geographical scope -> Different realities and goals depending on the country or region.

Regarding the vertical scope businesses are presented with the following dichotomy: either incorporate processes to the company or lean on other enterprises for some tasks, thus externalizing the process.


#### Types of strategies
Companies assess wether is more efficient to do something on their own, or collaborating with other companies.

- **Cost advantage**: reduced cost in a product
- **Differentiation advantage**: More expensive products adding premiums
- 
How the firm is going to differentiate themselves, providing something unique. Packaging, for example for perfumes and backery.


## The business environment
Bargaining power: How much power do the buyers have of negotiating a lower price'

Concentrated market: When the maket share is controlled by a small numher of players


Monopsoly: When a supply chain supplies to a single client, who has as a result a high bargaining power.

#### Porter's competitive forces
**Threat of entry**: If we are big, players, threat of entry shoudl always exist, as a big player in another industry could come and afect our market share.



#### To diversify or not to diversify

Related diversification -> Synergies

Unrelated diversification 


### Value Chain analysis

We distinguish between **Primary  activities** and **Support activities**.

If I outsorce marketing and sales, I vertically desintegrate.
If I do it own my own, I integrate vertically

Forward integration: owing shops is one example because it is more near to the customer (closer to the customer).

Backward integration: buying the factories to be your own suplier (closer to the supplier).


TRANSACTIONAL VS ORGANIZATIONAL/ADMINISTRATIVE COSTS <->
(EXTERNALS VS INTERNAL COSTS)
#### Advantages of 







