CHAPTER 3

BUSINESS ETHICS
Practice that determines what is right, wrong and appropriate in the workplace.
4 Business Responsibilities
Economic Responsibilities
-corporation is obligated to make profit for its shareholder.
2. Legal Responsibilities

 legal concerns take priority in decision making.

 Economic and legal responsibilities are the bottom line for companies - essential to strong
economic systems.
3. Ethical and Philanthropic responsibilities

 how corporations contribute to the quality of life in the communities with which they have
relationships.
 high priority in strategy formulation and implementation.
IMPACT OF BUSINESS ETHICS IN H&T INDUSTRY
POSITIVE

 Follow laws and regulations in the operations.

 Moral standards that influence the behaviors and decisions of all managers and employees.
 Develop and document the code of ethics
NEGATIVE

 Ethical dilemmas - conflict in decision making process which leads to different issues related
to practices, customer and supplier relations, diversity, harassment, healthy and safety.
BUSINESS ETHICS ISSUES REQUIRES ATTENTION

 Corporate tax avoidance

 Executive pay
 Employee being able to speak out about wrong doing
 Bribery and corruption
 Discrimination
 Environmental responsibility
 Harassment and bullying in the workplace
 Sweatshop labor
 Fair and open pricing products and services
 Human rights
 Advertising and marketing practices
 Openness with information
 Safety and security in the workplace
 Work-home balance for employees
 Treatment of suppliers
SOCIAL RESPONSIBILITY

 ethical framework which a person works and cooperates with other people and
organizations for the benefit of the community.

 emphasizes acting in ways that have a positive impact on society while minimizing negative
impacts.

EXAMPLES:

Sustainable Business Practices: Adopts eco-friendly manufacturing processes to reduce

environmental harm.

Ethical Investing: Investors invest in companies that adhere to ethical standards and promote
positive social change.

CORPORATE SOCIAL RESPONSIBILITY

 a business model that helps a company remain socially accountable to itself, it’s community,
and its stakeholders.

IMPLEMENTATION

1. PHILANTROPHIC ACTIVITIES

 monetary donations and aid to non-profit organizations related to education, health,

housing etc.

2. RELATIONSHIP-BUILDING

 building strong relationships with other socially responsible organizations.

PURPOSE

 Helps to boost companies public image and reputation among its employees.
 Increases customer retention and loyalty
 Increases employee engagement
 Improves brand imaging
 Attracts investment opportunities and top talent.

5 CATEGORIES

 SUPPLY CHAIN
 Supplier’s selection
 Customer’s selection

 LOCAL COMMUNITY
 Sponsorship
 Cause-related marketing
 Active participations for local community activities
 Local regeneration
 ENVIRONMENT
 Water Reduction
  Noise Reduction
 Waste Management
 Pollution reduction
 Energy reduction
 Recycling
 Cultural heritage

 EMPLOYMENT
 Corporate internal communication
 Briefing with employees
 Corporate activities for employee’s benefit
 Training activities
 Flexible working time
 Retirement
 Daycare and family accommodation

COMMUNITY VOLUNTEERING

 Hiring persons with disabilities

 Volunteering for social issues

CHAPTER 4
EXTERNAL ENVIRONMENT

 lies outside the firms which includes idividuals, firms, systems adn institution that
have impact on it.
 Influences from the external environment come in the form of changes that occur
due to the forces that emanate from it.
Example:
Suppliers, customers, competitors, trends affecting industry, macro and micro economic
variables.
2 MOST RELEVANT TOOL

 PESTLE ANALYSIS(macroenvironment)
 PORTER’S FIVE FORCES

 PESTLE ANALYSIS
is a macro-environment tool for organizations to research and understand the
external macro environment which influences the business in some shape or form.
1. POLITICAL Factors

 How political decisions shaping the game you are playing?

 action of government which can affect an industry or organization, stability,
taxation, tariffs, labor and policies
2. ECONOMIC Factors

 What are current (and predictable) economic trends that influence your business?
 the scope depends on the growth rate, exchange rate, inflation rate etc.
3. SOCIAL Factors

 How are society’s need shifting? Which are the most relevant social factors
influencing your business?
 Demographic characteristics, population, consuming habits, culture, religions,
lifestyle, income or trends.
4.TECHNOLOGICAL Factors

 What is the role of technology in your business? What is the current state of
technology and how does it affect your organization?
 Technological innovations can affect the business, research and development,
overall media literacy and technological awareness.
5. LEGAL Factors

 Which laws and regulations restrict / enable you to operate most effectively?
 laws and legislation that affects business, safety standards, consumer rights,
advertising standards, regulatory policies.
6. ENVIRONMENTAL Factors

 What is the impact of the environment on your organization? And what’s your
organization’s impact on the environment?
 Factors related to climate, geography, natural resources, Sustainability,
environmental regulations and responsibility.

PORTER’S 5 FORCES
> focuses on industry analysis by determining the attractiveness of an industry.
1. RIVALRY- The level of competition in your industry
2. BARGAINING POWER OF SUPPLIERS-The degree to which suppliers in your industry can
influence prices.
3. BARGAINING POWER OF BUYERS- The degree to which buyers (customers) can influence
prices.
4. THREAT OF NEW ENTRANTS
The degree to which it is easy for a new company to enter the industry.
5. THREAT OF SUBSTITUTES
The degree to which it is easy for customers to switch among product/ competitors in the
industry. The least differentiated your offering, the more likely your customers may be
willing to switch.

Albert Humphrey

 Father of SWOT Analysis

 American Business and Management
 Consultant invented the SWOT Analysis in 1960 from Stanford University
Provides framework to assess the resources and capabilities.
Strategic Fit

 Alignment between the firm’s internal resources and capabilities and external
opportunities.
 FIT, ensures that firms align themselves with emerging opportunities.
Hamel and Prahalad (1989;1994)

 Pioneers who brought about the paradigm shift in how strategy formulation and
implementation were conceptualized.
 Created the Core Competency Model
They proposed that it is essential for firms to view such positioning from a strategic
perspective so they can sustain competitive advantage in the long term.
Strategic Intent

 captured a firm’s posture toward its environment in terms of identifying the

opportunities and threats and positioning by acquiring resources and capabilities.
 Resources should be acquired and capabilities should be developed to tap tomorrows
opportunities and threats
Environment Characteristics
a. ENVIRONMENTAL UNCERTAINTY
Difficulty in accurately prediciting the occurence of an event.
b. ENVIRONMENTAL VOLATILITY
Rate of change related to factors in the external environment
c. ENVIRONMENTAL MUNIFICENCE
The availability of slack resources and the opportunities for firms to grow.
d. ILLIBERALITY
 The opposite of munificence, an environment in which scope for growth is limited.
e. ENVIRONMENT DYNAMISM
Degree of change in key factors in the environment categories, especially the general
and task environments.
f. ENVIRONMENTAL HOSTILITY
The unfavorable conditions in the firm’s general environment that have a negative
impact on the firm.
g. MARKET HOSTILITY
Pertains to the unfavorable conditions in the firm’s task environment.
h. ENVIRONMENTAL TURBULENCE
Amount of change in the firm’s external environment.
Environment Dimensions
a. Simple-complex dimension
refers to the number of factors or variables that influence the environment.
b. Static-dynamic dimension refers to the degree of change overtime related to the
factors or variables pertaining to the internal and external environments.
Internal Environment

 the context within which social and physical factors are taken into
consideration by the individuals for decision-making.
3 COMPONENTS
Human Resource - manpower, staff
Organizational Function - operations, sales and marketing, materials management and
administration.
Organization Level - products and sevices, goals and objectives and the process that
integrates personnel within the organization.

Organizational Functions
1. OPERATIONS FUNCTIONS
deals with the day to day operations of the system in order to ensure that the
organization has the appropriate systems and procedures in place and delivers consistent
quality of service and products.

2. MARKETING FUNCTION
deals with the management demand by developing and implementing appropriate
pricing policies and running marketing campaigns and programs through various channels,
including television, magazines and the Internet.
3. HUMAN RESOURCES

 carry out a careful analysis of how the human assets of an organization for
sustainable competitive advantage.

 Responds to employee selection and recruitment issues and addressed the

needs and wants of employees by monitoring pay and reward systems,
training and empowerment policies.

4. FINANCE FUNCTION
concerned with identifying the main sources of funding and financing operations.

5. TECHNOLOGY FUNCTION
carries out analysis of technology capacity and abilities of Hospitality and Tourism
organization.

Resources, core competencies and distinctive competencies

 Tangible Assets
plant;, equipment, land, building
 Intangible Assets
associated with company knowhow and skillsets.
company reputation, brand, product reputation and brand, employee / leadership
skills/ experience, culture, networks, database, supplier knowhow, distributor, public
knowledge, contracts, intellectual property rights and trade secrets.

 Core Competencies
capabilities, knowledge, skills and resources that constitute its defining strength.
Not easily replicated by other organizations (creative thinking- marketing,
negotitation- sales role).
 Distinctive Competencies
superior characteristic, strength or quality that distinguishes a company from its
competitors. - innovation, skill, design, technology, name recognition, maerketing,
workforce, customer satisfaction or being first in the market.

Types of Organizational Structure

1. Functional Structure
functional activities undertaken by the organization.
2. Multidivisional Structure
having separate divisions based on products, services and geographical areas
3. Matrix Structure
functional departments such as marketing, HRM,finance, R&D are assigned to work as one
or more product or geographic business units.

CHAPTER 5
FINANCIAL ANALYSIS
 Financial Analysis involves using financial data to assess a company’s performance and make
recommendations about how it can improve going forward.
 the processs of examining a company’s performance in the context of its industry and
economic environment in order to arrive at a decision or recommendation.

FINANCIAL STATEMENT

 written records that convey the financial activities / financial status of a company. often
audited by government agencies and accountants to ensure accuracy and for tax, financing
or investing purposes

3 types of Financial Statement

1.Cash-flow statement
2.Balance Sheet
3.Income Statement
1.CASH FLOW STATEMENT

 statement of cash flow helps leaders account for firms incoming andoutgoing cash
inorder to evaluate its position and allocate resources.
3 Areas:
a. Operating activities - products/ service, payrolls, invoices from suppliers and lenders,
commissions fines, royalties lawsuits.
b. Investing activities - purchase of fixed assets,purchase or sale of securities issued by
otherentities, sale of stocks and bond.
c. Financing activities - reports of the amount ofnew debt acquired, sale of the company
shares, repurchase of of shares, purchase of plant andequipment.
2 Methods
1.Direct method - simply lists the amounts for cash received from customers and cash paid
to suppliers.
2. Indirect method - net income and then lists the adjustment. converting total net income
into a measure of accrued cash.
2. BALANCE SHEET
  helps leaders and investors identify the position of the firm within the industry by
demonstrating the strength and weaknesses of their assets, liabilities and investor equity.
 statement of financial position
 report of financial condition of a business in a given time.

Equity- is the value a business owes to its owners / stockholders.

Assets- refers to the value of property owned by the company.
3 components of Asset:
1. Current Asset - cash, marketable securities, account receivables and inventory.
2. Fixed Asset / long term asset - land, machine, equipment, building.
3. Other asset - prepaid expenses, income tax assets.
Liabilities - debts that the business owes to outsiders such as suppliers, employees, creitors and
government agencies.

2 components:

1. Current Liabilities - rent, tax, utilities, salaries and wages, customer payments, loans.

2. Long term liabilities - long term debt, income tax liabilities, pension funds.

3. INCOME STATEMENT

 aids leaders in quantifying the net income of firm based on the changer of its
position over a specific period of time.
 helps the management understand the wastes and efficiencies of the operations.
 identifies if the company is progressing towards its goals - increasing or decreasing in
exenpenses or cost or revenue.
1. Revenue - represents the inflow of assets or reduction of liabilities (Sale of goods and services)

2.Expenses - lists the costs producing the goods and services which oncludes operating cost such as
salaries,advertising, rent, utilities,insurance, legal fees, accounting fees, supplies and taxes.

3. Operating income - earnings before interest and taxes - gross profit minus operating expenses.

4. Income from continuing operations - expected income that will be generated by the company’s
ongoing operation.

5. Below the line items - effects f accounting changes and other extraordinary items.

“If revenue are > overall expensesfor an operating period, a company records PROFIT.
PROFIT is an increase in assets or decrease a liabilities . If revenue is < overall expenses, a
company records a loss”.