Huttelmeier.1

Question 1

Economy

Answer 1

The production and consumption activities, that determine how scares resources are allocated -> exists to satisfy its participants needs.

Question 2

Business Administration

Answer 2

How to manage a business according to the economic principle

Question 3

Why do companies exist?

Answer 3

Because of lower transaction costs: Within companies, transaction costs for the
provision of goods and services are lower than for the provision via markets, as the
coordination effort and expenses due to incomplete information are lower.
à Firms are a response to the high costs of markets

Question 4

Economic Entities

Answer 4

1. Househoulds (Economic entities in which goods are consumed to cover their own needs):

Private (one-person households multi-person households)

Public (Federal government, states, municipalities).

2. Enterprise - entities in which goods are
   produced and sold to meet external
   demand.

Question 5

Enterprises

Answer 5

Public (Stadtwerke Schweinfurt):

Principle of common ownership: enterprises are majority-owned by the federal
government, states or municipalities
– Organ principle: Public bodies with the right of co-determination
– Principle of non-profit status: no or only socially appropriate profit making

Private Enterprise (Bosch, Siemens):

– Principle of private ownership: the majority of rights of disposal are with private individuals
– Principle of autonomy: Companies can make decisions independently of state
institutions or other economic entities.
– Principle of profit maximization

Question 6

Economics Principle

Answer 6

Management means using scarce resources in a way that satisfies needs in the most
advantageous way possible.

Maximum: Achieve maximum output with a defined input. You try to get the best possible car on a certain budget

Minimum: Achieve a defined output with minimum input.You want porsche, but trying to get the cheapest porsche.

Question 7

Share holder vs. Stakeholder value

Answer 7

Shareholder value:
– Capitalized earnings value of shareholders’ equity
– Measure of the enterprise valuation as an alternative to the net asset value
– Shareholder value concept:
• Focus: listed stock corporation
• Objective: To increase the enterprise value (market value of equity)
• Target figure: Shareholder assets
• Benchmark: average capital costs of the company

Stakeholder Value:

Value share of different stakeholder groups in the enterprise value
– Stakeholder approach:
• Consideration of all stakeholders without whose support the company would not
be able to survive, e.g. employees, customers and suppliers, the state and the
public.
• builds on the coalition theory of the enterprise
• The task of the company management is to ensure the following
– Cooperation
– Compromises regarding the distribution of the company’s profits