Business Semester Test PDF

Business Semester Test Business Organization Different Department Human resources, Finance, Marketing, Operations HR (Human Resources) -​ Role to hire the right people and make sure that they are fairly reward for there work -​ In ord...

Business Semester Test Business Organization Different Department Human resources, Finance, Marketing, Operations HR (Human Resources) -​ Role to hire the right people and make sure that they are fairly reward for there work -​ In order to accomplish the goal they must recruit, train, dismiss and make sure they get the right compensation Finance and Account -​ Role is to make sure that there is enough money to make the product or provide the service -​ In order to accomplish the goal, they need to be able to predict (forcast) certain things (e.g wars, pandemics), keep accord records, produce financial resources form different providers, make sure all bill are paid (including fixed costs) Marketing -​ Make sure the product is applying to enough people that the company makes a profit -​ In order to accomplish the goal, they must use the right strategies to promote, price, package, and distribute the product and service Operation Managements -​ Need to make sure that the quality is as good as it should be -​ In order to achieve that goal they: -​ Must control the quantity and flow of the stock -​ Determine appropriate methods of production -​ Needs to find ways to produce the good or service more effectively Old test Questions: -​ What is not part of the HR plan? -​ Requmenit -​ Appraisal -​ Expansion -​ Training -​ Appraisal: employee review is closer to a discussion, with constructive feedback  -​ The type and length of employment contract used in a company are decisions for which department? -​ Operations Link: https://docs.google.com/presentation/d/1BD2wzvXdFFkrJZPP6fAq_cm4Il0VwMc6DhaCHP 2depE/edit#slide=id.p Business Sectors P. 6 (12) -​ Different businesses can be classified according to the type of sector in which they operate -​ Classification into these sectors is a simplified way of categorising industries -​ It helps to provide a means of making comparisons between firms in the same sector -​ It does not capture the full complexity and interconnectedness of the business world -​ Many businesses operate across multiple sectors or may not fit neatly into a single category -​ The primary sector -​ This sector is concerned with the extraction of raw materials from land, sea or air such as farming, mining or fishing -​ Closely monitored by the government due to fragile environment -​ Less developed economies -​ Jobs: farming, mining, fishing -​ The secondary sector -​ This sector is concerned with the processing of raw materials such as oil refinement, and the manufacture of goods such as vehicles -​ Used to take place in developed countries, today also in developing countries -​ Jobs: packaging, manufacturing -​ The tertiary sector -​ This sector is concerned with the provision of a wide range services for consumers and other businesses such as leisure, banking or hospitality -​ Developed countries -​ Jobs: education, healthcare, transport -​ The quaternary sector -​ This sector is concerned with the provision of knowledge-focused services, often related to IT technology, consultancy or research -​ Subgroup of tertiary sector -​ Developed countries -​ Jobs: e-services and those involving IT, the media, and web-based services  -​ The four sectors are linked in the chain of production which is the series of steps taken to turn raw materials into a finished product that can be marketed and sold -​ How can a country change from primary to secondary or from secondary to tertiary? -​ By investing into education, healthcare, Types of businesses Link - For profit (sole traders, partnerships, cooperation for profit): https://docs.google.com/presentation/d/13jM9egH2I6fLddGHPIBTBMdPsQGv8LjtbXoAKCc7Ryw/e dit#slide=id.p -​ Profit based organization (for profit): aim is to generate profits - detail in presentation -​ 3 main types: sole trader, partnership, companies or corporations -​ For Profit social enterprises P 29 (35) : -​ or legal standing in different countries, in general it refers to a form of business that has a social purpose. Social purpose generally means that the organization aims to improve human, social, or environmental well-being. Although social enterprises should and typically do operate to a professional standard (regarding legal existence, proper accounts, management structure, and reporting procedures, etc.), the social aim nevertheless takes priority over any other aim such as growth, maximizing sales, or making profit, which are typical objectives of for-profit organizations. For-profit social enterprises aim to make a profit. However, they do not want to maximize profit if doing so compromises their social purpose. The for-profit social enterprise can take the form of any of the three models we have seen already (sole trader, partnership, or company). -​ Three types of for profit social enterprises: -​ Cooperatives: Cooperatives are a form of a partnership whereby the business is owned and run by all the “members” but, unlike partnerships (which in most countries can have no more than 20 partners), cooperatives may have more than 20 members. Each member participates actively in the running of the business. -​ E.g certain grocery stores, grab frame -​ Micro-financiers: Since the work of the Nobel Prize winner Muhammad Yunis, founder of the Grameen Bank in Bangladesh in the 1980s, a whole industry has developed, particularly in low-income economies. The idea is very simple: to provide small amounts of finance to those who traditionally would not have access to it. The money is lent with specified conditions of use and scheduled repayments. The micro-financier expects to receive repayment of principal and to make a profit on the loans (interest). The loan amounts are small and the interest rates are low, and micro-financiers do not use the aggressive tactics of other forms of moneylenders. While the model has proved to be very profitable for all parties, the main aim has always been to help those who would previously never have had access to finance to take the first steps towards economic independence. In many low-income economies, individuals with good ideas and a strong work ethic have been able to open their own business through the help of micro-finance. -​ E.g low-income individuals, families in rural communities, and women. -​ Public private partnerships: A PPP is a business created between a private sector business and the public sector. Typically, a PPP involves the construction of a facility with a social aim (for example in healthcare or education). It could also be for a specific project such as the development of a site for alternative energy or a nature reserve. The business is expected to make a return on the money invested into it, but the priority is not profits. The public sector usually provides the finance and the private business the expertise.Often, the government offers tax incentives to the private sector to take part in the partnership. A PPP may not be limited to small partnerships such as a drug rehabilitation service but can involve large businesses  doing big projects. The multinational Swedish company Skanska was involved in a PPP to help construct the Eurotunnel, the channel tunnel between France and the UK. -​ Main features: -​ Profit is import but not the main goal -​ Collaboration between business and local community -​ There is greater democracy in the business than in other organizations. -​ The business operates the same functions as any other business. -​ Advantages of for-profit social enterprises compared to traditional sole traders, partnerships, and companies include these: -​ A favourable legal status is achieved. -​ Can help people without being personally liable (responsible) to the shareholder -​ There is a strong communal identity. -​ Employee high degree of satisfaction they have a purpose to do something positive in society -​ There are benefits to the stakeholder community. -​ Governments also prove because they help reduce problems for the community -​ Disadvantages: -​ Decision making is time consuming -​ Lots of people involved -​ Not enough capital for general growth or finale growth -​ Profit not the main goal, without enough profit not enough money for growth -​ No deep financial strength No profit social enterprise (P. 39) -​ Definition: are businesses that do not aim to make profits but instead generate surpluses (total revenue - total cost) to support social purposes. The surpluses are used to advance the social mission rather than being distributed to owners. -​ E.g red cross -​ NGOs (Non-Governmental Organizations): These organizations aim to support socially desirable causes and can be apolitical or political (not working for the government but trying to influence the government) -​ Can be single issue or broader spectrum examples: save the whales, greenpeace -​ Charities: A specific type of NGO that focuses on providing relief to those in need. They rely on donations and may be excluded from taxes. Different then NGO - desire to help does you can’t help themselves -​ Not run by government operates in private sector of business -​ Funding: NPOs primarily rely on donations, with some having endowments that generate ongoing revenue. However, funding can be unstable, especially during economic downturns. -​ No profits generated - surplus -​ Ownership and Control: NPOs often face issues regarding ownership, control, and governance, including questions about the compensation of top executives. -​ Advantages of Non profit social enterprises: -​ They provide essential services to communities and causes in need. -​ For profit social enterprises may not be able to help as may people -​ They foster a philanthropic spirit and community involvement. -​ People feel good about helping each other, may better attitude towards community -​ They encourage informed discussions about resource allocation. -​ Inform about problems, causes, and solutions -​ NPOs often innovate and find creative solutions to social problems due to their focus on social impact rather than profit. -​ Disadvantages of NPOs: -​ There can be lobbying for socially undesirable causes (e.g., some NGOs may support harmful practices like whaling). -​ Passionate employees may sometimes engage in actions that harm the organization's reputation. -​ Funding can be unreliable, particularly in economic recessions, as they depend heavily on donations. Business Tools SWOT analysis P. 47 (PDF 53) -​ SWOT Analysis is an analytical tool used by businesses to identify -​ Internal strengths and weaknesses -​ External opportunities and threats -​ SWOT combine both internal and external factors -​ SWOT can be effective: -​ Understand where the business is -​ What can be expected from the future (treats - how can they be prevented) -​ Not to brainstorm strength and weakness of a strategy, instead it is to develop a business strategy based on the strength and weaknesses of the business -​ Strength: What the business is good at -​ E.g Qualities that separate the business from rivals -​ Internal resources such as skilled staff or a particular innovation -​ Possession of assets such as capital, patents or intellectual property -​ A loyal customer base -​ Effective leadership -​ Weakness: What the business does poorly -​ E.g Ways in which the business lags behind competitors -​ Resource or capital limitations, including labour and finance -​ Lack of a competitive advantage -​ Lack of a unique selling proposition (USP) -​ Poor online presence -​ Opportunities: opportunities a business may take to achieve future success -​ Few competitors exist -​ Social or technological developments create an emerging need for the businesses products -​ Economic indicators becoming more favourable -​ A potential for positive media coverage of the business -​ Threats: potential danger to the business success -​ New or emerging competitors are gaining market share -​ A changing legal or political environment negatively impacting on business processes and decisions -​ Social or technological developments threaten obsolescence of products -​ Economic indicators becoming less favourable -​ Negative press coverage -​ Changing customer attitudes towards the business -​ Strength so be made use of -​ Weaknesses should be eliminated -​ Opportunities should be grasps -​ Threats should be reduced (can’t be eliminated because they are external) STEEPLE Analysis P.61 (PDF 67)  -​ Business environment: conditions external to the business -​ Can be used if a business wants to to relocate to a new country so to learn about the country or also to see where a business stands -​ Business has limited ways to control external factors and even if controlled they will still have an impact - yet method like STEEPLE can help plan, prepare backup plans to deal with external issues, or if a business wants to relocate -​ PEST – Political, Economic, Social and Technological -​ PESTLE – Political, Economic, Social, Technological, Legal and Ecological -​ STEEPLE – Social, Technological, Economic, Ecological, Political, Legal and Ethical -​ If a STEEPLE factors it can impact objective (goal) and strategy of business -​ STEEPLE is basically a list of common external factors a business may face -​ When is STEEPLE useful? -​ Workforce planning (depending on social, economic trend should new people be hired, are people looking for a job) -​ Should a new product be designed (how will future trends may impact them e.g fitness equipment may be a good idea in a society whom more and more focus on fitness) -​ Should we relocate to this country or not Social -​ Trends -​ Religion -​ Education -​ Demographics (population, age group, gender number) -​ Social mobility (people moving from different social classes) -​ Fashion, taste How might changing attitudes toward remote work affect business operations? Technology -​ New technology -​ Infastracuter -​ Research and development costs -​ Privacy -​ Tracking How are advancements in artificial intelligence improving customer service and user experience? Is technological advancement in AI improving customer service efficiency  across industries? Economic -​ Exchange rates -​ Rate of unemployment -​ Inflation -​ Interest rates (e.g banks - interest rates are based on the strength of the economy) -​ Strength of the overall economy How does rising inflation affect consumer spending on non-essential goods and services? Ecologic -​ Global warming (cost can be increased) -​ Natural disasters -​ Impact crops -​ Depletion (lowering) of renewable resources What strategies are companies implementing to reduce the environmental impact of shipping itmes need for the porduct? Could advancements in renewable energy help businesses reduce their ecological footprint? Political -​ Political stability -​ Trade policy (e.g higher taxes for important things) -​ Lobbying -​ Elections (things what police say may impact the confidence of people in were they invest their money) -​ Regional politics (e.g EU has certain standards for businesses) How do international trade policies and tariffs impact global supply chains and business operations? Legal -​ Regulations (e.g environmental protection laws) -​ Employment laws/regulations (e.g pay, breaks)  -​ Health and safety -​ Competition laws What impact do data protection regulations have on businesses use of consumer data? Ethics -​ Fair trade -​ Corruption -​ Transparency -​ Codes of business behaviour How do businesses balance profitability with ethical responsibilities, such as sustainability and worker welfare? Ansoff Matrix Used when a company wants to grow P50 (56 PDF) Market penetration: -​ Business is growing by increasing its market share, selling more of its existing products in the same market.  -​ Relies heavily on selling more of the same product to existing customers which is done by increasing brand loyalty, more regular and generally an increased use of product -​ Safest option -​ Downside: Limited opportunity to increase market share because of competerios (the % of sales in and industry, a certain business is selling) -​ Examples: “Toy Story”, “Shrek” or “Iron Man”, Key factors to increase the chance of success are: -​ the growth potential of the market -​ The strength of customer loyalty -​ the power and ability of competitors. (weak competitors) Text form book Market penetration occurs when a business grows by increasing its market share, selling more of its existing products in the same market. Market penetration is considered the safest option but opportunities for increasing market share may be limited by the competitors in the market. Market penetration relies heavily on promoting brand loyalty in order to encourage repeat customers and on promotion in general to lure customers away from the competition. Television soap operas, telenovelas, or even Hollywood blockbusters with sequels that tell more or less the same story, such as “Toy Story”, “Shrek” or “Iron Man”, would fall into this category. Market development: -​ Looks for new markets or market segment (specific groups with similar features) in exciting market, selling the an existing product -​ Riskier than market penetration, business may not understand new Market -​ E.g Starbucks is Australia, Wal-Mart in germany Key factors to reduce the risk of market development are: -​ effective market research -​ having local knowledge on the ground -​ having an effective distribution channel (were you are selling the product) Text from book: Market development expands the market by looking for new markets or for new market segments in the existing market. Market development is a riskier strategy than market penetration, as the business may not understand the new markets. For example, Starbucks was unsuccessful when it opened coffee stores in Australia. Wal-Mart also was unsuccessful when it expanded into Germany. Wal-Mart had underestimated the loyalty of the German public to existing (German) superstores. Successful market development requires different approaches from market penetration. Product development -​ Developing a new product for an existing market -​ Riskier than market penetration (a lot depends on how loyal customer are to original product and if they are willing to buy new product) -​ Can be a completely new product -​ or only an upgrade -​ E.g Iphones -​ Or variation -​ Budget airline “Scoot” Key factors to reduce the risk of product development are: -​ effective market research (to be able to know what your customer want) -​ having a strong research and development system -​ having first mover advantage (being the one who comes up with the product first) Text from textbook: Product development is the development of new products for the existing market. Sometimes it may be a genuinely and wholly new product. Often, however, so-called “new” products are upgrades of existing products such as the iPad, iPad 2, iPad 3, iPad mini and all the different variations. At other times, a “new product” is a variation on an existing product. For example, this was the case when Singapore Airlines introduced their budget airline “Scoot” to fight off competition from Australian budget airlines. Product development is riskier than market penetration, with much depending on how loyal the customers are to the original products Diversification: -​ Completely diversifying both the market and the product - new product new market -​ 2 elements of risk: -​ Not familiar or experienced in new market -​ Product untested -​ E.g apple moving away from home computer and into the music market (successful), failed attempted of Blue Circle’s to sell lawnmowers (were selling cement to build garden patios) Key factors to reduce the risk of diversification are: -​ effective market research -​ due thorough testing to determine: -​ the attractiveness of the market (is it worth entering the market) -​ Cost of entering new market Text from book Diversification: is the riskiest growth strategy a business can pursue. When diversifying – introducing a new product into a new market – a business combines two elements of risk: -​ lack of familiarity and experience in the new market -​ the untestedness of any new product. When Apple moved away from home computing and entered the digital music market and then the handphone market, it successfully diversified. Many attempts at diversification, however, have failed. For example, a British cement producer ‘Blue Circle’ decided to produce lawnmowers. Its rationale was that people using their cement to build garden patios would want a lawnmower to cut the grass. Blue Circle’s failed attempt at diversification was a factor contributing to the takeover of the business in 2001. BCG Matrix Boston consulting Group Matrix (298) -​ Definition: Is a product profile analysis method (asses products based on market share and market growth) should help business to decide where to put money -​ Product profile analysing: process that evaluates the products of a business -​ Business should invest more into profitable product and get rid of less profitable products -​ Measure market growth rate and market share 21 -​ Market growth: the percentage change in the total market size over a period of time. Shows how attractive the product itself is in the market -​ Market share: What percentage of sales (by value or volume) does one company own. Shows the products strength in the market Name of category Explanation Implication Stares -​ High market growth, -​ Positive cash flow high market share -​ marketing focus on -​ (if the company sells building bard most of the product reganion, increasing in that market and it market share is a growing market) -​ However over time -​ The company product matures, typically invests in market growth soles, stars to maintain or turn into cash cow increase their market share - need to invest a lot to sustain rapid growth and stay relevant in market Cash cow -​ Low market growth, -​ the business tries to high market share (if get as much as the the business sells possible out of the most of the product cash cow in this field but the -​ Positive cash flow, market is not but not more growth growing potential -​ -​ business invests minimal resources in  cash cows as they are seen as stable sources of income -​ Marketing efforts focus on maintaining their market share and profitability -​ Should be sustained but not invested more Problem child (question -​ High market growth -​ Should be carefully mark) but low market share considered if product -​ The product it is developed into popular put the stare or eliminated company is not -​ May go into negative selling a lot of it’s cash flow if business product (low invests into it percentage of sales) -​ Marketing focus on -​ Have potential but a increasing brand bit of a problem as it recognition and with requires a lot of that market share investment in order -​ How it can be to increase market improved: product is share in competitive market a good marketing strategy could be a way to succeed Dogs -​ Low market share, -​ Generate little profit, low market growth no growth potential -​ Operating in markets -​ Businesses often which are not move away (divest) growing and the from these to focus business it not on more profitable selling a lot of products (if they products in that keep selling this market product they may face cash-flow problems) -​ Marketing efforts are almost zero -​ The stages are not set in stone -​ Starters usually turn into cash cows  -​ Problem children can either turn into stares or dogs depending on if the market keeps growing so a business needs to consider if they really want to invest into the problem child -​ Cash cows not be invested into heavily as the market does not have a further but at the same time it is a stable income which should be sustained -​ Dogs will just be gotten rid of - don’t have further Key business Tools (SWOT, STEEPLE, Ansoff Matrix, BCG Matrix) -​ SWOT: -​ Propose: To evaluate a company’s internal strengths and weaknesses and external threats and potential opportunities -​ Key features: Helps identify areas of improvement and growth potential. -​ Focuses on internal (Strengths, Weaknesses) and external ( potential Opportunities, Threats) factors -​ When used: Strategic planning or before launching new initiative or a new business plan -​.used to both assess external and internal factors. Strength weaknesses are internal for the business, opportunities and threats are external. -​ Used to evaluate a company companies options to create a business plan based on the strengths and weaknesses of the business and any threats or opportunities the business may face in the future -​ STEEPLE: -​ Propose: analyze external factors (business environment) -​ Key features: Examines Socio-cultural, Technological, Economic, Environmental, Political, Legal, Ethical factors. -​ Focuses solely on external influences, unlike SWOT. -​ When used: To understand external market dynamics and plan for long-term or when a business wants to relocate -​ external factor, can be used for a business to be able to plan ahead, or relocate to a new countries -​ Ansoff Matrix: -​ Propose: To determine growth strategies by analyzing products and markets. -​ Key features: Provides four strategic options: 1.​ Market Penetration: Existing products in existing markets. 2.​ Market Development: Existing products in new markets. 3.​ Product Development: New products in existing markets. 4.​ Diversification: New products in new markets. -​ When used:  -​ To decide on product-market strategies for growth. -​ used when a company wants to grow based on internal factors -​ BCG Matrix: -​ Purpose: To assess and prioritize products or business units based on market growth and market share. -​ Key Features: Divides products/businesses into four categories: 1.​ Stars: High market growth, high market share. 2.​ Cash Cows: Low market growth, high market share. 3.​ Question Marks: High market growth, low market share. 4.​ Dogs: Low market growth, low market share. -​ When to Use: -​ To assign resources and decide which products to invest in, develop, or discontinue. -​ evaluating products of the business based on market growth and share (do they have a future or not, are the profitable or not if not, if not just the product be invested in or not ) Decision Tree, fishbone diagram, force field analysis, Gantt chart -​ Organizational planning tools, help businesses reach their objectives Decision Tree P. 82 (88) -​ Definition: planning tool, should help simplify complex decisions -​ Visual structure, should help managers make good strategic decisions -​ Construct a decision tree: -​ A square ‘node’ represents decisions which needs to be made, the possible choices as lines stemming from the node with the choice written above the line. -​ If there are multiple outcomes they are represented by a circle node, line connected to the circle represents possible outcomes, nodes are number to help identify them -​ With data provided the probability of the outcomes happening are estimated (will be written on top of line) -​ Cost of choice is but at the end of line -​ Calculate each the decision will be the one highest EV (expected value) - the costs of building the factories Fishbone Diagram P. 80 (86) -​ Definition: show causes and effects of quality problems, used with small group of managers -​ Applied: “4 Ps” for service businesses (places, procedures, people and politics) and the “4 Ss” for administration (surroundings, suppliers, systems, and skills). -​ Similar to 5 why technic - find and fix and underlying problem (not just the symptom) -​ In fishbone diagram the effect is placed at the head, each fishbone represents one thing that could have caused the problem, each fishbone is then further broken down into sub causes -​ Eliminates the fishbones which are not the problem and then so finding the root problem Force field analysis -​ Definition: a decision-making tool used to determine the impact and influence of various factors before implementing changes in business processes. (management of change concept) -​ How it is used -​ Change factor is first being highlighted  -​ Business brainstormed possible driving forces (pros) and restraining forces (cons) -​ Weigh out each factor and giving it a number 1 -5, 5 being the strongest weigh (a strong reason for or against the change) -​ Restarting forces and driving forces are being added up the one which is higher determines if the business will do the change or not Gantt Chart -​ Definition: A bar chart used to schedule, manage, and monitor specific tasks and resources in a project - help to plan work schedules, used for production project (multiple tasks) -​ How it is used: -​ Create framework -​ The tasks are scheduled, order The order, time, and sequence of tasks is denoted by shading in parts of the matrix,  -​ Processes can me check with coloring in the part completed Growing a business Economies of Scale -​ Economies of scale: reduced pierce per unit when buying large amounts -​ Economies of scale help large firms to lower their costs of production beyond what small firms can achieve -​ As a firm continues increasing its scale of output, it will reach a point where its average costs (AC) will start to increase -​ Scale = menge -​ Fixed costs optimization -​ Lower porcahing cost (because you business buys more volume) -​ Efficiency and process optimization -​ Diseconomies of scale: average cost per unit increases as the business expense. -​ Diseconomies of scale can happen when the business expanse to fast -​ To much investment  -​ Output = sales -​ With relatively low levels of output, the businesses average costs are high -​ As the business increases its output, it begins to benefit from economies of scale which lower the average cost per unit -​ At some level of output, a business will not be able to reduce costs any further - this point is called productive efficiency -​ Beyond this level of output, the average cost will begin to rise as a result of diseconomies of scale Horizontal integration -​ Horizontal integration: when a business buys or merges with another business engaged in more or less the same activity (offering products and services) (buying or merging with the competition) -​ Indent: is usually intended to increase market share and market power and to take advantage of economies of scale. -​ Advantages: -​ Rapid increase of market share -​ Reductions in the cost per unit due to economies of scale -​ Reduces competition  -​ Existing knowledge of the industry means the merger is more likely to be successful -​ Firm may gain new knowledge or expertise -​ Disadvantages: -​ Diseconomies of scale may occur as costs increase e.g. unnecessary duplication of management roles -​ There can be a culture clash between the two firms that have merged -​ Examples: facebook buying instagram (both were working the the social media field) - were competitors Vertical integration -​ Vertical integration: acquiring other businesses involved in earlier or later stages in the chain of production or by beginning operations in an earlier stage through internal growth. (business with different strength are bought out by one company fo from one business) -​ occurs for varied reasons like: -​ Lowering transaction costs – transactions between businesses typically have transaction costs. These are eliminated. -​ Ensuring reliable supply – if the vertical integration is backward (or “upstream”), the upstream stage can treat the “downstream” stage as a preferred customer in terms of quantity, availability, and price. -​ Avoiding government regulation – such as price controls, taxes, or explicit regulation of various stages through integration. -​ Increasing market power – if integration is successful (that is, if it lowers costs), the business has greater flexibility in setting its prices to others and can use various pricing strategies to increase its market power. -​ Eliminating or weakening the market power of other businesses. -​ Advantages: -​ Reduces the cost of production as middle man profits are eliminated -​ Lower costs make the firm more competitive -​ Greater control over the supply chain reduces risk as access to raw materials is more certain -​ Quality of raw materials can be controlled -​ Forward integration adds additional profit as the profits from the next stage of production are assimilated -​ Forward integration can increase brand visibility -​ Disadvantage: -​ Diseconomies of scale occur as costs increase e.g. unnecessary duplication of management roles  -​ There can be a culture clash between the two firms that have merged -​ Possibly little expertise in running the new firm results in inefficiencies -​ The price paid for the new firm may take a long time to recoup Mergers and Acquisitions, Joint ventures, Strategic alliance (external growth method) P.71 (77) - P. 73 (79) Define it Example Pros Cons Mergers and Merger: 2 business Horizontal, - Economies of - Expensive acquisitions become 1 forward and scale - company (M&As) backward - possible culture clash Acquasisions: vertical and control over takeovers is conglomerate chain of hostile, one (one parent production company buys company that another buys a lot of small companies which often work in different industries then the parent coampny) Joint venture 2 companies - The channel - Greater scale - have to share combined tunnel and efficiency profits (only resources to - New - increased sales form the third achieve a certain Zealand post - Both parent company) goal. They created - DHL companies stay - not always a 3th company for (2004-2012) independent successful (risk a limited time. - transfer of of disagreement skills and like in all Could potentially knowledge partnerships) lead to buy out (one company buys the other) Strategic Almost always - Star - economies of - more alliance more than 2 Alliance scale companies companies share (airline) (27 - can negotiate equally more resources. companies) together options (can get Business - individual messy on  collaboration for a business in agreements) specific goal alliance remain - no legal No new business independent existence unlike a joint - more fluid - no economies venture. Can than join of scale change rapidly ventures No new legal (business can company leave without destroying alliance) Franchises P. 73 (79) - 75 (81) -​ Definition: Franchising involves an individual (franchisee) buying the rights to operate a business model, use its branding and software tools and receive support from a larger company (franchisor) in exchange for an initial lump sum plus ongoing fees (Induivale, partnerships, companies who buy the right to sell the parent company product. Have to follow guidelines, part of the company’s profit goes back do company (franchisor)) -​ Rapid form of growth - especially globally -​ -​ Franchisor: an original business -​ Franchees: you buy the rights to sell the products, concept, you don’t have to come up with new ideas, has the knowledge about local marker, language, culture etc -​ Popular to expand globally -​ Examples: McDonalds, hotels, Hilten, -​ The franchisor (O.G business) will provide: -​ the stock (the products sold) -​ the fittings -​ the uniforms -​ staff training -​ legal and financial help -​ global advertising -​ global promotions -​ The franchisee will provide: -​ employ staff -​ set prices (is different in different countries) -​ set wages -​ pay an agreed royalty on sales -​ create local promotions -​ sell only the products of the franchisor -​ advertise locally.  -​ Advantages for the franchisee: -​ The product exists and is usually well known. -​ The format for selling the product is established. -​ The set-up costs are reduced. -​ The franchisee has a secure supply of stock. -​ The franchisor can provide legal, financial, managerial, and technical help. -​ Disadvantages for the franchisee: -​ has unlimited liability for the franchise (fully responsible for any debts or lose losses of the franchise) -​ has to pay royalties to the franchisor ( based on sales and revenue the franchisee will have to pay money to the franchisor regularly - regardless if they made profit or not) -​ has no control over what to sell -​ has no control over supplies -​ makes all the global decisions. -​ Advantages for the Franchisor -​ gains quick access to wider markets -​ makes use of local knowledge and expertise​ does not assume the risks and liability of running the franchise -​ gains more profits and the sign-up fees. -​ Disadvantages for the franchisor -​ loses some control in the day-to-day running of the business -​ can see its image suffer if a franchise fails or does not perform properly. Marketing Not on study guide: Product - oriented: a business approach that focuses on making the product first before attempting to sell it Market oriented: a business approach of first establishing consumer demand through market research before producing and selling a product  Market share -​ Market size: total sales of a business in a market (what is the percent of your sales in the total market) -​ Can be measured in two ways by volume and by value -​ By volume: number of units (products) sold e.g how many bags are sold -​ By value: total revenue (amount spent by by customers on the total number of goods sold by the business) -​ Value represents the value you get out of the market and the economic of the business -​ By value show you the “wert” of the market -​ Market share: the percentage of one firm’s share of the total sales in the market (the percentage of total sales in an industry generated by a particular company.) -​ A high market share or an increase in market share can indicate the business has an effective market strategy especially compared to their competitors as they have a higher percentage of customers then them -​ Market share can indicate market leader (a firm with the highest market share in a given market) -​ Market leader: a firm with the highest market share in a given market -​ Influence other companies to follow it -​ Can affect future strategies and objectives (goals) -​ The benefits of being a market leader include the following: -​ The market leader will have increased sales, translating to higher profits. -​ The business will be able to gain economies of scale, (i.e. a decrease in the average costs of production as a result of increasing its scale of operation) -​ Since the market leader could also be the brand leader (providing the product with the highest market share), the leading brand can act as a good promotional tool for consumers who would like to associate with popular brands. -​ Connection with why langer business benefit from economies of scale: higher market share also means business are able to take advantage of economies of scale) -​ Careful when interpreting market share (what can influence your calculations for market share?): -​ Since market share can be measured in different ways, by value and volume, different results may be obtained in the same time period. -​ Changes in the time period and market can influence market share results. -​ The type of products included may also influence the calculation of market share.  -​ Firms sales: revenue (prise x unit (stückte) / total revenue Market growth -​ Market size: total sales of a business in a market -​ Can be measured in two ways by volume and by value -​ By volume: number of units (products) sold e.g how many bags are sold -​ By value: total revenue (amount spent by by customers on the total number of goods sold by the business) -​ Market growth: the percentage change in the total market size over a period of time (Market growth is the increase in the overall size, value or volume of a market over a period of time, usually expressed as a percentage) -​ Usually happens when there is an increase in sales (profit) of a certain product, this attracts more suppliers leading to a growing market (market growth) -​ Growth is influenced by several external factors, such as economic growth patterns, technological changes, changes in consumer tastes, and income, among others. -​ Market growth provides motivation for businesses looking to expand, increase sales, and generate higher revenue. -​ Business attracted to potential growing markets as they can became quite competitive really quick so to get a head start can be good  Calculations of Market share and Market growth: a)​ 550+700+620=1870 550 / 1870 =0.294 x 100 = 29.4% (by volume) i)​ The market share of XYZ in 2011 is 29.4% by volume The total number of units in that market in 2011 was 1870 million units. The XYZ company sold 550 million units. This means their market share by volume was their units sold (550) divided by total the units sold in that maker it that year so 1870 x 100 as it is a percentage. b)​ 28+48+30=106 48/106= 0.4528x 100= 45.28% (by value) i)​ The market share of ABC Company by value in 2012 is 45.28%. c)​ 550+700+620=1870​ 620/1870= 0.332 x 100=33.2% (by volume) i)​ The market share of PQR Company by volume in 2011 is 33.16%. d)​ 2011: 25+45+32= 102 2012: 28+48+30= 106 106-102/102= 0.0392 x 100 = 3.92% market growth i)​ The market growth for the whole industry by value from 2011 to 2012 is 3.92%. The total market size by value in 2011 was 102 millions. In 2012 the total market size was 106 million. This means the total maker grows. This can also be verified by calculating the percentage of growth. This is done by taking away the last year's market sales from this year's market sales and dividing it by last year's market sales. Then everything is timesed by 100 because the goal was to find a percentage.  Marketing Mix 4P’s P. 265 (271) -​ The marketing mix refers to the seven elements that contribute to the successful marketing of a product -​ Product: a good or service, should satisfy the needs and expectations of customers, new or exciting product if changing something the customer need to be taken into consideration -​ Pirce: amount customers are charged for the product, -​ indicates how valuable customers view the product. -​ Deciding the price of the product /service is hard because consumer perching behavior can change based on internal and external factors. -​ Do decide factor in: how much are people willing to pay, cost of production, competition, demand, perceived value -​ Place: distribution channel (path /route the product series goes to get to customer) or physical location were the product/service available to customers -​ Place involves decisions related to the selection of sales outlets, logistics and supply chain management  -​ E.g big supermarket chain have many different store locations, to make their products available to as many customers as possible -​ Promotion: ways in which customers are informed about the product and persuaded to buy it, -​ promoted to the product/service to the target market including advertising, public relations, sales promotions, personal selling etc. -​ Promotional strategies are used to: existing and potential customers aware of their product, build their brand image and encourage loyalty Market Segmentation P. 266 PDF 272 Market segment: a sub group of customers with similar characteristics in a given market Market segmentation: the process of driving the market into specific groups of consumers so that their needs and wants are meet -​ Market segmentation: a single market is divided into sub markets or 'segments', based on similar characteristics / preferences of the customers in given markets -​ Each segment represents a slightly different set of consumer characteristics -​ Markets are often segmented based on factors such as social status, geographical location, religion, gender, or lifestyle -​ A target market is one or more market segments at which a product or service is primarily aimed -​ Demographic segmentation (characteristics of the human pollution in that market): -​ ages (babies need different things then teenager), -​ gender (women may want more personal care product), -​ religion (business have a hard time selling pork products in muslims dominated countries), -​ family characters (parents have to worry about items for their kids, so companies may special target people with or without kids ), -​ (ethnic grouping (different language, ethnicity), not one of the main for groups -​ Geographic segmentation (different geographic sectors /physical segmentation of people) : -​ Countries, conitens, regions (depending on where people are located their needs change e.g in california with a lot of swimming options selling bikinis may be profitable) -​ Climat (if a business tries to sell winter coats in a country were it is always warm, it will probably not be successful) -​ Tourism (if the palace has a large number of tourists, then a business which sells tourist items like souvenirs may be successful) -​ Physiological segmentation (lifestyle choices, personality, characteristics of people) -​ social and economic status (high income people may buy different things e.g designer product - having different needs or options then low incomer income people)  -​ Values (e.g animal testing, recycling or for religious values less exposing clothes) -​ Politicals beliefs (especially if a country has political tensions people may only buy products from companies with whom their political beliefs aline) -​ A business used usually several criterias to identify a market segment and also sells to different once: -​ For example, Coca Cola's product range is segmented according to gender, health interests and how the product is used Market segmentation Advantages and Disadvantages Advantages Disadvantages Helps identifying existing gaps and new Not everybody within the segment behaves opportunities (there may be a certain needs the same way, may lead to missing a of one of the market segments which have potential customer not been meet) Products / services can be changed based or May be difficult to identify a segment and designed for the different needs of specific consumers can belong to multiple segments customer groups at the same time Less expensive and wasteful marketing Segmentation requires more detailed (instead of marking the product everywhere market research which can prove costly (but it is only marketed for a specific customer beneficial) to the business group) Customer loyalty, (meeting the needs of Small segments may be discovered but they specific customers may make them feel can be unprofitable understand and wanting to buy more form the company) Tragating P. 267 (273) -​ Target market: group of customers with common needs or wants that the business decides to meet (serve to /sell to) - Marketing to a specific market segment -​ Tragt marking uses the following strategies: -​ Mass marketing (Undifferentiated marking): -​ Large / board market that ignores specific business segments -​ firm ignores the differences in the specific market segments and targets the entire market. -​ Business considers the common needs wants of people and advertise which would reach a lot of people - no specific target audience -​ Goal: large number of customers to maximize sales -​ E.g Samsung, Nokia, -​ LG, Dell, HP, and Coca Cola.  -​ Segmenting marketing: (differentiated marketing): -​ Targeting several market segment, developing fitting marketing mixes for each -​ Goal: gain stronger position in market segments, increase sales, market share -​ Trying to target specific groups with specific advertising -​ E.g Toyota designs cars for the different socio-economic status of people in the world. -​ Niche marketing (concentrated marketing) -​ Definition: a narrow, smaller or more specific market segment -​ Small specific marketing segments - not as much competition because they are so specific -​ Good strategy for smaller firms with limited resources -​ Fewer competitors, use opportunities which may have been overlooked larger firms -​ Products can be marked more efficiently, efficiently by targeting septic consumers, leading to more profit -​ E.g and Rolls-Royce cars, doesn't just mass market, but instead advertisements are placed in specific places Consumer profile -​ Definition: the characteristics of consumers of a particular product in different markets based on their gender, age, and income levels, among other characteristics -​ Consists of informations about customers who buy a specific product in different markets -​ Customer profile includes: -​ Gender, age, social status, income levels -​ Spending patterns (numbers and frequency of the product being bought by that customer) -​ In order for market segmentation to be successful the business needs to know who their customer are (having a customer profile) - allows them to target products efficiently (to the right customers), using good marketing strategies, cost effective (saving promotion costs)  The product Life Cycle P.293 (299) Possible test questions: be able to tell in which phase a company is Test scenarios, give suggestions for extension activity Definition: describes the different stages a product goes through, from its development to its decline. 6 stages development, introduction, growth, maturity, saturation and decline Diagram of a product life cycle. (development would be before introduction where sales are 0) Terminologies words will be in bold at the end of the table Marketing mix strategies: product, price promotion place the relationship between the product life cycle, investment, profit, and cash flow Cash flow: the movement of money into and out of the business Stage Explanation Suggestion (market strategy) Development -​ Generating and screening -​ Greeting awareness and product ideas, creating a generating interest in the product prototype, use test audience, promoting it (commercials) -​ Investment:High research and development costs -​ Profit: non  -​ Cashflow: negative even though the business invest heavily Introduction -​ Begins when the product is -​ Product: basic product is market launched -​ Price: cost-plus, Price skimming -​ Characterised by slow sales or penetration piercing growth as the product is still -​ Promotion: informative new and unknown to most advertising consumers -​ Place: selective or restricted -​ Investment: high cost on distribution promotion -​ Cash flow negative as the -​ Profit: non or negative business usually incurs high -​ cash flow: negative but costs for promotion, advertising improves with sales and distribution -​ Where do we sell? -​ Promotional efforts are focused -​ What price? on creating awareness and -​ How quick to expand? generating interest in the product -​ Pricing strategies will depend upon the nature of the product and the market -​ Price skimming may be used for innovative or high technology products where little competition exists -​ Penetration pricing may be more suited to products being introduced to competitive markets Growth -​ sales begin to increase rapidly -​ Product: Product improvements/ -​ Break even new product development plans -​ Expansion start. -​ business focus shifts to -​ Price:Penetration prices building market share and -​ slightly increase. increasing production to meet -​ Promotion: preservation and the growing demand advertising -​ Investment: average to high -​ Place: more distribution outlets cost on promotion -​ Cash flow turns positive, as  -​ Profit: some profit, begins to revenue increases and costs are rise spread out over a larger volume -​ cash flow: positive of production -​ Marketing strategies focus on differentiating the product from its competitors -​ Price skimming tactics may be dropped in favour of longer-term premium pricing for high-end products -​ Promotional activity including advertising is likely to increase as customers are encouraged to purchase repeatedly Maturity -​ Strong sales, but slowing -​ Product: new product -​ More competition development advantage, -​ Loyal customers extension strategy introduced -​ Competitors have entered -​ Price: Competitive or market to take advantage of -​ Promotional pricing success -​ Promotion: extensive advertising -​ Investment: lower costs on to remind people of product promotion -​ Place: more intensive / wide -​ Profit: highest (at its peak) ranged distribution -​ cash flow: Positive -​ Cash flow positive during this stage, sales revenue continues to come in, costs are reduced through economies of scale and efficient production processes -​ marketing strategy aims to maintain market share and increase profitability by cutting costs and finding new markets -​ Compantive or Promotional pricing tactics -​ Advertising will focus on reminding customers of  product benefits, and building computer loyalty -​ Product features may be upgraded Saturation -​ Sales peak but but begin to fall -​ Product: extension strategies in -​ As many competitors order to maintain sales have entered the market -​ Price: competitive pricing -​ Close some locations -​ Promotion: aggressive -​ Stop gaining new customers advertising - pointing out brand -​ Investment: focuses on benefits, differences extension strategy -​ Place: wide range of -​ Profit: high mostly stable geographical distribution -​ cash flow: positive -​ use high levels of promotional activities such as aggressive advertising in an effort to maintain sales also increase brand awareness and loyalty that if a extension strategy is introduced later on, people are willing to buy the product because of the brand -​ geographical distribution outlets has been established Decline -​ Starts when sales begin to -​ Product: weak products decline withdrawn from market -​ The business focus shifts to -​ Price: cut are made managing the product's decline -​ Promotion: advertising reduced and reducing costs to minimum -​ Sales drop rapidly -​ Place: selective distribution -​ Losing money unprofitable outlets are -​ Investment: very low cost on eliminated promotion -​ The marketing strategy involve -​ Profit: decreasing discontinuing the product, -​ cash flow: positive but reducing its price to clear decreasing inventory, or finding new uses for the product Pierce skimming: setting a high price when introducing a new product to the market Penetration pricing: setting a low initial price for a product with the aim of attracting a large number of customers quickly and gaining a high market share Economies of scale: unit cost falls when business expands their scale of production (cost to produce each single product decreases because business porches more overall - maybe get better deals for certain items which are need to produce the product) Remember: every product life cycle looks different, some may be very short lasting a few months or even only a few weeks E.g. fidget spinner Others may last for decades. E.g Coca Cola Extension strategies -​ techniques used by businesses to extend the life of a product beyond its natural life cycle, it is done in the matury or saturation states -​ Defitnon from book: Extension strategies are an attempt by firms to stop sales from falling by lengthening or extending the product’s life cycle. -​ Done in the maturity or saturation stages. -​ Methodes: -​ New markets, New audiences (e.g in new countries or new regions) -​ New use for product e.g smart phone in the begin only communication device -​ New packaging of product -​ Target new market segments -​ New promotion / advertising strategy -​ Sometimes business may remove the product from market rather than continue to invest in it  Branding P.300 (306) -​ Notes class: -​ Brand: When you see the logo you already know certain things about the product -​ Brand awareness different to brand loyalty - know the difference -​ Brand awareness: people recognizing the brand can lead to higher sales compared to competitors -​ How to develop brand: increase brand awareness -​ Brand loyalty: that how you get a cash cow - customers prefer you brand (products) - if you can built it -​ brand awareness just means that people know it not necessary that they buy it -​ Brand value: worth of the brand - Apple has the highest brand value -​ People pay more if the brand on there (business can make extra money because of the brand logo) -​ Brand: a name, symbol, sign, or design that differentiates a firm's product from its Competitors (something like a name, symbol, design or other feature that makes the product of the business look unique and with that different than the competitors) -​ Branding: growing and nurturing the brand, is a strategic tool that helps businesses create awareness, develop strong customer relationships, generate loyalty, and establish a perceived value that sets them apart from competitors -​ Brand awareness: the ability of consumers to recognize the existence and availability of a firm’s good or service -​ To affect promote a product brand awareness is important, because often there is little difference between a brands product and their competitors product, so brand awareness can lead to a higher number of salles -​ E.g Coca Cola -​ Brand awareness = higher sales = higher market share -​ Brand development: This is any plan to improve or strengthen the image of a product in the market - enhancing brand awareness, by increasing recognition of the brand (name, singe, symbol - increasing power of the name) -​ Leading to higher sales and market share -​ Increase brand awareness -​ Businesses may have to invest heavily in promotion and advertising of product to convince people to buy the product, but in the long run it helps with brand development -​ Free samples of products may help to convince people to buy products and be viewed by the brand (strengthening the brand development by making people aware to the product as well as strengthening the public image of the brand) -​ Brand loyalty: when consumers become committed to a firm’s brand and are willing to make repeat purchases over time -​ Result of brand preference - customer preferring a certain brand over others  -​ Customers with brand loyalty will consistently purchase products from their preferred brands, despite the high prices of some products, because they feel the added value the brand carries justifies its price. -​ In order to get loyal customers a business will use different marketing strategies to gain loyal customers - developes brand ambassadors - people talking positively about the brand colleagues, friends, or relative (enhancing the image and reputation, as well as brand loyalty as people are often times more likely to believe a friend then an advertisement, meaning they themselves may even become loyal to the brand, because their friends is as well) -​ E.g Samsung -​ Brand value: how much a brand is worth in terms of its reputation, potential income, and market value -​ Extra money business makes because of the brand name -​ Costumes are willing to pay more for high value brands, and buy the product of a specific firm and not its’ competitors (help differentiate businesses) -​ E.g Starbucks -​ Brand values are an expression of a brand’s “personality” and act as a code by which a particular brand lives. -​ Brand value very important -​ Importance of Branding: -​ Essential for both start-ups and established companies. -​ Despite have investment -​ Creates a recognizable identity and influences customer perceptions. -​ Start ups: -​ Focus on building a clear image for target audiences. -​ Branding must complement the market and meet customer expectations to drive sales and so that the brand start to get recognized immediately -​ Not meeting customers expectations = decrease in sales -​ Established companies: -​ Strong brands can use price skimming,high prices because of an already established brand (e.g., Mercedes-Benz, BMW). -​ Customers associate well-known brands with high quality and reliability. -​ Presentation, such as colors, impacts public perception (e.g., gyms painted pink may deter male customers). -​ Legal protection: -​ Branding differentiates products and prevents competitors from copying features. -​ Provides businesses with ownership of their unique offerings. -​ E.g companies such as Nike, Nestlé, and Toyota have been able to distinguish themselves well in their respective industries -​ Emotional connection:  -​ Strong branding fosters personal identification and loyalty among customers. -​ Positive impressions increase the likelihood of repeat business. -​ Sufficient resources are needed to build and maintain a good brand reputation. Packaging -​ Definition: concerns the design and production of the physical container or wrapper of a product -​ Help differentiate one product from another - plays big role in marketing -​ Most important thing is that is literally product the product -​ Making it more practical - shape how to ship it -​ E.g difference between plastic and glass, glass is heavier than plastic more difficult to ship -​ Color, shape can be attracting customers -​ Also safety e.g medication is very salty packaged -​ Information - you get nutritional facts (food what is in it) -​ Important functions: -​ physical protection. -​ Packaging protects a product from getting spoilt or damaged, especially during transportation. It must also provide a good cover against dust, direct light, or high temperatures. -​ convenience. -​ A good package should make it easy for consumers and distributors to handle the product. This could include the ability to reuse, recycle, and easily dispose of the product. -​ provides information. -​ The labels on packages can be used to relay important information to the consumer. Food containers may provide information on the particular ingredients a product contains. Technological products may contain information on how to use the item. It may be a legal requirement for companies producing cigarettes and alcohol to provide warnings on their packages regarding the consumption of these products. -​ reduce security risks, especially during transportation. -​ Packages designed with tamper-proof features can help deter intentional tampering with the product. These features can also help reduce the risks of product pilferage. -​ It aids promotion. -​ The package should be eye-catching and appealing to consumer -​ The colour and shape of the package is key in reinforcing and projecting the brand image of the product. This can also help in differentiating a firm's product from its competitors’. Packages with attractive graphic designs can  encourage impulse buying or unplanned purchases by potential buyers of a product. This is especially important in supermarkets that stock a wide variety of consumables, where good packaging can create instant recognition of a firm's product. -​ Much money is spent by businesses to figuring out the best design for packaging and then on producing a package that will attract a lot of customers -​ Impact of the packet on environment e.g supermarkets going green -​