Introduction to International Business Summary PDF

Introduction to International Business Complete Summary ©Max Tolhoek ©Milan Sluijter ©Jonathan van Westerlaak Chapter 1 Marketing: Creating customer Value and Engagement When a company is...

Introduction to International Business Complete Summary ©Max Tolhoek ©Milan Sluijter ©Jonathan van Westerlaak Chapter 1 Marketing: Creating customer Value and Engagement When a company is met with competition it’s possible to launch a customer service initiative. An example of this would be a free night at a hotel combined when you buy an expensive flight. Today’s successful companies have one thing in common: they are strongly customer focused and heavily committed to marketing. Marketing, more than any other business branch, deals with customers. Marketing is engaging customers and managing profitable customer relationships. Marketing is satisfying the customer needs. The marketing process can be divided into 5 steps. Companies work to understand consumers, create customer value and build strong customer relationships. The final step companies will reap the rewards of creating superior customer value. These are 5 core customer and marketplace concepts: 1. Needs wants and demands, 2. Market offerings, 3.value and satisfaction, 4. Exchanges and relationships, 5. Markets. The most basic concept of marketing is human needs. Human needs are states of deprivation. Basic needs are food, clothing and safety. While social needs for belonging and affection, and individual needs for knowledge and self-expression. Wants are the form human needs take as they are shaped by culture and individual. Consumers needs and wants are fulfilled through market offerings. Market offerings are a combination of products, services, information, or experiences offered to a market to satisfy a need or want. Many sellers make the mistake of paying more attention to the specific products they offer than to the benefits and experiences produced by these products. These sellers suffer from marketing myopia. Marketers must be careful to set the right level of expectations. If they set them too low, they may satisfy those who buy but fail to attract enough buyers. If they set them too high, buyers will be disappointed. Exchange is the act of obtaining a desired object from someone by offering something in return. The concepts of exchange and relationships lead to the concept of a market. A market is the set of actual and potential buyers of a product or service. These buyers share a particular need or want that can be satisfied through exchange relationships. Marketing management can design a customer value-driven marketing strategy. We define marketing management as the art and science of choosing target markets and building profitable relationships with them. The company must first decide whom it will serve. It does this by dividing the market into segments of customers (market segmentation) and selecting which segments it will go after (target marketing). The company must also decide how it will differentiate and position itself in the marketplace. A brand’s value proposition is the set of benefits or values it promises to deliver to consumers to satisfy their needs. The production concept holds that consumers will favour products that are available and highly affordable. Therefore, management should focus on improving production and distribution efficiency. The product concept holds that consumers will favour products that offer the most in quality, performance, and innovative features. 1 Chapter 1 Marketing: Creating customer Value and Engagement Many companies follow the selling concept, which holds that consumers will not buy enough of the firms’ products unless it undertakes a large-scale selling and promotion effect. This is typically practiced with unsought goods. The marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfaction better than competitors do. The societal marketing concept questions whether the pure marketing concept overlooks possible conflicts between consumer short run wants and consumer long run welfare. Is a firm that satisfies the immediate needs and wants of target markets always doing what’s best for its consumers in the long run? The company’s marketing strategy outlines which customers it will serve and how it will create value for these customers. The major marketing mix tools are classified into four broad groups called the four P’s. Price, Product, Place and Promotion. Customer relationship management is one of the most important concepts of modern marketing. It is the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction. A customer buys from the firm that offers the highest customer-perceived value which is the customers evaluation of the difference between all the benefits and all the costs of a market offering relative to those competing offers. Customer satisfaction depends on the product’s perceived performance relative to a buyer’s expectations. The old marketing involved marketing brands to consumers. The new marketing is customer- engagement marketing. This means fostering direct and continuous customer involvement in shaping brand conversations, brand experiences and brand community. Greater consumer empowerment means companies can no longer rely on marketing by intrusion. Instead, they must practice marketing by attraction. This means to create market offerings and messages that engage consumers rather than interrupt them. One form of customer-engagement marketing is consumer- generated marketing, by which consumers themselves play role in shaping their own brand experiences and those of others. In addition to being good at customer relationship management, marketers must also be good at parent relationship management, which is working closely with others inside and outside the company to jointly engage and bring more value to customers. Good customer relationship management can help marketers increase their share of customer, the share they get of the customer’s purchasing in their product categories. An example of this is that banks want to increase ‘’share of wallet’’ and supermarkets want to get more ‘’share of stomach’’. The ultimate aim of customer relationship management is to produce high customer equity. Customer equity is the total combined customer lifetime values of all of the company’s current and potential customers. It’s a measure of the future value of the company’s customer base. The more loyal the firms profitable customers, the higher its customer equity. Digital and social media marketing involves using digital marketing tools such as websites, social media, mobile ads, apps and other digital platforms to engage consumers anywhere. Social media provides exciting opportunities to extend customer engagement and get people talking about a brand. Social media can offer an ideal platform for real-time marketing, by which marketers can engage consumers in the moment by linking brands to important trending topics. Marketers are also taking a fresh look at the ways in which they relate with the broader world around them. Almost every company today, large or small, is touched in some way by global competition. As the worldwide consumerism and environmentalism movements mature, today’s marketers are being called on to develop sustainable marketing practices. Social responsibility and environmental movements will place even stricter demands on companies in the future. 2 Chapter 2 Products, Services, and Brands: Building Customer Value We define a product as anything that can be offered to a market for attention, acquisition, use, or consumption that might satisfy a want or need. Products include more than just tangible objects, they also include services, events, persons etc. Services are a form of product that consists of activities, benefits, or satisfaction offered for sale that are intangible and do not result in the ownership of anything. Products and services fall into two classes based on the types of consumers who use them, consumer products and industrial products. Consumer products are products and services bought by final consumers for personal consumption. Convenience products are consumer products and services that customers usually buy frequently. Shopping products are less frequently purchased consumer products and services that customers compare carefully on suitability, quality, price and style. Specialty products are consumer products and services with unique characteristics or brand identifications for which a significant group of buyers is willing to make a special purchase effort. Unsought products are consumer products that a consumer either does know about or knows bout but does not normally consider buying. Industrial products are those products purchased for further processing or use for conducting a business. Thus the difference between consumer products and industrial products are their purpose. Capital items are industrial products that aid in the buyer’s production or operations, including installations and accessory equipment. Organization marketing consists of activities undertaken to create, maintain, or change the attitudes and behaviour of target consumers toward an organization. Both profit and not-profit organizations practice organization marketing. Person marketing consists of activities undertaken to create, maintain, or change attitudes or behaviour towards particular people. Examples of this would be presidents, entertainers, doctors, lawyers etc. Place marketing involves activities undertaken to create, maintain, or change attitudes or behaviour toward particular places. Social marketing consists of using traditional business marketing concepts and tools to encourage behaviours that will create individual and societal well-being. Marketers make product and service decisions at three levels: individual product decisions, product line decisions and product mix decisions. Developing a product or service involves defining the benefits that it will offer. The benefits of a product have attributes such as quality, features, and style and design. Product quality is one of the marketers major positioning tools. Quality affects product or service performance; thus, it is closely linked to customer value and satisfaction. Total quality management (TQM) is an approach in which all of the company’s people are involved in constantly improving the quality of products, services, and business processes. For most top companies, customer-driven quality has become a way of doing business. Performance quality is the products ability to perform its functions. For example, a Rolls Royce provides higher performance quality than a Chevrolet. Beyond quality level, high quality can mean high levels of quality consistency. Conformance quality means freedom from defects and consistency in delivering a targeted level of performance. All companies should strive for high levels of conformance quality. 3 Chapter 2 Products, Services, and Brands: Building Customer Value Product features are a competitive tool for differentiating the company’s product from competitors’ products. Being the first producer to introduce a valued new feature is one of the most effective ways to compete. Another way to add customer value is through distinctive product style and design. Design is a larger concept than style. Style simply describes the appearance of a product. Design goes to the heart of the product. Good design contributed to a product’s usefulness as well as to its looks. The most distinctive skill of a professional marketer is their ability to build and manage brands. A brand is a name, term, sign, symbol, or design or a combination of these that identifies the maker or seller of a product or service. Customers attach meanings to brands and develop brand relationships. As a result, brands have meaning well beyond a product’s physical attributes. Branding helps buyers in many ways. Brand names help consumers identify products that might benefit them. The brand name also gives legal protection to the seller for the unique features they provide to the product. Packaging involves designing and producing the container or wrapper for a product. It used to primarily be used to hold and protect the product, however nowadays packaging has become an important marketing tool. Due to increased competition, packages must now perform many sales tasks, such as attracting buyers to communicating brand positioning to closing the sale. Poorly designed packages can cause consumers to not buy the product and lose sales for the company. Labels and logos range from simple tags attached to products to complex graphics that are part of the packaging. The label identifies the product or brand, and might also describe several things about the product. Finally, the label might help to promote the brand. Customer service is another element of product strategy. A company’s offer usually has some support services included, which can be major or minor. Keeping customers happy after the sale is the key to building lasting relationships. A product line is a group of products that are closely related because they function in a similar manner, are sold to the same customer groups, and are marketed through the same types of outlets, or fall withing given price ranges. Product line filling involves adding more items within the present range of the line. Product time stretching occurs when a company lengthens its product line beyond its current range. An organization with several products has a product mix. A product mix (or product portfolio) consists of all the product lines and items that a particular seller offers for sale. A company’s product mix has four important dimensions: width, length, depth and consistency. Width refers to the number of different product lines the company has. Length refers to the total number of items a company carries. Depth refers to the number of versions offered of each product in the line. Consistency of the product mix refers to how closely related the various product lines are. A company must consider 4 special service characteristics when designing marketing programs intangibility, inseparability, variability, and perishability. Service intangibility means that services cannot be seen, tasted, felt, heard, or smelled before they are bought. The service provider’s task is to make the service tangible in one or more ways and send the right signals about quality. In contrast to physical goods, services are first sold and then produced and consumed at the same time. Service inseparability means that services cannot be separated from their providers, whether the providers are people or machines. If an employee provides the service, then the employee becomes a part of the service. Service variability means that the quality of services depends on who provides them as well as when, where, and how they are provided. 4 Chapter 2 Products, Services, and Brands: Building Customer Value Service perishability means that services cannot be stored for later sale or use. Some doctors charge patients for missed appointments because the service value existed only at that point and disappeared when the patient did not show up. The service profit chain, which links service firm profits with employee and customer satisfaction. The chain consists of 5 links. Internal service quality, superior employee selection and training, a quality work environment and strong support for those dealing with customers. Satisfied and productive service employees, more satisfied, loyal, and hardworking employees. Greater service value, more effective and efficient customer value creation. Satisfied and loyal customers, satisfied customers who remain loyal, make repeat purchases and refer other customers. Healthy service profits, superior service firm performance. Service marketing requires more than just using the 4 P’s. Service marketing also requires internal marketing and interactive marketing. Internal marketing means that the service firm must orient and motivate its customer-contact employees and supporting service people to work as a team to provide customer satisfaction. Interactive marketing means that service quality depends heavily on the quality of buyer-seller interaction during the service encounter. Service marketers often complain about the difficulty of differentiating their services from their competitors. The solution to price competition is to develop a differentiated offer, delivery and image. The offer can include innovative features that set one company’s offer apart from their competitors’. Service companies can differentiate their delivery by having more able and reliable customer-contact people. Finally, service companies also can work on differentiating their images through symbols and branding. A service firm can also differentiate itself by delivering higher quality than its competitor. Like product marketers, service providers need to identify what target customers expect in regard to service quality. Brand equity is the differential effect that knowing the brand name has on customer response to the product and its marketing. It’s a measure of the brand’s ability to capture consumer preference and loyalty. Positive brand equity derives from consumer feelings about and connections with a brand. Brand value is the total financial value of a brand. A brand can be better positioned by associating its name with a desirable benefit such as taking the hassle out of cooking and cleaning, better energy savings, or more stylish kitchens. The strongest brands are positioned on strong beliefs and values, engaging customers on a deep, emotional level. When positioning a brand, the marketer should establish a mission for the brand and a vision of what the brand must be and do. Desirable qualities for a brand name include the following: (1) It should suggest something about the product’s benefits and qualities. (2) It should be easy to pronounce, recognize and remember. (3) The brand name should be distinctive. (4) It would allow expansion into other categories. (5) The name should translate easily into foreign languages. (6) It should be capable of registration and legal protection. A national brand is the brand of a product distributed under a brand name, owned by a producer of distributor. While a store brand is a product that carries the brand of the retailer rather than the producer. Co-branding occurs when 2 established brand names of different companies are used on the same product. Because both brands operate in a different category, they create broader consumer appeal and greater brand equity. Co-branding can not only take advantage of the complementary strengths of the 2 brands, but also expand into a category it might otherwise have difficulty entering alone. Line extensions occur when a company extends existing brand names to new forms, colours, sized etc. of an existing product category. A company might introduce line extensions as a low-cost, low- 5 Chapter 2 Products, Services, and Brands: Building Customer Value risk way to introduce new products. Brand extension extends a current brand name to new or modified products in a new category. Multi-branding offers a way to establish different features that appeal to different customer segments. Chapter 3 Pricing Strategies: Additional Considerations Pricing decisions are subject to a complex array of company, environmental, and competitive forces. To make things even more complex, a company does not set a single price but rather a pricing structure that covers different items in its line. This structure changes over time as products move through their life cycle. Companies bringing out a new product face the challenge of setting prices for the first time. They can choose between 2 broad strategies: market-skimming pricing and market-penetration pricing. Market-skimming (or price skimming) is a strategy that many companies that invent new products use, where they set high initial prices to skim revenues layer by layer from the market. With each new generation of product (e.g the iPhone), new models start at a high price then work their way down as newer models are introduced. To use this the quality and image must support its higher price, and enough buyers want the product at that price. Market-penetration pricing is when companies set a low initial price to penetrate the market quickly and deeply, which is to attract a large number of buyers quickly and win a large market share. To use this the market must be highly price sensitive so that a low price produces more market growth. Also the production and distribution costs must decrease as sales volume increase. Pricing is difficult because the various products have related demand and costs and face different degrees of competition. Now we take a closer look at the five product mix pricing situations. (1) Product line pricing: Setting across an entire product line. (2) Optional-product pricing: Pricing optional or accessory products sold with the main product. (3) Captive-product pricing: Pricing products that must be used with the main product. (4) By-product pricing: Pricing low-value by-products to get rid of or make money on them. (5) Product bundle pricing: Pricing bundles of products sold together. In product line pricing management must determine the price steps to set between the various products. This should take into account cost differences between products in a line. Optional- product pricing is pricing optional or accessory products along with the main product. For example, a car buyer may choose to order a navigation system with the car. Captive-product pricing is used by companies that make products that must be used along with a main product. For example, video games. Using by-product pricing, the company seeks a market for by-products to help offset the costs of disposing of them and help make the price of the main product more competitive. For example, cheese makers in Wisconsin have discovered a use for their leftover brine, a salt solution used in the cheese-making process. Using product bundle pricing, sellers often combine several products and offer the bundle at a reduced price. For example, Microsoft Office. Most companies adjust their basic price to reward customers for certain responses, such as paying bills early. These price adjustments are called discounts and allowances. One form of a discount is a cash discount, a price reduction to buyers who pay their bills promptly. A quantity discount is a price reduction to buyers who buy large volumes. A seller offers a functional discount (a.k.a trade discount) to trade-channel members who perform certain functions, such as selling and storing. A seasonal discount is a price reduction to buyers who buy merchandise or services out of season. 6 Chapter 3 Pricing Strategies: Additional Considerations Allowances are another type of price reduction. Trade-in allowances are price reductions given for turning in an old item when buying a new one. Promotional allowances are payments or price reductions that reward dealers for participating in advertising. In segmented pricing, the company sells a product or service at 2 or more prices, even though the difference in prices is not based on differences in cost. Under customer-segment pricing, different customers pay different prices for the same product or service. Under product form pricing, different versions of the product are priced differently, but not according to differences in their costs. For example, business seat flights are more expensive than economy seats. Using location-based pricing, a company charges different prices for different locations, even though the cost of offering each location is the same. For segmented pricing the market must be segment able, and segments must show different degrees of demand. In using psychological pricing, sellers consider the psychology of prices, not simply the economics. For example, consumers usually perceive higher-priced products as having higher quality. Another aspect of psychological pricing is reference pricing, prices that buyers carry in their minds and refer to when looking at a given product. The reference price might be formed by noting current prices, remembering past prices or assessing the buying situation. With promotional pricing, companies will temporarily price their products below list price, and sometimes even below cost, to create buying excitement and urgency. Sellers may simply offer a discount from normal prices, but they can also use special-event pricing in certain seasons to draw more customers. Promotional pricing can help move customers over humps in the buying process. However, in holiday seasons this can have a downside because it turns into a bargain war with sellers constantly reducing prices to gain the upper hand. A company must also decide how to price its products for customers located in different parts of the world. There are 5 geographical pricing strategies. One option is to ask each customer to pay the shipping cost from the factory to the customer’s location. FOB-origin pricing means that the goods are placed free on board (FOB) a carrier. At that point the responsibility goes to the customer, who pays the freight from the factory to the destination. Uniform-delivered pricing is the opposite of FOB-pricing, here the company charges the same prices plus freight to all customers, regardless of their location. Zone pricing falls between FOB-pricing and uniform-delivered pricing. The company sets up 2 or more zones, all customers given a zone pay a single total price. For example, a company might set up an East Zone for 100$, and a Midwest Zone which charges 150$. Using basing-point pricing, the seller selects a given city as a ‘’basing point’’ and charges al customers the freight cost from that city to the customer location, regardless of the city from which the goods are actually shipped. The seller who is anxious to do business with a certain customer or geographical are might use freight-absorption pricing. Using this strategy, the seller absorbs all or part of the actual freight charges to get the desired business. Many companies are now reversing the fixed pricing trend. They are using dynamic pricing, which is adjusting the prices continually to meet the characteristics and needs of individual customers and situations. Some companies set their products internationally at the same price, however most companies adjust their prices based on the local market. In some cases, the company might want to initiate either a price cut or price increase. In botch cases, it must anticipate possible buyer and competitor reactions. Several situations may lead a firm to consider cutting its price. This could be excess capacity, falling demand or weakened economy. 7 Chapter 3 Pricing Strategies: Additional Considerations. A major factor in price increase is cost inflation. Rising costs squeeze profit margins and lead companies to pass cost increases along to customers. A brand’s price and image are closely linked. A price change, especially a drop in price, can adversely affect how consumers view the brand. In setting prices, companies usually are not free to charge whatever prices they wish. Many laws govern the rules of fair play in pricing. In addition, companies must consider societal pricing concerns. Federal legislation on price-fixing states that sellers must set prices without talking to competitors. Otherwise, price collusion is suspected, which is illegal. Chapter 4 Retailing and Wholesaling Retailing includes all the activities involved in selling products or services directly to final consumers for their personal use. Most retailing is done by retailers, businesses whose sales come primarily from retailing. Many marketers are now using the concept of shopper marketing, focusing the entire marketing process from product and brand development to logistics, promotion, and merchandising toward turning shoppers into buyers as they approach the point of sale. Today’s consumers are increasingly omni-channel buyers, who make little distinction between in-store and online shopping. Influencing consumers’ buying decisions calls for omni-channel retailing, creating a seamless cross channel buying experience that integrates in-store, online and mobile shopping. Self-service retailers serve customers who are willing to perform their own locate-compare-select process to save time or money. Full-service retailers, such as high-end specialty stores assist customers in every phase of the shopping process. Some retailers such as specialty stores, carry narrow product lines with deep assortments within those lines. Some retailers, such as speciality stores, carry narrow product lines with deep assortments within those lines. By contrast, department stores carry a wide variety of product lines. Supermarkets are the most frequently visited type of retail store. Convenience stores are small stores that carry a limited line of high-turnover convenience goods. Superstores are much larger than regular supermarkets and offer a large assortment of routinely purchased food products, non-food items and services. For example, Walmart or Target. There also has been a rapid growth of superstores, that are actually giant specialty stores, the so-called category killers. For example, Best Buy or Home Depot. Service retailers include hotels and motels, banks, airlines etc. A discount store sells standard merchandise at lower prices by accepting lower margins and selling higher volume. Off-price retailers are retail stores that sell products at ultralow-price, high-volumes. The 3 main types of off-price retailers are independents, factory outlets and warehouse clubs. Independent off-price retailers either are independently owned and run or are divisions of larger retail-corporations. Factory outlets are manufacturer-owned and operated stores by firms such as Gap, Levi Strauss and others, they sometimes group together in factory outlet malls and value retail centers. Warehouse clubs (a.k.a wholesale clubs), such as Sam’s Club, operate in huge, warehouse- like facilities and offer few frills in exchange for the bare-bones environment, they offer ultralow prices and surprise deals on selected branded merchandise. Corporate chains are 2 or more outlets that are commonly owned and controlled, their size allows them to buy in large quantities at lower prices. 8 Chapter 4 Retailing and Wholesaling Retailers must first segment and define their target markets and then decide how they will differentiate and position themselves in these markets. Retailers must decide on 3 major product variables: product assortment, services mix and store atmosphere. The retailer’s product assortment should differentiate it while matching target shoppers expectations. A retailer can either offer highly targeted product assortment, or offer merchandise that no other competitor carries. The services mix can help set one retailer apart from another. The store’s atmosphere is important because retailers want to create a unique store experience, one that suits the target market and moves customers to buy their products. Successful retailers carefully design every aspect of the consumer store to create the ultimate store atmosphere. Most retailers seek either high prices on lower volume (specialty stores mostly) or low prices on higher volume (mass merchandise and discount stores). Retailers use various combinations of the 5 promotion tools: advertising, personal selling, sales promotion, public relations, and direct and social media marketing. Another thing successful retailers point at is the importance of location. It’s very important that retailers select locations that are accessible to target markets. A shopping center is a group of retail businesses built on a site that is planned, developed, owned, and managed as a unit. Most retailers had a hard time during the Great Recession of 2008-2009, however some retailers actually benefit from a down economy. For example, as consumers cut back and looked for ways to spend less on what they bought, big discounts such as Costco scooped up new business from bargain-hungry shoppers. Many retailers are also using limited-time pop-up stores that let them promote their brands to seasonal shoppers and create buzz in busy, high-rents areas. Consumers now have a broad array of non-store alternatives, including direct and digital shopping via websites, mobile apps, and social media. Direct and digital marketing are currently the fastest- growing forms of marketing. Many shoppers check out merchandise at a physical-store showrooms, but then buy it online using a computer or mobile device, a process called showrooming. The boundaries between in-store and online retailing are blurring rapidly. To meet the needs of these omni-channel buyers, store retailers must master omni-channel retailing, integrating store and online channels into a single shopping experience. Wholesaling includes all the activities involved in selling goods and services to those buying them for resale or business use. Firms primarily engages in wholesaling are called wholesalers. Why are wholesalers important to sellers? Wholesalers add value by performing one or more of the following channel functions: (1) Selling and promoting. Wholesalers sales forces help manufactures reach many small customers at a low cost. (2) Buying and assortment building. Wholesalers can select items and build assortments needed by their customers. (3) Bulk breaking. Wholesalers save their customers money by buying in carload lots and breaking bulk. (breaking large lots into small quantities) (4) Warehousing. Wholesalers hold inventories, hereby reducing inventory costs. (5) Transportation. Wholesalers provide quicker delivery to buyers because they are closer to buyers than are producers. (6) Risk bearing. Wholesalers absorb risk by taking title and bearing the cost of theft. (7) Market information. Wholesalers give information to suppliers and customers about competitors. (8) Management services and advice. Wholesalers often help retailers train their salesclerks and improve store layouts. 9 Chapter 4 Retailing and Wholesaling Wholesalers fall into 3 major groups: merchant wholesalers, brokers and agents, and manufacturers’ and retailers’ branches and offices. Merchant wholesalers are the largest group of wholesalers. There are 2 types of merchant wholesalers, full-service and limited-service. Brokers and agents differ from merchant wholesalers in 2 ways: They do not take title to goods and they perform only few functions. A broker brings buyers and sellers together. Agents represent buyers or sellers on a more permanent basis. Manufacturers’ and retailers’ branches and offices is done by sellers or buyers themselves rather than through independent wholesalers. Chapter 5 Engaging Consumers and Communicating Customer Value: Integrated Marketing Community Strategy Promotion mix (marketing communications mix) = The specific blend of promotion tools that the company uses to persuasively communicate customers value and build customer relationships. 5 major promotion tools: - Advertising = any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor. (broadcast) - Sales promotion = short-term incentives to encourage the purchase or sale of a product or a service. (discounts) - Personal selling = personal presentations by firm’s sales force for the purpose of engaging customers, making sales, and building customer relationships.(trade shows) - Public Relations (PR) = building good relations with company’s various publics by obtaining favourable publicity, building up a good corporate image and handling or heading off unfavourable rumours, stories and events.(sponsorships) - Direct and digital marketing = Engaging directly with carefully targeted individual consumers and costumers communities to both obtain an immediate response and build lasting customer relationships.(direct mail) Mass marketing = selling highly standardized products to masses of customers. Several major factors are changing the face of today’s marketing communications: - Consumers, they are better informed. - Market strategies, they are developing more focused marketing programs. - Digital technology, changing the way companies and customers communicate. Content marketing = Creating, inspiring and sharing brand messages and conversations with and among consumers across a fluid mix of paid, owned, earned and shared channels. The explosion of online, mobile and social media marketing presents tremendous opportunities but also big challenges. It gives marketers rich new tools for understanding and engaging customer. At the same time, it complicates and fragments overall marketing communications. Integrated Marketing Communications (IMC) = carefully integrating and coordinating the company’s many communications channels to deliver a clear, consistent and compelling message about the organization and its products. Communication involves 9 elements: 1.Sender, the party sending the message to another party 2.Encoding, process of putting thought into the symbolic form. (words, sounds and illustration that will convey the intended message) 3.Message, the set of symbols the sender transmits 4.Media, the communication channels through with the message moves 10 Chapter 5 Engaging Consumers and Communicating Customer Value: Integrated Marketing Community Strategy 5.Decoding, receiver assigns meaning to the symbols 6.Receiver, party receiving the message 7.Response, reactions of the receiver 8.Feedback, receiver’s response communicated back to the sender 9.Noise, the unplanned static or distortion. Steps in developing an integrated communication and prometon program: - Identify the target audience - Determining the communication objectives Buyer-readiness stages = the stages consumers normally pass through on their way to a purchase: awareness, knowledge, liking, preference, conviction and the actual purchase. - Designing a message, message designer must think about what to say(message structure) and how he will say it (message format and structure). message content is about figuring out the appeal or theme that will produce the desired response. The 3 types of appeal are emotional rational and moral. Emotional is about negative and positive emotions that can motivate. purchase. Rational is about the self-interest of the audience and moral is about what is right and wrong. Message structure, how to handle the three message structures: Draw the conclusion or leave it to the audience, present the strongest arguments first or last and present a one-sided argument or two-sided argument. Message format a strong format is needed, think about title, illustration and colours. This is in order to attract attention. - Choosing communication channels, there are two types of communication channels: Personal communication channels = channels through which two or more people communicate directly with each other, including face-to- face, on the phone, via mail or email or even through an internet “chat” Word-of-mouth influence = the impact of the personal words and recommendations of trusted friends, family, associates and other consumers on buying behaviour. Buzz marketing = Cultivation opinion leaders and getting them to spread information about a product or a service to others in their communities. Nonpersonal communication channels = media that carry messages without personal contact or feedback, including major media, atmospheres and events. - Selecting the message source, the message impact also depends o how the target audience views the communicator. - Collecting feedback, is about researching the effect on the targe audience, seeing how much of the market becomes aware, tries the product and is satisfied with the process. 4 common methods used to set the total budget for advertising: - Affordable method, setting the promotion budget at the level management thinks the company can afford. - Percentage-of-sales method, setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price. - Competitivity-parity method, setting the promotion budget to match competitors’ outlays. - Objective-and-task method, developing the promotion budget by 1) defining specific promotion objectives 2) determining the tasks needed to achieve these objectives 3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget. Each promotion tool has unique characteristics and costs. Advertising can reach a lot of people at a low cost per exposure. 11 Chapter 5 Engaging Consumers and Communicating Customer Value: Integrated Marketing Community Strategy Personal selling is known as the most effective Sales promotion effects can be short lived but have a lot of effect Public relations is very believable, combined with other tools it can be very effective. Direct and digital marketing are well suited to highly targeted marketing efforts, creating customer engagement and building one-to-one customer relationships. Push strategy = A promotion strategy that calls for using the sales force and trade promotion to push the product through the channels. The producer promotes the product to channel members who in turn promote it to final consumers. Pull strategy = A promotion strategy that calls for spending a lot on consumer advertising and promotion to induce final consumers to buy the product, creating a demand vacuum that ‘pulls’ the product through the channel. To achieve an integrated promotion mix, all of the firm’s functions must cooperate to jointly plan communication efforts. An integrated promotion mix ensures that communications efforts occur when, where and how customers need them. A company must be aware of the many legal and ethical issues surrounding marketing communications. Advertising and sales promotion, these must avoid being false or deceptive advertisements. For personal selling they must follow the rule of ‘fair competition’ , this means that salesman won’t lie about their products or false advantages a certain product holds. Chapter 6 An Overview of Logistics Logistics are an important component in any country’s economy and can play an important role in a nations economic growth and development. The economic impacts that affect individuals consumers such as you can be illustrated through the concept of economic utility which is the value or usefulness of a product in fulfilling customer needs or wants. The four general types of economic utility are possession, form, time and place; logistics clearly contributes to time and place utilities. Possession utility refers to the value or usefulness that comes from a customers being able to take possession of a product and can be influenced by for example the payment method. Form utility refers to a product being in a form that can be used by the customer and is of value to the customer, form utility is usually associated with production and manufacturing, logistics can make this cheaper by ordering a large amount of a product and distributing it to the smaller parties. Place utility refers to having products available where they are needed by customers. Products can for example be moved from a warehouse to a supermarket shelf since they have a greater value there. Time utility refers to having products available when they are needed by customers. Different products have different consequences (spoiling vs non spoiling for example) Achieving these utilities goes a long way but does not guarantee customer satisfaction. Logistics management is that part of supply chain management that plans implements and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers’ requirements (check page 162 for a more in depth definition) 12 Chapter 6 An Overview of Logistics Humanitarian logistics is the logistics of people, resources, skills and knowledge to help people who have been affected by a natural or man made disaster. After the government relaxed its grip on logistics, price flexibility started to happen since previously the government chose the prices and the levels. Consumer behaviour started to change as well, the customized customer wants a specific product customized for the customer, going forward, mass customization is likely going to be made by advances in 3d printing. Changing family roles is referring to dual income households, home delivery and ready to eat/cook food. Rising customer expectations tend to increase over time which means that a satisfactory level of performance in the past might not be considered so today. Technological advances creates new alternatives for already existing distribution channels, the removal of intermediaries between product and consumer (Disintermediation) can clearly affect the design of logistics systems because the number and location of warehouses and distribution centres can change. Technological advances can also improve the productivity of the picking process. Advances in Retailing. Big box retailers are stores with large amounts of both floor space and products for sale and see their superior logistics as an essential component of their corporate strategies. These retailers are also trendsetters with respect to environmental and social issues in logistics Omnichannel retailing is a strategy that focuses on providing customers a seamless shopping experiences regardless of sales channel, retailers enable their customers to transact within and across any contract channel (online, in store, mobile app, etc.) to enhance information availability. Customer experience, inventory visibility and accurate demand forecasting is essential for successful omnichannel retailing Globalization of trade Countries have traded with each other for thousands of years, globalizations impact is however greater today than ever before. Many factors such as rising standards and multicounty trade alliances have contributed to the growth of global trade and logistics have played a key role in it, for example the container which is a huge reusable metal box in which goods are shipped was a big factor in world trade, international logistics will be looked at in greater detail in chapter 10 From a companywide perspective the systems approach indicated that a company’s objective can be realized by recognizing the mutual interdependence of the major functional areas of the firm such as marketing, production, finance and logistics. One implication of the systems approach is that the goals and objectives of the major functional areas should be compatible with the company’s goals and objectives. This means that one logistics system does not fit all companies because of goal and objective differences. A second implication is that decisions made by one functional area should consider the potential implications on other functional areas. For example one consequence of pursuing the marketing concept, which focuses in customer satisfaction, is often a marked increase in the number of Stock keeping units(SKUs) or line items of inventory (each different type or package size of a good is a different SKU) 13 Chapter 6 An Overview of Logistics Business logistics is made up of material management (movement into and storage in a firm) and physical distribution (storage of finished product and movement to the customer) intrafunctional logistics attempts to coordinate materials management and physical distribution in a cost effective manner that supports an organizations customer service objective. One way of coordinating materials management and physical distribution is by using the same truck to deliver materials and pick up finished goods. Managers use the total cost approach to coordinate materials management and physical distribution in a cost efficient manner. Using the total cost approach all relevant activities in moving and storing products should be considered as a whole (their total cost) Cost trade offs, changes to one logistics activity cause some costs to increase and other to decrease. The key to the total cost approach is that all relevant logistical cost items are considered simultaneously when making a decision Finance The finance staff is often responsible for the company’s funds for projects desired by the operating departments and they often need to approve capital budgeting decisions that affect logistics. Inventory is another area where finance and logistics can interact. (page 168 & 169) Production A common interface between production and logistics is the length of the production, long production times equals lower production cost per unit but a large inventory, sometimes access. Access inventory is causes extra costs and could also be replaced by products that are selling. Postponement (the delay of the value-added activities such ass assembly, production and packaging until the latest possible time) Marketing Logistics strategies can facilitate customer satisfaction by reducing the cost of new products which could translate into lower prices and more choices to where the customer can buy or use the products. 4 P’s of marketing Place decisions Logistic decisions concern the most effective way to move and store the product rom where it is produced to where it is sold. Co-branding is a popular marketing strategy involving two brand working together (ex. Subway located in some Walmart stores) Price decisions Managers must decide how the transportation costs of a product is going to reflect the selling price, one way of doing this is using the landed costs which refers to the price of a product at the source plus transportation costs to its destination. Managers are also expected to know the costs of providing various levels of customer service. Product decisions Marketers often prefer to carry higher quantities of particular items because this reduces the likelihood of Stockouts (being out of an item at the same time there is demand for it) However from a logistics perspective, more products means additional storage pace and increase inventory carrying costs. Product design can also have a big influence, bigger products use more storage, different materials break quicker. 14 Chapter 6 An Overview of Logistics Promotion decisions most promotional decisions require coordination between marketing and logistics. An important example is advertising a product, if you’re heavily advertising one product it would damage the company’s image horribly if you run out of that product. When a new products drops it is the responsibility of the logistics department to make sure that the product will be in place on the scheduled release date. Marketing channels refers to ‘’a set of institutions necessary to transfer the title to goods and move goods from the point of production to the point of consumptions and, as such, which consists of all the institutions and all the marketing activities in the marketing process’’ the traditional institutions in the marketing channel are the manufacturer, the wholesaler and the retailer and they work together in several different channel arrangements, owner ship channel, negotiation channel, financing channel, promotions channel and logistics channel. The Ownership channel covers movement of the title to the goods. The Negotiations channel is the one in which buy and sell agreements are reached. The Financing channel handles payment for goods. More importantly it handles the company’s credit The Promotions channel is concerned with promoting a new or an existing product. The most significant contribution that the logistics channel makes to the overall channel process is the sorting function which bridges ‘’the discrepancy between the assortment of goods and services generated by the producer and the assortment demanded by the consumer.’’ The sorting function has 4 steps, Sorting out is sorting a heterogeneous supply of products into stocks that are homogeneous Accumulating is bringing together similar stocks from different sources Allocating is breaking a homogeneous supply into smaller lots Assorting is building up assortments of goods for resale, usually retail customers These steps are performed by the wholesaler, the retailer or specialist intermediaries In the logistics channel facilitators or channel intermediaries play minor but essential roles. Intermediaries make the system function better and are only used when they add value to a transaction, they are used when 2 parties cant communicate well for example a translator, they function in areas needing orderly routine and they serve as a buffer between various channel members. Brokers, who are associated with the negotiation channel, are independent contractors paid to arrange a particular transaction, they can be used by both buyer and seller and is often used to arrange truck transportation Activities that are considered to be logistics related include, but are not limited to the following: Customer service, Demand forecasting, Facility location decisions, International logistics, Inventory management, Materials handling, Order management, Packaging, Procurement, Reverse logistics, Transportation management, Warehousing management, the definitions of these can be found at page 174 and 175 15 Chapter 7 The Supply Chain Management Concept A supply chain can be liberally viewed as a combination of processes, functions, activities, relationships and pathways along with products, services, information and financial transactions move in and between enterprises from original producer to the end user (page 181 w example) A successful SCM requires companies to adopt an enterprise-to- enterprise point of view which can cause organizations to accept practices and adopt behaviours that haven’t been associated with buyer-seller interaction. Moreover a successful SCM have to apply the System approach (chapter 6) across all organizations in the supply chain. There are two prominent SCM frameworks, The SCOR model identifies 6 processes--- Plan, Source, Make, Deliver, Return and Enable--- associated with the SCM (self-explanatory but explanation at table 7.1 page 183) Logistics is key within these models The GSCF model comprises 8 processes--- Customer relationship management, Supplier relationship management, Customer service management, Demand management, Order fulfillment, Manufacturing flow management, Product development and commercialization and Returns management. (Explanation table 7.2 page 184) This model includes the involvement of all business functions Understanding the implications of increased Customer power Because of more information the customers power grew a ton in recent years, customers know more about companies individual organization and its products as well as also becoming aware of competing organizations and their products. Since customer needs can change quickly supply chains are required to be fast and agile. A Fast supply chain emphasized speed and time component whereas an Agile supply chain focuses on an organizations ability to respond to changes in demand with respect to volume and variety. Not being fast and agile can result in decreased market share, reduced profitability, lower stock price or dissatisfied customers for supply chain members. The perfect order (Simultaneous achievement of relevant customer metrics such as on time delivery, damage free and correct order quantity) metric has been shown to help diagnose problems within a supply chain and improve satisfaction by looking at orders from the customers POV. In cases where customer demand is relatively stable and the need for variety is low, a Lean supply chain may be more appropriate, LSC are focused on eliminating all waste, including time, and ensuring a level schedule. A hybrid called Leagility combines aspects of both lean and agile supply chain Establishing appropriate relationship structures Well run supply chains improve the long term performance of the individual companies and the supply chain as a whole so long term key staff members will be important. A long term orientation tends to be predicated on relational exchanges, whereas a short term orientation tends to focus on transactional exchanges. Supply chain collaboration will be defined as cooperative relationships between members f a supply chain – formal or informal – between companies and their suppliers or customers established to enhance the overall business performance of all parties 16 Chapter 7 The Supply Chain Management Concept An example of a strategic collaboration could be the formal Supply chain partnership, defined as a tailored business relationship between 2 supply chain members, key characteristics include: High interdependence among partners, an increased willingness to share information, compatible goals, mutual trust and buying decisions based of value opposed to cost or price. Leveraging technology for enhanced visibility and communication Computing power and the internet have changed the supply chain. They are extremely helpful and made communication and information more accessible Use of supply chain facilitators Third-party logistics also called Logistics outsourcing or Contract Logistics, continues to be one of the most misunderstood terms in logistics and SCM, there is no commonly accepted definition of third-party logistics. the general idea behind 3PL is that one company (say a manufacturer) allows a specialist company to provide it with one or more logistics functions (warehousing outbound transportation) 3PL customers can demand inbound and outbound transportation, carrier negotiation and contracting, freight consolidation and supplemental services such as final product assembly and product repair. 3PL arrangements can easily result in failure, one common cause is unrealistic and unreasonable expectations, another is lack of flexibility, unexpected issues are bound to arrive. Fourth-party logistics (4PL) or the Lead logistics provider (LLP) is a measure of outsourcing in SCM. For our purposes 4PL will refer to a company whose primary purpose is to ensure that various 3pls are working toward the relevant supply chain goals and objectives. Regulatory and political considerations Lack of top management commitment Reluctance to share, or use, relevant information Incompatible information systems Incompatible corporate cultures Globalization challenges An individual firm can be involved in multiple supply chains at the sae time which will have different demands. Supply chains agreements should be rewarding to all participants and punish all if failing. When an organization enters a long term agreement with a supplier or customer the organization must keep in mind how this arrangement could affect the rest of the supply chain Chapter 8 Transportation Transportation can be defined as the actual, physical movement of goods and people between two points and is pivotal to the successful operation of any supply chain. Transportation influences or is influenced by the logistics activities. These include: 1. Transportation costs, 2. Inventory requirements, 3. The transportation mode, 4. The type of carrier used, 5. Order management 6. Customer service goals. Check page 199, talks about comparing different countries with a table 17 Chapter 8 Transportation There are five modes of transportation and six attributes Cost, Speed, Reliability, Capability, Capacity, Flexibility Airfreight Line haul( Terminal-to terminal movement of freight or passengers) Consignees (receivers of freight) Accessorial service (transportation service that is supplemental to the line haul) Air travel is the quickest way but quite expensive. Most consignees are not located at an airport and using the accessorial service adds to both transportation costs and transmit time, air also increases the number of times a shipment is handle The cost, speed and capacity attributes mean that for the most part airfreight is most suited to high value low volume products that are of perishable nature or require urgent or time specific delivery Motor carriers The most important business user of the highway system is the motor carrier (trucking) industry. one way of classifying motor carriers is according to whether they carry less-than-truckload (LTL) or truckload (TL) traffic. LTL Shipments range from about 150 to 10000 pounds and operate trough a system of terminals (A facility where freight is shifted between vehicles). TL carriers focus on shipment grater than 10000 pounds and may have only one customer per truck load Without question the primary advantage for motor carriers is flexibility, Motor carriers are cheaper than air but more expansive than the other forms of transport, the type of motor carries however can make a big difference. Pipelines are the only form of transport without a vehicle, they can however only transport liquid and gasses and is the slowest form of transportation The lack of vehicles makes this the most reliable option but it makes flexibility very limited Slurry systems allow bulk commodities to become liquifiable by grinding the solid materials to certain particle size Railroads Railroads are heavily influenced by the weather and are not either the best or worst in any of the 6 attributes. Railroads have the ability to transport a wide variety of products even so they usually transport low value, high volume items such as coal Rails posses less flexibility than motor carriers unless the customer is next to a railroad but generally do have better flexibility than water, air and pipeline. In terms of volume rails are superior to air and motor but not to pipeline and water. They’re less expensive than air and motor but more expensive than pipeline and water, they are faster than pipeline and water but slower than air and truck Water Water is heavily influenced by weather. Inland water transportation is on average slow but cheap, truck costs are appr. 20 to 30 times higher than inland in land water carriers. Many different kinds of products can be carried but inland water carriers focuses on lower value bulk commodities. Intermodal transportation refers to transportation when using a container or other equipment that 18 Chapter 8 Transportation can be transferred from the vehicle of one mode to the vehicle of another without the contents being reloaded or disturbed. Piggyback transportation is either truck trailer-on-flatcar, to take advantage of rails low transportation costs on the line-haul along with trucks ability to provide door to door service The goal is to utilize the advantages of both methods Air freight containers, often referred to as unit load devices (ULD) are constructed of lightweight metals and come in different sizes. Although intermodal containers can range between 10 and 53 feet in length a common metric is Twenty-foot equivalent unit(TEU) Freight forwarders are not modes but from the shipper’s viewpoint they are analogous to other carriers Surface carriers give volume discount to customers shipping large quantities of freight at one time. The air forwarding industry works with the air carriers and air forwarders to consolidate shipment and tender the in containers ready for aircraft loading Shippers associations perform basically the same function as surface and air freight forwards except they do not operate as profit-making organizations Brokers are another type of transportation specialist, they are companies that look to match the shippers freight with a carrier to transport it as well as getting you the best deals. Third party logistics are involved in arranging transportation services Parcel carriers are companies that specialize in transporting parcels which are often referred to as packages that weigh up to 150 pounds The five modes of transportation have been influenced and continue to be influenced by various types of regulations by federal, state and local governments Environment regulation influences transportation in a number of ways, such as pollution and resource conservation Safety regulation The Department of transportation (DOT) is the us federal government body with primary responsibility for transportation safety regulations, their safety responsibilities encompass all five modes of transport but in land water carriers is the primary responsibility of the us coast guard Economic regulation in transportation refers to control over business practices and activities such as entry and exit, pricing, service, accounting and financial issues and mergers and acquisitions. The key factor that separates a Common carrier from other forms of transportation is that the common carrier has agreed to serve the general public A contract carrier offers a specialized service to customers on a contractual basis Exempt carriers are for-hire carriers that have been exempted from economic regulation through provisions in various pieces of legislation. Private carriers which are exempt from any economic regulation are companies whose primary business is other than transportation. 19 Chapter 9 Transportation Management Transportation management will refer to the buying an controlling of transportation services by either a shipper or a consignee. Rate determination Rate is the logistics the that signifies that price charged for freight transportation, rate determination is essential to calculating the appropriate transportation cost, according to the following formula Weight X Rate= transportation charge One approach to rate making is a commodity rate (determining one specific rate for every possible combination of product weight and distance), it is very good for dealing with demand specific situations but becomes overwhelmed easily. The class rate system simplified each of the three primary rate factors, product, weight and distance Four factors are used to determine a products freight classification, namely density, stow ability, ease of handling and liability to damage and theft. Density refers to how heavy a product is Stow ability refers to how easy the commodity is to pack into a load. Ease or difficulty of handling refers to challenges to handling that might be presented by a commodity’s size, weight and so on Liability for loss and damage considers among others a commodity’s propensity to damage other freight, its perishability and its value Rate and service negotiations Rate and service negotiations can include monetary penalties if you fuck up and premium payments for an extraordinary job (check table 9.2 page 227 or a representative list of items that might be used in the negotiation process) One consideration in rate and service negotiations involves the Domestic terms of sale or when the freight charges are paid for in a particular domestic shipment. Fob (free on board) is followed by either origin or destination and this location specifies the point at which the title for a shipment passes from buyer to seller. The FOB location term also establishes which party is responsible for filling freight claims Modal and carrier selection is a 2 step process in which the transportation manager first determines the appropriate mode, or modes, to use and then selects a particular carrier, or carriers within the chosen modes. Documentation serves both a practical function ( what where how much is being transported ) as well as a legal one. Bill of lading is the most important single document, it is the basic operating document in the industry. It functions as a delivery receipt and as proof, it is a binding contact and simplifies the transportation managers job (it specifies the shipper and carrier duties) There are 2 types, the straight bill of lading which is printed on white paper, the name of the consignee is stated and the carrier is under legal obligation to deliver the freight to the named consignee and no one else The order bill of lading is printed on yellow paper without a specified name. 20 Chapter 9 Transportation Management Freight bill A basic document that the manager must be familiar with is the freight bill which is an invoice submitted by the carrier requesting to be paid. Freight claims Another key documentation issue involves freight claims, which refers to a document that notifies a carrier of wrong or defective deliveries, delays or other delivery shortcomings. One of the most difficult and challenging aspects of claim work is the determination of the exact dollar amount damage. A key word in this is the word earned ; Another key area of decision making in transportation management involves making and receiving shipments which refers to tactical planning and control of shipments along with supervision of freight loading and unloading. Consolidating small shipments Small shipments are often more than 150 and less than 500 pounds. Smaller shipment are problematic for several reasons, from a carrier perspective accepting small shipment may not be attractive because they’re looking for a lot of work. There is also a belief that small shipments can lose you money. From a transportation manager’s perspective, a large number of small shipments means that there needs to be an information system capable of tracking each shipments status, the slower times could result in poorer customer service Demurrage is a penalty made by the shipper or consignee to a railroad for keeping a railcar beyond the time when it should be released back to the carrier. Detention is basically the same concept as demurrage except that it usually refers to the trucking industry. Routing can be defined as the process of determining how a shipment will be moved between origin an destination. Tracking refers to determining a shipments location during the course of its move and the ability to track shipments directly after Expediting, which involves the need to rapidly move a shipment to its final destination. Macroenvironmental changes such as globalization and advantages in technology have caused organizations to demand higher levels of service quality. This is especially true for transportation services. Chapter 10 International Logistics Macroenvironmental influences refer to the uncontrollable forces and conditions facing an organization and include cultural, demographic, economic, natural, political and technological factors. A relatively common political restriction on trade involves tariffs, or taxes that governments place on the importation of certain items. Another form of political restriction are non-tariff barriers, which refer to restrictions other than tariffs that are placed on imported products. A type of that is an import quota, which limits the amount or product that may be imported from any one country during a period of time. Embargoes, or the prohibition of trade between particular countries, are another political restriction on trade and generally result 21 Chapter 10 International Logistics from political tensions. Balance of payments is the system of accounts that records a country’s international financial transactions. Governments also support their own carries through cargo preference rules, which require a certain percentage of traffic to move on a nation’s flag vessels. When one country’s currency is weak relative to other currencies, it becomes more costly to import products, but exports often surge. Another economic factor is a countries infrastructure. There are 3 cultural factors that affect logistics which are: language, national holidays and time orientation. A commercial invoice is similar in nature to a domestic bill of lading in the sense that a commercial invoice summarizes the entire transaction of contains and has key information to include a description of the goods, the terms of sale and methods of payment. Chapter 10 International Logistics A certificate of origin specifies the country in which a product is manufactured and can be required by governments for control purposes or by an exporter to verify the location of manufacture. A shipper’s export declaration (SED) contains relevant export transaction data such as transportation mode(s), transaction participants and what is being exported. A shipper’s letter of instruction (SLI) often accompanies an SED and provides explicit shipment instructions. Choosing the terms of sale involves parties working within the negotiations channel, looking at possible logistics channels and determining when and where to transfer. 1. The physical goods (logistics channel) 2. Payment for the goods, freight charges, and insurance (financing channel 3. Legal title to the goods (ownership channel) 4. Required documentation (documentation channel) 5. Responsibility for controlling or caring for the goods in transit (logistics channel) Terms that apply to any mode of transport: EXW (ExWorks): The seller fulfils his obligation by having the goods available for the buyer to pick up at his premises or another named place. Buyer bears all risk and costs. FCA (Free Carrier): The seller delivers the goods export cleared to the carried stipulated by the buyer or another party authorized to pick up goods at the seller’s premises or another named place. Buyer assumes all risk and cost. CPT (Carriage Paid To): The seller clears the goods for export and delivers them to the carrier or another person stipulated by the seller at a named place of shipment. Seller is responsible for transport costs and risk. DAT (Delivered at Terminal): The seller clears the goods for export and bears all risks and costs associated with delivering the goods and unloading them at the terminal at the named port or place of destination. DAP (Delivered at Place): The seller clears the goods for export and bears all risks and costs associated with delivering the goods to named place. Buyer is responsible for all costs and risk associated with unloading the goods. DDP (Delivered Duty Paid): The seller bears all risk and costs associated with delivering goods to the named place of destination ready for unloading and clearing for import. FOB (Free on Board): The seller clears the goods for export and delivers them when they are onboard the vessel at the named port of shipment. Buyer assumes all risk and cost for goods from this moment on. 22 Chapter 10 International Logistics FAS (Free Alongside Ship): The seller clears the goods for export and delivers them when they are placed alongside the vessel at the named port of shipment. The buyer assumes all risk and cost for goods from this point forward. CFR (Cost and Freight): The seller clears the goods for export and delivers them when they are onboard the vessel at the port of shipment. Seller bears the cost of freight to named port. Buyer assumes all risk for goods. CIF (Cost, Insurance, and Freight): The seller clears the goods for export and delivers them when they are onboard the vessel at the port of shipment. Seller bears cost of freight and insurance. Risk goes from seller to buyer once goods are onboard the vessel at the port. Methods of payment refer to the manner by which a seller will be paid by a buyer and methods of payment are much more challenging in international logistics than in domestic logistics. An open account where a seller sends the goods and all documents directly to the buyer and trusts the buyer to pay by a certain date, involves risk for the seller and non for the buyer. A letter of credit is issued by a bank and guarantees payment to a seller provided that the seller has complied with the applicable terms and conditions of the particular transaction. There are several international trade specialists, the following are: International Freight Forwarders: They specialize in handling either vessel or air shipments. Advising on acceptance of letters of credit: When a client receives a letter of credit, the document contains many conditions that the seller must meet. The forwarder determines whether the client can meet these conditions and if cannot, will advise the client that the letter of credit must be amended. Booking space on carriers: Space is more difficult to obtain on international carries than on domestic ones. Vessel or aircraft departures are less frequent, and the capacities of planes or ships are strictly limited. Forwarders are experiences at keeping tabs on available space. Preparing an export declaration: An export declaration is required by the U.S government for statistical and control purposes. Preparing an air waybill or bill of lading: The international air waybill is a fairly standardized document; the ocean bill of lading is not. Ocean bills are frequently negotiable. Obtaining consular documents: Consular documents involve obtaining permission from the importing country for the goods to enter. Arranging for insurance: Unlike domestic shipments, international shipments must be insured. Either the individual shipment must be insured or the forwarder (shipper) must have a blanket policy covering all shipments. Preparing and sending shipping notices and documents: The financial transaction involving the sale of goods is coordinated with their physical movements. The forwarder handles the shipper’s role in the document preparation. Sometimes the manufacturer seeking to export retains the services of an export management company (EMC), a firm that acts as the export sales department for a manufacturer. Export packers custom pack shipments when the exporter lacks the equipment or the expertise to do itself. 23 Chapter 11 Managers and You in the Workplace Managers can be the age of 18 to 80+. They can work in large corporations, government department, hospitals, ext. Nowadays nonmanagerial employees are hard to differentiate from managers, because a lot of companies give nonmanagerial employees the same activities as managers. Nonmanagerial people work directly on the job. A manager is someone who coordinates and oversees the work of other people so organizational goals can be accomplished. A manager’s job is about helping others to do their work. There are 3 levels of management: 1. Top Managers = Managers at or near the upper levels of the organizational structure, responsible for making organization-wide decisions and establishing the plans and goals that effect the entire organization. (Executive Vice President, President, Chief Operating Officer, ext.) 2. Middle Managers = Manage the work of first-line managers, they can be found between the top and the lowest levels of organizations. (Regional Manager, Project Leader, Store Manager, ext.) 3. First-Line (or Frontline) Managers = Manage the work of nonmanagerial employees who typically are involved with producing the organization’s products or serving the organization’s costumers. (Shift Managers, District Managers, Department Managers, ext.) Most companies work with the traditional pyramidal form. Top management is on top, second is middle managers, third are first-line managers and last are the nonmanagerial employees. Organization = A deliberate arrangement of people to accomplish some specific purpose. All organizations have 3 characteristics: Distinct purpose = goals a company hopes to accomplish. People = It takes people to achieve the goal of the company Deliberate structure = A structure within the organization that tell which members do their work. This can be flexible and open, with no specific job duties. Nowadays companies tend to be more flexible and responsive to changes. 3 reasons managers are important: - Organizations need their managerial skills and abilities. - They’re critical to getting things done. - Managers matter to organizations, Single most important variable in employee productivity is the quality of the relationship between employees and their direct supervisors. Management = coordinating and overseeing the work activities of others so their activities are completed efficiently and effectively. Efficiency = Doing this right, or getting the most output from the least amount of input. Effectiveness = Doing the right things, or doing those work activities that will result in achieving goals. Efficiency is concerned with the means of getting things done, effectiveness is concerned with the ends, or attainment of organizational goals. Management strives for low resource waste (High Efficiency) and high goal attainment (High Effectiveness). 4 Functions of Management: - Planning: Management function that involves setting goals, establishing strategies and developing plans to coordinate activities. - Organizing: Management function that involves determining what needs to be done, how it will be done, and who is to do it. - 24 Chapter 11 Managers and You in the Workplace - Leading: Management function that involves motivating, leading and any other actions involved in dealing with people. - Controlling: Management function that involves monitoring activities to ensure that they are accomplished as planned. These 4 functions lead to achieving the organization’s stated purposes. Henry Mintzberg concluded that what managers do can be best described by looking at the managerial roles. Managerial roles = Specific actions or behaviours expected of and exhibited by a manager. When describing what managers do from a roles perspective, we’re not looking at the specific person pre se, but at the expectations and responsibilities associated with the person in that role. There are 10 roles grouped around Interpersonal relationships, the transfer of information and decision making. - Interpersonal Roles = Managerial roles that involve people and other duties that are ceremonial and symbolic in nature. The 3 roles are: Leader, Figurehead and Liaison. - Informational Roles = Managerial roles that involve collecting, receiving and disseminating information. The 3 informational roles include spokesperson, monitor and disseminator. - Decisional Roles = Managerial roles that revolve around making decisions. The roles are entrepreneur, disturbance handler, resource allocator and negotiator. Skills are also important for managers to have, the 3 critical skills according to Robert L. Katz are: - Technical skills = Job-specific knowledge and techniques needed to proficiently perform work tasks. These skills tend to be more important for first-line managers. Because they manage employees who use tools and techniques. - Interpersonal skills = The ability to work well with other people individually and in a group. This skills is equally important for all the levels of management. - Conceptual skills = The ability to think and to conceptualize about abstract and complex situations. This skills is important for top managers. (more skills on P.274 Exhibit 11-7) Changes that influence a managers’ jobs include global economic and political uncertainties, changing workplaces, ethical issues, security threats, and changing technology. Focus on Customer = Managers must focus on customer service because employee behaviour plays a big role in customer satisfaction. Focus on Technology = Managers must focus on technology because it has influence on how things get done in the organization. Focus on Social Media = Managers must focus on social media because these forms of communication are important and add valuable tools in management. Focus on Innovation = Managers must focus on innovation because it’s important to be competitive. Focus on Sustainability = Managers should also focus on sustainability as goals are developed. Focus on the Employee = Managers must focus on employees in order for them to become more productive. Social media = Forms of electronic communication through which users create online communities to share ideas, information, personal messages and other content. Sustainability = A company’s ability to achieve its business goals and increase long-term shareholder value by integrating economic, environmental and social opportunities into its business strategies. 25 Chapter 11 Managers and You in the Workplace The value of studying management by looking at three things: 1. The Universality of Management = The reality that management is needed in all types and sizes of organizations, at all organizational levels, in all organizational areas, and in organizations no matter where located. 2. The Reality of Work = You will manage or be managed 3. Rewards and Challenges of being a Manager = As a manager you have a lot of challenges, but you receive a lot of rewards in exchange. Division of labour (or job specialization) = breaking down jobs into narrow and repetitive tasks. Industrial revolution = a period during the late eighteenth century when machine power was substituted for human power, making it more economical to manufacture goods in factories than at home. 4 management approaches: Classical, Behavioural, Quantitative and Contemporary. Classical approach: The first studies of management, which emphasized rationality and making organizations and workers as efficient as possible. There are two major theories: Scientific management and general administrative theory. Scientific management = An approach that involves using the scientific method to find ‘one best way’ for a job to be done. Nowadays this is used to hire the best qualified workers and man more reasons. Frederick W. Taylor is the ‘father’ of scientific management. He looked for a way to increase production efficiency. Therbligs = A classification scheme for labelling basic hand motions. The Gilbreths found efficient hand-and-body motions and made tools for optimizing work performance. General administrative theory = an approach to management that focuses on describing what managers do and what constitutes good management practice. Nowadays this is used when they perform the functions of managers or structure their organizations. Fayol developed 14 principles of management: Division of work, authority, discipline, unity of command, unity of direction, subordination of individual interests to the general interest, remuneration, centralization, scalar chain, order, equity, stability of tenure of personnel, initiative, esprit de corps. Max Weber found bureaucracy, a form of organization characterized by division of labour, a clearly defined hierarchy, detailed rules and regulations and impersonal relationships. Behavioural approach: Organizational behaviour (OB)= the study of the actions of the people at work. OB thinks the most important asset of an organizations is its people. The Hawthorne Studies = a series of studies during the 1920s and 1930s that provided new insight into individual and group behaviour. These studies lead to new emphasis on the human behaviour factor in managing. The behavioural approach has largely shaped how organizations are managed today. Quantitative approach: The use of quantitative techniques to improve decision making. This approach is also known as management science. It involves applying statistics, optimization models, information models, computer simulations and other quantitative techniques to management activities. Totally Quality Management (TQM)= a philosophy of management that is driven by continuous improvement and responsiveness to customer needs and expectations. This approach contributes directly to management decision making in the areas of planning and control. Contemporary approach: Researches began researching thee external environment outside the boundaries of organizations. Two contemporary management perspectives: Systems and Contingency. 26 Chapter 11 Managers and You in the Workplace System = a set of interrelated and interdependent parts arranged in a manner that produces a unified whole. The two basic types of systems are open and closed. Closed systems are not influenced and do not interact with their environment. Open systems are influenced by and do interact with their environment. The system approach contributes to our understanding of management, because systems show how all interdependent units work together to achieve the organization’s goal. In addition, the systems approach implies that decisions and actions in one organizational area will effect other areas. Finally, it recognizes that organizations are not self- contained. They rely on their environment for essential inputs and as outlets to absorb their output. Contingency approach = a management approach that recognizes organizations as different, which means they face different situations (contingencies) and require different ways of managing. It stresses that there are no simplistic or universal rules for managers to follow. Managers need to look at a situation and determine that if this is the way my situation is, then this is the best way for me to manage. Chapter 12 Decision Making Decision = A choice among two or more alternatives. Making a decision is considered a process that has 8 steps. Step 1: Identify a Problem A problem is considered an obstacle that makes it difficult to achieve a desired goal or purpose. Step 2: Identify Decision Criteria Once the problem has been identified, he or she must identify the decision criteria important or irrelevant to resolving the problem. Decision Criteria = Criteria that define what’s important or relevant to resolving a problem. Step 3: Allocate Weights to the Criteria If the relevant criteria aren’t equally important, the decision makes must weight the items in order to give them correct priority in decision. (example on P.310 Exhibit 12-2) Step 4: Develop Alternatives Create other possibilities. Step 5: Analyse Alternatives Repeat step 3 for other alternatives found. Step 6: Select an Alternative Make a choice. Step 7: Implement the Alternative Put your decision into action, get other people who are affected by your decision to comment on your choice. Step 8: Evaluate Decision Effectiveness Evaluate the outcome. Was the problem solved? Managers need to make a lot of decisions, they can make these decisions based of four perspectives. 1. Rationality Mangers are expected to use rational decision making; this means that they will make logical and consistent choices and maximize value. The assumptions of rationality are that the problem is clear and unambiguous. 2. Bounded Rationality Decision making that’s rational, but limited (bounded) by an individual’s ability to process information. Because of the fact that managers cannot analyse all information, they often satisfice. Satisfice = accept the solutions that are ‘good enough’. Some decisions are influenced by organization’s culture, internal politics and escalation of commitment. Escalation of Commitment = An increased commitment to a previous decision despite evidence it may have been wrong. 3. Intuition Intuitive decision making is making decisions based of experience, feelings and accumulated judgement. 4. Evidence-Based Management EBMgt is the systematic use of the best available evidence to improve management practice. Chapter 12 Decision Making 27  The four essential elements are: Decision maker’s expertise and judgement, External evidence that has been evaluated, opinions and preferences by the people who have influence in this decision and relevant organizational factors (context, circumstances, ext.) There are two different type of decisions. 1. Structured problems and programmed decisions. Structured problems are problems that are straightforward, familiar and easily defined problems. Programmed decisions are a repetitive decision that can be handled by a routine approach. There are three different programmed decisions: 1. A procedure is a series of sequential steps used to respond to a well- structured problem. 2. A rule is an explicit statement that tells the managers what can or cannot be done. 3. A Policy is a guideline for making decisions. Unstructured problems and nonprogrammed decisions Unstructured problems are problems that are new or unusual and for which information is ambiguous or incomplete. Unstructured problems require nonprogrammed decisions, nonprogrammed decisions are unique and nonrecurring decisions that require a custom-made solution. Lower-level managers have more structured problems than higher managers. Decisions have three conditions: - Certainty, a situation in which a manager can make accurate decision because all outcomes are known. - Risk, a situation in which the decision makes is able to estimate the likelihood of certain outcomes. - Uncertainty, a situation in which the decision maker has neither certainty nor reasonable probability estimates available. Psychological orientation will leave a decision maker with 3 options in case of uncertainty: 1. Maximax , maximizing the maximum possible payoff. 2. Maximin, maximizing the minimum possible payoff. 3. Minimax, minimizing the maximum regret, amount of money that could have been made if a different decision had been made. Limited amount of information also has influence on decisions in case of uncertainty. Managers may use the “Rules of Thumb,” or Heuristics, to simplify their decision making. This isn’t always reliable, because they may lead to errors and biases in processing and evaluating information. There are 12 common decision-making errors and biases: Overconfidence, decision maker thinks he knows everything better. Immediate gratification, decision maker wants immediate rewards and tends to avoid costs. Anchoring, decision maker fixate on initial information as a starting point, once set, fail to adequately adjust for subsequent information. Selective perception, this influences the information they identify, the problems they identify and the alternatives they develop. Conformation, decision makers seek out information that confirms past choices and discount past judgements. Framing, decision maker highlights certain aspect and excludes others. Availability, decision makers tend to remember past events that are vivid in their memory. Representation, decision makers assess the likelihood of an event based on how it resembles other events. Randomness, decision makers try to create meaning out of random events. Sunk cost, decision makers forget that current choices cant correct the past. Self-serving, decision makers blame outsiders for failure and credit themselves for success. Hindsight, decision makers falsely claim to have known the outcome of an event once it happened. Chapter 12 Decision Making 28 Managers can make effective decisions if they; Understand cultural differences, create standards for good decision making, know when it’s time to call it quits, use an effective decision-making process and develop their ability to think clearly. The effective decision-making process: 1) It focusses on what’s important. 2) It’s logical and consistent. 3) It Acknowledges both subjective and objective thinking and blend analytical with intuitive thinking 4) It requires only as much information and analysis as necessary to resolve a particular dilemma. 5) It encourages and guides the gathering of relevant information and informed opinion. 6) It’s straightforward, reliable, easy to use and flexible. Design thinking = Approaching management problems as designers approach design problems, this can be useful when identifying a problem and when identifying and evaluating alternatives. Big data = The vast amount of quantifiable information that can be analysed by highly sophisticated data processing. Big data helps making decisions, but it still needs good judgement. Chapter 13 Patterns of Structure and Workplace Design Structure is the defining feature of a work organisation. The purpose of structure is to provide for: - Economic and efficient performance of the organisation and level of resource utilisation. - monitoring activities of the organisation. - accountability for areas of work undertaken by groups and individual members of the organisation. - co-ordination of different parts of the organisation and different areas of work. - flexibility in order to respond to future demands and developments and to adapt to changing environmental influences. - social satisfaction of members of the organisation. Consequences of structure, exacerbating problems of structures (child): Low motivation and morale, late and inappropriate decisions, conflict and lack of co-ordination, poor response to new opportunities and external change and rising costs. The Organization dimension covers the structure and general managerial mechanisms of the event firm Organisations consist of three interrelated levels: Technical level, Managerial level and Community level. Technical level is concerned with specific operations and discrete tasks and actual jobs or tasks to be done. Technical level interrelates with the managerial