Key Concepts from Chapter 1_ The Changing Face of Business PDF

Key Concepts from Chapter 1: The Changing Face of Business 1. Definition of Business Business refers to all profit-seeking activities that provide goods and services necessary in an economic system. Includes for-profit businesses and not-for-profit organizations, with the latter...

Key Concepts from Chapter 1: The Changing Face of Business 1. Definition of Business Business refers to all profit-seeking activities that provide goods and services necessary in an economic system. Includes for-profit businesses and not-for-profit organizations, with the latter focusing on public service rather than profits (e.g., charities, universities). 2. Factors of Production Land: Natural resources used to produce goods, like minerals and timber. Labor: Human effort, both physical and intellectual, contributed by workers. Capital: Includes technology, tools, information, and physical facilities. Entrepreneurship: The willingness to take risks and create new businesses. 3. The Private Enterprise System Also known as capitalism, where businesses are privately owned and operate for profit. Relies on four key rights: ○ Private property: Ownership rights to land, buildings, and goods. ○ Profits: Right to keep profits after expenses and taxes. ○ Freedom of choice: Freedom to choose employment, purchases, and investments. ○ Competition: Drives businesses to improve products and lower prices. Entrepreneurship is essential in this system for economic growth and innovation. 4. Historical Eras of Business in the U.S. Colonial Period: Mostly agricultural economy. Industrial Revolution: Introduction of factories and mass production. Age of Industrial Entrepreneurs: Rise of innovation and big businesses. Production Era: Focus on increasing manufacturing efficiency (assembly lines). Marketing Era: Focus shifted to consumer needs and branding. Relationship Era: Emphasis on customer relationships and loyalty. Social Era: Use of technology and social media to engage with consumers. 5. Current Workforce Trends Aging Workforce: Older employees are staying in the workforce longer. Diverse Workforce: Increased diversity in terms of gender, ethnicity, and background. Changing Nature of Work: More service-oriented roles and outsourcing. Flexibility and Mobility: Rise of remote work and flexible hours. Innovation through Collaboration: Team-based projects and crowdsourcing. 6. Skills for Today's Managers Vision: Ability to see future needs and lead a company towards fulfilling them. Critical Thinking: Analyzing information to solve problems and find opportunities. Creativity: Developing innovative solutions for business challenges. Leadership: Guiding organizations through change and motivating employees. 7. Characteristics of Admired Companies Admired companies generally have strong profits, consistent growth, quality products, ethical practices, and social responsibility. Review Questions 1. What are the primary objectives of a business? 2. Describe the major types of economic systems and their differences. 3. How has technology influenced the evolution of business? 4. Identify and explain the importance of stakeholders in a business. Standard of living: The amount of goods/services people can buy with their income Quality of Life: General well being like healthcare, environment and safety Stakeholders: Individuals or groups affected by business decisions Insourcing: Assigning functions internally( production) Outsourcing: Contracting functions to external firms Chapter 2 Summary: Business Ethics and Social Responsibility This chapter discusses the importance of ethical behavior and social responsibility in business, detailing how companies can operate responsibly, shape ethical conduct, and meet their obligations to society and investors. Key Points: 1. Ethical and Societal Concerns: ○ Businesses face pressure to act ethically and consider societal impacts, including how their decisions affect the environment, employees, and customers. ○ Social responsibility aims to enhance society's welfare through policies, values, and actions that prioritize long-term success and positive societal impact. 2. The Contemporary Ethical Environment: ○ High-profile corporate scandals have underscored the need for ethical conduct, as businesses face increasing scrutiny from the public and media. ○ Companies like Starbucks and Coca-Cola demonstrate how to integrate ethics into business practices, such as offering health benefits to employees, supporting sustainable sourcing, and creating programs to reduce environmental impact. ○ The Sarbanes-Oxley Act (2002) enforces transparency and accountability in corporate ethics, requiring companies to publish and adhere to codes of conduct. 3. Corporate Responsibility and Compliance Programs: ○ The U.S. Sentencing Commission Guidelines outline minimum standards for ethical compliance, including assigning high-level personnel to oversee ethics, conducting training programs, monitoring compliance, and enforcing ethical codes. ○ Ethics compliance officers play a key role in implementing these programs, detecting and deterring wrongdoing, and fostering a culture of ethics and responsibility within organizations. 4. Individual Ethics and Moral Development: ○ Personal ethics and moral reasoning evolve through stages, as proposed by Lawrence Kohlberg: 1. Preconventional: Self-interest driven; actions based on rewards or punishment. ○ “What's in it for me” 1. Conventional: Decisions are influenced by societal expectations and obligations. ○ What's morally accepted( Follow the law) = What will people think 1. Postconventional: Individuals make ethical choices based on personal principles, considering the broader impact on society. ○ Consider justice/equality for society= What's the right thing to do Kohlberg’s 6 Stages of Moral Development 5. On-the-Job Ethical Dilemmas: ○ Employees often face ethical dilemmas, such as conflicts between personal and organizational interests or pressure to meet performance quotas.  ○ Case Study: Wells Fargo encouraged employees to cross-sell products, leading to the creation of millions of fake accounts and significant reputational damage. This example highlights the dangers of misaligned incentives and the importance of ethical oversight in business practices. 6. Corporate Social Responsibility (CSR) Approaches: ○ Many companies adopt a three-pronged approach to CSR: 1. Philanthropy: Supporting causes through donations and sponsorships. 2. Risk Management: Identifying and mitigating social and environmental risks. 3. Creating Value: Finding opportunities to do the right thing while enhancing company value. 7. Fundraisers and Ethical Careers: ○ Fundraisers play a critical role in nonprofit organizations, where ethical practices are essential to gaining trust and support from donors. They need strong communication, organization, and leadership skills to manage relationships with donors and uphold high ethical standards. Review Questions 1. What is the role of ethics in business, and why is it important? Why Ethics Matters in Business 1. Trust: When a business is ethical, people trust it more. This helps the business build a good reputation, which attracts loyal customers and committed employees. 2. Following Rules: Ethical businesses stay out of trouble by following laws and regulations, which helps avoid fines and legal problems. 3. Happy Employees: A fair and respectful workplace makes employees feel valued. This leads to higher morale, better teamwork, and a lower chance of employees leaving the company. 4. Loyal Customers: People like supporting businesses that act responsibly. Ethical companies often keep customers for the long run because people feel good about buying from them. 5. Sustainable Success: Acting ethically helps a business last. It builds a solid foundation for growth without causing harm to the environment or society. In short, ethics in business is important because it leads to trust, keeps the company out of trouble, makes employees and customers happy, and supports long-term success. Chapter 3: Economic Challenges Facing Business Today Overview Chapter 3 explores economic principles, including microeconomics and macroeconomics, and the impact of economic cycles on business. It also explains how governments manage economic performance through fiscal and monetary policy. Key Concepts 1. Microeconomics and Macroeconomics: ○ Microeconomics focuses on the behaviors of individuals and businesses in specific markets, analyzing supply, demand, and pricing. ○ Macroeconomics examines the broader economy, addressing issues like GDP, inflation, and unemployment rates. 2. Supply and Demand: ○ Demand refers to consumers' willingness to purchase goods at various prices, while supply represents producers' willingness to provide goods. ○ The intersection of supply and demand sets the equilibrium price for goods in the market. 3. Economic Indicators: ○ Key economic indicators, including GDP, inflation, and unemployment rates, help gauge the economy’s health and stability. 4. Business Cycles: ○ Business cycles have four stages: expansion, peak, recession, and recovery. ○ These cycles impact consumer behavior, business strategies, and employment levels. 5. Government Policies: ○ Monetary Policy: Managed by central banks, monetary policy involves adjusting interest rates and controlling money supply to influence economic activity. The Bank of Canada cuts interest rates to boost spending during a recession. ○ Fiscal Policy: Governments use fiscal policy to stimulate or restrain economic activity through tax collection and spending. The government spends more money on building roads and schools to create jobs during an economic slowdown. Types of competition: Perfect Competition: Many players, no one has influence over prices Monopolistic competition: Differentiated products Oligopoly: Few firms control the market Monopoly: one major seller owns the whole market Inflation: rising prices reduce purchasing power Deflation: falling prices slow economic activity CPI: Consumer Price Index tracks changes in prices of goods PPI: Producer price index measures prices producers receive for goods Chapter 4 Summary: Competing in World Markets Why Nations Trade Nations trade to capitalize on each other's strengths, such as resources, labor, and innovation, enabling them to specialize in producing goods efficiently. This process enhances economic growth and helps companies access larger markets, spreading risk across different economies. International trade helps nations secure factors of production they may lack domestically, like labor or natural resources, while expanding the potential for profit in rapidly developing markets. Measuring Trade Between Nations Trade is measured by a nation's balance of trade (exports minus imports) and balance of payments (total money flow in and out of a country). A positive trade balance, or surplus, occurs when exports exceed imports, while a trade deficit means imports are higher. Exchange rates, reflecting currency values relative to one another, play a significant role in trade by affecting the costs of goods and investment flows. A strong currency boosts purchasing power for imports but can make exports more costly, while a weak currency does the opposite. Barriers to International Trade Trade barriers can be economic, legal, political, and cultural. Economic Barriers include infrastructure challenges and currency fluctuation, which can impact the stability and profitability of business. Social and Cultural Barriers involve understanding language, customs, and values that influence consumer behavior, such as in advertising or product adaptation.  Political and Legal Barriers are shaped by the host country's political stability and trade policies. Tariffs (taxes on imports), quotas (limits on import quantities), embargoes (total bans on certain goods), and dumping (selling products below cost) are common trade restrictions that countries may impose to protect domestic industries. For instance, tariffs raise the cost of foreign goods, making local products more competitive, while non-tariff barriers, like complex regulations, quotas, and exchange controls, limit the quantity of goods a country imports. Political actions, such as trade sanctions or tariffs on imports from certain countries, are also often used strategically to protect or promote specific industries. Reducing Barriers to International Trade Efforts to reduce trade barriers include international agreements and organizations that facilitate free trade. The World Trade Organization (WTO) oversees global trade agreements, mediates disputes, and works to lower trade barriers. The World Bank provides loans for developing countries to build infrastructure, boosting their economic capacity. The International Monetary Fund (IMF) offers short-term financial support to countries facing economic instability, helping to stabilize the global economy. Regional economic communities, like the European Union (EU) and USMCA (formerly NAFTA), simplify trade between member countries by eliminating tariffs and setting uniform standards, enabling easier access to markets within these regions. Decisions to Go Global Firms go global to gain access to larger markets, improve efficiency, and diversify risk. This expansion can also provide cost advantages through local production and distribution in foreign markets. Companies have multiple entry options: Exporting is the simplest approach, allowing firms to sell goods abroad with minimal investment. A Canadian maple syrup company sells its products directly to stores in Japan, without setting up any physical presence in Japan Licensing and Franchising enable businesses to partner with local firms that use their brand or products in exchange for fees. McDonald’s allows a business owner in Dubai to open a McDonald’s restaurant using its brand, menu, and operational systems, in return for royalties.  Joint Ventures involve sharing resources with a foreign partner, providing a higher level of control in the new market while spreading the risk. Sony (Japan) and Ericsson (Sweden) formed a joint venture to create Sony Ericsson, a company that combined their expertise to produce mobile phones Foreign Direct Investment (FDI) through subsidiaries or acquisitions gives companies complete control over foreign operations but requires substantial investment. Apple builds and owns its own manufacturing facility in China to produce iPhones (subsidiary). Developing a Strategy for International Business Successfully entering and competing in global markets requires understanding local laws, culture, and market preferences. Global companies must adapt products, marketing, and business practices to align with foreign consumer expectations, regulatory requirements, and cultural values. Businesses also consider the political climate, as stable political conditions reduce risks and improve operational stability. For example, companies adapt their strategies based on consumer preferences, religious practices, or holidays specific to the market they are entering. Apple Inc., under Angela Ahrendts' leadership, exemplifies global strategy by tailoring retail experiences to local cultures, creating “Town Squares” as community-focused stores, and emphasizing brand experience rather than price competition. This reflects how successful global businesses invest in understanding and aligning with local consumer expectations to enhance their brand's global appeal. Chapter 4 Key Takeaways Nations trade to leverage strengths and resources, with trade measured by balance of trade and payments. Barriers to trade—tariffs, quotas, legal restrictions, and cultural differences—pose challenges that companies must navigate when expanding globally. Organizations like the WTO, World Bank, and IMF promote free trade and assist in overcoming economic hurdles. Companies going global assess entry methods like exporting, licensing, and joint ventures, balancing control, cost, and risk. Developing effective international strategies requires cultural awareness, regulatory knowledge, and adapting business practices to fit foreign markets. Chapter 5 Summary: Forms of Business Ownership and Organization This chapter examines the different forms of business ownership and organization, focusing on small businesses, franchises, public and collective ownership, corporate structures, mergers, and joint ventures. It provides insights into each type of ownership, including their benefits, challenges, and organizational structures, essential for understanding how businesses operate in various environments. 1. Small Business Ownership Significance of Small Businesses: Small businesses make up 99.7% of U.S. companies and are instrumental in job creation, innovation, and economic growth. They drive the economy by offering unique products and services, creating new industries, and adapting quickly to consumer needs. Defining a Small Business: According to the Small Business Administration (SBA), a small business has fewer than 500 employees, although definitions vary by industry. Contributions to the Economy: ○ Job Creation: Small businesses provide more than half of private-sector jobs. ○ Innovation and Industry Creation: Many groundbreaking inventions and new industry trends originate from small businesses. Common Reasons for Failure: ○ Management Challenges: Lack of experience, financial management, or customer understanding. ○ Inadequate Financing: New businesses often struggle with limited funding and high start-up costs. ○ Regulatory Challenges: Small businesses face significant regulatory and compliance expenses. Business Plans: A strong business plan is essential for setting company goals, obtaining financing, and creating a foundation for growth. Key sections include the executive summary, financial projections, marketing strategy, and risk assessments. 2. Franchising Benefits: ○ For Franchisors(company): Franchising allows for expansion using others’ investments and provides access to new geographic areas with local expertise. ○ For Franchisees(people): Franchisees benefit from an established brand, a tested business model, and ongoing support, making it a relatively low-risk way to start a business. Challenges: ○ For Franchisors: The failure or poor performance of franchisees can negatively affect the brand. ○ For Franchisees: Operating a franchise can be restrictive, as franchisees must adhere to corporate guidelines and may face substantial financial commitments. Role of the Franchisee: Franchisees operate individual units of the business while following the franchisor's standards. This offers independence within a proven framework. 3. Forms of Private Business Ownership Sole Proprietorship: A business owned by a single individual, offering simplicity and full control. However, the owner assumes full personal liability for the business’s debts. Partnership: Owned by two or more people, partnerships allow for shared resources and expertise but carry unlimited personal liability for each partner. Corporation: A separate legal entity that offers limited liability to shareholders. Corporations can raise capital through stock sales but are subject to double taxation (corporate and shareholder level). Special Types of Corporations: ○ S Corporation: Offers limited liability and single taxation for businesses with fewer than 100 shareholders.  ○ Limited Liability Company (LLC): Combines limited liability with pass-through taxation, making it flexible and tax-efficient. ○ B Corporation: Certified for-profit companies committed to social and environmental goals, balancing profit with impact. Forms of Business Ownership 4. Public and Collective Ownership Public Ownership: Government-run businesses provide essential services where private businesses may be less effective. Examples include Amtrak and the Hoover Dam. Collective Ownership (Cooperatives): Cooperatives, or co-ops, are owned by groups of people or small businesses that join forces to share resources, reduce costs, and increase bargaining power. Common in agricultural sectors, co-ops benefit members by pooling resources for production and distribution. 5. Corporate Structure and Management Types of Corporations: ○ Domestic: Operates within its state of incorporation. ○ Foreign: Incorporated in one state but operating in others. ○ Alien: Incorporated in one country but operating in another. Corporate Charter: A legal document that establishes a corporation, detailing its name, purpose, and structure. Management Structure: ○ Stockholders: Owners who elect the board of directors and may attend annual meetings. ○ Board of Directors: Sets overall policy and hires executives. ○ Corporate Officers (e.g., CEO, CFO): Manage daily operations and implement policies. Stock Types: ○ Common Stock: Holders have voting rights and claim on assets after debts. ○ Preferred Stock: Holders receive dividends first but have limited voting rights. 6. Mergers and Acquisitions (M&A) Definitions: ○ Merger: When two companies combine to create a new company. ○ Acquisition: When one company buys another, assuming its assets and liabilities. Types of Mergers: ○ Vertical Merger: Between companies at different production stages (e.g., a supplier and a retailer). Tesla buys a battery supplier company ○ Horizontal Merger: Between companies in the same industry to increase market reach or product lines. Disney buying Pixar ○ Conglomerate Merger: Between unrelated companies, primarily for diversification. Examples: Amazon’s acquisition of Whole Foods enabled expansion into grocery services and improved delivery capabilities. 7. Joint Ventures Definition: A joint venture is a temporary partnership between companies for a specific project, sharing resources, risks, and profits. Purpose: Often used by companies entering foreign markets or large-scale projects to reduce individual risk and leverage combined expertise. Corporate-Nonprofit Joint Ventures: These partnerships provide nonprofits with funding and visibility while helping corporations meet social goals. For instance, Google provides advertising credits to nonprofits, broadening their reach and support base. Chapter Summary Chapter 5 provides a thorough overview of business ownership structures, from small businesses and franchises to corporations, cooperatives, and joint ventures. Understanding these models helps entrepreneurs and business leaders make informed choices about risk, legal responsibilities, and the potential for expansion. Each structure offers unique benefits and challenges, impacting everything from liability to control over operations and profitability. Chapter 6: Starting Your Own Business – The Entrepreneurship Alternative Overview: This chapter delves into the world of entrepreneurship, exploring why people choose to start their own businesses, the types of entrepreneurs, and the environmental factors that support entrepreneurship. It covers everything from key traits of successful entrepreneurs to financing options, business planning, and ways larger companies promote an entrepreneurial culture. The chapter also includes practical advice for anyone considering this career path. Learning Objectives 1. Define "entrepreneur." 2. Identify different types of entrepreneurs. 3. Explore reasons why people choose entrepreneurship. 4. Discuss the current environment supporting entrepreneurs. 5. List characteristics often found in successful entrepreneurs. 6. Outline the steps to start a new business. 7. Understand intrapreneurship within established companies. 1. Defining Entrepreneurship Entrepreneur: An individual who takes risks within the private enterprise system, seeking opportunities and establishing a business to fulfill market needs. Difference from Small-Business Owners: Entrepreneurs, unlike many small-business owners, focus on growth and expansion rather than just stability. Difference from Managers: Managers direct the efforts of others within an existing organization. Entrepreneurs, however, combine ideas, resources, and people to create and grow new business ventures. 2. Types of Entrepreneurs  Classic Entrepreneurs: Identify a business opportunity and build a company to tap into a new market. Example: Greg Wittstock started Aquascape, selling pond kits and landscaping services. Start a business and grow it for a long time Serial Entrepreneurs: Start, run, and often sell multiple businesses over their career. Example: Elon Musk founded multiple companies, including PayPal, Tesla, and SpaceX. Start a business, sell it then start another one repeatedly. Social Entrepreneurs: Aim to solve societal challenges. Example: Kristen Richmond and Kirsten Tobey created Revolution Foods to provide nutritious school meals. 3. Why People Choose Entrepreneurship Desire for Independence: Many entrepreneurs want to control their work and make all decisions. Example: Michael Grondahl redefined the gym industry with Planet Fitness. Financial Success: Entrepreneurs often aim for wealth creation, motivated to bring new products to market and profit. Example: Tony Hsieh’s Zappos, eventually sold to Amazon. Job Security: Owning a business can create personal job security, avoiding layoffs common in large corporations. Quality of Life: Many pursue entrepreneurship to improve work-life balance. Example: Tim Ferriss, author of The 4-Hour Workweek, advocates for maximizing efficiency in business. 4. Environmental Factors Supporting Entrepreneurship Globalization: The rise of global business opportunities allows entrepreneurs to expand beyond local markets. Example: LinkedIn’s global reach with millions of users worldwide. Education: Schools now offer courses, majors, and internships in entrepreneurship. Example: Northeastern University’s entrepreneurship programs. Information Technology: Advances in IT enable entrepreneurs to compete with larger firms, leveraging tools like social media to reach audiences. Example:  YouTube helped Ian Hecox and Anthony Padilla of Smosh become viral video creators. Demographic Trends: Aging Baby Boomers, a growing immigrant population, and Millennials create niche business opportunities, such as Insomnia Cookies catering to college students. 5. Traits of Successful Entrepreneurs Vision: Entrepreneurs have a clear goal and work persistently toward it. Example: HTC co-founder Cher Wang. High Energy Level: Willingness to work long hours and maintain motivation is essential. Need for Achievement: The desire to reach personal goals drives success. Self-Confidence and Optimism: Belief in oneself helps entrepreneurs take risks and overcome challenges. Tolerance for Failure: Many entrepreneurs view failure as part of the learning process. Creativity: Innovation and problem-solving abilities set successful entrepreneurs apart. Risk Tolerance: A comfort level with uncertainty and financial risk is necessary. Flexibility and Adaptability: The ability to pivot and adjust to changing conditions is vital. 6. Starting a New Business Business Idea Generation: Successful ventures often start with an idea that meets a unique need or solves a problem. Business Plan Development: Essential for outlining goals, strategies, and operational details, a well-prepared business plan also helps secure financing. Resources like Bplans and SCORE provide guidance. Financing Options: ○ Debt Financing: Loans or credit lines from banks, credit cards, or community lenders. ○ Equity Financing: Selling ownership stakes to raise funds, through venture capital or angel investors. ○ Alternative Funding: Crowdfunding platforms like Kickstarter connect entrepreneurs with potential investors. ○ Government Support: The SBA, business incubators, and enterprise zones offer support through grants and low-interest loans. 7. Franchising and Buying an Existing Business Franchising: A low-risk entry option, where entrepreneurs can buy into an established brand and business model, popular in health, fitness, and retail. Buying an Existing Business: Purchasing an established company can reduce some startup risks, especially if the brand and customer base are already developed. 8. Intrapreneurship – Innovation within Organizations Definition: Intrapreneurship encourages innovation within a company, fostering entrepreneurial activities among employees. Skunkworks: A project where an employee initiates an idea and gathers resources to bring it to life. Corporate Support: Companies like 3M and Facebook encourage intrapreneurship through innovation budgets and events, like hackathons. Key Concepts for Review 1. What is the primary difference between an entrepreneur and a small-business owner? 2. List the three main types of entrepreneurs and describe each. 3. Identify four major reasons people pursue entrepreneurship. 4. What is a lifestyle entrepreneur? 5. Explain the role of globalization, education, and IT in entrepreneurship. 6. Describe traits commonly found in successful entrepreneurs. 7. What are the pros and cons of debt vs. equity financing? 8. What is intrapreneurship, and how does it benefit large organizations? Feasibility Analysis: Testing if a business idea is practical and profitable Pivoting: Entrepreneurs adjust their business model based on market feedback Assessment Check 1. How do entrepreneurs create businesses? They take calculated risks, organize resources, and pursue market opportunities to start companies. 2. What are the categories of entrepreneurs? Classic, serial, and social entrepreneurs.  3. Why might someone prefer entrepreneurship over employment? For independence, financial success, job security, and work-life balance. 4. What are the benefits of business planning? It defines goals, strategies, and helps secure funding. 5. List financing sources for entrepreneurs. Debt, equity, crowdfunding, and government programs. Chapter 10: Production and Operations Management Study Guide Focuses on operations management like transforming resources(capital, labour, materials) into goods and services efficiently. Operations Management: Planning, implementation and control of processes that transform, resources into goods and services Goal: Improve productivity, ensure quality and optimize resource use Utility: This is the ability of a good or service to satisfy what people want Types of utility: Form Utility: This happens when raw materials are turned into finished products that people can use. Example: Turning cotton into a T-shirt. Time Utility: Ensuring products are available when people need them. Example: Delivering hot pizza during dinner hours. Place Utility: Making goods available where people want them. Example: Selling bottled water at a sports stadium. Ownership Utility:Allowing people to take ownership of a product by buying it.  Example: Financing options that let you own a car immediately, even if you pay for it over time. Production Systems: 1. Mass Production: Produces large quantities of identical items quickly and cheaply. Example: Henry Ford's assembly line produced the same Model T cars efficiently. Limitations: Hard to customize products and repetitive work for employees. Flexible Production: Uses technology to make smaller, varied batches of products on the same line. ○ Example: Honda’s plant can make different car models without needing separate assembly lines. Customer-Driven Production: Makes products only after customers place orders, reducing waste. Example: Tesla builds cars based on each customer’s specifications, like color and features. Production Processes: Analytic Production System: Breaks raw materials into smaller parts or components. Example: Refining crude oil into gasoline, diesel, and jet fuel. Synthetic Production System: Combines materials or components to create a final product. Example: Canon assembling lenses, sensors, and body parts to make cameras. Time-Related Processes: Continuous Production: Runs non-stop for high-demand items. Example: Steel plants or oil refineries working 24/7. Intermittent Production: Stops and starts based on customer demand or product type. ○ Example: McDonald’s making fresh burgers when customers order Production Manager's Key Roles: 1. Planning the Process: Decide what to produce and how (e.g., choose layouts like process, product, or fixed-position). 2. Executing the Plan: Manage "make, buy, or lease" decisions, select reliable suppliers, and ensure smooth production flow. 3. Inventory Control: Use Just-in-Time (JIT) for minimal stock or Materials Requirement Planning (MRP) to ensure timely delivery of materials. Controlling the Production Process: 1. Planning and Organizing: Identify resources and materials, determine task sequences (Routing), and assign timeframes (Scheduling) using tools: Gantt Chart: A simple bar chart to track simple project timelines and progress visually. PERT Chart: A flowchart-style tool used for complex projects to coordinate tasks and identify the critical path (longest sequence of dependent tasks). 2. Executing Tasks: ○ Issue instructions for work (Dispatching) to ensure operations follow the planned schedule. Quality: Meeting standards and being free of deficiencies Benchmarking: comparing processes and metrics with other companies Quality Control Methods: 1. Six Sigma: A method aiming for near-perfect production with 99.9997% accuracy, minimizing defects. 2. ISO Certification: Global standards to ensure consistent quality and efficient processes. ○ ISO 9000: Focuses on maintaining quality assurance in products and services. ○ ISO 14000: Centers on environmental management to minimize environmental impact. Chapter 11: Customer-Driven Marketing Learning Objectives 1. Define marketing. 2. Discuss the evolution of the marketing concept. 3. Describe not-for-profit marketing and nontraditional marketing. 4. Outline the basic steps in developing a marketing strategy. 5. Describe marketing research. 6. Discuss market segmentation. 7. Summarize consumer behavior. 8. Discuss relationship marketing. Overview Business success today hinges on identifying and meeting target market needs effectively. Marketing is the bridge between organizations and customers, helping identify buyer needs and develop strategies to fulfill them. This chapter explains the marketing process, market research, market segmentation, and strategies for building long-term customer relationships. 1. What Is Marketing? Definition: Marketing involves creating, communicating, delivering, and exchanging offerings that provide value to customers and society. Utility: The ability of a product to satisfy customer wants and needs. Marketing creates: Exchange Process  An exchange process occurs when parties trade items of value. Marketing identifies consumer needs, ensuring products and services are well-positioned to meet them. 2. Evolution of the Marketing Concept Production Era: Emphasis on efficient production. Sales Era: Focus on aggressive sales tactics. Marketing Era: Understanding and fulfilling customer needs. Relationship Era: Building long-term customer relationships. Social Era: Leveraging technology and social media for interactive marketing. The Marketing Concept A customer-focused approach aiming for long-term success by understanding and satisfying consumer needs. 3. Not-for-Profit and Nontraditional Marketing Purpose: Not-for-profit organizations use marketing to achieve goals, attract volunteers, and raise funds. Nontraditional Marketing: Includes: ○ Person Marketing: Promoting individuals. ○ Place Marketing: Attracting visitors or businesses to a location. ○ Event Marketing: Promoting events. ○ Cause Marketing: Raising awareness for social issues. ○ Organization Marketing: Gaining support for organizations. 4. Developing a Marketing Strategy 1. Identify Target Market: Analyze potential markets and choose target segments. 2. Create Marketing Mix: Blend product, distribution, promotion, and pricing strategies to appeal to the target market. Environmental Scanning: Assess external factors like competition, social changes, and economic conditions. Marketing Plan: A detailed strategy outlining marketing goals, budget, and implementation timeline. 5. Marketing Research Purpose: Collect and analyze data to make informed marketing decisions. Types of Data: ○ Primary Data: Collected firsthand (e.g., surveys, focus groups). ○ Secondary Data: Previously published information. Big Data: Large volumes of data analyzed to reveal trends and patterns. Data Mining: Extracting useful information from large datasets. 6. Market Segmentation Dividing a large market into smaller groups based on common characteristics: ○ Geographic Segmentation: Based on location. ○ Demographic Segmentation: Based on age, gender, income, etc. ○ Psychographic Segmentation: Based on lifestyle and values. ○ Product-Related Segmentation: Based on product benefits, usage, and brand loyalty. Segmenting Business Markets Geographic Segmentation: Concentrating on specific locations. Customer-Based Segmentation: Focusing on business demographics. End-Use Segmentation: Tailoring products to how they are used. 7. Consumer Behavior Definition: Actions and decision-making processes of consumers. Influences: 1. Personal Factors: Needs, motives, perceptions, attitudes, self-concept. 2. Interpersonal Factors: Cultural, social, and family influences. Consumer Behavior Process: 1. Problem recognition. 2. Information search. 3. Evaluation of alternatives. 4. Purchase decision. 5. Post-purchase evaluation. 8. Relationship Marketing  Purpose: Build long-term, mutually beneficial relationships with customers. Benefits: ○ Cost savings from loyal customers. ○ Increase sales and referrals. ○ Valuable customer feedback. Tools: ○ Frequency Marketing: Rewards for repeat purchases. ○ Affinity Marketing: Partnering with organizations to target specific groups. ○ CRM Software: Managing customer interactions and data. Chapter 12: Product and Distribution Strategies Product Strategy Product: A combination of features and services designed to meet customer needs. Example: A smartphone offers technology, support, and brand value. Consumer Products: Convenience: Easy, frequent buys (e.g., chips). Shopping: Compared before purchase (e.g., laptops). Specialty: Unique and exclusive (e.g., Rolex watches). Unsought: Unexpected or rare purchases (e.g., insurance). = Goods bought for personal use Business Products: Used for creating other goods (e.g., factory equipment) = Goods bought to produce other products Product Mix vs. Product Line: Product Mix: All products a company sells (e.g., Coca-Cola's beverages). Product Line: Similar products grouped together (e.g., different flavors of Coca-Cola 2. Product Life Cycle Products go through four stages: Introduction: New product launched; high costs, low profits. Growth: Sales increase, competitors enter. Maturity: Sales plateau, intense competition. Decline: Sales fall; firms may discontinue or revamp product. Strategies to Extend Life Cycle: Increase frequency of use. Add new users. Find new uses. Change packaging or product features. Product Identification Brand: Name, symbol, or design that identifies a product. Brand Name: Words that differentiate a product (e.g., Nike). Trademark: Legal protection for a brand. Brand Loyalty: 1. Recognition: Aware of the brand. 2. Preference: Prefer over competitors. 3. Insistence: Will only buy that brand. Brand Equity: Added value a strong brand gives a product. Distribution Strategy Definition: Moving goods/services from producers to customers. Distribution Channels: ○ Direct: Producer → Consumer (e.g., online sales). ○ Indirect: Use of intermediaries like wholesalers and retailers. Distribution Intensity: ○ Intensive: Products sold everywhere (e.g., Coca-Cola). ○ Selective: Limited outlets (e.g., appliances). ○ Exclusive: Very few outlets (e.g., luxury watches). 5. Wholesaling Wholesalers sell goods to retailers, not end consumers. Types: ○ Merchant Wholesalers: Take title of goods (e.g., warehouses). ○ Agents/Brokers: Do not own goods; they connect buyers/sellers. Retailing Retailers sell directly to consumers. Types of Retailing: Store Retailers: Supermarkets, specialty stores, discount stores. Non-Store Retailing: E.g., e-commerce, vending machines, direct selling. Retail Strategy: 1. Identify target market. 2. Product selection. 3. Customer service. 4. Pricing. 5. Location choice. Logistics: Coordinating the flow of goods and services. Physical Distribution: Transportation: Trucks, rail, water, air, pipeline. Warehousing: Storage facilities. Order Processing: Fulfilling customer orders. Inventory Control: Managing stock levels. Supply Chain: Process of creating and delivering goods to consumers Chapter 14: Using Tech To manage Info Disruptive Innovation: Technologies like smartphones replace traditional tools (e.g., calculators, maps, cameras). Industry 4.0: The rise of digitization includes big data, robotics, augmented reality, and 3D printing.  Example: Companies like SpaceX and Airbnb are “unicorns” (start-ups valued over $1 billion). Data, Information Systems, and Big Data Data: Raw facts and figures. Information: Processed data that provides value. Big Data: Complex, large data sets collected from sources like social media, IoT, and business applications. Information System: Organized method to collect, process, and communicate data for decision-making. 3 Components and Types of Information Systems Components: Hardware: Physical components of a computer system (e.g., CPU, monitor, keyboard) Software: Programs and operating systems that run on hardware (e.g., Windows, Microsoft Networks: Systems connecting computers to share resources and data (e.g., the internet, Wi-Fi). Databases: Organized collections of data for easy access and management (e.g., customer records). Types of Information Systems: Operational Support Systems: Handle daily operations (e.g., transaction processing systems). Management Support Systems: Aid decision-making (e.g., MIS, DSS, and expert systems). Networks, Internet, and Cloud Computing Networks: Local Area Networks (LANs) and Wide Area Networks (WANs). Internet: Global network for data exchange. ○ Virtual Networks and VPNs for secure communication.  Cloud Computing: Using the internet to access and store data, software, and services instead of relying on your own devices (e.g., Google Drive for storage, Netflix for streaming). Security and Ethical Issues Cybercrime: Hacking, phishing, identity theft. Malware: Viruses, worms, Trojan horses, spyware. Cyberterrorism: Deliberate attacks on networks to cause disruption. Ethical Concerns: Privacy, employee monitoring, and misuse of technology Chapter 16: The Financial System The financial system moves money from savers (who have extra funds) to users (who need funds) through Direct transfers: (e.g., buying stocks directly) = Between savers and buyers OR Indirect transfers via financial institutions like banks = through banks Securities: financial tools for claims on future income: Money Market Instruments: Short-term debt (1 year): Government Bonds: Low-risk (e.g., U.S. Treasury bonds). Municipal Bonds: State/local bonds (tax-exempt). Corporate Bonds: Issued by companies (secured/unsecured). Mortgage Pass-Through Securities: Backed by mortgage payments. Stocks as well and Bonds are rated from AAA- D Financial Markets: Primary Market: Where new securities are sold for the first time (e.g., companies raising money through IPOs). Secondary Market: Where investors trade already-issued securities (e.g., buying stocks on NYSE or NASDAQ). Investment Banking: Helps companies issue securities (underwriting process)..Understanding Stock Markets Major Stock Markets: New York Stock Exchange (NYSE): World’s largest, face-to-face and electronic trading. NASDAQ: Fully electronic, focused on tech companies. Key Stock Indexes: Dow Jones Industrial Average (Dow): 30 major companies. NASDAQ Composite: Over 3,000 stocks. Order Types: ○ Market Order: Buy/sell at the best available price. ○ Limit Order: Set a price ceiling (buy) or price floor (sell). ECNs (Electronic Communication Networks): Allow direct, online trading fInancial Institutions 1. Depository Institutions: Commercial Banks: Accept deposits, issue loans. Savings Banks: Focus on home mortgages. Credit Unions: Member-owned, not-for-profit institutions.  2. Nondepository Institutions: Insurance Companies: Manage risk for customers. Pension Funds: Retirement fund management. Finance Companies: Short-term loans (e.g., auto loans). 3. Mutual Funds: Pooled investments managed professionally. ETFs (Exchange-Traded Funds): Trade like stocks, provide diversification. The Role of the Federal Reserve System Definition: Central bank of the U.S., regulates the economy and money supply. Responsibilities: Regulate banks. Set monetary policy. Provide financial services (e.g., check clearing). Monetary Policy Tools: 1. Reserve Requirements: % of deposits banks must hold. 2. Discount Rate: Interest rate at which banks borrow from the Fed. 3. Open Market Operations (OMO): Buying/selling U.S. Treasury securities to control money supply. ○ Buying securities: Increases money supply, lowers interest rates. ○ Selling securities: Decreases money supply, raises interest rate Federal Funds Rate: Rate at which banks lend to each other overnight Major Laws and Regulations: 1. Securities Acts of 1933 and 1934: Required full disclosure and created the SEC. 2. Dodd-Frank Act (2010): Increased oversight after 2008 financial crisis. 3. Federal Deposit Insurance: FDIC insures bank deposits up to $250,000 Insider trading: nonpublic info for gains in the market