Introbiz Midterm Summaries PDF

INTROBIZ MID TEST SUMMARIES (ACCORDING TO POWERPOINT) Jump to: Marketing Finance Operations Human Resource I. Introduction to Business What is “Doing Business”? Doing business refers to the process of engaging in any activities that involve producing, selling, or tr...

INTROBIZ MID TEST SUMMARIES (ACCORDING TO POWERPOINT) Jump to: Marketing Finance Operations Human Resource I. Introduction to Business What is “Doing Business”? Doing business refers to the process of engaging in any activities that involve producing, selling, or trading goods and services with the aim of generating profit. It is an essential concept that underpins the global economy, representing a variety of activities, from small street vendors to multinational corporations. Business involves several key elements: Value Creation Profit Motivation Exchange in goods and services Sustainability and growth Risk and reward Legal and ethical considerations A. Value creation A business exists to create value whether from tangible or intangible products. The value should meet the needs or desires of the customers, offering solutions to their problems or fulfilling their demand. B. Profit motivations The fundamental goal of doing business is to make profits. This means that the income generated from the sales should exceed the costs from production, operations, and other business activities. C. Exchange in goods and services Businesses operate by offering their goods or services in exchange for money/cash or valuable resources. This exchange can happen in various situations such as physical products and providing services. 1  D. Sustainability and Growth Businesses should not only focus on making profits, businesses should also focus on sustainable practices that ensure long-term survival. This involves managing resources, understanding market trends, and innovating over time. E. Risk and Reward Doing business inherently involves taking risks. Entrepreneurs should assess the market conditions, competitions, and customer behavior to make an informed decision that could lead to success or failures. F. Legal and Ethical Considerations Businesses are bound with laws and regulations that govern trade, customer protection, and ethical practices. Ensuring compliance with legal standards are crucial for the business’ long-term success and survival There are four key business functions such as Marketing, Finance, Operations, and HR or Human resource. II. Marketing Marketing is the process of creating, communicating, delivering, and exchanging the value to the customers, clients, partners, and society at large. Key functions of marketing: Creating: Product or service development, based on customer needs and desires. Communicating: Advertising, branding, and promotions that communicate the product’s value. Delivering: Channel and logistics ensuring the product is available when and where customer needs it. Exchanging: The transactions of goods/services for value, whether through physical stores, e-commerce, and another platform. The Evolution of Marketing Production Orientation (Late 19th – Early 20th Century) o Focused on mass production and efficiency. Demand was higher than supplies, so that company produced and expected customers to buy. o Focus on quality and innovation, assuming customers would naturally prefer superior products. 2  Sales Orientation (1920s – 1950s) o Companies began focusing on aggressive sales tactics and advertising to push products. Marketing Orientation (1950s – Present) o Companies began on understanding customer needs and desires. Companies started to make products based on market research. Societal Marketing Orientation (Late 20th Century – Present) o Emphasizes long-term customer relationships, societal well-being, sustainability, and corporate social responsibility (CSR). Understanding customers: Customer-Cetric Marketing o Understanding customer behavior, preferences, and pain helps in designing tailored products and services. Segmenting the Market o Dividing the market into segments to target specific groups more effectively. Meeting Expectations o Customers expect more from the product, they expect seamless, personalized experience across all touchpoints. Adapting to the market environment: Competition: Companies must constantly monitor competitors and adjust marketing strategy to differentiate and stay relevant. Technology: Technological advancements can disrupt the industry, helping brands to evolve quickly Regulations: Companies must adapt to product safety, advertising, and environmental effect. Social and Cultural Trends: Marketing must adapt to changing social norms and cultural trends to stay relevant. 4Ps For Products: Product: What company offers to meet customer needs. Price: The value exchanged for the product. Place: How the product reaches the customer/distribution. Promotion: How the company communicates their product with its target audience. Product Decisions: Decision about product design, features, quality, branding, and packaging. Importance of understanding the customer’s needs, preferences, and pains. 3 Product Life Cycle: Stages: Introduction → Growth → Maturity → Decline. How product strategy changes as the product moves through these stages. Pricing Strategies: Cost-plus pricing: Adding a markup to the cost of production. Penetration pricing: Setting a low price to gain market share quickly. Skimming: Setting a high price then lowering over time. Dynamic pricing: Adjusting price based on demand, competitors, or any other factors. Psychological pricing: Pricing that considers customer psychology such as setting price at $9.99 instead of $10. Place Strategies: Decision about where and how to sell products, direct to customers, retailers, or online. Multi-channel Distributions (Physical stores, E-commerce, third parties). Place’s Key Decisions: Intensive Distribution: Selling through many outlets. Exclusive Distribution: Limiting sales through selected outlets. Selective Distribution: Using a few selected retailers to reach the targeted customers. Promotion strategies. Advertising: Paid communication to promote products (TV, Online). Sales Promotion: Short-term intensives (Discount, coupons). Personal Selling: Direct interaction with the customer through sales teams. Public Relations: Building a positive brand image through media relations and corporate communications. STP allows businesses to tailor their marketing strategies to specific customers. Segmentation: Dividing market share into specific characteristics. o Types of Segmentations: ▪ Demographic: Age, gender, income, education. ▪ Psychographic: Lifestyle, values, personality. ▪ Geographic: Location, climate, region. ▪ Behavioral: Loyalty, purchase behavior, product usage. 4  Targeting: Selecting the most attractive segments into marketing efforts. o Criteria for targeting ▪ Size & Growth Potential: Is the segment large enough to be profitable? ▪ Accessibility: Can you effectively reach and serve the targeted segments? ▪ Fit: Does the segment align with your business objectives and strengths? Positioning: Crafting a distinct image or offering to the selected segments. o Unique selling point (USP): A key differentiator that makes your brand stand out. o Positioning strategy: Create a distinct image or message into your product to stay in customer’s mind. Market Sizing (TAM, SAM, SOM) TAM (Total Addressable Market): The total demand for product or services if there were no competitors or limitations. o How to calculate: Multiply number of potential customers by the average revenue per customer. SAM (Serviceable Available Market): The portion of TAM that the product or service can target. o How to calculate: TAM filtered by the specific market you can reach and serve with your current offerings. SOM (Serviceable Obtainable Market): The portion of SAM that your business can actually capture. o How to calculate: SAM filtered by the expected market share based on competition and company’s capacity. Market sizing helps businesses to evaluate potential growth and competition. Image 1: TAM, SAM, SOM (source: blog.hubspot.com) 5 Practical Applications of market sizing: Business Planning: TAM, SAM, SOM helps businesses to estimate the potential revenue and growth. Investment Decisions: Investors use this metric to gauge the viability and scalability of the business. Strategic Focus: Helps to prioritize which market segments to focus based on opportunity size and competition. 7Ps (Services): 4Ps (Price, Product, Place, Promotion) People: The employers who attract with the customers. o Employees as brand ambassadors: Frontline staff directly impact the customer experience, from greetings to service delivery. o Customer-centric approach: Training employees to align with the companies’ brand promises and values is the key. Process: The system and processes that deliver the service experience. o Operational Efficiency: Processes in service delivery must ensure consistency and quality across all customer touchpoints. o Customer experience: Mapping the customer journey to identify critical touchpoints and optimizes the process for maximum satisfaction. o Automation and Technology: Automating processes where possible (self-services, online check-ins) enhances efficiency and customer satisfaction. Physical Evidence: The tangible elements that help customers to evaluate service quality. o The importance of tangible: Even though service is intangible, physical evidence (uniforms, web-design) is required to provide reassurance to customers. o Brand image and Physical cues: Physical evidence helps reinforce the brand identity and signal quality. o Online physical evidence: Social media, websites, etc. These are essential to deliver a complete and consistent services. Differences between service and products Intangibility: Service can’t be seen or touched before purchase. Inseparability: Produced and consumed simultaneously, requiring customer interactions. Variability: Service quality may vary depending who’s delivering it. Perishability: Service can’t be inventoried. 6 Market research is the process of gathering, analyzing, and interpreting information about market, customers, and competitors. Key uses: o Identifying customer needs and preferences. o Understanding the market trends and competitive dynamics. o Reducing risk in decision-making. The role of market research: Gathering Customer Insights Assessing Market Opportunities Improving Product Development Market research for decision-making: Product Development Customer Segmentation Market Positioning Qualitative Research: Focusing on understanding of motivations, emotions, and behaviors. Common methods: Focus groups, in-depth interviews, observations. Quantitative Research: Involves collecting numerical data to identify patterns and predict trends. Common methods: Survey, polls, experiments. Cross-functional collaborations: Product development and innovations. Pricing strategies. Employee engagement and branding. Marketing’s Collaborative Touchpoints: Operations: Demand forecasting, product specifications, and ensuring supply chain alignment with promotional campaigns. Finance: Allocating budgets, pricing strategies, and resource investments in new markets. HR: Ensures that workforce is trained to deliver the brand promise. 7 III. Branding and Storytelling in Marketing. Branding is the process of creating a unique identity for a product or company that differentiates it from the competitors. Why is branding important? Recognition. Trust. Emotional Connection. Elements of Strong Brand: Logo and Visual Identity. Brand Voice and Personality. Brand Promise. Brand Archetypes are universal character models that defines brand’s personality. By using archetypes, brands can create a consistent, relatable identity that resonates emotionally with the customers. Archetypes help brandings in: Connecting with the customers. Creating differentiation. Guiding brand communication. 12 Archetypes and examples: The Innocent o To spread happiness and optimism. o Simple, honest, and sincere. o Coca – cola with their slogan “Open Happiness”. The Explorer o To seek freedom and adventure. o Independent, adventurous, and curious. o The North Face encourages exploration and outdoor activities and adventure. The Sage o To seek knowledge and truth. o Rational, wise, thoughtful. o Google helps people to find answers. The Hero o To achieve greatness, inspiring the others. o Brave, ambitious, focused on achievements. o Nike with their tagline “Just Do It”. 8  The Outlaw o Break the rules, challenges the status quo. o Rebellious, bold, unconventional. o Harley Davidson represents a rebellious spirit. The Magician o To make extraordinary happen. o Innovative, visionary, mythical. o Disney is known for creating magical experiences. The Lover o To create intimate, emotional connections. o Sensual, passionate, loving. o Chanel, associated with the emotional desires of romance. The Jester o To bring joy, make people laugh. o Playful, humorous, and light-hearted. o Old spice uses absurd humor in its commercial. The Everyman o To belong and connect with others. o Friendly, approachable, down-to-earth. o IKEA, as an affordable solution for everyone’s daily needs. The Caregiver o To protect and care for others. o Compassionate, nurturing, and selfless. o Johnson & Johnson focuses on providing gentle products for babies. The Creator o To create something new and unique. o Creative, innovative, individualistic. o LEGO, inspires creativity The Ruler o To create order and maintain control o Authoritative, responsible, commanding. o Mercedes-Benz embodies prestige, power, and high quality. Components of a Great Brand Story: The Hero (Customer) The Problem (Problem the Hero faces) The Solutions (How the brand helps) The Transformation (The Result) 9 How to develop a brand story: Start with Why. Know your Audience. Create a Relatable Narrative. Be authentic. Storytelling Framework: What’s the hero journey? o The customer as the hero with the brand playing as the mentor or guide. Why use the hero’s journey in branding? o Relatable Structure. o Emotional Connection. o Engagement and Loyalty. The 12 Stages of the Hero’s Journey: The ordinary world: The hero’s everyday routines. The call to adventure: The hero receives something that disrupts their routines. Refusal of the call: The hero may hesitate or doubt to take the challenge. Meeting the mentor: The hero meets a mentor figure. Crossing the threshold: The hero commits to the journey. Tests, allies, and enemies: The hero faces challenges, meets allies who help them. Approach to the inmost cave: The hero prepares for their greatest challenges. The ordeal: The hero faces the greatest challenges. The reward: The hero is rewarded. The road back: The hero begins their journey back to the ordinary world. The resurrection: The hero faces one final challenge. Return with the elixir: The hero returns home and brings back “elixir” or the solution that benefits the others. Direct Engaging with Audiences: From one-way communication to Two-way interaction. o In the past commercials and ads use one way communication such as TV, print, etc. Now, social media and digital platforms provide a two-way interaction. Real-time feedback. 10 Adapting to the market environment: Personalized Brand Experience o Brands are using data analytics, AI, and machine learning to tailor their messaging. Micro-targeting through social media ads. User generated content: Shift from Brand-controlled stories to consumer-driver stories from reviews, photos, videos, testimonials. Influencer Marketing. 11 IV. Finance Introduction to accounting: Accounting provides financial information. Aims to provide help to make correct decisions. As a business owner, you need to provide the information needed to run the business as efficiently as possible while maximizing profits and keeping the cost low. Accounting consists of three basic activities such as identifies, records, and communicates. Why do businesses need accounting? Accounting functions: o Record transaction. o Organize transaction. o Report transaction. Accounting is useful for: o Decision making. o Monitoring the financial health of a company. o Tax compliance. o Cash flow management. Who uses accounting data? Internal: o Marketing. o HR. o Finance. o Operation. External: o Investors. o Creditors. Core financial reports: Balance sheets (Neraca) o Presents a summary of a firm’s financial position at the current time. o To evaluate a company’s performance, source of information for investors, lenders, and corporate management. o Two sides, assets on left, liability and equity on right. The total dollar on each side must be equal. o The statement balances the firm’s assets against financing, which can be either debt or equity. 12 o Used to: ▪ Assess a company’s financial health. ▪ Evaluate a company’s ability for near-term operating needs. ▪ Evaluate a company’s ability to make future obligations. ▪ Evaluate a company’s ability to make distribution to owners. ▪ Measure financial ratios. Image 2: Balance Sheet Framework (Source: PPT) Image 3: Balance sheet (Source: PPT) 13  Income statement o Provides financial summaries during a specific period. o Computed monthly by management and quarterly for tax purposes. o Statement of cash flows is a financial statement that summarizes a company’s cash inflow and outflows over a specific period of time. o Used to: ▪ Strategic planning. ▪ Budgeting. ▪ Financial Forecasting. ▪ Evaluating Strategies. Image 4: Income statement framework (Source: PPT) Image 5: Income Statement (PPT) 14  Statement of Cash Flows o Financial statement that summarizes a company’s cash inflows and outflows. o Provides summary of the firm’s operating, investment, and financing cash flows. o Ties together balance sheet and income statement. o Can be used to ▪ Operational activities ▪ Investment activities ▪ Financing activities Understanding cash flow Forecasting future cash flow Assessing financial health Identifying areas for improvement Determining creditworthiness Image 6: Statement of Cash Flows (Source: PPT) 15  Image 7: Statement of Cash Flow (2) (Source: PPT) Statement of Retained Earnings o Reconciles the net income during given year and any cash dividends paid. o Used to: ▪ Understanding a company’s financial position. ▪ Making business decisions. ▪ Communicating with shareholders. ▪ Attracting investors and creditors. ▪ Tracking business performance. Image 8: Statement of Retained Earnings (Source: PPT) 16 V. Financial Ratio Analysis Methods of calculating and interpreting financial ratios to analyze and monitor firm’s performance. Interested parties: Internal Management Current and Prospective shareholders Creditors Why do we need financial ratio analysis? Performance Evaluation Comparison Decision making tool Efficiency Monitoring Early Warning Signals Basic Accounting: Assets = Liability + Equity Profitability Ratio o Return on Total Assets (ROA) = Net Income : Total Assets, A healthy ROA is at least 5%, but 20% and above is even better. o Return on Equity (ROE) = Net Income : Equity, ROE > 15% is considered good. o Operating Profit Margin = Operating Profits : Sales, Healthy status at least 10% Liquidity Ratio o Current Ratio (CR) = Current Assets : Current Liabilities, Ideal is at least 2 Debt Ratio o Debt to Asset Ratio (DR) = Total Liabilities : Total assets, Less than or equal 0.5 considered healthy, vice versa. o Debt to Equity Ratio (DOE) = Total Liabilities : Equity, Ideal ratio is 100%, the lower the better. Activity Ratio o Inventory Turnover (IOT) = Cost of Goods Sold : Inventory, Between 4 – 8 is considered healthy. 17  Cost of Capital is the cost of all of its debt + the cost of all its equity. Cost of debt is the effective interest rate a company pays on its borrowed funds Cost of Equity is the return shareholders expect for their investment in the company DuPont System Framework used to decompose a company’s ROE. Merges income statement and balance sheet Allows the firm to break its return on equity into profit on sales component (Net profit margin), Total asset turnover, financial leverage multiplier. The total return to owners can be analyzed in these dimensions. Image 9: DuPont System (Source: PPT) How to use financial ratios: Cross-sectional Analysis Time series analysis Benchmarking Comparison to industry averages 18 VI. Operations “A business process consists of a set of activities that are performed in coordination in an organizational and technical environment. These activities jointly realize a business goal,” (Mathias Weske, 2007). ”A collection of activities that take one or more kinds of input and create an output that is of value to the customer,” (Hammer & Champy, 1993). “A set of logically related tasks performed to achieve a defined business outcome for a particular customer or market,” (Davenport, 1992). Input → Process Flow → Output Why is business process important: Differentiate good or bad. Reducing costs, providing insight to be used to improve your business. Related to assets 3 Types of Business Process: Core Process (Primary Activity) refers to the operations from raw materials to a product and also after-sales services. Inbound logistics → Operations → Outbound logistics → Marketing & Sales → After sales services. Support Process (According to viewpoint.co.za) refers to the enabling processes designed to assist the value-delivering core processes by providing resources and infrastructure. Management Process refers to the coordination of all the processes. Main Characteristics of business processes: Process Goals Process Leader Process (time-based, start and end) Process inputs and outputs Process steps Process performance monitoring Process stakeholders Continuous improvement *Important: KPI (Key Performance Indicator) 19 By measuring, monitoring, controlling, analyzing, a company can deliver a consistent value to customers and has the basis for process improvement. Process should be managed by business process modeling (workflow). Business + process + modelling. Organized groups of related activities that create values to the customers + Modelling refers to using models which are logical representation of a system = In system engineering is the activity of representing processes of an enterprise. The seven step of the business process modelling lifecycle: Step 1: Define your goals Step 2: Plan and map your process Step 3: Set actions and assign stakeholders Step 4: Test the process Step 5: Implement the process Step 6: Monitor the results Step 7: Repeat Business Process Modelling Notations (BMPN) Processes are intangible, we cannot manage them directly. Natural languages are inappropriate for process description. We need model processes in order to work with them. To take full potential out of process modelling, we need to use a standardized notation. Object Management Group (OMG) standard for representing business processes. The primary goal of BMPN is to provide notation that is readily understandable by all business users and to business people who will manage and monitor those processes. 20  Image 10: Process Modelling Viewpoints (Source: PPT) Image 11: Working with Business Processes (Source: PPT) 21 Image 12: Basic Elements of BPMN model (Source: PPT) Image 13: BPMN Categories of elements (Source: PPT) 22 Image 14: An Order Management Process (Source: PPT) Image 15: Main type of BPMN (Source: PPT) 23  Image 16: Swim lanes (Source: PPT) Image 17: Example of Collaboration Model (Source: PPT) 24  Image 18: Order management process with pools (Source: PPT) Image 19: Order Management Process with Pools (2) (Source: PPT) Essential attributes of an ideal business processes: Finite Repeatable Creates Value Flexibility 25 VII. Improving Business Processes Value Based Improvement. Productivity Based Improvement. Value Analysis: Ensuring that they provide maximum value to the customer. o Focus Areas: ▪ Identifying non-value-added and eliminating them. ▪ Maximizing value by streamlining essential activities. o Benefits: ▪ Reduces Costs. ▪ Enhances quality of outputs. ▪ Improves customer satisfaction. Value Activity: Value-add (Optimize) Business-non-value-add (Minimize) Non-value-add (Eliminate) Productivity: Output of any production process. Produce more with less cost. The measure of the ability to create goods and services. The importance of measuring productivity: Identifying area of improvement. Identifying performance employees. Tracking progress over time. Comparing against industry standards. Choosing the right metric. 26  Image 20: Productivity Metric (Source: PPT) Partial productivity: The resources of productivity when measured separately. Image 21: Productivity Ratio (Source: PPT) Integrating Value Analysis & Productivity: Value analysis identifies areas where the process can be streamlined and focused on value creation. Productivity improvements ensure those streamlined processes are performed efficiently. Outcome: o Higher output with fewer resources. o Enhanced customer satisfaction through better quality and service delivery. o Reduced costs and increased profitability. 27 VIII. Human Resources Image 22: An overview of HR and Organization (Source: PPT) Visions are goals and missions are the steps required to achieve the goals. Organizational Structure: A Framework that explains the activities in an organization. Encompasses the hierarchy, roles, responsibilities, and communication flows within the organization. Organizational Structure Types: Flat Structure/Simple Structure o All employees report directly to the owner without a middle management layer. o Advantages: High flexibility, fast problem solving, and a collaborative environment where everyone has direct access to the owner. Image 23: Example of Flat Structure (Source: PPT) 28  Simple Functional Structure o Employees are grouped based on their roles in specific functions. o Advantages: Easy to manage, clear division of tasks, employees develop expertise in their functional areas. Image 24: Simple Functional Structure Example (Source: PPT) Manpower planning: Begins with forecasting the workforce’s needs based on strategic objectives of the business. This involves demand for labor based on future business activities and comparing it to the current supply of available employees. Basic techniques: Ratio analysis to determine future demand for human resources. Job Description: Refers to the structured approach of defining, documenting, and communicating roles, responsibilities, and qualification. It serves as a foundation of recruitment. Main components: o Job Title. o List Of Tasks. o Performance Metrics (KPI). o Qualification and Skills. o Reports to. o Work Environment. o Employment Type. 29 Compensation and Benefits: Basic Salary o Steps to determine basic salary: ▪ Review UMR and UMK. ▪ Evaluate the level of each position. ▪ Benchmark salary data. Benefits are non-cash perks provided by the employer such as free lunch. Recruitment and selection plan: Recruitment: The process of attracting qualified candidates Selection: The process of assessing and choosing the best candidates. SMEs tend to emphasize practical skills, flexibility, and cultural fit. Key consideration: o Job clarity o Efficiency o Cultural fit Training Plan Training Needs Analysis (TNA) will help to identify the gaps between the current and required competencies. TNA Step by step: o Identify Job Responsibilities. o Asses Current Job Performance. ▪ Observation. ▪ Interview. ▪ Secondary Data. o Gap Analysis. o Prioritize Training Needs. o Design Training Plans. 30