SOM 122 Final

marketing strategy

A plan for (1) identifying the target market among market segments, (2) creating the right marketing mix to reach that target market, and (3) dealing with important forces in the external marketing environment.

Arbitration

A process in which a neutral third party makes a binding decision

Mediation

A process in which a neutral third party makes suggestions and encourages reaching a solution outside of court

Recession vs Depression

A recession is two or more consecutive quarters with a decline in GDP. A depression is a more severe and long-lasting depression accompanied by deflation.

Promissory Note

A written contract prepared by the buyer who agrees to pay the seller a certain amount by a certain time.

Marketing Environment

Consists of the outside forces that can influence the success of marketing programs.

Business Market

Consists of those business individuals and organizations that want business goods and services that will help them produce or supply their own business goods and services.

Oligopoly Competition

Few sellers, some product difference

savings and loan association

Financial institutions that accept deposits and were originally intended to make loans primarily for home mortgages

Non-banks

Financial institutions—insurance companies, pension funds, finance companies, and brokerage firms—that offer many of the same services as banks provide.

Risk-return trade-off

Financial managers continually try to balance the firm's investment risk with the expected return from its investments

Mutual Savings bank

For-profit financial institutions similar to savings and loans, except that they are owned by their depositors rather than by shareholders

Mercosur

Largest common market in Latin America. It has five core members—Argentina, Brazil, Paraguay, and Uruguay, and Venezuela

GDP

Measure of goods and services produced in the country. (Measure of US economic conditions)

Fiscal policy

Refers to the U.S. government's attempts to stabilize the economy by (1) raising or lowering taxes, or (2) borrowing or spending money. (Congress)

Monetary Policy

Represents the U.S. government's attempts to manage the money supply and interest rates in order to influence economic activity. (Federal Reserve)

Entrepreneurial Team

a group of people with different kinds of expertise who form a team to create a new product. One variant is a so-called skunkworks, a team whose members are separated from an organization's normal operation and asked to produce a new, innovative project.

Producer Price Index (PPI)

an average of the prices received by producers of goods and services at all stages of the production process. (Measure of US economic conditions)

Business Plan

a document that outlines a proposed firm's goals, the methods for achieving them, and the standards for measuring success.

Incubator

a facility that offers small businesses low-cost offices with basic services, such as secretarial and accounting services and legal advice.

Countertrading

bartering goods for goods

B corporation

or "benefit corporation," legally requires that the company adhere to socially beneficial practices, such as helping communities, employees, consumers, and the environment.

Return on Sales

or profit margin, is net income divided by sales. This information helps the company understand how much profit is being generated by every dollar of sales.

Financial Managers

people responsible for planning and controlling the acquisition and uses of funds

tangible personal property

personal property that can be moved

4 parts of Management

planning, organizing, leading, controlling

cash balance

the balance in the firm's cash account at the end of the year

Negotiable Instruments

transferable promise-to-pay documents. (Universal Commercial Code)

General Partnership

two or more partners are responsible for the business, and they share profits, liabilities (debt), and management responsibilities.

Intangible Personal Property

Written documentation

Statutory Law

Written laws created by a legislative body

M1 and M2 money

(1) Money that can be accessed quickly and easily (that is, M1) and (2) money that takes more time to access

Types of Financial Statements

(1) balance sheets; (2) income statements; (3) cash flow statements; and (4) statements of shareholders' equity.

Joint Ventures

(High risk): a strategic alliance, with a foreign company to share the risks and rewards of starting a new enterprise together in a foreign country.

Foreign Subsidiaries

(Highest Risk): a company in a foreign country that is totally owned and controlled by the parent company.

Importing/exporting

(Lowest Risk): goods purchased from other countries/sale of goods to a foreign country.

Franchising

(Moderate Risk): Giving someone your "playbook" and company name in exchange for initial payment and cut of profit. Franchisee's execution must be good to protect the companies reputation.

Global Outsourcing

(Moderate Risk): suppliers outside the company to provide goods and services

3 leadership styles

- Autocratic: Make decisions without consulting others - Participative: Delegate authority and involve employees in their decisions. -Free-rein: Set objectives, and employees are relatively free to choose how to achieve them

Types of Franchises

- Business-Format Franchise: The franchisee uses the franchisor's trade name and format, following guidelines for marketing and pricing the product. - Product-Distribution Franchise (Distributorship): The franchisee is given the right to sell trademarked products purchased from the franchisor. - Manufacturing Franchise: The franchisee is given the right to manufacture and distribute a certain product, following a formula or using supplies purchased from the franchisor.

Forecast Types

- Cash Flow Forecast: Predictions about money flows in the next one to three months - Short-Term Forecast: Predictions for the next year or less. - Long-Term Forecast: Predictions for the next 1, 5, or 10 years.

Types of deposit accounts

- Checking Accounts: Allows you to deposit money in a bank account and then write checks on that account. - Savings Accounts: A bank account that pays low interest and doesn't allow check writing. - NOW Accounts: Pays interest and allows you to write an unlimited number of checks, but you have to maintain a minimum monthly balance. (Super-NOW accounts offer higher interest rates) - Money Market Accounts: Offer interest rates competitive with those of brokerage firms but they require higher minimum balances and limit check writing. - Certificate of Deposit: Pays interest upon the certificate's maturity date.

Reasons to write a business plan

- Creating a business plan helps you get financing. A formal business plan shows lenders and investors what they want to see before they invest in your startup. The more money you ask investors to put at risk, the more detailed your business plan will have to be. -Creating a business plan helps you think through important details. In most cases, business ideas shouldn't be rushed to market. So, invest your time wisely by taking three or four weeks (or more) to research and write a thorough business plan.

Customer buying behavior factors

- Culture and Subculture - Social Class - Reference Groups - Personal Image - Situational Matters

Key aspects of the marketing concept

- Customer Satisfaction - Focus on Serving Customers - Emphasis on Profitability, Not Sales

Elements of a business plan

- Executive Summary: provides a short description of your product or service, its market potential, and what distinguishes it from competitors. This is the place to really sell your idea to your reader. - Introduction: describes the general nature of the industry you propose to compete in, the product or service you will offer, its unique characteristics, and why customers will want and benefit from it. - Marketing: describe the market you are going into; your competitors; your strategy for identifying, contacting, and servicing customers; advertising plans; pricing; and projected sales. - Manufacturing: describe how and where the product will be made, the machinery and labor required, and inventory and quality-control methods. - Management: discusses the background and qualifications of you and others who will manage the organization. - Legal: discuss the legal plan for the business, whether sole proprietorship, partnership, corporation, or some other form of legal organization. You should also describe the licenses, permits, and insurance that you will need and name the attorney who will handle your legal matters. - Financing: you get into the numbers: your expected revenue and expenses every year for the first five years, your month-by-month cash flow for the first two years, and when you expect the firm to break even

Marketing segmentation (Types)

- Geographic: Dividing the Market by Location - Demographic: Dividing the Market by Age, Gender, or Income - Psychographic: Dividing the Market by Psychological Characteristics, Values, and Lifestyles - Benefit: Dividing the Market by Benefits That People Seek in a Product - User Rate: Dividing the Market by Frequency of Customer Usage

Classification of business markets

- Geographic: categorizing customers according to their geographic location - Customer-Based: consists of categorizing business customers according to specific characteristics. - Product-use-based: categorizes business customers according to how they will use the seller's product.

Types of Mergers

- Horizontal Merger: Two companies merge that are in the same industry and perform the same activity. - Vertical Merger: Two companies merge that are in the same industry but each performs a different activity. - Conglomerate Merger: Two companies merge that are in different industries and each performs different activities.

Questions to ask when purchasing an existing business

- How do the business and industry work? - Why is the owner selling, and what do they want to do next? - Is the price right?

Types of Bank loans

- Line of Credit: How much a bank is willing to lend the borrower during a specified period of time. - Revolving Credit Agreement: The bank guarantees the loan and is obligated to loan funds up to the credit limit. - Transaction Loans: Credit extended by a bank for a specific purpose

Sources of long term financing

- Long-term loans: loans generally requiring repayment in three to seven years, although they may be as long as 20 years—from commercial banks, life insurance companies, pension funds, and commercial finance companies. - Debt financing: Issuing bonds - secured and not secured - Equity financing -Retained earnings Receiving investment capital: funds acquired from wealthy individuals and institutions that invest in promising start-ups or emerging companies in return for their giving up some ownership.

3 functions of money

- Medium of Exchange: I don't have to barter; using money is easier. - Store of Wealth: I can save this for some time. - Standard of Value: I can use this as a common way to compare how much things are worth.

Benefits of Capitalism

- More jobs and higher incomes - More goods and services - Help for the less fortunate - Career choices and entrepreneurial activity

The Five Factors of Production

- Natural resources—materials supplied by nature, such as land, soil, water, and minerals. - Capital—the buildings and tools used to produce goods and services. - Human resources—the human effort, both mental and physical, required to produce goods and services. - Entrepreneurship—the process of taking risks to create a new enterprise. - Knowledge—the technological expertise and practical experience that allows entrepreneurs to quickly determine new wants and needs and deliver new products.

Reasons for entrepreneurship

- Opportunity Entrepreneurs: ambitious and start a business to pursue an opportunity (and profits). - Necessity Entrepreneurs: people who suddenly must earn a living and are simply trying to replace lost income.

8 Possibilities of Financing

- Personal Savings, Credit Cards, and Second Mortgages - Family and Friends - Supplier and Barter Arrangements - Financial Institutions - Small Business Administration-Backed Loans - Angel Investors and Venture Capitalists - Public Stock Offerings - Other Funding Sources

Drawbacks of Capitalism

- Possibility of heavy loses - Income inequality - Exploitation (greed can result in breaking laws)

Four Basic Rights of Capitalism

- Right to own property - Right to compete - Right to free choice - Right to make and keep profits

Characteristics of Entrepreneurs

- Self-Confidence and Belief in Personal Control - Need for Achievement and Action Orientation - Tolerance for Ambiguity and Risk - Energy

Strategic Planning SWOT Analysis

- Strengths (S): What the company excels at and how this differentiates it from the competition - Weaknesses (W): Where the company needs to improve to remain competitive - Opportunities (O): Favorable external factors, such as new markets, that the company can use to ensure competitive advantage - Threats (T): Factors that can potentially harm the company

Reasons to develop new products

- To Stay Ahead of or Match the Competition - To Continue to Expand Revenues and Profits - To Fill Out a Product Line - To Take Advantage of an Opportunity

Reasons to purchase an existing business

- To reduce uncertainty: When you take over a successful business, the previous owner has already dealt with and overcome most of the risks. - To generate profits more quickly: When you step into an existing well-run enterprise, you should be able to earn profits fairly quickly.

Sources for Short term investing

- Trade credit: Short-term financing by which a firm buys a product, then receives a bill from the supplier, then pays it later. - Short-term loans: Companies may need to borrow short-term funds to pay unexpected bills or to buy additional inventory. - Pledging and factoring: o Pledging Accounts Receivable: A firm uses its accounts receivable as collateral, or security, to obtain a short-term loan o Factoring Accounts Receivable: A firm sells its accounts receivable at a discount to a financial institution. - Commercial paper: Unsecured, short-term promissory notes over $100,000 issued by large banks and corporations.

Ways banks make money

- by charging interest on loans, - by charging fees for other services, and - by offering other financial products.

Small Business

- is independently owned and operated, - is not dominant in its field of operation, and - meets certain criteria set by the SBA for number of employees and annual sales revenue. - A small business almost always has 100 or fewer employees, but according to some definitions, a small business may have as many as 500 employees.

S.M.A.R.T Goal Acronym:

- specific, - measurable, - attainable, - relevant -time-bound

Contract Law Aspects

-Did a serious, definite offer get communicated, and was it accepted? -Was the offer accepted voluntarily, with no fraud or duress? -Did the parties have the capacity, or competence, to negotiate? -Were the items that were exchanged within the contract items of value? -Did the contract involve a legal transaction? Was the contract prepared and signed in a form required by the law?

Steps of the marketing strategy

1. Conducting Research and Determining the Target Market 2. The Product Strategy: A marketing program starts with designing and developing a product—a good, service, or idea intended to satisfy consumer wants and needs. 3. The Pricing Strategy: Figuring out how much to charge for a product 4. The Place Strategy: the process of moving goods or services from the seller to prospective buyers. 5. The Promotion Strategy

Stages of Globalization

1. Countries deregulating their economies 2. Increase of free trade 3. Technological improvements 4. Rise of multinational corporations

Steps in the Marketing Research Process

1. Define the Problem: Clarify the Question to Be Answered 2. Collect Facts: Use Published Data or Interviews, Observation, Experimentation, and Focus Groups to Get Information 3. Analyze the Data: Use Statistical Tools to Determine the Facts 4. Take Action: Implement the Best Solution

Finance Activities

1. Establish budgets and financial controls. 2. Determine long-term investments. 3. Analyze cash flows. 4. Plan the expenditure of funds. 5. Manage the firm's financial risks.

4 step control process

1. Establish standards. 2. Monitor performance. 3. Compare performance against standards. 4. Take corrective action, if needed

Four phases of the business cycle

1. Expansion: The expansion in economic activity is triggered by a rise in investment spending, government spending, or exports, which causes an increase in GDP. The initial part of the expansion is called the recovery phase. The latter part is the prosperity phase. 2. Peak: The height of prosperity, the peak, is when the expansion starts to lose steam and go into a decline or contraction. 3. Contraction: In the contraction phase, the pace of economic activity slows down and the GDP falls, usually triggered by falling investments, cuts in government spending, or a rise in taxes, which causes decline in consumer spending. This is the part known as a recession or even depression. 4. Trough: The trough is the lowest point of a business cycle, where the contraction ends—and the expansion begins again.

Financial Plan

1. Forecasting: Predicting revenues, costs, and expenses for a certain period of time 2. Budgeting 3. Financial controls

The decision making process

1. Identify the Problem 2. Think of Possible Solutions 3. Weigh Alternative Solutions and Select One 4. Implement and Evaluate the Solution Chosen

4 types of ratios

1. Liquidity ratios, which determine how well a firm can pay its liabilities as they come due 2. Activity ratios, which determine how well the firm manages its assets to generate revenue 3. Debt to owners' equity ratios, which determine how much the firm relies on borrowing to finance its operations 4. Profitability ratios, which determine how high the firm's profits are in relation to its sales, assets, or owners' equity

6 Step Accounting Process

1. Locate and sort records (collection). 2. Record daily transactions in journals (recording). 3. Organize journal entries in categories within a ledger (classification). 4. Test the accuracy of the ledger by running a trial balance (summarization). 5. Issue financial statements (reporting). 6. Assess the firm's financial condition via ratio analysis (analysis).

Reasons to borrow money

1. Managing everyday business activities 2. Extending credit to their customers 3. Keeping enough product (inventory) available 4. Making major investments

Customer buying process

1. Need recognition 2. Information search 3. Evaluation of alternatives 4. Purchase decision 5. Post-purchase evaluation

4 Principles of Budgets

1. Operating budgets: Used to predict sales and production goals and the costs required to meet them. 2. Capital budgets: Used to predict purchases of long-term assets. 3. Cash budgets: Used to predict cash shortages or surpluses during the year. 4. Master budgets: Used to pull together the other budgets into an overall plan of action.

5 Characteristics of Money

1. Portability 2. Divisibility 3. Durability 4. Uniqueness 5. Stability

3 types of planning

1. Strategic planning: Done by top managers for the next 1-5 years (goals, objectives). 2. Tactical planning: Done by middle managers for the next 6 to 24 months (goals, objectives); 3. Operational planning: Done by supervisory managers for the next 1-52 weeks (goals, objectives).

Three levels of management

1. Top Managers: Making Decisions for the Long Term 2. Middle Managers: Implementing Decisions 3. Supervisory Managers: Directing Nonmanagerial Employees

APEC

: Asia-Pacific Economic Cooperation: A common market of 21 Pacific Rim countries whose purpose is to improve economic and political ties.

Demand Deposits

A commercial bank's or other financial institution's checking account, from which you may make withdrawals at any time.

Balance Sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date. (Full info in notes)

Common Market

A group of nations within a geographical region that have agreed to remove trade barriers with one another.

Generally Accepted Accounting Principles (GAAP)

Accounting standards that ensures that financial statements are relevant, reliable, consistent, and comparable.

Chapter 11 Bankruptcy

Allows companies to continue operating while making payments.

Accounting Equation

Assets = Liabilities + Equity

Time deposit

Bank funds that can't be withdrawn without notice or transferred by check

Electronic Funds Transfer Systems (EFTSs)

Computerized systems that move funds from one institution to another over electronic links

Chapter 7 Bankruptcy

Chapter 7 bankruptcy forces debtors to relinquish their assets.

Common Law

Common law refers to rulings by judges on cases brought before them based on precedents

brokerage firm

Companies that buy and sell stocks and bonds for individuals and offer high-interest-rate combination checking and savings accounts

Tort Law

Covers wrongful injuries in business relationships not covered by contract or criminal

Intellectual Property

Creations of the mind

Credit union

Depositor-owned, nonprofit, financial cooperatives that offer a range of banking services to their members

International Monetary Fund

Designed to assist in smoothing the flow of money among nations.

World Trade Organization

Designed to monitor and enforce trade agreements

Effectiveness vs. Efficiency

Effectiveness: realizing goals Efficiency: The means of realizing goals through wise use of materials

Customer Relationship Management (CRM)

Emphasizes finding out everything possible about customers and then using that information to satisfy and even exceed their expectations in order to build customer loyalty over the long term.

EU

European Union: Worlds largest common market, established Euro and removed all trade barriers between several European countries.

goal vs objective

Goal: broad, long-range target that an organization wishes to attain. Objective: a specific, short-term target designed to achieve the organization's goals.

Automated Clearing House (ACH)

Magnetic computer tap technology that transfers bank deposits

Perfect Competition

Many sellers, no product difference

Monopolistic Competition

Many sellers, some product difference

Insurance companies

No deposit companies that accept payments from policyholders

Finance companies

Non deposit companies that make short-term loans at higher interest rates to individuals or businesses that don't meet the credit requirements of regular banks.

Pension Funds

Non deposit institutions that provide retirement benefits to workers and their families.

Monopoly

One seller, no competition

commercial finance companies

Organizations willing to make short-term loans to borrowers who can offer collateral.

Jobs of Financial Managers

Oversee bill payment, Oversee collection of money owed, minimize taxes, monitor accounting

Who are business stake holders?

People who have interest or concern in a business. All shareholders are stakeholders but not the opposite way around.

Financial Control

Process by which a company periodically compares its actual revenues and expenses with those predicted in its budget.

World Bank

Provides low-interest loans to developing nations for improving health, education, transportation, and telecommunications.

Gross Profit

Sales revenue - cost of sales

Secured Loan

The borrower pledges some sort of asset, such as personal property, that is forfeited if the loan is not repaid.

Business Model

The needs the firm will meet, the operations of the business, the company's components and functions, and its expected revenues and expenses

Cost of capital

The rate of return a firm must earn to cover the cost of generating funds in the marketplace.

Infrastructure

The set of physical facilities that form the basis for a country's level of economic development. Infrastructure includes telecommunications, schools, roads, airports, railroads, harbors, utilities, and hospitals

Financial Leverage

The technique of using borrowed funds to increase a firm's rate of return.

USMCA

United States-Mexico-Canada Agreement: Provide duty-free trade and economic integration among North American trading partners. The USMCA adds some additional rules regarding digital trade and intellectual property, and it expands measures around energy trade.

Sole Prioprietorship

a business owned and typically managed by one person.

Solopreneur

a business owner who owns and operates his or her business alone.

Corporate social responsibility(CSR)

a concern for taking actions that will benefit the interests of society as well as the organization

Consumer Price Index (CPI)

a measure of the overall cost of the goods and services bought by a typical consumer. (Measure of US economic conditions)

Chapter 13 Bankruptcy

a reorganization form of bankruptcy for individuals that allows the debtors to keep their property and use their income to pay a portion of their debts over three to five years

Enterprise Zone

a specific geographic area in which government tries to attract business investment by offering lower taxes and other government support.

Consumer Market

all the individuals and households that buy or acquire goods and services for personal consumption

Embargoes

complete ban on the import or export of certain products

Marketing mix

consists of the four key strategy considerations called the 4 Ps: product, pricing, place, and promotion strategies.

Limited Liability Partnership (LLP)

each partner's liability—and risk of losing personal assets—is limited to just his or her own acts and omissions and those of his or her directly reporting employees.

Sarbanes-Oxley Act

established protections for whistleblowers, record-keeping requirements for public companies, and penalties for noncompliance

ratio analysis

evaluates the variables within a financial statement

S Corporation

has no more than 100 owners (shareholders), but, like a partnership, the owners are taxed only at the personal level, not the corporate level.

Limited Partnership

has one or more general partners plus other, limited partners who contribute an investment but do not have any management responsibility or liability.

Corporations

have the key benefit of limited liability for shareholders. Each shareholder's liability is limited to the amount he or she paid for stock. Creditors cannot go after stockholders' personal assets

C Corporation

is a state-chartered entity that pays taxes and is legally distinct from its owner; this type is favored by most big businesses.

Bookkeeping

is one function of accounting, which includes recording a company's financial transactions.

Income Statement

known as the profit-and-loss statement, shows a firm's revenues and expenses for a particular time period and the resulting profit or loss. The income statement itself has four principal parts: (1) sales revenue, (2) cost of goods sold, (3) operating expenses, all of which lead to the bottom line of (4) net income.

Tangible Real Property

land and anything attached to it

Import Quota

limits the quantity of a product that can be imported. Its purpose is to protect domestic industry by limiting the availability of foreign products.

Return on Assets

net income/average total assets, This information helps the company understand how well they are using their assets to generate profits.

Sherman Antitrust Act

prohibits the restraint of trade and monopolies.

Warranties

promises by a seller to stand by its products. (Universal Commercial Code)

Cash Flow Statement

reports over a period of time, first, the firm's cash receipts and, second, disbursement related to the firm's (1) operating, (2) investing, and (3) financing activities, which leads to the bottom line of (4) the cash balance.

Micropreneur

takes the risk of starting and managing a business that remains small (often home-based). This allows them to do the kind of work they want to do and may offer a more balanced lifestyle.

Financial Management

the job of acquiring funds for a firm and managing them to accomplish the firm's objectives.

Master Limited Partnership (MLP)

the partnership acts like a corporation, selling stock on a stock exchange, but it is taxed like a partnership, paying a lower rate than the corporate income tax.

Contingency Planning

the process of preparing alternative courses of action that may be used if the primary plans don't achieve the organization's objectives

Intrapreneur

works inside an existing organization, sees an opportunity for a product or service, and mobilizes the organization's resources to turn the opportunity into a profitable reality