Final Exam for business

7Employee Selection

Selection is the process of determining which people in the applicant pool possess the qualifications necessary to be successful on the job.

(3)The Marketing Research Process

Six Relevant Steps in the Marketing Research Process:1.Define the problem and research objectives2.Develop an approach to the problem3.Formulate the research design/instrument4.Collect the data (can use primary and/or secondary data)5.Analyze the data 6.Report/present findings

7 What does Google have to say about what makes a team great?

The Study: "Project Aristotle"Study Details:•180 teams (115 engineering teams and 65 sales teams)•Included mix of high and low performing teamsStudy tested how team composition and team dynamics impact team effectiveness•Team composition = personality traits, sales skills, demographics on the team•Team dynamics = what it was like to work with the teammates

13

the investment pyramid

11 Production Types: Mass Production

"One for All"Mass production: manufacturing many identical goods at once (e.g., canned goods, over-the-counter drugs, and household appliances)•Emphasis is on keeping manufacturing costs low by producing uniform products using repetitive and standardized processes•Born out of Industrial Revolution (e.g., Henry Ford's Model T)

Push-back against Unicorns?

"Part of the problem seems to be that nobody these days is content to merely put their dent in the universe. No, they have to ****ing own the universe. It's not enough to be in the market, they have to dominate it. It's not enough to serve customers, they have to capture them." ◦David Heinemeier Hanson

Place: Atmosphere

"Place" includes atmospherics—the image of the store, website, vending machine, etc. Marketers combine the store's merchandise mix, service level, and atmosphere to make up a retail image.Several influential factors in creating atmosphere: •Employee type and density •Merchandise type and density•Fixture type and density•Sound

12 5 P's: Promotion

"Promotion" is comprised of 6 parts: •Traditional advertising•Sales promotion•Personal selling•Public relations•Social media•E-commerce

Four Primary Business Growth Strategies

1. Intensive growth strategies-Exploit opportunity in the current market2. Integrative growth strategies-Exploit growth within the industry as a whole3. Diversification strategies-Exploit opportunities outside the current market/industry4. Global strategies-Exploit opportunities in the international arena

12 Promotional Goals

1.Creating awareness2.Getting consumers to try products3.Providing information4.Keeping loyal customers5.Increasing the amount and frequency of use6.Identifying target customers7.Teaching the customer

(1)"Product Ecosystems":An emerging distinctive competency

A "product ecosystem" is a set of products that are used complementary to one anotherTrue value behind development of "product ecosystems" is through interconnection◦More precisely, the value derived from a product ecosystem is to enable other products to use your product interface as a medium to consume their already created product

12Marketing Intermediaries in the Distribution Channel

Agents: sales representatives of manufacturers and wholesalers; Brokers are entities that bring buyers and sellers together. Both agents and brokers are usually hired on commission basis by either a buyer or a seller. Agents and brokers are go-betweens whose job is to make deals. They do not own or take possession of goods.Industrial distributors: independent wholesalers that buy related product lines from many manufacturers and sell them to industrial users (e.g., aircraft manufacturing, mining, and petroleum industries). Wholesalers: firms that sell finished goods to retailers, manufacturers, and institutions (such as schools and hospitals). Historically, their function has been to buy from manufacturers and sell to retailers.Retailers: firms that sell goods to consumers and to industrial users for their own consumptionNontraditional Channels: internet, infomercials, kiosks, etc.

(4)The Accounting Equation

Assets = Liabilities + Owner's Equity•Used by accountants to balance data for the org's financial transactions at various points in the year•Underlies all record-keeping procedures•Must be in balance after each financial transaction (e.g., payments to suppliers, sales to customers, wages to employees, etc.)•SIMPLE INTUITION:•EVERYTHING THE COMPANY HAS BELONGS TO THE OWNERS OR SOMEONE ELSE

4Financial Statements: Balance Sheets

Balance Sheet: financial statement that supplies detailed information about an org's assets, liabilities, and owner's equity (the items that comprise the accounting equation).•They show an org's financial position at one point in time (so they are also referred to as statements of financial position)

11Improving Production and Operations

Balancing productivity and quality: To compete effectively in today's business world, companies must keep production costs down while also producing/delivering the high-quality goods and services customers demand. Methods to help meet these challenges include quality-management techniques, lean manufacturing, and technology and automation.

12For example:

Channels make distribution simpler by reducing the number of transactions required to get a product from the manufacturer to the consumer.Each publisher sells to one bookstore rather than to four students. Each student buys from one bookstore instead of from five publishers

Unsecured Short Term-Loans: Commercial Paper

Commercial paper: financing option used by major corporations (large and financially strong companies) •Corporations issue commercial paper in multiples of $100,000 for periods ranging from 3 to 270 days. •Preferable over short-term bank loans because the interest rate on commercial paper is usually 1 to 3 percent below bank rates.

Unique Ways Organizations Collect and Use Data

CookiesWe have all seen this word in our browser settings, but what does it actually mean? Cookies help companies track visitors, delineate between multiple page views and single visits, personalize landing pages and allow users to stay logged in.

Production Types: Customization

Customization: company produces goods or services one at a time according to the specific needs or wants of individual customers (opposite of mass production). •Different from mass customization, as each product or service produced is unique. •Example: a print shop may handle a variety of projects, including newsletters, brochures, stationery, and reports. Each print job varies in quantity, type of printing process, binding, color of ink, and type of paper. •Service example: personal training or nutrition coaching

9Developing Your Data Strategy

Developing Your Data Strategy

12E-Commerce: Trends

E-commerce: the development and maintenance of a company's website and the facilitation of commerce on the website, such as the ability for customers to order products online, to get questions answered about products, and for the company to introduce new products and ideas (involves anything associated with an actual company website related to marketing)More than half of all retail sales involve an online component•Why? It's easier, faster, etc. than going to a store•Search technology and comparison-shopping sites have allowed online businesses to market their products to millions of potential customers•Online merchants can offer a far broader array of merchandise because they don't have to keep the products on store shelves

(4) Assets

Economic Resources (things of value owned by person or business) Land•Buildings•Property/Equipment•Office Supplies•Patents•Accounts Receivable (payments due to the company)

12 Traditional Advertising

Emotional brain > Rational brainResearch shows that ads that touch customers' emotions are more successful than ads that only touch their intellect

(2)What are Ethics?

Ethics: beliefs, or moral standards, about what is right and wrong or good and bad◦Moral principles that govern a person's behaviorBusiness ethics: ethical or unethical behavior by employees (managers, staff, etc.) in the context of their jobs◦Use of ethics in business means the organization must make the choices that benefit the good of everyone, including shareholders, stakeholders, and the community

Sales Promotion: FMOT versus ZMOT

FMOT: "First moment of truth" - the three to seven seconds when someone notices an item on a store shelf and makes up their mind about it. - coined by Procter & Gamble•This instant is considered to be one of its most important marketing opportunities. •P&G recently created a position entitled Director of First Moment of Truth, or Director of FMOT to produce sharper, flashier in-store displays. There is a 15-person FMOT department at P&G headquarters in Cincinnati as well as 50 FMOT leaders stationed around the worldZMOT: Zero moment of truth - coined by Google◦Technology has created a barrage of information, resulting in us being "always on shoppers" - as consumers, we ae "open for business 24/7)https://www.forbes.com/sites/michaelrsolomon/2018/08/23/who-moved-the-zmot-social-shopping-disrupts-in-store-selling/#313d515c2c57

11Facility Layout

Facility layout is important in both product and service industries Three main types of facility layouts•Process layout: workers are grouped by task and the products pass from one workstation to another •Product layout: workstations or departments are arranged in a line with products moving along the line. •Fixed Position layout: the product or service stays in one place while workers and machinery move to it

(4) Liabilities

Financial Obligations (debts; amounts owed to 3rd parties) •Salaries/Wages Payable•Rent Payable•Taxes Payable•Notes Payable•Bonds Payable•Accounts Payable (payments due to creditors or suppliers)

Production Planning, cont.

Four important decisions must be made in production planning:1.Type of production process that will be used2.Site selection3.Facility layout4.Resource planning

13Investment Types: Stocks, Corporate Bonds, and Municipal Bonds

Greater risk and return than CDs and Treasury Debt!!•Stocks from many of the large, well-established firms (e.g., Apple, Verizon, etc.) pay a regular return on the invested dollar in the form of dividends.•Represent a partial share of the companies worth•Corporate bonds: issued by businesses with a set interest rate and maturity date that investors buy as they become the lender. •The company will return periodic interest payments to the investor and return the invested principal when the bond matures. Each bond will have credit rating issues by rating agencies (most secure rating = AAA)•Municipal bonds: debt issued by communities throughout the US to help build infrastructures such as sewer projects, libraries, and airports. Their credit rating is based on the financial stability of the issuer.

4Financial Statements: Income Statements

Income Statement (Profit-and-Loss Statement) - financial statement that lists an org's annual revenues and expenses resulting in a figure showing its annual profit or loss (or, bottom line)•Note: The bottom line is the most important figure for any business as it shows the liquidity and theoretical value of the business•Different timeframes for a balance sheet versus an income statement•Balance sheet: financial condition at a specific point in time•Income statement: financial results during a period of time, or reporting period (e.g., a month, quarter, or year)•The income statement is divided into 4 major categories:1.Revenues2.Cost of Revenues 3.Operating Expenses4.Net Income

8How do Information Systems Enhance Business Processes?

Increase efficiency of existing processes•UPS delivery route optimization (right turns)•Amazon Go! Enable new processes that transform the business•Venmo•Uber

IT Impact on Business and Decision-Making

Information technology (IT): includes the equipment and techniques used to manage and process information, such orders, products, inventory, scheduling, shipping, customers, suppliers, and employees. •In less than 70 years, we have shifted from an industrial society to a knowledge-based economy driven by information.•Businesses depend on IT for everything from running daily operations to making strategic decisions. •Supercomputers are used to analyze big data to gain insights into customer behavior, improve inventory and production management and for product design•Internal networks help facilitate internal communication and operations•The internet is used vastly for internal and external communication

11Quality Control Methods, cont.

Lean Manufacturing streamlines production by eliminating steps in the production process that do not add benefits customers want. In other words, non-value-added production processes are cut so that the company can concentrate its production and operations resources on items essential to satisfying customers.Just-In-Time (JIT): based on the belief that materials should arrive exactly when they are needed for production, rather than being stored on-site. Manufacturers use computerized systems to determine what parts will be needed and when and then order them from suppliers, so they arrive "just in time." •Under the JIT system, inventory and products are "pulled" through the production process in response to customer demand (so requires close teamwork between vendors and purchasing and production personnel )

11Production Location

Location must be determined early in production and operations planningWhy does it matter?•The facility's location affects operating and shipping costs and, ultimately, the price of the product or service and the company's ability to compete. •Mistakes made at this stage can be expensive, because moving a factory or service facility once production begins is difficult and costly. •Companies must weigh a number of factors to make the right decision:•Availability of production inputs•Marketing factors•Manufacturing environment•Local incentives•International location considerations

(2)And what about CSR in the future?

Main Points:1. Investor interest in CSR will continue to grow2. Measurement of CSR program impacts are of key importance3. Companies need to catch up on diversity and inclusion goals4. Employees take control5. Age of radical transparency

Management Information Systems

Main Types of Management Information Systems:1.Transaction Processing System (TPS)2.Management Support System (MSS)•Data warehouse•Data mart3.Decision Support System (DSS)4.Executive Information System (EIS)5.Expert System

11Resource Planning

Make-or-Buy Decision: decision whether a company will make its own production materials or buy them from outside sources (outsourcing) Inventory Management: deciding how much of each type of inventory to keep on hand and the ordering, receiving, storing, and tracking of itComputerized Resource Planning: computerized systems used by many manufacturing companies to control the flow of resources and inventorySupply-Chain Management: focuses on smoothing transitions along the supply chain, with the ultimate goal of satisfying customers with quality products and services

11Innovation as a Necessity

Many factors have necessitated innovative approaches in operations management. For example:•Ever-shrinking product lifecycles•New trends on the labor market•Environmental concerns•Digitalization of the processes

11Technology and Automation

Many technologies are automating manufacturing tasks, such as:•Computer-Aided Design and Manufacturing Systems•Computer-Aided Design (CAD): computers are used to design and test new products and modify existing ones. Engineers can analyze the products, make changes, and test prototypes before manufacturing a single item•Computer-Aided Manufacturing (CAM): computers develop and control the production process (they analyze the steps required to make the product, then automatically send instructions to the machines that do the work)•Robotics: technology involved in designing, constructing, and operating robots that operate with little to no human intervention •Adaptable Factories: •Flexible Manufacturing Systems (FMS): automates a factory by blending computers, robots, machine tools, and materials-and-parts-handling machinery into an integrated system•Computer-Integrated Manufacturing Systems (CIM): combines computerized manufacturing processes (such as robots and flexible manufacturing systems) with other computerized systems that control design, inventory, production, and purchasing

Growth Strategy 1:Intensive Growth Strategies

Market Penetration (i.e. Capture a larger portion of the market)-Increase sales through effective marketing strategies within the current target market-Lower selling price (if possible)-Expand distribution channels•Market Development (i.e. Market expansion)-Expand sales through expanding geographic representation-Franchising (think Dunkin Donuts)-Licensing (think most software applications)-Product Development•Increase sales through new products/services

Production Types: Mass Customization

Mass customization: goods are produced using mass-production techniques, but only up to a point. At that point, the product or service is custom-tailored to the needs or desires of individual customers. •Allows a customer to design certain features of a product while still keeping costs closer to that of mass-produced products. •Example: modular homes - allow customers to make changes to the base home package

6Raising Funds (Financing)

Obtaining funding for the firm's operations and investments and seeking an "optimal" balance between debt (borrowed funds) and equity (funds raised through the sale of ownership in the business)Both NEW and EXPERIENCED firms need business financing at some point.◦NEW Firms: Starting costs◦EXPERIENCED Firms: Finance growth and working capital

11A Supply Chain KPI Example: OTIF

On Time In Full (also known as DIFOT: Delivered In Full, On Time) is a supply chain KPI measuring if:•The expected product has been delivered.•The ordered quantity has been delivered.•The quality is conform to the required level.•The product has been delivered at the place asked by the customer and on time.

(3)Marketing Mix: Pricing

Pricing: selecting the best price to sell a product Need to find a profitable middle ground between covering direct/indirect costs and not steering customers towards lower-priced alternativesLow-price strategies and high-price strategies can each be effectiveLow-price: more units sold, but typically lower profits on each High-price: fewer units sold, but higher profits on each (and may also indicate higher quality from the customer's perspective)

11Production Planning: Production Process

Production Process: the way a good or service is created•Need to determine which type of production process best fits with the type of good or service being produced, the company goals and customer demand. •Three common types of production: 1.Mass production2.Mass customization3.CustomizationIn addition to production type, operations managers also classify production processes in two ways: 1.How inputs are converted into outputs and 2.The timing of the process.

11 Bringing a Product to Market (Operations) Production and Operations Management: 3 Decisions

Production planning: The first decisions facing operations managers come at the planning stage. At this stage, managers decide where, when, and how production will occur. They determine site locations and obtain the necessary resources.Production control: At this stage, the decision-making process focuses on controlling quality and costs, scheduling, and the actual day-to-day operations of running a factory or service facility.Improving production and operations: The final stage of operations management focuses on developing more efficient methods of producing the firm's goods or services.

11 Production Planning

Production planning: allows the company to consider the competitive environment and its own strategic goals to find the best production methods. •The challenge: good production planning has to balance goals that may conflict, such as providing high-quality service while keeping operating costs low or keeping profits high while maintaining adequate inventories of finished products. Sometimes accomplishing all these goals is difficult.3 Phases of Production Planning:1.Long-term planning (3-5-year timeframe): focuses on which goods to produce, how many to produce, and where they should be produced. 2.Medium-term planning (2-year timeframe): these decisions concern the layout of factory or service facilities, where and how to obtain the resources needed for production, and labor issues.3.Short-term planning (within 1-year timeframe): converts the broader goals into specific production plans and materials management strategies.

12 Promotion Strategy

Promotion: "an attempt by marketers to inform, persuade, or remind consumers and B2B users to influence their opinion or elicit a response"•The goal is to stimulate action from the people or organizations of a target market•Businesses: the desired action is for the consumer to buy the promoted item•Not-for-profit organizations: seek a variety of actions with their promotions (e.g., to recycle, to buckle up, to attend the ballet, etc.)

12 The Promotional Mix(aka Integrated Marketing Campaigns)

Promotional mix: the combination of traditional advertising, personal selling, sales promotion, public relations, social media, and e-commerce used to promote a productEach of these promotions must be integrated! They must send a uniform message about the product, the company, their values, etc.An integrated marketing campaign combines multiple channels such as content, email, display advertising and social media in order to promote a consistent message to a specific audience. The main goal of most integrated campaigns is to convert viewers into customers.

11Quality Management

Quality:•Consumer perspective: how well a product serves its purpose. •Manufacturer perspective: the degree to which the product conforms to a set of predetermined standards. Quality control: involves creating quality standards, producing goods that meet them, and measuring finished goods and services against them. •Requires a company-wide dedication to managing and working in a way that builds excellence into every facet of operations (not saved for end-of-the-line inspections) - top management must foster a company-wide culture dedicated to producing quality

7How can we promote psychological safety in teams?

Remember...Psychologically safety = Ability to take risks on a team without feeling insecure or embarrassedWhat does the Google study suggest? (Lots of obvious things!!)‐ Demonstrate engagement‐ Show understanding‐ Be inclusive in interpersonal settings‐ Be inclusive in decision‐making‐ Show confidence and conviction without appearing flexible

Sales Promotion

Sales promotions are marketing events or sales efforts—not including traditional advertising, personal selling, and public relations—that stimulate buying•The goal of many promotion tactics: immediate purchase. •Customers are targeted according to their general behavior (e.g., is the consumer loyal to the marketer's product or to the competitor's? Does the consumer switch brands readily in favor of the best deal? Does the consumer buy only the least expensive product, no matter what? Does the consumer buy any products in your category at all?)

Financial Statements: Statements of Cash Flows

Statement of Cash Flows: financial statement describing an org's yearly cash receipts and cash payments. Shows three categories of cash flows:•Cash Flows from Operations - cash transactions involved in buying and selling goods and services•Cash Flows from Investing - includes cash receipts and payments from buying and selling stocks, bonds, property, equipment, and other productive assets •Cash Flows from Financing - reports net cash from all financing activities such as inflows from borrowing or issuing stock, and outflows for payment of dividends and repayment of borrowed moneyWhy is this information important to creditors and stockholders?•When they know how an org obtained and used funds throughout the year, they can more easily interpret year-to-year changes in the balance sheet and income statement and determine whether the business has access to the cash needed to pay off its debts.

13Two Types of Securities Markets

Stocks, bonds, and other securities trade in securities markets (these markets streamline the purchase and sales activities of investors by allowing transactions to be made quickly and at a fair price)•Primary market: where new securities are sold to the public, usually with the help of investment bankers. •In the primary market, the issuer of the security gets the proceeds from the transaction. •A security is sold in the primary market just once—when the corporation or government first issues it. •Secondarymarket: where old (already issued) securities are bought/sold/traded, among investors (think New York Stock Exchange)•The issuers generally are not involved in these transactions. The vast majority of securities transactions take place in secondary markets, which include broker markets, dealer markets, the over-the-counter market, and the commodities exchanges.

11Supply Chain Management

Supply Chain: the entire sequence of securing inputs, producing goods, and delivering goods to customers. •If any links in this process are weak, chances are customers—the end point of the chain—will feel it•Companies need contingency plans for supply-chain disruptions (avoid major losses with a back-up plan to determine where they'll get the resource if needed)•Effective supply-chain strategies and technology improves efficiency and reduces costs (can track inventory, manage goods, automate more processes and save time/money)•Important to develop tight bonds with suppliers (e.g., reducing the number of suppliers used and asking them to offer more services or better prices in return for an ongoing relationship)•Suppliers play an important role in supporting the operations of their customers: in meeting high quality standards, offering suggestions that can help reduce production costs, and even contributing to the design of new products.

12 The Distribution Channel

Supply chain management helps increase the efficiency of logistics service by minimizing inventory and moving goods efficiently from producers to the ultimate users

7Performance Planning and Evaluation

The manager establishes performance standards.•The employee works to meet the standards and expectations.•The employee's supervisor evaluates the employee's work in terms of quality and quantity of output and various characteristics such as job knowledge, initiative, relationships with others, and attendance and punctuality.•Following the performance evaluation, reward (pay raise) and job change (promotion) decisions can be made. If work is unsatisfactory, the employee may be put on a performance improvement plan,

7What does Google have to say about what makes a team great?

Their main finding..."Who is on a team matters less than how the team members interact, structure their work, and view their contributions."

6Angel Investment

These are individuals or groups who invest their own money in companiesHow do they differ from venture capitalists?•More common than venture capital •Whereas venture capitalists often wait a few years to see demonstrated business success, angel investors invest during the earlier growth stagesHow are they similar to venture capitalists?•They normally focus on high-growth companies at early stages of development rather than established, stable, low-growth businesses.

(3)Marketing Mix and the Infamous "P's"

This refers to all the marketing programs and activities that a business will use to achieve its marketing goals (and when they'll occur)Includes 5 components of the marketing matrix:Productgood/service/ideaPricingHigh or low price competitor?PlaceWhere and how customers get productPromotionCommunications to consumersAdvertising, interaction, sales discounts, etc...PeopleCustomers and employees

(3)Types of Competition

Three types of competition:1.Substitute product: product that is different from those of competitors but can fulfill the same needExample: which gym membership or vacation resort should I pursue? 2.Brand competition: appeals to consumer perceptions of benefits of products offered by particular companiesExample: which browser should I use? Google or Bing?3.International competition: domestic products against foreign productsExample: Ford (US), Volkswagen (German) or Toyota (Japanese)?

11Quality Control Methods

Total Quality Management (TQM): emphasizes the use of quality principles in all aspects of a company's production and operations. It recognizes that all employees involved with bringing a product or service to customers—marketing, purchasing, accounting, shipping, manufacturing—contribute to its quality. •TQM focuses on continuous improvement, a commitment to constantly seek better ways of doing things in order to achieve greater efficiency and improve quality. Company-wide teams work together to prevent problems and systematically improve key processes instead of troubleshooting problems only as they arise. Six Sigma: company-wide, quality-control program method that focuses on measuring the number of defects that occur and systematically eliminating them in order to get as close to "zero defects" as possible (goal = every process produces no more than 3.4 defects per million). •A key process of Six Sigma is called DMAIC: Define, Measure, Analyze, Improve, and Control.

12 The Promotional Mix (Explained)

Traditional advertising: Any paid form of nonpersonal promotion by an identified sponsor that is delivered through traditional media channels.Personal selling: A face-to-face presentation to a prospective buyer.Sales promotion: Marketing activities that stimulate consumer buying, including coupons and samples, displays, shows and exhibitions, demonstrations, and other types of selling efforts.Public relations: The linking of organizational goals with key aspects of the public interest and the development of programs designed to earn public understanding and acceptance. (e.g., lobbying, publicity, special events, internal publications, etc.)Social media: The use of social media platforms such as Facebook, Twitter, Pinterest, Instagram, and blogs to generate "buzz" about a product or company. (e.g., paying celebrities to wear a specific line of clothing and posting these images on Twitter or Instagram) E-commerce: The use of a company's website to generate sales through online ordering, information, interactive components such as games, and other elements of the website.

Wholesaling

Wholesalers: channel members that buy finished products from manufacturers and sell them to retailers. Retailers in turn sell the products to consumers•Wholesalers also sell products to institutions, such as manufacturers, schools, and hospitals•Wholesalers also sell products to manufacturers for use in the manufacturing process•Some wholesalers even sell to other wholesalers

12 Retailing

•Although most retailers are involved in small businesses, most sales are made by the giant retail organizations, such as Walmart, Target, and Macy's (half of all retail sales come from fewer than 10 percent of all retail businesses.)•This small group employs about 40 percent of all retail workers. •In recent years, online retailing trends have significantly impacted retailing organizations, providing more opportunity for smaller retailers and more competition for larger retailers

12 Sales Promotion: Couponing

•American consumers receive over $321 billion worth of coupons each year and redeem about $3 billion.•Almost 85 percent of all Americans redeem coupons. #1 source = Sunday newspaper supplements (but significant growth in online coupons, as they have a higher redemption rate) •Coupons are used most often for grocery shopping. •Do they save you money? One study found that people using coupons at the grocery store spent eight percent more than those who didn't.

13 Invest Earnings or Pay off Debt? An example...

•Bob has a car loan of $10,000 at 5% interest for 5 years. •He will pay $12,762 over that time. •$10,000 on the loan and $2,762 in interest•If Bob invests those $10,000 at 7.5% instead, he would end up with $14,356 at the end of those 5 years•$10,000 on the initial investment and $4,356 in return on the investment•In this case r (7.5%) > i (5%),therefore Bob should make the investment!•The difference of $1,594 ($14,356 - $12,762) is the amount extra Bob will receive by investing the $10,000 rather than paying off the loan right away

11Recent Trends in Operations Management

•Business Process Reengineering (BPR)•Business Process Management (BPM)•Lean and agile manufacturing•Six Sigma•Reconfigurable manufacturing system (RMS)•Employee involvement•Sustainability•Behavioral operations management

13Common vs. Preferred Stock

•Common stock: a security that represents an ownership interest in a corporation. •Initial Public Offering (IPO): a company's first sale of stock to the public (existing stockholders, usually employees, family, and friends who bought the stock privately, hope to earn big profits on their investment•Preferred stock:usually has a dividend amount that is set at the time the stock is issued (which must be paid before the company can pay any dividends to common stockholders)•If the company goes bankrupt and sells its assets, preferred stockholders get their money back before common stockholders do.•Increases the company's financial risk because it obligates them to make a fixed payment.

13Dividends and Retained Earnings

•Dividends: payments to stockholders from a corporation's profits (can be paid in cash or in stock) •Stock dividends are payments in the form of more stock.•Typically, the company's CFO and Board of Directors determines how much of the profits to distribute as dividends and how much to reinvest.•Retained earnings: profits that have been reinvested in the business•Used for growth within the firm•That is, they provide financial resources to reinvent in operations, like R&D, facility construction, renovation, and expansion•Also, there are tax advantages for retaining earning, which is another incentive to reinvest within the firm

14 How is business "growth" measured?

•Growth can be measured in a variety of ways, but most commonly, it is measured by:-Revenue-Cost-Profits-Earnings per share (EPS)-Customer demand-Customer retention-Market share-Workforce health (i.e. employee satisfaction and retention)

14Growth Strategy 3:Diversification Growth Strategies

•Investing in or acquiring products/businesses which are outside the core competencies and industries•Use when all other growth strategies within the current market/industry have been exhausted-Synergistic strategy-Acquire products/services unrelated to the core•Example: Disney-Purchased Marvel Comics and ESPN, among other media organizations-Only 32% of profits come from movies and parks- most profitable growth comes from new products in new markets

13 Investments and Investing - what is it?

•Investing: the act of using money (i.e., capital) to generate returns in the form of interest, dividends, or through the appreciation of the investment product•Types of Investments •There are many products that you can invest in (i.e., " investment securities"); the most common beingstocks, bonds, mutual funds, certificates of deposit (CDs), and exchange-traded funds.•Each investment product carries a level of risk and this danger connects directly back to the level of income that particular product provides.•Generally speaking, with higher risk comes higher reward

7Performance Planning and Evaluation

•It's important to communicate to new employees the expectations around performance (and the ways in which they will be evaluated).•Job expectations are communicated in a variety of ways, including job objectives, schedules, deadlines, and product and/or service quality requirements. •Performance appraisal: "a comparison of actual performance with expected performance to determine an employee's contributions to the organization and to make decisions about training, compensation, promotion, and other job changes."

11Production and Operations Control

•Often involves critical path analyses and updating processes, as needed to improve efficiencies •Critical Path Method (CPM):•Manager identifies all of the activities required to complete the project, the relationships between these activities, and the order in which they need to be completed. •Manager develops a diagram that uses arrows to show how the tasks are dependent on each other. •The longest path through these linked activities is called the critical path. If the tasks on the critical path are not completed on time, the entire project will fall behind schedule.

14 Growth Strategy 4:Growing by Going Global (i.e. Globalization)

•Reasons to go global early in development-Product lives are short due to rapid technology changes-R&D is expensive and must be spread across many markets-Competition and saturated markets •Characteristics of successful globalization- A global vision from the start- Internationally experienced managers- Strong international business networks

Securities: What are they?

•Securities: investment certificates that represent either equity (ownership in the issuing organization) or debt (a loan to the issuer)•In other words, securities allow you to own things without physically holding onto them

13 Common Types of Investment

•U.S Treasury Debt•Investors lend money to the federal government for a specified period of time•Commercial Deposits (AKA Certificate of Deposit)•Product offered by banks and credit unions that provides an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time•Stocks•Investors purchase partial-ownership in a company in exchange for capital•Bonds (corporate/municipal)•Investors lend money to businesses and/or municipalities for a specified period of time

13 Investment Types: CDs and U.S. Treasury debt

•U.S. Treasury Debt•These investments (known as fixed-income investments) are considered the safest form of investing •They provide steady income at a rate slightly higher than typical savings account from the bank. •Commercial Deposits (CDs)•A certificate of deposit, or CD, is a type of federally insured savings account that has a fixed interest rate and fixed date of withdrawal, known as the maturity date. CDs also typically don't have monthly fees.•Think of it like treasury debt, but for a bank

14 Growth Strategy 2:Integrative Growth Strategies

•Vertical Integration Strategies-Growing forward/backward within the distribution channel (i.e. purchase suppliers and buyers)•Horizontal Integration Strategies-Buying up competitors within the current industry (i.e. purchase competitors)

Invest Earnings or Pay off Debt?

•What should you do? •Consider the two variables:•The interest rate you are paying on your debt (i)•The rate of return you expect to earn on your investment (r) •Decision Rule:•If i > r, then pay down debt•If r > i, then invest

(2)So what's the difference between Ethics and Corporate Social Responsibility?

- Ethics are guiding principles. ◦Ethics determine was is GOOD vs. BAD or RIGHT vs. WRONG.- Social responsibility is the practical application of ethical concerns for the benefit of society. ◦CSR determines what is allowable and what is not.

9Example: Google

1. Do managers matter? •To answer this, they used performance reviews and employee surveys. They compared the top tier with the bottom tier and found that teams with better managers performed best, were happier, and worked at Google longer.2. What makes a good manager? •To answer this, they created the "Great Managers Award" to encourage employees to nominate managers they felt made a difference. Employees were required to provide examples of good manager behavior in the nomination application. Google also interviewed managers about their practices.Using this data, Google established eight behaviors for good managers, as well as the top three reasons managers might struggle in their roles. Outcome: Google then used this data to measure managers against these behaviors, enact a twice-yearly feedback survey and revise its management-training program.

6Why is there an overpopulation of unicorns?

1. Get big fast (GBF) strategy is loved by investors◦Expand at high rate through large funding rounds and price cutting to generate market share2. Company buyouts◦In low-interest rate and slow growth environment, large companies focus on acquisitions instead of developing new products in-house3. Increase in private capital◦Average age of tech company when going public in 1999?: 4 years ◦Average age of tech company when going public in 2019?: 11 years4. Prevent IPO◦Fears of undervaluation in the public market5. Technological advancements◦Mobile smartphones, P2P platforms, and Cloud Computing make economies of scale possible!

7 Google's Five Dynamics of a Successful Team

1. Psychological Safety: Team members feel safe to take risks and be vulnerable in front of each other2. Dependability: Team members get things done on time and meet high expectations of the organization3. Structure and Clarity: Team members have clear roles, plans, and goals.4. Meaning: Work is personally important to team members.5. Impact: Team members think their work matters an creates change.

4Income Statements: 4 categories

1. Revenues - funds that flow into a business from the sale of goods and/or services2. Cost of Revenues (Cost of Goods Sold) - costs that a company incurs to obtain revenues from other companies (e.g., Apple's cost for manufactures to produce phones, computers, and other hardware; licensing fees to distribute music, movies, etc., and others is approx. $140,000 million)Cost of Goods Sold - costs of obtaining and transforming materials for making the physical products sold by a company during the year •Gross Profit: simple profit figure calculated from the company's revenues (from selling their product) minus the cost of revenues3. Operating Expenses - costs, other than the costs of revenues, incurred in producing a good or service (e.g., research development, marketing, office supplies, salaries, etc.)4. Operating and Net Income•Operating Income: gross profit from operations minus operating expenses•Net Income (Net Profit or Net Earnings): gross profit minus operating expenses and income taxes

(4)Accounting - What is it?

Accounting: a comprehensive system for collecting, analyzing, and communicating financial information (to business owners, employees, the public, regulatory agencies, etc.)The primary role of accounting: •Provide tangible information on the financial strength of the organizationTwo Types of Accounting:1. Financial Accounting: concerned with external user'sof a company's financial information, such as consumer groups, unions, stockholders, suppliers, creditors, and government agencies•Reports (e.g., income statements and balance sheets) are focused on the financial activities of the company as a whole, rather than individual departments2. Managerial Accounting: serves internal users, such as managers and employees •Used to make departmental decisions, monitor projects, set performance goals, and plan future activities

9For Discussion

After watching the video in the last slide...•Why was Amazon unsuccessful while Netflix was highly successful?•What do you think about basing decisions fully on data? •Wernicke talks about how data can be useful in dissecting a problem and analyzing the bits and pieces. He argues that it is not helpful in doing what? • What is the overall takeaway, or message, that Wernicke is trying to convey? Do you agree or disagree? Why or why not?

Financial Statements: Balance Sheets cont.

Assets: three major types include current, fixed, and intangible Current Asset - asset that can or will be converted into cash (liquidated) within a year•On the balance sheet, current assets are typically listed in order by of ease liquidity Fixed Asset - asset with long-term use or value (e.g., land, buildings, or equipment)•With time, the asset loses values (e.g., as equipment wears down) so accountants also calculate the depreciation (they calculate its useful life in years, divide its worth by that many years, and subtract the resulting amount each year) - see balance sheet on previous slide•Example: a $5,000 machine is projected to last 10 years. Each year, it will depreciate $500. So, after one year it is worth $4,500, after the second year, it is worth $4,000, and so on.Intangible Asset - nonphysical asset that has economic value in the form of expected benefit•Example: fees paid by others for rights to your product (patents, trademarks, copyrights, franchises)

(2)What is Corporate Social Responsibility?

Corporate Social Responsibility: the concern of a business for the welfare of society; ◦The overall way in which a business attempts to balance its commitments to relevant groups and individuals in society (or, in other words, to its organizational stakeholders) when making decisions.Who are organizational stakeholders?•Customers•Employees•Owners/Investors•Local (and global) community•Suppliers

Difference between Data and Information

DATARaw facts; Raw facts; events such as business events such as business transactions -> PROCESSOrganizeOrganizeFilterFilterInterpretInterpretAnalyzeAnalyzeSummarize -> INFORMATIONon which conclusions on which conclusions and decisions are based

9What does it mean for decisions to be "Data Driven"?

Data-driven decision making (or DDDM) is the process of making organizational decisions based on actual data rather than intuition or observation alone◦Most professionals understand that— without data—bias and false assumptions (among other issues) can cloud judgment and lead to poor decision making.

Databases

Databases are at the core of business information systems. For example, how might different departments in a business utilize a customer database (containing information such as customers' name, address, payment method, products ordered, price, order history, etc.)?•Marketing: can track new orders and determine what products are selling best•Sales: can identify high-volume customers or contact customers about new or related products•Operations: can use order information to obtain inventory and schedule production of the ordered products•Finance: can use sales data to prepare financial statements

(3) Competitive Advantage

Definition: "a set of unique features of a company and its products that are perceived by the target market(s) as significant and superior to those of the competition." -also referred to as "differential advantage"3 Types:Cost - maintaining profit margin at lower costsProduct/service differentiation - includes brand names, image, product reliability, service quality, etc.Niche - serving a specific segment of the population (and doing so really well)

(3)Marketing

Definition: "activities, a set of institutions and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large" (American Marketing Association)Creating customer value is a core business strategy of many firmsWhen you hear VALUE, what do you think of?- The monetary worth of an asset, business entity, good sold, service rendered, or liability or obligation acquired?- The worth of all the benefits and rights arising from ownership?- The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by customer's willingness to pay for it?- A magnitude or quantity represented by numbers?

6Long Term-Loans: Debt and Equity Financing

Financial managers try to select the mix of long-term debt (borrowing) and equity (ownership) that results in the best balance between cost and risk.Debt Financing: includes term loans, bonds, and mortgage loans•Major advantages: The deductibility of interest expense for income tax purposes, which lowers its overall cost; there is no loss of ownership. •Major drawback: Financial risk (the chance that the firm will be unable to make scheduled interest and principal payments): The lender can force a borrower that fails to make scheduled debt payments into bankruptcyEquity Financing: obtained by selling new ownership shares (external financing), by retaining earnings (internal financing), or through venture capital (external financing).•Major advantage: Form of permanent financing that places few restrictions on the firm (they're not required to pay dividends or repay the investment.•Major drawback: Equity is more costly than debt. Unlike the interest on debt, dividends to owners are not tax-deductible expenses.

(3)Identifying Market Segments

Five of the most important influences on consumer behavior:1.Geographic Segmentation - where they live (neighborhoods, countries, etc.)2.Demographic Segmentation - age, income, gender, martial status, etc.3.Geo-Demographic Segmentation - combo of first two4.Psychographic Segmentation - lifestyles, interests, personalities5.Behavioral Segmentation - how customers behave (e.g., those who buy in bulk, situation buyers during Halloween, etc.)

(2)Arguments For/Against CSR?

For:- Address social issues brought on by business- Wards off government intervention- Businesses well equipped to address issues in dynamic and efficient way- Public support (additional profits) Against:- Constrains the classic economic goal of profit maximization- Business not equipped to handle social activities- Dilutes primary purpose of business- Limits the power of business

(3) Marketing Research

Four Methods of Market Research:1.Observation - watching and recording consumer behavior2.Surveys - collecting consumer data through questionnaires, telephone calls, or face-to-face interviews3.Focus Groups - using a small group of people to gather their attitudes, opinions and beliefs about a product in an open discussion4.Experimentation - using different sample groups to test variations of a product

Unique Ways Organizations Collect and Use Data

GPS TrackingEvery time you download an app or check-in on social media, your location data is stored. Many companies have faced problems with the transparency regarding location data collected, but many other times we have thanked these companies for locating our device whenever we misplace it or when we just want to use location stickers on our pictures.

9Example: Amazon

Goal: Customer obsession (focused more on the customer than on competitors)Amazon bases its recommendations on what customers have bought in the past, the items in their virtual shopping cart, what items the customer has ranked or reviewed after purchase and what products the customer has viewed when visiting the site. Amazon also uses key engagement metrics such as click-through rates, open rates and opt-out rates to further decide what recommendations to push to which customers.Is it working?•By integrating recommendations into nearly every aspect of Amazon's purchasing process, from product browsing to checkout, the company has found that product recommendations, in fact, do drive sales and increase the bottom line.

(3)Marketing Mix: Product

Product: good, service, or idea designed to meet a customer's need or wantProduct differentiation: creation of a product feature or image (e.g., brand name, packaging, colors, a warranty, accessories,, service program, etc.) that differs enough from existing products to attract customers

"Your Approach to Hiring is All Wrong" (HBR)

Hiring talent remains the number one concern of top CEO's around the world◦Costs companies, on average, $4,129 to hire someoneChange in recruiting practices over past 10 years◦".. the majority of people who took a new job last year weren't searching for one: Somebody came and got them."◦"Often employers advertise jobs that don't exist, hoping to find people who might be useful later on or in a different context." (PHANTOM JOBS)40% of all recruiting and hiring function has been outsourced◦"... subcontractors scour LinkedIn and social media to find potential candidates. They sometimes contact them directly to see whether they can be persuaded to apply for a position and negotiate the salary they're willing to accept."If hiring process is left to the organization, huge market for machine‐learning software that matches candidate applications with the job

6Strategies for raising funds.

How do organizations raise the funding they need? •By borrowing money (debt), •By selling ownership shares (equity)•By retaining earnings (profits)A basic principle of finance is to match the term of the financing to the period over which benefits are expected to be received from the associated outlay. •Short-term items should be financed with short-term funds, and long-term items should be financed with long-term funds.

(1)What is a Business?

How do you define business? What do you think of when you hear the term "Business?"•Business: an organization that provides goods or services to earn a profitNot-for-Profit organizations have different goals. Examples?•Environmental preservation, mental health, decreasing homelessness, etc. •Why is it called not for profit? Any profits are generally put back into the organization, instead of going to owners/shareholders

6What we want to understand...

How does a business finance its operations? In other words, how does a firm get the funding to start producing its product/service and then to help the business grow?And related to your writing, what is the best avenue for your firm to secure funding?

(1)Starting (and Operating) a New Business

How will a new business earn success? It must perform better than the competition. This is achieved through distinctive competencies. Distinctive Competency: core skills and practices that increase the competitiveness of an organization and make it different from its competitorsTwo categories of distinctive competencies:1. New niche in an established market•Identifying a segment of the market that is not currently being exploited by other companies2. New market•Identifying new markets by either transferring a product/service from one established geographic market to another, or by creating entirely new industries

9Unique Ways Organizations Collect and Use Data

In-Store WiFiCompanies offering free WiFi not only collect the info from your social media profile or email address, but they can also track your activity on the web inside the store. With this information on your WiFi activity they could see if you visited Amazon inside their store or whatever other websites you might be checking to evaluate your purchase decisions, and things you might be able to buy based on profile.

7Compensation and Benefits

Includes direct pay (salary) and indirect pay Examples of indirect pay? ◦pensions, health insurance, vacation time, sick time, tuition or paid professional development, retirement contribution, unemployment compensation, worker's compensation, Social Security, and many others) What factors might be considered in determining an individual's salary?•Employee's skills and experience•Employee's performance•Level of the position (e.g., entry versus senior or executive‐level)•Competitor rates (can be found online via sites such as Glassdoor)•Financial health of the organization

8Five Component Model of Information Systems

Information technology: HardwareSoftware SoftwareData Data Business: Procedures ProceduresPeople

(2)The Four Dimensions of CSR

Iphone

7Job Analysis/Description/Specification

Job analysis: a study of the tasks required to do a job well. •This information is used to specify the essential skills, knowledge, and abilities required for the job. •Jobs are examined to make any changes in job duty and task responsibilities. Job Description and Specification: Job description: the tasks and responsibilities of a jobJob specification: the skills, knowledge, and abilities a person must have to fill a job (i.e., the required qualifications) These two documents help human resource planners find the right people for specific jobs.

Financial Statements: Balance Sheets cont.

Liabilities: two different categories - current liabilities and long-term liabilities Current Liabilities - debts that must be paid within one year•Includes Accounts Payable (or, Payables): unpaid bills to supplies for materials as well as wages and taxes due within the coming yearLong-term Liabilities - debts that are not due for at least a year•Typically represent borrowed funds on which the company must pay interest

9Unique Ways Organizations Collect and Use Data

License PlatesMass collection of license-plate images is just one of many ways in which entities legally compile data on individuals. The data, including the license plate number and where the picture was taken, is then sold again to global information brokering companies. The same companies that offer credit checks and identity protection are also selling license plate scans showing where you've been, accompanied by records about what you own, where you live and who you know.

(2) Discussion: "The Friedman Doctrine" (1970)Milton Friedman, Economist

Main argument: A company has no "social responsibility" to the public or society; its only responsibility it to its shareholdersWhy? Making decisions that are good for society are sometimes "costly"Spending company money on "social causes" is spending somebody else's money for their own purposesThe appropriate agents of social causes are individuals..."The stockholders or the customers or the employees could separately spend their own money on the particular action if they wished to do so."Friedman's overarching conclusion:"there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

(4) Financial Statements

What are financial statements?•Several types of reports that summarize a company's financial status to stakeholders and to aid in managerial decision making•It shows where the company's money came from, where it went, and where it is now3 Broad Categories of Financial Statements:•Balance Sheets (NET WORTH)•Income Statements (PROFITABILITY)•Statements of Cash Flows (CASH)

8Data and Information Systems

Management information systems: methods and equipment that provide information about all aspects of a firm's operations •They provide managers with the information they need to make decisions. •They help managers properly categorize and identify ideas (i.e., process data) into useful information (resulting in substantial operational and cost benefits as well as facilitating a variety of business decisions).•The data is typically collected and organized in an electronic filing system, called a database •This helps different departments integrate their knowledge into a shared information system, which enables more effective problem-solving

(3)Five Key Stages of Market Research

Market Analysis - information pertaining to the target market (e.g., the geographic, demographic, psychographic and behavioral variables)Competitor Analysis - research pertaining to the products, services, of those in your particular industryTrends Analysis - current trends and future opportunities (including technologies and other new resources) Customer Analysis - preferences of potential customersDefining Opportunities - data related to the size of the market, growth tendencies, competition, trends and target customers aid in predicting the overall demand for a product.

(3)Marketing Research

Marketing Research: the systematic and objective study of customers and competitors in an industryIdentifies what consumers need and want and how to best meet those needsIdentifies the competitors in an industry and how to differentiate the product/service based on what already existsWhat questions might marketing research answer for us?Is there a need for your product or service?How much money is spent on your particular industry each year?Who will likely be your consumers? Age? Income? Lifestyle? Etc.?What are their buying preferences? Why do they typically choose a specific product over others? What strategies can you utilize to make the consumers buy from you?Is there room in the market for your business to be successful?

(3)The Case of Starbucks: Discussion (2)

Marketing Strategy and the five P's:3. Considering the various components of the marketing matrix (product, pricing, place, and promotion), in what ways did Starbucks' marketing strategy fail?Product: their product did not meet the Australian customers' need - Local taste is different - they don't want large sugary drinks. They prefer smaller, more "sophisticated" beveragesPricing: it was more expensive than their local cafes, which they preferred anywayPlace: it was "too available" - they moved into regional areas and outer suburbsPromotion/People: impersonal distribution; wasn't their local barista serving the coffee

(3) The Marketing Environment

Marketing decisions need to consider the external environment, or factors outside an organizations boundaries or control.Let's focus on two external environmental factors: sociocultural and economicSociocultural EnvironmentThis refers to the buying behaviors, the customs, values and demographic characteristics of the society in which the organization functionsEconomic EnvironmentEconomic conditions/variables (e.g., inflation, interest rates, employment rates, recessions, etc.) that influence spending patterns by consumers, businesses and governments

9Cognitive Biases

Most of the decisions we believe we're making with a clear mind are actually controlled by mental shortcuts known as cognitive biases and it is important to learn how to minimize their negative impacts on innovation."https://www.boardofinnovation.com/blog/16-cognitive-biases-that-kill-innovative-thinking/Self-Reflection... (not to turn in)Think abut these cognitive biases and the ways in which they might interfere with business decisions. How could data be used to make more objective decisions?

6Commercial Lenders (i.e. Banks)

Much more likely to finance established businesses than they are startupsWhy is this?•Federal banking laws prohibit them from risking the savings from depositors - if the banks invest it in risky new businesses, which don't have enough collateral, they could lose the depositors' money.•Small business owners, however, can borrow from banks, if they can back the loan in inventory, accounts receivable, and/or personal collateral (such as the home they own)

7Employee Training and Development

On the Job Training - might include a general orientation to the company and/o department, as well as specific job instruction, coaching, special project assignments, job rotation, apprenticeship, and/or mentoring.Off the Job Training - might include physical off‐site locations (e.g., in a classroom) or web‐based, E‐trainings

(4)Owner/stockholder Equity

Owners' Claims (on the assets of the business)Amount of money the owner would receive if they sold all the org's assets and paid all of its liabilities •Retained Earnings•Preferred Stock•Common Stock•Capital Stock•Dividends

4Financial Statements: Balance Sheets cont

Owners'/Shareholders' Equity: two different categories - paid-in capital and retained earnings Paid-in capital - money invested in a company by its ownersRetained earnings - net profits retained by a company for its use rather than paid out as dividends to stockholders

(3)Marketing Mix: People

People: refer to the staff, salespeople, and those who work for the business. People decisions are usually centered around customer service - how do you want your employees to be perceived by customers? "Customers do not come first. Employees come first. If you take care of your employees, they will take care of the clients." - Sir Richard Branson,

(3)Marketing Mix: Place

Place (Distribution): refers to where and how customers get access to the products they purchase (e.g., a retail store, via digital device, direct delivery, etc.)It's the channel that brings the product to the consumerDistribution: the set of activities that moves products from producers to consumers

(3)Marketing Mix: Promotion

Promotion: techniques for communicating information about products Key Promotional Tools:Advertising - any form of paid non-personal communication used by an identified sponsor to persuade or inform potential buyers about a productPersonal Selling - person-to-person sales (e.g., cosmetic counters in a dstore)Sales Promotions - direct inducements such as premiums, coupons, and package inserts to tempt customers to buy products (e.g., Groupon)Public Relations - communication efforts directed at building goodwill and favorable attitudes in the minds of the public toward the organization and its products

Secured Short Term-Loans

Secured loans: require the borrower to pledge specific assets as collateral, or security (this collateral, including accounts receivable or inventory, can be taken by the secured lender if the borrower doesn't repay the loan)•Commercial banks and commercial finance companies are the main sources of secured short-term loans to business. •Used by borrowers whose credit is not strong enough to qualify for unsecured loansFactoring: an organization sells its accounts receivable (or invoices) to a third-party funding source (i.e., a factor) for cash. The factor (often a commercial bank or finance company) buys the accounts receivable at a discount and collects on the due payments over time. •Often used in the clothing, furniture, and appliance industries. •Factoring is more expensive than a bank loan because the factor buys the receivables at a discount from their actual value.

8Selecting KPIs

Select performance indicators that are directly linked to your business goals!•They should offer you insight into the progress made by your business (towards the goal) in a given period of time. •For example, if your goal is to improve online sales by 20% in the next year, then your KPIs must include conversion rate, daily sales and website traffic, etc. In order to choose goal-aligned KPIs, you must ask yourself the following questions:•What is the purpose of my business?•For how long am I setting these goals?•How will I be able to know that I have reached my goals?

Market Research: SWOT Analysis

Strengths: key advantages relative to competition, target markets( internal company factors) Weaknesses: Key disadvantages relative to competition, target markets (internal company factors) Opportunities: Marketplace conditions addressed by the proposed business, service, or product (factors external to the company) Threats: Possible impediments to achieving business, service, or product objectives(factors external to the company)

6Funding Opportunities

To start the next "Chapter" in your venture, you'll need to think about the following questions:Where will you go to raise the capital required to finance you new venture?What information will they need to make a decision whether or not to give you the funds?How will you use the funds?

6Unsecured Short Term-Loans: Trade Credit

Trade credit: the seller extends credit to the buyer between the time the buyer receives the goods or services and when it pays for them (i.e., cash is not due on delivery. The organization is billed and pays at a later date). Trade credit is a major source of short-term business financing. The buyer enters the credit on its books as an account payable. •Until the buyer pays the seller, the seller has an account receivable from the buyer, and the buyer has an account payable to the seller.

Unsecured Short Term-Loans: Bank Loans

Unsecured bank loans include 2 types: lines of credit and revolving credit agreements.Line of credit: specifies the maximum amount of unsecured short-term borrowing the bank will allow the organization over a given period, typically one year. The org either pays a fee or keeps a certain percentage of the loan amount (generally 10 to 20 percent) in a checking account at the bank. Revolving credit agreement: guaranteed line of credit that carries an extra fee in addition to interest (typically arranged for a period of 2-5 years.

6How do firms raise money?

What are the most common sources of funding for a business?•Family and friends•Personal savings•Lending institutions•Investors•Governmental agencies

8Management Information Systems

What are they?•They are information systems of users, hardware, and software that collect and store a company's key data and produce the information managers need for analysis, control, and decision-making.Examples:•Factories use computer-based information systems to automate production processes and order and monitor inventory. Most companies use them to process customer orders and handle billing and vendor payments. •Banks use a variety of information systems to process transactions such as deposits, ATM withdrawals, and loan payments. •Consumer transactions also involve information systems. When you check out at the supermarket, book a hotel room online, or download music over the internet, information systems record and track the transaction and transmit the data to the necessary places.

6Small Business Administration

What does the SBA do? It guarantees loans to small businesses and startups so commercial banks (certified lenders) can safely make them (it doesn't make loans directly). •The SBA normally requires that at least 1/3 of the required capital be supplied by the new business owner and the rest must be guaranteed by reasonable business or personal assets.

(3)Target Marketing and Market Segmentation

What is a Target Market?Target Markets: particular group of people or organizations on which an organization's marketing efforts are focusedSelected from the total market after marketers have developed an understand of the environmental factors involved.What is Market Segmentation?Market Segmentation: process of dividing a market into categories of customer types/segments with similar interests, wants and needsOnce marketers identify a target segment, they can then begin marketing products for that segment. This process of fixing, adapting, and communicating the nature of the product is product positioning.

7Human Resources Management

What is it?•Human resource (HR) management is the process of hiring, developing, motivating, and evaluating employees to achieve organizational goals.•Core role within an organization:Leverages employees for competitive advantage

7 Recruiting Applicants

What is recruitment?•the process of attracting qualified people to form an applicant poolMethods of recruiting: •Ads via tv, print, radio, etc.•Job/career fairs (e.g., at universities, in‐house, and other locations)•Online search engines such as Monster, Indeed, Glassdoor, etc. •Social networking: e.g., LinkedIn and referrals Two sources of job applicants: internal and external labor markets•Internal: potential applicants currently employed by the organization•External: potential applicants outside the organization

8Key Performance Indicators (KPIs)

What's the purpose of KPIs? •They drive the performance of your business. •They provide crucial information on sales, marketing, finances and productivity. •They enable you to make changes to the segments of the business that may be underperforming. ** BUT, in order to make quantifiable improvements, you need to select the most appropriate performance indicators for your organization (only by setting precise goals for yourself can you define your KPIs.)

(3) Marketing

When you hear the term VALUE, what do you think of?The monetary worth of an asset, business entity, good sold, service rendered, or liability or obligation acquired (Accounting)The worth of all the benefits and rights arising from ownership (Economics)The extent to which a good or service is perceived by its customer to meet his or her needs or wants, measured by customer's willingness to pay for it (Marketing)A magnitude or quantity represented by numbers (Math)

(3)What is marketing?

When you hear the term marketing, what initially comes to mind?Advertising?Brand creation, including logos and slogans?Selling/sales?Conducting focus groups to find out what people think of your company?

7 "Your Approach to Hiring is All Wrong" (HBR)

Why do employers spend so much on something so important while knowing so little about whether it works?◦In other words, why is hiring so difficult?Two possible explanations:More external hiring because they don't have to train new employeesAssume they come in with required experience and only need organizational trainingRetention of employees is difficult because more external hiringMost vacancies are due to voluntary turnover because other firms are "stealing" talentWhat does this mean? Labor markets are incredibly competitive!

(4)Owner's Equity, cont.

Why is owner's equity important to investors/lenders?•A larger owner's equity signifies greater financial securityOwner's equity consists of two sources of capital:1.The amount that the owners originally invested2.Profits earned by the owners and reinvested in the companyIncreasing Equity:•When a company operates profitably, its assets increase faster than its liabilities. If profits are retained in the business, instead of paid out as dividends to stockholders, owner's equity will increase. It also increases if owners invest more of their own money to increase assets.

7What did they find did not matter for team effectiveness?

•Colocation of teammates (sitting together in the same office)•Consensus‐driven decision making•Extroversion of team members•Individual performance of team members•Workload size•Seniority/Tenure•Team size

6Borrowing Money: Short-Term Loans

•Due within one year (whereas long-term loan mature after one year) •Short-term financing is shown as a current liability on the balance sheet and is used to finance current assets and support operations. •Can be unsecured or secured loans•Unsecured loans: based on the organization's creditworthiness and the lender's previous experience with them •3 main types of unsecured short-term loans: trade credit, bank loans, and commercial paper

(1)What is the role of business in society?

•Employment (job creation)•Production of the goods and services that we want and need•Innovation of new goods/services that we don't know we want/need•Community leadership and support for charities •Contribute to governmental initiatives through taxes•Overall: Business (profit and non-profit) influence an economy's standard of living•Higher output = higher standard of living

(4)Written Another Way:The Accounting Equation & Owner Equity

•If a company's assets > liabilities, the owner's equity is positive - if the company were to close, the owner's may receive some cash (a gain) after selling assets and paying off liabilities)•Ifliabilities > assets, owner's equity is negative - assets are insufficient to pay off all debts, and the company is bankrupt. If the company goes out of business, the owners will not get cash and some creditors will not be paid.

For Example:The Accounting Equation & Home Equity

•Let's say, you buy a house for $100,000 (you finance the entire amount)•After 10 years, you decide to sell. You have paid $20,000 toward your mortgage (in principal payments). •Your home is now valued at 110,000.•What are the amounts of your Assets, Liabilities, and Equity?

(2)So what about CSR in the present?

•The Business Roundtable, a group of CEOs of nearly 200 major U.S. corporations issued a statement with a new definition of the "purpose of a corporation"•The new idea of a corporation drops the notion that they function first and foremost to serve their shareholders and maximize profits•Investing in employees, delivering value to customers, dealing ethically with suppliers and supporting outside communities are now at the forefront of American business goals.

6Venture Capital

•Venture Capital is NOT a common source of funding•Available to exceptional start-ups with a great likelihood of high value within the next few years (must demonstrate product/market opportunity and proven management teams)•Typically reserved for new growth industries, multimedia communications, biotechnology, or high-technology products in new markets that project increasing sales