COMM Exam 2 UVA

Accounting DEF

"Accounting is recording, classifying, summarizing, and interpreting financial transactions and events to provide accurate information about an organization's financial status and performance."

Finance DEF

"How businesses raise capital, invest in assets, and manage financial risk."

Marketing DEF

"Identifying, anticipating, and satisfying customers' needs and wants while achieving business objectives. Involves researching, communicating and delivering offerings that bring value to customers."

Organizational Structure DEF

"The arrangement or relationship of positions within an organization...that guide activities and contribute to attaining organizational objectives"

4) FDIC (Federal Deposit Insurance Corporation)

$250,000 Depository insurance Reserve requirement high to protect the bank

Factors affecting the 4 Ps --> General and Specific environments PT.3

-- > (for each organization and business) What's happening with the economy, demographics, competitors, what are the customers saying When the economy slows down, the higher end stores goes down

Assigning tasks (Specialization aka Differentiation)

--> (Adam Smith): who does what --> Horizontal - how many different jobs --> Vertical - how many levels there are from top to bottom Small business 2-3 Midsize business - 5-7 Large business 12-13

Balance Sheet

--> A = L + E - wheres the cash in the system --> Profitability (bottom line- most important) - profit from operations How much profit you make from day to day operation Selling something, making something, providing a service -->Liquidity - how much cash you have in hand to cover short-term obligations -->Solvency - ability to pay long term debt - cover long-term obligations what resources do you have to cover long term obligations --> Efficiency - ITO to generate revenue How to quick to make something or solve a problem Input, Throughput, Output --> Leverage - amount of debt to finance operations ratio

Ethics

--> Accounting Fraud --> Putting forth information that is incorrect and having people base decisions based on it Can be intentional or unintentional --> Take future sales and report them in the current quarter Keep debts/ obligations off balance sheet Fake invoices to inflate revenue Ex: Kmart, xerox , Enron, AOL Companies were already in trouble

Liabilities

--> All the obligations you owe to someone else or entity a) Taxes: IRS b) Debts (any loans) c) Wages (employees - owe them money under contract or law)

Ethics and marketing (connections) Pricing PT.2

--> Bait and switch pricing Bait Ex: Advertise a car for a certain price, but it's actually more that what they led on with --> Hidden fees Ex: Ticket fee, convenience fee, delivery fee, hotels

1) Monetary policy

--> Buy/sell treasury bills (t-bills); take cash out of the economy a) Can buy t-bills on your own but not common --> Reserve requirement b) Each bank is required to have a certain amount of money on hand to give to you --> Discount rate c) If they raise the discount rate, and the price of the t-bills go up, then more people are going to buy it --> Credit controls d) charging credit, regulating the monetary piece

American Financial System - future

--> Cashless society Ex: Google wallet & Apple Pay Higher level of security --> Cryptocurrency Ex: Bitcoin --> Robo/AI investing Ex: Fidelity --> Non-bank funding sources Ex: Go fund me & KickStarter

Assigning responsibility (Centralization) - who's doing the job

--> Centralization - between two or more people or is it spread out --> Delegation of Authority - who decides --> Responsibility v. Accountability Who makes decisions? --> Span of management - wide vs. narrow Wide: one boss with a lots of people that work for them Narrow: a boss with a few people that work for them Larger - generally more decentralized and more specialized Ex: steve jobs ( known to make all the decisions) Advantage: connectivity

Banking Institutions

--> Commercial banks Ex: citibank - Chase, Wells Fargo --> Savings & Loans --> Credit Unions --> Non profit bank, originally designed to serve certain group of people Provide banking services that lower cost Ex: Northwest --> Non banks Ex: Fidelity

Teams in organizations (Groups vs. Teams)

--> Committees - general permanent --> Task Forces/Project Teams - specific change, specific charge, specific set of people Specifically for the tasks or the project --> Product Development Teams - identifying new products --> Quality Assurance Teams --> Self-Directed Teams - not sure what the problem or solution is so you put together people with the skills needed and have them figure it out Topic is worthy and entire course (think of it as a subset of structure) Special kinds of structures within a large business

Finance basics (Capital Structure)

--> Debt (loans) vs. equity (cash,stock) --> How much debt are you willing to take on relative to what your business is worth --> D/E ratio - how risky is the borrow practice

Factors affecting the 4 Ps --> Marketing research (biggest factor) PT.1

--> Demographics on product reviews (information about their customers) --> Surveys, ratings, qualitative (focus groups), one-on-one conversations product and customer reviews, interviews, they also wanna know who you are --> When company is newer, it's best to take the slower approach of focus groups and one-on-one conversations --> Data brokers - collect data about you and sell it to companies Ex: National Public Data (hacking scandal)

Product strategy steps PT.1

--> Develop and screen ideas (variation/selection) - come up with new ideas, discuss and the ones that make it through:... --> Business analytics (internal selection) - how do you take an idea and turn it into something you can buy in the store -Describe, predict, prescribe --> Is there competition, what does it look like, how much are they willing to pay for it, what are our competitors doing, going to be desirable to customers and give it value

Financial Statements (Limitations)

--> Does not capture non-financial factors Position, brand equity, customer satisfaction Ex: Bombas --> Many estimates (e.g., depreciation and future earnings) "Creative accounting" possible --> Novel ideas → fraud, blind variations that weren't intended Ex: MCI - made up income numbers --> Industry, country limit comparability Ex: Ryanair & United Airlines

Ethics and marketing (connections) Promotions PT.1

--> Ethical side to marketing - getting you to spend money you didn't know you needed to spend --> Promotion - promoting a good or service that's not exactly what it seems to be Data privacy - Facebook Misleading product information - Clif bars

Assigning rules (Formalization)

--> Formalization - how formalized is the rules and policies Documented or vague Follows from bureaucracy De facto vs. de jure De facto: of the fact, the way things are (informal rules) De jure: documented and written down (formal policies) Handbooks, rules, procedures Ex: United Airlines (very formalized) Ex: UVA Health

Standards

--> GAAP (IFRS) - designed to make sure the information is relevant and reliable Meaning generated in a consistent way Allows you to compare companies or periods of time --> SEC - transparent, accurate Everybody has the same information and is as accurate as possible Protect investors

American Financial System - basics PT.2

--> Gold in Ft Knox +/- $290b There are no developing countries that uses the Gold Big central bank of the U.S. government government agency 12 regions Four responsibilities

Who uses accounting? External stakeholders

--> Governments, suppliers/distributors, customers --> Competitors

Financial Statements PT.2

--> Gross Profit Margin: Gross Profit/Net Sales For every $1 of sales, how much is profit (0.xx of gross profit) Managerial: useful How much did it cost to make it after relative to what you sold it for

Positioning

--> How the brand is perceived -->If a business can figure out how a customer thinks of them, they can leverage it Ex: IKEA --> Maintain and improve brand equity Ex: Boar's Head meat

Finance

--> How they think about it is key --> Risk orientation in how we think about money Facilities financial transactions Interdisciplinary field Considers assessment of risk (risk tolerance) -->How much risk are you willing to take to invest in a product

Financial Statements PT.1

--> Income Statement: Revenue - Expenses = Net Income (Loss) --> How much money you made and how much did it cost you to make that money --> If it cost more than you made - LOSS --> If you made more than it cost - Gain income --> Need to know when it happened to know if its good or bad

Conclusions about structure

--> Inherent tensions: as the organization gets bigger and grows, some departments can clash Specialization vs. Integration Formality vs. Flexibility (as they get bigger you need more rules and regulations, but that limits flexibility Ex: environmental changes, Impacts many other business functions --> Driven by design and context --> Equifinal

Conclusions about marketing

--> Key business function Getting our idea to the point where its valuable for our customers --> Exchange Fair and reasonable exchange Customers have the power --> Create value Equifinal - there's no one single ideal marketing plan

Finance basics (Factors)

--> Lifecycle stage - e.g., startup vs. midlife --> Industry - e.g., energy vs. tech --> (you) Leadership/firm preference - risk tolerance

Questions/Reflections #8

--> Managerial: planning, looking forward, --> Financial: external, what has happened over the past A company needs to know everything about each transaction A = L + E → assets are things that you own, Liabilities is what you owe and equity is what is left GAAP does not apply everywhere and is only in the US IFRS - international reporting - used everywhere else

Marketing basics PT.2

--> Market - exchange (Business 2 Business) and (Businesses to customer/consumer) Ex: Boeing Ex: United Airlines --> Segmentation - subgroups - take the market and break it up into sections and pieces and how they break it up depends on them Break up by the demographic: age, income, education, location, demographic, previous spending history

Questions/Reflections #7

--> Marketing ethics and enforcement (law enforcement) Things can be unethical but not illegal --> Can marketing overcome a bad product? (Yes) --> Targeting - more and more focused More effort should lead to higher sales but it's going to be hard to do

Financial Statements PT.3

--> Net Profit Margin: Net income/Revenue (sales - adjust) - (how much net profit did I earn) For every $1 of revenue 0.xx of income Investor: useful Restaurants foods - $0 - make their money from drinks --> Reported in SEC 10-Q - quarterly income report

Developing a marketing strategy (Segment → Target → Position) PT.2

--> Niche/concentrated Within each of those segments, there are people who like specific kinds/flavors -->Micro-segment/customized Ex: Coldstone Personally design and customize what you want

Financial Statements (Statement of Cash Flows)

--> Operating activities What the business does --> Investing activities Not a core business function - other stuff (selling property) Selling an assets through a short influx of cash --> Financing activities You get loans or payments that provide an influx of cash

Ethics and marketing (connections) Predatory Marketing PT.3

--> Payday lenders - you don't deposit your paycheck, you sign over your paycheck to the lender and they give you money but it comes with a big fee --> Target unbanked people, minority, immigrants, who can fall for the overcharged interest Mortgages and car loans

Factors affecting the 4 Ps --> Consumer Behavior PT.2

--> People behave in a reasonably predictable way (can be used in a marketing perspective) --> Individual psychology - more likely to do certain things --> Social Factors - use data to find select/key people Ex: Subaru cars

Other marketing issues (connections) Push vs. Pull PT.3

--> Push people to buy it Pull: You the customer demands the thing Ex: Pokemon Go --> Push: Starbucks, pushes you to think you need coffee by putting stores everywhere You didn't know you wanted it until it became available to you Ex: (Apple)

Double-entry bookkeeping

--> Record every transaction twice --> Debit to one, credit to another Examples: a) If you buy supplies with cash? You now own however much you paid in cash of it b) Increases and decreases assets (they balance them out) You still have the same amount of assets you just transformed it into something else c) Buy supplies with a debit card? Increases assets and increases liability

Ethics and marketing (connections) CSR + marketing PT.4

--> Satisfy consumers and enhance well-being Ex: Zapos, sell shoes and clothes; you can call a representative and they will listen and talk to you for however long you want

Developing a marketing strategy (Segment → Target → Position) PT.1

--> Segmentation & Targeting Total/undifferentiated Ex: ice cream --> Segmented/differentiated - target market different segments Figure out who likes certain ice cream flavors and then target segment them to those specific groups

Marketing basics PT.3

--> Target Market Ex: Ryanair - cheap and affordable but uncomfortable Ex: United Airlines --> Positioning - in this market, what is your position, how are you perceived, and what do people think about your business Ex: RyanAir - lowest fares, lowest emission --> Trying to line up who they are with the consumers perception of them so it can add up

American Financial System - basics PT.1

--> The Federal Reserve Bank (1913) --> Treasury Bill: less than a year of maturity - the bill pays interest at maturity and you buy it at discount and sold at auctions Purchased by banks and financial institutions Short term(< 1 year), pay interest at maturity, sold @ discount --> Treasury notes: mid range (2-10 years), pay interest every 6 months, $100 increments --> Treasury bonds: long maturities (20-30 years) locking up your money for an extended period of time, pay interest every 6 months, sold @ discount

Financial Statements (Statement of Owner's Equity)

--> Tracks any changes due to investments/withdrawals --> If owners are pulling money out of the company you have to question why --> Supplemental to balance sheet

Product strategy steps PT.2

--> Transition from an idea to a thing --> Built a full scale version or a mockup of the real thing Ex: design a new car --> Test market (external selection) - once you built the idea you can test it --> Commercialization (possible retention) - get it in the supply chain to get it shipped to you Similar to retention Other companies will copy off of this

Who uses accounting? Managerial Accounting

--> accounting for management --> Planning perspective --> Timeliness for control (timeliness is critical) --> Formats can vary since it is internal

Assets PT.1

--> all resources owned/owed by the company Ex: land, tools, cash, inventory, buildings, equipment, robots, machinery, intellectual property (ex: patents, trademark, and copyrights/ legal right)

Sources of structure (Design)

--> businesses choose structure (decide how you want it to be set up) Ex: Zappos.com - holacracy - nobody has a boss and everyone's everyone's boss Ex: Steve jobs was a control freak and wanted to sign off on everything --> Both made a conscious decision on how they wanted things to go

4 P's: Price

--> capturing value (price is relative) a) Is the exchange reasonable b) Money, time, energy, effort c) Price includes other things

4 P's: Promotion

--> communicating value to you a) Design b) Colors, shapes, c) Advertising --> End of the line, here's what we are and what we have to offer Ex: Amazon: everything from a→z and make you happy with the smile Ex: FedEx: we will get something to you fast (arrow - express)

4 P's: Place

--> creating convenience & comfort a) Availability b) Supply Chain Offer you things that you couldn't get anywhere else Make sure it works its way through the chain, where you want it and when you want it

4 P's: Product

--> creating value Ex: Goods, service, and ideas that satisfy demands

Equity

--> how much of the assets are claimable by the owner (how much is left) a) Personal investments b) Accumulated profits - as long as it carries over and not owed to someone else c) Stock held - ownership share of the company

Sources of structure (Context)

--> open systems environment - environments affect structure Ex: united airlines (governed by the FIA) Ex: Dominion Energy

Who uses accounting? Financial accounting

--> outwardly focused, producing numbers for people Ex: GAAP - Set of rules (the way you calculate something follows GAAP) --> Historical perspective - here's how we're doing, and how it compares to the past --> Precision and verifiability --> Standard rules and procedures --> Overlap

Assigning tasks (Departmentalization)

--> specialized departments --> Functional - Marketing, HR, Operations --> Product - Snacks, drinks, sports Ex: Pepsi -->Geographic - U.S, Europe, Asia --> Market - luxury, business, leisure Ex: British Airways --> Ted got shut down --> Whos doing it (key)

Finance basics (Capital Budgeting)

--> the money you borrow for certain things --> Long-term investments Investing now for a pay-off in the future --> Strategic direction - growth vs. stability Stability - stay the same Growth - for future rewards --> Alignment w/ long-term goals The way you spend your money should be aligned with what your goals are Ex: Sears (misalignment)

Finance

--> time value of money (key finance concept) --> A dollar today is worth more than a dollar tomorrow Could be advantageous or disadvantageous --> Small differences add up

Organizational Structure

Able to see who does what, where do they do it and who do they report to

Account Equation

Assets = Liabilities + Equity

Marketing basics PT.1

Creating value - definition of business Marketing Concept - establish relationship --> Product - industrial revolution --> Sales - as supply exceeded demand (20s) -->Market - meeting customers needs (50s) (great depression, moving out of suburbs) -->Value - (modern stage) quality for the money (00s+)

Assets PT.2

Ex: BMW Owns the largest manufacturer plant in the United States Located in South Carolina - $12.5 billion Ex: Amazon (Inventory) Net inventory = $34 billion Ex: United Airlines (planes) Airplanes = $48.5 billion Ex: Google (cash) Cash = $111 billion Accts Receivable = $49 billion

Other marketing issues (connections) Product lifecycle/dynamism PT.1

Ex: car models - upgrading/updating features (they have more time, life cycle is slower) Ex: tech field/fast food (life cycle is a lot quicker, environment is more dynamic)

Who uses accounting? Internal stakeholders

Executives Managers Owners/Investors Board

The marketing mix - the 4 PS

How do you build the brand and equity Value Proposition - why buy from you? Focus on the concept of not buying, but solving a problem

Other marketing issues (connections) Distribution/logistics PT.2

If you have control over the distribution (local) you can be convenient, local and small Ex: Local florist If your selling things to a lot of different people, your more focused on how to get things from point A to point B as efficiently and quickly as possible Ex: Amazon, Zapos, UPS

Marketing

Interview you, ask questions Building that relationship and connection between your needs and wants --> Part of a broader system --> Driven by exchange

Conclusions about accounting

Key business function Reporting financial transactions Keeping track of things to make informed decisions Accuracy is key *Interpretation and ethics*

3) Check clearing

One of the four responsiblities

Accounting

Part of a broader system Point in time Interpretation What does the number mean and how do you interpret it

All businesses have a structure

Sole proprietors don't have a structure unless you hire one more person The structure provides guidance and tells people what they can do, with the goal of contributing to organizational success Pulls from Adam Smith division of labor Results in a hierarchy (Weber) Includes rules & regulations to control behavior

Questions/Reflections #6

There is no one singular structure, and business chooses based on environments, competition and their own individual style Appropriate spans: it depends - the more control you have, you narrow the span should be Groups vs. Teams - --> group: higher order concept - 3 or more work towards a shared goal but they don't have to specialist not working towards a singular goal --> Teams more specialized

2) Regulate institutions

a) Rules and policies b) Mergers --> Ex: Wachovia c) Make sure assets are available