MGMT 470 EXAM 3 REVIEW (CHAPTERS 6-10)

OPERATING MARGINS

- Measures profits earned from the organization's main line of business - EBIT/Sales

VALUE STRATEGY

A firm that focuses on aspects of providing a product with the: - Best price - Best product - Best service

CO-MARKETING

A marketing strategy where brands or organizations partner together to expand their reach.

RETRENCHMENT

An organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival.

NICHE MARKET

A narrowly defined segment of the population that is likely to share interests or concerns. - EX: 25- to 34-year-old women, families with twins, Boy Scouts, Italian restaurants, manufacturers in your city

A BLUE OCEAN STRATEGY

A strategy based on creating a new product or service that has no competitors. - Can also be referred to as pure innovation which is: The process of creating new products or services, which results in a previously unseen product or service - EX: Philadelphia chef Joseph Poon was one of the early developers of a food style called Asian Fusion, which combined Asian food with contemporary American and nouvelle cuisine elements. His restaurant reflected the Asian Fusion theme with light woods, simple lines, and oriental details. Other Asian Fusion restaurants, such as Roy's of Seattle or the E&O Trading Company in San Jose, California,10 added different wines, beers, and liquors, and even new types of mixed drinks developed to complement the food.

VISION STATEMENT

A very simple 5- to 10-word sentence or tagline that expresses the fundamental idea or goal of the firm. - As strategy professors Greg Dess and Tom Lumpkin suggest: This is supposed to be inspiring, overarching, and long term. - EX: Bill Gates and Paul Allen started Microsoft as teenagers, their vision was "a computer on every desk—running Microsoft software." - EX: Book Passage (Corte Madera, California): The Bay Area's Liveliest Bookstore. - EX: Crum Electric Supply (Casper, Wyoming): Plug into Quality—People, Products, Service. - EX: Progressive Insulation & Windows (Chatsworth, California): Total Living Comfort.

Introduction stage (Business Life Cycle)

The life cycle stage in which the product or service is being invented and initially developed.

CORE COMPETENCIES

The main work of a firm in a particular line of business.

COMPETITIVE ADVANTAGE

The particular way a firm implements customer benefits that keeps the firm ahead of other firms in the industry.

CHURN

The rate at which customers stop doing business with a company over a given period of time - How to Minimize? --> Keeping existing customers is more valuable than finding new ones.

Decline Stage (Business Life Cycle)

A life cycle stage in which sales and profits of the firm begin a falling trend.

EFFECTUATION

A logical process in which one analyzes the resources available and restraints on the use of resources to create an attainable goal.

SHARED MEDIA

Called word-of-mouth or referral advertising. - Service providers get customers through referrals or word of mouth. - Social media sites have the possibility of viral marketing. - Creating and leveraging hashtags increases the viral impact. - Embassies - your gateway to shared content - Ultimate form of free advertising

VALUE PROPOSITION

Small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition. - The relation of product or company capabilities to customer pains and gains

SOLE PROPRIETORSHIP

A business owned by a single individual who is responsible for all debts and claims against the business. - Most popular amongst Start-Ups

LEAN BUSINESS PRACTICES

- Means eliminating waste and producing a minimum viable product. - An application created by Eric Ries that addresses the specifics of new business creation, particularly Internet-based businesses, where rapid experimentation and constant monitoring of viewers' choices are possible. - Include a set of tried-and-true methods that can lessen capital requirements and reduce cash outflows from the business. - This reduces the financial risk of start-up and early operations when cash is often scarce. - Refer to systematically eliminating waste of time, materials, and money throughout a business. - Argue all you need is a pitch deck

A SPIN-OFF

A business that is created by separating part of an operating business into a separate entity. - Created to get rid of "noncore" activities. The parent firm reduces capital requirements and provides a tighter focus for management on the remaining businesses. - Also are created when the parent lacks either the interest or the resources to pursue the opportunity

SCOPE

A characteristic of a market that defines the geographic range covered by the market—from local to global.

SYNERGY

A combination in which the whole is greater than the sum of its component parts.

COST STRATEGY

A generic strategy aimed at mass markets in which a firm offers a combination of cost benefits that appeals to the customer. - EX: For example, one gravel supplier in Memphis, Tennessee, was the undisputed low-cost provider. His secret? A farmer by trade, he discovered gravel under one of his farm fields. He sold directly to the users, cutting out intermediaries and their costs.

FOCUS STRATEGY

A generic strategy that targets a portion of the market, called a segment or niche. - EX: Scott Stone Company in Mebane, North Carolina, offers 11 different types of gravel that differ in color, stone size, and durability. By ensuring the quality and consistency of the gravel and knowing which types work best in specialized settings, such as oriental gardens or waterscapes, Scott Stone offers customers products and expertise not readily available elsewhere.

BRAND AMBASSADOR

A real person who, under contract with the brand's marketing organization, acts as a spokesperson for the brand. - A form of Incentive Media such as sponsorships, etc.

INDUSTRY ANALYSIS

A research process that provides the entrepreneur with key information about the industry, such as its current situation and trends. - Most entrepreneurs initially do this to find out what the profits are in an industry in order to better estimate possible financial returns. Taking this one step further, finding out how those profits are generated often makes the difference between success and failure.

MAJOR ASPECTS THAT COME FROM SECURING OUTSIDE INVESTMENT

Accomplishes two things: (1st): The process of obtaining investment funds means that your business will be critically examined by outsiders who have no vested interest in your idea, product, or service. (2nd): The fact that you were able to convince outsiders to invest in your business indicates a level of belief in the business and you that provides legitimacy.

TANGIBILITY

An item's capability of being touched, seen, tasted, or felt. - EX: The car; it is something you can touch, but your check also covered the cost of a warranty on the car, which is a service, and something intangible. If you included a satellite radio, or a cell service like OnStar, or an extended warranty, you have bought more services. Still, the vast majority of what you are paying for is for the car itself, so most car purchases would be an example of a good-dominated product.

ENTRY WEDGE

An opportunity that makes it possible for a new business to gain a foothold in a market.

STRATEGY FOCUS

Is the idea and actions that explain how a business makes its profits - Focus is on the kinds of customers you want to sell to and the benefits that will attract them. - Focuses on firm's COMPETITIVE ADVANTAGE

A PIVOT

Typically, a term describing a change of direction in the thinking of an entrepreneur or a firm, often based on new data or other findings. There are two possibilities: - (1) Change or reconsider your product or service to better fit with what customers are talking about - (2) Change or reconsider your customer base to find people who would be willing to buy what you propose. If neither works, you probably need to look at another business idea.

ALTURISM

Unselfish concern for the welfare of others ****

EARNED MEDIA

Public relations and press relations, or "free ink." - Occurs when others talk about your firm or products in the media and you did not pay them directly for the mentions, called free ink

THE CUSTOMER DEVELOPMENT FUNNEL

- The idea is that to some extent, marketing is a game of numbers; To get people to buy what you are offering, you first need to make an impression on them, letting them know who you are and what you are offering. - Designed for selling goods and services in the physical world, where you actually can hold the product in your hands, or have the service delivered by a person at some physical location (a store, shop, or your home). - Expand on classic marketing funnel - Awareness - Interest - Consideration - Purchase

OWNED MEDIA

- Your website, newsletters, emails, signage, etc - Is your business/product/service name, including logos, symbols, characters, slogans, hashtags, uniforms, and packaging - EX: Domain name, logo, phone line, business card, brochures, sales packet/marketing kit, online support material, sign, packaging, and promotional novelties - all with a succinct message

FIRST STEP FOR PERFORMING DUE DILIGENCE (All the Steps Listed)

1. Conduct extensive interviews with the sellers of the business. 2. Study the financial reports and other records of the business. 3. Make a personal examination of the site (or sites) of the business. 4. Interview customers and suppliers of the business. 5. Develop a detailed business plan for the acquisition. 6. Negotiate an appropriate price for the business, based on the business plan projections. 7. Obtain sufficient capital to purchase and operate the business.

BUSINESS LIFE CYCLE

1. Introduction stage 2. Growth Stage 3. Boom Stage 4. Shake- Out Stage 5. Maturity Stage 6. Decline Stage 7. Death or Retrenchment Stage

KEY TO CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

2 Steps: (1) Gathering Data (2) Analyzing the data - The KEY to this is the data on current or prospective customers. - Focuses on the longer-term monitoring and promotion of customer interest and loyalty. The process of tracking the customer's different contacts with the firm, and using these data to help improve sales as well as the customer's experience.

ELEVATOR PITCH

A 30-second (100 words or less) action-oriented description of a business designed to sell the idea of the business to another. - EX: StowCart: Do you ever have trouble carrying heavy or bulky objects in the yard, home or work? Are wheelbarrows or rolling platforms themselves too bulky to easily use? Our alternative is the StowCart, an award-winning, lightweight, easy to use, easy to store, two-wheeled handcart that lays flat for loading and can let you easily carry up to 250 pounds of nearly anything right out of the box. StowCart will be the last hauling device you'll ever need. Can I fix you up with one?

MISSION STATEMENT

A paragraph that describes the firm's goals and competitive advantages. - Fell out of favor as they became too much like one another and too full of business jargon. - Today, many small businesses drop this, moving from a vision to an elevator pitch.

DIFFERENTIATION STRATEGY

A type of generic strategy aimed at clarifying how one product is unlike another in a mass market. - Aimed at mass markets - Situations in which nearly everyone might buy your product or service

Boom Stage (Business Life Cycle)

A type of life cycle growth stage marked by a very rapid increase in sales in a relatively short time.

Shake-Out Stage (Business Life Cycle)

A type of life cycle stage following a boom in which there is a rapid decrease in the number of firms in an industry.

PRIMARY RESEARCH

An approach to researching based on the gathering of new information, using techniques such as interviewing, surveying, and observation. - Observation, Focus Groups, Surveying, - You decide what you need to know and how to get that information. This information is extremely current, but it can often take somewhat more time and money to gather it - EX: Building customer profiles with other techniques including observation, focus groups, and surveying.

SECONDARY RESEARCH

An approach to researching based on the use of existing information, often from government, commercial, or academic databases and research efforts. - EX: Every google search you do

Growth Stage (Business Life Cycle)

An industry life cycle stage in which customer purchases increase at a dramatic rate.

AUGMENTED PRODUCT

Core product plus features that tend to differentiate it from the competition. - Features can include brand names, quality levels, packaging, and specific features of your product.

COGNITIVE DISSONANCE

Doubt that occurs after a purchase has been made. An inconsistency between experience and belief.

ME-TOO ENTERPRISES

Products essentially similar to something already on the market. - Most start-ups are this - EX: a beauty shop, a restaurant, a bar or lounge, a rock band, a sign company, plumbing service, yard care, and so on (A copycat business)

COMPARABLE SALES OF OTHER FIRMS

Represent the combined experience of people active in the industry ***

MARKETING FOCUS

The actions of a business related to promoting and selling products or services. - Focuses on the customers with the key being the goods' or services' - Focuses on VALUE PROPOSITION

LEGITIMACY

The belief that a firm is worthy of consideration or doing business with because of the impressions or opinions of customers, suppliers, investors, or competitors.

CONVERSION RATE

The measure of how many visitors to your website (or people who click on your online advertisement) are actually willing to make a commitment to the product or service promoted on the site. - The percentage of people who buy out of the total population of people you approach. - You get this from test marketing or pre-selling (introducing your product to potential customers and taking orders for later delivery).

PROTOTYPE

The name given to the first model of a product or service - Some versions of this may be functioning, but built in a way that no consumer would buy it (e.g., with exposed wires and sharp edges) but shows the product can do what is promised. - Some versions look like the final product, but might not be functional. - These are made to prove aspects of the idea and are seen as the first stop along the path of product/service creation.

PAID MEDIA

You pay for ad placement - EX: Promotional video for building awareness, audio, print for complex information, locational promotion including OOH, and network advertising.

Three major problems with using book value:

1. The original cost of an asset might bear no relation to its current value—for example, a computer bought five years ago may be worth next to nothing today. 2. Depreciation is an arbitrary, although systematic, method of transferring asset value to expense. Depreciation makes no attempt to measure actual loss of value of an asset. For example, for income tax purposes, a new car is depreciated over a five-year period of time, where in fact it loses 40 percent of its value when you drive it off the lot, but may well have significant cash value at the end of the depreciation period. 3. Internally developed assets, such as patents, trademarks, and trade secrets, do not have book value. For an example, consider the Coca-Cola Company. Its single greatest asset is its rights to the names "Coca-Cola" and "Coke." However, if you examine the annual statement of the company, you will discover that no value for this right is shown in the bal- ance sheet. To address such problems, you must make adjustments to the value of assets that are obviously worth more or less than their book values.

PESO Model

A Hybrid Model of How to Think about the Media Landscape Brand Premise is at the center with: - Paid - Earned - Shared - Owned

OPERATIONAL PLANS

A business plan designed to be used internally for management purposes. - Includes detailed specifications of the major techniques, methods, recipes, formula, and sources used by the firm to do its work.

BRICOLAGE

A word derived from the French verb bricoler ("to tinker"). In entrepreneurial usage this refers to the process of analyzing the resources available and creating a product or service from them - Practice of making something from whatever you have at hand. - Resembles the strategy of effectuation in that it means carefully considering the resources available, and then making something from them

BREAK-EVEN

The point at which total costs equal gross revenue.

EARNINGS MULTIPLE

The ratio of the value of a firm to its annual earnings.

SCALE

A characteristic of a market that describes the size of the market— a mass market or a niche market.

HEURISTICS

A commonsense rule; a rule of thumb. - Commonly used to estimate firm value in relation to some easily observable characteristic of the business. - Amazingly Accurate - Exist for nearly all industries and are usually available from the group's trade association. - EX: In the bed and breakfast and small inn industry, two forms of this are often used to estimate the value of an operating inn. The first is that an inn should sell for approximately $100,000 per rental room. The second is that an inn should sell for approximately four times its annual gross revenue.

MASS MARKET

A customer group that involves large portions of the population. - EX; All men, all women, all teens, all elderly, all families, all manufacturers, all restaurants

GLOBAL MINDSET

Ability to take an international, multidimensional perspective that is inclusive of other cultures, perspectives, and views then apply it to your business or process

KEY RESOURCE ACQUISITIONS

Also called bulk asset purchases, are the only way a sole proprietorship may be purchased. This technique may also be used with any other form of business - Comprise purchasing only the assets of the business. - Provides one important advantage. Because only the assets are acquired, the subsequent business, regardless of its legal form, is not responsible for any of the acts or transactions made prior to purchasing the business.

BUSINESS FORMAT FRANCHISING

An agreement that provides a complete business format, including trade name, operational procedures, marketing, and products or services to sell. EX: Is exemplified by the McDonald's Corporation. A McDonald's franchise includes the right to use McDonald's many trade names, specifications of the product to be sold, operating methods, marketing plan, and national advertising. Franchisees pay to the franchisor both an up-front fee to obtain the franchise rights and a percentage of gross sales.

PRODUCT DISTRIBUTION FRANCHISING

An agreement that provides specific brand-name products that are resold by the franchisee in a specified territory. - Two examples of this type of franchising are Snap-On Tools and auto dealerships.

TRADE NAME FRANCHISING

An agreement that provides to the franchisee only the rights to use the franchisor's trade name and/ or trademarks. - Two examples of this are True Value Hardware and Associated Grocers, Inc.

Death or Retrenchment Stage (Business Life Cycle)

An organizational life cycle stage in which established firms must find new approaches to improve the business and its chances for survival. - Last stage in Business Life Cycle

BUYOUTS

Are restricted to businesses that have a formal legal form of organization, including corporations, limited liability companies, and some partnerships. - This is accomplished through purchasing the ownership interest in the entity. - Primary advantage is simplicity. - Made with ownership being transferred over some agreed-upon time range - The ones made by employees are examples of changes of ownership over time. Employee versions of these were made legal in 1974 when employee stock ownership plan regulations were codified into law.

INTANGIBLES

Assets, such as patents or trade- marks, and liabilities, such as accounts payable, that have no physical existence. - Things that have no physical existence, but rather are legal rights and obligations. - Include accounts receivable, patents, licenses, and liabilities

BUSINESS INCUBATORS

Is an organization that provides financial, technical, and managerial help to start-up businesses. - Associated with economic development agencies and are integrated into the community. - Provide access to angel investors, public grants for seed money, and technology support. - Created to strengthen the local economy by helping create jobs through the establishment of successful small businesses. - Aid in the commercialization of new technologies, the revitalization of distressed neighborhoods, and the creation of wealth. - Provide inexpensive office space with full-time on-site managers who can assist the entrepreneur in many ways - Provide legitimacy by furnishing the business with a location and with established business processes.

STRATEGY

Is the idea and actions that explain how a firm will make its profit. - All small businesses have one - May be a blueprint for planning or a standard to compare actions against. - Defines for you, your customers, and your competition how your business operates.

MAJOR GOALS OF THE NEW COGNITIVE DISSONANCE FOR THE CUSTOMER DEVELOPMENT FUNNEL

Major goals: (1) Get customers (2) Keep customers (3) Grow customers.

KPI'S

Measures or metrics that identify the outcomes that are most important to the success of a business. - While outcomes like sales or products produced are a form of this, events leading up to these are also usually considered key, like customers coming to your store or website for sales, or number of products started.

REPLACEMENT VALUE

The cost to acquire an essentially identical asset. - Is an estimate of what an identical asset would cost to be acquired and readied for service.

BOOK VALUE

The difference between the original acquisition cost and the amount of accumulated depreciation. - Unreliable as depreciation is arbitrary and some assets have don't have this

EXTERNAL LEGITIMACY

The extent to which a small business is taken for granted, accepted, or treated as viable by organizations or people outside the small business or the owner's family. - When you are seeking outside support- whether financial or expert—you do a business plan to signal your professionalism and how serious you are about the business. - Investors, whether they are venture capitalists, informal investors (called angels), government bureaucrats, bankers, or your two great-aunts, are going to expect to see a business plan before considering investing in your business

TAKEOVERS

The seizing of control of a busi- ness by purchasing its stock to be able to select the board of directors. - Only corporations and certain partnerships can, under any circumstance, be acquired in this process - The buyer (often called a raider) seizes control of the business without the permission of all owners. - Takeovers are hostile events.

Maturity Stage (Business Life Cycle)

The third life cycle stage, marked by a stabilization of demand, with firms in the industry moving to stabilize or improve profits through cost strategies.

BOOTSTRAPPING

Using low-cost or free techniques to minimize your cost of doing business. - Got its name from an old description of a person who began poor and through persistence and self-reliance achieved unlikely success - Is especially important for firms early in their lives because one of the major threats to the survival of new firms is undercapitalization

INCREMENTAL INNOVATION

An overall strategic approach in which a firm patterns itself on other firms, with the exception of one or two key areas. - EX: Seen it in the fast-food business where Burger King told customers "have it your way." This approach was bettered by Wendy's, which offered custom-built hamburgers that were, in addition, "hot and juicy." Hardee's moved into the fray with supersized custom burgers.

DUE DILIGENCE

The process of investigating a business to determine its value and potential for investment. - Every aspect of the business is examined in exacting detail. - Nothing is taken for granted. - No statement is accepted without evidence. - Evidence is, itself, substantiated with sources external to the company

INDUSTRY

The general name for the line of product or service being sold, or the firms in that line of business. EX: Types of this include restaurant, computer consulting, collectible doll, etc.

PRIMARY GOAL FOR PERFORMING DUE DILIGENCE

Two primary goals: 1st. You are attempting to find any wrongdoing: - (1) fraud committed by the owners or managers; - (2) misrepresentations of the sellers, such as improperly recognized revenues or expenses; - (3) missing information, including pending or threatened litigation, technological obsolescence of equipment, processes, product, or service, and unpaid taxes. 2nd. You are trying to find any inefficiencies, unnoticed opportunities, waste, and mismanagement. - (1)st goal is information that greatly affects the value of the business and the advisability of purchasing it - (2)nd goal is how you, as a new owner, can make changes to increase its value. Both goals can give you a negotiating advantage.

DISTINCTIVE COMPETENCIES

What you do that no one else does - Does your idea have something special compared to competitors that is valuable to your customers or buyers (e.g., better technology, better quality, easier to buy or use, better support, new/better features, costs less, gives your firm an advantage over competitors, rare, costly for others to imitate, etc.)