SM131 Exam Module 2
Accounting requires many judgements and estimations by management. True/False
True
7. If you start out with sufficient materials to produce 1000 units and you sell good units for $40, what is the contribution at 100% yields? 8. If you start out with sufficient materials to produce 1000 units and you sell good units for $40, what is the contribution at current yields? 100% quality cost = 29 less than 100% quality cost = $31.88 current yields: 85.73%
"Contribution" = gross profit 7. REV - COGS = (1000*40) - (1000*29) = $11000 8. (1000*.8573) = 85.73 units produced Rev - COGS = (85.73 units * $40) - (85.73 units * $31.88) = $6961
Warby Parker is an example of (horizontal/vertical) integration
"Reaching milestones with VERTICALLY integrated eCommerce" —> Cut out middlemen by designing own frames, sourcing own raw materials, working directly w/manufacturers (making supply chain more cost-efficient) → high-quality eyewear at significantly lower prices - just $95 per pair of glasses, including prescription lenses.
8. If there are 20 jobs on the average in inventory, and the copy center turns out 50 jobs per month, what is the inventory turnover rate? *Probably don't need to know
(Sales per period) /inventory = inventory turnover rate 50 jobs / 20 jobs = 2.5 times /month
Horizontal Integration
*Find better definition Absorption into a single firm of several firms involved in the same level of production and sharing resources at that level - an expansion strategy adopted by a company that involves the acquisition of another company in the same business line. (SEVERAL different)
WP Story + Pain Points + Solutions
- "The value proposition in Warby Parker is to provide great quality glasses at a great price in a convenient manner." - Direct-to-consumer (DTC) landscape. - PR efforts were KEY! - PP: Price, returns/shipping fees, picking style - Solutions included customer services like advice, free shipping, try on home kit... - vertically integrated eCommerce ---> cut out middlemen by designing own frames, sourcing own raw materials, working directly w/manufacturers (making supply chain more cost-efficient) → high-quality eyewear at significantly lower prices - just $95 per pair of glasses, including prescription lenses.
Financial statements decide how do we understand this business model? How do we make decisions? What's happened over time + where are they now? - Which tells us "Where is the company"? - Which What tells us "What's happened over time"?
- Balance Sheet covers where the company is at a certain point in time. At a specific moment in time, describes how much/what assets the company has, where $ has come in to pay for those, the liabilities/debt + equity. - Income statement tells us what happened over time ("story"). Tells us how much revenue did you sell in a period of time, what that money was spent on in the form of expenses, and how much profit was left over? ... which leads to another balance sheet, another set of assets, another set of financing
Marketing Discussion Takeaways (Nike)
- Brands are depository of meaning - Market research is used to provide insights - Meaning is co-created by the brand and the market place - Nike is engaged in constant back + forth w/ the culture in which it operates - sells + reaffirms cultural values via values-driven marketing - Brand Values, heroes, Activism, Brand tribe - Value-driven: very powerful, but also perilous strategy that is not possible for most brands - NIKE prevailed in the end
Broad Cost Leadership Examples
- Broad market + low cost - Walmart, Southwest airlines, Ikea, Marshall's, McD's, Acer laptops, State Uni's, H&M
Financial Statements Communicate Condition + Performance of Company to Outsiders. - it's like a "________" - GAAP ? - Allows ____ + _____
- Business Scorecard - Everyone uses same rules to keep score: GAAP (GENERALLY ACCEPTED ACCOUNTING PRINCIPLES) - Allows analysis + comparison
- CU relates _____ to cost + _____ to customer service - As CU passes 80% + approaches 100% ....
- CU relates DIRECTLY to cost + INVERSELY to customer service - Q times rise exponentially
The capacity of the bottleneck equals ______ + can be increased by _____
- Capacity of bottleneck... equals the capacity of the system - Can be increased by reducing its task time
Notes on Supply Chains:
- Competition → less about company vs. company + more about supply chain vs. supply chain - Companies may have to take ethical responsibility for the actions + errors of their supply chain
Quality Costs
- Conceptual framework - Not always totally quantifiable - Useful for attention getting - Requires consistency of measurement - Useful as a mechanism for keeping score
2 DIFFERENT MARKETS:
- Consumer - Business to Business (B2B) --> Customers in the B2B market are few large construction firms or mining operations
CLASSES OF CONSUMER GOODS/serivces:
- Convenience: frequently w/min effort - Shopping: after comparing value/quality/price - Specialty: unique characteristics (no reasonable substitute) - Unsought: unaware of/problematic - Industrial goods: used to make another product
Creating + Deliver value includes: Capturing value includes: Sustaining value includes:
- Creating + Deliver value includes: 5 C's, Segmenting, Targeting, Positioning, Product/service, Place, Promotion - Capturing value includes: Sustaining value includes: Price (last of 4 P's) - Sustaining value includes: Customer acquisition --> customer retention
Value creation & capture: The tale of Dr. Lonnie Johnson & the Super Soaker
- Dr. Lonnie Johnson's invention of the Super Soaker + distribution of value throughout the supply chain - developed heat pump to make great water gun - Sales > $1 billion! → Created lots of value, but lots of it got distributed across long range of supply chain + users of product... raw material providers, manufacturer that combine materials, toy company...
Identifying opportunities and risks in supply chains + Innovation Opportunities in Supply Chains
- Environmental + Financial Risks in Supply Chains - Environmental issues deep w/in a firm's upstream supply chain tiers can significantly impact its environmental + financial performance
Place
- Facilities: Location, layout, network - Capacity: Growth policy, economies of scale, additions
Operational expenses include...
- Fixed costs like rent, salaries/wages, advertising, SGA, utilities, inventory
Segway + e-scooters CaseStudy e-scooters went to market based on a shared economy model → rental vs ownership
- Great engineering ≠ Great product - Segway focused on engineering w/out an understanding of the market - Did poorly with consumer + business use - Eventually segmented the market, but didn't see significant increase in sales - missed 2018 boom in micro-mobility - E-scooters went to market based on a shared economy model (rental vs ownership) + presented a slightly different solution for basically the same need + related technological know-how... but Segway offered them too! - Rental Advantages: No customer fixed cost, no worries about storing, maintenance, new product that will make yours obsolete, etc... - Success → E-scooters were in service business, provide platform, on-demand, access very large numbers of customers at a very low price point Business model was the key, not ownership! Result = much better CUSTOMER VALUE
Competitive Positioning (PORTER)
- Helps us understand how firms are different from one another + how they make the core trade offs that lead to their positioning - prompts us to consider the core TRADEOFFS that firms make in their effort to achieve profits greater than rivals
Capacity Definition + Equation
- How many units can be produced (or customers can be served) in a period of time Capacity = Time available / cycle time - Can be expressed in either units of OUPUT (Ex: pages per min or tons per day) or in units of TIME (available hours per day) - Capacity at given steps = Available time (usually 1 hour) / task time
What is marketing?
- Innovation, research, strategy, informing operations of a firm because marketing is where the knowledge of the customer resides and without the knowledge of the customer, you cannot have product design, distribution, SEO, etc -Includes research, analytics, strategy, planning, product development, marketing artificial intelligence, ROI analysis, A/B Testing, SEO, Targeting Positioning, Segmentation - business function w/ customer knowledge
5 Forces (PORTER)
- Most well known external framework - Helps us understand the factors outside a firm that are in its industry that affect the ability of the industry to achieve high/low profits - asks us to consider which forces affect the average prices + costs (and, hence, profits) that firms in an industry can obtain
Cost of Quality to the Firm (4)
- Prevention (investment) - Appraisal (investment) - Internal Failure (expense) - External Failure (expense)
VC + Yield Memorized Table + Calculations
- Rows represent each stage - Columns = Stage, VC at beginning + Given VC = Total VC / Yield = End stage cost
Define: - Single-segment concentration - Selective specialization - product specialization - market specialization - full market coverage
- Single-segment concentration: Focus on 1 product category + go after 1 market - Selective specialization: multiple markets but in different product categories - product specialization: focused on 1 product category but try to address several markets - market specialization: focused on 1 market + have different products - full market coverage: Addresses several markets + product categories
Strategy is a (broad/narrow) theme...
- Strategy is a broad theme that drives organizational choices & policies - must be understood by all in the organization from the CEO to the newest employees firms that formulate & COMMUNICATE such clear strategies are rare, but usually more effective EX) Walmart: always low prices Kodak: you press the button, we do all the rest
SWOT (acronym, factors it considers, steps)
- Strengths = internal & positive - Weaknesses = internal & negative - Opportunities = external & positive - Threats = external & negative - SWOT analysis considers both internal & external environment Step #1 - identify factors internal & external positives + negatives that may affect future firm profits Step #2 - categorize these appropriately Step #3 - use these as inputs to direct future strategic action of the firm
5 forces in Porter's 5 Forces framework?
- Suppliers, Buyers, Potential Entrants, Substitutes, Industry Rivalry Vertical: Potential entrants, Industry Rivalry (center), Substitutes
Processes
- Tech/Innovation: Project, Job shop, Cell, Flow, Humans vs. Machines, Product Innovation, Process Innovation - Execution: Planning + Control, QC, Maintenance - Improvement: Continuous Improvement, 6 Sigma Lean, Reengineering
BRANDS How much is Amazon's Brand is worth? Why are brands powerful? . Brand equity shifts the demand curve b/c...
- The NAME (not company) → Amazon, google, etc. - Worth $220 B - Brand equity shifts the demand curve b/c... People are WTP more for strong brands!
Income Statement
- The company over a period of time - Is reset to zero after a certain period of time is over - Looks different from company to company while balance sheets look almost the same - financial statement that summarizes revenues, costs of goods and expenses (including taxes) for a specific period and highlights the total profit/loss the firm experienced during that period - Companies can decide how much detail to put in their income statements
Positioning Pitfall To havecompetitive advantage... *Exception is that...
- Trying to be everything often ends up being nothing! Stuck in the middle usually does not work well. - .. You need to be best at something that resonates with customers - Sometimes you can be more than one thing, but it has to make sense and have a market for it.
Balance Sheet
- Where are they now? Snapshot/picture - Gets updated everyday, every year - A financial statement that reports assets, liabilities, and owner's equity on a specific date/single point in time. - Assets (what you own) - Liabilities (what you owe) = Equity (what you're worth) SO --> A = L + E *What you own = how you paid for it *gets constantly updated everyday, month, year, etc.
People
- Workforce: Selection, Training, Retention - Organization: Structure, Rewards, Performance Measurement, Culture
- The strength of the five forces determines... - Weak forces means...
- avg profit potential of the industry! - weak forces mean HIGH industry profits!
Broad Differentiation examples
- broad market + high prices - Starbucks, Apple, Whole Foods, Rolex, Watches, Tiffany + Co, Macy's, BU
How does strategy help coordinate all internal firm activities?
- by giving guidelines to each function within the firms, drives organizational choices/policies Ex) should firm invest more than rivals in R&D? - if we are making world's best razor blade (Gillette), then yes! - if we are making private labels (Wal-Mart brand), then no! - Without overall strategy to guide such decisions, they may be uncoordinated, duplicative, + work at cross purposes!
RMV Motor Vehicles Improvements included
- combining tasks + adding workers helps increase (double) capacity - UR is evened out almost flat (same at stations, more even work distribution). - pay per hr rises, but price per unit reduced
Steps for determining the strength of each force ...
- list ... (existing buys, suppliers, entrants, substitutes) - can they squeeze profits? - determine as lo/me/high - Overall, does the analysis suggest that the 5 Forces can exert substantial downward pressure on industry profits? Yes/No? Why?
Competitive Positioning - A firm has a competitive advantage if... - Organizations attempting to achieve competitive advantage (through Strategy) should choose between...
- most well-known - if it achieves a higher profitability than its industry average - Chose b/w: 1) achieving low costs (cost leadership) or high/premium prices (differentiation) & 2) serving all segments of a market (broad) or just a few segments (narrow)
focused differentiation
- narrow market + high prices - Ferrari, Ducati, Great Expectation Dating, Adventure Travel services, Lux Retirement Communities
Focused Cost Leadership examples
- narrow market + low cost - Student travel agency, Super 88, Market Basket (j in Boston), BU credit union, lunch trucks
Partnership
- supply chain: vertical integration coordination
Test marketing
- testing product amongst potential users
Operations
- the business function concerned with designing, controlling, and improving the process of producing goods or services. - it's about realizing that value (provided to customers + created in marketing) by producing goods and services that customers can purchase.
Bottleneck
- work center with least capacity (longest cycle time) - lowest capacity (fewest units produced in given time) - 100% CU
Most employees would rather see their boss fired than receive a pay raise. True/False
True
BUSINESS MODEL OF THE COMPANY: How does the business work (rough outline of steps to run a business, ~5 )?
1) Bring in capital in the form of equity ($ owners put in to get the business to get started) 2) buy assets (resources needed run business) 3) receive revenue from created value of good/service 4) spend most $ to run business (expenses on operations) 5) if leftover $ = profit - If profit not needed, given to shareholders as dividends OR if needed for growth, put back into business as equity investment (decision by shareholders) *More partners, split ownership of equity + profits
Marketing 5 C's
1) Company 2) Collaborators 3) Customers 4) Competitors 5) Context
Marketing Mix (4 P's) + Define each
1) Product/Service - a bundle of features + services - Any physical good, service, or idea that satisfies a want or need plus anything that would enhance the product in the eyes of consumers, such as the brand - Core, Actual, Augmented 2) Place/Channels - Select a distribution system, get the product to the right place *Intermediaries help! 3) Promotion - Design a promotional program - All the techniques sellers use to inform people about and motivate them to buy their products or services (visible to public: advertising, PR, etc.) 4) Price - Determine a brand name, design a package, and set an appropriate price - price is not related to cost --> its about WTP!
Evolution of Marketing (ERAS)
1) Production - focus on high Q! 2) Selling - mass production techniques est. → goals went from producing to selling, advertising, persuasion 3) Marketing Concept - Customer orientation, service orientation, profit orientation 4) Customer-relationship - 90's-early 200s → learning as much as possible abt presnet customer's + doing everything to satisfy, meet, exceed expectations, enhance customers satisfaction
Reading Notes: - 3 key principles of strategic positioning - strategy functions
1) Strategy is the creation of a unique and valuable position, involving a different set of activities 2) Strategy requires you to make trade-offs in competing- to choose what not to do 3) Strategy involves creating "fit" among a company's activities - discipline, set limits, communication (strategy + leadership are linked)
Brand Latter (4) w/ explanation
1) Values: "our audience stands for" - Ex: Good parenting, Family values Freedom, Love of nature 2) Emotional benefits "our product makes people feel" - Ex: Stops children crying, Reduces parental anxiety, No more fear of the outdoors 3) Rational benefits: "Because our product can" - Ex: Can be used with kids >2yo, Reduces symptoms, Acts quickly 4) Product Attributes: "Because our product has" - Ex: Benadryl contains camphor. Has no toxic/dangerous chemical, has gel formulation - Products have certain features, which produce rational benefits
What's considered short term?
current = 12 months / 1 year --> if you expect to use/receive/sell it within 1 year
7. What is arguably the most basic/simple strategy tool? A. Five Forces analysis B. Cost-Benefit analysis C. Scenario planning D. SWOT analysis E. Competitive positioning analysis
D. SWOT analysis found on slides 33 and 36
3 Key analytic tools
1. SWOT 2. 5 Forces 3. Competitive Positioning
18. All of the following are classes of consumer goods, EXCEPT: A. Convenience goods B. Shopping goods C. Specialty goods D. Support goods E. Unsought goods
D. Support goods Chapter 14 pp. 395-397
Warby Parker Takeaways How does WP create value?
1. Transparency is crucial to good customer service 2. Scaling up requires streamline operations 3. Decisions should be driven by data 4. Customer experience comes first 5. Even the little guy can take on Goliath • Marketing is about customer-centricity --> foundation of any business --> powers customer-empathy --> source of innovation --> drives: vision, mission, strategies, and tactics • marketing mix elements are aligned to support the customer value creation + overall customer experience • Everything the organization does is in order to create a satisfied customer (customer acquisition =>customer retention) - Create vale by focusing on customers, employees, community + environment - "We've created an example of a business that can scale, be profitable, and do good in the world without charging a premium for it."
2. To be successful a company must realize all the following, EXCEPT: A. Marketing innovation principles only apply to tangible product B. Innovation success is predicated on having the right business model C. A need can usually be solved by many types of products or services D. Customers must be willing to pay for the product or services E. Innovation must solve needs or relieves a pain point better than competing alternatives
A. Marketing innovation principles only apply to tangible product Slide 20
A Company's Supply Chain (chart)
2nd-tier suppliers --> 1st-tier suppliers --> [Inbound logistics] Transformation process - COMPANY [Outbound logistics] Distributors --> Customers
5. In Operations, what does "Cheap" mean in the phrase "Good Stuff Cheap"? A. The product is produced using the fewest resources B. The product is sold at a low price C. The product satisfies the customers wants and needs D. The product is produced with low cost labor E. The product is produced using low cost materials
A. The product is produced using the fewest resources
2. The routing for the job in Problem 1 also calls for stapling and three-hole drilling (in that order). The time standards are 10 minutes and 20 minutes, respectively. If labor cost is charged on the basis of total standard time multiplied by $6.00 per hour, estimate the cost of this job, including the work in Problem 1
35 min + 10 min + 20 min = 65 min 65 min / 60 min = 1.083 hours of labor for this job 1.083 hours of labor * $6.00/hour = $6.5 for the job
13. What is the main goal of the Porter's 5-Forces Analysis? A. To analyze expected industry profitability B. To analyze supply chain forces' contribution to profit C. To analyze the impact of company, customers, competitors, collaborators and context on profit D. To determine the intensity of one's rivals and its impact on profit E. To determine how product, people, place, processes and strategic processes impact profit
A. To analyze expected industry profitability found in slides + "The 5 competitive forces that shape strategy" pp. 40, 2nd to last paragraph
5. What is the maximum number of such jobs that can be produced in a 40 hour week?
40 hours/week X 60 minutes/hour = 2400 minutes in one week Cycle time = 35 min 2400 minutes available in one week to do job / 35 minutes to complete one job = 68.6
A factory can produce 60 toys per hour and wants to produce 240 toys in an 8-hour day. What's its capacity utilization? 160% 62.50% 75% 50.00%
50.00% CU = capacity required or demanded / capacity available Capacity demanded: 240 toys in 8 hours Capacity available: 60 toys per hour 60 toys per hour x 8 hours = 480 toys in 8 hours CU = 240 / 480 = 50%
1. The copy center has a job order that requires 500 pages of white and 200 pages of pink. The copying rate is 25 pages per minute, the overall setup time is 5 minutes, and the color change time is 2 minutes. What is the expected capacity requirement for the copy machine center to do this job? Assume that the setup must be done for every job of this type
700 pages total / 25 = 28 min 5+28+2 = 35 Total = 35 minutes of capacity needed
inventory turnover rate
= (Sales per period) /inventory =
Market Segmentation + Ice cream example
= Identifying + describing groups of customers who share similar needs Steps: 1. Identify Bases for Segmentation 2. Develop Profiles of Segments A) Homogeneous preferences (single large cluster) Ex: everyone wants creaminess + sweetness --> Response: produce sweet ice cream B) Diffused Preferences (dispersed, heterogenous) Ex: Everybody is really different in tastes --> Response: produce fro-yo, soft serve cone, + cup sorbet C) Clustered Preferences (several small clusters) Ex: 3 clusters of different combinations of creaminess + sweetness --> Response: produce 3 unique combos Segmenting: Heterogeneous/Homogeneous/ Operational/Substantial
Targeting List the 5 Market Targeting Strategies/Patterns of Target Market Selection
= selecting the group(s) of customers to go after (best potential return) 3. Develop Measures of Attractiveness 4. Select Target Segment(s) Strategies depends on Product & Market: - Single-segment concentration: Focus on 1 product category + go after 1 market - Selective specialization: multiple markets but in different product categories - product specialization: focused on 1 product category but try to address several markets - market specialization: focused on 1 market + have different products - full market coverage: Addresses several markets + product categories
Queue
= wait time - time spent waiting where no value is added - the input is not transformed in any material way *in terms of customer usually
8. Small Business LLC has $275,000 in long term assets, and they owe $200,000 for a mortgage and $100,000 in equity. How much do they have in cash? A.$25,000 B.$50,000 C.$75,000 D.$125,000 E.Not enough information to determine
A.$25,000 Assets = $275,000 + cash L = $200,000 E = $100,000 ($200,000 + $100,000) = $275,000 + cash 300,000-27000 = A.$25,000
Product Definition + Elements
A product is a bundle of features and services - Core Product: Basic Features/Benefits - Actual Product: Brand, quality, style, packaging, design - Augmented: Extra Service, Delivery, Installation, CSR, Financing, Warranties, End of Life *Competition occurs here
Identify each as a 1) Value 2) Emotional benefits 3) Rational benefits 4) Product Attributes A) A car has a battery hybrid propulsion system B) The car saves gas C) People like it because it has a fun design, it attracts peoples' attention D) Prius hybrid saves gas (+$) + makes me stand out E) It allows me to live + give voice to my own personal values of protection of the environment. A battery hybrid propulsion → allows me to live up life values → gives purpose to life
A) Product Attributes B) Rational Benefit C) Emotional benefit D) Rational + emotional E) Value
12. Shanice's hair salon is one of the best salons in town. However, Shanice is the only person working in the salon and the process for getting a haircut involves shampooing, cutting and then styling. If it takes Shanice 10 minutes to shampoo, 15 minutes to cut and 20 minutes to style hair, how many haircuts can Shanice do in one 8 hour-shift (assuming that she works continuously, and stops after 8 hours)? A. 10 haircuts B. 11 haircuts C. 24 haircuts D. 32 haircuts E. 48 haircuts
A. 10 haircuts 10+15+20 = 45 45min/60min=.75 hr 8/.75 = 10.67
10. The ___________ product is the product layer composed of elements such as Brand, Quality, Style, Packaging and Design. A. Actual B. Visual C. Augmented D. Core E. Finished
A. Actual Slide 69
4. In Accounting, what is the formula used for a Balance Sheet? A. Assets = Liabilities + Equity B. Assets + Liabilities = Equity C. Revenue - Liabilities = Gross Income D. Assets - Liabilities = Gross Income E. Liabilities = Assets + Equity
A. Assets = Liabilities + Equity slide 16
6. Which of the following is true? A. Balance sheet tells "where the company is" and Income statement tells "what happened" B. Balance sheet and income statements both tell "what happened" C. Balance sheet tells both "where the company is" and "what happened" D. Balance sheet tells "what happened" and income statement tells "where the company is" E. Income statement tells both "where the company is" and "what happened"
A. Balance sheet tells "where the company is" and Income statement tells "what happened" Slides 11, 15, and 16
Packaging must perform the following functions, except: A. Be made of recyclable material B. Attract the buyer's attention C. Protect the goods inside D. Describe and give information E. Explain the benefits of the good inside
A. Be made of recyclable material Chapter 14, p 398
14. When a firm attempts to achieve a sustainable competitive advantage by preserving what is distinctive about the firm (selecting the customers it will serve, deciding what different activities to perform), which of the strategy frameworks would be most helpful? A. Competitive Positioning Analysis B. Five Forces Analysis C. 5-C analysis D. Segmentation analysis E. A SWOT Analysis
A. Competitive Positioning Analysis slides 43 and 46
Calculating Labor Cost
Calculate Throughput time = TT + QT Labor cost = hourly wage x TPT
3. Hyun and Asha have started a Fruit Stand business in a rented store front. For this year, they bought fruits for $400,000, they ran ads in the local paper for $5,000 and paid rent of $2,500/per month. During the same period, they sold $600,000 of fruits and paid $100,000 in payroll for the two of them. What is their operating income? A.$65,000 B.$95,000 C.$100,000 D.$195,000 E.Not enough information to determine
A.$65,000 Operating Income = Sales/Revenue - COGS - operating expenses 600,000 - 400,000 - (5000+100000+(2500*12)) = 65,000
1. Acme Corp makes simple earnings using precious metals and beautiful gems. There are 3 steps in the manufacturing process, each with different yields and variables (materials and labor), as listed in the chart below. What is the Yield for this Process? (round to 2 decimals in your interim steps) Step 1: VC = 6, Yield = 90% Step 2: VC = 11, Yield = 87% Step 3: VC = 9, Yield = 95% A.74% B.87% C.90% D.95% E.Not enough information to determine
A.74%
Accounting is an _____________ that... Accounting turns _______ into _________
Accounting is an INFORMATION SYSTEM that: - measures business activities - processes data into reports + financial statements - communicates results to decision makers Accounting turns DATA into INFORMATION!
BS or IS? (can't go on both) Accounts Receivable Selling and Administrative Expenses Cash Machinery Office Supplies expenses Promotion and Advertising Sales Revenue Notes Payable Retained Earnings Accounts Payable
Accounts Receivable - BS Selling and Administrative Expenses - IS Cash - BS Machinery - BS Office Supplies expenses - IS Promotion and Advertising - IS Sales Revenue - IS Notes Payable - BS Retained Earnings - IS Accounts Payable - BS BS: - Accounts Receivable - Cash - Machinery - Notes payable - RETAINED EARNINGS - Accounts Payable IS: - Selling and Administrative Expenses - Office Supplies expenses - Promotion and Advertising - Sales Revenue *You find the retained earnings, but it doesn't GO ON the IS at first
Retained earnings
An amount earned by a corporation and not yet distributed to stockholders. - can be dividends or go back as equity investment
Apple cart company example: - We put in $100 of our own money - ACLLC borrows $200 from a bank - Company $275 to buy a cart How much cash?
Assets = $275 + cash Liabilities = $200 Equity = invested $100 300 = 275 + cash $25 in cash
7. Small Business LLC has $25,000 in cash, $275,000 in long term assets, and they owe $200,000 for a mortgage. How much do they have in equity? A. $225,000 B. $100,000 C. $250,000 D. $175,000 E. $75,000
B. $100,000 A = L + E ($275,000 + $25,000) = $200,000 + E E = ($275,000 + $25,000) - $200,000 E = $100,000 Slide 18
6. Tommy Quay is trying to figure out how much income his Garden Supply company made last year. He is so confused with all the numbers in front of him on his spreadsheets. He knows they made $600,000 in revenues, his Operating Profit was $65,000, the Cost of Goods Sold totaled $100,000 and that his tax rate to figure the expense is 20%. What was the Garden Center's Profit Margin? A. 2.17% B. 8.67% C. 10.83% D. 83.33% E. Not enough information to determine
B. 8.67% We know that operating income includes taxes, it's after taxes have been deducted from operating income, so we can just take $65,000, subtract (65,000*0.2 = 13,000) = $65,000 - 13,000 = $52,000 = net income. Since Profit Margin = net income / Rev sales, 52,000/600,000 = 8.67% The only things you need to pay attention to is your operating profit because everything has already been factored into it. So the next step it to take your taxes out of that so you will subract 13,000 from 65,000 and get 52,000. Then because it is profit margin your 52,000 is your net income and you divide that by your revenues to get your profit margin.
10. What are some of advantages to US companies manufacturing themselves as opposed to outsourcing/offshoring the Supply Chain? A. Companies can expand their markets B. Companies can have more control over their operations C. Companies can lower the investments needed D. Companies can pay lower wages E. Companies can have fewer regulations to worry about
B. Companies can have more control over their operations
9. When a company is able to harvest its own materials, assemble products, and sell them directly to the consumer, this is known as horizontal integration? A. True B. False
B. False That's vertical integration!
2. In the United States, what is the name/acronym for the rules we use for Accounting? A. US-ACC B. GAAP C. US-IFRS D. IRS E. IFRS
B. GAAP (Generally Accepted Accounting Principles) Slide 12
10. Which of the following forces is NOT one of Michael Porter's Five Forces: A. Industry rivalry B. Labor power C. Threat of Substitutes D. Buyer power E. Threat of entry
B. Labor power
9. What are the 4Ps of Operations? A. Product, People, Partnership, and Processes B. People, Place, Processes, and Partnerships C. Promotion, Product, Price and Profit D. Processes, Partnerships, Price and People E. Place, Price, Promotion, and Product/Service
B. People, Place, Processes, and Partnerships
4. What are the 4 P's of the Marketing Mix? A.People, Planet, Profit and Price B.Product, Place, Price and Promotion C.Planet, Product, Planet, and Profit D.Profit, People, Place, and Product
B. Product, Place, Price and Promotion *vs operations 4 P's: place process ppl partnership
4. When a company advertises "Our car goes 0-60 miles per hour in 6.1 seconds" they are promoting: A. Product attributes B. Rational benefits C. Emotional benefits D. Values E. All of the above
B. Rational benefits slide 25, 26, and 27
13. Having channels intermediaries: A. Does not create value for consumers B. Reduces the number of transactions in the market C. Is old fashioned and on its way out D. Always drives costs up for consumers E. Increases the power of manufacturers
B. Reduces the number of transactions in the market slides 75-76
Nike + Beats Differences
BEATS: • Product + celeb focused • Link sport to product ("getting in zone") • Leverage celebrity for their professional stance • What you can do with your headphones NIKE: • Value focused (no product) • "Ordinary" people focused • Celebrating achievements of "ordinary" people • Puts celebrities and "ordinary" people on equal level • What you can do with your body • Takes a strong societal value stand - CULTURAL brand!
Accounting basic equations
Balance Sheet: A = L + E Income Statement: Revenue - Expenses = Net Income (profit or loss) *If Exp>Rev --> operating at a loss
Income Statement goes (before/after) Balance sheet because...
Before b/c net income = your retained earnings use in the Equity part of your balance sheet!!
1. The copy center has a job order that requires 500 pages of white paper and 200 pages of pink paper. The copying rate is 25 pages per minute, the overall setup time is 5 minutes, and the color change time is 2 minutes. How many jobs like this one can the Copy Center complete in 1 (one) hour? (Assume that the setup must be done for every job of this type). A. Less than 1 job per hour B. 1 or more job per hour, but less than 1.5 jobs per hour C. 1.5 or more jobs per hour, but less than 2 jobs per hour D. 2 or more jobs per hour, but less than 2.5 jobs per hour E. 2.5 or more jobs per hour
C. 1.5 or more jobs per hour, but less than 2 jobs per hour 500 + 200 = 700 pages required for this job Copying rate = 25 pages per min 700 pages / 25 pages per min = 28 min for this job 28 min copying + 5 min setup + 2 min color change = throughput time of 35 min for this job In 1 hour: 60 min / 35 min per job = 1.71 jobs per hour
12. Which company is an example of Focused Cost Leadership according to the Competitive Positioning framework? A. Ikea the largest furnishing retailer, inspired by Swedish design B. Kia, a popular Korean automaker competing on price and design C. A discount, business-class only airline that operates between London and New York only D. Greyhound, the leader in intercity bus transportation in the US E. Starbucks Reserve, 12 new Starbucks locations, serving only the rarest, most extraordinary coffees
C. A discount, business-class only airline that operates between London and New York only "What is Strategy" reading p. 6 lecture slide 44
5. Which is true about strategy? A. Internal factors must be weighed against rivals before setting prices B. External environments are always unpredictable C. Both external environments & internal environments affect profits D. Profitability is based on a firm's ability to make its rivals look "bad" E. The best internal decisions are based on external factors only
C. Both external environments & internal environments affect profits found on slide 22
15. Operational effectiveness can be a source of competitive advantage via improvement in the following activities, except: A. Delivery processes B. Creation processes C. Communication processes D. Selling processes E. Production processes
C. Communication processes "What is Strategy" reading, top of p. 5
8. As part of positioning, marketing managers should consider: A. What the competitive set for the product/brand is B. What distinguishes the product/brand from the competitors C. How consumers should think about the product/brand D. How the company will impact consumers' thinking about the product/brand E. All of the above
C. How consumers should think about the product/brand Slide 61
19. Competition is greatest in which stage of the product life cycle: A. Introduction B. Growth C. Maturity D. Decline E. Both A&B
C. Maturity Chapter 14, p 405
15. Which marketing element has the least impact on the firm expenses? A. Product B. Place C. Price D. Promotion E. They all have comparable impact on expenses
C. Price Slide 83
11. Which one is NOT one the basic competitive strategies identified in Porter's competitive positioning framework? A. Cost leadership B. Differentiation C. Price leadership D. Focused differentiation E. All four are competitive strategies identified in Porter's framework
C. Price leadership slide 44
13. Financial accountants do the following, EXCEPT: A. Assess risks and benefits of investments B. Analyze financial statements C. Review systems, process, controls, and the numbers D. Prepare financial statements E. Analyze new opportunities for the business
C. Review systems, process, controls, and the numbers slides 38 and 41 ACCOUNTANTS are responsible for (A, B, D, E) AUDITORS/Audit services... - Auditors review systems, process, controls, and the numbers - Takes 1,000's of hours of CPA (Certified Public Accountant) work - Look for verification of transactions based on Statistical Sampling - Can't check every transaction - Look at enough to allow CPA to offer an Opinion that the financial reports are Fair The major product of an auditing firm is its integrity
14. The basic objectives of marketing communication are the following EXCEPT: A. Remind B. Persuade C. Serve D. Inform
C. Serve Slide 78
7. Which of the following statements is true? A. Segmentation divides a market into smaller segments of heterogeneous customers B. Segmentation is always done based on demographic characteristics C. Targeting is about selecting the best potential segment D. Positioning is about finding the optimal store/shelf location for a product E. All of the above are true
C. Targeting is about selecting the best potential segment *NOT A b/c segmentation sometimes divides market into homogenous groups w/ similar interests + sometimes into heterogenous (clusters) Chapter 13, p.376
6. What does cycle time mean in terms of Process Analysis? A. The time required for a job to go from start to finish B. The time required to complete a task C. The time between completion of successive tasks. D. The time of the bottleneck process E. The time waiting where there is no value
C. The time between completion of successive tasks.
3. Customers will usually buy which product? A. the one with the lowest cost B. the one with the most features C. the one with the highest value D. the one with the most benefits E. the one with the lowest price
C. the one with the highest value slide 24 and 28
2. Acme Corp makes simple earnings using precious metals and beautiful gems. There are 3 steps in the manufacturing process, each with different yields and variables (materials and labor), as listed in the chart below. What is the cost at 100% Quality? (round to 2 decimals in your interim steps) Step 1: VC = 6, Yield = 90% Step 2: VC = 11, Yield = 87% Step 3: VC = 9, Yield = 95% A.$19.24 B.$22. 11 C.$26.00 D.$30.85 E.Not enough information to determine the answers
C.$26.00
Task CU rate
CU = task time/bottleneck or cycle time *Process CU = capacity demand/capacity available
6. The copy center has a job order that requires 500 pages of white and 200 pages of pink. The copying rate is 25 pages per minute, the overall setup time is 5 minutes, and the color change time is 2 minutes. The time standards for step 2 and step 3 are 10 minutes and 20 minutes, respectively. What is the capacity utilization of each of the three work centers when the operating unit works at the maximum rate as determined in problem 5?
CU for a task = task cycle time/ process cycle or BN time. Copy = 35/35 = 100% Staple = 10/35 = 28.6% Punch = 20/35 = 57.1%
CMA
Certified management accountant (CMA)- professional accountant who has met certain educational and experience requirements, passed a qualifying exam and has been certified by CMA
Possible Competitive Positionings
Choose b/w: - low cost (cost leadership), differentiation (high/premium prices) - Broad/narrow market 1) broad + low cost = Broad Cost Leadership 2) broad + differentiation = Broad Differentiation 3) Narrow + low cost = Focused Cost Leadership 4) narrow + differentiation = Focused differentiation
Cost of quality equation
Cost of Good Quality + Cost of Poor Quality = Cost of Quality Cost of Quality includes all costs associated with the quality of a product from: - preventive costs intended to reduce or eliminate failures, - cost of appraisals to maintain quality levels, - the costs related to failures both internal and external.
Cost per hour + Cost per unit
Cost per hour = hour / sum of worker hourly wages Cost per unit = cost per hour / process capacity (units produced)
What is the cost of bad quality? What is the cost per unit of poor quality?
Cost per unit of poor quality = [Cost at less than 100% quality] - [cost at 100% quality] *the cost of bad quality = the difference b/w actual quality + perfect quality It means that it cost you $X more per unit because you have failures or imperfect quality
Prevention Costs
Costs associated with preventing defects before they happen: • Quality Planning (Hoshin Kanri) • Design (Prototyping, Field Testing) • Education + Training • Process Control • Information • Reporting • QIP, QIT • Supplier Involvement
Internal Failure Costs
Costs incurred to fix problems that are detected before g/s is sold: • Scrap • Rework • Retesting • Downtime - Capacity • Yield Losses • Managing Defective Materials
Appraisal Costs
Costs of activities designed to ensure quality or uncover defects: • Incoming Inspection • In-Process Inspection • Final Inspection • Testing Devices • Destructive Testing • Inventory Safeguarding
External Failure Costs
Costs that arise when a defect is discovered AFTER g/s is sold: • Customer Complaint Adjustment • Returned Materials - Restocking + Reshipping • Warranty Charges • Allowances for Defective Materials • Lost Business
15. Which of the following is NOT a reason Walmart is effective in managing their supply chain? A. Leader in logistics and supply chain technology B. The delivery dot C. Vendor managed inventory D. Closely guarded demand data for competitive advantage E. Point of use delivery
D. Closely guarded demand data for competitive advantage
6. What are the 5Cs in marketing management analysis? A. Channels, Consumers, Competitors, Company, Context B. Customers, Channels, Competitors, Collaborators, Context C. Customers, Channels, Collaborators, Company, Context D. Customers, Company, Competitors, Collaborators, Context E. Customers, Consumers, Competitors, Company, Collaborators
D. Customers, Company, Competitors, Collaborators, Context Slide 31
8. On an Income Statement, what are the costs of running a company called? A. Depreciations B. Entitlements C. Debt D. Expenses E. Liabilities
D. Expenses
5. Which is NOT one of the basic competitive strategies identified in Porter's Competitive Positioning Strategy? A. Cost leadership B. Differentiation C. Broad market D. Focused positioning E. They are all part of Porter's Competitive Positioning Framework
D. Focused positioning
1. Accounting can be described as an 'information system' that does all of the following, EXCEPT: A. Communicates results to decision makers B. Measures business activities C. Supports efficient allocation of capital D. Is mainly preoccupied with tax issues E. Processes data into financial statements
D. Is mainly preoccupied with tax issues Slide 5 and 6.
9. What are the components of the Marketing Mix or 4Ps? A. Promotion, Product, Price, Profit B. Planet, Profit, People, Price C. Process, Plant, Product, Profit D. Place, Promotion, Product, Price E. Product, People, Planet, Profit
D. Place, Promotion, Product, Price Chapter 13 p.367
4. What is strategy from an organizational perspective? A. The course of actions that the shareholders want implemented B. The discipline that analyzes the drivers of profit C. The collective vision of the board and executive team D. The activities that coordinates all the firm's functions E. The agreed upon approach for employees to best achieve short-term goals
D. The activities that coordinates all the firm's functions found on slide 13
17. The followings are historical eras in the development of the marketing discipline: EXCEPT A. The production era B. The selling era C. The customer relationship era D. The service era E. The marketing concept era
D. The service era Chapter 13 p.363-365
How do marketers implement the 4 P's of Marketing?
Design a product people want, price it competitively, place it where consumers can find it easily, and promote it so consumers know it exists
How to calculate variable cost of a good unit (cost per unit) at less than 100% quality? (non 100% yields)
Draw Table - For each step: cost = total VC (beginning cost + given VC at that stage) / yield as decimal - put the end cost of each stage as the beginning cost for the following state until you get to the end = cost per unit at imperfect quality
12. Amazon, the most valuable brand in the world, is worth about: A. $20 Billions B. $200 Millions C. $2 Billions D. $2,000 Billions E. $200 Billions
E. $200 Billions Slide 65
2. The copy center has a job order hat has 3 Tasks: Task 1 requires 500 pages of white paper and 200 pages of pink paper. The copying rate is 25 pages per minute, the overall setup time is 5 minutes, and the color change time is 2 minutes. The second Task for the job calls for stapling and the third Task is three-hole drilling (in that order). The time standards are 35 minutes for Task 1 (copy), 10 minutes for Task 2 (staple) and 20 minutes for Task 3 (3 hole drilling), respectively. If labor cost is charged on the basis of total standard time multiplied by $6.00 per hour, estimate the cost of this job. A. $2.80 per job B. $3.00 per job C. $5.80 per job D. $6.00 per job E. $6.50 per job
E. $6.50 per job cost of a job = TPT x hourly wage TPT = 35 + 10 + 20 = 65 min 65 min / 60 min per hour = 1.083 hours (TPT) Cost = 1.083 total hours x $6 = $6.5
To formulate a potentially effective strategy, we need to understand an organization's _____ + ______ Environment External Environment --> Internal Environment -->
Internal + External External Environment = Industry level sources Internal Environment = Firm-level sources Industry + Firm levels sources form firm strategy which drives Firm's Economic Profits
IFRS
International Financial Reporting Standards
3. The copy center has a job order that requires 500 pages of white paper and 200 pages of pink paper. The copying rate is 25 pages per minute, the overall setup time is 5 minutes, and the color change time is 2 minutes. The second Task for the job calls for stapling and the third Task is three-hole drilling (in that order). The time standards are 35 minutes for Task 1 (copy), 10 minutes for Task 2 (staple) and 20 minutes for Task 3 (3 hole drilling), If the job has to wait in queue at the copy work center for 24 minutes, at the stapling work center for 43 minutes, and at the three-hole drilling work center for 17 minutes, what is the throughput time for this job? (These queue times apply only to this question!) A. 82 minutes B. 84 minutes C. 108 minutes D. 132 minutes E. 149 minutes
E. 149 minutes TPT = Task time + Q time TPT = 24 + 35 + 43 + 10 + 17 + 20 = 149 min
4. The copy center has a job order that requires 500 pages of white paper and 200 pages of pink paper. The copying rate is 25 pages per minute, the overall setup time is 5 minutes, and the color change time is 2 minutes. Suppose the copy center only did jobs exactly like this one (500 white, 200 pink). What would the cycle time be? Assume that different people work in each of the three work centers. A. 20 minutes B. 28 minutes C. 30 minutes D. 33 minutes E. 35 minutes
E. 35 minutes Cycle time = bottleneck task Since copying takes the longest (35 min > 10 min stapling, > 20 min drilling) cycle time = 35 min
5. What is the best way to create customer value? A. Decreasing costs B. Increasing benefits C. Decreasing cost and benefits D. Increasing benefits and cost E. Both A or B can do it
E. Both A or B can do it Slide 28
3. The profits realized by a firm become: A. Dividends B. Equity C. Assets D. Revenue E. Dividends and/or equity
E. Dividends and/or equity Slide 10
8. According to Porter's economic model of industry profit, which industry is an example of "perfect competition"? A. Supermarket retailing B. Mobile telecom industry C. Airlines industry D. IT consultancy E. House cleaning services
E. House cleaning services found on slide 38
3. What are the three possible mechanisms to ensure long-term profitability of the firm? A. Increase profits, lower prices, or improve quality B. Lower costs, increase market share, or decrease defective products C. Corner the market, decrease number of competitors, or retain more customers D. Increase quantity, improve quality, or lower costs E. Increase prices, increase quantity, or lower costs
E. Increase prices, increase quantity, or lower costs "Goal is to maximize size of rectangle by raining prices, reduces costs, improving amount you can sell relative to avg for industry" found on slide 12
11. Hyun and Asha have started a Fruit Stand business in a rented store front. For this year, they bought fruits for $400,000, they ran ads in the local paper for $5,000. During the same period, they sold $600,000 of fruits and paid $100,000 in payroll for the two of them? What is their operating income? A. $95,000 B. $100,000 C. $195,000 D. $200,000 E. Not enough information to determine.
E. Not enough information to determine. Total Sales = $600,000 Cost of sales/ COGS = $400,000 Operating expense (advertising + payroll) = $5,000 + $100,000 *Missing rent! (goes into operating expenses)
9. All of the following are correct limitations of the SWOT analysis EXCEPT: A. sensible, thoughtful, well-informed people can draw completely different SWOT analyses B. SWOT does not tell us much about external drivers of profits C. strengths can also be weaknesses D. SWOT does not tell us much about internal drivers of profits E. SWOT is not widely used in strategy analysis
E. SWOT is not widely used in strategy analysis answer can be found on slide 36
7. What does Cost of Sales represent? A. The expenses incurred by a company to receive revenue for their product or service B. The liabilities incurred by a company to receive revenue for their product or service C. The operational expenses related to running the business during a specific period of time D. The dollar amount of markdowns applied when items are discounted E. The direct cost of goods provided to customers
E. The direct cost of goods provided to customers
15. What does cost of sales represent? A. The operational expenses related to running the business during a specific period of time B. The cost (salaries + expenses) of sales people C. The expenses incurred by a company to receive revenue for their product or service D. The dollar amount of markdowns applied when items are discounted E. The direct cost of goods provided to customers
E. The direct cost of goods provided to customers Slide 31 COS = Direct cost of goods provided to customers
1. What is the goal of strategy in practice? A. to achieve the largest market share relative to competitors B. to enable the organization to devote most its capital to shareholder-maximizing activities C. to achieve long-term environmental sustainability D. to achieve operational efficiencies that minimize waste E. to enable organizations to achieve the greatest possible profit
E. to enable organizations to achieve the greatest possible profit answer can be found on slide 10
Origins of Porter's Five Forces framework based on... What's porter's insight? Categorize the following: - Sofit-drinks like Coke + Pepsi, Micro-processors - Patented drugs, phone companies in '70's - Restaurants, Tax Advice - Taxi drivers, lawn care, house cleaning products
Economic Models of Industry Profit Perfect comp: - entry, many firms, no differentiation/identical goods, no entry cost - 0 Profit - Ex) Taxi drivers, lawn care, house cleaning products Mon Comp - price + entry, many firms, some diff, entry cost > 0 - Price > MC, 0 profit - Ex) Restaurants, Tax Advice Oligopoly - Un-differentiated Q, Differentiated P, few firms, entry cost > 0 - Price > MC, Profit > 0 - Ex) Sofit-drinks like Coke + Pepsi, Micro-processors Monopoly - Price --> Quant, Diff irrelevant, 1 firm, entry cost >> 0 - price >> MC, HIGH profit - Ex) Patented drugs, phone companies in '70's Porter's insight = principles of economics to help firms understand (and improve!) industry profits
Marketing Environment Factors
Environment: Sociocultural, competitive, technological, global, economic
Price + Revenue Management
Expenses = Place, Promotion, + product Price allows us to capture revenue price - expenses = revenue Price has nothing to do with cost (!), it is what people are willing to pay *Important b/c It is usually cheaper and more profitable to retain customers than attract new ones
T/F: Avg profitability remains the same across industries + firms
FALSE
11. It is always a bad idea to try to be more than one thing in consumers' mind. True/False
FALSE Slide 65: "Sometimes you can be more than one thing, but it has to make sense and have a market for it."
7. You wait in line at Starbucks for 5 minutes. It takes 2 minutes for you to place your order of a tall mocha with the cashier and pay. It takes 4 minutes for the barista to make the mocha. The bottleneck in this process is your wait time of 5 minutes. True/False
FALSE That's the Q time, bottleneck is 4 min.
16. Optimal cost of quality is reached when prevention costs and appraisal cost are at their lowest point. True/False
False
17. Companies in the same industry tend follow the same supply chain design approach. True/False
False
9. A software company will usually have a lot fewer current assets than long term assets? True/False
False
13. Damien has a wedding invitations printing yes business. He made a typo on the invitation for Alejandro and Kendra's wedding. He only saw the mistake while inspecting the order before mailing out the 100 invitations on behalf of the couple. Consequently, all 100 invitations had to be scrapped (thrown away in the recycle bin) and he had to redo everything. Scraping the 100 invitations is an example of prevention costs for quality management. True/False
False (Inspection is an example of appraisal cost)
12. Typically, operating income is greater than gross profit True/False
False Gross profit will typically be greater than operating income because operating income is Gross profit - operating expenses (Slide 31)
10. Operating Income is determined after interest and tax are deducted. True/False
False Slide 33
1. Branding, Advertising campaigns, and online strategies are the main components of marketing. True/False
False Slide 6 & Chapter 13 p. 362
16. Product price should be set based on product variable cost. True/False
False Slide 88
14. During an accounting audit, the auditors spends many hours checking every financial transaction in the company. True/False
False Slide 41 - spend 1000's of hours of CPA work, but can't check EVERY financial transaction
Finding __________ = Finding _______
Finding Applications = Finding Potential Customers
Goal of strategy (in practice + in research)? Key features?
Goal: Enable organizations (typically, firms) to achieve the greatest possible organizational performance (profits) - develop/implement an overall approach for ensuring long-term profitability + highest possible rate of success (relative to rivals) 1 - max value create + capture 2 - brains that coordinates all firm functions 3 - rivals respond 4 - both external/internal environment affect firm profits 5 - requires tradeoffs (what you do/do not do) - in research: understand the determinants of long-term organizational performance (with the hope of informing practice)
Good Stuff Cheap
Good - Effectiveness: the extent to which the product and its delivery satisfy the customers' wants and needs Stuff - Goods + Services Cheap- Efficiency: extent to which products are produced using the fewest resources necessary
Gross Profit Margin
Gross profit / sales revenue *100 Regular profit is between 5% to 10%
Work in Process (WIP)
Inventories held at or between work centers.
Raw materials
Inventory inputs stored before processing
Finished Goods
Storages of completed products or outputs.
Positioning
HOW A CONSUMER (SEGMENT) THINKS OF THE BRAND!! - Plus, How the company tries to impact that thinking though the use of all marketing mix variables Segmentation/Targeting + DIFFERENTIATION (Distinguishing brand from its competitors) ===> Positioning Differentiation is the creation of real or perceived product differences. Some are very small and others can be great such that customers are asking for the product by just their brand name. Ex) kleenix instead of tissue or Coke/pepsi instead of cola
The Two dimensions of the 5 Forces: What does each determine?
Horizontal: The Power of Buyers, Suppliers, + Industry Rivalry determines who gets the profits that the industry could potentially generate Vertical: The Threat of Entry and Threat of Substitutes determine whether the industry value chain can generate any profits at all
Vertical Analysis
How do the #'s RELATE to each other? •State numbers as a % of another. •For example: as a % of revenue •Could be done on any basis and is applicable to balance sheet as well (for example as % of total assets) Reasons why we do this analysis: •Easier to understand the relationships between items on a statement •Easier to compare with a benchmark company or industry averages
Horizontal Analysis
How do the numbers CHANGE over time? • Looks at performance and/or financial health over time • Can be done year-to-year or quarter-to-quarter, or month-2-month etc. • based on raw #'s or % • Is applicable to balance sheet too Reasons why we do this analysis •Allow to better track the impact of managerial decisions (before-after) •Is the business improving or not? •Connect business performance to macro-economic or competitive environment changes
Gladwell Ted Talk
Howard Moskowitsx → reinvented spaghetti sauce 1) Changed how the food industry thinks about making you happy 2) Horizontal Segmentation - product plane = horizontal (market = vertical) - food does not exist on a hierarchy but rather a horizontal plane → no good, bad, imperfect mustards → There are only different kinds of mustards that suit different kinds of people 3) Confronted the notion of the platonic dish --> Recent movement from universals to understanding variability
Product Life Cycle Most + Least competetive?
INTRODUCTION, GROWTH, MATURITY, DECLINE - maturity is the most competitive - decline is least com
Income statements vs balance sheet How often is each updated + which tend to look alike across companies + which vary?
IS: - Reports out on period of time, all #'s go to 0 + start reporting on new period of time - Challenge → they all look very different - More variation b/w companies in how much detail/information to put on BS: - updated every day based on whats happened to company - All look alike w/ current, LT assets, liabilities, Eq. etc.
Idle time
Idle Time: period of time an ASSET (machine or employee) is ready and available, but is not doing anything productive. When cycle times of the different operations are unbalanced, some steps in the process are idle while others are working all or most of the time.
Process Flow Diagrams Definition + Key
Illustrates the preparation process - Tasks = rectangles or circles - Flows = arrows - Decision points = diamonds - wait = inverted triangles.
Marketing is central to_________ because....
Innovation + bringing solutions to markets b/c... - innovation too important to be left to scientists/engineers - Innovation solves needs/relieves pain points (better than competing alternatives) - Customers must be WTP (for benefits it creates) - A need can be solved by many types of products/services. Marketing figures out which type is most likely to succeed. - Innovation success is predicated on the right product/service design, the right business model, and the right go-to-market strategy + RIGHT ALIGNMENT W/ CUSTOMERS' NEEDS
The accounting system
Inputs accounting documents --> processing --> outputs (SM 131 focuses on this part) Outputs: Financial statements Balance sheet Income statement Statement of cash flows
Promotion is often called... IMC 3 Basic objectives include:
Integrated Marketing Communication (IMC) to reflect the multitude of media and touch points between customers and the brand 1) Inform 2) Persuade 3) Remind
Role of Channels + Intermediaries Pharmacy Example
Intermediaries reduce the # of commercial relationships/transactions + transaction costs Ex) Pharmacy → Labs sell to pharmacy → Lowers cost of system → Brings more value since all customers can pick up all 3 medications at 1 location instead of having to go pick up 3 different medications at 3 different places PILLPACK (amazon)→ sends presorted medication w/day of week, month, time Reduce # of transactions + extra benefit Economic, health, social value
Assets
Investments in the business, stuff purchased by company (what you own), resources Current/short-term: - #1 CASH! - Notes Receivable - Accounts Receivable - Inventory + Supplies Fixed/Long Term: - Equipment (ex. vehicles) - Property/plant/buildings Current + Fixed = Total Assets *Listed in order of LIQUIDITY
What is the ratio of variable cost per unit at 100% yields to variable cost per unit at current yields?
Just divide the costs
Longest task time means _____ capacity and _____ CU
Longest task time means lowest capacity + highest CU
Steps in customer analysis:
Market Segmentation 1. Identify Bases for Segmentation 2. Develop Profiles of Segments Market Targeting 3. Develop Measures of Attractiveness 4. Select Target Segment(s) Marketing Positioning 5. Develop Positioning for Each Segment 6. Develop Mix for Marketing Each Segment
McD's Effective Supply Chain Management Example
McD's: - Effective partnership policies - Loyalty to suppliers - Progressive franchise policy - Policy effects (High consistency, high innovation levels , Industry leadership)
CALCULATE YIELD Ex) Yield at Task 1 = 95%, 2 = 82%, 3=97%, 4=92%, 5=89
Multiply yield %'s as decimals (.95 * .82 * .97 * .92 * .89 = .619) Total yield = 61.9%
What's your net income? - Buy a crate of apples for $40 - Run an ad for $5 - It works, we sell the apples for $60
Net income = Rev - Exp NI = 60 - (40 + 5) = 60 - 45 NI = $15
Profit Margin
Net income/ sales revenue *100
Liabilities
Non-owner financing, $$ borrowed by the company (What you owe/DEBT) Current (also w/in 1 year): - Accounts payable (general administrative expenses yet to be paid - wages, advertising, etc.) - Rent, lights, utilities - Short term notes payable (ex. loan under 1 yr) *ignore depreciation Long-term: - Notes payable (financial institution, interest rate, formal) --> Ex) property mortgage, loans for a fleet, etc.
Which of the following is NOT one of the ways financial statements track the activities of a business? Operating: creating and bringing value to customers Investing: acquisition and sale of assets Financing: capital inflows and outflows Projections: reporting future earnings of the business
Projections: reporting future earnings of the business
Equity
Owner financing, $$ invested by owners OR $$ Earned by the company (what you're worth) Controlled Capital: - Common STOCK - other equity - Retained Earnings ! (this is what goes into the EQUITY part of the balance sheet
External Environment (acronym) factors to consider:
PEEST • Political factors • Impact on the Environment and Sustainability • (Macro) Economic factors • Social factors • Technological factors • Regulatory factors • Demographic factors • Industry factors • Competitors' actions
OM 4 P's
People Place Processes Partnership
Customers buy _______A______, not ______B________. A are the basic ingredient in _______.
People buy benefits - not features Benefits are the basic ingredient in perceived value
Vertical Integration
Practice where a single entity controls the entire process of a product, from the raw materials to distribution - Vertical integration occurs when the chocolate manufacturer (e.g. Mondelez) purchases a cocoa bean processor that is buying its beans from. As a result, the manufacturer can pay exactly the marginal cost - rather than profiting the processor. In turn, consumers may see lower prices in a competitive market place. Vertical = ONE Company does it all = the combination in one company of two or more stages of production normally operated by separate companies.
Which of these belongs on a balance sheet? Advertising Expenses Revenue Cost of Goods Sold Prepaid Expenses
Prepaid Expenses Because Advertising, Expenses, Revenue, Cost of Goods Sold all go on IS
Pricing Paradox
Price is arguably the easiest, fastest, + least costly adjustment that one can make to the marketing mix... yet small changes in price can have very large effects on the bottom line
What do Financial Accountants Do?
Primarily revolves around the preparation and analysis of financial statements • Analyze new opportunities for the business • Determine costs + prices of goods and services • Evaluate + help determine marketing alternatives • Assess risks + benefits of investments • Participate in strategies for mergers and acquisitions • Develop systems to control, track + analyze financial performance • Serve as consultants on variety of strategic decisions - Private + Public/CPA Accountants - Public Accountants Bring Integrity to Financial Reporting
Who Uses Accounting Information? Goal of accounting?
Primary Audience for financial accounting info: - (potential) stockholders (investors in firm equity) - (potential) creditors - employees, owners, creditors, unions, investors, government Goal = give these investors information to efficiently allocate capital
Process Capacity vs. Task Capacity
Process Capacity = units produced at bottleneck station = available time / cycle time (BN) Task Capacity = Time available (typically 1 hour) / task time
Process Capacity
Process Capacity per hour = available time / cycle time - how much can be produced (or customers served) in a given amount of time
Cycle Time Vs Task cycle time
Process cycle time = time between completion of successive units = bottleneck time Task cycle time = (task time/ # of workers)
You are at Disney World and wait 45 minutes to ride the roller coaster at Space Mountain. Guests board the roller coaster in batches of 20. The ride takes 3 minutes and all riders get off at the same time. What is the cycle time of this process? What is your throughput time?
Q time = 45 min Task time = 3 min Cycle time = bottleneck Cycle time = 3 min TPT = Q + Run time = 45 + 3 TPT = 48 min
Queue vs Idle time
Q: Time work in progress waits to be processed or time customer waits (work in process is stacking up waiting to be manipulated) Idle: Asset (person/machine) waits to do/process/ manipulate something and is not adding value
Calculating the yield of a full process with Rolled Throughput Yield (RTY):
RTY = (Yield at Step 1) * (Yield at Step 2) * ... (Yield at Step n) In a multi-step process, the RTY is the product of the yields at each step and provides better insights into the cost of quality and where we could improve.
Order of Income Statement
Sales/Rev - Cost of Goods Sold Gross Profit - Operational Expenses (SGA, utilities, rent, salaries...) Operating Income/Profit (Earning Before Interest + Tax) - Interest Expense (bank payment) Earnings Before Tax - Tax Expense (= tax rate * EBT) Net Income Net income --> Retained Earnings (EQUITY) in balance sheet or DIVIDENDS
There are MANY ways to segment markets (orange example). The challenge is to find the meaningful way. The one that maximizes _______
Segment - What is it used for ? Juice? Snack? Dessert? Ingredient? Mixer? - In what form do they want it? Smoothie? Packaged? - What do people care about? health? family time? Vitamins? ***Identify the way that maximizes competitiveness for a given firm + a given set of market conditions.
Marketing Management 3 Building Blocks
Segmentation, Target Market Selection, Product Positioning
How to calculate variable cost of a good (cost per unit) be if yields at each step were 100% (perfect quality)?
Sum of Variable Costs
Examples: - Supermarket industry profitability? - tobacco industry profitability? - Airplane industry
Supermarket industry (LOW): buyers are strong b/c can shop anywhere + not particularly loyal. Suppliers are particularly strong b/c it's whether they can get specific personal brands at those supermarkets (not loyal to supermarket brand) - In 5 forces, tobacco industry does NOT lead to low profits
Task Capacity
TASK Capacity per hour = time avail/task time
What is quality?
The ability of a product or service to CONSISTENTLY meet or exceed customer expectations
4. Suppose the copy center only did jobs exactly like this one (500 white, 200 pink). What would the cycle time be? Assume that different people work in each of the three work centers
The bottleneck is still the copy stations. It is 35 minutes, highest task cycle time.
10. Potential Criteria to evaluate the quality of the copy center's product
The correct count of pages The absence of badly printed/wrinkled pages The on-time delivery The position of the staple The quality of the paper used The use of the right color paper The absence of paper powder, or "confettis" from the punching machine The sorting/collating/packaging of the order The price charged The invoicing system The types of payments they accept The visual appearance of the copy center The hours of operations The friendliness of the staff
Rework
The correction of a product that does not initially meet the minimum quality standards
batch
The number of units to be produced at a time
Capacity Utilization Definition + Equation
The percentage of capacity used, how much of the available capacity is used CU = capacity required / capacity available CU = demand / capacity CU = actual output / max output possible *this in other words = task time / BN time Capacity Utilization is the ratio of: capacity demanded (e.g., expressed as quantity demanded or time demanded) / capacity available in process CU @ a given task = task time/ bottleneck task time or process cycle time OR: Demand/capacity (of units per station) bottleneck unit capacity / given task unit capacity
3. If the job has to wait in queue at the copy work center for 24 minutes, at the stapling work center for 43 minutes, and at the three-hole drilling work center for 17 minutes, what is the throughput time for this job? (These queue times apply only to this question!) What's the bottleneck?
Throughput time = Task time + Q time TPT = 24+35+43+10+17+20 = 149 min Bottleneck: copy workstation at 35 min
Throughput time Definition + Equation
Time for a single unit (or customer) to get from the beginning of the process to the end. - Throughput time = Queue time + Task time - Time required for a job to go from start to finish.
Task Time
Time required to complete a task Task Time = Run Time + Setup Time
Supply Chain: To Make or not to Make?
To Make: - More control - Easier integration across functions - Fewer transportation issues - Rapid response to customer - Avoid safety/environmental blindspots - Fewer trade/tariff issues Not to Make: - Lower wages - Lower fixed costs - Fewer regulations - No/less investment required - IT enables global coordination - Globalization expands markets
11. In light of COVID-19, fast-food retail establishments are using their websites for mobile orders as opposed to using workers for in-person service. This is an example of a change to Processes as it relates to the 4Ps of Operations. True/False
True
8. Suppose you are operating a machine that produces only one type of part and the part is produced every 30 seconds (its cycle time). The capacity of your machine in units per hour is 120 units/hour. True/False
True 3600/30 = 120
5. On a Balance Sheet, Assets are things purchased by the company. True/False
True Assets are what you own, stuff Purchased by the company (Slide 17)
14. When a company is able to harvest its own materials, assemble products and sell them directly to the consumer, this is known as vertical integration. True/False
True Slide 26 "Organizations Add Value by: Harvesting Raw Materials Producing Basic Materials Fabricating Parts Assembling Products Distributing Products Selling Products to Customers Providing After-Sales Service Reclaiming Materials through Recycling Some firms perform several of the activities; those firms are vertically integrated."
2. Strategy requires you to choose what not to do True/False
True "What is Strategy" reading, p. 6
6. The point of industry analysis is to understand the underpinnings of competition and the root cause for profitability True/False
True found in "The 5 competitive forces that shape strategy" pp. 51
Who uses GAAP? IFRS
US: GENERALLY ACCEPTED ACCOUNTING PRINCIPLES IFRS = International Financial Reporting Standards, also IFRS Variation *last in first out accounting: LIFO, FIFO US GAAP: about 85% same as IFRS
Environment analysis is related to marketing b/c... - Use ________ to understand the external and internal environments - Determine how you can compete (2 fundamental ways)
Use SWOT analysis to understand the external + internal environments. Internal factors for company analysis. External factors for market analysis. Cost leadership (low cost) - Lower cost structure to still be profitable at lower price point - NOT PRICE: Lower cost will give you price advantage, but anyone can have price advantage if willing to sacrifice profitability OR Differentiation (premium price) - Can't offer cost-leadership position - Offering something unique/different that customers are willing to pay more for
Organizations Add Value by: Firms that perform several of these activities are:
Vertically integrated firms add value by: - Harvesting Raw Materials - Producing Basic Materials - Fabricating Parts - Assembling Products - Distributing Products - Selling Products to Customers - Providing After-Sales Service - Reclaiming Materials through Recycling
2 Questions we need to know about each business:
What happened? Where are they now?
Work Centers
Within an operating unit, particular kinds of transformation operations are performed by people or pieces of equipment.
Cost of quality sweet spot (graph)
X axis = quality + y axis = cost - increasing curve is costs of prevention + appraisal (good quality) - decreasing curve is costs of int/ext. failure (bad quality) - goal = right in the middle at the intersection of the 2 curves, lowest total cost, invest enough so int/ext failures are minimal
Annual report
a yearly statement of the financial condition, progress, expectations of an organization - Management's discussion + analysis of operations - Balance sheet - Income statement - Statement of cash flows - Statement of owners' equity or retained earnings - Auditor's opinion
Assets are listed in order of _______ + separated into ______
liquidity and are separated into current/short term + fixed/long-term assets.
Brand categories
manufacturers, dealer, generic, knockoff
Accounting promotes....
appropriate resource allocation by firms + capital markets
Flows
arrows
Assets are _____ while liabilities and equity are ______
assets are resources L + E are sources of capital
Costs + benefits include...
benefits: functional, social, personal, experiential Costs: monetary, temporal, psychological, behavioral
Marketing is about.... Customer value =
creating and delivering value for customers and the world CUSTOMER VALUE = TOTAL BENEFITS - TOTAL COSTS
decision points
diamonds
Net income becomes...
either Retained Earnings (EQUITY) in balance sheet or DIVIDENDS
Contributed capital
equity - owner contributions to a corporation
"Expected Capacity requirement" means...
expected time the task/process will take; task or throughput time depending on the wording of the problem
Process analysis
how to develop a process for producing goods and services
wait
inverted triangle
Scrap/Scrap Rate
measures the losses per period (1 - yield) *defective SCRAP RATE = BAD UNITS / TOTAL UNITS (or: 1 - yield rate)
- Strategy = set of choices that lead to... - What is an organizations profits? - How do you maximize those profits (rectangle size)?
price/cost + quantity graph (proftis!) - Difference b/w price + avg cots multiplied by quantity of item sold = organization's profits (value capture) Increase prices, quantity you can sell relative to industry avg, or reduce costs
As appraisal + prevention costs are increase...
quality increases + Int/Ext failure costs decrease
Tasks depicted as
rectangles (or circles)
Strategy is based on... • Because rivals respond, individual functions alone will (often/rarely) lead to long-term advantage
rivalry --> Strategist must focus on fact that rivals respond! - Strategy requires undertaking actions while anticipating their potential effect on rivals' and rivals' likely responses to those actions • Because rivals respond, individual functions alone will RARELY lead to long-term advantage
Liquidity
the ease with which an asset can be converted into cash
Yield/Yield Rate
the percent of good items in a batch (output quantity/input quantity) YIELD RATE.= GOOD UNITS / TOTAL UNITS
WorKflow
the sequence of steps required (or routing).
Set-up Time
time used to prepare for a job and clean up after the job is completed (Setup time is independent of the # of items in the batch)
What is the right capacity utilization for a process?
• As high as you can make it (100% is the limit) + still meet customers' requirements - like quality, fast and/or reliable delivery, or customization • Capacity utilization is an efficiency measure that relates directly to cost and inversely to customer service • Queue times rise exponentially as capacity utilization passes 80% and approaches 100%
Internal Environment factors to consider:
• Firm history • Physical Capital (Resources $$) • Human Capital (leadership, quality of personnel + training) • Routines (innovative practices) • Products/Market share (synergies across products) • Intellectual Property • Location/Real Estate
• How are effectiveness and efficiency achieved?
• Knowing customer needs • Understanding technology • Innovation (Design, Technology, Process) • Deploying + coordinating resources (Process design, Process execution --> Discipline + Consistency+
Assurance / Audit Services Provide Integrity to Financial Reports What do they do?
• Management prepares the financial reports • Auditors review systems, process, controls, + the numbers • Takes 1,000's of hours of CPA work • Look for verification of transactions based on Statistical Sampling • But CAN'T check EVERY transaction • Look at enough to allow CPA to offer an Opinion that the financial reports are Fair
(Risk) Ethical Issues Arise from Supply Chains
• Safety (ex: Honda, Nizzan) • Worker treatment - wages, hours, well-being (ex: Nike sweatshops, Apple Foxconn) • Environment (Chemicals, Steel)
Walmart Effective Supply Chain Management Example
• Trailblazers in supply chain coordination • Sharing of demand data • Leader in logistics + supply chain technology • Point of use delivery • Vendor managed inventory • The delivery dot • Results: Small, rural-based competitor --> Industry leader + top of Fortune 500
SWOT: About, Pros, Cons
• simplest • most widely used • the tip of the iceberg! • not the most powerful strategy framework Pros • quick; easy to do; easy to understand • most widely used/ recognized • they help strategists organize their thoughts Cons • strengths can also be weaknesses (ex: high quality labor is also expensive) • sensible, thoughtful, well-informed people can draw completely different SWOT analyses • SWOT does not tell us much about EXTERNAL or INTERNAL drivers of profits
