PR 429 Quiz 2
SEC
A government commission created by Congress (1934) to regulate the securities markets and protect investors. In addition to regulation and protection, it also monitors the corporate takeovers in the U.S. Created after crash of 1929
Organic growth
comes from expanding your organization's output and by engaging in internal activities that increase revenue organic growth is internal growth the company sees from its operations, often measured by same-store or comparable sales
Inorganic growth
comes from mergers, acquisitions, and joint ventures. growth from buying other businesses or opening new locations
Form 4
whenever there are changes in an insider's ownership (i.e. a purchase or sale) of company securities Ex: if CEO decides to sell a great deal of the stock he has
Different competitive business strategies
** A competitive strategy is narrower in scope than a business strategy
Financial Communication: Reasons why private companies do no disclose financial information
- Attracting private capital - Attracting suitor for a merger or acquisition - Attracting JV partner/key recruiting - Pre-IPO, starting to act like a publicly traded company to start establishing credibility in advance of an offering and its quiet period
Focus strategies keys to success:
- Choose a niche were customers have a distinctive preference, unique needs or special requirements - Develop a unique ability to serve the needs of a niche target market
Adam Smith
- Father of modern economics - Wrote wealth of nations (published 1776) - Laissez faire - let things be - Believed gvmt and policy should be hands off - Economy doesn't need interference I.e. if you're a bad business, you deserve to go under Classical view of economics - hands off Dominant view until great depression - His ideas came back in relevance w Margaret Thatcher (prime minister 1979-1990) - believed we should not regulate business - Very similar thoughts to ronald reagan - less gvmt interference - If he lined up w today's views, he would be the republican view (conservative) GOVERNMENT SHOULD NOT BE INVOLVED in economy Before Great Depression → Adam Smith outlook on gvmt
Best-cost provider strategy (competitive strategy)
- Give customers more value for the money by combining an low cost with an upscale differentiation - Combines low-cost and differentiation - Create superior value by meeting or beating customer expectation on product attributes and beating their price expectations ex: Lexus (luxury car, without the price) - Match close competitors on key product attributes and beat them on cost - Expertise at incorporating upscale product attributes at a lower cost than competitors - Contain costs by providing customers a better product Ex: courtyard by marriott
What makes a niche attractive?
- Large enough to be profitable - Good growth potential - Not critical to the success of major competitors - Organization has the resources to effectively serve the niche - Organization can defend itself through a superior ability to serve the niche - No competitors are focusing on the niche Ex of a niche: Trader Joes
Responsibilities of Board of Directors
- Responsible for organization performance - Set out the rules of the company - To make the annual budgets - Responsible for the compensation arrangement of the top officials - To elect the CEO of the company by casting their votes
Pricing (4p's of marketing mix)
- Revenue models - Last step after product, place, promotion - Pricing based on created value for customer - Strategic intent: Capture Value (Make Money!) - Skim vs. Penetration - Customization - Leadership
Corporate Reputation
- Straightforward term for how a company is perceived by others This includes public opinions on the company's products or services or how the company treats its employees. A reputation can be positive or negative, and it can change over time. For example, a popular news story about a company can change its reputation, but so can word of mouth among customers of the business the sum of all the views and beliefs about a company based on its history, interactions, and future prospects in comparison to its close competitors
Creditor
- The creditor is an organization or company that claims the debtor owes property, service, or money. Most bankruptcy cases involve several creditors.
debtor
- The debtor is the party who has debt, or owes money, to the creditor. - A debtor can be a company or an individual.
5 competitive strategies
- overall low cost leadership strategy - broad differentiation strategy - best-cost provider strategy - focused low-cost strategy - focused differentiation strategy
Financial Communications
- privately held company - Private companies are not required to disclose any info on financial performance.
What changed with USMCA? (NAFTA became USMCA - updated version)
1) Auto manufacturing boost 2) Labor laws strengthened 3) Dairy farmers get more market access 4) Updating NAFTA for the digital era 5) Environmental protections 6) Congress keeps control over biologic drugs
5 C's of Marketing Analytics
1) Customer Needs What needs do we seek to satisfy? 2) Company Skills What special competence do we possess to meet those needs? 3) Competition Who competes with us in meeting those needs? 4) Collaborators Who should we enlist to help us and how do we motivate them? 5) Context What cultural, technological and legal factors limit what is possible?
What are the core functions of marketing communications?
1: demand generation 2: branding
What do financial analysts want?
1: financial data 2: management 3: plans
Bull market
A Bull Market is a period of generally rising prices. The start of a bull market is marked by widespread pessimism. This point is when the "crowd" is the most "bearish". The feeling of despondency changes to hope, "optimism", and eventually euphoria, as the bull runs its course. This often leads the economic cycle, for example in a full recession, or earlier.
Bear Market
A bear market is a general decline in the stock market over a period of time. It is a transition from high investor optimism to widespread investor fear and pessimism. The Vanguard Group, "While there's no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period."
"The Street"
A key audience: ANALYSTS - Different types of financial analysts - Collectively known as "the street"
Bankruptcy
A legal process in which an organization restructures its Financial obligations to creditors (known as Chapter 11) or liquidates its assets and shuts down completely (known as Chapter 7)
Security
A security is a financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship with a governmental body or a corporation (bond), or rights to ownership as represented by an option. In terms of a public company - these are the shares sold by a company
Corporate Social Responsibility
A self-regulating business model that helps a company be socially accountable—to itself, its stakeholders, and the public. By practicing corporate social responsibility, also called corporate citizenship, companies can be conscious of the kind of impact they are having on all aspects of society, including economic, social, and environmental
shareholder
A shareholder is someone who owns stock in your company, while a stakeholder is someone who is impacted by (or has a "stake" in) a project you're working on Stakeholders hold stake in a given company, shareholders own unit shares in a company **all shareholders are stakeholders, but not vice versa
What is business strategy?
A strategy is a business approach to a set of competitive moves that are designed to generate a successful outcome
Trade Agreements
A trade agreement (also known as trade pact) is a wide ranging tax, tariff and trade treaty that often includes investment guarantees The most common trade agreements are of the preferential and free trade types are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories can be bilateral or multilateral
bilateral trade
A trade agreement is classified as bilateral (BTA) when signed between two sides
multilateral trade
A trade agreement signed between more than two sides (typically neighboring or in the same region) is classified as multilateral
Sarbane-Oxley Act
Also known as Sarbox or SOX, is a United States federal law that set new or enhanced standards for all U.S. public company boards, management and public accounting firms. Created in 2002 federal law that established sweeping auditing and financial regulations for public companies. Lawmakers created the legislation to help protect shareholders, employees and the public from accounting errors and fraudulent financial practices.
Form S-1
Also known as a prospectus, is the registration document required to be filed by companies planning to go public Used by companies planning on going public to register their securities with the U.S. Securities and Exchange Commission (SEC)
Annual Reports
An annual report is a corporate document disseminated to shareholders that spells out the company's financial condition and operations over the previous year.
Institutional Investor
An institutional investor is a company or organization that invests money on behalf of other people. Mutual funds, pensions, and insurance companies are examples Top priorities include the health and safety of employees; financial liquidity; business continuity, such as work-from-home models; and investment performance. In some cases, institutions had already discussed with their boards how to act in the next crisis.
Environmental Scanning
Monitor and interpret social, political, economic, ecological and technological events to spot trends and conditions that could impact the industry/organization Identify new opportunities and threats
Portfolio Manager
Portfolio manager - Individual at a buy-side firm responsible for making buy, sell and hold decisions
Common Stock
Common stock is a security that represents ownership in a corporation. Holders of common stock elect the board of directors and vote on corporate policies. This form of equity ownership typically yields higher rates of return long term.
promotion (4 p's of marketing mix)
Communications strategy WHAT ARE THE CORE FUNCTIONS OF MARKETING COMMUNICATIONS? 1: demand generation 2: branding
What does a trade deal help you avoid?
Tariffs and quotas
unsecured debt
Any debt (amount owed) that is not secured or backed by any form of collateral
Sell-side analyst
Brokerages and investment banks JP morgan, Morgan Stanley, Goldman Sachs Sell-side analyst - Conducts research, develops earnings estimates, establishes price targets and provides stock recommendations to institutional and retail clients (estimates are included in First Call) - Their information is made public (different from buy-side analysts bc the buy-side's analysts info is not made public)
broad differentiation strategy (competitive strategy)
Build customer loyalty by differentiating from competitors' products Differentiate to create value for customers that are not easily copied Not spending more to differentiate than the price premium that can be charged Ex: Starbucks
Depth (Product)
How many types of a given product?
Place (4 P's of Marketing Mix)
Channel ... is about marketing channel
Different chapters in bankruptcy
Chapter 7: Individuals and Companies Chapter 11: Companies Chapter 11 gives you time to restructure/reorganize to hopefully carry on as normal in the future If this doesn't work, next comes chapter 7 Chapter 13 is like chapter 11 for individuals
Secured and Unsecured Debt
Debtors can have two different types of debt -- secured and unsecured.
Product (4 P's of Marketing Mix)
Definition is more than just what the product does Product: the total package of benefits obtained by the customer Three things you look at with a product - breadth, length, and depth
Financial Analysts
Financial analysts work in banks, pension funds, insurance companies, and other businesses. Financial analysts guide businesses and individuals in decisions about expending money to attain profit. They assess the performance of stocks, bonds, and other types of investments. Financial analysis
stakeholder primacy
Focusing on all those who are a part of a company (consumer, manager, employees, etc...). Tends to be more successful than the shareholder model.
Growth Hacking
Growth hacking is a marketing technique developed by technology startups which uses creativity, analytical thinking, and social metrics to sell products and gain exposure. It can be seen as part of the online marketing ecosystem, as in many cases growth hackers are using techniques such as search engine optimization, website analytics, content marketing and A/B testing. Growth hackers focus on low-cost and innovative alternatives to traditional marketing, e.g. utilizing social media and viral marketing instead of buying advertising through more traditional media such as radio, newspaper, and television. Growth hacking is particularly important for startups, as it allows for a "lean" launch that focuses on "growth first, budgets second."
Breadth (Product)
How many different lines will the company offer?
Length (Product)
How many items will there be in the lines to cover different price points
Supply Chain Management
In commerce, supply chain management (SCM), the management of the flow of goods and services, involves the movement and storage of raw materials, of work-in-progress inventory, and of finished goods from point of origin to point of consumption CRUCIAL process for every company (Supply chain: a network between a company and its suppliers to produce and distribute a specific product, and the supply chain represents the steps it takes to get the product or service to the customer)
World Trade Organization (WTO)
Intergovernmental organization which regulates international trade The WTO officially commenced on 1 January 1995 under the Marrakesh Agreement, signed by 123 nations on 15 April 1994, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948 The WTO deals with regulation of trade between participating countries by providing a framework for negotiating trade agreements and a dispute resolution process aimed at enforcing participants' adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments.
Quiet Period
Mandated by law. A company that has registered to sell stock is limited in public statements it can make. - (Some companies voluntarily have 4 week "quiet periods" before quarterly earnings release)
Milton Friedman
Milton Friedman (1912-2006): American economist who received the 1976 Nobel Memorial Prize in Economic Sciences for his research on consumption analysis, monetary history and theory and the complexity of stabilization policy - The social responsibility of business is to increase profits - PRIMARY FOCUS: profits and returning profits to shareholders Adam Smith type attitude Shareholder primacy
4 & 5: Focus Strategies Focused low-cost strategy Focused differentiation strategy
Objective of focus strategies is to better service a niche target - Concentrate on a narrow customer segment beating competition on lower cost - Offering niche customers a differentiated product customized to their needs
John Maynard Keynes
Other side of spectrum from Adam Smith - If he lined up w today's views, he would be the democrat view (liberal) - Believed there was a role for gvmt and gvmt policy to play in business wrote The General theory (1936) Believed there were certain times when economy goes bad that gvmt must step in w policies to achieve full employment and price stability Ex: during pandemic → stimulus checks (gvmt interference)
Positioning Statements
Part of promotion (communications strategy) Format: X OUR PRODUCT/BRAND X is X SINGLE MOST IMPORTANT CLAIM X among all X COMPETITIVE FRAME X because X SINGLE MOST IMPORTANT SUPPORT X
3P's of Triple Bottom Line Reporting
People, profit, planet
4 P's of Marketing Mix
Product Place Promotion Pricing
Earnings Call
Quarterly - An earnings call is a conference call (typically held in the form of a teleconference or a webcast) during which the management of a public company announces and discusses the financial results of a company for a quarter or a year
R. Edward Freeman
R. Edward Freeman (1951) American philosopher and professor of business administration at the Darden School of the University of Virginia, particularly known for his work on stakeholder theory (1984) and on business ethics Importance is stakeholders
What's being moved in a trade deal?
Raw materials, parts, and finished goods
Regulation Fair Disclosure Act
Regulation Fair Disclosure - 2000 Also commonly referred to as Regulation FD or Reg FD The rule mandates that all publicly traded companies must disclose material information to all investors at the same time
A successful differential strategy allows an organization to:
Set a premium price Increase unit sales Build brand loyalty ex: BMW
Stock Option
Stock option grants the employee the right to purchase a certain number of shares of the company's stock at a predetermined price.
Managements game plan for
Strengthening the organization's competitive position Satisfying customers Achieving performance targets
Why is the positioning statement important?
Solving the positioning problem enables the company to solve the marketing mix problem. The marketing mix (Product, Price, Place, and Promotion) is essentially the working out of the tactical details of the positioning strategy.
Forms 8-K; 10-K; 10-Q; 4 and S-1
The federal securities laws require publicly traded companies to disclose information on an ongoing basis. The documents must be filed with the U.S. SEC's EDGAR system (Electronic Data Gathering, Analysis, and Retrieval)
Shareholder versus Stakeholder primacy
Two different theories on CSR - Friedman & Freeman Shareholder (Friedman) vs stakeholder primacy (Freeman)
Debtors and Creditors
Two main parties are involved in bankruptcy filings -- the debtor and the creditor.
Triple bottom line
The triple bottom line (or otherwise noted as TBL or 3BL) is an accounting framework with three parts: social, environmental (or ecological) and financial. Some organizations have adopted the TBL framework to evaluate their performance in a broader perspective to create greater business value.
Vesting Period
Vesting period: the time an employee must work for an employer in order to own outright employee stock options, shares of company stock or employer contributions to a tax-advantaged retirement plan **Vesting period:promotes loyalty
Greenwashing
When brands use marketing techniques to persuade you into believing their products are "green" and good for you
Where to look for differentiation:
Where to look for differentiation - Supply chain - Research and development - Production activities - Marketing, sales and service
Secured Debt
With secured debts, creditors have the legal right to something of yours if you fail to make the proper payments. Your mortgage, for example, is a secured debt.
Buy-side analyst
Work for Mutual funds, pension funds, hedge funds, etc - Fidelity, Vanguard, American Century, TIAA-CREF, CalPERS Buy-side analyst - Conducts research and makes stock recommendations for internal use at their own firm (does not submit estimates to "Street Consensus"/First Call) INTERNAL ONLY - not made public Portfolio manager - Individual at a buy-side firm responsible for making buy, sell and hold decisions
Focused differentiation strategy
focus strategy
Focused low-cost strategy
focus strategy
shareholder primacy
is a theory in corporate governance holding that shareholder interests should be assigned first priority relative to all other corporate stakeholders.
Form 8-K
is the "current report" companies must file with the SEC to announce major events ("material current event") that shareholders should know about between a periodic report Any major event that happens within a company, you must file w the SEC under 8-K form (ex: CEO dies)
Marketing Channel
is the set of mechanisms or market via which a firm "goes to market" ...is in touch with the customer from demand generation to sales to delivery of product
NAFTA
north american free trade agreement Includes Canada, US, and Mexico Eliminated all tariff and non-tariff barriers of trade and investment between the United States, Canada and Mexico Since agreement - trade between these countries has tripled NAFTA becomes USMCA (tweaks to NAFTA that were needed)
Form 10-K
reports a company's annual results and forms the foundation for a firm's annual report. Independently audited - Annual comprehensive overview of financials and changes in management, etc - From this - company will write its annual report - Independently audited by outside auditing firm (ensures that you cannot lie)
Form 10-Q
reports a company's quarterly results. Unlike the 10-k, these financial are unaudited
overall low-cost leadership strategy (competitive strategy)
seeks to become a leader in providing low cost products - Scrutinize each cost activity - Manage each cost lower year after year - Reengineer cost activities to reduce overall costs - Cut some cost activities out of the value chain - Company that serves as an ex of this strategy: McDonalds
Corporate structure
share holders elect > board of directors hire > CEO hires > managers hire employees
Investor Relations
strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation. Shorter Definition: The IR function provides company information to investors to help them make informed buy and sell decisions Disclosure (public transparency)
Trade Tariffs
taxes on goods imported into the USA Tariffs are used to restrict imports by increasing the price of goods and services purchased from overseas and making them less attractive to consumers. A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. Customs duties on merchandise imports are called tariffs. Tariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments. ** INTERESTING NOTE: Adam Smith was one of the first to question the wisdom of tariffs. He thought countries should trade with one another, rather than erecting barriers. Tariffs are a drag on economic growth, even if they can be deployed to benefit certain narrow sectors under certain circumstances.
Impact Investing
the process of investing funds with the goals of doing social good while also generating profits