WOB FINAL
Long-Term Financing (MikesBikes)
-Occurs when firm decides to borrow -Bank Borrowing -Long-term liability -Paid back when firm decides to pay it back -8% interest rate
Short-Term Financing (MikesBikes)
-Occurs when firm spends more cash than available -Overdraft -Current Liability -Paid back the next year -20% interest rate
Sustainable Development
-Operating business in a manner that minimizes pollution and resource depletion, ensuring that future generations will have vital resources
Private Equity
-Ownership assets that aren't publicly traded; includes venture capital
Location (Retail format)
-Physical (bricks and mortar), internet
Financial Management
-Planning for a firm's money needs and managing the allocation and spending of funds
Strategic Plans
-Plans that establish the actions and the resource allocation required to accomplish strategic goals Usually defined for periods of two to five years and developed by top managers
Equity (financing provided by shareholders/stockholders)
-Preferred stockholders (Another way for a company to earn money) -Common stockholders (Common Stock in MikesBikes)
Distribution Channel
-Producer -Wholesaler -Retailer -Customer
Issuing Stock
-Provides an inflow of cash to the firm -Less financial obligations than issuing debt (dividends not obligatory) -Unlike debt, stock never has to be repaid -Dilutes ownership interest of existing shareholders
Quality in MikesBikes
-Road = 90% -Mountain = 75% -Youth = 60%
Retailing Formats
-Selection -Price -Location
Maslow's Hierarchy of Needs
-Self-Actualization (Leadership Role) -Esteem Needs (Job Title/recognition) -Social needs (Friends at work) -Safety Needs (Health insurance) Physiological needs (Salary)
Strategic CSR
-Social contributions that are directly aligned with a company's overall business strategy
Stock Split
-The act of dividing a share into two or more new shares and reducing the market value by the same ratio
Risk/Return Trade-off
-The balance of potential risks against potential rewards
Customized Productions
-The creation of a unique good or service for each customer -Applicable to the Road Bike product in MikesBikes.
Mass Production
-The creation of identical goods or services, usually in large quantities. -Applicable to the Youth Bike product in MikesBikes.
Quality
-The degree to which a product or process meets reasonable or agreed-upon expectations
Transparency
-The degree to which affected parties can observe relevant aspects of transactions or decisions
Whistle-Blowing (Telling on someone)
-The disclosure of information by a company insider that exposes illegal or unethical behavior by others within the organization
Philanthropy
-The donation of money, time, goods, or services to charitable, humanitarian, or educational institutions
Corporate Social Responsibility (CSR)
-The idea that business has obligations to society beyond the pursuit of profits
Price/ Earnings Ratio
-The market value per share divided by the earnings per share
CSR: Consumers
-The right to buy safe products - and to buy them safely -The right to be informed -The right to choose which products to buy -The right to be heard
Ethics
-The rules or standards governing the conduct of a person or group
Leverage
-The technique of increasing the rate of return on an investment by financing it with borrowed funds
Insider Trading
-The use of unpublicized information that an individual gains from the course of his or her job to benefit from fluctuations in the stock market
Top Managers (Pyramid)
-Those at the highest level of the organization's management hierarchy -Responsible for setting strategic goals, and they have the most power and responsibility in the organization
First-Line Managers
-Those at the lowest level of the management hierarchy -They supervise the operating employees and implement the plans set at the higher management levels
Middle Managers
-Those in the middle of the management hierarchy -they develop plans to implement the goals of top managers and coordinate the work of first-line managers
What do Intermediaries do? (the producer the customer)
-Transport and store products -Break shipments into smaller units -Provide promotional and sales support (Awards to worker with most sales) -Assume risks -Provide financing -MAKE SELLING TO CUSTOMERS EASIER
Equity Financing (Stockholders)
-Voting rights (elect board of directors) -Discretionary payments (dividends) -Permanent capital (principal never repaid) -Dividends are not tax-deductible (paid with after-tax income)
Bonds
-a form of long-term debt; they are interest bearing certificates of debt.
Indirect Channel
-a number of intermediaries needed to deliver the product to the consumer in an efficient and cost-effective manner while meeting customer needs and expectations
Effective inventory management
-a system to keep track of inventory on hand and on order -a sales forecast sales for your firm -knowledge of lead times (orders for production are processed immediately in MikesBikes) (how long it takes to be delivered) -knowledge of inventory costs (ordering, shortage, & holding or carrying costs) (Shipping) -a classification system for keeping track of inventory (raw materials and finished bikes in MikesBikes)
Channel length (Manufacturer to Retailer)
-how many intermediaries are in the channel.
Issues with issuing debt
-increases interest expense which, in turn, reduces profitability. -increases the debt-to-equity ratio, and thereby lowers SHV. -obligation to repay that debt in the future.
When do you use teams?
1. When a variety of expertise is needed 2. To share the workload in accomplishing a goal 3. When creativity and innovation are needed 4. For tasks high in complexity 5. For tasks that have many interdependent subtasks
lost-horse forecasting technique (MB)
1. start with last known value for total market sales 2. List the factors that could affect the forecast indicating negative or positive 3. Use that information to make forecast
Capacity Requirements
= Forecasted sales X Required Production Efficiency
Liquidity
A measure of the ease with which an asset can be converted into money without a significant loss of value.
Debt-to-Equity Ratio
A measure of the extent to which a business is financed by debt as opposed to invested capital, calculated by dividing the company's total liabilities by owners' equity Total Liabilities / Total Equity
[Types of teams] Problem-solving team
A team that meets to find ways of improving quality, efficiency, and work environment
[Types of teams] Virtual team
A team that uses communication technology to bring together geographically distant employees to achieve goals
[Types of teams] Functional team
A team whose members come from a single function department which is based on the organization's vertical structure
Team
A unit of two or more people who share a mission and collective responsibility as they work together to achieve a goal
Convenience Good
A widespread good that is inexpensive and available everywhere. Brand is not too important. Purchased a lot.
Annual Report
A yearly statement of the financial condition, progress, and expectations of an organization.
Vertical Merger
Occurs when a company purchases a complementary company at a different stage or level in an Industry (Lumber supplier-furniture maker-furniture retailer)
Penetrating Pricing [5 Common Pricing Strategies]
Offering new products at low prices in the hopes of achieving high sales volume
Raw Materials , component parts, sub-assemblies, supplies: (No raw matericals inventory in MB
inputs to manufacturing & service-delivery processes
Market Potential
maximum total sales of a product by all firms to a segment during a specific time period under specific marketing efforts by those firms
Preferred Stock
may have any combination of features not possessed by common stock including properties of both an equity and a debt instrument
Emotional Intelligence
measure of a person's awareness of and ability to manage his or her own emotions
Emotional Intelligence (Leading function)
measure of a person's awareness of and ability to manage his or her own emotions
Price
money or other payment exchanged to acquire or use a product or service
Lost Sale
occurs when the customer is unwilling to wait and purchases the item elsewhere
[how do groups make decisions] Decision by lack of response
one idea after another is suggesting without any discussion-taking place
Work-in-progress inventory
partially finished products in various stages of completion awaiting further processing
Selective
Shopping goods (Bikes, TV, Cell Phones)
Share Holder Value (SHV)
(EPS, D/E, DIV)
Disadvantages of Sole Proprietorship
**Financial liability -unlimited (No difference between company and person) Demands on the owner Limited managerial perspective Resource limitations No employee benefits for the owner Finite life span
Disadvantages of Partnership
*Unlimited liability *Potential for conflict Expansion, succession, and termination
Characteristics of Effective Teams
- clear sense of purpose - open and honest communication - create thinking - accountability - focus - decision by consensus
How to create a high performing team...
- communicate high-performance standards - set the tone in the first meeting - create a sense of urgency - make sure members have the right skills - establish clear rules for behavior - find ways to create early "successes" - have members spend time together - give positive feedback
Purchase influences
- culture - socioeconomic level - reference groups - situational factors - self-image
Price Level Considerations
- marketing objectives - government regulations - customer perceptions - market demand - competition
Target Market for Mikes Bikes
- mountain bikes: you, suburban adults interesting in outdoors, fitness, fun - marketing mix: .75 quality, .60 specs, real cool cycles brand, product in its mature stage - price: retail $700 - distribution: 199 sports stores, 55 bike shops, 145 discount stores
Forecasting: prediction events or sales (business decision-making)
- operations (prod. quality, inventory planning) - accounting (cost and profit projections, cash management) - finance (timing and amount of funding) - marketing (setting prices, budgets, target market)
Good Brand Name Criteria
- should suggest benefits - be simple, memorable, distinctive - shouts fit company or product image - should have no legal or regulatory restrictions
Identity Theft
-A crime in which thieves steal personal information and use it to take out loans and commit other types of fraud
Capital Structure
-A firm's mix of debt and equity financing
Consumerism
-A movement that pressures businesses to consider consumer needs and interests
Ethical Lapse
-A situation in which an individual or a group makes a decision that is morally wrong, illegal, or unethical
Conflict of Interest
-A situation in which competing loyalties can lead to ethical lapses, such as when a business decision may be influenced by the potential for personal gain
Ethical Dilemma
-A situation in which more than one side of an issue can be supported with valid arguments
Establishing a Dividend Policy
-A stable history of dividend payments indicates good financial health. -If a firm that has been making regular dividend payments cuts or skips a dividend, investors may start thinking it has serious financial problems. -The increased uncertainty often results in lower stock prices. Thus, most firms set dividends at a level they can keep paying. -They start with a relatively low dividend so that they can maintain a steady or slightly increasing dividend over time.
5 Common Pricing Strategies...
1. Skimming 2. Penetration Pricing 3. Odd-Even Pricing 4. Competition-Based Pricing 5. Demand-Orietned Pricing
Cap and Trade
-A type of environmental policy that gives companies some freedom in addressing the environmental impact of specified pollutants, by either reducing emissions to meet a designated cap or buying allowances to offset excess emissions
Code of Ethics
-A written statement that sets forth the principles that guide an organization's decisions
Affirmative Action
-Activities undertaken by businesses to recruit and promote members of groups whose economic progress has been hindered through either legal barriers or established practices
Debt Financing
-Arranging funding by borrowing money
Equity Financing
-Arranging funding by selling ownership shares in the company, publicly or privately
Debt (financing provided by lenders/creditors)
-Banks -Long Term Loans/Bonds
Paying Dividends (Paid in cash or stock)
-Cash dividends provide income to C-S holders, which they like, and thereby boost share price and shareholder value. -Firms are not legally obligated to make or to continue to make dividend payments; investors, however, will react adversely if their dividends are cut! -Payment of dividends reduces cash available for operations. -Payment of dividends reduces Retained Earnings, which decreases the firm's equity and therefore increases its debt-to-equity ratio.
Credit Scoring for Long term loans
-Character (their experience and qualifications to run the type of business for which they plan to use the loan proceeds) -Capacity (debt ratios, liquidity ratios, and other measures of financial health) - Capital (enough capital to succeed) -Conditions (the overall condition of the economy as well as conditions within the applicant's specific industry) -Collateral (Expects to be paid cash but if company has no cash the lenders will take real estate or equipment)
Public Equity
-Common stock that are publicly traded after a public offering through an "initial public offering" (IPO).
Ethical Behavior
-Competing fairly and honestly -Communicating truthfully -Being transparent -Not causing harm to others
Repurchasing Shares
-Concentrates ownership interest among remaining shareholders -Must have cash available to accomplish, so carefully evaluate your firm's cash position
Relationship between Business and Society
-Consumers in contemporary societies enjoy and expect a wide range of benefits, from education and healthcare to credit and products that are safe to use. -Profit-seeking companies are the economic engine that powers modern society; they generate the vast majority of the money in a nation's economy.
Factors Influencing Ethical Behavior
-Cultural Differences -Knowledge -Organizations Behavior
Common Stock in MikesBikes
-Currently 1 million shares issued and outstanding -Additional shares are issued/sold at market value -Shares may be repurchased at market value (i.e., at current share price) -Decisions are entered on the equity screen in total market value amounts
Selecting (Retail Format)
-Department stores (Macy)
Price (Retail Format)
-Discount stores (Walmart, TJ max), off-price retailers
Marketing strategy process
-External environment [social, demographic, economic, competitive forces (SWOT)] -Choose target market -Create competitive advantage [positiogn through cost, differentiation, or niche advantage] -Develop a marketing mix [product, price, place, promotion]
Types of Productions and Operations Management
-Facilities location and design -Forecasting and capacity planning -Scheduling -Lean systems (Efficient)
Key activities of Financial Manager
-Financial planning (budgeting) -Investments (spending money) -Financing (raising money)
Short-Term Financing
-Financing used to cover current expenses (generally repaid within a year)
Long-Term Financing
-Financing used to cover long-term expenses such as assets (generally repaid over a period of more than one year)
CSR: The Natural Environment
-First, the creation, delivery, use, and disposal of products that society values virtually always generate pollution and consume natural resources. -Second, "environmental" causes are often as much about human health and safety as they are about forests, rivers, and wildlife. -Third, many of these issues often require tough trade-offs, occasional sacrifice, disruptive change, and decision making in the face of uncertainty
Capacity Planning in MikesBikes
-Impacts ability to meet future requirements (demand; est. lost sales; delivery index) -Relationship between capacity and operating costs (efficiency / wastage costs; overhead costs) -Initial cost of capacity (commitment of resources)
Capacity Options in MikesBikes
-Improve efficiency of the existing factory -Increase the size of the factory
Discrimination
-In a social and economic sense, denial of opportunities to individuals on the basis of some characteristic that has no bearing on their ability to perform in a job
Market Coverage
-Intensive -Selective -Exclusive
Retailers
-Intermediaries that sell goods and services to individuals for their own personal use -Provide promotional and sales support -Assume risks -Provide financing
Wholesalers
-Intermediaries that sell products to other intermediaries for resale -Transport and store products -Break shipments into smaller units
Quality Control
-Measuring quality against established standards after the good or service has been produced and weeding out any defective products
Debt Financing (Stockholders)
-No voting rights -Obligatory payments (coupon interest) -Fixed life/maturity (must be repaid) -Interest is a tax-deductible expense
Nongovernmental organizations (NGOs)
-Nonprofit groups that provide charitable services or promote social and environmental causes
Dividends
-payments to stockholders from a corporation's after-tax profits.
Total/theoretical capacity (absolute max production)
-the maximum output per unit of time the process can achieve for a short period of time under ideal operating conditions. -Zero wastage & idle time (the "ideal" world)
The goal of the financial manager
-to maximize the value of the firm to its owners (i.e., to maximize shareholder value = SHV)
Three concepts of Financial Management
1. Balancing Short term (Salaries, taxes, bills) and long term demands 2.Balancing potential risk and potential reward. 3. Balancing leverage and flexibility
Steps for Rollovers
1. Change Name 2.Set Price and Estimated Sales 3.Set Advertising Budget 4.Set PR Budget 5.Set Production Quantity 6. Check Forecast Results 7. Check Current Decisions 8.Wait for results
Strategic Planning Process
1. Define Mission,Vision,Values 2. Perform SWOT analysis 3. Develop Forecast 4. Analyze the competition 5. Establish goals and objectives 6. Develop Action plans
Advantages of Working on Teams...
1. Higher quality decisions 2. Increased diversity of views 3. Increased commitment to solutions and changes 4. Lower levels of stress and destructive internal competition 5. Improved flexibility and responsiveness
New Product Development Process
1. Idea generation 2. Idea screening 3. Business analysis 4. Prototype development 5. Test marketing 6. Commercialization
Potential Disadvantages of Group Decision Making
1. Individuals may feel compelled to conform to the apparent wishes of the group 2. decision-making may be dominated by one individual or small coalition 3. decision take longer to make 4. potential for group thing
Potential Advantages of Group Decision Making...
1. More knowledge and expertise is applied to solve the problem 2. A greater number of alternatives are examined 3. The final decision is better understood and accepted by all group members 4. More commitment among all group members to make the final decision work
Communication Mix
A blend of communication elements (or vehicles) including advertising, direct marketing, personal selling, sales promotion, social media, and public relations—that a company uses to reach current and potential customers (Product advertising & PR budgets in Mikes Bikes) (Promotion Mix)
Vision statement
A brief and inspirational expression of what a company aspires to be (Longer term) (What their vision is)
Values statement
A brief articulation of the principles that guide a company's decisions and behaviors (What they value)
Mission Statement
A brief statement of why an organization exists; in other words, what the organization aims to accomplish for customers, investors, and other stakeholders
Goal
A broad, long- range target or aim
Franchise
A business arrangement in which one company (the franchisee) obtains the rights to sell the products and use various elements of a business system of another company (the franchisor)
Sole proprietorship
A business owned by a single person
Franchisee (More motivated) (money depends on franchise success)
A business owner who pays for the rights to sell the products and use the business system of a franchisor
Small Business
A company that is independently owned and operated, is not dominant in its field, and employs fewer than 500 people (although this number varies by industry)
Franchisor(Helps franchisee)
A company that licenses elements of its business system to other companies (franchisees)
Private corporation
A corporation in which all the stock is owned by only a few individuals or companies and is not made available for purchase by the public (Limited shares)
Public corporation*
A corporation in which stock is sold to anyone who has the means to buy it
Initial public offering (IPO)
A corporation's first offering of shares to the public
Organization Chart
A diagram that shows how employees and tasks are grouped and where the lines of communication and authority flow
Business plan
A document that summarizes a proposed business venture, goals, and plans for achieving those goals
Shopping Good
A fairly expensive good that has a large number of selective outlets. People prefer specific goods but will accept substitues. Infrequent purchases.
Liabilities
A financial obligation of a business that it is required to repay in the future (debts).
Distribution Strategy (to its plan for moving products from its facility)
A firm's overall plan for moving products through marketing intermediaries and on to final customers.
Product Development
A formal process of generating, selecting, developing, and commercializing product ideas
Organization Structure
A framework that enables managers to divide responsibilities, ensure employee accountability, and distribute the decision-making authority
Board of directors
A group of professionals elected by shareholders as their representatives, with responsibility for the overall direction of the company and the selection of top executives
Unlimited liability
A legal condition under which any damages or debts incurred by a business are the owner's personal responsibility Taxes for income from business part of personal income taxes
Corporation
A legal entity, distinct from any individual persons, that has the power to own property and conduct business
Scientific Management
A management approach designed to improve employees' efficiency by scientifically studying their work
Theory X (Little trust towards workers) (Workers do not want to work need theory x to work)
A managerial assumption that employees are irresponsible, are unambitious, and dislike work and that managers must use force, control, or threats to motivate them
Theory Y (Complete Trust towards employees) (workers wanna find meaning in work)
A managerial assumption that employees enjoy meaningful work, are naturally committed to certain goals, are capable of creativity, and seek out responsibility under the right conditions
Debt-to-Assets Ratio (Long term payments due)
A measure of a firm's ability to carry long-term debt, calculated by dividing total liabilities by total assets Total Liabilities / Total Assets Higher ratio means they are in more debt (Risky company)
Earnings Per Share
A measure of a firm's profitability for each share of outstanding stock, calculated by dividing net income after taxes by the average number of shares of common stock outstanding *Net Income/Average Number of Shares (Calculate income on per share)
Quick Ratio (asset test ratio)
A measure of a firm's short-term liquidity, calculated by adding cash, marketable securities, and receivables, then dividing that sum by current liabilities Cash + Marketable Securities + Receivables / Current Liabilities
Current Ratio
A measure of a firm's short-term liquidity, calculated by dividing current assets (CA) by current liabilities (CL) CA/CL
Accounts Receivable Turnover Ratio
A measure of the time a company takes to turn its accounts receivable into cash, calculated by dividing sales by the average value of accounts receivable for a period Net Sales / Average Accounts Receivable Companies who have high ratio is better- cash faster--- means better management
Inventory Turnover Ratio
A measure of the time a company takes to turn its inventory into sales, calculated by dividing cost of goods sold (COGS) by the average value of inventory for a period COGS/Average Inventory
Break-Even Analysis
A method of calculating the minimum volume of sales needed at a given price to cover all costs
Maslow's hierarchy (Can't get to the top unless you have the things on the bottom)
A model in which human needs are arranged in order of their priority, with the most basic needs at the bottom and the more advanced needs toward the top
Herzberg's two-factor theory
A model that divides motivational forces into satisfiers ("motivators") and dissatisfies ("hygiene factors")
Management by objectives (MBO)
A motivational approach in which managers and employees work together to structure personal goals and objectives for every individual, department, and project to mesh with the organization's goals
Balance Sheet
A report showing all assets, liabilities, and owner's equity of a business as of a specific date.
Supply chain (Who your suppliers are, customers, distributions are)
A set of connected systems that coordinates the flow of goods and materials from suppliers all the way through to final customers
Organizational Culture
A set of shared values and norms that support the management system and that guide management and employee behavior
Sales Promotion (Element)
A short-term inducement (e.g. coupons, samples, contests) to trigger action by current or potential customers.
Ledger
A specialized accounting book or computer program in which information from accounting journals is accumulated into specific categories and posted so that managers can find all the information about one account in the same place.
Objective
A specific, short-range target or aim
Statement of Cash Flows (Cash Deals)
A statement of a firm's cash receipts and cash payments that presents information on its sources and uses of cash Describes changes in the cash account based on three types of activities (cash in, cash out): Operating Activities - general operations of the business Investing Activities - buying and selling of long term assets (New business) Financing activities - the raising of debt or equity funds or the payments of cash related to the issuance or repayment of these funds (Experienced business)
Integrated Marketing Communications (IMC)
A strategy of coordinating and integrating communication and promotion efforts to ensure greater efficiency and effectiveness in communicating with current and potential customers.
Financial Statement
A summary of all the transactions that have occurred over a particular period.
The Hawthorne effect (Practice harder while coach is watching)
A supposed effect of organizational research, in which employees change their behavior because they are being studied and given special treatment
[Types of teams] Self-managed team
A team in which members are responsible for an entire process of operation
Cross-Functional Teams - task force
A team of people from several departments who are temporarily brought together to address a specific issue
Advisory Board
A team of people with subject-area expertise or vital contacts who help a business owner review plans and decisions
[Types of teams] Cross-functional team
A team that draws together employees from different functional areas
Cross-function Teams - committee
A team that may become a permanent part of the organization and is designed to deal with regularly recurring tasks
Advantages of Corporation
Ability to raise capital Liquidity - A measure of how easily and quickly an asset such as corporate stock can be converted into cash by selling it Longevity Limited liability** (If business goes broke, doesnt effect person)
International Financial Reporting Standards (IFRS)
Accounting standards and practices used in many countries outside the United States
Inventory: Objectives (Versus Functions)
Achieve satisfactory level of customer service (meet demand and distribution & delivery index objectives) ... while... Keeping costs of ordering and carrying inventory reasonable
Area of Satisfaction (Motivators)
Achievement Recognition Responsibility Work itself Personal Growth
Core Competencies
Activities that a company considers central and vital to its business
Three ways to determine a budget
All you can Afford Percentage of sales objective and task
Fixed-Order-Interval Model (How much safety stock to make)
Amount to order (Product quantity)= expected demand (Forecast) + safety stock (2-3 weeks) - inventory on hand (left over)
Accrual Basis
An accounting method in which revenue is recorded when a sale is made and an expense is recorded when it is incurred
Cash Basis (When company actually receives money)
An accounting method in which revenue is recorded when payment is received and an expense is recorded when cash is paid
Acquisition
An action taken by one company to buy a controlling interest in the voting stock of another company (Completely buying another company)
*Merger
An action taken by two companies to combine and perform as a single entity (Two ceo's coming together)
The Marketing Concept
An approach to business management that stresses customer needs and wants, seeks long-term profitability and integrates marketing with other functional units within the organization
Engagement
An employee's rational and emotional commitment to his or her work
Independent Audit
An evaluation and unbiased opinion about the accuracy of a company's financial statements.
System (To be successful, have to manage system well)
An interconnected and coordinated set of elements and processes that converts inputs to desired outputs
Management Pyramid
An organizational structure divided into top, middle, and first-line management
Partnership
An unincorporated company owned by two or more people
Fiscal Year (ends after busy time of year)
Any 12 consecutive months used as an accounting period
Depreciation
Any decrease or loss in value caused by age, wear, or market conditions. Shows how a company is actually doing.
Social Media (Element) (If popular can receive items from company for user to review)
Any electronic media that transforms passive audiences into active participants (e.g., Facebook, LinkedIn)
Advertising (Element)
Any paid form of non-personal communication by an identified sponsor
Fundamental Accounting Equation
Assets = Liabilities + Owners' equity; this is the basis for the balance sheet
Leadership Styles
Autocratic Leadership Democratic Leadership Laissez-fair Leadership
Three Managerial Roles (What do they do to fulfil their functions)
Behavioral patterns and activities involved in carrying out the functions of management; includes interpersonal, informational, and decision making roles
[Cost Structure] Fixed Cost
Business costs that remain constant regardless of the number of units produced
[Cost Structure] Variable Costs
Business costs that varies with the number of units produced
Current Assets (What they currently have, can sell quickly and make money)
Cash and items that can be turned into cash within one year
Benchmarking
Collecting and comparing process and performance data from other companies
Conglomerate Merger
Companies unrelated
Intensive Products (Distribution Strategy)
Convenience Goods are what type of product
Disadvantages of Corporation
Cost and complexity Reporting requirements Possible loss of control Double taxation
Expenses
Costs created in the process of generating revenues
Operating Expenses
Costs involved in operating a business, such as rent, utilities, and salaries.
Standards
Criteria against which performance is measured (Things need to be measurable)
Working Capital
Current assets (CA) minus current liabilities (CL) CA-CL
Accounts Payable
Current liabilities are bills the company owes to others for merchandise or services purchased on credit but not yet paid for.
Customer Service - Distribution & Delivery
Customers in MB have a delivery preference index of 1.0 or in other words they want inventory to be available any time they decide to make a purchase. In other words, customers prefer no stockouts.
Horizontal Merger
Different Companies at the same stage or level (Nike-Adidas, Lumber Supplier-Leather Supplier)
Direct Marketing (Element) (College emails)
Direct communication to generate a response such as an order or request for additional information about the product or service.
[Team Conflict] Destructive Conflict
Diverts energy from more important issues destroys the morale of teams or individual team members, or polarizes or divides the team
Factors in the Number of Small Businesses
E-commerce Social Media Technological Advances Growing Diversity Corporate downsizing and outsourcing
EBITDA
Earnings before interest, taxes, depreciation, and amortization
Assets
Economic resources (things of value) owned by a firm.
Planning
Establishing objectives and goals for an organization and determining the best ways to accomplish them (Making goals, objectives, setting metrics to accomplish them)
Capacity Planning
Establishing the overall level of resources needed to meet customer demand
Sales promotion (Communication mix)
Expenditures on channel support are for sales promotion as well as personal selling
Personal Selling (Element) (Athlete sits down with dean and tries to sell athlete on business school)
Face-to-face (two-way) communication to a prospective customer
Business Incubators
Facilities that house small businesses and provide support services during the company's early growth phases
Product Life Cycle
Four stages through which a product progresses: introduction, growth, maturity, and decline In MikesBikes, the Mountain Bike product is in the maturity stage where the emphasis is on taking sales away from competitors
private accounting
In business and industry
External Auditors
Independent accounting firms that provide auditing services for public companies to determine if financial statements were prepared in accordance with GAAP.
Skimming [5 Common Pricing Strategies]
Introducing a product with a high price then lowering the price over time
Just-In-Time (JIT)
Inventory management in which goods and materials are delivered throughout the production process right before they are needed
Venture Capitalists (VCs) (People searching for the next up and coming business)
Investors who provide money to finance new businesses or turnarounds in exchange for a portion of ownership, with the objective of reselling the business at a profit
Shareholders -owners
Investors who purchase shares of stock in a corporation
Forecasting Techniques
Judgements- Direct decision (experience), Lost horse technique (last sales x influences) Surveys- Buyers, Sale Force Statistical Methods- Trend (extend a pattern), Linear trend (linear pattern)
Reasons why new businesses fail
Leadership Issues Marketing and Sales Issues Financial Issues System and Facilities Issues
Entrepreneurs Qualities
Like to control their own destiny Eager to learn to reach goals Learns from mistakes In tune with their markets Willing to take "sensible" risks Love their work Passion to succeed Optimistic and confident Relates well with diverse personalities Talent for inspiring others Works very hard to succeed
Fixed Assets
Long-term assets that are relatively permanent such as land, buildings, or equipment.
Democratic Leadership
Manager shares decision-making authority, seeking input and inviting subordinates to participate in a coordinate planning process (Workers and Managers work together)
Laissez-fair Leadership
Managers act as advisor and supporter, offering input when asked but generally letting subordinates chart and adjust their own course toward meeting agreed-upon goals and objectives
Autocratic Leadership
Managers makes the decisions and issues directives down the chain of command
Public relations (also called publicity) (Communication mix)
Mass communication like advertising (for awareness) but with more credibility (which is why it works better in the high-priced road bike segment). You can't completely control the end message
Accounting
Measuring, interpreting, and communicating financial information to support internal and external decision-making.
Inventory: Functions (Versus Objectives)
Meet demand Smooth production (Smooth line compared to hectic line) Protect against stockouts
Why people start their own company
More control over their future Tired of working for someone else Passion for new product ideas Pursue business goals that are important to them on a personal level Inability to find attractive employment anywhere else.
Characteristics of Small Businesses
Most small firms have a narrow focus Small businesses have to get by with limited resources Small businesses often have more freedom to innovate Entrepreneurial firms find it easier to make decisions quickly and react to changes in the marketplace
Personal selling (Communication mix)
None by your company directly, but the retail dealers obviously do some and you provide sales training for them through your channel support expenditure (see following slides) (Dean sitting down telling athlete about business school trying to sell them on it)
Unsought Good
Not many purchases made for these goods. Awareness is essential for success. (Burial insurance, thesaurus)
Long-Term Liabilities
Obligations that fall due more than a year from the date of the balance sheet
Current Liabilities (what they owe)
Obligations that must be met within a year
Inventory Costs
Ordering Costs Shortage Costs Holding Costs
Micro Lenders (More common in other countries) (Small loans)
Organizations, often not-for-profit, that lend smaller amounts of money to business owners who might not qualify for conventional bank loans
Production and Operations Management
Overseeing all the activities involved in producing goods and services
Owner's Equity
Owners share in a business. Defines worth of business
Four Management Functions
Planning Organizing Controlling Leading
Angel investors
Private individuals who invest money in start-ups, usually earlier in a business's life and in smaller amounts than VCs are willing to invest or banks are willing to lend
Direct Channel
Producer straight to the customer
Advertising (Communication mix)
Product advertising customized to each target market & brand advertising targets all segments (to build brand equity).
Product Continuum
Products contain both tangible and intangible components; predominantly tangible products are categorized as goods, whereas predominantly intangible products are categorized as services.
Public Relations (Publicity) (Element)
Publicity is information about a company or product that appears in the news media and is not directly paid for by the company (seller).
Net Loss
Revenue Depleted
Net Income
Revenue left over
Capacity in Mikes Bikes
Road = 1.0 SCU; mountain = 0.5 SCU; youth = 0.25 SCU
Share Holder Value (SHV)
SHV = share price + dividends Share price is a function of: Profitability (measured by EPS) Riskiness (measured by D/E ratio) (More debt
Demand-Oriented Pricing [5 Common Pricing Strategies]
Set prices based on consumer demand
Competition-Based Pricing [5 Common Pricing Strategies]
Setting a price based on competitors' pricing
Odd-Even Pricing [5 Common Pricing Strategies]
Setting price at an odd number so consumers perceive a lower price
Notes Payable
Short-term or long-term liabilities that a business promises to repay by a certain date. (loans ect)
Advantages of Partnership
Simplicity Single layer of taxation More resources Cost sharing Broader skill and experience base Longevity
Advantages of Sole Proprietorship
Simplicity Single layer of taxation (Important) Privacy Flexibility and control Personal satisfaction
Exclusive
Specialty Goods
Establishing Goals and Objectives
Specific Measurable Attainable Relevant Time Limited
GAAP (Generally Accepted Accounting Principles)
Standards and practices used by publicly held corporations in the United States and a few other countries in the preparation of financial statements; on course to converge with IFRS
SWOT Analysis
Strengths Weakness Opportunities Threats
Blueprint for an Effective business plan
Summary Mission and Objective Company Overview Products and services Management and key personnel Target market Marketing Strategy Design and development plans Operations plan Start-up schedule Major risk factors financial projections Exit strategy
Lean Systems
Systems (in manufacturing and other functional areas) that maximize productivity by reducing waste and delays
Gross Profit (Gross Margin)
The amount remaining when the cost of goods sold is deducted from sales (Total revenue minus cost of goods sold)
Management Accounting (internal)
The area of accounting concerned with preparing data for use by managers within the organization
Accounting Equation
The basic accounting equation, stating that assets equal liabilities plus owners' equity (basis for one of the Financial Statements - the Balance Sheet) Assets = Liabilities + Owner's Equity Assets - Liabilities = Owner's Equity
Supply chain management (SCM)
The business procedures, policies, and computer systems that integrate the various elements of the supply chain into a cohesive system
Motivation
The combination of forces that move individuals to take certain actions and avoid other actions (Internal factors and external factors)
Cost of Goods Sold (Cost of inventory in a period)
The cost of producing or acquiring a company's products for sale during a given period
Productivity
The efficiency with which an organization can convert inputs to outputs
Seed Money
The first infusion of capital used to get a business started
Matching Principle
The fundamental principle requiring that expenses incurred in producing revenue be deducted from the revenues they generate during an accounting period
Equity theory (Do you get out what you put in)
The idea that employees base their level of satisfaction on the ratio of their inputs to the job and the outputs or rewards they receive from it
Expectancy theory (How well they think can do the task at hand and the value of the reward)
The idea that the effort employees put into their work depends on expectations about their own ability to perform, expectations about likely rewards, and the attractiveness of those rewards
Sarbanes-Oxley
The informal name of comprehensive legislation designed to improve integrity and accountability of financial information
Auditing
The job of reviewing and evaluating the information used to prepare a company's financial statements.
Stockholders Equity
The owners claim to the remainder of the assets after all the obligations have been fulfilled
Retained Earnings
The portion of shareholders' equity earned by the company but not distributed to its owners in the form of dividends
Entrepreneurial Spirit
The positive, forward-thinking desire to create profitable, sustainable business enterprises
Organizing
The process of arranging resources to carry out the organization's plans (Know plans, how are we going to accomplish goals)
The Controlling Function (Controlling)
The process of measuring progress against goals and objectives and correcting deviations if results are not as expected
Controlling
The process of measuring progress against goals and objectives and correcting deviations if results are not as expected (Evaluations)
Management
The process of planning, organizing, leading, and controlling to meet organizational goals
Return on Sales
The ratio between net income after taxes and net sales also known as the profit margin Net Income/Net sales (Nike 12 cents per dollar
Return on Equity
The ratio between net income after taxes and total owners' equity *Net Income/Total Owners' Equity
Journal
The record book or computer program where accounting data are first entered.
Economic Role of Small Business
They provide jobs They introduce new products They meet the needs of larger organizations They inject a considerable amount of money into the economy. (Large economic role) They take risks that larger companies sometimes avoid They provide specialized goods and services
Types of Mergers
Vertical Merger Horizontal Merger Conglomerate Merger
Specialty Good
Very expensive good that is sold at specific places. Very brand loyal and is rarely purchased and lots of research and thought put into a purchase. (Sports cars, Rolex) Brand and status are stressed.
External Financing
When the firm is unable to fund growth internally, outside investors are needed. There are two sources of external financing 1.Debt (financing provided by lenders/creditors) 2. Equity (financing provided by shareholders/stockholders)
Inventory Managers two fundemental questions
When to order items from a supplier or when to initiate production runs (if the firm manufactures its own products), and... How much to order (from suppliers) or produce each time a purchase order or production order is placed. (Have to pay for warehouse to store if order too much)
Area of Dissatisfaction (Hygiene Factors)
Working conditions Pay and security Company policies Supervisors Interpersonal Relationships
All you can Afford
a common method driven by financial (budget) constraints
Income Statement
a financial document that shows how much money (revenues) came in and how much money (expenses) was paid out
product line
a group of products that are physically similar or intended for similar uses and having similar characteristics (ex: bicycles, accessories, safety gear)
Trial Balance
a proof of the equality of debits and credits in a general ledger
[how do groups make decisions] Decision by unanimity
all group members agree totally on the course of action to be taken
product mix
all the product lines sold by the company
Public Accountant
an accountant who provides accounting services to individuals or businesses on a fee basis
Safety stock inventory
an additional amount of inventory kept over and above the amount required to meet expected demand Safety Stock = (prior period sales / 52 weeks) X number of weeks of desired safety stock
Marketing Strategy
an overall plan for marketing a product; includes the identification of target market segments, a positioning strategy, and a marketing mix
Inventory
any asset held for future use or sale (things you will sell) (including raw materials, parts, etc.)
product
any good or service along with perceived attributes and benefits that create values for customers
Percentage of sales
base their promotion budget on a certain percentage of their last year's sales (usually 2 - 10%).
Qualitative Forecasts
based on intuitive judgments
[Team Conflict] Constructive Conflict
brings important issues into the open, increases the involvement of team members, and generates creative ideas for solving a problem
Current Assets
cash and other assets expected to be exchanged for cash or consumed within a year
objective and task (Doing the math and figuring out the amount you should spend on advertising)
communications objectives are set then the amount needed to meet the objectives is budgeted (e.g., awareness from 0.125 to desired index of 0.25, double the advertising $.)
Finished goods inventory
completed products ready for distribution & sale to consumers
Ordering costs
cost of ordering and receiving raw materials
Holding Costs
cost to carry raw materials and finished goods inventory (Listed in Cash Flows Statement)
fixed cost
costs that remain constant
variable costs
costs that vary with quantity produced or sold
[marketing in society] Needs:
differences between a person's actual state and his or her ideal state; they provide the basic motivation to make a purchase
[how do groups make decisions] Decision by consensus
discussion leads to one alternative being favored by most members and the other members agree to support it
product items
each product with a unique model name, size, price, etc. (ex: mountain, road and youth bikes - bicycle product line)
total cost =
fixed cost + variable cost
Break-Even Point =
fixed costs/selling price - variable costs per unit
Common Stock
form of a piece of ownership of a corporation. (Normal Stock)
[how do groups make decisions] Decision by majority rule
formal voting may take place, or members may be polled to find the majority viewpoint
Stockouts
inability to satisfy demand for an item (resulting in either a backorder or lost sales)
Maturity (Bond)
indicates the length of time until the bond issuer (i.e., the firm) returns the par value to the bondholder.
Social intelligence (Leading function)
involves looking outward to understand the dynamics of social situations and the emotions of other people, in addition to your own
Inventory management
involves planning, coordinating & controlling the acquisition, storage, handling, movement, distribution and possible sale of raw materials, component parts and subassemblies, supplies and tools, replacement parts, and other assets to meet customer wants and needs.
Cognitive Intelligence
involves reasoning, problem solving, memorization, and other rational skills
lost-horse
last sales x influences
Intangible Assets
long-term assets (e.g., patents, trademarks, copyrights) that have no real physical form but do have value
Bonds Payable
long-term liabilities that represent money lent to the firm that must be paid back
brand managers
managers who develop and implement the marketing strategies and programs for specific products or brands (product manager)
Market Research
the collection and analysis of information for making marketing decisions (observation, surveys, interviews, focus groups)
Retailer selling price
price to consumers
Manufacturer selling price
price to distributors
total revenue =
price x quantity
Common Stock
recorded at par value (little economic significance)
The bond indenture
the contract between the firm and its bondholders.
Cash Flow
the difference between cash coming in and cash going out of a business
Break-Even Point
sales volume (in units) at a given price that will cover all of a company's costs
[marketing in society] Wants:
specific goods, services, experiences, or other entities that are desirable in light of a person's experiences, culture, and personality
Effective capacity
the actual output per unit of time that the organization can reasonably be expected to sustain in the long run under normal operating conditions.
Par value or face value
the amount that is returned to the bondholder at the time of maturity. It is the principal.
Financial Accounting (External)
the area of accounting concerned with preparing financial information for users outside the organization
Ratio Analysis
the assessment of a firm's financial condition using calculations and interpretations of financial ratios developed from the firm's financial statements
[how do groups make decisions] Decision by authority rule
the chair, manager, or leader makes a decision for the group
Cost of Goods Manufactured
the manufacturing costs associated with the goods that were finished during the period
Coupon interest
the percentage of the par value that will be paid out annually in the form of interest.
Double-Entry Bookkeeping
the practice of writing every business transaction in two places.
Bookkeeping
the recording of business transactions
price elasticity of demand
the responsiveness or sensitivity of quantity demanded to price changes
group think
the tendency of members in highly cohesive groups to lose their critical evaluative capabilities (not get shit done and lose focus)
brand equity
the value of the brand
brand loyalty
three key components: brand awareness, brand preference, brand insistence
Profit =
total revenue - total cost
Sales Forecast
total sales of a product that a firm expects to sell during a specific time period under its planned marketing efforts
[how do groups make decisions] Decisions by minority rule
two or three people are Abe to dominate or "railroad" the group into making the decision to which they agree
Quantitative Forecasts
typically based on historical data or tests and often involve complex statistical computations
brand
unique name, symbol, design (differentiates product form its competitors), trademark (legal protection), may unify company brands
Actual output
what is actually produced (listed on the MB Factory Report - "Production" as a % of total capacity).
Shortage Costs
when demand exceeds supply; opportunity costs of not making sales (Can be significant in MB)
elasticity of price
when price increases, total revenue decreases
inelasticity of price
when price increases, total revenue increases; when price decreases, total revenue decreases
