BM by Polina Strus

BM by Polina Strus https://padlet.com/polina_strus/o152o1w8bck0 Revision en-us 2017-09-11 18:57:18 UTC 2017-09-12 19:46:53 UTC hello@padlet.com Business and Management polina_strus https://padlet.com/polina_strus/o152o1w8bck0/wish/186532727 2017-09-11 18:58:19 UTC https://padlet.com/polina_strus/o152o1w8bck0/wish/186532727 Business organization(unit 1) polina_strus https://padlet.com/polina_strus/o152o1w8bck0/wish/186534263 1.1 Introduction to business management
Business sectors:

primary-involves the harvesting of naturally available resources
secondary- involves manufacturing of raw products to finished or component goods
tertiary- Involved with service and retail
quaternary- involves intellectual activities or innovation services

1.2 Types of organization
Private vs. Public sectors
Private Sector

Goal is to make profit
Owned, financed and run by private individuals or entities

Public Sector(museums,public hospitals and etc)

Goods and services provided by the government or local authority
May be free or sometimes with a small fee

Types of for-profit/commercial organizations

Sole trader

Business is owned by one person
Simplest form of business
Owned by a single person who assumes all profits and liabilities
Advantages
- Little legal requirements for setup
- All the income goes to one man
- Less restrictions and easy decision-making
~~Disadvantages~~
- All the income tax is shouldered by one man
- Unlimited liability (owner is the same legal entity as the business) and all the debt incurred by the business is put on the owned

Partnership

Company ran by two or more individuals
Each person contributes money and resources, as well as sharing the responsibilities of managing a business.
Involves presence of “silent” or “sleeping” partners, who do not make decisions, merely giving money to the business and earning profit
Advantages
- Liability is spread around
- Range of skills
- Higher capital
~~Disadvantages~~
- Unlimited liability despite being spread out between partners
- Slower decision-making

Types of for-profit social enterprises

Cooperatives

Organizations that are jointly owned and run by its members who share in profits and benefits
Advantages
- Shareholders must be help run organization, work is more spread out
- Equal voting rights/power among all shareholders
Disadvantages
- Decision-making may be more time consuming or involve more conflicts
- Less profit for each shareholder as it is spread among many members

Microfinance providers

Microfinance – loan service offered to individuals or groups with no access to more conventional banking services (unemployed, low-income individuals, etc.)

Public-Private Partnerships (PPP)

Public corporations are sold-off or transferred to the private sector
Advantages
- Incentivized to be more efficient and productive
- Government can focus on other projects and infrastructure
- Enjoy the skills and talents of the private sector (can lead to increased efficiency and productivity)
Disadvantages
- Services provided would be more expensive
- Prices goes up, government has to subsidize (increase in taxes)
- Aim of profit may lead to cost cutting, lower quality, higher prices

1.3 Organizational Objectives
Vision statement and mission statement
Vision

Describes a desired position for the company in the far future (“Where do we want to be?”)

Mission

Purpose of business, states what the business is and does (“How do we get there?”)

Aims, objectives, strategies, and tactics

Aims – long term goals of what the company wants to be
Objectives – shorter term goals that are specific and measurable
Individual targets, departmental objectives, divisional objectives, corporate objectives, mission, aim (pyramid, base to height is left to right)
Guides and unifies management and workforce
Basis for strategic planning
Builds trust and goodwill

Ansoff Matrix
(https://www.mindtools.com/media/Diagrams/Ansoff-Matrix-1-NEW.jpg)

Analytic tool to determine growth strategy by focusing on product/market combination
Growth strategies
Existing product + existing market = Market Penetration (low risk)
- Seeks to maintain or increase market share
  - Price adjustments
  - Increase of market promotion
  - Minor product improvements
  - Intense competition
- New product + existing market = Product Development (medium risk)
  - Innovation to replace existing products
  - Focusing on consumer needs
  - Brand extension
  - Capitalize on technology
  - Consumers in existing market may not like the new product
- Existing product + new market = Market Development (medium risk)
  - New distribution channel
  - Expanding geographically
  - Attract new market segments
  - New consumers may not like the product
- New product + new market = Diversification (high risk)
  - If successful, higher gains can be reaped from various industries
  - Spreads out risks and safeguards against economic shocks over diverse product portfolio

1.4 Stakeholders
Stakeholders

People who can be affected by and therefore have interest or stake in actions of the business
- e.g. shareholder, employees, suppliers, customers, competition, government/state, pressure groups, etc.
Stakeholder Concept – priority to stakeholders rather than shareholders

Interests of internal stakeholders vs. interests of external stakeholders

Internal
- Employees-employment security, wage levels, conditions of employment, participation in the business
- Managers-employment security, salary and benefits offered, responsibilities given
- Shareholders-owners of shares in the company, have decision-making power, receive dividends (share of profit)
External
- Suppliers-speed of payment, level and regularity of orders, fairness of treatment
- Customers-value for money, product quality, quality of service
- Government-job creation, tax payments, value for output produced, impact on wider society/economy
- Special Interest groups (SIGs)-Care about individual interests: payment of debts, environment, etc.
- Competitors-fairness of competitive prices, strategic plans of the business
Stakeholder conflict
- Not possible to satisfy all stakeholders all the time
- Conflict will always arise from new developments, business activities, etc.
- Stakeholder conflict resolution
  - Arbitration
    - To resolve industrial disputes between workers and managers
    - Advantage
      - Both sides agree to an independent arbitrator who will decide th
    - Disadvantage
      - Neither stakeholder group will likely receive what they want
      - Decision is binding
  - Workforce Participation
    - To improve communication, decision-making and reduce potential conflicts between employees and managers
    - Advantage
      - Gain cooperation of workers – better motivated and involved
    - Disadvantage
      - Waste of time and resources to be able to get all information
  - Profit-sharing scheme
    - Reduce conflict between workers and shareholders over allocation of profits and benefits
    - Advantage
      - Sharing profits can encourage workers to work in ways that will increase long-term profit
    - Disadvantage
      - Reduces retained profits and/or profits paid out to shareholders unless the scheme pays off
  - Share-ownership scheme
    - To reduce conflict between workers , manager and shareholders
    - Advantage
      - Provides share options; employees and shareholders benefit and aligns their interests with one another
    - Disadvantage
      - Administration costs, decreased ownership, qualification constraints may limit motivation

1.5 External Environment

STEEPLE
- Business tool for understanding a business’ external environment
- Looks at the market potential and situation
- Stands for Social, Technological, Economic, Environmental, Political, Legal, and Ethical analysis (of the industry)
- External environmental factors are analyzed in decision making and strategy development because they can heavily influence the business
- Social
  - Attitude of society towards wide range of issues
  - Population demographics (more young/old, more women/men, etc.)
  - Roles and attitudes of people
  - Cultural and religious beliefs
  - Security and education
- Technological
  - Use of tools and machines
  - Information technology
  - Innovations in technology
- Economic
  - State of the economy
  - Interest and tax rates
  - Exchange rates and foreign relations
  - Inflation rates, unemployment rates, etc.
- Environmental
  - Abundance of natural resources or raw materials
  - Threats from nature (or natural disasters)
  - Waste disposal/recycling
- Political
  - Laws (employment, consumer, business) & policies (fiscal and monetary)
  - Changes brought about by new government
  - Possible effects of political unrest
- Legal
  - Employment or contract laws
  - Trade unions
  - Environmental protection regulations
- Ethical
  - Client confidentiality
  - Bribery and other forms unethical (and possibly illegal) business transactions
  - Fair competition
How changes in STEEPLE factors affect a business’s objective and strategy
- Changes in trends, social norms, public opinion, views on ethics can affect the company’s products, business activities, and the way they market their products
- Changes to legal or political factors may force businesses to change the way they operate to comply with new laws or regulations
- Changes to technological factors could result to the company adopting newer technology or machinery to increase efficiency or keep up with industry standards
- Changes to environmental factors could force companies to adapt to scarce raw materials, frequent natural disasters, etc.
- Changes to economic factors (economic growth, interest rates, etc.) could affect the costs of operations of the business, spending attitude of consumers, etc.

1.6 Growth and evolution
Economies and diseconomies of scale

Scale of operations/business
- Maximum output that can be achieved using available resources
- Scale can only be increased in the long term by employing more of all inputs
- Producing more =/ increasing scale of production
- Increase scale of operations attains economies of scale
Economies of scale
- Increase in efficiency of production as the number of output increases
- Average cost per unit decreases through increased production
- Fixed costs are spread over an increased number of output
- Cost per unit = (total variable costs + total fixed cost) ÷ units produced
- Importance: customer enjoy lower prices due to the lower costs which in turn increases market share or business could choose to maintain its current price for its product and accept higher profit margins
- Types of economies of scale:
  - Internal – achieved by the organization itself
    - Purchasing (bulk-buying) economies
      - Wholesale discounts
    - Technical economies
      - Investing in technology to reduce costs
    - Financial economies
      - Easier for large companies to receive loans from banks
    - Marketing economies
      - More efficient to advertise a large number of products
    - Managerial economies
      - Larger firms are able to hire specialists who help improve efficiency
  - External
    - Improved infrastructure (e.g. transportation)
    - Advances in the industrial efficiency due to better training, innovations in processes/machinery, etc.
    - Growth of other industries that support the organization
Diseconomies of scale
- Economies of scale have peaks, if this point is passed, diseconomies of scale are experienced
- Can occur when a company or even the whole industry becomes too big and unit costs begin to increase rather than decrease
- Possible due to:
  - Communication problems leading to poor coordination
  - Overworked machinery and laborers
  - Alienation of workforce and slower decision-making (for larger businesses)
- Diminishing marginal returns
  - Decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant

Small vs. large organizations

Importance of small businesses
- Small firms create jobs
- Small businesses are often run by dynamic and innovative entrepreneurs
- Provides competition for big business
- Supply specialists goods and services for specific industries
- Small firms can become big businesses in the future
Advantages
- Small business
  - Easily managed & controlled by the owner
  - Quicker to adapt to changing customer needs and feedback
  - Offer personal service to customers
  - Establishes better employer-worker relationships
- Large business
  - Can afford to employ specialist, professional managers
  - Benefit from more economies of scale
  - More access to varied sources of finance
  - Can diversify in several markets, thus spread out the risks
  - Can afford more formal research & development
Disadvantages
- Small business
  - Can’t afford to employ specialist, professional managers
  - Doesn’t benefit from more economies of scale
  - Less access to varied sources of finance
  - Can’t diversify in several markets, thus spread out the risks
  - Can’t afford more formal research & development
- Large business
  - Difficult to be managed & controlled by the owner
  - Slower to adapt to changing customer needs and feedback
  - Can’t offer personal service to customers
  - Establishes poorer employer-worker relationships

Internal growth vs. external growth

Internal/organic growth
- Occurs when businesses grow using its own resources to increase the scale of its operations and sales revenue
- Methods used to achieve internal growth:
  - Change of pricing strategies
  - Increase advertising and promotions
  - Offer flexible financing schemes
  - Improve and innovate the product or service
  - Sell in different locations
  - Increase capital expenditure on production and technologies
  - Train and develop staff
External/inorganic growth
- Occurs through dealings with outside organizations
- Vertical integration
  - The main business takes part in the primary, secondary, and tertiary aspect of business
- Horizontal/lateral integration
  - Businesses unify under the same industry
  - Between firms who have the same operations, but do not necessarily compete with one another
  - e.g. Ford bought Jaguar, Ford is low to mid class while Jaguar is high class. They don’t compete and when they merge they now cater to a bigger market

External growth methods

Conglomerate mergers, takeovers, or acquisitions
- Amalgamation of two businesses that are in completely different markets
- Results in dissolution of original business entities in favor of forming a new one
- Reasons for mergers:
  - They want to increase revenue
  - Fight the rising of prices together
  - Increased customer satisfaction (new and better content)
  - Bigger market
- Reasons for failure:
  - The companies could not synergize
  - The competition was stronger than the merged business
  - Conflicting cultures
  - Poor management and leadership
  - Poor timing/recession
Joint ventures
- Two companies join for a specific undertaking and set-up a new legal entity
- e.g. Sony + Ericsson = Sony Ericsson
Strategic alliances
- Like a joint venture, but NO new legal entity is created (only for a specific project or product)
- Profit is split between the two companies
Franchising
- An individual buys the right to operate under another business’ name
- Can be offered individuals or large businesses
- Franchisee pays a franchise fee (royalties and supplies) and is given a license to operate by the franchiser
- Franchisee is a different type of entrepreneur – much less risk compared to the normal entrepreneur
- Franchiser provides marketing, training and equipment to set-up
  - Support to ensure business will have a good chance of success, retain good brand image, and maintain standard of product/service quality
  - Franchiser may take a portion of profits and has a say on how the business should be run
- Franchisor
  - Benefits
    - Grow cheaply and quickly
    - Less manpower to directly manage
    - Income from franchise fee, royalties, and supply purchases
  - Downside
    - Not easy to revoke
    - Less control over quality or performance of franchise
    - Conflict in profit vs. volume
- Franchisee
  - Benefits
    - Known brand results in strong start-up sales
    - Support from franchisor
    - Easy financing options
    - Lower cost of supplies because of economies of scale (though sometimes the franchisor charges high for supplies)
  - Downsides
    - Little freedom/flexibility in running
    - Franchise/start up fee may be too costly
    - Bad management in headquarters affects all branches
    - Still not guaranteed success

]]> 2017-09-11 19:01:29 UTC https://padlet.com/polina_strus/o152o1w8bck0/wish/186534263 Marketing (unit 4) polina_strus https://padlet.com/polina_strus/o152o1w8bck0/wish/186534391 4.1 The role of marketing
Marketing

Addresses people’s needs and wants and influences target consumers to buy a specific product instead of other competing products
A management process involved in identifying, anticipating, and satisfying consumer requirements profitably
It is about satisfying consumer needs and wants through exchange
It is a research based process of getting customers interested in a product through the management of the 4 (or 7) P’s

Marketing goods/products versus services

Goods/Products: 4Ps
- Product
- Place
- Price
- Promotion
Services: 7Ps
- 4Ps
- People (frontline staff appearance, skill, charm, helpfulness)
- Processes (time, ease, accessibility, payment, aftersales)
- Physical evidence (facilities, cleanliness, design, atmosphere, peripheral products)
- Has a product oriented approach

Product oriented vs. market oriented marketing

Product Oriented Marketing
- Business develops products based on what it is good at making
- Mainly for products that are high tech, high quality, and high differentiation
Market Oriented Marketing
- Business develops products based on the market
- Geared to mass consumer markets using expensive market research, but is more flexible and less risky
- Flexible: Adapts more easily as this approach is sensitive to market trends, such as habits, needs, lifestyle, and taste
- Less Risky: More assurance of success since the product meets customer requirements

Social vs. commercial marketing

Social marketing
- Seeks to influence behavior to benefit society as a whole by selling a desired behavior, thus satisfying societal needs
- Using social marketing (i.e. commercials, etc.) to bring about social change
  - Celebrity endorser
  - Media coverage
  - Giving out cards
  - Workshops/modules
  - Movies
  - Signature campaign – Pledge board
  - Slogans
  - Dropboxes
  - Email/hotline/customer service
Commercial marketing
- Seeks to satisfy customers by selling a particular needed product or service, thus satisfying individual needs
- Delivering what people already want instead of changing what people want

Market

A place or process which allows suppliers and customers to exchange physical goods, services, information, etc..
Kinds of Markets
- Consumer – General public
- Industrial/Commercial – Businesses and governments
Markets size
- Can be measured through the number of potential customers, the total volume of sales achieved by the numerous businesses active in the market, or the value of said sales
- Helps businesses assess whether a particular market is worth participating in due its number of potential customers and the barriers to entry
Market growth
- Rate the size of a market increases/decreases over a period of time
- Measured by an increase in the total value or volume of sales in a market
- Helps businesses assess whether a particular market is worth entering due to its rate of growth or contraction

Market share

The percentage of all the sales in a particular market that are held by a business, and can be measured by the volume or value of the sales
Importance
- Helps measure a firm’s performance and market position against other competitors
- Might indicate that a business is a market leader
  - Can influence its competitors to follow the leader’s model
  - Can influence the leader to continually enact strategies in order to maintain its position
  - Can indicate the degree of success or failure of a business’ current strategies
  - Can lower prices or maintain higher profit margins as compared to competitors due to better economies of scale
Ways to increase market share
- Brand promotion
- Improved customer service
- Copyright and patent filing
- Product development
Limitations
- May be difficult to identify the most important market share value for products that cross into several markets
- Cannot be used as an absolute measure of a firm’s success or performance
  - Firms can be intentionally lowering their market share as a result of its more stringent client selection
  - A decline in a firm’s market share can be a result of a new entrant and not necessarily as a result of lowered sales
  - Should mainly be compared against the most similar and closest of competitors, and not necessarily the market as a whole

Marketing objectives

Common targets that marketing activities will achieve
- Market share/leadership
  - Acquiring a greater/bigger market share and volume by improving sales/revenues (e.g. expansion, globalization, franchising, aggressive advertising, further market penetration, etc.)
- Customer service
  - Providing loyalty programs, after sales services/policies through quality staff training
- Brand building
  - Improving the image of the company through CSR, sponsorships, publicity, packaging, etc.
- Growth strategies
- Innovation
  - Launching a totally original or new product into the market (attain the first-mover advantage)
- Positioning
  - Involves expanding or modifying product line/mix to enhance or change image.
Successful marketing objectives are
- Aligned with business’ overall main vision-mission-goals (or VMGs)
- Appropriate to organization’s size, financial capacity and production efficiency
- Mindful of competition, external (PEST) factors and social issues

4.2 Marketing Planning
Marketing mix

Combination of key decisions that must be taken in the marketing of a product
Consists of the 4 or 7 Ps (product, price, place, promotions, etc.)
- Not all of the P’s have the same degree of significance in all cases
- P’s must be coherent in an interrelated marketing plan
- Marketers must be careful not to confuse consumers with conflicting messages about the goods or services being sold
- (The Ps will be discussed in units 4.5 and 4.6)

Marketing plan

Formal written document that outlines how a business intends to achieve its marketing objective
Contains detailed action programs, budgets, sales forecasts and strategies
Effective marketing planning relies on a clear awareness of market trends, competitor’s actions and consumer wants
Marketing plan usually begins with a marketing audit which is a review of a business’ current marketing situation
- SWOT and the 4P’s employed
- Current PEST
- Review of current marketing strategies
Elements
- Key marketing objectives
- Market research (target market, competition, market size, trends etc.)
- Marketing strategies for the marketing mix and specific activities
- Marketing budget
- Likely problems and backup plans
- Monitoring and review process (to be modified along the way)

Market segmentation

Process of dividing the market into subgroups based on defined attributes
Each segment has distinct identity, specific needs, and preferences
Attributes provide each segment with a clear customer profiles allowing business to target a segment with the appropriate marketing mix
Successful segmentation requires a business to have a clear picture of the consumer in the target market it is aiming to sell in
Marketing mix has to be appropriate for the target market and positioning of the business
Profile segmentation by
- Demographics
  - Age, group, gender, marital status, income group, social class, education, profession, religion, language
- Psychographics
  - Status, values, cultures, interests, politics, causes, beliefs, buying habits, decision factors
- Geographic
  - Location: urban, rural, cosmopolitan or closed, multicultural, island, low/uplands
  - Climate: desert, tropical, four season, seasonal rain, humidity
Advantages
- Define the market more precisely
- Identifies gaps in the market for exploitation
- Minimize selling to consumers who have no intention of buying
- Small firms can specialize in one or two target markets
- Allows for price discrimination to maximize revenue and profits
Disadvantages
- May need product variations to satisfy different segments:
- High cost for R&D, varied promotions, and production and inventory
- Excessive specialization is dangerous if your segment changes your attitudes or behavior
Using DAMAS for segmentation
- Differentiated
  - Each segment must be unique in response to different elements of marketing mix
- Actionable
  - Business must be able to address the needs of each segment
- Measurable
  - Size and purchasing power must be quantifiable
- Accessible
  - Customer in the segment must be reached in a cost-efficient way
- Substantial
  - Sufficiently large in order to generate profits

Target marketing

Part of market research, comes after market segmentation
Targeting refers to the market segment that a business wishes to sell to
Appropriate marketing strategies are then developed for these target markets
- Niche/concentrated
  - Targets a specific, well-designed segment that requires very specialized product or high luxury item
- Undifferentiated/mass market
  - Ignores segments but targets wide market to maximize volume
- Differentiated/selective
  - Uses different marketing mix for each segment to address differences in perceptions and lifestyles

Market positioning

Basically consumer perception
An analysis that looks at how consumers “perceive” brands (how they are ranked or classified in the eyes of the consumer)
Stages of positioning
- Identify the competitive advantage of the product (brand or USP)
- Decide on which strengths should be marketed to the segment
- Implement the desired positioning by using the appropriate marketing mix
Brand VS. USP (Unique Selling Proposition)
- Corporate image is the consumer perception behind a brand
- USP is the differentiating factor that makes a company product unique and thus motivates consumers to buy

Product position/perception map

Shows the general market’s or consumers’ perceptions of a product’s or brand’s key aspects in relation to other competitors in the particular market
Mainly uses two variables, such as price and quality, convenience and environment, taste and healthiness, etc.
Uses
- Allows businesses to identify any gaps in its product portfolio or in the market, which it can fill with new or existing products
  - Can be used for targeting strategies
  - Allows businesses to determine how to place their products more competitively
  - Can inform businesses if the need to reposition their products arises
  - Businesses may try to reposition its products according to market/consumer tastes in order to further capitalize on consumer demand without developing entirely new products
    - Involves modifying the product’s image, features or target market
Limitations
- Filling gaps in the market however shouldn’t always be a priority as gaps could exist for reasons, such as generally low demand or low profitability, high barriers of entry, etc.
- Firms also have to asses whether they have the capacity or ability to fill the gaps in the market, and whether going into such gaps correspond to the business’ image

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