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What is a Business or Firm
Corportation
What are characteristics of a corporation?
Legal entity that can sue or be sued, can make party to contracts and can acquire property
Owned by stockholders but managed by C-Suite and governed by board of directors
earnings flow through to stockholders via dividends and increased share values
Who owns corporations?
stockholders
How are stockholders paid?
Dividends and increased share value
What is the goal of the firm?
Maximize firm value
How is firm value maximized?
Making decisions that allow the firm to maximize the present value of expected future cash flow earned from investments
What are the 3 drivers of firm value?
Cash flows, timing and risk
How are cash flows related to firm value
positively
How is timing related to firm value
negatively
How is risk related to firm value
negatively
Agency Problems
Conflict of interest inherent in any relationship where one party is expected to act in anothers best interests
What is a partial solution to agency problems?
Corporate governance
What is corporate governance?
System by which companies are directed and controlled
Who is responsible for corporate governance?
Board of Directors
What is stakeholder view?
Corporate decision making should account for the well-being of constituencies (other than stakeholders) such as employees, supplies, local communities, creditors, environment etc
What is the role of strategy?
How a firm positions itself relative to its competition, deploys its resources and directs its activities to create and sustain its competitive edge
Low-Cost Strategy
Seeking sales volume to achieve lowest price through lowest cost
Differentiation strategy
seeking higher profit margin by providing a unique good or service
What are the components of SWOT analysis
Strengths, Weaknesses, Opportunities, Threats
SWOT analysis: Internal, Advantages
Strengths
SWOT analysis: Internal, Challenges
Weaknesses
SWOT analysis: External, Advantages
Opportunities
SWOT analysis: External, Challenges
Threats
What are the components of the BCG Growth Share Matrix
Question Marks, Stars, Dogs, Cash Cows
BCG: Low marketshare, high market growth
question marks
BCG: Low marketshare, low market growth
dogs
BCG: high marketshare, high market growth
stars
BCG: high marketshare, lowmarket growth
cash cows
In this course, “business” is the legal operating form referred to as
Corporation
Which of the following roles is least likely to report to the CFO
VP of Marketing
Which of the following is most consistent with the concept of firm value maximization?
Maximizing the present value of future cash flows
Firm value is negatively related to the following
Cash Flow Timing, Risk
Which of the following best describes a mechanism to mitigate conflicts of interest that may exist between the stockholders of a firm and the firm’s management?
Corporate Governance
The way in which the firm positions itself relative to competitors and uses is resources refers to
strategy
Which of the following refers to the strategy of providing a unique good or service to customers
Differentiation Strategy
The tool used in strategic planning to assess attractive markets or product lines is referred to as
BCG growth-share matrix
Suppose a firm presently has a low market share in an industry with a low market growth rate. This industry is referred to as a
Dog
In SWOT analysis an external challenge is referred to as a
Threat
Marketing is focused on
Generating revenue
Marketing
the activity, set of institutions and process for creating, communicating, delivering and exchanging offerings that have value for customers, clients, partners and society at large
What do products or services sold need to provide to customers?
value
Value represents what?
The perceived benefits, both monetary and nonmonetary that a customer receives from a product compared with the cost of obtaining it
Customers buy products to satisfy what?
wants and needs
Wants
form that human needs take as they are shaped by personality, culture and buying situation
Need
state of felt deprivation
Marketing seeks to match
needs with wants
primary functions of marketing
create value, communicate value, deliver value
Create value
if the benefit of the product or service = or exceeds its cost, the organization has created value
communicate value
firm must communicate what its product is AND what value that product brings to potential customers
Deliver value
a firm will deliver value by optimizing supply chain
Supply chain
set of multiple companies directly linked by one or more of the upstream and downstream flows of products, services, finances and information from a source to a customer
Segmentation
process of dividing larger market into smaller groups, or market segments based on meaningfully shared characteristics
Three primary functions of market segmentation
define needs and wants of customers
design specific marketing strategies
decide how to allocate marketing resources
5 criteria for effective segmentation
Substantial, measurable, differentiable, accessible, actionable
Substantial segmentation
must be large enough for firm to make a profit
measurable segmentation
must be able to identify size and purchasing power
differentiables segmentation
must be able to differentiate from competitors
accessible segmentation
it must be able to reach and serve
actionable segmentation
must be able to attract certain segments
Four basics of segmenation
Demographic, Geographic, Psychographic, Behavioral
Targeting
occurs when markets evaluate each market segment and determine which segments present the most attractive opportunity to maximize sales
Target market
group of customers an org has decided to direct its marketing efforts
3 factors in selecting target markets
Growth potential, level of competition, strategic fit
Growth potential
higher the future growth rate, more attractive a segment is
level of competition
more intense the competition within the market segment, the less attractive it is to marketers
strategic fit
target markets selected should fit with what the organization wants to be
What defines what an org wants to be?
Mission statement
What tool provides a framework to determine if a firm will be successful targeting a specific segment
SWOT
Positioning
consists of activities a firm undertakes to create a certain perception of its product in the eyes of target market
What does positioning assume
consumers compare goods and services on the basis of their benefits
what does positioning take into account?
the identity of the org and where it fits relative to competition
3 steps to decide how to best position their product
Analyze competitors positions
clearly define your competitive advantage
evaluate feedback
4 P’s of marketing mix
Product, price, place, promotion
Product
contains tangible and intangible characteristics. It can also take the form of services or ideas
Price
relates to the value consumers place on the product
What is easiest marketing mix element to change?
Price
What does price effect
revenue
What is revenue
the amount earned from selling products to customers
Place
important because firms must distribute products to where customers can buy and consume them without difficulty. It relates to locations, transportation, logistics and supply chain management
Promotion
includes advertising, sales promotion, personal selling, and public relations
Consumer behavior
study of individuals, groups, or organizations and all the activities associated with the purchase, use and disposal of goods and services
Rational appeals
seek to use logic and reason to stimulate consumers buying decisions
Nonrational (emotional) appeals
seek to use emotional state, needs and aspirations to stimulate consumers buying decisions
Always be closing (ABC)
motivational phrase used to describe a sales strategy. Implies salesperson should continuously look for new prospects, pitch products or services to those prospects and ultimately complete a sale
Attention, Interest, Decision and Action (AIDA)
model designed to illustrate the hierarchy of effects in the context of customer response to marketing communications
What is a market in marketing
refers solely to buyers, that is a firms current or potential customers
Formula to estimate # of customers
population base * adoption %
What is market share?
portion of the market controlled by a particular company or product