BA 260 Final

Price cutting occurs when…

Competitors are all roughly the same size with no clear market leader

Market consolidation may occur when…

One or more companies try to acquire their competitors to grow in size and reduce competition

Example: major airlines are acquiring or at least developing strong partnering agreements with smaller airlines. (United-Continental, Delta-NorthWest, Alaska-Virgin, etc.)

Market Consolidation

Companies might do ___ if there is no appreciable difference between competing product (example, commodities industries)

Price cutting

Competitor rivalry is stronger when…

The rate of growth is stagnant or slow

___often occurs in industries whose products are on the mature side of the Product Life Cycle curve

Price cutting

Firms with ___ must sell at high volumes to remain profitable and will be willing to reduce prices in order to keep their factories running at efficient levels

High fixed costs

Chevy was attempting to convince potential buyers not to purchase Ford’s F150 truck due primarily to its poorer quality, this is an example of ___

A quality comparison of aluminum beds

Direct Competitors:

Businesses offering identical or similar products, try to predict the competitor’s reaction to your company entering their market space.

Direct competitors will often…

Try to convince the buyer to not purchase a competitor’s product due primarily to its poorer quality

Indirect Competitors

Businesses offering close substitutes products, competing materials fall into this category

Factors of indirect competition…

price, performance, and availability

Future Competitors

Businesses that are not yet direct or indirect competitors but could be at any time

Business Model

A firm’s plan or recipe for how it creates, delivers, and captures value for its stakeholders.

The proper time to develop a business model is…

Following the feasibility analysis stage and prior to fleshing out the operational details of the company.

A firm’s business model is…

Integral to its ability to succeed both in the short and long term.

Cloud-based Service to Connect Riders and People Willing to Provide Rides (Provided riders with an app that connects them with the owners of private cars)

Uber, Lyft

Freemium Business Model

The basic product or service is provided free of charge, but money (a premium) is charged for additional features, services, or goods that expand the functionality of the free version.

Bricks and Clicks Business Model

Merchants run both an online store and a physical retail outlet.

Razor and Blades Business Model

The basic product is sold at a low price (or given away for free) in order to increase sales of a complementary good, such as consumable supplies.

Manufacturer Business Model

Manufacturing of raw materials to create a product to sell. B2B or B2C

Disruptive Business Model

New products or services that enter at the bottom of the market and overtime move up and displace established market leaders.

Two-sided Business Model

A platform that facilitates transactions between two distinct user groups, providing each other with network benefits.

In order to succeed, a new firm must address this important issue:

Who are our customers and how will we appeal to them?

A well-managed start-up approaches customer market questions by following a three-step process:

Segmenting the market, Selecting a target market. Establishing a unique position.

Market Segmentation…

Involves studying a firm’s industry and determining the different target markets in that industry.

Markets can be segmented in different ways including:

Lifestyle, Context, Product type, Geography, Demographic variables

Requisites for a good target market:

sufficiently attractive, the firm must have the capability to serve it.

By focusing on a clearly defined market…

A firm can become an expert in that market and then be able to provide customers a high level of service.

Tagline

A phrase so strong that when seen or heard creates a clear picture of these attributes in the mind of the consumer.

What % of consumers say that a known and trusted brand is a reason to buy a product?

Over 50%

A brand allows a company to…

Charge a price for its products or services that is consistent with its image.

What % can a successful brand can increase the market value of a company by?

50% to 75%

An MVP has three key characteristics:

It has enough value, It demonstrates enough future benefit to retain early adopters, It provides a feedback loop to guide future developement

Four Ps of Marketing

Product, Price, Promotion, Place

Core Product

The product itself

Actual Product

The product plus all the attributes that come with it

Why the customer will purchase your product.

The solution to a problem

Cost-Based Pricing

The list price is determined by adding a markup percentage to a product’s cost.

Value-Based Pricing

The list price is determined by estimating what consumers are willing to pay for a product.

Advertising

Making people aware of a product or service in hopes of persuading them to buy it.

Public Relations

Refers to the activities the firm takes to communicate the merits of its product to its target market.

MARCOM Objectives

Build brand equity by utilizing Web-based marketing, Utilize print advertising in targeted magazines, Participate in tradeshows and conferences related to our product, Install a Customer Relations Management (CRM) System to track contacts

MARCOM Platforms

Web Advertising, Print Advertising, Targeted magazines, Radio Advertising, Press Releases, Conferences, Tradeshows, Local fairs and shows, Research Articles

One of the most cost-effective ways to increase the awareness of the products of a company is through …

Public relations

Public relations refer to…

Efforts to establish and maintain a company’s image with the public.

The major difference between public relations and advertising is…

Public relations is paid for indirectly

Public Relations techniques focus on…

The Company

Common Public Relations Techniques:

Press release, Traditional media coverage, Social media coverage, trade shows, conferences.

Why Most New Ventures Need Funding?

Cash flow challenges, capital investments, lengthy product development cycles

Income Statement

Reflects the results of the operations of a firm over a specified period of time

Balance Sheet

A snapshot of a company’s assets, liabilities, and owner’s equity

High risk with uncertain return business characteristics:

Weak cash flow, high leverage, low-to-moderate growth, unproven management

Low risk, semi-predictable return business characteristics:

Strong cash flow, low leverage, audited financials, good management, healthy balance sheet

High return business characteristics:

Unique business idea, high growth, niche market, proven management

SBIR Program

A competitive grant program that provides over $1 billion per year to small businesses in early-stage and development projects.

Each year, __ federal departments and agencies are required by the SBIR to reserve a portion of their R&D funds for awards to small businesses.

11

Three-phase program

Firms that qualify have the potential to receive more than one grant to fund a particular proposal.

Historically, less than __% of all Phase I proposals are funded. The payoff for successful proposals, however, is high.

15%

Breakeven Point

The point where total revenue received equals the total costs associated with the sale of the product.

Number of units to sell to breakeven

Total Fixed Costs / (Unit Sales Price – Unit Variable Costs)

Types of patents

Utility, Design, Plant

Utility Patent

New or useful process, machine, manufacturer, or composition of material.

Length of utility patent

20 years from the date of the original application.

Design Patent

Invention of new, original, and ornamental design for manufactured products.

Length of design patent

14 years from the date of the original application.

Plant patent

Any new varieties of plants that can be reproduced asexually.

Length of plant patent

20 years from the date of the original application.

According to the US Patent and Trademark Office (USPTO), it takes about __ months to acquire a patent.

25

Physical Measures for Protecting Trade Secrets

Restricting access, labeling documents, password protection, maintaining logbooks, maintaining adequate security

Alternatives to vertical integration

Backwards integration, Forward integration

Integration: Outside Suppliers/ In-House Suppliers

Could also be material suppliers/producers

Issues to Consider in Choosing a Legal Form of Business Ownership

Cost of setting up and maintaining Legal Form, Extent of Personal Asset Shielding, Tax Considerations, Number and type of Investors

Sole Proprietorship

Most prevalent form of business organization, all profit and loss flows through the owner’s personal tax returns

General Partnership

The profit and loss flows through to the partners personal tax returns, all partners share in the liability and all partners are adversely affected by the negligence of one

S Corporation

Only earnings actually paid out in salaries are subject to payroll taxes

Requirements of an S corp

All shareholders must be US citizens, can have no more than 100 employees

Limited Liability Company (LLC)

Very popular with startups, the members (Shareholders) are liable only for the amount of their investment

What Year did Willamette Industries get purchased by Weyerhaeuser?

2002

Globalization

Is part of a firm’s corporate strategy with the goal to gain and sustain a competitive advantage and compete against other foreign and domestic companies around the world.

___Is achieved primarily by Foreign Direct Investment

Globalization

Corporations that are active in globalization are called…

Multinational Enterprises (MNEs)

Cultural Distance Aspects:

Cultural, Administrative and Political, Geographic, Economic

Cultural Distance

Disparity between a firm’s home country and its targeted host country

Administrative & Political Distance Aspects:

Political hostilities, Weak or strong legal and financial institutions

Political and administrative barriers include:

Tariffs, Trade quotas, FDI restrictions

Geographic Distance

Physical size (Canada versus Singapore), Within-country distances to its borders, The country’s topography, Time zones, Whether the countries are contiguous to one another, Access to waterways and the ocean

Infrastructure is also important:

Large time zone differences stress the communication channels

Structure of the Business Plan

To make the best impression a business plan should follow a conventional structure.

Although some entrepreneurs want to demonstrate creativity, departing from the basic structure of the conventional business plan is usually a …

Mistake

Typically, ___ are busy people and want a plan where they can easily find critical information.

Investors

Summary Business Plan

10-15 pages, works best for new ventures in the early stages of development that want to “test the waters” to see if investors are interested

Executive Summary

A short overview of the entire business plan.

An executive summary should be…

Concise and shouldn’t exceed two single-spaced pages.

Industry Analysis

Begin by describing the industry the business will enter in terms of its size, growth rate, and sales projections.

Products and services

Explanation of your product, how your product is unique, and how you plan to position it in the marketplace

Larry is a McDonald’s

Late Majority