BU 111 Final Flash Cards

Cash Cow

a product or business that brings in steady money because it’s already successful and doesn’t cost much to keep going. It’s like a money-maker you can count on!

Capital Gain/Losses

Difference between purchase price and face value at maturity.

David & Goliath

it means a small company competes with a much bigger one by being smart and using its unique strengths. It’s all about using what you’re good at to beat someone who looks unbeatable!

Leverage

Using borrowed money to boost your returns

Canadian Financial System

1) Chartered Banks
2) Alternate Banks

3) Insurance Companies

4) Investment Dealers

What do social factors in the PEST framework include?

Customs, habits, values, attitudes, and demographics

What is NOT a learning objective related to demographics?

Understanding supply chain logistics

What does the activity participation rate measure?

The percentage of a cohort engaging in a behavior

Which cohort is known for being brand loyal and preferring in-person interactions?

Baby Boomers

What challenge arises from Canada’s aging population?

Increase in elder care needs

What is an implication of the increasing urban concentration in Canada?

Businesses must adapt to urban markets

Why is Canada’s increasing immigration rate significant for businesses?

They bring new cultural influences to markets

Which of the following is NOT a key question to consider about demographic cohorts?

What are their preferred global trade policies?

Which cohort values flexibility and has a tech-first mindset?

Gen Z

How do social trends influence the economic factor in PEST?

By changing spending habits

What is a challenge of smaller households in Canada?

Time constraints for families

What is an effective strategy to market to Gen Z?

Utilize social media outreach

Demographics

Data about populations, such as age groups, used to predict market demands and workforce behaviors.

Fertility Rate

The average number of children a woman has in her lifetime.

Baby Boomers

Born 1946-1964, brand loyal, prefer in-person transactions, and value stability.

Gen X

Born 1965-1979, prioritize flexibility, multiple careers, and work-life balance.

Millennials

Born 1980-1994, digitally savvy, value authenticity, and prefer experiences over assets.

Gen Z

Born 1995+, highly social-minded, value customization, and have a tech-first mindset.

Aging Population

Challenges include increased elder care needs and strain on pensions; opportunities include targeting products for aging consumers.

Urban Growth

Increased population in cities like the Golden Horseshoe and Vancouver, requiring businesses to adapt strategies to urban demand.

Immigration Trends

Immigrants bring diversity to the workforce and markets, often younger and urban-based.

Key Questions

Focus on understanding consumer preferences, employee habits, and aligning products with cultural norms.

Cohort Characteristics

Shared values and experiences, like Baby Boomers' brand loyalty or Gen Z's flexibility, shaping marketing and HR strategies.

Social-Economic Link

Social trends affect economic factors, like changing spending habits and workforce demographics.

Smaller Households

Social trends affect economic factors, like changing spending habits and workforce demographics.

Marketing To Gen Z

Social trends affect economic factors, like changing spending habits and workforce demographics.

Estimation

The process of approximating values for variables like market size, revenues, and profitability to support decision-making.

Assumptions

Inputs used to estimate values when exact data is unavailable; refining assumptions improves accuracy.

Example: Estimating hours worked per day when calculating the time to complete a task.

Market Size

The total addressable market (TAM) for a product or service, often expressed in terms of revenue or units.

Refinements: Segmenting by demographics or considering replacement frequency.

Breaking Down Problems

Dividing complex questions into smaller, manageable components to simplify calculations.

Example: Estimating the time to move a mountain by calculating trips and time per trip.

Proxy

A stand-in measurement used to approximate data, such as using households or individuals.

• Guidelines:

  • Use households for group-based consumption (e.g., lightbulbs).

  • Use individuals for personal demand (e.g., smartphone ownership).

Top-Down Approach

Starting with general population or market data and breaking it down into smaller, specific components.

Sense Check

Reviewing calculations to ensure results are realistic and align with known benchmarks or examples.

Total Addressable Market (TAM)

The total potential market for a product if every potential customer were reached.

Serviceable Available Market (SAM)

The portion of the TAM targeted by the business, based on the segment it serves.

Serviceable Obtainable Market (SOM)

The share of the SAM the business expects to capture.

Market Sizing Example

Estimating cell phone sales by population and replacement frequency.

• Steps:

  1. Population owning phones (40M × 86%).

  2. Adjust for replacement frequency (/2).

  3. Add dual ownership.

  4. Multiply by average price.

Drivers of Revenue

Factors influencing sales, such as the number of customers, average spending, and transaction frequency.

Example: Starbucks’ revenue estimated by customers/hour, order size, and number of stores.

Profit Framework

Organizing costs and revenues to calculate profitability:

• Revenues: Selling price × units sold.

• Costs: Materials, labor, and fixed operating costs.

Defending Assumptions

Justifying the logic behind assumptions by showing benchmarks, sensitivity analysis, and comparisons with similar cases.

Estimating Product Demand

Using factors like replacement frequency, demographics, and segmentation to calculate demand for products (e.g., diapers, lightbulbs).

Store Saturation

Calculating the number of stores needed in an area based on population density and existing store locations.

Example: Estimating BMW dealerships in Canada.

Refinements

Adjusting calculations to improve precision, such as accounting for replacement cycles or targeting specific subgroups.

Economic Factors

Variables that influence consumer behavior, business costs, and market opportunities, such as inflation, interest rates, employment rates, and exchange rates.

Debt Financing

Borrowing money with an obligation to repay, often with interest.

• Pros: Retain ownership and control.

• Cons: Requires repayment and interest payments.

PEST Economic Factors

Components that affect a company’s operations and decision-making.

• Examples:

  • Inflation influences consumer spending.

  • Interest rates determine borrowing costs.

  • Exchange rates affect export pricing.

Equity Financing

Raising capital by giving up ownership shares in the company.

• Pros: No repayment required.

• Cons: Dilutes ownership and profits.

Stocks vs. Bonds (Investor Perspective)

• Stocks: Higher risk, variable returns via dividends or capital gains, offer ownership and voting rights.

• Bonds: Lower risk, fixed returns (interest or coupons), priority in liquidation.

Yield

The percentage return expected or received on an investment.

• Formula: Yield = (What you made) ÷ (What you paid).

Risk-Return Trade-Off

Higher risk investments demand higher expected returns to compensate for uncertainty.

Expected Yield

Risk-free return plus a risk premium reflecting the investment's risk level.

Time Value of Money

The concept that money today is worth more than the same amount in the future due to risk, inflation, and opportunity cost.

Present Value (PV)

The current worth of a future sum of money, discounted by a specific interest rate.

Future Value (FV)

The value of an investment or payment at a future date, considering compound interest.

Annuities

Equal payments made at regular intervals.

Ordinary Annuity: Payments occur at the end of each period.

Annuity Due: Payments occur at the start of each period.

Bonds

A debt investment where an investor loans money to an entity for a fixed term and interest.

Components: Coupon rate, face value, maturity date.

Approximate Yield to Maturity

An estimate of a bond’s annual return, considering its interest payments and capital gains over its term.

Why Bond Prices Fluctuate

Changes in interest rates or perceived risk cause bond prices to adjust to maintain expected yields.

Leverage

Using borrowed funds to amplify investment returns.

Example: Buying stocks on margin (investing with part of the value provided by a broker).

Margin Call

A broker's demand for additional funds when the value of a margin account falls below the required level.

Net Present Value (NPV)

The difference between the present value of cash inflows and outflows for an investment, used to determine profitability.

Internal Rate of Return (IRR)

The discount rate that makes the NPV of a project zero, indicating its profitability.

Political-Legal Factors

Elements like laws, regulations, taxes, and trade agreements that influence business operations.

• Significance:

  • Protect consumers and businesses.

  • Promote fair competition.

  • Create opportunities in foreign markets.

Business Influence on Government

Methods businesses use to shape government policy and regulation, such as lobbying, advocacy, and public campaigns.

Service Provider

Government provides essential services like infrastructure and public utilities, influencing business efficiency.

Taxation

Government collects income, property, and sales taxes, impacting business costs and consumer spending.

Business Support

Includes subsidies, trade agreements, and research funding to promote innovation and competitiveness.

Laws and Regulations

Legal frameworks to protect consumers, ensure fair competition, and address social goals like environmental protection.

Porter’s Five Forces and Government Impact

Government policies affect industry competition and profitability by influencing barriers to entry, buyer power, and supplier relationships.

Sole Proprietorship

A single-owner business with complete control but unlimited liability.

Partnership

A business owned by two or more individuals, with shared control and liability.

General Partnership

All partners share joint liability

Limited Partnership

Liability is limited to the partner’s investment

Corporation

A separate legal entity with ownership divided into shares, offering limited liability to shareholders

Private Corporation

Limited to 1–49 shareholders

Public Corporation

Shares traded publicly

Social Enterprise

A business model prioritizing social value alongside financial sustainability.

Example: Grameen Bank provides microloans to alleviate poverty.

Globalization

The process of integrating economies worldwide, creating opportunities and challenges for businesses.

Trade Barriers

Political or economic restrictions, such as tariffs, quotas, and local content laws, that affect international trade

Diamond-E Framework

A strategic tool used to assess a company’s internal and external environment for international expansion decisions

Foreign Entry Strategies

Methods for entering international markets, such as exporting, franchising, joint ventures, and foreign subsidiaries.

• Examples:

  • Indirect Export: Using a third-party export merchant.

  • Licensing: Granting rights to use intellectual property.

  • Joint Venture: Partnering with a local business.

  • Foreign Subsidiary: Establishing a local presence for manufacturing and sales

Market Inequities

Situations where markets fail to address societal needs, such as education, health, or poverty.

Dual Stakeholders

Social enterprises serve both those who benefit from their services and those who support the organization financially

Strategic Focus

A company's plan to achieve growth by deciding where and how to allocate resources effectively.

Expansion Models

Frameworks guiding growth strategies, such as the Ansoff Matrix, which identifies four key modes of growth.

Market Penetration

Selling more of the same product to the same market, aiming to increase market share or purchase frequency.

• Tactics: Price cuts, increased advertising, loyalty programs.

• Challenges: Competitor reactions, customer retention.

Market Development

Selling existing products to new markets, such as new geographic areas or customer segments.

• Tactics: Expanding distribution channels, creating awareness in new markets.

• Challenges: Adjusting branding, accessing new distribution networks.

Product Development

Developing new products for existing customers, leveraging brand equity and customer knowledge.

• Tactics: Product bundling, line extensions.

• Challenges: Cannibalization, production efficiency losses.

Diversification

Entering new markets with new products, creating entirely new businesses.

• Types:

  • Concentric/Horizontal: Related industries.

  • Conglomerate: Unrelated industries.

• Challenges: High resource requirements, operational complexity.

Key Expansion Questions

Questions to assess feasibility and fit, such as:

• Market Penetration: Can I increase volume to offset price cuts?

• Market Development: Can I adapt branding or access new customers?

• Product Development: Can I scale production profitably?

• Diversification: What new capabilities are required?

Decision Criteria

Factors influencing international market entry, such as demand, competition, trade barriers, and distance.

Foreign Entry Strategies

Methods to enter foreign markets, each with varying risk and control:

• Indirect Export: Using a third-party distributor.

• Licensing/Franchising: Allowing local firms to produce or sell products.

• Joint Ventures: Partnering with local firms.

• Foreign Subsidiary: Direct investment in local production and sales.

GE-McKinsey Matrix

A tool for evaluating a company's portfolio of products or business units based on industry attractiveness and competitive strength.

Industry Attractiveness

Evaluates long-term growth potential, profitability, and entry barriers.

Factors: Growth rate, size, and market conditions.

Competitive Strength

Assesses a unit's position relative to competitors.

Indicators: Market share, brand equity, profitability.