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Stage 6. Business Intelligence and Data-Driven Decision Making
a. Concepts
i. Data-driven decision-making- using data and statistics to help make business decisions by indicating key aspects, trends, and information within the data/survey
ii. Value of Data. Data is not only valuable in terms of measuring certain components and testing/hypothesizing future trends but also has a whole-money value as companies like Google and Facebook hoard data and use it to sell or target advertisements. Tech companies with 100,000 or more users could be forced into sharing how much their individual user data is worth to them with this new legislation.
iii. Data and Statistics- helps show biases- central bias is cognitive bias/ taking mental shortcuts. Some notable aspects of cognitive bias are conformation bias, framing bias, anchoring, bandwagon effect, and dunning Kruger effect. These help us think accurately but not always precisely use prior experiences to limit risk. The main effect is that they limit creativity and innovation
iv. Key Performance Indicators- financial, sales, marketing, operational, customer and corporate responsibility
Why marketers are data-hungry...
- Personalization becomes easy and
effective
- Decisions based on concrete data
- Customer journeys become clearer
- Data leads to a better understanding of
ROI
b. Videos and Other Readings
i. “16 cognitive biases that can kill your decision making.”
Stage 7. Operations- Bringing a Product to Market
a. Concepts
i. Operations Management- primarily concerned with planning organizations and supervising in the context of production manufacturing or the provision of services. It is delivery focused on ensuring that an organization efficiently turns inputs into outputs. Works alongside supply chain management and logistics
Supply chain management is a way to link major business processes within
and across companies into a high-performance business model that drives
Competitive advantage.
• Logistics refers to the movement, storage, and flow of goods, services and
Information inside and outside the organization.
ii. 3 Primary Decisions of Ops
1. Production planning Long-term planning (3-5-year timeframe): focuses on which goods to produce and where they should be made. (MOST BROAD PLANS)
2. Medium-term planning (2-year timeframe): these decisions concern the layout of factory or service facilities, where and how to obtain the resources needed for production and labor issues.
3. Short-term planning (within a 1-year timeframe): converts the broader goals into specific production plans and materials management strategies. (MOST SPECIFIC PLANS)
• .production control Location must be determined early in production and operations planning
• Why does it matter?
• The facility’s location affects operating and shipping costs and, ultimately, the price of the product or service and the company’s ability to compete.
• Mistakes made at this stage can be expensive because moving a factory or service facility once production begins is difficult and costly.
• Companies must weigh several factors to make the right decision:
• Availability of production inputs
• Marketing factors
• Manufacturing environment
• Local Incentives
• International location considerations
Improving production and operation
iii. Production Types are the four critical decisions when doing production planning. 1 type of production process that will be used
Two site selection
Three facility layouts and three main types
. Process layout -a type of layout wherein like machines are grouped in a single
space, and is primarily used when the production process is non-repetitive
. Product layout-: workstations or departments are arranged in a line with products
Moving along the line. Suitable for products that require a repetitive production
process
. Fixed position layout- the product or service stays in one place while workers and
machinery move to it
Four resource planning
Resource planning begins by specifying which raw materials,
Parts and components will be required, and when to produce
Finished goods.
• Make-or-Buy Decision: the decision whether a company will make
Its production materials or buy them from outside sources
(outsourcing)
• Considerations: quantity of items needed, unique design features, reliability/quality of
outside sources
• Inventory Management: deciding how much of each type of
inventory to keep on hand and the ordering, receiving, storing,
and tracking of it
• Consideration: how to meet customer/production demands while minimizing costs (tying
up money, storage, frequent reordering, etc.)
Quality management
Quality Management
• Quality:
• Consumer perspective: how well a product serves its purpose.
• Manufacturer perspective: the degree to which the product
Conforms to a set of predetermined standards.
• Quality control: involves creating quality standards,
Producing goods that meet them and measuring finished
Goods and services against them.
• Requires a company-wide dedication to managing and working in a
The Way that builds excellence into every facet of operations (not saved
for end-of-the-line inspections) – top management must foster a
a company-wide culture dedicated to producing quality
Quality Control Methods
• Total Quality Management (TQM): emphasizes the use of
quality principles in all aspects of a company’s production and
Operations. It recognizes that all employees are involved in bringing.
a product or service to customers—marketing, purchasing,
Accounting, shipping, and manufacturing—contribute to its quality.
• TQM focuses on continuous improvement, a commitment to seek better constantly
Ways of doing things to achieve greater efficiency and improve quality.
Company-wide teams work together to prevent problems and systematically improve.
Key processes instead of troubleshooting problems only as they arise.
• Six Sigma: company-wide, quality-control program method that
Focuses on measuring the number of defects that occur and
systematically eliminating them to get as close to “zero
defects” as possible (goal = every process produces no more
Than 3.4 defects per million).
• A key process of Six Sigma is called DMAIC: Define, Measure, Analyze, Improve,
And Control.
Quality Control Methods, cont.
• Lean Manufacturing streamlines production by eliminating steps in the
A production process that does not add benefits customers want. In other
Words non-value-added production processes are cut so that the
The company can concentrate its production and operations resources on
Items are essential to satisfying customers.
• Just-In-Time (JIT): based on the belief that materials should arrive
Exactly when they are needed for production, rather than being stored
On-site. Manufacturers use computerized systems to determine what
Parts will be needed and when and then order them from suppliers, so
They arrive “just in time.”
• Under the JIT system, inventory and products are “pulled” through the production process in
Response to customer demand (so requires close teamwork between vendors and purchasing.
and production personnel )
Three common forms of production
• Mass productions “One for All”
• Mass production: manufacturing many identical goods at once (e.g., canned goods, over-the-counter drugs, and household appliances)
• Emphasis is on keeping manufacturing costs low by producing uniform products using repetitive and standardized processes
• Born out of the Industrial Revolution (e.g., Henry Ford’s Model T)
Customization
• Customization: A company produces goods or services one at a time according to the specific needs or wants of individual customers (the opposite of mass production).
• Example: a print shop may handle various projects, including newsletters, brochures, stationery, and reports. Each print job varies in quantity, type of printing process, binding, color of ink, and type of paper.
• Service example: personal training or nutrition coaching
Mass customize
• Mass customization: goods are produced using mass-production techniques, but only up to a point. At that point, the product or service is custom-tailored to the needs or desires of individual customers.
• Allows a customer to design certain features of a product while still keeping costs closer to that of mass-produced products.
• Example: modular homes - allow customers to make changes to the base home package
• iv. Critical Path Method (study on paper) Critical Path Method (CPM):
• The manager identifies all the activities required to complete a project, the relationships between these activities, and the order in which they need to be completed.
• Manager develops a “Network Diagram” to show how the tasks depend on each other.
• Analysis is conducted to identify the “critical path”
• Critical path represents the path of activities that, if not on time, the entire project will fall behind
• This method helps determine a project's anticipated “end date.”
b. Videos and Other Readings
i. “The Next Manufacturing Revolution is Here,” Olivier Scalable
ii. “Global Supply Chains in a Post-Pandemic World” (HBR)
Stage 8. Selling to Customers
a. Concepts
5 P’s: Promotion
“Promotion” is comprised of 6 parts:
• Traditional advertising
• Sales promotion
• Personal selling
• Public relations
• Social media
E-commerce
i. Promotional Goals
ii. Promotional Mix/Integrated Marketing Campaigns
Promotional mix: the combination of traditional advertising, personal selling, sales promotion, public relations, social media, and e-commerce used to promote a product
An integrated marketing campaign combines multiple channels such as content, email, display advertising, and social media to promote a consistent message to a specific audience. The main goal of most integrated campaigns is to convert viewers into customers.
Traditional advertising: Any paid form of nonpersonal promotion delivered through traditional media channels by an identified sponsor.
Personal selling: A face-to-face presentation to a prospective buyer.
Sales promotion: Marketing activities that stimulate consumer buying, including coupons and samples, displays, shows and exhibitions, demonstrations, and other selling efforts.
Public relations: The linking of organizational goals with key public interest aspects and the development of programs designed to earn public understanding and acceptance. (e.g., lobbying, publicity, special events, internal publications, etc.)
Social media: The use of social media platforms such as Facebook, Twitter, Pinterest, Instagram, and blogs to generate “buzz” about a product or company. (e.g., paying celebrities to wear a specific line of clothing and posting these images on Twitter or Instagram)
E-commerce: The use of a company’s website to generate sales through online ordering, information, interactive components such as games, and other website elements.
iii. Emotional Brain vs. Rational Brain
b. Videos and Other Readings
i. “Is there a buy button inside the brain?” Patrick Renvoise
• Critical Path Method (CPM):
• The manager identifies all the activities required to complete a project, the relationships between these activities, and the order in which they need to be completed.
• Manager develops a “Network Diagram” to show how the tasks depend on each other.
• Analysis is conducted to identify the “critical path”
• Critical path represents the path of activities that, if not on time, the entire project will fall behind
• This method helps determine a project's anticipated “end date.”
Stage 9. Investing Earnings and Strategies for Growth
a. Concepts
i. Measurements of “business growth”
Growth can be measured in a variety of ways, but most.
Commonly, it is measured by:
• Revenue
• Cost
• Profits
• Earnings per share (EPS)
• Customer demand
• Customer retention
• Market share
• Workforce health (i.e., employee satisfaction and retention)
ii. Business Growth Strategies
1. Intensive growth strategies
• Exploit growth opportunities inside the current market
• Market Penetration (i.e., Capture a more significant portion of the market)
• Increase sales through effective marketing strategies within the current target market
• Lower selling price (if possible)
• Expand distribution channels
• Market Development (i.e. Market expansion)
• Expand sales through expanding geographic representation
• Franchising (think Dunkin Donuts)
• Licensing (think most software applications)
• Product Development
• Increase sales through new products/services
•
2. Integrative growth strategies
• Exploit growth within the industry as a whole
• Vertical Integration Strategies
• Growing forward/backward within the supply chain(i.e. purchase suppliers and buyers)
• Examples:
• Amazon: controls three stages along the supply chain (sourcing, marketing and sales, and distribution)
• Ikea: controls two stages along the supply chain (sourcing and marketing/sales)
• Netflix: controls two stages along the supply chain (production and distribution)
• Horizontal Integration Strategies
• Buying up competitors within the current industry (i.e., purchasing competitors)
• Examples:
• Amazon purchased Whole Foods
• Porsche purchased Volkswagen
• Facebook purchased Instagram
• Disney purchased Pixar
3. Diversification strategies
• Exploit opportunities outside the current market/industry
• Investing in or acquiring products/businesses that are outside the core competencies and industries
• Use when all other growth strategies within the current market/industry have been exhausted
• Synergistic strategy
• Acquire products/services unrelated to the core
• Example: Disney
• Purchased Marvel Comics and ESPN, among other media organizations
• Only 32% of profits come from movies and parks– most profitable growth comes from new products in new markets
•
4. Global strategies
2. Reasons to go global early in development
1. Product lives are short due to rapid technological changes
2. R&D is expensive and must be spread across many markets
3. Competition and saturated markets
3. Characteristics of successful globalization
1. A global vision from the start
2. Internationally experienced managers
3. Strong international business networks
• Exploit opportunities in the international arena
• Investing: the act of using money (i.e., capital) to generate returns in the form of interest, dividends, or through the appreciation of the investment product
• Types of Investments
• There are many products that you can invest in (i.e., “ investment securities”), the most common being stocks, bonds, certificates of deposit (CDs), and treasury debt.
• Each investment product carries a level of risk, and this danger connects directly to the level of income that the particular product provides.
• Generally speaking, with higher risk comes higher reward
• Common investing U.S Treasury Debt
• DEBT: You lend the federal government money, and they pay you back
• How does your investment grow? You earn interest and get your money back in the future
• Commercial Deposits (AKA Certificate of Deposit)
• DEBT: You lend banks money, and they pay you back
• How does your investment grow? You earn interest and get your money back in the future
• Bonds (corporate/municipal)
• DEBT: You lend businesses and municipalities money, and they pay you back
• How does your investment grow? You earn interest and get your money back in the future
• Stocks
• EQUITY: You purchase partial ownership in a company
• How does your investment grow? When the company performs well
• U.S. Treasury Debt
• These investments (known as fixed-income investments) are considered the safest form of investing
• They provide steady income at a rate slightly higher than a typical savings account from the bank.
• Commercial Deposits (CDs)
• A certificate of deposit, or CD, is a type of federally insured savings account with a fixed interest rate and fixed withdrawal date, known as the maturity date. CDs also typically don’t have monthly fees.
Think of it as treasury debt but for a bank,
• Stocks from many large, well-established firms (e.g., Apple, Boeing, etc.) pay a regular return on the invested dollar in the form of dividends.
• Represent a partial share of the companies worth
• Corporate bonds: issued by businesses with a set interest rate and maturity date, corporate bonds are bought by investors as they become the lender.
• The company will return periodic interest payments to the investor and return the invested principal when the bond matures. Each bond will have credit rating issues by rating agencies (most secure rating = AAA)
• Municipal bonds: debt issued by communities throughout the US to help build infrastructures such as sewer projects, libraries, and airports. Their credit rating is based on the issuer's financial stability.
• Dividends: payments to stockholders from a corporation’s profits (can be paid in cash or stock)
• Stock dividends are payments in the form of more stock.
• Typically, the company’s CFO and Board of Directors determine how much profits to distribute as dividends and how much to reinvest.
• Retained earnings: profits that have been reinvested in the business
• Used for growth within the firm
• That is, they provide financial resources to reinvest in operations like R&D, facility construction, renovation, and expansion
• Also, there are tax advantages for retaining earnings, which is another incentive to reinvest within the firm
• Decision Rule:
• If i > r, then pay down debt
• If r > i, then invest
• What makes banks vulnerable? Deposits are redeemable on request (short term)
• Bank assets (loans and securities) are illiquid (long-term)
Banks take deposits with a short maturity and invest them in securities and loans with a long maturity… THIS IS RISKY!!
iii. Silicon Valley Bank collapse
: Did not diversity consumers (i.e., depositors)
- Many large tech companies whose deposits were more than $250,000 (uninsured)
- The collapse of the tech boom from November 2021 onwards meant that many of SVB’s corporate clients were drawing down their deposits in 2022
The high proportion of assets tied up in long-term securities meant that SVB had not left itself a lot of “wiggle” room
• Cause #2: Inflation & Interest Rates
• The Federal Reserve has been trying to contain inflation by increasing interest rates
• When interest rates go up, the value of LT bonds goes down
When tech companies were demanding their money back, the value of their money in SVB was less than half of what they initially deposited
iv. Irrational Investing and Behavioral Finance
• Investors (of all types) are often “irrational”
• That is, they make investments that end up losing $$$z
• Why does this happen?
• Behavioral Finance tries to understand why we invest in such irrational ways…
• Some common explanations:
• Representativeness
• Overconfidence
• Anchoring
• Ambiguity aversion
• Loss aversion
• Framing
Note: Advances in behavioral sciences (e.g., psychology and neuroscience) help explain these phenomena, just like hiring, marketing, etc.…
b. Videos and Other Readings
i. “Do Algorithms Make Better/Fairer Investments Than Angel Investors” (HBR)
• The Problem:
• Investing is difficult
• Large returns require significant risks
• Lots of unknowns
• Individuals are biased in terms of their talent, as well as according to gender and race
• Large hedge funds increasingly use AI to make investment decisions, but is it any better?
• The Research Question(s):
• Can an algorithm (i.e., artificial intelligence) outperform the average angel investor?
• If it can, will it make less biased investments?
• What biases? Local bias, loss aversion, overconfidence, gender, race
• The Experiment:
• Researchers built an investing algorithm (i.e., AI). They put it head-to-head with 255 angel investors in a simulation to select the most promising investment opportunities among 623 deals from one of the largest European angel investment networks.
• The Results:
• The algorithm significantly outperformed the average novice investor and even experienced investors who fell prey to cognitive biases but were bested by the top tier of professional investors, who could control for their own biases.
• While the algorithm may have made less biased choices regarding the race and gender of the founders it picked, it also reflected systemic inequalities. It illustrated the limits of how algorithmic investing can be used to address deep social inequalities.
• Even so, the experiment offers a vision for how — and when — investors might deploy similar algorithmic aids in investing and how it might lead to better and fairer decisions.
______________________________________________________________________________
[Old Material]
1. Ideation/Corporate Social Responsibility
a. Concepts
i. Background: impact of business on economy/society
-employment/job creation
-production of goods and services we want and need
-innovation of new goods and services we didn’t know we needed or wanted.
-community leadership and support for charities
-contributes to government initiatives through taxes
-overall business (profit and nonprofit) influences an economy's standard of living- higher output-higher level of living
ii. Distinctive Competencies
-core skills and practices that increase the competitiveness of an organization and make it different from its competitors, usually two categories to distinctive competencies
1. the new niche is an established market- identifying a segment of the market that companies are not currently exploring
2. New market: Identifying new markets by transferring a product/service from one established geographic market to another or creating entirely new industries.
iii. Product Ecosystems
Definition- a set of products that are used complementary to one another.
The actual value behind the development of product ecosystems is through interconnection; the value derived from a product ecosystem is to enable other products to use your product interface as a medium to consume their already created product.
One of the product ecosystems is Apple; it has its main brand, APPLE, but it also provides phones, pens, laptops, and other services. Another example is smart home devices.
iv. Individual ethics and business ethics
Ethics- beliefs or moral standards about right or wrong or good and evil.
Business ethics- ethical or unethical behavior by managers, staff, etc., in the context of their jobs; use of ethics in business means the organization must make the choices that benefit the good of everyone, including stakeholders, shareholders, and the community.
v. Social responsibility / Responsibilities to stakeholders /CSR
Corporate social responsibility- the concern of a business for the welfare of society, the overall way in which a business attempts to balance its commitments to relevant groups and individuals in society, or in other words, how it affects organizational stakeholders when making decisions
Organizational stakeholders consist of
One -customer
Two -employees
Three-- owners/inventors
Four -local and global community
Five -suppliers
Difference between ethics and CSR
Ethics are guiding principles that determine whether a decision is good, bad, right, or wrong, while CSR determines what is allowable and what is not.
Four Dimensions of CSR
Economic- required- example -be profitable, maximize sales, and minimize cost.
Legal – required- example- obey laws and adhere to regulations.
Ethical-expected- avoid questionable practices, do what is right, fair, and just.
Philanthropic- desired/expected- be a good corporate citizen. Give back essentially
For CSR
. Address social issues brought on by business.
Businesses well equipped to address the problems in dynamic and efficient ways
.wards off government intervention
.public support/additional profits
Against CSR
.constrains the classic economic goal of profit maximization
. Businesses not equipped to handle social activities.
.dilutes primary purpose of business
Limits the power of business
.
examples
1. Business ideas that solve problems
2. Solve things that may become problems
3. Adapt to evolving needs
4. Save people money
5. Make people's lives easier
6. Make chores or things that feel like tasks less unpleasant
7. Turn a hobby or something you're passionate about into a business
8. Fulfill a need
9. Appeal to a base emotion
10. Experience more
11. Steal others' ideas
iii. The Social Responsibility of Business is to Increase its Profits (Friedman) main idea is that “company has no “social responsibility”to the public, only responsibility to shareholders. Trust one person with money =unequal distribution-voting should be the only way to change that
2. Marketing Research and Competitive Analysis
a. Marketing Defined- a set of activities, institutions, and processes for creating, Concepts communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large is a core
Creating customer value is a core business strategy of many firms and a core responsibility of marketing.
i. Marketing Environments
Social culture- refers to the buying behavior, the customers, values, and demographic characteristics of the society in which the organization functions.
Economic environment- refers to economic conditions and variables, e.g., inflation, interest rates, employment rates,
Recessions, etc.) that influence spending patterns by consumers, businesses, and
Governments.
ii. Marketing Mix
1. 5 P’s: product, price, place, promotion, and people
A simple definition is putting the product in the right place at the right time and price.
Price- what is sold out
Place-where can you get the product
Product-how its different than the other product in the market
Promotion- what are the channels for market communication
People- how does the company view its employee
iii. Types of competition
1. Susbsitute products are different from those of competitors but can fulfill the exact needs (e.g.,” Which gym membership or vacation should I choose?”)
Two-brand competition appeals to the consumer's perceptions of the benefits of products offered by particular companies (e.g.,” Which browser should I use, Google or Go Duck Go?”).
Three international competitions- domestic products against foreign products. (ex-Ford of the US or Volkswagon Japan”)
iv. Marketing research (main types)
Primary- Provides results specifically about your company.
Secondary - involves applying results of previously completed studies to your situation
Four methods of primary market research
Observation, surveys, focus groups, and experimentations
v. Competitive advantage four types: cost, product, service, and niche)
b.
3. Cost Analysis
a. Concepts
i. Role of accounting-financial statements, income statements, balance sheet, statement of cash flow, and the accounting equation.
Four main parts of the income statement(revenues, cost of revenue/cost of goods sold, operating expenses, and net income)
Cash flow is divided into three categories: cash flows from operations, cash flows from investments, and cash flow from financings.
ii. Types of Accounting-income statements and balance sheet
iii. Accounting equation=assest =liabilityies plus equity(amount of money the owner would get if he sold the company)
iv. Financial Statements: balance sheets, income statements, budgets
1. What is the role of each of these statements?
Balance sheets are statements that provide a snapshot of a company's financial position at a specific point in time. They present a summary of a company's assets, liabilities, and equity.
income statements- profit and loss statement
Budgets are plans that estimate future income and expenses over a specific period.
4. Funding Opportunities
a. Concepts
The three primary funding parts are debt, equity, and retained earnings.
i. Primary sources of funding
Rising funds Personal savings (~57% of all new/small/start-up
businesses!!)
• Family and friends
• Lending institutions (i.e. “Banks”)
• Investors (i.e. Venture Capital, Angel Investment)
• Governmental agencies
Strategies for raising funds...
• How do organizations raise the funding they need?
• By borrowing money (debt),
• By selling ownership shares (equity)
• By retaining earnings (profits
ii. The role of banks in finance
1. Secured vs. Unsecured Loans
5. • Unsecured loans: based on the organization’s creditworthiness
and the lender’s previous experience with them
• Secured loans: loan connected to a piece of collateral that is
owned by the business that is taking out the loan
Banks are more likely to loan money to established businesses
• Secured vs. Unsecured loans
• Small Business Association helps secure loans
i. Pros and Cons of Debt and Equity
1. The main idea is risk vs. cost
ii. Venture Capital and Angel Investment (main ideas)
6. Venture Capital = EQUITY
• An increasingly popular form of equity financing
• Venture Capital is NOT a common source of funding
• Available to exceptional start-ups with a significant likelihood of high
Value within the next few years (must demonstrate product/market
opportunity and proven management teams)
• Typically reserved for new growth industries, multimedia
communications, biotechnology, or high-technology products in new
markets that project increasing sales
7. Angel Investment = EQUITY
These are individuals or groups who invest their own money in companies.
How do they differ from venture capitalists?
• More common than venture capital
• Whereas venture capitalists often wait a few years to see demonstrated
Business success: angel investors invest during the earlier growth.
stages
How are they similar to venture capitalists?
• They usually focus on high-growth companies in the early stages of
Development rather than established, stable, low-growth businesses.
Venture Capital and Angel Investment: funding for high-growth
potential companies... both very risky (AI riskier than VC)
• VC is not a common source of funding
• AI is a more common source, as they invest in the early stages of
development
a. Video and Other Readings
i. “Women-Led Startups Received Just 2.3% of VC Funding in 2020” (HBR)
ii. “Male and Female Entrepreneurs Get Asked Different Questions by VCs…” (HBR)
iii. “How the VC Pitch Process is Failing Female Entrepreneurs” (HBR)
b. OpenStax Chapter 16
8. Acquiring and Nurturing Talent
a. Concepts
i. Human Resources Management
What is it? What is its core role? The process of hiring,
developing, motivating, and evaluating employees to achieve
Organizational goals.
• Core role within an organization:
Leverages employees for competitive advantage
1.
2. HR Management Process
It starts with strategy, making my goals and marketing position, then- Acquiring talent( three stages: job analysis and design, employee recruitment, then employee selection), then goes to nurturing talent( training and development, performance and planned evaluations, and compensation and benefits) then goes to HR outcomes than to retention turnover