IBP 069 CHAPTER OUTLINES

CHAPTER 1: MANAGING WITHIN THE DYNAMIC BUSINESS ENVIRONMENT: TAKING RISKS AND MAKING PROFITS

BUSINESS AND ENTREPRENEURSHIP: REVENUES, PROFITS, AND LOSSES

Basic Concepts:

· Business is:

· Goods:

· Services:

· Revenue:

· Expenses:

· Profit:

v Matching Risk with Profit

· Profit:

· Loss:

· Risk:

· Risk vs. reward:

v Businesses Add to the Standard of Living and Quality of Life

v Responding to the Various Business Stakeholders

· Stakeholders:

v Using Business Principles in Nonprofit Organizations

ENTREPRENEURSHIP VS. WORKING FOR OTHERS

v Opportunities for Entrepreneurs

Entrepreneurs:

v The Importance of Entrepreneurs to the Creation of Wealth

· Factors of Production (5):

Ø Land:

Ø Labor:

Ø Capital:

Ø Entrepreneurs:

Ø Knowledge:

THE BUSINESS ENVIRONMENT

· Five Environmental Factors:

Ø economic

Ø technological

Ø competitive

Ø social

Ø global

v The Economic and Legal Environment

· governments can foster business by:

v The Technological Environment

How Technology Benefits Workers and You

Technology:

The Growth of E-commerce

Ø E-commerce:

¨ types of e-commerce

§ B2C

§ B2B

Using Technology to Be Responsive to Customers

· Database:

v The Competitive Environment

Competing by Exceeding Customer Expectations

Competing with Speed

Competing by Restructuring and Meeting the Needs of Employees

v The Social Environment

· Demography:

Managing Diversity

Ø increased multiculturalism in...

¨ the workforce

¨ the marketplace

The Increase in the Number of Older Americans

Two-Income Families

· Single Parents

v The Global Environment

· Growth of international competition

¨ Productivity:

How Global Changes Affect You

THE EVOLUTION OF AMERICAN BUSINESS

v Progress in the Agricultural and Manufacturing Industries

v Progress in Service Industries

Ø Services:
intangible products

v Your Future in the Global Economy

Chapter 2: How Economics Affects Business: the Creation and Distribution of Wealth

HOW ECONOMIC CONDITIONS AFFECT BUSINESS

v What Is Economics? 

· Economics is...

·  Macroeconomics:

· Microeconomics:

v Why Economics Was Known As "the Dismal Science"

v Growth Economics and Adam Smith

v How Businesses Benefit the Community

· The Invisible Hand:

There Are Three Evolving Global Economic Systems:

· Capitalism

· Socialism

· Communism

Key difference:

UNDERSTANDING FREE-MARKET CAPITALISM

· Capitalism

v The Foundations of Capitalism

· right to own private property

· right to own a business and keep profits

· freedom of competition

· freedom of choice

v How Free Markets Work

v How Prices Are Determined

· Supply and demand

v The Economic Concept of Supply

· Supply:

v The Economic Concept of Demand

· Demand:

v The Equilibrium Point or Market Price

v Competition within Free Markets

Market structure

The four types of market structure are:

· Perfect Competition (AKA "pure" competition):

· Monopolistic Competition:

· Oligopoly:

· Monopoly:

v Benefits and Limitations of the Free-Market System

UNDERSTANDING SOCIALISM

· Socialism:

v The Benefits of Socialism

v The Negative Consequences of Socialism

UNDERSTANDING COMMUNISM

· Communism:

THE TREND TOWARD MIXED ECONOMIES

· Mixed Economies:

Global Trend:

UNDERSTANDING THE ECONOMIC SYSTEM OF THE UNITED STATES

v Key Economic Indicators

Gross Domestic Product (GDP):

The Unemployment Rate:

Four types of unemployment:

¨ Frictional Unemployment:

¨ Structural Unemployment:

¨ Cyclical Unemployment:

¨ Seasonal Unemployment:

The Price Indexes

· Inflation:

· Disinflation:

· Deflation:

· Consumer Price Index (CPI):

· Producer Price Index (PPI):
measures prices at the wholesale level

v Productivity in the United States

· Productivity:

v Productivity in the Service Sector

v The Business Cycle (4 Stages):

1.  Prosperity:

2.  Recession:

3.  Depression:

4.  Recovery:

v Stabilizing the Economy through Fiscal Policy

· Fiscal Policy:

· Budget deficit:

· National Debt:

v Using Monetary Policy to Keep the Government Growing

· Monetary Policy:

Ø Federal Reserve system (the Fed)

Chapter 3: Competing in Global Markets

THE DYNAMIC GLOBAL MARKET

· global vision:

Ø Exporting:

Ø Importing:

WHY TRADE WITH OTHER NATIONS?

v The Theories of Comparative and Absolute Advantage

· Absolute Advantage:

· Comparative Advantage Theory:

· Free trade:

GETTING INVOLVED IN GLOBAL TRADE

v Importing Goods and Services

v Exporting Goods and Services

· exporting:

v Measuring Global Trade

· balance of trade:

Ø trade deficit (unfavorable balance of trade:

· balance of payments:

Ø favorable balance of payments:

Ø unfavorable balance of payments:

TRADING IN GLOBAL MARKETS: THE U.S. EXPERIENCE

· Foreign Direct Investment:

· dumping:

STRATEGIES FOR REACHING GLOBAL MARKETS

Modes of Entry:

v Exporting

v Licensing

¨ Licensing:

v Franchising

¨ Franchising:

v Contract Manufacturing:

v International Joint Ventures and Strategic Alliances 

· Joint Venture:

· Strategic Alliance:

v Foreign Direct Investment and Foreign Subsidiaries:

· Foreign Direct Investment

· Foreign Subsidiary:

Multinational Corporation:

FORCES AFFECTING TRADING IN GLOBAL MARKETS

v Sociocultural Forces

· self-reference criterion:

· global marketing:

¨ economies of scale:

· multidomestic marketing:

· global/local marketing:

v Economic and Financial Forces

· exchange rate:

· devaluation:

· countertrading:

v Legal and Regulatory Forces

· Foreign Corrupt Practices Act:

v Physical and Environmental Forces

TRADE PROTECTIONISM

· trade protectionism:

· tariff:

Ø protective tariff:

Ø revenue tariffs:

· non tariff barriers:

Ø import quota:

Ø embargo:

Ø customs regulations:

v The General Agreement on Tariffs (GATT) and Trade, and the World Trade Organization (WTO)

· General Agreement on Tariffs and Trade (GATT)

Ø most favored nation principal:

· World Trade Organization (WTO):

v Trading Blocks

v North American Free Trade Agreement (NAFTA):

· Free Trade Area:

v European Union:

· Economic and Monetary Union:

· the Euro

THE FUTURE OF GLOBAL TRADE: GLOBAL E-COMMERCE

· global opportunities:

· growth of the Internet

v Globalization and You

· career thoughts:

Chapter 4: Demonstrating Ethical Behavior and Social Responsibility

ETHICS IS MORE THAN LEGALITY

v Ethical Standards Are Fundamental

· ethics:

v Ethics Begins with Each of Us

· ethical dilemmas

· three questions test:

Ø

Ø

Ø

· Front page of the newspaper test:

MANAGING BUSINESS ETHICALLY AND RESPONSIBLY

v organizational ethics begins at the top

v Setting Corporate Ethical Standards

· compliance-based ethics codes:

· integrity-based ethics codes:

CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility:

· corporate philanthropy:

· corporate responsibility:

v Responsibility to Customers

v Responsibility to Investors

· best efforts to be profitable

· insider trading:

v Responsibility to Employees

v Responsibility to Society And the Environment

· what is businesses’ responsibility to society?

Ø trends in corporate philanthropy

¨ "strategic giving"

v Social Auditing

· social audit:

INTERNATIONAL ETHICS AND SOCIAL RESPONSIBILITY

Chapter 13: Marketing: Building Customer and Stakeholder Relationships

WHAT IS MARKETING?

Marketing:

Marketers create exchanges...

Exchange:

v The Evolution of Marketing

· The Production Era

Until the early 20th century:

Product orientation

· The Selling Era

1930s and 1940s

Sales orientation

· The Marketing Concept Era

After WWII

buyer’s market

Ø Marketing concept:

· The Customer Relationship Era
1990’s to Present

Ø "relationship era" of marketing

¨ customer relationship management (CRM):

§ database technology

v Nonprofit Organizations Prosper from Marketing

THE MARKETING MIX

· Marketing Strategy:

·  Target Market:

· Marketing Mix ("the 4 Ps"):

v Applying the Marketing Process

v Designing a Product to Meet Needs

· product:

Ø concept testing:

Ø prototype:

· test marketing:

· brand name:

v Setting an Appropriate Price

· factors:

v Getting a Product to the Right Place

· distribution (Place):

v Developing an Effective Promotional Strategy

· promotion:

PROVIDING MARKETERS WITH INFORMATION

v The Marketing Research Process

· collecting data

Ø method of research.

Ø Two types of data:

¨ secondary data:

¨ primary data:

· analyzing the research data

v The Marketing Environment

· environmental scanning:

· global factors:

technological factors:

· sociocultural factors:

· competitive factors:

· economic factors:

· political and legal factors:

v Two Different Markets: Consumer and Business-to-Business

Ø consumer market:

Ø business-to-business (B2B):

THE CONSUMER MARKET

\

· market segmentation:

· target market:

v Segmenting the Consumer Market

· geographic segmentation:

· demographic segmentation:

· psychographic segmentation:

· benefit segmentation:

· the volume segmentation:

Ø 80/20 rule

v Reaching Smaller Market Segments

· niche marketing:

· One-to-one (micro) marketing:

Ø database marketing:

v Moving Toward Relationship Marketing

· relationship marketing:

v Consumer Decision-Making Process

THE BUSINESS-TO-BUSINESS MARKET

UPDATING THE MARKETING CONCEPT

v From Providing Customer Satisfaction to Exceeding Expectations

v Benchmarking and Uniting Organizations

· must have world-class service and quality

Ø Competitive Benchmarking:

Ø Cooperation in the Supply Chain

v Maintaining a Profit Orientation

ESTABLISHING RELATIONSHIPS WITH ALL STAKEHOLDERS

· e.g. Green Products:

v Customer Relationship Management (CRM)

· the 80/20 rule

v Your Prospects in Marketing

THE ABC'S of MARKETING

Chapter 14: Developing and PricingProducts and Services

This chapter will focus on the marketing mix elements of product and price

PRODUCT DEVELOPMENT AND THE TOTAL PRODUCT OFFER

· Product:

· Value:

v Developing a Total Product Offer

· Total Product Offer

v Product Lines and the Product Mix

· Product Line:

· Product Mix:

PRODUCT DIFFERENTIATION

· Product Differentiation:

· Two Basic Classifications:

Ø Consumer Products:

Ø Business (Industrial) Products:

v Marketing Different Classes of Consumer Goods and Services

· Convenience Goods and Services:

¨ impulse items

¨ staples

¨ emergency items

· Shopping Goods and Services:

· Specialty Goods and Services:

· Unsought Goods and Services:

PACKAGING CHANGES THE PRODUCT

v The Growing Importance of Packaging

BRANDING AND BRAND EQUITY

· Brand:

Ø benefits of branding (three main purposes):

1. 

2. 

3. 

· Brand Name:

· Trademark:

v Brand Categories

· Manufacturers’ Brand Names (National Brands)

· Dealer (Private) Brands:

· Generic Name:

· Generic Goods:

· Knockoff Brands:

v Generating Brand Equity and Loyalty

· Brand Equity:

· Brand Awareness

· Brand Preference

· Brand Loyalty/Insistence

v Creating Brand Associations

· Brand Association:

BRAND MANAGEMENT

· Brand Manager:

THE NEW-PRODUCT DEVELOPMENT PROCESS

· reasons for failure

How to prevent some of the failures?  Disciplined method of product development.

v Generating New-Product Ideas -- based on consumer wants and needs

v Product Screening:

v Product Analysis:

v Product Development and Testing

· prototype:

· concept testing:

v Commercialization ("rollout"):

v The International Challenge

· mass customization:

THE PRODUCT LIFE CYCLE

· Product life cycle:

v Example of the Product Life Cycle

· Text example: instant coffee p. 443

v The Importance of the Product Life Cycle

COMPETITIVE PRICING

· Price:

Ø price determines profit margins:

v Pricing Objectives

1.  Target return on investment or profit

2.  Building traffic

3. Achieving greater market share

4.  Creating an image

prestige pricing

5.  Furthering social objectives

6.  Survival:

v Cost-Based Pricing:

· "markup"

Ø Business costs (two categories):

¨ fixed costs:

¨ variable costs:

v Demand-Based Pricing

· Target Costing:

· Competition-Based Pricing:

· Price Leadership:

· Flat-rate Pricing

v Pricing in the Service Sector

v Other Pricing Strategies

New Product Pricing Strategies

· Skimming price strategy:

· Penetration strategy:

Pricing Strategies Used by Retailers:

· Everyday low pricing strategy (EDLP):

· High-low pricing:

· Bundling:

· Psychological Pricing:

v How Market Forces Affect Pricing

· supply and demand

NONPRICE COMPETITION:

v Non-price Strategies

· Product Differentiation:

· adding value

· educating consumers

· establishing relationships

Chapter 15: Distributing Products Supply Chain Management

· Physical Distribution:

THE EMERGENCE OF MARKETING INTERMEDIARIES

· Marketing intermediaries ("middlemen"):

Ø Wholesalers:

Ø Retailers:

· Channel of distribution:

v Why Marketing Needs Intermediaries

v How Intermediaries Create Exchange Efficiency

v The Value Versus the Cost of Intermediaries

THE UTILITIES CREATED BY INTERMEDIARIES

· Utility:

v Form Utility:

v Time Utility:

v Place Utility:

v Possession Utility:

v Information Utility

v Service Utility:

WHOLESALING INTERMEDIARIES

v Merchant Wholesalers:

Ø full-service wholesalers:

Ø limited-function wholesalers

v Agents and Brokers (Don't Take Title)

· Agents:

· Brokers:

RETAIL INTERMEDIARIES

· retailer:

v How Retailers Compete

· price competition:

· service competition:

· location competition:

· selection competition:

Ø category killer stores:

· entertainment competition:

v Retail Distribution Strategy

· intensive distribution:

· selective distribution:

· exclusive distribution:

NONSTORE RETAILING

v Electronic Retailing:

Ø  "click-and-mortar" stores:

v Telemarketing:

v vending machines, kiosks and carts

v Direct Selling:

v Multilevel Marketing:

v Direct Marketing:

BUILDING COOPERATION IN CHANNEL SYSTEMS

v Corporate Distribution Systems:

v Contractual Distribution Systems:

· franchise systems

· wholesaler-sponsored chains

· retail cooperatives:

v Administered Distribution Systems:

v Supply Chain (a.k.a. value chain):

Supply-chain Management:

THE EMERGENCE OF LOGISTICS

Logistics:

· inbound logistics:

· factory processes:

· outbound logistics:

v The New Challenges in Supply-Chain Management

GETTING GOODS FROM PRODUCER TO CONSUMER EFFICIENTLY

Basic goal:

v Choosing Right Transportation Modes

· Trains

· Trucks

· Water Transportation

· Pipelines

· Air Transportation

· Intermodal Shipping:

Ø Containerization:

v The Storage Function

· storage warehouse:

· distribution warehouses:

v Materials Handling:

v Inventory Management

· inventory costs:

Ø holding costs:

Ø stock out costs:

v WHAT ALL THIS MEANS TO YOU

Chapter 16: Today's Promotional Techniques

PROMOTION AND THE PROMOTION MIX

· promotion:

Ø functions of promotion:

· promotion mix:

· integrated marketing communications (IMC):

ADVERTISING: PERSUASIVE COMMUNICATION

· advertising:

Ø choice of medium

§ audience selectivity:

· Product Placement:

v The Growing Use of Infomercials

· infomercial:

v Advertising and Promotion on the Internet

· Interactive promotion -- potential for customer loyalty

· self-directed search

· customer profiles

v Global Advertising

· standardization vs. customization

Ø global advertising:

Ø local advertising:

Ø global/local advertising:

Ø Trend toward customization

PERSONAL SELLING: PROVIDING PERSONAL ATTENTION

· personal selling:

Ø adaptable promotion

v Steps in the Selling Process

Ø sales force automation (SFA):

v Using Technology to Practice Consultative Selling

· consultative salesperson:

v Business-to-consumer (B2C) Sales Process

PUBLIC RELATIONS: BUILDING RELATIONSHIPS

· public relations (PR):

Ø three steps:

¨

¨

¨

v  Publicity: the Talking Arm of PR

· publicity:

Ø advantages of publicity

Ø disadvantages

· keys to publicity management:

SALES PROMOTION: GETTING A GOOD DEAL

· sales promotion:

Ø examples of sales promotions:

¨

¨

¨

¨

¨

¨

¨

¨

v Sampling Is a Powerful Sales Promotion Tool

· sampling:

· Word-of-mouth:

v Viral Marketing and Other Word-of-mouth Strategies

· viral marketing:

Ø "swag"

Ø testimonials:

v How New Technologies Are Affecting Promotion

MANAGING THE PROMOTIONAL MIX: PUTTING IT ALL TOGETHER

v Promotional Strategies

Ø two basic categories:

¨ pull strategy:

¨ push strategy:

v Creating an Integrated Marketing Communication (IMC) System

· integrated marketing communications (IMC):

· conflicting messages create distrust

v Building Interactive Marketing Programs

interactive marketing programs:

Chapter 7: Management, Leadership, and Employee Empowerment

MANAGERIAL CHALLENGES

v Managers’ Rolls Are Changing

FUNCTIONS OF MANAGEMENT

· Management:

· Planning:

· Organizing:

· Leading:

· Controlling:

PLANNING: CREATING A VISION BASED ON VALUES

· Planning:

Ø vision:

Ø mission statement:

· goals:

· objectives:

· SWOT analysis:

· strategic planning:
major long-term goals

· tactical planning:

· operational planning:

· contingency planning:

· crisis planning:

v Decision-making: Finding the Best Alternative

· decision-making:

ORGANIZING: CREATING A UNIFIED SYSTEM

· organizational chart:

Levels of management:

· top management:

· middle management:

· supervisory management (first-line managers):

v Tasks and Skills at Different Levels of Management

· technical skills:

· human relations skills:

· conceptual skills:

· skills by level:

Ø first level managers

Ø top managers

v The Trend toward Self-management Teams

v Stakeholder-Oriented Organization

· Stakeholders:

v Staffing: Getting and Keeping the Right People

· staffing:

v Managing Diversity:

LEADING: PROVIDING CONTINUOUS VISION AND VALUE

· leaders must:

Ø

Ø

Ø

v Leadership Styles

· autocratic leadership:

· participative (democratic) leadership:

· laissez-faire (free-rein) leadership:

· application of leadership styles:

v Empowering Workers

· empowerment:

· enabling:

v Managing Knowledge

· knowledge management:

CONTROLLING: MAKING SURE IT WORKS

· control function:

Ø setting standards:

¨

¨

¨

v A New Criterion for Measurement: Customer Satisfaction of both...

· external customers:

· internal customers:

v The Corporate Scorecard

Chapter 17: Understanding Financial Information and Accounting

This chapter will focus on the basic accounting statements and what they mean to business

UNDERSTANDING KEY FINANCIAL STATEMENTS

· Financial Statement:

· Key financial statements:

Ø  Balance Sheet:

Ø Income Statement:

Ø Statement of Cash Flows:

v THE FUNDAMENTAL ACCOUNTING EQUATION

Your assets are equal to what you owe plus what you own, i.e.:

The Balance Sheet:

v Assets:

· Tangible

· Intangible

· Liquidity:

Ø Assets are classified based on liquidity

¨ Current assets:

¨ Fixed assets:

¨ Intangible assets:

v Liabilities and Owners Equity

· Liabilities:

Ø Current liabilities:

Ø Long-term liabilities:

Ø Common liabilities:

¨ Accounts payable:

¨ Notes payable:

§ Bonds payable:

· Owners equity:

§ Stockholders equity:

§ Retained earnings:

v The Income Statement

· "bottom line" -- (net income or net loss)

· The Income Statement Formula:

revenue
- cost of goods sold_____
 gross profit (gross margin)

- operating expenses___
 net income before taxes

- taxes__________ 
net income (or loss)

v Revenue:

· Sales revenue

Ø Gross sales

Ø Net sales

v Cost of Goods Sold (the Cost of Goods Manufactured):

· Gross Profit (Gross Margin):

v Operating Expenses and Net Profit or Loss

· Operating expenses:

Ø Selling expenses:

Ø General expenses:

· Net Income before Taxes:

v Statement of Cash Flows:

· Operations:

· Investments:

· Financing:

v The Importance of Cash Flow Analysis

Cash Flow: