b102 exam notes - little...
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Final exam notes BUSINESS AND ENTERPRISE II !WEEK ONE - Business Environments !PESTEL analysis • Political • Economic • Socio-cultural • Technological • Environmental • Legal !SWOT analysis • Strengths • Weaknesses • Opportunities • Threats !• Internal environment (employees etc.) • Micro-environment (customers, stakeholders etc.) • Macro-environment (political, socio-cultural etc.)
• Market • Economic • Legal • Technological • Social !
WEEK TWO - Innovation and Entrepreneurship !Innovation • Conversion of knowledge and ideas into new or improved products/processes/
services • Innovation is a specific function of entrepreneurship !Entrepreneurship • The process of creating or seizing an opportunity and pursuing it to create something
of value regardless of current available resources • Takes on financial risk in the hope of profit !“Do something different rather than doing better what is already being done” !!
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Capitalist economic growth is fuelled by creative destruction Typewriting used to be a profession, now disappeared because of widespread availability of portable computers !What if we don’t invest in innovation? e.g. Kodak !Schumpeterian Cycle of Innovation and Entrepreneurship We are now in the fifth wave !Opportunities for innovation 1. Unexpected occurrences 2. Incongruities 3. Process needs 4. Industry / market changes 5. Changes in demographics 6. Changes in perception 7. New knowledge !WEEK FOUR - Business Models How do we create, deliver and capture value? !The Business Model Canvas • Key resources • Key partners • Key activities • Channels • Customer relationships • Value propositions • Customer segments • Revenue streams • Cost structure !Examples of simple / complex business models: !Complex: Freemium model Spotify Complex: Razor and blades model Gilette, Nespresso, HP printers Simple: Franchise model McDonald’s, Dunkin' Donuts !!!!!!
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Sustainability Meeting today’s needs without sacrificing those of future generations 1. Reduce dependence on fossil fuels 2. Reduce dependence on synthetic chemicals 3. Reduce destruction of nature 4. Meet human needs fairly and efficiently We should view sustainability as opportunity, not compliance. !But be careful: competitive advantages soon become competitive necessities. !Corporate Social Responsibility • Cadbury Palm Oil scandal • Cadbury fell from being most trusted NZ brand to 36th place !Tells us that a brand is no longer what we tell people it is, it is what people tell each other it is. !WEEK FIVE - Marketing = Customer Orientation Marketing is as much an art as a science !Motivation Internal drive that dictates our behaviour !Involvement LOW INVOLVEMENT !!! HIGH INVOLVEMENT !!!!!!!!!
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SOCIAL ECONOMIC
!!ENVIRONMENTAL
NEED RECOGNITION PURCHASE POST-PURCHASE EVALUATION
NEED RECOGNITION PURCHASE POST-PURCHASE EVALUATION
INFORMATION SEARCH
EVALUATE ALTERNATIVES
!!How can we understand consumers and what they like / don’t like? • Experiments • Surveys • Focus groups !The job of the marketer is to convince consumers that particular goods/services will solve their problems !Four eras in the history of marketing… ! PRODUCTION ERA A good product will sell itself ! SALES ERA We can persuade customers to buy with good advertising ! MARKETING ERA Create products which satisfy customers’ needs ! RELATIONSHIP ERA Create long-term relationships with customers Profits through customer satisfaction !Four types of utility • Form utility • Time utility • Place utility • Possession utility !!!!!!!!!!
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SATISFACTION TRUST LOYALTY
WEEK SIX - Marketing Strategy
!!Market segmentation Dividing customers into segments, made up of particular characteristics, needs etc. !Anchor milk • Mega - extra Vitamin D • Blue Top - Kiwi classic • Skim - health conscious !Cadbury chocolate • Roses - special occasions and celebrations • Old Gold - higher quality cocoa, dark chocolate • Bubbly - youthful, something different !Competitive differentiation Finding a point of difference which proposes value to the customer !Lower cost? Higher quality? Easier to use? Better service? Subway have loyalty programme, school lunch programmes, healthier menu options… as a result, fastest growing franchise worldwide with more branches globally than McDonald’s !Positioning Positioning is about communicating important attributes and ‘positioning’ the brand and its characteristics in the customer’s mind. !Diet Coke (feminine) vs Coke Zero (masculine) Different positioning of two low-calorie products !Marketing Mix Product A bundle of value that satisfies a customer’s need(s) !Price Money charged for the product !Place (distribution channels) Systems for moving products from producer to consumer
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Segment(s) to target
Competitive differentiation
Position in customer’s mind
Design the marketing mix
Promotion Communication with target market (marketing) !The classical view is that buyers will recognise needs, evaluate decisions and come to a rational conclusion - the reality, however, is far less logical and far more complicated than this. !Cognitive dissonance When a customer’s behaviour doesn’t match their beliefs. Buyer’s remorse often results from this. !Situational factors Life events or personal circumstances which affect buying behaviour e.g. bad mood —> retail therapy (shopping) to feel better !Reference groups MEMBERSHIP Groups which we actually belong to ASPIRATIONAL Groups used as role models for what we want to become !Self-image comes into play too - are you what you buy? !
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PRO
DU
CT!
NEW
!!
!EX
ISTI
NG
NEW! ! ! ! EXISTING!MARKET
PRODUCT DEVELOPMENT DIVERSIFICATION
MARKET PENETRATION
MARKET DEVELOPMENT
WEEK SEVEN - Marketing Mix (4 Ps) The marketing mix brings concepts to life and helps us do business. !Marketing offering We need to provide every customer with an offer - something with proposed value. ! EXAMPLE OF A HIGHER QUALITY OFFERING e.g. Louis Vuitton - their offering is luxurious, elegant, sophisticated. Superb packaging, hand-crafted and of high quality. ! EXAMPLE OF A LOWER QUALITY OFFERING e.g. Dollar Shave Club - nothing special like customer service, just high-quality razors sent to your home. They save money and pass those savings onto the consumer. Augmenting the product ! !! !!! !!
The SAY DO triangle !A brand is no longer what we tell people it is A brand is what others tell each other it is (Rise in social media sites like Twitter and Facebook facilitate this) !Product life cycle Introduction, Growth, Maturity, Decline !Product development process Generate ideas, screen ideas, business analysis, prototype, test marketing, commercialisation !Ways to create product identity Brand, brand name, brand equity, logos, symbols etc. !
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CORE BENEFIT
AUGMENTED PRODUCT
ACTUAL PRODUCT
WHAT WE SAY WHAT WE DO
WH
AT OTH
ERS SAY W
E DO
CU
STOM
ER
Ways to expand products into the market Think: what has been overlooked by competitors? !• Expand product line (series of related products offered by a firm) • Expand product mix (complete portfolio of products offered by a firm) • Brand extension (extending brand name onto new products) !What factors should we consider when pricing products? ! OBJECTIVES Increase market share? Increase sales? Increase profits? ! GOVERNMENT REGULATIONS We don’t want to break laws (e.g. price collusion to force another firm out of the market) ! MARKET DEMAND Do people want our product? Consider price elasticity - if we change price, how will quantity demanded react? ! CUSTOMER PERCEPTIONS Is offering it at a lower price going to affect the product’s perceived value? ! BREAK-EVEN ANALYSIS (Because you don’t want costs to exceed revenue… obviously) !Different methods of pricing: ! COST-BASED Based on financial costs VALUE-BASED Based on value received by customer ! OPTIMAL Create demand curve for every product DYNAMIC Changing prices according to supply and demand SKIM Introductory price is high, lower the price later (e.g. iPhone) PENETRATION Introductory price is low, in the hope of increasing sales LOSS LEADER Selling a product at a loss in the hope that they will buy other products that you offer PARTICIPATIVE Pay what you think it is worth (e.g. AdBlock) FREEMIUM Free, but a premium product comes with a price (e.g. Spotify) !DISTRIBUTION STRATEGY A STRATEGY WHICH DETAILS HOW WE GET THE PRODUCT FROM PRODUCER TO CONSUMER !• Product moves through intermediaries such as wholesalers / agents / brokers to the customer. • Logistics is concerned with organising this distribution between producer and consumer !!!
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!WEEK EIGHT - The co-creation of value • The role of the consumer is changing and our mindset is changing too. • If we produce products which are designed to satisfy customers’ needs, why not
involve them and find out what they need? !CUSTOMER LIFETIME VALUE It is better and cheaper to retain customers than gain new customers !Relationship marketing is focused on creating relationships with customers, which increases the lifetime value of customers. !The three dimensions of customer lifetime value: !The job of the marketer is to maximise customer lifetime value by carefully focusing on maximising particular dimensions. !
How can we increase customer lifetime value? !Customer loyalty programmes (e.g. Airpoints, Fly Buys) !Up-selling Persuading consumer to buy a better version of something Cross-selling Suggesting other items consumer might like too Bundling Bundling complementary products together !Relationship marketing is once again vital for maximising and maintaining the lifetime value of the customer. !!!!!!
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TIME
FREQUENCY
SHARE OF WALLET
How long does our relationship!with the customer last?
How many times do our customers!come back and buy?
What share of their total spending!goes towards our business?
Five types of customer relationships: ! Basic Only sells the product Reactive Sells product and encourages customer to contact if they need help/advice Accountable Sells product and calls back the customer and asks if there are any problems Proactive Sells product, then calls back regularly to check on customer and perhaps even try to get the customer to buy other products Partnership Maintains a consistent and healthy relationship with customer and how we can better serve them !CO-CREATION OF VALUE Businesses collaborate with customers, creating products which satisfy customers’ needs - in essence, they create value with their customers. !BEFORE Firm creates value Presents offer to the market Value captured through revenue from consumer !!!WITH CO-CREATION OF VALUE Firm AND consumer create value together !!!!!!!!!!!!!!
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FIRM creates value
Value captured from CONSUMER
FIRM CONSUMER
WEEK NINE - Managing and Motivating • How do we get people to do things? Without motivation, nothing happens. • Humans seek meaning through experience - we are social beings, so we produce
meaning through our interactions with others. !What skills do managers needs? Technical, conceptual, interpersonal and decision-making skills !What are the three types of managerial roles? Decisional Making rational decisions after evaluating alternatives Informational Using management dashboard with KPIs Interpersonal Work is accomplished through the help of others !Maslow’s Hierarchy of Needs A lot of motivation theory is based on this classical hierarchy - humans are motivated by satisfaction of their needs. We are sociological beings and we seek rewards and create meaning through relationships. !Edgar Schein’s Career Anchors !Service to others? Managerial competence? Pure challenge? Career anchors are the reasons why we are anchored in our work.
!PROCESS THEORIES OF MOTIVATION: ! EXPECTANCY THEORY Determining our level of motivational force: - Do I believe that I can do the job? - What rewards will I get? - Will I value those rewards? Maximising these three elements maximises our motivational force. ! EQUITY THEORY If senior management are getting paid unfairly more, then employees lower down the hierarchy will sense the lack of equity, which can demotivate them. !!!!!!!!
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McGregor’s Theory X / Theory Y Theory X Humans don’t like to work, so need to motivate them to do so Managers need to use force and control them Theory Y Humans are naturally wired to want to work Managers need to use rewards to enhance creativity and increase productivity of their workers !Herzberg’s Two Factor Theory Motivational factors Promotion opportunities, recognition, achievement etc. Hygiene factors Pay, relations with others, job security etc. !These two types of factors either lead us to be satisfied or dissatisfied. !Goal Setting Theory Setting specific, measurable, achievable, realistic and time-limited goals (SMART goals) can be an effective way to motivate employees !Management by Objectives Setting objectives for different individuals / departments. Then use the control cycle (one of the 4 classical PLOC functions of management) to evaluate progress against set benchmarks. !Positive reinforcement Given rewards for good behaviour Negative reinforcement Takes away negative consequences Punishment Giving out negative consequences !MAX WEBER German economist and sociologist ! Bureaucracy The exercise of control based on expertise and experience. !MARY PARKER FOLLETT American management consultant ! Integrative conflict resolution Conflict is good and should be embraced - to resolve conflict, neither side should compromise, and finding alternatives which meet both their needs. !!!!
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WEEK TEN - Human Resources and Labour Relations Managing your workforce is crucial if you want your business to succeed !What are the trends in the workforce? • More diversity • An ageing workforce • International division of labour • Unionism in decline !WORKFORCE MANAGEMENT
! ! ! !!!!
UNIONS Protect and advance the interests of workers ! COLLECTIVE BARGAINING Process of negotiation between workers union and employer !HUMAN RESOURCE MANAGEMENT Planning how to recruit employees, encourage training and development, evaluate and pay them. ! What challenges does an HR manager face? - Encouraging and maintaining employee loyalty - Aligning workforce with organisational needs and goals - Establishing work-life balance for employees (QWL - Quality of Work Life) ! THREE STAGES OF THE EMPLOYMENT LIFE CYCLE Hiring, Termination, Retirement !!!
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STAFFING!!Job analysis!!Recruitment
and selection!!
Induction / orientation
Training and Development
Performance Planning and
Appraisal
Remuneration!and other rewards
Employment Termination
WEEK ELEVEN - Systems and Operations Management Designing, creating, controlling and improving operational processes ! !!!
Inputs are transformed into outputs along the supply chain. !Systems are a collection of parts working together Systems thinking is about looking at everything together and seeing how the parts fit together and work as a whole. !Outsourcing can be good and bad: PROS Lower costs / prices, better support for international customers CONS Product safety issues, reduced jobs domestically !Quality control Measure quality against established standards after the product has been manufactured Quality assurance Comprehensive policies across the company to ensure quality is consistent across production line !Quality control is important, but quality assurance is vital. !!!
GENERAL THINGS FOR THE FINAL EXAM !Section A Short answer questions (write no more than half a page) Four questions worth 10 marks each !Section B Application questions (write no more than 1 and a half pages) Three questions worth 20 marks each !• Be able to define and explain key concepts • Be able to recall case studies and examples to demonstrate understanding of those concepts • Structure your answer carefully, and use the word limit wisely !
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INPUTS OUTPUTSCONVERSION