BA 101 Midterm Flashcards
Know your customers and determine how to best serve them
marketing
Marketing Mix
Product
• Is a product being offered with attributes the target market is willing to pay for?
Price
• The amount of money customers pay for a product
Place
• Where do customers go to buy the product
Promotion
• Advertising
Service
• Customer service
How many units of product can the factory produce
Capacity
not being able to produce enough for customers
Stocking out
How much labor/automation is needed?
a combination of the two
• Expensive (salary, benefits, etc.)
• Very flexible in terms of increasing or decreasing
o Does not cost much to add or reduce this type of labor
Direct labor
• No salary, benifts – less expesnisve
• Not flexible
o Cost a lot initially
o Hard to get rid of
Automation
Where do companies get money to start and operate
Finance
Three sources of money
Take on debt (Loans or bonds)
Issue stock (investors/owners)
On going operations of the company (Retained earnings)
o What if? (Before making a change)
Proforma – what if scenarios
o What happened? (After making a change)
Helps to learn from mistakes
Accounting
Creates and issues Income statement, balance sheet and cashflow statement.
Accounting
who hires the people needed to operate a factory
Human resources (Hiring people)
An organizational function and a set of process for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders
Marketing
Marketing mix should fit___
customers needs
Know you target market
Can specifically create a market mix tailored to that customer
Target Market
Needed to determine return (size, is it profitable?….) and what kind of marketing mix to develop.
Target Market
Everybody
Companies do not develop the marketing mix for the mass market
To market for the mass market companies have many target markets
Mass Market
Companies do turn target markets into____markets
Mass
Revenue (sales) – expenses (costs) =
Profit
Are the revenues large enough to pay for the marketing mix?
…
public information that is free or given at a fee, data previously collected for any purpose other than the one at hand
Secondary data
information collected for the first time. Can be used for solving the particular problem under investigation
Primary Data
segmentation
Geography • Location Demographics • Gender, age and income • Can be measured Psychographics • Attitude, lifestyles and beliefs • Cannot be measured Benefits sought • What do they want from buying this product Usage rate • Light users vs heavy users
The process of grouping customers into market segments according to the benefits they seek from the product
Benefit segmentation
• Attributes (customer Value Assessment)
Price
Age
Reliability
Positioning
o The activities designed to provide goods and services that provide value and satisfy customers.
Marketing
o Processes a consumer uses to make purchase decisions, as well as to use and dispose of purchased goods or services; also includes factors that influence purchase decisions and the product use.
Consumer behavior
o Represent market research that has been done for you
Foundation will always give this score
Must be better than everyone else
Attractiveness scores
MTBF (Mean Time Before Failure)
o The higher the MTBF the more attractive
o Low tech – 20,000 = attractiveness score of 100
o Low tech 14000-20000 21%
o High tech 17000-23000 13%
The expense of obtaining materials for making the products sold
• Manufacturing
Cost of goods
given up in an exchange to acquire a good or service
price
Price stats for foundation
Low tech 15-35 41%
High Tech 25-45 25%
A combination of the size and speed
Position
setting prices so that total revenue is a large as possible relative to total costs
Profit Maximization (To maximize the wealth of the owners)
What are the characteristics of the product that are important to customers?
Size Performance (processing speed) • Overtime your target market demands smaller and faster products Reliability (MTBF) Age: how recently has it been updated
What is the price low tech customers are willing to pay?
15-35$
What is the price high tech customers are willing to pay?
25 – 45 $
Create a company that will allow you to compete on price (lower your prices) and still meet your performance targets
Lower your material costs
Lower your labor costs
strategy
Positioning (date)
The repositioning date will cut the age in half of your product
Promotion =
your message
Awareness =
percent of the market that received the message
The most invested the higher awareness returned but it will eventually cost more because more and more people become aware
Diminishing return
Managing Low Tech products
o Price: As much as you can and still meet your goals with the consideration that price competition requires efficient production
o Revise: Only to manage the age (ideal = 3)age range over the year: 2-3 or 3-4
Revise every 2 years (revision date –age = 4)
Make 1.0 unit faster, 1.0 unit smaller
o MTBF: Never above 20,000 (
Managing High Tech products
o Ideal spot is most important -revise every year to keep it on or near the ideal:
.7 units faster and .7 units smaller
o Age is 2nd most important -revise every year to keep it as young as possible
o Price is 3rd important -charge as much as you can and still meet your sales goals
o MTBF set it at 23,000 hours and leave it alone
Trade offs (Higher price)
Fewer People buy - make more money on each
Trade offs (Lower Price)
More people buy - makes less money on each
Trade offs (new product)
Expense of new development - new customers
Trade offs (old products)
Loss of appeal - no risk
Low Tech Position
.5 faster and .5 smaller each year
Contribution Margin
the difference in sales and variable costs
Promotional mix
o You will invest money in promotion and create awareness
o It relates to your advertising efforts
• Customer survey score creates _____?
Demand
your message
promotion
Percent of the market that received the message
Loses 33% each year
Example of diminishing return
awareness
when supply is less than demand –you can price your product up to $9.99 above the price range and it will still sell at the same volume.
In a sellers market
o Limited supply is available due to stock outs
o Customers search for any available products and reduce their expectations
o Products priced up to $9.99 above the price range will sell. (Not at or above $10.00)
o A seller’s market changes the volume and the outcome may be different than the sales forecasts.
sellers market
o There is plenty of product available.
o Customers will be selective about the products they buy.
o Sellers must make products as appealing as possible and priced right.
o Sales will decrease 10% for every dollar over the range.
o A buyer’s market may be more predictable based on demand, market share forecasting, and customer buying behavior.
buyers market
o Actual is less than demand
o You can raise selling price up to 9.99
sellers market
actual and demand are equal
Buyers market
Market share formula
company sales / industry sales
o For each product, take the number your company sold in the low tech segment and increase it by the growth rate for the upcoming year -10% or 9.4% or …
o For each product, take the number your company sold in the high tech segment and increase it by the rate for the upcoming year -20% or 19.5% or …
o If a product sells in both, take the number sold in the segment, increase each by the growth rate, and add the two together.
market growth estimate
o Take the “Total Industry Unit Demand” and increase it (10% or 20%) this is the DEMAND for low tech products next year.
o Take each product’s “Potential Market Share” from the reported year and multiply it by the DEMAND.
o Gives you a potential share estimate
o Total industry demanded * market share estimate
market share estimate
o Calculate the total DCS score … this is the base number
o 1. Total the DCS scores:28+20+23+18+20+1+1= 111
o 2. Divide Able’s DCS by the Total DCS:28 / 111 = 25.2%
This is your DCS share
CSS drives demand
DCS
stakeholders are
Owners Employees Customers Citizens (government that represents their interests) Creditors and financial institutions
These groups use accounting information to determine the degree to which the company is meeting its responsibilities
stakeholders
management accounting
helps managers with company operation
income statement
o Bottom line is net income
o Total Revenue – Total costs = profit / net income
o Prift in a given time period
o
o Total revenue pxq
o -Variable costs (vary with # of units produced) (COGS)
Direct labor, raw materials
o Contribution margin (Gross profit)
o Utility, salary, rent, advertising and promotions (fixed costs)
Do not vary with # of units produced, although they do change
o Depreciation (income statement)
Net income can be issued as dividends to the owners or _____ which is called ____
reinvested into the company
Accounting equation (for the balance sheet)
assets = liabilities + owners equity
o Accumulated assets and liabilities o Accumulated wealth of the company o Assets Cash Inventory Accounts receivable • Money not yet received Equipment Building Land Accumulated depreciation • All the depreciation added up from all previous years o Liabilities Debt Accounts payable o Owners’ equity What the owners own Retained earnings = starts from the beginning Common stock = The amount of capital invested by shareholders in the company
balance sheet
The value of the stuff the organization controls
Assets
The debt claims against the stuff
Liabilities
Owners Equity
The owners claims
Cash
Accounts receivable
Inventory
current assets
PP&E
Depreciation
fixed assets
Accounts payable
Current debt
Current Liabilities
Common Stock
Retained earnings
Owners equity
the story of transactions over a specific time period
Income statement
Revenue transactions
business and its customers
expense transactions
Business and its suppliers – such as resources, people and capital
The difference between Revenue and expense
Net Income is also Profit (loss)
The more you make the greater the cost
Labor used to make a product or service
Material use to make a product or service
Cost of keeping inventory
Variable costs
The cost of being in business that month
Selling expenses
Administrative expenses
Fixed costs
If the company reinvests the income it is called ________
retained earnings
If the company give income to owners…
Dividend to the stockholders
Income to partners or sole proprietor
Contribution margin pays…
fixed costs
How much inventory do you want left?
> 0 ≤ 2 months available for sale
Production forecast
Forecast + (forecast/12) = available for sale (adds a 13th month)
Subtract last year’s inventory before you determine how many to produce
o Manage Production Efficiently 1 Star –3 points Contribution margin >30%
o Manage Cash (don’t run out)1 Star – 3 points Emergency Loan = $0
o Manage Inventory1 Star – 3 points Inventory >0 and <60 days (total / 6)
o Create Wealth; Make Profit 1 Star –3 points Net Income > $0
o Increase Owners’ Wealth 1 Star –3 points Stock price increase
Performance targets
The cost to make one sensor
unit cost
the cost of the stuff you use in your sensor smaller, faster, more reliable = higher cost
material cost
The cost to assemble your product
Labor cost
Bigger size
Slower performance
Lower reliability = MTBF 20,000
Material costs are lower
low tech
Smaller size
Faster performance
Higher reliability = MTBF 23,000
High tech
o Revenue (price x units sold) o Gogs (unit cost x units sold) o Contribution margin (Rev-COGS)
Income statement
o Too little inventory –Sell all the sensors you make = STOCK OUT lost sales & opportunities = bad management
o Too much inventory –Inventory is expensive and it ties up cash, plus the product “ages” and is less desirable
o Just right –1 or more units left Less than 60 days (production scheduled/6)
Inventory
o Don’t Stock out.
o Have at least 1 unit left in inventory.
o No more than 60 days of sales left in inventory.
o Divide by 6
You do not want more than that much of inventory let
Inventory
How many products should I make available for sale?
Make your best sales estimate and add a “13thmonth” to provide an additional cushion.
This puts you in the MIDDLE of the 60 day cushion
o Uncertain due to past ambiguous information to predict a future that has change
o Important because a lot depends on it
How many to produce
If I need to invest in capacity next year
Financing requirements
• Cash managements
• Capital investments
FOrecast sales
o Forecast annual sales
o Add 13th month to get “units available for sale” (Meets Inventory targets)
o Subtract current inventory amount from “units available for sale”
o Balance is # of units to produce.
o Check production capacity.
Order of decision making
o Plan for the future.
o It takes 1 year to add capacity
o What might my forecast be for next year?
o And the year after that?
o Invest in capacity to support those anticipated sales volumes.
Capacity decisions
