Chapter 2 Essentials Flashcards
Chapter 2 focuses on the what of a business?
Sizing Up
A size-up focuses on assessing the what and what of a business?
External Environment and Operation Decisions
SWOT Analaysis
Strength, Weaknesses, Opportunities, Threats
GDP
The sum of all goods and services produced in an economy
Includes assessing GDP, sector factors, inflation, interest rate, yield curve, stock conditions, etc.
Economy Size UP
Business Cycle
Gaps in actual output and capacity: Peak, Recession, Trough, Expansion
Recession
Two consecutive quarterly declines in real GDP
Inflation has had average of what but with wide fluctuations
3.3%
The what plots the different rates at which a government can borrow, with differing times to maturity
Yield Curve
Prior to recession the yield curve is often what?
Inverted
business cycle stage?
Relationship cycle and Busi rev?
Relationship cycle and Busi costs?
How important are changing interest rates?
current economy outlook?
Current interest rate outlook?
Easy to get financing?
Other variables that would affect?
Questions to Ask During an Economic Size-Up
Industry life cycle
Competitive environment
PEST Analysis
Industry Size Up Components
PEST Analysis
Political, Economic, Social, Technological
Key Outcomes of a Industry Size Up
Identify Key Industry Success Factors
1 start up
2 rapid growth
3 mature growth
4 stabilization/maturity
5 decline
Industry Life Cycle - Revenue Changes
Porter’s five forces governing competition and impacting profit margins
Intensity of Rivals, Threat of new Entrants, Bargaining Power of Customers, Threats of Substitutes, Bargaining Power of Suppliers
Key to sustainable advantage
Low Cost or Differentiation
Life cycle?
How profitable rn?
How competitive? 5 porters
Prospects for growth?
Key pest opportunities?
Key success factors in the industry?
Question to Ask During an Industry Size-Up
Assuming customer demand is strong, to what extent is the firm able to fulfill that demand by providing the service or making the product available to the customer?
Supply Risk
The 6 P’s of Operations
Product Quality, Process, Plant or Inventory, Parts or Inventory, People or Labour, Partners or Supply Network
- How important is quality to the customer?
- how does the firm attempt to determine and deliver quality?
Product Quality
- what process does the firm currently employ?
- how efficiently does it function?
- how critical are tech innovation and investments?
Process
- What is the firm’s facility capacity?
- how close is it to capacity?
Plant or Inventory
- what type of inventory do we have?
- how much is required to meet demand?
- where is it?
- how do we manage it?
Parts or Inventory
- what skills do we need?
- how skilledd are our current people?
- what is our current environment?
People or Labour
- how well is the supply network configured?
- how reliable and efficient is it?
Partners or Supply Network
Assuming the firm is able to readily supply a product or service, to what extent is customer demand available?
Demand Risk
The Four P’s of Marketing
Product, Price, Place, Promotion
How important are The Who, what, where, when, and how of a purchase decision decides your what?
Target Market
What are the products critical physical and intangible attributes
Product
Is the product price appropriate relative to the competition?
Price
Is the distribution channel appropriate?
Place
Is the promotional campaign having a positive impact on potential buyers?
Promotion
- how would prospective lender or investors view the firm’s management?
- does the current management team offer opportunities or present risk to the firm?
Sizing Up Human Resource
Key Success Factors in HR and Management
Leadership, Character, Experience
- current management challenges?
- are they being addressed?
- firm strategy or focus?
- firm key principles?
- individual tech skills?
- business experience?
- leadership sills?
- ownership authority?
- management according to size and life stage?
- character and intelligence of managers?
- management depth or turnover?
- overall strength and weaknesses of management?
Questions Related to HR and Strategy
Conditions are ever changing and we want to preserve profit and highlight risks or needs
Size Up Relevance for Managers
