Chapter 3 Flashcards
vision statement
outlines company’s long term aspirations
declaration clarifying your
business’s meaning and purpose for stakeholders( especially employees).
Short sentences: business’s purpose. Should motivate employees.
what do we want to become?
Eg: Nikes: do everything possible to expand human potential
mission statement
summary of the long term goals and core values.
consider interest and needs
of stakeholders
Key Elements:
Purpose: Why does the business exist?
Goals: What does the business aim to achieve?
Values: What principles or beliefs guide the business?
Corporate Culture:
Shared values, beliefs, and behaviors of a company’s employees that
are expressed through their social interactions and work environment.
Corporate Governance
system of rules, practices, and processes by which a company is directed and controlled.
Ensures company is managed in way transparent, accountable, and ethical, while aligning interests of stakeholders.
+ corporate governance
- minimizing risks
- promoting trust
- preventing conflicts of interest in a company
(-)corporate governance
- knowledge imbalance
- monitoring limits ( limited access to information, time constraints, over-reliance on management reports).
This can allow poor practices or unethical behavior to go unchecked, increasing the risk of mismanagement.) - misaligned incentives (If managers are incentivized with short-term rewards, such as bonuses tied to quarterly profits, they may make decisions that boost short-term performance but harm the company’s long-term sustainability)
MARKETING:
Process of defining, anticipating, creating, and fulfilling customers’ needs wants.
Pricing:
- Governments: influence pricing decisions through regulations and taxes.
- Suppliers: Cost of inputs and raw materials can have a significant impact
on pricing decisions. - Distributors: affect with their markups and pricing strategies.
- Competitors’ prices.
+ management information systems
● Better decision making
● Identification of patterns and trends
● Increased efficiency
● Competitive advantage
Porter’s Five Forces Model:
- Rivalry
- Threat of new entrants
- Threat of substitutes:
- Bargaining power of suppliers
- Bargaining power of customers:
Rivalry:
● Price wars
● innovation (new products)
● Intensive promotion (increased costs in marketing)
- customer loyalty
Threat of new entrants:
● Economies of scale
● Brand preferences and customer loyalty
● Tariffs
● Patent
Threat of substitutes:
● price and performance of the substitute can match the industry’s product.
● Brand loyalty
● Switching costs
Bargaining power of suppliers:
It is high when:
● Low number of suppliers
● Low number of substitutes products
● Risk of forward vertical integration of suppliers: If the suppliers can easily integrate forward and start producing the product themselves. For example, if a supplier of raw materials starts producing finished products,
they can become direct competitors of their former buyers.
● The resource supplied is scarce
control price and quality
Bargaining power of customers:
It is high when:
● Buy in volume
● Number of firms supplying the product (substitutes).
● Number of customers
● If sellers are struggling in the face of falling consumer demand
