Final Flashcards
What are the 5 main factors of production?
Natural resources, Labour, Capital, Entrepreneurs, Knowlegde
Describe Natural resources
farmland, forests, mineral and oil deposits, and water. Today urban sprawl,
pollution, and limited resources have raised questions about resource use. Conservationists,
environmentalists, and government bodies are proposing laws to require land-use planning and
resource conservation.
Describe labour
refers to the economic contributions of people working with their minds and muscles. This input
includes the talents of everyone—from a restaurant cook to a nuclear physicist—who performs the
many tasks of manufacturing and selling goods and services.
Describe Capital
The tools, machinery, equipment, and buildings used to produce goods and services and get
them to the consumer are known as capital. “Capital” does not include money.
Describe entrepreneurs
are the people who combine the inputs of natural resources, labor, and capital to
produce goods or services with the intention of making a profit or accomplishing a not-for-profit goal.
These people make the decisions that set the course for their businesses; they create products and
production processes or develop services.
Describe Knowledge
refers to the combined talents and skills of the workforce and has become a primary driver
of economic growth. Today’s competitive environment places a premium on knowledge and learning
over physical resources, many “routine” jobs have been replaced by automation over the last decade or
outsourced to other countries, technology has actually created more jobs that require knowledge and
cognitive skills.
What is the supply chain
The supply chain encompasses the entire business cycle in terms of sourcing raw material to getting it in
the hands of the end consumer. Figure 1 is a simplified model of the different steps that it takes to get a
chocolate bar from raw materials (cocoa, sugar, milk) to the hands of the end consumer. At each stage
there is a business, where a business will grow the raw material (cocoa beans), process it for final
production (cocoa beans to cocoa powder), produce the end product (create chocolate bar), run the
distribution network (stores and delivery) or act as the final retail step and sell to the end consumer. (Think about figure of chocolate bar)
What is a product
In marketing, a product (a good, service, or idea), along with its perceived attributes and benefits,
creates value for the customer. Products can be classified into two broad categories, Consumer
Products and Business Products and are either tangible or intangible.
What are the types of products
Consumer and Business
What are the types of consumer products and explain each type/ give an example
Unsought Products are unplanned by the potential buyer, or known products that the buyer does not actively seek (Life insurance)
Convenience Products are relatively inexpensive items that require little shopping effort and are routinely purchased; might not be a planned purchase. (Bread)
Shopping Products are bought only after a brand and store comparison of price, suitability, and style; purchases decision might take months or even years of search and evaluation. (Cars)
Specialty Products are products for which consumers search long and hard and for which they refuse to accept substitutes; as consumers are willing to spend much time and effort to find them, distribution is often limited to one or two sellers in a given region (Expensive jewelry)
What are consumer nondurables?
Consumer products that get used up, such as Nexxus shampoo and Lay’s potato chips, are called
consumer nondurables
What are consumer durables
Those that last for a long time, such as Whirlpool washing machines and Apple
computers, are consumer durables.
What is a business products
Products bought by businesses or institutions for use in making other products are called business
products, as summarized in Table 2. These products can be commercial, industrial, or services products.
What are the types of business products
Installations
these are large, expensive capital items that
determine the nature, scope, and efficiency of a
company.
(Factory/office building)
Accessories
do not have the same long-run impact on the firm
as installations, and they are less expensive and
more standardized.
(Small equipment/computers)
Component parts and materials
are items that are built into an end product. Some
component parts are custom-made, others are
standardized for sale to many industrial users.
(Computer chips/ leather/screws)
Raw Materials
are expense items that have undergone little or no
processing and are used to create a final product.
(Copper/lumber/zinc)
Supplies
do not become part of the final product. They are
bought routinely and in fairly large quantities.
(Pencil paper)
Services
these are used to plan or support company
operations
(Consulting/janitor)
What are the three main types of businesses
Sole Proprietorship
are single person firms, most popular, but
relatively small in terms of revenue and profit
Partnership
two or more people that agree to go into
business together. Partners may be active or
silent.
Corporation
separate legal entity, largest in terms of
revenue and total profit.
Which type of business has the most business
Sole proprietorship
Which type of business most revenue
Corporation
What are the advantages of sole proprietorship
• Easy and inexpensive to form, few legal requirements • Profits go to the owner • Owner has direct control of the business • Not required to consult others when making decisions • Fewer government controls • Profits are taxed as owner’s personal income, simple tax structure is easier • Easy to dissolve (close) the business
What are the disadvantages of sole propriotorship
Unlimited liability, sole proprietors’ assets
and company assets are treated the same.
You can lose your house, car, savings,
etc… if there is a claim against your
business
• More difficult to raise capital, as assets are
also personal assets
• Owner usually relies on own funds to start
up (credit cards, second mortgage, line of
credit)
• Limited managerial expertise, leaves gaps
in skills and knowledge
• Can be harder to find employees as there is
not as much room to grow and fewer
benefits
• Time consuming and unstable. You are
the main person, so any medical issues can
be devastating
• When owner dies, business is shutdown
What are the advantages of partnerships
• Easy and inexpensive to form, few legal requirements, although a written partnership agreement is recommended • Capital is likely more available due to more partners, which may help reassure outside investors • Possible to have a more diverse skill range • Maintains flexibility to make rapid changes, though now must come to agreement • Profits are taxed as personal income of the partners, simple tax structure is easier • Profits go to the partners • Fewer government controls
What are the disadvantages of partnerships
Unlimited liability, all partners are
personally responsible for debts of the
business (except LLP’s)
• Partners may have disagreements or
different ideas, leading to breakdowns in
communication, outside intervention or
dissolution of partnership in worst case
• Profit sharing can be more complex if
partners bring different skills, talents, work
ethic and/or investment to the partnership
• Partnerships are easier to create than
dissolve, good agreements will include
language around how the business will be
sold/shutdown/bought out
What is difference between general partnerships and limited partnerships
There are two basic types of partnerships: general and limited. In a general partnership, all partners
share in the management and profits. They co-own the assets, and each can act on behalf of the firm.
Each partner also has unlimited liability for all the business obligations of the firm. A limited partnership
has two types of partners: one or more general partners, who have unlimited liability, and one or more
limited partners, whose liability is limited to the amount of their investment. In return for limited
liability, limited partners agree not to take part in the day-to-day management of the firm. They help to
finance the business, but the general partners maintain operational control. See Table 5 for a list of
some advantages and disadvantages
What is incorporation process
- Selecting the company’s name
- Writing the articles of incorporation and filing them with the appropriate government office
- Paying required fees and taxes
- Holding an organizational meeting
- Adopting bylaws, electing directors, and passing the first operating resolutions
What are the advantages of corporations
• Limited Liability, shareholders can only
lose what they invest in the company
(excluding fraud)
• Easy to transfer ownership by selling
shares to another party
• Unlimited life, does not automatically
shut down after shareholders’ death, it is
a separate legal entity
• Tax deductions and lower tax rates can
be advantageous
• May be easier to raise capital, especially
if a larger organization
What are the disadvantages of corporations
Double taxation on profits. The corporation pays tax on profits, and the shareholders pay tax when they receive money from the corporation as a dividend. Although some income tax laws mitigate this problem • More expensive and time consuming to setup and form a corporation • More government restrictions • Publicly listed companies incur significant annual expenses due to audit fees and required reporting
What is a Co-op business
When you eat a Sunkist orange or buy a jacket at Mountain Equipment Co-op (MEC), you are purchasing
from a cooperative. A cooperative is a legal entity with several corporate features, such as limited
liability, and unlimited life span, an elected board of directors, and an administrative staff. Member-
owners pay fees to the cooperative and share in the profits, which can be distributed to members in proportion to their contributions. Because they do not retain any profits, cooperatives are not subject to
taxes, in Canada cooperatives can retain the profit until a member chooses to cash their share in.
What is a joint venture
In a joint venture, two or more companies form an alliance to pursue a specific project, usually for a
specified time period. There are many reasons for joint ventures. The project may be too large for one
company to handle on its own, and joint ventures also afford companies access to new markets,
products, or technology. Both large and small companies can benefit from joint ventures.
What are the advantages of a franchise
• Recognized name, product and concept reduces risk • Ability to expand using proven model and format • Management and training assistance to help with franchise success • Easier to setup, as product development, supply chain and design are provided • Financial assistance can be easier to obtain if linked to a well known brand
What are the disadvantages of a franchise
Must pay a royalty to franchisor, usually as
a % of sales and/or profit
• Cost of investing in (buying) a franchise
can be expensive
• Restricted in how you can operate and
promote your business under the franchise
agreement
• May be required to purchase materials
from franchisor at high price
• Can lose franchise rights if policies are not
followed
What are roles of managers
Planning/organizing/controlling/leading
What are the functions and characteristics of money
Scarcity/durability/portability/divisibilité
Function of money:
- uniform system
- medium of exchange
- standard of value
- store of value
How are new products developed
Set new product goals Develop new ideas Screen ideas and concepts Develop the market Test market Introduce the product
What is the role of the product manager
A product manager develops and implements a complete strategy and
marketing program for a specific product or brand of product. Some companies may have numerous
brands of the same type of product, such as many versions of laundry soap, each with different target
markets, brand names, and attributes. Product management first appeared at Procter & Gamble in 1929.
What are the stages of the product life cycle
Intro
Growth
Maturity
Decline
What happens in intro stage
Product will face many obstacles and focus is on developing a market for the product (if a new market) or gaining market share if entering an existing market.
Competition may be light, the introductory
stage usually features frequent product
modifications, limited distribution, and heavy
promotion of the idea, not necessarily the
brand. The failure rate is high.
The Internet of Things (IOT) and associated
devices is just starting to find a market but
has not yet gained widespread consumer
acceptance.
Usually operating at breakeven or a loss while market is being created. Production & marketing costs are high due to low volume
What happens in growth stage
If a product survives the first stage sales will begin to grow, profits are healthy, and many competitors enter the market. Large companies may start to acquire small pioneering firms that have reached this stage.
Typically see aggressive brand advertising
and communicating the differences between
brands.
Distribution becomes a major key to success
and manufacturers scramble to find dealers
and distributors. Without adequate
distribution, it is impossible to establish a
strong market position.
Smartphones are starting to approach the
peak of the growth phase.
Sales are growing at an increasing rate, profits are growing. Price reductions may result from increased competition and costs are reduced due to economies of scale. Product development costs have likely been recovered.
What happens in the maturity phase
After the growth stage, sales continue to mount—but at a decreasing rate. Most products that have been on the market for a long time are in this stage.
Most marketing strategies are designed for
mature products. One such strategy is to
bring out several variations of a basic
product (line extension). Kool-Aid, for
instance, was originally offered in six flavors.
Today there are more than 50.
Sales growth slowing,
profits have peaked or
show signs of decline.
What happens in the decline stage
The rate of decline is governed by two factors: the rate of change in consumer tastes and the rate at which new products enter the market.
Sometimes companies can improve a
product by implementing changes to the
product, such as new ingredients or new
services. If the changes are accepted by
customers, it can lead to a product moving
out of the decline stage and back into the
introduction stage.
Sales and profits
declining
What is the Marketing concept and relationship building
Marketing is the process of getting the right goods or services or ideas
to the right people at the right place, time, and price, using the right
promotion techniques and utilizing the appropriate people to provide
the customer service associated with those goods, services, or ideas:
Focusing on the needs and wants of the customers so the organization can distinguish its
product(s) from competitors’ offerings. Products can be goods, services, or ideas.
• Integrating all of the organization’s activities, including production and promotion, to satisfy these
wants and needs.
• Achieving long-term goals for the organization by satisfying customer wants and needs legally and
responsibly.
Key components:
- customer value
- customer satisfaction
- Building relationships
What is customer value
Customer value is the ratio of benefits for the customer (organization or consumer) to the sacrifice
necessary to obtain those benefits. The customer determines the value of both the benefits and the
sacrifices. Creating customer value is a core business strategy of many successful firms. Customer value is
rooted in the belief that price is not the only thing that matters.
What is customer satisfaction
Customer satisfaction is a theme stressed throughout this text. Customer satisfaction is the customer’s
feeling that a product has met or exceeded expectations. Expectations are often the result of
communication, especially promotion. Utilizing marketing research to identify specific expectations and then crafting marketing strategy to meet or exceed those expectations is a major contributor to success
for an organization
What is relationship building within a business?
Relationship marketing is a strategy that focuses on forging long-term partnerships with customers.
Companies build relationships with customers by offering value and providing customer satisfaction. Once
relationships are built with customers, customers tend to continue to purchase from the same company,
even if the prices of the competitors are less or if the competition offers sales promotions or incentives.
Customers (both organizations and consumers) tend to buy products from suppliers whom they trust and
feel a kinship with, regardless of offerings of unknown competitors. Companies benefit from repeat sales
and referrals that lead to increases in sales, market share, and profits. Costs fall because it is less expensive
to serve existing customers than to attract new ones
What is the nature and function of distribution
Distribution is efficiently managing the acquisition of raw materials by the factory and the movement of
products from the producer or manufacturer to business-to-business (B2B) users and consumers.
What are main marketing intermediaries and what do they do
Agents and bookers- bring buyers and sellers together (hired on commission and does not deal with product)
Industrial distributors- independent wholesalers that sell to industrial users (usually have sales force and make deliveries)
Wholesalers- buys from manufacturer or other wholesaler for resale (resells finished good to retailers and takes possession of product)
Retailers-buys from manufacturer or wholesaler for resale (sells goods to end consumers and industrial users)
What are some non traditional Chanel’s
Internet or mail order… can also provide another avenue for large firms
What do Chanel’s do
Focus on what they are good at. A factory is bad at selling and a store is bad at making (traditionally)
What are ways Chanel’s eases the flow of goods
Packs products into more manageable order sizes for customers.
- Allows customers to purchase products in one place.
- Removes need for the producer to source individual customers.
- Provides a storage location for goods until customers are ready to purchase.
What is the role of supply chain mangers
Accordingly, supply-chain managers are responsible for making channel strategy decisions, coordinating
the sourcing and procurement of raw materials, scheduling production, processing orders, managing
inventory, transporting and storing supplies and finished goods, and coordinating customer-service
activities. Supply-chain managers are also responsible for the management of information that flows
through the supply chain
What is needed for production (inputs)
Natural resources/ raw materials/Human Resources/capital
What is the output of production
Products and services
What are 3 main types of production management decisions
- Production planning. The first decisions facing operations managers come at the planning
stage. At this stage, managers decide where, when, and how production will occur. They
determine site locations and obtain the necessary resources. - Production control. At this stage, the decision-making process focuses on controlling
quality and costs, scheduling, and the actual day-to-day operations of running a factory or
service facility. - Improving production and operations. The final stage of operations management focuses
on developing more efficient methods of producing the firm’s goods or services.
What types of production processes are there
One for all: mass production- Mass production, manufacturing many identical goods at once, was a product of the Industrial Revolution.
Henry Ford’s Model-T automobile is a good example of early mass production. Each car turned out by
Ford’s factory was identical, right down to its color. If you wanted a car in any color except black, you were
out of luck. Canned goods, over-the-counter drugs, and household appliances are other examples of goods
that are mass-produced. The emphasis in mass production is on keeping manufacturing costs low by
producing uniform products using repetitive and standardized processes. As products became more
complicated to produce, mass production also became more complex.
Just for You: Customizing Goods
In mass customization, goods are produced using mass-production techniques, but only up to a point. At
that point, the product or service is custom-tailored to the needs or desires of individual customers. For
example, American Leather, a Dallas-based furniture manufacturer, uses mass customization to produce
couches and chairs to customer specifications within 30 days. The basic frames in the furniture are the
same, but automated cutting machinery precuts the color and type of leather ordered by each customer.
Using mass-production techniques, they are then added to each frame.
What is production timing
A second consideration in choosing a production process is timing. A continuous process uses long
production runs that may last days, weeks, or months without equipment shutdowns. This is best for high-
volume, low-variety products with standardized parts, such as nails, glass, and paper. Some services also
use a continuous process. Your local electric company is an example. Per-unit costs are low, and
production is easy to schedule.
What are the 3 stages of the business activity cycle and explain them
Financing (1st Stage): involves how an organization
obtains money from investors (equity) or borrows
money (debt). The investors and lenders are rewarded
in the form of dividends and debt payments.
Investing (2nd Stage): is when the organization takes the
money from stage 1 and acquires the different factors
of production it needs to operate. This often includes
land, buildings, equipment and inventory.
Operating (3rd Stage): is the day-to-day operation of the
business. This involves selling the product (generating
revenue) and paying bills (expenses). Profit is what is left
over after the expenses are paid.
What is the Finnancial managers role
Financial planning and monitoring
Investment -spending money
Financing -raising money
GOAL: maximize the value of the firm to it’s owners
What are the long term financing options
Term loan (secured or unsecured) Bonds (secured or unsecured) Common shares (unsecured) Preferred shared (semi secured) Venture (unsecured)
What are the short term financing options
Bank loan (unsecured) Other loan (secured) Factoring (unsecured) Trade credit (unsecured) Commercial paper (unsecured)
How do u decide where to open business
Availability of product inputs Marketing factors Manufacturing environment Local incentives International location considerations
What to consider when designing facility
Forces layout
Product layout
Fixed position layout
Cellular manufacturing
What are 3 stages of making a firm
Stage 1 financing
Stage 2 investing
Stage 3 operating
What are the 3 main parts of operating the business
Inventory
Revenues
Short term expenses
What is the nature of demand
Demand is the quantity of a good or service that people are willing to buy at various prices. The higher
the price, the lower the quantity demanded (QDemanded), and vice versa. A graph of this relationship is
called a demand curve.
What is the nature of supply
Demand alone is not enough to explain how the market sets prices. We must also look at supply, the
quantity of a good or service that businesses will make available at various prices (QSupplied). The higher
the price, the greater the number of jackets a supplier will supply, and vice versa. A graph of the
relationship between various prices and the quantities a business will supply is a supply curve.
What happens when there is a change in demand
A number of things can increase or decrease demand. For example, if snowboarders’ incomes go up,
they may decide to buy a second jacket. If incomes fall, a snowboarder who was planning to purchase a Demandjacket may wear an old one instead. Changes in fashion or tastes can also influence demand. If
snowboarding were suddenly to go out of fashion, demand for jackets would decrease quickly. A change
in the price of related products can also influence demand: if the average price of a snowboard rises to
$1,000, people will quit snowboarding, and jacket demand will fall.
What happens when there is a change in supply
Other factors influence the supply side of the picture. New technology typically lowers the cost of
production. For example, North Face, a ski and snowboard jacket supplier, purchased laser-guided
pattern-cutting equipment and computer-aided pattern-making equipment. As each jacket was cheaper
to produce, the profit per unit increased, which incentivized them to supply more jackets at every price.
If the price of resources like labour or fabric goes up, North Face will earn a smaller profit on each unit,
and the amount supplied will decrease at every price. The reverse is also true. Changes in the prices of
other goods can also affect supply. Table 1 denotes various factors that can shift supply and demand.
What are the factors that impact supply and demand and how do they affect them
Buyer income (high-more demand/low means less demand) Buyer preference Number of buyers Change in tech Change in resource prices Number of suppliers
What are the 4 market structures
Perfect Comp
Pure monopoly
Monopolistic competition
Oligopoly
Explain perfect comp
Many firms No ability to control price Few to no barriers to entry Very little product differentiation Examples: wheat and corn
Explain Pure monopoly
One firms High ability to control price Gov regulated barriers to entry No direct comp Examples: utilities such as gas and water
Describe monopolistic competition
Fewer firms than perfect comp Some ability to control price Few barriers to entry Some perceived product differentiation Examples: clothing
Describe Oligopoly
Few firms Some to control price Many barriers to entry Some product differentiation Examples: cable/mobile phones/ banks
What are porters 5 forces and describe them
The 5 forces model, developed by Michael Porter, is used to assess five competitive forces that impact a given target market. This model helps the analyst determine the strengths, weaknesses, opportunities, and threats (SWOT) faced within a market, so they can develop a strategy to compete effectively. It can be helpful to think back to the types of competition to help assess aspects of this model
Threat of New Entry
This force evaluates how easy or difficult it is for a new competitor to enter the existing market. If the
market is easy to enter, competition will likely be fierce, which can make the market unattractive.
Whereas, if the market has some barriers to entry, but your organization already has or can acquire the
relevant resources, then the market might be very attractive to enter, as it will be more difficult for
others to enter. Factors to consider when evaluating this force include, time and cost of entry, specialist
knowledge, economies of scale, cost advantage and a technology advantage. If the organization can
develop an advantage in any or all of these factors, it is possible that the market is attractive to enter.
Threat of Substitute
This force evaluates how easy or hard it is for an end user to switch to an alternative product. In this
force it is very important to clearly define what market you are analyzing. For example, if a company is
examining the local carbonated beverage market for their new cola, a substitute product could be orange juice, coffee or tea (non-carbonated beverages). Other colas, like Coke and Pepsi, would be
considered under competitive rivalry. Factors to consider include what it would cost to change to a
different product and how close the substitute’s performance is to the existing product. Remember, this
would be like comparing stairs vs. elevator in the vertical lift market, elevators might be faster and
require less energy, but if someone is only going up 1 level and there is a wait, the stairs might be a
great substitute, if it was 60 floors, the stairs might not be a very good substitute.
Buyer Power
Buyers are the consumers of the product that is being sold. It is important to consider factors such as
the number of buyers, as a few large buyers will have more power than many small individual buyers.
Order size and frequency may make certain buyers more important than others and the cost of
substitutes or a buyer’s sensitivity to changes in price might give them more or less power. Continuing
with the example of a local carbonated beverage company, it is unlikely they will have a significant
amount of power against the supermarket retailers that might buy their product, because there are
many well-known competitors and substitutes that are able to offer a product at the same or lower
price. A single beverage is unlikely to be a major portion of the business of any supermarket, which
means they can choose not to stock it. In the food industry, many producers actually pay retailers a fee
to have their product carried in the store.
Supplier Power
Suppliers are the ones that supply the goods to make a product, the amount of power they have is
largely a function of how much they control the market. If there are few suppliers, that are quite large,
where changing supplier is difficult and expensive, suppliers will have significant power. Where if it is
easy to change products, there are many suppliers and the cost is low, suppliers will have very low
power.
Competitive Rivalry
The competitive rivalry assesses the direct competitors for the market that is being analyzed. The key
factors to consider are the number of competitors, differences in what they are offering, the cost of
switching between competitors and how loyal customers are. The restaurant industry is a good example
of a highly competitive market, it is easy to switch to a different restaurant, quality varies and
restaurants actively cultivate customer loyalty through service, promotions and/or other rewards.
What is pricing objectives
Price is important in determining how much a firm earns. The prices charged customers times the
number of units sold equals the gross revenue for the firm. Revenue is what pays for every activity of
the company (production, finance, sales, distribution, and so forth). The money that is left over (if any)
after expenses are accounted for, is profit. Managers strive to charge a price that will allow the firm to
earn a fair return on its investment and will often seek to maximize return on investment. In some other
cases, in order to establish their product, the firm will focus on gaining market share, the % of total
market in terms of volume or revenue.
The chosen price must be neither too high nor too low, and the price must equal the perceived value to
target consumers.
What are the main pricing strategies
Price skimming Penetration pricing Leader pricing Pricing of services Bundling Physcological pricing Prestige pricing
Explain price skimming
The practice of introducing a new product on the market with a high price and then lowering the price
over time is called price skimming. As the product moves through its life cycle, the price usually is
lowered because competitors are entering the market. As the price falls, more and more consumers can
buy the product. A recent example is LED flat-screen televisions, at one time these were priced at over
$1,000, but have since sunk to under $400.
What are the advantages to price skimming
Price skimming has four important advantages. First, a high initial price can be a way to find out what
buyers are willing to pay. Second, if consumers find the introductory price too high, it can be lowered.
Third, a high introductory price can create an image of quality and prestige. Fourth, when the price is
lowered later, consumers may think they are getting a bargain. The disadvantage is that high prices
attract competition.
Explain penetration pricing
A company that doesn’t use price skimming will probably use penetration pricing. With this strategy, the
company offers new products at low prices in the hope of achieving a large sales volume. Procter &
Gamble did this with its SpinBrush toothbrush. Penetration pricing requires more extensive planning
than skimming does because the company must gear up for mass production and marketing. When
Texas Instruments entered the digital-watch market, its facilities in Lubbock, Texas, could produce 6
million watches a year, enough to meet the entire world demand for low-priced watches. If the
company had been wrong about demand, its losses would have been huge. In 2012, the first of Tesla’s
Model S started at around $60,000 USD, and this low price helped them develop market share; they are
now priced starting around $75,000.
What are the advantages of penetration pricing
Penetration pricing has two advantages. First, the low initial price may induce consumers to switch
brands or companies. Using penetration pricing on its jug wines, Gallo has lured customers away from
Taylor California Cellars and Inglenook. Second, penetration pricing may discourage competitors from
entering the market. Their costs would tend to be higher, so they would need to sell more at the same
price to break even.
What is leader pricing
Pricing products below the normal markup, or even below cost, to attract customers to a store where
they wouldn’t otherwise shop, is leader pricing. A product priced below cost is referred to as a loss
leader. Retailers hope that this type of pricing will increase their overall sales volume and thus their
profit.
What is pricing of services
Pricing of services tends to be more complex than pricing of products that are goods. Services may be
priced as standard services, such as the price a hair stylist might charge for a haircut, or pricing may be
based on tailored services designed for a specific buyer, such as the prices charged for the design of a
new building by an architect.
What is bundling
Bundling means grouping two or more related products together and pricing them as a single product.
Marriott’s special weekend rates often include the room, breakfast, and free Wi-Fi. Department stores
may offer a washer and dryer together for a price lower than if the units were bought separately.
What is physiological pricing
Psychology often plays a big role in how consumers view prices and what prices they will pay. Odd-even
pricing (or psychological pricing) is the strategy of setting a price at an odd number to connote a bargain
and at an even number to imply quality. For years, many retailers have priced their products in odd
numbers—for example, $99.95 or $49.95—to make consumers feel that they are paying a lower price
for the product.
What is prestige pricing
The strategy of raising the price of a product so consumers will perceive it as being of higher quality,
status, or value is called prestige pricing. This type of pricing is common where high prices indicate high
status. In the specialty shops on Rodeo Drive in Beverly Hills, which cater to the super-rich of Hollywood,
shirts that would sell for $65 elsewhere sell for at least $150. If the price were lower, customers would
perceive them as being of low quality. Prestige pricing is also very prevalent in services because services
providers with reputations for excellent service are more in demand, often with a waiting list. This is due
to the fact that services are tied directly to the people who provide them and those people have only so
much time in a week in which to provide services. Once the calendar fills up, the demand goes up, and
the prices become prestige prices.
What are the types of retailing give example
Department (the bay) Specialty (best buy) Convenience (7-11) Discount (Walmart) Supermarket (Safeway) Factory outlet (coach) Vending (candy) Direct selling (essential oils) Online (Amazon)
What are the categories of unethical business activities
Taking things that dont belong to you Saying things you know aren’t true Giving or allowing false impressions Buying influence Hiding or divulging information Taking unfair advantage Committing inproper personal behavior Abusing power and mistreating individuals Permitting organizational abuse Violating rules
What is utilitarianism
Seeking best for majority
How can organizations encourage ethical business behaviour
Lead by example Offer ethics training programs An ethical dilemma used for training Establish formal code of ethics Making the right decision The feelings test Newspaper or social media test
What is corporate social responsibility
Acting in an ethical manner is one of the four components of the pyramid of corporate social
responsibility (CSR), which is the concern of businesses for the welfare of society. It consists of
obligations beyond those required by law or union contract. This definition makes two important points.
First, CSR is voluntary. Beneficial action required by law, such as cleaning up factories that are polluting
air and water, is not voluntary. Second, the obligations of corporate social responsibility are broad. They
extend beyond investors in the company to include workers, suppliers, consumers, communities, and
society at large.
What are the 4 sections of CSR pyramids
Economic-illegal and irresponsible
Legal-legal but irresponsible
Ethical-Legal and responsible
Philanthropic- addressing issues before they are even problems (above and beyond)
What are the 4 main global economic systems
Capitalism, communism, socialism mixed economy
Describe capitalism
Business are privately owned with minimal gov interference
Complete freedom of trade, little or no gov control
Strong incentive to work and innovate because profits are retained by owners
Each enterprise is manages by owners or professional managers with little gov interference
Ex: USA
