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Business Management 1 & 2 > Module 3: Market Analysis, Location, Government Regulations, Inventory Management, Pricing Policies, CVI & Pricing Strategies (Q3) > Flashcards

Module 3: Market Analysis, Location, Government Regulations, Inventory Management, Pricing Policies, CVI & Pricing Strategies (Q3) Flashcards

1
Q

Customer Profile

A

A description of the key demographic and
psychological characteristics of potential customers in a target market.

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2
Q

Actual Sales Forecast

A
  • Should include the most likely, best-
    case, and worst-case scenarios.
  • Includes the major benefits to customers provided by the new product or service.
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3
Q

Market

A

A group of potential customers possessing purchasing power and unsatisfied needs

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4
Q

Market survey

A

A study that is used by a business to determine where potential customers are located
- Selection of a community
- Sources of published market data

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5
Q

Selection of a community

A
  • demographics
  • economic base
  • population trends
  • disposable income trends
  • competition
  • social and business climate
  • select the site
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6
Q

Sources of Published Data

A
  • Census of Population
  • Census of Business
  • Census of Housing
  • Census of Manufacturing
  • Chamber of Commerce
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7
Q

Competition

A
  • Existing competitors – Key management personnel profiles, competitors’ overall strengths and weaknesses.
  • Existing related products or those possibly in the pipeline.
  • SWOT analysis (strengths, weaknesses, opportunities, threats)
  • Where your business stands relative to the competition.
  • How competitors are likely to react when you change or try a new marketing tactic.
  • What actions you might take when you cannot overcome a weakness or avoid a threat.
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8
Q

Brick and Mortar Facility

A

The traditional physical facility from
which businesses have historically operated

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9
Q

Key Factors in Selecting a Good Location

A
  • Neighbor mix
  • Security and safety
  • Services
  • Past tenants’ fate
  • Location’s life-cycle stage
    Customer Accessibility
  • Convenience goods require location close to target customers.
  • Services must be readily accessible.
  • Access critical for some businesses.
  • Site-selection software helps business owners.
  • Facilities parking
    Business Environment Conditions
  • Can hinder or promote success.
  • Competition, legal requirements, tax structure, weather.
  • Nearly all cities have regulations that restrict new business operations under certain circumstances.
  • Room for expansion
  • Internal and external traffic flow
    Availability of Resources
  • Access to raw materials
  • Suitability of the labor supply
  • Availability of transportation
    Personal Preference of the Entrepreneur
  • Locating in one’s home community sometimes makes sense, but may be poor choice.
  • Personal preferences that drive the location decision are as varied as the entrepreneurs who make it.
  • Site Availability and Costs
  • Business incubator – A facility that provides shared space, services, and management assistance to new businesses.
  • Ultimately depends on evaluation of all relevant costs.
  • Decide whether to lease or buy.
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10
Q

Americans with Disabilities Act

A

Legislation that guarantees disabled people equal access to employment, as well as access to public places

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11
Q

Zoning Ordinances

A

The formal codification of land use policies by a unit of local government with the goal to establish permitted use for land to
distinguish between different types of uses which may be incompatible

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12
Q

Economic order quantity

A

An index that determines the quantity to purchase in order to minimize total inventory costs.

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13
Q

Statistical inventory control

A

A method of controlling inventory that uses a targeted service level, allowing statistical determination of the appropriate amount of inventory to carry.

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14
Q

Inventory Turnover

A

The number of times the average inventory has been sold or used up during a period.

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15
Q

Age of inventory/days in inventory

A
  • The number of days, on average, that a company holds inventory.
  • Days in inventory equals Inventory divided by Cost of goods sold divided by 365 days.
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16
Q

Just-In-Time Inventory Systems

A

A method of cutting inventory carrying costs by making or buying what is needed just as it is needed.
- Reduces inventory levels to an absolute minimum.
- Allows quality problems to become evident more quickly to reduce waste.
- Used by businesses of all sizes with good results

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17
Q

Average Pricing

A

An approach in which the total cost for a
given period is divided by the quantity sold in that period to set a price

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18
Q

Freemium Strategy

A

A strategy that offers customers basic
features at no cost based on the idea that they will upgrade to advanced products or services at subscription prices

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19
Q

Elasticity of Demand

A

The degree to which a change in price
affects the quantity demanded

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20
Q

Elastic Demand

A

Demand that changes significantly when
there is a change in the price of the product or service

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21
Q

Inelastic Demand

A

Demand that does not change significantly
when there is a change in the price of the product or service

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22
Q

Break-Even Analysis

A
  • Analysis that requires the examination of cost-revenue relationships and the incorporation of sales forecasts.
  • Examining Cost-Revenue Relationships
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23
Q

Break-even point

A
  • Sales volume at which total sales revenue
    equals total costs and expenses.
  • Break-even point = Total fixed operating costs and expenses divided by Unit selling price minus Unit variable costs and
    expenses
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24
Q

Contribution Margin

A

The difference between the unit selling
price and the unit variable costs and expenses

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25
Q

Markup Pricing

A
  • An approach based on applying a percentage to a product’s cost to obtain its selling price.
  • Manageable pricing system that allows quick pricing of many products.
  • Must cover operating expenses, subsequent price reductions (i.e., such things as markdowns and employee discounts), and desired profit
26
Q

Markdown

A
  • A reduction of selling price below the original selling price
  • Utilize to move products quickly
27
Q

Penetration pricing strategy

A
  • A technique that sets lower than normal prices to hasten market acceptance of a product or service or to increase market share.
  • Strategy can sometimes discourage new competitors from entering the market niche.
28
Q

Price Skimming Strategy

A
  • A technique that sets very high
    prices for a limited period before reducing them to more competitive levels.
  • Assumes certain customers will pay the higher price due to the perception that it is a prestige item.
29
Q

Follow-the-leader pricing strategy

A
  • A technique that uses a particular competitor as a model in setting prices.
  • Price differential options may not work with different size competitors.
30
Q

Variable pricing strategy

A
  • A technique that sets more than
    one price for a product or service in order to offer price concessions to certain customers.
  • Can offer price concessions to particular buyers—for example, those who purchase large quantities of their product.
31
Q

Price lining strategy

A
  • A technique that sets a range of several
    distinct merchandise price levels.
  • Amount of inventory stocked at different quality levels depends on the income levels and buying desires of a store’s customers.
32
Q

Resale price maintenance

A

local, state, and federal laws must be considered; protects small customer-service retailers from large discounters

33
Q

Product line pricing

A

A technique that places different prices
on a range of products or services to reflect the benefits to the customer of parts of the range

34
Q

Adaptive pricing

A

companies engage in placing different
values on a product or service for customers with different needs.

35
Q

Consumer Value Index

A
  • the percentage derived by dividing
    the wholesale cost of the merchandise by the retail price of the merchandise.
  • This measures the value the customer’s money spent on the
    product.
  • CVI = Wholesale Cost (what you paid for it) ÷ Retail Price
  • As the CVI increases, the consumer gains more value.
36
Q

Merchandise Value Ratio (MVR)

A
  • examines the relationship between the wholesale cost of the merchandise and the total cost (both service and merchandise) to the consumer.
  • This measures the merchandise value compared to the total dollar amount spent.
  • MVR = Wholesale Cost ÷ (total of merchandise + services)
  • As the MVR increases, the customer’s value increases
37
Q

Fixed Multiple Method

A
  • multiplies their cost by a constant factor
  • This is one of the simplest ways to mark up your merchandise.
  • It also does not create any impact on the Consumer Value Index.
38
Q

Graduated Recovery Method

A
  • This pricing strategy is a method where the markup will vary.
  • There are three (3) varied methods: Increasing, Decreasing, and Modified.
39
Q

Increasing Graduated Recovery Method

A

lower end wholesale merchandise starts with a lower markup and increases as the wholesale cost increases. Your gross
margin (profit margin) and consumer value index will decrease

40
Q

Decreasing Graduated Recovery Method

A

lower end wholesale merchandise starts with a higher markup and decrease as the wholesale cost increases. Your gross margin (profit margin) will vary and consumer value index will increase

41
Q

Modified Graduated Recovery Method

A
  • similar to the declining method.
  • However, the first 1-3 units will increase in markup before declining.
  • This keeps lower end units affordable for families. Profit margins will vary and CVI will decline, before increasing.
42
Q

Americans with Disabilities Act (ADA)

A

Legislation that guarantees disabled people equal access to employment, as well as access to public places.

43
Q

Zoning Ordinances

A

The formal codification of land use policies by a unit of local government with the goal to establish permitted use for land to distinguish between different types of uses which may be incompatible.

44
Q

Environmental Protection Agency (EPA)

A

A governmental agency with environment protection regulatory and enforcement authority.

45
Q

State Board

A

Governing boards within the state of licensure.

46
Q

Market Analysis

A

The process of locating and describing potential customers.

47
Q

Market Survey

A

A study that is used by a business to determine where potential customers are located.

48
Q

Demographics

A

The statistical study of human populations with respect to their size, density, distribution, composition, and income.

49
Q

Economic Base

A

The wealth produced in or near a community that provides employment and income to the local population.

50
Q

Census of Population

A

A source of market data that compiles population data by region, area, etc.

51
Q

Census of Business

A

Source of market data that explains where certain businesses are located.

52
Q

Census of Housing

A

Source of market data that keeps track of new home sales by region and/or the construction of new houses by region and specific area

53
Q

Census of Manufacturing

A

Source of market data that explains where certain manufacturers are located

54
Q

Chamber of Commerce

A

An association, primarily of people in business, who attempt to protect and promote the commercial interest for a community.

55
Q

Chamber of Commerce

A

An association, primarily of people in business, who attempt to protect and promote the commercial interest for a community.

56
Q

Inventory

A

Those goods or stock of goods which are held for resale at a profit.

57
Q

Economic Order Quantity (EOQ)

A

The quantity to be purchased which minimizes total costs.

58
Q

Inventory Turnover

A

The number of times the average inventory has been sold or used during a period.

59
Q

Age of Inventory

A

Measures the average time required to sell inventory

60
Q

Pricing Policy

A

Factors which influence prices

61
Q

Markup

A

The difference between merchandise cost (wholesale) and selling price (retail).

62
Q

Markdown

A

A reduction of selling price below the original selling price.

Business Management 1 & 2 (9 decks)

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