BUSINESS 121 WINTER 2012 BBA MIDTERM REVIEW GUIDE Multiple Choice questions from readings = 25 marks base

e concepts Short Answer questions from lectures = 40 marks more in-depth Explanation and application, !hat did " learn#$ and !h% did " learn it#$ Problems = &5 marks Total: 80 marks TOPICS TO BE COVERED: B s!"#ss Pla""!"$ 'hapter &()* +riting an Effecti,e -usiness .lan o !h% !rite a business plan o model of business planning o se,en deadl% sins /ecture Art of the Start o 5 things an entrepreneur must accomplish o reasons for !riting a business plan Comm "!%at!o" 'hapter 2(4* .lanning -usiness 0essages o 4 principles of business !riting o 1x1 !riting process /ecture Made to Stick o definition of stick% o 23''E22 model principles !h% the% affect stickiness !a%s to achie,e principles Cr!t!%al T&!"k!"$ /ab 0anual pg &04-&54 o claims, e,idence, underl%ing assumptions, and causal claims !hat the% are and ho! to find them ho! to test5challenge and ho! to appl% to !riting o techniques of persuasion, ho! to build a persuasi,e argument Note: this material !as also co,ered in labs and thus !ill be tested in the short ans!er section as !ell as in multiple choices6 Mark#t!"$ 'hapter 7(&2* 3nderstanding the 'ustomer o 0arketing concept, relationship marketing, and customer relationship management o 'ompetiti,e ad,antage o 'onsumer decision-making process, influences o -2- market o 8rends /ecture 9& :e% o .roduction sales marketing orientation o 2teps to defining a target market 0arket segmentation bases, process .erceptual mapping and preference anal%sis process, choosing target o .ositioning consumer, competiti,e

o .roduct 'lassification (tested in multiple choice* 'hapter &0(&1* 'reating 0arketing 2trategies o .roduct 'lassification consumer ,s6 -2-, related to intensit% of distribution .roduct life c%cle stages and strategies, changing speed of c%cle (from lectures* o .ricing ;b<ecti,es, markup, strategies o .lace5=istribution 'hannels, intermediaries, alternati,e arrangements and strategic alliances >unctions of channels o .romotion ?oals, integrated marketing communications ("0'* >actors affecting mix o 8rends /ecture 92 :e% o 8otal .roduct 'oncept -randing, brand name, brand insistence model o .rice approaches, strategies o .romotion - "0' @d,ertising communication model factors to consider, !hat the% achie,e and ho! to impro,e .ersonal 2elling combined !ith ad,ertising, factors to consider in budget 2ales .romotion and .ublicit% o .lace5=istribution "mplications demand-back!ard pricing, push ,s6 pull promotion

A%%o "t!"$ a"' (!"a"%# 'hapter &&(&4* 3sing >inancial "nformation and @ccounting o @ccounting s%stem o >inancial ,s6 managerial accounting o >inancial statements in annual report 2ections of -alance 2heet, "ncome 2tatement, 2tatement of 'ash >lo!s o 8rends /ecture 3nderstanding @ccounting, 'ash 0anagement o ?@@., @2.E and ">A2 :e% differences format, ,aluation o @udit statement !hat it does and does not sa% o -alance 2heet ,s6 "ncome 2tatement +hat the% sho!, ho! the%Bre built ;rder of current assets, amortiCation of capital assets, good!ill 0atching concept o 'ash ,s6 .rofit Do! compan% that is profitable can go bankrupt o 0anaging cash (Problems and short answers) +orking capital management !orking capital c%cle risk and return, speed and predictabilit% /iquidit% ratios current ,s6 acid test, recei,ables ratios and in,entor% turno,er 'ash budget process and construction

B s!"#ss Pla""!"$
+h% !rite a business plan# =ifficult to arri,e some!here unless %ou kno! !here %ou are going =etailed road map for con,erting %our ideas and ,ision into a real functioning business Explain !hat the ne! ,enture is tr%ing to accomplish and ho! it !ill go about attaining these goals 'lear understanding on the best !a% of proceeding 2uccessful entrepreneurs tr% to co,er this Prepare relatively simple business plan, this can be used to obtain initial funding if needed Actually start the business Refine the business plan on the basis of experience gained from running the business and use to revised plan to run the business and secure additional funding as necessary !ontinue to gro/ the business 0 produce and mar1et the product, hire employees, as needed etc2

'omponents of business planE +hat is the basic idea, !h% is this ne! product useful, ho! !ill the idea for the ne! ,enture be realiCed, !ho are the entrepreneurs, ho! much funding .lan needs to be arranged and prepared in proper order, should be short and succinct as possible, should be persuasi,e @fter exec summar%, talk about the follo!ing things o -ackground F purpose describe %our idea o 0arketing market for product5ser,ice o 'ompetition information on existing competition and ho! it !ill be o,ercome, pricing and related issues o =e,elopment, production and location !here %ou product or ser,ice is right no! in terms of de,elopment o 0anagement- describe experience, skills and kno!ledge of ne! ,enture o >inancial compan%Bs current financial state and offers pro<ections for future needs o Aisk factor- risks ne! ,enture !ill face and the steps management team is taking to protect against o Dar,est5exit ho! in,estors !ill gain if compan% is successful o 2cheduling and milestone each phase of ne! ,enture !ill be completed should be included o @ppendices 2e,en deadl% sins for GH business plan &6 .lan is poorl% prepared and has unprofessional look 56 Go clear ans!er pro,ided to the question 26 .lan is too slick 46 Go clear statement of qualifications of management team 16 Executi,e summar% is too long and rambling I6 >inancial pro<ection are largel% an exercise of !ishful 46 Got clear !here the product is in terms of de,elopment thinking Art o) t&# Start: 1*Mak# M#a"!"$ 2* Mak# Ma"tra +*G#t Go!"$ ,* D#)!"# a - s!"#ss mo'#l .* W#a/# a MAT 0M!l#sto"#s1 Ass m2t!o"s1 tasks3 -usiness model made eas% don deblak THE OB E!T"#E "$ TO %"&E'T(&E )O(R B($"&E$$ $O THAT "T ?E/ >actors *E+"#ER$ A++ THE ,E+ %A!TOR$ A&* )O(-++ BE AB+E TO .R"TE ?- great customers A ,REAT B($"&E$$ P+A& E-eas% sales /- long life "hat is a #usiness Model$ '! business model describes the rationale of how an organi ation creates, delivers, and captures value( !le$ander )sterwalder * 'Business +odel ,eneration( #ow a company intends to make money how your idea actually becomes a business that makes money Different companies can have similar offerings but different business models +odel affects strategy-ways of operating +rite for the right reasons =ue-diligence stage of courting an in,estor >orces the founding team to !ork together 0akes the team consider issues it glossed o,er in the euphoria 3nco,ers holes in the founding team T&# 2ro%#ss !s mor# !m2orta"t t&a" t&# '#st!"at!o" Wr!t# '#l!-#rat#1 a%t #m#r$#"t P!t%& t&#" Pla" &0520510 rule - 8itle, .roblem, 2olution, -usiness 0odel, 3nderl%ing 0agic, 0arketing and 2ales, 'ompetition, 0anagement team, >inancial pro<ections and ke% metrics, 'urrent status, accomplishments to date, timeline and use of funds 8r% it out on people do it &0x, >ix the pitch , +rite the plan Key components The Grab-Lead with the most compelling statement of why you have a really big idea , Direct and specific, not abstract and conceptual The Problem The Solution What specifically you are offering to whom to solve the problem youve identified? The Opportunity -Basic market segmentation, si e, growth and dynamics Your Competitive Advantage !rticulate your uni"ue benefits The Model #ow specifically are you going to generate revenues? What are the critical metrics on which you will be evaluated and what levels will you reach in the ne$t %-& years? The Team Why is your team uni"uely "ualified to win? The Promise what you are going to make for the investors The As! the amount of funding you are asking for now

Comm "!%at!o"s
+riting should be P r2os#) l1 P#rs as!/#1 E%o"om!%al1 a"' A '!#"%# Or!#"t#' +4+ Wr!t!"$ Pro%#ss 1) Prewriting Analyze Purpose 3 $elect channel Anticipate your Audience Adapting to Tas1 and Audience, to teams, to legal and ethical responsibilities 2) Writing ,athering information through Research Organizing "deas 0 list, outlines, patterns Compose the first draft 0 effective sentences, po/erful paragraphs 3) Revising B siness !essages Revise for conciseness, for clarity, for readability Proofread 0 spelling, grammar, punctuation, names 3 numbers, format Evaluate ' chec1list

+hat 2ticks# 2tick% = understandable, memorable, and effecti,e in changing thought or beha,ior$ - =e,elop argument !ell 3rban legends - because itBs stick%, eas% to understand6 Ar# !'#as -or" !"t#r#st!"$ or ma'# !"t#r#st!"$5 0o,ie popcorn - "nteresting but not sensational, truthful but not mind-blo!ing, and important but not Jlife or deathB6 Or %a" 6o mak# t&#m !"t#r#st!"$ a"' #l#/at# %omm "!%at!o"5 2ix .rinciples of 2tickiness - ,er% hard for %ou to communicate %our kno!ledge to someone !ho doesnKt kno!666$the%Bll get itL S!m2l!%!t6 2imple = core M compact >ind the core$ of the message and sa% it in compact !a%

=onBt Jbur% the leadB 'ommunicate the core - ,er% compactl% 3se pro,erbs 2imple but profound666 Lgolden ruleL

'ommanderBs intent$ - !hat the% call in the arm%, !hat is our number one goal, much like %our business plan, important to kno! the core message, if %ou canKt execute plan, execute the commanders intent 0atter of forced prioritiCation

3se existing schema - use existing kno!ledge 3se analogies 3se generati,e metaphors - generates perception - Lcast memberL666sub!@N and sand!ich artist (not effecti,e* ?enerate interest and curiosit% ;pen gaps in kno!ledge ?i,e context >ill those gaps - make them curious, what questions can ou ask, what questions will the ha!e, "et them thinkin"

U"#42#%t#'"#ss ?et audience to pa% attention

-e counterintuiti,e uncommon sense in the ser,ice of the core message GordstromKs Co"%r#t#"#ss 0ake ideas clear

Geed both surprise and interest Hiolate expectations

>ill !ith concrete images - be concrete not abstract 2our grapes$ - messa"e stuck from fables because the ima"es are concrete -ro!n e%es, blue e%es - #rd "rade teacher who wanted to make pre$udice !er concrete %e&periment% Damburger Delper product of "eneral mills, concrete ima"e of how important con!enience is for customer and how critical that is, think it's important to e&pand product line and "i!e options to people, but, that wasn(t want it, all she cared was that her kids will eat it, predictabilit became concrete, ))*ead to ten percent increase of sales Cr#'!-!l!t6 "nternal credibilit% - credibilit within messa"e itself 0ake them belie,e Hi,id details - makes it more real for us @uthorities -tend to trust credible Experts 2tatistics
'elebrities tend to trust people that we want to be like Janti-authoritiesB belie!able, honest, real situation e)") campai"n+ series of ad!ertisement alon" the same scene

8estable credential - put it in words people will understand))) Puttin" audience in position of "i!in" credibilit ) ,&tremel effecti!e campai"n of -end 's G-@ - brand new pla ers, quite oun", all of a sudden dramaticall life chan"es, dan"er of female attention, ma"ic .ohnson /aids

Emot!o"s ?et people to care Mak# t&#m feel som#t&!"$ for people ,s6 abstractions or statistics -feel for people not stats))) Mother 0heresa %if 1 look at mass, 1 will ne!er act, if 1 look at the one, 1 will%))) A person !s) mass stats e)") donatin" mone ))) Anal tical !s) emotional Po7#r o) asso%!at!o" - create an associate with somethin" @ppeal to self-interest - EmphasiCe benefits ,s6 features +put in sense of benefits to that person instead of $ust %features% imagine$ - @ppeal to identit% - "et them to care but appealin" to who he was, that kind of person, does not litter)) ,)") don't mess with 0e&as Stor!#s 8 G#t 2#o2l# to a%t - Geed simulation and inspiration - simulate2 how to act and inspiration2 inspire them to do so 0ental flight simulators - used to train people in situation, creates the same firin" in brain as actual acti!ities, ou "et 34# of benefit of simulation than actuall doin" it))) So a stor is like a mental fli"ht simulation "nspiration - 5 subs under 6 "rams of sub, man decided to onl eat subs, after # months lost 788 lbs), %subwa sa!ed m life% ))M9 can(t do health for fast food))) *e"al said no b4c medical claim, 2ub!a% S2ott!"$ a stor6 'hallenge plot - willpower !s) ad!ersit 'onnection plot - human connection which brid"e "ap) :a!e a coke / a smile 'reati,it% plot - inspirin" to see massi!e breakthrou"hs Oared ,s6 I under 4$ Simple + eat subs and lose wei"ht %Sunwa sa!ed m life ;ne&pected + lose !eight eating fast food Concrete+ o!ersi<ed pants Credible + anti

authorit ,motional + indi!idual !s) mass, reachin" potential Stor + inspirin"

D!))#r#"t Wr!t!"$ R l#s

Adapting to tas1 3 audience4 You must return the form by 5pm would you please return form by 5 pm Audience benefit4 Our warranty becomes effective only when we receive owners registration your warranty begins working for you as soon as you return owners registration !ultivating the 5you6 vie/4 I need your account number would you mind giving me your account number so that I can locate your records to solve your problem? !onversational but professional4 look dude, this report is bogus and the figures dont look kosher. how me some real stats. !ot sources? "ecause figures in this report seem inaccurate, please submit the source statistics. Express yourself positively4 the plan definitely cannot succeed if we dont obtain management approval the plan definitely can succeed if we obtain management approval Being !ourteous steward you must complete all performance review today steward, will you please complete all performance view today B"A$ %REE +A&,(A,E 0 dont use hiss#herss, racial, disability or age biases ($E P+A"& .OR*$ 7 %A8"+AR A&* PRE!"$E 7 #",ORO($ .OR*$ Basic sentences has sub9ect than verb the manager of I$ sent an email to all employees %&OI' (O))O* +*$+*(+ ,%-.$ / ,0%!)+*$ , 0-* O* +*$+*(+, (O))% 1.I(+ +*$+*(+ 2345 words in sentence 567834778 comprehension9 Active voice for directness, vigor and clarity the manager completed performed reviews for all employees Passive voice to be tactful or to emphasi:e the action rather than does (redit cannot be granted Avoid dangling and misplace modifiers after working nine hours the report was finally finished after working nine hours, we finally finished the report (se direct paragraph plan to define classify illustrate or describe (se pivoting paragraph plan to compare and contrast Eliminate flabby expression as a general rule generally +imit +ead "&$ 0 get to the point we are sending this announcement to let everyone know that new parking permits will be available :an 4st new parking permits will be available :an 4 Re9ect redundancies 0 absolute essential essential Revise for clarity short and simple / warn your employees about dangerous chemicals. 'ump trite phrases / as per your re;uest / as you re;uest, drop clich<s and slang below the belt last but not least, unburying verbs / conduct a discussion of discuss PROO%REA* %OR REA*AB"+"T)

Cr!t!%al T&!"k!"$
'ritical thinking approach to reading, thinking and learning in,ol,es asking questions, examining assumptions and !eighing ,alidit% of arguments -de,elop frame of mind, set of strategies that !ill be used to determine !hether or not to belie,e !hat !e ha,e read self-a!are introspect o!n thinking process, !ork at kno!ing biases, and name strategies used to make <udgement 'urious explore beneath the surface of issues, challenge ideas and tr% ne! approaches, seeking ne! ,ie!points to expand kno!ledge "ndependent listen to ideas of others, learn to form them, de,elop o!n informed opinions, understand full range of options 5 dimension to critical thinking &6 purposeful decide on appropriate action 26 looks at qualit% of data reasons that are a,ailable to support claims 16 underl%ing assumptions and ,alues support through our basic ,ie!points 46 causal claims inference about cause and effect ,alidate our causal inferences 56 ideas expressed to persuade readers and listeners Cla!ms 9 "=EG8">N @38D;AB2 '/@"0 ma<or conclusion, look for therefore, thus, in summar , 1 belie!e that, clearl , in short)))etc 3ncontested claims- accepting claim !5o examining e,idence through o!n experiences, facts that are independent, agreement among experts, technical5mathematical claims 'ontested 'laims question itBs truth, introduce ne! ideas that a!aken curiosit% and cause people to think in ne! !a%s, must pro,ide e,idence to <ustif% their position and examine5e,aluate the <ustification E/!'#"%# an argument is combination of claim and e,idence6 'ue !ords because, as a result, in the first place, for e&ample, in addition etc) Pualit% of e,idence e,aluate the accurac%, precision, sufficienc%, representati,eness, authorit% 'larit% of expression must be clear U"'#rl6!"$ Ass m2t!o"s gap that separates the claims and e,idence once assumption of topic is formed, it becomes the foundation of e,er%thing else find them b% looking at !hat people !rite, then making guesses about !hat the% must belie,e in order to ha,e !ritten that 8%pes of @ssumption Aealit% assumptionE our beliefs about !hat e,ents ha,e taken place, !hat exists or ho! things !ork in the !orld666 our beliefs about realit% and ho! things are Halue assumption are our ideals, our standards of right and !rong, the !a% things ought to be, recogniCe them through !orlds like ou"ht, should, desirable Ca sal Cla!ms argue that certain e,ents of factors (causesQ are responsible for bringing about other e,ents of situation (effects* cause and effect relationships natural and useful in understand business en,ironment gi,es meaning to the !orld and basis for decision making and reasoned action D!))!% lt -#%a s# %a s#s %a" -# #l s!/# determining relationship !hen outcomes ma% ha,e multiple causes o techniques of persuasion, ho! to build a persuasi,e argument T#%&"!: #s o) P#rs as!o" Pualit% of the e,idence accurate, precise, sufficient, representati,e, authorities and clear 2oundness of the causal argument e,idence presented ma% be compatible !ith more than one causal interpretation 'onflicts in ,alue preferences or realit% assumption common ;o78to a22roa%& 9 t&!"k a-o t a '!#"%# A"t!%!2at# a"' %o "t#r r#a'#rs o-<#%t!o" 9 brainstorm, troubleshooting process in !hich %ou should put %ourself in the shoes of audience and perform destructi,e testing on %our ideas N#$at!/# #/!'#"%# 9 complex and contradictor% place, rare that e,er% piece of e,idence bears on an issue !ill lead irre,ocabl% to clean and unassailable conclusion Ai,al causes %a sal %la!m l!k#l6 &a/# r!/al %a sal #42la"at!o" o) 6o r #/!'#"%#

D#-ata-l# ass m2t!o"s challenge underl%ing realit% assumption, present counter argument =IMIT %la!ms 7&#" 6o &a/# "o r#- ttal 9 limits to generaliCation, an assesment that the le,el of probabilit% is less than &00R, a refinement or redefining of %our term R&#tor!% : the use of language be complete, use appropriate tone, be !i!id,

Mark#t!"$ 9 understanding the customer base

!ar"eting 0 process of discovering the needs and /ants of potential buyers and customers then providing goods and services that meet or exceed their expectation Prod cts' in mar1eting, any good or service /ith its perceived attributes and benefits that creates value for the customer #$change' ta1es place /hen t/o parties give something of value to each other to satisfy their respective needs2 To encourage exchanges mar1eters follo/ the right principle2 0 determines mar1eting success !ar"eting concept identifying consumer needs and then producing the goods or services that /ill satisfy them /hile ma1ing money, concept involves ,ocusing on customers wants, integrating all of organi=ations activities %chieving long term goals Prod ction orientation4 an approach in /hich a firm /or1s to lo/er production cost /ithout a strong desire to satisfy the needs of customers 'Organi:ations concentrate on mass production 0 focus on maximi:ing efficiency of operations, increasing output, and ensuring uniform ;ualities C stomer val e% ration of benefits to the sacrifice necessary to obtain those benefits, as determined by the customer, reflects /illingness of customers to buy a product 0 core business strategy, price is not the only thing that matters 0 pay premium for superior customer services C stomer satis&action the customer-s feeling that a product has met or exceeded expectation < four measure describe overall satisfaction< ;uality=reliability, vehicle appeal, o/nership cost and service satisfaction B ilding relationships 0relationship marketing is a strategy that focuses on gorging long term partnership /ith customers by offering value and providing customer satisfaction2 Benefit from repeat sales and referrals increase in sales, mar1et share and profit222 cost fall less expensive to serve existing customer than to attract ne/ ones2 (ustomer relationship management the process used by organi:ation to trac1 and organi:e info about current and prospective customers222 includes information about customers=potential customers, past history /ith organi:ation, and future prospects loyalty programs- aka fre;uent3 buyer club build long term relationship employees attitudes and action must be customer oriented Creating !ar"eting strategy incl de &o r main steps 'nderstanding the e$ternal environment environment scanning 0 process by /hich a firm continually collects and evaluates information about its external environment six categories 0 social forces, demographic forces, economic forces, technological forces, political and legal forces, competitive forces (e&ining the target mar"et target mar1et 0 the specific group of consumers to/ard /hich a firm directs its mar1eting efforts, identifying this helps business focus its mar1eting efforts on those /ho are most li1ely to buy its product or services Creating a competitive advantage "s the factor or factors that cause customers to patroni:e a firm and not the competitions !ost competitive advantage 0 firm-s ability to produce a product or service at a lo/er cost than all other competitors in industry /hile maintaining satisfactory profit margins2 %irms become cost leader by obtaining inexpensive ra/ materials, ma1ing plant operations more efficient and designing product for ease of manufacture, controlling overhead cost and avoiding marginal customers> might not be long term advantage *ifferential competitive advantage 0 firm-s ability to provide a uni;ue product or service /ith set of features that the target mar1et perceives as important as and better than the competitors2 *urability of this ma1es strategy more attractive to managers, advantages include brand name, strong dealer net/or1, product reliability, image and service &iche competitive advantage 0 a firm-s ability to target and effectively serve a single segment of the mar1et /ithin a limited geographic area 0 might be only viable option2 8ar1et segment has good gro/th potential but not crucial to success of ma9or competitors is good for niche2 %irms must defend against challenges through its superior ability to serve buyers (eveloping mar"eting mi$ )blend of product offering, pricing, promotional methods and distribution system that brings a specific group of consumers superior value based on the ? P-s product, price, promotion and place Prod ct strategy* heart of mar1eting mix is goods and service, involves choosing a brand name, pac1aging, colors, /arranty, accessories and service program Price +trategy ) demand for the product and cost of producing it222 special introductory price try ne/ products2 Enter /ith lo/ price, stic1 to lo/ price (istri, tion +trategy creating the means by /hich products flo/ from the producer to consumer 0 deciding ho/ many stores and /hich /holesalers and retailers /ill handle the product in geographic area Promotion +trategy uni;ue combination of personal selling, advertising, publicity and sales promotion to stimulate the target to buy a product or service2 Advertising helps buyer get to 1no/ company, paves /ay for sales call2 Public Relations special role in promotion, used to create good image of the company and products good publicity time, effort and money spent by PR2 $ales promotion stimulates sales includes trade sho/s, catalogues, contests, games, premiums, coupon and special offers -ot &or pro&it mar"eting application of mar1eting principles and techni;ues are vital, identify target mar1ets and develop effective mar1eting mixes2 Profit motive is both an ob9ective for guiding decisions and criterion for evaluating result +ocial mar"eting the application of mar1eting techni;ue to social issues and causes B yer Behavio r the action people ta1e in buying and using goods and services 0 based on cultural, social, individual and psych factors !ultural, social, individual and psychological factors affect all steps @2 &eed recognition A2 "nformation search ?2 Evaluation of alternative ?2 Purchase B2 Post purchase behaviour .n&l ences on cons mer decision ma"ing !ulture 0 set of values, ideas, attitudes and symbols created to shape human behaviour, social in nature2 Human interaction creates values prescribes acceptable behaviour, give order to society by creating common expectation2 !ulture adapts to changing societal needs and evolving environmental factors $ocial 0 see1 out opinions of others to reduce search and evaluation effort or uncertainty 0 see1 out for guidance on ne/ products or service, products /ith image related attributes, products /here attribute information is lac1ing or uninformative through reference groups, opinion leaders and family members for product information and approval "ndividual influences 0 personal characteristics result in different needs2 Personality combines psychological ma1eup and environmental forces2 "ncludes people-s underlying disposition> less useful concept self3concept /ho/ people perceive themselves, ideal self3image /ay individual /ill li1e to be, real self3image / ho/ an individual actually perceive him=herself Psychological 0 perception beliefs and attitudes, /hat consumer use to interact /ith their /orld recogni:e feelings and gather 3analy:e information /ypes o& cons mer , ying decisions 0 five factors < level of consumer involvement, length of ma1ing a decision, cost of goods or service, degree of info search and number of alternatives to consider Croutine response behaviour, limited decision ma1ing, extensive decision ma1ingD B2B business mar1ets include hospital, schools, manufacturers, /holesalers and retailers and branches of gov-t2 (haracteristics purchase volume, number of customers, location of buyers and direct distribution !ar"et segmentation *emographic Emost commonF, ,eographic, psychographic, benefit /rends in !ar"eting "nternet )arketing 0esearch, canner "ased 0esearch / from single group of respondents by continuously monitoring advertising, promotions and pricing, .oyalty (ards, One to One marketing / creating uni;ue marketing mi> for every customer using marketing database

(ognitive dissonance / the condition of having beliefs or knowledge that are internally inconsistent or that disagree with ones behaviour

Marketing continue... understanding customer base

What is marketing? >an 5integrated system of activities designed to plan, price, promote and distribute, want-satisfying goods and services to present and potential customers6 ? @eys to successful mar1eting> figure out /hat customers /ant, and to ma1e sure you mar1et it using integrated system of activities Keys to Success 01 1ey Related to providing a want3satisfying good or service (sed to be 5sell /hat you produce6> needed to s/itch the /ay things /ere happening &o/ it-s 5produce /hat you can sell 5Production 0 $ales 0 !ustomer Orientation ' mar1eting concept, focusing on customer, /hat does the customer /ant, the core of the company, come up /ith something that THE) /ant The Marketing Concept 3 Aust not about the customer value but we also want customers to be loyal so we built a relationship...spent a lot of time nurturing relationship !reate customer value B(T the product must not only provide a particular benefit=satisfy a particular /ant or need, but it must be needed or *eliver customer satisfaction /anted> not enough to find benefits that consumer or see1ing, if they are already satisfy, it /ill no longer motivate them, Build relationships ship has sale, find a gap, find /here they have a need but not fully satisfy it must provide a uni$ue benefit that the competition does not 3 providing a benefit that is uni;ue or find something you can do better /arget !ar"et the group of customers to /hom you /ish to direct your product to/ard ' a group of customers /hose /ants and needs have not been met by the competition +teps to de&ining a /arget !ar"et% @2 8ar1et $egmentation ' ta1e /hole mar1et, and brea1 it into groups, once you have the group, figure out /ho to target at A2 Perceptual 8apping ' finding a group of people /hose needs are not met, then map out these people-s perception G2 Preference Analysis ' /hat do these customers actually /ant, compare preference to /hat they /ant and /hat they thin1 they are getting, do they feel they have something that meets the need Bases &or +egmentation% State-of-being ' /ho are these peopleH geographic 0 region, popn si:e, popn density, climate demographic 0 age, gender, lifecycle, income, occupant-s, educating, religion, social class, etc2 customer type ' is it an end consumer or business state-of-mind ' ho/ do they thin1 psychographic Epersonality and lifestyle ' A"OF Attitudes interest and opinions product usage 0 behavior volume 0 usage rate, user status, readiness to buy sensitivity to mar1et factors, occasions ' snac1 vs2 gift, different product different approach loyalty benefits sought ' trying to find a group of people /ho /ant something, see1ing a benefit, so you can provide a benefit for them, you can subdivide later, but must understand /ho this is, in the mar1et of this /hat are people loo1ing for e2g2< &olkswagen $& positive thinking 3 something you can rely on, donBt have to worry about it at all, happy carefree, car is reliable trusted &olkswagen clean toured commercial 3 looks good, want a car that can be capable of doing that but not willing to sacrifice the looks ? day rule %$C$ 3 no drop calls, reliable "utcher %$C$ 3 no dropped calls, demographics, different ages, and relationship Dconsumer group and business to businessD Bene&it +egmentation
I Bene&its +o ght (emographic +ensory +egment %lavor appearance Jids +ocia,le Brightness fresh breath Teens )oung adults $ociable self'conscious Active Worriers *ecay prevention %amilies Parents Hypochondriacs !onservation .ndependents Price Older men

$teps4 @2 $egment on basis of benefits ' /ant the same thing A2 *escribe using other bases ' behavioral characteristics, ho/ they thin1 G2 &ame them lastP *emographics vs2 psychographics> can-t loo1 at state of being characteristics, needs to ma1e it clic1 e2g2 8olson L ' adult male, psychographics4 not really gro/n up, uncomfortable of role of society, and unsuccessful future

Personality 2i&estyle

$elf'involved Hedonistic

Autonomous #alue'oriented

Percept al !apping 3 Pre&erence Analysis4 determine /hich of the segments /ill be the target mar1et by finding the biggest gap bet/een ho/ the customer perceives the competition meets their needs 0 perceptual map 0 and /hat they really /ant 0 preference analysis +teps% 14*ra/ axes that represent the relevant dimensions by /hich people differentiate bet/een product offerings A2 +ocate the positions of competing products on the axes=dimensions according to customer perceptions> erceptual Mapping +ocate each segment-s ideal product> compare /hat they thin1 to /hat they /ant reference !nalysis *etermine the target mar1et %ocus on the gap in figure, concerns not that circles are bigger, but /hat is the perfect product Eusually located in the middle222the KLKF /hat " really care about is not the competition, but ho/ the competitors meet the need of the customer, loo1 for the gap to start, should be going after GL 2OO1 5+lides Positioning '%inding a distinct position for your product in the customer-s mind ' one that communicates that the product provides a uni;ue benefit in comparisons... 'the ob9ective is to position the product as close to the target-s ideal as possible 2 approaches% consumer approach ' preference analysis, communicate there is a direct link of product and people competitive approach ' the uni;ueness is the benefit Prod ct Classi&ication -nderstanding "uying 'ecisions pg. ?26#67 !onvenience ,ood=$ervice ' pic1ing up /hat-s the easiest, buy fre;uently=routinely $taples 0 branding, ma> e>posure, shelf position Estrong relationship, distribution network is critical, should be right at eye levelF e.g. eggs, bread, milk, butter "mpulse goods 0 ma> e>posure, shelf position, 1 of 1 Epoint of purchase, right at the place purchasing itF 3 wonBt put a lot of taught behind Emergency goods 0 near 1 of 1, readily accessible, seeing itG DOh yeah I need thatD +hopping 6ood7+ervice 8omogeneo s 0 e>posure for price comparison, think everythings the same, so Aust looking at price Heterogeneous 0 e>posure near similar products 3 looking a ;uality difference A++O. THE8 TO *O THAT222facilitate process customers need, 9ust ma1e sure yours compares better +pecialty 6ood7+ervice 0 selective distn for e>clusivity 3 make e>tra special, e.g. musical instruments, engagement ring, cosmeticsG do not make it readily accessible, let it be special 'nso ght 6ood7+ervice 0 aggressive promo, personal selling 3 not seeking these goods, then you go to the customer, telemarketers *ifferent mar1ets classify products differently ' be careful that you understand the customer important to see your product as customer does ' 9orecasting (emand "o formula 0 pro9ections based on research and logic M educated guess you can defend Market potential # Sales forecast 3 *O &OT $A) our /hole mar1et is our sales point %orecast depends on plan Top-down forecasting 8ar1et potential not 9ust Nhouseholds E/ith la/ns = li1ely to mo/ la/n = care about benefits $till doesn-t e;ual sales forecastF ready to buyH E+a/n mo/ers=yr2=capita 0 target buy in same proportionH need ne/ oneH time to adopt = s/itching costsHF Top-down forecasting /hat you can do given capacity and mar1eting plan Nsales calls=/12 E?OF x /ee1s in school year E@OF M ?OO vs2 @G,BOO schools Nstores that sell mo/ers = N that /ill carry = Neach must sell to meet target 0 ma1e senseH !ompare to brea1even 0 /hat you have to do +ensitivity analysis and contingency plan Assumptions to base sensitivity on EBrea1even, +argest=smallest=average competitor, similar product launch !apacity, 8ilestones 0 points that increase valuation of business, !ontingency planF

Mark#t!"$ PtA0 (reating )arketing trategies

Buying pac1ages of benefits that deliver value, ho/ consumer vie/ the types of product companies sell in order to design mar1eting mix appealing for target consumer product /bought by end users consumer nondurables 0 used up, consumer durables 0last a long time Cons mer prod ct (efinition &egree of effort e'pended
-nsought products / life insurance, burial plots, new products (onvenience products / soft drinks, bread, milk, coffee hopping product3 automobile, homes, vacation pecialty product / Aewelry, gourmet dinner Products that either are un1no/n to potential buyer or are 1no/n but not actively sought Relatively inexpensive product that re;uire little shopping effort and purchased routinely Bought after considerable planning, including brand'brand and store'store comparisons "tems for /hich consumer search long and hard and refuse to accept subs &o effort #ery little=minimum !onsiderable maximum

Classi&ying , siness prod cts capital products / large, e>pensive items with a long life span i.e. building e>pense items / typically smaller, less e>pensive with smaller life span i.e. printer cartridgeG industrial products have following categoriesH installations, accessories, component parts and materials, raw materials, supplies and services Prod ct li&e cycle as management tool % better forecast future sales and e>plains new marketing strategies. 1roduct must move from 4stage to ne>t. I0ight priceJ K e>pected satisfaction 14 .ntrod ction ) many obstacles, light competition, fre;uent modifications, limited distribution, and heavy promotions. ,ailure rate is high, costs are high, and sales are low. 1rofits are usually 3ve 24 6rowth +tage )sales increasing rate, healthy profit, competitors enter, aggressive advertising, distribution K maAor key, Lend price fall 34 !at rity % sales mount Ldecreasing rate, long time e>posure, and Iline e>tensionJ :4 (ecline % sales C profit fall, decline stage, rate of decline by ? factorsM rate of change in consumer taste and rate of new product enter. Pricing o,;ective / impt in determining how much firm earns. 1rices charged > number of units sold K !ross revenue, after paying activities Kprofit Pro&it ma$imizing% means producing a product for as as re,enue S cost goalT get largest profit 8arget return on in,estment pricing ob<ecti,e !here price of product is set to gi,e compan% desired profitabilit% in terms of return in mone% Halue pricing- pricing strateg% in !hich target market is offered DP product at fair price and !ith good ser,ice6 Halue marketers offer products that perform, gi,e consumer more than the% expect, gi,es meaningful guarantees, and gi,es bu%ers facts, build long term relationship Mark 2 2r!%!"$ method certain R( mark up* is M to product cost to gi,e price6 MU>?!t#m %ost @ 2r!%# influencesT tradition, competition, store image, stock turn o5r Br#ak#/#" 2o!"t 9 prices U !hich productBs cost are co,ered, so additional sales result in profit6 T(C?)!4#' %ost %o"tr!- t!o" 0s#ll!"$ 2r!%# 2#r "!t 9 VC3 Product Pricing Strategies Pr!%# sk!mm!"$ introducing a product !ith high initial price and lo!ering price o,ertime as product mo,es through life c%cle6 @=H &6 >ind out !hat the% are !illing to pa% 26 "f intro price is high, can be lo!ered 16create image of qualit% and prestige 46 .rice lo!ered customer think the% are getting a deal P#"#trat!o" Pr!%!"$ selling ne! products at lo! price in hope to achie,e lg6 sales ,olume - more extensi,e planning big mass production M marketing o,erestimate demand666 2 @=H lo! initial price induces consumers to s!itch brand5compan% and discourage competitors to enter market =#a'#r 2r!%!"$: pricing product belo! normal mark up or belo! cost to attract customer to store the% !ould not come !ell kno!n appeal to customers B "'l!"$: grouping 2 or more related products together and pricing them as single reach segment !here sold indi, not effecti,e O'' #/#" 2r!%!"$ : setting price at an odd number to connote a bargain and at e,en number to suggest qualit% Pr#st!$# Pr!%!"$: increasing price of a product so consumers !ill percei,e it as being DP, status 5,alue Nature and function of distribution (logistics3 efficientl% managing acquisition of ra! materials to factor% and mo,ement of products from producer to industrial user 2uppliers of ra! material factor% (finish product* !holesaler5distribution center retailers, !holesaler5distribution centers customers Mark#t!"$ !"t#rm#'!ar!#s organiCation that assist in mo,ing goods and ser,ices from producers to end users agents(sales rep) 5brokers("ob4w), industrial distributors (independent wholesalers bu product line and sell to industrial users), !holesalers (finish "oods to retailers, manufacturer))), retailers (sell "oods) Alt#r"at!/# %&a""#l arra"$#m#"t 8 D al '!str!- t!o" 9 25more channels that distribute same product to target market No"tra'!t!o"al %&a""#l 9 differentiate a firmBs product from competition Strat#$!% %&a""#l all!a"%#s 9 one manufacturer using another manufacturer pre,iousl% established channel to distribute goods ( "%t!o"s o) C&a""#l Channels reduce =of transaction- make distribution simpler -producers !ant to do this b5c &6!ish to focus on production 26 'annot produce F distribute channels ease the flow of "oods sorting (break items to separate stocks* , accumulating (bring similar stocks together in lg6 quantities* and allocating( breaking similar products into smaller and smaller lots* U!holesale le,el=breaking bulk locate bu%ers for merchandise Perform needed functions increase efficienc%, perform important function U reasonable cost to exist6 .erform 1 functions &6 8ransactional 26 /ogistical 16 facilitating I"t#"s!t6 o) mark#t %o/#ra$# exclusi,e distribution (&52 dealers*, selecti,e distribution (more than V but limited*, intensi,e distribution (man%* ?oal of suppl% chain create satisfied customer b% coordinating all acti,ities of suppl% chain members into seamless process completel% customer dri,en @llo!s compan% to respond !ith unique product configuration and mix of ser,ices demanded b% customerT dual role &6 'ommunicator 26 .h%sical flo! 0anaging logistical components of suppl% chain, sourcing and procument (reduce cost*, production scheduling (forecast calls* Promotion attempt b% marketers to inform, persuade or remind consumer and industrial users to engage in the exchange process .romotional goals includeT creating a!areness, getting consumer to tr% product, pro,iding information, keeping lo%al customers, increase amount and frequenc% of use T&# 2romot!o"al m!4 a"' !"t#$rat#' mark#t!"$ %omm "!%at!o"s @d,ertising an% paid form of non-personal promotion b% identified sponsor .ersonal selling face to face presentation to prospecti,e bu%er (important in marketing industrial product and least important in nondurable* 2ales promotion 0 marketing acti,ities that stimulate consumer bu%ing including coupon, samples, displa%s, sho!s, demonstration .ublic relations linking of organiCational goals !ith ke% aspect of public interest and de,elopment of programs designed to earn public understanding IMC 9careful coordination of all promotional acti,ities to produce a consistent unified message that is customer focused managers !ork out roles it !ill pla% and result of campaigns (a%tors t&at a))#%t 2romot!o"al m!4 Nat r# o) 2ro' %t each t%pe of promotional mix !orks better than another in different cases Mark#t %&ara%t#r!st!%s 9 potential customers are !idel% scattered, bu%ers highl% informed and are brand lo%al more ad,ertising M sales promotion personal selling666 detailingT ph%sical stocking of merchandise at retailer b% salesperson !ho deli,ers merchandise A/a!la-l# ) "'s 9 mone%5lack of it huge influence on promotional mix P s& a"' 2 ll strat#$!#s aggressi,e personal selling and trade ad,ertising to con,ince !holesale5retailer to carr% F sell merchandise .32D (promoting* manufacturer focuses on stimulating consumer demand for its product rather than persuading .3// (demanding* Trends in Marketing I"%or2orat!"$ mor# t#%&"olo$6 at all l#/#ls internet, corporate network and wireless setup linkin" people, machines and companies > connect seller and

bu ers) ,nables to collect detailed data about customer bu in" habits, preference and spendin" limits))) prices online enables shiftin" prices up and down , online retail increasing, search tech and comparison shopping sites cheaply and effectively mar1et products, promotions applied online AMS &#l2 %om2a"!#s ma4 r#/#" #s %ield management s%stems help ad<ust prices a mathematical soft!are to maximiCe re,enues - spreading Cat#$or6 ma"a$#m#"t retailers ask one supplier in categor% to determine ho! retailer should best stock its shel,es O tso r%!"$ lo$!st!%s ) "%t!o"s external partners increasingl% important for suppl% chain management, outsourcing is rapidl% gro!ing in distribution industr% partners are helping each other

Mark#t!"$ PtA !ontinue0 (reating )arketing trategies

@ey to success N4 uni$ue benefit N? convince the customer that product provides that benefit through O1s.. integrative system of activities 3 !ll parts of organi ation must have clear idea of uni"ue benefit w- commanders intent, no "uestion, know core message .o we used a tool called Core #ene%it Proposition &C#P/ - internal clear type of way00 1hat says here is the proposition 2lear, concise statement of products uni"ue benefit or value proposition - do not make decision without coming back to this Total Product Concept'-physical features necessary to support 2B3 00 total package of benefits/value package as seen from the eyes of the consumer4 Brand, 3ackage, .ervice Warranty Delivery 2redit !tmosphere 5mage, 6eputation !ccessibility Price - see value at product at a price disengage in a way to look it from their perception "hat is brand$ a collection of perceptions in the mind of the consumer - the brand is in bodies what we were thinking of, all about the experience built not only through effective communications or appealing logos * it is built through the total experience that the product offers (rand "ame - communicate 2B3- say what the product does, e0g 7cover girl7 core benefit in the name0 +ove customer through stages of recognition /o loyalty programs create loyalty? 8on-recognition Brand recognition - brand name, not where you want to start, not something done on own 'et promoter score- about advocating the product(that)s loyalty( , loyalty Brand recall-awareness - pass the point, think about it programs get you to buy but does not Brand preference - but then connection must be there really keep you loyal Brand loyalty - ultimate goal 4 name is not enough, need them to buy product all time
BRA-( .-+.+/#-C.#+

Price Approaches- 2ost-based * mark-up, 2ompetitive-based * market share - price in comparison of competition, 2onsumer-based * value - does it fit onto preferences, +ost important4 support 2B3 - has to 999 core message must be there !8D test pricing Speci%ic Strategies(Tactics 5ntroductory pricing * :skimming or :penetration life span - need to be in market longer speed of competitive entry- how "uickly will competition enter, if theres price 7skimming7 will entice them, if we think it will enter slowly, we can come with lower price, sunk costs huge determinant of what you do, Market protection, Market domination, Market stabilization * :follow-the-leader if you play with price where there is adominant leader, they will cut you off, ;ust follow them, don<t play the game, Product line promotion, bundling - sell related products together, make better deals like shampoo = conditioner, getting people to buy the conditioner they usually won<t buy but since it<s bundle they will, product line promotion - sell one product at low price , Price lining -lots of products, which can get confusing, color, cut, style and price> whole product line at limited price > lower end at $ price, middle end $$ price and higher end $$$ price, choose limited price choice, easier to choose, 2ustomer attraction * o loss leader - price something at a really low price, to advertise people to buy other things too, can work at grocery stores but not place like future shop o bait & switch - high ticket item - bait- advertise low price item at bait, and then hope that it<ll be switched >7special == something better700 #ave to have the bait? Image enhancement * psychological pricing -:)dd- enhances image that it<s lower 7@0AA or @AA0BB 7 -even -+ultiple pricing 7package things together, make sure people buy this at multiples7 -Cuality-prestige pricing Advertising -7any form of non personal sales presentation of a long term nature that is paid for by an identified sponsor)) Ob*ectives 2reate !5D!, 2)++D852!1E 2B3> FEG 5.. .ELL 36)DD21. 00 Personal Selling - personal selling is personal, one on one .ales 3romotion- short 3ublicity- is free Communication +odel - all of these come together Advertiser- the sources, medium - where the source comes out, the message0 1rying to get to customer-receiver +eedbac!- are they going to listen - respond to our message, buying the product? ,) -ncrease credibility o% source- has to absorb the message and believe it Hfamiliarity - another one of family of product 7327, making that connection helps them pay attention, but 3=, never does that because they have so many products, spokesperson- sometimes do not see themselves similar as much as a credible individual and think it<s not in their league-then use anti authority00 8eed to be careful with which celebrity<s you may choose, > pros cons- be very often with whats great , buckleys 71aste awful, but works7> car companys 7we<re number I00 But we try harder7 .)/evelop clear message - listening to you but have no clue what you<re talking about, communicate the core benefit, uni!ue selling proposition "#$%&00 1rimming it to one little thing in a way that<s selling it0 Htone- can confuse the message, affect clarity of itJ> Huse

most effective medium - the channel chosen, it<s not getting to them with message you hope> must reach consumer with message intended, 7the medium is the message700 1he medium pro;ects it<s own message7 tv, radio, maga ine00 Watch how they are "uoting the cost * 23+ %0 use e%%ective medium)) must reach consumer with message intended 'the medium is the message( at the most effective 23+> 23+ - you have &BBB, and then &BBB will reach @ +, 23+&K

! K&,BBB-@,BBB,BBB L K& 23+ B K&,BBB-@BB,BBB L K&B 23+ BD1 ! K&,BBB-@B,BBB target L K&BB effective 23+?? - look at data, look at who are in your target> look at effectively clioawards0com-winners- integrated campaign, cheerios00

Mark#t!"$ PtA !ontinue0 (reating )arketing trategies

Personal Selling

more effective but more expensive ' individual /ill as1 for sale, ans/er ;uestion combine /ith advertising to4

generate leads ' through advertising decrease cost of sales call ' seen and understand product, time reduced therefore less cost reach Qinaccessible- ' reach people /ho canRt be reached, some people donRt li1e personal selling 8aintain image in buyer-s mind ' 1eep image22 8a1e them remember you2 But if you 1eep bugging them they-ll as1 u to bac1 off perceived ris1 of sale 0 financial, social, performance ' buying stereo system, or computer22 $ales person can help ma1e you feel comfortable, social ris1 ' clothings, performance ' are you buying product to do something specific Kthere to help you feel betterF amount of information to convey ' canRt do that in ad, sales person degree of customi:ing necessary ' not off the shelf product, then adaption can be made

factors to consider in budget decision '

Sales Promotion short term incentives to induce purchase - don<t do long term b-c they don<t work00

free samples, trial period, cents off coupons, cash rebates ' higher tic1et items, extra volume for same price, bonuses, ,ivea/ays ' in cereal box, contests, Premiums ' send a/ay for $3H , point'of'purchase displays, support personal selling and advertising ' actually supports /hat else is done, support !BP ' core benefit proposition22if it doesnRt /e got a problem, Publicity and public relations ' may pay money to get that service, but itRs free, greater impact due to perceived ob9ectivity ' feed them information about you, ho/ they spin it and your 9ob to give information out, you need to be ne/s, must be Qne/s/orthy- ' find opportunities, integrated capaign ' replay gatoride22 8a1e your o/n ne/s ublic )elations * ublicity greater impact due to perceived ob9ectivity

must be Qne/s/orthy-

Place

purchase is a function of desire and availability

-mplications

logistical decisions costly, time consuming and not easily changed choice of location must fit /ith !BP ' must be consistent critical decision

use of mar1eting intermediaries = channel of distribution

Demand Backward Pricing

o o

0)11 * @0&B * @0BB L KI0MA to wholesaler KI0MA N @0BB N @0&B L 0)11 to consumer

L lower contribution? 5s it worth it - is the margin lowered00 What do all the channels do for you vs0 what are they worth for you0 What if u did all those stuff yourself, will it cost you more00 1hey can spread cost out00 Gou can<t paying the whole shot00and probably are better at it that<s why they are in distribution base, can do it cheaper and better00 But some companies can do it themselves and if they need control00 Bottom line to think through 1hen they control price> start at price you think product should sell at, start at I0MA, then sell it at wholesaler N@, then retailer @0&, then M0AA will be the price

3ush vs 3ull

%ush to channel members Oolume * distribution arrangements, training 2ontribution * case allowances, volume discounts - sell more or make more 3romotional allowances %ull * promotion to consumer

BRA-( .-+.+/#-C.#+

A%%o "t!"$ B (!"a"%# 8 Using Financial Information and Accounting

@ccounting process of collecting, recording classif%ing, summariCing, reporting and anal%Cing financial acti,ities6 Aesults in reports that descri,e financial condition of an organiCation pro,ides frame !ork for looking at past performance, current financial health and future performance66 helps in comparisons 8here are 2 t%pes Ma"a$#r!al a%%o "t!"$ pro,ides financial information that managers inside the organiCation can use to e,aluate and make decisions about current and future operations6 0ight prepare ,er% detailed financial reports for their o!n use and pro,ide summar% reports to top management (!"a"%!al A%%o "t!"$ focus on preparing external financial reports that are used b% outsiders, people !ho ha,e interest in business6 .ro,ides useful information for managers, shareholders, lenders, suppliers, in,estors and go,ernment agencies to assess the financial strength of business 8he @daption of ">A2 to pro,ide consistenc% in finicall% reporting internationall% and replace ?@@. o,er &00 countries (O@G 20&&*6 @nnual reports %earl% document describe firmBs financial status and discusses the firmBs acti,ities during past %ear6 1 primar% financial statements areT statement of financial position, income statement, and statement of cash flo!s T&# a%%o "t!"$ '#s!$"at!o"s '"'@ '@, '0@ 'anada-'0@, '?@-'anada '?@ pro,ides specialiCed ser,ices and educational M!ork experience requirement CA 9pro,ide tax, audit, and management ser,ice focus on external reporting and pro,ide opinion if financial statement accuratel% reflected CMA primaril% in industr% and focus on internal management accounting, combine accounting expertise and business kno!-ho! !ith professional management skills to pro,ide strategic financial management, planning, sales and marketing, info tech, DA, finance and operation CGA focuses primaril% on external financial reporting, pro,ide tax and ad,ice to indi,iduals and businesses A%%o "t!"$ 2ro%#' r#s bookkeeping s%stem used to record firms financial transaction is routine and clerical6 @ccountant takes this and classif% summariCe the info A%%o "t!"$ E: at!o" @ssets- /iabilities M ;!nerBs equit% (al!a%s balance* 6 e,er% transaction must be recorded t!ice (=ouble entr% book keeping* A%%o "t!"$ %6%l# process of generating financial statement !5 business transaction and ending !5 preparation of the report6 &6 @nal%Ce business transaction documents 26 Aecord business transaction in <ournal 16 .ost <ournal entries to ledger 46 .repare trial balance 56 .repare financial statements and reports 46 @nal%Ce reports Stat#m#"t o) )!"a"%!al 2os!t!o" summariCe firmBs financial position at specific point in time6 Aeports the resources of compan% (asset*, obligations (liabilities* and difference b5! !hat is o!ned (asset* and !hat is o!ed(liabilities*, aka o!nerBs equit% 9 l!st#' !" or'#r o) l!: !'!t6 0speed con,erted to cash* '3AAEG8 can or !ill be con,erted to cash in &2 months, pro,ide funds to pa% for current bills6 Cash, marketable securities, accounts recei!able, notes recei!able, in!entor >"WE= long term assets used b% firm for more than a %ear6 3sed in production includes buildin", machiner , equipment and fi&tures ,?C,P0 land, fi&ed assets wear out and become out dated accumulating decrease in ,alue through amortiCation "G8@G?"-/E long term asset !5 no ph%sical existence patents, cop ri"hts, trademarks, "oodwill =!a-!l!t!#s B OE '3AAEG8 /"@-"/"8"E2 2hort term claims that are due !ithin a %ear of date of statement of financial position accounts pa able, notes pa able and accrued e&penses, income ta& pa able, current portion of lon" term debt /;G? 8EA0 /"@-"/"8"E2 come due more than one %ear after date of statement of financial position bank loans, mort"a"es on buildin" and compan 's bonds ;!nerBs Equit% amount left o,er from profitable operations since firmBs beginning equal to total profits minus all di,idends paid to shareholders @etained earnin"s > amount left o!er from profitable operations since firm's be"innin" 0A0A* P@AB10 + 91C19,N9S I"%om# Stat#m#"t 9 summariCes firmBs re,enue and expenses and sho!s its total profit or loss o,er period of time6 (prepared monthl%, quarterl% and annuall%* R#/#" # dollar amount of firmBs sales plus an% other income it recei,es from interest, di!idends and rent) Gross sal#s, total amount of compan%Bs sales 2ales discount returns and allo!ance6

N#t sal#s amount left after deductions E42#"s#s cost generation re,enues 8!o t%pes are recorded 'ost of ?oods 2old-total expense of bu%ing5producing goods or ser,ice
;perating Expenses -expenses running a business that not directl% related to producing or bu%ing the product -"M".="@2-E"=';?2 ?ross profit = Get sales ';?2 source of fund to co,er all firmBs expenses ;E= 2elling expense M general and administrati,e expense N#t Pro)!t?=oss amount obtained b% subtracting all of firmBs expenses from its re,enues, !hen re,enue is more than expenses or ,ice Stat#m#"t o) Cas& )lo7 financial statement that pro,ides summar% of mone% flo!ing into and out of firm during a certain period, t%picall% one %ear three groupsT cash flow from operatin" acti!ities+ related to production of firmBs good or ser,ice cash flow from financial acti!ities related to debt and equit% financing @nal%Cing statements ratio anal%ses in,ol,es calculating and interpreting financial ratios using data taken from firmBs financial statement to assess its condition and performance6 -ased on historical data, merel% highlights potential problems

cash flow from in!estment acti!ities related to purchase and sale of assets

=!: !'!t6 rat!os measure firmBs abilit% to pa% its short term debts as the% come6 2pecial interest to firmTs creditors6 1 measures C rr#"t rat!o total current assets to total current liabilities6 2 is good

Tr#"'s

A%!' t#st : !%k rat!o" total current assets excluding in,entor% to total current liabilities6 @tleast & preferred N#t 7ork!"$ %a2!tal amount obtained b% subtracting total current liabilities from total current assets, used to measure firmBs o,erall liquidit% A%%o "ta"ts #42a"' t&#!r rol# more acti,e role in ad,ising clients on s%stem and procedures, soft!are and regulations6 Expand consulting ser,ices Val !"$ k"o7l#'$# ass#ts intellectual capital is more important to organiCations, ,alue to the intangible Ca"a'a mo/#s to !"t#r"at!o"al )!"a"%!al r#2ort!"$ sta"'ar's most significant trend, international trade and in,estment important, companies operating globall% creates man% ad,antage T lo!er costs associated !ith prep of financial info, consistenc% in reporting, ease of financial comparison6 Ae,enue=income, balance sheet statement of financial position, cash flo! statement = statement of cash flo!s

U"'#rsta"'!"$ A%%o "t!"$ B Cas& Ma"a$#m#"t

A4+4P4#4 7 64A4A4P4 and .494R4+4 Accounting $tandards for Private Enterprise ' A$PE , same thing as gaap even if youRre a private enterprise you can use ,AAP ,enerally Accepted Accounting Principles "nternational %inancial Reporting $tandards ' if you are a public , then use this, for more consistency anuary AO@@ Private vs Public companies in !anada 1ey di&&erences Relevancy vs Reliability ' need to trust /hat you are saying22 Qfair value- vs Qhistoric cost ' Ca buildingD value at /hat you paid- asset valuation 22 But /ith "R%$ itRs o1ay to choose fair value because itRs more relevant, Title of statements ' $tatement of %inancial Position = $tatement of !omprehensive "ncome Cfor income statementD Order of assets ' Reverse order 0 non'current before current ' sho/ /hat you o/n and value it, no/ reversed, the things /e o/n /ith short life expectancy used to be first, but no/ fixed asset Cnon'currentD is first22 A dit ' !hartered accountants audit, financial accounts All public companies by la/ !hec1 that standards applied on consistent basis ' doing strategically chec1 Auditor-s $tatement222some fate that papers have been audited and /hat it says o $cope and Opinion sections, Sualifications ' ma1e sure opinon is you can trust it, Sualification< run as fast as you can,2rare to see it22red flag do &OT say statements are accurate ' canRt because of lots of estimations , allo/ed, /onRt be perfect o %air ' go ahead and trust them o no material errors ' big enough that you can be misled $ection ?O? of the $arbanes'Oxley Act = !$A or !anadian $ecurities Administrators in !anada ' &OT TE$TE* o !EOs and !%Os must certify the design and effectiveness of internal accounting controls

!ccounting E"uation - based upon it<s built premise upon which the balance sheet is built !..E1. L ECD515E. - must balance Hresources and claims, what we own, what we oweJ !..E1. L L5!B5L515E. N )W8E6. ECD51G - two categories of e"uity e$P buy car for K@&,BBB with K&,BBB down @&BBBL@B BBB N &BBB sell the car for K@I,BBB shortly after @IBBBL@B BBB N IBBB always the balancing factor will be owner<s e"uity, when we lose money it<ll go down, but if you sell it for more )E goes up #alance sheet2Statement o% %inancial Position )rder of current assets Li"uidity - selling assets to get cash to pay bills, how much total is close to cash Capital(3on-current assets - *mortization- accumulated amount, spreading the cost of the asset over the years it earns revenue bought building for @B+, and paid for it, then do not e$pense it b-c it helps you for many years, but on balance sheet HsnapshotJ , value - all amorti ation that is accumulated, then here it is right now B Matching expenses to revenue Good4ill - what you built up overtime with customer base, loyality, good management team, reputation but is 8)1 the company<s, b-c that would be an sub;ective opinon Must be bought - the idea is if copany is showing goodwill then it buy from another company +hen one company buys another for more than the fair market value of its net tangible assets %aying for intangibles not reported on the statements- worth more than on balance sheet b-c of good will, don<t think that<s the good will the company owns, they B)D,#1 it -ncome Statement Keys5 matching e$penses with the revenue they help to generate - this time period, they made these sales, and cost associated e$pense of given period was incurred to earn revenue of same period 8ot necessarily what was spent ,ash vs %rofit - 2an a company that is profitable go bankrupt? .ales 6evenue * !ccounts 6eceivable haven<t collected what you sold, how much left to collect, E$penses * !ccounts 3ayable - haven<t paid them, what you owe, !morti ation - isn<t cash, write it off overtime, accounting things, )wners E"uity * cash to use for business? 3rofit is not cash, investments can be used for very specific things, not a pool of cash Statement o% Cash +lo4s - important to understand the point -mpact on Cash - this is why cash account change from beginning to

the end .tart with 3rofit sense of why cash account change
Add bac1 Amorti:ation ' ta1es amorti:ation and puts it bac1 in profit, add that bac1 in b=c it isnRt cash 7 *ecrease = ' "ncrease in Accounts Receivable ' if A=r goes do/n, then cash goes up ' means you got the cash 7 *ecrease = ' "ncrease in "nventory ' if inventory goes do/n, then cash goes up 7 "ncrease = ' *ecrease in Accounts=&otes Payable' A=p goes up then cash go up ' ta1en a loan, donRt pay still have cash 7 *ecrease = ' "ncrease in !apital Assets ' spending cash to buy capital assets donRt understand statement, understand essence it is saying !naly+ing the Statements What is ratio analysisH ust a tool What is a ratioH ust a fraction /ypes o& ratios? .i;uidity # %ctivity # +fficiency ' ho/ li;uid you are, /e /ant to stay viable=alive, tability # 'ebt ' ho/ stable are you, are you going to stay in business B=@O years, 1rofitability ' ho/ profitable is the company ,ro/th' are things gro/ing, )arketability ' ho/ mar1etability are your shares ' donRt have to pay OE bac1, but debt you do, .hat do they tell usH &othing by themselves, What do they tell se< (omparisons ' can calculate all rations /hich are /aste of time if you donRt compare, Other firms=benchmar1 ' some perspective, "ndustry average' most common thing, then is published Rule of thumb-' more broad and general Past years' are they getting /orse= betterH Another ratio' as long as there is a relationship +oo1 at components of numerator and denominator, if used profit, /hat part is causing the problemH

,-./-&-T0 measure a company-s ability to meet its current=short'term obligations 0 short3term viability Ehow capable are we with themF assess the ade;uacy of a firm-s working capital management 3 money with short time frame, money we are working with o 0elationship between current assets and current liabilities assess /hether net /or1ing capital provides a sufficient cushion to meet current debts as they come due ' some turn into cash, some donRt but ma1e sure you have enough to pay bills A++ RAT"O$ B(T &O +ABE+$ &et .or1ing !apital M current assets ' current liabilities Ob9ective 0 balance ris1 and return ' to maximi:e the return /hat is sufficientH ' depends on4 $peed of working capital cycle 3 starts with cash, and you buy or manufacture inventory, might get cash back after sales, then will turn into %#0 and turns back to (% P but at the same time pay the liabilities, we want enough moving through so theres always someone coming back to pay bills Jno/ledge of = ability to predict Q(( 3 you donBt know forsure if inventory will sell and what will get collected , ability to predict detemines how much cushion youBll have. 'onBt have money paying liabilities you will go bank rupt look at cycle from slides If company is managing this well, then they can get it to 7, need to manage it !urrent Ratio ' ho/ /ell /e are managing it M current assets = current liabilities Qrule of thumb- =2%1 >not so ris"y) ? @:%1>do not diminsh ret rns) suggests that &.! should be at least as large as current liabilities !AEAF ' !+ E@F M &.! E@F M !+ ' current ration rule says /e should have enough &.! that /ill e;ual liabilities, must have enough net &ot great ratio, because it has all current assets Acid Test = Suic1 Ratio ' better measure of /hatRs truly li;uid, 9ust a lil bit more is fine M current assets ' Einventories7supplies7prepaidsF current liabilities Qrule of thumb- T1%1 Receivables ratios @2 Average !ollection Period M avg2 EclosingF accounts receivable x GUB days=GUO annual EcreditF sales compare to credit terms e>M ?#47, net R7 vs2 BV days if you pay in ten days, you get A W or you pay in GO chec1 industry terms, discount, penalty, credit granting procedures22 8atters because there is trade off in ris1 and return> if ris1 lo/er, return is lo/er> if all the people are ta1ing discount, /ere ta1ing it last22 /hy so important to ta1e advantage of discountH22A percent cost you for AO days22 @X times a year you are losing AW, A2 Accounts Receivable Turnover ' ho/ many times do your receivable do they get collected each year M annual EcreditF sales = avg2 EclosingF A=R tradeoffH " /ant it fast enough, that the money is coming bac1 to cash, but if itRs too fast then lo/er returns "nventory Turnover M cost of goods sold = average inventory OR sales = average inventory tradeoffH ' need to achieve a balance ' not too slo/, not too fast -ote4 li;uidity ratios aJA Qactivity- or Qefficiency- ratios because they help assess ho/ efficiently a company employs its resources to balance ris1 and return Cash (udgeting management of cash flo/s management of /or1ing capital cycle .hat you already do, loo1 in our poc1et Ybeginning cash balanceF 7 receipts M total cash availible Edo it monthly basisE Then ta1e a/ay monthly bills EdisbursementF M !ash Excess=*eficiency $ee 1'ample on slide * lab manual 2 13!M 45 marks Jeys4 G possibilities Ebesides excess M balance re;-dF @2 *eficiency borro/ for deficiency 7 minimum, ending balance M minimum re;-d A2 Excess T 8inimum surplus available to repay borro/ing, if do> ending balance M minimum re;-d if don-t> ending balance M total excess G2 Excess Z 8inimum borro/ to M minimum re;-d, end balance M minimum re;-d ST!(-,-T0 measure a company-s ability to meet its long'term obligations by measuring the relationship bet/een components of a firm-s capital structure long3term viability 3 is it going to go bank rupt 5 years from now? sho/s results of financing decision !apital structure M long term liabilities 7 o/nerRs e;uity %inance through e;uity or debt *ebt to E;uity OR *ebt to &et .orth M total debt = shareholders- e;uity Enet /orthF M current liabilities 7 long'term liabilities common stoc1 7 pref2 stoc1 7 retained earnings Qrule of thumb- for industrial firm @1%1 donRt /ant a lot of debt, /ant more e;uity then debt "nvestors=shareholdersH But investor=shareholder are o1ay /ith debt, not putting anymore money on it, 1eep ma1ing money on someone elses money for me22 "f balance better they can maximi:e this process

+everage 'better measure of this M long'term debt = sh2 e;uity Enet /orthF measures the degree to /hich a company has loc1ed itself into fixed financial costs, e;uity doesnRt have anything fixed, do it because thereRs magnified impact to the logic implies that a given change in sales /ill result in a greater change in profit Qrule of thumbZ2B4@ lo/ 2B4@ ' @4@ average T@4@ high advantage4 long'term debt is the cheapest so rce o& capital because interest is ta$ ded cti,le, dividends are not, therefore higher R#/'R- * de,t cost yo interest? , t when yo sell eA ity m st give dividends .n income statement * they are not there? they are distri, tion o& ,ottom line pro&it? not ded cted as e$pense44 B t interest is an e$pense44 /he ,igger e$pense the lower income yo are co nting yo r ta$ disadvantage4 higher long'term debt means higher interest payments /hich are a legal o,ligation /hereas dividends are not, therefore a greater R.+1 o& insolvency ++ +S%)1.+ $ummary4 lo/ degree of leverage4 lo/er risk but higher cost of capital M lo/er return high degree of leverage4 because youRre loc1ing in22 But do it biggest lo/er cost higher risk but lo/er cost of capital M higher return "nterest !overage Ratio ' figure out the ris1, can /e pay the interest, can /e accept it M EB"T = annual interest helps assess the ris1 inherent in being highly levered Qrule of thumb- for industrial firm TGx, but should loo1 at long'run trend in earnings, and variability in earnings loo1ing at lo/ points, in the future, can /e still cover it, t/o critical decision for finance )67-T!(-,-T0 ,ross Profit 8argin E,P8F M gross profit = sales after ta1ing cost off &et Profit 8argin E&P8F M net profit = sales after ta1ing out OP exp chec1 components of "ncome $tatement RO" ' /hat shareholder ultimately care about M net income = shareholder-s e;uity Enet /orthF most important profitability ratio for investor 8)6WT9 measures the rate of gro/th of any Balance $heet or "ncome $tatement account M present yr-s 5''''''6 ' past yr-s 5''''''6= past yr-s 5''''''6 M!)K1T!(-,-T0 :directing to common stock holders; Earnings per $hare EEP$F M earnings available for common stoc1holders= N shares of common stoc1 M net income ' preferred stoc1 dividends= N shares of common stoc1calculate fully diluted if P=$ convertible ' if all preferred goes into common !ant ta1e it from face value, Price=Earnings Ratio M mar1et price=share= EP$ helps gauge stoc1 value and gro/th prospects if high P=E ratio ' /hy /ould people bid up price relative to earnings availableH "f lo/, 1eeps ratio tighter )ield M dividends=share= price=share "mportant to see ho/ mar1etible the stoc1 is Payout M dividends=share= EP$ relationship to P=E ratioH *o /e necessary see high pay outH22because it chooses dividend 22 As an investor you have t/o things< capital gains and dividends, if theres not a lot of prospect for capital gain do you expec dividends , other/ise stal1 isnRt mar1etable, and current investors are not happy, ma1es it difficult to sell stal1s and raise capital through stal1s, and then maybe you max out your debts, 1eep shareholders happy, 1eep mar1etable up> you need to strategically pay them out !ompany doesnRt have to pay dividends but /hat percentage is really paying out