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BUS 446 - Lecture 3

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Simon Fraser University
Business Administration
BUS 362
Lindsay Meredith

Debate Next Week  Team 7: What environmental standing variables should Tec use when selling copper to electrical wiring manufacturers in India?  Team 6: What environmental scanning variables should a Vancouver police force inspector use when trying to estimate the cocaine on the streets? Regarding: Macroenvironment Industry Customers Firm Competitors Macrodeterminant  Sociocultural  Economic  Politico-Legal  Demographics  Technology o You need to “see them coming” beforehand o It’s ok to invest in technologies that may cannibalize their own sales so you can stay ahead of the change  cannibalize the business yourself versus having a competitor do so  E.g. CD business  investing in hard drives, usbs  But now, going to Cloud computing o Kodak  First to release digital camera  Just didn’t keep up with the technology and was surpassed by Sony + others Cannibalization  Usually, the low margin product cannibalizes the high margin product  If the low margin product is of equal value with the high margin product, people substitute it out and it eats the entire “high margin product”  Flagship vs Fighting Brand (Cheaper one) o Fighting Brand: Brand I use to attack you guys; Put it on the store shelf so you want them to compare the cheap product to the expensive product  Accessing different market segments b/c they respond to different pricing  Differentiate by brand o Develop 2 different brand names if there’s price strengths  high cost vs low cost  New Product/Technology  Figure out all the different ways it can be done and patent it so competitors can’t take it o Example: Pharmaceuticals  If you want to enter a foreign market, partner someone inside the country o 100% of nothing vs 50% of something -- Industry Determinants  A) Market Size is Proxied by Total o Sales revenue generation o Number of final customers  Derived demand o Number of buyers  Might not be the final user of the product  Someone upstreaming the supply chain o Unit volumes purchased  Combine with Sales Revenue Generation to learn the unit price  Helps you with margin evaluation  Proxy for demand as well  Figure out immediate market volatility o Price Effects bias  Same number of units sold, but more expensive o NOTE: Risk Diversification  4 final customers at 4million dollars or 4000 customers at 4million dollars  If one drops out, the risk is high o NOTE: Bigger volume in customers  you can cross sel  B) Market Growth Proxies Industry Sales Potential o Trade off – Large static markets vs Small Markets with Large Growth potential?  Large markets  Higher demand and people try to enter  Small Market  Boutique  smaller; small volume, at least you have small inventory  Heavy machinery  larg
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