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Comm 101 2 - Sept 11 - Marketing Meets Accounting.docx

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COMM 101
Jeff Kroeker

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Comm 101 – September 11 CLASS 2: MARKETING MEETS ACCOUNTING Please go to the Comm101 library page* and pre‐read the following articles . 1) Read: Detroit is still stuck in the 1950s Article Notes: • “Too bad just about everything else about their products seems stuck in the 1950s, or earlier.” Fuel Economy • Ford Model T (1908 and 1927) 25 miles a gallon 2004, average fuel economy of the Ford fleet (cars, light trucks- SUVs) was 23 miles a gallon. • US, the first gasoline-powered car hit the road in 1893. More than a century later, basic design remains unchanged. Internal-combustion engines are still the standard means of propulsion. • Cars may be faster, safer and equipped with concert-hall sound systems, but they're still a highly inefficient and highly polluting form of transportation. • North American International Auto Show in Detroit, GM unveiled Sequel o Powered by hydrogen fuel cells and batteries, water vapour is its only tailpipe emission. o First hydrogen car with the range (about 500km) and performance of a gasoline- powered car. A version of it could be in production by 2010. o Has the potential to "remove the automobile from the environmental debate." o "It's doable, but not affordable," GM boss Rick Wagoner said. o Fuel cells cost as much as small houses. There is no hydrogen infrastructure anywhere; of the 175,000 filling stations in the United States, only two dozen sell hydrogen. o The truth is, the Sequel and its kin are more hype than reality. • Almost every year, GM, the world's biggest auto maker, introduces alternative-fuel cars. o In late 1990s, it produced the EV-1, a battery-powered car that flopped because it had a short range and took forever to recharge. o Hydrogen cars, Autonomy and Hy-wire, each promised a transportation and environmental revolution. Each vanished. • Japanese virtually own the market for hybrid cars, which are powered by a combination of batteries and a small gasoline engine and consume roughly half as much fuel as typical cars. o The Toyota Prius hybrid is so popular that Toyota cannot keep up with demand • Biggest advances in design, engineering are the result of government edict, not consumers Comments: • US – needs: productivity, product quality and reliability to match Japanese, fuel efficient, lower healthcare costs and employee pension, the will and imagination (innovation) • Japanese – more innovative o Honda Accord: sensible, reliable, fuel efficient 2) Read: Detroit seeks health‐care refit • Consider: Why did healthcare costs soar? Article notes: • growing pool of retirees as their work forces shrink, soaring U.S. health-care costs • reduce costs for auto makers – may lead to more production outside the US • Ford paid $3.2-billion in health-care expenses for employees, retirees and dependants in 2003. o An astonishing $2.2-billion of that went to retirees. • General Motors spent $4.8-billion in 2003 to cover 1.1 million people – more than cost of steel • DaimlerChrysler AG paid out $1.9-billion to 181,000 employees and retirees in 2003. • Health care adds $1,400 to the cost of every vehicle it makes in the United States. o Healthcare – 15% of the US GDP • Toyota/Honda/Nissan -newer assembly plants, no retirees, substantially lower health costs • Some other big industries (eg steel) eliminated costs by going under bankruptcy protection, take over by new companies that pay no health-care benefits for retirees Notes: Why did healthcare soar? • Supply and demand o Increased healthcare expenditure on aging baby bloomers, more retirees o Overwhelming supply of physicians and hospital facilities • Obesity – 1/3 of population, large number of hospital admissions • Cost of technology, new specialty pharmacy drugs and medical devices • Legacy costs – associated with “deals” that were made in previous years which create a liability for the future o Previous contract which included health care benefits • This cost will not go away and it is enormous on a ‘per vehicle basis’ • Bankruptcy – government stepped in 3) Read: SWOT analysis • Environmental factors internal to the firm – Strengths or Weaknesses • External to the firm – Opportunities or Threats • Analysis of the strategic environment – SWOT analysis o Info to help match firm’s resources and capabilities to the competitive environment Strengths – develop a competitive Weaknesses – absence of certain advantage strengths • Patents • Lack of patent protection • strong brand names • weak brand name • reputation • poor reputation • cost advantages from proprietary • high cost structure know-how • lack of access to resources • exclusive access to high grade natural resources • lack access to key di
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