Intro to Business Lecture Notes

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Business Administration and Policy
BUS 1000
O' Malley

9/12/11 Chapter 1 Business environment- framework in which business functions -Outsourcing- asking other countries to do some or all functions of a firm like its production -Affecting tons of students leaving college -Stakeholders are individuals or groups that stand to gain or lose by the policies and activities of business. -10 Stakeholders 1. Stockholders 2. Customers 3. Local Community (Walmart) 4. Environment (BP Oil Spill) 5. Dealers (Mercedes, Acura) 6. Employees (Asset or Liability) 7. Government 8. Suppliers (iPod/iPad/iPhone-Foxcon- workers committed suicide) 9. Media 10. Bankers 4 other factors of production (5 total) Look Linda Come E 1. Land- Natural Resources 2. Labor-Human Energy 3. Capital- Machines/Plant/Money 4. Enterprise- Taking risk 5. Knowledge/Technology: Information Circle chart in book Tunisia and political upheaval Egypt and strategic alliances with USA 1. Israel 2. Egypt 3. Pakistan Egypt is very important for 2 reasons: 1. Suez Canal 2. Oil Increasingly, global geostrategic events impact the business and economic environments. Francis Bacon- “Some book are to be tasted, some to be chewed, and few to be chewed and digested” Will contagion of political upheaval spread? Yes. -Population 80.4 million -50% under 20 years old -All connected to Internet European Banking Crisis: Portugal, Ireland, Italy, Greece, Spain (PIIGS) -Social upheaval and breakdown (riots and protests) -Bankrupt and massive debt PIIGS will increase jitters in Europe well into Oct and Nov of 2012 European Bond Spreads chart -Greek bond jumped massively -The spread is the difference between interest rates -As difference gets bigger between them, risk gets bigger so Greek bonds are riskier -Interest rate= price of money -So higher the price, riskier it is END OF CHAPTER 1. Chapter 2- Economics Two main branches 1. Micro (companies, individuals) 2. Macro (international/governmental) a. Fiscal policy- government spends b. Monetary policy- money supply within the economy Adam Smith- wrote “The Wealth of Nations” -The Father of modern economics -Believed if people could see the economic reward, they would work harder -Invisible Hand: self- directed gains turn into social and economic benefits for all 1. Who is the current treasury secretary? Timothy Geithner 2. Who was his predecessor? Hank Paulson The economic system, like any organism needs the fluidity of money and credit as its oxygen and blood to live. If this fluidity is impeded, lending is obstructed and economic activity is stunted. Free-market economy (Capitalism) Command economy (Socialism and Communism) Will the TARP (Troubled Asset Relief Program) succeed in alleviating the impediment? Don’t think so, it’s like putting a band-aid on an open wound with blood flying everywhere. Debt Clock US national debt- 14 trillion 73% of GNP (gross national product) is consumption National Deficient- Amount of money the government spends in a year more than it took in with taxes Budget Deficient- government spends more than it takes in Trade Deficient- country imports more than it exports 3. Who is the current Fed chairman? His predecessor? Ben Bernanke (egghead-never left academia and had a job outside academia) and Alan Greenspan (“irrational exuberance”-felt people were living beyond their means) Currently we are in a crisis: Do these theories apply? Test the theory in the real word (TTTITRW) -If it doesn’t work, we shouldn’t be adopting it Economic indicators: statistics that look how economy is doing calender.asp?dist=skey GDP- Gross Domestic Product- total value of final goods and services produced in a country in a given year CPI- Consumer Price Index- measures general price level of products and services consumers are buying, measures pace of inflation/deflation PPI- Producer Price Index- measures the cost of producing the products and services (wholesale) Unemployment rate- rate of people that do not have a job (Obama says about 9.1% but way off) Jobless claims (how does the government count those who have given up looking for work? They don’t! 7.5%? 10%?) U.S. government debt- 14 trillion Fiscal policy- Governments effort to keep economy stable by increasing/decreasing taxes or government spending (taxes and spending) Monetary policy- management of the money supple and interest rates (controlled by the Fed) Who own the debt? -China (2) -Japan (1) Lecture 3 Documentary: “IOUSA”- looks at the effect of government spending deficits and borrowing. Will Obama and his administration be able to tame the debt beast? Or will there be a 1929 type global stock market crash and depression? Kenneth Galbraith (Economist) wrote a book called the great crash 1929 Chapter 4- Ethics Business ethics is an oxymoron- when it comes to making money people throw ethics out the window 9/11 and Enron spawned a plethora of compliance for the financial industry: 1. USA Patriot Act (2002) 2. Sarbanes-Oxley Act (2002) Paul Sarbanes and Michael Oxley senators. S-O Act ensures CEOs will sign off on public financial accounts (no more excuses) 3. PCAOB: Public Company Accounting Oversight Board- oversees public account of corporations Root of the word ETHICS- 1602 “the science of morals” Where do you get your ethics? Parents, religion, experiences, observations, schools “study of moral” (1387), from O.Fr. ethique, from L.L. ethica, from Gk. ethike 9/19/11 2 Exams- Midterms and Final with 50 questions on each Midterm- October 17, 50 questions up until September 26 Chapter Securities Markets Example of bond issue: 2008 Matures 5 years from the date issued 3/1/2013 Tranche- sections Investors will get 4.3% Maturity date- date the bond has to be repaid Bond is a loan; owe Stock is a piece; own Debt: equity ratio is what is long term financial state of this company? If too much debt, the ratio isn’t healthy. Less debt, the better Bond= debt Stock= equity I.P.O.- Initial Public Offering, no more a private company. (when private company becomes public and offer stock more sale) (ex; google) People make a lot of money from IPO’s like LinkedIn NASDAQ; AMEX and NYSE (NYStock Exchange), LSE 4 Animals on stock exchange (what kind of investors engage in stock activity?) 1. Bull- buys low expecting stock to rise and sell high; bullish means hopeful market will continue to rise 2. Bear- sell at the high and buy back low; bearish means expects markets to continue to decline Constant battle EVERYDAY between bulls and bears 3. Pig- greedy and holds on too long, ends up not making a profit or loses more than should have lost Take profit stock lost ratio (what level do I take profit out and stop a loss?) 4. Sheep- follow the crowd and get slaughtered, panic very easily and lose lots! Hump and Dump- corner the market with little stocks and price goes up so everyone buys it and then they dump it and price plummets Fear and panic cause investors to sell, sell, sell. 1929 Crash- October 29, 1929- Great Depression started and the roaring 20s ends What causes stock prices to rise or fall? 1. Wall Street Expectations 2. Revenue and profit (Is it going up or down? What is % of profit to revenue ratio?) 3. Successful marketing 4. Economic boom 5. Future earnings 6. Competitors market share i.e. Apple Ipod 7. Other factors? SEC: Securities and Exchange Commission was formed because there was a Cabal of people who controlled stock marked 1933/1934 (Under Bush it was degraded) http:/// What does SEC do? Interpret Securities Laws, Issue New Rules, Oversee Securities Firms, Coordinate US Securities Regulation Don’t have teeth to clump down on fraud. Why? Low funding, and made up of retired wall street people so they help their friends Is it sufficiently managed to enforce the law? Under Bush, many of the staff was cut. What has Obama done to strengthen the SEC? Nothing, he talked. Warren Buffet (Berkshire Hathaway) With a net worth of 50 billion dollars, Buffet was the richest person in 2008 Got his big break when he gained control of Berkshire Hathaway He invests in undervalued companies with strong management Types of Securities Markets Primary Maket vs. Secondary Market Primary Markets handle the sale of new securities Secondary markets handle the trading of securities between investors with the proceeds of the sale going to the seller Initial Public Offering (IPO)- The first offering of a company’s stock 2 areas in stock leagues Investment bankers- specialists who assist in the issues and sale of new securities Institutional investors- large organizations such as pension funds or mutual funds that invest their own funds or the funds of others TIAA Craft (pension funds)- manages teacher’s retirement, one of the biggest pension funds in the world Mutual fund- a collection of funds like food fund or tech fund Stock Exchanges Stock Exchange- An organization whose members can but and sell securities on behalf of companies and individual investors Over-The-Counter (OTC) Market- provides companies and investors with a means to trade stocks not listed on the national securities exchanges. NASDAQ- A telecommunications network that links dealers across the nation so they can exchange securities Top Stock Exchanges NYSE Euronext NASDAQ London Stock Exchange Tokyo Stock Exchange Deutsche Borse Stocks- Shares of ownership in a company Stock Certificate- Evidence of stock ownership Dividends- part of a firm’s profits that the firm may distribute to stockholders as either cash or additional shares (divide profit by number of shares) Advantages of issuing stocks -Stockholders are owners of a firm and never have to be repaid their investment -There’s no legal obligation to pay dividends -Issuing stock can improve a firm’s balance sheet since stock creates no debt Cash flow statement- does it have a lot of cash available to pay debts? Common Stock Equity under Stockholder’s Equity- divide that by number of stock When your launching a product that’s competing with something out already, RIM is competing with iPad with Playbook, expectations is way down. Expected to sell 200,000 but actually sold 20,000 Two kinds of stock Common Stock- the most basic form; holders have right to vote for the board of directors and share in the profits if dividends are approved Preferred Stock- owners are given preference in the payment of company dividends before common stock dividends are distributed. Preferred stock can also be: Callable Convertible Cumulative Chapter: Financial Institutions The Federal Reserve Bank (FED)- private organization not public ABA American Banking Association- lobby group for all banks (keeps interest of that group in forefront of Washington) Federal Reserve Act (1913)- All federally chartered banks had to join the Federal Reserve System (December 22) Pp549: Federal Reserve District Banks- Boston, Phil, NY, Cleveland, Richmond, Atlanta (East coast) St. Louis, Chicago, Kansas City, San Francisco, Minneapolis, Dallas (West coast) 12 total *Board of Governors *FOMC (Fed open market committee) *12 Fed Banks *Advisory councils *Member banks of system (jp morgan, chase, citi bank, bank of America…) Ben Bernanke: Fed chairman (eggman) Credit crisis and sub-prime Is Fed behind the curve? FDIC (Fed Deposit Insurance Corporation) OCC- Office of the comptroller of the currency 1. Is the Fed able to prevent us from going to an economic recession? 2. How high will oil prices go? 3. What is the Fed doing to stand the horrible mortgage foreclosures in this country? 4. What control does the Fed have other inflation? 5. What are the other factors? ARM- Adjustable Rate Mortgage (percent you have to pay on mortgage can change) 9/26/11 Purpose of accounting is to analyze, record and classify expenses, assets, liabilities and to find out if the company made a profit or a loss. Income statements- if company is making a gross profit/loss or a net profit/loss Balance Sheet- tell us the company’s equity position- in terms of assets, liabilities (what does company owe?), short term assets Cash Flow Statement- tells us the company’s ability to pay its short term debt (How much money do they have right now?) Investors- to need to analyze these 3 statements 4 main kinds of accounting 1. Managerial (Management) Accounting- accountant internally working for a company, usually looking at budgets, costs, how revenues can increase and costs decrease, usually a member of certified management association (or CINA in Ireland) 2. Financial Accountant- CPA certified public accountant- work outside organization 3. Audit Accountant- work for large companies, prepare financial statements for companies 4. Tax Accountants- do all tax related activity Ratio- analysis- looks at liquity (indicator of how speedily a company can repay its short term debts) and the main equity ratio is the current ratio (current assets to current liabilities) Ideal current ratio is 2:1. Ratio- health of a company Current assets- cash in the bank, anything that we can convert into cash quickly, expenses we pay in advance like prepaid rents, inventory turnover Leverage- what the balance sheet looks at in terms of long term debt vs. equity, debt: equity, equity- stock/shares Performance Ratio- earnings per share (EPS) which is all profit divided by all shares Return on sales- how much profit are we making on sales? Return on equity (ROE)- how much profit are we making on our equity (net profit/equity*100) Activity Ratio- how quickly do we turnover our inventory (and get them out the door)? (cost of goods sold/average inventory) Lobbyists/Accounting- lobby for accounting industries IASB (International Accounting Standards Board) PCAOB (Public Company Accounting Standards Board)- Doug Carmichael from our school Accounting Fraud: Sarbanes-Oxley Compliance- outraged with ENRON and said we need to make changes, created a whole industry revolving around Compliance ENRON and World Comm Consequences Challenges: How do you account for stock options, derivatives and other exotic financial instruments? SEC Enforcements? Accounting- recording, classifying, summarizing and interpreting of financial events and transactions in an organization to provide interested parties needed financial information Outside parties- like employees, owners, creditors, unions, investors, and the government- make use of a firm’s accounting information Institute of policy studies Accountants’ responsibilities- tax/auditing (minimize tax), cash management and forecasting, market strategy and planning personal financial planning, valuation merger and acquisition Managerial Accounting- provides info and analysis to mangers inside the organization to assist them in decision making Involved with- costs of production, costs of marketing, preparation and control of budgets, minimizing tax liabilities Return on investment on the marketing budget Who uses the accounting information? Government tax authority (use tax reports) Government regulatory agencies (use required reports) People interested in the organization’s income (use financial statements found in annual reports) Managers of the firm (use financial statements and internally distributed financial reports) Financial Accounting- financial info and analyses are generated for people primarily outside the organization. Outside users are interested in these questions: Is the organization profitable? Is it able to pay its bills? Test: What are current assets and liabilities? And Ratio Federal Reserve, Accounting, Ethics, Business environment, economics, securities and bonds, Reuter’s sessions, video in class Video- October 29, 1929- Black Tuesday 1920s- excess of spending, people were buying stocks on margin Roger Babsin- economist who said the economy is going to slow and crash Kenneth Galbraith- wrote book great crash of 1929 American Experience crash of 1929 TEST 1 10/17/11 Marketing- Chapter 13 The 4 p’s: Price (Going to impact marketing), Promotion (How are we going to promote), Product and Place (where are we going to sell the product) Return-on-investment of Marketing- Justify why the marketing department needs the millions of dollars to market the product The nature of viewers- tv vs. computer Conventional way- hope it will hit target Google is targeted: Google Analytics (Can analyze clicks and profile of people looking at your products) 4 Eras in evolution: 1. Production 1920s-1940 massive production of products, differentiate the product a. “Produce what you can because the market is limitless” b. After mass production, the focus turned from production to persuasion 2. Selling 1950-1980 (baby boom generation and golden era of marketing economy) 3. Marketing Concept- marketing started to lose its way to arts and media a. After WWII, a consumer spending boom developed b. Businesses knew they needed to be responsive to consumers if they wanted their business 4. Customer Relationship (CRMgt) 1990s and Internet got popular The Marketing Mix: Example- Product- IPod Price- $199 Place- Apple Store Promotion- Cheap ads Marketing Concept includes 3 parts 1. Customer Orientation- Finding out what customers want and then providing it 2. Service Orientation- Making sure everyone in an organization is committed to customer satisfaction 3. Profit Orientation- Focusing on the goods and services that will earn the most profit Customer Relationship Era (CRM)- Learning as much as you can about customers and doing what you can to satisfy or exceed their expectation Organizations seek to enhance customer satisfaction building long-term relationships Chapter: Promotion Promotional Mix: 1. Advertising 2. PR (public relations) 3. Personal Selling- people physically involved in the selling like a car showroom 4. Sales Promotion- What mix are we going to use? TV? Radio? PR? IMC- Integrated Marketing Communication- How do we want the consumer to perceive our product? REMEMBER. Advertising is supposed to remind us about the product like propaganda Combines all of the above to enhance the brand image, meet customer needs and promote the goals of the firm Emulating famous people Main goals of advertising Inform about a new product Persuade to buy an existing product Remind that our product is better than competition - Over $200 billion yearly is spent in the US on ads - According to AdAge, ad spend globally in 2010 increased by 2.2% - Internet ad spent up 12.6% in 2009, up from 10.5% in 2008 - Magazine ad spent FELL 10.3% in 2009, will fall 9.6% in 2010, 9.1% (’11) and 8.6% (’12) Is this an indication that recession is over? Nope Companies are asking what is the return we’re getting on ad $$ spent? (return on investment of marketing- ROI of Marketing) What best use to put $$ to work on advertising campaigns? Product Placement- Movie called Castaway. Main character was FedEx. Product physically placed in a movie or show Or Starbucks with movie I Am Sam Celebrity Endorsements: Can a single person persuade consumers to buy a product? Tiger Woods (Nike) LeBron James (Coke) Michael Phelps (Power Bar) - TV advertising is being threatened by DVR/TIVO - Is he ad model broken? Yes because the ads are not effective - Companies pay top dollar to have product advertised on top shows CBS: “NCIS (LA)”- WalMart, Pfizer, Home Depot NBC: “The Office” & “Southland” FOX: “American Idol” Ideal age group: Single males 18-35 years old because no commitment yet and want to show off their masculinity Product Placement: According to AC Nielsen- Top 3 (overall) Feb/Mar 2010 1. Coke 2. AT&T 3. Nike Case Study of Google: 1.PageRank 2. Advertising 3. Youtube 4. Turning Marketing upside down 5. Business model 6. Challenges 7. Future Branding- A name, symbol or design that identifies a good or service and distinguishes it from competitors (ex Facebook or LinkedIn) Question: Can a quality brand track relationship between ads and revenue? Psychographics- a way of analyzing who your consumer is (target to ultra specific niches) attributes related to personality, values, attitudes, interests or lifestyles. Market Research- Analyzing markets to determine challenges and opportunities, and finding the info needed to make good decisions - Research is used to identify products consumers have used in the past and what they want in the future - Research uncovers market trends and attitudes held by company insiders and stakeholders Primary Data- In- depth info gathered by marketers from their own research Telephone, online an mail surveys, personal interviews, and focus groups are ways to collect primary date Secondary Date- existing data that has previously been collected by sources like the government Secondary data incurs no expense and is usually easily accessible Secondary data doesn’t always provide all the needed info for marketers Focus Group- A group of people who meet under the direction of a discussion leader to communicate opinions - Marketers must turn data into useful info - Must use their analysis to plan strategies and make recommendations - Finally, marketers must evaluate their actions and determine if further research is needed Key benefits of marketing research: - Analyze customer needs and satisfactions - Analyze current markets and opportunities - Analyze the effectiveness of marketing strategies - Analyze marketing process and tactics currently used - Analyze the reasons for goal achievement or failure “The Persuaders” (a documentary) looks at how The Marketing Environment: - Sociocultural (demographics)- What trends in demographical society is changing? - Competitive (speed, service) - Economic (very important in ’08) - Global (trade agreements) - Technological (bar codes, RFID- regular frequency identity) Market Segmentation: An attempt to categorize the subconscious attitudes of the market, delves deeper into behaviors and values Geographic- regional/global Demographic- age, race, etc. Volume- usage: heavy, light Psychographic- personality, values, attitudes, lifestyle, etc. 10/24/11 Watch 60 minutes (CBS) interview with journalist about steve jobs Look up apple marketing and effect of efficient marketing and stock price th Apple store on 5 ave has highest profit per square foot 168 hours during the week Final- Marketing and Promotion, Pricing but only basic questions on distribution. Motivation, leadership, business enterprise- 13-16, 5-7,10 Promotion Promotion Mix- the combo of promotional tools an organizations uses, the traditional mix includes: Advertising, Personal selling, public relations, sales promotion Total advertising expenditures exceed $294 billion yearly Consumers benefit because production costs of TV programs, newspapers and magazines are paid for by advertisers Marketers choose ad media that will reach the target market Major categories of advertising: 1. Advocacy- supports a particular view of an issue 2. Comparative- c
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