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Midterm

MKT 100 Study Guide - Midterm Guide: Fixed Cost, Variable Cost, Epicurus


Department
Marketing
Course Code
MKT 100
Professor
Chris Gibbs
Study Guide
Midterm

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Marketing Review
!
Metric 1:
expense types
Classification of Expensives
- One common classification is by variability
- These include:
-Variable Costs: balloon & string (bottom right); paint & material (top left
-Fixed Costs: cash register (bottom left)
-One Time Fixed Costs (Capital Costs): real estate & building (centre)
Variable cost:
-Increase directly in proportion to the level of sales in dollars or units sold
-Change in proportion to the activity of a business
-Sometimes referred to as unit-level costs since they vary with the number of units produced
-Can also be referred to as Cost of Goods Sold (COGS)
-Examples include:
-Cost of goods sold (COGS)
-Direct labour costs
-Sales commission
-Shipping charges
-Delivery Charges
-Cost of direct materials or supplies
-Wages of temporary or part-time employees
-Bonuses
-Raw material
-Labour
-Song Royalties
Monthly Fixed cost:
-Stay the same regardless of sales
-Fixed costs are sometimes referred to as Operating Overhead Expenses or Recurring Costs
-Examples include:
-Marketing related costs
-Rent
-Insurance
-Equipment expenses
-Business licenses
-Salary of permanent full-time employees
Fixed cost (need for a company to run)
One time fixed:
-Similar to capital costs
-Capital costs are the fees associated with the initial setup of a plant or project, after which there will only be recurring operational or running costs
-Capital costs are one time expenses
-Capital costs are fixed and are therefore independent of the level of output
-Payment may be spread out over many years in financial reports and tax returns
-Examples include:
-Land
-Real estate
-Buildings
-Construction
-Purchase of equipment
-Leasehold improvements/renovations
-Crane
-Tooling
Importants to marketers
> the distinction is crucial in forecasting the earning generated by various changes in units sales and thus the financial impact of proposed
marketing campaigns
> fundamental to understanding prices and volume trade offs
understand profitability
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Marketing Review
!
Monopoly
> one seller who sets the price for a unique product
> controlled by the government (lcbo)
> ie. ICBC and LCBO
Oligopoly
> few sellers who are sensitive to each other’s prices
> depends on industry
>some price leaders or follower of competitiors
> ie cable t.v
Monopolistic competition
> many sellers who compete on non-price factor
> the difference between Microsoft and apple
> battling over things in the customer but not always concerned about price
Perfect competition
> many sellers who follow the market price for identical commodity products
Metric 2:
Percentage Change
- Percentage change is a way to express a change in a variable.
- It represents the relative change between the old value and the new one.
- It allows marketers to compare performance indicators such as revenue over different periods.
- In this particular case, the chart indicates the shrinking of US Newspaper Advertising Revenues and the percent change year-over-year.
percentage change- one of the biggest metrics used
- most common thing to use in business
got to look at tending throughout the years
Example
•Last year we had sales of did $300,000, this year our sales are $400,000
Metric 3
Market Share & Market Analytics
- Market share is the percentage of a market (defined in terms of either units or revenue) accounted for by a specific entity.
- Market share is closely monitored for signs of change in the competitive landscape, and it frequently drives strategic or tactical action.
- Market share is key indicator of market competitiveness. It is an indicator of how well a firm is doing against its competitors.
- Market Share: The percentage of a market accounted for by a specific entity. how to compare revenues and units sold
-Revenue Market Share: Revenue market share differs from unit market share in that it reflects the prices at which goods are sold.
- Relative Market Share: Indexes a firm’s or a brand’s market share against that of its leading competitor. It is used to assess a firm’s or
a brand’s success and its position in the market.
- Three (Four) Firm Concentration Ratio: The total (sum) of the market shares held by the leading three (four) competitors in a
market.
- Herfindahl Index: a market concentration metric derived by adding the squares of the individual market shares of all the players in the
market. As a sum of squares, this index tends to rise in markets dominated by large players.
-The lower the Hefindahl Index , the higher the competitiveness of the market. According to the Antitrust Division of the U.S.
Department of Justice a score of 0.18 or above indicates a concentrated market.
concentration- means highly competitive - market concentration market... (shoes, mp3 -apple nano, soda )
Unit market share (%) = unit sales (#)
Total market unit sales
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