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University of Toronto St. George
Rotman Commerce
Khan, Michael

RSM TEST 1 NOTES CHAPTER 1 Business: Profit seeking activities and enterprises that provide goods and services. Profits: Rewards for businesspeople who take the risks involved in blending people, tech, and information to create and market want goods and services. Non-for-profit organizations: business-like establishments that have primary goals other than returning profits to their owners. (Public service>Profits)  160,000 registered organizations  Raised more that 112 billion and 2 million people ------------------------------------------------------------------------------ FACTORS OF PRODUCTS:  Natural resources: include all production inputs.  Capital: Tech, tools, information and physical facilities. To remain competitive, a firm needs to continually acquire, maintain, and upgrade its capital. (More money)  Human resources: include anyone who works. Company relies on employee’s ideas, innovation and physical effort.  Entrepreneurship: is the willingness to take risks to create and operate a business. ------------------------------------------------------------------------------ PRIVATE ENTERPRISE ECONOMY: An economic system that rewards firms for their ability to identify and serve the needs and demands of customers. (Capitalism) Competitive differentiation: The unique combination of organizational abilities, products and approaches that sets one company apart from its competitors in the minds of customers. Basic Rights in the Private Enterprise System  Private property: The most basic freedom under the private enterprise system; the right to own, use, buy, sell and hand down land, buildings, machinery, equipment, patents, individual possessions and various intangible kinds of property.  Competition  Freedom of choice: Means that a private enterprise system relies on citizens to choose their own employment, purchases, and investments.  Profits ------------------------------------------------------------------------------ SIXS ERAS  Colonial Period (Prior to 1776): Primarily agricultural.  Industrial Revolution (1760-1850): Mass production by semiskilled worker, aided by machines.  Industrial entrepreneurs (Late 1800s): Advances in technology, and increased demand for manufactured goods, leading to enormous entrepreneurial opportunities.  Production (Through the 1920s): Emphasis on producing more goods faster, leading to production innovations such assembly lines.  Marketing (Since 1950): Consumer orientation, seeking to understand and satisfy needs and preferences of customer groups.  Relationship (Began in 1990s): Benefits derived from deep, ongoing links with individual customers, employees, suppliers, and other businesses. Chapter 3 Four types of competition in a private enterprise system:  Pure competition: A market structure where large numbers of buyers and sellers exchange similar products, and no single participant has a large influence on price.  Monopolistic competition: A market structure where large numbers of buyers and sellers exchange similar products so each participant has some control over price.  Oligopoly: A market situation where few sellers compete and high start-up costs act as barriers to keep out new competitors.  Monopoly: A market situation where a single seller controls trade in a good or service, and buyers can find no close substitutes. PLANNED ECONOMY: an economic system where business ownership, profits, and resource allocation are shaped by a plan to meet government goals. Not goals set by individual firms. (Communism and Socialism) ------------------------------------------------------------------------------ Price-Level Changes  Inflation: Rising prices caused by a combination of excess consumer demand and higher costs of raw materials, component parts, human resources, and other factors of production.  Core inflation rate: The inflation rate after energy prices and food prices are removed.  Hyperinflation: an economic situation marked by soaring prices.  Deflation: the opposite of inflation, occurs when prices continue to fall. ------------------------------------------------------------------------------ Monetary Policy: A government plan to increase or decrease the money supply and to change banking requirements and interest rates to affect bankers’ willingness to make loans.  Expansionary monetary policy: a plan to increase the money supply to try to decrease the cost of borrowing. Lower interest rates encourage businesses to make new investments, which leads to employment and economic growth.  Restrictive monetary policy: a plan to reduce the money supply to control rising prices, overexpansion, and concerns about overly rapid economic growth. Fiscal Policy: a plan of government spending and taxation decisions designed to control inflation, reduce unemployment, improve the general welfare of citizens, and encourage economic growth. The federal budget  Budget deficit: situation where the government spends more than it raises through taxes.  Budget surplus: the excess funding when government spends less than it raises through taxes and fees.  Balanced budget: situation where total revenues raised by taxes and fees equal the total of spending  National debt: the money owed by government to individuals, businesses, and government agencies who purchase Treasury bills, Treasury notes, and Treasury bonds. Chapter 5 SMALL BUSINESSES: an independent business with fewer than 100 employees and revenues less than 2 million, not dominant in its market. (29 Percent of the nation’s gross domestic product in Canada) Small businesses are good at innovation. One of the reasons they are so successful is the same reason they fail, the willingness to take a risk. The most common difficulties for a small firm are management inexperience, inadequate financing, and the challenge of meeting government regulations. Owners of small businesses can increase their chances of success by learning the principles of business; knowing the industry they operate in; developing good interpersonal skills; understanding their own limitations; hiring motivated employees; and asking for professional advice on finance, regulations and other legal matters. ------------------------------------------------------------------------------ BUSINESS PLAN: A formal document that details a company’s goals, methods, and standards.  An executive summary that briefly answers the who, what, where, when, why, and how questions for the business  An introduction that includes a general statement of the concept, purpose, and objectives of the business  Separate financial and marketing sections that describe the firm’s target market, marketing plan, and detailed financial forecasts of the need for funds and when the firm is expected to break even-the level of sales where revenues equal cost.  Resumes of principals-especially important in plans written to obtain financing. These sections contains the company’s mission and addresses the following issues: 1, the company’s mission and vision of its founders 2, an outline of why the company is unique 3, the customers 4, the competition 5, financial evaluation of the industry and market conditions 6, assessment of the risks ------------------------------------------------------------------------------ Business Development Bank of Canada (BDC): a governmental agency that assists, counsels, and protects the interests of small businesses in Canada. It provides:  Financial assistance  Management counseling, improve management skills  Training, technical assistance and education Business incubator: A local program designed to provide low-cost, shared business facilities to small start-up companies. Venture capital: Money invested in a business by another business or a group of individuals in return for an ownership share. Franchising: is a contract- based business arrangement between a manufacturer or other suppliers, and a dealer, such as restaurant operator or retailer.  Franchisee is the individual or business firm purchasing a franchise.  Franchisor is the firm whose products are sold to customers by the franchisee. Chapter 11 Marketing is an organizational function and set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. Exchange process is an activity in which two or more parties trade something of value (goods, services, cash) that satisfies each other’s needs. UTILITY is the power of a good or service to satisfy a want or need. Company’s production function creates form utility by converting raw materials, component parts, and other inputs into finished goods and services. Marketing function creates three types of utility:  Time Utility: Making a good or service available when customers want to purchase it creates time utility.  Place Utility: Created by making a product available in a location convenient for customers.  Ownership Utility: Refers to an organized transfer of goods and services from seller to the buyer. ------------------------------------------------------------------------------ Marketing concept refers to a companywide customer focus with the goal of achieving long-term success. The basic idea of it is that marketplace success begins with the customer. It can be explained by the shift from a seller’s market, to a market with a shortage of goods and services, to a buyer’s market, a market with too many goods and services. NON-FOR-PROFIT ORGANIZATION use one or more of five major categories of nontraditional marketing:  Person Marketing: Refers to efforts that are designed to attract the attention, interest and preference of a target market toward a person  Place Marketing: An attempt to attract people to a particular area, such as a city, region, or country.  Event Marketing: Refers to marketing or sponsoring of short-term events such as athletic competitions and cultural and charitable performances.  Cause Marketing: Marketing that promotes a cause or social issue, such as preventing child abuse, anti- littering efforts, and stop-smoking campaigns.  Organizational marketing: A marketing strategy that influences consumers to accept the goals of an organization, receive the services of an organization, or contribute in some way to an organization. ------------------------------------------------------------------------------ Two steps to develop a Marketing Strategy:  Decision makers study and analyze all possible target markets and choose the most suitable market.  Create a marketing mix to satisfy the chosen market. Consumer Product (B2C): A good or service that is purchased by end users. Business Product (B2B): A good or service purchased to be used, either directly or indirectly, in the production of other goods for resale. Target Market: A group of people that an organization markets its goods, services, or ideas toward, using a strategy designed to satisfy this group’s specific needs and preferences. MARKETING MIX: a blending of the four elements of marketing strategy- product, distribution, promotion, and pricing, to satisfy chosen customer segments.  Product Strategy: Includes decisions about package design, brand names, trademarks, warranties, product image, new-product development, and customer service based on needed qualities.  Distribution Strategy: Ensures that customers receive their purchases in the proper quantities at the right times and locations.  Promotional Strategy: Effectively blends advertising, personal selling, sales promotion and public relations to achieve its goals of informing, persuading and influencing purchase decisions.  Pricing Strategy: Most difficult. Setting profitable and justifiable prices for their product offerings. Business Intelligence: Using various activities and technologies to gather, store, and analyze data to make better competitive decisions. Date Mining: the use of computer searches of customer data to detect patterns and relationships. Data warehouse: a customer database that allows managers to combine date from several different organizational functions. ------------------------------------------------------------------------------ MARKET SEGMENTING: the process of dividing a total market into several relatively similar groups. Segmenting Consumer Markets:  Geographical segmentation: dividing an overall market into similar groups on the basis of their locations.  Demographic Segmentation: dividing markets on the basis of various demographic or socioeconomic characteristics, such as gender, age, income, occupation, household size, stage in family like cycle, education, or ethnic group.  Psychographic Segmentation: Dividing consumer markets into groups with similar attitudes, values and lifestyles.  Product-Related Segmentation: dividing consumer markets into groups that are based on benefits sought buyers, usage rates, and loyalty levels. Segmenting Business Markets:  Geographical Segmentation: Target geographically concentrated industries.  Demographic Segmentation: Begins with a good or service being designed to suit a specific organizational market.  End-Use Segmentation: A marketing strategy that focuses on the precise way a B2B purchaser will use a product. ------------------------------------------------------------------------------ Consumer Behavior: end consumers’ activities that are directly involved in obtaining, consuming, and disposing of products, and the decision processes before and after these activities. Relationship Marketing: developing and maintaining long- term, cost-effective exchange relationships with partners. Lifetime value of a customer- the revenues and intangible benefits from a customer over the life of the relationship, minus the amount the company must spend to acquire and serve that customer. Frequency Marketing Programs: a marketing initiative that rewards frequent purchases with cash, rebates, merchandise, or other premiums. Affinity Program: a marketing effort sponsored by an organization that targets people who share common interests and activities. Comarketing: a cooperative arrangement where two businesses jointly market each other’s product. Cobranding: cooperative arrangements where two or more businesses team up to closely link their names on a single product. Chapter 12 PRODUCT: A bundle of physical, service, and symbolic characteristics designed to satisfy consumer wants. Classifying Consumer Goods and Services  Convenience products: items that consum
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