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Business Study Notes.docx

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Wilfrid Laurier University
Laura Allan

Business Study Sheet BUSINESS PLANNING (7/80) Chapter 1(8) – Writing an Effective Business Plan – 3 marks (MC) 1. Why write a business plan: Business Plan: a written expression of all the entrepreneur’s vision for converting ideas into a profitable business ­ Takes a long time to think of/create ­ Some plans get ignored in the end ­ It is truly difficult to arrive somewhere unless you know where you want to go ­ Plan is what persuades people into investing also acts as map for bringing your vision to life ­ Addresses complex issues (i.e. how you will produce, price at which it will sell, how/who marketed to, comparisons to competition and resources needed etc.…) ­ Explains what it will accomplish/how it will establish these goals what investors want to know  tells them how to proceed ­ Living document – always changing as business develops… don’t do too much too quickly, develop it with time 2. Model of business planning Step 1: Develop a simple, basic plan Step 2: start the business Step 3: take the info that is gained from starting and running the business and use it to refine the plan and obtain funding as it becomes necessary Step 4: Continue to grow the business + refine plan ­ Don’t want to waste a lot of time on guess work… get it started ­ Can be long detailed or short and simple plan, depends what’s necessary, i.e. good to be simple for most part then add detail but when capital intensive might require more length and detail ­ Planning should be careful but flexible and in a form that fits your venture (simplicity) 3. Seven deadly sins of business plans – likely to be rejected if any present a. 1 – Looks poorly prepared and has an unprofessional look b. 2 – plan is far too slick (go easy on the fireworks, what are they hiding c. 3 – Executive Summary is too long and rambling – doesn’t get right to the point… makes them think your waste of time d. 4 – Readiness of product is unclear where is it in terms of development? e. 5 – No clear answer to why someone would want to buy one (marketing plan)- why its wanted f. 6 – no clear statement of the qualifications of the management team. Want to know your experience. Otherwise none? g. 7 – Financial Projections are wishful thinking… think you are naïve and waste of time Lecture – Art of the Start – 4 marks (SA) • 5 things an entrepreneur must accomplish 1. MAKE MEANING – most important thing to accomplish. Know why the world would be worse off without your company in it. You need what your doing to be meaningful for you to keep going àotherwise no motivation to continue 2. MAKE MANTRA– an often-repeated word or phrase (sacred verbal formula repeated). Should be to the point and concise. I.e. Pepsi – refresh everything 3. GET GOING – You have to start with something… so get going take action. “Don’t wait or be embarrassed, don’t wait to develop the perfect product or service. Good is good enough. There will always be plenty of time for refinement later. ITS NOT HOW GREATYOU START BUT HOW GREATYOU END UP 4. DETERMINEABUSINESS MODEL – (i.e. use gel) How will you make money from your idea? “Abusiness model describes the rationale of how an organization creates, delivers, and captures value” How a company intends to make money How your idea actually becomes a business that makes money  Model affects strategy/ways of operating 5. WEAVEA MAT – MAT = Milestones,Assumptions, tasks “… To understand the scope of what you’re undertaking, test assumptions quickly, and provide a method to find and fix the large flaws in your thinking.” • Reasons for writing a business plan  Write for the right reasons • Due-diligence (investigation) stage of courting an investor • Forces the founding team to work together • Makes the team consider issues it glossed over in the euphoria • Uncovers holes in the founding team  The process is more important than the destination  Write deliberate, act emergent COMMUNICATION (8/80) Chapter 2(4) – Planning Business Messages – 3 marks • 4 principles of business writing – very different from other writing 1. Purposeful – writing is to solve problem or convey info focus on the main idea/purpose 2. Persuasive – want your audience to believe and accept your message 3. Economical – need to present ideas clearly but concisely. No reward for length 4. Audience Oriented – concentrate on looking at the problem from the prospective of the audience instead of own p.o.v • 3 x 3 writing process 1. Pre Writing (decide purpose first) (25%) a) Analyze the audience and purpose b) Anticipate their reaction (profile the audience) c) Adapting correct tone/words to win approval 2. Writing (25%) a) Research the topic, gather info/data b) Organize what you accumulate c) Compose the first draft (quickly and use short clear sentences) 3. Revising (50%) a) Revise for clarity, tone, conciseness, readability b) Proofread for grammar/punctuation c) Evaluate your message… did you achieve your goal? Lecture – Made to Stick – 5 marks • Definition of sticky Sticky – understandable, memorable and effective in changing thought or behavior You want your communication to stick, make it stay with the consumer For example: saying something has this much fat… not sticky, however if you name 3 fatty products then tell them the fat content of all 3 equals the fat in the single product it will stick (popcorn at theatres) Asticky idea is understood, remembered and changes something. • SUCCESs model principles S - Simplicity ­ Core and compact ­ Finds core message and communicates it ­ Commanders intent: vision which defines operations purpose ­ Prioritize what to include ­ Don’t bury the lead… start off with what’s important ­ Use to communicate: o Proverbs o Metaphors o Analogies o Schema/references U – Unexpectedness ­ Grabs attention ­ Generates surprise + interest + curiosity ­ Violate expectations, be counter-intuitive (opposite of common sense) ­ Open gaps in knowledge… give context then fill these gaps C – Concreteness ­ Make ideas very clear ­ Fill with concrete images i.e. brown eyes vs. blue eyes, sour grapes, hamburger helper C – Credibility ­ Make them believe ­ Use authorities (experts, celebs, anti-authorities) ­ Internal credibility o Vivid details o Stats o Testable credential E – Emotions ­ Get people to care ­ Make them feel something  (use people not abstract things or stats) ­ Power of association o Appeal to self-interest o Benefits vs. features o “Imagine….” o Appeal to identity S – Stories ­ Get people to act  simulation + inspiration ­ Mental flight simulators ­ Inspiration ­ Spotting a story o Challenge plot o Connection plot o Creativity plot  Why they affect stickiness  Ways to achieve principles Critical Thinking – 7 marks total (read over natashas as well) Lab Manual pg 106-156 • Claims, Evidence, Underlying assumptions, and Causal claims (read over)  What they are and How to find them  How to test/challenge and How to apply to writing Claims:Amajor conclusion of a piece of writing the author is trying to persuade you to believe. It is crucial to understand and analyze a piece Evidence: supports authors claim, accuracy, precision, sufficiency, representatives, authority, clarity of expression UnderlyingAssumptions: what the author implies but does not say… what they want us to assume Causal Claims: cause and effect relationships… this happens because of this. Provides basis for reasoning, decision-making and action • Techniques of persuasion, How to build a persuasive argument 1. Anticipate and counter readers objections 2. Negative evidence show you’ve considered it 3. Rival causespresent them then show why yours is better 4. Debatable assumptions anticipate questions 5. Limit claims when you have no rebuttal (concede point) 6. Rhetoric (language) 7. Be complete give full detail 8. Use proper tone (scholar, narrative etc.) (Based on audience) 9. Be vivid with language… attract attention be memorable 10. Effective reading make it good to read Marketing – 29 marks total  Chapter 9(12) – Understanding the Customer – 5 marks • Marketing concept, Relationship marketing, and Customer relationship management Marketing concept – identifying consumer needs and then producing the goods and services that will satisfy them while earning a profit ­ Focus on wants of consumers to distinguish yourself from other competition ­ Integrating all activities to satisfy wants (including production) ­ Achieving long term goals by satisfying wants (legally + responsibly) ­ Firms used to use production orientation before marketing concept, which was an approach where firms work to lower production costs w/o strong desire to satisfy customer needs… this was a good thing but will people buy? First and foremost must satisfy people’s wants Relationship Marketing – strategy that focuses on forging long term partnerships with customers by offering value and providing customer satisfaction ­ Allows firms to benefit from repeat sales and referrals… meaning more sales and more profits ­ Less costly also: less expensive to serve existing rather then attract new customers (approximately ¼ the cost) ­ 60% chance to retain customers ­ 30% chance to land new customers ­ Also crucial to have relationships with your suppliers as it allows you to make high quality products and reduce costs ­ Customers remain loyal to firms that provide them a greater value and satisfaction then the competition Customer relationship management – the processes used by an organization to track and organize info about current and prospective customers ­ Includes info on current, past or future customers ­ Software used to gather and find correlation ­ Use loyalty programs to help build relationships ­ How customers treated reflects how they see the organization (employee interaction ­ Strong relationships are what can help small businesses compete with large firms • Competitive advantage Competitive advantage (differential) – unique features of a company and its product that are perceived by the target market as significant or superior to those of the competition. Something unique (lasts longer then cost comp adv.). Includes brand name, distribution networks, reliability, image and service Cost competitive advantage – a firms ability to produce at a lower cost then all other competitors in an industry while maintaining satisfactory product margins… competitors catch on to our advantage… wont last forever Niche CompetitiveAdvantage – a firm’s ability to target and effectively serve a single segment of the market within a limited geographic area (necessary for small businesses vs. big competitors) • Consumer decision-making (processes, influences) Culture: set of values, ideas, attitudes, and other symbols created to shape human behavior (creates common expectations) Social: interact socially to learn others opinions. Groups that reference buyer behavior are known as reference groups. They have opinion leaders who influence the others. Typically these people are first to explore. Also have socialization process – the passing down of values from parents to children Individual: people are influenced by gender, personality, and self-concept. ­ Men and women are very different ­ Personality: how we react, what were like ­ Self concept: how we think we are Psychological: influenced by perception beliefs and attitudes ­ Perception: how we see things ­ Selective exposure: deciding what to acknowledge or ignore ­ Belief: something individual holds true ­ Attitude: how we respond towards things These factors: cultural, social, individual and psychological affect the consumer decision-making process… Consumer decision-making process: 1. Need recognition 2. Info search 3. Evaluation of alternatives 4. Purchase 5. Post purchase behavior • B2B market Business to business these goods are identified because they are meant to be used at businesses as opposed to at home Characteristics of B2B Markets: 1. Purchase Volume: businesses buy in much larger quantities then consumers 2. Number of customers: business marketers usually have far fewer customers then consumer markets 3. Location of buyers: business customers tend to be much more geographically concentrated then consumers. I.e. Ontario has concentrated oil industries, so producers/suppliers locate near them 4. Direct Distribution: business sales tend to be more direct to buyers, consumers go through intermediaries (retailers) • Trends Internet Marketing Research: ­ Allows for quicker access to business intelligence = faster decision making ­ Improves a firms ability to respond quickly to customer needs and market shifts ­ Facilitates conducting follow up studies/research ­ Slashes labor and time intensive research activities (and associated costs), including mailing, telephone, data entry and tabulation and reporting ­ Rapid development, real time reporting ­ Dramatically reduces cots ­ Personalization ­ Higher response rates ­ Contacting hard to reach Scanner Based Research: system for gathering info from a single group of respondents by continuously monitoring the advertising, promotion and pricing they are exposed to and the things that they buy Loyalty Cards: cards issued by an organization that give discounts for loyal/frequent customers, shows the firm their tendencies One-to-one marketing: unique marketing mix for each consumer, making it personalized from him or her. Requires a database Marketing Lecture – #1 Key – 6 marks • Production – sales – marketing orientation ????? Production orientation is when you focus on cutting production costs efficiency, not necessarily satisfying consumer needs Marketing orientation (concept) – is focusing your efforts on consumer needs and then creating a product that will satisfy them Sales orientation – focusing on creating more sales? Promoting your product and stimulating buying • Steps to defining a Target Market  Market segmentation – bases, process State-of-being:  Geographic – region, pop’s size, pop’n density, climate  Demographic – age, gender, lifecycle, income, occupat’n, educat’n, religion, social class, etc.  customer type state-of-mind:  psychographic (personality and lifestyle -AIO) Product usage - behavior  Volume – usage rate, user status, readiness to buy  Sensitivity to market factors, occasions  Loyalty Benefits sought  Benefits you want to get from product (very crucial) • 1. Segment on basis of benefits • 2. Describe using other bases • 3. Name them last!  Perceptual mapping and Preference analysis – process, choosing target • determine which of the segments will be the target market • by finding the biggest gap between how the customer perceives the competition meets their needs – perceptual map – and what they really want – preference analysis  Steps:  Draw axes that represent the relevant dimensions by which people differentiate between product offerings  Locate the positions of competing products on the axes/dimensions according to customer perceptions… Perceptual Mapping  Locate each segment’s ideal product… Preference Analysis  Determine the target market (See slides for example)  Positioning – consumer, competitive  Positioning • finding a distinct position for your product in the customer’s mind • one that communicates that the product provides a unique benefit • the objective is to position the product as close to the target’s ideal as possible • 2 approaches:  Consumer approach: why this product is good for the consumer  Competitive approach: why the benefits of your product > benefits of competitors’ product  Product classification  Convenience Good/Service  Staples – branding, max exposure, shelf position (i.e. soap or tooth paste)  a. Staples is consumer goods purchased on a regular basis or periodically, such as soap and toothpaste.  Impulse goods – max exposure, shelf position, P of P  Impulse goods are goods that are purchased without prior planning or research effort  Emergency goods – near P of P, readily accessible  Relief goods are goods purchased if the consumer feels the need is urgent, such as umbrellas and raincoats during the rainy season  Shopping Good/Service  Homogeneous – exposure for price comparison  Homogeneous shopping goods are goods that the consumer is considered similar in quality but different enough in price. Thus, consumers who try to find the cheapest price by comparing the price in a store with another example, the store is a tape recorder, television and washing machine.  Heterogeneous – exposure near similar products  Commercial goods are goods that heterogeneous appearance and characteristics (features) are considered more important by consumers as the price aspect. In other words, consumers perceive it differently in terms of quality and attributes. For example, for household goods, furniture and clothing.  Specialty Good/Service – selective dist’n for exclusivity  Specialist shops are goods which have characteristics and / or identification of a single brand in which a group of consumers willing to make a special effort to buy it.  Unsought Good/Service – aggressive promo, personal selling  Unsouqht goods are goods that are not known to consumers or is already known, but are not generally thought of buying it. (could be known by all just unsought or new and therefore unsought) * different markets classify products differently * important to see your product as customer does  Tested in multiple choice  Chapter 10(13) – Creating Mktg Strategies – 6 marks • Product  Classification – consumer vs B2B, related to intensity of distribution Product is any good or service, along with its perceived attributes and benefits, that create value for the customer. Consumer products – products bought by end users Types + effort expanded by customer • Unsought Products: either are unknown to potential buyer or are known but not actively sought i.e. life insurance, new products (requires no effort) • Convenience products – very little/minimal effort. Relatively inexpensive items that require little shopping effort and are purchased routinely without planning • Shopping Products – considerable effort – items that are bought after considerable planning, including brand-to-brand and store-to-store comparisons of price, sustainability, style, etc. (i.e. homes, cars, vacations) • Specialty products – maximum effort – items for which consumers search long and hard, and for which they refuse to accept substitutes, i.e. jewelry, limited production autos) B2B or business/industrial products – products bought either by businesses or institutions for use in making other products or providing services Classified as: Capital products: large expensive items with a long life span that are purchased by businesses for use in making other products or providing a service ­ Installations: large expensive capital items that determine nature/efficiency of firm; takes most planning to buy (i.e. ford assembly plant) ­ Accessories: capital products, but less impact on firms then installations, less costly, and more standardized (they rely on brand, advertising and personal selling) Expense Items: items purchased by businesses that are smaller and less expensive then capital products and usually have a life span of less than a year ­ Component parts and materials: expense items built into end product (some custom, others standard) i.e. processors for computers and cement for construction trade ­ Raw materials: expense items that haven’t been processed (much) and are used to create the final product (i.e. zinc, copper, lumber) ­ Supplies: expense items, do not become part of final product bought routinely to run businesses (i.e. pens, paper) ­ Services: expense items used to plan or support company operations (i.e. janitorial cleaning)  Product life cycle – stages and strategies, changing speed of cycle (from lectures) 1. Introduction: ­ Faces many obstacles ­ Competition is light, but usually features frequent product modifications, limited distribution, and heavy promotion ­ Failure rate is high ­ Production and marketing costs are high, sales volume is low ­ Profits are usually small or negative 2. Growth: ­ Sales grow at increasing rate, profits are healthy ­ More competitors enter the market ­ Switch from primary demand promotion aggressive brand promotion ­ Strong distribution is key for strong market position, many seek to acquire deals with dealers (long term stuff) ­ Near the end, prices begin to fall, profits peak (there is more competition resulting in price drops in addition to minimizing expenses/cost reductions) ­ Mostly covers development costs, focus is on market share and enhancing profit 3. Maturity: ­ Sales continue to mount (but at a decreasing rate) ­ Most have been out for a long time ­ Most marketing strategies are designed for this period… I.e. line extension, new variations, like new Kool-Aid flavors ­ Come up with extensions and product variations so people buy more and move the product back to growth stage ­ Find a new market and new users (Canadian tire making cooking supplies not just men stuff) 4. Decline (and death) ­ sales and profits fall ­ rate depends on change in consumer tastes and the new products entering the market… I.e. VCR in Canada o PLANNED OBSOLECENCE SPEEDS UPTHE CYCLE o Speed the cycle up by making new products all the time such as cars in which the old cars are obsolete o Or quality obsolete so they don’t last forever Strategies for success at each stage of the product life cycle Category Introduction Growth Maturity Decline Marketing Encourage trial, Get triers to Seek new users Reduce Objectives establish repurchase, or uses marketing distribution attract new users expenses, keeping loyal users Product Establish Maintain product Modify product Maintain product competitive quality advantage Distribution Establish Solidify Provide Eliminate trade network distribution additional allowances relationships incentives to ensure support Promotional Build brand Provide Reposition Eliminate most awareness information product advertising and sales promotions Pricing Set introductory Maintain prices Reduce prices to Maintain prices price (either skim meet competition or penetrate) • Pricing  Objectives, markup, strategies (text) Pricing Objectives are important in determining how much firms earn. Gross revenue = price x units sold and this has to pay for everything with the left over being profit. Need to charge a price that will allow firm to earn their fair return on investment. Cant set it to high or low… should try to make it equal to perceived customer value 1. Maximizing Profit  Getting largest possible profit from producing it for as long as the revenue > cost of producing 2. Achieving target return  a pricing objective where the price is set so as to give the company that desired
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