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BU121 Midterm Notes

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Laura Allan

Business 121 Midterm Review BUSINESS PLANNING WHY WRITE THE BUSINESS PLAN  To gain funding for your venture. Take it to banks, or venture capitalists to get funds.  It is a detailed road map of how to proceed with the new venture  living document gives you direction  Entrepreneurs who prepare a business plan are more likely to attain success that those who do not.  Model of Business Planning o Develop a single, basic business plan. o Start business. o Take information gathered from business operations and refine and improve business plan.  Then expand the business.  Persuasion plays big role; venture capitalists quickly look and if argument is not persuasive, plan will be rejected. SEVEN DEADLY SINS  The plan is poorly prepared and has an unprofessional look: no mistakes. Must look neat, tidy, and presentable.  The plan is far too slick; too fancy makes the investor wonder if the person is hiding something.  The exec summary is too long and rambling. It is not succinct: not worth the time.  Product development stage/process is unclear.  No clear identification of why anyone would want to buy the product or service.  No clear qualifications of the management team.  Financial projections are unreasonably optimistic and exorbitant. 5 THINGS AN ENTREPRENEUR MUST ACCOMPLISH  Make meaning: o What learned: The best way to start an organization is to make meaning – create a product or service that will make the world a better place. It‟s not about money, power, or prestige. o Why learned: most powerful motivator and help you become more successful. o How to apply it: With this well understood meaning, the business will have a firm direction.  Make mantra: o What learned: An internal verbal saying or formula that your business is founded upon. o Why learned: This will help provide a core internal message for the business to give it direction.  Get going: o What learned: Don‟t wait to develop the perfect product or service. Start the business once you have enough information. Good is good enough.  not about how great you start, but how you end up o Why learned: Starting the business allows us to gather information. o How to apply it: With the information we get, we can refine the business, expand it, and make it better.  Define a business model: o What learned: Define a business model to see how all the factors of the business are integrated together. It helps identify how you will generate revenue. o Why learned: helps implement effective strategies; changes our way of operating. o How to apply it: Use the business model and GEL to help make a better business plan.  Weave a MAT (milestones, assumptions, and tasks). o What learned: To understand the scope of what you‟re undertaking, test assumptions quickly, and to set milestones that the business must achieve (target dates) o Why learned: Helps find and fix major problems allows business to be prepared for any future obstacle. REASONS FOR WRITING A BUSINESS PLAN  Write for the right reasons  Must write a business plan to get funding from potential investors.  Forces the founding team to work together  uncovers any holes in the team so they can fix early  Makes the team consider any issues that had been previously glossed over.  The process is more important than the destination. Business 121 Midterm Review COMMUNICATION 4 PRINCIPLES OF BUSINESS WRITING  Purposeful: fulfill a purpose in each message that you write. Write to solve problems and convey information.  Persuasive: You want your audience to believe and accept your message.  Economical: Must present ideas clearly and concisely.  Audience oriented: Concentrate on writing the message from the perspective of the audience. 3 X 3 WRITING PROCESS Prewriting 25% Writing 25% Revising 50% Analyze: identify purpose Research: gather information Revise: 45%  Why am I sending this  Formal methods: Internet,  The message must now be message and what do I hope search manually, investigate edited for clarity, conciseness, to achieve? primary sources. and readability.  Is there a primary/secondary?  Informal methods: Look in the  Consider using bulleted points  What is the best way to deliver files, talk to your superior, talk or list to make it easier and the message? How formal? to the target audience, more appealing conduct an informal survey. Anticipate: profile the audience Organize: group similar facts Proofread: 5%  The person reading will be  Using lists and outlines:  Spend time carefully reading thinking „what‟s in it for me?‟ Alphanumeric format uses through the message and and „what am I supposed to do Roman numerals and shows locate any spelling, grammar, with this information?‟ major and minor ideas. punctuation errors.  Knowing the audience helps Decimal format shows every  Make sure that all the names, shape the message. level relating to the whole. numbers, and formats are  What do they already know?  Direct for receptive audience, correct. What language is appropriate? indirect for uninterested  Whitespace, redundancies, headings, long lead-ins Adapt: to the task and audience Compose: first draft Evaluate:  One important factor is tone.  first draft of your organized  Take a final look at the Affects how the reader feels. message. This should be done message and ask yourself  Use the „you‟ view. quickly as this will be revised „Will this achieve the  Keep it conversational but in the last step. purpose?‟ professional.  Direct method for positive,  Is the message appealing and indirect for negative/persuade persuasive enough to get the  Bias-free no stereotypes  Active vs. passive voice job done? SUMMARY OF LEARNING OBJECTIVES  The „you‟ view is writing a message through the readers perspective.  Must avoid exaggerations about „half-truths‟ when writing about investments. Must have safety information if the product contains something that can harm the user. DEFINITION OF „STICKY‟  Sticky: Understandable, memorable, and effective in changing thought or behaviour.  Simple: A simple message is memorable and understandable, it sticks. o Ways to achieve principle: Keep the message simple and compact. Communicate the core by using proverbs. This is affective because they are simple but profound. Use existing schema (existing knowledge), analogies, and generative metaphors.  Unexpected: violates expectations by surprising in interesting way. It captures attention and generates curiosity. o Ways to achieve principle: Be counterintuitive – uncommon sense in the core message. Open gaps in your receiver‟s knowledge, give them some context that they are familiar with, and then fill those gaps.  Concrete: It makes ideas clear and stays away from being abstract. The person receiving the message can easily picture the visual representation of the image in their mind. Business 121 Midterm Review o Ways to achieve principle: Use concrete images that the person will be able to relate to such as blue eyes, brown eyes; or use familiar terms such as „sour grapes‟.  Credible: Makes the person believe the message. When they believe it without any doubt, they remember it. o Ways to achieve principle: Use authorities such as celebrities, experts, and „anti-authorities‟. Internal credibility is when you give statistics to back up the message.  Emotional: Making a person feel different can change their behaviour toward something  helps stick o Ways to achieve principle: Make the story relatable instead of abstract. Use the power of association, and make the story appeal to the person‟s self-interest. Emphasize the benefits and not the features and appeal to the person‟s ego and identity.  Stories: Use a story to inspire a person and this inspiration will lead to action. o Ways to achieve principle: Generate inspiration by using certain plots:  Challenge plot: Up against a challenge and you overcome that.  Connection plot: A human story that connects and bridges a gap in the person‟s knowledge.  Creativity plot: Generate inspiration by showing massive mental breakthroughs. CRITICAL THINKING CLAIMS  A claim is the major conclusion that the author is trying to persuade you to accept; not always explicit  Cue words: therefore, thus, in summary, I believe that, clearly, in short, as a result, in fact.  Uncontested claims: Claims that generally do not need to be contested. o Consistent with our own experiences usually go uncontested. o Facts independent of interpretation, events that have happened in the past like an accident or war. o Areas in which there is general agreement amongst experts, or it is common knowledge. o Mathematical claims, technical claims  Contestable claims: When a claim is not uncontested, we need to question it.  Presenting claims: try to present the essence of what the author is saying in a clear and concise way. (fair) o It can be graphical such as a mind map. EVIDENCE  Evidence is any statement that supports the claim.  An argument is the combination of a claim and its supporting evidence.  Cue words: as a result, in the first place, for example, in addition, given that, studies show, for following reasons.  Quality: can be strong and substantial or weak and shaky. Our job is to evaluate the quality of the evidence. o Accuracy: Make sure that the sources are good and the overall writing is free of errors. o Precision: Statistics make the claim more credible. o Sufficiency: There must be enough evidence to back up each claim fallacy of hasty generalization o Representativeness: The evidence must represent the claim fairly and from an unbiased perspective. o Authority: Using the experience of other credible authorities such as scholars makes evidence better.  fallacy of false appeal to authority, fallacy of argumentum ad populum o Clarity of Expression: The significance of the evidence should be clearly stated. UNDERLYING ASSUMPTIONS  A logical link that fills the gap between a piece of evidence and a claim.  Try to identify what must be true for between the evidence and the claim for the argument to exist.  Could someone believe this evidence and still argue with the claim?  Reality assumptions: Our belief on what events have taken place, what exists, or how things work in the world.  Challenge by presenting information that shows the author‟s notion of reality as debatable/wrong.  Value assumptions: Values are our ideals, our standards of right and wrong, the way things ought to be.  Cue words: ought to, should, desirable, unacceptable.  People can also rank their values differently. One might be more important than the other. This can lead to disagreements about the relevance of the evidence presented for a claim.  Challenging value assumptions is difficult because values are rooted early and resistant Business 121 Midterm Review CAUSAL CLAIMS  Certain events or factors (causes) are responsible for bringing about other events or situations (effects).  The question that we pose is „Why?‟  The outcome „effect‟ may have multiple causes.  Must question whether the author‟s cause-and-effect link might have a rival causal relationship. 1. Difference between groups: is that the only difference? 2. Correlation of characteristics: reverse causation, direct, through a third party 3. Post hoc ergo propter hoc: B happened after A, therefore B must be caused by A TECHNIQUES OF PERSUASION  The quality of the evidence and the omitted evidence makes for a persuasive message.  You must profile your audience and make sure you understand what they know, believe, value, and assume.  Anticipate and counter readers‟ objections: “destructive testing”.  Readers are aware of negative evidence that refutes your claim.  They can come up with rival casual explanations.  Readers can disagree with your value preferences or your reality assumptions.  Negative evidence: o Must address this negative evidence and show that it is either:  Not actually a negative piece of evidence.  It is not reliable.  Its importance is overstated.  Rival causes: Brainstorm the alternate causes, rebut them, and explain why they are not the cause.  Debatable assumptions: As a writer, anticipate challenges to your assumptions and back them up with data  Limit claims which have no rebuttal. o Limit to your generalizations; refinement or defining your terms o Showing that the probability of your claim is less than 100%.  Rhetoric: This is the art of using language to persuade. This is when you can make your reader feel anger, pride, fear etc. through your word choice and language.  Make sure you are complete, using vivid language.  Tone: you can use scholarly tone (appeal to authority) or narrative tone (appeal to emotion) MARKETING MARKETING CONCEPT  Identifying customer needs and then producing want-satisfying goods or services while making a profit.  Customer wants, so the organization can distinguish its products from its competitors.  Integrating all of the organization‟s activities, including production, to satisfy these wants.  Achieving long term goals for the organization by legally and responsibly meeting these wants. RELATIONSHIP MARKETING  A strategy that focuses on forging long-term partnerships with customers  use employee commitment o Customer value: what they believe they are getting in terms of benefits, and what they must sacrifice o Customer satisfaction: When the customer feels the product has met or exceeded expectations. o Companies benefit from repeat sales and referrals that lead to more sales. o Costs also fall because it is 25% cost to sell to an existing customer than trying to chase a new one. o The probability of retaining a customer is 60% whereas acquiring a new one is 30%.  Customer Relationship Management (CRM): o Processes used to track and organize information regarding current and prospective customers. o Information about (potential) customers, past history with the organization, and future prospects. o CRM software takes all the customer data and forms a correlation used to increase customer sales. o All employees must have a positive attitude toward customers o Small firm can focus on a small segment of the market with its employees and compete with large firms. Business 121 Midterm Review COMPETITIVE ADVANTAGE  A set of unique features of a company and products perceived by the target as superior to those of competition.  Differential: firm provides something unique that is valuable to buyers beyond just having a low price.  Tend to last longer than cost advantage.  Some examples are brand names, a strong dealer network, product reliability, image and service.  Cost: firm can produce its product for a lower cost than its competitors while maintain satisfactory profit margins.  Obtaining inexpensive raw materials, making plant operations more efficient, designing products for easy manufacture, controlling overhead costs and avoiding marginal customers.  Over time this advantage may fall because competition also gets more efficient technology etc.  Niche: firm targets a single segment of the market within a limited geographic area.  This may be the only option for small companies with limited resources.  A segment that has good growth potential and is not so important to large competitors  Once a niche has been established, the firm must defend it from its competitors. CONSUMER DECISION MAKING  This refers to buyer behaviour which the actions people are taking when buying products.  Process: All the influences such as cultural, social, individual, and psychological factors affect all steps.  1. Need Recognition.  2. Information Search.  3. Evaluation of Alternatives.  4. Purchase.  5. Post-purchase behaviour.  Influences on consumer decision making: A. Culture: A set of values, ideas, attitudes, and symbols created to shape human behaviour.  Culture is environmentally oriented and it is social in nature. It is not static because it adapts to changing societal needs and evolving environmental factors.  Rapid growth of technology has accelerated the rate of cultural change B. Social: Consumers seek out opinions to reduce their effort in information search and evaluation of alternatives.  Reference groups: All formal and informal groups that influence buyer behaviour. Consumers look at how people operate and base their consumption decisions off of their observations.  Opinion leaders, individuals who are the first to try new things because they are trend setters or are curious about the product. These are people you want to convince.  Socialization process: The passing down of cultural values and norms to children. C. Individual: A buyer is also influenced by one‟s personal characteristics such as gender, personality, and self- concept. These are generally stable over the course of an individual‟s life.  Personality: A way of organizing and grouping how an individual reacts to situations. It is a combination of psychological make-up and environmental forces. o Includes people‟s underlying dispositions. o Consumers sometime buy certain products which they perceive reflects their personality.  Physiological: differences in roles of genders  Self-concept: how consumers perceive themselves; attitudes, perceptions, beliefs, self-evaluations. o Ideal self-image: The way an individual would like to be. o Real self-image: How an individual perceives themselves. D. Psychological: This is a person‟s set of perceptions, beliefs, and attitudes.  Perception: How we see the world around us and how we recognize that we need some help  Selective exposure: deciding which stimuli to ignore  Belief: organized pattern of knowledge that a person holds as true about their world. Through beliefs, a consumer can develop a brand image. This shapes the consumer‟s attitude toward the product.  Attitude: A learned tendency to respond consistently toward a given object, idea, or concept, such as a brand. These factors rest on an individual‟s value system and because of this, they are more complex to deal with than beliefs. Business 121 Midterm Review CONTINUUM OF CONSUMER BUYING DECISIONS  Routine response behaviour: low cost, frequently bought, little search or decision making; bread, milk.  Limited decision-making: consumer has previous product experience but is unfamiliar with the current brands  Extensive decision-making: unfamiliar, expensive, infrequently bought item. BUSINESS-TO-BUSIENSS (B2B) MARKET  The key difference between a consumer product and a business product is the intended use. o Purchase volume: buy in much larger quantities than consumers. o Number of customers: fewer customers; easier to monitor prospective buyers and their needs. o Location of buyers: tend to be much more geographically concentrated than consumers. o Direct distribution: tend to be made directly to the buyer, because sales involve large quantities. Consumer goods are likely to be sold through intermediaries such as wholesalers and retailers. TRENDS  Internet Marketing Research: o Allows rapid access to business intelligence and thus allows for better and faster decision making. o Improves a firm‟s ability to respond quickly to consumer demands and needs and market shifts. o Cuts down on a lot of research costs to increase profitability. o Personalization: respondents enjoy pertinent questions  higher number, hard-to-reach  Scanner-Based Research: ad campaigns, coupons, displays o A system for gathering information from a single group of respondents by continuously monitoring the advertising, promotion, and pricing they are exposed to and the things they buy. o Results in a huge database; accurate, objective picture of direct causal relationship  Loyalty cards: o Issued by manufacturer, service organization, or retailer that give discounts to loyal/frequent shoppers. o It also allows for a huge amount of data to be collected from the shopper in a cost effective way. This allows them to change their operations to better correlate with consumer trends.  One-To-One Marketing: o Creating a unique marketing mix for every customer. The key is having a good marketing database. o This helps managers understand customers on an individual basis.  30 pages vs. brochure o marketing database: computerized file of (potential) customers‟ profiles and purchase patterns. WHAT IS MARKETING?  An integrated system of activities designed to plan, price, promote, and distribute, want satisfying goods and services to present and potential customers  Production orientation: focus on reducing costs by mass production and economies of scale  Sales: focus is to make the product and sell it to target market  Market: try to understand their needs through research; ensure info is fed to heart of organization TARGET MARKET  KEY  provides a unique benefit, and communicate that unique benefit (convince them)  The group of customers to whom you wish to direct your product toward  not yet met by competition  Use resources efficiently, on those most likely to buy the product STEPS TO DEFINING A TARGET MARKET  Segmentation: separating, identifying, and evaluating the market to define a target market  Bases of Market Segmentation o State-of-being:  Demographic: Age, gender, lifecycle, income, occupation, education, religion, social class, etc.  Geographic: Region, population size, population density, climate. o State-of-mind: Psychographic: personality, lifestyle, interests, opinions o Product usage – behaviour: Business 121 Midterm Review  Volume – usage rate, user status, readiness to buy. o Benefits sought: Start with finding a group of people seeking the same benefit and then take the market and split it into the people who want that same thing.  Segment the market into different groups on basis of benefits  Describe those using different bases; personality, demographics etc.  Name the boxes last.  Perceptual Mapping and Preference Analysis: o Find the biggest gap between how the customer perceives the competition meets their needs (perceptual mapping) and what they really want (preference analysis).  Draw axes that represent relevant dimensions by which people differentiate 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.  Now determine the target market by choosing the segment in which the markets‟ needs have not been well met by a competitor. o Measure the distance from what the customer wants (the center of the circle) to the nearest competition. o Now position your product as close to the center of the circle (what the customer perceives) as possible  Positioning: o Finding a distinct position for your product in your customers‟ mind. o One that communicates your product as one with a unique benefit. o The objective is to position the product as close as possible to what the target market believes to be ideal  Consumer approach: Focusing on what they want and using a preference analysis.  Competitive approach: Focusing on competition and how you compare/match up with them. o Allows us to decide whether to use a consumer approach or competitive approach to position our product. PRODUCT CLASSIFICATIONS OF PRODUCTS  Product: any good or service, along with its perceived benefits, which create value for customers.  Different markets classify products differently  important to see products from customer‟s perspective so you know how to sell it to them  Consumer products are bought by the end user, and can be non-durable or durable  Classification of consumer products: o Unsought: unknown goods; customer doesn‟t actively seek to buy them. Life insurance, burial plots, new products. No effort by customer  aggressive promotion, personal selling, telemarketers, etc. o Convenience: relatively inexpensive items, frequently bought. Soft drinks, milk, bread. Very little effort by the customer  impulse goods(buy depending on point of purchase display; maximize exposure), emergency goods (must be readily accessible), staple good (depends on strong branding) o Shopping: Automobiles, homes, vacations. Considerable effort required by the customer.  Homogeneous: exposure for price comparison  Heterogeneous: exposure near similar products (price + quality) o Speciality: Expensive jewellery, gourmet dinners, limited production automobiles. Maximum effort.  selective distribution for exclusivity  Classification of business products: o products bought by businesses for use in making other products or in providing services. o Capital goods: Large, expensive items which have a long life span. o Expense items: Smaller, less expensive items that has a life span of less than a year. i. Installations: large, expensive capital items that determine the nature, scope and efficiency of the company. Buying an installation requires long negotiations, planning, many opinions ii. Accessories: capital goods such as copy machines, and personal computers. Less expensive and more standardized. Marketers often rely on well-known brands, extensive advertising and personal selling. iii. Component parts/materials: expense items that are built into the end product. Custom/standardized. iv. Raw materials: expense items that have undergone little or no processing to create a final product. Examples include lumber, copper, and zinc. v. Supplies: Bought for the office in large quantities. Little impact on firm‟s long run profits. vi. Services: expense items used to plan or support company operations; for example janitorial cleaning Business 121 Midterm Review PRODUCT LIFE CYCLE  Product life cycle: pattern of sales and profits over time for a product or product category. o Introduction: Product enters the life cycle and faces many obstacles.  Competition is light but the product has frequent modifications, needs heavy promotion, and has limited distribution  high costs but low volume  high failure rate o Growth stage: sales grow exponentially, profits are healthy, and many competitors enter.  There is more aggressive brand advertising and comparing between competitors brands.  Distribution is a major factor; need dealers and distributors and build long-term relationships.  Toward the end of this stage, prices normally begin to fall and profits peak  price reduction due to increased competition and cost reductions from economies of scale o Maturity stage: Sales mount but at a decreasing rate  most marketing strategies for this stage  Most products that have been on the market for a long time  One strategy is to bring out different variations of a product (line extension) o Decline (and death) stage: when the sales and profits start to fall; demand is virtually non-existent  State of decline is governed by two factors:  The rate of change in consumers‟ tastes.  The rate at which new products enter the market. STRATEGIES FOR THE STAGES OF THE PRODUCT LIFE CYCLE Category Introduction Growth Maturity Decline Marketing Encourage trial, establish Get triers to repurchase, Seek new users or Reduce marketing Objectives distribution attract new customers uses expenses, keep loyal customers Product Establish competitive Maintain product quality Modify product Maintain product advantage Distribution Establish distribution Solidify distribution Provide additional Eliminate trade network relationships incentives to ensure allowances support Promotional Build brand awareness Provide information Reposition product Eliminate most advertising and sales promotion Pricing Set introductory pricing Maintain prices Redu
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