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BU121 Midterm: BU121 Notes Midterm

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Business
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BU121
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Laura Allan

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BUSINESS MODELWhat is a business model?Implications of business model on operations? BusiValue Proposition Design:Differences and overlap between EI, IQ & PersonaliWhat is EQ?Connections:Application of EI in business and leadership:Understanding DISC profiles – greatest fear, antagBUSINESS COMMUNICATIONImplication of the “curse of knowledge”MARKETINGMarketing concept: Core value Proposition and BuilTypes of competitive advantage:Consumer decision-making process, influences on cConsumer buying decisions:B2B Decision Making:Trends:Lecture MaterialHow to locate a target market using market segmentPerceptual Mapping/Preference Analysis:Perceptual Mapping:Preference Analysis:Positioning:Classifying consumer products vs. business productProduct life cycle (+ altering the speed of the cChannels of distribution and marketing intermediarChannels ease the Flow of Goods:Channels perform needed functions:Promotion objectives and factors affecting the proIncorporating more technology at all levels:Yield Managements Systems (YMS) help companies maxCategory Management:Outsourcing logistics functions#2 Key to successful marketing – importance of valProduct classification – how consumers classify prTotal product concept – brand and brand insistencePricing mechanisms (ways to price) and approaches Personal Selling-one on one (more effective since Sales Promotion—SHORTPublic Relations & Publicity—FREE 2This document belongs to RebeccaBUSINESS MODELWhat is a businessmodel?How a company intends to make money / the logic by which it sustains itself financially.Shows how the organization, creates, delivers and captures value “Idea becomes a business”Business Model Canvas:Needs to be ScalableNeeds for flow and connection between them9 Components:customer segments: which customers and users are you serving? Which job do you really want to getdone? -Mass market: wide large population: consumer electronics. -Niche market: specific market: gluten-free products. –Segmented: banking. –Diversified: Amazon. –Multi-sided: credit card companies. Differentcustomers groups that independent. value propositions: What are you offering them? What is that getting done for them? Do they care? -Cost reduction: UPS. -Risk reduction: (service guarantee)(more expensive cars comes with free services). –Price: Walmart. –Accessibility: Net Jets. -Convenience/usability (iTunes)(download music easily). -Brand/status: (Rolex)(The value is in that brand). –Design: Apple. -“Getting the job done”:(rollsroyce)(sell services, charge for hours). –Customization: Jeans, will measure you. –Performance: (PCs) feelthey needed. –Newness: cell phones. channels: How does each customer segment want to be reached? Through which interaction points? –awareness: How you create awareness, how you connect the value with customers. –evaluation: How youhelp customers value it? -purchase: What channel they purchase? -delivery: What channel you delivery? -after sales: How you attract customers after sales?customer relationships: What relationships are you establishing with each segment? Personal?Automated? Acquisitive? Retentive? –personal assistance: car dealerships -Dedicated personal assistance:private banking; have someone specifically cooperate to -self service: grocery stores; (change your model)-automated services: amazon -communities: bring different customers together, create the community(HOGs) -co-creation: Youtube revenue streams: what are customers willing to pay for? How? Are you generating transactional orrecurring revenues? –asset sales: one time purchase. –usage fee: hotel. -subscription fees: magazines. -lending/renting/leasing: zipcar.con(lending the car). –licensing: technology patents, Media copyright. –advertising: media. -brokerage fees: monster.com(help people to get a job)key resources: which resources underpin your b.model? which assets are essential? -physical:walmart. –intellectual: software (Microsoft). –human: Mayo Clinic. –financial: stock options for keyemployees (have partners to allow that).key activities: which activities do you need to perform well in b.model? what is crucial? –making:manufacturing, providing services, platform/network development. –selling: promotion and education(educate them on that value). –supporting: finding talent/HR, customers service, platform/networkmanagement. key partners: which partners and suppliers leverage your model? Who do you need to rely on? -optimization and economy of scale: outsourcing or sharing infrastructure. -reduction of risk and uncertainty:BluRay (lower risks, more likely to be successful). -acquisition of resources and activities: all the resourcesare all us, or others (Mobile phone operating systems: who your key supplier will be)cost structure: what is the resulting cost structure? Which key elements drive your costs? -cost driven:walmart. –value driven: hotal(offering). –fixed cost: manufacturing. –variable cost: service (every singletime you do it, there is a cost; the more your service, the more cost will have). -economies of scale:distributions of scope. -economies of scopeWhy it is important to understand your business model (Lab Manual – Why Business 3This document belongs to RebeccaModels Matter)? Model affects strategy/ways of operatingoBlueprint describing how an organization operates…oHas implications on business strategies Represent a better way than the existing alternatives—“writing a new story” Business model isn’t the same thing, as a strategy, even though may people use theterms, interchangeably. Scientific method of a business A strong business model that is hard to replicate can become your competitiveadvantage. Strategy should align with business model. Strategies help you differentiate yourselffrom identical business models.o IE Kmart and Walmart of simplifying and making it very BASICHow companies can have essentially the same product and different business models?Different companies can have similar offerings, but different business modelDifferences in Revenue Models:Panasonic VS Gillette Razors:oIE Panasonic’s one time high investment Electric Razor VS. Gillette Bait and HookModel with replaceable bladesoIn this case both serve the same function but they have different streams of revenues.Panasonic has one time fee, while Gillette has constant resupply fee.Consumer Report VS Vogue:o Consumer reports makes money off of subscriptions should have good content forthem to subscribe to the next month.oVogue makes money off of advertising need content that attracts company 'starget market, so that they actually place their ads in the magazine. For example TeenVogue as a Material girl adsHowever both serve the same offering of providing contentDifferences in multiple ways :o Differences in Customer Segments:oGoodHouse Keeping Mag.→target market is moms- 4This document belongs to Rebeccao Teen Vogue-→Young Adultso Both serve the same offering of providing contentImplications of business model on operations?Business model patterns and examples:Multi-Sided Platforms: Value is created by facilitating interactions between two or more distinct but interdependent groups ofcustomers. You facilitate the interaction between those 2 or more. The interaction is the valueproposition. Valuable to one group only if the other groups are involved– grows in value to the extentthat it attracts more users – network effect Often solved by one segment subsidizing another Example: Visa (credit card companies), eBay, Financial Times (newspapers), Facebook, Video gameconsoles, GoogleIE Google Free Search (value proposition)Web surfers(segment) Monetizing website content since web suffers are searching for these websites (**Nofee**) (value proposition)Content Creators (segment)Targeted Ads on Google (value proposition) advertiser (segment)KeywordAuctions (revenue stream)**ads will pop when I search ***Long Tail:Selling ‘less of more’ – focusing on offering a large number of niche products, each of which sellsrelatively infrequently vs. focusing on selling a small number of products, each selling in highvolume(sell a lot of a few things) Examples: Netflix, eBay, YouTube, Facebook, LEGO Factory (customer-designed kits), lulu.com(different model from normal publishing company. Focus on niche audience. Only produce the goodbook that people will buy).IE NetflixWide variety niche of TV shows and movies, however only have them at limited time(expires) all for one fee.Instead a pay per view optionIE ChaptersSell a variety of books= Large Quantitysells less of each of variety of booksFree: When customer segment is able to benefit from a free of charge offer,financed by another part of the model or other customer segment “Something is free, but needs to make money off another part of the model” Advertising—IE Facebook, Twitter At least one substantial customer segment is able to continuously benefit from a free-of-charge offer,financed by another part of the business model or by another customer segment. Different patterns make the free offer possibleAdvertising: television, radio; google(suffer the internet for free but get money from advertiser) Freemium: get you rely on it, and when you want more, you need to pay a fee. Bait & Hook: have a free mobile but need to pay for the phone plan monthly. (building lock-in)Additional Models: Membership models – subscription box, member community, flash sales Crowdsourcing models – crowdsourcing, crowdfunding, peer-to-peer sharingEnvironmental Context: “So what 5This document belongs to RebeccaImpacts the components of the business modelso Design drivers for your modelMarket ForcesoMacro Economic ModeloKey Trendso Industry ForcesDoes your model have a competitive edge today. does it inline with customer needs, howwill your model adjust to macro-econ? Does your model go with emerging trendsValue Proposition Design:The set of valueproposition benefits thatyou design to attractcustomers must FIT withthe set of customersegment characteristicsCustomer Segment:Jobs: What are trying to getdone in their work and in their lives,expressed in their own wordsproduct and services functionality should aid in their jobs. Functional jobs – when they try to perform or complete a specific task or solve aspecific problem. IE trying to eat healthy. Social jobs – when they want to look good or gain power or status; how they want tobe perceived by others. IE Look trend, be perceived as component, Personal/emotional jobs – when they seek a specific emotional state. IE I want to feela good about myself, security, peace of mind. Supporting jobs: context of purchasing and consuming value. Need to understand endexperience buying, co-creating transferring value.Job contextcontext in which the job is performed may impose constraints or limitations -important to consider. Context is different, job is differentJob importanceOn a scale from important to insignificant – determine how much does itmatter to the customer. More crucial  more valuePains: Potential bad outcomes, risks, and obstacles related to customer jobsPain relieversin the product supposed to aid thisUndesired outcomes, problems, and characteristicso Pains are functional (doesn’t work), social (I look bad doing this), or emotional (Ifeel bad), or ancillary ( its annoying to have to go to the store for this), or mayinvolve undesired characteristics 6This document belongs to Rebecca Obstaclesmaking it difficult, Don’t have time/afford ito Things that prevent customers from even getting started with a job or that slowthem downRisks (undesired potential outcomes). I loose my crediablity, security breacho What could go wrong and have important negative consequencesPain severityoOn a scale from extreme to moderate –determine how much does it annoy oraffect themGains: The outcomes customers want to achieve or the concrete benefits that are seekingGainCreator allows them to do this Required gainsWithout which a solution wouldn’t work – the most basic expectation.A Must have. The cellphone must be able to make the call. Expected gainsRelatively basic gains that customers expect from a solution, even if itcould work without them. IE phone is well designed and looks good. Desired gainsThat go beyond what customers expect from a solution but would love tohave if they could. IE phone seamlessly intergrates with other devices. Unexpected gainsThat go beyond customer expectations and desires; they wouldn’teven come up if you asked them. Not coming up with something and convincing them tobuy it. Innovation (touch screends) Gain relevanceOn a scale from essential to nice to have – determine how relevant isthe gain to themDISC & EMOTIONAL INTELLIGENCELab Manual – The Business Case for Emotional Intelligence - major concepts only, Building theEmotional Intelligence of Groups (covered in lectures as well)Establishing group norms that create awareness and regulation of emotions at the individual andgroup level“elephant in the room, that doesn’t ’t create productivity. “Managers need today, find ways to make teams work betterTeam emotional intelligence is more difficult than individualAware of emotions and can regulate inward + outwardNeed to be aware of the needs/emotion of the group in another departmentCreating norms among the group, individual, and cross-boundaryo Confronting/caringoCreating strong eco./ express emotionsoBuilding relationshipsDifferences and overlap between EI, IQ & Personality: EI: Emotional intelligence: how well you handle stressful situations and challenges, how your emotionsinfluence your decision making, thinking, social relationships. EI improves as you get older and learnHow is EI different from IQ: IQ is cognitive intelligence, fixed after a certain age, peaks at 18, EI changes,IQ is set by age 17Group emotionaltrust, identity,Parcipation,better decisions, 7This document belongs to RebeccaHow is EI different from personality: Personality doesn’t change much vs. EI, personality is more a set oftraits that defines how a person responds/behaves overlap: they all can influence someone’s leadership.Settle Differences:•Self-Regard vs. self-esteem  knowing you strengths vs. weaknesses, VS positive imageabout oneself.•Assertiveness vs. aggressivenessable to speak up for yourself in a nonaggressive wayVS being aggressive when speaking up for oneself•Empathy vs. sympathyable to understand the other person feelings and putting oneselfon in their shoes VS agree with them and put emotions on themselves. Feel what theirfeeling•Impulse Control vs. spontaneityNegative vs. positive consequences.What is EQ?“An array of non-cognitive (emotional and social) capabilities, competencies and skills thatinfluence one’s ability to succeed in coping with environmental demands and pressures.” Reuven Bar On’s EQi is the most accurate one Happiness effects indirectly EQ-I but not included in scoreBALANCE is the key. Your assertiveness needs to balance with your empathy forexample having an imbalance makes other criteria’s worse offyour EQ maginifiies your iQ and technical skillsElements Include:PerceivingUnderstandingRegulatingEQ-i ModelConnections:Self perception affects self-expression 8Self-expressioninterpersonal skillsInterpersonal skillsthrough feedback make effect decision makingDecision makingstress management.Application of EI in business and leadership: ability to remain calm under pressureability to resolve conflict effectively More successful hiringDecreased attrition rates Reduced training costsHigher levels of productivity and success Greater individual performance Better leaders and managersStronger relationships with employees and customers EI skills of primary importance in distinguishing successful from unsuccessful leadersEI skills of primary importance for flagging possible derailment (stress management; problem solving;self-regard) Examples: - American Express: predict key characteristics associated with top performance in orderto develop selection criteria. – United States Air Force: to determine the differences betweensuccessful and unsuccessful recruiters to increase retention (saving training cost). – CIBC: todetermine key EI characteristics that defines successful sales representatives, used for selection andleadership development.Understanding DISC profiles – greatest fear, antagonized response, emotionalmeasured and how to communicate with each:D(3%): - Greatest fear: being taken advantage ofAntagonized response: aggressiveEmotional measured: anger- How to communicate with? Be brief and tothe point; ask “what” not “how”questions;focus on results; highlight the logical benefits;agree with facts and ideas, not people; discussproblems in light of how they affect outcomes;do not ramble or repeat, focus on problems, betoo social or generalize. I (11%): -Greatest fear: rejection- Antagonized response: negotiate- -Emotion measured: optimism- -How to communicate with? Build a favorableenvironment; let them talk about ideas; sharetestimonials; allow for social time; writedetails, but do not dwell on them; createincentives for following through; do noteliminate social time, do all talking ignoretheir ideas or tell them what to do. S(69%): - Greatest fear: loss of security- Antagonized response: passive- Emotion measured: emotional expression- How to communicate with? Build a safeenvironment; show a genuine interest in them;define goals/procedures and their role in theplan; patiently draw out goals; give them timeto adjust; minimize perceived risk and assurepersonal follow-up; do not be pushy,aggressive, demandingabrupt or controversial. C(13%): -Greatest fear:criticism- Antagonized response:passive- Emotion measured: fear- How to communicate with?Prepare case in advance; useaccurate date; assure them, no“surprises”; use preciseexplanations; be specific; givepatient and diplomaticexplanations; do not refuse toexplain the details or answerquestions vaguely or casually 9BUSINESS COMMUNICATIONWhat is a sticky message?Understandable, memorable, and effective in changing thought or behavioro IE Urban Legendso IE medium-sized popcornmedium-sized “butter” popcorn at a typicalneighborhood movie theatre contains fat more fattening than big mac, instead ofjust stating the factImplication of the “curse of knowledge”when you know it too well, it is hard to put their shoes- difficult for them to get themessage6 principles of stickiness:Simple: very clear-aid in understand, Core + Compact Unexpectedness: get customers attention (lose weight eating fast food).Concreteness: make ideas clear-understand and remember (oversized pants) Credibility: make them believe (anti-authority, because of the experience)Emotion: get people to care (individual vs mass, reaching potential-self-interest).Stories: get people to act (inspiring challenge plot).MARKETINGChapter 3: The Customer FocusMarketing concept: Core value Proposition and Building RelationshipsFocusingIdentifying customer needs and then producing want-satisfying goods or services whilemaking a profit.Focusing on customer wants, so the organization can distinguish its products from its competitors. Integrating all of the organization’s activities, including production, to satisfy thesewants.Achieving long term goals for the organization by legally and responsibly meeting thesewants.Types of competitive advantage:A set of unique features of a company and products perceived by the target as superior tothose of competition.Differential: firm provides something unique that is valuable to buyers beyond justhaving a low price. Tend to last longer than cost advantage. Some examples are brand names, a strong dealer network, productreliability, image and service.Cost: firm can produce its product for a lower cost than its competitors while maintainsatisfactory profit margins. Obtaining inexpensive raw materials, making plant operations moreefficient, designing products for easy manufacture, controlling overheadcosts and avoiding marginal customers. Over time this advantage may fall because competition also gets moreefficient technology etc. 10Niche: 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 largecompetitors Once a niche has been established, the firm must defend it from itscompetitors.Consumer decision-making process, influences on consumer decision-making:A. Culture: A set of values, ideas, attitudes, and symbols created to shape human behavior.Environmentally oriented and it is social in nature. It is not static because itadapts to changing societal needs and evolving environmental factors.Rapid growth of technology has accelerated the rate of cultural changeB. Social: Consumers seek out opinions to reduce their effort in information search andevaluation of alternatives.Reference groups: All formal and informal groups that influence buyerbehavior. Consumers look at how people operate and base their consumptiondecisions off of their observations.Opinion leaders, individuals who are the first to try new things because theyare trendsetters or are curious about the product. These are people you wantto convince.Socialization process: The passing down of cultural values and norms tochildren.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 anindividual’s life.Personality: Consumers sometime buy certain products which they perceivereflects their personality.Physiological: differences in roles of gendersSelf-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 weneed some helpSelective exposure: deciding which stimuli to ignoreBe
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