Afm 131 3b615t

AFM 131 Midterm Notes Chapter 3 – Competing in Global Markets    

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Exporting: selling products (ie. Goods and services) to another country Importing: buying products form another country. Free trade: the movement of goods and services among nations without political or economic barriers Comparative advantage theory: a theory that states a country should sell to other countries those products that it produces most effectively and efficiently and buy from other countries those products that it cannot produce as effectively or efficiently trade. Absolute advantage: the advantage that exists when a country has a monopoly on producing a specific product or can produce it more efficiently than all other countries Real job potential is with small businesses contribute between 25 and 41 percent of Canada GDP and employ approximately seven million individuals The Canada Border Services Agency deals with importers and the regulation involving products (ie. Is the article prohibited entry into Canada)? Exports alone for one in three Canadian jobs Balance of Trade: a nation’s ratio of exports to imports Trade Surplus: a favourable balance of trade; when exports > imports Trade Deficit: an unfavourable balance of trade; when imports >exports Balance of Payments: the difference between money coming into a country and money leaving the country plus money flows from other factors such as tourism, foreign aid, military expenditures, and foreign investment. Canada’s is highly dependent on their biggest trading partner US (70%) Canada trade identified three priority market types: 1. Emerging markets with broad Canadian interests 2. Emerging markets with specific markets with specific opportunities for Canadian businesses 3. Established markets with broad Canadian interests Predominantly in Asia Pacific and Middle East and Africa. China and India are of interest.

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Risk and Commitment for Global Expansion (from lowest to highest) 1. Licensing: a global strategy in which the licensor allows a foreign company (the licensee) to produce its products in exchange for a fee (royalty) 2. Exporting: exporting goods and services to other countries. Companies can engage in indirect exporting through specialists called export-trading companies. 3. Franchising: Selling the rights to use an established business name and sell a product/ service in each territory (adapt territory, ie. KFC, Taco Bell etc.) 4. Contract Manufacturing (outsourcing): foreign company manufactures goods to which a domestic company then attaches its own brand name or trademark 5. International t ventures and strategic alliances: a. t Venture: a partnership in which two or more companies (often from different countries) to undertake a major project. i. Shared tech, risk, marketing, and management expertise, facilitates entry b. Strategic Alliance: A long-term partnership between two or more companies established to help each company build competitive market advantages. i. Does not involve sharing costs, risks, management, or profits 6. Foreign Direct Investment: buying permanent property and businesses in foreign nations

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a. Foreign subsidiary: a company owned in a foreign country by the parent company. Must follow regulation from both domestic and foreign country. Multinational corporation: an organization that manufactures and markets products in many different countries and has multinational stock ownership and multinational management. Branch Plant Economy: when many subsidiaries owned by foreign companies and profits are returned to the home country rather than reinvested in Canada Ethnocentricity: an attitude that one’s own culture is superior to all others. Successful companies are those that can understand cultural differences and adapt accordingly Exchange rate: the value of one nation’s currency relative to the currencies of other countries Devaluation: lowering the value of a nation’s currency relative to other currencies. Countertrading: a complex form of bartering in which several countries may be involved, each trading goods for goods or services for services In global markets, the absence of a central system of law means many different systems of laws may apply o Canadian businesses must follow Canadian laws in conducing business globally. Trade Protectionism: the use of government regulations to limit the import of goods and services Dumping: selling products in a foreign country at lower prices than those charged in the producing country Tariff: a tax imposed on import o Either protective tariffs or revenue tariffs Import Quota: a limit on the number of products in certain categories that a nation can import Embargo: a complete ban on the import or export of a certain product or the stopping of all trade with a country. Non-tariff barriers: ie. Restrictive standards such as safety, health and labelling GATT (general agreement on tariffs and trade): a 1948 agreement that established an international forum for negotiating mutual reductions in trade restrictions. WTO (world trade organization): the international organization that replaced the general agreement on tariffs and trade, and was assigned the duty to mediate trade disputes between countries International Monetary Fund (IMF): international bank that makes short-term loans to countries experiencing problems with their balance of trade. World Bank: an autonomous UN agency that borrows money from the more prosperous countries and lends it to less developed to develop infrastructure Producer Cartels: organizations of commodity-producing countries that are formed to stabilize or increase prices to optimize overall profits in the long run. Common Market (trading bloc): a regional group of countries that have a common external tariff, no internal tariffs and a coordination of laws to facilitate exchange; also, called a trading bloc. An example is the EU. NAFTA EU: almost 87 nations

Chapter 4 – Role of Government in Business  

National Policy: Government directive that placed high tariffs on imports from the United States to protect Canadian manufacturing which had higher costs Crown Corporations: companies that are owned by the federal or provincial government

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o Provinces also own crown corporations (ie. Power supply companies) Canadian government is embarking upon a series of measures designed to reduce the role of government in the economy. o Privatization: the process of governments selling Crown corporations. Deregulation: government withdrawal of certain laws and regulations that seem to hinder competition o Everyone is looking to lower cost of operation and improve efficiency. Federal Government is responsible for issues that affect citizens across Canada. Primarily to ensure and country’s economic performance o Trade regulation, national defence, taxation, banking, unemployment, immigration criminal law. o Competition Act: Merger of large corporations o Competition Bureau: Independent law enforcement agency ensures a competitive and innovative marketplace : prevents price fixing Marketing Boards: organizations that control the supply or pricing of certain agricultural; products in Canada Provincial Government Responsibilities: issues that affect provincial residents that do not necessarily affect all Canadians o Regulation of provincial trade and commerce, health and social services, property law, labour law, education o Interprovincial trade is $300 billion industry in Canada, though many Canadian companies and individuals face obstacles trying to do business, o AIT (Agreement on Internal Trade) is an intergovernmental trade agreement signed by Canadian First Minister; serves to eliminate trade barriers Municipal Government Responsibilities: water supply, sewage, garbage, roads playgrounds, libraries Sin tax: taxing of certain classes of products which the government wants a reduce usage of Fiscal Policy: the federal government’s effort to keep the economy stable by increasing or decreasing taxes or government spending Deficit: occurs when a government spends over and above the amount it gathers in taxes in a fiscal year. National Debt (federal debt): the accumulation of government surpluses and deficits over time Surplus: an excess of revenues over expenditures Federal Budget: a comprehensive report that reveals government financial policies and priorities for the coming year. Keynes Model  Top Up Approach (Canada’s approach) o Need for government oversight o Future is uncertain o Need for a quick spark o We can’t just wait for the market o Drawbacks: control expenditures and deal with massive debts Hayek model  Bottom Up Approach o Let the economy do the job o Don’t bail out the losers o Don’t need a series of bubbles (result of government intervention) o With alternative, no end to the cost Fiscal Policy: how governments collect and spend tax dollars. Monetary Policy: the management of the money supply and interest rates controlled by the Bank of Canada.

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o raising and lowering interest rates help control inflation Subprime mortgages are loans targeted tat people who do not qualify for regular mortgages b/c of low credit scores. Government expenditures o Pensions, employment insurance, welfare, subsidies etc. Transfer payments: direct payments from governments to other governments or to individuals o social security and income Equalization: a federal government for reducing fiscal disparities among provinces o help less prosperous provinces provide Government contracts are often awarded to help Canadian businesses even if they are sometimes more expansive than bids by non-Canadian companies. Canada Business Network, involves setting up Canada Business service centres in every province and territory. NRC: national research council is a federal agency that does research to help Canadian industry remain competitive and innovative. Department of Foreign Affairs, Trade and Development: assist companies in the global markets Industrial Policy: a comprehensive, coordinated government plan to guide and revitalize the economy

Chapter 7 – Entrepreneurship and Starting a Small Business 

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Entrepreneurship: accepting the challenge of starting and running a business  Differences between Entrepreneurship and small business  Amount of Wealth Creation  Speed of Wealth Creation  Risk  Innovation Why people take the entrepreneurial challenge  New Idea, Process, or Product:  Independence  Challenge  Family Pattern  Profit  Immigrants What does it take to be an entrepreneur?  Self-Directed  Self-nurturing  Action-oriented  Highly Energetic  Tolerant of Uncertainty  Able to learn quickly SMEs (small and medium-sized enterprises): refers to all businesses with fewer than 500 employees Increase in female entrepreneur’s b/c  Financial needs, lack of promotion opportunities, women returning to the workforce, women have a higher rate of success than men Entrepreneurial team: group of experienced people from different areas of business who to form a managerial team with the skills needed to develop, make, and market a new product.

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Micro-enterprises: a small business defined as having one to four employees Micropreneurs: small-business owners with fewer than five employees who are willing to accept the risk of starting and managing the type of business that remains small, lets them do the kind of work they want to do, and offers them a balanced lifestyle.  many are home-based businesses b/c of improving computer technology, corporate downsizing and change in social attitudes Web based businesses must offer more than the same merchandise customers can buy at stores and must be unique marketing: an online marketing strategy in which a business rewards individuals or other businesses(s) for each visitor or customer the sends to its website Intrapreneurs: creative people working within corporations Industry Canada’s SME Research and Statistics site offers research on small business and entrepreneurship  Services to help entrepreneurs and small businesses succeed  Business Development Bank of Canada (BDC)  Canada Business Network  Business Incubators: centres that provide space, services, advice and to assist new and growing businesses to become established and successful Business Establishment: must meet the following minimum criteria: it must have at least one paid employee; it must have annual sales revenue of $30,000 and it must be incorporated and have filed a federal corporate income tax return at least once in the previous three years. Small Business: a business that is independently owned and operated, is not dominant in its field and meets certain standards of size in of employees or annual revenues. Forms of Business Ownership  Sole Proprietorship  Advantages: easy to set up, low start up, freedom  Disadvantages: unlimited liability, business continuity, raising funds  Partnership  Advantages: Additional talent, more access to fund, less regulatory  Disadvantages: Unlimited liability, conflicts  Corporation  Separate legal entity  Advantages: limited liability, indefinite life, greater access to financing  Disadvantages: Higher cost to incorporate, complexity of managing records Most common reasons for small-business failure is managerial incompetence and inadequate financial planning.  Important to learn from mistakes  Get some experience  buy an existing business  buy a franchise  inherit/take over a family business Five functions of business in a small-business setting  Planning your business  Business Plan: a detailed written statement that describes the nature of the business, target market, the advantages the business will have in relation to competition and the resources and qualifications of the owner(s)  Financing your business (finance)  Angel Investors: private individuals who invest their own money in potentially hot new companies before they go public

Venture Capitalists: individuals or companies that invest in new businesses in exchange for partial ownership of those businesses  Crowdfunding: raising funds through the collection of small contributions from the public (known as the crowd) using the internet and social media.  Government grants Knowing your customers (marketing)  Market: people with unsatisfied wants and needs who have both the resources and willingness to buy. Managing your employees (HR)  Delegating work and relinquishing control Keeping Records (ing) Looking for help  Exterior consulting help business has advantages over large business in international trade in: Overseas buyers enjoy dealing with individual’s vs large corporate bureaucracies More personal Faster shipping 

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Chapter 14 – Helping Buyers Buy   

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Marketing: a set of business practises designed to plan for and present an organization’s products or services in ways that build effective customer relationships Today much of marketing is helping buys buy instead of focusing on helping sellers sell Five Eras (Orientations) of Marketing 1. The Production Era: everything centered around producing as there was a limitless market 2. The Sales Era: Companies emphasized selling as production outpaced buying. 3. The Marketing Concept Era: 1. Marketing concept: a three-part business philosophy: customer orientation, service orientation and profit orientation.  Customer Orientation: find out what customers want and provide it  Service Orientation: make sure everyone in the organization is focused on customer satisfaction.  Profit Orientation: focus on goods and services that will enable the most profit and enable the organization to survive and expand to serve more customers’ wants and needs 4. The Market Orientation Era 1. Market Orientation: focusing efforts on (1) continuously collecting information about customer’s needs and competitor’s capabilities, (2) sharing this information throughout the organization, and (3) using the information to create value, ensure customer satisfaction and develop customer relationships. 2. CRM (customer-relationship management): the process of building longterm relationships with customers by delivering customer value and satisfaction. 5. The Social Media Marketing Era: 1. Social Media Marketing: About consumer-generated online-marketing efforts to promote brands and companies for which they are fans and companies marketing themselves. Non-Profit organizations prosper from marketing. Marketing Mix 1. Product: any physical good, service, or idea that satisfies a want or need

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1. Test Marketing: the process of testing products among potential s 2. Brand Name: a word, letter, or group of words or letters that differentiates one seller’s goods or services from those of competitors 2. Price: the money or other consideration (including other goods and services) exchanged for the ownership or use of a good or service 3. Place: location, usage of intermediaries, distribution 4. Promotion: all techniques sellers use to motivate customers to buy their products 1. Building relationships with customers Marketing research: marketers analyze markets to determine opportunities and challenges and to find information they need to make good decisions 1. Help identify consumer purchasing trends 1. Defining question 2. Collecting Data  Secondary data: information that has already been compiled by others and published in journals and books or made available online.  Primary data: data that you gather yourself (ie. Surveys, Focus Groups, Observation) 3. Analyzing the research data 4. Choosing the best solution and implementing it The Marketing Environment 1. Environmental Scanning: the process of identifying the factors that can affect marketing success. 1. Global Environment 2. Technological Environment 3. Social Environment 4. Competitive Environment 5. Economic Environment 6. Legal Environment Consumer Market: consists of all individuals or households that want goods and services for personal consumption or use. Cause Marketing: when a charitable contributions of a firm are tied directly to the customer revenues produced through the promotion of one of its products. Business to Business market: all individuals and organizations that want goods and services to use in producing other goods and services or to sell, rent or supply goods to others. 1. Customers in B2B are relatively few 2. Businesses are relatively large 3. Markets tend to be geographically concentrated 4. More rational than consumers 5. Tend to be direct but not always 6. More emphasis on personal selling in B2B markets. Methods of market segmentation  Market Segmentation: the process of dividing the total market into groups with similar characteristics  Geographic segmentation: dividing the market by geographic area  Demographic segmentation: dividing the market by age, income, and education level  Psychographic segmentation: dividing the market using the group’s values, attitudes, and interests  Behavioural segmentation: dividing the market based on behaviour with or toward a product  Best strategies are to use all the variables to find the profitable target market

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Target marketing: marketing directed towards segmented groups organization determines it can serve profitably Mass Marketing: developing products for everyone Niche marketing: finding small but profitable market segments and deg products for them One-to-one marketing(micromarketing): developing a unique mix of good sand services for each individual customer Product positioning: the place an offering occupies in customers’ minds on important attributes relative to competitive products Positioning statement: how a company wants to be perceived by customers Relationship marketing: Marketing strategy with the goal of keeping individual customers over time by offering them products that exactly meet their requirements (ie. Loyalty marketing) Consumer behaviour: when marketing researchers investigate consumer thought processes and behaviour at each stage in a purchase to determine the best way to help the buyer buy. Green marketing: the process of selling products and or services based on their environmental benefits Greenwashing: when businesses try to make themselves or their products or services look green or socially responsible without the action to back it up. Ethnic Marketing: combinations of the marketing mix that reflect the unique attitudes, race or ancestry, communication preferences, and lifestyles of ethnic Canadians.

Chapter 15 – Managing the Marketing Mix            

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Value: good quality at a fair price. Total Product Offer (value package): everything that customers evaluate when deciding whether to buy something, considering tangible and intangible dimensions Product line: a group of products that are physically similar or are intended for a similar market Product mix: the combination of product lines offered by an organization Product differention: the creation of real or perceived product differences Packing of products play a huge role in promoting it o Bundling: grouping tow or more products together and pricing them as a unit Brand: a name, symbol, or design that identifies the goods or services Brand Equity: the value of the brand name and associated symbols Brand loyalty: the degree to which customers are satisfied, enjoy the brand and are committed to further purchase Employer Branding: how employers can separate themselves from others Brand Manager: a manager who has direct responsibility for one brand or one product line; aka product manager A product life cycle: a theoretical model of what happens to sales and profits for a product class over time; the four stage of the cycle are introduction, growth, maturity and decline o Not all products follow cycle Popular pricing objectives o Achieving a target return on investment or profit o Building traffic o Achieving greater market share o Creating an image o Furthering social objectives

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Cost-Based pricing: basing price off the cost of producing product Demand-based pricing (target costing): deg a product so that it satisfies customers and meets the profit margins desired by the firm Competition-Based pricing: a pricing strategy based on competitors o Price leadership: a strategy by a dominant firm sets the pricing practises for the rest of the industry Break-even: (Total FC / P – VC), process used to determine profitability at various levels of sales Total fixed costs: all expenses that remain the same no matter how many products or services are made Variable costs: costs that change depended on production Skimming price strategy: when new product is priced high to make optimum profit while there’s little competition Penetration pricing: priced low to attract customers and discourage competitors EDLP (everyday low pricing): setting prices lower than competitors and not having any special sales High-low pricing strategy: set prices that are higher than EDLP stores but have many sales Psychological Pricing: pricing goods and services at price points that make the product appear less expensive than it is. Demand-oriented pricing: different consumers may be willing to pay different prices Many non-price factors go into competition o Product image, consumer benefits Marketing intermediaries: organizations that assist in moving goods and services from producers to business and consumer s o B2B o B2C Channel of distribution: the path between suppliers to consumers Agents/Brokers: intermediaries that bring buyers and sellers together and assist in negotiating an exchange but do not take title to the goods Wholesaler: a marketing intermediary that sells to other organizations Retailer: an organization that sells to ultimate consumers Intermediaries perform certain marketing tasks faster and cheaper than most manufacturers such as transportation, storage, selling, advertising, relationship building Intensive distribution: distribution that puts products into as many retail outlets as possible Selective distribution: distribution that sends products to only a preferred group of retailers in an area Exclusive distribution: distribution that sends products to only one retail outlet in each geographic area Direct selling: selling to customers in their homes or where they work. Promotion mix: the combination of promotional tools an organization uses o Advertising o Personal Selling o Public relations o Direct marketing o Sales promotion IMC (integrated marketing communication): combines all the promotional tools into one comprehensive and unified promotional strategy. Advertising: paid promotion

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Global advertising: involves developing a product and promotional strategy that can be used worldwide. o Today companies are moving away from globalism and towards regionalism Personal Selling: the face to face presentation and promotion Sales promotion: the promotional tool that stimulates consumer purchasing and dealer interest by means of short-term activities. Public relations: evaluating public attitudes and makes changes to earn public understanding and acceptance Direct marketing: any activity that directly links manufacturers or intermediaries with the ultimate customer. Word-Of Mouth Promotion: a promotional tool that involves people telling other people about products they have purchased Push strategy: promotional strategy in which the producer uses all promotional tools to convince wholesalers and retailers to stock and sell merchandise Pull strategy: heavy advertising and sales promotion efforts are directed toward consumers so that they will request the products from retailers.

Chapter 10 – Operation Management, Producing World-Class Goods & Services 

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Canada is still a large industrial country with many major industries o Canada is becoming less competitive b/c of inability to be modern and increases in innovation. o Current business field is based around constant and restless change and dislocation. R&D: work directed toward the innovation, introduction and improvement of products and processes. Canadian manufacturers have done these things to regain a competitive edge o Focus on customers, maintain close relationships with suppliers, practise continuous improvement, focus on quality, etc. Relationships between inputs and outputs, improvement when: o Fewer input to produce the same level of outputs o Same input more output Production: the creation of finished goods and services using the factors of production; land, labour, capital, entrepreneurship and knowledge. Activity-based management: rescue non-value added processes Production Management: the term used to describe all the activities that managers do to help their firms create goods. Operations Management: a specialized area in management that converts or transforms resources (including HR) into goods and services. o all about enriching the customer experience. o Operations management is the implementation phase of management o Operation management has lead to tremendous productivity increases in the service sector. Operations Management Planning: solves problems in the service and manufacturing sectors o Facility location, layout, quality control o Facility Location: the process of selecting a geographic location for a company’s operations o Outsourcing goods and services such as software development, call-centre jobs and back-office jobs have been moving to developing countries for some time.

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Telecommuting: working from home via computer is become a major trend in business Facility Layout: the physical arrangement of resources (including people) in the production process.  Assembly-line: workers only do a few tasks at a time  Modular layout: where teams of workers combine to produce more complex units of the final product  Fixed-position layout: allows works to congregate around the product to be completed  Process layout: one in which similar equipment and functions are grouped together  Allows for flexibility MRP (material requirement planning): a computer-based production management system that uses sales forecasts to make secure that needed parts and materials are available at the right time and place. ERP (enterprise resource planning): computer application that enables a firm to manage all its operations (finance, requirements planning, human resources, and order fulfillment), based on a single, integrated set of corporate data.  Enables the firm to monitor quality and customer satisfaction as it is happening Purchasing: the functional area in a firm that searches for quality material resources, finds the best suppliers and negotiates the best price for goods and services JIT Inventory Control: a production process in which a minimum of inventory is kept on the premises and parts, supplies and other needs are delivered just in time for use on the assembly line.  Will only work effectively if process works in unison with an accurate production schedule (ERP)  Ensures the right materials are at the right place at the cheapest cost to meet both customer and production needs. Quality: consistently producing what the customer wants while reducing errors before and after delivery to the customer.  In the past quality was tested after production  QC should always be part of operations management planning rather than simply an end-of-the-line inspection.  Six Sigma Quality: a quality measure that allows only 3.4 defects per million events.  Statistical Quality Control (SQC): the process some managers use to continually monitor all phases of the production process to assure that quality is built from beginning  Statistical process control (SPC): the process of testing statistical samples of product components at each stage of the production process and plotting those results on a graph. Any variances from quality standards are recognized and can be corrected if beyond the set standards.  ISO (International Organization for Standardization) 9000: given to quality management and assurance standards  ISO 14000: a collection of the best practises for managing an organization’s impact on the environment Supply Chain: the sequence of firms that perform activities required to create and deliver a good and service to consumers or industrial s Logistics: those activities that focus on getting the right amount of the right products or services to the right place at the right time at the lowest possible cost.

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Supply Chain Management: the integration and organization of information and logistics activities across firms in a supply chain for the purpose of creating and delivering goods and services that provide value to customers.  The need for improvement to remain competitive, increase in outsourcing, shorter product life cycles and increased, customization etc. Form Utility: the value added by the creation of finished goods and services (ie. Transforming silicon into computer chips or putting services together to form vacation package)  Build and deliver products in response to the demand of the customer at a scheduled delivery time  Provide acceptable quality level  Provide everything at the lowest possible cost Process Manufacturing: the part of the production process that physical or chemically changes materials (ie. Boiling egg) Assembly process: that part of the production process that puts together components (ie. Making car) Continuous Process: a production process in which long production runs turn out finished goods over time (lots of eggs) Intermittent process: a production process in which the production run is short and the machines and changed frequently to make different products. (ie. manufacturers of custom designed furniture) The goal of operations management is to provide high-quality goods and services instantaneously in response to customer demand.  Flexible Manufacturing: deg machines to do multiple tasks so that they can produce a variety of products  Lean Manufacturing: the production of goods using less of everything compared to mass production  Mass Customization: tailoring products to meet the needs of individual customers  Industrial robotics CAD Computer-Aided Design: the use of computers in the design of products CAM Computer-Aided Manufacturing: the use of computers in the manufacturing of products  Manufacturers can program small change and it can change the way the process operates CIM Computer Integrated Manufacturing: the uniting of computer-aided design with computer-aided manufacturing.  Expensive but cuts a lot of costs (PERT) Program Evaluation and Review Technique: a method for analyzing the tasks involved in completing a given project, estimating the time needed to complete each task and identifying the minimum time needed to complete the total project.  Critical Path: in a PERT network, the sequence of time the longest time to complete Gantt Chart: bar graph showing production managers what projects are underway and what stage they are in at any given time.