BA 101 Pre-Midterm NOTES
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Date Created: 04/25/14
BA 101 42514 645 PM Weath Transactions Competition to be a part of exchanges results in 0 Pressure for lower prices 0 Pressure for newerbetter products 0 Pressure for more efficient ways to do things Specialized Economy Uncertainty 0 Not knowing how the market will respond Risk 0 Damage associated with bad outcomes Management Process To deal with uncertainty and risk in complex and specialized competitive markets managers rely on 0 Planning Understand the task to be accomplished Design the productservice 2 Come up with the idea and then convince the world they cant live without it Design the process by which it should be created to meet the needs of the task environment low costhigh quality 0 Organizing Configure your resources people materials tools 0 Operating Work your plan 0 Controlling Measure your results Compare them to the plan Adjust your plan accordingly Learnimprove your performance Areas of Management 0 Marketing know your customers and how best to serve them 0 Production Build quality products at lowest possible cost 0 Finance arrange tools and money to meet the goals of the company 0 Administrative determine who the company is and what it wants to accomplish Asset Items tangible or intangible that have value probable future economic benefits In an economic sense your knowledge skills and abilities are your assets BA 101 42514 645 PM BA 101 tutors in 155 Liis MR 47 F 125 HW capsim introductory lesson rehearsal tutorial practice rounds 1 and 2 quiz 1 What is Marketing Marketing is an organizational function and a set of processes for creating communicating and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stakeholders Customer Perceived Value A customers evaluation of the difference between all the benefits and all the costs of a marketing offer relative to those of competing offers Marketing asks Who are your customers 0 How big is the market 0 How fast is it growing 0 Can you usefully group your customers What do they want from you 0 Product characteristics Product 0 How much will they pay Price 0 Where do they go to buy my product Place 0 How 0 they learn about my product Promotion 0 The 4 P39s 9 the marketing mix 0 Product 0 Price 0 Place Distribution 0 Promotion Marketing Research Marketing 0 Market Research 0 Market segmentation and target markets 0 Consumer behavior In FOUNDATION you should be able to 0 Determine market size 0 Create an ideal product Secondary Data Data previously collected for any purpose other than the one at hand 0 Census form 0 Etc Primary Data Data collected for the first time For own purposes Segmenting Markets What is the largest market segment in Foundation 0 Low tech Price matters Adopt Wa Mart approach to making money How fast is demand growing in the low tech segment 0 BA 101 42514 645 PM Marketing The way a company informs customers about its products and services Tries to understand what the customers want to better serve them Demand Analysis Leftover product is better than not having enough product Consumer behavior The processes a consumer uses to make purchase decisions as well as to use and dispose of goods and services Includes factors that influence purchase decisions and the product use Low tech Price importance 41 Age importance 29 Reliability importance 21 39gtSquotquot High tech Position importance 9 1 Positioning importance 33 2 Age importance 29 3 Price importance 25 4 Reliability importance13 Cost versus Price Price 0 Price is that which is given up in an exchange to acquire a good or service 0 Lower is more attractive than higher Cost 0 The expense of obtaining materials for making the products sold Profit Maximization Setting prices so that the total revenue us as large as possible relative to total costs The main idea of a business is to make profit They need to watch the costs relating to the product so that they maximize their profit Who are the customers Segmenting markets Target markets 0 What are the market segments in foundation Low tech and high tech 0 In terms of units old what is the largest market segment in founda on Low tech 0 How fast is demand growing in the low tech segment Look on foundation What do they want from you Product what are the product characteristics Price How much will they pay Place Where do they buy my product Promotion How do they learn about my product 0 Service What level of service will I experience What happens if high tech customers decide to buy your low tech product This is good and bad 0 Good you sell more of your product 0 Bad this could mess up your sales by potentially running out of product The impact of SERVICE Products could be identical but the service associated with buying this can really affect which company sells more The service element can be particularly influential for commodity products those products that are similar to each other without meaningful differentiation EX cars Toyota 0 High end Lexus 0 Middle Toyota 0 Low end Scion Why do they do this 0 They are appealing to different market segments 0 Trying to increase sales by providing products that are attractive to a variety of market segments What can increase material costs The more ideal you make your product the more expensive it is to make Age Low tech How do you manage age What is the ideal age Your product gets older every month 0 July 1 it is 0 0 Dec 31 it is 12 year old 0 By the second December it39s a year and a half old 0 reposition changes size and performance moving product on the perceptual map Promotional Mix You will invest in a promotion budget and create awareness It relates to your advertising efforts The awareness you create is specific to a single product Commercials are one example of this Trade offs Higher price 0 Fewer people buy make more money on each Lower price 0 More people buy make less money on each New product 0 Expense of development new customers Old products 0 Loss of appeal no risk BA 101 42514 645 PM Promotion and Awareness The more you invest the more attractive your product is The more accessible your product is the easier it is for your customer to buy it and the more attractive it becomes Sales Budget and Access More is not always better Understand the rate of diminishing returns 33 Accessibility Access to your sales people Demand ast year Growth use to adjust Demand Sales will decrease 10 for every dollar over the range A buyers market may be more predictable based on demand market share etc Rules of thumbstrategies for foundation High Tech Leave high tech MTBF at 23000 reliability is not valued too much to be changing it Add able in round 2 for release in round 3 Give it performance of 95 and size of 105 Add able 3 in round 4 for release in R5 Give it a performance of 109 and a size of 91 After release reposition every year 7 units smaller and 7 units faster 0 This will keep it young and on the ideal spot 13 of the people that knew about you on Dec 1 do NOT remember you on Jan 1 need a consistent investment on the promotions budget Buy more awareness than you are losing Eventually you will get to 100 othen start making smaller investments just to keep the people 1400000 Low Tech Revise to the ideal spot in round 1 Revise so that age will be cut in half in Novemberwhen it is 4 After revise every 2 years rounds 357 and move it one unit smaller and one unit faster Leave low tech MTBF at 20000 Sales Forecasting 1 Market Growth Estimate Technique For each product take the number of units sold and increase it by the growth rate for the next round For each product take the number sold in the high tech segment and increase it by the growth for the next round 2 Market Share Estimate Take the Total Industry Unit Demand and multiply it by the Actual Market Share this gives you an actual share estimate Take each product39s potential market share from the reported year and multiply is by the Demand for next round this gives you a potential share estimate 3 Counting Products count the aggressively competitive products by looking at the circle chart 0 for high tech or low tech 0 least accurate way to do this 4 December Customer Service Scores BEST WAY your product compared to customer expectation o adjusted by awareness accessibility accounts receivable customers will compare your evaluation to your competitors what percentage of the total satisfaction does your product have add up all the products customer service scores and see where you stand in the whole thing ex bold is our product 282023182011111 28111your percentage BA 101 42514 645 PM quiz 2 due Tuesday 422 practice round 1 due Wednesday 423 practice round 2 due 425 quiz 3 due Thursday 51 by 10AM MIDTERM DAY Accounting Concepts represented by numbers The goal of business to create wealth Competing for transactions in the market How can you tell how well you are doing Measure individual transactions Put them all together o How much stuff acquired wealth do you have and where did it come from Assets Liabilities Owners Equity 0 How much wealth are you accumulating Revenue Expense Profit Assets property owned by a person or company the value of the stuff the organization controls Liabilities outsiders claims against those assets you owe for the electricity you use debt Owners Equity the investment of the owner into the business their claims what they actually own on the stuff Revenue salary and wages Expenses the cost that the company has to operate to make and sell the sensors J net income net earning Accounts Receivable the delay between delivery and the payment of your products Common Stock the amount invested by shareholders in the company Accounts Payable what the company currently owes suppliers that they have received but not yet paid for Current Debt what the company has to pay back in a year or less Long term Debt what the company has to pay over a long term in the form of bonds Retained Earnings the profits that the company chose to keep within the company instead of paying dividends to shareholders Income statement The story of transactions over a specific time period Revenue Transactions between business and its customers Expense Transactions between business and its suppliers resources people capital Net Income is also Profit LOSS the earnings before interest and taxes minus those interest taxes and profit sharing Expenses Variable Costs 0 Costs of goods sold COGS o The more you make the greater the total cost Labor used to make the product or service Material to make product or service Cost of keeping inventory PeriodFixed Costs 0 Fixed CostsOperating Expense o The cost of being in business that month 0 Selling expenses 0 Administrative expensive Contribution Margin Gross Margin Sales Variable Cost Amount of money value left after you pay for the products you sell Depreciation the part of the profit that was used up last year If the company reinvests the income Retained Earnings If the company gives it to its owners o Dividend to its stockholders 0 Income to its partners or a sole proprietor BA 101 42514 645 PM MIDTERM MAY 1 Revenue priceunits sold Costs of Good Sold unit costunits sold Contribution Margin revenue COGS Inventory tied to the production process Foundations inventory is all finished goods 0 Too little inventory STOCK OUT 0 Too much inventory it39s expensive and ties up cash plus the product ages and is not desirable 0 Just right 1 or more units left less than 60 days Sales forecast and Production Generate a variety of guesses Pick a number to produce such that the inventory management range gt0 ltprod6 captures your forecasts How many would you produce 0 Sales forecasting estimates EXAMPLE 1440 market growth forecast 1350 potential market share forecast 1275 December customer survey forecast o How many would you produce At least 1441 but we pick 1500 This sales range captures all guesses Use the sales forecasts to 0 Determine how many to produce Meet inventory management goal 0 Put worse case forecast to finance IfI only sell X amount will I have enough cash 0 Check if you met performance targets IfI only sell X will I make a product and will my stock price increase Total Capacity represents what you are capable of producing in your FIRST shift You have a SECOND overtime shift and it is expensive But you can produce a total of twice the amount of the first shift Product limitations If you can only make X amount and that is lower than the expected amount that you wanted to make you might have to increase your price or somehow make the product less desirable BA 101 42514 645 PM Round 2 suggestions COGS RampD 0 Leave Able where it is Marketing 0 Price 35 0 Keep promotion and sales the same 0 Sales forecast market growth potential DCS Production 0 As much as I can Finance 0 More than 3000 in ending cash balance TQM 0 1000 in 4 or 5 areas that will reduce labor or material costs 0 revenuevariable costs contribution margin Unit cost the cost to make one sensor Unit costs material costsabor costs Labor Costs Capacity how many sensors you can make one shift at regular hours Overtime workers work extra hours at higher wage Automation mix between machines and human labor Required Investments Equipment machinery is expensive 400 per unit of capacity for each level of automation Example Machinery for 1000 unites of capacity with an automation level of 5 Automation 0 4 number of units number of new levels Business Plamn production Automation tradeoff Higher the automation lower labor cost Higher automation this results in a delay and a longer time to reposition the product in RampD Low Tech production automate early Current 3427 Increase auto 3 levels 3422 High Tech automation 3 If higher the RampD cycle takes too long to minimize age and keep it on the ideal spot Invest in Additional capacity It takes one year to add capacity for a new product line to add capacity to existing line To increase capacity invest money to 0 Get the factory prepared floor space 6 per unit 0 Buy machinery 4 level of automationunit Add 1000 units of capacity with an automation rating of 3 o 10006431000 18000 Selling Capacity If you want to reduce the capacity of a product OR drop a product offering you can sell capacity at 65 of investment If you sell all of your capacity any inventory you have in stock is liquidated at half the cost to make it If you sell all but 1 unit of capacity you can sell your remaining inventory at your price
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