What is the primary focus of a profit organization?,To make a profit.

What are the four functions of management?,Planning, organizing, controlling, and leading

What are the factors of production used to make goods and services?,quality products, efficient
operations, social responsibility, and business ethics.

What is Communism?,Owned and operated by by government. No competition, the government

owns and operates everything. Excess income goes to the government. Consumers have
limited choice of goods and services, prices usually high. Little choice in career choice, most
work for government-owned farms and industries.

What is Socialism?,Gov owns and operates major industries, individuals own small businesses.
Restricted in major industries, encouraged in small business. Profits earned in small business
may be reinvested in business, profits from gov owned industries go to gov. Consumers have
some choice of goods and services, prices determined by supply and demand. Some choice of
careers, many work in gov jobs.

What is Capitalism?,Individuals own and operate all business. Encouraged by market forces
and government regulations. People are free to keep profits and use them as they wish.
Consumers have wide choice of goods and services, prices determined by supply and demand.
Unlimited choice of careers.

What is pure competition?,Many small businesses in same product market.

What is monopolistic competition?,small number of businesses little difference in products.

What is oligopoly?,Very few businesses selling a product.

What is a monopoly?,The market structure that exists when there is only one business providing
a product in a given market.

What is economic expansion?,Economy is growing and consumers are spending money.

What is a depression?,unemployment very high; consumer spending low; business output

sharply reduced

What is a recession?,Decline in production, employment, and income

What is economic contraction?,spending declines, layoffs, economy slows down.

What is inflation?,Condition characterized by continuing rise in prices.

What is importing?,the purchase of goods and services from foreign sources

What is exporting?,the sale of goods and services to foreign markets

What is a budget deficit?,the condition in which a nation spends more than it takes in taxes

What is a negative balance of trade?,A country who brings more in than they are sending out

What is a positive balance of trade?,A country who sends out more than they are bringing in

What is an entrepreneur?,an individual who risks his or her wealth, time and effort to develop for
profit an innovative product or way of doing things.

What are business ethics?,principles and standards that determine acceptable conduct in
business

What is the primary reason for the Sarbanes-Oxley Act?,help restore confidence in corporate
America by the public

How should someone determine the best way to handle an ethical decision?,Look through the
viewpoint of stakeholders

What is conflict of interest?,Most common ethical issue identified by employees. Put own
interest before interest of customer.

What is a code of ethics?,Formalized rules and standards that describe what a company
expects of it's employees

What is plagiarism?,The act of taking come else's work and presenting it as your own without
mentioning the source

What is whistleblowing?,The act of an employee exposing an employer's wrongdoing to

outsiders, such as the media or government regulatory agencies.

Studies indicate that organizations that are profitable also practice ________.,Social
Responsibility

What are the arguments for Social Responsibility?,Businesses helped create many of the social
problems that exist today, so they should help fix them. They have the financial and technical
resources to help solve problems. As members of society, businesses should do their fair share
to help others. It's necessary to ensure economical survival.

What are the arguments against Social Responsibility?,Sidetracks managers from the primary
goal of business. Participation give businesses greater power, perhaps at the expense of
particular segments of society. People question whether business has expertise needed to
assess and make decisions about social problems. People believe that social problems are the
responsibility of gov agencies and officials, who can be held accountable by voters.

What are the environmental concerns of today's society?,Animal rights, pollution, and going
green.

What are the benefits of technology?,Improved global access, faster productivity growth,
improved efficiency, and reduced costs.

What is MIS?,Management Information System- Collect, store, update, process and present
data.

What is intranet?,a network of computers similar to the Internet that is available only to people
inside an organization

What is extranet?,a network of computers that permits selected companies and other
organizations to access the same info and may allow collaboration and communication.

What is the Internet?,Global information system that links many computer networks together.

What is the World Wide Web?,a collection of interconnected websites or pages of text.

What is the largest focus for future legislation of business conducted in the Internet?,personal
privacy

What are the three components of Sarbanes-Oxley?,Criminalized fraud, strengthened penalties

for fraud, and created the Accounting Oversight Board.

What six barriers should organizations research prior to conducting business outside its own
country?,Overly aggressive financial or business objectives, abusive and intimidating behavior,
conflict of interest, fairness and honesty, communication, and business relationships.

What is identity theft?,criminals obtain personal information allowing them to impersonate others
in order to use their credit card to obtain financial accounts and make purchases.

What countries are parties of NAFTA?,Canada, US, and Mexico

What is licensing?,manufacturing and production

What is franchising?,service businesses, selling the ability to produce but not actually doing it
yourself.

What is Business to Business?,use of the Internet for transactions and communications

between organizations
What is Business to Consumer?,delivery of products and services directly to individual
consumers.

What is Consumer to Consumer?,market in which consumers market goods and services to

each other through the Internet.

What is joint venture?,a partnership established for a specific project or for a limited time.

What is strategic alliance?,a partnership formed to create competitive advance on a worldwide

basis.

What is an absolute advantage?,a monopoly that exists when a country is the only source of an
item, the only producer of an item, or the most efficient producer of an item.

What is a comparative advantage?,the basis of most international trade, when a country

specializes in products that it can supply more efficiently or at a lower cost than it can produce
other items.

What is an embargo?,a prohibition on trade in a particular product

What is a dumping?,the act of a country or business selling products at less than what it costs to
produce them.

What is a quote?,...

What is globalization strategy?,a strategy that involves standardizing products for the whole
world, as if it were a single entity

What is multinational strategy?,a plan, used by international companies, that involves

customizing products, promotion, and distribution according to cultural, technological, regional,
and national differences.

What is low hanging fruit?,business opportunity that is easily within reach.

What is job spill?,worktime exceeding standard or agree-upon limits

knowledge management,company's approach to capturing, organizing, and disseminating

internal or proprietary information.

milker,consultant who intentionally stalls a project in order to keep getting paid.

mind share,proportion of a target demographic familiar with a company's products or services.

corporate culture,company's shared values and norms

download,to communicate all known information on a given project or topic.

drill down,to inquire rigorously esp. to discover root causes and effects

ego wall,wall in executive's office displaying self-congratulatory material as in degrees,

certifications, awards, and plaques.

externalities,secondary or unintended consequence of business activities which impacts

unassociated entities.

face time,in-person communication, especially in contrast to remote discourse via electronic

interface

future proof,characterizing a product or service that will not be rendered obsolete by subsequent
technological or social advancements.

golden handcuffs,benefits preferred to keep employees in otherwise unsatisfying or problematic

jobs.

globalization,development of an increasingly interdependent multinational economy resulting

from free flow om capital goods and services.

geek gap,disparity in technical knowledge between those who create or implement computer
systems and those who acquire them.

A key component of this _______ approach to human resource management is recognizing that
managers need to spend more time on talent development.,Asset-Based

As with investment decisions relating to equipment and/or a building, the ________ of an

organization's human resource assets require a significant up-front investment on the part of an
organization.,Recruitment and Development

Once in the position, a new employee needs to be allowed time to understand all of the
following, EXCEPT...,Their financial impact on the bottom line.

Managers must think through the process and plan for the ________ of an employee in the
same way as we look to purchase equipment and other valuable organizational assets.,Hiring

Failure to provide the right work __________-based incentives (ERR) will heighten the
probability of employee defection (turnover), thereby forfeiting any potential return on our
investment.,Environment, rewards, and recognition.
Which of the following is NOT one of the fundamental things which managers can, and should,
keep in mind when looking to work with, enhance the productivity of, and motivate their
employees?,Authorize

Which of the TALENT motivational tool kit is often cited as the most important?,Approval, praise,
and recognition.

________ factors were found to be general working conditions, policies and administrative
procedures, salary, job security, organizational structure, and the type of supervision.,Hygiene

All of the following are behaviours exhibited by Theory X managers, except...,View people as
seeking out potential for advancement.

All of the following are behaviours exhibited by Theory Y managers, except...,View workers as
having a dislike for responsibility.

The concept that a hierarchy of human needs could be used to explain motivation was
developed by...,Abraham Maslow

Maslow was mainly concerned with explaining how...,Human motivation was related to a
hierarchy of needs.

According to Maslow, a higher order need...,Becomes a source of motivation after lower . order
needs are satisfied.

Maslow classified the needs for basic items such as food, water, and shelter as...,Physiological
Needs

Maslow called the needs people have for security at work and at home...,Safety Needs

In Maslow's hierarchy, __________ needs refer to the desire to reach one's fullest
potential.,Self-Actualization

Maslow placed _________ needs at the highest level of his hierarchy.,Self-Actualization

Jackie had been very pleased with her part-time job at a local convenience store until a recent
incident occurred. During Jackie's shift, the store was burglarized. Although no one was hurt,
Jackie now feels uneasy and fearful during her late night shift. She is so nervous and worried
that she is having a hard time concentrating on her work and is thinking about quitting.
Management needs to be aware of Jackie's unmet _______ needs.,Safety

John dropped out of school after the ninth grade and now must support himself though he has
few skills. He is a part time employee at a small retailer earning minimum wage. John would like
to earn more, but hasn't been able to find a better job. He is having a hard time paying his rent
and utility bills and has quit eating breakfast to try to save on his food bills. John is having
trouble meeting his...,Physiological Needs

Abraham Maslow thought that once needs at one level of his hierarchy were met...,Another,
higher order need would emerge to motivate that person.

Most workers in poor, less developed nations are motivated by the desire to
satisfy...,Physiological Needs

Workers in Canada and other developed nations are least likely to be motivated by the desire to
satisfy __________ needs...,Physiological

Julie has worked for the Rarwick Corporation for several years. Recently, management
recognized her as one of her company's best workers. Her fellow employees respect and
admire her, and she feels good about herself. The type of needs that are likely to motivate Julie
in the future are...,Self-Actualization Needs

Maalem Ben Ali is a refugee from Ethiopia who has none of the basic necessities Americans
take for granted. He lives in an overcrowded tent in a refugee camp. He is often hungry because
food is scarce in the camp, and is often thirsty because the main water supply is polluted.
Maalem Ben Ali is concerned about his ___________ needs.,Physiological

The characteristic of work that is concerned with the amount of direct and clear information
workers receive about performance is called...,Feedback

________ emphasizes motivating the worker through the characteristics of the job itself.,Job
Enrichment

At Boss Motorcar Company, workers are grouped into teams. Each team is responsible for
assembling an entire automobile. Boss gives the teams freedom and flexibility to decide for
themselves how to divide up the work. The company keeps the workers informed about how
their cars are selling, and even shows them the comments customers make about quality and
performance on customer satisfaction questionnaires. Boss Motorcar Company is using a
strategy of...,Job Enrichment

__________ contribute(s) to a feeling of achievement and recognition.,Feedback

Which of the following aspects of an employee's organization is NOT a core driver of their
overall sense of accomplishment?,None of the above.

Which of the following are ways for managers to meet the expectations of employees with
respect to work that challenges them and fits into their career aspirations?,a), b), and c)

Which of the following is NOT part of compensation?,None of the above

Notes of appreciation, awards, and gift certificates given to reward employees for accomplishing
or surpassing established objectives are all examples of...,Cashless Bounses

Non-health related fringe benefits...,Allow employees to spend more time at work.

Which of the following is NOT one of the key competencies that managers must have in order to
be successful in their planning, organizing, developing, directing, and leading
endeavours?,Competitive Skills

Managers with good ______ are able to visualize, understand, and communicate the big
picture.,Conceptual Skills

__________ is the ability to communicate expectations, in an engaging, motivating, and

collaborative manner.,Human Relations Skills

_________ are all about inspiring others to achieve identified levels of expectations.,Leadership
Skills

________ is the power which a manager possesses as a result of his/her leadership

competencies.,Personal Power

Human relations is concerned with all of the following except...,Sales

The de-emphasis of long-term goal setting and talent development initiatives can, and often do,
result in heightened organizational ______.,Disagreement

Successful firms _______ the needs of all stakeholders, and manage the organization in a
manner which ensures its survival today, but protects its long-term competitiveness and
sustainability going forward.,Balance

A potential near-term impact of this short-term management approach, referred to as

"short-termism", is:,Talent development costs viewed more as operational expense than capital
investment.

A potential near-term impact of this short-term management approach, referred to as

"short-termism", is:,Hiring is viewed as a potentially profit-reducing expense.

Creating and maintaining a positive work environment requires a _______, __________

approach on the part of managers.,Consistent; Methodical

_______ goes beyond the ability to control or improve, and fundamentally focuses on the design
and development of such processes as well.,Operations Management
Successful organizations understand the interconnectivity of ___________, and seek to ensure
that all three are integrated into the decision-making process.,Strategy, business structure, and
operations.

Which of the following is NOT one of the results of the business system and the corresponding
actions which take place within the operations area...,The right colour.

___________ are understood to be the actual processes employed, which, when combined with
the utilization of the organization's capital assets, enable strategic outcomes to be
actualized.,Operations

The organization must develop and maintain efficient and effective ________ processes, which
deliver to the marketplace the products and/or services which the organization
offers.,Operational

Companies like Dell and General Electric have prospered and grown by...,Getting closer to their
customers by offering a variety of services.

Aaron Nance is a freshman in college who has not yet decided on his major. He is thinking
about majoring in operations management and is concerned about job opportunities in this field.
Which of the following statements about jobs for operations management majors is most
accurate? If he majors in operations management, Aaron will...,Acquire skills and knowledge
that are valuable to firms in both the manufacturing and service sectors.

Operations management refers to activities managers perform to help their firms produce...,Both
goods and services.

________________ is the specialized area of management that converts or transforms

resources into goods and services.,Operations Management

____________ is the design and development of the work flow and connectivity of the
operational requirements (processes) needed to ensure that an organization's products and
services are efficiently produced and effectively delivered to the marketplace.,Process
Management

__________ refers to the management of the flow of materials and/or products, information, and
costs through the front-end of an organization's Value Chain.,Supply chain management.

_____ is the management of the inter-dependencies which suppliers, manufacturers, and

distributors all have with each other.,Supply chain management

Product/service management includes all of the following EXCEPT...,Process management

overview.
________ refers to the variety of activities which commence with the design and development of
potential new products in R&D, and extend to the post-purchase support of products and
services now in the hands of customers,Product/Service management.

Which of the following activities are included in supply chain management?,All of the answers
are correct.

All activities involved in obtaining and managing raw materials and component parts, managing
finished products, packaging them, and getting them to customers are part of...,Supply chain
management.

What is the root concept of "value chain analysis"?,Value Maximization

Which of the following is NOT one of the primary activities in the value chain?,Repair Service

________ refers to the management of supplier relationships relating to those parts and/ or
components, or finished products, which are brought into the organization in order to
manufacture finished products for delivery to the marketplace.,Customer Service

_______ are those areas within the organization which are not directly associated with the
actual processes which the organization uses to produce products and/or deliver
services.,Support Activities

For most service businesses the quality standard has become...,Delighting customers by
anticipating their needs.

Which of the following statements about operations management in the service sector is most
accurate? Operations management in the service sector...,Should focus on providing customers
with a good experience.

Recent trends in the service sector suggest that...,Services have increased consumer
satisfaction by becoming increasingly interactive.

_________ is the alignment of the operational tasks within an organization, by its management
team, in order to meet the strategic outcomes defined in the organization's business
strategy.,The operations cycle.

Which of the following is NOT one of the core decision areas that operations managers need to
examine?,Materials management.

_________ refers to the assessment and implementation of the tasks necessary to get the
required work accomplished, and how such tasks will be grouped and sequenced to ensure that
the most efficient and effective processes are utilized in the production of products and/or
services.,Process design, layout, and execution.
________ refers to the development of the supply chain structure and the accumulation of the
necessary information needed to make effective supply chain decisions.,Supply chain planning.

The ISO's focus is to strive to make the manufacturing of products and services ________.,a),
b), and c)

Which of the following is NOT part of the Six Sigma methodology?,Upgrade their quality
performance results.

_______ can be thought of as a management system which seeks to assimilate the concept of
quality improvement across the entire organization.,TQM

________ challenges the organization to be customer focused and to strive for total employee
involvement to ensure that quality (in the delivery of products or services) is fully integrated as a
core component into the strategy, processes, and communication messages of the
organization.,TQM

________ focuses on how organizations transform production and manufacturing processes to

improve the way that people work.,BPR

___________ is one of the predominant challenges facing the small business

owner.,Operational efficiency and effectiveness.

How does a small business owner seek to tackle the need to create as efficient an operation as
is possible?,All of the above.

Small business owners should seek to involve their employee team in discussions relating
_______.,a), b), and c)

Small business owners should think in terms of _________, striving to deliver consistent
experience with each customer interaction.,Product consistency.

Organizations must tailor their ______ to the needs of their customers, ensuring that the
expectations of these customers are met, and that the right product is delivered to the right
place at the right time for the right price.,Operations.

In its simplest context, the purpose of marketing is to design, develop, and communicate
_______.,Value

Which of the following is NOT part of the process of marketing?,Providing customers with
access to the product.
This perceived difference in _______ is what truly differentiates a company's products and/or
services from those of its competitors.,Value

Value, real or _______, can equally be based on intangible.,Observed

Which of the following is NOT an interpretation of an organization's solutions to their customers'

problems over their competitors?,Convenience

_____ is largely perceived as the communications link between an organization and its
marketplace.,Marketing

Which of the following is NOT one of the Six (6) R's of marketing?,The right price to charge.

One of the six core challenges is: "Can we create a ________ which positions our product
and/or service as the best solution to our targeted customers?",Value Proposition

One of the six core challenges is: "Do we understand our targeted customers'
_________?",Needs and Desires

_______ objectives support the achievement of business objectives and, ultimately,

organizational objectives and the company's overall vision and mission.,Product and/or service.

Brands, products, and/or services which are well positioned _______ come to the consumer's
mind when making repeat purchases.,Automatically

A way to think about the concept of _______ is to think about it as being the place in the
consumer's mind which you want your organization's brand, products, and/or services to
own.,Positioning

A key objective that marketing managers need to attain to effectively position brands, products
and/or services is...,Understand the customers to be targeted.

_______ is built around a value proposition which clearly differentiates an organization's brands,
products, and/or services from those of its competitors and, based on a solid understanding of
market fundamentals, effectively delivers on the identified target customer's needs.,Positioning

Successful marketing researchers...,Identity particular segments within the market.

__________ consists of information that has already been researched by others and published
in journals or books, or has been made available online.,Secondary Data

The fact that Curves is designed to appeal to women of a certain age, education and income
level, means that they are using...,Demographic segmentation.
If you choose to do a telephone survey attempting to find out what people are looking for in
terms of a product or service you sell, you are segmenting your market by...,Behaviour

In an effort to increase profits, Pearl River Chinese restaurant is attempting to appeal to a

specific segment of the market by offering an all-you-can-eat buffet. These efforts, designed to
identify specific groups that can be profitably served, represent an example of...,Target
Marketing

_____ is a strategy of increasing market share for present products in existing markets.,Market
Penetration

_____ is a strategy that attracts new customers to existing products.,Market development.

_____ is a strategy that creates new products for present markets.,Product development.

Due to several recent late spring freezes, orange growers in Florida have lost millions of dollars.
As a result, some growers have decided to bulldoze their orange groves and put in freshwater
lakes for raising shrimp, a product that has a strong popularity and is more weather- resistant.
Former orange growers who are now raising shrimp are pursuing a _____
strategy.,Diversification

_______ focus managers on assessing opportunities which lie outside of the organization's
current products and/or services, and represent the creation or development of new markets
served by new products and/or services.,Diversification

The length of time spent within each stage of the decision-making process is dependent upon
all of the following, EXCEPT...,Why potential customers would purchase a particular product
and/or service.

Examples of Consumer-driven marketing technique follow, EXCEPT...,Point of purchase

displays.

Effective marketing does not end at the ________.,Point of purchase.

The role of marketing is to communicate the _______ for an organization's products and/or
services as the "best" solution to the needs of a targeted market of prospective
customers.,Value proposition.

Which of the following is NOT one of the historically referred Four P's of Marketing?,Proposition

A traditional "Pillar" of Marketing, _______ has since been replaced with the word
"communication".,Promotion
A traditional "Pillar" of Marketing, _______ has since been replaced with the word
"distribution".,Place

Traditionally, marketing textbooks and marketers have been trained to think of the marketing mix
around four concepts from a _______ approach.,Company-Centric

An alternate view is to think of a successful marketing effort as including these areas, but to
design it and build it with a more _______ slant.,Customer-Centric

When thinking about product positioning and product strategy, the key is to think about how the
product and/or service offers to the ______ the best solution in the face of competitive
alternatives.,Customer

Viewing the product strategy as that of ________ attributes brings into play a considerably
broader range of attributes which can be used to more fully align the organization's offerings to
the needs of the target market and create greater opportunity for differentiation.,Value
proposition.

All of the following are a part of a total solution package, possibly allowing a premium- price
player to retain its competitive edge, EXCEPT...,Inferior quality.

All of the following potential advantage points come from thinking about products in terms of
value proposition attributes, EXCEPT...,Message advantages.

Brands which have reached the "Brand ________" level have an active and loyal customer base
which continually places the brand at the top of their pre-determined purchase list.,Commitment

All of the following are leading to relentless downward pressure on price, EXCEPT...,Expense
creep.

All of the following are leading to relentless upward pressure on an organization's cost base,
EXCEPT...,Upward pressure on price.

All of the following are ways marketers can respond to the ongoing pressure on price,
EXCEPT,Develop greater economies of scale.

______ refers to the maximum price point that the customer is willing to pay for a product or
service.,Consumer price threshold.

______ is the change in demand that is anticipated to occur at the various price points the
organization is considering for its product and/or service.,Price elasticity.

______ refers to connecting directly with customers and handling the final sale of product and/or
the delivery of services without the assistance of a channel intermediary.,Direct distribution.
A(n) ____________ consists of the marketing intermediaries that transport and store goods as
they move through their path from producer to final user.,Channel of distribution.

______ are distribution systems that incorporate both direct and indirect distribution options
within their distribution strategy.,Mixed distribution systems.

To create a methodology for "connecting" with customers, the organization needs to think in
terms of ___________, in addition to cost and distribution efficiencies.,Accessibility and
Convenience

A(n) ___________ distribution strategy distributes a product through only a preferred group of
retailers in a given area.,Selective

All of the following are keys to "message rifling", EXCEPT...,To the right business.

Examples of Company-driven marketing technique follow, EXCEPT...,Social media websites.

All of the following are primary reasons that users follow a brand on Facebook, EXCEPT...,To
show a willingness to buy a product they follow.

All of the following are critical things required for social media marketing to be successful,
EXCEPT...,Build active customer trustworthiness.

Hobby-Light is a desk light that lets hobbyists match colour swatches accurately without going
outside. Its like convenient, natural sunlight inside. The lights have high marketing costs, are
sold with high dealer margins, and high production costs. Ads for the product aim at educating
craftspeople who work with fabrics and paints about the benefits of the Otto-Light. In which
stage of the product life cycle is the light?,Introductory

The length of the introductory stage of the product life cycle for a new product is largely
determined by...,Product characteristics, such as advantages over substitute products.

The advertising strategy during the growth stage of the product life cycle should be to...,Make
the mass market aware of brand benefits.

The phase of the product life cycle in which healthy profits usually begin to appear is...,Growth

Typically, at the beginning of the maturity stage of the product life cycle, sales...,Increase at a
decreasing rate.

For an NFP, failure to _______ and deliver a meaningful solution to a need can result in the
desertion of support from both monetary and altruistic stakeholders.,Communicate
___________ is all about making decisions on where to invest in order to improve the
organization's market position going forward.,Portfolio management.

A _____ is designed to focus managers on the core cost/benefit trade-offs which need to be
considered given the relationship between market potential and the current market
position.,Growth-share matrix.

The revised the Growth/Share Matrix model recognizes that market potential may not always be
categorized as high or low, but that a given, ______ level of market potential may offer
managers opportunities to further grow a product line and/or service opportunity via selective
strategies.,All of the above.

The liquor industry is attempting to revive the stagnant spirits industry by introducing low-alcohol
cocktails such as Jack Daniel's Country Cocktails, Smirnoff Quenchers, and Southern Comfort
Cocktails. These activities are known as...,Product line extensions.

All of the following are reasons for managers to understand the configuration of the cost base of
the organization, EXCEPT....,None of the above.

All of the following are key elements of understand the configuration of the cost base,
EXCEPT...,Identify the various sacrifices which the organization will face.

All of the following are areas of focus for managers to develop a good understanding of an
organization's cost base, EXCEPT...,The sell pressures which will impact the cost base.

Producers often use ________ as a primary basis for setting prices on the goods and services
they offer the public.,Costs

An organization's cost base is made up of the _______ costs associated with delivering the
organization's products or services to the marketplace.,Total

_______ are those costs which are directly tied to the manufacturing of a product, or the
delivery of a service, depending on the type of business being assessed.,Variable Costs

Costs incurred regardless of the number of units of a product that are produced or sold are
called...,Fixed Costs

_______ costs are those costs that increase as the level of production increases.,Variable

A type of indirect costs, called _______ are costs which the organization commits itself to within
an operating year, and which often are spent in advance or at the front end of a
manufacturing/sales cycle.,Committed Costs
To build an understanding of the cost base is accomplished by working through the various
zones within an organization's ______ and determining the cost composition of each.,Value
Chain

The relationship between variable and fixed costs impacts the _______ which a management
team has over its cost base.,Degree of Control

Understanding an organization's cost base is essential in determining the required _____

strategy which will be utilized in the marketing of a product and its corresponding impact on
profit.,Pricing

The more the cost base is composed of variable or direct costs, the more ______ managers
have over the actual management of this cost base on a day-to-day basis.,Control

The more the cost base is composed of fixed or indirect costs, the more ______ it is for
managers to use cost reduction strategies to protect the organization's profitability in response
to decreases in demand for products and services.,Difficult

Competitive pressures have caused service providers (who typically have a large variable
portion of their total costs) to...,Cut costs wherever possible.

The point where the revenue, from the sales of the products (units) offered to the marketplace,
equals the total costs (variable costs + fixed costs) associated with producing these products
(units) is called the...,Break-even point.

The level of sales revenue or volume which is required in order for the organization to cover all
of its costs is called the ________.,Break-even point.

_________ is the process used to determine the profitability of a product at various levels of
sales.,Break-even analysis.

At the break-even point...,Total revenue is equal to total cost.

The formula for the Break-even Point is...,(Total Fixed Costs) divided by (1- Variable Cost %)

Ongoing operating levels below BEP will eventually result in the organization becoming
_____.,Insolvent

For managers, understanding the level of sales activity (volume or revenue) is fundamental to
determining the feasibility of various ______ objective levels.,Profit

The formula for the Break-even Point plus profit is...,Forecasted cash requirements.
Phil asks you to calculate the break-even point for his firm. You respond that you will need the
following information...,Total fixed costs, selling price, and variable costs per unit.

Virtual Electronics utilizes a strategy to charge a very high introductory price for their automobile
video theater. After identifying that their rival firms did not carry this new product, they chose this
strategy to achieve maximum profits. Virtual Electronics has chosen a ________
strategy.,Skimming

Barker Brothers Pens utilizes a strategy of low prices to attract customers and discourage
competition. This represents a _______ strategy.,Discounting

Gourmet Pets feels its target market is more concerned with perceived quality than actual
product cost. They also feel that the newness of this concept offers an opportunity to make high
profits since they are the first firm to enter this market, so they face no direct competition. Their
decision to charge a high price is consistent with the ________ strategy.,Skimming Price

Which of the following represents a pricing strategy that establishes a low price in hopes of
attracting a great number of customers and attempts to discourage competitors?,Discounting
strategy.

A skimming pricing strategy...,Establishes a high price in order to earn the highest possible profit
while there is little competition.

How are business organizations' legal structure and financing interrelated?,As a business
organization grows the need for additional cash resources often acts as a catalyst for the way
that its legal structure evolves .

All of the following are factors that influences the determination of the type of legal structure to
utilize in commencing business operations, EXCEPT...,The magnitude . of wealth and
individual(s) is/are willing to take on.

A sole proprietorship is a popular form of business because...,It is heavily regulated by the

government.

What is the key advantage of the Sole Proprietorship, beyond the simplicity of the
commencement of the operation?,The sole proprietor has 100% control of the business.

All of the following are advantages of a sole proprietorship except...,Unlimited liability.

For many individuals, commencing business operations is easiest via the establishment of
_______.,A Sole Proprietorship

A private corporation is one that...,Is owned by only a few people and not traded on the open
market.
The type of ownership form which can raise capital most easily is a...,Public Corporation

As business owners and managers, we need to continually be aware of all the following,
EXCEPT...,Market value of out business.

Persons or organizations that agree to provide some funds for a new business in exchange for
ownership interest or stock are called...,Venture Capitalists

In general, for-profit organizations have all of the following sources of funds available to them,
EXCEPT...,Funds obtained via family and friends financing.

A method of long-term financing that requires repaying funds with interest is...,Issuing Bonds

Long-Term Credit Facilities are...,Debts that will be repaid of a number of years.

A bond...,Must be repaid over a stipulated periods of time at regular intervals.

Public-equity investment opportunities are limited to ______.,Public Corporations

The role of the senior management team is to determine an organization's overall direction and
then _________ the execution of the tactics and strategic thrusts.,Direct and manage.

A management team tracks the effectiveness of its decisions and product/service offerings with
respect to growth, profitability, and asset productivity by __________.,Analyzing its financial
statements.

Which of the following is NOT tracked by managers' analysis of financial statements?,Success

of the organization's human resource intactness.

Financial statements provide vital information, to managers, regarding an organization's current

_______ position.,Liquidity and Solvency

With respect to Financial Statements, managers generate the clearest picture of what is
happening within an organization by reviewing ________.,All three together.

One of the fundamental types of business transactions that managers are constantly making
decisions about and reviewing is...,Capital Asset Transactions and Operational Transactions

Operational transactions represent the flow of money within the organization which is directly
related to ______ business dealings.,Day-to-day
_________ are decisions which managers make with respect to investment and divestment of
capital assets (buildings, equipment, business subsidiaries) which may be needed, or are no
longer needed.,Capital Asset Transactions

Although Capital Asset Transaction do not directly related to the current year's profit of the
organization, they do impact on the _______ of the organization over the period of time.,Cash
flow.

_____ refers to the ability of the company, on the basis of the cash it has on hand and the cash
it is generating within its operations, to meet its ongoing financial obligations.,Solvency

_______ refers to a longer-term assessment of the financial stability of the

organization.,Liquidity

_____ refers to how effective the organization is in deploying its resources and managing its
operational processes in the delivery of goods and/or services to the marketplace.,Solvency

Financial ________ is a general term which relates to an organization's cash reserves and
borrowing power,Solvency

All of the following are considered in an organization's solvency analysis, EXCEPT...,Past cash
disbursements.

An income statement shows...,Revenues, expenses, and net income over a period of time

The financial document that has been likened to a snapshot of how the company's finances are
doing at that moment is called a(n)...,Balance Sheet

The financial statement that represents an accumulation of all of a company's transactions since
it began is the...,Balance Sheet

Which of the following equations is equivalent to the accounting equation?,Owners' Equality=

Assets - Liabilities

The financial statement that explains how a firm's cash changed from the beginning of the
accounting period to the end is called the...,Statement of cash flow.

______ is the process by which we assess and interpret the relationships between the financial
results shown on an organization's financial statements.,Ratio Analysis

_______ is the process of assessing the impact of the amount of debt which an organization
has incurred in order to finance its asset base.,Leverage Analysis
______, whereby we look at trends occurring over time by analyzing financial statements across
multiple time periods.,Trend Analysis

_______ is where we look at the specific dollar amount of financial resources

available.,Absolute Analysis

All of the following are reasons for the importance of forecasting and budgeting, EXCEPT...,Sets
specific strategic objectives for the various divisions and departments within the organization

All of the following are steps in the forecasting and budgetary process, EXCEPT...,SWOT
Analysis

The organization's management team will prepare ______ (projected) statements to determine
its anticipated profitability position.,Pro-forma

All of the following are issues that NFP managers must manage, EXCEPT...,Profitability

All of the following are ways that NFPs generate the dollars needed to sustain their charitable
and community-based mission, EXCEPT...,The selling of stock.

All of the following are phases associated with venture analysis, EXCEPT...,PESTEL Analysis

All of the following are examples of fatal flaws that could potentially derail a venture,
EXCEPT...,Overcapitalization

The utilization of a __________, such as a franchise, can assist in mitigating the business
venture risk, to some extent.,Proven business model and Turnkey operation.

Mitigating uncertainty and risk is all about __________.,Working hard.

Upon reading a business plan, all of the following should be apparent, EXCEPT...,How the
business will reach venture capitalist.

Key success factors for market penetration and obtaining sufficient market reach and scale
depend on all of the following, EXCEPT...,Looking to compete as a new entrant in a new
geographic location.

All of the following are key metrics for market analysis of new ventures, EXCEPT...,Existing
customer assessment.

All of the following are components of the Value Analysis Litmus Test, EXCEPT...,Attention
getting message.
All of the following are key factors reviewed when assessing an organization's cost base,
EXCEPT...,What are the overall cost estimates?

All of the following are key fundamental points relating to the capitalization well in assessing
business plans and new ventures, EXCEPT...,What is the total amount of the capital burn?

All of the following are key analytical areas of operational capacity, EXCEPT...,Set-up

A well-developed business plan will demonstrate just how the business and/or its products and
services will be _______ to customers.,All of the above.

Using the _______, is an excellent way to assess the overall legitimacy of the operational model
being proposed within the new venture.,Value chain model.

Which of the following is NOT an operations decision?,None of the above.

In many cases, the final "GO" or "NO GO" decision comes down to the _______
analysis.,Management acumen.

All of the following are part of the acronym, MERFS, EXCEPT...,Managment

________ refers to the overall desire to excel.,Motivation

_______ focuses on the skill set, knowledge base, experience, and decision-making aptitude of
the individuals and/or the management team.,Expertise

_______ focuses on the linkage which key individuals and managers have with key external
stakeholders and which are critical to the business venture's success.,Relationships

A determination of the _______ which an acquisition needs to bring to the entrepreneur and/or
the company needs to be recognized and validated.,Value advantage.

All of the following are reasons why developing a new business opportunity from the ground up
represents significantly greater risk, EXCEPT...,Creating new market space as a first mover.

______ implies growing a business from within, using its existing business lines as a basis for
such growth.,Organic growth.

______ refers to conducting a search as to potential candidates for acquisition.,Identify the

target.

______ focuses on business valuation.,Determine the price.

A partnership with foreign country that can provide immediate market knowledge and access
comedies risk and control over product attributes is a Joint venture

A reduction in value of a nations currency relative to the curtains about the country is called
Currency devaluation

A trade restriction that limits the amount of a particular good that may have been imported into a
country during a given period of time is Import quota

An organization of Nations formed to promote the free movement of resources and product
among its members and to create common economic policies Economic community

A firm that operates on a worldwide scale is called Multinational Enterprise

Initiating is social responsibility program takes A commitment of employees

Funding a program of social responsibility can come from A corporate that absorb the cost as
a business expense

An employee's decision to inform the press or government officials of his or her firm's unethical
practices is referred to as A whistleblower

Many economists refer to the average level of output per worker as Productivity

Which of the following is not the four states of the business cycle Deficit

The Business Cycle

1. Trough
2. Expansion
3. Peak
4. Recession

A general rise in the level of prices is called Inflation

A market situation in which there are many buyers and sellers of a product and no single buyer
or seller can control the price Pure competition

A system of Exchange in which goods and services are exchanged without the use of money is
known as A barter system

Which of the following is not one of the four resources used by businesses today Governmental

Do Use:
1. Material
2. Informational
3. Financial
4. Human

One person maintaining a business is known as Sole proprietorship

Advantages of Sole Proprietorships Ease of Formation

Retention of Control
Pride of Ownership
Retention of Profits
Possible Tax Advantages

Disadvantages of Sole Proprietorships Limited Financial Resources

Unlimited Liability
Limited ability to attract and maintain talented employees
Lack of Permanence

Advantages of Pooled Financial Resources

Shared Responsibilities
Ease of Formation
Tax Advantages

Disadvantages of Unlimited Liability

Disagreements
Difficulty in withdrawing from agreement
Lack of Continuity

Advantages of Corporations Limited Liability

Permanence
Easy to Transfer Ownership
Ability to Raise Capital
Specialized Management

Disadvantages of Corporations Expense/complexity of formation and operation

Double Taxation
Paperwork and Regulation
Conflicts of Interest

Unlimited liability means The owner is responsible for all the business debt

A person who assumes full co-ownership of a partnership including unlimited liability is a

General partner

shares of ownership of a corporation is known as Stock

Shares of stock cannot be purchased on any stock Exchange or just by any individual. What
kind of Corporation is this Closed Corporation

This person invest in the business but has no management responsibility Limited partner

In the state of which a business is incorporated this is known as a Domestic Corporation

A distribution of earnings to the stockholders of a corporation is a Dividend

A partnership formed to operate for a specific time period or to accomplish a specific purpose is
known as Joint venture

The purchase of one Corporation buy another is known as Merger

A technique used to gather enough stockholder votes to control a Target company is known as
a Proxy fight

When Comcast and Time Warner Cable decided to become one company this is a example of
Horizontal takeover

Horizontal Merger between firms that make and sell similar products/services in similar
markets

Vertical
Merger between firms that operate at different levels in the production and marketing of a
product

When a company purchase stock a price that is just high enough to tempt the current stock
holder this action is called a Tender offer

Businesses are generally placed into three broad categories Services industry
Production industry
Distribution industry

Services industry a business that does work for a customer, and occasionally provides
goods, but is not involved in manufacturing.

Production industry Construction

Mining
Manufacturing

Distribution industry making a service available for the consumer or business user that needs
it.
Small businesses are typically managed by The people who start them

What is the common mistake that small business owners make when they're business starts
growing They over-expanding without proper planning

What do franchisees typically have to pay to the franchisor A one one-time fee and the monthly
royalties based on sales

Franchising Advantages Less Risk

Training and Support
Brand Recognition
Access to Funding

Franchising Disadvantages Costs

Lack of Control
Negative Halo Effect
Growth Challenges
Restriction on Sale
Poor Execution

In line with a franchising agreement the franchisee may use Patents

design
business know-how
Geographic exclusivity
Trademark and copyright

What is the Cornerstone of franchising Standardization

Franchising is a what kind of method Management oriented method

The most important element for prospective franchisees is to investigate The franchisor

The requirements to be a successful franchisee The willingness to work long hours

Willingness to face personal sacrifices

Be an organized person

A manager with few subordinates is said to have a Narrow span of control

A manager with a lot of subordinates is said to have a Wide span of control

A relatively permanent committee charged with performing reoccurring is called A standing
committee

In order to best handle a grape vine managers should Try to eliminate it

Services differ from production of manufactured good in all the ways except that servicesAre not
as important as manufactured production to the US economy

The goal of basic research is to Uncover new knowledge without regard for its potential use

Two important components to schedule is Place and time

A common planning Horizon for production activities is A year

The process of acquiring materials, supplies, components, and parts from another firm is known
as Purchasing

Procter & Gamble uses what kind of production to produce household goods Mass
production

If a good or service satisfy a human need it has Utility

Activities that increase employee satisfaction such a as satisfaction surveys, employee

communication programs, exit interviews, and fair treatment is all apart of which phase of the
human resource management process Maintaining Human Resources

Periodically employees at Southwest Airlines complete satisfaction surveys that management

uses to improve employee job satisfaction. What is this example ofJob analysis

When sales drop each summer, the owners temporarily have too many employees to service
the reduced amount of tourists. In this situation what is most likely to happen in this situation?
Layoffs workers

When people from various countries and educational and work experience background come
together to work on a project they often have varying perspective on the given issues. This
benefits the company in the form of better problem solving better problem solving

Paul wanted to know about the skills and experience needed to qualify for a management
position at JCPenney. He called and asked the Personnel specialist to send him a Job
description

A list of specific qualifications necessary for a particular position is called a Specification

A company is interested in attracting managers who can contribute New Perspective to the
managerial process. This company should concentrate on what kind of recruiting External
recruiting

Gathering information about applicants for a position and choosing the most appropriate
applicant is called Selection

The most used technique of selecting a applicant Interview

A company is interested in verifying previous job responsibilities held by its applicants. The
selection technique that is most helpful in obtaining this information is the Reference check

New employees at Disney World in Orlando spend their first several days learning what it
means to be a cast member by studying the traditions up Disney. This is called Orientation
process

Payments that employees receive in return of their labor Compensation

Payment representing some percentage of sale revenue Commission

Employee benefits Non-monetary Rewards

Training method in which the training learned by working with a experienced employee
On-the-job training

An employee's attitude towards his or her job, supervisors, and the firm itself Morale

Frederick Taylor research led to the emergence of Scientific Management which is The
application of scientific principles to the management of the work and workers

Hierarchy of needs was developed by Maslow

Examples of Hinesburg hygiene factors Supervision

pay
working condition

NOT
Responsibility

The reinforcement Theory says that people are motivated by By receiving Rewards or
punishments based on their behavior
If you want any manager who made sure that rewards are distributed to your employees fairly
based on their performance and each employee clearly understood the basis for his or her own
pay you would be using what theory Equity Theory

As long as the employee is putting a certain amount of hours at the end of the week this plan is
called Flex time

Which of the following stages are not a part of Team development process Reminding

The team development process includes

Forming
Storming
Norming
Performing
Adjoining

The organizational functions and set of processes for creating, communicating, and delivering
value to customers and for managing customer relationships in ways that benefit the
organization its stakeholders Marketing

A company has its own trucks that ship merchandise to its Warehouse from the supplier for the
back stock purposes. What function is this Transporting and storing

The utility created by converting production inputs into finished product is called what utility
Form utility

The process of shipping one thing to one place to another place is called the what utility Place
utility

By selling Christmas trees from late November through December this company is providing
what utility Time utility

Marketing concept Make the customers happy to make more profits

Marketing plan What are you going to achieve the marketing concept

What indicates a customer orientation Developing planets been satisfied customers needs

A market is a group of individuals or organization that have needs for products in a given
category.

They have the __________, ________, and ________ to purchase products Ability
Willingness
Authority
Markets on eBay classified as either Consumer-to-business business-to-business

A company is a Electronics manufacturer that purchase wires from various wire manufacturer.
This company is a part of which type of Market Producer

The process of dividing a market into segments is called Market segmentation

Cars manufacturers tend to use what approach in teaching their target market Differentiated

Types of Marketing Segmentation Geographic segmentation.

Demographic segmentation.
Psychographic segmentation.
Behavioral segmentation.

Geographic segmentation. segmenting markets by region of a country or the world, market

size, market density, or climate

Demographic segmentation. dividing the market into segments based on variables such as
age, life-cycle stage, gender, income, occupation, education, religion, ethnicity, and generation

Psychographic segmentation. segmenting markets on the basis of personality, motives,

lifestyles

Behavioral segmentation. Dividing the market based on how people behave toward various
products.

The elements of the marketing mix are combined to Satisfy customers

A computer-based system for continually Gathering internal and external information is called
Marketing information system

Consumer Product Classification Convenience

Shopping
Specialty

Convenience Inexpensive, frequently purchased item; buyers exert minimal effort

Shopping Buyers willing to expend considerable effort planning/making purchase

Specialty Possesses one or more unique characteristics; significant group of buyers willing
to expend considerable purchasing effort

Goal of promotion Informs

Persuades
Reminds

Stages of Product Life Cycle Introduction

Growth
Maturity
Decline

A company May extend the life of a product by Significantly improving the products
formulation

One product that is distributed four different uses is known to having what product mix Narrow
product mix

The stage of new product development in which potential customers are presented with a
written or oral description of the product to determine their initial attitudes and the buying
intentions Concept testing

Brand Unique design, sign, symbol, words, or a combination of these, employed in creating an
image that identifies a product and differentiates it from its competitors

Brand mark is a design element, such as a symbol (e.g., Nike swoosh ), logo (e.g., Yahoo!
graphic), a character (e.g., Keebler elves) or even a sound (e.g., Intel inside sound), that
provides visual or auditory recognition for the product.

Trademark A symbol or a word that is registered with the US patent and trademark office and
is legally protected from the use by anyone but its owner

Non-price competitionCompetition that is based on such as product quality, emotion, customer

service and packing

Distribution Channel A sequence of organizations that directs a product from one producer to
the ultimate user

Merchant wholesaler A middleman that purchases Goods in large quantities then sell them to
retailers

Agent A functional middle man that does not take title to product and who is Complicated by
commissions paid by producers

Warehousing Refers to the set of activities involved with receiving and storing goods and
preparing them for reshipment
Airplanes The mode of transportation that carriers a smaller percentage of all Intercity
Freight

Advertising Any non-personal promotional message that is paid for by a identified sponsor
and it's directed towards a selected audience

Institutional advertising When a company uses celebrity to enhance the company's image

Personal selling The most expensive but most adaptable method of the promotional mix

Publicity Information about the company its employees and its product that is published or
broadcasted in a mass media free of charge

Data The basic resource from which plans are developed and decisions are made

Database A single collection of data stored in one place and it's used by employees
throughout the organization

the type of manager that would be most concerned with products offered by its competitors
Marketing managers

Functions of a management information system Collecting, storing, updating and processing

the data into information

Collection of data needed to establish an Mis results in Databank

Data gathered for MIS comes from Internal sources

When a customer purchase a product the system immediately reflects that purchase in a central
computer and calculates the new inventory level what kind of system is this Performing
statistical analysis

Statistics A measure that summarizes a particular characteristics of a group of numbers

The part of a business report that presents suggestions on how to solve a problem
Recommendation

A diagram that represents several items of information in a manner that compare is called
Visual display

To determine if it is sensible for managers and employees to use the internet to solve problems
firms use Cost and benefit analysis
A computer-based system that facilitates and supports the decision making needs of top
managers and Senior executives Executive information

Collaborative Learning System it is a work environment that Allows problem solving

participation by team members

Is a firm post employee openings along with the required skills that is needed on its website it is
using the internet to Recruit

The organized effort of individuals to produce and sell for profit the products and services that
satisfy society's needs through the internet E-Business

A source of Revenue flown into the farm Revenue stream

Two firms offer the same products and needs about the same type of employees Business
model

Online Farms take a business-to-customer model approach by Emphasizing customer focus

Try to build a long-term relationship with the customers

try to understand how the customer being online

An internal Force that's not affecting businesses The egg

Audit Required by many bankers and lenders who are trying to validate a company accountant
state

The more information a manager has.... The less risk when making a decision

Asset property owned by a person or company, regarded as having value and available to
meet debts, commitments, or legacies.

Owners equity total liabilities subtracted from total assets

Balance SheetAnother name for statement of financial position

Net Worth Total assets subtract liability

Liquidity Ease of which assets can be converted into cash

Examples of current assets Cash, Marketable securities, notes receivable and merchandise

Intangible assets Examples - Trademarks and Good Will

Long Term Liabilities Debts to be repaid in 2 years or less

Income statement Earning statement

A sales allowance A price reduction offered to customers who accept damaged or soiled
goods

cash flow statement Financial statement that provides information about a firm's operating,
investing and financing activities in a specific period of time

Merchandise inventory Value of Goods on hand for sale to customers

Return on Sales ratio divide net income after taxes by net sales

Working capital Difference between Current assets and Current liabilities

Current ratio Divide Crrent assets by current liabilities

inventory turnover Number of times a firm sells and replaces its merchandise in 1 year

Financial Management All activities concerned with obtaining money and using it
effectively

Cash Flow Movement of money into and out of

Capital budget A tool used by managers to estimate major expenditures for assets, expansion of
facilities and mergers and acquisition

Capital debt Money obtained when loans are called in

Unsecured Financing Short term financing not backed by collateral

Prime interest rate Lowest interest rate charge by a bank for a short term loan

Accounts receivable and inventory Assets most commonly used as collateral for short term
financing

Factor A firm that specializes in buying other firms accounts receivable

Trade Credit Least expensive form of short term financing

Equity Capital Used to start a business regardless of its legal form

Initial Public offering Common Stock for the first time

Line of Credit Loan approved before the money is actually needed

Dividends Earning of corporation that are distributed to stockholders

Securities Exchange A marketplace where member brokers meet to but and sell securities

Preferred and common Two types of stock a company can sell

Board of Directors Elected by Common stockholders

Venture Capital Firms Invest in small firms that have potential to be very successful

Maturity Date Date on the face of a bond telling when the bond is to be repaid

Convertible bond Corporate bond exchanged for shares o Common stockf

Free enterprise the system of business in which individuals are free to decide what to
produce, how to produce it, and at what price to sell it

Cultural (or workplace) diversity differences among people in a workforce owing to race,
ethnicity, and gender

Business the organized effort of individuals to produce and sell, for a profit, the goods and
services that satisfy society's needs

Human Resources

Material resources

Informational resources

Financial resources A business must combine the following four resources effectively to be
successful

Manufacturer

Marketing Intermediary
Consumer Today, businesses are usually organized as one of three specific types

e-business the organized effort of individuals to produce and sell for a profit, the goods and
services that satisfy society's needs through the facilities available on the Internet

Profit what remains after all business expenses have been deducted from sales revenue

Stakeholders all the different people or groups of people who are affected by an organization's
policies, decisions, and activities

Economics the study of how wealth is created and distributed

Microeconomics
Macroenconomics Today, experts often study economic problems from two different
perspectives

Economy the way in which people deal with creation and distribution of wealth

An Entrepreneur is a person who risks time, effort, and money to start and operate a
business

Factors of production resources used to produce goods and services

capitalism and command economies Today, two different economic systems exist

Capitalism an economic system in which individuals own and operate the majority of
businesses that provide goods and services

Invisible hand a term created by Adam Smith to describe how an individual's personal gain
benefits others and a nation's economy

Market economy an economic system in which businesses and individuals decide what to
produce and buy, and the market determines quantities sold and prices

Mixed economy an economy that exhibits elements of both capitalism and socialism

Households
Businesses
Governments In a mixed economy, the four basic economic questions (what, how, for whom,
and who) are answered through the interaction of

Consumer Products goods and services purchased by individuals for personal consumption
Command economy an economic system in which the government decides what goods and
services will be produced, how they will be produced, for whom available goods and services
will be produced, and who owns and controls the major factors of production

Productivity the average level of output per worker per hour

Gross domestic product (GDP) the total dollar value of all goods and services produced by
all people within the boundaries of a country during a specified time period—usually a one-year
period

Inflation a general rise in the level of prices

Deflation a general decrease in the level of prices

Unemployment rate the percentage of a nation's labor force unemployed at any time

Consumer price index (CPI) a monthly index that measures the changes in prices of a fixed
basket of goods purchased by a typical consumer in an urban area

Producer price index (PPI) an index that measures prices that producers receive for their
finished goods

Business cycle the recurrence of periods of growth and recession in a nation's economic
activity

Recession two or more consecutive three-month periods of decline in a country's GDP

Depression a severe recession that lasts longer than a typical recession and has a larger
decline in business activity when compared to a recession

Monetary policies Federal Reserve's decisions that determine the size of the supply of
money in the nation and the level of interest rates

Fiscal policy government influence on the amount of savings and expenditures; accomplished
by altering the tax structure and by changing the levels of government spending

Federal deficit a shortfall created when the federal government spends more in a fiscal year
than it receives

National debt the total of all federal deficits

Competition rivalry among businesses for sales to potential customers

Perfect (or pure) competition the market situation in which there are many buyers and sellers of
a product, and no single buyer or seller is powerful enough to affect the price of that product

Supply the quantity of a product that producers are willing to sell at each of various prices

Demand the quantity of a product that buyers are willing to purchase at each of various
prices

Market price the price at which the quantity demanded is exactly equal to the quantity supplied

Monopolistic competition a market situation in which there are many buyers along with a
relatively large number of sellers who differentiate their products from the products of
competitors

Product differentiation the process of developing and promoting differences between one's
products and all competitive products

Oligopoly a market (or industry) in which there are few sellers

Monopoly a market (or industry) with only one seller, and there are barriers to keep other
firms from entering the industry

Standard of living a loose, subjective measure of how well off an individual or a society is,
mainly in terms of want satisfaction through goods and services

Domestic system a method of manufacturing in which an entrepreneur distributes raw

materials to various homes, where families process them into finished goods to be offered for
sale by the entrepreneur

Factory system a system of manufacturing in which all the materials, machinery, and
workers required to manufacture a product are assembled in one place

Specialization the separation of a manufacturing process into distinct tasks and the assignment
of different tasks to different individuals

The growth of the service economy an economy in which more effort is devoted to the
production of services than to the production of goods—changed the way American firms do
business.

Social media the online interaction that allows people and businesses to communicate and
share ideas, personal information, and information about products or services

Sustainability the ability to maintain or improve standards of living without damaging or

depleting natural resources for present and future generations
Ethics the study of right and wrong and of the morality of the choices individuals make

Business ethics the application of moral standards to business situations

Ethical Issues often arise out of a business's relationship with investors, customers, employees,
creditors, suppliers, or competitors

Fairness and HonestyBusinesspeople are expected to refrain from knowingly deceiving,

misrepresenting, or intimidating others.

Sarbanes-Oxley Act of 2002 provides sweeping new legal protection for employees who report
corporate misconduct

Code of ethics a guide to acceptable and ethical behavior as defined by the organization

Whistle-blowing informing the press or government officials about unethical practices

within one's organization

Social responsibility the recognition that business activities have an impact on society and the
consideration of that impact in business decision making

Corporate citizenship adopting a strategic approach to fulfilling economic, ethical,

environmental, and social responsibilities

caveat emptor Latin term for "buyer beware"

Economic model of social responsibility the view that society will benefit most when
business is left alone to produce and market profitable products that society needs

Socioeconomic model of social responsibility the concept that business should

emphasize not only profits but also the impact of its decisions on society

Consumerism all activities undertaken to protect the rights of consumers

The Basic Rights of Consumers The Right to Safety

The Right to Be Informed
The Right to Choose
The Right to Be Heard

Additional Consumer Rights The Right to Consumer Education

The Right to Service

Major Consumerism Forces Consumer advocates and organizations

Consumer education programs
Consumer laws

Federal Hazardous Substances Labeling Act (1960) Required warning labels on

household chemicals if they were highly toxic

Kefauver-Harris Drug Amendments (1962) Established testing practices for drugs and required
manufacturers to label drugs with generic names in addition to trade names

Cigarette Labeling Act (1965) Required manufacturers to place standard warning labels on all
cigarette packages and advertising

Fair Packaging and Labeling Act (1966) Called for all products sold across state lines to be
labeled with net weight, ingredients, and manufacturer's name and address

Motor Vehicle Safety Act (1966) Established standards for safer cars

Truth in Lending Act (1968) Required lenders and credit merchants to disclose the full cost of
finance charges in both dollars and annual percentage rates

Credit Card Liability Act (1970) Limited credit-card holder's liability to $50 per card and
stopped credit-card companies from issuing unsolicited cards

Consumer Product Safety Commission Act (1972) Established an abbreviated procedure for
registering certain generic drugs

Fair Credit Billing Act (1974) Amended the Truth in Lending Act to enable consumers to
challenge billing errors

Equal Credit Opportunity Act (1974) Provided equal credit opportunities for males and females
and for married and single individuals
Provided for minimum disclosure standards for written consumer-product warranties for
products that cost more than $15

Amendments to the Equal Opportunity Act (1976, 1994) Provided equal credit opportunities
for males and females and for married and single individuals

Fair Debt Collection Practices Act (1977) Outlawed abusive collection practices by third
parties

Nutrition Labeling and Education Act (1990) Required the Food and Drug Administration to
review current food labeling and packaging focusing on nutrition label content, label format,
ingredient labeling, food descriptors and standards, and health messages
Telephone Consumer Protection
Act (1991) Prohibited the use of automated dialing and prerecorded-voice calling equipment
to make calls or deliver messages

Consumer Credit Reporting Reform Act( 1997) Placed more responsibility for accurate
credit data on credit issuers; required creditors to verify that disputed data are accurate and to
notify a consumer before reinstating the data

Children's Online Privacy Protection Act (2000) Placed parents in control over what
information is collected online from their children younger than 13 years; required commercial
Web site operators to maintain the confidentiality, security, and integrity of personal information
collected from children

Do Not Call Implemnetation Act (2003) Directed the FCC and the FTC to coordinate so that
their rules are consistent regarding telemarketing call practices including the Do Not Call
Registry and other lists, as well as call abandonment

Credit Card Accountability,

Responsibility, and Disclosure Act (2009) Provided the most sweeping changes in credit card
protections since the Truth in Lending Act of 1968

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 Promoted the
financial stability of the United States by improving accountability and responsibility in the
financial system; established a new Consumer Financial Protection Agency to regulate home
mortgages, car loans, and credit cards; became Public Law on July 21, 2010

Minority a racial, religious, political, or other group regarded as different from the larger
group of which it is a part and that is often singled out for unfavorable treatment

Affirmative action program a plan designed to increase the number of minority employees at
all levels within an organization

Equal Employment Opportunity Commission (EEOC) a government agency with the power
to investigate complaints of employment discrimination and the power to sue firms that practice
it

Hard-core unemployed workers with little education or vocational training and a long
history of unemployment

National Environmental Policy Act (1970) Established the Environmental Protection Agency
(EPA) to enforce federal laws that involve the environment

Clean Air Amendment (1970) Provided stringent automotive, aircraft, and factory emission
standards
Water Quality Improvement Act (1970) Strengthened existing water pollution regulations
and provided for large monetary fines against violators

Resource Recovery Act (1970) Enlarged the solid-waste disposal program and provided
for enforcement by the EPA

Water Pollution Control Act Amendment (1972) Established standards for cleaning
navigable streams and lakes and eliminating all harmful waste disposal by 1985

Noise Control Act (1972) Established standards for major sources of noise and required the
EPA to advise the Federal Aviation Administration on standards for airplanes

Clean Air Act Amendment (1977) Established new deadlines for cleaning up polluted areas;
also required review of existing air-quality standards

Resource Conservation and Recovery Act (1984) Amended the original 1976 act and required
federal regulation of potentially dangerous solid-waste disposal

Clean Air Act Amendment (1987) Established a national air-quality standard for ozone

Oil Pollution Act (1990) Expanded the nation's oil-spill prevention and response activities;
also established the Oil Spill Liability Trust Fund

Green marketing the process of creating, making, delivering, and promoting products that
are environmentally safe

Clean Air Act Amendments (1990) Required that motor vehicles be equipped with onboard
systems to control about 90 percent of refueling vapors

Food Quality Protection Act (1996) Amended the Federal Insecticide, Fungicide and
Rodenticide Act and the Federal Food Drug and Cosmetic Act; the requirements included a new
safety standard—reasonable certainty of no harm—that must be applied to all pesticides used
on foods

American Recovery and Reinvestment Act (2009) Provided $7.22 billion to the EPA to protect
and promote "green" jobs and a healthier environment

International businessall business activities that involve exchanges across national boundaries
(also they have an absolute advantage.)

Absolute advantage the ability to produce a specific product more efficiently than any other
nation
Comparative advantage the ability to produce a specific product more efficiently than any
other product

Exporting and Importing countries trade when they each have a surplus of the product in
which they specialize and want a product in which the other country specializes.

Exporting selling and shipping raw materials or products to other nations

Importing purchasing raw materials or products in other nations and bringing them into
one's own country

Balance of trade the total value of a nation's exports minus the total value of its imports
over some period of time

Trade deficit a negative balance of trade

Balance of payments the total flow of money into a country minus the total flow of money out of
that country over some period of time

Licensing a contractual agreement in which one firm permits another to produce and
market its product and use its brand name in return for a royalty or other compensation

Letter of credit issued by a bank on request of an importer stating that the bank will pay an
amount of money to a stated beneficiary

Bill of lading document issued by a transport carrier to an exporter to prove that merchandise
has been shipped

Draft issued by the exporter's bank, ordering the importer's bank to pay for the merchandise,
thus guaranteeing payment once accepted by the importer's bank

Joint venture a partnership formed to achieve a specific goal or to operate for a specific period
of time

Advantage of Joint Venture Immediate market knowledge and access

Reduced risk
Control over the product attributes

Disadvantage of Joint Venture Complexity of establishing agreements across national

borders
High level of commitment required of all parties involved

Totally owned facilities a firm's own production and marketing facilities in one or more
foreign nations
Advantage of Totally owned facilities:The direct investment provides complete over operations

Disadvantage of Totally Owned Facilities: It carries a greater risk than a joint venture.

Strategic alliance a partnership formed to create competitive advantage on a worldwide

basis

Trading company provides a link between buyers and sellers in different countries

Countertrade an international barter transaction

Multinational enterprise a firm that operates on a worldwide scale without ties to any
specific nation or region

Import duty (tariff) a tax levied on a particular foreign product entering a country

Revenue tariffs imposed solely to generate income for the government

Protective tariffs imposed to protect a domestic industry for competition by keeping the
price of competing imports level with or higher than the price of similar domestic products

Dumping exportation of large quantities of a product at a price lower than that of the same
product in the home market

Nontariff barrier a nontax measure imposed by a government to favor domestic over

foreign suppliers

Import quota A limit on the amount of a particular good that may be imported into a country
during a given period of time

Embargo A complete halt to trading with a particular nation or in a particular product

Foreign-exchange control A restriction on the amount if a particular foreign currency that can
be purchased or sold

Currency devaluation The reduction of the value of a nation's currency relative to the currencies
of other countries

Reasons for Trade Restrictions To equalize a nation's balance of payments

To protect new or weak industries
To protect national security
To protect the health of citizens
To retaliate for another nation's trade restrictions
To protect domestic jobs

Reasons Against Trade Restrictions: Higher prices for consumers

Restriction of consumers' choices
Misallocation of international resources
Loss of jobs

General Agreement on Tariffs and Trade (GATT) an international organization of nations

dedicated to reducing or eliminating tariffs and other barriers to world trade
Most-favored-nation status (MFN) was the famous principle of GATT.

World Trade Organization (WTO) powerful successor to GATT that incorporates trade in
goods, services, and ideas

Economic community an organization of nations formed to promote the free movement of

resources and products among its members and to create common economic policies

Export-Import Bank of the United States an independent agency of the U.S. government
whose function is to assist in financing the exports of American firms

Multilateral development bank (MDB) an internationally supported bank that provides

loans to developing countries to help them grow

International Monetary Fund (IMF) an international bank that makes short-term loans to
developing countries experiencing balance-of-payment deficits

A number of economic communities now exist, including: The European Union

*The North American Free Trade Agreement*
The Central Free Trade Agreement
The Association of Southeast Asian Nations
The Commonwealth of Independent States
Trans-Pacific Partnership (TPP)
The Common Market of the Southern Cone (Mercosur)
The Organization of Petroleum Exporting Countries

Any activity which seeks to earn a profit by providing a good or service is known as
a...,Business

____________ is the amount a business earns over and above what it spends for salaries and
other expenses.,Profit

A loss occurs when expenses are greater than...,Revenue

A business incurs a ___________ if its costs and expenses exceed its revenues.,Loss
The total amount of money that businesses earn by selling goods and services is called
________.,Revenue

Last year, MacTeck Enterprises had total revenues of $34 million while its total expenses were
$22 million. Based on this information, MacTeck...,Earned a profit of $12 million.

Which of the following is the best example of a business?,Wal-Mart

Businesses differ from nonprofit organizations in that a business's focus is on...,Profit

The goal of business is to earn...,A Profit and Responsibility

Which of the following is NOT one of the three fundamental characteristic that an efficient and
effective operating platform will possess?,A system of integrate actions.

Which of the following is NOT integral in how an organization can succeed in identifying
solutions to needs the marketplace desires?,Right Invention

____________ refers to the value-creating skills which an organization's employees bring to the
marketplace.,Employee Interaction

Which of the following does NOT make up a business?,Develops wealth for its employees.

The functions of organizing, staffing, planning, and controlling are most closely associated
with...,Managers

To be successful in today's markets, businesses must...,Delight customers with a quality

products at a good price and outstanding service.

Business has changed over time, traditionally business was more focused on the product and
how to sell...,Quality and Service

__________ refers to the ability of managers to establish a direction for the organization based
on the needs identified in the marketplace and the mission (reason for being) of the
organization...,Visionary Leadership

___________ refers to the human resource requirements of the business.,Labour

_______ refers to the money needed by an organization,Capital

Which of the following is NOT one of the four core fundamental resource areas an organization
will build its business model or system around..,Strructure
____________ refers to the ability of managers to establish a direction for the organization
based on the needs identified in the marketplace and the mission (reason for being) of the
organization.,Visionary Leadership

When purchasing a product, the consumer is actually buying its anticipated benefits
and...,Satisfaction and Productivity

If a business is to be successful in the long run, it must treat its customers, employees, and
community with social...,Responsibility and Insight

Which of the following is not a product?,A lawyer's advice in a divorce case and Business Profit

To start any business you must first have...,An Idea

A precise statement of the rationale for a business and a step-by-step explanation of how it will
achieve its goals is a...,Business Plan

The business plan should do all of the following except...,Act as a shackle to limit the business's
flexibility and decision making.

Which of the following is NOT part of the process called The Business Planning
Cycle?,Management team capitalizes on its identified strategic opportunities.

A company has a competitive advantage when it can...,All of the above.

A business' objectives should NOT be which of the following...,Easy

What makes up the 3C assessment?,Capabilities, Competencies, Capacity

A business' objectives should be...,All of the above.

In order to achieve long-term growth and profitability, businesses are constantly searching for
new markets and new opportunities to further grow the scope and focus of their
organizations...,To pay its bills and reinvest in the future & In order to achieve long-term growth
and profitability

Too much emphasis on developing future products and/or services, versus responding to
customer needs today, may result in the business...,Liquidity issues if it is unable to cover its
expenses in the short term.

Profitability analysis takes into consideration...,All of the above.

Any activity which seeks to earn a profit by providing a good or service is known as
a(n)...,Business
__________ is the amount a business earns over and above what it spends for salaries and
other expenses.,Profit

Non-profit organizations...,Can provide an opportunity for individuals to address social issues.

Businesses differ from nonprofit organizations in that a business's focus is on,Organization

When consumers calculate the value of a product, they...,Look at the benefits the product
provides then subtract the cost.

The combination of all the factors that consumers evaluate when deciding whether or not to buy
a good or service is called a...,Total Product Offer

When people consider purchasing a good, they...,May evaluate and comparer a variety of
factors.

Which of the following refers to a group of products offered by a firm that are physically similar
or are intended for a similar market?,Product Line

All of the following would be included in the total product offer of benefits that consumers
consider when buying a good or service except the...,Consumer's Income

The purpose of __________ is to create real or perceived product differences.,Product

Differentiation

For small businesses, product differentiation...,Can be an important strategy to gain market

share.

LoRider Wheels sells high quality bicycles and accessories. The store is known for a pleasant
environment, friendly salespeople and an excellent service department. All of these elements
are part of the ___________ offered by LoRider.,Total Product Offer

When consumers decide to purchase a particular product, they...,Consider the total collection of
benefits that they product.

Successful product differentiation...,Can be based on either real or perceived differences in

products.

All of the following would allow a firm to utilize product differentiation except...,Increased
Production
The _______ of the value proposition is the perceived sum of your company's ability to deliver in
each of the areas noted within the value proposition equation, versus the _____ of your
competitors' value propositions measured across these same benefit areas.,Strength; strength

A value proposition which has a positive price/quality relationship is considered superior to

those of your competitors, if it...,All of the above.

______ expenditures are expenses incurred as a result of the normal business operations. The
salaries/wages of employees, the purchase of raw materials for the fabrication of products, the
costs of shipping products from point A to point B, or the costs of advertising campaigns, are
examples of such expenses.,Operating

Sweet Dream Confectioners uses the same ingredients as most other producers of chocolate
candies. In fact, taste tests suggest that the candy itself, while quite good, isn't much better than
other well-known brands of chocolate. However, the company wraps its candies in expensive
looking foil and places them in very attractive boxes. It promotes its products in advertisements
as "the ultimate in chocolate experience." Sweet Dream charges a much higher price than most
competitors, but sales continue to grow. This success indicates that,There is more to the total
product offer than the physical product.

In evaluating colleges, students and parents are likely to judge a school...,By the collection of
benefits offered by the school.

"I Can't Believe That It's Medicine" is an advertising slogan for a new antacid. The manufacturer
claims that their antacid works faster and tastes better than any competing brand. These claims
are part of the firm's strategy to achieve...,Product Differentiation

As restaurant chains that specialize in Mexican cuisine, Fernando's and Carmelita's offer similar
items on their menus. However, Fernando's restaurants are positioned in the market as elegant
establishments with high prices. Carmelita's restaurants, on the other hand, are located in
middle class neighborhoods, with a casual atmosphere that welcomes families with young
children. The prices at Carmelita's are in the moderate range. When evaluating the marketing
strategies used by these restaurants, we can conclude that...,They utilize product differentiation.

______________ is the art of getting things done using organizational resources.,Management

Today's progressive managers,Tend to emphasize teamwork and cooperation rather than

discipline and order-giving

Today, managers have to make allocation decisions around the use of which scarce
resources...,All Resources

__________ is the development of plans and decisions which will guide the direction of the firm
and determine its long-term performance.,Strategy
_______, managers need to understand where the market is going and how their products and
services will fit into the market and meet customer needs. ________, they need to ensure that
the right product reaches the right customer at the right time and at the right place for the right
price...,Strategically; Tactically

Strategy...,All of the above.

___________ is the development of plans and decisions which will guide the direction of the
firm and determine its long-term performance.,Strategy

In recent years, productivity in the manufacturing sector of the Canadian economy has
been...,Rising

Economic expansion occurs when...,An economy is growing and people are spending more
money.

Economic contraction occurs when...,Spending Declines

The following contributing factor has NOT helped Canada be seen as a safe and lucrative place
to do business...,Existence of Corruption

Approximately what percentage of the FDI flowing into Canada comes from the USA?,53%

Canada has a strong natural resource base results in our having a ___________ when it comes
to the commodities and energy market sectors.,Comparative Advantage

Which of the following is NOT one of the contributing factors impacting Canada's economic
development...,Political system is unstable.

Approximately 53% of the FDI flowing into Canada comes from the USA, however almost what
percent of the INCREASES in FDI come from non-U.S. sources?,100%

The ability of a country to produce or supply goods or services at a lower cost than other
countries or to possess resources or unique services that are unavailable elsewhere is
a..,Competitive Advantage

The Canadian economic system can be described as a...,Mixed Economy

Today, the economic systems of most nations could most accurately be classified as...,Mixed
Economies

A controlled system is characterized by...,Reliance on the government to determine what is

produced and who gets the output.
A core fundamental of an open, economic environment, the Law of Supply and Demand, refers
to the ability of the market, independent of external influences, to determine the..,Price for which
a product or service will be brought and sold.

Inelastic demand results when movement in price...,Results in significant changes in demand.

Suppliers need to think about the cost of production versus the revenue which will be received
from selling their product, and the change in profit which will be realized at different points on
the schedule. This is called the...,Law of Supply

Elastic demand results when movement in price...,Results in significant changes in demand.

In pure economic terms, this refers to the point where the quantity supplied equals the quantity
demanded, with the price point set.,Equilibrium

The quantity of a good or service that manufacturers or owners are willing to sell at different
prices during a specific time period is known as the...,Supply of that product.

A typical supply curve shows that an increase in the price of a good will cause the quantity
supplied to...,Increase

A typical supply curve shows a relationship between the...,Price of a good and the quantity
seller would be willing to offer for sale.

A(n) _____________ curve shows the relationship between the price of a good and the quantity
of that good people are willing and able to buy in a given time period.,Demand

A typical demand curve shows that...,People tend to buy more of a good when its price
decreases.

When the supply curve and demand curve for a particular good are on a single graph, the point
at which the two curves intersect identifies the:,Equilibrium price of the good.

When prices are free to adjust over time, the market price of a good tends to...,Equal the
equilibrium in the long run.

If a shortage exists for a good in a free-market economy, the...,Price of the good will rise.

Economic expansion occurs when...,An economy is growing and people are spending more
money.

A continuing rise in prices over a period of time refers to...,Inflation

Increased unemployment can reduce consumer demand for goods and services, leading
to...,Economic Contraction

Economies move and grow as a result of activities of everyone in the following areas...,All of the
above.

Of the following, which factor is NOT included in the total value of GDP...,Business investments
in other countries .

Key economic drivers vary from country to country, for Canada, what is NOT considered to be a
key driver...,Production of goods and services for purpose of exporting.

Productivity and its resulting economic activity is predicated on the following fundamental
factor...,All of the above.

Economies move and grow as a result of activities of the following...,Everyone

Economies growth depends upon...,The development stage of the economy and its key GDP
drivers.

Which of the following terms describes the set of values, beliefs, rules, language, and
institutions held by a specific group of people?,Culture

Selling the same product in essentially the same way worldwide is known as...,Global Marketing

Which of the following represents the value of one nation's currency relative to the currencies of
another country?,Exchange Rate

Hennessy Hardware, a Canadian retailer, buys much of its inventory from Asian countries.
Hennessy Hardware would benefit if the value of the dollar ________ relative to the currencies
of the countries from which Hennessy imports.,Rose

Kwality Computers utilizes the same promotional message about their product worldwide. This
is an example of...,Global Marketing

Paula, a Canadian businessperson who closely follows international business conditions,

recently read a newspaper article predicting that the value of the dollar will soon fall. If this
article is correct, Paula should expect..,Price of imported goods to rise, but prices of Canadain
good sold overseas to fail.

The danger with geographic clustering occurs when such distinctness occurs at the broader
macro level, resulting in what?,The inability of governments to effectively control economic
expansion or contraction.
Canada's aging workforce is poised to impact the employment needs of Canada's energy
sector, resulting in what?,The need to important to skilled and well-educated workers due to a
shortage domestically.

Which of the following is NOT one of the prominent trends which Canadian managers will need
to assess in order to plan appropriately for their business operations?,Energy Prices

Why is it important for managers to understand trends which are occurring within the economic
market?,Pose opportunities and challenges to the livelihood of businesses.

Inflation robs an economy of true growth and __________ negatively impacts the confidence
levels of consumers and business operators alike.,Psychologically

Which of the following is NOT one of the prominent trends which Canadian managers will need
to assess in order to plan appropriately for their business operations?,Large Business Emphasis

________ is characterized by a large number of firms selling products that appear to be

identical.,Perfect Competition

___________ exists when a large number of firms produce goods that are similar but are
perceived by buyers as being different.,Monopolistic Competition

An oligopoly is a market that is characterized by...,A few large sellers who dominate the market
supply.

__________ exists when the entire supply of a good is controlled by a single seller.,A Monopoly

The markets for laundry detergents, soft drinks, and automobiles all are dominated by just a few
sellers. Economists would classify these markets as examples of...,An Oligopoly

In most large cities there are a large number of bakeries. These bakeries produce similar, but
not identical, products. Some bakeries claim to have the best cheesecakes in town, while others
brag about their cookies or specialty breads. The bakery market in a large city is an example
of...,Monopolistic Competition

The presence of competition in free markets...,Typically results in better quality and lower prices.

Bigbux is a major producer of whatsits, but it faces competition in the whatsit market from three
other major producers. Together, Bigbux and its three large rivals control almost the entire
supply of whatsits. The type of market Bigbux is in is called...,Oligopoly

Jane's Garden Center exists in a market where there are many sellers & no seller is large
enough to dictate the price of a product. Under what degree of competition does Jane's
company compete?,Perfect Competition
Susan Gilles wants to invest in a Tim Horton's franchise but opts not to once she finds out just
how much it costs to buy a franchise. She decides to start her own independent coffee shop.
She understands the need to differentiate her business from all the other coffee shops, given
the type of competition that exists in this industry, which is...,Monopolistic Competition

One of the most-often-used business tools to assess the market they are operating within is a
business model created by Michael Porter of the Harvard Business School called...,Five Forces
Model

Daily changes are influenced by both controllable and non-controllable factors. In many cases,
these changes can be the result of broader _________ forces beyond a specific
industry.,Macro-Economic

Managers assess the macro level, the political, social, technological, environmental, and legal
changes in their environment. This analysis is commonly referred to as a ________
analysis...,PESTEL

As managers, we must not only be in tune with the general directions which are occurring, but
also with the ______________ which will develop as a result of such increased economic
activity and...,Opportunities and Threats

Managers need to understand what the general indicators are saying about the _______
economy and about the ________ relationship between the key variables governing our mixed
economic system...,Current; Current

___________ is the selling of goods and services to other countries.,Exporting

Approximately how many people live in the "Emerging Markets"?,3+ Billion

What is happening to the standard of living for the billions of people in the "Emerging
Markets"?,Improving

___________ is an example of a successful Canadian business which started out as a small

local player, and has evolved into an international organization with retail store locations in the
U.S. and Australia.,Lululemon Athletics

What type of investment is currently under way within the emerging market countries?,Foreign
Direct

What is happening to the standard of living for the billions of people in the "Emerging
Markets"?,Improving

Canadian natural resources include which of the following...,Mining, Agriculture, and Energy
Where do Canadian companies naturally look first for potential growth opportunities?,U.S

In terms of global competitiveness, companies are attracted to countries where _______ costs
are relatively low and __________ are relatively high.,Labour; Professional Skills

The search for new markets is not __________, with developing economy companies also
looking to export to fully-developed economies, such as the U.S. and Canada.,A one-way focus.

Why do companies look beyond their domestic markets to expand?,New Market Opportunities

Why are a variety of Canadian organizations realizing new market potential in emerging
developing economies of the world?,Rapid Growth

China's meteoric economic rise has been largely driven by a(n) ___________ strategy.,Export

Many countries use ________________ policies as a way to protect their domestic industries
from unfair foreign competition.,Trade Protectionism

___________ is the use of government regulations to limit the import of goods and
services.,Trade Protectionism

A ________ tariff is designed to raise the price of imported products so that domestic goods are
more competitively priced.,Protective

Which of the following government policies creates an environment of restrictive standards

intended to make it difficult for foreign firms to successfully sell their products?,Nontariff Barriers

The __________ represents the first attempt to establish a truly global mediation centre to
resolve international trade disputes.,World Trade Organization

United States has stopped some Canadian goods from entering the country because it said that
the information on the labels was too small. This is an example of a(n)...,Nontariff Barriers

With respect to the global marketplace, what did the meltdown of the financial services sector in
the fall of 2008, and the accompanying recession of 2009 bring to the
forefront?,Interdependency and Connectivity

What surprised many analysts was the _______ in which a recession, initially focused in the
United States, turned into a global recession with economic contraction occurring
worldwide.,Speed
What organization played a key role in the development of a solution to the sovereign debt
issues challenging the governments of a number of European Union members in 2010 and
2011?,IMF

Which of the following is NOT one of the six fundamentals which governments globally need to
commit to, are the following...,Protectionism

_______ refers to the need for developing economies to maintain a focus on the core elements
of an open economy -those being the law of supply and demand, encouragement of
entrepreneurship and wealth creation, and the willingness to encourage and support private
ownership.,Market Openness

What is Protectionism?,All of the above.

The outlook for growth in global trade appears to be...,Brighter Everyday

For firms interested in global markets, investments in China are considered to be...,An emerging
business opportunity.

Many economists and business experts contend that ________ will likely be the growth market
of the future.,Asia

Which of the following statements best describes the possibilities for small businesses in global
markets?,Small businesses are often better prepared to enter global markets than large,
bureaucratic corporations.

Which of the following are NOT considered part of the BRIC countries leading emerging
economy impact on the global marketplace?,Italy

What sectors prices are expected to continue to have a strong influence on the cost base of
many businesses?,Energy

The ability of governments and their central banks to manage monetary and credit policy
_______, will have significant bearing on inflationary pressures in the years to
come.,Individually and Jointly

At approximately what rate are the emerging economies expect to grow compared to the
fully-developed economies of the world?,2X

How many countries in The European Union use the Euro as a common currency?,16

What has allowed trade to flourish?,Specialization

Trade occurs between _________.,Organizations and Individuals

Which of the following factors does not influence the value of a nation's currency?,The
competitiveness of the country in question.

When a country devalues its currency, this encourages the sale of its...,Domestic goods to
foreign countries.

If Canada wanted to reduce the cost of its goods in foreign markets, it could...,Devalue its
currency.

Paula, a Canadian businessperson who closely follows international business conditions,

recently read a newspaper article predicting that the value of the dollar will soon fall. If this
article is correct, Paula should expect...,Prices of imported goods to rise, but prices of Canadian
goods sold overseas to fall.

Which of the following is NOT a reason that the United States dollar remains the benchmark
currency?,The U.S sovereign debt.

Which of the following is NOT a core component behind the rise of the developing economies of
the world?,Enhances purchasing power for consumers.

Which of the following is NOT a requirement for competing in today's global economy?,Efficient
and effective resource allocation.

In expanding internationally, what issues will managers find demand more and more of their
time?,Risk Management and Global Technology-Based Connectivity

What annual percentage growth over the past decade has Canadian imports to the BRIC
nations (and many other emerging players) been?,17

Which of the following in NOT part of the whole new set of employment and organizational
structure requirements and challenges?,Cultural and social issues, relating to foreign market
needs.

What is a one tenth of one percentage point increase in imports growth of the Chinese economy
worth to Canada?,$20 Billion

Businesses can best meet their responsibility to society by...,Creating wealth for their
stockholders.

Ethical problems and issues of social responsibility are...,Not unique to Canada.

Top leaders in government and business today are...,Held to higher ethical standards than in the
past.
Issues of social responsibility and ethical behaviour are...,Found in many different countries.

All of the following are arguments in favor of social responsibility except...,Businesses may lose
their focus on profit-making.

Which of the following is NOT a reason why Great Britain and Europe, during the mid-to-late
1700's, began the shift from one of a largely agricultural-based dependent society to that of a
market transitioning towards a production-based model...,Environmental Stewardship

What was a key factor in why Canadians use so much water, according to The Conference
Board of Canada study?,A lack of water conservation practices.

Which of the following is NOT a goal of sustainable business strategy?,Incorporate protection

and respect for water resources.

According to statistics released by the Conference Board of Canada (2008), our country ranks
15th out of 16 (with 1 being the best) peer countries in terms of _________.,Water Conservation

Which of the following is NOT a successful economic development ratings that goes beyond
production and consumption indices and include additional measures?,Production-Based
Productivity Indexes

What was a key factor in why Canadians use so much water, according to The Conference
Board of Canada study?,A lack of water conservation practices.

Issues of social responsibility are...,Not unique to Canada.

What is The United Nations' (U.N.) current estimate for the population growth of our planet in
2050?,36%

What is The United Nations' (U.N.) current estimate for the population of our planet in 2050?,9.2
Billion

What percentage cuts to carbon-based emissions are needed to significantly reverse the
downward spiral associated with climate change?,50%

Which of the following is NOT one of the five critical sustainability challenges?,Water Depletion

According to the World Health Organization (WHO), approximately how many people live in
areas which do not have access to clean and safe drinking water?,1.1 Billion

When working with international firms, Canadian businesses...,Expect socially responsible

behaviour from their business partners.
Which of the following is NOT a critical trading practice that global market participants must
agree to in order to achieve environmental sustainability?,All of the above.

Which of the following is NOT one of the fundamental shifts in the thought process associated
with waste according to The Resource Management model?,Waste disposal is an unavoidable
cost.

Emissions Management is focused on our ability, across the globe, to achieve a position of
________.,Zero Global Emissions

Which of the following groups need NOT be involved to redefine the way in which we can
achieve the required economic development which will result in an improvement in the standard
of living for all global citizens while, at the same time, protect the planet which we call
home?,None of the above.

_______ refers to the tactical shifts required within our business operations in order to maximize
the efficiency of our resource utilization and minimize or eliminate the resulting current
degradation to the planet which such operations bring.,Eco-Efficiency Management

All else held equal, socially responsible firms...,Are viewed more favourably by consumers.

Determining what is involved for a firm to be socially responsible...,Varies even among those
who are interested in corporate responsibility.

Corporate ___________ is the concern businesses have for the welfare of society.,Social
Responsibility

In addressing social responsibility, managers must consider their firms' relations with...,All of the
answers are correct.

Managers consider social responsibility...,On a daily basis.

A business's responsibilities to its owners and investors include...,All of the answers are correct.

__________, often driven by external groups and concerned citizens, has resulted in a greater
awareness and understanding of the environmental challenge which we are now facing.,Social
Pressure

Which of the following is NOT one of the long-term benefits that results from the integration of
environmental sustainability practices into an organization's...,Stronger Recruitment Positioning
The full emersion of environmental sustainability into the strategic planning process of an
organization means integrating it throughout our _____, _______ and __________.,Culture;
Operations; Processes

___________ means that businesses need to see environmental sustainability as an integral

part of value creation and that this creation includes sustaining and enhancing the resources
which we depend on well into the future.,Strategic Integration

For many businesses, environmental sustainability is focused which two short-term

outcomes?,Improved Corporate Image and Regulatory Compliance

Which of the following would least likely involve ethical concerns?,Forecasting sales for the next
year.

Which of the following statements about business ethics is false?,What is ethical is determined
by the public, government regulators, interest groups, competitors, and each individual's
personal moral values.

Studying business ethics will not necessarily...,Inform you concerning the impact of the work
group on ethical decisions.

Which of the following statements is false?,Ethical issues are limited to for-profit organizations.

Organizational ethics are learned by...,Observing the actions of others.

All of the following are reasons why a business should be managed ethically except...,Because
strict global regulations require it.

Corporate values are...,Learned by observing the actions of other in the organization.

When managers appear to disregard ethical concerns, the likely results would include...,Mistrust
between workers and management.

A competitive corporate environment...,Can encourage employees to deceive customers.

Following an ethics-based approach to decision making will normally lead to higher

________.,Trust and Cooperation

With respect to business ethics, it can be said that "it takes two to tango." This indicates
that...,An individual's behaviour is influenced by the behaviour of others

The majority of CEOs blame unethical employee conduct on...,A failure of leadership to
establish ethical standards.
Which of the following terms describes someone who reports illegal or unethical
behaviour?,Whistleblower

Which of the following would be a unique focus of an integrity-based ethics code?,Shared

accountability among employees.

The Sarbanes-Oxley Act and Ontario's Bill C-198 were both passed to...,Help restore
confidence in Corporate American and Canada.

Which of the following have been cited as incidents of unethical business activity recently?,All of
the above.

As a new employee, Vanessa has heard her boss say, "Do whatever it takes to meet your sales
quota. However, anyone caught violating a law will be immediately fired." Vanessa recognizes
this as a(n) ________-based code of ethics.,Compliance

After developing a code of ethics, it should be communicated to...,Everyone with whom the
business has dealings.

Which step is the most critical to help improve business ethics?,The ethics code must be
enforced.

A set of formalized rules and standards that describe what a company expects of its employees
is called a(n)...,Code of Ethics

What occurs when an employee exposes an employer's wrongdoing to

outsiders?,Whistleblowing

Codes of ethics foster ethical behavior by...,All of the above.

Which of the following should help reduce the incidence of unethical behavior in an
organization?,All of the above.

Corporate social responsibility describes the firm's...,Concern for the welfare of society.

Which of the following describes charitable donations by corporations to nonprofit

organizations?,Corporate Philanthropy

Corporate ________ encompasses various issues such as setting minority hiring practices,
manufacturing safe products, and minimizing pollution.,Responsibility

Top management at Lancer Distributing is convinced that they have a social responsibility to
their community. They believe that they can have the greatest impact in this area through cash
contributions to nonprofit organizations. This is an example of corporate...,Philanthropy
Those who argue in favour of corporate social responsibility suggest that...,Companies who are
perceived as being socially responsible will ultimately earn more profits fore their investors.

Consumers vote against firms they view as socially irresponsible by not...,Buying the company's
products.

One strategy guaranteed to displease your customers is to...,Practice deception regarding

product safety issues.

If a business fails in meeting its responsibilities to its employees, all of the following are likely to
occur except...,Reduced employee turnover.

Which of the following is not one of the approaches associated with corporate social
responsibility?,Altruistic

Which of the following is NOT one of the "Market Assessment and Strategy Development"
responsibilities?,Research Practices

Which of the following is NOT one of the "Business System Design and Development"
responsibilities?,Outsourcing Practices

Which of the following is NOT one of the "Financial Resource Management"

responsibilities?,Resource procurement and consumption practices.

Which of the following is NOT one of the "Attracting, Retaining and Managing Talent"
responsibilities?,Outsourcing Practices

Which of the following were not identified as being fundamental to the CSR definition?,Energy
Consumption

In order for an organization to be successful over the long term, managers need to have a
___________ as to where and how to compete in the markets in which they intend to
serve.,Game Plan

Which of the following is NOT one of the six key areas that business managers answer in the
development of a business strategy.,Assets

_____________ refers to identifying who, within the business, will be responsible for each
aspect of the strategic plan.,Responsibility and Accountability

Developing a business strategy looks at each of the six areas _______, but also ________, in
determining the road which an organization should take.,Individuality; Holistically
A ________ statement is a forward-thinking statement which defines what a company wants to
become and/or where it is going.,Vision

The revolution in management that is currently underway suggests that the most effective
managers of the future will...,Be skilled communicators and team players.

A __________ is an overall explanation of why an organization exists and where it is trying to

head.,Vision

A vision for a company is...,An explanation of why the company exists and where it wants to go.

A meaningful mission statement should address topics such as the

organization's...,Self-Concept and company philosophy.

Employees often work with managers to develop a(n) __________ that outlines the fundamental
purposes of their organization.,Mission Statement

________ involves setting the organization's vision, goals, and objectives.,Planning

___________ are broad, long-term accomplishments an organization wants to achieve.,Goals

____________ are specific, short-term results an organization needs to achieve in order to fulfill
its long term goals.,Objectives

Which of the following is NOT part of the strategic planning process and its organizing
framework?,Understanding what is influencing markets today.

Which of the following is NOT one of the key areas in which the I/E Analysis is assessing
business risk and change?,Industry

What is a key outcome of the I/E Analysis?,Identifying anticipated moves by competitors.

What are the three parts of formulating the strategic plan?,Corporate, Business, and Operating

The _________ level of planning would be determining specific objectives which it hopes to
achieve for each of its identified business initiatives and/or business units.,Business

________ analysis is used to help companies evaluate their economic environments, assess
their strengths and weaknesses, and identify competitive threats and market
opportunities.,SWOT

What is Restructuring single, isolated business processes,relates to the formal framework

around which the business system is designed and how such a structure directs and influences
collaboration, the exchange of knowledge, the communication and sharing of ideas, and the
work environment surrounding the accomplishment of tasks and the meeting of responsibilities
(the focus of this chapter).

Control Systems to Manage Strategic Intent,defines the managerial evaluation and control
processes utilized to determine the success of the organization in meeting its strategic and
operational goals and objectives. This would include financial management systems, along with
the establishment of key success metrics relating to productivity, market share growth, and
asset performance, to name a few. It also refers to the formalized communication tools used to
disseminate critical information up, down, and across the organization. These control systems
are designed to guide managers and employees during the integration of business-level
strategies in support of the overall corporate-level vision and mission.

Mechanisms for Effective Talent Management,refers to the decision-making hierarchy, the

delegated span of control within an organization, and the allocation of position power within it (

Operational Processes and Market Support and Alignment,focuses on the processes and
initiatives needed to support and direct product/service transformation within the organization,
the creation of the value proposition applicable to such products/services, and the distribution,
marketing, sales, and service in support of these products/services. These operational and
market support processes are commonly referred to as the value chain

What is structure,relates to the formal framework around which tasks are organized and
responsibilities are allocated within an organization. As managers, we need to view the
requirements of our business in meeting the expectations of our customers and determine the
best structural approach to take in order to support and accomplish this.

What is a designing structure,n designing structure, we need to think about how we interact with
customers, and design the organization's framework in a way that best facilitates these
interactions and ensures the highest level of responsiveness to meeting the needs of the
individuals or businesses who buy and use our products. We must also realize that the design
and development of a structure should not be thought of as being static (i.e., a one-time event),
but rather requires ongoing monitoring to ensure it continues to meet the needs of the
organization as it evolves and grows (or contracts).

Types of structure,Efficient structures will reflect the best framework for a company at a given
point in time.

Structures are fluid in that as needs and conditions change, so too must structures. Having said
this, many organizations have a tendency to follow a generalized structure development path as
they flow through their life cycle.

In their infancy stage, organizational structures tend to be fairly flat and simple. If you think of an
entrepreneur launching a new business, in many cases the number of employees and the
managerial decision-making structure will be fairly straightforward (owner and a few employees;
no formal hierarchical structure).

As the organization grows, there may be a need for better controls to maintain efficiency and
effectiveness. In this situation, the organization may shift to a functional structure, where it is
departmentalized around specific tasks such as marketing, sales, manufacturing, service,
engineering, finances, and HR.

different type of structure,Simple structure: owner makes all decisions

Functional structure: organizes around departments—marketing, HR, manufacturing, finance

etc

Customer Structure: organizes around customers—individuals, businesses, institutions,

charities

Divisional structure: organizes around divisions— health and medical, small appliances,
industrial products, customer credit

Geographic Structure: organizes geographically— North America, Europe, Asia, South America,
central America

What is a departmentalized organization,Departmentalized approaches to structure seem to fit

best for traditional organizations where some aspect of task specialization is present. In this
situation, the grouping of jobs into departments seems to make logical sense from the
perspective of efficiency and effectiveness as well as ease of managerial control

What is a matrix organizational structure,A matrix organizational structure takes into

consideration that individuals will have specific expertise related to defined departmental areas.
The difference, however, is that this expertise can be considered fluid in that different types of
expertise may be needed for each project the organization currently has on the go. In this
situation, the organization defines project managers who then draw on the resources and
expertise of various departments to successfully complete the projects designed. Engineering
firms, construction companies, and large project-driven organizations are the types of
companies that are more likely to consider a matrix-style approach to organizational structure.
Figure 8.5 provides an example of a matrix-style organizational setup.

What is a virtual organization,The Business in Action vignette focused on the "virtual"

organization offers insight into the rise of this increasingly acceptable structural model, and the
impact it has on our ability to effectively manage an organization whose structure, contrary to
traditional thought, is absent any physical framework.

Its existence is predicated on the principle that individuals who are part of the organization or
who interact with it can conduct business from any location, and can maintain the collaborative
relationships fundamental to conducting work as a result of a formally established
communication network and support protocols

So what is the best way to structure your organization?,The response to this is that it depends
on a number of factors. The organization's size, geographic dispersion, range of business
undertakings, task specialization requirements, general nature of its work, ability to leverage
communication and interactive technology, and perceived best way to connect with customers
all will influence how an organization structures its work responsibilities and its management
decision-making process. It also has been emphasized that structures are not static, and that
organizations will revisit and modify their structures throughout their evolution.

What are periods of growth,Periods of growth—whether the result of acquisition, current product
growth, or new market opportunity development—as well as periods of organizational
contraction due to economic or financial challenges, or simply a need or a desire to be more
efficient and effective, can all result in substantial changes in the appearance and framework of
an organization. Organizational structures can, and should, be thought of as almost a
customization of the manner in which an organization perceives it is best able to manage its
business system and deliver its products/services to the marketplace.

What's are the building blocks of structure,customer intimacy, work efficiencies, and degree of
departmentalization

What is customer intimacy,Customer intimacy refers to ensuring the structure an organization

designs and puts into place is built on interactions and connectivity to customers in order to
meet their expectations for contact, service, and support. As organizations grow, the tendency
can be to build structure more around internal efficiencies and practices versus ensuring that
such structures are designed to support the value proposition around which products and
services are sold. Managers must ensure that customer "touch points" (i.e., mechanisms for
interaction) are fundamental to structural development and alignment.

What are work efficiencies?,Work efficiencies refers to the need for the organization to fully
analyze the type, number, and responsibilities of the various positions within the organization
and align these to the tasks required to support the design, development, marketing,
distribution, and sale of the organization's products and services in the most efficient and
effective manner possible. This analytical assessment could include such initiatives as
re-engineering fabrication and assembly processes, reviewing continuous improvement tactics,
assessing packaging and shipping procedures, defining new uses and modifying existing uses
of technology within the workplace, determining human resource allocations to various
products/services, implementing quality assurance protocols, and redefining specific task
requirements and responsibilities on a position-by-position basis. A key outcome of work
efficiency evaluation is the desire to create core competencies within the organization that will
enable it to compete more effectively in the marketplace and that will ideally result in a
sustainable competitive advantage.
What are departmentalization,Departmentalization refers to dividing the organization's work
units into defined functional areas. This type of division would take into consideration the
specific skill sets needed for the employees involved and the tasks/responsibilities to be
completed. The degree of departmentalization is generally driven by efficiency and effectiveness
outcomes. By grouping employees into defined functional areas the organization is striving to
centralize the tasks involved, thereby creating synergies within the department with the end
result ideally being the maximization of efficiency and effectiveness.

A common example of departmentalization is found within functional structures where

organizations create defined departments, such as finance, engineering, manufacturing, and
marketing.

Often-listed advantages of departmentalization include the sharing of tasks, economies of scale

resulting from the centralization of tasks, ease of managing due to the narrowly defined skill
focus, and greater control over the quality of work being produced.

Disadvantages that need to be recognized are that departmentalization can lead to a "silo
mentality" where decisions are made in isolation of other organizational needs, reduced
cross-organizational communication, loss of the organizational "big picture" or vision by
employees, and a tendency to focus on internal priorities versus external customer, market, and
stakeholder needs.

Professor Geert Hofstede five dimensions,Large power distance <———-> small power
distance

Individualist <————-> collectivist

Masculinity<————-> femininity

Strong uncertainty avoidance <————> weak uncertainty avoidance

Short term orientation <————> long temr orientation

What is employee interaction,Employee interaction refers to the level and style of interaction
that occurs among employees and between work units and their management teams. It defines
the participatory nature of the work environment, the sense of teamwork that is fostered within
the organization, and the commitment of the management team toward supporting and
developing each employee's skills and capabilities.
What is risk allowance,Risk allowance refers to the degree of entrepreneurship that is
embedded into the organization. It is the extent to which the environment allows and
encourages risk taking and flexibility in making decisions, supports innovation and innovative
ideas, and rewards creativity in the workplace.

What is Control protocols,refers to the rigidity or flexibility associated with the application of, and
adherence to, rules, policies, and procedures within the organization. It is the degree of rigidity,
order, and uniformity that is embedded within the organization, and the overarching emphasis
on work conduct defined by efficiency and effectiveness protocols. Financial systems, quality
control systems, and reward systems are examples of control protocols developed by an
organization to oversee and direct operational performance.

What is competitive emphasis,Competitive emphasis refers to the extent to which the

organization rewards and reinforces goal achievement, emphasizes competitiveness (internal
and external), and defines its success on the basis of market superiority. This can also be
thought of as the degree of passion that the organization communicates to its employees (and
the frequency of such communications) relating to organizational successes and achievement of
performance benchmarks. This also includes the effective use of logos and other visual
representations by the organization in order to create a profile and define its market uniqueness.

What is Managerial hierarchy,Managerial hierarchy refers to the number of levels of

management deemed necessary to effectively manage the organization, and the sequential
ranking of the managerial positions in relationship to one another; this hierarchy is often referred
to as the "chain of command."

What is centralized authority,Centralized authority generally retains managerial control and

decision making at the top of the organization. S

What are the advantages of centralized approach,Supporters of centralized approaches believe

that this results in the greatest efficiency and ensures that decisions are made in a consistent
manner across the organization. They also argue that a centralized approach better ensures
that the organization's operating plan remains aligned with its strategic objectives and vision.

What are the disadvantages of centralized approach?,Opponents to a centralized managerial

approach argue that this results in lower-level managers feeling less empowered and therefore
reluctant to make decisions. This can result in a slower response to customer needs, lower
morale among such managers, and heightened organizational conflict due to the inability to
respond to day-to-day planning, organizing, and directing requirements. Many also believe that
this approach inhibits the development of lower-level managers, resulting in long-term negative
impact to the organization's overall health.

What are the advantages of a decentralized managerial approach,A decentralized managerial

approach is believed by its proponents to provide the organization with a quicker response
mechanism to internal and external issues, stronger developmental outcomes, higher morale
levels for lower-level managers, and less overall organizational conflict as decisions are made
on the spot.

Wha are the disadvantages of a decentralized managerial approach?,As with any situation there
are opponents who express concerns about such a managerial approach, pointing to the
potential for inconsistency across the organization as various managers will interpret policies
and procedures differently. They also point toward the increased risk of poor decisions due to
some managers lacking experience or the information needed to make a fully informed decision,
as well as loss of control over business operations as decisions may not be made in alignment
with the overall corporate strategy and operating pla

What is span of control,Span of control refers to the number of subordinates a manager will
have reporting to him/her. The span of control is generally determined by an analysis of the
position's breadth and complexity of responsibilities, the degree of day-to-day interaction with
subordinates, and the experience, expertise, and capabilities of both the individual in the
position and those who report to them. In general, the more the manager has to be involved in
the day-to-day interactions of an area of responsibility, and the more complex the tasks
associated with the responsibility assigned, the narrower the span of control will be.

What is Coordination of the work effort,refers to the grouping of tasks and the facilitation of
collaborative efforts among departments that must occur within the organization (and in
interacting with its broader ecosystem) to ensure its products/services are designed, developed,
produced, packaged, and distributed in a manner that successfully reaches the desired markets,
and that customer connectivity and intimacy are achieved and their benefits maximized. This
coordination of work effort will have a significant impact on the managerial hierarchy (or chain of
command) that an organization puts into place, as well as the span of control associated with
each managerial or supervisory position created.

Work effort coordination also assesses the nature of the work that needs to be accomplished,
and seeks to identify the most efficient processes for accomplishing such work.

What is nature of the work,Nature of the work refers to the specific tasks that need to be
accomplished at the individual job level within the organization.

What is restructuring,Restructuring generally occurs when companies recognize a

disconnection to their intended strategy as a result of disruptions that have occurred either
internally or from the external marketplace. Recognizing that a change to their business system
or their desired position in the marketplace is required, organizations decide to make
fundamental changes to the way in which they do business. This often is driven by a desire to
change the formalized structuring around which a company's activities, resources, and
workforce have been grouped. Restructuring an organization can be in response to such
activities as an immediate need to reduce costs, a longer-term need to redirect the
organization's business efforts due to a fundamental shift in the demand for the
products/services they offer, competitive pressures, a change in customer behaviour, technology
obsolescence, or bankruptcy.

what is the goal of any restructuring initiative,should be to increase the value and the long-term
health of the organization.

Reorganization of operations to reduce costs

Response to a shift in customer behaviour

Refocus of an organization's efforts regarding key products and/or account relationships

Integration of new technologies that significantly change operating protocols

Creation of more efficient and effective outcomes resulting from the interaction of an
organization's workforce

Divestiture of a portion of the organization (product line, subsidiary, etc.)

Acquisition or merger by the organization

Enhancement or more effective leveraging of an organization's competitive advantage

Significant transformation of the business's underlying business model

What are the three common elements of restructuring,structural design, execution, and
communication.

What is structural design,Structural design: The first element is the structural design of the
restructuring plan. What changes or adjustments to the organizational structure will be required
to successfully achieve the desired objectives of the restructuring plan? What impacts to our
culture are anticipated? Are significant changes being implemented that will fundamentally
change our chain of command and managerial decision-making process?

What is execution,Execution: What will the restructuring process look like? What are the various
phases to the plan that will need to be implemented? Is this simply a subtle change as a result
of challenging the status quo in order to maintain or enhance the organization's competitive
position, or is this a significant and drastic move as a result of very real and significant market
disruptions? Will the restructuring process severely disrupt the organization's business
operations? If so, what is the intended strategy to help keep business flowing?

What is communication,Communication: What is the communication plan? How are we going to

communicate the restructuring to the various stakeholder groups impacted? Have we definitively
tied the restructuring plan to the revised organizational strategy to ensure a full understanding of
the rationale for the action? How can we minimize negative impact to morale and preserve our
employee culture if such an impact is perceived to exist?

What is a key determination in the success of a restructuring initiative?,A key determination in

the success of a restructuring initiative lies in the extent of the change the organization is
undertaking. In general, restructuring single, isolated business processes or initiatives is easier
to implement, with a higher probability of success. For example, the desire to restructure the
fabrication process of a single product via enhanced technology application is easy for a
managerial team to focus on and guide to its completion. The risk of implementation gets
considerably greater, and the probability of success lower, as the degree of change required,
the broadness of the change focus, and the length of time to completion all increase. Figure
8.17 provides an illustration of the risk and complexity impact on the probability of success for a
restructuring effort.

What is a value chain?,The processes and initiatives needs to support and direct the
product/service transformation within the organization, the creation of hte value proposition
applicable to such products/services, and the distribution, marketing, sales and service in
support of these products/services.

What is a structure?,Is the formal framework around which tasks are organized and
responsibilities allocated within an organization

What's us customer intimacy,The interactions and connectivity that organizations seek to foster
with their customers in order to meet their expectations for contact, service and support

What are work effieicneies,Refers to the alignment of the tasks required to support the design,
development, marketing, distribution, and sale of an organizations products/services in the most
efficient and effective manner possible

What is departmentalization,Refers to the process of dividing the organizations work units into
defined functional areas

What is culture?,Defines how the individuals within the organization behave and how the
organization as a whole will react to both internal and external challenges and stimuli

What is employee interaction,Refers to the value-creating skills an organizations employees

bring to the marketplace. The success of many business lies with the specialized skills that exist
within its labor force

What is risk allowance,Refers to the degree of entrepreneurship that is embedded into the
organization

What are control protocols,Refers to the rigidity or flexibility associated with the application of,
and adherence to, rules, policies, and procedures within the organization
What is competitive emphasis,Refers to the extent to which the organizations reward and
reinforces goal achievement, emphasizes competitiveness (internal and external), and defines
its success on the basis of market superiority

What is managerial hierarchy,Refers to the number of levels of management deemed necessary

to effectively manage the organizations, and the sequential ranking of the managerial
postiopons in relationship to one another

Decision-making control,refers to the level of responsibility and decision-making authority that is

actually transferred to each specific managerial position

Span of control,refers to the number of subordinates a manger based reporting to him or her

Coordination of the work effort,is the organization and allocation of the HR complement, and the
development of the structure surrounding it, in a manner that produces the most effective and
efficient business system.

Nature of the work,Refers to the specific tasks that need to be accomplished at the individual
job level within the organization

Restructuring,addresses the need to change an organization's business system or desired

position in the marketplace, or to make fundamental changes to the way an organization does
business

What is an entreprenur,Refers to a person woh stars a business and is willing to accept the risk
associated with investing money in order to make money. They "start up" a company

What does MERFS stand for,Motivation

Expertise
Risk management
Focus
Self belief

The concept of risk: life in the Uncertainty lane,Uncertainty I'd unavoidable: success is never a
certainty— the challenge for entrepreneurs to fully recognize and define the magnitude of risk

A proven business model or turnkey operation, such as a franchise, can mitigate risk

Examples of sucessful tech pivots (changes/switching),Android: previously a digital cameras

developer

Groupon: previously a consumer activism website

Nokia: previously a wood pulp mill

Offsetting the uncertainty: the business plan,A new venture assessment focuses first on the
development of as business plan, and the non assessing the viability of the plan to work and
meet its identified objectives

The business plan:

- describes the business
- assesses the opportunity given market and competitive conditions
- defines the strategy
- detailed the management expertise
— detailed operation-based and marketing-based tactics
- provide financial validation
- Explains why the business will succeed

Rules of the road,The five rules of the road for the business plan are:

Rule 1: know your customer

Rule 2: know why you will win
Rule 3: know hw you will win
Rule 4: Know what it will take to win
Rule 5: Demonstrate why others should believe in you

Financing your business start-up,- a key need of business start ups is access to capital

Sources of capital:
- personal savings/line of credit
- obtaining capital by pledging personal assets (wealth) as collateral ( a second mortgage on a
home or other form of collateral)
- angel investors/venture capital firms
- government start up grants/ government -backed small business loans
- seeking partners

VC Funding of Start up,Venture capitalists agree on a set of key fundamentals in assessing

start-up potential:

1. Quality of the management tram

2. Uniqueness of the product//service offering
3. Market size and opportunity alignment
4. Current conditions within the market
5. Investment hypothesis (business plan0

Venture capitalist refers to an individuals who provides capital to a business venture for start-up
or expansion purposes.
The market assessment and strategy development responsibility,involves determining a
destination, choosing a route, and providing a GPS to ensure you stay on track.

The business model design and development responsibility,responsibility involves determining

the type of vehicle to be used, deciding whether to use your own vehicle or rent a vehicle,
arranging pre-trip maintenance, booking hotels, and purchasing maps and tickets.

The financial resource management responsibility,involves establishing a budget, allocating the

required financial resources to ensure the monetary needs of the trip are met, and ensuring
financial obligations incurred during the trip are covered.

The talent responsibility,involves driving the vehicle, interpreting the route and GPS directions,
ensuring the schedule is maintained, and arriving at the destination as planned.

Asset versus expense approach,Demographics, globalization, and the need for

higher-knowledge skill-based employees are requiring us to take a longer, more "asset versus
expense" approach to our human resource team.

This means defining human resource objectives that are in line with business objectives, and
targeting talent at all levels within the organization for skill, knowledge, and capability
improvement as an opportunity to raise operational productivity, sales, and profits.

What is the key component of asset-based approach,A key component of this asset-based
approach to human resource management is recognizing that managers need to spend more
time on talent development; managers need to focus their efforts on coaching and providing
feedback to employees, ensuring that a culture of collaboration and communication exists within
the organization, effectively addressing underperformance, providing rewards that reflect the
level of performance given, and investing in the resources needed in order for all to be
successful in their work endeavours.

The Employee Transformation Process,1. Job Position Identification and Design

2. Recruitment
3. Selection
4. Intake
5. Acclimatization and Training
6. Productivity (ROI)
7. Retention via Opportunity, Challenge, Enrichment

The same approach should be fundamental to decisions involving our human assets. We should
first determine the need within the organization that we are trying to solve and develop a set of
specifications that identify the specific skill set required to fill the position. Then, we should
determine the type of individual best suited to filling the need, recruiting and selecting a
preferred candidate from a list of applicants. Once this person has been hired, we must provide
orientation, training, and skill support development to the new employee, seek to maximize the
individual's potential through periodic or ongoing investment in new or existing skill
development, look to enrich the employee's experience through additional opportunities for
contribution to the organization, and evaluate and provide feedback on the employee's overall
productivity and contribution to the sales and profitability of the organization.

It also recognizes that there will be a period during which the investment in the employee will
exceed the productivity value of that employee. Figure 9.1 provides a simplified overview of the
transformation process that an organization incurs in moving an employee into the organization
and then to a fully productive level.

investment decisions,This investment takes the form of costs associated with:

- preparing the job specification or job description

- identifying the type of candidate required and advertising and recruitment (agency fees, etc.)

-interviews and aptitude or behavioural testing (if required)

- travel, relocation, and job acclimatization, such as orientation and training

- hiring bonuses and other job-related expenses

As managers, what is a major part of ensuring our organization reaps the benefits of its
employees' productivity,lies in our ability to effectively manage our workforce and invest in them
the time, energy, and financial resources that will enable them to effectively perform their jobs.
This means that, as managers, we need to provide the motivation, rewards, and environment to
move our employees up the productivity curve to a point where their contribution results in a
positive return on the investment we have made in them, and that will provide, on an ongoing
basis, the incentive and desire to maintain such productivity levels

What is ERR?,We must also recognize that a failure to provide the right work environment,
rewards, and recognition-based incentives (ERR) will heighten the probability of employee
defection (turnover), thereby forfeiting any potential return on our investment and requiring us to
spend new dollars to attract new employees to take their place.

Productivity (Contribution) Curve,Recruitment, selection and protestation determine the starting

point

Training determines initial development and productivity improvement

Rewards, compensation, delve-mental deter men ongoing productivity improvement and

retention
Failure to prove ERR heightens the probability of defection

Challenge, opportunity, growth, position enhancement required to retain

What Constitutes a Great Company?,It really refers to the fact that employees need to believe
the organization is perceived as an industry leader or a challenger and innovator within the
market segments that it serves. This could be at the international, national, regional, or local
level. For many employees, their work environment is a major aspect of their overall life.
Employees like to feel that the organization they work for offers exciting challenges for the
future, possesses values that are in line with their own thinking, is composed of talented people
all working toward a well-defined goal or vision, is recognized within the industry and the
community as an innovator and strong performer, is led by a high-quality management team,
and provides an acceptable level of job security for its workforce.

What Makes for a Great Job?,First, it is important that we communicate to employees how their
job fits into the big picture of the organization overall and contributes to the mission and vision of
the organization. Employees need to understand how they fit in if they are to view their job as
being meaningful—each employee, no matter whether they are the CEO of the organization or a
front-line server dealing with customers on a day-to-day basis, must have a sense as to the
purpose of their work in delivering the organization's mission. Second, employees need to feel
that their current position provides challenges commensurate with their background and skill
set. Great jobs offer employees opportunities for advancement, the ability to grow through job
enrichment or job enhancement, and the ability to take on a sense of ownership and
accountability for the work being performed. Third, employees need to perceive a good fit with
their immediate supervisor or boss. Employees value feedback and interaction with their
managers. They are looking for approval, praise, and recognition of a job well done, as well as
positive, constructive criticism delivered in a professional manner when corrections to their
performance need to be communicated.

Compensation and Lifestyle Influences,Recognizing that compensation levels are limited by the
financial capabilities of an organization, employees fundamentally need to perceive that the
organization's compensation system is equitable in its underlying performance/reward
framework. In other words, organizations need to ensure that inequity within their reward
system, driven by internal and external comparisons, does not result in employees feeling
undervalued or unappreciated.

Keep in mind that, although we think of compensation largely in terms of salaries or wages,
compensation also encompasses bonuses, such as signing bonuses, longevity bonuses, and
performance bonuses; long-term incentives, such as stock options; employee benefits, such as
life and health insurance; and pensions or retirement plans. An additional component to
establishing a high-performance work environment is the requirement for employees to
recognize that their organization understands and respects their need for a balanced lifestyle.
The ability to provide flextime options, meaningful and valued fringe benefit options,
performance-based financial incentives, acceptable levels of stress, a manageable work pace,
opportunities for advancement, developmental programs for personal and job-related growth,
and recognition reward systems all work to create an underlying framework for positive
performance.

Great Ways to Reward Employees without Spending $$$,Use your words: Verbal and written
(notes, etc.) reinforcement

Acknowledge effort: Even if the results are not fully successful

Flexible hours: Freedom with responsibility

Keep it meaningful: Allow people to showcase their talents

Create a culture of success: Invest in your team

Communicate the larger picture: Share vision, information, results, accomplishments, and
challenges

Offer open houses: Enable family members of employees to share and understand an
employee's work

Publicize results: Communicate accomplishments to others

Say thank you: Show appreciation

The Motivational Tool Kit,Creating a positive and productive work environment is not always
easy, but there are some fundamental things that managers can, and should, keep in mind
when looking to work with, enhance the productivity of, and motivate their employees. These
can be thought of as your motivational tool kit and are easily remembered by the acronym
TALENT (see Figure 9.4).

T: trust and respect

A: approval, praise, recognition

L: lead by example

E: enrichment

N: Negotiation skills

T: treasure
The Motivational Tool Kit: T = Trust and respect,One of the key attributes of great work
environments is that they are developed on the underlying principle of trust and respect.
Employees value managers and companies that trust them and respect their views and
opinions. A recent survey by the McKinsey & Company revealed that trust between a company
and its employees is a key attribute of a dedicated workforce.

The Motivational Tool Kit: A = Approval, praise, and recognition,Often cited as one of the most
important motivators, employees respond positively to praise and recognition for a job well
done. Managers should not underestimate the role that regular, positive feedback plays in
maintaining a high-performance work unit. Recognition of a job well done heightens levels of
employee satisfaction in the workplace and is a key driver of employee retention. It should be
noted that recognition does not always have to be monetarily focused. Research has
demonstrated that praise and commendation, attention, and opportunities for new challenges
are as strong a motivator as money. In fact, a recent McKinsey survey concluded that three
non-cash motivators—praise from immediate managers, attention from leaders, and a chance to
direct projects—were as effective a motivator as three leading money-based motivators
(performance cash bonuses, increase in base pay, and stock options).

The Motivational Tool Kit: L = Lead by example,Employees expect their managers to lead by
example. The willingness of managers to work side by side with employees, as part of the team,
to get the job done results in employees building stronger bonds with these managers and
having greater respect for them.

The Motivational Tool Kit: E = Enrichment,Employees often value the opportunity for new work
experiences and additional challenges. Enriching the opportunities for individual growth on the
job will result in a more productive and higher-skilled workforce.

The Motivational Tool Kit: N = Negotiation skills,Negotiation skills refers to a manager's ability to
deliver two key areas of support to their employee base. The first has to do with a manager's
ability to orchestrate, on behalf of their team, the removal of barriers, the acquisition of
resources, and the enhancement of processes that will enable the team to achieve the level of
performance needed to accomplish the stated goals and objectives. This means creating an
environment that supports success. The second support area is the ability of managers to
effectively communicate to their employees the desired level of expectations for each individual,
as well as the team overall, in a manner that reinforces an environment of collaboration,
accountability, and interdependence.

The Motivational Tool Kit: T = Treasure,Employees are motivated by financial incentives that are
directly related to work performance and levels of productivity. Performance-based cash
bonuses and other creative financial incentives are valued by employees as long as they are felt
to be equitable, realistic, and achievable. It should be understood, however, that financial
incentives by themselves are not as strong a motivator as the other tools within TALENT. For
individuals who are satisfied with their compensation levels, additional short-term bursts of
financial rewards may result in only short-term bursts of additional productivity. Another key
concern with financial incentives lies in their "sustainability."

Managing your workforce,To be able to successfully organize, develop, direct, and lead their
team, managers themselves need to fully understand the direction the organization is pursuing
and the key competitive advantages it hopes to bring to the table as it seeks to acquire and
retain customers. They then need to be able to take this information and develop a road map for
success, as well as a framework for ensuring that objectives are met, and communicate this
effectively to their employees. Once the direction is set and the road map established,
managers then need to be able to monitor the progress being made via the benchmarks they
have developed and make the appropriate corrections to keep the effort on track, thereby
ensuring that objectives are met. Knowing what needs to be done and how to do it is one thing.
To succeed in carrying out these tasks, managers need to be able to transcend this analytical
assessment of what needs to be done and "lead" employees in ensuring the goals and
objectives are accomplished in a manner that exceeds customer expectations and outperforms
competitive rivals.

With the identification of skill gaps, managers must then embark upon the appropriate
skill-development strategies to ensure these gaps are closed, thereby providing their team with
the best possible chance of success.

key areas of workforce management focus,Lead: determine the managerial style needed to
achieve the results

Plan: understand what needs to be done and the outcome that needs to be achieved

Organize: identity the focus of the effort and procure and allocate resources in response to it

Develop: identify the competencies and capabilities the team needs to improve and initiate such
improvements

Direct: use performance metrics to keep the effort on track and focused on the overarching
objective

how do managers convert planning, organizing, developing, leading, and directing to practical
application,performance. To do this requires that they create a positive reaction across all
employees as to what needs to be accomplished. It is this individual reaction that will determine
if company performance expectations are met. Individual reaction is predicated on three key
items: the tools (resources) employees have at their disposal, the ability of the organizational
structure to support their work efforts, and the underlying culture, decision process, and
managerial approach that oversees the transformation process. If any of these three key items
are lacking or misaligned, then the individual reaction of employees will be impacted and
company performance will, ultimately, be compromised.
Skills Successful Managers Must Possess,Skills Successful Managers Must Possess

To be successful in their planning, organizing, developing, directing, and leading endeavours,

managers must recognize that their skill set needs to encompass four key competencies. These
critical skills are what separate high-performing managers from lower-performing individuals

Conceptual skills
Managerial skills
Leadership skills
Technical and analytical skills
Human relations skills

Leadership skills:,Strong leadership skills are fundamental to successful managers. Leading

means being able to build continuous momentum within your workforce, and building a system
that encourages innovation, creativity, and can survive beyond a single individual (succession
management). Leadership is all about inspiring others to achieve identified levels of
expectations

Technical and analytical skills:,Simply put, to be successful managers must have a solid
understanding of the work that needs to be accomplished. This is essential to be able to identify
the relevant issues that need to be addressed, barriers that need to be removed, and
performance metrics that need to be achieved if the organization's goals and objectives are to
be met.

Conceptual skills,noted above, managers need to be able to visualize, understand, and

communicate the big picture. This means describing to their employees how their work and their
efforts contribute to the overall success of the organization.

Human relations skills:,The ability to communicate expectations in an engaging, motivating, and

collaborative manner is key to successful management. Successful managers understand that
their role is to develop and motivate their HR asset.

Personal power,is the power that a manager possesses as a result of their leadership
competencies. It is the ability to motivate, facilitate, demonstrate empathy, and collaborate with
staff in order to meet organizational expectations.

Position power,is the power that a manager legitimately holds due to the title they have within
the organization. This power is derived on the basis of expertise, legitimacy of rank, the ability to
control rewards and resources, and the requirement to assess performance.

Determining the Culture/Structure Balance,The key to making decisions relating to the

culture/structure balance that will result in the optimal workplace environment is to determine
the mix of collaboration, autonomy, and centralized decision-making control required given the
tasks to be completed and the management approach to be deployed. Figure 9.10 offers some
insight into this process. In thinking about culture and the tasks required, managers are
constantly balancing the concepts of participation, flexibility, and interactiveness on the part of
employees with the need to formalize decision-making responsibility, process efficiencies and
standardization, and overall accountability.

Managing in a Unionized Environment,It is much more about ensuring that as a manager within
such an environment we take the time to fully understand the collective bargaining agreement
(labour contract) governing the workplace (see Figure 9.11), and the underlying procedures for
dispute resolution that have been agreed to by both parties, including those related to
grievances, mediation, and arbitration.

In addition to employees, however, managers must also learn to interact and recognize the
responsibilities of the union steward (shop steward). Union stewards are representatives of the
union and work in ensuring that employee interests, as outlined by the collective bargaining
agreement, are respected by the company and its management team.

Understanding the Collective Bargaining Agreement,Know the rights of both employees and
management, as outlined by the contract.

Recognize the key provisions and hot spots that continually surface from the collective
agreement and build a plan as to how to effectively respond to them.

When faced with employee concerns or grievances, employ the appropriate actions that support
the integrity of the collective agreement (mediation, arbitration, etc.).

Where possible, include specific references to provisions within the collective agreement that
form the basis for your decision.

Understand the role of the union steward, and build an environment of trust and collaboration
between management and the union's representatives.

Set clear and definitive expectations in a way that promotes high levels of performance, offers
feedback, and motivates workers.

Three Key Conclusions—Collective Bargaining Agreement,Management flexibility

Communication protocols

Union as a partner

The fact that workers organize should not automatically result in managers perceiving that the
organization is now facing an adversarial environment. One key benefit of a negotiated
collective bargaining agreement is that the rules and regulations governing employee actions,
benefits, and protocols are clearly defined.
Inclusiveness, Diversity, and Employment Equity,The Canadian Human Rights Act, and the
Canadian Human Rights Commission that supports the legislation, outlines measures that
managers are required to follow to ensure people from four underrepresented populations
(women, Aboriginal peoples, persons with disabilities, and members of visible minorities) are
treated fairly and reasonably. Further, employers seeking to do business with the federal
government, and who have more than 100 employees and whose work with the government
exceeds $1 million,10 are required to commit to an agreement to implement employment equity
and demonstrate on a regular assessment basis that such policies exist and are actively
executed within their organizations. Employment equity in this situation means demonstrated
policies that provide fair and reasonable access to employment for underrepresented
populations in a manner that is transparent and non-discriminatory, and reasonable efforts to
ensure that full representation from the designated groups is occurring.

As managers, we have a duty to accommodate persons from these employment groups and
ensure that we provide the levels of accommodation and support required to enable these
individuals to perform the daily tasks associated with their jobs. For you and me in managing
our workforce this may mean that we need to revisit the underlying facilities associated with
work locations; establish or revisit selection, promotion, and performance evaluation practices
and policies to ensure they do not contain inherent biases relating to future promotion and
retention; and review merit and pay-raise policies to demonstrate equal and fair assessment
practices are implemented and adhered to. Best practices also include ensuring that job
postings, candidate searches, hiring committee composition, interview approaches, and hiring
decisions are free from underlying inherent biases that place these groups at a disadvantage

The Employment Equity Act: Underrepresented Groups,Women

Aboriginal peoples
Persons with disabilities
Members of visible minorities

Triggers of Performance Erosion,-Mediocrity of lip service

-Managers with ADD
-Managers create a world of chaos
-Non-meaningful BHAG

The mediocrity of lip service,refers to the disconnect between what management says is
important for company success and what it actually focuses its efforts on. For example,
management may communicate that its focus is to drive and support innovation and new
product development as critical to its current and future success. Even having said this,
however, management fails to allocate the necessary resources and assets to support truly
innovative work and/or new product development. Instead, it allocates resources aimed at
reducing costs and or seeking operational efficiencies. For employees, the disconnect becomes
a basis for disengagement and disillusionment. What employees thought was the underlying
structural and cultural focus is in reality something completely different.
Managers who lack focus,refers to situations where managers continually change what the
organization is working toward. The end result is that a strategic or tactical execution can never
be fully carried out to completion, as the strategy to be focused on changes and the tactical
methodology for getting there is repeatedly revised.

Managers create a world of chaos,refers to the inability of managers to effectively integrate and
coordinate the cross-functional activities within their companies. Think of it as the right hand not
knowing what the left hand is doing, and vice versa. An example of this occurs when sales
managers make promises to clients that are beyond the capabilities of the operations unit to
deliver upon, and then look for some miracle to occur that will deliver the product/service to the
client as promised. The end result is a failure to execute in a way that reinforces customer
satisfaction and loyalty, and that instead generates internal conflict and chaos as the
organization now expends significant non-productive activity fighting the self-induced crisis and
massaging clients due to the lack of coordinated effort on the part of the full team.

Non-meaningful BHAG ("big hairy audacious goals"),refers to the fact that goals set by
management are abstract in a way that employees of the organization cannot translate into
actionable tactics and daily work priorities. Either goals are too broad in scope or too numerous
to prioritize, thereby resulting in a clear lack of direction to the talent-base of the organization.

The Danger of Short-Term Pressures,When this shift to short-term pressure occurs, the areas of
leadership and development—two fundamentals of long-term strategic and operational
health—often get relegated to a lower priority, while a third area, planning, focuses more on
immediate operational plans, which may lose their synergy with the organization's overall
strategic plan and long-term vision. The potential near-term impact of this short-term
management approach, referred to as "short-termism," is the following:

Organizations tend to decrease their emphasis on talent management strategies.

Organizations and their decision-making processes have a tendency to become "siloed," with a
reduced emphasis on collaboration and information sharing.

Company investment decisions tend to be dominated by immediate short-term financial results

and shareholder return expectations.

Talent development costs are viewed more as an operational expense than a capital
investment.

Short-Termism Loop: Impact to Talent Development,1. Lack of growth or desire to enhance

immediate returns, increase pressure on short term operations-focused decision making

2. Top management responds with short term financial reaction ( includes cutting HR spending)
3. Company migrants towards as reactive HR strategy

4. Reactive strategy results in a critical lack of talent to meet future needs

5. Lack if talent blocks or inhibits growth

silo mentality,"I win, you lose"

Using the cheapest suppliers.
Ignoring customers.
Assigning few resources to new product & service design

Incompatible goals due to silo mentality can arise among what are meant to be cross-functional
units. The staffing resources needed to get the job done and meet the increasing complexity of
the tasks required can become insufficient, and the managerial competencies needed to guide
the organization forward can become lacking.

Leadership/Management—Today, Tomorrow, and Beyond,Astute business people focus on four

key criteria around which organizations are built: vision, innovation, strategic thinking, and social
responsibility.

The end result is that leadership and the accompanying decision-making skills associated with it
require stronger risk management, negotiating, and interpersonal and collaborative
competencies than ever before

In an article titled "Leading for the 21st Century," McKinsey & Company offers the leaders of
tomorrow three sound pieces of advice

Managing in the 21st Century,1. See with a microscope and a telescope. The microscope
analogy refers to the need for leaders to drill down and ensure they fully understand the
challenges and decision ramifications of managing in today's increasingly scrutinized and
critiqued environment. In a similar vein, the telescope imagery signifies that in today's rapidly
changing markets, managers must be increasingly cognizant of the trends, challenges,
disruptions, and opportunities appearing on the horizon.

2. Manage the triple bottom line—recognize that decisions cannot be made in isolation.
Managers are recognizing more and more that external factors and stakeholders are gaining
greater leverage toward influencing the strategic and tactical decision-making process within
companies. Government's involvement in the marketplace, given the impact of the financial
crisis and subsequent slower economic growth, de-leveraging requirements, and high
unemployment level challenges, is considered by many to be at an all-time high. Add to this the
increasing pressures associated with societal expectations relating to corporate social
responsibility, and one quickly realizes that decisions can no longer be made in isolation of the
broader public arena. Managers must think across all components of the triple bottom line
(people, planet, profit) as they implement strategy and execute tactics across the globe.
3. Stay grounded. Given our rapidly changing market environments, managers are facing
increasing pressures to anticipate and proactively control an ever-increasing number of
variables now impacting the long-term viability of the companies they manage. Crisis
management, which used to be the exception, now seems to be an almost everyday event in
the lives of many executives. Staying grounded during such crises requires significant maturity,
focus, stamina, and leadership. The ability to adhere to the saying "never let them see you
sweat," and to manage in a world of chaos, complexity, and pressure, requires increasing
psychological, sociological, and methodical decision-making skills. CEOs and managers must
bring to the table a skill set that enables them to appropriately assess such situations and
establish a sequential controlled response in a way that calms the organization, prevents
decision-making paralysis, and enables it to proceed with overcoming such challenges.15

HR manage your I'm the small business setting,First, given their size and lack of personnel in
the HR area, a mistake that entrepreneurs and small business managers often make is trying to
apply large-business structures to their small operations. The key is to keep it simple.
Entrepreneurs and small business owners should seek to use mechanisms that are sustainable
and that can be applied consistently with little bureaucratic infrastructure. Second, in
establishing their approach, entrepreneurs and small business managers should look to develop
strategies toward those performance factors that represent the best win/win outcomes for them
and their employees: compensation, benefits, training, flexibility and work balance, and a feeling
of inclusion. Note that promotion and advancement does not appear in this list—this is not
because they are not valued, but because, in many small business settings, the opportunity to
reward in this fashion may be limited.

Wha is a key component to talent asset management,Is the creation of a work culture that
encourages collaboration and cooperation among employees and the management team

Personal power,Is the power that a manger possesses as a result of his/her leadership
competencies. It is the ability to motivate, facilitate, demonstrate empathy, and collaborate with
staff in order to meet organizational expectations

Position power,Is the power that a manager legitimately holds due to the title he/she has within
an organization. This power is derived on the basis of expertise. Legitimacy of rank, the ability to
control rewards and resources, and the obligation to assess performance.

Collective bargaining agreement,Is a legally binding document that defines the policies,
procedures, and protocols both the company and its union have agreed to with respect to the
regulation of workplace conditions for a defined period of time

Grievances,Are complaints raised by an employee

Mediation,Is the process by which a management and the union invite a third part to assist in
the resolute of a dispute
Arbitration,Is the settling of a dispute by a third party, whose decision is considered to be binding
on both parties to the dispute

Union Steward (Shop Steward),Is a representative of the union who works in ensuring that
employee interns, as outlined by the collective bargaining agreement, are respected by the
company and its management team.

What is (HRM) Human Resource Management?,

What does the human resource management do,- oversee compensation and benefits
- ensure better company culture
- promote job training and educational development
- monitor performance
- recruit employees

Employee Transformation Process,1. Job Position Identification and Design

2. Recruitment
3. Selection
4. Intake
5. Acclimatization and Training
6. Productivity (ROI)
7. Retention via Opportunity, Challenge, Enrichment

-Very expensive to attract develop and motive and retain employees

-As employees are assets not expenses, ,managers should see a retain pm their investment in
each employee
- to revive this anticipated return, human assets need to be treated th same way as capital

What makes a good job?,Perceived quality of the company

Great attributes
Fits with employee lifestyle

3 factors

1. Perceived quality of the company

- employees like to be part of a winning team working for an industry leader or challenger and
innovators
- organizations should offer exciting challenges for the future

2. Key attributes of the position

- the job challenges employees and fits into their career aspiration
- employees understand how they fit into the organizations big picture and how their job
contributes to the organization's mission and vision
- great job offers employees opportunities for advancement
- employees need to perceive a good fit with their boss and value their boss's feedback and
interaction

Managing your workforce,Managing requires diverse skill set:

- able to engage employees
- Build consensus
- develop and execute strategy
- anticipate and remove productivity leaders
- enhance operational efficiencies
- maneuver through increasingly complex regulatory, environmental and legal environments

Human resource management in small business setting,SMEs must motivate their workforce
inspire commitment, and create recognition and compensation systems
- often lack the support of an established HR department
- SME should meet HR structures simple
- retention bonuses and profit sharing also yield

What is a union?,An organization of workers acting collectively to improve working and social
conditions for all workers
- use a document known as collective bargaining agreement: means an agreement in emitting
between an employer and union.

what is the purpose behind the development of a marketing strategy,is to design, develop, and
communicate value.

Value in this context refers to the ability of an organization to communicate, to existing and
potential customers, why its product/service offering meets the needs of these individuals and
businesses, and why it should be judged superior to those of competitive alternatives.

two fundamental principles associated with customer behaviour,Principle #1 Customers don't

buy products or services—they buy solutions to problems or needs.

Principle #2 Customers will not pay more for a product if they can get a similar product for less.

What is the role of marketing,The role of marketing is to:

- determine who desires a given product/service,
- what is important to them in making this decision,
- how the company should position its solution relative to rivals,
- how to communicate and deliver the value the customer desires.
Marketing's Link to Strategy,This means understanding the six R's of marketing: the right need
to pursue, the right solution to offer, the right value proposition to position the organization's
products and services around, the right methodology for delivery, the right price to charge, and
the right communication message to use.

6 Core Challenges of Marketing,These six core challenges can be framed into a series of six
questions that marketers must be able to answer in order to assess the viability or success of
the potential of a product and/or service offering. The six questions are as follows:

1. Message development and delivery

2. Need identification
3. Assessment of our ability to respond
4. Value proposition creation and positioning
5. Distribution capabilities
6. Price point validation

6 questions of core challenges of marketing,1. Do we understand our targeted customers' needs

and desires?

2. Do we believe that our current or anticipated product and/or service represents a viable
solution to the targeted customers' needs and desires?

3. Can we create a value proposition that positions our product and/or service as the best
solution to our targeted customers?

4. Is there an existing or potential viable distribution model for delivery of our product and/or
service to the marketplace in a manner that effectively reaches our targeted customers?

5. Can we support the product and/or service and its delivery to the marketplace at a price point
that is attractive to the targeted customer and that allows us to be profitable?

6. Can we develop and deliver to the targeted customers a communication message that will
attract these buyers to our product and/or service?

To be successful in the execution of its overall strategy, an organization must be successful at

both the product strategy level and the business strategy level. Marketing is integral to this
success

The Marketing Formula,An Effective and Well-Defined Market Position + Superior Marketing
Effort = Profitability and Growth

Marketing's impact on strategy,Effective marketing positively influences:

1. Mission and vision
2. Corporate strategy
3. Business-level strategy

To be successful in the execution of its overall corporate strategy, an organization must be

successful at both the product strategy level and the business strategy level.

The Concept of Positioning,The easiest way to think about the concept of positioning, according
to social marketer Francois Legarde, is to think about it as being the place in the consumer's
mind that you want your organization's brand, products, and/or services to own.

Positioning to Win/ Successful positioning objectives,1. Communicate the solution effectively to

the targeted customers

2. Understand the market to be served

3. Understand the customers to be targeted

4. Deliver the solution in a way that is superior to competitors

Marketing Research: A First Step in the Segmentation Process,The concept of market

segmentation recognizes that "one size does not fit all." This means that we need to define the
best way to segment the market, and determine how this segmentation will result in an
improved probability that we can be successful in targeting a given segment and marketing our
products and/or services to these potential customers.

Primary sources of information,are those that an organization develops and/or utilizes to

generate information specific to the organization and the products and services it offers.

Examples of primary sources of information are customer surveys; customer input via social
media sites such as Facebook, tweets from Twitter users, and company Web sites; focus
groups that we establish to test and/or obtain comments on existing products and services or
new product concepts; formal test marketing initiatives; and behavioural observations.

Secondary sources of information,are those that already exist and are available at no cost or on
a fee basis; managers use these information sources to conduct research and draw
conclusions.

Four core characteristics in tying marketing research to segmentation,Demographics—age,

gender, income

Geographic clustering—location, reach

Psychographics—lifestyle, status, ego, emotion, tastes, trends

Behavioural—use, buying patterns

Three fundamental questions that drive the marketing effort,This information is then used to help
determine which segments to target and in the facilitation of the response to three fundamental
questions that will, ultimately, drive the marketing effort (see Figure 10.6):

1. What are the key decision criteria that potential and/or existing customers use in determining
which product(s)/service(s) they will buy?

2. What is the priority or ranking of these criteria? Is there any one criterion that will
predominantly influence the purchase decision?

3. How can we best position our product/service offering to align most closely to meeting these
key decision criteria used by our sought-after customer base when measured against our
competitors?

Transitioning Segmentation Analysis to Target Marketing/ The marketing process,This evolution

from market assessment to target marketing forms the front end of what is called the marketing
process:

1. Marketing research
2. Segmentation
3. Target market
4. Value proposition development and profiling
5. Marketing mix development
6. Message rifling and concentration

Target marketing,Target marketing is leveraging the information acquired during the research
and segmentation process and determining which market segment(s) the organization feels
is/are its primary or best opportunity for penetration and sales success.

By defining target market segments, the organization can develop its value proposition around
those decision criteria that the customer values the most, thereby tailoring the product and/or
service offering to best meet the needs of the target market identified and the customer profile
created.

Segmentation Analysis to Target Market,Industry sector (100%) --> potential market (30%) -->
interested market (15%) --> able market (10%) --> target market (5%)

By "need," we mean the overall desire to solve a problem and satisfy a want. Target marketing
then looks at the segments exhibiting the greatest need (desire to solve the problem or satisfy
the need), and looks to identify those segments with the greatest willingness to pay for the
solution to the need—or, in other words, purchase the product or service. Marketing research
will assist us in understanding what the "need" is. Segmentation defines the level of need, and
target marketing defines those who will pay for the need

"Need to Pay for the Solution to the Need" Approach,1. Is there a need
2. Higher levels of need
3. Willingness to 'pay for the solution to the need"

Need Identification,Need identification focuses on assessing opportunities that exist within the
marketplace for our current and potential (soon-to-be-launched) products and/or services. It
means attempting to identify untapped or unmet needs within the marketplace and leveraging
our R&D capabilities to develop products and/or services that will meet such needs. It also
means looking at our current portfolio of products and/or services and deciding where
opportunities exist that will enable us to maximize their revenue and profitability potential (via
the product/opportunity matrix). Finally, need identification considers whether our emphasis
should be on new customer acquisition, further leveraging relationships with existing customers,
or a combination of the two (see Figure 10.10).

ANSOFF MATRIX (Product/Opportunity Matrix),1. Market penetration

2. Product/service development
3. Diversification
4. Assessing market opportunities
5. Market development

Market penetration opportunities,focus a manager's attention on growing the sales revenue of

the organization's existing products through its existing customer base. This means seeking
ways to (a) get its existing customers to purchase the organization's products/services more
frequently, or (b) increase the average transaction revenue per purchase at the time when these
customers are buying

New product and/or service opportunities,New product and/or service opportunities focus a
management team on identifying and developing new products/services for the existing markets
within which it competes, and/or the existing customer base that it serves.

Market development opportunities,Market development opportunities focus a management team

on identifying and cultivating new customers for the existing products an organization currently
offers. Market development opportunities can be the result of product line extensions of existing
products designed to capture new customers via segmentation stretch, or simply finding new
uses for existing products that attract previously uninterested customers to purchase an
organization's existing product.

Diversification opportunities,Diversification opportunities focus managers on assessing

opportunities that lie outside the organization's current products and/or services, and represent
the creation or development of new markets served by new products/services.
The buying process,In making a decision to buy, potential customers will fundamentally go
through a four-phase process

In initiating brand and/or product extension strategies to stretch a product/service offering

across wider market segments, managers need to consider two key points:,The first has to do
with cannibalism. Managers need to determine whether any sales volume erosion has occurred
to the existing product/service offering, and, if so, whether this volume decrease is offset by the
newly launched extended brand's sales gains. The marketing team also has to be careful about
sending mixed messages when marketing a similar product toward similar but distinct segments
(kids, families, adults).

Second, when accompanied by a repositioning shift, marketing managers need to ensure that
customer desertion to a competitive offering does not occur due to the change in brand or
product communication message focus.

Consumer Decision Making Process,the specific sequence of steps consumers follow to make a
purchase

Includes:

- Initial consideration of options

- Active consideration and evaluation of options
- Point of purchase
- Post-purchase influences

As marketers, our goals with respect to this decision-making process are the following:,Be at the
top of the potential customer's purchase list as they enter into the decision-making process, and
reinforce and support the purchase of our product as the potential customer transitions to the
point of purchase.

If we are not at the top of the potential customer's purchase list during the initial consideration of
purchase alternatives, then our goal is to disrupt the potential customer's predetermined list of
viable purchase alternatives in a way that creates awareness and preference for our products
and/or services.

Assuming that we have won the battle for the initial purchase, reinforce and support the
customer in a way that encourages them to develop a loyalty and commitment to our product,
thereby making future purchases almost automatic with little consideration of alternative
products and/or services being offered by our competitors.

marketer's tool box,1. Company-driven marketing techniques

- Advertising
-Sales Promotion
- Publicity
- Point of Purchase Displays
- Dedicated Sales Force

2. Consumer-driven marketing techniques

- Internet Searches
- Product Reviews
- Peer Recommendations
- Analysts' Blogs and Vlogs
- Social Media Web Sites and Commentary

3. Channel support and interaction techniques

- Dealer Incentives
- Point-of-Purchase Discounts
-Channel Member Training
- Exclusivity Arrangements
- Salesperson Recommendations

Consumer Decision-Making Process: The Marketer's Goals,Initial consideration of options

Active consideration and evaluation of options

Point of purchase

Post-purchase influence

post-purchase period,,In addition to illustrating the various influences that will occur throughout
this decision-making process, there is another key point associated with marketing: the need to
effectively manage and positively reinforce the post-purchase phase of the decision-making
process. Effective marketing does not end at the point of purchase. Considerable emphasis is
placed on the post-purchase period, which is where true customer loyalty and commitment is
developed. This is important for three reasons:

1. Customers need immediate and ongoing reinforcement that the purchase they made was the
right one. Reinforcing the purchase decision, particularly decisions that require a significant
financial commitment, is fundamental to developing customer loyalty and commitment.

2. For many purchases, particularly business-based purchases, ongoing servicing and training
may be core aspects of the buying decision. The quality of such support services is, in many
cases, as important as the initial purchase.

3. Satisfied customers tell others about the quality of the products and services that they
purchase and use. Active referrals from current customers assist us in broadening our customer
base.
Growing the customer base,Existing customer base + new customers - deserting customers =
new customer base

Value Proposition Composition,Value Proposition

=
Service Benefits
+
Product Benefits
+
Brand Benefits
+
Cost Benefits
+
Emotional Benefits

Responding to Needs: Value Proposition Development and Communication,The role of

marketing, as reinforced throughout this chapter, is to communicate the value proposition for an
organization's products/services as the "best" solution to the needs of a targeted market of
prospective customers

A Note Pertaining to Not-for-Profits,For not-for-profits, this concept of social marketing needs to

ensure that the organization becomes fully rooted as a valuable resource to the community it
serves, and is seen as a valued benefit in a way that encourages individuals, businesses, and
government(s) to support the delivery of such products and services through philanthropy,
membership or program fees, or budgetary commitment. The vitality of the not-for-profit
organization is predicated on positioning itself as the preferred provider of products and/or
services, and in meeting the needs of its user base in a way that generates loyalty, empathy,
and commitment to the cause the not-for-profit aspires to respond to.

Management Reflection—Back to Strategy,When considering the potential of a market segment,

marketing managers need to consider five fundamental factors that Kenneth Wong, a leading
marketing strategist at Queen's University in Kingston, Ontario, refers to as the "mission critical
factors" associated with marketing strategy. These five factors are outlined as:

Market Dynamics: Critical Factors:

1. Market Clarity and Stability
2. Customer Analysis
3. Competitor Analysis
4. Competitive Advantage Analysis
5. Culture and Business System Analysis

Market clarity and stability,Market clarity and stability: Will things stay right within this market
long enough for us to fully implement our intended marketing strategy and achieve our targeted
financial goals? Are there external pressures, political influences, industry innovations, or
competitive responses that will close the perceived window of opportunity prior to the successful
execution of our strategy? Is there clarity and stability in the market segment(s) we intend to
pursue?

Customer analysis:,Customer analysis: Are we marketing our products/services to the right set
of customers? In other words, have we identified the primary market segments that have the
greatest need and will be receptive to our product/service offerings?

Competitor analysis:,Competitor analysis: Have we analyzed our competitors and their

respective positioning strategies? Do we understand and can we anticipate their competitive
actions and responses?

Competitive advantage analysis:,Competitive advantage analysis: Have we identified the right

competitive advantage around which to position our product? Has this perceived advantage
been validated via marketing research and/or some other objective basis?

Culture and business system analysis:,Culture and business system analysis: Do we have the
right culture, capital capacity, and business system to support our intended positioning strategy
and marketing effort? Can we deliver on what marketing intends to communicate to the targeted
market segment(s) in terms of needs solution, benefits, services, and features?

Marketing,The process through which organizations design, delves, and communicate the value
of their products and/or service

Positioning,Refers to our ability to develop a unique, credible, sustainable, and valued price in
the minds of our customers for our brand, products, and/or services

Segmentation,Refers to determining the best way to divide the market in a manner that will
result in a better understanding of potential customer needs, interests, preference, attitudes,
and behaviors

Primary sources of information,Are those that an organization develops or utilizes to generate

information specific to the organization and the products and services it offers

Secondary sources of information,are those that already exist and are available at no cost or on
a fee basis; managers use these information sources to conduct research and draw conclusions

Target Marketing,is the process whereby organizations determine which market segments
represent the strongest clustering of poetical customers who are most likely to purchase the
product and who have the capacity to do so

Segmentation stretch,Refers to expanding the focus of a product/service to similar and related

market segments that share a positive affinity for the product/service offering
Cannibalism,is the reduction in sales of an existing product/service due to the launch of a new,
similarly targeted product/service offering.

Customer Desertion,Occurs when customers move to a competitive offering due to a change in

brand or product communication message focus

Value proposition,Is a statement that summarized whom a product or service is geared towards
and the benefits the purchases will realize as a result of using the product or service

Four Pillars of the Marketing Effort,-Communication Strategy

-Product Strategy
-Pricing Strategy
-Distribution Strategy (Connectors)

This marketing effort is most easily understood as the creation and execution of an
organization's marketing mix, comprising strategic and tactical decisions relating to its
product/service offerings, pricing, distribution, and marketing communication efforts and
approaches. Historically referred to as the four P's of marketing (product, price, place, and
promotion), the ability to create and integrate these four decision areas into a unified marketing
approach can be more effectively thought of as the "four pillars to the marketing effor

Four concepts of the marketing mix,Traditionally, marketing textbooks and marketers have been
trained to think of the marketing mix around four concepts: product strategy, pricing strategy,
distribution strategy, and company-managed communication strategies. Although valid in terms
of a company-centric approach, an alternate view is to think of a successful marketing effort as
including these areas, but to design it and build it with a more customer-centric slant (see Figure
11.2). Let's take a look at each of these areas in order to explain the value of this different
approach to creating a marketing mix.

Product Strategy: Value Proposition Attributes versus Product Attributes,viewing the product
strategy as that of value proposition attributes brings into play a considerably broader range of
attributes that can be used to more fully align the organization's offerings to the needs of the
target market and create greater opportunity for differentiation. Creating a value proposition
strategy broadens the focus to include such additional items as branding, emotional bonding,
peer acceptance, and post-purchase service support.

Value Proposition Attributes,Total customer service:

- brand leveraging
- cost advantage
- behavior linkage
- point of scale and phrase services and benefits
- financial incentives and benefits
- tangible product attributes
- psychological and social benefits

The power of brands,A brand that carries emotional ties and strong intrinsic value into a value
proposition greatly improves the chances for its success. Strong brand names communicate
quality, reliability, product consistency, and peer acceptance in many market sectors.

Truly successful brands, which add power to a company and/or its products and services, are
those that have evolved to the top end of the brand ladder

Brands that have reached the "brand commitment" level on the ladder have an active and loyal
customer base that continually places the brand at the top of their predetermined purchase list,
resulting in their immediate migration to the purchase decision without further consideration of
alternate competitive options.

Brand Ladder,1. Brand Awareness

2. Brand Preference
3. Brand Loyalty
4. Brand Commitment

,The movement up the ladder toward brand preference and brand loyalty results in customers
using this brand and, recognizing the benefits from it, choosing to repurchase the brand and
concluding that its benefits (versus those of competitors) are such that a relationship to the
brand is formed.

,The ability to transition a brand from awareness to commitment is all about delivering the value
proposition in a way that demonstrates distinctiveness and creates emotional and psychological
ownership with customers as the proven solution to solving their needs. Again, this means going
beyond the core tangible attributes of a product and tapping into the emotional "psyche" of the
customer in terms of attributes such as style, ego, status, peer pressure, and lifestyle affiliation,
to name a few

Pricing Strategy: Return on Sales Maximization,In the face of a growing global marketplace,
companies are being challenged across many sectors with a relentless downward pressure on
price. Increasing competitive intensity and product substitutability, coupled with the rapidity of
technological innovation and change, continues to contribute to this downward pressure. This,
coupled with the constant challenge of "expense creep," places additional pressure on
organizations to maintain and protect their operating margins. Upward pressure on capital costs,
HR costs, R&D requirements, market development costs, and process development costs, to
name a few, all contribute to this upward pressure on an organization's cost base.

Our ability to respond to this globalization trend fundamentally comes down to how well we can
differentiate our products and services from our competitors' products and services in the
markets we are serving. The ability of our marketing mix to demonstrate and communicate this
to our target markets is, and will be, a core component of our success. In situations where we
are unable to truly differentiate our products and services, price will become a major point of
comparison and, therefore, a core decision-making criterion as to which product and/or service
is chosen by potential customers. The ability to effectively differentiate ourselves will enable us
to minimize price as a major point of comparison, thereby reducing its influence on the
decision-making process

Responding to Price Pressures,1. project our price point

- communicate product importance
- develop brand distinction
- develop quality differentials
- develop unique need
- solution features

2. respond to price reduction requirements

- process innovation
- develop greater economies of scale
- reduce quality
- reduce marketing effort

Managing the Pricing Process,Pricing involves considering a number of factors and requires
solid knowledge of both internal and external influences. Internally, managers and marketers
must fully understand the cost base of the organization and the margins that are needed in
order to ensure that the price being charged is sufficient to cover the operating expenses and to
support the investment needs of the organization. Externally, managers and marketers need to
assess the competitiveness of their price against alternate product offerings, and against the
willingness of the customer to "pay for the solution to the pain" at the price point being
considered.

four key fundamentals need to be assessed prior to finalizing a pricing decision.,1. Fully identify
the cost structure components of the product/service that the organization intends to offer to the
targeted market.

2. Research and identify the cost structures of your major competitors, and the extent to which
they intend to focus on price as a major point of comparison.

3. Analyze the price elasticity of the target market; that is, the change in demand that is
anticipated to occur at various price points. An additional aspect of this is to understand the
price range that consumers will conclude is acceptable for the product/service you intend to
offer. A core fundamental is the ability to define the consumer price threshold: the maximum
price point that the customer is willing to pay for your product or service.
4. Determine the degree of value proposition positioning strength that the product/service
commands in the marketplace. This will enable marketers and managers to identify the
premiums that can be allocated to the base pricing model given core differentiators such as
brand strength, emotional ties, psychological attribute uniqueness, publicity initiatives, and other
positioning-based communication message tactics.

Key Fundamentals to Setting Price,- Determine the degree of value proposition strength

- analyze the price elasticity that exists 9 driven by substitutability0

- understand your competitors cost structures

- analyze your critical cost structure components

Direct, indirect, or mixed systems,Direct distribution implies that the organization intends to
connect directly with its customers to handle the final sale of its products and/or the delivery of
its services without the assistance of a channel intermediary

Organizations tend to use direct distribution channels as a result of a belief that their product is
better supported by dedicated, company-employed sales personnel, and/or that they can gain
greater customer loyalty and greater "share of wallet" by dealing directly with the customer.
Amazon.com's business model has been predominantly built around a direct distribution,
Web-based model. In the cosmetics industry, Avon Products Inc. and Mary Kay Inc. both use
direct sales personnel to sell their products and services to families across North America.
Direct distribution approaches can also be the result of organizations believing that they can
more effectively control the transportation and distribution costs associated with their products

Indirect distribution,Indirect distribution implies the use of a channel intermediary, such as a

broker, wholesaler, or retailer, to facilitate the sales of an organization's products and/or services
to the customer . Organizations tend to use indirect distribution tactics as a result of the belief
that significantly greater market reach and support can be provided by leveraging the expertise,
locations, facilities, and experience of channel intermediaries. An example of an indirect
distribution approach is an individual who desires to sell their home. In most cases, the
homeowner will hire a real estate agent/broker to facilitate the sale and handle the transaction
on their behalf.

Mixed distribution systems,Mixed distribution systems incorporate both direct and indirect
distribution options within their distribution strategy (see Figure 11.15). The ongoing
development of Web-based models has resulted in more and more organizations viewing this
distribution tactic as a preferred business model.

Product/service delivery options,Pop-ups are a temporary use of physical or online retail space
by a company in order to provide additional access to its goods and services. Pop-ups are often
used by companies to test market opportunities in new locations in order to determine if
sufficient demand for its products exists, judge the reaction to new products as part of a test
market launch, expand market reach on a temporary basis during peak seasonal periods
(Halloween, Christmas, etc.), reach new customers, generate a "get it while supplies last"
purchase mentality, and educate customers on product features and uses. The concept of the
pop-up store is generally driven by the desire to expand the customer base, create stronger
brand awareness, and/or generate additional sources of revenue in locations not typically
serviced by the company. Canadian-based Shopify.com has built its business model around
being a pop-up online retail location for businesses looking to expand their market reach and
leverage new revenue opportunities.

Multi-channel distribution strategy,Organizations that incorporate a number of different channel

connections through which customers can purchase a product and/or service are undertaking a
multi-channel distribution strategy. The critical component to this approach, however, is the need
to ensure that customers experience a seamless interaction with a company regardless of which
option they choose to use to connect with a particular business. BOPIS (buy online, pick up in
store) and BORIS (buy online, return in store) are two good examples of where such
seamlessness needs to exist. Returns, as an example, represent a constant challenge for many
companies expanding into online interactions. Returning products to online players not only
represents a significant cost, but also can result in a significant negative impact on the overall
customer experience and future loyalty if not handled conveniently and seamlessly.

Degree of sales support within the channel,A key decision associated with determining the type
of channel system lies in determining the level of sales support that is needed for your product
and/or service. Although customers care about the quality of the product and its price, a positive
buying experience is what really drives value. A key part of this experience is ensuring that
customers are supported in the selling process by channel intermediaries and at the point of
purchase.

Intensive distribution,Intensive distribution arrangements seek to maximize product availability in

the marketplace. Intensive distribution implies a desire by an organization to distribute the
product and/or service through as many locations or channel outlets as is possible

A good example of this lies with convenience goods, which are products and services that we
use every day. Often, decisions to buy are based on convenience and availability in addition to
brand loyalty and commitment. The desire to purchase a soda is a good example of this.
Energy-boosting drinks can be found in retail stores, vending machines, grocery outlets, arenas,
convenience stores, office building kiosks, and restaurants

Selective distribution arrangements,Selective distribution arrangements narrow the breadth of

access that products and/or services have in the marketplace. The decision to limit the extent of
the reach could be based on the need for heightened sales support at the time of purchase.

The purchase of a Coach handbag must take place at either a Coach Inc. retail location or at
one of its authorized distributors (Nordstrom, Dillard's, Bloomingdale's, Lord & Taylor).
Organizations using selective distribution arrangements do so because they believe their
products or services will be better supported at the point of sale by these channel
intermediaries. They also feel that they can retain a greater degree of control over how the
product is priced, marketed, and sold.

Exclusive distribution arrangements,Exclusive distribution arrangements reflect a further

focusing on the distribution of products through a single, authorized channel intermediary. For
manufacturers of products, this means offering these products through only one market
representative. As an example, Tesla electric vehicles can be purchased only at Tesla
"in-person" showrooms or through its online purchasing platform. Organizations often use
exclusive distribution arrangements when the selling process associated with their products
requires the highest levels of support, or when the organization is attempting to break into new
markets. Distribution exclusivity is also a key to franchise-based operations, where the
franchisor agrees to provide to the franchisee a full business operating model governed by an
exclusivity contract.

In general, exclusive distribution arrangements should also give the organization maximum say
in how the product/service will be marketed and sold, and generally prohibit the channel
intermediary from carrying competitive lines. The risk for the organization is that, should the
exclusive distribution arrangement not result in the required level of sales success, then the
organization may have few immediate alternate options to stimulate demand for the product, as
contractual provisions may prevent the organization from terminating the relationship in the
short term

Importance of channel intermediaries,Channel intermediaries, when properly cultivated and

incentivized, can become instrumental in building market share, shaping the product mix
through key information gathering and feedback, forecasting demand, participating in and
sharing the costs of sales and marketing efforts, educating customers, and acting as critical
contacts at the front end of the organization's customer relationship model. In many situations,
channel intermediaries bring to the market experience and expertise that the manufacturing
and/or service company does not possess in-house. Significant risk mitigation can also take
place through channel intermediaries, who commit to purchasing products and/or services in
advance, and absorb the cost of unsold inventory once these products are purchased. Used
effectively, channel intermediaries help make the connections with customers more effective,
assist in driving down costs, and help to identify profit leaks, thereby improving the overall
performance of product and service-supplying organizations

Communication Strategy: Communicating the "Fit,Communication strategy development takes

the information discussed in Chapter 10 (segmentation, target market selection, customer
profiling and positioning) and embodies this within a focused message, driven by a well-defined
and well-developed value proposition and targeted specifically at a defined audience (see
Figure 11.16). This is referred to as message rifling.
Growing importance of social media as part of the communication strategy,Studies have shown
that people who follow companies and their brands on Facebook and Twitter are more likely to
purchase products or services from those companies. They also are more likely to recommend
those companies to their friends. More than half of those surveyed indicated a greater
willingness to buy a product they follow, and over 60% indicated a willingness to recommend
brands that they follow to others.

The primary reasons why users follow a brand on Facebook are (a) to receive discounts and
promotional information for the brand, (b) to identify themselves as customers of a particular
brand or company, (c) to draw others to the brand, and (d) because doing so is fun and
entertaining.

Individuals in fully developed countries in Europe, North America, and Asia spend, on average,
more than four hours per month watching YouTube videos. Canadians, for example, watch an
average of 4.4 hours of YouTube videos per month.

Companies that blog are found to have more visitors to their Web sites and create more inbound
links to their Web sites. Blogging also results in more indexed pages in support of company
products, services, and brands.

The conclusion to be drawn is that social media marketing, if managed properly, can create
reach for an organization and can build loyalty for its products and services in a way never
before seen. The most prominent newspapers in the world cannot claim anywhere near the
reach of Facebook and Twitter in terms of numbers of subscribers.

For social media marketing to be successful, it needs to accomplish four critical things:,Capture
interest among general Internet traffic

Increase customer engagement with the organization

Turn interest and engagement into sales

Build active customer loyalty

Managing a products life cycle,The length of this life cycle and the success that a product or
service has within it is determined by both the success of the positioning strategy designed for
the product/service and the successful execution of its marketing effort (marketing mix).

Traditionally, products that have achieved some initial level of success will transition through five
specific stages of life during their life cycle: development, introduction, growth, maturity, and
decline
The development stage refers to the steps associated with the creation of a new
product/service. This includes the development of an idea or concept; the assessment of its
feasibility to be commercialized; the development of a physical prototype (if a product); an
analysis of its market potential via focus groups (customer and channel partner), surveys, or
third-party testing; resource allocation approval; test marketing; and pre-launch communication
initiatives.

initiatives that can be employed in a mature marke,Product innovation and enhancement,

product-line extension strategies, market penetration tactics, and market consolidation
strategies are all examples of initiatives that can be employed in a mature marke

At some point, the product will begin to experience a decline in sales. This could be due to
product obsolescence, a shift in customer needs and demand, or a combination of the two. As
the product progresses through this decline stage, a decision will need to be made as to how
long to support the product and when it would be appropriate for the organization to divest itself
of it.

Managing across the Life Cycle,Success within the life cycle of a product or service comes
down to possessing an effective positioning strategy backed by a successful marketing effort
formulated around a meaningful (in the eyes of customers) value proposition. As managers, we
need to be able to sense the stage of development not only for our product/service offering, but
also for the industry itself.

Managing a product portfolio,Portfolio management is all about making decisions on where to

invest in order to improve the organization's market position going forward. As managers, one
fundamental we can almost always count on is that the resource needs of the organization will
exceed our ability to supply such resources. This means that, given the finite nature of our
financial and physical resources, and the fact that our needs will exceed our supply, we will
continually be pressed to define priorities on where to invest and grow the organization.
Decisions relating to this will impact the various products and/or services within our portfolio. As
managers, however, our responsibility lies in doing what is best to improve the overall
performance of the organization versus any one individual product line.

One approach to making decisions relating to where to invest, maintain, harvest, and divest is
called the growth/share matrix, made popular by the Boston Consulting Group. This business
model suggested that, as a frame of reference in making portfolio management decisions,
managers focus on the growth potential of a product relative to the product strength that it
currently possesses in the marketplace.

A Note Pertaining to Not-for-Profits,Not-for-profits must also seek to make use of the same tools
that for-profit entities use in the creation of their marketing mix. Social networks, focus groups,
media-based advertising, and channel partner development are of equal importance in the NFP
arena. Utilization of Facebook and other social media sites enables stakeholders to provide a
real "voice" in support of the not-for-profit's efforts.
For the NFP, the key components for survival lie in the ability of the organization to achieve
rootedness within the community and vitality through membership, philanthropic gifts, and the
meaningful delivery of its services in support of its mission. To successfully accomplish this, the
NFP needs to achieve the same outcomes as for-profit organizations with respect to brand
recognition and a value proposition that is judged by its customers and users to be superior to
those of other for-profits and NFPs competing for the same dollars.

price/quality trade-off.,As managers, we must also understand that pricing decisions cannot be
made in a vacuum, focused solely on costs, but that external influences, competitive offerings,
and customer expectations will all significantly influence the price at which we offer our products
and services to the marketplace. Customers, in finalizing a product selection or a decision on
where to purchase needed services, will assess the various options and determine which
competitive offering they feel represents the best price/quality trade-off. This decision will be
influenced by factors such as:

The customer's ability or willingness to pay

The preferences of the customer in terms of functionality and intangible "psychographic"

benefits

The importance of quality and performance

Behavioural issues, such as the regularity and intensity of use

The number of direct alternatives or options available in the marketplace

Marketing mix,Refers to an organizations strategic and tactical decisions relating to its

product/service offering, pricing, distirubiron, and marketing communication efforts and
approaches

Predetermined Purchase List,refers to the ranking of products/services that purchasers develop

for all the options available when making a purchase decision

Price elasticity,Is the change in demand that is anticipated to occur a the various price points the
organization is considering for it product and/or service

Consumer price threshold,refers to the maximum price point that the customer is willing to pay
for a product or service

Payback Period,The length of time required to recover or earn back the cost of an investment

Direct distribution,refers to connecting directly with customers and handling the final sale of
products and/or the delivery of services without the assistance of a channel intermediary.
channel intermediary,refers to an organization that assists a company in the distribution and
delivery of goods or services to its customers

Indirect distribution,implies the use of a channel intermediary, such as a broker, wholesaler, or

retailer, to facilitate the sales of a company's products and/or services to its customers.

Mixed Distribution Systems,Distribution systems that incorporate both direct and indirect
distribution options within their distribution strategy

Multi-channel distribution,refers to the incorporation of a number of different channel

connections through which customers can purchase a product and/or service

Intensity distribution,Is a decision by an organization to distribute the product and/or service

through as many location r channel outlet as is possible

Convenience goods,are goods purchased by customers on a regular basis, with minimum effort
and little emotional connection

selective distribution,Refers to a decision by an organization to sell its products and/or services

though a limited number of channel intermediaries

Exclusive distribution,Refers to a decision by an organization to offer its products and/or service

through a single market representative

Profit leaks,inefficiencies within an organization's marketing mix that result in margin erosion
and loss of profit

Message Rifling,A focused message, driven by a well-defined and developed value proposition,
that is targeted specifically at a defined audience

Expense Creep,- tendency for expenses associated with organization's various cost lines to rise
due to inflationary pressures, union negotiated contracts, and so on

What is marketing,The process through which organizations design, develop, and communicate
the value of their products/services
- much more than advertising or media campaign
- value does not always have to be tangible
- value can be based on intangible attributes such as peer acceptance, status, entail all benefit,
pride of ownership or brand loyalty

2 principles of consumer behavior,Principle 1: customers don't buy products or services- they

buy solutions to problems or needs
Principle 2: customers will not pay more for a product if they can get a similar product for less

Core challenges of marketing,1. Message development and delivery

2. Need identification
3. Assessment of our ability to respond
4. Value proposition creation and positioning
5. Disitirvution capabilities
6. Price point validation

The Six R's of marketing,1. Right need to pursue

2. Right solution to offer
3. Right value proposition to position the organizations products and services around
4. Right methodology
5. Right price
6. Right communication message to use

The marketing formula,An Effective and Well-Defined Market Position + Superior Marketing
Effort = Profitability and Growth

4 key objectives of positioning to win,Successful positioning objectives

1. Communicate the solution effectively to the targeted customers

2. Understand the market to be served

3. Understand the customers to be targeted

4. Deliver the solution in a way that is superior to competitors

Segmentation and target marketing,Successful companies forums on identifying segments

within the market

Marketing research: customer profiles,Marketers will strive to create a profile of the customers
within the various segments identified in a market

The profile is built around 4 core characteristics:

- demographics
- geographic
- psychographic
- behavioral

Market research data,Data collected from its source and generally gathered by a business for its
own specific purposes.
Primary market research tends to take the raw data such as information collected through focus
groups or surveys, and interpret the data for a variety of business purposes.
- in depth interview
- surveys
- focus groups
- social media monitoring

Conversely, secondary market research relies on information previously gathered.

- government statistics
- Industry associations
- trade publications
- company websites
- market research reports

Marketing Mix (4 P's),Product, Price, Place, Promotion

Product:
- features, quality, branding, packaging, services, warranties

Price:
- price strategy, pricing, allowances, discounts , payment terms

Place
- channels, market coverage, assortment, location, inventory, transport

Promotion:
- sales promotion, advertising, public relations, direct marketing

The power of brands,Brand name— can communicate superior positive performance attribute
- can carry emotional ties and strong intrinsic value to improve a products chance for success
- truly successful brands have evolved to the top of the brand ladder

Canadians 10 best domestic brands as of 2014,1. Tim hortons

2. Jean coutu
3. West jet
4. Shoppers drug mart
5. Canadian tire
6. Saputo
7. McCain foods
8. Home Hardware
9. Rona
10. Bombardier

Pricing methods and strategies,1. Cost based

2. Competitor based
3. Value based

Operations Management: Fitting Into the Big Picture,For a business to truly be successful, a
third fundamental component to its business system must be present:
- the organization must develop and maintain efficient and effective operational processes that
deliver to the marketplace the products or services the organization offers.
- Successful organizations understand the interconnectivity of strategy, business structure, and
operations, and seek to ensure that all three are integrated into the decision-making process
and that structure and operations are aligned and in support of the organization's strategic goals

Business System Components,Business system

Business structure
Business strategy execution
Operations
Strategic intent

Successful organizations understand the interconnectivity of strategy, business structure, and

operations, and seek to ensure that all three are integrated into the decision-making process
and that structure and operations are aligned and in support of the organization's strategic
intent.

When we visualize the interconnectivity of these three business system components, we should
conclude the following:

-Strategy is what we want to accomplish.

- The business structure should provide the controls and the formal communication and
responsibility framework that will guide the organization as it seeks to realize its strategy.

- Operations are understood to be the actual processes employed, which, when combined with
the utilization of the organization's capital assets, enable strategic outcomes to be actualized.

Operations management,Operations management is all about the effective design,

development, and management of the processes, procedures, and practices embedded within
an organization's business system for the purpose of achieving its strategic intent.

Responsibilities of Operations Managers,In broad terms, the mandate of today's operations

management team can be thought of as encompassing four broad categories of responsibility
(see Figure 12.3). The intent of the operations management team is to design and develop such
processes, procedures, and practices in a way that takes into consideration time requirements
associated with getting products/services to the market.

Operations Management: Areas of Responsibility,Process management

Supply chain management

Product/service management

Information technology-based operational analytics

Process management,Process management is the design and development of the work flow
and connectivity of the operational requirements (processes) needed to ensure that an
organization's products and services are efficiently produced and effectively delivered to the
marketplace.

Supply chain management,Supply chain management refers to the management of the flow of
materials and/or products, information, and costs through the front end of an organization's
value chain.

It includes interactions such as the purchase of materials from suppliers and the coordination of
just-in-time (JIT) inventory practices. It also considers the warehousing and distribution logistics
required to move finished product from the organization's manufacturing or distribution facility to
its channel partners, who ultimately sell the product to its final users (customers). Supply chain
management is all about relationship management. It is the management of the
interdependencies among suppliers, manufacturers, and distributors. It also seeks to develop
the terms and conditions that will enable all parties to efficiently and effectively meet their
obligations to one another due to their business relationships

Product/Service Management,Product/service management refers to the variety of activities that

commence with the design and development of potential new products in R&D and extend to
the post-purchase support of products and services now in the hands of customers.
- Product/service management includes supporting product modifications, enhancements, and
other changes made throughout the product's life cycle.
- It also involves the decision trade-offs associated with quality and cost. Decisions relating to
functionality, durability, and performance are just some of the factors that need to be assessed
within this area of responsibility.

Product/service management decisions are made in close cooperation with the organization's
R&D, marketing, and engineering departments. Consumer wants and preferences must be
identified, and decisions jointly made prior to the product/service management team
incorporating them into the design or redesign of a new or current product.

Information technology-based operational analytics,Information technology-based operational

analytics refers to the assessment of historical data along with observations and conclusions
relating to the inclusion of predictive data into the decision-making process.
This is supported and acted upon via applications of machine-based learning, AI, and other
analytics-based methodologies in a way that enables the operations management team to
actively manage the organization's current and future needs in four distinct areas:

1) work flow optimization and technology-based efficiency and effectiveness planning,

2) monitoring of customer and market behaviour in order to predict future trends and needs and
uncover business opportunities,

3) enhanced service support via data-based knowledge management and methodology

application, and

4) intelligent forecasting, again based on data-based analytics, in order to enhance the

scheduling accuracy of the various tasks and processes the organization undertakes in the
delivery of goods and services to the marketplace

Primary activities,Primary activities relate to the specific activities through which the
development and transformation of a product or service occurs as it is produced and delivered
to the marketplace.

Inbound logistics

Operations

Outbound logistics

Marketing and sales

Customer service

Inbound logistics,Inbound logistics refers to the management of supplier relationships relating to

those parts and/or components, or finished products, that are brought into the organization in
order to manufacture finished products for delivery to the marketplace. Again, using our iPhone
X example to illustrate a manufacturing setting, this would relate to the scheduling, shipping,
and temporary warehousing of the glass, metal, and electronic parts and components.

Operations,Operations refers to the manufacturing and/or product change processes set up to

ensure that the final product the organization is manufacturing or handling is ready for the
marketplace.

Outbound logistics,Outbound logistics refers to the distribution activities required to get the right
product to the right place at the right time. This means getting the finished product to the
customer via a distribution channel that is accessible, convenient (in terms of the customer's
ability to purchase), and able to minimize stockouts and other sales impediment factors that
could result in customers shifting to an alternate provider. Outbound logistics decisions focus on
warehouse needs, distribution, and inventory management activities, as well as on
transportation and routing activities.

Marketing and sales,Marketing and sales refers to those activities that create profile and
awareness for the organization's products, services, or brand(s), and the benefits derived from
the acquisition and use of such products or services. Referring back to Chapter 1 and our
discussion relating to the creation of a value proposition, it is the role of marketing to effectively
communicate the benefits of the products and services being offered in a manner that creates
preference for, and commitment to, the organization's products and services on the part of its
customer base.

Customer service,Customer service refers to the support provided to customers before, during,
and following the purchase process. Customer service can be thought of as technical support,
repair support, warranty service work, installation, replacement parts management, upgrading
options, and customer training, to name a few. A key desired outcome relating to customer
service is to maintain and, where possible, enhance the value of the product/service purchased
by the customer. Achieving this can result in high levels of customer satisfaction, which
translates into customer loyalty and commitment.

Value Chain Analysis: Support Activities,Support activities are those areas within the
organization that are not directly associated with the actual processes the organization uses to
produce products and/or deliver services; these activities, however, are integral parts of the
support structure the primary activities rely on to successfully execute strategy

Some examples of support activities include:

The IT department, which will collaborate with the operations department on the development
and application of new technologies and analytics-based methodologies in support of the value
chain process.

The research and development and engineering departments, which primarily focus on new
product development, existing product enhancement, and process design and development.

Human resource management, which assists in recruitment, employee development, and

support services for employees.

Other supporting departments such as finance, accounting, legal, and environmental safety.

Business Planning Cycle,Outlines the focus and methodology for setting the business model in
motion

Steps:
1. Productive resource capability assessment
2. Strategy formulation (develops business plan)
3. Strategy execution (execute business plan)
4. Company performance and profitability
5. Company growth and expansion

Operations Cycle,A key component of this process is to take the information derived from this
strategy review and implement it through what is called the operations cycle. The operations
cycle is the alignment of the operational tasks within an organization by its management team in
order to meet the strategic outcomes defined in the organization's business strategy

1. What's the strategy

2. Does this translate into an emphasis on lower price or better quality
3. Determine what needs to be done to execute the strategy
4. Make the required operational changes and investments
5. Manage the process to realize desired performance

process standardization and process simplification.,Conversely, if the organization's desired

strategic position is to focus on low price and acceptable quality, then the operations cycle will
more likely place an emphasis on process standardization and process simplification. This
requires a focus on process research and innovation versus product research and innovation,
highly centralized material procurement to maximize economies of scale, and a focus on capital
investment that drives ease of manufacturing design and execution.

Process Management,These are as follows:

Process design, layout, and execution

Materials management

Facility design and layout

Capital asset evaluation and acquisition

Process design, layout, and execution,Process design, layout, and execution refers to the
assessment and implementation of the type of tasks needed to get required work accomplished,
and how such tasks will be grouped and sequenced to ensure that the most efficient and
effective processes are utilized in the production or delivery of products and/or services

key fundamentals associated with process design, layout, and execution,DICE—define, identify,
create, and execute

Define. The tasks and civility required

Identify. The sequencing needed to maximize efficiency and effectiveness

Create: the process— layout and fine tuning

Execute: the process (put into action) and evaluate

Two commonly used project management tools,Two commonly used project management tools
are the PERT chart and the Gantt chart Both PERT charts and Gantt charts are project
management tools that offer a decision-making framework to assist managers in estimating the
time, money, and people required to develop and execute a business project.

PERT (Program Evaluation and Review Technique),PERT (Program Evaluation and Review
Technique) charts focus on the identification and dependency relationships of the tasks
required, along with the recognition of the critical components of the project that must be
completed at given points in a project's life, which if not understood and managed will result in
project delays.

Gantt charts are,planning charts used to schedule resources and allocate time

Materials management,Materials management refers to the management of the inputs required

in order to develop the products or services the organization is intent on delivering to the
marketplace. Materials management could be associated with inputs/items such as:

components for assembly purposes

parts for repair and maintenance of products sold

raw materials, such as molten aluminum for the fabrication of transmission casings or pistons for
automobiles

hazardous waste disposal

sanitary practices for the safe handling of food at restaurants

regulation compliance for the handling of goods such as prescription drugs

the handling of fully finished goods that the organization has purchased with the intent of
reselling such items through its retail outlets

Facility design and layout,Facility design and layout refers to infrastructure layout and related
facility components that will be required to house and support the processes noted above. Key
decisions in this area of operations management responsibility include decisions relating to
production capacity, plant, facility, and/or retail locations, warehousing, storage, and other
similar decisions.
Decisions relating to capacity, plant size (footprint), and plant layout often have to be made
years in advance, based on estimated sales forecasts given anticipated market conditions.
Building too little capacity can result in not being able to meet customer demands, which
presents an opportunity for competitors to move in to the market and steal market share. Too
much capacity, particularly if production processes limit the ability to change what is being
produced (i.e., fixed assembly lines), can result in idle plant and equipment, which ties up
dollars and can negatively impact the organization's cost structure (hence the need to shift
production, in Toyota's case to Kentucky).

Capital asset evaluation and acquisition,Capital asset evaluation and acquisition refers to an
assessment by the operations management team of the state of current capital assets and a
determination as to their applicability to meeting the needs of the organization. Obsolete
equipment must be replaced or modernized. New technologies need to be acquired and
implemented. Plants, facilities, and equipment that are no longer needed should be divested of.

Supply Chain Management,Supply chain management refers to the management of the flow of
materials and/or products, information, and costs through the front end of an organization's
value chain. This means planning, sourcing, and delivering the required components, parts, or
products purchased for resell to the organization, and then delivering the finished products to
the marketplace either through business-to-business relationships (B2B) or
business-to-customer (B2C) sales locations.
- refers to the development of the supply chain structure and the accumulation of the necessary
information needed to make effective supply chain decisions.

For an organization, a key aspect of supply chain management is an understanding of the

various partners the organization will need to interact with to ensure that it successfully
develops the network needed for the efficient flow of goods and services into and out of the
organization.

Supply chain operating execution,Refers to the execution of the specific tasks necessary to
ensure that key performance results are achieved. This would include activities such as the
management of inventory levels, efficient utilization of the organization's transportation fleet,
effective use of technology systems in place, accurate and timely invoicing and collection,
ensuring that products reach the market in a timely fashion, and the achievement of the required
manufacturing quantities to meet the expectations of retailers and other product distributors.

Supply Chain Performance Evaluation,refers to the critical outcomes that the supply chain must
achieve in support of the organization's overall operating performance.
Two critical outcomes in this regard are (1) maximum utilization of the capital asset base, and
(2) minimization of the time involved within the cash operating cycle.

The cash operating cycle (COC),The cash operating cycle (COC), also known as the
cash-to-cash cycle, refers to the amount of time it takes for an organization to recover the cash
(product is sold and money is received) it has paid out for the development, production, and
distribution of products. It represents the amount of time it takes for money you are spending to
finance the transformation of inputs into products and/or services (process flow across the
stages of the value chain) to be returned to you in the form of cash once sales have been made
and accounts receivable collected.

Existing product/service changes,Existing product/service changes relates to the existing

products and/or the existing level of services offered to the marketplace within which the
organization currently competes. Decisions associated with this area of operations management
relate directly to the product modifications or enhancements that are deemed necessary from a
competitive perspective (such as component input changes, feature/benefit modifications, level
of service support, and stocking of replacement parts).

New product opportunities,New product opportunities refers to the development of new products
for market opportunities that exist today and for which research has concluded there is
near-term revenue potential. Amazon's development of the Alexa assistant and its related
ecosystem support devices (Echo, etc.) not only provides Amazon with immediate new revenue
derived from the sale of Alexa-related devices, but also offers an additional connectivity
mechanism with Amazon customers, thereby enabling the company to generate additional
revenue from the broader Amazon portfolio of products and services that have now become
more easily accessible via having Alexa in your home.

Long-reach opportunities,The investment in, and development of new product research for
potentially emerging markets of the future

these types of R&D decisions is to develop leading-edge technologies and/or products and
services that will enable the organization to obtain "first mover advantage" when, and if, these
markets emerge

Information Technology (IT),Information technology-based operational analytics focuses on two

common elements in support of the operations management decision-making process:

1. Combining software and machine-learning methodologies with operations infrastructure and

technologies to improve the design, creation, transformation, delivery and servicing of goods
and services to the marketplace, and

2. The utilization of data, analytics, and business-value dashboards to gain critical insights,
thereby enabling companies to improve customer service, create greater efficiencies in the
execution of operational processes and protocols, and mitigate supply chain and broader
operational risks.

In this regard, think about information technology-based operational analytics as the full
integration of the power of the Internet, data-collecting software, machine-learning
methodologies, and the physical movement of goods and services, ultimately ending with the
customer with performance being assessed on the basis of excelling in the delivery of the total
customer experience.

So, just how does an organization successfully implement an information technology-based

operational analytics program?,According to Gartner, one of the world's leading information
technology research and advisory companies, a key to this is to view the organization's
business model in a new way

Digital technology integration mapping,Digital technology integration mapping simply asks four
key questions relating to how technology is and/or should be used in our operation. These
questions are as follows:

1. Enhance—where and how should our current technology be upgraded?

2. Add—what new technologies should we integrate into our operating ecosystem?

3. What existing technologies should be maintained?

4. What technologies are now obsolete and need to be removed from the operating
environment?

lagging indicators,(outputs measured after the fact) such as revenue, profitability, net new
customers, sales lead conversion rate, etc.

leading indicators,(activities and actions that can be tracked or measured at the front end),
reveal almost instantaneously how well the organization is executing its strategy

Establishing Quality Standards,A key part of this challenge is to continually protect and, in many
cases, enhance the quality of the products and services being offered in the face of constant
downward pressure on price. This means that operations managers and their teams must work
to continually improve the efficiency and effectiveness of the organization's operations cycle,
while at the same time striving to reduce the costs incurred in doing so

Quality Impact Factors,Market Expectations

Employee Education and Training
Process Analysis
Systematic and Fact-Based Decision Approach
Effective Communication of Strategy and Intent
Product Consistency

ISO (International Organization for Standardization) certification,Internationally recognized

standards that ensure a company's goods, services, and operations meet established quality
levels and its operations minimize harm to the environment.
first step in ensuring that they meet the expectations of their customers. The ISO has developed
more than 18 000 standards relating to the manufacturing and supplying of products and
services. Its focus is to make the manufacturing of products and services safer, more efficient,
and more socially responsible. Its work results in customers benefiting from knowing that
manufacturers have conformed to international standards relating to reliability and quality. By
achieving ISO certification, manufacturers agree to adhere to the product and process
specification requirements and criteria in the manufacturing of products and services within their
industry classification, and to use a common technological language in their communication with
suppliers and customers. ISO standards cover a wide range of industry sectors, such as
agriculture, construction, engineering, manufacturing, distribution, and information and
communication technologies, to name a few. The ISO's best-known categories of standards
cover general management practices and quality standards (ISO 9000 series) and
environmental management standards

Six Sigma,Six Sigma is a methodology that focuses on a philosophy of total improvement. It

seeks to integrate within an organization's culture an organized approach for the analysis of
processes, with the intent of minimizing (and eliminating) the occurrence of defects—which,
ultimately, impact the quality of the products/services being delivered to the marketplace and the
costs incurred in their creation. Based on a methodology of DMAIC (define, measure, analyze,
improve, control) for existing operations, or DMADV (define, measure, analyze, design, verify)
for new operations, Six Sigma analyses guide managers to map the processes being used
within the organization, align these with customer needs, and then seek to improve or develop
such processes and implement the necessary controls for maintaining the heightened (required)
quality levels.

TQM (total quality management),can be viewed as more of a broad-based approach to

managing quality within the organization. TQM can be thought of as a management system that
seeks to assimilate the concept of quality improvement across the entire organization. TQM
challenges the organization to be customer focused and to strive for total employee involvement
to ensure that quality (in the delivery of products or services) is fully integrated as a core
component into the organization's strategy, processes, and communication messages. Similar
to Six Sigma, TQM looks for managers to implement quality improvement initiatives on the basis
of facts and on the utilization of analytical thinking in determining ways to become more efficient
and effective

Operations Management in Small Businesses,Operational efficiency and effectiveness is one of

the predominant challenges facing the small business owner. Possessing, in many cases,
limited resources and expertise, small business owners often do not have the abilities or the
financial capabilities required to take full advantage of the technologies and practices available
to maximize the cost-effectiveness of their businesses. Also, lacking the depth and functional
expertise of full-time operations management professionals, small business owners must
generally seek to tackle the intricacies of operations management while attending to the broader
business issues (sales, finance, HR, and so on). A small, generally more transient employee
base also limits their ability and desire to commit significant financial resources into the training
and education of what are perceived to be non-critical business positions.

Small business owners should look to understand customer expectations and translate this into
processes designed to support customers at the key interaction touch points where the
business and customers connect. Small business owners should also think in terms of product
consistency, striving to deliver consistent experience with each customer interaction. A key
component of this process is to determine what skills are fundamentally required at the point of
customer contact and seek to ensure that employees are recruited, trained, and educated to
support this interaction. Small business owners should also take the time to plan their business
layout

Management Reflection—Operational Success,More and more organizations understand that

the battle to develop sustainable competitive advantages lies at the front end of the value chain.
The need for efficient and effective transformation processes and supply chains can, and will,
dramatically influence the ability of an organization to compete in today's global marketplace.

Operations management,Is the effective design, development, and management of the

processes, procedures and practices embedded within an organizations dedicated business
system for the purpose of achieving the strategic intent

Process Management,is the design and development of the work flow and connectivity of the
transformation requirements (processes) needed to ensure that an organization's products and
services are efficiently produced and effectively delivered to the marketplace.

Supply Chain Management,Is the management of the interdependencies among suppliers,

manufactures, and distributors; it seeks to develop the terms and conditions that will enable all
parties to efficiently and effectively meet their obligations to one another due to their business
relationships

Product/Service management,refers to the variety of activities that commence with the design
and development of potential new products in R&D and extend to the post-purchase support of
products/services now in the hands of customers.

Value Maximization,refers to maximizing the benefits (price/quality comparison) that an

individual or set of customers will realize as a result of using a product or service

primary activities,Relate to the specific activities through which the delve-men and
transformation of a product or service occurs as it is produced and delivered to the marketplace

inbound logistics,Refers to the management of supplier relationships relating to those parts

and/or components, or finished products, that are brought into the organizitookn in order to
procure finished products for delivery to the marketplace
outbound logistics,refers to getting the finished product to the customer via a distribution
channel that is accessible, convenient, and able to minimize stockouts and other sales
impediment factors.

Marketing and Sales,refers to those activities that create profile and awareness for the
organization's products, services, or brand(s), and the benefits derived from the acquisition and
use of such products or services.

support activities,Are those areas in thin the organization that are not directly associated with ht
actual processes the organizations uses to precut products and/or deliver services but are an
integral part of the support suture the primary activism rely on t successfully execute strategy

Operations cycle,the alignment of the operational tasks within an organization by its

management team in order to meet the strategic outcomes defined in the organization's
business strategy.

Process Standardization,is the design and utilization of common platforms and common task
sequencing to produce/develop a variety of products or services.

process simplification,Is the design and utilization of a minimum number of tasks when
developing products and/or services

PERT chart,Is a scheduling methodology that focuses on task sequencing and the identification
of the critical path of steps that will most greatly impact the ability to complete a project, and the
length of time needed for completion

Gantt chart,Is a methodology used to schedule the steps associated with a project and the time
required to complete each step

Materials Management,refers to the management of the inputs required in order to develop the
products or services that the organization is intent on delivering to the marketplace.

Facility Design and Layout,refers to infrastructure layout and related facility components that will
be required to house and support the processes and materials used by the organization.

Capital Asset Evaluation and Acquisition,refers to an assessment by the operations

management team of the state of current capital assets and a determination as to their
applicability to meeting the needs of the organization.

ISO (International Organization for Standardization),The largest standards-development body in

the world, comprising the national standards institutes of 162 countries.

The Fundamentals of Financial Analysis,The ability to analyze and draw conclusions regarding
the financial integrity of an organization is fundamental to understanding both its current
situation and the strategic and tactical planning decisions going forward. At its broadest level,
this analysis looks to draw conclusions across five key areas.

Revenue model

Cost structure and cost drivers

Margin requirements

Cash operating cycle

Capitalization requirements

Revenue model,When we think about the revenue model, we are focusing on how the
organization generates sales and, ultimately, the dollars that flow into its coffers through the
delivery of its products and/or services to the marketplace. In simple terms, it can be thought of
as the dollars generated as a result of the following equation:

Per Unit Selling Price X Quantity Sold =

Sales Revenue

Microsoft's revenue,Let's return to Microsoft to illustrate how market trends are impacting its
revenue model. A big part of Microsoft's revenue has historically been driven from sales of its
Windows operating system to PC manufacturers. In thinking about this aspect of its revenue
model and the revenue equation of Selling Price × Quantity Sold = Sales Revenue, we can see
that there are two potential factors that will impact whether revenue will grow or decline within
this operating division. First, a reduction in the demand for PCs that use the Windows operating
system will result in a potential decline in revenue. This is actually happening worldwide as unit
sales of desktops, laptops, and tablets have been on a downward trend since peaking in 2014.1
This reduction in quantity sold directly impacted Microsoft's overall sales performance, as
overall revenue was relatively stagnant from 2015 to 2018 given this drop in PC-related sales of
Windows and Office products, despite growth in its cloud and service divisions.2 The "selling
price" part of the equation can be used either to offset this reduction or further contribute to the
downward pressure on sales. If Microsoft is able to increase the price to PC manufacturers for
its Windows and Office software then it may be able to hold its revenue constant despite a
reduction in volume. If it is forced to keep price the same or lower then this will further impact its
revenue outcome. In this particular situation, Microsoft was able to adjust its ASP (average
selling price) upward a bit, thereby reducing the overall impact of the unit sales volume
reduction.

Cost Structure and Cost Drivers,addition to recognizing the costs incurred within each of these
areas, we also need to determine whether these costs are directly involved in the manufacturing
process (called direct or variable costs) or whether they are operational support costs (indirect,
fixed, or semi-fixed costs) that exist because we are in business, but that are not directly tied to
the creation of the product (in this case, our sensor). Figure 13.5 provides an easy formula for
analyzing an organization's cost base.

Variable versus Fixed Costs,As noted above, variable costs (also referred to as direct costs) are
those costs that are directly tied to the manufacturing of a product or the delivery of a service
depending on the type of business being assessed

the variable or direct costs associated with the manufacturing and distribution of these sensors
could include the following:

1. The cost of the components that are used in the sensor (memory chips, power supplies,
switches, relays, motion detectors, etc.)

2. The cost of the labour needed to manufacture and/or assemble each sensor

3. The cost of the packaging each sensor is shipped in

4. The shipping costs associated with delivering the sensors to the customer

Fixed costs,Fixed costs (also referred to as indirect costs) are those costs that, although not
directly tied to the manufacturing of a specific product or the delivery of a specified service,
nonetheless exist as a result of conducting our business and operating our company. Examples
of fixed or indirect costs—which a business must account for in its cost base and must,
therefore, ensure are incorporated into its pricing strategy—are insurance, utilities, interest
expense on debt, and administration costs. An additional uniqueness of fixed costs is that these
costs represent an expense that is, for the most part, uncontrollable in the near term.

Committed costs,Another type of indirect cost that should be assessed is called committed
costs. These are costs that the organization commits itself to within an operating year, and that
often are spent in advance or at the front end of a manufacturing/sales cycle.

Computing the Indirect Cost Base of an Organization,Fixed costs + committed current period
costs = an organizations indirect cost base

Understanding an organization's cost base is essential to determining the required pricing

strategy that will be utilized in marketing the product and its corresponding impact on profit.

Breakeven Point Analysis (BEP),The breakeven point (BEP) is the level of sales revenue or
volume required for the organization to cover all of its costs. It is most easily thought of as that
point where the total revenue of the organization equals its total costs, resulting in a profit of $0

Operating below the breakeven point means that the organization is operating in a loss position
and, therefore, would need to draw upon its cash reserves and/or access to external cash
resources (debt financing or equity financing) in order to assist in covering its expenses. If the
organization did not possess sufficient cash reserves, and did not have access to additional
cash from external sources, the end result could be insolvency and business closure. Operating
at breakeven point does mean that total costs are being covered. It also means, however, that
the organization is not making a profit.

Break even point,Total sales revenue - total costs (VC + FC) = $0 profit

The point where the revenue from the sales of the products (units) offered to the marketplace
equals the total costs (variable costs + fixed costs) associated with producing these products
(units) is the breakeven point,

2 step process of BEP,Step #1 is to estimate (within a degree of decision-making credibility) an

organization's costs, and determine the nature of these costs (variable or fixed costs).

Step #2 is to take this cost analysis and incorporate it into the breakeven point formula in order
to effectively calculate the BEP for the organization. Keep in mind, again, that BEP is that point
where total sales revenue equals total costs.

Calculating BEP in units,If costs are generally looked at on a per unit basis, as one would
usually find in manufacturing operations, then calculating BEP in units may be the easiest
approach. If costs are best understood as a percentage of sales revenue, then calculating BEP
in dollars makes the best sense.

Calculating BEP in dollars ($$$),In some situations, in servicing their customers companies
provide such a wide variety of products and services that it is unrealistic to compute BEP on a
per unit basis. In this situation, these organizations, based on their cost analysis process and
their business model, may be in a better position to compute BEP, initially, on the basis of total
sales revenue ($$$)

Margin Requirements,With respect to managing a company, margin is a term that relates to the
relationship between revenue and costs.

These margins are a key indicator of the overall operating efficiency of an organization. As
noted above, managers will look to set margin targets and then view actual results against these
targets. The ability to meet targeted expectations is an important part of the financial
management assessment process. Not only are results measured against current-year targets,
but they are also measured against prior-year performance in order to determine if the
organization has been more or less effective in the delivery of its goods and services into the
marketplace

cash operating cycle (COC),The cash operating cycle (COC), also known as the cash-to-cash
cycle, refers to the amount of time it takes for an organization to recover the cash (product is
sold and money is received) it has paid out for the development, production, and distribution of
products.

In general, the shorter the cash operating cycle, the more quickly the organization is getting
back the cash it has expended on producing its goods and services and, therefore, the less the
organization needs to rely on cash reserves or short-term debt financing to cover the
expenditures. An additional generalization associated with cash operating cycles is that the
longer it takes for a company to produce its products, move them into the market, have them
sold, and receive the revenue from them, the more expensive the cost of producing these
products will be.

Calculating cash operating cycle,To calculate an organization's COC, take the number of days a
product spends in production and in inventory (called DIO, or days inventory outstanding), add
to this the number of days it takes to receive money from the customer (called DSO, or days
sales outstanding), and subtract from this total the number of days you take to pay your
suppliers (called DPO, or days payable outstanding).

(COC) = DIO + DSO − DPO

Capitalization Requirements,This means that managers need to review the capital structure of
their organization and make decisions as to how the organization is going to finance its
operations and what will be the mixture of use of the different sources of funds it will have at its
disposal. A key component of this analysis will be to manage the debt/equity ratio (discussed in
more detail in Chapter 14), which provides managers with an understanding as to how much
debt the organization has incurred, or is willing to incur, in financing its operations, and whether
this has added significant negative risk to the or

ganization's financial stability.

Current-year operating profits,Current-year operating profits (or operating surplus, in the case of
not-for-profits) are the excess dollars that organizations have generated, and have at their
disposal, during the current operating period as a result of their business activities after their
current expense obligations have been paid. It can be best understood as total revenue minus
total operating expenses during a defined period of time (i.e., month, quarter, or year). The
organization's statement of comprehensive income (income statement), discussed in Chapter
14, which reflects operating results for this defined period of time, identifies the profit that the
organization has realized from its operations.

Retained earnings,Retained earnings represents the dollar amount of net earnings that an
organization has accumulated over the history of its operations, and that it has chosen to hold
within the organization (not pay out to investors/shareholders).

Credit facilities (debt financing),Credit facilities refers to debt that an organization has taken on
in support of its business activities. It represents the organization borrowing money or receiving
products or services on a credit basis from another organization or individual(s). Credit facility
arrangements provide the borrowing organization with access to money that it normally would
not have access to, under the stipulation that it will be paid back over a defined period of time,
or on a definitive date. The repayment terms may include an obligation to pay interest on the
money borrowed as well. Credit facilities are generally viewed as falling into one of two debt
categories: short-term credit facilities and long-term credit facilities

Short-term credit facilities,Short-term credit facilities refers to debt obligations that an

organization takes on for a short period of time, generally one year or less.

Trade credit, for example, is used when the organization orders products or receives services
from another organization but payment for these products or services is deferred until a later
date (e.g., "30 days to pay"). These are commonly referred to as the accounts payable of the
organization, and are found under the current liabilities section of the statement of changes in
financial condition (balance sheet), discussed in Chapter 14. Credit facilities relating to
borrowing against the future inflow of accounts receivable, or against a line of credit, relate
directly to the cash operating cycle and the managing of the cash flow needs of the
organization. A line of credit (LOC) is a credit facility that gives the organization immediate
access to a predetermined sum of money at a specified interest rate. Pre-approved through a
lending facility, the line of credit provides the organization with the ability to draw on this account
to meet frequent, short-term capital needs

Organizations with short-term borrowing requirements make use of this type of credit facility in
order to cover the cost of short-term projects, quarterly seasonal fluctuations in their business,
bridge financing for longer-term projects, or other definitive short-term borrowing needs. These
notes may be secured with collateral, or, assuming a strong credit rating on the part of the
company, could be lent without a formal collateral requirement (i.e., secured versus unsecured
notes).

Long-term credit facilities,Long-term credit facilities represent debt that an organization

obligates itself to repay over a time frame that exceeds one year in duration. As with short-term
credit facilities, these debt obligations may or may not include an interest expense obligation;
although, with long-term credit facilities, it is likely that such a cost of borrowing will apply.
Examples of some of the more common long-term credit facilities that organizations tend to
utilize in procuring borrowed capital for infusion into their operations are bonds, mortgages,
long-term notes, and lease obligations. The amount of cash required to build the capital asset
infrastructure needed to compete would be beyond the scope of many organizations if long-term
financing capabilities, through the use of credit facilities, were not part of their funding mix. The
costs, as an example, of the plant and facility investments required to build manufacturing
facilities in the automotive, aerospace, and technology sectors can run into the millions of
dollars. Long-term credit arrangements enable organizations to construct such facilities by
providing the needed dollars up front and then allowing the organizations to repay these debt
obligations over the useful lifespan of the capital assets that the debt has funded. For plant and
facility capital assets, this could be periods of 15, 20, or 25 years or more. Given the importance
of this source of funding, let's briefly look at some of the more common long-term credit facility
options used by organizations.

A bond,A bond (also referred to as a fixed-income security) is a credit facility by which an

organization (corporations, governments) borrows money for a stipulated period of time. In
return for the use of these funds, the organization promises to pay the holder of the bond an
agreed-upon amount of interest at regular intervals (generally semi-annually) during the period
of time for which the funds are borrowed. At the end of the stipulated period of time, the
organization borrowing the money agrees to repay the full amount borrowed (bond principal or
face value). A number of different types of bonds are available in the marketplace (treasury,
convertible, step-up, put bonds).

Although bonds are considered a credit facility (debt instrument), the purpose of a bond for
many organizations is to raise capital for the firm. The dollars raised from the issuance of a
bond are often used to provide an organization with the capital necessary to build infrastructure,
fund acquisitions, or provide new working capital to the organization for the purpose of
developing and growing the business.

Long-Term Notes,A long-term note refers to a credit facility under which an organization borrows
a stipulated amount of money, for a defined period of time (which exceeds one year), and with a
defined interest rate schedule (fixed or variable). Long-term notes are similar in their setup to
that of a mortgage (defined repayment terms), except that they are generally written for a
shorter time duration. Long-term notes can be underwritten either with or without a collateral
requirement (secured or unsecured).

Lease Obligations,Lease obligations that cover periods in excess of one year are considered
long-term debt obligations of an organization. Lease obligations represent a legal obligation to
pay a service provider with an agreed-upon amount of money, via a defined periodic payment
schedule over an identified period, in return for the use of property, equipment, or some other
service.

Leasing enables the organization to minimize the upfront cash outlay for equipment and other
assets, and ensures that the organization stays current with the latest technology.

Equity financing options,The third way in which an organization can raise capital is through the
procurement of equity financing. Depending on its legal structure (sole proprietorship,
partnership, corporation), an organization will have access to private equity and/or public equity
funding options

Equity Options,Private equity:

- owners personal financial resources
- angel investors
- private equity firms
- venture capitalists

Public equity
- capitals raised via an IPO
- capital raises via an APO or secondary offering

Private equity,Private equity is equity capital (money) that is obtained by an organization from
private sources (not through one of the public exchanges). Examples of private equity include
the equity contribution to the business by the owner(s), family, friends, or some other initial
backer (commonly referred to as an angel investor), private-equity firms, or venture capitalists.

Private-equity investments can be either a direct monetary investment into the company (for
sole proprietorships and partnerships) or monetary investments as a result of the issuance
(sale) of stock (for corporations)

Public equity,Public equity refers to equity investments in an organization by investors as a

result of the purchase of publicly traded shares (stock) due to an initial public offering (IPO) or
an additional public offering (APO), also referred to as a secondary offering. Proceeds from the
sale of these shares are often used to provide the necessary capital to assist in the expansion
of the business, build and/or update asset and infrastructure requirements critical to operation of
the business, pay down or eliminate debt, or provide additional working capital in support of the
business operation (see the Business in Action feature "What Is an IPO?"). Public-equity
investment opportunities are limited to corporations.

Public-Equity Offering: Cash Flow,First, a company receives the proceeds from the sale of stock
only at the time of its initial issue and sale. After that, the trading (selling) of shares that occurs
in the marketplace is between the owners of the stock (sellers) and the new purchasers

Second, in considering an APO or secondary share offering managers must weigh the impact
on the current share value of the organization's stock in the marketplace. Issuing additional
shares of stock can result in price dilution, which means that the price of existing shares of stock
will decline due to the fact that a larger number of shares (which represent ownership in the
company) now exist.

Summary: Sources of Funds Advantages,Advantages;

No external funding source is required
No dilution of ownership occurs
No fixed repayment schedule
No interest payments
No dilution of ownership occurs
Can provide large inflows of capital now, with payments spread out over long periods of time
Enables the organization to use someone else's money to fund organizational needs
Interest expense is considered to be an operational expense
Enables the organization to raise cash without the leverage concerns associated with debt
financing
No repayment obligations
External funding source—does not place pressure on operations to fund organization's needs

Summary: Sources of Funds Disadvantages,Monies available may not meet the full needs of
the organization
Uncertainty may exist as to the amount of money available now and in the future
Monies needed internally cannot be distributed to owners as a return on their investment
Requires full repayment, either on a periodic or lump sum basis
Obligations must be met, regardless of the financial condition of the organization
A cost of borrowing is incurred
Collateral is usually required—may restrict future asset use
ilutes ownership
If publicly traded—control lies with the owner of a majority of shares (51%)
Short-termism—management decisions may be impacted by shareholder investment needs

A Note Pertaining to Not-for-Profits,Although similar to for-profit organizations in many ways,

one of the key fundamental differences between not-for-profit (NFP) organizations and for-profit
organizations lies in their capital structure. For-profit business organizations, as has been
illustrated within this chapter, have essentially three sources of capital funding: (1) cash
available from internal operations (current profit and retained earnings), (2) the use of debt
financing via a variety of credit facility options, and (3) equity investments (private or public) that
are acquired in exchange for an ownership stake in the for-profit business. Not-for-profit
organizations can utilize cash available from internal operations, as well as debt financing via
credit facility options.

The concept of philanthropy and the ability to accept donations—and, if registered charities,
issue donation tax receipts to their donors—represents a core fundamental source of capital for
many NFPs

Using BEP to Understand Profit Objectives,Having said this, investors, shareholders, and
management teams are not in business to break even. Expectations are that organizations will
strive to achieve a defined level of profit in a given year, as well as ongoing profitability.

Managers should not assume that the optimal price point is the only price point that can be used
for a product as it enters the market. Often times, the optimal price point may simply be too rich
for the market to accept, and/or may not be in keeping with the overall brand and pricing
strategy of the company. It is meant to simply be one element of a full pricing discussion and
plan. Trade-offs will have to be made. In some cases, the introductory price will need to be set
low to stimulate interest and demand. In other cases, it will need to be set high in order to
recapture the significant development costs associated with the product.
price skimming strategy,If not cost-related, the price differential could be the desire of one of the
organizations to take a price discounting approach to drive market share or increase volume, or
a price skimming approach, where the emphasis is on maximizing the profit margin on each of
the units sold. This would be reflected in the profit margin objective attached to a particular
product or service (see Figure 13.25). To further complicate the pricing process, some retailers
may choose to incorporate psychological pricing (i.e., pricing at $33.99 versus $34.00) into their
final price position, adjust prices for seasonality, provide rebates, coupons, or price reductions
via temporary sales promotions, or offer customers quantity discounts should they buy certain
amounts of the product.

Rebates,Are a temporary price reduction offered on a product or service in order to stimulate

sales. Rebates can be offered s the point of sale or on a deferred basis

psychological pricing,is the practice of setting prices slightly lower than rounded numbers, in the
belief that customers do not round up these prices, and so will treat them as lower prices than
they really are.

Price skimming,Refers to the utilization of a premium price strategy in order to maximize the
margin return on the sale of each individual unit of a particular products

Price discounting,reduction in the price of the product with the intent to stimulate the sale of the
product over a defined period of time

Sales Revenue,= per unit selling price x quality sold

variable costs,Are those costs that are directly tied to the manufacturing of a product or the
delivery of a service depending on the type of business being assessed

fixed costs,Although not directly tied to the manufacturing of a specific product or the delivery of
a specific iced service, nonetheless exists as a result of conducting our business and operating
our company

margin,Represents the portion of an organizations revenue that is left over after paying for an
identified level of costs

Cash Operating Cycle (COC),refers to the amount of time it takes for an organization to recover
the cash (product is sold and money is received) it has paid out for the development,
production, and distribution of products.

Capital Structure,Refers to an organizations mixture (use) of debt, internal cask revenues, and
external equity-based investments in financial support of operational activities

operating profit,Sales revenue - cost of sales - operating expenses

retained earnings,Refers to the dollar amount of net earnings accumulate over the history of an
organist on that it has chosen to hold within the organization

credit facilities,Describe the variety of loans that could be offered to a business or a country

Short-Term Credit Facilities,Refers to debt obligations that an organization takes on for a short
period of time, generally less than one year

Accounts Payable,Refers to money owed by an organization to its supplies and other short-term
service providers

line of credit,Refers to an arrangement with a lending institution that provides an organizations

with a pre-arranged borrowing ceiling (maximum) that the organziiton can draw on at any tie,
and in any amount, up to he agreed upon limit

Collateral,Is an asset that an individual pledge as security towards a credit facility (loan); the
individual agrees to forfeit the collateral in the event of an inability to repay the loan

Long term credit facilities,Represent debt that an organization obligates itself to repay over a
time frame that exceeds one year

cost of borrowing,Refers to the total sum of money over and above the principal borrowed paid
by an organizations as a rule of incurring and repaying a debt obligation. Thus include interest
paid as well as costs incurred In setting up the credit facility

Bond,Refers to a credit facility with which an organization borrows money for stipulated period
of time. In return for the use of these funds, the organization promises to pay the holder of the
bond an agreed-upon amount of interest at regular intervals (generally, semi annually) during
the period of the time which the funds were borrowed

mortagage,Refers to a credit facility thats backed by the real estate collateral, and that's sets
forth as defined schedule of periodic payments for the full repayment of the debt owed, p;s
interest, over a defined period of time

long-term notes,Refers to a credit facility under which an organization borrowed as stipulated

amount of money for a defined period of time (which exceeds one year), and with a defined
interest rate schedule (fixed or variable)

Lease Obligations,Represent a legal obligation to pay a service provider with an agreed-upon

amount of money via a defined periodic payment schedule over an identified period, in return for
the use of property, equipment, or some other service

Debt Leverage,Refers to the use of debt to finance an organization's capital asset base
Private Equity,Refers to equity capital that is obtained by an organization from private sources

Stock,Is a security that represents a percentage of ownership in as corporations assets, and

entitlement to a pro-rata claim on earning when released

Public Equity,refers to equity investments in an organization, by investors, as a result of the

purchase of publicly traded shares (stock) due to an initial public offering (IPO) or an additional
public offering (APO), also referred to as a secondary offering.

Secondary Offering,Any public sale of securities by a company after the initial public offering

Price Dilution,Means that the price of existing shares of stock will decline due to the fact that a
larger number of shares (which represent ownership in the company) now exist

Market capitalization value,refers to the current market value of an organization. It is calculated

by taking the number of shares outstanding multiplied by the current value of its shares.

Stock exchanges,Is an exchange that provide a variety of service to investors, brokers, and
traders, in support of the trading stocks and other investment-related products ad service

Philanthropy,Refers to the receipt of funds form anyone person organization for the purpose of
using them to enhance the well-being of others

Two Fundamental Types of Business Transactions,These statements provide vital information to

managers regarding an organization's current liquidity and solvency position, as well as its
overall financial capacity to respond to opportunities and challenges that the organization may
face in the near term.

Operational transactions,Operational transactions represent the flow of money within the

organization that is directly related to day-to-day business dealings. Revenue (generated as a
result of selling goods and/or services) and reoccurring expenses relating to the manufacturing,
distribution, and selling of such goods or services are primary examples of operational
transactions. Capital asset transactions are decisions that managers make with respect to
investment and divestment of capital assets (buildings, equipment, business subsidiaries) that
may be needed, or are no longer needed, as part of the organization's business system

Liquidity, Solvency, Efficiency, and Capacity,An important responsibility for managers in

conducting a financial analysis of their organization is to draw conclusions about the current and
future liquidity and solvency of the organization

Three Primary Financial Statements,Statement of Comprehensive Income

A Statement of Comprehensive Income is the financial statement that responds to the question
of whether our business is earning a profit as a result of the sales we have made versus the
expenses we have incurred in developing our goods and services and delivering them to the
marketplace. This statement, which reflects a specific period of time (year, quarter, month),
identifies the revenue we have received and then subtracts the expenses the business has
incurred in generating such revenue.

Simplified Statement of Comprehensive Income,Sales Revenue: Reflects the dollar ($$$)

amount that the organization has received as a result of selling its products and/or services.
Revenue can be typically thought of as the sales that a company has made (less product or
merchandise returns), and can be further broken down into the number of units an organization
has sold multiplied by its selling price.

Cost of Goods Sold: Are the expenses that are directly incurred in the manufacturing of a
product or the delivery of a service. As an example, if an organization were in the business of
manufacturing and selling laptop computers, the cost of goods sold (product costs) involved
would be the cost of the components used to build the laptop, the labour associated with
assembling the laptop, and the packaging and delivery charges incurred to ship the laptop to the
customer.

Gross Profit Margin: Is the difference between the total revenue that an organization receives
and the direct expenses it incurs. Gross profit margin represents the amount of money left over
from the sale of the organization's products and/or services, which can then be used to cover
other business expenses and meet profit objectives.

General Operating Expenses: Are indirect expenses that an organization incurs and that must
be paid from an organization's gross profit margin. General operating expenses include
administrative expenses, general marketing expenses, and operational overhead (utilities,
insurance, lease costs, maintenance costs, R&D costs, depreciation, etc.).

EBIT (Earnings Before Interest and Taxes): Is determined by subtracting general operating
expenses from gross profit margin.

Interest Expense: Is the interest payments that the organization is obligated to pay during a
specified period on the debt that the organization has undertaken in order to finance its
operations.

EBT (Earnings Before Taxes): Is the amount of earnings the operation has produced prior to
recognizing its federal and provincial income tax obligations.

Net Profit or Loss: Represents the firm's profit or loss from the sale of its products and/or
services to its customers. This dollar amount is typically referred to as net income or net loss.
Statement of Changes in Financial Position,The Statement of Changes in Financial Position is a
financial statement that provides managers with an understanding of the resources the
organization has at its disposal at a given point in time, and the financial obligations the
business has incurred as a result of purchasing these resources.

Assets = Liabilities + Owners Equity

The Statement of Changes in Financial Position,Summarizes organizations final nations;

position in terms of assets, liabilities and owners equity

Is a snapshot of the organizations position at a specific point in time

Provides a good barometer of an organizations capacity an liquidity

Assets,Assets represent the resources that the organization has at its disposal and that it can
utilize in the generation of business activity and, ultimately, profit. Assets can be classified as
either "current" or "non-current." Current assets are resources that organizations can convert to
cash and/or consume, usually within a short period of time (i.e., one year or less). Examples of
current assets are cash, marketable securities, accounts receivable, and inventory.

Liabilities,Liabilities are the debts or financial obligations that an organization has incurred as a
result of conducting its business. As with the asset section of the statement of changes in
financial position, the liability section typically separates such debts or financial obligations into
those that are coming due in the short term (current liabilities) and those that extend into the
future (long-term liabilities). A standard rule for current liabilities is that they are obligations the
organization will need to pay within the current business year. Examples of current liabilities are
accounts payable, trades payable, and short-term debt (such as a 90-day loan). Long-term
liabilities are obligations that extend out beyond a one-year period. Examples of long-term
liabilities are a 5- or 10-year loan, a mortgage on a building, or an obligation such as a 10-year
bond

Owners' equity (or shareholders' equity),Owners' equity (Figure 14.10) represents the value of
capital received from the owners of the business that is used to fund the start-up or ongoing
operations of the business, plus the value of the organization's retained earnings. Generally,
companies will retain a portion or all of their current-year profits in order to fund future growth
opportunities, buy new equipment, purchase new buildings, develop new products, or to hold in
reserve to cover unforeseen contingencies. Retained earnings equals the profits generated
since the inception of the company's operations, less all dividends paid since inception. An easy
equation to help us remember the composition of owners' equity (also called shareholders'
equity) is the following:

Owners Equity =
Owners' Capital Invested + Retained Earnings
Going back to our statement of changes in financial position accounting equation, Assets =
Liabilities + Owners' Equity, we can see that, given the composition of the statement of changes
in financial position, the following additional conclusions can be reached:

Liabilities = Assets − Owners' Equity

Owners Equity = Assets − Liabilities

Statement of Cash Flows,The statement of comprehensive income, as noted previously,

provides us with a good understanding of the operational transactions that an organization
incurs in its drive to create profitable growth. It must be understood, however, that organizations
generate cash inflows and cash outflows beyond operational transactions. The purchase or
construction of a building, the selling of additional shares of stock, and repayments of principal
on loans are all examples of transactions that deal with the organization's capital assets. These
transactions, which require monetary support in the same manner as those expenses being
incurred on a statement of comprehensive income, also must be recognized within the
managerial decision-making process.

This is, in essence, the role of the Statement of Cash Flows. While the statement of
comprehensive income provides insight into the operational transactions that are occurring
within an organization, the statement of cash flows provides managers with a full understanding
of the total movement of cash (from all sources) into and out of the business. Given this, many
managers and analysts consider the statement of cash flows to be the best source of
information relating to an organization's liquidity situation

,The $10-million 10-year bond now showing under the liabilities section of the statement of
changes in financial position was issued in the current year.

The $10 million in "construction in progress" showing under the asset section of the statement of
changes in financial position was spent in the current year.

The taxes shown as being owed on the statement of comprehensive income are deferred until
the next period, and therefore do not actually have to be paid at this time.

Other non-cash items (such as changes to the levels of accounts payable and accounts
receivable) netted out to be $100 000.

CAA Tronics Inc. repurchased 100 000 shares of company stock at $20 per share.

Principal repayment on the 5-year note and 20-year mortgage was $1 300 000.
Simplified Statement of Cash Flows,Net results from the income statement + net results from
cash form operational activities + net results from cash form investing activities ( adding back of
non-cash items, such ads depreciation, deferred taxes, ad changes in AR and AP levels.) + net
results from cash from investing activities ( funds shed to purchase capitals assets. Funds
received from the sale of capital assets) + net results for Micah financing activities ( funds
revived form their issuance of shares or debt. Funds used to repay debt, repurchase share and
pay dividends) = changes of cash position

Wha is product quality,- fitnes for use or purpose

- to do a right thing the first I've
- to do a right thing at the right time
- feature meet customer needs
- no deficiencies or defected
- conformance to standards
- value or worthiness for money

Ratio Analysis,Ratio analysis is a primary tool that managers use to assess the financial health
of an organization. Ratios seek to define the relationship between critical components of
information found on the financial statements. Ratio analysis is really a driver for the
development of questions to which the management team will seek additional information in
order to effectively manage the organization.

Recognizing that ratio analysis can extend into a variety of analytical areas, managers
fundamentally utilize ratio analysis to get a feel for the operational efficiency of the organization
in four fundamental areas:

1. Profitability

2. Solvency and liquidity

3. Debt

4. Activity

Profitability ratios,Profitability ratios Profitability ratios focus on assessing the amount of income
the organization has earned in comparison to the operating activity that has taken place and the
assets that have been used to support its income generation. Ideally, an organization will want
to be as efficient as possible given the resources expended and the activities that have taken
place

1. Return on sales

2. Return on assets
3. Return on equity

4. Earnings per share

Solvency and liquidity ratios,Managers need to understand the amount of cash that will be
required to meet their operating needs and financial obligations. Solvency and liquidity ratios
assist in doing just this. By comparing financial obligations with the financial resources that an
organization has, managers can determine whether the organization possesses sufficient capital
resources to meet its upcoming needs.

Common solvency and liquidity ratios used by managers include:

1. Current ratio

2. Quick ratio

3. Solvency ratio

Debt ratios,Debt ratios Debt ratios focus on the amount of debt an organization has taken on,
the relationship of this debt value to its total asset base, and the ability of the organization to
meet its debt servicing (payments) obligations. Three common debt ratios used by managers
are:

Debt to asset ratio

Debt to equity ratio

Times interest earned ratio

Activity ratios,Activity ratios Activity ratios assist managers in assessing the efficiency and
effectiveness of key components of an organization's operations. By computing these ratios,
managers can get a sense as to how effectively the organization is utilizing its asset base,
whether changes in cash flow into and out of the organization could be negatively impacting its
cash operating cycle, and how well capital is being utilized in support of the organization's
strategic and tactical decisions.

A Note Pertaining to Not-for-Profits

So, how do these organizations generate the dollars needed to sustain their charitable and
community-based mission?,The answer lies in the receiving of grants, government subsidies,
and private donations. For many NFPs, the ability to raise money via events, annual campaigns,
capital (building) campaigns, and so on is an important part of their business strategy
Restricted funds are funds that have been designated for specific purposes. Although they may
appear as a line item in the asset section of the statement of changes in financial position,
managers have to be careful—for example, when computing ratios (such as the current
ratio)—that such funds are not viewed as part of the organization's current asset base. This is
because, although the organization has this money, it does not have the ability to use these
dollars in the same way that a for-profit organization can manage its cash, near cash, and
current asset base. In the NFP setting, the focus of the analysis is on what is termed "free and
clear" available money. Simply put, this can be determined by taking the cash and near-cash
assets of the NFP and subtracting any designated restricted assets (cash and near cash) in
order to determine the true surplus funds available to management for the purpose of
responding to the working capital needs of the NFP organization

Management Reflection—Keeping Your Finger on the Pulse of the Organization,The statement

of comprehensive income provides us with crucial information regarding the operation. The
statement of changes in financial position provides us with an understanding of the depth and
strength of an organization's current financial capabilities, and the statement of cash flows
enables us to sense whether the organization is generating or using cash, given its operations
and capital asset transactions.

Return on Sales (ROS),Return on Sales (ROS) The return on sales ratio identifies to managers
the percentage of sales the company has generated that actually represent profit (net income)
for the business.

Return on sales = Net income / Net sales

Return on Assets (ROA),Return on Assets (ROA) The return on assets ratio identifies the
relationship of net income to the total asset base of the organization. This ratio reflects how
productive the deployment of these assets was in producing income for the organization. ROA
is calculated as follows:

Return on assets = Net income / total assets

Return on Equity (ROE),Return on Equity (ROE) The return on equity ratio (ROE) computes the
amount of net income that was earned on each dollar of invested capital provided by the
business's owners (shareholders). This ratio is computed as follows:

Return on equity = net income/ total equity

Earnings per Share (EPS),Earnings per Share (EPS) This ratio is calculated for corporations
where shares have been issued and investors are looking to see what the return on their
investment is for each share purchased. The earnings per share ratio reflects the return that
individual investors would recognize for each share of stock that they owned. It should be noted
that this does not mean that shareholders would actually receive this money, as the organization
may not pay these dollars out but will most likely keep them in order to fund future capital
needs.

Earnings per share = net income / # of shares

Current ratio,One of the most popular ratios used in measuring the solvency and liquidity
position of an organization is the current ratio. This ratio shows the relationship between an
organization's current assets and its current liabilities. Remember that current assets are those
assets that represent cash, near cash, or items that can be converted to cash in the short term
(usually within the current operating period). Current liabilities are the financial obligations the
organization must meet in the short term.

Current ratio = current assets / current liabilities

What this means to CAA Tronics Inc.'s management team is that the organization has $2.22 in
current assets for each $1.00 it has in current liabilities. For the management team, there is
comfort in knowing that the organization has sufficient cash and near-cash resources to meet its
current financial obligations. It should be noted, however, that what is an acceptable current
ratio will vary by industry and by the length of an organization's business cycle (the length of
time it takes to develop, manufacture, distribute, and sell its products/services). In some
industries, a current ratio of 1:1 may be acceptable, while in others a much higher current ratio
may be required. Maintaining a strong current ratio is a best practice for keeping an organization
solvent and for meeting its liquidity needs.

Quick Ratio,Quick Ratio The quick ratio (also known as the acid test ratio) is a valuable ratio to
use when an organization is really concerned about its current liquidity position. The quick ratio
looks to remove from the current ratio calculation those assets that are not so easily converted
into cash immediately and therefore would take time to generate cash from in the event of a
need for immediate cash resources.

Solvency Ratio,Solvency Ratio The solvency ratio is designed to assess the ability of an
organization to meet its long-term financial obligations. This ratio takes an organization's net
income, adds back depreciation (which is a non-cash transaction, and is found on the statement
of comprehensive income

Solvency ratio = net income + depreciation / total liabilities

Debt to Asset Ratio,Debt to Asset Ratio The debt to asset ratio assesses the relationship
between the value of the debt that has been taken on by an organization and the value of its
total assets. This lets managers and analysts know how much of the asset base of the
organization has been created via debt financing

Debt to asset ratio= total liabilities/ total assets

The ratio, in essence, lets managers and analysts know if the organization is generating
sufficient profit to meet its interest expense obligations. The times interest earned ratio is
computed as follows:

Time Interest Earned Ratio =

Debt equity raito,Debt equity ratio = total liabilities/ total equity

Inventory Turnover,Inventory Turnover The ability of a company to turn its inventory into cash is
an important activity ratio to measure. Inventory represents products that have been paid for
(either purchased as a finished good or manufactured) but have yet to be sold by the company
and converted into sales revenue. The longer the inventory remains unsold, the greater the
concern that the company will not be able to get its full selling price for it. Also, the longer it
remains unsold, the greater the strain it places on the organization's cash flow.

What us operations,Input—> process—> output

The organizations value chain,Describes the full range of activities needed to create a product
or service
- they are two kinds: primary and secondary
- support activities:
- the it dpea

Gross profit margin,Is the portion of an organization revenue that is left over after the
organization has paid direct costs ( wages, components, materials, etc.) associated with its
products or service

Profitability Margin,is the portion of an organization's revenue that is left after all operating
expenses associated with its products or services have been paid.

Operational transaction,Represents the flow of money within the organization they is directly
related to day-to-day business dealings

Capital Asset Transactions,are the decisions managers make with respect to investment and
divestment of capital assets (buildings, equipment, business subsidiaries) that may be needed,
or are no longer needed, as part of the organization's business system.

Statement of Comprehensive Income,Is the financial Save me that response to the question of
whether our business is earning a profit as a result of the sales we have made versus the
expenses we have incurred in developing our good an service and delivering them to the
marketplace
Net Change in Cash Position,refers to the net movement in the cash position of the organization
based on operating, financing, and investing activities.

Ratios,Seek to define the relationship between critical components of information found on the
financial statements

Profitability Ratios,Focus on assessing the amount of income the organization has earned in
coats on to the operating activity that has taken places and the assets that have been sued to
support its generations

Solvency and Liquidity Ratios,Analyze the financial obligations that an organization has against
its financial resources in order to determine whether the organization possesses sufficient
capital to meet its upcoming needs

Debt ratios,Focus on the amount of debt an organization has taken on, the relationship of this
debt value against its total asset base, and the ability of the organization to meet its debt
servicing

Activity ratios,Assist managers in assessing the efficiency and effectiveness of key components
of an organization's operations.

Leverage,Refers to the amount of debt an organization used in order to finance its asset base

Forecasting and Budgeting,Refers to management's ability to project forward anticipated results

for the upcoming quarter, year, or planning-cycle period

Designated Restricted Assets,Are assets that have been earmarked for a specific purpose and
that are not available for managers to support organizational operating needs

Analyzing Business Ventures,One of the most important skills a manager or entrepreneur can
learn is how to analyze a business venture. Whether it is a new business opportunity or the
expansion of an existing business's market space, the ability to assess the financial, operations,
and market risk associated with such a venture is critical to the overall evaluation process.
Recognizing that some level of risk will always exist, the analytical process associated with
business ventures can be best thought of as a methodology for recognizing the degree of risk a
potential business opportunity faces, and then, given this risk, assigning a "go or no go" to the
project.

Six phases associated with venture analysis,1. Market analysis

2. Value analysis

3. Financial analysis
4. Operations analysis

5. Management competency analysis

6. Contingency plans or exit options

What are fatal flaws?,Examples of fatal flaws can be inadequate pricing models,
undercapitalization, weak management competencies, insufficient marketing research initiatives,
poor understanding of industry configuration and market segmentation, or the absence of a
well-focused execution strategy (see Figure 15.3).1 Identifying and understanding such fatal
flaws enables managers to determine whether such barriers can be overcome and whether the
risk associated with these barriers results in too much uncertainty to move forward with the
venture.

Fatal Flaw Analysis,- Inadequate Pricing

- Under-Capitalization
- Weak Management Competencies
- Insufficient Marketing Research
- Poor Industry Assessment
- Absence of Well-Focused Execution Strategy

Market Analysis,Market analysis is all about assessing the legitimacy of the perceived
opportunity that the manager or entrepreneur sees for the organization. To legitimize this
opportunity, we need to assess it in four ways (see Figure 15.5). First, we need to analyze the
current market environment. Is it the right time to enter into the market? Is the market's direction
clear enough to ensure the sustainability of the venture, particularly in the early stages? Does
our PESTEL analysis reveal any significant barriers or concerns that could impact our ability to
succeed? Second, we need to look at the market sector or industry within which we will be
competing. An assessment via Porter's Five Forces, coupled with a solid company-focused
SWOT analysis and well-researched competitive analysis, should enable us to sense the overall
future growth potential of the industry, and enable us to draw conclusions as to our overall
company strength in comparison to that of our competitors.

Value Analysis,Although identified as a separate phase, the value analysis phase is closely
integrated with the market analysis phase. In fact, the value analysis is really about fully
understanding "market fit" and validating that we do have a definitive competitive advantage or
uniqueness around which we can develop a positioning campaign.

What are the three conclusions of the value analysis?,Does the business plan demonstrate that
we can create a customer habit of purchasing our product and/or service?

Does the business plan demonstrate that we can build an association with our targeted
customer base and that our product and/or service provides a credible solution to their needs?
Does the business plan demonstrate that we can get customers to care more about our
products and/or services than those of our competitors?

litmus test,An examination of the political ideology of a nominated judge

Value Proposition: What is it? What makes it unique? Where is the value?

Target Market: Who is the primary target market? What does the target market look like? Do we
understand the connection between the target market and the value proposition?

Customer Profile: How does the customer behave? Are there any unique characteristics we can
leverage?

Key Decision Criteria: Why does this customer buy? Where is the decision-making weight
placed? Is the value proposition properly aligned to this?

Target Message Development: What do we plan to say to catch and hold this customer's
attention?

Communication Delivery: What is the plan for reaching the customer? Does this fit with the
customer profile?

Demand and revenue model assessment,Keep in mind that for new ventures, particularly new
start-ups, demand begins at zero. The strategy for demand creation, therefore, forms a key part
of the assessment of the revenue model, as without demand there is no revenue.

Revenue Analysis,Revenue analysis focuses on the number of potential revenue streams the
organization is adding, the sources of revenue within each stream, the initial size of these
revenue streams, the growth potential of this revenue looking forward, the interdependency of
this new revenue source on existing revenue sources (if they exist), and the price pressure that
can be anticipated on the revenue streams identified (see Figure 15.8). In essence, we are
trying to determine, with an acceptable degree of credibility, the initial demand and
corresponding revenue inflow anticipated, its projected growth, and external forces that may
impact such growth potential.

Key Financial Assessment Risk Factors,1. Revenue:

# of streams
Source(s)
Size of each stream
Growth potential of each stream
Interdependency of each stream
Price pressure on each stream

2. Cost Drivers
Structure—fixed, semi-fixed, committed, and variable
Type—reoccurring vs. nonreoccurring
Key cost centres
Degree of control and market volatility
Source of competitive advantage
Built-in expense creep within each cost

3. Benchmark Requirements
Point of positive cash flow
Breakeven point
GPM (gross profit margin) requirement and target
OM (operating margin) requirement and target
PM (profit margin) requirement and target

4. Cash Flow Projections

Timing and size of cash inflows and outflows
Identify key impact factors on cash flow
Define the range of movement available prior to liquidity impact
Determine the cash reserve required to fund the COC

5. Capitalization Well
Total investment size
Maximum financing needs
Depth of private- equity support
Free cash reserve availability

Cost structure and key driver assessment,A number of key factors need to be reviewed by
managers and entrepreneurs when assessing an organization's cost base. These factors are as
follows:

1. What does the overall cost structure look like? What is the relationship (to revenue) of
product costs and operating expenses? What are the key cost centres that will ultimately drive a
large percentage of the organization's cost base?

2. What costs are anticipated to be reoccurring versus those felt to be non-reoccurring?

3. What type of built-in expense creep do we anticipate within these cost areas?

4. Will market volatility, such as commodities, impact our expense lines? If so, by how much?

5. Do we feel that our cost base, as it is estimated, yields a competitive advantage?

Assessing Benchmark Requirements,Two key benchmarks are understanding the point at which
the organization becomes cash flow positive, and where the initial estimated breakeven point is
anticipated to be. "Cash flow positive" is that point where cash inflows finally exceed cash
outflows for the organization. This is an important first step in defining how long a new venture's
burn rate will last. As long as cash outflows exceed cash inflows, additional capital will be
needed to offset the burn rate occurring. Breakeven point, as defined in Chapter 13, is that point
in time where total revenue = total expenses and, therefore, profit = $0.

Defining the capitalization well,In addition to assessing the financial potential of the business,
once it is operating we also need to assess the magnitude of capital asset investment and other
pre-launch costs, often referred to as start-up costs, required to launch the new business
venture and/or a new product line.

To truly understand the magnitude of the total capital needed to launch and support a new
business venture or product (start-up costs and initial operational costs), managers and
entrepreneurs are advised to make use of a business model called the capitalization well. The
idea behind the capitalization well (see Figure 15.9) is to provide a framework by which
managers and entrepreneurs can assess the full capital requirements that will be needed to
ensure the successful capitalization of a business venture. By doing so, managers and
entrepreneurs can minimize one of the primary reasons for new venture failures, that being
undercapitalization. Fully understanding the capitalization requirements of the organization also
results in a much better outcome pertaining to "go and no go" decisions at the outset of a
venture assessment process versus dealing with significant and unanticipated cash burns and
cash deficiencies once a business or product launch is underway.

In assessing business plans and new ventures,In assessing business plans and new ventures,
managers and entrepreneurs need to define and understand three key fundamental points
relating to the capitalization well:

1. What is the depth of the capital burn—in other words, how much money will we truly need?

2. What is the length of the capital burn—how long will it take to get to cash flow positive and
then breakeven point?

3. What is the potential revenue that we believe can be realized? Will this enable us to achieve
profitability and long-term business stability, return the investment made in the business, and
contribute positively to stakeholder wealth?

Operations Analysis,Often overlooked in light of the emphasis on market analysis and financial
assessment, a key analytical area in determining whether a business venture will be successful
lies in a firm understanding of the infrastructure, equipment, and value chain flow that will be
needed to effectively execute the business plan and the accompanying business strategy. A
well-developed business plan will demonstrate just how the business and/or its products and
services will be developed, communicated, and connected to customers. Think of this as a
business schematic that details the framework around which the business plan will be executed.
This would entail a full value chain development plan (see Figure 15.11). A business plan and
the business venture assessment processes look at the legitimacy of an operation as well as
the efficiency and effectiveness associated with it.

Contingency Plans or Exit Options,Contingency plans or exit options refer to whether or not
there is an intended back-up plan for the business and, if so, what type of conditions would
trigger such a strategy. In some cases, contingency plans or exit options can be thought of as a
"plan B" to be taken where anticipated revenue growth does not materialize. In other cases, as
in an exit plan, options can be a formal intent of the entrepreneur to exit a business or venture
via a planned sale of the business once a certain sales volume or level of profitability is
achieved.

Reality Check—The Perils of Starting a New Business,Working long hours, the feeling of
isolation, loneliness, poor diet, lack of sleep, and fear of failure have been acknowledged as
common elements of an entrepreneur's life, particularly at the front end of a business start-up.
Add to this the potential for bad investment advice, misreading the market in terms of demand
and/or timing, the need to appease impatient investors, and the need to constantly sell, sell, sell,
even when things don't seem to be clicking, and even the most mentally strong individuals can
be challenged. Periods of depression, coupled with analysis/paralysis on what to do or where to
go next, can add unimaginable levels of stress to individuals and their family life. Essential to
managing this is the ability to find balance in one's life and to set limits around what is
realistically possible.

Acquiring an Existing Business,In many cases, the idea of developing a new business
opportunity from the ground up (organic growth) represents significantly greater risk than a
company or individual is willing to take on. This may be the result of an immediate need to gain
access to a particular market, the length of time it may take to develop the competencies and/or
capabilities internally to successfully compete, concerns over heightened competition and its
potential for deteriorating margins and profitability, or the long-term capital commitment required
to generate the scale needed to ensure profitability and sustainability. The alternative to growing
organically is to consider the acquisition of an existing business that offers the entrepreneur
and/or a company immediate access to a currently operating entity and, therefore, access to a
desired market and an established customer base. Just as success in the start-up of a new
business or business line is predicated on an organized and thorough assessment of a
proposed business plan, so too is the case for acquiring a company.

acquisition process,This entails identifying the potential target for acquisition, determining a
price to offer for the company or operation to be purchased, arranging the financing for the
acquisition, and then integrating the acquisition into the business portfolio.

1. Identify the target

2. Assess the fit
3. Determine a price (valuation)
4. Make the purchase
5. Integrate the operation

Acquisition process; Identify the Target,Identify the Target refers to conducting a search as to
potential candidates for acquisition. Once found, preliminary negotiations will need to take place
to determine whether the acquiring company should proceed with a formal "fit" analysis.

Acquisition process: Assess the Fit,Key focal points of this analysis will be to determine
operational synergies that can be realized, cost savings that can be achieved, and the cultural fit
of the two organizations.

Acquisition Process: Determine a Price,Determine a Price focuses on business valuation. At

some point in the process, an offer and acceptance need to be made. For the acquiring
company, the price being paid for the acquisition must not exceed the current value of the
company plus the anticipated synergies to be realized. In reality, the acquiring company will
strive for an agreed-upon price below this point in order to realize an immediate value for the
acquisition. For the selling company, the value must be sufficient to ensure that investors view
the sale of the company as being in their best interests. This will generally mean striving for a
value that exceeds the immediate market value of the organization

The price of the acquisition can be determined in a number of ways. Valuation methods can
include P/E ratios, EBITDA calculations, gross profit margins, revenue forecasting, market
capitalization analysis, total enterprise analysis modelling, cash flow analysis, and net present
value calculations coupled with weighted cost of capital (WACC) calculations. The actual
valuation process for medium and large company-based acquisitions is often developed by
financial analysts on behalf of the companies involved in the acquisition and is beyond the
scope of this textbook. In many cases, the valuation process will include a number of
approaches in order to validate an acceptable purchase price range.

Acquisition Process: Make the Purchase,Make the Purchase involves the legal steps associated
with the actual purchase of the target. A key component of this phase will be a finalization of
how the acquisition will be financed. Will it be an all-cash purchase? Will it be a combination of
cash and shares of stock in the acquiring company? Will it include substantial short and/or
long-term debt? In addition, major acquisitions within an industry may result in regulatory review
at multiple levels of government, including international regulatory review.

Acquisition Process: Integrate the Operation,Integrate the Operation implies the actual process
of transitioning business processes and protocols to and through the acquired company once
the actual purchase process is completed. In many ways, this is the most challenging aspect of
the purchase. This is the execution of the tactics needed in order for the objectives for the
acquisition and the achievement of the anticipated synergies to be realized

4 main factors can be taken into consideration when looking to determining the price for a small
business.,1. Asset valuation—this is drawing a conclusion as to the fair market value of the
tangible (working) assets owned by the company. By fair market value we are referring to the
cost of replacing the working assets of the business less an offset amount (think in terms of
depreciation) for wear and tear, or the using up of the asset (reduced life expectancy due to
usage). It may also include an amount for recent leasehold improvements made by the seller
into the building where the business is located.

2. Intangible value (goodwill)—an easy way to think of this is the perceived value of the brand
and/or the name of the business. A key component of this valuation would be an assessment of
the strength of the customer base (going forward) and the overall reputation of the company
since it was established. This particular valuation is probably the most difficult to place a value
on, as it is often subjective and, in many cases, is referred to as a psychological value versus a
tangible value.

3. Percentage of current average sales revenue, or a multiple of current average earnings—a

percentage of sales revenue valuation is just that. You would multiply the recent average sales
by a specific percentage (say, 50%).

In using a multiple of the current average earnings, financial analysts typically utilize EBITDA
(earnings before interest and taxes, plus depreciation and amortization). Depreciation and/or
amortization amounts are non-cash items (a cheque is not written for these expenses). The use
of EBITDA is thought to offer the best indication of the true earnings of the organization for
valuation purposes.

4. Future cash flow potential—this focuses on the value of future cash flows from operating
activities, discounted by a risk rate, to determine a value for purchase price purposes. The intent
of this approach is to base the valuation on the anticipated future cash potential the prospective
owner could look to realize, at least in the short run, in assuming control of the business. The
risk (or what is termed the discount) rate is usually related to, or based o

A Note Pertaining to Not-for-Profits,Historically, many not-for-profits have relied on external

funding sources, such as government, foundations, and granting agencies, to cover their
operating expenses. For foundations, reduced returns on principal invested have resulted in a
reduction in the dollar amount of support that they, in turn, are able to provide. Faced with
budgetary deficits coupled with taxpayers demanding minimal increases in taxes, governments
are reducing or withdrawing support in many non-core service areas. Transfers to
non-government granting agencies are also being reduced. The end result is that not-for-profits
are being increasingly challenged to create new revenue streams and business opportunities.

What is a litmus test?,Refers to a process or something that's is used to make a judgement or

draw conclusions bout the acceptability of an opinion

Cats flow positive,Refers to that point in time when an organization is able to cover the actual
cash expenses of an operation form the revenue it generates
start-up costs,Are the initial capital investment required to laud ha new business or product
venture

Capaitaliziton well,Refers to a framework for assessing the full capital requirements of a

business venture

Undercapitalization,is the situation where a company lacks the required funding to continue
business activities

Organic growth,refers to growth that comes from an organization's existing business portfolio

Operational Synergies,Refers to maximization of productivity and efficiency through the

combining of resources

EBITDA,is earnings before interest and taxes + depreciation expense + amortization expense

Fair market value,Is the price that a tangible asset or property is worth in the marketplace

Goodwill,Is the additional amount that a company or individual is willing to add to the value of a
company it is acquiring, above the fair market value of it's tangible assets.

The fundamentals of financial analysis,1. Revenue model

2. Cost structure
3. Margin requirements
4. Cash operations cycle (COC)
5. Capitalization requirements (ROIC)

Costs ca be:,1. Directly involved in the production process (direct/variable costs) or

2. Operational support cost (indirect/fixed costs) that are not directly tied to the creation of the
product

Therefore:

An organizations direct or variable costs + organizations indirect or fixed costs = total cost base

Variable vs. Fixed Costs,Variable cost change indirect to proportion to change in activity level
while fixed costs does not in total regardless of the activity level.

Fixed costs: costs that's are unaffected by the company's volume. Ex: rent, insurance,
equipment

Variable costs: costs that are directly linked to the company's volume. ex: raw materials,
commissions, shipping costs
break-even point,the point where total revenue equals total cost resulting in a profit of $0

Margin,Relates to the relationship between the revenue and costs

- represented the portion of an organizations revenue which is left over after aging for an
identified level of costs

Margin = revenue — costs of goods sold / Revenue

Cash Operating Cycle (COC),the amount of time it takes for an organization to recover the cash
(product is sold and money is received) it has paid out for the development, production and
distribution of products.
- in general, the shorter the cash operating cycle, term ore quickly the organization is getting
back the cash

Capitalizations requirements : funding the organization,Determine the mixture of the different

sources of funds available
- funds derived from operations (revenue from sales)
-funds obtained via credit facilities (debt)
- funds obtained via equity financing ( stock market)

Sources of funds,1. Funds from operations

Advantages: no external funding source is required, no dilution of ownership occurs, no fixed
repayment schedule, no interest payments
Disadvantages: money visible may not meet the full needs of the organization, uncertainty may
exist as to the amount of money available now and in the future, and monies needs internally
cannot be distributed to owners as a return on their investment

2. Credit Facilities
Advantages: no dilution of ownership occurs, can provide large inflows of capital now, with
payments spread over long period of time, enable the organization to use someone else's
money to fund organizational needs, and interested expense is considered to be an operational
expense

Disadvantages: requires full repayment, either on a periodic or lump sum basis,, obligations
must be met, regardless of the financial condition of the organization, a cost of borrowing is
incurred, and collateral is usually required- may restrict future asset use

3. Equity financing
Advantages: enable the organization to raise cash without the leverage concerns associated
with debt financing, no repayment obligations, external funding source — does not place
pressure on operations to fund organizations needs
Disadvantages: dilutes ownership, if publicly traded— control lies with the owner of as majority
of shares (51%), short termism— management decisions may be impacted by shareholder
investment needs
The role of financial statements,Financial statements: track the effectiveness of decisions and
product/service offerings with respect to growth, profitability and asset productivity.

Analyzing and interpreting financial statements is what enables as magnet to team to "keep its
fingers on the pulse" of the organization

Importance of financial statement,important to:

1. Management
2. Creditors
3. Bankers
4. Investors
5. Government

Definitions,Revenue: the dollar amount the organization receives as a result of selling its
products/services

Cost of goods sold (COGS) : the expenses thats are directly incurred in the manufacturing of a
product or delivery of a service

Gross Profit Margin: the difference between total revenue that an organization received and the
direct expenses it incurs

General Operating/ other expenses: the indirect expenses that an organization incurs and must
be paid from the gross profit margin

Earnings Before Interest & Taxes (EBIT): determined by subtracting general operating expenses
from the gross profit margin

Key takeaways relating to the Statement of Comprehensive Income,- the source of sales is as
important as the sales amount
- the key secret to making more money is to spend less money acquiring each additional dollar
of sales
- no sales = no revenue = no business
- total revenue - product costs - gross profit margin

- companies that are able to control product costs tend to have consistently higher gross
margins

- without a competitive advantage, companies have to compete by lowering the price of the
product or service they are selling... this damages gross profit margins
- Gross profit margins, by themselves, do not guarantee profit. The three key killers to gross
profit margin are high R&D costs, high selling and administrative costs, and high interests costs
of debt

- if sales begins to fall, companies can quickly cut product costs. The challenge is how quickly
can they cut committed, fixed and semi-fixed expenses?

- the critical line in income statement analysis is EBT ( earnings before taxes)... this defines the
true level of earnings which a company is realization given out of its operations

What is a balance sheet?,Summarizes an organizations financial position in terms of assets,

liabilities, and owners equity. Is a snapshot of the organization position at a specific point in
time. It provides a good barometer of an organizations capacity and liquidity.

Assets = liabilities + owners equity

What is the statement of cash flows?,Summarizes the sources and uses of an organizations
cash. Identifies the inflows and outflows of money within a firm during a specified period of time.
Provides insight into the current and projected liquidity position of the firm

Ratio analysis,Is a primary tool that managers use to assess the financial health of an
organizations

There are four fundamentals areas of ratio analysis

1. Profitability
2. Solvency and liquidity
3. Debt
4. Activity

Trend or Comparative Analysis,Reviewing current results against prior year actual results and
anticipated forecast results

Strategic planning looks at the organization as a whole, while ________ planning focuses on
specific supervisors, department managers, and individual employees.,Operational

Jamal is part of a management group that is examining whether his company, State
Engineering, should offer some important new services that would broaden its business by
appealing to a different group of potential clients. Jamal's group is involved with...,Strategic
Planning

When a firm makes use of SWOT analysis, one of its objectives is to...,Identify the things it does
well as an organization and the things it needs to improve.
Karen Jobs is a supervisor who deals directly with a group of production line workers. She
spends several hours each week developing specific work assignments and production
schedules for the coming week so that the production department can meet its short-term
production objectives. This suggests that a significant component of Karen's job
involves...,Operational Planning

A key component of the operating plan development process is...,Seek out acquisitions,
collaborations, and strategic alliances which complement existing products and capabilities.

What is developed after the corporate level and business level strategies and objectives have
been identified?,Operating Plan

What is a key component of the operating plan development process?,Assess position in the
marketplace.

The following are key components of the operating plan development process,
except...,Identification of competitive advantages which the organization possess.

_______ strategy objectives, which defined how to accomplish the stated corporate
objectives.,Business Level

What is the final phase of the strategic planning process?,Strategy Execution

Which of the following do organizations NOT commit their capital resources for within the
execution phase?,All of the above.

What is a key requirement of the strategy execution phase?,Continuously monitor the success
of the implantation of strategy & Take corrective action quickly in the event that things are not
going well.

Why can't small and medium-size business owners, seem to take the time to plan
strategically?,All of the above.

Small and medium-size business owners need to assess and anticipate the changes which are
occurring...,Within their markets, With their needs for their products, With new opportunities.

Rather than having __________, not-for-profits' actions are being assessed by some organized
______ (membership base, government entity, or community board).,Stakeholders; Collective

Like for-profit entities, not-for-profits must develop ________ which produce positive financial
results for the organization.,Strategies and Tactics
With respect to the overall mission of the organization, what is the difference between for-profit
entities and not-for-profits?,To whom the management team of the organization needs to
respond to.

In formulating and implementing strategy in the social economy, managers must ensure that
their actions guide the ______ activity of the not-for-profit (NFP), as well as other strategy
considerations.,Economic

In formulating and implementing strategy in the social economy, managers must ensure that
their actions, in addition to guiding the economic activity of the not-for-profit (NFP), effectively
respond to the following...,All of the above.

What are considered to be the cornerstones to the structural foundation of a business, how it
operates, and how its tactical execution is tied to its strategic plan?,All of the above.

______ relates to the formal framework around which the business system is designed and how
such a structure directs and influences collaboration, the exchange of knowledge, the
communication of and sharing of ideas, and the work environment surrounding the
accomplishment of tasks and the meeting of responsibilities.,Organizational Structure, Culture
and Management Approach

_________ defines the managerial evaluation and control processes utilized to determine the
success of the organization in meeting its strategic and operational goals and
objectives.,Control Systems to Manage Strategic Intent

_______ refers to the decision-making hierarchy, the delegated span of control within an
organization, and the allocation of position power within it.,Mechanism for Effective Talent
Management

___________________ focuses on the processes and initiatives needed to support and direct
the product/service transformation process within the organization, the creation of the value
proposition applicable to such products/services, and the distribution, marketing, sales, and
service in support of these products/services.,Operational Processes and Market Support &
Alignment

________ refers to the process of dividing organizational functions into separate

units.,Departmentalization

The traditional technique used to departmentalize an organization is by...,Function

Which of the following is considered to be an advantage of departmentalization?,Employee

skills can be developed in depth.
_______ relates to the formal framework around which tasks are organized and responsibilities
allocated within an organization.,Structure

The concept of ______________ encompasses designing structure that considers the manner
in which we interact with customers, and design the organization's framework in a way which
best facilitates these interactions.,Customer "touch points"

Many organizations have a tendency to follow a generalized structure development path as they
flow through their _______.,Life Cycles

A _______ organizational structure takes into consideration that individuals will have specific
expertise related to defined departmental areas.,Functional

Which of the following is NOT one of the key questions that managers should take into
consideration when developing the organization's framework?,What specialization will best
achieve the strategies.

______________ refer to those functions that an organization does as well as, or better than,
any other organization in the world.,Core Competencies

Independence Electronics prides itself as a world-class producer of components used in CD and

DVD players. The outstanding performance of the production department indicates that this
activity is one of the firm's ________.,Core Competencies

HipHop Music Company assigns workers to departments based on similar skills and has
created a marketing department, a production department, a finance department, and a
personnel department. This suggests that HipHop departmentalizes by...,Function

Gangsta Industries produces a variety of anti-crime and safety products such as burglar alarms,
smoke detectors, surveillance cameras, and specialty locks. Gangsta sells to households,
businesses, and government agencies. They have found that each market group requires a
different marketing strategy. Gangsta would probably benefit from departmentalization
by...,Customer Type

______________ means that decision-making authority is delegated to lower-level managers

and employees.,Decentralized Authority

Organizations that require consistent production standards to help create a high quality public
image would tend to favour...,Centralized Authority

Greenwave Garden Centres is a national chain of discount gardening stores. The top
management at Greenwave realizes that different regions in Canada have very different
climates and soil conditions, so they give regional managers a great deal of freedom to decide
exactly what types of plants, fertilizers, and other items to stock and how to best market these
products. Greenwave is an example of a _______________ organization.,Decentralized

As the head of the marketing department, Jody works with her subordinates on complex and
challenging projects. The level of detail in this work requires Jody to spend a significant amount
of time with her subordinates providing advice and support. Within the marketing department,
Jody probably has a(n) ________ span of control.,Narrow

Vaughn Studios organizes its operations by activity, such as production, marketing, accounting,
and finance. Vaughn utilizes _____________ departmentalization in order to maximize their
efficiency...,Functional

Dean's Formals, an old local business, is experiencing some severe cash flow problems.
Therefore, in order to effectively address these problems the senior management has adopted
the following decision making model...,Centralized

Which of the following is a disadvantage of decentralized management?,Less Efficiency

Louise works in a company with fewer chances of advancement. This is considered a

disadvantage of ___________.,A wide span of control.

Compared to the decentralized management structure, which of the following is a disadvantage

of the centralized management structure?,Potential for interorganizational conflict.

The optimum number of subordinates a manager can supervise is referred to as the...,Span of

Control

The span of control for a manager...,Depends on a number of factors, and can vary from one
manager to another.

The business operations of the Cadet Corporation are complex, requiring a great deal of
planning and coordination. The span of control for the managers of the Cadet Corporation is
likely to be...,Narrow

An organization that consists of many layers of management is referred to as a ____________

organization.,Tall

The ________ an organization's structure, the ________ the span of control.,Flatter; Wider

An organization with only a few layers of management is known as a...,Flat Organization

Which of the following is NOT a factor used to determine the best organizational structure for a
particular company?,Current product growth.
The ability to create a more efficient and effective structure, and create stronger customer
relationships, can result in a(n) __________ in the marketplace.,Competitive Advantage

Which of the following is NOT one of the building blocks that the reorganization of a business'
structure generally focuses on?,Non of the above.

_______ refers to the need of the organization to fully analyze the type, number, and
responsibilities of the various positions and align these...,Work Efficiencies

_________ refers to the dividing of the organization's work units into defined functional
areas.,Degree of Departmentalization

Culture reflects the ________ aspect of the internal processes and procedures which the
organization uses to facilitate the completion of tasks and the management of
outcomes.,Behavioural

Which of the following is NOT one of the five key dimensions in Geert Hofstede's Cultural
Dimensions Model?,Risk Allowance

_______ refers to the degree of entrepreneurship which is embedded into the organization.,Risk
Allowance

The key, with respect to this cultural framework, is to try and develop a culture which
passionately pursues the _______ of the vision and the mission of the organization.,Attainment

This can also be thought of as the degree of passion which the organization communicates to
its employees (and the frequency of such communications) relating to organizational successes
and achievement of performance benchmarks.,Competitive Emphasis

_________ is often referred to as the "Chain of Command".,Managerial Hierarchy

_________ refers to the level of responsibility and decision-making authority which is

transferred to each specific managerial position.,Decision-Making Control

________ refers to the grouping of tasks and the facilitation of the collaborative efforts between
departments which must occur within the organization.,Coordination of the Work Effort

_________ refers to the number of subordinates a manager will have reporting to him or
her.,Span of Control

As ________ change, so must the business system framework required to ensure the
successful execution of the revised strategic direction.,Strategies
________ generally occurs when companies recognize a disconnection to their intended
strategy as a result of disruptions which have occurred either internally or from the external
marketplace.,Restructuring

Restructuring an organization can be in response to which of the following...,All of thew above.

The goal of any restructuring initiative should be to increase the _______ and the long-term
health of the organization.,Value

Which of the following is NOT required by the management team for a restructuring effort to be
successful?,Full understanding of the rationale for the action.

Which of the following is NOT fundamentally influenced by the structure, culture, and
managerial approach?,Learning curves for staff involved.

Commercial Endeavours Refers to the markets the organizations serves, the products and
services it offers, and the needs it professes to meet in the market place.

Employee Interaction Refers to the value-creating skills an organization's employees bring to

the marketplace. The success of many business lies with the specialized skills that exist within
its labour force.

Organizational Efficiency and Structure Is a reflection of the complexities of the business

activities that circulate within an organization.

Business Refers to the mission-focused activities aimed at identifying the needs of a

particular market or markets, and the development of a solution to such needs through the
acquisition and transformation of resources into goods and services that can be delivered to the
marketplace at a profit.

Business Models Can be visualized as the underlying operational platform or structure

which a business used to position its approach to a given market and thereby generate its
revenue and, most importantly, derive its profit.

Activities Refer to key processes and organization undertakes in order to deliver products
and services to the marketplace.

Resources Refer to four core areas- assets, labour, capital, and managerial acumen.

Assets Refers to the infrastructure and resource base of the organization.

Labour Refers to the human resource (talent) requirements of the business.

Capital Refers to the money needed by an organization to support asset-based expenditures,
meet operating cash requirements, and invest in the development of new products and/or
services which the organization desires to introduce into the marketplace.

Managerial Acumen Refers to the foresight, drive, knowledge, ability, decision-making

competency, and ingenuity of the organization's key individuals- its owners or top-level
managers.

Partners Refers to complementary dependencies and/or relationships we have with router

organizations that are deemed essential to the design, development, and delivery of products
and services to the marketplace.

Cost Structure The expenses that will be incurred as a result of offering products and/or
delivering service to the marketplace.

Product/Service Portfolio Refers to the different items, products, and/or services which a
company offers for sale.

Opportunity Assessment Is analyzing the marketplace in such a way (via marketing

research and data analytics) that enables the organization to determine which segments are
most likely to respond to its communication messages and purchase its products and/or
services.

Positioning Refers to our ability to develop a unique, credible, sustainable, and valued place
in the mind of out customers for our brand, products, and/or services.

Value Proposition Is a statement that summarizes whom a product or service is geared

toward and the benefits the purchaser will realize as a result of using the product or service.

Revenue Model Focuses on the relationship between the prices organizations are able to
charge for their services, the volume of purchases they are bale to generate and the profitability
derived from such activity.

Competitive Advantage Occurs when a company possesses capabilities that enable it to

perform critical activities better than its rivals.

For-Profit Companies Are organization whose overarching objective is profitability and wealths
creation on behalf of their shareholders and stakeholders.

Not-For-Profit Organizations (NFPs) Are organizations whose objective is not profitability and
wealth creation but to deliver services to the people, groups and communities that they serve
via a model of collective interest and social goal achievement.
Stakeholder Refers to individuals, groups, or organizations that abbe a direct or indirect
relationship with an organization, and that can be impacted by its policies, actions, and
decisions. Stakeholders could include customers, suppliers, government, employees, and so
on.

Visionary Leadership Involves inspiring your workforce (talent) to pursue a shared goal, beyond
ordinary expectations.

Strategy Refers to the development of plans and decisions that will guide that direction of
the firm and determine its long-term performance.

Tactics Refers tot that immediate-term actions which a firm executes in order to meet the
short-term objectives set forth in the current planning cycle.

Profit Is the "bottom line" result an organization has realized for an identified, immediate period
of time. In simple terms, total revenue - total expenses = profit.

Profitability Measures how well a company is using it s resources over a specific period of
time to generate earnings relative to its competitors.

Stockholders Refers to any person, company, or organization that owns at least one share of
stock in a specific company.

G7/8 Is a quasi-organization comprising the world's major fully developed economies. The G7
consists of the United States, Japan, Germany, great Britain, France, Italy, and Canada. In
2006, the G7 transitioned to the G7/8 with the inclusion of Russia into its membership. Heads of
the G7/8 countries meet at least once annually to discuss major economic, political, and societal
issues challenging to global marketplace. Recent meeting trends have also resulted in
representatives of major developing economics (such as China) attending at least part or all of
such summit meetings. Although still relevant, the G7/8 is seeing its overall global economic
influence diminishing, as the larger G20, consisting of the G7/8 countries as well as
representatives from developing economies, is anticipated to become the more
policy-policy-influencing organization with respect to economic decisions globally.

Comparative Advantage Refers to the ability of a country to produce or supply goods or

services at a lower cost than other countries or to possess resources or unique services that are
unavailable elsewhere.

Foreign Direct Investment (FDI) Occurs when a company or individual form one country
makes an investment into a business within another country. This investment can reflect the
physical ownership of productive assets or the purchase of a significant interest in the
operations of a business.
Law of Supply and Demand Refers to the ability of the market, independent of external
influences, to determine the price for which a product to service will be bought and sold.

Open System Refers to economic system that adheres to the principles of economic freedom:
the law of supply and demand, full and open access to the principles of private ownership,
entrepreneurship, and wealth creation, and absence of regulation on the part of government.

Controlled System Refers to economic systems where the fundamentals of the law of supply
and demand, private ownership, entrepreneurship, and wealth creation are largely restricted or
absent, and the government fully controls the economic direction and activity.

Mixed Economic System Refers to an economic system that contains components of both
open and controlled systems. It includes the core principles of economic freedom, with some
degree of centralized economic planning and government regulation and involvement.

Chartered Banks Are financial institutions regulated under the Canada Bank Act. Their
primary responsibility is to bring together borrowers and lenders by accepting deposits and
lending out money- all in a manner that safeguards the interests of their customers.

Gross Domestic Product (GDP) Refers to the total market value of the goods and services
(economic output) a nation produces domestically over a period of time (generally one calendar
year).

Recession Is a period of time that marks a contraction in the overall economic activity within
an economy. A recession is typically believed to occur when an economy experiences two or
more quarters of negative GDP movement.

Inflation Is a rise in the level of prices of goods and services within an economy over a
period of time.

Parity Means being equal or equivalent to; specifically, the value of one currency being qual to
the of another.

Purchasing Power Parity (PPP) A meaner that takes into account the relative cosy of living
and the inflation rates of each country, and adjusts the total value of economic activity
accordingly.

code of ethics(social),1)Societal interpretation

2)Societal conditioning.
3)Legal and regulatory guidelines: Sarbanes-Oxley, SEC, OSC, etc.

code of ethics(Business Culture),1)Pressure to meet company objectives.

2)Structure of "reward" systems.
3)Pressure from superiors.
4)Corporate "ethics" guidelines.
5)Stakeholder influences.

code of ethics(Professional),1)Professional designation and association influences.

2)Industry practices: GAAP, IASB, IFCA, etc.

code of ethics(Individual),Personal values.

Spiritual influences.
Past experiences.
Past environments.
Cultural influences.
Social image.

CSR and the Four Quadrants of Managerial Responsibility,1)Business System Design and
Development.
2)Attracting, Retaining, and Managing Talent.
3)Financial Resource Management.
4)Market Assessment and Strategy Development.

Market Assessment and Strategy Development.,1)Customer Privacy Policies and Practices.

2)Relationships with External Stakeholders.
3)Product Safety.
4)Truth in Marketing Practices.
5)Pricing Practices.
6)Product Accessibility Practices.
7)Consumer Safety Information.

Attracting, Retaining, and Managing Talent.,1)Diversity and Discrimination.

2)Safe Working Conditions.
3)Labour Relations.
4)Education and Training.
5)Fair and Equitable Personnel Policies and 6)Procedures.
7)Equitable and Realistic Compensation 8)Practices.
9)Employee Benefit Programs.

Business System Design and Development.,1)Resource Procurement and Consumption

Practices.
2)Recycling and Disposal Practices.
3)Emissions and Carbon Footprint Impact.
4)Packaging Requirements.
5)Outsourcing Policies.
6)Research Practices.
7)Transportation Modeling.
Financial Resource Management.,1)Financial Transparency.
2)Investor Relations.
3)Ethical Financial Reporting Practices.

Which of the following best describes the group(s) to receive communication after a firm has
developed a code of ethics?,everyone with whom the business interacts.

Which step is the most critical to help improve business ethics?,The ethics code must be
enforced.

about codes of ethics,1) Codes of ethics limit the opportunity to behave unethically by providing
punishments for violations of the rules and standards.
2) Codes of ethics expand the opportunity to behave ethically by providing rewards for following
the rules.
3) Codes of ethics limit the opportunity to behave unethically by providing rewards for violations
of the rules and standards.
4) Codes of ethics expand the opportunity to behave ethically by providing punishments for
following the rules.

Corporate social responsibility describes the firm's,concern for the welfare of society.

As a new employee, Vanessa has heard her boss say, "Do whatever it takes to meet your sales
quota. However, anyone caught violating a law will be immediately fired." Vanessa recognizes
this as a(n) ________-based code of ethics.,compliance

The Sarbanes-Oxley Act and Ontario's Bill C-198 were both passed to:,help restore confidence
in Corporate America and Canada.

Determining what is involved for a firm to be socially responsible,varies even among those who
are interested in corporate responsibility.

Which of the following would be a unique focus of an integrity-based ethics code?,Shared

accountability among employees.

A set of formalized rules and standards that describe what a company expects of its employees
is called a(n),code of ethics.

corporate social responsibility,1) Personal projects

2) Philanthropy
3) Strategic partnering
4) Operational initiatives

What occurs when an employee exposes an employer's wrongdoing to

outsiders?,Whistleblowing
Which area of the ethics wheel includes such factors as structure of reward systems and
pressure from superiors?,business culture

With respect to business ethics, it can be said that "it takes two to tango." This indicates that:,an
individual's behaviour is influenced by the behaviour of others.

someone who reports illegal or unethical behaviour,Whistleblower

Hostile Takeover Refers to an attempt by a company to take over another company whose
management and board of directors are unwilling to agree to the merger or takeover.

PESTEL Analysis Refers to a macro-level assessment of the political, economic, social,

technology, environmental, and legal trends that can or will impact the markets within which an
organization competes.

Protectionism Is the outcome of the intent of economic policies that are put in a place to protect
or improve the competitiveness of the domestic industries via impending or restricting the
openness of a market or markets to foreign competitors through the use of tariffs, trade
restrictions, quotas, artificial control of currency values, or other related activities.

Purely Competitive Markets Are markets that are characterized by a number of similar
(undifferentiated) products or services, the absence of a dominant market leader, and few
barriers to entry.,

Monopolistic Markets Are markets that possess a number of different suppliers of products and
services, bu the nature of the product or service, along with the marketing effort initiated by
business within the sector, has enabled true differentiation to set in.

Oligopoly-Based Markets Are markets that contain a small number of suppliers that control a
larger percentage of market share within the market, and that compete on the basis of products
and/or services that have achieved success in distinguishing themselves from their competitors.

Monopoly-Based Markets Are markets that are served by a single product/service supplier.

Commoditization Is the process by which products and/or services that have been
considered unique and/or distinguishable in the past became similar, or non-differentiated in the
eyes of the consumer.

Offshoring Is transferring a component (operations, services support) of a firm's business

system to another country for the purpose of reducing costs, improving efficiency or
effectiveness, or developing a competitive advantage.
Outsourcing Is contracting out a portion of, or a component of, a firm's business system for
the purpose of reducing costs, improving efficiency or effectiveness, acquiring expertise, or
developing a competitive advantage.

Economies of Scale Are reductions in the cost base of an organizations as a result of greater
size, process standardization, or enhanced operational efficiencies.

Liquidity Refers to the cash position of a company and its ability to meet its immediate
debt and operational obligations. It also refers to the ability of the company to convert existing
assets to cash in order to meet such obligations.

Solvency Refers to the long-term stability of the company and its ability to meet its ongoing
debt and operational obligations, and to fund future growth.

Credit Facilities Is a general term that describes the variety of loans that could be offered
to a business or a country.

Black Market Is the illegal market that arises within economies where goods are scarce,
taxation on such good is high, or the prices of legitimate goods are being the capacity of
significant segments of the population to buy.

Sovereign Debt Is debt issued or guaranteed by a national government.

Balance of Trade Is the relationship between import and exports over a defined period of
time. A positive balance (where exports exceed imports) is known as a trade surplus. A negative
balance (where imports exceed exports) is known as trade deficit.

Current Account Is a country's net trade in goods and services (balance of trade surplus or
deficit), plus net earnings from interest and investments and net transfer payments to and from
the rest of the world during the period specified.

Foreign Exchange Reserves Are assets held by central banks and/or the monetary authorities
of a country, and are used to back to country's liabilities. Typical currencies held for this purpose
are the US dollar, the Japanese yen, and, to a lesser extent, the euro.

Deflation Occurs when prices fall. The content with deflation is that falling prices reduces
revenue and income, which affects the ability to meet debt obligations as well as impacting
government tax revenue.

Free Trade Agreements Facilitate international trade between companies that is not
constrained to regulated by governments, and that is not impacted via the use of tariffs, duties,
or other monetary restrictions.
Floating Exchange Rate Is one whose value is allowed to move relative to other currencies.
The value of the currency is set by foreign exchange market and is influenced by the demand
for that currency via the forex market.

Pegging Is when the call of one country's currency remain constant against other
currency. It is also referred to as a fixed exchange rate.

Environmental Stewardship Is the integration of sustainability values into the managing of

environmental resources.

Degradation Is the deterioration of the environment through the depletion of resources and the
destruction of ecosystems.

Kyoto ProtocolIs the 1997 (effective 2005) international agreement that binds participating
nations into stabilizing and reducing greenhouse gas (GHG) emissions, by at least 40% below
1990 levels.

British Thermal Units (BTU) Is a measure of heat required to raise the temperature of one
pound of water by 1 degree F.

Peak Model Theories Are based on the belief that resources are finite and that, at some point in
time, the availability of such resources will pass their maximum production point and being to
decline.

Resource Management Is the ability to actively manage existing supplies and regenerate
new supplies of material in such a way that we minimize resource depletion.

Sovereign Wealth Funds Are country- or state-owned investment funds.

Cost of Capital Is the cost of company funds (both debt and equity).

Financial Protectionism Refers to government actions or policies that restrict or restrain

the outflow of funds form one economy to another.

Eco-Efficiency Management Is the tactical shift required within our business operations to
maximize the efficiency of our resource utilization and minimize or eliminate the resulting current
degradation to the planet.

Cradle-to-Cradle Sustainability Management Is the process whereby organizations create

production and distribution techniques that are not just more efficient but are truly waste free.

Productivity Cycle Includes the processes involved in transforming materials into a product
or service abatable for sale in the marketplace.
Ponzi Scheme Is a type of investment fraud that involves the payment of purported return to
existing investors from funds contributed bye new investors.

Ethics Is a reflection of the moral principles or beliefs about what an individual views as being
right or wrong.

Integrity Is honesty, reliability, ethics, moral judgement.

Board of Directors Is the term for the governing body of corporation, compromising,
individuals chosen or elected to oversee the management of the organization.

Whistleblowing Is the process through which an individual informs someone in authority

of a dishonest act or the dishonest behaviour of another person.

Code of Conduct Is the name for a statement that describes the required responsibilities,
actions, and rules of behaviour of an organization's employees.

Forensic Accounting Is the integration of accounting, auditing, and investigative skills.

Corporate Social Responsibility (CSR) Is the understanding that the purpose of an

organization is to create shared value (business and society) by strategically integrating into its
actions a partnership mentality with society where the objectives of both parties are met.

Mission Defines an organization's purpose or reason for existence.

Vision Is a forward-thinking statement that defines what a company wants to becomes and
where it is going.

Harvesting Is a strategy that reflects a reduced commitment to a particular market given its
perceived weak future growth or profitability potential.

SWOT Stands for strengths, weaknesses, opportunities, and threats.

Competitive Advantage Is an advantage which an organization has over its rivals which
enables it to generate greater sales, and/or margins, and creates preference for its products and
services in the minds of its customers.

Corporate-Level Strategy Defines what the organization intends to accomplish and where it
plans to compete.

Business-Level Strategy Outlines specific objectives the organization hopes to achieve for
each of its identified business initiatives and/or business units.
Operating Plan Is a detailed, immediate-term set of objectives and corresponding tactics
designed to achieve a specific business initiative.

Directional Lock-In Is the level of financial and operation commitment an organization incurs
as a result of implementing the organization's strategies.

Vitality Refers to the ability of the NFP to grow and sustain its membership base and donor
base.

Collective Entrepreneurship Ensures that the involvement of the community where an

organization is located and the population that it serves are reflected in the formulation and
implementation fo the strategy.

Rootedness Refers to the extent to which the NFP is interwoven into the fabric of the
community that it serves and is supported by a board representation fo its organizations,
businesses, and citizens.

Entrepreneur Refers to a person who starts a business and is willing to accept the risk
associated with investing money in order to make money.

Venture Capitalist Refers to an individual who provides capital to a business venture for
start-up or expansion purposes

Cash Flow Positive Refers to that point in time when an organization is able to cover the
actual cash expenses of an operation from the revenue it generates.

Breakeven Point Refers to the point where total expenses = total revenue. The income
statement, which takes into consideration actual cash expenses as well as non-cash expenses,
results in profit = $0.

Inflection Points Are decision points where the current path a business is taking is
assessed relative to where the company is and where it should be.

Collateral Is an asset that an individual pledges as security toward a credit facility (loan);
the individual agrees to forfeit the collateral in the event of an inability to repay the loan.

Crowdfunding Is the process of funding a project or business venture by raising money via an
internet-supported funding management system.

Sole Proprietorship Refers to a business that is owned by one person and that is initiated
without a requirement to create a separate legal entity.

Partnership Is a business organization that is formed by two to more individuals.

Partnership Agreement Is a written agreement among the partners that outlines the
expectations of each partner and details how the partnership is going to work.

Joint and Several Liability Refers to the liability obligation of partners as the result of a legal
contract; partners can be held individually liable for their share of the obligation (several), or fully
liable for the fully obligation (joint) in the even that the other parties to the agreement are unable
to pay their obligations.

Buy-Sell Agreement Is a written agreement among the partners that details the sale by one
partner and the purchase by another of the business interest of the selling partner.

Limited Liability Partnership (LLP) Is a partnership that is made up of both general partners
(at least one) and limited (passive) partners.

Corporation Is business entity that, legally, is separate and distinct from its owners.

Incorporation Is the legal process of setting up a corporation.

Board of Directors Is an appointed or elected body of a for-profit or not-for-profit corporation

that oversees and advises management on issues challenging the organization on behalf of its
stakeholder and shareholders.

Private Corporations Are corporations whose ownership is private; the shares of stock of the
corporation are not publicly traded.

Public Corporations Are corporations whose shares of stock are traded on at least one stock
exchange or are publicly available in the over-the-counter market.

Initial Public Offering (IPO) Refers to the initial sale of stock, by a corporation, through a
public exchange.

Exchange Is an organization that facilitates the trading of securities, stocks, commodities,

and other financial instruments; exchanges provide a platform for selling these financial
instruments to the public at large.

Over-The-Counter (OTC) Refers to stocks being publicly traded through a dealer network
versus on an exchange.