Notes, summaries, assignments, exams, and problems for Economics

Contract Manufacturing

Contract manufacturing is the term used to refer to manufacturing that is outsourced to an external partner—one that specializes in production and production technology.

Benefits

• Labor cost advantages
• Savings via taxation
• Lower political and economic risk
• Quicker access to markets

Caveats

• A contract manufacturer may become a future competitor
• Lower productivity standards
• Backlash from the company’s home-market employees regarding HR and labor issues
• Issues of quality and production standards

Licensing

Licensing refers to the exchange of rights to another party in exchange for payment.

Rights Covered by Licensing

• Patent covering a product or process
• Manufacturing know-how not subject to a patent
• Technical advice and assistance
• Marketing

Components of International Economic Accounts

Factor Income and Receipts

The Factor Income consists largely of payments and receipts of interest, dividends, and other income generated on foreign investments that were previously made.

Unilateral Transfers Defined

Unilateral Transfers, the final category of the Current Account, are one-way payments that do not require a counter-compensating monetary action. Examples include:

• Foreign aid and reparations
• Official and private grants
• Donations and gifts

The Capital Account Structure

The Capital Account includes all purchases and sales of assets such as stocks, bonds, bank accounts, real estate, and businesses. It measures the difference between a country’s sales of assets (e.g., US, Colombia) to foreigners...

Big Five Personality Dimensions (Vecchio, 2003)

1. Need for Achievement (importance of parental influences)
2. Need for Autonomy
3. Locus of Control: Internal (control of own destiny)/ External (others control my destiny)
4. Risk Taking Propensity
5. Entrepreneurial Self Efficacy (ESE)

PHASE 1: Start Up

Pitfalls

1. The owner works for free.
2. Less attention to financial aspects.
3. Everybody feels responsible, no one is responsible.
4. Too much excitement. Down to earth!

Skills

1. Accounting skills
2. Leadership skills
3. Capability to slow down

PHASE 2: Steadying the Ship

Pitfalls

1. Less attention for management of the company.
2. Conflicts among managers and departments.
3. Working in the company instead of working at the company.

Skills

1. Managerial skills
2. Able to analyze changes in the business environment

PHASE

What is Negative Business Power?

Negative business power is something an organization acquires by obtaining immense wealth, knowledge, and technology within a country. Such power can cause trouble for both the company and the country. Therefore, the government should take necessary steps to regulate business power, preventing it from emerging as negative business power.

Differences Between Direct and Indirect Expenses/Costs

1. Direct Expenses/Costs

The value of the components, parts, or materials used during the income period.

2. Indirect Expenses/Costs

Expenses that cover the indirect costs of production during the income period. Examples of indirect expenses include transport costs (petrol/repairs), marketing costs (advertising), and administration...

2(a)(i) Shareholders

2(a)(ii) Total Costs Increase

10,000 x 50HKD = 500,000 HKD

20,000 x 40HKD = 800,000 HKD

2(a)(iii) Profit Calculation

TR - TC = Profit

200,000 HKD

2(b)(i) Economies of Scale

Economies of scale mean that as output increases, cost per unit falls. So in Table 2A, we can observe how output increases from 10,000 to 20,000 and average cost falls from 50HKD to 40HKD.

2(b)(ii) Factors Contributing to Economies of Scale

• Bulk Buying: Can result in per-unit costs of raw materials falling.
• Division of Labor: Involves employing specialist employees to do specialist work. The production manager cannot do all of the work of the production department themselves.

2(b)(iii) Limiting Factor to Expansion

Lack of Finance: Banks may not loan money to small...

Understanding Brand Equity: Core Advantages

Strong brand equity offers numerous benefits to businesses, contributing significantly to long-term success and market resilience:

• Greater customer loyalty
• Less vulnerability to competitive marketing actions
• Reduced vulnerability to marketing crises
• Larger profit margins
• More inelastic consumer response to price increases
• More elastic consumer response to price decreases
• Greater trade cooperation and support
• Increased marketing communication effectiveness
• Possible licensing opportunities
• Additional brand extension opportunities

Enhancing Marketing Communication Effectiveness

Effective marketing communication assumes consumers progress through a series of stages or mental states based on the communication received:...

Consumer Theory: Practice Questions

1. Marginal Rate of Substitution and Optimal Choice

   A consumer has an MRS = 2. If the relationship between the prices is: Px = 3Py, the optimal choice will be found in:

   • a) Any bundle on the budget constraint.
   • b) The consumer will spend all income on X.
   • c) The consumer will spend all income on Y.
   • d) None of the above.

2. Utility Maximization with Cobb-Douglas Function

   A consumer has an income of 100€. Prices are Px = 10 and Py = 5. If the utility function is u(x, y) = x²y, the optimal choice will be:

   • a) X* = 6.66, Y* = 6.66
   • b) X* = 1, Y* = 18
   • c) The utility at the optimal choice is 245.
   • d) None of the above.

3. Characteristics of Utility Functions

   Which of the following options is correct:

   • a) In a Cobb-Douglas function, the equilibrium

E-Marketing Fundamentals

Marketing Segmentation

• Geographic Segmentation: Dividing a market based on location.

• Demographic Segmentation: Dividing a market based on demographic variables.

  • Uses age, gender, family size, income, education, religion, or ethnicity.

• Psychographic Segmentation: Dividing a market based on psychological attributes.

  • Various social classes, personalities, or approaches to life.
  • Includes: Segmentation using customer behavior.

Applying to Internet Commerce

Internet commerce applies segmentation by:

1. Collecting user profiles.
2. Performing automatic analysis (e.g., personalization and classification).

Data sources for user profiles and analysis include:

• User input (e.g., user profile).
• Previous transactions.
• Other sources (e.g., from partner

More engaged employees = up to 21% productivity boost

Strategy

Creating a competitive advantage that generates superior, sustainable financial returns.

• Need to choose a position against the competition, player dynamic, and industry changes.
• Successful strategy considers: external environment, internal activities, and long-term industry/organizational changes.
• Decisions should be mutually reinforcing, leading to optimization of effort.

Aspirations

The purpose and goals of a person or corporation, essential for a strategy.

• Personal Aspirations: Intrinsically motivated, more than a goal; enduring and motivated from within, an expression of the search for fulfillment.
• Organizational Aspirations: Extrinsically motivated, encompassing mission, vision, and

1. Legal and Economic Definition of Enterprise

Economic definition of enterprise

• An enterprise may be defined as an organized assemblage of capital and work intended for manufacturing or distributing goods or services for meeting market demand.
• It designates activity and the instrumental organization.

Legal definition of enterprise

There is no single unitary concept of "enterprise" from the legal point of view. In legal terminology the concept of enterprise can embody different meanings. Thus it is clear that the concept of enterprise in laws against restraints on competition does not coincide with that of corporation law. In company law, an enterprise is identified with the single legal personality of each company or corporation; in restraints-...