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

Why is the Purchasing Activity Becoming More Important to Global Firms?

Over the past three decades, increasing global competition has caused a dramatic increase in the outsourcing of materials. Firms are demanding the best value for all components used in finished products. Parts that were produced in-house as a matter of corporate policy are now being purchased from suppliers around the world. For a typical manufacturing firm, the share of finished product cost that is represented by purchased parts (as opposed to in-house) can range from 40-60%. As a result, purchasing is becoming a key success factor, and the current movement towards even greater international trade will only increase its importance.

What are the Tasks and Goals of Purchasing?

1. Volatility of Returns

- Small company stocks

2. Christine's Return

P0= $42.40, P1= $38.20, Divd= 1.4%

- [(38.20-42.4)/42.4] + 0.014 = -8.51%

3. Scott's Annual Return

200 shares, P0= $48, n= 4 months, dividend= $0.22

HPR= -0.120

- Annual return= (1-0.120417)^(12/4)-1 = -31.95%

4. Annualized Return

Annual returns: 15%, 12%, -18%, 2%, 37%, n=5

- Standard deviation= 20.03%

5. Stock Return Range

Stock return= 14.6%, standard deviation= 19.2%, two-thirds of the time?

- -4.6% to 33.8%

6. Forecasting Returns

Historical dollar-weighted... If you want to forecast, the best:

- Arithmetic average return

7. Jeanette's Future Value

Investment= $12,000, n=4, arithmetic average= 8.72%, geometric average= 8.43%

- FV= 12,000(1+0.0843)^4 = $16,587

8. Black Stone's Geometric Average

What is a Business Plan?

A Business Plan is a Written Document that details proposed venture: Describes the current status, expected needs and projected results of a new Business /Covers the project’s research and development, manufacturing, management, marketing, critical risks, financing and milestones or timetable

Demonstrates a road map of where the venture is aimed to reach and how the entrepreneur proposes the route it will reach by.

Elements of a Business Plan:

Sec 1: Executive Summary: summary or brief statement of a longer report or proposal about the project for the reader to be acquainted with without reading the full details Sec 2: Business Description: Is the key element of a full business plan (how to make profit), ranges between... Continue reading "Understanding Business Plans, Marketing, and Financing" »

Selling Externally

Just as employees must “sell” ideas internally, entrepreneurs with plans based on new business models must sell them to other parties, such as investors or potential collaborators.

Technique Nº 4: Prototyping

It's a methodology for exploring different possibilities until a truly good one emerged. It's a central part of an inquiry process that helps participants gain a better sense of what is missing in the initial understanding of a situation.

Prototyping is a powerful tool for developing new, innovative business models. Like visual thinking, it makes abstract concepts tangible. In recent years, in business discipline, it has gained traction in areas such as process design, service design and even organization and strategy... Continue reading "Innovative Business Model Techniques: Prototyping and Storytelling" »

Defining International Marketing

International Marketing can be defined as the tasks involved when a company introduces a product into a foreign market. It includes the multinational process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives.

The Role of an International Marketer

The work of an international marketer is mainly concerned with:

a) Adapting the marketing mix to enter a market in another country.

Controllable Factors in International Marketing

Controllable factors in international marketing are:

c) Promotion and Price.

Understanding Ethnocentrism

Ethnocentrism can simply be defined as:

d) The notion that people

1. The CEO of Gulf Italia could probably justify paying a bribe to Italian government officials if he embraced a Utilitarian ethical framework.

2. When a company creates a wholly owned subsidiary in a foreign country, it makes a direct investment to establish a business that it solely owns and controls there.

3. Which of the following is NOT true about Whole Foods? Workers are encouraged to form unions.

4. According to the Friedman Doctrine, 'the business of business is business.'

5. According to management Guru Peter Drucker, the main responsibilities of a manager include all of the following EXCEPT: Disciplining people for bad.

6. European multinational firms commonly use a region-country focused approach because they are operating in multiple... Continue reading "Ethical Frameworks and Global Business Practices" »

Social Networks

are spaces on the internet formed by communities of individuals with interests and activities in common, such as friendship, kinship, work, and that allow contact between them, so they can share content and interact.

No one thought that social networks were going to be a success

Many believed that they were just going to be a fad and would soon disappear. What is even more surprising is that it is now a consolidated universal platform, a highly requested and necessary tool for a brand, company, business, or artist. But it is not only of great help for various sectors, also for any individual who is in them.

Now, networks are already generating employment

but it was never thought that it would ever exist. New jobs were born due to

Balanced Budget

Balanced budget is when current revenues equal current expenditures; however, when a deficit budget occurs causing revenues to fall short of expenditures, it requires the government to borrow money or even tap into reserves to make up the difference. This becomes a requirement that shapes the entire budget process, thus making budget deliberations revenue-driven when revenues determine the level of spending. Balanced budget is elusive when authorities propose a balanced budget but the council approves an unbalanced one or state or local laws allow the deficit at the end of the year to be carried over to the next year. Furthermore, there are no consistent or enforced standards for the balanced budget since it may be manipulated... Continue reading "The Importance of Balanced Budget and Tax Neutrality in Financial Management" »

Product

Product is anything that can be offered to a market for attention, acquisition, use, or consumption, in order to satisfy customer needs.

Consumer Products

are bought by consumers for personal consumption.

Industrial Product

are bought by other companies for further processing or use in conducting a business.

Product Value (Creating and communicating value): 2 ways

• The customer-value hierarchy

Perceived value will differentiate a company from competitors and will make the product more attractive for the market.

• Core benefit
• Basic product
• Expected Product
• Augmented Product
• Potential Product

• Value Proposition

consists of identifying the Benefits, Barriers, and Needs. Describes the benefits customers can expect from your products and services.

• Benefits
• Experience
• Barriers
• Needs
• Features

• The

Futures Contracts

Long Hedge:

Involves the purchase of a futures contract to guard against a price increase.

Short Hedge:

Involves the sale of a futures contract to protect against a price decline in commodities or financial securities.

Perfect Hedge:

Occurs when gain/loss on hedge transaction exactly offsets loss/gain on unhedged position.

Speculation: Buying a futures contract (today) is often referred to as 'going long,' or establishing a long position.

Recall: Each futures contract has an expiration date. A new futures price is established every day before expiration. If this new price is higher than the previous day's price, the holder of a long futures contract position profits from this futures price increase. If this new price is lower than... Continue reading "Futures Contracts and Options: A Comprehensive Guide" »