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

Business Concepts

What is a Business?

A business is an organization that strives for a profit by providing goods and services desired by its customers.

Goods

Tangible items manufactured by businesses.

Demographics

Baby Boomers

Baby boomers are people born during the demographic post-World War II baby boom, approximately between the years 1946 and 1964.

Generation X

Please provide information about Generation X.

Generation Y

Please provide information about Generation Y.

Economic Systems

Capitalism

Economic system based on competition in the marketplace and private ownership of the factors of production.

Communism

Economic system characterized by government ownership of virtually all resources, all markets, and economic decision-making by the central government.... Continue reading "Introduction to Business Concepts" »

Promotion: The Key to Increased Sales

The final and crucial factor that helps to increase sales and marketing effectiveness is promotion. Promotion is the method of communication by which the marketer provides information about the product. It includes advertisements, personal selling, word-of-mouth publicity, etc. For example, the Apple iPhone is promoted on TV, social media, etc.

E-commerce Pricing Strategies

Many online retail businesses use one of three popular strategies to set product prices: cost-based, competitor-based, and value-based.

Cost-Based Pricing

Cost-based pricing, or as it is sometimes called, cost-plus pricing, may be the most popular pricing model in the retail industry. Its greatest advantage is simplicity. It permits a store,... Continue reading "Effective Marketing Strategies and Pricing Models" »

International Market Selection: A Systematic Approach

Expansive Approach

Firms gradually move into international markets, starting with markets similar to their domestic market. This approach reduces perceived risk and information requirements.

• Lower cultural distance: increased confidence
• Lower costs associated with unfamiliar markets

Screening Approach

Involves systematically filtering the global market using criteria to identify the most suitable market for the firm.

Aim: Identify the market with the greatest marketing opportunity.

Stages of Screening Approach

Stage 1: Initial Screening

Objective: Identify national markets for further analysis.

Stage 2: Analysis of Potential Sales for an Industry in Country

Consider:

• Forecast of future sales
• Minimum scale
• Transport

1. Raw Materials and Services Defined

   • Raw materials are basic products.
   • Services refer to technical support.

2. Understanding Industrial Products

   An industrial product is defined as the combination of tangible and intangible aspects.

3. Industrial Product Development Process

   The process to develop new industrial products includes:

   1. Idea Generation
   2. Idea Screening
   3. Concept Development and Testing
   4. Business Analysis
   5. Product Development
   6. Market Testing
   7. Commercialization

4. Distribution Channel Decisions

   A distribution channel decision consists of determining the type and number of middlemen.

   • In the cardboard case, it was suggested to combine all distribution channels.
   • Distribution channels in industrial markets should be responsible for selling and promoting the products.

5. Total

Market Sentiment

• Bullish: Share prices are rising, and confidence is high.
• Bearish: Share prices are dropping, and confidence is low.

Financial Metrics and Accounting

• COGS vs. Operating Expenses: COGS (Cost of Goods Sold) is the carrying value of goods sold during a period. Operating expenses are ongoing costs for running a product or service.
• EBIT vs. Net Income: EBIT measures profit including all income and expenses except interest and taxes. Net income is a company's total income minus the cost of goods sold.
• Retained Earnings: The accumulated net income of a company retained at a specific point in time.
• Shareholder's Equity: Represents the net value of a company (Total Assets minus Total Liabilities). It is a key metric for determining financial

Financial Intermediation

1. In direct financing, the lender… Trades money for the financial claim of the borrower
2. Which of the following is an example of indirect financing? … An SSU purchasing a financial claim from a commercial bank
3. Denomination intermediation is best exemplified by… issuing five $3,000 CDs and making one $15,000 loan
4. Maturity intermediation is best associated with… receiving funds in six-month CDs and offering thirty-year mortgage loans
5. All of the following are benefits provided by financial intermediaries, except: elimination of default risk

The Federal Reserve

6. Which of the following is not one of the original goals of the Federal Reserve? Maintaining the value of the U.S. dollar relative to gold
7. Which of the following are

Limitations of Business Portfolio Models

Business portfolio models are useful for allocating resources among Strategic Business Units (SBUs), but they also have limitations:

• No empirical validation.
• Classification of SBUs is rather subjective.
• Simplification that can be dangerous (based on theoretical assumptions).
• It makes sense for large companies only.
• Analysis is based on cash flows only; there is a need to take into consideration other factors, such as sales margins or ROI.
• They do not consider interrelations among SBUs.

Identification and Selection of New Business Areas

Companies have different possibilities to grow, categorized into two main classifications:

Internal vs. External Growth Strategies

• Internal growth: Based on the company's resources.

Understanding Core Economic Concepts

Functions of Money

The three essential functions of money are:

• Medium of Exchange: Money facilitates transactions, allowing depositors to make withdrawals from bank accounts, often by writing checks or using electronic transfers.
• Unit of Account: Money serves as a common measure for prices and value, simplifying economic calculations.
• Store of Value: Money provides a means of holding wealth over time, though its value can be affected by inflation.

How Banks Function and Generate Profit

Banks operate by accepting deposits and then issuing loans from these pooled funds. To remain profitable and continue operations, the interest rate banks charge on loans must be higher than the interest rate they pay on deposits.... Continue reading "Core Economic Principles: Money, Banking, and Monetary Policy Explained" »

Carol's E-commerce Decision: Scaling the Business

Carol, an emerging talent in fashion design, faces a critical decision regarding sales channels. Her choice to utilize e-commerce is driven by the necessity to reach a larger, global audience with a relatively low initial investment. As she cannot afford the high fixed costs associated with expensive physical retail spaces, e-commerce, with its significantly lower overhead, appears to be the only viable alternative for selling her dresses to a worldwide market.

The Strategic Advantages of Selling Online

E-commerce penetration is increasing globally, and consumers are increasingly likely to purchase goods and services online. Carol, who already employs a Business-to-Consumer (B2C) approach, is perfectly... Continue reading "E-commerce for Emerging Designers: Carol's Path to Global Sales" »