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

-External Analysis: To detect Opportunities and Threats - Internal Analysis: To discover Strengths and weaknesses.

PEST Analysis

Strategic business tool used by organizations to discover, evaluate, organize, and track macro-economic factors which can impact their business now and in the future. The framework examines opportunities and threats due to:

• Political
• Economic
• Social
• Technological forces

SWOT Analysis

Understanding TODAY TO BUILD A BETTER TOMORROW! It should be placed at the beginning of a project to begin the process of decision-making. SWOT analysis is the first stage in the planning process for a business venture or to measure almost anything that is influenced by internal and external factors.

• Strengths - Internal Factor +, favorable when

1 - In the Five Force Model: Factors Influencing Existing Competition

1. The degree of existing rivalry - Determined by number of firms, relative size, degree of differentiation between firms, demand conditions, exit barriers.
2. Threat of potential entrants - Determined by attractiveness of industry, height of entry barriers (e.g., start-up costs, brand loyalty, regulation, etc.)
3. Bargaining power of suppliers -Determined by number of suppliers and their degree of differentiation, the portion of a firm's inputs obtained from a particular supplier, the portion of a supplier's sales sold to a particular firm, switching costs, and potential for vertical integration.
4. Bargaining power of buyers - Determined by number of buyers, the firm's degree of differentiation,

Drivers of International Expansion

Push Factors

• Domestic market maturity or saturation
• Legal restrictions
• Increasing costs
• Unfavorable economic conditions
• Unfavorable demographic changes

Pull Factors

• Corporate philosophy
• Perception of growth opportunities
• Niche opportunities
• Imitation of competitors
• Following the customers
• Technology acquisition

Facilitating Factors

• Accumulation of experience
• Decreasing barriers to international trade
• Enhanced communication technologies
• Managers’ drive and vision
• Learning from other firms’ experience

International Entry Modes

Exporting

Indirect Export

• Foreign buyer/broker:
  • Advantages: Simple and cheap; does not require experience.
  • Disadvantages: Total lack of control over marketing strategies and market selection.
• Independent agents,

Financial Terms

Basic Concepts

• Mortgage: A loan to buy real estate.
• Deposits: Money you put in the bank.
• Pension: Money paid to a retired person.
• Stock/Shares: Securities representing part-ownership of a company.
• Capital: Money invested in a business.
• Bonds: Interest-paying securities issued by companies that need to borrow.

Company Actions

• Takeover: When a company gains control of another by buying its stock.
• Merger: When two formerly separate companies join together.

Financial Institutions

1. Retail Banks: Making loans, receiving deposits.
2. Building Societies: Arranging mortgages.
3. Insurance Companies: Providing pensions, offering life insurance.
4. Investment Banks: Issuing shares or bonds, arranging mortgages, arranging or fighting takeover bids.

Vocabulary

Key

The Network Approach to Internationalization

This approach explains the internationalization process through the interaction of a firm with other firms in its network, such as suppliers, customers, and competitors. Success is a combination of the Competitive Advantages of the firm + Competitive Advantages of the network + Competitive Advantages of the countries.

Firm Archetypes in the Network Model

• Early Riser: Characterized by penetration in close markets with a low level of commitment and a sequential development process.
• Lone Ranger: Faces less risk when entering new markets and makes more committed investments. This type often promotes the internationalization of the entire network.
• Left Behind: The network can drive the firm's internationalization.

Monetary Policy

Monetary policy involves actions taken by a central bank or regulatory committee to control the money supply and influence interest rates. These actions include modifying interest rates, buying or selling government bonds, and adjusting bank reserve requirements.

Types of Monetary Policy

Expansionary Monetary Policy

Expansionary monetary policy increases the money supply to lower unemployment, encourage borrowing and consumer spending, and stimulate economic growth.

Contractionary Monetary Policy

Contractionary monetary policy slows or decreases the money supply to control inflation. While necessary at times, it can slow economic growth, increase unemployment, and reduce borrowing and spending.

Example: The Federal Reserve in the 1980s

To... Continue reading "Monetary Policy: Controlling Inflation and Economic Growth" »

Market Segmentation and Targeting

True/False Questions

Question 4

Dove, a division of Unilever, traditionally targeted both men and women with its Dove-branded skin care products.

Question 6

For some consumer products such as cigarettes, soft drinks, and candy that have a low per-unit cost, income is often a more valuable segmentation variable than population.

Question 12

Categories such as "successful idealists" and "affluent materialists" can be used to describe psychographic segmentation, not age segmentation.

Question 13

Sometimes it is preferable to market to a particular mind-set rather than an age group; in such an instance, psychographic studies can help marketers arrive at a deeper understanding of consumer behavior than is possible with traditional... Continue reading "Understanding Market Segmentation and Targeting" »

Basic Economic Problems

In view of the scarcity of resources at our disposal and the unlimited ends we seek to achieve, the economic problem lies in making the best possible use of our resources so as to get maximum satisfaction in the case of the consumer and maximum profit for the producer. Hence, economic problem consists in making decisions regarding the ends to be pursued and the goods to be produced and the means to be used for the achievement of certain ends.

Fundamental Problems facing an economy (Basic Economic Problems)

What to Produce?

The first major decision relates to the quantity and the range of goods to be produced. Since resources are limited, we must choose between the different alternative collection of goods and services that... Continue reading "Understanding Basic Economic Problems and Economic Systems" »

1. What is Economic Competition?

Economic competition is the process of rivalry between undertakings for consumer choice by offering the best possible goods and services.

2. Negative Effects of Lack of Competition

When markets lack effective competition, several negative consequences can arise:

• High Prices (Artificial): Without competition, businesses can artificially inflate prices beyond reasonable levels.
• Low Quality: The absence of competitive pressure can lead to a decline in product or service quality.
• Limited Options for Consumers: Consumers face fewer choices when competition is limited.
• Lack of Innovation: Without the drive to outperform competitors, innovation stagnates.

3. Economic Regulation vs. Competition Policy

While both aim to promote... Continue reading "Understanding Economic Competition and Its Effects" »

Different Marketing Orientations in International Business

Understanding the approach a company takes when entering foreign markets is crucial. These orientations dictate the level of adaptation required for the marketing mix.

1. Domestic Market Extension Orientation

This orientation is illustrated by a domestic company seeking sales extension of its existing domestic products into foreign markets. It is typified by the belief that, if a product sells successfully in the home market, it will sell anywhere else in the world.

Minimal efforts are made to adapt the marketing mix to foreign markets; the firm’s orientation is to market to foreign customers in the same manner as the company markets to domestic customers. It seeks markets where demand... Continue reading "International Marketing Strategy Models and Starbucks Business Strengths" »