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Strategic Analysis

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Erandi Medina

on 7 April 2015

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Transcript of Strategic Analysis

Topic 1: Business organization and environment
Topic 2: Human resources
Topic 3: Accounts and Finance
Topic 5: Operations Management
Topic 4: Marketing
*4 departments

*Handy's shamrock organization
By: Sara Torres, Sofía García and Erandi Medina
Topic 6: Business Strategy
Strategic Analysis
*Types of organization
*Marketing position
*Public and private sector
*Mission and vision
*Ethic and social responsibility
*Problems and solutions
*Opportunities and Threats
*Decision making
*Decision tools
*Porter's generic strategies
*Strategic alliances
*Mergers and takeovers (franchises)
*7C framework
*Lewind's force field analysis
*Multinational companies
*Organizational charts
*Centralization and decentralization
*Communication classification
*Communication networks
*Leadership styles
*Key functions of management
*Motivation theories
*Motivation in practice
*Non-financial motivation
*Corporate/organizational culture
*Negotiations/collective bargaining
*Methods to achieve objectives
*Conflicts and solutions between employers and
*Crisis management and contingency planning
*Sources of Finance
-Internal and external
-Short, medium and long term
*Payback period
*Average rate of return
*Discounted cash flow
*Net present value

*Working capital cycle
*Cash-flow forecast
*Management of working capital
*Purpose of budgeting
*Variance analysis
*Accounts for limited companies:
-Trading account
-Profit and loss account
-Appropiation account
*Balance sheets
-Straight line
-Reducing balance
*Intangible assets:
-Patents and copyrights
*Stock valuation
*Profitability ratios
-Gross profit margin
-Net profit margin
*Liquidity ratios:
-Curret ratio
-Acid test ratio
*Efficiency ratios
-Stock turnover
-Return on capital employed
*Shareholder ratios
-Earnings per share
-Dividend yield
*Gearing ratio
*The market
-Marketing size
-Marketing growth
-Market share
*Nature of marketing
*Marketing plan
*Marketing mix
*Ethics of marketing
*Marketing audit
*Porter's 5 forces
*Marketing research
*Sales forecasting
*Classification of products
*Product life cycle
*Product portafolio analysis
*Pricing strategies:
*Supply and demand
*Types of promotion
-Above the line
-Below the line
Promotional mix
*Channels of distribution
*Distribution strategies
*Supply chain management/logistics
*Entry into international
*B2B (Business-to-business)
*B2C (Business-to-commerce)
*Production methods:
-Line and flow
*Cell production
*Types of costs:
*Contribution to fixed costs
*Cost and profit centres
*Break-even quantity
*Profit or loss
*Margin of safety
*Target profit and revenue
*Quality control and quality assurance
*Total quality culture
*National and international quality standards
*Location production (national and international)
*Impact of globalization on location
*Patents, copyrights and trademarks
*Factors affecting innovation
*Stock control
*Outsourcing and subcontracting
*Make-or-buy decisions
*Project management
-Critical path analysis
1.1 Nature of Business
The company is the basic economic unit responsible to meet market needs through the use of human resources; it is responsible for the production, capital and labor of the business. The business is a system that works together to achieve goals.
1. Production: Change Natural resources into a product or service.
2. Marketing: Identification of consumers’ needs for satisfaction.
3. Finance: Control of money and its transaction.
4. Administration: Area who plans, organize, direct and control de business.
5. Human resources: Area in charge of people management, recruitment, selection, evaluation, training, security.
6. Research and development: Area for investigation for new techniques of the product.
There are three economic sectors; the primary is the one in charge of the direct exploitation of the natural resources. The secondary is the one who uses the machinery to transform the natural resources and the tertiary is the one who provides the service.
1.2 Types of Organization
Organization formed and controlled by the government. Organization formed and controlled by individuals or groups of persons.

An organization is the association that is regulated by a set of rules based on a certain purpose. It can have a Limited Liability which states that the responsibility of the entire organization is limited by the law by the belongings of the owner(s). It can also have a Unlimited Liability in which the owner should take the entire responsibility in case of debt, their belongings will be used for responding to debts.

Profits organizations
In which the one person’s takes full control, responsibility and benefits of the organization. That person will receives all profit of it, and he could make all the decisions, as the work time, investment. The only disadvantage is that is a Unlimited Liability org.
PARTNERSHIP: A relationship of two or more entities conducting business for mutual benefit.
a) General Society
Form of Legal Organization in which Two or More Business Owners join and share the management and the risk of a new organization. In there the owners should specialize in different areas in which they are strong, the decision making is shared at the same way as loses, profit, authority and additional capital. It must be signed a SOCIETY Contract.

b) Corporation
Is the separated legal entity from the owners of the company in which they are responsible for the actions and its required taxes. The owners in this type of organization have limited liability. The responsibility goes though the company, if is there any debt or lawsuit it can be harmful to company by itself not owners. There is more regulation and complexity at paperwork which causes difficulty to constitute. It must be at least 2 partners “Shareholders” with an action of 50,000 dollars. Each share will be equal value, entitle to one value.

c) Limited liability
Is the kind of association in which is constituted by partner who are obligated to pay their contribution without social parties. In this kind of partnership, the partner or investor's liability is limited to the amount he/she has invested in the company. Each share is unequal; causing that the percentage of right to vote is different in each partner. It must be on the company a maximum of 50 owners with a minimum capital of 3, 000,000, the only disadvantage is that the cost for its integration is very complex.
Non-Profits organizations
It is set by a group of philanthropist with their own assets. The federation, state and municipalities contribute with their economic. The length is determined by the institution, but when is declared exist, the assets belong to charity.
It is a private entity, with goals and objectives defined by its members. It is created independently.
1.3 Objectives of an Organization

Vision: is the dream about the company, what and do they want to be.
Ethical Objectives: Values to achieve trust between the employees which will cause to have a better external image, prestige, an excellent work environment and a harmonic relationship between them. With that also improve the recruitment and retention of staff, therefore the motivation and reduction of conflicts.
Mission: Is the fundamental purpose from all the groups with are stated to motivate the employees and are expressed qualitative.
Corporate/ Strategic objectives: Are the goals that are established by the organization to measure the performance of employees.
Division/ tactical Objectives: Are the specific goal of each division set to achieve the strategic objectives, there are more predictable.
Operational and Functional Objectives: Are the goals of each department to guide daily operation, compatible with mission.
Measurement tool that examines the external environment and global factors that can affect a company, provide a quick visual representation and the pressures of a company.
Factor to how the regional, national, and international political affect the company.
Includes laws, regulations, political pressure and the point of view of the gov.

Factors that involves economic factor and their impact.
Consumer activity, economic variables (inflation, unemployment, trade, growth), fiscal government polices, taxes and variable cost, change of market

Demographic trend, education level, changes in life style, consumer attitude, social mobility.
Brand image
Fashion and role models
Ethnic and religious factor
Culture Globalization
Development of competitor
Research funding
Dependent technologies
Substitute solutions
Licensing, patents

Aware about the negative impact on business on the environment worldwide.
strategic decisions
are long term which influence the entire company and are made by the owners.
tactical decisions
are the midterm which can be calculated and are made by the managers.
operational decisions
are the short term which are the daily and quickly decision made by the employees.
pportunities and
The size of a company can be measures by the sales revenue, the number of workers, amount of capital, earning, market share, market capitalization.
MICROENTERPRISE: Less than 10 employees.
SMALL BUSINESS: Less than 50 employees.
MEDIUM ENTERPRISE: between 50 and 250 employees.
GREAT COMPANY: more than 250 employees.

Reasons for growing => Survival, gain from the economies of scale, future benefits, market share, reduce risk.
Economic of scale: benefit in cost production.
INTERNAL: administrative (grow because specialist managers, improving efficiency, lower average cost), financial ( increase resources to choose from) Purchase ( better prices buying wholesale) Marketing (administrative cost not increase in proportion to the size.
EXTERNAL: Labor (training cost reduction) Commercial services (Attraction of small firms) Cooperation (join business of same industry) Disintegration (concentration of a component)

Internal: Without involvement of other business
New process, new systems, quality, price, branding.
External: With the involvement of other company.
Acquisition (Merger, takeover) , innovation, tightening

MERGERS: TWO COMPANIES COME TOGETHER AN OPERATE AS ONE ORGANIZATION. It happen when a small company want to grow or to integrate operation and achieve saving because is easier and cheaper to expand.
Horizontal: merger of companies n similar activities.
Vertical: union of companies which are active in different stages of production cycle.
Conglomerate: union of companies with different activities
Lateral: union of companies with similar operation but no competition.

ADVANTAGES: Growth sales volume, share responsibility., elimination of competition.
DISADVANTAGES: Fail of alliance, disagreement in the management, profit is divided.

Michael porter’s Generic strategies.
Rivalry among competitors
Threats of new entrant into market
Threat of substitute products.
The power of a consumer to threat
The power of threat of suppliers.
Benefits as a method of growth for the franchisee :
The franchisor has proved a formula so that the probability of commercial success is high.
He gets the "know-how" of the franchisor, allowing him to train staff, both in financial and service aspects.
He receives free advertising, helping him to reduce costs.
Decreased workload at the start of business
Benefits as a method of growth for the franchisor :
• The parent company is experiencing rapid growth (franchise may be less risky than an organic growth)
• It allows the company to have a national and international presence.
• Through growth and expansion of operations, the franchisor can benefit from economies of scale.
• The franchisor can benefit from growth without having to worry about operating expenses, such as staff salaries, recruitment, promotion, etc.
Disadvantages for the franchisor :
• Franchisees who do not follow the procedures could damage the reputation of the company.
• Changes to the franchise system must be programmed.
• Monitoring and control of each of the franchises released.
Disadvantages for the franchisee :
• The money required to buy a franchise, can be very high.
• A percentage of the profits must be paid to the franchisor.
• You can not make decisions about the business or try to generate new ideas.
• Do not have access to the ownership of the brand.
• Acceptance of supervision and control of your business.
Resistant to change: John Paul states that the reason for resistance to changes are the personal interests, misunderstandings, different points of view, low tolerance to changes, etc.
The growing integration and interdependence of the world´s economies. It has led national economies to integrate towards a single global economy.
Factors that contribute:
International trades that encourage importation and exportation.
Technological progress that reduces the cost of information interchange.
Lack of regularization that causes the fall of cost of transportation and distribution.
Cultural recognition
The globalization increase competition, increase demand and consumer expectation, allow economies of scale, opportunity of growth.

MULTINATIONAL COMPANY: Business that operates in two or more countries.
Problems of expansion: lack of knowledge, storage transportation and distribution may increase, legal restriction. Language barrier, cultural differences, political and economic condition of the foreign country.

TRADE BLOCK: free trade area for by one or more agreement between two or more countries.
• European Union
• European Free Trade Association
• Caribbean Community
• Union of South American Nations
• Southern Common Market
• Andean Community
• North American Free Trade Agreement (NAFTA)
HR Function: Planning, Recruitment and Selection, Induction and Training, Promotion and Transfer, Evaluation, Discipline, Well conditions, Salary, Development, Compensation and Motivation.
Study planning
*Internal: Promotion, Development, Training, Retirement, Flexibility and Legal factors.
*External: Housing, Transport, Flexibility, Skills, Trends, Competition, Unemployment, Government, Subside and cost.
1. Recruitment
a. Job analysis: Study of the job, the skills and training required
It is stated the profile of the employee, skills, effort, responsibility and knowledge the employee should have and the activities this employee should develop. It is stated the value of the position by the punctuation squeme to state salary.
2. Selection:
a. Application form
i. Personal information (cv)
ii. Education level (cv)
iii. Interest
iv. Experience (cv)
v. References an reason

i. Interview
ii. Role play
iii. Test, psychometric intelligence and aptitudes
iv. Group presentation
v. Simulation
3. Training
Induction: courses or/and practices for adaptation and being comfortable. It is shown the history, rules, benefits, roles, teammates and supervisors.
At work: workplace
Outside: Coaching, job rotation, tutoring, self-learning, distance education and e-learning.
Flat: Short chain of command (continuous line of authority) and a wide control scope (subordinates)

Hierarchical: Long chain of command and
a narrow control scope.

Bureaucracy is the division of labor with impersonal relations, and the delegation is the assignment of the authority (person with rights over people)
The centralization is called when the decisions are made by a single senior manager with strong leadership, and decentralization is when there is delegation of authority and decision making.

INFORMAL relations and friendship among members
* Advisory: dependency in problems
*Trust: Sharing information in crisis

1. Hierarchical: authority and decision making is shared
2. Matrix: Teams of people with same abilities in charge of several projects.
3. Independent: each employee take their own decision, communication is lack.
4. Business Structure: Centralization

1. Sender
2. Message
3. Channel: Vertical and Horizontal, Formal (Approved) and informal, Internal and external
4. Media
a. Written: letter, memo, reports, notice, newspaper, magazine and forms
b. Visual: face to face to allow feedback and cooperation
c. Oral: telephonic caused by distance.
d. Technological: internet, email, mobile phone, answering machine…
5. Receiver
6. Feedback
Leadership is the process of influencing a group to guide towards the achieving goals. A leader is someone who influences others, he has a vision and commitment, and he is an expert in the area, at the same time is creative and innovative and provides a positive self-image.
Autocratic Leader
: bases his power in threats and punishment, he is firm and only cares about the results of the company.
: He is concern about their subordinates, he trust in the good capacity of their employees and assigned tasks on the skills of the workers, at the same time, he share decision making.
He isn´t involved on the work and he has little concern about the work. He gave freedom for decision making and evades responsibility

*Situational Motivation and Knowledge
100% motivation 60% motivation 50% motivation 0% motivation
100% Knowledge 60% Knowledge 0% Knowledge 0% Knowledge
*Continuous: Centralization and Subordination
1- Fayol: 5 manager functions (Plan, organize, direct, coordinate and control) and 14 principles
a. Division of Work
b. Authority
c. Discipline
d. Unity of Command
e. Unity of Direction
f. Subordination
g. Remuneration
h. Centralization
i. Scalar Chain
j. Order Clean
k. Equity Managers
l. Stability of Tenure of Personnel
m. Initiative
n. Esprit de Corps

Theories of Leadership and Management
2- Peter Drucker The management in a business should be by the 6 objectives.
(Goals, organization, motivation, communication, performance and development)

3- Likert: System of Management
(Authority exploitation, pattern authority, consultive and participative)
4- Fleider= Leadership Style: Task Assignment and relationship between employees.

5- Robert Blake= Style of Managers
(Improvised, Country club, perish style, middle of the road and team style)
6- Tannen Baum Continuous Leadership

7- Handy Leadership as gods
Retribution: concept wider than just payment

• Financial
♥ Salary
♥ Wages
♥ Time workers
♥ Pieceworkers

Employment benefits
: Payment by performance and skills, bonus for success, commission, increase of salary by the years of service
Supplementary Benefits
: Pension, Disability, insurance and company car
Incentive scheme
Payment based on performance and commission
: Utility participation (Society Contract), Share Capital Participation, Merit & skills
• Non- Financial

♥ Remuneration of needs
♥ Recognition
♥ Responsibility
♥ Growth

Incentive scheme
Give more work
Recognize employments, give confidence, more decision making.
Expand Role
Job rotation: workers and tasks shif
Theories of Motivation
: Theory of need pyramid
: Monetary Bonus
Douglas Theory
X: $ => Lazy and Selfish
Theory y: Needs: Creative and Motivated
Employee need to achieve 3 needs: Achievement, Affiliation and Power
: Recognition, Promotion, Responsibility, enrichment and empowered
: Motivation by goals
Comparation between employees and compensation
Set of values and beliefs that are share in an organization, are reflected in the mission and influences decision making.
How to develop a strong corporate culture?
People need to share a meaningful story to address problems
Share values, belies.
Join the culture by stories, legends, symbols, slogans.
Advantages_ sense of belonging and security, they feel part of the business which improve teamwork and motivation. Minimization of errors, cohesion is promote, minimization of group problems.

Kotter and Heskett : Adaptive and inert culture
Handy: Power (centralized decision), role(defined positions), task (focus on results) and person culture (share knowledge among emplyees
Jones and Goffe: Sociability (care about their collegues) and Solidarity (unity of organization)
Johnson: Fragmented organization (LOW SOLIDARITY AND SOCIABILITY)
Deal and Kennedy the way things are done describe the type of culture
Geer Hosftede:
Power Distance
Individualism vs. collectivism
Masculinity vs. femininity
Uncertainty avoidance
Long-terms. short term orientation
Reason for clashes
: growth, merger, acquisition, change in management and leadership.
The main problems are caused because of the payment rates, flexible working, and working conditions.

COLLECTIVE BARGAINING: way to reduce conflict through the negation between trade unions determining conditions of work and terms of employment. The employees are free to join the trade union, can be independent of the state, should negotiate on faith. Result => collective agreement.

AUTONOMOUS: operate under senior’s supervision, make own decision, TEAMWORK,
SHAREHOLDERS: depending the percentage of the share.

LABOR UNION: association of works or employers formed to improve and defend their interest.
Types: skill, industrial, general white collar
A contingency plan forecast the possible and worst scenarios of crisis.

help reduce risk, reduce impact of crisis, ensure safety.
invested time and cost, problem may never occur, updating.
Finances: branch of economics that studies the generation and management of the individual in the company, is the science studying money.
Account: Primary purpose is to provide useful information in the economic decision making. The final product is the financial report that summarizes the economic and financial situation of the company.
Management: information system that serves the internal needs of the administration to facilitates the planning. Is the information for internal user that is for the future, related to the economic statistics.
Financial: expressed in quantity and monetary terms all the transcription of the company in order to provide information from the past to the external user for decision making.
Tax: information system designed to comply with tax obligation of organization regarding a specific user.
Economic resource property of an entity that is expected to yield benefits in the future. The values is determined based on the acquisition coast of the item, plus all necessary expenses.
Asset= capital + liability

• Cash
• Deposits in the bank
• Account receivable
• Products or goods
• Land
• Transportation equipment
• Furniture
• Office equipmen
what a business owes to other person or entity know as creditor.

• Payable account
• Wages
• Taxes
• Bank loans
contribution of owners know as shareholder
Resources that are received by the sale of product or service by cash or credit, if not is know as account receivable.
assets that have been used or consumed in the business in order to earn income or revenue

• Salaries
• Wages
• Insurance
• Rent
• Commission
• Advertising
Investment: Purchase of capital goods (used in the production of other goods)
Types: capital goods, construction, inventories, public sector

APPRAISAL: quantitative tecniques used to calculate the financial costs and benefits of investement.
Net cash flow: amount of money the company expect to receive each year of the investment.

Payback period: timer it takes for a project to recover or setle the down.
Useful when changes rapidly, simple
Cash after payback is not taken into account, ignore usefulness of the project.

Accounting rate of return: average prift on a investment profit as percentage of the amount investement.
Show the profit of an investment, compare projects

Discounted cash flow
Net present value

Takes into account the interest rate and time.
Presented value is the current valu of a sum of money available in the future.
The discounted cash flow takes into account the interest rates affect the present value in the future.

Accounting rate of return: mesures ration betwwn average cash flow and average initial net investment. It measures how many times the Net Cash flow represents relative to the average investment of the investment project.
A budget is a financial plan for expected revenue and expenditure for an organization or department for a given period of time. It is used for planning, for communication plans, to coordinate activities, to clarify authority and responsibility, to motivate and to monitor staff.

: monetary cost of the staff that the organization required.
forecast of how the activities will be achieve with its budget.
breakdown of planed volume and value sales
: level of output
units= factor of inventory + unitary sales – initial inventory unit
used when it’s not easy to calculate cost in some areas and there is need to be a justification of the money to approve the expenditure.

: difference between the budget of the company and the actual outcome
*Favorable and unfavorable
FINANCIAL ACCOUNTS: Documents that a company must prepare at the end of an accounting period, in order to know the financial situation and the economic performance of its activities. They ensure that there are sufficient funds to acquire the resources needed to meet objectives, ensure that costs are controlled. Ensure an adequate cash flow and help to establish and control the levels of profitability.
They provide information to workers, debtors, creditors, suppliers, clients, shareholders, government, Competition, financiers and investors.

BALANCE SHEET: Statement of financial position (Assets, Lliability and Equity)
set of real and personal properties
cash and bank, temporary investment, notes and accouts receivable, inventory
*Fixed Asset:
Land, building, machinery, furniture, tools, vehicles
Intangible assets
: Brand, franchise and patent
legal obligations for which the debtor is obligated to pay the creditor
Operating profit= gross profit – expenses

investment of owners in company, retained profit, accumulated losses.

PROFIT AND LOSS ACCOUNT: shows operating profit and net profit/loss of a business.
TRADING ACCOUNT: show the top section of P&LA, show the gross profit of a business.
Gross profit= Sales – (Opening Stock + Purchases – Closing Stock)

APPROPRIATION ACCOUNT: shows how does the net profit is distributed. (Taxes, dividend, retain profit)
Marketing is an organizational function and a set of process to communicate and deliver value of their product or service so the organization and shareholders obtain benefit. It focuses on the competition rather than itself to win the battle against the competition and therefore have the best strategic position.

*Business growth *Maintain sell levels *Consumer’s satisfaction
*Maximize benefits *Corporate image *Product differentiation
*Innovation *Survival *Market Share

The factors that impact marketing is the economic growth fashion, technology and competition.
Product Marketing
*Market oriented business: Analysis of consumers’ needs
*Product oriented business: production of high quality, with development for the consumers
Social Marketing
*Influence social behaviors, benefit the target audience, and Balance the pursuit of business profits with the consumer’s desires and society best interest
Non-Profit Marketing
Company is looking for the increase of funds by governmental subside, donations and sales services.
Organizational market: public respect for the company
Personal Market: Public respect for the person
Service Marketing
Both, the company of her father
and her own business belong to
the third sector

The father of LadyA work independently and
operate as a sole trader.
LadyA attended to classes organized by a
private local charity institution and non-profit organization.
LadyA change his business from a sole trader administration to a private limited company.
The mission statement of the non-profit
organization class that Mrs. Carroccio attended
was “to help all adults immigrants learn English”
There were different types of employees that work for LadyA.
Core Employees: Band, group of dancer, music and video technicians,
Temporary employees: Set the venue and stage at the concerts
Peripheral Employees: two personal assistants, two housekeepers,
one chef, one personal trainer, one river, one chief bodyguard
and six bodyguards.

The hispanic population in the US was rapidly growing, however this was causing a negative political reaction in the US affecting Lady Alejandra. She changed her name to LadyA to increase her popularity in the american market. Her popularity on the hispanic market also grew, people saw her story as a shining success of the hispanic american people.
In 2000 technology was changing the music industry which impacted on the profitability of her music videos. She had to invest in the productions of them, but did not get any direct revenue. Also, with the creation of MP3 the album sales began to fall since people could get the songs for free on internet.
The economic downturn that began in 2008 affected the revenue of music too, artist had to transform themselves into media personalities to get revenue from their branded identities.
As her business grew internally LadyA
changed the nature of it to a private
limited company
LadyA has three strategic options to increase her brand,
one of them is move into South American markets and
create a powerful name through concerts, firms, etc.
Another option is to develop a global market with the products under the LadyA brand, this includes e-commerce since it will offer many opportunities.
LadyA had different strategic options to
maintain sales level and also to grow into
the international market, which are some objectives of marketing.
’s mom received training where she had a job in the cafeteria of a local school.
Lady A
had some acting job when production companies were recruiting for small roles in films in Miami.
’s agent, Ruth Lieberman was recruited.
Lady A
’s business has a hierarchical structure, in which she is on the top, then her core employees and then peripheral employees.
Lady A
was very inconsistent in her style of leadership, sometimes she adopted an autocratic leadership and other times a more laissez-faire. But after some years in the business her leadership style matured with her, and now she had a more paternalistic leader. She delegated some work but kept a very close interest in all decisions.
Lady A
mom received financial retribution when she worked in the cafeteria of a local school. She received some fringe payment such as health insurance.
With the information provided in the case it can be said that the family of LadyA were at the bottom of the Maslow need pyramid because they were looking for basic needs such as food and shelter.
Lady A
The problems in the relationship between employers and employees were mainly because the working conditions. They weren't comfortable with the style of leadership of LadyA because she was very inconsistent with it. The communication between them was poor and this caused the main problems. The employees were complaining behind her back and calling her
"la princesa"
to mock her
Lady A
Time series Analysis
Predict future levels of the latest data by two components: trend, which is calculated by the moving averages; and the fluctuation the cyclical (Influenced by changes in economic expansions), seasonal (Time series whose frequency is less than a year) and random (influence by external problems).
Reasons to make a market study
DESCRIPTIVE: To know what is happening
PREDICTIVE: To know what will happen
EXPLANATORY: To know why is happening
EXPLORATORY: To know what could be done

Primary: Information that doesn't exists, the one who is looking for by the market test, interviews…
Secondary: Information that already exist such as Annual Reports form the company and external.
Sampling: Selection of population for market study

o Quota: population is divided into categories and assigned a quota for different categories.
o Random: Sort random of units
o Striated Random: Random sample divided into groups by characteristics.
o Cluster: Population straitened geographically
o Snowball: Set of interviews which causes recommendation
o Systematic: fault of sample
o Inadequate: difficult to obtain the information
o Failure in data collection: lack of data, inappropriate answer
o Coverage: important elements not include
Segmentation: Division of groups by needs, characteristics and common behavior
Variable identification
Age, gender, education, family, preferences, geographic, ethnic groups, life style.
o growth
o Keep sales
o Product differentiation
o Introduction and product innovation
o Knowledge and customer satisfaction
o Survival
o Maximizing the benefits updated
o Market share
o corporate image
Target markets are groups of individuals that are separated by distinguishable and noticeable aspects. Target markets can be separated by the following aspects:
• Geographic segmentations, addresses (their location climate region)
• demographic / socioeconomic segmentation (gender, age, income, occupation, education, household size, and stage in the family life cycle)
• Psychographic segmentation (similar attitudes, values, and lifestyles)
• Behavioral segmentation (occasions, degree of loyalty)
• Product-related segmentation (relationship to a product)[2]


o Place of the product in the target consumers’ minds in relation to the competitive products.
o Action of design image of a company and how to supply so that these occupy a distinctive place in the minds of consumers.

The strategies must be consistent with the objectives. Many businesses take into account the strategies of their competitors to define themselves. The marketing strategy may be influenced by the level of competition and the degree of change within different markets. Attitudes are influenced by the environment in which a business operates, but also the views of managers and directors and the business culture. Many businesses consider brand loyalty or the will as an important intangible asset.
-LEADER: Expanding the total market, Increase market share and defend current market share
-MARKET FOLLOWER (copy, innovate, not able for challenge)
-NICHE: They are very small segments of the market. Based on Geographic location, differentiation (plays, travel "business class"), Consumer group (organic food), Type of product
-UNIQUE SELLING PROPOSITION STRATEGY Aspects of a product that make them unique and different from the rest.
LEADER IN COST Winning a cost advantage over competitors, holding higher levels of productivity
FOCUS concentrated in one part of the market segment in particular rather that in the whole, to effectively meet the needs of a consumer group.
Classification of Product
Product line: Group of products that are related because of their function
Product Mix: Consist of all groups of the same kind
Product Range: Consist of all products of the company
Product Portfolio: Total set of lines which a company work.

Research and development is the research of the end of life cycle, need to be replaced. Involves developing techniques in the laboratory for innovation

LIFE CYCLE: Stages through which a company passes and sales can be expressed.
1. Development: design of the product, research and development of the product
2. Introduction: sales are low, the cost are included on the price, high price.
3. Growth: product is stable and known by the consumers, profit is made
4. Maturity: sales level off, the product stabilizes, competitors enter market, extension stra.
5. Saturation: Many firms enter the market, lot of competition
6. Decline: Sales and profit fall down, company need to be innovated.
EXTENSION STRATEGIES=Used on the saturation and decline stages to find new uses, new markets, develop wide range of products, change image, change components.

Boston Consulting Group of Matrix: Technique that allows business to analyze their portfolio
• Nominative: Word
• Innominative: logo, visual.
• Tridimensional: shape of package
• Private: wholesalers brand
• Advertisement: Phrase, Slogan
• Manufactures: created by the producers, the product/service uses the name
• Family: Different product, name of the company or corporation that creates loyalty.
• Product: Single brand “ariel”
• Companies: product as a result of the brand
Price: amount of money for a product or service of the sum of values that consumers exchange for delivering benefits of owning product or using service
Factors to price

: marketing goals, strategies, cost, organization
nature of market, demand, competition, environment factors, economic, government
Cost-Based Method
• Marginal cost/Cost plus Pricing PRICE=AVERAGE COST + PROFIT MARGIN
• Total Cost Absorption/Full cost pricing PRICE= DIRECT + INDIRECT
Competition based
• Leadership: Establish the price according the market they are leader, freedom to establish
• Predator: reduce the price to eliminate opponent
• Current/ going rate: price that follows the competitor not challenge
Market based
• Penetration: set a low price to enter market
• Skimming: set a high price (technologic)
o Prestige: permanently high price because of image, reputation
• Price discrimination/ variable: offer same product in a different price (cinema)
• Loss leader: set price below cost value
• Psychological $14.99
• Promotional: Low price in season to get rid of excess of stock
Sensitivity of the supplied or demanded quantity in relation to the change in price
Elastic: change in price, demand change
Inelastic: change in price, no demand change
Objectives: To inform, to persuade, to remind

Above the line: used of media (Pull promotion)
Tv: coverage mass market, high cost, brief exposures
Magazine: select target, promotion is static
Radio: local acpetance, select audience, audio message, brief exposures
Cinema: specific market segment, cost, limited audience
Below the line: (Push promotion)branding, logo, sloga, packing, word of mouth,
• Advertising: Non personal information used to inform the market all characteristc of the product, idea to persuade and build brand preference, used to remind the product.
• Sales promotion: incentives to sales

o Sample
o Coupon
o Reimburesment
o Free prize
o Comercial item
o Point of sale
o Special price
o Sponsorships

Promotional Mix: set of tools that the company used to communicate
Channels of distribution
*Zero level: any intermediary, producer sells directly
*One level channel: one intermediary, use of retailer, agent, distributor
*Two level channel: two intermediary, wholesalers
WHOLESALERS: business that purchase large quantity of product from manufacturer and separate and sell in smaller unit to retailer
DISTRIBUTORS: Independent specialist business that trade the product (NISSAN)
RETAILERS: sellers to the final costumer (shops)
*Independent: stocker operating sole proprietorship
*Multiple: chain stores
*Supermarkets: food stuff
*Hypermarket: huge outlet not just from food but products, located out of town
*Departmental store: retail outlet that sell large range of products (Liverpool)
Channels of distribution
*Zero level
: any intermediary, producer sells directly
*One level channel
: one intermediary, use of retailer, agent, distributor
*Two level channel
: two intermediary, wholesalers
WHOLESALERS: business that purchase large quantity of product from manufacturer and separate and sell in smaller unit to retailer
DISTRIBUTORS: Independent specialist business that trade the product (NISSAN)
RETAILERS: sellers to the final costumer (shops)
: stocker operating sole proprietorship
chain stores
: food stuff
huge outlet not just from food but products, located out of town
*Departmental store:
retail outlet that sell large range of products (Liverpool)
Trading of goods and services via internet.
The consumers can shop online from the conform the internet gives another distribution channel, the respond is faster, reduction of packing, reduce fixed cost, high speed transaction.
Bank impose charges for credit services, fraud, soam, no easy acess in some countries, volatile.
recruited a full time accountant to help her manage the money and pay the appropriate taxes

Working capital is the amount of money needed to pay for the day-to-day trading of a business.
WC= current assets– current liabilities
Cash flow forecasts are a list of estimated cash inflows and outflows of a future time period.

Thanks to some technological changes, the direct profitability of music videos ended, which decreased her revenue.
When her father was trying to set up his own business, his cash-flow forecasts were weak so he got turned down several times for bank loans.
managed all her accounts with help of a professional
In the music industry depreciation doesn’t work the same way as if it was another product, for example a TV.
The main intangible asset for LadyA is her name
At first
decided to target the Spanish-Speaking market in the USA, because of that she was promoted as “Lady Alejandra” to emphasize her Hispanic origins.
The US changed rapidly demographically , the Hispanic population was growing but it was creating a negative political reaction in the US. Because of that she changed her brand name to LadyA. That change caused the opening of a new market: The English-speakers
Primary and secondary market research had showed that perfume and cosmetics would best connect with LadyA’s established brand and help her reach her main target market: teenage girls and young women.
Ruth Liberman, agent of
, explained to her that the product life cycle of music stars has to be carefully managed, because it is often short.
LadyA’s product range consisted of music, perfume and cosmetics, under the same nominative brand LadyA
When LadyA had several years in the market Kersey & Joyce proposed several extension strategies to keep her in the public for a little longer, some of this strategies were develop more products under the LadyA brand, re-brand herself, or move into South-American markets.

appeared on both, below the line and above the line promotions of various types of products. She was very careful of which products she endorsed so that they could strengthen her brand identity.
One of the strategic options that Kersey and Joyce suggested to
was related to the opening of a new channel of distribution of her new products .
The second strategic option focuses on developing an international market with different products, like a clothing range or accessories distributed under the name of LadyA
Another of the strategic options that Kersey and Joyce suggested to
is related to e-commerce. It is recommended to use it to open a new channel of distribution of her new products so a global market can be developed
Job production: involves the organized production of a single product or small orders in s special period of time, this tends to be intensive, classified and limited by machinery.
The quality is according to needs; motivate workers, uniqueness and flexibility.
The cost of labor is high, machine and equipment is expensive
Batch: used when there is demand on the product and the production is divided into number operations, it performs a particular operation and then passes to the other
There is flexibility at work in every batch, workers focused on one operation
The planning and coordination of machinery and workers is required, less motivated workers and if the batch is small the unit cost would be high.
Line and Flow: different operations, continuous sequence, unit cost reduction, high cost of startup.

The Malaysian manufacturer would produce
perfume and cosmetics using batch production
Costs are the basis of the price the company charge for their product to cover the cost of production.
Fixed: costs that remain constant and no matter the product or quantity (Rent, advertising, market research, security, salaries, utility, insurance, administrative)
Variable: costs of production increase according to the volume production (Raw material, labor, direct input, commission, containers, packing)
Semi-Variable: fixed costs that changes according to the production (light consumption, cellphone)
Direct: costs related to manufacturing, to a particular project or the output of a single product
Indirect: costs not-directly related to manufacturing

Quality control= traditional way of quality management that involves checking and reviewing process
Quality assurance = management process of guaranteeing the consumer of a product quality.

TQC (TOTAL QUALITY CONTROL): Philosophy that occurs in organization that embeds quality in every business operation process, the motivation is improved, the wastage is reduced, there is lower cost of production and the image is improved. But there is high cost for establishment and long time to see effect.

KAIZEN continuous improvement philosophy used to increase productivity by forming groups in each area to check and eliminate waste.

QUALITY CIRCLES: smalls groups created for discussion.

BENCHMARKING: Comparation (Strategic, performance, process, internal, external and international)

Because of the batch production of the perfume, quality control may be a problem for LadyA
A patent is the legal right to be the exclusive producer or user of a newly invented process or product, for a finite period of time. The patent is granted after the inventor has registered and satified the conditions stipulated by the government.
Copyrights provide legal protection for artists and authors by preventing others from using or copying their published work without permission
A trademark is a sign or logo that represents a business or a product belonging to that business.If the trademark is registered at a patent office, it acts as a barrier to rivals wanting to imitate the product name or symbol.

In the case of
Lady A,
her trademark is her name
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