OCEB2F 01 Business Goals

Module 1. Business Goals, Objectives⌘

Business Basics from the purely Business Point of View

• Business fundamentals
• Strategy
• Planning and goal-setting
• Project management
• Marketing
• Staffing
• Finance

Source of information⌘

	Steven Stralser, MBA in a Day, Wiley, 2004 [ ISBN-10: 0471680540 ]
	Tim Gorman, The Complete Idiot's Guide to MBA Basics, 2nd Edition, Alpha, 2003 [ ISBN-10: 0028644492 ]

Project Management⌘

• PMI definition: "The application of knowledge, skills, tools and techniques to a broad range of activities to reach a predetermined goal or objective."
• Usually organizations manage project portfolios

Project Management as a Process⌘

• PM is made of IPECC:
  • Initiation - project is started, a project manager is selected.
  • Planning - plan how the project should go.
  • Executing - project team completes the work.
  • Controlling - control the work to ensure that’s it done according to plan.
  • Closing - project work is complete, close out the project finances, team reports.
• According to the PMI, one of these steps fails in 74% of projects
• IPECC are activities of BPs

Sample Questions⌘

According to PM Institute, what might cause a project failure?

• One of the process steps: financing, risk appraisal, goals, monthly progress reports.
• One of the process steps: purposes, finances, actions, prioritizing.
• One of the process steps: delineation, time frames, venue creation, promotion activities.
• One of the process steps: initiation, planning, executing, controlling, closing.

Sample Question⌘

According to the Project Management Institute, Project Management covers what areas?

• A variable sequence of specialized activities including: reporting a sequence of activities, designing the proper retreats for the managers, and supporting roles.
• A fixed sequence of standard activities including: scheduling a sequence of activities, designing, effectively managing business and supporting modern systems and processes.
• A range of topics covering management of development process to ensure its efficiency, effectiveness and success.
• A wide range of topics, designed to reach an objective or goal, including the application of knowledge, skills, tools and techniques.

Marketing⌘

• Is a Strategy and a Process
• Marketing are activities you do in order to sell a product or provide a service
• Influences how customers perceive a business and generates interest and encourages customer to pay for the product or services

Marketing Strategy and Practice⌘

• Marketing is actually the process by which we offer goods or services up for sale
  • Marketing is not a cost or expense but rather a strategic investment
  • Benefit of marketing is longer-term
  • Social and managerial process by which individuals or groups obtain what they need and want through creating, offering and exchanging products of value with others
• The foundation and catalyst of making sales is marketing
• The key to successful sales is a consistent proactive marketing strategy

Key to consistent proactive
marketing strategy⌘

(from MBA in a Day)

1. Dedicate their resources to ensuring that the wants, needs and demands of the customer are the firm's focus
2. Customer focus is the foundation of the strategy of the marketing process
3. Plan that gives direction, guidance, and a structure of proactive strategies to increase sales and improve business relationships

Marketing Four P's⌘

• Marketing Mix is represented by the well-known "4 P's of Marketing"

Marketing as Business Process⌘

• An effecting marketing strategy/plan is an value-creating process composed of several elements:
  • Market segmentation
  • Marketing strategy
  • Market research
  • Pricing
  • Placement
  • Value chain

Market Segmentation⌘

• Marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs and priorities, and then designing and implementing strategies to target them.
• Market segmentation is simply taking a look at the overall market of your product and service and thinking of it in terms of smaller, more manageable pieces
• Market segmentation strategies:
  • geographic segmentation (regional or local markets)
  • demographic segmentation (age, gender, income, race)
  • product segmentation (cars: luxury, midsize, compact, sport, ...)
  • sales-channel segmentation
• Example:
  • Market for a hotel rooms.
  • Rolls-Royce targets wealthy individuals with disposable income > 500k a year
  • Who would be a segment for Barbie Doll?

Marketing strategy⌘

Marketing strategy is like a plan that directs business activities of a company to achieve predefined goals

Market research⌘

• All activities that help to get and analyze information on customers (attitudes, behaviors, ...) that affect buying your product.
• Market research means trying to understand your customers.
• Some important types of information:
  • Buying behaviors (the way in which customers buy)
  • Customer feedback / satisfaction
  • Lifestyle and attitudes

Pricing⌘

Some examples of pricing strategies:

• cost-plus pricing
• competitive pricing
• value pricing

Placement⌘

There are many ways of selling:

• direct sale
• wholesale / retailer
• telemarketing
• Internet
• ...

Marketing and the Value Chain⌘

• The focus on strategy is to build value for the company, so strategy often involves value chains
• A value chain is process of producing and delivering product or service (all activities that add value to the product in any way)
• A value chain typically includes
  • Inbound and outbound logistics
  • Marketing and Sales
  • Services
  • Firm's Infrastructure
  • HR
  • Technology

Human Resources⌘

• A critical process area
• HR helps managers hire, orient, train employees, creates guidelines for employee compensation and performance evaluations.
  • Recruitment process is responsible for filling open positions in the company.
  • Compensation is defining job functions and qualifications, defining salary ranges

Human Resources⌘

Signs of a poor Onboarding and related processes include:

• Regular breakdowns in flow
  • Missed deadlines
  • Increased returns
  • Decreased customer loyalty
  • Regular administration mistakes
• Frequent absenteeism and turnover caused by:
  • Overstressed employees
  • Poor morale
  • Looking for other employment
• Excessive overtime caused by employees being overworked or given too much responsibility
  • Overworked employees can lead to burnouts and increase costs in the long run

Strategy⌘

• Strategy is a process that transfers a long term vision into day-to-day tactics.
• Strategy involves all areas of the company from operations to finance to HR.
• Processes should be connected to a business model (BMM)
• Michael Porter created standard for strategy and analysis
• Porter's Five Forces process
  • Analyse the industry and company's environment
  • Paints a picture of the current environment
  • Develop long-term strategies

Porter's Five Forces⌘

• Five Forces is a framework for industry analysis and business strategy development.
• This model can be used on any firm of any size in any location in any industry and can be utilized regularly to keep a constant eye on the market, the direction of the market, and the competitors coming and going within that market.

Porter's Five Forces Analysis⌘

The outcome of the Porter's Strategic Process should be a strategic plan with objectives with dates and quantities

Porter's Five Forces Examples⌘

• Threat of new entrants: "The barriers to entry in the telecommunications market are extremely high"
• Threat of substitute products: substitute of traditional phone with VoIP phone, tap water as a substitute for Coke
• Bargaining power of customers: Large store can purchase in large volume from the supplier, forcing down prices for the end customer.
• Bargaining power of suppliers: If you are making biscuits and there is only one person who sells flour, you have no alternative but to buy it from them.
• Intensity of competitive rivalry: all four aforesaid create rivalry among competitors.

Managers Must⌘

• Monitor the Essential Six business principles
  • Value for customers - a business exists to create value of some kind (increase value of raw materials or activities)
  • Organization - an organization must have goals and the resources (human, material, financial)
  • Competitive advantage - a company must do something better than other companies in that business
  • Control - ensure that the manager knows what's going on
  • Profitability - a business has to make money
  • Ethical practices - hold themselves to the highest ethical standards

Management Types: process Participants⌘

• Finance: make certain there is enough money for the company to operate
• Accounting: counts the money
• Operations: makes what the company sells
• Marketing: sells
• Sales bring the money
• Support functions do the rest (HR, Legal, Investor Relations, Facilities)

Accounting Basics⌘

• Asset - is an economic resource, everything the company owns: the furniture, the inventory, the equipment, the building, and even cash in the bank, value of ownership that can be converted into cash
  • Assets are there to generate cash.
• Liability - amount of money owned by the company to an organization or individual (suppliers, creditors, government - taxes). It must be paid on specific date.
  • Liabilities arise from past transactions or events.
• Owners' equity - the amount left for the company's owner
  • Assets - Liabilities = Owner's equity
• Balance sheet - a picture of the company's accounts at a certain date

Accounting Basics⌘

Finance, Metrics and Balance Sheet⌘

• Finance and Accounts are deeply involved in the mysteries of the balance sheet
• Of all controls the balance sheet is the most important
• Financial Metrics include
  • Working capital measures a company's capability to pay its current obligations (Current Assets − Current Liabilities)
  • Current Ratio also called the working capital ratio, shows the relationship between current assets and liabilities
    • 
  • The quick ratio (AKA acid-test or liquid ratio) is the capability of the company to meet its current obligations with most liquid assets
    • 

Management Analysis⌘

In addition to monitoring the financial health of the company, managers engineer the results of the strategy.

• Break-even point (BEP) is the point at which cost or expenses and revenue are equal: the operations has not made a profit or a loss

• Return on Investment (ROI) or sometimes just return is the ratio of money gained or lost of an investment relative to the amount of money invested
  • ROI = (Net profit / Investment) × 100%

Cost Accounting ⌘

• Process of tracking, recording and analyzing costs associated with the products or activities of an organization.
  • fixed costs: remain the same regardless of the amount of product the company makes or sells
  • variable costs: change with company's production and sales volume
• Prototypical factors include
  • Raw Materials
  • Labor
  • Indirect Expenses
  • Overhead (electricity, water, rent, ...)

Module 1. Questions⌘

• How can marketing process be described?
• What does HR do?
• What is Porter's Five Forces Analysis?
• What is Value Chain?
• What is BEP and RIO?
• What is Working Capital?
• What kind of costs are there?