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This page will provide a brief overview of the different types of basic
forms of business ownership including: corporation, sole
proprietorship, and partnership.
Corporations
CLASSIFICATION
library classification is a system of coding and organizing library materials
(books, serials, audiovisual materials, computer files, maps, manuscripts,
realia) according to their subject and allocating a call number to that
information resource. Similar to classification systems used in biology,
bibliographic classification systems group entities that are similar together
typically arranged in a hierarchical tree structure. A different kind of
classification, called a 'faceted' system, is also widely used. This synthesises
a class mark from various aspects of the subject.
Classification of a piece of work consists of two steps. Firstly the 'aboutness'
of the material is ascertained. Next, a call number,(essentially a book's
address), based on the classification system will be assigned to the work
using the notation of the system.
It is important to note that unlike subject heading or Thesauri where multiple
terms can be assigned to the same work, in classification systems, each work
can only be placed in one class. This is due to shelving purposes: A book
can have only one physical place. However in classified catalogs one may
have main entries as well as added entries. Most classification systems like
DDC and Library of Congress classification, also add a cutter number to
each work which adds a code for the author of the work.
Classification systems in libraries generally play two roles. Firstly they
facilitate subject access by allowing the user to find out what works or
documents the library has on a certain subject. Secondly, they provide a
known location for the information source to be located (e.g where it is
shelved).
Until the 19th century, most libraries had closed stacks, so the library
classification only served to organize the subject catalog. In the 20th
century, libraries opened their stacks to the public and started to shelve the
library material itself according to some library classification to simplify
subject browsing.
Some classification systems are more suitable for aiding subject access,
rather than for shelf location. For example, UDC which uses a complicated
notation including plus, colons are more difficult to use for the purpose of
shelf arrangement but are more expressive compared to DDC in terms of
showing relationships between subjects. Similarly faceted classification
schemes are more difficult to use for shelf arrangement, unless the user has
knowledge of the citation order.
Organization
An organization (or organisation — see spelling differences) is a social
arrangement which pursues collective goals, which controls its own
performance, and which has a boundary separating it from its environment.
The word itself is derived from the Greek word ὄργανον (organon)
meaning tool. The term is used in both daily and scientific English in
multiple ways.
In the social sciences, organizations are studied by researchers from several
disciplines, the most common of which are sociology, economics, political
science, psychology, management, and organizational communication. The
broad area is commonly referred to as organizational studies, organizational
behavior or organization analysis. Therefore, a number of different theories
and perspectives exist, some of which are compatible, and others that are
competing.
• Organization – process-related: an entity is being (re-)organized
(organization as task or action).
• Organization – functional: organization as a function of how entities
like businesses or state authorities are used (organization as a
permanent structure).
• Organization – institutional: an entity is an organization (organization
as an actual purposeful structure within a social context)
Theoretical scope
Mary Parker Follett (1868–1933), who wrote on the topic in the early
twentieth century, defined management as "the art of getting things done
through people".[2] One can also think of management functionally, as the
action of measuring a quantity on a regular basis and of adjusting some
initial plan; or as the actions taken to reach one's intended goal. This applies
even in situations where planning does not take place. From this perspective,
Frenchman Henri Fayol[3] considers management to consist of five functions:
1. Planning
2. Organizing
3. Leading
4. Coordinating
5. Controlling
6. Measuring results
Some people, however, find this definition, while useful, far too narrow. The
phrase "management is what managers do" occurs widely, suggesting the
difficulty of defining management, the shifting nature of definitions, and the
connection of managerial practices with the existence of a managerial cadre
or class.
One habit of thought regards management as equivalent to "business
administration" and thus excludes management in places outside commerce,
as for example in charities and in the public sector. More realistically,
however, every organization must manage its work, people, processes,
technology, etc. in order to maximize its effectiveness. Nonetheless, many
people refer to university departments which teach management as "business
schools." Some institutions (such as the Harvard Business School) use that
name while others (such as the Yale School of Management) employ the
more inclusive term "management."
Speakers of English may also use the term "management" or "the
management" as a collective word describing the managers of an
organization, for example of a corporation. Historically this use of the term
was often contrasted with the term "Labor" referring to those being
managed.
Historical development
Difficulties arise in tracing the history of management. Some see it (by
definition) as a late modern (in the sense of late modernity)
conceptualization. On those terms it cannot have a pre-modern history, only
harbingers (such as stewards). Others, however, detect management-like
activities in the pre-modern past. Some writers[who?] trace the development of
management-thought back to Sumerian traders and to the builders of the
pyramids of ancient Egypt. Slave-owners through the centuries faced the
problems of exploiting/motivating a dependent but sometimes unenthusiastic
or recalcitrant workforce, but many pre-industrial enterprises, given their
small scale, did not feel compelled to face the issues of management
systematically. However, innovations such as the spread of Hindu-Arabic
numerals (5th to 15th centuries) and the codification of double-entry book-
keeping (1494) provided tools for management assessment, planning and
control.
Given the scale of most commercial operations and the lack of mechanized
record-keeping and recording before the industrial revolution, it made sense
for most owners of enterprises in those times to carry out management
functions by and for themselves. But with growing size and complexity of
organizations, the split between owners (individuals, industrial dynasties or
groups of shareholders) and day-to-day managers (independent specialists in
planning and control) gradually became more common.
Sun Tzu's The Art of War
Written by Chinese general Sun Tzu in the 6th century BCE, The Art of War
is a military strategy book that, for managerial purposes, recommends being
aware of and acting on strengths and weaknesses of both a manager's
organization and a foe's.[4]
manufacture of pins. While individuals could produce 200 pins per day,
Smith analyzed the steps involved in manufacture and, with 10 specialists,
enabled production of 48,000 pins per day.[5]
19th century
Some argue[citation needed] that modern management as a discipline began as an
off-shoot of economics in the 19th century. Classical economists such as
Adam Smith (1723 - 1790) and John Stuart Mill (1806 - 1873) provided a
theoretical background to resource-allocation, production, and pricing
issues. About the same time, innovators like Eli Whitney (1765 - 1825),
James Watt (1736 - 1819), and Matthew Boulton (1728 - 1809) developed
elements of technical production such as standardization, quality-control
procedures, cost-accounting, interchangeability of parts, and work-planning.
Many of these aspects of management existed in the pre-1861 slave-based
sector of the US economy. That environment saw 4 million people, as the
contemporary usages had it, "managed" in profitable quasi-mass production.
By the late 19th century, marginal economists Alfred Marshall (1842 - 1924)
and Léon Walras (1834 - 1910) and others introduced a new layer of
complexity to the theoretical underpinnings of management. Joseph
Wharton offered the first tertiary-level course in management in 1881.
20th century
By about 1900 one finds managers trying to place their theories on what
they regarded as a thoroughly scientific basis (see scientism for perceived
limitations of this belief). Examples include Henry R. Towne's Science of
management in the 1890s, Frederick Winslow Taylor's Scientific
management (1911), Frank and Lillian Gilbreth's Applied motion study
(1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first
college management textbook in 1911. In 1912 Yoichi Ueno introduced
Taylorism to Japan and became first management consultant of the
"Japanese-management style". His son Ichiro Ueno pioneered Japanese
quality-assurance.
The first comprehensive theories of management appeared around 1920. The
Harvard Business School invented the Master of Business Administration
degree (MBA) in 1921. People like Henri Fayol (1841 - 1925) and
Alexander Church described the various branches of management and their
inter-relationships. In the early 20th century, people like Ordway Tead (1891
- 1973), Walter Scott and J. Mooney applied the principles of psychology to
management, while other writers, such as Elton Mayo (1880 - 1949), Mary
Parker Follett (1868 - 1933), Chester Barnard (1886 - 1961), Max Weber
(1864 - 1920), Rensis Likert (1903 - 1981), and Chris Argyris (1923 - )
approached the phenomenon of management from a sociological
perspective.
21st century
In the 21st century observers find it increasingly difficult to subdivide
management into functional categories in this way. More and more
processes simultaneously involve several categories. Instead, one tends to
think in terms of the various processes, tasks, and objects subject to
management.
Branches of management theory also exist relating to nonprofits and to
government: such as public administration, public management, and
educational management. Further, management programs related to civil-
society organizations have also spawned programs in nonprofit management
and social entrepreneurship.
Note that many of the assumptions made by management have come under
attack from business ethics viewpoints, critical management studies, and
anti-corporate activism.
Management topics
Basic functions of management
Management operates through various functions, often classified as
planning, organizing, leading/motivating and controlling.
• Planning: deciding what needs to happen in the future (today, next
week, next month, next year, over the next 5 years, etc.) and
generating plans for action.
• Organizing: making optimum use of the resources required to enable
the successful carrying out of plans.
• Leading/Motivating: exhibiting skills in these areas for getting others
to play an effective part in achieving plans.
• Controlling: monitoring -- checking progress against plans, which
may need modification based on feedback.
Formation of the business policy
• The mission of the business is its most obvious purpose -- which may
be, for example, to make soap.
• The vision of the business reflects its aspirations and specifies its
intended direction or future destination.
• The objectives of the business refers to the ends or activity at which a
certain task is aimed.
• The business's policy is a guide that stipulates rules, regulations and
objectives, and may be used in the managers' decision-making. It must
be flexible and easily interpreted and understood by all employees.
• The business's strategy refers to the coordinated plan of action that it
is going to take, as well as the resources that it will use, to realize its
vision and long-term objectives. It is a guideline to managers,
stipulating how they ought to allocate and utilize the factors of
production to the business's advantage. Initially, it could help the
managers decide on what type of business they want to form
How to implement policies and strategies
• All policies and strategies must be discussed with all managerial
personnel and staff.
• Managers must understand where and how they can implement their
policies and strategies.
• A plan of action must be devised for each department.
• Policies and strategies must be reviewed regularly.
• Contingency plans must be devised in case the environment changes.
• Assessments of progress ought to be carried out regularly by top-level
managers.
• A good environment is required within the business.
• Accounting management
• Agile management
• Association management
• Capability Management
• Change management
• Communication management
• Constraint management
• Cost management
• Crisis management
• Critical management studies
• Customer relationship management
• Decision making styles
• Design management
• Disaster management
• Earned value management
• Educational management
• Human resources management
• Hospital management
• Information technology management
• Innovation management
• Interim management
• Inventory management
• Knowledge management
• Land management
• Leadership management
• Logistics management
• Lifecycle management
• Marketing management
• Materials management
• Operations management
• Organization development
• Perception management
• Practice management
• Program management
• Enterprise management
• Environmental management
• Facility management
• Financial management
• Forecasting
• Project management
• Process management
History of Entrepreneurship
The Entrepreneur
Entrepreneurs have many of the same character traits as leaders. Similarly to
the early great man theories of leadership; however trait-based theories of
entrepreneurship are increasingly being called into question. Entrepreneurs
are often contrasted with managers and administrators who are said to be
more methodical and less prone to risk-taking. Such person-centric models
of entrepreneurship have shown to be of questionable validity, not least as
many real-life entrepreneurs operate in teams rather than as single
individuals. Still, a vast but now clearly dated literature studying the
entrepreneurial personality found that certain traits seem to be associated
with entrepreneurs:
• David McClelland (1961) described the entrepreneur as primarily
motivated by an overwhelming need for achievement and strong urge
to build.
• Collins and Moore (1970) studied 150 entrepreneurs and concluded
that they are tough, pragmatic people driven by needs of
independence and achievement. They seldom are willing to submit to
authority.
• Bird (1992) sees entrepreneurs as mercurial, that is, prone to insights,
brainstorms, deceptions, ingeniousness and resourcefulness. they are
cunning, opportunistic, creative, and unsentimental.
• Cooper, Woo, & Dunkelberg (1988) argue that entrepreneurs exhibit
extreme optimism in their decision-making processes. In a study of
2994 entrepreneurs they report that 81% indicate their personal odds
of success as greater than 70% and a remarkable 33% seeing odds of
success of 10 out of 10.
• Busenitz and Barney (1997) claim entrepreneurs are prone to
overconfidence and over generalisations.
• Cole (1959) found there are four types of entrepreneur: the innovator,
the calculating inventor, the over-optimistic promoter, and the
organization builder. These types are not related to the personality but
to the type of opportunity the entrepreneur faces.
Characteristics of Entrepreneurship
• The entrepreneur has an enthusiastic vision, the driving force of an
enterprise.
• The entrepreneur's vision is usually supported by an interlocked
collection of specific ideas not available to the marketplace.
• The overall blueprint to realize the vision is clear, however details
may be incomplete, flexible, and evolving.
• The entrepreneur promotes the vision with enthusiastic passion.
• With persistence and determination, the entrepreneur develops
strategies to change the vision into reality.
• The entrepreneur takes the initial responsibility to cause a vision to
become a success.
• Entrepreneurs take prudent risks. They assess costs, market/customer
needs and persuade others to join and help.
• An entrepreneur is usually a positive thinker and a decision maker.
Contributions of Entrepreneurs
1. Develop new markets. Under the modern concept of marketing,
markets are people who are willing and able to satisfy their needs. In
Economics, this is called effective demand. Entrepreneurs are
resourceful and creative. They can create customers or buyers. This
makes entrepreneurs different from ordinary businessmen who only
perform traditional functions of management like planning,
organization, and coordination.
2. Discover new sources of materials. Entrepreneurs are never satisfied
with traditional or existing sources of materials. Due to their
innovative nature, they persist on discovering new sources of
materials to improve their enterprises. In business, those who can
develop new sources of materials enjoy a comparative advantage in
terms of supply, cost and quality.
3. Mobilize capital resources. Entrepreneurs are the organizers and
coordinators of the major factors of production, such as land labor and
capital. They properly mix these factors of production to create goods
and service. Capital resources, from a layman's view, refer to money.
However, in economics, capital resources represent machines,
buildings, and other physical productive resources. Entrepreneurs
have initiative and self-confidence in accumulating and mobilizing
capital resources for new business or business expansion.
4. Introduce new technologies, new industries and new products. Aside
from being innovators and reasonable risk-takers, entrepreneurs take
advantage of business opportunities, and transform these into profits.
So, they introduce something new or something different. Such
entrepreneurial spirit has greatly contributed to the modernization of
economies. Every year, there are new technologies and new products.
All of these are intended to satisfy human needs in more convenient
and pleasant way.
5. Create employment. The biggest employer is the private business
sector. Millions of jobs are provided by the factories, service
industries, agricultural enterprises, and the numerous small-scale
businesses. For instance, the super department stores like SM,
Uniwide, Robinson and others employ thousands of workers.
Likewise giant corporations like SMC, Ayala and Soriano group of
companies are great job creators. Such massive employment has
multiplier and accelerator effects in the whole economy. More jobs
mean more incomes. This increases demand for goods and services.
This stimulates production. Again, more production requires more
employment.
Advantages of Entrepreneurship
Every successful entrepreneur brings about benefits not only for himself/
herself but for the municipality, region or country as a whole. The benefits
that can be derived from entrepreneurial activities are as follows:
1. Enormous personal financial gain
2. Self-employment, offering more job satisfaction and flexibility of the
work force
3. Employment for others, often in better jobs
4. Development of more industries, especially in rural areas or regions
disadvantaged by economic changes, for example due to globalisation
effects
5. Encouragement of the processing of local materials into finished
goods for domestic consumption as well as for export
6. Income generation and increased economic growth
7. Healthy competition thus encourages higher quality products
8. More goods and services available
9. Development of new markets
10.Promotion of the use of modern technology in small-scale
manufacturing to enhance higher productivity
11.Encouragement of more researches/ studies and development of
modern machines and equipment for domestic consumption
12.Development of entrepreneurial qualities and attitudes among
potential entrepreneurs to bring about significant changes in the rural
areas
13.Freedom from the dependency on the jobs offered by others
14.The ability to have great accomplishments
15.Reduction of the informal economy
16.Emigration of talent may be stopped by a better domestic
entrepreneurship climate
Ownership
Ownership is the state or fact of exclusive rights and control over property,
which may be an object, land/real estate, intellectual property (arguably) or
some other kind of property. It is embodied in an ownership right also
referred to as title.
Ownership is the key building block in the development of the capitalist
socio-economic system. The concept of ownership has existed for thousands
of years and in all cultures. Over the millennia, however, and across cultures
what is considered eligible to be property and how that property is regarded
culturally is very different. Ownership is the basis for many other concepts
that form the foundations of ancient and modern societies such as money,
trade, debt, bankruptcy, the criminality of theft and private vs. public
property.
The process and mechanics of ownership are fairly complex since one can
gain, transfer and lose ownership of property in a number of ways. To
acquire property one can purchase it with money, trade it for other property,
receive it as a gift, steal it, find it, make it or homestead it. One can transfer
or lose ownership of property by selling it for money, exchanging it for other
property, giving it as a gift, being robbed of it, misplacing it, or having it
stripped from one's ownership through legal means such as eviction,
foreclosure and seizure. Ownership is self-propagating in that if an object is
owned by someone, any additional goods produced by using that object will
also be owned by the same person.
Types of owners
In person
Individuals may own property directly. In some societies only adult men
may own property; in other societies (such as the Haudenosaunee), property
is matrilinear and passed on from mother to daughter. In most societies both
men and women can own property with no restrictions.
Structured Ownership Entities
Throughout history, nations (or governments) and religions have owned
property. These entities exist primarily for other purposes than to own or
operate property, hence they may have no clear rules regarding the
disposition of their property.
To own and operate property, structures (often known today as legal entities)
have been created in many societies throughout history. The differences in
how they deal with members' rights is a key factor in determining their type.
Each type has advantages and disadvantages derived from their means of
recognizing or disregarding (rewarding or not), contributions of financial
capital or personal effort.
Cooperatives, corporations, trusts, partnerships, condominium associations
are only some of the many varied types of structured ownership; each type
has many subtypes. Legal advantages or restrictions on various types of
structured ownership have existed in many societies past and present. To
govern how assets are to be used, shared or treated, rules and regulations
may be legally imposed or internally adopted or decreed
Sharing Gains
At the end of each financial year, accounting rules determine a surplus or
profit, which may be retained inside the entity or distributed among owners
according to the initial setup intent when the entity was created.
Entities with a member focus will give financial surplus back to members
according to the volume of financial activity that the participating member
generated for the entity. Examples of this are producer cooperatives, buyer
cooperatives and participating whole life policyholders in both mutual and
share-capital insurance companies.
Entities with share voting rights that depend on financial capital distribute
surplus among shareholders without regard to any other contribution to the
entity. Depending on internal rules and regulations, certain classes of shares
have the right to receive increases in financial "dividends" while other
classes do not. After many years the increase over time is substantial if the
business is profitable. Examples of this are common shares and preferred
shares in private or publicly listed share capital corporations.
Entities with a focus on providing service in perpetuam do not distribute
financial surplus; they must retain it. It will then serve as a cushion against
losses or as a means to finance growth activities. Examples of this are not-
for-profit entities: they are allowed to make profits, but are not permitted to
give any of it back to members except by way of discounts in the future on
new transactions.
Depending on the charter at the foundation of the entity, and depending on
the legal framework under which the entity was created, the form of
ownership is determined once and for all time. To change it requires
significant work in terms of communicating with stakeholders (member-
owners, governments, etc) and acquiring their approval. Whatever structural
constraints or disadvantages exist at the creation thus remain an integral part
of the entity. Common in New York City is a form of real estate ownership
known as a cooperative (also co-operative or co-op) which relies heavily on
internal rules of operation instead of the legal framework governing
condominium associations. These "co-ops", owning the building for the
mutual benefit of its members, can ultimately perform most of the functions
of a legally constituted condominium, i.e. restricting use appropriately and
containing financial liabilities to within tolerable levels. To change their
structure now that they are up and operating would require significant effort
to achieve acceptance among members and various levels of government.
Sharing Needles
The owning entity makes rules governing use of property; each property
may comprise areas that are made available to any and every member of the
group to use. When the group is the entire nation, the same principle is in
effect whether the property is small (e.g. picnic rest stops along highways)
or large such as national parks, highways, ports, and publicly owned
buildings. Smaller examples of shared use include common areas such as
lobbies, entrance hallways and passages to adjacent buildings.PISS
Types of ownership
Personal property
Personal property is a type of property. In the common law systems personal
property may also be called chattels. It is distinguished from real property,
or real estate. In the civil law systems personal property is often called
movable property or movables - any property that can be moved from one
location or another. This term is in distinction with immovable property or
immovables, such as land and buildings.
Personal property may be classified in a variety of ways, such as goods,
money, negotiable instruments, securities, and intangible assets including
choses in action.
Land ownership
Real estate or immovable property is a legal term (in some jurisdictions) that
encompasses land along with anything permanently affixed to the land, such
as buildings. Real estate (immovable property) is often considered
synonymous with real property (also sometimes called realty), in contrast
with personal property (also sometimes called chattel or personalty).
However, for technical purposes, some people prefer to distinguish real
estate, referring to the land and fixtures themselves, from real property,
referring to ownership rights over real estate. The terms real estate and real
property are used primarily in common law, while civil law jurisdictions
refer instead to immovable property.
In law, the word real means relating to a thing (from Latin res, matter or
thing), as distinguished from a person. Thus the law broadly distinguishes
between [real property] (land and anything affixed to it) and [personal
property] (everything else, e.g., clothing, furniture, money). The conceptual
difference was between immovable property, which would transfer title
along with the land, and movable property, which a person would retain title
to. (The word is not derived from the notion of land having historically been
"royal" property. The word royal — and its Spanish cognate real — come
from the unrelated Latin word rex, meaning king.)
Definitions of policy
Definitions of policy and research done into the area of policy is frequently
performed from the perspective of policies created by national governments,
or public policy. Several definitions and key characteristics of policy have
been identified within the framework of government policy. While many of
these are broadly applicable to other organizations such as private
companies or non-profit organizations, the government-focused origin of
this work should be kept in mind.
According to William Jenkins in Policy Analysis: A Political and
Organizational Perspective (1978), a policy is ‘a set of interrelated decisions
taken by a political actor or group of actors concerning the selection of goals
and the means of achieving them within a specified situation where those
decisions should, in principle, be within the power of those actors to
achieve’. Being the author of numerous papers on the subject he is
considered to be a leading authority in this field.
According to Thomas Birkland in An Introduction to the Policy Process
(2001), there is a lack of a consensus on the definition of policy. Birkland
outlines a few definitions of policy (Table 1.3 on p. 21):
• "The term public policy always refers to the actions of government
and the intentions that determine those actions". -Clarke E. Cochran,
et al.
• "Public policy is the outcome of the struggle in government over who
gets what". -Clarke E. Cochran, et al.
• Public policy is "Whatever governments choose to do or not to do".
-Thomas Dye
Impact of policy
Intended Effects
The goals of policy may vary widely according to the organization and the
context in which they are made. Broadly, policies are typically instituted in
order to avoid some negative effect that has been noticed in the organization,
or to seek some positive benefit.
Corporate purchasing policies provide an example of how organizations
attempt to avoid negative effects. Many large companies have policies that
all purchases above a certain value must be performed through a purchasing
process. By requiring this standard purchasing process through policy, the
organization can limit waste and standardize the way purchasing is done.
The State of California provides an example of benefit-seeking policy. In
recent years, the numbers of hybrid vehicles in California has increased
dramatically, in part because of policy changes that provide USD $1,500 in
tax credits as well as the use of high-occupancy vehicle lanes to hybrid
owners. In this case, the organization (state and/or federal government)
created a positive effect (increased ownership and use of hybrid cars)
through policy (tax breaks, benefits).
Unintended Effects
Policies frequently have side effects or unintended consequences. Because
the environments that policies seek to influence or manipulate are typically
complex adaptive systems (e.g. governments, societies, large companies),
making a policy change can have counterintuitive results. For example, a
government may make a policy decision to raise taxes, in hopes of
increasing overall tax revenue. Depending on the size of the tax increase,
this may have the overall effect of reducing tax revenue by causing capital
flight or by creating a rate so high, citizens are disincentivized to earn the
money that is taxed. (See the Laffer curve)
The policy formulation process typically includes an attempt to assess as
many areas of potential policy impact as possible, to lessen the chances that
a given policy will have unexpected or unintended consequences. Because of
the nature of some complex adaptive systems such as societies and
governments, it may not be possible to assess all possible impacts of a given
policy.
Policy cycle
In political science the policy cycle is a tool used for the analysing of the
development of a policy item. It can also be referred to as a "stagist
approach". One standardised version includes the following stages:
1. Agenda setting (Problem identification)
2. Policy formation
3. Decision-making
4. Policy implementation
5. Policy analysis and evaluation (continue or terminate)
An eight step policy cycle is developed in detail in The Australian Policy
Handbook by Peter Bridgman and Glyn Davis: (now with Catherine Althaus
in its 4th edition)
1. Issue identification
2. Policy analysis
3. Policy instrument development
4. Consultation (which permeates the entire process)
5. Coordination
6. Decision
7. Implementation
8. Evaluation
The Althaus, Bridgman & Davis model is heuristic and iterative. It is
intentionally normative and not meant to be diagnostic or predictive. Policy
cycles are typically characterised as adopting a classical approach.
Accordingly some postmodern academics challenge cyclical models as
unresponsive and unrealistic, prefering systemic and more complex models
Policy content
Policies are typically promulgated through official written documents. Such
documents have standard formats that are particular to the organization
issuing the policy. While such formats differ in terms of their form, policy
documents usually contain certain standard components including:
• A purpose statement, outlining why the organization is issuing the
policy, and what its desired effect is.
• A applicability and scope statement, describing who the policy affects
and which actions are impacted by the policy. The applicability and
scope may expressly exclude certain people, organizations, or actions
from the policy requirements
• An effective date which indicates when the policy comes into force.
Retroactive policies are rare, but can be found.
• A responsibilities section, indicating which parties and organizations
are responsible for carrying out individual policy statements. These
responsibilities may include identification of oversight and/or
governance structures.
• Policy statements indicating the specific regulations, requirements, or
modifications to organizational behavior that the policy is creating.
Some policies may contain additional sections, including
• Background indicating any reasons and history that led to the creation
of the policy, which may be listed as motivating factors
• Definitions, providing clear and unambiguous definitions for terms
and concepts found in the policy document.
Policy typology
Policy addresses the intent of the organization, whether government,
business, professional, or voluntary. Policy is intended to affect the ‘real’
world, by guiding the decisions that are made. Whether they are formally
written or not, most organizations have identified policies.
Policies may be classified in many different ways. The following is a sample
of several different types of policies broken down by their effect on
members of the organization.
Distributive policies
Distributive policies extend goods and services to members of an
organization, as well as distributing the costs of the goods/services amongst
the members of the organization. Examples include government policies that
impact spending for welfare, public education, highways, and public safety,
or a professional organization's policy on membership training.
Regulatory policies
Regulatory policies, or mandates, limit the discretion of individuals and
agencies, or otherwise compel certain types of behavior. These policies are
generally thought to be best applied in situations where good behavior can
be easily defined and bad behavior can be easily regulated and punished
through fines or sanctions. An example of a fairly successful public
regulatory policy is that of a speed limit.
Constituent policies
Constituent policies create executive power entities, or deal with laws.
Constituent policies also deal with Fiscal Policy in some circumstances.
Miscellaneous policies
Policies are dynamic; they are not just static lists of goals or laws. Policy
blueprints have to be implemented, often with unexpected results. Social
policies are what happens ‘on the ground’ when they are implemented, as
well as what happens at the decision making or legislative stage.
When the term policy is used, it may also refer to:
• Official government policy (legislation or guidelines that govern how
laws should be put into operation)
• Broad ideas and goals in political manifestos and pamphlets
• A company or organization’s policy on a particular topic. For
example, the equal opportunity policy of a company shows that the
company aims to treat all its staff equally.
There is often a gulf between stated policy (i.e. which actions the
organization intends to take) and the actions the organization actually takes.
This difference is sometimes caused by political compromise over policy,
while in other situations it is caused by lack of policy implementation and
enforcement. Implementing policy may have unexpected results, stemming
from a policy whose reach extends further than the problem it was originally
crafted to address. Additionally, unpredictable results may arise from
selective or idiosyncratic enforcement of policy.
Types of policy include:
• Causal (resp. non-causal)
• Deterministic (resp. stochastic, randomized and sometimes non-
deterministic)
• Index
• Memoryless (e.g. non-stationary)
• Opportunistic (resp. non-opportunistic)
• Stationary (resp. non-stationary)
These qualifiers can be combined, so for example you could have a
stationary-memoryless-index policy.
Types of policy
• Communications and Information Policy
• Domestic policy
• Education policy
• Economic policy
• Energy policy
• Environmental Policy
• Foreign policy
• Health policy
• Housing policy
• Human resource policies
• Macroeconomic policy
• Monetary policy
• National defense policy
• Population policy
• Public policy in law
• Social policy
• Transportation policy
• Urban policy
• Water policy
Applications
In public policy
Planning refers to the practice and the profession associated with the idea of
planning an idea yourself, (land use planning, urban planning or spatial
planning). In many countries, the operation of a town and country planning
system is often referred to as 'planning' and the professionals which operate
the system are known as 'planners'....... Planning: Planning is a process for
accomplishing purpose. It is blue print of business growth and a road map of
development. It helps in deciding objectives both in quantitative and
qualitative terms. It is setting of goals on the basis of objectives and keeping
in view the resources.
It is a conscious as well as sub-conscious activity. It is “an anticipatory
decision making process ” that helps in coping with complexities. It is
deciding future course of action from amongst alternatives. It is a process
that involves making and evaluating each set of interrelated decisions. It is
selection of missions, objectives and “ translation of knowledge into action.”
A planned performance brings better results compared to unplanned one. A
Managers’ job is planning, monitoring and controlling. Planning and goal
setting are important traits of an organization. It is done at all levels of the
organization. Planning includes the plan, the thought process, action, and
implementation. Planning gives more power over the future. Planning is
deciding in advance what to do, how to do it, when to do it, and who should
do it. It bridges the gap from where the organization is to where it wants to
be. The planning function involves establishing goals and arranging them in
logical order.
In organizations
Planning is also a management function, concerned with defining goals for
future organizational performance and deciding on the tasks and resources to
be used in order to attain those goals. To meet the goals, managers may
develop plans such as a business plan or a marketing plan. Planning always
has a purpose. The purpose may be achievement of certain goals or targets.
The planning helps to achieve these goals or target by using the available
time and resources. To minimize the timing and resources also require
proper planning.
Human responsibilities
Human Responsibilities refers to universal responsibilities of human beings
regardless of jurisdiction or other factors, such as ethnicity, nationality,
religion, or sex.
The idea of human responsibilities arises as a natural counter-balance to the
philosophical idea of human rights. Several groups and individuals have
suggested what exactly these responsibilities might be[citation needed], perhaps the
most well known being those proposed[1] by the InterAction Council[2], an
international council of former heads of state, in 1997 partly to mark the
50th anniversary of the Universal Declaration of Human Rights adopted by
the United Nations in 1948.
Socrates
This page is about the Classical Greek philosopher. For other uses of
Socrates, see Socrates (disambiguation).
Western Philosophy
Ancient philosophy
Socrates
Name Socrates (Σωκράτης)
Birth c. 470[1]
Death 399 BC
School/tra
Classical Greek
dition
Main
epistemology, ethics
interests
Notable
Socratic method, Socratic irony
ideas
Influenced Plato, Aristotle, Aristippus,
Antisthenes Western
philosophy
Socrates (Greek: 470 BC–399 BC[1]), was a Classical Greek philosopher.
Considered one of the founders of Western philosophy,[1] he strongly
influenced Plato, who was his student, and Aristotle, whom Plato taught. His
work continues to form an important part of the study of philosophy.
Principally renowned for his contribution to the field of ethics, Socrates also
lends his name to the concepts of Socratic irony and the Socratic Method, or
elenchus. The latter remains a commonly used tool in a wide range of
discussions, and is a type of pedagogy in which a series of questions are
asked not only to draw individual answers, but to encourage fundamental
insight into the issue at hand. Socrates also made important and lasting
contributions to the fields of epistemology and logic, and the influence of his
ideas and approach, remains strong in providing a foundation for much
western philosophy which followed.
Aristotle
For other uses, see Aristotle (disambiguation).
Western philosophy
Ancient philosophy
Philosophy
The Cyrenaics held that pleasure was the supreme good, but pleasure
primarily in the sense of bodily gratifications, which they thought more
intense and more choiceworthy than mental pleasures. They also denied that
we should defer immediate gratification for the sake of long-term gain. In
these respects they differ from the Epicureans.
The Cyrenaics were also known for their skeptical theory of knowledge.
They thought that we can know with certainty our immediate sense-
experiences (for instance, that I am having a sweet sensation now) but can
know nothing about the nature of the objects that cause these sensations (for
instance, that the honey is sweet). They also denied that we can have
knowledge of what the experiences of other people are like.
As Hedonists, they believed that pleasure is the only good in life and pain is
the only evil. Like most other philosophers, they believed in living
according to nature, also. ( Socrates, although he held that virtue was the
only human good, admitted to a certain extent the importance of its
utilitarian side, making happiness at least a subsidiary end of moral action
(see Ethics). Aristippus and his followers seized upon this, and made it the
prime factor in existence, denying to virtue any intrinsic value. Logic and
physical science they held to be useless, for all knowledge is immediate
sensation (see Protagoras). These sensations are motions which (1) are
purely subjective, and (2) are painful, indifferent or pleasant, according as
they are violent, tranquil or gentle
Epicureanism
Epicureanism is a system of philosophy based upon the teachings of
Epicurus (c. 341–c. 270 BC), founded around 307 BC. Epicurus was an
atomic materialist, following in the steps of Democritus. His materialism led
him to a general attack on superstition and divine intervention. Following
Aristippus—about whom very little is known—Epicurus believed that the
greatest good was to seek modest pleasures in order to attain a state of
tranquility and freedom from fear (ataraxia) as well as absence of bodily
pain (aponia) through knowledge of the workings of the world and the limits
of our desires. The combination of these two states is supposed to constitute
happiness in its highest form. Although Epicureanism is a form of hedonism,
insofar as it declares pleasure as the sole intrinsic good, its conception of
absence of pain as the greatest pleasure and its advocacy of a simple life
make it quite different from "hedonism" as it is commonly understood.
For Epicurus, the highest pleasure (tranquility and freedom from fear) was
obtained by knowledge, friendship, and living a virtuous and temperate life.
He lauded the enjoyment of simple pleasures, by which he meant abstaining
from bodily desires, such as sex and appetites, verging on asceticism. He
argued that when eating, one should not eat too richly, for it could lead to
dissatisfaction later, such as the grim realization that one could not afford
such delicacies in the future. Likewise, sex could lead to increased lust and
dissatisfaction with the sexual partner. Epicurus did not articulate a broad
system of social ethics that has survived.
Epictetus
Epictetus (Greek: Ἐπίκτητος; ca. 55–ca. 135) was a Greek Stoic
philosopher. He was probably born a slave at Hierapolis, Phrygia (present
day Pamukkale, Turkey), and lived in Rome until his exile to Nicopolis in
northwestern Greece, where he lived most of his life and died. The name
given by his parents, if one was given, is not known—the word epiktetos in
Greek simply means "acquired."
Life
Epictetus was born c. 55 AD,[1] at Hierapolis, Phrygia.[2] He spent his youth
as a slave in Rome to Epaphroditus, a very wealthy freedman of Nero.
Epictetus studied Stoic philosophy under Musonius Rufus,[3] as a slave.[4] It
is known that he became crippled, and although one source tells that his leg
was deliberately broken by Epaphroditus,[5] more reliable is the testimony of
Simplicius who tells us that he had been lame from childhood.[6]
2. They are internal in source and the business venture has absolute
control over its application.
"What do we do?"
"For whom do we do it?"
"How do we excel?"
In business strategic planning, the third question is better phrased
"How can we beat or avoid competition?". (Bradford and Duncan,
page 1).
Contents [hide]
Methodologies
Vision - Define the vision and set a mission statement with hierarchy
of goals
SWOT - Analysis conducted according to the desired goals
Formulate - Formulate actions and processes to be taken to attain
these goals
Implement - Implementation of the agreed upon processes
Control - Monitor and get feedback from implemented processes to
fully control the operation
Situational analysis
Markets (customers)
Competition
Technology
Supplier markets
Labor markets
The economy
The regulatory environment
It is rare to find all seven of these factors having critical importance. It
is also uncommon to find that the first two - markets and competition -
are not of critical importance. (Bradford "External Situation - What to
Consider")
Contents
1 Business Plan Content
2 Business
2.1 Support services
2.2 Resources for researching facts and figures
2.2.1 Internal corporate records
2.2.2 Free information
2.2.3 Fee-based services
2.3 Strategic Analysis
2.4 Forecasts: Modeling Techniques
3 Presentation Formats
4 Revisiting the Business Plan
4.1 Cost overruns and revenue shortfalls
5 Legal and Liability Issues
5.1 Disclosure requirements
5.2 Limitations on content and audience
6 Open Business Plans
6.1 Examples
7 How Business Plans are Used
7.1 Venture Capital
7.2 Public Offerings
7.3 Within Corporations
7.3.1 Fundraising
7.3.2 Total Quality Management
7.3.3 Management by Objective
7.3.4 Strategic Planning
7.4 Education
7.4.1 K-12
7.4.2 Higher Education
8 Satires of Business Plans
9 References
10 See also
For example, a business plan for a non-profit might discuss the fit
between the business plan and the organization’s mission. Banks are
quite concerned about defaults, so a business plan for a bank loan
will build a convincing case for the organization’s ability to repay the
loan. Venture capitalists are primarily concerned about initial
investment, feasibility, and exit valuation. A business plan for a
project requiring equity financing will need to explain why current
resources, upcoming growth opportunities, and sustainable
competitive advantage will lead to a high exit valuation.
Business
Support services
books, portals, and other sources of written information
consulting services
electronic planning templates (software)
face to face help: mentoring programs, training courses
Germany: Bundesministerium für Wirtschaft und Technologie (BMWi)
[1].
Morocco: CRI (Centre Régional d'Investisment)
Pakistan: SMEDA (Small and medium enterprise development
authority)
UK: Business Link
USA: SCORE, SBA centers
Canada: Industry Canada, [2]
India : Allindialive Business Planing Portal,[3]
Switzerland : venturelab (Förderprogramm der Bundes für innovative
Start-ups mit Wachstumspotenzial)
Other countries: needs research
Free information
published statistics on the web
business libraries
Fee-based services
marketing reports from subscription services
archive and journal services
books
Strategic Analysis
Industry Assessment
The macroenvironment
Customer Strategy & Market Analysis
Competitor Analysis
Porter 5 forces analysis
Presentation Formats
The format of a business plan depends on its presentation context. It
is not uncommon for businesses, especially start-ups to have three or
four formats for the same business plan:
Disclosure requirements
An externally targeted business plan should list all legal concerns and
financial liabilities that might negatively affect investors. Depending
on the amount of funds being raised and the audience to whom the
plan is presented, failure to do this may have severe legal
consequences.
In the free software and open source business model, trade secrets,
copyright and patents can no longer be used as effective locking
mechanisms to provide sustainable advantages to a particular
business and therefore a secret business plan is less relevant in
those models.
While the origin of the Open Business Plan model is in the free
software and Libre services arena, the concept is likely applicable to
other domains.
Examples
Neda Open Business Plan [10]
Venture Capital
business plan contests - provides a way for venture capitals to find
promising projects
venture capital assessment of business plans - focus on qualitative
factors such as team.
Public Offerings
in a public offering, potential investors can evaluate perspectives of
issuing company [11]
Within Corporations
Fundraising
Fundraising is the primary purpose for many business plans, since
they are related to the inherent probable success/failure of the
company risk.
Management by Objective
For more information see Management by objectives
Strategic Planning
For more information see Strategic Planning
Education
K-12
Business plans are used in some primary and secondary programs to
teach economic principles.[12] Wikiversity has a Lunar Boom Town
project where students of all ages can collaborate with designing and
revising business models and practice evaluating them to learn
practical business planning techniques and methodology.
Higher Education
BA, MBA programs
integrative team projects
projects for specific course work
Business plan contests
GetSet for Business [4] provides UK educational establishments with
the facility for students to learn about starting a business and produce
a professional and bespoke business plan online.
In the article "South Park's" Investing Lesson, the The Motley Fool
columnist "Fool on the Hill" uses the Underpants Gnomes to illustrate
the fallacy of focusing on goals without a clear implementation
strategy. The Underpants Gnomes episode satirizes the business
plans of the Dot.com era. Surrounding the issue of the opening of a
huge corporate coffee shop in competition with the existing small-
town cafe owned by Tweak's parents, it features a three-part
business plan for the gnomes to profit from stealing underpants from
unsuspecting humans:
Collect underpants
???
Profit!
References
^ Small Business Notes business plan outline for small business
start-up
^ Center for Non-profit Excellence non-profit business plan
^ State of Louisana, USA government agency operational plan
^ Visitask project framework
^ Tasmanian government project management knowledge base
government project plan
^ Boston College, Carroll School of Management, Business Plan
Project The business school advises students that "To create a
robust business plan, teams must take a comprehensive view of the
enterprise and incorporate management-practice knowledge from
every first-semester course." It is increasingly common for business
schools to use business plan projects to provide an opportunity for
students to integrate knowledge learned through their courses.
^ Eric S. Siegel, Brian R. Ford, Jay M. Bornstein (1993), 'The Ernst &
Young Business Plan Guide' (New York: John Wiley and Sons) ISBN
0471578266
^ Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl
(2002),"Underestimating Costs in Public Works Projects: Error or
Lie?" Journal of the American Planning Association, vol. 68, no. 3,
279-295.
^ Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl (2005),
"How (In)accurate Are Demand Forecasts in Public Works Projects?"
Journal of the American Planning Associationsidoo kale ayaa waxaa,
vol. 71, no. 2, 131-146.
^ Neda Open Business Plan - By* Services
^ Alternative Stock Library (2008-01-28). Successful Business Plan.
Alternative Stock Library. Retrieved on 2008-02-28.
^ Pennsylvania Business Plan Competition - competition intended to
teach economic principles to K-12 students
^ Tricia Bisoux, "Funny Business", BizEd, November/December, 2002
•3 See also
•4 References
General model
A general model of the buyer decision process consists of the following
steps:
Need recognition;
Search for information on products that could satisfy the needs of the
buyer;
Alternative selection;
Decision-making on buying the product;
Post-purchase behavior
There are a range of alternative models, but that of AIUAPR, which most
directly links to the steps in the marketing/promotional process is often seen
as the most generally useful[1];
•AWARENESS - before anything else can happen the potential
customers must become aware that the product or service exists. Thus,
the first task must be to gain the attention of the target audience. All
the different models are, predictably, agreed on this first step. If the
audience never hears the message they will not act on it, no matter
how powerful it is.
•INTEREST - but it is not sufficient to grab their attention. The message
must interest them and persuade them that the product or service is
relevant to their needs. The content of the message(s) must therefore
be meaningful and clearly relevant to that target audience's needs, and
this is where marketing research can come into its own.
•UNDERSTANDING - once an interest is established, the prospective
customer must be able to appreciate how well the offering may meet
his or her needs, again as revealed by the marketing research. This
may be no mean achievement where the copywriter has just fifty
words, or ten seconds, to convey everything there is to say about it.
•ATTITUDES - but the message must go even further; to persuade the
reader to adopt a sufficiently positive attitude towards the product or
service that he or she will purchase it, albeit as a trial. There is no
adequate way of describing how this may be achieved. It is simply
down to the magic of the copywriters art; based on the strength of the
product or service itself. PURCHASE - all the above stages might
happen in a few minutes while the reader is considering the
advertisement; in the comfort of his or her favourite armchair. The
final buying decision, on the other hand, may take place some time
later; perhaps weeks later, when the prospective buyer actually tries to
find a shop which stocks the product.
•REPEAT PURCHASE - but in most cases this first purchase is best
viewed as just a trial purchase. Only if the experience is a success for
the customer will it be turned into repeat purchases. These repeats, not
the single purchase which is the focus of most models, are where the
vendors focus should be, for these are where the profits are generated.
The earlier stages are merely a very necessary prerequisite for this!
This is a very simple model, and as such does apply quite generally. Its
lessons are that you cannot obtain repeat purchasing without going through
the stages of building awareness and then obtaining trial use; which has to
be successful. It is a pattern which applies to all repeat purchase products
and services; industrial goods just as much as baked beans. This simple
theory is rarely taken any further - to look at the series of transactions which
such repeat purchasing implies. The consumer's growing experience over a
number of such transactions is often the determining factor in the later - and
future - purchases. All the succeeding transactions are, thus, interdependent -
and the overall decision-making process may accordingly be much more
complex than most models allow for. [2]
in all four dimensions. In each category, 83% of E-I types, 89% of S-N
types, 90% of T-F types, was 10.8 points better and for groups with the same
personality dimensions was 4.4 points better than individuals (Volkema 114-
16). Working in groups with a variety of people composed of multiple
personalities and cognitive styles, often produces a better outcome in
decision making rather than individually.
References
•Carlyn, Marcia. “An Assessment of the Myers-Briggs Type Indicator.”
Journal of Personality Assessment. 41.5 (1977): 461-73.
•Cheng, Many M., Peter F. Luckett, and Axel K. Schulz. “The Effects of
Cognitive Style Diversity on Decision-Making Dyads: An Empirical
Analysis in the Context of a Complex Task.” Behavioral Research in
Accounting. 15 (2003): 39-62.
•Gardner, William L., and Mark J. Martinko. “Using the Myers-Briggs
Type Indicator to Study Managers: A Literature Review and Research
Agenda.” Journal of Management. 22.1 (1996): 45-83.
•Henderson, John C., and Paul C. Nutt. “Influence of Decision Style on
Decision Making Behavior.” Management Science. 26.4 (1980): 371-
386.
•Kennedy, Bryan R., and Ashely D. Kennedy. “Using the Myers-Briggs
Type Indicator in Career Counseling.” Journal of Employment
Counseling. 41.1 (2004): 38-44.
•Myers, I. (1962) Introduction to Type: A description of the theory and
applications of the Myers-Briggs type indicator, Consulting
Psychologists Press, Palo Alto Ca., 1962.
•Nicosia, F. (1966) Consumer Decision Processes, Prentice Hall,
Englewood Cliffs, 1966.
•Pittenger, David J. “The Utility of the Myers-Briggs Type Indicator.”
Review of Educational Research. 63:4 (1993): 467-488.
•Simon, H. (1947) Administrative behaviour, Macmillan, New York,
1947, (also 2nd edition 1957).
•Volkema, Roger J., and Ronald H. Gorman. "The Influence of
Cognitive-Based Group Composition on Decision-Making Process
and Outcome." Journal of Management Studies. 35.1 (1998): 105-
121.
Retrieved from "http://en.wikipedia.org/wiki/Buyer_decision_processes"
•2 History
•4 Advantages
•4.2 Expansion
•4.3 Training
•5 Disadvantages
•5.1 Control
•5.2 Price
•5.3 Conflicts
•6 Legal aspects
•6.1 Australia
•6.3 Russia
•6.4 UK
•6.5 Kazakhstan
•7 Social franchises
•8 Event franchising
•9 See also
•10 References
History
Franchising dates back to at least the 1850s; Isaac Singer, who made
improvements to an existing model of a sewing machine, wanted to increase
the distribution of his sewing machines. His effort, though unsuccessful in
the long run, was among the first franchising efforts in the United States. A
later example of franchising was John S. Pemberton's successful franchising
of Coca-Cola.[3] Early American examples include the telegraph system,
which was operated by various railroad companies but controlled by , and
exclusive agreements between automobile manufacturers and operators of
local dealerships.[5] Earlier models of product franchising collected
royalties or fees on a product basis and not on the gross sales of the business
operations of the franchisees.
Modern franchising came to prominence with the rise of franchise-based
food service establishments. This trend started before 1933 with quick
service restaurants such as A&W Root Beer.[6] In 1935, Howard Deering
Johnson teamed up with Reginald Sprague to establish the first modern
restaurant franchise. [7] [8] The idea was to let independent operators use
the same name, food, supplies, logo and even building design in exchange
for a fee.
The growth in franchises picked up steam in the 1930s when such chains as
Howard Johnson's started franchising motels.[9] The 1950s saw a boom of
franchise chains in conjunction with the development of the U.S. interstate
highway system.[10] Fast food restaurants, diners and motel chains
exploded. In regard to contemporary franchise chains, McDonalds is
unarguably the most successful worldwide with more restaurant units than
any other franchise network.
According to Franchising in the Economy, 1991-1993, a study done by the
University of Louisville, franchising helped to lead America out of its
economic downturn at the time.[2]Franchising is a unique business model
that has encouraged the growth of franchised chain formula units because
the franchisors collect royalties on the gross sales of these units and not on
the profits. Conversely, when good jobs are lost in the economy, franchising
picks up because potential franchisees are looking to buy jobs and to earn
profits from the purchase of franchise rights. The manager of the United
States Small Business Administration's Franchise Registry concludes that
franchising there is continuing to grow and that franchising is growing in the
national economy. [11]
Franchising is a business model used in more than 70 industries and that
generates more than $1 trillion in U.S. sales annually.[12]
Advantages
Quick start
As practiced in retailing, franchising offers franchisees the advantage of
starting up a new business quickly based on a proven trademark and formula
of doing business, as opposed to having to build a new business and brand
from scratch (often in the face of aggressive competition from franchise
operators). A well run franchise would offer a turnkey business: from site
selection to lease negotiation, training, mentoring and ongoing support as
well as statutory requirements and troubleshooting
Expansion
After their brand and formula are carefully designed and properly executed,
franchisors are able to expand rapidly across countries and continents, and
can earn profits commensurate with their contribution to those societies.
Additionally, the franchisor may choose to leverage the franchisee to build a
distribution network.
Also with the help of the expertise provided by the franchisers the
franchisees are able to take their franchise business to that level which they
wouldn't have had been able to without the expert guidance of their
franchisors.
Training
Franchisors often offer franchisees significant training, which is not
available for free to individuals starting their own business. Although
training is not free for franchisees, it is supported through the traditional
franchise fee that the franchisor collects.
Disadvantages
Control
For franchisees, the main disadvantage of franchising is a loss of control.
While they gain the use of a system, trademarks, assistance, training,
marketing, the franchisee is required to follow the system and get approval
for changes from the franchisor. For these reasons, franchisees and
entrepreneurs are very different. The United States Office of Advocacy of
the SBA indicates that a franchisee "is merely a temporary business
investment where he may be one of several investors during the lifetime of
the franchise. In other words, he is "renting or leasing" the opportunity, not
"buying a business for the purpose of true ownership." [13] Additionally, "A
franchise purchase consists of both intrinsic value and time value. A
franchise is a wasting asset due to the finite term, unless the franchisor
chooses to contractually obligate itself it is under no obligation to renew the
franchise." [14]
Price
Starting and operating a franchise business carries expenses. In choosing to
adopt the standards set by the franchisor, the franchisee often has no further
choice as to signage, shop fitting, uniforms etc. The franchisee may not be
allowed to source less expensive alternatives. Added to that is the franchise
fee and ongoing royalties and advertising contributions. The contract may
also bind the franchisee to such alterations as demanded by the franchisor
from time to time. (As required to be disclosed in the state disclosure
document and the franchise agreement under the FTC Franchise Rule)
Conflicts
The franchisor/franchisee relationship can easily cause conflict if either side
is incompetent (or acting in bad faith). For example, an incompetent
franchisee can easily damage the public's goodwill towards the franchisor's
brand by providing inferior goods and services, and an incompetent
franchisor can destroy its franchisees by failing to promote the brand
properly or by squeezing them too aggressively for profits. Franchise
agreements are unilateral contracts or contracts of adhesion wherein the
contract terms generally are advantageous to the franchisor when there is
conflict in the relationship. [15] Additionally, the legal publishing website
Nolo.com listed the "Lack of Legal Recourse" as one of Ten Good Reasons
Not to Buy a Franchise:
“ As a franchisee, you have little legal recourse if you're wronged by the
franchisor. Most franchisors make franchisees sign agreements waiving their
rights under federal and state law, and in some cases allowing the franchisor
to choose where and under what law any dispute would be litigated.
Shamefully, the Federal Trade Commission (FTC) investigates only a small
minority of the franchise-related complaints it receives.[16] ”
Legal aspects
Australia
In Australia, franchising is regulated by the Franchising Code of Conduct, a
mandatory code of conduct made under the Trade Practices Act 1974.
The Code requires franchisors to produce a disclosure document which must
be given to aprospective franchisee at least 14 days before the franchise
agreement is entered into.
The Code also regulates the content of franchise agreements, for example in
relation to marketing funds, a cooling-off period, termination and the
resolution of disputes by mediation.
United States
In the United States, franchising falls under the jurisdiction of a number of
state and federal laws. Franchisors are required by the Federal Trade
Commission to provide a Uniform Franchise Offering Circular (UFOC) to
disclose essential information to potential franchisees about their purchase.
States may require the UFOC to contain specific requirements but the
requirements in the State disclosure documents must be in compliance with
the Federal Rule that governs federal regulatory policy.[17] There is no
private right of action under the FTC Rule for franchisor violation of the rule
but fifteen or more of the States have passed statutes that provide a private
right of action to franchisees when fraud can be proved under these special
statutes.
The franchise agreement is a standard part of franchising. It is the essential
contract signed by the franchisee and the franchisor that formalizes and
specifies the terms of the business arrangement, as well as many issues
discussed in less detail in the UFOC. Unlike the UFOC, the franchise
agreement is a fluid document, crafted to meet the specific needs of the
franchise, with each having its own set of standards and requirements. But
much like a lease, there are elements commonly found in every agreement.
[17] "There is a difference between a discrete contract and a relational
contract, and franchise contracts are a distinct subset of relational contracts."
Franchise contracts form a unique and ongoing relationship berween the
parties. "Unlike a traditional contract, franchise contracts establish a
relationship where the stronger party can unilaterally alter the fundamental
nature of the obligations of the weaker party......." [18]
There is no federal registry of franchises or any federal filing requirements
for information. States are the primary collectors of data on franchising
companies, and enforce laws and regulations regarding their presence and
their spread in their jurisdictions. In response to the soaring popularity of
franchising, an increasing number of communities are taking steps to limit
these chain businesses and reduce displacement of independent businesses
through limits on "formula businesses."[19]
The majority of franchisors have inserted mandatory arbitration clauses into
their agreements with their franchisees. Since 1980, the U.S. Supreme Court
has dealt with cases involving direct franchisor/franchisee conflicts at least
four times, and three of those cases involved a franchisee who was resisting
the franchisor's motion to compel arbitration. Two of the latter cases
involved large, well-known restaurant chains (Burger King in Burger King
v. Rudzewicz and Subway in 517 US 681 (1996) Doctor's Associates, Inc. v.
Casarotto); the third involved Southland Corporation, the parent company of
7-Eleven in Southland Corp. v. Keating, 465 US 1 (1984) .
Russia
In Russia, under ch. 54 of the Civil Code (passed 1996), franchise
agreements are invalid unless written and registered, and franchisors cannot
set standards or limits on the prices of the franchisee’s goods. Enforcement
of laws and resolution of contractual disputes is a problem: Dunkin' Donuts
chose to terminate its contract with Russian franchisees that were selling
vodka and meat patties contrary to their contracts, rather than pursue legal
remedies.[citation needed]
UK
In the United Kingdom, there are no franchise-specific laws; franchises are
subject to the same laws that govern other businesses. For example,
franchise agreements are produced under regular contract law and do not
have to conform to any further legislation or guidelines.[citation needed]
There is some self-regulation through the British Franchise Association
(BFA). However there are many franchise businesses which do not become
members, and many businesses that refer to themselves as franchisors that
do not conform to these rules.[citation needed] There are several people and
organisations in the industry calling for the creation of a framework to help
reduce the number of "cowboy" franchises and help the industry clean up its
image.[who?]
On 22 May 2007, hearings were held in the UK Parliament concerning
citizen initiated petitions for special regulation of franchising by the
government of the UK due to losses of citizens who had invested in
franchises. The Minister of Industry, Margaret Hodge, conducted hearings
but resisted any government regulation of franchising with the advice that
government regulation of franchising might lull the public into a false sense
of security. The Minister of Industry indicated that if due diligence were
performed by the investors and the banks, the current laws governing
business contracts in the UK offered sufficient protection for the public and
the banks.[20]
Kazakhstan
Until 2002, franchising rules in Kazakhstan were also governed by Chapter
45 of the Kazakh Civil Code (CC). Measures of state support franchising
generally been included in the programme of support for business. Measures
to promote franchising were provided in paragraph 2.4.1 of the state
program for small business development and support for the 1999–2000.
Key provisions of Chapter 45, as well as the rules governing the franchise in
more detail relations, entered the law "About integrated business license
(franchise)", dated 24 June 2002, No. 330 - II. It should be noted that
amongst the Commonwealth of Independent States, Kazakhstan is one of the
first countries to introduce the legal definition of franchising in a special
law.
Social franchises
In recent years, the idea of franchising has been picked up by the social
enterprise sector, which hopes to simplify and expedite the process of setting
up new businesses. A number of business ideas, such as soap making,
wholefood retailing, aquarium maintenance, and hotel operation, have been
identified as suitable for adoption by social firms employing disabled and
disadvantaged people.
The most successful example is probably the CAP Markets, a steadily
growing chain of some 50 neighborhood supermarkets in Germany. Other
examples are the St. Mary's Place Hotel in Edinburgh and the Hotel Tritone
in Trieste.
Event franchising
Event franchising is the duplication of public events in other geographical
areas, while retaining the original brand (logo), mission, concept and format
of the event.[21] As in classic franchising, event franchising is built on
precisely copying successful events. Good example of event franchising is
the World Economic Forum, or just Davos forum which has regional event
franchisees in China, Latin America etc.
References
^ "Harrap's shorter French and English dictionary" ISBN 0-245-55046-1
^ a b Frandata Corporation (February 2000) The Profile of Franchising:
A Statistical Abstract of UFOC Data accessed 2007-12-20
^ Franchising - Types Of Franchises, History Of Franchising, The Spread
Of Franchising
^ Lemelson Center: Archives: Western Union Collection
^ http://findarticles.com/p/articles/mi_m0FJN/is_n8_v30/ai_18728418
^ http://www.aw-drivein.com/About_Us.cfm A&W official site: About
Us
^ Allen, Robin Lee. (1998). Foodservice’s theory of evolution: Survival
of the fittest. Nation’s Restaurant News 32(4), pages 14 -17.
^ Howard, T. (1996). Howard Johnson: Initiator of franchised
restaurants. Nation’s Restaurant News, 30(2), pages 85-86.
^ http://www.wdfi.org/fi/securities/franchise/history.htm
^ Special Report: The Interstate Highway System at 50, Civil
Engineering—ASCE, Vol. 76, No. 6, (June 2006), page 36
^ , 2007)
^ Econ Study cover_title pg
13 Product marketing
Product marketing deals with the first of the "4P"'s of marketing, which are
Product, Pricing, Place, and Promotion. Product marketing, as opposed to
product management, deals with more outbound marketing tasks. For
example, product management deals with the nuts and bolts of product
development within a firm, whereas product marketing deals with marketing
the product to prospects, customers, and others. Product marketing, as a job
function within a firm, also differs from other marketing jobs such as
Marcom or marketing communications, online marketing, advertising,
marketing strategy, etc.
A Product Market is something that is referred to when pitching a new
product to the general public. The people you are trying to make your
product appeal to is your consumer market. For example: If you were
pitching a new playstation game to the public, your consumer market would
probably be a younger/teenage market (depending on the type of game).
Thus you would carry out market research to find out how best to release the
game. Likewise, a massage chair would probably not appeal to younger
children, so you would pitch your product to an older generation
Contents
[hide]
•1 Role of Product Marketing
•3 Qualifications
•5 See also
•6 References
Qualifications
Typical qualifications for this area of business are is a high level Marketing
or Business related degree, e.g. an MBA, not forgetting sufficient work
experience in related areas. As a key skill is to be able to interact with
technical staff, a background in engineering is also an asset.
Product Marketing (Alternative View)
The “Product Marketing” discipline is an outbound activity aimed at
generating product awareness, differentiation, and demand. There are three
principal methods to achieving this goal.
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/wiki/Image:Marketing_Domain.jpg
Each of these principal methods concentrates on one of the various aspects
of the product: price, features, or value. The price emphasis method is called
“Price Competition”. The features emphasis method is called “Comparative
Marketing”. The value emphasis method is called “Value Marketing”.
In the price emphasis method, the goal of product marketing is reached by
emphasizing and communicating to the market the price of the product as a
marketing signal. For example, touting the product’s high price may signify
a premium product and attempt to positively affect a perception of quality
via inference. The goal of the price emphasis method is to create a situation
where the customers primarily consider the product’s price as the main
buying decision factor.
In the feature emphasis method, the goal of product marketing is reached by
emphasizing and communicating to the market the existence or merit of the
product’s features in comparison to the features of other competing products.
The goal of the feature emphasis method is to create a situation where the
customers primarily consider the product’s feature set as the main buying
decision factor.
In the value emphasis method, the goal of product marketing is reached by
emphasizing and communicating to the market the value the product holds
relative to the customer and comparatively to the value offered by other
competing products. The goal of the value emphasis method is to create
superior perceived value and prove superior actual value. “Superior
Perceived Value” is a state where customers perceive the product (bought
from a particular company) gives a net value more positive than its
alternatives; and “Superior Actual Value” is a state where the product
factually gives customers a net value more positive than its alternatives. The
result of these states would be a situation where the customers primarily
consider the product’s value as the main buying decision factor.
The price emphasis and feature emphasis methods (price competition and
comparative marketing) are considered significantly easier to implement
than the value emphasis method (value marketing). This is because the price
emphasis and feature emphasis methods convey simple qualitative concepts
that are easy to understand and require minimal interpretation by the
customers. Conversely, the value emphasis method relays abstract and
qualitative concepts which project conjecture and argumentation, and thus
are more challenging to grasp.
Another method in the product marketing discipline is product branding.
“Product Branding” is the process of building and maintaining a brand at the
product level. “Brand” is an identity, made of symbols and ideas, which
portray a specific offering from a known source. Product branding is
executed concurrently with one or more of the principal methods in product
marketing.
The process of product branding and the derived brand is often the result of
a deliberate and conscious effort by the company, but can also be an
unintentional by-product resulting from the execution of any of the three
principal methods of product marketing. Product branding is therefore not
considered a principal method on to its own since the formation of a brand
can be the outcome of applying any of the three principal methods in product
marketing.
References
1. ^ This is described in further detail by S. Wheelright and K. Clark in
Revolutionizing Product Development (1992), p. 40-41; at the beginning of
the section titled "Product/Market Planning and Strategy".
2. ^ This thirty page PRD details the authoring of the product requirement
document in further detail, and can be viewed at
http://software.franteractive.com.
•Gabriel Steinhardt (2008). "Concept of Marketing" (PDF). 2.0.
Blackblot. Retrieved on 2008.
•Gabriel Steinhardt (2008). "Value-Marketing Model" (PDF). 2.0.
Blackblot. Retrieved on 2008.
Retrieved from "http://en.wikipedia.org/wiki/Product_marketing"
Pricing
Marketing
Pricing is one of the four p's of the marketing mix. The other three aspects
are product, promotion, and place. It is also a key variable in microeconomic
price allocation theory. Price is the only revenue generating element
amongst the 4ps,the rest being cost centers. Pricing is the manual or
automatic process of applying prices to purchase and sales orders, based on
factors such as: a fixed amount, quantity break, promotion or sales
campaign, specific vendor quote, price prevailing on entry, shipment or
invoice date, combination of multiple orders or lines, and many others.
Automated systems require more setup and maintenance but may prevent
pricing errors.
Contents
[hide]
•1 Questions involved in pricing
•3 Definitions
•4 Approaches
•5 See also
•6 External links
•How important are customer price sensitivity (e.g. "sticker shock") and
elasticity issues?
•Can real-time pricing be used?
•How visible should the price be? - Should the price be neutral? (ie.: not
an important differentiating factor), should it be highly visible? (to
help promote a low priced economy product, or to reinforce the
prestige image of a quality product), or should it be hidden? (so as to
allow marketers to generate interest in the product unhindered by
price considerations).
•Are there joint product pricing considerations?
•What are the non-price costs of purchasing the product? (eg.: travel time
to the store, wait time in the store, disagreeable elements associated
with the product purchase - dentist -> pain, fishmarket -> smells)
•What sort of payments should be accepted? (cash, check, credit card,
barter) Pricing
Process of determining what a company will receive in exchange for its
products. Pricing factors are manufacturing cost,market
place,compitition,maket condition,Quality of product.
Definitions
The effective price is the price the company receives after accounting for
discounts, promotions, and other incentives.
Price lining is the use of a limited number of prices for all your product
offerings. This is a tradition started in the old five and dime stores in which
everything cost either 5 or 10 cents. Its underlying rationale is that these
amounts are seen as suitable price points for a whole range of products by
prospective customers. It has the advantage of ease of administering, but the
disadvantage of inflexibility, particularly in times of inflation or unstable
prices.
A loss leader is a product that has a price set below the operating margin.
This results in a loss to the enterprise on that particular item, but this is done
in the hope that it will draw customers into the store and that some of those
customers will buy other, higher margin items.
Promotional pricing refers to an instance where pricing is the key element
of the marketing mix.
The price/quality relationship refers to the perception by most consumers
that a relatively high price is a sign of good quality. The belief in this
relationship is most important with complex products that are hard to test,
and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the more of a
premium they are prepared to pay. The classic example of this is the pricing
of the snack cake Twinkies, which were perceived as low quality when the
price was lowered. Note, however, that excessive reliance on the
price/quantity relationship by consumers may lead to the raising of prices on
all products and services, even those of low quality, which in turn causes the
price/quality relationship to no longer apply.
Premium pricing (also called prestige pricing) is the strategy of
consistently pricing at, or near, the high end of the possible price range to
help attract status-conscious consumers. A few examples of companies
which partake in premium pricing in the marketplace include Rolex and
Bentley. People will buy a premium priced product because:
They believe the high price is an indication of good quality;
They believe it to be a sign of self worth - "They are worth it" - It
authenticates their success and status - It is a signal to others that they
are a member of an exclusive group; and
They require flawless performance in this application - The cost of
product malfunction is too high to buy anything but the best - example
: heart pacemaker
The term Goldilocks pricing is commonly used to describe the practice of
providing a "gold-plated" version of a product at a premium price in order to
make the next-lower priced option look more reasonably priced; for
example, encouraging customers to see business-class airline seats as good
value for money by offering an even higher priced first-class option.[citation
needed] Similarly, third-class railway carriages in Victorian England are
said to have been built without windows, not so much to punish third-class
customers (for which there was no economic incentive), as to motivate those
who could afford second-class seats to pay for them instead of taking the
cheaper option.[citation needed] This is also known as a potential result of
price discrimination.
The name derives from the Goldilocks story, in which Goldilocks chose
neither the hottest nor the coldest porridge, but instead the one that was "just
right". More technically, this form of pricing exploits the general cognitive
bias of aversion to extremes. This practice is known academically as
"framing". By providing three options (i.e. small, medium, and large; first,
business, and coach classes) you can manipulate the consumer into choosing
the middle choice and thus, the middle choice should yield the most profit to
the seller, since it is the most chosen option.
Demand-based pricing is any pricing method that uses consumer demand -
based on perceived value - as the central element. These include : price
skimming, price discrimination and yield management, price points,
psychological pricing, bundle pricing, penetration pricing, price lining,
value-based pricing, geo and premium pricing. Pricing factors are
manufacturing cost,market place,compitition,maket condition,Quality of
product.
Approaches
Pricing as the most effective profit lever. (Template:Cite book:) Pricing can
be approached at three levels. The industry, market, and transaction level.
Pricing at the industry level focuses on the overall economics of the
industry, including supplier price changes and customer demand changes.
Pricing at the market level focuses on the competitive position of the price in
comparison to the value differential of the product to that of comparative
competing products.
Pricing at the transaction level focuses on managing the implementation of
discounts away from the reference, or list price, which occur both on and off
the invoice or receipt. Pricing at the transaction level focuses on managing
the implementation of discounts away from the reference, or list price, which
occur both on and off the invoice or receipt.
Promotion (marketing)
Example
The publicity for the 40th anniversary of the 1966 NCAA Basketball
championship included [1]
The renaming of a city street
A tie-in with an autobiography with the same title
The screening of a film with the same title
The release of a breakfast cereal box with coordinated materials
A pep rally on a university campus
Media coverage, have been successful
Distribution (business)
Channels
A number of alternate 'channels' of distribution may be available:
•Selling direct, such as via mail order, Internet and telephone sales
•Agent, who typically sells direct on behalf of the producer
•Distributor (also called wholesaler), who sells to retailers
•Retailer (also called dealer or reseller), who sells to end customers
Channel members
Distribution channels can thus have a number of levels. Kotler defined the
simplest level, that of direct contact with no intermediaries involved, as the
'zero-level' channel.
The next level, the 'one-level' channel, features just one intermediary; in
consumer goods a retailer, for industrial goods a distributor. In small
markets (such as small countries) it is practical to reach the whole market
using just one- and zero-level channels.
In large markets (such as larger countries) a second level, a wholesaler for
example, is now mainly used to extend distribution to the large number of
small, neighborhood retailers.
In Japan the chain of distribution is often complex and further levels are
used, even for the simplest of consumer goods.
In Bangladesh Telecom Operators are using different Chains of Distribution,
especially 'second level'.
In IT and Telecom industry levels are named "tiers". A one tier channel
means that vendors IT product manufacturers (or software publishers) work
directly with the dealers. A one tier / two tier channel means that vendors
work directly with dealers and with distributors who sell to dealers.But the
most important is the distributor or wholesaler.
Channel Decisions
•Channel strategy
•Product (or service)<>Cost<>Consumer location
Channel management
The channel decision is very important. In theory at least, there is a form of
trade-off: the cost of using intermediaries to achieve wider distribution is
supposedly lower. Indeed, most consumer goods manufacturers could never
justify the cost of selling direct to their consumers, except by mail order. In
practice, if the producer is large enough, the use of intermediaries
(particularly at the agent and wholesaler level) can sometimes cost more
than going direct.
Many of the theoretical arguments about channels therefore revolve around
cost. On the other hand, most of the practical decisions are concerned with
control of the consumer. The small company has no alternative but to use
intermediaries, often several layers of them, but large companies 'do' have
the choice.
However, many suppliers seem to assume that once their product has been
sold into the channel, into the beginning of the distribution chain, their job is
finished. Yet that distribution chain is merely assuming a part of the
supplier's responsibility; and, if he has any aspirations to be market-oriented,
his job should really be extended to managing, albeit very indirectly, all the
processes involved in that chain, until the product or service arrives with the
end-user. This may involve a number of decisions on the part of the supplier:
•Channel membership
•Channel motivation
•Monitoring and managing channels
Channel membership
Intensive distribution - Where the majority of resellers stock the `product'
(with convenience products, for example, and particularly the brand
leaders in consumer goods markets) price competition may be evident.
Selective distribution - This is the normal pattern (in both consumer and
industrial markets) where `suitable' resellers stock the product.
Exclusive distribution - Only specially selected resellers or authorized
dealers (typically only one per geographical area) are allowed to sell
the `product'.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary
sales and service support. Motivating the owners and employees of the
independent organizations in a distribution chain requires even greater
effort. There are many devices for achieving such motivation. Perhaps the
most usual is `incentive': the supplier offers a better margin, to tempt the
owners in the channel to push the product rather than its competitors; or a
competition is offered to the distributors' sales personnel, so that they are
tempted to push the product. At the other end of the spectrum is the almost
symbiotic relationship that the all too rare supplier in the computer field
develops with its agents; where the agent's personnel, support as well as
sales, are trained to almost the same standard as the supplier's own staff.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution
activities need to be monitored and managed, so will those of the
distribution chain.
In practice, many organizations use a mix of different channels; in particular,
they may complement a direct salesforce, calling on the larger accounts,
with agents, covering the smaller customers and prospects.
Vertical marketing
This relatively recent development integrates the channel with the original
supplier - producer, wholesalers and retailers working in one unified system.
This may arise because one member of the chain owns the other elements
(often called `corporate systems integration'); a supplier owning its own
retail outlets, this being 'forward' integration. It is perhaps more likely that a
retailer will own its own suppliers, this being 'backward' integration. (For
example, MFI, the furniture retailer, owns Hygena which makes its kitchen
and bedroom units.) The integration can also be by franchise (such as that
offered by McDonald's hamburgers and Benetton clothes) or simple co-
operation (in the way that Marks & Spencer co-operates with its suppliers).
Alternative approaches are 'contractual systems', often led by a wholesale or
retail co-operative, and `administered marketing systems' where one
(dominant) member of the distribution chain uses its position to co-ordinate
the other members' activities. This has traditionally been the form led by
manufacturers.
The intention of vertical marketing is to give all those involved (and
particularly the supplier at one end, and the retailer at the other) 'control'
over the distribution chain. This removes one set of variables from the
marketing equations.
Other research indicates that vertical integration is a strategy which is best
pursued at the mature stage of the market (or product). At earlier stages it
can actually reduce profits. It is arguable that it also diverts attention from
the real business of the organization. Suppliers rarely excel in retail
operations and, in theory, retailers should focus on their sales outlets rather
than on manufacturing facilities ( Marks & Spencer, for example, very
deliberately provides considerable amounts of technical assistance to its
suppliers, but does not own them).
Horizontal marketing
A rather less frequent example of new approaches to channels is where two
or more non-competing organizations agree on a joint venture - a joint
marketing operation - because it is beyond the capacity of each individual
organization alone. In general, this is less likely to revolve around marketing
synergy.
References
•Louis W. Stern et al, 'Marketing Channels', (Prentice-Hall, 7th ed.,
2006)
•Richard E. Wilson, 'A Blueprint for Designing Marketing Channels',
(www.chicagostrategy.com)
•P. Kotler, 'Marketing Management' (Prentice-Hall, 7th ed., 1991)
•G. Lancaster and L. Massingham, 'Essentials of Marketing' (McGraw-
Hill, 1988)
•Julian Dent, "Distribution Channels: Understanding and Managing
Channels to Market" (Kogan Page, 2008)
Service (economics)
•2 Service definition
•3 Service specification
•4 Service delivery
•7 See also
• 9 References
Key characteristics
Services can be paraphrased in terms of their main attributes. They are
intangible and insubstantial; they cannot be handled, smelled, tasted, heard,
etc. There is neither potential nor need for storage and they are said to be
inseparable and perishable. Because services are difficult to conceptualize,
marketing them requires creative visualization to effectively evoke a
concrete image in the customer's mind. From the customer's point of view,
this characteristic makes it difficult to evaluate or compare services prior to
experiencing the service delivery. They are perishable, unsold service time is
a lost economic opportunity. For example a doctor who is booked for only
two hours a day cannot later work those hours— she has lost her economic
opportunity. Other service examples are airplane seats (once the plane
departs, those empty seats cannot be sold), and theatre seats (sales end at a
certain point). There is a lack of transportability as services tend to be
consumed at the point of "production" although this does not apply to
outsourced business services. Services are regarded as heterogeneity or lack
of homogeneity and are typically modified for each consumer or each new
situation (consumerised). Mass production of services is very difficult. This
can be seen as a problem of inconsistent quality. Both inputs and outputs to
the processes involved providing services are highly variable, as are the
relationships between these processes, making it difficult to maintain
consistent quality. There is labor intensity as services usually involve
considerable human activity, rather than a precisely determined process.
Human resource management is important. The human factor is often the
key success factor in service industries. It is difficult to achieve economies
of scale or gain dominant market share. There are demand fluctuations and it
can be difficult to forecast demand which is also true of many goods.
Demand can vary by season, time of day, business cycle, etc. There is buyer
involvement as most service provision requires a high degree of interaction
between service consumer and service provider. There is a client-based
relationship based on creating long-term business relationships.
Accountants, attorneys, and financial advisers maintain long-term
relationships with their clientes for decades. These repeat consumers refer
friends and family, helping to create a client-based relationship.
Service definition
The clear-cut, consistent, generic definition of the service term reads as
follows:
A service is a set of benefits delivered from the accountable service
provider, mostly in close coaction with his service suppliers, generated by
the functions of technical systems and/or by distinct activities of individuals,
respectively, commissioned according to the needs of his service consumers
by the service customer from the accountable service provider, rendered
individually to the authorized service consumers on their dedicated request,
and, finally, utilized by the requesting service consumers for executing
and/or supporting their day-to-day business tasks or private activities.
Service specification
Any service can be completely, consistently and cleary specified by means
of the following 12 standard attributes
Service Consumer Benefit(s)
Service-specific Functional Parameter(s)
Service Delivery Point
Service Consumer Count
Service Readiness Time(s)
Service Support Time(s)
Service Support Language(s)
Service Fulfillment Target
Maximum Impairment Duration per Incident
Service Delivering Duration
Service Delivery Unit
Service Delivering Price
The meaning and content of these attributes are:
1. Service Consumer Benefits describe the (set of) benefits which are
callable, receivable and effectively utilizable for any authorized service
consumer and which are provided to him as soon as he requests the offered
service. The description of these benefits must be phrased in the terms and
wording of the intended service consumers.
2. Service-specific Functional Parameters specify the functional
parameters which are essential and unique to the respective service and
which describe the most important dimension of the service output, e.g.
maximum e-mailbox capacity per registered and authorized e-mail service
consumer.
3. Service Delivery Point describes the physical location and/or logical
interface where the benefits of the service are made accessible, callable and
receivable to the authorized service consumers. At this point and/or
interface, the preparedness for service delivery can be assessed as well as the
effective delivery of the service itself can be monitored and controlled.
4. Service Consumer Count specifies the number of intended, identified,
named, registered and authorized service consumers which are allowed and
enabled to call and utilize the defined service for executing and/or
supporting their business tasks or private activities.
5. Service Readiness Times specify the distinct agreed times of day when
•the described service consumer benefits are
•accessible and callable for the authorized service consumers at the
defined service delivery point
•receivable and utilizable for the authorized service consumers at
the respective agreed service level
•all service-relevant processes and resources are operative and effective
•all service-relevant technical systems are up and running and attended
by the operating team
•the specified service benefits are comprehensively delivered to any
authorized requesting service consumer without any delay or friction.
The time data are specified in 24 h format per local working day and local
time, referring to the location of the intended service consumers.
6. Service Support Times specify the determined and agreed times of day
when the usage and consumption of the contracted services is supported by
the service desk team for all identified, registered and authorized service
consumers within the service customer’s organizational unit or area. The
service desk is the single point of contact for any service consumer inquiry
regarding the contracted and delivered services. During the defined service
support times, the service desk can be reached by phone, e-mail, web-based
entries and/or fax, respectively. The time data are specified in 24 h format
per local working day and local time, referring to the location of the
intended service consumers.
7. Service Support Languages specifies the languages which are spoken by
the service desk team(s) to the service consumers calling them.
8. Service Fulfillment Target specifies the service provider’s promise of
effective and seamless delivery of the defined benefits to any authorized
service consumer requesting the service within the defined service times. It
is expressed as the promised minimum ratio of the counts of successful
individual service deliveries related to the counts of called indivdual service
deliveries. The effective service fulfillment ratio can be measured and
calculated per single service consumer or per consumer group and may be
referred to different time periods (workday, calenderweek, workmonth, etc.)
9. Maximum Impairment Duration per Incident specifies the allowable
maximum elapsing time [hh:mm] between
•the first occurrence of a service impairment, i.e. service quality
degradation or service delivery disruption, whilst the service
consumer consumes and utilizes the delivered service,
•and the full resumption and complete execution of the service delivery
to the content of the affected service consumer.
10. Service Delivering Duration specifies the promised and agreed
maximum period of time for effectively delivering all specified service
consumer benefits to the requesting service consumer at the defined service
delivery point.
11. Service Delivery Unit specifies the basic portion for delivering the
defined service consumer benefits. The service delivery unit is the reference
and mapping object for all cost for service generation and delivery as well as
for charging and billing the consumed service volume to the service
customer who has ordered the service delivery.
12. Service Delivering Price specifies the amount of money the service
customer has to pay for the consumption of distinct service volumes.
Normally, the service delivering price comprises two portions
•a fixed basic price portion for basic efforts and resources which provide
accessiblity and usablity of the service delivery functions, i.e. service
access price
•a price portion covering the service consumption based on
•fixed flat rate price per authorized service consumer and delivery
period without regard on the consumed service volumes,
•staged prices depending on consumed service volumes,
•fixed price per particularly consumed service delivering unit.
Service delivery
The delivery of a service typically involves six factors:
•The accountable service provider and his service suppliers (e.g. the
people)
•Equipment used to provide the service (e.g. vehicles, cash registers)
•The physical facilities (e.g. buildings, parking, waiting rooms)
•The requesting service consumer
•Other customers at the service delivery location
•Customer contact
The service encounter is defined as all activities involved in the service
delivery process. Some service managers use the term "moment of truth" to
indicate that defining point in a specific service encounter where interactions
are most intense.
Many business theorists view service provision as a performance or act
(sometimes humorously referred to as dramalurgy, perhaps in reference to
dramaturgy). The location of the service delivery is referred to as the stage
and the objects that facilitate the service process are called props. A script is
a sequence of behaviours followed by all those involved, including the
client(s). Some service dramas are tightly scripted, others are more ad lib.
Role congruence occurs when each actor follows a script that harmonizes
with the roles played by the other actors.
In some service industries, especially health care, dispute resolution, and
social services, a popular concept is the idea of the caseload, which refers to
the total number of patients, clients, litigants, or claimants that a given
employee is presently responsible for. On a daily basis, in all those fields,
employees must balance the needs of any individual case against the needs
of all other current cases as well as their own personal needs.
Under English law, if a service provider is induced to deliver services to a
dishonest client by a deception, this is an offence under the Theft Act 1978.
/wiki/Image:Service-goods_continuum.png
/wiki/Image:Service-goods_continuum.pngService-Goods continuum
•customer service
•mechanics
•construction
•carpentry
•plumbing
•death care
•coroners (who provide the service of identifying corpses and
determining time and cause of death)
•funeral homes (who prepare corpses for public display, cremation
or burial)
•dispute resolution and prevention services
•arbitration
•museum
•school
•sexual services
•sports
•television
•fabric care
•dry cleaning
•financial services
•accounting
•stock brokerages
•foodservice industry
•hairdressing
•health care (all health care professions provide services)
•hospitality industry
•information services
•data processing
•database services
•language interpretation
•language translation
•risk management
•insurance
•security
•social services
•social work
•transport
•utilities
•electric power
•natural gas
•telecommunications
•waste management
•water industry
References
^ CIA World Factbook: https://www.cia.gov/library/publications/the-
world-factbook/fields/2012.html
•Pascal Petit (1987). "services," The New Palgrave: A Dictionary of
Economics, v. 4, pp. 314-15.
Retrieved from "http://en.wikipedia.org/wiki/Service_%28economics%29"
Categories: Economics terminology | Goods | Services management and
marketing | Marketing | Supply chain management terms
Hidden categories: All articles with unsourced statements | Articles with
unsourced statements since December 2007 | Articles needing additional
references from October 2007
Retailing
Retailing consists of the sale of goods or merchandise from a fixed location,
such as a department store or kiosk, or by post, in small or individual lots for
direct consumption by the purchaser.[1] Retailing may include subordinated
services, such as delivery. Purchasers may be individuals or businesses. In
commerce, a retailer buys goods or products in large quantities from
manufacturers or importers, either directly or through a wholesaler, and then
sells smaller quantities to the end-user. Retail establishments are often called
shops or stores. Retailers are at the end of the supply chain. Manufacturing
marketers see the process of retailing as a necessary part of their overall
distribution strategy.
Shops may be on residential streets, shopping streets with few or no houses,
or in a shopping center or mall, but are mostly found in the central business
district. Shopping streets may be for pedestrians only. Sometimes a shopping
street has a partial or full roof to protect customers from precipitation. In the
U.S., retailers often provided boardwalks in front of their stores to protect
customers from the mud. Online retailing, also known as e-commerce is the
latest form of non-shop retailing (cf. mail order).
Shopping generally refers to the act of buying products. Sometimes this is
done to obtain necessities such as food and clothing; sometimes it is done as
a recreational activity. Recreational shopping often involves window
shopping (just looking, not buying) and browsing and does not always result
in a purchase.
Contents
•1. Retail pricing
•2. Retail industry
•3 Retail Services
•4. Etymology
• 8. Bibliography
Retail pricing
The pricing technique used by most retailers is cost-plus pricing. This
involves adding a markup amount (or percentage) to the retailers cost.
Another common technique is suggested retail pricing. This simply involves
charging the amount suggested by the manufacturer and usually printed on
the product by the manufacturer.
In Western countries, retail prices are often called psychological prices or
odd prices.
Often prices are fixed and displayed on signs or labels. Alternatively, there
can be price discrimination for a variety of reasons, where the retailer
charges higher prices to some customers and lower prices to others. For
example, a customer may have to pay more if the seller determines that he or
she is willing to. The retailer may conclude this due to the customer's
wealth, carelessness, lack of knowledge, or eagerness to buy. Another
example is the practice of discounting for youths or students. Retailers who
are overstocked, or need to raise cash to renew stocks may resort to "sales",
where prices are "marked down", often by advertised percentages - "50%
off".
Retail industry
Retail industry has brought in phenomenal changes[citation needed]in the
whole process of production, distribution and consumption of consumer
goods all over the world[citation needed]. In the present world most of the
developed economies are using the retail industry as their vital growth
instrument[citation needed]. At present, among all the industries of U.S.A.
the retail industry holds the second place in terms of employment
generation[citation needed]. In fact, the strength of the retail industry lies in
its ability to generate large volume of employment[citation needed].
Not only U.S. but also the other developed countries like the UK, Canada,
France, Germany & Australia are experiencing tremendous growth in their
retail sectors[citation needed]. Key Canadian retailers include Canadian
Tire, Grand & Toy, Harry Rosen, Loblaw, Winners Merchants, Reitmans,
Shoppers Drug Mart, The Hudson's Bay Company, and Sleep Country
Canada. This boom in the global retail industry was in many ways
accelerated by the liberalization of the retail sector.[citation needed]
Observing this global upward trend of retail industry, now the developing
countries like India are also planning to tap the enormous potential of the
retail sector. Wal-Mart, the world's largest retailer, is interested in opening
shops in India. Other popular brands like Pantaloons, Big Bazar (India), and
Archies (U.S.) are rapidly increasing their market share in the retail sector.
According to a survey [citation needed], within five years, the Indian retail
industry is expected to generate 10 to 15 million jobs by direct and indirect
effects. This huge employment generation can be possible because being
dependent on the retail sector shares a lot of forward and backward linkages.
Emergence of a strong retail sector can contribute immensely to the
economic development of any country [citation needed]. With a dominant
retail sector, the farmers and other suppliers can sell their products directly
to the major retail companies and can ensure stable profit. On the other hand,
to ensure steady supply of goods, the retail companies can inject cash into
the production system. This whole process can result into a more efficient
production and distribution system for the economy as a whole [citation
needed].
Wal-Mart is the United States' and the World's largest retailer.
Retail Services
Behind the scenes at retail there is another factor at work. Coporations and
independent store owners alike are always trying to get the edge on their
competitors. One way to do this is to hire a merchandising solutions
company to design custom store displays that will attract more customers in
a certain demographic. The nation's largest retailers spend millions every
year on in-store marketing programs that correspond to season and
promotional changes. As products change, so will a retail landscape.
Etymology
Retail comes from the French word retaillier which refers to "cutting off,
clip and divide" in terms of tailoring (1365). It first was recorded as a noun
with the meaning of a "sale in small quantities" in 1433 (French). Its literal
meaning for retail was to "cut off, shred, paring".[2] Like the French, the
word retail in both Dutch and German (detailhandel and Einzelhandel
respectively) also refer to sale of small quantities of items.[citation needed]
Retail types
There are three major types of retailing. The first is the market, a physical
location where buyers and sellers converge. Usually this is done in town
squares, sidewalks or designated streets and may involve the construction of
temporary structures (market stalls). The second form is shop or store
trading. Some shops use counter-service, where goods are out of reach of
buyers, and must be obtained from the seller. This type of retail is common
for small expensive items (e.g. jewelry) and controlled items like medicine
and liquor. Self-service, where goods may be handled and examined prior to
purchase, has become more common since the 20th century. A third form of
retail is virtual retail, where products are ordered via mail, telephone or
online without having been examined physically but instead in a catalog, on
television or on a website. Sometimes this kind of retailing replicates
existing retail types such as online shops or virtual marketplaces such as
Amazon.[3]
Buildings for retail have changed considerably over time. Market halls were
constructed in the Middle Ages, which were essentially just covered
marketplaces. The first shops in the modern sense used to deal with just one
type of article, and usually adjoined the producer (baker, tailor, cobbler). In
the 19th century, in France, arcades were invented, which were a street of
several different shops, roofed over. Counters, each dealing with a different
kind of article, were invented; it was called a department store. One of the
novelties of the department store was the introduction of fixed prices,
making haggling unnecessary, and browsing more enjoyable. This is
commonly considered the birth of consumerism [4] In cities, these were
multi-story buildings which pioneered the escalator.
In the 1920s the first supermarket opened in the United States, heralding in a
new era of retail: self-service. Around the same time the first shopping mall
was constructed [5] which incorporated elements from both the arcade and
the department store. A mall consists of several department stores linked by
arcades (many of whose shops are owned by the same firm under different
names). The design was perfected by the Austrian architect Victor Gruen[6]
All the stores rent their space from the mall owner. By mid-century, most of
these were being developed as single enclosed, climate-controlled, projects
in suburban areas. The mall has had a considerable impact on the retail
structure and urban development in the United States. [7]
In addition to the enclosed malls, there are also strip malls which are
'outside' malls (in Britain they are called retail parks. These are often
comprised of one or more big-box stores or superstores.
Bibliography
•Krafft, Manfred; Mantrala, Murali K. (eds.) (2006). Retailing in the 21st
century: current and future trends. New York: Springer Verlag. ISBN
3540283994.
Retrieved from "http://en.wikipedia.org/wiki/Retailing"
Categories: Distribution, retailing, and wholesaling
Hidden categories: All articles with unsourced statements | Articles with
unsourced statements since December 2007 | Articles with unsourced
statements since July 2007
Sales promotion
promotional mix. (The other four parts of the promotional mix are
advertising, personal selling, direct marketing and publicity/public
relations.) Media and non-media marketing communication are employed
for a pre-determined, limited time to increase consumer demand, stimulate
market demand or improve product availability. Examples include:
•contests
•rebates
•3 Political issues
•4 External references
•5 See also
•6 References
Political issues
Sales promotions have traditionally been heavily regulated in many
advanced industrial nations, with the notable exception of the United States.
For example, the United Kingdom formerly operated under a resale price
maintenance regime in which manufacturers could legally dictate the
minimum resale price for virtually all goods; this practice was abolished in
1964.[1]
Most European countries also have controls on the scheduling and
permissible types of sales promotions. Germany is notorious for having the
most strict regulations. Famous examples include the car wash that was
barred from giving free car washes to regular customers and a baker who
could not give a free cloth bag to customers who bought more than ten rolls.
(Anonymous, "Handcuffs on the high street," The Economist 355)
External references
•US specialist magazine for sales promotion, Promo magazine
Public Relation
Definition
The Public Relations Society (PRSA) of America coined the first widely
accepted definition of Public Relations in 19882, "Public relations helps an
organization and its publics adapt mutually to each other." According to the
PRSA, the essential functions of Public Relations include research, planning,
communications dialogue and evaluation. 3
Edward Louis Bernays, who is considered the founding father of modern
public relations along with Ivy Lee, defined public relations as a
management function which tabulates public attitudes, defines the policies,
procedures and interest of an organization followed by executing a program
of action to earn public understanding and acceptance," in the early
1900s(see history of public relations).
Today "Public Relations is a set of management, supervisory, and technical
functions that foster an organization's ability to strategically listen to,
appreciate, and respond to those persons whose mutually beneficial
relationships with the organization are necessary if it is to achieve its
missions and values." (Robert L. Heath, Encyclopedia of Public Relations).
Essentially it is a management function that focuses on two-way
communication and fostering of mutually beneficial relationships between
an organization and its publics.
There is a school of public relations that holds that it is about relationship
management. Phillips, explored this concept in his paper "Towards
relationship management: Public relations at the core of organisational
development" paper in 2006 which lists a range of academics and
practitioners who support this view.
•7 See also
•8 Notes
•9 References
•Brand name testing - what do consumers feel about the names of the
products?
•Commercial eye tracking research - examine advertisements, package
designs, websites, etc by analyzing visual behavior of the consumer
•Concept testing - to test the acceptance of a concept by target
consumers
•Coolhunting - to make observations and predictions in changes of new
or existing cultural trends in areas such as fashion, music, films,
television, youth culture and lifestyle
•Buyer decision processes research - to determine what motivates
people to buy and what decision-making process they use
•Copy testing – predicts in-market performance of an ad before it airs by
analyzing audience levels of attention, brand linkage, motivation,
entertainment, and communication, as well as breaking down the ad’s
flow of attention and flow of emotion. (Young, p 213)
•Customer satisfaction research - quantitative or qualitative studies that
yields an understanding of a customer's of satisfaction with a
transaction
•Demand estimation - to determine the approximate level of demand for
the product
•Distribution channel audits - to assess distributors’ and retailers’
attitudes toward a product, brand, or company
•Internet strategic intelligence - searching for customer opinions in the
Internet: chats, forums, web pages, blogs... where people express
freely about their experiences with products, becoming strong
"opinion formers"
•Marketing effectiveness and analytics - Building models and
measuring results to determine the effectiveness of individual
marketing activities.
•Mystery shopping - An employee or representative of the market
research firm anonymously contacts a salesperson and indicates he or
she is shopping for a product. The shopper then records the entire
experience. This method is often used for quality control or for
researching competitors' products.
•Positioning research - how does the target market see the brand relative
to competitors? - what does the brand stand for?
•Price elasticity testing - to determine how sensitive customers are to
price changes
•Sales forecasting - to determine the expected level of sales given the
level of demand. With respect to other factors like Advertising
expenditure, sales promotion etc.
•Segmentation research - to determine the demographic, psychographic,
and behavioural characteristics of potential buyers
•Online panel - a group of individual who accepted to respond to
marketing research online
•Store audit - to measure the sales of a product or product line at a
statistically selected store sample in order to determine market share,
or to determine whether a retail store provides adequate service
•Test marketing - a small-scale product launch used to determine the
likely acceptance of the product when it is introduced into a wider
market
•Viral Marketing Research - refers to marketing research designed to
estimate the probability that specific communications will be
transmitted throughout an individuals Social Network. Estimates of
Social Networking Potential (SNP) are combined with estimates of
selling effectiveness to estimate ROI on specific combinations of
messages and media.
All of these forms of marketing research can be classified as either problem-
identification research or as problem-solving research.
A company collects primary research by gathering original data.
Secondary research is conducted on data published previously and usually
by someone else. Secondary research costs far less than primary research,
but seldom comes in a form that exactly meets the needs of the researcher.
A similar distinction exists between exploratory research and conclusive
research. Exploratory research provides insights into and comprehension of
an issue or situation. It should draw definitive conclusions only with extreme
caution. Conclusive research draws conclusions: the results of the study
can be generalized to the whole population.
Exploratory research is conducted to explore a problem to get some basic
idea about the solution at the preliminary stages of research. It may serve as
the input to conclusive research. Exploratory research information is
collected by focus group interviews, reviewing literature or books,
discussing with experts, etc. This is unstructured and qualitative in nature. If
a secondary source of data is unable to serve the purpose, a convenience
sample of small size can be collected. Conclusive research is conducted to
draw some conclusion about the problem. It is essentially, structured and
quantitative research, and the output of this research is the input to
management information systems (MIS).
Exploratory research is also conducted to simplify the findings of the
conclusive or descriptive research, if the findings are very hard to interpret
for the marketing manager.
References
•Bradley, Nigel Marketing Research. Tools and Techniques.Oxford
University Press, Oxford, 2007 ISBN-10: 0-19-928196-3 ISBN-13:
978-0-19-928196-1
•Marder, Eric The Laws of Choice -- Predicting Customer Behavior (The
Free Press division of Simon and Schuster, 1997. ISBN 0-684-83545-
2
•Young, Charles E, The Advertising Handbook, Ideas in Flight, Seattle,
WA, April 2005. ISBN 0-9765574-0-1
•Kotler, Philip and Armstrong, Gary Principles of Marketing Pearson,
Prentice Hall, New Jersey, 2007 ISBN13 978-0-13-239002-6, ISBN10
0-13-239002-7
15 Business Marketing
•4.4 Pricing
•4.5 Promotion
•8 Notes
•9 References
B2B Branding
B2B branding is different from B2C in some crucial ways, including the
need to closely align corporate brands, divisional brands and product/service
brands and to apply your brand standards to material often considered
“informal” such as email and other electronic correspondence.
Promotion
Promotion planning is relatively easy when you know the media,
information seeking and decision making habits of your customer base, not
to mention the vocabulary unique to their segment. Specific trade shows,
analysts, publications, blogs and retail/wholesale outlets tend to be fairly
common to each industry/product area. What this means is that once you
figure it out for your industry/product, the promotion plan almost writes
itself (depending on your budget) but figuring it out can be a special skill
and it takes time to build up experience in your specific field. Promotion
techniques rely heavily on Marketing Communications strategies (see
below).
Positioning Statement
An important first step in business to business marketing is the development
of your positioning statement. This is a statement of what you do and how
you do it differently and better and efficiently than your competitors.
Briefing an agency
A standard briefing document is usually a good idea for briefing an agency.
As well as focusing the agency on what's important to you and your
campaign, it serves as a checklist of all the important things to consider as
part of your brief. Typical elements to an agency brief are: Your objectives,
target market, target audience, product, campaign description, your product
positioning, graphical considerations, corporate guidelines, and any other
supporting material and distribution.
Measuring results
The real value in results measurement is in tying the marketing campaign
back to business results. After all, you’re not in the business of developing
marketing campaigns for marketing sake. So always put metrics in place to
measure your campaigns, and if at all possible, measure your impact upon
your desired objectives, be it Cost Per Acquisition, Cost per Lead or tangible
changes in customer perception.
Notes
^ McCarthy, Jerome E.: "Basic Marketing: A Managerial Approach".
Homewood, IL: Irwin, 1996
^ Kotler & Pfoertsch: "B2B Brand Management", page 21. Springer
Berlin, 2006
^ Malaval: "Strategy and Management of Industrial Brandds: Business to
Business Products and Services", page 16. 2001
^ Brown, Duncan and Hayes, Nick. Influencer Marketing: Who really
influences your customers?, Butterworth-Heinemann, 2008
^ Kotler & Pfoertsch: "B2B Brand Management", page 53. Springer
Berlin, 2006
References
•Anderson, James C., and Narus, James A. (2004) Business Market
Management: Understanding, Creating, and Delivering Value, 2nd
Edition, 2004, Pearson Education, Inc.
•Business Marketing Association (2003) "Marketing Reality Survey"
•Dwyer, F. Robert, Tanner, John F. (2006) Business Marketing:
Connecting Strategy, Relationships, and Learning, 3rd Edition,
McGraw-Hill/Irwin
•Greco, John A. Jr., (2005) "Past indicates promising future for b-to-b
direct; BtoB magazine, June 13, 2005
•Hutt, Michael D., Speh, Thomas W. (2001) Business Marketing
Management: A Strategic View of Industrial and Organizational
Markets, 7th Edition, Harcourt Inc.
•Morris, Michael H., Pitt, Leyland F., and Honeycutt, Earl Dwight (2001)
Business-to-Business Marketing: A Strategic Approach, Sage
Publications Inc.
•Reid, David A., and Plank, Richard E. (2004) Fundamentals of Business
Marketing Research, Best Business Books, an Imprint of The
Haworth Press, Inc.
•Brown, Duncan and Hayes, Nick. Influencer Marketing: Who really
influences your customers?, Butterworth-Heinemann, 2008
16 Marketing Management
Marketing
Marketing management is a business discipline focused on the practical
application of marketing techniques and the management of a firm's
marketing resources and activities. Marketing managers are often
responsible for influencing the level, timing, and composition of customer
demand in a manner that will achieve the company's objectives.
Contents
[hide]
•1 Definition and scope
•3 References
•4 See also
Definition and scope
There is no universally accepted definition of the term. In part, this is due to
the fact that the role of a marketing manager can vary significantly based on
a business' size, corporate culture, and industry context. For example, in a
large consumer products company, the marketing manager may act as the
overall general manager of his or her assigned product category or brand
with full profit & loss responsibility. In contrast, a small law firm may have
no marketing personnel at all, requiring the firm's partners to make
marketing management decisions on a largely ad-hoc basis.
In the widely used text Marketing Management (2006), Philip Kotler and
Kevin Lane Keller define marketing management as "the art and science of
choosing target markets and getting, keeping and growing customers
through creating, delivering, and communicating superior customer value."
[1]
From this perspective, the scope of marketing management is quite broad.
The implication of such a definition is that any activity or resource the firm
uses to acquire customers and manage the company's relationships with
them is within the purview of marketing management. Additionally, the
Kotler and Keller definition encompasses both the development of new
products and services and their delivery to customers.
Noted marketing expert Regis McKenna expressed a similar viewpoint in his
influential 1991 Harvard Business Review article "Marketing is Everything."
McKenna argued that because marketing management encompasses all
factors that influence a company's ability to deliver value to customers, it
must be "all-pervasive, part of everyone's job description, from the
receptionists to the Board of Directors." [2]
This view is also consistent with the perspective of management guru Peter
Drucker, who wrote: "Because the purpose of business is to create a
customer, the business enterprise has two--and only these two--basic
functions: marketing and innovation. Marketing and innovation produce
results; all the rest are costs. Marketing is the distinguishing, unique function
of the business."[3]
But because many businesses operate with a much more limited definition of
marketing, such statements can appear controversial, or even ludicrous to
some business executives. This is especially true in those companies where
the marketing department is responsible for little more than developing sales
brochures and executing advertising campaigns.
The broader, more sophisticated definitions of marketing management from
Drucker, Kotler and other scholars are therefore juxtaposed against the
narrower operating reality of many businesses. The source of confusion here
is often that inside any given firm, the term marketing management may be
interpreted to mean whatever the marketing department happens to do, rather
than a term that encompasses all marketing activities -- even those marketing
activities that are actually performed by other departments, such as the sales,
finance, or operations departments.[4] If, for example, the finance
department of a given company makes pricing decisions (for deals,
proposals, contracts, etc.), that finance department has responsibility for an
important component of marketing management -- pricing.
Marketing strategy
Main article: Marketing strategy
Once the company has obtained an adequate understanding of the customer
base and its own competitive position in the industry, marketing managers
are able to make key strategic decisions and develop a marketing strategy
designed to maximize the revenues and profits of the firm. The selected
strategy may aim for any of a variety of specific objectives, including
optimizing short-term unit margins, revenue growth, market share, long-term
profitability, or other goals.
To achieve the desired objectives, marketers typically identify one or more
target customer segments which they intend to pursue. Customer segments
are often selected as targets because they score highly on two dimensions: 1)
The segment is attractive to serve because it is large, growing, makes
frequent purchases, is not price sensitive (i.e. is willing to pay high prices),
or other factors; and 2) The company has the resources and capabilities to
compete for the segment's business, can meet their needs better than the
competition, and can do so profitably.[5] In fact, a commonly cited
definition of marketing is simply "meeting needs profitably." [1]
The implication of selecting target segments is that the business will
subsequently allocate more resources to acquire and retain customers in the
target segment(s) than it will for other, non-targeted customers. In some
cases, the firm may go so far as to turn away customers that are not in its
target segment. The doorman at a swanky nightclub, for example, may deny
entry to unfashionably dressed individuals because the business has made a
strategic decision to target the "high fashion" segment of nightclub patrons.
In conjunction with targeting decisions, marketing managers will identify
the desired positioning they want the company, product, or brand to occupy
in the target customer's mind. This positioning is often an encapsulation of a
key benefit the company's product or service offers that is differentiated and
superior to the benefits offered by competitive products.[8] For example,
Volvo has traditionally positioned its products in the automobile market in
North America in order to be perceived as the leader in "safety", whereas
BMW has traditionally positioned its brand to be perceived as the leader in
"performance."
Ideally, a firm's positioning can be maintained over a long period of time
because the company possesses, or can develop, some form of sustainable
competitive advantage.[9] The positioning should also be sufficiently
relevant to the target segment such that it will drive the purchasing behavior
of target customers.[8]
Implementation planning
Main article: Marketing plan
After the firm's strategic objectives have been identified, the target market
selected, and the desired positioning for the company, product or brand has
been determined, marketing managers focus on how to best implement the
chosen strategy. Traditionally, this has involved implementation planning
across the "4Ps" of marketing: Product management, Pricing, Place (i.e.
sales and distribution channels), and Promotion.
Taken together, the company's implementation choices across the 4Ps are
often described as the marketing mix, meaning the mix of elements the
business will employ to "go to market" and execute the marketing strategy.
The overall goal for the marketing mix is to consistently deliver a
compelling value proposition that reinforces the firm's chosen positioning,
builds customer loyalty and brand equity among target customers, and
achieves the firm's marketing and financial objectives.
In many cases, marketing management will develop a marketing plan to
specify how the company will execute the chosen strategy and achieve the
business' objectives. The content of marketing plans varies from firm to
firm, but commonly includes:
•An executive summary
•Situation analysis to summarize facts and insights gained from market
research and marketing analysis
•The company's mission statement or long-term strategic vision
•A statement of the company's key objectives, often subdivided into
marketing objectives and financial objectives
•The marketing strategy the business has chosen, specifying the target
segments to be pursued and the competitive positioning to be achieved
•Implementation choices for each element of the marketing mix (the 4Ps)
•A summary of required investments (in people, programs, IT systems,
etc.)
•Financial analysis, projections and forecasted results
References
^ a b c Kotler, Philip.; Kevin Lane Keller (2006). Marketing Management,
12th ed.. Pearson Prentice Hall. ISBN 0-13-145757-8.
^ McKenna, Regis (Jan. 1991). "Marketing is Everything". Harvard
Business Review.
^ Drucker, Peter F. (1993 (reprint)). Management: Tasks,
Responsibilities, Practices. HarperCollins. ISBN 0-88730-615-2.
^ Kotler, Philip (Nov. 1977). "From Sales Obsession to Marketing
Effectiveness". Harvard Business Review.
^ a bClancy, Kevin J.; Peter C. Kriegafsd (2000). Counterintuitive
Marketing. The Free Press. ISBN 0-684-85555-0.
^ Keller, Kevin Lane (2002). Strategic Brand Management, 2nd ed..
Prentice Hall. ISBN 0-13-041150-7.
^ Porter, Michael (1998). Competitive Strategy (revised ed.). The Free
Press. ISBN 0-684-84148-7.
^ a bRies, Al; Jack Trout (2000). Positioning: The Battle for Your Mind
(20th anniversary ed.). McGraw-Hill. ISBN 0-07-135916-8.
^ Porter, Michael (1998). Competitive Advantage (revised ed.). The Free
Press. ISBN 0-684-84146-0.
^ Schultz, Don E.; Philip J. Kitchen (2000). Communicating Globally.
Palgrave Macmillan. ISBN 0-333-92137-2.
Sales management
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Importance of sales management is critical for any commercial
organization. Expanding business is not possible without increasing sales
volumes, and effective sales management goal is to organize sales team
work in such a manner that ensures a growing flow of regular customers and
increasing amount of sales.
Contents
[hide]
•1 Sales Management Process
•2 Sales Planning
•3 Sales Tracking
•4 Sales Reporting
Sales Planning
Unfortunately, when the business is growing, customers need more products,
service and customization, this individual activity oriented approach can
become a barrier for sales to grow because unfocused and uncoordinated
activity decreases effectiveness. Your sales department must be reorganized,
and sales people should specialize and co-operate with each other as well as
other departments of your company. Poor team sales management leads to
losing orders and customers so it is better to introduce a sales planning
system as soon as possible. Appropriate software will help sales team leader
to set sales goals which will motivate sales personnel (estimated sales
volumes should grow steadily from period to period despite the seasonal
variations of demand because decreasing estimated sales volumes
discourages sales managers).
After setting sales goals, salespersons’ activities should be planned by
regions, clients, channels, managers, products etc. Sales team leader or sales
department head should choose volume and operational metrics to evaluate
sales managers' effectiveness and to motivate them from achieved result.
While planning it is important to consider market potential and structure,
company's strengths and weaknesses, customer relations history, etc. that's
why sales planning software must be able to store all sales-related
information and allow a flexible searching, filtering, grouping and showing
statistics (i.e. flexible customer, task and order forms, calculated fields,
tables, schedules and charts). It is a good practice to let sales managers
describe how he or she will execute assigned sales tasks to check his or her
motivation to get things done. So the software for sales planning should
allow breaking a task down into to do items with possibility to set such
parameters as time, resources and measured results. It enables tracking
intermediate and final results, sales force effectiveness and sales plans
accomplishment.
Sales Tracking
Sales tracking is an integral part of sales management. Without tracking
sales tasks it is hard to find out if everything goes right and estimated
intermediate results are achieved in time and in the limits of expected
resources. If anything is out of expected range, you can analyze the details,
talk to a sales manager responsible for this task and take corrective actions.
Sales Tracking tracks selling activities as opposed to Revenue Tracking
which focuses on tracking the progress of forecasted opportunities. The most
difficult part of tracking selling activities is knowing if the activities will
actually lead to sales. Management must have a method of knowing if sales
reps are correctly engaging in enough of the right activities to produce
revenue in the future. This leads to three key metrics: the right activities, the
right way, the right amount. An individual sale is a stepwise process and key
activities, or “Transitional Milestones”, must be achieved along the way.
Sales Management must collect data on how the sales function as a whole is
progressing through these “Transitional Milestones” to determine the
likelihood of future revenue.[1]
Software used for sales tracking should allow sales team leaders to control
sales tasks completion by using reminders and notifications, highlighting
overdue tasks, analyzing task history, etc.
If your sales task management system is really great and duly implemented,
you are informed about all details of your company’s sales process in reall
time and know who does what, when, and how.
Sales Reporting
The sales reporting includes the key performance indicators of the sales
force.
The KPI indicate whether or not the sales process achieves the results as set
forth in the sales planning and enables the sales managers to take corrective
action in time in case the indicators deviate from the projected values.
More process than result related is information on the sales funnel and the
hit rate
In addition, sales reporting is a source for motivating sales managers,
because awarding best managers without accurate and reliable sales reports
is not objective.
Also, sales reports are made not only for internal use or top management. If
other divisions’ compensation plan depends on final results, it’s needed to
present results of sales department’s work to other departments.
Finally, sales reports are required for investors, partners and government, so
the sales management system should have advanced reporting capabilities to
satisfy needs of different target audiences and help sales force to be more
effective and make more sales.
Actual Sales Management Challenges
Managing sales is not difficult while a company is small, customer count
and sales persons count are limited, and sales process is simple and
transparent. However, when sales start to grow, companies understand that it
is very hard to manage enlarged sales workflow as effectively as they did
before. Managing increased sales volumes is more difficult because sales
management process becomes more complicated and sales department has to
deal with all aspects of the process. Not only the number of sales tasks
grows but also grows the number of regions, customers and products. It is
almost impossible for salespersons to handle with sales grows without a
special system for planning, tracking, analyzing, reporting, and controlling
all aspects of sales activity, projects and tasks.
Television advertising
For the TV advertising activity, we can know how each ad copy has
performed in the market in terms of its impact on sales volume. We can gain
insights into the direct and the halo effect of TV activity and hence optimize
advertising spends across various products or sub-brands under the same
brand. We can know the effectiveness of a 15-seconder ad vis-à-vis a 30-
seconder ad. We can also know how an ad has performed when it was run
during a prime-time slot vis-à-vis during an off-prime-time slot. Hence
depending on the differential cost one can identify the most optimal way to
allocate TV advertising budget. MMM also tells us the effectiveness in
terms of volume response at various levels of media weight, as measured by
Gross Rating Points within a time frame, be it a week or a month. We can
know the minimum level of GRPs (threshold limit) in a week that need to be
aired in order to make an impact; we can know the level at which the activity
gives maximum ROI; we can know the level of GRPs at which the impact
on volume maximizes (saturation limit) and that the further activity does not
have any payback. The role of new product based TV activity and the equity
based TV activity in growing the brand can also be identified.
Trade promotions
Trade promotion is a key activity in every marketing plan. It is aimed at
increasing sales in the short term by employing promotion schemes which
effectively increases the customer awareness of the business and its
products. The response of consumers to trade promotions is not straight
forward and is the subject of much debate. Non-linear models exist to
simulate the response. Using MMM we can understand the impact of trade
promotion at generating incremental volumes. It is possible to obtain an
estimate of the volume generated per promotion event in each of the
different retail outlets by region. This way we can identify the most and least
effective trade channels. If detailed spend information is available we can
compare the Return on Investment of various trade activities like Every Day
Low Price, Off-Shelf Display etc. We can use this information to optimize
the trade plan by choosing the most effective trade channels and targeting
the most effective promotion activity
Pricing
Price changes of the brand impacts the sales negatively. This effect can be
captured through modeling the price in MMM. The model provides the price
elasticity of the brand which tells us the percentage change in the sales for
each percentage change in price. Using this, the marketing manager can
evaluate the impact of a price change decision.
Distribution
For the element of distribution, we can know how the volume will move by
changing distribution efforts or, in other words, by each percentage shift in
the width or the depth of distribution. This can be identified specifically for
each channel and even for each kind of outlet for off-take sales. In view of
these insights, the distribution efforts can be prioritized for each channel or
store-type to get the maximum out of the same. A recent study of a laundry
brand showed that the incremental volume through 1% more presence in a
neighborhood Kirana store is 180% greater than that through 1% more
presence in a supermarket.[citation needed] Based upon the cost of such efforts,
managers identified the right channel to invest more for distribution.
Launches
When a new product is launched, the associated publicity and promotions
typically results in higher volume generation than expected. This extra
volume cannot be completely captured in the model using the existing
variables. Often special variables to capture this incremental effect of
launches are used. The combined contribution of these variables and that of
the marketing effort associated with the launch will give the total launch
contribution. Different launches can be compared by calculating their
effectiveness and ROI.
Definitions
The effective price is the price the company receives after accounting for
discounts, promotions, and other incentives.
Price lining is the use of a limited number of prices for all your product
offerings. This is a tradition started in the old five and dime stores in which
everything cost either 5 or 10 cents. Its underlying rationale is that these
amounts are seen as suitable price points for a whole range of products by
prospective customers. It has the advantage of ease of administering, but the
disadvantage of inflexibility, particularly in times of inflation or unstable
prices.
A loss leader is a product that has a price set below the operating margin.
This results in a loss to the enterprise on that particular item, but this is done
in the hope that it will draw customers into the store and that some of those
customers will buy other, higher margin items.
Promotional pricing refers to an instance where pricing is the key element of
the marketing mix.
The price/quality relationship refers to the perception by most consumers
that a relatively high price is a sign of good quality. The belief in this
relationship is most important with complex products that are hard to test,
and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the more of a
premium they are prepared to pay. The classic example of this is the pricing
of the snack cake Twinkies, which were perceived as low quality when the
price was lowered. Note, however, that excessive reliance on the
price/quantity relationship by consumers may lead to the raising of prices on
all products and services, even those of low quality, which in turn causes the
price/quality relationship to no longer apply.
Premium pricing (also called prestige pricing) is the strategy of consistently
pricing at, or near, the high end of the possible price range to help attract
status-conscious consumers. A few examples of companies which partake in
premium pricing in the marketplace include Rolex and Bentley. People will
buy a premium priced product because:
1. They believe the high price is an indication of good quality;
2. They believe it to be a sign of self worth - "They are worth it" - It
authenticates their success and status - It is a signal to others that they
are a member of an exclusive group; and
3. They require flawless performance in this application - The cost of
product malfunction is too high to buy anything but the best -
example : heart pacemaker
Approaches
Pricing as the most effective profit lever. (Template:Cite book:) Pricing can
be approached at three levels. The industry, market, and transaction level.
Pricing at the industry level focuses on the overall economics of the
industry, including supplier price changes and customer demand changes.
Pricing at the market level focuses on the competitive position of the price in
comparison to the value differential of the product to that of comparative
competing products.
Pricing at the transaction level focuses on managing the implementation of
discounts away from the reference, or list price, which occur both on and off
the invoice or receipt. Pricing at the transaction level focuses on managing
the implementation of discounts away from the reference, or list price, which
occur both on and off the invoice or receipt.
Debits and credits
Introduction
Debits and Credits are the most fundamental concepts in accounting.
In accounting theory, the financial aspects of an entity, stated in terms of
units of currency, is calculated using the "accounting equation," which is
that Assets equal Liabilities plus Capital. Each Asset, Liability and Capital
account contains debit and credit transactions that allow for the calculation
of values for these accounts.
Debits and credits are a system of notation developed before a concept of
positive and negative numbers were in use. If a certain type of account
normally has a debit balance, a credit balance is a way of denoting a
negative quantity of that item. For example, an account (in your books) for
your account at the bank (an account on the bank's books) normally has a
debit balance, meaning that the bank owes you the money (or that the money
is yours, if you prefer). If that account in your books has a credit balance,
you owe the bank money (you're overdrawn). The account in the bank's
books normally has a credit balance, meaning the bank owes you the money
(it's your money). Nobody inventing double-entry bookkeeping today would
use left-and-right debits and credits--he or she would certainly use positive
and negative numbers, which is exactly what almost all computer programs
do that perform bookkeeping. Indeed, that is a convention (debits are
positive, credits are negative) that goes back to COBOL. It would be better
to think of double-entry bookkeeping as a system (in the abstract sense of
the word) in which the "entity" begins with nothing, and every change in
assets (a debit to increase, a credit to decrease) has an equal and opposite
reaction. It sounds almost Newtonian when you look at it that way.
(theunbalancedaccountant)
Credit (creative arts)
Credit in writing
Non-fiction
In non-fiction writing, especially academic works, it is generally considered
important to give credit to sources of information and ideas. Failure to do so
often gives rise to charges of plagiarism, and "piracy" of intellectual rights
such as the right to receive a royalty for having written. In this sense the
financial and individual meanings are linked.
Academic papers generally contain a lengthy section of footnotes or
citations. Such detailed crediting of sources provides readers with an
opportunity to discover more about the cited material. It also provides a
check against misquotation, as it's easy for an attributed quote to be checked
when the reference is available. All of this is thought to improve integrity of
the instructional capital conveyed, which may be quite fragile, and easy to
misinterpret or to misapply.
In fiction
In fiction writing, authors are generally expected to give credit to those who
contributed significantly to a work. Sometimes authors who do not want
credit for their work directly may choose to use a pen name. A ghostwriter
gives all or some of the credit for his or her writing to someone else.
Credit (education)
United States
In the United States, a student in a high school or university earns credits for
the successful completion of each course for each academic term. The state
or the institution generally sets a minimum number of credits required to
graduate. Various systems of credits exist: one per course, one per
hour/week in class, one per hour/week devoted to the course (including
homework), etc.
Europe
In Europe a common credit system has been introduced. The European
Credit Transfer System (ECTS) is in some European countries used as the
principal credit and grading system in universities while other countries use
the ECTS as a secondary credit system for exchange students. In ECTS a
full study-year normally consists of 60 credits. Grades are given in the A-E
range, where F is fail. Schools are also allowed to use a pass/fail evaluation
in the ECTS system.
Similar systems are widely used elsewhere. Often the word "unit" is used for
the same concept.
Credit (finance)
Credit is the provision of resources (such as granting a loan) by one party to
another party where that second party does not reimburse the first party
immediately, thereby generating a debt, and instead arranges either to repay
or return those resources (or material(s) of equal value) at a later date. The
first party is called a creditor, also known as a lender, while the second party
is called a debtor, also known as a borrower.
Any movement of financial capital is normally quite dependent on credit,
which in turn is dependent on the reputation or creditworthiness of the entity
which takes responsibility for the funds.
The term credit is used similarly in commercial trade, known as "trade
credit", to refer to the approval for delayed payments for purchased goods.
Sometimes, credit is not granted to a person who has financial instability or
difficulty. Companies frequently offer credit to their customers as part of the
terms of a purchase agreement. Organizations that offer credit to their
customers frequently employ a credit manager.
Credit is denominated by a unit of account. Unlike money (by a strict
definition), credit itself cannot act as a unit of account. However, many
forms of credit can readily act as a medium of exchange. As such, various
forms of credit are frequently referred to as money and are included in
estimates of the money supply.
18 Business Process Management
Business process management (BPM) is a method of efficiently aligning an
organization with the wants and needs of clients. It is a holistic management
approach that promotes business effectiveness and efficiency while striving
for innovation, flexibility and integration with technology. As organizations
strive for attainment of their objectives, BPM attempts to continuously
improve processes - the process to define, measure and improve your
processes – a ‘process optimization' process.
Overview
A business process is a collection of related, structured activities that
produce a service or product that meet the needs of a client. These processes
are critical to any organization as they generate revenue and often represent
a significant proportion of costs.
People
BPM is considered by some to be a philosophy. BPM alignment to the
customer means that customer-facing staff are best suited to understand
customer needs and must be empowered to make improvements. Many of
these improvements can be done without the use of new technology.
Technology
BPM System (BPMS) is sometimes seen as the whole of BPM. Some see
that information moves between enterprise software packages and
immediately think of Service Oriented Architecture(SOA); while others
believe that modeling is the only way to create the ‘perfect’ process, so they
think of modeling as BPM.
Both of these concepts go into the definition of Business Process
Management. For instance, the size and complexity of daily tasks often
requires the use of technology to model efficiently. Bringing the power of
technology to staff is part of the BPM credo. Many thought BPM as the
bridge between Information Technology (IT) and Business.
Business process management life-cycle
The activities which constitute business process management can be
grouped into five categories: design, modeling, execution, monitoring, and
optimization.
Design
Process Design encompasses both the identifying of existing processes and
designing the "to-be" process. Areas of focus include: representation of the
process flow, the actors within it, alerts & notifications, escalations,
Standard Operating Procedures, Service Level Agreements, and task hand-
over mechanisms.
Good design reduces the number of problems over the lifetime of the
process; a real world analogy can be having an architect design a house.
Whether or not existing processes are considered, the aim of this step is to
ensure that a correct and efficient theoretical design is prepared.
The proposed improvement could be in human to human, human to system,
and system to system workflows, and might target regulatory, market, or
competitive challenges faced by the businesses.
There are several common techniques and notations for business process
mapping (or Business process modeling), including IDEF, BPWIN, Event-
driven Process Chains, and BPMN.
Modeling
Modeling takes the theoretical design and introduces combinations of
variables, for instance, changes in the cost of materials or increased rent, that
determine how the process might operate under different circumstances.
It also involves running "what-if analysis" on the processes: What if I have
75% of resources to do the same task? What if I want to do the same job for
80% of the current cost?
A real world analogy can be "wind-tunnel" test of an aeroplane or test flights
to determine how much fuel it will consume and how many passengers it
can carry.
Execution
One way to automate processes is to develop or purchase an application that
executes the required steps of the process; however, in practice, these
applications rarely execute all the steps of the process accurately or
completely. Another approach is to use a combination of software and
human intervention; however this approach is more complex, making
documenting a process difficult.
As a response to these problems, software has been developed that enables
the full business process (as developed in the process design activity) to be
defined in a computer language which can be directly executed by the
computer. The system will either use services in connected applications to
perform business operations (e.g. calculating a repayment plan for a loan) or,
when a step is too complex to automate, will message a human requesting
input. Compared to either of the previous approaches, directly executing a
process definition can be more straightforward and therefore easier to
improve. However, automating a process definition requires flexible and
comprehensive infrastructure which typically rules out implementing these
systems in a legacy IT environment.
Monitoring
Monitoring encompasses the tracking of individual processes so that
information on their state can be easily seen and statistics on the
performance of one or more processes provided. An example of the tracking
is being able to determine the state of a customer order (e.g. ordered arrived,
awaiting delivery, invoice paid) so that problems in its operation can be
identified and corrected.
In addition, this information can be used to work with customers and
suppliers to improve their connected processes. Examples of the statistics
are the generation of measures on how quickly a customer order is processed
or how many orders were processed in the last month. These measures tend
to fit into three categories: cycle time, defect rate and productivity.
Optimization
Process optimization includes retrieving process performance information
from modeling or monitoring phase and identifying the potential or actual
bottlenecks and potential rooms for cost savings or other improvements and
then applying those enhancements in the design of the process thus
continuing the value cycle of business process management.
Future developments
Although the initial focus of BPM was on the automation of mechanistic
business processes, it has since been extended to integrate human-driven
processes in which human interaction takes place in series or parallel with
the mechanistic processes. A common form is where individual steps in the
business process which require human intuition or judgment to be performed
are assigned to the appropriate members of an organization (as with
workflow systems).
More advanced forms such as human interaction management are in the
complex interaction between human workers in performing a workgroup
task. In this case many people and system interact in structured, ad-hoc, and
sometimes completely dynamic ways to complete one to many transactions.
Dimensions of BTM
BTM addresses four critical dimensions that serve as integrated building
blocks supporting improvements across the enterprise:
Process
The first dimension for institutionalizing BTM principles is set of robust,
flexible and repeatable processes. Simply defining these processes is
insufficient though, to effectively implement BTM requires that processes be
defined and consistently optimized evaluated to ensure:
• General quality of business practice—Doing the right things
• Efficiency—Doing things quickly with little redundancy
• Effectiveness—Doing things well.
Organization
Management processes are more likely to succeed when they are supported
by appropriate organizational structures based on clear understanding of
roles, responsibilities, and decision rights. Such organizational structures
generally include:
• Participative bodies—involving senior-level business and technology
participants on a part-time but routine basis
• Centralized bodies—requiring specialized, dedicated technology staff
• Needs-based bodies—involving rotational assignments, created to
deal with particular efforts
Information
Valid, timely information is a prerequisite for effective decision making.
This information must be delivered in a way that is comprehensible to non
specialists and, at the same time, actionable in terms of informing choices
that matter. Useful information does not just happen. It depends on the
interaction of two related elements: data and metrics. Data must be available,
relevant, accurate, and reliable. Metrics distill raw data into useful
information. Thus, metrics need to be appropriate and valid for strategic and
operational objectives. Internally, they should be comparable across the
enterprise and across time; and externally across industries, functions, and
extended-enterprise partners.
Technology
Effective technology, (that is, management automation tools) can help
connect all the other dimensions. Appropriate technology helps make
processes easier to execute, facilitates timely information sharing, and
enables consistent coordination between elements and layers of the
organization. It does this through the following:
• Automation of manual tasks
• Reporting
• Analytics for decision making
• Integration between management systems
BTM capabilities
A BTM Capability is defined as a competency achieved by combining each
dimension and creating well-defined repeatable management processes that
are executed through appropriate organizational structures, using an
effective information architecture that is supported by the right level of
automation and technology. BTM defines 17 of these specific capabilities,
and each is grouped into one of four functional areas.
The first area is Governance and Organization is focused on enterprise CIOs
and business executives concerned with enterprise-wide governance of
business technology. The capabilities that must be developed to support this
functional area ensure that required decisions are identified, assigned, and
executed effectively. Necessary capabilities also include the ability to design
an organization that meets the needs of the business, manages risk
appropriately and gives proper consideration to government, regulatory and
industry requirements.
The second area is Managing Technology Investments. This functional area
focuses on the Enterprise Program Management Office (EPMO) and other
technology and business executives who are concerned with ensuring
selection and execution of the right business technology initiatives. The
capabilities that must be developed to support this functional area ensure
that the organization understands what it owns from an IT standpoint, what
it is working on, and who is available. The organization must make certain
that business technology investment decisions are closely aligned with the
needs of the business and that technology initiatives are executed using
proven methodologies and available technology and IP assets.
History
Reference to non-business performance management occurs in Sun Tzu's
The Art of War. Sun Tzu claims that to succeed in war, one should have full
knowledge of one's own strengths and weaknesses and full knowledge of
one's enemy's strengths and weaknesses. Lack of either one might result in
defeat. A certain school of thought draws parallels between the challenges in
business and those of war, specifically:
• collecting data - both internal and external
• discerning patterns and meaning in the data (analyzing)
• responding to the resultant information
Prior to the start of the Information Age in the late 20th century, businesses
sometimes took the trouble to laboriously collect data from non-automated
sources. As they lacked computing resources to properly analyze the data
they often made commercial decisions primarily on the basis of intuition.
As businesses started automating more and more systems, more and more
data became available. However, collection remained a challenge due to a
lack of infrastructure for data exchange or due to incompatibilities between
systems. Reports on the data gathered sometimes took months to generate.
Such reports allowed informed long-term strategic decision-making.
However, short-term tactical decision-making continued to rely on intuition.
In modern businesses, increasing standards, automation, and technologies
have led to vast amounts of data becoming available. Data warehouse
technologies have set up repositories to store this data. Improved ETL and
even recently Enterprise Application Integration tools have increased the
speedy collecting of data. OLAP reporting technologies have allowed faster
generation of new reports which analyze the data. Business intelligence has
now become the art of sieving through large amounts of data, extracting
useful information and turning that information into actionable knowledge.
In 1989 Howard Dresner, a research analyst at Gartner , popularized
"Business Intelligence" as an umbrella term to describe a set of concepts and
methods to improve business decision-making by using fact-based support
systems. Performance Management is built on a foundation of BI, but
marries it to the planning and control cycle of the enterprise - with enterprise
planning, consolidation and modeling capabilities.
What is BPM?
BPM involves consolidation of data from various sources, querying, and
analysis of the data, and putting the results into practice.
BPM enhances processes by creating better feedback loops. Continuous and
real-time reviews help to identify and eliminate problems before they grow.
BPM's forecasting abilities help the company take corrective action in time
to meet earnings projections. Forecasting is characterized by a high degree
of predictability which is put into good use to answer what-if scenarios.
BPM is useful in risk analysis and predicting outcomes of merger and
acquisition scenarios and coming up with a plan to overcome potential
problems.
BPM provides key performance indicators (KPIs) that help companies
monitor efficiency of projects and employees against operational targets.
Methodologies
There are various methodologies for implementing BPM. It gives companies
a top down framework by which to align planning and execution, strategy
and tactics, and business unit and enterprise objectives. Some of these are
six sigma, balanced scorecard, activity-based costing, total quality
management, economic value-add, and integrated strategic measurement.
The balanced scorecard is the most widely adopted performance
management methodology. Methodologies on their own cannot deliver a full
solution to an enterprise's CPM needs. Many pure methodology
implementations fail to deliver the anticipated benefits because they are not
integrated with the fundamental CPM processes.
Features
Its features include:
• Personnel administration
• Personnel management
• Manpower management
• Industrial management[2][3]
But these traditional expressions are becoming less common for the
theoretical discipline. Sometimes even industrial relations and employee
relations are confusingly listed as synonyms,[4] although these normally refer
to the relationship between management and workers and the behavior of
workers in companies.
The theoretical discipline is based primarily on the assumption that
employees are individuals with varying goals and needs, and as such should
not be thought of as basic business resources, such as trucks and filing
cabinets. The field takes a positive view of workers, assuming that virtually
all wish to contribute to the enterprise productively, and that the main
obstacles to their endeavors are lack of knowledge, insufficient training, and
failures of process.
HRM is seen by practitioners in the field as a more innovative view of
workplace management than the traditional approach. Its techniques force
the managers of an enterprise to express their goals with specificity so that
they can be understood and undertaken by the workforce, and to provide the
resources needed for them to successfully accomplish their assignments. As
such, HRM techniques, when properly practiced, are expressive of the goals
and operating practices of the enterprise overall. HRM is also seen by many
to have a key role in risk reduction within organisations.[5]
Academic theory
The goal of human resource management is to help an organization to meet
strategic goals by attracting, and maintaining employees and also to manage
them effectively. The key word here perhaps is "fit", i.e. a HRM approach
seeks to ensure a fit between the management of an organization's
employees, and the overall strategic direction of the company (Miller, 1989).
The basic premise of the academic theory of HRM is that humans are not
machines, therefore we need to have an interdisciplinary examination of
people in the workplace. Fields such as psychology, industrial engineering,
industrial and organizational psychology, industrial relations, sociology, and
critical theories: postmodernism, post-structuralism play a major role. Many
colleges and universities offer bachelor and master degrees in Human
Resources Management.
One widely used scheme to describe the role of HRM, developed by Dave
Ulrich, defines 4 fields for the HRM function:[6]
• Strategic business partner
• Change agent
• Employee champion
• Administration
Business practice
Human resources management comprises several processes. Together they
are supposed to achieve the above mentioned goal. These processes can be
performed in an HR department, but some tasks can also be outsourced or
performed by line-managers or other departments.
• Workforce planning
• Recruitment (sometimes separated into attraction and selection)
• Induction and Orientation
• Skills management
• Training and development
• Personnel administration
• Compensation in wage or salary
• Time management
• Travel management (sometimes assigned to accounting rather than
HRM)
• Payroll (sometimes assigned to accounting rather than HRM)
• Employee benefits administration
• Personnel cost planning
• Performance appraisal
Careers
The sort of careers available in HRM are varied. There are generalist HRM
jobs such as human resource assistant. There are careers involved with
employment, recruitment and placement and these are usually conducted by
interviewers, EOE (Equal Opportunity Employment) specialists or college
recruiters. Training and development specialism is often conducted by
trainers and orientation specialists. Compensation and benefits tasks are
handled by compensation analysts, salary administrators, and benefits
administrators.
Professional organizations
Professional organizations in HRM include the Society for Human Resource
Management, the Chartered Institute of Personnel and Development (CIPD),
the International Public Management Association for HR (IPMA-HR) and
the International Personnel Management Association of Canada (IPMA-
Canada).
20 Operations Management
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Operations management is an area of business that is concerned with the
production of goods and services, and involves the responsibility of ensuring
that business operations are efficient and effective. It is the management of
resources, the distribution of goods and services to customers, and the
analysis of queue systems.
APICS The Association for Operations Management also defines operations
management as "the field of study that focuses on the effectively planning,
scheduling, use, and control of a manufacturing or service organization
through the study of concepts from design engineering, industrial
engineering, management information systems, quality management,
production management, inventory management, accounting, and other
functions as they affect the organization" (APICS Dictionary, 11th edition).
Operations also refers be the production of goods and services, the set of
value-added activities that transform inputs into many outputs.[1]
Fundamentally, these value-adding creative activities should be aligned with
market opportunity (see Marketing) for optimal enterprise performance.
Origins
The origins of Operations Management can be traced back to the Industrial
Revolution, the same as Scientific Management and Operations Research.
Adam Smith treats the topic of the division of labor when opening his 1776
masterpiece: An Inquiry into the Nature and Causes of the Wealth of
Nations also commonly known as The Wealth of Nations. The first
documented effort to solve operation management issues comes from Eli
Whitney back in 1798, leading to the birth of the American System of
Manufacturers (ASM) by the mid-1800s. It was not until the late 1950's that
the scholars noted the importance of viewing production operations as
systems.[2] [3]
Organizations
The following organizations support and promote operations management:
• The Association for Operations Management (APICS)
• The Association for Professionals in Business Management (APBM)
• Chartered Management Institute
• European Operations Management Association (EurOMA) [1], which
supports the International Journal of Operations & Production
Management
• Institute for Operations Research and the Management Sciences
(INFORMS)
• Institute of Operations Management [2]
• Production and Operations Management Society (POMS
Resource
.Gold has been treasured through the ages.
A resource is any physical or virtual entity of limited availability.[citation needed]
In most cases, commercial or even ethic factors require resource allocation
through resource management.
21 Purchasing
Purchasing refers to a business or organization attempting to acquire goods
or services to accomplish the goals of the enterprise. Though there are
several organizations that attempt to set standards in the purchasing process,
processes can vary greatly between organizations. Typically the word
“purchasing” is not used interchangeably with the word “procurement”,
since procurement typically includes Expediting, Supplier Quality, and
Traffic and Logistics (T&L) in addition to Purchasing.
Overview
Purchasing managers/directors, and procurement managers/directors guide
the organization’s acquisition procedures and standards. Most organizations
use a three-way check as the foundation of their purchasing programs. This
involves three departments in the organization completing separate parts of
the acquisition process. The three departments do not all report to the same
senior manager to prevent unethical practices and lend credibility to the
process. These departments can be purchasing, receiving; and accounts
payable or engineering, purchasing and accounts payable; or a plant
manager, purchasing and accounts payable. Combinations can vary
significantly, but a purchasing department and accounts payable are usually
two of the three departments involved.
Historically, the purchasing department issued Purchase Orders for supplies,
services, equipment, and raw materials. Then, in an effort to decrease the
administrative costs associated with the repetitive ordering of basic
consumable items, "Blanket" or "Master" Agreements were put into place.
These types of agreements typically have a longer duration and increased
scope to maximize the Quantities of Scale concept. When additional
supplies are required, a simple release would be issued to the supplier to
provide the goods or services.
Another method of decreasing administrative costs associated with repetitive
contracts for common material, is the use of company credit cards, also
known as "Purchasing Cards" or simply "P-Cards". P-card programs vary,
but all of them have internal checks and audits to ensure appropriate use.
Purchasing managers realized once contracts for the low dollar value
consumables are in place, procurement can take a smaller role in the
operation and use of the contracts. There is still oversight in the forms of
audits and monthly statement reviews, but most of their time is now
available to negotiate major purchases and setting up of other long term
contracts. These contracts are typically renewable annually.
Purchasing: Topics
Acquisition Process
The revised acquisition process for major systems in industry and defense is
shown in the next figure. The process is defined by a series of phases during
which technology is defined and matured into viable concepts, which are
subsequently developed and readied for production, after which the systems
produced are supported in the field.[1]
Business inventory
The reasons for keeping stock
There are three basic reasons for keeping an inventory:
1. Time - The time lags present in the supply chain, from supplier to user
at every stage, requires that you maintain certain amount of inventory
to use in this "lead time"
2. Uncertainty - Inventories are maintained as buffers to meet
uncertainties in demand, supply and movements of goods.
3. Economies of scale - Ideal condition of "one unit at a time at a place
where user needs it, when he needs it" principle tends to incur lots of
costs in terms of logistics. So Bulk buying, movement and storing
brings in economies of scale, thus inventory.
All these stock reasons can apply to any owner or product stage.
• Buffer stock is held in individual workstations against the possibility
that the upstream workstation may be a little delayed in long setup or
change-over time. This stock is then used while that change-over is
happening. This stock can be eliminated by tools like SMED.
These classifications apply along the whole Supply chain not just within a
facility or plant.
Special terms used in dealing with inventory
• Stock Keeping Unit (SKU) is a unique combination of all the
components that are assembled into the purchasable item. Therefore
any change in the packaging or product is a new SKU. This level of
detailed specification assists in managing inventory.
• Stockout means running out of the inventory of an SKU.[1]
• "New old stock" (sometimes abbreviated NOS) is a term used in
business to refer to merchandise being offered for sale which was
manufactured long ago but that has never been used. Such
merchandise may not be produced any more, and the new old stock
may represent the only market source of a particular item at the
present time.
Typology
1) Buffer/safety stock
2) Cycle stock (Used in batch processes, it is the available inventory
excluding buffer stock)
3) De-coupling (Buffer stock that is held by both the supplier and the user)
4) Anticipation stock
5) Pipeline stock (goods still in transit or in the process of distribution - have
left the factory but not arrived at the customer yet)
Inventory examples
While accountants often discuss inventory in terms of goods for sale,
organizations - manufacturers, service-providers and not-for-profits - also
have inventories (fixtures, furniture, supplies, ...) that they do not intend to
sell. Manufacturers', distributors', and wholesalers' inventory tends to cluster
in warehouses. Retailers' inventory may exist in a warehouse or in a shop or
store accessible to customers. Inventories not intended for sale to customers
or to clients may be held in any premises an organization uses. Stock ties up
cash and if uncontrolled it will be impossible to know the actual level of
stocks and therefore impossible to control them.
Manufacturing
A canned food manufacturer's materials inventory includes the ingredients to
form the foods to be canned, empty cans and their lids (or coils of steel or
aluminum for constructing those components), labels, and anything else
(solder, glue, ...) that will form part of a finished can. The firm's work in
process includes those materials from the time of release to the work floor
until they become complete and ready for sale to wholesale or retail
customers. This may be vats of prepared food, filled cans not yet labelled or
sub-assemblies of food components. It may also include finished cans that
are not yet packaged into cartons or pallets. It's finished good inventory
consists of all the filled and labelled cans of food in its warehouse that it has
manufactured and wishes to sell to food distributors (wholesalers), to
grocery stores (retailers), and even perhaps to consumers through
arrangements like factory stores and outlet centers
Logistics or distribution
The logistics chain includes the owners (wholesalers and retailers),
manufacturers' agents, and transportation channels that an item passes
through between initial manufacture and final purchase by a consumer. At
each stage, goods belong (as assets) to the seller until the buyer accepts
them. Distribution includes four components:
1. Manufacturers' agents: Distributors who hold and transport a
consignment of finished goods for manufacturers without ever owning
it. Accountants refer to manufacturers' agents' inventory as "matériel"
in order to differentiate it from goods for sale.
2. Transportation: The movement of goods between owners, or between
locations of a given owner. The seller owns goods in transit until the
buyer accepts them. Sellers or buyers may transport goods but most
transportation providers act as the agent of the owner of the goods.
3. Wholesaling: Distributors who buy goods from manufacturers and
other suppliers (farmers, fishermen, etc.) for re-sale work in the
wholesale industry. A wholesaler's inventory consists of all the
products in its warehouse that it has purchased from manufacturers or
other suppliers. A produce-wholesaler (or distributor) may buy from
distributors in other parts of the world or from local farmers. Food
distributors wish to sell their inventory to grocery stores, other
distributors, or possibly to consumers.
High level inventory management
It seems that around about 1880[2] there was a change in manufacturing
practice from companies with relatively homogeneous lines of products to
vertically integrated companies with unprecedented diversity in processes
and products. Those companies (especially in metalworking) attempted to
achieve success through economies of scale - the gains of jointly producing
two or more products in one facility. The managers now needed information
on the effect of product mix decisions on overall profits and therefore
needed accurate product cost information. A variety of attempts to achieve
this were unsuccessful due to the huge overhead of the information
processing of the time. However, the burgeoning need for financial reporting
after 1900 created unavoidable pressure for financial accounting of stock
and the management need to cost manage products became overshadowed.
In particular it was the need for audited accounts that sealed the fate of
managerial cost accounting. The dominance of financial reporting
accounting over management accounting remains to this day with few
exceptions and the financial reporting definitions of 'cost' have distorted
effective management 'cost' accounting since that time. This is particularly
true of inventory.
Accounting perspectives
Financial accounting
An organization's inventory can appear a mixed blessing, since it counts as
an asset on the balance sheet, but it also ties up money that could serve for
other purposes and requires additional expense for its protection. Inventory
may also cause significant tax expenses, depending on particular countries'
laws regarding depreciation of inventory, as in Thor Power Tool Company
v. Commissioner.
Inventory appears as a current asset on an organization's balance sheet
because the organization can, in principle, turn it into cash by selling it.
Some organizations hold larger inventories than their operations require in
order to inflate their apparent asset value and their perceived profitability.
In addition to the money tied up by acquiring inventory, inventory also
brings associated costs for warehouse space, for utilities, and for insurance
to cover staff to handle and protect it, fire and other disasters, obsolescence,
shrinkage (theft and errors), and others. Such holding costs can mount up:
between a third and a half of its acquisition value per year.
National accounts
Inventories also play an important role in national accounts and the analysis
of the business cycle. Some short-term macroeconomic fluctuations are
attributed to the inventory cycle.
Distressed inventory
Also known as distressed or expired stock, distressed inventory is inventory
whose potential to be sold at a normal cost has or will soon pass. In certain
industries it could also mean that the stock is or will soon be impossible to
sell. Examples of distressed inventory include products that have reached its
expiry date, or has reached a date in advance of expiry at which the planned
market will no longer purchase it (e.g. 3 months left to expiry), clothing that
is defective or out of fashion, and old newspapers or magazines. It also
includes computer or consumer-electronic equipment that is obsolescent or
discontinued and whose manufacturer is unable to support it.
23 DISTRIBUTION
Explanation
An explanation is a description which clarify causes, context, and
consequences of a certain object, and a phenomenon such as a process, a
state of affairs. This description may establish rules or laws, and may clarify
the existing ones in relation to an object, and a phenomenon examined. The
components of an explanation can be implicit, and be interwoven with one
another.
An explanation is often underpinned by an understanding that is represented
by different media such as music, text, and graphics. Thus, an explanation is
subjected to interpretation, and discussion.
In scientific research, explanation is one of the purposes of research,
e.g.,exploration and description. Explanation is a way to uncover new
knowledge,and to report relationships among different aspects of studied
phenomena.
The distribution channel
Frequently there may be a chain of intermediaries, each passing the product
down the chain to the next organization, before it finally reaches the
consumer or end-user. This process is known as the 'distribution chain' or the
'channel.' Each of the elements in these chains will have their own specific
needs, which the producer must take into account, along with those of the
all-important end-user.
Channels
A number of alternate 'channels' of distribution may be available:
• Selling direct, such as via mail order, Internet and telephone sales
• Agent, who typically sells direct on behalf of the producer
• Distributor (also called wholesaler), who sells to retailers
• Retailer (also called dealer or reseller), who sells to end customers
• Advertisement typically used for consumption goods
Distribution channels may not be restricted to physical products alone. They
may be just as important for moving a service from producer to consumer in
certain sectors, since both direct and indirect channels may be used. Hotels,
for example, may sell their services (typically rooms) directly or through
travel agents, tour operators, airlines, tourist boards, centralized reservation
systems, etc.
Channel members
Distribution channels can thus havoke a number of levels. Kotler defined the
simplest level, that of direct contact with no intermediaries involved, as the
'zero-level' channel.
The next level, the 'one-level' channel, features just one intermediary; in
consumer goods a retailer, for industrial goods a distributor. In small
markets (such as small countries) it is practical to reach the whole market
using just one- and zero-level channels.
In large markets (such as larger countries) a second level, a wholesaler for
example, is now mainly used to extend distribution to the large number of
small, neighborhood retailers.
In Japan the chain of distribution is often complex and further levels are
used, even for the simplest of consumer goods.
In Bangladesh Telecom Operators are using different Chains of Distribution,
especially 'second level'.
In IT and Telecom industry levels are named "tiers". A one tier channel
means that vendors IT product manufacturers (or software publishers) work
directly with the dealers. A one tier / two tier channel means that vendors
work directly with dealers and with distributors who sell to dealers.
The internal market
Many of the marketing principles and techniques which are applied to the
external customers of an organization can be just as effectively applied to
each subsidiary's, or each department's, 'internal' customers.
In some parts of certain organizations this may in fact be formalized, as
goods are transferred between separate parts of the organization at a `transfer
price'. To all intents and purposes, with the possible exception of the pricing
mechanism itself, this process can and should be viewed as a normal buyer-
seller relationship. The fact that this is a captive market, resulting in a
`monopoly price', should not discourage the participants from employing
marketing techniques.
Less obvious, but just as practical, is the use of `marketing' by service and
administrative departments; to optimize their contribution to their
`customers' (the rest of the organization in general, and those parts of it
which deal directly with them in particular). In all of this, the lessons of the
non-profit organizations, in dealing with their clients, offer a very useful
parallel.
Channel Decisions
• Channel strategy
• Product (or service)<>Cost<>Consumer location
Channel management
The channel decision is very important. In theory at least, there is a form of
trade-off: the cost of using intermediaries to achieve wider distribution is
supposedly lower. Indeed, most consumer goods manufacturers could never
justify the cost of selling direct to their consumers, except by mail order. In
practice, if the producer is large enough, the use of intermediaries
(particularly at the agent and wholesaler level) can sometimes cost more
than going direct.
Many of the theoretical arguments about channels therefore revolve around
cost. On the other hand, most of the practical decisions are concerned with
control of the consumer. The small company has no alternative but to use
intermediaries, often several layers of them, but large companies 'do' have
the choice.
Channel membership
1. Intensive distribution - Where the majority of resellers stock the
`product' (with convenience products, for example, and particularly
the brand leaders in consumer goods markets) price competition may
be evident.
2. Selective distribution - This is the normal pattern (in both consumer
and industrial markets) where `suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized
dealers (typically only one per geographical area) are allowed to sell
the `product'.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary
sales and service support. Motivating the owners and employees of the
independent organizations in a distribution chain requires even greater
effort. There are many devices for achieving such motivation. Perhaps the
most usual is `incentive': the supplier offers a better margin, to tempt the
owners in the channel to push the product rather than its competitors; or a
competition is offered to the distributors' sales personnel, so that they are
tempted to push the product. At the other end of the spectrum is the almost
symbiotic relationship that the all too rare supplier in the computer field
develops with its agents; where the agent's personnel, support as well as
sales, are trained to almost the same standard as the supplier's own staff.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution
activities need to be monitored and managed, so will those of the
distribution chain.
In practice, many organizations use a mix of different channels; in particular,
they may complement a direct salesforce, calling on the larger accounts,
with agents, covering the smaller customers and prospects.
Vertical marketing
This relatively recent development integrates the channel with the original
supplier - producer, wholesalers and retailers working in one unified system.
This may arise because one member of the chain owns the other elements
(often called `corporate systems integration'); a supplier owning its own
retail outlets, this being 'forward' integration. It is perhaps more likely that a
retailer will own its own suppliers, this being 'backward' integration. (For
example, MFI, the furniture retailer, owns Hygena which makes its kitchen
and bedroom units.) The integration can also be by franchise (such as that
offered by McDonald's hamburgers and Benetton clothes) or simple co-
operation (in the way that Marks & Spencer co-operates with its suppliers).
Horizontal marketing
A rather less frequent example of new approaches to channels is where two
or more non-competing organizations agree on a joint venture - a joint
marketing operation - because it is beyond the capacity of each individual
organization alone. In general, this is less likely to revolve around marketing
synergy.
24 Legal Managment
International law
Providing a constitution for public international law, the United Nations was
conceived during World War II
International law is the term commonly used for referring to the system of
implicit and explicit agreements that binds together nation-states in
adherence to recognised values and standards, differing from other legal
systems in that it concerns nations rather than private citizens[1]. However,
the term "International Law" can refer to three distinct legal disciplines:
Constitutional law
The French Declaration of the Rights of the Man and of the Citizen, whose
principles still have constitutional value
Constitutional law is the study of foundational or basic laws of nation states
and other political organizations. Constitutions are the framework for
government and may limit or define the authority and procedure of political
bodies to execute new laws and regulations.
Criminal law
The term criminal law, sometimes called penal law, refers to any of various
bodies of rules in different jurisdictions whose common characteristic is the
potential for unique and often severe impositions as punishment for failure
to comply. Criminal punishment, depending on the offense and jurisdiction,
may include execution, loss of liberty, government supervision (parole or
probation), or fines. There are some archetypal crimes, like murder, but the
acts that are forbidden are not wholly consistent between different criminal
codes, and even within a particular code lines may be blurred as civil
infractions may give rise also to criminal consequences. Criminal law
typically is enforced by the government, unlike the civil law, which may be
enforced by private parties.
Contract law
A contract is a legally binding exchange of promises or agreement between
parties that the law will enforce. Contract law is based on the Latin phrase
pacta sunt servanda (pacts must be kept).[1] Breach of contract is recognised
by the law and remedies can be provided. Almost everyone makes contracts
every day. Sometimes written contracts are required, such as when buying a
house.[2] However, most contracts can be and are made orally, like buying a
law textbook, or a coffee at a shop. Contract law can be classified, as is
habitual in civil law systems, as part of a general law of obligations (along
with tort, unjust enrichment or restitution).
TORT LAW
Tort law is the name given to a body of law that creates, and provides
remedies for, civil wrongs that do not arise out of contractual duties.[1] A
person who is legally injured may be able to use tort law to recover damages
from someone who is legally responsible, or "liable," for those injuries.
Generally speaking, tort law defines what constitutes a legal injury, and
establishes the circumstances under which one person may be held liable for
another's injury. Torts cover intentional acts and accidents.
For instance, if somebody throws a ball and hits a pedestrian in the eye, the
pedestrian may sue the ball thrower for losses occasioned by the accident
(for example, costs of medical treatment or lost income during time off
work). Whether or not the pedestrian wins will depend on whether he can
prove the thrower engaged in tortious conduct. If the person threw the ball at
the pedestrian on purpose, the pedestrian could sue for the intentional tort of
battery. If it was an accident, the pedestrian must establish negligence. To do
this, the pedestrian must show that his injury was reasonably foreseeable,
that the thrower owed him a duty of care, and that the thrower fell below the
standard of care required of him. One of the main issues in negligence law is
determining the "standard of care" - a legal phrase that means distinguishing
between when conduct is or is not negligent.
In much of the western world, the touchstone of tort liability is negligence.
Unless the injured person can prove that the person they believe injured
them acted with at least negligence to cause their injury, tort law will not
compensate them. Tort law also recognizes intentional torts and strict
liability, which apply to defendants who engage in certain actions.
In tort law, potential "injuries" are defined broadly. Injury does not just
mean a physical injury such as where the bicycle rider is struck by a ball.
"Injuries" in tort law reflect any invasion of any number of individual
"interests." This includes interests recognized in other areas of law, such as
property rights. Actions for nuisance and trespass to land can arise from
interfering with rights in real property. Conversion and trespass to chattles
can protect interference with movable property. Interests in prospective
economic advantages from contracts can also be injured and become the
subject of tort actions. A number of situations caused by parties in a
contractual relationship may nevertheless be tort rather than contract claims,
such as breach of fiduciary duty
Property law
Property law is the area of law that governs the various forms of ownership
in real property (land as distinct from personal or movable possessions) and
in personal property, within the common law legal system. In the civil law
system, there is a division between movable and immovable property.
Movable property roughly corresponds to personal property, while
immovable property corresponds to real estate or real property, and the
associated rights and obligations thereon.
The concept, idea or philosophy of property underlies all property law. In
some jurisdictions, historically all property was owned by the monarch and
it devolved through feudal land tenure or other feudal systems of loyalty and
fealty.
Though the Napoleonic code was among the first government acts of
modern times to introduce the notion of absolute ownership into statute,
protection of personal property rights was present in medieval Islamic law
and jurisprudence,[1] and in more feudalist forms in the common law courts
of medieval and early modern England.
Equity Office Properties Trust
Equity Office Properties Trust, headquartered in Chicago, Illinois, is the
largest owner of office buildings in the United States. It was formed in 1976
by Samuel Zell [1] and in February 2007, was acquired by the Blackstone
Group for $23 billion plus the assumption of $16 billion in debt [2]. The
acquisition was the largest leveraged buyout since the buyout of RJR
Nabisco.
Notable properties
• Chase Tower (Indianapolis)
• Chicago Civic Opera House
• Columbia Center
• Frost Bank Tower
• One Worldwide Plaza
• Wachovia Financial Center
• Washington Mutual Tower
Legal systems of the world
Civil law
Shamash (the Babylonian sun god) hands King Hammurabi a code of law
Civil law is the most widespread system of law in the world. It is also known
as European Continental law. The central source of law that is recognised as
authoritative are codifications in a constitution or statute passed by
legislature, to amend a code. Civil law systems mainly derive from the
Roman Empire, and more particularly, the Corpus Juris Civilis issued by the
Emperor Justinian ca. 529AD. This was an extensive reform of the law in
the Eastern Empire, bringing it together into codified documents. Civil law
was also partly influenced by religious laws such as Canon law and Islamic
law.[1][2] Civil law today, in theory, is interpreted rather than developed or
made by judges. Only legislative enactments (rather than judicial
precedents) are considered legally binding. However, in reality courts do pay
attention to previous decisions, especially from higher courts[citation needed].
Scholars of comparative law and economists promoting the legal origins
theory usually subdivide civil law into four distinct groups:
• French civil law: in France, the Benelux countries, Italy, Spain and
former colonies of those countries;
• German civil law: in Germany, Austria, Croatia, Switzerland, Greece,
Portugal, Turkey, Japan, South Korea and the Republic of China;
• Scandinavian civil law: in Denmark, Norway and Sweden. Finland
and Iceland inherited the system from their neighbors.
• Chinese law is a mixture of civil law and socialist law.
Common law
King John of England signs Magna Carta
Common law and equity are systems of law whose sources are the decisions
in cases by judges. Alongside, every system will have a legislature that
passes new laws and statutes, however these do not amend a collected and
codified body of law. Common law developed in England, influenced by the
Norman conquest of England which introduced legal concepts from Norman
law and Islamic law.[2] Common law was later inherited by the
Commonwealth of Nations, and almost every former colony of the British
Empire (Malta being an exception). The doctrine of stare decisis or
precedent by courts is the major difference to codified civil law systems.
Common law is currently in practice in Ireland, most of the United Kingdom
(England and Wales and Northern Ireland), Australia, India, South Africa,
Canada (excluding Quebec), Hong Kong and the United States (excluding
Louisiana) and many more places. In addition to these countries, several
others have adapted the common law system into a mixed system. For
example, Pakistan and Nigeria operate largely on a common law system, but
incorporate religious law.
Religious law
Religious law refers to the notion of a religious system or document being
used as a legal source, though the methodology used varies. For example,
the use of Jewish Halakha for public law has a static and unalterable quality,
precluding amendment through legislative acts of government or
development through judicial precedent; Christian Canon law is more
similar to civil law in its use of civil codes; and Islamic Sharia law (and Fiqh
jurisprudence) is based on legal precedent and reasoning by analogy (Qiyas),
and is thus considered a precursor to common law.[5]
The main kinds of religious law are Sharia in Islam, Halakha in Judaism,
and Canon law in some Christian groups. In some cases these are intended
purely as individual moral guidance, whereas in other cases they are
intended and may be used as the basis for a country's legal system. The latter
was particularly common during the Middle Ages.
The Islamic legal system of Sharia (Islamic law) and Fiqh (Islamic
jurisprudence) is the most widely used religious law, and one of the three
most common legal systems in the world alongside common law and civil
law.[6] During the Islamic Golden Age, classical Islamic law had a fairly
significant influence on the development of common law,[2] and also
influenced the development of several civil law institutions.[1]
King Hammurabi is revealed the code of laws by the Mesopotamian sun god
Shamash.
The history of law is closely connected to the development of civilizations.
Ancient Egyptian law, dating as far back as 3000 BCE, had a civil code that
was probably broken into twelve books. It was based on the concept of
Ma'at, characterised by tradition, rhetorical speech, social equality and
impartiality.[64] Around 1760 BCE under King Hammurabi, ancient
Babylonian law was codified and put in stone for the public to see in the
marketplace; this became known as the Codex Hammurabi. However like
Egyptian law, which is pieced together by historians from records of
litigation, few sources remain and much has been lost over time. The
influence of these earlier laws on later civilisations was small.[65] The Old
Testament is probably the oldest body of law still relevant for modern legal
systems, dating back to 1280 BCE. It takes the form of moral imperatives, as
recommendations for a good society. Ancient Athens, the small Greek city-
state, was the first society based on broad inclusion of the citizenry,
excluding women and the slave class from about 8th century BCE. Athens
had no legal science, and Ancient Greek has no word for "law" as an abstract
concept.[66] Yet Ancient Greek law contained major constitutional
innovations in the development of democracy.[67]
Roman law was heavily influenced by Greek teachings.[68] It forms the
bridge to the modern legal world, over the centuries between the rise and
decline of the Roman Empire.[69] Roman law underwent major codification
in the Corpus Juris Civilis of Emperor Justinian I. It was lost through the
Dark Ages, but rediscovered around the 11th century. Mediæval legal
scholars began researching the Roman codes and using their concepts. In
mediæval England, the King's powerful judges began to develop a body of
precedent, which became the common law. But also, a Europe-wide Lex
Mercatoria was formed, so that merchants could trade using familiar
standards, rather than the many splintered types of local law. The Lex
Mercatoria, a precursor to modern commercial law, emphasised the freedom
of contract and alienability of property.[70] As nationalism grew in the 18th
and 19th centuries, Lex Mercatoria was incorporated into countries' local
law under new civil codes. The French Napoleonic Code and the German
became the most influential. As opposed to English common law, which
consists of enormous tomes of case law, codes in small books are easy to
export and for judges to apply. However, today there are signs that civil and
common law are converging. European Union law is codified in treaties, but
develops through the precedent laid down by the European Court of Justice.
Philosophy of law
"But what, after all, is a law? […] When I say that the object
of laws is always general, I mean that law considers subjects
en masse and actions in the abstract, and never a particular
person or action. […] On this view, we at once see that it can
no longer be asked whose business it is to make laws, since
they are acts of the general will; nor whether the prince is
above the law, since he is a member of the State; nor whether
the law can be unjust, since no one is unjust to himself; nor
how we can be both free and subject to the laws, since they are
but registers of our wills."
Jean-Jacques Rousseau, The Social Contract, II, 6.[80]
The philosophy of law is also known as jurisprudence. Normative
jurisprudence is essentially political philosophy and asks "what should law
be?". Analytic jurisprudence, on the other hand, is a distinctive field which
asks "what is law?". An early famous philosopher of law was John Austin, a
student of Jeremy Bentham and first chair of law at the new University of
London from 1829. Austin's utilitarian answer was that law is "commands,
backed by threat of sanctions, from a sovereign, to whom people have a
habit of obedience".[81] This approach was long accepted, especially as an
alternative to natural law theory. Natural lawyers, such as Jean-Jacques
Rousseau, argue that human law reflects essentially moral and unchangeable
laws of nature. Immanuel Kant, for instance, believed a moral imperative
requires laws "be chosen as though they should hold as universal laws of
nature".[82] Austin and Bentham, following David Hume, thought this
conflated what "is" and what "ought to be" the case. They believed in law's
positivism, that real law is entirely separate from "morality".[83] Kant was
also criticised by Friedrich Nietzsche, who believed that law emanates from
The Will to Power and cannot be labelled as "moral" or "immoral".[84] Thus,
Nietzsche criticised the principle of equality, and believed that law should be
committed to freedom to engage in will to power.[85]
In 1934, the Austrian philosopher Hans Kelsen continued the positivist
tradition in his book the Pure Theory of Law.[86] Kelsen believed that though
law is separate from morality, it is endowed with "normativity", meaning we
ought to obey it. Whilst laws are positive "is" statements (e.g. the fine for
reversing on a highway is €500), law tells us what we "should" do (i.e. not
drive backwards). So every legal system can be hypothesised to have a basic
norm (Grundnorm) telling us we should obey the law. Carl Schmitt, Kelsen's
major intellectual opponent, rejected positivism, and the idea of the rule of
law, because he did not accept the primacy of abstract normative principles
over concrete political positions and decisions.[87] Therefore, Schmitt
advocated a jurisprudence of the exception (state of emergency), which
denied that legal norms could encompass of all political experience.[88]
Economic analysis of law
Economic analysis of law is an approach to legal theory that
incorporates and applies the methods and ideas of economics to law. The
discipline arose partly out of a critique of trade unions and U.S. antitrust
law. The most influential proponents, such as Richard Posner and Oliver
Williamson and the so-called Chicago School of economists and lawyers
including Milton Friedman and Gary Becker, are generally advocates of
deregulation and privatisation, and are hostile to state regulation or what
they see as restrictions on the operation of free markets.[94]
The most prominent economic analyst of law is 1991 Nobel Prize winner
Ronald Coase. His first major article, The Nature of the Firm (1937), argued
that the reason for the existence of firms (companies, partnerships, etc.) is
the existence of transaction costs.[95] Rational individuals trade through
bilateral contracts on open markets until the costs of transactions mean that
using corporations to produce things is more cost-effective. His second
major article, The Problem of Social Cost (1960), argued that if we lived in a
world without transaction costs, people would bargain with one another to
create the same allocation of resources, regardless of the way a court might
rule in property disputes.[96] Coase used the example of a nuisance case
named Sturges v. Bridgman, where a noisy sweetmaker and a quiet doctor
were neighbours and went to court to see who should have to move.[97] Coase
said that regardless of whether the judge ruled that the sweetmaker had to
stop using his machinery, or that the doctor had to put up with it, they could
strike a mutually beneficial bargain about who moves house that reaches the
same outcome of resource distribution.
Sociology of law
Legal institutions
"It is a real unity of them all in one and the same
person, made by covenant of every man with every
man, in such manner as if every man should say to
every man: I authorise and give up my right of
governing myself to this man, or to this assembly of
men, on this condition; that thou givest up, thy right
to him, and authorise all his actions in like manner.
Legislature
Prominent examples of legislatures are the Houses of Parliament in London,
the Congress in Washington D.C., the Bundestag in Berlin, the Duma in
Moscow and the Assemblée nationale in Paris. By the principle of
representative government people vote for politicians to carry out their
wishes. Although countries like Israel, Greece, Sweden and China are
unicameral, most countries are bicameral, meaning they have two separately
appointed legislative houses. In the 'lower house' politicians are elected to
represent smaller constituencies. The 'upper house' is usually elected to
represent states in a federal system (as in Australia, Germany or the U.S.A.)
or different voting configuration in a unitary system (as in France). In the
United Kingdom the upper house is appointed by the government as a house
of review. One criticism of bicameral systems with two elected chambers is
that the upper and lower houses may simply mirror one another. The
traditional justification of bicameralism is that an upper chamber acts as a
house of review. This can minimise arbitrariness and injustice in
governmental action.[114]
To pass legislation, a majority of Members of Parliament must vote for a bill
(proposed law) in each house. Normally there will be several readings and
amendments proposed by the different political factions. If a country has an
entrenched constitution, a special majority for changes to the constitution
will be required, making changes to the law more difficult. A government
usually leads the process, which can be formed from Members of Parliament
(e.g. the UK or Germany).
Executive
The word "bureaucracy" derives from the French for "office" (bureau) and
Ancient Greek for "power" (kratos). Like the military and police, all of a
legal system's government servants and bodies that make up the bureaucracy
carry out the wishes of the executive. One of the earliest references to the
concept was made by Baron de Grimm, a German author who lived in
France. In 1765 he wrote,
"The real spirit of the laws in France is that bureaucracy of which the late
Monsieur de Gournay used to complain so greatly; here the offices, clerks,
secretaries, inspectors and intendants are not appointed to benefit the public
interest, indeed the public interest appears to have been established so that
offices might exist."[121]
Cynicism over "officialdom" is still common, and the workings of public
servants is typically contrasted to private enterprise motivated by profit.[122]
In fact private companies, especially large ones, also have bureaucracies.[123]
Negative perceptions of "red tape" aside, public services such as schooling,
health care, policing or public transport are a crucial state function making
public bureaucratic action the locus of government power.[123] Writing in the
early 20th century, Max Weber believed that a definitive feature of a
developed state had come to be its bureaucratic support.[124] Weber wrote
that the typical characteristics of modern bureaucracy are that officials
define its mission, the scope of work is bound by rules, management is
composed of career experts, who manage top down, communicating through
writing and binding public servants' discretion with rules
Legal profession
Lawyers give their clients advice about their legal rights and duties, and
represent them in court. As European Court of Human Rights has stated, the
law should be adequately accessible to everyone and people should be able
to foresee how the law affects them.[126] In order to maintain professionalism,
the practice of law is typically overseen by either a government or
independent regulating body such as a bar association, bar council or law
society. An aspiring practitioner must be certified by the regulating body
before undertaking his practice. This usually entails a two or three year
programme at a university faculty of law or a law school, earning the student
a Bachelor of Laws, a Bachelor of Civil Law or a Juris Doctor degree. This
course of study is followed by an entrance examination (e.g. admission to
the bar). Some countries require a further vocational qualification before a
person is permitted to practice law. For those wishing to become a barrister a
year's pupillage under the oversight of an experienced barrister. Beyond the
requirements for legal practice higher academic degrees may be pursued.
Examples include a Master of Laws, a Master of Legal Studies or a Doctor
of Laws.
Civil society
The term "civil society" dates back to British philosopher John Locke. He
saw civil society as people who have "a common established law and
judicature to appeal to, with authority to decide controversies between
them."[127] German philosopher Georg Wilhelm Friedrich Hegel also
distinguished the "state" from "civil society" (Zivilgesellschaft) in Elements
of the Philosophy of Right.[128] Hegel believed that civil society and the state
were polar opposites, within the scheme of his dialectic theory of history.[129]
Civil society is necessarily a source of law, by being the basis from which
people form opinions and lobby for what they believe law should be. As
Australian barrister and author Geoffrey Robertson QC wrote of
international law,
Modern accounting
Accounting is the process of identifying, measuring and communicating
economic information so a user of the information may make informed
economic judgments and decisions based on it.
Accounting is the degree of measurement of financial transactions which are
transfers of legal property rights made under contractual relationships. Non-
financial transactions are specifically excluded due to conservatism and
materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping
system. This system involves making at least two entries for every
transaction: a debit in one account, and a corresponding credit in another
account. The sum of all debits should always equal the sum of all credits,
providing a simple way to check for errors. This system was first used in
medieval Europe, although claims have been made that the system dates
back to Ancient Rome or Greece.
History of accounting
Early history
Accountancy's infancy dates back to the earliest days of human agriculture
and civilization (the Sumerians in Mesopotamia), when the need to maintain
accurate records of the quantities and relative values of agricultural products
first arose. Simple accounting is mentioned in the Christian Bible (New
Testament) in the Book of Matthew, in the Parable of the Talents [4]. The
Islamic Quran also mentions simple accounting for trade and credit
arrangements [5]).
Twelfth-century A.D. Arab writer Ibn Taymiyyah mentioned in his book
Hisba (literally, "verification" or "calculation") detailed accounting systems
used by Muslims as early as in the mid-seventh century A.D. These
accounting practices were influenced by the Roman and the Persian
civilisations that Muslims interacted with. The most detailed example Ibn
Taymiyyah provides of a complex governmental accounting system is the
Divan of Umar, the second Caliph of Islam, in which all revenues and
disbursements were recorded. The Divan of Umar has been described in
detail by various Islamic historians and was used by Muslim rulers in the
Middle East with modifications and enhancements until the fall of the
Ottoman Empire.
Luca Pacioli and the birth of modern accountancy
Luca Pacioli (1445 - 1517), also known as Friar Luca dal Borgo, is credited
for the "birth" of accounting. His Summa de arithmetica, geometrica,
proportioni et proportionalita (Summa on arithmetic, geometry, proportions
and proportionality, Venice 1494), was a textbook for use in the abbaco
schools of northern Italy, where the sons of merchants and craftsmen were
educated. It was a compendium of the mathematical knowledge of his time,
and includes the first printed description of the method of keeping accounts
that Venetian merchants used at that time, known as the double-entry
accounting system. Although Pacioli codified rather than invented this
system, he is widely regarded as the "Father of Accounting". The system he
published included most of the accounting cycle as we know it today. He
described the use of journals and ledgers, and warned that a person should
not go to sleep at night until the debits equalled the credits! His ledger had
accounts for assets (including receivables and inventories), liabilities,
capital, income, and expenses — the account categories that are reported on
an organisation's balance sheet and income statement, respectively. He
demonstrated year-end closing entries and proposed that a trial balance be
used to prove a balanced ledger. His treatise also touches on a wide range of
related topics from accounting ethics to cost accounting.
Post-Pacioli
The first known book in the English language on accounting was published
in London, England by John Gouge (or Gough) in 1543. It is described as A
Profitable Treatyce called the Instrument or Boke to learn to know the good
order of the kepyng of the famouse reconynge, called in Latin, Dare and
Habere, and, in English, debtor and Creditor.[citation needed]
A short book of instructions was also published in 1588 by John Mellis of
Southwark, England, in which he says, "I am but the renuer and reviver of
an ancient old copies printed here in London the 14 of August 1543:
collected, published, made, and set forth by one Hugh Oldcastle,
Schoolmaster, who, as reappeared by his treatise, then taught Arithmetics,
and this booke in Saint Ollaves parish in Marko Lane." Mellis refers to the
fact that the principle of accounts he explains (which is a simple system of
double entry) is "after the former of Venice".
A book described as The Merchants Mirrour, or directions for the perfect
ordering and keeping of his accounts formed by way of Debitor and
Creditor, after the (so termed) Italian manner, by Richard Dafforne,
accountant, published in 1635, contains many references to early books on
the science of accountancy. In a chapter in this book, headed "Opinion of
Book-keeping's Antiquity," the author states, on the authority of another
writer, that the form of book-keeping referred to had then been in use in Italy
about two hundred years, "but that the same, or one in many parts very like
this, was used in the time of Julius Caesar, and in Rome long before." He
gives quotations of Latin book-keeping terms in use in ancient times, and
refers to "ex Oratione Ciceronis pro Roscio Comaedo"; and he adds:
These firms are associations of the partnerships in each country rather than
having the classical structure of holding company and subsidiaries, but each
has an international 'umbrella' organization for coordination (technically
known as a Swiss Verein).
Before the Enron and other accounting scandals in the United States, there
were five large firms and were called the Big Five: Arthur Andersen,
PricewaterhouseCoopers, KPMG, Deloitte Touche Tohmatsu and Ernst &
Young.
On June 15, 2002, Arthur Andersen was convicted (later overturned) of
obstruction of justice for shredding documents related to its audit of Enron.
Nancy Temple (Andersen Legal Dept.) and David Duncan (Lead Partner for
the Enron account) were cited as the responsible managers in this scandal as
they had given the order to shred relevant documents. Since the U.S.
Securities and Exchange Commission does not allow convicted felons to
audit public companies, the firm agreed to surrender its licenses and its right
to practice before the SEC on August 31, 2002. A plurality of Arthur
Andersen joined KPMG in the US and Deloitte & Touche outside of the US.
Historically, there had also been groupings referred to as the "Big Six"
(Arthur Andersen, plus Coopers & Lybrand before its merger with Price
Waterhouse) and the "Big Eight" (Ernst and Young prior to their merger
were Ernst & Whinney and Arthur Young and Deloitte & Touche was
formed by the merger of Deloitte, Haskins and Sells with the firm Touche
Ross).
Bodies and organizations
Accounting standard-setting bodies
• International
o International Accounting Standards Board
• Australia
o Australian Accounting Standards Board
• Canada
o Accounting Standards Board "AcSB"
• Germany
o Accounting Standards Committee of Germany (ASCG, in
German: DRSC)[7]
• Ghana
o Institute of Chartered Accountants of Ghana
• Iran
o Accounting Standards Board
• Malaysia
o Malaysian Accounting Standards Board[8]
• Malta
o Maltese Accountancy Board[9]
• New Zealand
o Accounting Standards Review Board[10]
o New Zealand Institute of Chartered Accountants
• Nigeria
o Institute of Chartered Accountants of Nigeria (ICAN)
• Pakistan
o Institute of Chartered Accountants of Pakistan (ICAP)
• Ireland
o Institute of Chartered Accountants in Ireland
• South Africa
o South African Institute of Chartered Accountants (SAICA)
• United Kingdom
Professional organizations
•
o American Institute of Certified Public Accountants (AICPA)
o Arab Society for Certified Accountants (ASCA)
o Association of Accounting Technicians (AAT)
o Association of Chartered Certified Accountants (ACCA)
o Association of National Accountants of Nigeria (ANAN)
o Canadian Institute of Chartered Accountants (CICA)
o Certified General Accountants Association of Canada (CGA)
o Guild of Industrial,Commercial and Institutional Accountants,
Canada (ICIA)
o Chartered Institute of Cost & Management Accountants
(CICMA)
o Chartered Institute of Management Accountants (CIMA)
o Chartered Institute of Public Finance and Accountancy
(CIPFA)
o CPA Australia[11]
o German CPA Society (GCPAS)[12]
o Hong Kong Institute of Certified Public Accountants
o Institute of Chartered Accountants in Australia
o Institute of Chartered Accountants in England and Wales
(ICAEW)
o Association of International Accountants (AIA)
o Institute of Financial Accountants (IFA)
o Institute of Chartered Accountants in Ireland (ICAI)
o Institute of Chartered Accountants of India
o Institute of Chartered Accountants of Nigeria (ICAN)
o Institute of Chartered Accountants of Pakistan (ICAP)
Government agencies
Government agencies enforce the securities laws. Public companies must
file financial reports with these government agencies.
• Germany
o German Federal Financial Supervisory Authority (BaFin)[15]
• India
o Reserve Bank of India (for banks)
o Securities and Exchange Board of India (SEBI)[16](for public
companies)
• Pakistan
o State Bank of Pakistan (for Banks)
o Securities and exchange commission of Pakistan (for Public
Companies including Banks)
• United States
Oversight boards (regulators for the accounting industry)
Oversight boards are new, private-sector non-profit organizations that were
set up after the Enron scandal to oversee the auditors of public companies.
• Germany
o German Auditor Oversight Commission (AOC, in German:
APAK)[17]
• United States
o Public Company Accounting Oversight Board - public
companies
Auditing standards-setting bodies
• International
o International Auditing and Assurance Standards Board[18]
• Australia
o AUASB - Auditing & Assurance Standards Board
• Germany
o German Institute of Certified Public Accountants (IDW)[19]
• South Africa
o Public Accountants and Auditors Board - public companies
Topics in accounting
See list of accounting topics for complete listing.
Auditing
• Assurance services
• Audit
• Information technology audit
• Internal audit
Accountancy methods and fields
• Lean accounting
• Cost accounting
• Cash-basis and accrual-basis accounting
• Financial accountancy
• Fund Accounting
• Internal and external accountancy
• Management accounting
• Project accounting
• Positive accounting
• Environmental accounting
• Tax accounting
Accounting Principles
Accounting principles, rules of conduct and action are described by various
terms such as concepts, conventions, tenets, assumptions, axioms and
postulates.
Accounting concepts
• Entity concept
• Dual aspect concept
• Going concern concept
• Accounting period concept
• Money measurement concept
• Historical Cost concept
• Realization concept
• Accounting methods (includes a discussion on the concept of
accruals)
• Understandability
• Relevance
• Reliability
• Comparability
• Accrual (also known as Matching principle)
• Unified Ledger Accounting
Accounting conventions
• Convention of disclosure
• Convention of materiality
• Convention of consistency
• Convention of conservatism
Tools for accounting
• Accounting software
• Online accounting
Types of accountancy
The following list is intended to give some idea of the breadth and scope of
the accountancy profession:
• lean accounting
• auditing
• bookkeeping
• chartered accountant
• cost accounting
• management accounting
• financial accounting
• forensic accounting
Personal finance
Questions in personal finance revolve around
• How much money will be needed by an individual (or by a family) at
various points in the future?
• Where will this money come from (e.g. savings or borrowing)?
• How can people protect themselves against unforeseen events in their
lives, and risk in financial markets?
• How can family assets be best transferred across generations
(bequests and inheritance)?
• How do taxes (tax subsidies or penalties) affect personal financial
decisions?
• How does credit affect an individual's financial standing
Corporate finance
Managerial or corporate finance is the task of providing the funds for a
corporation's activities. For small business, this is referred to as SME
finance. It generally involves balancing risk and profitability, while
attempting to maximize an entity's wealth and the value of its stock.
Long term funds are provided by ownership equity and long-term credit,
often in the form of bonds. The balance between these forms the company's
capital structure. Short-term funding or working capital is mostly provided
by banks extending a line of credit.
Another business decision concerning finance is investment, or fund
management. An investment is an acquisition of an asset in the hope that it
will maintain or increase its value. In investment management -- in choosing
a portfolio -- one has to decide what, how much and when to invest. To do
this, a company must:
• Identify relevant objectives and constraints: institution or individual
goals, time horizon, risk aversion and tax considerations;
• Identify the appropriate strategy: active v. passive -- hedging strategy
Capital
Capital, in the financial sense, is the money which gives the business the
power to buy goods to be used in the production of other goods or the
offering of a service.
Sources of capital
• Long Term - usually above 7 years
o Share Capital
o Mortgage
o Retained Profit
o Venture Capital
o Debenture
o Sale & Leaseback
o Project Finance
Capital market
• Long-term funds are bought and sold:
o Shares
o Debentures
o Long-term loans, often with a mortgage bond as security
o Reserve funds
o Euro Bonds
Money market
• Financial institutions can use short-term savings to lend out in the
form of short-term loans:
o Credit on open account
o Bank overdraft
o Short-term loans
o Bills of exchange
o Factoring of debtors
Borrowed capital
This is capital which the business borrows from institutions or people, and
includes debentures:
• Redeemable debentures
• Irredeemable debentures
• Debentures to bearer
• Hardcore debentures
Own capital
This is capital that owners of a business (shareholders and partners, for
example) provide:
• Preference shares/hybrid source of finance
o Ordinary preference shares
o Cumulative preference shares
o Participating preference share
• Ordinary shares
• Bonus shares
• Founders' shares
Fixed capital
This is money which is used to purchase assets that will remain permanently
in the business and help it to make a profit.
Working capital
This is money which is used to buy stock, pay expenses and finance credit.
Capital budget
This concerns fixed asset requirements for the next five years and how these
will be financed.
Cash budget
Working capital requirements of a business should be monitored at all times
to ensure that there are sufficient funds available to meet short-term
expenses.
Management of current assets
Credit policy
Credit gives the customer the opportunity to buy goods and services, and
pay for them at a later date.
Forms of credit
• Suppliers credit:
o Credit on ordinary open account
o Instalment sales
o Bills of exchange
o Credit cards
• Contractor's credit
• Factoring of debtors
Credit collection
Overdue accounts
• Cards arranged alphabetically in card index system
• Attach a notice of overdue account to statement.
• Send a letter asking for settlement of debt.
• Send a second or third letter if first is ineffectual.
• Threaten legal action.
Stock
Stockpiling
This refers to the purchase of stock at the right time, at the right price and in
the right quantities.
There are several advantages to the stockpiling, the following are some of
the examples:
• Losses due to price fluctuations and stock loss kept to a minimum
• Ensures that goods reach customers timeously; better service
• Saves space and storage cost
• Investment of working capital kept to minimum
• No loss in production due to delays
There are several disadvantages to the stockpiling, the following are some of
the examples:
• Obsolescence
• Danger of fire and theft
• Initial working capital investment is very large
• Losses due to price fluctuation
Cash
Depreciation
Depreciation is the decrease in the value of an asset due to wear and tear or
obsolescence. It is calculated yearly to ensure realistic book values for
assets.
Insurance
Insurance is the undertaking of one party to indemnify another, in exchange
for a premium, against a certain eventuality.
Uninsurable risks
• Bad debt
• Changes in fashion
• Time lapses between ordering and delivery
• New machinery or technology
• Different prices at different places
Requirements of an insurance contract
• Insurable interest
o The insured must derive a real financial gain from that which he
is insuring, or stand to lose if it is destroyed or lost.
o The item must belong to the insured.
o One person may take out insurance on the life of another if the
second party owes the first money.
o Must be some person or item which can, legally, be insured.
o The insured must have a legal claim to that which he is
insuring.
• Good faith
o Uberrimae fidei refers to absolute honesty and must
characterise the dealings of both the insurer and the insured.
Shared Services
There is currently a move towards converging and consolidating Finance
provisions into shared services within an organization. Rather than an
organization having a number of separate Finance departments performing
the same tasks from different locations a more centralized version can be
created.
Finance of states
Country, state, county, city or municipality finance is called public finance.
It is concerned with
• Identification of required expenditure of a public sector entity
• Source(s) of that entity's revenue
• The budgeting process
• Debt issuance (municipal bonds) for public works projects
Financial economics
Financial economics is the branch of economics studying the interrelation of
financial variables, such as prices, interest rates and shares, as opposed to
those concerning the real economy. Financial economics concentrates on
influences of real economic variables on financial ones, in contrast to pure
finance.
It studies:
• Valuation - Determination of the fair value of an asset
o How risky is the asset? (identification of the asset appropriate
discount rate)
o What cash flows will it produce? (discounting of relevant cash
flows)
o How does the market price compare to similar assets? (relative
valuation)
o Are the cash flows dependent on some other asset or event?
(derivatives, contingent claim valuation)
• Financial markets and instruments
o Commodities - topics
o Stocks - topics
o Bonds - topics
o Money market instruments- topics
o Derivatives - topics
Financial mathematics
Financial mathematics is a main branch of applied mathematics concerned
with the financial markets. Financial mathematics is the study of financial
data with the tools of mathematics, mainly statistics. Such data can be
movements of securities—stocks and bonds etc.—and their relations.
Another large subfield is insurance mathematics.
Experimental finance
Experimental finance aims to establish different market settings and
environments to observe experimentally and provide a lens through which
science can analyze agents' behavior and the resulting characteristics of
trading flows, information diffusion and aggregation, price setting
mechanisms, and returns processes. Researchers in experimental finance can
study to what extent existing financial economics theory makes valid
predictions, and attempt to discover new principles on which such theory
can be extended. Research may proceed by conducting trading simulations
or by establishing and studying the behaviour of people in artificial
competitive market-like settings.
Justice as trickery
In Republic, the character Thrasymachus argues that justice is the interest of
the strong: merely a name for whatever the powerful or cunning ruler has
managed to impose on the people, to his or her own advantage. Nietzsche, in
contrast, argues that justice is part of the slave-morality of the weak many,
rooted in their resentment of the strong few, and intended to keep the noble
man down. In Human, All Too Human he states that, "there is no eternal
justice."