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Manager
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person who directs resources to achieve stated goal(s)
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Managerial Economics
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The study of how to direct scarce resources in the way that most efficiently achieves a managerial goal.
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Business Decision Making
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the process of choosing between different alternatives for the purpose of achieving desired goals
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4 Key Tasks of Managers
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planning, organizing, directing, controlling
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Planning
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Key task of manager, preparing business for future
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3 Levels of Planning
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strategic - developing courses of action for long term, tactical - short term plans that are consistent with strategic plan, contingency - alternative plans for different conditions
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Organizing
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represents the systematic classification and grouping of human and other resources consistent with goal.
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Directing
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guiding others toward achieving goal
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Controlling
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monitoring and evaluating activities, measuring performance
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5 Key Functions of Managers
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marketing, financial, operations/logistics, risk, human resource
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Marketing Management
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carefully planned execution of why, how, where, and who sells product/service and to who it is sold, physical economic activities to move products from initial producer through intermediaries to final consumer
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Financial Management
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utilizing and monitoring financial resources and position of the firm to achieve greatest returns.
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Operations/Logistics Management
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focuses on the direction and control of the processes used to produce goods and services
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Risk Management
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choosing among alternatives for the purpose of reducing the effects of risk and uncertainty on the firm's welfare
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Human Resource Management
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encompasses management of mechanics of personnel/administration and finer point of motivating employees to offer/contribute their maximum potential
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5 Management Decisions Related to Marketing
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products to produce, service offered, info provided, price to charge how to promote, distribution
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7 Activities Representing Marketing Management
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selling, advertising, market research, new product development, customer service, physical distribution, price
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Market Efficiency
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functions of marketing system performed to increase marketing output to marketing input ratio
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Implication of Marketing Efficiency
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getting products to customer with most effiecient use of resources and least cost per unit
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Concept of Marketing Efficiency
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process of anticipating the needs of targeted customers and finding ways to meet needs in profitable way
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Marketing Plan
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how activities are decided to guide business, tactical plan, key element to lay out firm's purpose and objective
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6 Steps to Marketing Plan
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analysis of current market situation, opportunities/issues, marketing strategy, financial analysis, implementation program, controls
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Analysis of Current Market Situation (Marketing Plan)
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assess current situation, the performance of firm's products, assess competitors, assess distribution, and assess macroeconomic environment
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Market Situation (Analysis)
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background and current situation on consumer needs, perception, buying trends
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Product Situation (Analysis)
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analysis of recent history of firms products, sales/revenues, costs/profits, growth/decline, product life cycle, typically 3-5 year span
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Competitive Situation (Analysis)
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who, size, goals, market share, products, qualities, strategies, other information to understand competitors
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Distribution Situation (Analysis)
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prices, practices, organization and terms of trade used my industry related to distribution of products
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Macroeconomic Environment (Analysis)
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changes in economy affect sales/costs change in demographic of customers, climate, politics, technology, legal, regulations, social, and cultural factors
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Opportunities and Issues (Marketing Plan)
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current market situation the manage must identify, opportunities/threats the firm and its products will encounter, internal strengths/weaknesses
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Marketing Strategy (Marketing Plan)
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identify target markets, market positioning, marketing mix, and marketing expenditures
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4 Parts of Marketing Mix (Marketing Strategy)
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product, price, place, and promotion
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Value Bundle (Marketing Mix) (Marketing Strategy)
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tangible/intangible benefits customers receive from the products/services the business provides
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Notion (Marketing Mix) (Marketing Strategy)
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value is the ratio of what customers receive (benefits) relative to what they give up (costs)
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Economic Concept (Marketing Mix) (Marketing Strategy)
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MRS to ratio of price/cost
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11 Specifics of Marketing Strategy (Marketing Mix)
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market research/assessment, target market, product positioning, size of product, price, type of distribution, size/type of sales force, level of quality of service, advertising, sales promotion, research/development
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Implementation Program (Marketing Plan)
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plan includes clear statements about who does what, when, for whom, and how much
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Financial Analysis (Marketing Plan)
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plan transitions into revenues/expenses, and how strategy contributes
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Controls (Marketing Plan)
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controls needed to measure progress
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9 Types of Pricing Strategy
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plus pricing, competitive, value based, penetration, skimming the market, discount, loss-leader, psychological, and prestige
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Plus Pricing (Pricing Strategy)
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adding constant margin to basic cost of product, margin covers overhead and handling, provides profit margin
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Competitive Pricing (Pricing Strategy)
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prices based on competitors, different value bendles determine price
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Value Based Pricing (Pricing Strategy)
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level lower than value
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Penetration Pricing (Pricing Strategy)
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low price to gain broad market acceptance
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Skimming the Market Pricing (Pricing Strategy)
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introduce at high price, excellent profits on sales made initially, opposite of penetration
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Discount Pricing (Pricing Strategy)
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offers reduction from the published price for specified reason
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Loss-Leader Pricing (Pricing Strategy)
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offer 2+ products in a product mix at specially reduced price for limited time, encourage long term adoption of product line, encourage purchase of other products
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Psychological Pricing (Pricing Strategy)
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establishing prices that are emotionally satisfying because they are lower than some virtually equivalent price Ex: 99.99 vs 100
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Prestige Pricing (Pricing Strategy)
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appeals to consumers interested in high quality elite image
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Price affects what 3 things?
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revenue of firm, quantity sold, and demand relationships
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Equation for Profit
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Profit = Total Revenue - Total Cost
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Equation for Revenue
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Revenue = Price * Quantity
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2 Questions Managers Asses in Regard to Price
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Is price relative to competitor? What happens if I raise/lower price?
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Own Price Elasticity of Demand
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movements along a demand curve for changes in own price while all other factors affecting quantity demanded are held constant (% change in quantity demanded and % change in own price)
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Elastic
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greater than 1, % change in quantity demanded, exceeds % change in own price
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Inelastic
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less than 1, % change in quantity demanded less than % change in own price
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Unitary Elastic
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equal to 1, % change in quantity demanded equals change in price
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3 Predictions of Elasticities
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change in quantity demanded, change in price, effect on total revenue (inelastic price then TR moves in direction of price)
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3 Factors Affecting Elasticities
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availability of substitutes, % of customers budget spent on commodity, time period of adjustment (longer period = more elastic)
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Income Elasticity of Demand
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measure of responsiveness of quantity demanded to changes in income, holding all other variables in demand function constant, Em=% change in Q demanded
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Normal Good
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Em > 0
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Inferior Good
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Em < 0
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Cross Price Elasticity of Demand
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measure of responsiveness of quantity demanded to changes in price of related good holding all other variable in demand function constant, EXR = % change in Q demand
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Gross Substitutes
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EXR > 0
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Gross Compliments
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EXR < 0
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Market Analysis
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areas in marketing plan that require information or data to make decision, provides input to making informative decision
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2 Types of Data (Market Analysis)
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secondary - gathered by entries outside firm and more macroeconomic in nature and primary - gathered by firm, directly ask customers
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2 Ways of Data Arrangement (Market Analysis)
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cross sectional - different groups/locations at the same time, understand market characteristics at point in time and time-series - 1+ groups over time, forecast what may happen based on trends
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Concept of Forecasting and 2 Types (Market Analysis)
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predicted from existing data, assumption - past behavior to predict future behavior and graphical - nature/behavior to understand trends
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Demand Forecasting
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Analyzing demand using price/quantity relationship
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3 Building Blocks to Empirical Demand Function
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number based on demand equations estimated from market data, estimate impact of each variable on quantity demanded, can predict effect on sales
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4 Steps to Estimate Empirical Demand Function
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decide what should be in the price-setting firm's demand function, collect data on variables, estimate demand function, evaluate result (estimates of slopes/intercepts)
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Line Equation
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y (quantity demanded) = m(change in Q demanded/slope) * x(price) + b (intercept)
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Trend Forecasting
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use past sales and adjust based on changes in economic conditions, statistical trend analysis, survey data to understand buying intentions
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4 Areas that Benefit from Forecasting
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planning, logistics, inventory, and allocation of resources
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