IED Study Notes

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IED Study Notes

Business Description

1. Who are your target audience?

2. What are the needs & wants of the targeted audience?

3. What are the features of the company's products & services that fulfill the needs & wants of the targeted audience?

SCAMPER Approach 1. Substitute - Example: keys changed into fingerprint key lock

2. Combine - Example: combine two items into a new product

3. Adapt - Example: life jacket/airbag for motorcyclist

4. Modify/Magnify - Example: sizes of water bottles, items

5. Put to other uses - Example: wastes put together to make a new product

6. Eliminate - Example: air freshener to eliminate odour / bad smell

7. Rearrange/Reverse - Example: modular furniture

Macro-Environmental Forces 1. Demographic Environment

➡various traits that determine the product preferences or buying behaviour of the targeted audience

➡examples: gender, age, income, marital status, occupation

2. Economic Environment

➡refers to the nature and direction of the economy in which the company operates

3. Social Environment

➡refers to the beliefs, attitudes, values and lifestyles

4. Political-Legal Environment

➡refers to the regulations and policies which could reduce the firm's profits or even prevent the firm from entering a certain industry

➡examples: policies during baby boom

5. Technological Environment

➡refers to the understanding of technological changes taken place in the industry so as to avoid obsolescence and promote innovation

➡ introduction of new products into the industry

6. Global Environment

➡ refers to the strong competition from local and international players in the industry

Accounting Terminology 1. Assets: something of value to the company which help generate sales

2. Liabilities: debts owed to the bank or others by the company

3. Revenues: dollars of sales generated by the company from selling its goods and services

4. Cost of Goods: cost of raw materials made for the products

5. Expenses: cost incurred by the company for operation of its goods and services

6. Depreciation: the decrease of value of an asset over a period of time due to wear and tear

7. Share Capital: money invested into the company by the shareholders

8. Retained Earnings: profits earned that are kept aside for future expansion and development of the company

9. Owner's Equity: Share Capital + Retained Earnings

10. Income Statement: summaries all the revenues and expenses of the company over a period of time eg. one year

11. Balance Sheet: summaries all the assets and liabilities of the company over a particular time or date

SWOT Analysis 1. Strengths - attributes of the person or the company that are helpful to achieving the objective

2. Weaknesses - attributes of the person or the company that are harmful to achieving the objective

3. Opportunities - external conditions that are helpful to the business's objective

4. Threats - external conditions that could do damage to the business's objective

Competitor Analysis 1. Direct Competitors - have similar products/services to the same customers at about similar prices

➡Coca-Cola vs Pepsi

➡Starbucks vs Coffee Bean

2. Indirect Competitors - have similar products/services but different prices

➡Coca-Cola vs Pokka Coffee

➡Coca-Cola vs beer, liquors

3. Indirect Competitors (broader definition) - target the same consumer dollar

➡Hair services vs manicure, slimming services

4. "Latent" Competitors - "hidden danger" from future competitors

➡Encyclopedia Britannica vs Microsoft Encarta

5. Assess Competitors - comparing market strategy, position, strengths and weaknesses

6. Competitive Strategy

➡"attack or avoid" strategy

↪weak vs strong competitors

↪close vs distant competitors

7. Areas to consider in analysis

➡Market share & position

➡Products

➡Market Strategy

➡Location & History of Business

Government Rules & Regulations 1. policies, licenses

Industry Analysis Porter's Competitive Model

1. Bargaining Power of Buyers

2. Bargaining Power of Suppliers

3. Threat of Substitutes

4. Threat of New Entrants

5. Intense Rivalry among Competitors

Market Research 1. market research techniques

➡survey

➡face-to-face interview

➡internet survey

➡telephone interview

Market Segmentation 1. Geographic Segmentation - divides market into different geographic units

2. Demographic Segmentation - divides market into distinct groups by age, gender, income, marital status

3. Psychographic Segmentation - divides market into groups based on social class, lifestyle, personality and characteristics

4. Behavioural Segmentation - divides market into groups based on their knowledge, attitudes, uses or responses to a product

Market Targeting ➡evaluating each market segment's attractiveness and selecting one or more segments to enter

Market Size Estimation ➡estimate market size of target market in dollar($) value and/or in unit volume by using 1. Primary Data & 2. Secondary Data

1. Primary Data

➡Customer Profile Survey - information eg. frequency of purchase, amount spent per purchase

➡Expert opinion - gather opinions from distributors, marketing consultants

➡Observation & Study - observe competitors, customer traffic count, retail shopping traffic

2. Secondary Data

➡government agencies' reports eg. economic data, statistics and census, magazines, books and newspapers, reliable internet sources

Level of Product 1. Core Level - intangible, basic level of a product strategy

2. Actual Level - tangible product of the company that is utilised by consumers

3. Augmented Level - extra accessories or items added to the product that is unnecessary for the consumer to use them

Financial Analysis

1. Probability Ratios - show how profitable the firm is

➡net profit margin(net income/sales x 100%) - measures income per dollar of sales

➡gross profit margin(gross profit/sales x 100%) - measures the percentage of each sales dollar after the company has paid for its goods

➡return on assets(net income/total assets x 100%) - measures the company's effectiveness in generating sales with its total assets

➡return on equity(net income/shareholder's equity x 100%) - measures the company's success in obtaining the maximum return of profits on its shareholder's equity

2. Asset Utilisation Ratios - shows how well the firm utilises its assets

➡average collection period(receivables/sales/360) - average length of time needed for the company to collect its account receivables

➡inventory turnover(sales/inventory) - how fast the company can sell its product

➡fixed asset turnover(sales/fixed asset) - measures how effectively the company can utilise its plants and equipment

➡total asset turnover(sales/total asset) - measures the company's efficiency in generating profits by utilising its total assets

3. Liquidity Ratios - shows how the firm meet its short-term obligations

➡Current Ratio(current assets/current liabilities) - measures firm's ability to meet its short-term obligations

➡Quick Ratio(current assets-inventory/current liabilities) - measures firm's ability to meet its short-term obligations without relying on the sales of inventories

4. Debt Ratios - shows how well the firm is using or managing debt

➡Debt Ratio(total liabilities/total assets x 100%) -

➡