chapter 2, 3, 4, 5: Innovation, Marketing & Sales, Finance, Value Chain Model

Question 1

What are the differences between discovery, invention and innovation?

Answer 1

Discovery is a finding of something which was already in nature.
Invention is usage of knowledge to realize new problem solutions.
Innovation happens when invention is successfully integrated in market/economically exploited, leading to economic success

Question 2

What is R&D?
Which 3 activities does R&D conduct?

Answer 2

R&D (Research and Development): Systematic creative work to increase knowledge stock and devise new applications.

Three activities in R&D:

1. Basic Research: Experimental/theoretical work to acquire foundational knowledge without specific application.
2. Applied Research: Original investigation to acquire new knowledge for specific practical aims or objectives.
3. Development: Systematic work to produce new materials, products, devices, or processes, or improve existing ones, using existing knowledge from research and practical experience.

Question 3

What are 3 phases of simplified innovation process?

Answer 3

1. Conception (Requirement Analysis, Idea Generation, Idea Evaluation, Project planning)
2. Implementation (Development, Prototype, Testing)
3. Marketing (Production, Market launch and penetration)

Question 4

What is marketing and sketch core marketing concept?
What is the difference between human needs and wands and demands?
What is a product and exchange?

Answer 4

Marketing is a social and managerial process by which individuals obtain what they want through creating and exchanging products and value with others.

Needs (state of depravation) -> Wants (needs shaped by culture) -> Demand (wants backed up by buying power) -> Exchange Transaction (act of obtaining a desired product by exchanging goods)

Product (Anything which may be offered at market that might satisfy needs or wants) -> Market (set of actual and potential buyers of a product)

Question 5

What is a transaction and what is the difference between monetary and barter transaction?

Answer 5

A transaction: A trade between two parties involving at least two things of value, with agreed upon conditions.

Monetary Transaction: Products are exchanged for money. E.g., Buying a car for $30,000.

Barter Transaction: Goods are exchanged for other goods. E.g., Trading a bag of rice for a bag of beans.

Question 6

Which factors affect demand?

Answer 6

• Product’s Price
• Consumer Income
• Product Quality
• Advertising
• Availability of Substitutes
• Price of Complementary Goods
• Seasonal Changes and Weather
• Expectations of Future Price Changes

Question 7

How do sellers and buyer’s market differ?

Answer 7

Seller’s market is characterized by excess of demand over supply, leading to higher prices and more advantageous conditions for sellers.

buyer’s market is characterized by excess supply over demand giving buyers an advantage in price negotiations

Question 8

scetch and describe concept behind size of the market.

Answer 8

Potential Market Capacity: Maximum possible demand.
Real Market Capacity: Achievable sales considering influencing factors.
Market Volume: Total number of transactions over specific timeframe.
Market Share: Proportion of total sales by a brand or product.

Question 9

Define turnover, sales and sales volume.

Answer 9

Turnover[e/year] – sales volume of a company in a specific period
Sales – activity of selling products
Sales volume – units/year – quantity of products sold in certain period

Question 10

What is market segmentation and what are some requirements?

Answer 10

Market Segmentation: Dividing market into distinct groups/segments with differing needs, characteristics, or behavior.

Requirements:

Measurability: Ability to measure size, purchasing power of segments.
Accessibility: Segments reachable and serviceable.
Substantiality: Segments large/profitable enough to pursue.
Actionability: Ability to design effective programs for segments.

Question 11

Which 3 factors are used for evaluation of target market?

Answer 11

1. Segment Size and Growth
2. Segment structural attractiveness (long-term attractiveness, competitors, buyers’ power, suppliers)
3. Company objectives and Resources

Question 12

Which 3 factors are used for evaluation of target market?

Answer 12

1. Segment Size and Growth
2. Segment structural attractiveness (long-term attractiveness, competitors, buyers’ power, suppliers)
3. Company objectives and Resources

Question 13

What are 3 market cover strategies?

Answer 13

1. Undifferentiated marketing (ignore market segments and go after whole market with one offer)
2. Differentiated marketing (target several segments and design offer for each)
3. Concentrated marketing (company goes after a large share of one/few market segments)

Question 14

What are latent needs?

Answer 14

Latent needs are needs which customer does not realize that he has. Problem which he has but has not realized.

Question 15

Explain Kano model of customer satisfaction and what is the key factor of success?

Answer 15

Kano model of customer satisfaction classifies product attributes based on how they are perceived by customers. Key factor is product cost-value relation compared to competitor’s product.

Question 16

What is market positioning and what are some strategies?

Answer 16

Market Positioning: Defining how a product is perceived in relation to competing products.

Positioning Strategies:

• Product Attributes: Position based on specific features (e.g., Apple’s design).
• Needs/Benefits: Positioning based on what needs the product fulfills (e.g., Red Bull “gives wings”).
• Usage Occasions: Positioning based on when/where product is used (e.g., Gatorade for summer sports).
• User Categories: Positioning for specific types of users.
• Against Competitors: Positioning directly in comparison to a competitor (e.g., Samsung vs. Apple).
• Away from Competitors: Differentiating product as unique/different from others (e.g., 7-Up as the “un-cola”).

Question 17

What is crowdfunding and how does it work?

Answer 17

practice of funding a project by raising monetary contributions from large number of small-scale investors. Each investor provides small amount (carries little risk) but is able to increase values of stake in company.

Question 18

On what actors is modern financing model build?

Answer 18

• Project initiator who promotes the idea
• Support group
• Moderation organization/platform that brings parties together to launch the idea

Question 19

For what is value chain model used?

Answer 19

• formulate competitive strategies
• understand the sources of competitive advantage
• identify and develop linkages between activities which create values

Question 20

How are activities performed in the value chain model and value transformed?

Answer 20

Actions performed are sequentially interdependent, and value is added to the product at each stage.

Question 21

value chain model: What are differences between primary and support activities?

Answer 21

Primary activities are directly concerned with creation or delivery of a product,
support activities assist the primary activities.

Question 22

Describe/sketch basic structure of the company performance and financing processes.

Answer 22

From procurement market the factors of productions are acquired in exchange for cash outflow.
They are then transformed with production facilities/materials/labor into products and semi-finished products which are exchanged for cash inflow on seller’s market.

Question 23

What is firm infrastructure and why is it used?

Answer 23

Infrastructure supports the entire chain and not just individual activities. It can be seen as an overhead, but also as a form of competitive advantage.

Question 24

What are tasks of law department and facility management?

Answer 24

• Law department provides legal services and advice to the company and its employees.
• Facility management is in charge of creating a workflow which strongly supports primary objectives of the organization. It is divided in hard (building, AC, elevators) and soft (cleaning, pest control) services.

Question 25

What is the difference between factory and company?

Answer 25

**Factory** is an **industrial site** with buildings and machinery. It is characterized by spatial combinations of employees, machines, materials, information… **Company** is an **organization** or **economic system** where goods and services are exchanged for one another or for money.

Question 26

According to Guttenberg, which two principles do all companies need to obey?

Answer 26

Principle of efficiency principle of financial equilibrium

Question 27

Which additional two principles hold for privately owned companies in capital market economies, unlike in state owned companies in planned economies?

Answer 27

Principle of **autonomy** (no authority external to the company can determine decisions made within company) Principle of **profitability**

Question 28

What is a firm? What are theoretically conflicting objectives of companies?

Answer 28

Firm is a **legal name** of the company under which it conducts a business. **conflicting objectives** (canot be achieved simulatneously) * **Optimal supply of community** with goods and services and * **maximization of profits** Supply of community is seen as a side effect of profit maximization.

Question 29

What is the formula for liquidity, and why low liquidity can lead to bankruptcy?

Answer 29

Liquidity = total liquid assets available within the period consider _----------------------------------------------------------------------- all duties to pay within period considered value larger than 1 -> fully covered Liquidity expresses companie's financial equilibrium. If company is in need of short-term finance and is **not able** to lend it or liquidate assets, it can in worst case scenario lead to bankruptcy.

Question 30

Define productivity, return on sale, return on equity and economic efficiency.

Answer 30

**Productivity** = output units / hours worked , average measure of the efficiency of production **Return on sales** (net profit margin) = net income/net sales * 100, one of the most commonly used measures of profitability. **Return on equity** = net income/shareholder investment * 100, measures the ability of a firm to generate profits from its shareholders investments **Economic efficiency** is ratio of revenues over expenses. **Net income** is defined as earning minus all expenses.

Question 31

What are company’s classes of objectives?

Answer 31

1. **Success Objectives** (Productivity, Efficiency, Earning Power) 2. **Performance Objectives** (Result objectives, Financial o, Leadership and Organizational o, Social and Ecological o)

Question 32

What are success objectives and how are they formulated?

Answer 32

(Productivity, Efficiency, Earning Power) oriented to the **economic success** of **all activities** of all companies’ **functions**. Basic principle of them is *economic rationality principle*. Performance objectives support success objectives and are used to steer concrete activities in daily business.

Question 33

What are performance objectives and how are they formulated?

Answer 33

Performance objectives shall support success objectives used to steer concrete activities in daily business * Result objectives * Financial objectives * Leadership- and organizational objectives * Social and ecological objectives

Question 34

What is most often non quantifiable objective?

Answer 34

**Independence** – avoiding any external influences on the part of creditors customers and other objectives based on personal motive

Question 35

Sketch and name all phases and crisis of Greiner’s growth model.

Answer 35

Describes phases though which **all companies pass** regardless of the type as they grow. Each period of constant growth is **followed by a crisis**. Growth through creativity (leadership crisis); Direction (Autonomy); Delegation (Control); Co-ordination (Red-Tape); Collaboration (Growth); Alliances

Question 36

How can companies be classified?

Answer 36

By size branch of trade legal form

Question 37

What are different sized of companies?

Answer 37

Annual balance sheet total Micro (balance sheet total 2mil) Small (<=10mil) Medium (<=43mil) Large(43+mil) or turnover (2, 10, 50)

Question 38

Classification of economy by products.

Answer 38

**Household (consumer)** – Private and public households **Producing industries** – companies producing physical products (Raw materials, Production facilities, Customer goods), service companies (banks, trades, insurance...)

Question 39

Which are some legal basis for company in Austria.

Answer 39

* The law on Bills of Exchange (Wechselgesetz) * The law on Checks (Scheckgesetz) * The unfair competition law (Gesetz gegen unlauteren Wettbewerb) * Banking law (Kreditwesengesetz) * Consumer Protection Act - CPA (Konsumentenschutzgesetz)

Question 40

What is regulated by legal form?

Answer 40

* Liability (state of being legally responsible) * Distribution of profits * Management of the company * Funding options * Costs of foundation * Taxes

Question 41

What are 3 basic classifications by legal form?

Answer 41

1. Sole Proprietorship 2. Business partnership 3. Incorporated (Capital) company

Question 42

What is sole proprietorship and state advantages and disadvantages.

Answer 42

Refers to the person who owns the business and is **personally responsible** for its **debts**. Can operate **under name of the owner**, but **no legal entity** is created. **Advantages** are instant, * easy and inexpensive establishment * little to no ongoing formalities * no need to pay unemployment tax on himself * free mix of business and personal assets Disadvantages are * unlimited personal liability * cannot raise capital by selling an interest in the business * proprietorships rarely survive death of owners, do not retain value

Question 43

What is franchising and how does it work?

Answer 43

Type of **license** that a party (franchisee) acquires to access franchisors **proprietary knowledge**, **processes** and **trademark** in order to *provide services under business name*. Usually pays **annual** and **initial fees** to franchisor. Used as a **foreign market entry mode**.