Exam revision Flashcards
(108 cards)
1
Q
Define “utility”
A
A measure of personal satisfaction experienced by the consumer of a good or service.
2
Q
Define “marginal utility”
A
The change in satisfaction that a consumer experiences by consuming 1 more unit of a good or service.
3
Q
Describe a diminishing marginal utility curve and give an example
A
a.k.a diminishing demand curve
The level of satisfaction decreases with the consumption of each additional unit of the good/service.
Downward curve.
4
Q
Define “hazard”, “risk”, and “safety” and explain the 4 classes of hazard.
A
> Hazard:
- A risk to one’s personal safety, a potential source of danger
Risk
- The likelihood of a hazard occurring
Safety
- A judgement of the acceptability of the risk
CLASSES:
> Physical
- Those which threaten the physical safety of a worker.
- e.g. getting hit by a forklift
> Chemical
- Chemical substances which threaten the health/safety of a worker. - e.g. pesticides
> Biological
-
Other
5
Q
Define, in terms of related goods, a substitute
A
A good that can be consumed in place of another; e.g. a hamburgers and sandwiches are substitute lunch options. If a burger shop opens next to a sandwich shop, sandwich sales are likely to go down.
6
Q
Define, in terms of related goods, a complement
A
Goods that are provided together; e.g. fish and chips - if the price of potatoes goes up, fish sales are likely to go down.
7
Q
What would shift the demand curve to the left?
A
A decrease in demand.
8
Q
What should shift the demand curve to the right?
A
An increase in demand.
9
Q
What would shift the supply curve to the left?
A
A decrease in supply
10
Q
What would shift the supply curve to the right?
A
An increase in supply
11
Q
What are some causes/reasons for shifts in the supply curve?
A
> Prices of other goods, particularly substitutions and complements > Input prices > Expected future prices > Changes in the number of suppliers > Changes/improvements in technology
12
Q
Explain why the demand and supply curves take the shape that they do
A
Supply is driven by the cost of production
if the cost increases, the quantity that one is willing to supply decreases.
Demand is driven by price
if the price decreases, the amount that a consumer is willing to purchase increases, though that depends on the marginal utility.
13
Q
Define ‘consumer surplus’
A
People paying less than they were prepared to
14
Q
Define ‘producer surplus’
A
Getting more for your product than you would’ve been happy with
15
Q
Explain what would happen to the supply and demand curves if the demand for Australian grain was expected to increase over the next few years
A
Demand curve shifts to the right
Price increases
Supply increases to capture increased price
= supply curve shift to the right
= price decreases back to original state
Increasing both supply and demand results in increased quantity being sold, but for the same price.
16
Q
Define and explain price ceilings and their effects on the market
A
A price ceiling is the maximum legal price that a seller can charge for a product or service.
They can result in shortages (when the quantity of supply doesn’t match the demand) and black markets.
17
Q
Define and explain price floors (price support) and their effects on the market
A
A price floor is a guarenteed minimum sale price that is fixed by the government that are above equilibrium prices.
Can result in surpluses when supply is greater than the demand.
e. g. Wool floor price scheme
- demand wasn’t keeping up with supply
- caused wool stockpile
18
Q
What are the effects of taxation on supply and demand curves?
A
Taxation = incr. costs = decr. supply = incr. price = decr. demand
Shifts supply curve left (or upward).
19
Q
Explain what is meant by “the price elasticity of demand”
A
The % change in the quantity demanded of a good divided by % change in its price
It is essentially a measure of how sensitive the product is to changes in price affecting demand.
Important for:
> Projecting revenue
> It has an impact on taxation
> Has an impact on economic welfare
20
Q
What are some factors that influence the elasticity of demand?
A
> The number of substitute goods/services
The proportion of a consumer’s income being spent on the good/service
The amount of time that has elapsed since the last change in price
Whether the good/service is a luxury or necessity
21
Q
What is the result of an increase in price with elastic demand?
A
= larger percentage decrease in the quantity demanded
* total revenue and expenditure DECREASE
22
Q
What is the result of an increase in price with inelastic demand?
A
= smaller percentage decrease in quantity demanded
* total revenue and expenditure INCREASE
23
Q
What is ‘unit elasticity’?
A
A change in price has no effect on total revenue
24
Q
What does an elastic demand curve look like?
A
A very shallow (close to horizontal) line, meaning that a shift in price (along Y axis) of one unit has a proportionally greater increase in quantity (X-axis). i.e. 1 unit price increase =»_space; 1 unit quantity increase.
25
What does an inelastic demand curve look like?
A very steep line, meaning that a shift of 1 unit in price will result in a proportionally smaller increase in quantity; i.e. 1 unit price increase =
26
Give an example of a completely inelastic good and explain your reasoning
Insulin; demand won't change despite a change in price because there's no alternative.
27
Know how to depict a change in revenue with a price elasticity curve
show change in unit price on the y axis
show change in unit number on the x axis
e.g. going from $5/unit to $4/unit, and selling 6 units to 6.5 units with relatively inelastic demand
revenue decr = ($5 - $4) * 6 = $6
revenue gain = (6.5 - 6) * $4 = $2
net revenue loss = $6 - $2 = $4
28
What are the major decisions which are relevant for ALL economic activities, and why are they significant?
- Who is affected (positively and negatively)
- What are the benefits?
- What are the risks?
- What are the opportunity costs?
- What to produce
- How to produce it
- For whom to produce it
All need to be considered to maximize resource use efficiency
29
Explain the meaning of social welfare
Managing resources in a way that benefits the majority of society (as a whole)
30
Define and explain a "market economy"
A market economy relies on supply and demand to determine resource allocation
> Private entrepreneurs that own/control resources make decisions about the use of those resources and the production of goods/services in response to the messages they receive from markets, the cost of inputs, and the value of outputs.
31
Define and explain a "mixed economy"
A market economy with some degree of government intervention, such as in Australia.
Supply and demand still plays a role
32
Define and explain a "planned economy"
Major government intervention
Minimal role of supply and demand.
e.g. N Korea, China, Cuba
33
Why is it that price tends to act to ration goods and services?
People only have so much money, meaning they can only buy a certain amount of things. This means that price plays a significant role in what, and how much or something they buy, which in turn dictates demand.
34
Explain 'scarcity' in the economic sense
Human wants are greater than the resources available to satisfy those wants.
Resources have to be allocated to those wants that are deemed the most important and achievable.
Wants are not just physical resources - time is a scarce resource.
35
Define and explain opportunity cost
The value of the alternative product/resource/option that is foregone.
36
Define and explain 'market failure', it's three key areas, and the government interventions to address them.
> A break-down in the supply-demand concept
> Where supply and demand are out of equilibrium
> Occurs when the market does not allocate and/or use scarce resources effectively.
There are 3 key areas with respect to market failure:
INEFFICIENCY IN RESOURCE ALLOCATION
> Property rights and obligations being inadequately specified, allocated, or enforced
> Positive and negative externalities that arise due to an absence of appropriately specified, monitored and/or enforced property rights and obligations.
> Public goods
> Monopoly or other restrictive markets
> Missing markets (fail to establish a way to meet consumer desires)
> Discount rate (reduces the present value of future expected benefits and future expected costs)
*** Examples of government intervention:
> land- and water-use regulation
> governments directly providing or subsidising the provision of certain goods/services (e.g. police, national defense, health, education)
> social discount rates
> trade practices legislation
INEQUALITY (SOCIALLY UNACCEPTABLE DISTRIBUTIONS OF INCOME AND WEALTH)
> Resolved by government intervention to redistribute incomes and wealth through income and wealth taxation policies
INSTABILITY (DUE TO INFLATION, UNEMPLOYMENT, LOW ECONOMIC GROWTH)
Government intervention:
> monetary policies (e.g. changes in interest rates)
> fiscal policies (e.g. changes in taxation and govt. spending)
> incomes policies
37
What is the difference between micro- and macro-economics?
```
MICROECONOMICS:
The study of economics at the individual, group, or company level
> individuals
> households
> companies
> industries
```
```
MACROECONOMICS:
The study of the economy as a whole.
> national
> international
> policy
> unemployment rates
> economic growth
> government borrowing/lending
```
38
In terms of economics, what are resources described as?
Different types of capital; e.g. natural resource capital (land), human capital (labour), human-produced capital/infrastructure (capital),
39
In terms of economics, what are inputs?
Everything that goes in to producing something, incl. labour, infrastructure use, etc.
40
Define economic equity
The fairness with which the costs and benefits of a decision are distributed amongst society.
41
What are the benefits of a market/mixed economy?
> Decentralizes power - gives less scope for coercion or corruption
> Encourages innovation through profit-seeking competition
42
Explain the Pareto Principle
Optimal allocation of resources occurs when no one can be made better off without someone else becoming worse off.
43
Explain a Pareto Improvement
Someone gaining additional satisfaction from resource allocation without it negatively affecting someone elses existing level of satisfaction
44
Explain the Kaldor-Hicks Principle
Changes in resource allocation/use create social welfare improvement if those who are made better off from the change are able to compensate those who are made worse off, and still remain (net) better off.
e.g. tax changes for high income earners = overall social improvement
45
Define/explain 'utilitarian ethics'
> Decisions are made solely on the basis of their outcomes
| > The greatest good for the greatest number of people
46
Define/explain 'rights ethics'
> Decisions are made on the basis of respect for, and protection of individual human rights
47
Define/explain 'justice ethics'
> Decision makers imposing and enforcing rules fairly and impartially
48
Define/explain 'positive economics'
Analysis of what is
49
Define/explain 'normative economics'
Analysis of what should be (in an ideal world)
50
Define/explain economic efficiency
Satisfying as many people's needs/wants as possible with the limited (scarce) resources available.
Intertemporal
Interpersonal
51
What are the 4 types of industry structure? Explain
```
MONOPOLY/MONOPSONY
> Monopoly = 1 seller
> Monopsony = 1 buyer
> In either situation, the single entity has a significant amount of power to influence market prices and resource use
e.g.
Sellers: Airports
Buyers: 'Tasmanian Vegetable Growers'
```
OLIGOPOLY
> More than a monopoly/duopoly, but still relatively few players
> Reasonable number of firms producing similar goods/services
> Strong degree of ability to influence
> Actions by a firm in the industry will affect the other firms
e.g.
Sellers: Supermarkets, banks, machinery firms
Buyers: processors, supermarkets
MONOPOLISTIC COMPETITION
> Many firms, but one or more try to gain influence in the market by differentiating their product(s) from their competitors
e.g.
Sellers: stud breeders, dentists, financial planners
Buyers: restaurants, buying groups
PERFECT COMPETITION
> Many producers and consumers
> Homogeneous products
> No enterprise is large enough to influence market prices or how other enterprises operate
> Getting in to and out of the industry isn't too costly
Sellers: milk producers, grain producers
Buyers: consumers
52
What factors drive demand?
```
> Price of substitutes
> Price of complements
> Consumer income
> Taste and preferences
> Population demographic
```
*** Demand is NOT a function of the good's own price
53
Define 'marginal cost'
The cost of producing an additional unit of output
54
To produce or not to produce:
If price received > average total costs:
If average total costs > price > average variable costs:
If average variable costs > price:
Explain why you made the choices you did
If price received > average total costs:
Produce and make a profit
If average total costs > price > average variable costs:
Not enough to cover all costs, but enough to cover variable costs.
Better to produce and minimize losses
If average variable costs > price
Don't produce and limit costs to fixed costs
Fixed costs need to be paid whether you produce or not in any given year, and are therefore irrelevant to the production decision. For this reason, it is better to concentrate on variable costs, and if you can cover those, you should produce, and if not, then don't produce.
55
If your fixed costs are $10,000, your total variable costs are $8,000, and your total revenue is $12,000, should you produce or not?
Fixed costs are $10,000; payable whether you produce or not.
If you produce, the total costs are $18,000, and the revenue is $12,000. This works out to -$6,000, which is $4,000 better off than you would be if you didn't produce.
56
Explain a bit about property rights re. res nullius resources
res nullius = absence of property rights = open access
e.g. atmosphere, rainwater, sunlight
Creates significant challenges for management, because the responsibilities for management aren't clear. This can lead to a 'tragedy of the commons' situation, where the lack of responsibility or incentive for resource conservation leads to the degradation or depletion of a resource. The atmosphere is a good example of this, though in terms of agriculture, rainfall harvesting might be a more applicable example. Rainfall is an open access resource, however, it's harvesting can have far-reaching implications that have negative impacts on a considerable number of people (e.g. reduced environmental flows, decreased water allowances because of it).
57
Define and explain "eco efficiency"
Generating as much output as possible from using as few resources as possible while generating the least amount of waste and pollution possible.
58
Define and explain "negative externalities"
A cost that is incurred by a third party as the result of an economic transaction.
59
How would you explain/depict a substitute effect on supply demand with an example?
Beef and lamb:
| An incr. in beef price = an incr. in supply = (potential) decr. in lamb supply = incr. lamb demand = incr. lamb price
60
Define/explain 'sustainable development'
Progress which meets the needs of the present without compromising the ability of future generations to meet their own needs.
61
Define/explain 'weak sustainability'
maintenance of the total capital by the depletion of natural capital in order to accumulate manufactured capital with the assumption that the stocks are highly substitutable between each other.
62
Define/explain 'strong sustainability'
maintenance of the stock of natural and man-made capital on the assumption that they are complements rather than substitutes in most production functions.
63
What are some attributes of/ways of achieving sustainability?
Sustainability relies on the moral choice of accepting intertemporal equity as an overriding ethic.
> Significantly reduced rates of non-renewable resource consumption
> Significantly increased reliance on the sustainable use of renewable resources
> Significantly reduced rates of creating damaging wastes and non-reusable goods
> Integration of ecological and social goals into economic (and other) policies and techniques
64
Describe the precautionary principle
Pretty much how it sounds - taking a precautionary approach to a decision because one is unsure about whether it is the best choice (now and in the future) based on limited current knowledge of ecological processes.
Puts the burden of proof on the operator/producer to show that the practice in question is not harmful to the operators land, water, vegetation, fauna, or the resources of other landholders, etc
65
Explain 'functional value'
How fit-for-purpose something is; i.e. how well it serves a recognisable purpose.
A functioning tractor is far more valuable to a farmer who needs to sow a crop than one only good for scrap.
Functional value is relative to the purpose of the good/service and how important it is.
66
Explain 'aesthetic value'
value associated with beauty and/or intrinsic attributes
| product differentiation often incorporates aesthetic value (how pleasing something is to look at).
67
Explain 'moral value'
Incorporates judgement on rightness, justice, virtue, etc.
e.g. improved animal welfare, innovative water-use practices, regenerative agriculture practices, reduced carbon emissions, etc
68
Explain 'moral considerability' and 'moral significance'
Essentially a judgement on whether something is worthy of moral consideration. A good example is that of sentient animals. Moral significance determines the level of moral consideration something is worthy of.
69
Explain the difference between direct and indirect values
Primary (direct) and secondary (indirect) values are determined by whether they benefit humans directly or indirectly, and are consummable or not.
e.g.
Direct = functional value, e.g. food
Indirect = moral and aesthetic values, e.g. scenery
70
What is the role of policy (in regards to economics)?
To control or modify market forces
71
What are some criteria used to judge policy alternatives
EFFECTIVENESS - how likely is it that the problem/issue will be solved after the policy has been implemented
EFFICIENCY - what benefits will be achieved, and at what cost
EQUITY - how fairly distributed will the costs and benefits be (intertemporally and interpersonally)?
FLEXIBILITY - how well can it adapt to changing circumstances (technology, social attitudes, etc)
ENFORCEABILITY - how well/easily can it be enforced?
ACCEPTABILITY - within existing markets and political and institutional systems
COMPATIBILITY - with the existing policies and objectives
72
Explain how governments can apply price incentives (government sponsored price incentives).
Governments can apply taxes
> can be an incentive or disincentive (i.e. a reward for producing more or less)
> can be used to correct for discrepancies between private and social costs
> e.g. GST = tax on consumption
Governments can provide subsidies/grants
> to correct for discrepancies between private and social benefits
73
Explain what 'command and control' policies are
Government applying direct controls or standards, such as resource use and zoning regulations, minimum fish sizes allowed to be caught, minimum codes of practice, etc
74
Explain the policy implementation process
1. Proposal
- government seeks public feedback and undertakes consultation
2. Adoption
3. Implementation
4. Review
75
Be able to provide an example of government failure and possible reasons for why policies and regulations fail
The handling of poor animal welfare practices (cattle beating) in Indonesia (banning live export) caused a huge negative effect on Australian cattlemen and the Australian beef market.
Laws and regulations can fail because they were implemented with incomplete knowledge, are inadequately enforced, are inequitable (i.e. produce an unfair share of benefits and costs between members/groups of society), etc.
76
Define eco-efficiency
The concept of creating more goods/services while using fewer resources and creating less waste and pollution
77
Define eco-effectiveness
A strategy for business growth and prosperity that generates increased ecological, social, and economic value
78
Explain what environmental management systems are
What they sound like - systems in place to monitor environmental impact and implement changes to improve outcomes
79
Explain what is meant by corporate social obligation
The obligation of a business to meet its legal and economic responsibilities
80
Explain what is meant by corporate social responsiveness
The ability of a business to react to changing societal conditions as they're presented
81
Explain what is meant by corporate social responsibility
To responsibility or a business to go a step beyond compliance or their economic and legal oblications; to integrate social and environmental concerns into their operations and interactions with their stakeholders on a voluntary basis; to pursue goals that are held to be beneficial for society; to be proactive.
> Can be used as a marketing point
82
Explain the four P's of the marketing mix
- think about how the P's influence the marketing of a good
PRODUCT
> Convenience products
purchased frequently/immediately with minimum comparison
e.g. staples, impulse items, things needed in an emergency situation
> Shopping products
purchased on comparative suitability (price, functional value, quality, style, etc)
e.g. clothes, shoes, etc
> Specialty products
purchased with special purchase effort (significant research)
e.g. new car, machinery, etc
> Unsought products
things that customers didn't even know existed yet
> Business to business products
Usually larger scale, more routine
PRICE
The price of a product is going to be influenced by the cost of production, as well as the risk of product failure and weighted against the sacrificed opportunity cost of spending the funds.
It will also be consumer driven, mainly by the perceived value
- what it's worth once purchased (acquisition value)
- whether the price was discounted (reference price)(discount = incr. value)
- what they actually paid (transaction value)
- how fit for purpose it is (value in use)
- whether it can make money (value in use)
PLACE (distribution/logistics)
The point of exchange/transaction
```
PROMOTION (marketing)
Advertising - how/where
Personal selling
Sales promotion
Public relations, especially in terms of return customers
```
83
In terms of product differentiation, what is meant by an 'augmented product'?
A product with something that sets it apart from the competition (i.e. a product that is differentiated from possible substitutions - colour, features, branding, durability, etc.
84
Describe the life cycle/development of a product
```
Goes through 5 stages
> Development
> Introduction
> Growth
> Maturation
> Decline
```
Remember the graph - volume of product on the Y axis, time on the X axis. Volume starts out low, towards end of development, slowly increases, peaks by maturation, then goes down in decline stage.
85
Define 3 pricing strategies
> Competitor based pricing
> Market place pricing
> Cost orientated pricing
Their meanings are obvious
86
Define a commodity
> A product produced without any specific knowedge of the future buyer or their requirements.
> Had little or no processing
> Unbranded
> Can experience considerable price fluctuations
87
What is the purpose of differentiation, and what are some ways of achieving it?
To increase market share
To access new/niche markets
Increasing differentiation = incr. monopolisation
Could provide a service alongside a product
Branding
Value-adding
Could be product- or consumer-focused
88
Explain the Theodore Levitt model in terms of differentiated products
> The differentiated aspects of a product become expected, meaning you need to keep adapting/adding features to keep ahead.
> You can only ever really be 1 year ahead of competitors before they copy/adapt
*** You must continually improve to have/maintain points of differentiation ***
Year 1: expected product
Year 2: expected product + delivery
Year 3: expected product + delivery + warranty
89
Define/explain 'value adding'
The modification of an existing product or the transformation of raw materials into manufactured products.
> Adding value generally refers to offerring lower prices than the competitors for equivelent benefits, or
> Providing unique benefits that more than offset the higher price.
90
Explain 'Porter's Five Forces model'
Factors/forces that have an effect on what we're producing
> Firm/industry in the middle
> Bargaining power of suppliers (timing of delivery, cost, etc)
> Bargaining power of consumers (alternative choices, price bargaining power, etc)
> Threat of substitutes
> Threat of new entrants/competitors
91
Describe some components of Porter's Strategic Management framework (to gain a competitive advantage)
> Cost leadership
- becoming the lower/lowest cost producer in an industry (e.g. McDonalds, IKEA)
- utilises economies of scale
> Product differentiation
- incr. differentiation = decr. threat of new entrants/competitors
- incr. differentiation = decr. threat of substitutes
- incr. differentiation = decr. consumer bargaining power (incr. monopoly)
> Focus on niche markets
- targeted cost leadership
- boutique differentiation
92
What are the three growth and market share strategies?
INTENSIVE GROWTH
> expanding market share with existing products (market penetration)
> developing new markets for existing products (market development)
> developing new products (product development)
INTEGRATIVE GROWTH
> Taking over one or more suppliers, vertical integration (backward integration)
> expansion toward the consumer (forward integration)
> buying out competitors (horizontal integration)
DIVERSIFICATION GROWTH
> applying existing expertise and economies of scale to an entirely new market (concentric diversification)
> producing a new, non-related product using a non-related production process (horizontal diversification)
> Establish a new business not related to existing production technology or existing markets (conglomerate diversification)
NICHE MARKET FOCUS
COST LEADERSHIP
93
What are some contributors to value?
```
Price
Exclusivity
Product quality (safety, nutrition, sensory, integrity, etc)
Morals
Ethics
```
94
```
Define the following in regards to food products:
> 'search attributes'
> 'experience attributes'
> 'credence attributes'
> 'intrinsic attributes'
> 'extrinsic attributes'
```
SEARCH ATTRIBUTES:
> attributes which the consumer can determine by inspection before purchase
> e.g. colour, shape, quality (freshness, marbling, etc)
EXPERIENCE ATTRIBUTES
> attributes which the consumer can determine after purchase
> e.g. taste, quality (tenderness, flavour, aroma)
CREDENCE ATTRIBUTES
> those attributes which can't be determined before purchase or even after consumption.
> e.g. method of production (organic vs conventional, GM, animal welfare claims, use of renewable energy, etc)
INTRINSIC ATTRIBUTES
> physical product features that can't be changed without changing the tangible product
> e.g.
- product safety and health (pathogens, toxins, foreign objects)
- sensory properties
- shelf life
- nutritional value
- product reliability and convenience
EXTRINSIC ATTRIBUTES
> production system attributes (e.g. organic, animal welfare, etc) and characteristics which are not part of the physical product
> e.g. price, brand, country of origin
95
*** Explain Juran's Quality Trilogy
QUALITY PLANNING
- understanding consumer wants and required benefits
- planning designing product specifications to meet those demands and required benefits
- develop systems and processes for the organisation to produce such products
- implementing plans
QUALITY IMPROVEMENT
- define what's limiting quality, find the cause, fix it
- monitoring of, and adapting to changing consumer requirements
- making changes in product attributes/performance
- making changes in the methods of production
- applying new technologies
QUALITY CONTROL
- to maintain the quality improvement (i.e. to hold the gains)
- setting standards for all inputs, production, and product outputs
- conducting performance assessments against standards
- determining problems
- implementing corrections
96
Explain quality assurance
> Ensuring consistency to customers
> Internal and external audits
> Examples:
- Flockcare
- Cattlecare
- Coles & Woolies have their own
- HACCP (Hazard Analysis and Critical Control Point systems)
97
Define HACCP and explain the 12 stages for development and introduction
HACCP = Hazard Analysis and Critical Control Point systems
> A food safety management system
1. Assemble a HACCP team
2. Develop a description of the product and its distribution
3. Identify the intended product use and customer groups
4. Development of flow diagrams
5. On-site varification of flow diagram
- -----
6. Conduct a hazard and risk analysis of the production/processing system
7. Critical control points
8. Critical limits
9. Establish the monitoring system
10. Establish a corrective action plan
11. Establish verification procedures
12. Establish record keeping and documentation systems
98
What does "ISO" stand for in ISO 22000?
International Standards Organisation
99
Explain 'derived demand' in relationship to industrial market characteristics
Organisational demand ultimately originates from the demand for consumer goods; e.g. the demand for leather (for shoes) driven by the demand for shoes.
> similar to effect of complements
100
Who are the participants in the business buying process?
> Gatekeepers
- Control the flow of information to others within the organisation.
- e.g. receptionist
> Deciders
- People within the organisation with the authority to approve purchases
> Buyers
- People within the organisation with the formal authority to select suppliers and negotiate terms
> Influencers
- Technical personnel who evaluate alternatives
> Users
- The end user/consumer
101
What are the major influences on business buying behavior?
> Environmental
- level of primary demand, economic outlook, cost of money, supply conditions, competitive developments, political and regulatory developments
- what it costs to make that purchase at that time
> Organisational
- objectives, policies, procedures, structure, systems
> Interpersonal
- authority, status, persuasiveness, empathy
- particularly at the gatekeeper stage
> Individual
- age, education, job position, personality, presentation, attitude to risk
102
Differences in the buying steps between businesses and consumers
> Problem recognition
B: anticipates and plans for purchases on a routine basis
C: reacts to needs when they arise
> General need description
B: extensive, objective cost benefit analysis
C: limited analysis of benefits
> Product specification
B: precise, technical description using techniques such as value analysis
C: description more in terms of benefits
> Information/supplier search
B: extensive search that extends to the search for supplier
C: limited search, geographically and in terms of sources
> Proposal solicitation
B: formal, such as a tender process if large volumes or values are required
C: much less formal - can be verbal
> Supplier selection
B: made after extensive analysis of objective information
C: limited analysis, subjective and anecdotal information influencing the decision
> Order routine specification
B: routine calculation of re-order points as well as time and place of delivery
C: not routine
> Post purchase performance review
B: extensive comparison made and feedback given, concern with quality management at the source
C: little basis for comparison, not much feedback unless unsatisfied
103
Define 'stakeholders'
external groups/individuals that are affected by the organisations decisions and actions, and who can in turn influence the decisions and actions of the organisation.
104
Describe the strategic triangle
The organisation
The competitors
The customers
105
Describe the strategic diamond
The organisation
The competitors
The customers
The suppliers
106
What constitutes a sustainable comparative advantage
skills, knowledge, attitudes, culture, networks, etc that enable an organisation to keep its advantage despite competitors' actions or changes in the industry
107
Describe and explain the general management environment
```
--- TOTAL MANAGEMENT ENVIRONMENT ---
> INTERNAL (how the business functions)
- Management style
- Culture
- Staff
- Structure
- Strategy
- Systems of management
> EXTERNAL
- General
- Things that are continually changing, that we can't alter, and which provide opportunities and threats
- Economic
- Political
- Technological
- Social/cultural/demographic
- Natural environment
- Specific
- Customers
- Suppliers
- Competitors
```
108
Describe the difference between free and fair trade
Free trade agreements reduce government intervention on the importing and exporting of goods.
Fair trade, which includes the majority of international trade, has some level of government intervention to ensure that exports receive an adequate share of foreign markets, and imports are controlled to protect the domestic market
