Final Exam Flashcards
1
Q
What are the 9 components of the business model canvas?
A
Value proposition, channels, customer relationships, customer segments, revenue streams, key partnerships, key activities, key resources, cost structure
2
Q
fixed cost vs variable cost structure
A
fixed: cost remains the same despite production volume change
variable: cost changes with production volume change
3
Q
economies of scope vs economies of scale
A
scope: cost advantages that a company receives due to a large range of operations
scale: cost advantages that a company receives due to increased sales
4
Q
generic strategies
A
cost leadership and differentiation
5
Q
cost leadership (low cost provider)
A
striving to achieve lower overall costs than rivals and appealing to a broad range of customer usually by underpricing rivals
6
Q
focused low cost
A
concentrating on a narrow buyer market (niche) and outcompeting rivals by having lower costs and being able to serve at a lower price
7
Q
broad differentiation
A
seeking to differentiate product or service from rivals in ways that would appeal to a broad spectrum of buyers
8
Q
focused differentiation
A
seeking to differentiate product or service from rivals while concentrating in a narrow market niche
9
Q
best cost strategy
A
hybrid of differentiation and cost leadership. companies aim to target a mass of value conscious consumers looking for a good to very good product at an economic price
10
Q
arenas
A
tell where a firm will be active and with how much emphasis
11
Q
economic logic
A
how a firm makes money above its cost of capital
12
Q
ethics vs compliance
A
ethics: principles or standards of behavior to which we hold ourselves
legal compliance: the baseline min compliance with laws and regulations
13
Q
fraud triangle and components
A
pressure, opportunity, and rationalization
14
Q
expected vs standard practice
A
“everyone does this”
15
Q
materiality
A
“there’s no negative material impact so does it really hurt anyone”
16
Q
locus of responsibility
A
“i dont want to do this, but im just following orders”
17
Q
locus of loyalty
A
“ik this isnt fair but i dont want to hurt my team/company”
18
Q
giving voice to values (GVV) seven pillars
A
values: find common ground based on values shared
purpose: what is important to me?
choice: do i have a choice in voicing and acting on my own values
normalization: are value conflicts the exception or are they normal in our lives
self knowledge and alignment: am i the kind of person who can effectively voice and act on my values
voice: how can i find my voice to act on my own values?
reasons and rationalization: what are typical objections or pushback i may get when i try to voice or act on my own values
19
Q
seperation fallacy
A
the tendency to separate business cases from ethical cases
20
Q
integration thesis
A
conducting ourselves and our business to benefit others as if we would have a long term relationship rather than a single transaction
21
Q
shareholder theory
A
a company’s sole purpose is to benefit the shareholders who want more profits
22
Q
stakeholder theory
A
firm should create value for all stakeholders not just maximize profit– Ed Freeman
23
Q
stakeholders def
A
individuals or groups outside the business who have an interest in how it brings products or services to the market for profit
24
Q
examples of stakeholders
A
customers, suppliers, employees, investors, communities, etc
25
bethany mclean-- what does business do right
creates socially and individually beneficial products
make profits and products
driver of a better world
create jobs
26
tom gardner-- what wins in the marketplace
taking responsibility of the well being of all stakeholders
27
impact of stock options on ceos and companies
try to maximize share price
stock options are valuable
executives could buy future stock at current prices = executives incentivized to maximize profit
28
short term vs long term
short term: wall street incentivizes firms to focus on quarterly profits
long term: everyone will do better if you look out for all stakeholders
29
corporate social responsibility
practice where a business views itself within a broader context as a member of society with certain implicit social obligations
companies engage in ethical practices beyond legal standards
values all stakeholders, not just shareholders
30
triple bottom line
social: employee well-being, fair trade, community stakeholder
economic: revenue, growth, costs
environmental: land use, carbon footprint, waste
31
greenwashing
carrying out superficial CSR efforts to cover up systematic ethics problems
publicity scheme
32
shareholder primacy
the sole responsibility of a business is to increase its profits
33
esg
environmental social governance
34
incremental innovation
making small scale improvements to existing services, products, processes, and business models
35
disruptive innovation
when a new product or service, drawing on new technology, engages the existing market
36
architectural innovation
when new products or services use existing technology to create new markets and or new consumers who didnt purchase that item before
37
radical innovation
when new products or services are created using new technology that opens up new markets
38
objects of innovation
product, service, process, business model
39
product (innovation)
development of a new product, improvement in the performance of an existing product, or a new feature to an existing product
40
service (innovation)
introducing new services or improving the delivery of existing services, enhances utility of an existing offering
41
process (innovation)
internal benefits such as reduced production costs which lead to increased revenue
42
business model (innovation)
creating, adapting, or fundamentally changing the way a company delivers value to its customers and/or generates revenue
43
design thinking
empathize: develop a deep understanding of the challenge
define: clearly articulate the problem you want to solve
ideate: brainstorm potential solutions and develop one
prototype: design a prototype to test all or parts of your solution
test: engage in a continuous short-cycle innovation process to continually improve your design
44
active interia
tendency to follow established patterns of behavior even when the competitive environment shifts
45
strategic frames become
blinders, mindsets of how managers see the world are not open to new opportunities
46
processes harden into
routines, prevent new ways of working
47
relationships become
shackles, when conditions shift company's relationships prevent them from being flexible
48
values harden into
dogmas, rigid rules and regulations thats legitimacy comes from precedent
49
marketing concept
satisfy customer needs while meeting organizational goals of profit and growth
50
target market
specific group of customers who are very interested in your product, have access to it, and the means to buy it
51
market segments
groups of potential customers with common characteristics that influence their buying decisions
52
demographic segmentation
divides groups into age, marital status, gender, ethnic background, income, occupation, and education
53
geographic segmentation
divides market based on region, climate, and population density
54
behavioral segmentation
divides consumers by variables as attitude, behavior, and status
55
psychographic segmentation
classifies consumers based on individual lifestyles that reflect their interests, activities, and values
56
marketing mix
product, price, place, promotion
57
product (marketing mix)
using primary and secondary data
what unique problems does your product help this segment solve?
what benefits or capabilities are critical for this segment?
What would make the ideal product for your target segment?
58
price (marketing mix)
What price(s) are your target customers willing to pay for your product?
How much is too expensive? How much is too cheap?
59
place (marketing mix)
Where does this segment look or shop for your product?
What is the best way to get your product to your target customers?
60
promotion (marketing mix)
What are the best ways to get your target segment’s attention?
What do you want this segment to remember about your product?
61
primary data
newly collected info that addresses questions curated by secondary data conclusions
62
ways to collect primary data
surveys, focus groups, personal interviews
63
secondary data
information already collected, by the organization or by other means, that pertains to the target market
64
brand equity
added value generated by favorable customer experiences with a product
65
private branding
private labeling, company makes a product and sells it to a retailer who resells it under its own name
66
generic branding
maker attaches no branding information to a product except a description of its contents (brand name vs generic)
67
manufacturer branding
a company sells 1+ products under its own brand names
68
multiproduct-branding
sells many products under one brand; company assigns different brand names to products covering different segments of the market
69
brands (def)
“an intangible asset” that is intended to create “distinctive images and associations in the minds of stakeholders, thereby generating econ benefits/values”
70
managerial vs financial accounting
managerial: provides internal reports used by managers to evaluate current and future operations
financial: external reports used by outsiders to assess financial strength
71
annual report
yearly document that discusses firm's financial status
discusses firms activities for the past year and prospects for the future
balance sheet, income statement, cash flow statement
72
accounting equation
assets - liabilities = owner's equity
73
balance sheet
summarizes firm's financial position at a specific point in time
74
assets
tangible or intangible, things of value owned by firm
75
current assets
assets that can be converted into cash within the next year, provide funds to pay current bills
76
current asset examples
cash, marketable securities, accounts receivable, notes receivable, inventory
77
fixed assets
long term assets used by a firm for more than a year
ex: machinery, equipment, land, buildings
78
liabilities
debts the firm owes its creditors
79
current liabilities
short term claims that are due within a year of the balance sheet due date
80
current liability examples
accounts payable, notes payable, accrued expenses, income taxes payable, current portion of long term debt
81
long term liabilities
due more than one year after balance sheet due date
ex. bank loans, mortgages, bonds sold
82
owner's equity
net worth, total amount of investment in the firm minus liabilities
83
owners equity examples
owners’ investment, stock purchases, retained earnings
84
income statement
summarizes the firm’s revenues and expenses, shows total profit/loss over a period of time
85
cost of goods sold vs operating expenses
COGS: total expense of producing the firm’s goods
operating expenses: expenses from running a business that aren’t related to producing its products
86
gross sales
total dollar amount in company sales
87
net sales
amount left after deducting sales discounts and returns and allowances from gross sales
88
sales discounts
price reductions to customers for paying their bills early
89
returns and allowances
dollar amount of merchandise returned by customers due to dislike or damage
90
gross profit
amount earned less production costs but before operating expenses
91
net profit
all revenues less expenses
92
statement of cash flows
summarizes money flowing in and out of the firm (sources and uses of cash) during a period of time to identify cash flow problems and assess the firm’s financial viability
93
operating activities
cash flow related to production of firm’s goods or services
94
investment activities
cash flow related to purchase and sale of fixed assets
95
financing activities
cash flow related to debt and equity financing
96
liquidity ratios
measure firm's ability to pay short-term debts as they're due
97
current ratio
total current assets over total current liabilities
98
acid quick test
total current assets excluding inventory over total current liabilities
99
net working capital
measures firms overall liquidity-- total current assets - total current liabilities
100
profitability ratios
measure how well a firm uses its resources to generate profit and how efficiently its managed
101
net profit margin
ratio of net profit to net sales; measures percentage of each sales dollar remaining after deducting all expenses and taxes
102
return on equity (ROE)
ratio of net profit to total owners' equity; measures return owners receive on their investment in the firm
103
earnings per share (EPS)
ratio of net profit to number of shares of common stock outstanding; measures number of dollars earned by each share of stock
104
activity ratios
measure how well a firm uses its assets; reflect speed resources are converted to cash or sales
105
inventory turnover ratio
measures speed inventory moves through firm and is turned into sale
106
debt ratio
measure degree and effect of firm's use of borrowed funds to finance its operations
107
debt to equity ratio
measures relationship between amount of debt financing and amount of equity financing
total liabilites / total equity
108
accounting flow of information
A business entities undergoes activities → internal accountants codify info about the activities → external accountants (auditors) verify the info is prepared correctly → external decision makers access and use info
109
corporate finance: in flows
cash sales, owners’ investment, borrowed funds, sale of fixed assets, collection of accounts receivable
110
corporate finance: out flows
purchase of fixed assets, payment of dividends, purchase of inventory, payment of expenses
111
key activities of finance
planning, investment, financing
112
planning
preparing the financial plan, which projects revenues, expenditures, and financing needs over a given period
113
investment
investing the firm’s funds in projects and securities that provide high returns in relation to their risks
114
financing
obtaining funds for the firm’s operations and investments and seeking the best balance between debt (borrowed funds) and equity (funds raised through the sale of ownership in the business)
115
risk-return tradeoff
risk: the potential for a loss or the investment not achieving expected level of return
return: opportunity for profit
tradeoff: the higher the risk, the greater the return that is required
116
liquidity
how quickly individual/firm can quickly purchase/sell asset w/o causing drastic change in asset’s price
117
capital expenditures
investment funds in physical assets (land, machinery, building, etc)
unlike operating expenses, benefits from capital expenditures extend beyond 1 yr
paper, ink, supplies = expenses
mergers and acquisitions = capital expenditures
reason to make capital expenditures: to expand, replace or renew fixed assets, or to develop new products
118
capital budgeting
analysis of long-term projects and select those that offer the best returns while maximizing the firm’s value
119
short term expenses (operating expenses)
are outlays used to support current production and selling activities
result in current assets (ex cash and other assets (ex: accounts receivable and inventory) that can be converted into cash within a year)
120
long term expenses
typically for fixed assets
ex: capital expenditures
121
debt financing
No say in management
payment of interest and principal is a contractual obligation
stated maturity date
interest is tax deductible
122
equity financing
common stockholders have voting rights
have residual claim of income (dividends) but no obligation
no maturity date
dividends aren't tax deductible and are paid from after tax income
123
dividends
payments to stockholders from a corporation’s profits
124
retained earnings
profits that are reinvested into firm
125
SEC
1934 Act: regulate securities exchanges and authority over the dealer markets
126
accounting vs finance (principles/purpose)
accounting: communicate financial position, prepare financial statements, oriented in the past and on results. focus on rules and accuracy
finance: determine how and where to add value, analyze financial statements, oriented in the future and on projections, focus on analysis and insights
127
time value of money
idea that money in the present is worth more than money in the future due to potential for earning interest and inflation
128
discounting
finding present value based on future value
PV = FV / ((1+r)^n)
129
compounding
finding future value based on present value
FV = PV * ((1+r)^n)
130
net present value
allowed firms to compare value of investments considering different costs, returns, and time frames (goal: inflows > outflows)
131
NPV
PV cash inflows - PV cash outflows
future cash flows each occur over different times thus must be discounted individually to different present values--
sum those discounted cash flows to find NPV
132
primary market
new shares are issues and sold once
amount received from the issuer of shares goes to the company for their business expansion
securities are issued by the companies to the investors
securities are all issued at one price for all investors participating in the offering
133
secondary market
existing shares are sold and traded an unlimited number of times
amount invested by the buyer of shares goes to the seller
securities are traded between buyers and sellers which is facilitated by the stock exchange
securities are exchanged at market price
134
IPO
first time being able to sell stock on exchange
Pros:
Yields optimally high price for company
Allows you retain part of the company
Cash to yourself
Market liquidity
Makes exiting market easier
Cons:
need board of directors
- pro: looks after public interest
- con: less flexibility
disclose information to investors and SEC
135
ways to innovate (3)
configuration: behind the scenes
offering: product or service
experience: customer experience
136
price skimming
introducing a new product at a high price then lowering the price over time
- prestige created and customers may think they are getting a bargain
137
penetration pricing
offering products at lower prices with hopes of achieving a large sales volume
138
leader pricing
pricing products below normal mark up costs to attract customers to stores to increase sales volume
139
bundling
grouping two or more products together and pricing them as a single product
140
odd-even pricing
odd prices connotate a bargain, even prices connotate quality
141
Duolingo
mix element: promotion
142
Mars
mix elements: all
143
LV
mix elements: product and price
144
tesla
mix elements: price and product
145
san fran
mix elements: product and promotion
146
nike
mix elements: place, promotion
147
exploration vs exploitation
exploration: high uncertainty, focusing on new ideas, search for new opportunities, for the long term
exploitation: low uncertainty, focusing on efficiency and improvement, refining existing knowledge, for the short term
148
perpetual search trap
only focusing on exploration no focus on exploitation, no chance to grow
149
success trap
only focusing on exploitation, no chance to, susceptible to be overtaken by competitors who explore
ex. blockbuster
150
linked chain
exploring should be the search of something to do, and once that thing is found exploiting should be the growth of that thing, balance between the two is necessary
151
