1. Instructions for Name Card Be sure to stamp the correct date and correct box. Professor Pr Jan 18 2011 Francescucci Week 7 Week 10 COLLECT YOUR NAME CARD (Alpha order by last name) Be sure to ONLY stamp your own card Everyone to collect and stamp their own card Do Not Stamp the lower box. Week 13 Week 1 Week 2 Week 6 Week 3 Week 11 Week 4 Week 8 Week 12 Week 5 Week 9 1
2. Welcome to MKT 100-021Week 2 - Market analysis & planning Anthony Francescucci Assistant Professor, Marketing Please ensure all electronic devices are in “silent mode”, “vibrate mode” or “turned off” 2
11. What type of cost? Variable Variable Fixed - Operating Fixed - Operating Fixed - Capital Variable Fixed - Capital 11
12. Classifying Costs Example The Acme Coach Company produces one kind of bus. Each bus requires $60 of raw materials and components, and 6 hours of hand labour at $40/hour. The company rents the building where the buses are produced at a cost of $600/month and has an annual insurance premium of $1200/year. Additionally, the company needed to purchase a crane to lift and move components in place for assembly at a cost of $1000 and invested $2500 in tooling to turn the raw materials into components. Finally, the owner pays herself $300/month. What are Acme’s variable costs? What are Acme’s monthly fixed operating costs? What were Acme’s capital (one-time) costs? What are Acme’s yearly fixed operating costs? 12
13. Classifying Costs Example Variable costs: $ 60 Raw materials and components + $240 Labour (6 hours @ $40/hour) $300 Total Variable Cost per Unit Monthly fixed operating costs: $600 Rent $100 Insurance ($1200 / 12 months) + $300 Salary $1000 Total Fixed Costs per Month Capital (one-time) costs: $1000 Crane + $2500 Tooling $3500 Total Capital (one-time) Costs 13
14. Classifying Costs Example (Cont’d) Q: What are Acme’s yearly fixed operating costs? A: Yearly fixed operating costs: $7,200 Rent ($600/mth * 12 months) $1,200 Insurance + $3,600 Salary ($300/mth * 12 months) $12,000 Total Fixed Costs per Year 14
15. Importance to Marketers Need an understanding of which costs are variable and which fixed This distinction is crucial in forecasting the earnings generated by various changes in unit sales and thus the financial impact of proposed marketing campaigns Fundamental to understanding price and volume trade-offs Fundamental to understanding profitability 15
18. % Change New Amount Old Amount Percentage Change – Example 1 18 $400,000 + 33.3 % $300,000 100 % Old Amount $300,000 % Change New Amount Old Amount 100 % Old Amount
19. % Change New Amount Old Amount Percentage Change – Example 2 19 $150,000 -50 % $300,000 100 % Old Amount $300,000 % Change New Amountntt Old Amount 100 % Old Amount
20. Let’s look at the worksheet Metrics Mastery Worksheets 1 & 2 20
36. New communication and transportation technologies reduce transaction costs. Low labor costs and quality and on-time delivery assurance contracts make supplier attractive. Retailer/distributor “discovers” a new global source of supply. Retailer/distributor develops a trading alliance with new source. If the net effect of shifting investment and employment is a recession, then the retailing/ distribution sector will react to reduced sales by seeking more global suppliers who will reduce cost of goods sold. If they do not, competitors will, and they will gain market share. Domestic and global sources in existing trade alliances come under pressure to innovate, to reduce prices and increase services. Employment in manufacturing sectors exposed to fierce global price competition shrinks. Sectors that are insulated, such as health care, benefit from lower supply prices. Other sectors that lead the world in production and manufacturing innovation, such as pharmaceuticals, aerospace, and forest products, flourish. Domestic manufacturing output contracts as profits are lowered by global competition. Retailer/distributor profits increase and or consumer prices drop in very price-competitive markets. Retailers and shareholders reinvest profits or invest in manufacturing and services insulated from global competition or leading global competition. Demand increases generally for all goods as a result of falling prices (an income effect) and in particular for the lower priced goods (a substitution effect). New communication (the Internet) and transportation technologies (the container) reduce transaction costs. 36
38. MKT100 Manufacturer’s CapabilitiesQuality-value offering Customer service Push-pull marketing Physical delivery Process improvement Retailer’s CapabilitiesQuality-value offering Customer service Merchandising Procurement Process improvement How Good is the Fit? Marketing Mix Fit Manufacturer’s Customers Where do they want to shop? Retailer’s Customers What do they want to buy? Served Market Fit Analyzing Channels 38
70. Customers Market research firm Marketing Sales R&D Integrated freight-forwarders Design firm Logistics Production Purchasing Engineering consultants Distributors Component suppliers Functions are not good at holding together a network of organizational relationships during implementation. 70
71. Customers Market research firm Marketing Sales R&D Integrated freight-forwarders Design firm Cross-functional team Logistics Production Purchasing Engineering consultants Distributors Component suppliers A team holds itself together and its network of organizational relationships during implementation much better. 71
73. Next Week: two additional readings World Electric Vehicle (WEV) Case Can be found in module 2 – “Cases” on the online site Download cases from Module 2. It is the second case. Articles on the Wireless Industry Can be found on blackboard under “Course Info & Materials / Week 2” 73
-Increase directly in proportion to the level of sales in dollars or units sold-Change in proportion to the activity of a business-Sometimes referred to as unit-level costs since they vary with the number of units produced-Can also be referred to as Cost of Goods Sold (COGS)-Examples include: -Cost of goods sold (COGS) -Direct labour costs -Sales commission -Shipping charges -Delivery Charges -Cost of direct materials or supplies -Wages of temporary or part-time employees -Bonuses
-Stay the same regardless of sales-Fixed costs are sometimes referred to as Operating Overhead Expenses or Recurring Costs-Examples include: -Marketing related costs -Rent -Insurance -Equipment expenses -Business licenses -Salary of permanent full-time employees
-Similar to capital costs-Capital costs are the fees associated with the initial setup of a plant or project, after which there will only be recurring operational or running costs-Capital costs are one time expenses-Capital costs are fixed and are therefore independent of the level of output-Payment may be spread out over many years in financial reports and tax returns-Examples include: -Land -Real estate -Buildings -Construction -Purchase of equipment -Leasehold improvements/renovations
Percentage change is a way to express a change in a variable.It represents the relative change between the old value and the new one. It allows marketers to compare performance indicators such as revenue over different periods. In this particular case, the chart indicates the shrinking of US Newspaper Advertising Revenues and the percent change year-over-year.
