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Business Principles Training


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Business Principles Training Global Business Training Group (Hong Kong) Ltd.

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Business Principles Training

  1. 1. Business Principles Training Global Business Training Group (Hong Kong) Ltd.
  2. 2. Subject – Budgeting
  3. 3. What is a Budget? <ul><li>A budget can be: </li></ul><ul><li>1) an estimate, often itemized, of expected income and expense for a given period in the future . </li></ul><ul><li>The Consumer Electronics Division did a projected sales, expenses, and profits budget for 2010-2012 </li></ul><ul><li>2) an itemized allotment of funds for a given period: The Accounting Department’s budget is $10 million in 2010 . </li></ul><ul><li>3) the total sum of money set aside or needed for a purpose: The construction budget to build the new factory is $100 million. </li></ul>
  4. 4. Why are Budgets Important? <ul><li>Budgets provide the baseline of expected performance against which managers measure actual performance. </li></ul><ul><li>For example, </li></ul><ul><li>- The Accounting Department prepares reports every month that compare actual monthly performance to the expected budget performance. </li></ul><ul><li>- Managers must explain the variance (the amount of difference) between the two performances. </li></ul>
  5. 5. Different Budgets <ul><li>Sales Budget </li></ul><ul><li>Labor (or Salaries) Budget </li></ul><ul><li>Production Budget </li></ul><ul><li>Expense Budget </li></ul><ul><li>Capital Budget </li></ul>
  6. 6. Sales Budget <ul><li>This budget estimates the total number of units (products or services) or money value of those units that will be sold in a given future period. </li></ul>
  7. 7. Sales Budget <ul><li>For example, </li></ul><ul><ul><ul><ul><ul><li> Q1 2010 </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Budget Actual Variance </li></ul></ul></ul></ul></ul><ul><li>Sales $10 mm 9 mm (1 mm) </li></ul><ul><li>Sales are too low compared to the budget and the variance is $ -1 million. Why? (Perhaps our product prices are too high or maybe our competitors are stealing our customers.) </li></ul>
  8. 8. Labor (or Salaries) Budget <ul><li>This budget has the number and names of all the people who hold various positions in a company along with the salary budgeted for each position. </li></ul>
  9. 9. Production Budget <ul><li>This budget estimates the cost of labor, materials, and other costs required to produce the quantities of units to be sold in the sales budget </li></ul>
  10. 10. Expense Budget <ul><li>This budget estimates all the different expenses that a department may incur during a future time period. </li></ul>
  11. 11. Capital Budget <ul><li>This budget estimates the fixed assets (office furniture, computers, vehicles, equipment, tools, machinery, etc.) that a department plans to acquire during the budget period </li></ul><ul><li>The budget period is usually for a full year. The year may be broken up into quarters (Q1, Q2, etc.) or months (Jan., Feb., etc.). </li></ul>
  12. 12. Budgets are Control Mechanisms <ul><li>Budgets are control mechanisms that prevents company spending from going out of control </li></ul>
  13. 13. How to Make a Budget the Wrong Way? <ul><li>Make a copy of last year’s budget and submit it as the new budget </li></ul>
  14. 14. Making a Budget the Right Way <ul><li>Closely review your budgeting documents and instructions </li></ul><ul><li>Meet with your staff members and ask for their input </li></ul><ul><li>Gather data – look at previous budgets and accounting reports and then compare budgeted numbers to actual numbers </li></ul><ul><li>Apply your judgment and run the numbers </li></ul>
  15. 15. Staying on Budget <ul><li>What can you do if your actual expenditures start to exceed your budget? </li></ul><ul><li>1) Freeze discretionary expenses </li></ul><ul><li>2) Freeze or postpone hiring of non-essential employees </li></ul><ul><li>3) Postpone new products and projects </li></ul><ul><li>4) Stretch payments to suppliers </li></ul><ul><li>5) Freeze wages, lay off employees, or close facilities </li></ul>
  16. 16. Marketing and Sales Training Global Business Training Group (Hong Kong) Ltd.
  17. 17. Subject – Marketing Plan
  18. 18. Marketing Plan <ul><li>The marketing plan is a written document that contains: </li></ul><ul><li>1) product historical data </li></ul><ul><li>2) customer analysis </li></ul><ul><li>3) competitor analysis </li></ul><ul><li>4) industry analysis </li></ul><ul><li>5) marketing goals </li></ul><ul><li>6) marketing strategy </li></ul><ul><li>7) marketing mix </li></ul><ul><li>8) financial projections </li></ul>
  19. 19. Product Historical Data <ul><li>Product historical data is the most recent financial data on product sales, expenses, profits, and market share </li></ul>
  20. 20. Customer Analysis <ul><li>Who are the current and potential customers of the product or service? </li></ul><ul><li>What are their buying habits? What products are they buying? How much are their total purchases? How do they use the product? </li></ul><ul><li>Why do they buy? How do they make purchasing decisions? </li></ul><ul><li>Where do they buy the product or service? What distribution channels are they using? </li></ul>
  21. 21. Customer Analysis (2) <ul><li>When and how often do they buy? </li></ul><ul><li>What are their levels of customer satisfaction? </li></ul><ul><li>What are recent customer trends? </li></ul>
  22. 22. Customer Analysis (3) <ul><li>Customer analysis also involves analyzing: </li></ul><ul><li>1) competitors’ customers – so you can understand why these customers are buying the competitors’ products instead of your company’s </li></ul><ul><li>2) former customers- so you can understand weaknesses in your company’s product or service operations </li></ul><ul><li>3) people who have never bought the product – helps you understand how to expand the market and achieve higher sales </li></ul>
  23. 23. Competitor Analysis <ul><li>• Analyze your competitors’: </li></ul><ul><li>1) customers (who they are, why they buy, what they buy, when they buy, what are their buying habits) </li></ul><ul><li>2) supply chain (purchasing, suppliers, manufacturing, transport, distribution, and warehousing) </li></ul><ul><li>3) performance (sales, profits, market share, etc.) </li></ul><ul><li>4) marketing mix (products, pricing, promotion, place, customer relationship management) </li></ul>
  24. 24. Competitor Analysis (2) <ul><li>• Analyze your competitors’: </li></ul><ul><li>5) strengths, weaknesses, opportunities, threats (S.W.O.T. analysis) </li></ul><ul><li>6) vision (long-term ambitious aspirations) </li></ul><ul><li>7) goals and objectives (short-term and medium-term) </li></ul><ul><li>8) strategies (current and future strategies, including value proposition and product positioning) </li></ul>
  25. 25. Competitor Analysis (3) <ul><li>• Analyze your competitors’: </li></ul><ul><li>9) businesses (product markets, portfolio relatedness, geographic and vertical boundaries)) </li></ul><ul><li>10) resources (assets, skills, and capabilities) </li></ul><ul><li>11) organization (structure, systems, and processes) </li></ul>
  26. 26. Competitor Analysis (4) <ul><li>Competitor analysis may also include: </li></ul><ul><ul><li>1) sampling your competitor’s products </li></ul></ul><ul><ul><li>2) doing reverse engineering (i.e., taking your competitor’s products apart) </li></ul></ul><ul><ul><li>3) going to your competitor’s booth at trade shows </li></ul></ul><ul><ul><li>4) going on factory tours of your competitors </li></ul></ul><ul><ul><li>5) looking at your competitor’s annual reports </li></ul></ul><ul><ul><li>6) looking at competitor’s patent filings </li></ul></ul>
  27. 27. Subject - Brands
  28. 28. Brands <ul><li>A brand is an identifying symbol, word or words, name, association, or mark that distinguishes a product or company from its competitors (e.g., Marlboro, Nescafe, Channel No. 5, Big Mac, Snickers) </li></ul><ul><li>Brands often have the same name as their companies or manufacturers (e.g., Coca Cola, Rolex, Toyota, Samsung) </li></ul><ul><li>Brands are usually registered (trademarked) with a regulatory authority so they cannot be used by other parties. </li></ul>
  29. 29. Types of Brands <ul><li>Corporate brands </li></ul><ul><li> – are company names that are also brands, e.g., Coca Cola, IBM, Disney, Rolex </li></ul><ul><li>Umbrella brands (corporate parent brands) </li></ul><ul><li>– are brands names where the company brand is carried with the individual product names (e.g., Toyota Corolla, HP Laserjet) </li></ul><ul><li>Product brands (single brand identity) </li></ul><ul><li>- these are brand names separate from the corporate brand, e.g., Crest (toothpaste). Thus, Crest is not marketed with the Proctor & Gamble name. </li></ul>
  30. 30. Types of Brands (2) <ul><li>Brand extensions </li></ul><ul><li> - when a popular brand’s recognition and reputation is extended to a new type of product, e.g., (budget airline) getting into the rental car business and giving the new business the brand, thus leveraging the “easy” brand. </li></ul><ul><li>Co-brands </li></ul><ul><li>- when two independent companies cooperate to have both brands highlighted in a product, e,g., a flavor of Haagen-Daz (ice cream) has been promoted as having M & Ms (chocolate candies made by Mars). </li></ul><ul><li>Family of names brands </li></ul><ul><li>- different brands that have a common name stem. Nestle uses the names “Nescafe”, “Nesquik”, and “Nestea” for its beverages. </li></ul>
  31. 31. How to Build a Successful Brand <ul><li>Create a brand identity – the company must develop the value proposition and differentiate its brand from the competition. </li></ul><ul><li>Be consistent over time – the company must not change its advertising or selling messages frequently </li></ul><ul><li>Track the brand equity – measure the equity, (i.e., customers’ brand awareness, brand loyalty, and perception of quality) over time </li></ul>
  32. 32. How to Build a Successful Brand (2) <ul><li>Appoint people solely to monitor the status of brands – These people will be responsible for guarding the brand’s image and perceived quality. </li></ul><ul><li>Invest in the brands – do effective advertising as well as sales promotions that strengthen the brand’s image and increase brand awareness. (Avoid price promotions and discounting.). </li></ul>
  33. 33. Subject - New Product Development
  34. 34. New Product Development <ul><li>The most successful companies generate nearly 50% of their sales from new products. </li></ul><ul><li>(For example, Hewlett-Packard, obtains over 50% of its revenues from products introduced within the last two years.) </li></ul>
  35. 35. New Products <ul><li>New products are commonly divided into three categories: </li></ul><ul><ul><li>Innovative products – new-to-the-world products </li></ul></ul><ul><ul><li>New category entries – the product category already exists but the firm is just entering it, e.g., Nike entering the sporting goods business </li></ul></ul><ul><ul><li>Additions to product lines – new variations of existing products already marketed by the company, e.g., new flavors, colors, options, technical variations </li></ul></ul>
  36. 36. New Product Success Factors <ul><li>Developing a superior, differentiated product, with unique benefits and superior value to the customer </li></ul><ul><li>Having a strong market orientation throughout the process, i.e., a thorough understanding of target customers, likely competitors, and the external environment </li></ul>
  37. 37. New Product Success Factors <ul><li>Sharp product definition </li></ul><ul><li>- specifying the benefits to be delivered to target customers </li></ul><ul><li> - having a basic idea how the product will be positioned </li></ul><ul><li> - finalizing the features and other product characteristics </li></ul>
  38. 38. New Product Success Factors <ul><li>Having the appropriate organizational structure and philosophy </li></ul><ul><li>- having cooperative inter-functional teams and strong support from top management </li></ul><ul><li>- having an entrepreneurial culture that encourages risk taking and the open exchange of ideas </li></ul>
  39. 39. New Product Success Factors <ul><li>Careful launch planning - the company must have a good marketing plan for introducing the new product to the market </li></ul><ul><li>Fast time-to-market – the company must reduce the time as much as possible from the original product concept to the launch. </li></ul>
  40. 40. New Product Development Steps <ul><li>Opportunity identification – the company decides which markets to enter </li></ul><ul><li>Design - the company designs the product based on customer needs </li></ul><ul><li>Product testing – the product is tested with targeted customers and product changes are made </li></ul><ul><li>Test marketing – the company markets the product in a limited number of markets </li></ul><ul><li>Introduction – the product is marketed nationally </li></ul>
  41. 41. Subject - Customer Relationship Management
  42. 42. Customer Relationship Management Model <ul><li>Create a customer database </li></ul><ul><li>Analyze the database </li></ul><ul><li>Select target customers </li></ul><ul><li>Develop relationship programs with target customers </li></ul><ul><li>Measure the results of the CRM program </li></ul>
  43. 43. Create a Customer Database <ul><li>The core of a CRM program is a customer database, sometimes referred to as a CIF (customer information file). </li></ul><ul><li>The basic idea behind a CRM program is to assess the value of each customer in the CIF and then to develop relationship programs that will be customized both in content and intensity </li></ul>
  44. 44. CIF (Customer Information File) <ul><li>Content: </li></ul><ul><li>Customer descriptors (company demographics, contact names, titles, addresses, and numbers) </li></ul><ul><li>Purchase history (the customer’s purchase history, i.e., products bought, prices paid, channels utilized) </li></ul><ul><li>Contact history – every contact with the customer (sales calls, customer complaints, etc.) </li></ul><ul><li>Response information – how customer has responded to prior direct-marketing programs and promotional activities </li></ul><ul><li>Value of the customer – an estimate of the future monetary value (profitability) of the customer to the company </li></ul>
  45. 45. Analyze the Database <ul><li>Identify: </li></ul><ul><li>- Customer targets </li></ul><ul><li>- Purchasing trends </li></ul><ul><li>- Customer profitability </li></ul>
  46. 46. Customer Targets <ul><li>Decide </li></ul><ul><li>1) which customers are worth keeping (look at their purchase history and current and future expected profitability) </li></ul><ul><li>2) how much money to spend trying to keep them </li></ul>
  47. 47. Relationship Programs <ul><li>Customer service - offering levels of customer service that your competitors cannot match. This high level of customer service goes beyond customer expectations and differentiates your product from the competition. </li></ul><ul><li>Loyalty programs – encourage repeat purchasing through a formal enrollment process and the awarding of benefits, e.g., frequent flyer programs </li></ul>
  48. 48. Relationship Programs (2) <ul><li>Mass customization – a marketing process by which a company develops a system so that the product can be customized to each customer’s specifications. This way, the customer sees the company as providing a product or service tailored to his or her needs. </li></ul><ul><li>Customer value management – offering the customer a higher level of perceived value at the right price compared to competition </li></ul>
  49. 49. Relationship Programs (3) <ul><li>Community building – creating a web-based community (i.e., a group of customers who share information online between themselves and the company about their experiences with the product or service) </li></ul><ul><li>These communities (user groups): </li></ul><ul><li>a) can be sponsored by the company or formed independently </li></ul><ul><li>b) offer opportunities for strengthening the brand and creating long-term relationships between the company and customers. </li></ul>
  50. 50. Finance, Investments, and Entrepreneurship Training Global Business Training Group (Hong Kong) Ltd.
  51. 51. Subject - Financial Statement Analysis
  52. 52. Financial Statement Analysis <ul><li>When you do financial statement analysis, you analyze a company’s: </li></ul><ul><li>1) Balance Sheet </li></ul><ul><li>2) Income Statement </li></ul><ul><li>3) Cash Flow Statement </li></ul><ul><li>Balance Sheet - summarizes the assets, liabilities, and equity of a business at a moment of time, usually the end of a month, quarter, or year </li></ul><ul><li>Income Statement – summarizes the revenues, expenses, and profits of a business over a period of time, usually a month, quarter, or year. </li></ul><ul><li>Cash Flow Statement – summarizes the cash inflows and outflows of a business over a period of time </li></ul>
  53. 53. Balance Sheet Analysis <ul><li>1) Analyze the current and fixed assets </li></ul><ul><li>- look at the quality and amount of every current and fixed asset </li></ul><ul><li>- determine if the market value is higher or lower than the recorded historical cost. </li></ul><ul><li>2) Analyze the short-term and long-term liabilities </li></ul><ul><li>- look at when the payments are due and who the creditors are </li></ul><ul><li>3) Look at the footnotes at the end of the balance sheet </li></ul><ul><li>- look at the break-down of long-term liabilities </li></ul><ul><li>- look at contingent liabilities (e.g., lawsuits) </li></ul>
  54. 54. Balance Sheet Analysis (2) <ul><li>Perform financial ratio analysis for the last 3-4 years </li></ul><ul><li>- compute the balance sheet ratios (liquidity ratios and debt ratios) </li></ul><ul><li>- determine if the ratios are getting better or worse. </li></ul><ul><li>Perform trend analysis for the last 3-4 years </li></ul><ul><li>- look at the most current balance sheet and the balance sheets for the last 3-4 years and perform trend analysis. </li></ul><ul><li>- analyze and explain the directional changes in the amounts of assets and liabilities over the last 3-4 years </li></ul><ul><li>- determine if the company’s financial condition is improving or deteriorating </li></ul>
  55. 55. Subject – Sources of Capital
  56. 56. Sources of Capital <ul><li>The four main sources of capital (money) that companies use to finance their current and future operations are: </li></ul><ul><ul><li>Internally generated funds </li></ul></ul><ul><ul><li>Bank loans </li></ul></ul><ul><ul><li>Shares </li></ul></ul><ul><ul><li>Bonds </li></ul></ul>
  57. 57. Internally Generated Funds <ul><li>Internally generated funds are cash generated by normal operations of the company, i.e., the company sells its products or services and eventually collects the cash. </li></ul><ul><li>Internally generated funds can also mean using the retained earnings of a company, i.e., using the earnings that the company does not pay out in dividends </li></ul>
  58. 58. Bank Loans <ul><li>A bank loan is when a bank (creditor) lends money to a company (debtor) for a certain period of time at a particular rate of interest </li></ul><ul><li>For example, ABC Bank lends $1 million to XYZ Company for 5 years at 9% interest per year. </li></ul><ul><li>Principal = $1 million (the amount of the loan) </li></ul><ul><li>Loan term = 5 years </li></ul><ul><li>Interest rate = 9%/yr. (So, XYZ pays $90,000 interest per year.) </li></ul>
  59. 59. Types of Bank Loans <ul><li>Secured loan </li></ul><ul><li>Unsecured loan </li></ul><ul><li>Balloon loan </li></ul><ul><li>Fully-amortized loan </li></ul><ul><li>Fixed rate loan </li></ul><ul><li>Variable rate loan </li></ul>
  60. 60. Secured Loan <ul><li>A secured loan is a loan where the borrower pledges collateral to the lender as security for the loan </li></ul><ul><li>Collateral = security = something of value (stocks, bank accounts, house) </li></ul><ul><li>Many companies pledge their assets (e.g., accounts receivable, inventory, machinery, equipment) to secure the loan, i.e., to act as collateral for the loan </li></ul><ul><li>Real estate and car loans are secured. If the loan isn’t repaid, the bank takes back (repossesses) the real estate or car and sells it to get its money back </li></ul>
  61. 61. Unsecured Loan <ul><li>An unsecured loan is a loan that is not secured with collateral, i.e., the borrower pledges no security for the loan </li></ul><ul><li>For example, money owed on a credit card is an unsecured loan. Also, a loan from a friend or family member is usually unsecured. </li></ul>
  62. 62. Balloon Loan <ul><li>A balloon loan is an interest-only loan where the borrower makes interest-only payments during the life of the loan and then repays the entire principal at the end of the loan. </li></ul><ul><li>For example, National Bank makes a $1 million 5-year balloon loan to ABC Company at 10% interest per year </li></ul><ul><li>- Principal: $1 million </li></ul><ul><li>- Interest rate: 10% </li></ul><ul><li>- Term of the loan: 5 years </li></ul><ul><li>- Loan type: balloon (i.e., annual interest-only payments, principal due at the end of the 5 th year) </li></ul><ul><li>Borrower pays $100,000 interest at the end of the 1 st , 2 nd , 3 rd , 4 th , and 5 th years. Borrower also pays the $1 million principal at the end of the 5 th year. </li></ul>
  63. 63. Fully-amortized Loan <ul><li>A fully-amortized loan is when the borrower makes equal (annual, quarterly, or monthly) payments of both principal and interest throughout the life of the loan. </li></ul><ul><li>For example, National Bank gives a $1 million, 8%,15-year fully-amortized loan to a person to buy a house </li></ul><ul><li>- Principal: $1 million </li></ul><ul><li>- Interest rate: 8% </li></ul><ul><li>- Term of the loan: 15 years, equal monthly payments of both principal and interest </li></ul><ul><li>- Loan type: fully-amortized loan </li></ul><ul><li>- Payment terms: 180 payments of $9,557/month </li></ul><ul><li> (Borrower will pay back a total of $1,720,174. Total interest paid is $720,174.) </li></ul>
  64. 64. Fixed Rate Loan <ul><li>On fixed rate loans, the interest rate stays the same, i.e., it is fixed over the lifetime of the loan. </li></ul><ul><li>If you want to borrow money and think that interest rates are going up, then you should get a fixed-rate loan, i.e., borrow at a fixed rate. </li></ul><ul><li>If you think that interest rates are going down, then a variable rate loan might be better. </li></ul>
  65. 65. Variable Rate Loan <ul><li>On variable rate loans, the interest rate charged to the borrower is adjusted up or down every six or 12 months. </li></ul><ul><li>These loans usually have below-market interest rates for the first year, then the interest rates are periodically reset to market rates. </li></ul>
  66. 66. Management, Leadership and Teamwork Training Global Business Training Group (Hong Kong) Ltd.
  67. 67. Subject – Motivating Employees
  68. 68. Motivating Employees <ul><li>Managers have the biggest influence on how motivated their employees are. </li></ul><ul><li>Key questions to ask: </li></ul><ul><li>- Do managers recognize their employees for doing a good job? </li></ul><ul><li>- Do managers ask their employees what they want? </li></ul><ul><li>- Do managers provide a pleasant and supportive work environment? </li></ul>
  69. 69. What do Employees Really Value the Most? <ul><li>Learning activities </li></ul><ul><li>Flexible working hours </li></ul><ul><li>Personal praise </li></ul><ul><li>Increased authority </li></ul><ul><li>Increased autonomy </li></ul><ul><li>Time with their manager </li></ul><ul><li>Time off from work </li></ul><ul><li>Choice of assignment </li></ul>
  70. 70. How do Managers Typically Motivate Employees? <ul><li>Positive consequences – awards, recognition, titles, money, and so on </li></ul><ul><li>Negative consequences – warnings, reprimands, punishment, demotions, firings, etc. </li></ul>
  71. 71. What are the Best Ways to Motivate Employees? <ul><li>Provide learning activities that give employees a chance to develop new skills that enhance their worth in their current position and prepare them for future advancement in the organization </li></ul><ul><li>This the #1 way to motivate your employees. </li></ul><ul><li>Personally thank employees for doing a good job </li></ul><ul><li>Take the time to meet with and listen to employees </li></ul><ul><li>Provide employees specific and frequent feedback about their performance </li></ul>
  72. 72. What are the Best Ways to Motivate Employees? (2) <ul><li>Recognize, reward, and promote high performers. Work with poor performers so they improve or leave. </li></ul><ul><li>Share company information with employees about future plans and strategies, new products, the department’s and employee’s role in the overall plan, etc. </li></ul><ul><li>Involve employees in decision making, especially those decisions that affect them </li></ul>
  73. 73. What are the Best Ways to Motivate Employees? (3) <ul><li>Create a work environment that is open, trusting, and fun, which encourages employee initiative, new ideas, and suggestions </li></ul><ul><li>Celebrate successes of the company, department, and individual employees. Take time for team- and morale-building activities </li></ul><ul><li>Give money, awards, promotions, bigger offices, business trips, cars, private secretaries, and so on </li></ul>
  74. 74. Subject – Corporate Strategy
  75. 75. Corporate Strategy vs. Business Strategy <ul><li>Corporate strategy </li></ul><ul><li>- is the overall plan for how a diversified company can build corporate advantage and maximize shareholder value </li></ul><ul><li>(Executive management, i.e., the CEO and senior vice presidents, typically focus on corporate strategy) </li></ul><ul><li>Business strategy </li></ul><ul><li>- is the ways that a company builds sustainable competitive advantage in a particular product market </li></ul><ul><li>(Divisions and departments focus on business strategy) </li></ul>
  76. 76. What is Corporate Strategy? <ul><li>Corporate strategy </li></ul><ul><li>- is the way that a company creates and sustains competitive advantage throughout the company by achieving leadership in production, sales, costs, profits, market share, and shareholder value </li></ul>
  77. 77. What is Corporate Strategy? (2) <ul><li>Corporate strategy is the decisions that a company makes that: </li></ul><ul><li>- determine the company’s goals </li></ul><ul><li>- create the systems for achieving those goals </li></ul><ul><li>- define the range of businesses that company will pursue </li></ul>
  78. 78. Framework for an Effective Corporate Strategy <ul><li>An effective corporate strategy results from a harmonious combination of: </li></ul><ul><ul><li>Vision </li></ul></ul><ul><ul><li>Goals and objectives </li></ul></ul><ul><ul><li>Resources </li></ul></ul><ul><ul><li>Businesses </li></ul></ul><ul><ul><li>Organization </li></ul></ul>
  79. 79. Vision <ul><li>The “vision” plays the central role in the development of corporate strategy, i.e., corporate strategy starts with the vision. </li></ul><ul><li>The “vision” describes what the company wishes to become in many years’ time. It is the road map to the long-term future of the company. </li></ul><ul><li>The “vision” is all the ambitious aspirations of the company, the time frame of which may be far into the future </li></ul><ul><li>Aspirations are all the things that the company hopes to do or become in the future. </li></ul>
  80. 80. Goals and Objectives <ul><li>Goals refer to the short- and medium-term qualitative intentions of the company, e.g., improve new product development capabilities, become a global organization </li></ul><ul><li>Objectives refer to the short- and medium-term quantitative targets of the company, e.g., the sales objective for 2008 is $100 million </li></ul><ul><li>Goals and objectives more immediately motivate employees because they are closer at hand (i.e., the time frame is much shorter) and so can be seen to be achievable </li></ul><ul><li>Goals and objectives should always support the vision </li></ul>
  81. 81. Resources <ul><li>Resources include: </li></ul><ul><li>1) tangible assets (i.e., physical assets) </li></ul><ul><li>2) intangible assets (e.g., intellectual property, brand names, company reputation, company culture, accumulated experience) </li></ul><ul><li>3) skills and processes (e.g., manufacturing technology, inventory systems, fast product development, CRM programs) </li></ul><ul><li>4) organizational capability (e.g., quality of human resources, leadership, management, teamwork, entrepreneurship) </li></ul><ul><li>Question: What is the scarcest resource in a company? </li></ul>
  82. 82. Businesses <ul><li>Businesses refer to the industries in which the company operates and the product groups that a company is involved in. </li></ul><ul><li>Industry choice is very important to the long-term success of a corporate strategy. </li></ul><ul><li>The best predictor of a company’s performance is the profitability of the industry in which it operates. </li></ul>
  83. 83. Businesses (2) <ul><li>The industries in which a firm operates and how they relate to each other determine the firm’s ability to create synergy among its businesses. </li></ul><ul><li>An analysis of a firm’s businesses should include: </li></ul><ul><li>- the attractiveness of their industries </li></ul><ul><li>- the competitive strategies the firm pursues in each industry </li></ul><ul><li>- the opportunities that exist for synergy </li></ul>
  84. 84. Organization <ul><li>Organization includes the: </li></ul><ul><li>1) structure (how the company is divided into separate units and the organization chart that shows the delegations of authority) </li></ul><ul><li>2) systems (policies and procedures that govern organizational behavior) </li></ul><ul><li>3) processes (all the organization’s activities) </li></ul><ul><li>The firm’s organization (i.e., internal design) should flow from its strategy and be customized to fit the resources and businesses of the particular firm </li></ul>
  85. 85. Subject – Expansion
  86. 86. Expansion <ul><li>Expansion can take place: </li></ul><ul><li>1) inside a company’s core industry, i.e., the company decides to compete in the same product market (industry) </li></ul><ul><li>2) outside a company’s core industry, i.e., the company decides to compete in multiple distinct product markets (industries) and geographies </li></ul>
  87. 87. Main Players in the Core Industry <ul><li>Suppliers </li></ul><ul><li>The company </li></ul><ul><li>Competitors </li></ul><ul><li>Distributors (wholesalers and retailers) </li></ul><ul><li>Logistics companies (companies that transport and store raw materials and finished products) </li></ul><ul><li>Consumers </li></ul>
  88. 88. Expansion in the Core Industry <ul><li>A company typically starts to expand in its core industry in order to: </li></ul><ul><li>1) enhance or protect the company’s position in that market </li></ul><ul><li>2) make the company bigger, stronger, and more competitive </li></ul><ul><li>3) pursue business activities that are profitable </li></ul><ul><li>4) add value to the company (As the company engages in more and more profitable activities, total profits go up, which increases the value of the company.) </li></ul>
  89. 89. Expansion in the Company’s Core Industry <ul><li>Vertical integration </li></ul><ul><li>Horizontal integration </li></ul><ul><li>Forward integration </li></ul><ul><li>Backward integration </li></ul>
  90. 90. Vertical Integration <ul><li>Vertical integration is the process in which several steps in the production and/or distribution of a product or service are controlled by a single company, in order to increase the company’s power in the marketplace </li></ul><ul><li>Vertical integration is when a company expands its business into areas on different points of the same production and/or distribution path </li></ul><ul><li>A company that buys one of its suppliers would be an example of vertical integration, e.g., a car company that expands into tire manufacturing. A company such as this is referred to as being “vertically integrated.” </li></ul>
  91. 91. Horizontal Integration <ul><li>Horizontal integration is when a company expands its business into different products that are similar to the company’s current product line </li></ul><ul><li>For example, a hot dog salesman expanding into selling hamburgers is an example of horizontal integration. </li></ul>
  92. 92. Forward Integration <ul><li>Forward integration is a business strategy that involves a form of vertical integration, whereby activities are expanded to include control of the direct distribution of its products </li></ul><ul><li>For example, a farmer who decides to sell his products at a local market himself instead of to a distribution center is engaging in forward integration </li></ul>
  93. 93. Backward Integration <ul><li>Backward integration is a form of vertical integration whereby a company buys one of its suppliers in order to reduce dependency. </li></ul><ul><li>For example, a bakery buys a wheat farm to reduce the risk of being dependent on flour. </li></ul>
  94. 94. Diversified Expansion <ul><li>Diversified expansion (or corporate diversification) is when a company chooses to compete in multiple distinct product markets (or industries) </li></ul>
  95. 95. Why Do Firms Diversify? <ul><li>External Conditions </li></ul><ul><li>- Attractive opportunities in other industries (offensive expansion) </li></ul><ul><li>- Threats from competitors or downward shift in customer demand for the company’s products (defensive expansion) </li></ul>
  96. 96. Why Do Firms Diversify? (2) <ul><li>Internal Conditions </li></ul><ul><li>- Excess resource capabilities (meaning resources are underutilized) </li></ul><ul><li>- Deficient resource capabilities (meaning the company lacks resources) </li></ul>
  97. 97. Alternative Ways to Diversify <ul><li>Internal Growth </li></ul><ul><li>Mergers and Acquisitions (M&A) </li></ul><ul><li>Alliances - joint ventures, equity investment, franchises, long-term contracts </li></ul>
  98. 98. Internal Growth <ul><li>Internal growth means expansion of the company (i.e., growth of company assets) through use of internal resources and financing. </li></ul><ul><li>Advantages: </li></ul><ul><li>1) allows for incremental decision making </li></ul><ul><li>2) easier to transfer resources to new company </li></ul><ul><li>3) compatible with company culture </li></ul><ul><li>4) internalizes learning and experience </li></ul><ul><li>5) encourages entrepreneurship </li></ul><ul><li>Disadvantages: </li></ul><ul><li>1) slow process (slow decision making) </li></ul><ul><li>2) need to develop new resources </li></ul><ul><li>3) investment in an unsuccessful internal development can be difficult to get back </li></ul>
  99. 99. Acquisitions <ul><li>An acquisition, also known as a takeover, is the buying of one company (the “target”) by another. </li></ul><ul><li>An acquisition may be friendly or hostile : </li></ul><ul><li>- a friendly takeover is when the companies cooperate in negotiations </li></ul><ul><li>- a hostile takeover is when the takeover target is unwilling to be bought (i.e., the target’s management is not interested in selling) or the target's board has no prior knowledge of the offer </li></ul><ul><li>An acquisition usually refers to when a bigger company buys a smaller company. </li></ul><ul><li>A “reverse takeover” is when a smaller firm acquires management control of a bigger company. </li></ul>
  100. 100. Mergers <ul><li>A merger: </li></ul><ul><li>1) is a combination of two companies into one larger company </li></ul><ul><li>2) is usually voluntary and involve stock swaps as it allows the shareholders of the two companies to share the risk involved in the deal </li></ul><ul><li>3) can result in a new company name (often combining the names of the original companies) and in new branding </li></ul>
  101. 101. Alliances <ul><li>An alliance is an agreement between two or more parties, made in order to advance common goals and to secure common interests </li></ul><ul><li>Examples of alliances include: </li></ul><ul><li>- joint ventures </li></ul><ul><li>- equity investment </li></ul><ul><li>- franchises </li></ul>
  102. 102. Subject – Leadership
  103. 103. What is Leadership? <ul><li>Leadership is the ability to: </li></ul><ul><li>- Inspire others to achieve great things </li></ul><ul><li>- Develop ideas and create a vision of the future for employees to strive for </li></ul><ul><li>- Live by values that support those ideas and that vision </li></ul><ul><li>- Make hard decisions about the allocation of human and other resources </li></ul><ul><li>- Unify different people </li></ul>
  104. 104. Leaders vs. Managers <ul><li>Leaders - challenge their employees to achieve the organization’s goals by creating a powerful vision of the future and then unlocking their employees’ creativity </li></ul><ul><li>Managers - use policies, procedures, schedules, incentives, discipline, and other means to push their employees to achieve the goals of the organization </li></ul>
  105. 105. Leaders vs. Managers (2) <ul><li>A leader: </li></ul><ul><li>Is a visionary concerned about substance </li></ul><ul><li>Innovates </li></ul><ul><li>Asks what and why </li></ul><ul><li>Focuses on people </li></ul><ul><li>Does the right things </li></ul><ul><li>Develops </li></ul><ul><li>Inspires trust </li></ul><ul><li>Has a long-term perspective </li></ul><ul><li>Challenges the status-quo </li></ul><ul><li>Originates </li></ul><ul><li>A manager: </li></ul><ul><li>Is a planner concerned about process </li></ul><ul><li>Administers </li></ul><ul><li>Asks how and when </li></ul><ul><li>Focuses on systems </li></ul><ul><li>Does things right </li></ul><ul><li>Maintains </li></ul><ul><li>Relies on control </li></ul><ul><li>Has a short-term perspective </li></ul><ul><li>Accepts the status-quo </li></ul><ul><li>Imitates </li></ul>
  106. 106. What Are the Most Important Traits of a Great Leader? <ul><li>Great leaders have integrity , i.e., ethical behavior, high morals, good values, fairness, and a strong sense of soci al responsibility </li></ul><ul><li>Integrity is the most desired trait that employees want from their leaders </li></ul>
  107. 107. What Are the Most Important Traits of a Great Leader? (2) <ul><li>Great leaders are optimistic , i.e., they see the future as a wonderful place and spread this optimism to employees, which results in: </li></ul><ul><ul><li>higher employee morale </li></ul></ul><ul><ul><li>a better working atmosphere </li></ul></ul><ul><ul><li>greater worker productivity </li></ul></ul>
  108. 108. Different Leadership Styles <ul><li>Autocratic (or authoritarian) </li></ul><ul><li>Democratic </li></ul><ul><li>Laissez-faire </li></ul><ul><li>Bureaucratic </li></ul><ul><li>Charismatic </li></ul><ul><li>Task-Oriented </li></ul><ul><li>Transformational </li></ul><ul><li>Situational </li></ul>
  109. 109. Autocratic Leadership <ul><li>An autocratic leader has absolute power over the employees or team, giving little opportunity to them to make suggestions or participate in decision-making </li></ul><ul><li>Autocratic leadership requires continual pressure and direction from the leader in order to get things done. </li></ul><ul><li>Autocratic leadership usually leads to high levels of absenteeism and staff turnover as most employees dislike this type of leadership. </li></ul><ul><li>Autocratic leadership is sometimes effective when managing unskilled workers or handling a crisis. </li></ul>
  110. 110. Democratic Leadership <ul><li>A democratic leader makes decisions by consulting his team, while still maintaining control of the group. </li></ul><ul><li>A good democratic leader: </li></ul><ul><li>1) encourages participation and delegates wisely, but never loses sight of the fact that he bears the crucial responsibility of leadership. </li></ul><ul><li>2) values group discussion and input from his team to obtain their best performance </li></ul><ul><li>3) motivates his team by empowering them to direct themselves </li></ul>
  111. 111. Laissez-Faire Leadership <ul><li>A laissez-faire leader exercises little control over his group and allows its members to define individual roles and tasks. In general, this approach gives little direction or motivation to team members. </li></ul><ul><li>Laissez-faire leadership can be effective when leading a team of highly motivated and skilled people, who have produced excellent work in the past. </li></ul>
  112. 112. Bureaucratic Leadership <ul><li>Bureaucratic leaders work “by the book”, ensuring that their staff follow procedures exactly. </li></ul><ul><li>Bureaucratic leadership is an appropriate style for work involving serious safety risks (such as working with machinery or toxic substances) or where large sums of money are involved (such as cash-handling). </li></ul>
  113. 113. International Business Training Global Business Training Group (Hong Kong) Ltd.
  114. 114. Subject – Globalization
  115. 115. What is Globalization? <ul><li>Globalization is: </li></ul><ul><li>the process of world markets and businesses becoming increasingly interconnected and interdependent </li></ul><ul><li>the free flow of technology, capital, and labor among countries </li></ul><ul><li>businesses and investments moving from domestic markets to international markets </li></ul><ul><li>businesses creating global supply and distribution chains </li></ul><ul><li>the reduction of trade barriers between countries that permit the free flow of goods </li></ul>
  116. 116. Why do Companies Globalize? <ul><li>Companies globalize in order to: </li></ul><ul><li>1) expand and diversify their markets </li></ul><ul><li>2) get new customers, become stronger competitors, and increase sales and profits </li></ul><ul><li>3) develop strong global brands </li></ul><ul><li>4) obtain raw materials and supplies </li></ul>
  117. 117. Why do Companies Globalize? (2) <ul><li>Companies globalize in order to: </li></ul><ul><li>5) lower labor and production costs </li></ul><ul><li>6) seek new technology, do global research and development, design, and engineering </li></ul><ul><li>7) acquire globally competitive human resources </li></ul><ul><li>8) avoid trade barriers </li></ul>
  118. 118. Subject – Foreign Direct Investment
  119. 119. Foreign Direct Investment <ul><li>FDI is: </li></ul><ul><li>1) long-term investment in a country </li></ul><ul><li>2) an investment made to acquire a long-term ownership interest in an overseas company </li></ul><ul><li>3) when a company from one country makes an investment in factories, buildings, machinery, and equipment in another country </li></ul><ul><li>The FDI relationship consists of a parent enterprise and a foreign affiliate. i.e., a company related to its parent, which together form a multinational corporation (MNC). </li></ul><ul><li>To qualify as an FDI, the investment must give the parent enterprise control over its foreign affiliate, typically owning 10% or more of the ordinary shares or voting power of a company. Lower ownership shares are known as portfolio investment. </li></ul>
  120. 120. Benefits of FDI – for the Investing Company <ul><li>FDI provides the investing firm with: </li></ul><ul><li>- new markets, customers, supply chain, and distribution channels </li></ul><ul><li>- cheaper production facilities </li></ul><ul><li>- access to resources, new technology, products, skills, and financing </li></ul><ul><li>- opportunities for joint ventures, joint marketing, and licensing arrangements with local partners </li></ul><ul><li>- a way to get around trade barriers </li></ul>
  121. 121. Benefits of FDI – for the Host Country <ul><li>For the country that receives the investment, FDI: </li></ul><ul><li>1) creates new production capacity </li></ul><ul><li>2) provides new products </li></ul><ul><li>3) creates new jobs (often at higher wages than domestic firms); </li></ul><ul><li>4) transfers technology and know-how </li></ul><ul><li>5) leads to investments in research and development, which has a positive effect on the innovation of domestic firms </li></ul><ul><li>6) transfers organizational and management skills </li></ul><ul><li>7) creates linkages to the global marketplace </li></ul><ul><li>8) provides a strong impetus to economic development </li></ul>
  122. 122. Categories of FDI – By Motive <ul><li>FDI is categorized based on the motive behind the investment from the perspective of the investing firm : </li></ul><ul><li>1) Resource-Seeking FDI </li></ul><ul><li>- Investments which seek to acquire factors of production that are more efficient than those obtainable in the home country of the firm. In some cases, these resources may not be available in the home economy at all, e.g., cheap labor and natural resources. This typifies FDI into developing countries, for example seeking natural resources in the Middle East and Africa, or cheap labor in Southeast Asia and Eastern Europe. </li></ul><ul><li>2) Market-Seeking FDI </li></ul><ul><li>- Investments which aim at either penetrating new markets or maintaining existing ones. FDI of this kind may also be employed as defensive strategy. Businesses are more likely to be pushed towards this type of investment out of fear of losing a market rather than discovering a new one, e.g., the foreign mergers and acquisitions by accounting, advertising, and law firms in the 1980’s. </li></ul>
  123. 123. Categories of FDI – By Motive (2) <ul><li>3) Efficiency-Seeking FDI </li></ul><ul><li>- Investments which firms hope will increase their efficiency by exploiting the benefits of economies of scale and scope. This type of FDI typically comes after resource or market seeking investments, with the expectation that it further increases the profitability of the firm. </li></ul><ul><li>4) Strategic-Asset-Seeking FDI </li></ul><ul><li>- A tactical investment to prevent the gain of resource to a competitor </li></ul>
  124. 124. FDI Government Incentives <ul><li>Countries encourage FDI by offering: </li></ul><ul><li>- tax breaks (or holidays) </li></ul><ul><li>- subsidies (e.g., on rent, electricity, water, labor) </li></ul><ul><li>- low interest loans (e.g., to buy equipment and machinery) </li></ul><ul><li>- grants (e.g., training grants) </li></ul><ul><li>- waivers or reductions of import duties (e.g., company doesn’t have to pay duties on imported equipment) </li></ul><ul><li> </li></ul><ul><li>Countries restrict FDI by placing: </li></ul><ul><li>- ownership and industry restrictions, restraints or limits </li></ul>
  125. 125. Subject – Foreign Investment Regulations
  126. 126. Foreign Investment Regulations <ul><li>Why do countries impose foreign investment regulations? </li></ul><ul><li>1) to make sure that foreign investment doesn’t lead to loss of national control in key sectors of the economy </li></ul><ul><li>2) to protect sensitive domestic industries that are important to national security </li></ul><ul><li>3) to make sure that foreign investment doesn’t deplete the country’s natural resources </li></ul><ul><li>4) to protect local industries from competition </li></ul>
  127. 127. Foreign Investment Regulations (2) <ul><li>Foreign investment regulations provide information about: </li></ul><ul><li>1) Legal and capital requirements to apply for and obtain a foreign investment license (a.k.a. foreign investment registration certificate) </li></ul><ul><li>2) Potential requirement to prepare technical and financial feasibility studies </li></ul><ul><li>3) Permitted investments, restricted investments, and prohibited industries </li></ul><ul><li>4) Company formation and registration </li></ul><ul><li>5) Shareholder, director, and secretary requirements </li></ul><ul><li>6) Maximum ownership restrictions </li></ul><ul><li>7) Reporting and recordkeeping requirements </li></ul><ul><li>8) Audit requirements </li></ul><ul><li>9) Annual fees </li></ul><ul><li>10) Technology transfer requirements </li></ul>
  128. 128. Foreign Investment Regulations (3) <ul><li>Foreign investment regulations provide information about: </li></ul><ul><li>11) Labor laws – employing workers, work permits, labor contracts, unions, immigration laws, importing workers, visa requirements </li></ul><ul><li>12) Foreign currency restrictions and exchange rates </li></ul><ul><li>13) Tax laws – corporate and individual tax rates </li></ul><ul><li>14) Capital registration </li></ul><ul><li>15) Legal protection - settlements of disputes, arbitration, mediation, international arbitration </li></ul><ul><li>16) Protection of intellectual and industrial property </li></ul><ul><li>17) Local partner requirements </li></ul><ul><li>18) Repatriation (remittance) of capital and profits, restrictions on remittances </li></ul><ul><li>19) Foreign land ownership – if foreigners allowed to own property, land use restrictions </li></ul><ul><li>20) Import laws - importing of raw materials, components, equipment and machinery, customs duties </li></ul>
  129. 129. Foreign Investment Regulations (4) <ul><li>Foreign investment regulations provide information about: </li></ul><ul><li>21) Transfer of ownership </li></ul><ul><li>22) Performance requirements – completion deadlines, production quotas </li></ul><ul><li>23) Accounting standards </li></ul><ul><li>24) Environmental regulations </li></ul><ul><li>25) Permission to export </li></ul><ul><li>26) Price controls </li></ul><ul><li>27) National treatment - foreign should investors receive the same treatment as domestic businesses </li></ul><ul><li>28) Most-favored-nation treatment - foreign investors must be accorded treatment no less favorable than that accorded to investors from any other country </li></ul><ul><li>29) Rights and protection from nationalization and expropriation </li></ul>
  130. 130. Subject – International Marketing
  131. 131. International Marketing <ul><li>International marketing is the: </li></ul><ul><li>- application of marketing principles and marketing capabilities to more than one country </li></ul><ul><li>- performance of business activities that direct the company's goods and services to consumers or users in more than one country </li></ul>
  132. 132. International Marketing (2) <ul><li>At its simplest level, international marketing involves the firm in making one or more marketing mix decisions across national boundaries </li></ul><ul><li>At its most complex level, international marketing involves: </li></ul><ul><li>- establishing manufacturing facilities overseas, and </li></ul><ul><li>- coordinating marketing strategies across the globe </li></ul><ul><li>Global marketing </li></ul><ul><li>- refers to marketing activities coordinated and integrated across multiple country markets </li></ul>
  133. 133. Establishing Manufacturing Facilities Overseas <ul><li>Advantages: </li></ul><ul><li>1. avoid tariffs and other trade barriers </li></ul><ul><li>2. gain new sources of raw materials </li></ul><ul><li>3. closer to foreign suppliers and customers </li></ul><ul><li>4. seek the lowest cost location for their production facilities </li></ul><ul><li>5. take advantage of skilled and cheap foreign labor </li></ul><ul><li>6. reduce transport and distribution costs </li></ul><ul><li>7. t ake advantage of exchange rates /reduce forex (foreign exchange) risk </li></ul><ul><li>8. follow a similar action made by a competitor (i.e., company enters the market simply because a major competitor has done so) </li></ul>
  134. 134. Country Entry – Decisions and Strategies <ul><li>Important decisions </li></ul><ul><li>1) Choice of which country or countries to enter </li></ul><ul><li>2) Timing of the entry </li></ul><ul><li>3) How to operate in those countries </li></ul><ul><li>Country level segmentation </li></ul><ul><li>- In international marketing, segmentation is typically done at the country level. You decide what countries to target based on: </li></ul><ul><li>1) geography (based on the belief that neighboring countries and countries </li></ul><ul><li> tend to share similarities, e.g., climate, terrain) </li></ul><ul><li>2) demographics (e.g., population, average income, age, education, </li></ul><ul><li> population distribution, income, etc.) </li></ul><ul><li>(Note: In domestic marketing, segmentation is done at the customer level, i.e., you are deciding what customers to target) </li></ul>
  135. 135. Global Product Positioning <ul><li>Global Product Positioning </li></ul><ul><li>- what different product advantages are to be emphasized and communicated to customers in different countries </li></ul><ul><li>Firms often have to make a tradeoff (decision) between: </li></ul><ul><li>- adapting their products to the unique demands of a particular country </li></ul><ul><li>- standardizing their products in exchange for cost savings and the maintenance of a consistent global brand image. </li></ul>
  136. 136. Country Marketing Strategies <ul><li>1) “Individualized&quot; Marketing Strategy </li></ul><ul><li>2) Global Marketing Strategy (GMS) </li></ul>
  137. 137. Individualized Marketing Strategy <ul><li>Individualized marketing strategy </li></ul><ul><li>- is when a company does comprehensive research and makes a significant effort to tailor a product or service and marketing mix to each individual country market </li></ul><ul><li>- this approach is often used by smaller businesses involved in only one or two foreign markets </li></ul>
  138. 138. Global Marketing Strategy (GMS) <ul><li>GMS: </li></ul><ul><li>- believes that a standardized product and marketing mix in various country markets can achieve enormous savings, especially in production, advertising, packaging, and distribution </li></ul><ul><li>- is a controversial approach that largely ignores country differences and believes that consumers around the world are growing more and more similar </li></ul><ul><li>- believes that global travel and communication have exposed more and more people to products and services that they have heard about, seen, or experienced - and now want </li></ul>