AFM 131 Midterm Notes

Chapter 3 Competing in Global Markets

Exporting: selling products (ie. Goods and services) to another country

Importing: buying products form another country.
Free trade: the movement of goods and services among nations without political or
economic barriers
Comparative advantage theory: a theory that states a country should sell to other
countries those products that it produces most effectively and efficiently and buy from
other countries those products that it cannot produce as effectively or efficiently trade.
Absolute advantage: the advantage that exists when a country has a monopoly on
producing a specific product or can produce it more efficiently than all other countries
Real job potential is with small businesses contribute between 25 and 41 percent of
Canada GDP and employ approximately seven million individuals
The Canada Border Services Agency deals with importers and the regulation involving
products (ie. Is the article prohibited entry into Canada)?
Exports alone account for one in three Canadian jobs
Balance of Trade: a nations ratio of exports to imports
Trade Surplus: a favourable balance of trade; when exports > imports
Trade Deficit: an unfavourable balance of trade; when imports >exports
Balance of Payments: the difference between money coming into a country and money
leaving the country plus money flows from other factors such as tourism, foreign aid,
military expenditures, and foreign investment.
Canadas is highly dependent on their biggest trading partner US (70%)
Canada trade identified three priority market types:
1. Emerging markets with broad Canadian interests
2. Emerging markets with specific markets with specific opportunities for Canadian
businesses
3. Established markets with broad Canadian interests
Predominantly in Asia Pacific and Middle East and Africa. China and India are of interest.

Risk and Commitment for Global Expansion (from lowest to highest)

1. Licensing: a global strategy in which the licensor allows a foreign company (the
licensee) to produce its products in exchange for a fee (royalty)
2. Exporting: exporting goods and services to other countries. Companies can engage in
indirect exporting through specialists called export-trading companies.
3. Franchising: Selling the rights to use an established business name and sell a
product/ service in each territory (adapt territory, ie. KFC, Taco Bell etc.)
4. Contract Manufacturing (outsourcing): foreign company manufactures goods to
which a domestic company then attaches its own brand name or trademark
5. International joint ventures and strategic alliances:
a. Joint Venture: a partnership in which two or more companies (often from different
countries) join to undertake a major project.
i. Shared tech, risk, marketing, and management expertise, facilitates entry
b. Strategic Alliance: A long-term partnership between two or more companies
established to help each company build competitive market advantages.
i. Does not involve sharing costs, risks, management, or profits
6. Foreign Direct Investment: buying permanent property and businesses in foreign
nations

a. Foreign subsidiary: a company owned in a foreign country by the parent

company. Must follow regulation from both domestic and foreign country.
Multinational corporation: an organization that manufactures and markets products in
many different countries and has multinational stock ownership and multinational
management.
Branch Plant Economy: when many subsidiaries owned by foreign companies and
profits are returned to the home country rather than reinvested in Canada
Ethnocentricity: an attitude that ones own culture is superior to all others.
Successful companies are those that can understand cultural differences and adapt
accordingly
Exchange rate: the value of one nations currency relative to the currencies of other
countries
Devaluation: lowering the value of a nations currency relative to other currencies.
Countertrading: a complex form of bartering in which several countries may be involved,
each trading goods for goods or services for services
In global markets, the absence of a central system of law means many different systems
of laws may apply
o Canadian businesses must follow Canadian laws in conducing business globally.
Trade Protectionism: the use of government regulations to limit the import of goods and
services
Dumping: selling products in a foreign country at lower prices than those charged in the
producing country
Tariff: a tax imposed on import
o Either protective tariffs or revenue tariffs
Import Quota: a limit on the number of products in certain categories that a nation can
import
Embargo: a complete ban on the import or export of a certain product or the stopping of
all trade with a country.
Non-tariff barriers: ie. Restrictive standards such as safety, health and labelling
GATT (general agreement on tariffs and trade): a 1948 agreement that established
an international forum for negotiating mutual reductions in trade restrictions.
WTO (world trade organization): the international organization that replaced the
general agreement on tariffs and trade, and was assigned the duty to mediate trade
disputes between countries
International Monetary Fund (IMF): international bank that makes short-term loans to
countries experiencing problems with their balance of trade.
World Bank: an autonomous UN agency that borrows money from the more prosperous
countries and lends it to less developed to develop infrastructure
Producer Cartels: organizations of commodity-producing countries that are formed to
stabilize or increase prices to optimize overall profits in the long run.
Common Market (trading bloc): a regional group of countries that have a common
external tariff, no internal tariffs and a coordination of laws to facilitate exchange; also,
called a trading bloc. An example is the EU.
NAFTA
EU: almost 87 nations

Chapter 4 Role of Government in Business

National Policy: Government directive that placed high tariffs on imports from the
United States to protect Canadian manufacturing which had higher costs
Crown Corporations: companies that are owned by the federal or provincial government

o Provinces also own crown corporations (ie. Power supply companies)

Canadian government is embarking upon a series of measures designed to reduce the role
of government in the economy.
o Privatization: the process of governments selling Crown corporations.
Deregulation: government withdrawal of certain laws and regulations that seem to
hinder competition
o Everyone is looking to lower cost of operation and improve efficiency.
Federal Government is responsible for issues that affect citizens across Canada. Primarily
to ensure and support countrys economic performance
o Trade regulation, national defence, taxation, banking, unemployment, immigration
criminal law.
o Competition Act: Merger of large corporations
o Competition Bureau: Independent law enforcement agency ensures a competitive
and innovative marketplace : prevents price fixing
Marketing Boards: organizations that control the supply or pricing of certain
agricultural; products in Canada
Provincial Government Responsibilities: issues that affect provincial residents that do not
necessarily affect all Canadians
o Regulation of provincial trade and commerce, health and social services, property
law, labour law, education
o Interprovincial trade is $300 billion industry in Canada, though many Canadian
companies and individuals face obstacles trying to do business,
o AIT (Agreement on Internal Trade) is an intergovernmental trade agreement signed
by Canadian First Minister; serves to eliminate trade barriers
Municipal Government Responsibilities: water supply, sewage, garbage, roads
playgrounds, libraries
Sin tax: taxing of certain classes of products which the government wants a reduce usage
of
Fiscal Policy: the federal governments effort to keep the economy stable by increasing
or decreasing taxes or government spending
Deficit: occurs when a government spends over and above the amount it gathers in taxes
in a fiscal year.
National Debt (federal debt): the accumulation of government surpluses and deficits
over time
Surplus: an excess of revenues over expenditures
Federal Budget: a comprehensive report that reveals government financial policies and
priorities for the coming year.
Keynes Model Top Up Approach (Canadas approach)
o Need for government oversight
o Future is uncertain
o Need for a quick spark
o We cant just wait for the market
o Drawbacks: control expenditures and deal with massive debts
Hayek model Bottom Up Approach
o Let the economy do the job
o Dont bail out the losers
o Dont need a series of bubbles (result of government intervention)
o With alternative, no end to the cost
Fiscal Policy: how governments collect and spend tax dollars.
Monetary Policy: the management of the money supply and interest rates controlled by
the Bank of Canada.

o raising and lowering interest rates help control inflation

Subprime mortgages are loans targeted tat people who do not qualify for regular
mortgages b/c of low credit scores.
Government expenditures
o Pensions, employment insurance, welfare, subsidies etc.
Transfer payments: direct payments from governments to other governments or to
individuals
o social security and income support
Equalization: a federal government for reducing fiscal disparities among provinces
o help less prosperous provinces provide
Government contracts are often awarded to help Canadian businesses even if they are
sometimes more expansive than bids by non-Canadian companies.
Canada Business Network, involves setting up Canada Business service centres in every
province and territory.
NRC: national research council is a federal agency that does research to help Canadian
industry remain competitive and innovative.
Department of Foreign Affairs, Trade and Development: assist companies in the global
markets
Industrial Policy: a comprehensive, coordinated government plan to guide and revitalize
the economy

Chapter 7 Entrepreneurship and Starting a Small Business

Entrepreneurship: accepting the challenge of starting and running a business

Differences between Entrepreneurship and small business
Amount of Wealth Creation
Speed of Wealth Creation
Risk
Innovation
Why people take the entrepreneurial challenge
New Idea, Process, or Product:
Independence
Challenge
Family Pattern
Profit
Immigrants
What does it take to be an entrepreneur?
Self-Directed
Self-nurturing
Action-oriented
Highly Energetic
Tolerant of Uncertainty
Able to learn quickly
SMEs (small and medium-sized enterprises): refers to all businesses with fewer than 500
employees
Increase in female entrepreneurs b/c
Financial needs, lack of promotion opportunities, women returning to the workforce,
women have a higher rate of success than men
Entrepreneurial team: group of experienced people from different areas of business
who join to form a managerial team with the skills needed to develop, make, and market a
new product.

Micro-enterprises: a small business defined as having one to four employees

Micropreneurs: small-business owners with fewer than five employees who are willing to
accept the risk of starting and managing the type of business that remains small, lets
them do the kind of work they want to do, and offers them a balanced lifestyle.
many are home-based businesses b/c of improving computer technology, corporate
downsizing and change in social attitudes
Web based businesses must offer more than the same merchandise customers can buy at
stores and must be unique
Affiliate marketing: an online marketing strategy in which a business rewards
individuals or other businesses(affiliates) for each visitor or customer the affiliate sends to
its website
Intrapreneurs: creative people working within corporations
Industry Canadas SME Research and Statistics site offers research on small business and
entrepreneurship
Services to help entrepreneurs and small businesses succeed
Business Development Bank of Canada (BDC)
Canada Business Network
Business Incubators: centres that provide space, services, advice and support to
assist new and growing businesses to become established and successful
Business Establishment: must meet the following minimum criteria: it must have at
least one paid employee; it must have annual sales revenue of $30,000 and it must be
incorporated and have filed a federal corporate income tax return at least once in the
previous three years.
Small Business: a business that is independently owned and operated, is not dominant
in its field and meets certain standards of size in terms of employees or annual revenues.
Forms of Business Ownership
Sole Proprietorship
Advantages: easy to set up, low start up, freedom
Disadvantages: unlimited liability, business continuity, raising funds
Partnership
Advantages: Additional talent, more access to fund, less regulatory
Disadvantages: Unlimited liability, conflicts
Corporation
Separate legal entity
Advantages: limited liability, indefinite life, greater access to financing
Disadvantages: Higher cost to incorporate, complexity of managing records
Most common reasons for small-business failure is managerial incompetence and
inadequate financial planning.
Important to learn from mistakes
Get some experience
buy an existing business
buy a franchise
inherit/take over a family business
Five functions of business in a small-business setting
Planning your business
Business Plan: a detailed written statement that describes the nature of the
business, target market, the advantages the business will have in relation to
competition and the resources and qualifications of the owner(s)
Financing your business (finance)
Angel Investors: private individuals who invest their own money in
potentially hot new companies before they go public

Venture Capitalists: individuals or companies that invest in new businesses

in exchange for partial ownership of those businesses
Crowdfunding: raising funds through the collection of small contributions
from the public (known as the crowd) using the internet and social media.
Government grants
Knowing your customers (marketing)
Market: people with unsatisfied wants and needs who have both the
resources and willingness to buy.
Managing your employees (HR)
Delegating work and relinquishing control
Keeping Records (Accounting)
Looking for help
Exterior consulting help
business has advantages over large business in international trade in:
Overseas buyers enjoy dealing with individuals vs large corporate bureaucracies
More personal
Faster shipping

Small

Chapter 14 Helping Buyers Buy

Marketing: a set of business practises designed to plan for and present an organizations
products or services in ways that build effective customer relationships
Today much of marketing is helping buys buy instead of focusing on helping sellers sell
Five Eras (Orientations) of Marketing
1. The Production Era: everything centered around producing as there was a
limitless market
2. The Sales Era: Companies emphasized selling as production outpaced buying.
3. The Marketing Concept Era:
1. Marketing concept: a three-part business philosophy: customer orientation,
service orientation and profit orientation.
Customer Orientation: find out what customers want and provide it
Service Orientation: make sure everyone in the organization is focused
on customer satisfaction.
Profit Orientation: focus on goods and services that will enable the
most profit and enable the organization to survive and expand to serve
more customers wants and needs
4. The Market Orientation Era
1. Market Orientation: focusing efforts on (1) continuously collecting
information about customers needs and competitors capabilities, (2) sharing
this information throughout the organization, and (3) using the information to
create value, ensure customer satisfaction and develop customer
relationships.
2. CRM (customer-relationship management): the process of building longterm relationships with customers by delivering customer value and
satisfaction.
5. The Social Media Marketing Era:
1. Social Media Marketing: About consumer-generated online-marketing
efforts to promote brands and companies for which they are fans and
companies marketing themselves.
Non-Profit organizations prosper from marketing.
Marketing Mix
1. Product: any physical good, service, or idea that satisfies a want or need

1. Test Marketing: the process of testing products among potential users

2. Brand Name: a word, letter, or group of words or letters that differentiates
one sellers goods or services from those of competitors
2. Price: the money or other consideration (including other goods and services)
exchanged for the ownership or use of a good or service
3. Place: location, usage of intermediaries, distribution
4. Promotion: all techniques sellers use to motivate customers to buy their products
1. Building relationships with customers
Marketing research: marketers analyze markets to determine opportunities and
challenges and to find information they need to make good decisions
1. Help identify consumer purchasing trends
1. Defining question
2. Collecting Data
Secondary data: information that has already been compiled by
others and published in journals and books or made available online.
Primary data: data that you gather yourself (ie. Surveys, Focus
Groups, Observation)
3. Analyzing the research data
4. Choosing the best solution and implementing it
The Marketing Environment
1. Environmental Scanning: the process of identifying the factors that can affect
marketing success.
1. Global Environment
2. Technological Environment
3. Social Environment
4. Competitive Environment
5. Economic Environment
6. Legal Environment
Consumer Market: consists of all individuals or households that want goods and services
for personal consumption or use.
Cause Marketing: when a charitable contributions of a firm are tied directly to the
customer revenues produced through the promotion of one of its products.
Business to Business market: all individuals and organizations that want goods and
services to use in producing other goods and services or to sell, rent or supply goods to
others.
1. Customers in B2B are relatively few
2. Businesses are relatively large
3. Markets tend to be geographically concentrated
4. More rational than consumers
5. Tend to be direct but not always
6. More emphasis on personal selling in B2B markets.
Methods of market segmentation
Market Segmentation: the process of dividing the total market into groups with
similar characteristics
Geographic segmentation: dividing the market by geographic area
Demographic segmentation: dividing the market by age, income, and education
level
Psychographic segmentation: dividing the market using the groups values,
attitudes, and interests
Behavioural segmentation: dividing the market based on behaviour with or
toward a product
Best strategies are to use all the variables to find the profitable target market

Target marketing: marketing directed towards segmented groups organization

determines it can serve profitably
Mass Marketing: developing products for everyone
Niche marketing: finding small but profitable market segments and designing products
for them
One-to-one marketing(micromarketing): developing a unique mix of good sand
services for each individual customer
Product positioning: the place an offering occupies in customers minds on important
attributes relative to competitive products
Positioning statement: how a company wants to be perceived by customers
Relationship marketing: Marketing strategy with the goal of keeping individual
customers over time by offering them products that exactly meet their requirements (ie.
Loyalty marketing)
Consumer behaviour: when marketing researchers investigate consumer thought
processes and behaviour at each stage in a purchase to determine the best way to help
the buyer buy.
Green marketing: the process of selling products and or services based on their
environmental benefits
Greenwashing: when businesses try to make themselves or their products or services
look green or socially responsible without the action to back it up.
Ethnic Marketing: combinations of the marketing mix that reflect the unique attitudes,
race or ancestry, communication preferences, and lifestyles of ethnic Canadians.

Chapter 15 Managing the Marketing Mix

Value: good quality at a fair price.

Total Product Offer (value package): everything that customers evaluate when
deciding whether to buy something, considering tangible and intangible dimensions
Product line: a group of products that are physically similar or are intended for a similar
market
Product mix: the combination of product lines offered by an organization
Product differention: the creation of real or perceived product differences
Packing of products play a huge role in promoting it
o Bundling: grouping tow or more products together and pricing them as a unit
Brand: a name, symbol, or design that identifies the goods or services
Brand Equity: the value of the brand name and associated symbols
Brand loyalty: the degree to which customers are satisfied, enjoy the brand and are
committed to further purchase
Employer Branding: how employers can separate themselves from others
Brand Manager: a manager who has direct responsibility for one brand or one product
line; aka product manager
A product life cycle: a theoretical model of what happens to sales and profits for a
product class over time; the four stage of the cycle are introduction, growth, maturity and
decline
o Not all products follow cycle
Popular pricing objectives
o Achieving a target return on investment or profit
o Building traffic
o Achieving greater market share
o Creating an image
o Furthering social objectives

Cost-Based pricing: basing price off the cost of producing product

Demand-based pricing (target costing): designing a product so that it satisfies
customers and meets the profit margins desired by the firm
Competition-Based pricing: a pricing strategy based on competitors
o Price leadership: a strategy by a dominant firm sets the pricing practises for the
rest of the industry
Break-even: (Total FC / P VC), process used to determine profitability at various levels
of sales
Total fixed costs: all expenses that remain the same no matter how many products or
services are made
Variable costs: costs that change depended on production
Skimming price strategy: when new product is priced high to make optimum profit
while theres little competition
Penetration pricing: priced low to attract customers and discourage competitors
EDLP (everyday low pricing): setting prices lower than competitors and not having any
special sales
High-low pricing strategy: set prices that are higher than EDLP stores but have many
sales
Psychological Pricing: pricing goods and services at price points that make the product
appear less expensive than it is.
Demand-oriented pricing: different consumers may be willing to pay different prices
Many non-price factors go into competition
o Product image, consumer benefits
Marketing intermediaries: organizations that assist in moving goods and services from
producers to business and consumer users
o B2B
o B2C
Channel of distribution: the path between suppliers to consumers
Agents/Brokers: intermediaries that bring buyers and sellers together and assist in
negotiating an exchange but do not take title to the goods
Wholesaler: a marketing intermediary that sells to other organizations
Retailer: an organization that sells to ultimate consumers
Intermediaries perform certain marketing tasks faster and cheaper than most
manufacturers such as transportation, storage, selling, advertising, relationship building
Intensive distribution: distribution that puts products into as many retail outlets as
possible
Selective distribution: distribution that sends products to only a preferred group of
retailers in an area
Exclusive distribution: distribution that sends products to only one retail outlet in each
geographic area
Direct selling: selling to customers in their homes or where they work.
Promotion mix: the combination of promotional tools an organization uses
o Advertising
o Personal Selling
o Public relations
o Direct marketing
o Sales promotion
IMC (integrated marketing communication): combines all the promotional tools into
one comprehensive and unified promotional strategy.
Advertising: paid promotion

Global advertising: involves developing a product and promotional strategy that can be
used worldwide.
o Today companies are moving away from globalism and towards regionalism
Personal Selling: the face to face presentation and promotion
Sales promotion: the promotional tool that stimulates consumer purchasing and dealer
interest by means of short-term activities.
Public relations: evaluating public attitudes and makes changes to earn public
understanding and acceptance
Direct marketing: any activity that directly links manufacturers or intermediaries with
the ultimate customer.
Word-Of Mouth Promotion: a promotional tool that involves people telling other people
about products they have purchased
Push strategy: promotional strategy in which the producer uses all promotional tools to
convince wholesalers and retailers to stock and sell merchandise
Pull strategy: heavy advertising and sales promotion efforts are directed toward
consumers so that they will request the products from retailers.

Chapter 10 Operation Management, Producing World-Class

Goods & Services

Canada is still a large industrial country with many major industries

o Canada is becoming less competitive b/c of inability to be modern and increases in
innovation.
o Current business field is based around constant and restless change and dislocation.
R&D: work directed toward the innovation, introduction and improvement of products and
processes.
Canadian manufacturers have done these things to regain a competitive edge
o Focus on customers, maintain close relationships with suppliers, practise continuous
improvement, focus on quality, etc.
Relationships between inputs and outputs, improvement when:
o Fewer input to produce the same level of outputs
o Same input more output
Production: the creation of finished goods and services using the factors of production;
land, labour, capital, entrepreneurship and knowledge.
Activity-based management: rescue non-value added processes
Production Management: the term used to describe all the activities that managers do
to help their firms create goods.
Operations Management: a specialized area in management that converts or
transforms resources (including HR) into goods and services.
o all about enriching the customer experience.
o Operations management is the implementation phase of management
o Operation management has lead to tremendous productivity increases in the
service sector.
Operations Management Planning: solves problems in the service and manufacturing
sectors
o Facility location, layout, quality control
o Facility Location: the process of selecting a geographic location for a companys
operations
o Outsourcing goods and services such as software development, call-centre jobs and
back-office jobs have been moving to developing countries for some time.

o
o

o
o

Telecommuting: working from home via computer is become a major trend in

business
Facility Layout: the physical arrangement of resources (including people) in the
production process.
Assembly-line: workers only do a few tasks at a time
Modular layout: where teams of workers combine to produce more complex
units of the final product
Fixed-position layout: allows works to congregate around the product to be
completed
Process layout: one in which similar equipment and functions are grouped
together
Allows for flexibility
MRP (material requirement planning): a computer-based production
management system that uses sales forecasts to make secure that needed parts
and materials are available at the right time and place.
ERP (enterprise resource planning): computer application that enables a firm to
manage all its operations (finance, requirements planning, human resources, and
order fulfillment), based on a single, integrated set of corporate data.
Enables the firm to monitor quality and customer satisfaction as it is
happening
Purchasing: the functional area in a firm that searches for quality material
resources, finds the best suppliers and negotiates the best price for goods and
services
JIT Inventory Control: a production process in which a minimum of inventory is
kept on the premises and parts, supplies and other needs are delivered just in time
for use on the assembly line.
Will only work effectively if process works in unison with an accurate
production schedule (ERP)
Ensures the right materials are at the right place at the cheapest cost to
meet both customer and production needs.
Quality: consistently producing what the customer wants while reducing errors
before and after delivery to the customer.
In the past quality was tested after production
QC should always be part of operations management planning rather than
simply an end-of-the-line inspection.
Six Sigma Quality: a quality measure that allows only 3.4 defects per
million events.
Statistical Quality Control (SQC): the process some managers use to
continually monitor all phases of the production process to assure that quality
is built from beginning
Statistical process control (SPC): the process of testing statistical
samples of product components at each stage of the production process and
plotting those results on a graph. Any variances from quality standards are
recognized and can be corrected if beyond the set standards.
ISO (International Organization for Standardization) 9000: given to
quality management and assurance standards
ISO 14000: a collection of the best practises for managing an organizations
impact on the environment
Supply Chain: the sequence of firms that perform activities required to create and
deliver a good and service to consumers or industrial users
Logistics: those activities that focus on getting the right amount of the right
products or services to the right place at the right time at the lowest possible cost.

o
o
o
o

o
o

Supply Chain Management: the integration and organization of information and

logistics activities across firms in a supply chain for the purpose of creating and
delivering goods and services that provide value to customers.
The need for improvement to remain competitive, increase in outsourcing,
shorter product life cycles and increased, customization etc.
Form Utility: the value added by the creation of finished goods and services (ie.
Transforming silicon into computer chips or putting services together to form
vacation package)
Build and deliver products in response to the demand of the customer at a
scheduled delivery time
Provide acceptable quality level
Provide everything at the lowest possible cost
Process Manufacturing: the part of the production process that physical or
chemically changes materials (ie. Boiling egg)
Assembly process: that part of the production process that puts together
components (ie. Making car)
Continuous Process: a production process in which long production runs turn out
finished goods over time (lots of eggs)
Intermittent process: a production process in which the production run is short
and the machines and changed frequently to make different products. (ie.
manufacturers of custom designed furniture)
The goal of operations management is to provide high-quality goods and services
instantaneously in response to customer demand.
Flexible Manufacturing: designing machines to do multiple tasks so that
they can produce a variety of products
Lean Manufacturing: the production of goods using less of everything
compared to mass production
Mass Customization: tailoring products to meet the needs of individual
customers
Industrial robotics
CAD Computer-Aided Design: the use of computers in the design of products
CAM Computer-Aided Manufacturing: the use of computers in the
manufacturing of products
Manufacturers can program small change and it can change the way the
process operates
CIM Computer Integrated Manufacturing: the uniting of computer-aided design
with computer-aided manufacturing.
Expensive but cuts a lot of costs
(PERT) Program Evaluation and Review Technique: a method for analyzing the
tasks involved in completing a given project, estimating the time needed to
complete each task and identifying the minimum time needed to complete the total
project.
Critical Path: in a PERT network, the sequence of time the longest time to
complete
Gantt Chart: bar graph showing production managers what projects are underway
and what stage they are in at any given time.