Business in United States of America

Intensive distribution puts products to as many retail outlets as possible. Products that need such distribution include candy, cigarettes, gum etc.

Selective distribution is the use of only preferred group of the available retailers in an area. Such selection helps assure the producers of quality sales and service. Manufacturers of TV sets, furniture and clothing usually use selective distribution.

Exclusive distribution is the use of only one retail outlet in a given geographical area. Because the retailer has exclusive rights to sell the product, he or she is more likely to carry more inventory, give better service and pay more attention to this brand than others. Automobile manufacturers usually use exclusive distribution.

Regardless of the strategy used, manufacturers often ship their goods through wholesalers, because they are more efficient at performing the distribution functions.

A wholesaler is a marketing middleman who sells to organizations and individuals, but not final consumers. He purchases, for resale, the best available merchandise at the lowest possible prices and expedite the delivery of goods from the producer to the customer.

There are basically 2 types of wholesalers: full-function wholesalers that do all eight functions and limited-function wholesalers that do only a few.

So, the reason for middlemen is to help perform the physical distribution function, that is movement of goods from producer to customer. Physical distribution begins with raw materials that have to be shipped to manufacturers who change them into useful products; it also includes those functions involved in purchasing goods, receiving them, moving them through the plant, inventorying them, storing them, and shipping finished goods all the way to final users.

Exercise 7. True or false?

1. Middlemen only add cost to products and do no good.

2. A wholesaler is a marketing middleman who sells to final consumers.

3. The success of any retail outlet depends largely on its sales workers.

4. A good distribution strategy for selling expensive cars is intensive distribution.

Promotion

A promotion mix is some combination of promotional tools (advertising, personal selling, public relations, publicity, sales promotion, a good product or service, and word-of-mouth) that can be used to communicate to various publics.

Advertising is limited to paid, nonpersonal communication through various media by organizations and individuals who are in some way identified in the advertising message. When people refer to advertising, they are usually talking about TV advertising; but only about 22% of advertising is on TV. The other media used for advertising are: newspapers, radio, magazines and direct mail.

The public benefits greatly from advertising. First, we learn about new products, new features, sales items, and more. But we also benefit from free radio and TV and subsidized newspapers and magazines. In short, advertising not only informs us about products but pays for us to watch TV and get the news from magazines and newspapers.

Sales promotion consists of those marketing activities that stimulate consumer purchasing and dealer interest by means of such things as displays, shows and exhibitions, and contests. Sales promotion programs supplement personal selling, advertising, and public relations efforts by creating enthusiasm for the overall promotional program.

There are two ways to promote the movement of products from producers to customers. The first is called a push strategy. In push strategy, the producer uses promotional tools to convince wholesalers and retailers to stock and sell merchandise. If it works, consumers will then walk into the store, see the product, and buy it. The idea is to push the product down the distribution system to the stores. One example of a push strategy is to offer dealers one free case of beer or soda for every dozen cases they purchase. A second strategy is called a pull strategy. In this case heavy promotion is directed toward consumers. If it works, consumers will go to the store and order the products. The storeowner will then order them from the producer. Products are thus pulled down through the distribution system. Dr. Pepper has used television advertising in a pull strategy to increase distribution. Of course, a company could use both a push and pull strategy at the same time in a major promotional effect.

Word-of-mouth promotion encourages people to tell other people about products they have enjoyed. Word of mouth is one of the most effective promotional tools, but one most marketers do not use to full effectiveness.

Anything that encourages people to talk favourably about an organization is effective word of mouth – music, fairs, clowns and other attention-getting devices. Samples are another way to generate word of mouth. But the best way is to have a good product, provide good services, and keep customers happy. We consumers are happy to tell others where to get good services and reliable products. However, we are also quick to tell others when we are unhappy with products and services. Negative word of mouth hurts a firm badly. Taking care of consumer complaints quickly and effectively is the best way to lessen negative word of mouth.

Public relations is defined as the management function that evaluates public attitudes, identifies the policies and procedures of an individual or an organization with the public interest, and executes a program of action to earn public understanding and acceptance. Public relations start with good marketing research. The second step, after listening to the public, is the development of policies and procedures that are in the public interest. The final step is to take action to earn public understanding and acceptance.

Personal selling is the face presentation and promotion of products and services plus the searching out of prospects and follow-up service. Effective selling is not simply a matter of persuading others to buy. In fact, it is more accurately described as helping others to satisfy their wants and needs.

Exercise 8. True or false?

1. Advertising is paid, personal communication through different media.

2. Only companies benefit from advertising.

3. Displays, shows and exhibitions are all means of sales promotion.

4. Offering a dealer a free box of goods for every dozen bought is an example of a push sales strategy.

Price

Firms must establish realistic and measurable pricing goals if marketing strategy is to be effective. Some firms aim for a target return on investment which enables them to determine a required level of profit. This, in turn, helps in the setting of prices and other marketing mix variables.

Some firms use market share as a pricing goal. In the search for increased share of the market, firms might cut prices and hurt their profit margins.

Another pricing objective is to meet competition. Many firms are suffering greatly from such practices or even go bankrupt.

Some firms set a profit-maximization objective, where the goal is to earn as mush as possible. Such policy cannot usually be implemented over a long run because of competitive and government forces, but in the short run it can be quite effective.

Pricing objectives are based on a firm’s overall objectives, the market segments being served, competition, market conditions, and many other variables. The basic overall objective is to establish mutually beneficial exchange relationships with selected target markets.

There are different pricing strategies. A skimming price strategy is one in which the product is priced high to make optimum profit while there is little competition. Of course, those large profits will attract others to produce similar goods so they can’t last long.

A penetration strategy is one in which a product is priced low to attract more customers and discourage competitors. This strategy enables the firm to penetrate or capture a large share of the market quickly. Another pricing strategy is called psychological or odd pricing when retailers price good at $9.99 instead of $10.00 believing that such odd prices are psychologically more attractive than even prices.

Exercise 9. True or false?

1. To increase market share it is sometimes necessary to decrease the price.

2. A profit-maximization objective can't be used during a long period of time.

3. A penetration strategy is one when a product is priced very high.

4. Odd pricing is based on studying people's psychology.

 

Part 3. Management

 

Exercise 10. Match the words and their definitions:

1. Management a. The art of getting things done through people and other resources.

2. Planning b. Allocating resources, assigning tasks and establishing the organization objectives.

3. Organization c. Anticipating future trends and determining the best strategies and tactics to achieve organizational objectives.

4. Leadership d. Measuring performance relative to objectives and standards and taking corrective actions where necessary.

5. Controle e. Establishing values, sharing visions, creating enthusiasm an maintaining focus on a few, clear objectives.

Management is the art of getting things done through people and other resources.

The four primary managerial functions are planning, organization, leadership, and control. Other functions include stuffing (personnel), directing, reporting, and budgeting.

But management is much more complex than doing a few tasks. A good manager must know about the industry the firm is in and all the technological, political, competitive, and social factors affecting that industry. He or she must also understand the kind of people who work in the industry and what motivates them. Finally, a manager must be skilled in performing various managerial tasks, especially technical tasks, human relations tasks, and communications tasks.

Planning

Planning includes anticipationg future trends and determining the best strategies and tactics to achieve organizational objectives. Most planning follow similar patterns. Planning answers three fundamental questions for business:

1. What is the situation now? What is the state of the economy? What opportunities exist for meeting people’s needs? How much competition is there?

2. Where do we want to go? What objectives do we want to accomplish?

3. How can we get there from here? This is the most important part of planning which takes three forms:

1. Strategic (long-range) planning determines the major objectives of the organization and the policies and strategies for obtaining and using resources to achieve those objectives. At this stage the company decides which customers to serve, what products or services to sell, and the geographic areas in which the firm will compete.

2. Tactical planning is the process of developing detailed, short-term decisions about what is to be done, who is to do it, and how it is to be done.

Whereas strategic planning is done by the top managers of the firm, tactical planning is more often done by managers at lower levels of the organization. Tactical planning may involve setting annual budgets and deciding on the details of how to meet the strategic objectives.

3. Contingency planning is the preparation of alternative courses of action that may be used if the primary plans do not achieve the objectives of the organization. The economic and competitive environments change so rapidly that it is wise to have alternative plans of action ready in anticipation of such changes.

Exercise 11. True or false?

1. Strategic planning is the process of making short-term decisions.

2. Strategic planning is mainly done by top managers.

3. Contingency planning is the same as tactical planning.

4. It's necessary to have alternative plans in case of changes in economic environment.

Organization

Organization means allocating resources, assigning tasks, and establishing procedures for accomplishing the organization objectives. When organizing, a manager develops a structure or framework that relates all workers, tasks, and resources to each other. That framework is called the organization structure and pictures who reports to whom and who is responsible for each task.

An important part of organizing is staffing, getting the right people on the business team. Today it is called human resources management because it is as important to develop the potential of employees, as it is to recruit good people in the first place.

Exercise 12. True or false?

1. Organizational structure is a picture showing who reports to whom in the company.

2. Stuffing is a part of an organization structure.

Leadership

Leadership today is not just good management. It is also a matter of establishing values, sharing visions, creating enthusiasm, and maintaining focus on a few, clear objectives.

There are different leadership styles.

Autocratic leadership means making managerial decisions without consulting others, and implies power over others.

Bureaucratic leadership is based on inflexible routine supported by rules, regulations, and policies.

Diplomatic leadership is based on skill and tact in convincing employees to follow the leader's decisions.

Democratic leadership means that managers set work together to make decisions.

Laissez-faire leadership means that managers set objectives and employees are relatively free to do whatever it takes to accomplish those objectives. Many scientists and doctors work best under laissez-faire leadership.

Employee-controlled leadership consists of having employees set objectives, and management handle administrative matters. Many universities are run this way.

Participative management involves employees in setting objectives and making decisions; consultive, democratic and laissez-faire leadership are all forms of participative management.

One manager may use a variety of leadership styles depending on whom he is dealing with and the situation.

Exercise 13. True or false?

1. Autocratic leadership is based on tact in convincing people to follow the leader's decisions.

2. Every manager uses only one leadership style.

3. Democratic management is an example of participative management.

4. Doctors and scientists usually better work under bureaucratic leadership.

Control

The control function involves measuring performance relative to objectives and standards and taking corrective action when necessary. The control function, therefore, is the heart of the management system because it provides the feedback that enables managers to adjust to any deviations from plans and to changes that have occurred in the environment that have affected performance.

Controlling consists of the following steps:

1. Setting clear standards;

2. Monitoring and recording performance (results);

3. Comparing results against plans and standards;

4. Communicating results and deviations to the employees involved;

5. Taking corrective action when needed.

Tasks and skills at different levels

of management

A manager must have three categories of skills.

Technical skills involve the ability to perform tasks of a specific department such as selling or accounting.

Conceptual skills refer to a manager’s ability to picture the organization as a whole and the relationship of various parts to perform tasks such as planning and controlling.

Human relations skills include leadership, communication, motivation, coaching, and training.

The higher up one goes in management, the more time is spent on conceptual and human relations functions and less on technical functions.

Exercise 14. True or false?

1. Top managers spend more time on technical function than on the others.

2. Conceptual skills refer to ability to perform specific tasks.

 

Part 4. Accounting and Finance

 

Exercise 15. Match the words and the definitions:

1. Accounting A document reporting the results of company operations over a particular period of time.

2. Income statement A financial statement that reports the financial position of a firm at a specific time.

3. Balance sheet Acquiring funds for the firm and managing funds within a firm.

4. Financing Recording data from transactions and preparing financial statements.

Accounting

Accounting process consists of two major functions:

1. Recording data from transactions;

2. Preparing financial statements.

Transactions include buying and selling goods and services, acquiring insurance, using supplies, and paying taxes. After the transactions have been recorded, they are usually classified into groups that have common characteristics. For example, all purchases are grouped together, as are all sales transactions. Other kinds of accounting documents are: purchasing documents, payroll records, bank documents, travel and entertainment records. The business is thus able to obtain needed information about purchases, sales and other transactions that occur over a given period of time. The methods used to record and summarize accounting data into reports is called an accounting system. One purpose of accounting is to help managers evaluate the financial condition and the operating performance of the firm so that they may take better decisions. Another is to report financial information to people outside the firm such as owners, creditors, suppliers, and the government (for tax purposes).

When recording the original transaction documents in a journal the accountant places them in certain accounts.

Accountants use five major accounts to prepare financial statements:

1. Assets. Assets are what a business owns, property that have money value. Assets include the following:

· Cash (cash on hand and deposits in banks)

· Accounts receivable (money owed to a business from customers who bought goods on credit)

· Inventory

· Investments

· Land

· Equipment

· Buildings

· Motor vehicles

· Patents

· Copyrights

Assets are divided into three categories:

1) Current assets (items that can be converted to cash within one year),

2) Fixed assets (items such as land, buildings and fixtures that are relatively permanent),

3) Other (intangible) assets (patents and copyright).

2. Liabilities. Liabilities are what the business owes to others. They include:

· Accounts payable (money owed to others for merchandise and services purchased on credit, but not paid for yet),

· Accrued expenses payable (expenses the firm owes that haven’t been paid),

· Bonds payable (these represent money loaned to the firm that it must pay back).

Liabilities are divided into two categories:

Current liabilities or obligations that must be paid within one year, such as accounts payable.

Long term liabilities or obligations that will not be paid within one year, such as bonds.

3. Owners’ equity. It is assets minus liabilities. For sole proprietors, owners’ equity means the value of everything owned by the business minus any liabilities of the owners (for example, outstanding loans). For corporation, the owners’ equity account records the owners’ claims to funds they have invested in the firm (capital stock) plus earnings kept in the business and not paid out in dividends (retained earnings).

4. Revenues. Revenues is the value of what is received for goods sold, services rendered, and from other sources. That includes sales revenues, rental revenues, commissions, royalties.

5. Expenses. They are costs incurred in operating the business, such as rent, utilities, salaries and wages, insurance, advertising etc.

Financial documents

The two most important financial statements are: the income statement and the balance sheet.

1. The income statement is also called profit and loss statement. It summarizes all the resources that came into the firm from operating activities (called revenue), money resources that were used up (called cost of goods sold and expenses), and what resources were left after all costs and expenses were incurred (net income or net loss). It reports the results of operating over a particular period of time.

2. The balance sheet is the financial statement that reports the financial position of a firm at a specific time. The words "balance sheet" imply, that the report shows a balance, an equality between two figures. That is the balance sheet shows a balance between assets and liabilities plus owner’s equity.