Unit 9 Seminar MT209, Small Business Management

Unit 9 Seminar Game Plan Course Check-In Course Website Check-In Course Activities & Assignments Check-In Review Unit 7 & 8 Content Content Review Assignment Review Unit 9 Check-In Look Ahead to End of Course & Term

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–3 UNIT 7 Review- Setting a Price Price A specification of what a seller requires in exchange for transferring ownership or use of a product or service. Prices set too low, loss in revenue Price set too high, loss in revenue Price and demand are related for many goods and services Credit An agreement between a buyer and a seller that provides for delayed payment for a product or service.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–4 Exhibit 16.1 The Three Components of Total Cost in Determining Price

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–5 Cost Determination for Pricing Total Cost The sum of cost of goods sold, selling expenses, and overhead costs. Variable Costs Costs that vary with the quantity produced or sold. Fixed Costs Costs that remain constant as the quantity product or sold varies. Average Pricing An approach in which total cost for a given period is divided by quantity sold in that period to set a price.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–6 How Customer Demand Affects Pricing The Elasticity of Demand The degree to which a change in price affects the quantity demanded. Elastic Demand Demand that changes significantly when there is a change in the price of the product. Inelastic Demand Demand that does not change significantly when there is a change in the price of the product. Demand Price Elastic Inelastic

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–7 Pricing and Competitive Advantage Customers will demand and pay more for a product or service that they perceive as important to their needs. Prestige Pricing Setting a high price to convey an image of high quality or uniqueness (competitive advantage). Customers associate price with quality. Markets with low levels of product knowledge are candidates for prestige pricing.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–8 Applying a Pricing System Break-Even Analysis A comparison of alternative cost and revenue estimates in order to determine the acceptability of each price. Steps in the analysis Examining revenue-cost relationships: the quantity at which the product will generate enough revenue to start earning a profit. Break-even units sold = total fixed costs and expenses selling price – unit variable costs and expenses

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–9 Offering Credit Benefits of Credit to Borrowers Provides working capital Ability to satisfy immediate needs and pay later Better records of purchases on credit billing Better service and greater convenience when exchanging purchased items Establishment of credit history

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–10 Types of Credit Consumer Credit Financing granted by retailers to individuals who purchase for personal or family use. Trade Credit Financing provided by a supplier of inventory to a given company which sets up an account payable for the amount. Terms of sale may be 2/10, net 30—two percent discount on the invoiced amount if paid in full within 10 days of the invoice date, otherwise the full amount of the invoice is due in 30 days.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 16–11 Managing the Credit Process Evaluation of Credit Applicants Can the buyer pay as promised? Will the buyer pay? If so, when will the buyer pay? If not, can the buyer be forced to pay? The Traditional Five C’s of Credit Character Capital Capacity Conditions Collateral

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 18–12 Small Businesses as Global Enterprises Globalization The expansion of international business: Converging market preferences Falling trade barriers Integration of national economies. Born-Global Firms Small companies launched with cross-border business activities in mind Size does not necessarily limit a firm’s international activity—small companies can build upon their unique resources to become global competitors.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 18–13 Questions Before Going Global What are management’s objectives? Reasons, commitment, expected payoff How prepared is management to go global? Expertise, responsibility for and time allocated to international operations, organizational structure Is there sufficient production capacity? Present capacity, effect of international operations on local production Is there enough financial capacity? Capital available for marketing, expansion, payback

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 18–14 Exhibit 18.2 Basic Forces Driving Global Enterprises

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 18–15 Exhibit 18.4 Strategy Options for Global Enterprises

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–16 UNIT 8 -Entrepreneurial Leadership What is Leadership? Involves pointing the way: creating and communicating the entrepreneur’s vision of the firm. Varies in a business as it grows larger and more mature. Leadership Qualities of Founders A tolerance for ambiguity A capacity for adaptation

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–17 Entrepreneurial Leadership (cont’d) What Makes an Effective Leader? One who is focused intently on attaining the firm’s business goals. One who creates a significant personal relationship with employees based on loyalty and respect. One who directly influences employees’ understanding of how the firm operates (e.g., its ethics). One who makes the firm attractive to new employees.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–18 Entrepreneurial Leadership (cont’d) Leadership Styles Visionary leaders mobilize people toward a vision. Coaching leaders develop people, establishing a relationship and trust. Affiliative leaders create emotional bonds. Democratic leaders build consensus through participation. Pacesetting leaders set high standards and expect excellence. Commanding leaders demand immediate compliance. Which type are you??

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–19 Entrepreneurial Leadership (cont’d) Leaders Shape the Culture of the Organization Empowerment Giving employees authority to make decisions and take actions on their own Work teams Groups of self-managed employees with the freedom to function without close supervision Working environment Workers are affected by their surrounding Good Hiring Employees who fit the personality of the firm

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–20 Exhibit 19.1 Organizational Stages of Small Business Growth

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–21 Stages in Firm Growth and Management Growth StageEntrepreneur’s Workload Stage 1. One-Person OperationDoing all of the work. Making contact with customers. Stage 2. Player-CoachContinuing to do some of the basic work, although learning to hire and supervise. Stage 3. Intermediate SupervisionRising above hands-on management; working through intermediate managers. Stage 4. Formal OrganizationUsing plans and budgets; following policies and procedures.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–22 Managing Versus Doing

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–23 Creating an Organizational Structure The Unplanned Structure Structure evolves as the firm evolves. Growth creates the need for structural change. Chain of Command The official, vertical channel of communication in an organization A channel for two-way communication Span of Control The number of subordinates supervised by one manager

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 19–24 Exhibit 19.2 Line-and-Staff Organization

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 20–25 Recruiting Personnel The Need for Quality Employees Employee performance directly or indirectly affects the capability of the firm to service customer needs. Employee performance affects profitability. Payroll costs affect firm’s bottom line. Quality of employees determines the long-term competitive potential of the firm.

© 2010 South-Western, Cengage Learning, Inc. All rights reserved. 20–26 Diversity in the Workforce Workforce Diversity Differences among employees in terms of such dimensions as gender, age, and race. Diversity is increasing with higher proportions of women, older workers, and racial minorities entering the workforce.

Unit 9: Final Project Activity: Financial Management Financial Management This portion of your mini-business plan should contain summary information on what financial resources you will need to launch your business, what types of expenses you will have over the first three years of operation, and what your financial goals are for the first three years of operation. Be sure to draw on your work from the Unit 5 Activity for this segment of the Final Project. Please remember: As a guide to help you develop your mini- business plan, please refer to the content of the Atayne, LLC business plan on pages 675 to 695 of our textbook.

Unit 9 Information Please note that the Unit 9 Final Project (Business Plan & MS PowerPoint Presentation) must be submitted no later than the end of Unit 9. No late submissions of this important assignment will be accepted to allow time for grading and submission of final grades for the term. Unit 9: Managi ng Operations, Assets & Risks Reading Discussion Final Project: Business Plan Review Seminar Preview Unit 10 Writing Assignment Discussion Posts Final Project: Business Plan Paper /PPT presentation Review- 20 questions

Unit 10 Information Please note that the Unit 10 Writing Assignment must be submitted no later than the end of Unit 10. No late submissions of this important assignment will be accepted to allow time for grading and submission of final grades for the term. Unit 10: ReflectionWriting Assignment: Careers and Reflection Paper

Last Live Seminar! This was our last live seminar in MT209 Thank you for attending tonight’s seminar. It was great working with each of you this term! Best wishes to you for much success in your upcoming classes at Kaplan University!!!