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Basic Forms of Business Ownership

This page will provide a brief overview of the different types of basic
forms of business ownership including: corporation, sole
proprietorship, and partnership.

Corporations

A corporation is a legal entity with authority to act and have liability


separate from its owners. They make up 19 percent out of all the basic
forms of ownerships. They account for 89 percent out of all the profits
from the basic forms of ownerships. Some advantages of corporations
are more money for investment, limited liability, perpetual life, and
size. Some disadvantages of corporations are expensive initial costs,
double taxation, and conflict with the board of directors. There are two
types of corporations, conventional (C) corporations and S
corporations. A S corporation is a unique government creation that
looks like a corporation, but is taxed like sole proprietorships and
partnerships. They have the benefit of limited liability, but their profits
are taxed as the personal income of the shareholders, thus avoiding
the double taxation of C Corporations. Examples include: Varsity
Liquors in Princeton, NJ and Conte Brothers Automotive in Cherryhill,
NJ.
Sole Proprietorship

A sole proprietorship is a business that is owned and usually managed


by one person. This is the most common form of business ownership.
Advantages include: being your own boss, leaving a legacy, ease of
starting and ending a business. Disadvantages include: limited
financial resources, unlimited liability, and overwhelming time
commitment. They make up 74 percent of businesses, but only take six
percent of all profits. An example of this type of business is The
Brunswick Fitness Store in Marlboro, NJ.
Partnerships
A partnership is a business between two or more people. It is the least
common type of all the basic forms of ownership. Out of all business it
makes the least amount of profits. Advantages include: more financial
resources, shared management and knowledge, and longer survival.
Disadvantages include: unlimited liability, division of profits,
disagreements among partners and the partnership will be difficult to
terminate. An example of a partnership is Mobile Exchange, which is
located in New Brunswick, NJ.

CLASSIFICATION
library classification is a system of coding and organizing library materials
(books, serials, audiovisual materials, computer files, maps, manuscripts,
realia) according to their subject and allocating a call number to that
information resource. Similar to classification systems used in biology,
bibliographic classification systems group entities that are similar together
typically arranged in a hierarchical tree structure. A different kind of
classification, called a 'faceted' system, is also widely used. This synthesises
a class mark from various aspects of the subject.
Classification of a piece of work consists of two steps. Firstly the 'aboutness'
of the material is ascertained. Next, a call number,(essentially a book's
address), based on the classification system will be assigned to the work
using the notation of the system.
It is important to note that unlike subject heading or Thesauri where multiple
terms can be assigned to the same work, in classification systems, each work
can only be placed in one class. This is due to shelving purposes: A book
can have only one physical place. However in classified catalogs one may
have main entries as well as added entries. Most classification systems like
DDC and Library of Congress classification, also add a cutter number to
each work which adds a code for the author of the work.
Classification systems in libraries generally play two roles. Firstly they
facilitate subject access by allowing the user to find out what works or
documents the library has on a certain subject. Secondly, they provide a
known location for the information source to be located (e.g where it is
shelved).
Until the 19th century, most libraries had closed stacks, so the library
classification only served to organize the subject catalog. In the 20th
century, libraries opened their stacks to the public and started to shelve the
library material itself according to some library classification to simplify
subject browsing.
Some classification systems are more suitable for aiding subject access,
rather than for shelf location. For example, UDC which uses a complicated
notation including plus, colons are more difficult to use for the purpose of
shelf arrangement but are more expressive compared to DDC in terms of
showing relationships between subjects. Similarly faceted classification
schemes are more difficult to use for shelf arrangement, unless the user has
knowledge of the citation order.

Organization
An organization (or organisation — see spelling differences) is a social
arrangement which pursues collective goals, which controls its own
performance, and which has a boundary separating it from its environment.
The word itself is derived from the Greek word ὄργανον (organon)
meaning tool. The term is used in both daily and scientific English in
multiple ways.
In the social sciences, organizations are studied by researchers from several
disciplines, the most common of which are sociology, economics, political
science, psychology, management, and organizational communication. The
broad area is commonly referred to as organizational studies, organizational
behavior or organization analysis. Therefore, a number of different theories
and perspectives exist, some of which are compatible, and others that are
competing.
• Organization – process-related: an entity is being (re-)organized
(organization as task or action).
• Organization – functional: organization as a function of how entities
like businesses or state authorities are used (organization as a
permanent structure).
• Organization – institutional: an entity is an organization (organization
as an actual purposeful structure within a social context)

Theoretical scope
Mary Parker Follett (1868–1933), who wrote on the topic in the early
twentieth century, defined management as "the art of getting things done
through people".[2] One can also think of management functionally, as the
action of measuring a quantity on a regular basis and of adjusting some
initial plan; or as the actions taken to reach one's intended goal. This applies
even in situations where planning does not take place. From this perspective,
Frenchman Henri Fayol[3] considers management to consist of five functions:
1. Planning
2. Organizing
3. Leading
4. Coordinating
5. Controlling
6. Measuring results

Some people, however, find this definition, while useful, far too narrow. The
phrase "management is what managers do" occurs widely, suggesting the
difficulty of defining management, the shifting nature of definitions, and the
connection of managerial practices with the existence of a managerial cadre
or class.
One habit of thought regards management as equivalent to "business
administration" and thus excludes management in places outside commerce,
as for example in charities and in the public sector. More realistically,
however, every organization must manage its work, people, processes,
technology, etc. in order to maximize its effectiveness. Nonetheless, many
people refer to university departments which teach management as "business
schools." Some institutions (such as the Harvard Business School) use that
name while others (such as the Yale School of Management) employ the
more inclusive term "management."
Speakers of English may also use the term "management" or "the
management" as a collective word describing the managers of an
organization, for example of a corporation. Historically this use of the term
was often contrasted with the term "Labor" referring to those being
managed.

Nature of managerial work


In for-profit work, management has as its primary function the satisfaction
of a range of stakeholders. This typically involves making a profit (for the
shareholders), creating valued products at a reasonable cost (for customers),
and providing rewarding employment opportunities (for employees). In
nonprofit management, add the importance of keeping the faith of donors. In
most models of management/governance, shareholders vote for the board of
directors, and the board then hires senior management. Some organizations
have experimented with other methods (such as employee-voting models) of
selecting or reviewing managers; but this occurs only very rarely.
In the public sector of countries constituted as representative democracies,
voters elect politicians to public office. Such politicians hire many managers
and administrators, and in some countries like the United States political
appointees lose their jobs on the election of a new president/governor/mayor.
Some 2500 people serve at the pleasure of the United States Chief
Executive, including all of the top US government executives.
Public, private, and voluntary sectors place different demands on managers,
but all must retain the faith of those who select them (if they wish to retain
their jobs), retain the faith of those people that fund the organization, and
retain the faith of those who work for the organization. If they fail to
convince employees of the advantages of staying rather than leaving, they
may tip the organization into a downward spiral of hiring, training, firing,
and recruiting. Management also has the task of innovating and of
improving the functioning of organizations

Historical development
Difficulties arise in tracing the history of management. Some see it (by
definition) as a late modern (in the sense of late modernity)
conceptualization. On those terms it cannot have a pre-modern history, only
harbingers (such as stewards). Others, however, detect management-like
activities in the pre-modern past. Some writers[who?] trace the development of
management-thought back to Sumerian traders and to the builders of the
pyramids of ancient Egypt. Slave-owners through the centuries faced the
problems of exploiting/motivating a dependent but sometimes unenthusiastic
or recalcitrant workforce, but many pre-industrial enterprises, given their
small scale, did not feel compelled to face the issues of management
systematically. However, innovations such as the spread of Hindu-Arabic
numerals (5th to 15th centuries) and the codification of double-entry book-
keeping (1494) provided tools for management assessment, planning and
control.
Given the scale of most commercial operations and the lack of mechanized
record-keeping and recording before the industrial revolution, it made sense
for most owners of enterprises in those times to carry out management
functions by and for themselves. But with growing size and complexity of
organizations, the split between owners (individuals, industrial dynasties or
groups of shareholders) and day-to-day managers (independent specialists in
planning and control) gradually became more common.
Sun Tzu's The Art of War
Written by Chinese general Sun Tzu in the 6th century BCE, The Art of War
is a military strategy book that, for managerial purposes, recommends being
aware of and acting on strengths and weaknesses of both a manager's
organization and a foe's.[4]

Niccolò Machiavelli's The Prince


Believing that people were motivated by self-interest, Niccolò Machiavelli
wrote The Prince in 1513 as advice for the leadership of Florence, Italy.[5]
Machiavelli recommended that leaders use fear—but not hatred—to
maintain control.

Adam Smith's The Wealth of Nations


Written in 1776 by Adam Smith, a Scottish moral philosopher, The Wealth
of Nations aims for efficient organization of work through division of labor.
[5] Smith described how changes in processes could boost productivity in the

manufacture of pins. While individuals could produce 200 pins per day,
Smith analyzed the steps involved in manufacture and, with 10 specialists,
enabled production of 48,000 pins per day.[5]

19th century
Some argue[citation needed] that modern management as a discipline began as an
off-shoot of economics in the 19th century. Classical economists such as
Adam Smith (1723 - 1790) and John Stuart Mill (1806 - 1873) provided a
theoretical background to resource-allocation, production, and pricing
issues. About the same time, innovators like Eli Whitney (1765 - 1825),
James Watt (1736 - 1819), and Matthew Boulton (1728 - 1809) developed
elements of technical production such as standardization, quality-control
procedures, cost-accounting, interchangeability of parts, and work-planning.
Many of these aspects of management existed in the pre-1861 slave-based
sector of the US economy. That environment saw 4 million people, as the
contemporary usages had it, "managed" in profitable quasi-mass production.
By the late 19th century, marginal economists Alfred Marshall (1842 - 1924)
and Léon Walras (1834 - 1910) and others introduced a new layer of
complexity to the theoretical underpinnings of management. Joseph
Wharton offered the first tertiary-level course in management in 1881.
20th century
By about 1900 one finds managers trying to place their theories on what
they regarded as a thoroughly scientific basis (see scientism for perceived
limitations of this belief). Examples include Henry R. Towne's Science of
management in the 1890s, Frederick Winslow Taylor's Scientific
management (1911), Frank and Lillian Gilbreth's Applied motion study
(1917), and Henry L. Gantt's charts (1910s). J. Duncan wrote the first
college management textbook in 1911. In 1912 Yoichi Ueno introduced
Taylorism to Japan and became first management consultant of the
"Japanese-management style". His son Ichiro Ueno pioneered Japanese
quality-assurance.
The first comprehensive theories of management appeared around 1920. The
Harvard Business School invented the Master of Business Administration
degree (MBA) in 1921. People like Henri Fayol (1841 - 1925) and
Alexander Church described the various branches of management and their
inter-relationships. In the early 20th century, people like Ordway Tead (1891
- 1973), Walter Scott and J. Mooney applied the principles of psychology to
management, while other writers, such as Elton Mayo (1880 - 1949), Mary
Parker Follett (1868 - 1933), Chester Barnard (1886 - 1961), Max Weber
(1864 - 1920), Rensis Likert (1903 - 1981), and Chris Argyris (1923 - )
approached the phenomenon of management from a sociological
perspective.

21st century
In the 21st century observers find it increasingly difficult to subdivide
management into functional categories in this way. More and more
processes simultaneously involve several categories. Instead, one tends to
think in terms of the various processes, tasks, and objects subject to
management.
Branches of management theory also exist relating to nonprofits and to
government: such as public administration, public management, and
educational management. Further, management programs related to civil-
society organizations have also spawned programs in nonprofit management
and social entrepreneurship.
Note that many of the assumptions made by management have come under
attack from business ethics viewpoints, critical management studies, and
anti-corporate activism.
Management topics
Basic functions of management
Management operates through various functions, often classified as
planning, organizing, leading/motivating and controlling.
• Planning: deciding what needs to happen in the future (today, next
week, next month, next year, over the next 5 years, etc.) and
generating plans for action.
• Organizing: making optimum use of the resources required to enable
the successful carrying out of plans.
• Leading/Motivating: exhibiting skills in these areas for getting others
to play an effective part in achieving plans.
• Controlling: monitoring -- checking progress against plans, which
may need modification based on feedback.
Formation of the business policy
• The mission of the business is its most obvious purpose -- which may
be, for example, to make soap.
• The vision of the business reflects its aspirations and specifies its
intended direction or future destination.
• The objectives of the business refers to the ends or activity at which a
certain task is aimed.
• The business's policy is a guide that stipulates rules, regulations and
objectives, and may be used in the managers' decision-making. It must
be flexible and easily interpreted and understood by all employees.
• The business's strategy refers to the coordinated plan of action that it
is going to take, as well as the resources that it will use, to realize its
vision and long-term objectives. It is a guideline to managers,
stipulating how they ought to allocate and utilize the factors of
production to the business's advantage. Initially, it could help the
managers decide on what type of business they want to form
How to implement policies and strategies
• All policies and strategies must be discussed with all managerial
personnel and staff.
• Managers must understand where and how they can implement their
policies and strategies.
• A plan of action must be devised for each department.
• Policies and strategies must be reviewed regularly.
• Contingency plans must be devised in case the environment changes.
• Assessments of progress ought to be carried out regularly by top-level
managers.
• A good environment is required within the business.

The development of policies and strategies


• The missions, objectives, strengths and weaknesses of each
department must be analyzed to determine their roles in achieving the
business's mission.
• The forecasting method develops a reliable picture of the business's
future environment.
• A planning unit must be created to ensure that all plans are consistent
and that policies and strategies are aimed at achieving the same
mission and objectives.
• Contingency plans must be developed, just in case.
All policies must be discussed with all managerial personnel and staff that is
required in the execution of any departmental policy.

Where policies and strategies fit into the planning process


• They give mid- and lower-level managers a good idea of the future
plans for each department.
• A framework is created whereby plans and decisions are made.
• Mid- and lower-level management may add their own plans to the
business's strategic ones.

Managerial levels and hierarchy


The management of a large organization may have three levels:
1. Senior management (or "top management" or "upper management")
2. Middle management
3. Low-level management, such as supervisors or team-leaders
Top-level management

• Top-level managers require an extensive knowledge of management


roles and skills.
• They have to be very aware of external factors such as markets.
• Their decisions are generally of a long-term nature
• Their decision are made using analytic, directive, conceptual and/or
behavioral/participative processes
• They are responsible for strategic decisions.
• They have to chalk out the plan and see that plan may be effective in
the future.
• They are executive in nature.
Middle management

• Mid-level managers have a specialized understanding of certain


managerial tasks.
• They are responsible for carrying out the decisions made by top-level
management.
Lower management
• This level of management ensures that the decisions and plans taken
by the other two are carried out.
• Lower-level managers' decisions are generally short-term ones

Areas and categories and implementations of


management

• Accounting management
• Agile management
• Association management
• Capability Management
• Change management
• Communication management
• Constraint management
• Cost management
• Crisis management
• Critical management studies
• Customer relationship management
• Decision making styles
• Design management
• Disaster management
• Earned value management
• Educational management
• Human resources management
• Hospital management
• Information technology management
• Innovation management
• Interim management
• Inventory management
• Knowledge management
• Land management
• Leadership management
• Logistics management
• Lifecycle management
• Marketing management
• Materials management
• Operations management
• Organization development
• Perception management
• Practice management
• Program management
• Enterprise management
• Environmental management
• Facility management
• Financial management
• Forecasting
• Project management
• Process management
History of Entrepreneurship

The understanding of entrepreneurship owes much to the work of economist


Joseph Schumpeter and the Austrian economists such as Ludwig von Mises
and von Hayek. In Schumpeter (1950), an entrepreneur is a person who is
willing and able to convert a new idea or invention into a successful
innovation. Entrepreneurship forces "creative destruction" across markets
and industries, simultaneously creating new products and business models.
In this way, creative destruction is largely responsible for the dynamism of
industries and long-run economic growth. Despite Schumpeter's early 20th-
century contributions, the traditional microeconomic theory of economics
has had little room for entrepreneurs in its theoretical frameworks (instead
assuming that resources would find each other through a price system).[2]
Conceptual and theoretic developments in entrepreneurship history. Adapted
from Murphy, Liao, & Welsch (2006)

Some notable persons and their works in entrepreneurship history.


For Frank H. Knight (1967) and Peter Drucker (1970) entrepreneurship is
about taking risk. The behavior of the entrepreneur reflects a kind of person
willing to put his or her career and financial security on the line and take
risks in the name of an idea, spending much time as well as capital on an
uncertain venture. Knight classified three types of uncertainty.
• Risk, which is measurable statistically (such as the probability of
drawing a red colour ball from a jar containing 5 red balls and 5 white
balls).
• Ambiguity, which is hard to measure statistically (such as the
probablity of drawing a red ball from a jar containing 5 red balls but
with an unknown number of white balls).
• True Uncertainty or Knightian Uncertainty, which is impossible to
estimate or predict statistically (such as the probability of drawing a
red ball from a jar whose number of red balls is unknown as well as
the number of other coloured balls).
The acts of entrepreneurship is often associated with true uncertainty,
particularly when it involves bringing something really novel to the world,
whose market never exists. Before Internet, nobody knew the market for
Internet related businesses such as Amazon, Google, YouTube, Yahoo etc.
Only after the Internet emerged did people begin to see opportunities and
market in that technology. However, even if a market already exists, let's say
the market for cola drinks (which has been created by Coca Cola), there is
no guarantee that a market exists for a particular new player in the cola
category. The question is: whether a market exists and if it exists for you.
The place of the disharmony-creating and idiosyncratic entrepreneur in
traditional economic theory (which describes many efficiency-based ratios
assuming uniform outputs) presents theoretic quandaries. William Baumol
has added greatly to this area of economic theory and was recently honored
for it at the 2006 annual meeting of the American Economic Association.[2]
Entrepreneurship is widely regarded as an integral player in the business
culture of American life, and particularly as an engine for job creation and
economic growth. Robert Sobel published The Entrepreneurs: Explorations
Within the American Business Tradition in 1974.

The Entrepreneur
Entrepreneurs have many of the same character traits as leaders. Similarly to
the early great man theories of leadership; however trait-based theories of
entrepreneurship are increasingly being called into question. Entrepreneurs
are often contrasted with managers and administrators who are said to be
more methodical and less prone to risk-taking. Such person-centric models
of entrepreneurship have shown to be of questionable validity, not least as
many real-life entrepreneurs operate in teams rather than as single
individuals. Still, a vast but now clearly dated literature studying the
entrepreneurial personality found that certain traits seem to be associated
with entrepreneurs:
• David McClelland (1961) described the entrepreneur as primarily
motivated by an overwhelming need for achievement and strong urge
to build.
• Collins and Moore (1970) studied 150 entrepreneurs and concluded
that they are tough, pragmatic people driven by needs of
independence and achievement. They seldom are willing to submit to
authority.
• Bird (1992) sees entrepreneurs as mercurial, that is, prone to insights,
brainstorms, deceptions, ingeniousness and resourcefulness. they are
cunning, opportunistic, creative, and unsentimental.
• Cooper, Woo, & Dunkelberg (1988) argue that entrepreneurs exhibit
extreme optimism in their decision-making processes. In a study of
2994 entrepreneurs they report that 81% indicate their personal odds
of success as greater than 70% and a remarkable 33% seeing odds of
success of 10 out of 10.
• Busenitz and Barney (1997) claim entrepreneurs are prone to
overconfidence and over generalisations.
• Cole (1959) found there are four types of entrepreneur: the innovator,
the calculating inventor, the over-optimistic promoter, and the
organization builder. These types are not related to the personality but
to the type of opportunity the entrepreneur faces.

Characteristics of Entrepreneurship
• The entrepreneur has an enthusiastic vision, the driving force of an
enterprise.
• The entrepreneur's vision is usually supported by an interlocked
collection of specific ideas not available to the marketplace.
• The overall blueprint to realize the vision is clear, however details
may be incomplete, flexible, and evolving.
• The entrepreneur promotes the vision with enthusiastic passion.
• With persistence and determination, the entrepreneur develops
strategies to change the vision into reality.
• The entrepreneur takes the initial responsibility to cause a vision to
become a success.
• Entrepreneurs take prudent risks. They assess costs, market/customer
needs and persuade others to join and help.
• An entrepreneur is usually a positive thinker and a decision maker.
Contributions of Entrepreneurs
1. Develop new markets. Under the modern concept of marketing,
markets are people who are willing and able to satisfy their needs. In
Economics, this is called effective demand. Entrepreneurs are
resourceful and creative. They can create customers or buyers. This
makes entrepreneurs different from ordinary businessmen who only
perform traditional functions of management like planning,
organization, and coordination.
2. Discover new sources of materials. Entrepreneurs are never satisfied
with traditional or existing sources of materials. Due to their
innovative nature, they persist on discovering new sources of
materials to improve their enterprises. In business, those who can
develop new sources of materials enjoy a comparative advantage in
terms of supply, cost and quality.
3. Mobilize capital resources. Entrepreneurs are the organizers and
coordinators of the major factors of production, such as land labor and
capital. They properly mix these factors of production to create goods
and service. Capital resources, from a layman's view, refer to money.
However, in economics, capital resources represent machines,
buildings, and other physical productive resources. Entrepreneurs
have initiative and self-confidence in accumulating and mobilizing
capital resources for new business or business expansion.
4. Introduce new technologies, new industries and new products. Aside
from being innovators and reasonable risk-takers, entrepreneurs take
advantage of business opportunities, and transform these into profits.
So, they introduce something new or something different. Such
entrepreneurial spirit has greatly contributed to the modernization of
economies. Every year, there are new technologies and new products.
All of these are intended to satisfy human needs in more convenient
and pleasant way.
5. Create employment. The biggest employer is the private business
sector. Millions of jobs are provided by the factories, service
industries, agricultural enterprises, and the numerous small-scale
businesses. For instance, the super department stores like SM,
Uniwide, Robinson and others employ thousands of workers.
Likewise giant corporations like SMC, Ayala and Soriano group of
companies are great job creators. Such massive employment has
multiplier and accelerator effects in the whole economy. More jobs
mean more incomes. This increases demand for goods and services.
This stimulates production. Again, more production requires more
employment.

Advantages of Entrepreneurship
Every successful entrepreneur brings about benefits not only for himself/
herself but for the municipality, region or country as a whole. The benefits
that can be derived from entrepreneurial activities are as follows:
1. Enormous personal financial gain
2. Self-employment, offering more job satisfaction and flexibility of the
work force
3. Employment for others, often in better jobs
4. Development of more industries, especially in rural areas or regions
disadvantaged by economic changes, for example due to globalisation
effects
5. Encouragement of the processing of local materials into finished
goods for domestic consumption as well as for export
6. Income generation and increased economic growth
7. Healthy competition thus encourages higher quality products
8. More goods and services available
9. Development of new markets
10.Promotion of the use of modern technology in small-scale
manufacturing to enhance higher productivity
11.Encouragement of more researches/ studies and development of
modern machines and equipment for domestic consumption
12.Development of entrepreneurial qualities and attitudes among
potential entrepreneurs to bring about significant changes in the rural
areas
13.Freedom from the dependency on the jobs offered by others
14.The ability to have great accomplishments
15.Reduction of the informal economy
16.Emigration of talent may be stopped by a better domestic
entrepreneurship climate

Ownership
Ownership is the state or fact of exclusive rights and control over property,
which may be an object, land/real estate, intellectual property (arguably) or
some other kind of property. It is embodied in an ownership right also
referred to as title.
Ownership is the key building block in the development of the capitalist
socio-economic system. The concept of ownership has existed for thousands
of years and in all cultures. Over the millennia, however, and across cultures
what is considered eligible to be property and how that property is regarded
culturally is very different. Ownership is the basis for many other concepts
that form the foundations of ancient and modern societies such as money,
trade, debt, bankruptcy, the criminality of theft and private vs. public
property.
The process and mechanics of ownership are fairly complex since one can
gain, transfer and lose ownership of property in a number of ways. To
acquire property one can purchase it with money, trade it for other property,
receive it as a gift, steal it, find it, make it or homestead it. One can transfer
or lose ownership of property by selling it for money, exchanging it for other
property, giving it as a gift, being robbed of it, misplacing it, or having it
stripped from one's ownership through legal means such as eviction,
foreclosure and seizure. Ownership is self-propagating in that if an object is
owned by someone, any additional goods produced by using that object will
also be owned by the same person.

Types of owners
In person
Individuals may own property directly. In some societies only adult men
may own property; in other societies (such as the Haudenosaunee), property
is matrilinear and passed on from mother to daughter. In most societies both
men and women can own property with no restrictions.
Structured Ownership Entities
Throughout history, nations (or governments) and religions have owned
property. These entities exist primarily for other purposes than to own or
operate property, hence they may have no clear rules regarding the
disposition of their property.
To own and operate property, structures (often known today as legal entities)
have been created in many societies throughout history. The differences in
how they deal with members' rights is a key factor in determining their type.
Each type has advantages and disadvantages derived from their means of
recognizing or disregarding (rewarding or not), contributions of financial
capital or personal effort.
Cooperatives, corporations, trusts, partnerships, condominium associations
are only some of the many varied types of structured ownership; each type
has many subtypes. Legal advantages or restrictions on various types of
structured ownership have existed in many societies past and present. To
govern how assets are to be used, shared or treated, rules and regulations
may be legally imposed or internally adopted or decreed

Liability for the Group or for Others in the Group


Ownership implies responsibility, for actions regarding the property. A
"legal shield" is said to exist if the entity's legal liabilities do not get
redistributed among the entity's owners or members. An application of this,
to limit ownership risks, is to form a new entity to purchase, own and
operate each property. Since the entity is separate and distinct from others, if
a problem occurs which leads to a massive liability, the individual is
protected from losing more than the value of that one property. Many other
properties are protected, when owned by other distinct entities.
In the loosest sense of group ownership, a lack of legal framework, rules and
regulations may mean that group ownership of property places every
member in a position of responsibility (liability) for the actions of each other
member. A structured group duly constituted as an entity under law may still
not protect members from being personally liable for each others' actions.
Court decisions against the entity itself may give rise to unlimited personal
liability for each and every member. An example of this situation is a
professional partnership (e.g. law practice) in some jurisdictions. Thus,
being a partner or owner in a group may give little advantage in terms of
share ownership while producing a lot of risk to the partner, owner or
participant

Sharing Gains
At the end of each financial year, accounting rules determine a surplus or
profit, which may be retained inside the entity or distributed among owners
according to the initial setup intent when the entity was created.
Entities with a member focus will give financial surplus back to members
according to the volume of financial activity that the participating member
generated for the entity. Examples of this are producer cooperatives, buyer
cooperatives and participating whole life policyholders in both mutual and
share-capital insurance companies.
Entities with share voting rights that depend on financial capital distribute
surplus among shareholders without regard to any other contribution to the
entity. Depending on internal rules and regulations, certain classes of shares
have the right to receive increases in financial "dividends" while other
classes do not. After many years the increase over time is substantial if the
business is profitable. Examples of this are common shares and preferred
shares in private or publicly listed share capital corporations.
Entities with a focus on providing service in perpetuam do not distribute
financial surplus; they must retain it. It will then serve as a cushion against
losses or as a means to finance growth activities. Examples of this are not-
for-profit entities: they are allowed to make profits, but are not permitted to
give any of it back to members except by way of discounts in the future on
new transactions.
Depending on the charter at the foundation of the entity, and depending on
the legal framework under which the entity was created, the form of
ownership is determined once and for all time. To change it requires
significant work in terms of communicating with stakeholders (member-
owners, governments, etc) and acquiring their approval. Whatever structural
constraints or disadvantages exist at the creation thus remain an integral part
of the entity. Common in New York City is a form of real estate ownership
known as a cooperative (also co-operative or co-op) which relies heavily on
internal rules of operation instead of the legal framework governing
condominium associations. These "co-ops", owning the building for the
mutual benefit of its members, can ultimately perform most of the functions
of a legally constituted condominium, i.e. restricting use appropriately and
containing financial liabilities to within tolerable levels. To change their
structure now that they are up and operating would require significant effort
to achieve acceptance among members and various levels of government.

Sharing Needles
The owning entity makes rules governing use of property; each property
may comprise areas that are made available to any and every member of the
group to use. When the group is the entire nation, the same principle is in
effect whether the property is small (e.g. picnic rest stops along highways)
or large such as national parks, highways, ports, and publicly owned
buildings. Smaller examples of shared use include common areas such as
lobbies, entrance hallways and passages to adjacent buildings.PISS

Types of ownership
Personal property
Personal property is a type of property. In the common law systems personal
property may also be called chattels. It is distinguished from real property,
or real estate. In the civil law systems personal property is often called
movable property or movables - any property that can be moved from one
location or another. This term is in distinction with immovable property or
immovables, such as land and buildings.
Personal property may be classified in a variety of ways, such as goods,
money, negotiable instruments, securities, and intangible assets including
choses in action.
Land ownership
Real estate or immovable property is a legal term (in some jurisdictions) that
encompasses land along with anything permanently affixed to the land, such
as buildings. Real estate (immovable property) is often considered
synonymous with real property (also sometimes called realty), in contrast
with personal property (also sometimes called chattel or personalty).
However, for technical purposes, some people prefer to distinguish real
estate, referring to the land and fixtures themselves, from real property,
referring to ownership rights over real estate. The terms real estate and real
property are used primarily in common law, while civil law jurisdictions
refer instead to immovable property.
In law, the word real means relating to a thing (from Latin res, matter or
thing), as distinguished from a person. Thus the law broadly distinguishes
between [real property] (land and anything affixed to it) and [personal
property] (everything else, e.g., clothing, furniture, money). The conceptual
difference was between immovable property, which would transfer title
along with the land, and movable property, which a person would retain title
to. (The word is not derived from the notion of land having historically been
"royal" property. The word royal — and its Spanish cognate real — come
from the unrelated Latin word rex, meaning king.)

Corporations and legal entities


An individual or group of individuals can own corporations and other legal
entities. A legal entity is a legal construct through which the law allows a
group of natural persons to act as if it were an individual for certain
purposes. Some companies and entities are owned privately by the
individuals who registered them with the government while other companies
are owned publicly.
Some duly incorporated entities may not be owned by individuals nor by
other entities; they exist without being owned once they are created. Not
being owned, they cannot be bought and sold. Mutual life insurance
companies, credit unions, and cooperatives are examples of this. No person
can purchase the company, as their ownership is not legally available for
sale, neither as shares nor as a single whole.
A a publicly listed company, known as a public company, is owned by any
member of the public who wishes to purchase stock in that company rather
than by a relatively few individuals. A company that is owned by
stockholders who are members of the general public and trade shares
publicly, often through a listing on a stock exchange. Ownership is open to
anyone who has the money and inclination to buy shares in the company
Intellectual property
Intellectual (IP) property refers to a legal entitlement which sometimes
attaches to the expressed form of an idea, or to some other intangible subject
matter. This legal entitlement generally enables its holder to exercise
exclusive rights of use in relation to the subject matter of the IP. The term
intellectual property reflects the idea that this subject matter is the product
of the mind or the intellect, and that IP rights may be protected at law in the
same way as any other form of property.
Intellectual property laws confer a bundle of exclusive rights in relation to
the particular form or manner in which ideas or information are expressed or
manifested, and not in relation to the ideas or concepts themselves (see idea-
expression divide). It is therefore important to note that the term "intellectual
property" denotes the specific legal rights which authors, inventors and other
IP holders may hold and exercise, and not the intellectual work itself.
Intellectual property laws are designed to protect different forms of
intangible subject matter, although in some cases there is a degree of
overlap.
• copyright may subsist in creative and artistic works (eg. books,
movies, music, paintings, photographs and software), giving a
copyright holder the exclusive right to control reproduction or
adaptation of such works for a certain period of time.
Chattel slavery
The living human body is, in most modern societies, considered something
which cannot be the property of anyone but the person whose body it is.
This is in contradistinction to chattel slavery. Chattel slavery is a type of
slavery defined as the absolute legal ownership of a person or persons,
including the legal right to buy and sell them. The slaves do not have the
freedom to live life as they choose, but as they are instructed by their
owners, and their rights may be either severely limited or nonexistent. In
most countries, chattel slaves were considered as movable property.

Social Views of Ownership


In modern Western popular culture some people (principally among the far
political left) believe that exclusive ownership of property underlies much
social injustice, and facilitates tyranny and oppression on an individual and
societal scale. Others (principally among the political right) consider the
striving to achieve greater ownership of wealth as the driving factor behind
human technological advancement and increasing standards of living.
Vedantic view
The Indian spiritual science called Vedanta believes that the root of
ownership is the feeling that one is separate from the rest of the
universe[citation needed]. Given this understanding, one disconnects oneself from
the universe, and then attempts to reconnect with objects through a
relationship which is called ownership. Vedanta believes that the feeling of
ownership is an illusion, which remains with oneself as long as one
considers oneself as separate from the Universe. When one understands the
fundamental reality that there is only one entity called the Universe, there is
no need for ownership and one gets rid of this illusion.

Ownership Issues in Politics


Ownership society is a political slogan used by United States President
George W. Bush to promote a series of policies aimed to increase the control
of individual citizens over health care and social security payments and
policies. Critics have claimed that slogan hid an agenda that sought to
implement tax cuts and curtail the government's role in health care and
retirement saving

Controversies over the Universality of Ownership


Native America
A modern myth is that some societies, notably Native American ones,
appeared to exist without the concept of personal ownership. Members of a
society would feel free to take any objects they had need of, and expect them
to be taken by others.[citation needed] Recently, however, researchers have started
to question just how collectivist Native American societies really were.
Citing earlier studies done by anthropologists and historians "who were able
to interview tribal members who had lived in pre-reservation Indian
society," they argue that in fact, "most if not all North American indigenous
peoples had a strong belief in individual property rights and ownership." [1]
These researchers further assert that Native American collectivism is a myth
originating from the first encounters with tribes who, because of their
hunting-orientation "did not view land as an important asset", and indeed,
did not have a private property system with regards to land. The collectivist
myth was initially propagated by reporters and politicians who never
actually had contact with Native Americans and then made into a reality by
the collectivist property rights system forced on Indians by the 1934 Indian
Reorganization Act.
Policy
A policy is a deliberate plan of action to guide decisions and achieve rational
outcome(s). The term may apply to government, private sector organizations
and groups, and individuals. Presidential executive orders, corporate privacy
policies, and parliamentary rules of order are all examples of policy. Policy
differs from rules or law. While law can compel or prohibit behaviors (e.g. a
law requiring the payment of taxes on income) policy merely guides actions
toward those that are most likely to achieve a desired outcome.
Policy or policy study may also refer to the process of making important
organizational decisions, including the identification of different alternatives
such as programs or spending priorities, and choosing among them on the
basis of the impact they will have. Policies can be understood as political,
management, financial, and administrative mechanisms arranged to reach
explicit goals.

Definitions of policy
Definitions of policy and research done into the area of policy is frequently
performed from the perspective of policies created by national governments,
or public policy. Several definitions and key characteristics of policy have
been identified within the framework of government policy. While many of
these are broadly applicable to other organizations such as private
companies or non-profit organizations, the government-focused origin of
this work should be kept in mind.
According to William Jenkins in Policy Analysis: A Political and
Organizational Perspective (1978), a policy is ‘a set of interrelated decisions
taken by a political actor or group of actors concerning the selection of goals
and the means of achieving them within a specified situation where those
decisions should, in principle, be within the power of those actors to
achieve’. Being the author of numerous papers on the subject he is
considered to be a leading authority in this field.
According to Thomas Birkland in An Introduction to the Policy Process
(2001), there is a lack of a consensus on the definition of policy. Birkland
outlines a few definitions of policy (Table 1.3 on p. 21):
• "The term public policy always refers to the actions of government
and the intentions that determine those actions". -Clarke E. Cochran,
et al.
• "Public policy is the outcome of the struggle in government over who
gets what". -Clarke E. Cochran, et al.
• Public policy is "Whatever governments choose to do or not to do".
-Thomas Dye

Impact of policy
Intended Effects
The goals of policy may vary widely according to the organization and the
context in which they are made. Broadly, policies are typically instituted in
order to avoid some negative effect that has been noticed in the organization,
or to seek some positive benefit.
Corporate purchasing policies provide an example of how organizations
attempt to avoid negative effects. Many large companies have policies that
all purchases above a certain value must be performed through a purchasing
process. By requiring this standard purchasing process through policy, the
organization can limit waste and standardize the way purchasing is done.
The State of California provides an example of benefit-seeking policy. In
recent years, the numbers of hybrid vehicles in California has increased
dramatically, in part because of policy changes that provide USD $1,500 in
tax credits as well as the use of high-occupancy vehicle lanes to hybrid
owners. In this case, the organization (state and/or federal government)
created a positive effect (increased ownership and use of hybrid cars)
through policy (tax breaks, benefits).
Unintended Effects
Policies frequently have side effects or unintended consequences. Because
the environments that policies seek to influence or manipulate are typically
complex adaptive systems (e.g. governments, societies, large companies),
making a policy change can have counterintuitive results. For example, a
government may make a policy decision to raise taxes, in hopes of
increasing overall tax revenue. Depending on the size of the tax increase,
this may have the overall effect of reducing tax revenue by causing capital
flight or by creating a rate so high, citizens are disincentivized to earn the
money that is taxed. (See the Laffer curve)
The policy formulation process typically includes an attempt to assess as
many areas of potential policy impact as possible, to lessen the chances that
a given policy will have unexpected or unintended consequences. Because of
the nature of some complex adaptive systems such as societies and
governments, it may not be possible to assess all possible impacts of a given
policy.

Policy cycle
In political science the policy cycle is a tool used for the analysing of the
development of a policy item. It can also be referred to as a "stagist
approach". One standardised version includes the following stages:
1. Agenda setting (Problem identification)
2. Policy formation
3. Decision-making
4. Policy implementation
5. Policy analysis and evaluation (continue or terminate)
An eight step policy cycle is developed in detail in The Australian Policy
Handbook by Peter Bridgman and Glyn Davis: (now with Catherine Althaus
in its 4th edition)
1. Issue identification
2. Policy analysis
3. Policy instrument development
4. Consultation (which permeates the entire process)
5. Coordination
6. Decision
7. Implementation
8. Evaluation
The Althaus, Bridgman & Davis model is heuristic and iterative. It is
intentionally normative and not meant to be diagnostic or predictive. Policy
cycles are typically characterised as adopting a classical approach.
Accordingly some postmodern academics challenge cyclical models as
unresponsive and unrealistic, prefering systemic and more complex models
Policy content
Policies are typically promulgated through official written documents. Such
documents have standard formats that are particular to the organization
issuing the policy. While such formats differ in terms of their form, policy
documents usually contain certain standard components including:
• A purpose statement, outlining why the organization is issuing the
policy, and what its desired effect is.
• A applicability and scope statement, describing who the policy affects
and which actions are impacted by the policy. The applicability and
scope may expressly exclude certain people, organizations, or actions
from the policy requirements
• An effective date which indicates when the policy comes into force.
Retroactive policies are rare, but can be found.
• A responsibilities section, indicating which parties and organizations
are responsible for carrying out individual policy statements. These
responsibilities may include identification of oversight and/or
governance structures.
• Policy statements indicating the specific regulations, requirements, or
modifications to organizational behavior that the policy is creating.
Some policies may contain additional sections, including
• Background indicating any reasons and history that led to the creation
of the policy, which may be listed as motivating factors
• Definitions, providing clear and unambiguous definitions for terms
and concepts found in the policy document.

Policy typology
Policy addresses the intent of the organization, whether government,
business, professional, or voluntary. Policy is intended to affect the ‘real’
world, by guiding the decisions that are made. Whether they are formally
written or not, most organizations have identified policies.
Policies may be classified in many different ways. The following is a sample
of several different types of policies broken down by their effect on
members of the organization.
Distributive policies
Distributive policies extend goods and services to members of an
organization, as well as distributing the costs of the goods/services amongst
the members of the organization. Examples include government policies that
impact spending for welfare, public education, highways, and public safety,
or a professional organization's policy on membership training.
Regulatory policies
Regulatory policies, or mandates, limit the discretion of individuals and
agencies, or otherwise compel certain types of behavior. These policies are
generally thought to be best applied in situations where good behavior can
be easily defined and bad behavior can be easily regulated and punished
through fines or sanctions. An example of a fairly successful public
regulatory policy is that of a speed limit.
Constituent policies
Constituent policies create executive power entities, or deal with laws.
Constituent policies also deal with Fiscal Policy in some circumstances.
Miscellaneous policies
Policies are dynamic; they are not just static lists of goals or laws. Policy
blueprints have to be implemented, often with unexpected results. Social
policies are what happens ‘on the ground’ when they are implemented, as
well as what happens at the decision making or legislative stage.
When the term policy is used, it may also refer to:
• Official government policy (legislation or guidelines that govern how
laws should be put into operation)
• Broad ideas and goals in political manifestos and pamphlets
• A company or organization’s policy on a particular topic. For
example, the equal opportunity policy of a company shows that the
company aims to treat all its staff equally.
There is often a gulf between stated policy (i.e. which actions the
organization intends to take) and the actions the organization actually takes.
This difference is sometimes caused by political compromise over policy,
while in other situations it is caused by lack of policy implementation and
enforcement. Implementing policy may have unexpected results, stemming
from a policy whose reach extends further than the problem it was originally
crafted to address. Additionally, unpredictable results may arise from
selective or idiosyncratic enforcement of policy.
Types of policy include:
• Causal (resp. non-causal)
• Deterministic (resp. stochastic, randomized and sometimes non-
deterministic)
• Index
• Memoryless (e.g. non-stationary)
• Opportunistic (resp. non-opportunistic)
• Stationary (resp. non-stationary)
These qualifiers can be combined, so for example you could have a
stationary-memoryless-index policy.

Types of policy
• Communications and Information Policy
• Domestic policy
• Education policy
• Economic policy
• Energy policy
• Environmental Policy
• Foreign policy
• Health policy
• Housing policy
• Human resource policies
• Macroeconomic policy
• Monetary policy
• National defense policy
• Population policy
• Public policy in law
• Social policy
• Transportation policy
• Urban policy
• Water policy

Other uses of the term policy


• In enterprise architecture for systems design, policy appliances are
technical control and logging mechanisms to enforce or reconcile
policy (systems use) rules and to ensure accountability in information
systems.
• In insurance, policies are contracts between insurer and insured used
to indemnify (protect) against potential loss from specified perils.
While these documents are referred to as policies, they are in actuality
a form of contract - see insurance contract.
• In gambling, policy is a form of an unsanctioned lottery, where
players purport to purchase insurance against a chosen number being
picked by a legitimate lottery. Or can refer to an ordinary Numbers
game
• In artificial intelligence planning and reinforcement learning, a policy
prescribes a non-empty deliberation (sequence of actions) given a
non-empty sequence of states.
Planning
From Wikipedia, the free encyclopedia
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Planning is both the organizational process of creating and maintaining a
plan; and the psychological process of thinking about the activities required
to create a desired future on some scale. As such, it is a fundamental
property of intelligent behaviour. This thought process is essential to the
creation and refinement of a plan, or integration of it with other plans, that
is, it combines forecasting of developments with the prepararation of
scenarios of how to react to them.
The term is also used to describe the formal procedures used in such an
endeavor, such as the creation of documents, diagrams, or meetings to
discuss the important issues to be addressed, the objectives to be met, and
the strategy to be followed. Beyond this, planning has a different meaning
depending on the political or economic context in which it is used.

The planning process

The planning process[1]


The planning process provides the framework for developing conservation
plans on the basis of ecological, economic, social, and policy considerations.
Implementation of these plans may then be facilitated by utilizing technical,
educational, and financial assistance programs from NRCS or other sources.
[1]

The same planning process is used to develop conservation plans and


areawide conservation plans or assessments, but different activities are
required to complete each step of the process. Guidance in this handbook is
separated accordingly into conservation planning and areawide conservation
planning. On-site visits with the client are an integral part of the planning
process.[1]
Conservation plans are normally developed with an individual decision-
maker. An areawide conservation plan or assessment reflects the desired
future conditions developed in conjunction with the client and other
stakeholders in the area. The stakeholders may, or more likely may not, be
decision-makers for implementing planned activities.[1]

Applications
In public policy
Planning refers to the practice and the profession associated with the idea of
planning an idea yourself, (land use planning, urban planning or spatial
planning). In many countries, the operation of a town and country planning
system is often referred to as 'planning' and the professionals which operate
the system are known as 'planners'....... Planning: Planning is a process for
accomplishing purpose. It is blue print of business growth and a road map of
development. It helps in deciding objectives both in quantitative and
qualitative terms. It is setting of goals on the basis of objectives and keeping
in view the resources.
It is a conscious as well as sub-conscious activity. It is “an anticipatory
decision making process ” that helps in coping with complexities. It is
deciding future course of action from amongst alternatives. It is a process
that involves making and evaluating each set of interrelated decisions. It is
selection of missions, objectives and “ translation of knowledge into action.”
A planned performance brings better results compared to unplanned one. A
Managers’ job is planning, monitoring and controlling. Planning and goal
setting are important traits of an organization. It is done at all levels of the
organization. Planning includes the plan, the thought process, action, and
implementation. Planning gives more power over the future. Planning is
deciding in advance what to do, how to do it, when to do it, and who should
do it. It bridges the gap from where the organization is to where it wants to
be. The planning function involves establishing goals and arranging them in
logical order.
In organizations
Planning is also a management function, concerned with defining goals for
future organizational performance and deciding on the tasks and resources to
be used in order to attain those goals. To meet the goals, managers may
develop plans such as a business plan or a marketing plan. Planning always
has a purpose. The purpose may be achievement of certain goals or targets.
The planning helps to achieve these goals or target by using the available
time and resources. To minimize the timing and resources also require
proper planning.
Human responsibilities
Human Responsibilities refers to universal responsibilities of human beings
regardless of jurisdiction or other factors, such as ethnicity, nationality,
religion, or sex.
The idea of human responsibilities arises as a natural counter-balance to the
philosophical idea of human rights. Several groups and individuals have
suggested what exactly these responsibilities might be[citation needed], perhaps the
most well known being those proposed[1] by the InterAction Council[2], an
international council of former heads of state, in 1997 partly to mark the
50th anniversary of the Universal Declaration of Human Rights adopted by
the United Nations in 1948.

Criticism of the doctrine of positive responsibility


Many, particularly libertarians, assert there is no "social responsibility" to do
anything, but to refrain from doing. They argue that social responsibility
only exists to the extent that an individual or business should not initiate
physical force, threat of force, or fraud against another. In his famous article
The Social Responsibility of Business is to Increase Profits, Nobel
economist Milton Friedman(Classical View/theory of Social Responsibility)
asserts that businesses have no social responsibility other than to increase
profits and refrain from engaging in deception and fraud. He maintains that
when businesses seek to maximize profits, they almost always incidentally
do what is good for society. Friedman does not argue that business should
not help the community but that it may indeed be in the long-run self-
interest of a business to "devote resources to providing amenities to [the]
community..." in order to "generate goodwill" and thereby increase profits.

Can a business be socially responsible?


This brings us to the next question in the search for the meaning of socially
responsible ethics and what it means to business. Can a business be socially
responsible? If it can be then criteria does it need to be to ensure that it is
perceived in this manner? For each business it must be a different measure.
(Kaliski, 2007) After all, each business is trying to reach different goals.
However, there are four areas that should be measured no matter what the
outcome that is needed. Those measurements are Economic function,
Quality of life, Social investment and Problem solving. In economic
function, the goal that is trying to be achieved should be measured to see if it
meets with the cost guidelines that the business is willing to contribute.
(Kaliski, 2007) For instance if the business were to try to better the plant by
reducing its carbon footprint; how would it go about doing this? (Carbon
Footprint, 2006) Would it begin by doing something major like installing
water heaters throughout the building or re-doing the building insulation? Or
would they begin in small ways that would be more cost effective like
mandating that parking lots lights are turned off at a certain time? Or that
office computers all be turned off at the end of the workday instead of being
left on and simply logged out.I like responsibty In the quality of life
measurement “should focus on whether the organization is improving or
degrading the general quality of life in society”. (Kaliski, 2007) Does the
business produce a tangible good? Is that tangible good anything that betters
society and how people live? If the business produces a service, then does
that service do anything to improve how people live? If the answer to those
questions was no, then how could the good or service produced better
society?
Morality
Generally speaking, morals are basic guidelines for behavior intended to
reduce suffering in living populations.
The proper system of values and principles of moral conduct promotes good
customs (virtues), but also condemns bad customs (vices). Moral judgement
determines whether an action should be considered as appropriate or
inappropriate, selfish or unselfish. The true identification of morality is
virtue, which has to be regarded as; goodness, propriety, rectitude,
righteousness. Hypocrisy is the act of false virtue, by claiming to have
higher moral standards which in reality do not correspond to the
achievements.
Morals are evaluated through logic, experience and proper judgement,
whether this originates from culture, philosophy, religion, society or
individual conscience. In normative and universal sense morality refers to an
ideal code of conduct, one which would be espoused in preference to
alternatives by all rational people, under specified conditions. To deny
'morality' in this sense is a position known as moral skepticism.[1]
Morality is sometimes used as a synonym for ethics, the systematic
philosophical study of the moral domain.[2] Ethics seeks to address questions
such as how a moral outcome can be achieved in a specific situation (applied
ethics), how moral values should be determined (normative ethics), what
morals people actually abide by (descriptive ethics), what is the fundamental
nature of ethics or morality itself, including whether it has any objective
justification (meta-ethics), and how moral capacity or moral agency
develops and what its nature is (moral psychology).[3]
Classic Greek philosophy
Socrates
Socrates, an Athenian philosopher, believed that a person should always try
to do well. He believed that one should "know thyself." This is evidenced by
disobeying a bad command. He made his most important contribution to
Western thought through his method of inquiry. In addition, he also taught
many famous Greek philosophers. His most famous pupil was Plato.
However, since Socrates discussed ideas that upset many people (some in
high positions), he was given a choice to be banished from Athens, or to be
sentenced to death by drinking a poison, hemlock (Conium maculatum). He
was given a cup of hemlock by a guard. He chose to drink the poison,
perhaps because he could not stand the thought of being banished from his
home. The ironic thing about this is that during the reign of the Thirty
Tyrants he was often threatened, but survived despite his continued protests
for democracy. When democracy came, he was executed for corrupting their
young children. Most of what we know about Socrates came from Plato as
Socrates wrote nothing down

Socrates
This page is about the Classical Greek philosopher. For other uses of
Socrates, see Socrates (disambiguation).
Western Philosophy
Ancient philosophy

Socrates
Name Socrates (Σωκράτης)
Birth c. 470[1]
Death 399 BC
School/tra
Classical Greek
dition
Main
epistemology, ethics
interests
Notable
Socratic method, Socratic irony
ideas
Influenced Plato, Aristotle, Aristippus,
Antisthenes Western
philosophy
Socrates (Greek: 470 BC–399 BC[1]), was a Classical Greek philosopher.
Considered one of the founders of Western philosophy,[1] he strongly
influenced Plato, who was his student, and Aristotle, whom Plato taught. His
work continues to form an important part of the study of philosophy.
Principally renowned for his contribution to the field of ethics, Socrates also
lends his name to the concepts of Socratic irony and the Socratic Method, or
elenchus. The latter remains a commonly used tool in a wide range of
discussions, and is a type of pedagogy in which a series of questions are
asked not only to draw individual answers, but to encourage fundamental
insight into the issue at hand. Socrates also made important and lasting
contributions to the fields of epistemology and logic, and the influence of his
ideas and approach, remains strong in providing a foundation for much
western philosophy which followed.

Aristotle
For other uses, see Aristotle (disambiguation).
Western philosophy
Ancient philosophy

Name Aristotle (Ἀριστοτέλης)


384 BC
Birth
Stageira, Chalcidice
322 BC
Death
Euboea
School/tra Inspired the Peripatetic school
dition and tradition of Aristotelianism
Main Politics, Metaphysics, Science,
interests Logic, Ethics
Notable The Golden mean, Reason,
ideas Logic, Biology, Passion
Influenced Parmenides, Socrates, Plato,
by Heraclitus
Influenced Alexander the Great, Al-Farabi,
Avicenna, Averroes, Albertus
Magnus, Maimonides
Copernicus, Galileo Galilei,
Ptolemy, St. Thomas Aquinas,
Ayn Rand, and most of Islamic
philosophy, Christian
philosophy, Western
philosophy and Science in
general
Aristotle (Greek: (384 BCE – 322 BCE) was a Greek philosopher, a student
of Plato and teacher of Alexander the Great. He wrote on many different
subjects, including physics, metaphysics, poetry, theater, music, logic,
rhetoric, politics, government, ethics, biology and zoology.
Aristotle (together with Socrates and Plato) is one of the most important
founding figures in Western philosophy. He was the first to create a
comprehensive system of philosophy, encompassing morality and aesthetics,
logic and science, politics and metaphysics. Aristotle's views on the physical
sciences profoundly shaped medieval scholarship, and their influence
extended well into the Renaissance, although they were ultimately replaced
by modern physics. In the biological sciences, some of his observations were
only confirmed to be accurate in the nineteenth century. His works contain
the earliest known formal study of logic, which were incorporated in the late
nineteenth century into modern formal logic. In metaphysics,
Aristotelianism had a profound influence on philosophical and theological
thinking in the Islamic and Jewish traditions in the Middle Ages, and it
continues to influence Christian theology, especially Eastern Orthodox
theology, and the scholastic tradition of the Roman Catholic Church. All
aspects of Aristotle's philosophy continue to be the object of active academic
study today.

Basic concepts Hedonism


The basic idea behind hedonistic thought is that pleasure is the only thing
that is good for a person. This is often used as a justification for evaluating
actions in terms of how much pleasure and how little pain* (i.e. suffering)
they produce. In very simple terms, a hedonist strives to maximise this total
pleasure (pleasure minus pain). The nineteenth-century British philosophers
John Stuart Mill and Jeremy Bentham defended the ethical theory of
Utilitarianism, according to which we should perform whichever action is
best for everyone. Conjoining hedonism, as a view as to what is good for
people, to utilitarianism has the result that all action should be directed
toward achieving the greatest amount of happiness for the greatest number
of people. Though consistent in their pursuit of happiness, Bentham and
Mill’s versions of hedonism differ. There are two somewhat basic schools of
thought on hedonism:[1]
Cyrenaics
The Cyrenaics were an ultra-hedonist Greek school of philosophy founded
in the 4th century BC, allegedly by Aristippus of Cyrene or his grandson of
the same name, so called after Cyrene, the birthplace of Aristippus. It was
one of the two earliest Socratic schools.

Philosophy
The Cyrenaics held that pleasure was the supreme good, but pleasure
primarily in the sense of bodily gratifications, which they thought more
intense and more choiceworthy than mental pleasures. They also denied that
we should defer immediate gratification for the sake of long-term gain. In
these respects they differ from the Epicureans.
The Cyrenaics were also known for their skeptical theory of knowledge.
They thought that we can know with certainty our immediate sense-
experiences (for instance, that I am having a sweet sensation now) but can
know nothing about the nature of the objects that cause these sensations (for
instance, that the honey is sweet). They also denied that we can have
knowledge of what the experiences of other people are like.
As Hedonists, they believed that pleasure is the only good in life and pain is
the only evil. Like most other philosophers, they believed in living
according to nature, also. ( Socrates, although he held that virtue was the
only human good, admitted to a certain extent the importance of its
utilitarian side, making happiness at least a subsidiary end of moral action
(see Ethics). Aristippus and his followers seized upon this, and made it the
prime factor in existence, denying to virtue any intrinsic value. Logic and
physical science they held to be useless, for all knowledge is immediate
sensation (see Protagoras). These sensations are motions which (1) are
purely subjective, and (2) are painful, indifferent or pleasant, according as
they are violent, tranquil or gentle
Epicureanism
Epicureanism is a system of philosophy based upon the teachings of
Epicurus (c. 341–c. 270 BC), founded around 307 BC. Epicurus was an
atomic materialist, following in the steps of Democritus. His materialism led
him to a general attack on superstition and divine intervention. Following
Aristippus—about whom very little is known—Epicurus believed that the
greatest good was to seek modest pleasures in order to attain a state of
tranquility and freedom from fear (ataraxia) as well as absence of bodily
pain (aponia) through knowledge of the workings of the world and the limits
of our desires. The combination of these two states is supposed to constitute
happiness in its highest form. Although Epicureanism is a form of hedonism,
insofar as it declares pleasure as the sole intrinsic good, its conception of
absence of pain as the greatest pleasure and its advocacy of a simple life
make it quite different from "hedonism" as it is commonly understood.
For Epicurus, the highest pleasure (tranquility and freedom from fear) was
obtained by knowledge, friendship, and living a virtuous and temperate life.
He lauded the enjoyment of simple pleasures, by which he meant abstaining
from bodily desires, such as sex and appetites, verging on asceticism. He
argued that when eating, one should not eat too richly, for it could lead to
dissatisfaction later, such as the grim realization that one could not afford
such delicacies in the future. Likewise, sex could lead to increased lust and
dissatisfaction with the sexual partner. Epicurus did not articulate a broad
system of social ethics that has survived.
Epictetus
Epictetus (Greek: Ἐπίκτητος; ca. 55–ca. 135) was a Greek Stoic
philosopher. He was probably born a slave at Hierapolis, Phrygia (present
day Pamukkale, Turkey), and lived in Rome until his exile to Nicopolis in
northwestern Greece, where he lived most of his life and died. The name
given by his parents, if one was given, is not known—the word epiktetos in
Greek simply means "acquired."

Life
Epictetus was born c. 55 AD,[1] at Hierapolis, Phrygia.[2] He spent his youth
as a slave in Rome to Epaphroditus, a very wealthy freedman of Nero.
Epictetus studied Stoic philosophy under Musonius Rufus,[3] as a slave.[4] It
is known that he became crippled, and although one source tells that his leg
was deliberately broken by Epaphroditus,[5] more reliable is the testimony of
Simplicius who tells us that he had been lame from childhood.[6]

Roman-era ruins at Nicopolis


It is not known how Epictetus obtained his freedom, but eventually he began
to teach philosophy at Rome. Around 93 AD Domitian banished all
philosophers from Rome, and ultimately, from Italy,[7] and Epictetus traveled
to Nicopolis in Epirus, Greece, where he founded a philosophical school.[8]
His most famous pupil Arrian studied under him as a young man (c. 108
AD) and claims to have written the famous Discourses based on his lecture
notes, although some scholars argue that they should rather be considered an
original literary composition by Arrian comparable to the Socratic
literature[9]. Arrian describes Epictetus as being a powerful speaker who
could "induce his listener to feel just what Epictetus wanted him to feel."[10]
Many eminent figures sought conversations with him,[11] and the Emperor
Hadrian favoured him[12] and may have visited his school in Nicopolis.[13]
He lived a life of great simplicity, with few possessions.[6] He lived alone for
a long time,[14] but in his old age he adopted a friend's child who would
otherwise have been left to die, and raised it with a nurse to help him.[15] He
died sometime around 135 AD.[16] After his death his lamp was said to have
been purchased by an admirer for 3000 drachmae.[17]
Meta-ethics
In philosophy, meta-ethics (sometimes called "analytic ethics")[1] is the
branch of ethics that seeks to understand the nature of ethical properties, and
ethical statements, attitudes, and judgments. Meta-ethics is one of the three
branches of ethics generally recognized by philosophers, the others being
ethical theory and applied ethics. Ethical theory and applied ethics make up
normative ethics. Meta-ethics has received considerable attention from
academic philosophers in the last few decades.
While normative ethics addresses such questions as "What should one do?",
thus endorsing some ethical evaluations and rejecting others, meta-ethics
addresses the question "What is (moral) goodness?", seeking to understand
the nature of ethical properties and evaluations.
Some theorists argue that a metaphysical account of morality is necesssary
for the proper evaluation of actual moral theories and for making practical
moral decisions, however others make the (reverse) claim that only by
importing ideas of moral intuition on how to act can we arrive at an accurate
account of the metaphysics of morals

9 Strategic planning & MSMEs in Pakistan

Strategic planning is an organization's process of defining its


strategy, or direction, and making decisions on allocating its
resources to pursue this strategy, including its capital and people.
Various business analysis techniques can be used in strategic
planning, including SWOT analysis (Strengths, Weaknesses,
Opportunities, and Threats ) and PEST analysis (Political, Economic,
Social, and Technological analysis).

Strategies are different from tactics in that:

1. They are proactive and not re-active as tactics are.

2. They are internal in source and the business venture has absolute
control over its application.

3. Strategy can only be applied once, after that it is process of


application with no unique element remaining.

4. The outcome is normally a strategic plan which is used as


guidance to define functional and divisional plans, including
Technology, Marketing, etc.

Strategic planning is the formal consideration of an organization's


future course. All strategic planning deals with at least one of three
key questions:

"What do we do?"
"For whom do we do it?"
"How do we excel?"
In business strategic planning, the third question is better phrased
"How can we beat or avoid competition?". (Bradford and Duncan,
page 1).

In many organizations, this is viewed as a process for determining


where an organization is going over the next year or more -typically 3
to 5 years, although some extend their vision to 20 years.

In order to determine where it is going, the organization needs to


know exactly where it stands, then determine where it wants to go
and how it will get there. The resulting document is called the
"strategic plan".

It is also true that strategic planning may be a tool for effectively


plotting the direction of a company; however, strategic planning itself
cannot foretell exactly how the market will evolve and what issues will
surface in the coming days in order to plan your organizational
strategy. Therefore, strategic innovation and tinkering with the
'strategic plan' have to be a cornerstone strategy for an organization
to survive the turbulent business climate.

Contents [hide]

1 Vision, mission and values


2 Methodologies
3 Situational analysis
4 Goals, objectives and targets
5 Mission statements and vision statements
6 References
7 See also
8 External links

Vision, mission and values

Vision: Defines where the organization wants to be in the future. It


reflects the optimistic view of the organization's future.

Mission: Defines where the organization is going now, basically


describing the purpose, why this organization exists.
Values: Main values protected by the organization during the
progression, reflecting the organization's culture and priorities.

Strategic planning saves wasted time, every minute spent in planning


saves ten minutes in execution.

The purpose of individual strategic planning is for you to increase


your return on energy, the return on the mental, emotional, physical
and spiritual capital you have invested in your life and career.

Every minute an individual spends planning their goals, activities and


time in advance saves ten minutes of work in the execution of those
plans -- or so claim several experts. Careful advance planning gives
you a return of ten times, or 1,000% , on your investment of mental,
emotional and physical energy. (The 100 Absolutely Unbreakable
Laws of Business Success.) In any case, it is generally agreed that
spending a meaningful period of time reflecting on strategy and goals
before taking action is almost always a wise course of action for any
individual or institution.

Methodologies

There are many approaches to strategic planning but typically a


three-step process may be used:

Situation - evaluate the current situation and how it came about.


Target - define goals and/or objectives (sometimes called ideal state)
Path - map a possible route to the goals/objectives
One alternative approach is called Draw-See-Think

Draw - what is the ideal image or the desired end state?


See - what is today's situation? What is the gap from ideal and why?
Think - what specific actions must be taken to close the gap between
today's situation and the ideal state?
Plan - what resources are required to execute the activities?
An alternative to the Draw-See-Think approach is called See-Think-
Draw

See - what is today's situation?


Think - define goals/objectives
Draw - map a route to achieving the goals/objectives
In other terms strategic planning can be as follows:

Vision - Define the vision and set a mission statement with hierarchy
of goals
SWOT - Analysis conducted according to the desired goals
Formulate - Formulate actions and processes to be taken to attain
these goals
Implement - Implementation of the agreed upon processes
Control - Monitor and get feedback from implemented processes to
fully control the operation

Situational analysis

When developing strategies, analysis of the organization and its


environment as it is at the moment and how it may develop in the
future, is important. The analysis has to be executed at an internal
level as well as an external level to identify all opportunities and
threats of the new strategy.

There are several factors to assess in the external situation analysis:

Markets (customers)
Competition
Technology
Supplier markets
Labor markets
The economy
The regulatory environment
It is rare to find all seven of these factors having critical importance. It
is also uncommon to find that the first two - markets and competition -
are not of critical importance. (Bradford "External Situation - What to
Consider")

Analysis of the external environment normally focuses on the


customer. Management should be visionary in formulating customer
strategy, and should do so by thinking about market environment
shifts, how these could impact customer sets, and whether those
customer sets are the ones the company wishes to serve.
Analysis of the competitive environment is also performed, many
times based on the framework suggested by Michael Porter.

Goals, objectives and targets

Strategic planning is a very important business activity. It is also


important in the public sector areas such as education. It is practiced
widely informally and formally. Strategic planning and decision
processes should end with objectives and a roadmap of ways to
achieve those objectives.

The following terms have been used in strategic planning: desired


end states, plans, policies, goals, objectives, strategies, tactics and
actions. Definitions vary, overlap and fail to achieve clarity. The most
common of these concepts are specific, time bound statements of
intended future results and general and continuing statements of
intended future results, which most models refer to as either goals or
objectives (sometimes interchangeably).

One model of organizing objectives uses hierarchies. The items listed


above may be organized in a hierarchy of means and ends and
numbered as follows: Top Rank Objective (TRO), Second Rank
Objective, Third Rank Objective, etc. From any rank, the objective in
a lower rank answers to the question "How?" and the objective in a
higher rank answers to the question "Why?" The exception is the Top
Rank Objective (TRO): there is no answer to the "Why?" question.
That is how the TRO is defined.

People typically have several goals at the same time. "Goal


congruency" refers to how well the goals combine with each other.
Does goal A appear compatible with goal B? Do they fit together to
form a unified strategy? "Goal hierarchy" consists of the nesting of
one or more goals within other goal(s).

One approach recommends having short-term goals, medium-term


goals, and long-term goals. In this model, one can expect to attain
short-term goals fairly easily: they stand just slightly above one's
reach. At the other extreme, long-term goals appear very difficult,
almost impossible to attain. Strategic management jargon sometimes
refers to "Big Hairy Audacious Goals" (BHAGs) in this context.) Using
one goal as a stepping-stone to the next involves goal sequencing. A
person or group starts by attaining the easy short-term goals, then
steps up to the medium-term, then to the long-term goals. Goal
sequencing can create a "goal stairway". In an organizational setting,
the organization may co-ordinate goals so that they do not conflict
with each other. The goals of one part of the organization should
mesh compatibly with those of other parts of the organization.

Mission statements and vision statements

Organizations sometimes summarize goals and objectives into a


mission statement and/or a vision statement:

While the existence of a shared mission is extremely useful, many


strategy specialists question the requirement for a written mission
statement. However, there are many models of strategic planning that
start with mission statements, so it is useful to examine them here.

A Mission statement: tells you what the company is now. It


concentrates on present; it defines the customer(s), critical processes
and it informs you about the desired level of performance.
A Vision statement: outlines what a company wants to be. It
concentrates on future; it is a source of inspiration; it provides clear
decision-making criteria.
Many people mistake vision statement for mission statement. The
Vision describes a future identity and the Mission describes why it will
be achieved. A Mission statement defines the purpose or broader
goal for being in existence or in the business. It serves as an ongoing
guide without time frame. The mission can remain the same for
decades if crafted well. Vision is more specific in terms of objective
and future state. Vision is related to some form of achievement if
successful.

A mission statement can resemble a vision statement in a few


companies, but that can be a grave mistake. It can confuse people.
The vision statement can galvanize the people to achieve defined
objectives, even if they are stretch objectives, provided the vision is
SMART (Specific, Measurable, Achievable, Relevant and
Timebound). A mission statement provides a path to realize the vision
in line with its values. These statements have a direct bearing on the
bottom line and success of the organization.

Which comes first? The mission statement or the vision statement?


That depends. If you have a new start up business, new program or
plan to re engineer your current services, then the vision will guide
the mission statement and the rest of the strategic plan. If you have
an established business where the mission is established, then many
times, the mission guides the vision statement and the rest of the
strategic plan. Either way, you need to know where you are, your
current resources, your current obstacles, and where you want to go -
the vision for the future.[citation needed]

10 The business Plan for MSMEs in Pakistan

A business plan is a formal statement of a set of business goals, the


reasons why they are believed attainable, and the plan for reaching
those goals. It may also contain background information about the
organization or team attempting to reach those goals.

The business goals being attempted may be for-profit or non-profit.


For-profit business plans typically focus on financial goals. Non-profit
and government agency business plans tend to focus on service
goals, although non-profits may also focus on maximizing profit.
Business plans may also target changes in perception and branding
by the customer, client, tax-payer, or larger community. A business
plan having changes in perception and branding as its primary goals
is called a marketing plan.

Business plans may be internally or externally focused. Externally


focused plans target goals that are important to external
stakeholders, particularly financial stakeholders. They typically have
detailed information about the organization or team attempting to
reach the goals. With for-profit entities, external stakeholders include
investors and customers.[1] External stake-holders of non-profits
include donors and the clients of the non-profit's services.[2] For
government agencies, external stakeholders include tax-payers,
higher-level government agencies, and international lending bodies
such as the IMF, the World Bank, various economic agencies of the
UN, and development banks.

Internally focused business plans target intermediate goals required


to reach the external goals. They may cover the development of a
new product, a new service, a new IT system, a restructuring of
finance, the refurbishing of a factory or a restructuring of the
organization. An internal business is often developed in conjunction
with a balanced scorecard or a list of critical success factors. This
allows success of the plan to be measured using non-financial
measures. Business plans that identify and target internal goals, but
provide only general guidance on how they will be met are called
strategic plans.

Operational plans describe the goals of an internal organization,


working group or department.[3] Project plans, sometimes known as
project frameworks, describe the goals of a particular project. They
may also address the project's place within the organization's larger
strategic goals.[4][5]

Contents
1 Business Plan Content
2 Business
2.1 Support services
2.2 Resources for researching facts and figures
2.2.1 Internal corporate records
2.2.2 Free information
2.2.3 Fee-based services
2.3 Strategic Analysis
2.4 Forecasts: Modeling Techniques
3 Presentation Formats
4 Revisiting the Business Plan
4.1 Cost overruns and revenue shortfalls
5 Legal and Liability Issues
5.1 Disclosure requirements
5.2 Limitations on content and audience
6 Open Business Plans
6.1 Examples
7 How Business Plans are Used
7.1 Venture Capital
7.2 Public Offerings
7.3 Within Corporations
7.3.1 Fundraising
7.3.2 Total Quality Management
7.3.3 Management by Objective
7.3.4 Strategic Planning
7.4 Education
7.4.1 K-12
7.4.2 Higher Education
8 Satires of Business Plans
9 References
10 See also

Business Plan Content


For more details on this topic, see Content of a business plan.
Business plans are decision-making tools. There is no fixed content
for a business plan. Rather the content and format of the business
plan is determined by the goals and audience. A business plan
should contain whatever information is needed to decide whether or
not to pursue a goal.

For example, a business plan for a non-profit might discuss the fit
between the business plan and the organization’s mission. Banks are
quite concerned about defaults, so a business plan for a bank loan
will build a convincing case for the organization’s ability to repay the
loan. Venture capitalists are primarily concerned about initial
investment, feasibility, and exit valuation. A business plan for a
project requiring equity financing will need to explain why current
resources, upcoming growth opportunities, and sustainable
competitive advantage will lead to a high exit valuation.

Preparing a business plan draws on a wide range of knowledge from


many different business disciplines: finance, human resource
management, intellectual property management, supply chain
management, operations management, and marketing, among
others.[6]. It can be helpful to view the business plan as a collection
of sub-plans, one for each of the main business disciplines.[7]

Business

Support services
books, portals, and other sources of written information
consulting services
electronic planning templates (software)
face to face help: mentoring programs, training courses
Germany: Bundesministerium für Wirtschaft und Technologie (BMWi)
[1].
Morocco: CRI (Centre Régional d'Investisment)
Pakistan: SMEDA (Small and medium enterprise development
authority)
UK: Business Link
USA: SCORE, SBA centers
Canada: Industry Canada, [2]
India : Allindialive Business Planing Portal,[3]
Switzerland : venturelab (Förderprogramm der Bundes für innovative
Start-ups mit Wachstumspotenzial)
Other countries: needs research

Resources for researching facts and figures

Internal corporate records

Free information
published statistics on the web
business libraries

Fee-based services
marketing reports from subscription services
archive and journal services
books

Strategic Analysis
Industry Assessment
The macroenvironment
Customer Strategy & Market Analysis
Competitor Analysis
Porter 5 forces analysis

Forecasts: Modeling Techniques

Presentation Formats
The format of a business plan depends on its presentation context. It
is not uncommon for businesses, especially start-ups to have three or
four formats for the same business plan:

an "elevator pitch" - a three minute summary of the business plan's


executive summary. This is often used as a teaser to awaken the
interest of potential funders, customers, or strategic partners.
an oral presentation - a hopefully entertaining slide show and oral
narrative that is meant to trigger discussion and interest potential
investors in reading the written presentation. The content of the
presentation is usually limited to the executive summary and a few
key graphs showing financial trends and key decision making
benchmarks. If a new product is being proposed and time permits, a
demonstration of the product may also be included.
a written presentation for external stakeholders - a detailed, well
written, and pleasingly formatted plan targeted at external
stakeholders.
an internal operational plan - a detailed plan describing planning
details that are needed by management but may not be of interest to
external stakeholders. Such plans have a somewhat higher degree of
candor and informality than the version targeted at external
stakeholders.

Revisiting the Business Plan

Cost overruns and revenue shortfalls


Cost and revenue estimates are central to any business plan for
deciding the viability of the planned venture. But costs are often
underestimated and revenues overestimated resulting in later cost
overruns, revenue shortfalls, and possibly non-viability. During the
dot-com bubble 1997-2001 this was a problem for many technology
start-ups. However, the problem is not limited to technology or the
private sector; public works projects also routinely suffer from cost
overruns and/or revenue shortfalls. The main causes of cost overruns
and revenue shortfalls are optimism bias and strategic
misrepresentation.[8][9] Reference class forecasting has been
developed to reduce the risks of cost overruns and revenue shortfalls.

Legal and Liability Issues

Disclosure requirements
An externally targeted business plan should list all legal concerns and
financial liabilities that might negatively affect investors. Depending
on the amount of funds being raised and the audience to whom the
plan is presented, failure to do this may have severe legal
consequences.

Limitations on content and audience


Non disclosure agreements (NDAs) with third parties, non-compete
agreements, conflicts of interest, privacy concerns, and the protection
of one's trade secrets may severely limit the audience to which one
might show the business plan. Alternatively, they may require each
party receiving the business plan to sign a contract accepting special
clauses and conditions.

This situation is complicated by the fact that many venture capitalists


will refuse to sign an NDA before looking at a business plan, lest it
put them in the untenable position of looking at two independently
developed look-alike business plans, both claiming originality. In such
situations one may need to develop two versions of the business
plan: a stripped down plan that can be used to develop a relationship
and a detail plan that is only shown when investors have sufficient
interest and trust to sign an NDA.

Open Business Plans


Traditionally business plans have been highly confidential and quite
limited in audience. The business plan itself is generally regarded as
secret. However the emergence of free software and open source
has opened the model and made the notion of an open business plan
possible.
An Open Business Plan is a business plan with unlimited audience.
The business plan is typically web published and made available to
all.

In the free software and open source business model, trade secrets,
copyright and patents can no longer be used as effective locking
mechanisms to provide sustainable advantages to a particular
business and therefore a secret business plan is less relevant in
those models.

While the origin of the Open Business Plan model is in the free
software and Libre services arena, the concept is likely applicable to
other domains.

Examples
Neda Open Business Plan [10]

How Business Plans are Used

Venture Capital
business plan contests - provides a way for venture capitals to find
promising projects
venture capital assessment of business plans - focus on qualitative
factors such as team.

Public Offerings
in a public offering, potential investors can evaluate perspectives of
issuing company [11]

Within Corporations

Fundraising
Fundraising is the primary purpose for many business plans, since
they are related to the inherent probable success/failure of the
company risk.

Total Quality Management


For more information see Total Quality Management

Management by Objective
For more information see Management by objectives

Strategic Planning
For more information see Strategic Planning

Education

K-12
Business plans are used in some primary and secondary programs to
teach economic principles.[12] Wikiversity has a Lunar Boom Town
project where students of all ages can collaborate with designing and
revising business models and practice evaluating them to learn
practical business planning techniques and methodology.

Higher Education
BA, MBA programs
integrative team projects
projects for specific course work
Business plan contests
GetSet for Business [4] provides UK educational establishments with
the facility for students to learn about starting a business and produce
a professional and bespoke business plan online.

Satires of Business Plans


The business plan is the subject of many satires. Satires are used
both to express cynicism about business plans and as an educational
tool to improve the quality of business plans. For example,

Five Criteria for a successful business plan in biotech uses Dilbert


comic strips to remind people of what not to do when researching and
writing a business plan for a biotech start-up. Scott Adams, the author
of Dilbert, is an MBA graduate (U.C. Berkeley) who sees humor as a
critical tool that can improve the behavior of businesses and their
managers.[13] He has written numerous critiques of business
practices, including business planning. The website Dilbert.com -
Games has a mission statement generator that satirizes the wording
often found in mission statements. His book The Dilbert Principle – A
Cubicle’s Eye View of Bosses, Meetings, Management Fads & Other
Workplace Afflictions discusses the foibles of management and their
plans as depicted in the Dilbert comic strips by Scott Adams.

In the article "South Park's" Investing Lesson, the The Motley Fool
columnist "Fool on the Hill" uses the Underpants Gnomes to illustrate
the fallacy of focusing on goals without a clear implementation
strategy. The Underpants Gnomes episode satirizes the business
plans of the Dot.com era. Surrounding the issue of the opening of a
huge corporate coffee shop in competition with the existing small-
town cafe owned by Tweak's parents, it features a three-part
business plan for the gnomes to profit from stealing underpants from
unsuspecting humans:
Collect underpants
???
Profit!

References
^ Small Business Notes business plan outline for small business
start-up
^ Center for Non-profit Excellence non-profit business plan
^ State of Louisana, USA government agency operational plan
^ Visitask project framework
^ Tasmanian government project management knowledge base
government project plan
^ Boston College, Carroll School of Management, Business Plan
Project The business school advises students that "To create a
robust business plan, teams must take a comprehensive view of the
enterprise and incorporate management-practice knowledge from
every first-semester course." It is increasingly common for business
schools to use business plan projects to provide an opportunity for
students to integrate knowledge learned through their courses.
^ Eric S. Siegel, Brian R. Ford, Jay M. Bornstein (1993), 'The Ernst &
Young Business Plan Guide' (New York: John Wiley and Sons) ISBN
0471578266
^ Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl
(2002),"Underestimating Costs in Public Works Projects: Error or
Lie?" Journal of the American Planning Association, vol. 68, no. 3,
279-295.
^ Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl (2005),
"How (In)accurate Are Demand Forecasts in Public Works Projects?"
Journal of the American Planning Associationsidoo kale ayaa waxaa,
vol. 71, no. 2, 131-146.
^ Neda Open Business Plan - By* Services
^ Alternative Stock Library (2008-01-28). Successful Business Plan.
Alternative Stock Library. Retrieved on 2008-02-28.
^ Pennsylvania Business Plan Competition - competition intended to
teach economic principles to K-12 students
^ Tricia Bisoux, "Funny Business", BizEd, November/December, 2002

11 The Decision Making In & For MSMEs


Buyer decision processes are the decision making processes undertaken by
consumers in regard to a potential market transaction before, during, and
after the purchase of a product or service.
More generally, decision making is the cognitive process of selecting a
course of action from among multiple alternatives. Common examples
include shopping, deciding what to eat. Decision making is said to be a
psychological construct. This means that although we can never "see" a
decision, we can infer from observable behaviour that a decision has been
made. Therefore we conclude that a psychological event that we call
"decision making" has occurred. It is a construction that imputes
commitment to action. That is, based on observable actions, we assume that
people have made a commitment to effect the action.
In general there are three ways of analysing consumer buying decisions.
They are:
•Economic models - These models are largely quantitative and are based
on the assumptions of rationality and near perfect knowledge. The
consumer is seen to maximize their utility. See consumer theory.
Game theory can also be used in some circumstances.
•Psychological models - These models concentrate on psychological and
cognitive processes such as motivation and need recognition. They are
qualitative rather than quantitative and build on sociological factors
like cultural influences and family influences.
•Consumer behaviour models - These are practical models used by
marketers. They typically blend both economic and psychological
models.
Nobel laureate Herbert Simon sees economic decision making as a vain
attempt to be rational. He claims (in 1947 and 1957) that if a complete
analysis is to be done, a decision will be immensely complex. He also says
that peoples' information processing ability is very limited. The assumption
of a perfectly rational economic actor is unrealistic. Often we are influenced
by emotional and non-rational considerations. When we try to be rational we
are at best only partially successful.
Contents
[hide]
•1 Models of buyer decision making

•1.1 General model

•2 Cognitive and personal biases in decision making

•3 See also

•4 References

Models of buyer decision making


In an early study of the buyer decision process literature, Frank Nicosia
(Nicosia, F. 1966; pp 9-21) identified three types of buyer decision making
models. They are the univariate model (He called it the "simple scheme".) in
which only one behavioural determinant was allowed in a stimulus-response
type of relationship; the multi-variate model (He called it a "reduced form
scheme".) in which numerous independent variables were assumed to
determine buyer behaviour; and finally the "system of equations" model (He
called it a "structural scheme" or "process scheme".) in which numerous
functional relations (either univariate or multi-variate) interact in a complex
system of equations. He concluded that only this third type of model is
capable of expressing the complexity of buyer decision processes. In chapter
7, Nicosia builds a comprehensive model involving five modules. The
encoding module includes determinants like "attributes of the brand",
"environmental factors", "consumer's attributes", "attributes of the
organization", and "attributes of the message". Other modules in the system
include, consumer decoding, search and evaluation, decision, and
consumption.

General model
A general model of the buyer decision process consists of the following
steps:
Need recognition;
Search for information on products that could satisfy the needs of the
buyer;
Alternative selection;
Decision-making on buying the product;
Post-purchase behavior

There are a range of alternative models, but that of AIUAPR, which most
directly links to the steps in the marketing/promotional process is often seen
as the most generally useful[1];
•AWARENESS - before anything else can happen the potential
customers must become aware that the product or service exists. Thus,
the first task must be to gain the attention of the target audience. All
the different models are, predictably, agreed on this first step. If the
audience never hears the message they will not act on it, no matter
how powerful it is.
•INTEREST - but it is not sufficient to grab their attention. The message
must interest them and persuade them that the product or service is
relevant to their needs. The content of the message(s) must therefore
be meaningful and clearly relevant to that target audience's needs, and
this is where marketing research can come into its own.
•UNDERSTANDING - once an interest is established, the prospective
customer must be able to appreciate how well the offering may meet
his or her needs, again as revealed by the marketing research. This
may be no mean achievement where the copywriter has just fifty
words, or ten seconds, to convey everything there is to say about it.
•ATTITUDES - but the message must go even further; to persuade the
reader to adopt a sufficiently positive attitude towards the product or
service that he or she will purchase it, albeit as a trial. There is no
adequate way of describing how this may be achieved. It is simply
down to the magic of the copywriters art; based on the strength of the
product or service itself. PURCHASE - all the above stages might
happen in a few minutes while the reader is considering the
advertisement; in the comfort of his or her favourite armchair. The
final buying decision, on the other hand, may take place some time
later; perhaps weeks later, when the prospective buyer actually tries to
find a shop which stocks the product.
•REPEAT PURCHASE - but in most cases this first purchase is best
viewed as just a trial purchase. Only if the experience is a success for
the customer will it be turned into repeat purchases. These repeats, not
the single purchase which is the focus of most models, are where the
vendors focus should be, for these are where the profits are generated.
The earlier stages are merely a very necessary prerequisite for this!
This is a very simple model, and as such does apply quite generally. Its
lessons are that you cannot obtain repeat purchasing without going through
the stages of building awareness and then obtaining trial use; which has to
be successful. It is a pattern which applies to all repeat purchase products
and services; industrial goods just as much as baked beans. This simple
theory is rarely taken any further - to look at the series of transactions which
such repeat purchasing implies. The consumer's growing experience over a
number of such transactions is often the determining factor in the later - and
future - purchases. All the succeeding transactions are, thus, interdependent -
and the overall decision-making process may accordingly be much more
complex than most models allow for. [2]
in all four dimensions. In each category, 83% of E-I types, 89% of S-N
types, 90% of T-F types, was 10.8 points better and for groups with the same
personality dimensions was 4.4 points better than individuals (Volkema 114-
16). Working in groups with a variety of people composed of multiple
personalities and cognitive styles, often produces a better outcome in
decision making rather than individually.

Cognitive and personal biases in decision making


It is generally agreed that biases can creep into our decision making
processes, calling into question the correctness of a decision. Below is a list
of some of the more common cognitive biases.
•Selective search for evidence - We tend to be willing to gather facts that
support certain conclusions but disregard other facts that support
different conclusions.
•Premature termination of search for evidence - We tend to accept the
first alternative that looks like it might work.
•Conservatism and inertia - Unwillingness to change thought patterns
that we have used in the past in the face of new circumstances.
•Experiential limitations - Unwillingness or inability to look beyond the
scope of our past experiences; rejection of the unfamiliar.
•Selective perception - We actively screen-out information that we do not
think is salient.
•Wishful thinking or optimism - We tend to want to see things in a
positive light and this can distort our perception and thinking.
•Recency - We tend to place more attention on more recent information
and either ignore or forget more distant information.
•Repetition bias - A willingness to believe what we have been told most
often and by the greatest number of different of sources.
•Anchoring - Decisions are unduly influenced by initial information that
shapes our view of subsequent information.
•Group think - Peer pressure to conform to the opinions held by the
group.
•Source credibility bias - We reject something if we have a bias against
the person, organization, or group to which the person belongs: We
are inclined to accept a statement by someone we like.
•Incremental decision making and escalating commitment - We look at a
decision as a small step in a process and this tends to perpetuate a
series of similar decisions. This can be contrasted with zero-based
decision making.
•Inconsistency - The unwillingness to apply the same decision criteria in
similar situations.
•Attribution asymmetry - We tend to attribute our success to our abilities
and talents, but we attribute our failures to bad luck and external
factors. We attribute other's success to good luck, and their failures to
their mistakes.
•Role fulfillment - We conform to the decision making expectations that
others have of someone in our position.
•Underestimating uncertainty and the illusion of control - We tend to
underestimate future uncertainty because we tend to believe we have
more control over events than we really do.
•Faulty generalizations - In order to simplify an extremely complex
world, we tend to group things and people. These simplifying
generalizations can bias decision making processes.
•Ascription of causality - We tend to ascribe causation even when the
evidence only suggests correlation. Just because birds fly to the
equatorial regions when the trees lose their leaves, does not mean that
the birds migrate because the trees lose their leaves.

References
•Carlyn, Marcia. “An Assessment of the Myers-Briggs Type Indicator.”
Journal of Personality Assessment. 41.5 (1977): 461-73.
•Cheng, Many M., Peter F. Luckett, and Axel K. Schulz. “The Effects of
Cognitive Style Diversity on Decision-Making Dyads: An Empirical
Analysis in the Context of a Complex Task.” Behavioral Research in
Accounting. 15 (2003): 39-62.
•Gardner, William L., and Mark J. Martinko. “Using the Myers-Briggs
Type Indicator to Study Managers: A Literature Review and Research
Agenda.” Journal of Management. 22.1 (1996): 45-83.
•Henderson, John C., and Paul C. Nutt. “Influence of Decision Style on
Decision Making Behavior.” Management Science. 26.4 (1980): 371-
386.
•Kennedy, Bryan R., and Ashely D. Kennedy. “Using the Myers-Briggs
Type Indicator in Career Counseling.” Journal of Employment
Counseling. 41.1 (2004): 38-44.
•Myers, I. (1962) Introduction to Type: A description of the theory and
applications of the Myers-Briggs type indicator, Consulting
Psychologists Press, Palo Alto Ca., 1962.
•Nicosia, F. (1966) Consumer Decision Processes, Prentice Hall,
Englewood Cliffs, 1966.
•Pittenger, David J. “The Utility of the Myers-Briggs Type Indicator.”
Review of Educational Research. 63:4 (1993): 467-488.
•Simon, H. (1947) Administrative behaviour, Macmillan, New York,
1947, (also 2nd edition 1957).
•Volkema, Roger J., and Ronald H. Gorman. "The Influence of
Cognitive-Based Group Composition on Decision-Making Process
and Outcome." Journal of Management Studies. 35.1 (1998): 105-
121.
Retrieved from "http://en.wikipedia.org/wiki/Buyer_decision_processes"

12 The Franchising System For MSMEs

Franchising (from the French franchir: vt to clear an obstacle or difficulty)


[1] refers to the method of practicing and using another persons philosophy
of business. The "franchisor" authorizes the proven methods and trademarks
of his business to the "franchisee" for a fee and a percentage of gross
monthly sales. Various tangibles and intangibles such as national or
international advertising, training, and other support services are commonly
made available by the franchisor. Agreements typically last five to twenty
years, with premature cancellations or terminations of most contracts
bearing serious consequences for franchisees.
Contents
[hide]
•1 Overview

•2 History

•3 Businesses for which franchising works best

•4 Advantages

•4.1 Quick start

•4.2 Expansion

•4.3 Training

•5 Disadvantages

•5.1 Control

•5.2 Price

•5.3 Conflicts

•6 Legal aspects

•6.1 Australia

•6.2 United States

•6.3 Russia

•6.4 UK

•6.5 Kazakhstan

•7 Social franchises

•8 Event franchising

•9 See also

•10 References

•11 External links


Overview
The term "franchising" is used to describe business systems which may or
may not fall into the legal definition provided above. For example, a vending
machine operator may receive a franchise for a particular kind of vending
machine, including a trademark and a royalty, but no method of doing
business. This is called "product franchising" or "trade name franchising".
A franchise agreement will usually specify the given territory the franchisee
retains exclusive control over, as well as the extent to which the franchisee
will be supported by the franchisor (e.g. training and marketing campaigns).
The franchisor typically earns royalties on the gross sales of the franchisee.
[2] In such cases, franchisees must pay royalties whether or not they are
realizing profits from their franchised business.
Cancellations or terminations of franchise agreements before the completion
of the contract have serious consequences for franchisees. Franchise
agreement terms typically result in a loss of the sunk costs of the first-owner
franchisees who build out the branded physical units and who lease the
branded name, marks, and business plan from the franchisors if the franchise
is canceled or terminated for any reason before the expiration of the entire
term of the contract.[citation needed] (Item 15 of the Rule of the Federal
Trade Commission requires disclosure of terms that cover termination of the
franchise agreement and the terms substantiate this statement)

History

Franchising dates back to at least the 1850s; Isaac Singer, who made
improvements to an existing model of a sewing machine, wanted to increase
the distribution of his sewing machines. His effort, though unsuccessful in
the long run, was among the first franchising efforts in the United States. A
later example of franchising was John S. Pemberton's successful franchising
of Coca-Cola.[3] Early American examples include the telegraph system,
which was operated by various railroad companies but controlled by , and
exclusive agreements between automobile manufacturers and operators of
local dealerships.[5] Earlier models of product franchising collected
royalties or fees on a product basis and not on the gross sales of the business
operations of the franchisees.
Modern franchising came to prominence with the rise of franchise-based
food service establishments. This trend started before 1933 with quick
service restaurants such as A&W Root Beer.[6] In 1935, Howard Deering
Johnson teamed up with Reginald Sprague to establish the first modern
restaurant franchise. [7] [8] The idea was to let independent operators use
the same name, food, supplies, logo and even building design in exchange
for a fee.
The growth in franchises picked up steam in the 1930s when such chains as
Howard Johnson's started franchising motels.[9] The 1950s saw a boom of
franchise chains in conjunction with the development of the U.S. interstate
highway system.[10] Fast food restaurants, diners and motel chains
exploded. In regard to contemporary franchise chains, McDonalds is
unarguably the most successful worldwide with more restaurant units than
any other franchise network.
According to Franchising in the Economy, 1991-1993, a study done by the
University of Louisville, franchising helped to lead America out of its
economic downturn at the time.[2]Franchising is a unique business model
that has encouraged the growth of franchised chain formula units because
the franchisors collect royalties on the gross sales of these units and not on
the profits. Conversely, when good jobs are lost in the economy, franchising
picks up because potential franchisees are looking to buy jobs and to earn
profits from the purchase of franchise rights. The manager of the United
States Small Business Administration's Franchise Registry concludes that
franchising there is continuing to grow and that franchising is growing in the
national economy. [11]
Franchising is a business model used in more than 70 industries and that
generates more than $1 trillion in U.S. sales annually.[12]

Businesses for which franchising works best


Businesses for which franchises is said to works best have the following
characteristics
•Businesses with a good track record of profitability.
•Businesses built around a unique or unusual concept.
•Businesses with broad geographic appeal.
•Businesses which are relatively easy to operate.
•Businesses which are relatively inexpensive to operate.
•Businesses which are easily duplicated.

Advantages

Quick start
As practiced in retailing, franchising offers franchisees the advantage of
starting up a new business quickly based on a proven trademark and formula
of doing business, as opposed to having to build a new business and brand
from scratch (often in the face of aggressive competition from franchise
operators). A well run franchise would offer a turnkey business: from site
selection to lease negotiation, training, mentoring and ongoing support as
well as statutory requirements and troubleshooting

Expansion
After their brand and formula are carefully designed and properly executed,
franchisors are able to expand rapidly across countries and continents, and
can earn profits commensurate with their contribution to those societies.
Additionally, the franchisor may choose to leverage the franchisee to build a
distribution network.
Also with the help of the expertise provided by the franchisers the
franchisees are able to take their franchise business to that level which they
wouldn't have had been able to without the expert guidance of their
franchisors.

Training
Franchisors often offer franchisees significant training, which is not
available for free to individuals starting their own business. Although
training is not free for franchisees, it is supported through the traditional
franchise fee that the franchisor collects.

Disadvantages

Control
For franchisees, the main disadvantage of franchising is a loss of control.
While they gain the use of a system, trademarks, assistance, training,
marketing, the franchisee is required to follow the system and get approval
for changes from the franchisor. For these reasons, franchisees and
entrepreneurs are very different. The United States Office of Advocacy of
the SBA indicates that a franchisee "is merely a temporary business
investment where he may be one of several investors during the lifetime of
the franchise. In other words, he is "renting or leasing" the opportunity, not
"buying a business for the purpose of true ownership." [13] Additionally, "A
franchise purchase consists of both intrinsic value and time value. A
franchise is a wasting asset due to the finite term, unless the franchisor
chooses to contractually obligate itself it is under no obligation to renew the
franchise." [14]

Price
Starting and operating a franchise business carries expenses. In choosing to
adopt the standards set by the franchisor, the franchisee often has no further
choice as to signage, shop fitting, uniforms etc. The franchisee may not be
allowed to source less expensive alternatives. Added to that is the franchise
fee and ongoing royalties and advertising contributions. The contract may
also bind the franchisee to such alterations as demanded by the franchisor
from time to time. (As required to be disclosed in the state disclosure
document and the franchise agreement under the FTC Franchise Rule)

Conflicts
The franchisor/franchisee relationship can easily cause conflict if either side
is incompetent (or acting in bad faith). For example, an incompetent
franchisee can easily damage the public's goodwill towards the franchisor's
brand by providing inferior goods and services, and an incompetent
franchisor can destroy its franchisees by failing to promote the brand
properly or by squeezing them too aggressively for profits. Franchise
agreements are unilateral contracts or contracts of adhesion wherein the
contract terms generally are advantageous to the franchisor when there is
conflict in the relationship. [15] Additionally, the legal publishing website
Nolo.com listed the "Lack of Legal Recourse" as one of Ten Good Reasons
Not to Buy a Franchise:
“ As a franchisee, you have little legal recourse if you're wronged by the
franchisor. Most franchisors make franchisees sign agreements waiving their
rights under federal and state law, and in some cases allowing the franchisor
to choose where and under what law any dispute would be litigated.
Shamefully, the Federal Trade Commission (FTC) investigates only a small
minority of the franchise-related complaints it receives.[16] ”

Legal aspects

Australia
In Australia, franchising is regulated by the Franchising Code of Conduct, a
mandatory code of conduct made under the Trade Practices Act 1974.
The Code requires franchisors to produce a disclosure document which must
be given to aprospective franchisee at least 14 days before the franchise
agreement is entered into.
The Code also regulates the content of franchise agreements, for example in
relation to marketing funds, a cooling-off period, termination and the
resolution of disputes by mediation.

United States
In the United States, franchising falls under the jurisdiction of a number of
state and federal laws. Franchisors are required by the Federal Trade
Commission to provide a Uniform Franchise Offering Circular (UFOC) to
disclose essential information to potential franchisees about their purchase.
States may require the UFOC to contain specific requirements but the
requirements in the State disclosure documents must be in compliance with
the Federal Rule that governs federal regulatory policy.[17] There is no
private right of action under the FTC Rule for franchisor violation of the rule
but fifteen or more of the States have passed statutes that provide a private
right of action to franchisees when fraud can be proved under these special
statutes.
The franchise agreement is a standard part of franchising. It is the essential
contract signed by the franchisee and the franchisor that formalizes and
specifies the terms of the business arrangement, as well as many issues
discussed in less detail in the UFOC. Unlike the UFOC, the franchise
agreement is a fluid document, crafted to meet the specific needs of the
franchise, with each having its own set of standards and requirements. But
much like a lease, there are elements commonly found in every agreement.
[17] "There is a difference between a discrete contract and a relational
contract, and franchise contracts are a distinct subset of relational contracts."
Franchise contracts form a unique and ongoing relationship berween the
parties. "Unlike a traditional contract, franchise contracts establish a
relationship where the stronger party can unilaterally alter the fundamental
nature of the obligations of the weaker party......." [18]
There is no federal registry of franchises or any federal filing requirements
for information. States are the primary collectors of data on franchising
companies, and enforce laws and regulations regarding their presence and
their spread in their jurisdictions. In response to the soaring popularity of
franchising, an increasing number of communities are taking steps to limit
these chain businesses and reduce displacement of independent businesses
through limits on "formula businesses."[19]
The majority of franchisors have inserted mandatory arbitration clauses into
their agreements with their franchisees. Since 1980, the U.S. Supreme Court
has dealt with cases involving direct franchisor/franchisee conflicts at least
four times, and three of those cases involved a franchisee who was resisting
the franchisor's motion to compel arbitration. Two of the latter cases
involved large, well-known restaurant chains (Burger King in Burger King
v. Rudzewicz and Subway in 517 US 681 (1996) Doctor's Associates, Inc. v.
Casarotto); the third involved Southland Corporation, the parent company of
7-Eleven in Southland Corp. v. Keating, 465 US 1 (1984) .
Russia
In Russia, under ch. 54 of the Civil Code (passed 1996), franchise
agreements are invalid unless written and registered, and franchisors cannot
set standards or limits on the prices of the franchisee’s goods. Enforcement
of laws and resolution of contractual disputes is a problem: Dunkin' Donuts
chose to terminate its contract with Russian franchisees that were selling
vodka and meat patties contrary to their contracts, rather than pursue legal
remedies.[citation needed]

UK
In the United Kingdom, there are no franchise-specific laws; franchises are
subject to the same laws that govern other businesses. For example,
franchise agreements are produced under regular contract law and do not
have to conform to any further legislation or guidelines.[citation needed]
There is some self-regulation through the British Franchise Association
(BFA). However there are many franchise businesses which do not become
members, and many businesses that refer to themselves as franchisors that
do not conform to these rules.[citation needed] There are several people and
organisations in the industry calling for the creation of a framework to help
reduce the number of "cowboy" franchises and help the industry clean up its
image.[who?]
On 22 May 2007, hearings were held in the UK Parliament concerning
citizen initiated petitions for special regulation of franchising by the
government of the UK due to losses of citizens who had invested in
franchises. The Minister of Industry, Margaret Hodge, conducted hearings
but resisted any government regulation of franchising with the advice that
government regulation of franchising might lull the public into a false sense
of security. The Minister of Industry indicated that if due diligence were
performed by the investors and the banks, the current laws governing
business contracts in the UK offered sufficient protection for the public and
the banks.[20]

Kazakhstan
Until 2002, franchising rules in Kazakhstan were also governed by Chapter
45 of the Kazakh Civil Code (CC). Measures of state support franchising
generally been included in the programme of support for business. Measures
to promote franchising were provided in paragraph 2.4.1 of the state
program for small business development and support for the 1999–2000.
Key provisions of Chapter 45, as well as the rules governing the franchise in
more detail relations, entered the law "About integrated business license
(franchise)", dated 24 June 2002, No. 330 - II. It should be noted that
amongst the Commonwealth of Independent States, Kazakhstan is one of the
first countries to introduce the legal definition of franchising in a special
law.

Social franchises
In recent years, the idea of franchising has been picked up by the social
enterprise sector, which hopes to simplify and expedite the process of setting
up new businesses. A number of business ideas, such as soap making,
wholefood retailing, aquarium maintenance, and hotel operation, have been
identified as suitable for adoption by social firms employing disabled and
disadvantaged people.
The most successful example is probably the CAP Markets, a steadily
growing chain of some 50 neighborhood supermarkets in Germany. Other
examples are the St. Mary's Place Hotel in Edinburgh and the Hotel Tritone
in Trieste.

Event franchising
Event franchising is the duplication of public events in other geographical
areas, while retaining the original brand (logo), mission, concept and format
of the event.[21] As in classic franchising, event franchising is built on
precisely copying successful events. Good example of event franchising is
the World Economic Forum, or just Davos forum which has regional event
franchisees in China, Latin America etc.

References
^ "Harrap's shorter French and English dictionary" ISBN 0-245-55046-1
^ a b Frandata Corporation (February 2000) The Profile of Franchising:
A Statistical Abstract of UFOC Data accessed 2007-12-20
^ Franchising - Types Of Franchises, History Of Franchising, The Spread
Of Franchising
^ Lemelson Center: Archives: Western Union Collection
^ http://findarticles.com/p/articles/mi_m0FJN/is_n8_v30/ai_18728418
^ http://www.aw-drivein.com/About_Us.cfm A&W official site: About
Us
^ Allen, Robin Lee. (1998). Foodservice’s theory of evolution: Survival
of the fittest. Nation’s Restaurant News 32(4), pages 14 -17.
^ Howard, T. (1996). Howard Johnson: Initiator of franchised
restaurants. Nation’s Restaurant News, 30(2), pages 85-86.
^ http://www.wdfi.org/fi/securities/franchise/history.htm
^ Special Report: The Interstate Highway System at 50, Civil
Engineering—ASCE, Vol. 76, No. 6, (June 2006), page 36
^ , 2007)
^ Econ Study cover_title pg

13 Product marketing
Product marketing deals with the first of the "4P"'s of marketing, which are
Product, Pricing, Place, and Promotion. Product marketing, as opposed to
product management, deals with more outbound marketing tasks. For
example, product management deals with the nuts and bolts of product
development within a firm, whereas product marketing deals with marketing
the product to prospects, customers, and others. Product marketing, as a job
function within a firm, also differs from other marketing jobs such as
Marcom or marketing communications, online marketing, advertising,
marketing strategy, etc.
A Product Market is something that is referred to when pitching a new
product to the general public. The people you are trying to make your
product appeal to is your consumer market. For example: If you were
pitching a new playstation game to the public, your consumer market would
probably be a younger/teenage market (depending on the type of game).
Thus you would carry out market research to find out how best to release the
game. Likewise, a massage chair would probably not appeal to younger
children, so you would pitch your product to an older generation
Contents
[hide]
•1 Role of Product Marketing

•2 Product Marketing vs. Product Management

•3 Qualifications

•4 Product Marketing (Alternative View)

•5 See also

•6 References

Role of Product Marketing


Product marketing in a business addresses four important strategic
questions:[1]
•What products will be offered (i.e., the breadth and depth of the product
line)?
•Who will be the target customers (i.e., the boundaries of the market
segments to be served)?
•How will the products reach those customers (i.e., the distribution
channels to be used)?
•Why will customers prefer our products to those of competitors (i.e., the
distinctive attributes and value to be provided)?

Product Marketing vs. Product Management


Product marketing frequently differs from product management in high-tech
companies. Whereas the product manager is required to take a product's
requirements from the sales and marketing personnel and create a product
requirements document (PRD),[2] which will be used by the engineering
team to build the product, the product marketing manager can be engaged in
the task of creating a marketing requirements document (MRD), which is
used as source for the product management to develop the PRD.
In other companies the product manager creates both the MRDs and the
PRDs, while the product marketing manager does outbound tasks like giving
product demonstrations in trade shows, creating marketing collateral like
hot-sheets, beat-sheets, cheat sheets, data sheets, and white papers. This
requires the product marketing manager to be skilled not only in competitor
analysis, market research, and technical writing, but also in more business
oriented activities like conducting ROI and NPV analyses on technology
investments, strategizing how the decision criteria of the prospects or
customers can be changed so that they buy the company's product vis-a-vis
the competitor's product, etc.
In smaller high-tech firms or start-ups, product marketing and product
management functions can be blurred, and both tasks may be borne by one
individual. However, as the company grows someone needs to focus on
creating good requirements documents for the engineering team, whereas
someone else needs to focus on how to analyze the market, influence the
"analysts", press, etc. When such clear demarcation becomes visible, the
former falls under the domain of product management, and the latter, under
product marketing. In Silicon Valley, in particular, product marketing
professionals have considerable domain experience in a particular market or
technology or both. Some Silicon Valley firms have titles such as Product
Marketing Engineer, who tend to be promoted to managers in due course.
The trend that is emerging in Silicon Valley is for companies to hire a team
of a product marketing manager with a technical marketing manager. The
Technical Marketing role is becoming more valuable as companies become
more competitive and seek to reduce costs and time to market.

Qualifications
Typical qualifications for this area of business are is a high level Marketing
or Business related degree, e.g. an MBA, not forgetting sufficient work
experience in related areas. As a key skill is to be able to interact with
technical staff, a background in engineering is also an asset.
Product Marketing (Alternative View)
The “Product Marketing” discipline is an outbound activity aimed at
generating product awareness, differentiation, and demand. There are three
principal methods to achieving this goal.
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/wiki/Image:Marketing_Domain.jpg
Each of these principal methods concentrates on one of the various aspects
of the product: price, features, or value. The price emphasis method is called
“Price Competition”. The features emphasis method is called “Comparative
Marketing”. The value emphasis method is called “Value Marketing”.
In the price emphasis method, the goal of product marketing is reached by
emphasizing and communicating to the market the price of the product as a
marketing signal. For example, touting the product’s high price may signify
a premium product and attempt to positively affect a perception of quality
via inference. The goal of the price emphasis method is to create a situation
where the customers primarily consider the product’s price as the main
buying decision factor.
In the feature emphasis method, the goal of product marketing is reached by
emphasizing and communicating to the market the existence or merit of the
product’s features in comparison to the features of other competing products.
The goal of the feature emphasis method is to create a situation where the
customers primarily consider the product’s feature set as the main buying
decision factor.
In the value emphasis method, the goal of product marketing is reached by
emphasizing and communicating to the market the value the product holds
relative to the customer and comparatively to the value offered by other
competing products. The goal of the value emphasis method is to create
superior perceived value and prove superior actual value. “Superior
Perceived Value” is a state where customers perceive the product (bought
from a particular company) gives a net value more positive than its
alternatives; and “Superior Actual Value” is a state where the product
factually gives customers a net value more positive than its alternatives. The
result of these states would be a situation where the customers primarily
consider the product’s value as the main buying decision factor.
The price emphasis and feature emphasis methods (price competition and
comparative marketing) are considered significantly easier to implement
than the value emphasis method (value marketing). This is because the price
emphasis and feature emphasis methods convey simple qualitative concepts
that are easy to understand and require minimal interpretation by the
customers. Conversely, the value emphasis method relays abstract and
qualitative concepts which project conjecture and argumentation, and thus
are more challenging to grasp.
Another method in the product marketing discipline is product branding.
“Product Branding” is the process of building and maintaining a brand at the
product level. “Brand” is an identity, made of symbols and ideas, which
portray a specific offering from a known source. Product branding is
executed concurrently with one or more of the principal methods in product
marketing.
The process of product branding and the derived brand is often the result of
a deliberate and conscious effort by the company, but can also be an
unintentional by-product resulting from the execution of any of the three
principal methods of product marketing. Product branding is therefore not
considered a principal method on to its own since the formation of a brand
can be the outcome of applying any of the three principal methods in product
marketing.

References
1. ^ This is described in further detail by S. Wheelright and K. Clark in
Revolutionizing Product Development (1992), p. 40-41; at the beginning of
the section titled "Product/Market Planning and Strategy".
2. ^ This thirty page PRD details the authoring of the product requirement
document in further detail, and can be viewed at
http://software.franteractive.com.
•Gabriel Steinhardt (2008). "Concept of Marketing" (PDF). 2.0.
Blackblot. Retrieved on 2008.
•Gabriel Steinhardt (2008). "Value-Marketing Model" (PDF). 2.0.
Blackblot. Retrieved on 2008.
Retrieved from "http://en.wikipedia.org/wiki/Product_marketing"

Pricing
Marketing
Pricing is one of the four p's of the marketing mix. The other three aspects
are product, promotion, and place. It is also a key variable in microeconomic
price allocation theory. Price is the only revenue generating element
amongst the 4ps,the rest being cost centers. Pricing is the manual or
automatic process of applying prices to purchase and sales orders, based on
factors such as: a fixed amount, quantity break, promotion or sales
campaign, specific vendor quote, price prevailing on entry, shipment or
invoice date, combination of multiple orders or lines, and many others.
Automated systems require more setup and maintenance but may prevent
pricing errors.
Contents
[hide]
•1 Questions involved in pricing

•2 What a price should do

•3 Definitions

•4 Approaches

•5 See also

•6 External links

Questions involved in pricing


Pricing involves asking questions like:
•How much to charge for a product or service? This question is that a
typical starting point for discussions about pricing, however, a better
question for a vendor to ask is - How much do customers value the
products, services, and other intangibles that the vendor provides.
•What are the pricing objectives?

•Do we use profit maximization pricing?

•How to set the price?: (cost-plus pricing, demand based or value-based


pricing, rate of return pricing, or competitor indexing)
•Should there be a single price or multiple pricing?
•Should prices change in various geographical areas, referred to as zone
pricing?
•Should there be quantity discounts?

•What prices are competitors charging?


•Do you use a price skimming strategy or a penetration pricing strategy?

•What image do you want the price to convey?


•Do you use psychological pricing?

•How important are customer price sensitivity (e.g. "sticker shock") and
elasticity issues?
•Can real-time pricing be used?

•Is price discrimination or yield management appropriate?

•Are there legal restrictions on retail price maintenance, price collusion,


or price discrimination?
•Do price points already exist for the product category?

•How flexible can we be in pricing? : The more competitive the industry,


the less flexibility we have.
•The price floor is determined by production factors like costs
(often only variable costs are taken into account), economies of
scale, marginal cost, and degree of operating leverage
•The price ceiling is determined by demand factors like price
elasticity and price points
•Are there transfer pricing considerations?

•What is the chance of getting involved in a price war?

•How visible should the price be? - Should the price be neutral? (ie.: not
an important differentiating factor), should it be highly visible? (to
help promote a low priced economy product, or to reinforce the
prestige image of a quality product), or should it be hidden? (so as to
allow marketers to generate interest in the product unhindered by
price considerations).
•Are there joint product pricing considerations?

•What are the non-price costs of purchasing the product? (eg.: travel time
to the store, wait time in the store, disagreeable elements associated
with the product purchase - dentist -> pain, fishmarket -> smells)
•What sort of payments should be accepted? (cash, check, credit card,
barter) Pricing
Process of determining what a company will receive in exchange for its
products. Pricing factors are manufacturing cost,market
place,compitition,maket condition,Quality of product.

What a price should do


A well chosen price should do three things :
•achieve the financial goals of the firm (eg.: profitability)
•fit the realities of the marketplace (will customers buy at that price?)
•support a product's positioning and be consistent with the other variables
in the marketing mix
•price is influenced by the type of distribution channel used, the
type of promotions used, and the quality of the product
•price will usually need to be relatively high if
manufacturing is expensive, distribution is exclusive, and
the product is supported by extensive advertising and
promotional campaigns
•a low price can be a viable substitute for product quality,
effective promotions, or an energetic selling effort by
distributors
From the marketers point of view, an efficient price is a price that is very
close to the maximum that customers are prepared to pay. In economic
terms, it is a price that shifts most of the consumer surplus to the producer.
A good pricing strategy would be the one which could balance between the
Price floor(the price below which the organization ends up in losses) and the
Price ceiling(the price beyond which the organization experiences a no
demand situation).

Definitions
The effective price is the price the company receives after accounting for
discounts, promotions, and other incentives.
Price lining is the use of a limited number of prices for all your product
offerings. This is a tradition started in the old five and dime stores in which
everything cost either 5 or 10 cents. Its underlying rationale is that these
amounts are seen as suitable price points for a whole range of products by
prospective customers. It has the advantage of ease of administering, but the
disadvantage of inflexibility, particularly in times of inflation or unstable
prices.
A loss leader is a product that has a price set below the operating margin.
This results in a loss to the enterprise on that particular item, but this is done
in the hope that it will draw customers into the store and that some of those
customers will buy other, higher margin items.
Promotional pricing refers to an instance where pricing is the key element
of the marketing mix.
The price/quality relationship refers to the perception by most consumers
that a relatively high price is a sign of good quality. The belief in this
relationship is most important with complex products that are hard to test,
and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the more of a
premium they are prepared to pay. The classic example of this is the pricing
of the snack cake Twinkies, which were perceived as low quality when the
price was lowered. Note, however, that excessive reliance on the
price/quantity relationship by consumers may lead to the raising of prices on
all products and services, even those of low quality, which in turn causes the
price/quality relationship to no longer apply.
Premium pricing (also called prestige pricing) is the strategy of
consistently pricing at, or near, the high end of the possible price range to
help attract status-conscious consumers. A few examples of companies
which partake in premium pricing in the marketplace include Rolex and
Bentley. People will buy a premium priced product because:
They believe the high price is an indication of good quality;
They believe it to be a sign of self worth - "They are worth it" - It
authenticates their success and status - It is a signal to others that they
are a member of an exclusive group; and
They require flawless performance in this application - The cost of
product malfunction is too high to buy anything but the best - example
: heart pacemaker
The term Goldilocks pricing is commonly used to describe the practice of
providing a "gold-plated" version of a product at a premium price in order to
make the next-lower priced option look more reasonably priced; for
example, encouraging customers to see business-class airline seats as good
value for money by offering an even higher priced first-class option.[citation
needed] Similarly, third-class railway carriages in Victorian England are
said to have been built without windows, not so much to punish third-class
customers (for which there was no economic incentive), as to motivate those
who could afford second-class seats to pay for them instead of taking the
cheaper option.[citation needed] This is also known as a potential result of
price discrimination.
The name derives from the Goldilocks story, in which Goldilocks chose
neither the hottest nor the coldest porridge, but instead the one that was "just
right". More technically, this form of pricing exploits the general cognitive
bias of aversion to extremes. This practice is known academically as
"framing". By providing three options (i.e. small, medium, and large; first,
business, and coach classes) you can manipulate the consumer into choosing
the middle choice and thus, the middle choice should yield the most profit to
the seller, since it is the most chosen option.
Demand-based pricing is any pricing method that uses consumer demand -
based on perceived value - as the central element. These include : price
skimming, price discrimination and yield management, price points,
psychological pricing, bundle pricing, penetration pricing, price lining,
value-based pricing, geo and premium pricing. Pricing factors are
manufacturing cost,market place,compitition,maket condition,Quality of
product.

Approaches
Pricing as the most effective profit lever. (Template:Cite book:) Pricing can
be approached at three levels. The industry, market, and transaction level.
Pricing at the industry level focuses on the overall economics of the
industry, including supplier price changes and customer demand changes.
Pricing at the market level focuses on the competitive position of the price in
comparison to the value differential of the product to that of comparative
competing products.
Pricing at the transaction level focuses on managing the implementation of
discounts away from the reference, or list price, which occur both on and off
the invoice or receipt. Pricing at the transaction level focuses on managing
the implementation of discounts away from the reference, or list price, which
occur both on and off the invoice or receipt.

Promotion (marketing)
Example
The publicity for the 40th anniversary of the 1966 NCAA Basketball
championship included [1]
The renaming of a city street
A tie-in with an autobiography with the same title
The screening of a film with the same title
The release of a breakfast cereal box with coordinated materials
A pep rally on a university campus
Media coverage, have been successful

Distribution (business)

The distribution channel


Frequently there may be a chain of intermediaries, each passing the product
down the chain to the next organization, before it finally reaches the
consumer or end-user. This process is known as the 'distribution chain' or the
'channel.' Each of the elements in these chains will have their own specific
needs, which the producer must take into account, along with those of the
all-important end-user.

Channels
A number of alternate 'channels' of distribution may be available:
•Selling direct, such as via mail order, Internet and telephone sales
•Agent, who typically sells direct on behalf of the producer
•Distributor (also called wholesaler), who sells to retailers
•Retailer (also called dealer or reseller), who sells to end customers

•Advertisement typically used for consumption goods


Distribution channels may not be restricted to physical products alone. They
may be just as important for moving a service from producer to consumer in
certain sectors, since both direct and indirect channels may be used. Hotels,
for example, may sell their services (typically rooms) directly or through
travel agents, tour operators, airlines, tourist boards, centralized reservation
systems, etc.
There have also been some innovations in the distribution of services. For
example, there has been an increase in franchising and in rental services -
the latter offering anything from televisions through tools. There has also
been some evidence of service integration, with services linking together,
particularly in the travel and tourism sectors. For example, links now exist
between airlines, hotels and car rental services. In addition, there has been a
significant increase in retail outlets for the service sector. Outlets such as
estate agencies and building society offices are crowding out traditional
grocers from major shopping areas.

Channel members
Distribution channels can thus have a number of levels. Kotler defined the
simplest level, that of direct contact with no intermediaries involved, as the
'zero-level' channel.
The next level, the 'one-level' channel, features just one intermediary; in
consumer goods a retailer, for industrial goods a distributor. In small
markets (such as small countries) it is practical to reach the whole market
using just one- and zero-level channels.
In large markets (such as larger countries) a second level, a wholesaler for
example, is now mainly used to extend distribution to the large number of
small, neighborhood retailers.
In Japan the chain of distribution is often complex and further levels are
used, even for the simplest of consumer goods.
In Bangladesh Telecom Operators are using different Chains of Distribution,
especially 'second level'.
In IT and Telecom industry levels are named "tiers". A one tier channel
means that vendors IT product manufacturers (or software publishers) work
directly with the dealers. A one tier / two tier channel means that vendors
work directly with dealers and with distributors who sell to dealers.But the
most important is the distributor or wholesaler.

The internal market


Many of the marketing principles and techniques which are applied to the
external customers of an organization can be just as effectively applied to
each subsidiary's, or each department's, 'internal' customers.
In some parts of certain organizations this may in fact be formalized, as
goods are transferred between separate parts of the organization at a `transfer
price'. To all intents and purposes, with the possible exception of the pricing
mechanism itself, this process can and should be viewed as a normal buyer-
seller relationship. The fact that this is a captive market, resulting in a
`monopoly price', should not discourage the participants from employing
marketing techniques.
Less obvious, but just as practical, is the use of `marketing' by service and
administrative departments; to optimize their contribution to their
`customers' (the rest of the organization in general, and those parts of it
which deal directly with them in particular). In all of this, the lessons of the
non-profit organizations, in dealing with their clients, offer a very useful
parallel.

Channel Decisions
•Channel strategy
•Product (or service)<>Cost<>Consumer location

Channel management
The channel decision is very important. In theory at least, there is a form of
trade-off: the cost of using intermediaries to achieve wider distribution is
supposedly lower. Indeed, most consumer goods manufacturers could never
justify the cost of selling direct to their consumers, except by mail order. In
practice, if the producer is large enough, the use of intermediaries
(particularly at the agent and wholesaler level) can sometimes cost more
than going direct.
Many of the theoretical arguments about channels therefore revolve around
cost. On the other hand, most of the practical decisions are concerned with
control of the consumer. The small company has no alternative but to use
intermediaries, often several layers of them, but large companies 'do' have
the choice.
However, many suppliers seem to assume that once their product has been
sold into the channel, into the beginning of the distribution chain, their job is
finished. Yet that distribution chain is merely assuming a part of the
supplier's responsibility; and, if he has any aspirations to be market-oriented,
his job should really be extended to managing, albeit very indirectly, all the
processes involved in that chain, until the product or service arrives with the
end-user. This may involve a number of decisions on the part of the supplier:
•Channel membership
•Channel motivation
•Monitoring and managing channels

Channel membership
Intensive distribution - Where the majority of resellers stock the `product'
(with convenience products, for example, and particularly the brand
leaders in consumer goods markets) price competition may be evident.
Selective distribution - This is the normal pattern (in both consumer and
industrial markets) where `suitable' resellers stock the product.
Exclusive distribution - Only specially selected resellers or authorized
dealers (typically only one per geographical area) are allowed to sell
the `product'.

Channel motivation
It is difficult enough to motivate direct employees to provide the necessary
sales and service support. Motivating the owners and employees of the
independent organizations in a distribution chain requires even greater
effort. There are many devices for achieving such motivation. Perhaps the
most usual is `incentive': the supplier offers a better margin, to tempt the
owners in the channel to push the product rather than its competitors; or a
competition is offered to the distributors' sales personnel, so that they are
tempted to push the product. At the other end of the spectrum is the almost
symbiotic relationship that the all too rare supplier in the computer field
develops with its agents; where the agent's personnel, support as well as
sales, are trained to almost the same standard as the supplier's own staff.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution
activities need to be monitored and managed, so will those of the
distribution chain.
In practice, many organizations use a mix of different channels; in particular,
they may complement a direct salesforce, calling on the larger accounts,
with agents, covering the smaller customers and prospects.

Vertical marketing
This relatively recent development integrates the channel with the original
supplier - producer, wholesalers and retailers working in one unified system.
This may arise because one member of the chain owns the other elements
(often called `corporate systems integration'); a supplier owning its own
retail outlets, this being 'forward' integration. It is perhaps more likely that a
retailer will own its own suppliers, this being 'backward' integration. (For
example, MFI, the furniture retailer, owns Hygena which makes its kitchen
and bedroom units.) The integration can also be by franchise (such as that
offered by McDonald's hamburgers and Benetton clothes) or simple co-
operation (in the way that Marks & Spencer co-operates with its suppliers).
Alternative approaches are 'contractual systems', often led by a wholesale or
retail co-operative, and `administered marketing systems' where one
(dominant) member of the distribution chain uses its position to co-ordinate
the other members' activities. This has traditionally been the form led by
manufacturers.
The intention of vertical marketing is to give all those involved (and
particularly the supplier at one end, and the retailer at the other) 'control'
over the distribution chain. This removes one set of variables from the
marketing equations.
Other research indicates that vertical integration is a strategy which is best
pursued at the mature stage of the market (or product). At earlier stages it
can actually reduce profits. It is arguable that it also diverts attention from
the real business of the organization. Suppliers rarely excel in retail
operations and, in theory, retailers should focus on their sales outlets rather
than on manufacturing facilities ( Marks & Spencer, for example, very
deliberately provides considerable amounts of technical assistance to its
suppliers, but does not own them).

Horizontal marketing
A rather less frequent example of new approaches to channels is where two
or more non-competing organizations agree on a joint venture - a joint
marketing operation - because it is beyond the capacity of each individual
organization alone. In general, this is less likely to revolve around marketing
synergy.

References
•Louis W. Stern et al, 'Marketing Channels', (Prentice-Hall, 7th ed.,
2006)
•Richard E. Wilson, 'A Blueprint for Designing Marketing Channels',
(www.chicagostrategy.com)
•P. Kotler, 'Marketing Management' (Prentice-Hall, 7th ed., 1991)
•G. Lancaster and L. Massingham, 'Essentials of Marketing' (McGraw-
Hill, 1988)
•Julian Dent, "Distribution Channels: Understanding and Managing
Channels to Market" (Kogan Page, 2008)
Service (economics)

A service is the non-material equivalent of a good. A service provision is an


economic activity that does not result in ownership, and this is what
differentiates it from providing physical goods. It is claimed to be a process
that creates benefits by facilitating either a change in customers, a change in
their physical possessions, or a change in their intangible assets.
By supplying some level of skill, ingenuity,and experience, providers of a
service participate in an economy without the restrictions of carrying stock
(inventory) or the need to concern themselves with bulky raw materials. On
the other hand, their investment in expertise does require marketing and
upgrading in the face of competition which has equally few physical
restrictions.
Providers of services make up the Tertiary sector of industry.
Contents
•1 Key characteristics

•2 Service definition

•3 Service specification

•4 Service delivery

•5 The service-goods continuum

•6 List of economic services

•7 See also

•8 Finding related topics

• 9 References
Key characteristics
Services can be paraphrased in terms of their main attributes. They are
intangible and insubstantial; they cannot be handled, smelled, tasted, heard,
etc. There is neither potential nor need for storage and they are said to be
inseparable and perishable. Because services are difficult to conceptualize,
marketing them requires creative visualization to effectively evoke a
concrete image in the customer's mind. From the customer's point of view,
this characteristic makes it difficult to evaluate or compare services prior to
experiencing the service delivery. They are perishable, unsold service time is
a lost economic opportunity. For example a doctor who is booked for only
two hours a day cannot later work those hours— she has lost her economic
opportunity. Other service examples are airplane seats (once the plane
departs, those empty seats cannot be sold), and theatre seats (sales end at a
certain point). There is a lack of transportability as services tend to be
consumed at the point of "production" although this does not apply to
outsourced business services. Services are regarded as heterogeneity or lack
of homogeneity and are typically modified for each consumer or each new
situation (consumerised). Mass production of services is very difficult. This
can be seen as a problem of inconsistent quality. Both inputs and outputs to
the processes involved providing services are highly variable, as are the
relationships between these processes, making it difficult to maintain
consistent quality. There is labor intensity as services usually involve
considerable human activity, rather than a precisely determined process.
Human resource management is important. The human factor is often the
key success factor in service industries. It is difficult to achieve economies
of scale or gain dominant market share. There are demand fluctuations and it
can be difficult to forecast demand which is also true of many goods.
Demand can vary by season, time of day, business cycle, etc. There is buyer
involvement as most service provision requires a high degree of interaction
between service consumer and service provider. There is a client-based
relationship based on creating long-term business relationships.
Accountants, attorneys, and financial advisers maintain long-term
relationships with their clientes for decades. These repeat consumers refer
friends and family, helping to create a client-based relationship.

Service definition
The clear-cut, consistent, generic definition of the service term reads as
follows:
A service is a set of benefits delivered from the accountable service
provider, mostly in close coaction with his service suppliers, generated by
the functions of technical systems and/or by distinct activities of individuals,
respectively, commissioned according to the needs of his service consumers
by the service customer from the accountable service provider, rendered
individually to the authorized service consumers on their dedicated request,
and, finally, utilized by the requesting service consumers for executing
and/or supporting their day-to-day business tasks or private activities.

Service specification
Any service can be completely, consistently and cleary specified by means
of the following 12 standard attributes
Service Consumer Benefit(s)
Service-specific Functional Parameter(s)
Service Delivery Point
Service Consumer Count
Service Readiness Time(s)
Service Support Time(s)
Service Support Language(s)
Service Fulfillment Target
Maximum Impairment Duration per Incident
Service Delivering Duration
Service Delivery Unit
Service Delivering Price
The meaning and content of these attributes are:
1. Service Consumer Benefits describe the (set of) benefits which are
callable, receivable and effectively utilizable for any authorized service
consumer and which are provided to him as soon as he requests the offered
service. The description of these benefits must be phrased in the terms and
wording of the intended service consumers.
2. Service-specific Functional Parameters specify the functional
parameters which are essential and unique to the respective service and
which describe the most important dimension of the service output, e.g.
maximum e-mailbox capacity per registered and authorized e-mail service
consumer.
3. Service Delivery Point describes the physical location and/or logical
interface where the benefits of the service are made accessible, callable and
receivable to the authorized service consumers. At this point and/or
interface, the preparedness for service delivery can be assessed as well as the
effective delivery of the service itself can be monitored and controlled.
4. Service Consumer Count specifies the number of intended, identified,
named, registered and authorized service consumers which are allowed and
enabled to call and utilize the defined service for executing and/or
supporting their business tasks or private activities.
5. Service Readiness Times specify the distinct agreed times of day when
•the described service consumer benefits are
•accessible and callable for the authorized service consumers at the
defined service delivery point
•receivable and utilizable for the authorized service consumers at
the respective agreed service level
•all service-relevant processes and resources are operative and effective
•all service-relevant technical systems are up and running and attended
by the operating team
•the specified service benefits are comprehensively delivered to any
authorized requesting service consumer without any delay or friction.
The time data are specified in 24 h format per local working day and local
time, referring to the location of the intended service consumers.
6. Service Support Times specify the determined and agreed times of day
when the usage and consumption of the contracted services is supported by
the service desk team for all identified, registered and authorized service
consumers within the service customer’s organizational unit or area. The
service desk is the single point of contact for any service consumer inquiry
regarding the contracted and delivered services. During the defined service
support times, the service desk can be reached by phone, e-mail, web-based
entries and/or fax, respectively. The time data are specified in 24 h format
per local working day and local time, referring to the location of the
intended service consumers.
7. Service Support Languages specifies the languages which are spoken by
the service desk team(s) to the service consumers calling them.
8. Service Fulfillment Target specifies the service provider’s promise of
effective and seamless delivery of the defined benefits to any authorized
service consumer requesting the service within the defined service times. It
is expressed as the promised minimum ratio of the counts of successful
individual service deliveries related to the counts of called indivdual service
deliveries. The effective service fulfillment ratio can be measured and
calculated per single service consumer or per consumer group and may be
referred to different time periods (workday, calenderweek, workmonth, etc.)
9. Maximum Impairment Duration per Incident specifies the allowable
maximum elapsing time [hh:mm] between
•the first occurrence of a service impairment, i.e. service quality
degradation or service delivery disruption, whilst the service
consumer consumes and utilizes the delivered service,
•and the full resumption and complete execution of the service delivery
to the content of the affected service consumer.
10. Service Delivering Duration specifies the promised and agreed
maximum period of time for effectively delivering all specified service
consumer benefits to the requesting service consumer at the defined service
delivery point.
11. Service Delivery Unit specifies the basic portion for delivering the
defined service consumer benefits. The service delivery unit is the reference
and mapping object for all cost for service generation and delivery as well as
for charging and billing the consumed service volume to the service
customer who has ordered the service delivery.
12. Service Delivering Price specifies the amount of money the service
customer has to pay for the consumption of distinct service volumes.
Normally, the service delivering price comprises two portions
•a fixed basic price portion for basic efforts and resources which provide
accessiblity and usablity of the service delivery functions, i.e. service
access price
•a price portion covering the service consumption based on
•fixed flat rate price per authorized service consumer and delivery
period without regard on the consumed service volumes,
•staged prices depending on consumed service volumes,
•fixed price per particularly consumed service delivering unit.

Service delivery
The delivery of a service typically involves six factors:
•The accountable service provider and his service suppliers (e.g. the
people)
•Equipment used to provide the service (e.g. vehicles, cash registers)
•The physical facilities (e.g. buildings, parking, waiting rooms)
•The requesting service consumer
•Other customers at the service delivery location
•Customer contact
The service encounter is defined as all activities involved in the service
delivery process. Some service managers use the term "moment of truth" to
indicate that defining point in a specific service encounter where interactions
are most intense.
Many business theorists view service provision as a performance or act
(sometimes humorously referred to as dramalurgy, perhaps in reference to
dramaturgy). The location of the service delivery is referred to as the stage
and the objects that facilitate the service process are called props. A script is
a sequence of behaviours followed by all those involved, including the
client(s). Some service dramas are tightly scripted, others are more ad lib.
Role congruence occurs when each actor follows a script that harmonizes
with the roles played by the other actors.
In some service industries, especially health care, dispute resolution, and
social services, a popular concept is the idea of the caseload, which refers to
the total number of patients, clients, litigants, or claimants that a given
employee is presently responsible for. On a daily basis, in all those fields,
employees must balance the needs of any individual case against the needs
of all other current cases as well as their own personal needs.
Under English law, if a service provider is induced to deliver services to a
dishonest client by a deception, this is an offence under the Theft Act 1978.
/wiki/Image:Service-goods_continuum.png
/wiki/Image:Service-goods_continuum.pngService-Goods continuum

The service-goods continuum


The dichotomy between physical goods and intangible services should not
be given too much credence. These are not discrete categories. Most
business theorists see a continuum with pure service on one terminal point
and pure commodity good on the other terminal point.[citation needed] Most
products fall between these two extremes. For example, a restaurant
provides a physical good (the food), but also provides services in the form of
ambience, the setting and clearing of the table, etc. And although some
utilities actually deliver physical goods — like water utilities which actually
deliver water — utilities are usually treated as services.
In a narrower sense, service refers to quality of customer service: the
measured appropriateness of assistance and support provided to a customer.
This particular usage occurs frequently in retailing.

List of economic services


/wiki/Image:2005gdpServices.PNG
/wiki/Image:2005gdpServices.PNGService output in 2005
In 2005, USA was the largest producer of services followed by Japan and
Germany, reports the International Monetary Fund. Services accounted for
78.5% of the U.S. Economy in 2007[1], compared to 20% in 1947.
The following is an incomplete list of service industries, grouped into rough
sectors. Parenthetical notations indicate how specific occupations and
organizations can be regarded as service industries to the extent they provide
an intangible service, as opposed to a tangible good.
•business functions (that apply to all organizations in general)
•consulting

•customer service

•human resources administrators (providing services like ensuring


that employees are paid accurately)
•child care

•cleaning, repair and maintenance services

•janitors (who provide cleaning services)


•gardeners

•mechanics

•construction

•carpentry

•electricians (offering the service of making wiring work properly)

•plumbing

•death care
•coroners (who provide the service of identifying corpses and
determining time and cause of death)
•funeral homes (who prepare corpses for public display, cremation
or burial)
•dispute resolution and prevention services

•arbitration

•courts of law (who perform the service of dispute resolution


backed by the power of the state)
•diplomacy

•incarceration (provides the service of keeping criminals out of


society)
•law enforcement (provides the service of identifying and
apprehending criminals)
•lawyers (who perform the services of advocacy and
decisionmaking in many dispute resolution and prevention
processes)
•mediation

•military (performs the service of protecting states in disputes with


other states)
•negotiation (not really a service unless someone is negotiating on
behalf of another)
•education (institutions offering the services of teaching and access to
information)
•library

•museum

•school

•entertainment (when provided live or within a highly specialized


facility)
•gambling

•movie theatres (providing the service of showing a movie on a big


screen)
•performing arts productions

•sexual services

•sports

•television

•fabric care
•dry cleaning

•laundromat (offering the service of automated fabric cleaning)

•financial services

•accounting

•banks and building societies (offering lending services and


safekeeping of money and valuables)
•real estate

•stock brokerages

•tax return preparation

•foodservice industry

•hairdressing
•health care (all health care professions provide services)

•hospitality industry

•information services
•data processing

•database services

•language interpretation

•language translation

•risk management

•insurance

•security

•social services
•social work

•transport

•utilities

•electric power

•natural gas

•telecommunications

•waste management

•water industry

References
^ CIA World Factbook: https://www.cia.gov/library/publications/the-
world-factbook/fields/2012.html
•Pascal Petit (1987). "services," The New Palgrave: A Dictionary of
Economics, v. 4, pp. 314-15.
Retrieved from "http://en.wikipedia.org/wiki/Service_%28economics%29"
Categories: Economics terminology | Goods | Services management and
marketing | Marketing | Supply chain management terms
Hidden categories: All articles with unsourced statements | Articles with
unsourced statements since December 2007 | Articles needing additional
references from October 2007

Retailing
Retailing consists of the sale of goods or merchandise from a fixed location,
such as a department store or kiosk, or by post, in small or individual lots for
direct consumption by the purchaser.[1] Retailing may include subordinated
services, such as delivery. Purchasers may be individuals or businesses. In
commerce, a retailer buys goods or products in large quantities from
manufacturers or importers, either directly or through a wholesaler, and then
sells smaller quantities to the end-user. Retail establishments are often called
shops or stores. Retailers are at the end of the supply chain. Manufacturing
marketers see the process of retailing as a necessary part of their overall
distribution strategy.
Shops may be on residential streets, shopping streets with few or no houses,
or in a shopping center or mall, but are mostly found in the central business
district. Shopping streets may be for pedestrians only. Sometimes a shopping
street has a partial or full roof to protect customers from precipitation. In the
U.S., retailers often provided boardwalks in front of their stores to protect
customers from the mud. Online retailing, also known as e-commerce is the
latest form of non-shop retailing (cf. mail order).
Shopping generally refers to the act of buying products. Sometimes this is
done to obtain necessities such as food and clothing; sometimes it is done as
a recreational activity. Recreational shopping often involves window
shopping (just looking, not buying) and browsing and does not always result
in a purchase.
Contents
•1. Retail pricing
•2. Retail industry

•3 Retail Services

•4. Etymology

•5. Retail types

•6. See also

•7. Notes and references

• 8. Bibliography
Retail pricing
The pricing technique used by most retailers is cost-plus pricing. This
involves adding a markup amount (or percentage) to the retailers cost.
Another common technique is suggested retail pricing. This simply involves
charging the amount suggested by the manufacturer and usually printed on
the product by the manufacturer.
In Western countries, retail prices are often called psychological prices or
odd prices.
Often prices are fixed and displayed on signs or labels. Alternatively, there
can be price discrimination for a variety of reasons, where the retailer
charges higher prices to some customers and lower prices to others. For
example, a customer may have to pay more if the seller determines that he or
she is willing to. The retailer may conclude this due to the customer's
wealth, carelessness, lack of knowledge, or eagerness to buy. Another
example is the practice of discounting for youths or students. Retailers who
are overstocked, or need to raise cash to renew stocks may resort to "sales",
where prices are "marked down", often by advertised percentages - "50%
off".

Retail industry
Retail industry has brought in phenomenal changes[citation needed]in the
whole process of production, distribution and consumption of consumer
goods all over the world[citation needed]. In the present world most of the
developed economies are using the retail industry as their vital growth
instrument[citation needed]. At present, among all the industries of U.S.A.
the retail industry holds the second place in terms of employment
generation[citation needed]. In fact, the strength of the retail industry lies in
its ability to generate large volume of employment[citation needed].
Not only U.S. but also the other developed countries like the UK, Canada,
France, Germany & Australia are experiencing tremendous growth in their
retail sectors[citation needed]. Key Canadian retailers include Canadian
Tire, Grand & Toy, Harry Rosen, Loblaw, Winners Merchants, Reitmans,
Shoppers Drug Mart, The Hudson's Bay Company, and Sleep Country
Canada. This boom in the global retail industry was in many ways
accelerated by the liberalization of the retail sector.[citation needed]
Observing this global upward trend of retail industry, now the developing
countries like India are also planning to tap the enormous potential of the
retail sector. Wal-Mart, the world's largest retailer, is interested in opening
shops in India. Other popular brands like Pantaloons, Big Bazar (India), and
Archies (U.S.) are rapidly increasing their market share in the retail sector.
According to a survey [citation needed], within five years, the Indian retail
industry is expected to generate 10 to 15 million jobs by direct and indirect
effects. This huge employment generation can be possible because being
dependent on the retail sector shares a lot of forward and backward linkages.
Emergence of a strong retail sector can contribute immensely to the
economic development of any country [citation needed]. With a dominant
retail sector, the farmers and other suppliers can sell their products directly
to the major retail companies and can ensure stable profit. On the other hand,
to ensure steady supply of goods, the retail companies can inject cash into
the production system. This whole process can result into a more efficient
production and distribution system for the economy as a whole [citation
needed].
Wal-Mart is the United States' and the World's largest retailer.

Retail Services
Behind the scenes at retail there is another factor at work. Coporations and
independent store owners alike are always trying to get the edge on their
competitors. One way to do this is to hire a merchandising solutions
company to design custom store displays that will attract more customers in
a certain demographic. The nation's largest retailers spend millions every
year on in-store marketing programs that correspond to season and
promotional changes. As products change, so will a retail landscape.

Etymology
Retail comes from the French word retaillier which refers to "cutting off,
clip and divide" in terms of tailoring (1365). It first was recorded as a noun
with the meaning of a "sale in small quantities" in 1433 (French). Its literal
meaning for retail was to "cut off, shred, paring".[2] Like the French, the
word retail in both Dutch and German (detailhandel and Einzelhandel
respectively) also refer to sale of small quantities of items.[citation needed]

Retail types
There are three major types of retailing. The first is the market, a physical
location where buyers and sellers converge. Usually this is done in town
squares, sidewalks or designated streets and may involve the construction of
temporary structures (market stalls). The second form is shop or store
trading. Some shops use counter-service, where goods are out of reach of
buyers, and must be obtained from the seller. This type of retail is common
for small expensive items (e.g. jewelry) and controlled items like medicine
and liquor. Self-service, where goods may be handled and examined prior to
purchase, has become more common since the 20th century. A third form of
retail is virtual retail, where products are ordered via mail, telephone or
online without having been examined physically but instead in a catalog, on
television or on a website. Sometimes this kind of retailing replicates
existing retail types such as online shops or virtual marketplaces such as
Amazon.[3]
Buildings for retail have changed considerably over time. Market halls were
constructed in the Middle Ages, which were essentially just covered
marketplaces. The first shops in the modern sense used to deal with just one
type of article, and usually adjoined the producer (baker, tailor, cobbler). In
the 19th century, in France, arcades were invented, which were a street of
several different shops, roofed over. Counters, each dealing with a different
kind of article, were invented; it was called a department store. One of the
novelties of the department store was the introduction of fixed prices,
making haggling unnecessary, and browsing more enjoyable. This is
commonly considered the birth of consumerism [4] In cities, these were
multi-story buildings which pioneered the escalator.
In the 1920s the first supermarket opened in the United States, heralding in a
new era of retail: self-service. Around the same time the first shopping mall
was constructed [5] which incorporated elements from both the arcade and
the department store. A mall consists of several department stores linked by
arcades (many of whose shops are owned by the same firm under different
names). The design was perfected by the Austrian architect Victor Gruen[6]
All the stores rent their space from the mall owner. By mid-century, most of
these were being developed as single enclosed, climate-controlled, projects
in suburban areas. The mall has had a considerable impact on the retail
structure and urban development in the United States. [7]
In addition to the enclosed malls, there are also strip malls which are
'outside' malls (in Britain they are called retail parks. These are often
comprised of one or more big-box stores or superstores.

Notes and references


^ Distribution Services. Foreign Agricultural Service (February 9, 2000).
Retrieved on 2006-04-04.
^ Harper, Douglas (2001). Retailing. Online Etymology Dictionary.
Retrieved on 2008-03-16.
^ O'Brien, Larry; Frank Harris (1991). Retailing: shopping, society,
space. London: David Fulton Publishers. ISBN 978-1853461224.
^ Chung, Chuihua Judy (ed.) (2002). Harvard Design School Guide to
Shopping. Köln: Taschen. ISBN 978-3822860472.
^ Borking, Seline (1998). The Fascinating History of Shopping Malls.
The Hague: MAB Groep BV. ISBN 978-9080183421.
^ Hardwick, M. Jeffrey (2003). Mall Maker: Victor Gruen, Architect of
an American Dream. Philadelphia: University of Pennsylvania Press.
ISBN 978-0812237627.
^ Kowinski, William Severini (2002). The Malling of America: travels in
the United States of Shopping, 2nd ed., XLibris. ISBN 1401036767.
Retail Information

Bibliography
•Krafft, Manfred; Mantrala, Murali K. (eds.) (2006). Retailing in the 21st
century: current and future trends. New York: Springer Verlag. ISBN
3540283994.
Retrieved from "http://en.wikipedia.org/wiki/Retailing"
Categories: Distribution, retailing, and wholesaling
Hidden categories: All articles with unsourced statements | Articles with
unsourced statements since December 2007 | Articles with unsourced
statements since July 2007

Sales promotion
promotional mix. (The other four parts of the promotional mix are
advertising, personal selling, direct marketing and publicity/public
relations.) Media and non-media marketing communication are employed
for a pre-determined, limited time to increase consumer demand, stimulate
market demand or improve product availability. Examples include:
•contests

•point of purchase displays

•rebates

•free travel, such as free flights


Sales promotions can be directed at either the customer, sales staff, or
distribution channel members (such as retailers). Sales promotions
targeted at the consumer are called consumer sales promotions. Sales
promotions targeted at retailers and wholesale are called trade sales
promotions. Some sale promotions, particularly ones with unusual methods,
are considered gimmick by many.
Contents
[hide]
•1 Consumer sales promotion techniques

•2 Trade sales promotion techniques

•3 Political issues

•4 External references

•5 See also

•6 References

Consumer sales promotion techniques


•Price deal: A temporary reduction in the price, such as happy hour

•Loyal Reward Program: Consumers collect points, miles, or credits for


purchases and redeem them for rewards. Two famous examples are
Pepsi Stuff and AAdvantage.
•Cents-off deal: Offers a brand at a lower price. Price reduction may be
a percentage marked on the package.
•Price-pack deal: The packaging offers a consumer a certain percentage
more of the product for the same price (for example, 25 percent
extra).
•Coupons: coupons have become a standard mechanism for sales
promotions.
•Loss leader: the price of a popular product is temporarily reduced in
order to stimulate other profitable sales
•Free-standing insert (FSI): A coupon booklet is inserted into the local
newspaper for delivery.
•On-shelf couponing: Coupons are present at the shelf where the product
is available.
•Checkout dispensers: On checkout the customer is given a coupon
based on products purchased.
•On-line couponing: Coupons are available on line. Consumers print
them out and take them to the store.
•Mobile couponing: Coupons are available on a mobile phone.
Consumers show the offer on a mobile phone to a salesperson for
redemption.
•Online interactive promotion game: Consumers play an interactive
game associated with the promoted product. See an example of the
Interactive Internet Ad for tomato ketchup.
•Rebates: Consumers are offered money back if the receipt and barcode
are mailed to the producer.
•Contests/sweepstakes/games: The consumer is automatically entered
into the event by purchasing the product.
•Point-of-sale displays:
•Aisle interrupter: A sign the juts into the aisle from the shelf.
•Dangler: A sign that sways when a consumer walks by it.
•Dump bin: A bin full of products dumped inside.
•Glorifier: A small stage that elevates a product above other
products.
•Wobbler: A sign that jiggles.
•Lipstick Board: A board on which messages are written in
crayon.
•Necker: A coupon placed on the 'neck' of a bottle.
•YES unit: "your extra salesperson" is a pull-out fact sheet.

Trade sales promotion techniques


•Trade allowances: short term incentive offered to induce a retailer to
stock up on a product.
•Dealer loader: An incentive given to induce a retailer to purchase and
display a product.
•Trade contest: A contest to reward retailers that sell the most product.
•Point-of-purchase displays: Extra sales tools given to retailers to boost
sales.
•Training programs: dealer employees are trained in selling the product.
•Push money: also known as "spiffs". An extra commission paid to retail
employees to push products.
Trade discounts (also called functional discounts): These are payments to
distribution channel members for performing some function .

Political issues
Sales promotions have traditionally been heavily regulated in many
advanced industrial nations, with the notable exception of the United States.
For example, the United Kingdom formerly operated under a resale price
maintenance regime in which manufacturers could legally dictate the
minimum resale price for virtually all goods; this practice was abolished in
1964.[1]
Most European countries also have controls on the scheduling and
permissible types of sales promotions. Germany is notorious for having the
most strict regulations. Famous examples include the car wash that was
barred from giving free car washes to regular customers and a baker who
could not give a free cloth bag to customers who bought more than ten rolls.
(Anonymous, "Handcuffs on the high street," The Economist 355)

External references
•US specialist magazine for sales promotion, Promo magazine

•UK specialist magazine for sales promotion, Sales Promotion


References
^ Stuart Mitchell, "Resale price maintenance and the character of
resistance in the conservative party: 1949-64," Canadian Journal of
History 40, no. 2 (August 2005): 259-289.
Sales Promotions for kids Sales promotions are sales like Buy One Get One
Free, Half Price or Money Off. Like in Tesco or Sainsbury's or Marks and
Spencers, You always see sales going on where evere you go.
Retrieved from "http://en.wikipedia.org/wiki/Sales_promotion"
Categories: Marketing | Promotion and marketing communications | Sales
promotion

Public Relation
Definition
The Public Relations Society (PRSA) of America coined the first widely
accepted definition of Public Relations in 19882, "Public relations helps an
organization and its publics adapt mutually to each other." According to the
PRSA, the essential functions of Public Relations include research, planning,
communications dialogue and evaluation. 3
Edward Louis Bernays, who is considered the founding father of modern
public relations along with Ivy Lee, defined public relations as a
management function which tabulates public attitudes, defines the policies,
procedures and interest of an organization followed by executing a program
of action to earn public understanding and acceptance," in the early
1900s(see history of public relations).
Today "Public Relations is a set of management, supervisory, and technical
functions that foster an organization's ability to strategically listen to,
appreciate, and respond to those persons whose mutually beneficial
relationships with the organization are necessary if it is to achieve its
missions and values." (Robert L. Heath, Encyclopedia of Public Relations).
Essentially it is a management function that focuses on two-way
communication and fostering of mutually beneficial relationships between
an organization and its publics.
There is a school of public relations that holds that it is about relationship
management. Phillips, explored this concept in his paper "Towards
relationship management: Public relations at the core of organisational
development" paper in 2006 which lists a range of academics and
practitioners who support this view.

The Industry Today


The public relations industry is most prominently separated into two camps -
in-house and agency. As industry consolidation becomes more prevalent5
organizations are more often faced with a choice between boutique firms or
large global agencies. Smaller firms typically specialize in only a couple
topic areas so they have a greater understanding of their client's business and
stronger relationships with journalists in a specific market. They are also
often cheaper and grant more attention to smaller clients. [1]. Larger firms
have access to more resources and experts in certain areas of public
relations.
Almost any organization that has a stake in how it is portrayed in the public
arena employs some level of public relations. Most often one or more PR
managers that work for the company works with a team of agency
employees that work on several different accounts. Large organizations have
larger dedicated teams for PR. [2].
Public relations is an important management function in any organization.
An effective public relations plan for an organization is developed to
communicate a message that coincides with organizational goals and seeks
to benefit mutual interests whenever possible[3].
A number of specialties exist within the field of private relations, such as
Investor Relations or Labor Relations.

Methods, tools, and tactics


Public relations and publicity are not synonymous but many PR campaign
include provisions for publicity. Publicity is the spreading of information to
gain public awareness for a product, person, service, cause or organization,
and can be seen as a result of effective PR planning.
Audience targeting
A fundamental technique used in public relations is to identify the target
audience, and to tailor every message to appeal to that audience. It can be a
general, nationwide or worldwide audience, but it is more often a segment of
a population. Marketers often refer to economy-driven "demographics," such
as "white males 18-49," but in public relations an audience is more fluid,
being whoever someone wants to reach. For example, recent political
audiences include "soccer moms" and "NASCAR dads." There is also a
psychographic grouping based on fitness level, eating preferences,
"adrenaline junkies,"etc...
In addition to audiences, there are usually stakeholders, literally people who
have a "stake" in a given issue. All audiences are stakeholders (or
presumptive stakeholders), but not all stakeholders are audiences. For
example, a charity commissions a PR agency to create an advertising
campaign to raise money to find a cure for a disease. The charity and the
people with the disease are stakeholders, but the audience is anyone who is
likely to donate money.
Sometimes the interests of differing audiences and stakeholders common to
a PR effort necessitate the creation of several distinct but still
complementary messages. This is not always easy to do, and sometimes –
especially in politics – a spokesperson or client says something to one
audience that angers another audience or group of stakeholders.

14 The Process of Marketing Research


Marketing
Consumer marketing research is a form of applied sociology that
concentrates on understanding the behaviours, whims and preferences, of
consumers in a market-based economy, and aims to understand the effects
and comparative success of marketing campaigns. The field of consumer
marketing research as a statistical science was pioneered by Arthur Nielsen
with the founding of the ACNielsen Company in 1923 and later the A.C.
Nielsen Center for Marketing Research.
Other forms of business research include:
•Market research broader in scope and examines all aspects of a
business environment. It asks questions about competitors, market
structure, government regulations, economic trends, technological
advances, and numerous other factors that make up the business
environment (see environmental scanning). Sometimes the term refers
more particularly to the financial analysis of companies, industries, or
sectors. In this case, financial analysts usually carry out the research
and provide the results to investment advisors and potential investors.
•Product research - This looks at what products can be produced with
available technology, and what new product innovations near-future
technology can develop (see new product development).
•Advertising research - is a specialized form of marketing research
conducted to improve the efficacy of advertising. Copy testing, also
known as "pre-testing," is a form of customized research that predicts
in-market performance of an ad before it airs, by analyzing audience
levels of attention, brand linkage, motivation, entertainment, and
communication, as well as breaking down the ad’s flow of attention
and flow of emotion. Pre-testing is also used on ads still in rough
(ripomatic or animatic) form. (Young, pg. 213)
Research is the scholarly or scientific practice of gathering existing or new
information in order to enhance one's knowledge of a specific area. Research
has many categories, from medicine to literature. Marketing research, or
market research, is a form of business research and is generally divided into
two categories: consumer market research and business-to-business (B2B)
market research, which was previously known as industrial marketing
research. Consumer marketing research studies the buying habits of
individual people while business-to-business marketing research investigates
the markets for products sold by one business to another.
Contents
[hide]
•1 Types of marketing research

•2 Marketing research methods

•3 Business to business market research

•4 Marketing Research in Small Business and Nonprofit Organizations

•5 International Marketing Research

•6 Commonly used marketing research terms

•7 See also

•8 Notes

•9 References

Types of marketing research


Marketing research techniques come in many forms, including:
•Ad Tracking – periodic or continuous in-market research to monitor a
brand’s performance using measures such as brand awareness, brand
preference, and product usage. (Young, 2005)
•Advertising Research – used to predict copy testing or track the
efficacy of advertisements for any medium, measured by the ad’s
ability to get attention, communicate the message, build the brand’s
image, and motivate the consumer to purchase the product or service.
(Young, 2005)
YEADS
•Brand equity research - how favorably do consumers view the brand?

•Brand name testing - what do consumers feel about the names of the
products?
•Commercial eye tracking research - examine advertisements, package
designs, websites, etc by analyzing visual behavior of the consumer
•Concept testing - to test the acceptance of a concept by target
consumers
•Coolhunting - to make observations and predictions in changes of new
or existing cultural trends in areas such as fashion, music, films,
television, youth culture and lifestyle
•Buyer decision processes research - to determine what motivates
people to buy and what decision-making process they use
•Copy testing – predicts in-market performance of an ad before it airs by
analyzing audience levels of attention, brand linkage, motivation,
entertainment, and communication, as well as breaking down the ad’s
flow of attention and flow of emotion. (Young, p 213)
•Customer satisfaction research - quantitative or qualitative studies that
yields an understanding of a customer's of satisfaction with a
transaction
•Demand estimation - to determine the approximate level of demand for
the product
•Distribution channel audits - to assess distributors’ and retailers’
attitudes toward a product, brand, or company
•Internet strategic intelligence - searching for customer opinions in the
Internet: chats, forums, web pages, blogs... where people express
freely about their experiences with products, becoming strong
"opinion formers"
•Marketing effectiveness and analytics - Building models and
measuring results to determine the effectiveness of individual
marketing activities.
•Mystery shopping - An employee or representative of the market
research firm anonymously contacts a salesperson and indicates he or
she is shopping for a product. The shopper then records the entire
experience. This method is often used for quality control or for
researching competitors' products.
•Positioning research - how does the target market see the brand relative
to competitors? - what does the brand stand for?
•Price elasticity testing - to determine how sensitive customers are to
price changes
•Sales forecasting - to determine the expected level of sales given the
level of demand. With respect to other factors like Advertising
expenditure, sales promotion etc.
•Segmentation research - to determine the demographic, psychographic,
and behavioural characteristics of potential buyers
•Online panel - a group of individual who accepted to respond to
marketing research online
•Store audit - to measure the sales of a product or product line at a
statistically selected store sample in order to determine market share,
or to determine whether a retail store provides adequate service
•Test marketing - a small-scale product launch used to determine the
likely acceptance of the product when it is introduced into a wider
market
•Viral Marketing Research - refers to marketing research designed to
estimate the probability that specific communications will be
transmitted throughout an individuals Social Network. Estimates of
Social Networking Potential (SNP) are combined with estimates of
selling effectiveness to estimate ROI on specific combinations of
messages and media.
All of these forms of marketing research can be classified as either problem-
identification research or as problem-solving research.
A company collects primary research by gathering original data.
Secondary research is conducted on data published previously and usually
by someone else. Secondary research costs far less than primary research,
but seldom comes in a form that exactly meets the needs of the researcher.
A similar distinction exists between exploratory research and conclusive
research. Exploratory research provides insights into and comprehension of
an issue or situation. It should draw definitive conclusions only with extreme
caution. Conclusive research draws conclusions: the results of the study
can be generalized to the whole population.
Exploratory research is conducted to explore a problem to get some basic
idea about the solution at the preliminary stages of research. It may serve as
the input to conclusive research. Exploratory research information is
collected by focus group interviews, reviewing literature or books,
discussing with experts, etc. This is unstructured and qualitative in nature. If
a secondary source of data is unable to serve the purpose, a convenience
sample of small size can be collected. Conclusive research is conducted to
draw some conclusion about the problem. It is essentially, structured and
quantitative research, and the output of this research is the input to
management information systems (MIS).
Exploratory research is also conducted to simplify the findings of the
conclusive or descriptive research, if the findings are very hard to interpret
for the marketing manager.

Marketing research methods


Methodologically, marketing research uses the following types of research
designs:[1]
Based on questioning:
•Qualitative marketing research - generally used for exploratory
purposes - small number of respondents - not generalizable to the
whole population - statistical significance and confidence not
calculated - examples include focus groups, in-depth interviews, and
projective techniques
•Quantitative marketing research - generally used to draw conclusions
- tests a specific hypothesis - uses random sampling techniques so as
to infer from the sample to the population - involves a large number of
respondents - examples include surveys and questionnaires.
Techniques include choice modelling, maximum difference
preference scaling, and covariance analysis.
Based on observations:
•Ethnographic studies -, by nature qualitative, the researcher observes
social phenomena in their natural setting - observations can occur
cross-sectionally (observations made at one time) or longitudinally
(observations occur over several time-periods) - examples include
product-use analysis and computer cookie traces. See also
Ethnography and Observational techniques.
•Experimental techniques -, by nature quantitative, the researcher
creates a quasi-artificial environment to try to control spurious factors,
then manipulates at least one of the variables - examples include
purchase laboratories and test markets
Researchers often use more than one research design. They may start with
secondary research to get background information, then conduct a focus
group (qualitative research design) to explore the issues. Finally they might
do a full nation-wide survey (quantitative research design) in order to devise
specific recommendations for the client.

Business to business market research


Business to business (B2B) research is inevitably more complicated than
consumer research. The researchers need to know what type of multi-faceted
approach will answer the objectives, since seldom is it possible to find the
answers using just one method. Finding the right respondents is crucial in
B2B research since they are often busy, and may not want to participate.
Encouraging them to “open up” is yet another skill required of the B2B
researcher. Last, but not least, most business research leads to strategic
decisions and this means that the business researcher must have expertise in
developing strategies that are strongly rooted in the research findings and
acceptable to the client.
There are four key factors that make B2B market research special and
different to consumer markets:[2]
•The decision making unit is far more complex in B2B markets than in
consumer markets
•B2B products and their applications are more complex than consumer
products
•B2B marketers address a much smaller number of customers who are
very much larger in their consumption of products than is the case in
consumer markets
•Personal relationships are of critical importance in B2B markets.
Most of B2B market research today is done online, using online panels.
Marketing Research in Small Business and Nonprofit Organizations
Marketing research does not only occur in huge corporations with many
employees and a large budget. Marketing information can be derived by
observing the environment of their location and the competitions location.
Small scale surveys and focus groups are low cost ways to gather
information from potential and existing customers. Most secondary data
(statistics, demographics, etc.) is available to the public in libraries or on the
internet and can be easily accessed by a small business owner.

International Marketing Research


International Marketing Research follows the same path as domestic
research, but there are a few more problems that may arise. Customers in
international markets may have very different customs, cultures, and
expectations from the same company. In this case, secondary information
must be collected from each separate country and then combined, or
compared. This is time consuming and can be confusing. International
Marketing Research relies more on primary data rather than secondary
information. Gathering the primary data can be hindered by language,
literacy and access to technology.

Commonly used marketing research terms


Market research techniques resemble those used in political polling and
social science research. Meta-analysis (also called the Schmidt-Hunter
technique) refers to a statistical method of combining data from multiple
studies or from several types of studies. Conceptualization means the
process of converting vague mental images into definable concepts.
Operationalization is the process of converting concepts into specific
observable behaviors that a researcher can measure. Precision refers to the
exactness of any given measure. Reliability refers to the likelihood that a
given operationalized construct will yield the same results if re-measured.
Validity refers to the extent to which a measure provides data that captures
the meaning of the operationalized construct as defined in the study. It asks,
“Are we measuring what we intended to measure?”
Applied research sets out to prove a specific hypothesis of value to the
clients paying for the research. For example, a cigarette company might
commission research that attempts to show that cigarettes are good for one's
health. Many researchers have ethical misgivings about doing applied
research.
Sugging (or selling under the guise of l.market research) forms a sales
technique in which sales people pretend to conduct marketing research, but
with the real purpose of obtaining buyer motivation and buyer decision-
making information to be used in a subsequent sales call.
Frugging comprises the practice of soliciting funds under the pretense of
being a research organization.

References
•Bradley, Nigel Marketing Research. Tools and Techniques.Oxford
University Press, Oxford, 2007 ISBN-10: 0-19-928196-3 ISBN-13:
978-0-19-928196-1
•Marder, Eric The Laws of Choice -- Predicting Customer Behavior (The
Free Press division of Simon and Schuster, 1997. ISBN 0-684-83545-
2
•Young, Charles E, The Advertising Handbook, Ideas in Flight, Seattle,
WA, April 2005. ISBN 0-9765574-0-1
•Kotler, Philip and Armstrong, Gary Principles of Marketing Pearson,
Prentice Hall, New Jersey, 2007 ISBN13 978-0-13-239002-6, ISBN10
0-13-239002-7

15 Business Marketing

Business Marketing is the practice of organizations, including commercial


businesses, governments and institutions, facilitating the sale of their
products or services to other companies or organizations that in turn resell
them, use them as components in products or services they offer, or use them
to support their operations. Also known as industrial marketing, business
marketing is also called business-to-business marketing, or B2B marketing,
for short. (Note that while marketing to government entities shares some of
the same dynamics of organizational marketing, B2G Marketing is
meaningfully different.)
Contents
[hide]
•1 Origins of business marketing

•2 Business marketing vs. consumer marketing

•3 Who is customer in a B2B Sale?

•4 B2B Marketing Strategies

•4.1 B2B Branding

•4.2 Product (or Service)

•4.3 People (Target Market)

•4.4 Pricing

•4.5 Promotion

•4.6 Place (Sales & Distribution)

•4.7 B2B Marketing Communications Methodologies

•4.7.1 Positioning Statement

•4.7.2 Developing your messages

•4.7.3 Building a campaign plan

•4.7.4 Briefing an agency

•4.7.5 Measuring results

•5 How big is business marketing?

•6 What's driving growth in B2B Marketing?

•7 The impact of the Internet

•8 Notes

•9 References

•10 External links


Origins of business marketing
In the broadest sense, the practice of one purveyor of goods doing trade with
another is as old as commerce itself. As a niche in the field of marketing as
we know it today, however, its history is more recent. In his introduction to
Fundamentals of Business Marketing Research, J. David Lichtenthal,
professor of marketing at the City University of New York's Zicklin School
of Business, notes that industrial marketing has been around since the mid-
19th century, although the bulk of research on the discipline of business
marketing has come about in the last 25 years.
Morris, Pitt and Honeycutt, 2001, point out that for many years business
marketing took a back seat to consumer marketing, which entailed providers
of goods or services selling directly to households through mass media and
retail channels. This began to change in middle to late1970s. A variety of
academic periodicals, such as the Journal of Business-to-Business
Marketing and the Journal of Business & Industrial Marketing, now publish
studies on the subject regularly, and professional conferences on business-
to-business marketing are held every year. What's more, business marketing
courses are commonplace at many universities today. In fact, Dwyer and
Tanner (2006) point out that more marketing majors begin their careers in
business marketing today than in consumer marketing.

Business marketing vs. consumer marketing


Although on the surface the differences between business and consumer
marketing may seem obvious, there are more subtle distinctions between the
two with substantial ramifications. Dwyer and Tanner (2006) note that
business marketing generally entails shorter and more direct channels of
distribution.
While consumer marketing is aimed at large demographic groups through
mass media and retailers, the negotiation process between the buyer and
seller is more personal in business marketing. According to Hutt and Speh
(2001), most business marketers commit only a small part of their
promotional budgets to advertising, and that is usually through direct mail
efforts and trade journals. While that advertising is limited, it often helps the
business marketer set up successful sales calls.
Marketing to a business trying to make a profit (Business-to-Business
marketing) as opposed to an individual for personal use (Business-to-
Consumer, or B2C marketing) is similar in terms of the fundamental
principals of marketing. In B2C, B2B and B2G marketing situations, the
marketer must always:
* successfully match the product/service
strengths with the needs of a definable target
market;
* position and price to align the
product/service with its market, often an intricate
balance; and
* communicate and sell it in the fashion that
demonstrates its value effectively to the target
market.
These are the fundamental principals of the 4 Ps of marketing (the marketing
mix) first documented by E. Jerome McCarthy in 1960.[1]

Who is customer in a B2B Sale?


While "other businesses" might seem like the simple answer, Dwyer and
Tanner (2006) say business customers fall into four broad categories:
companies that consume products or services, government agencies,
institutions and resellers.
The first category includes original equipment manufacturers, such as
automakers, who buy gauges to put in their cars, and users, which are
companies that purchase products for their own consumption. The second
category, government agencies, is the biggest. In fact, the U.S. government
is the biggest single purchaser of products and services in the country,
spending more than $300 billion annually. But this category also includes
state and local governments. The third category, institutions, includes
schools, hospitals and nursing homes, churches and charities. Finally,
resellers consist of wholesalers, brokers and industrial distributors.
So what are the meaningful differences between B2B and B2C marketing?
A B2C sale is to an individual. That individual may be influenced by other
factors such as family members or friends, but ultimately it’s a single person
that pulls out their wallet. A B2B sale is to an organization. And in that
simple distinction lies a web of complications that differ because of the
organizational nature of the sale and which vary widely by firmographic
(i.e., “demographic” for segmenting businesses) such as business size,
location, industry and revenue base.
The marketing mix is affected by the B2B uniqueness which include
complexity of business products and services, diversity of demand and the
differing nature of the sales itself (including fewer customers buying larger
volumes).[2]. Because there are some important subtleties to the B2B sale,
the issues are broken down beyond just the original 4 Ps developed by
McCarthy.

B2B Marketing Strategies

B2B Branding
B2B branding is different from B2C in some crucial ways, including the
need to closely align corporate brands, divisional brands and product/service
brands and to apply your brand standards to material often considered
“informal” such as email and other electronic correspondence.

Product (or Service)


Because business customers are focused on creating shareholder value for
themselves, the cost-saving or revenue-producing benefits of products and
services are important to factor in throughout the product development and
marketing cycles.

People (Target Market)


Quite often, the target market for a business product or service is smaller and
has more specialized needs reflective of a specific industry or niche.[3]
Regardless of the size of the target market, the business customer is making
an organizational purchase decision and the dynamics of this, both
procedurally and in terms of how they value what they are buying from you,
differ dramatically from the consumer market. There may be multiple
influencers on the purchase decision, which may also have to be marketed
to, though they may not be members of the decision making unit.[4]
Pricing
The business market can be convinced to pay premium prices more often
than the consumer market if you know how to structure your pricing and
payment terms well. This price premium is particularly achievable if you
support it with a strong brand.[5]

Promotion
Promotion planning is relatively easy when you know the media,
information seeking and decision making habits of your customer base, not
to mention the vocabulary unique to their segment. Specific trade shows,
analysts, publications, blogs and retail/wholesale outlets tend to be fairly
common to each industry/product area. What this means is that once you
figure it out for your industry/product, the promotion plan almost writes
itself (depending on your budget) but figuring it out can be a special skill
and it takes time to build up experience in your specific field. Promotion
techniques rely heavily on Marketing Communications strategies (see
below).

Place (Sales & Distribution)


The importance of a knowledgeable, experienced and effective direct (inside
or outside) sales force is often critical in the business market. If you sell
through distribution channels also, the number and type of sales forces can
vary tremendously and your success as a marketer is highly dependent on
their success.

B2B Marketing Communications Methodologies


The purpose of B2B marketing communications is to support the
organizations' sales effort and improve company profitability. B2B
marketing communications tactics generally include advertising, public
relations, direct mail, trade show support, sales collateral, branding, and
interactive services such as website design and search engine optimization.
The Business Marketing Association[1] is the trade organization that serves
B2B marketing professionals. It was founded in 1922 and offers certification
programs, research services, conferences, industry awards and training
programs.

Positioning Statement
An important first step in business to business marketing is the development
of your positioning statement. This is a statement of what you do and how
you do it differently and better and efficiently than your competitors.

Developing your messages


The next step is to develop your messages. There is usually a primary
message that conveys more strongly to your customers what you do and the
benefit it offers to them, supported by a number of secondary messages,
each of which may have a number of supporting arguments, facts and
figures.

Building a campaign plan


Whatever form your B2B marketing campaign will take, build a
comprehensive plan up front to target resources where you believe they will
deliver the best return on investment, and make sure you have all the
infrastructure in place to support each stage of the marketing process - and
that doesn't just include developing the lead - make sure the entire
organization is geared up to handle the inquiries appropriately.

Briefing an agency
A standard briefing document is usually a good idea for briefing an agency.
As well as focusing the agency on what's important to you and your
campaign, it serves as a checklist of all the important things to consider as
part of your brief. Typical elements to an agency brief are: Your objectives,
target market, target audience, product, campaign description, your product
positioning, graphical considerations, corporate guidelines, and any other
supporting material and distribution.
Measuring results
The real value in results measurement is in tying the marketing campaign
back to business results. After all, you’re not in the business of developing
marketing campaigns for marketing sake. So always put metrics in place to
measure your campaigns, and if at all possible, measure your impact upon
your desired objectives, be it Cost Per Acquisition, Cost per Lead or tangible
changes in customer perception.

How big is business marketing?


Hutt and Speh (2001) note that "business marketers serve the largest market
of all; the dollar volume of transactions in the industrial or business market
significantly exceeds that of the ultimate consumer market." For example,
they note that companies such as GE, DuPont and IBM spend more than $60
million a day on purchases to support their operations.
Dwyer and Tanner (2006) say the purchases made by companies,
government agencies and institutions "account for more than half of the
economic activity in industrialized countries such as the United States,
Canada and France."
A 2003 study sponsored by the Business Marketing Association estimated
that business-to-business marketers in the United States spend about $85
billion a year to promote their goods and services. The BMA study breaks
that spending out as follows (figures are in billions of dollars):
•Trade Shows/Events -- $17.3
•Internet/Electronic Media -- $12.5
•Promotion/Market Support -- $10.9
•Magazine Advertising -- $10.8
•Publicity/Public Relations -- $10.5
•Direct Mail -- $9.4
•Dealer/Distributor Materials -- $5.2
•Market Research -- $3.8
•Telemarketing -- $2.4
•Directories -- $1.4
•Other -- $5.1
The fact that there is such a thing as the Business Marketing Association
speaks to the size and credibility of the industry. BMA traces its origins to
1922 with the formation of the National Industrial Advertising Association.
Today, BMA, headquartered in Chicago, has more than 2,000 members in
19 chapters across the country. Among its members are marketing
communications agencies that are largely or exclusively business-to-
business-oriented.

What's driving growth in B2B Marketing?


The tremendous growth and change that business marketing is experiencing
is due in large part to three "revolutions" occurring around the world today,
according to Morris, Pitt and Honeycutt (2001).
First is the technological revolution. Technology is changing at an
unprecedented pace, and these changes are speeding up the pace of new
product and service development. A large part of that has to do with the
Internet, which is discussed in more detail below.
Technology and business strategy go hand in hand. Both are corelated
.While technology supports forming organization strategy, the business
strategy is also helpful in technology development. Both play a great role in
business marketing.
Second is the entrepreneurial revolution. To stay competitive, many
companies have downsized and reinvented themselves. Adaptability,
flexibility, speed, aggressiveness and innovativeness are the keys to
remaining competitive today. Marketing is taking the entrepreneurial lead by
finding market segments, untapped needs and new uses for existing
products, and by creating new processes for sales, distribution and customer
service.
The third revolution is one occurring within marketing itself. Companies are
looking beyond traditional assumptions and adopting new frameworks,
theories, models and concepts. They're also moving away from the mass
market and the preoccupation with the transaction. Relationships,
partnerships and alliances are what define marketing today. The cookie-
cutter approach is out. Companies are customizing marketing programs to
individual accounts.

The impact of the Internet


The Internet has become an integral component of the customer relationship
management strategy for business marketers. Dwyer and Tanner (2006) note
that business marketers not only use the Internet to improve customer
service but also to improve opportunities with distributors.
According to Anderson and Narus (2004), two new types of resellers have
emerged as by-products of the Internet: infomediaries and metamediaries.
Infomediaries, such as Google and Yahoo, are search engine companies that
also function as brokers, or middlemen, in the business marketing world.
They charge companies fees to find information on the Web as well as for
banner and pop-up ads and search engine optimization services.
Metamediaries are companies with robust Internet sites that furnish
customers with multiproduct, multivendor and multiservice marketspace in
return for commissions on sales.
With the advent of b-to-b exchanges, the Internet ushered in an enthusiasm
for collaboration that never existed before--and in fact might have even
seemed ludicrous 10 years ago. For example, a decade ago who would have
imagined Ford, General Motors and DaimlerChrysler entering into a joint
venture? That's exactly what happened after all three of the Big Three began
moving their purchases online in the late 1990s. All three companies were
pursuing their own initiatives when they realized the economies of scale they
could achieve by pooling their efforts. Thus was born what then was the
world's largest Internet business when Ford's Auto-Xchange and GM's
TradeXchange merged, with DaimlerChrysler representing the third partner.
While this exchange did not stand the test of time, others have, including
Agentrics, which was formed last year with the merger of WorldWide Retail
Exchange and GlobalNetXchange, or GNX. Agentrics serves more 50
retailers around the world and more than 300 customers, and its members
have combined sales of about $1 trillion. Hutt and Speh (2001) note that
such virtual marketplaces enable companies and their suppliers to conduct
business in real time as well as simplify purchase processes and cut costs.

Notes
^ McCarthy, Jerome E.: "Basic Marketing: A Managerial Approach".
Homewood, IL: Irwin, 1996
^ Kotler & Pfoertsch: "B2B Brand Management", page 21. Springer
Berlin, 2006
^ Malaval: "Strategy and Management of Industrial Brandds: Business to
Business Products and Services", page 16. 2001
^ Brown, Duncan and Hayes, Nick. Influencer Marketing: Who really
influences your customers?, Butterworth-Heinemann, 2008
^ Kotler & Pfoertsch: "B2B Brand Management", page 53. Springer
Berlin, 2006

References
•Anderson, James C., and Narus, James A. (2004) Business Market
Management: Understanding, Creating, and Delivering Value, 2nd
Edition, 2004, Pearson Education, Inc.
•Business Marketing Association (2003) "Marketing Reality Survey"
•Dwyer, F. Robert, Tanner, John F. (2006) Business Marketing:
Connecting Strategy, Relationships, and Learning, 3rd Edition,
McGraw-Hill/Irwin
•Greco, John A. Jr., (2005) "Past indicates promising future for b-to-b
direct; BtoB magazine, June 13, 2005
•Hutt, Michael D., Speh, Thomas W. (2001) Business Marketing
Management: A Strategic View of Industrial and Organizational
Markets, 7th Edition, Harcourt Inc.
•Morris, Michael H., Pitt, Leyland F., and Honeycutt, Earl Dwight (2001)
Business-to-Business Marketing: A Strategic Approach, Sage
Publications Inc.
•Reid, David A., and Plank, Richard E. (2004) Fundamentals of Business
Marketing Research, Best Business Books, an Imprint of The
Haworth Press, Inc.
•Brown, Duncan and Hayes, Nick. Influencer Marketing: Who really
influences your customers?, Butterworth-Heinemann, 2008

16 Marketing Management
Marketing
Marketing management is a business discipline focused on the practical
application of marketing techniques and the management of a firm's
marketing resources and activities. Marketing managers are often
responsible for influencing the level, timing, and composition of customer
demand in a manner that will achieve the company's objectives.
Contents
[hide]
•1 Definition and scope

•2 Activities and functions

•2.1 Marketing research and analysis

•2.2 Marketing strategy

•2.3 Implementation planning

•2.4 Project, process, and vendor management

•2.5 Organizational management and leadership

•2.6 Reporting, measurement, feedback and control systems

•3 References

•4 See also
Definition and scope
There is no universally accepted definition of the term. In part, this is due to
the fact that the role of a marketing manager can vary significantly based on
a business' size, corporate culture, and industry context. For example, in a
large consumer products company, the marketing manager may act as the
overall general manager of his or her assigned product category or brand
with full profit & loss responsibility. In contrast, a small law firm may have
no marketing personnel at all, requiring the firm's partners to make
marketing management decisions on a largely ad-hoc basis.

In the widely used text Marketing Management (2006), Philip Kotler and
Kevin Lane Keller define marketing management as "the art and science of
choosing target markets and getting, keeping and growing customers
through creating, delivering, and communicating superior customer value."
[1]
From this perspective, the scope of marketing management is quite broad.
The implication of such a definition is that any activity or resource the firm
uses to acquire customers and manage the company's relationships with
them is within the purview of marketing management. Additionally, the
Kotler and Keller definition encompasses both the development of new
products and services and their delivery to customers.
Noted marketing expert Regis McKenna expressed a similar viewpoint in his
influential 1991 Harvard Business Review article "Marketing is Everything."
McKenna argued that because marketing management encompasses all
factors that influence a company's ability to deliver value to customers, it
must be "all-pervasive, part of everyone's job description, from the
receptionists to the Board of Directors." [2]
This view is also consistent with the perspective of management guru Peter
Drucker, who wrote: "Because the purpose of business is to create a
customer, the business enterprise has two--and only these two--basic
functions: marketing and innovation. Marketing and innovation produce
results; all the rest are costs. Marketing is the distinguishing, unique function
of the business."[3]
But because many businesses operate with a much more limited definition of
marketing, such statements can appear controversial, or even ludicrous to
some business executives. This is especially true in those companies where
the marketing department is responsible for little more than developing sales
brochures and executing advertising campaigns.
The broader, more sophisticated definitions of marketing management from
Drucker, Kotler and other scholars are therefore juxtaposed against the
narrower operating reality of many businesses. The source of confusion here
is often that inside any given firm, the term marketing management may be
interpreted to mean whatever the marketing department happens to do, rather
than a term that encompasses all marketing activities -- even those marketing
activities that are actually performed by other departments, such as the sales,
finance, or operations departments.[4] If, for example, the finance
department of a given company makes pricing decisions (for deals,
proposals, contracts, etc.), that finance department has responsibility for an
important component of marketing management -- pricing.

Activities and functions


Marketing management therefore encompasses a wide variety of functions
and activities, although the marketing department itself may be responsible
for only a subset of these. Regardless of the organizational unit of the firm
responsible for managing them, marketing management functions and
activities include the following:

Marketing research and analysis


In order to make fact-based decisions regarding marketing strategy and
design effective, cost-efficient implementation programs, firms must possess
a detailed, objective understanding of their own business and the market in
which they operate.[5] In analyzing these issues, the discipline of marketing
management often overlaps with the related discipline of strategic planning.
Traditionally, marketing analysis was structured into three areas: Customer
analysis, Company analysis, and Competitor analysis (so-called "3Cs"
analysis). More recently, it has become fashionable in some marketing
circles to divide these further into certain five "Cs": Customer analysis,
Company analysis, Collaborator analysis, Competitor analysis, and analysis
of the industry Context.
The focus of customer analysis is to develop a scheme for market
segmentation, breaking down the market into various constituent groups of
customers, which are called customer segments or market segments.
Marketing managers work to develop detailed profiles of each segment,
focusing on any number of variables that may differ among the segments:
demographic, psychographic, geographic, behavioral, needs-benefit, and
other factors may all be examined. Marketers also attempt to track these
segments' perceptions of the various products in the market using tools such
as perceptual mapping.
In company analysis, marketers focus on understanding the company's cost
structure and cost position relative to competitors, as well as working to
identify a firm's core competencies and other competitively distinct
company resources. Marketing managers may also work with the accounting
department to analyze the profits the firm is generating from various product
lines and customer accounts. The company may also conduct periodic brand
audits to assess the strength of its brands and sources of brand equity.[6]
The firm's collaborators may also be profiled, which may include various
suppliers, distributors and other channel partners, joint venture partners, and
others. An analysis of complementary products may also be performed if
such products exist.
Marketing management employs various tools from economics and
competitive strategy to analyze the industry context in which the firm
operates. These include Porter's five forces, analysis of strategic groups of
competitors, value chain analysis and others.[7] Depending on the industry,
the regulatory context may also be important to examine in detail.
In Competitor analysis, marketers build detailed profiles of each competitor
in the market, focusing especially on their relative competitive strengths and
weaknesses using SWOT analysis. Marketing managers will examine each
competitor's cost structure, sources of profits, resources and competencies,
competitive positioning and product differentiation, degree of vertical
integration, historical responses to industry developments, and other factors.
Marketing management often finds it necessary to invest in research to
collect the data required to perform accurate marketing analysis. As such,
they often conduct market research (alternately marketing research) to obtain
this information. Marketers employ a variety of techniques to conduct
market research, but some of the more common include:
•Qualitative marketing research, such as focus groups
•Quantitative marketing research, such as statistical surveys

•Experimental techniques such as test markets

•Observational techniques such as ethnographic (on-site) observation

Marketing managers may also design and oversee various environmental


scanning and competitive intelligence processes to help identify trends and
inform the company's marketing analysis.

Marketing strategy
Main article: Marketing strategy
Once the company has obtained an adequate understanding of the customer
base and its own competitive position in the industry, marketing managers
are able to make key strategic decisions and develop a marketing strategy
designed to maximize the revenues and profits of the firm. The selected
strategy may aim for any of a variety of specific objectives, including
optimizing short-term unit margins, revenue growth, market share, long-term
profitability, or other goals.
To achieve the desired objectives, marketers typically identify one or more
target customer segments which they intend to pursue. Customer segments
are often selected as targets because they score highly on two dimensions: 1)
The segment is attractive to serve because it is large, growing, makes
frequent purchases, is not price sensitive (i.e. is willing to pay high prices),
or other factors; and 2) The company has the resources and capabilities to
compete for the segment's business, can meet their needs better than the
competition, and can do so profitably.[5] In fact, a commonly cited
definition of marketing is simply "meeting needs profitably." [1]
The implication of selecting target segments is that the business will
subsequently allocate more resources to acquire and retain customers in the
target segment(s) than it will for other, non-targeted customers. In some
cases, the firm may go so far as to turn away customers that are not in its
target segment. The doorman at a swanky nightclub, for example, may deny
entry to unfashionably dressed individuals because the business has made a
strategic decision to target the "high fashion" segment of nightclub patrons.
In conjunction with targeting decisions, marketing managers will identify
the desired positioning they want the company, product, or brand to occupy
in the target customer's mind. This positioning is often an encapsulation of a
key benefit the company's product or service offers that is differentiated and
superior to the benefits offered by competitive products.[8] For example,
Volvo has traditionally positioned its products in the automobile market in
North America in order to be perceived as the leader in "safety", whereas
BMW has traditionally positioned its brand to be perceived as the leader in
"performance."
Ideally, a firm's positioning can be maintained over a long period of time
because the company possesses, or can develop, some form of sustainable
competitive advantage.[9] The positioning should also be sufficiently
relevant to the target segment such that it will drive the purchasing behavior
of target customers.[8]

Implementation planning
Main article: Marketing plan
After the firm's strategic objectives have been identified, the target market
selected, and the desired positioning for the company, product or brand has
been determined, marketing managers focus on how to best implement the
chosen strategy. Traditionally, this has involved implementation planning
across the "4Ps" of marketing: Product management, Pricing, Place (i.e.
sales and distribution channels), and Promotion.
Taken together, the company's implementation choices across the 4Ps are
often described as the marketing mix, meaning the mix of elements the
business will employ to "go to market" and execute the marketing strategy.
The overall goal for the marketing mix is to consistently deliver a
compelling value proposition that reinforces the firm's chosen positioning,
builds customer loyalty and brand equity among target customers, and
achieves the firm's marketing and financial objectives.
In many cases, marketing management will develop a marketing plan to
specify how the company will execute the chosen strategy and achieve the
business' objectives. The content of marketing plans varies from firm to
firm, but commonly includes:
•An executive summary
•Situation analysis to summarize facts and insights gained from market
research and marketing analysis
•The company's mission statement or long-term strategic vision
•A statement of the company's key objectives, often subdivided into
marketing objectives and financial objectives
•The marketing strategy the business has chosen, specifying the target
segments to be pursued and the competitive positioning to be achieved
•Implementation choices for each element of the marketing mix (the 4Ps)
•A summary of required investments (in people, programs, IT systems,
etc.)
•Financial analysis, projections and forecasted results

•A timeline or high-level project plan


•Metrics, measurements and control processes
•A list of key risks and strategies for managing these risks

Project, process, and vendor management


Once the key implementation initiatives have been identified, marketing
managers work to oversee the execution of the marketing plan. Marketing
executives may therefore manage any number of specific projects, such as
sales force management initiatives, product development efforts, channel
marketing programs and the execution of public relations and advertising
campaigns. Marketers use a variety of project management techniques to
ensure projects achieve their objectives while keeping to established
schedules and budgets.
More broadly, marketing managers work to design and improve the
effectiveness of core marketing processes, such as new product
development, brand management, marketing communications, and pricing.
Marketers may employ the tools of business process reengineering to ensure
these processes are properly designed, and use a variety of process
management techniques to keep them operating smoothly.
Effective execution may require management of both internal resources and
a variety of external vendors and service providers, such as the firm's
advertising agency. Marketers may therefore coordinate with the company's
Purchasing department on the procurement of these services.

Organizational management and leadership


Marketing management usually requires leadership of a department or group
of professionals engaged in marketing activities. Often, this oversight will
extend beyond the company's marketing department itself, requiring the
marketing manager to provide cross-functional leadership for various
marketing activities. This may require extensive interaction with the human
resources department on issues such as recruiting, training, leadership
development, performance appraisals, compensation, and other topics.
Marketing management may spend a fair amount of time building or
maintaining a marketing orientation for the business. Achieving a market
orientation, also known as "customer focus" or the "marketing concept",
requires building consensus at the senior management level and then driving
customer focus down into the organization. Cultural barriers may exist in a
given business unit or functional area that the marketing manager must
address in order to achieve this goal. Additionally, marketing executives
often act as a "brand champion" and work to enforce corporate identity
standards across the enterprise.
In larger organizations, especially those with multiple business units, top
marketing managers may need to coordinate across several marketing
departments and also resources from finance, R&D, engineering, operations,
manufacturing, or other functional areas to implement the marketing plan. In
order to effectively manage these resources, marketing executives may need
to spend much of their time focused on political issues and inte-departmental
negotiations.
The effectiveness of a marketing manager may therefore depend on his or
her ability to make the internal "sale" of various marketing programs equally
as much as the external customer's reaction to such programs.[1]

Reporting, measurement, feedback and control systems


Marketing management employs a variety of metrics to measure progress
against objectives. It is the responsibility of marketing managers -- in the
marketing department or elsewhere -- to ensure that the execution of
marketing programs achieves the desired objectives and does so in a cost-
efficient manner.
Marketing management therefore often makes use of various organizational
control systems, such as sales forecasts, sales force and reseller incentive
programs, sales force management systems, and customer relationship
management tools (CRM). Recently, some software vendors have begun
using the term "marketing operations management" or "marketing resource
management" to describe systems that facilitate an integrated approach for
controlling marketing resources. In some cases, these efforts may be linked
to various supply chain management systems, such as enterprise resource
planning (ERP), material requirements planning (MRP), efficient consumer
response (ECR), and inventory management systems.
Measuring the return on investment (ROI) of and marketing effectiveness
various marketing initiatives is a significant problem for marketing
management. Various market research, accounting and financial tools are
used to help estimate the ROI of marketing investments. Brand valuation,
for example, attempts to identify the percentage of a company's market value
that is generated by the company's brands, and thereby estimate the financial
value of specific investments in brand equity. Another technique, integrated
marketing communications (IMC), is a CRM database-driven approach that
attempts to estimate the value of marketing mix executions based on the
changes in customer behavior these executions generate.[10]

References
^ a b c Kotler, Philip.; Kevin Lane Keller (2006). Marketing Management,
12th ed.. Pearson Prentice Hall. ISBN 0-13-145757-8.
^ McKenna, Regis (Jan. 1991). "Marketing is Everything". Harvard
Business Review.
^ Drucker, Peter F. (1993 (reprint)). Management: Tasks,
Responsibilities, Practices. HarperCollins. ISBN 0-88730-615-2.
^ Kotler, Philip (Nov. 1977). "From Sales Obsession to Marketing
Effectiveness". Harvard Business Review.
^ a bClancy, Kevin J.; Peter C. Kriegafsd (2000). Counterintuitive
Marketing. The Free Press. ISBN 0-684-85555-0.
^ Keller, Kevin Lane (2002). Strategic Brand Management, 2nd ed..
Prentice Hall. ISBN 0-13-041150-7.
^ Porter, Michael (1998). Competitive Strategy (revised ed.). The Free
Press. ISBN 0-684-84148-7.
^ a bRies, Al; Jack Trout (2000). Positioning: The Battle for Your Mind
(20th anniversary ed.). McGraw-Hill. ISBN 0-07-135916-8.
^ Porter, Michael (1998). Competitive Advantage (revised ed.). The Free
Press. ISBN 0-684-84146-0.
^ Schultz, Don E.; Philip J. Kitchen (2000). Communicating Globally.
Palgrave Macmillan. ISBN 0-333-92137-2.

Sales management

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Importance of sales management is critical for any commercial
organization. Expanding business is not possible without increasing sales
volumes, and effective sales management goal is to organize sales team
work in such a manner that ensures a growing flow of regular customers and
increasing amount of sales.
Contents
[hide]
•1 Sales Management Process

•2 Sales Planning

•3 Sales Tracking

•4 Sales Reporting

•5 Actual Sales Management Challenges

•6 Effective Sales Management Solutions

•7 Sales Management Software

•8 Sales Manager Day

•9 Notes and references

•10 External links

Sales Management Process


The four phase-model of Management Process
Conception
Planning
Execution
Control
This model is cyclical, so it is a constant/continuous process.

Sales Planning
Unfortunately, when the business is growing, customers need more products,
service and customization, this individual activity oriented approach can
become a barrier for sales to grow because unfocused and uncoordinated
activity decreases effectiveness. Your sales department must be reorganized,
and sales people should specialize and co-operate with each other as well as
other departments of your company. Poor team sales management leads to
losing orders and customers so it is better to introduce a sales planning
system as soon as possible. Appropriate software will help sales team leader
to set sales goals which will motivate sales personnel (estimated sales
volumes should grow steadily from period to period despite the seasonal
variations of demand because decreasing estimated sales volumes
discourages sales managers).
After setting sales goals, salespersons’ activities should be planned by
regions, clients, channels, managers, products etc. Sales team leader or sales
department head should choose volume and operational metrics to evaluate
sales managers' effectiveness and to motivate them from achieved result.
While planning it is important to consider market potential and structure,
company's strengths and weaknesses, customer relations history, etc. that's
why sales planning software must be able to store all sales-related
information and allow a flexible searching, filtering, grouping and showing
statistics (i.e. flexible customer, task and order forms, calculated fields,
tables, schedules and charts). It is a good practice to let sales managers
describe how he or she will execute assigned sales tasks to check his or her
motivation to get things done. So the software for sales planning should
allow breaking a task down into to do items with possibility to set such
parameters as time, resources and measured results. It enables tracking
intermediate and final results, sales force effectiveness and sales plans
accomplishment.

Sales Tracking
Sales tracking is an integral part of sales management. Without tracking
sales tasks it is hard to find out if everything goes right and estimated
intermediate results are achieved in time and in the limits of expected
resources. If anything is out of expected range, you can analyze the details,
talk to a sales manager responsible for this task and take corrective actions.
Sales Tracking tracks selling activities as opposed to Revenue Tracking
which focuses on tracking the progress of forecasted opportunities. The most
difficult part of tracking selling activities is knowing if the activities will
actually lead to sales. Management must have a method of knowing if sales
reps are correctly engaging in enough of the right activities to produce
revenue in the future. This leads to three key metrics: the right activities, the
right way, the right amount. An individual sale is a stepwise process and key
activities, or “Transitional Milestones”, must be achieved along the way.
Sales Management must collect data on how the sales function as a whole is
progressing through these “Transitional Milestones” to determine the
likelihood of future revenue.[1]
Software used for sales tracking should allow sales team leaders to control
sales tasks completion by using reminders and notifications, highlighting
overdue tasks, analyzing task history, etc.
If your sales task management system is really great and duly implemented,
you are informed about all details of your company’s sales process in reall
time and know who does what, when, and how.

Sales Reporting
The sales reporting includes the key performance indicators of the sales
force.
The KPI indicate whether or not the sales process achieves the results as set
forth in the sales planning and enables the sales managers to take corrective
action in time in case the indicators deviate from the projected values.
More process than result related is information on the sales funnel and the
hit rate
In addition, sales reporting is a source for motivating sales managers,
because awarding best managers without accurate and reliable sales reports
is not objective.
Also, sales reports are made not only for internal use or top management. If
other divisions’ compensation plan depends on final results, it’s needed to
present results of sales department’s work to other departments.
Finally, sales reports are required for investors, partners and government, so
the sales management system should have advanced reporting capabilities to
satisfy needs of different target audiences and help sales force to be more
effective and make more sales.
Actual Sales Management Challenges
Managing sales is not difficult while a company is small, customer count
and sales persons count are limited, and sales process is simple and
transparent. However, when sales start to grow, companies understand that it
is very hard to manage enlarged sales workflow as effectively as they did
before. Managing increased sales volumes is more difficult because sales
management process becomes more complicated and sales department has to
deal with all aspects of the process. Not only the number of sales tasks
grows but also grows the number of regions, customers and products. It is
almost impossible for salespersons to handle with sales grows without a
special system for planning, tracking, analyzing, reporting, and controlling
all aspects of sales activity, projects and tasks.

Effective Sales Management Solutions


Sales management system helps sales departments to organize sales process
details, find potential bottlenecks, discover new opportunities and strategic
advantages, save cost and time, etc. The system should provide clear vision
of what salespersons did yesterday, what they are doing now and what they
will do tomorrow. Many companies have already implemented sales project
and task management on the basis of appropriate software. Now it’s time to
benchmark their best practice for all the rest organizations.

Sales Management Software


Sales project and task management software helps sales departments develop
comprehensive, prioritized sales plans, track their completion and create
real-time reports. Implementing a centralized sales data management leads
to better understanding of sales tasks and how they rely on sales strategy,
their priorities and status, new ways of sales growth and new sources of
motivation from achieved results.

Sales Manager Day


Every baller needs a day. It is celebrated the last Monday in April.
Notes and references
^ Free download of Wayne Gillikin (2007), Tracking the Hunter: The
Protean Methods Pipeline Development Process.
www.proteanmethods.com. Retrieved on 2008-02-20.

17 Integrated Marketing Communications

Integrated Marketing Communications (IMC), according to The American


Marketing Association, is “a planning process designed to assure that all
brand contacts received by a customer or prospect for a product, service, or
organization are relevant to that person and consistent over time.” Marketing
Power Dictiona Integrated marketing communication can be defined as a
holistic approach to promote buying and selling in the digital economy. This
concept includes many online and offline marketing channels. Online
marketing channels include any e-marketing campaigns or programs, from
search engine optimization (SEO), pay-per-click, affiliate, email, banner to
latest web related channels for webinar, blog, RSS, podcast, and Internet
TV. Offline marketing channels are traditional print (newspaper, magazine),
mail order, public relations, industry analyst relations billboard, radio, and
television

Goal of Integrated Marketing Communications


A management concept that is designed to make all aspects of marketing
communication such as advertising, sales promotion, public relations, and
direct marketing work together as a unified force, rather than permitting
each to work in isolation. In practice, the goal of IMC is to create and sustain
a single look or message in all elements of a marketing campaign. A
successful integrated marketing communication plan will customize what is
needed for the client based on time, budget and resources to reach target or
goals. Small business can start an integrated marketing communication plan
on a small budget using a website, email and SEO. Large corporation can
start an integrated marketing communication plan on a large budget using
print, mail order, radio, TV plus many other online ad campaigns.
Reasons For The Growing Importance of IMC
There have been many shifts in the advertising and media industry that have
caused IMC to develop into a primary strategy for most advertisers
7 main shifts
1. From media advertising to multiple forms of communication
(including promotions, product placements, mailers...)
2. From mass media to more specialized media, which are centered
around specific target audiences.
3. From a manufacturer-dominated market to a retailer-dominated
market. The market control has transferred into the consumer's hands.
4. From general-focus advertising and marketing to data-based
marketing.
5. From low agency accountability to greater agency accountability.
Agencies now play a larger role in advertising than ever before.
6. From traditional compensation to performance-based compensation.
This encourages people to do better because they are rewarded for the
increase sales or benefits they cause to the company.
7. From limited Internet access to widespread Internet availability. This
means that people can not only have 24/7 access to what they want,
but that advertisers can also target potential buyers just as much.
SEKURU FRANCO (1968)highlighted the issue of marketing in relation to
the stigma of sales
Roles of Individual Media
This goal may appear simple but, for companies with different teams of
people working on each element of the campaign, it can be a challenge to
create effective advertising for all media using the same images and
messages. Tactically, most marketers think the goal of each medium is
different. For example, television ads are generally used for awareness
generation, print to educate, and outdoor and radio to keep the message top-
of-mind. In reality, the goal of all advertising, including packaging, is to sell.
Identifying Best Marketing Elements
Even though the different elements in a campaign are designed to work
together, that does not mean that all the creative executions will work
equally well. This obstacle can be overcome by using advertising to identify
the images and messages that will work best across media platforms.
Marketers can use systems, such as the ARS Impact Campaign system
(www.ars-group.com), to directly compare recall and persuasion scores
across IMC vehicles and to understand synergies that make the whole IMC
program more powerful than the sum of its parts. Simple, comparable
metrics with a proven relationship to business performance make it easy for
ad managers to make comparisons across media platforms.
Market research is the process of systematically gathering, recording and
analyzing data and information about customers, competitors and the
market. Its uses include to help create a business plan, launch a new product
or service, fine tune existing products and services, and expand into new
markets. Market research can be used to determine which portion of the
population will purchase a product/service, based on variables like age,
gender, location and income level.
Market research is generally either primary or secondary.[1] In secondary
research, the company uses information compiled from other sources that
appears applicable to a new or existing product. The advantages of
secondary research are that it is relatively cheap and easily accessible.
Disadvantages of secondary research are that it is often not specific to your
area of research and the data used can be biased and is difficult to validate.
Primary market research involves testing such as focus groups, surveys, field
tests, interviews or observation, conducted or tailored specifically to that
product.
A list of questions that can be answered through market research:
• What is happening in the market? What are the trends? Who are the
competitors?
• How do consumers talk about the products in the market?
• Which needs are important? Are the needs being met by current
products?
Elements measured in MMM
Base and incremental volume
The very break-up of sales volume into base (volume that would be
generated in absence of any marketing activity) and incremental (volume
generated by marketing activities in the short run) across time gain gives
wonderful insights. The base grows or declines across longer periods of time
while the activities generating the incremental volume in the short run also
impact the base volume in the long run. The variation in the base volume is a
good indicator of the strength of the brand and the loyalty it commands from
its users

Television advertising
For the TV advertising activity, we can know how each ad copy has
performed in the market in terms of its impact on sales volume. We can gain
insights into the direct and the halo effect of TV activity and hence optimize
advertising spends across various products or sub-brands under the same
brand. We can know the effectiveness of a 15-seconder ad vis-à-vis a 30-
seconder ad. We can also know how an ad has performed when it was run
during a prime-time slot vis-à-vis during an off-prime-time slot. Hence
depending on the differential cost one can identify the most optimal way to
allocate TV advertising budget. MMM also tells us the effectiveness in
terms of volume response at various levels of media weight, as measured by
Gross Rating Points within a time frame, be it a week or a month. We can
know the minimum level of GRPs (threshold limit) in a week that need to be
aired in order to make an impact; we can know the level at which the activity
gives maximum ROI; we can know the level of GRPs at which the impact
on volume maximizes (saturation limit) and that the further activity does not
have any payback. The role of new product based TV activity and the equity
based TV activity in growing the brand can also be identified.

Questions involved in pricing


Pricing involves asking questions like:
• How much to charge for a product or service? This question is a
typical starting point for discussions about pricing, however, a better
question for a vendor to ask is - How much do customers value the
products, services, and other intangibles that the vendor provides.
• What are the pricing objectives?
• Do we use profit maximization pricing?
• How to set the price?: (cost-plus pricing, demand based or value-
based pricing, rate of return pricing, or competitor indexing)
• Should there be a single price or multiple pricing?
• Should prices change in various geographical areas, referred to as
zone pricing?
• Should there be quantity discounts?
• What prices are competitors charging?
• Do you use a price skimming strategy or a penetration pricing
strategy?
• What image do you want the price to convey?
• Do you use psychological pricing?
• How important are customer price sensitivity (e.g. "sticker shock")
and elasticity issues?
• Can real-time pricing be used?
• Is price discrimination or yield management appropriate?
• Are there legal restrictions on retail price maintenance, price
collusion, or price discrimination?
• Do price points already exist for the product category?
• How flexible can we be in pricing? : The more competitive the
industry, the less flexibility we have.
o The price floor is determined by production factors like costs
(often only variable costs are taken into account), economies of
scale, marginal cost, and degree of operating leverage
o The price ceiling is determined by demand factors like price
elasticity and price points
What a price should do
A well chosen price should do three things :
• achieve the financial goals of the firm (eg.: profitability)
• fit the realities of the marketplace (will customers buy at that price?)
• support a product's positioning and be consistent with the other
variables in the marketing mix
o price is influenced by the type of distribution channel used, the
type of promotions used, and the quality of the product
 price will usually need to be relatively high if
manufacturing is expensive, distribution is exclusive, and
the product is supported by extensive advertising and
promotional campaigns
 a low price can be a viable substitute for product quality,
effective promotions, or an energetic selling effort by
distributors

Trade promotions
Trade promotion is a key activity in every marketing plan. It is aimed at
increasing sales in the short term by employing promotion schemes which
effectively increases the customer awareness of the business and its
products. The response of consumers to trade promotions is not straight
forward and is the subject of much debate. Non-linear models exist to
simulate the response. Using MMM we can understand the impact of trade
promotion at generating incremental volumes. It is possible to obtain an
estimate of the volume generated per promotion event in each of the
different retail outlets by region. This way we can identify the most and least
effective trade channels. If detailed spend information is available we can
compare the Return on Investment of various trade activities like Every Day
Low Price, Off-Shelf Display etc. We can use this information to optimize
the trade plan by choosing the most effective trade channels and targeting
the most effective promotion activity

Pricing
Price changes of the brand impacts the sales negatively. This effect can be
captured through modeling the price in MMM. The model provides the price
elasticity of the brand which tells us the percentage change in the sales for
each percentage change in price. Using this, the marketing manager can
evaluate the impact of a price change decision.

Distribution
For the element of distribution, we can know how the volume will move by
changing distribution efforts or, in other words, by each percentage shift in
the width or the depth of distribution. This can be identified specifically for
each channel and even for each kind of outlet for off-take sales. In view of
these insights, the distribution efforts can be prioritized for each channel or
store-type to get the maximum out of the same. A recent study of a laundry
brand showed that the incremental volume through 1% more presence in a
neighborhood Kirana store is 180% greater than that through 1% more
presence in a supermarket.[citation needed] Based upon the cost of such efforts,
managers identified the right channel to invest more for distribution.

Launches
When a new product is launched, the associated publicity and promotions
typically results in higher volume generation than expected. This extra
volume cannot be completely captured in the model using the existing
variables. Often special variables to capture this incremental effect of
launches are used. The combined contribution of these variables and that of
the marketing effort associated with the launch will give the total launch
contribution. Different launches can be compared by calculating their
effectiveness and ROI.

Definitions
The effective price is the price the company receives after accounting for
discounts, promotions, and other incentives.
Price lining is the use of a limited number of prices for all your product
offerings. This is a tradition started in the old five and dime stores in which
everything cost either 5 or 10 cents. Its underlying rationale is that these
amounts are seen as suitable price points for a whole range of products by
prospective customers. It has the advantage of ease of administering, but the
disadvantage of inflexibility, particularly in times of inflation or unstable
prices.
A loss leader is a product that has a price set below the operating margin.
This results in a loss to the enterprise on that particular item, but this is done
in the hope that it will draw customers into the store and that some of those
customers will buy other, higher margin items.
Promotional pricing refers to an instance where pricing is the key element of
the marketing mix.
The price/quality relationship refers to the perception by most consumers
that a relatively high price is a sign of good quality. The belief in this
relationship is most important with complex products that are hard to test,
and experiential products that cannot be tested until used (such as most
services). The greater the uncertainty surrounding a product, the more
consumers depend on the price/quality hypothesis and the more of a
premium they are prepared to pay. The classic example of this is the pricing
of the snack cake Twinkies, which were perceived as low quality when the
price was lowered. Note, however, that excessive reliance on the
price/quantity relationship by consumers may lead to the raising of prices on
all products and services, even those of low quality, which in turn causes the
price/quality relationship to no longer apply.
Premium pricing (also called prestige pricing) is the strategy of consistently
pricing at, or near, the high end of the possible price range to help attract
status-conscious consumers. A few examples of companies which partake in
premium pricing in the marketplace include Rolex and Bentley. People will
buy a premium priced product because:
1. They believe the high price is an indication of good quality;
2. They believe it to be a sign of self worth - "They are worth it" - It
authenticates their success and status - It is a signal to others that they
are a member of an exclusive group; and
3. They require flawless performance in this application - The cost of
product malfunction is too high to buy anything but the best -
example : heart pacemaker

Approaches
Pricing as the most effective profit lever. (Template:Cite book:) Pricing can
be approached at three levels. The industry, market, and transaction level.
Pricing at the industry level focuses on the overall economics of the
industry, including supplier price changes and customer demand changes.
Pricing at the market level focuses on the competitive position of the price in
comparison to the value differential of the product to that of comparative
competing products.
Pricing at the transaction level focuses on managing the implementation of
discounts away from the reference, or list price, which occur both on and off
the invoice or receipt. Pricing at the transaction level focuses on managing
the implementation of discounts away from the reference, or list price, which
occur both on and off the invoice or receipt.
Debits and credits

Introduction
Debits and Credits are the most fundamental concepts in accounting.
In accounting theory, the financial aspects of an entity, stated in terms of
units of currency, is calculated using the "accounting equation," which is
that Assets equal Liabilities plus Capital. Each Asset, Liability and Capital
account contains debit and credit transactions that allow for the calculation
of values for these accounts.
Debits and credits are a system of notation developed before a concept of
positive and negative numbers were in use. If a certain type of account
normally has a debit balance, a credit balance is a way of denoting a
negative quantity of that item. For example, an account (in your books) for
your account at the bank (an account on the bank's books) normally has a
debit balance, meaning that the bank owes you the money (or that the money
is yours, if you prefer). If that account in your books has a credit balance,
you owe the bank money (you're overdrawn). The account in the bank's
books normally has a credit balance, meaning the bank owes you the money
(it's your money). Nobody inventing double-entry bookkeeping today would
use left-and-right debits and credits--he or she would certainly use positive
and negative numbers, which is exactly what almost all computer programs
do that perform bookkeeping. Indeed, that is a convention (debits are
positive, credits are negative) that goes back to COBOL. It would be better
to think of double-entry bookkeeping as a system (in the abstract sense of
the word) in which the "entity" begins with nothing, and every change in
assets (a debit to increase, a credit to decrease) has an equal and opposite
reaction. It sounds almost Newtonian when you look at it that way.
(theunbalancedaccountant)
Credit (creative arts)

Credit in the arts


In the creative arts, credits are an acknowledgement of those who
participated in the production. They are often shown at the end of movies
and on CD jackets. In film, video, television, theater, etc., credits means the
list of actors and behind-the-scenes staff who contributed to the production.

Credit in writing
Non-fiction
In non-fiction writing, especially academic works, it is generally considered
important to give credit to sources of information and ideas. Failure to do so
often gives rise to charges of plagiarism, and "piracy" of intellectual rights
such as the right to receive a royalty for having written. In this sense the
financial and individual meanings are linked.
Academic papers generally contain a lengthy section of footnotes or
citations. Such detailed crediting of sources provides readers with an
opportunity to discover more about the cited material. It also provides a
check against misquotation, as it's easy for an attributed quote to be checked
when the reference is available. All of this is thought to improve integrity of
the instructional capital conveyed, which may be quite fragile, and easy to
misinterpret or to misapply.
In fiction
In fiction writing, authors are generally expected to give credit to those who
contributed significantly to a work. Sometimes authors who do not want
credit for their work directly may choose to use a pen name. A ghostwriter
gives all or some of the credit for his or her writing to someone else.
Credit (education)

United States
In the United States, a student in a high school or university earns credits for
the successful completion of each course for each academic term. The state
or the institution generally sets a minimum number of credits required to
graduate. Various systems of credits exist: one per course, one per
hour/week in class, one per hour/week devoted to the course (including
homework), etc.

Europe
In Europe a common credit system has been introduced. The European
Credit Transfer System (ECTS) is in some European countries used as the
principal credit and grading system in universities while other countries use
the ECTS as a secondary credit system for exchange students. In ECTS a
full study-year normally consists of 60 credits. Grades are given in the A-E
range, where F is fail. Schools are also allowed to use a pass/fail evaluation
in the ECTS system.
Similar systems are widely used elsewhere. Often the word "unit" is used for
the same concept.
Credit (finance)
Credit is the provision of resources (such as granting a loan) by one party to
another party where that second party does not reimburse the first party
immediately, thereby generating a debt, and instead arranges either to repay
or return those resources (or material(s) of equal value) at a later date. The
first party is called a creditor, also known as a lender, while the second party
is called a debtor, also known as a borrower.
Any movement of financial capital is normally quite dependent on credit,
which in turn is dependent on the reputation or creditworthiness of the entity
which takes responsibility for the funds.
The term credit is used similarly in commercial trade, known as "trade
credit", to refer to the approval for delayed payments for purchased goods.
Sometimes, credit is not granted to a person who has financial instability or
difficulty. Companies frequently offer credit to their customers as part of the
terms of a purchase agreement. Organizations that offer credit to their
customers frequently employ a credit manager.
Credit is denominated by a unit of account. Unlike money (by a strict
definition), credit itself cannot act as a unit of account. However, many
forms of credit can readily act as a medium of exchange. As such, various
forms of credit are frequently referred to as money and are included in
estimates of the money supply.
18 Business Process Management
Business process management (BPM) is a method of efficiently aligning an
organization with the wants and needs of clients. It is a holistic management
approach that promotes business effectiveness and efficiency while striving
for innovation, flexibility and integration with technology. As organizations
strive for attainment of their objectives, BPM attempts to continuously
improve processes - the process to define, measure and improve your
processes – a ‘process optimization' process.

Overview
A business process is a collection of related, structured activities that
produce a service or product that meet the needs of a client. These processes
are critical to any organization as they generate revenue and often represent
a significant proportion of costs.

Approaches within BPM


BPM articles and pundits often discuss BPM from one of two viewpoints:
people and technology

People
BPM is considered by some to be a philosophy. BPM alignment to the
customer means that customer-facing staff are best suited to understand
customer needs and must be empowered to make improvements. Many of
these improvements can be done without the use of new technology.

Technology
BPM System (BPMS) is sometimes seen as the whole of BPM. Some see
that information moves between enterprise software packages and
immediately think of Service Oriented Architecture(SOA); while others
believe that modeling is the only way to create the ‘perfect’ process, so they
think of modeling as BPM.
Both of these concepts go into the definition of Business Process
Management. For instance, the size and complexity of daily tasks often
requires the use of technology to model efficiently. Bringing the power of
technology to staff is part of the BPM credo. Many thought BPM as the
bridge between Information Technology (IT) and Business.
Business process management life-cycle
The activities which constitute business process management can be
grouped into five categories: design, modeling, execution, monitoring, and
optimization.

Design
Process Design encompasses both the identifying of existing processes and
designing the "to-be" process. Areas of focus include: representation of the
process flow, the actors within it, alerts & notifications, escalations,
Standard Operating Procedures, Service Level Agreements, and task hand-
over mechanisms.
Good design reduces the number of problems over the lifetime of the
process; a real world analogy can be having an architect design a house.
Whether or not existing processes are considered, the aim of this step is to
ensure that a correct and efficient theoretical design is prepared.
The proposed improvement could be in human to human, human to system,
and system to system workflows, and might target regulatory, market, or
competitive challenges faced by the businesses.
There are several common techniques and notations for business process
mapping (or Business process modeling), including IDEF, BPWIN, Event-
driven Process Chains, and BPMN.
Modeling
Modeling takes the theoretical design and introduces combinations of
variables, for instance, changes in the cost of materials or increased rent, that
determine how the process might operate under different circumstances.
It also involves running "what-if analysis" on the processes: What if I have
75% of resources to do the same task? What if I want to do the same job for
80% of the current cost?
A real world analogy can be "wind-tunnel" test of an aeroplane or test flights
to determine how much fuel it will consume and how many passengers it
can carry.
Execution
One way to automate processes is to develop or purchase an application that
executes the required steps of the process; however, in practice, these
applications rarely execute all the steps of the process accurately or
completely. Another approach is to use a combination of software and
human intervention; however this approach is more complex, making
documenting a process difficult.
As a response to these problems, software has been developed that enables
the full business process (as developed in the process design activity) to be
defined in a computer language which can be directly executed by the
computer. The system will either use services in connected applications to
perform business operations (e.g. calculating a repayment plan for a loan) or,
when a step is too complex to automate, will message a human requesting
input. Compared to either of the previous approaches, directly executing a
process definition can be more straightforward and therefore easier to
improve. However, automating a process definition requires flexible and
comprehensive infrastructure which typically rules out implementing these
systems in a legacy IT environment.
Monitoring
Monitoring encompasses the tracking of individual processes so that
information on their state can be easily seen and statistics on the
performance of one or more processes provided. An example of the tracking
is being able to determine the state of a customer order (e.g. ordered arrived,
awaiting delivery, invoice paid) so that problems in its operation can be
identified and corrected.
In addition, this information can be used to work with customers and
suppliers to improve their connected processes. Examples of the statistics
are the generation of measures on how quickly a customer order is processed
or how many orders were processed in the last month. These measures tend
to fit into three categories: cycle time, defect rate and productivity.
Optimization
Process optimization includes retrieving process performance information
from modeling or monitoring phase and identifying the potential or actual
bottlenecks and potential rooms for cost savings or other improvements and
then applying those enhancements in the design of the process thus
continuing the value cycle of business process management.
Future developments
Although the initial focus of BPM was on the automation of mechanistic
business processes, it has since been extended to integrate human-driven
processes in which human interaction takes place in series or parallel with
the mechanistic processes. A common form is where individual steps in the
business process which require human intuition or judgment to be performed
are assigned to the appropriate members of an organization (as with
workflow systems).
More advanced forms such as human interaction management are in the
complex interaction between human workers in performing a workgroup
task. In this case many people and system interact in structured, ad-hoc, and
sometimes completely dynamic ways to complete one to many transactions.

Business process management in practice


Whilst the steps can be viewed as a cycle, economic or time constraints are
likely to limit the process to one or more iterations.
In addition, organizations often start a BPM project or program with the
objective to optimize an area which has been identified as an area for
improvement.
Use of software
Some say that not all activities can be effectively modeled with BPMS, and
so some processes are best left alone. Taking this viewpoint, the value in
BPMS is not in automating very simple or very complex tasks, it is in
modeling processes where there is the most opportunity.
Technology Management
While Technology Management can be defined as the integrated planning,
design, optimization, operation and control of technological products,
processes and services, a better definition would be the management of the
use of technology for human advantage.
Within both definitions there is an implication that different kinds of
technology share common management methodologies, at this point that
cannot be proven and thus is axiomatic to the discipline.
At this point there is little conceptual theory for this area, most of the
practical learning results from pioneering efforts in the field. Despite the fact
that we have lived in a technologically based society for over fifty years,
there is very little guidance for those wishing to better manage technology,
thus the world tends to follow rules of thumb such as "leading is bleeding"
and shy away from technologies that are less well understood.
Perhaps the most authoritative input to our understanding of technology is
the diffusion of innovations theory developed in the first half of the
twentieth century. It suggests that all innovations follow a similar diffusion
pattern - best known today in the form of an "s" curve though originally
based upon the concept of a standard distribution of adopters. In broad terms
the "s" curve suggests four phases of a technology life cycle - emerging,
growth, mature and aging.
Business Technology Management
Business Technology Management (BTM) is a management science that
seeks to unify business and technology decision-making at every level in an
enterprise. BTM delivers a set of guiding principles, known as BTM
Capabilities. These capabilities are combined to form BTM solutions,
around which a company's practices can be organized and improved. BTM
also defines the expected characteristics of an organization according to five
levels of a maturity model.
BTM builds bridges between previously isolated tools and standards for
business technology management by strategically incorporating both
operational and infrastructure levels of technology management to ensure
that an enterprise’s business strategy can be realized by the technology it
deploys. This structured approach is used by enterprises to align,
synchronize and even converge technology and business management for the
purpose of ensuring better execution, risk control and profitability.

BTM alignment, synchronization and convergence


Many enterprises perceive the alignment of business technology with the
business to be a sort of management “Holy Grail”. From a BTM perspective,
alignment can be defined as a state where technology supports, enables, and
does not constrain the company’s current and evolving business strategies. It
means that the IT function is in tune with the business thinking about
competition, emerging threats and opportunities, and the business
technology implications of each. Technology priorities, investments, and
capabilities are internally consistent with business priorities, investments,
and capabilities. When that’s the case, the company has reached a level of
BTM maturity that relatively few have achieved to date. Alignment is a
good thing, and sometimes sufficient to serve a particular business situation.
There are other higher states to consider however, and for some enterprises,
synchronization of technology with the business is the right goal. At this
level, business technology not only enables execution of current business
strategy but also anticipates and helps shape future business models and
strategy. Business technology leadership, thinking, and investments may
actually step out ahead of the business (that is, beyond what is “aligned”
with today’s business). The purpose of this is to seed new opportunities and
encourage far-sighted executive vision about technology’s leverage on
future business opportunities. Yet the business and technology are
synchronized in that the requisite capabilities will be in place when it is time
to “strike” the strategic option.

Dimensions of BTM
BTM addresses four critical dimensions that serve as integrated building
blocks supporting improvements across the enterprise:
Process
The first dimension for institutionalizing BTM principles is set of robust,
flexible and repeatable processes. Simply defining these processes is
insufficient though, to effectively implement BTM requires that processes be
defined and consistently optimized evaluated to ensure:
• General quality of business practice—Doing the right things
• Efficiency—Doing things quickly with little redundancy
• Effectiveness—Doing things well.
Organization
Management processes are more likely to succeed when they are supported
by appropriate organizational structures based on clear understanding of
roles, responsibilities, and decision rights. Such organizational structures
generally include:
• Participative bodies—involving senior-level business and technology
participants on a part-time but routine basis
• Centralized bodies—requiring specialized, dedicated technology staff
• Needs-based bodies—involving rotational assignments, created to
deal with particular efforts

Information
Valid, timely information is a prerequisite for effective decision making.
This information must be delivered in a way that is comprehensible to non
specialists and, at the same time, actionable in terms of informing choices
that matter. Useful information does not just happen. It depends on the
interaction of two related elements: data and metrics. Data must be available,
relevant, accurate, and reliable. Metrics distill raw data into useful
information. Thus, metrics need to be appropriate and valid for strategic and
operational objectives. Internally, they should be comparable across the
enterprise and across time; and externally across industries, functions, and
extended-enterprise partners.
Technology
Effective technology, (that is, management automation tools) can help
connect all the other dimensions. Appropriate technology helps make
processes easier to execute, facilitates timely information sharing, and
enables consistent coordination between elements and layers of the
organization. It does this through the following:
• Automation of manual tasks
• Reporting
• Analytics for decision making
• Integration between management systems

BTM capabilities
A BTM Capability is defined as a competency achieved by combining each
dimension and creating well-defined repeatable management processes that
are executed through appropriate organizational structures, using an
effective information architecture that is supported by the right level of
automation and technology. BTM defines 17 of these specific capabilities,
and each is grouped into one of four functional areas.
The first area is Governance and Organization is focused on enterprise CIOs
and business executives concerned with enterprise-wide governance of
business technology. The capabilities that must be developed to support this
functional area ensure that required decisions are identified, assigned, and
executed effectively. Necessary capabilities also include the ability to design
an organization that meets the needs of the business, manages risk
appropriately and gives proper consideration to government, regulatory and
industry requirements.
The second area is Managing Technology Investments. This functional area
focuses on the Enterprise Program Management Office (EPMO) and other
technology and business executives who are concerned with ensuring
selection and execution of the right business technology initiatives. The
capabilities that must be developed to support this functional area ensure
that the organization understands what it owns from an IT standpoint, what
it is working on, and who is available. The organization must make certain
that business technology investment decisions are closely aligned with the
needs of the business and that technology initiatives are executed using
proven methodologies and available technology and IP assets.

The BTM Maturity Model


A maturity model describes how well an enterprise performs a particular set
of activities in comparison to a prescribed standard. In this case, the BTM
Maturity Model defines five levels of maturity, scored across the four
critical dimensions—process, organization, information and technology and
assists in levying a grade based on objective, best practice characteristics.
The maturity model also makes it possible for an enterprise to identify
anomalies in performance and benchmark itself against other companies or
across industries. The measurement of BTM capabilities through the BTM
Maturity Model identifies areas most in need of improvement, fixes the
starting point for the enterprise, and specifies the path for change. A growing
body of research shows that at level 1, enterprises typically execute some
strategic business technology management processes in a disaggregated,
task-like manner. A level 2 organization exhibits limited BTM capabilities,
attempts to assemble information for major decisions, and consults IT on
decisions with obvious business technology implications. Enterprises at
level 3 are “functional” with respect to BTM, and those at level 4 have BTM
fully implemented. Organizations achieving level 5 maturity are good
enough to know when to change the rules to maintain strategic advantages
over competitors who themselves may be getting the hang of BTM.

History
Reference to non-business performance management occurs in Sun Tzu's
The Art of War. Sun Tzu claims that to succeed in war, one should have full
knowledge of one's own strengths and weaknesses and full knowledge of
one's enemy's strengths and weaknesses. Lack of either one might result in
defeat. A certain school of thought draws parallels between the challenges in
business and those of war, specifically:
• collecting data - both internal and external
• discerning patterns and meaning in the data (analyzing)
• responding to the resultant information
Prior to the start of the Information Age in the late 20th century, businesses
sometimes took the trouble to laboriously collect data from non-automated
sources. As they lacked computing resources to properly analyze the data
they often made commercial decisions primarily on the basis of intuition.
As businesses started automating more and more systems, more and more
data became available. However, collection remained a challenge due to a
lack of infrastructure for data exchange or due to incompatibilities between
systems. Reports on the data gathered sometimes took months to generate.
Such reports allowed informed long-term strategic decision-making.
However, short-term tactical decision-making continued to rely on intuition.
In modern businesses, increasing standards, automation, and technologies
have led to vast amounts of data becoming available. Data warehouse
technologies have set up repositories to store this data. Improved ETL and
even recently Enterprise Application Integration tools have increased the
speedy collecting of data. OLAP reporting technologies have allowed faster
generation of new reports which analyze the data. Business intelligence has
now become the art of sieving through large amounts of data, extracting
useful information and turning that information into actionable knowledge.
In 1989 Howard Dresner, a research analyst at Gartner , popularized
"Business Intelligence" as an umbrella term to describe a set of concepts and
methods to improve business decision-making by using fact-based support
systems. Performance Management is built on a foundation of BI, but
marries it to the planning and control cycle of the enterprise - with enterprise
planning, consolidation and modeling capabilities.

What is BPM?
BPM involves consolidation of data from various sources, querying, and
analysis of the data, and putting the results into practice.
BPM enhances processes by creating better feedback loops. Continuous and
real-time reviews help to identify and eliminate problems before they grow.
BPM's forecasting abilities help the company take corrective action in time
to meet earnings projections. Forecasting is characterized by a high degree
of predictability which is put into good use to answer what-if scenarios.
BPM is useful in risk analysis and predicting outcomes of merger and
acquisition scenarios and coming up with a plan to overcome potential
problems.
BPM provides key performance indicators (KPIs) that help companies
monitor efficiency of projects and employees against operational targets.

Methodologies
There are various methodologies for implementing BPM. It gives companies
a top down framework by which to align planning and execution, strategy
and tactics, and business unit and enterprise objectives. Some of these are
six sigma, balanced scorecard, activity-based costing, total quality
management, economic value-add, and integrated strategic measurement.
The balanced scorecard is the most widely adopted performance
management methodology. Methodologies on their own cannot deliver a full
solution to an enterprise's CPM needs. Many pure methodology
implementations fail to deliver the anticipated benefits because they are not
integrated with the fundamental CPM processes.

Metrics / Key Performance Indicators


For business data analysis to become a useful tool, however, it is essential
that an enterprise understand its goals and objectives – essentially, that they
know the direction in which they want the enterprise to progress. To help
with this analysis key performance indicators (KPIs) are laid down to assess
the present state of the business and to prescribe a course of action.
Metrics and Key performance Indicators (KPI’s) are critical in prioritization
what has to be measured. The methodology used helps in determining the
metrics to be used by the organization. It is frequently said that one cannot
manage what cannot be measured. Identifying the key metrics and
determining how they are to be measured helps the organizations to monitor
performance across the board without getting deluged by a surfeit of data; a
scenario plaguing most companies today.
More and more organizations have started to speed up the availability of
data. In the past, data only became available after a month or two, which did
not help managers react swiftly enough. Recently, banks have tried to make
data available at shorter intervals and have reduced delays. For example, for
businesses which have higher operational/credit risk loading (for example,
credit cards and "wealth management"), A large multi-national bank makes
KPI-related data available weekly, and sometimes offers a daily analysis of
numbers and realtime dashboards are also provided. This means data usually
becomes available within 24 hours, necessitating automation and the use of
IT systems.
Most of the time, BPM simply means use of several financial/nonfinancial
metrics/key performance indicators to assess the present state of the business
and to prescribe a course of action.
Some of the areas from which top management analysis could gain
knowledge by using BPM:
1. Customer-related numbers:
1. New customers acquired
2. Status of existing customers
3. Attrition of customers (including breakup by reason for
attrition)
2. Turnover generated by segments of the Customers - these could be
demographic filters.
3. Outstanding balances held by segments of customers and terms of
payment - these could be demographic filters.
4. Collection of bad debts within customer relationships.
5. Demographic analysis of individuals (potential customers) applying to
become customers, and the levels of approval, rejections and pending
numbers.
6. Delinquency analysis of customers behind on payments.
7. Profitability of customers by demographic segments and segmentation
of customers by profitability.
8. Campaign management
9. Realtime Dashboard on Key operational metrics
1. Overall Equipment Effectiveness
10.Clickstream analysis on a website
11.Key product portfolio trackers
12.Marketing Channel analysis
13.Sales Data analysis by product segments
14.Callcenter metrics

Application software types


People working in business intelligence have developed tools that ease the
work, especially when the intelligence task involves gathering and analyzing
large amounts of unstructured data.
Tool categories commonly used for business performance management
include:
• OLAP — Online Analytical Processing, sometimes simply called
"Analytics" (based on dimensional analysis and the so-called
"hypercube" or "cube")
• Scorecarding, dashboarding and data visualization
• Data warehouses
• Document warehouses
• Text mining
• DM — Data mining
• BPM — Business performance management
• EIS — Executive information systems
• DSS — Decision support systems
• MIS — Management information systems
• SEMS — Strategic Enterprise Management Software
• Business Dashboards

Designing and implementing a business performance management


program
When implementing a BPM program one might like to pose a number of
questions and take a number of resultant decisions, such as:
• Goal Alignment queries: The first step is determining what the short
and medium term purpose of the program will be. What strategic
goal(s) of the organization will be addressed by the program? What
organizational mission/vision does it relate to? A hypothesis needs to
be crafted that details how this initiative will eventually improve
results / performance (i.e. a strategy map).
• Baseline queries: Current information gathering competency needs to
be assessed. Do we have the capability to monitor important sources
of information? What data is being collected and how is it being
stored? What are the statistical parameters of this data, e.g., how much
random variation does it contain? Is this being measured?
• Cost and risk queries: The financial consequences of a new BI
initiative should be estimated. It is necessary to assess the cost of the
present operations and the increase in costs associated with the BPM
initiative? What is the risk that the initiative will fail? This risk
assessment should be converted into a financial metric and included in
the planning.
• Customer and stakeholder queries: Determine who will benefit from
the initiative and who will pay. Who has a stake in the current
procedure? What kinds of customers / stakeholders will benefit
directly from this initiative? Who will benefit indirectly? What are the
quantitative / qualitative benefits? Is the specified initiative the best
way to increase satisfaction for all kinds of customers, or is there a
better way? How will customer benefits be monitored? What about
employees, shareholders, and distribution channel members?
• Metrics-related queries: These information requirements must be
operationalized into clearly defined metrics. One must decide what
metrics to use for each piece of information being gathered. Are these
the best metrics? How do we know that? How many metrics need to
be tracked? If this is a large number (it usually is), what kind of
system can be used to track them? Are the metrics standardized, so
they can be benchmarked against performance in other organizations?
What are the industry standard metrics available?
• Measurement Methodology-related queries: One should establish a
methodology or a procedure to determine the best (or acceptable) way
of measuring the required metrics. What methods will be used, and
how frequently will data be collected? Are there any industry
standards for this? Is this the best way to do the measurements? How
do we know that?
• Results-related queries: The BPM program should be monitored to
ensure that objectives are being met. Adjustments in the programme
may be necessary. The program should be tested for accuracy,
reliability, and validity. How can it be demonstrated that the BI
initiative, and not something else, contributed to a change in results?
How much of the change was probably random?

19 Human Resource Management


(HRM) is the strategic and coherent approach to the management of an
organization's most valued assets - the people working there who
individually and collectively contribute to the achievement of the objectives
of the business.[1] The terms "human resource management" and "human
resources" (HR) have largely replaced the term "personnel management" as
a description of the processes involved in managing people in organizations.
[1] Human Resource management is evolving rapidly. Human resource

management is both an academic theory and a business practice that


addresses the theoretical and practical techniques of managing a workforce.

Features
Its features include:
• Personnel administration
• Personnel management
• Manpower management
• Industrial management[2][3]
But these traditional expressions are becoming less common for the
theoretical discipline. Sometimes even industrial relations and employee
relations are confusingly listed as synonyms,[4] although these normally refer
to the relationship between management and workers and the behavior of
workers in companies.
The theoretical discipline is based primarily on the assumption that
employees are individuals with varying goals and needs, and as such should
not be thought of as basic business resources, such as trucks and filing
cabinets. The field takes a positive view of workers, assuming that virtually
all wish to contribute to the enterprise productively, and that the main
obstacles to their endeavors are lack of knowledge, insufficient training, and
failures of process.
HRM is seen by practitioners in the field as a more innovative view of
workplace management than the traditional approach. Its techniques force
the managers of an enterprise to express their goals with specificity so that
they can be understood and undertaken by the workforce, and to provide the
resources needed for them to successfully accomplish their assignments. As
such, HRM techniques, when properly practiced, are expressive of the goals
and operating practices of the enterprise overall. HRM is also seen by many
to have a key role in risk reduction within organisations.[5]

Academic theory
The goal of human resource management is to help an organization to meet
strategic goals by attracting, and maintaining employees and also to manage
them effectively. The key word here perhaps is "fit", i.e. a HRM approach
seeks to ensure a fit between the management of an organization's
employees, and the overall strategic direction of the company (Miller, 1989).
The basic premise of the academic theory of HRM is that humans are not
machines, therefore we need to have an interdisciplinary examination of
people in the workplace. Fields such as psychology, industrial engineering,
industrial and organizational psychology, industrial relations, sociology, and
critical theories: postmodernism, post-structuralism play a major role. Many
colleges and universities offer bachelor and master degrees in Human
Resources Management.
One widely used scheme to describe the role of HRM, developed by Dave
Ulrich, defines 4 fields for the HRM function:[6]
• Strategic business partner
• Change agent
• Employee champion
• Administration

Critical Academic Theory


Postmodernism plays an important part in Academic Theory and particularly
in Critical Theory. Indeed Karen Legge in 'Human Resource Management:
Rhetorics and Realities' possess the debate of whether HRM is a modernist
project or a postmodern discourse (Legge 2004). In many ways, critically or
not, many writers contend that HRM itself is an attempt to movement away
from the modernist traditions of personnel (man as machine) towards a
postmodernist view of HRM man as individuals. Critiques include the
notion that because 'Human' is the subject we should recognize that people
are complex and that it is only through various discourses that we
understand the world. Man is not Machine, no matter what attempts are
made to change it i.e. Fordism / Taylorism, McDonaldisation (Modernism).
Critical Theory also questions whether HRM is the pursuit of "attitudinal
shaping" (Wilkinson 1998), particularly when considering empowerment, or
perhaps more precisely pseudo-empowerment - as the critical perspective
notes. Many critics note the move away from Man as Machine is often in
many ways, more a Linguistic (discursive) move away than a real attempt to
recognise the Human in Human Resource Management.

Business practice
Human resources management comprises several processes. Together they
are supposed to achieve the above mentioned goal. These processes can be
performed in an HR department, but some tasks can also be outsourced or
performed by line-managers or other departments.
• Workforce planning
• Recruitment (sometimes separated into attraction and selection)
• Induction and Orientation
• Skills management
• Training and development
• Personnel administration
• Compensation in wage or salary
• Time management
• Travel management (sometimes assigned to accounting rather than
HRM)
• Payroll (sometimes assigned to accounting rather than HRM)
• Employee benefits administration
• Personnel cost planning
• Performance appraisal

Careers
The sort of careers available in HRM are varied. There are generalist HRM
jobs such as human resource assistant. There are careers involved with
employment, recruitment and placement and these are usually conducted by
interviewers, EOE (Equal Opportunity Employment) specialists or college
recruiters. Training and development specialism is often conducted by
trainers and orientation specialists. Compensation and benefits tasks are
handled by compensation analysts, salary administrators, and benefits
administrators.

Professional organizations
Professional organizations in HRM include the Society for Human Resource
Management, the Chartered Institute of Personnel and Development (CIPD),
the International Public Management Association for HR (IPMA-HR) and
the International Personnel Management Association of Canada (IPMA-
Canada).
20 Operations Management
From Wikipedia, the free encyclopedia
• Have questions? Find out how to ask questions and get answers. •
Jump to: navigation, search
Operations management is an area of business that is concerned with the
production of goods and services, and involves the responsibility of ensuring
that business operations are efficient and effective. It is the management of
resources, the distribution of goods and services to customers, and the
analysis of queue systems.
APICS The Association for Operations Management also defines operations
management as "the field of study that focuses on the effectively planning,
scheduling, use, and control of a manufacturing or service organization
through the study of concepts from design engineering, industrial
engineering, management information systems, quality management,
production management, inventory management, accounting, and other
functions as they affect the organization" (APICS Dictionary, 11th edition).
Operations also refers be the production of goods and services, the set of
value-added activities that transform inputs into many outputs.[1]
Fundamentally, these value-adding creative activities should be aligned with
market opportunity (see Marketing) for optimal enterprise performance.

Origins
The origins of Operations Management can be traced back to the Industrial
Revolution, the same as Scientific Management and Operations Research.
Adam Smith treats the topic of the division of labor when opening his 1776
masterpiece: An Inquiry into the Nature and Causes of the Wealth of
Nations also commonly known as The Wealth of Nations. The first
documented effort to solve operation management issues comes from Eli
Whitney back in 1798, leading to the birth of the American System of
Manufacturers (ASM) by the mid-1800s. It was not until the late 1950's that
the scholars noted the importance of viewing production operations as
systems.[2] [3]

Historically, the body of knowledge stemming from industrial engineering


formed the basis of the first MBA programs, and is central to operations
management as used across diverse business sectors, industry, consulting
and non-profit organizations

Operations Management Planning Criteria


The task of production and operations management is to manage the
efforts⇒ and activities of people, capital, and equipment resources in
changing raw materials into finished goods and services.

Organizations
The following organizations support and promote operations management:
• The Association for Operations Management (APICS)
• The Association for Professionals in Business Management (APBM)
• Chartered Management Institute
• European Operations Management Association (EurOMA) [1], which
supports the International Journal of Operations & Production
Management
• Institute for Operations Research and the Management Sciences
(INFORMS)
• Institute of Operations Management [2]
• Production and Operations Management Society (POMS

Resource
.Gold has been treasured through the ages.
A resource is any physical or virtual entity of limited availability.[citation needed]
In most cases, commercial or even ethic factors require resource allocation
through resource management.
21 Purchasing
Purchasing refers to a business or organization attempting to acquire goods
or services to accomplish the goals of the enterprise. Though there are
several organizations that attempt to set standards in the purchasing process,
processes can vary greatly between organizations. Typically the word
“purchasing” is not used interchangeably with the word “procurement”,
since procurement typically includes Expediting, Supplier Quality, and
Traffic and Logistics (T&L) in addition to Purchasing.

Overview
Purchasing managers/directors, and procurement managers/directors guide
the organization’s acquisition procedures and standards. Most organizations
use a three-way check as the foundation of their purchasing programs. This
involves three departments in the organization completing separate parts of
the acquisition process. The three departments do not all report to the same
senior manager to prevent unethical practices and lend credibility to the
process. These departments can be purchasing, receiving; and accounts
payable or engineering, purchasing and accounts payable; or a plant
manager, purchasing and accounts payable. Combinations can vary
significantly, but a purchasing department and accounts payable are usually
two of the three departments involved.
Historically, the purchasing department issued Purchase Orders for supplies,
services, equipment, and raw materials. Then, in an effort to decrease the
administrative costs associated with the repetitive ordering of basic
consumable items, "Blanket" or "Master" Agreements were put into place.
These types of agreements typically have a longer duration and increased
scope to maximize the Quantities of Scale concept. When additional
supplies are required, a simple release would be issued to the supplier to
provide the goods or services.
Another method of decreasing administrative costs associated with repetitive
contracts for common material, is the use of company credit cards, also
known as "Purchasing Cards" or simply "P-Cards". P-card programs vary,
but all of them have internal checks and audits to ensure appropriate use.
Purchasing managers realized once contracts for the low dollar value
consumables are in place, procurement can take a smaller role in the
operation and use of the contracts. There is still oversight in the forms of
audits and monthly statement reviews, but most of their time is now
available to negotiate major purchases and setting up of other long term
contracts. These contracts are typically renewable annually.

Purchasing: Topics
Acquisition Process
The revised acquisition process for major systems in industry and defense is
shown in the next figure. The process is defined by a series of phases during
which technology is defined and matured into viable concepts, which are
subsequently developed and readied for production, after which the systems
produced are supported in the field.[1]

Model of the Acquisition Process.[1]


The process allows for a given system to enter the process at any of the
development phases. For example, a system using unproven technology
would enter at the beginning stages of the process and would proceed
through a lengthy period of technology maturation, while a system based on
mature and proven technologies might enter directly into engineering
development or, conceivably, even production. The process itself includes
four phases of development:[1]
Selection of Bidders
This is the process where the organization identifies potential suppliers for
specified supplies, services or equipment. These suppliers' credentials
(qualifications) and history are analyzed, together with the products or
services they offer. The bidder selection process varies from organization to
organization, but can include running credit reports, interviewing
management, testing products, and touring facilities. This process is not
always done in order of importance, but rather in order of expense. Often
purchasing managers research potential bidders obtaining information on the
organizations and products from media sources and their own industry
contacts. Additionally, purchasing might send Request for Information (RFI)
to potential suppliers to help gather information. Engineering would also
inspect sample products to determine if the company can produce products
they need. If the bidder passes both of these stages engineering may decide
to do some testing on the materials to further verify quality standards. These
tests can be expensive and involve significant time of multiple technicians
and engineers. Engineering management must make this decision based on
the cost of the products they are likely to procure, the importance of the
bidders’ product to production, and other factors. Credit checks,
interviewing management, touring plants as well as other steps could all be
utilized if engineering, manufacturing, and supply chain managers decide
they could help their decision and the cost is justifiable.
Bidding Process
This is the process an organization utilizes to procure goods, services or
equipment. Processes vary significantly from the stringent to the very
informal. Large corporations and governmental entities are most likely to
have stringent and formal processes. These processes can utilize specialized
bid forms that require specific procedures and detail. The very stringent
procedures require bids to be open by several staff from various departments
to ensure fairness and impartiality. Responses are usually very detailed.
Bidders not responding exactly as specified and following the published
procedures can be disqualified. Smaller private businesses are more likely to
have less formal procedures. Small private firms are more likely to have
informal procedures. Bids can be in the form of an email to all of the bidders
specifying products or services. Responses by bidders can be detailed or just
the proposed dollar amount.
Most bid processes are multi-tiered. Acquisitions under a specified dollar
amount can be “user discretion” permitting the requestor to choose who ever
they want. This level can be as low as $100 or as high as $10,000 depending
on the organization. The rationale is the savings realized by processing these
request the same as expensive items is minimal and does not justify the time
and expense. Purchasing departments watch for abuses of the user discretion
privilege. Acquisitions in a mid range can be processed with a slightly more
formal process. This process may involve the user providing quotes from
three separate suppliers
Commercial Evaluation
Payment Terms (/b)Cost of Money - Cost of Money is calculated by
multiplying the applicable currency interest rate multiplied by the amount of
money paid prior to the receipt of GOODS. If the money were to have
remained in the Buyer's account, interest would be drawn. That interest is
essentially an additional cost associated with such Progress or Milestone
payments. Manufacturing Location - The manufacturing location is taken
into consideration during the evaluation stage primarily to calculate freight
costs and regional issues which may be considered. For instance, in Europe
in is common for factories to close during the month of August for Summer
holiday. Labor agreements may also be taken into consideration and may be
drawn into the evaluation if the particular region is known to frequent labor
unions. Manufacturing Lead-Time - the manufacturing lead-time is the time
from the placement of the order (or time final drawings are submitted by the
Buyer to the Seller) until the goods are manufactured and prepared for
delivery. Lead-times vary by commodity and can range from several days to
years. Transportation Time - Transportation time is evaluated while
comparing the delivery of goods to the Buyer's required use-date. If Goods
are shipped from a remote port, with infrequent vessel transportation, the
transportation time could exceed the schedule an adjustments would need to
be made. Delivery Charges - the charge for the Goods to be delivered to a
stated point. Bid Validity Packing Bid Adjustments Terms and Conditions
Seller's Services Standards Organizations Financial Review Payment
Currency Risk Analysis - market volatility, financial stress within the
bidders Testing
Negotiating
Negotiating is a key skillset in the Purchasing field. One of the goals of
Purchasing Agents is to acquire goods per the most advantageous terms of
the buying entity (or simply, the "Buyer"). Purchasing Agents typically
attempt to decrease costs while meeting the Buyer's other requirements such
as an on-time delivery, compliance to the commercial terms and conditions
(including the warranty, the transfer of risk, assignment, auditing rights,
confidentiality, remedies, etc).
Good negotiators, those with high levels of documented "cost savings",
receive a premium within the industry relative to their compensation.
Depending on the employment agreement between the Purchasing Agent
(Buyer) and the employer, Buyer's cost savings can result in the creation of
value to the business, and may result in a flat-rate bonus, or a percentage
payout to the Purchasing Agent of the documented cost savings.
Selection and Award
This is the process an organization utilizes to procure goods, services or
equipment. Processes vary significantly from the stringent to the very
informal. Large corporations and governmental entities are most likely to
have stringent and formal processes. These processes can utilize specialized
bid forms that require specific procedures and detail. The very stringent
procedures require bids to be open by several staff from various departments
to ensure fairness and impartiality. Responses are usually very detailed.
Bidders not responding exactly as specified and following the published
procedures can be disqualified. Smaller private businesses are more likely to
have less formal procedures. Small private firms are more likely to have
informal procedures. Bids can be in the form of an email to all of the bidders
specifying products or services. Responses by bidders can be detailed or just
the proposed dollar amount.
22 Inventory
Inventory is a list for goods and materials, or those goods and materials
themselves, held available in stock by a business. Inventory are held in order
to manage and hide from the customer the fact that manufacture/supply
delay is longer than delivery delay, and also to ease the effect of
imperfections in the manufacturing process that lower production
efficiencies if production capacity stands idle for lack of materials.

Business inventory
The reasons for keeping stock
There are three basic reasons for keeping an inventory:
1. Time - The time lags present in the supply chain, from supplier to user
at every stage, requires that you maintain certain amount of inventory
to use in this "lead time"
2. Uncertainty - Inventories are maintained as buffers to meet
uncertainties in demand, supply and movements of goods.
3. Economies of scale - Ideal condition of "one unit at a time at a place
where user needs it, when he needs it" principle tends to incur lots of
costs in terms of logistics. So Bulk buying, movement and storing
brings in economies of scale, thus inventory.
All these stock reasons can apply to any owner or product stage.
• Buffer stock is held in individual workstations against the possibility
that the upstream workstation may be a little delayed in long setup or
change-over time. This stock is then used while that change-over is
happening. This stock can be eliminated by tools like SMED.
These classifications apply along the whole Supply chain not just within a
facility or plant.
Special terms used in dealing with inventory
• Stock Keeping Unit (SKU) is a unique combination of all the
components that are assembled into the purchasable item. Therefore
any change in the packaging or product is a new SKU. This level of
detailed specification assists in managing inventory.
• Stockout means running out of the inventory of an SKU.[1]
• "New old stock" (sometimes abbreviated NOS) is a term used in
business to refer to merchandise being offered for sale which was
manufactured long ago but that has never been used. Such
merchandise may not be produced any more, and the new old stock
may represent the only market source of a particular item at the
present time.
Typology
1) Buffer/safety stock
2) Cycle stock (Used in batch processes, it is the available inventory
excluding buffer stock)
3) De-coupling (Buffer stock that is held by both the supplier and the user)
4) Anticipation stock
5) Pipeline stock (goods still in transit or in the process of distribution - have
left the factory but not arrived at the customer yet)
Inventory examples
While accountants often discuss inventory in terms of goods for sale,
organizations - manufacturers, service-providers and not-for-profits - also
have inventories (fixtures, furniture, supplies, ...) that they do not intend to
sell. Manufacturers', distributors', and wholesalers' inventory tends to cluster
in warehouses. Retailers' inventory may exist in a warehouse or in a shop or
store accessible to customers. Inventories not intended for sale to customers
or to clients may be held in any premises an organization uses. Stock ties up
cash and if uncontrolled it will be impossible to know the actual level of
stocks and therefore impossible to control them.

Manufacturing
A canned food manufacturer's materials inventory includes the ingredients to
form the foods to be canned, empty cans and their lids (or coils of steel or
aluminum for constructing those components), labels, and anything else
(solder, glue, ...) that will form part of a finished can. The firm's work in
process includes those materials from the time of release to the work floor
until they become complete and ready for sale to wholesale or retail
customers. This may be vats of prepared food, filled cans not yet labelled or
sub-assemblies of food components. It may also include finished cans that
are not yet packaged into cartons or pallets. It's finished good inventory
consists of all the filled and labelled cans of food in its warehouse that it has
manufactured and wishes to sell to food distributors (wholesalers), to
grocery stores (retailers), and even perhaps to consumers through
arrangements like factory stores and outlet centers

Logistics or distribution
The logistics chain includes the owners (wholesalers and retailers),
manufacturers' agents, and transportation channels that an item passes
through between initial manufacture and final purchase by a consumer. At
each stage, goods belong (as assets) to the seller until the buyer accepts
them. Distribution includes four components:
1. Manufacturers' agents: Distributors who hold and transport a
consignment of finished goods for manufacturers without ever owning
it. Accountants refer to manufacturers' agents' inventory as "matériel"
in order to differentiate it from goods for sale.
2. Transportation: The movement of goods between owners, or between
locations of a given owner. The seller owns goods in transit until the
buyer accepts them. Sellers or buyers may transport goods but most
transportation providers act as the agent of the owner of the goods.
3. Wholesaling: Distributors who buy goods from manufacturers and
other suppliers (farmers, fishermen, etc.) for re-sale work in the
wholesale industry. A wholesaler's inventory consists of all the
products in its warehouse that it has purchased from manufacturers or
other suppliers. A produce-wholesaler (or distributor) may buy from
distributors in other parts of the world or from local farmers. Food
distributors wish to sell their inventory to grocery stores, other
distributors, or possibly to consumers.
High level inventory management
It seems that around about 1880[2] there was a change in manufacturing
practice from companies with relatively homogeneous lines of products to
vertically integrated companies with unprecedented diversity in processes
and products. Those companies (especially in metalworking) attempted to
achieve success through economies of scale - the gains of jointly producing
two or more products in one facility. The managers now needed information
on the effect of product mix decisions on overall profits and therefore
needed accurate product cost information. A variety of attempts to achieve
this were unsuccessful due to the huge overhead of the information
processing of the time. However, the burgeoning need for financial reporting
after 1900 created unavoidable pressure for financial accounting of stock
and the management need to cost manage products became overshadowed.
In particular it was the need for audited accounts that sealed the fate of
managerial cost accounting. The dominance of financial reporting
accounting over management accounting remains to this day with few
exceptions and the financial reporting definitions of 'cost' have distorted
effective management 'cost' accounting since that time. This is particularly
true of inventory.
Accounting perspectives

The basis of Inventory accounting


Inventory needs to be accounted where it is held across accounting period
boundaries since generally expenses should be matched against the results of
that expense within the same period. When processes were simple and short
then inventories were small but with more complex processes then
inventories became larger and significant valued items on the balance
sheet[3]. This need to value unsold and incomplete goods has driven many
new behaviours into management practise. Perhaps most significant of these
are the complexities of fixed cost recovery, transfer pricing, and the
separation of direct from indirect costs. This, supposedly, precluded
"anticipating income" or "declaring dividends out of capital". It is one of the
intangible benefits of Lean and the TPS that process times shorten and stock
levels decline to the point where the importance of this activity is hugely
reduced and therefore effort, especially managerial, to achieve it can be
minimised.

Financial accounting
An organization's inventory can appear a mixed blessing, since it counts as
an asset on the balance sheet, but it also ties up money that could serve for
other purposes and requires additional expense for its protection. Inventory
may also cause significant tax expenses, depending on particular countries'
laws regarding depreciation of inventory, as in Thor Power Tool Company
v. Commissioner.
Inventory appears as a current asset on an organization's balance sheet
because the organization can, in principle, turn it into cash by selling it.
Some organizations hold larger inventories than their operations require in
order to inflate their apparent asset value and their perceived profitability.
In addition to the money tied up by acquiring inventory, inventory also
brings associated costs for warehouse space, for utilities, and for insurance
to cover staff to handle and protect it, fire and other disasters, obsolescence,
shrinkage (theft and errors), and others. Such holding costs can mount up:
between a third and a half of its acquisition value per year.

The role of a cost accountant on the 21st-century in a


manufacturing organization
By helping the organization to make better decisions, the accountants can
help the public sector to change in a very positive way that delivers
increased value for the taxpayer’s investment. It can also help to incentivise
progress and to ensure that reforms are sustainable and effective in the long
term, by ensuring that success is appropriately recognized in both the formal
and informal reward systems of the organization.
To say that they have a key role to play is an understatement. Finance is
connected to most, if not all, of the key business processes within the
organization. It should be steering the stewardship and accountability
systems that ensure that the organization is conducting its business in an
appropriate, ethical manner. It is critical that these foundations are firmly
laid. So often they are the litmus test by which public confidence in the
institution is either won or lost.
Finance should also be providing the information, analysis and advice to
enable the organizations’ service managers to operate effectively. This goes
beyond the traditional preoccupation with budgets – how much have we
spent so far, how much have we left to spend? It is about helping the
organization to better understand its own performance. That means making
the connections and understanding the relationships between given inputs –
the resources brought to bear – and the outputs and outcomes that they
achieve. It is also about understanding and actively managing risks within
the organization and its activities.

FIFO vs. LIFO accounting


When a dealer sells goods from inventory, the value of the inventory is
reduced by the cost of goods sold (CoG sold). This is simple where the CoG
has not varied across those held in stock; but where it has, then an agreed
method must be derived to evaluate it. For commodity items that one cannot
track individually, accountants must choose a method that fits the nature of
the sale. Two popular methods exist: FIFO and LIFO accounting (first in -
first out, last in - first out). FIFO regards the first unit that arrived in
inventory as the first one sold. LIFO considers the last unit arriving in
inventory as the first one sold. Which method an accountant selects can have
a significant effect on net income and book value and, in turn, on taxation.
Using LIFO accounting for inventory, a company generally reports lower net
income and lower book value, due to the effects of inflation. This generally
results in lower taxation. Due to LIFO's potential to skew inventory value,
UK GAAP and IAS have effectively banned LIFO inventory accounting.
In computer science, FIFO and LIFO correspond to the queue and stack data
structures, respectively. In fact, the acronyms are commonly used to denote
the corresponding data structures.

Standard cost accounting


Standard cost accounting uses ratios called efficiencies that compare the
labour and materials actually used to produce a good with those that the
same goods would have required under "standard" conditions. As long as
similar actual and standard conditions obtain, few problems arise.
Unfortunately, standard cost accounting methods developed about 100 years
ago, when labor comprised the most important cost in manufactured goods.
Standard methods continue to emphasize labor efficiency even though that
resource now constitutes a (very) small part of cost in most cases.
Standard cost accounting can hurt managers, workers, and firms in several
ways. For example, a policy decision to increase inventory can harm a
manufacturing managers' performance evaluation. Increasing inventory
requires increased production, which means that processes must operate at
higher rates. When (not if) something goes wrong, the process takes longer
and uses more than the standard labor time. The manager appears
responsible for the excess, even though s/he has no control over the
production requirement or the problem.
In adverse economic times, firms use the same efficiencies to downsize,
rightsize, or otherwise reduce their labor force. Workers laid off under those
circumstances have even less control over excess inventory and cost
efficiencies than their managers.
Many financial and cost accountants have agreed for many years on the
desirability of replacing standard cost accounting. They have not, however,
found a successor.

Theory of Constraints cost accounting


Eliyahu M. Goldratt developed the Theory of Constraints in part to address
the cost-accounting problems in what he calls the "cost world". He offers a
substitute, called throughput accounting, that uses throughput (money for
goods sold to customers) in place of output (goods produced that may sell or
may boost inventory) and considers labor as a fixed rather than as a variable
cost. He defines inventory simply as everything the organization owns that it
plans to sell, including buildings, machinery, and many other things in
addition to the categories listed here. Throughput accounting recognizes
only one class of variable costs: the operating expenses like materials and
components that vary directly with the quantity produced.
Finished goods inventories remain balance-sheet assets, but labor efficiency
ratios no longer evaluate managers and workers. Instead of an incentive to
reduce labor cost, throughput accounting focuses attention on the
relationships between throughput (revenue or income) on one hand and
controllable operating expenses and changes in inventory on the other.
Those relationships direct attention to the constraints or bottlenecks that
prevent the system from producing more throughput, rather than to people -
who have little or no control over their situations.

National accounts
Inventories also play an important role in national accounts and the analysis
of the business cycle. Some short-term macroeconomic fluctuations are
attributed to the inventory cycle.

Distressed inventory
Also known as distressed or expired stock, distressed inventory is inventory
whose potential to be sold at a normal cost has or will soon pass. In certain
industries it could also mean that the stock is or will soon be impossible to
sell. Examples of distressed inventory include products that have reached its
expiry date, or has reached a date in advance of expiry at which the planned
market will no longer purchase it (e.g. 3 months left to expiry), clothing that
is defective or out of fashion, and old newspapers or magazines. It also
includes computer or consumer-electronic equipment that is obsolescent or
discontinued and whose manufacturer is unable to support it.
23 DISTRIBUTION
Explanation
An explanation is a description which clarify causes, context, and
consequences of a certain object, and a phenomenon such as a process, a
state of affairs. This description may establish rules or laws, and may clarify
the existing ones in relation to an object, and a phenomenon examined. The
components of an explanation can be implicit, and be interwoven with one
another.
An explanation is often underpinned by an understanding that is represented
by different media such as music, text, and graphics. Thus, an explanation is
subjected to interpretation, and discussion.
In scientific research, explanation is one of the purposes of research,
e.g.,exploration and description. Explanation is a way to uncover new
knowledge,and to report relationships among different aspects of studied
phenomena.
The distribution channel
Frequently there may be a chain of intermediaries, each passing the product
down the chain to the next organization, before it finally reaches the
consumer or end-user. This process is known as the 'distribution chain' or the
'channel.' Each of the elements in these chains will have their own specific
needs, which the producer must take into account, along with those of the
all-important end-user.
Channels
A number of alternate 'channels' of distribution may be available:
• Selling direct, such as via mail order, Internet and telephone sales
• Agent, who typically sells direct on behalf of the producer
• Distributor (also called wholesaler), who sells to retailers
• Retailer (also called dealer or reseller), who sells to end customers
• Advertisement typically used for consumption goods
Distribution channels may not be restricted to physical products alone. They
may be just as important for moving a service from producer to consumer in
certain sectors, since both direct and indirect channels may be used. Hotels,
for example, may sell their services (typically rooms) directly or through
travel agents, tour operators, airlines, tourist boards, centralized reservation
systems, etc.

Channel members
Distribution channels can thus havoke a number of levels. Kotler defined the
simplest level, that of direct contact with no intermediaries involved, as the
'zero-level' channel.
The next level, the 'one-level' channel, features just one intermediary; in
consumer goods a retailer, for industrial goods a distributor. In small
markets (such as small countries) it is practical to reach the whole market
using just one- and zero-level channels.
In large markets (such as larger countries) a second level, a wholesaler for
example, is now mainly used to extend distribution to the large number of
small, neighborhood retailers.
In Japan the chain of distribution is often complex and further levels are
used, even for the simplest of consumer goods.
In Bangladesh Telecom Operators are using different Chains of Distribution,
especially 'second level'.
In IT and Telecom industry levels are named "tiers". A one tier channel
means that vendors IT product manufacturers (or software publishers) work
directly with the dealers. A one tier / two tier channel means that vendors
work directly with dealers and with distributors who sell to dealers.
The internal market
Many of the marketing principles and techniques which are applied to the
external customers of an organization can be just as effectively applied to
each subsidiary's, or each department's, 'internal' customers.
In some parts of certain organizations this may in fact be formalized, as
goods are transferred between separate parts of the organization at a `transfer
price'. To all intents and purposes, with the possible exception of the pricing
mechanism itself, this process can and should be viewed as a normal buyer-
seller relationship. The fact that this is a captive market, resulting in a
`monopoly price', should not discourage the participants from employing
marketing techniques.
Less obvious, but just as practical, is the use of `marketing' by service and
administrative departments; to optimize their contribution to their
`customers' (the rest of the organization in general, and those parts of it
which deal directly with them in particular). In all of this, the lessons of the
non-profit organizations, in dealing with their clients, offer a very useful
parallel.
Channel Decisions
• Channel strategy
• Product (or service)<>Cost<>Consumer location

Channel management
The channel decision is very important. In theory at least, there is a form of
trade-off: the cost of using intermediaries to achieve wider distribution is
supposedly lower. Indeed, most consumer goods manufacturers could never
justify the cost of selling direct to their consumers, except by mail order. In
practice, if the producer is large enough, the use of intermediaries
(particularly at the agent and wholesaler level) can sometimes cost more
than going direct.
Many of the theoretical arguments about channels therefore revolve around
cost. On the other hand, most of the practical decisions are concerned with
control of the consumer. The small company has no alternative but to use
intermediaries, often several layers of them, but large companies 'do' have
the choice.

Channel membership
1. Intensive distribution - Where the majority of resellers stock the
`product' (with convenience products, for example, and particularly
the brand leaders in consumer goods markets) price competition may
be evident.
2. Selective distribution - This is the normal pattern (in both consumer
and industrial markets) where `suitable' resellers stock the product.
3. Exclusive distribution - Only specially selected resellers or authorized
dealers (typically only one per geographical area) are allowed to sell
the `product'.
Channel motivation
It is difficult enough to motivate direct employees to provide the necessary
sales and service support. Motivating the owners and employees of the
independent organizations in a distribution chain requires even greater
effort. There are many devices for achieving such motivation. Perhaps the
most usual is `incentive': the supplier offers a better margin, to tempt the
owners in the channel to push the product rather than its competitors; or a
competition is offered to the distributors' sales personnel, so that they are
tempted to push the product. At the other end of the spectrum is the almost
symbiotic relationship that the all too rare supplier in the computer field
develops with its agents; where the agent's personnel, support as well as
sales, are trained to almost the same standard as the supplier's own staff.
Monitoring and managing channels
In much the same way that the organization's own sales and distribution
activities need to be monitored and managed, so will those of the
distribution chain.
In practice, many organizations use a mix of different channels; in particular,
they may complement a direct salesforce, calling on the larger accounts,
with agents, covering the smaller customers and prospects.

Vertical marketing
This relatively recent development integrates the channel with the original
supplier - producer, wholesalers and retailers working in one unified system.
This may arise because one member of the chain owns the other elements
(often called `corporate systems integration'); a supplier owning its own
retail outlets, this being 'forward' integration. It is perhaps more likely that a
retailer will own its own suppliers, this being 'backward' integration. (For
example, MFI, the furniture retailer, owns Hygena which makes its kitchen
and bedroom units.) The integration can also be by franchise (such as that
offered by McDonald's hamburgers and Benetton clothes) or simple co-
operation (in the way that Marks & Spencer co-operates with its suppliers).
Horizontal marketing
A rather less frequent example of new approaches to channels is where two
or more non-competing organizations agree on a joint venture - a joint
marketing operation - because it is beyond the capacity of each individual
organization alone. In general, this is less likely to revolve around marketing
synergy.
24 Legal Managment
International law
Providing a constitution for public international law, the United Nations was
conceived during World War II
International law is the term commonly used for referring to the system of
implicit and explicit agreements that binds together nation-states in
adherence to recognised values and standards, differing from other legal
systems in that it concerns nations rather than private citizens[1]. However,
the term "International Law" can refer to three distinct legal disciplines:
Constitutional law

The French Declaration of the Rights of the Man and of the Citizen, whose
principles still have constitutional value
Constitutional law is the study of foundational or basic laws of nation states
and other political organizations. Constitutions are the framework for
government and may limit or define the authority and procedure of political
bodies to execute new laws and regulations.
Criminal law
The term criminal law, sometimes called penal law, refers to any of various
bodies of rules in different jurisdictions whose common characteristic is the
potential for unique and often severe impositions as punishment for failure
to comply. Criminal punishment, depending on the offense and jurisdiction,
may include execution, loss of liberty, government supervision (parole or
probation), or fines. There are some archetypal crimes, like murder, but the
acts that are forbidden are not wholly consistent between different criminal
codes, and even within a particular code lines may be blurred as civil
infractions may give rise also to criminal consequences. Criminal law
typically is enforced by the government, unlike the civil law, which may be
enforced by private parties.
Contract law
A contract is a legally binding exchange of promises or agreement between
parties that the law will enforce. Contract law is based on the Latin phrase
pacta sunt servanda (pacts must be kept).[1] Breach of contract is recognised
by the law and remedies can be provided. Almost everyone makes contracts
every day. Sometimes written contracts are required, such as when buying a
house.[2] However, most contracts can be and are made orally, like buying a
law textbook, or a coffee at a shop. Contract law can be classified, as is
habitual in civil law systems, as part of a general law of obligations (along
with tort, unjust enrichment or restitution).
TORT LAW
Tort law is the name given to a body of law that creates, and provides
remedies for, civil wrongs that do not arise out of contractual duties.[1] A
person who is legally injured may be able to use tort law to recover damages
from someone who is legally responsible, or "liable," for those injuries.
Generally speaking, tort law defines what constitutes a legal injury, and
establishes the circumstances under which one person may be held liable for
another's injury. Torts cover intentional acts and accidents.
For instance, if somebody throws a ball and hits a pedestrian in the eye, the
pedestrian may sue the ball thrower for losses occasioned by the accident
(for example, costs of medical treatment or lost income during time off
work). Whether or not the pedestrian wins will depend on whether he can
prove the thrower engaged in tortious conduct. If the person threw the ball at
the pedestrian on purpose, the pedestrian could sue for the intentional tort of
battery. If it was an accident, the pedestrian must establish negligence. To do
this, the pedestrian must show that his injury was reasonably foreseeable,
that the thrower owed him a duty of care, and that the thrower fell below the
standard of care required of him. One of the main issues in negligence law is
determining the "standard of care" - a legal phrase that means distinguishing
between when conduct is or is not negligent.
In much of the western world, the touchstone of tort liability is negligence.
Unless the injured person can prove that the person they believe injured
them acted with at least negligence to cause their injury, tort law will not
compensate them. Tort law also recognizes intentional torts and strict
liability, which apply to defendants who engage in certain actions.
In tort law, potential "injuries" are defined broadly. Injury does not just
mean a physical injury such as where the bicycle rider is struck by a ball.
"Injuries" in tort law reflect any invasion of any number of individual
"interests." This includes interests recognized in other areas of law, such as
property rights. Actions for nuisance and trespass to land can arise from
interfering with rights in real property. Conversion and trespass to chattles
can protect interference with movable property. Interests in prospective
economic advantages from contracts can also be injured and become the
subject of tort actions. A number of situations caused by parties in a
contractual relationship may nevertheless be tort rather than contract claims,
such as breach of fiduciary duty
Property law
Property law is the area of law that governs the various forms of ownership
in real property (land as distinct from personal or movable possessions) and
in personal property, within the common law legal system. In the civil law
system, there is a division between movable and immovable property.
Movable property roughly corresponds to personal property, while
immovable property corresponds to real estate or real property, and the
associated rights and obligations thereon.
The concept, idea or philosophy of property underlies all property law. In
some jurisdictions, historically all property was owned by the monarch and
it devolved through feudal land tenure or other feudal systems of loyalty and
fealty.
Though the Napoleonic code was among the first government acts of
modern times to introduce the notion of absolute ownership into statute,
protection of personal property rights was present in medieval Islamic law
and jurisprudence,[1] and in more feudalist forms in the common law courts
of medieval and early modern England.
Equity Office Properties Trust
Equity Office Properties Trust, headquartered in Chicago, Illinois, is the
largest owner of office buildings in the United States. It was formed in 1976
by Samuel Zell [1] and in February 2007, was acquired by the Blackstone
Group for $23 billion plus the assumption of $16 billion in debt [2]. The
acquisition was the largest leveraged buyout since the buyout of RJR
Nabisco.

Notable properties
• Chase Tower (Indianapolis)
• Chicago Civic Opera House
• Columbia Center
• Frost Bank Tower
• One Worldwide Plaza
• Wachovia Financial Center
• Washington Mutual Tower
Legal systems of the world

The three major legal systems of the world today consist of


civil law, common law and religious law. However, each country (see
State law) often develops variations on each system or incorporates
many other features into the system

Civil law

Shamash (the Babylonian sun god) hands King Hammurabi a code of law
Civil law is the most widespread system of law in the world. It is also known
as European Continental law. The central source of law that is recognised as
authoritative are codifications in a constitution or statute passed by
legislature, to amend a code. Civil law systems mainly derive from the
Roman Empire, and more particularly, the Corpus Juris Civilis issued by the
Emperor Justinian ca. 529AD. This was an extensive reform of the law in
the Eastern Empire, bringing it together into codified documents. Civil law
was also partly influenced by religious laws such as Canon law and Islamic
law.[1][2] Civil law today, in theory, is interpreted rather than developed or
made by judges. Only legislative enactments (rather than judicial
precedents) are considered legally binding. However, in reality courts do pay
attention to previous decisions, especially from higher courts[citation needed].
Scholars of comparative law and economists promoting the legal origins
theory usually subdivide civil law into four distinct groups:
• French civil law: in France, the Benelux countries, Italy, Spain and
former colonies of those countries;
• German civil law: in Germany, Austria, Croatia, Switzerland, Greece,
Portugal, Turkey, Japan, South Korea and the Republic of China;
• Scandinavian civil law: in Denmark, Norway and Sweden. Finland
and Iceland inherited the system from their neighbors.
• Chinese law is a mixture of civil law and socialist law.

Common law
King John of England signs Magna Carta
Common law and equity are systems of law whose sources are the decisions
in cases by judges. Alongside, every system will have a legislature that
passes new laws and statutes, however these do not amend a collected and
codified body of law. Common law developed in England, influenced by the
Norman conquest of England which introduced legal concepts from Norman
law and Islamic law.[2] Common law was later inherited by the
Commonwealth of Nations, and almost every former colony of the British
Empire (Malta being an exception). The doctrine of stare decisis or
precedent by courts is the major difference to codified civil law systems.
Common law is currently in practice in Ireland, most of the United Kingdom
(England and Wales and Northern Ireland), Australia, India, South Africa,
Canada (excluding Quebec), Hong Kong and the United States (excluding
Louisiana) and many more places. In addition to these countries, several
others have adapted the common law system into a mixed system. For
example, Pakistan and Nigeria operate largely on a common law system, but
incorporate religious law.

Religious law
Religious law refers to the notion of a religious system or document being
used as a legal source, though the methodology used varies. For example,
the use of Jewish Halakha for public law has a static and unalterable quality,
precluding amendment through legislative acts of government or
development through judicial precedent; Christian Canon law is more
similar to civil law in its use of civil codes; and Islamic Sharia law (and Fiqh
jurisprudence) is based on legal precedent and reasoning by analogy (Qiyas),
and is thus considered a precursor to common law.[5]
The main kinds of religious law are Sharia in Islam, Halakha in Judaism,
and Canon law in some Christian groups. In some cases these are intended
purely as individual moral guidance, whereas in other cases they are
intended and may be used as the basis for a country's legal system. The latter
was particularly common during the Middle Ages.
The Islamic legal system of Sharia (Islamic law) and Fiqh (Islamic
jurisprudence) is the most widely used religious law, and one of the three
most common legal systems in the world alongside common law and civil
law.[6] During the Islamic Golden Age, classical Islamic law had a fairly
significant influence on the development of common law,[2] and also
influenced the development of several civil law institutions.[1]

Aleppo Codex: 10th century Hebrew Bible with Masoretic pointing


The Halakha is followed by orthodox and conservative Jews in both
ecclesiastical and civil relations. No country is fully governed by Halakha,
but two Jewish people may decide, because of personal belief, to have a
dispute heard by a Jewish court, and be bound by its rulings. Sharia Law
governs a number of Islamic countries, including Saudi Arabia and Iran,
though most countries use Sharia Law only as a supplement to national law.
It can relate to all aspects of civil law, including property rights, contracts or
public law.
Jurisdictions
Though the legal traditions described have resulted in a number of common
traits across jurisdictions, each sovereign entity can have unique aspects.
The lists below link to articles on individual jurisdictions, organised by
geography.
History of law

King Hammurabi is revealed the code of laws by the Mesopotamian sun god
Shamash.
The history of law is closely connected to the development of civilizations.
Ancient Egyptian law, dating as far back as 3000 BCE, had a civil code that
was probably broken into twelve books. It was based on the concept of
Ma'at, characterised by tradition, rhetorical speech, social equality and
impartiality.[64] Around 1760 BCE under King Hammurabi, ancient
Babylonian law was codified and put in stone for the public to see in the
marketplace; this became known as the Codex Hammurabi. However like
Egyptian law, which is pieced together by historians from records of
litigation, few sources remain and much has been lost over time. The
influence of these earlier laws on later civilisations was small.[65] The Old
Testament is probably the oldest body of law still relevant for modern legal
systems, dating back to 1280 BCE. It takes the form of moral imperatives, as
recommendations for a good society. Ancient Athens, the small Greek city-
state, was the first society based on broad inclusion of the citizenry,
excluding women and the slave class from about 8th century BCE. Athens
had no legal science, and Ancient Greek has no word for "law" as an abstract
concept.[66] Yet Ancient Greek law contained major constitutional
innovations in the development of democracy.[67]
Roman law was heavily influenced by Greek teachings.[68] It forms the
bridge to the modern legal world, over the centuries between the rise and
decline of the Roman Empire.[69] Roman law underwent major codification
in the Corpus Juris Civilis of Emperor Justinian I. It was lost through the
Dark Ages, but rediscovered around the 11th century. Mediæval legal
scholars began researching the Roman codes and using their concepts. In
mediæval England, the King's powerful judges began to develop a body of
precedent, which became the common law. But also, a Europe-wide Lex
Mercatoria was formed, so that merchants could trade using familiar
standards, rather than the many splintered types of local law. The Lex
Mercatoria, a precursor to modern commercial law, emphasised the freedom
of contract and alienability of property.[70] As nationalism grew in the 18th
and 19th centuries, Lex Mercatoria was incorporated into countries' local
law under new civil codes. The French Napoleonic Code and the German
became the most influential. As opposed to English common law, which
consists of enormous tomes of case law, codes in small books are easy to
export and for judges to apply. However, today there are signs that civil and
common law are converging. European Union law is codified in treaties, but
develops through the precedent laid down by the European Court of Justice.

Philosophy of law

"But what, after all, is a law? […] When I say that the object
of laws is always general, I mean that law considers subjects
en masse and actions in the abstract, and never a particular
person or action. […] On this view, we at once see that it can
no longer be asked whose business it is to make laws, since
they are acts of the general will; nor whether the prince is
above the law, since he is a member of the State; nor whether
the law can be unjust, since no one is unjust to himself; nor
how we can be both free and subject to the laws, since they are
but registers of our wills."
Jean-Jacques Rousseau, The Social Contract, II, 6.[80]
The philosophy of law is also known as jurisprudence. Normative
jurisprudence is essentially political philosophy and asks "what should law
be?". Analytic jurisprudence, on the other hand, is a distinctive field which
asks "what is law?". An early famous philosopher of law was John Austin, a
student of Jeremy Bentham and first chair of law at the new University of
London from 1829. Austin's utilitarian answer was that law is "commands,
backed by threat of sanctions, from a sovereign, to whom people have a
habit of obedience".[81] This approach was long accepted, especially as an
alternative to natural law theory. Natural lawyers, such as Jean-Jacques
Rousseau, argue that human law reflects essentially moral and unchangeable
laws of nature. Immanuel Kant, for instance, believed a moral imperative
requires laws "be chosen as though they should hold as universal laws of
nature".[82] Austin and Bentham, following David Hume, thought this
conflated what "is" and what "ought to be" the case. They believed in law's
positivism, that real law is entirely separate from "morality".[83] Kant was
also criticised by Friedrich Nietzsche, who believed that law emanates from
The Will to Power and cannot be labelled as "moral" or "immoral".[84] Thus,
Nietzsche criticised the principle of equality, and believed that law should be
committed to freedom to engage in will to power.[85]
In 1934, the Austrian philosopher Hans Kelsen continued the positivist
tradition in his book the Pure Theory of Law.[86] Kelsen believed that though
law is separate from morality, it is endowed with "normativity", meaning we
ought to obey it. Whilst laws are positive "is" statements (e.g. the fine for
reversing on a highway is €500), law tells us what we "should" do (i.e. not
drive backwards). So every legal system can be hypothesised to have a basic
norm (Grundnorm) telling us we should obey the law. Carl Schmitt, Kelsen's
major intellectual opponent, rejected positivism, and the idea of the rule of
law, because he did not accept the primacy of abstract normative principles
over concrete political positions and decisions.[87] Therefore, Schmitt
advocated a jurisprudence of the exception (state of emergency), which
denied that legal norms could encompass of all political experience.[88]
Economic analysis of law
Economic analysis of law is an approach to legal theory that
incorporates and applies the methods and ideas of economics to law. The
discipline arose partly out of a critique of trade unions and U.S. antitrust
law. The most influential proponents, such as Richard Posner and Oliver
Williamson and the so-called Chicago School of economists and lawyers
including Milton Friedman and Gary Becker, are generally advocates of
deregulation and privatisation, and are hostile to state regulation or what
they see as restrictions on the operation of free markets.[94]
The most prominent economic analyst of law is 1991 Nobel Prize winner
Ronald Coase. His first major article, The Nature of the Firm (1937), argued
that the reason for the existence of firms (companies, partnerships, etc.) is
the existence of transaction costs.[95] Rational individuals trade through
bilateral contracts on open markets until the costs of transactions mean that
using corporations to produce things is more cost-effective. His second
major article, The Problem of Social Cost (1960), argued that if we lived in a
world without transaction costs, people would bargain with one another to
create the same allocation of resources, regardless of the way a court might
rule in property disputes.[96] Coase used the example of a nuisance case
named Sturges v. Bridgman, where a noisy sweetmaker and a quiet doctor
were neighbours and went to court to see who should have to move.[97] Coase
said that regardless of whether the judge ruled that the sweetmaker had to
stop using his machinery, or that the doctor had to put up with it, they could
strike a mutually beneficial bargain about who moves house that reaches the
same outcome of resource distribution.

Sociology of law

Sociology of law is a diverse field of study that examines the


interaction of law with society. Sociology of law overlaps with
jurisprudence, economic analysis of law and more specialised subjects
such as criminology.[101] The institutions of law and the social
construction of legal issues and systems are relevant areas of inquiry.
Initially, legal theorists were suspicious of the discipline. Kelsen
attacked one of its founders, Eugen Ehrlich, who wanted to emphasise
the difference between positive law, which lawyers learn and apply,
and other forms of 'law' or social norms that regulate everyday life,
generally preventing conflicts from reaching lawyers and courts.[102]
Around 1900 Max Weber defined his "scientific" approach to law,
identifying the "legal rational form" as a type of domination, not
attributable to people but to abstract norms.[103] Legal rationalism was
his term for a body of coherent and calculable law which formed a
precondition for modern political developments and the modern
bureaucratic state and developed in parallel with the growth of
capitalism.[104] Another sociologist, Émile Durkheim, wrote in The
Division of Labour in Society that as society becomes more complex,
the body of civil law concerned primarily with restitution and
compensation grows at the expense of criminal laws and penal
sanctions.

Legal institutions
"It is a real unity of them all in one and the same
person, made by covenant of every man with every
man, in such manner as if every man should say to
every man: I authorise and give up my right of
governing myself to this man, or to this assembly of
men, on this condition; that thou givest up, thy right
to him, and authorise all his actions in like manner.

The main institutions of law in industrialised countries are independent


courts, representative parliaments, an accountable executive, the military
and police, bureaucratic organisation, the legal profession and civil society
itself. John Locke in Two Treatises On Civil Government, and Baron de
Montesquieu after him in The Spirit of the Laws, advocated a separation of
powers between the institutions that wield political influence, namely the
judiciary, legislature and executive.[107] Their principle was that no person
should be able to usurp all powers of the state, in contrast to the absolutist
theory of Thomas Hobbes' Leviathan.[108] More recently, Max Weber and
many others reshaped thinking about the extensions of the state that come
under the control of the executive. Modern military, policing and
bureaucratic power over ordinary citizens' daily lives pose special problems
for accountability that earlier writers like Locke and Montesquieu could not
have foreseen. The custom and practice of the legal profession is an
important part of people's access to justice, whilst civil society is a term used
to refer to the social institutions, communities and partnerships that form
law's political basis.
Judiciary
Some countries allow their highest judicial authority to strike down
legislation determined to be unconstitutional. For instance, the United States
Supreme Court struck down a Texan law forbidding assistance to women in
abortion, in Roe v. Wade.[113] The constitution's fourteenth amendment was
interpreted to give Americans a right to privacy, hence a woman's right to
choose abortion. The judiciary is theoretically bound by the constitution,
much as legislative bodies are. In most countries judges may only interpret
the constitution and all other laws. But in common law countries, where
matters are not constitutional, the judiciary may also create law under the
doctrine of precedent. On the other hand, the UK, Finland and New Zealand
still assert the ideal of parliamentary sovereignty, whereby the unelected
judiciary may not overturn law passed by a democratic legislature.

Legislature
Prominent examples of legislatures are the Houses of Parliament in London,
the Congress in Washington D.C., the Bundestag in Berlin, the Duma in
Moscow and the Assemblée nationale in Paris. By the principle of
representative government people vote for politicians to carry out their
wishes. Although countries like Israel, Greece, Sweden and China are
unicameral, most countries are bicameral, meaning they have two separately
appointed legislative houses. In the 'lower house' politicians are elected to
represent smaller constituencies. The 'upper house' is usually elected to
represent states in a federal system (as in Australia, Germany or the U.S.A.)
or different voting configuration in a unitary system (as in France). In the
United Kingdom the upper house is appointed by the government as a house
of review. One criticism of bicameral systems with two elected chambers is
that the upper and lower houses may simply mirror one another. The
traditional justification of bicameralism is that an upper chamber acts as a
house of review. This can minimise arbitrariness and injustice in
governmental action.[114]
To pass legislation, a majority of Members of Parliament must vote for a bill
(proposed law) in each house. Normally there will be several readings and
amendments proposed by the different political factions. If a country has an
entrenched constitution, a special majority for changes to the constitution
will be required, making changes to the law more difficult. A government
usually leads the process, which can be formed from Members of Parliament
(e.g. the UK or Germany).
Executive

The "executive" in a legal system refers to the government's centre of


political authority. In most democratic countries, like the UK, Italy,
Germany, India and Japan, it is elected into and drawn from the legislature
and is often called the cabinet. Alongside this is usually the head of state,
who lacks formal political power but symbolically enacts laws. The head of
state is sometimes appointed (the Bundespräsident in Germany), sometimes
hereditary (British monarch) and sometimes elected by popular vote (the
President of Austria). The other important model is found in countries like
France, the U.S. or Russia. Under these presidential systems, the executive
branch is separate from the legislature, and is not accountable to it.[115]
The executive's role may vary from country to country. Usually it will
initiate or propose the majority of legislation and handle a country's foreign
relations. The military and police often fall under executive control, as well
as the bureaucracy. Ministers, or secretaries of state of the government head
a country's public offices, such as the health department or the Department
of Justice. The election of a different executive is therefore capable of
revolutionising an entire country's approach to government.
Military and police
The military and police are sometimes referred to as "the long and strong
arm of the law".[116] While military organizations have existed as long as
governments themselves, a standing police force is relatively modern.
Mediæval England's system of traveling criminal courts, or assizes used
show trials and public executions to instill communities with fear and keep
them under control.[117] The first modern police were probably those in 17th
century Paris, in the court of Louis XIV,[118] although the Paris Prefecture of
Police claim they were the world's first uniformed policemen.[119] In 1829,
after the French Revolution and Napoleon's dictatorship, a government
decree created the first uniformed policemen in Paris and all other French
cities, known as sergents de ville ("city sergeants"). In Britain, the
Metropolitan Police Act 1829 was passed by Parliament under Home
Secretary Sir Robert Peel, founding the London Metropolitan Police.
Sociologist Max Weber famously argued that the state is that which controls
the legitimate monopoly of the means of violence.[120] The military and
police carry out enforcement at the request of the government or the courts.
The term failed state is used where the police and military no longer control
security and order and society moves into anarchy, the absence of
government.
Bureaucracy

The word "bureaucracy" derives from the French for "office" (bureau) and
Ancient Greek for "power" (kratos). Like the military and police, all of a
legal system's government servants and bodies that make up the bureaucracy
carry out the wishes of the executive. One of the earliest references to the
concept was made by Baron de Grimm, a German author who lived in
France. In 1765 he wrote,
"The real spirit of the laws in France is that bureaucracy of which the late
Monsieur de Gournay used to complain so greatly; here the offices, clerks,
secretaries, inspectors and intendants are not appointed to benefit the public
interest, indeed the public interest appears to have been established so that
offices might exist."[121]
Cynicism over "officialdom" is still common, and the workings of public
servants is typically contrasted to private enterprise motivated by profit.[122]
In fact private companies, especially large ones, also have bureaucracies.[123]
Negative perceptions of "red tape" aside, public services such as schooling,
health care, policing or public transport are a crucial state function making
public bureaucratic action the locus of government power.[123] Writing in the
early 20th century, Max Weber believed that a definitive feature of a
developed state had come to be its bureaucratic support.[124] Weber wrote
that the typical characteristics of modern bureaucracy are that officials
define its mission, the scope of work is bound by rules, management is
composed of career experts, who manage top down, communicating through
writing and binding public servants' discretion with rules
Legal profession

Lawyers give their clients advice about their legal rights and duties, and
represent them in court. As European Court of Human Rights has stated, the
law should be adequately accessible to everyone and people should be able
to foresee how the law affects them.[126] In order to maintain professionalism,
the practice of law is typically overseen by either a government or
independent regulating body such as a bar association, bar council or law
society. An aspiring practitioner must be certified by the regulating body
before undertaking his practice. This usually entails a two or three year
programme at a university faculty of law or a law school, earning the student
a Bachelor of Laws, a Bachelor of Civil Law or a Juris Doctor degree. This
course of study is followed by an entrance examination (e.g. admission to
the bar). Some countries require a further vocational qualification before a
person is permitted to practice law. For those wishing to become a barrister a
year's pupillage under the oversight of an experienced barrister. Beyond the
requirements for legal practice higher academic degrees may be pursued.
Examples include a Master of Laws, a Master of Legal Studies or a Doctor
of Laws.

Civil society
The term "civil society" dates back to British philosopher John Locke. He
saw civil society as people who have "a common established law and
judicature to appeal to, with authority to decide controversies between
them."[127] German philosopher Georg Wilhelm Friedrich Hegel also
distinguished the "state" from "civil society" (Zivilgesellschaft) in Elements
of the Philosophy of Right.[128] Hegel believed that civil society and the state
were polar opposites, within the scheme of his dialectic theory of history.[129]
Civil society is necessarily a source of law, by being the basis from which
people form opinions and lobby for what they believe law should be. As
Australian barrister and author Geoffrey Robertson QC wrote of
international law,

25 FINALCIAL MANAGEMENT IN MSMEs

The Role of Managerial Accounting


To interpret financial results in the manner described above, managers use
Financial analysis techniques.
Managers also need to look at how resources are allocated within an
organization. They need to know what each activity costs and why. These
questions require managerial accounting techniques such as activity based
costing.
Managers also need to anticipate future expenses. To get a better
understanding of the accuracy of the budgeting process, they may use
variable budgeting.

The Role of Corporate Finance


Managerial finance is also interested in determining the best way to use
money to improve future opportunities to earn money and minimize the
impact of financial shocks. To accomplish these goals managerial finance
uses the following techniques borrowed from Corporate finance:
• Valuation
• Portfolio theory
• Hedging
• Capital structure

Modern accounting
Accounting is the process of identifying, measuring and communicating
economic information so a user of the information may make informed
economic judgments and decisions based on it.
Accounting is the degree of measurement of financial transactions which are
transfers of legal property rights made under contractual relationships. Non-
financial transactions are specifically excluded due to conservatism and
materiality principles.
At the heart of modern financial accounting is the double-entry bookkeeping
system. This system involves making at least two entries for every
transaction: a debit in one account, and a corresponding credit in another
account. The sum of all debits should always equal the sum of all credits,
providing a simple way to check for errors. This system was first used in
medieval Europe, although claims have been made that the system dates
back to Ancient Rome or Greece.

History of accounting
Early history
Accountancy's infancy dates back to the earliest days of human agriculture
and civilization (the Sumerians in Mesopotamia), when the need to maintain
accurate records of the quantities and relative values of agricultural products
first arose. Simple accounting is mentioned in the Christian Bible (New
Testament) in the Book of Matthew, in the Parable of the Talents [4]. The
Islamic Quran also mentions simple accounting for trade and credit
arrangements [5]).
Twelfth-century A.D. Arab writer Ibn Taymiyyah mentioned in his book
Hisba (literally, "verification" or "calculation") detailed accounting systems
used by Muslims as early as in the mid-seventh century A.D. These
accounting practices were influenced by the Roman and the Persian
civilisations that Muslims interacted with. The most detailed example Ibn
Taymiyyah provides of a complex governmental accounting system is the
Divan of Umar, the second Caliph of Islam, in which all revenues and
disbursements were recorded. The Divan of Umar has been described in
detail by various Islamic historians and was used by Muslim rulers in the
Middle East with modifications and enhancements until the fall of the
Ottoman Empire.
Luca Pacioli and the birth of modern accountancy
Luca Pacioli (1445 - 1517), also known as Friar Luca dal Borgo, is credited
for the "birth" of accounting. His Summa de arithmetica, geometrica,
proportioni et proportionalita (Summa on arithmetic, geometry, proportions
and proportionality, Venice 1494), was a textbook for use in the abbaco
schools of northern Italy, where the sons of merchants and craftsmen were
educated. It was a compendium of the mathematical knowledge of his time,
and includes the first printed description of the method of keeping accounts
that Venetian merchants used at that time, known as the double-entry
accounting system. Although Pacioli codified rather than invented this
system, he is widely regarded as the "Father of Accounting". The system he
published included most of the accounting cycle as we know it today. He
described the use of journals and ledgers, and warned that a person should
not go to sleep at night until the debits equalled the credits! His ledger had
accounts for assets (including receivables and inventories), liabilities,
capital, income, and expenses — the account categories that are reported on
an organisation's balance sheet and income statement, respectively. He
demonstrated year-end closing entries and proposed that a trial balance be
used to prove a balanced ledger. His treatise also touches on a wide range of
related topics from accounting ethics to cost accounting.
Post-Pacioli
The first known book in the English language on accounting was published
in London, England by John Gouge (or Gough) in 1543. It is described as A
Profitable Treatyce called the Instrument or Boke to learn to know the good
order of the kepyng of the famouse reconynge, called in Latin, Dare and
Habere, and, in English, debtor and Creditor.[citation needed]
A short book of instructions was also published in 1588 by John Mellis of
Southwark, England, in which he says, "I am but the renuer and reviver of
an ancient old copies printed here in London the 14 of August 1543:
collected, published, made, and set forth by one Hugh Oldcastle,
Schoolmaster, who, as reappeared by his treatise, then taught Arithmetics,
and this booke in Saint Ollaves parish in Marko Lane." Mellis refers to the
fact that the principle of accounts he explains (which is a simple system of
double entry) is "after the former of Venice".
A book described as The Merchants Mirrour, or directions for the perfect
ordering and keeping of his accounts formed by way of Debitor and
Creditor, after the (so termed) Italian manner, by Richard Dafforne,
accountant, published in 1635, contains many references to early books on
the science of accountancy. In a chapter in this book, headed "Opinion of
Book-keeping's Antiquity," the author states, on the authority of another
writer, that the form of book-keeping referred to had then been in use in Italy
about two hundred years, "but that the same, or one in many parts very like
this, was used in the time of Julius Caesar, and in Rome long before." He
gives quotations of Latin book-keeping terms in use in ancient times, and
refers to "ex Oratione Ciceronis pro Roscio Comaedo"; and he adds:

Accountancy qualifications and regulation


The expectations for qualification in the profession of accounting vary
between different jurisdictions and countries.
Accountants may be certified by a variety of organisations or bodies, such as
the Association of Accounting Technicians (AAT),[6] British qualified
accountancy bodies including the Chartered Institute of Management
Accountants (CIMA), Association of Chartered Certified Accountants
(ACCA) and Institute of Chartered Accountants, and are recognised by titles
such as Chartered Management Accountant (ACMA or FCMA) Chartered
Certified Accountant (ACCA or FCCA) and Chartered Accountant (UK,
Australia, New Zealand, Canada, India, Pakistan, South Africa, Ghana),
Certified Public Accountant (Ireland, Japan, US, Singapore, Hong Kong, the
Philippines), Certified Management Accountant (Canada, U.S.), Certified
General Accountant (Canada), or Certified Practicing Accountant
(Australia). Some Commonwealth countries (Australia and Canada) often
recognise both the certified and chartered accounting bodies
The "Big Four" accountancy firms
The "Big Four auditors" are the largest multinational accountancy firms.
• PricewaterhouseCoopers
• Deloitte Touche Tohmatsu
• KPMG
• Ernst & Young

These firms are associations of the partnerships in each country rather than
having the classical structure of holding company and subsidiaries, but each
has an international 'umbrella' organization for coordination (technically
known as a Swiss Verein).
Before the Enron and other accounting scandals in the United States, there
were five large firms and were called the Big Five: Arthur Andersen,
PricewaterhouseCoopers, KPMG, Deloitte Touche Tohmatsu and Ernst &
Young.
On June 15, 2002, Arthur Andersen was convicted (later overturned) of
obstruction of justice for shredding documents related to its audit of Enron.
Nancy Temple (Andersen Legal Dept.) and David Duncan (Lead Partner for
the Enron account) were cited as the responsible managers in this scandal as
they had given the order to shred relevant documents. Since the U.S.
Securities and Exchange Commission does not allow convicted felons to
audit public companies, the firm agreed to surrender its licenses and its right
to practice before the SEC on August 31, 2002. A plurality of Arthur
Andersen joined KPMG in the US and Deloitte & Touche outside of the US.
Historically, there had also been groupings referred to as the "Big Six"
(Arthur Andersen, plus Coopers & Lybrand before its merger with Price
Waterhouse) and the "Big Eight" (Ernst and Young prior to their merger
were Ernst & Whinney and Arthur Young and Deloitte & Touche was
formed by the merger of Deloitte, Haskins and Sells with the firm Touche
Ross).
Bodies and organizations
Accounting standard-setting bodies
• International
o International Accounting Standards Board

• Australia
o Australian Accounting Standards Board

• Canada
o Accounting Standards Board "AcSB"

• Germany
o Accounting Standards Committee of Germany (ASCG, in
German: DRSC)[7]
• Ghana
o Institute of Chartered Accountants of Ghana

• Hong Kong (see Accountancy in Hong Kong)


o Hong Kong Institute of Certified Public Accountants
(HKICPA)
• India
o Institute of Chartered Accountants of India

• Iran
o Accounting Standards Board

• Malaysia
o Malaysian Accounting Standards Board[8]

• Malta
o Maltese Accountancy Board[9]

• New Zealand
o Accounting Standards Review Board[10]
o New Zealand Institute of Chartered Accountants

• Nigeria
o Institute of Chartered Accountants of Nigeria (ICAN)

• Pakistan
o Institute of Chartered Accountants of Pakistan (ICAP)

• Ireland
o Institute of Chartered Accountants in Ireland

• South Africa
o South African Institute of Chartered Accountants (SAICA)

• United Kingdom
Professional organizations

o American Institute of Certified Public Accountants (AICPA)
o Arab Society for Certified Accountants (ASCA)
o Association of Accounting Technicians (AAT)
o Association of Chartered Certified Accountants (ACCA)
o Association of National Accountants of Nigeria (ANAN)
o Canadian Institute of Chartered Accountants (CICA)
o Certified General Accountants Association of Canada (CGA)
o Guild of Industrial,Commercial and Institutional Accountants,
Canada (ICIA)
o Chartered Institute of Cost & Management Accountants
(CICMA)
o Chartered Institute of Management Accountants (CIMA)
o Chartered Institute of Public Finance and Accountancy
(CIPFA)
o CPA Australia[11]
o German CPA Society (GCPAS)[12]
o Hong Kong Institute of Certified Public Accountants
o Institute of Chartered Accountants in Australia
o Institute of Chartered Accountants in England and Wales
(ICAEW)
o Association of International Accountants (AIA)
o Institute of Financial Accountants (IFA)
o Institute of Chartered Accountants in Ireland (ICAI)
o Institute of Chartered Accountants of India
o Institute of Chartered Accountants of Nigeria (ICAN)
o Institute of Chartered Accountants of Pakistan (ICAP)
Government agencies
Government agencies enforce the securities laws. Public companies must
file financial reports with these government agencies.
• Germany
o German Federal Financial Supervisory Authority (BaFin)[15]

• India
o Reserve Bank of India (for banks)
o Securities and Exchange Board of India (SEBI)[16](for public
companies)
• Pakistan
o State Bank of Pakistan (for Banks)
o Securities and exchange commission of Pakistan (for Public
Companies including Banks)
• United States
Oversight boards (regulators for the accounting industry)
Oversight boards are new, private-sector non-profit organizations that were
set up after the Enron scandal to oversee the auditors of public companies.
• Germany
o German Auditor Oversight Commission (AOC, in German:
APAK)[17]
• United States
o Public Company Accounting Oversight Board - public
companies
Auditing standards-setting bodies
• International
o International Auditing and Assurance Standards Board[18]

• Australia
o AUASB - Auditing & Assurance Standards Board

• Germany
o German Institute of Certified Public Accountants (IDW)[19]

• Hong Kong (see Accountancy in Hong Kong)


o Hong Kong Institute of Certified Public Accountants
(HKICPA) (formerly known as Hong Kong Society of
Accountants (HKSA))
• India
o Auditing & Assurance Standards Board
• Pakistan
o Institute of Chartered Accountants of Pakistan

• South Africa
o Public Accountants and Auditors Board - public companies

Topics in accounting
See list of accounting topics for complete listing.
Auditing
• Assurance services
• Audit
• Information technology audit
• Internal audit
Accountancy methods and fields
• Lean accounting
• Cost accounting
• Cash-basis and accrual-basis accounting
• Financial accountancy
• Fund Accounting
• Internal and external accountancy
• Management accounting
• Project accounting
• Positive accounting
• Environmental accounting
• Tax accounting
Accounting Principles
Accounting principles, rules of conduct and action are described by various
terms such as concepts, conventions, tenets, assumptions, axioms and
postulates.

Accounting concepts
• Entity concept
• Dual aspect concept
• Going concern concept
• Accounting period concept
• Money measurement concept
• Historical Cost concept
• Realization concept
• Accounting methods (includes a discussion on the concept of
accruals)
• Understandability
• Relevance
• Reliability
• Comparability
• Accrual (also known as Matching principle)
• Unified Ledger Accounting

Accounting conventions
• Convention of disclosure
• Convention of materiality
• Convention of consistency
• Convention of conservatism
Tools for accounting
• Accounting software
• Online accounting

Types of accountancy
The following list is intended to give some idea of the breadth and scope of
the accountancy profession:
• lean accounting
• auditing
• bookkeeping
• chartered accountant
• cost accounting
• management accounting
• financial accounting
• forensic accounting

The main techniques and sectors of the financial industry


An entity whose income exceeds its expenditure can lend or invest the
excess income. On the other hand, an entity whose income is less than its
expenditure can raise capital by borrowing or selling equity claims,
decreasing its expenses, or increasing its income. The lender can find a
borrower, a financial intermediary, such as a bank or buy notes or bonds in
the bond market. The lender receives interest, the borrower pays a higher
interest than the lender receives, and the financial intermediary pockets the
difference.
A bank aggregates the activities of many borrowers and lenders. A bank
accepts deposits from lenders, on which it pays the interest. The bank then
lends these deposits to borrowers. Banks allow borrowers and lenders, of
different sizes, to coordinate their activity. Banks are thus compensators of
money flows in space.
A specific example of corporate finance is the sale of stock by a company to
institutional investors like investment banks, who in turn generally sell it to
the public. The stock gives whoever owns it part ownership in that company.
If you buy one share of XYZ Inc, and they have 100 shares outstanding
(held by investors), you are 1/100 owner of that company. Of course, in
return for the stock, the company receives cash, which it uses to expand its
business in a process called "equity financing". Equity financing mixed with
the sale of bonds (or any other debt financing) is called the company's
capital structure.

Personal finance
Questions in personal finance revolve around
• How much money will be needed by an individual (or by a family) at
various points in the future?
• Where will this money come from (e.g. savings or borrowing)?
• How can people protect themselves against unforeseen events in their
lives, and risk in financial markets?
• How can family assets be best transferred across generations
(bequests and inheritance)?
• How do taxes (tax subsidies or penalties) affect personal financial
decisions?
• How does credit affect an individual's financial standing

Corporate finance
Managerial or corporate finance is the task of providing the funds for a
corporation's activities. For small business, this is referred to as SME
finance. It generally involves balancing risk and profitability, while
attempting to maximize an entity's wealth and the value of its stock.
Long term funds are provided by ownership equity and long-term credit,
often in the form of bonds. The balance between these forms the company's
capital structure. Short-term funding or working capital is mostly provided
by banks extending a line of credit.
Another business decision concerning finance is investment, or fund
management. An investment is an acquisition of an asset in the hope that it
will maintain or increase its value. In investment management -- in choosing
a portfolio -- one has to decide what, how much and when to invest. To do
this, a company must:
• Identify relevant objectives and constraints: institution or individual
goals, time horizon, risk aversion and tax considerations;
• Identify the appropriate strategy: active v. passive -- hedging strategy
Capital
Capital, in the financial sense, is the money which gives the business the
power to buy goods to be used in the production of other goods or the
offering of a service.

Sources of capital
• Long Term - usually above 7 years
o Share Capital
o Mortgage
o Retained Profit
o Venture Capital
o Debenture
o Sale & Leaseback
o Project Finance

• Medium Term - usually between 2 and 7 years


o Term Loans
o Leasing
o Hire Purchase
• Short Term - usually under 2 years
o Bank Overdraft
o Trade Credit
o Deferred Expenses
o Factoring

Capital market
• Long-term funds are bought and sold:
o Shares
o Debentures
o Long-term loans, often with a mortgage bond as security
o Reserve funds
o Euro Bonds

Money market
• Financial institutions can use short-term savings to lend out in the
form of short-term loans:
o Credit on open account
o Bank overdraft
o Short-term loans
o Bills of exchange
o Factoring of debtors

Borrowed capital
This is capital which the business borrows from institutions or people, and
includes debentures:
• Redeemable debentures
• Irredeemable debentures
• Debentures to bearer
• Hardcore debentures

Own capital
This is capital that owners of a business (shareholders and partners, for
example) provide:
• Preference shares/hybrid source of finance
o Ordinary preference shares
o Cumulative preference shares
o Participating preference share

• Ordinary shares
• Bonus shares
• Founders' shares

Differences between shares and debentures


• Shareholders are effectively owners; debenture-holders are creditors.
• Shareholders may vote at AGMs and be elected as directors;
debenture-holders may not vote at AGMs or be elected as directors.
• Shareholders receive profit in the form of dividends; debenture-
holders receive a fixed rate of interest.
• If there is no profit, the shareholder does not receive a dividend;
interest is paid to debenture-holders regardless of whether or not a
profit has been made.
• In case of dissolution of firms debenture holders are paid first as
compared to shareholder.

Fixed capital
This is money which is used to purchase assets that will remain permanently
in the business and help it to make a profit.

Factors determining fixed capital requirements


• Nature of business
• Size of business
• Stage of development
• Capital invested by the owners
• location of that area

Factors determining fixed capital requirements


• Nature of business
• Size of business
• Stage of development
• Capital invested by the owners
• location of that area

Working capital
This is money which is used to buy stock, pay expenses and finance credit.

Factors determining working capital requirements


• Size of business
• Stage of development
• Time of production
• Rate of stock turnover ratio
• Buying and selling terms
• Seasonal consumption
• Seasonal production
The desirability of budgeting

Capital budget
This concerns fixed asset requirements for the next five years and how these
will be financed.

Cash budget
Working capital requirements of a business should be monitored at all times
to ensure that there are sufficient funds available to meet short-term
expenses.
Management of current assets

Credit policy
Credit gives the customer the opportunity to buy goods and services, and
pay for them at a later date.

Advantages of credit trade


• Usually results in more customers than cash trade.
• Can charge more for goods to cover the risk of bad debt.
• Gain goodwill and loyalty of customers.
• People can buy goods and pay for them at a later date.
• Farmers can buy seeds and implements, and pay for them only after
the harvest.
• Stimulates agricultural and industrial production and commerce.
• Can be used as a promotional tool.
• Increase the sales.

Disadvantages of credit trade


• Risk of bad debt.
• High administration expenses.
• People can buy more than they can afford.
• More working capital needed.
• Risk of Bankruptcy.

Forms of credit
• Suppliers credit:
o Credit on ordinary open account
o Instalment sales
o Bills of exchange
o Credit cards

• Contractor's credit
• Factoring of debtors

Factors which influence credit conditions


• Nature of the business's activities
• Financial position
• Product durability
• Length of production process
• Competition and competitors' credit conditions
• Country's economic position
• Conditions at financial institutions
• Discount for early payment
• Debtor's type of business and financial position

Credit collection

Overdue accounts
• Cards arranged alphabetically in card index system
• Attach a notice of overdue account to statement.
• Send a letter asking for settlement of debt.
• Send a second or third letter if first is ineffectual.
• Threaten legal action.

Effective credit control


• Increases sales
• Reduces bad debts
• Increases profits
• Builds customer loyalty

Stock

Purpose of stock control


• Ensures that enough stock is on hand to satisfy demand.
• Protects and monitors theft.
• Safeguards against having to stockpile.
• Allows for control over selling and cost price.

Stockpiling
This refers to the purchase of stock at the right time, at the right price and in
the right quantities.
There are several advantages to the stockpiling, the following are some of
the examples:
• Losses due to price fluctuations and stock loss kept to a minimum
• Ensures that goods reach customers timeously; better service
• Saves space and storage cost
• Investment of working capital kept to minimum
• No loss in production due to delays
There are several disadvantages to the stockpiling, the following are some of
the examples:
• Obsolescence
• Danger of fire and theft
• Initial working capital investment is very large
• Losses due to price fluctuation

Influence of stock management on rate of return


• Right price
• Right quantity
• Right quality
• Right place
• Right time
• Right property

Rate of stock turnover


This refers to the number of times per year that the average level of stock is
sold. It may be worked out by dividing the cost price of goods sold by the
cost price of the average stock level.

Determining optimum stock levels


• Maximum stock level refers to the maximum stock level that may be
maintained to ensure cost effectiveness.
• Minimum stock level refers to the point below which the stock level
may not go.
• Standard order refers to the amount of stock generally ordered.
• Order level refers to the stock level which calls for an order to be
made.

Cash

Reasons for keeping cash


• The transaction motive refers to the money kept available to pay
expenses.
• The precautionary motive refers to the money kept aside for
unforeseen expenses.
• The speculative motive refers to the money kept aside to take
advantage of suddenly arising opportunities.

Advantages of sufficient cash


• Current liabilities may be catered for.
• Cash discounts are given for cash payments.
• Production is kept moving.
• Surplus cash may be invested on a short-term basis.
• The business is able to pay its accounts timeously, allowing for easily-
obtained credit.
Management of fixed assets

Depreciation
Depreciation is the decrease in the value of an asset due to wear and tear or
obsolescence. It is calculated yearly to ensure realistic book values for
assets.

Insurance
Insurance is the undertaking of one party to indemnify another, in exchange
for a premium, against a certain eventuality.
Uninsurable risks
• Bad debt
• Changes in fashion
• Time lapses between ordering and delivery
• New machinery or technology
• Different prices at different places
Requirements of an insurance contract
• Insurable interest
o The insured must derive a real financial gain from that which he
is insuring, or stand to lose if it is destroyed or lost.
o The item must belong to the insured.
o One person may take out insurance on the life of another if the
second party owes the first money.
o Must be some person or item which can, legally, be insured.
o The insured must have a legal claim to that which he is
insuring.
• Good faith
o Uberrimae fidei refers to absolute honesty and must
characterise the dealings of both the insurer and the insured.

Shared Services
There is currently a move towards converging and consolidating Finance
provisions into shared services within an organization. Rather than an
organization having a number of separate Finance departments performing
the same tasks from different locations a more centralized version can be
created.

Finance of states
Country, state, county, city or municipality finance is called public finance.
It is concerned with
• Identification of required expenditure of a public sector entity
• Source(s) of that entity's revenue
• The budgeting process
• Debt issuance (municipal bonds) for public works projects

Financial economics
Financial economics is the branch of economics studying the interrelation of
financial variables, such as prices, interest rates and shares, as opposed to
those concerning the real economy. Financial economics concentrates on
influences of real economic variables on financial ones, in contrast to pure
finance.
It studies:
• Valuation - Determination of the fair value of an asset
o How risky is the asset? (identification of the asset appropriate
discount rate)
o What cash flows will it produce? (discounting of relevant cash
flows)
o How does the market price compare to similar assets? (relative
valuation)
o Are the cash flows dependent on some other asset or event?
(derivatives, contingent claim valuation)
• Financial markets and instruments
o Commodities - topics
o Stocks - topics
o Bonds - topics
o Money market instruments- topics
o Derivatives - topics

• Financial institutions and regulation


Financial Econometrics is the branch of Financial Economics that uses
econometric techniques to parameterise the relationships.

Financial mathematics
Financial mathematics is a main branch of applied mathematics concerned
with the financial markets. Financial mathematics is the study of financial
data with the tools of mathematics, mainly statistics. Such data can be
movements of securities—stocks and bonds etc.—and their relations.
Another large subfield is insurance mathematics.

Experimental finance
Experimental finance aims to establish different market settings and
environments to observe experimentally and provide a lens through which
science can analyze agents' behavior and the resulting characteristics of
trading flows, information diffusion and aggregation, price setting
mechanisms, and returns processes. Researchers in experimental finance can
study to what extent existing financial economics theory makes valid
predictions, and attempt to discover new principles on which such theory
can be extended. Research may proceed by conducting trading simulations
or by establishing and studying the behaviour of people in artificial
competitive market-like settings.

Quantitative behavioral finance


Quantitative Behavioral Finance is a new discipline that uses mathematical
and statistical methodology to understand behavioral biases in conjunction
with valuation. Some of this endeavor has been lead by Gunduz Caginalp
(Professor of Mathematics and Editor of Journal of Behavioral Finance
during 2001-2004) and collaborators including Vernon Smith (2002 Nobel
Laureate in Economics), David Porter, Don Balenovich, Vladimira Ilieva,
Ahmet Duran, Huseyin Merdan). Studies by Jeff Madura, Ray Sturm and
others have demonstrated significant behavioral effects in stocks and
exchange traded funds.
The research can be grouped into the following areas:
1. Empirical studies that demonstrate significant deviations from classical
theories.
2. Modeling using the concepts of behavioral effects together with the non-
classical assumption of the finiteness of assets.
3. Forecasting based on these methods.
4. Studies of experimental asset markets and use of models to forecast
experiments.

Related Professional Qualifications


There are several related professional qualifications in finance, that can lead
to the field:
• Qualified accountant qualifications: Chartered Certified Accountant
(ACCA, UK certification), Chartered Accountant (CA, certification in
Commonwealth countries), Certified Public Accountant (CPA, US
certification)
• Non-statutory accountancy qualifications: Chartered Cost
Accountant CCA Designation from AAFM
• Business qualifications: Master of Business Administration
(MBA),Bachelor of Business Management (BBM), Master of
Financial Administration (MFA), Doctor of Business Administration
(DBA)
26 The Importance Of Justice
Justice concerns the proper ordering of things and persons within a society.
As a concept it has been subject to philosophical, legal, and theological
reflection and debate throughout history. According to most theories of
justice, it is overwhelmingly important: John Rawls, for instance, claims that
"Justice is the first virtue of social institutions, as truth is of systems of
thought."[3]: Justice can be thought of as distinct from and more fundamental
than benevolence, charity, mercy, generosity or compassion. Research
conducted in 2003 at Emory University, Georgia, involving Capuchin
Monkeys demonstrated that other cooperative animals also possess such a
sense and that "inequality aversion may not be uniquely human."[4]
indicating that ideas of fairness and justice are of an instinctual nature.
Justice as harmony
In his dialogue Republic, Plato uses Socrates to argue for justice which
covers both the just person and the just city-state. Justice is a proper,
harmonious relationship between the warring parts of the person or city. A
person’s soul has three parts – spirit, resourcefulness and mindfulness.
Similarly, a city has three parts – Socrates uses the parable of the chariot to
illustrate his point: a chariot works as a whole because the two horses’
power is directed by the charioteer. Lovers of wisdom – philosophers, in one
sense of the term – should rule because only they understand what is good.
If one is ill, one goes to a doctor rather than a quack, because the doctor is
expert in the subject of health. Similarly, one should trust one’s city to an
expert in the subject of the good, not to a mere politician who tries to gain
power by giving people what they want, rather than what’s good for them.
Socrates uses the parable of the ship to illustrate this point: the unjust city is
like a ship in open ocean, crewed by a powerful but drunken captain (the
common people), a group of untrustworthy advisors who try to manipulate
the captain into giving them power over the ship’s course (the politicians),
and a navigator (the philosopher) who is the only one who knows how to get
the ship to port. For Socrates, the only way the ship will reach its destination
– the good – is if the navigator takes charge.[5]
Justice as divine command
Justice as a divine law is commanding , and indeed the whole of morality, is
the authoritative command. Killing is wrong and therefore must be punished
and if not punished what should be done?. There is a famous paradox called
the Euthyphro dilemma which essentially asks: is something right because
God commands it, or does God command it because it's right? If the former,
then justice is arbitrary; if the latter, then morality exists on a higher order
than God, who becomes little more than a passer-on of moral knowledge.
Some Divine command advocates respond by pointing out that the dilemma
is false: goodness is the very nature of God and is necessarily expressed in
his commands.
Justice as natural law
John Locke of the natural law believes that justice would become a natural
law, it involves the system of punishments which are prone from choices. In
this, it is similar to the laws of physics: in the same way as the Third of
Newton's laws of Motion requires that for every action there must be an
equal and opposite reaction, justice requires according individuals or groups
what they actually deserve, merit, or are entitled to. Justice, on this account,
is a universal and absolute concept: laws, principles, religions, etc., are
merely attempts to codify that concept, sometimes with results that entirely
contradict the true nature of justice.
Justice as human creation
In contrast to the understandings canvassed so far, justice may be understood
as a human creation, rather than a discovery of harmony, divine command,
or natural law. This claim can be understood in a number of ways, with the
fundamental division being between those who argue that justice is the
creation of some humans, and those who argue that it is the creation of all
humans.
Justice as authoritative command
According to thinkers including Thomas Hobbes, justice is created by
public, enforceable, authoritative rules, and injustice is whatever those rules
forbid, regardless of their relation to morality. Justice is created, not merely
described or approximated, by the command of an absolute sovereign power.
This position has some similarities with divine command theory (see above),
with the difference that the state (or other authority) replaces God

Justice as trickery
In Republic, the character Thrasymachus argues that justice is the interest of
the strong: merely a name for whatever the powerful or cunning ruler has
managed to impose on the people, to his or her own advantage. Nietzsche, in
contrast, argues that justice is part of the slave-morality of the weak many,
rooted in their resentment of the strong few, and intended to keep the noble
man down. In Human, All Too Human he states that, "there is no eternal
justice."

Justice as mutual agreement


According to thinkers in the social contract tradition, justice is derived from
the mutual agreement of everyone concerned; or, in many versions, from
what they would agree to under hypothetical conditions including equality
and absence of bias. This account is considered further below, under ‘Justice
as fairness’.
Justice as a subordinate value
According to utilitarian thinkers including John Stuart Mill, justice is not as
fundamental as we often think. Rather, it is derived from the more basic
standard of rightness, consequentialism: what is right is what has the best
consequences (usually measured by the total or average welfare caused). So,
the proper principles of justice are those which tend to have the best
consequences. These rules may turn out to be familiar ones such as keeping
contracts; but equally, they may not, depending on the facts about real
consequences. Either way, what is important is those consequences, and
justice is important, if at all, only as derived from that fundamental standard.
Mill tries to explain our mistaken belief that justice is overwhelmingly
important by arguing that it derives from two natural human tendencies: our
desire to retaliate against those who hurt us, and our ability to put ourselves
imaginatively in another’s place. So, when we see someone harmed, we
project ourselves into her situation and feel a desire to retaliate on her
behalf. If this process is the source of our feelings about justice, that ought to
undermine our confidence in them.[6]
Theories of distributive justice

Theories of distributive justice need to answer three questions:


1. What goods are to be distributed? Is it to be wealth, power, respect,
some combination of these things?
2. Between what entities are they to be distributed? Humans (dead,
living, future), sentient beings, the members of a single society,
nations?
3. What is the proper distribution? Equal, meritocratic, according to
social status, according to need?
Distributive justice theorists generally do not answer questions of who has
the right to enforce a particular favored distribution.
This section describes some widely-held theories of distributive justice, and
their attempts to answer these questions.
Egalitarianism
According to the egalitarian, goods should be distributed equally. This basic
view can be elaborated in many different ways, according to what goods are
to be distributed – wealth, respect, opportunity – and what they are to be
distributed equally between – individuals, families, nations, races, species.
Commonly-held egalitarian positions include demands for equality of
opportunity and for equality of outcome.
Giving people what they deserve
In one sense, all theories of distributive justice claim that everyone should
get what he or she deserves. Where they diverge is in disagreeing about the
basis of desert. The main distinction is between, on one hand, theories which
argue that the basis of just desert is something held equally by everyone and
therefore derive egalitarian accounts of distributive justice; and, on the other
hand, theories which argue that the basis of just desert is unequally
distributed on the basis of, for instance, hard work, and therefore derive
accounts of distributive justice according to which some should have more
than others. This section deals with some popular theories of the second
type.
According to meritocratic theories, goods, especially wealth and social
status, should be distributed to match individual merit, which is usually
understood as some combination of talent and hard work. According to
needs-based theories, goods, especially such basic goods as food, shelter and
medical care, should be distributed to meet individuals’ basic needs for
them. Marxism can be regarded as a needs-based theory on some readings of
Marx’s slogan, ‘From each according to his ability, to each according to his
needs’.[7] According to contribution-based theories, goods should be
distributed to match an individual's contribution to the overall social good.
Fairness
A Theory of Justice, John Rawls used a social contract argument to show
that justice, and especially distributive justice, is a form of fairness: an
impartial distribution of goods. Rawls asks us to imagine ourselves behind a
veil of ignorance which denies us all knowledge of our personalities, social
statuses, moral characters, wealth, talents and life plans, and then asks what
theory of justice we would choose to govern our society when the veil is
lifted, if we wanted to do the best that we could for ourselves. We don’t
know who in particular we are, and therefore can’t bias the decision in our
own favour. So, the decision-in-ignorance models fairness, because it
excludes selfish bias. Rawls argues that each of us would reject the
utilitarian theory of justice that we should maximize welfare (see below)
because of the risk that we might turn out to be someone whose own good is
sacrificed for greater benefits for others. Instead, we would endorse Rawls’s
two principles of justice:
1. Each person is to have an equal right to the most extensive total
system of equal basic liberties compatible with a similar system of
liberty for all.
2. Social and economic inequalities are to be arranged so that they are
both
a) to the greatest benefit of the least advantaged, consistent with the
just savings principle, and
b) attached to offices and positions open to all under conditions of fair
equality of opportunity.[8]

Having the right history


Robert Nozick’s influential critique of Rawls argues that distributive justice
is not a matter of the whole distribution matching an ideal pattern, but of
each individual entitlement having the right kind of history. It is just that a
person has some good (especially, some property right) if and only if he or
she came to have it by a history made up entirely of events of two kinds:
1. Just acquisition, especially by working on unowned things; and
2. Just transfer, that is free gift, sale or other agreement, but not theft.
If the chain of events leading up to the person having something meets this
criterion, then he or she is entitled to it: it is just that he or she possesses it,
and what anyone else has, or does not have, or needs, is irrelevant.
On the basis of this theory of distributive justice, Nozick argues that all
attempts to redistribute goods according to an ideal pattern, without the
consent of their owners, are theft. In particular, redistributive taxation is
theft.
Welfare-maximization
According to the utilitarian, justice requires the maximization of the total or
average welfare across all relevant individuals. This may require sacrifice of
some for the good of others, so long as everyone’s good is taken impartially
into account. Utilitarianism, in general, argues that the standard of
justification for actions, institutions, or the whole world, is impartial welfare
consequentialism, and only indirectly, if at all, to do with rights, property,
need, or any other non-utilitarian criterion. These other criteria might be
indirectly important, to the extent that human welfare involves them. But
even then, such demands as human rights would only be elements in the
calculation of overall welfare, not uncrossable barriers to action.

Theories of retributive justice


Theories of retributive justice are concerned with punishment for
wrongdoing, and need to answer three questions:
1. why punish?
2. who should be punished?
3. what punishment should they receive?
This section considers the two major accounts of retributive justice, and their
answers to these questions. Utilitarian theories look forward to the future
consequences of punishment, while retributive theories look back to
particular acts of wrongdoing, and attempt to balance them with deserved
punishment.
Utilitarianism
According to the utilitarian, as already noted, justice requires the
maximization of the total or average welfare across all relevant individuals.
Punishment is bad treatment of someone, and therefore can’t be good in
itself, for the utilitarian. But punishment might be a necessary sacrifice
which maximizes the overall good in the long term, in one or more of three
ways:
1. Deterrence. The credible threat of punishment might lead people to
make different choices; well-designed threats might lead people to
make choices which maximize welfare.
2. Rehabilitation. Punishment might make bad people into better ones.
For the utilitarian, all that ‘bad person’ can mean is ‘person who’s
likely to cause bad things (like suffering) ’. So, utilitarianism could
recommend punishment which changes someone such that he or she is
less likely to cause bad things.
3. Security. Perhaps there are people who are irredeemable causers of
bad things. If so, imprisoning them might maximize welfare by
limiting their opportunities to cause harm.
So, the reason for punishment is the maximization of welfare, and
punishment should be of whomever, and of whatever form and severity, are
needed to meet that goal. Worryingly, this may sometimes justify punishing
the innocent, or inflicting disproportionately severe punishments, when that
will have the best consequences overall (perhaps executing a few suspected
shoplifters live on television would be an effective deterrent to shoplifting,
for instance). It also suggests that punishment might turn out never to be
right, depending on the facts about what actual consequences it has.[9]
Retributivism
The retributivist will think the utilitarian's argument disastrously mistaken. If
someone does something wrong, we must respond to it, and to him or her, as
an individual, not as a part of a calculation of overall welfare. To do
otherwise is to disrespect him or her as an individual human being. If the
crime had victims, it is to disrespect them, too. Wrongdoing must be
balanced or made good in some way, and so the criminal deserves to be
punished. Retributivism emphasizes retribution – payback – rather than
maximization of welfare. Like the theory of distributive justice as giving
everyone what he or she deserves (see above), it links justice with desert. It
says that all guilty people, and only guilty people, deserve appropriate
punishment. This matches some strong intuitions about just punishment: that
it should be proportional to the crime, and that it should be of only and all of
the guilty. However, it is sometimes argued that retributivism is merely
revenge in disguise.[10]
Institutions
In an imperfect world, institutions are required to instantiate ideals of justice,
however imperfectly. These institutions may be justified by their
approximate instantiation of justice, or they may be deeply unjust when
compared with ideal standards — consider the institution of slavery. Justice
is an ideal which the world fails to live up to, sometimes despite good
intentions, sometimes disastrously. The question of institutive justice raises
issues of legitimacy, procedure, codification and interpretation, which are
considered by legal theorists and by philosophers of law.
Another definition of justice is an independent investigation of truth. In a
court room, lawyers, the judge and the jury are supposed to be independently
investigating the truth of an alleged crime. In physics, a group of physicists
examine data and theoretical concepts to consult on what might be the truth
or reality of a phenomenon.
THE END
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