Business Management Archives - My Accounting Course

What is Turnaround Time?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:22:38 +0000

Definition: Turnaround time is a period of time required for completing a particular process or task since the moment it is formally demanded. Turnaround time commonly refers to the amount of time measured from the submission of a request to the conclusion and delivery to the requester.

What Does Turnaround Time Mean?

This term can be used in several situations because task completion is a frequent event in everyday’s routines. In business, most companies want to know their turnaround time for several activities and sub-activities. Minimizing turnaround time for key processes is a common managerial goal because it increases efficiency and customer satisfaction.

Usually, this is a kind of performance metric. For example, a company might monitor how the length of time since a customer places an order to its completion and delivery evolves on a monthly basis.

The company therefore calculates an average of all orders submitted in each month and analyzes how this time can be reduced. Considering high rivalry and competition in today’s markets, firms commonly aim to complete the most important processes in the lowest time possible.

Example

Jillson Transportation is a company that provides road transportation services to several clients located in certain U.S. city. It operates 25 trucks that carry merchandise from twelve regular customers to deliver it to other companies. Jillson’s top clients frequently asked for lower turnaround time. This was measured from the moment they placed a transportation request to the moment when the merchandise is successfully received at its destination.

The company realized at first glance that the turnaround time varied from client to client because the loading process was sometimes difficult and long at the client’s warehouses. Jillson Transportation then developed a project along with some customers with the purpose of reducing the loading time thus improving the turnaround time. The project successfully reduced 25% of the loading time and as a whole it reduced transit periods by 10%.

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What is a Target Market?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:19:53 +0000

Definition: A target market is a certain portion of the population that a business identifies as the main audience for its products or services. In other words, it is a group of people that the company will focus to reach, as they are the ones intended to consume what the business is selling.

What Does Target Market Mean?

Identifying a target audience is essential to develop effective marketing strategies. Companies will normally put a lot of effort into identifying all the characteristics of such group through a procedure called market segmentation.

This marketing technique will determine elements such as demographic qualities, geographic location, psychological characteristics and behavior of the targets, in order to design the most effective strategies to sell products and services to them. By using another tool called the marketing mix, often referred as “the 4 P’s”, a business will define price, product, place and promotion strategies that fit the needs, preferences and tastes of its intended audience in order to reach them. Depending on the company’s strategic plan, the target market could be very wide or narrow.

For example, companies that work for particular niches will find its target market to be very limited. On the other hand, companies with low-cost or product differentiation strategies will have a broader audience to reach. In such cases, most businesses design a wide product line in order to reach different segments through customized products or services that fit each of their particular needs.

Example

A new product called LemonAid is being launched to the market by Freska Co. a company that produces refreshing beverages for different markets. The company’s product line is very extensive, they started producing alcoholic beverages and later on they diversified their portfolio to include energy drinks, soda and other soft drinks. The company came up with LemonAid after identifying that there was a market for lemon-flavored drinks that was not content with the products that were currently available.

The Marketing Department identified this segment as male and female individuals within the ages of 35 to 45 years old, most of them with an aversion for black soft drinks. The segment was not homogenous in terms of income, since many different economic segments were potential consumers. The company successfully launched the product and it became one of the top sellers within its target market.

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What is Supply Chain Management?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:18:37 +0000

Definition: Supply chain management is a set of activities related to planning, supervision and control of sequential processes from the procurement of suppliers to customer’s deliveries, with the purpose of making the method more efficient and effective. This is a term that brings an integrated, cross-functional view of the supply chain with the aim of increasing alignment, synchronization and collaboration.

What Does Supply Chain Management Mean?

Supply chain management is a function that should exist, to some extent, in all organizations but it becomes crucial as the number and variety of suppliers and customers increases. It is mainly related to the movement of materials, intermediate and finished products as well as information through different stages along the value chain. Its primary responsibility is to facilitate a set of common goals among separate units.

Since every functional department tend to have its own, specialized approach, supply chain management works to integrate their diverse and sometimes conflicting visions. It aims to interconnect tasks that otherwise lack of coordination. Certainly, division of labor is needed to encourage higher levels of expertise but at the same time companies need to force integration among them.

The overall objective is minimizing delays and errors that ultimately affect company competitiveness, therefore creating a more productive environment that also increases the profitability of the business as a whole.

Example

Krein Co. is a producer and marketer of several packaged foods. The Executive VP realized that unit costs increased and the company lost some relevant customers due to frequent delays in delivery schedules. He decided to create a Supply Chain Management Department to improve integration among different departments, namely procurement, warehouse and inventory, production, marketing and dispatch.

This new management function even expanded the scope towards other companies to outsource intermediate goods as a way to make the whole process more efficient and less costly. The overall outcome was more linked functions with positive results in unit costs along with a higher level of customer satisfaction.

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What is Referent Power?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:12:58 +0000

Definition: Referent Power is a type of power that comes from the leader’s capacity to influence and inspire his followers. The source of its authority comes from how much people likes and admires him.

What Does Referent Power Mean?

This type of power is one of five different kinds that were described by John French and Bertram Raven, two social psychologist that studied in 1959 how leaders influenced people. Their study showed that there were five different types of power including legitimate power, reward power, expert power, referent power and coercive power. In the case of referent power, it refers to a person’s ability to influence others through interpersonal and relationships skills.

A leadership created through referent power attracts and inspire people with enough strength to turn them into followers who identify with the leader and start to be modeled by him. This type of power creates strong binds between the leader and his followers, who in most cases struggle to get his approval by mimicking the way the leader acts, decides, expresses himself or thinks.

A key disadvantage of such power is that it can create emotional dependence in the followers, which can lead to conflict whenever the leader somehow disappoints or drives his attention from the individual.

Example

Kyle is the Production Manager of a big consumer electronics firm. He has a strong leadership within his subordinates that comes from a positive attitude, a strong knowledge of the field and a charismatic way to transmit ideas. Since Kyle took the job, the company’s production figures have increased tremendously and the Board of Directors is very pleased with what he does.

An external consulting firm evaluated Kyle’s performance and concluded that he developed a strong referent power throughout the whole organization and this assessment created new opportunities for Kyle’s career. He is set to be the next CEO of the company if he keeps delivering such great results.

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What is a Punch List?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:10:29 +0000

Definition: A punch list is a document employed in construction jobs to identify a certain number of requirements that need to be fulfilled before the project can be considered entirely completed. It is a written list drafted by the contractor with a set of final specifications that need to be met before the payment can be issued.

What Does Punch List Mean?

When certain construction job is reaching its conclusion, general contractors, following the guidelines of the General Conditions to the Contract for Construction, have to declare to the contractor when the project has achieved a “substantial completion” stage.

In that moment, the general contractor should ask for an inspection of the project by the contractor, who, after performing an evaluation of specifications vs. actual results, should issue what is known as a punch list. This list has a comprehensive set of unfulfilled specifications and tasks that need to be completed before the payment can be issued to the general contractor.

This requirement is listed in Section 9.8.2 of the above-mentioned General Conditions. The list should have a pre-established deadline to avoid delays and each item should be described in detail since it will be the last modifications performed before the project is considered to be fully completed.

Example

Fashion Stores Co. is company with more than 15 outlet facilities located within the state of New York. When they are planning to open a new location they frequently hire a general contractor called Flexi Building LLC. They have performed many construction projects for Fashion Stores in the past and there is a clear procedure after a project is reaching its conclusion.

The Project Manager from Flexi Building has to communicate to the Infrastructure Department of Fashion Stores when the project is achieving its substantial completion. After that, one of the analysts from Fashion Stores will evaluate the design and blueprints to compare them with actual results obtained and he will issue a punch list with all items that still need to be completed in order to finish the project.

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What is a Marketing Concept?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:07:10 +0000

Definition: A marketing concept is a philosophy that encourages companies to develop products based on the market’s needs and preferences. This theory states that successful products and services are those that actually supply something that the customer is actually requiring.

What Does Marketing Concept Mean?

This concept has been broadly accepted by the business community for a few years now and it seems like there is no other way to do it. Nevertheless, some decades ago this concept was not the predominant one. Instead, companies were more worried about what they could produce cheaply and massively, which was part of the mindset and legacy of the industrial revolution.

Then, the business and product development philosophy changed a little bit, due to a more mature stage of the mass production euphoria. At this point, many companies were manufacturing products at an increasing pace but the market was not reacting positively to them in all cases. This created a sales focus, where companies poured a lot of their resources to advertise their products in order to obtain a bigger market share.

Finally, the sales-centered model exhausted itself due to the ever-increasing competition and finally, in modern times, marketing experts have settled with a marketing focus, a concept that places the customer at the center of product development decisions. This philosophy urges businesses to focus in developing ways and items that satisfy the existing needs of regular consumers.

Example

Soccer Fun Co. is a company that owns many soccer fields that individuals can lease for certain number of hours to play with their friends. It is a great place to bring the whole family and spend a lovely day together. Also, corporations see Soccer Fun as a great place to gather co-workers in a friendly environment where they can relate openly and get to know each other better, as a team building activity.

The concept of Soccer Fun emerged when its founder, Harold Foks, saw that there were no well-equipped soccer fields in his community and after conducting several interviews with the community’s population he saw that they would love to have a place where they could enjoy a professional soccer experience. This led to the idea of Soccer Fun, a concept that was developed based on an actual need identified within certain audience.

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What are Integrated Marketing Communications?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:02:51 +0000

Definition: Integrated Marketing Communications is a marketing strategy that combines different advertising and communicational channels to increase the effectiveness of a campaign. The goal of this technique is to take the message across all relevant platforms to reach the target audience.

What Does Integrated Marketing Communications Mean?

This concept was first presented by the American Association of Advertising Agencies in the beginning of the 19^th century and it has been widely adopted by most advertising firms and corporations. The first step to develop this strategy is to identify the target market and its essential characteristics such as demographic and geographic profiles.

Then, through Integrated Marketing Communications (IMC), a company employs all relevant media, including traditional and non-traditional tools, to reach its audience. This technique involves employees, top management, external advertising agencies, influencers, traditional advertising tools such as billboards and ads, along with digital media such as social networks and mobile platforms. By incorporating and combining all these platforms the message can be transmitted to a wider audience in a more compelling way.

On the other hand, one of the key elements of IMC strategies is that the message must be as homogeneous as possible, to increase the chances of positioning the brand in a privileged place within the mind of potential consumers.

Example

BigMart LLC is a company that operates more than 200 mega markets located across the U.S. territory and its managers are currently considering taking the business’ operations overseas. They have been involved in negotiations with a few partners in Europe to start a joint venture with the BigMart brand in France and Spain and after a few months of polishing the legal details they are ready to launch the brand.

In order to do so, the Global Marketing Director decided to implement an Integrated Marketing Communications strategy that includes hiring 5 different influencers with enough presence and reach to both countries within social media platforms, along with an extensive TV and radio advertising campaign, a mobile app that allows buyers to purchase goods that will be delivered in a few hours to their place and many billboards and other traditional advertising placed in key locations within the most important cities where the markets are. The strategy will communicate one simple and powerful message across all platforms: “A place with everything.”

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What are Implied Powers?

Shaun Conrad, CPA — Sat, 15 Dec 2018 07:01:06 +0000

Definition: Implied powers is a legal doctrine that identifies a particular implicit authority granted to U.S. Congress that allows it to carry on with its duties adequately. They are political powers that are not explicitly stated in the Constitution but that are necessary to ensure the proper functioning of this branch in an ever-evolving environment.

What Does Implied Power Mean?

The implied powers doctrine is based on the provision contained in Article One, Section 8 Clause 8 of the U.S. Constitution that establishes that Congress has the power to make laws that are necessary and proper to carry on with its own explicit powers.

Differently from powers clearly granted by the Constitution, the implicit powers are those that serve as the tool to maintain the explicit one’s effectiveness. In the event that these explicit duties are being partially or totally blocked by certain provisions, the implicit clause allows the Congress to write a law that takes out the obstacle in order to allow an adequate deliverance of its duties.

This legal principle was proposed by Alexander Hamilton during President George Washington’s administration and was effectively include in the previously mentioned clause and ratified through common law in the case of McCulloch v. Maryland in 1819, involving the Second Bank of the United States.

Example

Let’s say hypothetically that the U.S. Congress approved a certain housing program. This program includes a subsidy granted to families with an income of less than $30,000 a year. Nevertheless, in order to proceed with the program for these families there is a road block, since banks are not willing to lend money to them.

Given that the Congress has the implied power to regulate the legal framework of the banking system, they could also create a law that establishes a federal fund to cover for potential default situations in such loans. This law will serve as the right incentive for the banks to lend money to these families, since the loans are now backed up by the U.S. Government.

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What is a Halo Effect?

Shaun Conrad, CPA — Sat, 15 Dec 2018 06:57:13 +0000

Definition: A halo effect is a predisposition to value positively some attributes or features of a person or a brand, based only on a favorable opinion of another attribute of that person or brand. It is mainly a marketing term applied to those situations when a product is benefited by a good preconceived perception that is based on the experience with another product.

What Does Halo Effect Mean?

This term might be used in many contexts but it is particularly useful in the marketing field. Some popular products have halo effects over others if the formers provided a worthy experience. This means that consumers have a tendency of having a positive opinion of unknown products if a company that is rated good provides them.

Indeed, many companies take advantage of the halo effect. When a manufacturer achieves outstanding sales with a product, subsequent launches are probably to be benefited by this halo effect and therefore they often show strong acceptance. But this effect can also apply to different attributes of the same brand.

For example, a new store offering sweet bakery goods could offer a clean, luxury environment with sales people dressed flawless to make a favorable impression on observers from outside. These positive attributes would make people to think that all products are high-quality items even before they try them.

Example

Casuan & Durable is a brand created for high-quality, durable backpacks. Their products were well received by the market, especially by students that wanted nice designs but also durable materials that lasted a long time of intensive use. After building a solid name in that segment, the company’s directors decided to launch a new line of outdoor sport-styled shoes under the same brand.

The directors thought that the halo effect would benefit the new line and that effectively occurred. Casuan & Durable shoes took a considerable percentage of the market share within the sport shoe’s segment and this caused the company’s revenues to increase dramatically.

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What is Direct Distribution?

Shaun Conrad, CPA — Sat, 15 Dec 2018 06:53:27 +0000

Definition: Direct distribution is a supply chain strategy that delivers products directly from producer to end consumer without any intermediaries. This term applies when the manufacturer takes the product directly to the consumer with its own transport and logistics network.

What Does Direct Distribution Mean?

Although wholesalers and distributors are common participants in most of the distribution channels, some companies prefer direct distribution. When the producer chooses this model he must manage several complex processes. The company has to deal with customer orders, which means to receive and respond requests from multiple kinds of persons or companies. In addition, delivery logistics has to be designed with a low cost approach in order to maintain the profitability of the operations.

On the other hand, direct contact with end consumers allows the company to obtain permanent feedback about their opinions and reactions, which increases its ability to satisfy customers and provide them with some added value.

Nowadays, direct distribution is mainly seen at online sales because it is easier to reach global markets while maintaining lower marketing and sale costs by using the internet as the main distribution platform.

Example

A new small firm named Mandy Bed was created to manufacture high quality bedding with innovative designs and high-end materials. The Founder and President is trying to pick the most suitable distribution model. Selling through the most popular retailing chains will bring advantages because of the access to a large market and management of fewer customers. Nevertheless, the President thinks that an additional player will push prices too high.

Moreover, the brand will be competing with many other products on the shelves. The company finally selected direct distribution through two channels, one store located at a luxury commercial district and online sales through third-party marketplaces and its own web site. This will guarantee higher control on the distribution process and lower prices. The company will also have direct contact with consumers which will keep them supplied with first hand information about their opinions, preferences and reactions to the product.

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