BUSSPP 0200 1st Edition Lecture 10 Outline of Last Lecture I Diversification Corporate Office Outline of Current Lecture I Back to the Course Thesis II Differentiation as an Investment Current Lecture I Back to the Course Thesis A Escape avoidance of perfect selling competition 1 Differentiation a Develop product different from the generic b Requires risky investment 2 Process Enhancement 3 Changing business model B Basic concept of differentiation 1 Gut level new modified product a product offering i something provided to someone else b products goods services i tangible intangible some combination c modern approach many types not falling into goods services 2 More formal approach Utility a form utility i different characteristics b place utility i convenience c Time utility i available when you want to shop d transaction utility i is the purchase do able in the form you wish to do business 3 Utility any change in any and all of the above significant enough for a These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute consumer to observe the change and find it important C Types of differentiation 1 Novel completely different alternative product 2 Modified tweak more typical a product refinement change in a product that replaces the original i long run does not cause product proliferation ii Overlap until the old inventory is used up iii Secondary market still selling old product b Product extension change in a product that is sold alongside the original i linear geometric growth ii Long term causes product proliferation c sku stock keeping unit i dramatically increased by product extention II Differentiation as an investment A Investment expenditure of some resource to get another resource time people 1 Money in 5 different forms a current revenue b retained earnings c sale of assets d debt e sale of stock B Investments are risky 1 Costs before benefits a benefits may never occur may be too little too late 2 Apply this to differentiation a if debt then probably constrained b how to allocate R D product devel Market Research Distribution Promotion make but lease problem C Criterion for differentiation 1 E B E C 2 Adjustments a time value of money b cost of capital c opportunity costs d tax
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