MCEFINALA COMPLEX ENVIRONMENT is … Marked by rapid, large scale and uncertain change in many underlying business drivers each with a different set of dynamics.The more complex the environment…The faster the rate of changeThe greater the magnitude of changeThe greater the uncertainty of changeThe greater number of drivers (potential sources of change)The more varied and complicated the dynamics of the driversAll business environments are complex. The only real issue is how complex.MANAGING IN COMPLEX ENVIRONMENTS means … Attending to, anticipating, understanding, responding to and leading developments in many areas while efficiently using resources, making a profit, being a decent corporate citizen and operating within the law.OrKnowing, understanding and discharging one’s work place responsibilies, within the authority granted of the firm, in business economics characterized by many complex drivers that are subject to rapid, large-scale, and hard-to-predict changes.Firms usually have multiple goals, which likely vary across firms and time.In most US firms most of the time, profit emerges as either the dominant goal or at least a dominant goal, even if profit maximizing isn’t usually possible.Sellers must estimate demand and decide what attributes to provide before actual demand is known.Firms often try to “escape” (or avoid) perfect competition on the “sell” (or output) side while seeking the benefits of perfect competition on the “input” side. They try to escape by product differentiation, process enhancement, change of business model or some combinations of these. This is not true in their roles as buyers, when they prefer perfect competition.MCEVOCABULARYAdjustments – regular modifications that the firm will use under specific conditions or for specific productsPrice skimming – Setting the highest possible price for a product during the introduction stage of its life cyclePenetration pricing – Setting low prices during product introduction in an attempt to buildmarket share and perhaps inhibit the entry of other possible sellersPrice Discrimination – The same seller in an oligopoly can often price differently in different market segments (ex. movie ticket prices are different in adults and students); charging different prices to different classes of customersSales – The act of offering for purchase a product or group of products at a reduced price for a limited period of timeLife Cycle pricing – a planned adjustment to price as the product moves through its life cycleAgency Problem – the situation when employees may wish to maximize their own personal returns, rather than to maximize the firm’s profits.Authority – certain “rights” the firm builds into a position; includes rights to make certain decisions and rights to commit certain resources of the firmBackwards Channels – market channels which link the end user backward to the retailer, wholesaler, or manufacturerBohs Fide transaction – a freely entered (non-coerced) actual exchange among parties that have some form of communication and produces benefits to all parties, typically assisted by third parties.Brand – an identifier, identifies a product from a known sourceNames, terms, symbols, designs or some combination of these that identify a particular product, a particular product line, a particular product mix, a particular product producer, or a particular product seller.Brand names – brand identifiers that can be spoken (ex. DKNY)Brand marks – brand identifiers that are distinctive symbols or designsTrademarks – brand marks or brand names that are legally registered and protected. Trade name – the complete and legal name of the firmBrand extension – occurs when the firm applies an existing brand identifier to a new product in anew product lineBrand equity – refers to the total value of the brand of the firm. It tends to increase with brand awareness, brand loyalty, perceived quality and other positive brand associations, and other assets such as patents and trademarksBreak Even Quantity – The number of units that must be sold in the period for the total revenue (from all units sold) to equal exactly the total cost (of all units produced) for the periodOK, we know (P - V) Q - F= NIMCEAt Break-even (P - V) Q - F= NI = 0or (P - V)Q = For Break-even quantity: Q*= F/(P-V)Break Even Price – A similar bit of algebra can be used to solve for break-even price, which is P* = (F + VQ)/QBottleneck Problem – occurs when the production of one product is delayed waiting for a piece of equipment that is already in useCapital Budgeting Problem – concerns whether a firm should invest in this or that (or no) long-term project, given expected costs, expected benefits, the time value of money, the cost of capital, tax effects and perhaps other issuesCapitalism – practiced by nations characterized by market-driven economiesCaptive supplier – downstream player attempts to control the supplier by becoming the suppliers only customer (or overwhelmingly largest customerCentrally-Planned Economy – a government in which the state usually sets prices, determines product mix and controls the means of distributionChannels – complex links among parties to transactionsSupply channels – entire set of links that trace from raw material suppliers to end-usersMarketing channels – shorter set of links between potential sellers and buyers at any point in the entire supply chainCommunication channels – provide information that could range from advertisingto inquiries about products via InternetDistribution channels – display and deliver productSelling channels – effect transactionsChannel mix – the specific set of decisions a firm uses to manage its market channelsCompetition – occurs when parties compete for the same dollar, but with generally non-substitutable productsForm competition – occurs when the options are substitutable in the most general senseIndustry competition – occurs when the options are from the same industry but not head-to-head substitutes Brand competition – a form of head-to-head competition, which occurs when options have strong brand identification.Price competition – occurs when all products are generic or otherwise substitutable Conglomerate – extreme form of diversification; unusual today (ex. ITT: 350 businesses)Cost of hierarchy – the cost of building and operating the new unitCustomer Relationship Marketing (CRM) – actual