POM Updates 14/6

Date :- 14/June/2008

Attendees :- 191

Session 1: – Marketing Environment, Environmental Scanning, SWOT, Environmental Analysis,  Factors, Marketing Environment Hierarchy, PEST

Marketing Environment :- All the external factors to the decision maker (Marketer), that directly or indirectly affect the marketing of the product/brand/organization. Even company entities (like production etc) are considered to be external to the marketer.

There are three key perspectives on the marketing environment, namely the ‘macro-environment,’ the ‘micro-environment’ and the ‘internal environment’.

                                              

Macro – Across Industy Segments. PEST Factors, Also incl. Natural Factors like Tsunami etc. Examples include Inflation, Income, Company Policies (Epilator – Phillips example) etc

Micro – Industry Level (Peer), includes Consumers, Suppliers, Customers, and Stake holders. This has considerable degree of influence on the Mktg Environment

Internal – Five Ms. Men, Money, Machinery, Material and Markets. Managing these factors is called Internal Marketing.

A mode of auditing or analysing the Mktg Environment is done via SWOT analysis. Other tools include PEST Analysis and Porter’s Five-Forces analysis.

S-Strength, W – Weakness, O – Opportunity, T-Threat

Any change in the Mktg environment will result in either an Opportunity/Threat in which the company is Strong/Weak.

Opportunity and Threat – External to the Organization. The organization does not have direct control over this.

Strength and Weakness – Internal to the Organization. The organization can either encash the opportunity using its strength or suppress the threat using its strength. The Strengths and Weaknesses are purely based on the capability of the company.

Based on the above four variables we can come up with the following matrix

T ‹—› S (Key focus area as it provides the value edge Advantage)

0 ‹—› S

T ‹—› W

0 ‹—› W

Listed in the order of priority.  0 ‹—› W is typically avoided from a Mktg Perspective as there is little control on the same.

In SWOT, strengths and weaknesses are internal factors. For example:A strength could be:

• Your specialist marketing expertise.
• A new, innovative product or service.
• Location of your business.
• Quality processes and procedures.
• Any other aspect of your business that adds value to your product or service.

A weakness could be:

• Lack of marketing expertise.
• Undifferentiated products or services (i.e. in relation to your competitors).
• Location of your business.
• Poor quality goods or services.
• Damaged reputation.

In SWOT, opportunities and threats are external factors. For example: An opportunity could be:

• A developing market such as the Internet.
• Mergers, joint ventures or strategic alliances.
• Moving into new market segments that offer improved profits.
• A new international market.
• A market vacated by an ineffective competitor.

E.g Growing Economy is an Opportunity which could be leveraged provided the company can increase the capacity of Production

A threat could be:

• A new competitor in your home market.
• Price wars with competitors.
• A competitor has a new, innovative product or service.
• Competitors have superior access to channels of distribution.
• Taxation is introduced on your product or service.

E.g. Inflation to Product Companies, Health Issues for COLA products

(Source :- http://www.marketingteacher.com/Lessons/lesson_swot.htm)

SWOT analysis are subjective and should be used as a guide only.

Key Factors impacting Environmental Analysis

→ Identify all factors possible

→ Prioritize the factors

→ Identify the factors as Opportunities/Threats and do a SWOT

Class Exercise on Identifying all the factors for Mobile Phones: – Technology, Bandwidth, Plans, Health, Literacy, Income etc

Updates from Rohit – Sessions Rescheduled and Exam Dates

Due to the technical failure last Sunday, an additional session has been scheduled on the 21st of June from 5:00 PM to 6:30 PM. Normal classes will continue post 6:30 PM.

Please find the dates and pattern of End term examination for the course of MANAC & Principles of Marketing.

Mode of examination – Hardcopy

Date 20-Jul-08, Sunday

Giving the Blog a Makeover….

Folks,

After seeing some good amount of participation, I have decided to give the blog a makeover to add a few more widgets and make this more user friendly. Hope you all like it. A few more things on the lines of sharing, colloborating and networking.

1. It would be great if some of the folks can co-author this blog. I am sure I will be bunking a few classes here and there and it would help if someone keeps the flow going, and hence the continuity of the blog will not be impacted. Also updates from TAs could be posted as soon as you know it. Volunteers… anyone?

2. Network.. Network.. Network… – KG’s Orkut site is a place where we could all network, share a bit more about ourselves and add value to this entire process. For all we may even get a pay hike by switching to better jobs! 🙂 (Srikanth, I hear you!) (I did flick the opening words from Nigam’s journal. Nigam, apologize for the Plagiarism) 🙂

3. Colloborate – I am sure we can lend a helping hand to fellow students by sharing… CA folks, Marketing folks can do a good summary piece on the subjects for Techies/other folks to catch up. I am sure there is going to be project work down the line in all the subjects. So let us be prepared…

Any other suggestions, please do keep me posted. I am very much reachable on this blog!

POM Updates – 07-06-2008

Attendees :- 192

Truly speaking, I am not really sure of the pace with which this is done in the class. More than a few buzz words, I have not seen much progess. But my counter thought to this is may be, Marketing is a language of Jargons and it is better taught this way… The jury is still out…

The key things covered so far

1. Marketing Product : – Technical, Functional, Emotional :- Maps to Competition

2. Marketing Universe :- Target audience, This is dependent on the Marketing Product. e.g. if the product is Status, then the Universe is HIG, if the product is “Safety/Health”, the target audience is MIG, Mothers, Elder People etc

3. Marketing Objective :- Clearly defined objective to market the product or a super set

4. Assortment Level Competition :- Similar need based items prioritized by the needs of the end user

5. Value:- The Marketing value of the product (There are trade offs between the market and value for ny given produc)

Case Study : – Maharaja Dishwasher :- Reason for failure (Marketing Objective was not appropriate, they should have marketed the Kitchen instead of the Dishwasher)

Brand Image < Company Image < Country Image (In that order). This is with respect to some discussion around why market a brand viz-a-viz a Company name.

MAC Assignment 2 – Case 1

I literally plucked all the remaining hair (as if much was left) doing this. To the best of my understanding, I arrived at the numbers for Mar 20X6. My profit numbers still wound not tally with the balance sheet (off by 60). Adding insult to injury was the next accounting period. I am sure I got it all messed up with the second one. A crushing blow to my confidence on this subject…. I am sharing the work (err… the mess) I have done as a part of this. More than doing it as a part of the assignment, I would appreciate if the experts help me put together the answer to this puzzle… Lingering Questions (on the second period, how do we account for depreciation, interest amount, Loan value of the Overdraft – 70% of current asset – which value do we take, depreciated value?).

Accountants.. anyone?… Phew…..

http://spreadsheets.google.com/ccc?key=pFjLyBrmhza_jlNIV7cYCfg&hl=en

Rukavat Ke Liye Khed Hai….- from Hughes Net

Update from Hughes World…

“This is to inform you all that today’s session has been cancelled due to some unavoidable circumstances.the session will be rescheduled and intimated to you soon.”

Pls note this and plan accordingly. If folks reading this can update me on their individual contact details, such information can be shared in a better fashion!

MAC Updates – Rohit

A few updates from Rohit on MAC. For details, check your egroups email.

1. Assignment Uploaded for this week – We are required to solve case 1 or 2 or 3 from pages 148, 150, 152 of the book on P&L Statement. The last date for submission is 08-Jun-2008 (Sunday).

Mode :- Soft Copy

Submit To :- Rohit

Medium :- Email

2. Course Assignment – Rohit has sent the details for this and we need to submit a handwritten version by 29-June-2008.

The lighter side of Satellite Education

A little bit of fun won’t hurt a thing… Indeed… The folks who attend the sessions across various centres have made the classes a bit lighter, with some help from the professors.

Ram Kumar Kakani generally keeps the classes alive with his swift one-liners, “girl friend” jabs, awarding negative marks, or be it quoting from bollywood movies.

As with Marketing, the folks in the session keep it alive with their comments on the chat board. Though am not a proponent of using the chat sessions for personal use, I could not help smiling/laughing at some of the comments/suggestions. A case in point would be the jabs at a fellow student on the cement industry, Maya being relentless in asking her questions (Serious business, yet quite funny), Rakesh (campaigning the cause of the students), while Shirish is the Class Bachao Activist constantly raising the red flag on the “XLRI Studio”.

While having fun, some things to consider seriously,

1. Hughes is working constantly to improve the QoS, a few issues like “Echo” are due to the individual setting on the person’s mic volume (while you initiate a session). Rather than creating a brouhaha about “Echo” look at your settings first, before raising the red flag.

2. Too much abuse if I may, of the chat room will result in some crackdown at a later point in time. So let us use it more for class related discussions

3. Can we please stop all the hi’s/hello’s/any one from xxx questions in the room? If we want to get to get to know each other, there are other forums like the Orkut site (from KG), Nigam’s journals etc.

Just my thoughts! No offence meant! Ciao.

Management Accounting – Sessions 4/5 – MAC

Attendees : 191

Date:- 31-May-2008

Summary :- Ram Trader’s Balance Sheet (Solved with Roll # 58), Deferred Revenue Expenditure, P&L Account, Income Statement, Difference between BS and PL Statement, Components of a P&L Statement, Various types of Profit, Adjustments for P&L Account, Basis of Accounting (Accrual Vs Cash), Formats, Warranties/Bad Debts, Depreciation, Methods of calculation of Depreciation, Sample P&L Statement

Ram Trader’s Balance sheet was solved in the class using the sample roll # 58. Pretty much done in the line of how I did my assignment. The only difference being I accounted for the rent for 1 month while the prof. did it for 29 days.

On the question of Ram traders spending a 1000 rupees being a Deferred Revenue expenditure, the Prof. addressed that the question was subjective and we will have to evaluate whether the expense took care of the business for years to come or applicable only for the year.

 On a lighter note, the prof indicated that he had caught sight (on the video) of Rajesh Ramani on a mobile, vehemently denied by Rajesh, and effectively getting 5 marks for his question.

Profit and Loss Statement

Statement of Revenue and Expenses of a company. It is also referred as the Income statement. Apart from the revenues and expenses accomodated in this statement, it also needs to accomodate items like Depreciation, Accrued Interest, Tax Provisions etc. P&L statement is also a summary of the companies operations and helps us analyze the company’s performance in greater detail.

Wikipedia states “An Income Statement, also called a Profit and Loss Statement (P&L), is a financial statement for companies that indicates how Revenue (money received from the sale of products and services before expenses are taken out, also known as the “top line”) is transformed into net income (the result after all revenues and expenses have been accounted for, also known as the “bottom line”). The purpose of the income statement is to show managers and investors whether the company made or lost money during the period being reported.”

As this deals with the Profit/Loss Statement, we come across various types of profits like Gross Profit, Operating Profit, Net Profit etc.

Gross Profit : Sales – Cost of Goods (Direct Costs)

Operating Profit : Gross Profit – Operating Expenses

Net Profit : Operating Profit – (Interest Amt to be Paid + Taxes)

Withdrawals and Dividends are supposed to be done on the Net Profit numbers.

 In Services Industry such as IT/ITeS (Gross Profit will be pretty much same as Net Profit numbers)

Past Earnings – Profits carried on in the companies books, from previous years.

Difference Between Balance Sheet and P&L Statement of Accounts

1. Balance Sheet is a Position Statement, while P&L is a Performance Statement

2. Balance Sheet is a statement of Assets, Liabilities and OE, while P&L Statement is a statement of revenue/expenses/profit.

3. Balance Sheet states the matter of fact with respect to the companie’s performance (OE) , while P&L Statement can be used to analyze the performance of the company and provides answers to questions around company’s performance, expenses incurred etc

 Types of Accounting

Cash Basis – Governments (Road Tax collected now for 15 yrs will come under the current reporting period), also allowed for professionals (Lawyers, Doctors). Cash-basis accounting is not considered to provide a true and fair view of the financial performance and hence not used by companies.

Accrual Basis – Followed by companies, Complies GAAP Standard.  It is based on Realization. A Sale is made when the goods are delivered. Under accrual accounting, revenue is recorded when it is earned and realized, regardless of when actual payment is received. Similarly, expenses are “matched” (a process known as matching or expense matching) revenue regardless of when they are actually paid.

 P&L accounts are reported in 2 formats (Horizontal and Vertical). Not sure which is the standard?

Bad debts/warranties needs to be shown in P&L Statements, and reported accordingly. These are also shown under respective sections in the balance sheet. Bad Debts Losses (To be deducted in Current Assets), while Warranties are liabilities arrived at based on experience in the industry.

Concept of Depreciation 

Depreciation is a concept of reflecting the decrease the future economic utility of an Asset. It is applicable for Tangible assets of a business. It is done to account the normal wear and tear of an asset. Depreciation does not figure in the cash flow statement as it is notional.

Various Methods of Calculating Depreciation

Straight Line Method :- The reduction in cost of the asset is linear year on year. The formula to calculate Depreciation under this method

Depreciation = (Initial Cost – Salvage Cost)/Life of the Asset. This is applicable for items with the same usage during all the time of its use. E.g Furniture

Book Value – Beginning of Year	Depreciation Expense	Accumulated Depreciation	Book Value – End of Year
$17,000 (Original Cost)	$3,000	$3,000	$14,000
$14,000	$3,000	$6,000	$11,000
$11,000	$3,000	$9,000	$8,000
$8,000	$3,000	$12,000	$5,000
$5,000	$3,000	$15,000	$2,000 (Scrap Value)

WDV Method : The decrease in the value is based on a guidance percentage. e.g Computers in IT Industry (60 % YoY). Hence the decrease is more during initial years.

M.A.R.C.S Method : Modified Accelerated Cash Recovery System. US Concept. Decrease is more during the middle years. E.g Industrial Boilers, Pumps as it takes some time for such equipments to reach some optimal levels and then depreciates more from then on.

Companies may have 2 different P&L Accounts for a FY. i.e one for Investors and one for Tax authorites. (Different ways of Depreciation accounted for Assets in both cases)

P&L Statement also include schedule numbers, which provide details of the expense/sales and provides further break up of details.

Class work : – Preparing the P&L Statement for Ram Traders and Tallying the Retained Earnings in the BS problem with the Profit.

Some good read

http://ohioline.osu.edu/cd-fact/1153.html

http://en.allexperts.com/q/Managing-Business-1088/2008/3/balance-sheet-1.htm