CHAPTER 2 VALUE PROPOSITION - library.binus.ac.idlibrary.binus.ac.id/eColls/eThesisdoc/Bab2/CHAPTER...

15

CHAPTER 2

VALUE PROPOSITION

The idea of Value proposition is how the company can create a value for the

customer and to distinguish our position within another competitor and what kind of

service that the organizations try to provide The company should add a better value

for customers therefore customers convinced to use the product and service that the

organization offer This Chapter will be explains about the value proposition of the

business by describing the theory that will provide for the business

21 Understanding Different Types of Research

In the world of research there are two general approaches to gathering and

reporting information qualitative and quantitative approaches The qualitative

approach to research is focused on understanding a phenomenon from a closer

perspective The quantitative approach tends to approximate phenomena from a larger

number of individuals using survey methods In this research corner I describe

methods that are generally used in each strand of research Each approach has its

benefits and detriments and is more suitable to answering certain kinds of questions

16

211 QUALITATIVE APPROACH

The qualitative approach to gathering information focuses on describing a

phenomenon in a deep comprehensive manner This is generally done in interviews

open-ended questions or focus groups In most cases a small number of participants

participate in this type of research because to carry out such a research endeavor

requires many resources and much time

Benefits of the qualitative approach

Using open-ended questions and interviews allows researchers and practitioners to

understand how individuals are doing what their experiences are and recognize

important antecedents and outcomes of interest that might not surface when surveyed

with pre-determined questions Although qualitative research can be thought of as

anecdotal when pooled across a number of participants it provides a conceptual

understanding and evidence that certain phenomena are occurring with particular

groups or individuals

Allows identification of new and untouched phenomena

Can provide a deeper understanding of mechanisms

Gives a one-on-one and anecdotal information

Provides verbal information that may sometimes be converted to numerical form

May reveal information that would not be identified through pre-determined

survey questions

17

Limitations

Cannot generalize to the general population

Challenges in applying statistical methods

Difficulty in assessing relations between characteristics

212 QUANTITATIVE APPROACH

The quantitative approach to gathering information focuses on describing a

phenomenon across a larger number of participants thereby providing the possibility

of summarizing characteristics across groups or relationships This approach surveys

a large number of individuals and applies statistical techniques to recognize overall

patterns in the relations of processes

Benefits of the quantitative approach

Using survey methods across a large group of individuals enables generalization For

example if policy makers wanted to instantiate a policy about mentor training they

would likely require some evidence that this training actually works Interviewing a

few individuals or conducting a focus group with forty matches might be reflective

of specific cases in which the mentoring training worked however it would not

provide strong evidence that such training is beneficial overall Stronger support for

successful training would be evident if using quantitative methods

Enables gathering information from a relatively large number of participant

18

Can conduct in a number of groups allowing for comparison

Allows generalizing to broader population

Provides numerical or rating information

Informative for instantiating policy or guidelines

Lends to statistical techniques that allow determining relations between variables

(think of better word)

Limitations

Difficulty in recognizing new and untouched phenomena

Caution in interpretation without a control group

In summary the qualitative and quantitative approaches to research allow a different

perspective of situations or phenomena These two main approaches to research are

highly informative especially if used in combination Each approach has its benefits

and detriments and being aware of the methods used to gather information can help

practitioners and policy-makers understand the extent to which research findings can

be applied

22 FOOD HYGIENE THEORY

Good food hygiene is all about controlling harmful bacteria which can cause

serious illness The four main important aspects to remember for good hygiene are

Cross-contamination Cross-contamination is when bacteria are spread between food

surfaces or equipment It is most likely to happen when raw food touches (or drips

19

onto) ready-to-eat food equipment or surfaces To avoid cross- contamination try to

do the following use different equipment (including chopping boards and knives) for

raw meatpoultry and ready-to-eat food and make sure to wash your hands before

preparing food

Cleaning Effective cleaning gets rid of bacteria on hands equipment and surfaces

So it helps to stop harmful bacteria from spreading onto food

Chilling Chilling food properly helps to stop harmful bacteria from growing Some

food needs to be kept chilled to keep it safe for example food with a lsquouse byrsquo date

cooked dishes and other ready-to-eat food such as prepared salads and desserts It is

very important not to leave these types of food standing around at room temperature

Cooking Through cooking kills harmful bacteria in food So it is extremely

important to make sure that food is cooked properly When cooking or reheating

food always check that it is steaming hot all the way through

23 NUTRITION THEORY

The term is derived from the Arabic nutritional ldquogizardquo which means food

substances in English is well known as nutrition which means the material foods or

nutrients or often defined as the science of nutrition Other definition nutrient is

defined as a process that organisms use normally consumed food through the

digestive process absorption transport storage metabolism and spending substance

nutrition to sustain life growth and normal function organs as well as to generate

power (Irianto 2006 2)

20

231 UNDERSTANDING NUTRITION PARENTING

Manage the Nutrition in additional food for baby itrsquos for sustain the growth

and development of the physical and biological toddlers appropriately and impartial

(EvelineampNanang D 2010 11)

Figure 21 Kerangka TeoriSource Depkes RI 2007

According to (LIPI 2000123) a key aspect of nutrition parenting

a Care and protection from the mother to her baby

b The practice of breastfeeding and complementary feeding administration

c Parenting psychosocial

d Preparation of food

21

e Personal hygiene and environmental sanitation

Nutritional problems one of which is influenced by the mother to their baby

do not get enough information and ability to provide parenting from the mothers or

families will result in the incidence of malnutrition in their baby

232 THE PURPOSE OF SUPPLEMENTARY FEEDING

The purpose of supplementary feeding for baby more than 6 months of age is

to increase the energy and nutrients necessary that canrsquot provide from ASI because

the growing of the baby and with increasing the ages and weight Disorders on the

growth and development of normal children can happen when the energy and nutrient

needs of infants not fulfilled It can be caused by the food of the baby only ASI or the

additional food less qualified for the babys (Waryana 2010 p85)

Indonesia Government also issued a decision from Ministry of Health

represent the code etics form WHO In the decision ministry of health included

giving the ASI exclusive for the babys (permenkes nomer 450MenkesSKIV2004)

Also describe food for babys beside ASI (MP-ASI) in the regulation number

2371997 In this regulation the mean of food for babys beside ASI itrsquos not replacing

the ASI from the mother but the food beside the ASIrdquo said Rachmi Untoro Directors

of Social Nutritions Ministry of Health (httpdepkesstatus-gizigoid)

22

24 BUSINESS MODEL (NINE BUILDING BLOCKS)

The aim for this business model is to give visualization about how the

business wills works The idea it is included the purpose of the business operational

process and the business strategy therefore the model will give a specific concept to

be succeed in the future

Figure 22 Nine Building Blocks

Source Osterwalder amp Pigneur 2010

The canvas business model contain of nine important points it is define as nine

building blocks This model management strategic tools that could be develop for

new business or existing business The nine building blocks is cover as the following

23

1 Customer segments Target of the customers that define as a group of people

to reach and served

2 Value propositions It is the product and service that being offered to the

customer

3 Channels Defines how the business able to communicate and reach the

customer segment

4 Customer relationship Describes how to maintain the relationship between

the company and customers

5 Revenue streams Represent the cash that the company generate from the

customers

6 Key resources the assets and important source that the business need to

required thus the business will works

7 Key activities It s describe what the company activity do to run the business

8 Key partnership it is explains relationship networking between the suppliers

and partners that can support the company

9 Cost structure Expenses that the company must take in order to

manufacturing the product

Before going further into the innovation first a business need to create the

business model idea This is important to generate the idea of business and make into

a successful one (Osterwalder amp Pigneur 2010136)

24

25 PORTER FIVE FORCES MODEL

To analyze the structure of the business Five Forces Model is one of the

suggested frameworks to define the industry advantage and competitive advantage

with industry structure as the key to determinant it (Grimm Curtis M et al 200651)

Figure 23 Five Forces Model

Source Grimm Curtis Met al 2006

1 Threat new entrant

There are several factors that affect the threat of the new entry as the

following

a Entry barriers This is the ability of the product to enter the market If

the entry barriers are high it means the threat of the new entrant are

low and if the entry barriers are low the threat of new entrant are high

25

b Customer demand When the customer demand of product and service

are high threat of the possibility of new entrant is high since the

industry not be able to handle

c Product or service differentiation If the product can make

differentiation with new innovation then the threat is high

2 Threat of substitute products or service

The threat of substitute increased if there is competitor that can offer

better competitive price to the market

3 Bargaining power of customer

There are several factors that affect the bargaining power of customer as

the following

a Reputation When the product or service has a good reputation the

bargaining power of supplier will be low since the customer will have

no choice to select other product

b Switching cost High switching cost means the customer not easy to

switch to other competitor

c Quality of product and service Customers will buy the better quality

of the product even though the price is the same

d The number of the other industry competitor If the numbers of the

competitor are low the bargaining power of the customer also low

When the numbers of the competitors are high then the bargaining

power of the customer will be high

26

e Dependency to the product or service The bargaining power of the

customer will be low if a product have the ability to create a

dependency to the customer

4 Bargaining power of suppliers

There are some factors that affect the bargaining power of suppliers as the

following

a The number of supplier If the number of the supplier of the industry

are low then the bargaining power of the supplier are high and if the

number of the supplier are high then the bargaining power of supplier

are low

b Switching cost High switching cost in the product and service then it

is hard to change to another supplier

c Quality of the product serviceIt is very common to switch to another

supplier once the quality of product and service are low on the other

hand if the quality of the product and service are high there is not a n

option to change to other supplier

d Product or service availability The bargaining power of supplier will

be low if the availability of the product is high

e Image of the supplier If the supplier has a great image and status in

the industry then it will follow by the higher bargaining power

5 Intensity of competitive rivalry

Intensity of the industry will be high when there is other service and

products operate that involve many players which can be dominant or similar

27

26 SWOT ANALYSIS

A Way to monitoring the external and internal marketing environment is by using

SWOT analysis (Kotler Keller 2012 70) In their book Osterwalder and Pigneur

(2010 224) mentioned that a SWOT analysis in the business model yields two

results

1 Provides a snapshot of where is our business are (strength and weakness as

internal environment)

2 Suggest some future trajectories (opportunities and threats as external

environment)

SWOT analysis is such an important part in the process of designing business model

prototypes

A business unit must monitor key macro environment forces and significant

micro environment factors that affect is ability to earn profits An opportunity is the

are of buyer need an interest that a company has a high probability of profitability

satisfying Meanwhile a threat is a challenge posed by an unfavorable trend or

development that in the absence of defensive marketing action would led to lower

sales or profit (Kotler Keller 2012 71)

Meanwhile as an evaluation the business itself has to looking to its strength

and weaknesses By looking on these points the business could consider whether it

should limit itself to those opportunities for which it possesses the required strength

or consider those that might require it to find or develop new strength

28

261 TOWS MATRIX

Based on the journal from Heinz Weihrich (1982) Tows Matrix is a variant of

the classic business tool SWOT Analysis TOWS and SWOT are acronyms for

different arrangements of the words Strengths Weaknesses Opportunities and

Threats

Here are four basic strategies depending on the prevalence of the analyzed

group of factors (positive or negative) in the environment and within the company

SO situation - maxi-maxi strategy This situation applies to the company for

which dominates strengths in the environment and opportunities within This

situation corresponds to the maxi-maxi strategy strong expansion and

diversified development

WO situation - mini-maxi strategy In this situation company has the more

vulnerabilities - weaknesses but its environment gives more opportunities

The strategy should include the use of these opportunities while reducing or

correcting weaknesses within the organization

ST situation - maxi-mini strategy The source of development difficulties for

the company are unfavorable external conditions (prevalence of threats) The

company may use large internal strengths in attempt to overcome threats from

environment

WT situation - mini-mini strategy The company in this case is devoid of any

development opportunities It operates in hostile environments and its

29

potential for change is small It does not have significant strengths which

could withstand threats Mini-mini strategy boils down to a pessimistic

version of the liquidation or in optimistic situation - to strive for survival or

merger with another organization

Figure 24 TOWS Matrix Source Weihrich (1982)

27 MARKETING THEORY

The American Marketing Association define marketing as the activity set of

institutions and process for creating communication delivering and exchanging

offerings that have value for customers clients partners and society at large (Kotler

Keller 2012 27) Peter Drucker a leading management theorist said that the aim of

marketing is to make selling superfluous Successful marketing need and

30

understanding creating delivering capturing and sustaining customer value The

marketing plan is the central instrument for directing and coordinating the marketing

effort

271 Marketing Management

Based on (Kotler amp Amstrong 2010) the marketing management is analysis

planning implementation and programs control that made for created developed

and maintenance the transaction for gain the benefit based on the company purposed

Company management consist of demand that relationship with the customers

272 Segmenting Targeting Positioning

Based on (Kotler 2001) there are many consumers with differential needs so

the company must share the market choose good segmentation and also made some

appropriate strategy to gain a big benefit than other competitors Those strategies

process consist of there point which are

1 Market Segmentation

Segmentation is the share consumer activity into a more homogenous group m

hopes of a response is obtained such as buy wear accept and believe On the

practice segmentation market is the process share market into group

consumer based on their needs characteristic behavior and differentiation

mix market (Kasali 203) Based on (Kotler 2003) there are 3 main

segmentations of variable which are

31

a Geographic segmentation

Dividing market into different geographical units such as nations

states regions countries cities and neighborhoods

b Demographic segmentation

Dividing market into groups based on demographic variables such as

age gender family size family life cycle income occupation

education religion race and nationality

c Psychographic segmentation

Dividing a market into different groups based on social class lifestyle

or personality characteristic

Based on (Kotler 2003) that the market segment can drive so the

segment of the market must have 5 characteristics which are

Measurable size of the segment purchasing power of the

segment we want to reach and the last one is characteristic of

the segment can be measurable

Substantial a segment becomes the unity of homogeny group

that have a power to gain benefit if the program and marketing

drive by these groups

Accessible the segment that must be reach and served

effectively

32

Differentiable that the segments can be separate by conceptual

and respond differently to the program and the different

elements of the marketing mix

Actionable the program have made effectively that must be

implemented to attract and serve the segments

2 Market Targeting

These methods purpose to establish target market evaluation process begins

with the attractiveness of each market segment and has one or more segments

most benefit to be entered Based on (Kotler 2003) these are 5 patterns that

we can used to enter the market which are

a Single segment concentration

Concentrate with one segment the company get the knowledge

about what the market needs that to be the reach target market

and get a strong minded of consumers in that segment This

pattern have a high risk if there are saturation occurs in this

segment the company faces the risk of losing the entire market

b Selective specialization

On this pattern the company can choose the segment market

that where segment must gain the benefit The advantage of

this pattern are the ability of the company to reduce the risk

lower

c Product specialization

33

This pattern showed the company produced the goods which

will be sold in some segments

d Market specialization

The market showed that company produced the goods and sell

to the one segment the advantages if this pattern the company

have a high reputation from the consumer that segment market

have been entered

e Full market coverage

On this pattern the company try to reach whole market with

produced what consumer needs with the differential product to

gain the whole market the entered

3 Market Positioning

Market positioning is the activity of the company to place their product on the

market so their product get a clear position distinguishable as well as more

expected than competing production the minds of the target consumers that

will provide huge benefits in the target market

Based on (Kotler 2003) the company must avoid the four main errors in

placing market position which are

a Under positioning

It is mean the placement too low that causing superficial

picture of the product so consumer have a low response to the

product

b Over positioning

34

The placement is too high so it can cause the false perception

from consumers on the price of the product so consumers are

reluctant to buy because they think price is too high

c Confused positioning

Confusing placement of the product because the company too

often change their market position

d Doubtful positioning

Dubious product placement the effect of this position the

consumers distrust of the product

273 Marketing Mix

Based on (Kotler ampAmstrong 2010) marketing mix is a unity of the tools of

marketing that the tactical as well as directed and used by the company to produce the

desired response target market Marketing mix is a modern marketing theory

Marketing mix defined as the set of marketing tools that the form use to pursue its

marketing objective in the target market (Kotler 1994 98) Based on the Journal

Marketing by Chai Lee Goi Marketing mix is not scientific theory but a conceptual

framework that identifies the principal decision making manager make in configuring

their offerings to suit consumersrsquo needs (Lee Chai Goi 2009 1) To gain the benefit

for the company marketing mix is the weapon that company usually used to get the

change on the market That changed was grouped by four strategies named ldquo4Psrdquo

that consist of product price place and promotion

35

Product

Product is goods or services that company offered to the market

Price

Price is the several money that consumer must pay to buy a product

Place

Place (distribution) not only represent that the product can achieve or known

but also activity that company do for the product the produced easy to get at

the market and consumers

Promotion

Is the activity that company do to communicate their product and get the

consumer to reach their product Consist of advertising events sponsorship

and other activity are summarized in the Integrated Marketing

Communication (IMC)

Booms and Bitner is suggested 3 other elements beides the traditional 4Prsquos by

Kotler for service business which are (wwwlenamarketingnet 2013)

Physical Evidence

Is about where the service is being delivered from This element will

differentiate the company with other

Process

This element of the marketing mix looks at the used to deliver the service

36

People

People are essential ingredients in service provision recruiting and training

the right staff is required to create a competitive advantage

28 OPERATIONAL MANAGEMENT 281 THE SERVICE DESIGN PROCESS Service design is more comprehensive and occurs more often than product

design The inherent variability of service processes requires that the service system

be carefully designed The service concept defines the target customer and the desired

customer experience The service design process must be different and unique from

others to make the product selling point It also defines how onersquos service is

different from others and how it will compete in the marketplace Sometimes

services are successful because their service concept fills a previously unoccupied

niche or differs from the generally accepted mode of operation (Rusell amp Taylor

2011 193)

37

Figure 25 The Service Design Process Source Rusell amp Taylor2011

From the service concept a service package is created to meet customer

needs The package consists of a mixture of physical items sensual

benefits and psychological benefits Effective service design recognizes and

defines all the components of a service package Finding the appropriate mix of

physical items and sensual and psychological benefits and designing them to be

consistent with each other and the service concept is also important (Rusell amp

Taylor 2011 194) From the service package service specifications are developed

for performance design and delivery Performance specifications outline

expectations and requirements for general and specific customers

Performance specifications are converted into design specifications and finally

delivery specifications Design specifications must describe the service in

sufficient detail for the desired service experience to be replicated for different

individuals at numerous locations The specifications typically consist of

38

activities to be performed skill requirements and guidelines for service

providers and cost and time estimates Facility size location and layoutas well

as equipment needs are also included

29 FINANCIAL THEORY 291 BALANCE SHEET

According to Gitman amp Zitter (2012 62) The balance sheet presents a

summary statement of the firmrsquos financial position at a given time The statement

balances the firmrsquos assets (what it owns) against its financing which can be either

debt (what it owes) or equity (what was provided by owners) Below is the example

of balance sheet from Bartlettrsquos Company

Figure 26 Bartlett Company Balance Sheets Source Gitman amp Zitter 2012

39

The assets are listed from the most liquid (cash) ndash down to the least liquid

Marketable securities are very liquid short-term investments held by the firm

Because they are highly liquid marketable securities are viewed as a form of cash

(ldquonear cashrdquo) Accounts receivable represent the total monies owed the firm by its

customers on credit sales Inventories include raw materials work in process

(partially finished goods) and finished goods held by the firm The entry for gross

fixed assets is the original cost of all fixed (long-term) assets owned by the firm Net

fixed assets represent the difference between gross fixed assets and accumulated

depreciation ndash the total expense recorded for the depreciation of fixed assets The net

value of fixed assets is called their book value (Gitman amp Zitter 2012 62)

The liabilities and equity accounts are listed from short-term to long-

term Current liabilities include accounts payable amounts owed for credit

purchases by the firm notes payable outstanding short-term loans typically

from commercial banks and accruals amounts owed for services for which a bill

may not or will not be received Examples of accruals include taxes due the

government and wages due employees Long-term debt represents debt for which

payment is not due in the current year Stockholdersrsquo equity represents the

ownersrsquo claims on the firm The preferred stock entry shows the historical

proceeds from the sale of preferred stock(Gitman amp Zitter 2012 62)

40

292 INCOME STATEMENT

The income statement provides a financial summary of the firmrsquos operating

results during a specified period Most common are income statements covering a 1-

year period ending at a specified date ordinarily December 31 of the calendar year

Many large firms however operate on a 12-month financial cycle or fiscal year that

ends at a time other than December 31 In addition monthly income statements are

typically prepared for use by management and quarterly statements must be made

available to the stockholders of publicly owned corporations (Gitman amp Zitter

2012 59-60) The example of income statement is shown below

Figure 27 Bartlett Company Income

Statement Source GitmanampZitter2012

293 CASH FLOW ANALYSIS

A cash flow statement is one of the most important financial statements for a

project or business The statement can be as simple as a one page analysis or may

41

involve several schedules that feed information into a central statement A cash flow

statement is a listing of the flows of cash into and out of the business or project

Many cash flows are constructed with multiple time periods

For example it may list monthly cash inflows and outflows over a yearrsquos time

It not only projects the cash balance remaining at the end of the year but also

the cash balance for each month (wwwextensioniastateedu 2013) Some cash

flow budgets are constructed so that we can monitor the accuracy of our projections

These budgets allow us to make monthly cash flow projections for the coming year

and also enter actual inflows and outflows as we progress through the year This

will allow us to compare your projections to your actual cash flows and make

adjustments to the projections for the remainder of the year

Figure 28 Example of

Cash Flow Source

Gitman ampZitter 2012

Even though cash flow and profitability are closely related they are different

42

A cash flow statement lists cash inflows and cash outflows while the income

statement lists income and expenses A cash flow statement shows liquidity while an

income statement shows profitability

294 PAYBACK PERIOD

Payback periods are commonly used to evaluate proposed investments The

payback period is the amount of time required for the firm to recover its initial

investment in a project as calculated from cash inflows The payback period can be

found by dividing the initial investment by the annual cash inflow When the

payback period is used to make acceptndashreject decisions the following decision

criteria apply

If the payback period is less than the maximum acceptable payback

period accept the project

If the payback period is greater than the maximum acceptable payback

period reject the project

According to Gitman amp Zitter (2012 393) the length of the maximum

acceptable payback period is determined by management This value is set

subjectively on the basis of a number of factors including the type of project

(expansion replacement or renewal other) the perceived risk of the project and the

perceived relationship between the payback period and the share value It is simply a

value that management feels on average will result in value-creating investment

decisions

43

By measuring how quickly the firm recovers its initial investment the

payback period also gives implicit consideration to the timing of cash flows and

therefore to the time value of money Because it can be viewed as a measure of

risk exposure many firms use the payback period as a decision criterion or as a

supplement to other decision techniques The longer the firm must wait to recover

its invested funds the greater the possibility of a calamity Hence the shorter the

payback period the lower the firmrsquos risk exposure A second weakness is that this

approach fails to take fully into account the time factor in the value of money A

third weakness of payback is its failure to recognize cash flows that occur after the

payback period (Gitman amp Zitter 2012 394-396)

Figure 29 Calculation of

Payback Period Source

Gitman amp Zitter 2012

44

295 NET PRESENT VALUE (NPV)

The method used by most large companies to evaluate investment projects is

called net present value (NPV) The intuition behind the NPV method is simple

When firms make investments they are spending money that they obtained in one

form or another from investors Investors expect a return on the money that they give

to firms so a firm should undertake an investment only if the present value of the

cash flow that the investment generates is greater than the cost of making the

investment in the first place

Because the NPV method takes into account the time value of investorsrsquo

money it is a more sophisticated capital budgeting technique than the payback rule

The NPV method discounts the firmrsquos cash flows at the firmrsquos cost of capital This

rate is the minimum return that must be earned on a project to satisfy the firmrsquos

investors Projects with lower returns fail to meet investorsrsquo expectations and

therefore decrease firm value and projects with higher returns increase firm

value (Gitman amp Zitter 2012 397)

The net present value (NPV) is found by subtracting a projectrsquos initial

investment (CF0) from the present value of its cash inflows (CFt) discounted at a

rate equal to the firmrsquos cost of capital (r) as shown below

NPV = Present value of cash inflows - Initial investment

When NPV is used both inflows and outflows are measured in terms of

45

present dollars For a project that has cash outflows beyond the initial investment the

net present value of a project would be found by subtracting the present value of

outflows from the present value of inflows When NPV is used to make accept reject

decisions the decision criteria are as follows

If the NPV is greater than $0 accept the project

If the NPV is less than $0 reject the project

If the NPV is greater than $0 the firm will earn a return greater than its cost of

capital Such action should increase the market value of the firm and therefore the

wealth of its owners by an amount equal to the NPV (Gitman amp Zitter 2012 397)

296 INTERNAL RATE OF RETURN (IRR)

The internal rate of return (IRR) is one of the most widely used capital

budgeting techniques The internal rate of return (IRR) is the discount rate that

equates the NPV of an investment opportunity with $0 (because the present value of

cash inflows equals the initial investment) It is the rate of return that the firm will

earn if it invests in the project and receives the given cash inflows (Gitman amp Zitter

2012 401)

When IRR is used to make acceptndashreject decisions the decision criteria are as

follows

If the IRR is greater than the cost of capital accept the project

46

If the IRR is less than the cost of capital reject the project

To calculate IRR Most financial calculators have a pre-programmed IRR

function that can be used to simplify the IRR calculation With these calculators you

merely punch in all cash flows just as if to calculate NPV and then depress IRR to

find the internal rate of return Computer software including spreadsheets is also

available for simplifying these calculations All NPV and IRR values presented in

this and subsequent chapters are obtained by using these functions on a popular

financial calculator (Gitman amp Zitter 2012 402)

297 COST OF GOOD SOLD (COGS)

Cost of goods sold is the direct costs attributable to the production of the

goods sold by a company This amount includes the cost of the materials used in

creating the good along with the direct labor costs used to produce the good It

excludes indirect expenses such as distribution costs and sales force costs

COGS is the costs that go into creating the products that a company sells

therefore the only costs included in the measure are those that are directly tied to the

production of the products For example the COGS for an automaker would include

the material costs for the parts that go into making the car along with the labor costs

used to put the car together The cost of sending the cars to dealerships and the cost of

the labor used to sell the car would be excluded

The exact costs included in the COGS calculation will differ from one type

of business to another The cost of goods attributed to a companys products are

47

expensed as the company sells these goods In summary for manufacturers COGS is

the cost of buying raw materials and manufacturing finished products For retailers

itrsquos the cost of obtaining or buying the products sold to customers If the company is

in a service industry COGS is the cost of the service it offers

48

49

50

16

211 QUALITATIVE APPROACH

The qualitative approach to gathering information focuses on describing a

phenomenon in a deep comprehensive manner This is generally done in interviews

open-ended questions or focus groups In most cases a small number of participants

participate in this type of research because to carry out such a research endeavor

requires many resources and much time

Benefits of the qualitative approach

Using open-ended questions and interviews allows researchers and practitioners to

understand how individuals are doing what their experiences are and recognize

important antecedents and outcomes of interest that might not surface when surveyed

with pre-determined questions Although qualitative research can be thought of as

anecdotal when pooled across a number of participants it provides a conceptual

understanding and evidence that certain phenomena are occurring with particular

groups or individuals

Allows identification of new and untouched phenomena

Can provide a deeper understanding of mechanisms

Gives a one-on-one and anecdotal information

Provides verbal information that may sometimes be converted to numerical form

May reveal information that would not be identified through pre-determined

survey questions

17

Limitations



















18







Limitations








be applied






19




preparing food










23 NUTRITION THEORY








20











21



















22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

17

Limitations



















18







Limitations








be applied






19




preparing food










23 NUTRITION THEORY








20











21



















22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

18







Limitations








be applied






19




preparing food










23 NUTRITION THEORY








20











21



















22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

19




preparing food










23 NUTRITION THEORY








20











21



















22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

20











21



















22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

21



















22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

22











23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

23


to reach and served


customer


customer segment




customers











24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

24









following




25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

25











the following












26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

26






following




are low














27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

27

26 SWOT ANALYSIS




results




environment)


prototypes











28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

28

261 TOWS MATRIX




Threats














environment



29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

29






27 MARKETING THEORY






30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

30



effort


















31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

31




















effectively

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

32






2 Market Targeting















lower


33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

33







have been entered












a Under positioning



product

b Over positioning

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

34










273 Marketing Mix












35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

35

Product


Price


Place




Promotion




Communication (IMC)



Physical Evidence



Process


36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

36

People











2011 193)

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

37















38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

38











39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

39




















40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

40















41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

41













Cash Flow Source



42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

42




294 PAYBACK PERIOD






criteria apply











decisions

43














44





















45
















2012 401)


follows


46






















47





48

49

50

43














44





















45
















2012 401)


follows


46






















47





48

49

50

44





















45
















2012 401)


follows


46






















47





48

49

50

45
















2012 401)


follows


46






















47





48

49

50

46






















47





48

49

50

47





48

49

50

48

49

50

49

50

CHAPTER 2 VALUE PROPOSITION - library.binus.ac.idlibrary.binus.ac.id/eColls/eThesisdoc/Bab2/CHAPTER...

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Transcript of CHAPTER 2 VALUE PROPOSITION - library.binus.ac.idlibrary.binus.ac.id/eColls/eThesisdoc/Bab2/CHAPTER...