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Assistant Professor, MarketingPlease ensure all electronic devices are in “silent

mode”, “vibrate mode” or “turned off”

Anthony Francescucci

MKT 100-021WEEK 5 - MARKETING ETHICS &

SOCIAL RESPONSIBILITY

Welcome to

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AGENDA FOR TODAY

DISCUSS ASSIGNMENT #1

Upcoming Mid-term

Review Module 3

2 New Concepts

Metrics 3 & 4

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METRICS 3 & 4

Market Analytics&

Contribution Margin

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METRIC 3MARKET SHARE &

MARKET ANALYTICS

MARKET ANALYTICS

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O/S

Market Share(Units Sold) Herfindahl Index

XP 79.41% 0.631

Vista 9.19% 0.00845

Mac OS 7.00% 0.00490

Linux 0.60% 0.000036

Others 3.80% 0.00144

Total 100% 0.646

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MARKET SHARECalculate the Unit and Revenue Market Shares for the automakers:

Units Sold (000s)

Unit Market Share

Revenue (000s)

Revenue Market Share

Zipper 25.0 $375,000

Twister 10.0 $200,000

A-One 7.5 $187,500

Bowlz 5.0 $125,000

Chien 2.5 $50,000

Market Total 50.0 $937,500

Unit Market Share (%) Unit Sales (#)Total Market Unit Sales (#)

=

Revenue Market Share (%) Sales Revenue ($)Total Market Revenue ($)

=

25,00050,000

50%

20%

15%

10%

5%

100%

$375,000,000$937,500,000

40.0%

21.3%

20.0%

13.3%

5.3%

100%

X 100

X 100

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RELATIVE MARKET SHAREThe market for small urban cars consists of five players:

Units Sold (000s) Revenue (000s)

Zipper 25.0 $375,000

Twister 10.0 $200,000

A-One 7.5 $187,500

Bowlz 5.0 $125,000

Chien 2.5 $50,000

Market Total 50.0 $937,500

In the market for small urban cars, managers at A-One want to know their firm’s market position relative to its largest competitor on the basis of revenues and unit sales:

Relative Market Share (I)Brand’s Market Share ($, #)

Largest Competitor’s Market Share ($,#)=

Relative Market ShareA-One (Units)

7,500

25,000=

0.30Relative Market Share

A-One (Revenue)

$187,500,000

$375,000,0000.5

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Four Firm Concentration Ratio(in Unit terms)

50% + 20% + 15% + 10% 95%Four Firm Concentration Ratio

(in Revenue terms)40% + 21.3% + 20%

+13.3% 94.6%

MARKET CONCENTRATION

Units Sold (000s)

Unit Market Share

Revenue (000s)

Revenue Market Share

Zipper 25.0 50% $375,000 40.0%

Twister 10.0 20% $200,000 21.3%

A-One 7.5 15% $187,500 20.0%

Bowlz 5.0 10% $125,000 13.3%

Chien 2.5 5% $50,000 5.3%

Market Total 50.0 100% $937,500 100%

Four Firm Concentration Ratio = Sum (Market Share of top Four competitors)

= =

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MARKET CONCENTRATION (CONT’D)Finally, we’ll look at market concentration using the Herfindahl Index:

Units Sold (000s)

Unit Market Share

Herfindahl Index

Revenue (000s)

Revenue Market Share

HerfindahlIndex

Zipper 25.0 50% $375,000 40.0%

Twister 10.0 20% $200,000 21.3%

A-One 7.5 15% $187,500 20.0%

Bowlz 5.0 10% $125,000 13.3%

Chien 2.5 5% $50,000 5.3%

Market Total

50.0 100% $937,500 100%

Herfindahl Index = Sum [ (Market Share)⌃2 ]

0.25 ( )⌃2 =

( )⌃2 = 0.04

( )⌃2 = 0.0225

( )⌃2 = 0.01

( )⌃2 = 0.0025+0.325

0.16( )⌃2 =

( )⌃2 = 0.0455

( )⌃2 = 0.04

( )⌃2 = 0.0178

( )⌃2 = 0.0028+0.2661

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METRIC 4:CONTRIBUTION

MARGIN

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CONTRIBUTION MARGINThe amount left over

from sales revenue that can contribute to fixed

costs, once variable costs are deducted.

Can be expressed as a %, or a dollar amount

Can be expressed per unit or total dollars

ContributionMargin

Sales or Revenue

COGS orVariable

Costs

REMEMBER ACME COACH COMPANYVariable costs:

$ 60 Raw materials and components+ $240 Labour (6 labour hours @ $40/hour) $300 Total Variable Cost per Unit

Monthly fixed operating costs: Yearly fixed operating costs:

$600 Rent $100 Insurance ($1200 / 12 months)+ $300 Salary $1000 Total Fixed Costs per Month $12, 000 FC / year

One time capital costs: $1000 Crane+ $2500 Tooling $3500 Total One Time Fixed Costs

ContributionMargin %

Contrib Margin $ RevenueContribution

Margin %

WHAT IS THE CM AT ACME

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The amount left over from sales revenue,

once variable costs are deducted, to cover

fixed costs.

Can be expressed as a %, or a dollar amount

Can be expressed per unit or total dollars

Each bus sells for $450, and remember it costs $300 to make. We sell 100 buses in the first year.

What is our contribution margin?

ContributionMargin Revenue

COGS orVariable

Costs$150 $450 $300

$150 * 100 = $15,000

$450 * 100$45,000

300 X 100$30,000

100%33.3 %

So What?

WHAT DOES A CONTRIBUTION OF $15,000 MEAN FOR ACME?

Variable costs: $ 60 Raw materials and components+ $240 Labour (6 labour hours @ $40/hour) $300 Total Variable Cost per Unit

Monthly fixed operating costs: Yearly fixed operating costs:

$600 Rent

$100 Insurance ($1200 / 12 months)+ $300 Salary $1000 Total Fixed Costs per Month $12, 000 FC / yearOne time capital costs: $1000 Crane+ $2500 Tooling $3500 Total One Time Fixed Costs

ContributionMargin %

Contrib Margin $ RevenueContribution

Margin %

SECOND EXAMPLE: BOTTLED WATER

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The amount left over from sales revenue,

once variable costs are deducted, to cover

fixed costs.

Can be expressed as a %, or a dollar amount

Can be expressed per unit or total dollars

Suppose we are bottling water. We sell a bottle for $1.00, and it costs us $0.25 to make. We sold 50,000 bottles last quarter

What is our contribution margin?

ContributionMargin Revenue

COGS orVariable

Costs$0.75 $1.00 $0.25

$0.75 x 50K$37,500

$1 X 50K$50,000

.25 x 50K$12,500

100%75 %

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LET’S COMPLETE THE WORKSHEET

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SOME ADDITIONAL CONCEPTS

These concepts are not covered in the online modules so I’ve added some additional readings

on blackboard located at;

Course Info & Materials/Lecture Materials/Week 5/ MKT100 – Week 5 – Additional readings.pdf

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ANSOFF’S MATRIXExisting Products New Products

Exis

tin

g M

ark

ets

New

Mark

ets

MarketPenetration

ProductDevelopment

MarketDevelopment

Diversification

Framework for developing intensive

growth strategies

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PRODUCT ADOPTION CURVE

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PRODUCT ADOPTION & LIFE CYCLE CURVES

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MODULE 3

Marketing Ethics &

Social Responsibility

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CONSIDER THIS SCENARIO

A professor, who teaches a marketing course, saw one of his students

photocopying the textbook for his course and then this same student sent

an e-mail blast to everyone in the course that he had copies of the textbook

for sale.  Of course the professor was on the class email distribution list.  A

fellow student responded to the email and purchased the textbook for 1/3 of

the price of the bookstore copy.

Is this ethical? Yes/No? Why?

Who’s ethics are in question?

Should the professor report the student for academic misconduct?

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MARKETING ETHICS

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UNDERSTANDING MARKETING ETHICS

The Social Contract

•Ethical and moral codes maintain the social fabric. •Enlightenment is measured by its underlying ethics.•If you want to be part of society obey the rules.•Traders have a moral obligation to obey the rules.

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UNDERSTANDING MARKETING ETHICS

Utility Principle

• ”ethical behaviour” is the behaviour that produces the greatest good (the most good for the most people) in a specific situation.

Categorical Imperative Principle

• what if everyone did it?

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UNDERSTANDING MARKETING ETHICS

Utility Principle

• Hard to apply• How do you measure the amount of good and amount of bad?

• How do you determine the difference?• What if your self-interest is part of the equation?

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UNDERSTANDING MARKETING ETHICS

Categorical Imperative Principle

• Alternative to overcome limitations of Utility principle• The “Tragedy of the Commons” effect

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LET’S LOOK AT SOME SCENARIOS

Using the Utility

& Categorical Imperative

Principles

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CONTEMPORARY ETHICAL CASES

Price Gouging Moral Dilemma

•Florida Statute 501.160 states•it is unlawful during a state of emergency to sell, lease, offer to sell, or offer for lease commodities, dwelling units, or self-storage facilities for an amount that grossly exceed the average price of the commodity the thirty days before the declaration of the state of emergency unless the seller can show increases in its prices or market trends justifying the price.•Under the law, evidence of price gouging was explained as follows: the law compares the price of the commodity or service to the average price charged over the 30 day period prior to the declared state of emergency. If there is a “gross disparity” between the prior price and the current charge then it is price gouging.

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CONTEMPORARY ETHICAL CASES

Price Gouging Moral Dilemma

•Is price gouging unethical or is it simply suppliers exploiting an imbalance in supply & demand?

•When buyers exploit an imbalance in supply & demand to negotiate and obtain very low prices is this unethical?

•From a consumer perspective, is there any positive aspect to price increases following a disruptive event such as a major hurricane?

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CONTEMPORARY ETHICAL CASES

Organ Donor Dilemma

•In 2006 there were 67,600 people on the waiting list for a kidney. 16,470 individuals received a new kidney and 4100 died while waiting annually. Donors were half deceased and half living. Donors are solely motivated by altruism, as it is illegal to offer anything of value for an organ. Given the shortage and the restrictions on compensation enshrined in the law, the issue of compensation (payment) is being raised as a possible solution.•The case for compensated organ donation is based on the significant deficit of transplantable organs and the potential of a market system to help bridge the gap between supply and demand.

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CONTEMPORARY ETHICAL CASES

Moral Dilemma: Reason vs. Emotion

•One particular hypothetical scenario involves a runaway trolley, five helpless people on the track, and a large-framed man looking on from a footbridge. He may or may not tumble to a bloody demise: You get to make the call. That’s because in this scenario, you are standing on the footbridge, too. You know that if you push the large man off the bridge onto the tracks, his body will stop the trolley before it kills the five people on the tracks. Of course, he will die in the process.

•You decide to push the man off the bridge.

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GLOBAL CROSS-CULTURAL ETHICS

Marketing in a

Global World

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GLOBAL CROSS-CULTURAL ETHICS

Situational Ethics

• Is “when in Rome do as the Romans do” an acceptable ancient ethical principle in global trading?

• Is imposing your ethics, ethical? • Given modern technology such as the Internet, where is Rome?

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CONTEMPORARY ETHICAL CASES

The Yahoo Dilemma in China

•Yahoo has been criticized for collaborating with the Chinese Government in providing data which was then employed to prosecute at least three political dissidents.

•The most prominent of the three is Shi Tao, who has been sentenced to a 10-year prison term for leaking a propaganda directive.

•In its defense, Yahoo claims that it has no choice but to cooperate with the Chinese government. In part, that’s because Yahoo merged its China business with a Chinese e-commerce company, Alibaba.com.

•The U.S. company “does not have a day-to-day operational control” over Yahoo! China. Testifying before Congress, Yahoo’s lawyer said he could not say how often Yahoo provides information about its users to the authorities.

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CONTEMPORARY ETHICAL CASESPaying Bribes Around the

World

•How different are business ethics around the world anyway?

• www.transparency.org

• M3 Worksheet + Case 4: Company Bribery Practices and Government Corruption

  2002 2003 2004 2005 2006 2008Country GCI BPI GCI BPI GCI BPI GCI BPI GCI BPI GCI BPI

Australia 8.6 8.5 8.8 8.5 8.8 8.5 8.8 8.5 8.7 7.5 8.7 8.5

Belgium 7.1 7.8 7.6 7.8 7.5 7.8 7.4 7.8 7.3 7.2 7.3 8.8

Canada 9 8.1 8.7 8.1 8.5 8.1 8.4 8.1 8.5 7.4 8.7 8.8

China 3.5 3.5 3.4 3.5 3.4 3.5 3.2 3.5 3.3 4.9 3.6 6.5

France 6.3 5.5 6.9 5.5 7.1 5.5 7.5 5.5 7.4 6.5 6.9 8.1

Germany 7.3 6.3 7.7 6.3 8.2 6.3 8.2 6.3 8 7.3 7.9 8.6

Hong Kong 8.2 4.3 8 4.3 8 4.3 8.3 4.3 8.3 6 8.1 7.6

Italy 5.2 4.1 5.3 4.1 4.8 4.1 5 4.1 4.9 5.9 4.8 7.4

Japan 7.1 5.3 7 5.3 6.9 5.3 7.3 5.3 7.6 7.1 7.3 8.6

Netherlands 9 7.8 8.9 7.8 8.7 7.8 8.6 7.8 8.7 7.2 8.9 8.7

Russia 2.7 3.2 2.7 3.2 2.8 3.2 2.4 3.2 2.5 5.1 2.1 5.9

Singapore 9.3 6.3 9.4 6.3 9.3 6.3 9.4 6.3 9.4 6.7 9.2 8.1

S. Korea 4.5 3.9 4.3 3.9 4.5 3.9 5 3.9 5.1 5.8 5.6 7.5

Spain 7.1 5.8 6.9 5.8 7.1 5.8 7 5.8 6.8 6.6 6.5 7.9

Switzerland 8.5 8.4 8.8 8.4 9.1 8.4 9.1 8.4 9.1 7.8 9 8.7

Taiwan 5.6 3.8 5.7 3.8 5.6 3.8 5.9 3.8 5.9 5.4 5.7 7.5

UK 8.7 6.9 8.7 6.9 8.6 6.9 8.6 6.9 8.6 7.3 7.7 8.6

USA 7.7 5.3 7.5 5.3 7.5 5.3 7.6 5.3 7.3 7.2 7.3 8.1

Correlations 80% 83% 83% 79% 85% 89%

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0 1 2 3 4 5 6 7 8 9 104

5

6

7

8

9

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Government Corruption & Bribe Paying Correlation

Government Corruption index

Brib

e Pa

ying

Inde

x

IS BRIBE PAYING RELATED TO GOV’T CORRUPTION?

Hong Kong

Singapore

Belgium &Japan

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GROUP EXERCISE

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EACH GROUP TO ARGUE CASERow Case Group Principle to argue

1Front 1

Right Utility

Left Cat. Imp.

2 2Right Utility

Left Cat. Imp.

3 3Right Utility

Left Cat. Imp.

4 4Right Utility

Left Cat. Imp.

5&6Back 5

Right Utility

Left Cat. Imp.

Review the case and argue your answers to the questions

from the perspective of the assigned principle

•Note you’re points on back of handout•10 minutes to discuss with neighbours & document•Discuss as a class

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CASE #1

• Your supervisor enters your office and asks you for a check for

$150.00 for expenses he tells you he incurred entertaining a client

last night. He submits receipts from a restaurant and lounge. At

lunch your supervisor’s girlfriend stops by to pick him up for lunch

and you overhear her telling the receptionist what a great time she

had at dinner and dancing with your supervisor the night before.

• Was the supervisor unethical?

• If you do nothing are you unethical?

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CASE #2 • You have worked as a bank teller for several months when one of the other tellers

who has become a good friend tells you that her daughter is extremely ill and

that she must have an operation to survive. She also tells you that she has no

insurance and the operation will cost $10,000. Sometime later you ask her about

her daughter and she tells you she is just fine now. She then confides in you that

she took $10,000.00 from a dormant account at the bank to pay for the operation.

• She assures you that she has already started paying it back and will continue to do

so until it is all returned.

• Was the “other teller” unethical?

• If you do nothing are you unethical?

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CASE #3• Your newspaper has published a report on a national study, which concluded that

bottled water has virtually no health advantages over the tap water in more cities,

including yours. The study included comments from local health storeowners and

water distributors challenging the study. The AquaPure Bottled Water Company,

advertising account worth over $75,000. a year, has threatened to pull its account

with your newspaper unless you run another story of equal prominence, focusing

on the benefits of bottled water.

• Was AquaPure Company unethical?

• If your newspaper does nothing are they unethical?

• If your newspaper runs the second story with equal prominence are they unethical?

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CASE #4• You are interviewing to hire a CFO position. You have a complicated business

that requires expertise that most candidates do not have. You finally decide

on the best candidate. He does not have the exact experience you were

hoping for, but he says he can figure it out. You offer him the job, and he

accepts. He quits his job. Three days later you find the dream candidate and

they also want work, they are far superior. You withdraw you offer to the first

candidate and hire the dream candidate?

• Are you unethical?

• Is the dream candidate unethical, if he accepts the offer knowing the

situation?

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CASE #5

• You are a member of the TTC advertising review committee

considering a $200K deal from Ashley Madison.com (a dating

site which promotes having affairs) to wrap 10 streetcars with an

ad saying “Life is Short. Have An Affair.

www.ashleymadison.com”. The TTC is cash strapped, and $200K

plus a 50¢ drop in fare for people who ride the streetcars.

• Do you accept the money and run the ads?

• Are you ethical?

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THE MID-TERM

Feb 15, 20113:10 pm sharp

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MID-TERMMid-term will be 75 minutes - No extra time if you are late

Test will cover Modules 1 – 3, Metrics 1-4, class discussion, cases, worksheets, etc.

100 % Multiple choice – ½ theory and ½ metrics – 40 questions

Must bring photo student card and have it available to write test

Note the sort number on your name card

• You will be called in by number, wait outside until your # is called

Front of Class

1 2 3 4 5 6 7 8 9 10 11 12 13

17 18 19 20 21 22 23 24 25 27 28 29 30 31 32

33 34 34a 34b 35 37 38 40 41 42 43 44 45 46 47

48 48a 49 50 51 52 53 54 55 56 57 58 59 61 61a

62 63 64 65 66 67 68 69 70 71 72 74 74a 75 76

77 78 79 80 81 82 83 84 85 86 87 89 90 90a

Back of Class

Seating Plan in Mid-term – TRSM 1-119

Note your seat location (based on number on your name card)

14 15

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MID-TERMMedical reasons are the only acceptable absences for mid-term

• Ryerson medical certificate is required • All other absences will receive zero grade for mid-term

Make-up test will be ENTIRELY short answer

Only items required for test are;

• Pencil, eraser, student card, • Only beverages allowed are transparent water bottles (labels removed) • ALL OTHER ITEMS TO BE LEFT AT FRONT OF CLASS UPON ENTRY (coats, hats, etc).• Basic calculators only (cannot have any other capabilities)• No cell phones, PDA, other devices• No pencil cases, no other beverages

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REMINDERS

Upcoming Deliverables

• IN-MODULE STUDY QUIZZES FOR MODULES 1-3 DUE BY 11:59PM FEB 11, 2011

• Otherwise you receive a zero grade for those modules

• TOP GUN #1 DEADLINE IS 11:59PM FEBRUARY 13, 2011

• Max 3 attempts, highest score recorded

• Each attempt must be completed in 1 session

• Don’t wait until the weekend, I will not be available to unlock your quiz.

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ASSIGNMENT # 1

Due TuesdayMarch 1st, 2011 by 11:59pm

Assignment must be posted to blackboard&

Peer group evaluation completedSee course outline for late penalties

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PRELIMINARY DETAILS

• Must work in groups of 4 to 5 people (you select your own groups)– Use discussion board if you are searching for a

group or need people to join your group.• Topic is on the internet-based video

streaming industry• SWOT analysis and recommendation on

whether Bell should enter this market?

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ASSIGNMENT RUBRICDescription MarksOverall Set-up - Title page, Table of contents, Page number

-5 if missing

Executive Summary 5Situation Analysis - Strengths 15Situation Analysis - Weaknesses 15Situation Analysis - Threats 15Situation Analysis - Opportunities 15Recommendation 10

Overall Organization - Sentence structure, argumentation, writing style, etc. 10

Appendices - SWOT Table, Prioritization Table, Competitive Analysis Table

5 each

Deductions - Improper APA referencing, if peer evaluations not submitted

-5 each if missing or incorrect

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FORMATTING

• Double-spaced• Put your charts / tables in appendices– Save the body of the report for text– In body, make sure you refer to the appendices

• APA formatting for in-text citations and references list

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SEPARATE YOUR THOUGHTS ON;

Analysis required for Assignment

From

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ANALYSIS

Identify applicable trends about P.E.S.T.L. environment, Competitive & Channel Analysis

• develop & use competitive analysis table to uncover differences between your company & competitors

Determine & state implications of each point

• ask so what does this mean for my decision, business or plan

Determine if points are S.W.O.Ts and populate SWOT matrix

Prioritize key points from SWOT to develop your Prioritization Table

• based on impact to business & probability of occurring

Determine recommendations based on outcome of prioritization

Analysis Process

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REPORT WRITING

Develop Tables (include all relevant points in prioritization order - HP-HI, HP-LI, LP-HI, LP-LI)

• Competitive Analysis• S.W.O.T. table (just point form, save implications for write-up section).• Prioritization Table

Write each section based on prioritization table order (HP-HI, HP-LI, LP-HI, LP-LI)

• Eg. In strength section, start by discussing HP-HI, then HP-LI, then LP-HI and finally LP-LI• Don’t forget to include the implications for each point. State point and implication together in write-up.

Don’t worry if you run out of space, in your write-up, for all your points

• You will have covered the important ones

Don’t forget to include citations for claims you may make in your report (you need evidence)

• You must use APA referencing for in-text citations and reference list

Report Writing Process

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DON’T FORGETTo include a Title page, table of contents, & pages numbers

Make it easy for marker to read (it should read as one report)

Support your claims with evidence by indicating the source (i.e. either from article or from external research)

Only one group member needs to submit the assignment report to blackboard (see assignment section)

• Penalties for submitting late

Each group member must submit an electronic peer evaluation on blackboard (see assignment section)

• No late submissions. Penalties for not submitting.

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BEFORE YOU LEAVE TODAY

name cards

Front of the Class

Hand In:

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SEE YOU NEXT WEEK