Category: Commerce Notes PPT

The JVs (Joint ventures) are generally characterized by shared ownership, returns, and risks, and also shared governance. 

Next, a Wholly owned subsidiary is a company whose entire stock is held by another parent company. The subsidiary generally operates independently of its parent company, the subsidiary has its own senior management structure, organization layout, and clients, this is not an integrated division or unit of the parent company.

The parent company on acquiring all the shares of a wholly-owned subsidiary, there are no minority shareholders. The subsidiary with the permission of the parent company operates in their own division, this act makes them an unconsolidated subsidiary.

 

Wholly Owned Subsidiary 

A company whose 100% of the common stock is owned by the parent company is called a wholly-owned subsidiary. A company is liable to be a wholly-owned subsidiary through an acquisition by a parent company, apart from this a regular subsidiary company is only 51-99% owned by the parent company.

Wholly owned subsidiaries is a method of international business which is incorporated by the entities for keeping full control over their Ventures. The organization which makes a hundred percent investment in its capital takes full control over another entity. In the international market, there are two ways for setting up wholly-owned subsidiaries. Those are – 

• Greenfield venture is setting up another organization to begin the activities abroad.

• Acquiring an organization that is already established in the foreign nation and making by utilization of that organization for delivering services in the host nation.

 

Wholly Owned Subsidiary Example 

A wholly-owned subsidiary may be in a different country than the parent company. The subsidiary has its own management structure and clients. Owning a wholly-owned subsidiary might help the parent company maintain its operations in wide geographic areas and markets or a different separate industry.

Volkswagen AG owns other distinguished brands that are Audi, Bentley, Bugatti, Lamborghini that are wholly owned by Volkswagen AG. 

Another example is Marvel Entertainment Company is the wholly-owned subsidiary of Walt Disney.

 

Joint Venture Subsidiary

A joint venture (JV) is a type of business arrangement where two or more parties come to an agreement and pool their resources for the purpose of achieving a specific task. This task can be a new project or for any other business activity.

In a joint venture (JV), the participants together are responsible for their own profits, losses and the costs incurred and are associated with them.  

In a JV business, there is a partnership in common sense but even in legal structure, they are business partners. JVs are used as a common purpose to partner up with a local business and then to enter a foreign market.

Joint Ventures – When an organization establishes and is mutually owned by two or more independent firms, it is known as a joint venture. It is about shared ownership and risk. It can bring into reality in these ways – 

• When a foreign investor creates interest in a local company. 

• When a local firm is interested in a local company. 

• When local and foreign entrepreneurs both jointly form a new enterprise. 

 

Wholly Owned Subsidiary Advantages & Disadvantages 

Advantages

The advantages of a wholly-owned subsidiary are hereunder:

1. Companies that will take control over the suppliers will benefit from the wholly owned subsidiaries.

2. They can form a vertical integration where the companies are under the same owner.

3. Wholly own subsidiary companies give space for the parent company to breathe and diversify, meaning they can fully grow and manage risk.

4. A company can avoid competition while entering a new market by combining with its subsidiary. 

5. For doing business abroad, the wholly-owned subsidiary can be utilized for this purpose as well.

6. It is affordable for international organizations to expand their business outside the boundaries of their nation. 

7. Joint ventures make it easy and beneficial for supporting huge ventures which require huge capital and labor and which eventually is shared in joint ventures. 

8. It helps in sharing the risks and expenses which helps the entity to enter the global market.

9. The parent organization can take full control of the operations in the organization in the foreign nation.

10. The parent organization is not needed for revealing its secret technology and techniques to others as they are the ones who look after everything of the company alone. 

Disadvantages

The disadvantages of a wholly-owned subsidiary are as follows: 

1. The parent company faces more taxes that are levied on these subsidiaries.

2. Doing diversification with the wholly-owned business may hamper focus on itself.

3. There may be a conflict between the parent and the subsidiary company that will affect the management of both companies.

4. Cost structure will shoot up, various other formalities need to be done with the wholly-owned subsidiary.

5. If the wholly-owned subsidiary proves inadequate to function, then it will disturb the flow of business of the parent company as well.

6. It has the risk of sharing secret techniques and the risk of revealing secrets of businesses which is a disadvantage of it. In a foreign nation, the sharing of technologies with the domestic organization may lead to the risk of the revelation of important things. 

7. Joint ventures might lead to a clash which can happen between the firms in regards to controlling and operating the venture and can lead to a lot of problems.

8. The parent organization needed for making a full investment in its subsidiary which is not reasonable for small and medium-sized organizations who have limited assets and resources for putting into the foreign nation. 

9. The parent organization has to bear the risk, losses, and misfortunes because they own 100% equity. 

10. Also, few Nations hesitate for setting up entirely owned subsidiaries by outsiders in their own nation. 

Leadership- Definition of Leadership, Concept of Leadership

Definition

Leadership is defined as the action or an act of guidance of leading a group of people or an organisation. For example,- what a pastor does in his state, a commander does in the play area, the supervisor needs to do the same in his association. Leaders in varying backgrounds possess certain essential characteristics. Leaders ought to have the option to set up contact with their equivalents, manage their subordinates and guide them, intervene in clashes, resolve issues by weighing different other options, apportion scant assets appropriately and face challenges and activities.

Concept

Leadership is a powerful social cycle that includes collaborations among pioneers, individuals and outside electorates. Great pioneers are made, not conceived. Leadership is a practical skill and a research area that helps individuals to influence or lead teams, organisations, or individuals. Great leaders are created through an endless cycle of self-study, training, preparing and experience. 

 

Great leaders are persistently working and concentrating on improving their administration aptitudes; they are not settling for the status quo. Authority is a cycle by which an individual impacts others to achieve a target and coordinates the association such that it makes it more durable and cognizant. Leaders complete this cycle by applying their administration ascribes, for example, – convictions, values, morals, character, information and abilities.

 

Styles of Leadership

Autocratic Style

The expression generally illustrative of an imperious authority style is “Do as I state.” Typically, a dictatorial pioneer accepts that the individual is the most astute individual at the table and knows more than others. They settle on all the choices with little contribution from colleagues. This order and control approach is regular with initiative styles of the past, yet it doesn’t hold a lot of importance with the present ability. Saying this doesn’t imply that that the technique may not be fitting in specific circumstances. For instance, you can plunge into a totalitarian authority style when choices of priority are undertaken on the spot, and you have the most information about the circumstance, or when you’re managing unpracticed and new colleagues. There’s no ideal opportunity to sit tight for colleagues to pick up experience with their job.

 

Affiliative Style

An expression frequently used to portray this sort of administration is “People first.” Of all the leadership styles, the affiliative initiative methodology is one where the leader gets very close with individuals. A pioneer rehearsing this style focuses on and upholds the feelings of colleagues. The leaders endeavour to open up a pipeline that associates the person in question to the group. In the affiliative leadership style, the leader pays attention to the employees and supports the emotional needs of the team members. It’s especially helpful, for instance, in smoothing clashes among colleagues or consoling individuals during seasons of pressure.

Laissez-Faire Style

The laissez-faire leadership style is the exact opposite of the Autocratic style of leadership. This leadership style involves the least amount of oversight, where the leader lets the people swim with the current of their issues. On the surface, the laissez-faire leader may appear to trust individuals but taken to the extreme situation; an uninvolved leader is aloof. While it’s beneficial for a leader to give people opportunities to spread their wings, but with the lack of direction, individuals may unwittingly drift away in the wrong direction, away from the monthly or crucial yearly goals of the organisation.

The Laissez-Faire Style is best suitable for highly skilled and experienced employees who happen to be motivated and self-starters. To be most effective with the laissez-faire style, leaders should monitor team performance and provide them with regular feedback.

Importance of Leadership

Leaders Provide Task Support:

Leaders uphold the supporters by gathering the authoritative assets and helping them achieve their undertakings as per principles of execution.

Building the Team Spirit: 

No individual can work alone. Leaders create cooperation among supporters to work, aggregate and arrange their exercises with authoritative exercises and objectives a leader functions as chief of the group.

Motivation:

Leaders spur the workers to take up occupations that they, in any case, may not be eager to work out.

Provides Feedback:

At the point when individuals run after very much characterised targets, they need a steady input of their presentation, which helps in accomplishing their objectives adequately. Leaders give them this criticism.

Introducing Change:

Successful leaders can persuade individuals about the need and advantages of authoritative change. The change cycle can, consequently, be easily completed.

Maintain Discipline:

Leadership is an incredible impact that upholds discipline in the association beyond what formal principles and guidelines can. Individuals will be submitted and faithful to rules and guidelines if their chiefs believe in them.

Management accounting is the process of providing financial facts, statistics, and resources to the managers involved in decision making. It is also known as managerial accounting. This form of accounting is only used by the managerial team of the institution. This is the only difference between management accounting and financial accounting. 

Objective and Advantage of Management Accounting

The main objective of this form of accounting is to manage the business organization. The managerial team of an organization withdraws financial information and makes judicious use of them to conduct business operations and activities more proficiently. Some of the advantages of management accounting are like controlling business operations, planning, decision making, and strategic administration considering financial data, recognizing business problem areas, and organizing. 

While making any decision, the charts, forecasts, tables, and various other similar kinds of analysis acts as a catalyst in making the process easier and justified.  The concept is, however, not mandatory and hence it can formulate its structure as per the requirement of the company. This means that if a company requires in-depth investigation or analysis, it can easily do so. This helps the management organization to focus on important areas that require development. Similarly, in launching or eliminating any existing product of the company, management accounting can play a crucial role in formulating strategies. 

Limitations of Management Accounting

Besides being helpful to the organization in making better decisions there are certain limitations to management accounting as well. For instance, the decisions that are made by the management team are only based on the information that is provided by Financial Accounting. Moreover, the majority of the management team does not have the required amount of skills, expertise, or knowledge in regards to economics, statistics, and finance. 

One of the common problems faced by the management team is that they receive historical outdated data. This means that the data might not be relevant to the present situation of the organization when they are planning to make any decision. Lastly, it requires a considerable amount of investment to set up a management accounting team. 

Unavoidable is the fact that Management Accounting helps in the framework of financial accounting at the end of the year. The verified and recorded data are highly helpful for the management accounting team. Some of the key differences between management accounting and financial accounting are that management accounting is not regulated by any form of law whereas in financial accounting there are standard rules that are required to be followed. The main objective of management accounting is to help the internal management system, unlike financial accounting that helps the investors or creditors take decisions in regards to their investment. 

Difference Between Management Accounting and Financial Accounting

The finance administration shares financial data and reports. These reports consist of invoices, financial balance statements, and things as such. This form of information that is achieved from management accounting helps the management to make better decisions. Thus, management accounting aims to use statistics and data to formulate better approaches and control the activity of an enterprise or institution in its business and development activities.

On the other hand, financial accounting aims to benefit the stakeholders of an organization. They provide recording and presentation and another form of information that is valuable to them.  However, management accounting stresses on presentation of the financial information for the development of the internal organization. It is, therefore, can be defined as the application of knowledge and professional skills that would be beneficial in the preparation of financial and accounting information.

It is prepared in a manner that helps the organization in making better decisions and develops better strategies. It also helps them in the formulation of new policies and regulates the operations of the business organization. It is important to keep in mind that there is no fixed structure or format that is incorporated in management accounting. For instance, some of the tools and techniques that are used by management accounting are costing, financial accounting, economics, and business analysis, and so on. All of these must serve the objective of helping the business organization imply better strategies in the development.

Management accounting is not subjected to investigation or audits and financial accounting has its records audited as per the law. Besides, management accounting concerns both financial and non-financial information, unlike financial accounting that only provides financial information. Therefore, a business enterprise requires both management accounting and financial accounting to operate successfully and most importantly with the help of management accounting it can take better strategies instigating the growth of the company.

Marketing Mix is a blend of different elements which must be present in a good marketing strategy. Priorly, Marketing elements consist of the blend of four elements, these are – Product, Price, Placement, and Promotion. There are different other types of elements used by different strategists, but these 4 are the focal ones. The blending elements which make the ‘marketing mix’ are the focus areas for comprehensive market planning. 

In this context, we are going to learn about what is Marketing Mix all about, factors affecting the mixes so that we understand how effective marketing is planned out. 

Elements of Marketing Mix

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The elements which form the marketing mix are – Product, Price, Placement and Promotion. They are popularly known as ‘4Ps’ as all these four elements begin with the letter ‘P’. These four elements got their recognition in the year 1960 when Marketing Professor and author E. Jerome McCarthy developed an effective marketing strategy. 

The author says the marketing element is dependent on the type of industry and the target of the specific marketing plan which the industry wants to implement. Marketing Managers thus take various types of approaches and formulate their strategy to manage each of the four Ps. The four elements can be examined independently, while in practice, they are best used when blended. Let us know about the four elements. They are as under:

Product means an item or a service that is designed or formulated to satisfy the needs and wants of the customer. Toto efficiently plan a product or service, a strategist is required to identify what will differentiate it from the competing products or the services. While this is also very important to determine if other types of products or services are to be marketed by making a conjunction with the main product.

The sale price of the product will reflect what is needed by the consumers, that is what they are willing to pay for it. The marketing professionals hired by different companies need to consider costs that are incurred by the company in the research and development, manufacturing, marketing, and distribution of that product. Only after knowing the base cost, the selling price can be fixed. 

The place where the product is sold is very important as this element ensures steady demand and sale of its product. Thus, determining the area of distribution often acts as a game-changer. For example, consumer products, like stationery or groceries are available in many general stores. While, supreme products like cars, dresses, mobile phones are available only in select stores. A new consideration that has evolved in this matter is whether to put up the product in an offline or online store. 

The marketing campaigns, bills, hoardings all are called a promotional mix. All these activities include advertising, sales promotion, personal selling, and other public-media relations. This is also a key consideration as this element makes the local people know about the product. The marketing professionals who are engaged in promotional activities carefully form a message which often concerns the other three elements and help them to pitch their product to the right target audience. 

Service Marketing Mix 

The service marketing mix is referred to the combination of all different marketing activities which an organization engages to promote and sell intangible services, this is opposed to the tangible products. In addition to the above mentioned four Ps of the traditional type product marketing, the services marketing mix also includes other three Ps of service marketing like:

• People

• Process 

• Physical Evidence. 

These are the services which the marketing mix refers to as the extended marketing mix.

Factors affecting Marketing Mix 

The factors that influence the marketing mix are classified into two factors; they are as follows:

1. Internal factors

2. External factors

Under Internal Factor there are:

• Product Planning

• Price

• Branding

• Personal Selling

• Sales Promotion

• Physical Distribution

• Market Research

While under external factors there are:

Why is Marketing Mix Important?

In a business, everything has to be planned and strategized. This is done to gain profit by way of a competitive advantage over the rival companies. So, while planning the marketing fixture as well, the marketing mix plays a vital role, as the total market is discussed in this marketing mix.

All the elements which are present in the marketing mix influence each other to form a perfect blend of the market plan. They make up a business strategic plan which helps the company in terms of harnessing the best market with the best product, with correct pricing after attracting the customers with attractive promotional activities. If the marketing mix is handled correctly, then it can elevate a great success for the business. If the marketing mix is handled in the wrong way, then the business could take years to recover from its failure of a drastic marketing strategy. 

Did You know?

• Unique Marketing Mix is the unique type combination of personal selling, traditional advertising, publicity, sales promotion, social media, and also engaging the branch of e-commerce to stimulate the target market to buy a good product. Sometimes this is referred to as the promotional mix as well.

• The most important element in the marketing mix is the product.

• The new Ps of Marketing mix along with the old Ps are Packaging, Positioning, People and even Politics, they form another vital mix of elements.

As we come to the end of the content, we understand the value laid by the marketing mix. We have gathered enough knowledge about the four elements of the marketing mix and how they help to elevate the product in the market by engaging the correct promotional activities which inform the people about its price. 

Below we also attach a marketing mix pdf for an, even more, a wide study which will give the students an exhaustive knowledge.

Demand relates to the willingness and potential of consumers to obtain a provided quantity of a good or service in any given point of time or over a duration in time. Also, in economics, the term means that the consumer has the pressing need, promoted by the ability to pay from an income. Income brings about a purchasing power that they practise in the market through effective demand. Economic demand is something that runs the commerce. With no economic demand, companies would no longer be willing to supply products as they wouldn’t be making any profit by entering the market. 

What a buyer pays to purchase a certain good is termed as price. Further, the total number of units purchased at that price is said to be the quantity demanded. The price is usually inversely proportional to the quantity demanded, i.e. when the price of any service or good increases, the quantity demanded deliberately decreases. Similarly, when the price of the good falls, the quantity demanded hikes up. Economists confidently pronounce this inverse relationship between price and quantity demanded as the law of demand. However, external factors govern economic demand; that’s where determinants come into the play.  Since now we know what demand is, let’s discuss the demand analysis meaning types and determinants of demand.

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Types of Determinants of Demand 

Every factor has a unique impact on demand. We need to understand the meaning of determinants and types of demand. The following are the few determinants of demand. 

Price of the Product

Price is used as a parameter by the people to decide if all the other factors remain constant or equal. According to the law of demand, the decrease in the demand follows an increase in the price and an increase in the demand follows a reduction in price. 

The Income of the Consumers

If the income rises, the number of goods demanded by the consumers also increases. Meanwhile, a drop in income leads to lower consumption levels. Thus the relationship between the demand and the income is not direct. However, the effect the income of a consumer has on the demand for a product depends on the type of commodity. With most goods, there is a positive relationship between demand and the income of the buyer. On the other hand, a change in income can have an inverse effect on the demand for a product. In these cases, when the income of the consumer increases, he/she tends to buy a high-quality product and avoid inferior goods. 

Number of Buyers in the Market

The number of consumers plays a vital role in net/total demands. When the number increases, the demand also increases. In some cases, the demand for the product increase with the changes in the population. In other cases, the demand increases as the product become more appealing to the customers. In such scenarios, the population remains the same but more people are buying the same commodity. 

Consumer’s Expectations 

Consumer expectation is one of the major factors that affect the demand for a commodity. That is why a business has to focus on both habits and expectations of its target audience, which makes it much harder to predict the demand for your product. Sometimes, consumers might wait before buying a product as they are expecting what might happen in the future. For instance, a person might not buy a mobile phone because they are waiting for a new model.

Tastes and Preferences of The Consumers 

Consumers can be picky about the product they want. When they are shopping for a product, it depends on their tastes and preferences as to what brand or model they will choose. These tastes and preferences of a consumer can change due to a number of reasons, both internal and externals. These factors include age, location, marital status, and much more. Even though taste and preference are intangible, they can have a huge impact on the demand for any given commodity. For instance, a consumer is more likely to buy a product when they see a certain celebrity endorsing it. However, if the consumer finds out there are some bad side effects of a product, the demand for that commodity will decrease drastically. 

Complement Goods 

Complement goods are the ones that go with each other. Let’s take care and petrol, for example. If there is an increase in the price of petrol, the demand for petrol will decrease and so will the demand for a car. So, two goods that complement each other will have an inverse relationship between the price of one commodity and the demand for the other. 

Substitute Product

In this case, when the price of one product increases, the demand for another product rises. No matter what you are selling, you will always face competition in the market. That is why you have to pay attention to what your competitors are selling as they can take a large chunk of your market share. So, to determine the demand for your product, you have to focus on the availability of substitute goods in the market. Consider the following factors:

• The price gap between your and your competitors’ products. 

• How many items of the same product line does the competitor deal in?

• The similarity between your product and the one sold by the competitor.  

Now that we understand the meaning of demand and its determinants, let’s discuss the types of demand. 

Types of Demand

We have already discussed what demand is. Now let’s read about the types of demand. Corporations often put a large sum of their budget into comprehending the consumer’s demand for their products. This facilitates them to drag their products to customers without losing any capital in any undesirable factors such as overproduction. Inferring what kind of demand your firm falls under is a fair business practice. Therefore let’s take a glance at different types of economic demands. 

Individual and Market Demand 

Market demand is also known as aggregate demand. It refers to the total economic demand in view of all the individual demand in any particular market. Individual demand is a demand for a product by an individual at a certain price. Customer tastes, distinguished quality and brand commitment or loyalty affect individual demand.

Short-term and Long-term Demand 

As the name implies, short-term demand is limited for a brief duration of time; it reflects trends, necessity and modifications in the price more dramatically than the long-term demand. For example, winter wear is worn only during winter, making the demand much shorter when compared to clothing worn all over the year. On the other hand, long-term demands pertain for a longer period of time and this demand doesn’t change with respect to time and price. 

Company and Industry Demand 

The demand for products at a specific price over a span of time from a sole element is known as company demand. Industry demand includes the total aggregate demand for an industry’s products. Company demand is often written in terms of the percentage of industry demand. For example, the demand for Coca-Cola is the company demand, and it makes up the percentage of total industry demand. 

Did You Know?

This Covid-19 pandemic has led to phenomenal catastrophes distinguished by immense job losses on a global scale. In the US, more than 20.5 million people lost their jobs just a few months ago. It has precisely resulted in vast economic distress, leading to excessive layoffs that have influenced a great impact on people of all races, backgrounds and classes. Therefore, the US condoned a staggering and record-breaking 14.7% rate of unemployment.