Novus Business and Information Technology Training Program Lesson Script Book

Novus is a comprehensive training course designed for small business owners, college and university students, and other interested individuals to acquire skills related to opening and operating a small business, using common computer software programs in a professional setting, and applying the skills and knowledge through a series of critical-thinking exercises and an interactive business simulation software program. The Novus Business and IT Training Program was designed and developed by Peace Corps Volunteers in Armenia through a collaboration with USAID and the Gyumri Economic Development Foundation.

TABLE OF CONTENTS BUSINESS CURRICULUM 3

LESSON 1: VISION AND MISSION STATEMENTS 3 LESSON 2: MARKET ANALYSIS AND SWOT 6 LESSON 3: STARTUP CAPITAL AND FINANCING 9 LESSON 4: ESSENTIAL ECONOMICS PRINCIPLES 12 LESSON 5: MARKET RESEARCH 15 LESSON 6: OPERATIONS MANAGEMENT - SIMPLE FORECASTING 19 LESSON 7: INTRODUCTION TO MANAGERIAL ECONOMICS 22 LESSON 8: PLACEMENT AND PROMOTION 26 LESSON 9: MANAGING PEOPLE 29 LESSON 10: BRANDS 32 LESSON 11: THE INCOME STATEMENT 35 LESSON 12: SUPPLY CHAIN MANAGEMENT 37 LESSON 13: THE BALANCE SHEET AND KEY FINANCIAL RATIOS 39 LESSON 14: WORKING CAPITAL MANAGEMENT 41 LESSON 15: STRATEGIC PLANNING 44 LESSON 16: CUSTOMER RELATIONSHIP MANAGEMENT 46 LESSON 17: ETHICS AND CORPORATE SOCIAL RESPONSIBILITY 50 LESSON 18: COMPETITOR ANALYSIS 52 LESSON 19: ANALYZING CASH FLOW 56 LESSON 20: ECONOMICS: UNDERSTANDING MACROECONOMIC INFLUENCES AND ECONOMIC STRUCTURES 58 LESSON 21: CORE COMPETENCY AND COMPETITIVE ADVANTAGE 61 LESSON 21: ECONOMICS – UNDERSTANDING MARKET TYPES AND MARKET INFLUENCES 64 LESSON 22: PORTER’S FIVE FORCES THEORY 64 LESSON 23 – LEADERSHIP AND TEAMBUILDING 67 LESSON 24: WRITING A BUSINESS PLAN 70

COMPUTER CURRICULUM 75

LESSON 1: MICROSOFT EXCEL 1: EXCEL BASICS 75 LESSON 2: MICROSOFT POWERPOINT 1: POWERPOINT BASICS 78 LESSON 3: MICROSOFT EXCEL 2: DATA ENTRY 81 LESSON 4: MICROSOFT WORD 1: WORD BASICS 84 LESSON 5: MICROSOFT WORD 2: ADVANCED FORMATTING 87 LESSON 6: MICROSOFT POWERPOINT 2: SLIDE DESIGN 90 LESSON 7: MICROSOFT EXCEL 3: DATA ANALYSIS 93 LESSON 8: MICROSOFT WORD 3: ENHANCING DOCUMENTS 97 LESSON 9: MICROSOFT EXCEL 4: REPORT GENERATION 99 LESSON 10: MICROSOFT WORD 4: FURTHER FUNCTIONS 102 LESSON 11: MICROSOFT POWERPOINT 3: ADVANCED SLIDE DESIGN 105 LESSON 12: ARMENIAN BUSINESS RESOURCES 107

BUSINESS CURRICULUM

LESSON 1: VISION AND MISSION STATEMENTS

Slide 1 What if Coca Cola started making cars? Would that be the best choice for Coca Cola? Would it make sense? Would the company still be the same? Probably not. So, why doesn’t Coca Cola start making cars? There are a number of reasons, but one important reason is that Coca Cola has a vision and a mission. Imagine going through life without a simple strategy. You have no aim in your life. You see other people around you accomplishing great things, but you are never able to even come close to accomplishing such great things. You’ve never thought about what you want from your life. Now imagine living your life according to a strategy. Suddenly, if you focus, everything you do contributes to achieving your goals and dreams. The same is true in business. If you start a company but do not have a vision and a mission for that company, then your company could have lack direction and fail. Fortunately, there are two great tools we can use to give a business the focus and purpose it needs for success. Slide 2 These tools are the vision statement and the mission statement. But what are they exactly?

• A vision statement defines your long term dream. • A mission statement defines the purpose of your company.

Why are they important? The vision and mission statements inspire and motivate staff. They guide the way a company uses resources in a focused and consistent way. They also form the basis for a company’s strategic plan. They act as a map for an organization. They are guiding principles for how a company operates. Vision and mission statements give a company financial and emotional benefits, if properly written and followed. Besides those benefits, just by creating the statements a business leader will ask important questions about what the business should be. In this lesson you will learn what makes a vision statement and mission statement, how they’re different, common mistakes in writing and using vision and mission statements, and suggestions for creating them and using them. Slide 3 The vision statement is your dream for the future. It is okay if the vision is very ambitious or even seems impossible. By creating an ambitious vision statement, you create something that you can always search for. The vision statement should not be easily achievable or else it would no longer be a vision. If your vision is an unreachable dream, then your business will always be working towards reaching it. Having a big challenge to work towards will motivate your business. A vision statement can be about the industry your company operates in. It can also be about a social issue that your company aims to address. A social issue can serve as extra motivation for employees. They will feel like they are part of something bigger than just a job. They will be working towards making the world a better place and solving the problem you’ve addressed in your vision. The vision statement should be clear and simple. It is important not to use too many words. The clearer the statement, the more encouraging it is for the company’s employees to make the vision a reality. A clear message will focus the company on the goal. Slide 4

• Ford (from the early 1900’s): Democratize the automobile • Honda (from 1970): We will destroy Yamaha • Sony (from the 1950s): Become the company most known for changing the worldwide poor-quality image of

Japanese products • Boeing (from 1950): Become the dominant player in commercial aircraft and bring the world into the jet age • Avon: To be the company that best understands and satisfies the product, service and self-fulfillment needs of

women – globally. Slide 5 Creating a Vision Statement So, how do you create a vision statement exactly? Let’s take a look at the process. When creating a vision statement, you should:

1. Have conversations – You need to discuss the future in your organization. Gather employees from across the organization. If you have a big organization or company, you can use representatives from each part. Then, with those employees, discuss a future that your employees and management want to create together.

2. Have insight – You need to see your situation clearly. Think about what is going on inside your company AND what is going on in the outside world.

3. Include people – The vision should not be created by 1 person after a meeting with all the staff. It should be a team effort among many people. You should build the vision together.

Since a vision statement is about the future, it should be worded accordingly. Most vision statements begin with “To become” or “To be”. The statement should make people want to be a part of your company. When employees read it, they should be proud to work there. When job-seekers read it, they should want to work there. And when your customers read it, they should feel good about doing business with you. Thus, you can use words like “safest, best, premiere” in order to inspire. For example, the phrase, “To be the safest…” is a good start. The statement should define what business you are in. It should be related to who you are as a company. The vision should be one sentence long. You should be able to remember your vision. If you make a vision longer, it may not be used effectively. Slide 6 When you create a vision statement, you should be careful. While it seems like an easy, simple task, it actually requires a lot of work and thought. You must think about what is important to your company and its employees. Here are some common problems to avoid:

• Is it actually de-motivating? – Because a vision statement is about the future, employees might think that it is too distant, unreal, or irrelevant. Also, when creating a vision statement, there can be frustration because of the differences of the ideal future and the current reality.

• Only management is involved in creating the vision – Sometimes a vision statement can create tension between management and staff. If the staff is not included in creating the vision, the vision might not accurately represent reality. Worse, the staff might not feel like the vision is their own. They might not be willing to work towards the vision. When creating a vision, you need the ideas of everyone on your team.

• It is too long – Ideally a vision statement is just one sentence about what you want the future to be. If it is longer than one sentence, the message will be lost. If you try to make everyone happy, you may make the sentence long and unclear. If it is not clear, the message will be confusing and less effective.

• Visions that don’t say anything unique about your company – Don’t make your vision “To be the global leader in profit.” Is that really what you want to do? In that case, you’ll be competing against all other companies from all other industries. Instead, include something specific to your situation in order to make the vision relevant and focused.

Slide 7 The mission statement is your company’s purpose. Why does your business exist? The mission statement should explain why. A mission statement can explain what your business does, who your customers are, or what the company’s core values are. Mission statements can be different lengths. They usually contain things like the type of products and services the business provides, company values, location, and position in the marketplace. While there are no strict rules for creating a mission statement, it should give an outsider a good idea of what your company is like. Many people confuse mission statements and vision statements. While a vision statement talks about future hopes and dreams, a mission statement tells us what your company does. The mission statement is what you do best every day. The vision statement is what the future will look like because you do that mission so well. Slide 8 Coca Cola

• To refresh the world... • To inspire moments of optimism and happiness... • To create value and make a difference.

Pizza Hut: We take pride in making a perfect pizza and providing courteous and helpful service on time all the time. Every customer says, "I'll be back!" We are the employer of choice offering team members opportunities for growth, advancement, and rewarding careers in a fun, safe working environment.

McDonald’s: To provide the fast food customer food prepared in the same high-quality manner world-wide that is tasty, reasonably-priced & delivered consistently in a low-key décor and friendly atmosphere. Courtyard by Marriott: To provide economy and quality minded travelers with a premier, moderate priced lodging facility which is consistently perceived as clean, comfortable, well-maintained, and attractive, staffed by friendly, attentive and efficient people Slide 9 When creating a mission statement, again, you should include people from across the organization in the conversation. Then, ask yourself:

1. Who is your target client/customer? 2. What product or service do you provide? 3. What makes your product or service unique?

These three points should be the basis of your mission statement. It’s important to also think about things that excite you about your business. Think about why others would get excited about your business too. Try to include these exciting ideas in your mission statement. Also, make sure to think about your business from your customers’ view. Next, think about what is important to your company. What is important to you? Although mission statements can be different lengths, try to not write a long mission statement. Think about your customers. Will they want to read what you have just written? If your mission is short, clear, and exciting, your customers and employees will have an easier time remembering it. Creating the mission statement sounds simple, but it can be difficult. You should not hurry when creating a mission statement. Maybe the first version you write will be revised several times before you have a great mission statement. Is it inspiring? Does it describe your business? Does it explain why your business exists? Finally, make sure several people review the mission statement before you finish. You may need to change or improve the language of the mission statement. It’s best to have other people read the statement to see if it is clear and gives the correct message. The mission statement should focus your organization, but it should not lock you in a certain direction. If your business is growing and changing, then you should rethink your mission. It’s okay to change your mission over time. Slide 10

• Length: Perhaps the biggest mistake people make when writing mission statements is making them too long. Your goal is to write something that people will read and remember. A long mission statement does not accomplish that goal.

• Boring: Many mission statements are just boring. People will not read a boring mission. A boring mission statement leaves a bad impression of your business.

• Too general: The mission statement should be specific to your company. Do not make it too broad. It should reflect what a great company you have.

• Not clear: Too many mission statements use technical words that people outside the organization don’t understand. Avoid using popular, meaningless business words. Find a way to write a message that everyone can understand.

• Unbelievable: While it’s okay for your vision statement to be ambitious, the mission statement should be more realistic. If your employees or customers don’t believe your mission, then it will not be effective.

Slide 11 Mission statements are important to give your company a strategic direction. However, they are often poorly used. Researchers once asked managers of leading North American companies about their mission statements. Here are some common problems they found with using mission statements as tools to guide organizations:

• Poor statements: Many companies use statements that do not follow the rules above. There are many statements that have no value because they are poorly written.

• Mission impossible: Most managers admitted that they were not achieving the goals in their statements. • Unclear: Only 8 percent of managers believed their statements were clear. This fact could be the reason why the

goals were not being achieved. • Dissatisfaction: Many managers were not happy with the content of the statement and the process of creating it.

Many statements are approved even though they are not ideal.

• No influence: The statements had a positive influence on behavior in only a very small number of companies. • No involvement: The writing process included many more top management employees than lower level

employees. • Writing for the wrong reasons: Only 35 percent of companies said they use mission statements to inspire and

motivate their employees. Clearly, mission statements are misunderstood and misused in many major companies. Slide 12 Besides avoiding the problems described on the previous slide, there are other things your business can do to ensure your mission statement is productive. The same study found several important connections. The influence of a mission statement over the behavior and actions of organizational members is much greater when:

• More various stakeholders are involved in developing the mission statement • Organizational structure matches the mission • The mission is satisfying

If you follow these guidelines and avoid the mistakes previously mentioned, you can help your company create a mission statement that will lead you in a positive direction for years.

LESSON 2: MARKET ANALYSIS AND SWOT Slide 1 A very important step in starting a business is to analyze the “market” in which it will operate. While a “market” may be a physical place, in business terms it refers to a non-physical collection of businesses and customers. And before you enter that market as a business, it is necessary to understand the market, how you can operate in it and how others are operating in it. Market Analysis is an important step to perform before starting a business. While there will always be someone willing to buy something, you need to see if there may already be too many people competing in that area. Basic things to consider are:

• Market Size. Some markets (food, clothing) are based on basic necessities and will always be large because people will always need them. Others (flowers, hair salons, restaurants) may not perform as well when the economy is bad and people have less to spend or do for themselves. There are many ways to measure the size of a market. You can look at the total of all the sales from companies operating in the market. You can also look at the number of customers in a market and how much they usually spend on that product or service. For a young women’s clothing store, you might find how many live in the area, how often they shop, and how much they usually spend.

• Market Share. The portion of sales in a market that you think your business can support and the portion of customers who will buy from you when others are selling the same thing. If one company has a monopoly in a market, you would need to give customers a very good reason to buy from you instead of that company.

• Market Trends. Is the market getting bigger or smaller? While more people are buying mobile phones every year (a growing market) fewer are buying phones for their homes (a shrinking market). Are people starting to wear jeans instead of skirts? Are leather coats becoming more popular than fur coats? Is the cost of food at a café going up?

• Market Growth Rate. If it is a growing market, will is stop growing at some point? A few years ago, everyone was buying notebook computers but now many prefer iPad “tablet” devices. Currently the market growth rate for notebooks is lower than the growth rate for iPads. Many things can influence the growth of a market, including inflation, population, consumer choices and price changes.

As you analyze the market, you need to decide whether the market can support another business. While the single grocery store in a village may be profitable, opening a second store in that village may not be profitable if the market does not need two. Similarly, opening a business in a market that is getting smaller may not be a good idea. Slide 2 Once you have decided that a market is big enough that your business can be part of it, a helpful tool to help understand how well you can compete is to look at four factors:

• Strengths – What you and your business are good at. • Weaknesses – What you and your business don’t do as well as others.

• Opportunities – Conditions in the market (or changes you expect) that can help your business if you take advantage of them.

• Threats – Conditions in the market (or changes you expect) that can hurt your business if you don’t protect yourself.

In English, this tool is called a “SWOT Analysis” and it is a tool for reviewing an organization and its environment. It is the first stage of planning (for either a new business or for an existing business to plan for a future period) and helps business people to focus on key issues. Slide 3 The SWOT analysis begins by making a list of internal strengths and weaknesses in your organization. You will then list the external opportunities and threats that may affect the organization, based on your market and the overall environment. Don’t be concerned about detailed descriptions of these topics at this stage; bullet points may be the best way to begin. Capture the factors you believe are relevant in each of the four areas. As you develop a marketing plan, you will want to review what you have noted here. The main purpose of the SWOT analysis is to identify and assign each significant factor, positive and negative, to one of the four categories, allowing you to take an objective look at your business. The SWOT analysis will be a useful tool in developing and confirming your goals and your marketing strategy. As you perform a SWOT analysis, remember that the strengths and weaknesses you identify are factors specific to your company (internal factors). Opportunities and threats come from other sources – competitors, government, nature, society, etc (external factors). You can start with either the internal or external factors. But if you start with the internal factors, you may need to add to that list if your list of external factors makes you realized you overlooked some. Slide 4 It is important to focus upon the part of the market you will operate in (the “market segment”). If you are planning to operate a clothing store for young women, you should focus on that market segment – young women’s clothing. Things that do not affect the buying and selling of young women’s clothing (for example, the price of coffee) should not be considered unless they can have a direct impact on your business (for example, if everyone in your town makes money selling coffee and a lower price may mean less money to buy clothes). Slide 5 Once you are focused on your market segment, you then ask “What is important to a buyer in that segment when he or she is deciding whether to spend money?” and identify the ones that are most important. When considering your strengths and weaknesses, you need to take the consumers’ view. You also must think about the customers’ opinion of your business compared to your competitors. Opportunities and threats should also be specific to a segment of the market. That is, while a projected increase in tourism may be an opportunity for your country, it should only be considered if your location is a tourist destination and your business is one that tourists may buy from (for example, a café near a tourist attraction). Slide 6 Strengths describe the positive things, tangible and intangible, about your organization that are within your control. What do you do well? What resources do you have? What advantages do you have over your competition? You may want to evaluate your strengths by area, such as marketing, finance, manufacturing, and organizational structure. Strengths include the positive things about the people involved in the business, including their knowledge, background, education, contacts, reputations, or the skills they bring. Strengths also include things such as available capital, equipment, credit, established customers, copyrighted materials, patents, information and processing systems, and other valuable resources within the business. Strengths capture the positive aspects internal to your business that add value or allow you to compete better (a “competitive advantage”). This is your opportunity to remind yourself of the value existing within your business. Examples of strengths for a SWOT analysis could be:

• Your clothing store has a brand that others do not have. • You have a deal with a supplier so that you pay a lower price than your competitors pay. • The location of your business is on a main road and people see it all the time. • The cook in your café has a reputation for preparing delicious food. • You are well known and trusted in your community.

Slide 7

Note the weaknesses within your business. Weaknesses are factors that are within your control that reduce your ability to be competitive. Which areas might you improve? Weaknesses might include lack of expertise, limited resources, lack of access to skilled workers or technology, inferior service offerings, or the poor location of your business. These are factors that are under your control, but need to be improved to run your business in the best way. Weaknesses capture the negative aspects internal to your business that reduce the value you offer, or place you at a competitive disadvantage. These are areas you need to improve in order to compete with your best competitor. The more accurately you identify your weaknesses, the more valuable the SWOT analysis will be for planning your business. Examples of weaknesses for a SWOT analysis could be:

• You have the same products or services as your competitors. • You competitor has a deal with a supplier so that you pay a higher price than he pays. • The location of your business is not very visible. • The quality of your goods or services is not good. • You have a damaged reputation • You are new to the community and unknown.

Slide 8 Opportunities are the external factors that represent the reason for your business to exist and do well. These are external to your business. What opportunities exist in your market, or in the environment, from which you hope to benefit? Opportunities are sources of additional profits you can earn by implementing your marketing strategies. Opportunities may be the result of market growth, lifestyle changes, positive market perceptions about your business, or the ability to offer greater value that will create a demand for your services. It is important to think about the timing of the opportunities. Does it represent something that will continue for a long time, or is it something that may occur only once? How quickly do you need to act? Opportunities are external to your business. If you have identified “opportunities” that are internal to the organization and within your control, you will want to classify them as strengths. Examples of opportunities for a SWOT analysis could be:

• A factory will be opening near your café and workers will need a place to eat. • A competing business is not doing well and may soon close. • The lack of young men’s clothing stores may allow you to expand your business beyond young women’s clothes. • A new trade deal by your country’s government will mean that you can buy your inventory less expensively.

Slide 9 What factors are potential threats to your business? Threats include factors beyond your control that could place your marketing strategy, or the business itself, at risk. These are also external – you have no control over them, but you may benefit by having plans to address them if they do occur. A threat is a challenge created by an unfavorable trend or development that may lead to reduced sales or profits. Competition – current or new – is always a threat. Other threats may include price increases by suppliers that you can’t afford, governmental regulation, economic downturns, unfavorable media coverage, a shift in consumer behavior that reduces your sales, or changes in technology that may make your products, equipment, or services obsolete. What situations might threaten your marketing efforts? List your worst fears. Part of this list may be very unlikely, but it could still add value to your SWOT analysis. It may be valuable to classify your threats by asking “how serious is it?” and “how likely is it?” The better you identify potential threats, the more likely you can plan for and respond to them. You will be looking back at these threats when you consider your contingency plans. Examples of threats for a SWOT analysis could be:

• The factory near your café is going to close and many of your customers may no longer be in the area. • A nationally known business opens a store in your town and you have new competition. • Your town is becoming more conservative and young women may not buy the clothes you are selling. • Taxation is introduced on your product or service and buying inventory will become more expensive.

Slide 10 Once you have identified all four groups, you can then match your strengths to opportunities and rank those opportunities that are most profitable or that will last. Then you need to look at the impact of threats and which create the biggest problems when looked at together with your weaknesses. The internal strengths and weaknesses, compared to the external

opportunities and threats, can give you information about the condition and potential of the business. How can you use your strengths to better take advantage of the opportunities ahead and minimize the harm that threats may introduce if they become a reality? How can weaknesses be minimized or eliminated? The true value of the SWOT analysis is in bringing this information together, to assess the most promising opportunities, and the most crucial issues. Analysis of these factors will play a part in developing strategic plans for the business, which should take into account how to take advantage of the opportunities and prepare for the threats to the business.

LESSON 3: STARTUP CAPITAL AND FINANCING Slide 1 Each type of business requires different resources. A clothing store does not require plates and spoons, while a café will not require clothing racks. In general, there are two types of costs for a new business: one-time costs and recurring costs. One-time costs are purchases that result in the business owning a piece of equipment or other item. Recurring costs are expenses that the business will continue to pay during its operation. Both types are equally important for a business owner to consider. Once you have decided what type of business you want to start, you need to determine what kinds of resources you will need to operate the business. The cost of items such as equipment, physical space, and inventory need to be taken into account. The total cost for all of these things is referred to as startup capital and is a key component of your business plan. Most people will not have all the money they need to successfully start their business. Further, many busi nesses do not make a profit in the first few years of their operation, so the calculation of startup capital should be carefully analyzed in order to prevent your business from running out of money. Once you have figured out the total cost of opening your business, you need to consider how to pay for them. For new businesses, there are two main forms of capital: debt and equity. In this lesson, you will learn about the most common types of resources needed for businesses and different methods for financing them. Slide 2 Many one-time expenses are paid before a business opens its doors. Common examples of one-time expenses are:

• Renovation of a room or building where your business will operate. • Purchase of machinery needed to manufacture your product or deliver your service. • The cost of registering your business with the local authorities. • Purchase of office furniture and computers for your staff to use. • Purchase of a delivery truck for transporting your products.

For a café, examples of one-time expenses might include the tables and chairs where the customers will sit, the ovens and refrigerators where food will be prepared and stored, and the sign that will be posted outside your business so your customers can find your café. For a clothing store, one-time expenses might include renovating the interior of a building to create rooms where customers can try on clothes or purchasing display racks for your inventory. It is important to carefully analyze your market and prospects for growth before determining how much and what kind of equipment you need. For example, if you are opening a café and expect 100 people to come eat every day, you might only need one refrigerator. However, if you expect this number to grow to 300 within the next two years, you might want to invest in two or even three refrigerators. Slide 3 There are many costs that a business will have to pay on an ongoing basis. Common examples of recurring costs include the wages you pay your staff, the monthly rent for your business’s office, and expenses for selling and promoting your product or service. For a café, recurring costs might include the ingredients for the food you prepare or the monthly amount you pay for electricity, gas, and other utilities. In the beginning, many businesses do not make a profit, so it is common to include theses costs in your startup capital calculation for the amount of time you believe it will take for your business to become profitable. If you believe that your business will be profitable after three months, then you should include three months of recurring costs in your startup capital calculation. Once a business’s profit is more than these recurring, or operating, costs, the business is self-sustainable. However, until it reaches that point, a business needs to have enough cash to continue operating.

Slide 4 Once you have totaled your one-time expenses and the amount of recurring costs that will be incurred before your business is self-sustainable, you need to consider what financing options are available. If you can pay for all of the startup expenses with your own savings, you are in a much better position than most, if not all, people who start businesses. Typically, a business requires external money to start. Remember to remain conservative in your estimations for one-time and recurring costs. If you are too optimistic about how much of a profit your business will make and then your actual performance is much worse, you will find yourself without enough cash to operate. In that case, you either have to find more capital or shut down. The two most common types of external financing are debt and equity. We will now explore the main characteristics of and differences between debt and equity. However, it is important to remember that the availability and attractiveness of external financing is largely dependent on the city, region, and country in which you start your business. Some people starting businesses will have no access to debt while others might be completely reliant on it. Slide 5 In its most basic form, debt is simply money that one person borrows from someone else to be paid back at a set time in the future. Typically, a financial institution such as a bank provides debt capital to businesses in the form of loans. There are many different types of loans, but the three main aspects of a loan are the amount borrowed, when and how that amount must be repaid to the bank, and the annual interest cost of the borrowed money. We will explain each of these aspects:

1. Amount: The amount borrowed, also referred to as the principal amount, is how much a bank lends to a business. Some organizations will provide loans as small as $50, while others have the ability to lend billions of dollars.

2. Payback Period: When a business borrows money from a bank, the bank will say when and how the business must repay the principal amount. This is called the payback period. The length of the payback period depends on the size of the loan, what it is being used for, and how easily the bank thinks the business borrowing the money can pay it back. Sometimes, a payback period may be as short as a few months, though it is more common for it to be many years. Further, some banks might require the principal to be paid back in small installments over time, which is referred to as loan amortization, or paid back in a lump sum at some point in the future.

3. Interest Rate: The bank charges the borrowing business an annual price for the use of its money. This is called the interest rate and it is a percentage of the amount of money borrowed. For example, if a bank charges a 10% interest rate on a $1,000 loan, the borrowing business will have to pay $100 each year in interest. Similar to the payback period, interest rates vary widely and can be as high as 25-30% in some places.

There are many other features, requirements, and restrictions to debt that are much complex and variable. For now, just remember that these are the three main factors to consider and that they are intertwined. Slide 6 There are many advantages to using debt capital.

• Debt is easy to understand. Many banks provide loans to businesses and have standard legal contracts that outline the main terms and features of the loan. The borrower has the ability to review and negotiate certain terms. Once a contract is signed, a business owner knows when and how much money will be paid back every year, making it easy to budget.

• In many countries, interest payments on debt are tax deductible, meaning that the payment of interest reduces the amount of taxes that a business must pay.

• Debt does not result in loss of control in your business. As will be explained later, using equity to finance your business typically results in giving up a share of ownership in the business. By taking out a loan from the bank, a business does not give the bank any operational control or influence on the strategic direction of the business.

• Debt is “cheaper” than equity. In finance, each type of capital has a cost or price to it. For debt, this cost is the interest rate that a business pays to a bank. For equity, the cost is much more complicated to calculate since it includes the future profits of the business as well as the operational control given through ownership to other investors. This is an advanced lesson in finance that will not be covered here, but it is important to note nonetheless.

While debt has its advantages, there is one main risk to consider, which is the threat of bankruptcy as a result of nonpayment. Most banks require some type of collateral, or security, for a loan. For a small business, collateral might be the equipment and machinery purchased, any existing cash the business has, or even the assets of the business owner. This collateral is the bank’s protection from lending money to a business and then not receiving its principal back. A loan

contract typically gives the bank the right to take these assets from the business and sell them if that business is unable to make the required payments on the loan. If a business does not make the required payments and the bank seizes these assets, it might be very difficult for the business to continue operating. Further, in many countries, a business’s lender often has the legal right to force the business into bankruptcy if they do not receive the interest and principal payments on schedule. While debt capital is more widely available than equity, businesses need to consider the potential dangers that an unpaid loan might have on their business. Banks that serve small businesses know about the challenges many new businesses will face and will sometimes work to restructure the loan. However, this will depend on the particular bank and the performance of the business. Slide 7 Equity, or investor equity, is capital obtained from investors in return for an ownership stake in the business. Equity may be contributed from friends, family members, and investor groups. Raising equity capital is accomplished by selling stock, which is a legal document granting an investor a certain ownership percentage in return for some amount of money. For example, if someone is attempting to open a clothing store and needs to raise $100,000 of equity capital for startup costs, the owner might grant a 50% ownership position in the clothing store to a wealthy friend for contributing the $100,000. The percentage of ownership given to investors will depend on how much equity the business needs and the estimated value of the business. For example, if a business’s potential future value is $1,000,000 based on profit projections, a $100,000 investment might be worth far less than a 50% ownership stake. This ownership stake gives the investors two main rights. First, it entitles them to be involved in the strategic direction of the business and may, depending on how much they own, let them overrule management on certain decisions. In other words, it gives them some control over the business. Second, investors are entitled to a portion of the business’s profits and will be able to control whether those profits are invested back into the business or paid out to investors as cash. As will be explained later in this lesson, profits that are reinvested in the business are known as retained earnings, which represent an additional financing option not typically available to new businesses. Slide 8 Raising capital in the form of equity provides one key advantage over debt: it does not require repayment. Whereas a business is obligated to pay back both the principal amount of a loan as well as interest payments, equity capital stays in the business. In its first few years, a business often needs to keep as much cash as possible to pay for operating costs. Making monthly payments to a bank can be very difficult if cash flows are uncertain and irregular for the new business. Recall that a bank might seize control of a business’s assets after missing only one interest payment and it has the option to force the business into bankruptcy. Since there is often no guarantee of repayment with equity, there is a reduced threat of bankruptcy. Further, if a business receives equity from an experienced investor or investment firm, that person or group might be able to contribute significant knowledge and strategic advice as the business grows. The main drawback of equity is that it requires giving up a percentage of your business, which reduces the control the entrepreneur has over the business’s strategy as well as the profits. Equity investors take a larger risk than banks, since if the business fails they could lose their investment. Thus, many equity investors take a very active role in the companies they invest in. They might force a manager to make certain decisions that he or she disagrees with, depending on what percentage of the company they control. In the previous example, the investor would have control over 50% of the business’s profits. Given the loss of control over the business and the right to this much of the business’s profits, equity is considered a more expensive financing option than debt. Slide 9 After deciding on how much startup capital your business needs, the next difficult decision is how much debt and how much equity to use to finance the business in its early years. In summary, let’s review some of the main advantages of both options.

The main advantages of debt are it is easily understandable with predictable repayment terms, interest payments that often reduce how much a business must pay in taxes, and it does not result in any loss of control over your business as long as it is paid. The main disadvantage is that debt requires repayment. This can be especially hard for a new business that should be trying to conserve cash. Most importantly, if the business does not perform well and does not make its required payments, the bank might seize the assets of the business, force the company into bankruptcy, or even sue the business owner. The main advantages of equity are that the investors might be valuable sources of strategic advice, the terms of the investment are very negotiable, and that the business does not need to repay the equity investment if it fails. The main disadvantages are that equity requires the firm to give up some control over the business as well as a percentage of the business’s future profits. As both debt and equity have positives and negatives, many companies use a combination to finance their business’s startup costs. Slide 10 The concepts noted throughout this lesson apply not only to new businesses, but existing businesses that are expanding or pursuing new opportunities. These often require additional financing and the business’s management will have to evaluate whether it is better for the business as a whole to take on additional debt, equity, or a combination of both. However, there is one additional resource that existing businesses may have that new businesses usually do not, which is cash accumulated through historical profits. This is called retained earnings. Once a business becomes profitable, it can decide whether to pay out its profits to investors or to reinvest it in the business. Many businesses will reinvest it into the business by saving it. They will gradually build up a significant cash reserve that is kept in a savings account with a local bank. These funds can be used to grow the business without having to borrow money or appeal to equity investors. This reduces the need for external financing, increases the business’s sustainability, and provides flexibility to take advantage of future opportunities.

LESSON 4: ESSENTIAL ECONOMICS PRINCIPLES Slide 1 There are many people in the world and each wants different things. Some of the things people want are plentiful, while others are not. In total, the things that people want usually exceed what exists to satisfy what we want or need. As a result, we can say that resources are limited – also referred to as “scarcity”. Economics is the study of how we make decisions about using these limited resources. While each of our individual resources and desires may differ, people tend to make decisions in similar ways. Slide 2 There are different types of economies. In a planned economy, the government decides what is available to buy and how much of each thing. In a market economy, people and businesses decide what is available to buy and how much. Many economies today are mixed – meaning that people and businesses decide what is available for most things, but the government is involved in certain areas such as transportation, health care, police protection and other areas. In mixed economies, the government may also limit the prices that may be charged by businesses or impose other forms of regulation. Slide 3 Market and mixed economies are based on how things that people want are provided to them. Businesses exist to provide either things, also known as goods, or services – both of which are what we call outputs. Businesses need resources in order to do that and these resources are what we call inputs. Inputs may be natural resources such as wood or electricity, human resources which are workers, and equipment such as machines or trucks. Slide 4 There are two basic participants in economics – suppliers and consumers. Any time that you purchase something, you are a consumer in the transaction and any time you sell something you are a supplier. Most suppliers are also consumers since they need to purchase the inputs for their businesses, such as a baker who needs to buy flour so that he can then sell bread.

As a worker, you are also a supplier since your skills are your output and your salary is what your employer pays for those skills. You then use the salary you earn to buy food, clothing, medicine and whatever else you need. Slide 5 The idea that there are always two sides to a transaction is a fundamental concept in economics. Keeping this in mind, another concept, the flow of income, can be easily explained. There are two main exchanges in the flow of income: the flow of money and the flow of resources. As noted above, people are a critical input for most business as they supply the labor and skills to provide different goods and services. These goods and services, otherwise called the outputs, are then sold to other people, or consumers. In exchange for their time and work, people are paid wages or salaries. They then use this money to purchase other goods and services. For example, let’s assume you own a café. You pay your waiters, waitresses, and cooks to come to prepare and serve food to your customers. Your staff uses their wages or salaries to purchase other items that satisfy their personal needs, such as rent for their house or schooling for their children. On the other side of the flow of income, your customers pay your café for the goods and services they receive. Slide 6 The most basic concept in economics is the concept of supply and demand. Defined simply, supply is what is available in a marketplace and demand is what consumers want. In a perfect situation for both suppliers and consumers, supply and demand would be equal – that is, everyone can buy something that they want because it will be available, and suppliers can sell all that they produce. Unfortunately, nothing is perfect and various factors influence both supply and demand. Slide 7 Demand is a combination of all consumers’ desire and their ability to purchase. In its simplest form, demand for a good or service increases as price goes down and demand decreases as price goes up. This chart illustrates what is called a demand “curve” showing this relationship. As we will discuss shortly, many other things affect demand, but price is almost always involved since money is a limited resource and people make decisions in ways that maximizes the utility of this scarce resource. As you can see in the chart, the supply curve is the opposite of the demand curve. That is, as price increases, suppliers in the market will produce more because doing so can lead to higher profits. While the goal of consumers is to use money as wisely as possible, the goal of suppliers is to maximize their business’s profits. On the other hand, if the market price declines, many suppliers will not find it profitable to sell that item and will decrease production, thereby decreasing supply. To better explain how the behavior of consumers and suppliers differ, let’s look at a simple example. Let’s assume that you own a clothing store that sells women’s dresses. There are two types of dresses: Italian and French. For each Italian dress the clothing store sells, it makes a profit of $100. For each French dress it sells, the profit is $50. If the demand for each type of dress is the same, the owner of the clothing store will try to sell as many Italian dresses as it can, since the profit is higher. In other words, the clothing store will focus on the higher-profit dresses. From the consumer’s perspective, let’s assume that the Italian dress has a selling price of $200 and the French dress has a selling price of $150. If the consumer has no preference for either type of dress, he or she would choose to purchase the French dress since it is cheaper. By purchasing the French dress, the consumer retains $50 of their limited money supply to use on other goods or services. What is important to note in the chart is where the demand curve and the supply curve meet. That is the point of “equilibrium”, meaning the price is such that consumers want the same amount as businesses are willing to provide. In a perfect market, this would be the price of the good or service you are analyzing. In the real world, though, equilibrium does not happen often; either the price is too high for consumers or quantity is higher than consumers want. In real life, the demand and supply lines are constantly shifting up and down. Slide 8 So what determines demand? What can make consumers want something and, more important to a supplier – what can make consumers want more of something? As we said earlier, market demand is the sum of individual consumers’ demand. Besides price, these are some factors that influence individual demand:

• Income – whether a person can afford something or not, especially if he loses his job • Preferences – coffee will always be in demand, but not everyone likes it • Weather – demand for umbrellas always increases when rain start to fall • Time of year – warm clothing is more in demand in winter than in summer

• Relative price to other goods – if two shirts are identical except for price, the less expensive one will likely be more popular

• Consumer's expectation – if prices are expected to increase, people may buy more before the increase Slide 9 Some factors that can influence the aggregate or market demand are:

• Distribution of wealth in community – if there are no wealthy people in a community, luxury goods will not sell well

• Community common habits – in a conservative community, more “fashionable” clothing may not sell well • Number of buyers in market – in a small community, you cannot expect to sell a large number of things needed

only once per year • Growth of population – baby food will sell better in a community with a high birth rate than in one with a falling

population. Understanding how demand changes is very important when running a business because a change in demand can also change the equilibrium price. Many businesses plan for changes in demand by increasing or decreasing supply and these predictions are sometimes not correct. Slide 10 As a general rule, the following can be expected:

• If demand increases and supply remains unchanged, then it leads to higher equilibrium price since there are more consumers demanding a good or service than the current suppliers can produce.

• If demand decreases and supply remains unchanged, then it leads to lower equilibrium price since suppliers will have to lower the price of their good or service to motivate consumers to purchase what is available.

• If supply increases and demand remains unchanged, then it leads to lower equilibrium price and higher quantity since, like the previous example, the suppliers will lower their price in an effort to attract customers.

• If supply decreases and demand remains unchanged, then it leads to higher equilibrium since consumers with more resources, or money, will be willing to pay more in order to acquire the good or service.

Slide 11 The first of these rules is shown in the chart. As an example, residents of a village need wood to heat their homes in the winter. In a winter that is colder than normal, the demand will increase but the supply stays the same because there are no more trees to cut. As a result, the equilibrium point moves up along the supply curve and the market price increases. These representations of supply and demand are simplified examples to illustrate the concept. In reality, businesses may not be able to increase supply to meet higher demand and consumers will not always purchase more if prices decline. The general concept, however, remains valid and some businesses will reduce production to increase prices – by making something harder to find, they may affect consumer behavior. The concept of supply and demand is not limited to things that consumers purchase. It is also true with salaries in cases such as when doctors are needed (employer demand) but few are trained to be doctors (population supply). It can also apply to rental costs for property and equipment, or any other case where there are willing buyers and sellers. Slide 12 Another basic economic concept is “opportunity cost”, which is sometimes defined as expressing the relationship between scarcity and choice. Said another way, when you only have enough resources for one of two things, you must choose one and your opportunity cost is not having the other. This is different from the actual cost of something – meaning money that you spend. Opportunity cost is not having something because you chose something else instead. This applies to both consumers and suppliers. In the case of a consumer, one might have $20, which is enough money to buy a dress or a pair of shoes but not both. If the consumer buys the dress, her actual cost is the $20, and the shoes are her opportunity cost. In the case of a supplier, the manager of a business may decide to make dresses instead of shoes. The cost of material and labor are some of the actual costs to run his business, while the profit he might earn from selling shoes is his opportunity cost because he chose not to make and sell them. Another way to think about opportunity costs is to remember that, because our resources are limited, we have to make decisions about how we use these resources. Each decision usually requires people to think about the trade-off of that choice. Should I purchase the Italian dress or the French dress? Should I sell coffee or tea? When making decisions, most

people will consider the trade-offs of how a particular decision will affect how they could use those limited resources in a different way. Slide 13 One final concept important to market and mixed economies is the importance of trade and specialization. Simply put, if people are able to provide the goods or services for which they are best suited, that is they possess specific skills or abilities that allow them to more efficiently or effectively provide that product, they should specialize in the production of that specific good or service. The easiest way to understand this concept is through a simple example. Let’s assume that you and your neighbor both own dairy farms. Both of you can make and sell butter or cheese. Both products are sold by the kilogram and are the same price. In the past, both you and your neighbor have produced and sold a combination of butter and cheese in your community, competing against each other. Let’s assume, though, that it takes you one hour to make one kilogram of cheese and three hours to make one kilogram of butter. Your neighbor, on the other hand, can make one kilogram of butter in two hours, but it takes him four hours to make one kilogram of cheese. Does it make more sense for you each to spend your entire day making both cheese and butter? Or would it be better if you specialized in the production of cheese and your neighbor specialized in the production of butter? By specializing in what you both excel at, you could produce more butter and more cheese, thus increasing your profits by selling more kilograms of both. Slide 14 It is important to understand that these concepts do not exist independently. For example, understanding opportunity cost can help you decide whether to expand your current business or enter a new one. In the example of a café, you may have a choice of producing more coffee or starting to sell tea also. If you choose to sell more coffee, the potential profits from tea are your opportunity cost. But if you see growing demand for tea, and the equipment you own allows you to expand and to sell both tea and coffee, you may lower your opportunity cost by providing two products that customers want. As you can see, managing a business involves many decisions – most of which are complicated and most of which can impact other decisions you must make. But if you gather enough information, and think about how the decisions relate to one another, you can use these managerial economic principles to better understand what your business should expect, and more informed decisions can help to make a better business.

LESSON 5: MARKET RESEARCH Slide 1 When you are starting a business, it is important to analyze your environment. An earlier lesson explained how to do a SWOT analysis, which is a helpful tool for outlining the opportunities for you and your business. In an ideal world, people will be able to use their skills and interests to succeed in business. However, before starting a new business, it is important to make sure that your idea relates to a need your customers have. For example, if you love to cook, you might think about opening a café in your town. But if there are already three other cafes that don’t have enough customers, opening a new café is likely to fail. How do you determine whether your business idea has a good chance of succeeding or failing before you begin operating? The answer is market research. In this lesson, we will discuss the differences between products and services, what market research is and how to do it, and key considerations to help guide your business’s strategy to improve your chance of success. Slide 2 There are two main types of businesses: those that sell things (also referred to as “goods”) and those that provide services. Goods are things you buy to use once or many times. Soda and sandwiches bought from a store are examples of goods, as are refrigerators and cars. Goods are tangible things. Services, conversely, are things someone else does for you. Examples of service businesses include hair salons, accounting firms, and taxis. While goods and services might seem like complete opposites, many businesses actually provide a combination of goods and services. For example, when you go to a café, you are paying for goods (the food you eat) as well as a service (a waiter or waitress serving you the food).

Further, goods or services may fall into one of three categories:

1. Existing product – is your good or service identical or very similar to another product currently available to customers? For example, is your idea for a clothing store the same as one your neighbor has?

2. Modified product – is your good or service a modified version of an existing product? For example, does your clothing store offer customers the chance to not only purchase new clothes, but also have them altered while they wait?

3. New product – are you inventing a good or service that is currently unavailable? Innovation is one of the biggest drivers for success. Companies like Apple and Microsoft have created many products that did not exist previously and it has made them very successful. Think about what the iPod has done for Apple’s investors!

Regardless of whether your business would sell strictly a good or service or a combination of the two, the purpose and methods for performing market research are the same. Slide 3 Successful businesses all have one thing in common: their product matches an unmet customer need. Customers will only buy your good or service if it is something they need or something they believe they should have. In order to create a business that accomplishes this, you need to gather information about your potential customers, your current and future competition, and the overall profile of your target market. Market research is the process of collecting and analyzing information about your customers, competitors, and industry to help you understand what products your customers want and need, and how you can differentiate yourself from the competition. After performing market research, you should be able to create a solid business strategy that allows you to complete the statement, “Customers will buy my product because…” For example, a café might develop a strategy to use only fresh ingredients purchased from local farmers. Their unique idea might be “Customers will eat at my café because I am the only restaurant in the area that uses all-natural ingredients while also supporting the local agricultural economy.” In general, market research helps managers make informed decisions about their business. This will help reduce the risk of failure by helping the manager identify the best markets to operate in, identify the right good or service to fulfill customer needs, and execute the best marketing plan. Market research can also help managers identify potential future problems or areas for growth in the market. It can also help identify potential sales opportunities and help managers create the most effective strategic plans for entering a new market. In general, market research can be divided into two categories: primary research and secondary research. Slide 4 Primary research is market research that you do yourself. Primary market research is also called custom research, since it is often done with a specific goal or question to answer. There are five main steps in primary research.

1. The first step is to define the problem or goal of the research and what you want to accomplish. A business manager first needs to decide what specific questions he wants answered or clarified by the market research. For example, the manager of a café might want to learn more about what customers want before he opens the café. The main goals of the research might be to determine whether customers are satisfied with the current cafes in the community, how often they go to cafes, how much they typically spend at a café, and what types of food and drinks are most popular.

2. The second step is to design the method for collecting the information. There are many easy methods that businesses use frequently, including: • Conducting surveys of target customers. Surveys can be done in-person, over the phone, or online through

special websites or email. • Holding in-person discussions, called focus groups, with customers from your target market. • Visiting and observing your competitors’ stores or locations. • Interviewing customers from your target market.

Using the example of the café manager, the best methods to use might be interviews of customers that frequently visit cafes and actual visits to the competing cafes.

3. The third step is implementing the chosen methods and managing the information collection processes. This includes creating schedules for performing the market research, assigning specific people to certain jobs, and setting deadlines.

4. The fourth step is analyzing the results of the market research. The type of analysis will depend on the type of research conducted. Both primary and secondary research can be divided into two categories: quantitative and qualitative. • Quantitative research typically involves some type of specific information that can be easily summarized.

Surveys that include questions based on rating scales, lists, and other questions with a limited number of answers are quantitative. The possible answers for each question on the survey have a limited number of potential responses to choose from. For example, a question on a survey might ask customers to state how many times they eat at cafes every month. In this example, while peoples’ answers might differ, you could easily figure out the average amount of times a customer typically eats at a cafe. This can sometimes be a very difficult process if you have a lot of information. Many managers use computer programs, such as Microsoft Excel, to analyze large amounts of data. This decreases the time analysis will take and increases the manager’s ability to use the information to make business decisions. After the analysis, the manager should look for trends or patterns. For example, after surveying 100 café customers, a manager might find that 70 are unhappy with the quality of customer service at the other cafes in the community.

• The other type of research is known as qualitative research. Qualitative research includes less structured methods, such as focus groups and conversations with customers. In many cases, there are no specific questions to be answered; instead, the manager uses these methods to learn about patterns or what customers think is important. Often, a manager will not be able to analyze qualitative information in the same way he or she might analyze quantitative information. However, qualitative research can be a helpful starting point for defining the goals, objectives, and methods for doing quantitative research.

5. The final step of the process is to use the information to make better business decisions. Having this market information is not enough; a manager needs to use this information to improve his business strategy. Market research can help increase a business’ chance of success, if it is defined, designed, implemented, analyzed, and utilized in the correct ways.

Slide 5 Depending on a business’s target market and particular goods or services, there might be existing sources of information that can add to primary market research. Secondary research is market research that is conducted and published by other organizations or researchers. Common secondary research sources include:

• Articles in trade journals and industry publications • Market research reports completed by research organizations • Information on the internet

One important thing to remember when using secondary research is to think about how reliable the source of the information is. While the internet is the largest and most valuable source of secondary research, there are many sources of information that are not correct. There is no one responsible for checking the accuracy of all information on the internet, so a business manager must decide whether the information seems logical and based on intelligent sources. If you decide to use information from the internet, you need to be careful to avoid sources that might be biased. If many different sources or websites present the same facts or information, you can be confident that the quality is good. Some secondary research is free for public use but other sources, such as market reports, often need to be purchased. In general, the most reliable sources of market research will be government agencies and market research firms that specialize in conducting research to sell. Since the reputation of these organizations depends on the quality of their research, the information they provide is usually good. Slide 6 Let’s look at the basic differences between primary and secondary market research. Primary research requires more time, since you need to design and do all the work yourself. Secondary research is usually available right away, but might not be as current since the information is based on historical data. For example, a market research report might include information based on consumer preferences from two or three years ago. Primary research is usually more expensive, since you are doing all the work yourself. However, local market research can actually be done with little or no expense. Secondary research might be free, though you will have to purchase most high-quality research reports.

Primary research can be designed to answer a specific question. It can be customized based on the particular situation and resources available. Secondary research might provide useful information about the industry, but may not contain the specific information a business manager needs to make a certain decision. Because there are many differences between primary and secondary research, many businesses use a combination of the two approaches. Slide 7 Whether a business uses primary or secondary market research, most market research typically focuses on one of three areas: the company’s target market and customers, the company’s competition, or the company’s industry in general. All three areas are important to consider for a business’s strategy. For a company’s target market, information needs to be gathered about the customers themselves, such as the average age, and if they are married. Information about their income and how much they spend on things like what your business will offer is also very important. You can also research how they usually acquire your product. Information about competitors is also very important. You need to know who your competitors are, how big or small they are, where they are located, and how profitable they are. If you determine that none of the cafes in your community are profitable due to increasing prices for food ingredients, you might conclude that opening a café now is not the best option. You can also use this research to determine industry averages for sales growth and profit margins. These will be helpful if you decide to open a similar business as you can determine whether your business is successful based on your profit levels in comparison to your competitors’. Further, you need to look at each particular competitor’s strategy. Many businesses also perform SWOT analyses for their competitors as well as their own business. The reason to do that is to identify your competitors’ weaknesses and find things that your business can do better. This may be selling a different type of women’s clothing or focusing on customer service at a café. As we will discuss in other lessons, the practice of choosing a strategy while thinking about your competitors’ strategies is known as competitive positioning. The idea is to make sure your company’s goods or services are different than other businesses so you can attract more customers to your business. Focusing on the factors that make you different is also known as identifying a business’s competitive advantages. Finally, market research should include information about the broader market for your goods or services. This can help define the particular opportunities and threats to include in your SWOT analysis. Market research can help identify important trends and patterns in the industry and help a manager predict the future direction of the industry. Slide 8 The information in this lesson has been about the importance of market research and how to do it. The goal of market research should be to help a business identify customer needs and market trends, then develop a plan to decide which specific goods or services are best to take advantage of these opportunities. Many times, a business will have to change its strategy or provide a completely different product based on market research. However, the following eight points will help a manager determine what goods or services are the most important for their business.

1. Fit to Mission: Does the good or service you think would be most successful fit with your business’ overall aim? Coca-Cola does not sell computers or offer financial services, despite them both being potentially good business opportunities.

2. Profitability: Is the good or service generally profitable? Do competing businesses seem to be making profits or are the profits declining?

3. Accessibility: Would customers pay for the good or service if you offered it? Introducing a new product into the market might be very successful, but people might not actually need it or have the money to pay for it.

4. Competitive Advantage: How many competitors exist in your market? Is there enough demand that an additional provider is needed in your market? Is there a way you can change the good or service to make it more appealing to your target customers?

5. Scalability: Can your product or business grow with the market? If your business cannot grow as the market increases, other competitors are likely to take your place and the larger customers are likely to go somewhere else with their business.

6. Distribution: Can you get your product to the customer in a timely and profitable manner? Perhaps you are considering offering a delivery service with your café. With the added expense of a driver and transportation expenses, can your business still sell food profitably?

7. Supplier Control: Do the businesses that would supply your business have significant control over the market? For example, do all the cafes in your town purchase their fruits and vegetables from one farmer? If so, the farmer has significant control over the prices and supply of these products, which exposes your business to more risk.

8. Customer Control: Do the customers in your particular market have a high degree control over what price you sell your good or service for? If customers can influence the price, a manager should consider the minimum amount he can sell for and still make money.

These last two items will be discussed more in a future lesson. In general, market research is as important for a new business as it is for an existing business. Managers need to constantly match their product offering to the conclusions gathered from market research. The overall goal of market research is to ensure that a business’s goods or services are profitably fulfilling a real customer need in a strong market in a way that is different than the competition.

LESSON 6: OPERATIONS MANAGEMENT - SIMPLE FORECASTING Slide 1 If you were running a business, how would you determine the correct amount of inventory to purchase for the coming month? How much cash do you think you need to have on hand for next period? To answer these questions, you would have to use some method of forecasting. While forecasting can be difficult to do well, it is an essential skill for an entrepreneur. Almost all forecasting methods use historical information. For example, if you are trying to forecast sales, you might use quarterly sales revenues for the past three years. Properly gathering data is important for getting good, consistent results. Slide 2 Here are a few characteristics that define good data:

• Sufficient Quantity – The more information you have, the easier it is to identify trends and understand the system you are trying to forecast.

• Objectivity – Factual, relevant data that accurately measures what you are attempting to forecast is necessary to avoid biased and irrelevant outcomes.

• Representative – It is often impossible to gather all of the information for a population. For example, finding the height of every human on earth would be very difficult. In these cases, we rely on a sample or sub-group of observations. It is important that the sample data is broadly representative of the population.

• Consistency – Data that is highly variable will produce less precise results than consistent data. Often times, observations that are very different from the others are removed from data sets because they are not representative of the broader trends you are attempting to capture when forecasting.

Slide 3 Measures of average can often be helpful in determining the expected value of an outcome. There are three common measures of average:

• The Mean – Commonly referred to as the “simple average”, the mean is found by taking the sum of all the data observations, and then dividing by the number of observations in the data set. The mean is a good way to determine an expected outcome when you have consistent data. However, the mean may be strongly influenced by anomalies in the data set. In the data set {0, 0, 1, 1, 1, 2, 7}, the mean would be (0+0+1+1+1+2+7) / 7, or 12 / 7, or about 1.7.

Slide 4 The Median – If you were to plot the points in a data set on a number-line, the center-most observation would be the median. The median is a good way to determine an expected outcome when a data-set includes a few very unusual observations, but maintains a strong central tendency. In the data set {0, 0, 1, 1, 1, 2, 7}, the median would be the fourth observation, or 1. Slide 5 The Mode – The mode is simply the observation that occurs most frequently in a data set. It is particularly useful in describing repetitive data sets. In the data set {0, 0, 1, 1, 1, 2, 7}, the mode would be 1. Slide 6

While measures of average can be useful for determining expected outcomes, it is important to know the range of possible outcomes. Having a good idea of probable high and low outcomes is sometimes more useful than the actual forecast. For example, a business would use a high sales estimate to plan inventory and staffing levels. This is because they don’t want to miss out on sale opportunities because of insufficient product or staff. The same business would use the low sales estimate to ensure that they will maintain adequate operating capital if there is a slump in demand. The simplest method of predicting the range of possible outcomes is to assume some margin of error. The specific margin, at least with this method, is something you will have to decide. You may make this decision based on your experience or historical outcomes. While the margin may be an absolute value, it is most often measured as a percentage of the forecast. To apply a margin of error, we simply calculate the margin itself, then add and subtract the margin from the actual forecast. The two resulting values will give us high and low forecast estimates. Let’s try an example with the Fancy Gift Company. For 2012, Fancy Gift Company has forecasted $92,000 in sales. They predict a 10% margin of error. The first step for us would be to calculate the margin. In our case, the margin would be $92,000 times 10%, or $9,200. Next we add and subtract the margin from the forecast value. Adding $9,200 to $92,000 gives us a high forecast estimate of $101,200. Subtracting $9,200 from $92,000 gives us a low forecast estimate of $82,800. There are many statistical tools for measuring distribution. Some are very simple and some are very complex. A discussion of these measures and methods are beyond the scope of this lesson, but a good understanding of basic statistics can be very helpful when performing forecasts. Slide 7 Many businesses are affected by seasonality. Retail stores often have higher than average sales during the winter due to the holiday season. Agricultural output is highly seasonal, and may generate almost all of its revenue during one or two seasons. When this is the case, you must take seasonality into account when forecasting. To illustrate the most common seasonal adjustment method, we will use quarterly sales information from the Fancy Gift Company for 2011. During 2011, the company had $80,000 in sales. First, we find the average quarterly sales, which were $20,000 ($80,000 divided by 4). Slide 8 To find the seasonal adjustment ratios, we take the actual sales in each quarter, and divide them by the average quarterly sales. For the fourth quarter of 2011, the seasonal adjustment ratio is 1.3. Slide 9 Now let’s use our seasonal adjustment ratios to help with next year’s forecast. Through rigorous forecasting, the Fancy Gift Company expects it will have $92,000 in sales for 2012. The first thing we need to do is figure out the average quarterly sales. Dividing $92,000 by 4 results in a quarterly sales estimate of $23,000. Slide 10 To get our seasonally adjusted forecasts, we would multiply 23,000 by the seasonal adjustment ratios for each quarter. For the first quarter, we would multiply 23,000 by 1. For the second quarter, we would multiply 23,000 by 0.8. For the third quarter, we would multiply 23,000 by 0.9. For the fourth quarter, we would multiply 23,000 by 1.3. The resulting quarterly forecasts will still total our 2012 sales estimate of $92,000, but will have accounted for seasonal differences. An even better method would be to average the seasonal adjustment ratios for multiple years. This captures more information, and helps minimize the impact of non-representative data. Slide 11 Most forecasting data sets use time series data, which are records of some activity over a period of time. A very simple method of forecasting is to simply analyze the changes from one period compared to the same period in the prior year. This is sometimes called a Delta Analysis. In this case, “Delta” is used to mean change. By analyzing the historical changes, we can gain idea of what might happen in the future. To illustrate this technique, we will again use data from the Fancy Gift Company. The chart shows the annual sales for the Fancy Gift Company for the past five years. If we take the year-to-year changes in sales, we see that, on average, the sales have increased by an average of $2,500 per year. We might use this as the starting point for our forecast, and assume that it will hold true for the following year. This would give us a 2012 sales estimate of $82,500.

Slide 12 Sometimes you only want to include recent data points in your analysis. Perhaps you think that information more than three years old is not useful. As a result, you would only include data from the most recent three years. This method is referred to as a Moving Average function. It’s still taking a simple average, but the data you include moves over time. To illustrate the moving average method, we will once again revisit the Fancy Gift Company. Again, we want to forecast the change in revenue for the coming year. We have year-to-year sales revenue changes for four years. However, let’s assume that we only want to use the past three years to calculate our forecast. If we are trying to calculate the sales revenue change for 2012, we would find the average of the sales revenue changes for 2011, 2010, and 2009. This would give use a forecasted sales revenue change of $2,500. Adding this to the sales revenue from 2011, our forecasted 2012 sales revenue would be $82,500. Slide 13 Often times more recent data should weigh more heavily on your forecast. To adjust the impact of past observations on your estimate, you can use a weighted moving average method. Let’s take another look at the year-to-year changes in sales for the Fancy Gift Company. Perhaps we decide that only the past three years are relevant. Furthermore, we decide that the 2011 year-to-year change should be weighted at 50% (perhaps because it is the most recent and came after changes were made to the store); the 2010 year-to-year change should be weighted at 30% (perhaps because it was before the store changes); and the 2009 year-to-year change should be weighted at 20% (perhaps because it is the oldest data used). It is very important to note that the sum of your weights must equal one-hundred percent. First we multiply each of these observations by its assigned weight. Next, we sum the results. The result is a weighted average of $2,600, which would give us a sales forecast of $82,600 for 2012. Because this is a moving average, next year we would only include the year to year sales differences for 2012, 2011, and 2010. However, we would still apply the same weights to each observation. Slide 14 Often times, forecasting is done for an entire financial report, such as an income statement or a balance sheet. A very useful tool for this is called “Common Size Analysis”. Rather than look at absolute year-to-year changes, a common size analysis shows everything as a proportion of some baseline. When performing a common size analysis on an income statement, you would take everything as a percentage of total sales. On a balance sheet, you would take everything as a percentage of total assets. Slide 15 Once again, we’re going to look at the Fancy Gift Company. To common size the 2011 income statement, we would divide everything by total sales. Simply doing this can be a helpful analytical tool, because it provides useful statistics like the gross margin, operating margin, and profit margin, which we discuss in more detail in another lesson. To gain useful insights for forecasting purposes, we need to do the same thing to income statements for at least two more years. Again, the more information you have, the better. Slide 16 Looking at the common sized income statements for 2009, 2010, and 2011, we can immediately see some common trends. First, Cost of Goods Sold has steadily decreased as a proportion of total sales at a rate of -1% per year. Second, the Selling, General, and Administrative operating expense has consistently been 12% of sales. Finally, Other Operating Expenses have been climbing quickly as a percentage of sales at about 2% per year. Barring any change in the way these costs are generated, it might be appropriate to assume that their general trends will be maintained in the following year. This would mean our estimate of cost of goods sold would be 35% of sales, our estimate of Sales, General, and Administrative would be 12% of sales, and our estimate of Other Operating Expenses would be 7% of sales. Slide 17 Now, let’s take Fancy Gift Company’s earlier 2012 sales forecast of $92,000 and come up with a projected income statement. To find the forecasted Cost of Goods Sold, we would multiply our sales forecast by 0.35 or 35%. The 2012 Sales, General, and Administrative expense would be 0.12 or 12% multiplied by the sales forecast. Finally, Other Operating Expense would be found by multiplying the sales forecast by 0.07 or 7%. By performing a common size analysis, we have generated an entire projected income statement for the coming year. Slide 18

All of the methods we have talked about are useful for forecasting expected results. However, they only provide a starting point. When forecasting, you also have to apply all of your knowledge about the outside world to logically modify the forecast. In other words, you must use information about what you expect in the future to supplement information about what you know happened in the past. For example, you’ve been reading articles and reports indicating that the economy is strengthening and that consumer spending is projected to rise. As a retail store owner, it would be logical to incorporate this into your estimate and increase your sales forecast for the coming year. Or, after talking to the accountant at Fancy Gift Company, you know that Other Operating Expenses are expected to plateau at 5% of sales. You would obviously use information like this when creating a projected income statement. Developing the right forecasting system for your business is a process. However, over time you can find the method that works best for you. One of the ways you can test the accuracy of a forecasting method is to forecast things that have already happened. If you have, for example, historical sales data for the past 15 years, you could compare the forecasting performance of two models at predicting the results of the past five years. This type of exercise can be useful in determining which forecasting model is right for you. Finally, it is worth repeating that high and low estimates can be more useful than forecasts. They allow you to evaluate and recognize potential opportunities and risks.

LESSON 7: INTRODUCTION TO MANAGERIAL ECONOMICS Slide 1 This session is to give students an overview of Managerial Economics and how it can be applied to a small business. Managerial economics is how the owner of a business applies economic theory to his business. Managerial economics is sometimes called business economics, and focuses mostly on microeconomic applications - that is, things that apply to individual consumers, businesses, and industries. Macroeconomic factors also need to be considered but, for this lesson, we will focus on small business issues and we will discuss macroeconomics in a later lesson. Slide 2 Although Managerial Economics is concerned with many things that managers do and decide, the two primary areas are Demand Analysis and the Production Decision. Demand Analys i s means studying a market to figure out how much of something customers want to buy from you. For the Produc t ion Dec i s ion , you need to answer four basic questions - what to produce, how to produce and how much to produce and for whom to produce. These areas are closely related and may be circular. For example, when deciding what and how much to produce, you need to understand the demand for that product or service. Even if there is a lot of demand in the market, you may not be able to produce or buy it at a cost low enough to allow you to make a profit. As you analyze both of these areas, you may find that your business idea needs to change. As an example, assume that you are a good cook and also know a lot about clothing. Also assume that you want to open a café. If your demand analysis tells you that there is not enough demand for another café in your town, changing your plan to open a clothing store might be a better idea. Of course, that decision should be made by analyzing demand for clothing. Slide 3 In another lesson, we spoke about Supply and Demand in general. Now we will talk about how those concepts apply to a specific business. As we discuss in the other lesson, supply and demand curves can be used to find what economics would call the perfect price for a good or service in a market – that is, where the supply and demand curves meet. When looking at a specific business, though, many things need to be thought about to determine your individual demand curve. These can include the price you want to charge, how your competitors behave, the time of year, your business hours, your location and anything else that can affect whether a customer wants to do business with you. Slide 4

Price is a primary consideration. To a retail business, price represents the amount of money received, and it helps create Revenue and Profit. To a customer, however, price represents a sacrifice and their perception of the value of what you are selling. There are numerous factors that impact price:

• Internal factors, which are things you can control as a business owner such as business objectives, business image, the cost of the good or service and the cost to sell it.

• External factors, which are things you do not have control over such as the market, buyer behavior, bargaining power of major consumers, competitor pricing, and government controls and regulations.

Slide 5 Again, economics may tell you a “perfect’ price for a good or service, but in reality prices are elastic. The term Pri c e Elas t i c i t y related to demand means that a change in price may change how much you sell. For example,

• If a manager decides to lower the price of his hats, he may sell more of them because more people can afford them.

• Similarly, if he raises the price, he may sell fewer. But if the new, higher price is still below his competitor’s price, he may still sell the same number and potentially increase his profit.

Slide 6 Let’s talk more about competitor pricing as it is one of the most important things to analyze when deciding on a price. As an example, if the total annual demand in town is normally 100 black women’s dresses, and your competitor sells the exact same dresses as you do, he may sell a larger percentage of those 100 dresses if he charges less for them than you do. Remember also that price is what the customer thinks something is worth, so if neither of you understands what the customer thinks, and as a result your price and your competitor’s are too high, it is possible that neither of you will sell much. Slide 7 But competitor pricing is not the only item to consider – you must also think about how your competitors behave in matters other than price. We will address customer service in detail in a later lesson, but by comparing how convenient your business is compared to your competitor’s you can learn valuable information. That information can help you make decisions that can impact your business’ demand curve. Examples include the hours during which your business is open (and if they are consistent and displayed for customers to see), how friendly you and your employees are to your customers, how well you promote your business and many other things. A customer’s perceived value of a good or service will be affected by these factors. If two businesses sell the same clothing at the same price, but one business’s employees are consistently friendly and helpful, more customers are likely to purchase their clothing from that store. The time of year is another very important thing to think about when analyzing demand. Demand will not be very high in summer months for coats and selling seed corn during a harvest period may not be a wise decision. Slide 8 In summary, here are several important things to remember about analyzing demand:

• A thorough review of a market should be done rather than simply assuming that customers will come to your business once it is opened. By understanding the market, you can estimate if there is demand that is not being satisfied (either the good or service is not available at all or those providing it have more business than they can satisfy)

• If there is a limited market and you want to take business from your competitor, you will have to give customers a reason to come to you. Those reasons can be your prices, the quality of your service, convenience or other things important to a customer.

• Demand can be seasonal, so your analysis should review different time periods. For a small business such as a café, effective ways to analyze demand would include:

• Observing how crowded your competitors are. • Surveying people in the community about how often they eat in a café and what they like to eat and drink there. • Seeking information about changes expected in the community such as new factories opening, changes in bus stop

locations, whether certain ingredients may not be available from farmers due to weather, increasing unemployment that may lead to fewer people eating in cafes, etc.

Slide 9

Now let’s turn to the Production Decision. As we said earlier in the lesson, the Production Decision answers four basic questions - what to produce, how to produce, how much to produce and for whom to produce. In addition to understanding the demand for your business, you must also think about having the goods or services available to sell – can you buy or produce enough to meet the demand you expect? While the name used in this lesson refers to “Production,” it does not only apply to businesses that make things – the same is true if you are buying inventory from a supplier to sell in a store or if you are providing personal services such as haircutting. The answer to “what to produce” and “for whom to produce” will be based on your market needs assessment. We discuss that topic in another lesson so we won’t repeat that here. The answers to all four questions, though, are also partly based on the demand analysis we already discussed. In addition, it also involves the cost of what you are selling. Slide 10 We have discussed that price is a very important part of your demand analysis, but it also affects your Production Decision. Choosing the best price for your business is not just a matter of trying to sell more than your competitor – you must also consider your cost of that product or service, your capacity to sell it and maybe also your capacity to make it. Cost of production is very important because you need to understand what you expenses will be to maximize your profit. The main categories of costs are:

• Fixed costs, which remain constant even when the business has no sales, for example office rent and the cost of machinery.

• Variable costs, which vary with the change in production or sales, for example cost of goods sold and some wages. • Mixed costs, which are partially fixed and partially variable. An example is the cost of utilities where there is a fixed

monthly amount plus extra for monthly usage. Slide 11 Total cost of a good or service will include all of these categories. That is, the total cost of operating your café includes the coffee beans (a variable cost), and the electricity you use to operate the coffee machine (a mixed cost), the salaries you pay to workers (a mixed cost) and the rent for the café itself (a fixed cost). One of the things to consider in the Production Decision is the price you sell a good or service for compared to its total cost – that is, the price has to be higher than the total cost or your business will lose money. Because the fixed costs exist whether you sell anything or not, it is not enough for the price you charge to be more than the variable and mixed costs – otherwise you will still lose money. For example, for a café to operate for one day, the rent and salaries may total $50. To make one cup of coffee, the variable cost of coffee beans and electricity may be $2. If you only produce one cup of coffee a day, therefore, the total cost is $52 for that day. If you can only sell that one cup of coffee at a price of $3, your café won’t be in business very long. Slide 12 So, another thing to consider is how much to produce or have ready to sell. You will never make a profit by opening a café and selling only one cup of coffee each day. By selling more than one, however, you consider the average to ta l co s t of an item. Since some of the costs are fixed or mixed, the more you can sell reduces the average total cost of each. That is, since the rent for your café is a fixed cost, the average cost to you for each cup of coffee sold is lower if you spread that cost over 10 cups instead of one. The calculation of Average Total Cost is Total cost / Quantity produced. Building on our coffee example, if the fixed cost is $50 and the variable cost for 10 cups is $2 x 10 or $20, total cost is $70 and the average total cost is $7 for each of the ten cups. At that average cost, selling a cup of coffee for $3 will not be profitable since it is lower than your average total cost. However, if you can sell 100 cups, the average total cost falls to $2.50 ($50 fixed cost plus $200 variable costs = $250 / 100 = $2.50). At that average cost, selling a cup of coffee for $3 will be profitable. One way that average cost declines is through the concept of economies of scale. The phrase “economies of scale” refers to the cost advantages that a business obtains due to expansion. To say it more simply, economies of scale means that the bigger your business is, the more efficiently you can do things. One way to achieve economies of scale is to spread out your fixed costs over additional units produced or services provided, as we just discussed with the number of cups of coffee in a café. Another way is when you can get a discount for

buying more of certain items – also known as a quantity discount. As an example, consider the owner of a bakery. If he needs 25 kilograms of flour each week, he will probably pay the same market rate as his competitors. But if he expands his business and needs 100 kilograms each week, he may be able to negotiate a lower price per kilogram by promising to buy from one supplier. Slide 13 Since not all costs are fixed, you also look at what is called marg ina l co s t . Marginal cost is the extra amount of expense from buying, producing or selling one more item. In our café example, the marginal cost of each cup of coffee is the $2 variable cost. If your business has mixed costs, a portion of those would also be included in the marginal cost. Recall that if you can sell 100 cups of coffee, the average total cost for one cup is $2.50. In our example, if you can sell a cup of coffee for $3, you can produce 100 cups, and you expect enough customers to buy 100 cups, then you will have a profit of $0.50 for each cup. If you can’t charge that price, if you can’t make enough or if you don’t have enough customers, you may not be able to stay in business since your sale price does not exceed your marginal cost. Managers decide on the quantity to produce based on marginal cost and sale price. If the sale price is higher than the marginal cost, then a business should supply the unit and sell it. If the sale price is lower than the marginal cost, this will be a loss to the business. Smart managers will not produce more if the marginal cost is higher than the sale price. Using cost information, a manager can calculate a level of sales needed to make a profit. This is called the “break-even point”. Slide 14 We discussed expenses earlier in this lesson and you need to consider all three categories – fixed, variable and mixed. For the purposes of calculating a break-even point it is very important to have the categories of expenses separate – in one group, the fixed costs and the fixed portion of mixed costs; in the other, variable costs and the variable portion of mixed costs. In order to calculate the break-even point for a particular product or service, you need to have a good understanding of the demand for that product or service, particularly about what price you would be able to charge. Once you know a product’s total fixed costs, total variable costs, and the predicted price, you can calculate the number of units you would have to sell in order for your revenues and expenses to be equal. Let’s use the same example about a cup of coffee. We will assume that the fixed costs for making coffee are $50 per month, the marginal cost per cup of coffee is $2.00, and the selling price of a cup is $3.00. To find the break-even point, that is how many cups of coffee you would need to sell in order not to lose money, you divide the fixed costs by the difference between the selling price and variable cost. In this example, the difference between the selling price and variable cost is $1.00. If you divide the fixed cost of $50 by this difference of $1.00, you get 50, which means that if you sell 50 cups of coffee every month, you will not lose money. If you sell more than 50 cups per month, you will begin earning a profit. While calculating the break-even point in this example was very straightforward, calculating it for a whole business is very complex. To calculate the break-even point for your business, you must first forecast the components of your income statement. Those components are discussed in detail in another lesson, but the basic components fall into two groups: revenues and expenses. Revenues are what you sell your goods or services for. Factors to consider and methods to follow in forecasting revenues are discussed in another lesson but the main point is estimating how much you can realistically sell when considering the items we discussed earlier in setting a sales price and the size of the market based on your market analysis. When considering expenses, remember that some are based on your revenue estimates, so creating a forecast will involve numerous updates as you refine your revenue forecast. Once you have your forecast completed, you should revise your revenue assumptions (including the corresponding expense amounts) until you reach a zero profit. It is important that you know the break-even point for each one of your goods or services. This break-even discussion relates to actual or “accounting” costs that are directly calculated in your profits. In making the Production Decision, however, you must also consider Opportuni ty Cos t . Opportunity cost is profit you don’t earn because of choices you made. An example is when you sell only coffee – the profit you don’t earn because you decided not to also sell tea is your opportunity cost. Slide 15 As you can see, managing a business involves many decisions – most of which are complicated and most of which can impact other decisions you must make. But if you gather enough information, and think about how the decisions relate to

one another, you can use these managerial economic principles to better understand what your business should expect, and more informed decisions can help to make a better business.

LESSON 8: PLACEMENT AND PROMOTION Slide 1 This lesson will introduce the marketing mix, and introduce the concepts of Placement & Promotion as critical decisions in how to sell products or services. The marketing mix is a good starting point when creating a marketing plan for a new offering. It helps you think through your approach, and ensures that your marketing expenses are being used well. Placement and promotion are both important parts of a marketing strategy. Placement is the process of deciding where to sell your product. If you place your product correctly, it will be visible and easily accessible to the groups of consumers who will find it most attractive. Promotion is the process of making people aware of your offering, and telling them why they want it. If you promote your product well, your offering will be clear and enticing to the groups of consumers to whom it will be most appealing. The marketing mix is one of the most famous marketing terms. The marketing mix is the calculated or operational part of a marketing plan. The marketing mix is made up of an offering’s price, place, product and promotion. Recently the marketing mix has included the addition of process, people and physical evidence. When marketing their products, businesses need to create a successful mix of:

• The right product • Sold at the right price • In the right place • Using the most suitable promotion

To create the right marketing mix, businesses have to meet the following conditions.

• The product has to have the right features – The offering must fill the needs and wants of consumers. • The price must be right – Products that aren’t appropriately priced will negatively impact the company’s success. If

the price is too high, then customers won’t buy it. If the price is too low, then the company will lose out on potential profits.

• The placement must be logical – The product must be sold in locations frequented by the types of customer most likely to buy it.

• The promotion must be targeted, clear, and attractive - Different offerings will appeal to different groups of consumers. These consumers have different preferences and behaviors. A good promotion will be highly visible to the offering’s ideal consumer, will be communicated in a way that is understandable to them, and will appeal to their tastes.

The concept of the marketing mix is simple. Think about another common mix – a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar! It is the same with the marketing mix. The offer you make to your customer can be altered by varying the mix elements. So for a high profile brand, increase the focus on promotion and lessen the weight given to price. Another way to think about the marketing mix is to use the image of an artist’s palette. The marketer mixes the prime colors (mix elements) in different quantities to deliver a particular final color. Every hand painted picture is original in some way, as is every marketing mix. Slide 2 What is Placement? Placement is where you actually sell your product. This may be in a boutique or a department store. You might decide that the best way to sell your product is out of the back of your car. The ideal placement depends on the customer segment that you are targeting with your offering. A company that makes men’s suits wouldn’t sell them in stores frequented mostly by women. A company that makes high-end computers wouldn’t sell them in a discount electronics store. In both cases, the company would want to place their products in locations where their ideal customers often go. A good place for the men’s suits would be a professional clothing store.

Knowing that their customers usually shop using the internet, the high-end computer maker would decide to place their products online. Different placement options have different cost implications. Although figures vary widely from product to product, roughly a fifth of the cost of a product goes on getting it to the customer. Getting the right product to the right place at the right time requires some sort of transportation. Depending on how far you need to send what you are selling, the placement costs can be cheap or expensive. This logistical part of Placement is an important consideration when developing a marketing strategy. Slide 3 What is Promotion? Promotion deals with the actual selling, advertising, or publicizing of the product. It entails communications with your customers and trying to convince or persuade them to purchase your products or services. This could be done through such things as television commercials, magazine ads, direct mailings to residences or businesses, and billboards. The specific types of promotion you utilize will depend on several factors, the most important of which are determined by the behavior of your targeted consumer groups. As we discussed earlier, different products will appeal to different consumer groups. A bicycle will appeal to active young people, while a planner will appeal to busy professionals. Do you think these two groups watch the same television shows or read the same magazines? Probably not! You would want to use different promotion methods for each group. The cost associated with promotion or advertising goods and services often represents a sizeable proportion of the overall cost of an offering. However, successful promotion increases sales so that advertising and other costs are spread over a larger output. Though increased promotional activity is often a sign of a response to a problem such as competitive activity, it enables an organization to develop and build up a succession of messages, and can be extremely cost-effective. Slide 4 In the modern world, promoting your product can be very difficult for small businesses. Large companies have much more resources to commit to expensive marketing campaigns. Advertising on television or billboards is not a realistic option for smaller businesses. So how do you communicate what you have to offer to your customers? How can you be noticed in a world where people are constantly surrounded by advertisements? Fortunately, there are many promotion techniques that leverage low-cost resources. These methods may require extra work and thought, but can be very effective when done right. The first step in any marketing effort is to gather information. You can then use that information to communicate your offering through your customer relationships, social networks, marketing materials, local media, the internet, and special offers. Slide 5 It’s especially important for small businesses to target their marketing efforts. It’s a waste of time and resources to promote an offering to customers who are unlikely to ever buy it. Many businesses use resources like industry reports, census data, and marketing analyses to gather information. While this can be helpful, you can take the first step by asking yourself the following questions:

• Who are my customers? o Who is most interested in what I am selling? You can distinguish groups of customers in many ways,

including gender, geography, income, and behavior. • Why do my customers buy from me?

o Is it because of what I sell? o Is it because of my prices? o Is it because of where I am located?

• What’s the best way to communicate with my customers? o Can I connect with them online? o Can I sell my offering directly or use word-of-mouth? o Can I distribute fliers, pamphlets, or other marketing materials to places where my customers will see

them? You can get all of this useful information just by paying attention to and building relationships with your customers.

Slide 6 One of the most important things an entrepreneur can do is build client relationships. This not only helps you sell your product or service, but allows you to better understand customer needs and communicate your promotions. Different businesses and different cultures will impact your customer interactions, but just taking the time to learn a customer’s name and ask how they’re doing can start a conversation. One benefit of having good customer relationships is that customers will communicate your promotions through their personal networks. Promoting this way can be as simple as asking your customers to tell their friends about your business. Word of mouth can be a very good thing or a very bad thing. If you delivered a quality product or service as advertised, then your customers will tell their friends how great you are. If you deliver a poor quality product or service, then your customers will tell their friends to shop somewhere else. Social networking has become a very popular way to market small businesses. Using Facebook, Twitter, or other websites can help you connect with customers, communicate your offerings, and make you more visible. Slide 7 Many small businesses use simple pamphlets or fliers to communicate offerings. This can be a great way to promote your business at a low cost. There are some important things to remember when creating marketing materials. First, the content should clearly communicate what need or want your product, business, or service fulfills. Second, the content should tell the customer how they can buy it. Finally, you should distribute your marketing materials in logical locations. A tour operator would want to place their pamphlet in hotels, airports, and tourism information centers, because those places are filled with tourists. Using local media, such as newspapers, radio, magazines, or television, can be a good way to reach a wide audience of people. While this type of marketing often requires a large upfront cost, it can allow you to communicate your promotion to a large number of potential customers. Websites are another good option for small businesses. However, it is important to think about a few things before you spend the money to have one created. First, consider whether your customers actually use the internet. Second, compare the benefit from having a website to promoting yourself through less costly marketing options. Third, have a plan in place to actively promote your website. Just having a website for the sake of having it is a waste of marketing resources. Slide 8 Including special offers as a part of a promotion can be a very effective way to gain new customers. Some common special offers are small discounts and buy-one-get-one-free deals. It’s important to think of the discounted or free product you give away as a marketing expense. Special offers are an especially good strategy if your business relies on repeat customers. By lowering the price or giving out free products, you lower the customers’ cost and make them more likely to buy. If the new customers like your product or service, then they will probably come back and tell their friends about it. An added benefit for store owners is that customers attracted by a special offer for one product will often purchase many other items. Slide 9 Let’s try and develop a marketing strategy for a local business, a bakery. The owner would like to grow her business by starting an effective promotion campaign. To start, she begins paying more attention to her customers. By building relationships and having conversations, she learns that most of her customers are from the neighborhood right around the bakery. For the most part, she has a core group of customers that come in every day or every other day. They like the bakery because it serves fresh baked goods at competitive prices. She also notes that many of her customers have the local newspaper with them when they come in. The owner decides that she is going to take out an advertisement in the local newspaper. She wants to make sure that the advertisement highlights the freshness of the baked goods, the low prices, and the convenient location of the store. She also decides to throw in a limited time special offer: buy two items, get one free. While she will lose a little bit of money because of the offer, she believes that it will pay off by attracting new customers, who will then become regulars.

While a strategy such as this may not work for every business, the important thing to remember is the connection with your customers. By understanding what they want and what is important to them, as well as how they get information, you can make sure that you provide what is useful to them. And that is a key step in having a successful business.

LESSON 9: MANAGING PEOPLE Slide 1 Businesses need many things to work. They need money. They may need machines or other equipment. But most importantly, they need people. The more skilled the people, the better the business will work. In addition, those people will need to be taken care of. Managing people (in the scope of this lesson) means taking care of an organization’s workforce. In this lesson you’ll learn what managing people is about and how it helps make businesses successful. Slide 2 There are many different business activities that must be managed:

• Attracting employees • Choosing employees • Training employees • Evaluating employees • Rewarding employees • Managing organizational culture • Following laws

We’ll call the department responsible for all of these activities “Personnel”. Small businesses may not have any people dedicated to this function. In large businesses it is common to have a Personnel department. Because a Personnel department mainly works with the company’s employees, larger companies have more demand for a separate department. Slide 3 One of the Personnel department’s main jobs is to advertise open jobs and find employees. A company needs to replace workers that leave and hire workers for new positions. Attracting good employees is important for any business. If a business attracts good employees from the beginning, it will have lower costs for recruitment, training, and managing the employees. The Personnel department is responsible for finding skilled new employees to keep the business healthy and strong. How can the Personnel department attract good employees? Here are some ways to attract the right employee:

• Offer a good salary – Personnel should do research for the position they need to fill. How much money is usually paid for this type of work? How much will the employee expect to be paid? A business should not offer a salary based on its own budget. Rather, the salary offered should be based on what is normally earned for that job.

• Offer good benefits – Salary is not the only thing that is important to employees. What else can a business offer employees? Popular benefits include discounts on company products and vacation time. Depending on the country, employees might also demand retirement savings accounts and insurance. There are many other possibilities; for example, a business could offer free lunch to its employees.

• Write clear job descriptions – The duties written in a job description should be clear. The duties should match the title of the job. Also, the job should be challenging but not impossible.

• Create opportunities – Good employees usually don’t want to do the same thing every day for the rest of their lives. If a business has jobs that will offer employees new challenges, then it is more likely to attract good workers. New challenges could be things like special projects, training opportunities, or simply the chance to be promoted to a new job.

• Advertise creatively – A business that advertises in many locations will have a better chance of finding quality employees. For example, instead of just advertising a job in a newspaper, a business could advertise on the radio, television, internet, or visit universities. Another method to find employees is by asking current employees to refer people. Some businesses offer a small cash reward to employees who help find a new employee.

Slide 4 A business might also attract bad employees. There are things the business can do to avoid hiring bad employees:

• Check backgrounds – If possible, a business should check a person’s history before hiring. Checking for criminal history, educational history, and work history can warn a business of a potential bad employee.

• Check references – Another great way to avoid bad employees is to ask for references from a job applicant. The business can call a reference to see what kind of worker he or she was.

Slide 5 Once a business has attracted some potential employees, it must choose who to hire. Again, the Personnel department is responsible for hiring these new employees. It’s an important job; a bad choice will mean wasted time and money. There are several ways to learn if the candidate is good for the job.

• Application – A written application allows the Personnel department to see basic information about the candidate, including work history, education history, and any other skills related to the job. The application can be a list of questions about personal information and job-related information. Many applications also require both a CV and a cover letter. The cover letter is a chance for the candidate to write about his or her abilities and experience. A cover letter gives the business additional information that is not present in the CV. After reading the application, the Personnel department should be able to decide whether or not the candidate should be interviewed.

• Interview – An interview allows the Personnel department to meet and speak with the candidate. Interviews are important to see if the candidate has the right personality and attitude for the job. There are two kinds of interviews:

o Structured – The interviewer asks the same questions to each candidate. The interviewer can write down the answers and easily compare candidates.

o Unstructured – The interviewer has a discussion with each candidate. Since the conversation will be different each time, it is more difficult to compare candidates.

There are also different types of questions an interviewer can ask. They are often used together:

o Behavior Questions – Behavior questions ask the candidate to describe a time when he or she demonstrated a particular skill or trait. Behavioral questions focus on past experiences and behavior of the candidate.

o Situation Questions – Situation questions ask the candidate about a pretend situation to see how the candidate would behave. Situational questions focus on how a candidate will react.

• Written tests – Tests are useful if the job requires specific knowledge. The test allows the Personnel department to evaluate candidates on level of knowledge, understanding of the job, and language skills.

• Work sample tests – Work tests can evaluate whether the candidate can do the tasks the job requires. For example, if a café needs to hire a cook, then a good work sample test might be preparing one of the café’s most popular dishes.

• Presentations – A candidate is asked to prepare a presentation. The candidate then gives the presentation to a group from the Personnel department. In this way the Personnel department can evaluate the candidate’s public speaking skills. Presentations are useful for jobs that will require a lot of public speaking, such as salesmen or trainers.

• Work examples – The candidate is asked to present a collection of past work. Work examples are often required for artistic positions like graphic designers or photographers.

Slide 6 After hiring an employee, the Personnel department’s next job is to train the employee. Training is important because it improves skills, knowledge, and ability to do a job. Training is also a good way to allow a new employee to understand how a company works. For example, a short lesson about the company’s mission and vision statements can help the new employee understand the company’s purpose and culture. Training is not just for new employees. It is also important to train existing employees in order to keep their knowledge and skills current. Additionally, if the company decides to change technology or equipment, it should provide training to employees. Finally, employees should be trained if they are promoted to new, more responsible jobs. There are two basic ways to train employees:

• On the job training – Employees learn while doing the work. For example, a new cashier at a clothing store can learn from a more experienced cashier. This type of training is simple and cheap.

• Off the job training – Employees participate in conferences, seminars, or workshops away from the workplace. This type of training is expensive but could provide new ideas.

There are many other ways the Personnel department can encourage employee training. Book clubs, discussion groups, and employee-led presentations are some easy ways a business can increase the skills and knowledge of its employees. Slide 7 Another job of the Personnel department is evaluating employees. This job is important because employees require comments on their work in order to grow and improve. Also, evaluation allows the Personnel department to know who is ready for promotion. Evaluating employees also helps the Personnel department to decide how much an employee should earn. Plus, if an employee is doing a bad job, the Personnel department needs to know so that the employee can be fired if necessary. There are several ways a business can begin to evaluate its employees. A consultant can be hired from outside the organization. The consultant can test the employees or help the business set up a system to evaluate the employees in the future. Or, the Personnel department can develop its own system for evaluating employees. Slide 8 In order to evaluate the employee, the employee must have goals that fit his or her job description. Also, the employee needs to know what the company management expects of him or her. Next, managers need to give their employees comments about their work. What do they do well? What do they need to improve? The reviews should be given regularly. For example, every 3 months the manager should meet with employees individually to evaluate their work. Finally, managers should give their employees resources (training classes, books, or mentors) to help them develop skills and improve performance. After this assessment, the Personnel department can look at the employee’s performance and look at the employee’s goals every year. If the employee is doing far better than expected, he or she may be a good candidate for promotion. If the employee is doing worse than expected, he or she may not be in the right job. The Personnel department can try to move the employee to a different position or fire the employee. Slide 9 The Personnel department is responsible to reward employees. The main ways to reward employees are paying them a salary and giving them benefits. The Personnel department’s responsibilities for salaries include:

• Payment – Employees are usually paid by the Personnel department. Employees should be paid consistently, either once a month, twice a month, every two weeks, or in a similar way.

• Amount – Personnel needs to choose starting salaries for new positions and give increases for inflation or for good employee performance. Salaries should be based on the job market. For example, a waiter at a café should earn a similar amount at any café in town. Salaries should also be based on how well the employee does his or her job. If the employee does a great job, it is the Personnel department’s responsibility to notice it during the employee evaluation. Then, the Personnel department can increase her salary to reward her for doing a good job.

The Personnel department is also responsible for any benefits that the company gives its employees. For example, many companies give health insurance to employees. The Personnel department must help employees join the insurance program and answer their questions about the program. Providing employees their salaries and benefits without any problems is an important job. The Personnel department keeps employees motivated and happy when it performs this job well. Slide 10 Each business has a unique culture, just as a country does. The way work gets done, the way employees are treated, and the way the business thinks are all part of its culture. The Personnel department has a large role in creating culture. The Personnel department can create culture through each of its jobs we’ve already discussed. Let’s take an example from each section to see how culture can be affected:

• Attracting employees – A job description is the candidate’s view of the business. The Personnel department can write a serious job description, or it can write a non-serious one.

• Choosing employees – During interviews, the Personnel department’s employees will display the company’s culture in how they dress and how formal the interview is.

• Training employees – By organizing training that helps employees behave in ways that agree with the company culture, the Personnel department can affect that culture.

• Evaluating employees – The Personnel department tells employees what is expected of them and how employees are behaving within the culture.

• Rewarding employees – The Personnel department can reward employees for working in the proper way. Slide 11 The Personnel department is also responsible for making sure the company follows all laws related to employees. Depending on the country, the company may have to pay special taxes or follow safety rules. There might be special rules to follow when hiring or firing employees. There could also be rules for how employees should treat each other. Personnel must inform all employees of laws that are important to their work. Employees must know what they can and cannot do. They also need to know what will happen if they do not follow the company’s rules. The Personnel department is responsible for creating a safe, legal place for people to work. Slide 12 Human Capital is the collection of skills and knowledge that employees have. The reason Personnel Management exists is because humans are an important resource for businesses. Each person has a collection of skills and knowledge. That collection can be used to create value for businesses. This idea is called Human Capital. Human Capital can be increased. For example, a new waiter at a café has some skills and knowledge. He knows how to do math and can list the ingredients for half of the items on the menu. Over time the waiter trains himself. He can now list ingredients for all of the items on the menu and can remember many orders without forgetting. Plus, the waiter gains experience over time. Because of his experience, he can do his job faster and with fewer errors. Thus, due to training and experience, the waiter now creates more value for the café than he did when he was a new waiter. Personnel Management is a tool used to increase Human Capital in a business. The higher the Human Capital, the more successful the business will be.

LESSON 10: BRANDS Slide 1 In this lesson, we will explain the concept of a brand and why it is an important part of a business’s strategic and marketing plans. We will show the differences between a brand, a corporate identity, and a logo. We will provide a general overview of how many small businesses can create a unique brand and what the benefits are of having a strong brand. Slide 2 In business, the term “brand” is used often to describe many different things. To some people, a brand is a logo. To others, it is the slogan or motto of an organization. The American Marketing Association defines a brand as “a name, term, design, symbol, slogan or any other feature that identifies one seller's goods or services as distinct from those of other sellers.” In fact, a business’s brand is all these things. A brand is the complex set of feelings a person has about a product, service, or organization. A brand is how your customers, competitors, and other stakeholders perceive your business. For small businesses, it is also how they perceive you, the owner. While a brand may include visual tools such as a logo, slogan, or memorable terms, a business’s brand is conveyed every day through:

• The images you convey • The messages you deliver in your advertisements • The way your employees interact with customers • The way your business is active in helping your community

Slide 3 To help illustrate a brand, let’s look at one large company with a very strong brand: Nike. Without seeing the company’s name or hearing a commercial, Nike’s logo conveys a lot of information about the company. What thoughts, words, or feelings do you have when you see this logo? Perhaps it makes you think of high-quality athletic shoes, Nike’s motto of “Just Do It”, or some of the world’s greatest athletes that have endorsed Nike’s products. Branding is important because it creates a special feeling about your products. It makes your competitive position and value real in the minds of your customers. Your brand reminds new and existing customers why they should buy from you.

Slide 4 While many large companies spend significant money and time on their brand, it is just as important for small businesses to create a strong brand reputation to help increase their chances of success. Here are just a few of the benefits of having a strong brand:

• Customer Recognition - It is easier to remember a branded company than a non-branded one. There is a range of methods you can use to make your product stand out. This can be as simple as using a color in your design or packaging that your competitors are not using and which creates an impression in the minds of consumers.

• Product Association - You can apply your brand to a specific product, or to a range of your products or services. This will allow consumers to associate each product you offer, and any new ones, with a consistent set of values.

• Communication - A strong brand can also add value to your central business by communicating your image. A recognizable brand communicates what your business stands for as well as what it offers.

• Customer relations – A brand can help you engage with customers and create an emotional connection. With positive experience with a memorable brand, they are more likely to purchase from you, less likely to go to your competitors, and more likely to recommend your business to their friends and family.

• Brand “Equity” - Successful branding also creates brand equity, which is the amount of money that customers are willing to pay for your product just because they are familiar with your brand. In addition to generating revenue, brand equity makes your company itself more valuable over the long term. For example, many people would choose to buy Nike athletic shoes instead of a similar, but unbranded, pair of shoes simply because it does not mean the same thing to them. A product without a brand does not convey the same image, even if the products are identical.

Slide 5 For any business, there are three important steps when you attempt to create or improve your brand. First, you need to define what makes your business different and what your business stands for. A brand needs to accurately reflect the personality of an organization. If customers perceive a business’s brand to be inconsistent with that business’s goods or services, it is likely to harm the business overall. To help define the brand identity for your business, consider the following questions:

• What products and/or services do you offer? Define the qualities of these services and/or products. • What are the core values of your products and services? What are the core values of your company? • What is the mission of your company? • What does your company specializes in? • Who is your target market? Who do your products and services attract?

Once you are able to easily define what differentiates your business from the competition, you can also think about what you want your business to be known for. Broadly speaking, this is referred to as your brand objectives. For example, let’s say you own a café that is located on the edge of a river and has a nice view of the surrounding nature. In addition to your indoor dining area, you also have a number of private gazebos outside where customers can sit and have a quiet dinner. Since none of the other cafes in the city have these same characteristics, you consider them to be some of the core strengths of your business. One of your brand objectives might be that you want customers to recognize your café as the most romantic dining location in the city. By having clearly defined objectives, it will be easier for to develop your brand strategy. Slide 6 The second step you need to take is to understand how your customers perceive your business today. As noted in other lessons, a business needs to identify the target market for its goods and services. The opinion of your target customers about your business may not be what you think it is. Similar to market analysis, you should attempt to answer the following questions:

• Where is your target audience located? • What do they think about your current brand? • What would you like them to think about your brand? • How will you attract them to your products or services? • Who else is competing for their loyalty and devotion?

It is important to consider your customers as you develop your brand. What your customers want and how you can deliver it is an important part of the branding process. You need to know what motivates your customers, and what makes them purchase particular goods and services. In most cases, it is not only about price. Once your brand values are consistent with what existing and potential customers look for, you have the beginnings of a useful brand and you're ready to start building on it. For example if a clothing shop brands itself as a place to buy high fashion, its brand is only valuable if its customers and potential customers want to buy high fashion clothes. Alternatively, if its customer base is made up of elderly people in a small village, those brand values may not be in line with customers' buying needs. Slide 7 The final step before you begin implementing your brand strategy is to analyze the brands of your competitors. In a different lesson, you will learn about a term called competitive positioning in detail. For now, remember that a strong brand differentiates your business from the competition. If you attempt to create a brand that is identical to a competitor’s, you will likely fail to build a strong identity of your own. Firstly, by creating a brand identical to your competitor’s, you may encounter legal problems if the competitor has certain trademarks, copyrights, or patents that you are copying. Secondly, by imitating a brand, you are implying that your competitor is a strong company, which may actually encourage your potential customers to go to your competitor. Businesses that succeed address a particular need of a specific customer segment in a way that is unique to or better than the competition. While you are building your brand, one key factor to remember is that, for it to be successful, your brand should be consistent with the underlying mission, values, and purpose of your business, not your competitor’s business. Slide 8 Understanding the difference between how your target market perceives your business today and how you would like them to perceive it in the future is the foundation of developing your brand strategy. Now that you have identified your organization’s strengths, your brand objectives, and the brands of your competition, you can set out to create or change your brand. Remember that a great brand creates a strong, emotional connection with your customers. There are a number of tools available for businesses to use in implementing a brand strategy. These tools will help create your corporate identity, which are the visual aspects that support your overall brand. These methods include:

• A logo (the symbol of the entire identity & brand) • Stationery (letterhead, business cards, etc.) • Marketing tools (flyers, brochures, books, websites, etc.) • Products and Packaging (products sold and the packaging in which they come in) • Apparel design (clothing items that are worn by employees) • Signage (interior & exterior design) • Messages and Actions (messages conveyed via indirect or direct modes of communication) • Other Communication (audio, smell, touch, etc.) • Anything visual that represents the business.

For small businesses, one very important factor to add to this list is the appearance of the store. Customers expect a store, café, or other business location to be kept clean, organized, arranged in a way that customers can easily move through, that is open regularly during the same hours, and that is stocked with the goods and services advertised. For a clothing store whose brand is based on having a wide variety of high-quality, Italian clothing, it would reflect poorly if a customer went in only to find the store was very cluttered and had a very limited supply of clothing from international designers. Slide 9 Logos can be an important part of your branding campaign. A logo identifies a company or product via the use of a mark, flag, symbol or signature. Logos rarely reflect the particular goods or services a business provides. Logos are used to communicate what your brand represents. In the first example, Nike’s logo would not lead someone to believe that Nike makes athletic apparel. However, since most people are familiar with the Nike brand, this symbol evokes the same emotional connection. Logos are the core of corporate identity, defining and symbolizing the character of the company. To simplify, a good logo is:

• Instantly recognizable. • Memorable. • Clear, even in small sizes. • Not too similar to other businesses’ logo

Be careful about this last point as copying another’s logo, or having one that is close enough to confuse customers, can cause legal problems. Slide 10 As you implement your brand strategy, be sure to understand what it will cost and whether you can afford it. In the lesson on startup capital, we talked about one-time expenses and ongoing expenses. The visual tools listed earlier can also be divided into these two categories. Some tools are more expensive than others. For example, the interior design of your store, as well as the sign outside, is a very expensive way to communicate your brand. On the other hand, other marketing tools, such as a website or Facebook page, are very cheap and sometimes free. Using the list of tools from the Brand Strategy slide, we have broken down the various tools used to build your corporate identity into their expense and cost categories. A realistic budget will help you to avoid spending unnecessarily and to prioritize what you do spend. In order to prioritize what tools you use, it is important to consider not only what you can afford, but what tools will be most effective. To make this decision, you should again think about your target market and how frequently your customers would encounter each tool. For example, if a very small portion of your target market have household computers, spending time and money to design a fancy website will probably not be very effective in communicating your brand. Slide 11 It is important to involve your entire staff throughout the brand building process. Since they will be ambassadors of your brand, your employees should know how you have defined your core company values, how you want to operate, and how you want to be perceived by customers. If you involve employees in the brand identification process, they can become emotionally attached to your brand, allowing for strong loyalties and a sense of ownership. You should keep your employees involved by asking for suggestions or conducting training sessions to discuss your brand, reinforce values, and how the brand strategy is performing. All of your employees will play a crucial part in managing your brand because they can affect what customers think of your business. The concept of customer relationship management is covered in a different lesson, though it is important to remember that all employees communicate your business’s brand. Each time a customer interacts with your staff, their perception of your brand will be changed. If your staff is properly trained on how to represent your business’s brand, the customer will likely have a deepened connection with your store. However, poor customer service can quickly lead to brand weakening, since unhappy customers are likely to tell their friends and family about their bad experiences. Slide 12 In many ways, your brand strategy and marketing strategy will be similar. Both are about effectively communicating with your target market. Your brand will affect the methods and designs you use in your marketing plan. However, your brand strategy will include other actions, such as interactions between your employees and customers. For many small businesses, the brand will also be impacted by the reputation of the business owner. Unlike specific actions in a marketing plan, which can be tested for success over a specific timeframe, building a brand takes a long time and its strength cannot be measured as easily as a marketing program. However, paying attention to your business’s brand and proactively taking steps to improve your corporate identity will add much more value than just a marketing program. Your brand will help create emotional connections with your customers, which will lead to higher revenue and profit in the long-term.

LESSON 11: THE INCOME STATEMENT Slide 1 Keeping good business records is very important. If good records are kept, a business owner can determine numerous things. He or she will know

• if he is making money or not • which things are selling better than others • if things are being stolen • if there is a seasonal pattern to the business

If a business owner wants to borrow money to expand or to receive credit from a vendor, he will be able to show that his business is strong enough to repay what he borrows.

One of the main financial statements is the Income Statement. This is sometimes called the Profit and Loss Statement. It shows how much money a company made or lost over a stated period of time. An income statement is usually created for 3-month periods and for yearly periods. Some countries use 6-month periods. The Income Statement gives a business owner information about a particular time period. For example, it shows how much he has sold his inventory for compared to how much he bought it for. It also gives him information about how his business has done over time – for example, if he is making more or less money per unit he sells this year than he made last year. Slide 2 The bottom line of the Income Statement is Net Income. In summary, it shows whether a company made money or lost money in that period. Slide 3 Let’s look at a simple example of an Income Statement. Star Hat Shop is a company that runs a store that sells hats. This is a simplified version of the shop’s Income Statement. The top line on the Income Statement is Sales. Sales indicates how much money was received by the company for its main business of selling hats during the accounting period. If a customer returned a hat he bought and was given his money back, the money that was returned would be deducted from sales. If the business won 8,000 AMD in a contest for having the best store window, it would not be included in sales. That would be shown in Other Income. We’ll talk about Other Income in a few minutes. The shop sold 100,000 dollars worth of hats in 2011. In 2010, he sold 80,000 dollars worth of hats. From this information, you can calculate that his hat sales increased 25%. If you were considering buying the Hat Shop, you would want to see that his sales had increased over time. Slide 4 The next line shows the Cost of Goods Sold. This is how much the company paid for the hats that it sold. If, for one hat, the owner paid the manufacturer 7 dollars plus 1 dollar for shipping, the cost would be 8 dollars. If there is a Value Added Tax, it might be included as part of the Cost of Goods Sold. Note that the owner might have bought the hats in an earlier time period. The owner paid 55,000 dollars for the hats that he sold in 2010. He paid 65,000 dollars for the hats that he sold in 2011. Slide 5 We call the difference between Sales and Cost of Goods Sold ‘Gross Profit’. The shop had a Gross Profit of 35,000 dollars in 2011. This is 10,000 dollars more than his Gross Profit in the previous year. Slide 6 Gross Margin is a measure of how profitable the company is. Gross margin is calculated by dividing Gross Profit by Sales. In 2011, the shop’s Gross Margin was 35,000/100,000 or 35%. In 2010, the Gross Margin was 55,000/80,000 or 31%. So, we can tell that the shop is earning more money for each hat it sells. If the owner can charge more for each hat without losing any customers, he will make more money. He will also make more money if he can sell his hats for the same amount, but buy them for less. Slide 7 The next line on the Income Statement is Selling, General and Administrative Expenses. These include advertising costs, rent, utilities and salaries. Slide 8 Operating Profit is determined by deducting SG&A expenses from Gross Profit. This number tells the business owner how much money he made from the main operations of his business. Slide 9 Next, Other Income and Expenses are added to or subtracted from Operating Profit. Other Expenses are subtracted from Other Income and the difference is shown on this line. If the Star shop won 8,000 dollars in the store window contest that was mentioned earlier, it would be added here because it is not directly related to the main operations of the business. Or if the business sold something other than the hats it normally sells, the money received from the sale would be included

here. Let’s say that the owner had two stores, and decided to sell one of them, the money he got from the sale would be Other Income. An expense that might be show in this category is interest paid on a loan. Slide 10 Pre Tax Income is what the business earned before it paid taxes to the Government. Slide 11 Taxes are what the government requires a business to pay out of the profits. Slide 12 Net income is the profit earned once all the expenses and taxes have been paid. This is also called the bottom line.

LESSON 12: SUPPLY CHAIN MANAGEMENT Slide 1 Any business – whether selling products or services – must obtain materials to create what it sells. It must also have a way of providing those services or putting goods in the hands of its customers. A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer. While it may appear independent, a supply chain is actually a complex illustration of how supply and demand interact. Slide 2 The slide you see illustrates a simplified supply chain for laptop computers. There are many different pieces needed to assemble a computer, and each piece is made of different materials, each with a variety of suppliers. Once the computer is assembled, it enters a network of businesses that sell the finish product, through which the customer finally buys it. The boxes highlighted represent one supply chain in that process. Slide 3 The phrase “Supply Chain Management” refers to how you try to use the supply chain concept to increase efficiency by integrating key business processes, from original suppliers through end users. In a supply chain, the “original suppliers” are those that provide products, services and information that add value for customers and others involved in the process. The “end users” are the customers actually buying the finished product or service. As an example, a business that sells tea in a shop is part of a supply chain that includes farmers and harvesters, those who dry the leaves, the manufacturers of packaging for the dried tea, sellers in wholesale markets, those who transport the tea between all of the production steps, the business owner and his customers. Each of those parties also has suppliers and customers for intersecting supply chains (for example, the farmer works with a seed supplier, and the transport company works with truck and fuel suppliers as well as other farmers). All of the parties in a supply chain are interested in the supply and demand information of the others in the chain and can use that information to make their operations more efficient. In our example of selling tea, the business that dries the tea leaves is interested in information from harvesters about the size of the tea crop and what types of leaves are available so that they can hire the correct number of people for processing. The businesses that sell in wholesale markets are interested to know about sales at tea shops so that they can bring enough to markets for sale to shop owners. Slide 4 The primary objective of supply chain management is to fulfill customer demands through the most efficient use of resources, including distribution, inventory and labor. That means that each business involved would be able to buy only what it is certain to sell, that suppliers would only make what their customers need, and that the manufacturers only need to hire the number of people needed to produce those amounts. It would also mean that customers could always find what they are looking for, because an efficient supply chain would always produce the amount to meet demand. If all relevant information is accessible to all the people involved, every company in the supply chain would have the ability to help optimize the entire supply chain. An example is with respect to inventory. The risk of having too much inventory in one place is that it may spoil and not be saleable. If all parties know how much they need to have available, they can ensure that inventory is properly stored if it is not needed for sale at that time, or it would not even be produced if there is

not enough demand for it. Similarly, when information is communicated that demand is increasing, each party needs to know so that workers can be hired and vehicles can be available to transport product. This will lead to better planned production and distribution which can cut costs and result in a final product that customers want, leading to better sales and better overall results for the companies involved. Slide 5 If information is being communicated properly, no business along the chain would be left with goods that it cannot sell. In general, the solution for supply chains is to create a flow of inventory so as to ensure greater availability and to eliminate surpluses. One way for this to happen more easily is to combine efforts. As mentioned earlier, there are multiple supply chains operating at the same time, especially when one business has multiple customers. If some of those customers work together (sometimes called a cooperative organization), they can make it easier for the supplier to project its demand, making his operation more efficient. At the same time, they can also negotiate a better price by combining their purchase orders. Likewise, rather than each using different transportation to get the product from one place to another, these cooperative business associations can negotiate lower transportation costs by giving a larger amount of combined business to one company. These cooperative arrangements not only make the businesses more efficient, but those efficiencies can also lead to higher profits. The cooperative concept is not limited to businesses selling products. As an example, some hotels that are separately owned have a cooperative agreement where they have a common brand name and share the marketing costs to build brand awareness. Since a large scale marketing campaign can cover a lot of areas, the hotels in each of those areas benefits and the cost for each business is lower than it would be for a separate campaign. Slide 6 Supply chain management can provide other benefits beside inventory management. For example, if your business is to provide food to grocery stores, you can make your business more efficient by placing your operations in a location convenient to both your suppliers and customers. Your suppliers might be the food packagers or food producers, and being close to them will lower the cost of transporting their goods to your store while also ensuring that the quality of the food does not decrease due to time or transportation type. Your customers would be the people who own the stores that buy the most from you and it makes good business sense to put your business in a location convenient to them. When making decisions such as location, however, you must compare the extra costs of having a convenient location to the lower costs of making your transportation more efficient. You must also find a balance between a location convenient for your suppliers and a location convenient for your customers. These decisions must consider all aspects of your business. For example, even if the convenient location has a higher combined cost, the cost may be worthwhile if the shorter delivery time and freshness of your deliveries leads to more business. Similarly, the transportation from your business to your customers is important if they do not carry things away. If you deliver goods to your customers, for example, it is a good idea to plan deliveries to the same area together to save costs related to fuel for your delivery truck or car. As with our earlier example, however, this should be compared to additional business you can win by promising fast delivery. In short, any process between raw materials and the final customer can be made more efficient by managing the supply chain. Slide 7 There are factors that can make it difficult for a supply chain to operate efficiently. There is at least one and at most a few in any given system. Constraints can be “internal” or “external” to the system. An internal constraint is something that prevents the supply chain from meeting the demand for a product or service. In the case of an internal constraint, the best solution is to find a way to produce or deliver more. Types of internal constraints are:

• Equipment - for example if a company making clothing does not have enough sewing machines or if the equipment is old and outdated, or if a delivery business does not have enough trucks to move farmers’ crops to the market on time.

• People - for example if the employees of a company manufacturing clothing do not know how to operate the sewing machines or the delivery company does not have enough people available to drive its trucks.

• Policy – for example, laws or local customs that prevent the system from making more, such as a tradition of not working on Sunday.

By using supply chain management, you can identify these internal constraints and develop ways to eliminate them. In the examples just given, if you identify that the outdated sewing machines are limiting the supply you can provide to your

market, you should study the cost of upgrading or replacing the equipment. If that cost is lower than the extra profits you can expect and your cash forecasts show that you can make the investment, it would be worthwhile to do so. Alternatively, if you determine that the skills of your workers are the issue, training on how to use the equipment would be an inexpensive way to eliminate the constraint. An external constraint exists when the system can produce more than the market wants. In the case of an external constraint, the organizations should focus on creating more demand for the products or services. In other lessons, we speak about ways to increase demand through marketing and other methods. These methods are approaches to address external constraints on the supply chain. Slide 8 In all of these cases related to supply chain management, the forecasting of results for the decisions you make is important. In another lesson, we discuss things to consider in compiling financial forecasts, and this process will probably require that several versions be completed with different assumptions. As these decisions can have actual financial costs, it is always a good idea to make sure your forecast assumptions are realistic. In many ways, forecasting and supply chain management are closely related, since both must make informed decisions about future supply and demand in your target market. For example, if you own a café, your sales forecasts will help you decide how much fresh food to have in the kitchen on a daily or weekly basis. If the forecasts are too optimistic, you may have too much uncooked food, which will cost you money when it spoils. If you have too little, may not be able to fill customer demand, which could lead to less sales in the future because of your customers’ dissatisfaction with your service. Thus, proper forecasting and planning will help you better manage your supply chain and avoid unnecessary costs. Slide 9 The concept of a supply chain is related to a similar concept known as a value chain. The value chain concept studies how a product grows in value as it moves through a system. While these are similar concepts, the supply chain usually views the process of an industry while the value chain is concerned more with an individual business. In summary, by understanding all of the components of a product you sell or a service you provide, you can identify ways to make the process more efficient and reduce costs. By managing your supply chain, you can reduce the amount of your working capital used for excess inventory while also improving customer satisfaction.

LESSON 13: THE BALANCE SHEET AND KEY FINANCIAL RATIOS Slide 1 This lesson will focus on the Balance Sheet, one of the financial statements that every business should maintain. There is information on the Balance Sheet that will help business owners and managers to make better business decisions. People who are considering investing in a business will find information here to help them decide if they are likely to profit from such an investment. Likewise, people who may lend money to a business will also find information here to help them decide if it is likely that they will be repaid or not. The balance sheet is like a photograph. It tells the person looking at it about the business at one point in time. This is different from the Income Statement, which shows the FLOW of money during a period of time. Slide 2 The Balance Sheet has three major parts:

• Assets, which is what the company owns • Liabilities, which is the money the company owes • Equity, which shows the investment of the Shareholders -- the owners and investors.

Slide 3 Under each of these three parts there are several accounts. In the Assets section, numerous items would be listed. Assets are divided into two main groups – those that have a short life span and those that have a longer life span. Assets with a short life span are called Current Assets and those with a longer lifespan are called Fixed Assets. Within the fixed asset group are things like machinery and buildings, which are listed as Property Plant and Equipment. Other Fixed Assets that might be seen on a Balance Sheet are intangible assets. An example of an intangible asset is a patent. A patent is not something that one could touch, but it has value.

Slide 4 In our sample Balance Sheet for Star Hat Company, Current Assets include Cash, Inventories and Accounts Receivable.

• Cash. This is the money the business has on hand. Star had $20,000 in cash at the end of 2011. Other short-term investments might include short-term bonds, or Certificates of Deposit.

• Inventory. This is what the company sells and how much it owns on the date of the balance sheet. Star’s inventory is the hats it has available to sell. On December 31st, 2011, Star had $143,600 worth of hats on hand.

• Accounts Receivable is money that is owed to the business. Much of that will be for goods that were sold, but have not yet been paid for. In our example, Star sold $30,000 worth of hats to a vendor in another town. That vendor has not yet paid for the hats, so $30,000 is shown as Accounts Receivable.

• If a company expects that a portion of it Accounts Receivable will not be paid, the company may set up an account called Reserves Against Receivables. When there is a default, then money is taken from the Reserves. Star has not set up such an account.

• If Star had paid in advance for something – advertising expenses, for example, the business might show that as an asset under Prepaid Expenses. These accounts are reduced as the items are used.

• Any property the company owns would also be listed under assets. Star rents its store, so the store would not be listed here. But Star does own display cases and racks and they are counted under Property, Plant and Equipment, another name for fixed assets. Other assets that might be accounted for in this category are vehicles, machinery or computers.

Let’s talk a bit about depreciation. Depreciation is used in accounting to try to match expenses to the sales that the asset brings in. Star bought the display cases and racks in 2010 for $60,000. This equipment has an estimated useful life of 6 years, so each year for the 6 year period, Star will record $10,000 of depreciation. Each year, the depreciation” accumulates”, so at the end of six years, the Net value of Property Plant and Equipment will be zero. Slide 5 The Liabilities section also has several accounts. These represent what the business owes to its workers, to other companies, to banks or to anyone else. Debts that will be paid within one year are considered Current Liabilities. Those that will be repaid over longer periods of time are considered Long-term liabilities. Slide 6 In our hat shop example, the owner has received a shipment of hats from his supplier worth $64,000. He has 30 days to pay for them. He owes money for the hats and that would be listed as Accounts Payable. Other debt would also be listed here. If the owner’s friend lent him money to buy a display rack and he has promised to pay his friend back within a year, the owner would list that debt as short-term debt. Star Hat Shop has no short term-debt. Star Hat Shop has received a loan from a bank. The loan will be repaid over 5 years. Since the loan is longer than one year, it would be listed as long-term debt. However, if Star had to pay some of that money back in the current year, that portion would be shown as the Current portion of long-term debt. That brings us to Equity. Star’s owner put $110,000 into the business when it started in 2010. The store did not make a profit in 2010. Nor did it lose money. In 2011, Star hat shop made $4,600 and that was added to Equity in the Retained Earnings line. Equity can be negative if the company loses more money than was invested. Equity is usually not repaid, unless the company makes a lot of money and pays a dividend. A dividend is a distribution of a portion of the profits of a company to the owners. Each owner receives dividends in proportion to his ownership of the company. Slide 7 And here is why it is called a Balance Sheet. The Assets and the combination of Liabilities and Equity must always be equal or “balance” out. Think of it this way:

• Liabilities and Equity is where the business gets its money. It comes either from loans or from owners. Owners could be the business proprietor alone, or it could also be from shareholders, who give money to the business expecting to get some of the profits.

• Assets show how the company is using the money it has and what will be used in the business in the future. Slide 8 Notice that when Liabilities and Equity are added together, they equal the value of Total Assets.

Slide 9 How can we tell how strong a company is? Potential investors and potential lenders often look at a company’s Debt to Equity Ratio. This is calculated by dividing Total Liabilities by Equity. A Company that has a high debt-to-Equity ratio is riskier than one that has a low one debt-to-equity ratio. If a company has a lot of debt and something goes wrong, it may not be able to pay what it owes. Lenders often have guidelines for this ratio and will not lend to companies that have too much debt compared to equity. Slide 10 So far, we have looked at information that is found on the Balance Sheet. But it is also helpful to look at information on the Income Statement and on the Balance Sheet at the same time. Business owners and investors are interested in profitability. How much will be earned on an investment? Are the potential earnings enough to justify all the work an owner will have to do? Are the potential earnings enough for an investor to justify risking capital? A good measure of this is Return on Equity. Return on Equity is calculated by dividing Net Income by Equity. We find the Net Income number on the Income Statement and the Equity number on the Balance Sheet. Star’s Return on Equity is 8.4%. Star’s owner might judge if he could do better by looking at similar businesses in his area. If similar businesses have Return on Equity ratios that are much higher, Star’s owner should investigate why he is not doing as well. An investor would look at other investment opportunities and decide if 8% is enough of a profit to make the risk of putting his money is this business worthwhile. If he could earn 7% in a savings account which is safe, he may think 8.4% Return on Equity is not enough. Remember: Accurate financial statements help both business owners and investors.

LESSON 14: WORKING CAPITAL MANAGEMENT Slide 1 In this lesson we will talk about Working Capital Management. Working Capital measures the net amount of a company’s current assets in excess of its current liabilities, also known as liquid net assets. Working Capital is calculated by subtracting Current Liabilities from Current Assets. Working Capital can be negative if a company has a lot of debt that is soon due. In general, companies with a lot of working capital are more successful than companies that have little or negative working capital. This is because businesses with good levels of working capital have the ability to expand and improve their operations quickly. However, if a company has a lot of cash that it is not using, it is not being as profitable as it could be. There is a balance between having enough resources to grow and improve and having resources sitting unused. We will see how keeping efficient levels of short-term assets and short-term liabilities is important in making a business as profitable as possible. Slide 2 Part of managing Working Capital is making sure there is enough Cash. Businesses have cash for three main purposes: First, businesses have cash to buy and sell things. A manufacturing business needs to buy raw materials. For example, the bread company needs to buy flour and yeast and other ingredients. Second, businesses hold cash as a precaution against undesirable events. Let’s say that the supermarket that buys bread from the bread company doesn’t pay for the bread on time. The company still has to pay for the flour it uses and it still has to pay other expenses, such as its workers. And third, businesses have cash for speculative reasons. Perhaps the bread company can buy flour at a much lower price than usual, if they can buy three times their normal order right away. If the business did not have cash, it could not take advantage of such a situation. Or, perhaps the bread company could buy more efficient equipment that would improve profitability of the business. Slide 3 Companies maintain different types of inventory. There are raw materials, Work in Progress and Finished Products. For example, a bread baking company holds items such flour and yeast as raw materials. Dough that has been mixed but has not been baked yet is Work in Progress and loaves of baked bread are the Finished Product. It is important for companies to manage these stages of inventory efficiently. If the company does not have the raw material flour in time, it will not be able to make bread to sell. Not only will it miss the sales, but the stores that sell its bread may decide to buy from another bread company because it is more reliable. Or, if the company mixes more dough than it has oven space to bake, some of the dough might go bad and have to be thrown out. That is a waste of resources. The bread company has to manage its

Finished Product too. If it has lots of bread to sell, but all of the delivery trucks have broken down, the bread will not be delivered to the stores so that it can be sold. The finished bread may become stale, losing money for the business. Slide 4 Here is the Balance Sheet for Star Hat Company. Star has positive Working Capital of $124,600. Its Current Assets are greater than its Current Liabilities. Slide 5 $124,600 sounds like a good number, but what matters is if $124,600 is good relative to the size of Star Hat Company. So, it is helpful to look at ratios and not just at the numbers. Let’s look at the Balance Sheet for Star Hat Company again to see what it can tell us about the company’s liquidity. That is, the Balance Sheet can tell us if Star is likely to be able to pay its debts when they are due. The Current Ratio is a measure of liquidity. It is calculated by dividing the value of current assets by the value of current liabilities. The current ratio for Stat Hat Company would be 193,600 divided by 69,000. That is the sum of cash, inventory and Accounts Receivable divided by Accounts Payable. Star Hat’s current ratio is 2.8. That sounds pretty good because the short-term assets are almost three times the value of the short-term debt. Slide 6 But Star cannot pay its debt with hats. A large part of the short-term assets is the inventory of hats. Another ratio to look at is the Quick ratio, which excludes inventory. Generally, a quick ratio of 1 is good. It shows if the company could pay its bills even without selling any inventory. Star’s Quick Ratio is 0.8. Star would have to sell some of its hats if it needed to pay its current liabilities immediately. Slide 7 There are other measures of efficiency that we can look at. Inventory Turnover is a measure of how well a business is managing its inventory. If it is turning its inventory quickly, it means that it is selling its product and replacing the inventory efficiently. If the inventory turnover is low, that would mean that the company is making or buying the inventory too soon. There is a risk that it can go stale, break or not sell because customers can tell it is old. Also, the money used to pay for that inventory could be used for something else. To calculate the Inventory Turnover ratio, we divide the Cost of Goods Sold by Average Inventory. Slide 8 We find the Cost of Goods Sold on the Income Statement and the Inventory numbers on the Balance Sheet. Average inventory is calculated by using last year’s inventory and the current the most recent year’s inventory. For Star Hat company, we divide Cost of Goods Sold of $65,000 by the average of $143,600 and $107,000. Star’s Inventory Turnover Ratio is 50%. Slide 9 It is helpful to think about inventory is terms of how quickly the company is selling it and replacing it – that is to think about it in terms of time. Managers often look at Inventory Turnover in terms of Days. To get this number, we divide 365 – the number of days in a year – by the Inventory Turnover ratio. Slide 10 In the Star example, that would be 365 dived by .5 or 730 days. That means that Star is only turning its inventory over once in two years. Star needs to do better than that if it wants to stay in business! A low Inventory turnover rate could mean one of a number of things:

• It could mean that Star is overstocking – holding too much inventory. • It could mean that that there is unsalable inventory being carried. Say Star’s hats are defective or have gone out of

style. • Or maybe Star’s marketing plan is not working.

On the other hand, an extremely high turnover rate might mean that the company is not carrying enough inventory and is missing the opportunity to sell a lot more hats. A good balance will mean the highest profitability for the company. Slide 11

In business, often companies must give their customers time to pay. But if they are given too much time to pay, then money is in customer’s bank account and not the business’ bank account. If you are the manager and the money was in your bank account, you could buy more inventory or improved equipment or even expand your business. So another measure to look at when assessing a company’s efficiency is Accounts Receivable Turnover. We calculate Inventory turnover ratio but dividing Sales by the average Accounts Receivable. Slide 12 Again, we need to get information from both the Income Statement and the Balance Sheet. Sales is found on the Income Statement and we find this year’s Accounts Receivable and Last Year’s accounts receivable on the Balance Sheet. Slide 13 Just as we can look at inventory turnover in days, we can look at how quickly customers pay in days. We do this by calculating the Collection Period. The collection period is found by dividing 365 by the Accounts Receivables Turnover ratio. Slide 14 In the example of Star Hat shop, the Collection Period is 91 days. If Star has arranged for a 3-month period for its customers to pay, that it would be right on target. Star sells some hats to a vendor in another town, but most of Star’s business is retail and customers pay for hats at the store, so perhaps the other vendor has been slow to pay. Star’s manager should find out if that is the case and take some action if it is true. If the vendor is being slow, Star might insist on being paid at the time of delivery. Or Star might charge a fee when the vendor is late to pay. Slide 15 Let’s look at one more way to evaluate how a company is using its resources. We just looked at how quickly a company’s debtors are paying what is due. We can also look at how quickly the company is paying for what it buys. Accounts Payable Turnover tells us this. Accounts Payable Turnover Ratio is calculated by dividing total supplier purchases, in our example that is the Cost of Goods Sold, by Average Accounts Payable. Slide 16 Star’s Accounts Payable Turnover ratio is 1.4. Slide 17 To get Accounts Payable Turnover in days, this is divided by 365. Slide 18 Star pays off its accounts payable every 269 days. In general, the quicker a company’s debtors pay to the company and the slower the company pays out money, the more money the company has to work with. Without knowing the terms of the purchases, Accounts Payable Turnover might not mean very much to an observer. But if one looks at Accounts Payable Turnover over time, some information can be learned. If the turnover is going up, meaning that the company is paying off its debts sooner, it might mean that the company has room to increase productivity. If it were to slow down paying its debts, perhaps it could buy more goods to sell and make more money. If the turnover is going down, meaning that the company is paying off its debts more slowly, it might mean that the company is doing just that – getting more productive. OR it might mean that business has slowed down and it is not able to pay off its suppliers as quickly. So we have looked at a number of ways to evaluate the safety and efficiency of a company by looking at its working capital. An astute lender, say a good bank loan officer, will look at these measures of liquidity and efficiency to evaluate the health of companies that are seeking loans. He will look at the state of a company’s finances now and he will look at the trends in these measures. He will ask himself questions about an applicant. Here are some of the things he might ask:

• Are the company’s revenues increasing over time? Are they steady? Are they seasonal? Or are they unpredictable? • Can the company cover its obligations in the short term if it were to have an unexpected setback? • Does the company have cash to finance growth? • Is the company getting paid by its customers as it should? • Is the company being efficient with its cash? • Is there room for improvement? Sometimes not being as efficient is not a terrible thing. It means that, with some

changes, the business can improve.

Good financial records help managers as well as lenders and investors. With good financial records, managers can find out where their businesses are performing well and where there is room for improvement. And improvement means making more money!

LESSON 15: STRATEGIC PLANNING Slide 1 So far you have learned a lot of business skills. All of these skills are useful and needed for success. But without an ability to assess a business’s situation and make long-term goals to work towards, all of these skills are useless. In this lesson you will learn about strategic planning. You will learn about the steps involved in creating a strategic plan. You will learn how to analyze the big issues affecting your business, which is equally as important as small details such as managing people or forecasting sales. Usually in large businesses strategic planning is done by the leaders of the business. However, even if you are not participating in strategic planning, it is important to understand it. When you understand the strategy of a business, everything you do as an employee has a meaning. If you work in a small business such as a café or clothing store you will be very involved in the strategic planning. Slide 2 What is a strategy? A strategy is a method for reaching a goal. What is strategic planning? Strategic planning is the process of defining a strategy. Strategic planning answers the following questions - What situation is this business in now? Where is this business going? What will it be like in 3 years? What will it be like in 5 years? How will the business get there? How will the business know if it has achieved its goals or not? Strategic planning is an important part of business, giving it a focus. It gives the business a map to follow and following the map can lead to success. It is also important because it allows a business to see whether or not it is doing things to accomplish its goals. In other words, it allows the business to monitor its progress. Slide 3 There are three important things to understand about a business when creating a strategic plan: the business’s vision, mission, and values. Vision and Mission – As you remember from the first lesson, a vision statement and a mission statement are good tools for focusing your business. As such, they are part of the larger strategic planning process. Recall that a vision statement is a dream for the future while a mission statement talks about the business’s purpose. So, both statements help a business think about its current situation. A vision statement also helps a business think about its future. Both the current situation and future must be carefully considered. Values – What are the principles that guide the company? What kind of behavior is expected in the company? Understand the current values and any missing values. The strategic plan should reflect these values. Slide 4 Strategic planning can seem overwhelming. There are many things to do. It’s hard to know where to start. However, there are four basic steps in strategic planning: situational analysis, setting goals, and creating a path. After these steps, the last thing to do is to use the plan and evaluate its effectiveness after the time horizon.

1. Situational Analysis – For strategic planning, first a business must understand its current situation. How can a business plan for the future without knowing where it currently stands?

2. Setting Goals – After the current situation is analyzed, a target must be created. This step involves creating goals and objectives.

3. Creating a path – Once a business has goals, it must figure out how to reach those goals. This step is about action planning.

4. Use the plan – After the plan is written it should be used! Let the plan guide future actions. Slide 5 There are several tools for understanding a business’s current situation:

• SWOT – The second lesson discussed SWOT. Remember that SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. SWOT is an excellent tool for identifying the internal situation (strengths and weaknesses) as well as the external situation (opportunities and threats). Sometimes it’s easy to forget about the external situation. Here are some external factors to consider during SWOT analysis:

o Markets (discussed in Lesson 2) o Competition (to be discussed in a future lesson) o Technology o Supplier Markets o Labor Markets o The economy o The legal environment

Not all of these factors will be important to every business. However, the first two factors are always important. • Reviewing an old strategic plan – If the organization has an existing strategic plan, then that is a great place to start

a situational analysis. Look at the goals and objectives from the old plan. Did the business reach the goals? Why or why not? Have a meeting with people who are important to the strategic planning process, such as managers, employees, board members, and customers to discuss these questions.

• Observation – Simply closely observing a business will also tell you something about its situation. Are the employees happy? Are the customers satisfied? What is the office like every day? Reviewing financial information can also give an idea of the company’s current situation.

• Mission and vision statements – If your organization doesn’t already have these statements, now is the time to create them. If it does already have them, then you should at least review them and make any needed changes.

Once the current situation is understood and analyzed, the organization can continue the strategic planning process. Slide 6 Writing down the goals of the business is the next step in the process. A strategic plan includes goals because the goals help you and your employees focus on what is important. The goals should be carefully written. First, the goals should reflect the time horizon of the strategic plan. Strategic plans can be written for 1 year, 2 years, 5 years, or any amount of time. Most organizations do not write strategic plans for 10 or more years because the time horizon is too large. Much can change during that time. Conversely, strategic plans are usually for 1 year at least. Strategic planning takes a lot of work and thus is not as useful for shorter time periods. If you choose to write a 1 year strategic plan, then you will be writing about different goals than if you choose to write a 5 year strategic plan. With a smaller plan the goals should be smaller and less ambitious. A longer plan can have more challenging goals since there is more time to achieve them. Also, the goals should reflect the organization’s mission and vision statements. There is a reason why you begin strategic planning with writing or reviewing mission and vision statements. Every goal you create should be related to the purpose of your company (the mission) and the company’s ideal future (vision). If the goals are not written according to the mission and vision statements, then they do not help the company focus in the correct area. Next, when writing the goals, there are several rules to follow:

1. The goal should be specific. An unclear goal is a bad goal. To make a goal specific, try answering the following questions:

a. What do I want to accomplish? b. Why? What is the benefit of accomplishing this goal? c. Who is involved? d. Where will it happen?

2. The goal should be measurable. If the goal is not measurable, then it is hard to know if it has been accomplished. Measurable goals answer these questions:

a. How much? b. How many? c. How will I know when it is accomplished?

3. The goal should be attainable. In other words, the company should be able to achieve the goal. This rule does not mean the goal should be easy. Rather, it should be challenging but realistic.

4. The goals should be relevant. Remember, the goal should reflect the mission and vision of the company. If a goal is relevant, then people will see it as important. Having the support of everyone in the company is important for achieving the goal. If the goal is not relevant, people won’t want to support it.

5. The goal should be time-bound. In other words, the goal should have a deadline. By default the deadline will be the time horizon of your strategic plan. But it is better to include a deadline in the goal itself.

A good example goal for a clothing store is this: Increase clothing sales 10% at our main location by the end of 2013.

When writing the goals, just focus on “what” and not “how.” After a list of goals is created, choose the 4 or 5 most important goals for the organization. If there are too many goals, the organization will have difficulty focusing on and achieving any of them. Slide 7 A SWOT analysis can be helpful in writing new goals. Strengths and weaknesses can be combined with opportunities and threats to create goals.

• A goal based on a strength and an opportunity can often be accomplished quickly and easily. These make good short-term goals.

• A goal based on a strength and a threat or a weakness and an opportunity are more difficult and time consuming. These make good medium term goals.

• Finally, a goal based on a weakness and a threat is quite challenging and could take a long time. These are good long term goals.

For strategic planning, an organization should focus on medium or long term goals, depending on the time horizon of the strategic plan. Slide 8 Now the goals are written. But the goals are big and ambitious. How does the company achieve these goals? The next part of strategic planning is creating an action plan for accomplishing the goals. In this step you focus on “how.” To begin creating an action plan, write down the following for each goal:

• Desired results – What do you want from accomplishing the goal? What benefit will the business receive? • Potential obstacles – What could get in the way of achieving this goal? What might slow down your work on this

goal? • Support – What do you need to accomplish this goal? What kinds of people or tools do you need? And what do

you already have? After thinking about these topics, next you should write down the steps that must be taken to accomplish the goal. Think about who will do each step and when it will be done. If you have responsibilities and deadlines, you can see if you are doing what is necessary to achieve the goal. You will know if you are on schedule. Another option is to create short-term and medium-term goals. These kinds of smaller, easier goals will help an organization reach its main goals. If your strategic plan is more complex, you may want to separate the goals into two levels – goals and objectives – with objectives being the more specific level. Slide 9 After creating the strategic plan, remember to use it. A strategic plan is no good if the organization only looks at it every 5 years. Periodically the strategic plan should be reviewed to see if progress is being made on the goals. Looking at the strategic plan a few times a year will also help keep the organization focused. Each year an organization can review the progress it made towards each goal. At the end of the entire time horizon, there should be a final review to see if the goals were met. If some goals were not met, determine why they were not met. Doing an honest evaluation is an important final step in strategic planning. It will lead to learning new things about the business and will help to start the strategic planning process again. Slide 10 While the steps may seem simple, strategic planning is not easy. It requires a lot of thought and work. It is also very hard to start the process sometimes. However, creating a strategic plan does not have to painful either. By creating, using, and reviewing strategic plans on a regular basis, businesses can benefit greatly. The more a business performs these tasks, the easier they become. And most importantly, the business will have a new focus and increased chances of success.

LESSON 16: CUSTOMER RELATIONSHIP MANAGEMENT

Slide 1 Customer Service is what a business provides to its customers before, during, and after a purchase. Customer Service can directly influence a company’s profit. Customer Service is one of the most important assets of a business. The future success of a company lies in keeping customers happy and satisfied. We all have stories about when we were treated

exceptionally well or very poorly and we tend to share these stories with others. Word-of-mouth marketing, that is what a customer tells others about your business, can be the absolute best – or – the worst for a company. In short, poor Customer Service can ruin a business – but great Customer Service can overcome almost anything! Slide 2 Let’s talk about what a business can do to have satisfied customers. Provide sincere, honest and reliable service - Customers who have been promised something and do not receive it will be frustrated and disappointed. Promising an early delivery date in order to make a sale is not a good idea if that order cannot be produced as promised. Losing a customer due to unfulfilled orders or promises not kept undermines the integrity of the business. The solution is to say what you will do, do what you say – then do it on time. To promise less but deliver more is the best policy. Be sincere and do everything in your power to get the merchandise as requested, but do not promise unless you know for a fact it can be delivered on time. You will retain a customer if you are honest in dealing with them, even if you cannot provide the item within the time frame they want. Listen to customers and help identify their needs - Nothing is more frustrating than telling a salesperson what you want or what your problem is and then discovering your request has been ignored. When a salesperson is set on making the sale without considering the customer’s needs, it is obvious to the customer that the sale is more important than she is. The solution is to listen to what customers say they want. Pay attention to what they don’t say and help them find what they need. Let your customer talk and show them that you are listening by making the appropriate responses, such as suggesting how to solve the problem. Help customers even if it means sending them elsewhere - When a customer requests something that your business does not have, you may be asked to direct them to someone who does have the item. It seems like it would be bad business to send the customer to your competitor and you may want to decline to help. If you do not provide the information, your customer will leave frustrated and will eventually find the item in another business. As a result your business loses the customer. The solution is if you don’t have what a customer wants but know of a business that does, direct them to that business. What is even more productive is to call the business and verify they do have the item and tell them you are sending them a customer. Your customers will remember your honesty and kindness in helping them and will come to you first for their future needs. This is an excellent example of customer retention. In addition, the other business may refer customers to you in the future. Ensure the customer understands what is being sold and how to use it - Let us say that a customer requests help with purchasing an electrical appliance and the salesperson quickly describes its uses and how to operate it. The customer is pleased and excited about the purchase and can’t wait to use it at home. After trying to get the same results as the salesperson did when demonstrating it, the customer becomes angry and frustrated and decides to return the item. The customer demands her money back. In this case the result is a customer that will probably not shop with you again. The solution is to take the time to explain with patience as many times as it takes until you feel certain the customer is comfortable with the product and how to use it. Do not let a customer leave without complete knowledge of the product. Additionally, the salesperson should tell the customer he is available to answer any future questions regarding the purchase. Deal kindly with complaints on a timely basis, know how to apologize, and value the customer - In the examples we have just mentioned, we see what can happen when a business does not give good customer service. Customers are lost. If you do not deal kindly with complaints on a timely basis, you will not have a fully successful business. The solution is that, “The customer is always right.” It is an old saying but it is absolutely true. Whatever the outcome of the complaint, customer service personnel must be able to sincerely apologize to the customer and when the customer leaves, he must know he is truly a valued customer of that business. Have a knowledgeable and trained staff to deal with customer service - It is vital that employees be fully trained in company policies before dealing with customers. On-going training sessions should be held on a regular basis to remind

employees about policies as well as to educate employees in the organization about new methods and ideas. Staff meetings should be held on a daily or weekly basis, depending upon the size and needs of the organization. Topics for discussion should include the following:

• Examples of good customer service compared to bad customer service • Sales training • Problems that have arisen with merchandise or services and how to deal with them • Training about new merchandise and services • Delivery dates • Return Policies • When to call senior management

Slide 3 Treat employees well. They are as important as your customers. Both are vital to your business. Take the time to hire the right employees. Talk with their past employers. Make sure the information from past employers is the same as what they report on their applications. Check their references. Conduct a second interview with applicants to discuss what you learned from their references. Once you have decided to hire a person, treat him or her very well – your employees are as important to the success of the business as your customers. Slide 4 Common knowledge tells us that it takes more time and money to find a new customer than it does to keep and do business with an existing one. Satisfied customers are also a company’s greatest source for referrals. What you can do to ensure you keep the customer happy and coming back? Here are some examples.

• Offer personalized treatment: A clothing store has many ways to keep their customers coming back. Telephone your customer when new merchandise arrives, offer free alterations, order merchandise for a particular customer, keep size and preference records for your customers.

• Be Reliable: Always keep your promises. When a customer wants a dress for a special occasion and must be specially ordered, verify with the manufacturer that the delivery date can be met before promising it to your customer.

• Be Flexible: Make changes as needed to accommodate the customer. For example, if most of your customers are mothers with young children, make sure your business hours are convenient for them (such as being open during the hours the children are in school).

• Build Trust: Be consistent, respectful and truthful. It is always better to tell a customer the truth and be known for being honest than to say what she wants to hear if it is not true. Let’s say you have a customer that needs approval before buying anything and has tried on a dress that is not flattering. Do you tell her what she wants to hear to make the sale or do you tell her the truth – and if you tell her the truth, will she be insulted? By telling the customer you have something else you think she will like better than the dress she has on you succeed in drawing her attention to another selection. It also tells her she can trust your honesty.

• Get Personal: Make friends with your customer. Ask about their family and important events in their lives. Call them and send birthday and anniversary cards. Let them know you value them personally as well as professionally.

• Be Here to Stay: Tell them you will be of service after the sale if they need you. Treat the customers like people not like the source of money in your pocket.

• Do Something Unexpected: Delight and surprise your customer – be creative with your customer follow-ups. For example, a women’s clothing store decided to do something special for their customers during the Christmas season by having a “Men’s Shopping Night.” They sent out invitations to their customer’s husbands and advertised it in the local newspaper. What the men didn’t know was that their wives had tried on and selected their ‘gifts’ before “Men’s Shopping Night” and it was up to the salesladies to sell the wives’ selections to the husbands. The result was that everyone was happy – the wives got what they wanted, the husbands got the size and selection right and the store had no returns!

• Pay attention to the customer: If you are in a service industry, you should make sure the customer is always aware of the service and its value. Do not risk this by talking on your mobile phone while you are cutting her hair.

Slide 5 Continued and consistent communication is key to maintaining customer loyalty. Here are some suggestions that can help your business maintain a steady and loyal clientele.

• Focus the majority of your marketing effort on current customers, as they are more likely to use your services than a new customer who does not know about your business. Newsletters are a great way to send customers useful

information and articles and to keep your name in front of your customer. Many people have access to the internet, so e-mailing newsletters and promotions can be very productive.

• All forms of communication and contact should be personal. Collect personal data about important events in your customers’ lives; such as anniversary dates, birthdays, family members, weddings, and funerals.

• “Thank-You” notes are a very important method of letting your customer know you appreciate their business. Writing a small note or letter is a quick and cheap way to let your customer know that they are valued.

• Telephone customers to wish them Happy Birthday, Happy Holidays, or just to say hello and ask if they are in need of your services.

• Reward your current customers with small gifts or discounts on special occasions or as a promotion. • Keep the level of customer service high. Do not think that an existing customer can’t become an unhappy one.

Ask for your customers’ comments. This lets them know you care about their needs and that you value their opinions.

• Have a ‘Customer Appreciation” event or party. This is a great way to maintain relationships and also learn more about what your customers think of your business.

Customer satisfaction begins with the first contact a customer has with your business and good customer service can actually be a determining factor in the success of your business. Slide 6 Customer Lifetime Value (CLV) is the value a business places on the profits that can be expected from a customer’s lifetime buying habits with your business. In other words, how much profit will a business receive from a single customer over the entire span of their relationship. This could be a day, week, month, but is usually thought of over the span of many years. This is also referred to as Customer Equity. A business’s existing customers provide the most reliable source of its future income. While attracting new customers is important, keeping your current customers plays a larger role in increasing their CLV. Typically, customers with higher lifetime value buy more often, spend more money, and have fewer returns. The value of a customer is viewed by both their current profitability and what the business will realize from the customer over time. Understanding how to predict and use your Customer Equity can give you an important competitive advantage. Knowing your CLV gives your business an extremely powerful tool. Slide 7 Customer Lifetime Value is typically calculated by using the dollar value of what profit your business will earn from all of a customer’s purchases over time. The detailed calculation is beyond the scope of this lesson, but would include:

• The average amount of gross profit you earn from a customer or group of customers (in another lesson, we define gross profit as sales price less cost to produce, ignoring general costs of running the business).

• An estimate of the costs to retain customers through efforts such as marketing, discounts and other means. • An estimate of the percentage of customers you expect to stay with your business.

To make the calculation more practical, you would look at customer groups: similar groups of customers who use your products/services in a similar way. For each group, determine how long an average customer stays with the business, also known as their “purchasing lifetime.” Next, look at customers’ buying patterns and calculate the total number of purchases they make over a given length of time – a month, for example - and how much they purchase during a single visit. Calculate the CLV for each segment: once you know the average lifetime, you will be able to calculate:

• The total profit the business will earn from all their customer’s purchases. • If a particular customer will make successive purchases. • The value of future income if you had the cash today.

Once you have determined the CLV for each customer group, you will be able to:

• Better allocate marketing budgets to acquire certain types of customers with higher CLV. • Identify current customers whose buying habits have slowed and target them for new advertising. • Determine how much you need to spend to profitably retain customers. • And calculate the average profitability of a single customer.

The CLV becomes more important as a company’s marketing budget rises and its customer base grows. Customer Lifetime Value is a way of thinking. It focuses on your best customers, producing higher profits and sustained growth at a

lower cost. Customer Service and Customer Lifetime Value when used together can create a profitable and growing organization - one that never forgets that its customers are its lifeline to success.

LESSON 17: ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

Slide 1 In this lesson we will learn about the field of study called business ethics. We’ll discuss what business ethics is, how it varies, and ways that business ethics help businesses. As an example, assume you are sitting at a small cafe. You order chicken. The waiter brings the chicken. You begin to eat the chicken. It is a simple transaction and yet you must trust the café. You trust the café to give you fresh chicken. However, think of the same situation from the café’s perspective. Maybe there is a chicken in the refrigerator that should have been sold last week. Last week it was fresh, but now it is not. The café could choose to throw the chicken away because it is not fresh, or they could choose to serve it to the next customer that orders chicken. After all, chicken is expensive, and business has been pretty bad lately. Maybe the café can’t really afford to throw the chicken away. What is the correct thing to do in this situation? Should the café try to earn as much money as possible and not worry about its customers? Or should the café care more about its customers’ health than its own profits? These questions are about business ethics. Slide 2 Ethics are moral values and principles. Business ethics are the decisions a business must make between right and wrong. The actions and decisions of both employees and organizations are all included in the field of business ethics. The difficult part about business ethics is determining what is right and what is wrong. This part of business ethics reflects the philosophy of business. In other words, why does a business exist? Depending on whom you ask you will get a different answer. Some people believe that a business exists only to make money. The business should not care about anything else than making money. Other people think that a business should do no harm. Another popular opinion is that a business should display corporate social responsibility. That means the business should act as a responsible citizen in its community. We will explore corporate social responsibility more a little later. Business ethics includes the following types of moral or ethical issues:

• The rights and duties between a company and its employees, customers, suppliers, neighbors, and government • The financial responsibility between a company and its owners • The behavior of companies competing with each other

Slide 3 Business ethics is a relatively new field of study. It became popular during the 1970’s and 1980’s in America. In the late 1980’s and early 1990’s businesses began talking about their ethics. Thus, the topic is still quite new. In addition, it has spread around the world at different rates. So, some countries might have a better idea of business ethics than others. It’s also important to note that the ethics of business change over time. Ethics reflect what is considered normal in society. Two hundred years ago slavery was common in America. Now it is illegal and considered unethical. If a company had a slave in the modern era, it would be considered highly unethical. As the social norms change around the world, businesses also need to review their ethics. Slide 4 Each area of a business can face its own ethical issues. Many businesses have policies to inform employees how the company expects situations to be handled. More companies are also training their employees in ethical issues like these. Here are some example business areas and ethical problems:

• Accounting: Some managers don’t want banks from which they have borrowed money to know about certain aspects of their business. While their accounting follows the rules, it misrepresents the real truth.

• Human Resources: A business is hiring a new worker. One of the applicants is a relative of the hiring manager. The manager chooses to hire his relative even though the other applicant is more qualified.

• Marketing: Coca Cola and Pepsi have many contracts with schools in America. The companies give the schools money for programs and equipment if the schools agree to put a vending machine in the school. Children in the school frequently buy unhealthy products from the machines. This arrangement continues despite America’s health problems.

• Information Technology: Some organizations or businesses choose to use illegal copies of Microsoft’s operating software instead of paying for a licensed copy.

Are these situations right or wrong? Many Americans would identify these behaviors as unethical. However, just because something is viewed as unethical in one country doesn’t mean others feel the same way. Slide 5 Ethics will be interpreted differently around the world. For example, in some countries corruption is very common. It is considered a normal part of doing business. In other countries it is very hard to find any corruption. Bribes are not tolerated at all in these countries. Additionally, countries may have different laws on the minimum legal working age, what is considered a safe workplace, copyright protection, and different views on nepotism. Religion also has a large effect on what is considered ethical. In Islam, charging interest on loans is not allowed. Many forms of American business would be considered unethical in the Islamic world. Similarly, Christianity, among other religions, has the Golden Rule. The Golden Rule says that you should treat others in the same way you would like to be treated. These thoughts and beliefs can heavily impact business ethics and morality in specific countries. Slide 6 Currently, the most popular way for businesses to address ethics is through something called corporate social responsibility. Corporate social responsibility is a movement where companies watch themselves to make sure they are working in an ethical way. The goal is to encourage a positive impact on the people and things that the business interacts with. The beneficiaries can include customers, community members, other businesses, and the environment. The business should feel responsible for these people and things. Like ethics, corporate social responsibility differs around the world. However, here are a few different ways that companies practice it:

• Philanthropy – Some businesses give money to people, organizations, or communities that are in need. • Business model – Companies can put something socially responsible into their business plan. For example, a

clothing store could plan to buy its t-shirts only from a local company that pays good wages to its factory workers. • Creating shared value – This method says that a business’s well-being and society’s well-being are connected. The

business should provide opportunities for income and philanthropy to the society. In return, the society is stronger and is a better environment in which the business can work.

Slide 7 Doing good things for the community costs a business money. However, there are also many possible benefits for companies that are socially responsible.

• Human Resources – Socially responsible companies are more attractive to graduates and other potential employees. Also, employees can feel more satisfied with the business when there are options to volunteer in the community or to donate parts of their paychecks.

• Risk management – Most companies have a lot to lose. Customers trust them. It takes a long time to build the trust, but it can be lost easily. In the earlier example, the café could lose a lot of trust if they serve the old chicken and a customer gets sick. Instead, if the café has a strong culture of caring about its customers more than anything else, then the chef will throw the chicken away. The café will avoid a costly mistake.

• Unique Brand – Social responsibility can be a way to make a company unique. Tom’s Shoes is a business in California that looks like just another shoe company. But for every pair it sells, Tom’s also donates a pair of shoes to the needy. This dedication to making the world better has made Tom’s brand stand out to customers.

• New Customers – It is possible to give back to the community in a way that will create new customers for a business. For example, Bill Gates spent a lot of time and money encouraging computer literacy. However, he only provided the Windows operating system of his company, Microsoft. In that way, the people that benefited from his act of kindness were also being introduced to and taught his company’s operating system.

Slide 8 Not everyone believes in the benefits of corporate social responsibility. While there are potential benefits, they are very hard to measure. Of course there are companies that practice social responsibility and succeed in business. There are also companies that do not practice social responsibility and still succeed in business. In general, being socially responsible doesn’t seem to have a big impact on the success of a company. It could be that not many customers care whether a company is socially responsible or not. Or it might be that customers just care about other things more, like price and quality of products.

Also, some people doubt how genuine companies’ efforts to be socially responsible are. For example, drug-maker Merck developed and gave out a free medicine to cure river blindness among the world’s poorest people. Despite that generous act, the same company didn’t release important safety information about one of its most profitable drugs. Some argue that being socially responsible is not critical to the success of a business. Employees and directors should try to act responsibly, but they should not expect to be rewarded for it. Slide 9 While it is debatable whether or not acting in an ethical manner can actually help a business, there is no doubt that ethical behavior prevents the people and things the business interacts with from getting hurt. Unethical behavior hurts almost everyone for the benefit of a few in power. Let’s look at some examples:

• An Italian media company is owned by a powerful politician. The government attempted to double the tax rate of Mediaset’s competitor.

• The CEO of an airline forbids employees from using company pens. They also cannot charge their cell phones at work. He also is known to scream at customers.

• A Gold mining company was partly responsible for destroying 130 homes in New Guinea, among other environmental disasters.

Slide 10 A company does not need to create a special web page about its corporate social responsibility just to make an impact. Ethics can be promoted through something basic like trust. Like we mentioned before, customers must trust a business. Trust is not only important with customers, but also with employees. Transparency is one of the simplest ways to build trust. Employees or customers should be able to interact with managers and directors of the company. They should be able to see where money is spent. The less a company hides from its employees and customers, the more trust it will have. When there is a lot of trust, transparency, and openness within an organization, it is more likely to behave in an ethical way. Slide 11 Ethics is a very complicated subject. While some issues are clearly right or wrong, many issues are not so clear. Even within one country there can be many different opinions on what is ethical behavior. Again, the philosophy of business plays a large role. What is the point of having a business? Some people think a business should create as much profit as possible. Others think a business should not hurt anyone. There are many businesses today making as much profit as possible and hurting people. When we consider different cultures and norms around the world, business ethics becomes even more difficult. It is difficult to know what set of ethics to follow when doing business in a foreign country. Should you follow the local ethics or your own country’s ethics? Many times there is no clear answer. The best we can do is to try our best to behave in ethical ways at all times. In later lessons you will also learn about competition. For now, just remember that competition and ethics are not mutually exclusive. That is, you can compete with rival businesses while still behaving in an ethical way. Slide 12 The study of business ethics is rather new, but already very popular. There are many different views on business ethics, but, essentially, it is about right and wrong. Each decision a business makes has an ethical component. As times change and cultures change, so do ethics. Ethics also change depending where in the world you are doing business. Corporate social responsibility is a method used to create businesses that act in the best interests of society. While there are some benefits to a business behaving ethically, it’s not entirely clear how much a company can benefit from social responsibility. Business ethics will always be a difficult subject because there is often no clear right or wrong answer. It is also difficult for businesses to weigh doing the right thing with doing the profitable thing. Unfortunately, we do not always see businesses behaving in ethical ways.

LESSON 18: COMPETITOR ANALYSIS Slide 1 Before entering any market, it is essential to understand the competitors in that market. While some entrepreneurs are hoping to launch a new product or service unlike other companies, there will always be competitors regardless of product innovation. Yet, not all competitors are necessarily detrimental. Some competitors may help to expand the market, increase customer motivation, or absorb demand changes. By gaining and analyzing information on how your competitors perform,

strategize, and measure themselves, one can acquire the insights to be positioned to outperform other companies and become a top performer in their industry. The purpose of a competitive analysis is to identify your top competition, determine their respective strengths and weaknesses, and develop strategies to increase your success. Similar to when completing a market analysis, the first step is to identify current and potential competition. Once this information is determined, specific information regarding the competitors will be gathered and finally analyzed. In analyzing the acquired information, one will be able to get a better grasp on barriers to success within a particular market, customer motivations, major costs, and characteristics of successful and unsuccessful companies. In this lesson, you will learn the key components of a competitor analysis and be provided a framework to apply this to your own market. Slide 2 The first step to your competitor analysis is to identify your competitors. Your competitors can be any company that could earn revenue instead of you. If you are entering a large market, it may be impossible to complete an in depth analysis of anyone affecting your revenue, so you can select 10 other businesses to analyze. Other methods of identifying your competitors are to determine which products in the same market are close substitutes – or similar in terms of use, geographic market, and what they do. Therefore, one should examine the similar functions a product/service provides as well as addressing similar needs. For example, if you want to start a business to sell tea, a coffee seller may be a competitor. If competitors are defined too narrowly, a company may later be surprised by a new competitor. Additionally, you may be unable to see ways to expand your business if there are similar things you can do. Therefore, you should define your competitors broadly enough to include some businesses with which you may want to compete through innovation and changes in the market. For example, if you own a small café, and fail to consider larger cafés or restaurants as your competitor, you may overlook when a restaurant opens a small coffee area. This new restaurant may be offering new types coffee to drink there or to take home. Unless you have an understanding of even what your loose competitors are offering, you may miss out on critical opportunities. Slide 3 Gathering information on each of your major competitors as well as future or potential competitors can prevent you from being blindsided like Kodak and Polaroid. This includes creating profiles on the competitor’s background, finances, products, etc. A starting list of ways to gather information about your competitor includes:

• Observation of competitors’ products and services • Conversations with suppliers • Conversations with customers • Basic company information (i.e. public information from government data) • Billboards, magazine ads, or other types of marketing/advertising

We will dive further into a framework on how to categorize this information later on in the lesson. However, when gathering all this information, it may be helpful to create a grid indicating the strengths and weaknesses you encounter. You may remember the SWOT analysis performed during the marketing analysis which can be a great tool to visualize how you are your competitors are doing. Additionally, while you gather information, look for information to answer WHY the competitors do things? Why did they hire new employees? Why did they decide to wait to sell a product until months after its completion? Remember, sometimes all it takes to start to analyze your competitor is to visit their café or to browse their clothing store. Slide 4 With the appropriate, detailed information about your customer you can begin the analysis itself. By analyzing all the information you received, you will be able to determine:

• With which businesses you should actually compete • What new things competitors will try to do • How competitors react to other businesses’ actions • How to use the competitor’s behavior to your advantage

The completion of this analysis requires knowledge of: (1) the competitive environment; (2) your competitive advantages, which will be discussed in a later lesson. Slide 5 To do this analysis and create your strategy, here is a good format to follow once you’ve identified your competitors. It was developed by Michael Porter, a leading business authority. Michael Porter identified 4 main categories in gathering information about competitors, as shown in the chart.

1. Competitor’s Objectives 2. Competitor’s Assumptions 3. Competitor’s Strategy 4. Competitor’s Capabilities

The two main questions driving this 4 component approach are (1) what drives the competitor? (2) what is the competitor doing or is he capable of doing? Determining your competitor’s objectives and his assumptions will help you to answer the question, “what drives the competitor?” Investigating the competitor’s strategy, resources, and capabilities will help answer the question “what is the competitor currently doing or capable of doing in the future?” Slide 6 In first examining what drives a business, one of the best indications is its objectives. This can provide information about different competitive moves. The objectives may include information on the following:

• Growth rate • Market share • Technology • Finance • Organizational Structure

When analyzing the competitor’s objectives remember our previous emphasis on WHY? Additionally, how well the competitor is meeting his objectives may play a role in how they create their strategy which we will discuss shortly. Things that a business owner assumes can also affect the actions or moves of a competitor. As an example, let’s look at a women’s clothing store If, in 2012, black pants failed to sell quickly, the store owner may assume that there is no market for black pants. These assumptions are not always accurate. The lack of sales could have resulted from the brand of pants he was trying to sell, the price he charged, or other factors. Assumptions can also play a large role in a business’ strategy or objectives and may be based on any of the following:

• Past experience with a product • Industry Trends • Future beliefs about a competitor, or • Regional Factors

Incorrect assumptions by a competitor can present opportunities for your business. While 2012 may not have been the best year for the sale of black pants, you may have the opportunity to be the only seller of black women’s pants in the area and increase your market share due to your competitor’s error. Slide 7 While assumptions and objectives help to reveal what drives the competitor, examining your competitor’s strategy, capabilities, and resources can help you see not only what the competitor is doing, but also what it is capable of doing in the future. To determine a competitor’s strategy, it is important to examine what it is doing and what the company says it is doing. These may seem similar, but they may often differ once you learn more about the competitor. To look at what the competitor is currently doing, a good start is to review the following:

• Number of workers • Current products and services • Physical changes in a company’s office • Location of company • Type of customers

• Type and name of supplier • New construction or remodeling • Advertising or marketing campaigns

Reviewing these strategies along with the assumptions and objectives of the company gives you information about how the company may want to act or respond to various market changes. However, examining a company’s resources will reveal its ability to do what it wants to. When analyzing a competitor’s resources, it is just as important to identify what the company is able to do as it is to identify what the company is not able to do. Again, this can present possible opportunities for your business. One easy way to capture this information is with a SWOT analysis as we discussed in the earlier lesson. Slide 8 To review, a SWOT analysis helps you to analyze your business or business idea by identifying your STRENGTHS, WEAKNESSES, OPPORTUNITIES, and THREATS. Similarly, the strengths and weaknesses of your competitors will be its specific internal factors, while the competitor’s opportunities and threats will come from external factors. Combining the information from your SWOT analysis with the data gathered from your competitor analysis will help you create a comprehensive profile of the competitor’s possible next moves. For example, if in your research, you find that a clothing store in your area

• has a high quality brand that you do not have (Competitor Strength) • has a high cost supplier (Competitor Weakness) • has a new business building being constructed in the neighborhood (Competitor Opportunity) • has a trend in the town of women becoming more conservative (Competitor Threat)

Within your research you also notice that the clothing store recently changed to this new higher cost supplier. You have learned that they created a 2 year partnership with this new supplier of high quality business clothes. They begin to put all of their non-conservative clothes on discount to sell them all quickly. Here are some examples of thoughts to consider in this situation:

• What do you see as your competitor’s strategy? • Are there any opportunities you see to take advantage of? • Are there any considerations which you should be taking? • Consider these questions as we continue to apply these principles.

Slide 9 In SWOT analysis, you matched your strengths to opportunities to determine which are most profitable and examined the impact of threats with your weaknesses to identify which were most problematic. In our competitor analysis, we will use the:

• Strategy • Objectives • Assumptions • Resources & Capabilities

to predict you competitor’s behavior and thereby help you to guide your behavior and decisions. Determining the best decisions for your business can be helped by comparing all the information gathered about your competitors to your own company. This process works not only to compare your business to a close competitor, but also to compare yourself to how the industry as a whole is performing. These comparisons can measure:

• Quality • Time • Cost

of various processes to see why or how some businesses are more successful than others. Continuing with our clothing store example, here are some ideas of various benchmarks:

• How quickly clothing is sold (inventory turnover) • Percentage markup from the supplier • How often customers return what they buy • Cost of advertising • Cost of labor • Amount of stolen or missing merchandise

Some other interesting comparisons to your competitors may include: • The Amount customers spend at each purchase • Average age of purchaser/customer • Amount of repeat customers

In conclusion, reviewing your competitors – both those who do the same as you do and those that are only similar – can provide important insight into you can succeed in the market. Find ways to get information on your competitor by eating at their café, browsing the clothing store, or talking to customers. Compare quality, costs, and time of your own business with your competitors to find opportunities that will allow you to achieve great results.

LESSON 19: ANALYZING CASH FLOW Slide 1 In this lesson we will look at the Cash Flow Statement. We will see that the Cash flow Statement is broken into three sections. We will learn why segregating cash flows is useful and we will gain an understanding of why it is important to know where cash is coming from and where it is going in a business. It has been said that if you really want to know a business, you should follow the money. Analyzing cash flow is another way of saying “follow the money.” Different accounting systems may do this a bit differently from one another. But they ask and answer the same questions. Where does the money come from? And where does the money go? The Cash Flow statement is normally prepared in addition to the balance sheet and income statement, both of which we discuss in other lessons, to present from where a business receives its cash and how that cash is used. There are generally two ways to prepare a cash flow statement. We are going to look first at a Cash Flow Statement created using what is called the Direct Method. Later we will take a brief look at one created using what is called the Indirect Method, which is common in American financial statement preparation. Cash can come into a business in several ways and it also can go out of a business in several ways. The Cash flow Statement is different from the Income Statement, also often called the Profit and Loss Statement. The Income Statement attributes income and expenses to a certain time period. This is not necessarily the same as when the money actually flows. The Cash Flow Statement shows when the money flows. The Cash flow Statement segregates the inflow and outflow of cash into three categories: Operating Cash Flow, Investing Cash flow and Financing Cash Flow. Slide 2 Let’s look first at Operating Cash Flow. Operating Cash Flow is the money that comes into and goes out of a business that is related to the ongoing operations. The most obvious operating inflow is sales. If you sell your product and your customer pays you in cash, that is operating cash inflow. If your customer does not pay you at the time of sale, the cash received when he does pay you is an operating inflow. Operating outflows are what are paid out that is related to the business of the company. Common operating outflows are raw materials that are purchased, salaries for employees, selling and administrative expenses such as rent, interest paid on loans, and taxes. Slide 3 Let’s look at an example. Here is a Cash Flow Statement for Star Hat Shop. The top section of the Cash Flow Statement shows Operating cash flows. In 2011, Star received cash for items sold totaling $99,000. It also received payment for $25,000 worth of hats that had been shipped in a previous time period, but for which payment was not made at the time of the transaction. Star also purchased inventory, paid salaries, paid interest on a loan, paid selling and administrative expenses and paid taxes. Slide 4 We can see that the timing of the flows matter. In the example of Star Hat Shop, most hats are sold for cash and the shop is paid at the time of the sale. If all sales were on a cash basis, then the inflow on the Cash Flow Statement would be the same as the sales number on the Income Statement. But, Star also sells some hats to a vendor in another town and gives the vendor 90 days to pay for the hats. The cash inflow for hats sold on credit would not be shown on the Cash Flow Statement until the vendor actually pays for the hats.

On Star’s Income Statement, we see sales totaling $100,000. On the Cash flow Statement, we see that only $99,000 of sales were recorded. Therefore, in this period there must have been $1,000 of sales made on credit. On the Income statement, however, Star would include the value of the hats shipped to the vendor in its sales for the current period – even though it has not received payment for them. On the Balance Sheet, Accounts Receivable would increase by $1,000 to show that the debt exists. When the amount is collected, there would be no addition to sales, because that was shown when the hats were shipped, but it would be shown on the Cash Flow Statement as an Operating cash flow and would be deducted on the Balance Sheet from Accounts Receivable. Slide 5 The second portion of the Cash Flow Statement shows the flow of funds for investment. Here we find inflows from the sale of assets and outflows from the purchase of assets. Some examples of investment assets are real estate, plant & equipment, and financial investments. If there were any cash flows related to the company acquiring another company or merging with another company, they would also be shown in this portion of the Cash Flow Statement. Slide 6 In the Star Hat shop example, Star had Investing cash outflow in 2010 and 2011. Star bought a truck in 2010 and a display case in 2011. This highlights another example of the difference in when events are recognized on the Cash Flow Statement and on the Income Statement--that is, when a company invests in equipment that will be used for multiple years. In our example, Star Hat Company bought a display rack in 2011 for $60,000 in cash. The display rack has an expected life of 6 years. On the Income Statement it will show an expense of $10,000 worth of depreciation every year for six years. That is, Star is attributing $10,000 of the expense to each yearly time period. But in fact, $60,000 flowed from the company in the first year. This would be seen on the Cash flow Statement in the first year under Investing Cash flows. Slide 7 The third portion of the Cash Flow Statement shows Cash Flows from Financing. Financing Cash Flow includes money that is invested by owners. This could be directly by owners or through the issuance of shares of stock. It also includes loans received and cash that comes in from the issuance of bonds, which is another form of borrowing. Financing outflow would include dividends paid to stockholders, company stock that is repurchased, or bought back, from shareholders, and loans repaid. Slide 8 In 2010, Star’s owner invested $150,000 in the business. And in 2011, Star took out a loan of $60,000. If Star had shareholders and paid out a dividend to them, it would be shown in this section as a financing cash outflow. Slide 9 At the bottom of the Cash Flow Statement, the net Cash Flow is shown. This is the net change in the cash balance on the company’s balance sheet. This number can be positive or negative. Slide 10 We have gained a basic understanding of the Cash Flow Statement by examining one made by the direct method. Let’s look at one prepared by the Indirect Method for ABC Company. This format is what you will encounter when looking at the financial statements of most American companies. While the net result is the same, the detail presented for operating cash flows is less than in the direct method. We do not start with a blank form and add in all the inflows and outflows in Operating, Investing and Financing categories. Instead, in Operating Cash Flows, we start with Net Income and adjust for the items that are not cash transactions. ABC Company starts with its Net Income Figure. This number was calculated on the Income Statement. Remember that there would be non-cash items included in the calculation of Net Income. For example, rather than expensing the entire amount of an investment in plant or equipment, only this year’s depreciation would have been included as an expense. On the Cash flow Statement, the entire purchase would be included in Investing Cash Flows and none of the depreciation would be included in Net Operating Cash flows. Therefore, depreciation is added back into the Operating section of the Cash Flow Statement. Similarly, if ABC had Accounts Receivable on the Balance Sheets at the beginning of the year and during the year some of these were collected, they would not show on the Income Statement. This is because they were counted as Sales when the receivable was recorded. On the Cash Flow Statement, these remittances are added to Operating Cash Flow. The same is

true for an increase in Accounts Payable or Taxes Payable – that is, if you recorded something as an expense but did not yet pay for it, you would add it back to net income in calculating operating cash flows. If Inventory increases, it means that money left the company, so increases in inventory would be deducted from Operating Cash Flow. Because transactions such as purchasing equipment, borrowing and repaying loans and getting investments from owners are not included in the income statement, the investing and financing sections of the cash flow statement are calculated the same way under both the direct and indirect methods. Why is the Cash Flow Statement important? What do we learn from it? We can see that $1,944,700 of cash was generated by ABC Company in 2011. And most of that was generated by the core operations of the business. This is a good sign because it means that ABC is generating enough cash to pay its obligations and to invest in the growth of the business. However, it is not true that having negative cash flow is always bad. There are times when it is wise for a company to invest in new plant and equipment or perhaps to acquire another company in order to expand. Perhaps next year ABC will build a new factory or buy a competitor. In that case, next year the Cash Flow will not look so strong, but it will allow ABC to grow significantly faster. In another lesson, we discuss how to analyze working capital so that you can judge how well a company is managing its assets. The information on the cash flow statement can be used in addition to those ratios to help your analysis. For example, if a company’s net income is declining but its accounts receivable is increasing, that may indicate that cash flow may be a problem in the following year if the customers don’t pay. Another factor to look at is the history of cash flow. If you were a banker considering making a loan to ABC, you would feel more confident that the company will be able to repay the loan if you see steady, increasing cash flow from operations. To sum up: Whether you are managing your own business or considering lending to or investing in someone else’s business, it is always smart to follow the cash.

LESSON 20: ECONOMICS: UNDERSTANDING MACROECONOMIC INFLUENCES AND ECONOMIC STRUCTURES

Slide 1 In an earlier lesson on economics, we talked briefly about the three different types of economies: free (or market) economies, planned (or command) economies, and mixed economies. In this lesson, we will look at the markets from a macroeconomic standpoint. Macroeconomics is the branch of economics that studies the performance, efficiency, and overall behavior of an entire economy. In this lesson, we will first describe three of the core concepts of macroeconomics: output, inflation, and unemployment. Later, we will review some of the differences in how countries decide to structure their economic systems in order to make best use of their resources. Slide 2 One of the core topics of macroeconomics is the measure of an economy’s output, or income. National output is the total value of everything a country produces in a specific length of time. This includes goods and services that were sold or are produced within this timeframe and within a certain place – a country for example. The most common measure for national output is referred to as Gross Domestic Product, or GDP. While there are many different ways to calculate GDP, just think of GDP as the total value of the goods and services of a country. If you calculate a country’s GDP and divide it by the country’s population, you would know the GDP per capita, which is a common tool for estimating the standard of living for a country’s population. GDP can grow or shrink over time, depending on how efficiently the economic participants – the buyers and sellers – are using their limited resources. Advances in technology, accumulation of machinery or financial capital, and improved educational systems often lead to higher growth in GDP over time. In many cases, positive and high growth in GDP implies that the country is doing well and that the quality of life for its inhabitants will improve. Slide 3 In addition to GDP, macroeconomic factors such as unemployment and inflation are key indicators of economic performance and are closely monitored by governments, businesses, and consumers. Unemployment is usually measured

as a percentage and shows the ratio of people who want to work but who do not have work. It is defined this way so that children and retired individuals would not be included in the calculation. There are a few different types of unemployment.

• Classical Unemployment – this type of unemployment occurs when the cost of hiring a new worker is so high that businesses cannot afford the additional expense. This might occur due to certain laws about minimum wages a person can be paid or by the effects of organized groups of similar workers, commonly known as unions.

• Frictional Unemployment – this second type reflects the unemployment related to a gap of time between when a qualified worker begins searching for a job and when they actually begin work. In other words, there are job vacancies that a person is qualified for, but until he or she begins work it is considered unemployment. In this way, frictional unemployment is often considered a short-term problem.

• Structural Unemployment – when frictional unemployment exists on a large, long-term scale, the underlying cause is often due to a significant change. For example, in the United States, many manufacturing companies began having their goods produced in other countries because the labor was cheaper. As a result, many people in the United States that had previously manufactured those goods were unemployed. As the number of jobs shrank, those people had to develop new skills and abilities related to other goods and services, which led to long-term unemployment. This kind of change often leads to structural unemployment.

While specific and local events can cause unemployment, overall changes in a country or economy can also lead to fluctuations in unemployment. Slide 4 The third major concept of macroeconomics is inflation and its opposite, deflation. A general increase in prices for goods and services across an economy is referred to as price inflation. When the opposite occurs and the prices of goods and services decrease, it is known as deflation. Economists measure these forces by tracking the prices of various goods and services over time. In general, inflation is a measure of how much goods and services cost. If the cost of goods and services is going up, we say that there is inflation. It is important not to confuse inflation with general prices changes due to the supply and demand of a particular good and service. If there is a shortage of oil, the price of it will rise over time. This does not mean that the economy is experiencing inflation in general. While inflation and unemployment are broad factors studied in macroeconomics, both will impact most business owners in the economy. First, it is important to understand that inflation and unemployment are related, meaning that they can impact one another in the short-term. Too much inflation and too much unemployment have negative effects on an economy. However, to some extent, they push in opposition directions and can serve to moderate each other. In a growing economy, there is typically low unemployment; similarly, low unemployment means that more people are spending more money on goods and services. As noted in a previous lesson, increases in demand typically lead to increases in price, which leads to inflation. Note how changes in unemployment can lead to changes in inflation. The two, in the short-term, are related. Economists and bankers attempt to stabilize both the unemployment rate and inflation through different monetary and fiscal policies, since too much of either inflation or unemployment will not lead to a healthy economy. Changes in inflation and unemployment impact all small business owners. Let’s talk about what happens when there is too much unemployment or inflation. When there is high unemployment, the cost of labor can decrease (unless there is a minimum wage). People who don't have jobs cannot spend money because they do not have the money to spend. When people have less money to spend, the people who are selling goods to them have to compete for buyers. In other words, you may have to continue to lower your price since the level of demand is decreasing due to persistent unemployment. Looked at from a different perspective, if a high level of unemployment persists for a long time, people compete for the jobs that exist and will accept lower wages rather than have no wages. A small business owner may be able to decrease overall expenses, since the laws of supply and demand also apply to things like jobs. When there is high inflation, businesses may be able to raise prices, but the costs they pay to manufacture, distribute, or provide their goods and services will also increase. Some costs may not increase as rapidly as others, which can lead to a business owner having to make decisions about what and how much to produce. Slide 5 Inflation can lead to increased uncertainty and other negative consequences. Deflation can lower economic output. Inflation and deflation can be caused by many factors, including how quickly an economy grows or shrinks. However, much of it is caused by the central money supply of a country. In other words, how much of a country’s currency is in circulation at any one time. Raising interest rates or reducing the supply of money in an economy will reduce inflation. Central bankers try to stabilize prices to protect economies from the negative consequences of price changes.

An economy does well when there is money circulating. As an example, let’s assume a worker receives his wages and goes to the market and buys meat from the butcher. The butcher uses some of the profits from selling meat to put new windows in his house. The window installer uses the money he received from the butcher to buy something else, and so on. When people and businesses can afford to buy goods and services, people can make a living selling them. The amount of money in circulation is not the only factor that affects its value. The frequency with which the money is spent has a major impact on inflation. We call this the velocity of money. In our example, the butcher used the profits from his business to put new windows in his house. Let’s say that he saved his money for six months before replacing his windows. The window installer would not get paid for his work for an additional six months. By not spending his profits right away, the butcher slowed the velocity of money. Inflation operates like a tax on savings. Let’s say you receive $100 in wages every month and you spend $90 on rent, food, and everything else you need. You would have $10 to save every month. But if the cost of the things you need to buy goes up, then you will not be able to save $10. In an inflationary time, $90 will not buy as much next month as it does today. We say that the purchasing power of money is declining. The velocity of money is why rapidly growing economies tend to generate more inflation than declining economies. Think about the window installer. If he has too much business, he can raise the price he charges for windows. But if he has too little business, he cannot raise his prices easily. It is simply a function of supply and demand. Slide 6 Remember that all economic structures are driven by the same challenge: scarcity. Nowhere in the world are the resources greater than the desires of the people. The study of economics is focused partially on how individuals, businesses, and nations decide how to allocate and utilize our limited resources. Now that we’ve covered some of the broader influences on economies, let’s look at the three most common types of economic structures: market, command, and mixed. A market, or free, economy is driven entirely by supply and demand. You will recall from the lesson on Economic Principles that as supply goes up, prices normally go down. When demand goes up prices normally go up as well. Due to the absence of government regulation, people are free to spend their money the way they want to in a market economy. Buyers and sellers – known as the economic agents – are allowed to buy, sell, and trade freely based on a mutual agreement on price. It is an economy that has very little government control, so if you wanted to start your own business, there are few limitations from the government and you can typically operate the business as you want as long as it complies with certain laws. People can take the risk of starting their own business and losing money or starting their own business and making lots of money. Thus, individuals are in complete control of how they use their resources, such as their time and their money. The opposite of a free market economy is a planned, or command, market economy. In a command economy, the government or other central organization manages and controls the major sectors of the economy, including what to produce, how much to produce, and to whom the goods or services are distributed. They make all decisions about the distribution of income, much like a communist state. The planners decide what should be produced then direct businesses to produce those goods. As a result, if you wanted to start your own business, you would have to get permission from the government. In a planned or command economy, the government owns most of the industries and companies. So if the business you wanted to start did not align with the government’s opinion of how the economy should function, you would probably not be opening that business. Most of the command economies in the world had strong central governments. These governments dictated how much was made and what was made by industry. One type of command economy is communism. True communism is a type of economic system that does not allow ownership of private property. The communists believed that life is a class struggle between workers and the owners of an industry or factory. In a communistic economy, goods were distributed on an as-needed basis. However, many of the pure command economies collapsed with or after the demise of the Soviet Union in the 1980s. Slide 7 In reality, there is no completely free economy or a completely planned economy. Most economies exist somewhere the two, as if they were opposite ends of an economic spectrum.

A mixed market economy combines elements from both the free and planned markets. A mixed economy is an economic system that incorporates aspects of more than one economic system. This usually means an economy that contains both privately-owned and state-owned enterprises. In reality, there is not one single definition for a mixed economy. In looking closely at a mixed economy, we see most have a degree of private economic freedom, including privately owned industry. They also have a certain amount of government or state economic planning. This can include environmental controls, social welfare, or state ownership of some production facilities. For example, certain social services, such as the police, would probably be difficult to create in a completely market economy. The reason is that the service benefits a very large number of people, but it is unclear how much value everyone receives, which makes it difficult for any one person to decide how much to pay for that service. As a result, a government or other central organization can be responsbile for deciding how much of that good or service is needed and requires that each person pay for their share, typically through the form of taxes. The advantage of a mixed economy is that it can be helpful in increasing the national production of a country. Both public and private sectors work hard to bring about more production. The problems created by free enterprise and too much public control are solved through mixed economy. It provides freedom of enterprise ownership and profit earning as well as social welfare and political freedom. Further, because very high levels of inflation and unemployment create distress, governments tend to intervene in order to control them. This is why most economies in the world are mixed. Even where economies are closer to the free economic system end of the spectrum, governments step in to avoid extreme inflation and unemployment.

LESSON 21: CORE COMPETENCY AND COMPETITIVE ADVANTAGE

Slide 1 As we previous discussed, nearly every business has competition – and most likely a lot. Therefore, it is extremely important for a company to develop strategies to be a competitive player in the market. One of the first ways to determine how to be a winner in your market is by identifying your strengths. In this lesson, we will use the word ‘competencies’ for things which enable your company to excel even if it has a lot of competition. Some may consider these ‘competencies’ to be your strengths – or what you’re good at – or your assets. We will dive further into this definition shortly, but want you to understand that these competencies are the building blocks of your company. They will allow you to innovate while still being a stable competitor in your market. The purpose of this lesson is to provide you with the tools to identify your own competencies and use them to gain a lead on all of your competition. Ideally with this information, you can strategize so that your company is always in the front of the race. We will discuss strategies that can help you have a long-term lead in a marathon race – not just a short-term lead in a sprint. Slide 2 So what are core competencies? What are the building blocks of your company? Core Competencies are the skills, characteristics, and assets that set your company apart. In another lesson, we talked about strengths as part of a SWOT analysis. Your core competencies are a subset of your strengths. More specifically, a core competency is said to meet the following 3 conditions:

1. It provides benefits to the customer 2. It is hard to imitate 3. It provides access to a wide variety of markets

These competencies provide the opportunity for your company to be better than all its competitors because they establish a stable base. If you imagine a tree, your core competencies are your very roots. Once your roots are planted firmly, you are able to innovate in your market and provide the most value to your customer. Innovation is essential to compete in any market. Even some of the oldest, longest-lasting companies have had to innovate to survive. These companies were able to succeed by developing core competencies through which later they were able to make slight changes to keep up with the market. So what are examples of core competencies? Core competencies can include:

• Employee’s technical knowledge • Close relationships with customers/suppliers • The company’s culture (i.e. employee dedication)

• Unique product For example, let’s say you are the owner of a sandwich café. You have access to the very best meat in the whole region because of your relationship with the farmers. You also have a very special recipe that no one knows except for you and your chef. Because you have the core competency of a quality product – meat – you can begin to innovate to different types of sandwiches – gourmet, grilled/fried, healthy, double meat, etc. If you go back to our initial criteria of a core competency, we should ask:

• Does your customer benefit from this food? • Is this product easy to imitate? • Does it provide access to a variety of markets?

To address the first question, as you are providing quality food to your customers, they will benefit through taste and quality. To address the second question, as you have a special relationship with the farmers and a special recipe, the same burger would be hard to imitate. However, you would want to be aware of the possible threat of an individual finding out your recipe and taking your suppliers. And finally, to address the third question, depending on your environment, your hamburger has the potential to access a variety of markets. You may consider freezing the burgers and distributing various types to either fast food or gourmet restaurants. Slide 3 In the previous example, it may appear quite clear that your main product is your core competency. However, what if it isn’t so clear? Are your core competencies supposed to be the same as all of your competitors? Not necessarily. It is actually better if your core competencies vary from your competitors. For example, in the automobile industry, one company’s competency might be safety while another’s is engines or another’s is durability. Therefore, when identifying your core competencies, a good start is to complete the following:

• Compile a list of company assets (both tangible/intangible) • Identify which of your products have succeeded in the past • Consider what positive reviews you’ve received from your customers

To compile the list of assets, remember that they can be physical things or non-physical things. Something like the location of your café or a specialized skill of fixing car engines can be an asset. Be sure to think past just your own assets – think about all of your employees’’ and company’s assets and what they excel at the most. But, remember to be realistic, there are few companies that have more than 5 basic competencies. And remember, your competencies should align with your long-term goals. Slide 4 Aligning your core competencies with your long-term goals can set your company up for long-term success. While short-term success can be won by anyone with a good idea, long term success revolves around consistency. Therefore, by integrating the same core products into new and innovative products you can create the consistency needed to succeed long-term. Remember our sandwich example? By having the organization of our company – the roots of our tree - structured around our high quality meat, we are able to make different kinds of dishes while being confident that we are still providing value to our customers. In order to be confident you are providing this value, remember to complete all the steps below when creating your company’s strategy:

• Identify your competencies • Develop your competencies • Structure your organization around your competencies • Involve core competencies in all end products

Without taking the time to identify your core competencies, your company may lose potential opportunities. For example, if I find the best new material to make clothing, I may want to make a nice shirt as quickly as possible and put it in my store for people to see. I fail to do any planning for the long-term because I am so excited about the possibility of getting the money for the shirt immediately. However, because I failed to plan, some of my competitors quickly purchased the rest of my supplier’s material after seeing the shirt in my store. Now, I will not be able to make any more clothing and have missed the opportunity for higher profits – and I have even given my competitors an advantage.

If I was able to identify this new material as a potential core competency of my business, I may have made an agreement with the supplier for a continuous supply. I could begin structuring the organization around this material and innovate new clothing. Thus, I would use the same core product to provide consistent market success. Slide 5 Consistent market success is a goal of many companies. When a company is able to consistently sustain profits greater than the average for its industry, it is considered to have a competitive advantage. A competitive advantage is something that places a company or a person above the competition. A company may have the competitive advantage due to:

• Superior assets • Superb capabilities • Key success factors

What differentiates a company with great assets but no competitive advantage - from a company with a competitive advantage - is the choice the company makes to design its strategy around achieving this competitive advantage. If the company does not have core competences or has too broad/too many core competencies, there is a good chance the company will end up being a mediocre company with below-average performance. For example, a new café in town is opening and wants to make a lot of money. In order to do so, it decides that it will have a lot of options for its customers. It will serve cheap, fast-food and it will also serve expensive, high-quality food. The owners think that in this way, they will be able to make everyone want to come to their café. However, what the owners soon find out is that trying to be all things to all people is not the best option. They have no loyal customers who want fast-food because the food is not very tasty or inexpensive enough. They have no loyal customers for gourmet food because they do not consider the restaurant to be as high quality as some others in town that only focus on this segment. Slide 6 Therefore, when a company thinks about their competitive strategy, they must consider how they can provide the most value to the customer. The most value to the customer is considered to be provided by 2 main strategies which create a competitive advantage. A company is not expected to be superior at both strategies, but instead, should be aware of both strategies and aim to achieve one. These strategies are demonstrated by:

1. A company delivering the same benefits for a product at a lower cost (cost leadership) 2. A company delivering better benefits for a similar product than its competition delivers (differentiation)

Therefore, in cost leadership, a company provides a similar product at a lower price for a competitive advantage. While in differentiation, a company provides a unique product at a higher price. Slide 7 While it is not necessary to achieve leadership in both of these strategies, it is extremely important to remember to not disregard the other. Thus, even if you want to be a cost leader in your market, you cannot ignore differentiation completely. Your product or service must still be viewed as comparable or acceptable by your customers. Otherwise, you will be forced to drop your prices so low that you will lose your ability to have strong profits. If you walk into a clothing store to buy a pair of jeans, would you buy a pair for $20 which would last 4-5 years or a pair for $5 which may rip after wearing them 2-3 times? In this situation, you can see that the $5 pair of jeans is not at the same comparable quality as its competitors. Therefore, the $5 company will most likely lose customers and profits because they are no longer providing ‘value’ to the customer. Another thing to consider before determining your competitive strategy is that cost leadership usually requires a firm to be the cost leader. The cost leader does not mean you are 1 of 5 companies on the same street with the lowest prices. If many companies are trying to be cost leaders, the rivalry will be very fierce. Because of this rivalry, there is a high likelihood that all the companies will lose profits. Slide 8 In differentiation, a company’s strategy is to be unique in some way that is greatly valued by customers. It selects one or more specific attributes that its customers believe are important and seeks to meet those needs. Differentiation can include:

• A better product • A quicker delivery system • A stronger marketing approach

• Better customer service • Longer product warranties

Yet, again in this strategy, the differentiation must still consider costs. The sale price of the product must exceed the extra costs to make it unique or better than other competitors. If a company expects customers to buy their product at a premium price, it must truly provide something unique or great. Let’s say you are considering opening up a restaurant in your town. You plan on selling expensive meat dishes because you have cow meat from a small part of the country that most people don’t have at their restaurant. Therefore, you decide to make the price 3 times that of your competition. However, when the first customers arrive, they decide that it tastes the same as all the other meat they normally eat and it is not worth the extra price. In this situation, the uniqueness of your product is not worth the premium price your customers have to pay. Now let’s say you found a new breed of cows which provide healthier and tastier meat. You market your new meat dishes to your customers to make sure they understand that the meat is much healthier and also has a better taste. The customers now feel it is worth their value to pay 3 times what they would pay at another restaurant. Therefore, you are able to become a leader in your market because of your differentiation. Slide 9 In conclusion, in order for companies to succeed, they must determine strategies to take a lead against their other competitors. One of the key ways to get this lead is by identifying core competencies of the company. These core competencies should meet the following 3 criteria:

1. Provide benefit to the customer 2. Be hard to imitate 3. Supply access to a wide variety of market

Structuring your organization around these core competencies can give you a ‘competitive advantage’ in your market – or place your company above the industry’s average in profits. Generally, there are two main strategies to achieve this advantage (1) Being the lowest cost provider; (2) Making your product better or more unique than your competitor’s. Focusing on one or the other of these two strategies, while still being aware of both, will give you the extra edge to win the race within your market.

LESSON 21: ECONOMICS – UNDERSTANDING MARKET TYPES AND MARKET INFLUENCES

LESSON 22: PORTER’S FIVE FORCES THEORY Slide 1 This lesson will discuss the economic theory about various forces that can affect the success of a business and the decisions that need to be made before starting a business. When managing a business or when assessing the prospects of a business, whether as a business owner or as someone who wants to lend to or invest in a business, one should have a good understanding of the industry that the business is in. Michael Porter, an American economist, developed a framework that helps us look at the different forces that affect an industry. It is not specific to any particular industry. Some forces will be very significant to some industries but not significant to others. The important idea is that the framework helps us to ask the right questions to understand an industry. Porter divides the forces that affect an industry into five categories. This slide shows the categories. We will go into further detail about each of the areas in a few minutes. The categories can be thought of as ‘horizontal’ (or side-to-side) categories and ‘vertical’ (or ‘up and down’) categories. The horizontal forces can be put into three main categories: 1) the threat of existing competitors, 2) the threat of new entrants, and 3) the threat from other products that could be substituted. The vertical ones involve the power of the supplier and the power of the buyers. Supplies come up into the company and leave to go to buyers. The Degree of Rivalry in the industry, shown in the middle in yellow, is the threat from existing competitors. Slide 2 Let’s look at some of the factors that indicate the degree of rivalry in an industry.

How concentrated is the industry? An industry with many small competitors is not concentrated. It would be relatively easy to compete in an un-concentrated industry. A monopoly, with only one company, is the most concentrated an industry can be. It is usually very hard to compete in an industry where there are a few very powerful competitors, known as an oligarchy. The current players have the benefit of efficient production and so can afford to charge lower prices than a new entrant could. Even if oligarchs do not conspire to control prices (which would be illegal in most countries), they are likely to price their product to maintain their market share. One way of measuring industry concentration is to add up the market share percentages of the largest four companies. If that number is low, the industry is not concentrated. If it is high, it may be a difficult industry to enter. For example, if the four largest banana importers provide bananas to 70% of your prospect market, it will be hard to gain business because the largest companies have gained economies of scale which will allow them to charge less for their bananas and still make a profit. They have also established relationships with their customers. If, however, the four largest banana importers control only 20% of the market you want to enter, your competitors will not be as strong. Industry growth rate: If an industry is growing very quickly, there is often room for more competitors to enter. We can think of it like the tide at the seaside. When the tide comes in, all the ships rise. If laptop case sales are growing very quickly, there may be room for a new maker of laptop cases to enter the market without causing current producers to defend their market share by lowering prices. On the other hand, if an industry is growing slowly or is contracting, the current producers will protect their market share by keeping prices at a point low enough to make it unattractive for new companies. In a shrinking market, companies often use lowering prices as the key tactic in attracting customers. With the rapid growth in sales of mobile phones, for example, the demand for standard landline phones is contracting. Companies that are producing landline phones are making a small profit on the phones they sell. A new manufacturer of standard landline phones, however, is not likely to prosper. Having high fixed costs: As we discuss in the lesson on managerial economics, a company’s fixed costs are those costs that have to be paid regardless of how much product is sold. This would include the cost of buildings, machinery, vehicles, to name just a few. If fixed costs are high, then the company must produce and sell a lot of its product and cannot afford to let its fixed assets be idle, because it required such a substantial investment to acquire these assets. A company in such a position may take competitive actions such as reducing prices in order to make sales. This increases rivalry. Having Perishable Products Businesses that sell perishable products, like food, may increase rivalry by reducing prices if their product is in danger of becoming unsalable. Other companies may then also have to lower prices in order to sell their product. Products other than food can also have a limited sales time or will see their value deteriorate over time. High fashion clothing is an example. If fashion changes, customers will not pay high prices for last season’s clothes. Technology and entertainment are other examples. Video game lovers will pay a high price for the latest game today, but in a few months they will not be willing to pay that price for the same game when there are newer ones available. Having High Storage Costs: Like an industry with high fixed costs, an industry with high storage costs may be more competitive than one with low storage costs. If it costs a company a lot of money to store its product, it may decide to lower its prices in order to sell it. Other companies would risk losing sales if they did not also lower prices. Let’s look at the case of two companies - Super Refrigerators and Ultra Refrigerators. These two companies sell very similar refrigerators, so price is very important to customers when they shop for refrigerators. Refrigerators are large and take up a lot of warehouse space. Super Refrigerators has a warehouse that is expensive to maintain. Ultra’s warehouse costs them almost nothing to run. Super’s management may reduce the price of their refrigerators in order to sell them because it would cost more to store them in the warehouse than the company would lose by accepting a lower price. Ultra would have to lower its prices in order to sell its refrigerators even though it has inexpensive warehousing. Low Switching Costs: If a company’s customers can switch from its product to that of a competitor easily, it means that the company must work harder to keeps its customers. This might mean providing better service or lower prices. If you own one of two plumbing supply shops in a small town, where both shops carry similar inventory, to gain market share, you could lower prices a bit to attract more customers. Or perhaps you could provide better service – you could give free delivery to plumbers who buy a certain amount of product from you every month, or you could offer free coffee and pastries every morning so that plumbers like coming to your shop. Little Product Differentiation: Lack of product differentiation is similar to having products with low switching costs. If it is hard for your customers to see a difference between your product and that of another company, in order to gain market share you will have to work harder to keep your customers or sell your product at a lower cost. As we discuss in the lesson about brands, having brand identification works in your favor. Think of people who always buy one brand of athletic

shoes. They will pay more money for name-brand shoes than they will for non-branded shoes of similar quality because they trust the brand or because the brand gives them status. High Exit Barriers: Businesses can be hard to get out of as well as hard to get into. Imagine that a business has expensive specialized equipment that can produce only the product it was designed to make, but that product is not as profitable now. The machinery is not useful to other industries, so it is hard to sell. Because abandoning the equipment is too costly, the firm may continue to produce the product and may lower prices just to sell the products being produced. Slide 3 Let’s look at another “horizontal” force that affects how competitive an industry is – the threat of new entrants or competitors. Having new firms enter your area of business is a threat to your business. If your company is in a business that it is hard to enter, you have an advantage. Slide 4 There are numerous things that could make a business hard to enter.

• Regulatory Hurdles: Does your product need to be approved by a government agency? Is special zoning needed for your business? Are there licenses required?

• Technology: Is there technology involved in the industry that you do not have access to? You may have excellent video game creators on your staff, but if the makers of the game systems do not share the technology built into their latest system, you will not be able to compete for that business.

• High Start Up Costs: Is it expensive to start the business you want? Do you need to build a plant or buy expensive raw materials? Let’s imagine that you have designed a new car tire that will significantly increase the number of kilometers a car can travel using one liter of petrol. In order to take your idea out of the laboratory and make money on it, you will have to build a factory and buy raw materials before you can sell a single tire. This requires a large investment.

• The Need for Size: As we discuss in another lesson, you need to look at your average cost to produce and sell your product or service. The lowering of your average cost as you grow is referred to as “economies of scale”. Is your business one in which you need to be large in order to be profitable? If you are starting a hotel, for example, you might need to have guests in a large percentage of your rooms in order to make a profit.

• Distribution: Is it difficult to distribute your product or service? Let’s say your business is growing tulips. If you don’t have a way to get them to florists, you won’t make any money. Is there a flower wholesaler who you could pay to distribute your tulips or do you need to build a system? Perhaps there is a daffodil grower who has built a delivery system, you might be able to cooperate with that company to deliver your tulips to florists. If you need to build your own delivery system, here are some of the questions you will have to answer: What kind of packaging is best for tulips? Where can you obtain the packaging? How expensive is it? Do you need a fleet of trucks? How many trucks will you need? What size trucks will be most efficient? How many truck drivers do you need to hire? Do you need to contract with an airline to ship your flowers? As you can see, developing a distribution system may take a lot of time and money.

• Powerful Competitors: It can be very hard to start a business when there is already a company that controls a lot of the industry and has a well-respected brand name. Your firm may make excellent printers, but it will be hard to compete against Hewlett-Packard and Canon.

Slide 5 Another threat is from substitutes. Some products face competition from products in other industries. For example, if your company manufactures beer bottles, your competition is not just other bottle makers. You must also compete with the makers of cans and kegs. If bottles are too expensive, your customers, the beer brewers, may decide to sell their beer in cans instead of in bottles. Slide 6 Often the threat of a substitute product causes prices to be lowered. If butter is too expensive, some people will switch to margarine. Butter manufacturers will need to lower their prices to the point where consumers will not switch. Sometimes the threat is from new technology. For example, for decades all telephones were landlines, which required an enormous system of wires and hubs to be constructed and maintained. Now there are so many mobile phones that old “wired” phones systems find it hard to compete. Slide 7 Let’s now look at the “vertical” forces that affect businesses. First we will look at suppliers. Then we will look at buyers. Are the suppliers in your industry powerful?

Slide 8 Let’s say your company makes pencils. If there are only two companies that make erasers that fit your pencils, they will be in a position to keep prices high. This is an example of how a high concentration in one industry can negatively impact another industry. But if you could buy erasers from any one of many companies, they will have to compete for your business, keeping prices low. This is an example of low concentration of suppliers. Suppliers have power if it is expensive or difficult for their customers to switch to another supplier. If your company makes bicycles and your bicycles are designed to work with a particular set of gears, it would be expensive for you to change your design. This gives the supplier of the gears power in your relationship. However, there is a limit to supplier power. If a supplier has a lot of bargaining power with its customer, it may be tempted to go too far. That is, to charge too much for its product. In that case, the customer may decide it is better to produce the product itself. For example if you are a pencil maker and your supplier gets too greedy and tries to charge you too much for erasers, you might decide to produce your own erasers. There are some circumstances in which suppliers have less power. If there are a few very large customers of a supplier, the supplier will not have the ability to raise prices easily. In contrast to the example about supplier concentration negatively impacting its customers, customer concentration can negatively impact suppliers as the customers will have great power to negotiate prices. If a supplier sells a commodity product, sugar for example, it is usually not able to charge a higher price than other suppliers of sugar. This is also true for products that are not commodities, but are standardized, like glass jars. Slide 9 And finally, how powerful are buyers in your industry? Slide 10 If there are only a few buyers of a product, they typically have power. An example of this is government purchases of military equipment and munitions. The government has a lot of power in this relationship. There isn’t a large and active market for military equipment and it may not be legal to sell to other potential customers such as other governments. If the government doesn’t buy it, the supplier does not have many other alternatives. Switching costs also affect the position of buyers. Think about laser printers. You have to buy the ink cartridges that fit your printer. To use different cartridges, you would have to buy a new printer. Typically, the more specialized the product, the less power the buyer has. If a cell phone manufacturer needs certain keypads for its phones, there will not be many places the keypads can be bought. The cell phone maker will likely pay the price that the seller of the keypads asks. Slide 11 In summary, Porter’s framework is a helpful tool. It helps to analyze the dynamics of an industry. When we have looked at the forces at work, we can make better business decisions.

LESSON 23 – LEADERSHIP AND TEAMBUILDING Slide 1 Any organization that has more than one member to share responsibilities has what can be referred to as a team – ranging from sports to businesses. How well people work together to fulfill these responsibilities affects how successful they will be. It is not enough to decide who is responsible for what. Effective teams need to have an agreement about what they want to accomplish and how each member can help the others to reach the common goal. For a business owner, the ability to create a team-oriented environment is as important as deciding what to sell. As you expand a business and need to add employees to the business, it is not enough to hire people who are very good at what they do – they must also be willing to work with others in a way that everyone agrees on as good for the business. For example, assume you have a café. At the beginning, you did everything yourself and your customers enjoyed fresh food that is served quickly so they can get back to work. As your business grows, you continue to prepare the food but you hire a person to interact with the customers. That employee has worked in other cafes and has found that spending a lot of time talking to customers improves customer service and he may be right, but that may slow down service and customers may have to wait longer. While spending more time conversing with customers may be good for business, it is different

than your existing customers expect and they may become unhappy. As this example illustrates, it is important for team members to listen to each other’s ideas but it is more important to agree on a way to do things that will benefit the business. Slide 2 So, how do you create an effective team? When adding people to an organization, having the skills to do a job is very important but as we said earlier it is not enough. There are four main characteristics of a good team environment that can help: Goals, Processes, Roles, and Relationships Slide 3 First, let’s talk about goals. As we mention in another lesson, it is important for a business to have a clearly defined vision – which defines the long-term dream for your company - and a clearly defined mission – which defines the purpose of your company. It is important that all of the employees of a business are aware of the vision and mission, but more important that they share them and believe in them. These provide goals for the team to work toward and can help the team members do their jobs better by always thinking about how what they are doing helps the team to achieve the goals. By having agreement on the goals, the team can develop strategies to achieve the goals and specific things that need to be done. In our café example, the owner and the person interacting with the customers can discuss a plan to create a friendly atmosphere to also attract customers who are not in a hurry. As customers enter the café, they can be asked if they need their food very fast or if they want to relax. The person working directly with the customers can spend time talking to customers to make sure they know they are remembered but also pay attention to when people want to leave so they do not feel they are being delayed. By responding to what the customers want, the owner of the café and his employee can make sure all of the customers are happy and make the business more successful since the team members are all focused on the business’s goals. Slide 4 A second thing that helps create an effective team is to have processes in place to make sure things get done the correct way. In a football game, the basic process may be very simple – get the ball away from the other team, move the ball to a clear area and shoot it into the goal. A business is the same. After you have agreed upon your vision and mission, you can establish processes to accomplish what you want to do. A process answers the question “How do we do things?” and most will relate to carrying out what your business wants to do. For a clothing store, that may involve making or buying the clothes you want to sell, putting them in place so customers can see them, and collecting the money the customers pay for the items. But processes are also needed for other aspects of the business. These can include how decisions are made about what to sell, how to settle disagreements among team members, what to do when things don’t happen the way you expect them to and basic rules for the business such as whether employees can talk on the phone during business hours. The type and size of the business will determine how complicated the processes are, but having a process in place is necessary to assign the roles to each member of the team. Slide 5 Now let’s talk about Roles. In a football game, two players may be very good at both stealing the ball from the other team and scoring goals from a long distance. Before the game starts, they must decide who will do each part – and even when they might switch roles or share them. The same is true in a business – everyone needs to agree what each is responsible for, when they need to work together on a specific task and to make sure that two people are not trying to separately do the same thing at the same time. This can be accomplished by understanding what each person has the skills to do and understanding what needs to be done. By assigning each person a role you can make sure that no tasks are left out, use each person’s skills effectively and make sure that all the roles are being done in a way the team agrees upon. In our café example, one member of the team is responsible for preparing the food while the other interacts with the customers. At the same time, both are working to make sure the customers are happy. Slide 6 The fourth characteristic of effective teams to discuss is Relationships – meaning how the team members interact. Some of the most important aspects of team relationships are communication, respect and involvement. Communication is probably the most important element of an effective team. This includes the communication of the business values and mission, making sure everyone is aware of the processes to be followed and the roles they are expected to fill and how everything is working (or isn’t working). If a problem is encountered and the processes need to change as a result, the team members must be made aware of that so that they can react appropriately. Similarly, if a team member becomes aware of something, he needs to let the other team members know so that the entire team can work together to solve it. In our café example, if the cook runs out of a certain type of food, he must let the other person know so that

customers can be told. Likewise, if the person interacting with the customers sees a large group of people come in, he needs to let the cook know that a lot more work will soon need to be done. Respect among team members is also necessary, including the trust that someone can get his job done. Team members must have respect for each other’s abilities and be willing to acknowledge that there may be more than one way to do things. That is to say that, if a fellow team member does things differently than you would, the other way is not necessarily wrong. By respecting others’ abilities, opinions and skills, you not only help that person to do his job but you may learn yourself. And when two team members respect each other, they often find a way to do things that combine the skills of both – which can make the team even more successful. Involvement of team members is also very important. While it is obvious that each member doing a job is involved, it is not always obvious to each member that his part is valuable to the workings of the team. And being involved does not only mean performing the agreed upon roles, but it also means involving all members of the team in decision making and deciding how things get done. Each member of a team sees the operation from a different angle and often sees things that the others may not be aware of. The person responsible for cleaning a factory may be the only one to notice that water is leaking through the ceiling, which may damage the machinery necessary for a business to operate. If his suggestions about protecting the equipment are not considered, the entire business could be in jeopardy. Similarly, the person collecting payments from customers in a café may hear customers complaining to each other about prices being high or service being bad – both of which are important things for the owner to know. Slide 7 Even though every member of a team is valuable, each team still needs a leader. Being a leader involves many things, including making final decisions on many matters. But leadership is much more than having authority and being the boss. Leadership involves helping a team work together, letting people use their strengths while also learning from each other. Leadership involves keeping the team working toward a common goal. Good leaders are followed mostly because people trust and respect them rather than the skills they possess. Leadership is about behavior first, skills second. The concept of serving is fundamental to the leadership role. Good leadership involves serving the organization or group and the people within it. Slide 8 While they are related, leadership is not the same as management. Management relies heavily on tangible measurable capabilities such as effective planning; the use of organizational systems; and the use of appropriate communications methods. While people may do what a manager tells them to do, simply managing does not necessarily mean that you will be respected. Leadership involves many management skills, but generally as a secondary or background function of true leadership. Leadership instead relies most strongly on less tangible and less measurable things like trust, inspiration, attitude, decision-making, and personal character. These are not processes or skills or even necessarily the result of experience. They are facets of humanity, and are enabled mainly by the leader’s character and especially his/her emotional reserves. Slide 9 There are numerous theories about what makes a leader effective, and it depends on the situation and the people you are leading. The following discussion, therefore, is not intended to address all situations, but instead to be a guide about qualities that can help you to be a good leader.

• Understanding the team members. As with the coach of a football team, it is necessary to understand the strengths and weaknesses of your team members, what motivates them and what areas they can grow into to develop new skills.

• Knowing your strengths and weaknesses. Nobody is perfect and you do not need to be perfect to be a leader. Being aware of what you are good and not good at is necessary to build a good team and be an effective leader. By knowing your own strengths, you can focus on what you can teach the people you are leading. By knowing the areas you are weaker in, you can be sure to add people to the team who have those skills. A leader does not need to know everything, but instead knows how to use the skills of the team members to accomplish the team’s goals. And the best leaders are aware that they don’t know everything and are willing to learn from the people they are leading. The captain of a football team does not need to know how to play every position, but instead knows how to utilize the talents of the other players.

• The ability to communicate. For a team to operate efficiently, the members must be aware of what is happening – the issues the team is facing, the decisions that need to be made, plans that are being made and their roles in

those plans. But communicating is not only telling people what you know and what needs to be done. Communicating with your team also includes listening to what they say and considering their ideas. Calling someone a team member is not enough if he feels that he is not important to how the team functions. Effective leaders listen and consider. If an idea from a team member can’t be used, an effective leader will explain why so that the team member is not discouraged from contributing in the future – the next idea may be the best the leader has ever heard.

• The ability to decide and act. While an effective leader listens to his team members, he or she ultimately must also make decisions. Listening to ideas does not need to mean putting every decision to a vote, although that may sometimes be appropriate. And once a decision is made, a good leader will act upon that decision. Later, if the decision turns out to not be a good one, an effective leader will acknowledge the mistake and work with the team to create a solution.

As a leader, your main priority is to get the job done, whatever the job is. Leaders make things happen by:

• Knowing your objectives and having a plan how to achieve them • Building a team committed to achieving the objectives • Helping each team member to give their best efforts

Slide 10 So now let’s discuss how these concepts work together. Teamwork in a business environment normally involves four distinct phases – the team’s formation, the generation of ideas, the selection of a goal and carrying out the tasks involved. The leader has a function in each of these phases, but those functions will be somewhat different as the team learns to work together. In the first phase, the team members are selected. In the case of a small business, this may simply include everyone involved but with roles identified that someone needs to fill. A leader is important in this phase for helping to identify the correct people to include or to whom roles should be assigned. In the second phase, members of the team present ideas about how to solve a problem or even what the team should do. Before a small business even begins to operate, this would include deciding what business to be in. The leader should take a less active role in this phase, allowing all team members to participate and be heard, but at the same time making sure that the team stays focused on what is being discussed, and making sure that disagreements are handled professionally and not personally. In the third phase, the team will agree on a goal and strategies to achieve the goal. The leader’s role in this phase is to facilitate and make sure that consensus is reached on a way to move forward. In the last phase, the team does what it agreed to do. In a small business, this may be carrying out the business plan and starting operations. Team members will be carrying out their assigned roles and working together for the benefit of the team. In this phase, the leader will be a decision maker and participant in the teams efforts in his or her agreed upon role. In summary, it is important for a group to have a common purpose for a business to succeed. A good leader understands how teams operate, how to form a good team and how to best use the resources available. By focusing on the good of the group, a leader inspires the other members of the team, and, leading by example, teaches them how to lead also.

LESSON 24: WRITING A BUSINESS PLAN Slide 1 Throughout the Novus course, you have learned about many of the skills necessary to operate a small business and many different concepts that will help you improve your chances of success. For many businesses, the combination of all these different aspects results in a business plan. A business plan is a roadmap for a business. It provides the strategic direction of a business and describes all the different aspects of how your business will operate, from the goods or services you will provide to how you will publicize and market your business. In this lesson, we will talk about what a business plan is and what it is not. We will describe the main pieces of a business plan, summarize the main considerations for each piece, and note which particular Novus lessons can be reviewed for more information. Slide 2

A business plan is an important first step for starting a business. It involves compiling research, preparing forecasts, making plans, and thinking about all the different things that your business will do or those things that might impact your business’s success. So why should you write a business plan?

• First, taking the time to write a thoughtful and thorough business plan will focus the strategy, goals, and objectives of your business. It will allow you to check if your goals and objectives are realistic given market conditions and market research.

• Second, potential investors often require a business plan. Most people will not have all the capital needed to open the business they want. Banks and other investors will use your business plan to assess the chances for success from an outside investor’s perspective.

• Third, and perhaps the most important, a business plan will help you identify the weaknesses of your business and the risks of your market. A business owner should always be aware of existing or potential future factors that could threaten the business’s success. This could be related to the demographics of your target customers or potential government regulations that may complicate operating your type of business.

Slide 3 Now that we understand the importance of a business plan, let’s briefly mention what a good business plan is and what it is not.

• A good business plan is a map for management and staff. It outlines what the business wants to achieve, how it will do it, and when the goals should be met. There is an old quote that sums this up: “If you don’t know where you’re going, how will you get there?”

• A good business plan is like a shopping list. It allows management to consider all the resources needed to accomplish their goals and objectives. These may be human resources, physical resources – such as equipment or property - or financial resources. Essentially, the business plan answers all the ‘who’, ‘what’, ‘where’, ‘when’, ‘why’, and ‘how’ questions about your business.

• A good business plan includes relevant information and thoughtful forecasts. • A good business plan may also include advice from outside experts. Perhaps you want to open a clothing store and

you know someone who operates a very successful chain of clothing stores in a different region or country. By talking with that person, you will gain useful advice that will help you adapt your strategy or consider things that you hadn’t previously.

Conversely, there are many things to avoid when writing your business plan:

• You should avoid being overly optimistic about future cash flows. Your business plan should be realistic in how many customers you will reach over time and what kind of revenues and profits can be reasonably accomplished in the next three to five years. A good business plan is conservative, not optimistic.

• You should avoid using very technical information that potential investors or other outsiders will not understand. Perhaps you have worked in the clothing industry for many years and understand many of the intricacies of doing business in that sector. If you need a loan from a bank, it is likely that they will need a much simpler explanation than the one you might be qualified to provide.

• You should avoid writing a very long business plan because you think the number of pages is important. There is no minimum or maximum number of pages for a business plan. You should find a balance between providing sufficient detail about the future potential successes and risks, while also being concise.

Slide 4 So what are the main components of a business plan? There are typically eight sections in a business plan. To make it easier to review, charts, graphs, spreadsheets, and other analyses should be used to support the text of the document.

1. The executive summary. This is often the first section of a business plan, but the last one to be written. The executive summary provides a snapshot of your entire business and summarizes the information included in the other seven sections.

2. The market analysis. This section includes information about the industry in which your business will operate as well as specific market and competitive analysis relevant to your business.

3. The company description. This provides information about the specific goods or services your business will provide and why your business will excel at providing them. This includes information about your target customers as well as your competitive advantages. The company description is more detailed than your executive summary, but only provides a high-level review of information included in the following sections.

4. The organization and management structure. This section will describe the intended organizational structure of the business’s staff, the backgrounds and specific skills of the management team, the type of organization, and the ownership structure.

5. The marketing and sales strategy. This section allows you to outline your plan to market your particular good or service and how you will attract your target customers.

6. The goods or services description. Though the company description also includes information about the particular products your business will sell, this section is an opportunity to explain why and how these goods or services fill a relevant customer need. If you plan to expand your offerings over time, you will also include information here about how and when you will do that.

7. The financial history and forecasts. For a new business, the information included here will be your expectations for the future cash flows of the business. Existing businesses may also include recent historical data as well.

8. The funding request. This final section is necessary if you do not have sufficient capital to open and operate your business. It will be closely related to the previous section and will explain how much capital you need, where you intend to get it, and what it will be used for.

Depending on the type of business and whether this is your first business plan or you are simply updating an old one, all the sections may or may not be relevant. However, thinking about what information would be included will help you think about all the various aspects of your business. Now let’s look at each section in more detail. We will begin with the second section – the market analysis – and save the executive summary for last. Slide 5 First, let’s look at what is typically included in the market analysis section of a business plan. You should include all the information you’ve collected about your industry and specific market, including any conclusions that support the reason for starting a business in this sector. This analysis can be broken down into four pieces:

• First, the industry in general. Describe the industry and any key trends such as current size and growth rates. • Second, the particular market your business is targeting. What particular portion of the industry will your business

serve? For example, if you want to open a women’s clothing store focused on high fashion, you would first describe the overall women’s clothing industry and then provide more information on the high fashion segment. What makes this target market unique? What is its size? How much of the target market can your business serve?

• Third, the competitive landscape for your industry and target market. This section should describe what other businesses you will compete with. It should include your plan for differentiating your business and any competitive barriers that exist.

• Finally, you should describe any regulatory restrictions relevant to the type of business you want to start. For example, if you are growing and selling food products, you may need a special license from your local government to ensure your products are safe for customers to consume.

For more information on this section, you might want to review the lessons on Market Analysis and SWOT, Essential Economic Principles, Market Research, and Porter’s Five Forces Theory. Slide 6 With the information included in the previous section, someone reading your business plan should have all the information to understand the opportunity for the business you want to start. After describing the industry, market, and competition, you should provide a description of your business. Specifically, this section should answer the following questions:

• What type of business are you opening? For a café, will your business focus on food that can be served quickly and is cheap? Or will you focus on elegant dining?

• Who are the specific customers in your target market and what are their specific needs? • How will your good or service fulfill these needs? • What are the specific core competencies and competitive advantages that will make your business different and

better than the competition? You will have an opportunity to further describe all the specific goods and services you will provide in a later section. For now, you should focus on relating how your business fills an opportunity you’ve identified in your particular market or industry. To help you with these sections, you should review the lessons on Market Analysis and SWOT, Market Research, Managerial Economics, Competitive Analysis, as well as Core Competency and Competitive Advantage. Slide 7

The next section is about the structure of your business. For most small businesses, this section will be rather short. It should include information about the type of business you are starting. For example, will you be the sole owner or will you sell stock to outside investors. In some cases, you might also include information about existing investors, ownership percentages, and any other important individuals, such as expert advisors or a Board of Directors. It should include information about the key members of the management team and explain what key skills or experience they uniquely contribute to the team. It should also include information about how many people you will need to hire, how and when they will be hired, and what their roles and responsibilities will be. Before writing this section, you might find the lessons on Startup Capital, Managing People, and Leadership and Teambuilding helpful. Slide 8 After the organizational structure, the next section of a business plan is the marketing and sales strategy. Simply opening a business does not guarantee success. You need to attract and retain customers to provide your business with strong revenues and profits. In this section, you should describe your strategy for increasing awareness about your business – the marketing strategy, and getting your product to your customer – the sales strategy. In the marketing strategy, you should describe how your business will enter the market. How will you inform your target customers about your business? How will you continue to increase the number of customers that have all the necessary information about what goods or services your business provides? What unique message are you going to transmit to your customers? What kind of brand are you going to build? After you have explained how you will market your business, you need to explain how you will actually sell your products. For example, are you going to hire someone to find new customers? Are you going to try to persuade a competitor’s customers to buy from you instead? Are you only going to sell food at your café or will you also provide a delivery service? This section can be a challenging one, especially for a small business with limited resources for marketing and advertising. However, customers are what drive a business’s success, so this section needs to be very thoughtful in how your business is going to identify and grow profitable customer relationships. For more information, you should review the lessons on Market Analysis and SWOT, Placement and Promotion, Brands, and Customer Relationship Management. Slide 9 The next section of the business plan should provide more details about the specific line of goods and/or services your business will provide and how they will benefit your target customers. You should explain how your products fulfill unmet customer needs in a way that the current competitors are not doing or cannot do in general. It should do this from a customer’s perspective to reinforce the particular advantages or strengths your business will have relative your competition. If you are developing a new product, you should describe at what stage of development your product is and when it will be ready to sell. You could also include any information about intellectual property or proprietary research and development. You will want to review the lessons on Market Analysis and SWOT and Market Research before writing this section. Slide 10 One of the most detailed aspects of a business plan is preparing the financial information about the business. For existing businesses, this section will also include any historical information about the financial results of the business. This section will also include your financial forecasts for the next three to five years. This includes preparing income statements, balance sheets, and cash flow statements that provide a detailed view of your business’s operations. In order to effectively forecast future results, you need to think critically about a number of factors, including:

• Any historical financial information for your business. • The prices of the goods or services you will provide and any expectations about changes in those prices due to

fluctuations in supply, demand, or inflation. • The introduction of new goods or services over the next few years. • How many customers you expect on a regular basis and how much of your target market you can reasonably

expect to capture. • The expenses of your business, including fixed costs, mixed costs, and variable costs. • Expenses related to marketing or advertising your business’s products. • Any capital expenditures or specific assets you need to purchase before you can open your business, such as

refrigerators or ovens for a café.

• Any expenses related to financing, such as interest on a bank loan. • Any information about the historical growth and profitability of competing businesses in your market.

Remember that a good business plan is conservative, detailed, and its assumptions are clearly defined. A good set of financial projections will explain the major trends or assumptions used in building the forecasts and what methods were used. In addition to the financial statements, you should also provide ratio analysis and any information about how your financial success would compare to your competition. For example, have you assumed that your net profit margin is similar, lower, or higher than your competition and why is that the case? Note that graphs and charts, like those made in PowerPoint or Excel, can be helpful in summarizing the information in this section and make it more accessible to outside readers. This is one of the most important sections of any business plan and also the most time consuming. You should plan on investing significant time in preparing your forecasts and constantly ask yourself if the assumptions you are making are reasonable. During the process, you should review the following lessons: Startup Capital and Financing, Forecasting, Managerial Economics, The Income Statement, The Balance Sheet and Key Financial Ratios, Working Capital Management, and Analyzing Cash Flow. Slide 11 After preparing the previous section, you will be able to write about how much capital you will need to finance your business until it becomes sustainable. This includes identifying the amount of capital you need now, any potential capital needs over the next three to five years, how the capital will be used, and how it will be repaid. Capital might be needed to purchase specific assets, such as equipment or machinery, or to fund ongoing expenses until the business becomes profitable, such as salaries for the staff. This is an especially important section since banks and other investors will want to know how their capital would be used if they lend to or invest in your business. You should review the lessons on Startup Capital and Forecasting again before writing this section. Slide 12 After you have written all these sections, your final task is to summarize the most important information into the executive summary. In most cases, this is considered the most important section of the business plan because it is the first section most people will read and will determine whether they want to keep reading or not. In addition to summarizing the other sections of the business plan, the executive summary is also where you define you business’s strategy and outline your specific goals and objectives. It should include information about why this business is going to succeed and how it will provide the right product to fill an unmet customer need in a way that is unique compared to the competition and that can be done in a profitable way. You should review the lessons on Vision and Mission Statements, Essential Economics Principles, as well as Strategic Planning before starting your business plan and review them again before writing the executive summary. Slide 13 A business plan is a great way to bring together many different stakeholder groups, including staff and potential investors, such as a bank or equity investors. However, a business plan should not be written once and never reviewed. Business plans should be reviewed regularly and updated if market circumstances or actual results are significantly different than you initially expected. Many businesses review their business plan at least once every few months and update it with new information every year. This means that existing businesses as well as new businesses should have a business plan that is current. An additional point to mention is that the strategy of writing a business plan can also be applied for new opportunities a business might be considering. For example, if a café owner is thinking of building an additional dining area outside, using a business plan structure will be helpful for analyzing the opportunity and potential for success. A business plan outline could also be used for opening a new store or acquiring a competitor. Throughout the Novus Business and IT Training Program, you gained an immense set of skills and knowledge necessary for starting or operating a business. Hopefully you will have also applied these skills using the critical-thinking exercises and business simulation software program. Perhaps you have even been able to complete your first business plan. Good luck in all your future endeavors!

COMPUTER CURRICULUM  

LESSON 1: MICROSOFT EXCEL 1: EXCEL BASICS Slide 1 Welcome to Novus Computer Lesson 1: Microsoft Excel 1: Excel Basics. The objective of this lesson is to provide an overview of Excel’s various toolbars and options, and give an introduction to data entry and data formatting. Most business decisions are made after carefully reviewing reports that help explain the current situation. These reports show the analysis of data that is available to the company or has been found through research. Slide 2 Excel is a commercial “spreadsheet” program sold by Microsoft, and is an important part of the Microsoft Office suite. Excel is very useful in business; it provides you with three major functions: calculation, charting, and database management – all can be tailored to help you in specific ways. Slide 3 Excel can handle a wide range of simple and complicated calculations. Calculations such as addition and standard deviation are handled through what are called “formulas”. While Excel assists you in finding the output of these formulas, you must first understand how the formulas work outside of Excel, and then use Excel’s formula tools to arrive at the answer. Excel removes the need to repeatedly perform calculations, making large amounts of calculations easier for you to perform. Slide 4 The second major function of is “charting”. Excel can take specific data and create a chart that shows the data in a graphical way. There are many different chart and graph options within Excel. These should be used to make sure that the information portrayed is useful and accurate. All other Microsoft Office suite programs also use Excel’s charting functions when creating graphs within their own documents. Because of this, once you understand how to create a graph or chart in Excel you will be able to create them in Word, PowerPoint, and various other Office programs. Slide 5 Finally, Excel can act as a database management system, making it easy to handle large amounts of organized information efficiently. Through the use of various tools, Excel makes it easy for users to analyze data, helping you to determine important statistics. Over the course of the four Novus Excel lessons, you will become familiar with each of these major functions, and learn how they can be used within business environments. Slide 6 You can open Excel by using your mouse to select Start > All Programs > Microsoft Office > Microsoft Excel. You may have a “shortcut” in the Start Menu or on the desktop that can both be used to open Excel. You can also open Excel by opening a saved Excel file. Once Excel is opened you will notice three separate areas, top, middle, and bottom. Slide 7 At the very top, a circular icon in the top left of the screen, this is the “Office Button.” By clicking on the Office Button, a menu appears providing the main program options for Excel. These options include starting a new Excel document, opening an existing spreadsheet, saving your spreadsheet, and printing your spreadsheet, among others. Saving is the process of placing a permanent copy of your document on the computer. This is an important step to continuously do as you are working on your document so that you don’t lose information if Excel or your computer crashes. To save your document you must press the “Save icon” in the Office Button Menu. Next to the Office Button is the “Quick Access Toolbar.” In this toolbar are your most commonly used commands: save, undo, and redo. While you already know what the save command does, later in this lesson we’ll explain what the undo and redo commands do. Next to the Quick Access Toolbar is the “Title bar,” which shows the name of the file you currently have open. Slide 8

By saving you are able to both save your progress and give your document a title. When you choose to save a document the first time, a dialog box called the “save window” will appear. Basically, the save window is asking you to choose the location where the document will be saved and to give your document a name. The main section of the save window displays the various “directories” on your computer, which you must browse through and choose a location to save your document to. On the left side of the save window are the most popular directories for saving: Desktop, My Documents, Recent Documents, etc. At the bottom of the save window is a textbox where you enter the title of your document. Pressing the save button is the final step in saving your document. After the first time you save, you can press the save button and your saved file will be updated with your current changes. If you want to save the document under a new name or in a new location, select the “Save As” option and change the location or name to what you want. Slide 9 Looking at the space below the Office Button and title bar, you will see a row of tabbed options at the top, a grid-like area in the middle, and some options and information at the bottom. First we’ll deal with the row of tabbed options at the top of the window. This area is called the “Ribbon Bar”. The Ribbon Bar in Excel has seven tabbed menus, Home, Insert, Page Layout, Formulas, Data, Review, View, and Developer. Let’s look at two of the most useful menus for understanding Excel basics: Home and View. Slide 10 The “Home” tab is useful when editing and formatting data in your spreadsheet, and is organized into different sections which provide different options. The Home tab provides the basic tools needed to make formatting and editing your data simple. The “View” tab provides options for changing how your document is displayed in the middle area. These different view layouts can make your current task easier to complete. The default view, “Normal,” is useful when you’re using Excel to creating tables, and viewing or using them on the computer. This is the view that will be used most often because it allows you to view the most data at one time. Page Layout shows you exactly how your spreadsheet will print; headers, footers, and margins are shown in this view. Slide 11 Below the ribbon is a small rectangular box on the left side of the window; this is called the “Name” box. The Name box is used to show the name of the currently selected cell, or the range of the currently highlighted cells. Next to the Name box is the “Formula Bar”; this is where you enter the data and formulas that you want to put into the cells. Later, we will discuss both of these aspects of Excel in more detail. Slide 12 The gridded area of the screen is the “Work Area” – the main part of the Excel spreadsheet document. This gridded area is called a “worksheet”. This is where you will input data and pictures and formulas, and where Excel’s calculations and other outputs will appear. Directly above the worksheet, below the formula bar, you will see a row of letters in alphabetical order. These letters are assigned to “columns” in the worksheet. Each column has a its own letter – ‘A’, ‘B’, ‘C’, and so on – which Excel uses to identify it, and what we’ll refer to as “identifying headers.” In each worksheet you have over 15,000 columns. On the left side of the worksheet are the identifying headers for the “rows” of the worksheet. There are over 1 million rows in each worksheet. Slide 13 The area where a column and a row merge to form a rectangular space is called a “cell”. Cells are where your information is inserted, stored, and calculated. Cells can be filled with numbers, letters, formulas, pictures, and many other inputs. Each cell has a name that is made up of its column letter and its row number. For example, the uppermost-left cell in the worksheet is A1, the cell found four rows down from there would be A5, and the cell found four columns to the right would be E5. These “cell names” are shown in the Name Box. With over 15,000 columns and over 1 million rows, each worksheet has over 15 billion cells. Like cell names, when you select multiple cells, Excel uses “cell range” to identify the multiple cells. Excel uses a system of identifying the uppermost-left cell and the lowermost-right cell to name the range. So, the range of A1:E5 contains 25 cells. Selecting ranges of cells can be accomplished by using your mouse to left-click and holding down on the mouse, drag your cursor diagonally across the cells you want to highlight. You can also select entire columns or rows of cells by selecting the

identifying column or row’s identifying header. The concepts of cell location and range are very important in Excel; take time to get familiar with them. To navigate between cells in Excel you can either use your mouse – clicking on specific cells that you want to select – or your use your directional keys – pressing keys up, down, right, and left to navigate to different cells. Slide 14 “Sheet tabs” are shown directly below the Work area. These sheet tabs show the different worksheets that are available for use in your Excel spreadsheet document. Worksheets are useful when you want to keep information on separate pages while also being able to reference information between different pages. Every new Excel spreadsheet has three worksheets by default. You can remove a worksheet in your document by right-clicking on the tab and selecting the delete option. To add a new worksheet, press the “New Slide” button to the right of the worksheet tabs. At the bottom of the program window is the “Status bar”. The Status bar is made up of different document view options and a “zoom slider.” To the right side of the Status bar is a group of options that allow you to switch easily between Excel’s views; Normal, “Page Layout”, and “Page Break” view. Next to these options is the zoom slider, which is used to zoom in or out on a certain section of your document. Slide 15 Now that we are familiar with the basic Excel program layout we will begin looking at inputting information, using basic “word processing” commands, and Excel’s formatting options. There are multiple ways to enter data into cells, let’s look at the most common ways. The first way to insert information into a cell is to select that cell with your mouse and begin typing using your keyboard. You will see the letters and numbers you are typing appear inside the cell. As you are typing you will see a “blinking marker” that shows where your typed text is being entered. Another way of entering information into cells is to select the cell, and type the information into the formula bar above the worksheet, where again you will see the blinking marker. Both of these forms of entering data are the same. Once the information has been typed in either the cell or the formula bar, you can press the enter key to accept the information or press the escape key to delete it. You can also utilize the ‘X’ or ‘Check’ icons to the left of the formula bar to cancel or accept your entry. When you want to edit information that is already in a cell you must select that cell and use your mouse to left-click in the formula bar. Doing this will place the blinking cursor on your text, and you will be able to edit. You can also double-click the cell, which will put a blinking marker within the cell itself and allow you to edit the text. If you attempt to use the second method but only single click the cell and begin entering information, you will overwrite whatever was originally in the cell. To delete all information from a cell that currently has information in it you must select the cell and press the backspace or delete key. Slide 16 Excel, like all Microsoft Office products, gives you word processing commands to make information entry and editing easier. The five basic commands are “copy,” “cut,” “paste,” “undo,” and “redo.” These commands can be found in the Ribbon Bar under the “Clipboard” section of the Home tab. The copy command lets you copy text or information to the computer memory. With this information in the computer’s memory, you can then use the paste command to paste the text in another place. These are two very useful commands in Excel. The cut command is very similar to copy, but it erases the information from the original location after it’s stored in the computer’s memory. Once again, you can use the paste command to paste the information in another place. Undo and redo are useful for correcting mistakes or changes to the worksheet, like going backward or forward in a sequence. All of these commands have keyboard-based shortcuts which can help save time and effort. One other Excel feature that assists in word processing is “predictive entering.” When entering data in a vertical list (down a column), Excel will suggest similar information that has already been entered in the list. The suggestions are based off of the letters being entered. So, for example, if in a vertical list there are the two cells, one containing the word ‘Time’ and the other containing the word ‘Score’, and in the third cell of the list you being by typing the letter ‘T’, Excel will predict that you want to enter the word ‘Time’ and make the completed word option available to you. If this is the word you want to enter into the cell press enter, if not then simply continue entering the word that you originally intended. Once your data has been entered, there are a number of formatting options that Excel offers to help you change how your text is organized and displayed. Different font characteristics can be changed using the “Font section” in the Home tab of

the Ribbon Bar. To change text format you must use your mouse to highlight the text that you want to format, and then select from the different options. Selected text can be changed to be bold, underline, italic, different sizes, different colors, and different fonts. Cell background color can also be changed from the Font section of the Home tab. While most of your data entry will go from the left side of the cell to the right, Excel gives you different options for positioning this text. Using the options in the “Alignment” section of the Home tab you can position your text to the left, right, center of your cell. You will find the blinking marker moves to the part of the cell that is described in the alignment option. Slide 17 Excel is a very powerful tool that will help make various business-related functions easier for professionals. It is important for you to understand the fundamental basics of the program because the more advanced features build off of these basics. During this lesson you have learned the layout of the program and its basic options, basic data entry, and data formatting. The next Excel lesson will cover advanced data entry and formulas.

LESSON 2: MICROSOFT POWERPOINT 1: POWERPOINT BASICS

Slide 1 Welcome to Novus Computer Lesson 2: Microsoft PowerPoint 1: PowerPoint Basics. The objective of this lesson is to provide an overview of PowerPoint’s various toolbars and options, and give an introduction to “slide” creation. Using PowerPoint to create presentations is very popular in the international business community. Most large meetings will have presentations that guide the presentation, provide additional details for meeting participants, and help direct discussions. Most businesses expect their employees to be able to create and run presentations through PowerPoint. Slide 2 PowerPoint is a commercial presentation program sold by Microsoft, and is an important part of the Microsoft Office suite. PowerPoint’s main purpose is to make the creation of multimedia-based presentations easy. PowerPoint’s capabilities can be divided into two separate parts: slide creation and presentation delivery. Slide 3 Slides are what PowerPoint uses to deliver your information. They are the images that you enter your information into and are displayed during your presentation. PowerPoint provides many options for helping make your presentation as effective as possible. These options include word processing functions; tables, charts, and diagrams to help make your information clear; and more advanced animation and multimedia features to make your presentation impressive. PowerPoint provides you with many premade design options and slide formats to decrease the need to manually design your presentation. Slide 4 After creating the slides, PowerPoint has the ability of displaying these slides in a presentation mode. PowerPoint’s presentation delivery options include slide organization, animation features, and customizable presentation delivery modes. PowerPoint can automatically run your presentation’s slides on a timer, or allow you to manually click through the presentation. PowerPoint also provides options for printing the presentation or packaging the presentation into various other formats that make them video and Internet compatible. Over the course of the three Novus PowerPoint lessons, you will become familiar with PowerPoint’s presentations functions, and learn how they are best used within business environments. Slide 5 You can open PowerPoint by using your mouse to select Start > All Programs > Microsoft Office > Microsoft PowerPoint. You may have a “shortcut” in the Start Menu or on the desktop that can both be used to open PowerPoint. You can also open PowerPoint by opening a saved PowerPoint file. Once PowerPoint is opened you will first notice a circular icon in the top left of the screen. This is the “Office Button.” By clicking on the Office Button, a menu appears providing the main program options for PowerPoint. These options include starting a new PowerPoint document, opening an existing presentation, saving your presentation, and printing your presentation, among others. Saving is the process of placing a permanent copy of your presentation on the computer. This is important so that you don’t lose information if PowerPoint or your computer crashes. To save your document you must press the “Save icon” in the Office Button menu.

Next to the Office Button is the “Quick Access Toolbar.” In this toolbar are your most commonly used commands: save, undo, and redo. While you already know what the save command does, later in this lesson we’ll explain what the undo and redo commands do. Next to the Quick Access Toolbar is the “Title bar,” which shows the name of the file you currently have open. Slide 6 By saving you are able to both save your progress and give your document a title. When you choose to save a document the first time, a dialog box called the “save window” will appear. Basically, the save window is asking you to choose the location where the document will be saved and to give your document a name. The main section of the save window displays the various “directories” on your computer, which you must browse through and choose a location to save your document to. On the left side of the save window are the most popular directories for saving; Desktop, My Documents, Recent Documents, etc. At the bottom of the save window is a textbox where you enter the title of your document. Pressing the save button is the final step in saving your document. After the first time you save, you can press the save button and your saved file will be updated with your current changes. If you want to save the document under a new name or in a new location, select the “Save As” option and change the location or name to what you want. Slide 7 Looking at the space below the Office Button and title bar, you will see a row of tabbed options at the top, three sections of different sizes in the middle, and some options and information are at the bottom. First we’ll look at the row of tabbed options at the top of the window. This area is called the “Ribbon Bar.” The Ribbon Bar in Word has seven tabbed menus, Home, Insert, Design, Animations, Slide Show, Review and View. Let’s look at three of the most useful menus for understanding PowerPoint basics: Home, Insert, and View. Slide 8 The “Home” tab is useful when editing and formatting information on your slides, and adding new slides to your presentation. The Home tab provides the basic tools needed to make formatting and editing text easy. The “Insert” tab gives you many options for adding different elements to your slide. For this lesson the most important element to notice is the Textbox, which is PowerPoint’s word processing tool for slides. The “View” tab gives you options for setting up your workspace, changing the slide view that determines how your presentation is displayed, changing the level of zoom at which to view your slides, and allowing you to start Slide Show mode which allows you to deliver your presentation. Slide 9 At the bottom of the program window is the “Status bar.” The Status bar is made up of presentation information, different presentation view options, and a “zoom slider.” To the left of the Status bar you can find the number of slides in your current presentation and your currently selected slide, the name of the theme you are using in your presentation, and the language you are typing in. The Status bar also provides quick access to some of the view options from the View tab. Here you can quickly change between views “Normal,” “Slide Sorter,” and “Slide Show.” Next to these options is the zoom slider, which is used to increase or decrease the viewing size of your current slide. Slide 10 In the middle of the screen is PowerPoint’s “Work Area”, which displays the contents of your presentation. The view options that PowerPoint provides in the View tab of the Ribbon bar change the way this workspace is set up. These different setups help make the creation of your presentation easier. The most useful views are Normal, Slide Sorter, and Slide Show – all of which can also be selected from the Status bar at the bottom of the program window. Normal view is the default PowerPoint view. It sets up the middle of the screen by making three different sections. The section that is on the left side of the work area is the “slides pane.” The slides pane provides you with a graphical list of the available slides in your presentation. The slides are presented in the order that they will be displayed during your presentation. Within the slides pane you can add and delete slides by left-clicking with your mouse to select a slide, and pressing the delete key on your keyboard to delete it.

The large section next to the slides pane contains your currently selected slide. In this section you are able to make edits to this slide’s design and content. This is where most of your work will be done using PowerPoint’s various slide creation tools. Below the current slide section is the notes section. Here you can insert notes to help you remember important information during your presentation. These notes will not appear on the slides themselves. Instead, notes are there to give the presenter additional information about that particular slide. Video 1 Now that we are familiar with the basic PowerPoint program layout we can begin looking at creation of slides, and the basics of setting up a presentation. The first slide that is included in all new PowerPoint presentations is the title slide. This slide should be used to display the name of your presentation. Also on the title slide should be some information about the presentation such as the presenter names or the date. On the title slide you will see two rectangles; these are the “title” and “subtitle” textboxes. “Textboxes” are areas in PowerPoint where you enter text and other information. Textboxes hold the text over the background of the slide, allowing you to move the text to any position on the slide. To edit the text, use your mouse to left-click on the textbox, this will place a “blinking marker” that shows where your entered text will show up. Once this blinking marker is visible inside the textbox, you can begin entering text. To enter text we use the keyboard. You will see that the text shows up instantly as you press the keyboard keys. When you are finished entering information, click anywhere outside the textbox to accept the entry. As you enter text into the slide, you can see the changes being reflected in the slide pane section to the left. Video 2 Once you have finished entering your text, there are a number of formatting options that PowerPoint offers to ensure that your text is shown in the most effective way. To change text format you must use your mouse to highlight the text that you want to format, and then select from the different options. Different font characteristics can be changed using the “Font section” of the Home tab in the Ribbon Bar. Selected text can be changed to be bold, underline, italic, different colors, different sizes, and different fonts. Location of the information within the textbox can also be changed using the options in the Alignment section of the Home tab, making text left, right, center, or justify aligned. PowerPoint, like all Microsoft Office products, gives you word processing commands to make information entry and editing easier. The five basic commands are “copy,” “cut,” “paste,” “undo,” and “redo.” These commands can be found in the Ribbon Bar under the “Clipboard section” of the Home tab. The copy command lets you copy text or information to the computer memory. With this information in the computer’s memory, you can then use the paste command to paste the text in another place. These are two very useful commands in PowerPoint. The cut command is very similar to copy, but it erases the information from the original location after it’s stored in the computer’s memory. Once again, you can use the paste command to paste the information in another place. Undo and redo are useful for correcting mistakes or changes to the document, like going backward or forward in a sequence. All of these commands have keyboard-based shortcuts which can help save time and effort. Video 3 Textboxes and other objects can be manually resized to fit the information inserted, but PowerPoint also automatically changes the size of the text to make it fit. To resize a textbox, use your mouse to select the textbox, and place the mouse on the edge of the textbox. When a double-arrowed icon appears, click and drag the side of the textbox until it is resized to what is needed. Clicking and dragging the side of the textbox will change the connecting sides – changing the textbox’s length or width – but by clicking on the corner you can resize by both length and width. Now that you have the title slide created you can add more slides to your presentation. To add new slides select the New Slide option from the Slides section of the Home tab. Left-clicking on this icon will insert a new slide into your presentation. The new slide will be placed after the slide that you were previously working on. The slide that is inserted is the Title and Content slide. It has two textboxes: the top one for the title of the slide, and the bottom one for the content of the slide. All textboxes in PowerPoint work the same for entering text. However, you will notice that the content textbox has small round dots to the left of your text. These dots are called bullet points. They help you organize your information. When typing in textboxes, pressing the enter key on the keyboard will start a new line. If you are typing with “bullet points” a new bullet point will appear to the left of the line. To insert bullet points in textboxes that don’t have them, click

on the small icon with three bullet points found in the “Paragraph section” of the Home tab. Similarly, to remove bullet points from the front of text, select the text and click on the small bullet point icon. Besides resizing textboxes you can also delete them. You can delete a textbox by moving your mouse to the edge of the textbox. Once the mouse icon changes to a four-directional arrow icon, click your mouse. This selects the textbox itself instead of selecting the text inside the textbox. Once the textbox is selected, press the delete key on your keyboard to remove the textbox from the slide. Video 4 Using the Status bar options to change the view to Slide Sorter, you can see that your presentation currently has two slides. The slide types are title, and title and content. In the slide sorter view you can At this point you are ready to give your presentation. Using PowerPoint’s presentation delivery capabilities, you can turn your collection of slides into a slideshow. To do this, use the Status bar options to change the view to “Slide show.” Slide show makes your currently selected slide cover the full screen, removing the distractions of your computer. To make sure your presentation starts from the beginning, select the first slide of our presentation, and press the Slide Show button. To go through the slide show you can either left-click using your mouse or use the directional keyboard keys. The up and down keys go back and forth, and the left and right key go back and forth. To exit out of your presentation press the esc key. This will bring you back to your most recent view. Slide 11 PowerPoint is a very powerful tool that will help make many business-related functions easier for professionals. It is important for you to understand the basics of the program because the more advanced features build off of these basics. During this lesson you have learned the layout of the program and its basic options, and basic creation of slides. The next PowerPoint lesson will cover creating more advanced presentations.

LESSON 3: MICROSOFT EXCEL 2: DATA ENTRY

Slide 1 Welcome to Novus Computer Lesson 3: Microsoft Excel 2: Data Entry. The objective of this lesson is to provide an overview of Excel’s data entry techniques including “sort and “filter”, document formatting, and “functions” and “formulas”. We will also look at Excel document and worksheet formatting. Slide 2 Another useful tab in the Ribbon bar is Page Layout. This will help you to setup your document to best fit your needs. Through the Page Layout tab you can change the size of your document, the print area, the colors, and set up your document for printing. Later in this lesson we’ll look at how to set these options Slide 3 Now that you understand Excel’s general program layout and are familiar with some of the Ribbon bar’s tabbed options, we are ready to look at some of Excel’s more advanced uses. As you should remember, Excel offers you different views – Normal view (the default), Page Layout, and Page Break Preview. In the Print Layout view Excel shows you how your spreadsheet will print. Using this view, you can setup your document to print exactly as you want it to; this includes options like setting margins, “page orientation”, and page size. Margins are the blank spaces at the top, bottom, right, and left edges of your document. These spaces are like borders used to keep your data from being too close to the edges of the page. You can change these margins to fit more data on the page by clicking the Margins button in the Page Setup section of the Page Layout tab. In the Page Layout view work area you will see a section above your data where the text ‘Click to add header is displayed. Using your mouse to click this area will enable you to enter header text that can serve as the title of your spreadsheet. Slide 4 In Page Break Preview, your work area is setup in the same way as the Normal view, but Excel shows where the printed page breaks will be, and displays a number watermark showing what order the pages will be printed. Excel also darkens any unused cells to the left or below your last used ”cell”. Video 1

The blue lines around your data show where your data will reach the printed document’s “borders,” and where Excel is placing a page break. The data on the right of the page break or below the page break will print on the next page. These lines can be moved to fit certain data on certain pages. To do this, click on the blue line and drag the line to the right edge of the column that contains the data that you want to show up last on your printed page. You can also insert new page breaks into your document. To insert a new page break, click on the column header that you want to be the first data on the new page, and click the Insert Break option from the Breaks menu of the Page Layout tab. To remove page breaks, select the column header with the blue page break line on its left edge and click the Remove Break option from the Breaks menu of the Page Layout tab. Slide 5 Excel gives you two options for page orientation: “portrait” or “landscape.” These options describe in what direction your spreadsheet will be printed and how your text will be displayed. Portrait orientation, the default in Excel, sets up your page in the way that is most common, making the long side of the page its height. In the landscape option, your page would be set up so that the long side is the width of the document. Text and other content would be entered to span this length, making the length of a page’s lines longer, but the number of lines in a page less. This option can be found in the Page Setup dialog box, opened by clicking the small square button on the bottom right of the “Page Setup” section of the Page Layout tab. Along with many other options, the size of your printed Excel page can be manually changed to fit different sizes of printer paper. While the default for your country will be appropriate most of the time, this option helps when you want to print on special sizes of paper. To change the size of your document select from the different options that will be displayed when you click the Size button in the Page Setup section of the Page Layout tab. Video 2 While each worksheet has millions of rows and thousands of columns, it is possible to insert columns and rows inside the original worksheet. This is helpful when you need to include extra data in a specific location of your spreadsheet. Inserting new columns and rows are done in the same way. First select the column header that you want to insert a column before; this should highlight the entire column of cells. With the column highlighted, select the Insert icon within the “Cells section” of the Home tab, the new column will take the identifying header of the highlighted column, and the remaining columns to the left will be renamed to stay in alphabetical order. To delete rows or columns, click their identifying header and select the Delete option in the cells section of the Home tab. Rows and columns can also use the word processing commands copy, cut, and paste. To move cells within the worksheet, select the cell and move the mouse to one of the cell’s edges. Once the mouse pointer changes to a “hand icon” click again and drag the cell to its new location. When using these features, you are really just moving the data and formatting of a cell, and not moving the actual cell. Excel will never leave an empty space in your spreadsheet. Deleted or cut columns, rows, or cells will be replaced with blank ones. Columns and rows can also be resized to fit the information inserted. To resize a column or row, place your cursor on the right edge of the column or row header and, when the cursor changes to “double-arrowed icon,” click and drag the column or row to the size needed. Excel also can automatically resize the column or row to fit the data in the cell with the most information. To do this, double click on the header’s right edge once the cursor changes to the double-arrowed icon. Video 3 While individual cells can’t be resized, Excel does have a feature called merging, where multiple cells can be combined into one cell that will span the space that was used by the individual cells. To merge cells, highlight the range of cells that you would like to merge and select the “Merge” option in the “Alignment section” of the Home tab. It’s important to remember that Excel will only keep the information in the upper-left-most cell, deleting the rest of the cell’s information. Cell formatting can help to make your table of data clearer. When you are making tables of data you should always try to ensure that the data in a column or row is labeled with a “header.” Use the formatting options we learned last week, like cell color and font sizes, to make these headers easily identifiable. People that read your spreadsheet should not have difficulty understanding what a column or row’s data means. Another formatting option that helps to make your table easily readable is “table borders.” The table border formatting option is found in the Alignment section, and gives you the option of marking the edges of cells or tables as a way of separating data or marking it. Borders can be of different styles, but make sure you use them properly to help you present your Excel data.

To add a border to your table or row, use your mouse to highlight the area that you want Excel to apply the border to, and then select the specific border style from the border menu in the Alignment section of the ribbon bar. Video 4 While we have seen that Excel data can be numbers and letters, they can also be basic “mathematical operators” and formula’s. Mathematical operators are signs such as the addition sign, the subtraction sign, the multiplication sign, and the division sign. Excel is able to handle all of these calculation tools and more. The most important rule for using Excel’s calculation capabilities, whether it’s for simple mathematical operators or advanced formulas, is that all calculations must begin with the “equal sign.” Following the equal sign you can begin entering your calculations. The basic mathematical operators can be used with numbers or with cell names. You should remember from the last Excel lesson that cell names are made of the cell’s column letter and row number. When using cell names, Excel takes the value of the data in the referenced cell and uses that in the calculation. Excel uses the order of operations in its use of calculations. As you will recall, the order of operations goes from calculating what is in the parentheses, then exponents, then the multiplication and division, then addition and subtraction. This order will always be followed in Excel. Video 5 Formulas are similar to mathematical operators in that they are tools that Excel uses to perform calculations. The difference is that formulas have the mathematical rules inside them, freeing you from using operators to get to your result. While this is very helpful when making large amounts of calculations, it is still important that you to understand the math behind formulas. Three simple but important Excel calculation formulas are SUM, MEAN, and MEDIAN. As you will remember from basic math courses, the sum of a group of numbers is the outcome of all the numbers being added together. This is what the SUM formula does – adding each cell together and giving you the total. When you are trying to add large amounts of data the SUM formula is easier to use than the addition operator. Formulas are just like operators in that they must start with an equal sign. After the equal sign you enter the formula name, SUM, and an open parentheses. Within the parentheses, Excel requires you to enter “arguments.” Arguments are used by Excel to define the type of “input” needed for the formula; these arguments are different for different formulas. For the SUM formula, Excel requires you to enter the numbers, cell names, or cell ranges that you want to calculate as the arguments. Commas are needed to separate these arguments. As you remember from last lesson, cell ranges identify groups of cells. Using the SUM formula for the cell range A1:A4 will give you the total of the values in cells A1, A2, A3, and A4. Remember - Excel performs formulas with the numbers you have given it, making it possible that you have received the wrong answer by using the wrong numbers. MEAN and MEDIAN are two other helpful formulas. The MEAN formula calculates the average of a group of numbers and the MEDIAN formula calculates you the value in the middle of a group of numbers. These formulas use the same format as the SUM formula, requiring that you enter the numbers, cell names, or cell ranges for the formula’s arguments. These numbers are what will be used in the calculation. Using cell names and ranges in formulas are helpful because the final calculation is automatically updated if you change the data in the cells. Excel explains what kind of input each formula requires.  Video 6 Large amounts of data can be difficult to understand, difficult to recognize patterns in, and sometimes not useful for finding specific information. Excel helps you analyze your data through the use of the “sort and filter” tools. The sort tool takes your data and reorganizes it in the way that you request. The basic sort options are ordering your data alphabetically or numerically. The filter tool gives you the ability to remove certain data from being visible in your table. Your options on what data to include are only limited by the data that is in your table. For example, if you have a table listing all the men in a city with their names and ages, you can use the filter tool to remove all 20-year-old men, or just men with a certain name. Similarly the sort tool can be used on this table to order it from names A-Z, or ages youngest to oldest. Before sorting you need to make sure your table has headers, both the sort and filter tools use these headers to identify data. To sort a table’s data you need to first highlight the table header of the column of data that you want to sort. After this is selected, find the sort option in the data tab of the ribbon bar. Here you’ll see three options – ‘A-Z with a down

arrow’, ‘Z-A with a down arrow’, and a ‘Sort button’ – for this training we’ll only deal with the first two. When you click the A-Z option, you will see that the column selected has been reordered in alphabetical order from A-Z, and the additional table data has been reordered as well – keeping your data correct. To sort by numbers, highlight the table header of the column that has numerical data, and again press the A-Z option. The table is now ordered numerically from 0 to larger numbers, and again the remaining table data has been reorganized as well. The second sort option, Z-A with a down arrow, will also order the data, but in the reverse fashion. To use the filter tool you will need to highlight one of your table’s header cells and select the filter option in the data tab of the ribbon bar. This will place small buttons with downward arrows on the bottom right of your table’s header cells. Now, depending on which column of your table you want to use to filter the data, you will click on that column’s downward arrow button. A menu will show up giving you your filter options. In the boxed area at the bottom of this menu are the different values of data that can be included or filtered from your table. Filtering by one specific value of data will remove any rows of your table where that value does not show up in the column. By clicking the small box to the left of a value you place an X in the box. The values with Xs inside their boxes will be included in your table; the remaining values with empty boxes will be filtered from your table along with their accompanying row of data. Slide 6 Excel’s tools are meant to make the calculation and analysis of data easier for the user. Formulas and data organization tools make this possible. To properly use Excel’s formulas it is important that you understand the math involved, and to use the organizational tools it is important that you recognize the expected outcome. During this lesson you have also learned more of the program’s layout and view options, and the use of formatting options to make table data easily understandable. The next Excel lesson will look at more advanced data analysis.

LESSON 4: MICROSOFT WORD 1: WORD BASICS

Slide 1 Welcome to Novus Computer Lesson 4: Microsoft Word 1: Word Basics. The objective of this lesson is to provide an overview of Word’s various toolbars and options, and look at how to use Word’s text formatting and document setup tools. Being able to quickly create professional documents with Word is a skill that you are expected to have in most if not all business professions. Slide 2 Word is a commercial “word processing” program sold by Microsoft, and is an important part of the Microsoft Office suite. Word’s main purpose is to create various types of documents, such as letters, announcements, mailing labels, and essays. Using Word’s included tools will make the development of these documents easier. Slide 3 As a word processor, Word provides you with a constantly updated display of your document, giving you the opportunity to edit and change it before saving or printing the final version. Word is also capable of adding tables, pictures, shapes, and charts to your document, which can be used to clarify your typed information or just for design purposes. Over the course of the four Novus Microsoft Word lessons, you will become familiar with Word’s word processing functions and learn how they are used within business environments. Slide 4 You can open Word by using your mouse to select Start > All Programs > Microsoft Office > Microsoft Word. You may have a “shortcut” in the Start Menu or on the desktop that can both be used to open Word. You can also open Word by opening a saved Word file. Once Word is opened you will first notice a circular icon in the top left of the screen, this is the “Office Button.” By clicking on the Office Button, a menu appears providing the main program options for Word. These options include starting a new Word document, opening an existing document, saving your document, and printing your document, among others. Saving is the process of placing a permanent copy of your document on the computer. This is important so that you don’t lose information if Word or your computer crashes. To save your document you must press the “Save icon” in the Office Button menu. Next to the Office Button is the “Quick Access Toolbar.” In this toolbar are your most commonly used commands: save, undo, and redo. While you already know what the save command does, later in this lesson we’ll explain what the undo and

redo commands do. Next to the Quick Access Toolbar is the “Title bar,” which shows the name of the file you currently have open. Slide 5 By saving you are able to both save your progress and give your document a title. When you choose to save a document the first time, a dialog box called the “save window” will appear. Basically, the save window is asking you to choose the location where the document will be saved and to give your document a name. The main section of the save window displays the various directories on your computer, which you must browse through and choose a location to save your document to. On the left side of the save window are the most popular directories for saving: Desktop, My Documents, Recent Documents, etc. At the bottom of the save window is a textbox where you enter the title of your document. Pressing the save button is the final step in saving your document. After the first time you save, you can press the save button and your saved file will be updated with your current changes. If you want to save the document under a new name or in a new location, select the “Save As” option and change the location or name to what you want. Slide 6 Looking at the space below the Office Button and title bar, you will see a row of tabbed options at the top, a blank page in the middle, and some options and information at the bottom. First we’ll deal with the row of tabbed options at the top of the window. This area is called the “Ribbon Bar.” The Ribbon Bar in Word has seven tabbed menus, Home, Insert, Page Layout, References, Mailings, Review, and View. Let’s look at three of the most useful menus for understanding Word basics: Home, Page Layout, and View. Slide 7 The “Home” tab is useful when editing and formatting your document, and is organized into different sections that provide different options. The Home tab provides the basic tools needed to make formatting and editing text simple. Through the “Page Layout” tab you can change the size of your document, the borders, the colors, and set up your document for printing. Later in this lesson we’ll look at how to set these options. The “View” tab provides options for changing how your document is displayed in the middle area. These different view layouts can make your current task easier to complete. Slide 8 In the middle of the program window is a blank page where the majority of your work will take place, including the entering of text and other objects, this area is called the “Work Area.” “Print Layout” is the default view. When this view is selected your printed document will look exactly the same as what is displayed here. In Print Layout, all of the different parts of your document are shown, like graphics, “headers”, and “footers”. In this view you are able to use all of Word’s different content, editing, and document setup tools. The Print Layout view also provides you with a ruler on the top and left side of your document. Depending on your current view, the work area will be displayed differently. Let’s look at the different view types - Print Layout, “Full Screen Layout,” “Web Layout,” “Outline” and “Draft” views. Slide 9 The Full Screen Reading view should be used when you want to read over and edit the contents of the document without any distractions. The maximum amount of space is given to displaying the contents of the document, removing the ribbon bar. The Full Screen Reading View does give you some options, which are within the “Mini toolbar” at the top left of the page. These options include save, print, a highlighting feature, a comments feature, and some document tools. The highlighting feature allows you to “highlight” text within your document as you read so you can return to these passages later. The comment feature gives you the ability to add comments to your document without actually changing the printable content. The document tools available include research tools like a dictionary, thesaurus, and access to research websites. There is also a quick translation tool that gives you access to simple language translation services.

The “navigation buttons” at the top center of the screen in Full Screen Reading view allow you to move forward or backwards through the pages. Clicking the close button will take you from Full Screen Reading view back to the default Print Layout view. Slide 10 The outline view shows a breakdown of your document in outline form, split into sections with headers, sub-headers, and your content. Sections can be collapsed to hide the information within them, making the outline of your document as detailed or basic as you want. Unlike the Full Screen Reading view, all of Word’s tools are available for use in outline view. When in the outline view, a new tab appears in the Ribbon: the “Outlining tab.” Within this tab you have the “Outline Tools” section that helps you navigate through the different levels of your outline, and show or hide certain levels of your outline. Also in the Outlining tab is the option to close out of the Outline view, bringing you back to the default Print Layout view. Slide 11 Draft view is very similar to Print Layout, except it does not show the graphics, columns, headers, and other special content of your document. For this reason, the draft view is best used when you are reviewing the text of your document, but not worried about formatting or multimedia content. Word will automatically change back to Print Layout view when you try to make changes to your header or insert graphics to your document. To leave Draft view, simply select a different view from the “Document Views” section of the Views tab in the Office Ribbon. Slide 12 At the bottom of the program window is the “Status bar.” The Status bar is made up of document information, different document view options, and a zoom slider. To the left you can find information about your document, including the currently viewed page, the total number of pages, and the total number of words in your document. To the right of this information is a group of options that allow you to switch easily between the views we discussed earlier. Next to these options is the “zoom slider,” which is used to zoom in or out on a certain section of your document. Video 1 Now that we are familiar with the basic Word program layout we can begin looking at inputting text, using basic word processing commands, and some of Word’s formatting options. When entering text into your Word document, the first thing we want to look for is the “blinking marker” that shows where your text will be entered. This marker will show up when you right-click on the blank document area with your mouse. To enter text we use the keyboard. You will see that the text shows up instantly as you press the keyboard keys. Some important keys to use when entering text in Word are the spacebar, the tab key, the enter key, and the delete key. The “spacebar” is used to put space between words. Pressing the spacebar will move the blinking marker to the right one space on your document, creating a blank space. Only one space is required between words. The “tab” key is similar to the space key in that it moves the blinking marker ahead, but the difference is that it inserts a longer blank space than the spacebar. The “enter” key takes your blinking marker to the next line, allowing you to start a new section of text. While the enter key is very useful for starting new sections of text, it is not necessary for you to press enter when your text reaches the right side of your word document. Word automatically continues your text on the next line. The “delete” key is used to erase information. It can be used alone, pressing or holding it down to erase long or short sections of text, or text can be highlighted and deleted. To highlight text, put your mouse cursor at the beginning of the text section you want to highlight. Left-click and holding down on the left button, drag your cursor to the opposite end of the text section you want to highlight, and release. This should leave the section you want to delete highlighted blue. At this point you can press the delete key to erase the text. Video 2 Word, like all Microsoft Office products, gives you word processing commands to make information entry and editing easier. The five basic commands are “copy,” “cut,” “paste,” “undo,” and “redo.” These commands can be found in the Ribbon Bar under the Clipboard section of the Home tab. The copy command lets you copy text or information to the computer memory. With this information in the computer’s memory, you can then use the paste command to paste the text in another place. These are two very useful commands in Word. The cut command is very similar to copy, but it erases the information from the original location after it’s stored in the computer’s memory. Once again, you can use the paste command to paste the information in another place. Undo and redo are useful for correcting mistakes or changes to the

document, like going backward or forward in a sequence. All of these commands have keyboard-based shortcuts which can help save time and effort. You can find a list of common key-shortcuts in the Computer Resources Document. Once your text has been entered, there are a number of formatting options that Word offers to help you change how your text is organized and displayed. Different font features can be changed using the “Font section” in the Home tab of the Ribbon Bar. To change text format you must use your mouse to highlight the text that you want to format, and then select from the different options. Selected text can be changed to be bold, underline, italic, different sizes, different colors, and different fonts. The text’s background color can also be changed from the Font section. While most of your writing will go from the left side of the document to the right, Word gives you different options for positioning this text. In the “Alignment section” of the Home tab are options to align your text to left, right, or center. Using these alignment options will move the blinking marker to different parts of your document. “Left alignment” is the default, and what most documents use. Selecting “center alignment” will place the marker in the middle of the document, and position text so that it is always centered. The “right alignment” option will place the marker to the right, and the text will line up with this side of the document. Another option in the Alignment section is justify spacing. “Justify spacing” means that a full line of text will be have different sized blank spaces between words so that the line begins on the left side of the document, and ends on the right side. Video 3 In Word you can setup your document to match your needs, including options like setting “margins,” “page orientation,” and page size. Margins are the blank spaces at the top, bottom, right, and left edges of your document. These spaces are like borders used to keep your text from being too close to the edges. Word moves your text to the next line or page as you get too close to these borders. To change the page margins, click the Margins button in the “Page Setup” section of the Page Layout tab. This will bring up a number of preset options for you to choose from. The Normal option is default for new Word documents, it places 1-inch margins on each side of your document. Some of the other options are ‘Narrow’, with .5-inch margins; ‘Moderate’, with 1-inch margins at the top and bottom, and .75-inch margins on the sides; and ‘Wide’ with 1-inch margins at the top and bottom, and 2-inch margins on the sides. Use these options to set up your document in a way that best displays your entered text. Word gives you two options for page orientation, “portrait” or “landscape.” These options describe in what direction your page will be positioned, and how your text will be displayed. Portrait orientation, the default in Word, sets up your page in the way that is most common, making the long side of the page its height. In the landscape option, your page would be set up so that the long side is the width of the document. Text and other content would be entered to span this length, making the length of a page’s lines longer, but the number of lines in a page less. To change the orientation of your document, select the Orientation button in the Page Setup section of the Page Layout tab – there are only two options, portrait and landscape. The size of your Word page has to be manually changed to fit different sizes of printer paper. While the default for your country will be appropriate most of the time, this option helps when you want to print on special sizes of paper. Word will change the size of the virtually displayed document to match the size of the actual printer paper, making sure your final printed document looks exactly as it does in the Word work area. To change the size of your document select from the different options that will be displayed when you click the Size button in the Page Setup section of the Page Layout tab. Slide 13 Word is a very powerful tool that will help make many business-related functions easier for professionals. It is important for you to understand the basics of the program because the more advanced features build off of these basics. During this lesson you have learned the layout of the program, its basic options, and basic text entry and formatting techniques. The next Word lesson will cover the program’s advanced formatting options.

LESSON 5: MICROSOFT WORD 2: ADVANCED FORMATTING

Slide 1 Welcome to Novus Computer Lesson 5: Microsoft Word 2: Advanced Formatting. The objective of this lesson is to provide you with advanced formatting tools that will help make your document more readable and organized. You will

learn about creating “organized lists,” using the “tab spacing” function, the “numbered and bulleted list” functions, and the “table” function. Slide 2 Most Word documents will need to be printed at some point to provide people with paper copies. In these cases you need to know how to print the document through Word. After you have finished setting up your document’s margins, size, and page breaks, you will need to print the document. The “print option” is located in the Office Button menu. When you click the Print option a dialog box called the “print window” will appear. The print window requires you to check a few options before printing. The first option is to select the pages that you want to print; here you can either select a specific page or multiple pages to print, or print the entire document. The second option is the number of copies that you need printed. Once these options are set you are ready to print your document by pressing the OK button on the bottom right of the print window Now that you are familiar with all the elements of document formatting and printing, let’s look at some of the advanced formatting options. Slide 3 As you learned in the previous lesson, the margins of a Word document are the blank spaces at the top, bottom, right, and left edges. While these spaces are used as borders to keep your text from getting too close to the edge of the page, the top and bottom areas can also be filled with information. The top area is called the header of the document. Most businesses use this area to display the business’s logo and contact information. In these cases, the header is also known as the letterhead. By default Word repeats the header information on every page of your document. The footer is found at the bottom of the document. This area usually includes things like the page number and the business’s confidentiality agreement. When using the footer to include a page number, Word automatically inserts the number of each page, making it unnecessary for you to update this as your document grows. The header and footer should not include much information - these areas are best used to include small pieces of extra information that wouldn’t belong in the body of your Word document. Video 1 Each page of your Word document has a header section. To edit the header you select the “Header” option from “Header & Footer” section of the Insert tab in the ribbon bar. This will open a menu with a number of preset template options. The first option is to have no special formatting or graphics in your header, the second option gives you a format of dividing the header into three columns. Using these blank header templates you can include your own information. Further down in the menu you will find other options; some of them even include graphics. When you select a header option, Word will open the header section of your document for editing, placing your marker there. Now you can begin typing and formatting text in the way that you would in any other section of a Word document. You will also notice that Word has added a new tab to your Ribbon bar, this new tab is the “Design tab.” Using the Design tab is used to make changes to your header including changing the header template, inserting a page number, inserting clip art, and inserting a picture. In the Design tab you will notice the button for editing the Footer. To edit the document’s footer you can either select this button, or close the Design tab by clicking the red close button on the right, and select the Footer option from the Header & Footer section of the Insert tab in the ribbon bar. Similar to the header button, the footer button provides you with a menu of templates. After selecting the template you would like to use the footer section of your document is opened and your blinking marker is placed there. This area is edited in the same way as the header section. In the design tab you will find options for having a different header or footer on various pages of your document. You have options such as making the first page different, or having different headers and footers for odd and even pages. Once you are finished making changes to your document’s header or footer you can return to editing the main section of your document by pressing the close button, or by double clicking outside the header or footer section. Once you have exited the header and footer areas, you can double click on the header or footer sections of your document to place your marker back in the area. This will also bring back the header and footer Design tab in the Ribbon bar.    Video 2 The tab button is a very popular tool in Word for aligning texts into neat columns. Most users don’t know how to properly control tab spacing, so columns of text are often misaligned and sloppy. Understanding how to format tab spacing is an important skill to have in the business environment.

Word’s default tab space is half of an inch. You can use the rulers on the top and left side of your document to see where the markers are. When you press the tab key on the keyboard, your marker is advanced to the next half-inch mark in your document leaving a blank space behind it. This is very useful when you want to make space between two sections of text. However, sometimes advancing a half-inch is not useful for aligning text. In these cases you will need to set custom tab spacing. Before setting tab spacing, press the “Paragraph button” in the Home tab. The paragraph button shows the formatting marks in your document, these marks are only to help you with formatting and will not be printed. Word uses an “arrow icon pointing to the right” to show where the tab key was pressed, and the “paragraph icon” to show where the enter key was pressed. By showing these marks we can make sure that we only have one tab between each column of text. To set the tab spacing, first highlight the text that you want to align. Once all of the text is highlighted, open the “Tab spacing options” window. To do this you need to click on the small button at the bottom right of the Page Layout tab’s Paragraph section. In this window you want to click the Tabs button at the bottom left. In the Tabs window you will see a list of the currently set tabs in the textbox on the left. To clear these settings press the Clear All button on the bottom right of the window. Any old tab spacing settings are now gone. Usually Word places text to the right of a tab mark, leaving text with a blank space behind it. When setting custom tab spacing you can select the alignment of your text on the tab mark. Your alignment options are left, center, or right. Having the text aligned to the left will place the tab mark to the left of the text, as is default. Having the text aligned to the right will place the tab mark to the right, and center makes your text’s center align with the tab. Next, you need to set the tab mark. Using the ruler on the top of your document, enter the location of the first tab in the top left textbox. This will put a tab mark at the measurement you entered, and place your blinking marker to the right of that mark. The next tab mark location you set will be entered below your first tab mark, and will affect the next piece of text. You can enter as many tabs as you need to properly format your document. When trying to align things in Word it is important to remember that tab spacing will properly align text, you should never use the space bar for alignment. Slide 4 Many documents use lists to organize information. Lists are very popular in business because they make information easy to read and understand quickly. There are two different types of lists, “numbered lists” and “bulleted lists.” Numbered lists place list entries in numerical order, usually with the more important or recent list entries appearing at the beginning of the list. The bulleted list separates list entries with some sort of symbol such as the bullet point. The list items may be listed in order of importance, but each point in the list is usually of equal importance. Numbered and bulleted lists are often used in business documents such as emails, meeting minutes, status updates, and resumes. Video 3 To start a bulleted list in your document, click the bulleted list button in the Home tab’s Paragraph section. This will place a bullet point to the left of your blinking marker. You can now enter text here. Word will not end this bullet point entry until you press the enter button. After pressing the enter button you will see that the blinking marker moves to the next line and a new bullet point is placed to the left. By pressing the tab key you create what is called a “nested bullet point.” Nested bullet points are positioned below bullet point entries, and aligned a half-inch to the right. Pressing the backspace key will remove the nested bullet point and return your blinking marker to the original bullet point location. Once all of the list information is entered, you exit the bullet list option by pressing enter. Creating a numbered list is done in the same way as a bulleted list, but instead of clicking the bulleted list button you need to click the numbered list button. You can also add numbers or bullets to typed lists that do not include them without having to retype the information. To do this you must highlight the list information and press either the numbered list or bulleted list button. This will make your lists more organized and understandable. The default icon for a bullet point is a simple black circle, but this can be changed. To change the “bullet icon,” highlight the entries that you want to change and click the down arrow button next to the bulleted list button. A menu showing the different bullet icons will appear. Select the icon that works best for your list by clicking on that icon.

You can also use images as bullet point icons. An example of this option’s usefulness is if you are trying to create a list of employees with their pictures next to descriptions of their positions and responsibilities. Changing the bullet point icon into a picture is done in the same way as changing it into an icon except select the “Define New Bullet” option. In the window that appears you will need to show the location of the image that you want to replace the bullet point icon. Slide 5 Similar to the organization that lists give to information, tables can also be used in organizing information. Creating tables in Word is very simple, but the formatting of them can be complicated. It’s important to use the table formatting options to help make table information clear and easy to understand. Video 4 To insert a table click the “Table button” in the Insert tab of the ribbon bar. This will bring up a menu that allows you to scroll your mouse over a grid to decide how many rows and columns you want to include in your table. As you scroll over the grid you will see the selected number of rows and columns highlighted in orange. After choosing the size of your table, you must left click to confirm your decision. The number of cells you highlighted will be inserted into your document. This is the easiest way of making a new table. You can also insert a table by selecting the “Insert Table” option found below the grid in the Table button menu. Clicking this will open a new window where you will be to select the number of rows or columns in your table. You can also choose between having fixed column width (where all the columns of the table are the same size), or auto-fit column width (where the columns adjust to the information as you enter it into the table). With very basic table in your document you can now format the table to your needs. To make formatting tables easier, Word puts two new tabs onto the ribbon bar. With the new “Design tab,” you can format your table’s header row, first column, borders, and colors. You can use the design tab’s options to format the entire table, certain rows or columns, or just specific cells. There are premade styles available that will automatically change your table’s formatting. You can also use the options to create your own style. The second new tab in the ribbon bar is the “Layout tab.” This tab gives more advanced table formatting options such as “table alignment” (how the table is aligned in your document), “text alignment” (how the text is aligned within your table’s cells), and adding or deleting rows and columns. To change the table alignment click the Properties button in the Table section of the Layout tab. This window is where you set the alignment of your table. Your alignment options are left, center, and right. The more advanced option from this window is “Text Wrapping.” With text wrapping enabled, Word will wrap the text of your document around the table. Entering information into your table is the same as entering text into your Word document. The same formatting and word processing tools are available to you in the Home tab of the ribbon bar. While the Word tables are mostly used for organizing information, you may also need to do calculations and present complicated data in a Word document. Word lets you include Excel spreadsheets in your Word document. To insert an Excel spreadsheet you must select the Excel Spreadsheet option in the Table button menu. This will enter a fully functioning resizable excel spreadsheet into your document. Review the Novus Excel trainings to understand the capabilities of Excel. Slide 6 Word is a very powerful tool that will help make many business-related functions easier for professionals. During this lesson you have learned advanced formatting techniques that help you display your information in a more organized manner. In the next lesson you will learn how to enhance your document using document themes, graphics, and shapes.

LESSON 6: MICROSOFT POWERPOINT 2: SLIDE DESIGN

Slide 1 Welcome to Novus Computer Lesson 6: Microsoft PowerPoint 2: Slide Design. The objective of this lesson is to teach you the tools that PowerPoint provides for changing the design and purpose of slides. In the last lesson you learned PowerPoint’s toolbars, options, and looked at slide creation. In this lesson you will learn about using design themes, templates, color schemes, and background styles. We will also look at more of PowerPoint’s slide types, and including images and other multimedia in your presentations. Slide 2

PowerPoint gives you preset design suggestions to help you with creating your presentation. These suggestions, known as “themes,” include everything from background image, font face and color, color schemes, and layout. Themes are found in the Design tab of the Ribbon bar, where only a handful of themes are displayed. You can find more preset themes by clicking the down arrow. Themes change your presentation from the boring white slides that you started with to more impressively designed presentations. Before you can understand the usefulness of themes, it’s important for you to understand the different components of a theme. Slide 3 PowerPoint presentations should keep the same general design throughout all of the slides. This helps the audience stay focused on the information and not concentrate on the design. The “color scheme” option helps you keep the design consistent while still allowing for some changes throughout your presentation. A color scheme is a group of colors that will be used throughout all of your slides. These groups are made up of anywhere from one to twelve colors and they are used to define the colors for the background, font, lines, and bullet points in your presentation. Each color that appears is assigned to a specific item in your slide. PowerPoint provides preset color schemes for your presentations. These color schemes are located in the Colors button on the Design tab of the Ribbon bar. After clicking this button, a number of different color schemes will be displayed in a menu. Microsoft believes that the preset scheme colors work well together to make your presentation more design friendly. If these preset schemes don’t work for your presentation you can create your own scheme, allowing you to have a different background color for example. Video 1 To create a completely new color scheme, use your mouse to select the Colors button in the Design Ribbon, and select the option Create New Theme Colors. This will open an option window where you can set the colors for different parts of your PowerPoint slide. Clicking on the color boxes will allow you to select the color you want to use. A preview of what your slide will look like is displayed on the right of the option window. Once your color scheme is selected you will see that as you create new slides, the colors of texts, background, and other parts of your slide are automatically set to what you selected in the color scheme option. Slide 4 While you just learned that your presentation’s “background” could be set to a solid color, sometimes you want your presentation’s design to be more interesting and engaging. To make this possible, PowerPoint provides options for using simple and advanced graphics for your presentation’s background. As you know, the default background for presentation is white. To change this, use your mouse to click the background styles button in the Design tab of the Ribbon bar. This opens a menu of choices. As you hover over these slides you will see that a preview of the currently selected background is shown in the slide workspace. Clicking on a slide background will insert that background in every slide of your presentation. However, if you only want that background to show up on the current slide you must right-click on the background and select “Apply to Selected Slides” Slide 5 Clicking the button at the bottom on the background styles menu opens an option window where you can be more specific about the background style of your slide. In the “Fill section” of this window let you control how you fill the background of your slides. They can be filled with a solid color, a gradient, and picture or texture. These options will affect your background. You already know what a solid color background looks like; the gradient option is a background where two colors fade from one to the other. The picture or texture option will repeat a selected image as your background. PowerPoint provides some images for texturizing your slides’ backgrounds. When they are repeated it will look like the entire slide is covered in that image. You can select your own image by clicking the File… button, or select from Office Clip Art through the “Clip Art” button. When inserting your own picture or using Office Clip Art, you can use the Picture option group to change the style of the picture. This option group is opened by choosing the Picture option found in the window’s option box on the left, below Fill. Use these options to make picture corrections such as increasing the brightness and contrast of the picture, or recolor the picture using the Recolor option. You can make your presentation look professionally designed with the help of these simple tools.

Slide 6 Since color schemes and background styles are the major components of themes, you can now understand how helpful themes are. Selecting a theme will take your ordinary presentation and stylize it to match the theme’s settings. This saves a lot of time when you have already created an entire presentation and have to change the design of it. If themes weren’t available you would need to go through your presentation and change the color of all the text, adjust the colors used on each slide, and format the background. Make use of PowerPoint’s themes to make the job easier. Video 2 In the last PowerPoint lesson you learned how to add title slide, and title and content slides to your presentation. These slides are the most commonly used slides in PowerPoint, but the program does offer other sample slides as well. These other sample slides organize information in different ways, sectioning off the slide for different types on content. To add these different types of slides to your presentation, use your mouse to select the dropdown arrow on the New Slide button in the Home tab. Clicking here will open a menu with options for various “slide templates.” By clicking on “Section Header” sample slide we will see that it is included in our slide sorter section to the left of the slide workspace. The Section Header sample can be used for a number of purposes, but it’s most useful when you have a large presentation that is split into sections and you want to define the current section clearly for the audience. The section header slide has two text boxes for you to include the section’s title and a short description. Another useful sample slide is the “Two Content” slide. In this slide you are given an area to include the slide title and two pieces of content, positioned side by side. These two pieces of content can include writing, pictures, videos, graphs, charts, spreadsheets, and many other types of multimedia. All of the sample slides are helpful in creating your presentation; make sure that you select the slide type that works best for your information. Slide 7 You already know that clicking the content box in the sample slides will allow you to include text, but it’s also useful to know how to include pictures. By moving our mouse over the icons in the middle of the slide we can select what type of media we want to include in the content box. Clicking on these icons will open windows that will allow you to enter the information or locate the file that is required. When you click on the Insert a Picture option, PowerPoint will open a file dialog box where you will need to locate where the picture you want to include is on your computer. Selecting the file and clicking the Insert button will place the picture within the slide’s content box. Once the picture is added to your slide you will notice that PowerPoint adds a new tab to the Ribbon bar. This new tab allows you to format your image in the way you want to. In this tab you can adjust how the picture looks using settings like brightness and contrast, you can choose from preset picture styles in the, and you can edit the picture’s size. Slide 8 Adding movies to your slide can also help improve your presentation. To add a movie, use your mouse to click on the movie icon in the group of icons in the content box. This will open a dialog box where you will need to locate the movie file you want to include in your presentation. This will also add a new tab to the Ribbon bar where you can edit your video’s size and volume, select whether the video will start automatically or after you click on it, and select whether the video will play once or continually loop while the current slide is open. Slide 9 PowerPoint uses Microsoft Excel’s powerful spreadsheet tools to help make it easy to add graphs to your presentation. After clicking the Graph button in the Insert tab, PowerPoint will open a Microsoft Excel window showing the graph data, and display a preview of graph of that data on your slide. The default PowerPoint graph has three series of data and four categories. You can change the data, using different numbers and adding or deleting rows and columns to make your graph show the data you need. View the Novus Excel lessons to better understand how to edit data in Excel. Once you have finished editing the data, you can add a title to your graph by entering it in the textbox at the top of the slide. Video 5 The blank sample slide option is the one that looks like it doesn’t have any content on it. A blank slide is not very useful in a presentation since it doesn’t give any information to your audience. However, when preparing a presentation, a blank slide lets you start from the beginning. You can use PowerPoint’s tools to add objects to a blank slide.

To add a Text Box to your blank slide, click the “Text Box” button in the Insert tab. After doing this your mouse icon should change to the letter A. When you see this icon, you are ready to insert a new textbox to your slide. Use your mouse to left-click where you want the top-left corner of your textbox to be on your slide, and drag the now visible textbox to the size that works for you. The textbox is now ready for you to insert your text. Adding shapes to your document can help to display connections between different parts of the slide. Many shapes are available in both 2D and 3D. Clicking in the “Shapes” button in the Insert tab will provide you with a listing of the available shapes. Once you have selected a shape it will be inserted into your slide. From here you can go about changing the location, size, and direction of your shape using the endpoints. This is the same technique we used to resize textboxes in the last lesson. To add a picture to your blank slide click the Picture button in the Insert tab. This will open a dialog box asking you to locate the picture that you want to include in the slide. The Clip Art, Movie, and other object buttons work similarly. Video 6 Besides adding new slides, the New Slide button in the Home tab also gives you the ability to duplicate slides, or insert a copy of them in your presentation. This can be helpful if you have a very detailed slide, want to create a new slide that is similar, but with some of the information changed. By duplicating the slide you don’t need to retype all of the information or reformat the objects on the slide. To duplicate a slide, select the slide that you want to duplicate from the slide sorter to the right and click the New Slide dropdown button like you would when you want to add a new sample slide to your presentation. Now, instead of selecting from the sample slides, select the Duplicate Selected Slides option. Once clicked, the selected slide will be inserted into your presentation directly below the last selected slide. You can also duplicate multiple slides. To do this you will need to select multiple slides. To select multiple slides in either your current Normal view or the Slide Sorter view we reviewed in the last lesson, simply click on the first slide you want to select, hold on the control button on your keyboard and click on the next slide you want to select. You can continue selecting slides this way until you have selected all the slides you need. If the slides that you want to select are in a row, you can select the first slide in the row, hold down the shift button on your keyboard, and select the last slide. This will select all the slides in between as well. Once the slides are selected, go through the New Slide dropdown menu and select the Duplicate Selected Slides option. Slide 10 In this lesson you learned how to change and enhance the design of your presentation. While design is an important part of every presentation, it is important to remember that the content of your message is more important. PowerPoint provides a number of preset design options that will work in most situations, giving you time to work on the presentation’s content.

LESSON 7: MICROSOFT EXCEL 3: DATA ANALYSIS

Slide 1 In the previous lesson, you learned about formatting Excel spreadsheets, basic formulas, and sorting and filtering. In this lesson, you will learn more about data analysis. You will learn about some new, powerful formulas. You will also receive some tips on how to quickly analyze large amounts of data. Slides 2 & 3 Filtering is a powerful tool in Excel. However, you may want to make some changes to your spreadsheet in order to easily filter and analyze your data. When you create a filter, the filter arrows will appear on the header row of data. If you do a lot of filtering, you will need to see the header row. But how can you see it if you have a lot of data rows? Your headers are all the way at the top of the sheet; you would have to do a lot of scrolling to change your filters. To solve this problem, Excel allows you to “freeze panes.” Think of a pane as part of the worksheet area. The pane can be a small area or a large area that you choose. Freezing a pane means that the selected rows and columns will always

appear on the worksheet, no matter where you scroll. So, we can freeze the header of the worksheet. Then you can always see the header and filters even if you are on the 1,000th row of your worksheet. To freeze panes, simply go to the view tab of the ribbon bar. In the section titled ‘Window’ you will see an icon called ‘Freeze Panes’. When you click on the Freeze Panes icon, 3 options are displayed. The first option freezes the worksheet based on the current selected cell. Everything above and to the left of the selected cell will be frozen. For example, if you select cell B3, then row 1, row 2, and column A will be frozen. The second option freezes just the top row. The third option freezes the first column. After you freeze panes you can easily unfreeze them. Just go back to the Freeze Panes icon and select the first option, unfreeze panes. Video 1 A great way to analyze large amounts of data is to add a row above the column headers. Let’s call that row a “Summary row.” In this row, you can insert formulas that add the amounts of the cells below. Putting summary formulas here allows you to easily see different information about your data. In the previous lesson, you learned how to use the SUM formula. SUM can be great for simple calculations. However, it is also a dangerous formula to use for analysis on filtered worksheets. Why? SUM ignores filters. If you put a SUM formula in the summary row, it will correctly add all the values below. However, as soon as you filter your data, the SUM formula will be incorrect. It will still show the total sum, not the sum of your filter. To avoid this problem, use the SUBTOTAL formula. After typing the equal sign, SUBTOTAL, and the open parentheses, you need to enter a number for the first argument (remember, arguments are used by Excel to define the type of input needed for the formula; these arguments are different for different formulas), which specifies the type of subtotal you need to use. The number 9 is used to calculate sum, so type in 9 followed by a comma. Now Excel asks for the data range. After you choose the data range, type the second parenthesis and hit enter to finish the formula. Now when you filter your data, the summary row cell will automatically update to sum the data present. There are many options for SUBTOTAL. Another useful option is number 3, which counts any cell with data. It works well if you need to know how many of something you have. In addition to a summary row containing SUBTOTAL formulas, there are other easy ways to sum data. When you highlight a group of cells, Excel automatically sums them and performs other mathematical operations. These operations are shown on the status bar. The status bar is just below the worksheet area. The status bar shows average, count, and sum by default. You can right click the status bar and choose to show more calculations on the status bar or delete the defaults. So, if you quickly need a sum, you can just highlight your data and look at the status bar. If the cells you want to analyze are not next to each other, you can still use the status bar to sum them. Just click on the first cell, then hold the control key down, and click the other cells you would like to add. Slide 4 Calculating “variance,” which is the difference between two values, is an important part of data analysis. In Excel it is quite easy to calculate variance for large amounts of data. Just use the subtraction formula to calculate the variance between two cells. It is helpful to put the formula in its own column. For example, if you have a column for Budget and a column for Spending, you can add a third column for the variance between the budget and the spending. Slide 5 Excel can automatically enter data in a worksheet. If you are entering a series of data, Excel might be able to automatically fill in the values. Sequential numbers, months, and days of the week can be entered at first by the user and then continued by Excel’s “AutoFill” capability. To use AutoFill, enter the first value in the first cell. For example, if you want to AutoFill from 1 to 10, you should type 1. Then, type 2 in the next cell to create a pattern. Select the cells that contain 1 and 2. The selection will have a fill handle. The fill handle is a small black square on the lower right corner of the selection. Click and drag the fill handle across the range you want to fill. As you drag, Excel displays a small gray box with a preview of the value that will be placed in each cell. Drag until you see 10 and then release the mouse button. Video 2

Similar to AutoFill, Excel also automatically updates any formulas that you copy and paste. Instead of writing a formula multiple times, you can just copy it and paste it where you need it. The cells of the original formula will be updated to correspond with the new location of the formula. For example, imagine a formula in cell C1 adds cells A1 and B1. If the formula is copied from C1 and pasted into C2, then the formula’s rows are updated. It will now add A2 and B2. Similarly, if the formula in C1 is pasted into D1, then the columns of the formula will be updated. It will now add B1 and C1. Copying and pasting formulas can save a lot of time. However, be careful when copying and pasting formulas. Depending on the situation, you may not want Excel to automatically update the formula. Or maybe part of the formula should be updated and part should not. You can “lock” different parts of a formula. When you paste a formula, the locked parts will not be updated. You can lock formulas using the dollar sign. There are multiple places where a formula can be locked. Let’s look at an example. Using our previous example, you now want the formula in cell C2 to add A1 and B2. The original formula should now contain a dollar sign to lock A1.

Enter the following in cell C1: =A$1 (pronounced A, “lock” 1) + B1 If we paste the formula from C1 to C2, then it will look like this: =A$1 (pronounced A, “lock” 1) + B2 If we paste the formula from C1 to D1, then it will look like this: =B$1 (pronounced B, “lock” 1) + C1 The column changed because it is not locked. It is possible to lock both the row and the column, using two dollar signs. In that case, C1 would look like this: =$A$1 (pronounced “lock” A, “lock” 1) + B1 If we paste the formula from C1 to D1, then it will look like this: =$A$1 (pronounced “lock” A, “lock” 1) + C1

Slide 6 Excel allows you to add “comments” to worksheets. Each cell can have a comment. A comment can be added by right clicking and selecting the add comment option. Alternatively, comments can be added by using the comments section of the review tab on the ribbon bar. The comments section allows you to search for the next or previous comment as well. Comments can be deleted or edited after they are created. By default comments will only appear when the cursor is over the commented cell. This setting can be changed by selecting ‘Show/Hide Comments’ from the right-click menu or from the review tab. A commented cell has a small red triangle in the upper right corner of the cell. Commenting is useful when you are doing complicated analysis. You can make a note to yourself so that you remember the logic you used when creating a formula. They are also useful when 2 or more people are working on one spreadsheet. Slides 7 & 8 The most common type of filtering is on the values that the column contains. But Excel also can filter on color, simple mathematical equations, and more. When clicking the filter arrow, a menu is displayed. There are a couple submenus. One is for filtering on color. By coloring certain cells in a column, you can filter your data by color. The filter on color option will appear on the filtering menu only when cells in the column are already colored. It is also possible to filter on no fill. Coloring cells is another way to flag. The other submenu is for filtering on numbers. There are many options to filter on simple mathematical equations, such as equals, greater than, less than, and custom. Using the custom filter, you combine 2 different number filters. If the column contains text instead of numbers, then this submenu will be for filtering on text. You can filter on beginning letters, ending letters, contains (where you type a phrase for the filter) and more. Video 3 “Flagging” is a way to help you with complex filters. While it is easy to filter on multiple characteristics, it can also take a long time. If you need to make a lot of clicks just to do one filter, consider creating flags. Imagine you are creating a complex filter on a spreadsheet about cars. You want to look at white Ford Delivery Vans that are at least 10 years old. You have a column for color, make, model, and age. You have to set a filter on each column in order to get your desired

result. But now, you want to see the entire spreadsheet again, so you clear your filter. If you want to see your previous filter again, you have to create it from the beginning again. With flagging, it’s much simpler. So how do you create flags? First, create a new column. Now, filter your data. In our example, filter on color, make, model, and age in order to display just the white Ford Delivery Vans that are at least 10 years old. Then, create a flag in your newly created column. The flag can be anything. It can be ‘X’ or it can be more specific, like ‘White Ford Delivery Van 10+’. The important thing is that you know what the flag means. Now clear your filter. Go to your new column. You can filter on your flag to easily white Ford Delivery Vans that are at least 10 years old. Creating flags increases your efficiency and accuracy when analyzing data in Excel. Video 4 A lot of data analysis requires combining data from different worksheets. Perhaps there is a worksheet with a list of Product IDs and their prices. A different worksheet contains Product IDs and the amount sold in 2012. Your job is to get the total revenue for each Product ID. What will you do? Most people try to copy and paste the data from one worksheet into another. However, there is a big problem with this method. The data is probably not arranged in the same way. Also, there may be more items on one worksheet than on the other. In that case, copying and pasting would lead to errors. It would take a lot of time to manually correct these errors and accurately combine the worksheets. Luckily, there is a formula that is perfect for combining data. The VLOOKUP formula can safely bring data from another worksheet. To use VLOOKUP, your two worksheets must have a unique identifier in common. In our example, it is the Product ID. Let’s add the number sold to the worksheet with prices.

1. On the 3rd column of the prices worksheet enter the formula: =VLOOKUP(

a. VLOOKUP has four arguments: i. Lookup Value – The unique identifier. In this case, cell A2. ii. Table Array – The range from the other worksheet that you want to search. For this argument,

switch to the worksheet with number sold. Select the range, starting with the first cell of Product IDs and ending with the last cell of number sold.

iii. Col Index Num – The value that you want VLOOKUP to return. This one can be a little confusing. You should enter a number. Entering 1 means you want the formula to give you the data that is in the first column of the table array. Entering 2 means you want the 2nd column, etc. In our case, we want the number sold, so we should type 2.

iv. Range Lookup – Don’t worry about this argument. Set it to FALSE. b. Remember after each argument to type a comma in order for Excel to know that you are finished with

that argument. Also make sure to close the formula. c. When finished, the formula should look like this:

=VLOOKUP(A2,'[Exercise VLookup B.xlsx]Sheet1'!$A$2:$B$7,2,FALSE) 2. Now you should have one cell with the VLOOKUP formula which is returning the number sold for the first

Product ID. 3. Copy the VLOOKUP formula to the rest of the cells in the column. If any of the Product IDs from the current

worksheet are not found on the worksheet VLOOKUP is searching, then the formula will return #N/A. 4. Select all the cells with VLOOKUP formulas. Copy the cells. 5. Paste values in the same location, overwriting the formulas. To do this, either right click and choose Paste Special

> Values > OK or click the Paste drop down menu in the clipboard section of the home tab and then select Paste Values.

a. It’s important to paste the values for VLOOKUP. A VLOOKUP formula is fragile. If you make any changes to the worksheet that the formula references (adding columns, changing values, or even moving the location of the file), the returned value may change.

Slide 9 A simple but useful formula is =Cell=Cell. If you want to check to see if cells have the same contents, you can use this formula. It will return a value of either ‘TRUE’ or ‘FALSE’, allowing you to quickly analyze massive amounts of data. For example, if you want to check cells A1 and B1, you can enter the following in cell C1:

=A1=B1 Slide 10 In this lesson you learned how to efficiently work with filters. You also learned some useful formulas and methods for analyzing data. Of course, this lesson is just an introduction to Excel’s many useful tools. As you get better with Excel, you can always use the Internet and Excel’s help feature to increase your knowledge. The final Excel lesson will be about creating reports. Specifically, you will learn about pivot tables, which are a very powerful feature for displaying and summarizing data.

LESSON 8: MICROSOFT WORD 3: ENHANCING DOCUMENTS

Slide 1 Welcome to Novus Computer Lesson 8: Microsoft Word 3: Enhancing Documents. The objective of this lesson is to provide you with the skills needed to make more attractive and professional documents. You will learn about inserting pictures and shapes into your document; text, paragraph, and line spacing options; and editing the appearance of your document using styles and themes. Slide 2 A document’s style is made up of the colors, font types, and font sizes that make up the general appearance of text. Word has a number of preset styles for you to choose from, each of them being most appropriate for different parts of your document. Some of the most useful styles are the “Normal” style, which is default in Word; the “Title” style, which is useful when titling your document; and “Heading” and “Heading 2” styles. Using these styles will remove the need for you to remember the exact color, size, and face of your different font types. The styles are found in the Styles section of the Home tab in the Ribbon bar. The main styles are displayed here, but you can access further styles by clicking the arrow button to the right of the Styles section. When this button is clicked, a menu with more styles. Slide 3 Similar to style, a document theme provides preset color and font settings that, when selected, are applied to your entire document. Themes are made up of different groups of styles. The benefit of having the same styles applied to an entire document is that it helps build recognition of your general design, or brand. These themes have been created by Microsoft designers and made available for you to make documents look more professional. This can save a lot of time when you have a deadline. In addition to the font colors and faces, Microsoft Office themes also provide preset styles for the backgrounds, tables, and other special elements in your document. Let’s take a look at how Word changes different elements of your document when you select a theme. Video 1 To take advantage of Word’s themes, it’s important that you create your document from the beginning using the different Styles, such as Header and Title, which were mentioned before. When you switch the theme of your document, Word will simply apply the new characteristics of the theme to these different styles. If you have already written your entire document, simply highlight the text you want to apply a style to, and then select the appropriate style from the Style section of the Home tab. Setting these initial styles is only the first step in changing the entire look of your document with themes. Since themes can also be applied to tables, it’s useful to change any text you have formatted using the tab key into a table. This is easily done by highlighting the entire text and then clicking the Table button in the Insert Tab, and selecting “Convert Text to Table” form the menu. This will place the information in a table that is ready to be styled. As we learned in the last lesson, tables in Word can be styled using the Design tab that appears when you are editing the table. Now that the different sections have appropriate styles, let’s change the theme of the document. To do this you need to click the Change Styles button in the Home tab. This will bring up a menu of styles available for your use. Some of the styles on this menu are Fancy, Modern, and Traditional. When you hover over the different style names you will see that your document’s theme changes, giving you a preview of what it will look like. Styles that were plain before have changed to include color and different font faces. By clicking the theme name that you want applied, Word will apply that theme to the elements in your document that have been assigned a style. Slide 4 Adding images to your document can make it look more professional or less professional. It is important to remember that only appropriate images should be included in documents. Images should be included to help tell a story, or as a means of

design. The most common types of graphics files added into documents are jpeg, gif, or bitmap. Before inserting your image place the blinking cursor where you want the image to appear. Clicking on the Picture button in the Illustrations section of the Insert tab will bring up the Insert Picture dialog box. From here you will need to locate where the image is on your computer, select it, and press the Insert button. Once the picture is added to your document you will notice that Word adds a new tab to the Ribbon bar. Using this tab you can adjust how the picture looks through the brightness and contrast settings, you can choose from preset picture styles in the Picture Styles section, and you can edit the picture’s size and shape. Depending on where your picture is inserted in your document, you may notice that text surrounding it has been rearranged making your document seem a little sloppy. Let’s look at how to change the way text is placed around images in your document. Video 2 As you can see in this document, the inserted image creates a blank horizontal space when it is inserted inline with the text, making the document look unprofessional. Using Word’s picture tools you can position the image in different ways within the text. Within the new Format tab of the Ribbon bar you will see a button called Position. Clicking this button will open a menu of different positioning options such as top, left, right, middle, and bottom. As you hover over these different options Word will provide you with a preview of what that option will look like. Your text now smoothly wraps around the image you have inserted, making the image seem like an integrated part of your document. Video 3 Simple shapes may be useful in the design of your document. There are a number of shapes that Word provides for your use, which you can add your own text and design to. Some simple but useful shapes are circles, triangles, squares, rectangles, arrows, and stars. To insert shapes into your document select the Shapes button from the Illustrations section of the Insert tab. Shapes can be resized to fit what you need for your document. To resize a shape, first use your mouse to select the shape, this will make little squares appear on the corners of the shape. Place your mouse on one of these little boxes, click, and drag the side of the shape until it is resized to what is needed. Shapes can also be rotated using the little green circle that appears when you click the shape with your mouse. Shapes are great ways of adding extra information to your document, but sometimes they are not enough. Video 4 Using diagrams is another way to illustrate a point and make your document more distinctive. Word’s Smart Art diagrams are very similar to shapes, but more complex. Smart Art diagrams are great preset diagrams that you can insert your own information into. Clicking the Smart Art button in the Illustrations section of the Insert tab can access the Smart Art menu. This will bring up a dialog box displaying all of the different diagrams available for use. On the right of the dialog box is a grouped listing of the different types of Smart Art, making it easier for you to find the diagrams that best works with your document. There are diagrams that help show lists, processes, cycles, hierarchy, relationships, matrix, and pyramid. After selecting a Smart Art diagram click OK and it will be inserted into your document. Once the diagram graphic is inserted you can make a number of changes to it through the new Design tab in the Ribbon bar. You can also change the size of your graphic by clicking and dragging on the side of the diagram. You will see that Word automatically adjusts the size of the text to fit appropriately in the diagram. One of the most important changes you can make is to add text to the graphic. Clicking the Text Pane button in the Create Graphic section of the Design tab does adding text. This will open a text box where you can then insert the text that will be placed in the different sections of the diagram. Make sure that your diagram is clear to the reader; only use diagrams when they help you illustrate your point better or more clearly. Slide 6

Some documents are better formatted when continuous sections of text are placed in columns instead of spanning the length of the page. Many newsletters utilize this format to make reading easier. Depending on your text, columns may make better use of the space on the page. Word provides options for formatting text into the default one column, two columns, or three columns. To change a section of text from single to multiple columns, highlight the text that you want to put into columns and click on the Columns button in the Page Setup section of the Page Layout tab. Within the Columns menu select the column option that best fits your document. Slide 7 Line spacing is another important part of document formatting. There are a number of different options when it comes to line spacing. Line spacing increases the vertical distance between each line of text. Line spacing can also be used when you need to add spacing between two sections of text. The Line Spacing button in the Home tab of the Ribbon bar provides a number of quick and easy options for setting the line spacing in your document. Clicking the Line Spacing button will open a menu of different line spacing options. Here you can select from different values between single-spaced and triple-spaced. To change the spacing of text, make sure that you highlight the text that you want to change before clicking the spacing option. Without highlighting, Word will only apply the spacing to the section of text where your blinking cursor is located. Within the Line Spacing menu are also options for adding before and after paragraphs, which can be useful when you want to spread out different sections of your document. Video 5 Now that you understand the options you have for quickly designing impressive, professional Word documents, you should learn about some other options that will help make your document even better. In the last lesson you learned how to easily add page numbers and graphical headers through the header and footer options. Word can also create impressive cover pages for your document just as easily. Cover pages give information like your document title, your name, and sometimes even a basic overview of what the document will be like. This information makes it easy for the reader to quickly understand the purpose of your document. To add a cover page click the Cover Page option from the Insert tab of the Ribbon bar. This will open a menu with a number of different designs. After choosing the design that best fits with your document Word will place the new cover page as the first page of your document. In this new page you will need to fill in the textboxes with the appropriate information such as document name and subtitle. Once this information is entered your cover page is complete. Slide 8 In this lesson you learned how to enhance the design of your Word document. Word provides a number of design options such as themes, images, and Smart Art to help make your document as effective as possible. It is important that you don’t overuse these options, but use them selectively to compliment your text. Once you have mastered the use of the design, formatting, and preset elements of Word, you will be able to quickly create professional documents.

LESSON 9: MICROSOFT EXCEL 4: REPORT GENERATION

Slide 1 This lesson is the 4th and final lesson on Excel. You’ve already learned about Excel’s features, the workspace, basic data entry, and data analysis. In this lesson you will learn how to create several types of reports in Excel. Slide 2 A “report” is just a collection of data. So, any worksheet can be a report. However, most worksheets need to be formatted and changed in order to make a good report. A report is a collection of data that is well organized and nicely summarized. A report should be easy for others to read and understand. Let’s start with the most basic report: a list of data. Your worksheet is probably already a list of data. There are a few things to think about before you print the worksheet or send it to someone else as a report:

• Are the data correct? – It is easy to make mistakes in Excel. The bigger the spreadsheet, the easier it is to make a mistake. Before giving a report to someone, you should always make sure that your data are correct. Check your formulas. Check any sums. Also check for spelling and grammar mistakes.

• Is it easy to read? – A worksheet may be clear to one person and confusing to another. It is important to create clear worksheets so that everyone can understand your work. Small things like freezing panes can save other people a lot of time when they look at your worksheet. Also, avoid small fonts and difficult colors. Sorting your data can make the spreadsheet much easier to read. Applying filters also helps.

• How much data should be shown? – Your worksheet might have extra, unnecessary data. Extra data makes a worksheet more difficult for others to understand. You should only include data that are important. However, you don’t need to delete unimportant data.

Slide 3 In Excel you can control which data are visible. Rows and columns can be hidden. To hide a row or column, select a row or column from the identifying header. It’s important to select the entire row or column and not just a few cells. Once the row or header is selected, right click on it. In the right-click menu, select Hide. You can unhide rows and columns in the same way. Once a row is hidden, you will notice that the identifying header skips the row. For example, if you hide row 3, then the identifying header will show rows 1, 2, and then row 4. Row 3 still exists in the worksheet, but it is simply not displayed. You can hide multiple rows or columns by selecting multiple rows or columns before right clicking. Video 1 A report should always be prepared for printing. Maybe you are not going to print the worksheet, but the person you send it to might want to print it. Here are several things you should check for every report:

1. Select the “Print Area” – By default Excel tries to print the entire worksheet. If you only want to print part of the worksheet, you can define a print area. To set a print area, click Print Titles under the Page Setup section of the Page Layout tab on the ribbon. On the dialog box’s Sheet tab, the first option is called Print Area. Click the icon to the right of this option. Now select the cells you want to print. Then, press enter or click the icon on the Print Area dialog box again.

2. Format the “Page Breaks” – As you learned in the second Excel lesson, you can start new pages wherever you want in Excel. It’s important to make logical page breaks when creating a report. Good page breaks make your report much easier to read. Use the Print Layout and Page Break Preview to see what your document will look like and how many pages it will be.

3. “Headers” and “Footers” – Depending on the worksheet, you might need to add headers and footers. For example, a multiple page worksheet should at least have footers with page numbers. Many businesses add a header with the title of the worksheet and footers with important information such as the date and the file name.

4. Repeat header rows and columns – If you are printing a large list of data, it is helpful to have the header row print on every page. Think of this like freezing panes, except for a printed worksheet. To repeat a header row or column, click Print Titles under the Page Setup section of the Page Layout tab on the ribbon. On the dialog box’s Sheet tab, the second section has options for repeating rows and columns. Similar to setting a print area, click the icon and then select the row or column you want to repeat. You can repeat multiple rows and columns.

Slide 4 In the first Excel lesson you learned that one of Excel’s functions is “charting.” Creating charts is a powerful reporting tool. To create a chart, first you need data. The most basic chart can be made from one column of data. However, the chart will not have any descriptions and will be confusing. So, most charts are made from 2 columns of data or more. Video 2 Let’s look at an example. We have different types of ice cream. We have each type’s popularity. We want to make a chart. A pie chart will be perfect to display our data in a graphical way. First, we should arrange our data so that there is a column for the type of ice cream and a column for popularity. Now, we need to select the data, including the header cells. Next, go to the Insert tab of the ribbon and click on Pie from the Charts area. There will be several pie chart options. Choose the first 2D pie option.

You now have a pie chart. You can change the chart in many ways. Let’s edit the title. Right now, it just says “Popularity”, which is not very descriptive. Let’s change the title to say, “Ice Cream Popularity”. Click the title in the pie chart. Now you can make changes to the title. When the chart is selected, a special chart menu appears in the ribbon bar. Through the three tabs, Design, Layout, and Format, you can edit the characteristics of the chart. Slide 5 & 6 “Pivot tables” are a great tool to quickly summarize a large worksheet. Pivot tables are interactive. They can be changed and updated to analyze and summarize data in different ways. Pivot tables are especially good for these situations:

• Working with large amounts of data • Summarizing data by categories and subcategories • Moving rows to columns or columns to rows (“pivoting”) to see different summaries of the source data • Presenting attractive, short printed reports

Pivot tables perform calculations on chosen fields. Any column in a worksheet can be a field in a pivot table. A field in a pivot table summarizes multiple rows of information. A pivot table has 3 main parts: columns, rows, and values. The fields can be placed in these 3 areas for different types of summaries. As the pivot table is interactive, it will be updated as soon as you make a change. This makes it easy try different things to see which way is best to summarize your data. Video 3 Pivot tables are easier to learn by doing. Let’s look at an example of creating a pivot table for a clothing store.

1. Select the data that will be summarized with the pivot table (include column headers). 2. Go to the Insert tab of the ribbon bar. Select Pivot Table and choose Pivot Table Report from the drop down

menu. 3. The Create PivotTable dialog box will appear. You have already selected the data, so the range will be displayed

in the box. You can create the PivotTable in a new worksheet or the existing worksheet. Choose new worksheet in order to keep the original worksheet clear.

4. A new sheet is created and the PivotTable Field List appears. There are 5 different viewing options for the Field List. In the beginning, choose the second option. You can later change options if you prefer a different view.

a. On the left side of the Field List are all the fields in your source data. Each field has a checkbox. By checking the checkbox, you select the field to be used in the PivotTable.

b. The right side of the Field list has boxes for a filter and the 3 areas of the PivotTable. When you select fields, they will appear in these boxes.

i. By default, selected text fields will appear in the Row Labels box. ii. By default, selected number fields will appear in the Values box.

5. Select all 3 fields: type, season, and sales. a. The PivotTable automatically updates to show you the current summary. This summary can easily be

changed by moving the fields from their default positions in the right side of the Field List. 6. Move the season field from the Row Labels box to the Column Labels box.

a. Notice how the PivotTable is updated. Now the Summer and Winter categories appear as columns. 7. By default, the Values box sums its fields. Change the sales field from a sum to a count.

a. Click the arrow on the sales field. b. From the menu click Value Field Settings. c. On the Summarize By tab, choose Count.

8. We can also use the Report Filter feature on the PivotTable Field List. Move Season from the Column Labels box to the Report Filter box.

a. Now the seasons disappear from the PivotTable. A filter is added on the first row. b. Change the filter from All to Winter.

Slide 7

When you select a PivotTable, the ribbon bar is updated with two new tabs: “Options” and “Design.” The Data section of the Options tab has two icons: Refresh and Change Data Source. These are important for keeping your PivotTable accurate. If data is changed in the original data source, the PivotTable will not show the changes automatically. The PivotTable must be refreshed. Clicking the Refresh icon will update the PivotTable with the current values within the original data source. If data is added or deleted in the original data source, the source data range needs to be updated. Clicking the Change Data Source icon lets you choose a new data source. Slide 8 Perhaps you want to send your Excel spreadsheet to someone as a report. In that case, it might be good to lock PivotTables, or in other words, replace the PivotTable with plain data. Locking PivotTables makes your worksheets simpler and easier to understand. Also, it ensures that other people can’t change your PivotTables. You can delete a PivotTable while still keeping the data summary it provides. Save your spreadsheet under a new name (so that you keep your original pivot tables on the original spreadsheet). Select everything on the PivotTable worksheet. Copy the data. Do Paste Special and choose Values. Now the PivotTable no longer exists, but the summary remains. Now you can make other changes to the summary, such as changing the names on the column headers. You can format the data to match the look of your other worksheets. Slide 9 Excel can also create “PivotCharts,” which are simply charts that are based on PivotTables. To create a PivotChart from a PivotTable, first select the PivotTable. On the Options tab choose PivotChart from the Tools section. Excel places a chart on the worksheet based on the PivotTable. The PivotChart Filter Pane window lets you change what is displayed on the chart. Making filters in this pane will also filter the PivotTable. Similar to PivotTables, PivotCharts have their own tabs on the ribbon bar. Using these tabs you can edit the characteristics of a PivotChart. Slide 10 In this lesson you learned how to format basic reports, setup printing, create chart reports, and create PivotTable reports. With this knowledge, Excel is not only a tool for analyzing and organizing large amounts of data – it’s also a powerful presentation tool. The reports you create in Excel can be used in other areas of Microsoft Office Suite.

LESSON 10: MICROSOFT WORD 4: FURTHER FUNCTIONS

Slide 1 Welcome to Novus Computer Lesson 10: Microsoft Word 4: Further Functions. The objective of this lesson is to present the advanced functions available in Word. You will learn how to create a “table of contents” for your document, with clickable links used to move to different sections; how to add “footnotes” and “references;” how to perform an automatic “Mail Merge” using information from a database; and how to use “document locking” and “collaborative editing” features in Word. Slide 2 In the previous lessons you learned how to insert page breaks in Word documents. The page break is best used when you want to start a new section on the next page of your document. But if you want to use different headers or footers, or restart the page numbering, you will need to use the “Section Break.” A Section Break places content in a new section, similar to how a Page Break places content on a new page. Using sections, you are able to change the page layout and formatting of your document. Within a new section you have the ability to change the page’s margins, paper size, orientation, borders, page numbers, headers and footers. Proper use of section breaks will allow you to create complex documents such as pages with both single and double columned text. The most used section break options are “Next Page Section Break” and “Continuous Page Section Break.” These two will create new sections differently. With Next Page Section Break, Word will move your text to the next blank page and designate it as a new section. Continuous Page Section Break doesn’t move your text, but instead

designates a new section at the beginning of it. The new section options are located in the Page Setup section of the Page Layout tab. By clicking the Breaks button you will see the two different Section options at the bottom of the menu. To set a section break, place your blinking marker on the line where you want the new section to start and select the type of section break you want. Video 1 To properly use sections in your document you have to use the skills from the previous lessons and apply them here. Using different footers and page numbers with different sections is one of the main reasons why Sections are useful. Many documents include a cover page, but if your document has headers, footers, or page numbers, Word will automatically add this information to the cover page. By using sections, you can resolve this issue. First, insert a Next Page Section Break, changing your document from one to two pages, and splitting it into two sections. Next, insert the footer into your document. In the “header and footer tools” tab, make sure that the two sections’ headers and footers are not linked. Linking them will make sure that they always remain consistent in style and design. To unlink them unselect the “Link to Previous” option in the Navigation section of the Insert tab. Now delete the footer on the first page by double clicking in the footer area and erasing the data. This will leave the only second page with information in the footer. The page number of the second page, however, will still be displayed as “2.” Since the cover page should not count as the first page of your document, you want the second page to actually be page “1”. Clicking on the footer section will bring the Header and Footer design tab back, and you will notice the Page Number button in the Header and Footer section. From the Page Number menu select Format Page Numbers, which will bring up a dialog box where you can select from what page Word should begin counting pages. The current selection is to continue numbering pages from the previous section, which is why the second page is “2.” By selecting the second option, Start at, and entering “1,” we will be able to make the second page appear to be page 1. Sectioning is a very useful tool in Word; it allows you to control the flow of your document from page to page, while still taking advantage of Word’s powerful automatic page numbering and header and footer tools. Slide 3 As documents become longer and more complicated, it is important to provide the reader with an easy way to navigate through the document’s different parts. Word provides an automatic Table of Contents creation tool to help with navigation. The easiest way to create a table of contents is to use the style options discussed in the previous lesson. When splitting up your document into different chapters for the table of contents, Word looks for the use of Heading styles as a way of marking the beginning of chapters. Word provides two different heading styles, Heading 1 and Heading 2. Heading 1 is used to identify chapters, which are used to divide the document into similar theme-based sections. Heading 2 is used for sub-chapters, which can be used to break the chapters down into more specific sections. To mark the chapters in your document, highlight the title or header of the chapter and select the appropriate Heading style from the Styles section of the Home tab. After all of your chapters and sub-chapters have been marked, place your blinking marker where you want the table of contents to be positioned. Next, click the Table of Contents button in the Table of Contents section of the References tab. The menu will give you different style options for the Table of Contents. Once selected, Word will insert a complete table showing the page numbers of the different chapters and sub-chapters that you have marked using the Header styles. As you add information to your document or decide that new chapters and sub-chapters need to be added, make sure that you update the information in the table by clicking the Update Table button located next to the Table of Contents button. Slide 4 In many business environments it is important that the information you have collected and reported is accurate. Supervisors and coworkers will expect you to provide references citing the source of your information. Including these references inline with your text can make your report seem unorganized and unprofessional. With Word’s Footnotes option it is easy to keep your document neatly organized while still providing clear references. Footnotes place a

“superscript number” at the end of your cited information, and a space, identified using the same superscript number, at the bottom of the page to document the reference. To insert a footnote, place your blinking marker at the end of the reference text and click the Insert Footnote button in the Footnotes section of the Reference tab. This will insert the superscript number, and then automatically bring you to the bottom of the page where you can insert the reference information. Slide 5 It is important that your document is reviewed and commented on by coworkers before it is sent to managers or clients. Word’s “Review tools” provide change tracking for your document so you can have coworkers review it and suggest changes. The review tools also give you the option of keeping the suggested changes or returning to your original text. To enable this feature, click the “Track Changes” button from the Tracking section of the Review tab in the Ribbon bar and select the Track Changes option from the menu. Once the option is enabled, any edits that you make in the document will be shown on the screen. The underlined colored font style is used to show added text, and the crossed out font style shows text that has been deleted. When you hover over a piece of edited text you will be shown the name of the person who made the edit as well as the time when the edit was made. As the original author of the document you can either accept or reject the suggested changes by clicking the Accept and Reject buttons in the Changes section of the Review tab. You are also able to insert short comments into your document where you or your coworkers can discuss the changes in more depth. Comments are added by placing your blinking marker within your text or highlighting a section of text, and clicking on the New Comment button in the Comments section. Change tracking and comments are useful tools when many people are collaborating on a document. Slide 6 While most documents you create will be public, some documents are very private and only for personal viewing. For these documents, Word provides a security feature that requires users to enter the password before they can view the contents of the document. To protect your document with a password, navigate to the “Encrypt Document” option in the Prepare submenu of the Office Button. This will bring up a dialog box asking you to enter your password, and reminding you that once it is set your password cannot be recovered. After entering your password you will need to click OK and enter the same password one more time before it is set. Save the document and from now on you will be prompted to enter the password whenever you try to open the document. To remove the password, navigate to the Encrypt Document option again and erase the password that is entered in the dialog box. While this is a great feature, it is important that you remember the password because it cannot be recovered after it is set. Video 2 When operating a business, you will often need to send emails and letters to customers, investors, and employees. While a generic message is acceptable, it is more professional to personalize your communication. Word makes the personalization of documents easier by providing a “Mail Merge” tool. Mail Merge can be used for mailings, mailing labels, nametags, and many other situations. The Mail Merge system requires two parts: a word document with the Mail Merge preferences set, and a list or spreadsheet containing the information that you want inserted into the document. For example, if you have to write letters to each member of your family, and insert their names and contact information, the personalization of each letter would take a lot of time to perform. With Mail Merge, all you need is a spreadsheet or list that contains the names and contact information of your family members, and a Word document, called a “form letter,” that has the Mail Merge preferences set to insert names and contact information. Word will then quickly create personalized letters for your family members.

While Mail Merge is most commonly used for letters, it can be used in many different situations. To set up a mail merge, you want to first write the letter or email that will be personalized. The easiest way to set up a letter for mail merge personalization is to replace any text that needs to be personalized with an “identifying term,” such as “NAME.” The Mail Merge function will use these identifying terms to show where personal information from the spreadsheet or list should be entered. A finalized letter, complete with the identifying terms is the first step of performing a mail merge. Once the document is complete, click on the Select Recipients button in the Mailings tab of the Ribbon bar. In the Select Recipients menu you will see three different options. The first option, Type New List, should be used if you don’t already have a list of the information that needs to be inserted. The second and third options will allow you to select the Excel spreadsheet, Outlook contacts list, or other database that contains the information. Clicking on the Type New List option opens a dialog box where you will insert the mail merge information and set the preferences. In the New List dialog box you will insert the information for the different recipients of your letter, but first you need to make sure the dialog box’s field columns match the identifying terms that you have in your document. While they don’t need to be the same name, having them be easily understandable makes the task easier. Clicking on the “Customized Columns” button will open another dialog box where you can delete, add, or rename the field names that you need for your document. Once you have set these fields and clicked the OK button you will be brought back to the New List dialog box, now updated with the customized field name columns. Now you need to enter the different recipients’ information. These field names are now associated with the recipient information. After entering the information, press the OK button, and you be asked to save the information you just entered. This is the second step of the mail merge. In the main document, you will now need to replace the identifying terms with the field names that you customized during the last step. To do this, highlight the identifying term and click on the Insert Merge Field button in the Write and Insert Fields section of the Mailings tab. Select the appropriate field name from the menu that appears and you will see it replace the identifying term. Replacing all of the terms with field names is the third step of the mail merge. The final step is to actually merge the list information with the letter. To make sure that you information will be correctly merged, click the Preview Results button in the Mailings tab. This will show you the final outcome of the mail merge. You can press the forward and backward arrows to preview other entries from your recipient information list. Clicking the Finish and Merge button will give you the option of either printing all of the merged entries, or editing the individual documents. Editing the documents will open new Word documents for each of the recipients on your list, which you can then edit or save for use in the future. Slide 8 In this lesson you learned how about the advanced functions that Word provides for making complex document creation easier. With the use of functions like Mail Merge, change tracking, and Table of Contents indexing, Word gives you the tools you need to easily and quickly produce professional documents.

LESSON 11: MICROSOFT POWERPOINT 3: ADVANCED SLIDE DESIGN

Slide 1 Welcome to Novus Computer Lesson 11: Microsoft PowerPoint 3: Advanced Slide Design. The objective of this lesson is to expand on the tools that PowerPoint provides for designing slides and making them more impressive. In the last lesson you learned about PowerPoint’s themes, styles, slide types, and inserting multimedia into slides. In this lesson you will learn about printing and saving your presentation, and some of PowerPoint’s basic animation techniques. Slide 2 Having your hands free from using the computer during your presentation can allow you to interact more with your audience. If your presentation type allows you to, PowerPoint provides automated timing preferences that will advance your presentation from one slide to the next without you clicking on the mouse or keyboard. This will make it seem as

if your presentation is running automatically. This technique is also useful for general information presentations that are best run without a presenter. To set your presentation to play automatically, you will need to tell PowerPoint the amount of time it should wait until it advances to the next slide. This time should be enough for the reader to read and process the information presented on the slide. The Advance Slide menu area in the Transition to This Slide section of the Animation tab provides the options for advancing to the next slide. PowerPoint’s default for advancing is to wait for the user’s mouse click, but underneath this option is the Automatically After option. After clicking on the checkbox next to this option, you will need to enter the number of seconds that PowerPoint should wait before advancing. Remember that this setting is only for the current slide, and not for every slide in your presentation. Clicking on the Preview button will allow you to see the transition without having to enter the Slide Show view. You can easily review the timing options you have set by switching from the normal view to the slide sorter view, where the slide’s timing will be displayed underneath it. Slide 3 Printed presentations and handouts can be great for large meetings where some participants maybe not be able to clearly view your slides. They can also serve as a reminder to people of your presentation’s content, and allow them to act on the information you have provided. PowerPoint provides a number of print options to make sure you area easily able to print the required information for either yourself or your audience. Video 1 To open the Print dialog box, click on the Print option found in Print submenu of the Office Button menu. In this dialog box are a number of options for printing your presentation. Your are able to specify exactly what it is you want to print by choosing from the options in the Print Range section. The All option will print your entire presentation, and the other options of Current Slide, Selection, and Range will print only specific slides that you choose. You can set the number of copies you want printed by entering the number into the Copies section of the dialog box. The Print What section of the dialog box gives you options for selecting what you want to print. The provided options are Slide, which prints the slides to that each slide takes up one page; Handouts, which prints multiple slides on one page; Notes, which will print the slide along with the notes that you may have entered into the notes section at the bottom on the normal view window area; and Outline, which prints only the text content of your presentation, with the slides clearly identified by numbers. You can use the Preview option on the bottom left of the Print dialog box to see what these different print options will produce. Slide 4 Besides saving a slide as a PowerPoint file, you are also able to save slides as pictures and PDF files. These options are useful for sending slides to users without Microsoft Office installed on their computers, and it also reduces the file size to something more manageable. It is important to remember that all animation and multimedia content will not be accessible in these versions of your presentation. The save dialog box provides you with many format options. Some of the most useful are JPEG, PNG, and PDF. To save your file in these formats select the format from the Save as type drop-down menu, and save the file in the normal way. Video 2 The Animations tab in the Ribbon bar provides the main animation options for PowerPoint, as well as the timing options that you learned about earlier in this lesson. Your slides must have content entered into them in order to begin using the animation features. Once there is content in your slides, the animate dropdown menu will be available. The dropdown menu provides a number of options, but let’s look at a few of the most useful. The animation types are broken down into three main categories, Fade, Wipe, and Fly In; and each type has two options for how it will be applied to the slide’s content, All at once, or by 1st level paragraphs. A quick preview of the animation is provided for you when you select it from the dropdown menu. This allows you to make sure you are using the correct transition for your presentation.

Besides text features, PowerPoint also allows you to animate the transition from one slide to the next. Hovering over the Transition options in the Transition To This Slide section will also give a preview of the animation. Clicking on the down arrow to the right of these shown options will open up a larger menu that includes a number of different transitions. Animation features can also be used on smart art graphics and shapes. These static shapes can help explain a process easier with the use of animation tools. Setting the Custom Animation option will give you more freedom for developing these types of animations. When the Custom Animations button is pressed, the Custom Animations pane is opened on the right side of the screen. Here you can use the same kind of animation types that were available in the animate dropdown menu, along with a number of other options. These other options can be found in the Add Effect dropdown menu in the Custom Animations pane. In this menu are four submenus, Entrance, Emphasis, Exit, and Motion. Simply experimenting with these options will help you use them correctly. Slide 5 In this lesson you learned how to use PowerPoint’s animation tools to make your well-designed presentation more impressive. As you learned last lesson, it is important to remember that the content of your message is more important. Using too many transitions and animations may make your presentation less professional, and move the audience’s attention away from the message. Use the features to enhance your presentation’s message.

LESSON 12: ARMENIAN BUSINESS RESOURCES

Slide 1 In this lesson, we will discuss the process for registering a new business in Armenia. We will describe the types of businesses that can be registered and the process for registering a business with the Armenian government. We will cover the steps the Armenian government has taken to simplify people’s ability to do business and where you can find additional resources as a potential business owner. Slide 2 According to the latest Armenian legislation, both Armenians and outside investors can register businesses using the same structure. The legislation provides the same legal guarantees and protections to local and foreign businesses. The laws relating to businesses are governed by the Civil Code, the Law on Joint Stock Companies, the Law on Limited Liability Companies and the Law on State Registration of Legal Entities. Individuals can register their businesses as a private entrepreneur or as a legal entity. Slide 3 In Armenia, the simplest way to start a business is to register as a sole proprietor. A sole proprietorship is owned by one person who is usually involved in the daily operation of the business. Although this form is distinct from legal entities, most of the provisions applicable for legal entities also regulate the activities of proprietorships. An entrepreneur is allowed to have a business seal, a bank account and employees. As we will see later when we describe legal entities in Armenia, sole proprietorships differ in one key way: there is no distinction between the owner and his or her business. In the case of a lawsuit or bankruptcy, the owner’s other assets and property may also be used to satisfy any obligations of the business. When a lawsuit, bankruptcy, or other negative scenario occurs, the concept of liability is important to understand. To be liable for something means that you are held personally accountable for remedying the situation. The extent of one’s liabilities in business is governed by law and each type of business structure has different rules and regulations for what extent a business owner is held liable. In some cases, such as a sole proprietorship, an owner’s other assets – such as a house, car, or television – may be used to satisfy any debts owed by his business. Slide 4 According to the Civil Code, the three most common types of legal business entities are Joint Stock Companies, Limited Liability Companies, and Business Partnerships. Let’s first look at the main features of a Joint Stock Company. A joint stock company is similar to a corporation in America or Europe. A joint stock company has the ability to sell shares of stock to owners or investors. The business founders determine the quantity and value of the stock. The

potential liability to the founders is based on this stated value. Please refer to the lesson on Startup Capital for an overview of the purpose and structure of stock. There are two types of joint stock companies: open and closed. For an open joint stock company, new stock may be issued and sold to new investors without the consent of other, existing shareholders. Each shareholder is able to sell his or her stock without the consent of other shareholders. The stock of the business may also be listed on public stock exchanges. For open joint stock companies, there are certain requirements for regular financial auditing and information disclosure. A closed joint stock company is limited to distributing its shares only to the business’s founders. Under current legislation, there cannot be more than 49 shareholders for a closed joint stock company. There is no minimal capital requirement for starting a joint stock company, unless your business intends to operate in the financial sector, such as banks or insurance providers. This means that, unless your business would be classified in a financial sector, you are not required to have a minimum value of assets to register your business. Slide 5 Next, let’s look at a Limited Liability Company. In some ways, a limited liability company is similar to a closed joint stock company. A limited liability company may be founded by one or many people, called members. The charter capital of the business is divided into a certain amount of ownership shares. Typically, the business’s profits are divided amongst the founders based on how much of the business they own with their shares. However, in some cases, there may be special provisions in the charter that stipulate a different type of profit distribution. Limited liability companies are not allowed to issue additional shares, unlike open joint stock companies. The main difference between a limited liability company and a joint stock company is that, with a limited liability company, the founders can only be held liable for their initial investment. In a joint stock company, the value of the owners’ shares may change over time and the owners may issue additional shares at any time in return for new capital. In the case of a lawsuit, the shareholders of a joint stock company are liable for whatever they state their stock is worth, which may be more or less than they invested. Limited liability companies represent the majority of small businesses within Armenia. Slide 6 Finally, let’s look at Business Partnerships. A business partnership is an association of two or more people or organizations who are co-owners of a profit-making business. Business partnerships may be created as general partnerships or limited partnerships. A general partnership is a partnership where the people or organizations both act as owners of the new business. The owners, or general partners, are liable for all their property and assets for the obligations of the partnership. Conversely, in a limited partnership, the participating individuals or organizations may be general partners or limited partners. The general partner still remains liable for the obligations of the new partnership with all of his or her property. However, a limited partner is only liable for the amount of capital he or she contributes to the partnership. By definition, limited partners are individuals or businesses that do not participate in or guide the daily operations of the business. Note that a person is limited to being the general partner in only one business partnership. Slide 7 In a 2012 report published by The World Bank and the International Finance Corporation entitled “Doing Business in Armenia,” out of a total of 183 countries worldwide, Armenia ranks 10th in terms of ease of starting a new business. This is largely due to the government’s initiatives in 2010 and 2012. In 2010, the government enacted the following reforms:

• It removed the minimal capital requirement for most businesses. • It removed the need to receive approval from the National Police Department in order to prepare a company

seal. • And it made the registration forms online.

In 2012, the government simplified the entire registration process through the following: • It combined the steps needed for obtaining a tax identification number, and the procedures for registering a

business and a business’s name. • It created an online portal, at www.e-register.am where people can actually register their businesses online.

These two steps greatly simplified the registration process, making it much cheaper and easier for people to start businesses in Armenia. Slide 8 Now that we understand some of the common types of business entities in the Republic of Armenia, let’s look at the registration process for a new business as a legal entity or as a sole proprietorship. The first step in creating a legal business entity is registering with the State. Applicants can file all of the necessary documents in person with the State Register or by uploading them through the registration website. There is a fee of 17,000 Armenian dram for this step, which can be paid at any bank as well as the State Register. According to the law, the State Register has to either approve or deny the application within five working days, or seven calendar days. They are only able to reject the application if the founding documents are proved to be inaccurate or incomplete. If approved, the applicant will receive their business name, business registration, and tax identification number. It is important to note that if you use the electronic registration website, the system will inform you if you are missing any documents or if they do not match the information in the State Register’s system. If you want to register as a sole proprietor, the process is a little faster and cheaper, though for the most part is very similar to the registration process for legal entities. Slide 9 Once registered, a business has the option of obtaining a company seal. While this is no longer required by law, many business owners decide to get a seal as it simplifies any interactions between government authorities during the business’s operations. For example, a seal might make dealing with tax authorities much easier. The fee for a seal varies depending on the length of time for its issuance. For example, if you want a seal within one day, you would have to pay a fee of 15,500 Armenian dram. However, if you wanted it in 30 days, you would only need to pay approximately 3,000 Armenian dram. Within thirty days of registration approval, you need to register your business with your local Social Security Fund office. To do this, you need to present a copy of your registration certificate, a copy of your charter, and your tax identification number. Another consideration to the registration process is whether or not your business needs a license. There are two types of licenses: simple and compound. Article 43 of the Law on Licensing outlines the type of license needed for businesses operating in different sectors and the body from whom the license must be received. Simple licenses are issued directly from the Ministry of Finance of the Republic of Armenia, while compound licenses are issued by various state agencies. Due to recent legislative changes, fewer types of businesses require licenses and licenses can be acquired online at www.e-gov.am. One final note about registration is that if your business plans on importing or exporting products, you will need to register with Armenia’s Customs Authorities. Slide 10 Now that you understand the context for opening a business in Armenia, let’s review some places where you can gather more information about doing business in Armenia. You will find the following websites helpful and there are phone numbers that you can call to speak with someone further.

• The Small and Medium Entrepreneurship Development National Center of Armenia – Also known as the SME DNC, this organization was founded by the Armenian government in 2002 to provide state support to developing small and medium-sized enterprises. The SME DNC has offices in all of Armenia’s marzes, through which they provide technical trainings and financial assistance to small businesses.

• The Armenian Development Agency – The Armenian Development Agency was formed to assist foreign investors seeking to do business within Armenia. Since foreign investors are subjected to many of the same laws as native Armenians, the information on this website will also help provide an overview for doing business in Armenia.

• The Chamber of Commerce and Industry of the Republic of Armenia – The Chamber of Commerce was developed to promote the collective interests of business operators in Armenia. Its mission is to improve the environment for doing business in Armenia, promote export from Armenia and foreign investment in Armenian businesses, support small and medium-sized businesses, and help stimulate economic growth. Additionally, the Chamber of Commerce proposes legislative amendments aimed at simplifying and growing business development in Armenia.

• The Enterprise Incubator Foundation – Based in Yerevan, the Enterprise Incubator Foundation is focused on providing incubation support and consulting for technology-focused businesses in Armenia. According to their website, “Our activities cover every aspect of sector development – Information and Communication Technology-related legal, business and educational reforms; investment channeling and creation of funding schemes for startups; individualized services and consulting for information technology companies; talent identification; and workforce development.”

• Finally, the United States Embassy in Armenia – The U.S. Embassy has a special website devoted to doing business in Armenia. It contains key information about the economic climate in Armenia, links to other business and legal resource websites, additional research about doing business in Armenia, and other useful information.

You can go to these organizations’ websites or call or visit their offices if you are interested in learning more. There are many individuals, organizations, and other secondary sources of information that will help you in your career in business.