Money and its Function

Money does not just consist of notes and coins. Only about 3 to 5% of the UK’s money supply consists of actual cash. Most money is held as deposits in banks and other financial institutions. The bulk of these deposits only appear as book keeping entries in the accounts of these institutions. It is possible for people to access the money in their accounts through the use of debit cards, cheques, standing orders, direct debits and so on without the need for cash. This means that banks and other financial institutions need to keep only a small percentage of these deposits in their safes and at their counters in the form of cash.

The Functions of Money
The primary function of money is to facilitate the buying and selling of goods, services and assets. This is known as a medium of exchange. There are also two other main functions of money. The main functions are covered in more depth below:

• Medium of exchange. In an economy where people make items themselves to meet their own needs there would be no need for money as people would barter using their spare items that they have produced. If one person wanted an item another person had they would simple barter and arrange an exchange of goods. In a modern economy which is highly developed, barter would be impractical in most circumstances. What is needed is a medium of exchange which is generally acceptable as a means of payment for goods, services, labour and factors of production/ service. Money carries out this function. To be an effective and suitable means of exchange, money must be light for it to be carried around, be divisible (come in different denominations) and not be easy forged or replicated.
  
• Means of Evaluation. Money allows for the comparison of the value of goods, services and assets. The value of goods and services is expressed in terms of prices and these prices are expressed in terms of money. This allows for different items which are dissimilar, such as a company’s assets, to be added up. Money, thus serves as a ‘unit of account’.
  
• Store of wealth. People and organisations need to be able to use the earnings of one days labour or operation to purchase goods and services in the future. This would mean they would need to store their wealth and that they need a means of saving. Money facilitates the storing of wealth as it can be saved.

Why Finance ?

Why Finance Matters - Building Financial Acumen

Now there’s a way to help your people develop the financial understanding they need to maximize their effectiveness, make sound business decisions, and drive bottom-line results.

Why Finance Matters, is a web-based offering from BTS, one of the world’s most trusted names in financial acumen. It delivers comprehension and on-the-job results, even for individuals who find “the language of business” a bit intimidating.

Developing Financial Acumen:

An Interactive Online Experience That Fully Engages the Learner

Why Finance Matters, instruction is delivered in a story setting complete with colorful characters and full motion video. What’s more, because the learning is web-based, getting around is a simple matter of point and click.

The 11 learning modules and associated proficiency exams of Why Finance Matters address every aspect of financial acumen—from understanding income statements and balance sheets, to calculating return on investment, to constructing what-if sensitivity work-ups. In fact, one highly regarded Fortune 50 firm uses the program to develop its career financial professionals.

The Perfect Business Skills and Finance Education Launch Pad

Use Why Finance Matters to equip leaders with the financial know-how to develop business plans and budgets and make decisions that contribute to your organization’s bottom line. Already an integral part of many corporate university leadership development programs, Why Finance Matters is also an ideal foundation for executive-level case studies and strategic simulations—ensuring that participants of varying financial backgrounds enjoy a level playing field.

Essential for Any Manager That Needs to Understand the Financial Impact of Decisions

Imagine if your salespeople were able to cost-justify their business proposals based on an intimate understanding of a prospect’s financial situation. Why Finance Matters can give them the wherewithal to do so.

For professionals charged with investing in new products and making significant technology and infrastructure commitments, Why Finance Matters provides analytic tools that assure your organization and shareholders an acceptable return. Managers will optimize the way they manage inventories, collect receivables, process transactions and extend credit to improve cash flow and return on sales. In fact, consider Why Finance Matters for any manager or knowledge worker who needs to understand the financial impacts of everyday decisions and the ripple effects across other work units.

Incorporate Your Own Business Financials in the Learning Process

All of the case examples in Why Finance Matters™ are easy for learners to grasp and then apply to their own work environment. But BTS can also customize the learning experience to include your organization’s financials as well as terminology and key performance ratios specific to your industry, your customers and your competition. The process is surprisingly quick and easy: You’ll find our consultants extremely adept at understanding your business goals and objectives..

The Balance Sheet

The Balance Sheet, one type of financial condition statement, provides a summary of what company owns and what it owes on a particular day.

Assets represent everything of value that is owned by a business, 5 such as property, equipment, and accounts receivable. on the another hand, liabilities are the debts owed by a company-for example, to suppliers and banks. if liabilities are subtracted from assets, the amount remaining is the owners share of a business. this is known as owners or stockholders equity.


The balance sheet must follow the following formula:

Assets = Liabilities + Shareholders' Equity

It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity).

Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses.

An Accounting Overview

Accounting is frequently called the “language of business” because of its ability to communicate financial information abaout an organization. Various interested parties, such as managers, potential investors, creditors, and the government, depend on a company’s accounting system to help them make informed financial decisions. An affective accounting system, therefore, must include accurate collecting, recording, classifying, summarizing, interpreting, and reporting of information on the financial status of an organization.


In order to achieve a standardized system, the accounting process follows accounting principles and rules. Regardless of the type of business or the amount of money involved, common procedures for handling and presenting financial information are used. Incoming money (revenues) and outgoing money (expenditures) are carefully monitored, and transaction are summarized in financial statements, which reflect the major financial activities of an organization.


Two common financial statements are the balance sheet and the income statement. The balance sheet shows the financial position of a company at one point in time, while the income statement shows financial performance of a company over a period of time. Financial statement allow interested parties to compare one organization to another and/or to compare accounting periods within one organization. For example, an investor may compare the most recent income statements of two corporations in order to find out which one would be a better investement.


People who specialize in the field of accounting are known as accountants. In the United States, accountants are usually classified as public, private, or governmental. Public accountants work independently and provide accounting services such as auditing and tax computation to companies and individuals. Public accountants may earn the title of CPA(Certified Public Accountant) by fulfilling rigorous requirements. Private accountants work solely for private companies or corporations that hire them to maintain financial records, and governmental accountants work for governmental agencies or bureaus. Both private and governmental accountants are paid on a salary basis, whereas public accountants receive fees for their services.


Through effective application of commonly accepted accounting systems private, public, and govermmental accountants provide accurate and timely financial information that is necessary for organization decision making.

The Target Market

A target market is a group of customers that the business has decided to aim its marketing efforts and ultimately its merchandise towards. A well-defined target market is the first element to a marketing strategy. The target market and the marketing mix variables of product, place(distribution), promotion and price are the four elements of a marketing mix strategy that determine the success of a product in the marketplace.

Market segmentations

Target markets are groups of individuals separated by distinguishable and noticeable aspects. Target markets can be separated into:

• Geographic segmentations, addresses (their location climate region)

• demographic/socio-economic segmentation (gender, age, income, occupation, education, household size, and stage in the family life cycle)

• psychographic segmentation (similar attitudes, values, and lifestyles)

• behavioral segmentation (occasions, degree of loyalty)

• product-related segmentation (relationship to a product)

 

Strategies for Reaching Target Markets

Marketers have outlined four basic strategies to satisfy target markets: undifferentiated marketing or mass marketing, differentiated marketing, concentrated marketing, and micromarketing/ nichemarketing.

Mass marketing is a market coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. It is the type of marketing (or attempting to sell through persuasion) of a product to a wide audience. The idea is to broadcast a message that will reach the largest number of people possible. Traditionally mass marketing has focused on radio, television and newspapers as the medium used to reach this broad audience.

For sales teams, one way to reach out to target markets is through direct marketing. This is done by buying consumer database based on the segmentation profiles you have defined. These database usually comes with consumer contacts (e.g. email, mobile no., home no., etc.). Caution is recommended when undertaking direct marketing efforts — check the targeted country's direct marketing laws.

Examples

CVS Caremark’s target market is women since they make up 80 percent of the pharmacy chain’s customers. CVS has marketed its stores to aid women who are constantly multitasking. They recently redesigned 1,200 of its 6,200 stores to women, including shorter wait times for prescriptions, wider and better-lit shopping aisles, and more beauty products.

The Oreo cookie is a popular cookie in the U.S., known for its two discs of chocolate with a white cream filling. The Double Stuf Oreo cookie is also marketed to U.S. consumers. However, Kraft has formulated a different version of the Oreo to target consumers in China. The Chinese version consists of four layers of long, thin biscuits coated in chocolate. Kraft CEO, Irene Rosenberg, trusts her executives who live and work in China to know what consumers would prefer in order to maximize their profits. In Germany, Kraft is appealing to the tastes and preferences of German consumers by creating dark chocolate products. It is also introducing premium instant coffee in Russia, which is a beverage that is popular to consumers.

World Wrestling Entertainment’s (WWE) target market is young males. Monday Night RAW is the number one entertainment program on primetime cable among male viewers (2 million+) including the male demographics of 18-34, 18-49 and 25-54. It is shown at 9:00 PM ET to reach its target market.

Kohl’s department store has a target market consisting of consumers buying for themselves and their families.

The psychology of target marketing

A principal concept in target marketing is that those who are targeted show a strong affinity or brand loyalty to that particular brand. Target Marketing allows the marketer / sales team to customize their message to the targeted group of consumers in a more focused manner.

Research has shown that racial similarity, role congruence, labeling intensity of ethnic identification, shared knowledge and ethnic salience all promote positive effects on the target market. Research has generally shown that target marketing strategies are constructed from consumer inferences of similarities between some aspects of the advertisement (e.g., source pictured, language used, lifestyle represented) and characteristics of the consumer (e.g. reality or desire of having the represented style). Consumers are persuaded by the characteristics in the advertisement and those of the consumer.

The Four P'S

Four P's and the Marketing Mix           
The Four P’s divide the different attributes of successful marketing in to categories. The one has a part to play in the delivery of a service or product to the eventual customer.
The Four P’s, also known as the Marketing Mix consist of the following:

Price
Price is focus on the cost to the customer of choosing to buy your offering as opposed to someone else’s.
Price is generally an important factor considered by buyers who when viewing two identical products, would in most situations opt for the cheaper one.
For some products and services there might be multiple tiers of costs. For example, there may be an initial cost of acquisition and then further service charges and maintenance costs which customers would consider.
Price therefore encompasses all costs of both immediate and ongoing.
The cost of a product is not the only factor in purchasing decisions as quality, service and other factors are also determinants.

Product
Product includes the features and benefits of the offering in question, including the manner it is packaged, what it looks like and further extras such as guarantees and warranties.
Many of the factors which are part of the Product category could be intangible and may have perceived rather than actual benefits. The fact that they might not be actual advantages is largely unimportant, whilst their existence in the mind of potential purchasers is.

Place
Buyers will consider the ease of obtaining the product or service once the decision to purchase has been made.
Long lead times or inconvenient delivery schedules can put customers off and result in them selecting a more expensive product which is available now and at their convenience.
Businesses should consider customer’s expectations and the industry norm when looking at where and when their products will be available.
Bettering current accepted norms for delivery might enable the business to excel in its appeal to customers. Consider internet downloads where possible or delivery of places of work where appropriate in order to maximise the whole package of what is being sold.

Promotion
Promotion is essentially the means used to reach intended customers. Imagination and creativity can result in a business’ products or information about them being displayed in places which other competitors are not.
Internet advertising is gradually replacing more traditional form of promotion and certain websites might provide a business with an immediate and predefined audience.
By viewing each element of the marketing mix and relating them to the business’ products and services, the enterprise can seek to prepare a comprehensive and effective promotion strategy.     

Marketing

Marketing is "the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large."

For business to consumer marketing it is "the process by which companies create value for customers and build strong customer relationships, in order to capture value from customers in return".

For business to business marketing it is creating value, solutions, and relationships either short term or long term with a company or brand. It generates the strategy that underlies sales techniques, business communication, and business developments. It is an integrated process through which companies build strong customer relationships and create value for their customers and for themselves.

Marketing is used to identify the customer, satisfy the customer, and keep the customer. With the customer as the focus of its activities, marketing management is one of the major components of business management. Marketing evolved to meet the stasis in developing new markets caused by mature markets and overcapacities in the last 2-3 centuries. The adoption of marketing strategies requires businesses to shift their focus from production to the perceived needs and wants of their customers as the means of staying profitable.

The term marketing concept holds that achieving organizational goals depends on knowing the needs and wants of target markets and delivering the desired satisfactions. It proposes that in order to satisfy its organizational objectives, an organization should anticipate the needs and wants of consumers and satisfy these more effectively than competitors.

The term developed from an original meaning which referred literally to going to a market to buy or sell goods or services. Seen from a systems point of view, sales process engineering marketing is "a set of processes that are interconnected and interdependent with other functions, whose methods can be improved using a variety of relatively new approaches."