LUMPAZ, JAN PAOLO M.

3rd Year BSBA – Marketing Management

ACTIVITY IN IBA101

1) What are value drivers?

Value drivers are anything that can be added to a product or service that will
increase its value to consumers. These differentiate a product or service from those of a
competitor and make them more appealing to consumers. Also, it is considered as
variables that impact revenues and costs of an organization at the highest level of
aggregation. These are a combination of the following;

• Revenue Drivers: Volume, Realization, Product/ Customer Mix

• Cost Drivers: Volumes, Direct Material Prices and Processing

2) What are the 16 core value drivers? Define each.

The following are the 16 core value drivers and their respective definitions:

• Industry – affects the value of your business. People are reluctant to invest in an
industry in a down trend.

• Company – significantly more valuable than a startup. Having a brand that people
in your target market recognize is important as you compete with other companies for
market share. Having a good reputation can make a huge difference in winning business
in competition.

• Product and services – the products and services that you sell to your customers

• Personnel – key employees are critical for company to grow. One should function
as a general manager to relieve daily activities. It’s important train new employees with
the company’s systems and procedures.

• Competition – knowing the competitors’ products and services and how they are
marketing and selling them is critical to the success of your business
• Growth – the trend of your company’s revenue and cash flow has a tremendous
effect on your company’s value

• Recurring Revenue – having recurring revenue is a huge value booster. Having a

nearly guaranteed revenue stream lowers risk significantly odds of banker’s investors and
business buyers. One example is repeat customers of consumables.

• Financial presentation – having a good and clean financial statement is very

important to prospective buyers. It should be readily accessible if a bank or investor or
prospective buyer request them. Not being able to produce your financials quickly
produces a red flag that something’s wrong with your company’s financial situation.

• System – another huge value driver for your company. System and procedures
should be established for every facet of the business so that a new owner investor feels
comfortable that the business operations don’t leave with the previous owner.

• Customer base – customers are lifeblood of any business. Without customers,

you have no business, but the makeup of your customer base has a big impact on your
company’s value. Having repeat customers is a very important aspect of your customer
base.

• Leases – lack of good lease terms can affect a company’s ability to get a bank
loan. An assignable lease agreement with your landlord is critical if the present location
of the business is important to the buyer.

• Suppliers – having a good supply chain can significantly affect your company’s
profitability. It is important to have a good and reliable primary supplier with at least two
backups.

• Scalability – ability of a business to multiply revenue with minimal incremental

costs. Having solid profit margin is fundamental to the scalable company. High margins
allow the business to fund the necessary resources and minimize the need for equity
funding.

• Cash flow – major component of the value equation. One should be aware of cost
increases and increase your prices accordingly.
• Bankability – the availability of financing has a significant impact on your
company’s value. Profitability of the company affects the ability to obtain financing lending
institutions unlikely to make loans to companies carrying too much debt.

• Intellectual Property – demand of large companies but smaller companies can

have some form of intellectual property also.

3) How do you construct a Value Driver Tree?

- In constructing a Value Driver Tree you need to:

• Identify the value drivers

• Distinguish the hierarchy of the listed drivers
• Set up a new model for the tree
• Set up all accounts for the tree
• Define the hierarchy
• Add dimensions to the model
• Upload data to the values
• Upload the values with data to the value driver tree model

4) What is metric? Give examples.

A metric is simply a numerical measurement of something that could be it on a

single data point or a set of data over a period of time. Metrics are quantitative rather than
qualitative meaning that they are numerical.

Examples of Metric are:

- Miles per gallon – standard measurement of fuel efficiency

- Net profit margin – the amount of money that is left over after all of the expenses
the businesses paid.
5) What is KPI?

A Key Performance Indicator is a measurable value that demonstrates how

effectively a company is achieving key business objectives. Organizations use KPIs at
multiple levels to evaluate their success at reaching targets. High-level KPIs may focus
on the overall performance of the business, while low-level KPIs may focus on processes
in departments such as sales, marketing, HR, support and others.

6) What are the types of KPI? Define each.

1. Quantitative Indicators

Quantitative indicators are the most straight-forward of KPIs. In short, they are
measured solely by a number. There are two types of quantitative indicators - continuous
and discrete. Continuous quantitative indicators can take any value (including decimals)
over a range. Discrete quantitative measures include things like complaints, accidents,
and rating scales. Examples of quantitative measurements include measurements of
time, dollars and cents, and weight.

2. Qualitative Indicators

Qualitative indicators are not measured by numbers. Typically, a qualitative KPI is

a characteristic of a process or business decision. Examples of qualitative KPIs include
opinions, properties, and traits. A common qualitative indicator that organizations
regularly use would be an employee satisfaction survey. While some of the survey data
would be considered quantitative, the measures themselves are based on the opinion of
a person. Qualitative focuses more on the “why” as opposed to the “how.”

3. Leading Indicators

Leading indicators are used to predict the outcome of a change in a process and
confirm long-term trends in data. In a survey of several fortune 500 companies around
the metrics that they use as leading indicators, 3M Corp, a mining and manufacturing
company, supplied these answers:
 • Number of new patents
• Number of new innovations
• Customer service perception

These are great examples of leading indicators. While in and of themselves they are not
standalone indicators of success, they are indicative of success in other metrics and serve
as an excellent indicator of success in their initiatives.

4. Lagging Indicators

Lagging indicators are used to measure results at the end of a time period to reflect
upon the success or failure of an initiative. Often, they are used to gauge historical
performance. Some examples of lagging indicators include total customer contacts or
total incidents. Lagging indicators give businesses the ability to evaluate the effectiveness
of their business decisions and determine whether their business decisions facilitated the
desired outcome.

5. Input Indicators

Input indicators are used to measure resources used during a business process.
Some examples of input indicators include staff time, cash on hand, or equipment. Input
indicators are necessary for tracking resource efficiency in large projects with a lot of
moving parts, but are also useful in projects of all sizes.

6. Process Indicators

Process indicators are used specifically to gauge the efficiency of a process and
facilitate helpful changes. A very common process indicator for support teams are KPIs
focused around customer support tickets. Tickets resolved, tickets opened, and average
resolution times are all process indicators that shed light on the customer support
process. In this example, that data can be used to influence changes in the support
process to improve performance.
 7. Output Indicators

Output indicators measure the success or failure of a process or business activity.

Output indicators are one of the most used KPI-types. Examples of output KPIs include
revenues, profits, or new customers acquired.

8. Practical Indicators

Practical indicators take into account existing company processes and explore the
effects of those processes on the company. For this reason, many practical indicators
may be unique to your company or work processes.

9. Directional Indicators

Directional indicators evaluate specific trends within a company. Where are the
metrics moving? Are they improving, declining, or maintaining? An example of a
directional metric used by many service providers would be Time on Site. This metric is
used to measure the time that techs spend on-site fixing issues and troubleshooting
problems. Ideally, most companies would like to lower their average Time on Site, as it is
indicative of a faster, more effective service. Broad directional indicators can be used to
evaluate your company’s position within your industry relative to competitors.

10. Actionable Indicators

Actionable indicators measure and reflect a company’s commitment and

effectiveness in implementing business changes. Those changes could be within
business processes, company culture, or political action. These metrics are used to
determine how well a company is able to enact their desired changes within specified
time-frames.

11. Financial Indicators

Financial indicators are the measurement of economic stability, growth, and

business viability. Some of the most common financial KPIs include gross profit margin,
net profit, aging accounts receivable and asset ratios. Financial indicators provide
straight-forward insight into the financial health of a company but must be paired with the
other KPI-types mentioned in this article to provide a complete picture.
3) What are the approaches in applying KPI’s? Which is more preferrable?

Creative KPIs without a performance management methodology. Businesses

select performance indicators within a strategy map from the balanced scorecard
performance management methodology.

4) What drives KPI?

Data drives KPI.

5) Draw the illustrated architecture that supports KPI’s.

6) Enumerate the categories for KPI’s.

• Business Focus
• Time Frame
• Primary Users
• Data
1) What are the suggested KPI’s for businesses?

• Number of Customers
• Growth rate of customers
• Average Order Value
• Lifetime Value of Customers
• Cancelation rate
• Number of requested funds
• Cost per acquisition

2) Describe the tea service business and enumerate the KPI’s.

The tea service business is a subscription bases online tea service going to offer
a certain amount of tea delivered to a person’s door enough for a month consumption
varied from month to month based on loose tea.

- number of customers
- growth rate of customers
- average order value
- lifetime value of customers
- cancellation rate
- number of requested refunds
- cost per acquisition
- overall site traffic
- customer satisfaction
- likelihood of referral

3) Describe the distillery business and enumerate the KPI’s

The distillery business is direct retailing rum and whiskey to nightclubs, bars, and
other distributors. KPI’s are:

- operating costs
- monthly metrics (labor costs, facilities cost, utilities costs)
- sales funnel
 - average order value
- repeat business

4) Describe the online magazine business and enumerate the KPI’s.

The online magazine business is ad-based. KPI’s are:

- total unique visitors

- page views
- time per session
- cost of content
- monthly expenses
- monthly sales
- ramp rate of sales
- pipeline of advertisers
- CPM’s and RPM’s

5) What’s the take-out of this video?

My takeaway in this video is that it takes on a broad topic that most people over
complicate and that is, starting and running a successful business. He breaks
entrepreneurship down into various simple ideas, insights and self-reflections that will
help you get started and follow through with your business. This comprehensive course
will demonstrate how to examine your idea in business, pitch your ideas to investors, get
funds, hire your employees on a budget, follow in the footsteps of other CEOs, and
whatnots.
1) Define Key Risk Indicators.

Key Risk Indicators (KRIs) are critical predictors of unfavorable events that can
adversely impact organizations. They monitor changes in the levels of risk exposure and
contribute to the early warning signs that enable organizations to report risks, prevent
crises and mitigate them in time.

1) Differentiate metrics, KPI’s and KRI’.

Metrics refers to something that is measurable such as air pollution, air

temperature, water depth, and people’s height and weight. On the other hand, a KPI
expresses the achievement of a desired level of results in an area relevant to an evaluated
entity’s activity. And lastly, Key Risk Indicators (KRI’s) are used in management to
measure risks that the business is exposed to. KRI’s help to monitor risks and take early
action to prevent or mitigate crisis.

1) What is benchmarking?

The objective of benchmarking is to understand and evaluate the current position

of a busines or organization in relation to best practice and identify areas and means of
performance improvement.

2) What are the key steps in benchmarking?

a) Understanding in detail existing business processes and performances

b) Analyze the business processes and performance of others

c) Compare own business with others

d) Implement steps necessary to close performance gaps

3) What are the types of benchmarking? Define each.

a) Strategic Benchmarking- examines the long-term strategies and general

approaches that are enabled high performers to succeed
b) Performance or Competitive Benchmarking- Businesses consider their position in
relation to performance characteristics of key products and services

c) Process Benchmarking- Comparing against best practice organizations that

perform similar work or deliver similar services

d) Functional Benchmarking- comparing with partners drawn from different business

sectors to find ways of improving work processes

e) Internal Benchmarking- benchmarking businesses or operations from within the

same organization, for example business units in different countries.

f) External Benchmarking- analyzing outside organizations that are simply known to

be “best in class”

Discuss the importance of data in doing business analytics.

Today, gathering data to help you better understand your customers and business is
relatively easy. Any business with a website, a social media presence, and accepts
electronic payments of any kind is collecting data about customers, user habits, web
traffic, demographics, and more. All that data is filled with potential if you can learn to get
at it.

Also, data helps you solve problems. After experiencing a slow sales month or watching
a poor-performing marketing campaign, how do you pinpoint what went wrong? Tracking
and reviewing data from business processes helps you uncover performance breakdowns
so you can better understand each part of the process and know which steps need to be
fixed and which are performing well.

Moreover, Data helps you understand and improve business processes so you can
reduce wasted money and time. Every company feels the effects of waste. It depletes
resources, squanders time, and ultimately impacts the bottom line. For example, bad
advertising decisions can be one of the greatest wastes of resources in a company. With
data showing how different marketing channels are performing, however, you can see
which ones offer the greatest ROI and focus on those. Or you could dig into why other
channels are not performing as well and work to improve their performance. This would
allow you budget to generate more leads without having to increase the advertising
spend.