Chapter 1 How Businesses Make Money
Learning Objectives
Describe how a business makes money.
Define competitive advantage.
Identify the four key strategies a business uses to differentiate itself from the competition.
Discuss how a business can use an innovation and design strategy.
Discuss how a business can use an operations strategy.
Discuss how a business can use a sales and marketing strategy.
Discuss how a business can use a customer service strategy.
Describe the difference between a customer-centric and operational-centric strategy.
Anyone who has ever visited New York City probably remembers his or her first visit to Fifth Avenue. Fifth Avenue has always been one of the premier shopping streets in the world. The sidewalks bustle with shoppers. There’s a constant flow of traffic in the street. The store windows are decked out with the latest fashions and electronic equipment. Clearly, Fifth Avenue is a retailer’s dream. If you have a store on Fifth Avenue, you’ve “made it.”
But let’s look at Fifth Avenue more closely. If you’ve been to Fifth Avenue more than once, you’ve probably noticed that some of the stores are different each time you visit. Last year’s fashion store has been replaced by a newer, trendier fashion store. The shoe store has become an electronics store. The travel agency is vacant. The restaurant has new owners and a new name. Even the world-famous Scribner’s Bookstore is now an athletic apparel store.
Perhaps Fifth Avenue isn’t a dream for all retailers. Some businesses have had their store on the street for decades and been very successful. Many others have opened and closed in the same time frame.
Even if you’ve never been to New York, you’ve probably taken this walk in your own community. You may have walked up and down Main Street or through the shopping mall. During your walk you probably saw something similar to Fifth Avenue. Some businesses are full of customers and still located where they’ve always been. In other places, a new business has replaced the one you remember. In still other places, the business you remember is gone and the store sits empty.
Clearly, there’s a difference between businesses. Some have been successful and continue to thrive, while others haven’t been as successful and continue to struggle, and still others have gone out of business completely.
If you own a business or are thinking of starting one, you’ll want your business to be successful. For your business to be successful, your business will need to make money. It’s that simple.
Let’s begin by taking a look at the strategies a business can use to help it make money.