Business mathematics and statistics (523)

Assignment No.2

Differentiation and their application in business

By
Haider Ali Roll# AD 511549

Department of Business Management Allama Iqbal Open University 2011(autumn)

Acknowledgement

In the name of Allah who gave me this worth to write down all this which I have learnt from the teachers and from the our colleagues .The study for this topic was interesting and found that how much it is helpful in our future life. I special pay thank to our tutor who really gave and paid full attention to understand this subject. I am confident that I shall utilize this knowledge in my future very well. Besides having this much knowledge regarding HR I am confident that in future I shall prove to be a better manager. And this will provide me the confidence to boost the differentiation between good and best in mathematical way.

INTRODUCTION In business terms, to differentiate means to create a benefit that customers perceive as being of greater value to them than what they can get elsewhere. It's not enough for you to be different--a potential customer has to take note of the difference and must feel that the difference somehow fits their need better. (Other words that mean virtually the same thing: Competitive Advantage; Unique Selling Proposition; or Value Proposition.) As you are building your business, you can use differentiation to attract more customers. Once you have momentum, differentiation allows you to charge a higher price because you are delivering more value to your customers. Make a point to evaluate and adjust your differentiation methods at least annually. The various methods of differentiating your businesses fall into four general categories: Price Differentiation Focus Differentiation Product/Service Differentiation Customer Service Differentiation

Differentiation Differentiation is all about finding rates of change of one quantity compared to another. We need differentiation when the rate of change is not constant. Constant Rate of Change Let's take an example of a car travelling at a constant 60 km/h. The distance-time graph would look like this:

We notice that the distance from the starting point increases at a constant rate of 60 km each hour, so after 5 hours we have travelled 300 km. We notice that the slope (gradient) is always 300/5 = 60 for the whole graph. There is a constant rate of change of the distance compared to the time. The slope is positive all the way (the graph goes up as you go left to right along the graph.) Rate of Change that is Not Constant Now let's throw a ball straight up in the air. Because gravity acts on the ball it slows down, then it reverses direction and starts to fall. All the time during this motion the velocity is changing. It goes from positive (when the ball is going up), slows down to zero, then becomes negative (as the ball is coming down). During the "up" phase, the ball has negative acceleration and as it falls, the acceleration is positive. Now let's look at the graph of height (in metres) against time (in seconds).

Notice this time that the slope of the graph is changing throughout the motion. At the beginning, it has a steep positive slope (indicating the large velocity we give it when we throw it). Then, as it slows, the slope get less and less until it become 0 (when the ball is at the highest point and the velocity is zero). Then the ball starts to fall and the slope becomes negative (corresponding to the negative velocity) and the slope becomes steeper (as the velocity increases).

Important Concept - Approximations of the Slope Now, let's zoom in on the section of the graph near t = 1 (where I have the rectangle in the graph above). We look at the bit between t = 0.9 s and t = 1.1 s. It looks like this:

Notice that if we zoom in close enough to a curve, it begins to look like a straight line. We can find a very good approximation to the slope of the curve at the point t = 1 (it will be the slope of the tangent to the curve, marked in dark red) by observing the points that the curve passes through near t = 1. (A tangent is a line that touches the curve at one point only.) Observing the graph, we see that it passes through (0.9, 36.2) and (1.1, 42). So the slope of the tangent at t = 1 is about: The units are m/s, as this is a velocity. We have found the rate of change by looking at the slope. Clearly, if we were to zoom in closer, our curve would look even more straight and we could get an even better approximation for the slope of the curve. This idea of "zooming in" on the graph and getting closer and closer to get a better approximation for the slope of the curve (thus giving us the rate of change) was the breakthrough that led to the development of differentiation. Development of Differential Calculus Up until the time of Newton and Leibniz, there was no reliable way to describe or predict this constantly changing velocity. There was a real need to understand how constantly varying quantities could be analyzed and predicted. That's why they developed differential calculus, which we will learn about in the next few chapters. Differentiation is also used in analysis of finance and economics.

One important application of differentiation is in the area of optimization, which means finding the condition for a maximum (or minimum) to occur. This is important in business (cost reduction, profit increase) and engineering (maximum strength, minimum cost.) In Isaac Newton's day, one of the biggest problems was poor navigation at sea. Before calculus was developed, the stars were vital for navigation. Shipwrecks occurred because the ship was not where the captain thought it should be. There was not a good enough understanding of how the Earth, stars and planets moved with respect to each other. Calculus (differentiation and integration) was developed to improve this understanding. Differentiation and integration can help us solve many types of real-world problems. We use the derivative to determine the maximum and minimum values of particular functions (e.g. cost, strength, amount of material used in a building, profit, loss, etc.). Derivatives are met in many engineering and science problems, especially when modeling the behavior of moving objects.

McDonald's

Differentiation and business model McDonalds forthcoming in-restaurant TV channel will break new ground in building business-to-consumer relationships, one of its developers said. The McDonalds Channel, a digital out-of-home network, will be tested in about 650 companyowned and franchisee-operated McDonalds restaurants in southern and central California

beginning this quarter, said Lee Edmondson, chief executive of Channel Port Communications LLC, which is developing the channel. It stems from an initial trial at 25 locations begun more than two years ago. Edmondson recently spoke with Nations Restaurant News about the channels business model and its content plans. The key is that these screens can add to the [guest] experience, and they can add to the brand and McDonalds, and other brands can tell a different story in this environment than they could on traditional television and on the Internet. We found that there was a significant interest in all kinds of stories if they were done in a much more subtle way if we were story telling, as opposed to advertising. It is clearly not intended to be something for McDonalds to chat away at its customer In fact, the minute and a half McDonalds will use will probably be story lines about what they are doing at Ronald McDonald House Charities, or How do you make a Big Mac. There are approximately eight minutes of traditional advertising available in an hour, which is about half of what youd see typically on cable TV What were moving towards in our business model is to give large brands like a Coke, like a Visa, like an AT&T an opportunity to think about this television channel in a different way and think about being in the content business and entertaining the customer and being much more subtle with the specific brand engagement. It also gives us a tremendous opportunity to work with the [movie] studios in their green band [approved for all audiences] trailers and in their longer form trailers. So rather than a 30second trailer that you might see on network TV, on the McDonalds Channel, you might see two minutes or even longer