Tag Archives: MBA

Business

Lessons from a Masters In Business Administration: Further Strategy

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Further Strategy: you need to sound out the cost and willingness to pay with your clients. You will see the source of the competitive advantage if you look at these forces. To understand that cost and willingness to pay you need to breakdown the business into its multiple parts, and then try to integrate them in different ways. If you move production, how does it effect culture? You always seek to empower everyone in your business; it was a guy from the mail room that discovered that you could cut a hole in the bottom of the pumpkin in order to allow a candle to be covered by it rather than cutting it from the top: Think Different.

Identify the bad customers who will make a spectacle early on. Business is about the people who run it, regardless of what an Excel spread sheet will tell you. People buy from people. You can tell in Indonesia, which companies are most closely connected to the party leader by what happens when that leader is taken ill. You don’t need to get a patent for a drug, if you can simply keep it a secret as Coca-Cola had with their soft-drink. Environmental campaigns often attack companies that will likely get their campaign the most attention. They may not target the most obvious environmental offenders.

Questions Upon Leaving Your MBA Program: How will I find a mentor? How will I pay off my student loans? How do I make sure I don’t get sacked after two years? People choose consulting because they aren’t sure what they want to do. You should start to recognize your weaknesses, and focus on developing your strengths. Are you willing to make a Faustian pact to work long-hours, and skew your work to family balance?

Rules To Live By: when we look back, the big things will look small and the little things will look big;

  1. Comparison is the death of happiness;
  2. We are all we have. No one else will rescue us.
  3. Resist the temptation to be a short-termist;
  4. Be honest with yourself about what jobs are the right ones for you.
  5. Keep your moral compass
  6. Maintain the proper balance between your professional career and your personal life.
  7. Be unconventional: success should not be based on monetary gain, but value.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Business, Politics

Lessons from a Masters In Business Administration: Mergers and Acquisitions / Porter’s Theory

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Mergers and Acquisitions: Company A announces a merger with Company B, it offers a price x, for Company B which is about Company B’s current stock market valuation. The arbitrageur asks himself, is the likelihood that this deal will actually go through? Will the shareholders of Company B accept it? Will there be account fraud of Company B? What if the CEO of Company A dies? The stock prices of the merging companies move around more than usual as investors weigh up the probability of the merger’s taking place. For risk arbitrageur, the risk of losing $100,000 is .1% and the risk of losing $500 is 20%. They spend an inordinate amount of time thinking about the 20% chance ruining a day instead of the .1% chance of running a career. Everywhere in life there are small risks of disaster that you would think of as an arbitrator: chances of the babysitter turning to be a kidnapper; and the costs would be infinite.

Porter’s Theory: Michael Porter believes that competition is the engine of productivity, growth and every business, town or country should be seeking out a competitive advantage. He’s not interested in cost and willingness to pay…

Private/Public Sectors: The relationship between business and government. Government gets its tax revenue from businesses, don’t ever forget that fact. Many believe that business does not need government whatsoever. MBAs are taught to believe that business is the most important institution in society.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Business, Politics

Lessons from a Masters In Business Administration: With Money Comes Freedom, Entrepreneurs and When Pitching To A VC

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With Money Comes Freedom: Business and government can work together. You can come from business, and move into government ie. Mitt Romney, or work in government and transition into business ie. Japanese civil servant system. In order to be successful in business/government ventures, David Rubenstein believes that you should be:

a) reasonably intelligent; b) have a strong work ethic; c) the ability to get along with others; d) desire to build something important; and e) the ability to keep one’s ego in check. People who mix government and business like Rubenstein have power over the most important aspect of the human experience: they control their time.

Work/Life Balance: Gandhi said that you should “Live as if you were to die tomorrow. Learn as if you were to live forever.”

When Pitching To A VC: it is vital to “get them juiced in the first five minutes. Get them captured and fully engaged quickly.” Do not start the pitch with Macro conditions. Aim high, solicit big players for input and advice. Sell with personal passion, make a personal connection. As venture capitals have become institutionalized, the people in it have become less and less venturesome. Those who visited campus were overwhelmingly male and white or Asian. VCs like to think of themselves as rule breakers but are frequently uniform.

Choosing Your Electives In Your MBA: You will need to rank your choices in order of preference. The challenge of picking the right courses was time consuming. You could choose to deepen your knowledge of one specific area. Or you could work on your weaknesses. Or finally, you could take the easier courses to free up time.

Entrepreneurs: to be a successful entrepreneur you must be a strong sales rep. Sometimes it is about solving the customers’ problem so efficiently that competitors come to join the company. The difference between success and failure as an entrepreneur is very fine.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]

Business, Politics

Lessons from a Masters In Business Administration: Juicing Up The Returns

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Juicing Up The Returns: Imagine 2 companies, each has assets worth $1,000,000. The first has funded its assets with $800,000 in borrowed money and $200,000 in equity from investors. The interest rate is 10% on borrowed money and the tax is 50%. Each year the $1,000,000 worth of assets leads to $200,000 in operating profits. $80,000 goes to pay interest on the debt, which the government calls an expense, of the $120,000, $60,000 pays taxes and the remaining $60,000 goes to equity holders. For their $200,000, the equity holder get a 30% return annually. Now imagine the same company funded with equity alone. They produce the same $200,000 in operating profits. There is no interest payment. $100,000 goes to government in taxes, leaving the equity holders with $100,000 which is a 10% return.

So, which would you want a Juiced or not juiced company?

Next you might buy a non-juice (debt-free) company, and dump your debt incurred into that new company. If at all possible, this will equal or exceed the amount of cash you yourself put into the deal. So you then are able to recoup your investment. Pooling debt into a company carries the innocuous term “leveraging the balance sheet.”

Now, you need to generate cash to keep up those interest payments. The company will be better run because it needs to run well or die, and it can be sold two or three years down the line at a huge profit:

First, you must strip the HQ down to its bare essentials, removing any perks or visible signs of comfort. Gut the health plans, fire loyal employees to keep up with crushing interest payments. Then you get consultants who are sharp-suited number crushers booked into the local Four Seasons, who tell you to keep squeezing the company, and the people within it. If you do so, you will be rewarded handsomely. Management is loyal to its equity holders, even though they plan to drop the business within a few years. Then the consultants send you a bill for their services which states is so high that you will have to take on more debt. After all, the government pays a chunk of it to charge interest as an expense. This enhances the returns of equity.

Next, you float the company on the stock exchange as if it has been ‘improved.’ The private equity investor recouped his original investment months ago by selling their stocks off in the IPOs very young stages. If the investor bought it for $1 billion and can sell it for $3 billion, the $2 billion is all his + the original equity. There will be a lot of suckers at the end of that ride!

This behaviour can potentially victimize communities where hedge funds are in it for the money, and see companies as economic machines. The social role of a company is zero. A private equity investor can stay in his lavish apartment, and trust that everything will be right without having to deal with the day to day consequences of their actions.

So some important questions need to be asked: Where are the leaders and difference-makers in private equity? What conscience do they bring to their work? What balance do they see in their roles as economic and social actors?

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Business, Politics

Lessons from a Masters In Business Administration: Negotiations 101, Leverage and Debt Theory

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Negotiations 101: the fundamentals begin with discussing ethics followed by the basic analytical tools of negotiations. The negotiator often tries to misled his opponent but the risk of unethical negotiations is a bad reputation. Bluffing is fine in negotiations. The sophistication of the parties is also relevant. Selling a complicated derivative to an economic illiterate and then blaming that person for not understanding the contracts hurts you in court proceeding.

There are three schools of negotiators: (1) the poker player who regards it all as a game; (2) the idealist who insists on doing the right thing every time; and (3) the pragmatist, who knows that what goes around comes around. BATNA is the ‘best alternative to a negotiated agreement’. BATNA prevents you from making a bad deal by asking what the alternatives might be; in other words you have a walk away strategy. ZOPA is the zone of possible agreement which means the general area/scope of agreement possible. When you go into a negotiation, you should determine the other person’s position a priori. The gifted negotiator adopts a three-dimensional perspective, working both at the table and away from it. If negotiations stall, the negotiator should go to the balcony to gain perspective and reframe the issues, moving from defensive positioning to shared interests.

Leverage and Debt Theory: hedge funds and private equity are awash with money. So much so that investment banking is considered a second tier move. Surely running a company is more important than banking services? Private equity brings managers, and owners closer together. In Private Equity and Hedge Funds, the money comes courtesy of debt. Debt is actually not a bad thing, because it allows you to leverage, structure your financial deal etc. Things become more possible using this method. Debt focuses the mind, forcing people to concentrate on THE ONLY THING THAT MATTERS: the cash flowing out of the business. Debt for lack of a better word, is good. Debt works. If a company is struggling to be valuable, then you would simply load up the balance sheet with debt. More to come.

[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]