Issues of Scope: What can our business do? What can it own? Where can it operate? General Electric’s approach is to say that its separate businesses should be ranked one or two in whatever sector they operate. If that business isn’t near the top, then GE sells it because they don’t want to be associated with mediocrity. McDonald’s decided long ago to get involved in franchising, rather than owning millions of parcels of real estate. Sound contracts and long-term relationships can be far less hassle than ownership. The ownership and value tests are more relevant in a globalized world…Could an American company with global ambitions adapt to new countries and cultures and run businesses better than local firms? Did global growth allow you to reduce your costs? What are the realities of doing business abroad?
Dispersed Manufacturing/Li and Fung: Li and Fung was founded in Canton in 1906 to help American and English merchants to access Chinese factories. It now manages the supply chain for many of the world’s largest retailers and manufacturers. Li and Fung built their business by expanding to Singapore, Korea, Taiwan. If you wanted to make shirts in Asia, Li and Fung would find the cotton businesses, and then move the unfinished product cheaper than if you picked a single factory. This is called dispersed manufacturing, and they don’t own any of these factories. There is a fragmented global supply chain, and the tiniest step requires specialization. Li and Fung helps customers through the maze.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Strategy Is Not Operational Efficiency: You can run the best kebab shop in London, UK but if you are doing something that many people can copy, you are not going to make any money. You need a great strategy, but the first step is picking the right industry. Anyone can become a proofreader. The most profitable sectors in the US earning over 20% growth per year: pharmaceuticals, high-technology, financial services, discount department stores, and oil. The worst industry is airlines. Picking the right industry, one with a sound structure, where your chances of making a profit are highest, was where good strategy begins. Note that you should be interested in what you are doing with your time. Passion is also important.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Re-branding and Marketing Matters: Example, Black & Decker Case Study: the power tools division is declining. The problem is possibly because a) B&D started making toasters and kettles that diminished the brand, and do not have large margins, or b) low-cost competitors in Japan. One solution is to create a new brand. This is because B&D are one of the most recognized brands in the US but it has a massive 45% of the consumer segment, only 20% of the industrial tools segment, and only 9% of the tradesmen segment.
So as the CEO of Black & Decker, do you: try to improve margins, create a sub-brand or try a DeWalt Line? Other solutions might be to have a Made in America stamp on the powertools playing on patriotism ie. “Going Nativist.” But the Japanese tools remained better and cheaper. Perhaps the solution lies in determining what the customer wanted rather than what the company could offer. A good isn’t the sole value, as you will need marketing, sales, and customer service to sell it.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Leadership & Organizational Behaviour: you will have to learn about this subject. Example, you might have a CEO who has a misogynistic head engineer, or staff who are envious of the salaries of others. When shareholders visit, the CEO might screw up by allowing those visitors to roam around the company offices to discover the lousy situation for themselves. Did the CEO create his own lack of empowerment? How can one be a leader and manage with inspiration and structure? Did the CEO deluge upper management with information in order to cover herself? Most people are skeptical of whether it is possible to teach leadership. There are all kinds of ways to reward. At a plating company you could reward highly-productive employees with extra time-off and turn a blind eye to their intimidating and casual racism. This action might help keep wages lower and secure the loyalty of workers who might otherwise have left. Ethics is ever present. Wall Street perks, for example, having a free cab ride home was something that investment bankers took even if they didn’t need the perk. Those who didn’t, hated the free cab ride perk as they didn’t need it; the psychological satisfaction of employees is important. The idea of people as an individual is not useful to most business thinkers, they want militants so understanding them might seem less salient.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
Ranking Industries: in your MBA program, you might be expected to look at a list of twelve industries, from a basic chemical company and a grocery chain to an airline and a retail bank, and then compare it with a list of unlabeled balance sheet percentages and ratios. The assignments then asks you to match the industry to the correct set of numbers.
Q: How are ratios, and percentages related to a given business model?
Companies that have inventory are always trying to balance the cost of storage with supply. You might want to buy large quantities but not so much that you cannot house them. If the ratio is 1 to 1, then the inventory is equal to how much it sells. In a grocery chain you would expect a high ratio as inventory is replenished on a daily basis. In jewelry, you would expect a ratio might be below one, as each item is held for a long time before it finds a buyer. A company with many fixed assets such as a store + factory would likely have more debt than say a deal a day site whose main assets were people. Banks don’t like lending to law firms, or deal a day sites because they can walk out the door, and leave at anytime.
[This is a synopsis of several books on the MBA experience including What They Teach You At Harvard Business School by P.D. Broughton]
This publication is dedicated to finance, politics and history
Issues of Scope: What can our business do? What can it own? Where can it operate? General Electric’s approach is to say that its separate businesses should be ranked one or two in whatever sector they operate. If that business isn’t near the top, then GE sells it because they don’t want to be associated with mediocrity. McDonald’s decided long ago to get involved in franchising, rather than owning millions of parcels of real estate. Sound contracts and long-term relationships can be far less hassle than ownership. The ownership and value tests are more relevant in a globalized world…Could an American company with global ambitions adapt to new countries and cultures and run businesses better than local firms? Did global growth allow you to reduce your costs? What are the realities of doing business abroad?
Dispersed Manufacturing/Li and Fung: Li and Fung was founded in Canton in 1906 to help American and English merchants to access Chinese factories. It now manages the supply chain for many of the world’s largest retailers and manufacturers. Li and Fung built their business by expanding to Singapore, Korea, Taiwan. If you wanted to make shirts in Asia, Li and Fung would find the cotton businesses, and then move the unfinished product cheaper than if you picked a single factory. This is called dispersed manufacturing, and they don’t own any of these factories. There is a fragmented global supply chain, and the tiniest step requires specialization. Li and Fung helps customers through the maze.
