23 August 2005

Out & About

!!!On Holidays!!!

The Blog would be up and running again by the 1st January 2006.

Trading Costs

The cost associated with trading securities can have a non-negligible impact on portfolio return. Trading costs include the following:
  • Explicit costs - commissions, fees, and taxes.
  • Market maker spread - difference between the bid and ask prices that the specialist sets for a stock; the specialist keeps the difference as compensation for providing immediacy. For less liquid stocks, the specialist has greater exposure to adverse price movements and likely will make the spread larger.
  • Market impact - results when high volume trades influence the market price. Market impact can be broken into two components - a temporary one and a permanent one. The temporary component is due to the need for liquidity to fill the order. The permanent impact is due to the change in the market's perception of the security as a result of the block trade.
  • Opportunity cost - the effective cost of price movements that occur before the trade executes.
NYSE specialists sometimes may appear to have a monopoly on trading their respective securities, creating a larger than necessary spread between bid and ask. However, there is more competition than is initially obvious. First, there is competition for the specialist positions, providing the specialist incentive to price fairly. Furthermore, there are other specialists on the floor who may be willing to trade within the spread if it is too wide.

The total trading cost of a buy transaction is calculated by taking the percentage increase of the average purchase price as compared to the price when the buy decision was made, and adding the commissions, fees, and taxes as a percentage of the price when the buy decision was made.

Active portfolio managers attempt to outperform passive benchmarks, but trading costs reduce any realized advantages. Typical trading commissions run 0.20% of the transaction amount, and the typical cost due to bid-ask spread and market impact is 0.55%. The total cost of a trade then is 0.75% of the trade amount. If a fund has a portfolio turnover rate of 80%, and for every sell transaction the stock is replaced via a buy transaction, a total of 160% of the portfolio value will be transacted each year. For trading costs of 0.75% per transaction, the annual trading costs amount to (1.6)(0.75%) = 1.20% of the portfolio value. If one adds a 0.3% management fee to this amount, the total becomes 1.50%.

Reducing Trading Costs: Passively Traded Funds

Passive portfolios have lower transaction costs and overall trading costs. The transaction cost is typically 0.25% of the transaction value, since a passive portfolio does not have to trade as quickly and can be more patient with each transaction. A typical turnover rate for a passive portfolio is about 4% per year, and assuming replacement 8% of the portfolio value will be transacted each year for annual trading costs of only (0.08)(0.25%) = 0.02% of the portfolio value. Passive portfolios have lower management fees, for example, 0.10%, so the total of trading costs and management fees is only 0.12%, compared to 1.50% for a typical actively managed fund.

Passively managed funds that track an index often have returns less than that of the index because of trading costs, especially for small-cap indices in which the securities are less liquid. These trading costs can be reduced if the weights of the securities in the fund are allowed to deviate somewhat from the index, since both trading volume and the need for immediacy are reduced. The correlation with the index still can remain quite high under the relaxed weights.

In 1982 Dimensional Fund Advisors (DFA) introduced a passive small-cap "9-10" fund composed of the lower two deciles of NYSE market capitalization. The fund sacrificed tracking accuracy by allowing the weights to deviate in order to minimize trading costs. The result was higher performance than other small-cap funds. The 9-10 fund even outperformed the stocks in the lower two market capitalization deciles of the NYSE, partly due to the following strategies:
  1. The 8th decile is treated as a hold range, not a sell range,
  2. The DFA waits a minimum of one year before buying IPO's,
  3. The fund does not buy stocks selling for less than $2 or having less than $10 million in market capitalization,
  4. The fund does not buy NASDAQ stocks having fewer than four market makers,
  5. The fund does not buy bankrupt stocks, and
  6. The fund is passive, not rigidly indexed.
Note that using the 8th decile as a hold range effectively increases the average market cap of the portfolio and increases returns in periods in which large caps outperform small caps, such as in the 1980's.

Reducing Trading Costs: Electronic Trading

Electronic crossing networks have lower trading costs than do exchanges because of lower commissions, no bid-ask spread, and elimination of market impact. By matching the natural buyers and sellers of a security at some predetermined price, for example, the NYSE closing price, electronic crossing networks eliminate the need for a market maker to provide liquidity. However, crossing networks require buyers and sellers to participate in order for there to be liquidity. Furthermore, there are the disadvantages of potentially limited liquidity and no inherent price discovery mechanism.

Electronic communications networks are computerized bulletin boards for matching trades. Because the traders can remain anonymous, price impact is diminished.

Another electronic trading mechanism is the single-price call auction in which buyers and sellers simply place limit orders. The market clearing price is set at the intersection of the supply and demand curves.

19 August 2005

Your Views?

* What effect is technology having on education?

* What role would technology play in education in the years to come?

Dont hesitate to express your views!

18 August 2005

Is Trade Good for Poor Countries?

Robert Hunter-Wade writes in the Financial Times:

Even the World Bank estimates that removing rich countries’ barriers to developing country exports would generate only very small income gains for the latter... many would actually lose from rich country trade liberalisation in key sectors. The ending of the multi-fibre agreement early this year, for example, has hurt textile exporters across the developing world as super-efficient producers in China gobble up the market.

Wade goes on to suggest other higher priorities (including reform of the WTO's intellectual property rules and the international monetary system).

But why have poor countries sometimes struggled to benefit from trade liberalisation? This paper from Bolaky and Freund provides evidence for an answer that is obvious in retrospect: countries with rigid labor laws or other excessive red tape cannot seize opportunities. Their entrepreneurs have to struggle against bureaucratic obstacles to respond to changes in the price of imports and exports.

Originally posted on PSD Blog by Tim Harford.

Competitiveness Partnerships

Governments that listen to the private sector are more likely to design credible and workable reforms, while entrepreneurs who understand what their government is trying to achieve with a program of reforms are more likely to accept and support them.

Benjamin Herzberg and Andrew Wright offer a practitioner's guide to setting up discussion between entrepreneurs and governments, with the aim of cutting red tape or otherwise improving the business environment.

Originally posted on PSD Blog by Tim Harford.

Joseph Stiglitz on Intellectual Property

Formerly Chief Economist at the Bank, the Nobel Laureate wrote a short piece on intellectual property in the Daily Times of Pakistan:

Without intellectual property protection, incentives to engage in certain types of creative endeavors would be weakened. But there are high costs associated with intellectual property. Ideas are the most important input into research, and if intellectual property slows down the ability to use others’ ideas, then scientific and technological progress will suffer. In fact, many of the most important ideas – for example, the mathematics that underlies the modern computer or the theories behind atomic energy or lasers – are not protected by intellectual property.

To read the article please click here.

16 August 2005

Financial Ratios

A firm's performance can be evaluated using financial ratios. Referencing these ratios to those of other firms allows a comparison to be made. The following is a listing of some useful ratios.

Leverage : Assets / Shareholder's Equity

Gross Margin = Gross Profit / Sales
Gross margin measures the profitability considering only variable costs and is a measure of the percentage of revenue that goes to fixed costs and profit.

Net Profit Margin = Net Income / Sales

Total Asset Turnover = defined as Sales / Total Assets

Return on Assets (ROA) = Net Income / Assets
ROA is a measure of the return on money provided by both owners and creditors, and is a measure of how efficiently all resources are managed.

Return on Equity (ROE) = defined as Net Income / Equity
Where the equity value is the shareholder's equity at the end of the period in which the income was earned. ROE is a measure of the return on money provided by the firm's owners.

ROE can be calculated indirectly as:

ROE = ( Net Income / Total Assets ) ( Total Assets / Equity )

ROE also can be calculated using DuPont analysis:

ROE = (Net Income / Sales)(Sales / Total Assets)(Total Assets / Equity)

This states that ROE is determined by multiplication of three levers:

ROE = (net profit margin) (total asset turnover) (leverage)

These levers are readily viewed on the company's financial statements. While ROE's may be similar among firms, the levers may differ significantly.


The term working capital is used to describe the current items of the balance sheet. Working capital includes current assets such as cash, accounts receivable, and inventory, and current liabilities such as accounts payable and other short term liabilities. Net working capital is defined as non-cash current operating assets minus non-debt current operating liabilities. Cash, short-term debt, and current portion of long-term debt are excluded from the net working capital calculation because they are related to financing and not to operations.

Two commonly used liquidity ratios are the current ratio and the quick ratio.

Current Ratio : defined as Current Assets / Current Liabilities.
The current ratio is a measure of the firm's ability to pay off current liabilities as they become due.

Quick Ratio : defined as Quick Assets / Current Liabilities.
The quick ratio also is known as the acid test. Quick assets are defined as cash, accounts receivable, and notes receivable - essentially current assets minus inventory.

14 August 2005

SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.


A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

* patents
* strong brand names
* good reputation among customers
* cost advantages from proprietary know-how
* exclusive access to high grade natural resources
* favorable access to distribution networks


The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:

* lack of patent protection
* a weak brand name
* poor reputation among customers
* high cost structure
* lack of access to the best natural resources
* lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.


The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:

* an unfulfilled customer need
* arrival of new technologies
* loosening of regulations
* removal of international trade barriers


Changes in the external environmental also may present threats to the firm. Some examples of such threats include:

* shifts in consumer tastes away from the firm's products
* emergence of substitute products
* new regulations
* increased trade barriers

PEST Analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

* Political
* Economic
* Social
* Technological

The acronym PEST (or sometimes rearranged as "STEP") is used to describe a framework for the analysis of these macroenvironmental factors.

Political Factors

Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some examples include:

* tax policy
* employment laws
* environmental regulations
* trade restrictions and tariffs
* political stability

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The following are examples of factors in the macroeconomy:

* economic growth
* interest rates
* exchange rates
* inflation rate

Social Factors

Social factors include the demographic and cultural aspects of the external macroenvironment. These factors affect customer needs and the size of potential markets. Some social factors include:

* health consciousness
* population growth rate
* age distribution
* career attitudes
* emphasis on safety

Technological Factors

Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions. Some technological factors include:

* R&D activity
* automation
* technology incentives
* rate of technological change

External Opportunities and Threats

The PEST factors combined with external microenvironmental factors can be classified as opportunities and threats in a SWOT analysis.

10 August 2005

Antidumping law: protecting special interests

The current issue of Foreign Affairs has an excellent article debunking the idea that America's antidumping policies are good for America. The essay, Antidumping: The Third Rail of Trade Policy, is written by N. Gregory Mankiw and Phillip L. Swagel. They say that antidumping law has become just a way for vested interests to protect themselves at the expense of American consumers (especially harming the poorest Americans) and at the expensive of companies that benefit from cheap inputs.

The authors point out that antidumping law's use in practice is very different from its purpose. It was introduced to act "when a foreign company uses temporary low prices to drive its competitors out of the market and then raises prices, a practice known as 'predatory pricing'." The idea was that consumers lose out in the long run because foreign producers are able to raises prices having put the competition out of practice. But even that might be a weak reason for the an antidumping law. As the authors point out: "On the other hand, if the price war lasts long enough or if the would-be predator is unable to raise prices in the end because of the entrance of new competitors, consumers are net winners. The possibility of new firms entering a market is thus a crucial constrain on anticompetitive behavior."

Moreover, predatory pricing isn't what the law is used for: "the American companies who petition for antidumping tariffs... use them to thwart foreign competition. In essence, 'antidumping' means little more than 'antibargain'."

The biggest user of antidumping procedures is the steel industry: "nearly half of antidumping tariffs imposed since 1970 have been on steel imports, and 158 of the 294 antidumping orders in force as of April 2005 were on steel products." The result, according to one study, is that for each job saved by steel tariffs, three jobs are lost in steel-using industries.

Sometimes antidumping rows are resolved by "suspension agreements" where foreign companies agree to minimum prices for their exports. But the authors point out: "It is no small irony that the [US] Department of Commerce sets prices in this fashion for steel plates imported into the United States from the former Soviet Union."

Originally published on the Globalization Institute Blog byAlex Singleton

09 August 2005

What Happened When Two Countries Liberalized Trade? Pain, Then Gain

"ECONOMISTS argue for free trade. They have two centuries of theory and experience to back them up. And they have recent empirical studies of how the liberalization of trade has increased productivity in less-developed countries like Chile and India. Lowering trade barriers, they maintain, not only cuts costs for consumers but aids economic growth and makes the general public better off."

To read this excellent article by Virginia Postrel please click here.

07 August 2005

A Definition of Entrepreneurship

The concept of entrepreneurship has a wide range of meanings. On the one extreme an entrepreneur is a person of very high aptitude who pioneers change, possessing characteristics found in only a very small fraction of the population. On the other extreme of definitions, anyone who wants to work for himself or herself is considered to be an entrepreneur.

The word entrepreneur originates from the French word, entreprendre, which means "to undertake." In a business context, it means to start a business. The Merriam-Webster Dictionary presents the definition of an entrepreneur as one who organizes, manages, and assumes the risks of a business or enterprise.

Schumpeter's View of Entrepreneurship

Austrian economist Joseph Schumpeter 's definition of entrepreneurship placed an emphasis on innovation, such as:

* new products
* new production methods
* new markets
* new forms of organization

Wealth is created when such innovation results in new demand. From this viewpoint, one can define the function of the entrepreneur as one of combining various input factors in an innovative manner to generate value to the customer with the hope that this value will exceed the cost of the input factors, thus generating superior returns that result in the creation of wealth.

Entrepreneurship vs. Small Business

Many people use the terms "entrepreneur" and "small business owner" synonymously. While they may have much in common, there are significant differences between the entrepreneurial venture and the small business. Entrepreneurial ventures differ from small businesses in these ways:

1. Amount of wealth creation - rather than simply generating an income stream that replaces traditional employment, a successful entrepreneurial venture creates substantial wealth, typically in excess of several million dollars of profit.

2. Speed of wealth creation - while a successful small business can generate several million dollars of profit over a lifetime, entrepreneurial wealth creation often is rapid; for example, within 5 years.

3. Risk - the risk of an entrepreneurial venture must be high; otherwise, with the incentive of sure profits many entrepreneurs would be pursuing the idea and the opportunity no longer would exist.

4. Innovation - entrepreneurship often involves substantial innovation beyond what a small business might exhibit. This innovation gives the venture the competitive advantage that results in wealth creation. The innovation may be in the product or service itself, or in the business processes used to deliver it.

A Race to the Top

"It was extremely revealing traveling from Europe to India as French voters (and now Dutch ones) were rejecting the E.U. constitution - in one giant snub to President Jacques Chirac, European integration, immigration, Turkish membership in the E.U. and all the forces of globalization eating away at Europe's welfare states. It is interesting because French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day. Good luck."

"Yes, this is a bad time for France and friends to lose their appetite for hard work - just when India, China and Poland are rediscovering theirs."

Article published by Thomas L. Friedman can be read here.

Web Globalization

Earlier this week John Yunker spotted a job advert. This job advert gave him an excuse to link back to a piece he did last December in which he said that 2005 would be the year when Web Globalization Goes Mainstream. Web designers are now being asked if they are also "web globalizers". Can they, that is to say, design websites that reach out successfully beyond their linguistic base, with well placed "change the language" buttons, which route viewers to their local supplier of the global goods or services in question?

One of the most portentous questions about cheap global electronic communication generally, and about the internet in particular, concerns whether these technologies will unite mankind, regardless of race, colour, creed, or language, or whether, by making global communication far easier between all those who share the same beliefs, cultures or languages, it will merely allow mankind to remain as divided and quarrelsome as ever.

But this latter tendency may only be the first consequence of the new technology.

Throughout the history of communications technology you get these first-this-then-that stories. Printing began with Latin Bibles, which seemed capable of uniting all of Christendom. But soon, printing presses were the basis of different, nationally distinct, church systems, each with their own particular Bibles, like the Church of England. Printing turned out to be divisive and nationalistic.

Our current electronic communications devices, when they first got started in the 1840s, when the Morse Code was first devised, seemed at first to hold out the promise of global unification. Yet the electric telegraph fed nationally selected news to national newspapers distributed on national railway systems which were themselves only made manageable by telegraph wires besides the railway lines. And when the nationalism thus democratised and inflamed culminated in the First World War, telephones enabled a new sort of twentieth century warlord to supervise battles that stretched over hundreds of miles and thus killed soldiers in unprecedented numbers.

In short, these things can be very hard to predict.

The tendency that John Yunker has noted suggests that the internet may now be engaged in yet another of these communications technology about-faces. Yes, the internet, during its first few years, has allowed people to concentrate on the easy stuff, of talking only to ideological allies, of uniting only those most easily united, of selling products only to those who already understand your language and already love your sales patter, needing only to hear it. But once that is accomplished, the balance of reward shifts, towards those who are able to reach out beyond the confines of shared belief, shared culture, or shared language. Selling across language barriers, with effective multi-lingual websites, is all part of this latter process.

Originally published on the Globalization Institute Blog by Brian Micklethwait.

06 August 2005

Made in China

Britain's tabloid Sun newspaper had an superb article on Friday on the effect of globalization on China. Oliver Harvey, writing from Shenzhen in China, pointed out that only 25 years ago Shenzhen was a...

...sleepy, impoverished, fishing village. Workers in blue Mao tunics cycled to work for a pittance in the bleak paddy fields on Communist farms. Today, the city is the heartbeat of the new China - a throbbing metropolis of soaring skyscrapers and ten million soulds that has become the workshop of the world.

The paper illustrated how China is cutting the cost of clothing with a picture of a man and woman with each bit of clothing priced. The article also explained that Chinese success does not mean we in Britain will lose out jobs-wise. It concluded with a Factfile:

China's economy is growing three times faster than America. It uses 40 per cent of the world's concrete and 25 per cent of its steel. Produces 16billion pairs of socks a year. Is currently building 200 airports. Built more power stations last year than exist in Britain. Makes 40 per cent of the world's microwaves, 30 per cent of our TVs, one in four washing machines.

All this is excellent news in the fight against poverty - and China's integration into the world economy should be welcomed too from the perspective of promoting peace and stability around the globe.

Originally published on the Globalization Institute Blog by Penelope Hawthorne.

Banana Wars

Some people still don't quite seem to get this free trade idea. I refer, of course, to Peter Mandelson's minions in Brussels who have once again been found to be in the wrong by the World Trade Organization.

Brussels suffered a blow in its latest trade war yesterday after the World Trade Organization ruled against its plans to triple import duties on bananas imported from the Americas.

They have managed to understand one small piece of the puzzle, that tariffs are at least better, less distorting, than quotas:

The "banana wars" go back to at least the 1990s when the EU agreed to dismantle its complex quota system and replace it with tariffs.

Why is it that they actually want to have tariffs at all? The European Union (small volumes from the Azores and Canaries aside) is not known as a producer of bananas so there is no domestic industry to protect (not that that would be a good reason even if there were).

The EU wants to give privileged access to its markets to African, Caribbean and Pacific region countries - many of which are former colonies. It had planned to lift tariffs on Latin American bananas from €75 (£52) a ton to €230 from the beginning of next year.

This shows up two points. Firstly, that organizations like the WTO are essential to keep those who sign agreements to the terms of those very agreements they have signed. Without a complaints procedure ("Teacher! He did it first!") whatever was actually down there on the piece of paper would be ignored in a welter of recriminations.

The second is that the Brussels mandarins seem not to have grasped the important point about free trade. If we wish to aid banana growers who are woefully uncompetitive in the world market (as, for example, many of the Caribbean ones are) we would be best served by aiding them directly, perhaps by helping to upgrade their production or by assisting their move into the production of other items.

Forcing every mother on the continent to pay more for the mashed banana she forces down her little one's throat is a grossly inefficient way of perpetuating those poor countries' dependency.

Far better to have free trade, zero tariffs and quotas, and then deal with the displaced and losers from the change directly.

Originally published on the Globalization Institute Blog by Tim Worstall.

03 August 2005

Market Share

Sales figures do not necessarily indicate how a firm is performing relative to its competitors. Rather, changes in sales simply may reflect changes in the market size or changes in economic conditions.

The firm's performance relative to competitors can be measured by the proportion of the market that the firm is able to capture. This proportion is referred to as the firm's market share and is calculated as follows:

Market Share = Firm's Sales / Total Market Sales

Sales may be determined on a value basis (sales price multiplied by volume) or on a unit basis (number of units shipped or number of customers served).

While the firm's own sales figures are readily available, total market sales are more difficult to determine. Usually, this information is available from trade associations and market research firms.

Reasons to Increase Market Share

Market share often is associated with profitability and thus many firms seek to increase their sales relative to competitors. Here are some specific reasons that a firm may seek to increase its market share:
  • Economies of scale - higher volume can be instrumental in developing a cost advantage.
  • Sales growth in a stagnant industry - when the industry is not growing, the firm still can grow its sales by increasing its market share.
  • Reputation - market leaders have clout that they can use to their advantage.
  • Increased bargaining power - a larger player has an advantage in negotiations with suppliers and channel members.
Ways to Increase Market Share

The market share of a product can be modeled as:

Share of Market = Share of Preference x Share of Voice x Share of Distribution

According to this model, there are three drivers of market share:
  • Share of preference - can be increased through product, pricing, and promotional changes.
  • Share of voice - the firm's proportion of total promotional expenditures in the market. Thus, share of voice can be increased by increasing advertising expenditures.
  • Share of distribution - can be increased through more intensive distribution.
From these drivers we see that market share can be increased by changing the variables of the marketing mix.
  • Product - the product attributes can be changed to provide more value to the customer, for example, by improving product quality.
  • Price - if the price elasticity of demand is elastic (that is, > 1), a decrease in price will increase sales revenue. This tactic may not succeed if competitors are willing and able to meet any price cuts.
  • Distribution - add new distribution channels or increase the intensity of distribution in each channel.
  • Promotion - increasing advertising expenditures can increase market share, unless competitors respond with similar increases.
Reasons Not to Increase Market Share

An increase in market share is not always desirable. For example:
  • If the firm is near its production capacity, an increase in market share might necessitate investment in additional capacity. If this capacity is underutilized, higher costs will result.
  • Overall profits may decline if market share is gained by increasing promotional expenditures or by decreasing prices.
  • A price war might be provoked if competitors attempt to regain their share by lowering prices.
  • A small niche player may be tolerated if it captures only a small share of the market. If that share increases, a larger, more capable competitor may decide to enter the niche.
  • Antitrust issues may arise if a firm dominates its market.
In some cases it may be advantageous to decrease market share. For example, if a firm is able to identify certain customers that are unprofitable, it may drop those customers and lose market share while improving profitability.

28 July 2005

Market Entry Modes

International Market Entry Modes (Part II)

Foreign Market Entry Modes

The decision of how to enter a foreign market can have a significant impact on the results. Expansion into foreign markets can be achieved via the following four mechanisms:

• Exporting
• Licensing
• Joint Venture
• franchising
• Direct Investment


Exporting is the marketing and direct sale of domestically-produced goods in another country. Exporting is a traditional and well-established method of reaching foreign markets. Since exporting does not require that the goods be produced in the target country, no investment in foreign production facilities is required. Most of the costs associated with exporting take the form of marketing expenses.

Exporting commonly requires coordination among four players:

• Exporter
• Importer
• Transport provider
• Government


Licensing essentially permits a company in the target country to use the property of the licensor. Such property usually is intangible, such as trademarks, patents, and production techniques. The licensee pays a fee in exchange for the rights to use the intangible property and possibly for technical assistance.

Because little investment on the part of the licensor is required, licensing has the potential to provide a very large ROI. However, because the licensee produces and markets the product, potential returns from manufacturing and marketing activities may be lost.

Joint Venture

There are five common objectives in a joint venture: market entry, risk/reward sharing, technology sharing and joint product development, and conforming to government regulations. Other benefits include political connections and distribution channel access that may depend on relationships.

Such alliances often are favorable when:

•The partners' strategic goals converge while their competitive goals diverge;
•The partners' size, market power, and resources are small compared to the industry leaders; and
•Partners' are able to learn from one another while limiting access to their own proprietary skills.

The key issues to consider in a joint venture are ownership, control, length of agreement, pricing, technology transfer, local firm capabilities and resources, and government intentions.

Potential problems include:

•Conflict over asymmetric new investments
•Mistrust over proprietary knowledge
•Performance ambiguity - how to split the pie
•Lack of parent firm support
•Cultural clashes
•If, how, and when to terminate the relationship

Joint ventures have conflicting pressures to cooperate and compete:

•Strategic imperative: the partners want to maximize the advantage gained for the joint venture, but they also want to maximize their own competitive position.
•The joint venture attempts to develop shared resources, but each firm wants to develop and protect its own proprietary resources.
•The joint venture is controlled through negotiations and coordination processes, while each firm would like to have hierarchical control.

Foreign Direct Investment

Foreign direct investment (FDI) is the direct ownership of facilities in the target country. It involves the transfer of resources including capital, technology, and personnel. Direct foreign investment may be made through the acquisition of an existing entity or the establishment of a new enterprise.

Direct ownership provides a high degree of control in the operations and the ability to better know the consumers and competitive environment. However, it requires a high level of resources and a high degree of commitment.

The Case of EuroDisney

Different modes of entry may be more appropriate under different circumstances, and the mode of entry is an important factor in the success of the project. Walt Disney Co. faced the challenge of building a theme park in Europe. Disney's mode of entry in Japan had been licensing. However, the firm chose direct investment in its European theme park, owning 49% with the remaining 51% held publicly.

Besides the mode of entry, another important element in Disney's decision was exactly where in Europe to locate. There are many factors in the site selection decision, and a company carefully must define and evaluate the criteria for choosing a location. The problems with the EuroDisney project illustrate that even if a company has been successful in the past, as Disney had been with its California, Florida, and Tokyo theme parks, future success is not guaranteed, especially when moving into a different country and culture. The appropriate adjustments for national differences always should be made.

27 July 2005

International Market Entry Modes (Part I)

In today's globalising world, firms are increasing looking towards other regions of the world to trade in. The newspapers are filled with reports of firms merging or aquiring firms from different part of the world or firms looking to franchise their products and services.

What are the steps taken by the executives of these firms before deciding on which market to enter? How do they make sure they make their journey a successful one? The decision requires an analysis of the aspects of the foreign market.
  • Whether to go abroad
  • Which markets to enter
  • How to enter those markets
  • Choice of marketing program
  • Marketing organisation
Criteria for Country Selection

1. Country/market Attractiveness in terms of the following:
o Market size
o Market growth and need potential in terms of demand
2. Company strength in terms of brand and accessibility
3. When the risk e.g. political is marginal compared to opportunities
4. Customer response
5. Competitive situation

However, most firms make their decisions to trade across boarders i.e. go international based on market conditions. They therefore become proactive or reactive in their decision making process.

A firm becomes proactive i.e. pulled by the potentials and advantages in the foreign market due to the following reasons:

1. The firms specific advantages in terms of profit
2. The advantage of having a unique brand
3. When a firm possesses technological advantages
4. The availability of resources in the foreign countries
5. Economies of scale
6. Economic and political factors

A firm becomes reactive i.e. pushed by bad domestic markets when the following is evident:

1. The pressure of domestic competition
2. Poor domestic market due to stagnant or declining sales figures
3. Saturated domestic markets
4. Overproduction

25 July 2005

Bangalore: Hot and Hotter

Technology plays a vital role in everyone's life may he/she be a student to an accountant. Where China dominates the manufacturing side of the business, India leads in the services industry of the world. To be more precise, Bangalore!

The silicon valley in Bangalore, India has been the talking point amongst techies as the haven for conducting technology based business.

Thomas L. Friedman in his article "Bangalore: Hot and Hotter" explores the importance Bangalore plays in todays globalising world.

Did you know that when China's prime minister, Wen Jiabao, visited India for the first time last April, he didn't fly into the capital, New Delhi - as foreign leaders usually do. He flew directly from Beijing to Bangalore - for a tech-tour - and then went on to New Delhi.

No U.S. president or vice president has ever visited Bangalore.

To read the article please click here.

Latest Economic Scapegoat: The Euro

The European continent's poor economic performance is being blamed on the Euro say's Floyd Norris in his article "Latest Economic Scapegoat: The Euro".

Italian cabinent ministers are suggesting a referendum to be held with regards to withdrawing from the European common currency. French and Dutch voters opposing the European constitution has brought many to think that euro will stop being the legal currency of much of Europe.

An interesting read for people to keep in touch with the political situation in Europe which will no doubt have a major affect on world economies and businesses worldwide. To read the article please click here.

23 July 2005

See a Bubble?

It's a good time to be a financial-disaster writer say's the author Roger Lowenstein of the article "See a Bubble?".

Over the past half-century the number of bubbles and consequent meltdowns are enough to fill a proper business school syllabus. However not every bubble leads to a meltdown...

A must read article for all. To read the article you can click here.

06 July 2005

Just a Thought

Over the past few days i have been thinking about the effects of informatin technology (IT) and the emergence of internet on students. As i was unable to get the full picture on how students have been affected, the idea of posting an article that might initiate in a public debate on this blog came about.

Well we can all agree that IT and the internet has provided us with lots of information for free of costs and therefore has enabled us to write great pieces of work, may they be homework, essays, dissertations or course works! They have also enabled us to learn agreat deal through alternative means.

However due to these technological breakthroughs the education systems have been on a decline. Once students used to do complicated calculations ( and still do in some parts of the world) single handedly! Now with the introduction of calculators and students have allowed themselves to rely on it so much that even simple calculations cannot be done without the use of calculators! Schools, Colleges and even Universities averages have been on a constant decline leading to grading criteria to be lowered over the years. Where once to achieve an 'A' grade used to be 90%, students are able to achieve this by getting 70% thesedays.

Above was just an example and im sure in some parts of the world my statement may not apply to. However, don't you agree that technology a powerful learning tool it may be, has also affected our minds to such an extent that it has lowered in some sence our education quantity as well as to some extent the quality levels?

Tomorrow's Education

Technology has become a very important part of our lives. Therefore it is time that we adopt technology in order to promote education as well as use technological means such as blogs as an educational tool and part of the curriculum.

Getting adapted to technology seems to be the hardest part for us, however, this could be overcome by awareness and understanding.

What about adoption? What does it do?

- media literacy
- course information management
- make those lessons extend - getting people involved on other levels (great for shy people and could help them to open up)
- summarise readings so they can participate more in class
- give project info
- group blogging
- user-centred learning

What can you do to get your students to blog:

- use only one publishing tool
- subscribe to their blogs
- comment on their posts at least once a week
- minimum post size
- require comments - make them interact with each other
- have guided questions
- determine grading on quantity or quality

What does this all mean for education?

- technology transformation
- blended classrooms
- distributed learning is possible
- need increased focus on interdisciplinary work - tech not just for geeks, soft skills not just for humanities students

SMS for Businesses?

As an organisation, the use of SMS may seem too innovative or unprofessional. So why are "forward-thinking" organisations throughout the world are welcoming SMS open-heartedly? What's so good about SMS? www.zyb.com has developed some reasons to use SMS in businesses.

The list they've come up with includes:

1. SMS is popular and well established
2. SMS' unique ability to reach anyone, anytime, anywhere
3. SMS is a great friendship-marketing tool
4. SMS is reliable
5. SMS is one of the most cost-effective methods of communication out there

The blog has also interestingly blamed neophobia for the reasons why businesses haven't started using sms.

For detailed information please visit their blog here.

14 June 2005

The Marketing Mix

The marketing mix is one of the dominant ideas in modern marketing. Philip Kotler in his co-authored book "Principles of Marketing" defines marketing mix as "the set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market". The marketing mix consists of everything the firm can do to influence the demand for its product. The many possibilities gathered into four groups of variables known as the 'four Ps'.

Product - Anything that can be offered to a market for attention, aquisition, use or consumption that might satisfy a want or need. It includes physical objects, services, persons, places, organisations and ideas.
Price - The amount of money charged for a product or service, or the sum of the values that consumers exchange for the benefits of having or using the product or service.
Place - All the company activities that make the product or service available to target customers.
Promotion - Activities that communicate the product or service and its merits to target customers and persuade them to buy.

The four Ps represent the sellers' view of the marketing tools available for influencing buyers. From a customer viewpoint, each marketing tool must deliver a customer benefit. One marketing expert suggested that companies should view the four Ps as the customer's 'four Cs':

Four Ps - Four Cs
Product - Customer needs and wants
Price - Cost to the customer
Place - Convenience
Promotion - Communication

10 June 2005


If there are any particular topics you would like me to post information on, please let me know via email or through comments link. I would be more than glad to compile relevent information and post the topic as soon as possible.


09 June 2005

International Trade Theories

An international trade theory can be seen as a measure to address problems in a country with a weak macro economy, high unemployment and inflation. International commitment to a free market economy will bring prosperity to the world economic system. Since 1970, the time of Adam Smith, economists have shown that free trade is efficient and leads to economic welfare.

Mercantilism – This trade theory suggested that a government can improve economic well being of the country by increasing exports and reducing imports, but turned out to be a flaw strategy.

Absolute Advantage – A country has an absolute advantage over it trading partners if it is able to produce more of a good or service with the same amount of resources or the same amount of a good or service with fewer resources. In the case of Zambia, the country has an absolute advantage over many countries in the production of copper. This occurs because of the existence of reserves of copper ore or bauxite. We can see that in terms of the production of goods, there are obvious gains from specialisation and trade, if Zambia produces copper and exports it to those countries that specialise in the production of other goods or services.

Comparative Advantage – A country has a comparative advantage in the production of a good or service that it produces at a lower opportunity cost than its trading partners. Some countries have an absolute advantage in the production of many goods relative to their trading partners. Some have an absolute disadvantage. They are inefficient in producing anything, relative to their trading partners. The theory of comparative costs argues that, put simply, it is better for a country that is inefficient at producing a good or service to specialise in the production of that good it is least inefficient at, compared with producing other goods.

Factor Endowment Theory - ‘Hecksher Ohlin’ theory powerfully supplements the theory of comparative advantage by bringing consideration to the endowment and cost of factors of production. The theory states that countries like China with big labour force will focus on labour intensive goods, and Sweden with more capital will focus on producing goods that are capital intensive. However the theory is criticised when taken the following into consideration:

1. Other factors – like minimum wage laws which leads to higher prices for relatively abundant labour - therefore making it cheaper to import rather than export.
2. Leontiff paradox – The United States makes export more labour intensive, this is due to the high tech products with high labour quality input rather than man hours of work e.g. level of education will also affect a country's advantage rather than its scarcity or abundance.

International Product Life-Cycle Theory (Verrons) - This theory states how a country's export can later become its import through different stages:

1. New Product stage – Initial consumption in home countries where price is inelastic and profits are high, which then go on to being sold to those willing to pay a premium price. This then goes on to being exported once local consumption runs out.

2. Maturing Product stage – Sales achieved through exports, and substitutes are being produced by local competitors. As substitute’s come into to the market, the demand for original product will fall. The firms with the new product switch from production to market protection, and tapping markets in less developed countries.

3. Standardized Product stage – Technology becomes widely diffused and available. Production shifts to low cost locations. Product becomes generic and price will become the sole determinant for demand. It is very likely that the same product may be at different stages with different versions for example cars (Japanese Toyota Avensis cars being imported into Japan).

Other considerations are government regulations, monetary valuation, currency for reporting profits, consumer tastes and branding.

Foreign Direct Investment (FDI) (Part III)

FDI Theories

Why do firms undertake FDI compared to exports? FDI is expensive due to costs of establishing production facility and risky due to problems related to doing business in an unfamiliar environment. However, firms still engage in FDI because of market imperfections related with exports such as:

• Transportation costs
• Trade barriers/government intervention
• Opportunistic behaviour of firms
• Bounded rationality
• Tight control needed for strategic reasons
• Tacit nature of knowledge

The most widely acclaimed theory on FDI is by John Dunnings - "Eclectic Paradigm", sometimes also referred to as the "OLI Theory".

John Dunnings Eclectic Paradigm

This theory ties together location advantage, ownership advantage, and internalisation advantage. “Eclectic” meaning deriving ideas from various sources. John Dunnings paradigm states that a firm will engage in FDI when all of the following three conditions are present:

• First, it must be more profitable to undertake a business activity in a foreign location than in a domestic location (location advantage). Examples of types of location-specific factors are markets, resources, production costs, political conditions, cultural/linguistic affinities, concentration of knowledge development.

• Second, the firm must own some unique competitive advantage that overcomes the disadvantages of competing with foreign firms in their own market (ownership advantage) such as technology, knowledge, patent, know-how, size.

• Third, the firm must benefit from controlling the foreign business activity, rather than hiring an independent local company to provide the service (internalisation advantage). This way the company can maintain their ownership advantages.

The more OLI advantages a firm possesses the greater the propensity of adopting an entrymode with a high control level such as wholly owned venture.

The OLI model was widely applied in the past to explain entry mode decisions and its basic ideas were supported by several empirical studies. But in spite of its eclecticism, its improved measurability, and its great explaining power the OLI model is solely a static one. It intends to explore all important factors impacting entry mode decisions but in fact fails to do so due to the neglect of strategic factors, characteristics of and situational contingency surrounding the decision maker, and competition.

This theory can be written in great detail, therefore anyone who is interested in this theory, please let me know as i would do my best to post more information as soon as possible.

Foreign Direct Investment (FDI) (Part II)

Reasons for FDI for a Business – Why businesses are interested?

1. Increase sales and profits – SME’s are interested with growth of MNE’s providing a need for local suppliers who may go on to supplying just locally in the long run. Better sales and profits opportunities for MNE’s as global markets offer more lucrative opportunities.

2. Enter rapidly growing markets – For example China, high economic growth and GDP. If a country continues to move towards a ‘market-driven’ economy, will allow entry for MNE’s which will result in the demand for goods and services not profitable by local firms. MNE’s are also trying to gain a foothold in Eastern European Countries.

3. Reduce costs – Labour costs and costs of producing. This depends on how labour intensive the business activities are. Materials, supply factor, and distance from supply source if too far may be a reason for a business to relocate closer to raw materials and resources. Costs of energy in some countries are lower than others, and transportation costs. For example US now goes to Mexico for textiles as a result of distance, and less and reduced transport costs. Lastly development of twin factories/maquiladoras which is where production operations are setup in both sides of the border (US and Mexican)

4. Gain a foothold in Economic Blocks – MNE’s that acquire a company in one of the three major blocks get additional benefits of less restriction and the ability to sell without import duties. A balance between blocks. Policies creation of new blocks will stimulate economies and provide a competitive stance for business operating under their umbrella.

5. Protect domestic markets – MNE’s entering international markets to attack competitors and prevent them from expanding overseas as they will be less inclined to expand overseas while busy trying to defend its home market position from MNE’s. Sometimes to bring pressure on a company that has already challenged overseas markets, for example when Fuji expanded to the US, Kodak expanded to Japan.

6. Protect foreign markets – If MNE’s can attract more customers and increase market share, they will be more able to move products directly to consumers. A possible joint venture could increase market share, protecting investments in the foreign market, otherwise local competitors will erode away firms position

7. Acquire technological and managerial know-how – Managerial and technological expertise. Relocating next to competitors to monitor, recruit scientists and specialists from local universities, for example Kodak’s expansion into Japan

Foreign Direct Investment (FDI) (Part I)

Types of FDI

Market seeking FDI: FDI undertaken to satisfy a particular or a set of foreign markets

Resource seeking FDI: FDI undertaken to gain access to natural resources such as minerals, oil, natural gas and agricultural products in some particular countries

Rationalised or efficiency seeking FDI: FDI undertaken to promote a more efficient division of labour or specialisation of an existing portfolio of foreign and domestic assets by MNEs

Strategic asset seeking FDI: FDI undertaken to protect or augment the existing ownership specific advantages of the investing firms or to reduce those of their rivals

27 May 2005

Own Branding (Part III)

Advantages of Own Branding for Suppliers:

Excess production capacity can be utilised
Own brands help absorb fixed costs
The retailer has an equal interest in selling the goods
Some warranty liabilities may transfer to the retailers

Disadvantages of Own Branding for Suppliers:

Advantages may be short-lived
Own brands may reduce sales of manufacturer's brands in the same store
Retailers may restrict display and promotion of manufacturer brands to emphasise own brands
Bargaining power is lost as the retailer can usually switch to alternative channels of supply

If anyone would like further examples of the advantages and disadvantages of supplying own brands for retailers, please let me know either via comments or email, and i would do my best to post them as soon as possible.

Own Branding (Part II)

Advantages of Own Brands for Retailer's:

* Image Building / Brand Loyalty

Good value enhances store image
Build relationship of trust and credibility
Control over relationship with customer
Good value builds loyalty to the store and own brand

* Competitive Edge / Extra Turnover

Advantage over competitors with no brand
Offer benefits distinct from competitors
More control of product specification and quality
Allows more retailer-led product innovation

* Higher Profits / Better Margins

Margins tend to be 5-20 percent better
Manufacturers' promotional expenses are avoided
Display space can be manipulated for better returns
Sales can be promoted by placing own brands next to major brands

If anyone would like further examples of the advantages for retailer's having own brands, please let me know either via comments or email, and i would do my best to post them as soon as possible.

Own Branding (Part I)

Drivers of Growth:
  • Product Category Characteristics
It is easy to make from commodity ingredients
The product is an inexpensive, low-risk purchase
  • New Product Activity
Manufacturer brands are offered in few varieties, so the retail brand offers clear alternatives
Consumers can easily make side-by-side comparisons of manufacturer and retailer brands
  • Retailer Brand Characteristics
Distribution is well managed
Consumers have confidence in their ability to make comparisons about quality
  • Price and Promotion Factors
Price gaps between national brands and private labels are wide
Retail margins in the category are relatively high
  • Retailer Characteristics
The retailer has the size and resources to invest in high quality, own brand development

If anyone would like further examples of the drivers of retail brand growth, please let me know either via comments or email, and i would do my best to post them as soon as possible.

Franchising (Part IV)

Potential Disadvantages for the Franchisor:

Less control over day-to-day operations
Reputation may be damaged by some franchisees
Franchisee motivation may wane over time
Some Franchisees take short-term view
A franchisee may become too powerful
Restricts use of other channels if exclusive geographical area agreed

Potential Disadvantages for the Franchisee:

Turnover and income may not meet expectations
May start to resent restrictions
Less scope for initiative and localisation
Cheaper supplies may be available from other sources
Still paying fees for marketing, even when a loyal customer base is established
As turnover increases, so typically does the fee

Franchising (Part III)

Advantages for Franchisor:

Rapid Growth is possible
Less capital required
Franchisees make highly motivated owner-managers
Lower monitoring costs
Chain can include some directly managed outlets
Scope for internationalisation
Low-risk way to test/develop a market

Advantages for the Franchisee:

Retains some independence
Rewards proportional to success achieved
Less start-up risk
Loans more readily available
Support and advice in setting up and operating
Use of well-known brand name
National/international marketing activity

Franchising (Part II)

Symbol Groups

A response by wholesalers and independent retailers to the growth of the multiples (e.g. Wal-Mart) has led to the formation of 'symbol', 'voluntary' or 'affiliation' groups. Within this form of contractual chain, a group name is utilised and:
  • The retailers normally are required to obtain a specified proportion of their goods from the group wholesalers.
  • The basis of of the contract is that the retailer sacrifices some freedom of action for the sake of big retailer disciplines that the sponsoring wholesaler seeks to provide.
  • Member retailers normally pay a levy towards the costs of the services that the group provides.
However a number of advantages are also obtained by the retailer in return:
  • Loans and financial support to develop or to extend/refurbish units.
  • Group buying power normally leads to better prices than an independent could obtain.
  • Benefits are gained through own-brand products and the group image.
  • Turnover is increased through lower prices, group marketing expertise, promotions, etc.
  • Selling costs as a percentage of turnover are therefore reduced.
  • Labour productivity is improved through higher turnover and better administrative systems.
  • Space productivity improves through advice on space allocations, merchandising and display.
  • Profitability and return on capital is improved.

Franchising (Part I)

The term ''franchising' has been used to describe various types of trading arrangements and opinions differ as to what truely comprises a franchise.

'Stern & Stanworth' (1988) took a broad view of the concept and identified 4 main contexts:
  • Manufacturer - Dealer: Within this agreement, the manufacturer is the franchisor and the franchisee sells direct to the public. Many such franchises are found in the retailing of cars and petrol.
  • Manufacturer - Wholesaler: The most notable examples are Coca-Cola and Pepsi-Co, who franchise the independent bottlers/canners who, in turn, sell to retail outlets.
  • Wholesaler - Retailer: Known as 'Symbol Groups' (would be discussed in part ii)
  • Business Format: The franchisor grants permission for the franchisee to sell the former's products or services. the franchisor also provides a proven method of trading, plus support and advice in setting up and operating the business.

Advantages of being a 'Multiple'

What is a 'multiple'?

Multiples are described as a retailer with atleast two, five or ten outlets.

The Growth Cycle

The growth of multiple's create improved buying power in terms of supply of goods, recruiting staff, acquisitions and also in services it buys from outside suppliers, such as advertising agencies, accounting (back-office services), etc.
Leading to:

Economies of scale are achieved through the ability to develop products, brand image, improving supply chains, which can be rolled out over a larger number of locations.
Leading To:

Margin Gains.
Leading To:

This enables a retailer to offer competitive prices through discounts, special offers and improvements in its product/service mix through increased product/service quality, offering choices and convenience.

Leading To:

Future Growth of a multiple-retailer.

26 May 2005

The Marketing Plan

Each business, product or brand needs a detailed marketing plan. What does a marketing plan look like? A product or brand plan should contain the following sections:

Executive Summary - the marketing plan should open with a short summary of the main goals and recommendations in the plan. The executive summary helps top management to find the plan's central points quickly. A table of contents should follow the executive summary.

Marketing Audit - is a systematic and periodic examination of a company's environment, objectives, strategies and activities to determine problem areas and opportunities.

SWOT Analysis - draws from the market audit. It is a brief list of critical success factors in the market, and rate strengths and weaknesses against competition. It should include costs and other non-marketing variables. The outstanding opportunities and threats should be given.

Objectives and Issues - after analysing the SWOT, the company sets objectives and considers issues that will affect them. The objectives are goals that the company would like to attain during the plan's term.

Marketing Strategy - In this section the manager outlines the broad marketing strategy of 'game plan' for attaining the objectives. It should detail the market segments on which the company will focus.

Marketing Mix - contains the 4P's: Product, Promotion, Price and Place. A manager should outline how each strategy responds to threats, opportunities and critical issues described earlier in the plan.

Action Programmes - answers the following questions: What will be done? When will it be done? Who is responsible for doing it? How much will it cost? The programme should outline special offers and their dates and other promotions.

Budgets - are the basis for materials buying, production scheduling, personnel planning and marketing operations. Budgeting can be very difficult and various budgeting methods can be applied i.e. 'rules of thumb'.

Controls - will monitor the progress. typically, these are the goals and budgets for each month or quarter. This allows higher management to review the results of each period and to spot businesses or products that are not meeting their goals. This leads to corrective actions taking place.

Implementation - is the process that turns marketing strategies and plans into marketing actions to accomplish strategic marketing objectives. Planning good strategies in only a start towards successful marketing. Without successful implementation, a brilliant strategy is worth nothing.

Forms of Economic Integration

There are five types of regional economic integration between countries, they include:
  • Free Trade Area (FTA)
A free trade area eliminates all barriers (both tariff and non-tariff) to trade between member countries but allows each country to establish its own trade policies against non members.
Examples include:
• The North American Free Trade Area (NAFTA) and
• The Association of Southeast Asian Nations (ASEAN)
  • Customs Union
A customs union combines the elimination of barriers (both tariff and non-tariff) to internal trade between member countries with the adoption of common external trade policies toward non members.
An example of a customs union is the one which exists between Switzerland and Liechtenstein.
  • Common Market
A common market combines the elements of a customs union with a policy that allows for the mobility of factors of production. Productivity is expected to rise in a common market because factors of production are free to locate where the returns to them are highest.
The European Union is an example of a common market till the late 1990s.
  • Economic Union
An economic union eliminates trade barriers between member countries, establishes a common external trade policy, follows a policy of factor mobility and a total harmonisation of monetary and fiscal policies which includes using a single currency.
The European Union is currently moving toward economic union status as only 12 out of 25 countries have adopted the Euro.
  • Political Union
A political union combines the elements of an economic union with the added feature of complete political integration.
The United States, transformed from 13 separate colonies into one, is an example of a political union.

25 May 2005

Learning Online: Trump University's Way

Donald Trump - He's built buildings, written books, married models and starred in a reality TV show. Yesterday, Donald Trump announced his latest venture: Trump University.

The for-profit online university will not offer degrees or grades. Courses will cost $300 and will take one to two weeks to complete. It will consist of online courses, CD-ROMS, consulting services and Learning Annex-type seminars.

"In today's hyper-competitive business climate, the need for the highest quality education has become more crucial than ever," Trump said. "But people are looking beyond the traditional business education model, which involves hours in the classroom and relies primarily on book learning."

Students (or customers, as Trump University staffers refer to them) will be able to register for classes in marketing, real estate and entrepreneurship, with additional curriculum areas planned for the future.

Read more here.

Overcoming the Biggest Barrier to Student Success

In the article, "Overcoming the Biggest Barrier to Student Success", the author Ron Bleed (vice chancellor IT, Maricopa Community Colleges) views various obstacles faced by students and explains different approaches that can be taken to overcome the problems.

Read more here.

24 May 2005

Blogs in Higher Education: Personal Voice as Part of Learning

The use of Internet technology to facilitate interaction, communication, and collaboration is well documented but its use in establishing and developing "personal voice" as part of learning is also now being addressed through the use of blogs. Finding personal voice as a pedagogical method is important to establish learner identity and focus, and journaling has long been recognized as an effective way to provide space for this to occur. The blog, however, provides a context in which personal voice can be "published" by the student, which means that attention is given to content, relevancy, and connection with learning outcomes to a higher degree than a traditional journal submission. The idea that more than one person will view the work is quite powerful in promoting a sense of ownership from the student. Teachers can also benefit from "hearing" the personal voice of their students to begin to really understand the learning path of each student through a course. The above is the opening paragraph in an article, Blogs in Higher Ed: Personal Voice as Part of Learning, published by Ruth Reynard in eLearning Dialogue. Here is the summary and recommendations from the article:

* Blogging must be integrated early in the course design and must be clearly connected to the course outcomes before it can become anything more than just an extra task for the students.

* Grading does seem to motivate the students, but it seems to be more effective to grade according to effort in relevancy to course content and outcomes than simply on numbers of submissions.

* There is an issue with privacy, particularly with older students. This should be addressed by emphasizing how to secure and share entries.

* Instructors need time to evaluate the importance of self-reflection as a methodological approach in learning as well as the value of integrating personal voice in the learning context. Otherwise the exercise will be perceived as futile to the students.

Read more here.

Case Study Write ups: Some Practicle Tips

1. Do not repeat Case Facts. The class or person marking will have read it too. You therefore do not need to repeat case facts. Such repetitious padding will add nothing either to the development of your argument for making a particular recommendation or to your mark.

2. Always assume you have sufficient information. It is not satisfactory to ‘cop out’ by stating that you do not have sufficient information. Managers the world over operate in situations where the information supply to make decisions is imperfect.

3. Waffle Factor. It helps to imagine that you are a consultant or a senior manager being asked for advice when working on a case study. If when you review your advice it seems a load of waffle, try again. Your advice would be of no practical use and is therefore not acceptable as an exercise in applying concepts.

4. Challenge or Acceptance? Generally speaking case studies are written to illustrate a problem or issue. If you find yourself endorsing or accepting the organisation’s thoughts or actions without discussion, think again! The case was written to generate debate. Is all as it appears? Become sceptical; do not necessarily accept bland statements without corroborating evidence. Challenge the views and perceptions of the people as represented in the case studies.

5. Thoroughness. Do not ignore data, financial or otherwise, that is included. It probably has a purpose; even if it’s an exercise in determining whether you can see the wood for the trees.

6. Credibility. Never forget implementation issues when making recommendations. Not all opportunities are exploitable. Employed human beings are not an infinitely disposable commodity. Your ability to determine the best match of decision in strategy, marketing etc. for the organisation’s capabilities, resources and the external environment is paramount and a major step on the way to becoming an effective manager.