20 May, 2009 | by Nidish Kamath
Forbes magazine had an interesting piece about large business acting as lenders to small business. This comes right behind the biggest credit meltdown in history. This lending comes in the form of retail financing or vendor financing, and in some cases, in the form of corporate venture funding. In 2008, as per NVCA, corporate venture funding arms amounted to 19.2% of all venture deals, an amount that works out to $5.4B out of total deals worth $28B. Similarly, the Forbes article pointed to $52B raised for corporate non-venture financing.
What does this mean for the shareholders in these corporations? Let us look at a few numbers. A stock screen on Yahoo for companies with positive free cash flow, and picked companies that have positive cash balance on their balance sheets reveals about 896 stocks, and most notable among them being Berkshire Hathaway with $16440 of cash available per share. Since free cash flow does not include the cost of debt servicing by these companies, one should also look at the total debt assumed by these companies. A vast majority of these companies have very little to zero debt on their balance sheets. So, to keep matters simple, let us assume there is no debt servicing expense.
The stock screen reveals that, on an average, after excluding outliers such as BRK-A, each company has a 15% return on equity, and $1.3B of cash in the bank. There is a total cash position of $1.2 trillion. In other words, the $5.4B continue reading »
4 May, 2009 | by Richard Vinhais
The Berkshire Hathaway (BH) annual shareholder meeting has long been regarded as the Mecca for prestigious investors and businessmen alike. Knowledge-thirsty shareholders and spectators flock from all over the world to hear the Oracle of Omaha, Warren Buffett, and his curmudgeonly sidekick, Charlie Munger, pontificate in grand fashion on the conglomerates’ performance, as well as on a wide array of current events.
Attending the meeting had been a personal desire of mine going all the way back to my grad school years. The event has often been described as an “MBA in a weekend” or even the “Woodstock for investors”. Such sensational statements always left me feeling a bit incredulous, as I always found it hard to believe that an annual shareholder meeting could yield such a worthwhile experience. However, my incredulity was surpassed by my appetite to discover the reality for myself. So I purchased my obligatory share of BH stock and made my way to Nebraska for the 2009 annual meeting on May 2nd.
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23 Apr, 2009 | by Matt Cummings
There has never been a more important time than now to re-assess business development, sales and marketing programs to ensure your marketing focus is very selective. That’s best done by test marketing your service or product.
Major corporations never think about introducing a product without first testing it. Professional service organizations, on the other hand, never test market their services. They’ve been cruising on a development bubble for years and felt it wasn’t necessary. It is now.
There is a way to test market your services and respond directly to client needs with minimum marketing and business development costs while still increasing business.
You must begin with an unbiased audit of your present marketing and client retention programs. This is best accomplished by a seasoned, independent business development consultant. Once the audit has been done the consultant will have a clear understanding of exactly how you market your services, what your key people see as your strengths and weaknesses, how you see yourself in the marketplace and how you feel you are perceived by potential clients. This is the basic information you need to start the process of blending your present marketing and business development initiatives with client trends, past, present and future, into a marketing program that is so focused, so accurate and so successful that it never fails to increase business and profits. continue reading »
28 Jan, 2009 | by Evan J Miller
On every coin and every bill issued by the United States Treasury you’ll find the words “In God We Trust”. In recent years that slogan has been extended to say: “In God We Trust – All Others Bring Data”.
This clever twist is especially popular in Lean Six Sigma and Total Quality Management circles, where the data-driven decisions are the holy grail – the means to reduced costs, improved efficiencies, reduced downtime, and driving waste out of processes.
Now it seems neither of these adequately represents how business actually operates.
According to CIO.com research published by Accenture found that nearly half (40%) of major corporate decisions are based on the decision maker’s ‘gut’, not on data.
While this number (40%) surprised me, I was not at all surprised to read that the top reason (61%) these managers rely on their gut is that good data are just not available.
Recently I visited one of these businesses. Like two thirds of survey respondents, these leaders recognize the weaknesses of their data systems and they’d love to fix them.
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11 Dec, 2008 | by Erik Luhrs
Photo by: Nadeem Chughtai
Especially these days, every choice an entrepreneur, business leader, or homeowner makes can be the difference between success and failure. Making the best possible choices is vital, whether it involves a stock portfolio or retirement plan, a household budget, or the future of a large corporation.
Fortunately, successful decision making is a skill that can be learned. Every day I teach it to people just like you at Make Your Business Boom, a unique hybrid that combines consulting and coaching with cutting edge concepts derived from psychological research. The synergy of this innovative approach is proven by the practical and effective way it motivates business owners and others to transform them into better decision makers.
Decision making is a complex process that requires time and training if a person wants to be empowered to make the best possible decisions in virtually any situation. But making choices is typically done from force of habit, as the mind accepts the easiest, most convenient, or most obvious option. Since poor decisions can cut off access to more desirable options and alternatives, it is important to train the mind to default to superior decisions and choices. continue reading »
16 Apr, 2006 | by Richard Vinhais
I, like many students of business, have great admiration for Walmart’s tremendous success through its innovative supply chain management structure, relentless pursuit of always having the lowest prices, etc, etc.
This does not mean I admire their complete and total disregard of their own blue collar employees. i.e. Paltry medical benefits and just a shear disinterest in workers in general. I’ll just leave it at that.
Recently, Walmart has begun to cannibalize sales of their own existing stores in various locations. Essentially stores are opening up in close proximately to older stores. Now, you would think Walmart would recognize and avoid such a maneuver given past experience of other retail giants. i.e. Home Depot, Target, etc. continue reading »
15 Oct, 2005 | by Richard Vinhais
The following is a summation and analytical assessment on the “Star Alliance (A): A Global Network” case study that was published in the fourth edition of “Transnational Management” by Bartlett, Ghoshal and Birkinshaw (C) 2005. The article provides history of the airline industry which includes the emergence of strategic alliances, budget carriers, competition and collaboration, cultural assessment and finishes off with a SWOT Analysis and perspective of the future of the Star Alliance.
The airline industry has grown and evolved by leaps and bounds since the early days of the Wright Brothers. It’s now layered with comprehensive alliances, strategic business models, revolutionary information systems and much more.
The airline industry took flight and yielded its first signs of competition in the late 1970s with deregulation. The US Airline Deregulation Act was signed into law on October 24, 1978 . This act caused the slow reduction in the powers of the Civil Aeronautics Board, which up to that point had strong control over pricing, market entry and most other airline functions. Deregulation in Europe followed similar suit which essentially ended many of the existing constraints on European carriers. continue reading »
10 May, 2005 | by Richard Vinhais
A new approach to strategic management was introduced in the early 1990′s by Drs. Robert Kaplan ( Harvard Business School ) and David Norton. The system was dubbed the ‘balanced scorecard’. The inception of the balanced scorecard was caused due to the weaknesses or ambiguities left from previous management approaches. These known weaknesses of managing solely by financial measures was a commonly understood vice for years. The balanced scorecard approach is intended to provide a clear formula as to what companies should measure in order to balance the financial perspective.
The balanced scorecard is more then just a measurement system. It is a total management system that provides a framework to organizations that helps maintain and clarify a sense of vision or strategy. Along with the vision and strategy that is essential to a company’s growth, the balanced scorecard provides usable data that can be leveraged to take appropriate business action with surgical precision. It provides vital feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. continue reading »