20 May, 2009 | by

smallpiggybank

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 »

28 Jan, 2009 | by

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.

continue reading »

15 Oct, 2005 | by

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. 

Airline History
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 »