Thursday, March 31, 2011
Wednesday, March 30, 2011
In our earlier blog on Business Models we discussed about Distribution and its criticality for the success of the supply chain of any product. Given its significance to the supply of most of the product, it is but evident that the companies which act as distributors have a very high say in allowing or not allowing the products to reach the destination. Given this super high influence on the supply chain it some of these distributors could have a very large margin in the products they distribute and hence make it costlier for the user.
Some companies who realized this decided to do away with these costly distributors and make it direct to the user - One such glorious example has been that of DELL computers. Dell computer's supply-chain innovation doing away with the distributor and assembling the various computer components just a few miles before it reaches the consumer has been greatly talked about by the management communities.
Eliminating the distributors in between doesn't just save the extra tax on the pocket of the user but also accrues alternate benefits and in fact the best of all these benefits has been Customer Delight. The process of doing away with the distributors and ensuring that the computer could be assembled just a few miles away from the user enables a greater customization and thereby enhancing the customer delight.
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_5833.html
Tuesday, March 29, 2011
It has been a journey of six weeks into the Discussion on Demand and Supply. As stated earlier, it is good to occasionally summarize the proceedings and give a perspective in hindsight so that we understand how much of the subject we have covered.
We began our discussion with having a basic understanding of the Demand and Supply and the laws that govern them. We then understood the concept of equilibrium price and began deriving the relation between the equilibrium price, the supply and the demand - We could summarize the relation in the following four laws which were essentially the summary of the blogs that succeeded the equilibrium price blog:
- If the demand increased while the supply remained unchanged, then the equilibrium price increases
- If the demand decreased while the supply remained unchanged, then the equilibrium price decreases
- If the supply increases with the demand remaining unchanged, then the equilibrium price decreases
- If the supply decreases with the demand remaining unchanged, then the equilibrium price increases
If you would have noticed, we have stuck with a major understanding that the only subject in the study is one object (lemon in our earlier case); in the process we have ignored some of the every essential factors which have a bearing on the demand and supply equations. In the upcoming blogs we would look at inter-relating these and creating a good understanding for the same.
However, there is one important corollary of these laws that we need to understand before we proceed with the relating to the other aspects by involving the external environment.
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_29.html
Monday, March 28, 2011
We generally hear people shout - the basic purpose of business is to earn profits for its investors - I have kind of challenged this notion in the earlier blog on business and society, where I point was that businesses need to be more proactive in their societal implication. This background leads us to this blog where we try understanding why we need a legal regulation for companies.
While businesses interact with society at various levels, they deal with both the money and the faith of the people with whom they transact. Given this, it is but fair that the interest of the people, business and society be carefully managed so that their economic activities function smoothly. This is where we have numerous regulations put in by law - right from the inception of a company (we would deal with the various types and details about the inception we know about in the So-Entrepreneurship Blog), to employment, their welfare, the agreements and contacts that govern the transactions between the organization, termination etc.
As generally said, in law the subject matter is not the person who is abiding, but the person who generally bends or breaks the boundaries; it would but be very interesting looking into this with some cases that have been in news in the past. None the less, law tries defining that the boundary for the use and abuse of the rights and privileges provided.
As we proceed with these blogs, we would disseminate some insights into the laws and their utility, implications for the business community.
Thursday, March 24, 2011
- ವರ್ತನೆಯು ಸಾಕಷ್ಟು ವಿಷಯಗಳಿಂದ ಪ್ರಭಾವಿತವಾಗಿರುತ್ತದೆ.
- ವರ್ತನೆಯು ಸಾಕಷ್ಟು ವಿಧದ ವಿಷಯಗಳಿಂದ ಪ್ರಭಾವಿತವಾಗಿರುತ್ತದೆ.
- ವರ್ತನೆಯು ವೈಯಕ್ತಿಕ ವ್ಯತ್ಯಾಸಗಳಿಂದಾಗಿ ನಿಶ್ಚಯವಾಗುತ್ತವೆ.
- ವರ್ತನೆಯು ಸಾಮಾನ್ಯತೆಗಳಿಂದಲೂ ಪ್ರಭಾವಿತವಾಗಿರುತ್ತದೆ.
- ವರ್ತನೆಯು ನಿರ್ದಿಷ್ಟ ಗುರಿ ಮತ್ತು ಉದ್ದೇಶದಿಂದ ಪ್ರಭಾವಿತವಾಗಿರುತ್ತದೆ.
- ವರ್ತನೆಯನ್ನು ಸಾಕಷ್ಟು ಮಟ್ಟಕ್ಕೆ ಹೆಚ್ಚಿನ ಪ್ರಮಾಣಕ್ಕೆ ಬದಲಾಯಿಸಬಹುದು.
- ವರ್ತನೆಯು ಸಾಕಷ್ಟು ಮಟ್ಟಕ್ಕೆ ಸಕ್ರಿಯ, ಅಂತೆಯೆ ಸ್ಥಾಯಿಯೂ ಆಗಿರುತ್ತದೆ.
- ವರ್ತನೆಯನ್ನು ಬಹು ಮಟ್ಟಕ್ಕೆ ಪ್ರವಾದಿಸಬಹುದು.
- ವರ್ತನೆಯು ಹಿಂದಿನ ಅನುಭವಗಳಿಂದ ಪ್ರಭಾವಿತವಾಗಿರುತ್ತದೆ.
- Behavior is influenced by a number of factors
- Behavior is influenced by various kinds of factors
- Behavior is determined by individual differences
- Behavior is affected by similarities
- Behavior is goal directed and purposeful
- Behavior is modifiable to a very large degree
- Behavior is dynamic as well as stable
- Behavior is predictable to some degree
- Behavior is influenced by past experience
Wednesday, March 23, 2011
Continuing further from the last model of Franchising which was expansion focused, we look at the delivery of goods aspect in this blog.
Distribution forms the critical link ensuring that the products produced reach the customers. In the whole of the business world, distribution forms the critical link that ensures responsiveness demanded by the customers and the businesses alike.
The field of the distribution is so critical that there are numerous companies which completely involve themselves into the distribution of products; Distribution is a critical factor in the Supply Chain of any industry. These companies generally offer the following benefits - storage, credit and collection, logistics. These are very critical for the smooth functioning of the businesses.
Innovations in the distribution model that have been hailed world over include the Dell model of computer delivery, the FedEx in shipping services. These innovations have created a lot of value add for all stakeholders involved with them. Their success has highlights the fact that any innovation in the area of distribution creates a value add that would benefit the entire stakeholder community (some more and some less but none the less all).
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_23.html
Tuesday, March 22, 2011
In the last discussion on the direct implication of the Supply and Demand laws; we saw how the increase in supply with a stagnant demand would lower the equilibrium price. In today’s section we come to the last direct implication of the Supply and Demand Law.
Building on the lemon sample again, let us makes the following assumptions - there was some pest which began affecting the lemons. So the general demand of 5 bags of lemons could not be satisfied and only 4 bags could be delivered. The demand was still for 5 bags of lemon by the day. Given this scenario, the vendor increased the price of each lemon; and the number of customers asking for this began dropping.
Analyzing this situation, we find that once the crop failed, the people who generally consume the lemons don’t immediately realize this and demand would remain the same. Since the supply would have dropped, the limited number of lemons now has a higher demand; hence price increases - only the people who would value the lemon more than the money they have in their pocket would go ahead and purchase which, while those who feel the lemons are not worth the higher price would not purchase it. The Rule therefore is - "If supply decreased and demand remains unchanged, then it leads to higher price and lower quantity."
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_22.html
Monday, March 21, 2011
It has been a bit over 20 years since India has liberalized itself and seen its benefits. If we look at the era before the liberalization, we had the government dominated industrial sector driving the economy. We had companies like the BHELs, BEMLs, ITIs, and HMTs etc which ruled the roost and provided a lifetime employment to the generation there.
A typical look at this era and we realize that these organizations had a typical set up; dispersed across the states, there were small colonies around these government companies. In addition there were employees who would travel by the transport that was provided by these organization, work and return in the evening. There were school very close to these colonies were most of the kids of the employees were trained and educated.
When I look back at these, I feel the concept with these government companies could be much better related to the social impact that accompanies the business of these companies. However with liberalization we find most of these government companies shutting down their premises and the businesses run by private people growing in numbers and success stories too.
But there seems to be one drawback with these private institutions when I compare them with the public sector companies. I find that the social aspect of business seems to have fallen away. The return on investment seem to be the major focus areas - pretty right with the capitalistic nature of the businesses today; but it is important to have the social impact is creates.
Realizing the real impact that corporate can do to society and being more proactive in these aspects, without limiting it their CSR activities; would be a key ingredient if private companies of today. Never isolate business from society - there is no business without a society flourishing around it.
Discussions of this nature are important part of the economic world and we would deal with on the discussion forum too - do let us know your opinion on these issues.
Thursday, March 17, 2011
- Micro OB - that dealing with the way individuals influence the organization
- Macro OB - that dealing with the way the organization influence the behavior of the people
Wednesday, March 16, 2011
The last of the business models we discussed about was Freemium; today we would explore the Franchisee business model.
We generally see brand names McDonald, Cafe Coffee Day and the like, expanding their operations to almost every small town in the country. How do they manage to scale up so quickly? They expand so at such speeds since the original companies - McD, CCD etc don’t really do all the necessary investment for every new outlet, they tie up with others who show the necessary interest & aptitude for their brand - Their business expansion style is called Franchise Model.
The franchisee business model has two parties in it -
- The franchisor - who is intending to expand his business (sometimes this could be at two levels - the main franchisor who owns the business and the franchisor who would have the power to license and expand the
- The franchisee - who intends to use the Franchisor's brand name and develop it at a location
These two are bound by a franchise agreement valid for a franchising period of time. The franchise agreement documents the details of the operation procedures, the rules and regulations that would bind the franchisee, non compete-clause, details of investment etc.
The franchise model has its own advantages and disadvantages. The advantages for the franchisor include a quick expansion of the business in areas which would otherwise be difficult to reach; the investment needed for the new set up would be shared with an additional resource - the franchisee. For the franchisee get the benefit of an established business model from the franchisor, a brand name, limited knowledge suffices as training is provided. The disadvantage on the other end would be that the franchisor would have to let go of the franchisee if the franchisee so wills after the franchise period. Given this scenario, it might open up another competitor in the business. The localization of the service or product to suit the needs of the local people.
This business model has been adopted extensively in the hospitality industry. Use this business model for expansion of your business only once you have learnt its nuances, and limit your risk with a good agreement.
Read in Kannada:http://somanagement.blogspot.com/2011/03/blog-post_16.html
Tuesday, March 15, 2011
Monday, March 14, 2011
- The pure start-up stage
- The small group growth stage
- The Established stage
Thursday, March 10, 2011
In the earlier blog on HRM, we understood the relevance and briefly touched on how it could be used at securing a competitive advantage for the company. One of the foundation stones of HRM is the area of Psychology. In this science of the mind, we have a concept of Ego. Ego as a concept is psychology was introduced by Sir Sigmund Freud. We would keep dealing with the theory he proposed for a later date.
Ego, in its Latin origins, means "I". Simply, it is the image we have about our-self - this image is built by our notions about our self & our achievements. This in many ways forms the beginning of all HR issues and hence attracts a lot of interest from the Managerial community. All humans work with a commitment to realizing their dream – how ever big or small; and to realize this (s) he would create her/his own path towards achieving it. In this journey one achieves a phenomenal number of achievements minor or major and begins associating with his personal image.
Over a period of time, the individual moves in the reverse, begins assigning too much weight to past successes and creates a small imaginary sphere around oneself to protect the territory that is so personal. Entry for anyone into this territory is based on the proximity of the individual to the person. People begin clashing with other people when they try to protect this boundary. This is one of the major issues that the HR department faces while dealing with people and their aspirations.
Understanding this “I” that people possess is a great secret for effective management of the human capital.
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_9081.html
Wednesday, March 9, 2011
Continuing in our discussion on business models, Direct Sales being the last one; today we deal with one of the most common model we see in the software world - It is what we called Freemium.
The term "freemium" is a collation of two words - free and premium. This name beautifully summarizes what this model is all about. Simply it is says make something free and as the customer asks for more features and modifications charge a premium for it.
One of the glaring examples for this is the anti-virus software that we find today. Most anti-virus are offered for free for a specified period of time say 45 days, and on completion the user would need to purchase it. Another variant of the freemium is to give a basic version of the software with limited essential features, and the additional features would be enabled on paying for the license.
This business model would work best when you are trying give the prospective customer a chance a feel of your product. This is a showcase to the customer and sometime also helps not just get the sale but in early phases of release can be used for reviewing the features etc. In some cases this also shows the confidence the developing company has in its product!
Use this technique to win your customer’s appreciation based on your product's strength.
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_09.html
Tuesday, March 8, 2011
Continuing form the point where we left in the earlier discussion on Demand and Supply, we will tweak with the scenario to create the following situation. We would again deal with the lemon vendor.
Let take the following situation: the last time the vendor visited the market, he had a lot people asking for lemons, so with that in mind he gets along with him a greater quantity of lemons than the previous time. As he set up the stall and set the board Rs 3 per lemon, and began waiting for customers to buy his lemons, he found that there was less number of customers turning up. He waited the whole day, and post lunch, he began giving a rebate, put up a board which read Rs 1.5/- per lemon. The number of consumer no increased!
Let’s have a look at what actually happened. The lemon vendor went took the earlier experience and got along with him a large but fixed quantity of lemons. He probably pitched the price point based on his earlier experience at Rs 3/- per lemon. But as the day progressed, not many lemons moved; we any way had to get at least some sales else he would need to take the stock back home. With this in mind he decides to reduce the price and see if the number of people who would purchase the lemons increases. This thought gets him to reduce the price and there by increase sale. Since the sale and the price were lower this time, the vendor would try to reduce the quantity he would get for selling also at that price.
Read in Kannada: http://somanagement.blogspot.com/2011/03/blog-post_4535.html
Monday, March 7, 2011
- ಪ್ರೇರಣೆಯ ವಿಧಿ
- ಆಡಳಿತ ಆಯಕಟ್ಟು
- Motivational style
- Formal structure
Thursday, March 3, 2011
Wednesday, March 2, 2011
Having looked at the underlying concept of Bait and Hook Model we shall now explore a bit of the pretty common direct sales method that is adopted.
We would definitely have heard about consumer product companies like Amway or Tupper-wear and also seen a lot of insurance agents from companies like LIC, HDFC Life, Bajaj Allianz etc. What is common between the two? - They both have people getting to explain their product to you in person or at a common demonstration. This is how most of these companies make new customers and consumers for themselves and thereby make money for the firm through them.
This business model is generally done when you need to explain in detail about the product to the customer - there is an evident need for educating the consumer about the product. This concept is not new and the first use as per my information dates back to 1886 by Avon Products, Inc in the United States and its success as a business is indicated by the fact that its revenues in 2008 were 10.9 billion!
This model derives its strength from the ability to influence a decision - I would generally like to know and interact with a person for business, if that person is pretty close to me say a friend or a family member I would rely more on him and hence there is a high probability that there would be a purchase.
Minor modifications to this personal contact based Direct Sales method leads so some interesting Marketing models like Multi-Level Marketing, Networking Marketing etc. We shall look at these marketing innovations as we progress into understanding the various business functions at a later date.
Read in kannada: http://somanagement.blogspot.com/2011/03/blog-post.html