In Q 1.5.3. they discuss the rapid inflation rates in Zimbabwe and the crisis it caused, in July 2008.
The three factors that may be causing inflation in Zimbabwe are:
- one of the main factors is that the price of food is raising too much, one issue of this is the fact that Zimbabwe is forced to sell it's staple food, maize out of the country, and import such important products, which are more expensive than home-grown products. The high food prices mean that everyday, people need to spend more in order to buy them, making inflation worsen.
- there is also problems with electricty, as it is expensive to power the homes, it is difficult for even the government and companies to supply the vast demand of power, especially in the farming sector, as they need lots of power to irrigate their crops. All this means more money has to be spent to buy the power and keep the farms going, which are an important source of income for the country.
- the final problem is the huge amount of un-employment, which means that people just do not have the money to pay for these basic living costs, making large debts and raising inflation through that route.
The combination of all these factors has caused inflation to raise at such a high level, that it just makes things worse in the end. These problems must be curbed in order for Zimbabwe to have a chance of recovery.
The main problems that uncontrollable inflation could cause for Zimbabwe are:
- a raise in food prices, meaning that the cost of living would be put even higher
- a serious problem with importing and exporting goods, as the currencies would transfer to Zimbabwe dollars and be worth even less the next day
- wage costs would have to raise, to match the high living costs, which would make the production costs for a company higher, which would make the product it produces more expensive, which would make inflation higher (becoming an endless cycle without some way to change it)
- poverty will worsen, which it already has come to an intolerable level, if there is a tolerable level of poverty
- people will not be able to afford living costs
- mass emmigration out of the country in order to find work in places with lower living costs, which will cause problems with finding workers in the country, making it even worse off
- there will be less savings, as the worth of them will become lower, so then there will be more spending, and in the long term, much less money for investments
Some information on the problems in Zimbabwe were found at this website: http://news.bbc.co.uk/2/hi/business/6665749.stm
Dec 20, 2009
Strong Stakeholders
Skoda Auto, which is located in Czech, perhaps has too many high risk stakeholders. Because of it's large export habits, the country has become too reliant on the money it brings, leading to crisis when a worker strike could end up creating huge losses of income. This raises a huge issue of whether it is wise for a government to rely on an company with it's own private interests, in order to supply income for the economy. There is too much vested in a relationship that is so precarious.
Nonetheless, the two main internal stakeholder groups mentioned by this issues are the employees, who feel their benefits are not substancial enough, and require higher pay, or they will strike. And, the managers and directors, who have to decide whether or not to sacrifice a large portion of their income to satisfy worker wants, or find a way to violate the labour rights, and keep their income high. There is also an added pressure of the shareholders, as it will be difficult to keep them happy if they are losing a large amount of their dividends and the stock prices lower, due to the loss of income. They will surely rebel as well.
The main conflict that exists between the main stakeholders, is the wants of the workforce and employees, which conflicts with the objectives of the shareholders, as well as will put a heavy strain on the government, as they rely on the income that the company provides. It could cause major problems within the country itself and indirectly affect the consummers as well, as the prices will probably raise in order to compensate for the increase in production costs. The competitors will probably be happy though, as the prices will raise, and the customers will go to them instead, to get better deals. Although, with automobiles there is a slight difference, as the cars are different depending on the brand, and if Skoda really is such a huge company, the raise in prices may cause less damage for the amount of customers than if the company was small the the products were the same for every company. Hopefully, with Skoda's reputation, they will be able to hold on to their customers without losing them, and causing a greater loss of income because the customers do not want to pay such high prices. It would depend on the time in which this was occuring. Since the issue started in 2007, there may be less tolerance for the price rise, as that was soon after the economic crisis, so people were less willing to spend more. That was probably the first cause of the strike, as the workers were suffering from the affects of the economic crisis, and wanted a higher pay in order to balance out the difference.
There are several ways that this conflict could be minimized. One main way, would be to raise prices. It is risky as the customers may not tolerate it and cause a greater loss of income, but if it was coupled with a greater public acceptance, it may be the right move. The factors are risky, but if the company was able to market itself well and continue bringing in good customers, adding value due to reputation and better qualities, then it could make the price raise more acceptable. One other way would be to
Nonetheless, the two main internal stakeholder groups mentioned by this issues are the employees, who feel their benefits are not substancial enough, and require higher pay, or they will strike. And, the managers and directors, who have to decide whether or not to sacrifice a large portion of their income to satisfy worker wants, or find a way to violate the labour rights, and keep their income high. There is also an added pressure of the shareholders, as it will be difficult to keep them happy if they are losing a large amount of their dividends and the stock prices lower, due to the loss of income. They will surely rebel as well.
The main conflict that exists between the main stakeholders, is the wants of the workforce and employees, which conflicts with the objectives of the shareholders, as well as will put a heavy strain on the government, as they rely on the income that the company provides. It could cause major problems within the country itself and indirectly affect the consummers as well, as the prices will probably raise in order to compensate for the increase in production costs. The competitors will probably be happy though, as the prices will raise, and the customers will go to them instead, to get better deals. Although, with automobiles there is a slight difference, as the cars are different depending on the brand, and if Skoda really is such a huge company, the raise in prices may cause less damage for the amount of customers than if the company was small the the products were the same for every company. Hopefully, with Skoda's reputation, they will be able to hold on to their customers without losing them, and causing a greater loss of income because the customers do not want to pay such high prices. It would depend on the time in which this was occuring. Since the issue started in 2007, there may be less tolerance for the price rise, as that was soon after the economic crisis, so people were less willing to spend more. That was probably the first cause of the strike, as the workers were suffering from the affects of the economic crisis, and wanted a higher pay in order to balance out the difference.
There are several ways that this conflict could be minimized. One main way, would be to raise prices. It is risky as the customers may not tolerate it and cause a greater loss of income, but if it was coupled with a greater public acceptance, it may be the right move. The factors are risky, but if the company was able to market itself well and continue bringing in good customers, adding value due to reputation and better qualities, then it could make the price raise more acceptable. One other way would be to
Dec 9, 2009
Mind Your Own Business - Stakeholders
Stakeholders are the people or organization that have a direct interest in and is affected by the actions and performance of a business.
Internal Stakeholders are the members of the actual organization or business.
Some are:
Employees
Who strive to improve:
- pay
- working conditions
- job security
- training and career progression opportunities
Shareholders
Who's main objectives are:
- maximizing dividend payments
- rise of the value of share price
Managers and Directors
Who attempts to:
- maximize their own benefits (bonus and perks)
- profit maximization
External Stakeholders are not part of the business but have interest in the actions of the organization.
Some are:
Suppliers
Who rely on business co-operation and purchasing
Customers
Who rely on the product and business, and have the control of either buying or not the business' service or good
Special Interest Groups are an organization that advocates certain issues, and is also an external stakeholder, monitoring the ethical behaviour of companies.
Their members are passionate individuals who believe in the cause that they are trying to promote/protect.
Some of the types of SIG's are:
Trade Unions (Labour Unions)
They aim to:
- protect and enhance the conditions of the working members
- make sure that wages and salaries rise with inflation
- introduces minimum wage
- better working conditions
Pressure Groups:
They aim to:
- place influence on organizations to act a certain way
- lobby a change in legislation
- protet their point of interest
- provide public awareness on the issue
Industry Trade Groups:
- promoting particular industries through education and advertising
- funded by business in particular industry
Local Community:
They will place demands on businesses that operates in their community
Such as:
- job creation and opportunities
- consideration of the local environment
- wide choice of provision of products with competitive prices
- sponsorship and fundraising of local events
Unless the business does these things for the local community, it will not be accepted into the area and will be boycotted.
The factors which when completed can help SIG's complete their goals are:
- funding (public funding will provide more strength in an SIG)
- public opinion (the better people think of them, the more damage they can do if displeased and the greater effects they can make)
- number of members (the more people involved, the bigger impact if goods are boycotted or protested)
- commitment of members (if the members are commited, there is a greater chance of success as they will be willing to sacrifice a lot for their cause)
The reasons a company should pay notice to a SIG is because:
- the effectiveness of the SIG (could cause more damage)
- market power of the business (if they have a monopoly they may not need to care)
- costs (if the price is higher than they can pay it is not worth it, but if they can then should they?)
- views of directors, senior managers, and shareholders (if they believe the SIG should be noticed, it causes more pressure to notice them)
- aims and objectives of the business (whether or not the SIG follows or conflicts with the objectives)
Internal Stakeholders are the members of the actual organization or business.
Some are:
Employees
Who strive to improve:
- pay
- working conditions
- job security
- training and career progression opportunities
Shareholders
Who's main objectives are:
- maximizing dividend payments
- rise of the value of share price
Managers and Directors
Who attempts to:
- maximize their own benefits (bonus and perks)
- profit maximization
External Stakeholders are not part of the business but have interest in the actions of the organization.
Some are:
Suppliers
Who rely on business co-operation and purchasing
Customers
Who rely on the product and business, and have the control of either buying or not the business' service or good
Special Interest Groups are an organization that advocates certain issues, and is also an external stakeholder, monitoring the ethical behaviour of companies.
Their members are passionate individuals who believe in the cause that they are trying to promote/protect.
Some of the types of SIG's are:
Trade Unions (Labour Unions)
They aim to:
- protect and enhance the conditions of the working members
- make sure that wages and salaries rise with inflation
- introduces minimum wage
- better working conditions
Pressure Groups:
They aim to:
- place influence on organizations to act a certain way
- lobby a change in legislation
- protet their point of interest
- provide public awareness on the issue
Industry Trade Groups:
- promoting particular industries through education and advertising
- funded by business in particular industry
Local Community:
They will place demands on businesses that operates in their community
Such as:
- job creation and opportunities
- consideration of the local environment
- wide choice of provision of products with competitive prices
- sponsorship and fundraising of local events
Unless the business does these things for the local community, it will not be accepted into the area and will be boycotted.
The factors which when completed can help SIG's complete their goals are:
- funding (public funding will provide more strength in an SIG)
- public opinion (the better people think of them, the more damage they can do if displeased and the greater effects they can make)
- number of members (the more people involved, the bigger impact if goods are boycotted or protested)
- commitment of members (if the members are commited, there is a greater chance of success as they will be willing to sacrifice a lot for their cause)
The reasons a company should pay notice to a SIG is because:
- the effectiveness of the SIG (could cause more damage)
- market power of the business (if they have a monopoly they may not need to care)
- costs (if the price is higher than they can pay it is not worth it, but if they can then should they?)
- views of directors, senior managers, and shareholders (if they believe the SIG should be noticed, it causes more pressure to notice them)
- aims and objectives of the business (whether or not the SIG follows or conflicts with the objectives)
Nov 10, 2009
Franchises and Baseball
Franchises: A type of ownership of a business where a person starts the business with a bought license with another firm's benefits (a.k.a. name, trademark, logo, and brands).
The franchisor (original owner of the firm) receives not only a license fee for the original costs of buying the brand, but also receives a royalty payment (the commissions) from the franchisee (the purchaser of the franchise).
Examples of Franchises:
- McDonald's
- Pizza Hut
- Subway
- The Body Shop
- Quiznos
Good Traits for Franchise Possibilities:
- a good track record of profitability
- a unique or unusual concept
- broad geographic appeal
- easy to operate
- inexpensive
- easily duplicated
Benefits for Growth of Franchisor:
- less risky as the franchisor has to spend less money for the outlet itself
- gives international and national presence without higher personal cost
- gives benefits of economies of scale
- can grow without worrying about costs of operation
- receives royalty payments from franchisee
- there is more incentives to do well on the franchisees part and that gives more motivation than a salaried manager
- brings more awareness of local market and cultural differences
Advantages for Franchisee:
- low risk as business already has success
- lower start-up costs since business has already been started
- there is more incentive to ensure the franchise succeeds
- benefits from large scale advertising from a well-known parent company
Pitfalls for Franchisor:
- difficult to control the business
- huge risk of reputation as the business name is at stake if franchisee fails at improving the company
- there are faster methods of growth
Disadvantages for Franchisee:
- very expensive
- no guarantees of payback
- less profit as franchisees have to give a royalty payment to the franchisor
- less flexibility for innovation
A franchise opportunity provides the opportunities for growth and the ability to run your own business, without having all the risks involved. The goals for a franchise is to expand and grow, while a business could be that as well as work on making a profit and getting a name for themselves. A franchise gives the franchisee a chance to learn how to run a business successfully (hopefully) and is a good learning experience for those who do not want to have to go through the trouble of setting up their own business and reduce risk. It also provides the franchisors with a lot of new opportunities.
And now the baseball...
Baseball teams value has apparently risen 15% last year. This means there is a much greater business to be made in managing and owning baseball teams. Currently the teams in the USA and Canada are worth over 176 million dollars, and the highest team is worth 950 million dollars (in 2005 according to Forbes.com). Several of these teams are in substantial debt which means they are more venerable to be outbid and sold to rival bidders. Some of these are:
Arizona Diamondbacks - Debt: 103%, Value: $286 mil, Operating Income: $-18.7 mil
Although this team's value is moderate, the debt is very high. Unless the franchisees are able to make a large increase in profits and pay off these debts, it will be difficult for them to be able to hold onto the company. They also have a negative operating income, which means they are continuing to lose money, which obviously will lead to more debt and a higher risk of outbidding.
Los Angeles Dodgers - Debt: 99%, Value: $424 mil, Operating Income: $-7.4 mil
This teams debt is high, as well as a negative income, which means it is in a precarious position to defend itself against bidders, the value is fairly high, but it may go down as the debt increases.
The Oregon Stadium is an example of a rival bidder for teams:
The Oregon Stadium Campaign is working in collaboration with city and state leaders to secure a Major League Baseball franchise for Oregon. The Oregon Stadium Campaign served as the driving force behind passage of the MLB Jobs Bill, which authorizes the state to transfer income tax revenue from player salaries to finance approximately $115 million of a new Portland ballpark. The campaign continues to work closely with the City of Portland to bring Major League Baseball to Portland in a way that is sensible for both Oregonians and for Major League Baseball.
(As taken from http://www.oregonstadiumcampaign.com/)
If English soccer Premier League were to take over teams like the Major League Baseball did, there would be a lot of fan protest. Although the teams would make more money and there would be better financing for the sport, as soccer is already such a huge market, and very reliant on the fans, it would be difficult to convince the masses that moving teams around and making them neutral instead of affiliated with particular cities, would cause dissatisfaction. Soccer, a more internationally acclaimed sport, is very reliant on heavily vocal fans, and most of it is very patriotic, which would cause problems if the teams roots were to be taken out of their original cities. Much like how Montreal was upset that their baseball team, the Montreal Expos, was moved around so much that it ceased to remain loyal to Montreal, many fans would protest and grow angry if the same thing were to happen to soccer teams. Not to mention, it seems as though soccer has so much money already invested in it, that if there was any more, it would become even more corrupt and less about the sport, and more about the money. Soccer would lose public confidence and morale. It probably would not do well in the long term.
Although the clubs in the League would have more business and grow more profitable from the increase in teams and games and money being pumped into them, the soccer associations outside of the League would suffer from a loss in participants and such thing as the Championship etc. would become less valued and there would be less public interest. This would mean that more money would be pumped into the League, and the other teams would be pressured to join. But this would only work if the League had public support, which would be difficult to get originally as mentioned in the previous paragraph. But if it were to work out, the profits of the people involved in running the League would be enormous.
The franchisor (original owner of the firm) receives not only a license fee for the original costs of buying the brand, but also receives a royalty payment (the commissions) from the franchisee (the purchaser of the franchise).
Examples of Franchises:
- McDonald's
- Pizza Hut
- Subway
- The Body Shop
- Quiznos
Good Traits for Franchise Possibilities:
- a good track record of profitability
- a unique or unusual concept
- broad geographic appeal
- easy to operate
- inexpensive
- easily duplicated
Benefits for Growth of Franchisor:
- less risky as the franchisor has to spend less money for the outlet itself
- gives international and national presence without higher personal cost
- gives benefits of economies of scale
- can grow without worrying about costs of operation
- receives royalty payments from franchisee
- there is more incentives to do well on the franchisees part and that gives more motivation than a salaried manager
- brings more awareness of local market and cultural differences
Advantages for Franchisee:
- low risk as business already has success
- lower start-up costs since business has already been started
- there is more incentive to ensure the franchise succeeds
- benefits from large scale advertising from a well-known parent company
Pitfalls for Franchisor:
- difficult to control the business
- huge risk of reputation as the business name is at stake if franchisee fails at improving the company
- there are faster methods of growth
Disadvantages for Franchisee:
- very expensive
- no guarantees of payback
- less profit as franchisees have to give a royalty payment to the franchisor
- less flexibility for innovation
A franchise opportunity provides the opportunities for growth and the ability to run your own business, without having all the risks involved. The goals for a franchise is to expand and grow, while a business could be that as well as work on making a profit and getting a name for themselves. A franchise gives the franchisee a chance to learn how to run a business successfully (hopefully) and is a good learning experience for those who do not want to have to go through the trouble of setting up their own business and reduce risk. It also provides the franchisors with a lot of new opportunities.
And now the baseball...
Baseball teams value has apparently risen 15% last year. This means there is a much greater business to be made in managing and owning baseball teams. Currently the teams in the USA and Canada are worth over 176 million dollars, and the highest team is worth 950 million dollars (in 2005 according to Forbes.com). Several of these teams are in substantial debt which means they are more venerable to be outbid and sold to rival bidders. Some of these are:
Arizona Diamondbacks - Debt: 103%, Value: $286 mil, Operating Income: $-18.7 mil
Although this team's value is moderate, the debt is very high. Unless the franchisees are able to make a large increase in profits and pay off these debts, it will be difficult for them to be able to hold onto the company. They also have a negative operating income, which means they are continuing to lose money, which obviously will lead to more debt and a higher risk of outbidding.
Los Angeles Dodgers - Debt: 99%, Value: $424 mil, Operating Income: $-7.4 mil
This teams debt is high, as well as a negative income, which means it is in a precarious position to defend itself against bidders, the value is fairly high, but it may go down as the debt increases.
The Oregon Stadium is an example of a rival bidder for teams:
The Oregon Stadium Campaign is working in collaboration with city and state leaders to secure a Major League Baseball franchise for Oregon. The Oregon Stadium Campaign served as the driving force behind passage of the MLB Jobs Bill, which authorizes the state to transfer income tax revenue from player salaries to finance approximately $115 million of a new Portland ballpark. The campaign continues to work closely with the City of Portland to bring Major League Baseball to Portland in a way that is sensible for both Oregonians and for Major League Baseball.
(As taken from http://www.oregonstadiumcampaign.com/)
If English soccer Premier League were to take over teams like the Major League Baseball did, there would be a lot of fan protest. Although the teams would make more money and there would be better financing for the sport, as soccer is already such a huge market, and very reliant on the fans, it would be difficult to convince the masses that moving teams around and making them neutral instead of affiliated with particular cities, would cause dissatisfaction. Soccer, a more internationally acclaimed sport, is very reliant on heavily vocal fans, and most of it is very patriotic, which would cause problems if the teams roots were to be taken out of their original cities. Much like how Montreal was upset that their baseball team, the Montreal Expos, was moved around so much that it ceased to remain loyal to Montreal, many fans would protest and grow angry if the same thing were to happen to soccer teams. Not to mention, it seems as though soccer has so much money already invested in it, that if there was any more, it would become even more corrupt and less about the sport, and more about the money. Soccer would lose public confidence and morale. It probably would not do well in the long term.
Although the clubs in the League would have more business and grow more profitable from the increase in teams and games and money being pumped into them, the soccer associations outside of the League would suffer from a loss in participants and such thing as the Championship etc. would become less valued and there would be less public interest. This would mean that more money would be pumped into the League, and the other teams would be pressured to join. But this would only work if the League had public support, which would be difficult to get originally as mentioned in the previous paragraph. But if it were to work out, the profits of the people involved in running the League would be enormous.
INTRODUCTION TO THE BLOG
This is my business class blog account. It is for school, so be forewarned ;) I hope that those who read this enjoy it, as it probably won't be all that interesting if you do not enjoy the idea and topic of business and related fields. Needless to say, please feel free to browse and enjoy :)
Anaira-La <3
Anaira-La <3
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