Blog about a Blog

I really do like the entire blog idea for class assignments. I felt it was really cool to have this as our assignment instead of reading a book.

I don't know if I could say that communicating through the blog really extended into the classroom. Most of the people that I commented on or that commented on my posts, we haven't spoken outside of class or in class for that matter. It just felt more like we would talk here and only here.

I really enjoyed the aspect of sharing opinions regarding certain companies and management issues. I felt that it was a useful alternative to taking words out of the book and teaching it in class. Each person had their own unique niche of companies that they knew about and provided some insightful thoughts into their management issues. It was definitely a good breath of air to hear others opinions on certain topics and I think really fostered a better method of learning about the subjects. I can't really think of an idea to make it more dynamic. Possibly an extra post every so often about certain companies or opinion-based questions about companies of the student's choice that is more on the consumer view of things rather than digging up information or management things?

I think for the outside material we could've used more. Some of the material covered in the professor's blog was quite insightful and is a motive of inspiration. Not only that, it provides a view that is outside of a textbook, which is what we need more of. I think a hands-on, realistic look at management and just on things in general would be beneficial to class. Perhaps some real life examples or things of that sort.

I think I will post on this blog beyond the class. It was fun to do and being able to examine the little things of companies or management that we notice is cool. Rather than being a silent grunt in the workforce, it allows us to make a little noise, even if no one is really reading it.

I think the blog should remain part of the class. Networking, sharing thoughts, and learning at the same time was pretty nifty aspect of this blog. I think to improve it, there should be more assignments based off a real-life view/aspect of companies. One or two of the assignments were very "textbook-ish" such as the Porter's 5. I think some people learned a bit about companies that they never really thought about and also may have changed a bit of perspective in their thinking, which is a big plus. Some people tend to have this jaded idea that management is followed straight out of a textbook, but I think through more real-life blog posts, they come to realize that there's a lot of ways management works.

That concludes the blog posting required for the classes. I hope to see you all again and that we all learned something from sharing our thoughts and opinions with each other.

Diagnosing Your Problems Today!

So let's talk about a few problems that are pretty good indicators that management isn't doing a good job.

Customer complaints! There's nothing worse than having the people you make your money off complain about things. Whether it be the product you're selling, bad customer service, or just that you're too far away from them, they have a lot of power over you. If they're complaining, you know something is wrong. It could be a multitude of things, but if it's one specific thing, such as poor customer service, you know management isn't doing their homework when hiring people. The management could also not be teaching their employees on handling customers. So there could be many things on management's part.

Now if a company has too much debt, this could be a strategic problem. But this all depends if the company is effectively utilizing their debt. If they aren't and the company has a weak product, obviously their debt is a problem then. Their strategy doesn't efficiently utilize the money they have borrowed or their product just isn't successful. This definitely points to a lack of proper strategy on part of management.

Now there's a whole slew of indicators that show management might not have a proper strategy in place. One of the companies out there that exhibit some of these problems is Take-Two Interactive. Currently, this company does not offer much product variety compared to their competitors like Electronic Arts or Activision. Take-Two publishes only one particular known brand name of a game while their competitors have numerous brand names that their company publishes. The company is also much slower at getting their product out compared to their competitors who produce a hit game numerous times throughout the year. Take-Two takes anywhere from 2-3yrs to produce a hit game.

These problems have come and created a company that recently posted a loss of $185 million in their previous fiscal year. The problems have expanded into an overall outlook that the single game they produce and publish is the only thing that could possibly get the company into the black. However, it is slowly being seen that the product might not even recoup all the losses incurred from other failed games or investments.

Take-Two cannot create quality games at the speed of EA or Activision and many companies are less like to go through Take-Two to publish their games because of their poor track record other than their single game, Grand Theft Auto. All these problems created another problem in a poor company image.

Take-Two has a lot of work in their future to repair these problems.

Apple Trying Not to Go Bananas

We've all heard of Apple. It's a fruit, a company that makes Mac's, the iPod, and the iPhone. The rate at which they expand and bring new technology out, marketable technology, is amazing. But what can stop their march of success? What can slow them down? We'll figure it out right here.

The first thing that might threaten their success is if vulnerabilities are found in their operating systems. Now I know most of you are probably thinking, "Pah! This isn't Microsoft man." Well, one of the reasons vulnerabilities haven't been found in Mac operating systems is because of their small user base. There will always be more hackers in Windows just because of the larger user base. But as the Mac OS popularity grows, you're going to see more and more hackers trying to get around the security features of Apple's systems. Just because no one hasn't found a weakness, doesn't mean it isn't there. There was one such example when some Windows users were testing Safari on Windows, they found a whole lot of holes in the security of Safari itself. While, it was on a Windows based machine, it is possible to find flaws in security on the Apple systems.

The odds of this happening are about 55%. I don't know the complete security features of Apple systems, but as more and more people use it, more and more people will try to crack it. It is inevitable that people will take cracks at it. But finding a weakness? Well, we'll have to see how long it takes the hackers.

The thing Apple can do to deal with this is just test and test and test. They don't have a whole lot of options regarding it but just be on top of it as their popularity increases. Maybe hiring some hackers to blow through their system might be a good idea...

Another thing that could become a potential problem for Apple is if a company makes a strong competitor to the iPod. iPod is Apple's money maker, so if something threatened iPod...it'd be pretty bad for Apple. What could come out that would threaten iPod? Well...not much other than an iPod ripoff or one that offers more features. But there are other MP3 players out there that offer better sound quality and don't require the usage of a program to install music. A lot more offer the plug & play option.

The odds of this occurring are about 25%. Not many companies out there can package as many features into a small little machine like Apple can.

Not to say Apple shouldn't be wary of a ripoff or any competitors. But they should focus on making the sound quality just a little bit better to compete with the sound offered by many other MP3 players. Perhaps a specially designed set of headphones for the iPod to make the sound quality better? Maybe making the iPod more user friendly to plug & play options? The options are endless for the expansion of features on the iPod.

Now another problem that Apple might face is over-expansion. Right now, Apple has about 3 product lines. Computers, music players, and the iPhone. I'm sure that the company is pondering what else they can expand into and make a big impact. Steve Jobs has done a good job of directing the company towards markets that Apple is strong in and making sure to effectively become a dominant player in that particular market. But what if the company expands into something that just is not for them? I'm sure we all remember when Apple used to be down in the dumps when Steve Jobs wasn't there.

The likelihood of this occurring in the present is pretty low at 5-10%. However, long term I think it is more of a possibility and jumping to 75% chance.

In order to survive this possible threat, Apple needs to train good managers and people who understand the markets, current trends, among other things. Someone similar to Steve Jobs would probably do a really good job. But let's face it, not everyone is Steve Jobs. So what else can Apple do if this happens? Take a look back at their history and see how the company has done and where it has faltered. If the product is popular but just not hitting the target audience from the right angle, they could do a lot more market research and determine how to better market the product. Now of course if the product is a complete flop, the company should recognize to pull out sooner rather than later.

Advantageous Competitiveness

Competitive advantage is an important part of a company's ability to keep itself out there and in the game. There's a lot of ways to keep ahead. Niche marketing, coming out with new ideas first, gobbling up the entire market share, keeping high tech, or having good old big brother government backing you up.

A few firms come to mind when thinking of competitive advantages. Microsoft, with Windows, has a strong advantage over most other companies in the OS market. Their market share completely obliterates and dominates all the other players. Of course, they're being thwarted by Apple and Linux. But most of the world's businesses and consumers use a Windows based OS. Though, they better keep on top of those security issues if they want to stay on top.

Another company that comes to mind is Gamespot. (See a trend and how I use them?) They're a good focus on niche marketing. They sell only games and the hardware to run those games. The company doesn't focus on anyone else. Their primary focus is on the gamers themselves. As I said in an earlier post, most companies that offer games in their store still cannot compete with Gamestop. When people think games, they immediately think Gamestop, or any of their stores with different names.

Let's bring back Apple and their iPod. Ya know, that nice little machine that plays a couple of million people's music everyday? They were the first company to really make full use of the mp3 market and make a machine that was simple to use and didn't run into a whole bunch of problems converting music and what not. The iPod design itself was also "trendy" and many companies followed it. (Wii anyone?) Apple and their iPod were first in the market to really make use of mp3s beyond illegal downloading and burning to CDs.

Finally, good ol monopoly status is given to most utility companies such as Con Ed. You'll never see Con Ed go out of business, unless everything they own blows up immediately. Of course, being allowed to be a basic monopoly comes with some setbacks. They can't charge exorbitant amounts for each little bit of wattage they provide us. As long as they keep up some decent service, they'll be in that position for a long time.

Strategically Strategizing

Many companies out there take on a specific role within their market and carve out a segment for themselves. They strive to bring about a particular business aspect, low cost, niche marketing, something specific that they can use to their advantage.

Walmart is a company that takes advantage of cost leadership. I don't believe Walmart's practices are very fair, they do take the crown as being a company that drives costs down. Not only are their prices generally lower than many existing competitors, they also reduce their in-house costs substantially. The company also has a knack for getting their suppliers to supply them at considerably lower costs. If any of you have seen the documentary on Rubbermaid...you will know that Walmart drove them into bankruptcy when Rubbermaid was unwilling to lower their selling point to meet Walmart's demands.

Sak's Fifth Avenue is a company that utilizes differentiation. The clothing in the store itself is high end and deserves the higher price tag over your regular run of the mill clothing. However, the company focuses a lot on the shopping experience itself. You practically get your own personal stylist when you enter. Of course for this service of a personal stylist, they charge a few hundred more than if you were shopping down the block at Macy's or something. It makes you wonder why people would pay the extra amount. Reason? People want the experience, don't want to go through the hassle of going through the larger crowds, and they have the money to burn.

A good focus company would be Gamestop. They're about as focused as it gets when it comes to offering a product. Like the word in their name, games is all they offer. From consoles to the computer, they have them all. Of course that's also all you will find as well. Don't expect to see computer parts, clothing, or food being served up at Gamestop. They have one focus and one focus only: Games. There's a reason why many other electronic retailers find it difficult to really sell games. It's because everyone goes to Gamestop because the employees know the games and that's all they sell.

Welp, that wraps up strategies. Follow them well and use it to your advantage. Just try not to kill a big company in the process.

Porter's 5 Forces

Today, I'm going to discuss Porter's 5 Forces. The basic forces are as follows: Barriers to entry, degree of rivalry, bargaining power of suppliers, bargaining power of buyers (consumers), and the relative substitute products.

Each force has a substantial impact in determining if a particular industry is attractive.

The barriers to entry would probably be at the top of anyone's list. If making the product for said industry requires tons of capital or is a risky proposition, then the likelihood of a company getting involved is slim.

Assuming you could enter, would the competitors completely dominate a newcomer by undercutting you in prices? If the competition is strong, your product might not survive compared to entrenched competition.

Do the suppliers have a great say in the price of supplies needed? If there happens to be one specific supplier, you might be in a crunch and at the whim of the suppler.

Will the customers cause havoc on your product? Will they demand lower prices for a completely unknown brand? This is another question you must determine an answer for when considering entering an industry.

And finally, similar to the competitor point, are there other substitute products that can take the place of your product that is as good or BETTER than your product?

Alas, so many questions to be asked utilizing Porter's 5 Forces. The forces are an excellent determinant if an industry is worth getting involved in. Of course, your product may be 10 times ahead of the competition and buyer's have no choice but to recognize your product. But, will the industry be suitable for you to enter without making massive concession or possibly losing all you invested? That's what Porter's 5 Forces helps you to determine.

An industry that I believe has high barriers to entry is the video game console market. The industry already has 3 major competitors, each with a substantial amount of market share. Some of the barriers you would face are large amounts of capital needed, the competitors and the brand loyalty they have already established, and 3rd party software support. These barriers already are a massive force blocking a successful entry into the market. The competitors are already established and getting 3rd party support for a complete unknown is unlikely. Even Microsoft, with all their capital and 3rd party support, has only posted 1 quarter of profit in their console division in their company.

So the console industry is a tough industry to enter.

A Stock Broker's Life Part 1

At the request of Eddie Wu I'm going to elaborate on the job of being a stock broker. Mainly, what we do, how we do, the job requirements, etc etc. All of this will be taken from the perspective I have at my investment banking firm. So it might not be the same perspective some of you may get at a specific firm. If you're looking for the assignment, it is below this entry.

Ok to start, there are two ways to get into a firm as a broker:

1. They hire you and train you themselves to be a broker.
2. You came from another firm as a stock broker after applying or them seeking you out and recruiting you.

If you came through option 1, like myself, you need to pass a few exams. The primary one you MUST pass is the Series 7. Second, you will have to take either the Series 63, 65, or 66. The Series 66 exam is a combination of both the 63 and 65 tests so you get both licenses at once. Most firms will require you to get the 66 but some may opt for only the 63.

After you complete your licensing exams you will most likely work under a broker. This is the HARDEST time of any broker's life. Normally you will be required to open anywhere from 10-40 accounts for the broker you're working under. Basically this means you're opening all these accounts and making no money from it. However, if you have a nice broker, the accounts you open will be joint accounts where you and the broker split commissions. I have this setup at my firm so it works out ok for me.

Now the entire opening account thing works like this: You make a cold call utilizing a prospect card or some other type of information. Normally these are bought from a marketing company or something. Then you can either make a pitch to immediately open an account (which is the hardest) or just get their interest and contact information so you can send them a packet of info regarding your firm so they might open an account at a later date.

Opening accounts is a pretty rough time because most new brokers aren't used to making cold calls and take a few weeks to open a single account unless you get lucky. Our workday starts at 8am and lasts at least until 4pm. However, most brokers will work from 7-8am till 6-10pm or later.

Brokers do a lot more too. Generally speaking, most of us will do our own research and not always use the firm's analyst as our guide. Sometimes the brokers influence the analyst's ideas since brokers are just as capable of picking good stocks as an analyst. Usually this is true at least. Some brokers don't have the capabilities to pick quality stocks.

Welp, brokers do a lot more beyond this. But I'll stop here.

I hope you all get some information out of this and if you want me to post more about how stock brokers work at my firm and a few others, leave me a comment. Just a reminder, this view right here is of one firm only. Some other firms have different methods. IE: Merrill Lynch's brokers work in a different capacity. New broker's there who worked under a specific broker automatically get a piece of the action from the client's already established. So in essence, you already have hundreds of accounts at your disposal.

Questions? Comments? Criticism? Leave me a comment.