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.
Monday, October 29, 2007
Tuesday, October 16, 2007
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.
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.
Thursday, October 11, 2007
A Mission, A Statement, Me
I'm Jonathan. The student. The stock broker in training. The guy that helps you out when you need it. The worker who is always busy. That's me in a nutshell and that's what I'm doing almost all the time. Working and focusing on making things better around me.
Now you might question, why work all that much and help out others at the same time? Well, here's what I think will emerge from it. Connections. Social networking. You meet a lot more people that way. Not only that, the work environment is a great way to make connections. Odds are you won't stay at the place for that long, so it's always good for them to see a face that they can't forget. (Mainly because I'm working with them for 40hrs of the week.) My vision is that working hard and helping people out will lead to more connections and that my hard work ethic will appeal to people and be noticed.
Working hard is something I'm committed to. You can't have everything handed to you on a silver platter. When you do get something handed to you, don't take it for granted. Utilize it and make sure you understand, you didn't get it on your own. My work will eventually get me what I want with my own work. I also value my relationships with friends. They're some of the most important things to have in your life.
The end result of everything is that I want to get my own place sometime soon. Utilizing the connections I have and working hard will allow this goal to be achieved. And of course, getting my own place just doesn't come to me on a silver platter. (That'd just be too big for a platter!)
Now you might question, why work all that much and help out others at the same time? Well, here's what I think will emerge from it. Connections. Social networking. You meet a lot more people that way. Not only that, the work environment is a great way to make connections. Odds are you won't stay at the place for that long, so it's always good for them to see a face that they can't forget. (Mainly because I'm working with them for 40hrs of the week.) My vision is that working hard and helping people out will lead to more connections and that my hard work ethic will appeal to people and be noticed.
Working hard is something I'm committed to. You can't have everything handed to you on a silver platter. When you do get something handed to you, don't take it for granted. Utilize it and make sure you understand, you didn't get it on your own. My work will eventually get me what I want with my own work. I also value my relationships with friends. They're some of the most important things to have in your life.
The end result of everything is that I want to get my own place sometime soon. Utilizing the connections I have and working hard will allow this goal to be achieved. And of course, getting my own place just doesn't come to me on a silver platter. (That'd just be too big for a platter!)
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