Human Capital


The economic growth, employment levels and the availability of a skilled workforce are inter-related. Economic growth creates employment, but economic growth partly depends on skilled human resources – a country’s human capital. The concept encompasses investment in the skills of the labor force, including education and vocational training to develop specific skills.

Personal and national success are increasingly correlated with the possession of skills. Skilled individuals can command a premium salary in periods of high economic activity. Worldwide, unemployed levels remain high, while organizations have difficulty filling vacancies which require specific expertise. A shortage of skilled people can act as a limiting factor on individual organizations and on the economy as a whole. Small firms are also vulnerable because their owners do not possess basic marketing and finance skills. It is in the interest of any country to maximize its human resources by investing in the skills of its workforce, its human capital. Human capital is one component of a country’s overall competitiveness.

The most successful developing countries are investing heavily in the education and technical skills of their population. Skills requirement are particularly critical at the managerial level.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

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The Employment Market


The employment market comprises all those people who are available for work. The market is affected by national or regional supply of and demand for appropriately  skilled employees. It is constrained by demographic factors such as the number of young people leaving schools and universities and by cultural variables such as expectations  for mothers to stay at home looking after children.

The employment or job market is the ultimate source of all new recruits. Human resource managers need to understand the dynamics of this market in order to deal properly with resourcing, set competitive salaries and obtain people with essential skills. They need to understand the expectations of prospective employees and have an insight into issues such as:

o     Why do people work?

o     What conditions and salaries are they prepared to work for?

o     What expectations do they have of employers?

o     How does the availability of human capital affect employment levels?

o     What effects do the activities of competitors have on employee availability?

o     What patterns of work are replacing traditional nine-to-five jobs?

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

 

Product Specificity


Product specificity means the extent to which the use of a product depends on local socio-technical conditions. This is a function of the type of applications to which the product can be put, its inter-relatedness to other products, the local culture, and government regulation. Cars, for example, would sell better in a large country with a good highway system, space to park cars, good credit systems, and availability of gasoline, than in one without. Such complementary conditions for selling automobiles can be taken for granted in the United States, but not in Nigeria. In some countries, air pollution standards limit the level of pollutants that a car can emit.

Baking foods requires baking ovens, which many households in many countries may not have. Foods that require refrigeration may not do well in countries like Nigeria, where very few people have refrigerators. In the local culture there may be taboos associated with certain products. Local culture can also make some features in local products unnecessary.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Productivity Measurement System


One of the important steps in productivity improvement is establishing a productivity measurement system with the enterprise. This in itself brings some improvement in performance by making people more aware of the meaning of productivity. The following advice could be useful in setting up the measurement system:

  • Determine the elements of the enterprise that most need to be monitored.
  • Determine the types of measure to be used.
  • Select perfect concepts and units of measurement for the output and input of the company as a whole, and for the critical sub-activities.
  • Ascertain the availability of data and make necessary compromises.
  • Select a post activity, section or group within the organization, and test the measurement system to obtain periodic feedback on the results.
  • Assess the system’s value, make any modifications and conduct a new pilot activity if the modifications completely change the original system design.

A measurement system must consider cost effectiveness, the limitations of productivity measurement and whether total factor measurement is necessary; in other words, it must determine the range and terms of the measurement system tasks. It must be easy to use and serve to identify the reasons for the organizational changes.

The general consideration on productivity management helps in identifying the so-called organizational meta-structure of productivity improvement process. Every given method of productivity improvement covers:

  1. Organizational forms of productivity improvement
  2. Productivity improvement areas
  3. Productivity improvement techniques

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Private Enterprise


Private or free, enterprise is the economic system. It means that most of the country’s goods and services are provided by privately owned firms that compete with a minimum of government controls. The private enterprise system has six key characteristics:

  1. Private Ownership of Property: most businesses, land, minerals, buildings, machinery, and personal goods are owned by people, not by governments. This ownership is the right of people. It is an incentive to work hard to acquire and care for our own property. This sort of incentive contributes to the economic growth of the country.
  2. Freedom of choice and limited government: Freedom of choice allows businesses to select the products they produce, hire and fire employees, compete for customers and supplies, and make and dispose of profits. Freedom of choice also allows consumers to buy whatever products and services they are willing and able to buy from whichever firms they choose. Freedom of choice implies a limited amount of government intervention in the area of private enterprise. In a free enterprise system, government sets the” economic rules of the game” by establishing basic laws and regulations that ensure society’s welfare. But within the context, individuals and organizations are left largely free to pursue their own interests and inclinations.
  3. Consumer sovereignty: Consumers rule; the more carefully they make their decisions, the more clearly the economy will reflect their needs. The more money you spend in the marketplace, the greater your influence.
  4. Profits: Profits make businesses responsive to consumer wants. Profits are also a good indicator of where to expand and how to compete better. As a shop owner you can also compare the overall profits with past results or with profits of other businesses to gauge how well your shop is doing. Profits are the clearest standard of performance available to a business. But consumers often misinterpret business profits. They also don’t always understand how profits direct a business’ efforts. And consumers usually substantially overstate how high business profits actually are.
  5. Competition: Most business leaders believe their industries are highly competitive. But the term “competitive” has many meanings. Pure, or perfect, competition exists in an industry when 1) there are many firms of about equal size, 2) all firms produce the same product, 3) each firm can enter or leave the industry when it wants, and 4) all firms and customers are well-informed about prices and availability of products. No industry completely satisfies all these conditions, although some come close. Most industries operate under conditions of imperfect competition. This means they satisfy some but not all the conditions of pure competition.
  6. Productivity: Productivity is essential to the economy, whether it means designing faster microcomputers or better-testing toothpaste. Increased productivity helps offset inflation and keep prices down. Productivity is defined as real output (the value of the product independent of price changes) per working hour, and it is usually written as a percentage.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

The Forces of Demand and Supply


In free enterprise system, the distribution of resources and products is determined by supply and demand. Demand is the number of goods and services that consumers are willing to buy at different prices at a specific time. From your own experience, you probably recognize that consumers are usually willing to buy more of an item as its price falls because they want to save money.

Supply is the number of products that businesses are willing to sell at different prices at a specific time. In general, because the potential for profits is higher, businesses are willing to supply more of a good or service at higher prices.

The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time is the equilibrium price.

Changing the price alters the supply situation and a new equilibrium price results. This is an ongoing process, with supply and demand constantly changing in response to change in economic conditions, availability of resources, and degree of competition.

Critics of supply and demand say the system does not distribute resources equally. The forces of supply and demand prevent sellers who have to sell at higher prices and buyers who cannot afford to buy goods at the equilibrium price from participating in the market. According to critics, the wealthy can afford to buy more than they need, but the poor are unable to buy enough of what they need to survive.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

Accounting Information


Accurate cost data are required for the successful implementation of the integrated physical distribution management concept using total cost analysis, for the management and control of physical distribution operations, and to aid in setting selling prices and in justifying price differentials.

As the cost of physical distribution increases, the need for accurate accounting for the costs becomes increasingly critical. Since the physical distribution function is relatively more energy intensive and labor intensive than other areas of the firm, its ratio of costs to total company costs has been steadily increasing. Efficient and effective distribution policies cannot be determined until the costs related to separate functional areas and their interaction are made available to distribution decision makers.

The quality of the accounting data will influence management’s ability to exploit new markets, take advantage of innovative transportation systems, make changes in packaging, choose between common carriers and private trucking, increase deliveries or increase inventories, and determine to what extent the order-processing system should be automated.

The accounting system must be capable of providing information to answer the following questions:

a)        What are the impacts of physical distribution costs on contribution by product, by territory, by customer, and by salesperson?

b)        What are the costs associated with providing additional levels of customer service? What trade-offs are necessary and what are the incremental benefits or losses?

c)        What is the optimal amount of inventory? How sensitive is the inventory level to changes in warehousing patterns or to changes in customer service levels? How much does it cost to hold inventory?

d)        What mix of transportation modes and carriers should be used?

e)        How many field warehouses should be used and where should they be located?

f)          How many production set-ups are required? Which plants will be used to produce each product?

g)        To what extent should the order-processing system be automated?

To answer these and other questions requires knowledge of the costs and revenues that will change if the physical distribution system changes. That is, determination of a product’s contribution should be based on how corporate revenues, expenses, and hence profitability would change if the product line were dropped. Any costs or revenues that are unaffected by the decision are irrelevant to the problem. For example, a relevant cost woul be public warehouse handling charges associated with a product’s sales; a non-relevant cost would be the overhead costs associated with the firm’s private trucking fleet.

Implementation of this approach to deceision making is severely hampered by the lack of availability of the right accounting data or the inability to use the data when they are available. The best and most sophisticated models are only as good as the accounting input, and a number of recent studies attest to the gross inadequacies of distribution cost data.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Lectures, Line of Sight

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