Employee Demand


Demand for workers is linked to the economic cycle increasing in boom times and decreasing in recession. Other factors include the adoption of new technology, productivity, improvements and changing skill requirements. Superficially, calculating employment supply and demand seems easy. In practice, the combination of variable consumer demand, development of new products and technology, and economic turbulence make it extremely problematic.

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.

TV Advertising


Television can only be effective if you see it enough. And enough is a lot. Enough is expensive. How much is enough? Many experts say you can measure how much enough is by understanding rating points. A GRP, or Gross Rating Point, is calculated on the basis of one percent of the TV sets in the TV marketing area. If one million TV sets are in the area, one rating point equal 10,000 sets. The cost of TV advertising is determined by the size of each GRP in the marketing area, and advertisers pay for a given number of GRPs when the buy advertising time. The experts advise that you should not consider TV advertising unless you can afford to pay for 150 GRP per month. Those can come in the form of 75 GRP per week every other week, or 50 GRPs for three weeks out of four, or even 150 GRPs for one week per month. How much a single rating point costs in your area depends upon the size of area, the competitive situation, and the time of year.

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.

Inflation and the Rule of 72


No formula is more useful for understanding inflation than the rule of 72. Basically, the idea is to compute quickly how long it takes the cost of goods and services to double at various compounded rates of growth. For example, if houses were increasing in cost at 9 percent a year, how long would it take for the price of a home to double? The answer is easy to calculate. Simply divide the annual increase (9 percent) into 72 and you get a number of years it takes to double the price (eight years). If houses go up in price by 12 percent, it only takes six years to double in price (72 divided by 12 = 6), and so on. Of course, the same calculation can be used to predict how high food prices or car prices will be 10 years from now.

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.

A Plan of Action


You should be prepared to identify possible courses of action on the basis of the situation analysis. More often than not, several alternatives are possible, and each should be carefully articulated. Each course of action typically has associated costs and revenues. These should be carefully calculated on the basis of realistic estimates of the magnitude of effort expected in their pursuit.

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.

 

Negotiating for Change


Occasionally, in any change effort a manager may run into another kind of roadblock: he/she may require the cooperation and support of managers in other departments and divisions, but may have no formal authority over them. Attempts to influence or persuade them  to support change may fail because the change may involve a perceived loss for the other managers, this could be loss in status, power, authority, prestige or prerequisites. Under these circumstances, it is not in the self-interest of those managers to support the change. Situations like these make the management of change explicitly political because, in order to gain their support, the manager may have to do some bargaining. In other words, when influence and persuasion fail, a manager may need to mobilize support through negotiation. Many managers, particularly those with technical backgrounds, find this process distasteful because it seems irrational. However, there is little that is irrational in these situations and they arise out of calculated self-interest. Just as there are sound scientific principles to influence and persuade people, negotiation and bargaining can also be based on logic and science. While part of negotiation—like management—is art, most of it is amenable of scientific analysis.

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 Development Process


The product development process involves analysis of the marketplace, the buyer, the company’s capabilities, and the economic potential of new product ideas. This process may be both expensive and time consuming. To accelerate the process, many companies create multidisciplinary teams so that manufacturing and marketing plans can be developed in tandem while the product is being designed.

  1. Generation and Screening of Ideas: The first step is to come up with ideas that will satisfy unmet needs. A producer may get new product ideas from its own employees or from external consultants, it may simply adapt a competitor’s idea, or it may buy the rights to someone else’s invention. Customers are often the best source of new product ideas.
  2. Business Analysis: A product idea that survives the screening stage is subjected to a business analysis. At this point the question is: Can the company make enough money on the product to justify the investment? To answer this question, companies forecast the probable sales of the product, assuming various pricing strategies. In addition, they estimate the costs associated with various levels of production. Given these projections, the company calculates the potential cash flow and return on investment that will be achieved if the product is introduced.
  3. Prototype Development: The next step is generally to create and test a few samples, or prototypes, of the product, including its packaging. During this stage, the various elements of the marketing mix are put together. In addition, the company evaluates the feasibility of large-scale production and specifies the resources required to bring the product to market.
  4. Product Testing: During the product testing stage, a small group of consumers actually use the product, often in comparison tests with existing products. If the results are good, the next step is test marketing, introducing the product in selected areas of the country and monitoring consumer reactions. Test marketing makes the most sense in cases where the cost of marketing a product far exceeds the cost of developing it.
  5. Commercialization: The final stage of development is commercialization, the large-scale production and distribution of those products that have survived the testing process. This phase requires the coordination of many activities—manufacturing, packaging, distribution, pricing and promotion. A classic mistake is letting marketing get out of phase with production so that the consumer is primed to buy the product before the company can supply it in adequate quantity. A mistake of this sort can be costly, because competitors may be able to jump in quickly. Many companies roll out their new products generally, going from one geographic area to the next. This enables them to spread the costs of launching the product over a longer period and to refine their strategy as the rollout proceeds.

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.

Executive Summary


The executive summary, sometimes called the epitome, executive overview, management summary, or management overview,  is a brief consideration of the document addressed to managers, who rely on it to cope with the  tremendous amount of paperwork they must read everyday. Generally, managers need only a broad understanding of the projects the organization undertakes and how they fit together into a coherent whole.

An executive summary for a document under 20 pages is typically one page (double spaced). For a longer document the maximum length is often calculated as a percentage of the document, such as 5 percent.

The executive summary presents information to managers in two parts:

  1. Background: this section explains the background of the project: the specific problem or opportunity—what was not working effectively or efficiently, or what potential modification of a procedure or product had to be analyzed.
  2. Major findings and implications: the methods are covered in only one or two sentences. The conclusions and recommendations, however, receive a full paragraph.

An executive summary differs from an informative abstract. An abstract focuses on the technical subject (such as whether the new radio based system effectively monitors the energy usage); an executive summary concentrates on whether the system can improve operations at a particular company.

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.

Calculating Market Share


Market share is the ratio of the competitor’s annual sales to the total annual sales of competitive products in the market being served by the competitors. It is usually measured by dividing the  competitor’s sales in dollars by the total sales volume in dollars for the industry. Dollars are used in the calculation because monetary value is usually easy to obtain.

As may be seen from the dimensions describing the horizontal axis of the economic experience curve. It would make more sense to measure the market share in units sold during the year. Dollar volume does not double when volume in units shipped doubles if price decreases with experience.

The dimensions of the experience curve are fully allocated unit expense in constant dollars and cumulative number of units produced. The reference to doubling sales is measured in units shipped. Because this kind of measure could be counted off on the horizontal axis of the curve, it is possible to relate the growth in shipments to fully allocated expense in constant dollards, a reasonable profit margin, and the resulting dollar volume of sales.

The difficulty in obtaining the information needed to calculate market shares in terms of units shipped is often resolved by trade association data, which reports in both units and dollars. Still the associations may not include every possible competitor among their membership. In almost all cases, however, the non-members are not big enough to be significant. Even without the non-member data, the trade association information is a good approximation to the actual figures.

Given that sufficient data is available, it is not entirely necessary to know a competitor’s exact market share. The information most meaningful to a manager is market share compared to that of the nearest competitor. This gives rise to the concept of a market share ratio.

A proposed ratio that has special meaning when used in conjunction with the economic experience curve. The ratio may be best understood as:

Market Share Ratio =   Your Market Share __________

Market Share of Your Biggest Competitor

The interesting result of defining the ratio this way is that only one competitor has a ratio greater than one. All the others have functional ratios, less than one. For instance, if you the largest market share your biggest competitor will have a smaller share than you, and your ratio will be a number greater than one. If your biggest competitor has a market share larger than yours, your ratio will be less than one.

Because only one competitor has market share ratio greater than unity, the dominant competitor is identified by a number greater than one. Also, the degree of the biggest competitor’s dominance is indicated by the size of the number.

Typically, when a new business concept arises that can be represented by an economic experience curve, several competitors enter the marketplace within a very short span of time. There is an initial market penetratiuon in which market shares are established. Managers have learned how difficult it is to change the market share of the competitors once they have been established. Market shares among suppliers who are competing forcefully tend to remain reasonably constant. Cummulative experience relative to other competitors tends to be aligned with the market share ratios.

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

Price-earnings Ratio


Price-earnings ratios are published daily in newspapers for stock market-listed companies, along with the gross dividend yield, dividend cover and other information about the shares of each company. The method of calculation is what the name suggests:

Price-earnings ratio = stockmarket share price divided byEarnings per share

The stockmarket share price used is the one published in the financial newspapers at the close of business in the stock exchange for the previous evening.

As a generalization, when the price earnings ratio of a company is higher than the average for other companies in the same business sector, the stockmarket expects the company to achieve higher than average earnings per share in the foreseeable future to justify the above-average valuation of the shares.

In certain circumstances, the explanation may be quite different. For example, a takeover bid for the company may be widely expected, and the share price has already increased significantly in anticipation of the price to be offered by the bidder.

It must never be forgotten than the analysis of share prices, and especially the prediction of future changes, cannot be done simply by calculating the various ratios. If this was possible, making a fortune on the stockmarket would be easy. In practice, even the most experienced investment-fund managers would make costly errors of judgment from time to time.

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, Line of Sight

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