Financing Alternatives


By the time your company reaches its first stage of development, it has probably consumed most, if not all, of its original seed capital. Although business may be looking up, sales are not generating enough free cash to buy the inventory needed for further growth. And, of course, the amount of cash you have taken out of the business for personal living expenses has probably been negligible.

Except in very rare circumstances, a new business needs about three years of steady growth before it generates free cash in sufficient amounts to survive. Working capital to keep the business growing must come from outside the company. Financing must be obtained from banks, other leading institutions, or investors, or the company will stagnate and quickly die.

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 Product Life Cycle


Customer demands are constantly changing. There are many reasons for this, ranging from fashions to new regulations. Sometimes there are obvious patterns to demand. Another pattern comes from the product’s life cycle. Demand for just about every product follows a life cycle with five stages:

  1. Introduction. A new product appears and demand is low while people learn about it, try it and see if they like it—for example, palmtop computers and automated checkouts at supermarkets.
  2. Growth. New customers buy the product and demand rises quickly—for example, telephone banking and mobile phones.
  3. Maturity. Demand stabilizes when most people know about the product and are buying it in steady numbers—for example, color television sets and insurance.
  4. Decline. Sales fall as customers start buying new, alternative products—for example, tobacco and milk deliveries.
  5. Withdrawal. Demand declines to the point where it is no longer worth making the product—for example, black and white television sets and telegrams.

The length of the life cycle varies quite widely. Each edition of The Guardian completes its life cycle in a few hours; clothing fashions last months or even weeks; the life cycle of washing machines is several years; some basic commodities like Nescafe has stayed in the mature stage for decades.

Unfortunately, there are no reliable guidelines for the length of a cycle. Some products have an unexpectedly short life and disappear very quickly. Some products, like full cream milk stayed at the mature stage for years and then started to decline. Even similar products can have different life cycles – with Ford replacing small car models after 12 years and Honda replacing them after seven years. Some products appear to decline and then grow again—such as passenger train services which grew by 7 per cent in 1998 and cinemas where attendances fell from 1.64 billion in 1964 to 54 million in 1984, and then rose to 140 million in 1997.

One thing we can say is that product life cycles are generally getting shorter. Alvin Toffler says, ‘Fast-shifting preferences, flowing out of and interacting with high-speed technological change, not only lead to frequent changes in the popularity of products and brands, but also shorten the life-cycle of products.’

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.

Planning for Uncertainty


Uncertainty has become so great as to render futile, if not counterproductive, the kind of planning most companies still practice: forecasting based on probabilities.

Unique events have no probability. Yet executives have to make decisions that commit to the future current resources of time and money. Worse, they have to make decisions not to commit resources—to forgo the future. The lengths of such commitments are steadily growing: in strategy and technology, marketing, manufacturing, employee development, in the time it takes to bring a new plant on steam or in the years until a commitment to a store location pays for itself. Every such commitment is based on assumptions about the future. To arrive at them, traditional planning asks, “what is most likely to happen?” Planning for uncertainty asks instead, “What has already happened that will create the future?”

The first place to look is in demographics. There have been two revolutionary changes in the workforce of developed countries: the explosion of advanced education and the rush of women into careers outside the home. Both are accomplished facts. The shift from blue-collar labor to knowledge and service workers as the centers of population gravity is irrevocable. But so is the aging of both the workforce and population.

Business people need to ask: “What do these accomplished facts mean for our business? What opportunities do they create? What threats? What changes do they demand in the ways the business is organized and run, in our goals, in our products, in our services, in our policies? And what changes do they make possible and likely to be advantageous?”

The next question is: “What changes in industry and market structure, in basic values (e.g., the emphasis on the environment), and in science and technology have already occurred but have yet to have full impact?” It is commonly believed that innovations create changes—but very few do. Successful innovations exploit changes that have already happened. They exploit the time lag—in science, often twenty-five or thirty years—between the change itself and its perception and acceptance. During that time the exploiter of the change rarely faces much, if any, competition. The other people in the industry still operate on the basis of yesterday’s reality. And once such a change has happened, it usually survives even extreme turbulence.

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

Managing Redeployment


A policy of employment security carries with it the task of managing the steady movement of employees out of redundant jobs and into jobs that have come into demand inside or outside the firm. Otherwise the employer faces mounting costs and the danger of carrying surplus people on the payroll, in addition to the costs and turmoil of hiring new employees. Uncontrolled, these costs jeopardize the policy of employment security, the viability of the firm, or both.

Managing the redeployment of people is not accomplished by merely setting goals and urging managers to pay heed. Specific responsibilities have to be assigned to individual managers, and specific routines for anticipating, planning, and implementing moves must be instituted. In a large organization, these arrangements will be put into place at site level, division level, and corporate level.

Retraining is and will continue to be an essential step in the process. Concrete methods that companies (and unions) have devised to ensure that retraining serves the purpose of employment security.

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

Managing a Shortage


In the real world, equilibrium prices are always changing. A flood in Brazil may cause the price of coffee to rise; good farming weather in the Midwest will lead to a fall in the price of wheat; advancing technology steadily lowers the price of computers. If enough people are drastically affected by the price change the government may decide to do something about it—whether wisely or unwisely. Rising apartment rents will lead to pressure for rent control, falling wheat prices will lead to pressure for agricultural price supports, and so forth.

When the government controls the price of a good below the market-clearing level, there will be a “shortage.” A shortage is not the same as scarcity. Scarcity simply means that not all desires can be satisfied, and so scarcity is always present. Diamonds are scarce, but there is no shortage—anyone who can pay the price of a diamond can buy one. A shortage exists when goods are not just expensive but unavailable to some people—except perhaps by unlawful means. In a city with rent controls, newcomers may be unable to rent an apartment at all, regardless of their willingness to pay. Thus, faced with a supply shift or demand shift dictating a higher equilibrium price, consumers are bound to lose out one way or the other—either from the higher price if the market adjustment proceeds unimpeded, or from the “shortages” that follow when government interventions keep the price low.

Using the concepts of short-run and long-run supply, let us trace out the consequences of coping with upward pressures on price by imposing a “ceiling.” There are some less visible consequences of price ceiling. Unable to raise price openly, firms may use subtler strategies. They may eliminate discounts or seasonal sales, reduce quality or variety or convenience of their offerings, or concentrate production in product lines that happen to have received a better break from the price-control authorities. Supplies may be sold abroad, leaving even less available for domestic consumers. And of course black markets may arise, providing a wider scope for people specializing in illegal activity. In extreme cases, there may be a breakdown of legitimate trade. In this connection, we can learn much from a previous great inflationary episode associate with World War 11 and its aftermath.

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

Communication, Business and You


Organizations bend over backward to see that communication both inside and outside the company are open, honest, and clear. Your ability to communicate increases productivity both yours and your organization’s. it shapes the impressions you make on your colleagues, employees, supervisors, investors, and customers. It allows you to perceive the needs of these stakeholders (the various groups you interact with), and it helps you respond to those needs. Whether you run your own business, work for an employer, invest in a company, buy or sell products, design computer chips, run for public office, or raise money for charities, your communication skills determine your success.

Good communication skills are vital because every member of an organization is a link in the information chain. The flow of information along that chain is a steady stream of messages, whether from inside the organization (staff meetings, progress reports, project proposals, research results, employee surveys, and persuasive interviews) or from outside the organization (loan applications, purchasing agreements, help-wanted ads, distribution contracts, product advertisements, and sales calls). Your ability to receive, evaluate, use, and pass on information affects your and your company’s effectiveness. 

Within the company, you and your co-workers use the information you obtain from one another and from outsiders to guide your activities. The work of the organization is divided into tasks and assigned to various organizational units, each reporting to a manager who directs and coordinates the effort. This division of labor and delegation of responsibility depends on the constant flow of information up, down, and across the organization. So by feeding information to your boss and peers, you help them do their jobs, and vice versa.

 If you are a manager, your day consists of a never-ending series of meetings, casual conversations, speaking engagements, and phone calls, interspersed with occasional periods set aside for reading or writing. From these sources, you cull important points and then pass them on to the right people. In turn, you rely on your employees to provide you with useful data and to interpret, transmit, and act on the messages you send them.

 If you are relatively a junior employee, you are likely to find yourself on the perimeter of the communication network. Oddly enough, this situation puts you in an important position in the information chain. Although span of influence may be limited, you are in a position to observe firsthand things that your supervisors and co-workers cannot see: a customer’s immediate reaction to a product display, a supplier’s momentary hesitation before agreeing to a delivery date, an odd whirring noise in a piece of equipment, or a slowdown in the flow of customers. These are the little gems of information that managers and co-workers need to do their jobs. If you don’t pass that information along, nobody will know about it—because nobody else knows. Such an exchange of information within an organization is called internal communication.

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

What’s Your Opinion?


A key part of the optimum result method is to get people to express themselves. Everyone has an opinion about a lot of things: What the company is doing, right or wrong; what’s good and what’s bad about the economy; how the mayor or president is performing; and whether any policy will survive.

 

And many people in a business have opinions about how the enterprise could be better run. The problem is, in most organizations the people who do the work are never asked, “What is your opinion?” “Got any ideas for doing this better?” and “Can you suggest a way to do this in less time?” As a result, a large amount of intelligence is untapped, the people with ideas feel frustrated, and the organization’s performance suffers.

 

A number of things explain, but one thing you should be doing is to get the opinions of your people before making key decisions. The best intelligence often comes from front-line staff. We install the steel we fabricate all over the country. Make it a point to talk with installation crews; ask for their opinions about what our customers are thinking. Maintain a steady flow of opinions, gathering information from your installation and sales people.

 

All people think. Encourage them to tell you what they’re thinking about. When you ask for opinions from employees doing different functions, you accomplish two things. First, you win their cooperation because they’ve had a chance to give you their views. Second, you pick up a lot of good ideas you can turn into profit.

 

Nevertheless, there is a problem when you teach the what-is-your-opinion technique to few managers. Some of them are conditioned to believe that asking other people, particularly subordinates, for their ideas is a sign of weakness. Letting other people express their opinions is a sign of strength.

 

Use the optimum results. It works wonders in getting what you want—a sale, a better job, and cooperation and support.

  • Find out what is the ideal benefit the other person seeks.
  • Tailor what you have to offer to provide that ideal benefit.

 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