Author Archives: BrodieWoods

Since being founded in 1996, WestJet has grown to become the second largest Canadian airline, operating 425 flights and transporting 45000 passengers per day. One of the ways in which WestJet differentiates itself from the competition is through the low prices that they charge compared to other competing airlines.  However, this low cost structure comes at an expense. Unlike AirCanada, and other large airlines, WestJet currently does not have an inflight entertainment system. Indeed, in a way to attract more customers WestJet announced plans last year to install entertainment systems into all of their planes. However, this increase in technology comes at a relatively high cost. In order to offset the costs associated with the entertainment system, WestJet plans on adding an extra row of seats to all of their planes. They predict that this added row of seats will help them drive higher revenues and grow as a company.

Due to the introduction of ‘slim-line’ seats consumers will gain one inch of added leg room so that the space taken away is less noticeable. Indeed, this move to change the seat layout is a smart longterm strategy for WestJet. This will allow WestJet to make more profit per flight and lower their average cost per flight. Due to the lower costs WestJet will be able to lower their prices even further than they currently are and attract more people to fly with them.  Going forward WestJet will be able to continue their cost leadership strategy, and continue to attract more consumers through their low costs and added entertainment systems.

Sources

http://www.ctvnews.ca/business/westjet-may-add-extra-row-of-seats-on-flights-to-boost-revenue-1.2086288

Seth Godin is an american entrepreneur, author, marketer and public speaker. Seth posts almost a blog a day onto his site, and gets nearly 540,000 views per month. In his blog entitled “The Dorm-room startup mindset“, Seth talks about how businesses need to start out small and grow over time. Seth develops the idea that when you are starting a business you are not trying to sell it for a huge payout, you are trying to grow it over time.

This idea is important because today too many businesses are focusing on growing at an unrealistic rate. The primary goal of most startups today is to make a profit. However many people believe that more profit is better and miss building the foundation of their company. When companies try to grow to fast they run the risk of running out of finances. A rapid increase in productions corresponds to a significant increase in accounts payable, many startups cannot afford the cost. Indeed, another way in which dorm-room mindset is beneficial is that it helps ensure that the companies operations stay consistent. Two big problems associated with operations are quality and opportunity. When businesses scale up too fast not only do they run the risk of reducing the quality products that the business differentiates itself on, but they run the risk of missing out on other opportunities that may have been present and overlooked in the scaling phase.

Every entrepreneur wants to grow their business as fast as possible, however they need to ensure that they grow at a sustainable pace while staying true to the value proposition that the company believes in.

Sources

http://en.wikipedia.org/wiki/Seth_Godin

http://sethgodin.typepad.com/

http://sethgodin.typepad.com/seths_blog/2014/10/the-dorm-room-startup.html

In Troy Mcgee’s blog he wrote about the positive effects that are developed through unpaid internships. Networking, and work experience are valuable for any student trying to enter the workforce. However is the opportunity cost of working a full summer unpaid worth it. Although Troy brought up many positive points, I believe there are other factors that need to be addressed. Are unpaid internships just for the wealthy? Are internships even useful.

Troy brought up the positive effects that an unpaid internship can have. Yes, internships may develop valuable work experience, but is the wage that is forgone worth the time. During an average summer internship students work for four months during the summer, five days a week, with no compensation other than experience. Sarah Stone, a speech language pathology student claims that her internship was useless,”I made no connections. I decided that I didn’t want to be apart of an unpaid internship and do not see the experience helping in the future”. Although the theory of work experience is good, the students are forgoing over $8000 that could be made if they worked minimum wage, 10 hours a day, 5 days a week. This raises the question as to just how useful are summer internships. In 2013 the National Association of Colleges and Employers said, “only 37% of students who worked unpaid internships received jobs within a year of graduation, only 1.8% above students who had no internship at all”. Students are forgoing over $8000 just to have a 1.8% better chance at being hired, meanwhile the money they could have earned could have helped cover their student loans. Indeed, although student loans are available, it doesn’t mean they should work for free and pay them off further in the future. Through working summers unpaid students accumulate longterm debt for minimal returns.

Although there is still debate whether unpaid internships really generate valuable experience I still believe that labour laws need to be put into place requiring companies to pay any intern for there compensation. This will allow all students to take part in work experience, not just those who can afford to work without being paid.

Sources

http://iamthepdxsx.com/2014/05/01/unpaid-internships-galore/

http://arbiteronline.com/2014/11/06/unpaid-interships-provide-misleading-opportunities/

In 2011 the Toronto Star was Canada’s largest circulating newspaper, however since then they have seen a steady decrease in readership levels. In the last quarter operating revenue fell 7.3% and the number of subscribers continues to decrease. In order for them to return to the success that they have reached before, the Toronto Star is adapting a new business model which will change the way that they make money and attract customers.

Currently the Toronto Star profits off a “paywall” strategy. This means that they charge readers to view their site and their online content. Infact a similar strategy is used by the ‘Globe and Mail’. However, due to the surplus of free content available on the internet already and the falling number of subscribers they have come to the conclusion that there is more revenue is to be made through add placements and through the development of a free tablet application. 

Although changing their business plan means changing the way in which the company profits it will allow for more growth. Consumer’s have unlimited resources for which they can view at no cost to them. Indeed, this new strategy that they are adopting will not only engage a larger audience, but it will help them attract a younger audience. The youth of today are not the type of consumer which intents to pay to view news articles that could be found on various websites for free. The action of making their content more accessible will make their site more attractive towards the student population.

In the long run this strategy that the Toronto Star is adopting will help them generate an increase in profit compared to previous levels. Although the company will lose their method of earning revenue for every subscriber they receive, they will now be able to attract more costumers and charge an increased price for advertisements on their website and on their tablet application.

Sources

http://www.theglobeandmail.com/report-on-business/torstar-swings-to-profit-on-boost-from-harlequin-sale/article21452577/

After losing 272000 contracts and $192 million in the most recent quarter Sprint released a statement on Monday saying that they intend to lay off 2000 workers. Since early 2014 share prices have fallen from $10.79 per share to $6.20, nearly a drop of 40%. Sprint’s share of the market is slowly dwindling due to competition from rival companies, AT&T, and T-Mobile. In fact, on Oct. 27th T-Mobile reported having the best third quarter results in their history, gaining 2.3 million costumers. As an effort to reverse the current situation Sprint hired a new CEO Marcelo Claure in August to lead the turnaround efforts. After price cuts, strategy changes, and layoffs, the big turnaround has yet to take effect.

Going forward Sprint needs to primarily deal with their massive loss of costumers and try to build long term subscriber growth. In the most recent consumer survey Sprint was ranked dead last in customer satisfaction for poor service, reception, and reliability. A few years ago Sprint started on the path to upgrade their network to allow for faster service, however the transitional period has been long and slow causing more and more consumers to switch carriers. Indeed, for Sprint to remain the United States’ third largest wireless carrier they need to continue to grow and strengthen their wireless network at an increased speed. More money and time needs to be invested into improving all operations of the company so that they can hold onto their current subscribers and in the long run develop a larger company as a whole.

Update

After Monday’s disappointing earning’s report share prices fell today 17% today to $5.16. This shows just how uncertain the investors’ confidence is in Claure’s ability to fix the current situation that Sprint is in. Many analysts were expecting to see improvements in earnings after the change in leadership, however those expectations clearly fell short. If the year end earnings report does not show an improvement from the current situation it could leave an uncertain future destined for the company.

Sources

http://newsroom.t-mobile.com/media-kits/t-mobile-us-reports-third-quarter-2014-results.htm

http://www.kansascity.com/news/business/article3554846.html

https://mysprint.sprint.com/mysprint/jsp/landingPage/contactus.jsp

Last week the Federal Court of Appeal granted the Gitxaala Nation approval to apply for a judicial review of the Northern Gateway pipeline. The Gitxaala are arguing that their rights were not considered when the Northern Gateway pipeline was granted approval. The proposed pipeline would send huge tankers through the indigenous harvesting territory. Indigenous nations tend to be extremely protective of their sacred land, and for such reasons rarely let companies infringe on their territory. Indeed, it is tribes such as the Gitxaala or the Tsilhogoti’n, as mentioned in readings, that are major external factors that impact companies such as Enbridge.

Enbridge has been fighting for the approval of the Northern Gateway pipeline since the mid 2000s but to this day still has severe opposition. The proposed pipeline would cost between $5.5-6.5 Billion USD and would generate billions of dollars of revenue for Enbridge and the First Nations tribes along the route. In an effort to help persuade the different tribes to sign on they have offered numerous different incentives for them. Incentives such as, agreeing to hire aboriginals to be 15% of their total labor force, and offering the tribes a 10% total equity stake in the pipeline over the next 30 years. However, such incentives are still not enough to purswade the Gitxaala. Infact the Gitxaala just recently evicted railway, logging, and sport industries off their property.  They claim that the Tsilhoqot’in v. British Columbia legal case, the case we were supposed to read for class, gave them confidence in their decisions. This goes to show how native tribes are banding together in an effort to prevent industries from profiting off of them. Going forward Enbridge and other companies trying to accomplish similar goals will have to take greater steps if they want to negotiate with the first nations tribes. Mere cash incentives have proven not to be enough motivation for the natives to sign off. For the companies to have the greatest success rate they need to learn more about their way of life and fully appreciate their culture and the land more than they previously have.

Sources

http://www.cbc.ca/news/canada/british-columbia/gitxsan-first-nation-evicting-rail-logging-sport-fishing-interests-1.2703664

http://www.vancouversun.com/news/There+will+pipeline/10122968/story.html

http://www.cbc.ca/news/canada/british-columbia/gitxaala-first-nation-granted-leave-to-appeal-northern-gateway-pipeline-1.2779604

Earlier this week Yahoo announced that they are the lead investor and financier of the social network Snapchat. After making over $9-Billion USD on the IPO of the chinese E-commerce website Alibaba, Yahoo hopes to invest in the tech start up Snapchat. Snapchat is a social network that allows users to send pictures and videos to each other and have them delete after a small amount of time. After being launched in July 2011 Snapchat has grown to become one of the most widely used social networks.

After turning down offers from Google, and Facebook, Snapchat has seemingly agreed to partner with Yahoo for an apparent $10-billion USD evaluation. This offer is more than three times the valuation that Facebook offered Snapchat late last year. However, to some this price seems to be quite high considering that Snapchat has yet to make any profit. The struggle that Snapchat is having is that they need to find a way to earn a profit off the nearly 700 million Snapchats that are sent daily. In February 2007 Youtube was purchased by Google for the price of $1.65-Billion dollars. At the time that Youtube was purchased they had yet to make any profit. Last year alone Google made $5.6-Billion dollars off of Youtube add revenue alone. Proving that although the company was not profitable at the time of purchase there was revenue to be made.

If Yahoo does purchase Snapchat for $10-Billion dollars Yahoo will need to figure out how they could profit off of the millions of users that the app generates on a daily basis or else they run the risk of sinking billions of investor’s dollars into a failing business model.

Sources

http://www.theglobeandmail.com/report-on-business/international-business/yahoo-said-close-to-investing-in-snapchat-at-10-billion-value/article20917778/

http://mashable.com/2014/10/03/yahoo-investing-in-snapchat/

In Andrew Killas’ blog he talked about how Apple has made profits through entering and engineering new markets, in addition he went on to speak about how Apple has the potential to help the watch industry expand to a new target audience and grow as a whole. Although I agree with what Andrew is saying, I plan on analyzing Apple’s usual product strategy.

October 23, 2001 Apple revolutionized the music industry with the release of their first line of iPods. Although there were similar products in the market at the time, Apple reengineered what was existing and created a masterpiece. To this day Apple’s iPod is still leading the music playing industry.  This same concept of reengineering a product could be seen with not only their iPods, but with their computers, and with their iPhones. They enter a market that was previously existing and proceed to better their competition. So in relation to the idea that Andrew was developing, Apple is continuing its prevailing market strategy once again by redesigning and improving the everyday watch.

Apple’s strategy has consistently proven to be profitable for them, which is why I believe that the release of the IWatch will be a revolutionary product, just like the iPod was thirteen years ago.

Andrew’s Blog

https://blogs.ubc.ca/andrewkillas/

Just last week in our class about financial accounting we learnt about the importance and relevance for good accounting principles. Over or understating the assets or liabilities of a company usually corresponds to major repercussions. Early this week Tesco released that it had mistakenly over estimated its profit forecast for the first half of the year by 408 million dollars. This accounting error that Tesco made dropped the share prices 11.6 % in one day to a year to date low of $194 per share.Tesco said the profits overstatement was “principally due to the accelerated recognition of commercial income and delayed accrual of costs”. This means that Tesco wrongly reported the timing of the accounting payments between the suppliers. This crippling accounting error further shows the importance of correctly stating the revenue of the company properly and how devastating a mistake can be to the stock valuations.  In response to the error Tesco fired four high level executives and launched an internal investigation as to determine the impact on the full year’s results. However, such precautions will not stop Tesco from generating a 3.6 billion dollar loss on the stock valuation and from losing the trust of numerous investors.

Ethics are defined as the moral principles that govern a person’s or group’s behavior. In order to make reasonable choices and decisions in a business environment a strong set of ethics are critical. Similar ideas could be found in an article that Bryan Borzykowski posted for the BBC called, “The Slippery Slope of Getting Away With Small Stuff”. Borzykowski states how “ethical lapses come about because of management, and through lack of ethical guidelines”. The most globally known example of lack of ethics comes from the CEO, Jeffrey Skilling,  of the former fortune 500 company Enron. Jeffrey Skilling demonstrated a lack moral ethics which helped the other top executives believe what they were doing was ethically right. Directly due to Skilling’s negative ethical leadership thousands of employees not only lost their jobs, but they lost their life savings as well. The executives at Enron failed to have strong ethics behind them, and thus ultimately led them down the “Slippery Slope” that they had created. The article goes on to say how “In a lot of companies ethics are un spoken of”. According to Edward Freeman a business that violates the rules of trade and ignores corporate responsibility is a business that is “in decline”. This such behavior needs to change in order for companies to create a positive brand image and a positive employee, customer feedback. Although the primary goal of a business or corporation is to provide its shareholders with positive returns, it also has a responsibility to the many stakeholders in the corporation to make their profits within the rules and regulations of a free market.