Imagine if airplane tickets are only 1/10th of their current price – I would hop on a flight back home – right now! But of course…there’s fuel, there’s maintenance, insurance, personnels, services such as luggage and food, and most of all, there’s depreciation!

Big doesn’t always win

I used to make faces at the high costs of airline businesses – until I went through a 10-K form of WestJet, and saw their astonishing Depreciation & Amortization costs – heck, what a load of money that needs to be written off!!! In fact, if company A & B bought the same 747 planes, and company A thought the plane would last for 20 years whereas B thought it would last for 30 years, there would be a massive difference in the two company’s balance sheets. Of course, if Company B decided to go with Operating Leases, like Air Canada does, that would be a much better option; but WestJet doesn’t. How come?

It boils down to the type of businesses that airlines are in. WestJet does lots of domestic flying, which only needs small planes, making costs much lower than big cross-Pacific flights. So as you see, big doesn’t always win.

4am on a Saturday night a couple weeks ago, a friend in New York texted me this: OMG  I can’t go shopping anymore cuz the streets are flooded WTH!!!!

Manhattan Flooding Source: National Geographic

At the time, I rolled my eyes, told him to get lost, at went back to sleep. Now that I think of this…OMG isn’t this supply chain management outliers threatening the entire retail sector’s revenues for 2012 Q4?!!! How could I have kept sleeping!!

As expected, the option market skewed heavily towards puts during “Sandy times”, and sectors that would typically be expected to fall did so. But… seriously, I can’t understand who would be shorting a put during hurricane times? It’s not like Sandy is the first “girl” that U.S. has encountered! Look at Irene, Katrina, and the entire list here.

After a while, don’t investors catch that the same things happen every time, and begin to expect these downfalls, so that these market changes eventually go away? For example, you’d expect airlines to go down a couple points, so you short it; but shouldn’t the market anticipate that already, and thus work against you? Well, at least that’s how I thought market efficiency worked.

Or, does it work the other way around – that expectations turn into reality? OR – Could it be that investors are just…plain forgetful?

Warning: this entry will be boring, viewer discretion is advised.

(1) In economics, we have learned that as long as a firm is functioning at a level which earns enough revenue to cover its variable costs, it should be kept running, as this is much better than not earning revenue at all, and still having to pay off the fixed cost.

(2) In one of the accounting classes, though, we learned that on graphs, fixed costs is the interception on the y-axis of the graph, where as variable costs is reflected in the rising line to the right.

If we merge the principles of (1) and (2), we will find that the following graph (made my me) manifests both relationships and should be one of the golden rules for companies:

I name the red line as the Minimum Revenue for Continuing Operations line; any firm should have an revenue at least like this to continue operations, as suggested by (1) and (2).

This doesn’t seem like rocket science; however, of I were not enrolled in a B.Comm program, how would I have thought of having firms keep operating even if it’s costing more to run it than the revenue can cover?

Kinda cool, isn’t it?

In Shanghai’s LuJiaZui district, each inch of floor space is an inch of gold. Yet, the tenth floor of Super Brand Mall, located steps away from the Oriental Pearl Tower,is entirely dedicated to the top Beijing based Chinese restaurant chain South Beauty.

the logo of South Beauty

dishes of South Beauty

In the past, I have been interested in South Beauty for many reason, from the entrepreneurial strive of founder Zhang Lan, to the distinct marketing strategies that epitomizes its name; yet, after learning about MIS, I am currently most fascinated with the technology in the restaurant’s kitchens.

The management of restaurants is one of the greatest challenges one can face. In the kitchen, owners are constantly worried that Chefs will “cheat” with the raw materials provided. If Chefs have no incentives to keep costs down by maximizing the utility of raw foods, much of the usable material could go to waste, and the owner would have no accurate way of knowing. To combat this phenomenon, South Beauty has adopted the usage of a technology system that has measured data for each plate; from the grams of sugar to the weight of the fish, South Beauty has systemized everything to hedge against inefficiencies in the kitchen.

South Beauty’s human resources have also taken action to keep chefs motivated to follow this rigid system. Overall, the kitchen of South Beauty shows benefits of modern MIS at work.

This post was inspired by Emily Chen’s post

Out of the many interesting things Prof. Gateman has said this year, “Starbucks is an affordable luxury” would definitely be one of the most thought-provoking.

I’m in love with Starbucks Canada for various reasons, but I’m also in love with Starbucks China for others. Indeed, the multi national enterprise has adjusts its market positioning and branding strategies for the Chinese population.

Three years ago, Starbucks was still only operating in first line cities such as Shanghai and Beijing. Back then, the relatively pricey drink attracted mostly foreigners and white collars. However, when I  went back this summer, Starbucks was everywhere – the great majority of provincial cities had at least two stores. And to my great surprise, my cousin, who is in middle school, would get together with friends and Starbucks. She told me that in her school, “could I buy you a cup of we Starbucks?” would guarantee a date.

There was a new Starbucks vibe in the air that I used to only sniff in North America. Like its counterparts around the world, Starbucks China had successfully captured the values of the Chinese. The Starbucks logo has once again evolved into a symbol of high taste, sophistication, and status.

With China’s great opening act in the economic sector, Chinese are getting richer, and they seek different ways to manifest this. Starbucks has aligned itself with the modern Chinese’ desire to differentiate him or herself through the means of consumption. Yet, unlike other Giffen goods such as Hermes bags and Christian Louboutin shoes, coffee’s relatively affordable pricing helps Starbucks not only appeal to the Chinese nouveau riche, but also the emerging bourgeoisie.

A couple weeks earlier, I went to the TED x Vancouver event. Out of the many inspiring presenters that day, one of the keynote speakers was the owner of the Downtown Hastings based restaurant Save On Meats, Mark Brand, who’s business we learned about in one of our classes with the Sauder ISIS.

Mark started off his talk by giving us some interesting facts on his personal biography. He has travelled widely, and before he had taken over and re-opened Save On Meats, Mark had managed other restaurant, which were not as successful. As he got to know the district, Mark decided that he wanted re-open the historical Save On Meat because he truly thought that was needed in the community. This incentive was aligned with Vancity group’s desire to grant the group

While many may view the downtown Hastings area with fear, and seek to avoid contact with the community at all costs, Mark pointed out that social enterprise are one of the most effective means of changing our society from the micro level. Not only does Save On Meat provide job opportunities for those bordering on society’s sidelines and change their lives in turn, it also remains as a reminder of what kind of positive impacts businesses can make when they focus their incentives on improving the wellbeing of others.