11. Financial LITERACY and its IMPORTANCE

Image from http://finance.dpi.wi.gov/

Financial literacy, according to Mbazigwe ‘s Canadian Youth Business Foundation blog post, is the ability to comprehend how to perform financial management, investment, expenditure and revenue generation. It is significant to be financially literate since it aids entrepreneurs with maintaining “financially balanced, sustainable, ethical [and] responsible” business.

From the previous blog post, IKEA has invested in a wind farm to practice sustainable business. Would it have been possible to invest in the wind farm without seeing the great future financial value in sustainable practices? Probably not. The manager is not only responsible for acquiring greater profit for its stakeholders, but is also responsible for leading the firm to the direction where the firm can grow. Without being financially literate, it is impossible to be a “good manager” no matter how great the ideas are because the implementation should be realistic, feasible, and hopeful – that is, acquiring financial profits. The investment would also have not been successful if IKEA was not able to afford the great costs of the wind farm. Therefore, financial literacy not only enables the manger to make the right decision for the future, but also helps them review the current financial circumstance of the firm.

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References:

1. Picture:

http://finance.dpi.wi.gov/

2. External Blog:

Christiana Mbazigwe’s blog post: The meaning of financial literacy and its importance

http://www.cybf.ca/2013/meaning-financial-literacy/

10. IKEA and 20-Turbine Wind Farm: Good Choice?

Image by DyeCoo

Referring to Tiffany Chen’s blog post, IKEA Canada purchased a 20-turbine wind farm near Pincher Creek and Southern Alberta, intending to be the socially responsible and sustainable firm. Although it is a highly costly investment for the firm, it is the “key to success in the future of business” and is “relevant in consumers’ hearts”.  

IKEA did not only purchase a wind farm to meet the environmental needs by reducing its dependence on fossil fuels, but also had other practices to meet the social and economic needs. For instance, IKEA redefined productivity in the value chain by reducing the distance between factory and distribution centre to the store, and built supportive industry clusters by cooperating with suppliers of wood on more sustainable forestry practices.

The combination of sustainable practices and the investment on wind farm will lead IKEA to the success due to its decreased cost of production, which can increase the profit for IKEA. Furthermore, the customers can also be benefited from these practices since the prices of the goods can be reduced due to decreased production cost. IKEA then may build a competitive advantage by offering cheaper products through sustainable practices; that is, sustainability is not pursued just to enhance a brand image, but it is rather a win-win strategy for the firm, the environment, and the customers.

References:

1. Picture by DyeCoo

http://www.dyecoo.com/ikea-greentech-venture-capital-invests-in-innovative-waterless-textile-dyeing-system/

2. Articles:

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/ikea-eyes-low-carbon-future-with-alberta-wind-energy-project/article15436596/

http://globalnews.ca/news/970814/ikea-buys-wind-farm-near-pincher-creek/

3.Blog post

Tiffany Chen’s Blog post: IKEA setting sustainability as the core of its business strategy

https://blogs.ubc.ca/tiffanyc/2013/11/17/ikea-setting-sustainability-as-the-core-of-its-business-strategy/

09. Kindle and Printed Books

Picture designed by Nebojsa Gelevski – Bane

According to Miranda Zhu’s blog post, Kindle provides an inexpensive and convenient reading experience to the customers with the development of technology. Selling Kindle devices at the bookstore was described as “inviting hungry foxes into the henhouse” as it harms the printed-book business.

It is true that offering Kindle reduces the demands for printed books. However, there is a significant difference between e-books and printed books; the readers cannot turn the physical pages, smell or feel the e-books. This is probably the reason why 81% of the parents suggest that reading printed books is very significant. Lowering price may help increase the demand for printed books, but it does not effectively create a competitive advantage. Furthermore, this will discourage the authors to publish printed books since they may have to be paid less, otherwise the cost should be reduced by lowering the quality of the papers. Rather, it is better to emphasize on the point of difference – the physical texture that e-books do not have – in order to compete against e-books.  Furthermore, e-book market is not as big as the printed book market yet, which implies that e-books have limited variety of books. In my opinion, Kindle is not as threatening as the book sellers think in the short term. Nevertheless, the book sellers must be ready for the battle for the future since the e-book market continues growing.

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References:

Pictures:

http://ebookfriendly.com/kindle-book-vs-print-book-picture/

Articles:

http://www.bbc.co.uk/news/technology-24868137

http://www.huffingtonpost.com/cate-pane/why-i-dont-read-digital-books-to-my-kids_b_4179144.html

Blog:

Miranda Z. (Kindle VS. Printed Books: A Challenge To Traditional Reading Habit)

https://blogs.ubc.ca/miranda8/2013/11/10/e-book-vs-printed-book-a-challenge-to-traditional-reading-habit/

08. How Social Entrepreneurship Changes the World : Khan Academy

Image is from www.khanacademy.org

Watch a video: Khan Academy Vision and Social Return

“A FREE WORLD-CLASS EDUCATION FOR ANYONE ANYWHERE”

-Khan Academy Mission Statement

                These days, we perceive business as a mechanism to be a “rich”- to earn money. The business’s objective was to maximize profit, and the stakeholders were interested in the profit and the returns. Doubtlessly, profit is significant in maintaining the business. However, should maximizing profit be the only objective of the business?

Khan Academy, offering approximately 3,100 short videos and 138 million free lessons to the customers, solves the social problem by providing learning opportunities to students whom cannot afford private tutors. Although all of its lessons and videos are free, it generated total revenue of $11,845,812 in 2011. This indicates that social entrepreneurship is fully capable of generating revenue while positively affecting the society (by providing learning resources).

Other than profit, Khan Academy shows us the reason why the firm should be socially responsible: without the customers, the firm is unable to deliver its value proposition. Since the customers enable the company to deliver value proposition and thus generate revenue, the firm should return benefits and values to the customers. This is an ethical standard that any firm should meet.

Khan Academy is an important example of social entrepreneurship that successfully integrates business and technology to fulfill the social needs. The business that only pursues the profit without returning values to the customers is a flower without bees or food without any taste; despite the great profit, it will no longer be able to respond to customer needs, and eventually encounter “death” of the business.

References:

1. Picture:

http://www.khanacademy.org/

2. Video:

https://www.youtube.com/watch?v=wRf6XiEZ_Y8&feature=player_embedded

3. Article:

https://www.openforum.com/articles/how-entrepreneurs-can-change-the-world/

4. Research:

http://www.guidestar.org/organizations/26-1544963/khan-academy.aspx#ctl00_phMainBody_divRevExp

07. L’Oreal and Management Information System

Image by The Interpretation of Dreams

                According to the report released by Coveo− the Management Information System (MIS) − the productivity of L’Oreal is increased by being provided with information that helps decision making. Coveo, by sorting and organizing data, makes data analysis more convenient. Furthermore, since MIS provides the employees with effective and quick access to useful information that is significant in decision making, it enables L’Oreal to respond to new demands of the customers as soon as possible.

The importance of MIS in business is clearly outlined in the report; nevertheless, it is still questionable if IT is always efficient in business. For instance, how does the firm ensure that the provided information is always accurate and reliable? How does the technology ensure that the provided information is always relevant to the firm’s value proposition?

L’Oreal’s was a great example of an efficient MIS usage since it tried a demo-version in certain departments prior to implementation in the entire firm. This not only prevented the company from wasting IT investments, but also allowed the firm to ensure that this type of MIS is effective in decision making; for instance, L’Oreal uses IT for measurement – to collect data of consumers – and experimentation – to get insights into the effect of its products on consumers. The technology itself does not enhance the productivity of the firm; rather, it is the firm’s responsibility to wisely select and use the technology provided to effectively make their decisions.

References:

1. Pictures:

http://eofdreams.com/computer.html

2. Report

http://coveosc.coveo.com/~/media/Files/CaseStudies/LOreal-lifts-employee-productivity-with-Coveo.ashx

06. Workplace Bullies and Corporate Culture

Picture by Risk to Business

Shown by Zappos, corporate culture is not only significant in motivating the employees, but also in corporate growth. Workplace bullying, which is not an uncommon phenomenon in South Korea, is in fact a serious problem that is not taken seriously enough.

In contrast to Zappos, where the employer did not own a corner office, a strict position and class (hierarchy) distinction among the Korean employees and employers exist. Furthermore, overwhelming working hours and the employers’ expectation to complete the jobs as soon as possible cause stress and inhibited communication among the employees. This not only results in a reduced productivity, but also slows down the process of developing its services and products in response to the customer needs. This eventually harms the potential growth of the company.

If developing corporate culture is essential for growth, why many Korean companies are reluctant to enhance the relationships among the employers? Developing and maintaining corporate culture may be costly since it requires spending funds and time on effective communication and working environment. It may be true that developing culture for a huge company is costly and rather difficult due to numerous branches, segments, and employees. However, it may be important to acknowledge that corporate culture is significantly related to the growth of company, and it is beneficial for the company in long-term; the company should strive to enhance its corporate culture.

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References:

1. Picture:

http://www.risktobusiness.com/workplace-bullying-update-april-2013/

2. Articles:

http://www.workplacebullying.org/2009/05/26/koreatimes/

http://www.forbes.com/sites/groupthink/2013/10/04/how-to-build-a-great-company-culture/

http://www.linkedin.com/groups/Korean-Working-Environment-Corporate-Culture-4032433.S.134570572

http://www.asiapundits.com/regions/korea/bullying-in-south-korea/

http://www.theaustralian.com.au/media/marketing/jon-wolske-tells-how-zappos-put-the-wow-into-its-corporate-culture/story-fna12mff-1226757780174#

05. The Best Cereal Commercials

Watch a video: Best Cereal Commercials (1-10)

                Commercials are significant channels that raise awareness of the firms’ products. The distinct and visually appealing cereal commercials are often peculiar as they seem to be targeting children instead of parents — the actual contributors to the firms’ revenue stream.

Successful cereal commercials, or the “best” commercials in the video, often had three features in common: (1) the usage of familiar cartoon characters, (2) melodies that can be easily remembered, and (3) the emphasis on their crunchiness, colorfulness, fruity tastes (“delicious!”), various shapes and nutrition.

The Flinstones Pebbles cereal commercial, 1970s

                I understand that the cartoon characters –Flinstones, Mario, and Ninja Turtles– and addictive melodies are very effective in attracting children, who often are more attracted to visual and auditory distinctiveness rather than the benefits of purchasing the goods. In the commercials, nutritional aspect of the cereal was not strongly emphasized; rather, the word “nutrition” was sung by the cartoon characters for a second.

If assuming that adult consumers are more interested in health of their children and nutrition, and knowing that they are more rational consumers, how did the commercials appeal to their actual customer segment–the parents?

The commercials were effective in persuading parents to purchase their goods even if the commercials often were too focused on their points of differences (which were distinct shapes, colourfulness and flavours) while being reluctant to strongly emphasize on their nutrition and healthiness. Perhaps, it means that parents perceive taste and shapes of cereals significant, or the commercials were very visually effective that it remained in parents’ perception for a long time.

Although the question remained unanswered, it was clear that sometimes the commercials are meant to win the consumers’ perceptions, rather than to provide logical reason why they should purchase their goods.

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1. Picture: http://www.ifood.tv/blog/smartfoods-cereal-tries-to-gain-foothold-in-america

                 :http://www.flickriver.com/photos/kerrytoonz/4045926450/

2. Video: https://www.youtube.com/watch?v=zhtjAUFdaZY

04. Sweet Chocolate and Bitter Business

                Cadbury’s smaller Dairy Milk Chocolate bar with the new shape resulted in the customers’ criticism in October, 2012. Despite the reduced size, the price was left unchanged; that is, by reducing the cost and keeping the price unchanged, the firm received higher profit. However, according to Cadbury, it was not true since the increased price of sugar also increased the cost of production.

Cadbury Dairy Milk chocolate bar with its shape

The firm’s responsibility was to increase the profit in a lawful manner and return its profits to the stakeholders. Assuming that the price of the raw materials remained similar, the decreased size of the chocolate, which reduces the amount of raw materials required to produce each unit, surely benefits the firm by reducing the variable cost. However, this is rather bitter for the consumers who should pay the same for less “sweetness”.

Nevertheless, not only Cadbury, but also many producers including Mars reduced the size of their products. How can Cadbury win their battle of consumers’ perception? According to the report, chocolates with rounded shapes are perceived to be sweeter; in fact, Cadbury chocolates had been said to be sweeter after changing their shapes. This may be opportunity for Cadbury to overcome its customers’ criticism by reducing its sugar contents while retaining the rounded shape of the chocolate bars. The chocolate will still be sweet due to its rounded shape, while the cost of producing chocolate bars will be reduced. Furthermore, Cadbury may develop its point of difference by associating the reduced sugar content and consumers’ health. This will be where business becomes sweet!

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References:

1. “Cadbury cuts the size of Dairy Milk chocolate bar (but keeps the price exactly  the same!)” written by Sean Poulter in October, 2012

http://www.dailymail.co.uk/news/article-2219775/Cadbury-cuts-size-Dairy-Milk-chocolate-bar-keeps-price-exactly-same.html

2. “Cadbury Dairy Milk: why rounded chunks of chocolate taste sweeter” written by Amy Fleming in October, 2013

http://www.theguardian.com/lifeandstyle/wordofmouth/2013/oct/01/cadbury-dairy-milk-rounded-chunks-chocolate-sweeter

(+) Business and Ethics (Part 2)

Previously mentioned in 01. Business and Ethics, McDonald’s advertisements and marketing strategies that target children may not be considered unethical since the firm may not be responsible for the high children obesity rate. However, the value propositions of McDonalds, including “quality, service, cleanliness and value for every customer, every time” (McDonald’s), may be incompatible with its advertisements since the value of their customers may be health. That indicates McDonald’s is responsible for promoting and offering healthy food products. Furthermore, value-based management requires strategies that do not take advantage of vulnerable people, including the children who have been targeted by McDonald’s advertisements; most of the children are unable to critically judge the quality of the products and thus are vulnerable to the advertisements.

Producing products to increase profit is critical to business management, yet it should not be the primary purpose of the business. Value-based management suggests that ethical and value proposition consideration is essential in business management as it not only benefits its customers through delivering its value propositions, but also benefits the firm by increasing revenue. Business should be the method of benefiting the both parties, but not the one which benefits and harms the other party.

References:

Picture published in August 10, 2013 by Mark Wheatley: http://siliconangle.com/blog/2013/08/10/how-ethical-is-your-big-data/got-ethics/

Silver, David. Introduction to Business Ethics. September 2013. Powerpoint.

McDonald’s. McDonald’s. 2013.( http://www.mcdonalds.ca/ca/en/our_story/values_in_action.html). September 2013.