Jake Black's Blog

For those of you wondering what a Bitcoin is, I will first explain. Bitcoins are an internet currency that recently increased dramatically in popularity. Bitcoins can be traded like standard currency or mined, which can be explained here. It has recently been involved in online black market drug trading and other scandals as they are untraceable. Unlike standard currency, more Bitcoins cannot be produced so there is no inflation. However the question that stood out to me was ‘Is this a viable investment?’

Investing in Bitcoin is a high risk high reward strategy. Horror stories of investors losing large sums have already emerged because stock price fluctuates massive amounts. I personally believe it is way too risky of an investment for multiple reasons. First Bitcoins are subject to being hacked and stolen online. No matter how well your Bitcoin wallet is encrypted there is always a possibility of being robbed. Second when investing in a commodity such as the Bitcoin, one does not receive anything physical. The difference between investing in gold and investing in Bitcoins comes down to their exit strategies. If gold were to fail it could still be used for jewelry to re-coop profits; Bitcoins nothing.

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In Maclean’s Business Blog Chris Sorensen goes briefly into the details of Westjet’s plans to enter a new sector of the commercial air industry: Europe. The company plans on instating hundreds of daily flights to Dublin Ireland where consumers can get connecting flights from other airlines once in Europe. However there are multiple potential flaws in this system.

Sorensen points out one potential flaws of WestJet going Trans-Atlantic to which I agree, being that it does not fit into their previous cost structure. WestJet has been known for their Boeing 737 only strategy that provides consistent low cost flights to customers.  The problem of instating European flights is that their traditional 737’s could not handle this flight comfortably, and they will need to buy either 767’s or 787’s. This upgrade will incur higher costs for technicians, maintenance and etc. What brings customers to Westjet in the first place is their low cost, with a price increase could they still flourish? He did not however raise the question of consumers transferring airlines once in Dublin, as Dublin is the only European city. It would be much easier to fly on an established European airline and not have to transfer upon arrival.

I took great interest in fellow classmate Amna Massud’s blog on the trendy app Snapchat. In her post she stated that Facebook made a 3 billion dollar offer to the company only to be rejected. I could not believe this and did some research on it myself, as it turns out this was the case.

 As it turned out the 2 founding partners turned down financial security for themselves, and probably even several future generations because of pride in their company. Oh yeah, and did I not mention Snapchat has no current source of revenue and that the 2 founders were living in a bungalo the past year? Facebook offered Snapchat the 3 billion with full intentions of advertising to make profit, but as it turns out the 2 founders were not impressed and want to make money without advertising. As Amna said their plan is to instate add-ons which cost money to buy. Do they honestly believe that consumers will pay for add-ons? And even if the add-ons do sell they will never make 3 billion dollars off of them. I personally believe this was a massive value judgement screw-up, as the company becomes a “pain killer” advertisement would not be a mistake.

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Volkswagen recently decided to cease production of the most iconic van of all time: the Kombi. The Kombi which hit market in 1949 was one of the company’s best sellers for decades, but in recent years has only been sold in Brazil and some European countries. Although it was basically only kept in production for historic purposes, it will still be missed by many.

Relating to class, this article is a great example of accounting costs outweighing benefits. As Volkswagen adjusts for the future of electric cars and sleek innovation the Kombi must be left behind. There is virtually no point of keeping the Kombi in production when sales only come from Brazil, and the numbers do not come close to any of their thriving models. As the company looks into the future and sees up and coming competition such as Tesla and many others, they can’t be focused on the past. Time and money can be spent on other aspects of the business, and Volkswagen realized this.

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I found Alexis Chow’s blog post on Potbelly Corp. very interesting, and decided to do some research of my own.  Alexis talks about how the company has succeeded despite the abundant competition in the industry, and comments on their great value proposition but neglects a huge part of the story. When Potbelly’s IPO was released it became one of the biggest IPO stories of the year when it closed 120% higher than it’s IPO price at just over $30.

   In Class we talked about Facebook’s IPO and how it was deemed a screw up, because the IPO price was too high. Potbelly on the other hand  is an example of an IPO priced too low. In this scenario investors made massive gains, all at the expense of Potbelly. When an IPO is too low the company is not getting a large enough take to prepare for the future. Long term investors should be worried because they may not have received the necessary capital from going public to grow in the future, unlike an IPO such as Facebook. In a situation like this, the only people who actually win are those who took the risk on the IPO.

http://www.fool.com/investing/general/2013/10/17/it-was-a-beautiful-ipo-for-potbelly-insiders.aspx

http://www.forbes.com/sites/maggiemcgrath/2013/10/04/great-vibes-for-potbelly-ipo-stock-doubles-at-open/

With the brand new Nike fuel band se coming to market December 6th the main question on everybody’s mind is why is it only compatible with Apple? Apple and Nike have a long history of partnering going back to the release of the Nike plus app and sensor in 2006, but is it a smart decision to ignore Android which owns basically 80% of the market. They have been able to get away with only using Apple on their first fuel band, but as they aim to promote their product overseas where android’s share is much higher, can they continue to get by without android compatibility?

Relating to class, I personally believe this is a big mistake in terms of their business plan, and operations. The cost of creating the software to also work on Android would be completely trumped by the opportunity cost of selling more product. After the first fuel band proved to be a hit they should’ve recognized their global potential. The reality is that there is no issue stopping them from producing an android app as well, other than their relationship to Apple and if they do choose to expand the rewards will be huge.

http://news.cnet.com/8301-1035_3-57607611-94/nikes-no-android-stance-on-fuelband-is-a-huge-mistake/

Recently in Canadian news, the first two medical marijuana licenses have been handed out to Saskatchewan-based company Prairie Plant Systems and its subsidiary CanniMed Ltd. This means that once the old program is phased out (April 1st 2014), the free market will begin where licensed growers will compete in what is expected to soon become a billion dollar industry starting . Currently in Canada there are over 30 000 license holders under the medical marijuana program, and of those approximately 18 000 grow their own. Once the new system comes in to effect none of those approved users will be able to grow their own anymore.

With the government stepping in, the hope is that the large licensed growing companies will demolish small scale operations which have tendencies to participate in the black market. The move has other potential upsides too, such as tax money and job creation but it is also an outrage to certified users who will now have to pay. User’s argue they don’t have the money to buy company grown marijuana and that they would be prepared to take matters to court. In the grand spectrum the government is risking that the upsides will outweigh citizen outrage.

http://globalnews.ca/news/761130/watch-medical-marijuana-users-vow-to-fight-new-licensing-laws/

http://globalnews.ca/news/858488/first-marijuana-licenses-issued-under-new-rules/

http://globalnews.ca/news/870996/birth-of-a-billion-dollar-marijuana-industry/

   In recent days the sales of the Iphone 5s and 5c are much higher than critics and doubters could ever have anticipated. When the two products were showcased the Apple stock (AAPL) took a hit in fear that the lower end plastic model was still too expensive. This drop came due to analysts hoping that Apple would produce a product more tailored to the cheaper end of the smart phone market, to compliment the original model and compete with the lower end androids which are huge in China. The fear was that a large portion of the Chinese market would still not be able to afford the lower end 5c. Apple however ignored this criticism and opted to price the 5c at $550 in the US instead of an optimal $400.

As we soon found out, contrary to doubt the two models were a massive hit. Apple broke their personal records in phone sales by nearly double with 9 million sales over the weekend compared to the 5 million the 5 brought in opening weekend. Since than the stock has returned to higher than original and the company has overcame any and all speculation.

http://www.theverge.com/2013/9/11/4718736/apple-iphone-5c-gold-5s-downgrades-stock-price-falls

http://www.theguardian.com/technology/2013/sep/23/iphone-5s-5c-apple-record-nine-million

http://money.cnn.com/2013/09/23/technology/mobile/apple-iphone-sales/

Recent news that is nearly impossible to not talk about revolves around Blackberry. In a press release just over a week ago today, Blackberry said it would lay off 45000 employees (40% of it’s workforce) after a reported near billion dollar loss in the quarterly earnings report. As if matters were not already enough under the public eye, Fairfax’s intention to buy the company has caused yet even more attention.

In regard to class, this story is living proof of a subject we have discussed; operations. Blackberry’s loss has been speculated largely due to a mess up on behalf of operations. With their focus on the Z10 and Q10 it is believed that a lot of hardware of previous models went unsold, meanwhile the Z10 and Q10 aren’t selling as well as predicted. Prem Watsa, should he indeed purchase the company “plan’s to to take a page out of Dell’s book”(everydaymoney) and take the company private. He wants to win back some of the business market the company has lost in previous years. In an attempt to save the company he wants to minimize stock, as too much stock was one of the reasons the company has been failing.

Cited/Articles: http://www.everydaymoney.ca/2013/09/struggling-smartphone-maker-blackberry-may-soon-be-acquired-by-a-consortium-led-by-its-biggest-shareholder-fairfax-financial.html

http://www.vancouversun.com/business/technology/BlackBerry+prepares+report+secondquarter+financial/8967292/story.html

With recent news that student loved Koerner’s pub will be re-opening before the beginning of the next school year, I opted to choose Koerner’s as the controversial subject of this post.

Koerner’s is not a worldwide known example of bad business ethics, or even a severe one compared to examples such as the Enron scandal or the Nike child labour scandal, however it is none the less an example of bad business ethics. For those who do not know, Koerner’s had a reputation of serving alcohol to underage students on campus. Run by the Graduate Student Society, it was warned multiples times in 2008 and 2009 until finally it was shut down in 2010 when a minor drunkenly fell off the roof.

Quoting Mr. Freeman on What is Stakeholder Theory, “Think about a business that is not a good citizen in the community, that routinely ignores or violates local custom and law…that is a business in decline.” By Koerner’s attempt to make extra money selling to underage students they not only failed to abide by stakeholder theory, they broke the code of business ethics. Many business’ with bad ethics fail as they did, but Koerner’s will get a second chance.

http://www.cbc.ca/news/canada/british-columbia/story/2009/04/30/bc-ubc-koerners-pub-under-aged.html