Oasis Business Blog

While the United Nations (UN) is a towering structure that has lead to general improvements in society, it has not brought about the revolutionary changes that social enterprises cultivate within developing nations.

I was a fervid Model United Nations competitor during high-school. Having attended several conferences, I realized that each representative represents a multitude of stakeholders and the UN itself is mandated to additional stakeholders. For example, UN’s Economic and Social Council’s website states:

“ECOSOC engages a wide variety of stakeholders – policymakers, parliamentarians, academics, …(the list goes on)”

It should be no surprise that most of the people who represent their nations are politicians, not innovators, not social entrepreneurs.

A Social enterprise seeks to better the people and planet while generating profit.

In no way am I trying to discredit the value of the UN; I am, however, trying to make the point that the UN and social enterprises are fundamentally different. Social enterprises focus on improvements in humans and the environment, for example the Arc Initiative. The Arc Initiative helps develop business management skills and leadership capacity; it seeks to empower the people so they are self-sustaining; it seeks immediate action to create future change.

Even if the UN was fully funded, injecting a surge of temporary support will not solve the problems of third world nations, but maybe if a fully funded UN and social enterprises worked together, magic could happen.

After reading the article “Why IBM Gives Top Employees a Month to Do Service Abroad” from Harvard Business Review, an external blog, I want to tie together two topics examined separately in COMM 101: social responsibility and corporate culture.

As discussed in class, creating shared value is key to many modern businesses and IBM’s initiate has logged more than 17 million hours in total and created immense social value.

IBM volunteering log in 2011.

At the same time, IBM believes that their skill-based volunteerism increases employee retention and builds skills in the workforce, which are both key factors in maintaing a sustainable competitive advantage – a trait of corporate culture.

But how exactly does it all tie in?

Having volunteered extensively during high school, I believe volunteering gives us a bigger picture of the world. From arranging canned goods for the homeless to helping out at the retirement homes, these acts that don’t ask for anything in return is fundamental to one of IBM’s core values: personal responsibility. By driving in a sense of duty into employees through encouraging volunteerism, IBM reinforces their corporate culture, which ultimately creates sustainable advantage, while generating social value for the community.

Recently, I stumbled upon fellow classmate Dominique Cai’s “Android One Low Cost Smartphone” blogpost in which she explains the new low-end smartphone introduced by Google.

Android One – 120 Dollars

Google phones, while still lacking behind Samsung’s and Apple’s in market share, is  trying to “establishing its name in the developing world” as Dominique wrote.

While I agree this is a strong move from Google as Apple and Samsung have few successful models in the low end market, there are other competitors from overseas that can pose a great threat to Google’s new Android One.

Just this summer, while I was back in China, I bought a temporary smartphone online for 369 Rmb, which is roughly 60 dollars. It has similar operating systems, processing capacity as that of the Android One while being half its price.

TCL P306C – 60 Dollars

How is that possible?

One explanation is that many Chinese retail websites actually lose profit through selling phones. The website I directed to, www.jd.com, is a large online retailer in China known for selling certain phone models at well below store retail prices. In exchange, it has amassed a huge inventory turnover rate that has driven many other online appliance retailers out of the market.

Instead of conventional marketing, JingDong uses the resources that would have been devoted to advertisement to instead drive down costs of certain phone models to attract customers.

Tangoo’s logo, which is a reference to tango.

Today, multiple Sauder alumni came to share their experience of starting their own company. The one that caught my attention the most was Tangoo, an application that suggests restaurants and events based on the users’ moods.

After reading an article on The Huffington Post about Tangoo, I’ve formulated some of my own suggestions and thoughts about it.

For starters, my main criticism is that the application almost seems too simple; while the main function demonstrated in class worked smoothly and stylishly, there should be auxiliary products that directly support the goal of Tangoo, which is to improve the way people socialize.

Ordering on the fly

One idea I had was a “pre-pay” system where people can charge a certain amount of money into their Tangoo account. While traveling to a restaurant, customers can pre-order dishes that fall within their charged amount. Customers can pay through their Tangoo balance or any normal method and withdraw remaining balances any time. If a customer fails to show up, then penalties will be deducted. Essentially, this creates value for Tangoo users because they can save time while eating out.

In addition, Tangoo also gains value because it can now track loyal consumers who eat at specific restaurants which is very useful information that can be sold or further developed upon.

Portfolio diversification seems to be key, as mentioned by students from the PMF program and professors of COMM 101, but how exactly should we diversify in an intelligent manner to increase yields?

To answer my own question, I first read “Correlation – The Basis of Risk Management” which states that a stable portfolio contains investments from non-correlating or negatively correlating assets, for example scarves and sandals. If it snows, then scarves will likely increase in value while sandals will drop; if it is sunny, the vice versa will occur.

Theoretical oscillation of perfect negatively correlated assets

Initially, buying negatively correlating assets seemed unintuitive.

While it is true that diversification can help minimize the risks of encountering a complete catastrophe, I felt there was another side of the coin that was disregarded. In essence, diversification limits profits if there is an unusual growth in a specific company or sector. In addition, if you have more knowledge or have access to faster information channels in a specific field, then it may be more profitable to focus specifically in that sector.

For example, during an interview with Warren Buffett, he was asked what was his greatest mistake. He said that it wasn’t investing in the wrong stocks, but rather not investing in the ones he knew more about.

 

That said, I think it is important to have a combination of diversification and specialization.

Just recently, in June, the Supreme Court of Canada granted the Tsilhqot’in the right to 1750 sq km of land, signalling a shift in judicial decision that will lay precedent for aboriginal cases to follow.

While this is a landmark decision, I believe it is only a small step towards recognizing aboriginal rights.

Businesses, specifically resource extraction businesses, who had interests in the land before will still hold their interests now; those who attempted to create an unfair deal before will still try to create an unfair deal now. It is undeniable, however, that the passing of this decision is a significant legislative barricade that will thwart many unfair deals; it is just my opinion that more needs to be done to truly place both parties, the business men and the aboriginals, on the same level.

What exactly needs to be done though?

I do not know for certain; I do not know because I don’t understand the situation well enough to make a concrete conjecture; I cannot feel the anger, despair and betrayal of the aboriginals nor can I comprehend the influences of a company and its duty to its stakeholders.

But I can say that one day, I will try my best to understand.

After reading a blog on the Harvard Business Review on consensus and how business decisions are made (link), I started to wonder about the hierarchical structure of a company and why in many traditional structures, the decision making power is often relayed all the way to the top.

One reason, I believe, is that people are simply are too un-equipped with business tools to make a judgement on their own because of the risk of a failed experiment or venture. In fact, many would happily shelve the task to higher executives.

Executives deliberating endlessly

The issue, I believe, lies within two fields: ineffective operations forecasting tools and poor managerial decision tools. As discussed in COMM 101’s operations class, forecasting is important to determine whether a proposed change’s outcome will bring in enough sales to justify making that change. Even providing basic forecasting information can produce more confident decisions.

In addition, managerial decision tools can analyze the potential profits or resources that needs to be devoted to a venture. A clearer understanding of costs, with amortized and sunk costs removed can help solidify whether a venture will be successful in generating profits.

Tesco, one of the largest retailers in the world, has been under performing in recent years and, in an attempt to draw more investment, overstated its profits by 250 million. The scandal, which has caused an all out investigation, has dropped Tesco stock and market shares even lower.

Price per Share from Sept 29 – Oct 2

Tesco currently faces the challenge of both retaining consumer loyalty and dispelling share holder concerns.

However, there is chance for Tesla to stabilize. On the consumer side, Tesco needs to prioritize consumer satisfaction and after-sale services as recent goals to expand internationally have caused Tesco to cut staff drastically. This is perhaps the main reason that services in UK has been neglected.

On the investors side, there lies a problem with trust, as shareholders who are more knowledgeable of the scandal, will probably be cautious of reinvesting into Tesco. In fact, a prominent investor said:

“I made a mistake on Tesco. That was a huge mistake by me.”                                                                                                                              -Warren Buffet

Tesco needs to straighten its image and changing its image won’t be easy as Trout and Rise expressed in their book Positioning: The Battle For Your Mind; thus I believe that Tesco should focus on recapturing consumer market instead of appealing to investors.

Just a day ago, a referendum took place in the UK that could have changed it forever – Scotland nearly became it’s own country. The main argument of the impassioned Alex Salmond, leader of the Scottish National Party (SNP), argued that Scotland could prosper on its own with its rich oil reserves, more on it can be read here.

Despite these attractive numbers, if Scotland independence did occur, I believe there will be several detrimental side effects.

For starters, the SNP seems to propagate that independence will bring an invigorating effect on the economy. While it is true that oil can be a major industry for Scotland, there are other more threatening issues that can overpower the effect.

For example, if the new Scotland decides to keep using the pounds system of currency, then monetary policies from England and Scotland will clash with one another. In addition, where will corporations decide to base: in England or in the new Scotland? Will there be enough resources, besides oil, to keep the new country self-sustaining? Most importantly, Scotland would need to devote significant resources to strengthen its army.

In my opinion, a better approach would be to seek more independent governing while remaining as a part of the union.