Month: November 2012

Categories
Accounting Managemnet

Do we need to consider sunk cost?

In accounting, sunk cost should not influence your decision. For example, I have ordered food which tastes so bad, and I need to decide whether or not I order other food. The cost of food is sunk cost. I can either suffer the rest of meal by continuing to eat it, or I could eat something else and enjoy it. According to sunk cost theory, I should stop eating and keep ordering because bad food cannot influence me.

However, I may continue to eat the bad food and never order new food. That is the truth, your decisions are tainted by the emotional investments you accumulate, and the more you invest something the harder it becomes to abandon it.

Another concept which can explain the behavior is that the differences between how people should make decisions and how people actually make decisions. The rational decision-making process is a six-step model: 1. define problems 2. identify the criteria 3. allocate weight to the criteria 4. develop alternatives 5. evaluate the alternatives 6. select the best alternatives. However, there are many limits for a rational decision-making. One judgement shortcut is confirmation bias. People seek out information that reaffirms our past choices, and discount information that contradicts them. As a result, even if individuals have made a wrong decision, but they  are likely to collect the views supporting the bad decision.

In the reality, we are not able to not to consider sunk cost.

You can learn a lot about dealing with a loss from a video game called Farmville. Actually, the lasting appeal of Farmville has little to do with fun. To understand why people commit to this game and what it can teach you about the addictive nature of investment, you must first understand how your fear of loss leads to the sunk cost fallacy.

money down the drain project waste rework

references: http://mindyourdecisions.com/blog/2007/08/22/the-idea-of-sunk-costs/

http://youarenotsosmart.com/2011/03/25/the-sunk-cost-fallacy/

OB text book

http://www.braintrustgroup.com/2012/how-sunk-costs-can-be-minimized-with-agile/

Categories
Managemnet

Who do you tend to blame when someone makes a mistake?

I learnt an interesting theory in Organizational Behavior class, and this is attribution theory. The theory suggests that when we observe what seems like atypical behavior by an individual, we try to make sense of it. We consider whether the individual is responsible for the behavior( the cause is internal), or whether something outside the individual caused the behavior( the cause is external). People tend to blame someone makes the mistakes caused by internal factors, rather than external ones.

There are three rules to determine whether behavior is internally or externally caused: distinctiveness, consensus and consistency. For example, a student is silent in a comm101 class, she or he does not listen to the teachers and join the class. If the student is always  underperforming not only in comm101 class, but also in other classes, professor may think the student is unwilling to join the class, and the cause is internal. There can be a F on his or her grade. However, if the action is unusual, the professor judge it as externally caused. Maybe the student is sick.

Another rule is consensus. If in a comm101 class, all students are late. That means consensus is high. In this case, professors would be expected to give an external attribution perspective like the bus students take is broken, and professors would not blame students. But if other students who take the same route make it to class on time, professors would conclude the cause of lateness was internal for the student( wake up late or does not like the class). As a result, professors will be very angry.

The last rule is consistency. If a student always misses to submit assignments. He or she missed case1, 2  and 3 submissions, professors are likely to attribute the missing to external causes.

Organizational Behavior is really useful and the theories can be applied to many areas. In my opinion, the most magic part of Organizational Behavior is that it can explain some strange behaviors which people even do not notice in lives.

There is a integrated understanding about attribution theory on simply psychology website. The website also give us other famous theories which can be used to explain individuals’ behaviors. You may find it is quiet interesting to apply Organizational Behaviors to our daily lives.

 

references: OB text book

http://www.papermasters.com/attribution-theory.html

 

Categories
Economics

Social Entrepreneur: making money or social good

Many people may have the question about social entrepreneurs. Are they making money or looking for social good? A definition of social entrepreneurs is that social entrepreneurs are individuals with innovation solutions to society’s most pressing social problems, and they are ambitious and persistent, tackling major social issues and offering new ideas for wide-scale change. According to the definition, the major thing that social entrepreneurs do is solving social problems. However, making profit is vital for those social entrepreneurs. They are not doing charity.

There are several example of social entrepreneurs. TOMS is famous for its “one for one” policy. With every pair consumers purchase, TOMS will give a pair of new shoes to a child in need. When TOMS company benefits poor children, they get the profit from purchase of consumers. Some of them may be motivated by the social good to buy the shoes because what they pay for shoes will be used to help people in need.

Another example is that a woman called Zeritu Tadesse invested a large amount of money in opening stores to sell fresh milk. She is the only person who sell fresh milk in her place, and what she does benefits local people. Local people can get organic food in an affordable price. Because the fresh milk is gotten by local farmers who have about 2 to 3 cows, she helps country-side farmers to sell milk. Additionally, she expands her business while helping street vendors. As a result, Zeritu gets a lot of profit by creating social good.

According the two examples, what social entrepreneurs do is making money by solving social issues. It is quiet hard to analyze which is more important for them. However, they manage to do two things at the same time.

Adrianne’s blog mentions Mr. Muruganatham. As Adrianne mentioned, he is someone who recognizes a social problem and uses entrepreneurial principles to organize and create a social change. Maybe we can learn something from social entrepreneurs, their spirits: ambitious and mission driven. As long as they find an opportunities, they have actions.

 

 

references: http://www.ashoka.org/social_entrepreneur

https://blogs.ubc.ca/benlee/2012/11/15/class-21-applied-social-enterprise/

http://www.toms.ca/

Categories
Marketing

Haagen-dazs’s Smart Strategy in China

continue to the last one

Market Method:

The major factor leading to the success of Haagen-dazs in China is its marketing method. There are several things the company did:

1. choose a special position: the Haagen-dazs only open stores in the downtown area of big cities. This also make sure its brand position: fashion and luxury

2. decorate stores: Haagen-dazs company use a lot of luxurious elements to decorate its stores to attract consumers, especially young customers.

3. improve brand awareness: Haagen-dazs company spent a large amount of money to advertise products, and engage celebrities in its advertisement. What he company want to do is make people think the brand is worth that money.

In a conclusion, Haagen-dazs focus on one group of people to sell products.

Products: Why does Haagen-dazs use the strategy in other countries? The answer is simple. In other countries like USA and New Zealand, ice cream is cheap but taste well. However, in China, maybe Haagen-dazs has a much better taste than other cheap ice cream.

 

references: http://en.cbf.net.au/Item/2735.aspx

http://www.google.ca/imgres?q=haagen+dazs&um=1&hl=en&sa=N&biw=1366&bih=597&tbm=isch&tbnid=eFuPQ83DgKq7cM:&imgrefurl=http://sfbstech.com/8W-09/29478/Haagen%2520Dazs.html&docid=PBr5jDlsZy2a1M&imgurl=http://sfbstech.com/8W-09/29478/Haagen%252520Dazs/haagen-dazs-1.jpg&w=450&h=337&ei=0euiUJaoFOPtiQLsuoDYCw&zoom=1&iact=hc&vpx=114&vpy=168&dur=61&hovh=194&hovw=260&tx=115&ty=121&sig=100619080821770163967&page=3&tbnh=137&tbnw=168&start=46&ndsp=26&ved=1t:429,r:39,s:20,i:316

Categories
Marketing

Haagen-dazs’s Smart Strategy in China

This is the prices of Haagen-dazs in different countries.

country city The price of haagen-dazs GDP of 2011
Local currency Dollars
China Guangzhou 33 5.16 1406
France Paris 3.8 4.75 5565
Singapore Singapore 5.9 4.61 9539
UK London 2.9 4.53 5719
Japan Tokyo 340 4.13 5631
Spain Madrid 2.85 3.56 4762
USA New York 3.99 3.99 7750

Haagen-dazs is a US ice cream brand established by Polish immigrants Reuben and Rose Mattus in 1961, after forty years development, it continues to be an ordinary ice cream brand in the US with its products being available in supermarkets and auto selling machine.

However, the US brand ice cream gained unmatched success in China. It turns into a high-end brand and stands for luxury in the world’s most populated country.

There are several aspects we can analyze: Brand Position, Marketing and Products.

Brand position: before the company entering into China, Haggen-dazs made a complete survey of mindset of consumers, especially young ones. In order to make consumers pay for its high-price ice cream, Haagen-dazs established itself as the representative luxury and fashion. Thanks to the survey, people believe that  eating Haagen-dazs is fashionable.

in the next post, I will analyze Marketing and Products.

Strategies are vital to develop a business. I have learnt another interesting business model from Claudia Pisarek’s Blog.  EcoATM is an interesting and innovative idea. The company has identified the current market of cell phones increasing and wondered the question: what happens to the old phone or mp3 players(since most smartphones currently contain one)? Obviously, this company has a unique view towards and is leading a new market.

preferences: http://en.cbf.net.au/Item/2735.aspx

http://www.ce.cn/cysc/sp/info/201211/12/t20121112_21281512.shtml

 

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