A business that adapts and innovates is a recipe for profitability. Innovation is key in industries that have the characteristics of an imperfect competition. Apple is a prime example of a firm that has successfully innovated and created many points of differences to differentiate itself from its competitors. Alternatively, Kodak is a great example of a company who did not innovate and technology caused the demise of Kodak as they were not able to adapt. Interestingly, there was a blog post regarding “Amazon constantly auditing its business model.” Amazon always looked for new ways to innovate and improve its business model as they were never satisfied with their existing business model as they knew that their “competitive edge today may be a burden tomorrow.” It is amazing how CEO Bezos steadily transformed Amazon’s business model into selling numerous goods through an intricate logistics system and most of all introducing whole sellers into their business. This change gave Amazon a point of difference against its competitors such as Japan’s e-commerce site Rakuten and other sites like Best Buy. Amazon continues to be the leading firm in e-commerce because they continually adapt and innovate as they are disciplined and challenged to improve their business model.

Justin Tiu posted an interesting article regarding employee motivation and the effective ways of improving it. It is clear the employee motivation directly correlates to productivity, yet it is a difficult proposition to achieve. Why do firms still fail in effectively motivating their employees? In short, people are complicated. The article separated different types of individuals as each individual has its own dynamic. Managers now have a great responsibility in managing their team as they need to know how each individual is motivated and devise a motivation scheme for their team. However, it is still a difficult task to motivate employees as it is evident with HP’s firing of CEOs which has destroyed job security in the organizational culture leading to CEOs pursing their own self-interest such as short term goals instead of the firm’s vision. On the other hand, a motivated workforce brings great customer service which is expressed in Zappos’ great customer service. Zappos’ employees believe in the firm’s goal and strive to achieve it. How do some companies successfully indoctrinate its employees to believe in the companies goals and some do not? People are complex creatures that need to be motivated for a firm to reach success.

Benji (Hao Hua) posted an interesting article regarding the iPhone’s performance in China. His post stated that Apple’s market share in China is 4.8% and dropping. This is because of its hefty price at $757 while its Chinese competitor, Xiaomi, sells its highest end phone at $285. Firms, like Apple, are profit maximizing companies that aim to increase profitability  and microeconomics is essential in finding the quantity that maximizes profitability. We can see that the iPhone is an elastic product as there are many competitors with Xiaomi and other famous smartphone brands like Samsung and HTC. An elastic product suggests that it is price sensitive and an adjustment in price would greatly affect the quantity demanded. As a result, Apple may increase revenue if it slightly reduced its price. Ultimately, this potentially could increase profitability as reducing the price of the iPhone will allow Apple to maximize revenue. However, Benji mentioned how the Chinese valued the prestige the iPhone had against its competitors. This suggests that the iPhone may be an inferior good suggesting a reduction in price would reduce the quantity demanded as it does not give the same marginal utility value as it loses it’s ‘prestige’ factor. We can see that Apple’s business decisions greatly incorporates microeconomics in calculating 

Twitter just went through their IPO and it Twitter’s price that has skyrocketed to $44.90 from $26 as of November 8, 2013. Similarly, Facebook and twitter obtain their profits from mobile advertising, but Twitter is currently sold at 48 times its 2013 projected revenue figure. Why do investors buy the stock? Investors get attracted to the “next big thing” phenomenon where they make their investment decision based on their intuition and emotion. In turn, investors believe twitter will continuously grow and expand its earnings, but Twitter has not achieved this feat yet which has caused its stock price to skyrocket. Therefore, investors are putting added risk to their portfolio as they are gambling on twitter to exponentially increase their earnings. However, CEO Costolo produced billions of dollars  from the IPO. There are even reports that twitter is only set to make profit by 2015, yet people purchase the stock. It is clear that twitter is overvalued at the price it is selling for, but why does our ‘gut feeling’ play a huge part in our financial decisions. Therefore, individual investors and firms need to ensure that each of their financial decision is made in a group to allow a wider group of views preventing emotion in guiding one’s decision. 

A profit maximizing firm needs to minimize cost and improving operations can bring a cost advantage to the business. In turn, effective communication between the CFO and the head of supply chain management in a business is correlated to business growth.  Great communication between two departments in a business can add more insight on how the business should operate, better risk-management, and greater alignment in achieving the firm’s goals. According to a report by EY, earnings growth of 5% has been directly related to an increase in “business partnering.” What does this tell us? Group decision-making in a firm is much more effective than individual departments deciding by themselves. We can see this because group decision-making provides more complete information, a diversity of views, and creativity. As a result, decision-making increases the accuracy for businesses  as there is more information used to construct a decision and ultimately it is more widely accepted in the business. However, group decision-making can be time-consuming and conformity pressures may be present in groups. We can see that healthy relationships between the finance and operations department can warrant more cost efficient ways to run the businesses’ operations while increasing productivity at the same time. Ultimately, cooperation achieves the desires of departments which all achieve the firm’s goal of maximizing profits.