What is Fortune 500?- top 500 most successful public companies, these are our focus for today

Job of Chief Operating Manager is to ensure that strategy gets done in the most efficient manner.

What is Operations Management (OM)? – Managing the transformation process of inputs to outputs (transform in a way that is in sync with overall strategy of the company)

Understand key principles:

• Processes (how things happen in an organization)
• Inventory (key driver of operations, response to a forecast)
• Variability (all uncertainty faced by business- job of operations is to protect firm against this)
• Capacity
• Measurement
• Quality

Dell Operations: How does going direct to the market affect the company?

• Days of inventory is one measure of how well an industry is doing (compare inventory at a bakery to a car manufacturer)
  
• Takes 4 days for Dell to turnover a computer, 100 days for cereal to go from factory to sale- what is the implication of this?
• What are the advantages of going directly to the market?

Examples of companies that sell direct:

• Lululemon, Clearly Contacts, Shoe Manufacturer (Nike), Financial Services (HSBC), Insurance

Advantages of Direct Business Model:

• Better information (data is valuable)
• Cut the “middle man”- not many companies actually do this
• Customization
  • Pros- increase demand, increase price/revenue

How do we deal with variance or variability? 

• “Forecast”= best guess (tells you plausible events and likelihood of those events)- forecast is NOT a number!

*Every time you make a decision under risk, need to consider revenue and cost (in forecast example, taking the average demand does not consider risk)- want to maximize long run average profit (best you could do under risk you are taking)

Hailey Coleman, a successful entrepreneur, holds an award for "innovation in business".

Like many other entrepreneurs, Hailey Coleman, had ambition, a dream, and not much else. She created a shoe company named “Damn Heels” straight out of university. Recognizing that she lacked the skills to help the company reach it’s potential, she enlisted the help of “Ideal Samples”, a Toronto-based company that helps entrepreneurs get their product from idea to marketplace. While this service was highly beneficial to her, it raises the question: How important is it that entrepreneurs independently create and manage their company?

Brian Anderson, assistant profesor of entrepreneurship at Western Ontario University, believes that “first hand experience of hustling to to achieve all of these things is the single best way to learn how to run a business”.

Jay Lebo disagrees and shares his belief that individuals should seek help when they need it. He states that, “Developing competitive business strategies is a skill. Not everyone is good at it”.

While I see the merit in both of the above opinions, I am most in agreement with Jay. If entrepreneurs value the success of their company, they will recognize that they cannot fill every position in the company and it may be in their best interest to seek external help.

Picture- Hailey Coleman 

Manulife Financial Corporation announced a loss of $1.28 billion in the third quarter. While low interest rates and falling stock markets have certainly contributed to the company’s profit loss, there is another vital factor at play here: discrepancies between the American and Canadian accounting rules.

Were Manulife to be located south of the border, they would have reported a $2.2 billion profit in the third quarter, this calculates to a discrepancy of $3.4 billion. Manulife’s shareholder equity is also $16 billion higher when calculated according to American standards.

These technical differences put Manulife as well as all other Canadian companies at a competitive disadvantage when compared to their American counterparts. Potential stakeholders will look at a company’s accounting statements to estimate the future return of the company before investing in it. A company with more profitable accounting statements will naturally attract more investors as it gives an image of secure returns.

In conjunction with the notion of ethics, the discrepancies between the American and Canadian accounting regulations are unethical for investors because they are not given a “true” picture of the market, and thus may be irresponsibly investing money.

Picture- Manulife Stock Prices

Manulife's stocks see a significant decline this week

Most of us probably associate the name “Oprah Winfrey” with a bubbly and compassionate woman that can be found on daytime TV. Alongside being an incredibly successful TV host, however, Oprah is also an equally successful entrepreneur.

Dissatisfied with working for anyone but herself, Oprah created Harpo Studios in 1988. Since then it has grown into Harpo Inc. and employs around 250 employees working in all forms of media production. She is also the co-founder for Oxygen Media, which provides a cable network to over 54 million viewers.

Although Harpo Inc. demonstrates all of the characteristics of an entrepreneurship, the most prevalent appear to be risk and innovation. Starting up an independent media company amidst the uncertainty of the entertainment industry has obvious inherent risks. Oprah’s decision to accept these risks highlight her bravery as an entrepreneur. Harpo Inc. displays the characteristics of innovation as it has taken the basic product of daytime television and innovated it into a fresh and exciting program for viewers. For many the Oprah Winfrey show is not just mindless television, it is an experience.

Picture- Harpo Inc. 

An article posted this summer on MSN News, gives shocking statistics that relay an overwhelming message of customer dissatisfaction. It states that 64% of consumers have walked out of a store as a result of poor service, and an even greater 67% have hung up the phone after a disappointing experience with a call centre.

Among the top contenders for worst customer service was America’s low cost giant, Wal-Mart. Initially I did not find this surprising as the company employs a low price strategy, and is therefore able to get away with a small focus on customer service. After further research, however, I found an statement from Wal-Mart President, Bob L. Martin, that said “one of the major strategies of the company is the promotion of a global brand name.”This statement in context with the above statistics provides a puzzling juxtaposition to me as a company’s brand name is associated with the overall organizational culture of the company, not just their primary strategy. Wal-Mart is spending unnecessary money and resources on advertising campaigns (such as their partnership with Yahoo), and neglecting a highly important marketing faucet: their customers.

In my opinion, the company would be better off improving their customer relations than spending money on external advertising.

A satirical take on the customer service industry

 Picture- Logic Buy

The Complexity of Apple's Supply Chain

While Apple may claim to be an environmentally friendly company, this is no more than a clever tactic to manipulate reality. The truth remains that Apple, in it’s essence, is an environmentally friendly company. Their numerous suppliers located overseas, however, are not.

Apple has been able to cut costs by outsourcing to small factories largely located in China where labour costs are lower, and social and environmental responsibilities are more lax than in the Western world. Statistics given by Johnathan Watts in The Guardian indicate poor environmental and labour conditions both in factories and their surrounding areas.

The above faults in Apple’s complex supply chain give rise to the benefits of Dell’s Direct Business Model. This model of direct supplier-customer interaction allows Dell to develop personal relationships with customers and in turn receive feedback on what consumers want. These translate into increased demand and revenue for the company. Apple, on the other hand, is using their supply chain as a facade to cover up cost cutting behaviour and in turn damaging their reputation.

Sources

Picture 1- Apple’s Supply Chain

Apple Supply Chain Article- The Guardian 

Consumers walk by Gap's flagship store in San Francisco, California.

In Johnson Kim’s Blog, he explores the general trend of American companies to rely on international markets. He discusses the interplay between the Chinese and American economies and states that, “America has slowly been suffocating financially under the stress of the doggie collar the Chinese have placed around its neck”. I agree with this statement, and think that American companies must be careful not to rely too much on the Chinese market. This makes the company vulnerable to both domestic and international economic turbulence, thus increasing overall financial risk for the company.

Gap is one example of an American company turning to international markets. The retailer plans to close several American stores to allow for expansion into China. By the end of 2013, they plan to decrease overall American square footage by 10% while doubling revenue from outside of the US to 30%.

Gap’s recent revamp, however, is not purely a result of the shortcomings in the American economy. Since the addition of competitors such as H&M  and Abercrombie&Fitch into the market, Gap has noted a considerable decrease in sales and overall American Revenue.

Sources:

Globe and Mail Article

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In Harpal Kandola’s Blog, he discusses the marketing crossroad that Blackberry encountered as Apple approached the launch of the iPhone 4S. While I agree that Blackberry is disadvantaged by Apple’s innovation, the recent disappointment in Apple’s latest iPhone may turn out to be an opportunity for Blackberry to reposition themselves in the market as an innovative smartphone and shake the stereotype of being “corporate and stuffy” (Globe and Mail).

After months of anticipation, many are disappointed in today’s release of the new iPhone 4S. Many see the product as a let down because it does not live up to Apple’s claim of it being “the most amazing iPhone yet” (Globe and Mail, 2011).

The iPhone 4S letdown is not a result of poor quality, but rather poor marketing. Apple marketed the iPhone 4S excessively and built consumer expectancy to an unrealistic level. This is an example of where poorly executed marketing can actually harm a company. This case also highlights the turbulence of IT intensive industries through the rapid jumps in company success. It would be advisable for Apple to revisit their BTM and experiment and measure innovative methods to regain their status as a smartphone superpower.

Sources:

Globe and Mail Article

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Germany’s parliament has announced this week that they plan to endorse an enhanced bailout package aimed to finally pull the EU out of a downward spinning economic catastrophe. Sounds ideal, right? Unfortunately, the European Financial Stability Facility (EFSF) plans to achieve this by providing troubled countries with liquidity loans and the reassurance that they will buy their bonds when no one else wants to.

The question remains: where is this money coming from? Although it is nice to hope for economic renaissance for Europe, they cannot simply solve debt with more debt. This plan is no more than a band-aid aimed at covering up their underlying issues of poor governmental leadership and lack of initiative. The only thing it will buy for Europe is more time. It is up to them whether to use this time to drive forward positive change or keep waiting for a simple solution.

The Euro Zone Crisis article we discussed in class addresses these same issues, and highlights the important fact that leaders need to commit to either: ending the common currency or adopting fiscal integration. While some may view it as “too little, too late” for Europe, any action is better than apathy.

Sources:

Globe and Mail Article

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In Nadia’s blog, she addresses the issue of bad publicity backdropped by the case of United Airlines. In this situation, United Airlines poked fun at a sombre event in an attempt to win the attention of consumers. I strongly agree with her belief that “companies must balance creativity and sensitivity in marketing”.

GroupOn’s most recent Super Bowl advertisement was similar to the above case as it poked fun at the Tibetan political hardship in an attempt to receive attention and worldwide publicity. Although the ad was never intended to be disrespectful, it has raised doubts about the company’s apparent lack of compassion towards global issues.

So the question remains, why did they do it? CEO Andrew Mason explains it quite simply: “Because it’s different”. With increasing competition from other discount companies, GroupOn may have felt that they needed to reposition themselves in the market by developing a unique point of difference. In accordance with our COMM101 discussions and the insight of Ries and Trout, this may be a valid marketing strategy to penetrate the minds of the consumer and avoid being lost in the trap of “information overload”.

GroupOn Superbowl Ad

Sources:

GroupOn Superbowl Ad Article