https://blogs.ubc.ca/rileyguttman/2013/11/15/my-experience-with-stocks/

When a person decide to buy stocks and invest in stock exchange market, what should he look at and pay attention to? The most important thing is to evaluate company’s both external and internal value.

External value includes advertisement, investors’ expectation and customers’ awareness as well as impression. Whether a company has enough external value determines whether the company is worth the market’s attention. For example, when Netflix started its IPO, most investors showed very high expectation to the company because Netflix has successful advertising strategy and customers’ loyalty.

But only having external value is not adequate. A successful company must have organized structure and advanced management system. A example could be EA. The video game company has several subsidiary corporations and each of them is very creative and organized. Every year, these subsidiary corporations produce different  video games and form EA’s various value proposition.

Pic: http://onproductmanagement.net/wp-content/uploads/2012/08/internal-external.jpg

https://blogs.ubc.ca/matthieudaniel/2013/10/08/airbus-expansion-to-japan/

Recently, Japan Airline, one of the biggest airline company in Asia, turned its airplane supplier into Airbus instead of Boeing. This action made Airbus’s market share increase more rapidly. On the contrary, Boeing lost one of its more important partner.

Japan Airline made this decision due to the delay of Boeing to offer its new 787 Dreamliner. Boeing considered that its comparative advantages and strategy would keep the company’s  leading position for a long time. Thus, Boeing chose to develop new partners and upgrade its technology. However, the company neglected the potential of losing existed partnership.

It’s like short-run performance versus long-run performance. Boeing maybe get short-run profits from its decision. But in a long-run, it is very possible that the company’s profitability will be lowered because of the quit of Boeing.

Pic: http://topnews.ae/images/Boeing_Airbus.jpg

It seems that housing price in China will skyrocketing forever. Every year, the price will be raised from 10% to 20%, which has already become one of the most significant problems in China.  The most important reason is that the demand for property is increasing at a very fast speed. First, China is experiencing the largest urbanization in history. Migrants from the countryside enter cities every day and all of them need homes. What is more, a large number of Chinese middle classes who are living in old houses also want to move to fancier buildings. These cause the unstoppable housing price in China.

There is no doubt that what is happening now is a real estate bubble. The most obvious feature is the rapid increases in valuations of real property. The theory also points out that every real estate bubble will burst and the housing price will heavily decrease. The problem is, when?

The only thing we can say is that the real estate bubble burst will lead to a huge amount of property investment losses.  However, this step is still necessary in the next phase of Chinese reform where people’s livelihood will be more pay attention to.

Pic: http://cdn.static-economist.com/sites/default/files/imagecache/full-width/images/print-edition/20131116_FNP001_2.jpg

http://cdn.static-economist.com/sites/default/files/imagecache/original-size/images/print-edition/20131116_FNC698_1.png

Reference:http://www.economist.com/news/finance-and-economics/21589877-even-big-developers-and-state-owned-newspapers-are-beginning-express-fears?zid=306&ah=1b164dbd43b0cb27ba0d4c3b12a5e227

Pic: http://cdn.static-economist.com/sites/default/files/imagecache/full-width/images/print-edition/20131116_FNP001_2.jpg

Besides accounting, marketing and financing, the another important part of a company is management. A firm cannot have good performance without a effective and efficient management system. In economics, there is a famous issue called “Principal-agent problem” which is relevant to how to manage employers well. According to the theory, the employee wants to maximize his company’s profits but what those employers hope is to get their salaries with minimum work. These two facts conflict to each other and will cause an inefficient working environment.

There are several solutions to this issue such as giving ownership to employers, offering them incentive payment and signing long-term contract. In fact, the key element of these solutions is giving employers incentives and inspiring them to work more passionate. This is also the core concept of performance management. A manager must learn about how to approach employers, organize company structure and build up a perfect working environment. There is no doubt that offering incentives is costly and sometimes it will generate loss in a short run. However, from a long run aspect, these methods always provide employers with return on investment.

http://us.123rf.com/450wm/radiantskies/radiantskies1210/radiantskies121000348/15996505-abstract-word-cloud-for-performance-management-with-related-tags-and-terms.jpg

Reference:http://www.smartkpis.com/blog/tag/principal-agent-problem/

When I first learnt about shared value and social entrepreneur in Comm101, I was very suspicious of the this concept’s feasibility. Business entrepreneurs’ behaviors are based on self-interest principle and always enlarge the gap between the rich and the poor, which is completely conflict with shared value and social benefit. However, after several research I found that the concept is different from what I thought.

Social entrepreneur’s business differs from tradition charity such as social welfare, voluntary works and public services. It is more like public-private partnerships which is trying to transform the way public services are offer, by using advanced technology or creative ideas in the private sector, in order to make win-win situations.

For instance, in the Comm101’s case study, the Ethiopian banana paper company is a good example of a enterprise both makes profits and helps the public. In Ethiopian, the technology level is low and high-quality printed papers are expensive. The banana paper is not only a cheap substitute of printer papers, but also very environmental-friendly. The business can both benefit Ethiopian people and the company itself.

Pic: http://www.pennsem.org/wp-content/uploads/2013/03/social-entrepreneur-word-cloud-1.jpeg

Reference:http://www.economist.com/node/16789766

Pic: http://www.pennsem.org/wp-content/uploads/2013/03/social-entrepreneur-word-cloud-1.jpeg

The thing I cannot understand most in Vancouver is that why Lululemon is so popular. honestly, when I heard this brand name first, I thought that it might be a fruit chain store company. It’s a bad impression — its brand name does not indicate what business the company does.

However, I notice the firm’s potential after doing some research. Lululemon mainly produces yoga-related athletic apparel and adapts many advanced business strategies. First, the company makes full use of Canadian loves of yoga. Because the demand of yoga is very high in Canada, Lululemon’s market is very big and the company got popular in a very short time. Second, Lululemon focuses on sustainability and uses recyclable raw material to make products. In a short run, it is costly but in a long run, it brings the company more comparative advantages and gives more reasons for customers to choose Lululemon. Third, Lululemon has its own enterprise culture. The company hires passionate yoga teachers as their culture ambassadors and host free yoga classes and events both for spreading yoga culture and popularizing its products and brand.

http://oldstrathcona.ca/Uploads/8071a9e8-8da6-4b57-b41e-9a5a13bc07c3.jpg

http://www.economist.com/node/10286974

Netflix is one of the two companies that I heard most frequently in Comm101 (There is not doubt that the other one is Lululemon). Even I never hear of this firm before I came to Vancouver, I can feel that it is a very potential enterprise and Netflix has already become a hotspot in commerce after its IPO. However, I notice that Netflix’s PE ratio is extremely high. In general, S&P 500 average PE ratio is nearly from 15 to 20 but Netflix’s is about 300. What’s that means?

PE ratio is A ratio of a company’s share price compared to its per-share earnings. At the time, Netflix ‘s share price overweigh its per-share earnings near 300 times. It means that investors have very high expectation to Netflix’s profitability and in order to meet the expectation, Netflix must try its best rise the company’s earnings.

Whether a company will make profits does not related to how much earning expectation investors have to the company. Now Netflix is facing both an opportunity and a challenge and whether the company can continue to succeed is unknowable to everyone. Investors should not blindly believe the potential without any analysis.

Picture from: http://scm-l3.technorati.com/13/06/17/76575/netflix-logo.jpg?t=20130617122322

Reference: http://finance.yahoo.com/news/realize-netflix-pe-ratio-implies-151408562.html

Perhaps, Enron scandal was the most well-known event about financial statement fraud in the last decade. Arthur Andersen LLP, one of the biggest accounting firms ten years ago, surrendered its licenses to practice as Certified Public Accountants in America because of the scandal. It sold most of its operations to KPMG, Deloitte and Ernst & Young and many accountants in Andersen joined other firms.

Credibility is one of the most criteria to all kind of companies, especially for accounting firms. Giving customers reliable and  credible financial data and statement is  the most significant and basic service of accounting firms. Without credibility, any firm will collapse. Andersen’s financial statement fraud totally ruined its reputation and credibility which had been built up for 90 years.

Reference:http://www.economist.com/node/1174960

Photo:http://www.chicagobusiness.com/assets/legacy/images/random/andersenrox.gif

Tencent is a Chinese internet company. I don’t think that people outside China will be familiar with it but it is exactly the most successful Internet firm in China, maybe, even in Asia. In 2012, Tencent’s revenue reached 7 $billion when even Facebook only had 5.1 $billion revenue. What’s more, unlike Google, Yahoo and other Internet firms which target to global market, Tencent is still making money in local market. It shows that both Tencent and home market in China are very potential.

Ten years ago, at the beginning, Tencent’s first product was QQ. It was a clone of ICQ and could offer instant-messaging service. Because QQ was the first product entering Chinese online chatting market, Tencent became very popular soon. Up to now, QQ is used by 800 million people(data from reference). Such a large number of customers have become foundation of Tencent’s success.

In addition, Tencent’s business model is different from most western e-commerce. Other companies such as Google, their major revenue sources are mostly from online advertising. However, Tencent not only uses advertising, but also advertise their products like online games. What’s more,  Tencent also persuades customers to pay for “value-added services” such as fancy weapons, snazzy costumes for their avatars and online VIP rooms. A research has claimed that “Tencent gets 80% of its revenues from the services.”(data from reference)

reference: http://www.economist.com/news/business/21586557-chinese-internet-firm-finds-better-way-make-money-tencents-worth

Picture: http://cdn.static-economist.com/sites/default/files/imagecache/290-width/images/print-edition/20130921_WBC428_1.png

Few days ago, The China (Shanghai) Pilot Free Trade Zone has been formally established. Chinese government regards the establishment of the zone as a significant chance to start the next phrase of economic and political reform in China. “They outline goals to upgrade financial services, promote trade and improve governance as well as measures to encourage foreign investment in 18 sectors in the country’s tightly regulated service industry.”China’s State Council said.(From reference)

This time, Chinese government offers more and higher level preferential policies in order to attract foreign investments. It is the biggest and most influential attempt made by government since the establishment of Chinese first special economic zone Shenzhen(which is my hometown). For example, according to the official announcement, the prohibition of selling video game consoles in China will be cancelled in the zone. In is a good signal which indicates that Chinese companies will soon develop more sorts of business and join in more competitive international markets.

In my opinion, the decision shows that Chinese government is trying to change its positioning strategy.Economically, it wants to make more use of Chinese other resources besides cheap labors. Politically, Chinese government is going to make institutions more efficient.

Reference:

http://news.yahoo.com/chinas-1st-pilot-free-trade-zone-opens-071413493–finance.html

Picture: http://l1.yimg.com/bt/api/res/1.2/QQrUT_XD3PkLsKFHN1Mi1A–/YXBwaWQ9eW5ld3M7Zmk9ZmlsbDtoPTU2NjtweW9mZj0wO3E9NzU7dz05NjA-/http://media.zenfs.com/en_us/News/ap_webfeeds/b6d2a56ad598bc203e0f6a70670081d6.jpg