This year is a great year. I have achieve many things. I have done public speaking which I never thought I will do. I have started to join soft skills training which I will continue to be active in 2010. I need to start my investment in stock market next year. Foreign exchange trading has been profitable, my partner and I reap high return on investment. Besides that, I have discover the secret to get good result in exams.
This is the plan for 2010. I need to get the business plan done in 10 January 2010. Besides that, I might want to be elected as president for a social club. Then, I want to finish reading the book titled “Investment valuation” by Aswath Damodaran.
Today I just bought a Microsoft Natural Ergonomic Keyboard 4000 for RM225. This piece of hardware is amazing !! You can type for hours and your hand wouldn’t feel pain or tired at all. It is design for maximum wrist comfort and minimize any type of injury. Microsoft product is good, everybody should have this keyboard at home.
Workers are viewed as a cost for the company. They are a fixed cost that should be reduced in normal times and removed in the form of retrenchment in times of difficulty. They do not recognize employee as a growing asset that will appreciate over time. This assumption is not all wrong as most employees do not improve themselves and only live from day to day. Moreover, most employees do not have the incentive to improve themselves because they get paid for the time spent in routine job. In other words, you don’t get paid immediately for improving, unless you got a promotion. But promotion does not always come as a result of improved productivity as there are other factors such as politics or peer pressure that comes into play.
When you work in a job, the company pays you based on the time you spent in that job. Time is a bad indicator of business effectiveness. This creates the problem of purposely dragging work which involve deliberately reducing work efficiency to gain more money per job-done. By increasing the time spent on each job, workers get paid more for doing less.
So you got a vicious cycle here. Organization pay employee based on time spent. Then, employees do not have the incentive to improve themselves because they will get a stable income whether they improve or not. Besides, workers generally delay their work and are not efficient. Therefore, organization does not treat them as a growing asset that needs to be nurture. Instead, they treat employee as fixed cost. If you are a self-motivated worker who continuously improves yourself, then your capacity as a growing asset is often overlooked by managers who rely on stereotype to categorize employees. In other words, you are considered as lazy and unmotivated as the next employees in the room. This limits your potential if you work in a stable job.
Freedom to leave
Another reason organization treat employees as fixed cost instead of growing asset is that employees have the freedom to leave the organization. Any training and development cost in making the employee more capable will only increase his/her competitive advantage, which can be used as a reason for pay rise. If the company does not comply with the pay rise demanded, they will leave the company and join another company; taking away any value created by the training with them. Therefore, it is not in company’s interest to train employees as these will create high cost of labor supply in the future.
Because training an individual employee can creates threat to the company, company nowadays uses team-based style of completing a project. This does not substantially creates a lot of competitive advantage in a particular employee but sufficient enough to complete the job even with under-trained employees. This type of working style implies that any
The idea of publishing newspaper using internet as the source of information is bugging me. Because I think that anything that is published on the newspaper has to represent truth and neutrality. But how do we determined whether the information we gather over the internet is truthful and neutral (not written in order to promote some product) ? And when people recognise this flaw in the objectivity in the materials they are reading, will they still support online advertisement ?
I just finished my final exam. I just wanted to write some light materials for relaxation.
Hmmm , what should I talk about ? I felt kind of empty now, after all stress is gone, I feel like there is nothing to do now.
I need to find something to do right away, otherwise I will feel that I am wasting time.
Today’s exam is fairly okay, at least didn’t screw up big. I still can manage to answer all the question.
Wednesday, December 16, 2009
My computer has become relatively slower this morning, maybe it is caused by the new Microsoft Office 2010 beta version I downloaded. Better remove it now.
This morning it dawned on me that companies engaging in serious competition are not healthy for them. I would like to create a few “what if analysis” on the effect of competition on two well-known and classic competitors, Pepsi and Coca-cola. They are chosen because their products are extremely similar and it is hard to distinguish their product if we were to drink Pepsi or Coke in two identical bottles.
What if Coke were to use the same old packaging style for its soft drinks for the last 50 years while Pepsi changed its packaging design every 5 years?
It is likely that customer would want to buy Pepsi’s product out of curiosity. Also, they may want to appear stylish and trendy to their friends, so they choose Pepsi over Coke. This translates into lost sales and lower profit margin for Coke.
What if Coke didn’t introduce variety into their products unlike Pepsi who did it with Pepsi Twist, Pepsi Max or Pepsi Diet?
Pepsi will create new customers and new market demand for their new products. Sales will increase for Pepsi, economies of scales kick in and Coke will gradually lose the competition.
What if Pepsi spend a lot of money on advertisement and Coke didn’t follow through with an equal monetary commitment on advertising.
Advertising has a direct impact on boosting sales. Under the influence of the media, people would unconsciously buy more Pepsi than Coke. Coke loses Pepsi wins.
In order for Coke to survive, it has to change its packaging every 5 years or less, introduce variety into its products and spend a fortune on advertisement and sponsorship. Consequently, cost will escalates for the company and return on investment will be reduced substantially. Both Pepsi and Coke lost in battle for market share. Again, competition is bad.
The firm’s capital structure refers to the mix of equity and debt the firm employed. There are actually 3 types of capital, namely debt, equity and preferred equity. Actually these three types of capital differs in only one area, the level of risk. Equity is the riskiest, preferred equity is middle and debt financing has the least risk.
That is why equity investor demand higher return for their investment. Although preferred equity investor and bond investor demand a fixed cost for their capital , they are compensated first if the firm goes bankrupt, reducing their level of risk. Equity investor are the last to get anything.
The good thing about debt financing is that it measures risk and return at a specific point in time. Imagine that a firm can get a low interest rate on debt when the firm is doing good and is making a lot of profit. Assume that this debt will last for 30 years. During that time, business deteriorates and the actual risk and return for investing in that company’s debt has risen. However, the company still enjoys the same old low cost debt. Therefore it is wise to borrow when business is good and strong.
Equity financing is not as rigid as debt financing. Companies have to pay more dividend (cost of equity) during good times and vice versa during bad times. In fact, certain companies do not even pay dividend when the company is making a loss hence zero cost of equity. However, dividend take up a big portion of the profit earned during good times to compensate for the risk taken.
Cost of capital differs across firms and across industries. Certain firms and industries can get a lower cost of capital depending on their level of risk. The risk involved is the default risk or risk of delayed payment. When an investment packs a lot of risk, investor generally wants a higher return. This is because out of the investor’s many investment, he needs the successful investment to pay for the failed investment.
I got bad result on my midterm. I started wondering whether the examination system in the university is all about memorizing and memorizing. Isn't it true that human civilization has prosper because human has put knowledge into paper and pass this knowledge to the next generation without having to relearn everything from stratch?
But, on the other hand, after memorizing the material I have studied, I have begin to feel that memorizing can improve understanding. The word have been drilled into your head and you are able to recall the definition of certain term instantly. You can start to explain to your friends and colleagues about things you don't even understand. But slow, you get the knack of the term and fully understand it.
Well, I guess this is the maximum power of memorizing. It doesn't work in real life as I think in real life , you need to have a very creative, innovative mind to create value for the customer. This is the only way to survive in this capitalistic society. Memory is important, it serves like a data storage for the brain, if you have a fast and efficient brain but poor memory, you will not be able to think that well also. Why? Because you do not have the necessary data to manipulate in your brain. We human do not always create data out of nothing, we commonly manipulate data by adding, deducting, or changing the features of existing data to be creative and innovative.
