Business term of the day - Term for September 2, 2013: "Competitive Heterogeneity"

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Source: Wikipedia
Competitive Heterogeneity is a concept from strategic management that examines why industries do not converge on one best way of doing things. In the view of strategic management scholars, the microeconomics of production and competition combine to predict that industries will be composed of identical firms offering identical products at identical prices. Deeper analyses of this topic were taken up in industrial organization economics by crossover economics/strategic-management scholars such as Harold Demsetz and Michael Porter. Demsetz argued that better-managed firms would make better products (or similar products at lower costs) than their competitors. Such firms would translate better products or lower prices (an optimal decision based on lower costs) into higher levels of demand, which would lead to revenue growth. These firms would then be larger than the more poorly-managed competitors. Porter argued that firms in an industry would cluster into strategic groups. Each group would be similar and movement between groups would be difficult and costly (barriers to mobility). Richard Rumelt and Stephen Lippman demonstrated how firms could differ in an industry in partial equilibrium-like circumstances. Richard Nelson and Sidney G. Winter discussed how firms develop differing capabilities. During this time, industrial economics focused on industry characteristics, treated the differences among firms in an industry as trivial. This was a point of contention within strategy and between strategy and economics from about 1980 to the mid-1990s.

Early in the 1990s a number of papers were published under the rubrics of the Resource-based View and Capabilities. Both approaches continue to develop. However, the RBV won the public relations war (complete with, allegedly, removing dissenting opinions from Wikipedia). The RBV argues that firms vary in their resources and resource variances lead to varying competitive positions. Capability theories, building on earlier work by Nelson and Winter and Teece, make a similar claim.

Developing ideas pioneered by Rumelt (1984) and discussed by Levinthal (1985) and Noda and Collis (2001). Hoopes, Madsen, and Walker (2003) use the term competitive heterogeneity to describe the performance differences between close competitors. Hoopes et al. argue that the RBV is but one of many possible explanations for competitive heterogeneity. Thus, the title of their paper and special issue, "Why is there a RBV?" In addition to economics-based explanations noted above, Hoopes et al. point out that differing beliefs, preferences, and objectives lead firms pursuing similar customers to find and develop unique competitive positions.

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Additionally, Hoopes et al. suggest that competitive advantage should be thought of in terms of each firm's "economic contribution. (Walker,2004; Hoopes Madsen, and Walker, 2003). Termed the V-C model, it is basically a bargaining model (see Tirole, 1986: 21-34) over the surplus created by a firm's activities. A buyer and supplier bargain over the price (P) for a good that contributes a value (V) to the buyer and costs the supplier some amount (C) to produce. "Value is the price a buyer is willing to pay for a good absent competing products or services yet within budget constraints and considering other purchasing opportunities. Most work considers costs in terms of marginal cost. The good’s market price lies between value and cost. So, the buyer receives a surplus of value minus the price (V-P), and the supplier receives a profit of price minus cost (P-C). The supplier’s resources and capabilities, in turn, influence the value of the good to the buyer and/or the cost of producing it (Hoopes, Madsen, and Walker (2003)." Also see Besanko, Dranove & Shanley, 1999: chapter 13; Ghemawat, 1991: chapter 4; Walker, 2004: chapter 2; see also Postrel, 2002). Under this theory, competitive advantage is deemed to be possessed by the firm who implements largest difference between value and cost when compared to rivals.

In summary, a theory of competitive heterogeneity seeks to explain why firms do not converge on a single best way of doing things as predicted by simple microeconomics. The RBV contains one approach. In recent years capability theories have expanded RBV logic. Recently, more work that focuses on heterogeneity has been published in strategy journals.

HSBC to cease wealth management business in some MidEast countries

By Dinesh Nair

DUBAI | Sun Sep 1, 2013 7:46am EDT

(Reuters) - HSBC Holdings (HSBA.L) will stop offering wealth management products in Bahrain, Jordan and Lebanon as the British lender continues to exit small or insufficiently profitable operations globally as part of a strategic review, the bank said.

HSBC, Europe's biggest bank, has cut its retail banking business in some Middle Eastern nations, including the three nations affected in the latest move, and merged its operations in Oman with a local bank as part of a three-year global restructuring instigated by Chief Executive Stuart Gulliver.

The worldwide move, which has seen the bank exit or sell 54 businesses to help improve profitability, has also seen it scale back its Islamic and private banking operations.

"HSBC's global strategy for retail banking and wealth management is to offer and grow the wealth business in markets where we can achieve scale," the bank said in a statement issued to Reuters on Sunday.

"After a detailed review of our MENA business, we will discontinue sales of any new wealth investment or wealth insurance products in Lebanon, Jordan and Bahrain from October 7, 2013." Read more...

Four tips for teaching your kids how to handle money

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For parents with young children, almost everything is a learning opportunity, and money lessons can't come soon enough.

Recent Northwestern Mutual research found that Americans have difficulty saving for the long-term—they know they need to save, but they're not making it a priority or habit.

Parents can help kids develop savings habits early. Financial literacy website TheMint.org shares ideas and tips for raising money-savvy kids:

1. Try the four-bank system. Whether your child has an allowance, receives birthday money or earns her own "income," work with her to divide earnings into four jars labeled GIVE, SPEND, read more...

Business term of the day - Term for September 1, 2013: "Communication Quotient"

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Source: Wikipedia
Communication quotient, communication intelligence, or CQ is a theory that communication is a behaviour based skill that can be measured and trained. CQ measures the ability of people to communicate effectively with one another. The first scholarly article referring to CQ was by Robert Service in CQ: the Communication Quotient for IS professionals. The article was published in 2005 in the Journal of Information Science. In 2010 at TED Women, Clare Munn spoke about the importance of our Communication Quotient in an increasingly digital world.

History

The development of CQ as a theory and a concept can be traced back to the challenging of IQ as fully explaining cognitive ability in 1983, by Howard Gardner with his Theory of multiple intelligences.[3] In Gardner's view, traditional types of intelligence, such as IQ, fail to fully explain cognitive ability. The development of CQ is part of the trend to analyse and fully understand human intelligence, a trend led by Daniel Goleman’s emotional intelligence and social intelligence.

Definition

The Times of India in 2005 , in an article entitled A Shift from IQ, referred to CQ as an ability multi-national corporations were testing for amongst Indian graduates. In 2005 Craig Harrison in Improving Your Communication Quotient described CQ skills specifically in terms of workplace communication. In 2007 Clare Munn and Maria Bello defined CQ as "Expressive & Receptive Intelligence" the communication bridge between IQ and EQ. In 2011 Alistair Gordon and Steve Kimmens in The CQ Manifesto defined CQ as "saying the right thing in the right way to the right people at the right time in a such a way that the message is received and understood as it was intended".

In Robert Service’s 2005 article he presented the communication quotient as a measurable and improvable type of intelligence, specifically for IT and IS professionals. Service aergues that the improvement of communication ability will allow individuals the opportunity to move up in the organisational ranks. The article presents two models to explain communication, the first is the model of two-way communications and the second is the CQ measurement and improvement matrix.

Money May Be Motivating Doctors To Do More C-Sections

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Obstetricians perform more cesarean sections when there are financial incentives to do so, according to a new study that explores links between economic incentives and medical decision-making during childbirth.

About 1 in 3 babies born today is delivered via C-section, compared to 1 in 5 babies delivered via the surgical procedure in 1996. During the same time period, the annual medical costs of childbirth in the U.S. have grown by $3 billion annually. There are significant variations in the rate of cesarean deliveries in different parts of the country — in Louisiana, for example, the C-section rate is nearly twice as high as in Alaska.

Obstetricians in many medical settings are paid more for C-sections. In a new working paper published by the National Bureau of Economic Research, health care economists Erin Johnson and M. Marit Rehavi calculated that doctors might make a few hundred dollars more for a C-section compared to a vaginal delivery, and a hospital might make a few thousand dollars more. Read more...

Why India’s Economy Is Stumbling

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WASHINGTON — FOR the past three decades, the Indian economy has grown impressively, at an average annual rate of 6.4 percent. From 2002 to 2011, when the average rate was 7.7 percent, India seemed to be closing in on China — unstoppable, and engaged in a second “tryst with destiny,” to borrow Jawaharlal Nehru’s phrase. The economic potential of its vast population, expected to be the world’s largest by the middle of the next decade, appeared to be unleashed as India jettisoned the stifling central planning and economic controls bequeathed it by Mr. Nehru and the nation’s other socialist founders.

But India’s self-confidence has been shaken. Growth has slowed to 4.4 percent a year; the rupee is in free fall, resulting in higher prices for imported goods; and the specter of a potential crisis, brought on by rising inflation and crippling budget deficits, looms.

To some extent, India has been just another victim of the ebb and flow of global finance, which it embraced too enthusiastically. The threat (or promise) of tighter monetary policies at the Federal Reserve and a resurgent American economy threaten to suck capital, and economic dynamism, out of many emerging-market economies. Read more...

Business term of the day - Term for August 31, 2013: "Communication audit"

Keywords: communication audit

A communication audit is a comprehensive evaluation of an organization’s ability to send, receive and share information with various audiences within the organization (and as organizations become flatter to allow groups within the organization to cooperate and share among themselves), as well at key constituencies outside, such as customers and investors, in the case of publicly traded companies. This type of audit can be performed to evaluate an organization's external or internal communication effectiveness. The purpose of a communication audit is to uncover the strengths and weaknesses between management, typically, and employees, customers and other groups such as investors, the news media, and regulators and legislative bodies with the objective to improve future communications by developing a strategic plan, through a series of recommendations, and to determine where gaps exists which need to be bridged .

A communications audit may be undertaken by corporate communications team or by outside consultants who are retained by management to assess the company’s communications effectiveness in accordance with the business objectives, compare the company vs. competitors, and identify target audience perceptions and motivators. The resulting strategic positioning and corresponding communications plan is focused on achieving strategic communications objectives – whether they be to achieve brand recognition, modify perceptions, maximize sales, encourage community support or establish leadership. If an outside auditor is retained, the auditor may include an evaluation of the corporate communications staff and the activities of the corporate communications department with recommendations to management designed to streamline departmental communications and inter-company communications effectiveness. Read more...