Attach Rate

Keywords: attach rate, measure of popularity, complementary goods

The attach rate of a product represents how many complementary goods are sold for each primary product. For example, the average number of DVD-Video discs (complementary product) purchased for each DVD player (primary product) sold, or the number of console-specific video games purchased for each console sold.

The attach rate is one measure of popularity for a given platform, since it is an indication of how quickly sales for the complementary products will grow as the installed base of the platform grows. 

For example, imagine the following situation:

• Platform A has sold 1,000 hardware units
• Platform B has sold 10,000 hardware units
• Publishers have sold 5,000 titles for Platform A
• Publishers have sold 10,000 titles for Platform B

In absolute terms, Platform B is outselling Platform A by a factor of 10:1, but Platform A has a much higher attach rate (5:1 versus 1:1). Thus for a content provider, Platform A may be more attractive, since at current attach rates the platform only needs to sell another 1,000 units for publishers to match their sales on Platform B.

Nevertheless, the attach rate can be skewed early on in a product's life-cycle due to the effect of early adopters whose consumer behavior may not be representative of the general populace. Attach rates also fail when considering a product late in its life-cycle. Using the DVD player example above, the adoption of the DVD-ROM format in computers and software would have a dramatically negative effect when the complementary product is DVD movies because many of these multi-use devices rarely are used to play videos.

Fayol's 14 Principles of Management

Keywords: Fayol's 14 Principles of Management
Fayol's 14 Principles of Management

The Principles of Management are the essential, underlying factors that form the foundations of successful management. According to Henri Fayol in his book General and Industrial Management (1916), there are fourteen 'Principles of Management'.

1. Division of Work - According to this principle the whole work is divided into small tasks.The specialization of the workforce according to the skills of a person , creating specific personal and professional development within the labour force and therefore increasing productivity; leads to specialization which increases the efficiency of labour.
2. Authority and Responsibility - This is the issue of commands followed by responsibility for their consequences. Authority means the right of a superior to give enhance order to his subordinates; responsibility means obligation for performance.
3. Discipline - It is obedience, proper conduct in relation to others, respect of authority, etc. It is essential for the smooth functioning of all organizations.
4. Unity of Command - This principle states that each subordinate should receive orders and be accountable to one and only one superior. If an employee receives orders from more than one superior, it is likely to create confusion and conflict.
5. Unity of Direction - All related activities should be put under one group, there should be one plan of action for them, and they should be under the control of one manager.
6. Subordination of Individual Interest to Mutual Interest - The management must put aside personal considerations and put company objectives firstly. Therefore the interests of goals of the organization must prevail over the personal interests of individuals.
7. Remuneration - Workers must be paid sufficiently as this is a chief motivation of employees and therefore greatly influences productivity. The quantum and methods of remuneration payable should be fair, reasonable and rewarding of effort.
8. The Degree of Centralization - The amount of power wielded with the central management depends on company size. Centralization implies the concentration of decision making authority at the top management.
9. Line of Authority/Scalar Chain - This refers to the chain of superiors ranging from top management to the lowest rank. The principle suggests that there should be a clear line of authority from top to bottom linking all managers at all levels.
10. Order - Social order ensures the fluid operation of a company through authoritative procedure. Material order ensures safety and efficiency in the workplace. Order should be acceptable and under the rules of the company.
11. Equity - Employees must be treated kindly, and justice must be enacted to ensure a just workplace. Managers should be fair and impartial when dealing with employees, giving equal attention towards all employees.
12. Stability of Tenure of Personnel - Stability of tenure of personnel is a principle stating that in order for an organization to run smoothly, personnel (especially managerial personnel) must not frequently enter and exit the organization.
13. Initiative - Using the initiative of employees can add strength and new ideas to an organization. Initiative on the part of employees is a source of strength for organization because it provides new and better ideas. Employees are likely to take greater interest in the functioning of the organization.
14. Esprit de Corps/Team Spirit - This refers to the need of managers to ensure and develop morale in the workplace; individually and communally. Team spirit helps develop an atmosphere of mutual trust and understanding. Team spirit helps to finish the task on time.

Asset Stripping

Keywords: Asset stripping, phoenixing

Definition

Asset stripping is a practice in which a company or an individual, known as a corporate raider, takes control of another company, and then auctions off the acquired company's assets. Funds from the sold assets are often used to repay the debt of the corporate raider, which may have increased due to the acquisition. Corporate raiders use asset stripping to repay debts while increasing their net worth. A company that may become susceptible to asset stripping is any company whose individual assets are worth more than its collective net worth.

The term is generally used in a pejorative sense as such activity is not considered productive to the economy. Asset stripping is considered to be a problem in economies such as Russia or China that are making a transition to the market. In these situations, managers of a state-owned company have been known to sell the assets they control, leaving behind nothing but debts to the state.

History

The innovators of asset stripping were Carl Icahn, Victor Posner, and Nelson Peltz; all of whom were investors in the 70’s and 80’s. Carl Icahn performed one of the most notorious and hostile takeovers when he acquired Trans World Airlines in 1985. Here Icahn stripped TWA of its assets, selling them individually to repay the debt assimilated during the takeover. This particular corporate raid formed the idea of selling a company’s assets in order to repay debt, and eventually increase the raider’s net worth.

One of the biggest corporate raids that failed to materialize was the takeover of Gulf Oil by T. Boone Pickens. In 1984, Pickens attempted to acquire Gulf Oil and sell its assets individually to gain net worth. However, the purchase would have had been severely detrimental to Chevron; a customer of Gulf Oil. Therefore, Chevron stepped in and merged with Gulf Oil for $13.2 billion, which at that time was the biggest merger between two companies in history.

In 2011, BC Partners acquired Phones 4u for a fee in the region of £700 million. At this point in time Phones 4u had already entered administration and had deep financial struggles. However, this did not prevent BC Partners from taking a £223 million dividend in order to pay off some of its own debts.Under the ownership of BC Partners, Phones 4u had very little financial freedom to expand and claim back the contract of EE. In September 2014 O2, Vodafone and Three decided to withdraw the rights for Phones 4u to sell their products. Due to the already poor financial situation of Phones 4u, the company has now no alternative but to sell its individual assets and close down. The net worth of Phones 4u’s assets are estimated to exceed £1.4 billion, which provides BC Partners with the credit to pay off some of its debts and significantly improve its net worth.

Controversy

Asset stripping has presented itself to be a highly controversial topic within the financial world. The positives of asset stripping generally lie with the corporate raiders, who can slash the debts they may have whilst improving their net worth. However, the general perspective of asset stripping is firmly negative. With most cases of asset stripping resulting in thousands of employees losing their jobs without much consideration of the consequences to the affected community. One particular example of where asset stripping cost a significant number of workers their jobs was in the Fontainebleau Las Vegas LLC case. After the takeover, 433 people lost their jobs when assets were sold off and the company was stripped.

In the United Kingdom

The process of asset stripping is not an illegal practice. If a corporate raider sells the target companies assets individually, pays off its debts then FSA or any legal body have no room for investigation. However, some firms perform the process illegally and if found guilty may incur a substantial fine or even prison.

Asset stripping by private equity firms in Europe is now regulated pursuant to the Alternative Investment Fund Managers Directive.

Phoenixing

This is one of two methods a corporate raider can use to strip assets illegally. For this method to work, the corporate raider and the targeted firm must have the same director. Assets of the targeted firm are transferred to the corporate raider to ensure they remain safe from debt collectors. This process lets the corporate raider improve their net worth while leaving liabilities with the targeted company.

Liquidation

This method acts on completely fraudulent terms, and results in a higher punishment from the FSA. Here, corporate raiders take ownership of a company on hostile terms, transfer the assets to their name and then put the dilapidated firm into liquidation. This ensures that the corporate raider improves their net worth, and has no liability to deal with the firm recently placed into liquidation. In comparison to phoenixing, this method has the highest rate of jail sentences issued for those found guilty.

Source: Wikipedia

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Keywords: new york banners

Ansoff Matrix

Keywords: Ansoff Matrix

Definition

The Ansoff Matrix is a strategic planning tool that provides a framework to help executives, senior managers, and marketers devise strategies for future growth.[1][2] It is named after Russian American Igor Ansoff, who came up with the concept.

Diagram showing the Ansoff Matrix

Growth strategies

Ansoff, in his 1957 paper, provided a definition for product-market strategy as "a joint statement of a product line and the corresponding set of missions which the products are designed to fulfill".[3] He describes four growth alternatives:

Market penetration

In market penetration strategy, the organization tries to grow using its existing offerings (products and services) in existing markets. In other words, it tries to increase its market share in current market scenario.This involves increasing market share within existing market segments. This can be achieved by selling more products or services to established customers or by finding new customers within existing markets. Here, the company seeks increased sales for its present products in its present markets through more aggressive promotion and distribution.

This can be accomplished by: (i) Price decrease; (ii) Increase in promotion and distribution support; (iii) Acquisition of a rival in the same market; (iv) Modest product refinements

Market development

In market development strategy, a firm tries to expand into new markets (geographies, countries etc.) using its existing offerings.

This can be accomplished by (i) Different customer segments (ii) Industrial buyers for a good that was previously sold only to the households; (iii) New areas or regions about of the country (iv) Foreign markets. This strategy is more likely to be successful where:- (i) The firm has a unique product technology it can leverage in the new market; (ii) It benefits from economies of scale if it increases output; (iii) The new market is not too different from the one it has experience of; (iv) The buyers in the market are intrinsically profitable.

Product development

In product development strategy, a company tries to create new products and services targeted at its existing markets to achieve growth.

This involves extending the product range available to the firm's existing markets. These products may be obtained by: (i) Investment in research and development of additional products; (ii) Acquisition of rights to produce someone else's product; (iii) Buying in the product and "branding" it; (iv) Joint development with ownership of another company who need access to the firm's distribution channels or brands.

Diversification

In diversification an organization tries to grow its market share by introducing new offerings in new markets. It is the most risky strategy because both product and market development is required. (i) Related Diversification - Here there is relationship and, therefore, potential synergy, between the firms in existing business and the new product/market space. (a) Concentric diversification, and (b) Vertical integration. (ii) Unrelated Diversification: This is otherwise termed conglomerate growth because the resulting corporation is a conglomerate, i.e. a collection of businesses without any relationship to one another.A strategy for company growth through starting up or acquiring businesses outside the company’s current products and markets.

Source: Wikipedia

Characteristics of an Entrepreneur

Keywords: Characteristics of an Entrepreneur, Definition of an entrepreneur, Entrepreneurial Development, Self-employed mindset

12 Essential Characteristics of an Entrepreneur

By ActionCoach

Definition of an entrepreneur

An entrepreneur is a businessperson who not only conceives and organizes ventures but also frequently takes risks in doing so. Not all independent business people are true entrepreneurs, and not all entrepreneurs are created equal. Different degrees or levels of entrepreneurial intensity and drive depend upon how much independence one exhibits, the level of leadership and innovation they demonstrate, how much responsibility they shoulder, and how creative they become in envisioning and executing their business plans.

The Five Levels of Entrepreneurial Development

Brad Sugars, a world-renowned business author and founder of his own international franchise with nearly 1,000 offices worldwide, identifies five different types or levels of entrepreneurial mindsets, patterns of thinking, and belief

systems.

They begin with the basic level of the employee – and an understanding that good employees often evolve into great entrepreneurs but that to become an entrepreneur one has to first adopt a perspective and seek out a role above and beyond that of an employee.

• The employee sets goals mainly to impress others, to avoid confronting fears – including the fear of personal

freedom and success – and to conform to a comfort zone rather than pushing to learn more and gain new

experiences.

• Because of self-imposed limitations, employees prefer to follow someone else’s game plan, and they lack the

desire to become a self-motivated and self-reliant entrepreneur.

• They focus primarily on personal security and their emotional motivation derives from a fear of insecurity and a desire to be within the comfort zone of a secure situation.

Those who want a greater sense of responsibility and control over their lives and have the confidence to experiment with that possibility often rise up from the ground level of employee status to the first level of entrepreneurship. They do this by becoming self-employed.

Level One: The Self-Employed Mindset

The emotional driving force behind the self-employed person is not security but a desire for greater control over his or her life, career, and destiny. Relinquishing that control to a boss every day from nine to five is not their idea of happiness, and they believe that they could do their job just as well without an employer – and perhaps without the need for other employees. They want more autonomy. They want to do things their own way. And they usually begin by creating a situation where they do the same type of work they did while an employee, but they figure out how to do it by themselves and for themselves. Read more

Business term of the day: Amalgamated company

Keywords: amalgamation, amalgamated company

Definition

In the business world, amalgamated refers to an organization that has undergone amalgamation. Amalgamated organizations may use "amalgamated" in their name to signify that it is the amalgamation of its component companies or trade unions.

Amalgamated organizations include:

In North America

• Amalgamated Bank of Chicago, a bank founded in 1923 by the ACWA and now owned by UNITE HERE
• Amalgamated Sugar Company
• Amalgamated Transit Union, a United States and Canada based union
• Amalgamated Advertising
• Dominica Amalgamated Workers' Union
• Amalgamated Workers Union, a trade union in Trinidad and Tobago

Now disbanded or further amalgamated

• Amalgamated Association of Iron and Steel Workers, a historical trade union
• Amalgamated Clothing Workers of America
• Amalgamated Machinery Corporation, manufacturers of the Amalgamated
• Amalgamated Meat Cutters, a North American trade union