Speaking at a TED Salon in London, economist Martin Jacques asks: How do we in the West make sense of China and its phenomenal rise? The author of "When China Rules the World," he examines why the West often puzzles over the growing power of the Chinese economy, and offers three building blocks for understanding what China is and will become.
SWOT Analysis
A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.
The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:
SWOT Analysis Framework
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Strengths
A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:
- patents
- strong brand names
- good reputation among customers
- cost advantages from proprietary know-how
- exclusive access to high grade natural resources
- favorable access to distribution networks
Weaknesses
The absence of certain strengths may be viewed as a weakness. For example, each of the following may be considered weaknesses:
- lack of patent protection
- a weak brand name
- poor reputation among customers
- high cost structure
- lack of access to the best natural resources
- lack of access to key distribution channels
In some cases, a weakness may be the flip side of a strength. Take the case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.
Opportunities
The external environmental analysis may reveal certain new opportunities for profit and growth. Some examples of such opportunities include:
- an unfulfilled customer need
- arrival of new technologies
- loosening of regulations
- removal of international trade barriers
Threats
Changes in the external environmental also may present threats to the firm. Some examples of such threats include:
- shifts in consumer tastes away from the firm's products
- emergence of substitute products
- new regulations
- increased trade barriers
The SWOT Matrix
A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.
To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:
SWOT / TOWS Matrix
Opportunities | S-O strategies | W-O strategies |
Threats | S-T strategies | W-T strategies |
- S-O strategies pursue opportunities that are a good fit to the company's strengths.
- W-O strategies overcome weaknesses to pursue opportunities.
- S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.
- W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.
Source: QuickMBA
Starbucks CEO Howard Schultz Q&A
Q. Do you remember the first time you were somebody’s boss?
A. The first time was when we opened up Il Giornale, which was the coffee-bar business that I started in 1985. At that moment, I realized I was responsible for something much larger than myself — people were relying on me.
Q. And was that an easy transition for you?
A. That was a time when we had unbridled enthusiasm for an idea, and I think it covered up a lot of mistakes and it covered up a lot of naïveté. But I also remember at that time writing a memo that has become kind of the template for the culture and values and guiding principles of Starbucks today.
What we set out to do then, and it has held true today, was really try to build a company that had a set of values and guiding principles that were as important as the equity of the brand or the product we were selling.
Q. Where did you get the idea to do that?
A. It was my experience as a young child and growing up in Brooklyn, where my dreams were beyond my station in life, and I wanted to build a different kind of company that perhaps my father never got a chance to work for. It came from seeing firsthand that if you were not a highly educated or a very successful person — that perhaps as a blue-collar worker or lower-middle-class person, as my parents were — that the work environment didn’t treat you with a level of respect.
Later on I realized that, not unlike a young child, new businesses are formed in the imprinting stage and organizations have a memory. People have come to me over the years and said to me: “I admire the culture of Starbucks. Can you come give a speech and help us turn our culture around?” I wish it were that easy. Turning a culture around is very difficult to do because it’s based on a series of many, many decisions, and the organization is framed by those decisions.
Here’s one example: In the late-’80s, before we went public in ’92, Starbucks gave comprehensive health insurance to part-time workers and equity in the form of stock options to part-time people. That created an unbelievable connection, and we still do it.
Q. What is your advice to an entrepreneur who asks you: “I’m just starting a company. How do I create a culture?”
A. I would say that everything matters — everything. You are imprinting decisions, values and memories onto an organization. In a sense, you’re building a house, and you can’t add stories onto a house until you have built the kind of foundation that will support them. I think many start-ups make mistakes because they are focusing on things that are farther ahead, and they haven’t done the work that has built the foundation to support it.
People ask me what’s the most important function when you’re starting an organization or setting up the kind of culture and values that are going to endure.
The discipline I believe so strongly in is H.R., and it’s the last discipline that gets funded. Marketing, manufacturing — all these things are important. But more often than not, the head of H.R. does not have a seat at the table. Big mistake.
Q. What are the some other lessons you’ve learned over the course of your life that have shaped the way you lead?
A. I was part of a family that grew up on the other side of the tracks, and that gave me tremendous motivation to want to exceed at a level that would create an environment for my own family that was different from the one I was in. I also think that I was insecure about being a poor kid, but with that came a sense of values and sensitivity about those people who didn’t get respect and had low self-esteem because of that.
So in the early days of Starbucks, my office was in the roasting plant. And I ended every day by walking the plant floor and thanking people who were the unsung heroes of the company. For many people, that demonstrated that I wasn’t sitting in some ivory tower. I was one of them. And I think the leadership style I have is that I’ve never put myself above anyone else, and I’ve never asked more of anyone than I was willing to do myself.
Q. What about early work experiences that influenced you?
A. I was working probably at the age of 10, when I had my first paper route. I had every different kind of job you could possibly imagine as a young kid.
Q. What was the strangest one?
A. I had a friend whose family had a furrier, and after school I took the subway from Brooklyn and came into Manhattan and I stretched skins with my hands.
Q. What kind of skins?
A. Fox. I was in high school, so I’d get there in the afternoon, and there’d be a pile of skins. You had to wet the pelt with a brush, and you had to stretch the skins. You were paid by the pelt. It just teaches you at a young age what it takes to make money.
I also worked in a garment company in Queens. It must have been 100 degrees in the summer, and I was steaming curtains. There was no air-conditioning. It was death, just death, but it was the only job I could get.
Q. How do you hire? What are you looking for in, say, somebody who would be a direct report?
A. I want big thinkers. I want people who are going to be entrepreneurial. I want people who are going to have important things to say and the courage to say them. I want people to challenge the status quo, but I also say something to everyone I hire, and that is: “You don’t have to come in here and try to hit a home run, and let me tell you why. You’re coming in here because I and many others believe very strongly in who you are and what you can bring to the company. So you don’t have to come in here and prove something right away.”
People who succeed at Starbucks are going to demonstrate a healthy level of respect and understanding of the culture of the company and the people who have come before them. There have been great people who have come into the company who haven’t succeeded because they have not embraced the culture and values of the company, so you need to do that.
I think the first 30, 60 days after a new person arrives at Starbucks is the most critical stage. So I will spend more time with that individual on the front end than I probably will that whole year, ensuring that they understand the deep level of sensitivity around the heritage and tradition of the company.
Q. A lot of the qualities you’ve mentioned are intangibles. How do you find out if a job candidate has them?
A. I think one of my strengths is that I have a very good antenna about people. I’ll ask a few things that are probably different from a traditional interview. First off, I want to know what you’re reading and then I’ll ask you why. Tell me what work-life balance means to you. I would want to know specifically their level of understanding about our company and Starbucks culture, and I’ll see early on who’s faking it and who’s not.
I obviously want people who enjoy coffee. I think it would be very difficult for me to hire somebody who doesn’t drink coffee. I want happy people. I want people who enjoy other people. And we’ll talk about what it’s going to take to win and I’ll ask people to describe that for me.
Q. Talk more about the winning question.
A. I’m aware of what it means to build a team. I played quarterback and I understand what it means to win, and that the guy throwing the ball or the guy scoring the touchdown only did that because the linemen protected the quarterback or opened the hole.
I think it’s so difficult to succeed today in business. The ability for the team to function together, to support one another, to trust one another, to have cohesion and to also have creative tension, is just mission-critical.
If you came in to our weekly Monday-afternoon meeting, you would think, “Man, this company’s in trouble.” Because we are incredibly self-critical, and that’s an attribute I have because I know there are always areas of improvement. But we also have to find opportunities to celebrate success, and I want to find opportunities for the people in the company to find those moments where people are doing things really well and recognize them and support them and celebrate them, especially in this kind of environment.
Q. If you could ask somebody only two questions in the job interview, what would those questions be?
A. I think I’d ask them about their current family and their family history. Now you’ve got to be careful with some of this, but I’d want to know that.
Q. What are you listening for?
A. If you don’t love what you’re doing with unbridled passion and enthusiasm, you’re not going to succeed when you hit obstacles. I want to see emotion. We are in an emotional business, and I need people around me who understand that we are an emotional business and have a visceral affection for it.
Q. What advice would you give to somebody who’s about to become C.E.O.?
A. I would say the following: Very few people, whether you’ve been in that job before or not, get into the seat and believe today that they are now qualified to be the C.E.O. They’re not going to tell you that, but it’s true. So everyone you meet has a level of insecurity. The level of insecurity that you have is a strength, not a weakness. The question is, how are you going to use it?
For whatever reason, people believe that when they get to that spot, they have to know everything. They’ve got to be in total control, and you can never show weakness. I would say one of the underlying strengths of a great leader and a great C.E.O. — not all the time but when appropriate — is to demonstrate vulnerability, because that will bring people closer to you and show people the human side of you.
Now, in order to demonstrate vulnerability, you have to make sure you have people around you who will never use that against you, because you trust them and they trust you. So the ability, behind closed doors, to have open and honest conversations with your team about the concerns you have, the fears you have, and the opportunities, is the balance that someone needs to succeed.
Source: The New York Times
Long-run average cost curve (LRAC)
In the long run, all inputs (factors of production) are variable and firms can enter or exit any industry or market. Consequently, a firm's output and costs are unconstrained in the sense that the firm can produce any output level it chooses by employing the needed quantities of inputs (such as labor and capital) and incurring the total costs of producing that output level.
Tulip Mania
Tulip mania or tulipomania was a period in the Dutch Golden Age during which contract prices for bulbs of the recently introduced tulip reached extraordinarily high levels and then suddenly collapsed. At the peak of tulip mania, in February 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble.
Lessons From Business Masters Pt. 4
“It's customers that made Dell great in the first place, and if we're smart enough and quick enough to listen to customer needs, we'll succeed.” – Michael Dell
“I like thinking big. If you're going to be thinking anything, you might as well think big.” – Donald Trump
"The world is changing very fast. Big will not beat small anymore. It will be the fast beating the slow." - Rupert Murdoch
BRICs
In economics, BRIC (typically rendered as "the BRICs" or "the BRIC countries" or known as the "Big Four") is a grouping acronym that refers to the countries of Brazil, Russia, India, and China that are deemed to all be at a similar stage of newly advanced economic development. Despite lagging behind the other members in terms of economic growth, China formally invited South Africa to join the BRICs in 2010, and so the acronym changes from "the BRICs" to "the BRICS". South Africa thus became the first African country to be admitted to BRICS.
Lessons From Business Masters Pt. 3
“Good management consists in showing average people how to do the work of superior people.” – John D. Rockefeller
“You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new.” – Steve Jobs
“The question isn't who is going to let me; it's who is going to stop me.” – Ayn Rand
Volatility Index (VIX)
The Volatility Index (VIX) is a contrarian sentiment indicator that helps to determine when there is too much optimism or fear in the market. When sentiment reaches one extreme or the other, the market typically reverses course.
Lessons From Business Masters Pt. 2
“If you pick the right people and give them the opportunity to spread their wings and put compensation as a carrier behind it you almost don't have to manage them.” - Jack Welch
401K vs Roth IRA
The 401k and Roth IRA are different individual retirement plans. As with all retirement plans, the 401k and Roth IRA have certain distinctive features. It is therefore important that retiring persons should always weigh these features before making a decision.
The 401k was the first of the two plans to be introduced and was available in 1978. 401k, which are also called Elective Deferrals, are a scheme in which the employer contributes matching funds toward the employee’s retirement account. The Roth IRA was introduced in 1998. It is a plan in which the self-employed, employed or individuals, contribute voluntarily to a scheme.
Lessons From Business Masters Pt. 1
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.” - Warren BuffettMargIN vs. MarkUP
Question of the day - What would you rather earn: a 20% margin or a 25% markup?
Let’s assume you sold a promotional item with a $40 cost for $50 and a $10 profit.
This is a 20% gross margin ($10 profit / $50 price = 20%). For margin, remember “IN”. The margIN is the profit IN the sales price.
Coincidentally, this example equals a 25% markup too. To calculate markup, you mark “UP” the cost. $40 cost + 25% markUP equals $10 profit ($40 x 25% = $10). This is also called “cost plus” pricing.
Let’s assume you sold a promotional item with a $40 cost for $50 and a $10 profit.
This is a 20% gross margin ($10 profit / $50 price = 20%). For margin, remember “IN”. The margIN is the profit IN the sales price.
Coincidentally, this example equals a 25% markup too. To calculate markup, you mark “UP” the cost. $40 cost + 25% markUP equals $10 profit ($40 x 25% = $10). This is also called “cost plus” pricing.
10/20/30 Rule of PowerPoint
The 10/20/30 Rule of PowerPoint is quite simple: a PowerPoint presentation should have ten slides, last no more than twenty minutes, and contain no font smaller than thirty points. This rule is applicable for any presentation to reach agreement: for example, raising capital, making a sale, forming a partnership, etc.
Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and venture capitalists are very normal. (The only difference between you and venture capitalist is that he is getting paid to gamble with someone else’s money). If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that a venture capitalist cares about are:
Ten slides. Ten is the optimal number of slides in a PowerPoint presentation because a normal human being cannot comprehend more than ten concepts in a meeting—and venture capitalists are very normal. (The only difference between you and venture capitalist is that he is getting paid to gamble with someone else’s money). If you must use more than ten slides to explain your business, you probably don’t have a business. The ten topics that a venture capitalist cares about are:
Jeff Bezos' Commencement Speech At Princeton University
Amazon founder and CEO Jeff Bezos spoke to the Class of 2010 about the difference between choices and gifts. Cleverness, Bezos pointed out, is a gift, while being kind to others is a choice. One's character, he suggested, is reflected not in the gifts one is endowed with at birth but rather by the choices one makes over the course of a lifetime.
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