Archive for the ‘General’ Category

« Older Entries
Newer Entries »

ECCO A/S – Global value chain management case study

Wednesday, August 31st, 2011

My operations management coursework was based on the ECCO A/S – Global Value Chain Management case study which is an interesting paper on ECCO A/S (ECCO) who have been very successful in the footwear industry by focusing on production technology and assuring quality by maintaining full control of the entire value chain from “cow to shoe.”.

ECCO follow a differentiation business strategy producing the highest quality shoes and they use their operations as one of their main points of competitive advantage.

ECCO’s operations strategy is top-down (i.e. formed in pursuit of its business strategy) and operations-led (i.e. based on the resources and capabilities within its operations). They prioritise quality and reliability; the supply chain is configured to produce in accordance with specification and without error.

ECCO has a very atypical operations strategy compared with their industry peers. Unlike their “branded marketer” competitors they produce their own materials and manufacture 80% of their own products in factories around the world. Owning and controlling the entire value chain gives them huge flexibility and allows them to maintain the highest levels of quality.

Leong et al. (1990) state that operation strategy consists of the key decision areas concerned with the structure and infrastructure of operations…

Download the full report: Operations Management Coursework – ECCO Shoes Global Value Chain

The report covers:

  • ECCO’s operations strategy
    • Structure
    • Infrastructure
    • Global vertical integration
    • Further operational execution examples
      • Manufacturing facilities
      • Training centres
      • Faster lead times
      • Production cycle
  • ECCO’s global supply chain
    • Tanneries
    • Manufacturing
    • Distribution
    • Drivers and trends in the industry
  • Supply chain risks and mitigation strategies
    • Intellectual property breaches
    • Inventory problems with changes in demand
    • Delays in material flows

Download the full report: Operations Management Coursework – ECCO Shoes Global Value Chain

Tags: , , ,
Posted in General | No Comments »

Do you adapt or redesign your business model for the Internet?

Tuesday, August 30th, 2011

I follow mma, which for those of you that do not know it is a very new sport that has only been popular for about 10 years. After watching UFC 134 at the weekend it dawned on me that its development has a lot in common with the Internet which is a relatively new technology .

In mma the current superstars are those who came from another discipline (such as wrestling or judo) and then learned to be more rounded mma fighters. However there is a new breed of competitor who studied mma from the start of their careers; 18-25 year olds who have been pure mma fighters since their first training session and who are built exactly for purpose.

I see the same parallel with Internet business models, take quickbooks and xero. Quickbooks is a pre-Internet company their desktop software was around long before the Internet. I used their software for years and it was always the same old thing; every few years they discontinued support for the old versions so I had to pay for yet another upgrade, each version looked exactly like the last with no innovation and if you needed any help at all you had to pay for support. Contrast that with Xero which was built from the ground up as a Saas application to be run in a browser, updates are free, there are constantly new features being added, there are no large up front costs (you simply pay a low monthly fee) and the support is not only free it is excellent!  Xero is built for the Internet, Quickbooks is a company trying to adapt it’s model to the Internet.

A pre-Internet company needs to realise that the rules have changed, it seems so obvious but you cannot simply take your old business model and put it online. Established companies have a lot of advantages in other areas e.g. supply chain, distribution, sales, so if they can get the business model right they have the opportunity to make a real impact online.

 

Tags:
Posted in General | No Comments »

Reflections on my MBA first year at Cass business school

Thursday, August 4th, 2011

My friend Richard has an excellent blog called Cass Reflections if you have not read it, you should, he has an excellent writing style that draws you in. His blog inspired me to write a reflection of the first year of my executive MBA at Cass business school.

What I have learned about an MBA

An MBA is much, much more work than you expect, after the first month I thought it was going to be easy but then suddenly it all ramped up and there were more and more courseworks due at the same time.  Mentally it is also quite draining to work all day and then have to be in class in the evenings or be constantly reading academic and business papers. Once the MBA is over I am going to enjoy reading the pile of fiction books that have been piling up on my bookshelf!

Managing group work is essential, our working groups are assigned to us and we have no control over the selection. What this means is that ever few months you have to work with a new group of people and hit the ground running. Changing groups has the advantage of allowing you to meet new people but it means that you have to create a team spirit quickly and learn the strengths and weaknesses of the group members very quickly. As it is outside of a professional work environment there is no hierarchy and those people used to managing a lot of people and being the boss may need to adapt a more democratic style.

It is obvious but time management is essential, you need to make sure that you have all of your readings done before and after lectures, your coursework in on time and any preparations for exams done in good time.

Most people learn pretty quickly that it is impossible to read everything so being selective in your reading and/ or skim reading is essential. My strategy is to read all the required papers and books and then skim read the additional reading as and when it supports my learning or coursework. You really need to learn to read faster or skim read as there is simply not the time to read slowly and take everything in.

I am very pleased that the first year’s mandatory courses are over, in the second year you get a lot more choice in your electives to follow the subjects that you want to.

What I liked

First and foremost I have met some incredible people who have taught me a lot and inspired me to think differently. I think the people who are in your cohort define your MBA experience so it is essential that you find a good fit for your personality.

An MBA is a generalist degree, you do not get in-depth knowledge of any one subject but you do get sufficient knowledge in all major management disciplines.  This is the most exciting part for me as it allowed me to find out which subjects I really enjoyed the most and where I needed to focus my learning and career path. I have finished my first year with the clear path that strategy, change management and technology are my key areas.

I like the structured learning, you could do a distance MBA and learn just from books but having to be in class at a certain time and having the coursework deadlines give you added incentive to learn and be accountable for your time.

The leadership weekend at the start of the course was a high point as was the consultancy trip to Brazil (which I just returned from and will blog about soon).

What I didn’t like

I would have liked more control over the selection of the working groups and perhaps every other group change should have been self-slecting so we could work with the people we had more rapport with.

Even though there were not that many, the weekend lectures and weekend professional courses were a really chore and had an impact on family life.

Last minute changes in schedule although inevitable, really mess up your timetable and put added stress on your life.

Would I do it again if I had the choice

Absolutely! I have had so much fun challenging myself, pushing my brain to the limit and I have met some incredible people. What I underestimated was the network of great people I would meet and after the knowledge has passed hopefully the relationships I have built over the last year will still be there.

The second year which starts in September is for electives and for your thesis so it is a very different year ahead!

Tags: , ,
Posted in General | 1 Comment »

Working with and leading multicultural teams

Wednesday, July 20th, 2011

I am off to consult in Brazil next week so I have been brushing up on how to work effectively  with multicultural teams.  Most people recognise the value of diverse teams in terms of delivering more varied viewpoints and ideas, but in order to lead effectively you need to take into account cultural differences.

The right start

A face-to-face kickoff meeting essential for new teams it puts “a name to a face” which can be very helpful for virtual teams.  It is an opportunity to talk about the obvious details of success criteria, roles, responsibilities and project details. However, the most effective teams also discuss how often they will communicate, communication preferences e.g. email vs. phone, flexibility needs, working styles, best practice and skill development.

Communication styles

Communicating effectively is a big challenge for multicultural teams because communication styles differ so much across cultures. For team members to work through these differences, they first have to understand that people communicate differently.

  • Direct communicators – say what is on their mind, and they deal with conflict by addressing it promptly
  • Indirect communicators -  speak around an issue, use nonverbal cues and carefully choose words to avoid offense
  • Informal communication – communicate informally, speak as equals, avoid titles, interrupt or speak over each other
  • Formal communication – polite, wait their turn to speak, wait for their manager to speak first

Leaders need recognise such dynamics and develop an environment that brings out the best performance of all individuals.

Language

Accents and the quality of spoken language have become major challenges for multicultural teams.  Language difficulties can impede conversations, which may have to be planned ahead so messages can be conveyed accurately. To combat this employees can:

  • Develop listening skills
  • Be respectful
  • Speaking more slowly
  • Avoid slang or idioms
  • Be patient

Team leadership

Leadership styles also vary. In Anglo-Saxon cultures leaders generally adopt a more egalitarian style with people free to express their opinions and disagree. In other cultures, such as those in Asia and the Middle East, leaders have a more hierarchical style. Team members will generally be more subdued in expressing their opinions and will take their cues regarding decisions from the team leader.

A team leader who recognises this dynamic and takes the time to coach team members can go a long way to resolving this issue and making sure all team members are heard.

Source: Mine the potential of multicultural teams by Sangeeta Gupta

Tags: , ,
Posted in General | 1 Comment »

Strategy and the parenting advantage

Monday, July 18th, 2011

The only way an MBA is worth the price is if you apply the teaching to your professional life. I had a superb lecturer for strategy II, Dr Paul Raspin, he created a lot of value with his teaching and I captured that value by charging my clients to put that knowledge into action.

A recent consultancy project required me to analyse my client’s business portfolio. So I applied the corporate parenting framework i.e. which business should you own and why. Corporate parenting is much like parenting children you need to add value, provide support, create resources and make sure you have the right environment to help the business grow.

What is the parenting advantage?

The parenting advantage is creating more value than your competitors would with the same businesses. For example would eBay (previous owner of Skype) or Microsoft (current owner of Skype) create more value owning Skype. Chances are Microsoft will create more value so they would have the parenting advantage over eBay in this case.

It is also about asking following questions:

  1. Which businesses should we own rather than our competition and why?
  2. What is the best configuration, processes or structure to foster superior performance?
  3. Is there a good fit between the skills of the parent and the needs of the business?

The last question is the most important, if you do not have skills or resources that the acquired business needs then there is little point owning it and you are actually more likely to destroy value.

So how does a corporate parent assess which businesses to own?

Step 1: Understand the critical success factors (CSF) of the business, what really makes a successful business. For example in the hotels market one CSF might be product branding or site selection.

Step 2: Assess the parenting opportunities i.e. is there any upside? An inefficient business might have a lot of upside but some businesses will be so well run and financed that there is little opportunity.

Step 3: Understand the characteristics of the corporate parent. Describe theirs skills, experience, structure, processes, and employees.

Step 4: Map these onto the parenting grid.

Understanding the parenting grid

You should focus your attention on businesses in the heartland and possibly those on the edge of the heartland. Edge of heartland business can be moved into the heartland when the parent learns the new CSF over time. The ballast businesses have little upside but can be a reliable source of earnings (cash cow). Those businesses in the alien territory and value trap should be avoided at all costs, as they will be a drain on resources and very distracting!

Remember it is much easier to change the portfolio to match the parent, changing the parent to match the portfolio is much, much harder.

 

Reference: Campbell, A.; Goold, M.; Alexander, M.(1995) Corporate Strategy: The Quest for Parenting Advantage.
Harvard Business Review, Mar/Apr95, Vol. 73 Issue 2, p120-132, 13p

 

Tags: ,
Posted in General | No Comments »

Cass MBA exams: A new way of revising in the 21st century

Friday, July 15th, 2011

I have just finished my last set of exams at Cass business school for my MBA, phew! Big sigh of relief! I have had a few days to reflect on what I did well and what I could have improved on it suddenly dawned on me how much my exam revision technique has changed.

When I was at school my approach was simple; create concise study notes and then learn them off by heart. The only tools I used were a pen and paper.

Fast forward to today and my approach to revision is very different. Nowadays I have much better recall and I only revise for a fraction of the time I used to:

Understand the big picture

This is a very important concept for me, once I understand the big picture and how the pieces fit together the detail becomes easy. If you know first principles you do not have to remember the details because you can derive them.

YouTube as a teacher

The hardest exam I took was business economics there was so much to learn and the topics were so abstract. How did I manage it? I did 90% of my revision using YouTube. It is amazing that I barely looked at my lecture notes and still managed to learn the syllabus. I think the reason is that having different people discuss the same topic in different ways helps to give a more rounded view. Also I found that strong vocal accents help greatly for recall as my brain remembers things out of the ordinary.

Peer learning

Using your fellow students is something that I have never utilised before. I had a couple of small group sessions where we each presented a few topics to the group and took questions. If you can explain a concept to someone else chances are you understand it very well.

Using all sides of the brain

In order for knowledge to stick in my head I realised that I needed to use a range of techniques:

  • Visual learning – videos, mind maps, linked stories
  • Audio learning - lecture recordings, podcasts, topical radio discussions
  • Kinaesthetic learning - active note taking, scribbling ideas on whiteboards

In twelve years my eldest son will start on his first major set of exams and it will be fascinating to see what tools and techniques are available for him to use in the future.

Tags: , , ,
Posted in General | 1 Comment »

Google Chrome, changing browsers and changing behaviours

Thursday, July 14th, 2011

Due to a bug in Firefox 4 I recently moved my default browser over to Google Chrome and I have been really impressed. Chrome does everything just a bit better; it is a bit faster, a bit easy to use, a bit cleaner with the interface, all of these add up to a big overall improvement. The main point for me is that Chrome does the basic things well i.e. browsing, searching, bookmarks and downloads. For most people this is all they will use the browser for.

Like most people I do not change browsers that often so it takes an external event (such as a bug or operating system incompatibility) to get me out of my comfort zone, it was the same when I moved from PC to Mac, my PC kept crashing so it gave me real incentive to change.

This made me ask myself the question how can a company incentivise people to change their default behaviours when there will be a time investment on the consumers part?

  • Make the change simple – Chrome allowed me to import all of my bookmarks and preferences very easily
  • Intuitive design – don’t make people invest time in learning new functions use industry standards
  • Configuration – make sure you can tailor the product to get the best of both worlds e.g. Chrome allowed me to add the bookmarks bar just like Firefox did
  • Constant improvement – keeping adding new features and updates so that there is no reason to move back to your old provider
I am sure there are many more but these are the ones from the top of my head.

 

Tags: , ,
Posted in General | No Comments »

Betfair IPO transaction analysis

Monday, June 27th, 2011

For my finance coursework we had to analyse a IPO transaction from the last twelve months. This was one of my favourite assignments to date as Betfair is such an interesting company with a fascinating finance history.

In the early days of online betting exchange market, there were two major players: Betfair and Flutter. Flutter was first to market, raising ~£28m VC funding in two rounds, one before product launch and one just after product launch in May 2000. Once Flutter had raised these two rounds the Betfair founders found that other VCs were unwilling to back a second competitor. Betfair instead raised ~£1.2m in incremental angel financing from friends and family. Despite significantly less capital, the Betfair team built the right product and got quicker user adoption than Flutter. The two companies merged about a year and a half after launch, combining user bases and bringing ~£12.3m of unused Flutter capital into Betfair.

Betfair floated on 22st October 2010 at an issue price of 1,300p, raising £211 million which valued the company at £1.4 billion. On the first day of trading the stock soared 19% but since then the performance has almost halved.

Download the full report: Betfair IPO Transaction

My report covers:

  • The Betfair business
    • The global gaming and betting market
    • Unique business value drivers
    • Management
    • Financing history
    • Key operating characteristics
      • Profitability
  • The IPO issue
    • IPO rationale
      • Exit for investors
      • International expansion
      • Expand product line
    • What the IPO issued at the right time?
    • IPO issue price
  • IPO performance
    • Day 1 share price
    • Day 1 distribution
    • Aftermarket performance
  • Lessons learned
  • Appendix 1: Fair value calculation
  • Appendix 2: Financial calculations

Download the full report here: Betfair IPO Transaction

 

Tags: , ,
Posted in Featured, General | 2 Comments »

Analysing Betfair’s business model

Wednesday, June 22nd, 2011

Introduction to Betfair

Andrew Black, a one-time professional gambler, and Edward Wray an ex-JPMorgan derivatives trader founded Betfair in August 1999. Today Betfair is the world’s largest international online sports betting company and the world’s biggest betting community.

The company has over three million registered users who bet on sports events and play online games including poker. Betfair is the world’s largest betting exchange handling 1,000 bets a second and completing 5m transactions a day, which is more than all European stock exchanges, combined.

Unique value drivers

1. Peer to peer betting exchange

The key difference to traditional gambling is that instead of betting against bookmakers Betfair customers bet against each other.

Betfair was built on a stock exchange model (similar to Nasdaq) where odds functioned as the share prices.[1] This enables bettors to trade in and out of positions on sporting events, much like trading in and out of positions on stocks. Betfair’s early product was hugely innovative in the UK sports betting markets, enabling people to “lay” or bet against sports for the first time. It also created a new type of gambler that took advantage of market trading dynamics, without needing to have an opinion on the outcome of the sporting event itself.

Of the 2,000 people working at Betfair, 600 are IT engineers.  The exchange technology used by Betfair is proprietary and, as well as being protected by copyright, is the subject of patent protection in various jurisdictions.[2]

2. No risk exposure on bets

Betfair differs from traditional gambling companies in that it does not bear the risk of the bet. It connects punters to each other and then pays out winnings rather than offering odds that it stands to win or lose. It makes its money by taking a commission on any winnings of between 3 and 5 per cent. A small percentage of consistent winners pay a “premium rate”.

This also creates an inherent cost advantage relative to the traditional bookmaker model in the UK. Because a bookmaker takes risk on the outcome of the race, this cost is built into the bookmaker odds offered to the public. Therefore the odds that the public sees on Betfair are more reflective of true market, resulting in most cases, in higher odds.[3]

3. Liquidity of transactions

Betfair says that much of the success of the product is dependent on maintaining high levels of liquidity, a significant proportion of which is generated by Betfair’s sophisticated and high-spending “Heartland Customers”.[4]

Early on Betfair recognised that the key to creating a successful betting marketplace was to improve the chances that any reasonable bet placed, would be matched. In essence, Betfair needed to balance supply and demand the same way that a stock exchange does. They solve this by encouraging volume betting, and marketing to high volume players. As mentioned previously Betfair’s betting exchange enabled a new type of bettor – people looking for arbitrage opportunities. These bettors move large volumes of bets to lock-in a very small profit regardless of the outcome on the race, providing liquidity to the exchange.

The network effects from its leadership provide sustainable competitive advantages.  A highly liquid exchange for bettors is a difficult barrier to entry to overcome, unlike most gambling sites (such as online poker or casinos) that has very few barriers to entry. Creating the critical mass to have an effective betting exchange is difficult and costly, and this is reflected by the almost non-existent competition.

Strengths

  • A near monopoly in peer to peer betting exchanges
  • A growing and cash generative business model (which allows for large dividend payments)[5]
  • An outstanding management team with a track record of operating within a measured and prudent regulatory approach and investing for long-term growth
  • Large and growing online sports betting and gaming market
  • Unique, disruptive Exchange Platform technology. £300m invested on the IT platform since it launched 10 years ago, with a recent major revamp to improve speed and prevent downtime during large sporting events
  • Good relationships with many sporting associations and high profile sporting clubs (such as FC Barcelona and Manchester United FC)
  • The betting exchange provides better pricing than bookmakers, which results in greater levels of customer loyalty and higher customer satisfaction rates.

Threats

  • The regulation and legality of online betting and gaming and varying enforcement[6]
  • Changes to the taxation of online betting or the imposition of other levies, duties or charges
  • Hacking attempts and security related concerns for high profile Internet businesses. Reputation can be severely compromised if security is taken lightly
  • Competing against large established bookmakers such as PaddyPower, William Hill and Ladbrokes
  • Negative publicity about gambling, match fixing and corruption in sport
  • The liquidity levels in the online exchange
  • The importance/ reliance on Betfair’s Heartland Customers (high volume bettors)

[1] Betfair Makes Online Odds on AC Milan, Hillary Clinton, Weather,” Bloomberg News, September 6, 2005.
[2] http://betting.betfair.com/lp/info/about-us.html
[3] Customer satisfaction results from April 2010 TNS UK syndicated case study
[4] Betfair IPO prospectus p.14
[5] The Directors are adopting a progressive dividend policy with a pay out ratio of approximately 20 per cent of profit after tax. IPO Prospectus p.3. At present no dividends are paid.
[6] In 2006 US Congress unexpectedly passed anti-online gambling laws, which caused several companies lose most of their share value http://www.theregister.co.uk/2006/10/02/us_outlaws_gambling/

Tags: ,
Posted in General | No Comments »

Blue ocean strategy vs. Porter’s five forces

Wednesday, June 8th, 2011

Are you a five-forces disciple or a blue-ocean enthusiast? I.e. Do you try to dominate existing markets or try to create new ones?

Basic economics models state that if an industry is profitable then new companies will enter the market and increase competition, thus driving down profits to marginal cost (where everyone more or less breaks even).

Researchers Andrew Burke, André van Stel, and Roy Thurik looked at entire industries to find out if an innovation strategy or a competitive strategy is best. In the blue ocean approach creating a new market would attract consumers over the long term, industry profits and the number of vendors would both steadily increase. If however, firm profitability went down as the number of firms went up you’d know companies focused on competition would outperform those setting their sights on blue oceans.

The study looked at profits and numbers of vendors for 41 shop types over a 19-year period (1982–2000) and found that evidence that blue-ocean strategy is sustainable. In more than half the shop types, average firm profits and the number of firms were positively related.

Although it would be foolish to dismiss competitive strategy altogether the study shows that competition eventually erodes the profits from innovation, but it is a slow process requiring 15 years or so, which suggests that it takes the better part of a generation for the blue-ocean approach to yield to competitive strategy.

This study suggests that businesses should consider a blend of the two approaches. For instance, by slowing down profit erosion with an effective competitive strategy for an existing market, they can increase the funds available for blue ocean investments and thus their chances of finding an untapped market with plenty of consumers.

 

Tags: , ,
Posted in Featured, General | 2 Comments »

« Older Entries
Newer Entries »