This is a well written article for all those who have doubts on the current MBA Education. Read it here.
I am preparing for an exam later later today when I read through this paragraph – it covers the gist of what business should aim for, which seems pretty simple.
Quality Aspects that contribute to the Business’ Success:
Building Quality into the Business:
Quality of a Product / Service is decided by the Customer and is built into the Product / Service through Design. Customers have certain needs or requirements from a Product / Service and the Design must build these needs and requirements specifications into the Product / Service specifications – including the manner in which in the Product / Service would be delivered to the customer. The manner in which the Product / Service is delivered is decided by a set of processes which are in sequence.
This set of processes, their sequence and interdependence gets defined while the design activity is performed and the design of process has a direct impact on the outcome, that is, the extent to which the outcome meets the specifications developed during the design.
Process design also contributes to Quality. One must understand that Quality is due only in design and cannot be add while manufacturing the Product / while delivering the Service.
Thought I’ll share this because lot of us (and as a result, businesses) have trouble in zeroing in on what needs to be addressed to improve Quality. We change Plans, Processes, People, Products / Services or the Market in pursuit of Quality but what really needs to be looked into is the Design. Design, interestingly is directly influenced by the Philosophy of the Business. Therefore, if the Philosophy is wrong, everything else is pretty much wrong.
Interestingly, a Business with wrong Philosophy / Design may make money. But there is no guarantee for the same and there always is a possibility of failure lurking.
Linda is the proprietor of a bar in Cork. In order to increase sales, she decides to allow her loyal customers – most of whom are unemployed alcoholics – to drink now but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans). Word gets around and as a result increasing numbers of customers flood into Linda’s bar. Taking advantage of her customers’ freedom from immediate payment constraints, Linda increases her prices for wine and beer, the most-consumed beverages. Her sales volume increases massively. A young and dynamic customer service consultant at the local bank recognizes these customer debts as valuable future assets and increases Linda’s borrowing limit. He sees no reason for undue concern since he has the debts of the alcoholics as collateral. At the bank’s corporate headquarters, expert bankers transform these customer assets into DRINKBONDS, ALKBONDS and PUKEBONDS. These securities are then traded on markets worldwide.
No one really understands what these abbreviations mean and how the securities are guaranteed. Nevertheless, as their prices continuously climb, the securities become top-selling items.
One day, although the prices are still climbing, a risk manager (subsequently of course fired due to his negativity) of the bank decides that the time has come to demand payment of the debts incurred by the drinkers at Linda’s bar. However they cannot pay back the debts. Linda can not fulfil her loan obligations and claims bankruptcy. DRINKBOND and ALKBOND drop in price by 95 %. PUKEBOND performs better, stabilizing in price after dropping by 80 %. The suppliers of Linda’s bar, having granted her generous payment due dates and having invested in the securities are faced with a new situation. Her wine supplier claims bankruptcy, her beer supplier is taken over by a competitor.
The bank is saved by the Government following dramatic round-the-clock consultations by leaders from the governing political parties (and vested interests). The funds required for this purpose are obtained by a tax levied on the non-drinkers.
I have been follwing what’s happening to Indians with H1B Visas in the US. To sum what’s happening in one word – it is just shortsightedness.
It is ironical that this step is being taken by the US that has for so long advocated free trade & freedom. it is getting caught in the web of geographical borders which do not mean much. This article pretty much lays everything out in perspective – in a much better manner than I could.
One of the best forwards I have ever received – fantastic.
Once there was a little island country. The land of this country was the tiny island itself. The total money in circulation was $ 2 as there were only two pieces of 1 dollar coins circulating around.
1) There were 3 citizens living on this island country. A owned the land. B and C each owned $ 1.
2) B decided to purchase the land from A for $ 1. So, A and C now each own $ 1 while B owned a piece of land that is worth $ 1.
The net asset of the country = $ 3.
3) C thought that since there is only one piece of land in the country and land is non producible asset, its value must definitely go up. So, he borrowed $ 1 from A and together with his own $ 1, he bought the land from B for $ 2.
A has a loan to C of $ 1, so his net asset is $ 1.
B sold his land and got $ 2, so his net asset is $ 2.
C owned the piece of land worth $ 2 but with his $ 1 debt to A, his net asset is $ 1.
The net asset of the country = $ 4.
4) A saw that the land he once owned has risen in value. He regretted selling it. Luckily, he has a $ 1 loan to C. He then borrowed $ 2 from B and and acquired the land back from C for $ 3. The payment is by $ 2 cash (which he borrowed) and cancellation of the $ 1 loan to C. As a result, A now owned a piece of land that is worth $ 3. But since he owed B $ 2, his net asset is $ 1.
B loaned $ 2 to A. So his net asset is $ 2.
C now has the 2 coins. His net asset is also $ 2.
The net asset of the country = $ 5. A bubble is building up.
(5) B saw that the value of land kept rising. He also wanted to own the land. So he bought the land from A for $ 4. The payment is by borrowing $ 2 from C and cancellation of his $ 2 loan to A.
As a result, A has got his debt cleared and he got the 2 coins. His net asset is $ 2.
B owned a piece of land that is worth $ 4 but since he has a debt of $ 2 with C, his net Asset is $ 2.
C loaned $ 2 to B, so his net asset is $ 2.
The net asset of the country = $ 6. Even though, the country has only one piece of land & $ 2 in circulation.
(6) Everybody has made money and everybody felt happy and prosperous.
(7) One day an evil wind blowed. An evil thought came to C’s mind. ‘Hey,what if the land price stop going up, how could B repay my loan. There is only $ 2 in circulation, I think after all the land that B owns is worth at most $ 1 only.’ A also thought the same.
(8) Nobody wanted to buy land anymore. In the end, A owns the $ 2 coins, his net asset is $ 2. B owed C $ 2 and the land he owned which he thought worth $ 4 is now $ 1. His net asset become $ -1.
C has a loan of $ 2 to B. But it is a bad debt. Although his net asset is still $ 2, his Heart is palpitating.
The net asset of the country = $ 3 again.
Who has stolen the $ 3 from the country ? Of course, before the bubble burst B thought his land worth $ 4. Actually, right before the collapse, the net asset of the country was $ 6 in paper.
(9) B had no choice but to declare bankruptcy. C as to relinquish his $ 2 bad debt to B but in return he acquired the land which is worth $ 1 now. A owns the 2 coins, his net asset is $ 2. B is bankrupt, his net asset is $ 0. B lost everything, C got no choice but end up with a land worth only 1 dollar (C lost one dollar), A gained $ 1 & the net asset of the country = 3 dollar.
There is however a redistribution of wealth. A is the winner, B is the loser, C is lucky that he is spared.
Morals:
(1) When a bubble is building up, the debt of individual in a country to one another is also building up.
(2) This story of the island is a close system whereby there is no other country and hence no foreign debt. The worth of the asset can only be calculated using the island’s own currency. Hence, there is no net loss.
(3) An overdamped system is assumed when the bubble burst, meaning the land’s value did not go down to below 1 dollar.
(4) When the bubble burst, the fellow with cash is the winner. The fellows having the land or extending loan to others are the loser. The asset could shrink or in worst case, they go bankrupt.
(5) If there is another citizen D either holding a dollar or another piece of land but refrain to take part in the game. At the end of the day, he will neither win nor lose. But he will see the value of his money or land go up and down like a see saw.
(6) When the bubble was in the growing phase, everybody made money.
(7) If you are smart and know that you are living in a growing bubble, it is worthwhile to borrow money (like A) and take part in the game. But you must know when you should change everything back to cash.
(8) Instead of land, the above applies to stocks as well.
(9) The actual worth of land or stocks depend largely on psychology.
(10) If the world market values petrol at $ 140 a barrel today and later values it at $ 100 some few months / years later (when electric cars alternate fuel automobiles come into play?) – there is surely some bubble that is going to burst!
