1. Multinational corporations are companies that operate production or service facilities outside their home country.
2. A holding company is a company that owns other companies' outstanding stocks.
3. Similarities and Differences between multinational companies and holding companies:
They both operate outside the home country. Holding companies buy shares of other companies while multinational corporations trade goods. Holding companies don't generally produce goods or provide services.
4. Google:
i)history:
Google began in January 1996, as a research project by Larry Page and Sergey Brin who were both PhD students at Stanford University in California. In August 1998, Andy Bechtolsheim, co-founder of Sun Microsystems, funded Google $100,000, which at the time was a corporation that did not exist.On June 7, 1999 a round of funding of $25 million was announced, with the major investors being rival venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital. In March 1999, the company moved into offices in Palo Alto, home to many other Silicon Valley technology startups. In 2000, Google began selling advertisements associated with search keywords.A patent describing part of the Google ranking mechanism (PageRank) was granted on 4 September 2001. The patent was officially assigned to Stanford University and lists Lawrence Page as the inventor.
ii)core business:
Google is an advertising company. It started in search, but search, maps, blogs, and everything else it does is secondary to ads, which bring in over $10 billion a year. For most of the Internet, Google is advertising.
iii)have they diversified their business? how?
Yes. It has Google everything. It started out as a search engine. Now, it has google mail, a.k.a. gmail, google maps etc. It has also recently released a google phone.
iv)what advantages does this give them over other businesses?
It has several fields of strength. It is one of the leading search engines, and some of its diversified products are also leading in their fields like gmail, google chrome, which is a very popular and reliable email. It also makes the company known worldwide. It is successful, reliable, and recognized internationally. It also has a large customer base.
v)what stock exchange are they listed on?
The company is listed on the NASDAQ stock exchange under the ticker symbol GOOG and under the London Stock Exchange under the ticker symbol GGEA.
vi)how many do they have on their board of directors?
Since Google was established, the company has grown to more than 10,000 employees worldwide, with a management team that represents some of the most experienced technology professionals in the industry. Eric Schmidt joined Google as chairman and chief executive officer in 2001.
Board of Directors
- Eric Schmidt, Google Inc.
- Sergey Brin, Google Inc.
- Larry Page, Google Inc.
- John Doerr, Kleiner Perkins Caufield & Byers
- Ram Shriram, Sherpalo
- John Hennessy, Stanford University
- Paul Otellini, Intel
- Shirley M. Tilghman, Princeton University
- Ann Mather
Google's Board of Directors consists of 9 members.
5. Berkshire Hathaway
i)what influences do they have over their subsidiaries? Is it a management thing or are they asset strippers?
Berkshire Hathaway is where Warren Buffett, one of the world's richest men, spreads his risk by investing in a variety of industries, from insurance and utilities to apparel and food, and building materials to jewelry and furniture retailers. Its core insurance subsidiaries include National Indemnity, GEICO Corporation, and reinsurance giant General Re. The company also owns Dairy Queen, Fruit of the Loom, Johns Manville, Clayton Homes, Helzberg Diamonds, McLane Company, and MidAmerican Energy Holdings. Known as the Oracle of Omaha, Buffett holds more than a quarter of Berkshire Hathaway, which owns more than 70 firms and has stakes in more than a dozen others.
Insurance, conducted on both a primary and reinsurance basis, constitutes Berkshire Hathaway's most important business. GEICO Corporation and General Reinsurance are the company's principal insurance subsidiaries. The company's other subsidiaries are involved in a variety of businesses. MidAmerican Energy Holdings Company is an international energy holding company that controls a variety of companies involved in the generation, transmission, and distribution of energy. Shaw Industries is the world's largest manufacturer of tufted broadloom carpet. McLane Company is a wholesale distributor of groceries and nonfood items. Benjamin Moore is a manufacturer and retailer of paint. See's Candies is a manufacturer of boxed chocolates and confectionery products. Borsheim's, Helzberg Diamond Shops, and Ben Bridge Jeweler are retailers of fine jewelry. Numerous other subsidiaries give the company stakes in retail, service, and manufacturing businesses. Berkshire Hathaway operates in a distinctly decentralized manner, employing fewer than 20 people at its headquarters in Omaha, Nebraska, and exerts little influence over the day-to-day business activities of its operating subsidiaries.
Asset strippers are a form of corporate raiders that focus on a target company. The goal is to own and control the company over time. Once the company is in the control of an asset stripper, various assets of the company are sold off, often in order to handle the outstanding debt incurred when gaining control of the company. The strategy involves making sure there is a strong chance that once a portion of the company’s assets have been sold, the remaining assets will still be sufficient enough to operate the company at a profit or make the company attractive to potential buyers.
Berkshire Hathaway is an asset stripper.
ii)how have MNC's and Holding companies achieved the growth they have, what are they renowned for in their respective markets?
Since 2001, Google has acquired several companies, mainly focusing on small start-ups.
In 2004, Google acquired a company called Keyhole, Inc., which developed a product called Earth Viewer, renamed in 2005 to Google Earth.
In February 2006, software company Adaptive Path sold Measure Map, a weblog statistics application, to Google. Registration to the service has since been temporarily disabled. The last update regarding the future of Measure Map was made on 6 April 2006 and outlined many of the known issues of the service.
In late 2006, Google bought the online video site YouTube for $1.65 billion in stock.Shortly after, on 31 October 2006, Google announced that it had also acquired JotSpot, a developer of wiki technology for collaborative Web sites.
On 13 April 2007, Google reached an agreement to acquire DoubleClick. Google agreed to buy the company for $3.1 billion.
On 2 July 2007, Google purchased GrandCentral. Google agreed to buy the company for $50 million.
On 9 July 2007, Google announced that it had signed a definitive agreement to acquire enterprise messaging security and compliance company Postini.
On August 5 2009, Google announced the purchase of video software maker On2 Technologies for $106.5 million - its first acquisition of a public company.
On 24 November 2009, Google announced the purchase of Teracent, a California based start up company, for an undisclosed price. This is another acquisition on Google's behalf in a series of advertising related purchases- AdMob, Double Click.
Partnerships
In 2005, Google entered into partnerships with other companies and government agencies to improve production and services. Google announced a partnership with NASA Ames Research Center to build up 1,000,000 square feet (93,000 m2) of offices and work on research projects involving large-scale data management, nanotechnology, distributed computing, and the entrepreneurial space industry. Google also entered into a partnership with Sun Microsystems in October to help share and distribute each other's technologies.The company entered into a partnership with AOL of Time Warner, to enhance each other's video search services.
The same year, the company became a major financial investor of the new .mobi top-level domain for mobile devices, in conjunction with several other companies including Microsoft, Nokia, and Ericsson. In September 2007, Google launched, "Adsense for Mobile", a service for its publishing partners which provides the ability to monetize their mobile websites through the targeted placement of mobile text ads, and acquired the mobile social networking site, Zingku.mobi, to "provide people worldwide with direct access to Google applications, and ultimately the information they want and need, right from their mobile devices."
In 2006, Google and Fox Interactive Media of News Corp. entered into a $900 million agreement to provide search and advertising on the popular social networking site, MySpace.
Google has developed a partnership with GeoEye to launch a satellite providing Google with high-resolution (0.41 m monochrome, 1.65 m color) imagery for Google Earth. The satellite was launched from Vandenberg Air Force Base on 6 September 2008.
In 2008, Google announced that it was hosting an archive of Life magazine's photographs, as part of a joint effort. Some of the images in the archive were never published in the magazine.The photos are watermarked and originally had copyright notices posted on all photos, regardless of public domain status.
Google get 99% of its revenue from advertising.
Berkshire Hathaway bought shares in many companies as mentioned above.
6. Has Google encountered any problems in operating in overseas markets?
Google is finding that its overwhelming dominance in American search doesn't translate to easy success in some of the biggest foreign markets. Like China for example, where the government recently announced a crackdown on pornography on the Web and explicitly denounced Google for facilitating the market. At first, Google maintained that it only provided links to other Web sites and can't be held responsible for their content. But within days, the company posted an apology on its China blog and promised to do a better job policing the Internet. Since then, the government has shut down 91 sites that pollute the Web.
In Russia, Google has run into entirely different setbacks. Back in October, Google tried to buy the powerful search advertising platform Begun for $140 million, but the government's antitrust arm blocked the deal in what was widely seen as a protectionist move. Now, Mozilla, which makes the popular browser Firefox, has announced that Google will not be its default search engine in its Russian models. Instead, the company will go with the domestic search engine Yandex.
7. What are the ramifications for Google of the problems?
Google is so successful and internationally recognized that a few problems with operating overseas as mentioned above don't harm it. Its success outweighs its failures. It costs Google some money to police it and sensor the results, but this doesn't put too big of a dent in the business since it can afford this as it is so successful. Problems in operating overseas motivates Google to improve its search engine and make it better suited for different cultures and overseas markets.
8. A conglomerate is a combination of two or more companies engaged in entirely different businesses together into one overarching company. The term may also refer to a multi-industry company.
9. General Electric, General Motors, IBM, Sony, Panasonic, and Microsoft could be described as conglomerates
10. Advantages of conglomerates:
Diversification results in a reduction of investment risk. A downturn suffered by one subsidiary, for instance, can be counterbalanced by stability, or even expansion, in another division.This advantage is enhanced by the fact that the business cycle affects industries in different ways.A conglomerate can show earnings growth, by acquiring companies whose shares are more discounted than its own.
Disadvantages of conglomerates:
- Synergies are misleading.Corporate synergy occurs when corporations interact congruently. A corporate synergy refers to a financial benefit that a corporation expects to realize when it merges with or acquires another corporation.
- The extra layers of management increases costs.
- Accounting disclosure is less useful information, many numbers are disclosed grouped, rather than separately for each business. The complexity of a conglomerates' accounts make them harder for investors and regulators to analyze, and makes it easier for management to hide things.
- Culture clashes can destroy value.
- Inactivity prevents development of innovation.
- Lack of focus, and inability to manage unrelated businesses equally well are the reasons to criticize conglomerates.
Sunday, 31 January 2010
Thursday, 7 January 2010
Skoda Auto Case Study
a) Identify two internal stakeholder groups suggested in the above case study
Two internal stakeholders suggested in the Skoda case study include the employees of Skoda and the shareholders of Volkswagen which is the parent company.
b) Explain one conflict that exists between the different stakeholders in the case study
Stakeholders sometimes have different opinions regarding matters to do with the business they’re involved with. A conflict that exists at Skoda is the workers demanding a pay in benefits increase. This would affect the stakeholders in different ways. The employees would want to increase their wages, salaries, and other financial benefits which would reduce the profits of the business. The shareholders of Volkswagen want a good dividend, which also comes from the profits. Also, a high declared dividend because of high profits will maintain or increase the share value – potential capital gains. Another stakeholder with a conflict here would be the directors or senior management, on the other hand, maybe looking towards further expanding Skoda by opening more factories, and/or investing in more modern equipment or machinery to make them more efficient. This would also come out of either capital reserves, or profits. Customers, who would mainly be foreign buyers, may not be prepared to pay an increased price caused by the increase in labor costs. The Czech government would also be very concerned because Skoda is its largest source of foreign currency through its exports. Any industrial action would have a disastrous effect on Czech exports with a knock-on effect on the balance of payments. Also, it would raise the unemployment figures which in turn would cause political unrest, social problems through a rise in crime, and the government may have to pay benefits to the unemployed. On the other hand, the government would be concerned that a pay increase to such a large employer would lead to inflation. Any suppliers that are providing materials or supplies to Skoda would also face difficulties if industrial action took place. From the local community point of view, there could be high unemployment which may lead to an increase in crime and political unrest, as mentioned, and the unemployed could face psychological issues like depression. The workers may also become de-skilled if unemployed for a long time.
c) Discuss how the conflict outlined in your answer above could be minimized
Stakeholder mapping could be used by the managers at Skoda in order for them to examine how to sort out the conflict between stakeholders. The following map is one Skoda could possibly use:
(above)
Priority has to be given to the employees and the shareholders’ representatives, as the employees and shareholders have a high level of interest and power. The main conflict is between the owners who want to keep the costs low, and the workers who want a pay increase. This could be overcome by giving the workers a pay increase based on productivity, which would be a good incentive and motivate them more. Although this would increase the costs, the output should also be increasing, leading to more income from sales. The process should begin with negotiations being opened up between the company and the workers’ representatives. This would enable both sides to put forward their respective points of view or perspectives, while also realizing that it is in everyone’s benefit to find a solution quickly. The process should continue with ongoing or regular communication between the company and the employees in order to keep them up to date with developments. Employees are more likely to agree to a solution such an increase based on productivity is they are kept informed on the situation of the business. The company could also motivate the employees by possibly giving them staggered benefits, through a schedule of benefits for the next few years, if there is no industrial action. Skoda being the country’s largest exporter has significant influence on the Czech government. If they could persuade the government to reduce taxation slightly, then they could negotiate a lower wage increase with the workers. However, lower tax throughout the country leads to higher disposable income, which in turn leads to inflation, which the government tries to prevent from being too high. Another solution could be buying from cheaper suppliers, which would reduce materials costs, which could allow labor costs to increase, while having the same cost of production per car. However, the quality may not be the same standard which will not be in Skoda or Volkswagen’s interest. Another disadvantage to changing suppliers is that Skoda has a good relationship with its existing suppliers, a number of whom may be in the local community, which could cause resentment within the community. Also, there’s always a risk of changing from a regular supplier to an unknown one. If the pay increase went ahead, it would lead to inflation, and the government could take action by increasing the interest rates which would persuade people to invest more, and spend less, but this has a negative effect on fixed incomes, and also stops people buying in credit. News of industrial disputes within a company is negative; therefore it may be in Skoda’s interest to carry out a public relations campaign to reassure its customers worldwide of the reliability of their product. The result of the negotiations will depend on the strength of the employee representatives or trade unions and the board of senior management.
To conclude, a slight reduction in taxation, a public relations campaign, and increased motivation of the employees through benefits and pay dependent on productivity, should help minimize stakeholder conflict through negotiations and satisfying both major stakeholders, the employees and shareholders. Employees would be getting a higher pay, the company should be producing more whilst the pay increase being subsidized by the reduction in taxation, implemented by the government who don’t want to see the conflict continue, because the company is a major exporter.
Sunday, 6 December 2009
Stakeholders
Briefly describe each of the internal and external stakeholders of a company including all SIGs (special interest groups).
A stakeholder is a person or organization directly interested in a business and affected by its performance. Stakeholders include shareholders, managers, employees, customers, suppliers, investors, competitors, the local community, and the government.
Pressure groups do not have formal authority in the operations of a business.
Internal Stakeholders of a business are members of the organization; consisting of employees, owners/shareholders, managers and directors of the organization.
External Stakeholders do not form part of the business (including customers, suppliers, and the government), but have a direct interest or involvement in the actions of the organization.
In terms of employees, they generally strive to improve their wages and salaries, and other financial benefits.
A stakeholder is a person or organization directly interested in a business and affected by its performance. Stakeholders include shareholders, managers, employees, customers, suppliers, investors, competitors, the local community, and the government.
Pressure groups do not have formal authority in the operations of a business.
Internal Stakeholders of a business are members of the organization; consisting of employees, owners/shareholders, managers and directors of the organization.
External Stakeholders do not form part of the business (including customers, suppliers, and the government), but have a direct interest or involvement in the actions of the organization.
In terms of employees, they generally strive to improve their wages and salaries, and other financial benefits.
Tuesday, 24 November 2009
Case Study - Franchising
Franchising refers to the purchasing of a licence which enables a business to use the name, logo, and trading method of an existing and generally successful business. The franchisee is required to pay an initial fee and an annual royalty based on the profits to the franchisor. Franchisees have to sign a contract outlining guidelines on operations set by the franchisor.
To what extent is a franchise opportunity a true reflection of what it is like to set up and run a business?
A franchise opportunity provides a business with the opportunity for growth through franchising. While setting up a business could be quite risky, franchising provides franchisees with a better chance to be successful as franchises or the original businesses are generally already successful. Also, there are lower start-up costs for franchisees who opt to franchise as opposed to starting a new business. Generally, entrepreneurs find it hard to get loans from banks for new businesses because new businesses are more at risk for failure, whereas franchising involves lower start-up costs and franchisees don't have to worry too much about the financing. Although it is expensive for the franchisee to buy a franchise, they are more likely to get loans due to the evident success of the business. However, setting up a business would offer more independence to the entrepreneur and they would be able to offer products and services as they choose, whereas with franchising, franchisees have to follow strict guidelines set by franchisors. Also, franchisees have to pay a percentage of their revenue to franchisors and also pay an annual royalty, which is a disadvantage as it decreases their profit, but they are still more likely to make a higher profit than if they were to start a business because that's riskier and have a smaller chance to be successful.
2. Use the Forbes site(http://www.forbes.com/business/2005/04/06/05mlbland.html) (select 'Skip this welcome screen' in the top right or wait a few seconds to see the story) and the Business of Baseball site(http://www.businessofbaseball.com/) to do some research on the financial position of the different baseball franchises in the United States and Canada. Using the data, suggest which teams are the most vulnerable to seeing their franchise sold to a rival bidder such as Portland Oregon (see the Oregon Stadium Campaign(http://www.oregonstadiumcampaign.com/)).
Baseball team values have risen 15% from 2004 to 2005. Baseball teams in the US and Canada are worth more than 176 million dollars. Many of these teams are in debt which makes them venerable to be sold to rival bidders. The most vulnerable teams to be sold to rival bidders include the Arizona Diamondbacks and the Los Angeles Dodgers.
(Note: All of the data is from 2005)
Arizona Diamondbacks -
The team value is $286 million. The baseball team is owned by a partnership consisting of 4 members. The baseball team's debt is very high, although the team value is not as high as some of the other well-known teams like The Dodgers. To pay off the debt, the team would have to have a considerable increase in profit. The player expenses are also fairly high which is affecting the team's situation. The team's vulnerability of being sold off to a rival bidder lie in its debt and the fact that the team is struggling to pay this debt off.
Los Angeles Dodgers -
Frank McCourt purchased the Los Angeles Dodgers for $421 million. The team is very successful and well-known which causes its significant difference in value to other teams like the Diamondbacks. Since the team's value is fairly high and it cost a considerable amount for the team, the debt is fairly high since a lot of money is necessary for the purchase of the team. Since the team is so far in debt and the team is favorable among bidders due to its success and popularity, it makes the team vulnerable of being sold off to a rival bidder.
3. Imagine a situation where the English soccer Premier League became the franchisor as is the case with MLB Inc.
Clubs in the Premier League might lose fans due to the change in location. In theory, the League would benefit from external economies of scale as franchising should enable growth. However, the direction of this growth may not be in the interest of fans, and the success of the League is dependent on the fan base which would make the League less successful in the long run. However, if the League could franchise while mainting fans' loyalty, it could cause a relative increase in success and profits. Outside clubs like the championships could also suffer from a loss in fan base and public interest.
To what extent is a franchise opportunity a true reflection of what it is like to set up and run a business?
A franchise opportunity provides a business with the opportunity for growth through franchising. While setting up a business could be quite risky, franchising provides franchisees with a better chance to be successful as franchises or the original businesses are generally already successful. Also, there are lower start-up costs for franchisees who opt to franchise as opposed to starting a new business. Generally, entrepreneurs find it hard to get loans from banks for new businesses because new businesses are more at risk for failure, whereas franchising involves lower start-up costs and franchisees don't have to worry too much about the financing. Although it is expensive for the franchisee to buy a franchise, they are more likely to get loans due to the evident success of the business. However, setting up a business would offer more independence to the entrepreneur and they would be able to offer products and services as they choose, whereas with franchising, franchisees have to follow strict guidelines set by franchisors. Also, franchisees have to pay a percentage of their revenue to franchisors and also pay an annual royalty, which is a disadvantage as it decreases their profit, but they are still more likely to make a higher profit than if they were to start a business because that's riskier and have a smaller chance to be successful.
2. Use the Forbes site(http://www.forbes.com/business/2005/04/06/05mlbland.html) (select 'Skip this welcome screen' in the top right or wait a few seconds to see the story) and the Business of Baseball site(http://www.businessofbaseball.com/) to do some research on the financial position of the different baseball franchises in the United States and Canada. Using the data, suggest which teams are the most vulnerable to seeing their franchise sold to a rival bidder such as Portland Oregon (see the Oregon Stadium Campaign(http://www.oregonstadiumcampaign.com/)).
Baseball team values have risen 15% from 2004 to 2005. Baseball teams in the US and Canada are worth more than 176 million dollars. Many of these teams are in debt which makes them venerable to be sold to rival bidders. The most vulnerable teams to be sold to rival bidders include the Arizona Diamondbacks and the Los Angeles Dodgers.
(Note: All of the data is from 2005)
Arizona Diamondbacks -
| 1-Yr Value Chg. | 3% |
| Ann. Value Chg.2 | 8% |
| Debt/Value3 | 103% |
| Revenue | $136 mil |
| Operating Income4 | $-18.7 mil |
| Player Expenses5 | $103 mil |
| Gate Receipts6 | $45 mil |
Los Angeles Dodgers -
| 1-Yr Value Chg. | 6% |
| Ann. Value Chg.2 | NA |
| Debt/Value3 | 99% |
| Revenue | $166 mil |
| Operating Income4 | $-7.4 mil |
| Player Expenses5 | $110 mil |
| Gate Receipts6 | $59 mil |
Frank McCourt purchased the Los Angeles Dodgers for $421 million. The team is very successful and well-known which causes its significant difference in value to other teams like the Diamondbacks. Since the team's value is fairly high and it cost a considerable amount for the team, the debt is fairly high since a lot of money is necessary for the purchase of the team. Since the team is so far in debt and the team is favorable among bidders due to its success and popularity, it makes the team vulnerable of being sold off to a rival bidder.
3. Imagine a situation where the English soccer Premier League became the franchisor as is the case with MLB Inc.
- How might the Premier League seek to use this position to expand the growth of the 'brand'?
- What implications would this scenario have for clubs in the League and outside it (i.e. those in the Championship)?
Clubs in the Premier League might lose fans due to the change in location. In theory, the League would benefit from external economies of scale as franchising should enable growth. However, the direction of this growth may not be in the interest of fans, and the success of the League is dependent on the fan base which would make the League less successful in the long run. However, if the League could franchise while mainting fans' loyalty, it could cause a relative increase in success and profits. Outside clubs like the championships could also suffer from a loss in fan base and public interest.
Sunday, 15 November 2009
Case Study - Franchises
- To what extent is a franchise opportunity a true reflection of what it is like to set up and run a business?
- Use the Forbes site(http://www.forbes.com/business/2005/04/06/05mlbland.html) (select 'Skip this welcome screen' in the top right or wait a few seconds to see the story) and the Business of Baseball site(http://www.businessofbaseball.com/) to do some research on the financial position of the different baseball franchises in the United States and Canada. Using the data, suggest which teams are the most vulnerable to seeing their franchise sold to a rival bidder such as Portland Oregon (see the Oregon Stadium Campaign(http://www.oregonstadiumcampaign.com/)).
- Imagine a situation where the English soccer Premier League became the franchisor as is the case with MLB Inc.
- How might the Premier League seek to use this position to expand the growth of the 'brand'?
- What implications would this scenario have for clubs in the League and outside it (i.e. those in the Championship)?
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