Chapter 5: Quantitative Analysis Outline

Quantitative analysis (QA) is one of the most important tools in a business curriculum and is used principally in finance, accounting, marketing and operations. QA helps individuals to remain objective when solving complicated problems. Important topics in QA include:

o   Decision tree

§  Simplifies decision making based on conditional probability

§  Start a business, etc. look at data or other people’s research to get probability

o   Cash flow analysis

§  How much does an investment cost and how much cash will it generate each year?

§  Too much cash? What to do with it?

·         Invest/Reinvest in company

·         Acquire other businesses (strategically)

·         Pay dividends

o   NPV – Net Present Value

§  A dollar tomorrow is almost always worth less than a dollar today.

·         Depends on the interest rate, inflation rate, opportunity costs

§  To compare different investments, convert them all to today’s dollar.

·         Called the discount rate, and it is different for different risks – very subjective.

o   IRR – Internal Rate of Return

§  Based on NPV

§  IRR of an investment is the interest rate that makes the sum of the net present value of an income stream equal zero in today’s dollars.

·         7% for 7 years will double your money.

o   Normal distribution – Bell Curve

§  Determined by the mean and standard deviation

§  Variance is the distance between sigma and negative sigma, or within one standard deviation.

o   Regression analysis and forecasting

§  Linear regression

·         Uses historical data to extrapolate the relationship between variables

·         Does not hold in the extreme

·         Excel data table – completes a table based on a relationship and givens

o   Business world does not tend us go as far as academics in finding the right curve for the data, usually just a straight line

·         R Square – if too low it doesn’t fit the data too well (70% very high, 30% not bad)

·         T Test – how strong X affects Y (-2<T<2 = data is significant)

·         Both T and R have to be high for the equation to be a good forecasting tool.

Chapter 4: Group Project - Organizational Behavior

Problem summary:

Your company is growing to 150 employees.  Being an international company, you have excellent employees from many culture background.  However, since about 1 year ago, they naturally break into ethnic groups A, B and C.  The groups started to develop conflicts and hurt company communications and collaboration.  e.g. group A believes group B are too aggressive, group B thinks group C are too selfish, group C talks about how lazy group A is.

As the leadership, your group need to solve the problem.  Apply the theory and the practices in the textbook to design a brief solution (200-500 words).  Insert the solution to your learning journal.

Solution outline:
Problem definition: Want Got Gaps
- Ethnic conflicts among three groups (A, B, C)
Level of Problem: individual, group, whole organization
- It shows the problems are on a group level but might be organizational
Action planning:
- As leaders it is important to take the information gained from reflection on the parameters above and construct a detailed action plan.
APCFB Model (Assumptions, Perceptions, Conclusions, Feelings, Behaviors)
- The multi-layered perspective of the APCFB model allows us to dig deeper to diagnose the source of the problem.
Engage goal congruence
- Rally employees to a common goal to realign their efforts.
Motivation: expectancy theory, job design
- Motivate a change.
Leadership VCM Model (Vision, Commitment, Management skills)
Performance appraisal: coaching and development, reprimands, leveraging power structures (referent, legitimate, expert), MBO/MBWA

-Try solving this problem by redistributing group members into inter-ethnic teams, or cross-functional teams that include members from each group.
- Redefine affiliations along non-ethnic boundaries.
- Highlight organizational core values or principles that emphasize embracing diversity and set a standard for how employees and group communication.
-MBO: everyone here for a common goal, emphasize that to minimize ethnic conflict.
- Employee perception survey to guide remedial action.
- Use performance appraisal process to coach employees into better collaborative habits.
-Assertiveness is not necessarily a negative thing. Apply job design to best match the needs of the business with motivating work in a way the diminishes ethnic conflict (interethnic teams, systems-based performance evaluation - rather than individual or team)
- Use employee evaluation to address other groups’ perceptions of each other to optimize employee deployment and job design.
- Tie employee performance to compensations to give more incentives compensation can be monetary and non-monetary.
- Understand cultural context for each group.
- Apply active listening techniques to understand root causes of inter-group misunderstandings.
- Can bring them all together to enhance communication once the manager understands what’s going on to cause conflict between the groups.
-Tie discussion back to time when the group were integrated and working together well.

Chapter 4: Organizational Behavior Outline

OB attempts teach methods to deal with human challenges in the workplace. OB trains managers and leaders to avoid tactical errors by taking into consideration people, groups and organizational context involved.

• Problem-solving model
• OB offers a three-set technique to solve organizational problems
• Problem Definition
• Know the source of the difficulty
• Don't be mislead by trying to solve the symptoms rather than the cause
• Want Got Gaps
• There is a problem when a deviation exists between what a manager thinks ought to be occurring and what is actually occurring.
• View the situation from the perspectives of all the participants and outline their want got gaps, or the difference between what they have and what they want.
• Level of Problems
• When you know what gaps exist, it is important to understand how they affect the organization
• Problems can affect a company in three ways:
• Within or between certain people (individual/personal)
• Within or between groups (intergroup)
• Within the whole organization (organization)
• Solve Problems and Causal Chains
• Find the most important problems and solve those first - source problems.
• Eliminate the source, eliminate the symptoms.
• A graphical method to get at source problems is to draw a causal chain
• Chart: contributing problems -> Source Problem -> Business Problem
• Analysis
• After defining the gaps and using causal chains, link the problems to their causes.
• Action Planning
• Be decisive and proactive.
• Action plan has six important steps:
1. Set specific goals
2. Define activities, resources needed, responsibilities
3. Set a timetable for action
4. Forecast outcomes, develop contingencies
5. Formulate a detailed plan of action in time sequence
6. Implement, supervise execution and evaluate based on the goals in step one.
• A menu of action levers exist: rewards, controls, and planning systems.
• Psychology lesson
• The Assumptions Perceptions Conclusions Feelings Behaviors (APCFB) Model
• Explains the cognitive process by linking external events to employee behavior.
• Assumptions affect the perceptions that people have
• Those perceptions affect the conclusions
• The conclusions prompt feelings.
• The feelings drive behaviors that managers observe.
• By understanding the process, there is an opportunity to influence positive behaviors in oneself and one's coworkers.
• We all see through filters that prevent us from perceiving events accurately and prevent us from acting out our true desires.
• Defense mechanisms act as additional filters to prevent psychological damage
• They also prevent an accurate reading of other people.
• We can influence assumptions, which make up our value system. In order of ease of accessibility they include:
• Expectations
• Can be changed through clear management intent and action
• Beliefs
• Can be influenced through management intent and action
• Values
• Deeply held assumptions that may be alterable given significant time.
• Goal congruence between the individual and the organization makes the group more productive.
• Motivation
• Expectancy theory of motivation
• Outlines the factors that produce motivation with individuals.
• Motivation = Expectation of Work will lead to Performance * Expectation Performance will lead to Reward * Value of Reward
• Behavior is motivated by the urge to satisfy needs.
• Motivation will be enhanced by maximizing motivators (or satisfiers) on the job and  minimizing dissatisfiers or maintenance factors (maintenance factors don't necessarily bring happiness, but are expected).
• Maslow (actually proven wrong via research data)
• Hierarchy of needs
• Physical needs
• Need for safety
• Need to belong
• Need for status
• Self-actualization
• David McClelland
• Three basic needs
• Need for achievement
• Need for power
• Need for affiliation
• Job Design is another way to influence employee motivation.
• Core dimensions of a job lead to critical psychological states within employees that lead to a variety of outcomes.
• Can be used to enhance quality of work life and empower employees.
• Leadership
• Leaders shape goals, develop new ideas, and reach people at an emotional level.
• Leaders take on challenges while managers solve problems.
• VCM Model
• Vision 
• Commitment
• Management skills
• Leadership patterns
• Spectrum of boss-centered to subordinate-centered
• Choice of leadership style is regulated by three forces:
• Within the manager
• Within the subordinates
• Forces of the situation
• Self-awareness is critical to avoiding inappropriate management styles.
• Creativity
• Should have the tools to capture creative ideas at any moment
• Mind mapping is a useful technique
• Type A and Type B Behaviors
• Type A
• Competitive need for achievement
• Sense of time urgency
• Aggressiveness
• Hostility to others and the world
• Evaluate their self-worth on external achievements
• In competition with others in noncompetitive situations
• Type B
• Enjoys life and feels more relaxed
• On-the-job office procedure
• Active Listening
• Helps you gain a clear perception of situations so you can deal effectively with them.
• Defined by:
• Respond to information and don't lead
• Respond to personal information and don't give advice
• Identify interviewee's feelings as well as content
• Performance Appraisals
• Effective appraisals have three types of goals:
• Organizational
• Aim to assure proper conduct and performance, placement, promotion and pay
• Feedback and evaluation
• Provides employer and employee with a formal process to document performance
• Coaching and development
• Should be the primary goals of the appraisal
• Define specific targets and timetables
• Appraisals must be timely and both participants must be prepared
• Appraisals provide documentation to legally fire an employee
• Reprimands
• Check out the facts first
• Give warning that you need to talk about the problem
• Pause and express your displeasure
• Display a caring attitude
• A good manager can balance reprimand with praise.
• Managing your boss
• Understand your bosses and their context including
• Their stated goals and objectives
• The pressures on them
• Their strengths, weaknesses and blind spots
• Their preferred working styles
• As your boss how s/he prefers to communicate
• Be introspective and understand yourself and your needs
• Your own strengths and weaknesses
• Your personal style
• Your predisposition toward dependence or on resistance to authority figures
• Incorporate the first two steps and develop and maintain a relationship that:
• Fits both your needs and styles
• Is characterized by mutual expectations
• Keeps your boss informed -- bosses hate surprises
• Is based on dependability and honesty
• Selectively uses your boss's time and resources
• Power
• Five types of power
• Coercive
• Based on fear
• Reward
• Expectation of receiving praise, recognition or income (the opposite of coercive power)
• Referent
• Derived from being a person whom other people admire regardless of formal job status
• Legitimate
• Formal status held in the organizational hierarchy
• Expert
• Comes from skills, knowledge and experience
• Expert power allow people to influence others.
• Managers must cross-train employees to keep expert power from creating little generals
• Management by Objective (MBO)
• Peter Drucker
• Managers delegate tasks by negotiating a contract of goals without dictating a detailed roadmap for implementation. Focus is on the result.
• Management by walking around (MBWA(
• Expounded at HP
• Bosses encouraged to be out of their offices and walking around to:
• Build relationships
• Motivate the team
• Keep direct touch with the activities of the company
• The organizational model and structures
• Organizations are networks of related parts -- organizational architecture
• Six elements define organizations:
• Strategy
• An implicit or explicit plan for success in the marketplace
• Policies and procedures
• Formal rules are written down, procedures are observable ways the company conducts business.
• Organizational structures
• Formal relationships in organizational charts
• Line employees
• People who are directly involved in producing or marketin the firm's products or services
• Staff employees
• Others who advise, serve and support the line
• Line and staff employees can be organized according to:
• Functional
• Divides work by tasks
• Product
• Groups all functions necessary to deliver a specific product
• Customer
• Grouped to satisfy customer needs, common in service industry
• Geographic location
• Regional offices manage business, particularly true of international business.
• Divisional
• Independent businesses operating under the umbrella of a parent company
• Matrix
• Departs from unity of command and gives each employee two or more bosses. 
• Requires flexible, professional staff members
• Amorphous
•  No formal structure at all
• Highly motivated managers create and dissolve reporting relationships as the task at hand requires.
• Hybrid
• Composed of a mix of operational structures
• Span of control - the number of people who report to a manager
• Using span of control is a common way to have:
• Reduction in force (RIF) = demassing = restructuring
• Systems
• Systems fall into one of six categories
• Money allocation, control and monitoring (accounting, investment, and budgeting systems)
• Object allocation, control and monitoring (inventory and production systems
• People allocation, control and monitoring (human resource planning, employee data and appraisals)
• Future anticipation (strategic planning, marketing-sales planning, business development functions)
• People reward and incentives (compensation schemes, bonus plans, profit-sharing plans)
• Integrative (mixes of the first five. In well-managed companies integrated systems forecast sales, which dictates production schedules required to meet the need)
• Climate
• The emotional state of an organization's members
• Culture
• Mix of behaviors, thoughts, beliefs, symbols and artifacts that are conveyed to people throughout an organization over time.
• Systems theory
• Likens organizations to living organisms with subsystems
• Management subsystem
• Sets goals, plans, controls
• Adaptive subsystem
• Acts as a firm's eyes to monitor the environment
• Boundary-spanning subsystem
• Controls the intake of the organization (hiring, buying, raising money)
• Production subsystem
• Converts inputs to goods and services
• Boundary spanning out subsystem
• Marketing, personnel, public relations
• Maintenance subsystem
• Employee incentives and newsletters
• Provides a means to analyze an organization to gauge its health or to make a change.
• Organizational evolution and revolution
• Companies that can change are called learning organizations
• Organizations exhibit five predictable stages of growth called evolutions and five periods of crisis called revolutions
• Growth pattern consists of tightening and loosening of management reins in response to changes within the organization and environment.
1. Creativity / Leadership crisis
2. Direction / Autonomy crisis
3. Delegation / Control crisis
4. Coordination / Red tape crisis
5. Collaboration / ? Crisis
• Resistance to change
• Change management strategies
• Company lacks information -> Education and communication tactics
• You need information and you have little leverage -> Participation and involvement tactics
• Adjustment problems -> Support and facilitation tactics
• Your desired changes will cause losses and opponents have power to block you -> Negotiation and agreement tactics
• You have no alternatives and no money for facilitation -> Manipulation (give no choices)
• Speed is needed and you have the power -> Explicit orders and coercion tactics

Chapter 3: Accounting Outline

Accounting is the language of business used by corporations to communicate their results to the world in a format that allows for comparisons to be made across very different types of business operations. Accounting also provides a means to control, evaluate and plan operations within the company. All corporate activities must eventually be measured in dollars.

Accounting answers three basic questions:

• What does the company own?
• How much does the company owe?
• How well did the company's operations perform?
• How does the company get the cash to fund itself?

Accounting overview:

• Common rules of accouting
• General Accepted Accounting Principles (GAAP Rules)
• Financial Accounting Standards Board (FASB) writes additional rules for new areas of business activity, about six per year.
• Fundamental Concepts of Accounting
• The Entity
• Reports communicate the activities of a specific entity so the parameters covered by a report must be clear.
• Cash and Accrual Accounting
• Using Cash Basis accounting, transactions are recorded only when cash changes hands.
• Tells you when and how much cash changed hands, but does not try to match the costs of conducting business with their related sales.
• Accrual accounting recognizes the financial effect of an activity when the activity takes place without regard to the movement of cash. Most businesses of any size use accrual accounting.
• As activity and cash movement do not occur at the same time, Allocation and Matching are important in accrual accounting
• Allocations to accounting periods
• Because profit and loss statements reflect activities over a specific time, the period of recognition is very important
• Matching
• Sales made in one period are matched with their related selling costs or COGS in the same accounting period.
• By matching sales and their related costs you can determine the actual profit
• Without policies for allocation and matching, financial reports could be easily manipulated by choosing when to record sales or expenses in order to cover up or delay bad results.
• Objectivity
• Accounting records only contain transactions that have been completed and that have a quantifiable monetary value.
• There must be reasonable and verifiable evidence to support the transaction, or else it does not get recorded.
• Conservatism
• When companies incur losses that a probably and that can be reasonably estimated, they are recorded even it they have not yet been realized.
• Gains are not recorded until they are actually realized.
• Dictates that transactions be recorded at their historical costs
• Going Concern
• Accountants presume that companies will continue to operate in the foreseeable future, so values assigned in the financial statements are not "fire sale" prices, but historical costs.
• Consistency
• An entity must use the same accounting rules year after year.
• This allows comparisons with the past to show performance trends.
• Inventory must be valued using the same system year after year.
• If a change of accounting method is necessary for a "substantial reason", the financial statements must state the reason in the footnotes and must also state how the change affected the profits and asset values that year.
• Materiality
• Financial statements are not exact to the penny, but are materially correct to provide the reader a fairly stated view of the entity.
• Big four accounting firms are:
• PricewaterhouseCoopers LLP
• KPMG LLP
• Deloitte & Touche LLP
• Ernst & Young LLP
• Financial Statements
• Balance Sheet
• Presents the assets owned by the company, the liabilities owed to others and the accumulated investment of its owners.
• Assets: resources the company possesses for the future benefit of the business
• Liabilities: dollar-specific obligations to repay borrowing, debts, and other obligations to provide goods or services to others.
• Owners equity: accumulated dollar measure of the owners' investment in the company.
• Can be shown as retained earnings or paid out as dividends
• Also known as net worth
• Show these balances as of a specific date.
• Snap shot of the company's holdings at a given time.
• Foundation for all accounting records.
• Fundamental accounting equation:
• Assets = Liabilities + Owners' Equity
• Current versus non-current
• Assets and liabilities are divided into current (easily transferred into cash within one year) and non-current (long-term)
• Working capital
• Gives an indication of a business's solvency
• Net Working Capital = Current Assets - Current Liabilities
• Double entry system
• All journal entries in the general ledger must have both a debit and a credit
• T accounts
• Income Statement
• Shows the flow of activity and transactions over a specific period
• Revenue from sales and expenses relating to those revenues
• When matched through accrual accounting, the difference is income
• Income = Revenue - Expenses
• Terminology
• Gross margin
• Gross margin = Sales - "The direct cost of good or services sold"
• Cost of Goods Sold (COGS) = Beginning inventory + new purchases - Ending inventory
• Operating Profit
• Earnings before interest and taxes (EBIT)
• Allocated cost of fixed assets (depreciation or amortization) must be charged to earnings.
• Divide the cost of equipment, tools, buildings and other fixed assets by their useful lives to estimate the cost of using up assets needed in the revenue-generating process
• Earnings before interest, taxes, depreciation and amortization (EBITDA) is one measure profitability.
• Net Income
• Items not directly linked to operations are deducted to calculate income
• Interest expense
• Deducted because companies may have used different proportions of bank borrowing and investors' money
• Investors' dividends are not deducted.
• Owners pay dividends out of the net income at the bottom of the statement.
• Segregating interest expenses allows operating income to reflect only the costs of operating the company, not those related to financing it.
• Tax expenses
• Segregated to leave operating income free of nonoperating expenses.
• Shows how the change in net assets occurred.
• Statement of Cash Flows
• Shows the net change in cash for the year.
• Mandated by FASB rule #95 for all financial statements.
• Knowing the sources and uses of cash is paramount for a business.
• Cash = Current liabilities + Noncurrent Liabilities + Owners' equity - Accounts receivable - Inventory - Noncurrent assets
• Answers the important questions:
• What is the relationship between cash flow and earnings?
• How are dividends financed?
• How are debts paid off?
• How is the cash generated by operations used?
• Are managements' stated financial policies reflected in the cash flow?
• Allows managers to plan and manage cash sources and needs from Operations, Investing and Financing activities.
• Operating activities
• Calculates the cash generated from the day-to-day operating activities of a business
• Converts accrual basis net income to a cash basis
• Must be adjusted in two ways to do this:
• Adjust net income for noncash expenses
• Operating items that did not use cash, but were deducted in the income statement as an expense must be added back.
• Add back depreciation (for example)
• Adjust net income for changes in working capital
• Adjust net income for changes in current assets and current liabilities that operational activities affected during the year.
• Increases in current assets use cash, while decreases in current assets produce cash
• Increases in current liabilities increase cash while decreases in current liabilities use it up
• To calculate the net changes for the year, subtract the beginning of the period's balances of current assets and liabilities from the ending balances items.
• The increases in current assets are uses of cash
• The increases in current liabilities are sources of cash
• Investing activities
• Deals with cash use and generation by long-term investments by the company
• Reflects the cash effects of transactions in long-term (noncurrent) assets on the balance sheet
• Financing activities
• Two ways for a company to finance itself: borrow money or raise money from investors.
• Borrowing would be reflected by changes in the long-term liabilities section of the balance sheet.
• When the company repays the debt, it will be reflected as a use of cash in the financing activities section.
• Participation by investors would be reflected in changes in the owners' equity accounts of the balance sheet.
• There are changes to the retained earnings when net income is added during the year and if dividends are paid out to investors.
• These three basic financial statements are inextricably tied together:
• Statement of cash flows demonstrates that the changes during the year in the cash balance had to result from changes in assets, liabilities and owners' equity.
• Assets and liabilities changes came from the balance sheet.
• Owners' equity changes were the result of changes in net income from the income statement.
• Using ratios to read financial statements
• Real information can be found in analyzing the relationship of one number to another or of one company to another in the same industry using ratios.
• Four main categories of ratios
• Liquidity measures
• Current ratio = current assets / current liabilities
• Can the company pay its bills comfortably? 
• A ratio greater than 1 shows liquidity.
• Capitalization measures
• Financial leverage = (total liabilities + owners' equity) / OE
• When a company assumes a larger portion of debt than the amount invested by its owners, it is said to be leveraged.
• Ratios larger than 2 show an extensive use of debt.
• Long-term debt to capital = long-term debt / (liabilities + OE)
• The level of debt is an important measure of a company's riskiness.
• Ratio of greater than 50% shows a high level of debt.
• Activity measures
• Assets turnover per period = sales / total assets
• Indicates how actively the firm uses all of its assets.
• Generating more sales with a given set of assets, a firm is said to have "managed its assets effectively"
• Ratios are industry-specific, but 36 is a high turnover of assets in most industries.
• Inventory turns per period = cost of goods sold / average inventory held during the period
• Average inventory = (beginning inventory + ending inventory) / 2
• Shows how actively a company's inventory is being deployed.
• Days sales in inventory = ending inventory / (cost of goods sold / 365)
• Shows how actively a company's inventory is being deployed.
• Profitability measures
• Return on Sales (ROS) = Net income / Sales
• Return ratios are easy to calculate and investment analysts use them frequently.
• Return on Equity (ROE) = Net income / Owners' equity
• Widely accepted yardstick to measure success.
• The mix of debt and equity can dramatically affect the ratios, as can the financial leverage used.
• The DuPont Chart
• Shows how several of the most important financial statement ratios are related to one another by displaying their components.
• Managerial Accounting
• Uses data to manage and analyze operations.
• Uses standards, budgets and variances to run the business and explain operational results.
• Two types of variances: price and volume
• Sales price variance
• Tells the manager how much of the difference between budgeted sales revenue and actual sales revenue is due to changes in sales price
• Sales Price Variance = (Actual Sales Price = Standard Sales Price) x (Actual Quantity Sold)
• Purchase Price Variance = (Standard Price - Actual Price) x (Actual Quantity Purchased or Used)
• Volume price variance
• Isolates the dollar effect of a different unit volume from what was budgeted assuming no price changes
• Sales Volume Variance = (Standard Sales Price) x (Actual quantity sold - Standard Quantity Sold)
• Material or Labor Efficiency Variance = (Standard Use Quantity - Actual Usage Quantity) x (Standard Cost of Material or Labor)
• Object is to budget a company's activities for a period of time, then explain why the actual results varied from the projections.
• Cost accounting
• Determines the cost of producing goods or services
• Allocating overhead is difficult as it must be allocated based on actual usage of the overhead expenses.
• Activity-based costing (ABC)
• Based on what it takes to create and deliver the product to the customer
• Ten Ways Accountants Can Misstate Earnings
1. Misclassify expenses as assets
2. Underestimate sales allowances for returns, discounts and markdowns
3. Underestimate bad-debt allowances on sales made on credit
4. Create off-balance-sheet liabilities
5. Recognize phantom revenues
6. Depreciate assets too slowly
7. Modify adjustments to inventory
8. Forecast unusual gains or losses
9. Create special reserves by overestimating future expenses and boost profits by revising those estimates downward later
10. Manipulate measures of performance that are tied to key executive bonus compensation.

Chapter 3: Group Project - Accounting

Apple Reports All-Time Record Third Quarter Results , But Is The Computing Giant Now On The Decline?

This week we reviewed Apple's financial statements and their MD&A, as well as an SEC Briefing on How to analyze financial statements. Then as a group, we discussed Apple's 6/25/2011 financial statement to determine if we agreed with its assertions and whether or not we would invest in Apple.

No doubt, Apple has had an incredible year. Record quarterly revenue of over $28 billion and record quarterly net profit of over $7 billion, and not one, but TWO all-star products -- iPad and iPhone -- that have both seen over 140% unit sales growth over the last year. It is perfectly clear why Apple CEO Peter Oppenheimer asserts that Apple is "defining the future of mobile media and computing devices."

Nevertheless, with recent passing of tech icon and Apple guru Steve Jobs, and aggressive competition from companies including the computing giant, Google whose Android phones are giving iPhone a run for its money while Google's cloud computing services and Chrome OS are not only free to use, but have beaten Apple's fall releases (iOS5 and iCloud) to the consumer.

Still, Apple has had a spectacular quarter in a spectacular year, managing to increase their operating margin from 28% to 31% in just a year, while taking their P/E ratio from 25.4 to 15.8, making Apple investors very happy. Given this stellar performance, I still cannot recommend Apple as a wise investment. Even their own projections for the fourth quarter show a slowing of this upward trend which makes this the wrong time to buy.

Chapter 2: Ethics Assignment

One ethical dilemma that we may face in pursing our triple bottom line business certification concept is the entanglement that comes with being funded by member organizations. In an effort to grow membership and strengthen the power of the certification, there may be pressure to ease membership standards to accommodate a wider group of potential members. I believe we can significantly mitigate this ethical risk by providing tiered membership. Not every member will achieve the highest level of certification (which we may call "Platinum") but a lower level (perhaps called "Silver" or "Gold") will be more broadly accessible. This will enable us to recognize companies in intrinsically challenging industries for their efforts without diluting the power of the certification.

Another potential ethical issue lies in the profit model for the business if we choose to make it a for-profit enterprise. A natural way to generate revenues would be to provide an array of remedial services that help businesses identify and change processes that undermine their successful adherence to certification standards. This could create a conflict of interest, and it would therefore be imperative that our company maintain the highest ethical standards and transparency.

Chapter 1: Group Project - Marketing

This group assignment went very well. We were quite organized and the group stayed focused and on target throughout the discussion. I think the topic review and the agenda with time allocations definitely helped. We also managed to set up a weekly rotation for facilitators. I facilitated this first meeting of the full group, Daniel is next, etc.

I also enjoyed hearing the different perspectives of the group members which led us to define a mission for the organization before we began the consumer and market analysis. This put us all on the same page and solidified the concept enough to discuss it productively.

Notes from our group meeting are as follow:

AGENDA 9/26/11, 7:45-8:15pm

(1) Briefly review business idea (3 minutes)



Mission statement [consumer-oriented]: our business helps consumers make wise purchasing decisions that influence corporations to make products and business operations choices that are socially equitable, non-environmentally damaging and that support the communities in which they operate.


(2) Conduct Consumer Analysis and make notes (10 minutes)
A. Is our product/service makable? How do you know?
Yes, it is conceptual rather than physical and follows a path forged by other certifying bodies.

B. Is our product marketable?
Yes, the precedent for such a product has already been set.

C. What is the buying process?
Company engages business who wish to be recognized for their corporate social responsibility and triple bottom line adherence. We build the brand with these initial members and introduce it to consumers as a cobrand on products and with a big launch.

D. Who are the influencers?
Industry leaders and secondary leaders, consumers, media and editorialists and bloggers.

E. Who needs the product and why?
Corporations and individual consumers.

F. Is it planned or impulse buy?
Planned buy and long-term investment.

G. What are (or will be) the perception of our product?
Socially responsible, strict standards, highest level of credibility, triple bottom line, neutral certifying body


(3) Conduct Market Analysis and make notes (10 minutes)
A. Is there a market for our product? How do we know?
Yes, there is much confusion over corporate operations and the good/harm they do the society. Similar certification programs have worked well in focused markets.

B. What is the market Size, growth, segments, georgics [geographics/geographic segmentation (p.13)?]?
Potentially huge market -- challenge will be establishing the brand,

C. What are the trends
Growing confusion in the market place. Many scandals over corporate crime, particularly among “trusted” businesses. Three phases: first is connect with low-hanging fruit of existing socially responsible companies to sign on to the certification, phase two is to engage businesses that are on the fence with this. And phase three is to leverage social pressure to change the acceptable standards for business operations to adhere to model set out by the triple bottom line.


(4) Company name and group name (5 minutes)
Profit/not-for-profit dilemma: Kerry - act as bridge for existing organizations
-alternative: for-profit as stakeholder

[for next time: for profit vs non-profit; ask Eric too]
Business name still undecided.


(5) Designate leader for 10/3 meeting (2 minutes)
Daniel will lead 10/3 meeting.
Kerry will lead 10/10 meeting.
Chiori will lead 10/17 meeting.


Daniel found that there are two organizations that are doing something similar to our business. However, they do not have a consumer-directed brand:
GRI Global Reporting Initiative - focused on government and businesses?
ULE 880 - gov and biz only?
*http://carbonpig.com/article/sustainability-certification-programs-and-sustainability-reporting-protocols-overview [Daniel: GRI overlaps what we’re doing a lot; however, they don’t have “brand” on products]
*http://www.greenbiz.com/news/2010/08/02/sustainability-certification-companies-opens-public-comment 
[Daniel: this is like what we’re doing too: “ULE 880 - Sustainability for Manufacturing Organizations" is a points-based standard that will feature three levels of certification. The 102 indicators aim to measure and rate the sustainability of an entire business, focusing on the full spectrum of social and environmental sustainability rather than the environment.”; again, no “brand” on products]
http://www.irca.org/certification/certification_11.html
http://www.greensupplychain.org/Green_Supply_Chain.org/About_Us.html