Archive for April, 2008

What is a company’s balance sheet

There are a variety of common financial statements that a company can use – one of the most common is the balance sheet.

The balance sheet shows the financial position of a company at a particular point in time and is split into three broad categories

Assets

– These are the resources owned by the business – this could be in the guise of raw materials, capital equipment and money owed by debtors

Capital

– A source of funds, often the money provided through sale of shares or retained profit from previous years trading.

Liabilities

– The debts of the business – money owed to suppliers etc. This might also include loans that need repaying.

In a balance sheet the value of assets must equal the value of liabilities and Capital

What is corporate culture?

Every company, whether publicized or not, has a set of values that are shared by the stakeholders (employees) within it. These values define how things are done in the that organization from methods of communication to processes and policies the corporate culture defines the normal behavior within that organization. Many organizations utilize a mission statement to define its cultural philosophies.

Corporate culture often influences change within an organization from decision making, efficiency and effectiveness. For many senior managers trying to instill or change the corporate culture is an important step in shaping an organization and often forms part of the organizations strategy.

Corporate culture is usually passed between (and reinforced with) employees through a variety of methods from formal methods including corporate communications and training to informal methods such as socialization.

For more an example of coporate culture check out Google Inc’s article on it’s own culture : http://www.google.com/corporate/culture.html

Business effeciency

A by product of business efficiency is cost – a highly efficient business generally have less cost than a business that is comparably less efficient.

For that, and other reasons, business efficiency, an indicator of how resources such as labor and raw materials are used and consumed in order to produce a product is an often used business KPI.

Measuring efficiency is therefore an important business activity as it can:

• Highlight areas of waste and cost
• Improve control of business activity
• Aid Benchmarking
• Accurately predict resource requirements

Effeciency can generally be calculated by dividing the output by the resource consumed so for example measuring staff productivity can be calculated by dividing the output (i.e. widgets produced) by the number of staff (check out this article for further examples)

The Five forces model

The five forces model enables the analysis of industry sectors in order to identify opportunities or threats – the five forces model consists of

  • Risk of new competitors/sellers
  • Increased competition and rivalry amoungs existing marketplace
  • Bargaining power of suppliers
  • Bargaining power of buyers
  • Threat of new products

When analyzing the results the stronger each force is the lower the ability for businesses to raise prices.  Further information on the model can be found here : http://en.wikipedia.org/wiki/Porter_5_forces_analysis

Contents of a Competitor Analysis

A competitor analysis is a business tool used for assessing rivals.  This form of analysis is used to examine competitors thier strenghts and oppourtunities and where possible learn from other businesses in your sector.

Traditional competitor analysis focus on:

Strategy
Constraints
Capabilities
Marketing
Financial
Customer perception

SWOT Analysis

A SWOT analysis is a management tool that is used to undertake a rapid examination of a businesses status.

It is often used to help devise business strategy and improvement programs – SWOTS are usefull in that they examine both internal and external influences over the business.  It is also a very effective method of gathering and categorizing business issues and information.

SWOT stands for

  • Strenghts
  • Oppourtunities
  • Threats
  • Weakneses

An example SWOT analysis can be seen here : – http://www.mepss.nl/cases/edf/image005.gif

Marketing aims to capture customer needs

It might seem obvious but a product will have a far better chance of success if it is aimed at satisfying the needs of it’s customers. One of businesses golden mantras is that consumers don’t by products they by things that solve them problems and needs – these needs might manifest themselves in a myriad of different ways and marketings primary objective should be both to find out what these needs are and to position the products accordingly.

By using market research companies often seek to ascertain the demand and needs of its customer base – market research can come in a variety of shapes and sizes from the humble customer survey to in depth demographic analysis.

Marketing should be viewed as an ongoing process and one in which businesses should be prepared to invest time and effort into its vital to remember that marketing is not simply advertising but is involved in building and developing complex relationships between customers which can help produce profits in the years to come.