Business Book Summaries

The Butterfly Customer – Capturing the Loyalty of Today's Elusive Consumer by Susan M. O'Dell and Joan A. Pajunen

"Butterfly customers" are defined by O'Dell and Pajunen to be people that flit from one store or supplier to another, always searching for a lower price or a different shopping experience. They have no loyalty to any particular store, and are always in search of a better deal or a new promotion.

"Constantly in motion for the best deal, the greatest choice, the latest trend, this creature selects a store or brand apparently at random, often abandoning the tried and true for the newest, the closest, the cheapest.

It's exhausting to be a butterfly and disheartening to serve one. There isn't one single store that captures all of their interest, dollars or oh-so-precious time. Consumers have been transformed from loyal, reliable and predictable patrons into transients – here today, flitting across the street tomorrow." (p. 1-2)

Butterfly customers have been spawned by the proliferation of options in the retail environment, in the last few decades, including suburban shopping malls that pulled people away from traditional downtown retail and service environments, and national chains of specialty stores that can take advantage of huge purchasing power to obtain the lowest prices for consumers. This is compounded by the fact that many consumers no longer trust retailers and service providers to deliver what they say they will, and to live up to expectations.

According to the authors, there are eight characteristics of Butterfly Customers:

they will readily accept offers to be loyal customers (through signing up for club memberships, points programs, etc.) but these programs will not truly create loyalty

they move across market segments, buying a luxury car one day and waiting in line to save $1 on a pair of socks the next

they are intelligent, educated and informed

they are cynical and skeptical, tending to disbelieve advertising messages and always reading the fine print

they would rather switch than fight – "The current reduction in customer complaints has less to do with a great improvement in service than it does with a collective shrug. What energy the Butterfly Customer does have is devoted to switching, not fighting." (p.8)

they are endlessly interested in the experience of others, and word of mouth is seen to be the most trusted and reliable source of information

they are not embarrassed to be Butterflies, and see this pattern of behavior as being praiseworthy in today's economy

they know their own worth

"It's a wonderful time to be a Butterfly as retailers and service providers everywhere strive to entice this elusive new breed of customer. Every day customers are bombarded with new concepts, new products and new services to try. And there are sales and special offers galore, all designed to lure prospective buyers from retailer to retailer, from bank to bank, from credit card to credit card, and from brand to brand looking to see what's new, what's better, what's different." (p.10-11) From the business perspective, though, Butterfly Customers are expensive to win (as there are significant costs entailed in getting their attention in the first place), difficult to service (as they are highly demanding), and almost impossible to keep.

However, all is not lost for the poor retailer….At the other end of the spectrum, the authors propose the concept of the "Monarch", a loyal customer who will return again and again because he or she trusts the retail or service operation and knows that what they expect will be what will be delivered.

"The Monarch is still a butterfly. The characteristics we described earlier still describe them. They are intelligent, curious, suspicious, and know their own worth. But the Monarch is a species of butterfly which, despite taking various byways and pathways, can be counted on to return to the familiar on a regular basis.

These loyal Monarch Customers are less expensive to attract. It usually doesn't take an expensive advertising campaign or give-away promotion to entice them back to your business. They take less transaction time from your staff and are quicker to buy because they are less skeptical and don't need a large amount of convincing. They are more willing to buy and less price sensitive all around." (p.35-36)

The authors describe five characteristics of Monarchs:

Monarchs always return – sooner or later

Monarchs often send someone in their place (i.e. recommending and referring other customers)

Monarchs always have an opinion – unlike the disinterested Butterfly customers who would rather switch than fight, Monarch customers always have an opinion that they will share if asked

Monarchs share their homework, and will freely provide information on what the competition is doing

Monarchs are forgiving and giving: "Monarch customers have a remarkable tolerance for the sheer ordinariness of service life. They know the coffee won't always be at exactly the right temperature and even the perkiest of airline attendants sometimes has a bad day. Customers who are loyal put elasticity in their transactions with you. They allow you to screw up once in a while and often even pitch in to help when the going gets rough." (p.39)

So, the big question becomes how do you create Monarchs from Butterflies (or, on the other side of the coin, how do you prevent your existing loyal Monarchs from abandoning you and becoming Butterflies)? O'Dell and Pajunen maintain that it boils down to building (or re-building, as the case may be) trust with the customer.

They propose the idea of the 'service kaleidoscope' – a three dimensional way of looking at a business to determine the extent to which it breeds trust in the customer. These three dimensions are:

the media dimension the physical dimension the people dimension

If the three dimensions are in harmony with one another, then the customer knows what to expect (and gets it), and develops a feeling of trust with the business. If the three dimensions are out of synch, then a feeling of discomfort and distrust will develop.

So, for example, if the media message about a retail environment suggests that offers upscale and quality merchandise, yet the physical surroundings suggest 'bargain warehouse' and the staff are surly and untrained, the customer will experience dissonance and not trust the business. (In O'Dell and Pajunen's terms, their "trust account" will be depleted.) They likely won't be back, having turned into a Butterfly Customer for someone else. Loyal Monarch Customers can be found in those environments where the three dimensions are in accord and support one another.

The authors have developed a self assessment tool for a business (which they call a '3-D audit', as it focuses on these three dimensions) and much of the book outlines the questions to be asked and procedures to be followed in undertaking this kind of assessment.

Another fundamental point that they make is that there needs to be another kind of three-dimensional harmony in place for a retail or service business to work – this time between the managers, the employees and the stockholders. This underscores for them the importance of leadership in creating the kind of environment that customers will trust – as this will create profits for the business, jobs and wages for the employees, and a return-on-investment for the equity owners.

One interesting point of contention for the authors that they deplore frequently throughout the book is the 'service excellence' feats that some other writers have lauded as examples of outstanding customer service (the sort of thing where a hotel front desk clerk charters a plane to return a briefcase that a guest has left). They say that these sorts of things are merely silly stories that raise expectations among consumers, but ultimately only end up costing everybody more (after all, somebody had to pay for that flight, most likely subsequent customers through prices that had to be raised to pay for all these feats of service heroism).

The Butterfly Customer is an interesting (if somewhat lightweight) book, with undoubtedly several good ideas about improving retail and service offerings to attract more loyal customers. Whether it really is as possible as they seem to suggest to create and keep loyal customers in this era of ever-proliferating consumer options is an open question at this point.

Technorati tags: book summaries, business books, business productivity, self improvement, customer service, The Butterfly Customer, Susan M. O'Dell

One of the more popular firewall products for the small business market is the Cisco PIX 501. Out of the box it requires just a few configuration entries and you are up and running.

In this guide, we will walk through the steps for configuring your brand new pix at the network edge.

This guide is written for the user who has no knowledge of the PIX firewall. As such, it is not a treatise on network security, but a quick, by-the numbers guide to configuring a PIX firewall with as little jargon as possible.

We are assuming that you have an internet connection with at least one static IP address. While the PIX can easily handle a dynamic IP address (that is the default configuration), you won’t be able to easily configure remote access, VPNs, Mail, or web servers without a static IP address.

Your PIX should have come with an AC adapter, a yellow CAT 5 cable, an orange CAT5 cable and a flat, (typically) baby blue cable with a 9-pin serial connector on one end and an RJ-45 plug on the other.

The yellow CAT5 cable is a standard Ethernet cable and is used to connect your pc or server to the 4-port Ethernet switch built into the PIX. The Orange CAT5 cable is a cross-over cable and may be required to connect the outside interface of the PIX to your ISP’s router (if your PC’s or workstations are plugged into a Cisco switch inside the network, you will also require a cross-over cable for connecting to one of the switch ports on the PIX).

What we are going to use for our configuration is the baby blue rollover cable. Insert the serial jack into one of the serial ports on the back of the PC or laptop you will be using to configure the PIX. Then, insert the RJ-45 plug into the port on the back of the PIX labeled “console.”

Windows has a built in application that is used for (among other things) configuring serial devices. Using the start menu, go to Start > Programs > Accessories > Communications > Hyper Terminal.

Choose the Hyper Terminal application. You may get a dialog box asking if you’d like to make Hyper Terminal your default telnet application. Unless you have a preference, go ahead and choose yes.

Then you will be asked for the area code from which you are dialing, although it isn’t applicable here, the program still wants to know, so fill it in and click ‘next’ or ‘ok.’

You can call the connection anything you’d like; in this example we’ll use PIX. Click ‘ok’ to move on.

Next, we’ll be asked to enter the details for the phone number we’d like to dial. Since we aren't dialing a phone number, use the drop-down selector at the bottom of the box to choose COM1 or COM2 (whichever is applicable). If you have no idea which one is which, you may need to try it both ways.

Now, you will be expected to tell the application some specifics about the port settings so that it can effectively communicate with the PIX.

Luckily, it isn’t too complex, just remember 9600, 8, none, and 1. Enter these settings into the drop down selectors of the box on your screen.

Now we are ready to set up the PIX. Insert the power cable and you will be greeted with the startup monologue (it’s not a dialog in this case; it’s just informing you of what is occurring).

Then, you will be greeted with a screen that asks if you’d like to program the PIX using interactive prompts. For the purpose of this exercise, type no and click ‘enter’.

You will now get a prompt that looks like this: pixfirewall> Type the word ‘enable’ (no quotes), when prompted for the password, just click ‘enter’ as the default is no password.

The prompt has changed to a hash mark: Pixfirewall# Type the phrase ‘configure terminal’ (no quotes); you are telling the PIX that you want to enter the global configuration mode and you will be doing your configuration via the terminal window.

Your prompt will now look like this: pixfirewall(config)#

The first thing we want to do is give your pix a host name. The PIX command syntax is: Variable name

Thus, to set the hostname we will enter: pixfirewall(config)# hostname mypix

Now, the domain name; it’s alright if you don’t have a domain set up on your network, you can call it whatever you like. However, give some thought to whether a domain might be a possibility at some point and plan your naming scheme appropriately. pixfirewall(config)# domain-name mydomain.com

As you can see from the configuration above, the ethernet0 interface is the outside interface, with a security setting of 0, while ethernet1 is the inside interface with a security setting of 100. Additionally, you can see that the interfaces are shutdown. All we need do to bring them up is enter the speed at which they should operate. As they are Ethernet interfaces, any software version after 6.3(3) will take 100full, prior to that, use 10full.

pixfirewall(config)# interface ethernet0 100full pixfirewall(config)# lnterface ethernet1 100full

Now to assign an address to the inside and outside interfaces; the ip address command sets the ip address of an interface. The syntax is as follows: Ip address

An example might be as follows: Ip address outside pixfirewall(config)# ip address outside 12.25.241.2 255.255.255.252 (this IP address, netmask combination should not be used, it is shown here for example only. Use the IP address/mask given to you by your ISP).

Then the inside IP address ip address inside pixfirewall(config)# Ip address inside 192.168.0.1 255.255.255.0

A brief word about IP addressing is in order here.

One way that is used to conserve public IP addresses is through the use of non-routable IP addressing blocks specified in RFC 1597. You may sometimes hear them referred to as “private” IP addresses, which is fine, but not quite technically accurate. There are three different blocks to choose from: 10.0.0.0 – 10.255.255.255 with a netmask of 255.0.0.0 172.16.0.0 – 172.31.255.255 with a netmask of 255.255.0.0 192.168.0.0 – 192.168.255.255 with a netmask of 255.255.255.0

as long as your internal network's IP addresses are all within one of those blocks of address space, you will not need to introduce the complexity of routing within your LAN. An example scheme for those who are not familiar is shown below: PIX – 192.168.0.1 netmask 255.255.255.0 File/DHCP server – 192.168.0.2 netmask 255.255.255.0 Workstations – 192.168.0.10 – 192.168.0.254 netmask (each) 255.255.255.0 * I intentionally skipped over the 192.168.0.3-9 addresses to plan for future expansion and the possible need for additional servers, you don't have to do this. * Configure your DHCP server to hand out addresses in the specified block using your ISP-provided DNS servers for name resolution. Make sure to change this should you ever decide to install a name server within your own network. * If you don't want to set up a DHCP server, just configure each PC with the IP address, default gateway, netmask & DNS servers

It is very important now to add a default route to the PIX configuration. Another term for default route is the “default gateway.” You need to tell the PIX that if it receives traffic destined for a network that isn’t directly connected, it should send it to the connected ISP router. Your ISP should have given you the IP address of your default gateway when you received your setup information.

Here is the syntax: Route The English translation is “if packets destined for interface on the network specified by network address are bounded by mask then route it via a next hop at the optional command is used to give an indication of distance.

For example pixfirewall(config)# Route outside 0 0 <12.25.241.1> 1 (if packets are destined outside the network to any ip address with any netmask, send them through the ISPs default gateway, which is one hop away, meaning it is the device to which the PIX is connected on the outside interface).

To password protect your PIX in order to prevent unauthorized access, use something that is secure and hard to guess. Try to stay away from the names of spouses, children, pets, birthdays or other easily guessed variable. Whenever possible, use a combination of letters and numbers. The syntax is as follows (but please don’t use cisco as your actual password) pixfirewall(config)# Passwd cisco (note the abbreviated spelling of the word password) this will set a password for basic access (rembember the pixfirewall> prompt?) pixfirewall(config)# Enable password cisco this will set the password for administrative access

Now that your PIX has been given a basic configuration, you should be able to access the internet, while preventing unauthorized access to your resources.

About Author: Ron Jones is the Founder and President of The Fulcrum Technology Group, Inc. www.fulcrumtechnologygroup.com Located just North of Atlanta, this consulting firm specializes in business technology solutions that will enable you to maintain a competitive advantage by increasing productivity, improving reliability and reducing expenses. Technorati tags: book summaries, business books, business productivity, self improvement, technology, small business

"Internet commerce is clearly becoming an imperative for the internetworked enterprise. It can be characterized as an evolution of international trade. From a technology perspective, the Internet is the catalyst for yet another new computing paradigm: Internet computing (also referred to as network-centric computing or internetworked computing). The marriage of the Internet with electronic commerce represents the cutting edge in business today.

Å Every firm that wants to stay in business beyond the turn of the century should be reevaluating its strategy and operations [in light of the potential for Internet commerce], from customer service to marketing to product development to merchandising, logistics and distribution." (p.8)

Walid Mougayar is the Canadian representative of CommerceNet, an industry association devoted to "accelerating the transformation of the Internet into a viable open marketplace" (p. 102). His book is about how businesses should be thinking about Internet commerce (which Mougayar also refers to as electronic commerce) in order to stay competitive for the future. A key point that he makes in this regard is that organizations cannot simply regard the Internet as merely another medium through which to make financial transactions. Rather, they must see the Internet as a strategic vehicle for the manipulation of digital data that is associated with financial transactions, and that creates additional value for the customer. Viewed this way, the Internet fundamentally transforms the nature of the transaction – and puts us into an entirely new era in supplier-consumer relationships.

Mougayar identifies several issues as being important at this still relatively early stage in the emergence of electronic commerce. In the first four chapters of the book he gives a very comprehensive overview of the current state-of-the-art (as of spring, 1998) in the field of Internet commerce. He describes in detail the technologies, initiatives, and industry associations and strategies that are being mounted to prepare the world for Internet commerce. In summary, the major factors that he identifies are:

- the convergence of technologies which is making new and more efficient capabilities possible in the transaction between buyer and seller

• the emergence of new intermediaries and other businesses between providers of services and the seller: these are new businesses, not in existence a few years ago, that are replacing the old intermediaries – examples would include multimedia content delivery companies such as Build-a-Card which enable the user to create greeting cards in cyberspace and deliver them instantly

- the developing legal and regulatory framework, which includes issues such as the lack of standards and consistent rules and policies, uncertainties regarding the treatment of custom duties and taxes across international boundaries, etc.

- the behavioral response of consumers,,in terms of concerns about security, privacy, fraud, hype and exaggerated promises, and a host of other uncertainties regarding the safety of doing business electronically

- the behavioral response of companies, which includes issues such as lack of awareness of what is now possible and what will be possible in the near term, lack of an understanding of the strategic advantages of electronic commerce, and lack of a coordinated approach to dealing with Internet commerce implementation

Some of these issues, such as the convergence of technologies, are pushers and drivers, impelling us sooner rather than later to embrace the world of electronic commerce. Some, on the other hand, are barriers, such as the level of suspicion and coolness towards Internet commerce that can be seen in many consumers, which mat inhibit to some extent the acceptance and adoption of Internet commerce.

Even though there are drivers and blockers at work at the present time, Mougayar leaves little doubt that there is no avoiding Internet commerce in the future, and that wise companies will begin planning immediately for a world where electronic commerce is routine. This brings us to the second part of the book (chapters five through eleven) where he presents a strategic approach for a company to become involved in electronic commerce.

First, he notes that it is important that a company have a complete perception of exactly what the Internet is, and the roles that it can play in electronic commerce. He outlines the multidimensional nature of the Internet as having five distinct aspects, which are:

1) a network – with proper security, the Internet can function as a network of suppliers, customers, intermediaries, regulators – all of the parties that potentially need to get together to make a transaction (or develop a product or service)

2) a medium – this view of the Internet sees it as another advertising and promotional medium, carrying messages to the marketplace

3) a market – this view sees the Internet as the marketplace itself, a coming-together of hundreds of millions of potential consumers

4) a transaction platform – this view sees the Internet as the vehicle through which financial transactions (and other exchanges) are made

5) an applications development platform – finally, this perspective sees the Internet as a 'skunkworks', enabling products as services to be trialed and perfected

"The Internet has five multiple identities, and each one must be taken advantage of by developing and applying a different strategy. It is important to understand and accept the unique potential of each one, as a sign of Internet organizational maturity. The synergistic effect realized by addressing all five faces of this identity enables organizations to take maximum advantage of electronic commerce capabilities. Successful large organizations are addressing every one of the five identities." (p. 83) With this multidimensional perspective firmly in mind, Mougayar then proceeds to outline a 10-step strategy for firms to follow in pursuing Internet commerce (or, as he puts it, to reach 'cybermaturity'). These are:

1. conduct necessary education

1. review current distribution and supply chain models

3. understand what your customers and partners expect from the Internet

4. reevaluate the nature of your products and services

5. give a new role to your human resources department (to establish the systems, procedures and protocols needed for electronic commerce)

6. extend your current systems to the outside

7. track new competitors and market shares in the new digital marketplace

8. develop a web-centric marketing strategy

9. participate in the creation and development of new virtual marketplaces and intermediaries

10. instill a management style that understands the synergies and the differences in dealing with electronic markets in addition to traditional markets

Each of these steps is further detailed, with expected outcomes at the conclusion of each specified, in Chapter 7 of the book. Chapter 9 also discusses IT strategies to incorporate electronic commerce into the orgnization.

Chapter 8 of the book is particularly interesting from a marketing perspective. Entitled 'The Wired Consumer', this chapter discusses among other things the emerging needs that are being demonstrated by consumers, and to which electronic commerce will have to respond. There are nine consumer needs and demands that Mougayar identifies, which are:

1. the need for customers to be able to serve themselves

1. the need for efficient access to information and relevant data

3. the need for Internet commerce to facilitate bidding (possibly using software agents representing the buyer, which are 'empowered' to make specific bids for products or services, up to a certain amount, on their behalf)

4. the demand for 'information appliances' which will be plugged into the Internet (such as the PC wallet and the Web-telephone)

5. the demand for virtual reality experiences

6. the need for on-line customer detail and transaction history

7. the need for universally available and accepted payment instruments

8. the need for suppliers to be able to handle microtransactions (that is, transactions with a value of only a few cents' (or fraction thereof)

9. the need for new casting capabilities (e.g. such as webcasting, which will combine the Web and television, or pointcasting, which will direct highly specific tailored content to an individual)

Appendix A of the book outlines the emerging digital payment options that are currently in use or are being developed: digital cash, smart cards, encrypted credit cards, electronic checks and Internet financial EDI (electronic data interchange). All of these are vehicles for possible commercial exchange that we will undoubtedly be seeing more of in future.

Technorati tags: book summaries, business books, business productivity, self improvement, internet commerce, Opening Digital Markets, Walid Mougayar

When I first heard of audio books in the 80’s they were mostly mentioned as being a good alternative for the sight impaired. An ugly green plastic box of cassettes at the library is my first memory of audio books, so speech books as they were known. Writing this brings back memories of the library lady who told us kids that these books are only for the blind and that we could not lend them. Too bad, I thought – it would be a great way to “read” books while doing other things, instead of watching TV.

Fast forward to 2006, and audio books are becoming a huge success. And they are certainly not just for those hard of seeing, they are for everybody. Imagine the busy business woman who just can’t squeeze in 30 minutes to read even thou she really longs to escape to the fantasy of a good book. Thanks to the Audio book, she can “read” that book while driving to work, rushing off for lunch or walking to the daycare center. In fact, now that the audio books can be loaded onto Ipods and other media players it’s really easy to bring it along anywhere you go. You could even load up tens of books and alternate between them. On a side not though; don’t forget to set your MP3 player to Normal play, instead of Random play or you could end up with some interestingly confusing results chapter wise.

Now that I have already touched the subject of different formats, why not get into that a bit deeper. You can get audio books in the form of CD’s, which is still a common way of delivering audio books. The disadvantage to this is that a book can take up a lot of CD’s and each only run for about one hour. More recently these spoken books have become available in the form of Media player sound files, such as MP3. The great advantage to this is that you can purchase your book online and download it and instantly begin to listen to it without any waiting time. If your book is not available as a sound file but as CD you can convert them yourself using different software, you can easily find them by searching for “convert CD mp3” or if you use Windows Media Player you actually have this function built in for free – it’s called Rip.

No matter what format you prefer, or when you like to listen to your books one thing is for sure – this market is growing and readers/listeners love the convenience of audio books. When the Internet became popular a bit over 10 years ago the rumor had it that the book was dying thanks to the Net, those rumors of death are now proved to be widely exaggerated. Books are not dead; they are “sound” alive.

About Author: Trendspotting Markus Wahlgren picks up what he finds interesting in today's trends, Audio books, is one example. Many other subjects can be found at his blog; Technorati tags: book summaries, business books, business productivity, self improvement, audio books

“Build it and they will come” only works in the movies. If you’re a small business owner, relying on people finding you will most likely end in disaster. Actively pursuing clients predicts success, but many entrepreneurs simply don’t know how to do that.

Let me assure you though that marketing is easy… IF you have a plan.

The best plans are written down in a notebook, or maybe they’re on your computer. Even a scrap of paper will do. But studies show when you write things down, you’re more likely to succeed.

Sometimes new business owners are wary of any talk about marketing because they think marketing must be expensive. Yet can you afford not to market your company? And usually they’re thinking of advertising rather than marketing. Although many think so, the two terms are not synonymous. Advertising is merely one form of marketing.

Here’s a few.

• It all starts with image (and yes, image is part of marketing as is pretty much everything you say and do). To show the world a professional image, consider the impact of having everything that represents your company match perfectly – be it business cards, brochures, and your web site to name a few.
• The single-most affordable marketing strategy is networking and requests for referral. In fact, not only is it the most affordable, it’s also the most effective. A client coming to your through a referral is likely interested in your product or services 60% of the time. You simply can’t beat that.
• Direct mail is an excellent strategy for reaching your target market one-on-one. Direct mail works for both business-to-business and consumer markets. And while writing for both markets has certain aspects in common, there’s also important differences when copywriting for the two.

• If your town has bulletin boards or storefronts that allow it (most do if you look hard enough), post a notice free of charge. The only cost bulletin board notices have is your time.
• Join your local business groups and offer to speak during their next meeting. Although public speaking is one of our most common fears, speaking to a group quickly establishes expert status.
• Find a business that offers complementary services to yours and split the costs of your both your marketing. For example, if you own a graphic design business, join forces with a printer.
• I can’t end this discussion without mentioning web sites. There is no other way to reach as many people at the same time (except maybe advertising, but advertising on the same scale can be very expensive). The problem with web sites is putting one up is just the beginning. Marketing your site takes a lot of hard work, but it’s worth it.

Small business marketing doesn’t need to be difficult. Nor does it need to be expensive. These 7 strategies are just the tip of the iceberg. Really, you’re only limited by your imagination, and of course your budget.

About Author: Eve Jackson offers marketing services to small business owners. If you’re an entrepreneur who’d like to increase your sales, give her a call at 306-373-1459 or visit her web site at detailssbs.com/services.php where you’ll find all sorts of information to help your small business succeed. You’ll learn about small business image, marketing strategies, direct mail and small business web site development from start to finish.

Technorati tags: book summaries, business books, business productivity, self improvement, marketing strategies

The essence of profitability is a firms Revenue – Costs with revenue depending upon price and quantity of the good sold.

1. The degree of competition a firm faces is important if a firm has monopoly power then it has little competition, therefore demand will be more inelastic. This enables the firm to increase profits by increasing the price. (For A2 draw monopoly diagram) However govt regulation may prevent monopolies abusing their power e.g. the OFT can stop firms colluding (to increase price)Regulators like OFGEM can limit the prices of Gas and Electricity firm

2. If the market is very competitive then profit will be low. This is because consumers would only buy from the cheapest firms. Also important is the idea of contestability. This is how easy it is for new firms to enter the market. If entry is easy then firms will always face threat of competition, even if it is just “hit and run competition” This will reduce profits. Firms may seek to create barriers to entry. The most common is creating brand loyalty through advertising.

3. The strength of demand is very important. For example demand will be high if the product is fashionable, e.g. mobile phone companies have been very profitable. However in recent months profits for mobile phone companies have fallen because the high profit encouraged over supply. Products which have falling demand like Spam (tinned meat) will lead to low profit for the company

4. The State of the economy. If there is economic growth then there will be increased demand for most products especially luxury products with a high YED. For example manufacturers of luxury sports cars will benefit from economic growth but will suffer in times of recession.

5. A successful advertising campaign can increase demand and make the product more inelastic, however the increased revenue will need to cover the costs of the advertising. Sometimes the best methods are word of mouth. For example it was not necessary for YouTube to do much advertising.

6. Substitutes, if there are many substitutes or substitutes are expensive then demand for the product will be higher. Similarly complementary goods will be important for the profits of a company.

7. The other aspect of profitability is the degree of costs. An increase in costs will decrease profits, this could include labour costs, raw material costs and cost of rent. For example a devaluation of the exchange rate would increase cost of imports therefore companies who imported raw materials would face an increase in costs. Alternatively if the firm is able to increase productivity by improving technology then profits should increase. If a firm imports raw materials the exchange rate will be important. An depreciation making imports more expensive. However depreciation of the exchange rate is good for exporters who will become more competitive.

8. A firm with high fixed costs will need to produce a lot to benefit from economies of scale and produce on the minimum efficient scale, otherwise average costs will be too high. For example in the steel industry we have seen a lot of rationalisation where medium sized firms have lost their competitiveness and had to merger with others.

9. If a firm is not dynamically efficient then over time costs will increase. For example state monopolies often had little incentive to cut costs, e.g. get rid of surplus labour. Therefore before privatisation they made little profit, however with the workings of the market they became more efficient.

10. If the firm can price discriminate it will be more efficient. This involves charging different prices for the same good, so the firm can charge higher prices to those with inelastic demand. This is important for airline firms.

About Author: Richard is an economics teacher in Oxford and is a member of the Sri Chinmoy Centre Richard edits a site on economics called Economics Help This is a useful resource of economics essays and help

Technorati tags: book summaries, business books, business productivity, self improvement, profitability

If you are getting tired of working for someone else or would like to explore how to make more money and develop an alternative career that can free you from your current job … then please give this article a thorough read. It discusses how to take skills you may already possess and interest you may already have to help you start a brand new career or explore alternatives to what you are doing now. Chances are that you are reading this article online or found it online and printed it out to read later. The internet has become a powerful and essential tool for many people for information, entertainment and education. But did you know that you can use a simple a tool as your web browser and internet access to make money from what you find online? Yes, you can and this article will tell you how you can do it. There are many industries that the concept we are going to discuss could be applied to but we are going to focus specifically on one: the Mergers & Acquisitions Industry (M&A). The M&A business for many years was predominantly limited to ‘insiders’ who had connections with each other (it was called, the ‘old boys’ network). These ‘insiders’ made millions of dollars by sharing information between themselves as to which companies were for sale and who wanted to buy them. As mergers and acquisitions “matchmakers” (also called “finders’’), they brought the “seller” and “buyer” together and made their huge finder’s fees. Now all that has changed; the Internet makes it possible for anyone using a computer to research and access business information that was previously hard to find and often available only to the ol’ boy ‘insiders’. And you can earn a finder or referral fee for introducing business buyers and sellers that result in a closed transaction. Let’s approach our discussion on this in the form of a Question & Answer session: Is the Mergers and Acquisitions business really that profitable? Absolutely. And being a finder for M&A deals can be a very lucrative home-based profession. You can think of it like being a real estate broker, only you match buyers and sellers of businesses, instead of homes. As a real estate broker you can sell a house for $100,000 or you can sell a house for $1 million. The more expensive the house, the more commission you earn. M&A finder or referral fees can be a lot more, since businesses transactions can be quite larger than a residential real-estate transaction. M&A Deal Finders do matchmaking with businesses that have at least $1 million in sales and go all the way up to $100 million in sales, on that basis alone; being a matchmaker in acquisitions and mergers is a much more profitable business than being a real estate broker. You are an intelligent person, but you don’t have an MBA degree or a law degree; will you be able to do Mergers and Acquisitions matchmaking? To answer this question, let’s take our example of being a real estate broker. You show a home for sale, the buyer either likes the home or they don’t. If they don’t like it, you take them to another home until they find the one they want. Mergers and Acquisitions works exactly the same way, only you use the power and information found on the internet to find what business buyers and investors are looking for and then find business owners and sellers that match what the buyers/investors are looking for … and all of the research is done on the computer using the internet to find businesses. Obviously having specialized learning, education or training will be of help to you in any business but you do not have to be a lawyer, CPA or have an MBA in order to be a successful Finder. One thing to keep in mind; being a Finder does not mean you are a broker. As a Finder you do not take on any fiduciary role or act as an agent on behalf of the buyer or seller; you are merely a matchmaker bringing the two parties together and for that you can earn a finder or referral fee. Can I do this part-time and do I need to travel or have a fancy office for this type of business? In the mergers and acquisition finder business you can search for and research businesses and buyers online and send and receive emails day or night, anywhere in the world. This way you can live in Oregon and be working on your computer at night (instead of watching TV) to sell a private business in Arizona to a public company located in Florida. The Florida Company will be closed when your email arrives that evening, but they can reply to you the next day. You can use email all over the world to send and receive business documents and it’s 100% free. Being a professional finder is perfectly suited for a home office. You can start out part-time spending as little as one hour per evening on your computer (the Internet is ‘open’ 24 hours-a-day, 7 days-a-week, so you can set your own hours). To demonstrate what is possible, I worked on selling a private telecommunications company in Brazil to a public company located in California, and most of the communication for the deal (specifically all of mine to the buyer and seller) was done by email. I will never meet in person the buyer, the seller, the executives of the business or ever see the actual company. Best of all you don’t have to know very much about the different businesses being sold. I don’t know a lot about telecommunications, but the public company that is the buyer knows that business very well. I just forward the selling company’s information by email to the buying company. The buying company evaluates the business deal and tells me if they want to proceed. Why is the Mergers and Acquisitions finder business so much in demand? Let’s say there is a public company that distributes computer software to retail stores like CompUSA. The public company has sales of $5 million and they want to grow. The public company can hire more salesmen and try to get into additional stores. But this can take a long time. What is the solution? They work with an M&A “matchmaker” to find them a company in the same business they can buy or merge with. You find a private company in the software distribution business with $5 million in sales (using Internet search engines and online industry directories) and you contact them to see if they are interested to work with you to be introduced to the public company buyer. If they are, you send the public company a blind profile on the business and the public company will tell you if they want to proceed with interest in the business. Finding suitable acquisitions to make is how a public company can double its sales very quickly. That is why this service is in such high demand. The M&A business is worldwide and so huge you will have not hundreds, not thousands, but millions of business owners, buyers and sellers. This opportunity is almost unlimited because each year more than 2 million businesses are up for sale in the USA alone, internationally the opportunity is even greater and all you need is a computer and Internet access. How would I get started at this business? Buyers can be found online by using a search engine and entering “business buyers” and then looking to see what the buyers have posted online for businesses wanted. This is an important step to take first because you want to start your “seller searches” with a buyer in mind. When you find an active buyer, create a document in your word processing program that details what the buyer is looking for. That becomes the buyers “profile” for you to use when searching for businesses and sellers for them. Here are the important things to make note of: 1. What industry (type of business are they looking to buy or invest in)? 2. What size (does the buyer need the business to meet a minimum revenue or sales level before they would consider buying or investing in them)? 3. What level of profitability (does the buyer need the business to meet a minimum earnings or net income level before they would consider buying or investing in them)? 4. What location(s) is the buyer interested in (are they looking everywhere or just in a specific city/state/region)? In our own network we have over two hundred business buyers, with their full acquisition criteria, we are currently working with and every month others contact us to assist them in finding business owners and sellers that would be interesting investments or acquisitions for them. Here is an example: Recently, a public company CEO sent me an email and asked me to help him find a private business that he could acquire for his public company. I researched "businesses for sale" using a search engine and found a business seller that would be of interest to the public company. For my efforts the business seller and the buyer both agreed to pay me a Finder's Fee. My email box is almost always full with requests from business buyers and sellers who want to be 'matched up'. Finding business owners and sellers is very easy. Through your own experience and contacts you may even know the owner of a business who might be interested in selling and if you do not directly know any business owners, then thousands of businesses can be found online. For example, use any search engine and enter “business for sale”. You will find thousands of web sites that list different businesses for sale. When you find the business you think will be of interest to a specific buyer, you contact the seller or business owner to see if they are interested to work with you and are willing to pay you a finder or referral fee to be introduced to buyer prospects. When they reply with interest, you get your fee agreement in place with them and then fill-out a simple form describing the business for sale that shows the business matches what the buyer says they are looking for. You then forward that information to the buyer in what is called a ‘blind profile’ so the buyer cannot contact the seller without getting back in touch with you. If the buyer doesn’t like the deal, then just send them another business for sale that matches their criteria until they find what they are looking for. When the buyer and seller each finds what they want, the deal goes into escrow. Before escrow closes the buyer (not you) makes a trip to inspect the business. The buyer meets with management and inspects their facility. If everything is acceptable, they present their offer, their professionals prepare the paperwork, set a closing date for the transaction and the buyer and seller tell the escrow company to proceed with the closing and your Finder’s Fee check is mailed to you or your fee is wired to you at the time of the closing of their transaction. Does it really work? We cannot make any earnings claims to you because success is up to an individuals effort, discipline and capabilities but many of the people we know in the M&A matchmaker business earn between $500,000 to over $3 million dollars each year. Again that does not mean that you will earn this much, or anything at all, since it all depends on your motivation, work habits and follow-up. Also keep in mind that this is not a “get rich quick” business, it takes time and effort on your part just like it does with any ‘real’ business. This business takes research on your part to find the right seller and contact them to see if they are interested, for the business to be presented to buyers the seller matches to, for the lawyers to prepare the 'buy-sell agreements' and for escrow to close before you get your check. But if you are looking for a great home-based business in an established industry with large income potential, then this is the best opportunity I know and certainly merits further study if you find it appealing to you as well. About The Authors: Gerald Newman, attorney and businessman, has spent over 30 years buying/selling businesses and helping others to do so. He has condensed that experience into a program so that business people can learn his proven M&A Deal Finder methods. Visit http://www.GetPaidFinderFees.com for more information about the program and his site http://www.MergersLawyer.com for more information. Dennis Lowery has been a business owner and entrepreneur since 1983. He is a business consultant, has started up, bought and sold a number of businesses and has helped private & public companies grow through strategic acquisition. Since 1996 he has provided consulting services to over 300 business professionals and entrepreneurs. He writes on a number of business topics sharing his broad experience with business people around the world. Technorati tags: book summaries, business books, business productivity, self improvement, search engine

The Death of Competition – Leadership and Strategy in the Age of Business Ecosystems by James F. Moore

"Every day in my work I observe companies that are drastically affected by the changing ecology of business competition and that seek ways to understand and shape the transformations engulfing them. I tell them about the death of competition.

Not that competition is vanishing. In fact it is intensifying. But competition as most of us have routinely thought of it is dead – and any business manager who doesn't realize this is threatened. Let me explain. The traditional way to think about competition is in terms of offers and markets. Your product or service goes up against that of your competitor, and one wins. You improve your product by listening to customers, and by investing in the processes that create it.

The problem with this point of view is that it ignores the context – the environment – within which the business lies, and it ignores the need for coevolution with others in that environment, a process that involves cooperation as well as conflict. Even excellent businesses can be destroyed by the conditions around them. They are like species in Hawaii. Through no fault of their own, they find themselves facing extinction because the ecosystem around them is itself imploding. A good restaurant in a failing neighborhood is likely to die. A first-rate supplier to a collapsing retail chain – a Bradlees, Caldor or Kmart – had better watch out." (p. 3)

So what Moore is saying, in fact, is that competition is not really dead, it just must be viewed within a larger context. Or, rather, that the traditional view of competition no longer holds; the new approach sees competition as one perspective on how business works, with cooperation between businesses and their suppliers and customers being another equally important perspective. (This is the thesis of another recent and influential book – Co-Opetition by Nalebuff and Brandenburger.)

Central to this new perspective is the notion of a business ecosystem, which Moore defines as:

"An economic community supported by a foundation of interacting organizations and individuals – the organisms of the business world. This economic community produces goods and services of value to customer, who themselves are members of the ecosystem. The member organisms also include suppliers, lead producers, competitors and other stakeholders. Over time, they coevolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles." (p.26)

Examples of business ecosystems which Moore discusses extensively in the book include:

Wal-Mart IBM AT&T Intel Microsoft the automobile industry

Moore maintains that there are four stages to the development of a business ecosystem: 1. the 'pioneering' stage, where the key leadership and strategic challenge is to create superior value through a new product or service – this new value must be a dramatically superior way of doing business (such as Wal-Mart inventing a new system of retailing or Intel inventing a new form of microchip)

2. the 'expansion' stage – in time, more players are lured into the network to be suppliers, customers, or competitors as it becomes apparent that the new product or service being offered in going to become the standard, replacing the previous product or service – the key leadership and strategic challenge in this stage is to ensure that the ecosystem reaches the sort of critical mass that is required in order to become the new paradigm – this requires enlisting the support of many other players

3. the 'authority' stage – after 'critical mass' is achieved, and there are many players in the game, there will inevitably be a 'shakeout period', where the roles and dominance of players in the ecosystem become established, depending upon the capabilities of the players, the relationships established, the luck of the draw, and many other factors – "A central challenge facing business strategists in maturing ecosystems is how to maintain their authority and the uniqueness of their contribution to the community while also encouraging communitywide innovation and coevolution." (p.77)

4. the 'renewal' stage – over time, new business ecosystems will develop that are related to (possibly directly competitive with) the established paradigm – these will offer superior value in their own areas and will eventually challenge the dominance of the established ecosystem – the leadership challenge in the established ecosystem is to ensure that continuous improvement processes are established and that the system continues to deliver value, rather than become obsolete

The leadership and strategic challenges can be summarized as shown below:

(from p. 83 of the book)

The bulk of the book is devoted to an in-depth exploration of this framework, examining the strategic challenges faced by a business ecosystem (and more particularly a leader in a that business ecosystem) in each of the four stages. Moore examines these according to what he calls the 'seven dimensions of competitive advantage' which are:

customers markets products processes organizations stakeholders government and society

These seven areas thus present a comprehensive framework for the discussion of how an ecosystem grows and develops at each stage.

The Death of Competition is an interesting example of a series of business books that have emerged in the nineties that postulate this concept of a 'business ecosystem', drawing upon examples from nature and ecology of an interacting web of producers, consumers, and influencers (see for example, in addition to the aforementioned Co-Opetition, Rothschild's Bionomics.) It is a very interesting perspective with much to commend it, insofar as it looks well beyond the traditional perspective of business existing to merely clobber the competition, and addresses more the question of the role of business in society overall.

Technorati tags: book summaries, business books, business productivity, self improvement, leadership, business strategy, James Moore

Strategy Safari ­ A Guided Tour Through the Wilds of Strategic Management by Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel

Using the analogy of the blind men trying to describe an elephant (remember the story where the one feeling its tail thought it was like a rope, the one feeling its leg thought it was like a tree, the one feeling its tusk thought it was like a spear, etc.) Mintzberg, Ahlstrand and Lampel discuss various approaches to strategic planning. They identify 10 different schools of thought, and describe in chapters devoted to each, its history and origins, basic concepts, applications, advantages and disadvantages, and situations in which that approach to strategic planning may be appropriate.

At the outset of the book, in attempting to define this amorphous beast, they outline what they call 'the 5 P's of strategy', which are really five different ways of thinking about the essential characteristics of strategic planning. These are:

1) strategy as a plan ­ a guide for a course of action, a path from a current state to a desired future end state

2) strategy as a pattern ­ "…that is, a consistency of behavior over time. A company that perpetually markets the most expensive products in its industry pursues what is commonly known as a high-end strategy, just as a person who always accepts the most challenging of jobs may be described as pursuing a high-risk strategy." (p.9)

3) strategy as position ­ the location of particular products in particular markets.

4) strategy as perspective ­ "in Peter Drucker's memorable phrase, this is the "theory of the business" (p.13) ­ it represents strategy as a particular philosophy of the business in terms of interacting with the customer, or the way(s) in which goods or services are supplied.

5) strategy as a ploy ­ under this definition, strategy is a means of gaining market share through a specific maneuver, designed to outwit a competitor or opponent.

The authors also discuss at the outset of the book the pros and cons of the various reasons why strategic planning has been thought to be beneficial in an organization. These are:

- strategy sets direction ­ while this is clearly beneficial, the danger is that the blinders that a strategic plan can impose upon an organization can make it difficult to appreciate new opportunities and possibilities as they arise

• strategy focuses effort ­ true, but the downside risk is that managers within an organization can get locked into a particular form of "groupthink", again missing out on potential new opportunities

- strategy defines the organization ­ again true to some extent, but the danger here is that the rich diversity inherent within the organization can get overlooked or lost by an overly simplistic stereotype of "what the organization is all about"

- strategy provides consistency ­ assuredly important, but consistency for consistency's sake, without having a clear market-oriented reason for this, is the obvious danger here

So it is apparent that the authors do not necessarily regard strategic planning as a good thing in all cases; they clearly indicate that there are dangers that an overly rational or overly rigorous approach can pose.

The core of the book is a detailed description of each of the 10 schools. They differentiate between two categories in this regard: the prescriptive schools, which attempt to identify directions for action on the part of the company based on an assessment of its current situation and that of the environment within which it operates, and the descriptive schools, which simply attempt to understand the historical reasons why a given company is where it is at a particular point in time.

The 10 schools are listed below; the accompanying chart (click here) provides further details on each:

Prescriptive Schools

1) Design School: This approach regards strategy formation as a process of conception, matching the internal situation of the organization to the external situation of the environment. Thus the strategy of the organization is designed to represent the best possible fit.

2) Planning School: Here strategy formation is seen as a formal process, which follows a rigorous set of steps from analysis of the situation to the development and exploration of various alternative scenarios.

3) Positioning School: Under this approach, which is very heavily influenced by the works of Michael Porter, strategy formation as an analytical process placing the business within the context of the industry that it is in, and looking at how the organization can improve its competitive positioning within that industry.

Descriptive Schools

4) Entrepreneurial School: This approach regards strategy formation as a visionary process, taking place within the mind of the charismatic founder or leader of an organization.

5) Cognitive School: This approach, based upon the science of brain functioning, regards strategy formation as a mental process, and analyzes how people perceive patterns and process information.

6) Learning School: This school of thought regards strategy formation as an emergent process, where the management of an organization pays close attention to what works and doesn't work over time, and incorporates these 'lessons learned' into their overall plan of action.

7) Power School: Here strategy development is seen to be a process of negotiation between power holders within the company, and/or between the company and external stakeholders.

Cultural School: This approach views strategy formation as a collective process involving various groups and departments within the company; the strategy developed is thus a reflection of the corporate culture of the organization.

9) Environmental School: Here strategy formation is seen to be a reactive process: a response to the challenges imposed by the external environment.

10) Configuration School: In this final approach, the purpose of strategy formation is seen as a process of transforming the organization from one type of decision-making structure into another.

In each of these schools, the process of strategy formulation itself is regarded as something of a "black box" ­ none of them are able to clearly describe how an individual or group is able to leap from the collection and analysis of information, to the conceptualization of alternative courses of action (although they do concede that the cognitive school comes closest). Overall, the authors appear to prefer the 'learning school' (they are teachers, after all), because of the emphasis that it places on an organization incorporating input from its environment, and adapting over time.

In the final analysis, just as none of the blind men's descriptions of the elephant was completely adequate, yet each contained elements of truth, none of these 10 approaches is complete in and of itself, either. Each offers some useful concepts, and some strong points to aid understanding, but has its disadvantages as well (again, see the chart).

As well as providing a useful illumination of the origins and characteristics of the different schools of thought, Strategy Safari also makes for a very enjoyable and entertaining read. Mintzberg et.al. have done an excellent good job of taking a difficult and potentially deadly boring subject and rendering it interesting. The book is highly recommended for anyone embarking upon, or engaging in, a strategic planning process.

Technorati tags: book summaries, business books, business productivity, self improvement, strategic management, Henry Mintzberg, Strategy Safari

Hackers, hurricanes, fires, flooding, power outages, denial of service attacks, application failures, employee error, sabotage and now terrorism are helping companies to focus on the necessity of a business continuity plan.

Through the late 1990s as companies prepared for Y2K, many IT executives, risk managers, CFOs and corporate managers realized that recovering computing systems, networks and data was not enough. As Y2K approached, it became more apparent that a disciplined approach was needed to recover not only data and systems, but also business processes, facilities and manpower to restore and maintain critical functions.

The starting point is a risk assessment. Identify and define your mission critical business processes and systems. Review them for vulnerabilities and identify steps required for restoration and recovery. For your data, make sure it is backed up to secure and separate locations. Evaluate various storage solutions including storage area networks, data replication systems, new virtualization systems, network attached storage devices and managed storage. Pay significant attention also to your telecommunications providers to ensure they have built diversity and redundancy into their networks and have well developed and tested contingency plans.

The risk assessment will start to drive out real questions on the business impacts and losses that could result from disruptions. Mission critical impacts, key business functions, processes and records must all be identified. This is also the time to determine resource requirements and acceptable recovery time frames.

Various recovery strategies should be evaluated to achieve your cost, reliability and time to recover objectives. Include physical, technological, legal, regulatory and personnel considerations when you evaluate alternatives. Common points of failure are a lack of executive and budget support and not fully engaging employees. Along with your data, employees are your most valuable asset. An excellent checklist "Considerations for senior management during a time of crisis" is at www.globalcontinuity.com (enter checklists in the search box, click on DR & BC checklists).

Business continuity planning sounds expensive and it can be time-consuming. However, losing your business functions, processes and systems as well as your company, customer and financial data can be devastating. Build your plan. Train, test, train and test again.

About The Author: Robert Mahood has significant technology and management experience in data communications, internet, storage, disaster recovery and data recovery. He is currently the president of Midwest Data Recovery.

Technorati tags: book summaries, business books, business productivity, self improvement, technology