Category: Business

Review of the Greek Issues

Posted on by bobdvb

 

This morning my brother asked me to tell him what I thought about the news reporting of the Greek issue, he asked about what are the alternatives. The only alternative I see is default, but I wanted to share some background and my views.
Currently the Greeks have a massive public debt because of massive public spending beyond any reasonable amount. Over 60% of the Greek workers are employed by the state, so less than 40% of the population pays for over 60% plus those on state support (pensions etc). Greece imports the majority of its fuel and manufactures very little beyond food. Tourism accounts for a significant portion of income but not so much to balance the entire economy and it has some ups and downs which would add risk.

Greece has been borrowing money since the late 1800s, each time they get close to paying it off some other disaster befalls them and they need another loan. They borrowed heavily after WWII and defaulted (as well as defaulting to some degree a few times before as well), so when they asked for another loan they ended up paying about 120% interest, it was like the other countries were being loan sharks. They are still paying loans with massive overheads and poor terms.

If Greece defaults it is far worse for France and Germany than for Greece, France and Germany have the greatest exposure, the top five French banks would be crippled if Greece defaulted. The Greeks import almost no food and while fuel might get very expensive they are already thrifty (almost no one has more than a 1.6L car) and almost all water is heated with solar boilers. The biggest problem would be currency devaluation for a decade (because they would have to go back to the Drachma), but there is enough import of foreign currency through tourism to help offset it. They have to stop public building projects and lay off lots of public sector workers, but these people are just a stone round the neck of the rest of the people because many of them aren’t productive because they effectively have “Job For Life”.

They have already started getting serious about corruption, so that should help a great deal, but corruption is endemic!
Every Greek born has €31,000 of public debt.
Unemployment is 43% among 15-24 year olds.
Every Greek will evade an average of €3,000 in tax in their lifetime
Europe has demanded €50bn of public assets to be privatised or sold (20% of GDP).

In my opinion Greece should default, and the state should start operating just with New Drachma, don’t convert savings from Euro to Drachma but the government should only pay out in Drachma and should insist on taxes being paid in Drachma. State industries should only accept Drachma. They could sell their assets but it wouldn’t achieve anything. Most of the phone network is owned by the German telecoms company. The power company has an aging infrastructure and horrible regulation which no one would pay much for. Many of the major road developments are already PPP. They don’t have enough assets to sell at a good value! Tourism and natural circulation would restore the value of the Drachma in a decade or two, there could be inward investment and with restricted ability to import products there would be a boost to local industries/production!

In addition: after the push to get Greece into the Euro they fudged their economic data once in to show they were maintaining their financial performance, it was only later, after they were well embedded that it was realised.

My partner and I have often discussed that despite being declared the “home of democracy” the Greeks now have neglected their duty and forgotten about what it really means to be democratic. I believe also they are negligent because they don’t have independent checks and balances. Politicians have the right of asylum in parliament rather than the idea that they should fear even more because they are in the home of democracy! Greek higher education believes it is impure to mix business and academia, they don’t leverage their massive assets (even the waiters in the cafes in Greece have a Masters or higher!) and universities don’t even know what an “Enterprise Unit” is. The agricultural school sells their excess stocks because they have more than their canteen can handle, but that is a rare exception!

Hope that gives you an idea. Every one in Greece seems very subdued and depressed at the moment, but they are getting on and trying to live their lives with an average of 20% less money in their pockets.

Warranties on consumer electronics

Posted on by bobdvb

When you purchase an item of consumer electronics it isn’t actually the manufacturer who has the main legal responsibility if the product goes wrong. The oft quoted “sale of goods act” applies to the person with whom the customer has exchanged the ownership. In most cases the contract of purchase is with the retailer and thus the onus is with them to assist the customer after sale. A manufacturer has a limited responsibility in the case that the retailer cannot, or will not, honour the warranty but in most cases it is the retailers generosity and discretion that prevails when the customer is speaking directly to the manufacturer.  Also remember that after six months the customer is deemed to have accepted that the goods are in working/acceptable order and if there is a problem after this period the customer must prove that the product was faulty at manufacture. Under six months the manufacturer must prove the product was not faulty at manufacture.

A manufacturer warranty is actually a form of insurance that is generally taken by the manufacturer on the products (either internally or externally guaranteed) and it is measured against the expected returns (when producing hundreds of thousands of units some must fail). A manufacturer may provide the company that purchases (the retailer) that warranty at whatever level suits their business model. In some cases a warranty is a point of negotiation because it must be built into the cost of dealing with that customer. In some circumstances a sales package may be offered to the retailer that says they cannot return any product to the manufacturer, in which case the retailer gets a better price because the cost dealing with that retailer is lower (in both logistics and support). A retailer will have a common warranty period that they can pass on but sometimes they might agree a shorter period because either the quality of the goods cannot be so easily quantified (re-manufactured product) or because they can achieve a lower retail pricing but give the customer a lower service level.

In most cases where a retailer sells the same product (not re-manufactured) as another but offers a lesser warranty this isn’t an indication that you are getting a lesser product and it isn’t that the retailer is trying to con the customer. It is just that they are offering a different service one that is consummate with their business model. This is also the case for extended warranties: they are offered where the supplier wishes to give the customer greater choice or an enhanced service. Although I will acknowledge that in some circumstances extended warranties have been pushed on customers to increase margins and also that re-manufactured stock (which often has a lesser warranty) has sometimes been sold by retailers as new stock without the customer knowing.

Economically Sustainable Housing Proposal

Posted on by bobdvb

Introduction

The purpose of this document is to describe a model for housing that firmly
embraces the 80’s ideal of ‘property ownership for all’ but which avoids uncontrolled
spiralling property values and creates affordable housing which stays affordable. It
enables all socio-economic groups to benefit from affordable housing without the
need for discrimination and does not rely on social exclusion. Additionally embedding
communities at the heart of the design and not making affordability a special case.
It is not intended to be a communist approach to the property market but to be
a business model which is designed to be sustainable economically and
environmentally, but yet socially aware. Many of the statements in this document
include observations based on the past two decades of the property market by the
authors who have had varying levels of involvement in property and construction but
are presently unable to purchase due to the state of the current property market.

 

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Outsourcing effectiveness

Posted on by bobdvb

I’ve noticed a disturbing trend towards “turnover per head” in organisations, this means that an organisation will do anything it can to increase it’s turnover relative to the number of book employees. Even sacrificing employees to outsourcing because, while costs increase, the amount of money handled per-head has dramatically increased.

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Introduction to KPI’s

Posted on by bobdvb

The KPI (Key Performance Indicator) is defined as a factor which is critical to the success of our business. As such it should be measured regularly by collecting and analysing reliable internal and external data. This data allows the company to evaluate its performance and subsequently benchmark it against the rest of the industry. Additionally, it makes our achievements directly comparable to those of our competitors.

 

The process of identifying and selecting the appropriate KPI’s for our business is paramount as this is the stage when a formal system for measuring our performance is established. The company’s commitment to measuring and analysing the collated data can lead to business objectives’ realisation and continual improvement. However, the KPI’s are only a business tool for decision making and at no point can it replace the formal strategic planning of the company. 

 

The benefits seized by such a methodology are presented below:

  • KPI’s can be an initiator for directing and driving our business forward through influencing our business processes. The successful management of our business processes can result into an efficient and profitable company as a whole.
  • KPI’s consist a great tool that supports the company’s vision and goals; two of the major “team binders”. It is generally accepted that integrated teams work more efficiently and produce results in shortest time. Time reductions mean less cost and so greater profitability and predictability of performance. 
  • KPI’s can be a mean for driving improvement through comparison. They can reveal the strengths and the weaknesses of a business and prepare the ground for building a competitive advantage. They reinforce our knowledge for the industry by learning from our competitors.
  • KPI’s could drive innovation. This is why a failure to identify meaningful and measurable KPI’s can put our business in danger as we become short sighted, having limited visibility and finally becoming counter-productive.

 

Notes on Customer Expectations

Posted on by bobdvb

The essence of customers’ expectations is about customers’ needs and requirements. The needs are harder to identify as they are more profound than the requirements which are pretty obvious and straightforward. Therefore, we need to identify the degree in which these elements are present through a survey. We need to quantify customers’ perception about the quality of our service given that customers do not (or should not) always expect ‘the best’ from us as this is subject to the cost and time available for completing the project rather than our capability and experience.

Any questionnaire should consist of quantifiable/measurable elements rated in a scale of 0-100% tolerance against customers’ standards. The same survey should then form part of our service benchmark completed by the client (benchmark the demand for service). This means that we should ideally carry out a customers’ expectation survey once we undertake the project, then using the same survey for having our performance measured by the client so we can check how well we perform through the customer’s eyes (customers shouts) and identify the areas of improvement prior to getting on site. Lastly, on the project’s practical completion we need to carry out the final satisfaction survey.

Three are the key elements to the customer’s expectations.

  1. Cost/Time
  2. Quality
  3. Competitive advantage (the wow factor that differentiates our brand from the competitors)

The questions is how elastic/inelastic are the above from the customers’ perspective? Meaning: 

  • What factors the customer feels as essential, prerequisites? Must have, the basics? (for example: H&S issues)
  • What factors add value to the service/product for the customers? It is about good performance, deliver what we promise (for example: min cost and time, higher quality)
  • What is the ‘wow’ factor of our service? Do we add value that the customer doesn’t expect? (Satisfy the ‘greedy’ customers. Once the basics, or expected requirements are met then they ask for more!)
  • Being successful means that not only we should offer what customers expect but also what they don’t expect.

The input would be: customers’ requirements and lessons learnt which are turned into the output: improved quality approach and structure, calibrate the service to meet demands

Knowing our customers needs, requirements and expectations provides us with better visibility thus, better forward planning avoiding bad surprises and implications which can put the project’s quality at risk.