PICKING THE MOST SUITABLE INVESTMENT

Investment opportunities present themselves in all shapes and sizes. It is possible to place money in as diverse a range of commercial ventures as transport, education, hospitality, health, retailing, textiles, banking and real estate.

Investment opportunities present themselves in all shapes and sizes. It is possible to place money in as diverse a range of commercial ventures as transport, education, hospitality, health, retailing, textiles, banking and real estate. There are a few rules a person wishing to invest can observe to find the best home for their money. Here, we are talking basic approaches that can be applied across all types of asset.

Deciding on Rate of Return

The tendency in most entrepreneurs is to hope for as high a profit rate as possible. Even so, the minimum acceptable return often differs from one person, group or organisation to another. As an investor, then, you have to see, for starters, if a business gives the least profit satisfaction you would be content with.

Understanding   the Type of Business

An appreciation of the kind of scheme one is considering having an interest in is important. You do not necessarily have to be expert, but merely familiar with the general behaviour of the particular business type. What is required is such basic knowledge as would make possible forecasting of sales.

Reading the Business Environment

This is a highly complementary issue to the preceding one (understanding type of business), as business can only be fully comprehended when viewed relative to what surrounds it, or could surround it at some point in time.

The business environment includes competition and government policy. Not to be ignored, however, is what lies inside the business, such as the capacity of the employees. It all helps an investor see what fortunes or misfortunes are likely to lie ahead.

Estimating Payback Period

This is closely related to rate of return (the higher the rate the more quickly costs are covered).

There must be calculation of what length of time it will take to recover the capital outlay. Less time generally means less exposure to hazard. Allowing a long payback period means so many things could potentially happen to change the course of business from good to bad.

Considering risk or uncertainty

Risk is danger that is known and may be estimated, while uncertainty is a threat that is not predictable, and may even be difficult to measure. Examining risk or uncertainty greatly helps in getting a more complete perspective of the profitability of an investment.

Where too much risk or uncertainty exists, it is naturally wiser not to stake any assets.  

Assessing Participation Level Needed

Some investors would like to take part in giving direction to the business while others would rather be largely passive.  

Measuring Free Time Allowed

Even when one would like to be part of active management, they may wish to dedicate some time to leisure and other interests. If an investment does not permit you time for other life pursuits, it might take fullness out of your life. It therefore cannot be said to be a good enough venture to get into.

Gauging Ease of Divesting   

Once an undertaking loses attraction (profitability, essentially), it should be relatively easy to retrieve the resources put in it - or what remains of them - so that they can be used in another type of endeavour.

Conclusion

Experienced business people and scholars are aware that part of the game of investing well is diversification of risk. It is the old adage of not putting all one’s eggs in one basket. It is better to have an asset portfolio spread over, at the least, two ventures. These also should advisably belong to different sectors (in simpler terms, you could invest in a mine and in a tourist resort). It stabilises income flow and thus shields against sudden and total fall from riches to rags.

THE EVOLUTION OF MARKETING

The flamboyant tree in full bloom!!! Glorious!!!

The field of marketing has not always been there in its present form. Five significant periods are identifiable in the evolution of marketing as a business discipline.

The Production Stage

The production phase started at the time of the industrial revolution. The industrial revolution was the time man learned to use advanced machines, and to mass-produce. Roughly, it was the 100 years from the mid-1700’s to the mid-1800’s.

The emphasis in the production stage was on producing – making as many things as possible available. This was understandable mainly because:-     

•          It was really the first time modern clothing and processed food had a chance of being available widely. There was a big section of society ready and waiting to consume. Never mind the ability to pay.
•          There were not many mechanised producers and, therefore, not much competition.

The Product Stage

As more parties jumped onto the industrialist bandwagon, the producer field became crowded – which meant competition for buyers. This situation promoted new thinking in manufacturers, to overcome the increased difficulty in finding customers. The result was birth of the product stage.

It was believed that businesses had to aim at making better quality than the competition to be sure of finding buyers. The ‘quality race’ was not the end of the search for a more reliable business philosophy.

From the works of some scholars, it is possible to conclude that the production stage was the period from about 1850, and that the product stage may have started around 1900.

The Selling Stage

By the 1930’s, a new way to look at unlocking business success had emerged. It was selling orientation.

The selling stage probably marked the beginning of modern-day thinking on the important role played by the salesman. The new belief was that it was the effort of sales people that would make the difference between finding buyers and not finding any. And so, the search was on for high-pressure sales employees.

The Marketing Stage

In the 1950’s, the marketing concept was born, underpinned by putting customer requirements first. Marketing orientation moved focus from the producer and product to the buyer. The realisation was that businesses existed to satisfy the needs and wants of customers: that there would be no business without a desire to consume something. Producers, it was stressed, had to strive to meet the expectations of their clients better than their competitors to win more buyers.

The Societal Marketing Stage  

Societal marketing is about not only providing merchandise and services that match customer requirements but also taking care of wishes beyond product attributes. It includes, for example, ensuring that food offerings do not cause excessive weight gain that exposes consumers to the risk of heart disease, and avoiding manufacturing processes that result in environment-damaging emissions.

Promotion of societal marketing started in the early 1970’s.

In many ways, societal marketing is not a totally new and independent concept, but an enhancement of the basic philosophy of marketing. It is, in that sense, in the same bracket as customer relationship marketing (CRM), which advocates building and maintaining close understanding with each customer.

Conclusion

Not every organisation today is marketing oriented. The environment does play a part in how much a business leans toward marketing. Where shortages are common, for instance, it is normal to see efforts mainly directed at maximising production.

   
Rupert Chimfwembe, 12 March 2018.

WORK STUDY: Method Study Steps

Work study is the scientific effort to understand specific operations and propose improvements. It covers all aspects of work including the content of the each responsibility, the time taken to do any job, the environment, the worker and aids used in the execution of tasks.

The two main areas of work study are method study and work measurement. Method study deals with suggestions as to the optimal way to perform tasks. Work measurement is aimed at finding the most appropriate length of time for carrying out specific assignments.

Method Study Steps

1.     Identify the work to be done.

2.     Develop a good understanding of what the job or task is about.

3.     Use an appropriate mode of information storage - video, audio, picture, text or other – to make an accurate record of the way the job is done.

4.     Use the recorded material to do a critical analysis of every part of the method used.   

5.     In conjunction with key stakeholders (such as the person or persons who do the work) formulate the best way of performing the task under the circumstances (that is, taking into account factors like tools available and the training the employees involved have).

6.     Introduce the new standard way of performing the job.

7.     Regularly check to ensure that the standard is adhered to.    

Why Method Study?

An effective method study programme can lead to benefits like:

·        Optimisation of productivity and profit.

·        Decrease in resource waste.

·        Better long-term worker health.

·        Less equipment wear and tear.

THE COMMUNICATION PROCESS

THE COMMUNICATION PROCESS

The communication process refers to what is involved in the movement of information from one point to another. The set of logical stages describing the process is what is referred to as the communication model.

 

In this article, we put the spotlight on the normal way communication is said to take place and compare it with another that we suggest.

Figure CM is the standard communication model.  Let us briefly explain it.

Sender or transmitter. The source or originator of data, facts, figures, the idea or other matter that is to be passed to another point.

Encoding. The moulding of the material to be moved into a form (picture, language, sign, for instance) that best suits the situation.

Message. The matter or material with a meaning that is to be transmitted.

Channel. It is the medium to be used by the sender to pass the message to another point.

Receiver or audience. This is the party the other point that the sender wants to take the message.

Decoding. To decode is to interpret the message so that its meaning is understood.  

Closed Circle and Open Circle Communication Models

Figure CM is closed circle, standard communication model. The receiver encodes the message and sends feedback to the sender.

Figure CM1 is the open circle communication model. This second diagram shows the two possible directions of communication as follows:

•              the receiver gets the message and sends feedback to the sender to          restart the cycle, and/or
•        sends the same message to another recipient; which also restarts the      cycle.

Not only is figure CM1 an ‘open circle’, but is also explicit about the decisions the recipient has to make decisions concerning type of encoding, channel, and appropriate audience (CM assumes these procedures. They are quite natural after all, to state it fairly). 

Figure CM: The 'closed circle' communications model.

Figure CM 1: The 'open circle' communications model.

Perhaps the biggest achievement of what I call the open circle communication process is simply getting us to appreciate that we do not have to set a limit on our directions of thought, not whether the above proposal is right or wrong. What is your reaction? 

BENEFITS OF INNOVATION

Innovation takes place when a change is introduced that improves what is already in existence. 

Innovation in business, as elsewhere, can take a wide range of specific forms. Many of the changes ultimately concern the physical products of an organisation or its processes. For example, a modification in manufacturing plant can lead to an improvement in some characteristic of a good or alteration of the manner in which it is made, or both. A shift in management structure or philosophy can also eventually impact the product or the way certain tasks are performed.

Pursuing a creative path in business comes with a number of important possible gains.

Gaining more control over price. Innovation is one way to reduce price-reduction competition that eats away at the profit margins. New features in a product, that competing brands do not have, mean less direct comparison by customers. In other words, a newly-innovated product is effectively differentiated: it is often seen in its own light and as deserving its own price. In fact, a really revolutionary product improvement is a good passport to top-of-the-range kind of pricing and can therefore bring enormous profits.

Improving efficiency.  Higher efficiency simply means achieving the same result with less resource. Inevitably, then, improved efficiency represents cost savings. These come in such shapes as reduced raw material, waste or time. Indeed, savings in costs are rises in profit.    

Efficiency is not just about the actual process of producing goods and services. It also concerns the general way in which an organisation and its various departments or sections are administered.

Re-designing the plant or machinery used to produce; tasks and responsibilities; procedures and processes, are all examples of innovations that can lead to greater efficiency.   

Creating new consumers. It happened when double cab pick-ups were introduced. The innovation transformed purely utility vehicles to family ones as well, which meant likelihood of more users.

Extending life cycle. By continually making improvements to goods and services, marketing techniques, human skills and other relevant aspects, the life of both the products – and hence the enterprise itself – can be prolonged.

Raising profile. Strong credentials as a creative firm could bring probability to more easily attract additional capital when needed; good talent in search of an environment in which they are able to freely showcase their individual resourcefulness; and even make customers more ready to prefer their products over those of businesses less firmly associated with dynamic offerings.                 

CONCLUSION

Innovation must be part of the central business culture of an enterprise. Many big organisations that have over the years grown more and more lethargic have fallen by the wayside and their place has been taken by newer firms directing more energies toward product and operational modifications.    

Rupert Chimfwembe  30                          January 2017

MARKET SEGMENTATION

Market segmentation is the practice of breaking down buyers or users of a product into smaller, more homogeneous divisions that can be satisfied with one marketing mix.

Marketing segmentation is at the very heart of the entire discipline of marketing, itself described basically as:

The set of activities in which the supplier first determines what is needed or wanted and then tries to provide the requirement at a profit.  

As can be seen, both segmentation and marketing clearly address the issue of customer satisfaction.

Marketing practitioners are expected to do market segmentation because it is their recognition that greater sales, and thus a more predictable, secure future in the ultimately belongs to the organisation that is able to meet customer desires.

Rather than assume that anyone that needs transport, for example, is ready to accept any vehicle, wise business people try to understand if there are any specific types of automobile that are preferred above others by some groups within the market for transport products. They do indeed come up with such classifications as utility vehicle and executive car.  

Main Benefit of Segmentation

Segmentation enables the marketer to raise chances of good performance, as they can devote energies to addressing special requirements. This contrasts with trying to present one product for all sub-classes in the market, as competitors who concentrate on the unique needs of smaller groups might out-do them.   

What determines segments?

The degree of importance to a particular market, of each possible criterion, is what makes it necessary or unnecessary to consider a classification candidate for market segment. There are other factors, next, to look at, which include:

-         

     Profitability. Does the grouping represent a return that makes business sense.

   Reachability. Is the segment easy to connect with physically and by way of other marketing communications tools like advertising and sales promotion?

-       

            Definability and measurability. If it is not distinguishable, it might be difficult to reach. And if it cannot be quantified, its commercial value might be impossible to establish.

-         

     Uniformity. The segment members must respond the same way to different offerings.

-     

Stability. Over the long term, the segment must remain basically undiminished in key elements like potential size of business.

Lines of Segmentation

There is no limit to how a market can be segmented. If your market were cyclists, lines of segmentation might include pursuit racers and mountain climbers. If you sold fire-fighting equipment, divisions might be, obviously among others, single-storey fighters and those who need facilities for between one and three floors.

For many consumer (non-business) products, broad bases of segmentation have often been demographic (for example, age, gender, income and education); geographic (describing where different customers are found); psychographic (profiling personal mental make-up in areas like attitudes, norms and values); and behavioural (dealing with activity patterns like when people sit down to watch TV).

Two Marketing Challenges in Segmentation

1)    Needs/wants versus product attributes. Segmentation is not a preserve of any single business. So, there is likely to be competition already, or sooner rather than later, in any market segment. It means a marketer has to aim at satisfying customers better than the others. One way is to match product attributes with segment characteristics more closely than the competition does.

    

2)    One niche or more? Segmentation does not imply a firm concentrating on only one sub-group of customer. It can go after two or more. However, it has to possess the capacity to be competitive, or develop it. The more the segments picked, the more the resources to be committed. However, there would be gains like greater revenue, diversification of risk and stability of income (for instance, if some segments are highly vulnerable to seasonal sales fluctuations).

Occurrence of Segments

Market segments present themselves in different ways. We share with you only two simplistic examples. In figure WC, the market for winter coats in country C has 100 customers, of whom 30 prefer the product in green colour and 33 in blue. The segments are totally independent of each other.

Figure WC: Market segments for green and blue winter coats in country C.

The second example, figure WC1, shows the same information as figure WC, but with the addition of a new segment, for purple winter coats. Its membership consists of 10 who also like green; 12 who also can wear blue and 11 who exclusively prefer purple. The total size of the purple colour segment is 33. In this representation, of course, the blue and green segments have a connection via their members who also like purple.

 

Figure WC1: Market segments for green, blue and purple winter coats in country C.

 

The two illustrations are intended only to free the mind of any restrictions in looking at how segments configure themselves.

Conclusion

Paying attention to special, uniform requirements of smaller parts of a market can be the first step to delivering better customer satisfaction. The approach is applicable to both profit and not-for-profit bodies.

                Rupert Chimfwembe 3                               February 2017.

THE CONTROL PROCESS

The controlling activity is one of the fundamental management functions including planning, organising, leading and co-ordinating (some add staffing instead) that a manager is expected to carry out. But, just what is control?

Control is the process of ensuring that the organisation steadily pursues what it decided it should achieve, and not anything else. So, to control is to ensure that the performance of the institution stays within predefined bounds.

Controlling is only possible where plans prescribing what is to be done exist; and plans may be a waste of resources without any form of control. That is because the purpose of control is focusing performance in the direction of the desired outputs, not just any outcomes.

Control can be applied to all sorts of plans, and examples are those concerning inventory re-order quantity, revenue, profitability, quality, productivity and safety.  

About five major steps are taken in the control process.

1.     Determining Standards. Ordinarily, anything to be regulated requires standards. Standards are performance benchmarks, or grades that indicate acceptable levels of operation, without which the organisation may not be able to achieve its objectives.  

Standards often make use of comparative representations like sales-to- quotation ratio and profit margin; rates like units produced a day and breakdowns per month; and even absolute measures like degrees Celcius or degrees Fahrenheit.

The level of performance picked as standard can depend on many factors. We use three examples from the sales arena:

                                         i.          The amount of experience possessed by the person carrying out the task. For example, new sales people fresh from school are not normally expected to sell as much as older, seasoned ones.

                                  ii.           The time of year. Sweaters and other warm clothes, for instance, do    not sell as much in summer as in winter.

                               iii.       The level of competition, as in a new, growing market generating a lot more business than a crowded, mature one. 

     

Other strong elements affecting the decision to adopt a particular standard are type of industry or product and resources at the disposal of the institution.

For some variables, say, friendliness of customer service, establishing standards can be difficult.

2.     Monitoring. Monitoring simply means keeping an eye on what is happening. Today, it is not always a necessity, especially because of the emergence of high-intelligence, computer-driven technologies which can perform the monitoring task and give alarm signals when something goes wrong. Even then, however, monitoring by humans remains extremely important in some cases. Besides, machines are not infallible.

Some jobs just may not be performed as well by the latest technology as by the manager. For example, cutting-edge technology might be unable to read sadness in a worker.  The human supervisor, on the other hand, can quickly notice and address it before it begins to affect output. Even if no action is immediately taken, step 4 is likely to be quicker and less time-consuming if the manager has some mental recollection of how, in this example, an employee had looked.

And there are problems that have to be spotted and corrected instantaneously, thereby requiring second-by-second monitoring: like those occurring in a boxing or football contest, making it necessary for the manager to shout out instructions all the time.

  

3.     Measuring and comparing. Measuring results and comparing with set standards is done to find out if everything is going well. The actual could turn out to be below or above expectation. There is often an acceptable degree to which actual can exceed standard or fall below.

Caution: just because the standard has been outstripped does not mean celebration. Sometimes, higher is as bad as lower. A business, therefore, cannot produce any more than its storage facilities can hold or the market can readily buy.  That is to say, control is for deficiencies as well as excesses.

4.     Diagnosing problem.  When outputs are in accord with standard, there is normally no action taken (if it ain’t broke, don’t fix it, some say), even though some might recommend measures to further strengthen the chances of attaining the preferred outcome.

When results are outside of allowable limits, steps are taken to determine what caused the deviation. The problem area is expected to be either the standard itself or the way things are done.

5.     Taking remedial action. Like step 3, this is split into two possibilities. If the problem is wrong standard, a new standard is worked out. If it is wrong work formula, a new formula is devised.

More specifically, the answer usually falls in any one, or combination of, the following categories:

                                                  i.      Changing the manner or style in which things are done.

                                                ii.      Changing the conditions under which things are done.

                                              iii.      Changing the inputs or aids.

                                             iv.      Changing the actor (machine or human), or

                                               v.      Changing the standard.

Do note (Figure XY below) that if it is the standard that has to be reviewed, step 1 serves as step 5 as well. It also is step 1 in subsequent cycles. Step 5 is phase 1 in circulations following the first.

       Figure XY: The five-step control process.

        

                        Rupert Chimfwembe                                                                                          30 January 2017

THE MARKETING AUDIT

The marketing audit is a study of variables in the environment of an organisation that are relevant to marketing, for the purpose of making it easier to plot a meaningful business course.

The marketing audit is a look at how the enterprise has fared over a given period of time and a forecast of what can be expected.  This makes the audit an important part of marketing planning.

    

Different organisations and individuals have given their own versions of the marketing audit. Partly, it is because there has not been any universally agreed upon format for conducting it. Nevertheless, one would probably expect all the most important aspects of the unique situation of each business to be covered. There are, however, some elements which would likely be considered natural constituents of the basic marketing audit. The framework suggested below is based largely on those components.  

A Basic Marketing Audit Framework

An elementary marketing audit could be typified as consisting of at least the following six main parts:

A.    Objectives and strategy audit.

B.     Macro-environment audit.  

C.     Industry environment audit. 

D.    Micro environment audit.

E.     Organisation audit.

F.     SWOT Analysis.

A.    Objectives and strategy audit.

-         What are our main objectives in the existing marketing plan? To what degree have we met them?

-         What is our strategy? How far has it been implementable?

-         Were there signs we over-looked other attractive objectives and strategies (based on what was experienced and seen in the marketplace itself?)

B.     Macro-environment audit.

This involves examining SLEPT variables, mainly the sociological, legal, economic, political and technological. SLEPT factors shape the mother environment in which businesses operate. Because enterprises basically cannot control these, the main discussion is how well they are adapted to. Key questions include:

-         What have the SLEPT factors been like and how have we responded to them?

-         How are they likely to change?

C.     Industry audit.

Michael Porter’s Five Forces model is most useful in studying the environment in the specific industry; how the organisation has positioned itself; and attempting to predict changes. While the variables examined here are part of the micro environment, the significance of the model in competitive analysis perhaps makes it deserving of separate treatment in audit.

D.    Micro-environment audit.

                                i.            Consumers (ultimate customer or user).

In addition to what is looked at in Porter’s model, the following questions are among the additional ones to be asked:

·        Where are they found?

·        What quantities do they buy?

·        What are their age groups?

·        How do they use our product?

·        What are their income patterns?

·        How much of this information have we been basing our decisions on?

·        Which direction do user characteristics appear to be going?

·        What percentage of the market are the customers (those who consume our product)?

                              ii.            Intermediaries and support organisations.

There must be a good profile of middlemen like wholesalers, retailers, agents and transporters; a determination of any areas of their requirements that have not been met; and of course, noting any emerging new trends among them that could affect business.

Essentially, understanding the middlemen is understanding the buyers looked at in Porter’s model.      In other words, this section is about shading more light on them. The assumption in this audit is that the buyers are not necessarily the users.

Details concerning suppliers and competitors also have to be available, as one would naturally expect.

   

Finally, it is necessary to be well-informed in respect of other critical business partners like banks and insurers.

                            iii.            Other micro-economic considerations.

They include the general public and special interest groups like those that campaign against obesity and global warming.

E.     Organisation audit.

                                i.            Structural and skills audit.

Both the overall and marketing structures, and available skills and experience, need evaluation in the light of the organisational objectives and strategy that were pursued.

                              ii.            Financial and physical resource audit.

What resources were deployed and how much has been achieved in areas like sales, profit or time savings? Where there resource shortfalls or over-supply?

Also to be looked at are issues like office or factory location, design, size and storage space, even though most of these are planned for long term suitability.

                            iii.            Marketing mix audit.

·  Product.

What needs or wants are the products meant to satisfy? Have there been any gaps in meeting customer expectations, or are there likely to be any?

·  Price.

This is an evaluation of how much price has been in line with the most relevant among key considerations like product life cycle pressures (such as competition), costs, required profit, and positioning.

·  Distribution.

A review is done of the range of suitable sales channels that have been accessible, including how they were employed and could evolve.

·  Promotion.

The promotion audit is a listing of the suitable marketing communications types that have been available, and assessment as regards how they have been utilised from such angles as expected sales, increase in product awareness, expense-budget comparison and combinations (mix) used. It is also an attempt to predict new ways of sending messages to the market and getting feedback.

  

F.     SWOT Analysis.

At this stage, some pattern of strengths, weaknesses, opportunities and threats will probably have surfaced. The more clearly identified they are, the more they can contribute to good marketing planning.  

The marketing audit is an important tool in marketing decision-making. It must, therefore, give a clear picture of where the organisation is and the future it is likely to face.

                 Rupert Chimfwembe   

                         3 February 2017