Operations seems boring to a MBA class. It's not like finance, which is so glamous, it seems we are playing with money.
Operation is like working in a factory, it seems boring, but still all the financial plans have to be implemented in firms.
Theory X, Theory Y and Theory Z have different view to human being, none of them can work at all time in all situations.
Friday, May 14, 2010
BUS 600-SP10, Day 6: Finance
Finance is my favorite part of this book.
I learned the three kind of firms in US, which are Proprietorships, partnerships and Corporations. I understand they are difference in liability. Right now I have a Proprietorship firm, I plan to incorporate it in future.
As for investment, I learned how to use beta, probability distributions to quantitize risk. The CAPM give us a method to estimate the value of an investment.
I am amazed about this risk factor.
This remind me a lesson I learned in the financial crisis. In year 2008, I read a book called "how to make money by selling put option". It seems selling put option is a very easy money. The author list how he made money by selling put option. According to the author, when you sell option, you will gain in three situation, if the market go up, stay flat and go down but not too much. You only lose money when the market goes down too much.
I was so excited, I put $100k account into this venture. I sold many put option. One example shows my logic. Due to the bearish view of wall steet, stock has been down from October of 2007. Until the middle of year 2008, many stock already dropped a lot. MGM is one of them. I am very confident about MGM, because I know half of the Las Vegas belong to MGM, and its capital size drop to only $5B. When MGM dropped to $47 from $100, I sold put option at $30. And this lead me to the journey to the hell. Whenever MGM drop, I said it's manipulation, and I hold it. Guess what, this stock all the way dropped to $3!
Same thing happen in other stock which I sold put option, such as STP, LVS, OIH, and even INTC.
I got numerous margin call, and finally my whole account was wiped out.
What's wrong here? Because I don't know the risk factor!
If I came to study in Calmat earlier, I can save the $100k!
Now I fully understand the put selling is so called naked put. As what my friends told me, selling naked put is like operating an insurance company for stock market. In normal case, you make money by collecting premium. But whenever disaster hit, you will pay back all your premius and end up with big loss. No insurance company will insure your stock, that's the reason.
Last week, a stock with a symbol ITMN dropped from $45 to $10 in one day after FDA rejected their medicine application. I saw a guy in message board said he lose $70k in one day due to selling naked put of $20. The $1 option at $20 level is very attractive, but actually that is because market make already consider the high risk.
I learned the three kind of firms in US, which are Proprietorships, partnerships and Corporations. I understand they are difference in liability. Right now I have a Proprietorship firm, I plan to incorporate it in future.
As for investment, I learned how to use beta, probability distributions to quantitize risk. The CAPM give us a method to estimate the value of an investment.
I am amazed about this risk factor.
This remind me a lesson I learned in the financial crisis. In year 2008, I read a book called "how to make money by selling put option". It seems selling put option is a very easy money. The author list how he made money by selling put option. According to the author, when you sell option, you will gain in three situation, if the market go up, stay flat and go down but not too much. You only lose money when the market goes down too much.
I was so excited, I put $100k account into this venture. I sold many put option. One example shows my logic. Due to the bearish view of wall steet, stock has been down from October of 2007. Until the middle of year 2008, many stock already dropped a lot. MGM is one of them. I am very confident about MGM, because I know half of the Las Vegas belong to MGM, and its capital size drop to only $5B. When MGM dropped to $47 from $100, I sold put option at $30. And this lead me to the journey to the hell. Whenever MGM drop, I said it's manipulation, and I hold it. Guess what, this stock all the way dropped to $3!
Same thing happen in other stock which I sold put option, such as STP, LVS, OIH, and even INTC.
I got numerous margin call, and finally my whole account was wiped out.
What's wrong here? Because I don't know the risk factor!
If I came to study in Calmat earlier, I can save the $100k!
Now I fully understand the put selling is so called naked put. As what my friends told me, selling naked put is like operating an insurance company for stock market. In normal case, you make money by collecting premium. But whenever disaster hit, you will pay back all your premius and end up with big loss. No insurance company will insure your stock, that's the reason.
Last week, a stock with a symbol ITMN dropped from $45 to $10 in one day after FDA rejected their medicine application. I saw a guy in message board said he lose $70k in one day due to selling naked put of $20. The $1 option at $20 level is very attractive, but actually that is because market make already consider the high risk.
Tuesday, May 11, 2010
BUS 600-SP10, Day 4: Organizational behavior
Organizational behavior sounds like a social science.
The main problem for operation is:
Capacity: How much can I produce?
Scheduling: How am I going to do it?
Inventory: How much inventory is there and how can I reduce it?
Standards: What do I consider efficient production and quality output?
Control: Is the production process working?
The main problem for operation is:
Capacity: How much can I produce?
Scheduling: How am I going to do it?
Inventory: How much inventory is there and how can I reduce it?
Standards: What do I consider efficient production and quality output?
Control: Is the production process working?
BUS 600-SP10, Day 5: Quantitative Analysis
Quantitative Analysis sounds like accounting, but it deals with decision making, not cmpany's internal income/expense/assets.
Using decison tree method make MBA make decision with more accurate base.
I read carefully about the Decision Tree example, but I really doubt in reality, it can be useful. Because a lot of parameters are either very subjective or not available.
The cash flow analysis is a very useful one, this help us to understand the healthiness of a company.
Using decison tree method make MBA make decision with more accurate base.
I read carefully about the Decision Tree example, but I really doubt in reality, it can be useful. Because a lot of parameters are either very subjective or not available.
The cash flow analysis is a very useful one, this help us to understand the healthiness of a company.
Monday, May 10, 2010
BUS 600-SP10, Day 3: Accounting
Accounting is dealing with numbers. It quantitizes company's behavior, so the final result is reflected from accounting results.
GAAP stands for Generally Accepted Accounting Principles. It's the convention of current accepted accounting method
The most important accounting formula is:
A = L + OE.
All the accounting result should show the two sides are equal, otherwise some mis-calculation happens.
GAAP stands for Generally Accepted Accounting Principles. It's the convention of current accepted accounting method
The most important accounting formula is:
A = L + OE.
All the accounting result should show the two sides are equal, otherwise some mis-calculation happens.
BUS 600-sp10, Day 2: Ethics
Ethics is a issue often faced by industry leaders.
Such as Environment issues, layoffs, health and so on.
I think this is really a important aspect for business. But it is in legislature level to help on this.
For example, in China, many company post very strong discrimination recruiting policy, such as age, gender and even face. But no law to control this.
Also due to very loose law, there are a lot of fake product, even posineous product. This really need to rely on high level politician to do anything for it
Such as Environment issues, layoffs, health and so on.
I think this is really a important aspect for business. But it is in legislature level to help on this.
For example, in China, many company post very strong discrimination recruiting policy, such as age, gender and even face. But no law to control this.
Also due to very loose law, there are a lot of fake product, even posineous product. This really need to rely on high level politician to do anything for it
BUS 600-SP10, Day 1: Marketing
Marketing is a special blend of art and science.
1. The marketing strategy process:
A. Consumer analysis
I. What is the need category?
II. Who is buying and who is using the product?
III. What is the buying process?
Awareness --> Information Search --> Evaluate Alternatives --> Purchase --> Evaluate
IV. Is what I'm selling a high- or low- involvement product?
V. How can I segment the market?
B. Market Analysis
C. Review of the competition and self
D. Review of the distribution channels
E. Development of a "Preliminary" Marketing Mix
F. Evaluation of the Economics
G. Revision and Extension of Steps 1-6 until a consistent plan emerges
1. The marketing strategy process:
A. Consumer analysis
I. What is the need category?
II. Who is buying and who is using the product?
III. What is the buying process?
Awareness --> Information Search --> Evaluate Alternatives --> Purchase --> Evaluate
IV. Is what I'm selling a high- or low- involvement product?
V. How can I segment the market?
B. Market Analysis
C. Review of the competition and self
D. Review of the distribution channels
E. Development of a "Preliminary" Marketing Mix
F. Evaluation of the Economics
G. Revision and Extension of Steps 1-6 until a consistent plan emerges
Thursday, May 6, 2010
BUS 600-SP10, Day 8: Economics
There are two level of economics: Micro and Macro.
Micro economics is focus on basic concepts of economics.
Opporutnity costs is the cost of choice, when output, time and money are limited.
The Supply and Demand chart shows that when price goes up, producer will have higher incentive to manufacuture, so supply will increase, but demand will decrease due to higher price. On the economy level, we have similar aggregate supply (AS) and aggregate demand(AD) chart.
There are two level of economics: Micro and Macro.
Micro economics is involved in basic concepts.
In micro-economics, we learned opportunity costs, marginal revenue and cost, marginal utility, price elasticity of demand, competitive market sturctures.
On Macroeconomics, we learned the KEYNES and FRIEDMAN concept. They are like the democratic and republic, always argue, I believe they both partially work.
Also we learned GNP, NNP and GDP.
The multiplier effect shows that economy is very easily to go extream. This explains why we either in bubble time or in recession time.
Micro economics is focus on basic concepts of economics.
Opporutnity costs is the cost of choice, when output, time and money are limited.
The Supply and Demand chart shows that when price goes up, producer will have higher incentive to manufacuture, so supply will increase, but demand will decrease due to higher price. On the economy level, we have similar aggregate supply (AS) and aggregate demand(AD) chart.
There are two level of economics: Micro and Macro.
Micro economics is involved in basic concepts.
In micro-economics, we learned opportunity costs, marginal revenue and cost, marginal utility, price elasticity of demand, competitive market sturctures.
On Macroeconomics, we learned the KEYNES and FRIEDMAN concept. They are like the democratic and republic, always argue, I believe they both partially work.
Also we learned GNP, NNP and GDP.
The multiplier effect shows that economy is very easily to go extream. This explains why we either in bubble time or in recession time.
Wednesday, May 5, 2010
BUS 600-SP10, Day 9: Strategy
To Eric: Even though it seems that I did this for a Grade A, but actually I really like to utilize this opportunity to carefully study the material. I missed in the first place due to this or not. It's really fun to take your class.
Just finish the video, Interview with Michael E. Porter, he talked about the five forces in strategy which he invented thirty years ago. Michael use airline industry and soft drink industy to explain the five forces. He especially spend time to talk about competition, competition is not always be negative, it can be positive too. The main point is to make the market pie bigger, instead of making price war.
I liked this quote:
1. The seven S model: In the core, it's Superordinate Goals. And the six surrouding ones are Structure, Systems, Style, Staff, Skills and Strategy.
2. The value chain: backwardly integrated and forwarded integration, and vertical and horizontal integration.
3. Levels of Strategy: Functional Strategy, Business Strategy and Corporate Strategy.
4. Expansion Strategeis: The Ansoff Matrix use "PRODUCT" and MARKET" as two axis, and "OLD" and "NEW" as two catogory.
5. Industry Analysis: The Five-Forces: In the center, it's "Industry Competitors", and the four leafs are "Suppliers", "Buyers", "Substitues" and "Potential Entrants".
6. Generic Strategies: Cost Leadership, Differentiation and Focus
7. Competitive Tactics: Signaling is an interesting topics. As a consumer of Airline industry, I have more knowledge about how those company decide air fare price and the prive movement.
I am amazed by the "Prisoner's dilemma". This scenario seems a very old story about how those policeman bluff to criminals. I am surprised that this can be applied to business world. It's really an old saying "Business world is a war world".
8. Portfolio strategies:
A. BCG model use "Industry Growth" and "Relative Market Share" as two axis, each has "High" and "Low" as two category. So totally four cateogries are identified: STAR, CASH COW, Question Mark and DOG
B. McKinsey model use "Business Position" and "Industry Attractiveness" as two axis, each one has three levels: Low, Medium and High, so totally nine box in the charts, there are three kind of categories identified: I(nvest/Grow), S(electivity/Earnings) and H(arvest/Divest)
C. ADL model use "Competitive Position" and "Industry Maturity" as two factors, and one has 6 levels and the later one has 4 levels. Totally 24 boxes in the table. It use traffic light to describe a business as Green, Yellow and Red.
9. Other Strategies:
A. evaluate business's "core competencies".
B. Customer retention: It is more effective to retain good customers than to constantly churn new ones.
C. "Reengineering the Corporation".
D. Economic value added(EVA) or market value added(MVA).
10. Globalization and Strategy:
The pro and con of globalization
11. Synergy and Strategy:
I just learned this word "synergy", it means that the benefit of combining two business may be bigger than a simple sum of them. This mean there is "leakage" between the two business. There are four types of business linkages: Market linkages, Technological Linkages, Product Linkages and Intangible Linkages.
The author use a good example of Quaker Oats's acquasition of Snapple. There ae a lot of factors which need to be consider when merging two companies. Synergy is one of the main factor to merge two company.
12. Strategic Skepticism: The five P strategy: Plan, Ploy, Pattern, Process and Perspective.
13. Strategy and Chinese Warfare:
I am proud of the fact that Chinese military strategist Sun-tzu's book has been widely used by so many modern business strategy people. On the other hand, I also feel embarressed that's the Chinese about 3000 years ago, and modern Chinese don't have much contribution to modern business theory and also other scientific and social advance.
14. Strategic Implementation: With implentation, Strategy is a waste. We should use the strategy in our normal business operation.
Just finish the video, Interview with Michael E. Porter, he talked about the five forces in strategy which he invented thirty years ago. Michael use airline industry and soft drink industy to explain the five forces. He especially spend time to talk about competition, competition is not always be negative, it can be positive too. The main point is to make the market pie bigger, instead of making price war.
I liked this quote:
1. The seven S model: In the core, it's Superordinate Goals. And the six surrouding ones are Structure, Systems, Style, Staff, Skills and Strategy.
2. The value chain: backwardly integrated and forwarded integration, and vertical and horizontal integration.
3. Levels of Strategy: Functional Strategy, Business Strategy and Corporate Strategy.
4. Expansion Strategeis: The Ansoff Matrix use "PRODUCT" and MARKET" as two axis, and "OLD" and "NEW" as two catogory.
5. Industry Analysis: The Five-Forces: In the center, it's "Industry Competitors", and the four leafs are "Suppliers", "Buyers", "Substitues" and "Potential Entrants".
6. Generic Strategies: Cost Leadership, Differentiation and Focus
7. Competitive Tactics: Signaling is an interesting topics. As a consumer of Airline industry, I have more knowledge about how those company decide air fare price and the prive movement.
I am amazed by the "Prisoner's dilemma". This scenario seems a very old story about how those policeman bluff to criminals. I am surprised that this can be applied to business world. It's really an old saying "Business world is a war world".
8. Portfolio strategies:
A. BCG model use "Industry Growth" and "Relative Market Share" as two axis, each has "High" and "Low" as two category. So totally four cateogries are identified: STAR, CASH COW, Question Mark and DOG
B. McKinsey model use "Business Position" and "Industry Attractiveness" as two axis, each one has three levels: Low, Medium and High, so totally nine box in the charts, there are three kind of categories identified: I(nvest/Grow), S(electivity/Earnings) and H(arvest/Divest)
C. ADL model use "Competitive Position" and "Industry Maturity" as two factors, and one has 6 levels and the later one has 4 levels. Totally 24 boxes in the table. It use traffic light to describe a business as Green, Yellow and Red.
9. Other Strategies:
A. evaluate business's "core competencies".
B. Customer retention: It is more effective to retain good customers than to constantly churn new ones.
C. "Reengineering the Corporation".
D. Economic value added(EVA) or market value added(MVA).
10. Globalization and Strategy:
The pro and con of globalization
11. Synergy and Strategy:
I just learned this word "synergy", it means that the benefit of combining two business may be bigger than a simple sum of them. This mean there is "leakage" between the two business. There are four types of business linkages: Market linkages, Technological Linkages, Product Linkages and Intangible Linkages.
The author use a good example of Quaker Oats's acquasition of Snapple. There ae a lot of factors which need to be consider when merging two companies. Synergy is one of the main factor to merge two company.
12. Strategic Skepticism: The five P strategy: Plan, Ploy, Pattern, Process and Perspective.
13. Strategy and Chinese Warfare:
I am proud of the fact that Chinese military strategist Sun-tzu's book has been widely used by so many modern business strategy people. On the other hand, I also feel embarressed that's the Chinese about 3000 years ago, and modern Chinese don't have much contribution to modern business theory and also other scientific and social advance.
14. Strategic Implementation: With implentation, Strategy is a waste. We should use the strategy in our normal business operation.
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