Points to Ponder – Marketing

Internet is found to be a very powerful medium for knowledge sharing. This was proven in some countries like US (during Obama’s Campaign) or even Malaysia in the 12th General Election. How does internet contribute to marketing? What happen to those rural areas of the third world countries where internet facilities are far much backward? What happen if the impact is negative or the information given is false information?

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The Ethics

Recently, the public of Malaysia has been tampered with news involving Ethics. These ranges from politics, business related and even consumer issues. Scholars, academicians, journalist and even fellow citizens have been curious where the ethics of Malaysian gone.

In politics, came out news explaining why a candidate for a party is found guilty of money politics yet only being warned and the other one found guilty for the offence and has been sentenced for the immoral act. Debates filled all over places and explanation spurred by relevant parties explaining the reason of ‘found guilty but warned’ and ‘found guilty; sentenced’.

I still remember that “law has to be taken as complete.” Here should not be any in moral act behind the decision made. Promises given to the public that a clean party election will be the doctrine of the party and later the outcome is almost saddened every walking citizens.

According to Kant; ethic theorist, “Something that wishes to be made a rule must be accepted completely by the community and not the hypothesis.” Kant then continues that, “To form universalism, a law must be fixed as complete and not hypothesis.”

While these debates were ongoing in the main media stream, I went for a leave during a short public holiday at Cherating by the virtue escaping from all the national issues. My destination was the 'beach of beauty' in East Malaysia where Club Med had their club present. The decision was made after I have read the advertisement published in the web.

I spend two days at a nice, quite and reputable resort, not far from Club Med. It is fantastic, with the marvelous food presented to me by the people of Cherating and the beautiful sandy beach. Every day I spent at the beach, reading books, bathing with my children and we took morning stroll early of each day.

On the early morning of the last day, I walk by the beach until, i reached the river outlet to the sea – ‘Muara Sungai’ which is a few hundred meters from the resort. To my surprise, the beauty of the nearby beach has been damaged by erosions. I am quite sure that this might not be the act human being such as development or any immoral activities of any business organizations. However the question that ringers my mind is why none of the business organization whom has been making so much money from their beach resorts and having a continuous flow of visitors from Malaysia and abroad, take an effort to contribute for environment management; the social environment responsibility in a specific words. Not only that, they are not treating their customers well by allowing their customer facing such an eroding beach until the happiness of being at the beach turns to adventures and scary.

I still believe that there is a strong relation between business and ecology. There is also strong link between moral act and politics. I could feel that all this has been declining or never being looked upon seriously by fellow Malaysian and especially by many profitable business organizations. It is so much different from Australia that I have been for sometimes before which high social responsibilities awareness.

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Negotiations, do we really need to have the knowledge?

Negotiation is part of life and with or without notice we undergo negotiations almost everyday. It might be a simple one or a complex one. In many cases it is unprofessionally done and some times it is a very successful one but incidentally happens or good luck. Not knowing what the flow process is, what are the mistakes commonly done by negotiators and what are the tactics, the person might undergo for a negotiation.

A formal study or learning on negotiations is necessary for any body involves in business, sales, marketing, politics, or any services just because it is not only to reduce the failure in negotiations but to make it success negotiations.

I have seen a few case study where negotiations fails not because the preparation was not good, but the party fails to recognize the ‘signal’ made by another party during negotiations and hence the negotiations ends up with a failure or unclosed.

There are some cases where preparation was not done by one party and hence the ‘zone of agreement’ became a very tiring and lengthy session. Later both parties were not able to handle rejections since both parties is not able to apply ‘explore’ strategy. It then ends up with failure.

In ensuring negotiations are in order and successful, that is reaching a win-win situation, it is important to acquire basic knowledge of negotiations. The knowledge of 3 process negotiations or the complex negotiation process that is the 8 process negotiations are the handy tools for negotiators. The additional knowledge such as the mistakes, tactics, changing minds, explore quadrant are all crucial. On the other hand the negotiator must at all time adhere to them selves to the ‘4 principles’ of negotiations. This is to ensuring the negotiations runs smooth despite it is a collaborative or competitive negotiations.

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YIELD METRICS, AN IMPROVEMENTS TOOL.

In my earlier article on Yield Value, I have explained the importance of Yield Value and a short case study was also discussed. Here we shall again discuss in detail on the transition from traditional yield value calculation to the current yield value calculation which is named as ‘Yield Metrics’.

In modern management approaches towards business processes has changed. The traditional approach of literatures report writing has been obsolete and replaced with numerical reports with explanation. The current report writing has again replaced by the numerical + explanation report by statistical analysis reports.

The idea of having this statistical report is to be precise and simple in the process of monitoring and control while maintaining the efficiency of the processes. Control charts such as Pareto chart, Run chart, Flow charts etc, has been the used as control tools for a single process or the whole process in the value chain.

In traditional management; out put is always been calculated and ratio between each production out put is calculated. Later transition in calculation came in where input/output ratio is calculated as the Yield Value. Currently this calculation has again being replaced by Yield Metrics of which the rework and scrap is also being calculated. This Yield Metrics measures a precise efficiency rate where variation and its cause were analyzed.

It is important to note that variation is the deviation from expectation, and this would determine the real output from any inputs. It is much related to the efficiency of the organization which directly determines the revenue and profit margin for any business organization

Measuring yield

According to Craig Gygi, Neil and Bruce, The traditional calculation of yield is often employed on the last, final inspection steps of a process; to measure the effectiveness of the overall process (Craig, Neil, Bruce 2005). He then continues by sayings that, the traditional result of calculating yield are misleading. Below differentiate between traditional yield calculation and the current yield calculation which is called ‘Yield Metrics’.

Let’s take an example for a credit department in a bank where loan application form received as the input value. The input value i.e. forms received are 352, and only 347 are the output (approved) where 103 is the rework. From 103, only 5 is a total rejection.

Traditional Yield:

Y= out /in = in – scrap/in

Hence in traditional calculation would be:

Y= 347 /352= 98.6%

The effectiveness is deemed to be good that is 98.6% and defect rate is only 1.4%.
However when we use the Yield Metrics calculation that is First Time Yield (FTY) the outcome would be different.


First Time Yield (FTY):

FTY= in – rework /in

The calculation would be:

FTY= 249/352= 70.75%

Here we realize that the effective rate of the process is only 70.75% and the defective rate is 29.9 % or 30%. The organization should now look immediately on the 30% defect on the process instead of seating comfortable with the 70.7% effective rate. Only then the organization is on the move toward continuous improvement and competitive.

From this single overall process, the organization should break this single big process into smaller process or value chain process. Later evaluation at every value chain components must be implemented, i.e. it’s FTY. Each FTY shall be calculated in total value, where it could be presented by RTY or Rolled Throughput yield. It is important to have in mind that in doing analysis in process evaluation, value chain must be the most effective approach.

Rolled throughput Yield (RTY):

RTY = FTYn x FTYn x FTYn x FTYn x FTYn

Where n is the number of breakdown process (n could be 1, 2, 3; according to number of process). As for the above example, lets take the process are being subdivided into 5 sections and
FTY1 = 0.75 FTY2= 0.95 FTY3= 0.85 FTY4= 0.95 and FTY5= 0.90

Therefore

RTY= 0.518 or 51.8%

It the realized that the effective rate or efficiency of the process is ONLY 51.8 % and the defective rate is 48.2% which turn to be very high.

Improving Processes

To immediately improve the overall performance, select which process of the lowest FTY, focus and improve for example using DMAIC. Then turn to the next lowest and improve using the same approach. Use the control tool charts as the monitoring measures from time to time.

Effective way of Implementing TQM

In this challenging world, people understood the words of Quality, Quality Management and even Total Quality Management (TQM). However not many understood what does it meant in the perspective of Business Management or even work improvements. It is actually important even to non-profitable organizations such NGOs and not neglecting to GLC or Government Link Organizations.

Discussing on quality, the application of it could be implemented in multi-international corporations, multi-national corporations, medium companies, small companies, Government Link Companies, Non-profitable companies, associations, society, and even family level and individual level.

Talks and forums have been held every where on TQM and some even went for a short course sent by their organizations. Some learn in some degrees or post graduate but how many has learnt in the right flow with concept and able to apply it in their daily life. It is found that some has really learned it, but has not reach the level of integrated it with statistical studies and statistical application. Only if we have learned TQM, that is the concept, theories, process, process tools such as PDSA (Plan Do Survey Act) or the DMAIC (Define Measure Analyze Improve Control), and then we must integrate with the statistical measurement. After developing all these measurement, the last part is to transfer it to the acceptable or manageable control tools. There a numbers of it but most scholars say it is 7 best control tools i.e. Pareto Chart, Histogram, Process Flow Diagram (Fish Bone), Run Chart etc. It is found that one of the most popular is Pareto Chart, Run Chart and Process Flow Chart. However in certain industries some would use different control tools accordingly.

One of the most important to analyze the efficiency of the business process using statistical analysis is a comparative analysis between Traditional Yield (Y) and Yield Metrics that is First Time Yield (FTY) for a main process and Rolled Through put Yield (RTY) for small sub processes.

It is found that that the value of FTY is lesser than Traditional Yield and it resembles a more accurate Yield Value calculation. If the rate of FTY is questionable, then the whole process flow must be measured. The RTY then should be used to measure at each process where RTY = FTY1 x FTY2 x FTY3 … depending on the number of the process.

Only integrating TQM with statistical evaluation would be beneficial to all users of TQM or to all TQM implementers.

As a case study, in 2002 one medium size motorcycle assembly plant in Queensland, has promoted that they are one of the most efficient assembly plant in Australia, at the rate of 98.6% out put or yield value. The yield value was calculated based on the production to assemble 352 motorcycles per months and completed for sales is 347 units. However, 103 units are to be rework after QAQC and leaving only 5 units as scraps.
In 2006, after the Production Manager retired, they have engaged one new production manager graduated form USC to be the Production Manager. She found out that after using Yield Metrics, the production rate or efficiency is only 70.75%. She then later found out after subdividing all the production process into sub-production processes into 5 groups, the Yield metrics turn to be only 51.8%.

After presenting to the Managing Director (MD), the MD questioned her findings and she managed to explain the findings and the integration of statistical analysis into her findings. She has also proposed to the MD the new way of using monitoring tools for the production control as one of the most effective way in implementing control system. The proposed control tools are run chart and Pareto Chart. The Managing Director was happy and requests her to implement TQM for improvements. Later after a year she is then promoted to Plant Manager, taking responsibility in procurements, production/assembly, Sand Blasting and Painting, QAQC, Inventory, and Distribution to outlets.

It has proven that TQM is a very effective way in improving an organization out put and for that reason in modern strategic implementation control and monitoring, TQM has been one of the crucial components besides six-sigma. Some scholars wrote that integration of six-sigma into TQM has proven a higher output standard of improvements

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Is Strategic Management a Process, idea or only Intention?

Many people claim that they are implementing strategic management in their organization. Some might speak that they are having ideas in implementing strategic management to their organization; unfortunately it dies before taking off. It is very crucial to understand why it happened. Why the idea remains as a good intention and never being implemented. Some implemented the strategic management but it diminishes after the take off.

I brought you here a case study that we all could share, analyze and make a study on the reason why this particular company had failed in their business despite having good banking facilities and some excellent valued resources.

In 2005, I came across a company of a friend called RCW Sdn Bhd. It is a company having an office in Petaling Jaya and later having its operation office in Padang, Sumatera Barat. The owner is a Pure Science graduate from US and having a few deep sea fishing permits which he chartered to a Thailand entrepreneur. On monthly basis the company had its revenues from this activity. From here the company applied and were granted then being grant by the government additional 5 Tuna Fishing permits.

Later the MD hired a Japanese to undertake the loan proposal to a bank in Kuala Lumpur and it failed despite the fact that the Japanese are well known for their experience in Tuna Fishing. After several months of failures, the MD later engaged a full time consultant to resolve this particular issue. The consultant found out that this Japanese expertise is in trading and not in the banking line or tuna fishing.

With a small office and two other personnel; personal assistant to the MD and a clerk, the consultant; Matt made his plan and strategize the situation. Despite of being requested to work alone he did the analysis required on the situation and on RCW. Capitalizing on the strength against the weakness, and opportunity against the threat, Matt manage to have the facility of RM 10 million for RCW to acquire the company 5 tuna fishing vessels within 4 months.

In the initial stage, the MD of RCW had assigned Matt the consultant, to undertake the task to acquire the facility in purchasing the vessels and later to undertake the management of the operation by the Indonesian Tuna Operator who would manage the operations of Tuna fishing of RCW.

Being a high self confident person that he could manage and having the idea of strategic management, cost saving, the MD decides that the management of the Indonesian Tuna Fishing Operator could be done by himself while assisted by a young supervisor, and ex-port field executive.

The MD started his work immediately while requesting Matt, the consultant to focus on acquiring next facility to purchase 5 additional vessels at the value of RM30million ringgit.

Matt does his work well for 7 months while the MD assisted by his supervisor manages the Indonesian Tuna Fishing operator and RCW manage to have the additional facilities of RM25 million subject to good management of current tuna fishing. The reason is that the company has no track record but the bank made a statement that the presentation done by Matt was too good to be rejected and furthermore tuna fishing is a high potential growth industry.

On the 8th month RCW has not being able to perform, the company is declining in its income, the loan repayment of the RM 10 million has not been paid regularly and the vessel are docking at fishing jetty in Padang.

The MD again request Matt to undertake the study on what are the probable cause to the poor situation. Matt had his two weeks study on only three areas:
1. Financial
2. Operation Procedures
3. Legal Documentation

Matt visited Padang, study the whole business process, financial process and audit all the legal documentations. He then found out that:

a. From 60% of the fishing time, most vessels are docking at the port
b. The fish sales are irregular and the price are not monitored
c. The project Profit & loss and cash flow are not being updated and studies or managed
d. Under utilized of manpower resources
e. Mismanage of fund by the MD himself
f. Supply to vessels such as diesel, food, water are not properly manage
g.The debtors and creditors increases more then 30% for every business quarters.

The company later was unable to have a draw down for the RM25million due to poor performance of the 5 vessel's operation. On the other hand RCW turn to be on the NPL list. Matt again been requested to be the consultant to address the new issues in solving the damages done by the company instead of being a consultant to develop RCW.

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STRATEGIC MANAGEMENT, the flow process

Strategic Management is a simple two grand words to mention but a complex practice to adopt. In many companies, the CEO or the key management has always says that “we have to think strategically”. Despite of saying, preaching the whole organization in adopting Strategic Management practice, in reality they are not having one.

Strategic Management is not only a mind thinking process, imagine and implement. It has to start with awareness of the need and importance of Strategic Management. Without awareness, the intended process of Strategic Management that they wish to implement will be a short life span dreams and later wash off in a short period off time.

The second main steps are developing the vision and followed by mission statement. These are two different schools of thought but having a similar focal point to organization. It is proposed to those organization wish to adopt Strategic Management and strategic implementation would first produce a good vision and mission statement.

Having moved from there, the analysis would come in i.e. the external and internal analysis. Internal analysis is the evaluation of the internal resources such as manpower, equipments and financial capabilities. The core competencies, present strategy, also need to be evaluated and what is the value contributed to the company in terms of tangible and intangible rewards.

The external analysis is another crucial factor to be analyzed since the firms or organizations are very much linked with the external environment. Tools such as Porters 5 forces, Strategic Group mapping and KSF are important to assist any strategic planner or managers to adopt the Strategic Management.

After evaluating the external and internal factors, the competitive analysis on the macro environment and the market share analysis is the important sequence to be followed in ensuring the process is intact. Many scholars proposed BCG Matrix, GE Business Screen Matrix, Mc Kinsey 7S framework are good tools for this section of the process. Other scholars would not make the competitive analysis by not using Ansoff matrix but all this depend on the practitioner.

In many cases organization need to go beyond the competitive strategy at business level only. In this modern business world, they would proceed to corporate level strategy in being competitive that is merger, acquisition, strategic alliances or even outsourcing.

Being a practitioner of strategic management, the organization should not only ensure all the required analysis done but they need to build their resources strength and organizational capabilities. This will enhance the organization in meeting their challenges as what found in their earlier analysis. Besides having a good preparation for the execution of the plan or strategic implementation later the organization need to develop the monitoring and control for correction purpose.

According to Arthur A. Thomson Jr, A.J Strickland III and John E. Gamble, there are 10 commandments for crafting successful business strategies.

1. Always put top priority on crafting and executing strategic moves that enhance a firm’s competitive position for long-term and that serve to establish it as an industry leader.

2. Be prompt in adapting and responding to changing market condition, unmet customer needs and buyer wishes.

3. Invest in creating sustainable competitive advantages.

4. Avoid strategies capable of succeeding only in best circumstances.

5. Don’t underestimate the reaction and commitment of rival firms.

6. Consider that attacking competitive weakness is usually profitable than attacking competitive strength.

7. Be judicious in cutting prices without an established cost advantage.

8. Employ bold strategic moves in pursuing differentiation strategies

9. Do not get “stuck back in the pack”.

10. Be aware that aggressive strategies moves to wrest crucial market share away from rivals often provoke aggressive retaliation.

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