Archive for category marketing
Synergy between various types of credit
Posted by admin in manufacturing, market demand, market forecasts, marketing, material costs on April 17th, 2010
Now that you’ve formalized your partnership—and are in a position to capitalize on it—start planning for the future. Strategic planning is the best way for partners to envision what will happen in the next few years.When partners plan together strategically, the synergy created is enormous. And the outcome is something your competitors can’t replicate because it exists only in the context of your partnership. No matter how hard they try, they cannot re-create that unique set of dynamics that is uniquely yours.
Some time ago I witnessed an example of this type of partnership synergy. At the time, I was participating in a workshop for a multimember partnership including the National Highway Safety Board, the California Department of Transportation, several automobile manufacturers, and some computer and software designers. They are dedicated to increasing auto safety and using technology to improve efficiencies. Their vision is to create a systemto provide interaction between the automobile and the road to enhance safety and performance. Electronic sensors embedded in the road surface will monitor traffic, surface conditions, and other useful information and relay it to the driver via a computer in the car. This data will be projected via a dashboard monitor or onto the windshield and also signal the optimum speed the car should be traveling under these conditions. Such a system could also indicate alternate routes should there be traffic delays or other obstacles.
How to compensate for default payday risk
Posted by admin in Global Markets, Money Tips, financial information, fixed costs, marketing, material costs on October 23rd, 2009
The spread needed to compensate for default risk depends upon future default rates, recovery rates and ratings transition probabilities. The rating agencies publish their forecasts of future default rates based on historical data. Usually required spreads come out significantly lower than current spreads for investment grade companies. For high yield, however, observed spreads tend to be too low, given the actual risk of default. While over the long term buy-and-hold strategies may earn an excess return over government bonds for pure investment grade portfolios, this strategy is not appropriate for high-yield portfolios. Here, investors need to focus much more on the process of selecting the right companies and avoiding the blowup names. A look at historical data shows that market spreads tend to overshoot at the end of credit cycles, especially in the wake of a recession.
For example, even if the historically high default rates of 1990/91 had persisted over the following years, investors should have required a BBB credit spread of only 115 bps for medium-term bonds. At that time the average market spread for BBB-rated issues, however, peaked at more than 180 bps.
Consequently, the market was much too bearish in 1991. Conversely, in 1997, at the beginning of the severe bear market for credit, spreads were too tight for the period of downgrades and credit blowups that followed. Note that these observations apply for bonds with a maturity of roughly 4 years.
While the cushion is not as comforting as for shorter maturities, even at the long end the spread levels reached in recessions provide sufficient protection, even when assuming that default rates stay high for a sustained period of time.
Fixed and Variable Costs in fiction – part 3
Posted by admin in management skills, manufacturing, marketing, material costs, performance objectives on August 1st, 2009
Decisions over semi-variable costs, such as marketing expenses, may be made based on the number of units you need to sell, but they likely are not unit-specific—unless, for example, the marketers decide to give away something free with each purchase. However, if we were to add an additional $5,000 in marketing expense to our 5,000-unit run, we add an additional dollar in semi-variable cost to each item. The same $5,000, spent on the 10,000-unit run, would add an additional 50 cents per piece.
The net cost, then, on the 5,000 unit run jumps to $8 per unit. Costs for the 10,000 unit run jump to $6.50. The net profit margins are $1 and $2.50 per unit, respectively.
Even with these costs applied, it should be evident that the higher this particular production run, the wider the profit margin. That’s all part of the sales income, to be sure. But the profitability per unit is determined primarily by the fixed and semi-variable costs. And that’s influenced by the budgeting procedure.