Exchange rates
Now here's a thing. Exchanging some US$ at an exchange office in Dubai today
I noticed that not only was there a rate of the British Pound but there was
a separate and DIFFERENT one for the Scottish Pound. If only I'd been
quicker witted I would have got more Scottish Pounds for my Dollars than I
did British pounds. I would have been £6.60 better off ... providing, of
course, that a bank in the UK would have changed my Scottish for British
Pounds on a basis for one basis. In the final analysis, though, who could
take the risk that there wouldn't have been some kind of catastrophe over
such an exchange?
Duncan Williamson
Communications and the internet ... the future?
How about communications and the internet ... the future?
Just been reading a little bit about Web 2.0 and came across these snippets:
Rather than ignoring, or fearing, criticism generated in Web 2.0 forums, companies should seize Web 2.0 tools to respond. For example, when frustrated JetBlue customers launched a blog recounting the hours that the airline left them stranded on the tarmac during a February 2007 storm, JetBlue responded not with a traditional press release but by posting a video apology from its CEO on YouTube. The video was viewed 40,000 times in its first seven days online, during which time JetBlue received thousands of supportive e-mails and phone calls from consumers. In addition, JetBlue was praised by blogger pundits for successfully incorporating social media into crisis communications. http://www.strategy-business.com/li/leadingideas/li00037?pg=1
Interesting that; but in the end I wonder how that initial complaining passenger was treated and dealt with?
Another airline, by coincidence, Southwest Airlines, has started its own Blog:
Nuts About Southwest which has
received more than 6,300 comments since it started in April 2006, in response to little more than 250 posts (emphasis added). And Southwest says that it has adjusted its approach to assigned seating and advance scheduling as a direct result of customer feedback on its blog. By actively participating in online conversations, these companies are engaging with their customers and demonstrating that they care about their opinions: which gives them a fair shot at influencing those opinions
How about this, too? Is there any semblence of a threat to mainstream marketing as a result of what they are finding at General Motors Vice where the Chairman Bob Lutz is the reported author of
GM's Fastlane Blog. Lutz
says that the consumer intelligence he gets from reading the comments on his blog is better than he's ever received from traditional market research channels such as surveys and focus groups (emphasis added).
Duncan Williamson
Chinese toys 2: the Mattel whitewash
I said in my message a few minutes ago that I hadn't researched this story. So I did. I read an article in the Economist online that tells us that the Chinese man at the centre of this story has killed himself. Secondly, I followed a link from that story to the part of the
mattel.com web site in which Bob Eckert the Chairman & Chief Executive Officer
Mattel Inc explains himself both in writing and in a video cast. The page's headline is boldly stated:
VOLUNTARY SAFETY RECALL FACTS
Eckert reads out a letter that is printed on the left hand side of the page and is reporduced in full here:
Dear Fellow Parents,
Many of us at Mattel are parents ourselves. And like you, we know that nothing is more important than the safety of our children. As you may know, Mattel has recently voluntarily recalled some products for two different reasons: impermissible use of lead paint and risks associated with small, high-powered magnets.
We want to ensure that every parent is aware of these issues, returns affected products to us and knows that we have already taken significant actions to further ensure the safety of our toys.
We hope that we don't have to recall any more products, but if we do, we pledge to address the matter promptly and to inform you quickly.
Our long record of safety at Mattel is why we're one of the most trusted names with parents. And it is our sincere hope that the actions we are taking now will maintain that trust in the future.
Thank you for your continued trust.
Bob Eckert
Chairman & Chief Executive Officer
Mattel, Inc.
Look at the title of the letter: your childred are our children.
Look at the opening of the letter: Dear Fellow Parents
Eckert's video cast begins with his telling us that he is the father of four children
In paragraph three Eckert says he HOPES they don't have to recall any more products; and in paragraph four he says that, '... it is our sincere hope ...' HOPING again.
In the video, Eckert spells out a three pont plan to improve their products. Take a look at that video. on
http://www.mattel.com/safety/us/ now scroll down that page and you will see this.
How can I trust that Mattel toys are safe? Our priority is the safety of the children who play with our toys. Mattel's philosophy is that every employee is responsible for the quality and safety of our products. Mattel has an organization of more than 1,500 people worldwide solely dedicated to the safety, quality and overall integrity of our toys, including more than 400 highly-trained engineers, technicians, auditors and managers who strive to meet the company's safety vision of providing "Quality and Value the World Can Trust." We are working around the clock to improve our system and have already taken significant actions to do so.Eckert never blamed Mattel at all for what has gone wrong although he has tugged at the heart of 'fellow parents' to entreat them to trust him. But 1,500 people seem to have been wasting their time in their supposed dedication to safety, quality and overall integrity, don't they? Never mind the 400 highly trained engineers, technicians, auditors and managers who are striving ... I wonder which clock it is that they are working around!
As a parent and grandparent I would now like to think that Eckert has been holding meetings during which he has held accountable some of his most senior managers as well as his 1,500 team including the 400 engineers ... Heads must have rolled already and more must be about to. If Eckert has not done this, then he must go. I don't normally talk like this but in this case, Mattel has talked themselves into a very tight corner.
Corporate Governance
As a matter of interest, you will notice that Eckert is both Chairman and CEO: this is not allowed in the UK and much of Europe as corporate governance rules and guidelines say that those two roles must be separated. This has been the case for a few years now.
In their corporate governance guidelines, Mattel says this about the combined roles:
Selection of Chair and Chief Executive Officer
It is the sense of the Board that it should have maximum flexibility to decide whether the offices of the Board Chair and Chief Executive Officer shall be combined or separate and, if separate, whether the Board Chair should be an independent director or an employee. The Board believes that this issue is part of the succession planning process and that it is in the best interests of the Company for the Board to make a determination whenever it elects a new Chief Executive Officer or appoints a new Board Chair.
http://www.mattel.com/about_us/Corp_Governance/guide.aspAs at 31 December 2006 Mattel was a $5.7 billion a yar turnover company with net assets of $3.4 billion.
Eckert was granted 225,000 units of common stock during the year to 31/12/2006 exercisable over the next three years in 33.33% tranches per year. The shares have an exercise price of $23.58. He recieved a furher 100,000 shares that were restriced in some way that I haven't researched as yet.
Interesting stuff in terms of marketing, product quality and safety, communications, corporate governance, investor relations, stock options ... I have also to say that unlike any other publicly traded company I have ever researched, I have found it the most difficult to find executive remuneration information. So I did a search on the internet and found at Forbes.com as follows:
Salary $1.25 million (above average for his sector (Household and Personal Products))
Bonus £0.98 million (well below average for his sector)
Other $1.37 million (well above average for his sector)
Total $3.60 million
I cannot find a definiton of
other remuneration on the Frobes.com page that I used,
http://www.forbes.com/lists/2006/12/6GNF.htmlDuncan Williamson
Chinese toys
You must have heard about the recall by Mattel and others of the millions of toys that have been made in China over the last couple of years or so. Potentially harmful lead based paint, tiny magnets falling out ready for small children to put in their mouths and swallow, quality problems ...
Good for Mattel that they recalled these things, although Perrier was severaly damaged a few years ago with minor contamination in its water supply and although total product recall helped in the UK it didn't help in the USA and Canada.
However, I haven't heard anyone, as yet, come down on Mattel like a tonne of bricks for accepting and then selling defective and sub standard products. They must have visited the factory in China: after all, China was then and is still an excllent must see jolly for loads and loads of business people and politicians. They must have inspected the factory and quality controlled all of the products they received. Yet still they didn't find the lead based paint? They didn't work out that those magnets were small and could choke any child that swallowed one were they to fall out ... I don't believe it.
I must say, I haven't researched this item as I have been waiting for a news report to the effect of what I have just said. Is this a cover up or has no one else really thought about this?
Duncan Williamson
Hans Rosling
This is a simulcast.
I have just watched a fascinating video on the ft.com web site: FT Videos ... Specials ... 17th July 2007.
Everyone should watch it as it concerns preconceptions, students, teachers, international health, international development, statistics, presentation skills ... really, you need to watch it.
You can also find this video by searching for Hans Rosling, a Swedish Professor, in google and doubtless yahoo, ask and any other decent search engine.
DW
Qantas the naughty boys ... but from the accounting point of view?
I wrote about the fine that was levied on British Airways the other day for price fixing. Korean Air was also fined for the same reason, although I didn't know that until just now.
In a similar way, Qantas, an Australian airline, has set aside $40m to cover "potential" fines relating to its role in fixing air cargo surcharges.
Question
How will Qantas show this provision of $40 million in its Profit and Loss Account, Balance Sheet and Cash Flow Statements?
Duncan Williamson
Wastage because of our political history
In this modern world where we are three decades on from gloating that we had the technology to get a man on the moon, we can't even manage our water supply. The reason for such mis management goes back 10, 20, 50 and more years.
The Victorians are responsible for kick starting the modern world and modern man has firmly kick right back.
What am I ranting about? How about this: around 15,400,000 homes' worth of water is being wasted every single day of our lives because these clowns in charge of our water utilities have been incompetent for those 1, 2, 5 and more decades that I mentioned.
I don't necessarily blame the Thatcherite scramble for profit but the government sector mentality that they are doing their best when they have no idea what their best ought to be.
The Severn Trent water authority has missed its target by 8,000,000 litres (that's 176,000 gallons) a day: that's its target, not the amount it's losing due to leakage. The total amount being lost each day throughout England and Wales due to leakage from rusty/faulty pipework and systems is 3,420,000,000 litres, that's 752,400,000 gallons a day.
Whilst this post is not really heading towards a shareholder bashing conclusion, it is worth noting that Severn Trent has paid out a total of £822,600,000 in equity dvidends over the five years to the end of March 2006. Equity capital has fallen slightly from £224,000,000 to £227,200,000 over the same five year period and Reserves have fallen significantly from £2,070,000,000 to £1,669,200,000: that's a fall of 19.3%.The point here is that the shareholders are earning a decent return, at least in absolute terms, yet the company's new finance is coming from debt providers. Total debt has increased by £411,400,000 over the five years and short term debt has increased by £457,800,000 over the same period.
You might care to find out more about Severn Trent by visiting its web site
http://www.severntrent.com and analysing its annual report and accounts for yourself. See if the directors have paid themselves bonuses in spite of this woeful performance! Severn Trent pays bonuses to its senior staff on the basis of 20 KPIs. You will find those KPIs on page 9 of their annual report and accounts for the year ended 31st March 2007. As you read through the list, try to determine how many of the 20 KPIs are hard critical indicators of success, how many are soft and howmany have no value as yet. Finally, you should also try to determine the weightings of the 20 KPIs vis a vis the bonus awards.
Duncan Williamson
The state of the money and stock markets
This posting is being copied to the BBC Today programme for their information as they have just run an article on the topic during which Norman Lamont, former Chancellor of the Exchequer, has just mentioned risk: as if he'd read this posting!
Here we are again: the financial markets are feeling the pinch and the world has come to a shudering realisation that they sometimes do things that maybe they shouldn't have. The sub prime lending market is risky and it seems as if both here in the UK as well as in the USA and elsewhere that sub prime lending has been allowed to go too far.
One things that strikes me as important, however, is the concept of risk:if you are buying a sub prime mortgage then you will pay more interest than if you were to buy a normal mortgage because you are a greater risk. Classic risk v return business strategy and everyone knows it. By the same token, if you are selling sub prime mortgages then you set your interest rates higher than normal because you know that your future potential for doubtful debt provisions is greater than normal. Classic risk v return business strategy and everyone knows it.
Is the financial world trying to tellus now that they have suddenly realised allof the above? Are they really saying that they are shocked that interest rates have risen? Under Alan Greenspan, interest rates were increased in the USA for month after month for a reltively very long time. So why the sudden correction in the markets and why the intervention by some of the Central Banks.
In short, the consumer, both corporate and personal, will pay for all of this, make no mistake.
Duncan Williamson
Budgeting and Forecasting? Pinch of salt time!
Building the world: Dubai
here are just a few notes to show that even with extremely large projects plans can change daily and therefore so can the budget.
Dubai is building a map of the world 4 km out in the Gulf of Arabia by reclaiming land. The total area of this project here's something like 7 km by 4 km. When I say reclaim I really mean built from scratch. They are pouring millions of tonnes of sand and rock into the Gulf to create the islands that make up the map of the world. The first five years of the project had been concerned solely with building the islands and a breakwater around the islands.
Here are just a few examples of some of the challenges that they are faced in this first phase.
Firstly the contract and designed the map of the world to be built using concrete and steel for the foundations. Following environmentalists' representations, Sheikh Mohammed, the ruler of Dubai, insisted that the foundations be made of sand and stone. Clearly that cause a major re-evaluation of their plans.
They began building the islands and relatively quickly ran out of sand! The main reason to this is that Dubai is also building two other major offshore developments known as the Palm: in fact there are three of them, two of Dubai and one of the Jebel Ali, another of the Emirates. The problem here being that they needed to use sea sand and despite the fact that the desert around Dubai contained billions of tonnes of sand.
Another of the constraints set out by Sheikh Mohammed was a breakwater was not be too high so that the wouldn't took the view of the sea. This was a major constraint and led to a major redesign of the breakwater: interestingly the redesign came in a moment of inspiration as the design engineer was flying to Dubai rather than after weeks and weeks of research in the laboratory. As it turned out the design was inspirational and reduces the energy of any way it in the breakwater from 100% to 5%.
They then faced the problem of stagnant water: the breakwater was proving so effective that it was taking from four to eight days for the water within it to be replaced. They redesigned one area of the breakwater and improved the water replacement so that it took place within two days. The problem here was that stagnant water would have led to the death of fish and plants and it would have been smelly and not in the least attractive to the residents of the islands.
Because of the foresight of Sheikh Mohammed and his insistence on building the foundations from sand and stone the flora and fauna within the development flourishing. Apparently the fish life he is regenerating at a much greater rate than they ever anticipated and plant life is colonising the foundations with species and again were not anticipated.
Here are just a few examples than of the kinds of things that happen out of the blue in spite of exceptionally detailed planning within very expensive and physically very large projects. So don't feel too bad is at the end of the month your bank balance he is £10 short has £10 too much and it...
Duncan Williamson
Liquid lenses? I see!
This is so good it's a simulcast
The Economist reports this week on a French company that is updating an 18th century technology so that we really can leave the camera at home and rely on our camera phones to do all we need as far as taking snaps is concerned.
Rather than making solid (eg glass or Perspex) lenses, the French company called Varioptic is working on liquid lenses. The Economist article says:
... To make a solid zoom lens zoom, you have to move the individual elements relative to one another. In a liquid zoom lens, by contrast, you only have to change their shape. That means a liquid zoom can be much slimmer than a glass one.
Varioptic's zoom is not quite there yet. The prototype is 27mm (just over an inch) from front to back, which is a bit deep for a phone and it can manage a zoom magnification of only two and a half times, which is not even as good as the threefold magnification of current phone zooms. But this performance is likely to improve soon and once liquid lenses work as well as their solid counterparts their other advantages will become apparent.
The first of these is speed. A liquid lens can shift its magnification in milliseconds. Mechanical lenses are much slower. Liquid lenses are also cheaper. A liquid zoom should cost around $25, whereas the existing mechanical zooms cost $'00.
Liquid zooms are sturdier than their solid counterparts, a particularly important advantage for mobile phones ... Since a liquid lens has no mechanical moving parts there are, quite simply, fewer things to break in it. And despite their being liquid, the minute size of the droplets that compose the lenses means the surface tension between the two fluids is so strong that they stay unstirred, no matter how violently they are shaken ...
Marvellous!
DW
British Airways
You have to wonder at the brain power and motivation of the people at British Airways who tried to do a deal with Virgin Atlantic to set or agree fuel surcharges that turned out to be illegal and has just cost BA a total of around £270 million in fines levied by the UK Office of Fair Trading (£121.5 m) and the US Department of Justice ($300 m ... £148.5 m approx: uncertainty due to exchange rates).
- Did these people act knowing that a deal with Virgin was singularly the worst thing they could do and thus acted in a malicious way knowing that it would cost BA dear?
- Did these people not know the history of animosity between Virgin and BA over dirty tricks carried out by BA on Virgin ... well documented in the press and in Sir Richard Branson's autobiography?
In any case the airline that tells us all it is 'The World's Favourite Airline' is being stripped bare yet again.
When business behaves badly and someone like Sir Richard Branson's Virgin gets involved, you'd better watch out. This came to light primarily because Virgin blew the whistle on BA and in the process evaded any fines themselves.
The CEO of BA, Willie Walsh, has said that passengers were not over charged as a result of this debacle but I tend not to believe that: they were doing this for so long and the fines are so large that the evidence seems to point in the other direction; and I suggest that Walsh checks his facts and takes action when he finds that he is wrong.
There is also the possibility that individuals may suffer criminal conviction as a result of this case. The Enterprise Act 2000 allows the UK government to prosecute individuals under its criminal powers: it could well become a cause celebre in this context: a big and well known company doing something naughty could well become a beacon for the UK government to show that they mean business: corporate governance is a serious matter and if they do something wrong then someone will pay with their personal loss of freedom.
Duncan Williamson
