In 1881, Francis Y. Edgeworth came up with a way of representing, using the same axis, indifference curves and the corresponding contract curve in his book “Mathematical Psychics: an Essay on the Application of Mathematics to the Moral Sciences”. It was Vilfredo Pareto, in his book “Manual of Political Economy”, 1906, who developed Edgeworth’s ideas into a more understandable and simpler diagram, which today we call the Edgeworth box.
Edgeworth box a conceptual device for analyzing possible trading relationships between two individuals or countries, using indifference curves. It is constructed by taking the indifference map of one individual (B) for two goods (X and Y) and inverting it to face the indifference map of second individual (A) for the same two goods. Thus, Edgeworth box is a traditional visualization of the benefits potentially available from international trade.
Individual A’s preferences are depicted the three indifference curves A1, A2 and corresponding to higher levels of satisfaction as we move outward from origin OA. Individual B’s preferences are depicted by the three indifference curves B2 and B3, corresponding to higher levels satisfaction as we move outward from origin OB. Both consumers’ preferences between the reflected in the slopes of their indifference curves, with the slope of a curve at any point reflecting the Marginal Rate of Substitution of X for Y. Only where individual A’s indifference curves are tangential to individual B’s indifference curves (points E, F and G) will A’s marginal rate of substitution of product X for product Y be the same as B’s marginal rate of substitution of X for Y, so that their relative valuations of the two products are the same.… Read the rest
Early Days of Sunbeam
Sunbeam was formed in 1897 as the Chicago Flexible Shaft Company. The company originally manufactured and sold agricultural tools. By 1910 the company introduced the iron as its first electrical home appliance. Later other appliances such as mixers, toasters and coffeemakers were introduced. Sunbeam came to be known as a recognized designer, manufacturer and marketer of innovative consumer products aimed at improving lifestyle. In 1946, the company changed its name to Sunbeam Corporation. In 1960, Sunbeam acquired Oster which allowed Sunbeam to expand into other home products such as hair dryers and health and beauty appliances. The company later added electric blankets, mattresses, humidifiers, vaporizers and thermostats, among other innovations. Sunbeam soon became the leading manufacturer of electric appliances. The company survived the 1980′s as the US economy suffered, and many companies underwent acquisitions, restructuring, and closings. In 1981, Allegheny International acquired Sunbeam, and the company retained its name. In this acquisition, John Zink, manufacturer of air pollution-control devices and Hanson scale, manufacturer of bathroom scales, were added to the business. Unfortunately the undertow of the economy consumed the company as well, and Allegheny was forced into bankruptcy in 1988.
In 1990, Michael Price, manager of Mutual Shares, corporate turnaround executive Paul Kazarian, and hedge fund manager Michael Steinhardt purchased the bankrupt Sunbeam. Under their leadership, Sunbeam went public as Sunbeam-Oster in 1992. Despite these obstacles, the board at Sunbeam felt that a profitable future was ahead, and they just had to search for someone to lead them in the right direction.… Read the rest
During the 1990′s cost control initiatives received paramount attention from corporate America. Often taking the form of corporate restructuring, divestment of peripheral activities, mass layoffs, or outsourcing, cost control techniques were seen as necessary to preserve – or boost – corporate profits and to maintain – or gain – a competitive advantage. The objective was often to be the low-cost producer in a given industry, which would typically allow the company to take a greater profit per unit of sales than its competitors at a given price level.
Cost control and reduction refers to the efforts business managers make to monitor, evaluate, and trim expenditures. These efforts might be part of a formal, company-wide program or might be informal in nature and limited to a single individual or department. In either case, however, cost control is a particularly important area of focus for small businesses, which often have limited amounts of time and money. In a small business the focus is often on selling and servicing the customer. This leaves the task of purchasing slightly sidetracked. Even seemingly insignificant expenditures – for items like office supplies, telephone bills, or overnight delivery services – can add up for small businesses. On the plus side, these minor expenditures can often provide sources of cost savings.
Cost control refers to management’s effort to influence the actions of individuals who are responsible for performing tasks, incurring costs, and generating revenues. First managers plan the way they want people to perform, then they implement procedures to determine whether actual performance complies with these plans.… Read the rest
What is Internal Auditing?
Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes. Internal auditing is a catalyst for improving an organization’s governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice.
The Institute of Internal Auditors has defined internal auditing as follows: “Internal auditing is the independent appraisal activity within an organization for the review of the accounting, financial and other operation as a basis for protective and constructive service to the management. It is a type of control, which functions by measuring and evaluating the effectiveness of other types of control. It deals primarily with accounting and financial matters but it may also properly deal with matters of an operating nature.”
Here are various definitions of Internal Auditing prevailing, which can be stated as follows:
- Internal Audit is a management tool, performed by employees of the organization to ensure correctness in accounting data and to detect fraud by way of periodical review of organizational system and procedures.
- Internal Auditing is a continuous and systematic process of examining and reporting the operations and records of a concern by its employees or external agencies specially assigned for this purpose.
… Read the rest
The buying behavior of customers will vary by segment, such as the elderly, the affluent, where people live, and so forth. If you want to understand how to compete, then you should understand the purchasing processes – who is buying what from whom? You can start your analysis with various customer segments and then test each hypothesis to see if this segment is buying the product or service. This type of analysis, referred to as customer segmentation analysis, helps the organization focus on those segments that provide the greatest growth. Customer segmentation analysis identifies and profiles promising target customers so that you can reach them with optimal marketing mixes.
All consumer markets contain many subgroups of customers and prospects who behave differently, have different hopes, fears and aspirations, and have different purchasing behaviors. Segmentation enables a company to craft individual marketing plans that hit the “hot buttons” of each consumer group. Segmentation is the practice of dividing consumers into groups of individuals that are similar in specific ways relevant to marketing, such as age, gender, interests and spending habits. The goal of segmenting customers is to decide how to relate to customers in each segment in order to maximize the value of each customer to the business. Armed with a better understanding of their customer base, marketing managers can design targeted marketing and service campaigns to reach specific customer segments with offers that are suited to their needs and preferences. The goal of customer segmentation analysis is to identify groups in which the customers are as much alike as possible—and greatly differentiated from customers in other segments.… Read the rest
Profiling a specific competitor is often important to management. However, many competitive profiles will fail to give management insights into how competitors will respond to your own strategy. Understanding this inter-relationship is important for knowing how to position your company in relation to the competition. One of the most popular models for this type of competitor analysis is the so-called Four Corners Analysis.
The Four Corners Analysis developed by Harvard Business School professor and strategy guru Michael Porter is a model well designed to help company strategists assess a competitor’s intent and objectives, and the strengths it is using to achieve them. By examining a competitor’s current strategy, future goals, assumptions about the market, and core capabilities, the Four Corners Model helps analysts address four core questions:
- What drives the competitor? Look for drivers at various levels and dimensions so you can gain insights into future goals.
- What is the competitor doing and what is the competitor capable of doing?
- What are the strengths and weaknesses of the competitor?
- What assumptions are made by the competitor’s management team?
From there, you can identify a competitive strategy that maneuvers around the rival’s objectives and strengths, and that plays to your company’s capabilities.
Michael Porter’s Four Corners Model can be used to develop a profile of the likely strategy changes a competitor might make and how successful they may be and determine each competitor’s probable response to the range of feasible strategic moves other competitors might make. It is also used to determine each competitor’s probable reaction to the range of industry shifts and environmental changes that may occur.… Read the rest