Gold or $ (dollar), nothing is certain, Risk is always there

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A friend of mine asked me about the US economy and if the US government will be able to pay its debts sooner or later? The US government and its related agencies have to pay 16 trillion dollars to different parties including local people, foreign people, local companies, foreign companies, and foreign governments. The question is really hard to answer and I think that God only knows.

My friend thinks that the dollar became risky after they have stop backing it with gold as per the famous law of the 70’s. I think this could be true based on your expectation of a value storage tool and the time frame of an investment. Holding dollars for very long time could be risky since there is a very high risk of dollar depreciation if the US government defaults on its debts. However for a guy who was born in the WWII time and made all his fortune in the time of 70’s to 90’s this is not the case; because he would be living the Golden Era of the US superpower.

To be clearer it is all about being a superpower or losing some of your power to others. It looks that there are many challenges to the US (empire) in the coming decades especially from East Asia, this may put huge pressures on the dollar and force investors to search for another value storage tool this could be gold or other currencies. The safest thing however is to be flexible with your savings and investments, putting them into tools that could be easily liquidated or transferred into other tools, and always store some value into assets (actually a lot into assets).

Back Again After a Long Sleep

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After three and half years of silence and observation I made my mind to come back again. I know that my pen is missing me so much as I do as well, however this long observation was needed to see things from another angle especially with all the drama and action happened throw these years worldwide (Politically, Technologically, Economically, and Culturally).

This time I will not write about Business, Economics, and Finance only. I will also add to this what comes to my mind in Thinking, Leadership, Strategy, Management, Innovation,Geopolitics, Culture, and Business. I hope that my words will be helpful for someone at least since it will never be for all.

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Venture Capital Investments in Crisis time!

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Many people think that investing in new businesses has great future profits when the economy is in a downward move because in times of downward markets or hard economic conditions many costs for start-up businesses and new investments are low. Well it could be right only if you have the money to do so. If we review employees’ salaries and the cost of buildings and equipments this is true but what really is happening is that many investors are stuck with liquidity problems.

Let’s focus more on the Venture Capital industry; if we compare the numbers from 2008 to 2009, we will find a 50% reduction in venture capital investments within that time frame. According to Dow Jones Venture Sources, in the beginning of 2009 the venture capital investments reduced to 3.9 Billion US$ from 8 Billion US$ just one year earlier. So if you thought that Silicon Valley will never enters into recession, think again because it sure did and did it twice. The first time was in year 2000 with the net bubble and the second time was by the end of year 2008 with the economic crisis. What is interesting is that even at the highest level of investments in Venture Capital industry in the last 9 years, which happened at the beginning of 2008, that high level of investment never reached the highest level of Venture Capital investments in history that happened in years 1997 and 1998.

Last year the investment in all Venture Capital sectors was down except for Venture Capital investments in energy efficiency. Although the Venture Capital industry is combined with huge profits in the mind of many investors but it come with high risk levels. One of the most important factors in any Venture Capital investment is which project to choose? because the success rate is very low ranging from 2-10% of all projects. The interesting thing is that these 2-10% of all Venture Capital projects usually come with huge profits that will not only cover the expenses of all other projects but in additional to that make extra profits that many investors would like to have. Not only the decision of which project to finance is hard but also the evaluation process of a Venture Capital is also hard because of lack of comparability to similar project since the project is new and some times the only one. In 2010 the venture capital market will be tight but most likely better than 2009.

A Deeper Look to the Financial Crisis and the Supposed Financial Growth in 2010

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The economy will recover from its crisis, maybe it won’t. Finding the answer to this question is very hard yet there are some indications to be considered in finding the reality. Many economists think that 2010 will be the back to growth year; it could be true but let me reveal some urgent questions. The first question I would like to have an answer to is that lets assume we will get back to growth but is this growth will be high enough to generate sufficient amount of money to pay the costly bills the governments paid in the crisis time? The second question I would like to have an answer for is that would the growth reduce the high unemployment rates that we are suffering from almost every where in the world? The final question and the most important one is that would this growth be a real one or it will be artificial? (That is artificially raised by collateralized debt obligations and Ponzi scheme financial tools).

The later raise in major stock markets in the world was greatly dependent on the governmental help and the money that was pumped to save economies. Off course if you pump 700 billion dollars in the US economy alone stock markets don’t have any choice other than raising, but the demand for goods and services is still on the same levels although there are some positive indicators that show increasing demands, but is it enough to take the economy to a healthier status. I think we need some more time and bigger scarifications to repair the financial, economic, production and even consumption systems.

Another point to consider is that lawmakers should check after the people who where behind the crisis. Let us my friend check out where they are???Unfortunately you are right they are in their positions doing the same work and taking the some amount of money, but who paid the bills of the crisis it is the poor low class workers. I think the people who where in charge before the crisis should be questioned for their role and some of them should be wiped out.

Analyzing Service Marketing, A Case Study on E*TRADE Financial Corporation.

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Introduction:

Marketing services is very important issue these days because of many reasons including its huge rule in developed economies, it is a very profit generating process if it is done correctly and it is different than marketing of products. (Zeithaml et al. 2006)

In this case study I will discuss the issue of service marketing based on a leading financial service company. The company is a US financial services provider company called E*TRADE Financial Corporation. In this discussion I will analyze, evaluate and solve some issues related to the marketing of the company’s services. First of all a market research was done to find out what are the main drawbacks and concerns around the services the company is providing. Then these issues are analyzed and investigated more to get some recommendations. After that a practical action plan was designed to deal with these issues.

Company Overview:

Company Name: E*TRADE Financial Corporation.
Headquarter: 135 East 57th Street, New York, NY 10022, United States.
Phone: 646-521-4300
Fax: 212-826-2803
Web Site: http://www.etrade.com

E*TRADE Financial Corporation was founded in 1982 and is based in New York. The company offers wide range of financial services to individuals and institutional customers. The company provides brokerage services for many US stock exchange markets, option markets, future markets, mutual funds markets, currency trading and bonds trading. It also provides researches and reports related to these markets; and advisory and asset management services to retail clients. The company is working also as a bank by providing services such as checking accounts, saving accounts, mortgage, credit card products, certificate of deposit, and different types of loans. The company provides its services through a network of customer service representatives, relationship managers, investment advisors and its web site at www.etrade.com.

The company is a member of S&P500 (Standard and Poor’s) Index, and is traded in New York Stock Exchange in the financial sector under investment brokerage industry. (Finance.yahoo.com 2009)

Analysis, Findings and Recommendations, and Action Plan:

E*TRADE Financial Corporation, is a very successful company in providing many financial services especially those related to exchange markets in the USA. I was assigned to the position of marketing manager of the equity related services. In my first meeting with the managing director, he was concerned about two main issues that are customer satisfaction and meeting customer expectation. As a marketing manager, he encouraged me of developing and managing tools and methods to improve these marketing related issues.

Analysis and Market Research:

First thing to do is to seek for the truth, to make sure that weather the issues we are dealing with are true or not, and this is done by designing a market research to find the issues behind our concerns.

My plan was to use some tools to test customers’ satisfaction. The company holds a very precious data that could help me and my team search for some good findings. The company holds a deep profile about each customer, his/her trading pattern and strategies, complains that were received from customers about our services, and the issues related to the banking service provided to customers. We have purchased an advanced data mining system that was used to analyze customer spending pattern on our services and the satisfaction level through these service purchases patterns.

In the same time, my team has designed a survey that was send to a randomly selected 10,000 customers using equity related services of the company world wide. This survey asks the customers about their purchasing pattern, desired and adequate level of service (their expectation of our service), services that will satisfy their need, and their opinion about some of our old improved services (example: 2 seconds execution time guarantee for US stock market purchases) and new designed services (example: ETFs – exchange traded funds, and free independent market research from six leading sources). (E*TRADE Financial Corporation 2009)

Note: sending this survey to all our customers will be very powerful and accurate research, but because we have 4.3 million accounts world wide, it is very time consuming to analyze this huge amount of data; hence we decided to send the survey to 10,000 randomly selected active customers. The team also sent emails to our active customers inviting them to try our new services, such as ETFs- exchange traded funds, free independent market research from six leading sources, our easy online retirement plan, and our free quick online money transfer service. (E*TRADE Financial Corporation 2009)

The results drown from the above research was analyzed and correlated to the company’s operational performance and the following important points where derived from this effort:

- Some customers have a very high standard of expectation that neither our company nor our market competitors could provide with the recent available technology used.

- Many of our customers especially the older ones, have difficulties in using some of our advanced services; such as and not only triggered stop loss order and options trading.

- Some customers are concerned about our brokerage services price, and they are considering the movement to another brokerage firms that provide same services with lower prices.

Findings and Recommendations:

First Issue: Some customers have a very high standard of expectation that neither our company nor our market competitors could provide with the resent available technology used.

What is customer’s expectation?

“Customer expectations are beliefs about service delivery that serve as standard or reference points against which performance is judged.” (Zeithaml et al. 2006, p. 81)

Customer’s expectation is measured by The Zone of Tolerance that was derived from customer satisfaction and service quality. The zone of tolerance is the difference between desired service (what is wished for) and the adequate service (the lower tolerated level of service). (Parasuraman et al. 1991; cited by Gwynne et al. 2000)

Some customers think that by the available advanced technology existed, we as a company having a magic rod to wish for what ever we want. In our business many customers ask for unrealistic services, this key problem is associated with their expectations of the service. Two examples of services that our customers are asking for but it is very hard to accomplish are; 1- Asking for 24 hrs trading for stocks and options market. 2- Asking for the availability of insider materials in our market research reports.

My recommendation for this issue is that we should deliver the right massage for the customers about our promised service. Don’t overestimate it so that the customer increases his/her adequate level of service; and in the other direction don’t underestimate our services so that the customer leave our firm and go to our competitors. This is done by educating the customer and giving him/her the right and unified massage from all our company stuff about our services that can we really provide with high quality.

For the two problems mentioned above, we can send explanatory materials as part of our daily market research e-mail, talking about issues like this. 24 hrs trading is truly available and we can do it for our customers but because it needs too much effort and money, our company is offering it for institutional and big clients only. For the insider information that is classified as material and non-public, trading using such information is not allowed and is punished by the law in the US. (wikipedia.org – Insider trading 2008)

Second Issue: Many of our customers especially the older ones, have difficulties in using some of our advanced services; such as and not only triggered stop loss order and options trading.

Technology is very powerful tool in developing new products and services. Because of our believe that it should be used to deliver the best services, we have implemented technology in many of our services. But some times because of the advanced technology and techniques we are offering, many customers have had hard time adapting and learning how to use these services.

My recommendation is that our company should work in two areas related to this issue. First the service design should be convenient and easy to use by the customers, and this is done by simplifying the service as possible as it takes. Customers’ recommendations and feedbacks are very important in service design process. Secondly, customers should have full education and support about all our services. Part of this is done already by online education material available on the web site and our 24 hrs world wide call centers. But this should be improved by putting more tools and authority under the control of call center employees (i.e. empowering our employees) (Zeithaml et al. 2006), and by providing call center services in other languages since we have many customers from Latin America, China, Japan, Russia, India and the Middle East.

Third Issue: Some customers are concerned about our brokerage services price, and they are considering the movement to another brokerage firms that provide same services with lower prices.  

Many customers are very sensitive for services’ prices regardless of the quality behind that price. Some customers gave us a massage about this issue, they are seriously thinking about leaving our company to other brokerage firms that may offer lower prices.

My recommendation: To retain our customers we have to develop a strong customer relationship. This is done by 3 strategies: 1- Core service provision by delivering excellent service, 2- Putting some switching barriers, 3- Building relationship bonds with the customer. (Zeithaml et al. 2006)

- First strategy is very applicable in our case. Our company is providing a bundle of complete and integrated financial services that our competitors could not provide their customers with. So we are competing on service quality and high value of our service. Many services are unique to our firm and our competitors having hard time provide or copy these services. E*TRADE provides total solutions for customers’ financial needs. For example: E*TRADE is not only a broker for many exchange markets it is also a bank that gives interests on deposited money and loans for financing different activities such as buying a car or a house. One of our advanced free services is the guaranteed 2 second execution on US stocks and options. Our brokerage services is ranging from 3-19.99 $ for a transaction, other brokers may provide lower prices but offering all in one account is E*TRADE’s competitive advantage. A customer who wants to trade in stocks and currencies should open two accounts for each service by other brokers, E*TRADE account can provide both and more other things such as and not only future contracts trading and option trading. This massage about our core advantage should be delivered to our customers throw an integrated service marketing campaign.

- Second strategy could not be that applicable in our business, since most of our business is done throw the internet and phone, and switching cost is very low especially in the US and Europe because of the availability of other alternatives.

- The third strategy is about relationship building. We as a firm can build financial bonds with customers by providing financial incentives. Example: low transaction costs for active traders. We also can work on structural bonds by designing the right service into the service delivery system; this is applicable by providing customized services for some customers who are asking for these types of services. Building Social bonds is not that easy because of the large amount of customers we have and the physical barriers to our mostly used services encounters (i.e. the internet and the phone). Customization bonds could be improved by organizing events and build customer loyalty. (Zeithaml et al. 2006)

Action Plan:

- Redesign our complicated services to be convenient to as much customers as we can.

- Design a big promotional advertising campaign, that should be lunched through business related TV channels and financial web sites.

- Training our employees to the new services and on customer relationship marketing.

- Give the authority, the tools and empower our employee for optimum customer service satisfaction.

- Educate the customers on our services in an easy and convenient way.

- E*TRADE should participate in exceptions, seminars and events about financial services. This will have good impact on the company’s image and brand loyalty.

- A well organized and highly skilled team should be formed to direct this action plan step by step, evaluating its effectiveness and updating it to meet new changes in the industry.

Conclusion:

The paper describes the role of marketing manager in a service oriented corporation. The role of the marketing manger is not related only to the advertising and service promotion, it is rather beyond this point. The first thing to do is to asses the market and customer requirements and satisfaction level by doing an informative market research. After that key points should be analyzed and recommendation should be made. The practical part is to design an action plan to implement. Then the whole improvement work should be evaluated and updated regularly to meet ever changing standards in service marketing.

E*TRADE Financial Corporation is a leading company in financial services. Our recommendations were made upon a market research to reserve the excellent image of the company and satisfy the customers as far as our resources allow. The wished for result is a win-win situation, where the customer and the organization are satisfied.

References:

-E*TRADE Financial Corporation [online] (cited 8 November 2009)

Available from <URL:www.etrade.com>

-Finance.yahoo.com – ETFC [online] (cited 8 November 2009)

Available from <URL:http://finance.yahoo.com/q/pr?s=ETFC>

-Gwynne, Devlin, J and Ennew, C (2000) ” The Zone of Tolerance: Insights

and Influences”, Journal of Marketing Management, 16, 545-564.

-Wikipedia.org – Insider trading [online] (cited 25 April 2008)

Available from <URL: http://en.wikipedia.org/wiki/Insider_trading>

-Zeithaml, V Bitner, M and Gremler, D (2006) Service Marketing: Integrating Customer Focus Across the Firm, 4th Edition, McGraw Hill, Singapore, Chapter 1, 7 and p. 81.

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Conflict Management

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Introduction

It is part of any relationship, either between individuals or organizations, that conflict sometimes may occur. Conflict means opposing of interests and it is usually arise because of differences in handling related issues and/or relationships between two or more parties. Conflict is not always a bad thing to handle, yet it may lead to a better understanding of the situation. Conflict could be handled by several ways and styles that may lead to different results.

Overview on Conflict

Definition: Conflict is defined as an “interactive process manifested in incompatibility, disagreement, or dissonance within or between social entities”(Rahim, 1992:16).

Conflicts happen everyday in organizations on intrapersonal and/or interpersonal levels. It may be related to different factors and reasons that may include: lack of job satisfaction, low self esteem and motivation, too much work or personal life pressures, and opposing of goals and interests.

Conflict Management: ‘Conflict management consists of diagnostic process, interpersonal styles, negotiation strategies, and other interventions that are designed to avoid unnecessary conflict and reduce or resolve excessive conflict’ (Hellriegel & Slocum,Jr. 2004:226). This process is very important and vital in controlling the conflict because conflict itself may be unavoidable.

 Symptoms of Conflict: The most important symptoms of conflict were described by C. Handy in his book, Understanding Organizations (1976). These symptoms are shown in the following diagram.

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Levels of Conflict: ‘Four primary levels of conflict may be present in organizations: intrapersonal (within an individual), interpersonal (between individuals), intragroup (within a group), and intergroup (between groups)’(Hellriegel & Slocum,Jr. 2004:227).

 A person that has to decide between a job that is secure but with low payment, and a job that is less secure with more salary and other advantages will be in an intrapersonal conflict situation.

An interpersonal conflict happened two months ago in my workplace, when me and my colleague had a different point of view on how to register prescribed drugs either manually in registration book or electronically in the computer.

Intragroup conflicts occur frequently between top shareholders of a company on the chief executive (C.E.O.) position.

An example of intergroup conflict is the conflict that occurs in the election process between two different parties, such as the democrats and the republicans in the United States president election. 

Interpersonal Conflict Handling Styles

The way of handling conflict between two persons differs widely according to different internal and external factors. Internal factors are mostly inherited, gained by time, and come from the person him/her-self. For example, gender, nationality, age, personality…etc. External factors are usually related to the environment around the person. For example, job satisfaction, job security issues, motivation, organizational pressers…etc.

There are many theories and models explaining interpersonal conflict handling styles. One of the best models was presented by Thomas and Kilmann in 1974 (Aritzeta, et al., 2005).

‘Styles of managing interpersonal conflict have primarily been defined based on two dimensions, assertiveness and cooperation (Thomas, 1976). Assertiveness is defined as a concern for self and cooperation as a concern for others. These two dimensions can be crossed to yield five independent styles: integrating (collaborating), obliging (accommodating), dominating (forcing), avoiding, and compromising (Rahim, 1983)’ (Antonioni, 1998:340).

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Conclusion

Conflict is an everyday action that happens in an organization or between organizations. It could be handled by many ways leading to positive or negative results. Conflict is not always unhealthy. Never the less, in some occasions it is very helpful in understanding different viewpoints and ideas and in pushing the organization forward to meet its needs.  

References:

Antonioni, D. (1998). ‘Relationship between the big five personality and conflict management styles’. The International Journal of Conflict Management, Vol. 9, No. 4:336-355.

Aritzeta, A., Ayestaran, S., & Swailes, S. (2005). ‘Team role preference and conflict management styles’. The International Journal of Conflict Management, Vol. 16, No. 2:157-182.

Handy, C. (1976). Understanding organizations. (4th ed.). England: Penguin.

Hellriegel, D., & Slocum,Jr., J. W. (2004). Organizational Behavior. (10th ed.). Canada: Thomson.

Rahim, M. A. (1992). Managing conflict in organizations. (2nd ed.). Westport, CT: Praeger.

Thomas, K. W., & Kilmann, R. H. (1978). ‘Comparison of four instruments measuring conflict behavior’. Psychological Reports, 42:1139-1145.

The Importance of Learning How to Trade in Stock Markets Before Starting Trading.

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Many traders in the global and local stock exchanges think that this process is like gambling, in that it will either lead them to be rich or they will lose all their money. In reality the case is not like that at all. Trading in stock markets is a science and an art that needs knowledge, practice and consistency.

Unfortunately many traders lose a lot of money in stock markets because of lack of knowledge about many aspects of trading, the money that was obtained from selling a house or a valuable asset. Some of these traders didn’t spend some time to learn some basic tools of trading because they were in a hurry to enter the market because they think that the opportunity will finish and it won’t come again. This is off course not true because in sophisticated stock markets the opportunity is always there.

There is an unofficial study that was published in Wall Street 5 years ago showed that 90% of new traders lost their capital by their first year of trading and half of the rest 10% lost it by the end of year two. Then by the third year another 3% moved out from the market and only 2% stayed there after 3 years. There may be some exaggeration in this statistic but the real numbers may be very close.

Another study showed that 80% of traders are suffering from continues losses because of there little knowledge about the basics of trading and stock analysis, and 10% are making profits because of luck only. The last 10% consist of 8% of losers because of bad money and risk management practices and 2% that are very successful in stock trading.

The important knowledge that is needed by traders consists of three parts. Part one is known as the fundamental analysis that focuses on the analysis of financial statements, projects that the company is performing, the industry that the company is doing business in, and the analysis of the economic status of the country(s) the company work in.

Part two is known as the technical analysis. This analysis is solely based on the analysis of the stock charts and it is related to the demand and supply of the company’s stock.

The third part is the money and risk management part that is the most important part and most traders have very little information about it. Lack of information about money and risk management is very obvious among small traders who usually suffer the most in cases of significant market movements.

Studying trading is very important to all traders in stock markets, and the most important part of it is the tools and practices of money and risk management that will maximize the profits and minimize the losses if performed well.