The BigMac Index

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Is it possible that the price of burger can be an indicator of the global economy? According the The Economist, it is more than anyone can imagine. In 1986, The Economist invented the Big Mac Index as a jovial attempt to determine whether or not currencies were at their correct level. It’s based on a theory called the (PPP) purchasing-power parity. The Big Mac Index is based on the principal that, in the long run, exchange rates will move toward a rate that would equalize the prices of the same basket of goods (burger) in two countries. The following is an example. The average price of a Big Mac in the U.S.A. in 2013 was $4.37. In China it was $2.57 at market exchange rates. As a result of this analysis, the index tells us that the Yuan was undervalued by 41%.

This index was never meant to be an exact measurement or litmus test of currency misalignment. It was meant to be only a tool to make the exchange-rate analysis more easily understandable. Over time, it has become a global standard and included in some text books and an objective of many academic studies. Ryan Avant (chief economist at The Economist) states that it’s a loose way of gauging changes in the wages’ of workers to productivity ratio globally and to see if currencies are at an accurate level. Here’s an example to illustrate this further. If a Big Mac is more expensive in the U.S. than in Switzerland, then Swiss Franc is more than likely overvalued. This is true because these are similar products in these countries. It’s interesting to note that one can consider income differential. Furthermore, if one applies Big Mac prices, China’s currency is very close to a reasonable value in spite of all the rhetoric about the so called ‘currency manipulation’. As stated earlier, the Big Max index is based on the PPP, which will be discussed next but considering that many central banks are making an effort to brace up or degrade currencies in conjunction with the instability of the financial markets, Big Macs will never cost the same everywhere (Lyster, 2013). As a result of these findings I can’t place much faith in the Big Mac Index.

The Purchasing-Power Parity was developed in 1920 by Gustav Cassel. In essence, it states that in efficient markets the same goods and services should have only one price and is based on the ‘law of one price’ (Studyforex, n.d.). The theory is very important to the foreign exchange market. It’s the driving force that moves the currencies in the foreign exchange market. This is critical because it’s used to determine the cost of living from county to country. This is how the normal exchange rate is calculated. Traded goods are compared to non-traded goods in conjunction with the per capita gross domestic product method. By dividing the GDP, of a country, by the population, one can derive the per capita Gross Domestic Product. Then the two countries’ currencies can be tabulated. Consequently, many variables need to be accounted for such as interest rates, market speculation and hedging by central banks. All factors affect the true value of per capita Gross Domestic Product. Misleading results will occur and lead to an inaccurate measurement of the standard of living. Hence, the PPP method is used to create a more viable depiction.

PPP doesn’t mean that nominal exchange rates are constant or that they are equal to one. The theory suggests that there is an interaction between nominal prices and exchange rates in so much that items that sell in the U.S. for one dollar and a certain value of a Yen in Japan today. Hence this ratio would change respectively with the nominal exchange rate. Succinctly, PPP states that real exchange rates are always equal to one. To make it simpler, one item purchased domestically can be exchanged for one foreign item.

Regardless of its appeal, purchasing-power parity is not embraced in practice. The reason is that it relies on opportunities between cost and risk to buy items at a low price in one place and sell them at a higher price in another. This has the effect of bringing the price together in different countries. However there are other costs and barriers that effect transactions that place limits on the ability to enable prices to converge. They are the power of markets.

Regardless of these stated facts, PPP is a factor to consider as a starting point only in a theoretical scenario. Even though it might not be a perfect measurement, the insight behind it does hold some weight. It can however place everyday limits on how much actual prices can deviate across countries.

References

Beggs, J. (2013) Introduction of Purchasing-Power Parity. Retrieved from    http://economics.about.com/od/Exchange-Rates/a/Introduction-To-Purchasing-Power-            Parity.htm

Froeb, L. (2008). Managerial Economics. Mason, OH:South-Weston Cengage Learning

Hakkio, C. (n.d.). Is Purchasing Power Parity a Useful Guide to the Dollar? Retrieved from             http://www.frbkc.org/PUBLICAT/EconRev/EconRevArchive/1992/3Q92hakk.pdf

Lyster, L. (2013). The Big Mac Index and Burgernomics. Retrieved from    http://finance.yahoo.com/blogs/daily-ticker/big-mac-index-burgernomics- 145755381.html

Petryni, M. (2013). The Importance of Purchasing Power Parity. Retrieved from           http://www.ehow.com/info_8425677_importance-purchasing-power-parity.html

Studyforex. (n.d.). Purchasing Power Parity. Retrieved from             http://www.studyforex.com/purchasing-power-parity.html

The Economist. (2013). The Big Mac Index. Retrieved from             http://www.economist.com/content/big-mac-index

Identify a Leader and Leadership Style

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Identify a Leader and Leadership Style

George W. Bush is the first president of the United States to hold an MBA. This has helped him early in his presidency then hurt him later. His top-down management approach was successful along with the style of secrecy and speed resulted in great strides for his presidency. Unfortunately this approach resulted in some failure and jeopardized his legacy. President Bush was said to be a visionary along with having a very loyal team. His advisory team was small and his decision making process involved this small team of very loyal pundits. This small team and short crisp meetings resulted in a smaller number of alternatives. This top down approach paralleled with speed and secrecy are all qualities of business management especially those public officials that are afraid of leaks, shared power and bureaucracy. His detractors elaborated that this quick approach to decision making did not allow a regularized development process.

President Bush’s defining feature of his strength was his ‘people’ skills. He was a master of motivating, rallying and energizing others. He was unlike President Reagan who was a true visionary because of his ability to “encompass consistency of viewpoint” (Getting inside the Bush Mind, 2000). Members of his team or his peripheral members falter his ability to attend to details. They attribute this to boredom and his daily routine tasks. His recognition of this offered these tasks to be delegated to his choice for Vice President, Cheney. He was a champion at organization skills.

While his intelligence is often challenged, it has to be recognized that his SAT score of 1206 is comparable to John F Kennedy. Unfortunately there is little indication of his quest for other knowledge, i.e., history, philosophy or more importantly his absorption of mundane daily briefings or background reports.

So how do I define George W Bush’s leadership style? I have to place his style between Situational and Leader Member Exchange theories. Let’s start with the Situational Approach and how we can apply this to President Bush’s leadership style. In the High Directive High Supportive model (S2), he clearly exhibits this style in so much that he manages top-down approach. His quick to decide method and small circle of advisors spawns this type of style. It’s also important to point out that S2 focuses on achieving goals and meeting subordinates’ sociomotivational needs (Northouse, 91). However, it is an extension S1, S2 does require the leader to make the final decision on what and how of the goal accomplishment.

Let’s now see how the Leader-Member Exchange Theory is part of President Bush’s leader ship style. In a previous observation it was noted that he had a small circle of advisors, no doubt, all presidents are surrounded by administrators, cabinet members and advisors. It’s clear in my research that he always surrounded himself with a small number of, what can only be classified as, a close knit in-group of decision makers. “Working with in in-group allows a leader to accomplish more work in a more effective manner than he or she can accomplish working with out one” (Northouse,154).

Analyze a Major Decision

Why did President Bush decide to invade Iraq? The facts are still under scrutiny but basically it was the results of CIA analysis that Saddam Hussien was in possession of weapons of mass destruction. It was also a conclusion of the CIA that he could not be removed from power except for a war. President Bush had secret meetings about this to avoid international angst and domestic speculation (Bush Began to Plan War Three Months After 9/11, 2004). Early in 2003 President Bush had made up his mind about taking military action against Iraq. To enforce the LMX Model his close relationship with Cheney and a closed group made a significant influence on this decision. Cheney won a bitter battle with Colin Powell in deciding to invade Iraq.

Why was the Decision Effective and could it have been Better?

The effectiveness of the decision is debatable today and will continue to be for some time. Of course there were not weapons of mass destruction found but in the defense of Bush’s decision, Saddam did use these types of weapons within his on country on his own people. So was the decision effective? The fall of Saddam’s regime was in many people’s mind a blessing. He was a cruel leader and according to Bush’s advisors, he was an imminent threat to the world’s safety.

What would’ve been the outcome if we didn’t invade Iraq? We certainly would not be responsible for rebuilding a country and spending billions of dollars. We also can’t put a price on lives lost particularly to the military.

If a different leadership style were implemented, would there have been a different decision made? I tried to apply transformational and authentic leadership type to Bush’s type and since both are highly dependant on morality, these do not fit. His high Christian values dictate that the decision would’ve been the same. He was convinced that this decision was the right thing to do. The Skills approach, if it was used in this instance might have had a different result. So let’s assume the Three Skills approach was applied here: Conceptual, Technical and Human. It was previously observed that Bush had strong Human skills so that can be applied in this situation. Conceptual skill is by far the outlier here. “Conceptual skills are central to creating a vision and strategic plan for an organization” (Northouse, 42). If this skill were evident and applied in this decision would we have invaded Iraq? I’m not so sure. Would a visionary have seen the outcome path of this decision years in advance? In addition, if the LMX were not used, the chances of a small, tight group of advisors might not have existed. The decision to invade Iraq might not have happened. There are those who have opposed the invasion and the rebuilding of Iraq and there are those who think it was the right decision. We certainly will never really know.

References

Bush Began to Plan War Three Months After 9/11 (2004) Retrieved July 26th 2011 from

http://www.washingtonpost.com/wp-dyn/articles/A17347-2004Apr16.html

Getting Inside the Bush Mind (2000) Retrieved July 20th, 2011 from

http://www1.csbsju.edu/uspp/Election/bush121700.htm

Leadership in the Bush House (2003) Retrieved July 27th from

http://hbswk.hbs.edu/archive/3745.html

Northouse, Peter. Leadership Sage2010. Print

The First MBA President (2007) Retrieved July 24th 2011 from

http://gunston.gmu.edu/pfiffner/index_files/Page1236.htm

Top Down Management (2011) Retrieved July 23rd 2011 from

http://www.gaebler.com/Top-Down-Management.htm

The Importance of Collecting Mobile Phone Data

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Mobile phones are a perfect vehicle for collecting data. They are cheap and they are pervasive. Even though most mobile phone users hate digital ads, these same ads pay for the free applications that users love so much. One of the most successful advertising companies is AdMob for which Google paid $750 million for in 2010. Not all of these types of companies are doing so well. Microsoft had to take a writedown of $6.2 billion in 2007 for aQuantive which it purchased for $6.3 billion (Economist, 2012).

Companies that use third party advertisers have to be prudent and thoughtful. Moonbeam Development a company that has about 200 applications were using LeadBolt. Initially it went well but when ads were pushed into users’ notification bars onto phones users were very angry which led to death threats. Leadbolt was apologetic and mentioned that users can avoid this by electing to remove this option by browsing to their website. Using advertising and or using third party marketers can lead a company into to a very precarious position.

Companies are recognizing the fact that rules dictating Personal Information Identification are eminent. App privacy policies should be explicit concerning the information they are collecting and why. Phone numbers and email addresses should be elected to collect but avoid collecting unique phone identification numbers for tracking purposes.

It’s also not uncommon for apps to collect and track website usage. Google scans email and Facebook collects Likes and Dislikes and displays them to Friends. Email contacts are also collected and used in the case of Path; they received backlash for that (Johnston, 2012). Collecting the correct information for marketers’ partners is an art. They have to know what information is needed for each customer. A great example of this process is used by a company called Text to Change. They will sit down with the stakeholders to arrive at a detailed list of data requirements to fit the needs of the organization (Wagenar, 2012).

If I had to acquire personal information, I would collect: address, web browsing history, email address and videos watched. This information, for example, can be used to locate a best place to open a particular type of store, which area might get most foot traffic or car traffic. In addition, it can also reveal if they own pets, Likes and Dislikes and as a result how to focus ads (Goldman, 2011). As a said earlier in this report, mobile phones are everywhere and used by many, i.e. there are 4.8 billion mobile phones in use today; it’s foolish not to take advantage of this (Turner, 2011).

References

Economist. (2012). Attack of the Covert Commercials. Retrieved from http://www.economist.com/node/21558272

Goldman, D. (2011). Your Phone Company is Selling Your Personal Data. Retrieved from http://money.cnn.com/2011/11/01/technology/verizon_att_sprint_tmobile_privacy/index.htm

Johnston, C. (2012). Mobile Phone Users are Mistaken. Retrieved from http://arstechnica.com/business/2012/07/mobile-phone-users-sorely-mistaken-about-how-much-privacy-they-have/

Turner, J. (2011). Are there really More Mobile Phones Than Toothbrushes? Retrieved from http://60secondmarketer.com/blog/2011/10/18/more-mobile-phones-than-toothbrushes/

Wagenar, M. (2012). Data Collection Using Mobile Phones. Retrieved from http://www.texttochange.org/blog/data-collection-using-mobile-phones-right-tool-job

Outsourcing

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Contact an offshore outsourcing company inquire about their services.

Project Leadership Associates appears as a viable IT outsourcing company. They have offices in and serve San Francisco, Oakland, Berkley, Boston, Chicago, New Orleans, Houston, Detroit and Seattle. They will also serve southern New Hampshire. The company was founded in 1998 with the intent to provide IT consulting and support for small businesses and mid-market clients. Each client is paired with a senior level consultant giving a unique responsive service and skillful advice.

The service that PL provides assists clients that do not have an IT department. They will provide server administration, desktop support, IT strategy and most importantly budgeting. Succinctly, they will run the IT department. They also provide proactive IT support, IT project strategies, 24X7 monitoring desktop support security audits, staff augmentation, cloud infrastructure services and Exchange services.

What is your position regarding IT outsourcing?

My answer, concerning my position on IT outsourcing, depends on certain variables. Some small to medium size companies do not have the budget to hire an IT staff and manage IT projects. They also might have projects that require a specific need that only precise skill of an IT outsourcing company can fulfill. In this case, IT outsourcing can definitely fill that need for that company. A survey that targeted businesses concluded that “The survey results highlight some outsourcing concerns, but they don’t mean you should avoid outsourcing altogether. You just need to be aware of the issues, and put in the due diligence to forge relationships with quality organizations you can trust” (Bradley, 2012). I have first-hand experience with IT outsourcing at Fidelity Investments. A decision was made to outsource approximately 30% of the staff for cost cutting purposes. Presently the cost savings is not as effective as once thought. We are now hiring in another country where the labor is more cost effective.

Am I in favor of IT sourcing? There is a prevailing theory that IT Outsourcing is the life blood of IT. This theory also states that it saves money and enables the company to engage a broader technical skill. However this confidence is not as high as once thought (Bradley, 2012). The answer is yes but only if the company performs a strenuous exercise to determine if the need to outsource fulfills a specific business requirement. Moreover the company needs to make sure that the expense of the outsourcing doesn’t outweigh an internal IT cost to fulfill the same requirement.

References

Bradley, T. (2012). Is IT Outsourcing Worth it? Retrieved from

http://www.pcworld.com/article/257897/is_it_outsourcing_worth_it_.html

Project Leadership. (2013). Services. Retrieved from http://plamanagedservices.com/services

The Importance of Collecting Mobile Phone Data

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Mobile phones are a perfect vehicle for collecting data. They are cheap and they are pervasive. Even though most mobile phone users hate digital ads, these same ads pay for the free applications that users love so much. One of the most successful advertising companies is AdMob for which Google paid $750 million for in 2010. Not all of these types of companies are doing so well. Microsoft had to take a writedown of $6.2 billion in 2007 for aQuantive which it purchased for $6.3 billion (Economist, 2012).

Companies that use third party advertisers have to be prudent and thoughtful. Moonbeam Development a company that has about 200 applications were using LeadBolt. Initially it went well but when ads were pushed into users’ notification bars onto phones users were very angry which led to death threats. Leadbolt was apologetic and mentioned that users can avoid this by electing to remove this option by browsing to their website. Using advertising and or using third party marketers can lead a company into to a very precarious position.

Companies are recognizing the fact that rules dictating Personal Information Identification are eminent. App privacy policies should be explicit concerning the information they are collecting and why. Phone numbers and email addresses should be elected to collect but avoid collecting unique phone identification numbers for tracking purposes.

It’s also not uncommon for apps to collect and track website usage. Google scans email and Facebook collects Likes and Dislikes and displays them to Friends. Email contacts are also collected and used in the case of Path; they received backlash for that (Johnston, 2012). Collecting the correct information for marketers’ partners is an art. They have to know what information is needed for each customer. A great example of this process is used by a company called Text to Change. They will sit down with the stakeholders to arrive at a detailed list of data requirements to fit the needs of the organization (Wagenar, 2012).

If I had to acquire personal information, I would collect: address, web browsing history, email address and videos watched. This information, for example, can be used to locate a best place to open a particular type of store, which area might get most foot traffic or car traffic. In addition, it can also reveal if they own pets, Likes and Dislikes and as a result how to focus ads (Goldman, 2011). As a said earlier in this report, mobile phones are everywhere and used by many, i.e. there are 4.8 billion mobile phones in use today; it’s foolish not to take advantage of this (Turner, 2011).

References

Economist. (2012). Attack of the Covert Commercials. Retrieved from http://www.economist.com/node/21558272

Goldman, D. (2011). Your Phone Company is Selling Your Personal Data. Retrieved from http://money.cnn.com/2011/11/01/technology/verizon_att_sprint_tmobile_privacy/index.htm

Johnston, C. (2012). Mobile Phone Users are Mistaken. Retrieved from http://arstechnica.com/business/2012/07/mobile-phone-users-sorely-mistaken-about-how-much-privacy-they-have/

Turner, J. (2011). Are there really More Mobile Phones Than Toothbrushes? Retrieved from http://60secondmarketer.com/blog/2011/10/18/more-mobile-phones-than-toothbrushes/

Wagenar, M. (2012). Data Collection Using Mobile Phones. Retrieved from http://www.texttochange.org/blog/data-collection-using-mobile-phones-right-tool-job

Social Sites Generate Revenue

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The fact is that there are more ways that social networking sites can use to generate revenue than only advertising. The graphic on page 4, in this report, shows the method by which social networking sites generate revenue. According to this graphic and details in the site being referenced show the methods that generate revenue: ads, web apps, paying customers, mobile apps and affiliates.

It’s also interesting to note that 77% of revenues are from Ads, 7 % from diverse revenue channels and 10% are looking at other methods of generating revenues. Some sites are using multiple methods, for example Google generates revenue from ads, paying customers and web apps. It’s also very apparent that marketing agencies have discovered social networking as an excellent revenue stream. Marketing agencies and social media sites are planning to spend more on advertising, i.e. 71% plan to spend more on using social networking sites for advertising medium in 2012 and 77% plan to use the same for 2013. In addition, 89% of marketing agencies realize experimentation in this arena are a permanent solution and in year 2013 as the year that the marketing and social networking combination will make a major breakthrough (Dugan, 2012).

Marketing pundits are still trying to find a way to insert advertising into the web experience without giving the user a negative feeling as they browse and use the site (Strickland, 2012). Basically, more traffic is generated as more users visit the site. Since Facebook has millions of active users  and this user base has enormous value. For this reason advertisers are willing to pay a greater amount of money for an advertisement on Facebook compared to another site with a smaller user base.

Facebook charges a developer fee; this generates revenue as well. Facebook does allow developers to incorporate their applications into Facebook. Although this is free for developers, Facebook charges $375.00 to evaluate their application. If the application meets Facebook’s criteria, it will be listed as a viable application (Strickland, 2012).

Other business models are emerging, for example, sites offering premium accounts for businesses. They in turn can use the social networking site as a platform to advertise. As a matter of fact Twitter has contemplated a model where companies would be required pay a fee to possess a Twitter company account.

It’s clear that social networking is here to stay and has an enormous impact on technology and the way users communicate. It’s growing at a tremendous pace, Bebo has 22 million visitors a month, Club Penguin, a children’s site has, 5 million and finally LinkedIn has about 5 million visitors a month (Urstadt, 2012).

 

(Dugan, 2012)

 

 

 

 

References

Dugan, L. (2012). Retrieved from http://www.mediabistro.com/alltwitter/how-do-facebook-twitter-and-pinterest-make-money-infographic_b19465

Strickland, J. (2012). Retrieved from http://computer.howstuffworks.com/internet/social-networking/information/how-social-networking-sites-make-money.htm

Urstadt, U. (2012). Retrieved from http://abcnews.go.com/Technology/AheadoftheCurve/story?id=5229625&page=1

[w1]They actually cracked a billion recently.