Portfolio Management - The key to successful business - A longitudinal case study of a construction company

Title Portfolio Management - The key to successful business A case study of a construction company Authors Britta Ek Thomas - Master of Science in Technology Management Filip Eliasson - Master of Science in Biotechnology Engineering with Technology Management Elin Skoghagen - Master of Science in Technology Management Advisors Charlotta Johnsson, Associate Professor Department of Automatic Control, Faculty of Engineering, Lund University Thomas Kalling, Professor Institute of Economic Research, Lund School of Economics and Management, Lund University Supervisor A, Product Manager The Mother Company Supervisor B, Director of Product Development The Mother Company Issue of Study Managing product portfolios in today’s business environment is highly complex; there are a number of orthogonal dimensions to consider in order to be successful. Theories within the area of portfolio management are often single tracked and lack the comprehensive picture of what vital aspects to consider to achieve portfolio management excellence. Purpose The purpose of the study is to increase the understanding of the mechanisms impacting portfolio management in an increasingly complex competitive and corporate environment. Methodology A longitudinal case study was chosen as research design since the authors aimed for a thorough and deep understanding of the case company’s strategic portfolio management over time. Initially, a literature review was conducted to increase the knowledge of portfolio management and the surrounding context of internal processes and the external environment. The chosen theories; portfolio management theory, PESTLE, Porter’s five forces, Porter’s generic strategies, Resource-based view and strategy process theory, were then composed into a unique theoretical framework. In the next step, empirical data from the case company was gathered through interviews, questionnaires, databases, observations and following of relevant employees. Finally, the theoretical framework and empirical conclusions were synchronized by using pattern matching. The conclusions drawn resulted in an increased understanding of the mechanisms impacting portfolio management in an increasingly complex competitive and corporate environment. The findings were visualized in Cheez - a generic portfolio management framework applicable in acquisition focused, capital and technology intensive industry companies operating within multinational B2B contexts. Conclusion The output of the study accentuates an amplified importance of internal company-specific processes, intrinsic barriers and driving forces to consider when managing product portfolios in an increasingly complex competitive and corporate environment. Further, deep understanding of the company’s internal and external market environment is required. Depending on the company’s portfolio management prerequisites, different aspects of the environment and the corporate processes have to been considered when striving for enhanced portfolio performance. To visualize the logic of the impacting mechanisms, the generic portfolio management framework Cheez has been developed, applicable on acquisition focused, capital and technology intensive industry companies operating within multinational B2B contexts

Time preferences and the pricing of complementary durables and consumables

There is strong empirical evidence that consumers discount at significantly higher rates than firms. Yet, most research abstracts from the effect of discount rates on marketing decisions such as pricing. We study the effects of a consumers' discount rate that is higher than a firm's discount rate on prices, profits and consumer surplus of complementary products in four competitive settings and an infinite time setting: the firm is a monopolist or competes in the durable market and either ties the consumable to the durable or sells untied products. Our analysis yields five main results: First, a higher time preference of consumers than the firm never increases the optimal durable price and never decreases the optimal consumable price. Second, the optimal consumable price of tied goods is always higher than the optimal consumable price of untied goods, whereas the optimal durable price is always higher when goods are untied. Third, a higher time preference of consumers than the firm never increases profit, always decreases consumer surplus and, as a result, always decreases welfare. Fourth, the ability of the firm to commit to future prices and of consumers to commit to future purchases benefits both consumers and the firm. Fifth, if the firm competes in the durable market, then tying increases consumer surplus when consumers commit to purchasing the consumable. We discuss the implications of our results for firms' pricing strategies

Old George Orwell Got it Backward: Some Thoughts on Behavioral Tax Economics

It is entirely appropriate that the study of public finance take seriously “behavioral” inconsistencies with traditional models of individual and collective decision-making. This raises the question of whether the state should play a role in protecting individuals from themselves, and whether individuals are susceptible to manipulation, or even exploitation, by the people who comprise the state. In this essay I address one aspect of this issue – how it affects an economic analysis of tax systems. In addressing this task I ask, and offer some tentative answers to, what is distinctive about behavioral tax economics as a sub-field of behavioral economics and as a sub-field of tax economics.complexity, compliance

Markdowns in Seasonal Conspicuous Goods

In common parlance, luxury and markdowns are, in many respects, contradictory concepts. Markdowns decrease product exclusivity and hence consumers’ willingness to pay (i.e., snob effect) since most consumers purchasing luxury desire uniqueness. Markdowns also encourage strategic (forward-looking) consumers to wait for lower prices (i.e., strategic effect). Yet, luxury retailers frequently adopt markdowns in practice to stimulate the demand for their seasonal products (i.e., sales effect). To study the impact of these three countervailing effects on a luxury retailer’s markdown policy and rationing strategy, this paper develops a game-theoretic model with strategic and exclusivity-seeking consumers who have heterogeneous (high and low) valuations. We characterize a luxury retailer’s equilibrium markdown and rationing strategies, and find that the retailer induces a buying frenzy (i.e., selling deliberately less than the demand) to increase consumers’ willingness to pay when they are sufficiently exclusivity-seeking. We show that the retailer’s markdown policy depends on consumers’ desire for exclusivity when the proportion of consumers with high valuation is not too high or too low. Interestingly, we find that, in such cases, consumers’ higher desire for exclusivity does not motivate the retailer to increase exclusivity and to adopt uniform pricing. To the contrary, it motivates the retailer to decrease the exclusivity and to adopt markdowns. By doing so, we identify exclusivity-seeking consumer behavior as another rationale behind markdown pricing. Lastly, we find that, when selling to exclusivity-seeking consumers, the negative impact of strategic consumer behavior is lower; however, ignoring it can be more costly

Optimal Strategies for Low Carbon Supply Chain with Strategic Customer Behavior and Green Technology Investment

Climate change is mainly caused by excessive emissions of carbon dioxide and other greenhouse gases. In order to reduce carbon emissions, cap and trade policy is implemented by governments in many countries, which has significant impacts on the decisions of companies at all levels of the low carbon supply chain. This paper investigates the decision-making and coordination of a low carbon supply chain consisting of a low carbon manufacturer who produces one product and is allowed to invest in green technology to reduce carbon emissions in production and a retailer who faces stochastic demands formed by homogeneous strategic customers. We investigate the optimal production, pricing, carbon trading, and green technology investment strategies of the low carbon supply chain in centralized (including Rational Expected Equilibrium scenario and quantity commitment scenario) and decentralized settings. It is demonstrated that quantity commitment strategy can improve the profit of the low carbon supply chain with strategic customer behavior. We also show that the performance of decentralized supply chain is lower than that of quantity commitment scenario. We prove that the low carbon supply chain cannot be coordinated by revenue sharing contract but by revenue sharing-cost sharing contract

e-Commerce fulfillment strategy for luxury brands in South Korea

Thesis (M. Eng. in Logistics)--Massachusetts Institute of Technology, Engineering Systems Division, 2012.Cataloged from PDF version of thesis.Includes bibliographical references (p. 81-84).Introduction and motivation: From a traditional paradigm, the term "luxury e-commerce" is an oxymoron. The high-volume, hands-off approach of online sales is a direct contradiction to that of the high touch, human relationship-based luxury retail industry. It is for this reason that, until recently, many luxury brands have avoided e-retail - the belief is that it cheapens their image (Okonkwo, 2010). However, the successful experiences of certain companies in specific regions are gradually giving many luxury retailers a reason to reconsider e-commerce. For example, the luxury retailer Ralph Lauren has experienced huge success in e-commerce (see Figure 1), and is on a mission to proliferate their multi-channel sales model across the globe. South Korea is one of the most recent locations in which Ralph Lauren has chosen to roll out an e-retail initiative. Explosive economic growth across Asia has rapidly expanded the market for luxury goods and services. In South Korea, this growth has been particularly strong and consistent, as has South Korean consumers' appetite for luxury. This strong market growth, confluent with the reputation as the world's most wired country, makes South Korea an attractive target for e-commerce implementation. The Ralph Lauren team came to us with a rather broad request: to help them investigate the potential challenges of their e-retail initiative in South Korea. Through our research, we found several interesting and pertinent optimization models that could be modified to plan for Ralph Lauren's e-retail operation in South Korea, but as we delved into these models we realized that they didn't address Ralph Lauren's paramount mission in Korea, which is to "elevate the brand". We took a step back and zeroed in on our focus question: how could Ralph Lauren elevate its brand while simultaneously launching an e-commerce initiative in South Korea? We believe the insights gained from our study will help Ralph Lauren utilize "systems-thinking" to make strategic and operational decisions in South Korea that can elevate their brand image. These insights might also apply to other luxury retailers considering an e-commerce initiative in South Korea or other countries. This thesis presents several thought models that incorporate factors like inventory policy, brand strength, mediation, customization and online sales mix - which may make this research of interest to sales, marketing, operations and supply chain professionals.by Mark F. Vanderbilt and Daniel G. Yunes.M.Eng.in Logistic

Business Development Strategy of Loan Save Unit (LSU) Nusa Makmur the Parent Company of Syirkah Muawanah Nusantara (Inkopsimnus)

Like other developing countries in the world, villagers in Indonesia who wish to develop their businesses often face difficulty in capital. This problem exists because the access to both Islamic and conventional banking is difficult, the absence of collateral pledged and low understanding about the bank credit. Indonesian society is dominated by Muslim and is living in rural areas need credit to small-scale or micro-credit for their working capital. Of the total Muslim population, 60 percent of them claimed to be part of a mass organization Nahdlatul Ulama (NU). Since it is considered important, then in 2012, NU opened a savings and loan (LSU) LSU Nusa Makmur called Islamic Microfinance. This institution is managed independently under a cooperative parent will develop the primary cooperatives that have most significantly, the Parent Cooperative Syirkah Muawanah Nusantara (Inkopsimnus).LSU Nusa Makmur taken as a case study research because these institutions have managed to obtain a credit loan commitments of Raptor Capital Management (RCM), an investment institution based in Singapore amounting to Rp 2.7 trillion, or 200 million US dollars over the next 10 years from agreement cooperation in 2012. in the last three years, this unit has been disbursing loans to 30 cooperatives and Baitul Mal wa Tamwil (BMT) with the acquisition of the operating results of Rp 3.2 billion or 245 thousand US dollars.This study analyzes the business development strategies of LSU Nusa Makmur. Data analysis using the SWOT method and QSPM with a number of selected respondents in the form of actors in LSU Nusa Makmur and external respondents including from the government and a successful example of savings and credit cooperatives in Indonesia, Kospin SERVICES.This study will examine what business development model suitable for these savings and loans unit. The results of this study indicate that the unit is in a position to grow and thrive. Nine alternative strategies generated in this study include the need for intensive promotion to all branches NU on their unsecured loans that can touch Jamiyah NU in the countryside, human resource training savings and loans unit itself. The most important strategic recommendations resulting from this study is that 10 years into the future, LSU Nusa Makmur need to metamorphose into a Cooperative Savings and Loans (KSP) which can deal directly with customers. Keywords: business development strategy, Nahdlatul Ulama, Microcredit, rural, Credit Unions

Hurricane Insurance in Florida

This paper studies the evolution of hurricane insurance in Florida over the last decades. Hurricanes (and other natural catastrophes) are typically referred to as “uninsurable” risks. The more exposed property owners find it difficult to obtain insurance cover from the private market and/or can do so only at premiums that substantially exceed their expected claims costs. The state of Florida has reacted to the incapacity of the private sector to insure hurricane risks at reasonable premium levels with the creation of Citizens Property Insurance Corporation (an insurer of last resort) and the Florida Hurricane Catastrophe Fund. Their existence has resulted in substantial premium reductions for the Florida property owners. Both institutions have the possibility of spreading the costs of a major hurricane over a (very) large number of policy holders through after the event compulsory assessments. The risk borne by each individual property owner is thus reasonably small, with substantial benefits for consumers as a group. Looking forward the challenge to the policy maker will be to fine-tune the operation (premium structure) of these two institutions so as to increase their political acceptance. To this end it will be necessary to limit the implicit subsidy of the “bad risks” through the “good risks”.hurricane, catastrophe insurance, regulation, market failure, Florida

Centralizing Data Management with Considerations of Uncertainty and Information-Based Flexibility

This paper applies the theory of real options to analyze how the value of information-based flexibility should affect the decision to centralize or decentralize data management under low and high uncertainty. This study makes two main contributions. First, we show that in the presence of low uncertainty, centralization of data management decisions creates more total surplus for the firm as the similarity of business units increases. In contrast, in the presence of high uncertainty, centralization creates more total surplus as the dissimilarity of business units increases. The pivoting distinction trades the benefit of reduction of uncertainty from dissimilar businesses for centralization (with cost saving) against the benefit of flexibility from decentralization. Second, the framework helps senior management evaluate the trade-offs in data centralization that drive different business models of the firm. We illustrate the application of these propositions formally using an analytical model and informally using case vignettes and simulation

Discount pricing strategies for smart phone using system dynamics modelling

Nowadays, retailers of highly demanded products such as fashion goods and high technology electronic devices (smart phone) are aggressively competing with one another in order to increase revenue and to maintain their position in the market place. Rapid introduction of new smart phone into the market has resulted in shorter product life cycle and intensified competition, which force retailers to enhance their strategic management and creates competitive advantages. The challenge is in designing a suitable pricing strategy and discount offerings. Thus, the aim of this research is to develop a dynamic model to understand the relations between factors influencing the discount-pricing decision, to analyze performance of the discount-pricing strategy and to present an insight on the effects of the strategy implemented. Hence, to help achieve all the purposes, system dynamics approach is chosen to model the discount-pricing strategy for new smart phone. System dynamics modelling simulates the behavior of complex systems over time. Data used in the research is collected from literature review and email interview. The email interview focuses on the information of discount-pricing strategy normally used by retailers. The simulation results show that the value of cumulative sales within introduction phase is the highest as compared to other phases. Based on the survey, it is proposed that suitable discount level to be offered for new smart phone ranges from 10 to 30. Furthermore, the study suggests that retailers can start a discount promotion early of the month of new smart phone released and, in addition, the discount-pricing strategy model of new smart phone is also produced as one of contribution of this study