Ebay’s hyped purchase of Skype  excuse the alliteration, was too high!  We studied impariment charges recently in Intermed I, here is an example of just that.  E Bay admits it paid too much and now has a charge for it on the statements.

Here is another few of what we teach in accounting.    I would agree that too much of the curriculum assumes that one is going to work in public accounting for a CPA firm or a pulicly owned company. 
Interesting letter indeed!

One hundred and fifty years ago, Horace Greely famously suggested that if one was on the look for fortune and adventure

Go West Young Man. Perhaps today he would suggest that one Go East.  India has been known as an English speaking call center, now it is moving into manufacturing. But as Jim Rogers suggested in his book, it’s not easy, click to read why.  This reflects more globalization pains.

Now stop and think, with all the infrastructure problems why are companies moving to India? Is it just low cost manufacturing?

Marion Jones, winner of five medals at the 2000 Olympic Games in Sydney, plead guilty this past week in Federal Court to taking drugs to ehance her performance .  She had denied drug usage for years following her victories. Click to read what Peter Uberoth of the Olmpic committee thinks.  She will be stripped of her medals and has retired from the sport.

Here we have another ethical breakdown. Who are the stakeholders?  Certainly the competitors who did not use the drugs and were denied the real thrill of winning rightfully at the time. Certainly youngsters looking for a role model are stakeholders in this episode. The Olympics themselves are at risk, and what sport isn’t these days?  But the really sad thing is that someone at this level in the sport, no dummy she, would deny she knew what was going on and blame it on someone else, please. One only has one’s reputation at the end of the day.

Ethical violations require pressure to perform, opportunity, and rationalization, here we see all three at work.

John Stossell makes a lot of sense. Which is more than I can say for most TV reporters. In this article he explains the Whole Foods Health Care Plan. It is based on HSAs in which people pay a high deductible.  That means they pay all the minor costs and the insurance pays the major costs. This is what insurance was supposed to be in the first place.  And he makes the point that the problem is that insurance allows doctors and patients to run the cost up rather than control it.  Good thinking in a year whenm politicians want o take over health care.

Yep another story about the 3500 WMT stores.   Plea read the previous post about Execution and then the Halo Effect to put this in perspective.  Business Week toured three WMT stores, hardly a scientific sample size to be fair, and concluded that the strategy was not being executed. Like MSFT and not long ago Chrysler, WMT was hailed for a couple of decades as the new model in retailing. WMT increased its inventory turnover from 5 to 8 as Halo Effect author points out.  The stock was said to magically double after every split, as though splitting the stock was the trigger for future firm performance.  And for a while the stock did rise in parabolic fashion.  But no more, these days MSFT and WMT make lots of money, but not for the shareholders. While one can argue they are mature businesses, better suited to paying dividends than hitting growth targets, that is not their legend.

Patricia Pao notes that WMT has tried to go upscale with their interiors. While the stores are cleaner and there are some moves to put faux wood on the floors, the service is non existent. WMT is trying to be an electronics retailer.  In what is surely a great irony, WMT is now attempting to sell DELL computers, the firm that all but ran out of retail with its on line computer sales. Yet there were no DELL computers to be found at WMT.  Can anyone imagine asking a WMT clerk about a computer, I know I can’t.

But poor attitude on the part of the clerks means that there is nothing here for the shopper but low price.  Low price means low margins which means there is no money for raises.  Perhaps WMT should take a lesson from the owner of the Detroit Tigers, see previous post, and hire some real help instead of whoever shows up willing to work cheap.  But to be fair, the Tigers only have one team, WMT has 3,500.  Gee is that like pushing on the sliver of wet spaghetti. How does one motivate employees at 3,500 stores?  It used to be the upward stock price, now that it languishes, the reward bin is empty.

The point is that WMT enjoyed the Halo Effect on the way up. Now that JCP and TGT and others offer more upscale venues, WMT is stuck with, well, rolling back prices.  And without folks on the floor to execute the strategy, WMT has become the new Woolworth’s.

Execution The Art of Getting Things Done is reviewed at this hyperlink.  The authors argue that many books have been written about strategy. But that is useless unless someone executes the strategy and gets it done.  Now bear with me, I am going to link this idea to the next post. 

Karl Popper or perhaps it was someone else observed that 80% of things that get done are accomplished by about 20% of the people in any one organization. My take is that without those 20%, nothing gets done. So the question becomes, how does one motivate and empower people in an organization to get things done?  Well I supose folks all the way back to Alexander the Great have been pondering this question and every month there is another business book on the topic. 

The Halo Effect argues that we tend to mistake causality with success or failure.  On the way up for example (this transitions to the next post) WMT was hailed as the new model of business success. Sam Walton was given a medal by then President Bush I. Suppliers opened offices in Bentonville, AR to make sure they were on the JIT track and would get contracts.  This book did not use WMT as an example, it used CSCO, the networking company.  But the point is the same. On the way up, execs and companies enjoy a Halo Effect. When success is all round, they are hailed as innovators.  Business books appear spotlighting the ‘new methodology or core strategy” of the firm.  Or perhaps authors praise the CEO like Jack Welch at GE or Bill Gates or Mike Dell.  Once the tide turns of course, so does the praise. Or when such folks are really full of themselves, they write their own books, go to Amazon.com, put in Jack Welch, and see what you get.  Welch divorced his wife, married a 20 year younger woman, cashed out his stock options, got a highly publicized lavish retirement, and now tells us to emulate him.  All this was handily accomplished before GE stock started down of course.   Once te stock price starts down on any company,  the stories read that ‘the firm has lost its focus, the core strategy has been abandoned, etc.’

Or as Jerry Reed sings, When You’re Hot You’re Hot, When You’re Not You’re Not.  Success gives rise to a Halo Effect of success whether it is justified or not, just ask Brittany Spears. 

All of this relates to Managerial Accounting.  Here we focus on what makes for successful business. Now let’s move to the next post on our old friends at WMT, and see the Halo Effect in action.

You are aware that I have students write about TQM and Six Sigma in the managerial class. Here is a story about how Starwood Hotels is using Six Sigman to boost the bottom line. One criticism of Six Sigma is that it is result oriented not design driven.  Design of the hotels took place first. But read how training across the spectrum fo workers to become black and green belt six sigmas has improved results.

Once again, mangerial accounting improves the bottom line.

Tom Friedman staked his reputation out with the bestseller The World is Flat.  Click on the link to read his latest thoughts on how the US is doing. I have posted articles on the poor results shown by American students on history and economics.  Friedman goes on to make the point that the Bejing airport offers wi fi and cell service but La Guardia does not.  Travel is down to the US and MSFT is opening offices in Canada. As always, Friedman is a world traveler with a world perspective.

Gee GM strikes are not what they used to be. This article perhaps sums up better than any other what I have been saying about the metamorphosis of the auto industry. In 1970 hundreds of thousands of workders struck. That one strike raised the national unemployment level.  That was hardly the case for the one last week.

Change is the only constant. The UAW and GM did not change. They no longer lead their industry.  Period.