Well that dictum seems simple enough, but Detroit often fails to do it.  And so Mike Jackson at Auton Nation is demanding Detroit pay attention.  He hired McKinsy to data mine what equipment customers want on which vehicles.  For example, what should be a $24K Chrysler Sebring covertible when optioned to $32K won’t sell, the buyer can almost get a BMW at that price.  ditto for a tull stized truck wtih a V 6 engine, I made the mistake of buying one, hated it, low power and lousy gas mileage as the engine had to work hard to pull the truck around. 

This is a good example of how dealer strength can affect manufacturing.  It is also an example of how Detroit still does not get it-the Japanese firms do a better job of tailoring the output to consumer tastes and as a result have lower inventories and higher inventory turnover, something we study in all accounting courses.  The article is on page one of the Friday 2/9/07WSJ.

DLE

Page A15 of the 2/7/07 WSJ contains an interesting take on hedge funds.  When for example does a fund become the very exchange it is chasing?  Fidelity Magellan got so big it could do little more than mimic the overall exchnage itself.  GE shred of the jet engines  is little more than a hedge fund the author argues.  Take a read, you tell me, lots of folks fishing for money out there.

OH and rememer this is not gambling, it’s investing……

DLE

Steve wants the music industry to remove DRM Digital Rights Management (rights for who I wonder) from iTunes and other sites, see WSJ page one 2/7/07.  After all CDs don’t have DRM and the music can be shared and played anywhwere, not so with download sites.  The record execs of course say this is all that is between them and any shred of ownership of IP, Intellectual Property, the song itself.

Well let me take you back to 1981. Let’s visit a pre PC or MAC computer store.  You can have a WANG, KAYPRO or COMMODORE  or a host of other brands that went by the by.  None of the machines can talk to one another or exchange files as they each use a proprietary operating system and software. Clearly your purchase is a bet on which will survive, you will note none of those three did though they were big names back then.  Now let’s go back to the 1920s when firms were being required to reveal financial statements.  Egads they declared, everyone will know everything about us, competitors will copy our operating model, it will be the end of us.  Today of course, financial analysis (read financial astrology what with backdating options, mark to market accounting etc.) is a major industry.

So what say you-Jobs says this leads to incompatibility.  And that is what Gates real legacy is-the open architecture of the PC system is why there are so many and the closed nature of Apple OS is why there are so few, will anyone point this out to Jobs?

So, what should the music industry do, drop DRM and throw it all wide open?  Or hunker down and continue to play all the cards face down?  Please use what we are studying in class to couch your answer.  Dr. Deming, cost, strategy, what?

DLE

Our first topic in CcATS the Community College Accounting Teachers Symposium this February is internships presented by Harvey Zimmerman. One student writes in B/W that the Dumbest Decision she made was to take a part time internship while still staying in grad school. Well under or grad, her points are still valid. Click on Dumbest Decision to read her thoughts and see what you think.

Her point is that sacrificing time away from school while still in school is a bad bet. ie, Teachers matter!

DLE

While Jim Rogers extols the Chinese  as great capitalists, the article by Ross  Terrell on page  A 17 of the Feb 6 07 WSJ reminds us that they are still communists.  Which is to say that like any dictatorial sociey, they throw anyone who disagrees in jail.  Mr. Terrell recounts that three intellectuals were jailed in 20060 for three to five years on trumped up charges, actually speaking out about the govt. 

One person speaking out on this issue is Lou Dobbs.   Click and read what he had to say in a Mother Jones Interview.  While yes I have seen photos of shiny new Chinese factories that appear spotlessly clean, I have also read of the falsified reports on worker safety and hours.  And let’s face it, you can be sure we don’t see the pictures of the other kind of factories, the ones that got Kathy Lee Gifford in hot water, plastered all over B/W. 

It was Jack Welch who started the outsourcing to India and China in 1989.  He got filthy stinkin rich off stock options as GE stock soared on cheap foreign labor.  Some have asked, if slave labor were legal these days, not so long ago it was, would folks like Welch seize on that to increase American profits?  You gotta wonder when they seize on dollar a day laborers, is Jack really proud of that?  Now he has divorced his same age wife for the 25 year younger model,  and holds forth as a columnist in B/W and popular panelist on talk shows. Even the business press commented on his lavish retirement package.   When asked about government office, I saw him respond that well after all there isn’t much money in it, true Jack, candidates have to beg guys like you for private jet transportation.  But then there isn’t much money in working in a Chinese factory either.

My point here, should we really be celebrating the success of American firms in moving to cheap labor?  What if they tried half as hard to say, employ Native Americans on reservations with chroniccaly high unemployment, at least till they turned to gambling casinos.  What about employing folks in small towns where overhead is low  and folks have  strong work ethic.  Is it really worth a cheaper can opener or coffee pot to know that we sent jobs to a country where the rule of law is an opinion rather than a judicial system, when we could pay a bit more and do it right here?

Sounds like an ethical question to me.

DLE

The Blog just about  constitutes a course in itself. 
One of my aims here is to get you the student the chance to read and view the news using critical thinking, and another  great accounting phrase, professional skepticism.  So let’s look at a few past posts and what has happened since.

9/25/06 I noted that  DESIGN is an emerging theme of ads and high profile celebrities.  Designers are the new Divas, says Fast Company magazine.  Now  the Samsung BlackJack ad in the latest B/W features, yep, celebrity fashion designer Derek Lam. Infiniti ads also feature designers.

10/06/06 I spotlighted the Logan, the hot selling French car in Eastern Europe. Now Page 44 of the 2/12/07 B/W reports Renault may sell one million a year  by 2010 and is helping push Renault Nissan to Number 3 worldwide taking out Ford’s spot.

10/22/06 I noted that Eastwood had a penchant for staying on budget in his films which resulted in profits and studio enthusiasm.  And so Speilberg and he agreed on Eastwood doing his first big budget movie Flags of Our Fathers.  While not a huge commercial success, Letters from Iwo Jima has lots of Oscar Buzz-and cost about $20 M to make.  As I said then, who thinks of Clint was a managerial accountant?

10/25/06 I pondered the Nicaragua Canal, now Panama is full speed ahead on a $5B re do of the Panama Canal, a ten year project, how will this affect the glowing predictions of an Inland Port here?

10/29/06 I noted that RSH Radio Shack was on sale, 80% off is stock price of five years ago, have you looked at its chart lately?

11/14/06 I speculated as to when FRPT Force Protection would start making money.  The stock has since soared from $8 to $20 and partnered with Gen Dynamics.  Also, the Pen Again innovative design is now on sale at WMT.

11/16/06  I noted that TGT has outperformed WMT stock.  The latest B/W interviews Julie Roehm the Chrysler ad whiz that got sacked ten months into WMT, hey Julie, it’s tough to turn around a super tanker.

2/4/07 I speculated that it would take a lot more than supply value chain cost cuts to jump start DELL ahead of HPQ.  Well read the page 33 article 2/12/07 B/W  "Dell believes the supply chain and manufacturing can be improved.  B/W observes, Dell does not have the innovation of an Apple or an HP, trying to win consumers strays from the direct sales model." Now DELL is a $90 B company not a $3B when Mike left.  Gee, haven’t we seen this movie at Ford? The fact is that DELL stills makes oodles of money, the shareholders and execs are just amazed the stock is not  going up 20% a year, in fact it is down 50%, gee, it happens in the best of companies.  What do we study in managerial accounting that could have prevented this?

At any rate, those are a few past observations that have pretty well turned out to be right on the mark.  A college degree is supposed to do that for you but my experience is that working problems in a book won’t get you there.  Only reading, writing, speaking, and analyzing will do the job.  And that is what the blog is trying to induce you to do.  So, read along, sound off, we can have some fun with this, and maybe show some practical application along the way.

DLE

Thank you Jordan (see his post about DELL) which is the perfect introduction to my next obsession, I think the entire MBA degree as it exists should be junked, everyone is offering the same MBA. Instead if UNT Dallas wants to differentiate itself, we should focus on DESIGN. I will post some of my articles on design. look at the Fast Company website, Designers Reign Supreme. Jobs took Apple from less than 5% of the computer market to folks looking at his computers for the first time by

Designing a whole new music download interface, still the easiest to use after everyone else has tried their hand at it
Designing a whole new easy to use media storehouse called the iPod
Followed that up with iPhone
Soon iVideo

These are not supply chain or value chain breakthroughs which is all the MBA lit talks about, these are

DESIGN INNOVATIONS

Dell is not going to improve his company with chain innovations because everyone is too competitive in that area. Does he employ creative designers? Well guess not, we know MSFT hasn’t, anyone buying ZUNE? OK MSFT has sold a lot of play stations but other efforts like ZUNE and the electronic book have gone nowhere. The reason is that MSFT employs programmers and code writers, not designers.

Great design can change completely the way people look at a firm, examples

Ford T Bird 1953
Datsun 240 Z 1972
Mazda RX 7 1978
Mazda Miata 1989

Ferrari sells less than 5,000 vehicles in the US per year, yet is there anyone who does not know the name and what it stands for, years of cooperation with Pininfarina is no accident here, this is why Ford bought Aston Martin, and it is doing well, too gad we can’t say that for Ford, can you watch the latest run of Bond movies and NOT want an Aston?

THe new Jag is on backorder after the whole Jag line has sagged for years, why, it is a new design, not an old model rehashed.

Soon everyone will be oggling the latest female fashions on display as ‘stars’ attend the Oscars, same story.

More as we continiue the semester, your thoughts?

DLE

DLE

Just a few years back Mike Dell suggested the best Apple Computer could do was to liquidate all assets and distribute the cash to the shareholders.  Look who’s laughing now.  Read the latest at Mike Dell replaces Rollins as CEO.

Rollins fired as CEO, a new lawsuit alleging concealed kickbacks from Intel, laptop recalls, failing to meet quarterly reports, gee,  and losing the number one spot to HPQ, all in one year!

Apple with less than a 5% share of the computer market, has a market cap $20 B higher than Dell!  Seizing the opportunity from Napster to make music downloading cheap and legal, Apple created a whole new music market, then mated the iPod to it, now the iPhone, and soon the IVideo viewer.  All this is causing more folks to look at Apple’s computer, particularly with, ugh, another MSFT product to learn all over again, VISTA.

Bob Dylan had it right, The Times they are a changin’.  What are you learning in managerial accounting that could help you prevent this from happening at your company?

DLE

As I have remarked in other posts, it is always interesting to read publications written in other countries to get a different perspective.  Page A5 of this Weekend’s WSJ refers to this article in The Economist .  Handily I found it and linked it right there for you.  Spotty electricity and no you can’t fire the help labor laws abound.

It was Jack Welch at GE that started the pilgrimage and outsourcing to India in 1989 by outsourcing computer code.But this article questions whether the infrastructure or what there is of it, is up to the task.   Several in my classes have chosen to read both of Jim Rogers round the world books.  Indeed his take on India’s prospects in Adventure Capitalist is negative.  He decries the excessive regulation, to the point that a border guard told him he could not leave the country after he in fact had left it.  Check it out at jimrogers.com   Click on the world map and then pick a city in India, lots of photos and observations, truly and interesting site about the state of the world  at the millennium which was his point. 

Speaking globally there is also an interesting article on travel to Taiwan.  Why don’t we have a high speed train like that linking Dallas, Austin SA, and Houston by the way?

DLE

Pete Kendall ran another of my observations at his Socionomics Site.   Socionomics is the study of how popular culture influences events and eventually markets. In short the market reflects the feeling and moods of its millions of participants.  While bull  markets reflect ebullience and upbeat emoticons, bear markets are wrought with fear and despair.  Clearly we are in a bull market now and in fact all technical indicators are still up.  But multiple large markets do not turn on a dime all at once. They turn singly at first then as the new emotion grips the participants, many rush out the door of what was ‘long term investing.’  That was the mantra back in 1987, but look how many exited not just in one day that Octobers but throughout that fall.  A similar situation existed in 1972. A popular president had been re elected in a landslide promising an end to an uncertain war. The Dow Industrials were at a new high-1,000 after six years of see sawing from that level  in  1966.  You will recall that the Sound of Music was a popular movie of that 1966 era.  Then everything went, literally and figuratively to pot.

Now, the re elected president enjoys the same low poll numbers as Nixon.  The war drags on amid discontent.  A seismic shift in political leadership has occurred.  Gold is up 50%, usually a bear market signal. The dollar weakens.  This is not a prediction, just an observation.

Now check out the article at socionomics as well as Pete’s past article from March 10, 2006. As I observe, Americans are loving violence, and channels like FX are ready to produce plenty of it.  Notably DIRT follows the success of Nip n Tuck.  The last season featured stealing organs from unsuspecting donors and, well, as I said, things too vile for  this publication……….

DLE