CFO

Hello guys! Welcome back! Today, we will discuss about CFO. Maybe some of us who have economic or finance background have heard about this terms, but not so sure about the others. So, what is CFO? CFO stands for Chief Financial Officer who is responsible for overseeing the financial activities of the company. CFOs provide leadership and coordination for the administrative, business planning, accounting, finance, and budgeting activities. CFO reports to the CEO (Chief Executive Officer). In some companies, CFOs supervise treasurers and controllers. The treasurer is responsible for handling cash flows, managing capital expenditure decisions, and making financial plans, while the controller is responsible for accounting function.

CFO in a company makes decisions for the stockholders. The decision must be good in financial peripheral from stockholder point of view. So, what is the fundamental goal of CFO? The fundamental goal of CFO is to maximize the current value per share of the existing stock that is owned by the stockholders.

In performing duties and responsibilities, CFO at least require four special skills, which are:

1. Chief Strategist

CFO will need to use real-time financial information to make crucial quick decisions.

2. Chief Dealmaker

CFO must be adept at venture capital, mergers, and acquisitions, and strategic partnerships.

3. Chief Risk Officer

Limiting risk will be even more important as markets become more global and hedging instruments become more complex.

4. Chief Communicator

Gaining the confidence of stock exchange and media will be essential.

Besides skill, there are others specification that CFO must have, such as:

1. Have a Master's degree in accounting or business administration, or business experience for more than 10 years in leading major company or division
2. Have experiences in partnering with executive team
3. Have a high level of written and oral communication skill

Base on the explanation, we can conclude the CFO has important role in company that is responsible for overseeing the financial activities of the entire company. To complete this task, CFO must have several special skills and experiences in business.

By Dera Hafiyyan

Reference:  

1. BusinessWeek, August 28, 200, p. 120.
2. Ross, Stephen A., Randolph W. Westerfield and Jefrey Jaffe. 2010. Corporate finance. 9th ed. New York: McGraw-Hill.

Supply and Demand Theory

Hi folks! Business Economic article is back! And today we will discuss about one of the most fundamental concept. It is the glorious “Supply and Demand Theory”. Have you ever heard about this creature? For those of you who have economic background, this is your breakfast, lunch and dinner right!? So let’s begin!

The supply and demand theory is one of the basic concept we need to understand. Demand is “how much (quantity based) products or services wanted by consumers”. Quantity demanded is “how much products or services people are willing to buy or use at certain point of price”. Supply in the other hand is “how much products or services producers could offer to the market, and Quantity Supplied is “the amount of products and services producers are willing to make with certain point of price”. So, to be clear there are two points of view, in this case they are from the consumers in the demand area, and the producers in the supply area. Consequently, price is the reflection of both supply and demand. Let us brought you to this unique yet understandable concept.

First of all let us sink in with “The Law of Demand”. It stated that if other variable stays the same, the higher the price of a particular product will lead to less people who buy it, or we can say naturally people are avoiding buying things that keep on getting more and more expensive, because with the same purchasing power, they will get less and less product. This graphic below will help us understand.

As we can see, in point A when the price is 30, only 5 quantities are demanded. But when we see in point F when the price is only 5, there are 30 quantities demanded. So, to sum things up, demand and supply has a negative relationship, if price goes up the quantity demanded will fall and vice versa. Got it?! It’s super easy right?!

And now let’s continue to “The Law of Supply”. Similar to the law of demand, it reflects how much product will be sold at a particular price. But, if you guys recognize, the demand curve shows a downward slope, where supply curve is upward slope. Why? Because the graphic wanted to show that the higher the price, the higher product which producers are willing to supply and it has a direct connection with the company’s revenue. Let us pay attention to the graphic below.

As we can see, in point A (P1, Q1) compared to the point B (P2, Q2), P1 < P2, Q1 < Q2. As the price goes up, more and more quantity of a product are being supplied, because if the producers could sell more product in higher price, it will leads to higher revenue for the company. This is used by producers, not costumer. Again easy peazy right?!

And the final form is “The Supply and Demand Curve” where those curve are embedded in 1 graphic to understand how the market goes. Let us see the graphic, again… haha (>_<)

Notice something new? Yes! The “Equilibrium” point. What is this animal?! Equilibrium point is a time where supply and demand curves intersect each other. In other words, it happens where the price and quantity produced is the same as the price and quantity demanded by the customers, so everyone in the market are satisfied. Don’t think that equilibrium point is fixed, it obviously could change overtime depending on the market situation which affect supply and demand quantities.

For example, have you ever noticed especially in Indonesia prior, and during Ramadhan almost every groceries prices are rising steadily, sometimes it rises as sharp as a Kilimanjaro mountain. How could this phenomenon occur? It’s simple! Because the demand for those groceries is rising, and the supply of those items just couldn’t catch up so scarcity spreads everywhere which leads to higher price. When this phenomenon appears there are several ways to counter it, first is the natural way which is “let the market mechanism do their job”. Second is government intervention using market operations or, fixing the highest price for the goods. Remember economics is a very versatile area especially when it affects many people.

So thanks guys for reading this article! Hope it help you people out there and remember, Stay Awesome Fellas!! My quote for today is:

“It does not matter how slowly you go as long as you do not stop.”

Confucius

Job Analysis and Design of Work

When you are having company and you are planning to hire some employees to run your company, the first thing you need to do is making job analysis. There are two items in making job analysis, there are: job specification and job description. By making job analysis, it will help you to show clear tasks for your future employees. Job design is a process of defining how work will be performed and the task that will be required in a given job.

Job Specification

Job specification is related to people. In this stage, we select employees based on skill, ability, knowledge, and character. It will become a core consideration to know whether the candidate is matched with particular job that will be assigned to them.

Job Description

Job description shows the candidate what kind of position that company will offer. It is basically consists the information of salary, task, report, responsibility, authority, and duties. Moreover, it is also can be used to evaluate performance management and consider the compensation.

However, sometimes even though we already had specific job design, we need to redesign it in a particular time, in case that there are changing tasks or the way of work in an existing job.

Herlin Syahrita

Business Model Canvas (1)

Hi! We’re back again. Today’s Business Practice session will discuss about Business Model Canvas (BMC). BMC usually used by the organization to be able to create, deliver and capture the value rationally. This model also helps everybody to understand what the concept will be applied in the future. The business model can best described through nine basic building blocks that show the logic of how the enterprise can make the money. Today we will have two blocks to discuss, first is Customer Segment and second we have Value Propositions.

As we can see the picture above, we will concern first to the Customer Segment block. This explains why customer segment really important for enterprise, because that segment is the main focus for them to deliver their product/ service. There are different types of Customer segment: you can aim to go to mass market, niche market, segmented or diversified. It depends on the enterprise which customer to deliver. Second is Value Propositions block. This explains of the enterprise’s product or service they are designing with value-added to deliver to the customer. The value might be innovative or new or it has not yet existed in recent market. The thing for this value is, be the answer for your customer segment!

        So, let us stop to Value Propositions block. Next session we will discuss another blocks and hope you guys enjoy the session. Cheers!

By: Bonnie AS

Referance: Business Model Generation, Alexander Osterwalder & Yves Pigneur

The Marketing Process

What are the common mistakes of MBA students? It is not a surprise if one of them is thinking that a promotional tool is a marketing process or marketing process stops in creating the promotional tools. That is really wrong because promotional tools are a part of marketing process and the marketing process does not stop there. Many students are too focused on the promotional tools that they become advertisers inevitably not marketers. So, what is marketing process? And what is the difference between marketing process and advertizing? Now, let’s look at marketing process first.

Marketing process has no start and no end as its basic principle. Keep in mind that the end is always evaluation to create more distinctive activities for each process [Exhibit 1]. The purpose of these distinctive tailored activities is to support the company competitive advantage, so it will not be imitated by competitor easily.  That is also why students need to be supported by valid and reliable data when they create marketing process. This data will lead them to a specific answer. “Never assume anything” is the last rule of marketing process, especially in research and strategy process. Gather all the data needed, analyzes them then create something from them is the best way to create marketing process. Sporting the most innovative idea for the promotion will be useless without valid and reliable data. Now, you already understand what marketing process is; it is a cycle that has to be repeated in order to get better and better each time. So, what are the differences between marketing process and promotional tool?

As most MBA students know, every company needs to create profit. It is the requirement of survival. For that reason, we can conclude that marketing process and promotional tools have similar purpose which is to generate company profit. However, they have different job in the company. Molding customer perception is what marketers do while changing customer perception is what advertisers do. For example, Apple marketers not only have to convince potential customers to believe that Apple products are innovative and reliable with technical specification that suitable with target market, but also unique [think different as slogan].On the other hand, advertisers have to push the potential customers to buy the products by putting advertisements in the most strategic places and using the most influential icon that is appropriate with the target market.    

Now you already understand what is marketing process and, the differences between marketing process and promotional tools. You might be wondering what you need to do to create a good marketing plan to start a good marketing process [realistically speaking marketing process only applied for companies, we as a student should be satisfied with marketing plan]. It might be a surprise but valid and reliable data is the most important thing in creating marketing plan. Having these data shape the purpose of the marketing plan itself. It shows the customer segmentation in a cluster so it is pretty easy to choose the segment that the students want to pursue. Moreover, it will give a big picture of what is the real product that the target market is looking for. Students must think of what the target market want to get. Creating the product that meets customers need and adding more value in it are a success guarantee for a marketing plan.

By: Claudya Lita Grace

Operation Management

In this occasion MBA League will discuss about Operation Management. Predominantly in any business or company there are four management pillars which are: Operation Management, Financial Management, Marketing Management and HR management. Operation Management itself mainly focusing on how to operate as lean and efficient as possible. There are lots of tools to reach the operation goals. Many huge multinational companies are doing depth research and development in this area. Have your ever heard the “Toyota Way”? Toyota somehow develop such sophisticated system that allows them to become one of the leading automotive industries.

Operation Management itself is tightly connected with other management, easy example; have you ever seen an assembly line within a factory? What did you see? Labor, technology (machine). What did they do? The rule of thumb is “turning sets of output into designated output” in order to be competitive, company using their factories need to produce as many production output as possible, using as low input as possible BUT still managing the output quality. These are the critical role of operation management. How could operation management interconnected with other? We will break it down. Firstly, Operation Management with Financial Management: Operation should work closely with the finance department in order to control the cost and revenue a company could generate with the quality of the output. It’s not wise omitting the quality of the output to reach low production cost. Always bear in mind that quality is one of the competitive advantage of a product. This is a no easy task to do that’s why both department need to work side by side. Secondly, operation management with HR department. We should always see our labor as company’s asset, so they are valuable and we need to treat them nicely. Human resources manage the people, and these people are the ones who work and produce the output for the consumer. Efficient operation is highly dependent to the worker, one of many way to keep setting the bar high is to manage the asset with tools such as training, the purpose of the training is to enhance our worker skill so they would possess better skill and work more efficient. The third is Operation with marketing management. The main concern is how marketing could synchronize with operation, because as we know the main goal for marketing is how to generate revenue for the company, and those revenue came from the output or product which the operation manage. Again the rule of thumb in this area is producing the output in order to maximize profits based on the data which the marketing division generate. Because producing too many output will resulted in high inventory cost, and unable to fulfill the market needs will resulted in unserved demand and leads to profit loss.

There are tons of operation tools we could applied depend on the industry itself. Toyota Automotive industry applied “Just in Time” tools in order to minimize inventory cost, another tools could be applied is TQM; a methodology for actualizing and overseeing quality change on an authoritative premise, this incorporates: cooperation, work society, consumer focus, supplier quality change and joining of the quality framework with business objectives, there are ways to easily understand and applied these tools, one of them is using business canvas model. By suing this model we can see the connection between each of the management functions are tightly connected to each other.

So thanks everyone for reading this article, we will surely discuss these focus again in the future because there are so many things to talk about. Stay awesome Guys! Today’s quote is:

“There are no secrets to success. It is the result of preparation, hard work, and learning from failure.” -Colin Powell-

By: Ibnu Prabowo Putra Mahardika

What Form will You Chose for Your Business?

Hello guys! When you start a business, the basic problem that you face is how to raise cash. The standard method to solve this problem is organizing your business as a corporation. Today we will discuss the three basic legal forms of organizing firms and also how firm raise large amount of money under each form.

The Sole proprietorship

A sole proprietorship is a business by one person. In this form, after you obtain the business license, you start hire as many people that you need and borrow money you need. At year-end all the profits and losses will be yours.

There are some important things related sole proprietorship:

1. The sole proprietorship is the cheapest business to form.
2. The sole proprietorship pays no corporate income taxes but taxed as individual income
3. No distinction is made between personal and business assets.
4. The life of the sole proprietorship is limited by the life of the sole proprietor.
5. The equity money that can be raised by the sole proprietor is limited to the proprietor’s personal wealth.

The Partnership

If you want to start business together with your friend or someone, you can form a partnership firm. Partnerships divided into two categories:

1. General partnerships

A general partnership happen, when:

1. All partners agree to provide some fraction of the work and cash and to share the profits and losses
2. Each partner is responsible for all of the debts of the partnership

2. Limited partnerships.

Limited partnerships permit some of partner are limited only be responsible to the amount of cash for the partnership. Limited partnerships usually require that at least one general partner and the limited partners do not participate in managing the business.

Here are some important things related a partnership:

1. Partnerships are usually inexpensive and easy to form.
2. The important tool in partnership is a partnership agreement that specifies the nature of the arrangement may be an oral or a formal document.
3. General partners have unlimited liability for all debts. The liability of limited partners is usually limited to the contribution each
4. The general partnership is terminated when a general partner dies or withdraws. However, limited partners may sell their interest in a business.
5. The equity money that can be raised by the sole proprietor is limited to a partner’s contribution to the partnership
6. Income from a partnership is taxed as personal income of the partners.
7. Management control resides with the general partners.

The Corporation

The last form and also the most important is corporation. When your business is in corporation form, your business has a distinct legal entity. Your corporation can have a name and enjoy many of the legal powers like citizen of state.

Here are some important things related a corporation:

1. Corporation is more complicated and also expensive to form. The incorporators must prepare articles of incorporation and a set of by lawyers
2. The corporation comprises three sets of distinct interests: the shareholders (the owners), the directors, and the corporation officers (the top management)
3. Because ownership in a corporation is represented by shares of stock, ownership can be readily transferred to new owners
4. The corporation has unlimited life. Because the corporation is separate from its owners, the death or withdrawal
5. The shareholders’ liability is limited to the amount invested in the ownership shares.
6. The corporation pays corporate income taxes

Based on the explanation, we can conclude that the main advantage to a sole proprietorship or partnership is the cost of getting started. In the other hand, the corporation makes your business ease to be sustain. So, what form will you chose for your business?

By: Dera Hafiyyan  as finance lover

Reference:

Ross, Stephen A., Randolph W. Westerfield and Jefrey Jaffe. 2010. Corporate finance. 9th ed. New York: McGraw-Hill.