August 2010 Archives

I had an idea today.. may be something similar or even the same thing has been said before by some great Management Guru, or Enterprising guy.

But for me.. it was My Spark for the day. It is a novel idea about how Companies should be measured / rated with a simple formula.

First thought.. was "Should I try to patent it.. or write a book and sell it.." etc.,

Second thought.. was "I share it.. I will get another spark later.. " .. pretty over confident of myself most-often.

But .., lets talk about the idea.

It is like said above.. a simple formula, that everyone would understand.. to measure / rate companies and brands around us.. so we know which product or company is actually doing good.. to invest with them or buy their investment (their product).

The formula goes like this..

1. Companies should not be measured by thier earnings.. but by their "power"..

What power ?
2. Power of a company should be equal to, the product of its customer-base, the revenue they make, and the resistance they have in the market to their product.

inspired from.. P = VI (power consumed by an electric appliance = voltage x current )
and V = IR (voltage = current x resistance)

P (of company ) = V (customer-base-size) * I (revenue they make.. not negative if they make losses.. its just the cost of all products they has sold without deducting costs, salaries, taxes) * R (resistance should be calculated by taking the nearest, valid, visible competitor's cost for the product for a single unit, divided by our company's product cost for a single unit)

P = V I R (but this is irrelevant anymore to be compared with the electrical formula)

1.
If a company has more than one product / brand.. their total Power would be calculated by:

P = P1 + P2 +......

2.
By calculating power this way, we ensure that companies can be easily rated, the competitor parameter is brought into the rating so that companies are vary of competition at all stages... and importantly companies don't try to increase costs on the same customer base to make high revenues and become popular with investors.

3.
If a company increases cost of its products, say a mobile phone company raises 2$ in their costs and has 1 million subscribers.. they increase their revenue by 200 % and majority of the subscribers would not make an issue of the 2$ increase.. and the company makes higher revenues without doing any hard work at all... which is bad. and the current system which is like this, allows companies to fleece subscribers or customers after making a huge customer base over the years. Nobody I know would cancel their mobile phone subscription with their big branded operators because they charge 2$ extra per month on some reason.

Companies exist to make money.. but they cannot make more and more money without any pain affecting them. it should pain them. it should pain their power rating.. and if this power rating like thing was used in stock markets and other investor forums to rate a company, then a bad power rating would pain the company's investors.. which is correct cycle.

4.
What happens with big companies that by their business model have small customer base.. for example oil companies.

Using this formula for oil companies which usually have only whole-salers and distributors on their customer base will mean that those companies will not be able to improve their power rating much by increasing their customer base.

But then, they will only be compared with other oil companies which will also have the same problem. Or, probably this power rating model would provide motivation for the oil companies to do direct retail marketing which could bring good competitive costs, better quality of oil.. for the end consumer... without having to pass through all that intermediaries of the distribution network.

---
So much for now.. about the spark.

What do you think about all this ? Intersting ?

There are numerous politicians in the country, scraping money to their accounts in foreign countries through various legally valid means.. in the name of Common Wealth Games.

As accounted so far, more than 2billion US$ (10,000 crore rupees) has been spent for improving the host city Delhi for the common wealth games.. another 2 billion+ US$ (10,000 crore rupees) for improving the sports infrastructure in the city (which is non-inclusive of stadiums they say).. and finally about 200 million+ US$ (1000 crore rupees) for constructing or preparing stadiums for the games.

Yes. they are all in US$ and are costs reported in equivalent indian rupees in govenment websites. You can expect to see a final costs estimate, officially stated in the next budget in march 2011... which could be much higher.

Approximately, 4.4 billion US$
Dividing by approx. population of India, 4.4 billion/2 billion = 2.2 US$

It is like almost every India, new born or old, rich or poor, has invested about 115 Indian rupees for the common wealth games..

Like it or not,.. we have all invested 115 Rupees each on this games.. (and we still only fight for those 5 and 10 bucks banks take out of our account as some kind of charges without our consent)

IF, for various reasons of bad media coverage, bad feelers and non-involvement of community .. etc the games are cancelled or shifted.. then the politicians have it all easy.. they don't have to now bother about doing a proper games after eating up all that money. .. there's also the bad news that it is going to be a miraculous thing to have a successful games hosted in just 2 months after all this happening in recent weeks.. so it is going to be open to the whole world how much corrupt Indian government system is.. and mostly be seen as incapacity of Indian people and Indian planning to pull off the games properly.

The breaking news in India in the past week is that Mr.Suresh Kalmadi, the chairman of the Commonwealth games India 2010 organizing comittee has some secrets that the entire Nation wants to know.

Looks like Mr.Kalmadi took the CommonWealth games in both letter and spirit.. and has assumed that all wealth that the country puts into the games is also his wealth and he can manage it alongwith his colleagues. His colleagues who are in the ministry.

All that has to happen now is not that the entire nation grow alarmingly hot on the issue and break Mr.Kalmadi into pieces.. but somebody having the smallest courtesy in explaining Mr.Kalmadi that CommonWealth doesn't mean its his wealth and he can keep some of it for himself. That would be helpful in correcting the problem I guess. What Say!