Business Studies

Mark Zuckerberg - the richest person in the world!

2012-02-11T10:36:35Z

Since is it is normal to talk about the best pound-for-pound boxers, we could also do the same for successful entrepreneurs! As the graphic below shows, the Facebook founder is the richest man in the world adjusted for age, ie billions of dollars per year of age.

It does assume a US$100 billion for Facebook but there is no indication yet that this won’t happen. While the world’s richest man Carlos Slim is still a lot more wealthy than Mr Zuckerberg, at 72 he has had a lot more time to amass his billions!

But not only is Mr Zuckerberg very rich, he has made a lot of other people rich as well, with reports that 1000 Facebook employees will become millionaires when the stock is listed. But my favourite story is that of David Choe, a graffiti artist that painted a mural at the Facebook office in 2005 and was offered the choice of a cash payment or Facebook shares. For reasons that he still seems to be unsure of (he didn’t think the Facebook idea was a goer) he took the shares and now stands to make US$200 million. Below are pictures of David Choe as well as the world’s most expensive mural with the Facebook founders.

So my advice to you T2U presenters - take shares in lieu of payment!

ResearchBuster: Acquisitions

2012-02-10T20:38:26Z

Our ResearchBuster blog posts are designed to help students identify and integrate examples of business strategy for their synoptic essays and exams. This ResearchBuster look at some of the most significant examples of takeovers / acquisitions in recent years…

(updated 11 Feb 2012 with 10 new entries)

Here is a selection of key acquisitions. Follow the link to identify at least one key strategic reason behind the deal:

1998: Merger of Daimler Benz and Chrysler
http://news.bbc.co.uk/1/hi/business/88912.stm

1999: Merger of Exxon and Mobile
Value: $82bn
http://news.bbc.co.uk/1/hi/business/544288.stm

2000: Merger of Glaxo Wellcome with SmithKline Beecham
http://news.bbc.co.uk/1/hi/business/607187.stm
Price: £130bn

2000: Buyer: Unilever
Target: Ben & Jerry’s
Price: £203 million

2000: Buyer: Unilever:
Target: Slim-Fast Foods
Price: £1.44bn

2001: Buyer: E.on
Target: Powergen
Price: £5.1bn

2002: Buyer: eBay
Target: PayPal
Price: $1.5bn

2002: Buyer: Hewlett Packard
Target: Compaq
Price: $25bn

2003: Buyer: Pearson
Target: Edexcel
Price: £20 million

2004: Buyer; WM Morrison
Target - Safeway
Price: £3bn

2004: Buyer: Santander
Target: Abbey National
Price: £8bn

2004: Buyer: Lenovo
Target: IBM PC Business
Price: $1.8bn

2004: Merger of Carlton and Granada to form ITV plc
http://news.bbc.co.uk/1/hi/business/2319563.stm

2005: Apax Partners (Private Equity)
Target: Tommy Hilfiger
Price: $1.6bn

2005: Buyer: eBay
Target: Skype
Price £1.4bn

2005: Buyer: News Corporation
Target: MySpace
Price: $580 million

2005: Buyer: ITV plc
Target; Friends Reunited
Price: £175 million

2005: Buyer; Adidas
Target - Reebok
Price: £2.1bn

2005: Buyer Telefonica
Target: O2
Price: £17.7bn

2005: Buyer: Cadbury’s plc
Target: Green & Black’s
Price: £20 million

2006: Buyer: Disney
Target: Pixar
Price: $7.4bn

2006: Buyer: Dubai Ports World
Target: P&O
Price: £3.9bn

2006: Merger of Arcelor and Mittal Steel
http://news.bbc.co.uk/1/hi/business/5114290.stm
Price: £33bn

2006: Buyer; Ferrovial
Target: BAA plc
Price: £10.3bn

2006: Buyer; First Choice
Target; Late Rooms
Price: £120 million

2006: Buyer; Nippon Sheet Glass
Target: Pilkington
Price: £1.9bn

2006: Blackstone Group (Private Equity)
Target: Center Parcs
Price: £205 million

2006: Buyer: Blackstone Group (Private Equity)
Target: Legoland Parks
Price: £259 million

2006: Buyer: Google
Target: YouTube
Price: $1.65bn

2006: Buyer: Procter & Gamble
Target: Gillette
Price: £30bn

2006: Buyer: L’Oreal
Target: Body Shop
Price: £652 million

2006: Buyer: Virgin Active
Target: Holmes Place
Price: not disclosed

2007: Buyer; Tata
Target: Corus
Price: £5.8bn

2007: Buyer; BSkyB
Target: Amstrad
Price: £125 million

2007: Buyer: KKR (Venture Capital)
Target: Alliance Boots
Price: £11.1bn

2007: Buyer: Merlin Entertainments
Target: Tussauds Group
Price: £1bn

2007: Buyer: Terra Firma (Venture Capital)
Target: EMI
Price: £4.2bn

2007: Merger of MyTravel and Thomas Cook
http://news.bbc.co.uk/1/hi/business/6353023.stm

2007: Merger of TUI and First Choice
http://news.bbc.co.uk/1/hi/6465387.stm

2007: Buyer: Blackstone Group (Venture Capital)
Target: Hilton Hotels
Price : $26bn

2007: Buyer: Easyjet
Target: GB Airways
Price: £104million

2007: Merger of Taylor Woodrow and George Wimpey
http://news.bbc.co.uk/1/hi/business/6494387.stm
Value: £5bn

2008: Buyer; Tata
Target: Jaguar Land Rover
Price: £1.7bn

2008 - Buyer: Lloyds TSB
Target: HBOS
Price: £12.2bn

2008: Buyer: Santander
Target: Alliance & Leicester
Price: £1.3bn

2008: Buyer: Santander
Target: Bradford & Bingley
Price: £612 million

2008: Buyer: Tesco
Target: E-Land (South Korea)
Price: £958 million

2008: Buyer: Bridgepoint Capital (Private Equity)
Target: Pret A Manger
Price: £not disclosed

2009: Buyer: Oracle
Target: Sun Microsystems
Price: $7.4bn

2009: Merger of Boots Opticians and Dollond & Aitchison
http://news.bbc.co.uk/1/hi/england/nottinghamshire/7859507.stm

2009: Buyer: Disney
Target: Marvel Entertainment
Price: £2.5bn

2009: Buyer: The Co-operative Group
Target: Somerfield
Price: £1.6bn

2009: Buyer: Resolution
Target: Friends Provident
Price: £1.9bn

2009: Buyer: HMV
Target: MAMA Group
Price: £42 million

2009: Buyer: Cisco
Target: Pure Digital (Flip)
Price: $590 million

2009: Merger of Orange UK and T-Mobile UK
http://news.bbc.co.uk/1/hi/business/8243226.stm

2009: Buyer: Panasonic
Target: Sanyo
Price: £2.8bn

2010: Buyer: Deutsche Bahn
Target: Arriva
Price: £1.6bn

2010: Buyer: Philips-Van Heusen
Target: Tommy Hilfiger
Price : $3.0bn

2010: Buyer: Blackstone Group (Venture Capital)
Target: SeaWorld Parks & Entertainment
Price : $2.3bn

2010: Buyer: KKR (Venture Capital)
Target: Pets At Home
Price: £1bn

2010: Buyer: Unilever
Target: Alberto Culver
Price: £2.3bn

2010: Buyer: Resolution
Target: AXA UK
Price: £2.8bn

2010: Buyer;Kraft Foods Inc
Target: Cadbury plc
Price: £1.96bn

2010: Buyer; New England Sports Ventures
Target: Liverpool FC
Price: £300 million

2010: Buyer: Onex
Target: Tomkins
Price: £2.9bn

2010: Merger of United Airlines and Continental Airlines
http://www.bbc.co.uk/news/business-11353161

2010: Buyer: Reckitt Benckiser
Target: SSL International
Price: £2.5bn

2010: Buyer: Coca-Cola
Target: Innocent
Price: not disclosed

2010: Buyer: Doughty Hanson (Private Equity)
Target: Vue Entertainment
Price: £450 million

2010: Merger of British Airways and Iberia
http://www.bbc.co.uk/news/business-11862956

2011: Buyer: Amazon
Target: LoveFilm
Price: £200 million (est)

2011: Buyer: Bridgepoint Capital (Private Equity)
Target: Wiggle
Price: £180 million

2011: Buyer; Whitbread
Target: Coffee Nation
Price: £60 million

2011: Buyer; Microsoft
Target: Skype
Price: £5.2bn

2011: Buyer: Google
Target: Motorola Mobility
Price: $12.5bn

2011: Carlyle Group (Venture Capital)
Target: RAC
Price: £1bn

2011: Buyer: Labelux
Target: Jimmy Choo
Price: £525 million

2011: Cheung Kong Infrastructure Holdings (CKI)
Target: Northumbrian Water
Price: £2.4bn

2011: Hewlett-Packard
Target: Autonomy
Price: £7 billion

2011: Buyer: Mattel
Target: Hit Entertainment
Price: £420 million

2011: Merger of Thomas Cook Travel Agents and Co-op Travel
http://www.bbc.co.uk/news/uk-england-cambridgeshire-14550184

2011: Buyer: Tesco
Target: Blinkbox
Price: £ not disclosed

2011: Buyer: International Airlines Group (IAG)
Target: British Midland (BMI)
Price: £172 million

2011: Buyer: SABMiller
Target: Fosters
Price: £6.5bn

2011: Buyer: Muller Group
Target: Robert Wiseman Dairies
Price: £280 million

2011: Buyer: Virgin Active
Target: Esporta
Price: £78 million

2011: Buyer: CVC Capital Partners (Private Equity)
Target: Virgin Active
Price: £450 million

2011: Buyer: Virgin Money
Target: Northern Rock
Price: £747 million

BUSS4 Research Theme - Merger and Takeover Egg Heads

2012-02-10T16:39:18Z

I often find that one of the key challenges with the research theme is finding ways to engage the students with the material in lessons and keeping them motivated and interested in the theme until the Summer.

With this in mind, I will be blogging about some strategies that I have successfully used in the past to engage the students and applying them to the new theme, Mergers and Takeovers.

This activity is really simple to do as well as the students doing all the work.

Find two juicy merger or takeover case studies. Lots of content, something for the students to get their teeth into. Then, split the class into four groups. Two groups are the question generators and two groups are the egg heads. Give each group one of the case studies. The question masters need to read the material and write down 15/ 20 questions on that merger or takeover. The egg heads need to read the material and prepare themselves for the questions. They also need to assign a key egg head.

Then, the egg heads come to the front of the class. The relevant group asks the egg heads their questions on the merger or takeover. They can answer only once but can confer. The key egg head is the only one allowed to answer. This continues to all the questions have been asked then the next team come to the front.

I did this last year with CSR and it worked brilliantly. The question masters engage with the material as they try to write questions to outfox the egg heads. The eggheads engage so that they can answer as many questions as possible. Its also fully inclusive as its a group activity.

You can score it a number of ways, egg heads against egg heads and question generators against question generators is always a good one.

Pricing and the consumer - a question of haggling?

2012-02-10T15:23:47Z

I got into trouble with Mrs T2U last week when I criticised her for accepting the first price offered by a supplier of bespoke curtains. “We’ve been ripped off!” I suggested, indicating that a door-to-door salesman is there to close the sale and will always accept a lower offer before signing the customer. A period of silence from Mrs T2U ensued…

I’m sure the curtains will be lovely (honest), but was I right to suggest that consumers should haggle? Do you feel comfortable negotiating the price of something or do you take it as a given?

This BBC video suggests that haggling is becoming more common, though I’m not sure there is much evidence used to back up that assertion. We British are typically reserved about negotiation - I don’t think haggling comes naturally. What do you think?

Further below, I’ve included the classic Life of Brian haggling sketch to show exactly how it should be done…

Product innovation - extending the humble cupcake

2012-02-10T12:36:02Z

It is often said that if you want to find the next “big thing” in consumer trends, then take a flight over to North America to see what is popular. Cupcakes are one such phenomenon - their popularity has spread quickly over here to the UK. So, could this slightly unusual product extension idea for cupcakes take off here too?

Perhaps this video is not one to show your students when they’ve just had their lunch. It reminds me a little of the deep-fried Mars Bar concept. What do you think? Would you buy one? Would you eat it if someone bought one for you? What other unusual ingredient combinations might prove similarly popular?

Video resource: Do bonuses work as an incentive for better performance?

2012-02-10T12:22:55Z

A timely short video here from the BBC looks at the way that a simple activity-related bonus improves productivity in a small drilling business. Employees and management seem happy at D-Drill. But, can the use of much larger-scale bonuses in financial services be justified in the same way? A great starting point for discussion with students…

The history of Apple’s product innovation - in 30 seconds

2012-02-10T12:01:04Z

Short and sweet - this 30 second video that showcases the progression of Apple’s product portfolio. A journey that takes us from the very first Apple prototype computer through to the iPad. Great for illustrating the process of product innovation. You can always pause the video (if you’re quick) to look at the individual products.

Starter activity - Contingency Planning (Japanese Style)

2012-02-09T21:58:24Z

When it comes to contingency planning, no-one does it better than Japan. And here are two humorous videos that demonstrate the extents to which you can go to prepare for risky events…

First, this news clip suggested by the ever-vigilant Paul Mills at Ashby School: it shows zoo staff undertaking a contingency planning exercise involving a ferocious-looking rhino.

http://www.bbc.co.uk/news/world-asia-16950361

...and then a slightly longer, but similar example, also from a Zoo in Japan…in fact it looks like it might be the same place??

The Biz Quiz - 9 February 2012

2012-02-09T11:36:43Z

The 9 February 2012 edition of The Biz Quiz is now available. Good luck everyone!

Launch the Biz Quiz - 9 February 2012

Download printable version (pdf)

BTEC First in Business - New 2012 Specification CPD Course

2012-02-08T14:16:33Z

A diary date here for all colleagues teaching the new BTEC First in Business specification - Friday 15 June 2012. tutor2u is running a special CPD course at the amazing Drayton Manor Theme Park focused on the new requirements for the 2012 specification (for first teaching from September 2012). We’ll look at the new methods of assessment and provide guidance on resourcing and organising the other new units too. We’ll also have some guest speakers from Drayton Manor - a great case study to use for BTEC First.

Places are strictly limited. Please complete this provisional booking form to grab some places before they all go…

Facebook vs the world at night!

2012-02-08T01:54:19Z

Lots of great posts on the upcoming Facebook IPO lately, including Jim’s post on what Facebook might do with the cash that it raises. But these graphics show what is really missing from the Facebook empire, and if they can crack that then $100 billion will probably look cheap!

The first picture shows the world at night - an image that is commonly used to show which areas are relatively highly developed. The second picture is a representation of facebook users around the world - with the interactions between them shown as rays of light. Ask your students what is the main difference they can see between the two pictures.

The world at night

Facebook at night

The main difference is that China is completely missing from the Facebook picture! You should be able to have a lively discussion as to why this is and what Facebook may be able to do about it (if anything).

But if Facebook is able to enter the Chinese market then Mark Zuckerberg will probably become the richest man on the planet!

Takeovers - the search for cost synergies

2012-02-07T20:16:54Z

Students researching the topic of takeovers and mergers will come across several unfamiliar terms. One of the most important for them to understand is “synergy” and we’ll write in more detail in subsequent blog entries about what these are. However, here is a useful piece of research which indicates the potential and significance of the most common kind of synergy - “cost synergies”.

First, a little background explanation.

Typically, takeovers and mergers transactions create value for shareholders in two ways.

First, the takeover/merger can help a business to sell more goods or services than the competition in new or existing markets. This effect is known as “revenue synergy”.

Second, the takeover/merger can allow the combined businesses to operate more efficiently together. This effect is known as “cost synergy”.

In both cases, the assumption is that the performance of the combined businesses will exceed the expected performance of each each business on their own. You might see this written as 2 + 2 = 5. How does this equation work? Because of synergy. Something happens to the two businesses combined which cannot happen if they simply operate independently.

So, back to the research by Deloitte looking specifically at cost synergies.

Deloitte highlighted the potential for cost savings that arise following a takeover or merger by looking at the details of 150 takeovers completed between 2004-2007 to analyse the reasons why some businesses were able to make more significant cost savings (cost “synergies”) than others.

Some of their key findings include:

The average overhead cost synergy has been found to be around 17% of the combined overhead cost base of the buying and the target company, where the entities are of comparable size; So, for every £1million of overheads in the two businesses operating independently, a takeover/merger can result in overhead savings of £170,000 per year. That’s a big saving, though it doesn’t necessarily happen straight away.

The greatest overhead savings can be achieved by removing costs in the IT (average cost synergies of 30%) and finance (25%) functions, primarily through the elimination of duplicate roles, making both businesses use the same IT systems and elimination of duplicated development projects. Deloitte found that the Sales & Marketing and Research & Development functions tend to offer the least potential for overhead cost reduction;

Capital-intensive sectors, such as manufacturing or telecoms can also exhibit potentially high overhead synergies of over 15% although these savings mainly depend on the elimination of excess capacity in the combined businesses.

At the other end of the scale, labour-intensive sectors, such as media and software, exhibit much lower overhead cost savings of around 10% due to their reliance on their creative talent and people. Management in these sectors clearly perceive a greater risk that the takeover or merger will disrupt the workforce;

However, it is important for students to appreciate that the achievement of cost synergies does not come for free. Up-front minimum investment is required, normally of £1-£1.50 of one-off implementation cost for every £1 of annual cost saving. Furthermore, the full achievement of annual cost savings typically takes three years to deliver.

So, for example, a firm might have to spend £1million to support overhead reductions (e.g. cost of redundancies, closure of duplicated locations) in order to unlock annual cost synergies of £1.5 million thereafter).

Deloitte make a useful summary observation about what a firm needs to do to fully realise the potential cost savings from a takeover. The essence is detailed integration planning, taking a long-term view on which activities and costs are important to the combined businesses. Deloitte caution against poorly thought-through and short-term cost-cutting which runs the risk of “causing operational disruption and organisational confusion”.

A light-hearted look at induction training

2012-02-06T21:47:01Z

I’m always on the look out for neat little video clips I can use to bring ideas and concepts to life. I’ve just seen the latest McDonald’s TV ad for the first time and it looks a great way of getting across the concept of induction training.

Ask students to make a list of as many things as they can think of that they’d want or need to know on their first day in a new job. Then ask them to see how many on their list (and others they hadn’t considered) appear in this whirlwind introduction to a new workplace.

Then students can discuss how it might be done in a better way, so that bigger issues such as culture and company objectives are covered, not to mention that your employee doesn’t feel the need to rush off to McDonalds and collapse in their seat with a Big Mac Meal!

Happiness in the workplace still proving elusive

2012-02-06T17:21:26Z

60 years ago we worked 30% longer and took half as many holidays. For most, pay was poor. Discrimination in the workplace was widespread, and permitted by law. Work was often hard, and for working class men it was often dangerous too. So it’s a sobering thought to think that several decades later, measures of anxiety in the workplace have risen, to the point that stress has replaced back pain as the most common cause of long-term sick leave, according to The Guardian. What’s going wrong?

The obvious answer is that no-one knows, or it might simply be an effect of our increased willingness to complain. Some of the reasons suggested in the article might be:

- Technology seems to have spawned more gadgets to bind us to the workplace.
- Unlike the 1950s, our careers are less likley to follow a clear path, bringing pressure to adapt constantly and move with the times.
- A perception that jobs are no longer as secure.
- A worry that somehow many of our jobs might not be ‘meaningful’ and hence are simply less rewarding.

The BBC carries the same story, with quotes like “with the threat of unemployment an underlying concern even in good times, people do not seem much happier about their working lives and many exhibit the symptoms of work-related stress”. They also focus on the increasing role for women in the workplace. The increase in the number of workless homes may be linked to changes in the way we work, with fewer men in the workforce and more households with two earners.

Plenty to reflect on here. During a period in which the total workforce has risen by 25%, the volume of output has increased by 300%. Perhaps this massive increase in productivity is at the heart of the problem. Earlier blogs have looked at the growing problem of job dissatisfaction, and the rise of stress. This problem is not about to vanish, though it has inspired creative solutions.

Which is better? Aldi or Lidl? Compare and contrast these (and others) using ‘Store Wars’

2012-02-06T16:37:22Z

I’ve only just stumbled on this excellent resource which pits Aldi against Lidl - and takes a snapshot of the differences in customers’ opinions. In this example, Lidl won 60/40. This is a fun few minutes suitable for a starter activity, with over twenty other examples to choose from.

Tesco Express vrs Sainsbury’s Local? Game vrs HMV? Or how about Body Shop vrs Lush? Check out the views and comments at The Guardian’s Store Wars.