July 2010

It’s a rather nice TV and a “bargain” at £6,999 but you’ll have to wait until 1 October to get the most out of it.

Published on: 28 Jul 2010

If you are one of those people that keep on losing the TV remote control then you’re going to have fun when you need to keep track of your 3D glasses as well.

We blogged earlier this year about the launch of 3D televisions and their position within the product life cycle.

When it comes to the marketing mix (the 4Ps) there are certain characteristics that are found at the introduction stage.

Witness for example the high prices that are currently being charged for 3D televisions – a Samsung UE55C900 52 inch 3D TV was today for sale at the John Lewis shop in Oxford Street in London for £6,999 plus £139.95 for two pairs of 3D Active Glasses (this in itself provides an interesting example of pricing given that one pair of 3D Active Glasses costs £59.95 – if you need a calculator to spot the significance then maybe a career in finance isn’t for you!).

The lack of 3D content however was always going to be a problem at the initial stages. After all, a top of the range 3D TV isn’t that good if there aren’t a lot of 3D programmes to watch.

Sky TV in the UK though is about to come to the rescue. They announced today that they will be launching a dedicated 3D TV channel on 1 October. Some highlights of the launch weekend include coverage of golf’s Ryder Cup as well as the film Monster vs. Alien.

The good news for Sky subscribers with the latest Sky+ HD set top box is that they won’t need any additional Sky equipment to watch the 3D content. They “only” need one of the latest 3D TVs.

If you’re in the UK you can look forward to a rush of “P – Promotion” for 3D TVs in the autumn. We’ll report back in a years time but expect by then the “P-Price” to have fallen, the “P-Product” to have developed, the “P-Place” for purchasing to have increased and the “P-Promotion” to have…..

How much do condoms cost to buy? Well, I guess anywhere from £1 to £2.5bn…

Published on: 26 Jul 2010

Reckitt Benckiser, the Anglo – Dutch consumer products group, has agreed to buy the maker of Durex condoms for £2.5bn.

Last week the board of SSL recommended that the shareholders accept the offer from Reckitt which was at an effective 33% premium on the share price.

In addition to Durex condoms SSL also make Scholl shoes but £2.5bn is a lot of money and a 33% premium is pretty good in today’s environment. Should the shareholders therefore grab this opportunity with both hands?

Students of business strategy will be aware that there are both pros and cons of acquisitions. The general view amongst analysts in this situation though appears to be that it represents a good fit for the Reckitt business.

Firstly, Reckitt will strengthen their health and personal care division which is currently their fastest growing area. Health and personal care is considered by many to be a key area for businesses going forward (this is a nice link to PESTEL within the syllabus).

Secondly, SSL has a larger presence in a number of emerging markets. In particular SSL are in a strong position in China, a country where Reckitt are relatively weak compared to their competitors.

Cost savings from synergies of course can never be ignored. If the deal goes ahead there could be reported savings of £100m a year in terms of removing duplicate jobs, combining distribution channels, etc.

Marketing synergies are also important. Reckitt for example produce the headache tablet Nurofen.

How can you make a salary of £26,000 stretch to buying a horse riding business, a holiday home, luxury holidays and a Range Rover costing £45,000?

Published on: 23 Jul 2010

It seems that not all accountants are 100% honest.

Whilst the vast majority of accountants are  trustworthy there were two court cases in the UK this week that resulted in jail sentences for accountants.

Gary Gordon, who previously worked for the Big 4 firm PricewaterhouseCoopers, stole £45,000 from his employer UK Mission Enterprises. He rather unimaginatively simple diverted the cash into his own accounts.

He apparently had a gambling habit and didn’t appreciate the amount of money that he had stolen. He’s been jailed for 16 months.

£45,000 however pales into insignificance when compared with £1.3 million which was the amount that Tracey Laws stole from her employer Inchcape Limited.

Inchcape Limited is the parent company of a number of motor trading companies in the UK and for nearly 10 years Laws wrote 75 fraudulent cheques totaling £750,000 to her own horse riding school (which she had set up with money that she had already been stolen from her employers). She had also fraudulently transferred over £500,000 to her husband’s decorating company.

Despite having a maximum annual salary of £26,000 during her time with Inchcape she managed to buy a horse riding school, a holiday home, luxury holidays and a brand new Range Rover.

It wasn’t these mis-matched spending habits that caught her out though. Her crime was uncovered by accident when one of the motor trading companies was changing payment systems and two employees noticed a cheque made out to West Acres Stables (the stables owned by Laws).

These two observant individuals noticed that the handwriting looked very much like the handwriting of Tracey Laws. It turned out that it was her hand writing and the end result was that Laws was jailed for four years last week.

No doubt there are new internal controls in place at Inchcape and looking on the bright side for Laws she will at least save her annual accountancy membership fees going forward and she will also have her bed and breakfast supplied free of charge by Her Majesty’s Government for the next few years.

Is this the real Willy Wonka? After all he bought enough chocolate on Friday to make over 5 billion bars of chocolate.

Published on: 19 Jul 2010

Anthony Ward, a British financier who set up hedge fund Armajaro Holdings, bought a huge chunk of chocolate on Friday.

To be precise, he spent over £650 million buying 241,000 tonnes of cocoa beans.

This was the highest single purchase of cocoa for nearly 15 years and happened as cocoa bean prices rose to their highest level for 23 years. On news of the purchase cocoa futures for July delivery jumped by 1.5%.

The trade took place on Liffe (the London International Financial Futures and Options Exchange), a market which trades contracts in commodities such as sugar, coffee and cocoa.

As well as the sheer size of the transaction the strange thing about it was that Mr. Ward’s company has actually taken delivery of the cocoa. This is very unusual as the vast majority of cocoa transactions normally involve traders exchanging option or futures contracts without actually taking possession of the beans.

So why has he purchased so much chocolate?

He’s a very astute and wealthy businessman who reportedly lives in a £10 million house in Mayfair, London.

The speculation is that he is stockpiling huge volumes of cocoa in order to be in a strong negotiating position. Harvests in the cocoa heartlands of Ghana and Ivory Coast have recently been weak and there is an increase in demand for chocolate in the Chinese and Indian markets.

It looks like chocolate prices are on the rise so what better excuse for me to stock up on some chocolate before the price rises. Somehow though I don’t think my stockpile will be anywhere near Mr. Wards…

If you wear a business outfit to work then surely getting dressed in the morning is overtime?

Published on: 16 Jul 2010

There was an interesting court case in Germany this week. Not only for people that follow employment law but also for people that have to wear certain outfits to work.

German Policeman Martin Schauder was awarded an extra 7 days of holiday a year after arguing that the time he spent changing into his uniform each day was part of his job. He therefore claimed that this time was part of his work time.

He stated that it took him 15 minutes every day to get his police outfit on and 15 minutes to take it off. These extra 30 minutes a working day amount to an extra 45 working hours every year.

The court in Germany agreed with the policeman and told his employers to either pay him the overtime or to give him holiday.

The police force have unsurprisingly said that they are going to appeal against the decision.

Now, if this case is upheld then it raises some interesting opportunities for me. As an accountant who meets clients then I am expected to be dressed smartly. My personal choice of clothes for the office however would be shorts and a t-shirt so the fact that I have to wear a tie surely means that the time it takes me to do my tie up is overtime.

This varies from a sleepy 1 hour plus on a Monday to a speedy sub 1 minute on a Friday. Adding this all up will amount to a significant sum of overtime money and this is before I take into account the time taken to tie up my shoelaces instead of slip on my preferred choice of footwear of flip flops.

What will make Ernst & Young different from the rest of the Big 4? Will it be an Executive Decision or…

Published on: 09 Jul 2010

According to reports this week, Ernst & Young will be the first of the Big 4 to appoint non-executive directors to its global advisory council.

This is a major move for the accountancy profession.

The profession has been under increasing regulatory pressure for a while now and the decision to appoint non-execs is reportedly in response to the new audit firm governance code that was published earlier this year.

The revised Ernst & Young advisory council structure will in broad terms mean that Ernst & Young will have a board structure which is similar to the multi-national companies that are their clients. Their remit will include monitoring strategy and risk.

Their global advisory council currently includes 36 senior partners. These partners will soon be joined by 4 non-executive directors drawn from the business and regulatory world.

The names of these non-execs will be disclosed later this year and although I’m not a betting man I’d probably have a wager that their CVs will not include the names of Deloitte, KPMG or PricewaterhouseCoopers.

I’d like the classic novel “To Kill a Mockingbird” and a whole lamb delivered tomorrow please.

Published on: 07 Jul 2010

So my plan for tomorrow night is to have a relaxing evening and settle down with a nice box of chocolates, a glass of Pinot Grigio wine and start reading the 50th anniversary edition of the book “To Kill a Mockingbird” which has just been released.

The only problem is that I don’t have chocolates, wine or the book…

Not to worry though as I can order these over the internet for delivery tomorrow. Two websites I’ve ordered from before are those of the supermarket Tesco and the online bookstore Amazon. Tesco have sold books as part of their offerings for a while now so I might as well order all of them from their website.

Hold your horses though as Amazon today announced that as well as books, DVDs and suchlike they would now be selling a range of grocery items online.  Over 22,000 grocery items in fact.

Items ranging from a packet of cinnamon sugar for 29p through to a Highland Fayre Royal Banquet for £1,203.97 are now available for home delivery on www.amazon.co.uk.

Is this a smart move by Amazon or simply an online bookstore trying to get some extra revenue? After all, shouldn’t they stick to what they do best and sell books?

Well, if you think about it, what do they do well? (what are their “core competencies” in strategy exam talk?)

I’d argue that they are pretty good at getting stock into their warehouses (using Porter’s value Chain: inbound logistics), processing orders (operations), delivering goods to customers (outbound logistics), running a website (sales and marketing) and dealing swiftly with any returns (after sales service).

Whether the item of stock being processed is the classic book by Harper Lee or a whole lamb for £119.99 then does it really make any difference?

Only time will tell whether this venture will be successful. Amazon has a trusted brand and is a world leader in processing orders over the internet so maybe they will be successful. The established supermarkets already have a successful internet presence though so it will be interesting to see how this develops.

Anyway, after writing this I’ve now made my decision and I’ll buy the chocolates, wine and books from the Sainsbury Express store next to the office and have the relaxing evening tonight.

It’s 225 years old and has just given birth to a beautiful newly born one pound baby.

Published on: 05 Jul 2010

The Times newspaper in the UK is one of the oldest in the world. It was first published in 1785 and for 219 years until 2004 it followed the traditional route of quality journalism delivered via a “broadsheet” newspaper.

In 2004 certain traditionalists were shocked when the newspaper moved to the smaller compact size favoured by the tabloid papers. This move proved to be successful though and the new size appealed to both the younger generation and commuters who no longer had to try to read their paper without upsetting the person next to them.

This was a good example of a successful adjusting of the product component of the marketing mix.

The Times has had one of the better newspaper websites and last week they completed their transition so that their website no longer has any free content. Instead, readers now have to pay £1 to read the online version of the newspaper. The “product” costs the same whether it is a paper version or an electronic version.

From mid June users were asked to register free to read articles but from last week when you clicked through you were greeted with the following:

Reports suggest that since the requirement to register was brought in last month the viewing figures of the website have almost halved.

The requirement to pay for viewing will no doubt cause viewing figures to drop even further.

The paper’s owner, Rupert Murdoch’s News Corp, will be expecting viewing numbers to fall but importantly for them they believe that charging for content will enable them to continue at the forefront of quality journalism.

There are also reports that the Sun and the News of the World, two other UK titles in the News Corp portfolio, will also disappear behind a website paywall. These papers are more “down-market” than the Times so it will be interesting to see how this will work.

The traditional newspaper street vendor’s call of “Read all about it, read all about it” may soon become “Read all about it either in this newspaper or the online version for the same price”. But then again will there be any paper newspapers being sold in a few years or will it all be electronic?

You know you’ve had too much to drink when your eyesight goes blurry, you slur your words and you spend half a billion dollars…

Published on: 02 Jul 2010

Steven Perkins, a 34 year old commodity broker, attended a company golfing weekend, had a bit too much to drink over the weekend and then took the Monday off of work.

This in itself didn’t justify being fined £72,000 earlier this week by the Financial Services Authority (FSA) and being identified as “an extreme risk to the market when drunk”.

It was what he did on the Monday evening that caused all the excitement.

After the golfing weekend, Mr. Perkins felt the need to carry on drinking and started drinking again on the Monday lunchtime. Late that night in a drunken stupor he bought 7 million barrels of oil using $520 million dollars belonging to his then employers PVM Oil Futures.

Because the purchases took place in the middle of the night other traders around the world thought that there was something major happening in the oil market and as a result the price of oil shot up by $1.50 a barrel in less than 30 minutes. Through the alcoholic haze Mr. Perkins gradually increased his bidding price each time to push the price up until at one stage he was responsible for nearly 70% of the global market volume.

He tried to gradually sell down his position in the morning but no doubt with a very dry mouth eventually admitted everything to his employer.

His drunken night time purchases resulted in PVM losing £6million, him being fined £72,000 and banned from the industry for five years. Plus of course, an almighty hangover.

The ExP Group