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Years ago, I co-founded a Non-Profit project for the community and arts based out of MA called Vibe City. Around the same time I was pretty involved with Section 17 and Planetary Circus Kingdom (Soundcloud, Youtube). We worked with a team of amazing supporters, contributors, friends and artists, focusing on the the advancement of independent art, creativity, positivity, love, and the success and sustainability of community, and the role that we all play in these important fields; both current and past members and their creative and passionate endeavors. We hosted numerous events and seminars with artists looking to expand their consciousness and follow their dreams. It's a wonderful DIY community. I wore many hats during these inspiring years. I collaborated with PCK directly as they were involved in every project. We built a studio to create, record, and practice all forms of expression and creativity through sound and art. I built a live streaming service to broadcast our activity and maintained some form of web presence. Purchased more music/art equipment, lighting, event gear, decorations, building materials, and studio tools than I can count. I helped manage, coordinate, plan, and execute all of our events. We organized a series of art and music showcases around New England. We completed numerous paintings and recorded multiple albums during this time. I'm so grateful for that time of my life. I was able to evolve and learn together with a growing, caring collective of people.
Throughout my life, I’ve been surrounded by smokers: My grandfather, father, and step-mother – all smokers. And guess what? They all have cancer. Growing up with the smell of tobacco lingering in my nostrils allowed me develop a keen hatred for smokers. This hatred has now evolved into addiction and dependence. I can attribute this to my social surroundings and careless nutrition habits. Part of smoking involves the act of deep breathing, and I know that helps calm me down too. I'm aware can I can do breathwork without the extra nicotine, It's also stimulating, and a way for me to take a break from people. I struggle with nicotine every day. Unfortunately, New England is an area with some of the highest lung cancer rates in the country2. However, clearly I’m not the only addict in recent memory. Cancer Facts & Figures 20101 states: “Lung cancer is the leading cause of cancer death in the United States for both men and women.” As a potential client of the 1.3 million deaths worldwide since 20043, I felt compelled to learn more about my potential disease.
Lung cancer derives from uncontrollable cell growth in lung tissue. This growth may facilitate metastasis, which stretches beyond the lungs. Most lung cancers are carcinomas of the lung from epithelial cells. Since starting smoking, I’ve experienced numerous symptoms that lead to lung cancer: Dyspnea, hemoptysis, wheezing, chest pain, and cachexia. Though I may not have already contracted the disease, I have educated myself further on a practice beyond healthy nutrition habits that could save my life: Stop smoking cigarettes.
Lung cancers are classified by histological type, distinguished by size and appearance of the malignant cells seen only under a microscope. These two types are non-small cell (NCSLC) and small-cell lung carcinoma (SCLC). NSCLC “refers to a subset of cancer types that account for approximately 70% of lung cancers, including squamous cell carcinoma of the lung, large cell carcinoma of the lung, and adenocarcinoma of the lung7.” Conversely, SCLC is responsible for approximately 15% of bronchogenic carcinomas. However, deaths resulting from SCLC in the United States have decreased during the past few decades. “Without treatment, SCLC has the most aggressive clinical course of any type of pulmonary tumor, with median survival from diagnosis of only 2 to 4 months. SCLC is more responsive to chemotherapy and radiation therapy; however, a cure is difficult to achieve because SCLC has a greater tendency to be widely disseminated by the time of diagnosis. It is the cancer most commonly associated with paraneoplastic syndromes, including the syndrome of inappropriate antidiuretic hormone secretion, paraneoplastic cerebellar degeneration, and Lambert-Eaton myasthenic syndrome9.”
During my research, I stumbled across a breakthrough for NSCLC. “Research at Virginia Commonwealth University Massey Cancer Center led by Charles E. Chalfant, Ph.D., associate professor of biochemistry and molecular Biology, discovered a previously unknown mechanism in non-small cell lung cancer (NSCLC) cells that contributes to their ability to maintain and grow tumors. Narrowing in on this mechanism could provide a breakthrough for the development of effective therapies for NSCLC and other cancers.”10 But wait, there’s even more hope. A new inhalable dry powder treatment has displayed increasing survival rates, facilitating less radiation or surgery and preventing more toxins from polluting the body. “Current lung cancer treatments can be grueling and take a significant toll on the patient," said Raimar Löbenberg from the University of Alberta. "Our results show that this treatment method may not only increase someone's survival rate but could also potentially be less toxic to the body."11
Since cancer develops in our airways, it makes sense that this prevention of airflow would cause breathing problems. This may facilitate secretion accumulation behind the blocked airway, exposing the victim to contraction of pneumonia. In addition, numerous lung cancers are rich in blood supply. So, if these cells are sensitive, blood my come from the cancer into the airways and essentially coughed out of the mouth. Tumors like Lambert-Eaton myasthenic syndrome, hypercalcemia, or syndrome of inappropriate antidiuretic hormone (SIADH) may also attract the disease. Tumors sitting on top of the lung causes altered sweat patterns and eye muscle issues because brachial plexus invasion.
I found throughout my studies that almost 90% of lung cancer developed across the world is because of smoking4. Particularly of cigarettes, because this smoke contains over 60 known carcinogens, radioisotopes resulting from radon decay, nitrosamine, and benzopyrene. Nicotine also depresses the immune system reaction to malignant growth in tissue that is exposed5. Even exposure to wood smoke destroys the lungs, increasing risk of COPD and related pulmonary problems. "When cigarette smokers are exposed to wood smoke their risk of having reduced lung function increases," explained Yohannes Tesfaigzi, Ph.D. senior scientist and director of COPD Program at the Lovelace Respiratory Research Institute, where the research was completed. "Cigarette smokers who have both changes in sputum DNA and are exposed to wood smoke have a synergistically increased risk of having reduced lung function and other indicators of COPD such as chronic mucous hypersecretion."6 Other causes of lung cancer include passive smoking, radon gas, asbestos, viruses, and particulate matter. Clearly, exposure is what kills.
There are multiple ways to treat lung cancer. Diagnosing the disease begins with a chest radiograph. If this does not suffice, a bronchoscopy or CT scan may be needed. Treating lung cancer depends on the cell type, spread, and infected person’s performance. Treatments include surgery, chemotherapy, and radio therapy. There are also various nutritional recommendations depending on present symptoms and treatment is endured by the patient. These options can be reviewed at the Health Castle’s Lung Cancer Diet & Treatment website. Most side effects subside after treatment, so a person can gradually resume a normal diet upon recovery. If a healthy weight and diet are stabilized, a person may begin to pursue appropriate healthy exercise and eating habits specific to their needs.
Combating lung cancer should be apparent by this point. Preventing lung cancer is one of the most cost-effective ways to prevent manifestation. Avoiding tobacco smoke of any kind must be the main foal for prevention. Even though we may never be able to escape smoke because of our social surroundings, we can avoid directly inhaling potential cancer. Long term supplement use of multi-vitamins like C, E, and folate don’t reduce risk. Conversely, this may actually increase the risk of lung cancer.
Smoke seems to be the source of lung cancer issues, even though lung cancer was around before the mass adoption of this terrible habit. Everything unhealthy results from smoke, especially the leading cause of cancer deaths in our World. Bottom line, young kids, and myself, need to stop smoking. Happiness and health are on the horizon.
8Govindan R, Page N, Morgensztern D, et al.: Changing epidemiology of small-cell lung cancer in the United States over the last 30 years: analysis of the surveillance, epidemiologic, and end results database. J Clin Oncol 24 (28): 4539-44, 2006
13Understanding Normal & Clinical Nutrition, 8th Edition
Question 1: Describe the “long tail” theory that was popularized by Chris Anderson in a Wired magazine article in 2004. How does it apply to sales of iTunes songs, Amazon books, and Netflix videos? Name another business that uses the long tail as a means of generating revenue, and describe how it does so.
Cur1y J: The long tail is a phenomenon which businesses can gross more money by selling low volumes of difficult-to-find products than by selling bigger volumes of more popular items.
The majority of Netflix’s rentals are DVD’s which are not usually carried in a video store. Unlike Blockbuster, Netflix doesn’t have a store front, so they can afford to hold a large inventory of diversified DVDs. This allows people to rent less popular and obscure DVD’s. This is called the long tail. So, while Blockbuster sells high volumes of popular DVDs, Netflix can easily and beneficially manage their huge inventory by renting long tail DVDs.
Amazon has the ability to take advantage of the long tail because of being virtual and possessing a huge warehouse where they can carry more products than a typical store. Amazon uses the long tail by suggesting products relative to what the customer has purchased. So, if I were in the market for a NY Times Bestseller, such as “The Shack”, Amazon may suggest a more obscure, relevant, good-ratings book. Thus, it is attractive and I may purchase this obscure book as well as “The Shack.” In another example, any movie that may come out that is based on a book with lower sales volumes may increase that books sales volumes.
Google uses Adwords to take advantage of the long tail. Google has the ability to monetize long tail keywords. For example, while some site may be able to monetize popular keywords such as “Boston lawyers” or “Attorney’s in Boston”, Google is able to monetize less searched for terms such as “the best lawyers in Boston, MA” or “top 10 lawyers in Great Boston”. They accomplished this by developing the Adwords program and offering it to small businesses and individuals. People could bid on any keyword, and Google took notice of the amount of people bidding on these long tail keywords. In effect, this high amount of keywords allows Google to generate greater revenues.
Question 2: Describe two different tools or strategies for using Twitter data in a business context. Briefly describe the technology involved that makes this possible. Name two steps Twitter should take in order for Lists to catch on as a useful feature of Twitter. Describe how a company might make use of Twitter Lists to grow its business.
Cur1y J: Twitter was used for publicity extensively by President Obama and other 2008 U.S. Presidential Campaign candidates. Ralph Nader used Twitter to update his campaign’s ballot access teams in real-time with Twitter and Google Maps. Numerous people became aware of Twitter because of the 2008 election. Candidates could reach out to millions of people, of all different backgrounds, through the use of Twitter. Anyone interested in the campaign could follow candidates and track their happenings, as Twitter can be easily updated through SMS or even iPod Touch.
News stations use Twitter to cover various news and occurrences around the globe. For example, CBC can link their website or blog to Twitter so that when a new story is updated, it posts the update on Twitter in less than 140 characters. So now the people following CBC news don’t have to actually check website. Instead, they will see any updates or news once it is updated on CBC via Twitter, as well as any other information the user is attracted towards.
Twitter is similar to a web-based internet relay chat, or IRC client. The interface uses Ruby on Rails framework, which is an open source web application for the Ruby programming language. However, Twitter is now using an API (application programming interface), which allows other web services and applications to integrate and connect with Twitter. As used in class, hashtags (#) and @ symbols allow for easy searches and interaction.
A company could use Twitter Lists to grow its business if it has multiple faces of the business on Twitter. For example, Comcast has multiple customer service representatives on Twitter with countless amounts of employees tweeting. Even though Twitter Lists may not result in new consumers or clients, it’s still useful for reporters, investors, and employees alike. These firms could make lists of the top people within the industry as they will be useful tools for others. Also, for example, if you were a travel company, you could make a list of the most active Twitter users in each city where you are located. Thus, all of these active users and influencers will find each other and help to expand the word around your company, showing how much passion there is behind your company.
Twitter Lists seem to be, as of right now, for die-hard Twitter users, as they are clearly the early adopters of this feature. So, casual users must be reached through creating useful lists and sharing them in other channels like blogs, email, and Facebook. Lists also may decrease the amount of direct user following, as you don’t need to follow all of the user in the List, so Twitter may want to require this because discovery of great people to follow is part of the value Twitter possesses.
Question 3: Other than syndicating blog posts as RSS feeds, describe two ways that syndicating content can help an organization capitalize on its core competences. Cite specific examples to make your case. For content producers, what is the main advantage of syndicating content? For content consumers, what is the main advantage of subscribing to it?
Cur1y J: Really Simple Syndication feeds allow people to syndicate their content so it can be found by other related content publishers. RSS uses Extensible Markup Language (XML), which is designed to draw a line between content and form, so information can be syndicated and extracted without the use of complicated code like HTML. RSS feeds have led to the huge user-content uploading.
So, a business owner could easily setup a blog to post updates about business offerings. News websites have taken massive advantage of RSS feeds. By having an RSS feed on their blog, customers can now subscribe to the RSS feed. Now, they can connect to see updates and posts in the RSS reader. This allows for easy and recurring contact with customers that may not have came back to the website if they didn’t subscribe to the RSS feed. Also, people will come back to the website if they see any interesting posts that relate to them through the feed.
Affiliate programs are great for RSS feeds. You can create a feed for individual products by utilizing the ability to separate content from form. Other websites could now use this feed to show content on their website about your specific products. Flickr uses RSS feeds with XML tags so websites and blogs can easily post pictures on their respective sites.
Content Producers would post RSS feeds so other websites can pick up content and syndicate it in other locations on the website. Thus, more people visit the site as content is more viral. Content producers also use RSS feeds to appeal to readers and know when websites are updated. This is easier than individually checking websites to see if anything was updated.
RSS feeds are attractive to content consumers because you can easily look at your RSS reader and see every site that has been updated instead of going to each individual site and checking if they have anything new posted. It consolidates the website into one location. This saves huge amounts of time because it makes scanning for updates easier and relative to their interests.
Question 4: Cloud computing has become a buzzword for a new strategy for developing and deploying software applications. Identify any application that runs in the cloud, and describe one of its features that could not be implemented as easily in a non-cloud architecture. What are the two biggest advantages for small to medium size enterprises (SME’s) that make use of applications running in the cloud? What features of cloud computing support those advantages? What are the two biggest risks of applications running in the cloud?
Cur1y J: An application that runs in a cloud is any web application (Facebook, Twitter, YouTube). These sites use numerous application plug-ins through the browser that allows for maximum user participation and accommodation. One of the features that could not be implemented as easily in a non-cloud architecture is the need to install and run the application on a customer’s computer, which relieves the pain of software maintenance and constant support.
Two of the biggest advantages for small to medium size enterprises that make use of applications running in the cloud is that cloud computing is a sort of on-demand hosting service. This is vital for e-commerce sites, increasing efficiency and lowering expenses. Another is it offers a pay-as-you-go structure, as users are only charged the amount of traffic, bandwidth, and memory used. Thus, online businesses become more efficient by only using storage and space that is needed.
A risk of running applications in the cloud is cloud computing has risks related to personal identifiable information that can be altered. People can fake identities and exploit these identities. Also, the specific location of data is unknown. So, tracking any data becomes very difficult. Any issues become very difficult to fix as users share hosting space.
Amazon created a cloud computing infrastructure (EC2), as they realized that many of the struggles they experienced while growing were also experienced by other start-ups. So, they created a service that allows companies to use their selective expertise in cloud infrastructure for their businesses.
Question 5: Chapter 5 in Amy Shuen’s book describes different types of innovation that result when combinations of companies and users collaborate. Identify a Web 2.0 company that provided a new platform on which an innovation ecosystem formed, and describe two ways that their platform led to the company’s success by supporting new forms of innovation.
Cur1y J: Amazon provides many new platforms, which has been vital to their success. The first platform Amazon provided was an open marketplace for sellers, charging fees and a % of their sales in exchange for service. They realized the there was a lot of competition in this market, so instead of trying to compete, the invited competitors to join their platform and thus raising profits and sales. By opening their platform, Amazon was able to build a better brand image and take advantage of the long-tail, as sellers were typically targeted towards specific niches that Amazon didn’t already service.
Amazon Affiliates is another innovation Amazon has used to their advantage to market their products. Amazon's affiliate program immediately generated thousands of sales force individuals who were working on commission. So, these people weren’t costing Amazon any money beyond the commission these people earned. In addition, the program opened their products up for marketing to the long-tail. Multiple affiliates were involved in niche blogs and website with faithful readers. The program allowed Amazon to get their products and brand image in front of these users in a very specifically targeted and cost effective way. Also, please see the above question for another way that Amazon has buily a platform leading to their success via cloud computing.
Question 6: Single sign-on, or the ability to use a single username and password to access different Web sites, is becoming an increasingly popular trend, as users no longer need to create a separate login and password for each site they visit. OpenID is one of several single sign-on providers. Other than not needing multiple usernames and passwords, describe another advantage of this approach to the user, (b) the site using single sign on, and (c) the provider of single sign on. Give a specific example an OpenID that you have. Who is your identity provider? Draw a diagram or describe the exchange of information that takes place between the user, the web site, the OpenID, and the identity provider, when a user logs into a Web site using an Open ID.
Cur1y J: Benefits of using Single Sign-On include:
- Reduces user password fatigue from entering different combinations on various sites. (user)
- Reduces IT costs as a result of a lower number of IT help inquiries. (site using single sign-on)
- Security on all levels of entry and exit to the systems without inconvenience of re-contacting users (site & user)
- SSO can support conventional authentication, like Windows credentials (provider)
For example, I have a site which uses single sign-on and I use single sign-on. I use Facebook, Twitter, Yahoo!, & MySpace as a provider. They provide a service of registering OpenID URLs and providing authentication. Below is how the exchange of information takes place between the user, web site, OpenID, and the identity provider, when a user logs into a website using OpenID:
- End user want to asset his/her identity to a site (i.e. me)
- The end user chooses a URL or XRI as their OpenID identifier
- A service provider registers OpenID URLs or XRIs and provides OpenID authentication (i.e. Facebook)
- The relying party site verifies the end-user’s identifier
- The server-agent then verifies the end-user’s identifier. This could be the end-user’s own blog.
- The end-user uses a browser to access the identity provider and relying party.
To: Eric E. Schmidt, CEO of Google, Inc.
Re: Google Ethics & Internationalization in China
Google, Inc. is facing a difficult dilemma. Should you lobby the Chinese government to change its censorship system? Operating within China must be considered. Should you physically enter the market, continue to rely on Google.com/cn, or abandon the Chinese market altogether? You want to protect Google’s “Don’t Be Evil” image, which could be affected due to user arrests as a result of using certain features. Recently increasing Chinese newspaper criticism and a lack of cooperation regarding firm information dissemination has lead to a question of how much Google really cares about complying with Chinese government regulations.
Good has resulted from Google’s expansion into China’s arena, as they’ve made strides in building positive relationships with the Chinese Government. However, U.S. political pressure for change in foreign countries has portrayed an image of disrespect towards varying cultures, including China. You’re global perspective mindset for global dynamic competitiveness regarding differing cultures and your specific knowledge skills should be maintained. These socioeconomic and sociopolitical differences are opportunities.
Google has the capacity to learn from participation in China, and transfer that knowledge to operations elsewhere in the world. You are learning to cope with a different institutional, legal, and cultural environment. This is a vehicle for innovation and improvement of Google’s products in existing markets. However, this is difficult to achieve while China limits consumer access to information.
You’ve been able to increase Google’s geographic scope by penetrating China’s market (i.e. internationalization). Now, you can leverage Google’s existing resources and supplement them with China’s resources. Take note, while exercising this option, you do not want to insult incumbents and threaten profitability. But, reconfiguration of the value chain and proper leverage of resources will help protect Google while continuing penetration of the new attractive Chinese market. Leveraging existing resources gives Google something to build off of that incumbents and other possible new entrants are likely to lack.
High research and development expenditures have helped you take advantage of both economies of scale and scope, in turn affecting Google’s economic logic. Google has been able to share its resources across markets, but it is difficult to be successful in sub-geographic markets like China or United States. The abundance of differing cultures within an already foreign market significantly increases complications in that economy.
By entering the Chinese market, Google may have caused the internet to become more isolated and regulated because of the new accessibility of information that you provide. It acts as an incentive for a user to find out more about whatever they find interesting, landing ignorant or tempted Chinese consumers in handcuffs. A government must look out for its people, and given China’s current economic well-being and growth, it’s difficult to argue how Google’s presence has positively influenced the “goodness” in China’s economy. By limiting access to certain information, China is allowing the economy to remain relatively stable and continue what has been working. In China’s case, consumer ignorance is bliss, and this must be recognized and respected.
When considering international strategy, you should look for global trends. China has seen an increase in economic activity and a growing number of consumers. However, these trends involve high governance and coordination costs, which increase as diversification increases. Diversification causes Chinese businesses to adapt to the changing environment and Google’s presence, as Google has realized. Also, you want to resolve tension between Chinese preferences and global standards. Google’s global vision tradeoff consists of a relatively low local response, but presents many opportunities to gain global efficiencies. You can build cost advantages through centralized, global scale operations. This vision requires the centralized and globally scaled resources and capabilities that Google possesses. You can easily disseminate your unique capabilities world-wide.
You are forced to count on the likelihood that Google’s services will meet the needs of Chinese consumers without fine tuning and customizing Google, in effect lowering costs. If you do not choose to follow these recommendations, you should take what Google has learned from this experience in China and apply these lessons and new knowledge in other markets. You do not want to fail due to a for-seeable external, economical, and social change. Respecting China and their practices is of the utmost importance, and lobbying for a foreign government to change so you can turn a profit is an avoidable cost, and if pursued, could lead to company disaster.
To: Michael Kowalski, CEO of Tiffany & Co
Re: Policy Recommendation for Recession positioning and pricing strategy
Dear Mr. Michael Kowalski,
Tiffany’s current positioning and strategic focus is one of focused differentiation. You offer a luxury product that is generally purchased by customers that can afford higher prices. Currently, Tiffany’s is having difficulty coping with the affects of a recession and maintaining its brand image. There’s been a decrease in demand for high end goods while operating in an economy where there is an increase in job losses and cuts in consumer spending. Namely, you are hurting in places where you are mature; such as the United States and Europe. The New York market alone accounts for 15% of Tiffany’s sales.
Tiffany’s must continue to focus on innovation capabilities and product improvements that has allowed you to maintain your competitive advantage and set prices at the industry average; maintaining them above competitors in this recession. You want to avoid being “stuck in the middle”. So, I recommend continuing investing heavily in quality control, design, innovation and marketing.
Tiffany’s has enormous strength in its brand, and you don’t want to jeopardize that by decreasing prices or forgetting about your loyal customer base. Teaming up with well-known designers will further reinforce your differentiation focus. Adding to this could be the development of new designs and increased distribution of, say, a certain watch line. However, you want to ensure that you don’t make your brand too accessible and hurt Tiffany’s reputation.
I recommend you implement a focused marketing campaign to build on core competencies. Tiffany’s must stick to its core customers while simultaneously reaching new business. Reaching new business is vital to your growth strategy, so you must ensure that you don’t alienate your current customer base during these vital growth stages. Since Tiffany’s is hurting in more mature countries such as the United States and Europe, expansion into developing countries like China, Asia, South America and the Middle East is recommended. Currently with 94 stores in Asia/Pacific and 24 in Europe, Tiffany’s could increase this amount by 6% over the next year; opening stores that will be exposed to volatility in the market. Also, in the event of inflation due to a weakening U.S. economy, your sizeable asset inventory would benefit from these new locations because of inflation’s affect on hard assets. In addition, your non-U.S. revenues would significantly increase if the U.S. dollar continues to weaken.
In the non-market environment, Tiffany’s wants to offset their competitive cost disadvantage and create value. Social, political, and legal environments are important considerations while expanding in to foreign markets. Entering high priced markets are ideal, and the possibility of closing stores in areas where you have matured and prices are low should be considered. Even though it may be perceived as ‘bad’ that a firm closes a store, it may actually be most beneficial to shareholders and other interested parties.
Similar to Toys R Us, you could implement a sophisticated control system to help with inventory issues and identifying hot sellers in varying regions. Once identified, Tiffany’s should pursue joint ventures with other companies in these foreign markets for information on store locations and differing government regulatory systems. You have an advantage in the non-market environment because it’s difficult to replicate your knowledge, expertise, and skill of managers. Tiffany’s managers understand issues in the internal and external environment. So, with this effective approach and quality reputation, your non-market strategy is one of support for free trade, ethics, relationships, and the environment in these foreign countries.
From a market environment standpoint, Tiffany’s has a cost advantage abroad. As referenced above, entering open markets with large populations and high incomes are ideal. Once penetrated, you should develop relationships with local retailers concerned with jeopardizing current customers and distancing channels.
As discussed throughout this memo, redefining your arenas and reconsidering the firm’s competitive mindset are both feasible strategies for solving Tiffany’s current issues. You can avoid using price cuts and tarnishing Tiffany’s brand name if you implement these strategies. Even though I believe the implication of strategies related to creating complementors out of suppliers, buyers, and competitors, as well as shifting your strategic thinking towards revolutionary and creative ideas are vital to success, the pursuit of redefining Tiffany’s arenas is the most important alternative that best balances the varying interests in this situation.
"The standard path of the mythological adventure of the hero is a magnification of the formula represented in the rites of passage: separation - initiation - return: which might be named the nuclear unit of the monomyth." - Joseph Campbell, The Hero With A Thousand Faces.
The Matrix strings together aspects of the hero’s journey in order to manifest its main character. Neo (also known as Thomas Anderson), the protagonist of the film, closely follows the path of a traditional hero. The film also offers views of mythical themes and archetypes that are present in heroic mythic tales.
Neo, the One, commences the film agitated, looking for answers to an elusive feeling. He is called to a quest by Trinity, who warns Neo that he is in danger. Agents oppose him and direct him toward detachment from Neo’s illusionary vision of the Matrix. He then encounters his mentor, Morpheus, who offers him a choice of accepting the call to take his journey or return to the old world. After his acceptance, marked by taking the red pill, he becomes completely separated from the illusionary old world, as he is discarded as dead and cast out of the physical matrix reality, and is reborn into the real world. With guides by his side, he begins preparation for tests to come in the new world. The Oracle provides Neo with more direction as a mentor. He confronts the antagonist that is the Matrix in order to save Morpheus, successfully overcoming his adversaries and reaching his destiny. He returns from the experience with knowledge of his abilities and realization of Trinity’s passion. The final scene displays a challenge to the old order, as Neo states that he will remake the world and complete the Journey.
Myths function as a mirror of the soul, displaying our beliefs and fears for analysis. Numerous people can relate to The Matrix. Who hasn’t had the feeling of question regarding the world and all that we can physically experience? The Matrix is a mythological manifestation of that questioning, fears and doubts.
From the first call to journey, Neo follows the cyclic stages of the hero’s development. From his refusal to answer the call to the acceptance of supernatural help to his crossing of the threshold into the dark world, all of the stages of the traditional journey are present.
Neo is in an environment where he is not comfortable. He needs something to change. He is going through the motions of life, subconsciously searching for more. Neo can sense there is something out there; something he can’t see, that he can sense. After initial refusal, he eventually becomes brave enough to follow his senses and answer his calling.
Neo must answer the call in order to grow and fulfill himself as a person. The call, in this case, appeared in the form of Trinity. She tells Neo that he is really searching for the Matrix. Trinity recognizes the hero within Neo, but Neo does not recognize Trinity.
Neo originally rejects the call to take his journey. By choosing not to follow Morpheus’ directions to escape, he figuratively and physically refuses the call by dropping his cell phone, succumbing to the custody of the antagonists. This refusal could have led to his absolute imprisonment in a world where all is known, leaving his abilities unfulfilled. The antagonists plant a tracking device inside Neo as punishment for his refusal to answer the call.
Neo eventually answers the call, moving into a world of quest where infinite growth is possible. He commits himself to the journey by saying “yes” to Morpheus on the phone. He travels to his mentor in the middle of the night and in severe weather. Danger is present in the air, presenting another reason for Neo to turn back. He is given another chance to reject his call, but accepts it upon Trinity’s influential words. She also warns him of Morpheus’ knowledge, saying that he knows more than Neo could imagine.
Neo meets his seemingly supernatural aid. Meeting his mentor helps him overcome his fear that led to his previous refusal to answer the call. The mentor knows of Neo, as Morpheus has been watching the One. Neo is only aware of his supernatural aid through word of mouth. The One is currently unaware of his destiny. Regardless, Morpheus provides the hero with spiritual advice, offering him a road that leads to answers. At this moment, Neo consciously chooses to embark on his adventure.
Neo proceeds to prepare himself physically and spiritually for his quest. His mentor teaches him lessons; among them to avoid temptations presented by the material world (e.g. women). These dangers would stand in his way to prevent him from completing his journey. He has now crossed the threshold, as the preparation is over and he is ready to set out on his adventure.
Neo begins to test his allies and enemies. He begins to experiment with the new world, seeing what is new, who’s on his side, and how everything works, meanwhile learning some lessons (e.g. the child with the spoon). Neo begins his journey with helpers and guides in Morpheus, Trinity, and the rest of the crew, facing challenges that the Matrix presents along the way. How he deals with these challenges indicates the depth of his inner and outer strength. All of the tests attribute to the same meaning; there are difficulties involved in achieving any goal worth having.
Now that Neo has explored his new world and uncovered some of its mysteries, he can get ready to face his adversaries (the agents) and follow his beliefs (saving his mentor Morpheus and creating peace). There is a moment of preparation before he faces his ultimate challenge. The agents challenge Neo in order to force the One to confront his fears. They draw forth aspects of Neo’s personality that is not readily perceived, allowing Neo a deeper understanding of self. The agents allow Neo to demonstrate his abilities (Neo realizes his full potential and ultimately defeats Agent Smith), and overcome his fear that his opponents have been exploiting.
Neo is rewarded for surviving his challenges. He finds true love in the form of Trinity. This love is so powerful that she is able to bring Neo back to life by declaring her love. Trinity is also a martyr. Neo does everything possible to keep her alive, whereas she accepts her potential death as a necessary part of Neo’s quest to save the world. Her willingness to sacrifice herself for Neo is not a sign of a weakness, rather a demonstration of her complete belief and commitment to a cause. She is just as determined to save humanity as Neo; her role in the journey is just different.
The One now must collect himself and start finishing his quest. This is indicated by his willingness to stand and fight against Agent Smith. At this moment, he is a changed person, beginning to believe in a cause greater than himself.
Neo must face death one last time, in a more final way, on a deeper level and bigger scale; so he is truly tested on what he has learned on his journey. Neo dies for humanity. Because of this, he holds out the promise for new life through this sacrifice. He displays the positive nature of death, as it is a catalyst for new birth through spirit and a final voyage into the unknown.
Lastly, there is a final return when Trinity acts as an elixir and revives Neo by declaring her love. Neo changes and brings back power and understanding to share with his cause. This is a moment of ultimate self-realization. He has faced and overcome death, being reborn with power that has been discovered on his journey. This power allows him to destroy his opponents and capture control of his reality.
Man vs. Machine
Similar to the story of Grendel, The Matrix reveals that both humans and machines possess similar qualities. Humans are restlessly driven towards their beliefs, just like machines. Morpheus has full faith in the Oracle’s prophecy and in Neo. His beliefs are unquestioning, and his followers automatically follow him in his pursuit of his beliefs. Trinity’s love for Neo is consistent like machines. Her actions display her love, but her love is expressed through her actions rather than through emotion and passion. Neo expresses a robotic calm once he is transformed, similar to Beowulf’s machine-like qualities in Grendel. He and Trinity wear black, plain clothes that symbolize machine’s bleakness. They possess incredible strength and fighting skills that parallel the machines as a result of downloaded computer programs into their bodies.
In contrast, the Agents (antagonists) are creative, adaptive, and smooth. They shape-shift easily throughout different programs, listening to human speech and responding in accordance with their beliefs. Agent Smith displays human emotions of disgust and fear when he converses with Morpheus while trying to crack his brain. He confesses himself after removing his glasses and ordering his comrades out of the room. Smith is seemingly desperate to become human.
How interdependent is man and machine? Technology threatens to become more intelligent than humans; however, technology does not need to be smarter than humans in order to enslave them. As long as humans use technology to solve human issues, humans and technology are interdependent. The machines grow and harvest humans in order to sustain their existence, as they are dependent on humans for life. Humans don’t rely on machines to survive unless they choose. At one point in time, humans needed A.I. for something and created it in order to satisfy that need.
The Matrix offers the illusion of choice. The Matrix is a world with predetermined results, all questions already answered. In the real world, humans possess the power to alter their fate, make mistakes, and act on their beliefs. Neo chooses the real world and the choices that come along with it by swallowing the red pill earlier in the film. He learns that free will does not come easy, as the real world is dangerous and unorganized. Pleasure seemingly only exists in the Matrix as a computer program.
Cypher regrets choosing the red pill. He believes that even false pleasure is better than no pleasure, saying that “ignorance is bliss.” He sees the truth as an unnecessary nightmare. He is the classic betrayer, symbolizing Satan. Cypher wears red and has a goatee, which are representational images of Lucifer. In contrast, Neo and his supporters value reality and the ability to make choices, however unsatisfying they may be. Everyone has a responsibility to choose between the fake world and the real world.
Cypher is a classic example of a betrayer. He cooperates with the enemy in order to ensure his own false reality. However, without Cypher’s betrayal, Neo would not have transformed through resurrection. Was this destiny? Was this the plan? If it was a plan, is there really a choice that can be made?
Neo is an example of free will, as fate plays an important role in his quest. He relies heavily on the Oracle, as everything she says comes true in one shape or form. She guides Neo towards the right decisions, as she can see around time. If she does this correctly, Neo doesn’t have to choose and use his free will.
Morpheus attempts to describe the Oracle as a guide, not just someone who can foresee the future. She is always right, raising questions as to how much free will Neo actually possesses. Her intelligence and swagger allows her visitors to trust in her, which may be why her prophecies are self-fulfilling. In this sense, she shares the same ultimate goal as Neo and his crew; they are trying to shape the future.
The antagonists are constantly wearing sunglasses in the film. Sunglasses cover the eyes and reflect the image of those looking into them. When the sunglasses are removed, this indicates that the character is developing a new perspective or is vulnerable in some way. When Morpheus offers Neo a choice between the blue and red pill, they are reflected in each of Morpheus’ sunglasses, a reference to the two alternate views that Neo must choose between. When Neo enters the new world, his glasses protect him from dangers he encounters.
Mirrors offer a view of how we see ourselves in our world as well as the outside world. After Neo takes the red pill, he enters the real world, touching a mirror that infects him with a metallic substance. This suggests the dismissal of all illusions set forth by the Matrix as he enters a new world of perception. Reflective materials are consistent throughout the film (e.g. rain and building glass), shifting forms and locations, transforming its reflections.
Archetypes and Character Analysis
The Ruler/Savior/Messiah archetype exists in all cultures and beliefs, as it is the heart of philosophy of modern mankind. Neo represents this icon, imparting peace and a sense of hope for mankind. He is associated with a hidden understanding, singled out to be admired. He is different from the rest. He represents things that others are not. In this sense, Neo will use his abilities to save mankind from possible extinction. He uses his powers to heal rather than destroy. The healing, hope, and knowledge he imparts to those in the Matrix causes them to worship him, even though he claims that he didn’t save them, they saved themselves.
Neo, being the Ruler, has a counterpart in Agent Smith. Smith is the anti-hero. Like a mirror, there can be no reflection unless there is an image that first appears in the glass. Neo and Smith are light and dark. They are polar opposites. Where there is a Savior, there is a Demon. Without the existence of Neo, there would be no Smith. There can be no light without darkness.
Neo and Smith begin to mirror each other, one becoming more machine-like and the other becoming more human-like. The future of society rests on the balance of power between Neo and Smith. The film shows us that peace is greater than good and evil. Good and evil are the same, yet opposites. The only difference between Neo and Smith is their individual beliefs.
Neo wants peace while Smith desires destruction. Smith’s desire to destroy is without reason. Smith could be viewed as a shadow Magician and shadow Ruler, as he attempts to turn all positive into negative. Neo follows his path because it is what he believes. Smith simply acts without thought or comprehension of an end result. At the end of the entire Matrix Trilogy, peace is only restored once both good and evil is destroyed. Neo understands that through his understanding, he has the ability to achieve his goal of peace, giving up his life for others; that is a true hero.
Trinity symbolizes archetypes of the Lover and Caregiver. She helps Neo access knowledge within himself, while at the same displaying unconditional love for the One. He became the One because of her powerful love. If not for her love, Neo would have died at the hands of Agent Smith in the hallway at the end of the film. His transformation and resurrection was a direct result of her love. Upon his resurrection, his vision became clear. She is the Spirit, divine force behind the One, and their union is unbreakable.
Morpheus represents a mix of the Seeker and Sage. He searches for the One, seeking out elements to create a better life for himself and others. He wants to achieve what he believes. He becomes wise due to his experiences and uses this wisdom in an effort to save humanity. He encourages Neo to develop a clarity of vision and to act in accordance with his beliefs. He wants to “free his mind.”
Morpheus believes without question that a Messiah exists and that it is his destiny to locate this being. He inspires with his words of wisdom. He found the One and trusts in Zion’s safe future. He possesses absolute conviction about his beliefs. He spoke of a prophecy he trusts in and prepared those around him for the arrival of the One so when he came, they would be prepared to receive him. Perhaps Morpheus’ purpose is to subconsciously care for the inhabitants of Zion though a message that could potentially be false.
The Oracle represents one side of the Creator. She represents love, guidance, and compassion. Her intent seems to be to aid mankind in finding purpose in their lives, especially Neo. She is also a source of hope for Morpheus. She informed him that he would find the One, and through this belief and faith, he fulfilled that prophecy.
The Oracle could also be seen as a Sage, possessing a pronounced wisdom that helps people discover why things happen. She represents femininity through her temperate, slow manor. She is viewed in the form of a woman living in a housing project, enjoying the simplicities of life. She speaks compassionately, as she is abstract. She is mythical, with a sense of humor. She understands the importance of machines and humans living in peace, and acts in accordance with this understanding.
The Oracle is the true heroine in the film. She risks all she knows in order to preserve peace. Once it is clear to her that Neo believes in lasting peace, she gives him an opportunity to achieve this idea. She is motivated by pure love. She loves the creation that is the Matrix, as well as humans existing alongside the machines. She believes fondly in peace and guides all aspects of making peace possible. She believes in Neo and trusts in him to make a sacrifice for the greater good of society. She never truly knows the outcome of others decisions, but simply believes.
Cavagna, Carlo. "The Matrix (1999)." AboutFilm.com. 1999. AboutFilm.com.
Gardner, John. Grendel. U.S.A.: Knopf, 1971.
The Matrix. Dir. Andy & Larry Wachowski. Perfs. Keanu Reeves, Laurence Fishburne, Carrie-Anne Moss,
Hugo Weaving. Croucho II Film Partnership, 1999.
"The Matrix." The Matrix 101. 2008. The Matrix 101. <http://www.thematrix101.com/matrix/>.
Pearson, Carol. Awakening the Heroes Within. New York: HarperCollins Publishers, 1991.
"The Roots of the Matrix." 29 Jan 2008. YouTube.com.
Based on my diagnostics, I have extrapolated three primary issues that must be addressed when considering how to achieve Toy Zone’s short and long term objectives: Communication and resistance to change, implementation of technology and unreliability (measuring change), and beyond implementation.
Pickering is trying to make a quick switch from the old to the new system (organization-wide and rapid change). The introduction of so many plans for change in such a small time frame has become too complex and, as a result, employee structure, morale, and operational effectiveness has been significantly reduced. The timeline for change must be increased beyond 18 months and the budget must be more than $15 million. More money and time will be required to alter the environment and perspectives of the company, as well as effectively implement change.
Even though a time-effective change is cost effective, I recommend we begin running parallel systems. The benefits of this will outweigh the increased costs. Employees can be assured the new system functions correctly, while the old system serves as a back-up in case the new implementation fails. There could be potential collaboration between systems and significantly help with continued operations of the firm. Also, management will be less resistant to change, as the “old school” and clan-cultured employees will be allowed to slowly convert to the new system. They will feel less pressured, increasing morale and encouraging confidence in the potential new, rigid and accountable culture. Lastly, a decrease in employee turnover should result.
Because of ineffective implementation techniques, we are now stuck with multiple plans (i.e. change culture, new management, close manufacturing units, outsource production, etc.). Pickering has been faced with poor sponsorship, high resistance from employees, conflict with employees (disciplining a sales manager), and a lack of change management expertise. We must avoid trying to make a few quick changes in a vain attempt to save the project. We must measure quality improvement and cost reduction as our goals while measuring progress. We will use incremental success and slowly complete smaller projects with higher rates of success. The labour-intensive use of consultants must be converted to leveraged use, as the project has become too complex and expensive. We can then begin to train employees more effectively, working with the people who will be using the new system, rather than doing all of the work and not planning for the integration in the business.
Employees, such as the insufficiently trained sales team, must be trained and educated three different times during the implementation process. They must be made aware that they were to begin to focus on changing customer perceptions and service excellence. This is good because customer and user perceptions are sometimes overlooked by management. Inform employees of the implementation of electronic devices to improve communication between the sales force and support office. Educate them about communication skills and how the improvement in communication between departments will lead to increased success of the business. Next, focus on specific training of the new technology to be introduced that will improve the company’s infrastructure (e.g. a new ERP system). Finally, conduct advanced training to make employees aware of how to take positive advantage of the new technology.
Using organizational control theory, I have concluded that Toy Zone’s current state is consistent with Cell 4 (Figure 8.1 Carlopio, 143). Unreliable information via an ineffective ERP system is significantly inhibiting management’s ability to properly measure time, costs, quality, and scope of the implementation. There is also a lack of a clear definition of the behaviours required by employees to complete the new project. We must focus on managing the inputs of our implementation; most importantly training and education. When we increase the quality of inputs, we increase the quality of our results.
Pickering has relied on the recruitment of highly qualified and experienced individuals who are technically sound due to concerns about the work ethic, training, and focus of employees. This is good in the sense that there is currently no way to rationally measure the work of the company, so these types of people can assure us of having an able and committed set of people. However, we must, again, begin to “rely on training, socialization and a ‘clan-like’ culture to help ensure those involved develop and display the attitudes, values, and beliefs (Carlopio, 146)” that will lead to the success of the business. We should allow the new managers to work with old managers, fostering a common ground where both types of people can collaborate and achieve goals linked throughout the business. Moving back to a ‘clan-like’ environment will allow current staff to commit to the change process and interact in a way that will increase value of the organization. So, I recommend we cease action to change the culture of Toy Zone into a rigid and formal culture, as it has resulted in extremely high employee turnover (which is very costly when referencing Exhibit 8.2 Carlopio, 149), conflict, varying goals and low morale.
Because current goals and strategies are extremely varied throughout the firm, we can use the balanced scorecard to properly measure the smaller-scale operational activities alignment with larger-scale goals. Manager’s attention will become more focused on the issues and management will be involved with implementing the new strategy. We must inform and reinforce to employees that we want to close certain manufacturing units, outsource aspects of production and revitalize the sales force. We then must communicate and sync these goals with department and individual objectives.
Pickering made a mistake by pushing staff beyond their abilities and adjusting sales target numbers; which led to a loss of highly valuable and experienced employees. We can’t only offer financial incentives tied to our short-term financial goals. Restructuring and diversifying the incentive system and commission structures for the sales team, as well as implementing a balanced scorecard management system will allow for long-term strategy understanding by managers at all levels, simultaneously aligning departmental and individual goals.
As stated above, most of what we can currently control about the implementation of Toy Zone’s strategy involves the inputs of the process. Therefore, feedback is an extremely important component that will allow us to consider the results of the implementation that affects the inputs. Feedback from managers will allow us to learn the positives and negatives of our system, concurrently giving managers some control over the process. This would allow for control and evolution of the system, learning from mistakes made during implementation, and most importantly encourage change as a team effort. Management, as a whole, must be pushed to continually measure all aspects of the business (individually, organization-wide, financially, customer-related, etc.), compare these results to our desired goals as a company, and adjust.
Measuring the management of the business will increase the likelihood of success. We must ensure that our strategy is communicated throughout the firm. Pickering has correctly indentified communication as a vital tool to the success of the new strategy. We should continue to hold meetings with management in order to effectively communicate our goals, keep them aligned throughout the company, and generate useful feedback. Also, we should continue to encourage teamwork and cooperation between new and old management that can be measured. If we can translate our vision and goals into terms management can understand and measure, we can then enforce the specifics that Pickering desires.
The enforcement of the idea that communication is key to successful change has been, and will continue to be, a useful theme throughout the implementation process. Weekly meetings with management, the ‘information blitz’, newsletter of achievements, new and future plans, an induction course, and quarterly prizes for excelling employees are all actions I recommend we continue. Without effective communication we can’t grow as a company.
More trust equals greater commitment and innovativeness of our departments. Increasing trust will lead to greater employee confidence, commitment, creativity, and innovativeness. Both internal and external stakeholders will extremely benefit from trust within our organization. Though Pickering is extremely detail oriented and prefers to keep tight control over communication with employees, we should do less monitoring and more encouraging of employee enthusiasm to influence innovation.
Seeking out an external agent “to obtain independent evidence of problems with the existing course of action and to clarify its magnitude” (Carlopio, 160) was a beneficial move made by Pickering for the firm. We can’t cancel some of the existing projects to alter the company’s infrastructure without an alternative (alternative discussed above). We must avoid complete termination of the project via convenience to avoid conflict within management (e.g. blame for failure). The truth about the current state of the business must be relayed throughout the firm.
Now that we have identified problems and solutions with the implementation process, we can discuss plans for evolution of our new processes. We can launch small experiments throughout the organization that allow us to manage these multiple strategies and measure them over time. Pickering’s desire to revert to a mechanistic, traditional, top-down strategy inhibits the ability of our company to innovate and learn. So, we must begin to experiment and use rapid learning to stimulate improvement, innovation, and learning of our implementation.
A strategic community would best fit our company. It will allow for better management of our infrastructure while providing “high-quality, validated solutions to issues; handle unstructured problems; and deal with the never-ending new developments in hardware and software” (Carlopio, 167). This community will also allow for more effective communication and shared knowledge between our departments. Our long-term performance will be positively affected by this type of community because of the increased learning and development. Also, we are currently leaning towards the development of a non-rational system that is chaotic and irrational, whereas we want a non-linear system which involves feedback from our outputs that affect our inputs and processes.
“Now that business is so complex we must simplify” (Carlopio, 176). Thus, we must move away from the complex implications of implementing a change process and new technology and simplify by using simple rules and processes that will spread throughout the firm. Management will be able to more effectively make decisions that are consistent with personal and overall goals if we can communicate a simplified corporate strategy. I believe the implementation of how-to-rules (key points on how to execute our goals), timing rules (sync timeframes throughout the company), and exit rules (if one department fails, we all fail) are strategic rules we should implement to drive our company’s strategy. Using the two-stage process for developing these strategic rules (Carlopio, 181), we can develop principles and generate rules that will aid employees in achieving our strategic goals.
I believe if we follow these recommendations and change plan, the short-term and long-term goals of individual employees and the organisation will be achieved.
Carlopio, James. Changing Gears: The Strategic Implementation of Technology. Great Britain: Creative Print & Design (Wales), 2003. Print.
In some countries, such as the U.S., companies are allowed the option to buy back their own stock. This action is known as a share repurchase or buyback. A share repurchase allows existing shareholders to receive cash in exchange for a fraction of the corporation’s outstanding equity (i.e. shares). Ultimately, the number of shares outstanding decreases in exchange for cash. After a repurchase occurs, the firm possesses the option to suppress the shares or maintain them in reacquired stock (treasury stock); made available to re-issue as shares in equity. The United States has an open market, private negotiations (between firms and their shareholders), repurchase put rights (buying back the right to sell a share at a strike price), and self-tender repurchases. Self-tender repurchases are classified in two categories: Dutch auction and fixed price tender offers.
There are alternative types of buy-backs. A selective buy-back occurs when offers are made to selected shareholders in the company. This type of buy-back must first be approved by all shareholders or a 75% majority (specialty resolution). Selling shareholders have the option to vote against a special resolution that would advocate a selective repurchase. Also, shares held for or by employees within a corporation may be repurchased by the firm. This employee share scheme buy-back beseeches an ordinary resolution. On-market buy-backs occur when a company repurchases its shares during trading on the stock exchange. However, this can only be executed once an ordinary resolution over the 10/12 limit is passed . Finally, a company listed on the stock exchange has the option of a minimum holding buy-back, wherein a firm buys unmarketable bundles of shares from shareholders. These purchased shares must be cancelled, but it does not demand a resolution.
There lays both advantages and disadvantages when a firm employs share repurchase options. Within these pros and cons lies diversified motivations and opportunities. Such will be discussed throughout the article.
Explaining Method of Stock Repurchasing
Ninety-five percent of all repurchases that occur in the U.S. are open-market stock repurchases. A corporation has the option of whether or not they announce their intent to repurchase shares in the open market. Conditions in the market decrees and sustains the option of how much, when, and whether or not to repurchase. These open-market buy-backs can last years. Conversely, daily repurchase limits restrain the amount of stock that can be bought over a given time period.
Fixed price tender offer buy-backs were once the only form of tender offer carried out using a fixed price. In 1981, Dutch auction share buy-backs were introduced as a surrogate form of tender offer. This form was first implemented by Todd Shipyards.
Fixed price tender offers determine, with public acknowledgement, an especial purchase price, the length of the offer, and the number of shares desired. It is possible for the offer to be made conditional upon the acquisition of a minimal amount of shares. In addition, it may allow removal of tendered shares before the expiration date of the offer. If shareholders decide to take part in the offer, they must also decide the amount of shares to delegate to the corporation at a certain price.
Dutch auction offers delegate a range of prices wherein the shares will eventually be bought. Shareholders have the option to tender their stock at any price within the given range of prices. The lowest price which enables the company to purchase the amount of shares desired is classified as the purchase price. Investors who tendered equal to or less than that price are paid the purchase price by the company. It not enough shares are tendered, the offer is either aborted or all tendered shares are repurchased at the highest price within the price range.
Motivation behind repurchasing shares vary, as the exact reasons for the decision to buy back stock are usually never made known to a common investor. Over the past few decades, we have seen investors begin to question motives behind repurchasing as a way of generating shareholder value. The question is whether or not share repurchasing is one of the most beneficial ways a company can spend capital.
Benefits of Share Repurchasing
Share repurchasing aids in closing the hole between value and price. Big repurchase programs usually have an impact of helping the price coverage on the underlying value earlier. This is a vital tool used by active investors to aid in the realization of the value of their investments.
When a corporation announces that a share repurchase is occurring, management is indicating that the stock is undervalued and they believe in future cash flow growth. This could raise the share price in a significant way, as potential growth is a vital tool used in the valuation of a firm.
Repurchasing stock generates a comfy price backing surface for investors. This holds especially true in environments similar to our current market (recession & bear market conditions). An enormous stock buy-back program generates excessive stock price aid that can be used as a safety line for investors in the firm.
Repurchasing shares can be improved by using cash from the issuance of debt. Extra cash held by a firm is not freely available for any use by the company. Shareholders claim ownership of the cash, and they expect good returns on equity investments.
By using debt issuances with interest rates below the cost of equity to repurchase shares, the firm’s leverage magnifies and the cost of capital decreases. Thus, return on capital invested by shareholders increases. Also, savings on taxes transforms into an increased share price, as interest expenses paid on the debt can be tax deduced.
Repurchasing stocks translates into a decrease in outstanding shares. This creates an increase in earnings per share, all else equal. A high EPS indicates high profitability per shareholder. However, this ratio does not take in to consideration future cash flows and cost of capital, both of which create shareholder value.
Downfalls of Share Repurchasing
Vital to the success of firms are a cautiously selected system with rewards based on performance. So, management’s incentive to boost a firm’s stock price could lead to tampering of the numbers in an effort to increase stock value and receive bonuses.
Repurchasing shares could have a similar effect. Increased earnings per share, return on assets, and a reduced P/E ratio are all derived from the reduction in shares outstanding. Therefore, the firm’s management would have earned their bonuses at the shareholder’s cost. Warren Buffet has been noted on multiple occasions that he believes employee stock option programs and repurchase programs can be quite shady. Repurchasing their own shares allows investors to believe their shares are increasing in value (EPS stays undiluted); when in fact the share value is artificially inflated. So, insiders may quickly sell their stock and allow individual investors to purchase at higher levels because of the inflated price the shares now hold. However, long-term price have not been linked to share repurchases, but significantly affect short-term stocks.
Every now and then, firms could be lacking in exploration of alternative means of using excess cash. A decision must be made on whether or not the corporation can earn a higher return investing elsewhere. If a dollar earned by a company does not increase the firm’s value by as much, shareholders should have cash returned to them so they may explore other investments.
However, it is important to keep in mind that every business situation is different. Firms may elect to retain a large portion of earnings because it is considered humiliating for a company to reduce dividends, even if they can’t profitably invest the excess cash. Investors react more adversely to a dividend cut than the withdrawal of a repurchase program. So, instead of increasing and reducing dividend payouts during periods of excess and low cash, respectively, corporations distribute conservative amounts of earnings in an effort to maintain an acceptable payout rate.
The common thought over the past few decades has been that it’s beneficial when a company desires to invest in itself. However, questions have been raised recently over the credibility and motives behind share buy-back programs. There’s no answer for whether or not a repurchase program will benefit or hurt a stock. Each situation is different.
As both an individual investor and a company, it is essential to understand what a repurchase program can mean for a firm company-wide. If a firm has announced a share repurchase plan, analyze the company’s financial standing. A cultured, financially healthy firm with strong dividends is likely to have increasing company and shareholder value in mind when repurchasing their own stock. Conversely, a company that announces a share buy-back while in poor financial standing with decreased earnings should be considered with more caution. In the event of a stock repurchase announcement, take a careful look at the firm involved preceding a final decision on what it may mean for the stock in the near future.
1 The 10/12 limit refers to ASIC's requirement that companies buy back no more than 10% of the voting rights in the company within 12 months
2 Bagwell, Laurie Simon and John Shoven, "Cash Distributions to Shareholders" 1989, Journal of Economic Perspectives, Vol. 3 No. 3, Summer, 129-140.
3 Bagwell, Laurie Simon, "Dutch Auction Repurchases: An Analysis of Shareholder Heterogeneity" 1992, Journal of Finance, Vol. 47, No. 1, page 71-105.
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I just finished reading Ordinary Resurrections: Children in the Years of Hope by Jonathan Kozol. The children of South Bronx did not have the same opportunities as I did as a child. The norms in their town consist of imprisoned fathers, poor environmental conditions resulting in high asthma, poverty, relatives with AIDS, gangs, eviction, and poor health care. Educational resources are limited because of race and class origin. This, in turn, limits the children’s futures. Expectations of the children are low, as careers as a technician or an aide are encouraged rather than persuading the children to obtain a college degree and pursue their dreams. The social and economic racism that is present in the community hinders the children.
Money is scarce in these children’s communities, leaving them at a significant disadvantage. A reflection of this is how and where they are taught. They don’t receive the quality of education that I received or they deserve. Also, money is unequally spent among schools. A child in Great Neck receives over triple in school spending than that of a child in South Bronx. Money spent on a children’s education per capita is significantly lower in South Bronx than the rest of the city. In fact, it is actually less than the amount spent to incarcerate men in prisons. Instead of money being spent on the development of a child, it is being spent to contain prisoners in a cell. Money has been an active contributor to the quality of my education (college alone is around $40,000 per year). Therefore, money can be directly related to the quality of education a person receives. Sure, money is not the only answer to providing these children with equal opportunity, but it is a start.
It is ironic that poor education exists in such a rich country. I feel sorry for the children, even though they seem kind, smart, capable, and happy. They are unaware of their surroundings, which makes their assumption that they are okay priceless. Their world is not surrounded by trees or grass, but rather buildings and violence. Hope carries these children as they make the best of their situations.
While growing up, my parents always wanted the best. Their dreams for me consisted of becoming an educated scholar and excelling in a highly respected industry. In addition, I had aspirations of becoming a star basketball player. These goals and dreams are far superior to that of the children in the book. Expectations of these kids consist of goals as future entry-level workers. It is the norm in South Bronx to barely get by rather than excel in life. Expectations are so low that if a child becomes a medical aide he could be viewed as very successful. Where my life has been full of ripe opportunity, the children have South Bronx have not been so lucky. When a rare window of opportunity opens, the children must take full advantage, or else that window will be closed forever.
While the kids who attend Public School 30 have the benefit of passionate and caring adults, they are still victim to the horrors that the inner-city children experience. For the most part, medical insurance, dental care, and optometrist care are absent from the lives of these kids. These necessities and benefits I have experienced as a child are a luxury compared to what the children in South Bronx enjoy.
I admire the characteristics these children possess; love, faith, ingenuity, resiliency, and courage. These characteristics help the children at Mott Haven rise above their fears. How they manage to overcome hardships is encouraging and inspiring. However, the reason behind the children’s constant struggle is why something needs to be done about the opportunities they receive and the futures they hold. They deserve an equal chance to make something of themselves.
Segregation is a big problem in today’s society. There is an increasing gap between different types of schools (home, public, private, etc.). Education inequalities are not being addressed; I believe each child should have an equal opportunity to achieve their goals, and society is in part responsible for creating circumstances where achieving dreams is possible. A positive environment is essential for both students and teachers to ensure a dignified experience.
Despite being neglected by an unfair system, the children remain resilient. However, this may diminish as the system continues to oppress them. However, some students do manage to succeed in spite of an unfair system. I can’t imagine what some of the children of South Bronx could accomplish if they were to grow up in the presence of individuals that care, such as the teachers currently present in their lives.
Also, it is hard to expect children to learn effectively in a poverty stricken, malnutrition, toxic polluted, disease inhabited environment. They are expected to survive and thrive in an unfair and unclean place. These problems are not only problems of the children, but society as a whole.
The predicament the children of South Bronx are in is clear. No matter how hard they work, no matter how well they do, admission into a cleaner; more stable, healthier school that prepares students for college is unlikely. It is a shame that these children can’t be given a fighting chance.