Understanding Your Audience

Understanding Your Audience

When you respond to people, there are some important principles that you must adhere to, the first of which is how to understand your audience.

If you are talking to a CEO of a company, then the subjects that will be of pivotal importance are likely to be different from those of the average employee.

The key concerns of the Buying Manager will not be the same as those of the Marketing Manager. A lack of awareness around this point will lead you to convey the wrong messages, which will possibly lose you the sale or job. Before you begin any conversation, you must find out who your audience is and what they can do.

You should be aware of the differences so that you adjust not only to the content of your discussion but also the language and tone you use. For example, as you listen to the speaker you will certainly notice that he (or she) uses certain types of words and gives clues away as to his (her) communication style. Generally speaking, advertising executives will use a great number of adjectives and images, while scientists will use more phrases based on facts and figures. Anyway, you should try to mirror this and use the same style of language they do. In presenting to a group, you should include this concept in your presentation.

For example, there is no point using images of a profit graph to a Finance Director who is only concerned with facts and figures of the true profit and loss report.

Each person will have a different level of capabilities and authority. In this case there is no point in asking them to do or agree to something that will be outside at their purview. To understand this situation is also therefore a key part of your preparation as you must ensure that you are in fact speaking to the right person. You must identify the key decision maker who has the potential to say “yes” to whatever your desired outcome is.

All these points are vital in developing the right pitch because the audience will be the deciding factor. A busy executive may only have a couple of minutes available as opposed to the full half an hour, and therefore it is essential that you communicate your point in the time provided.

A lady trying to understand her audience. Photo by Elena

Structuring your communication

You must be flexible in your method of communication and prepare for each accordingly. You should always do your research before you meet someone.

If you are dealing with those who are time-pressed, it is important that you put the key points of the message at the beginning of the conversation so that you are guaranteed to get these points across. However, with those who are more generous with their time, it is possible to build up to the key message with some background. However, if you did not know who you were talking to and were not aware of their time constraints, they you would not be able to structure your conversation to its optimum performance level.

Foreign Direct Investment (FDI)

Foreign Direct Investment (FDI)

Think Carefully, Invest Globally

The United States is not the only place to invest your hard-earned cash. In fact, it may not even be the best place, and risky emerging markets offer big returns, and you should watch them carefully

Consider that almost every emerging stock market open to foreign investors and tracked by the World Bank’s International finance corporation show greater returns than the Standard & Poor’s 500. And that is not one-year fluke: The IFC’s composite index of emerging stock markets for any five-year period show a mean annual report up to 30 percent, at least twice the S&P 500 return over the same period.

The catch: Emerging stock markets lack the regulatory safeguards that protect U.S. shareholders, and many of them are dominated by just a few stocks or are rife with speculation. Such instability can feed on itself. The history knows numerous examples: The horrific devaluation of the Mexican peso – 35 percent in the final 11 days of 1994 alone – sent Latin American markets into a tailspin. The IFC’s Latin American index dropped over 21 percent in the fourth quarter of that year.

You can buy foreign stocks directly, but an emerging market mutual fund may be a better bet. Professional managers examine a country‘s political stability, work ethic, education, family structure and other factors before investing. They also pay special attention to a country’s productivity rate. At least, such consideration pays off; and emerging market funds earn high actual returns. Some however take heavy hits, but experts believe most of them are poised for big growth in the long term.

For example, China, the world’s most populous nation doubles its aggregate output every 20 years. An evolving market economy and abundant labor makes it a standout. India, the world’s second most populous country has great potential, but also sporadic problems with religious opposition. Some other countries benefit from abundant natural resources, but beware of continued corruption and inflation, however.

Invest Globally. Photo by Elena

Anyway, many previously untraded stocks will become available to foreign investors. But these enormous market potential is tempered by doubts about whether it will move toward success and fear of political and exchange rate volatility in many countries.

FDI characterizes investments made in a different country than the one where the funds invested came from. The asset purchased must thus be of a dissimilar nation state than that of the investor’s home. Investment can take the form of financial, technological and even human capital (knowledge and skills development). By definition, there must be a lasting management interest - 10% of voting shares (Wan, 2010; Mossa, 2002). A smaller portion of shares describes portfolio investment. According to Caves (1971), FDI can be classified as vertical, horizontal and conglomerate. The vertical type can be further subdivided into forward and backward.

In the first decade of the millennium, FDI underwent exponential growth thanks to cross-border companies (Wan, 2010). Apparently despite the sharp rise in the 80s and 90s, the stimulating effect of FDI in developing economies continues to be debated. The optimistic school of thought rests on the neoclassical perspective and the new theory of economic growth. Radicalism is characterized by pessimism. A possibility exists that such capital brings about crowding out effects domestically, loss of autonomy and distress to local business. The author asserts that around 2010, FDI stock amounted to 1/5 of the global GDP. The reverse pattern, capital flow outwards from developing countries, also went up.

Hudson's Bay Company. Picture by Elena

Moosa (2002) draws attention to what distinguishes FDI from portfolio investment: FDI is designed for longer term and control of the assets acquired. The issue is surrounded by controversy, some seeing it as almost a new form of colonialism or imperialistic expansion. Still, FDI plays a major role in growth and economic development of the Third World and is one of the most stable international investment resources. Globally, FDI has risen since the 1980s. During those same years, the world has witnessed spectacular economic growth. There exist other forms of foreign investment than FDI. Notwithstanding, a decade later FDI represented 25% of international capital flow. Surprisingly resilient, this form of investment persisted almost unchallenged during the 1997-98 Asian financial crisis.

Scholars have examined the relationship for half a century and tend to agree on FDI furthering economic growth by modernizing the host’s technology, infrastructure, bureaucracy and so on (Wan, 2010). The author also underlines the repercussion of spillover effects of a technological nature. Figures are provided demonstrating the more pronounced positive correlation between FDI and business development, than between business growth and domestic investment; at least in the case of Latin America. In other regions, such as China, domestic influx plays a greater and more constructive role. Furthermore, it appears that the receiver country must be developed up to a certain point in order to be able to benefit from the arrangement.

References:

• Caves, R. E. (1971). International corporations: The industrial economics of foreign investment. Economica, 38 (149): 1-27.
• Moosa, I. A. (2002). Foreign direct investment: Theory, evidence and practice. Palgrave: New York, NY.
• Wan, X. (2010). A literature review on the relationship between foreign direct investment and economic growth. International Business Research, 3 (1): 52-56.

Economies of Scale

Economies of Scale

Economies of scale is an economic term and refers to the fact that for large companies already involved in a certain business, it is very easy to produce related products and thus more money by cutting on costs. To explain the concept, in terms that not necessarily involve economics, imagine a person who has two jobs. For example, a young woman who works as a writer during the day, and as French tutoring at night. Further, imagine the topic of her writing is French literature, therefore, she would be already prepared for her evening session of tutoring without exerting any special or extra effort. Thus the already prepared her tutoring lesson simply by writing at her first job writing about French literature.

Of course the case is very small compared to huge international corporations. For example, the world known store Walmart has been known y annihilating the competition by simply being able to offering merchandise at much lower prices than other stores. However, with Walmart the case is that because they are such a large corporation, they are able to buy in very large quantities, much larger than smaller merchandisers.

Alligator or Crocodile? Image: Megan Jorgensen (Elena)

Management accountants are the ones who deal with merchandising industries, as well as manufactures. The difference between the two is that merchandisers are resellers, while manufacturers actually produce the products they (or merchandisers) sell. In Canada, the designation of general accountants and management accountants have merged under one umbrella terms CPA or Chartered Professional Accountant or CPA. Interestingly, a very sought after job in accounting is the title of Controller or even higher in the organizational hierarchy, Chief Financial Officer or CFO. 

Aside from the large salaries that these jobs bring about, they call for much prestige. But all is not easy in the financial and accounting world.many financiers and accounting professionals must work a lot of overtime and even often work as much as twelve hours per day, in certain cases. Is a difficult life versus work balance worth the money, the stats and the prestige. Everyone has their own answer.

Hedge Funds

Hedge Funds

A hedge fund is defined as an aggressively managed portfolio geared to generate high returns. A hedge fund involves a group of investors or partners, who employ high risk strategies in the hopes of making high profits or high returns. For example, it is considered very risky to borrow money in order to invest, since losing the capital would result not only in a loss but also in debt. Conversely, low risk investments may guarantee capital, such as GICs (Guaranteed Investment Certificates), but because there is less risk, the profits or returns are likewise lesser. Generally, investing may be divided into aggressive strategies and conservative strategies.

Usually hedge funds, unlike mutual funds, are open to a limited number of individuals because they require high sums to be invested and locked in the fund for long periods of time (typically at least one year, but the large amounts of capital required, specify that only a limited number of investors can afford participation in a hedge fund).

Toronto Dominion Bank. Aside from major Canadian banks, there are many insurance companies, trust funds and credit unions. Photo by Elena

In the United States of America, the majority of hedge funds are unregulated, unlike mutual funds. The reason behind this is that investors in a hedge fund must be accredited, must make a certain income per year and must have a minimum net worth of one million dollars ($1,000,000) in order to invest in a hedge fund. Thus, it is implied that hedge fund investors possess a certain level of investment knowledge unlike mutual fund investors. Mutual funds are open to the public, and allow investors with much lesser capital to invest to profit from a professionally managed portfolio.

What may sound confusing is that hedging is actually a term meaning minimization of risk, but the goal of hedge funds are to maximize return on investment (ROI), thus a significant proportion of investment strategies involved may be quite risky, especially from the point of view of a conservative investor or a risk-averse investor.

Central Banks

Central Banks

The largest banks of Canada include the Toronto-Dominion Bank (TD), the Canadian Imperial Bank of Commerce (CIBC), the Bank of Montreal (BMO), the Royal Bank of Canada (RBC), the Scotia Bank and the Hongkong and Shanghai Banking Corporation (HSBC), among others. However, all these banks are commercial banks and individuals are able to open and maintain accounts at these institutions. Alternatively, central banks are banks where only the government can have an account. Central banks print the national currency, regulate the national economy with monetary policy and are capable to stimulate aggregate demand.

Further, examples of central banks include the European Central Bank, the Federal Reserve in the United States of America, and the Bank of England in the United Kingdom. Managing the country's money supply is one of the main functions of a central bank and is commonly known as monetary policy. Also, commercial banks turn to central banks in times of financial crisis. Indeed, central banks act as lenders of last resort. Central banks also manage and set interest rates, which then translate into bank lending rates.

Trust company Bank of Montreal. Photo by Elena

Historically, the first central bank is considered to be the Bank of Amsterdam established in 1609. Notwithstanding, it is widely believed that most modern central banks were modelled after the Bank of England established in the 17th century. Nonetheless, the Bank of England back in the days did not fill the same functions as central banks today. Further, the origins of central banking as it is understood today may lay with the Bank Charter Act of 1844, which restricted the power to issue banknotes to the Bank of England.

Finally, fiscal policy has to do with the collection of taxes. Governments rely on the revenue they collect from taxpayers to fund national defence, infrastructure, build roads, keep the public safe, provide healthcare and so on. The government and central bank of a nation work together to avoid contradiction of monetary and fiscal policies.