Who got the competitive advantage??

Competition exists everywhere. From the morning rush hour, when you are trying to find a seat(unlikely) or find a pole to grab on so you don't fall when bus/train are moving; or trying to squeeze in the Baruch elevator; to the classroom of BPL, where we are competiting for our grades. As firms competiting over each to win more customers, more revenue, and more profit. One way to win is to have an advantage. Once the firm has an advantage, it is easier for them win over the competitor. The two companies I choose that have competitive advantage are Wal-Mart and Dell.

One of the advantage is cost leadership. Wal-Mart is the world's biggest discount department store. You can find almost anything you need in Wal-Mart. It's slogan is "Save Money, Live Better." The items selling in Wal-Mart might not be the best quality item, but it usually is one of the lowest priced compared to the market. Most items selling in Wal-Mart are like me "Made in China" or like my friend Abdul "Made in India". The labor cost in those developing countries are extremely low. Thus the cost of good sold is going to be low as well. Wal-Mart shows economy of scale to its best definition. Since they are such a big company, their average variable cost per unit is going to be lower than those of small companies.

Dell is the first mover in the computer industry to have customers customized their computer their way. One of the reason behind their success is their idea of letting customer choose how their computer are built. The first three computer I bought was a Sony and two unknown brand. They were all built when I bought it. Their idea of customization let the customers choose/create thousands of models. Dell was once the largest seller of personal computers. But the competitors quickly adapt the same idea and right now Dell is the third biggest computer company in term of sales. However, Dell's first move of customization has made Dell one of the most successful company in the world.

Applying Porter's 5 Forces Model to Banking Inudstry

Porter's 5 Forces Model is a reality check to see if a industry is attractive enough to enter. The 5 forces are: 1)Threats from new or potential competitors. 2)The intensity of competition among existing firms. 3)The power of the suppliers. 4)The power of the customers. 5)The easiness of changing to substitute products. If all of those forces are high then the industry is less favorable to enter. Before entering a industry, one firm should check whether those forces is low, so its favorable for the firm to enter.

Banking industry is among the most competitive industry. Which happen to be the industry I am working in. Lets break it down and see how Porter's 5 Forces Model apply in this industry.

Force 1: Threats from new or potential competitors--- Low---This might be the only force that will score a low. Opening a bank requires a lot of capital. Every member of the board of directors need to be checked and verified by the fed, this usually takes a long time. The filing also takes a long time for the fed to approve.

Force 2: The intensity of competition among existing firms---High--- As you can see, banks are branching everywhere. The banks are offering incentives for opening accounts. You might heard of "Free Checking for Life", "No ATM fee EVER", "FREE $75 for opening a new account". Some of the bankers are required to open certain amount of accounts every month. This makes the competition very fierce.

Force 3: The power of the suppliers---High--- There is only one supplier, the fed. All bank in the United States has a account with the Fed. This is account number is their routing number. This means that Fed has total control over the industry. A little change in interest by the Fed will have tremendous effect on the whole industry. Other key influences are fed fund rate, required reserve ratio, etc..

Force 4: The power of the customers---High---If the customer doesn't like anything, and I mean anything of his/her bank. He can open account in another bank, which it won't take him more than 30 minutes. This is why customer service is becoming so important in this industry. The bank I work at offers a tons of stuff for the customers, including: free pens, free coining counting machine, lollipops, dog biscuit, even a greeter at the door, etc.

Force 5: The easiness of changing to substitute products---Medium---Customers can always put money somewhere to make a little interests, there are all kind of bonds, mutual funds, stocks etc. However, the power of check clearing of the banks are undeniable. All the paychecks, payments goes through some banks to clear. Imagine if there is no banks to clear checks, then the whole economy will goes in halt. There are other financial institutions other than banks, such as thrifts, credit union, etc

Porter's 5 Forces Model says that banking industry is unfavorable to enter since most of the forces scored high.

How significant is Mission Statement???

This is the mission statement of Lehman Brothers, a global investment bank serving the financial needs of corporations, institutions,governments and high-net-worth investors worldwide:

"We are One Firm, defined by our unwavering commitment to our clients, our shareholders, and each other. Our mission is to build unrivaled partnerships with and value for our clients, through the knowledge, creativity, and dedication of our people, leading to superior returns for our shareholders."

In my mind a sound mission statement should have include the following:

1. The firm's purpose & value
2. Written in a way that can be easily understood by grandmother.
3. Should not take more than 1 minute to read it.

This mission statement surely does meet my requirement of a sound requirement. The states the firm's purpose as well as its value. The mission of statement does not required me to use dictionary.com and I finished reading this mission statement in under minute.


SURPRISE!! I am the CEO and I don't know what's our mission statement!!!

Mission statement can harm a company if its not properly stated or implemented. In an interview by CNN Money's Adam Lashinsky, Fortune senior writer, with Yahoo's former CEO, Terry Semel who was asked what was the company's motto. Terry Semel, five year CEO of Yahoo had no idea what Yahoo's mission of statement was. Terry Semel was replaced by Jerry Yang, co-founder of Yahoo in June of 2007.

http://money.cnn.com/2007/02/01/technology/pluggedin_lashinsky_yahoo.fortune/index.htm

Me!!!

Hi, my name is Hai C. Huang. My email address is alanhuang88@msn.com. From this email, you can tell people call me Alan instead of Hi Hai (Hi ^2). The URL for my blog is http://awowzone.blogspot.com. This is my fourth year in Baruch college. My major is finance and investments. I hope this is my last year at Baruch. I have been living in Queens since I came to US in 1996. I have been working in banks for more than two years, if you have any question regarding banking, I think I will have the answer. That might be a little bit exaggerating. I love sports, almost any kind of sports. I love internet,I think its one of the biggest advance of this century, or ever in the human history.