"Aged Generation" vs. "Age Degeneration" in Ukraine: An Example from a Business.

posted Mar 8, 2016, 4:28 AM by Oleksiy Fesenko   [ updated Dec 26, 2017, 3:19 PM ]

The reasons for the age discrimination loomed large in the beliefs of the younger generation in Ukraine; many older people look beyond the low income and on the verge of survival. Can insight into the efficiency by an example of business provide any further explanation?


The reasons for the age discrimination loomed large in the beliefs of the younger generation in Ukraine; most people from the elder generation have crossed the read line separating them from powerty, many are staying on the verge of survival. A retirement payment under 100 USD per month is usual for Ukraine.Just imagine the assumed John Doe of millennials in Ukraine – ‘Emily’ with the egoistic intrinsic and immoral extrinsic motivation and a self-perception of the ‘perfect statue’, but what is the imagined ‘clay'?  

In her opinion, the elder generation is looking similar to the useless robots with the high, wear and tear, low efficiency and endurance.  The robots is the convenient comparison - as they do not need a payment of salaries, any retirement plan, human and the citizenship rights. According to ‘The Puzzle of the Stature and the Clay’ (Stanford Encyclopedia of Philosophy, 2009), the sculptor who has an intention to create a statue can imagine holding a statue and a lump of clay in his/her hands at the same time. According to Kant, time and space are absolute, but not age. Following to Leibniz's Law for any x and y, if x=y, then both is the same: accordingly the time that equals space can exist in our heads and age is just another opportunity for the effective creativity. But the effectve creativity requies the non-discriminative attitide to the reserves of the mind.

An Anecdote about the Ukrainian Army.

    A leftenant-colonèl approaches an aged senior sergeant asking "what f*ck of thoughts do you have in your head "?
    Then again a senior lietenant comes and asks the same question "what f*ck of thoughts do you have in your head"?
    The aged sergeant thinks a bit and answers "I think that you will both have the generically identical children".

    Source: Fesenko, O. (December 20, 2017). Identical Children. Retrieved from business.oleksiy.net

As, this difference between the ‘robots’ and the ‘clay’ is imaginable. How playing the computer games (Nichols, 2017) instead of studying and reading the books can impact the forming minds? Not surprisingly that the next stage is a workplace procrastination and the computer games instead of tutorials to the employees. The Emily’s way of thinking targets efficiency, but the ‘clay of wisdom’ is in contradiction to ‘robotic condition’ of her mind. Can insight into the efficiency by an example of business provide any further clue?

According to Heisinger & Hoyle (2012), one of the expressions of ROI is the multiplication of the operating profit margin to the asset turnover.

ROI = Operating Profit Margin (operating income/sales) x Asset Turnover (Sales/Average operating assets).

The web performance metrics suggested there are two key measures to understand the success of a website they are interrelation between the ‘trust flow’ and the ‘peoples flow’ (Majestic.com, 2016). Even further, Noah Kagan in the article “Why Content Goes Viral: What Analyzing 100 Million Articles Taught Us” shared his opinion that 3x in peoples' flow drives 1x in Trust flow and visa verse (Kagan, 2014). Let us hypothesize that the trust flow has a correlation with the strategic positioning, and peoples' flow with the operational efficiency.

According to Michael Porter, the businesses can pursue two goals: reaching the operational effectiveness and positioning (Porter, 2008). To earn the profit the companies employ the efficiency, but to ensure the customer satisfaction, they must make the strategic decisions and display a higher effort to reach the strategic & operational effectiveness. The operational effectiveness can increase a company’s ROI in many ways.  

The difference between the ‘ROI’ and ‘operating efficiency vs. positioning’ is that the former is the financial tool, the latter is strategic. However, the question was, can the strategic decisions contribute to return on investment and success the same way as the operational efficiency (Chart 1).

Chart 1: Impact of the Operational Efficiency and Strategic Positioning on Return on Investment (ROI).

Chart 1: Impact of the Operational Efficiency and Strategic Positioning on Return on Investment (ROI).

Fesenko, O. (2016, March 08). Chart1: Impact of the Operational Efficiency and Strategic Positioning on Return on Investment (ROI). In "Aged Generation"  vs. "Age Degeneration" in Ukraine: An Example from a Business. Retrieved from http://business.oleksiy.net/theory/personal_growth_Deus_Ex_Machina_Ukraine

1) According to Chart 1, the new and the unfocused companies usually start from the good ideas and low investments. Although the businesses have a little knowledge, low trust, and even relevance, the idea can drive the entire business. According to BCG Matrix (Arline, 2015), the starters with the right ideas are the ‘question marks’ of business - the energized companies with the high growth prospects and the little market share. An emergent company has the valuable asset it's talent pool that drives operational effectiveness and ROI.

Sales/Average operating assets: Steve Jobs started doing business in a garage with the small physical investments and operating assets, his team’s asset was the enthusiasm and vision.  

Operating income/sales: Most startups failed at the beginning, because of a deficiency in the cash flow and lack of the operating income to cover the initial expenses. 

2) The next growth stage is ‘Stars’. The Stars have the differentiated activates or the similar activates performed in a different way to grow fast (Porter, 2008). For them, the operational effectiveness is not critical as they have a unique position and no competitors in their category. Therefore, the strategic positioning drives the operational effectiveness.  The observation is that the strategic positioning drives asset turnover and operating profit margin when the operational efficiency and ROI are rising at a low rate.

Sales/Average operating assets: A company can display the high sales under the high price tag, low expenses for advertisement without a necessity to implement the newest technologies and the management approaches.

Operating income/sales: A company can reach an economy of scales, but its strategy sooner targets for faster and cheaper manufacturing rather than achieving the higher quality.

3) On the next, growth phase, a business turns into a ‘cash cow’ with large market share but a low growth rate. On this stage, a company has many competitors who emulate a business under the low price tag or by reaching the high effectiveness. The observation is that the operational efficiency drives the operating profit margin and asset turnover: the operational efficiency and ROI grow at a low rate.

Sales/Average operating assets: As the sales can stay at the same level, the operating assets are very likely to rise because of the intensified competition, lowering costs and improving value, reaching the absolute improvement in operational effectiveness. A company has an opportunity to focus a business by advertisement or through the corporate social responsibility.

Operating income/sales: Here, are coming to play the total quality management, continuous improvement, and best practices. A company has to reach the maximum value at a given cost, use the best available technology, top skills, and the best management techniques.

4) Finally, a business enters into the ‘Dogs’ phase with a low market share and a low growth rate. On this phase, operational efficiency drives operational profit margin and asset turnover; a company should make the unjustified efforts for reaching stability in the operational efficiency and ROI.

I will conclude that 1x in the ‘strategic positioning’ can drive ‘asset turnover’ and ‘operation profit margin’ to the strategic effectiveness at 3x of ROI. At the same time, the 3x in ‘operational efficiency’ can drive the ‘operating profit margin’ and ‘asset turnover’ to increase the strategic effectiveness at 1x of ROI and is diminishing to below the zero when there is no market and growth.

Is this a sufficient proof that having ‘clay of wisdom’ even in the gray heads is not the same as the automatic reflection of reality similar to the ‘Dogs’ phase in business? The other question is how playing the computer games instead of reading the books can defeat from the ‘internal robot’ – the ‘Question Marks’ in business. Moreover, there are too many computer games now, which ones to trust.  Should the trusted efficiency be like this?

Reference

Arline, K. (2015). What Is a BCG Matrix? Retrieved from http://www.businessnewsdaily.com/5693-bcg-matrix.html

Heisinger, K. & Hoyle, I.B. (2012). Accounting for Managers (v. 1.0). 11.4 Using Return on Investment (ROI) to Evaluate Performance. Further Analysis of ROI. Retrieved from http://2012books.lardbucket.org/books/accounting-for-managers/s15-04-using-return-on-investment-roi.html

Kagan, N. (2014). Why Content Goes Viral: What Analyzing 100 Million Articles Taught Us. Retrieved from http://www.huffingtonpost.com/noah-kagan/why-content-goes-viral-wh_b_5492767.html?ir=Australia

Majestic.com. (2016). Site Explorer. Retrieved from https://majestic.com/

Nichols, H. (July 10, 2017). How video games affect the brain. Medical News Today. Retrived from http://www.medicalnewstoday.com/articles/318345.php?utm_medium=email&utm_source=other&utm_campaign=opencourse.GdeNrll1EeSROyIACtiVvg.announcements~opencourse.GdeNrll1EeSROyIACtiVvg.JmStRXkMEee1jApzGcQi8A

Porter, M. E. (2008). THE FIVE COMPETITIVE FORCES THAT SHAPE STRATEGY. Harvard Business Review, 86(1), 78-93.

Stanford Encyclopedia of Philosophy. (2009). Material Constitution. Retrieved from http://plato.stanford.edu/entries/material-constitution/

Edited December 27, 2017




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