Tag: business

  • Business Risk: Meaning, Types, Nature & Causes

    Business Risk: Meaning, Types, Nature & Causes

    In this article, you’ll learn about Business Risk: Meaning, Types, Nature & Causes and more.

    What is Business Risk?

    Business risk refers to any potential threat or uncertainty that can negatively impact a company’s ability to achieve its financial and operational goals. These risks can arise from various internal and external factors, potentially leading to financial losses, damage to reputation, or even business failure.

    Types of Risk

    Business risks can be broadly categorized into several types:

    • Strategic Risk: These risks arise from poor decision-making regarding market entry, product development, competitive strategies, and overall business direction.
    • Operational Risk: These risks are associated with day-to-day business operations, such as production inefficiencies, supply chain disruptions, human error, and technological failures.
    • Financial Risk: These risks stem from financial uncertainties, including credit risk (the risk of customers defaulting on payments), market risk (fluctuations in interest rates and exchange rates), liquidity risk (insufficient cash flow to meet short-term obligations), and operational risk (risks associated with financial operations).
    • Reputational Risk: This risk arises from negative public perception, such as scandals, ethical breaches, or negative publicity, which can damage a company’s image and customer trust.
    • Legal and Regulatory Risk: These risks stem from non-compliance with laws, regulations, and industry standards, leading to fines, penalties, and legal disputes.
    • Technological Risk: These risks are associated with rapid technological advancements, such as cyberattacks, data breaches, obsolescence of technology, and the inability to adapt to new technologies.

    Nature of Business Risk

    • Dynamic: Business risks are constantly evolving. New threats emerge, while existing ones change in nature and severity.
    • Interconnected: Different types of risks are often interconnected. For example, a supply chain disruption (operational risk) can lead to financial losses (financial risk) and damage to customer relationships (reputational risk).
    • Uncertain: The exact timing, magnitude, and impact of many business risks are difficult to predict with certainty.

    Causes of Business Risks

    • Competition: Intense competition can erode market share, reduce profit margins, and force companies to invest heavily in research and development to stay ahead.
    • Economic Conditions: Economic downturns, inflation, and changes in consumer spending patterns can significantly impact a company’s revenue and profitability.
    • Technological Advancements: Rapid technological advancements can quickly render existing products and services obsolete, requiring companies to constantly innovate and adapt.
    • Political and Regulatory Changes: Changes in government policies, regulations, and trade agreements can create uncertainty and increase operating costs for businesses.
    • Natural Disasters: Natural disasters such as earthquakes, floods, and hurricanes can disrupt operations, damage assets, and disrupt supply chains.
    • Human Error: Mistakes made by employees, such as data entry errors, fraud, and negligence, can have significant consequences for a business.

    How to Deal with Risks?

    • Risk Identification: The first step in managing risk is to identify and assess potential threats. This can be done through various methods, such as SWOT analysis, risk registers, and scenario planning.
    • Risk Assessment: Once identified, risks should be evaluated based on their likelihood and potential impact. This helps prioritize which risks require immediate attention.
    • Risk Mitigation: Develop and implement strategies to reduce the likelihood or impact of identified risks. This may involve:
      • Risk Avoidance: Avoiding activities or decisions that expose the company to significant risk.
      • Risk Reduction: Implementing controls and safeguards to minimize the likelihood or impact of potential risks.
      • Risk Transfer: Transferring the risk to a third party, such as through insurance or outsourcing.
      • Risk Acceptance: Accepting the risk and its potential consequences, often for low-probability or low-impact risks.
    • Risk Monitoring and Control: Continuously monitor the risk environment and the effectiveness of risk mitigation strategies. Regularly review and update risk assessments and implement necessary adjustments.
  • Liberty Shoes: A Journey from Sole to Success

    Liberty Shoes: A Journey from Sole to Success

    Liberty Shoes, that spells quality and comfort for Indian feet today, started off on a very modest note way back in 1954 as a shoe manufacturing unit at Karnal in Haryana. The brainchild of Dharam Pal Gupta, Purshotam Das Gupta, and Rajkumar Bansal, this unit began its humble production with just four pairs a day, turning out their shoes with the help of skilled cobblers.

    A Decade of Growth: 1954-1964

    The initial years were slow but steady growth. Liberty Shoes was determined to lay a strong foundation, bring about constant improvements in the manufacturing process, and try to understand the changing needs of the Indian consumer. Gradually, production capacity was increased, and a wider range of footwear started coming out of the factory to cater to varied segments of the market.

    Expanding Horizons: 1965-1975

    The Indian economy expanded in the 1960s, and so did Liberty Shoes. New market territories were conquered as its distribution network spread to almost every nook and corner of the country. Technology and infrastructure saw major investments during this decade as production efficiency and product quality were enhanced manifold.

    Building a Brand 1976-1985

    By the late 1970s, Liberty Shoes was already a known name in the Indian footwear industry. The stage now saw new designs and styles coming in to capture the psyche of the young, fashion-conscious mind. The emphasis now shifted to creating a strong brand that stood for comfort, durability, and value for money.

    Retail Revolution (1986-1995)

    The 1980s emerged as the defining decade for Liberty Shoes. Enter the retail sector, open the first exclusive showroom in Kurukshetra, and there it goes, closer to consumers to develop a more direct relationship. During this decade, many new product lines were introduced, basically in view of different segments of consumer preference.

    Global Expansion, 1996-2005

    By this time, Liberty Shoes was already very well entrenched in the domestic market. It looked for international expansion and entered new markets, setting up units in a number of countries. This was basically a period of intense marketing and strategic tieups to make the brand name very visible.

    Digital Dominance, 2006-2015

    The digital revolution influenced the footwear industry in a big way, and Liberty Shoes had to quickly respond to it. The company thus launched its online store whereby products could reach a greater number of people. Utilize social media platforms for engaging with customers and building an effective online community.

    Innovation and Sustainability 2016-present

    The last two years have seen Liberty Shoes determinedly moving towards the twin objectives of innovation and sustainability. It is introducing eco-friendly materials and processes in its products for addressing the new demand of ethical fashion in consumers. Besides, heavy focus is being laid on research and development to introduce the most innovative designs in footwear.

    A Year-on-Year Success Story

    Basically, Liberty Shoes has shown a clean record in terms of financial performance over the years. The revenue has been trending upwards in view of enhanced sales, diversified products, and geographical presence. The company has very ably managed to hold its market leadership in the shoe industry, which is otherwise gloomy.

    Key Milestones

    • 1954: Foundation of Liberty Shoes
    • 1983: First exclusive showroom
    • 1986: Incorporation as a public limited company
    • 1991: Joint venture in Russia
    • 2001: Adesh Gupta becomes CEO
    • 2004: Launch of company-owned stores
    • Present: Strong focus on innovation, sustainability, and digital presence
  • 20 Ways to start conversation with strangers

    20 Ways to start conversation with strangers

    Feeling a little shy around new people? Starting a conversation with a stranger can be daunting, but it doesn’t have to be. Here are 20 simple and effective conversation starters to help you break the ice.

    Observation-Based Openers

    • Compliment their style: “I love your [item]. Where did you get it?”
    • Express interest in their belongings: “That’s a cool [book/shirt/etc.]. What’s it about/where’d you get it?”
    • Ask about their surroundings: “Have you tried the [food/drink] here? What do you think?”

    General Questions

    • Be direct and friendly: “Hi, do you mind if I join you?”
    • Show interest in their day: “How’s your day going?”
    • Seek recommendations: “Do you know any good places to eat around here?”
    • Ask for directions or information: “Excuse me, do you know where [place] is?”
    • Share your newness: “Hi, I’m new around here. Do you have any tips?”
    • Ask for opinions: “Excuse me, can I ask your opinion on something?”

    Shared Interests

    • Find common ground: “Hey, do you like [hobby/interest]? I’m really into it.”
    • Discuss current events: “Have you seen the latest [movie/show/etc.]? What did you think?”
    • Engage in light-hearted banter: “What’s your favorite thing about this place?”

    Direct and Simple

    • Classic icebreaker: “Hey, do you come here often?”
    • Show curiosity: “What brings you here today?”
    • Be polite and respectful: “Excuse me, do you have the time?”
    • Seek advice: “Can I get your advice on something?”
    • Find a hangout spot: “Do you have a favorite spot to hang out around here?”

    Remember, the key to a successful conversation is genuine interest and active listening. Don’t be afraid to follow up on their responses and keep the conversation flowing naturally. With a little practice, you’ll be a conversation pro in no time!

  • Sundar Pichai: A Biography of Success and Inspiration

    Sundar Pichai: A Biography of Success and Inspiration

    From a modest upbringing in India to leading one of the world’s most influential technology companies, Sundar Pichai’s journey is a testament to his intelligence, hard work, and unwavering determination. His rise from a metallurgical engineer to the CEO of Alphabet Inc., the parent company of Google, is a story of innovation, leadership, and the pursuit of excellence.

    NameSundar Pichai
    BornJune 10, 1972 – Madurai, Tamil Nadu
    Age49
    CitizenshipThe United States of America
    EducationIndian Institute of Technology, Kharagpur (B.Tech.), Stanford University (MS), University of Pennsylvania (MBA)
    TitleCEO of Alphabet and Google
    Board member ofAlphabet Inc., Magic Leap
    Net worth$1.31 Billion(as of 2022)
    Monthly Income$18 Million(as of Jan 2022)
    WifeAnjali Pichai

    Early Life and Education

    Sundar Pichai, born Sundar Pichai Sundararajan on June 10, 1972 in Madurai, Tamil Nadu, India, is known through his work in technology and great leadership. He was an ordinary child in a modest family in India but could become the CEO of Alphabet Inc., which was before known as Google. This itself shows his smartness along with hard work and stronger will.

    The childhood of Pichai has been anchored in the true value of education.

    Sundar Pichai - Early Life and Education
    Sundar Pichai – Early Life and Education

    His father was an electrical engineer who worked really hard and made Sundar also love learning and solving problems. He did well at school, especially at mathematics and science. Then went to Jawahar Vidyalaya Senior Secondary School, Chennai, before moving over to the famous Indian Institute of Technology (IIT), Kharagpur where he earned a metallurgical engineering degree.

    A Tour to the United States

    After his undergraduate degree, Pichai felt that he needed to learn more. He went to the United States. There, he won a scholarship to study for a master’s degree in materials science and engineering at Stanford University. While at Stanford, he became very interested in technology and software, which later guided his career.

    Sundar Pichai – Journey at Google

    Sundar Pichai embarked on his professional journey as an engineering and product manager at Applied Materials before joining McKinsey & Company as a management consultant. In 2004, he joined Google as a manager and focused on enhancing their client software products, which included Google Chrome and Chrome OS. Additionally, Pichai is recognized as the visionary behind Google Drive.

    In 2009, Pichai presented a demonstration of the Chrome OS, leading to the trial and testing release of Chromebook in 2011. The public release of Chromebook followed in 2012. Furthermore, on March 13, 2013, Pichai expanded his responsibilities to include the oversight of Android, a role previously held by Andy Rubin.

    Although Pichai did not invent the Google Chrome browser, he played a pivotal role in its active development and transformation into the most widely utilized web browser. Consequently, Pichai’s exceptional decision-making abilities and the successful launch of various products under his supervision contributed to his appointment as the CEO of Google on August 10, 2015. Under his leadership, Google witnessed unprecedented growth and diversification, expanding into various domains such as artificial intelligence, cloud computing, and hardware.

    Reach for the Top

    Pichai rose very fast at Google. He really cared how the users feel, and it was very easy for him to lead teams that can create new ideas. Most of the key Google products, like Gmail, Google Maps, and Google Drive, owe a lot of their creation to him as he led in making ideas clear to many of them.

    Pichai became the next CEO of Google in 2015 by taking over Larry Page’s place, who was its founder. This actually proved to be a big moment, making him one among the most powerful people in tech. During his period, Google kept on making new innovations and expanding its wings to find new areas in which to make further growth such as artificial intelligence, machine learning, or self-driving cars.

    CEO of Alphabet Alphabet Inc. was founded in 2019 after Google’s change in the company structure. Sundar Pichai is the CEO of Alphabet and is in control of all of the businesses under the umbrella of Alphabet Inc., including Google, Waymo, Verily, and X.

    A Visionary Leader

    Pichai, the CEO of Alphabet, is leading the future of technology. He has a clear vision for the company and wants to use technology to help with big problems in the world. Under his guidance, Google has made important progress in fields like artificial intelligence, healthcare, and sustainability.

    Sundar Pichai – The Family Man

    Sundar Pichai is married to Anjali Pichai. Anjali was Sundar’s classmate at IIT Kharagpur. They have two kids, a boy named Kiran Pichai and a girl named Kavya Pichai. The couple stays in Los Altos hills.

    Sundar Pichai - The Family Man
    Sundar Pichai – The Family Man

    Sundar and his family are known for maintaining a low profile and rarely discuss their lives on public platforms.

    He is humble, smart, and dedicated to his job. He has also worked towards aiding other fellow humans. The Pichai Family Foundation, backed by him and his wife, is dedicated to the propagation of education and healthcare among needy masses.

    Sundar Pichai – Inspiration and Leadership

    Sundar Pichai’s journey from a small town in India to the pinnacle of the tech industry serves as an inspiration to millions worldwide. His story embodies the power of determination, hard work, and continuous learning. Pichai’s leadership style is characterized by humility, empathy, and a deep understanding of the evolving needs of users and customers. He encourages a culture of innovation and inclusivity within the company, fostering an environment where employees can thrive and push boundaries. Pichai’s commitment to empowering the next generation of technologists and bridging the digital divide has been evident through initiatives like Google’s “Grow with Google” program, which aims to provide digital skills training to individuals across the globe.

  • EBITDA: Definition, Calculation Formulas, and More

    EBITDA: Definition, Calculation Formulas, and More

    EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, is a crucial financial metric used to assess a company’s financial health and operational performance. It was developed in the 1970s by John C. Malone, the former president and CEO of Tele-Communications Inc., and has since become a valuable tool for businesses, investors, and analysts. This article will provide an in-depth understanding of EBITDA, including its definition, importance, calculation, historical context, and criticisms.

    EBITDA
    EBITDA

    Definition and Importance of EBITDA

    EBITDA is a measure of a company’s financial performance that serves as an alternative to other metrics such as revenue, earnings, or net income. It allows businesses to focus on their operational profitability by excluding the impacts of non-operating decisions, such as interest expenses, tax rates, or significant intangible assets. By doing so, EBITDA provides a clearer picture of a company’s core operating performance, making it easier to compare the profitability of different companies within the same industry or across industries.

    One of the key advantages of EBITDA is its ability to reveal a company’s long-term profitability and its capacity to repay future financing. Moreover, EBITDA can be a useful tool for generating comparisons between different companies and industries, making it valuable for investors, analysts, and business owners. For companies looking to sell or attract new investors, EBITDA is often used to assess and communicate the business’s value.

    How is EBITDA Calculated

    It is mostly calculated by subtracting a company’s expenses other than interest, taxes, depreciation, and amortization from its net income. 

    If you are looking for an answer to how to calculate EBITDA, typically, there are two formulas that can be used for the same.

    EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization

    EBITDA = Operating Income + Depreciation + Amortization

    By using this formula, businesses can arrive at a figure that reflects their operational profitability, providing a clearer understanding of their financial performance.

    Companies implement these formulas to find out a specific aspect of their business effectively. Being a non-GAAP computation, one can select which expense they want to add to the net income. 

    For instance, if an investor wants to check how a company’s financial standing can be affected by debt, they can exclude only depreciation and taxes.

    Example of EBITDA Calculation 

    Let an example, A Corporation XYZ Income Statement as on 30th March 2019 can be illustrated as an EBITDA example.

    ParticularsAmount (Rs.)
    Total Revenue25,000,000
    Cost of Revenue12,500,000
    Operating Expense5,000,000
    Selling, General, and Administrative Expenses2,000,000
    Interest Expense300,000
    Income Tax1,500,000
    Income from Operations3,700,000
    Net Income3,200,000
    Depreciation and Amortization1,000,000

    Now, let’s calculate the EBITDA for XYZ Corporation:

    EBITDA=NetIncome+Interest+Taxes+Depreciation+Amortization
    EBITDA=3,200,000+300,000+1,500,000+1,000,000
    EBITDA=6,000,000

    So, in this example, the EBITDA for XYZ Corporation for the given period would be $6,000,000. This represents the earnings of the company before interest, taxes, depreciation, and amortization are taken into account.

    Historical Context

    The history of EBITDA dates back to the 1970s when it was developed by John C. Malone. As the former president and CEO of Tele-Communications Inc., Malone recognized the need for a metric that could accurately measure a company’s financial health and its ability to generate cash flow. Over the years, EBITDA has gained widespread acceptance and has become a standard tool for financial analysis and business valuation.

    EBITDA vs net profit

    AspectEBITDANet Profit
    DefinitionEarnings before interest, taxes, depreciation, and amortization.Total profit of a company after deducting all expenses from total revenue.
    CalculationEBITDA = Net Income + Interest + Taxes + Depreciation + AmortizationNet Profit = Total Revenue – Total Expenses
    PurposeMeasures operating performance and cash flow.Indicates overall profitability after accounting for all expenses.
    UseFocuses on core operating profitability, facilitates comparisons between companies.Provides a comprehensive view of a company’s overall financial health.
    LimitationsDoes not account for all expenses and may overstate cash flow. Not regulated under GAAP.Includes all expenses, can be impacted by one-time events and non-operating costs. Regulated under GAAP.

    Criticisms

    Despite its widespread use, EBITDA has been the subject of criticism, particularly due to its exclusion of certain expenses. Critics argue that by ignoring expenditure, EBITDA can allow companies to mask problem areas in their financial statements, potentially leading to misleading assessments of a company’s financial health. Additionally, EBITDA is not recognized under Generally Accepted Accounting Principles (GAAP), which means companies can interpret the formula and its components in different ways, potentially hiding red flags that could be uncovered during due diligence.

    Conclusion

    In conclusion, EBITDA is a valuable metric that provides insights into a company’s operational profitability and long-term financial prospects. While it has been widely adopted as a measure of business value, it is important to approach its use with a critical eye and an understanding of its limitations. By considering EBITDA in conjunction with other financial measures and working with trusted financial advisors, businesses can leverage this metric effectively to assess their performance, attract investors, and make informed strategic decisions.By understanding the definition, calculation, historical context, and criticisms of EBITDA, businesses and financial professionals can make more informed decisions and gain a deeper understanding of a company’s financial health and operational performance.

  • What is Cross-Selling? Benefits and Why big business use it

    What is Cross-Selling? Benefits and Why big business use it

    Cross-selling is a sales strategy where the seller encourages the customer to spend more by recommending related products that are already being purchased. The idea is that the customer spend more and buy him more things than he thought he would actually do.

    What is Cross Selling?

    Cross-selling is a strategy that capitalizes on the “just in case” mindset of customers. It is an art of enhancing the shopping experience of customers, while focusing on getting the most out of them. Many retailers and ecommerce stores rely heavily on cross selling because Cross-selling is a sales technique used to make the customer spend more to buy a product that is already related to being purchased. It’s easy to confuse cross-selling with upside. Cross-selling involves offering the customer a related product or service, while generally turmoil involves trading up to a better version of what is being purchased.

    Amazon has reportedly credited 35 percent of its sales as making sales through its “customers who bought this product” and the “often purchased together” option on each product page. This approach prompts a retailer to purchase a compatible – or necessary – product.

    Examples of Cross Selling

    Cross-selling involves offering different complementary products to your customers. These are products that optimize or improve the original product by adding new functionality. For example, think of a phone case or the insurance they always try to sell to you when you buy an electronic device.

    But it’s not just about offering everything you can think of. The key to this system is to add value to the user to indicate that you really know what they need, as in any other marketing action, there should be both planning and strategy behind cross-selling.

    Cross-Selling Strategies & Techniques

    Like upselling, cross selling strategies are also used at each stage of the marketing funnel, so the strategies can be divided into three stages

    • Before Sale- Product bundling and product recommendations at customer touch points make them look related to each other. E-commerce websites have recommendations and suggestions to increase the chances of cross-sales as the most popular deal’, ‘best offer’, ‘just for you’ etc.
    • During Sale- Recommendation of salesperson and parasitic offers at the point of sale in retail stores and ecommerce websites.
    • After Sale- Personalized emails, SMS and calls to entice customers to choose a related product.

    Difference between Cross-Selling and Upselling

    They are similar, but not identical, these two concepts are generally mixed. However, it is important to clearly distinguish them. Cross-selling, as we have already seen, encourages customers to buy other related products that complement their purchase.

    However, the upselling tries to get the customer to buy a different, more expensive version of the same product. They have different strategies with the same goal to increase the average checkout price. With cross-selling we get that product by adding other products, while we are fussy, we sell more expensive, and therefore more profitable, products.

    Let’s look at this with an example: When the salesman at a car dealership tries to convince customers to buy a model with more additional features, he is using upselling strategy . If, once the customer has purchased the car, he also provides insurance or a roof rack, which is cross-selling, cross-selling: final product + added product. Upselling high-priced final products, in both cases we increase the average checkout price, but in different ways.

    Benefits of Cross-Selling

    The most obvious advantage of cross-selling is that it increases sales volume, but it’s far from just one, let’s take a look at the rest.

    • More sales – this is one of the main reasons and for this reason you are reading this article. But be careful, it’s not an increase in sales, but rather that each customer buys more products with each order.
    • Optimized costs – Managing just one order with multiple products will always be cheaper than placing separate orders with just one product.
    • Greater client loyalty – Keeping in mind the needs of the user will make him feel more satisfied, because you are adding more value. This will result in greater loyalty to your brand.
    • Selling “unknown” products – This is the right position to show all the products you have, but it may be less popular.