final
answer 3 out of 4 question
from the reading.
one page single space per question.
or 2 pg 2x space.
font 10 or 11
turn in on may 21th. 6pm.

Global economic

STRATEGY & STRUCTURE

Conditions for success
1) Internal consistency: operating on efficiency frontier
2) Strategy + Structure = ex. lolipop
3) 1+2 must match external environment

Functional Form

Pyramid vs Pancake

Argument for Centralization
- High Coordination
- Decision are consistence objective
- Internal org change is easier
- Avoid duplication of activity
- Static model/ bureaucratic structure

Argument for Decentralization
- More mgnt time for primary function
- Increase individual freedom/motivation
- Rapid response to env. change
- adapt model/ organic structure
- Decision made close to front line
- Increase in accountability

ch.14 ENTRY STRATEGY & ALLIANCE

I. Where?
Profit = f(Revenue, Cost, size of market, wealth, growth)

II. Timing of entry
1st mover advantage - Brand Equity, Experience efficient, Creation of switching costs
1st mover disadvantage - Pioneering Cost: Failure, Develop the market, Educate consumer,

III. Scale ($ = Risk)
A. Strategic Commitment
Large scale, long term
Signaling to customers
Signaling to competition
B. Small scale: Test market
get Learning, small money & risk,

Global economic

STRATEGY
Value Creation
(Total Value) = Cost + Profit + C/S
- Value added is all value above cost
- Profit = TR - TC
- C/S = all value in excess of price

============
Consumer surplus | <-- Consumer is willing to pay
============ <-- Price (retail)
Profit
============
Cost
============

Strategies (Porter)
1) Low cost (brutal)
2) Differentiation strategy (sweet spot)


Efficiency frontier

Core competency- something u'r good at, other have difficulty & copy, customer value it.


Lowering Cost
===========
Experience curve:
Learning effect:
Economy scale:
Return to Specialization


4 Strategic choices

1. International Strategy
-Centralized product development (at home)
-Mfg+mkt in host country (control at home)
-Export core competency
-High Mfg cost due to duplication

2. Localization Strategy
-Maximum local responsiveness
-Customized product + marketing (each reason)
-Production + R&D at each major market
-Poor core competency leverage
-Very high cost structure
-Decentralize autonomous units
3. Global model
-Low cost strategy
-Utilize location economies and curve effect
-Very little or none customization
-Standardization
-Very low Pricing
4. Transnational model
-Must exploit economies of scale (were big)
-Must exploit location economies (low cost)
-Must transfer core competency
-Responsive to local market

Supply Chain Management

Rate Fences
-Physical rate fences
-type of inventory
-view or location
-Amenities
-Non-Physical rate fences
-Controlled availability (coupon, geographic)
-Sort on buyer characteristic (age)
-sort on transation chracteristics (time of purchase)
-Restrictions (no cancellation)


Rate Fence: Time of Purchase
-In fashion, some customer are very fashion conscious
-Eager to buy at the start of the selling season

SUMMARY

- Smart Pricing/Revenue Management Strategies
-WHy differentiate between different customers and offer different prices?
-result in higher revenue
-Integrate pricing and inventory strategies to influence

Global economic

CHAPTER 11
CAPITAL MARKETS
Investor + Buyers = Market

Investor-
1) non-bank - Financial Instuitions, Pension funds, Insurance co.
2) Corporation w/ cash
3) Individuals

Buyers-
1) Individuals
2) Companies
3) Goverments


Market maker tied Buyers and Investor together
- Comercial Bank - IR spread X + I
- Investment Banks - Bring parties together gone, examples bear stearn, leaman brothers

Debt is not bad, its a way of growing a business.
Liquidity = measure of how much cash flowing around?


Loans to corporations in 2 Primary forms
1) Equity: STOCKS ex. owed bank 800,000, the house worth 1mil, 200k is the equity
- dividends (voluntary)
2) Debt: note or bonds, corporate debts. Corporates bonds = Junk bonds (high risk, high yield)
- service


money is elastic goods.
Greater supply of liquidity, give us a lower cost of capital
more liquidity, there's more growth and capital.


Portfolio: --> Portfolio Risk = (Firm) Stock Specific Risk + Systematic(macroeconomic risk)

Portfolio: A+B
A: more diff stock = less risk (portfolio diversification)
at 30 stock we diversify all of the 75% of the risk.
the 25% is systematic risk

Can we diversify Macroeconomic risk?
Yes, by buying portfolio of foreign country
we can reducing risk by buying diff stock @ diff portfolio of foreign country, 90%

the more Integration of our global economy the more risk were vulnerable of one down being effects others.

GROWTH OF CAPITAL MARKET (good thing) "Fear & Greed drives all this."
cost less for capital in the future
are there more demand of capital currency when there are more capital?

Growth gives High liquidity, Low Cost of Capital, Greater acceleration of economic & GDP
Contagent & being able to contain contagent- Speculation (greed) lead alot of problems to this process and system (bubbles) -> Economic risk

"Hot Money" flow to where most profiting country, from develop to developing country. Money chasing highest return, the problem is when exist and left behind a country.

chasing 1 bubble to the next, 2000 market boom, taking all money out, put in housing, then oil.
next bubbles = stocks. The decision of the boom are controlled by the fews

Money leak out of system: Euro currency (nothing to do with europe)
ex. Bill gate build a bank in Macao and gov cant do anything about it.
Lower interest rate: Reserve Requirement: Bank must always have X amount requirement reserve in vault. to prevent bank run on.

100 deposit in fed system, 100 -10 = 90
10% of 90 = 9%

Euro System
100 - 0
9% = 9$

Data Mining

Test question #1 Calculate the Misclassification Rate
Split on A & B

Test question #2
Numeric Variable to split on.
out of all the split which is best to split?
class Smallest to biggest

split on all the places in between
then calculate Misclassification Rate

Test question #3
Predicting by reading the Tree output

age= middle
number = 5
start = 10
class = ?

look at level 1 @ number 2 or 3 follow down the tree then classify it.
whatever the word is, is the majority

test Question #4
ROC curve

Model M2
sort largest to smallest

True Possitive Rate =TP/(TP+FN)
(TP+FN) = same as # of actual positive

False Positive Rate = FP/(FP+TN)
(FP+TN) = same as # of actual negative

P Class TPR FPR
.68 - 0/5
.61 +
.45 +
.38 -
.31 -
.09 +
.05 -
.04 -
.03 +
.01 +


question #8
a) boosting
b) correct, bagging use repeated samples
c) boosting also

#9

Quality Mgt

6 sigma
1. Id core process & key customer
2. define customer req
3. measure current performance
4.prioritize, analyze and implement improvement system
5. expand and integrate the six sigma system


1. a) what are core process?
-central to the mission of the organization
-may be multi-functional and/or multi-organizational
-where the value added?
b) define your desire customer base
-who are you trying to serve or sell?

2. Define customer requirement
a) Customers are the reason for our existence
b) Capture the voice of the customer (what customer want? feeling? desire)
c) Customer always define their own desired experience

3. Measure current performance
a. Asses each core process against customer requirements
b. Action
- Establish a measurement infrastructure system
- Set priorities for resources (use Pareto Principle)
- Evaluate and chose improvement principle
- design and execute within capability

4. Prioritize, Analyze, and Implement Improvements
a. Identify improvement activities with greatest opportunity for return
b. Address root causes
c. Replace or improve process

5. Expand and Integrate the Six Sigma System
a. change your way of doing businesss
b. no quick fixes, short term solutions, etc.
c. monitor critical processes (SPC)
d. establish process ownership and management
e. Develop response plan and mechanisms
f. involve the entire company
g. continue to listen to the customer


--------------------------------------------------

not all companies are candidates for six sigma (and may never be)!
ex. family owned business, strong cultures and tides

Looking into the future
1. do we have a clear developed and staed strategy for the future
2. outlook for financial strength and growth of the organization
3. is the organization agile and able to adapt to change?

answer "no" to all 3 Question, not good for six sigma
Yes to all 3 is good foundation for six sigma
mixed answer, may need focus on some area

Looking at the Present Questions

1. What are our current performance levels?
-profit, return, growth, yield, k-sigma level, dpmo, PU, etc
2. how well do we meet customer requirement?
- sastisfaction index
3. what our current efficiency level?


Possitive answer, may mean six sigma is not urgen
mix need work


Looking at fitness for change questions
1. what are the state of our system for managing change?
- performance measures, integration, etc.
2. How well do we manage cross-functional proccesses?
- Multi-functional teams, cooperation, barriers
3. What else is going on that might conflict?
- Acquisitions, NPI, new systems, economic factors

Looking at fitness for change - Assessing the answers
1. if system are not in place this maybe a good place to start
2. if cross functional cooperation and integration are absent - watch out!
3. if other major activities are going on put six sigma on the back burner

* Six Sigma is not for everybody!
* Reason why you might decline or hold off
- You are already doing very well (better than 95% of what can be achieved in quality)
- You have too much on your plate already; put six sigma in your long term plan
- you recognize....

------------------------------------

Six Sigma cos/benefits

Benefit--
-probably need to estimate
-Use average, sample, expert opinion
-Find any concrete benefits you can
-recognize and communicate the uncertainty of the benefits data

The Time Element

-Results do not happen overnight
-Expect at least six to nine months before you can see result.

COST--
-Labor (payroll)
- full time six sigma team (black belt)
Management, support staff, part time team member
-Training and consulting
-Improvement implementation
-equipment, major process change, system

Is a cost/Benefit Ratio Right?
-Probably not!!
Exception: specific, small project, cost are much much more than benefits
-Other factors are more important
- survival, competitiveness, customer satisfaction, long term saving
-May require "leap of faith"

------------
Objective -- 3 Possible Levels
1. Business Transformation
- Major change in the business such as greater flexibility
2. Strategic Improvement
- High-level strategic

Scope - Org Factors
- available resources
- other concurrent activities
- how well are we to accept change

TimeFrame
-Break down effort with time estimate
-Find a meaningful and visible intended result
-Look for a reasonable "quick win"

Entries to the Roadmap
-Based on Objecctive Level
-Biz transformation -> id core process & key customer
- strategic improve - define customer

Pilots
-always start with pilot to test out
-reduce risk
-more easily manage
-easier to measure & adjust

Data Mining

K-mean clustering, (popular method of clustering)
each cluster get a center, we assign K amount of cluster
Find the cluster with the mimimizing the sum of squared distance from the center point.
repeat till center settle down.

1. Select K points as the initial centroids
2. repeat
3. form K cluster by assigning all points closest to centroid
4. compute the centroid of each cluster
5. untill the centroid dont change.

ex. 49
fit<-kmean (x,2) //take the data and put in 2 cluster
fit
clustering mean = 2 points
calculating the distances.

knnnfit<-knn(fit$centers,x,as.factor(c(-1,1))) */ basically gettin 2 diff color.

ex.50
just like last example. but using sonar data

ex.51 asking 2 diff thing metal and wood object, does the cluster we drew corresponding with the objects? now color them what the actuals points are. on 61th column
if we based on clustering, it have not much to do with the type of object that they are.
need to pick better attributes.

ex.52
use the cluster to classify the data, how accuracy would that be?
1-sum(knnfit==y)/lenghth(y) */ ==y means compare with the actual data|| 1-sum = Misclas er

ex.53
repeat with all 60 columns.
u can draw a cluster, it make no contribute to classify what type of materials it is.

ex.54
x<-c(1,2,3,5,6,7,8)

assign center, then assign closet points to center,
center 1 & 2

Iteration Centers
0 1&2
1 1&5*1/6
2 2&6.5
3 same, stop on repeat, make sure it the same.

ex.55
write Kmean algorithm in R

Marketing Notes ch.9

Product life cycle
Introductory stage - first time buyer, neg profit,
growth stage - ppl know about the product, benefits, result promo more relate with sales & coupon
maturity stage-
Decline Stage-
after decline, usually no1 left producing the product, there may still ppl who wants it, there's opportunity to monopolist

market label brand-rolex example, diff between 2 models pricing.
Toyota-Private label brand, allow to sell diff brand at diff outlets. Lexus
Brand Extension- if u got good name, Porshe goes into SUV arena
sometime its good to have completely seperate brand labels. benefits if in high risk industry

Data Mining

Boosting
fit the model, weight the one heavily wrong, test the model again then repeat.

AdaBoost - a version of the AdaBoost algorithm
g is our "weak learner"
classes -1 & 1

correct prediction gives 1
incorrect prediction gives -1

Clustering-divide data into group
descriptive statistic
Goal- object within cluster is similar with each other, being closed together

-Clustering for understanding
-Clustering for Ultility
-Summaeriziing: different algorithms can run faster on a data set summarized by clustering
-Compression: big set of data, break into cluster, what are the key in each cluster
-Finding nearest neighbors

K-mean = number of cluster we make
each cluster associate with the center, often the mean
each point assign to cluster with the closest centroid
the number of cluster, K, must be specified ahead of time.

Quality Mgt

Process Improvement Methodology
-Management responsibility
-dev process improvement plan
-determine process or area to examine
-Form and train Process/Quality Improvement team (need representation)
Team: use coarse tool
-Process flowchart (2 version, as it, & should be)
-check sheets and histogram
-Pareto analysis <-- (iterative)
-Fishbone chart --> steps)
Team: use fine tools
- Process control charts
- Run diagram
- scatter diagram
- failsafing
Team
-Determine process change
- Implement pilot process improvement
- Measure and evaluate results
-Repeat if result unsastisfactory; deploy full implementation if result satisfactory

PDCA or (PDSA) cycle
*also known as the Deming wheel, or deming/shewhart cycle or wheel
-4parts to the cycle
-Plan: document and analyze
-Do: implement "improvement"
-Check (or study): compare desire state
-Act: correct or standardized

Six Sigma

Started as a simple metric by Bill Smith working at Motorolla
Migrated to Allied signal (Honeywell)
Picked up by General Elecric
-Commitment by CEO Jack Welch in 1995

move from 3sigma to 6 sigma
1a = 32%
2a = 4.5%
3a = 0.3%
6a = 0.00034%

Defect- any mistake or error passed on to the customer
- general view any variation from specification
DPU (defect per unit)
- number of defect per unit of work
- ex: 3 lost bag/8000 customer = 0.000375

Statistics - Off-centering
Represents a shift in the process mean
Impossible to always keep the process mean the same time (this Would be perfection)
Does Not represent a change in specification
Control of shift within +-1.5 sigma of the targetr to keeps defect to a maximum of 3.4 per mil

Global economic

Circular reference study guide
Y=C+I+G+NX aggregate demand function
Biggest explanatory is C = consumption.
C=70% of y in USA
Balance of Payments
-Current account deficits in (U.S)
-lead to lower values
-rapid devaluation cause Capital Flight
-Increase Interest rate due to dumping US bonds
High budget deficits caused both above
- Downward spiral $ cause current account to goes back to balance & stabilize
- Fisher effect i = r_bar + I
i=nominal interest rate, r_bar = real interest rate, I = inflation
- PPP- purchasing power parity, d/$
- Federal Reserve, 2 scenario for U.S. Economy
Life is good scenario 1, A) Fed policy? raise real interest, reduce money supply, lower inflation & strenghten currency. Reduce M1, M2.
Life is bad scenario 2, B) Fed policy? raise Consumption back to 70% from 63%

Marketing ch.12

IMC- Integrated Marketing Communication
Product Price Distribution Position Promotion, put all together create a meaningful benefits about the product

about targeting msg to specific market segment
For example: If u wanna reek hispanic segment, a) ads on spanish medium, b) promote in neighborhood w/ high spanish %. Targeting.

Global economic

PPP = Purchasing Power Parity
price of a basket of goods should be roughly same in all country

P= Price
B= Basket of goods
$= dollar
d= duby

P_B_$/P_B_d = $/d

Change in its price will change the currency rate
Inflation = weaken $ values
Inflation is the primary driver for currency rate
Inflation has a monetary policy, relate with M1 & M2

1. change of money rate > change of GDP = Inflation
2. Low Fed Interest Rates

Fisher Effect:
i = r + I

i = Nominal interest rate
r= Real rate
I= Expected inflation

fed raise real estate significant high to attract investor it can strenghtening currency value while inflation

equity= earning interest on something u aren't pay for. ex. buy house as the value of it raise.

Ch.10

International monetary system
Y=C+I+G+NX
"Follow the money"

usa will not manipulate their currency, they let the market decide the price point.
however other country China manipulate their currency to lower its values so that their products are cheaper to have an trade export advantage.

ex. Sony, the cost of 1 yen strenght it cost 300mil dollar to them.

arguement against manipulate currency: Foreign Reserve account "keep pile of gold, yen, currencies" use reserve to defend their currency

Usa defense against japan by weaken its own dollar, and the price of japan import become more expensive, making its less attractive. End of currency manipulation.

Competive evaluation.

Global economic

Ch 9 Foreign Exchange Market
determine the relative rate of currency depend on supply & demand of that currency.

->Exchange Rate
convert currency from one to another
$=medium of exchange
store of value
US dollar is world based currency for trading

Currency Speculation

1) Spot exchange rate "right now deal"
2) Forward exchange "exchange currency for specified rate sometime in future"

PRICE THEORY
"The law of one price"
*assumption
-1 Competitive Markets
-2 No transaction cost
-3 No Barrier to trade

The Identical product sold in diff country must sell for the same price

PPP = Purchasing Power Parity
The price of the basket of goods should be roughly equivalence of each country
P = Price
B = Basket of goods
$ = dollar
d = duby

P_B$/P_Bd = $/d

Data Mining ch.5

Missclassification: Techniques

M.R
Class1: Cancer
Class2: No Cancer

Two way to error:
1. False Possitive, find something not there.
2. False Neg, Not find something there.

Test 1 for cancer
-Test on 1000 ppl

Classify
Cancer No cancer
Actual Cancer 10 40**
No Cancer 5* 945

* type 1
** type 2
Misclassification rate: 0.045

Test 2 for cancer
-Test on 1000 ppl

Classify
Cancer No cancer
Actual Cancer 48 2**
No Cancer 50* 900

Misclassification rate: 0.052




RECALL & PRECISION

Predicted Class
Class=Yes Class=No
Actual Class=Yes a (TP) b (FN)
Class=No c (FP) d (TN)

Recall = a/(a+b) = TP / (TP+FN) - tell us how we do on the ppl that are actual Possitive
Precision = a/(a+c) = TP / (TP+FP) - tell us how we do on the ppl that are predict Possitive
Before we just used accuracy = a+d /(a+b+c+d) = TP+TN / (TP+TN+FP+FN)

THE F MEASURE
F combines recall and precision into one number
F= 2rp/(r+p) = 2TP / (2TP+FP+FN)
its equals the harmonic mean of recall and precision
Book calls it F_1 measure because its weight both recall and precision equally

The ROC curve
ROC stands for Receiver Operating Characteristic
Since we can "turn up" or "turn down" the number of observations being classified as the possitive class, we can have many different values of true possitive rate (TPR) and false positive rate (FPR) for the same classifier.
TPR = TP / (TP+FN) a/(a+b)
FPR= FP / (FP+TN) c/(c+d)

The ROC curve plots TPR on the y-axis and FPR on the x-axis

Quality Mgt

Benefits of Teams
-broad range of skills
-Workload sharing
-Increase flexibility
-Synergy
-Increased organizational learning
-Balanced decision making

Five Motivators

1. Mutuality
2. Recognition for personal achievement
3. Belonging
4. Bounded power
5. Creative autonomy

Employee Empowerment and Involvement

Greater control over your work
No penalty for making decisions that don't pan out
Management is changing and becoming more contemporary
Management is committed to quality improvement over the long haul

Enablement = tools, training, communication
Empowerment = authority, control

Management will concede more control over company system to you
Mnagement values your ideas
Mnagement trusts you and is worthy of trust in return
You will be rewarded for making decisions that benefits the company
Labor is capable of making decisions

Things that are neccessary for empowerment
-Clear authority and accountability
-Participation in planning at all levels
-Adequate communications and information for decision making
-Responsibility with authority
-Flattening Hierachies for improved effectiveness
-Team leader roles and responsibilities
-Team rules

Teams of Quality Improvement Teams
-Process improvement teams
-Cross-functional teams - bring in various dept
-Tiger teams - job done in short time
-Natural work groups - natural protenity within work place
-Self-Directed work teams - minimum amount of mgnt
-Technology teams -
-Virtual teams

IMPLEMENT TEAMS

Facilitation- Helping or aiding teams by maintaining a process orientation
Team Building- Follows a process that identifies rules for team members and helps them become competent

Example of Teams
-Navy Seals
-Massaschusetts General Hospital Room

Global economic

wait till price crash then buy bonds.

Benefits of FDI for the host


{Home} {Host}
MNE
multi national enterprise
Cost of FDI for the host (to home)
1. Adverse affect on competition - MNE has for economic power, (radical view) Wipe existing co. out. End up with Monopoly power.
-Bring Brand Equity
-Funding
-Distribution Channel
-More experienced
Infant Industry argument
2. Adverse effects on B of P
Balance of payment effects on the host- Outflow of earning of MNE (Minus) Its in
-(Current account) merchandise trade
+ (Export account)
3. National S--- Loss of economic independence

Benefits of FDI to Home
1. Balance of Payment effects: + Investment Income + Merch Trade
Employment: Building sub comp
Learning economies: better and better at it.
Costs: Balance of Payments
-Negative employment effects

CH8 ECONOMIC INTEGRATION

Forms of:
Free trade area: All barrier to trade removed
Customs Union: Same as above, but w, a common external trade policy. (a little harder to do)
Common Market: same as above, plus factor of production move freely among member nation
Economic Union: All of the above, plus: common tax rate, currency, monetary policy, Fiscal policy (EU)
Political Union: U.S.