How should we measure TFP?

Article Abstract:

In the modern age, labor productivity is not the only factor involved in an organization's performance. To better evaluate productivity, total factor productivity (TFP) must be taken into account. To measure TPF, one must look into added value ratios (ADVs). These are illustrated by looking into the automobile industry, specifically General Motors, Volvo, Ford, Volkswagen, and British Leyland, and comparing their performance by using ADVs from published information. Some of the ratios compared are: labor costs to ADV, net assets to labor costs, ADV to net assets, sales to ADV, profit before tax to ADV, and depreciation to ADV. Ford and General Motors could increase their profits by subcontracting some areas of their operation.

Accounting and auditing, Statistics, Automobile industry, Labor economics, Labor productivity, Human capital

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Variations on the fixed costs theme

Article Abstract:

Vertical integration has created giant companies which are acquiring unnecessary financial risk because they are trying to integrate and control every stage of the production process. Companies can greatly reduce their production costs and financial risks by subcontracting high risk intermediary processes to suppliers. Current quality assurance and zero stock policies can maintain by working closely with suppliers to create shared production schedules. Management buyouts allow a company to part with a high risk segment without giving the market share to a direct competitor. Selling stock in a high risk division can transfer the risk to the stock market.

Management, Finance, Risk management, Corporations, Management buyouts, Overhead costs, Corporate finance, Outsourcing

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Dogs and cash cows revisited

Article Abstract:

The Boston Consulting Group's price and experience curve theories (developed in the 1970s) related to product development, business enterprise success and portfolio planning is reviewed and analyzed. The Boston experience curve states that businesses entering a new market (and new business enterprises) have significant business start-up costs because of their relative lack of experience (compared to established market participants) and that, as these business ventures mature, their costs will decrease, allowing them to either improve their profit margins are pass on savings to consumers in the form of reduced product prices.

Management science, Planning, Reports, Investments, Securities, Pricing, Product management, Criticism and interpretation, Boston Consulting Group

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