Tag Archives: Business

IS THE CENTRE OF WORLD’S ECONOMY MOVING TO ASIA?

Monday, June 1, 2009 in Washington DC, US Government approves bankruptcy for General Motors Corp. (GM). General Motor is the humbled auto giant that has been part of American life for more than 100 years. Magna International Inc., a company from Germany, has been deal with GM for buying Opel. Germany’s company also dealt to give fund stimulus to Opel.

Before 2008, GM is noted as the first rank global car market shares and Toyota is in the runner up. New phenomenon happens in 2008; GM lost its position as the best global car market shares.  Because of bankruptcy, GM’s market share will be fought over others car manufacturer. In this case, Toyota as the global leader car manufacturer and Ford as the second US car manufacturer have the biggest chance to get it. These data are supported by BBC for 2008 Global Car Sales below.

  • Toyota: 8.97m
  • GM: 8.35m
  • VW: 6.3m
  • Ford: 5.5m
  • Nissan: 3.2m
  • Renault: 2.4m
  • Fiat: 2.15m
  • Chrysler: 1.5m

For illustrated the US market share by Manufacturer, GM is always in the first rank, Toyota in the second rank, and Ford in the third rank. In May 2007 the market share of GM is 23.8%, Toyota with 17.2%, and Ford with 16.5%. But, in May 2008, the market share of GM and Toyota is slightly different. GM’s market share is 19.3%; Toyota with 18.4% keeps away from Ford with 15.4%. In the middle level, Honda can win against Chrysler. If in May 2007 Chrysler with 12.8% is in above Honda with 9.3%, in May 2008 Honda with 12% successes grabbing Chrysler position in the forth rank. More complete, the table is showed below.

U.S. Market Share by Manufacturer

Car Manufacturer

May 2007

May 2008

GM

23.8%

19.3%

Toyota

17.2%

18.4%

Ford

16.5%

15.4%

Chrysler

12.8%

10.7%

Honda

9.3%

12.0%

Nissan

6.0%

7.2%

Hyundai

4.6%

5.6%

BMW (includes Mini)

2.0%

2.3%

Volkswagen (includes Audi)

2.0%

2.2%

Mercedes (includes Smart)

1.4%

1.8%

Source: US News 2008

This phenomenon does not only happen in car market, but also in the world’s economic growth. Data from IMF show that the economic growth of Asia and Africa countries rises significantly from 2007, 2008, and also the projection in 2009 and 2010. Most of Asia and Africa countries’ economic growth is always positive. On the other hand; most of America and European counties are sloping down, even will be projected minus in 2009 and 2010.

IMF PROJECTION

IMF Projection 2009Source: IMF, World Economic Outlook, 2009

Europe became the central power of world’s economy in 18th and 19th century. It is signed with Industrial Revolution in England and some development in Germany and France. In 20th century the central power moves from Europe to America, specially the United States. In 21st century, global economic crisis with the epicentre in the US makes the economics of that country and European country unstable. Moreover, Asia and Africa in the fact are able to exist in global economic crisis. But, Asia has more benefit than Africa because many countries in Asia are developed like Japan, Singapore, and Taiwan. Then, the developing countries in Asia like China, India, Indonesia, and Middle East countries are going to growth. Will the centre of world’s economy moving to Asia?

Advertisements

WORLD NEEDS AUTOMOTIVE RECYCLING COMPANY

For support “World Environment Day June 5, 2009”

Have you imagine that one day in the future, land vehicles could not use on the road? Yes, it is possible and will be happened because all car companies in the world produce a number of cars every day whereas old cars which ages 30 years are still able to operate on the road. This issue will become a problem for government, producer, and also customer in every country in the future. On the other side, it can be a potential opportunity for automotive manufacturing company to invest an automotive recycling factory.

Moreover, end of life vehicles and unused vehicles occupy usually vast expanse of landfill. This condition will happen to degradation of environment because it is inclusive of hazardous waste (dangerous and poisonous). Actually, this waste is a potential energy if it could be reduce, reuse, recycle, and recovery (4R). Currently, 4R are implemented by unauthorized company or individual. But, it cannot 100% part of vehicle can be reduced, reuse, recycled, and recovered.

Investment in this business is not easy to implement because it processes waste that the world concern about. It needs carefully research about the impact of environment and also study of law or regulation. Moreover, it needs big investment but the revenue of this business will be also high. Today, the annual sales of an average ELV dismantler in Shanghai are about $2,784,503 and annual revenue is about $496,368. Assuming that the average level of operation and management of ELV dismantlers nationwide is similar to that of the dismantler in Shanghai, it is estimated that the annual sales of the national ELV dismantling industry are about $850-960 million and annual revenue about $169 million (Chen, 2005).

Where is the best place to build automotive recycling factory?

Huge land countries like China, United States, Canada, and Indonesia are contributed in vehicles consumption. For example, automotive factory in Indonesia could sell cars approximately 600,000 units in 2008. An opportunity to build automotive recycling factory in huge land country is very good. Beside the land is still available, natural resources and human resources are also easier to acquire.

If hand phone and gadget like Nokia can be recycled 100%, how about cars?

Car consists of many parts and materials. The breakdown materials by weight diagram below shows that metal are a dominant material (68% ferrous metal and 8% non-ferrous metal).

Car composition

Source: ACORD, Annual Report, 2001

Metal (76%)

Metal dominates around 76% of a car weight. Currently, 98% of metal in a car are recovered by steel industry and re-smelting plants. One of good news is that automotive manufacturing companies historically redesign car with reducing the weight of metals in a car. This reducing can support eco labelling product and environmental friendly product because it can reduce the total weight of car. Hence, the consumption of fuel is also reduced.

Plastic and Polymers (10%)

Plastic and polymers contribute roughly 10% of a car weight. Car manufactures use plastics increasingly from 1980s until today. In addition, utilizing plastics in a car for changing metal is more environmental friendly. Besides low cost, using plastics can decrease weight that has impact in decreasing the consumption of fuel. Automotive usually use polypropylene (PP), polyethylene (PE), polyurethane (PU) and polyvinylchloride (PVC). PP is common use in bumpers, dashboards, engine component, interior trim moulding, and wheel arch liners. Then, PE and PU are common use in seat foam and seat belt.  The rest of plastics parts are PVC.

PP, PE, and PU categorize plastics which are easily recycled. Plastic waste is chopped into flakes or pellets, and then it becomes the raw material of plastics.  It can be melted into new product of plastics. In contrast, PVC is difficult to recycle. Alternative disposal method of PVC is incineration, but it related with environmental concerns. The emission during incineration is dioxin and phthalate plasticisers which are thought to be disruptions of hormone system. Currently, car manufactures are doing research to change PVC.

Tyre, Rubber, and Carpet (6%)

Tyre, rubber, and carpet obtain approximately 6% of a car weight. Number of options for reuse, recycling, and recovery are following.

  • Scrapped and vulcanized to reuse treys in good condition.

  • Tyre can be shredded and the rubber granulated for use in other products, sports surfaces, paints, flooring, etc.

  • Tyre can be recycled by cryogenic fragmentation. First, tyres are shredded and cooled to below -80°C. Then, The resultant rubber granules can be used for athletics tracks, carpet underlay, playground surfaces and rubberised asphalt for road surfaces.

  • Tyres are broken by microwave prototype into their original component. The steel is recoverable. The carbon and oil also can be reused.

  • Pyrolysis is heating tyres without air; then the gas, oil and carbon can be reprocessed. In big capacity, this process also produces energy that can provide electricity.

  • Tyre are incinerated to extract energy.

  • Tyre can be used as a fuel in the manufacture of cement. 25% of the coal, replaced up from tyre, can be used in cement kilns and reduce nitrogen oxide emission.

Glass (3%)

Glass possesses approximately 3% of vehicles weight. Two types of glass are common use in the automotive industry; toughened glass and laminated glass. Toughened glass is easy to remove from vehicles. Laminated glass need to be removed manually. It is crushed into cullet (small pieces) and melted, then moulded to make new product like bottle and jar. Majority, the most of glass waste are sent to landfill because the value of glass is relatively low to recover. Most of industries are not interesting in glass recycled because it is profitless.

Fluids (2%)

The problem of fluids like engine oil is not only for end of life vehicles but also for vehicles during service or maintenance. Wrong treatment to dispose fluids can pollute clean water. Three options of oil disposal are reuse, recovery, and recycle. First, oil can recover as mucky lubricant for simple use. Second, oil can be used as a fuel burnt in heavy industry and power stations. Third, oil can refine as clean/base lubricant for the raw material of lubricating oil. The first treatment is boiling oil to remove water and remove metal particles.

Battery (1%)

Currently, the recycling rate for car batteries is estimated to exceed 90%. If the electrical component like lead anode and cathode pole and the plastic case do not broken, battery can be used again with refilling acid and distilled water. Battery consists of 4 materials that can be recycled. First, plastic battery cases can be recycled to be raw material. Second, lead cathode and anode can be melted down to be raw material of lead. Third, acid can be treated and neutralized. Forth, distilled water can be purified and used again.

Electrical Parts (1%)

Electrical Parts relatively complicate to be recycled because it contains of many different type of parts. Two options can be chose to recycle electrical parts. First, the electrical component disposal can be sold back to the electrical part supplier to be repaired, reused or recycled. Second, electrical parts actually are assembled from raw material like plastics, metal, glass, rubber, and so on. Hence, it is recycled with breaking down the component and recycles separately based on the material.

Other Components (1%)

A car is supported by approximately 1% additional groups of components. It consists of leather, foam, cloth, and so on. Because of this component in a small portion of car, it can be more profitable if company sells back to the supplier to be reused or recycled.

Conclusion

Theoretically, almost 100% of end of life car can be recycled. Despite of investment to open new plant for vehicle recycle needs a lot of money, it is a potential business. Many benefits will be taken by companies if they invest in this business sector.

  • Opening vehicle recycling company needs many resources. Besides of land, investment, and material; man power resource is also needed. It means opening new vocations and decreasing unemployment.

  • Investing in vehicle recycling company can help environment healthier and supports environmental friendly movement. Opening vehicle recycling company means processing waste into new product or raw material. Hence, it can decrease pollution. If this company is opened by automotive company, it will be additional benefit; because customers will be more trust and loyal.

  • Special for automotive company, this company will give additional profit because it will be a supply cycle. Thus, the supply of raw material will come from both supplier and vehicle recycling company.

Vehicle Production Cycle

On the other hand, this business also has many difficulties. Opening vehicle recycling company is not easy. Many factors should be considered in this project like law and environment (pollution of air, water, and soil). To open this company needs deeply law studies because it related with processing waste. As people know, sometimes waste is very dangerous because it can be polluted environment. Moreover, to open a company needs big investment.

Recycling-Plant

LINEAR PROGRAMMING AND SENSITIVITY ANALYSIS FOR SHOPPING

First Published: Thursday, May 7, 2009

One problem when people usually meet in shopping is what people should buy in “clearance sale” with aim to sale again. Usually people confuse to buy between/among two types of products or more. The objective of this problem usually is maximising profit, but this problem will be more difficult because people should decide among different constraints such as sales demand, budget, and capacity. How do we solve this problem?

Solving of this problem will become simple with Linear Programming (LP). LP is a mathematical technique for optimization of linear objective function. In 1939, Leonid Kantorovich, a Russian mathematician, founds this technique. Then, George B. Datzig, John von Neumann, Leonid Khaciyan, and Narendra Karmarkar develop this technique. Clearance sale shirt and t-shirt example below will show that LP can be used to solve this problem.

For example, a department store opens New Year clearance sale for shirt and t-shirt. One shirt prices $25 and $15 for a t-shirt. A shop looks this opportunity to make a $400. In addition, his inventory only can keep 100 clothes, whereas he has kept 53 shirts and 29 t-shirts. Then, he considers that he can sell shirt at least twice than t-shirt in one week. How much shirt and t-shirt should he buy in this clearance sale?

Consider that X1 is for shirt and X2 is for t-shirt. The objective of this problem is maximising profit from (40-25) X1 + (35-15) X2 = 15 X1 + 20 X2. There are three constraint of this problem. First, sales demand constraint is X1 – 2X2 >= 0. Second, budget constraint is 25X1 +15 X2 <= 400. Third, capacity constraints is X1 + X2 <= (100-53-29) ~ 18. So the mathematical equation is:

Max Profit:         z = 15X1 + 20 X2
Constraint:          X1 – 2X2 >= 0
                                  25X1 +15 X2 <= 400
                                  X1 + X2 <= 18

There are many ways to solve this problem such as LP Graphic and Excel Solver. The graphic and the excel solver output will be showed below.
LP Graph

 

 

 

 

 

 

 

 

 

From graphics, there are three alternatives of optimum solutions. First, in point (18, 0) will make profit $270. Second, in point (13, 5) will make profit $295. Third, in point (12.3, 6.15) will make profit $307.5, but this answer is invisible because shirt and t-shirt cannot be decimal. Hence, the nearest options are (12, 6) with profit $300. Furthermore, He should buy 12 shirts and 6 t-shirts. It is very suitable with the answer from Excel Solver table belSolver Answerow.

The owner of shop also can analyze the changing in the parameters of this LP problem. This analysis is called sensitivity analysis. In this case, Excel Solver is also used to define the sensitivity analysiSensitivity Analysiss.

The table above shows that the final answer will not be change if:

  • The profit of Shirt changes in range from 0 to 20
  • The profit of T-Shirt changes in range from 15 to infinity
  • The constraint of budget change in range from 290 to infinity
  • The constraint of capacity change in range from 0 to 18.461538462
  • The constraint of demand change in range from -36 to 3

Hence, have fun in shopping.

IS VALENTINE’S DAY A BUSINESS STRATEGY?

First Published: Monday, February 16, 2009

Most of people in the world concurrently celebrate Valentine’s Day on February 14th although no one country publishes that in that day is a national holiday. People said that the history of Valentine’s Day is to celebrate St. Valentine’s Day, a martyr from Roman Catholic Church. It is slightly confusing; because based on The Catholic Encyclopaedia (1908), the name of Valentine refers to three names of martyrs or saints. However, people believe that Valentine’s Day is come from the name of St. Valentine of Rome, a priest, a candidate of bishop in 143.

History of Valentine’s Day

Shortly, Valentine is a name of Roman Catholic priest who refused to leave his religion when Roman Emperor Claudius II led. In that era, the Roman Emperor had been ambition to build huge military soldiers, but men did not want to join because they did not want to leave his wife and family. Roman Emperor was so angry and he commanded to forbid marriage in his region. Someday, he gave married blessing to a couple. He was captured and jailed. Then, many people visited him including jail guard’s daughter who can increase his spirit. Before his head cut-off in 14 February 269AD, he was able to write a message to the girl about her care, support and help during in jail. The end of the message, he wrote: “With Love from Your Valentine”.

Over the centuries, February 14th is signed as Valentine’s Day the symbol of Love Day in the world. People send gift-giving and handmade cards every year in that day. Miss Esther Howland note as the first person who send the first valentine’s card in the 1840s. After this day, Valentine’s Day become a great moment and event in the world until today especially adolescents.

Business in Valentine’s Day

After 1840s, Valentine’s Day became popular. Miss Esther Howland was able to start her business of mass-production valentine’s cards. This is a good business strategy that she made. Yearly, this business grows not only valentine’s card, but also chocolate, flower, confectionery, candy, doll, and accessories. Businessman and company use the moment of valentine to sell their product.

Before Valentine’s Day, the types of business like chocolate, flower, confectionery, candy, restaurant, cafe, bar, super mal, post, package, doll, and accessories usually get a higher demand. Businessman and company should well prepare to get high profit during this moment. Good planning and marketing is the key of success in this moment.

The U.S. Greeting Card Association estimates those approximately one billion valentines are sent each year worldwide, making the day the second largest card-sending holiday of the year, behind Christmas. The association estimates that, in the US, men spend money in average twice than women. However, greeting card companies should make another strategy because technology growth fast. People begin change from greeting card by post into electronic card by internet.

The first time, Valentine’s Day was not a business strategy. But businessman and company use the moment of Valentine’s Day to make a business strategy to grow their market and demand.