Changing the Rules With Technology Information

Together with custoomer needs and core competences, information technology completes a trinity of elements leaders can combine to create market opportunities through revitalization. In fact, this element is so powerful that a company’s leadership can change the rules of the game through technology.

Technology is to corporate life what the nervouse system is to human life. It connect the various parts of the body in an integrated network of information sharing and decision making. It “ wires “ together disparate parts of the organization, allowing them to progres together toward a common goal rather than remain hopelessly disjointed. It can improve speed and efficiency, for example, through the automation of slower and error-prone human tasks.

Even more importantly, technology provides the wiring and programing needed to build connectors across corporate boundaries into the live of the other organization, giving birth to new corporate communities. This is why technology belongs to the revitalization section of our transformation framework, even though it can also be use for restructuring. For example, technology allows a company to build direct electronic links between it self, its customer, and its alliance partners, thus providing a conduit to extand the reach of the firm’s core competences.

Following the framework first offered by N. Venkatraman, the technology chromosome has five genes, corresponding to five levels of business operation, in increasing order of ambition and complexity : isolated activities or task, linked or integrated sets of related tasks, business processes, intercompany networks, and the scope of the business as a whole. The CEO has the following five corresponding tasks as genetic architect.

1. Sanctioning technology for localized efficiency improvement. The most apparent and widely applied advantage of technology rests in it ability to automate information-intensive ( and formerly paper-intensive) transaction and services. These are the most traditional applicationts that tend to be locally or functionallybased,. Payroll, other entry,customer support, CAD/CAM, reservation, and JIT inventory system are but a few examples here. Most companies recognizeand use such system, achieving remarkable increases in efficiency comparedto days gone by. Yet most companies are still plagued by unnecessary processes and layers of management that were created  before the era of “bit magic.”

2. inducing technology-based integration of internal business processes.

Common information is the central component of business process integration. Payroll information is affects benefits administration. The information taken in the order- entry process affect, or should affect, marketing, production planning, order fulfillmen, inventory management, accounts receivable, and so forth. Today’s technology makes it possible to build anelectronic “Main Street,” where related business processes are linked though shared information on a common IT platform.this in turn requires  the integration of organizational roles and responsibilitis neededto use that shared information.

3. Promoting technology-enabled reengineering. Connecting processes by putting them on the same technology platform is a launchpad for exploring brave new worlds of business process redesign, entering the realm of bioreenginering. Rthis is where radical change begins, where the “ought” starts becoming the “is.” It is where old process and organizational lines become very blurry, linked by the order chaos of free flowing information within amn organization. It is how lands’End takes your clothing order by phone in less than a minuts, and has it sitting on your doorstep within three days.

4. Leading the development of technology-enhanced bisiness networs. If technology –enabled reenginering lead to brave new worlds of business process redesign, then technology-enhanced business network transport a company into whole new galaxies. Many companies  already are forming more closely knit relationships with there suppliers, distributors, retailers, and customers. And while politicians are talking about building an “information superhighway,” some corporations are constructing their own, opening new strategic frontiers by sharing not just information but what was once considered proprietary knowledge.

5. redifining tyhe scope of the business through technology. As companies advance their business processes and network through technology, the very act of doing so expands or even fundamentally alters the scope of the business.in othher word, “bit magic” does to some corporations what automobiles did to buggy whips, or what  desktops did to mainframes. The preferable course is for a corporation to outomode itself with innovative applications of techology, while leveraging that innovation to redefine its business.

Using technology to expand a business’s scope or redefine it altogether is perhaps the CEO’s greates revitalization challenge. It can feel like being weaned a second time altering or discarding the very source of growth that has nurtured a company for decades. Few leadership teams accept the challenge, fewer still have surmounted it. But like Mount Everest, it is there. Unlike Mount Everest, meeting the challenge is not merely a personal option. Mastering technology has become a requirement of business survival.

      

Net Present Value

In finance, the net present value (NPV) or net present worth (NPW) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the present values (PVs) of the individual cash flows of the same entity. In the case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the purchase price, the NPV is simply the PV of future cash flows minus the purchase price (which is its own PV). NPV is a central tool in discounted cash flow (DCF) analysis, and is a standard method for using the time value of money to appraise long-term projects. Used for capital budgeting, and widely throughout economics, finance, and accounting, it measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.
The NPV of a sequence of cash flows takes as input the cash flows and a discount rate or discount curve and outputs a price; the converse process in DCF analysis - taking a sequence of cash flows and a price as input and inferring as output a discount rate (the discount rate which would yield the given price as NPV) - is called the yield, and is more widely used in bond trading.

Formula

Each cash inflow/outflow is discounted back to its present value (PV). Then they are summed. Therefore NPV is the sum of all terms,

where

t - the time of the cash flow

i - the discount rate (the rate of return that could be earned on an investment in the financial markets with similar risk.); the opportunity cost of capital

R_t - the net cash flow (the amount of cash, inflow minus outflow) at time t. For educational purposes, R₀ is commonly placed to the left of the sum to emphasize its role as (minus) the investment.

The result of this formula if multiplied with the Annual Net cash in-flows and reduced by Initial Cash outlay the present value but in case where the cash flows are not equal in amount then the previous formula will be used to determine the present value of each cash flow separately. Any cash flow within 12 months will not be discounted for NPV purpose.

The discount rate

The rate used to discount future cash flows to the present value is a key variable of this process.
A firm's weighted average cost of capital (after tax) is often used, but many people believe that it is appropriate to use higher discount rates to adjust for risk or other factors. A variable discount rate with higher rates applied to cash flows occurring further along the time span might be used to reflect the yield curve premium for long-term debt.
Another approach to choosing the discount rate factor is to decide the rate which the capital needed for the project could return if invested in an alternative venture. If, for example, the capital required for Project A can earn five percent elsewhere, use this discount rate in the NPV calculation to allow a direct comparison to be made between Project A and the alternative. Related to this concept is to use the firm's Reinvestment Rate. Reinvestment rate can be defined as the rate of return for the firm's investments on average. When analyzing projects in a capital constrained environment, it may be appropriate to use the reinvestment rate rather than the firm's weighted average cost of capital as the discount factor. It reflects opportunity cost of investment, rather than the possibly lower cost of capital.
An NPV calculated using variable discount rates (if they are known for the duration of the investment) better reflects the real situation than one calculated from a constant discount rate for the entire investment duration. Refer to the tutorial article written by Samuel Baker for more detailed relationship between the NPV value and the discount rate.
For some professional investors, their investment funds are committed to target a specified rate of return. In such cases, that rate of return should be selected as the discount rate for the NPV calculation. In this way, a direct comparison can be made between the profitability of the project and the desired rate of return.
To some extent, the selection of the discount rate is dependent on the use to which it will be put. If the intent is simply to determine whether a project will add value to the company, using the firm's weighted average cost of capital may be appropriate. If trying to decide between alternative investments in order to maximize the value of the firm, the corporate reinvestment rate would probably be a better choice.
Using variable rates over time, or discounting "guaranteed" cash flows differently from "at risk" cash flows may be a superior methodology, but is seldom used in practice. Using the discount rate to adjust for risk is often difficult to do in practice (especially internationally), and is difficult to do well. An alternative to using discount factor to adjust for risk is to explicitly correct the cash flows for the risk elements using rNPV or a similar method, then discount at the firm's rate.

NPV in decision making

NPV is an indicator of how much value an investment or project adds to the firm. With a particular project, if R_t is a positive value, the project is in the status of discounted cash inflow in the time of t. If R_t is a negative value, the project is in the status of discounted cash outflow in the time of t. Appropriately risked projects with a positive NPV could be accepted. This does not necessarily mean that they should be undertaken since NPV at the cost of capital may not account for opportunity cost, i.e. comparison with other available investments. In financial theory, if there is a choice between two mutually exclusive alternatives, the one yielding the higher NPV should be selected.

If...	It means...	Then...
NPV > 0	the investment would add value to the firm	the project may be accepted
NPV < 0	the investment would subtract value from the firm	the project should be rejected
NPV = 0	the investment would neither gain nor lose value for the firm	We should be indifferent in the decision whether to accept or reject the project. This project adds no monetary value. Decision should be based on other criteria, e.g. strategic positioning or other factors not explicitly included in the calculation.

Example

A corporation must decide whether to introduce a new product line. The new product will have startup costs, operational costs, and incoming cash flows over six years. This project will have an immediate (t=0) cash outflow of $100,000 (which might include machinery, and employee training costs). Other cash outflows for years 1–6 are expected to be $5,000 per year. Cash inflows are expected to be $30,000 each for years 1–6. All cash flows are after-tax, and there are no cash flows expected after year 6. The required rate of return is 10%. The present value (PV) can be calculated for each year:

Year	Cash flow	Present value
T=0		-$100,000
T=1		$22,727
T=2		$20,661
T=3		$18,783
T=4		$17,075
T=5		$15,523
T=6		$14,112

The sum of all these present values is the net present value, which equals $8,881.52. Since the NPV is greater than zero, it would be better to invest in the project than to do nothing, and the corporation should invest in this project if there is no mutually exclusive alternative with a higher NPV.
The same example in Excel formulae:

• NPV(rate,net_inflow)+initial_investment
• PV(rate,year_number,yearly_net_inflow)

Why Do Stock Prices Fluctuate?

The stock market is essentially a giant auction - only instead of antiques and heirlooms, it's ownership in businesses that's up for grabs. Stocks are traded at places called exchanges. At these exchanges, traders buy and sell shares of companies. Generally, the price of a stock is determined by supply and demand. For example, if there are more people wanting to buy a stock than to sell it, the price will be driven up because those shares are rarer and people will pay a higher price for them. On the other hand, if there are a lot of shares for sale and no one is interested in buying them, the price will quickly fall. Because of this, the market can appear to fluctuate widely. Even if there is nothing wrong with a company, a large shareholder who is trying to sell millions of shares at a time can drive the price of the stock down, simply because there are not enough people interested in buying the stock he is trying to sell. Because there is no real demand for the company he is selling, he is forced to accept a lower price.

Financial Analysis

Financial analysis (also referred to as financial statement analysis or accounting analysis) refers to an assessment of the viability, stability and profitability of a business, sub-business or project.
It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. These reports are usually presented to top management as one of their bases in making business decisions.

• Continue or discontinue its main operation or part of its business;
• Make or purchase certain materials in the manufacture of its product;
• Acquire or rent/lease certain machineries and equipment in the production of its goods;
• Issue stocks or negotiate for a bank loan to increase its working capital;
• Make decisions regarding investing or lending capital;
• Other decisions that allow management to make an informed selection on various alternatives in the conduct of its business.

Goals

Financial analysts often assess the firm's:
1. Profitability -its ability to earn income and sustain growth in both short-term and long-term. A company's degree of profitability is usually based on the income statement, which reports on the company's results of operations;
2. Solvency - its ability to pay its obligation to creditors and other third parties in the long-term;
3. Liquidity - its ability to maintain positive cash flow, while satisfying immediate obligations;
Both 2 and 3 are based on the company's balance sheet, which indicates the financial condition of a business as of a given point in time.
4. Stability- the firm's ability to remain in business in the long run, without having to sustain significant losses in the conduct of its business. Assessing a company's stability requires the use of both the income statement and the balance sheet, as well as other financial and non-financial indicators. etc

Methods

Financial analysts often compare financial ratios (of solvency, profitability, growth, etc.):

• Past Performance - Across historical time periods for the same firm (the last 5 years for example),
• Future Performance - Using historical figures and certain mathematical and statistical techniques, including present and future values, This extrapolation method is the main source of errors in financial analysis as past statistics can be poor predictors of future prospects.
• Comparative Performance - Comparison between similar firms.

These ratios are calculated by dividing a (group of) account balance(s), taken from the balance sheet and / or the income statement, by another, for example :

Net income / equity = return on equity (ROE)

Net income / total assets = return on assets (ROA)

Stock price / earnings per share = P/E ratio

Comparing financial ratios is merely one way of conducting financial analysis. Financial ratios face several theoretical challenges:

• They say little about the firm's prospects in an absolute sense. Their insights about relative performance require a reference point from other time periods or similar firms.
• One ratio holds little meaning. As indicators, ratios can be logically interpreted in at least two ways. One can partially overcome this problem by combining several related ratios to paint a more comprehensive picture of the firm's performance.
• Seasonal factors may prevent year-end values from being representative. A ratio's values may be distorted as account balances change from the beginning to the end of an accounting period. Use average values for such accounts whenever possible.
• Financial ratios are no more objective than the accounting methods employed. Changes in accounting policies or choices can yield drastically different ratio values.
• (fundamental analysis).

Financial analysts can also use percentage analysis which involves reducing a series of figures as a percentage of some base amount. For example, a group of items can be expressed as a percentage of net income. When proportionate changes in the same figure over a given time period expressed as a percentage is known as horizontal analysis. Vertical or common-size analysis, reduces all items on a statement to a “common size” as a percentage of some base value which assists in comparability with other companies of different sizes. As a result, all Income Statement items are divided by Sales, and all Balance Sheet items are divided by Total Assets.
Another method is comparative analysis. This provides a better way to determine trends. Comparative analysis presents the same information for two or more time periods and is presented side-by-side to allow for easy analysis.

E-GOVERNMENT

E-Government (short for electronic government, also known as e-gov, digital government, online government, or connected government) is digital interactions between a government and citizens (G2C), government and businesses/Commerce (G2B), government and employees (G2E), and also between government and governments /agencies (G2G). Essentially, the e-Government delivery models can be briefly summed up as (Jeong, 2007):

• G2C (Government to Citizens)
• G2B (Government to Businesses)
• G2E (Government to Employees)
• G2G (Government to Governments)
• C2G (Citizens to Governments)

This digital interaction consists of governance, information and communication technology (ICT), business process re-engineering (BPR), and e-citizen at all levels of government (city, state/provence, national, and international).

Defining e-Government

‘E-Government' (or Digital Government) is defined as ‘The employment of the Internet and the world-wide-web for delivering government information and services to the citizens.’ (United Nations, 2006; AOEMA, 2005).

'Electronic Government' (or in short 'e-Government') essentially refers to ‘The utilization of IT, ICTs, and other web-based telecommunication technologies to improve and/or enhance on the efficiency and effectiveness of service delivery in the public sector.’ (Jeong, 2007).

E-government describes the use of technologies to facilitate the operation of government and the disbursement of government information and services. E-government, short for electronic government, deals heavily with Internet and non-internet applications to aid in governments. E-government includes the use of electronics in government as large-scale as the use of telephones and fax machines, as well as surveillance systems, tracking systems such as RFID tags, and even the use of television and radios to provide government-related information and services to the citizens.

Examples of e-Government and e-Governance

E-Government should enable anyone visiting city website to communicate and interact with city employees via the Internet with graphical user interfaces (GUI), instant-messaging (IM), audio/video presentations, and in any way more sophisticated than a simple email letter to the address provided at the site” and “the use of technology to enhance the access to and delivery of government services to benefit citizens, business partners and employees”. The focus should be on:

• The use of Information and communication technologies, and particularly the Internet, as a tool to achieve better government.
• The use of information and communication technologies in all facets of the operations of a government organization^.
• The continuous optimization of service delivery, constituency participation and governance by transforming internal and external relationships through technology, the Internet and new media.

Whilst e-Government has traditionally been understood as being centered around the operations of government, e-Governance is understood to extend the scope by including citizen engagement and participation in governance. As such, following in line with the OECD definition of e-Government, e-Governance can be defined as the use of ICTs as a tool to achieve better governance.

UN e-Government Readiness Index

There are several international rankings of e-government maturity. The Eurostat rankings, Economist, Brown University, and the UN e-Government Readiness Index are among the most frequently cited. The United Nations Public Administration Network conducts a bi-annual e-Government survey which includes a section titled e-Government Readiness. It is a comparative ranking of the countries of the world according to two primary indicators: i) the state of e-government readiness; and ii) the extent of e-participation. Constructing a model for the measurement of digitized services, the Survey assesses the 191 member states of the UN according to a quantitative composite index of e-government readiness based on website assessment; telecommunication infrastructure and human resource endowment.

The following is the list of the top 50 countries according to the UN's 2010 e-Government Readiness Index.

Rank	Country	Index
1	South Korea	0.8785
2	United States	0.8510
3	Canada	0.8448
4	United Kingdom	0.8147
5	Netherlands	0.8097
6	Norway	0.8020
7	Denmark	0.7872
8	Australia	0.7863
9	Spain	0.7516
10	France	0.7510
11	Singapore	0.7476
12	Sweden	0.7474
13	Bahrain	0.7363
14	New Zealand	0.7311
15	Germany	0.7309
16	Belgium	0.7225
17	Japan	0.7152
18	Switzerland	0.7136
19	Finland	0.6967
20	Estonia	0.6965
21	Ireland	0.6866
22	Iceland	0.6697
23	Liechtenstein	0.6694
24	Austria	0.6679
25	Luxembourg	0.6672
26	Israel	0.6552
27	Hungary	0.6315
28	Lithuania	0.6295
29	Slovenia	0.6243
30	Malta	0.6129
31	Colombia	0.6125
32	Malaysia	0.6101
33	Czech Republic	0.6060
34	Chile	0.6014
35	Croatia	0.5858
36	Uruguay	0.5842
37	Latvia	0.5826
38	Italy	0.5800
39	Portugal	0.5787
40	Barbados	0.5714
41	Greece	0.5708
42	Cyprus	0.5705
43	Slovakia	0.5639
44	Bulgaria	0.5590
45	Poland	0.5582
46	Kazakhstan	0.5578
47	Romania	0.5479
48	Argentina	0.5467
49	United Arab Emirates	0.5349
50	Kuwait	0.5290