Archive for the ‘ economy ’ Category

Create a successful loan situation

24After the contractors and managers agreed on how they would work together in partnership to complete the job without spoiling the customers’ experience, the managers used the same partnershipbuilding process—the Partnership Continuum—with the store employees. Employees were under particular stress because they were often required to move stock from one side of the store to another and then be able to direct customers to the new location. Since the new location changed almost nightly for more than a month, there was a huge amount of pressure on everyone. Nevertheless, after partnering with the contractors, the store managers were able to transfer the knowledge they learned to the employees. This created a successful situation for everyone: owner, managers, customers, employees, and contractors. The remodeling was successful; customers continued to shop, and the job was completed on time.

Now here’s the trap of mental maps: they often include prejudice or bias about something or someone. In an imperfect society, prejudice is part of our programming. You can probably recall a time when you were misunderstood, discounted, or labeled by someone else who had an inaccurate mental map of you.

How to view the credit risk

139One example from the automotive sector is the large spread differential between Ford and Renault bonds with similar coupon and maturity.

Although the rating agencies assign approximately the same credit risk to both issuers, investors view the risk that is related to owning Ford bonds as significantly higher. It clearly outlines that Ford bonds have been much more volatile than Renault bonds between September 2003 and February 2004. When S&P put Ford on credit watch negative on October 21, 2003, spreads widened massively. Even if only very few investors feared a multiple notch downgrade of Ford from the then BBB rating, a 1 notch downgrade to BBB coupled with a negative outlook would have caused concerns about a later downgrade of Ford into high-yield. There were fears that the high-yield market would not be able to absorb the large volume of outstanding Ford bonds, and from a fundamental perspective that the company’s financing costs would rise, thus limiting the company’s financial flexibility massively. This example highlights that market technicals at least temporarily can be the dominant driver of credit spreads.

Some more key credit questions

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  • Do people in your organisation view sales from the customers’ perspective?
  • How well do people in your organisation know each individual customer? Could more data be gathered and assessed?
  • Do people in your organisation share information and insights about customers?
  • Are product benefits (not simply product features) highlighted?
  • Could you sell more to existing customers?
  • Do people in your organisation act decisively and swiftly to reassure and impress customers?
  • Do you take a co-ordinated approach to selling online?
  • Is buying online an easy and worthwhile experience for the customer? How could it be improved?
  • Is the website attractive, practical and relevant, learning from the lessons of the early years of website design?
  • Are you ready for the changes that may result from greater internet sales?

Riding high: Harley-Davidson’s credit programme

From its beginnings in Milwaukee in 1909, Harley-Davidson has enjoyed a long history as America’s foremost motorbike manufacturer. However, by the early 1980s its reputation and business were in serious trouble following a sustained onslaught from affordable, high-quality Japanese machines produced by companies such as Honda and Kawasaki. Following a management buy-out, Harley-Davidson tackled its product-quality problems using the techniques of W. Edwards Deming (ironically, an American whose quality methods transformed Japanese manufacturing). The next challenge was to win back and maintain market share.

This the company achieved, once again becoming America’s leading motorbike manufacturer, with an amazing 90% of Harley-Davidson customers staying loyal to the company.