Ricardo's Law of Comparative Advantage
Ricardo is perhaps best known for his theory of comparative advantage of nations, which postulated that specialization leads to wealth, and self-sufficiency leads to poverty. Such a proposition was initially regarded as preposterous—and often still is by those who do not truly understand the principle. Through his research, Ricardo demonstrated that trade between two countries can be mutually profitable, even when one country is more productive than the other in every commodity that is being exchanged.
England and Portugal
Ricardo used trade between England and Portugal as a prime example. Portugal could produce both wheat and wine more cheaply than England, giving Portugal an absolute cost advantage in both commodities. Delving deeper into the economics of these two countries, Ricardo found that one unit of wine in England cost the same amount to produce as two units of wheat, while in Portugal, the production cost of one unit of wine was the same as 1.5 units of wheat. Lost OpportunityEven though Portugal could produce wheat more cheaply than England, every unit of wheat it produced cost the country the opportunity to make a higher profit by producing one unit of wine. This is known as a lost opportunity cost. From this perspective, Portugal had a comparative cost advantage in the production of wheat. Ricardo went onto show how both countries could benefit by trading these two products with each other, with Portugal focusing on the production of wine and England focusing on the production of wheat.
Application in Your Life
At the personal level, this is why, in our coaching program we stress the importance of determining your highest-value tasks—the 20 percent of things you do that yield 80 percent of your desired results—and then focusing on these high value tasks while delegating (or even eliminating) the rest. A second lens through which you have learned to view this principle is that of your hourly rate. Anything you do, for which you could not pay someone your desired hourly rate leads to a lost opportunity cost.
Application in Your Business
Ricardo's Law of Comparative Advantage is equally relevant in the management of your business. To the extent that you invest any of your business's resources—the money, time, and energy of your employees, your physical plant and equipment, your intellectual capital and the like—in activities where another company has a comparative advantage, you incur a loss-of-opportunity cost. In some cases, the loss can be significant.
Action Exercise
Which of your products or services represent the highest return on investment of your business's resources? These represent your business's areas of comparative advantage.
If you would like to know more about how what your Comparative Advantage is in your business, please contact one of my business coaches at www.tafastrack.com.au
Thursday, November 12, 2009
Tuesday, October 6, 2009
The Most Important Words for the Workplace
A famous athlete was being inducted to his sports' hall of fame earlier this year and in his remarks, he commented on the need and value for team work. He quoted the often used phrase "there is no I in team" but he added "there is an I in win".
An online search for the author of the following short piece does not bring a definite answer - there are slight variations but the message is fundamentally the same:
- The six most important words:
"I admit I make a mistake"
- The 5 most important words:
"You did a good job"
- The 4 most important words:
"What is your opinion?"
- The 3 most important words:
"If you please"
- The 2 most important words:
"Thank you!"
- The 1 most important word:
"We"
- The least most important word:
"I"
If you need help with getting more from your team, contact me at www.tafastrack.com.au .
Enjoy.............Adrian Caruso
Wednesday, August 5, 2009
Bad cash flow has nothing to do with sales …
Bad cash flow has nothing to do with sales … but everything to do with how you spend your money …
In fact, it’s decisions to lease something and pay over 5 years, or to take on another type of monthly commitment that kill a company more than anything else.
Imagine running your business, bringing in a great deal of money and then finding out that there’s not enough to cover your bills. It literally happens every day, in fact, it would amaze you how often companies go under, right after their highest period in sales.
For just one reason … they have literally no idea how to manage their cashflow …
Easily more than 80% of the business people I meet have no idea about the cash gap, and even less of an idea about how to work a budget and keep to it …
The cash gap is the difference in timing of when you buy something and have to pay for it, it then sits on the shelf, or is a wage for a person at a desk and then it might be 90 days later or longer you sell it, and then 45 days later still you get paid for it. The cash gap here is 90 days shelf/desk time and 45 days until you’re paid … so 135 days or 4 and a half months that you have to fund.
Now imagine you had to fund 135 days in a company that grew at 10% and you had 10% margins, well you would almost never get to do anything but re-invest the profits back into the company, now triple the growth rate to 30% with the same margins, and you will KILL the cashflow unless you can reduce the GAP …
It’s basically where you think you’re making a profit when you’re really not. You see cashflow is about timing, NOT profitability …
This week I had another session with business owners where I get people to run the numbers on their business for and hour or so. We work out your real gross profit, your weekly expenses and the total number of sales you need each day, or week, or even hour to make a profit …
Learn your numbers or have a look at it next time you meet … if you need help contact one of my business coaches at www.tafastrack.com.au
All the Best … Adrian Caruso
In fact, it’s decisions to lease something and pay over 5 years, or to take on another type of monthly commitment that kill a company more than anything else.
Imagine running your business, bringing in a great deal of money and then finding out that there’s not enough to cover your bills. It literally happens every day, in fact, it would amaze you how often companies go under, right after their highest period in sales.
For just one reason … they have literally no idea how to manage their cashflow …
Easily more than 80% of the business people I meet have no idea about the cash gap, and even less of an idea about how to work a budget and keep to it …
The cash gap is the difference in timing of when you buy something and have to pay for it, it then sits on the shelf, or is a wage for a person at a desk and then it might be 90 days later or longer you sell it, and then 45 days later still you get paid for it. The cash gap here is 90 days shelf/desk time and 45 days until you’re paid … so 135 days or 4 and a half months that you have to fund.
Now imagine you had to fund 135 days in a company that grew at 10% and you had 10% margins, well you would almost never get to do anything but re-invest the profits back into the company, now triple the growth rate to 30% with the same margins, and you will KILL the cashflow unless you can reduce the GAP …
It’s basically where you think you’re making a profit when you’re really not. You see cashflow is about timing, NOT profitability …
This week I had another session with business owners where I get people to run the numbers on their business for and hour or so. We work out your real gross profit, your weekly expenses and the total number of sales you need each day, or week, or even hour to make a profit …
Learn your numbers or have a look at it next time you meet … if you need help contact one of my business coaches at www.tafastrack.com.au
All the Best … Adrian Caruso
Wednesday, July 29, 2009
Build an Irresistible Customer Relationship
We know that marketing budgets are very limited for the small and medium tourism suppliers. So why is it that these businesses give up on their hard-earned often-expensive customer lead so easily?
Did you know that almost 50% of sales people have given up communicating with a prospect after the first contact and that 65% have given up by the second contact?
A staggering 90% of sales people have given up pursuing the lead by the time they get to the fourth contact with them.
Do you know what this means?
It means that if you can stay in touch with the prospect beyond five contacts you have a far greater chance of winning their business when they are ready to buy. If you remain persistent in your communication you develop a relationship where they will continue to come back to you or send their friends and family your way.
The key is to developing a plan that will enable you to contact the prospect a minimum of eight times if necessary. Sit down with your staff and brainstorm all the different reasons why you might be able to phone, email, send a letter or even mail a postcard. Decide on the frequency of when you will communicate; will it be every two weeks or once a month then plan what piece of information will go out when and to whom.
When you know in advance what you need to do and your staff know what they need to do, and why, then your consistency and persistency will help you to build an irresistible customer relationship.
Did you know that almost 50% of sales people have given up communicating with a prospect after the first contact and that 65% have given up by the second contact?
A staggering 90% of sales people have given up pursuing the lead by the time they get to the fourth contact with them.
Do you know what this means?
It means that if you can stay in touch with the prospect beyond five contacts you have a far greater chance of winning their business when they are ready to buy. If you remain persistent in your communication you develop a relationship where they will continue to come back to you or send their friends and family your way.
The key is to developing a plan that will enable you to contact the prospect a minimum of eight times if necessary. Sit down with your staff and brainstorm all the different reasons why you might be able to phone, email, send a letter or even mail a postcard. Decide on the frequency of when you will communicate; will it be every two weeks or once a month then plan what piece of information will go out when and to whom.
When you know in advance what you need to do and your staff know what they need to do, and why, then your consistency and persistency will help you to build an irresistible customer relationship.
Tuesday, June 16, 2009
TAFastrack
Established in 2003, TA Fastrack has now become Australasia's leading travel, tourism and hospitality industry business solutions provider. Offering a range of specialised services including consultancy, business coaching, training and a separate marketing division. TA Fastrack's vision is to enrich the lives of members of the travel and tourism industry world-wide by providing the world's best solutions.
This is achieved by providing the industry with the world's 'best-practice' business solutions delivered by a specialist team of consultants, business coaches and people. Some of these 'best-practices' have been developed exclusively by TA Fastrack for the industry. TA Fastrack is the only company of its type in Australasia. No other business solutions company specialises solely in the travel, tourism and hospitality industry nor has the hands-on knowledge or experience that the TA Fastrack team has. TA Fastrack has worked with over 800 travel & tourism businesses in Australasia including some some of Australasia's leading travel companies.
This is achieved by providing the industry with the world's 'best-practice' business solutions delivered by a specialist team of consultants, business coaches and people. Some of these 'best-practices' have been developed exclusively by TA Fastrack for the industry. TA Fastrack is the only company of its type in Australasia. No other business solutions company specialises solely in the travel, tourism and hospitality industry nor has the hands-on knowledge or experience that the TA Fastrack team has. TA Fastrack has worked with over 800 travel & tourism businesses in Australasia including some some of Australasia's leading travel companies.
Sunday, May 24, 2009
Agents in Australia need to evolve or they will disappear
Agents and wholesalers need to start immediately changing (or I prefer to say ‘reinventing’) the way they do business with their customers and operate if they want to survive into the future. They will disappear if they don’t!
Agents need to join together as one and start immediately communicating with consumers the value a travel agent provides to their travel. That the travel consultant (or as they are now calling them in the USA/Canada ‘Travel Coincierges ) provides value, expertise, convenience and personal service to their customers. As opposed to booking their travel via the Internet and directly with the suppliers.
If they want to book a quick flight or week-end getaway….then tell them to use the Internet for it is normally an unprofitable booking for the agent anyway.
‘Travel planning is not about bookings or places…..It’s between people. The travel industry is a relationship business and travel agents in Australia don’t seem to understand this as much as their counterparts in the USA/Canada. Travel agents are the invaluable link between travelers and their destination. Agents are customer advocates. Agents are there for our customers before, during and after a trip and when the unexpected happens (one of ASTA’s motto’s and one that is printed on thousands of cards that have been distributed to every agent in the country).’
‘Agents need to work together in conjunction with organisation’s such as AFTA to assure consumers that agents provide value. Jointly both organizations need to create a national PR campaign that promotes the value of agents. Working together agents can help consumers make the right travel choices and encourage them not to use the Internet or book directly with suppliers. Both Internet and direct supplier bookings will continue to rise if agents don’t do something about it and start promoting their value and building strong relationships with their customers.’
Agents need to also better sell and promote themselves as ‘travel specialists’ or as they call them in the US now ‘concierges’ NOT travel agents. Remember…..agent means an agent for a supplier which we know agents aren’t. Over 95% of agents have been successfully charging Service Fees since 1995 including for fees for itinerary planning.
They also seem to have access to a great variety of on-line travel tools and information resources that Australian agents haven’t seen yet. ‘We are now going to start bringing some of these tools to Australia over the next couple of months. This will make an agent’s job much easier and provides greater value for their customer's experience.’
Agents also need to ‘look outside of their box’ they operate in. They need to find new ways of making clients loyal to them and also not just book the ranged of suppliers and wholesalers that are available in Australia. They need to ‘look outside the box’ and start booking suppliers directly not just to become more competitive but to offer a greater choice…..AND to specialize. ‘There is an amazing amount of great products and destinations out there. But agents in Australia think they can only book a wholesaler or supplier that is based in Australia. This is incorrect. There are so many more options you can give your clients if you look at booking overseas suppliers. This includes resorts, hotels, tour and ground operators. This will allow you to perfectly match what your customers want and save them lots more. ‘
Almost every agent in the US and Canada is a specialist to a destination or group or destinations and they actively promote themselves as one. They are not a travel specialist for EVERY destination or type of travel. Agents in the USA/Canada are also finding niche markets and specializing in them such as art, fishing, sports events, culinary tours etc. ‘Agents usually produce a CV’s on themselves on their area of specialization and where they have traveled to.’
The above brings the question of the value of agents in Australia belonging to a franchise chain and the value of the Franchisor’s name. In the US the most successful agents do not trade under a franchise name. They all trade under the owners surname, travel specialty, or other name. This makes them unique and assists them in promoting themselves to the market they want and not compete with a similar named agency. However they all belong to a buying consortia of some type.
Agents in the USA and Canada do things very differently to agents in Australia and have survived the Internet, direct bookings with suppliers and world events such as hurricanes and terrorist bombings. Agents in Australia need to start changing the way they do things NOW or they will dissappear. They need to start thinking outside the box.
Agents need to join together as one and start immediately communicating with consumers the value a travel agent provides to their travel. That the travel consultant (or as they are now calling them in the USA/Canada ‘Travel Coincierges ) provides value, expertise, convenience and personal service to their customers. As opposed to booking their travel via the Internet and directly with the suppliers.
If they want to book a quick flight or week-end getaway….then tell them to use the Internet for it is normally an unprofitable booking for the agent anyway.
‘Travel planning is not about bookings or places…..It’s between people. The travel industry is a relationship business and travel agents in Australia don’t seem to understand this as much as their counterparts in the USA/Canada. Travel agents are the invaluable link between travelers and their destination. Agents are customer advocates. Agents are there for our customers before, during and after a trip and when the unexpected happens (one of ASTA’s motto’s and one that is printed on thousands of cards that have been distributed to every agent in the country).’
‘Agents need to work together in conjunction with organisation’s such as AFTA to assure consumers that agents provide value. Jointly both organizations need to create a national PR campaign that promotes the value of agents. Working together agents can help consumers make the right travel choices and encourage them not to use the Internet or book directly with suppliers. Both Internet and direct supplier bookings will continue to rise if agents don’t do something about it and start promoting their value and building strong relationships with their customers.’
Agents need to also better sell and promote themselves as ‘travel specialists’ or as they call them in the US now ‘concierges’ NOT travel agents. Remember…..agent means an agent for a supplier which we know agents aren’t. Over 95% of agents have been successfully charging Service Fees since 1995 including for fees for itinerary planning.
They also seem to have access to a great variety of on-line travel tools and information resources that Australian agents haven’t seen yet. ‘We are now going to start bringing some of these tools to Australia over the next couple of months. This will make an agent’s job much easier and provides greater value for their customer's experience.’
Agents also need to ‘look outside of their box’ they operate in. They need to find new ways of making clients loyal to them and also not just book the ranged of suppliers and wholesalers that are available in Australia. They need to ‘look outside the box’ and start booking suppliers directly not just to become more competitive but to offer a greater choice…..AND to specialize. ‘There is an amazing amount of great products and destinations out there. But agents in Australia think they can only book a wholesaler or supplier that is based in Australia. This is incorrect. There are so many more options you can give your clients if you look at booking overseas suppliers. This includes resorts, hotels, tour and ground operators. This will allow you to perfectly match what your customers want and save them lots more. ‘
Almost every agent in the US and Canada is a specialist to a destination or group or destinations and they actively promote themselves as one. They are not a travel specialist for EVERY destination or type of travel. Agents in the USA/Canada are also finding niche markets and specializing in them such as art, fishing, sports events, culinary tours etc. ‘Agents usually produce a CV’s on themselves on their area of specialization and where they have traveled to.’
The above brings the question of the value of agents in Australia belonging to a franchise chain and the value of the Franchisor’s name. In the US the most successful agents do not trade under a franchise name. They all trade under the owners surname, travel specialty, or other name. This makes them unique and assists them in promoting themselves to the market they want and not compete with a similar named agency. However they all belong to a buying consortia of some type.
Agents in the USA and Canada do things very differently to agents in Australia and have survived the Internet, direct bookings with suppliers and world events such as hurricanes and terrorist bombings. Agents in Australia need to start changing the way they do things NOW or they will dissappear. They need to start thinking outside the box.
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