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I'm trying to get a jump start on our essay paper that is due 11/19 and a little stuck on what to put as my topic and thesis. the idea that i have is that i've noticed that since the recession stores like toys r us are doing alot of "price match" adjustments for their customers. for example, if i wish to purchase an item in toys r us and its sold at another store at a cheaper price (eg. walmart), toy r us will then give me the item at their competitors price. As a customer, i saved, but on toy r us end did they? what factor determines how low are they willing to go to to drop their prices? is this a profit margin essay? if so how do i go about formulating this into a thesis? and what direction should my paper go. These are my thoughts. But im not sure how i go about developing a topic and thesis from it. hope someone can help me.

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Nelly Stracke
Nelly StrackeLv2
30 Sep 2019

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Short Story
Too many managements – and the number seems to grow every year – are looking for any means to report, and indeed feature, “adjusted earnings” that are higher than their company’s GAAP earnings. There are many ways for practitioners to perform this legerdemain. Two of their favorites are the omission of “restructuring costs” and “stock-based compensation” as expenses.

Charlie and I want managements, in their commentary, to describe unusual items – good or bad – that affect the GAAP numbers. After all, the reason we look at these numbers of the past is to make estimates of the future. But a management that regularly attempts to wave away very real costs by highlighting “adjusted per-share earnings” makes us nervous. That’s because bad behavior is contagious: CEOs who overtly look for ways to report high numbers tend to foster a culture in which subordinates strive to be “helpful” as well. Goals like that can lead, for example, to insurers underestimating their loss reserves, a practice that has destroyed many industry participants.

Charlie and I cringe when we hear analysts talk admiringly about managements who always “make the numbers.” In truth, business is too unpredictable for the numbers always to be met. Inevitably, surprises occur. When they do, a CEO whose focus is centered on Wall Street will be tempted to make up the numbers.

Let’s get back to the two favorites of “don’t-count-this” managers, starting with “restructuring.” Berkshire, I would say, has been restructuring from the first day we took over in 1965. Owning only a northern textile business then gave us no other choice. And today a fair amount of restructuring occurs every year at Berkshire. That’s because there are always things that need to change in our hundreds of businesses. Last year, as I mentioned earlier, we spent significant sums getting Duracell in shape for the decades ahead.

We have never, however, singled out restructuring charges and told you to ignore them in estimating our normal earning power. If there were to be some truly major expenses in a single year, I would, of course, mention it in my commentary. Indeed, when there is a total rebasing of a business, such as occurred when Kraft and Heinz merged, it is imperative that for several years the huge one-time costs of rationalizing the combined operations be explained clearly to owners. That’s precisely what the CEO of Kraft Heinz has done, in a manner approved by the company’s directors (who include me). But, to tell owners year after year, “Don’t count this,” when management is simply making business adjustments that are necessary, is misleading. And too many analysts and journalists fall for this baloney.

To say “stock-based compensation” is not an expense is even more cavalier. CEOs who go down that road are, in effect, saying to shareholders, “If you pay me a bundle in options or restricted stock, don’t worry about its effect on earnings. I’ll ‘adjust’ it away.”

To explore this maneuver further, join me for a moment in a visit to a make-believe accounting laboratory whose sole mission is to juice Berkshire’s reported earnings. Imaginative technicians await us, eager to show their stuff

Question:

Discuss Buffett’s specific views on “adjusted earnings”

Based on below information: 1. Jack shows us a flow chart of the new warehouse system this week. What does a flow chart tell us? How can we use that information?

Elizabeth: -and it involves getting into a new market.
Gail: Okay, let’s go to it.
Andrew: If the main issue is control, there’s ways to protect ourselves and our interests.
Elizabeth: This is my company.
Maria: And if heads are going to roll, they say start at the top.
Warren: Yes!
Narrator: Welcome to the Mastering Operations Management episode, “Choosing a Strategy”.
Warren: Hey, Jack.
Debbie: Hi, Jack.
Jack: Hey, Warren. Hi, Debbie. How you doing?
Debbie: Good to see you.
Jack: You too.
Warren: How you doing, Jack?
Jack: Hey, bud, come on in.
Warren: What do we got?
Jack: Here you go, operations.
Warren: Okay.
Jack: Current facility on the left.
Warren: Mm hmm.
Jack: New, improved projected facility on the right.
Warren: So why does this one on the right say, “The house that Jack built”?
[Laughter]
Elizabeth, Gail, Andrew, Maria, Warren, Narrator, Debbie, Jack
Jack: Those crazy kids in IT. Anyway, process flow charts have been completed and the architectural firm of Simplify, Eliminate, Automate and Integrate have done a fine job.
Warren: Okay. So what are the highlights?
Jack: Well, barcoding, vertical material movement, and ASRSs do for distribution facilities what quick setups and group technology did for flexible manufacturing facilities.
Warren: Okay.
Jack: Notice, now, for future expansion I look at the performance data on just one ASRS to see how much quicker it is than the current system of picking. With two ASRSs-
Warren: We rule the world.
Jack: Yes. With even more capacity.
Warren: Right. Looks great. Now but what if there’s no volume increase?
Jack: Well, we’ve been talking about bringing more books in-house for quicker shipment. The second ASRS can either be used to double the volume shipped or to ship double the number of titles at current rates.
Warren: Now this figure down here, that’s census, right? That’s not a price tag?
Debbie: Liz won’t like that.
Warren: No, she won’t.
Jack: You’ve got to take a look at the net present value, the internal rate of return on these units.
Warren: Okay.
Jack: I mean you can’t beat that with a stick.
Warren: You’ve included our expected improvements in these numbers, right? Less labor, less space, greater revenue?
Elizabeth, Gail, Andrew, Maria, Warren, Narrator, Debbie, Jack
Jack: Of course I did, but I was conservative, and it still looks pretty good. And I even included installation and start-up costs in the MPV analysis. But we need to see if we can get the IT guys-
Debbie: And gals.
Jack: And gals. We’ve got to pull them off bandwidth and security projects to work on integrating data flow at several places in the system.
Warren: Oh boy. Liz, uh, you and I have known each other for many years and I just want to ask you-
Debbie: [Laughs]
Jack: No, no, wait – no, no, don’t – wait – just – just take your time. Talk about the long-term strategic impact of new technology and process change.
Warren: Yeah, that’s why I have you, Jack, to handle that part of the conversation.
Debbie: You guys will do great.
Jack: You know it.
Warren: We will do great, Debbie. All of us.
Narrator: Now move on to the brief summary of concepts and then to the interactive exercises.

1. Give me 2 issues and 2 recommendations about CanGo.

Clip # 1

Elizabeth: -and it involves getting into a new market.

Gail: Okay, let’s go to it. Andrew: If the main issue is control, there’s ways to protect ourselves and our interests.

Elizabeth: This is my company.

Maria: And if heads are going to roll, they say start at the top.

Warren: Yes! Narrator: Welcome to the Mastering Strategy episode “Concepts of Strategic Management”. [Telephone Rings]

Elizabeth: Hello? Julian on Telephone: Hi, sweetheart. Guess who?

Elizabeth: Hi, Julian. How are you? Julian on Telephone:

Pretty darn good. Elizabeth: What’s going on? Julian on Telephone: I’ve got to talk to you about a couple of things.

Elizabeth: Oh, come on. I know when somebody wants something. Julian on Telephone: Hmm. You know me; I admit that. Elizabeth: So games? Books? Music? Whose birthday is it? Julian on Telephone: Well now, it’s not anything like that, Liz. Why shouldn’t I call Can Go exactly what it is, a success story from the Hudson Valley. You went from a tiny fledgling backwater company to one of the largest small companies in this area. Elizabeth: [Laughs] Well, we have a long way to go. But come on, I know that the president of the Hudson Valley Business Association has better things to do than inflate my ego. Page 2 of 2 Elizabeth, Gail, Andrew, Elizabeth, Maria, Warren, Narrator, Julian Page 2 of 2 Julian on Telephone: Liz, that’s where you’re mistaken again. This is the most important thing I have to do this morning. Elizabeth: Well how do I get your job? Julian on Telephone: You mean informing the leader of the fastest-growing company in the Hudson Valley that she’s been selected the Regent’s Business Leader of the Year? Elizabeth: What!? Julian on Telephone: By the way, Liz, when you speak at the next Chamber of Commerce meeting it would be great if you could focus on the how and the why of Can Go’s success story. Elizabeth: Are you serious? Julian on Telephone: You’ve done all the right things, Liz. Potential entrepreneurs want to know how you made it. Give them a game plan, okay? Elizabeth: Well, I don’t know what to say. Julian on Telephone: For a change. Elizabeth: Well I will make you proud. Julian on Telephone: Already am. Talk to you later. Elizabeth: Okay, thanks. Bye. [Change Scenery] Elizabeth: Can Go’s development over the last few years – no. How did we plan this? How did I plan this? I don’t know, it was an accident. Started a business, became a success. I can’t do this. I’m not going to. I’m not. I can’t. I won’t. Narrator: Now move onto the brief summary of concepts and then to the interactive exercises.

Clip # 2
Elizabeth: -and it involves getting into a new market.
Gail: Okay, let’s go to it.
Andrew: If the main issue is control, there’s ways to protect ourselves and
our interests.
Elizabeth: This is my company.
Maria: And if heads are going to roll, they say start at the top.
Warren: Yes!
Narrator: Welcome to the Mastering Management episode “Planning”.
Warren: We don’t want to overestimate our customers on this, Nick. If our
online games get hot and then fail and there’s a downtime, then
those gamers are going to jump like rats off a sinking ship. Now
we have hardware we have to purchase, we also have some
software options to explore, and then there’s bandwidth, license
and fee issues we have to consider. There’s plenty of time for
planning, so we’ll be able to pull it together.
Nick: I hear you.
Warren: Now this is a top priority for you, all right. I want a full
implementation of online gaming, all right, with everything laid
out clearly.
Nick: Okay.
Warren: All aspects covered.
Nick: You got it, Coach.
Warren: You got it?
Nick: I got it.
Warren: There’s no defense on this; this is pure offense. Okay?
Nick: I hear you.
Warren: All right.
Nick: All right.
Page 2 of 2
Elizabeth, Gail, Andrew, Maria, Warren, Narrator, Nick, Whitney, Debbie
Page 2 of 2
Gail: Okay, this is your marketing file. This is deliveries. This is for
children’s books. Since you have such a great filing system, here.
Nick: Oh, actually, Gail, they go right over here. Thanks, Gail.
Whitney: Tenth row, corporate seats, wait service, and the team kicked butt.
Wish you were me last night? Nick? Nick!?
Nick: I was working last night.
Whitney: Yeah, right.
Debbie: Exactly what kind of surgery is this?
Nick: Look, I have to come up with this implementation plan for online
gaming; hardware, software, bandwidth issuesDebbie:
Easy, Nick. Do you need a little organizational help?
Nick: I – yeah.
Debbie: Well, where’s your to-do list?
All this? Is anything prioritized?
Nick, have you ever heard of a Gantt Chart?
Nick: The, um – a Gantt?
Debbie: You need an organizational lesson. Why don’t you ring me?
Nick: I’ll – I’ll do that.
Whitney: Yeah.
Nick: Yeah.
Oh.
Narrator: Now move on to the brief summary of concepts and then to the
interactive exercises.

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