A few months ago we commented on Starbucks’ strategy, (see The Starbucks Strategy) and mentioned that it had introduced a new line of baked goods in the US. On a recent trip south of the border I had the opportunity sample some of the new offerings. I am pleased to report that of the items sampled - the new chocolate chunk cookie, double chocolate brownie and the iced lemon pound cake - all were a vast improvement over the offerings in Canada. Sad to report however that I did not spy these offerings in the case at my local Starbucks on returing home.
Now to work on the coffee!
Here is an update to an earlier post “Real Estate Transactions: When price doesn’t equal perceived value”.
At their annual general meeting yesterday, Canadian Real Estate Association (CREA) members voted in favour of allowing agents to post listings on its MLS system on behalf of sellers for a flat fee. Melanie Aitken, Canada’s Competition Commissioner said it didn’t go far enough, as it keeps the power in CREA member’s hands, squelching innovation.
CREA has until March 25 to provide a response to the Competition Commissioner’s application to the Competition Tribunal.
See the Globe and Mail story: “No Sale: Realtors’ plan gets bad review” by Steve Ladurantaye.
What makes a customer shop at one hardware store vs. another? I have an example where price was not a deciding factor.
There are two hardware stores, Rona and Home Depot in close proximity to my home. Both stores offered the same or similar brands of toilets. So what if anything would determine where I made my purchase?
The deciding factor was service. A toilet is heavy and I was pretty sure that I wouldn’t be able to lift it, and even if I could I didn’t want to risk hurting my back.
The following table contains a comparison of the service I experienced at the two stores:
| Home Depot | Rona |
| Toilets mounted on a wall above my head, out of reach | Toilets on a floor display, within reach for easy comparison |
| After 10 minutes of looking at the display, no one comes to assist me. I leave. | Two staff members offer to assist: one immediately and one 2 minutes later. Both give advice on which toilet offers the attributes I am seeking. After a model is chosen, the second also explains what if any additional parts might be needed to complete the job. |
| Generally no assistance in transporting items the customer’s vehicle from this store. | I pay and then drive to a loading area where a staff member loads the toilet into my vehicle. |
I wonder if the two stores realize the vast difference in service they are offering. The gradual move to the big box store format has brought the customer more selection and better prices for some items, but it seems to have come at a cost – a loss of knowledgeable service.
And why not? Labour is a very expensive input. So minimizing its cost by hiring the bare minimum on a part time basis makes economic sense, because the savings can then be passed on to the consumers as a means to draw them into the store. This may work on some items and for some customers. But for other customers, whose time is at a premium or knowledge of all things hardware is precious little, or physical strength lacking, the lowest price isn’t as important, because the customer is willing to pay a bit more for the service they need.
Rona has chosen customer service as its value proposition. This is evident from the corporate values published on their website, which lists customer service as its top priority. Home Depot lists excellent customer service at #4. From my experience, both live up to their values.
The preceeding is but one example of a customer purchase – but it gives pause to consider the psychology behind customer purchase decisions. Cost is not always the deciding factor.
Companies in the midst of the transition to International Financial Reporting Standards (IFRS) from the current Canadian GAAP are required to make detailed disclosures throughout the process. The Ontario Securities Commission (OSC) is monitoring the transition, and has found that these disclosures are not always up to snuff.
The CICA had written a good summary of the issue and provides IFRS resources for firms. The OSC also offers resources which provide insights as to what is expected in terms of disclosure. See the following links:
CICA Summary:
http://www.cica.ca/transition/intheloop/
OCS News Release:
http://www.osc.gov.on.ca/en/NewsEvents_nr_20100205_52-718_osc-ifrs-transition.htm
Having worked as a senior economist in two provincial Ministries of Finance, I’ve had the opportunity to work on a number of provincial budgets, as well participate in a Federal budget lockup.
The lockup is an opportunity for provincial governments, banks, journalists, and the like to send their economists and analysts to Ottawa on the Budget day to review the document before it is presented, extracting what meaning they can on behalf of their clients.
A star-studded event
It’s exciting in a way. After all, there are celebrity economists! You know, the ones you see being interviewed on the news doing their best impression of a learned sage, prognosticating about our economic future, or taking credit for predicting the latest up or downturn. Well, they do a particularly good impression at the lockup! Ministry staff are also on hand to answer questions. It is a bit of a sport to try to get them to divulge some tidbit that will give you an angle that no one else will have.
In the midst of all of the excitement, you are reading like a maniac trying to extract from the 400+ page document the points that will matter most to your audience. Your briefing note has to be finished and polished by the time the Minister of Finance rises to give the speech. That’s when the internet access is opened so that the completed notes can be emailed to their intended recipient, so they in turn can draft their official response in time for the end of the budget speech.
The budget process
Flash back now to the weeks and months before budget day. What goes into making of the budget document? I’ve had the opportunity to participate in budget development, both from an economics perspective: where the economy is at, developing the forecast assumptions for where it is going, the economic context that shapes what tax revenue can be expected and expenditure pressures will be felt; and the fiscal perspective:the revenue and expenditures that is the budget.
Hurry up and wait
The process begins months in advance. Line ministries are hounded for their budget projections. Working on the health file was a particular challenge – its ever increasing budgetary expenditure figures caused me sleepless nights privately wondering how such cost increases could be supported. Seeing those figures has shaped my view on health spending ever since.
These line ministry budgets are fed into analyses and scenarios are run. At the same time detailed forecasts of the economy and its sectors are run and compared to the forecasts published by the banks. This information is fed up the chain to be consumed by the senior bureaucrats and political staff surrounding the minister. This process goes on for what seems like forever. Political jostling ensues, deadlines pass, drop dead dates too.
Once the strategic direction is decided, the panic to draft the document ensues, and the anxious calls to spouses to pick up kids at daycare, late nights and weekends begin for the staff. Sections are written, and rewritten. You proofread till you can’t see straight, checking every word, fact and number. Finally the day comes. The document goes to print.
Hats off!
Even now, when I read a federal or provincial budget I can’t help but give a mental “tip of the hat” to the many people who have put in countless hours to create what is the government’s economic plan, and wish them a well deserved break this weekend. Because come Monday – the process to develop the next Economic Update will begin!
Canada’s new public company accounting standards, IFRS are getting a lot of press these days. However a somewhat lesser known change is also in the works, that of Canadian GAAP for Private Enterprises (PE GAAP).
The purpose of this new standard is to simplify some of the reporting requirements provided under the current Canadian GAAP for private companies who generally have limited external reporting.
The most significant changes are to the following aspects of private enterprise financial reporting:
The new PE GAAP takes effect January 1, 2011. However comparative figures for 2010 are required, so an opening balance sheet must be prepared for January 1, 2010 as well (for those reporting on a calendar year). That means that companies adopting PE GAAP are already behind the eight ball.
Section 1500 of the CICA Handbook offers some adjustments for first-time adopters of PE GAAP, including optional and mandatory exemptions and disclosures. These adjustments will make adoption of the new requirements both possible and minimize opportunistic behaviour as a result of the changes.
PE GAAP resources are available on the following websites:
Additional Resources from accounting firms are available at:
0
Back to top