Monday, February 21, 2011

The sales comparison and cost approach valuation



The sales comparison approach is comparing a subject property with the comparable properties which have recently sold with similar transactions and similar characteristic to subject property. The sales comparison approach is based on the assumption in the competitive market substitutes for similar prices. This approach is based on the supply and demand factors to tend to move the price more equilibrium with close substitute selling for similar prices. After Identifying elements of comparison & value adjustment, the recently sold comparable sales are selected and reflect to make the general pricing preference in the market. Then indicated value of the subject property be obtained from reconciled the adjusted sale prices of the comparable properties by using weighting scheme. The result of this adjustment procedure is a final adjusted sale prices for each comparable property. Then appraiser evaluates and reconciles the final adjusted sale prices of the comparable properties into a single indicated value for the subject property.
The cost approach method is the based on the depreciated reproduction or replacement cost adding the market value of the site. The value of property is measured the current cost of construction for improvement subtracting all elements of accrued depreciation from the building’s cost. The reproduction cost is the exact detail materials to construct the building today In contrast, replacement cost is equal utility to construction the money required. The old structure, reproduction cost is often difficult to estimate because of no existing materials. As a result, replacement cost is often used since it is easier to obtain. cost approach is used for the specialty properties like church, educational facilities and specially used government properties. To determine existing property, the appraiser identifies and measures sales value of site similar zoning, utilities and similar use as the subject property. the next step is to estimate reproduction or replacement cost of improvement. Third adjustments are made for all accrued depreciation including physical depreciation, functional and obsolescence.

Income approach valuation


There are two methods in the income approach valuation. One is Direct Capitalization method, and the other is the Discount Cash Flow. With direct capitalization models, value estimates are based on a ratio or multiple of expected first year NOI. In the income approach, appraisers for first year estimated the periodic income of the property then convert the income forecast into value estimate. This method divides a single year’s net operating income by an appropriate overall capitalization rate, also known as the “going-in” cap rate, which is extracted from comparable sales in the current market. The indicated value of the subject property is determined by: Value = NOI1/R0, where R0 is the overall cap rate or “going-in” cap rate, NOI1 is the first year net operating income. The bond of investment method , Mortgage –equity rate analysis recognized that the NOI produced by a property represents the initial return on the total acquisition price of the property. Mortgage-equity rate analysis assume the investor’s minimum required cap rate is weighted average of the required cap rate on debt financing and the required cap rate on equity financing; Ro=MRm+(1-m)Re, Re=BTCF/Ve. The summation technique is add of the inflation, real return based on Treasury bill, risk premium and recapture premium. In the finally, General constant growth formula is that capitalization rate equals the subtraction of inflation growth rate form IRR on the equity. To get appropriate cap rate, these cap rate can be adjusted by reconciliation method.
The discounted cash flow method is the projection of the property’s annual net operating income over standard holding periods and discounts them back to present value of before tax cash flow by using the required yield or discount rate. Then with income from the sale of property at the end of the projected holding period, the total value is estimated. The incomes are discounted to present value utilizing the investor’s required rate of return to get the indicated value of subject property.

The real estate market value and investment value

The market value is defined as the most probable selling price assuming “normal” sale conditions as the value the typical participant would place on a property. It can be viewed concept of market value rests upon the interesting forces of supply and demand. Specific property right should sell the presence of willing buyers and sellers freely bidding in completion with one another on the fair condition by buyer and seller are motivated, well advised and acting what they consider their interest, a reasonable time is allowed for exposure in the open market, Payment is made of a cash or financing comparable and the market value should be clearly revealed in the appraisal report.
In the appraiser preparing, inspect the subject site and improvement of interior and exterior and gather the analyzed data and applied the sales comparison approach for indicating the market value for the subject property. For the best determine the market value and investment value of the subject property, The three method-sales comparison approach, cost approach and income approach will be proceed.
The goal of investment is to get decent operating income as well as property value appreciation. Considering low initial equity need, individual investor or partners are acceptable. Market value of a property is property selling price under competitive market under normal condition and with value for a typical investor. Investment value is the best worth property for investor and the maximum amount he is willing to pay based on the market and preference. However, seller’s investment value is the minimum he or she would be willing to accept. They each have differences because different investors have different requirements of return, tax and different financing situation.With the positive net present value of the after-tax cash flows and the desirable internal rate of return, the investment opportunity factors are subject property is in good condition, stabilized cash flows as low risk investment, and it is located in an area with high development demand.

Saturday, February 5, 2011

Liability of directors


The shareholders elect the directors to seek their best interest. The directors represent the shareholders as agents and make various corporate decisions on behalf of them. As fiduciaries, directors and officers owe legal duty to the corporation and shareholder for trust and confidence. The directors cannot exercise their power and act in ways that benefit their own interests but has to seek the interests of the shareholders and the corporation. The fiduciary duty includes the duty of care and duty of loyalty.
In the general rule, directors should have well understanding of the business of the corporation. Directors are expected to act in good faith and act in the best interest of the corporation. Directors should become familiar with the fundamentals of the business that the corporation is engaged. Directors’ management is general monitoring of corporation affairs and policies but does not required of detail inspections. However, directors are under a continuing obligation to keep informed about the activities of the corporation such as reviewing financial statements. Directors and officers who do not exercise the required duty of care can be liable for the harms suffered by corporation as a result of their negligence.
The duty of loyalty requires directors and officers to subordinate their personal interests to benefits of corporation. Directors may not use corporate funds or confidential corporate information for personal usage. Directors should not oppose a transaction that is in the corporation’s interest because it may not for director’s interest or position. To protect a lack of due care default, the directors and officers is covered by liability insurance. Typically D&O policy has two separate insurance agreements for the corporate reimbursement which insures corporation and personal coverage for directors and officers against losses for wrongful conduct for corporation loss.

Tuesday, February 1, 2011

Effective communication of the Starbucks II


The Starbucks has been a financially successful company since going public in 1992 with its reputation for rapidly expanding all over the global market. However, aggressive expansion of stores produced negative results that were inconsistent with the Starbucks vision and the communication also suffered as a result. For efficient production and reduce wait time, the Starbucks implemented many different machines, and these made the experience less personal interaction between the baristas and the customers.The Starbucks needs to make sure to get people’s attention of the message they are sending, conveying the massage with that in mind, creating the step to minimizing the errors between the leadership and the employee and sending the consistent message. Because misperception of the company’s vision can cause the loss of employee loyalty and untrustworthy of the brand from the customers. The Starbucks has successfully created the coffee drinking as the unique experience for the customers. The family-friendly services from the employees will provide the customers with valuable experience in the Starbucks culture.

Effective communication of the Starbucks I

With Howard Schultz’s vision, the Starbucks was created for people who would enjoy coffee drinking as a romance experience. Starbucks wanted to be the “Third place” between home and work where people can gather, relax and interact freely. The Starbucks offered various coffee drinks that could be created by customers in many different ways and result in unique beverages for each customer. The Starbucks wanted its customers to not only enjoy the final product but also the process of ordering their drinks.
To make the Third place, the leadership thought that the store employees’ ability to engage the customers was the heart of the Starbucks experience by two-way communication. Without flowing in only one direction from the leadership to the employees, the employees listen to the customers’ voice and apply their opinions in the operation. The employees deliver the customers’ feedback to the leadership and make the stores as local cultural events place. The interiors of Starbucks are artistic, and there were many opportunities for local artists and singers in the store bulletin board.
The employees are essential to provide the customers with valuable experience in Starbucks culture. To make this possible, the Starbucks focused on the employee benefits. Howard Schultz’s vision shaped how Starbucks treated its employees. The Starbucks treated the baristas as the “partners” in the business and offered health insurance to all partners, even the part-time employees.
The benefits to the employees enhance the upward communication. Employees get the motivation through the benefits, give the feedback to upward and provide better service to the customers. The Starbucks’ effort to involve the employees in the success of the business paid off. The Frappuccino idea came from the store managers in California. They tested the idea of cold blended beverage with different ingredients and tried with the customers. With customers’ approval, the company reversed its initial refusal and came around. Since then, Frappuccino became an instant hit and drove the store sales and represents the Starbucks as a successful drink item. Seasonal products such as a strawberry and cream Frappuccino and gingerbread latte also came from the stores with employee initiative.
For the Starbucks’ efficient downward communication, open-book management and coaching can be useful approaches. Sharing the company’s vision, financial information and benefits with every employee and coaching and educating the employees to pursue the company’s goals can make effective communication in organization and enhance employee identification with the Starbucks objective.

Playstation 3 Marketing Analysis


Sony’s strategic approach to new product development historically has been product innovation through technology. Sony’s brand name is associated with one of a kind electronics, and this was accomplished through rigorous protection of its rights on technology. The pros of this approach is being a pioneer in the market, no competitors at the initial stage and potentially creating an entirely new market. Sony enjoyed strong market share or market dominance when products launch were successful such as Walkman and Trinitron. The cons of this approach is to lose market to competitors with inferior technology by unwilling to share its technology and unwilling to adopt other technology.
PS3 has all the features for consumers to enjoy for long term. The firms that succeed in competitive markets have a clear understanding that they must first determine what consumers want. However the weakness of the PS3 is higher price than competitions. It costs $200 more than the Xbox 360. Even with the higher price, Sony lost about $300 on each console due to expensive manufacturing costs. On the other hand, PS3 lacks original games. PS3 launched with 15 titles, but most of these were already available in Xbox 360. In addition, Xbox and Nintendo Wii had higher game ranking titles than PS3.
The reasons of new product failure are poor matching between features and customer desire, over estimation of market size and incorrect positioning with price high or low. Inadequate distribution is another factor. Sony’s initial launch was delayed for a season with technological problems, and Sony could not deliver the number of consoles needed to retails to meet the market demand. Sony focused too much on producing consoles that can last for long-term. Due to delayed launch, Sony spent additional money to convince the customers to wait to buy a console after holiday season instead of buying from competitors.
In the PS3 operating system, diverse software programs are possible through internet. They add internet news in the world, cyber networking and home entertainment programs with simple download. Compared to the Sony’s marketing of PS3, Nintendo’s marketing of Wii was more simple. The development costs of Wii were about a third of PS3. Wii was inexpensive yet it had higher ranking game titles than PS3. PS3 focused more on providing its users with better graphic hardware, but Wii focused more on practical software. For example, Nintendo added to its product line by introducing Wii Fit, exercise and weight-loss system for busy mom to its Wii line of gaming consoles.
The success factor of product is matching product for market needs. Company should listen from customers what they want, and produce best products with strong leadership. The launch of a product cannot be successful when potential buyers do not have access at the right time. PS2 was successful because it offered reasonable price with newly developed games taking advantage of the console’s more advanced graphics and delivering enhanced content through a built-in DVD drive. PS3 is upgraded version of PS2 with Blu-ray. In order to increase sales of the PS3, it needs to offer more quality games with original content through software development. If it provides more diverse internet programs, it can be used as a multi-functioning electronic for home entertainment.