Types of Capital

Types of Capital

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There are different kinds of capital that individuals and organisations use to pursue their goals and deliver value.

Employees usually trade human capital (their individual time, talent and efforts) and intellectual capital (their thoughts and ideas) in exchange for financial capital (money).

Effort, ideas and money are not, however, the only forms of capital that exist.

There are at least six (6) different types of capital that individuals and organisations can use to achieve their objectives:

  1. Financial Capital – money, stocks and bonds. These are the most obvious forms of capital and some people focus on acquiring them to the exclusion of everything else.
  2. Human Capital – the time, energy and effort of individuals. Management consulting firms hire the best and brightest students and use them to produce new insights (and charge clients correspondingly high fees).
  3. Intellectual Capital – Ideas, knowledge, literature, software, proprietary technology and trade marks. Intellectual capital might be used as a substitute for human capital or to augment human capital and make it more productive and valuable.
  4. Material Capital – plant, property, equipment and computer hardware. The manufacturing industry often uses a lot of material capital in order to turn raw materials into finished products in an efficient way.
  5. Natural Capital – the farmland, hills, valleys, rivers, fresh air and oceans. Natural capital is the first and most fundamental type of capital upon which the other kinds are built. Unfortunately, profiteering capitalists and short sighted financiers often destroy natural capital in order to produce financial capital and maximise short term profits for shareholders.
  6. Social Capital – relationships, connection, recognition and prestige. Universities and religious institutions often produce large amounts of social capital. This form of capital would appear to be the glue which holds individuals, families, organisations and communities together.

Outsourcing Matrix

Outsoucing Decision Matrix

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The outsourcing matrix may prove useful in the consulting case interview, either as a standalone framework or as part of a larger profitability framework.

With the view to reducing costs, there are three questions that a firm would do well to consider:

  1. How long will it take to reduce major cost drivers?
  2. Are the activities strategically important?
  3. To what extent do the activities contribute to operational performance?

Outsourcing Matrix

A company will want to eliminate or outsource costly activities that have low strategic importance. If the activity has a low contribution to operational performance it can be eliminated, and if it has a high contribution to operational performance it should be outsourced.

A company will want to retain control of activities that have high strategic importance. This can be done by pursuing business as usual or by forming a strategic alliance or increasing efficiency.

Common cost reduction techniques include:

1. Procurement

  • Consolidate procurement or renegotiate supply contracts.

2. HR Management

  • Reduce labour costs through decreasing salaries, training, overtime, benefits and healthcare, introducing employee stock ownership, and right sizing.

3. Technology Development

  • Use IT and digital technology to reduce communication and organisational costs.
  • Employ more advanced production technology.

4. Logistics

  • Partner with distribution companies (e.g. FedEx).

5. Operations

  • Outsource manufacturing to a lower cost jurisdiction (e.g. China/India/other).
  • Improve the utilisation rate of plant, property and equipment.
  • Relocate headquarters to lower cost city, region or country.

6. Finance

  • Reduce working capital including inventory and accounts receivable.
  • Refinance outstanding debt.
  • Divest non-core assets.

[For more information on consulting interviews, please download “The HUB’s Guide to Consulting Interviews“.]

How You Can Use Signage To Brand Your Business

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This is a guest post from Sarah Smith.

Business owners know that they can’t attract customers if those customers don’t know that they exist. That is why they rent buildings in high traffic areas and pay large sums to place ads where people are likely to see them.

There are many ways that companies can get the word out, and with all the hype around online and social media marketing it would be easy for companies to overlook how important proper signage can be to the success of a company’s marketing strategy.

Let’s look at the link between branding and signage and list some reasons why clever signage can be an effective way to advertise your business.

Signage Can Be Simple, Affordable and Memorable

Even if someone doesn’t know what your company sells or what service it provides, he or she will recognize your brand if your signage is memorable enough. In many cases, people who see an attractive sign will want to learn more about the business behind it and what it does. Social media users may be willing to share your sign just because it looks cool and they want as many people to see it as possible. Ultimately, you are going to increase awareness for your brand, which will help to increase sales and revenue for your company.

Signage Can Be Simple, Affordable and Memorable

Signs Can Be Placed Anywhere

The best part about a sign is that you can put it almost anywhere. You could put a sign in your car window, on local bulletin boards or on a fence outside your property. If you want to reach a wider audience, you could even consider putting a sign on a public building or another area that is open to the public and which receives a large volume of foot traffic. For instance, you could put a sign on a light pole at a busy intersection.

Signs Can Be Placed Anywhere

Attract Customers From Miles Around

A brightly colored sign that is placed several hundred feet in the air can attract customers from miles around. To make it even more attractive, you could use neon lights or have it light up at night or at times that it may be harder to see. Depending on where the sign is located, you could include on it the closest highway exit to your location and the company’s web address and phone number. Doing this can allow potential customers to find your store, connect with you online or contact you by phone.

Attract Customers From Miles Around

Fence Signage Could Be Part of Your Marketing Plan

Large farms or public parks may have advertising space available on fences that surround the property or gated fences that people have to walk through to gain entry. The sign doesn’t need to be anything fancy, and a handmade sign can often be just as effective as a fence sign crafted by SiteSmart or something created using design software. If you are a startup founder looking to connect with your target audience, a handmade sign might also be seen as more authentic and fun.

Taking the time to create an effective sign can increase brand awareness, which can ultimately boost sales volume and revenues. The best part about signage is that you can be as creative as you want to be, and anyone in your company can help with the project. Signage can be an effective way to promote your business, and it is worth keeping this in mind when developing your branding and marketing strategy.

Sarah is a small business owner, and is currently learning about marketing, using the internet. Aside from working on her own business, she likes to use social media, and read travel books. Follow Sarah on Twitter.

The Perpetual Motivation Machine

The Perpetual Motivation MachineMotivation is about being in the moment, and being fully present; in that state, deciding what you want and then taking steps towards it tend to happen naturally.

How often do you hear of a baby that failed to learn to walk?

The strange thing about motivation though is that it can often feel illusive. Why is this the case?

To understand where things may have gone wrong, let’s start at the beginning.

The education system is valuable in many ways but it is also designed to provide students with the illusion of progress.

Students are almost always advanced to the next level even if they have failed to grasp basic concepts (this rarely happens in the workforce or in start-ups or in life).

Students are also forced to study a broad range of subjects, even ones which they find boring, difficult and pointless (people who tend to excel in later life usually pick activities that they find easy, interesting, and useful).

In short, one of the key lessons that the school system teaches young people is that they should persevere in the face of boredom.

And having learnt that lesson, many of us continue to do so for the rest of our lives.

Evidence of this fact is that there is an entire industry dedicated to helping people stay motivated.

Famous motivational speaker Zig Ziglar once said that “people often say that motivation doesn’t last. Well, neither does bathing – that’s why we recommend it daily.”

This is good advice in that it is helpful for people who find themselves trapped in difficult, boring or meaningless jobs. And if this is the case for you, then following Zig’s advice is probably a very good idea for the time being.

The problem with Zig’s advice though is that lack of motivation is probably a symptom of an underlying problem.

Society and our families often place subtle or direct pressure on us to shoot for the high paid or prestigious job options, even if these are not the ones which are the best fit with our interests and aptitudes.

People often talk about “selling out”, and what I think they mean by this phrase is that when we allow ourselves to accept more money or more prestige for a job which we don’t enjoy, aren’t good at, or which has little positive impact on the community, then we have sold ourselves drastically short.

Selling out costs us our time, and with it the freedom to create and produce things that we can really put ourselves into.

It can also sap our motivation, making future success just that little bit more illusive and harder to achieve.

We now live in a world where it is possible to connect and collaborate with more people more easily than ever before; all you need to find is the motivation to do so.

What are you waiting for?

Go, hurry, we need you.

(Image source: Flickr)