Giorgio Tomassetti Blog

Thesis: Entrepreneurial Orientation and Firm Performance

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 11 Oct 2011 13:57:57 PDT

The primary objective of this thesis is to determine whether firms who have a greater entrepreneurial orientation tend also to be more successful in terms of performance. In particular, I want to answer the following research question: “What is the relationship between the entrepreneurial orientation and the performance of a firm?”. This thesis is the result of a research project conducted on a set of 49 companies in the Consumer Goods sector listed on Borsa Italiana (the Italian Stock Exchange) during the year 2010. Entrepreneurial Orientation and Firm Performance - Giorgio Tomassetti The paper is composed of four parts. In the first chapter I introduce the subject of entrepreneurship. In particular, I describe the main findings and points of view on the topic of corporate entrepreneurship and entrepreneurial orientation. The research background in the first chapter allows the reader to gain a better understanding of the second chapter. Indeed, in the second chapter I describe the tools and the method used in this research project to gather the necessary data. In the third chapter, I explain the analysis I conducted on the information previously collected. Finally, the fourth chapter is about the results of my research. In this part of the paper I conclude that there is a moderate positive correlation between the level of entrepreneurial orientation and a firm’s performance and this result is coherent with previous research in the field of corporate entrepreneurship.

The Smart Shopper: How Information Is Changing The Way We Buy

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Wed, 31 Aug 2011 10:56:16 PDT

Here are two videos that help us understand the magnitude of the changes happening right now among consumers. Those of us who research a product online before going into a store and those who use their smartphone inside a store to gather more information about a product know what I am talking about.

The Smart Shopper: Constantly Connected

The Mobile Movement: Understanding Smartphone Consumers

The importance of trial and error in today's complex world

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 26 Jul 2011 13:16:25 PDT

As Tim Harford points out in a recent TED Talk presentation, 10 percent of American businesses disappear every year. However the U.S. economy is still the world's greatest economy. How can this be? It turns out that the high failure rate that exists in America is actually a good thing for the economy because it forces American businesses to evolve faster than in other countries through a process of trial and error.

There are two ways to make a decision. One is to study a problem and then find a solution and the other one is to test different solutions in order to understand the problem. Harford believes that the reason why we tend use the first technique more often than the second one is because we are affected by the so called "God complex". In other words, our brain can be easily persuaded to believe that we actually understand the world around us and therefore we can make reasonable choices based on our knowledge. The only problem is that our understanding of the world can only function if we develop some basic assumptions that allow us to reduce the uncertainty that surrounds us and frame the problem more easily. And guess what? Assumptions are not always true.
If you think that it is often hard for teachers to control a class of more than 20 students, now imagine being able to predict what almost 7 billion people around the world will do tomorrow. How likely is it?

Through technology and research, today we have a better understanding of our world, but also of our limitations as human beings living in a complex system. Trial and error is often a great way to find out what works and what doesn't. As Tim Harford points out in his talk, research shows that the use of trial and error as a way to solve problems is actually a common characteristic of successful organizations. However, even if people today realize the importance of trial and error (and it might also seem obvious to talk about it), if we think about the way we actually make most decisions in our life we realize that we rarely use this method.

If you are interested in the subject, I suggest reading Freakonomics: A Rogue Economist Explores the Hidden Side of Everything and The Black Swan: The Impact of the Highly Improbable. These two books will teach you the importance of challenging the conventional wisdom.

Lockitron: use your phone to open your door

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Sun, 26 Jun 2011 14:28:58 PDT

Lockitron is an interesting gadget that allows you to open the door of your house by using your phone. You can even allow your friends inside with a simple text message!

Groupon Inc (Case Study)

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Fri, 08 Apr 2011 21:35:29 PDT

Groupon has the capacity to maintain its leadership position in the group-buying industry by creating sustainable competitive advantages, despite the numerous competitive threats.

Groupon Inc, the group shopping website that features a new local deal every day, is the fastest growing company in the history of the Internet (Steiner, 2010) and it is now the leading player in the group-buying industry. Founded in 2008 by Andrew Mason, Groupon grew from $0 to $500 million in sales in only 18 months and it is now in 500 cities (Saporito, The Groupon clipper, 2011). Given the high growth potential, the negative working capital, and the low barriers of entry that characterize this business (Chan, 2010), many similar companies around the world tried to gain a share in this attractive and growing industry. The group-buying industry is expected to grow 138% to $2.66 billion in 2011 (Local Offer Network, 2011).
Groupon’s business model is scalable, which means that it is relatively easy to expand in different markets because the company can still use the same code and resources. Groupon should therefore leverage scalability and expand in new markets at a faster pace than its competitors, because a scalable marketplace is also attractive to new entrants and is likely to increase rivalry among existing players. Once a market is entered, it is crucial for Groupon to grow a competitive subscriber base.

Acquisitions and partnerships are additional competitive tools that Groupon can use to rapidly expand and establish a leadership position in a new market. For instance, Groupon’s purchase of the CityDeal allowed them to dominate the European market (Underwood, 2010). However, the company should not use acquisitions as a primary tool for growth because acquisitions tend to be more expensive than other approaches, and would also encourage new players to enter the industry. In countries in which cultural differences are a major issue, Groupon should seek to build partnerships as it did in China with Tencent and Yunfeng Capital (Saporito, Groupon heads to China, 2011).

The strategies outlined above will allow Groupon to continue to grow, but they cannot be successful unless Groupon develops true competitive advantages. In the period February-March 2011, for instance, revenues dropped 32% in major North American cities. One reason for this drop in revenue is the growing level of competition from companies such as LivingSocial, which during the same period experienced a 59% increase in revenue (Riley, 2011). In order for Groupon to maintain its leadership position in the group-buying industry, the company has to differentiate itself from the competition by focusing on a few key success factors. The success of Groupon is directly related to both the success of the merchants who run offers on the site and the satisfaction of those who buy the deals. According to a recent study 32% of the merchants surveyed were not profitable with the offer run on Groupon, and 40% said that they would not run a similar promotion again (McMahan, 2010).

Groupon should therefore continuously improve the quality of its service for both merchants and final customers. The company can achieve this goal by analyzing previously collected data to create a sophisticated model that can determine the optimal quantity for each deal at a certain price point.

In conclusion, Groupon should focus on expanding its customer base and maintaining its leadership position to reduce the competitive threats that characterize this industry and ensure long-term profitability for the company.

Case Study - Groupon

Photo: Duane_Brown

Case Study - Fiat/Chrysler

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Fri, 04 Mar 2011 08:27:15 PST

Despite their different background, the partnership between Fiat and Chrysler has the potential of being successful if the right mix of products is delivered in the different marketplaces and the resources are managed efficiently.
The pdf file can be found here.
Case Study - Fiat/Chrysler

Analyzing Policy: Efficiency

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Sun, 09 Jan 2011 12:48:24 PST

This is a summary of chapter three of the book “Analyzing Policy: Choices, Conflicts, and Practice” by Munger, which is about the efficiency of the market.

The author defines a market as a set of institutions, rules or informal norms, that promote exchange. In order for a market to exist, people have to have diverse preferences and diverse endowments. Also, economies of scale and specialization should be a reality.
The reason why markets have been very successful in organizing complex human activities is because they are usually very efficient. Also, markets allow a reduction of transaction costs and the gains from trade result in improved welfare for all participants.
As Aristotle points out, money doesn’t necessarily mean wealth, but money represent all other commodities and they are efficient because they reduce transaction costs of the exchange.
When talking about markets it is important to consider the concept of opportunity cost, which is the benefits you could have received by taking an alternative action. In the chapter Munger discusses a case study in which students have to choose between selling some tickets they found on the sidewalk, or use them and go to the concert. To answer this question we need to consider not much the real price of the ticket, but the its opportunity cost. Another important concept in this unit is scarcity, which implies a desire for a good or service. Without scarcity there would not be trade.

Munger also identifies the sources of market inefficiency, one of which is the so called “Pingou’s conjecture”; here the inefficiency derives from the overuse or underuse of the resource. The solution would be having the opportunity cost as close as possible to the price of the resource. The other source of market inefficiency is the “Coases’s counter-conjecture”.

According to the author there are four mechanisms for dealing with scarce resources.

Price system (markets). Markets are considered very efficient mainly because they offer information through prices and they are able to align the self-interest of the individual with the collective interest of the society by using incentives. Also, they are able to maximise the value of resources.
Queing. Queing favor those who have time to spend in line and ultimately wastes these people’s time. It is also not an efficient system.
Chance. Everyone is traded the same and this might feel fair to some people, but the allocation of the resources is random and this usually results in inefficiency.
Authority. This system favors those who are in power and those who are close to them and this means that corruption and favoritism are very likely.

In terms of information, prices are able to signal scarcity and determine wealth.
Munger also describes in this chapter the advantages of a simple barter economy and he does that with the use of the Edgeworth Box where the indifference curves represent people’s preferences. The equilibrium point is where the indifference curves are tangent to each other, even though all points on the contract curve (the set of potential equilibrium points) are Pareto optima.
After stating the advantages of a barter economy, Munger introduces the function and the advantages of using money as an accepted medium of exchange. First of all, the use of money reduces transaction costs. Indeed money are both a unit of account and a store of value since they do not easily deteriorate.
In the last part of the chapter the author lists the characteristics of a good currency, such as being widely accepted and durable.

Three Visions for Books in the Digital Age

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Thu, 20 Jan 2011 14:05:51 PST

IDEO made this very interesting video on the future of book. Definitely worth watching.

The Future of the Book. from IDEO on Vimeo.

From: fastcodesign.com

100 Things to Watch in 2011

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Sat, 01 Jan 2011 17:09:33 PST

JWT: 100 Things to Watch in 2011

View more presentations from JWTIntelligence.

From: Kedrosky

How Attracting More Foreign Skilled Workers and Entrepreneurs Can Improve the U.S. Immigration Policy

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 28 Dec 2010 13:56:02 PST

Immigration is an extremely complex topic of our time and the future of the United States will be partially shaped by the decisions and the actions taken today on this matter. In this paper, I want to answer the following question: how can we improve our immigration policy by attracting the best minds from all over the world and why this is important for the U.S.?

Justice: What's the Right Thing to Do

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 21 Dec 2010 18:51:57 PST

In this post I want to summarize the main ideas described in the book “Justice: What's the Right Thing to Do?” by Michael J. Sandel.

In this book the author explores the whole concept of justice and how differently it can be perceived by each one of us. He does that in a very effective way by forcing the reader to face real life situations in which he is suppose to decide what the right thing to do is.
In the first chapter he presents us with three case studies. In the first one he talks about laws against price gouging, and in particular he talks about what happened to prices in Florida after Hurricane Charley. As the author points out, the arguments for and against price-gouging law revolve around three ideas: welfare, freedom and virtue. Then the author goes on debating over who should qualify for the Purple Heart. In order to solve this problem we need to first understand which virtues we want to honor with this medal

The last case study is about the recent bailout that followed the financial crises, and in particular the author discusses the way people felt about the bonuses that the top management of firms involved received. Although some thought that bonuses were necessary, most people believed that they were unjust mainly because they rewarded failure instead of success.

Sandel outlines three approaches to justice that help us understand they way people make decisions and he talks about each one of them throughout the book. The first one is the idea of maximizing welfare or, in other words, the concept of utilitarianism. The second approach is related to freedom and individual rights and the third sees justice as a concept related to virtue and good life.

Before describing the different approaches to justice, the author talks about the so called “moral dilemmas”. We can explain them by using the morally reasoning process, which leads each one of us in different directions based on our moral instincts and on the way we reflect and justify our choices. Conflicts in this case might be caused by incomplete reasoning or conflicting moral imperatives.

In chapter two Sandel discusses the concept of utilitarianism by comparing two different approaches. The first one is the one of Jeremy Bentham, which is more focused on maximizing pleasure and minimizing pain in order to maximize the overall utility, even though the rights of the individual might be ignored, for example in the case of torture. Also, this view is based on the idea that it is possible to measure moral goods on a single scale but in reality this is very hard to do. The second approach is John Stuart Mill’s version of utilitarianism, in which people should be free to do whatever they want, provided they don’t harm to others. Also Mill believes that there are higher and lower pleasures.

Chapter three is about Libertarianism which is based on the idea that government should be minimal and the individual should be free to choose on his own. Libertarians oppose paternalism, moral legislation and redistribution of income. Those who oppose libertarianism argue that, for example, taxation is good because we are part of society and we need to contribute. Also, they believe that rich people should give back because their wealth is partially created by the society. Sandel then discusses the implications related to the buying and selling of organs. Then the book goes on talking about markets and morals and how the free market can be based on either freedom (libertarian case) or welfare (utilitarian).

Chapter five talks about the importance of motive and Kant’s view on this. He believed that morality was about respecting people, no matter who they were, which means doing the right thing just because it feels right.
After that, Sandel discusses the concept of egalitarianism through John Rawls’ view, also explains how it differs from the libertarianism and the utilitarianism view. Rawls believed that people desire equality in terms of basic liberties and in terms of social and economic life.

Chapter either is dedicated to Aristotle view of justice which is about rewarding the right virtues, which are learned through experience, while chapter nine is about loyalty in a social meaning and it goes through different issues: from immigration to family obligations. Finally, in chapter ten Sandel expresses his feelings about what is going to be the new politics of the common good with some practical applications (abortion and stem cells, same sex marriage).

Accept payments everywhere with Square

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 21 Dec 2010 19:11:32 PST

Square is a company that allows you to receive payments using your phone. They provide you with a free card reader that you can plug in your mobile device and then for each transaction you pay a percentage based fee.
The idea behind this product is very innovative and allows anyone to easily receive payments anywhere.
Payments made by card are likely to increase in the coming years and Square could take advantage of this trend by targeting small businesses.

Wondering what a Stock is? Take a look at this infographic

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Fri, 22 Oct 2010 13:32:12 PDT

Although the word "stock" could sound like a complicated concept to grasp, as you can see from this infographic, this is not true.

Personal Finance Software - Mint.com

Khan Academ: the biggest online school in the world

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Wed, 13 Oct 2010 15:24:54 PDT

In this video Salman Khan talks about his website Khan Academ, which is a collection of videos in which he teaches a wide variety of subjects, from algebra to chemistry. There are more than 1600 educational videos and it is now the most used open course video library on YouTube. The site is completely free and anyone from around the world can access it.

Articolo sulla Prealpina

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Mon, 10 Jan 2011 19:20:05 PST

Ringrazio Lucia Landoni per l'articolo sui miei siti che è uscito sulla Prealpina la scorsa settimana.

Who Cheats More: Bankers or Politicians? Italians or Americans?

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Sat, 17 Jul 2010 05:58:10 PDT

Behavioral economist Dan Ariely describes an experiment he conducted to test the relative prevalence of cheating in various countries and cities. After revealing that bankers in New York cheated more than congressional staffers on Capitol Hill, Ariely quips: "They're junior politicians...more research is needed."

Complete video at http://fora.tv/2010/06/07/Dan_Ariely_The_Upside_of_Irrationality

Learn How Google Works with this Infographic

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 13 Jul 2010 07:37:37 PDT

Finally an infographic that explains the way Google works. In just a few words you get a sense of how the most popular search engine indexes pages.

Infographic by PPC Blog

Drive: The Surprising Truth About What Motivates Us

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 25 May 2010 13:26:42 PDT

This lively RSA Animate, adapted from Dan Pink's talk at the RSA, illustrates the hidden truths behind what really motivates us at home and in the workplace.

Drive: The Surprising Truth About What Motivates Us

Learn how the Bloom Box works

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Sat, 27 Feb 2010 08:03:16 PST

Bloom Energy has developed a new kind of fuel cell that is generating a lot of buzz. Their Bloom Box, which is really small and less expensive than other energy sources, will enable homes and businesses to generate their own electricity and get off the electrical grid. They already have some customers, such as Walmart, Google, eBay and FedEx.
You can learn more about the Bloom Box with the following video.

Watch CBS News Videos Online

From: DigitalTrends

GapMinder - The world explained in graphs

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Tue, 26 Jan 2010 10:24:35 PST

Researcher Hans Rosling uses his cool data tools to show how countries are pulling themselves out of poverty. He demos Dollar Street, comparing households of varying income levels worldwide. Then he does something really amazing.

You can pay around with this graphs on the GapMinder website.

The correlation between demographics and the S&P 500

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Wed, 20 Jan 2010 06:55:37 PST

The correlation between the S&P 500 and the number of people entering the prime savings age of 35 - 39 years shown in the chart is pretty interesting and, I would say, understandable. But the chart makes the stock market look a little bit like a ponzi scheme.
The good news is that U.S. demographic trends argue for a multi-decade bull run.

From: Business Insider

Why is Google different? Look at their offices!

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Mon, 21 Dec 2009 10:53:00 PST

Google (GOOG) opened a new office in Kirkland, Washington -- just outside of Seattle. It's got a climbing wall, bean bags and a huge cafeteria. There's a puzzle embedded in the carpet! You can plug a USB card into the workout machines in the gym.

Source: Business Insider

The real price of bottled water

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Fri, 11 Dec 2009 12:48:32 PST

Far too many countries purchase bottled water instead of just purchasing it from the tap. Not only is this common practice wasteful, the water consumed is frequently less safe than what comes out of your faucet. Read more about the truth of bottled water in this graphic.
Click here to view the infographic.

The Future of Marketing by Eric Schmidt, CEO of Google

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Sat, 28 Nov 2009 04:56:11 PST

In this video from the ANA Annual Conference "Masters of Marketing" in Phoenix, AZ, Eric Schmidt, CEO of Google, talks about the future of marketing and the role that technology will play. He believes that location is going to be an important piece of information in every successful marketing campaign, in order to deliver targeted adverising. He also emphasizes the importance of measurements in both the online and off-line world.

Bill Gates and Warren Buffett at Columbia Business School

giorgiotomassetti@gmail.com (Giorgio Tomassetti) — Thu, 19 Nov 2009 08:41:56 PST

On November 12, Bill Gates and Warren Buffett sat down together and took questions from students at Columbia Business School in New York City.

Gates and Buffett, other than being the richest people in the world, are great friends. In this video they share their thoughts about business, philanthropy and a lot more.