Renaldo Niţă

Senior Trainer & Consultant

 Understanding people  Sound physical and
 Integrity mental condition
 Courage  Professional behaviour
 Objectivity and politeness
 Ambition  Consistent behavior
 Ability to solve and actions
problems  Confidence
 Analytical skills  Sound intellectual
 Communication skills capacity
 Psychological maturity  Creativity
 Empathy and kindness
 Ability to identify problems (diagnosis)
 The ability to find solutions
 Knowledge and technical expertise
 Communication Skills
 Marketing and sales skills
 Management Skills
◦ Cohen, How to Make It Big as a Consultant
 The rendering of independent advice and
assistance about management issues. This
typically includes identifying and investigating
problems and/or opportunities,
recommending appropriate action and helping
to implement those recommendations.
◦ The Management Consultancies Association (MCA),
which represents the major UK consultancy firms
 The service provided to business, public or
other undertakings by an independent and
qualified person or persons in identifying and
investigating problems concerned with policy,
organization, procedures and methods,
recommending appropriate action and
helping to implement those
recommendations.
◦ The Institute of Management Consultants
 an advisory service contracted for and
provided to organizations by specially trained
and qualified persons who assist, in an
objective and independent manner, the client
organization to identify problems, analyse
such problems, recommend solutions to these
problems and help, when requested, in the
implementation of solutions.
◦ L Greiner and R Metzger, Consulting to Management
(1983)
1. identifying a problem
2. recommending a solution
3. helping with implementation
1. Business Consulting – Introduction. The
Competencies and the Industry
2. The History of Modern Business Consulting
3. The Consulting Process: Initiation and Offer
4. The Consulting Process: Diagnosis 1 -
Diagrams
5. The Consulting Process: Diagnosis 2 – Tools
for Analysis
6. The Consulting Process: Planning activities
7. The Consulting Process: Implementation
8. The Consulting Process: Closing the mission
9. Financial Analysis in Consulting: Cash Flow,
Profit and Loss Statement, Balance Sheet
10. Financial Analysis in Consulting: Costs,
Breakeven Point
11. Financial Analysis in Consulting: Analysing the
organisational performance, Performance
Indicators
12. Investment Appraisal
13. Marketing consulting services
14. Etics in consulting
 DATES ACTIVITY

02.10.2017 – 20.12.2017 Courses

21.12.2017 – 03.01.2018 Christmas Holiday

04.01.2018 – 20.01.2018 Courses

21.01.2018 – 11.02.2018 Exams

12.02.2018 – 19.02.2018 Winter Holiday

 Time table – 17:00-20:00
 To receive from you:
◦ List of students (alphabetical order,
surname/name in different columns,
CAPITALS) in Excel
◦ List of project groups (in Word)
◦ List of groups and case studies (in Word)
◦ Contact details
1. Attendance – min. 3 (intermediary test + final
exam not included) – 10%
2. Video sequences – 10%
3. Case Study: Analysis + Presentations – 30%
4. Intermediary Written Test (date to be
confirmed) – 50%
a) Assessment Score = 100%

b) Final written exam – 100%

OAS = (Assessment Score+Exam Mark)/2

 Students who do not attend minimum 3
courses/seminars (case study presentation
+ intermediary test + final exam not included)
cannot enter the final examination
 Students who do not attend the Intermediary
Test cannot enter the final examination
1. Why did Enron fall?
2. Rosia Montana – Yes or No?
3. Bernie Madoff's Scam
4. The Failure of Windows Vista
5. The decline of Nokia (mobile phone
manufacturer)
6. Petrobras Oil Scandal
7. The decline of Kodak
8. Swiss Air Bankruptcy
1. Introduction – Objectives + Short history
2. Analyses
◦ Main stakeholders analysis
◦ PESTLE analysis
◦ SWOT analysis
◦ Porter’s 5 Forces Analysis on the Industry
◦ Multiple cause diagram or Ishikawa diagram – to deduct
main causes
3. Conclusions
4. Recommendations - Possible solutions/strategies
◦ With SMART objectives
5. Implementation
◦ Action plan + Gantt chart
6. Bibliography/References
 Reports (in MS Word format) + ppt. slides will be
send in (by e-mail) by Monday before the
presentation day
 Presentations will be made in groups order
 Presentations will be in ppt and will last min. 15
min. – max. 20 min.
 Each group member should deliver a part of the
presentation
 First presentation: Gr. 1 on 17th of Oct.
 Next presentations: Gr. 2 on 24th of Oct., Gr. 3 on
31st of Oct. etc.
 The group to present must bring its own laptop!
 KUBR, Milan, Management Consulting – A Guide to the
Profession, 4th ed., International Labour Office,
Geneva, 2002
 COHEN, William A., How to make it big as a
consultant, 4th ed., AMACOM, 2009
 SADLER, Phillip, Management Consultancy – A
Handbook of Best Practice, Kogan Page, 1998
 CURNOW, Barry & REUVID, Jonathan, International
Guide to Management Consultancy – The Evolution
Practice and Structure of Management Consultancy
Worldwide, 2nd ed., Kogan Page, 2003
 www.freebookspot.es
 www.scribd.com
 http://e-library.net
KUBR, Milan, Management Consulting – A
Guide to the Profession, 4th ed.,
International Labour Office, Geneva, 2002
 Chapters: 1-3, 7-11, 20-24, 26-27 and
Appendices 1, 3-7
 You are required to watch 10 video
sequences throughout this course
 The video sequences are shown in the next
slides
 The students will discuss main ideas from
each video sequence during each seminar
 Questions from the video sequences will be
asked in the seminar and in the final exam
1. The Trouble with Experts/Necazul cu expertii (17
Oct)
2. In premiera: Uite, UE nu e (24 Oct)
3. In premiera: Condusi din umbra (31 Oct.)
4. In premiera: Magnati de rumegus (7 Nov.)
5. Case Interview (Bain & Company) (14 Nov)
6. In premiera: Strict secret – Aurul Romaniei (21 Nov)
7. The Light Bulb Conspiracy (28 Nov)
8. How The Economic Machine Works (5 Dec)
9. Ce sunt banii și cum funcționează băncile (12 Dec)
10. Wag the Dog (1997) – 10 Ian. 2018
1. The Trouble with Experts/Necazul cu expertii
http://www.dailymotion.com/video/x5npl26
2. In premiera: Uite, UE nu e
http://inpremiera.antena3.ro/reportaje/uite-ue-
nu-e-390.html
3. In premiera: Condusi din umbra
http://inpremiera.antena3.ro/reportaje/condusi-
din-umbra-387.html
4. In premiera: Magnati de rumegus
http://inpremiera.antena3.ro/reportaje/magnati-de-
rumegus-371.html
5. Case Interview (Bain & Company)
http://www.bain.com/careers/interview-
preparation/case-interview.aspx
6. In premiera: Strict secret – Aurul Romaniei -
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy -
https://www.youtube.com/watch?v=-
1j0XDGIsUg
8. How The Economic Machine Works -
https://www.youtube.com/watch?v=PHe0bXAIuk
0
9. Ce sunt banii și cum funcționează băncile -
https://www.youtube.com/watch?v=ATDxwSraUl
k
10. Wag the Dog (1997) – movie, thriller
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
 Arthur D. Little (1886) – MIT Professor
◦ Tehnical research towards general management consultancy
 Booz Allen Hamilton (1914) - Edwin G. Booz
◦ management consultancy
◦ first to serve both industry and government clients
 McKinsey & Company (1926) - James O.
McKinsey
◦ professor of Managerial Accounting at the University of
Chicago Booth Business School
◦ First company to offer both strategy and management
consulting
◦ The modern version - Marvin Bower – father of modern
management consulting professional standards for laywers and
consultants
 Attitude - in the US it was natural to access
paid competences from outside the
organization to solve business problems
 Education level of US directors was much
smaller than those in Europe
 Research - In the 60-70 - Booz Allen,
McKinsey, BCG and Harvard Business School
have developed tools and approaches that
have defined strategic management
 Accenture former Arthur Andersen – Enron
2001
 IBM Global Services took over PwC Consulting
 Big Four: PriceWaterhouseCoopers, KPMG, Ernst
@ Young, Deloitte Touche Tohmatsu –
accounting firms
 Present trend – a clearer segmentation
◦ McKinsey, Bain, BCG – strategy
◦ Accenture, Capgemini - generalist – diversification for
achieving a greater volume with lower margins
 FEACO - Fédération Européenne des Associations de
Conseils en Organisation (Paris, 1960)
 ICMCI - International Council of Management
Consulting Institutes (UK, 1987)
 AMCF - The Association of Management Consulting
Firms (US, 1929)
 IMC – Institute of Management Consultants (US,
1968)
 MCA - Management Consultancies Association (UK)
 AMCOR - Asociația națională a firmelor de
consultanță și training în management
 accountancy-based firms
 IT companies
 small- to medium-sized independent
consultancies
 business school-based consultants
 sole practitioners - freelancers
1. Pitching (and Selling, Marketing)
2. Research
3. Analysis
4. Reporting
5. Implementation
6. Administration
 The need for personnel
 The need for fresh ideas
 Company politics
 The Need for Improved Sales
 The Need for Capital
 Government Regulations
 The Need for Maximum Efficiency
 The Need to Diagnose Problems and Find Solutions
 The Need to Train Employees
 The Need for a Complete Turnaround
 Computers and Data Processing
1. Special knowledge and technics
2. Temporary specialised intensive assistance
3. Objective/Impartial point of view
4. Justifying decisions in front of the
management board
5. The need for organisational/individual
learning
◦ Milan Kubr, Management Consulting
 Lack of a Written Business Plan
 Unexplained Low Morale
 Steady, Constant Increases in Costs
 Regular Cash Shortages
 Chronic Delays or Late Deliveries of Products
 Loss of Market Position
 Overworked Staff
 Excessive Rework Without Achieving Objectives
 Continual Supply Deficiencies
 Lack of Information About the Competition or
Market
1. Can you add something worthwhile to the
company’s total output?
2. Will your expertise bring the company any closer
to its goals?
3. Can you make the company work more
effectively?
4. Will you save the company time?
5. With the budget available, can you do a
comprehensive and effective job
 James Svatko
 You can work as/when you like
 You have control over own working time
 It is an opportunity to develop new skills
 No high costs
 Free high returns
 You are your own boss - flexibility and
freedom
 You can own your own company
 You need to look for clients on your own
 When you start a project, you must finish it
 Your income can fluctuate
 You can not blame others
 You don’t have someone to discuss things
 Longer working hours
 Bedside Manner
 The Ability to Diagnose Problems
 The Ability to Find Solutions
 Technical Expertise and Knowledge
 Communication Skills
 Marketing and Selling Ability
 Management Skills
◦ Cohen, How to Make It Big as a Consultant
 understanding people  good physical and mental
 integrity health
 courage  professional conduct and
 objectivity courtesy
 ambition  behavior and actions
consistent
 problem-solving skills
 confidence
 analytical skills
 good intellectual capacity
 communication Skills
 creative imagination
 psychological mature
 A tehnical dimension – identifying, analising
and solving problems in organisations
 A human dimension – the relationship
between client and consultant; the way the
staff from the client’s organisation react to
changes – the consultant can help them plan
and implement
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 First contacts with the client
 Preliminary diagnosis
 Planning the mission
 Clarifying roles
 Proposals made to the client
 Consulting contract
 Identifying facts
 Analising and synthesizing facts
 Detailed examination of the problems
 Designing solutions
 Designing options
 Offers made to the client
 Planning for implementation
 Offering assistance to implementation
 Improving/updating offers
 Training
 Many consultancy missions end up before
the implementation stage (just with a report
presenting an action plan)
 Assessment
 Final report
 Checking upon each party;s responsabilities
 Follow-up planning
 How The Economic Machine Works – 18 Oct.
https://www.youtube.com/watch?v=PHe0bX
AIuk0
 Plus Group 1 Case Study Presentation
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
1. A tehnical dimension – identifying,
analyzing and solving problems in
organisations
2. A human dimension – the relationship
between client and consultant; the way the
staff from the client’s organisation react to
changes – the consultant can help them
plan and implement
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 the period between the invitation to discuss a
possible assignment with a client and the
award of a contract to the selected
consultancy (Kubr, 1996)
 Objectives:
◦ understanding
◦ relationship building/selling
◦ contractual
 is very much a matching exercise
 the client wants to be sure that he is dealing
with the right consultant, and
 the consultant needs to be convinced that he
is the right person/consulting organization,
to address the problems of this particular
client
 is also important in building relations with
the potential client as it may enhance the
reputation of the firm or result in being asked
to bid for a future assignment
 the first impression you make with your client
should be the very best (appearance +
behavior)
◦ dress as neatly as possible, and
◦ try to look as much as possible like your client
 look and act like a professional
 be friendly and build empathy (doctors)
 Letitia Baldrige’s New Manners for New
Times: A Complete Guide to Etiquette, 2003
1. Armeş, Nicolae, Codul manierelor elegante, Editura
Prut, Chişinău, 2005
2. Baldrige, Letitia, Codul manierelor în afaceri, Editura
A.S.E. World Enterprises, Bucureşti, 1990
3. Dragostin, Mioara, Ghid practic de vestimentaţie pentru
profesionişti, Colecţia Hexagon, Editura Polirom, Iaşi,
2005
4. Marinescu, Aurelia, Codul bunelor maniere astăzi,
Editura Humanitas, Bucureşti, 2002
5. Post, Peggy, Codul universal al bunelor maniere, vol. 1-
3, Editura Antet, Bucureşti, 2002
6. Sabath, Ann Marie, Codul bunelor maniere in afaceri –
Avantajul competitiv al profesionalismului de azi,
Editura Vremea, Bucureşti, 2002
 CONSULTANT
 Gaining economic benefit
from the assignment
 Understanding the real
problem or issue the
client faces
 Making sure that the firm
has the competence to
deliver a good result
 Convincing the client that
this firm is the one to
choose
 Signing a legally binding
contract that results in
fees being paid
 Enhancing the reputation
of the firm even if the bid
is not won
 CLIENT
 Gaining economic
benefits from the results
of the intervention
 Matching the
consultancy’s view with
its own understanding
 Understanding the
capabilities of the
consultancy firm
 Being convinced that this
consultancy firm is the
best and will deliver the
expected value
 Signing a legally binding
contract that will result in
the benefits being
delivered
 Reinforcing the belief that
appropriate firms were
chosen to bid
 Take notes (written, recorded)
 Use active listening
 Interpret body language
 Hold off on giving advice
 Ask for the assignment
 Tell your client how you bill
 Follow up with a letter confirming exactly
what you will do next and the compensation
you will receive
 Many engagements, especially the larger ones,
require a formal proposal and additional analysis
on your part to determine:
◦ the appropriate methodology
◦ the time frame and
◦ the price for your services
 Therefore, at the end of the initial interview, you
will not be in a position to offer a proposal, only
to indicate when you will submit one
 Ascertain whether you are the only consultant
being contacted or whether your proposal must
compete with others
1. What problem needs solving?
2. Exactly what does the client want you to do?
3. How will you know whether the objectives
have been met?
4. Should you watch for particularly sensitive
issues?
5. Who will be your main point of contact?
6. Will there be a backup contact?
7. What authority does each player have?
 find out exactly why the client is seeing you
 some clients will blurt it out immediately;
others will say very little, not wanting to
reveal the full story until they know more
about you
 you must draw them out and understand
exactly why they are seeing you (reason)
 You need to have the objectives explained
explicitly once the reason for the assignment
has been determined
 For example, maybe this is a personnel
problem:
◦ Does she wish to decrease employee turnover?
◦ Does he wish to increase sales?
◦ Is there a problem in new product development,
with too many unsuccessful products?
 At first glance, the answer might seem obvious
- If sales are bad, the objective will be to
increase sales
 There is much room for a difference of opinion
 Will your client be satisfied if turnover
decreases 25, 10, 5, or 1% or if sales increase
5, 10, or 15%?
 You are looking for an exact figure so that
both you and your client will know when the
specified objectives have been met (SMART)
 As an outsider - you may stumble onto some
complicated political situations in the org.
 Certain individuals/subjects may be off limits
for interviews
 If you are not sensitive to these political
issues, you could end up leaving the company
in a much worse situation than when you
came, even though ostensibly you solved the
client’s problem
 Demonstrate the finesse of a real pro
 Usually this is the individual who contacted
you first, but not always
 The only way to find out is to ask
 Be certain that you have the name, title, e-
mail address, and telephone number of this
key individual
 Even if your main contact plans to be
available throughout the assignment, request
a backup contact
 Always ask for the name of someone else in
the company with the necessary authority on
your project, and get his/her title and contact
details
 A player (stakeholder) is anyone who has an
impact on your engagement
 Take time and trouble to identify the players,
their responsibilities, and their authority
 Otherwise you could find yourself
misdirected, either innocently by well-
meaning individuals or deliberately by those
within the company who have a different
agenda
1. Agreeing the brief and 2. Planning the project
its scope ◦ Conceptualizing
◦ Active listening ◦ Structuring
◦ Effective questioning ◦ Understanding
◦ Business understanding consultancy’s resources
◦ Conceptualization of vague and capabilities
situations ◦ Project management
◦ Ability to relate to the 3. Preparing the
client. proposal
◦ Professional selling ◦ Scoping
◦ Clarifying ◦ Estimating time and costs
◦ Problem-solving skills ◦ Proposal writing
◦ Creative thinking ◦ Contract law
◦ Negotiating (sometimes) 4. Presenting the
proposal
◦ Presentation skills
 Questions in the entry phase
and in the diagnosis phase
See How to Make it Big as a Consultant, Appendix C
 Organisation, address, contact details
 Products/services
 Subsidiaries in/outside the country
 Management board – functions and roles
 Departments – Organisation chart
 Primary contact for this engagement
 Backup contact for this engagement
 What are the main products/services?
 What is their use?
 What % of production is custom/standard
manufacture?
 What % of production is private label for
someone else or sold under your own name?
 What percentage of your total work do you
subcontract?
 Who are your major subcontractors?
 Are you satisfied with their work?
 How seasonal is your production?
 Who are your customers?
 What do they value?
 Total industry sales, your sales + market share,
major competitors’ share in the last 5-10 years
 List your products/services, the channels used to
distribute them, and your approximate % share of
each market
 What new competitors have entered the
marketplace in the past 5 years?
 If you have any done unusually well, in what
markets, with what products, and why?
 How many different individual products do you
manufacture?
 How many times is your average product
purchased by the same customer in a single year?
 What % of your customers are repetitive
customers?
 What is the average purchase life of your
customers?
 Why do they stop buying from you?
 Which of your products have the highest margins?
 Do you have an ongoing market research
program?
 If you make use of internally generated market
research, which organizations within your
company provide this research, and what research
do they provide?
 What segments of the market do your present
customers represent?
 Who makes the purchase decision for your
product?
 How do you decide on the price for your products?
 Is your distribution local/regional/national/
international? In what areas?
 What are your strongest regions/countries?
 What systems of distribution do you use?
 How do you subdivide your product lines in
your sales organization?
 How do you decide on methods of
distribution and which distributors to use?
 Do your salespeople, agents, or distributors have
exclusive territories?
 How many people do you have selling your
product, and what are their responsibilities?
 How do you motivate your salespeople?
 Do you offer any special sales incentives?
 What aids to selling do you, your distributor, or
your agent provide to people selling your product?
 Do you provide any type of formal sales training?
Explain type, subjects, length of programs, etc.
 What media do you use to promote to your
customers?
 What advertising (including direct mail and
telephone) have you done, and what were the
costs over the last year? What were the
results?
 How were results measured for these ads?
 Have you used the Internet for advertising?
What were the results?
 Do you have an advertising agency?
 What are the revenues and expenses for the
period under study (to determine the profit)
 What is the amount of gross revenue from
sales of your goods/service (gross sales)?
 What is the amount of goods returned by
your customers and credited (returns and
rejects)?
 Cost of goods sold, wages and salaries, rent,
utilities, supplies
 What is the level of your financial ratios for
the last 5-10 years?
Summary
1. Don’t sell more than you can deliver
2. Don’t take assignments that you are not
qualified to take (you have no competences
for them)
3. Don’t denigrate your competitors
4. Don’t sign contracts unless you know that
you can deliver added value to your client
5. Be as effective in both selling your services
and offering quality for your client
6. Your client’s needs and wishes should be at
the basis of the relationship with your clients
 Active listening your client
 Follow your client’s body language
 Don’t interrupt your client unless is way out of
the subject
 Stimulate your client to talk – I see, Aaaaa, So
 Rephrase for better understanding: correct me
if I’m wrong, but you want to say that …, in
other words what you want to say is …, let me
clarify this …
 Summarise after main subjects and in the end
 Use many “Why?” for finding causes
 In the end, make a summary of the meeting
and of the main ideas – these will be the basis
for your offer
 Take your time and note all the important ideas
as rigorous as possible
 “If I understand correctly, the main objectives
for this assignment are … because of …”
 Take notes –agenda, laptop or tape recorder
 Find out everything you can about your
client – brochures, annual reports, internet,
mass-media
 Don’t hesitate to ask info after you left the
meeting (phone, email)
 Restrain from giving away advice
◦ You don’t have all the info and you might be
wrong
◦ You are not paid (yet) 
 In premiera: Uite, UE nu e
http://inpremiera.antena3.ro/reportaje/uite
-ue-nu-e-390.html
 Plus Group 2 Case Study Presentation
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
 finalizes the agreement
 documents what you are going to do
 documents the time frame of your
performance
 documents what you are going to
receive for your services
 forms the basis for a contract
 specify the objectives for and the
approach to the assignment, based on
an agreed understanding of the
problem
 be a persuasive selling document
 be the basis of a legally binding
contract
 Keep the structure clear and logical
 Use a professional but friendly style
 Don’t spring surprises in your
proposal
 Double-check before you send
1. The tehnical section
2. The personnel section
3. Consultant’s/Company’s experitize
and experience
4. The financial section
◦ Kubr, Milan, Management Consulting, p.
180
1. Introduction
2. Background
3. Objectives
4. Study methods
5. Potential problems
6. Data flow charts and product development
schedules
7. The finished product
8. Cost and payment information
9. Converting a proposal into a contract
1. Introduction (following our meeting …, as
we have agreed in our meeting of the …)
2. The context and the problem
3. Objectives
4. Methods and approach
5. Possible risks
6. Planning activities/Mission length
7. Mission assessment (Final reporting)
8. Costs and payment
9. Presenting the team
1. The problem (described in the context of the
client’s business situation, strategy and
competitive position)
2. The anticipated benefits of the assignment
a. The methods and approaches the consultancy will
use
b. The results that are expected from these
approaches
3. The experience and staffing of the consultancy
a. Experience and capability of the firm
b. Professional staffing
4. Standard terms and conditions
a. Professional fees and expenses
b. Billing arrangements
c. Standard terms and conditions
 Appendix 1: Resumés of the key professionals
who would work on the assignment
 Appendix 2: Client list and examples of
relevant assignments
 Appendix 3: Technical explanations (of
methods, techniques etc.)
 Which law?
 What is a day?
 What are expenses? Is the client clear
about what may or may not be
charged?
 Cancellation conditions and charges
 Copyrights, rights to use materials
 Confidentiality rules
 Force majeure/casus fortuitus
 e.g. A RESEARCH PROPOSAL FOR: An
Investigation of the Seasonal Sales Trend of
Unique Sales Co., Inc.
◦ See: Cohen, William, How to Make It Big as a
Consultant, p. 82-85
 The client’s expectations from the
presentation
 Whether or not a formal presentation is
wanted
 The time allowed for a formal presentation
and for discussion
 Who will be there and what their interests are
 Which other firms have been asked to
present
 What the batting order is for presentations
 Prepare it carefully
 Rehearse it so you can keep strictly to the
time allowed
 Make it client-centred, stressing what is
important to them
 Do not always follow the proposal literally:
keep to key points and change the order to
suit the situation
 Make sure all visual aids are of a high quality
 Decide who is to attend and the role
of each
 Build in flexibility
 Encourage discussion
 Try not to bore them – yours may be
the umpteenth presentation they have
seen that day
 use the bid opportunity as a chance to learn
 if you win – speak to the client to find out
why your organization was preferred to the
others (but do not appear to be surprised!)
 if you lose – ask the client, without
appearing to criticize their decision or trying
to alter it, what the reasons were for their
choice and where your bid was lacking
 it can build a relationship with the client and
is a good way of gaining information about
competitors
1. Low-price strategy
2. High-price strategy
3. Meet-the competition strategy
 penetration pricing
 can work for new consultants
 enter the marketplace with a price
lower than those of your competitors
 you will be able to attract more
business than you could otherwise
 you have to work harder to make the same
amount of money than the others
 price has an image connotation – low price
means “cheap” - you may be given only the
less rewarding types of assignments, not
those that provide high exposure to top-
level management
 you may find it extremely difficult to raise
your price later - two different prices for
old/new clients
 is somewhat more risky
 you are telling the world that you are worth
more money
 your image is that of a high-quality
consultant
 however, your potential clients may not
believe you
 you had better be what you advertise
 in some cases, you may find that clients will
not even want to engage your services if you
charge too low a price
 approx. the same as your competitors
 if you choose this strategy, you must offer
something else in addition to your regular
services. Otherwise, why should anyone deal
with you?
 Differential advantages:
◦ quicker service
◦ specialized additional services not offered by
anyone else
◦ around-the clock availability to answer consulting
needs
◦ quicker results
◦ better results
 Industry Pricing – adjusting the price
on major (oil, IT, energy, banking) and
minor (ONGs) industries
 Client Price Adjustment - adjusting
the price on the client – private/state,
big/small
1. Daily/Hourly
2. Retainer
3. Performance
4. Fixed price
 you receive a constant monthly fee in return for
a guarantee that a certain number of your hours
will be available to your client
 most consultants are willing to take a retainer
at a reduced fee to ensure that money comes in
every month
 gives a guaranteed income and cash flow
 if the hours are not used, you get paid anyhow
 guarantees that you will work for your client
when needed and that he gets first priority on
your time
 compensation based on results
 for every EUR saved through your
recommendations, you might get 25
cents
 a good marketing tool
 putting all terms in writing is critical
 tying performance to profits is a mistake
because profits can be manipulated for
accounting or taxation purposes
 some clients will not accept a daily or hourly rate;
they prefer a fixed-price contract
 you agree to do a certain job and get paid a fixed
amount
 number of hours you work on the project is entirely
up to you
 you can make more money, but at a greater risk
because you guarantee accomplishment
 you need to cover: Direct Labor, Overhead, Direct
Expense + Profit
 some clients, especially the government, require full
disclosure of billing
1. Carefully document exactly what you
are required to do
2. Use good estimating techniques
3. Pad your estimations; overestimate a
little to allow for miscalculations
4. Control your costs closely
5. Be sure all changes to the contract
are put in writing
 you agree to do a certain job for a
predetermined amount
 with few exceptions, no price adjustment
is made after the award of the contract,
regardless of your actual cost in
performing it
 you assume all the cost risk
 if your estimate is poor, you can actually
lose money on a fixed-price contract
 if you can reduce the cost below the
original estimate, you have the potential
for making increased profit
 the more certain you are of your cost
and your potential for reducing it, the
more willing you should be to enter
into a fixed-price contract
 the more difficult it is to estimate a
particular job, the more risk you
assume and the less willing you should
be to accept such a contract
 with all types of contracts, accurate
estimating is important, but with the
fixed-price contract, it is crucial
 you are paid on your actual cost of
performing the services i.e. your time plus
related expenses such as the cost of
reproducing your reports
 some clients will not accept it; they want to
ensure that the project is actually completed
within a certain budget
 alternative - break the overall task into subtasks
OR a not-to-exceed clause in the contract
 Alternatives:
◦ cost + fixed fee
◦ cost + incentive fee
 fixed-fee type– the consultant is paid a total of
the cost plus a fixed amount agreed to by both
parties prior to performance
 incentive-fee type – the consultant is paid the
cost plus a variable incentive fee tied to different
levels of performance agreed to in the contract
 based on quantifiable results: cycle time
reductions, inventory reduction, margin
enhancements, profit improvements or
revenue increases
 your payment is based solely on actual
performance (head-hunters)
 do not accept a performance contract based
on profits - profits have too many definitions
and are too easily adjusted upward or
downward for accounting and taxation
purposes
 also tied to performance
 a type of incentive may also be combined
with a fixed-price or cost contract based on
achieving certain preset objectives or goals
 when setting these goals, you must help your
client; be certain that the incentive-fee
structure is not unrealistic for either side
 Do more than review your facts
 Know the areas in which you can afford
to be flexible and where you must
stand fast
 Write down your specific negotiating
objectives; that way you won’t forget
them in the heat of negotiation
 Know the price for your services below
which you cannot go
 Know the areas in which you can
speed things up and complete your
tasks earlier and where you cannot
 Understand where you can increase or
decrease the level of performance and
what this will cost or save
When pushed you can say, “Let me go back to my
office and put a proposal together that will
outline a work plan and cost. It will be on your
desk tomorrow.” Then do it.
1. The Trouble with Experts/Necazul cu expertii (17
Oct)
2. In premiera: Uite, UE nu e (24 Oct)
3. In premiera: Condusi din umbra (31 Oct.)
4. In premiera: Magnati de rumegus (7 Nov.)
5. Case Interview (Bain & Company) (14 Nov)
6. In premiera: Strict secret – Aurul Romaniei (21 Nov)
7. The Light Bulb Conspiracy (28 Nov)
8. How The Economic Machine Works (5 Dec)
9. Ce sunt banii și cum funcționează băncile (12 Dec)
10. Wag the Dog (1997) – 9 Ian. 2018
1. The Trouble with Experts/Necazul cu expertii
http://www.dailymotion.com/video/x5npl26
2. In premiera: Uite, UE nu e
http://inpremiera.antena3.ro/reportaje/uite-ue-
nu-e-390.html
3. In premiera: Condusi din umbra
http://inpremiera.antena3.ro/reportaje/condusi-
din-umbra-387.html
4. In premiera: Magnati de rumegus
http://inpremiera.antena3.ro/reportaje/magnati-de-
rumegus-371.html
5. Case Interview (Bain & Company)
http://www.bain.com/careers/interview-
preparation/case-interview.aspx
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
1. The Trouble with Experts/Necazul cu expertii
http://www.dailymotion.com/video/x5npl26
2. In premiera: Uite, UE nu e
http://inpremiera.antena3.ro/reportaje/uite-ue-
nu-e-390.html
3. In premiera: Condusi din umbra
http://inpremiera.antena3.ro/reportaje/condusi-
din-umbra-387.html
4. In premiera: Magnati de rumegus
http://inpremiera.antena3.ro/reportaje/magnati-de-
rumegus-371.html
5. Case Interview (Bain & Company)
http://www.bain.com/careers/interview-
preparation/case-interview.aspx
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 must first begin with it
 purpose - to get a broad view of the
company so as to identify as quickly and
efficiently as possible ‘where the shoe
pinches’ before engaging in more detailed
survey work
 aim - to initiate a strategic process in the
company and to identify possible areas
where competitiveness and profitability can
be improved
 European Handbook of Management Consultancy, 1996
 the core business purpose of the
organization
 the business units
 the strategic position of the organization as a
whole and that of the business units,
examining strengths, weaknesses and
competition, both current and possible
 the strategic potential of the organization
and the business units (this should include a
financial analysis, plus an assessment of
product lifecycles)
 Secondary research is the far less expensive
 In more complex primary research, you want
to know all about the subject before you
begin to invest your valuable time and
resources
 Chambers of commerce
 Employers' associations
 Magazines and specialized publications
 Databases
 Studies in domain
 National Commission for Statistics
 Ministries
 Libraries and bookstores
 Internet
 reading reports and documents
 interviewing people individually and in
groups (focus group)
 sampling people’s experiences and attitudes
by means of questionnaires
 observation
 Company accounts
 Business plans and budgets
 Technical and sales records
 Personnel records
 Records concerning key suppliers and
customers
 Concerning
◦ Shareholders
◦ Suppliers
◦ Customers
◦ Markets
◦ Public image
 Corrective issues – corrective
measures to a bad/damaged situation
 Improving issues – improving an
existing situation (even if it’s not
damaged yet)
 Creative issues – creating a totally new
situation (identifying new
opportunities)
1. Defining the Central Problem
2. Listing the Relevant Factors
3. Listing Alternative Courses of Action
or Solutions, with Advantages and
Disadvantages of Each
4. Discussing and Analyzing
Alternatives
5. Listing Conclusions
6. Making Recommendations
 More is at stake during the diagnostic
phase than gaining an understanding of
the problem. The perceptive consultant
will also need to assess how ready the
client is for change. Brilliant solutions
will be ignored or rejected if the client’s
employees are devoted to the status quo.
 Greiner and Metzger (1983)
 Suspend early judgment on problems or
solutions
 Maintain detachment from the client’s
problems in order to retain your objectivity
 Look behind every tree - part of the answer
to a problem will come from unlikely sources
 Don’t believe the client’s diagnosis - people
rarely see themselves as part of the problem
that is being talked about
 Greiner and Metzger
 Distinguish between symptoms and
causes - much of what you will have
been told will be symptoms and not
causes; acquire further detail on what
you have been told if need be, but
your task is to search for causes
 Recognize multicausality - most
problems/opportunities have several
causes
 Recognize the interrelationships between
causal factors
 the fact that an IT system is not working
effectively may have more to do with
changes in corporate strategy, in
suppliers and in certain managers’
changed needs than with there being
anything inherently wrong with the IT
system
 The causes that have been responsible for
the breakdown of the system are related
 Understand ‘the law of
interdependence’
 There is often a sound reason for bad
management and organizational
practices
 Before you recommend a change from
an outmoded or inefficient way of
operating, you may need to ask why
that practice grew up in the first place
and address that issue
 Interviewing
 Questionnaires
 Brainstorming
 Focus-groups
 Reporting
http://www.youtube.com/watch?v=TQwA9krV8EA
1. Mind maps (Tony Buzan)
2. Table/Matrix diagrams
3. Input-process-output diagram
4. System maps
5. Influence diagram
6. Fishbone diagram (Kaoru Ishikawa)
7. Spray diagrams
8. Multiple cause diagrams
9. Force field diagram(Lewin)
10. Critical path analysis
11. Gantt chart
1. Start in the center with an image of the topic,
using at least 3 colors
2. Use images, symbols, codes, and dimensions
throughout your mind map
3. Select key words and print using upper or lower
case letters
4. Each word/image is best alone and sitting on its
own line
5. The lines should be connected, starting from the
central image. The central lines are thicker,
organic and thinner as they radiate out from the
centre.
6. Make the lines the same length as the word/
image they support
7. Use multiple colors throughout the mind map,
for visual stimulation and also to encode or
group
8. Develop your own personal style of mind
mapping
9. Use emphasis and show associations in your
mind map
10. Keep the mind map clear by using radial
hierarchy, numerical order or outlines to
embrace your branches
 generate, visualize, structure and
classify ideas
 aid to studying and organising
information, solving problems,
making decision and writing
 problem-solving
 outline/framework design
 structure/relationship representations
 anonymous collaboration
 marriage of words and visuals
 individual expression of creativity
 condensing material into a concise and
memorable format
 team-building or synergy creating activity
 enhancing work morale
 Where good ideas come from …
 Graphical tool that shows the connection or
correlation between ideas or issues in the
form of a table/matrix
 A relationship is indicated at each
intersection of rows and columns as present
or absent
 Mediul din afara zonei de control a organizatiei

Aflate sub controlul organizatiei

Proces de Produse
Resurse Intrari Iesiri Clienti
Furnizori transformare Servicii

Feedback
 Influences on the manager of a firm
 herringbone diagrams, cause-and-effect
diagrams or Fishikawa
 causal diagrams created by Kaoru Ishikawa
(1968) that show the causes of a specific event
 causes are usually grouped into major
categories to identify these sources of
variation
 http://www.youtube.com/watch?v=LovSknc3o
XM
 People: Anyone involved with the process
 Methods: How the process is performed and the
specific requirements for doing it, such as policies,
procedures, rules, regulations and laws
 Machines: Any equipment, computers, tools, etc.
required to accomplish the job
 Materials: Raw materials, parts, pens, paper, etc.
used to produce the final product
 Measurements: Data generated from the process
that are used to evaluate its quality
 Environment: The conditions, such as location,
time, temperature, and culture in which the
process operates
 Create a horizontal line in the center of your
page or whiteboard with a circle at one end
 Write down the problem, the known effect, at
the head
 Consider how many categories of causes add
to that effect (use the 4Ps, 6Ms or another set
of categories)
 Create as many ribs as you have categories,
drawing them at 60-degree angles to the
spine
 Write the category at the end of the rib
 List all the aspects under the categories
 Machines
 Methods
 Materials
 Measurements
 Mother Nature (Environment)
 Manpower (People)
1. Mindpower (Also people/mainly brain
work)
2. Management (separate from
Manpower/People)
3. Money
4. Miscellaneous
5. (the) Moon (so far unknown cause)
http://systems.open.ac.uk/materials/T552/pages
/multiple/multiple.html
Forte pro

Echilibru

Forte contra Legenda:

Grosimea sagatii = intensitatea fortei
Lungimea sagetii = durata in timp
 What business benefit will the change deliver?
 Who supports the change? Who is against it?
Why?
 How easy will it be to make the change? Do
you have enough time and resources to make
it work?
 What costs are involved?
 What other business processes will be
affected by the change?
 What are the risks?
 You can use it in two ways:
1. To decide whether or not to move forward
with the decision or change
2. To think about how you can strengthen the
forces that support the change and weaken
the forces opposing it, so that the change is
more successful
 A list of all activities required to complete the
project (typically categorized within a work
breakdown structure)
 The time (duration) that each activity will take
to complete
 The dependencies between the activities
 Logical end points such as milestones or
deliverable items
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
1. The Trouble with Experts/Necazul cu expertii
http://www.dailymotion.com/video/x5npl26
2. In premiera: Uite, UE nu e
http://inpremiera.antena3.ro/reportaje/uite-ue-
nu-e-390.html
3. In premiera: Condusi din umbra
http://inpremiera.antena3.ro/reportaje/condusi-
din-umbra-387.html
4. In premiera: Magnati de rumegus
http://inpremiera.antena3.ro/reportaje/magnati-de-
rumegus-371.html
5. Case Interview (Bain & Company)
http://www.bain.com/careers/interview-
preparation/case-interview.aspx
1. Leadership, Team, Motivation,
Culture
2. Marketing
3. Strategy
4. Change Management
 Mintzberg’s managerial roles
 Fayol’s management functions
 Stewart’s model – constraints, choices, demands
 Managerial grid - Blake & Mouton
 Adair's action-centred leadership model
 Tuckman & Jensen’s stages of group
development
 Belbin’s Roles in a Team
 Lencioni's 5 dysfunctions of a team
 Motivational thepries (Maslow, ERG, Herzberg,
expectancy, XY)
 Hackman & Oldham’s job characteristics model
 Handy’s Organisational cultures (power,
role, task, person)
 Deal and Kennedy’s organisational culture
 Hofstede’s cultural dimensions (power
distance, uncertainty avoidance,
masculine/feminine,
individualistic/collectivistic)
 Signs of organizational culture (Trice &
Beyer)
 Factors affecting organisational structure
 Clarity of Abilities and
objectives skills
INTRINSIC
REWARDS
EFFORT PERFORMANCE
EXTRINSIC
Tools, materials,
information,etc. Recognition REWARDS

Satisfaction Perceived equitable

rewards

Extrinsic rewards Intrinsic rewards

•salariul
•beneficii suplimentare
•diversitatea muncii
•promovarea
•incadrarea intr-o alta activitate
•scaderi ale salariului
•statutul in cadrul companiei
•statutul in exteriorul companiei
•conditii de munca placute
• lauda
• timpul liber
•penalizari sociale
•respectul de sine
•sentimentul realizarii
•sentimentul de a invata ceva
•sentimentul de a realiza
ceva folositor organizatiei
•oboseala
 Power Culture 



Role Culture

Task Culture

 Person/Atomistic Culture
Johnson's
cultural web
Surface symbols: Inner symbols:

 mission statement  practices

 logo  communication
 reports channels
 balance sheet  manifestari materiale
 uniforms  language/slang
 exercitiul noului venit
 consecintele care apar cand cineva vrea “sa
sparga tiparele”
 povestirile, glumele, eroii si personajele
negative
 reactia organizatiei in fata unui eveniment
neobisnuit sau nefamiliar
 comparatii intre organizatii
 ceea ce izbutiti sa intelegeti atunci cand ceea
ce va era familiar devine strain
 Marketing mix – 4P or 7P/4C
 Segmentation – ideal marketing segment features
 Transaction Marketing vs. Relationship Marketing
 Customer loyalty ladder
 Product three level analysis (core, actual, augmented)
 Differentiation
 Unique selling proposition
 Product life cycle
 Targeting
 Positioning
 Ansoff matrix
 BCG matrix (stars, cash cows, problem children, dogs)
 Porter’s generic strategies
 Marketing communication mix
 is the science and art of exploring, creating, and delivering
value to satisfy the needs of a target market at a profit
 identifies unfulfilled needs and desires
 defines, measures and quantifies the size of the identified
market and the profit potential
 pinpoints which segments the company is capable of
serving best and it designs and promotes the appropriate
products and services
(P. Kotler)
To sell things that don’t come back
to people who come back.
 possible to measure
 large enough to earn profit
 stable enough that it does not vanish after some time
 possible to reach potential customers via the
organization's promotion and distribution channels
 internally homogeneous (potential customers in the
same segment prefer the same product qualities)
 externally heterogeneous i.e. potential customers from
different segments have different quality preferences
 responds consistently to a given market stimulus
 can be reached by market intervention in a cost-
effective manner
 useful in deciding on the marketing mix
 Measurable
 Substantial
 Accessible
 Differentiable
 Actionable
 Geographic segmentation
 Demographic segmentation
 Psychographic segmentation
 Behavioural segmentation
 Region: by continent, country, state, or even
neighborhood
 Size of metropolitan area: segmented
according to size of population
 Population density: often classified as urban,
suburban, or rural
 Climate: according to weather patterns
common to certain geographic regions
 Age  Occupation
 Gender  Education
 Family size  Ethnicity
 Family lifecycle  Nationality
 Religion
 Generation: Baby-
 Social class
boomers,
Generation X, etc.
 Income
 Activities
 Interests
 Opinions
 Attitudes
 Values
 Benefits sought
 Usage rate
 Brand loyalty
 User status: potential, first-time, regular, etc.
 Readiness to buy
 Occasions: holidays and events that stimulate
purchases
Core product (the main benefit, the
basic need satisfied by the
product/service)

Actual product (characteristics,

features)

Augmented product
(supplementary benefits)
 describes covert operations that are designed
to deceive in such a way that the operations
appear as though they are being carried out by
entities, groups, or nations other than those
who actually planned and executed them
 has its origins in naval warfare where the use
of a flag other than the belligerent's true battle
flag before (but not while) engaging the enemy
has long been accepted as a permissible ruse
de guerre (military deception)
 by contrast, flying a false flag while engaging
the enemy constitutes perfidy
 was a false flag project planned by Germany to
create the appearance of Polish aggression
against Germany, which was subsequently
used by Nazi propaganda to justify the
invasion of Poland
 On the night of 31st of August 1939 a small
group of German operatives, dressed in Polish
uniforms, seized the Gleiwitz station and
broadcast a short anti-German message in
Polish
 Several prisoners and a local Polish-Silesian
activist (arrested a day before) were left dead
on the scene in Polish uniforms
 The German radio and newspapers were
flooded with images of a dead Polish soldier
who was killed during the attack against the
German radio station
 Considered to be the start of WW2
 Pactul semnat de Joachim von Ribbentrop şi
Viaceslav Molotov, la Moscova, pe 23 august
1939
 După ce Germania a atacat Polonia pe 1
septembrie 1939, generalul Heinz Guderian a
ajuns pe 17 septembrie la Brest Litovsk,
dincolo de linia de demarcaţie de pe râul Bug
 Guderian a aşteptat aici sosirea sovieticilor,
care au ajuns la Brest pe 22 septembrie sub
comanda generalului Semion Moiseevici
Krivoşein
 Pe 22 septembrie 1939 la Brest-Litovsk
trupele Germaniei naziste mărşăluiau alături
de cele ale Uniunii Sovietice
 Părintele trupelor de tancuri naziste,
generalul Heinz Guderian se saluta şi primea
această ciudată paradă alături de unul dintre
cei mai valoroşi comandanţi de blindate ai
sovieticilor, generalul Semion Moiseevici
Krivoşei
 a screen name for hundreds of false flag
terror attacks and bombings carried out by
NATO and the western secret services in Italy,
Western Europe, Middle East, Latin America
and Asia
 it had targeted innocent civilians and then
blame the leftist and the communists for
those attacks
 school buses had been also targeted -
images of dead children will revolt people
and will prepare them to give up their
freedoms.
 Gladio was confirmed and admitted by the
Italian government in 1990, after a judge,
Felice Casson, discovered the network in the
course of his investigations into right-wing
terrorism
 Italian prime minister Giulio Andreotti
admitted Gladio’s existence but tried to
minimize its significance
 The August 2, 1980 bombing of the Bologna
train station which killed 85 people and injured
200 people, is widely recognized as a Gladio
operation
 While it was initially blamed on the communist
“Red Brigades,” eventually, right-wing and
fascists elements were discovered to be the
culprits
 Two Italian secret service agents and Licio Gelli,
the head of the infamous P2 Masonic lodge, were
convicted in connection to the bombing
 Similar Gladio-like operations have been
discovered across Europe, including France,
Belgium, Denmark, The Netherlands, Norway,
Germany, Switzerland
 In 1990, the European Parliament passed a
resolution condemning Gladio
 The resolution requested full investigations
and a total dismantlement of the paramilitary
structures involved—neither of which have
come to pass
 the CIA overthrew Dr. Muhammad Mossadeq’s
democratic government in 1953 and reinstalled
the Shah to the throne of Iran
 Mossadeq – educated in the West, pro-
American, cast out communist forces from the
north; shortly after his election in 1951 he
nationalized oil fields and declined BP monopoly
 terrorist attacks (detonating bombs in the home
of a religious leader, attacking mosques and
people in the street) organised by the CIA and
MI6 agents blaming Mossadeq for those attacks
 the new government only meant trouble for the US
 In 1953, there was a boycott of Iranian oil, their
oil revenues decreased, and the economy declined
 the CIA staged a coup d’etat in Iran to return the
Shah to power through CIA engineered protests
and bribery of Iranian officers
 1st phase was unsuccessful and the Shah fled
Tehran
 2nd phase was more successful, and enabled the
Shah to victoriously return to Iran where he then
had a 25-year dictatorship supported by the US
 August 2, 1964 - U.S. destroyer Maddox
reported shots with North Vietnamese torpedo
boats in the Gulf of Tonkin
 Two days later, Maddox and another destroyer
reported once again coming under fire
 Those attacks never actually occurred, but it
served as the pretext for an immediate ramp-
up of the Vietnam War
 By the end of the day, President Lyndon B.
Johnson had ordered retaliatory air strikes, and
by late 1965 some 180,000 American troops
were on the ground, with more on the way
 During the Six Day War between Israel and
Arab nations, the USS Liberty was sent to
collect data in the eastern Mediterranean
 The American ship was well signaled 14
miles from the Israeli coast in international
waters
 On June 8th, 1967, at 14:00 hrs., the ship
was attacked by three Mirage 3 bombers,
then three torpedo under Israeli flag
 During the entire attack, the ship continually
called the Sixth Fleet which was nearby,
begging for air support or rescue
 Two aircraft carriers from the Mediterranean
responded by launching fighter jets, but -
amazingly! - they were called back by The
White House
 Three hours after the start of the attack, the
Israelis withdrew due to the emergence of a
Russian spy ships (witness) and thus the USS
Liberty could escape
 Irakul acuza Kuwaitul de furt de petrol
 Nayirah depune mărturie în faţa Congresului
american - militarii irakieni au ucis cel puţin
300 de bebelusi intr-un spital din Kuwait
 Marturia a stat la baza interventiei din Golf
 Nayirah - fiica ambasadorului Kuwait în SUA,
iar marturia falsa a fost gândita de Hill &
Knowlton – o mare companie de PR
 Minciună mediatică: R. Finn şi B. Kouchner dezvăluie
existența „lagărelor morții” în Serbia
 Ce am aflat ulterior: Lagărele respective cuprindeau
prizonieri de război, ținuți acolo în vederea unor
schimburilor ulterioare, dupa cum a recunoscut si
preşedintele bosniac Izedbegovic
 Scop: Distrugerea Yugoslaviei, ultima rămasă pe listă,
și a sistemului ei de siguranță socială, pentru a
instaura, în schimb, controlul regiunii de către
companiile multinaţionale, care să poată folosi liber
rutele comerciale strategice, precum fluviul Dunărea
și zona Balcanilor
 Consecinţe: 4 ani de măcel înfiorător pentru toate
naţionalităţile (bosniaci, sârbi şi croaţi)
 Minciună mediatică: Sârbii au comis genocid împotriva
albanezilor kosovari
 Ce am aflat ulterior: Minciuna NATO recunoscuta de
Jamie Shea. (Vezi aici documentarul „Înșelătoria
lagărelor morții din Iugoslavia”:
http://vimeo.com/51240361#)
 Scop: Instalarea unei baze militare în Kosovo; punerea
Balcanilor sub controlul NATO și transformarea acestei
organizații într-o poliție cu puteri discreționare, la
nivel global
 Consecinţe: 2.000 de victime ale bombardamentelor
NATO. Purificare etnică în Kosovo, pusă în practică de
către UCK (Armata de eliberare din Kosovo) și
legitimată de NATO
 SUA - 1 spital la 62 de lăcașuri de cult (5.586
la 350.000) și la 56.000 de locuitori
 Suedia - 1 spital la 41 lăcașuri de cult (92 de
spitale la 4.000) și la 106.000 de locuitori
 România - 1 spital la 40 lăcașuri de cult (453
la 18 436) și la 43.000 de locuitori
 Bugetul Ministerului Sănătății peste 2015 este
6,8 MILIARDE de lei, iar bugetul tuturor
cultelor, în aceeași perioadă este 320 de
milioane de lei
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
6. In premiera: Strict secret – Aurul Romaniei - (21
Nov)
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy - (28 Nov)
https://www.youtube.com/watch?v=-1j0XDGIsUg
8. How The Economic Machine Works - (5 Dec)
https://www.youtube.com/watch?v=PHe0bXAIuk0
9. Ce sunt banii și cum funcționează băncile - (12
Dec)
https://www.youtube.com/watch?v=ATDxwSraUlk
10. Wag the Dog (1997) – movie, thriller 9 Ian. 2018
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
1. Leadership, Team, Motivation,
Culture
2. Marketing
3. Strategy
4. Change Management
 Your boss  Your team
 Shareholders  Lenders
 Government  Interest groups
 Senior executives
 Customers
 Analysts
 Alliance partners
 The public
 Trades associations  Prospective customers
 Co-workers  Future recruits
 Suppliers  The community
 The press  Your family
 S W

O Strategiile S – O Strategiile W – O

T Strategiile S – T Strategiile W –T
 People who founded the firm are busy creating
products and opening up markets
 There aren't many staff, so informal
communication works fine, and rewards for long
hours are probably through profit share or stock
options
 As more staff join, production expands and capital
is injected, there's a need for more formal
communication
 Ends with a Leadership Crisis where professional
management is needed
 founders may change their style and take on this
role, but often someone new will be brought in
 Growth continues - more formal communications +
budgets
 Focus on separate activities like marketing and
production
 Incentive schemes replace stock as a financial reward
 There comes a point when the products and processes
become so numerous that there are not enough hours in
the day for one person to manage them all, and he or she
can't possibly know as much about all these products or
services as those lower down the hierarchy
 Ends with an Autonomy Crisis - new structures based on
delegation are called for
 With mid-level managers freed up to react fast to
opportunities for new products or in new markets, the
organization continues to grow, with top management
just monitoring and dealing with the big issues (perhaps
starting to look at merger or acquisition opportunities)
 Many businesses flounder at this stage, as the manager
whose directive approach solved the problems at the
end of Phase 1 finds it hard to let go, yet the mid-level
managers struggle with their new roles as leaders
 This phase ends with a Control Crisis: A much more
sophisticated head office function is required, and the
separate parts of the business need to work together
 Growth continues with the previously isolated
business units re-organized into product groups
or service practices
 Investment finance is allocated centrally and
managed according to Return on Investment (ROI)
and not just profits
 Incentives are shared through company-wide
profit share schemes aligned to corporate goals
 Work becomes submerged under increasing
amounts of bureaucracy, and growth may become
stifled
 Ends on a Red-Tape Crisis - a new culture and
structure must be introduced
 The formal controls of phases 2-4 are
replaced by professional good sense as staff
group and re-group flexibly in teams to
deliver projects in a matrix structure
supported by sophisticated information
systems and team-based financial rewards
 This phase ends with a crisis of Internal
Growth – further growth can only come by
developing partnerships with complementary
organizations
 Recently added phase suggests that growth
may continue through merger, outsourcing,
networks and other solutions involving other
companies
 Growth rates will vary between and even
within phases
 The duration of each phase depends almost
totally on the rate of growth of the market in
which the organization operates
 The longer a phase lasts, though, the harder it
will be to implement a transition
 Think about where the organization is now
 Think about whether the organization is
reaching the end of a stable period of growth,
and nearing a 'crisis' or transition
 Ask what the transition will mean for you
personally and your team. Will you have to:
◦ Delegate more?
◦ Take on more responsibilities?
◦ Specialize more in a specific product or market?
◦ Change the way you communicate with others?
◦ Incentivize and reward you team differently?
 Plan and take preparatory actions that will
make the transition as smooth as possible for
you and your team
 Revisit the model again every 6-12 months,
and think about how the current stage of
growth affects you and others around you
 People feel that managers and company
procedures are getting in the way of them
doing their jobs
 People feel that they are not fairly rewarded
for the effort they put in
 People seem unhappy, and there is a higher
staff turnover than usual
 The Change Curve
Lewin's Change Management Model
Force Field Analysis
1. Unfreeze
2. Change
3. Refreeze
 the most difficult and stressful part of change
 preparing the organization to accept change
 break down the existing status quo before
you can build up a new way of operating
 developing a compelling message showing
why the existing way of doing things cannot
continue
 forcing the organization to re-examine its
core, you effectively create a (controlled)
crisis, which in turn can build a strong
motivation to seek out a new equilibrium
 People take time to embrace the new direction
and participate proactively in the change
 People need to understand how the changes will
benefit them
 Time and communication - the 2 keys to success
 Some people will be harmed by change (those
who benefit strongly from the status quo), others
may take a long time to recognize the benefits
that change brings - you need to foresee and
manage these situations
 Signs of the refreeze: a stable organization
chart, consistent job descriptions etc.
 Make sure that the changes are used all the
time + that they are incorporated into
everyday business
 With a new sense of stability, employees feel
confident and comfortable with the new ways
of working
 Celebrate the success of the change!
1. Determine what needs to change
◦ Survey the organization to understand the current
state.
◦ Understand why change has to take place
2. Ensure there is strong support from upper
management
◦ Use Stakeholder Analysis to identify and win the
support of key people within the organization
◦ Frame the issue as one of organization-wide
importance
4. Create a compelling message as to why
change has to occur
◦ Use your vision and strategy as supporting
evidence
◦ Communicate the vision in terms of the change
required.
◦ Emphasize the "why"
5. Manage and understand the doubts and
concerns
◦ Remain open to employee concerns and address
in terms of the need to change
1. Communicate often
◦ Do so throughout the planning and
implementation of the changes
◦ Describe the benefits
◦ Explain exactly the how the changes will effect
everyone
◦ Prepare everyone for what is coming
2. Dispel rumors
◦ Answer questions openly and honestly
◦ Deal with problems immediately
◦ Relate the need for change back to operational
necessities
3. Empower action
◦ Provide lots of opportunity for employee
involvement
◦ Have line managers provide day-to-day direction
4. Involve people in the process
◦ Generate short-term wins to reinforce the change
◦ Negotiate with external stakeholders as
necessary (such as employee organizations)
1. Anchor the changes into the culture
◦ Identity what supports the change
◦ Identify barriers to sustaining change
2. Develop ways to sustain the change
◦ Ensure leadership support
◦ Create a reward system
◦ Establish feedback systems
◦ Adapt the organizational structure as necessary
3. Provide support and training
◦ Keep everyone informed and supported
4. Celebrate success!
 Impact Analysis
The Burke-Litwin Change Model
Leavitt's Diamond
SIPOC Diagrams
 A. Organizational Approach:
◦ Impact on different departments, processes,
groups, people
 B. McKinsey 7Ss Approach
◦ Impact on Strategy, Structure, Systems, Shared
Values, Skills, Styles, Staff
 C. Tools-Based Approach
◦ Risk Analysis/Management
◦ Risk Impact/Probability Chart
◦ Stakeholder Analysis
 What is our strategy?
 How do we intend to achieve our objectives?
 How do we deal with competitive pressure?
 How are changes in customer demands dealt
with?
 How is strategy adjusted for environmental
issues?
 How is the company/team divided?
 What is the hierarchy?
 How do the various departments coordinate
activities?
 How do the team members organize and align
themselves?
 Is decision making and controlling centralized
or decentralized? Is this as it should be, given
what we're doing?
 Where are the lines of communication?
Explicit and implicit?
 What are the main systems that run the
organization? Consider financial and HR
systems as well as communications and
document storage.
 Where are the controls and how are they
monitored and evaluated?
 What internal rules and processes does the
team use to keep on track?
 What are the core values?
 What is the corporate/team culture?
 How strong are the values?
 What are the fundamental values that the
company/team was built on?
 How participative is the management/
leadership style?
 How effective is that leadership?
 Do employees/team members tend to be
competitive or cooperative?
 Are there real teams functioning within the
organization or are they just nominal groups?
 What positions or specializations are
represented within the team?
 What positions need to be filled?
 Are there gaps in required competencies?
 What are the strongest skills represented
within the company/team?
 Are there any skills gaps?
 What is the company/team known for doing
well?
 Do the current employees/team members
have the ability to do the job?
 How are skills monitored and assessed?
 Kotter's 8-Step Change Model
Nadler-Tushman congruence model
Lewin's Change Management Model
The Four Frame Model
 Directive strategies – managements’ right to
manage change
 Expert strategies – management of change as
problem solving
 Negotiation strategies – bargaining about
change
 Educative/normative strategies – winning
hearts and minds
 Participative strategies – we’re all involved

85
 hard soft
clear solution no one clear solution

solution can only be one thing resolutions can be one of

many things

know what the problem is not sure what the problem is

know what needs to be known not sure what needs to be

known

clear methods for working it no obvious method for

out working it out

structured unstructured
clear cut messy
1. Implementation took more time than was
originally allocated
2. Major problems surfaced during
implementation that had not been identified
beforehand
3. The co-ordination of the various
implementation activities was not creative or
imaginative enough
4. Competing activities and crises distracted
attention from implementing the decision
5. Employees did not have the necessary skills
6. The training and instruction given to the lower-
level employees was inadequate
7. Uncontrollable factors in the environment had
an adverse impact on implementation
8. The leadership and direction provided by
departmental managers was of poor quality
9. Certain key implementation tasks and activities
were not defined in enough detail
10. The information systems used to monitor
implementation were inadequate
 Two-way communication with all employees
 Start with a good concept or idea
 Obtain employee commitment and
involvement – ideally involve everyone in the
formulation of change strategy from the
beginning
 Provide sufficient resources – money, human
resources, technical skills, time and attention
from top management
 An implementation plan or strategy, so that
problems are addressed
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
6. In premiera: Strict secret – Aurul Romaniei - (21
Nov)
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy - (28 Nov)
https://www.youtube.com/watch?v=-1j0XDGIsUg
8. How The Economic Machine Works - (5 Dec)
https://www.youtube.com/watch?v=PHe0bXAIuk0
9. Ce sunt banii și cum funcționează băncile - (12
Dec)
https://www.youtube.com/watch?v=ATDxwSraUlk
10. Wag the Dog (1997) – movie, thriller 9 Ian. 2018
 To achieve the goals of company:

1. Finding funds from the most suitable

sources
2. Using them effectively and
3. Control the results
 Management of the finances of the org. in
order to maximize the benefit to the
members
 Goals of financial management
◦ Profitability
◦ Viability
◦ Long term development
managerial activities which deals with
planning and controlling of firms and
financial sources

an area of financial decision making

harmonsing individual motives and
enterprise goals
 the provision of financial information
 financial accounting provides information
regarding the financial position of the org.
and the results of its operation
 managerial accounting provides information
for making better managerial decisions
 the finance function covers both acquisition
of funds as well as the allocation of funds
to various uses
 is concerned with the issues involved in
raising of funds and efficient and wise
allocation of funds
 How large should an enterprise be and how
far it should grow?
 In what form should it hold its assets?
 How should the funds required be raised?

 Financial management is concerned with

finding answer to the above problems
 For starting up Everyday bill payments

Businesses
Expansion Take over bid
need money
for…

Internal Growth Replace

machinery/equipment
• Forecasting and planning
• Major investment and control
• Coordination and control
• Dealing with the financial markets
• Managerial incentives to maximize
shareholder wealth
• Social responsibility
• Stock price maximization and social
welfare
1. Investment decision
2. Financing decision
3. Dividend decision
The financial requirements may be for a long term, medium term or short term.

Financial Requirements

Short-Term Medium-Term Long-Term

Bank Credit Issue of Debentures Issue of shares

Customer advances Issue of Preference shares Issue of Debentures
Trade Credit Bank Loan Ploughing back of
Public deposit / Fixed deposit profits
Loan from
Loans from financial institutions spec.financial
institutions
 The company’s owned capital is split into
large number of equal parts, such a part
being called a “share”
 The person holding the share as
shareholder and becomes part-owner of the
company
 For this reason, the capital so raised is
known as “owned capital” and the shares
are called “ownership securities”
 The share capital of the company is ideal for
meeting the long term requirements
 It need not be paid back to the shareholders
within the life time of the company
 The only exception is the sum raised by the
issue of redeemable preference shares
 A public company can issue two types
of share:
◦ Equity share
◦ Preference share
Generally Accepted Accounting Principles (GAAP)
International Financial Reporting Standards
(IFRC)
 Actually there are a number of accounting
concepts and principles based on which we
prepare our accounts
 These generally accepted accounting
principles lay down accepted assumptions
and guidelines and are commonly referred
to as accounting concepts
 Investors
◦ Need information about the profitability,
dividend yield and price earnings ratio in
order to assess the quality and the price of
shares of a company
 Lenders
◦ Need information about the profitability
and solvency of the business in order to
determine the risk and interest rate of
loans
 Management
◦ Need information for planning, policy
making and evaluation
 Suppliers and trade creditors
◦ Need information about the liquidity of
business in order to access the ability to
repay the amounts owed to them
 Government
◦ Need information about various
businesses for statistics and formulation
of economic plan
 Customers
◦ Interested in long-tem stability of the
business and continuance of the supply of
particular products
 Employees
◦ Interested in the stability of the business
to provide employment, fringe benefits
and promotion opportunities
 Public
◦ Need information about the trends and
recent development
 Companies may use different methods of
valuation, cost calculation and recognizing
profit
 The balance sheet does not reflect the true
worth of the company
 Financial statements can only show partial
information about the financial position of
an enterprise, instead of the whole picture
Accounting: The Universal
Language of Business

GAAP Assumptions
business entity
Business entity The accounting assumption that
a business exists independently
of its owner’s personal holdings.
The accounting records and
Accounting period reports are maintained
separately and contain financial
information related only to the
Going concern business.
Accounting: The Universal
Language of Business

GAAP Assumptions

Business entity accounting period

The period of time covered by
an accounting report.

Accounting period
going concern
The accounting assumption that
a business is expected to
Going concern operate indefinitely.
 Revenues and profits are not anticipated;
only realized profits with reasonable
certainty are recognized in the profit and
loss account
 However, provision is made for all known
expenses and losses whether the amount is
known for certain or just an estimation
 This treatment minimizes the reported
profits and the valuation of assets
 Examples:
◦ Stock valuation sticks to rule of the
lower of cost and net realizable
value
◦ The provision for doubtful debts
should be made
◦ Fixed assets must be depreciated
over their useful economic lives

30
 Companies should choose the most
suitable accounting methods and
treatments, and consistently apply them in
every period
 Changes are permitted only when the new
method is considered better and can
reflect the true and fair view of the
financial position of the company
 The change and its effect on profits
should be disclosed in the financial
statements
 Examples
◦ If a company adopts straight line method
and should not be changed to adopt
reducing balance method in other period
◦ If a company adopts weight-average
method as stock valuation and should
not be changed to other method e.g.
first-in-first-out method

33
34
 Revenues are recognized when they are
earned, but not when cash is received
 Expenses are recognized as they are
incurred, but not when cash is paid
 The net income for the period is
determined by subtracting expenses
incurred from revenues earned

35
 Example
◦ Expenses incurred but not yet paid in
current period should be treated as
accrual/accrued expenses under current
liabilities
◦ Expenses incurred in the following
period but paid for in advance should be
treated as prepayment expenses under
current asset
◦ Depreciation should be charged as part
of the cost of a fixed asset consumed
during the period of use

36
 Three Types of Business Operations

Service Merchandising Manufacturing

Business Business Business

Manufacturing business
Merchandising
A business that buys raw
business
Service business materials, uses labor and
A business that
A business that machinery to transform
buys finished
provides a them into finished
products and
needed service products, and sells the
resells them to
for a fee. finished products to
individuals or other
individuals or other
businesses.
businesses.
Forms of Business Ownership

Proprietorship Partnership Corporation

 Generally owned  Owned by two or  Ownership

by one person. more persons. divided into
 Often small shares of stock
 Often retail and
service-type service-type  Separate legal
businesses businesses entity organized
 Owner receives under state
 Generally
any profits, corporation law
unlimited
suffers any personal liability  Limited liability
losses, and is
 Partnership
personally liable
agreement
for all debts.
SO 5 Explain the monetary unit assumption
and the economic entity assumption.
 Exploring the World
of Business

Three Types of Business Organization

Sole Partnership Corporation

Proprietorship

sole proprietorship
A business owned by one person.

partnership
A business owned by two or more persons.
corporation
A business recognized by law to have a life of its
own.
Glencoe Accounting
Exploring the World
of Business

Glencoe Accounting
Exploring the World
of Business

Glencoe Accounting
 Exploring the World
of Business

A corporation must obtain a charter.

Charter
Legal permission to
operate.

Glencoe Accounting
 Part of the value of the fixed asset is
consumed over time
 Therefore the annual consumption becomes
an expense
 Depreciation calculates this annual
consumption (expense)
 allocation of the cost of the asset (fulfils
matching principle) to the accounting
periods in which it is expected that the
asset will contribute to the production of
revenue
 Straight line method
 Accelerated depreciation method
 Written down value method
 Sinking fund method
 Machine Hour rate method
 Unit cost method
 Depletion asset method
 Depreciation Fund method
 Sum of digits method
Valuation Methods
 The decision on which method to choose depends
on the industry, company convention, and ERP system
capabilities
 The following methods are covered :

 Last-in, First-out (LIFO)

 First-in, First-out (FIFO)

 Average Cost

 Specific Identification
 assumes that the last unit added to inventory is the
first one sold
 as technology changes the composition of a
product, the older layers of inventory become
obsolete
 obsolete inventory must be written down
 best in periods of high inflation
 companies frequently use LIFO for external financial
reporting and income tax purposes, but employ
other inventory accounting methods to manage the
business
 assumes that the first unit added to inventory is the
first one sold
 this approach does not necessarily mean that the
oldest item is sold, but it is an accounting technique
that matches the oldest cost with the current
revenue
 assumes that inventory costs are based on the
average cost of goods sold in a specific period
 two average cost methods:
◦ Weighted Average: Both the inventory and cost of
goods sold are based upon the average cost of all units
in the period
◦ Moving Average: After each change to inventory, a
new weighted average cost is calculated
 best for small inventories of high-value items
 inventory items must be clearly identified by some
method (stamped receipt date, serial number, RFID
tag)
 the cost of each item must be tracked individually,
and when a sale occurs, that specific cost must be
subtracted from the inventory
 while this is the most accurate inventory method, it
is generally not practical and therefore is rarely
used
All methods have merit in
different situations and
economic conditions.
Frequently, the method
depends on the capabilities of
the system the business is
using. Most newer systems
have the technical ability to
utilize any method.

To decide, be sure to follow

GAAP conventions, consider
the company’s history, and
understand what is the
industry standard.
The Cash Flow Statement
Profit and Loss Statement
Balance Sheet
Balance Sheet – Present
The value of a company at a certain point in time.
Statement of Assets and Liabilities.

Cash Flow – Future

Statement showing cash generation
(inflow) and cash usage (outflow)

Profit and Loss Statement – History

Measures and reports Profit generated during a certain period.
Profit/Loss is an opinion, based on Accounting Principles.
 The Cash Flow Statement

The cash flow statement provides information

about:
 Cash Receipts (cash inflows)
 Uses of Cash (cash outflows)
 During a Period of Time

Inflows and outflows are reported for:

 Operating activities
 Investing activities
 Financing activities
Cash effects the transaction on Net Income
Operating Activities

Cash Inflow Cash Outflow

1) Cash Sales 1) Cash Purchases

2) Received from Debtor 2) Payment to Creditors
3) Commission & Fees 3) Cash Operating Expenses
4) Royalty 4) Payment of Wages
5) Income Tax
6) Manufacturing Expenses
 Investing Activities

Cash Inflow Cash Outflow

1) Sale of Fixed Assets 1) Purchase of Fixed Assets

2) Sale of investments 2) Purchase of Investments
3) Interest Received 3) Working Capital
4) Dividend Received
5) Working Capital Recovery
 Financing Activities

Cash Inflow Cash Outflow

1) Issue of Shares in Cash 1) Payment of Loans

2) Issue of Debentures in 2) Redemption of Preference
Cash Shares
3) Proceeds from long-term 3) Payment of Dividends
borrowings 4) Interest Paid
5) Repayment of Finance/
Lease Liability
1. Highlighting cash flow from different
activities
2. Short-term Planning
3. Cash Flow information helps to understand
liquidity
4. Efficient cash management
5. Prediction of sickness
6. Comparison with budget
7. Cash position
 Profit and Loss statement
Gross Sales Sales adjustment

P&L statement Net Sales Discounts and free of charge items

Cost of sales or
Sales Cost of Goods and Services provided
-Cost of goods sold
Gross margin Material, Resources,
-Operating Expenses Sub-contracting, Freight,
Administration
Royalties, SW licencies
Marketing
R&D
Operating profit
Gross Margin
Operating Expenses – Admin & General

Operating Expenses – Sales & Marketing

Operating Expenses – R&D

Operating Profit
Capital cost & Taxes
Net Profit $$Profit$$
 Basic principles of a balance sheet
Accurate balance sheets must obey the following
principle:

all assets must equal all liabilities

Which means that:

where
where
money has must equal
money came
been spent
from

Why is it so crucial assets and liabilities balance?

Fixed assets are those which the
business actually owns and which
are therefore ‘fixed’ into the
company.
Include buildings and furniture
fittings, machinery and company
vehicles.
Cost a lot of money and represent a large investment for
the business.
Last for a long period of time.
Can be sold to increase capital (i.e. the money invested
in the business).
Fixed assets are those that have a useful life in
excess of one year.
Current assets are those which the business holds
temporarily or that are always changing on a day-to-
day basis. Including inventories (stock), cash or trade
receivables (debtors).
For example:
A shop, the value of the stock is a
current asset.
An interior designer working on a job
for a client, the work in progress is a
current asset.

The final main types of current asset are customers

who owe money for goods bought Trade Receivables
(debtors) and also the amount of money in a company’s
current bank account.
Current liabilities, like current assets, are short-term
and always changing. However, this is money that a
business actually owes.
Common current liabilities include:

Short-term loans
Trade Payables (Creditors)
Bank overdrafts
Share dividend payments

Current liabilities are those that are expected to be

paid back in one year.
Non-Current liabilities relate to money owed to be paid
back over a longer period of time.

Common non-current liabilities include:

Mortgages
Loans

Current liabilities are those that are to be

paid back over a longer period of time.
The total amount if money being utilised in the
business from share capital and retained profit.

Share capital – money which

shareholders have invested in
the business.
Reserves – profit from previous
years which has been retained
to finance future developments.
Profit and loss account – money kept back from the
current year’s profits (the net profit).
Why is the money personally invested by a
business a liability and not an asset?
Assets Shareholder’s Equity and Liabilities
Fixed Assets Equity
+ Inventory Share Capital
+ Accounts Receivable + Other Restricted Equity
+ Cash and Cash + Net Profit for the Year
equivalent + Retained Earnings
= Total Assets = Total Equity

Liabilities
Long Term Loans
+ Short Term Loans
+ Accounts Payable
= Total Shareholder’s Equity and
Liabilities

Total Assets = Total Shareholder’s equity and liabilities

 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
6. In premiera: Strict secret – Aurul Romaniei - (21
Nov)
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy - (28 Nov)
https://www.youtube.com/watch?v=-1j0XDGIsUg
8. How The Economic Machine Works - (5 Dec)
https://www.youtube.com/watch?v=PHe0bXAIuk0
9. Ce sunt banii și cum funcționează băncile - (12
Dec)
https://www.youtube.com/watch?v=ATDxwSraUlk
10. Wag the Dog (1997) – movie, thriller 9 Ian. 2018
Cost can be described as:
• Direct and Indirect
• Variable, Fixed and Semi-variable
• Recurring and non-recurring
Type of costs ...
 a price that can be completely
attributed to the production of
specific goods or services
 refer to materials, labor and expenses
related to the production of a product
Can be traced back Are specifically Include materials,
to a product and identified by their labor and other
can be measured objectives direct costs
 Direct Direct work
Direct labor
materials hours

Use of Use of Number of

equipments facilities employees

Use of Consumption
materials of services
 Other costs, such as depreciation or
administrative expenses, are more
difficult to assign to a specific product,
and therefore are considered indirect
costs
 Refers to all ongoing business expenses
not including or related to direct labor,
direct materials or third-party expenses
that are billed directly to customers
 Costs not directly related to
Not directly identifiable
the project/product

Belong to the core Include

supporting business, but • Fringe benefits

cannot be directly assigned • Indirect manufacturing expenses

• General indirect expenses
to projects or individual
• General and administrative
contracts expenses
Type of costs ...
 do not change with an increase or decrease in
the amount of goods or services
 are expenses that have to be paid by a
company, independent of any business
activity
 it is one of the two components of the total
cost of a good or service, along with variable
cost
 Ex: rent, managers salaries, interest
payments on loans, advertising, insurance,
office supplies
Remain constant in the total, independently of the
amount of work performed

Remain the same even when the production line

pauses or is null

Include costs like rent, depreciation, administrative

team salaries and general expenses
 a corporate expense that varies with
production output
 costs that vary depending on a company's
production volume
 they rise as production increases and fall as
production decreases
 fixed costs + variable costs = total costs
 E.g. - raw material, fuel and power charges,
packaging, wages linked to production
 Vary as changes in the Can or cannot be
production are proportional to these
implemented production changes

Include expenses with

equipments and materials,
If there’s no production,
performance bonuses,
there’s no variable cost
freight and sales
comissions, for example
 these costs have fixed and variable
elements
 E.g. - a person working for the
company may have a fixed salary, but
may also earn commission on sales
 fixed costs + variable costs + semi-
variable costs = total costs
 Direct versus indirect costs - Direct costs
are easy to match with a process or
product, whereas indirect costs are more
distant and have to be allocated to a
process or product
 Fixed versus variable costs – If your
business sells more units of a certain item,
some of your costs increase accordingly
(variable costs), but others don’t budge one
bit (fixed costs)
Type of costs ...
Recurring Costs

• Repetitive, directs or indirects, which vary

depending on the production
• Daily/weekly/monthly/etc costs

Non-recurring costs

• One-time expense only

• Development, investment and other costs that
are paid only once
 Not every cost is important to every decision you need
to make about your business
 Relevant costs - Costs that should be considered and
included in your analysis when deciding on a future
course of action. Relevant costs are future costs —
costs that you would incur, or bring upon yourself,
depending on which course of action you take.
 Ex: say that you want to increase the number of books
that your publishing business produces next year in
order to increase your sales revenue, but the cost of
paper has just shot up. That cost will affect your
bottom-line profit and may negate any increase in
sales volume that you experience (unless you increase
the sales price). The cost of paper is a relevant cost.
 Costs that you should disregard when deciding on a
future course of action; if brought into the analysis,
these costs could cause you to make the wrong
decision
 is a vestige of the past — that money is gone
 Ex: suppose that your supervisor tells you to expect a
slew of new hires next week. All your staff members
use computers now, but you have a bunch of
typewriters gathering dust in the supply room. Should
you consider the cost paid for those typewriters in
your decision to buy computers for all the new hires?
Absolutely not — that cost should have been written
off and is no match for the cost you’d pay in
productivity (and morale) for new employees who are
forced to use typewriters.
 Sometimes the manager must decide
between two options
 Both options will be reviewed and the best of
the two is, hopefully, chosen as the winning
solution
 When comparing these two business options,
costs will be compared to see which one is
more cost-efficient
 This comparison of costs for both options
being considered is known as differential
cost
 In differential cost, a business looks at two
options and chooses the one that makes the
most sense to pursue
 That doesn't mean that the other option
wasn't good, it just means it wasn't as good
as the one selected
 However, sometimes a company has to lose
a benefit by choosing one option over
another
 This is known as opportunity cost
 E.g. - a company wants to build a new
building but needs to purchase land to do
so
 But, if they purchase the land instead of
investing those extra funds they will lose
potential profit if that investment climbed in
value
 To pursue the opportunity of buying land
instead of investing in securities is an
example of an opportunity (lost) cost
 Managerial accounting types of costs not only
deal with operational costs to produce and sell
products, they can also deal with situations in
which plant equipment purchased before is no
longer useful in new product line production
 This older and no longer needed equipment is
considered a sunk cost if it cannot be sold
 It is a cost that has come before and cannot be
changed
 Sunk costs are not to influence future financial
decisions
 Therefore, a business shouldn't go back to
producing a product that wasn't profitable just to
use obsolete equipment.
 Actual costs - Historical costs, based on actual
transactions and operations for the period just
ended, or going back to earlier periods
 Budgeted costs - Future costs, for transactions
and operations expected to take place over the
coming period, based on forecasts and
established goals
 Standard costs - Costs, primarily in the area of
manufacturing, that are carefully engineered
based on detailed analysis of operations and
forecast costs for each component or step in
an operation
1. Absorption Costing
2. Marginal Costing (or Direct Costing)
3. Activity Based Costing
 also known as full absorption costing
 a managerial accounting cost method of
expensing all costs associated with
manufacturing a particular product
 uses the total direct costs and overhead costs
associated with manufacturing a product as
the cost base
 GAAP require absorption costing for external
reporting
 Some of the direct costs associated with
manufacturing a product include wages for
workers physically manufacturing a product,
the raw materials used in producing a product,
and all of the overhead costs, such as all utility
costs, used in producing a good
 Absorption costing includes anything that is a
direct cost in producing a good as the cost base
 This is contrasted with variable costing, in
which fixed manufacturing costs are not
absorbed by the product
 Advocates promote absorption costing
because fixed manufacturing costs
provide future benefits
 Cost of a product unit under
absorption costing = cost of direct
materials + direct labor + variable
manufacturing overheads + (fixed
manufacturing overhead costs/units
produced)
 Only the variable costs will increase with an
increased level of output
 The increase in these variable costs per unit
of output is referred to as the marginal cost
 Important for management in calculating what
effect an increase in the level of output of
goods/services will have on the level of profit
 Costing that is based on variable costs per
unit, without taking fixed costs into account
at that stage, is known as marginal costing
 is a tool for management decision-making as
it shows the effect on contribution and
therefore on profit of increasing sales by one
further unit
 decisions on expanding or discontinuing
product lines may be taken by analyzing the
contribution to profit of each product or
service and deciding which product lines
should be expanded and which should be
discontinued
 A cost accounting concept that allows a firm to
determine the profitability of individual products
 It is calculated as follows:

Product Revenue - Product Variable Costs

Product Revenue

 can also refer to a per unit measure of a

product's gross operating margin, calculated
simply as the product's price minus its total
variable costs
 Consider a situation in which a business manager
determines that a particular product has a 35%
contribution margin, which is below that of other
products in the company's product line
 This figure can then be used to determine whether
variable costs for that product can be reduced, or if
the price of the end product could be increased
 If these options are unattractive, the manager may
decide to drop the unprofitable product in order to
produce an alternate product with a higher
contribution margin
 Disadvantage – hard to make a distinction
between fixed and variable overheads as they
are not as clear-cut in reality as they are in
theory
 The price, fixed cost and variable cost can all
vary frequently within an accounting period,
and stepped costs are very common in reality,
becoming relevant at various levels of output
 Difficult to be certain of the marginal cost or
the contribution made by an additional unit
of output at a particular moment in time
 First identifies the activities that are being
carried out in the organization, and
allocates the costs to these activities
 By then measuring the contribution of each
of the activities to the products and services
of the enterprise, it is possible to allocate
the costs relating to each activity among the
products or services which that activity is
involved in producing
 The costs are assigned to products on a
rational basis, and the profitability of each
product/service can be more accurately
determined than, for example, by
absorption costing which may use general
allocation keys
 Rmequires observation and measurement of
the various activities, of people or machines
involved in putting together the end
products of the enterprise
 Inefficiencies in procedures may be
highlighted by this system and the
real profitability of each product or
service can be ascertained, leading to
informed management decisions on
expansion or discontinuance of
product lines or services
 Can be expensive to implement, requiring detailed
observation + measurement of activities and
analysis of how these activities relate to particular
products and services
 Management may devote too many resources to
establishing the system, and produce detailed
information much of which is not needed in
operating the costing system
 Software systems required to implement activity
based costing can also be expensive
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
6. In premiera: Strict secret – Aurul Romaniei - (21
Nov)
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy - (28 Nov)
https://www.youtube.com/watch?v=-1j0XDGIsUg
8. How The Economic Machine Works - (5 Dec)
https://www.youtube.com/watch?v=PHe0bXAIuk0
9. Ce sunt banii și cum funcționează băncile - (12
Dec)
https://www.youtube.com/watch?v=ATDxwSraUlk
10. Wag the Dog (1997) – movie, thriller 9 Ian. 2018
 Intermediary Test - 19th of December
 On the 19th of Dec. (test date) there will be
no case study analysis presentation, nor
normal class course
 The test will start at 17.00 and will last 2-
2.5 hours
 Students who do not attend the
Intermediary Test cannot enter the final
examination
1. Diagnosis - 10 open questions (why?)
2. What other primary/secondary data you
need (why, sources)
3. Multiple cause diagram or Ishikawa diagram
4. Consulting Offer/Proposal
a. Objective
b. Time and price calculation (using hourly billing)
c. 2 models used in diagnosis (why?)
5. Financial analysis (Cash Flow, Profit and Loss
Statement, Balance Sheet)
KUBR, Milan, Management Consulting – A
Guide to the Profession, 4th ed.,
International Labour Office, Geneva, 2002
 Chapters: 1-3, 7-11, 20-24, 26-27 and
Appendices 1, 3-7
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 the point at which cost/expenses = revenue:
there is no net loss or gain, and one has
"broken even
 determine the point at which revenue
received equals the costs associated with
receiving the revenue
 calculates what is known as a margin of
safety, the amount that revenues exceed the
break-even point
 this is the amount that revenues can fall while
still staying above the break-even point
Finacial Ratios
 Ethics

Transformation Outputs
Inputs
Process (results)
(resources)

Economy
Efficiency Effectivness
 A ratio by itself may have no meaning
 Hence, a given ratio is compared to:
◦ (a) ratios from previous years
◦ (b) ratios of other firms and/or leaders in
the same industry
 Identify deficiencies in a firm’s
performance and take corrective
action
 Evaluate employee performance and
determine incentive compensation
 Compare the financial performance of
different divisions within the firm
 Prepare financial projections at both
firm and division levels
 Understand the financial performance
of the firm’s competitors
 Evaluate the financial condition of a
major supplier
Financial ratios are used by:
 Lenders in deciding whether or not to make
a loan to a company
 Credit-rating agencies in determining a
firm’s credit worthiness
 Investors (shareholders and bondholders) in
deciding whether or not to invest in a
company
 Major suppliers in deciding to whether or
not to grant credit terms to a company
1. How liquid is the firm?
2. Is management generating adequate
operating profits on the firm’s assets?
3. How is the firm financing its assets?
4. Is management providing a good return
on the capital provided by the
shareholders?
5. Is the management team creating
shareholders value?
 A liquid asset is one that can be
converted quickly and routinely into
cash at the current market price
 Liquidity measures the firm’s ability to
pay its bills on time
 It indicates the ease with which non-
cash assets can be converted to cash
to meet the financial obligations
 Liquidity is measured by two
approaches:
1. Comparing the firm’s current assets and
current liabilities
2. Examining the firm’s ability to convert
accounts receivables and inventory into
cash on a timely basis
 Compare a firm’s current assets with
current liabilities
1. Current Ratio
2. Acid Test or Quick Ratio
 Current ratio compares a firm’s current
assets to its current liabilities
 Formula:
Current ratio = Current assets/Current
liabilities
 Charlie's Skate Shop sells ice-skating
equipment to local hockey teams. Charlie is
applying for loans to help fund his dream of
building an indoor skate rink. Charlie's
bank asks for his balance sheet so they can
analysis his current debt levels. According
to Charlie's balance sheet he reported
$100,000 of current liabilities and only
$25,000 of current assets.
 Charlie's current ratio would be calculated like this:

 CR = 25,000/100,000 = 0.25

 Charlie only has enough current assets to pay off

25 percent of his current liabilities. This shows that
Charlie is highly leveraged and highly risky. Banks
would prefer a current ratio of at least 1 or 2, so
that all the current liabilities would be covered by
the current assets. Since Charlie's ratio is so low, it
is unlikely that he will get approved for his loan.
 Quick ratio compares cash and current
assets (minus inventory) that can be
converted into cash during the year with the
liabilities that should be paid within the year.
 What is the rationale for excluding
inventories?
 Formula:
Quick Ratio = Cash and accounts receivable/
Current liabilities
 Carole's Clothing Store is applying for a loan
to remodel the storefront. The bank asks
Carole for a detailed balance sheet, so it can
compute the quick ratio. Carole's balance
sheet included the following accounts:
 Cash: $10,000
 Accounts Receivable: $5,000
 Inventory: $5,000
 Stock Investments: $1,000
 Prepaid taxes: $500
 Current Liabilities: $15,000
 The bank can compute Carole's quick ratio
like this:

 QR = (10,000+5,000+1,000)/15,000 = 1.07

 This means that Carole can pay off all of her

current liabilities with quick assets and still
have some quick assets left over
 Measures a firm’s ability to convert
accounts receivable and inventory into
cash
3. Average Collection Period
4. Inventory Turnover
 How long does it take to collect the firm’s
receivables?
 A.k.a. Days sales outstanding
 Formula:
ACP = Accounts receivable * 365/ Annual
credit sales
 Devin's Long Boards is a retailer that offers
credit to customers. Devin often selling
inventory to customers on account with the
agreement that these customers will pay for
the merchandise within 30 days. Some
customers promptly pay for their goods,
while others are delinquent. Devin's year-
end financial statements list the following
accounts:
 Accounts Receivable: $15,000
 Net Credit Sales: $175,000
 Devin's days sales is calculated like this:

 ACP = (15,000/ 175,000) * 365 = 31 days

 It takes Devin approximately 31 days to

collect cash from his customers on average.
This is a good ratio since Devin is aiming
for a 30 day collection period.
 How many times is inventory rolled over per
year?
 Formula: Inventory Turnover = Cost of
goods sold/Inventory
 the direct costs attributable to the production
of the goods sold by a company
 includes the cost of the materials used in
creating the good along with the direct labor
costs used to produce the good
 it excludes indirect expenses such as
distribution costs and sales force costs
 COGS appears on the income statement and
can be deducted from revenue to calculate a
company's gross margin
 Donny's Furniture Company sells industrial
furniture for office buildings. During the
current year, Donny reported cost of goods
sold on its income statement of $1,000,000.
Donny's beginning inventory was $3,000,000
and its ending inventory was $4,000,000.
Donny's turnover is calculated like this:

 Inventory Turnover = 1,000,000 / (3,000,000

+ 4,000,000)/2 = 29
 As you can see, Donny's turnover is 29
 This means that Donny only sold roughly a
third of its inventory during the year
 It also implies that it would take Donny
approximately 3 years to sell his entire
inventory or complete one turn
 In other words, Danny does not have very
good inventory control.
 This question focuses on the profitability
of the assets in which the firm has
invested. We will consider the following
ratios to answer the question:
1. Return on Assets
2. Operating Profit Margin
3. Total Asset Turnover
4. Fixed Asset Turnover
 ROA measures how efficiently a company
can manage its assets to produce profits
during a period
 Formula: ROA = Net Income or Operating
Profit/Average Total Assets
 Charlie's Construction Company is a
growing construction business that has a
few contracts to build storefronts in
downtown Chicago. Charlie's balance sheet
shows beginning assets of $1,000,000 and
an ending balance of $2,000,000 of assets.
During the current year, Charlie's company
had net income of $20,000,000. Charlie's
return on assets ratio looks like this:
 ROA =
20,000,000/(1,000,000+2,000,000)/2 =
13,33
 In other words, every dollar that Charlie
invested in assets during the year produced
$13.30 of operating profit. Depending on
the economy, this can be a healthy return
rate no matter what the investment is.
 Investors would have to compare Charlie's
return with other construction companies in
his industry to get a true understanding of
how well Charlie is managing his assets.
 OPM examines how effective the company is
in managing its cost of goods sold and
operating expenses that determine the
operating profit.
 Formula : OPM = Operating profit/Sales
 In the UK is known as ROS i.e. Return on
Sales and is a so called secondary rate
 If Christie's Jewelry Store sells custom
jewelry to celebrities all over the country.
Christie reports the follow numbers on her
financial statements:
 Net Sales: $1,000,000
 Cost of Goods Sold: $500,000
 Rent: $15,000
 Wages: $100,000
 Other Operating Expenses: $25,000
 Here is how Christie would calculate her
operating margin:

 Operating profit = Net Sales - all operating

expenses = 1,000,000 – 500,000 - 15,000
- 100,000 - 25,000 = 360,000

 OPM or ROS = 360,000/1,000,000 = 0.36

 Christie's operating margin 0.36
 This means that 64 cents on every dollar of
sales is used to pay for variable costs
 Only 36 cents remains to cover all non-
operating expenses or fixed costs
 It is important to compare this ratio with
other companies in the same industry
 This ratio measures how efficiently a firm is
using its assets in generating sales
 Formula: Total Assets Turnover =
Sales/Total assets
 In UK is known as AUR i.e. Asset Utilisation
Ratio considered to be a secondary ratio
 Sally's Tech Company is a tech start up
company that manufactures a new tablet
computer. Sally is currently looking for new
investors and has a meeting with an angel
investor. The investor wants to know how
well Sally uses her assets to produce sales,
so he asks for her financial statements. Here
is what the financial statements reported:
 Beginning Assets: $50,000
 Ending Assets: $100,000
 Net Sales: $25,000
 The total asset turnover ratio is calculated
like this:

 TAT or AUR = 25,000 / (50,000+100,000)/2

= 0.33

 This means that for every dollar in assets,

Sally only generates 33 cents. In other words,
Sally's start up is not very efficient with its
use of assets.
 Examines efficiency in generating sales
from investment in “fixed assets”
 Formula: = Sales/Fixed assets
 Here we examine the question: Does the
firm finance its assets by debt or equity or
both?
 We use the following two ratios to answer
the question:
1. Debt Ratio
2. Times Interest Earned
 a solvency ratio that indicates the
percentage of the firm’s assets that are
financed by debt (implying that the balance
is financed by equity)
 shows how many assets the company must
sell in order to pay off all of its liabilities
 Formula: Debt Ratio = Total debt/Total
assets = Total liabilities/Total assets
 Dave's Guitar Shop is thinking about
building an addition onto the back of its
existing building for more storage. Dave
consults with his banker about applying for
a new loan. The bank asks for Dave's
balance to examine his overall debt levels.
 The banker discovers that Dave has total
assets of $100,000 and total liabilities of
$25,000.
 Dave's debt ratio would be calculated like
this:

 DR = 25,000/100,000 = 0.25

 In other words, Dave has 4 times as many

assets as he has liabilities. This is a
relatively low ratio and implies that Dave
will be able to pay back his loan. Dave
shouldn't have a problem getting approved
for his loan.
 A company with total assets of $100 million
and total debt of $30 million has a debt
ratio of 30%.
 Is this company in a better financial
situation than one with a debt ratio of 40%?
 It depends on the industry in which the
companies operate
 A debt ratio of 30% may be too high for a
company that operates in a sector where cash
flows are volatile and its peers have little
debt, since this debt level may reduce its
financial flexibility and competitive advantage
 Conversely, a debt level of 40% may be easily
manageable for a company in a sector such
as utilities, where cash flows are stable and
higher debt ratios are the norm
 A debt ratio of greater than 1 indicates that
a company has more debt than assets
 Meanwhile, a debt ratio of less than 1
indicates that a company has more assets
than debt
 Used in conjunction with other measures of
financial health, the debt ratio can help
investors determine a company's risk level
 is a coverage ratio that measures the
proportionate amount of profit that can be
used to cover interest expenses in the
future
 Formula: Times Interest Earned = Operating
income or Operating Profit/Interest
 Tim's Tile Service is a construction company
that is currently applying for a new loan to
buy equipment. The bank asks Tim for his
financial statements before they will
consider his loan. Tim's income statement
shows that he made $500,000 of income
before interest expense and income taxes.
Tim's overall interest expense for the year
was only $50,000. Tim's time interest
earned ratio would be calculated like this:
 TIE = 500,000/50,000 = 10 times
 Tim’s TIE is 10
 This means that Tim's income is 10 times
greater than his annual interest expense
 In other words, Tim can afford to pay
additional interest expenses
 In this respect, Tim's business is less risky
and the bank shouldn't have a problem
accepting his loan
Note:
 Interest is not paid with income but with
cash
 Oftentimes, firms are required to repay part
of the principal annually
 Thus, times interest earned is only a crude
measure of the firm’s capacity to service its
debt
 Measures how profitably a company can use
the money it gets from equity investors
 Shows how well the company can make profits
from the investments from shareholders
 Formula: ROE = Net income or Net
Profit/Shareholders equity

 Most of the time, ROE is computed for common

shareholders (preferred dividends are not
included in the calculation because these
profits are not available to common
stockholders)
 Tammy's Tool Company is a retail store that
sells tools to construction companies across
the country. Tammy reported net income of
$100,000 and issued preferred dividends of
$10,000 during the year. Tammy also had
10,000 @ $5 par common shares outstanding
during the year.
 ROE = (100,000-10,000)/10,000 * 5 = 1.80
 Tammy's Tool Company is a retail store that
sells tools to construction companies across
the country. Tammy reported net income of
$100,000 and issued preferred dividends of
$10,000 during the year. Tammy also had
10,000 @ $5 par common shares outstanding
during the year.
 ROE = (100,000-10,000)/10,000 * 5 = 1.80
 This means that every dollar of common
shareholder's equity earned about $1.80 this
year.
 In other words, shareholders saw a 180 percent
return on their investment. Tammy's ratio is most
likely considered high for her industry. This could
indicate that Tammy's is a growing company.
 An average of 5 to 10 years of ROE ratios will give
investors a better picture of the growth of this
company
 Company growth or a higher ROE doesn't
necessarily get passed onto the investors
however. If the company retains these profits, the
common shareholders will only realize this gain
by having an appreciated stock.
 a profitability ratio that measures how
efficiently a company can generate profits
from its capital employed by comparing net
operating profit to capital employed
 In other words, it shows investors how many
dollars in profits each dollar of capital
employed generates
 Formula: ROCE = Operating Profit/Total
capital employed
 Capital employed = Total Assets – Current
Liabilities
 Scott's Auto Body Shop customizes cars for
celebrities and movie sets. During the year,
Scott had a net operating profit of $100,000.
Scott reported $100,000 of total assets and
$25,000 of current liabilities on his balance
sheet for the year.
 ROCE = 100,000/(100,000-25,000) = 1.33
 In other words, every dollar invested in
employed capital, Scott earns $1.33
 Scott's return might be so high because he
maintains low assets level
 Companies with large cash reserves usually
skew/distort this ratio because cash is
included in the employed capital
computation even though it isn't technically
employed yet
 We can use two approaches to answer this
question:
1. Market value ratios (P/E)
2. Economic Value Added (EVA)
 These ratios indicate what investors think of
management’s past performance and future
prospects
 Measures how much investors are willing to
pay for $1 of reported earnings
 Shows what the market is willing to pay for
a stock based on its current earning
 Formula:
P/E = Price per share/Earnings per share
 Investors often use this ratio to evaluate
what a stock's fair market value should be
by predicting future earnings per share

 Companies with higher future earnings are

usually expected to issue higher dividends
or have appreciating stock in the future
 The PE ratio helps investors analyze how
much they should pay for a stock based on
its current earnings
 This is why the PE ratio is often called a
price multiple or earnings multiple
 Investors use this ratio to decide what
multiple of earnings a share is worth
 In other words, how many times earnings
they are willing to pay
 The Island Corporation stock is currently trading
at $50 a share and its earnings per share for the
year is 5 dollars.
 P/E = 50/5 = 10 times
 This means that investors are willing to pay 10
dollars for every dollar of earnings. In other
words, this stock is trading at a multiple of ten.
 Since the current EPS was used in this calculation,
this ratio would be considered a trailing price
earnings ratio. If a future predicted EPS was used,
it would be considered a leading price to
earnings ratio.
 Compares the market value of a share of
stock to the book value per share of the
reported equity on the balance sheet.
 Formula:
P/B = Price per share/Equity book value
per share
 How is shareholder value created?
◦ If the firm earns a return on capital that is greater
than the investors’ required rate of return.

 EVA attempts to measure a firm’s economic

profit, rather than accounting profit
 EVA recognizes the cost of equity in
addition to the cost of debt (interest
expense)
 EVA = (Operating return on assets - Total
cost of capital) x Amount of capital or Total
Assets
 A firm has total assets of $5,000 and has
raised money from both debt and equity in
equal proportion. Further, assume that cost
of debt is 8% and the cost of equity is 16%.
Assume that the firm earns 17% operating
income on its investments.
 EVA = (17% – 12%)* $5,000 = $250
 Where,
Cost of capital = 0.5*(8%) + 0.5*(16%) =
12%
 It is sometimes difficult to identify industry
categories or comparable peers
 The published peer group or industry averages
are only approximations
 Industry averages may not provide a desirable
target ratio
 Accounting practices differ widely among firms.
 A high or low ratio does not automatically lead
to a specific conclusion
 Seasons may bias the numbers in the financial
statements
 Bragg, Steven M., Business ratios and
formulas: a comprehensive guide, John Wiley
& Sons Inc., 2007
 Ciaran, Walsh, Key management ratios - the
clearest guide to the critical numbers that
drive your business, FT Prentice Hall, 4th ed.,
2006
 www.investopedia.com
 http://www.myaccountingcourse.com/
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
1. Payback period
2. Net present value (NPV)
3. Internal rate of return (IRR)
4. Average rate of return (ARR)
 Note that the payback calculation uses
cash flows, not net income
 Also, the payback calculation does not
address a project's total profitability
 Rather, the payback period simply
computes how fast a company will
recover its cash investment
 By using discounted cash flow techniques
we can calculate Net Present Value

 Present value is the today’s value (year 0) of

any future cash flow after discounting it by
an appropriate discount rate

 The process of converting cash to be

received in the future into a value at the
present time by the use of an interest rate
is called as discounting
 VV1 VV2 VV3 VVn
1+ 2+ 3 + .....+ n −InvIni
(1+ k ) (1+ k ) (1+ k) (1+ k)

NPV >0 = Accept project

NPV <0 = Reject project
 Discount Factor = (1 + r)n

 Where n = year number, r = discount rate

 Present value = FV / (1 + r)n

 Compounding is the opposite of discounting,

since it is the future value of present cash
flows

 Future Value = PV * (1 + r)n

 This is the discount rate that will cause the net
present value of an investment to be zero (NPV =
0)
 IRR is the Effective Interest Rate (EIR) of the project
 Also known as Discounted Rate of Return
 IRR is the “maximum cost of capital” that can be
allowed to finance a project. If your cost of capital
is greater than IRR , then you are incurring losses.
 Can be found by trial and error by using a number
of discount factors until the NPV equals zero
 IRR has a technical shortcoming. That is, when
cash flows of the project are unconventional
multiple IRRs are possible for a project. But,
only one IRR is economically significant in
determining whether or not the investment is
possible.

 Therefore, when unconventional cash flows

involve, NPV method is more appropriate to
decide whether project is accepted or not.
 To simplify the presentation, our calculations
have been based on the assumption that any
cash flows in future years will occur in one lump
sum at the year end

 Both NPV and IRR methods take into account the

time value of money

 Techniques that ignore the time value of money:

◦ Payback method
◦ Accounting rate of return (ARR)
a.k.a. Return on Investment
 also known as the return on investment
 this method differs from other methods in
that profits rather than cash flows are used

 ARR = (average annual profits / average

investments) x 100

 ignores the time value of money

Other Factors
 Not all investment projects can be described
completely in terms of monetary costs and
benefits
 Therefore, even if some costs and benefits
cannot be quantified they should be
considered in investment decisions
 Accept the project if NPV is positive
 Accept the project if Discount rate <
IRR
 Accept the project if payback is
comparatively shorter
 Accept the project if ARR > expected
rate of return
 Mutually exclusive projects exist where the
acceptance of one project excludes the
acceptance of another project

 It is recommended to use NPV method to

rank mutually exclusive projects
 Situations may occur where there are
insufficient funds available to a firm to
undertake all those projects that yield a
positive net present value
 This situation is described as capital rationing

 The term “soft capital rationing” is often used

to refer to situations where, for various
reasons the firm internally imposes a budget
ceiling on the amount of capital expenditure
 Where the amount of capital investment is
restricted because of external constraints such as
the inability to obtain funds from the financial
markets, the term “hard capital rationing” is used

 Whenever capital rationing exists, management

should allocate the limited available capital in a
way that maximizes the NPVs of the firm

 For ranking projects “profitability index” is used

 Profitability index = PV of cash inflows / Investment
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
6. In premiera: Strict secret – Aurul Romaniei - (21
Nov)
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy - (28 Nov)
https://www.youtube.com/watch?v=-1j0XDGIsUg
8. How The Economic Machine Works - (5 Dec)
https://www.youtube.com/watch?v=PHe0bXAIuk0
9. Ce sunt banii și cum funcționează băncile - (12
Dec)
https://www.youtube.com/watch?v=ATDxwSraUlk
10. Wag the Dog (1997) – movie, thriller 9 Ian. 2018
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 First contacts with the client
 Preliminary diagnosis
 Planning the mission
 Clarifying roles
 Proposals made to the client
 Consulting contract
 Identifying facts
 Analising and synthesizing facts
 Detailed examination of the problems
1. Mistaking symptoms for problems
2. Preconceived ideas about the causes of
problems
3. Looking at problems from one technical
viewpoint only
4. Ignoring how the problem is perceived in
various parts of the organisation
5. Wrong appreciation of the urgency of the
problems
6. Conclude diagnostic prematurely
7. Failure to clarify the focus purpose
1. Mistaking symptoms for problems
2. Preconceived ideas about the causes of
problems
3. Looking at problems from one technical
viewpoint only
4. Ignoring how the problem is perceived in
various parts of the organisation
5. Wrong appreciation of the urgency of the
problems
6. Conclude diagnostic prematurely
7. Failure to clarify the focus purpose
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 Designing solutions
 Designing options
 Offers made to the client
 Planning for implementation
1. What should the new solution achieve?
2. How will the new solution differ from the
present one?
3. Are the effects likely to last?
4. Where could solutions/ideas be found?
5. What difficulties may arise?
6. Who will be affected?
7. When is the best time to change?
 Previous assignments and clients (both
personal and organisational )
 Colleagues
 Professional literature
 Staff in other departments of the client
organisation who may have knowledge of
particular process
 Other consulting organisations that are ready
to share
 Suspend judgement – rule out premature
criticism of any idea
 Free-wheel – the wilder the idea, the better
the results
 Quantity – the more ideas, the better
 Cross-fertilize – combine and improve the
idea of others
 Develop alternative solution that take into
account future needs
 The solution should anticipate future changes
(in client’s organisation, environment,
demand for client’s products, competition)
 Identify alternative options and evaluate them
(using criteria)
 Ideal solution is rare – compare pros and
cons of several alternatives
 Too many criteria
 Basic criteria meet by all the options – further
criteria need to be investigated
 Some important criteria are difficult/
impossible to quantify
 Strong subjectivity – someone has to decide
how important various criteria are
 Explain risks (first ever solution, some opposition
or higher costs)
 Present conditions (discipline in recording data,
need for improved maintenance or staff
transfer/lay out)
 Admit tasks that could not be completed due to
lack of time/data
 Explain future perspectives – the solution does
(not) anticipate future developments (capacity
expansion, automation, use of solution for
affiliated companies, environmental legilslation)
 The planning may reveal future problems and
needs
 The plan shows not only what to implement,
but also how to implement
 Final decision belongs to the client (not the
consultant)
 Do not impose the solution to your client –
lack of commitment and room for blaming
 Consultant should be aware of the client’s
personal preferences and factors (cultural,
political etc.) influencing the client’s decision
– helps you avoid proposals that will not be
accepted
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 Offering assistance to implementation
 Improving/updating offers
 Training
 Many consultancy missions end up before
the implementation stage (just with a report
presenting an action plan)
 Involve client in all stages
 Collaboration during diagnosis and action
planning is essential
 Clients very rarely reject proposals that
resulted after joint work
 Some clients reluctant to involve the
consultant in this phase due to costs
 If possible, operate on lower costs
 Clearly define new responsibilities+controles
 Pace time of implementation
 Check key success indicators – assess
progress
 Gain support of key individuals – create
critical mass for change
 Keep client informed
 The more complex + innovative the solution,
the more adjustable the implementation
 Design and detail procedures
 Maintain enthusiasm and vision
 Encourage people
 Train the staff
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
 Assessment
 Final report
 Checking upon each party's responsibilities
 Follow-up planning
 New capabilities
 New systems
 New relationships
 New opportunities
 New behaviour
 New performance
 Thursday, 25th of Jaunary 2018
 You should study Chapters 1-3, 7-11, 20-
24, 26-27 and Appendices 1, 3-7 from
Milan Kubr’s Management Consulting
 0737-13.98.13
Renaldo.Nita@yahoo.com
 Renaldo Niţă
Senior Trainer & Consultant
6. In premiera: Strict secret – Aurul Romaniei - (21
Nov)
http://inpremiera.antena3.ro/reportaje/strict-
secret-aurul-romaniei-1.html
7. The Light Bulb Conspiracy - (28 Nov)
https://www.youtube.com/watch?v=-1j0XDGIsUg
8. How The Economic Machine Works - (5 Dec)
https://www.youtube.com/watch?v=PHe0bXAIuk0
9. Ce sunt banii și cum funcționează băncile - (12
Dec)
https://www.youtube.com/watch?v=ATDxwSraUlk
10. Wag the Dog (1997) – movie, thriller 9 Ian. 2018
1. Initiation (Introduction, The entry phase)
2. Diagnosis
3. Planning activities
4. Implementation
5. Closing the mission
 Milan Kubr, Management Consulting
1. AI
2. Robots
3. Bio-technology - Transhumanism (enhancing human
capabilities)
4. Nanotech (3D printing, medicine)
5. Car industry and fuel
6. Health industry
7. Clothing

 50% of the working population will be unemployed –

social movements
 Guaranteed average income
 Too many people
 It all starts as how we think of the world and life
 received 20 honorary doctorates
 awarded honors from three U.S. presidents
 Author of 7 books (5 of which have
been national bestsellers).
 inventor of many technologies ranging from the
first CCD flatbed scanner to the first print-to-
speech reading machine for the blind
 chancellor and co-founder of Singularity
University
 the guy tagged by Larry Page to direct artificial
intelligence development at Google
 a computer would defeat a world chess
champion by 1998. Then in 1997, IBM’s Deep
Blue defeated Garry Kasparov
 PCs would be capable of answering queries
by accessing information wirelessly via the
Internet by 2010. He was right, to say the
least
 by the early 2000s, exoskeletal limbs would
let the disabled walk. Companies like Ekso
Bionics and others now have technology that
does just this, and much more
 people would be able talk to their computer to
give commands by 2009. In 2009, natural
language interfaces like Apple’s Siri and Google
Now have come a long way. I rarely use my
keyboard anymore; instead I dictate texts and
emails
 computer displays would be built into eyeglasses
for augmented reality by 2009. Labs and teams
were building head mounted displays well before
2009, but Google started experimenting with
Google Glass prototypes in 2011. Now, we are
seeing an explosion of augmented and virtual
reality solutions and HMDs. Microsoft just
released the Hololens, and Magic Leap is working
on some amazing technology, to name two.
 by the 2010s, virtual solutions would be able
to do real-time language translation in which
words spoken in a foreign language would be
translated into text that would appear as
subtitles to a user wearing the glasses. Well,
Microsoft (via Skype Translate), Google
(Translate), and others have done this and
beyond. One app called Word Lens actually
uses your camera to find and translate text
imagery in real time.
 By the late 2010s, glasses will beam images
directly onto the retina. Ten terabytes of
computing power (roughly the same as the
human brain) will cost about $1,000.
 By the 2020s, most diseases will go away as
nanobots become smarter than current
medical technology. Normal human eating
can be replaced by nanosystems. The Turing
test begins to be passable. Self-driving cars
begin to take over the roads, and people
won’t be allowed to drive on highways.
 By the 2030s, virtual reality will begin to feel
100% real. We will be able to upload our
mind/consciousness by the end of the
decade.
 By the 2040s, non-biological intelligence will
be a billion times more capable than
biological intelligence (a.k.a. us). Nanotech
foglets will be able to make food out of thin
air and create any object in physical world at
a whim.
 People will be fluent in every language
 Software will predict traffic jams before they
occur
 Climate-controlled jackets will protect
soldiers from extreme heat and cold
 Nanoparticles will make chemotherapy far
more effective
 Electric cars will roam (some) highways
 Athletes will employ robotic trainers
 Bridges will repair themselves with self-
healing concrete
 Digital "ants" will protect the U.S. power grid
from cyber attacks
 Scrolls will replace tablets
 We'll send 3D printers to other planets to
print habitats for humans prior to our arrival
 Your genome will be sequenced before you
are born
 Radiation sickness will be cured by injection
 You will use 3D printer to download useful
things (a birthday cake, a Rolex, or a catalytic
converter for the car, prescription medicine)
 Drugs will be tested on "organ chips" that
mimic the human body
 Passwords will be obsolete - face-
recognition, retinal scans, fingerprints,
voiceprints and heartbeats software
 Car tires will be brewed by bacteria
 Self-cleaning buildings will help us fight
smog
 Your clothes will clean themselves too
 Drones will protect endangered species
 Rescuers will use electronic noses to locate
disaster victims
 Genetic testing will be used to halt epidemics
 Vaccines will wipe out drug addiction
 Smart homes will itemize electricy, water, and
gas bills by fixture and appliance
 Vegetarians and carnivores will dine together
on synthetic meats
 It will communicate with traffic lights to
improve traffic flow
 It will interact with other vehicles to prevent
accidents
 It will let you drag and drop a playlist from
your home network
 It will find the gas station with the deepest
discount and handle the payment.
 It will notify you when someone dents your
door and supply footage of the incident
 Contact lenses will grant us Terminator vision
 Checkups will be conducted by cellphone
 All 130 million books on the planet will be
digitized
 Nurse Jackie will be a robot
 Supersonic jets will return—for good this time
 Humans will begin augmenting their brains
by plugging the power of tomorrow's
cellphones directly into their heads
 Supercomputers will be the size of sugar
cubes
 The refrigerator will place your grocery order
 The carpet/floor will detect intruders and
summon help if you fall
 Lawn sensors will tell you which part of your
yard to fertilize
 The electric meter will monitor local power
consumption and help you make full use of
off-peak rates
 The thermostat will learn your preferences
and adjust the climate in each room as soon
as you enter
 A virtual lawyer will help you plan your estate
 Vertical farms will feed cities
 Robots will replace people in many industries
 The planet's protein could be produced in an
area half the size of Connecticut
 Due to nanotech Navy SEALs will be able to
hold their breath for 4 hours
 Robots will rule all sport games
 Underwater robots with laser radar or other
non-acoustic sensors will make the seas
virtually transparent
 An ion engine will reach the stars
 Scientists will map the quadrillion
connections between the brain's neurons
solving mental illness and helping learning
 One of us will celebrate a 150th birthday
 Doctors will check your vital signs around the
clock via tiny sensors
 Stomach chips will monitor your diet to help
you lose weight
 Spinal cord implants will reverse paralysis
 Brain chips will let you absorb data while you
sleep
 Brain interfaces will help you fully inhabit
virtual worlds
 Students who haven’t attended minimum 3
courses/seminars (intermediary test + final
exam not included) cannot enter the final
examination
 Students who haven’t attended the
Intermediary Test cannot enter the final
examination
 Exam will be a role play discussion between
the client (professor) and the consultant
(student)
 You will receive an exam paper with 5
questions
 You will have 20-25 min. to read the paper
and draft some answers
 After 20-25 min. you will be invited to a
meeting with client and discuss around the
issue + answer the questions
1. Questionnaire – 10 Qs
2. Multiple Cause Diagram
3. Solving your problem
4. 3 Indicators/Rates
5. Finance – Net Present Value, Payback Period,
Break Even Point

1. BONUS: IQ Questions and Questions from

course and video sequences
 If your mark is less than 5 after meeting with
your client, you will pick up a bonus question
 The bonus question is an IQ question, a
question from the course or from the video
sequences
 You cannot use any help/support in
answering the bonus question
 Failure to answer the bonus question leads to
exam failure
KUBR, Milan, Management Consulting – A
Guide to the Profession, 4th ed.,
International Labour Office, Geneva, 2002
◦ Chapters: 1-3, 7-11, 20-24, 26-27 and
Appendices 1, 3-7
 COHEN, William A., How to make it big as a
consultant, 4th ed., AMACOM, 2009
 0737-13.98.13
Renaldo.Nita@yahoo.com