World

Copyright © 2002 All Rights Reserved World Wide. World eBook Library and Logos Group eDocument Collection.

http://worldLibrary.net - This eBook was obtained from the World eBook Library Consortia enhanced PDF eBook Collection.Membership to the World eBook Library Consortia is only $8.95 per year. Your $8.95 helps to support a variety of global literacyprograms. 60,000 PDF eBooks and PDF eDocuments in 104 languages have been optimized for text to speak. Let your computerread to you. Join now and gain access to the world's largest PDF eBook Collection (60,000+ and growing daily). The LogosGroup's Wordtheque Collection, a is a massive eBook and eDocument collection containing multilingual novels, technical literatureand translated texts.

To join visit http://netLibrary.net/Join.htm

5th Generation Management See Management. 1992 Strategies For The Single Market See Policy. [[alpha]] See alpha, Beta and Finance. Abobe Adobe Systems is an american company which (in the form of John Warnock) invented thePostscript language. Warnock's work is in fact another development from Xerox PARC. It describes all objects (letters and graphics) in terms ofmathematical equations and is used in many PC systems, especially in desktop publishing. Accelerated change What is needed and will not work when a company in extreme ill health tries in order tosurvive. What a company should try when doing well. Acceptance Criterion See Finance. Access See Microsoft. Accounting For Growth See Control and Monitoring. Accounting Information Systems See Control and Monitoring. Accounting rate of return Not a particularly useful measure of payback period because it does not take account of thedifference between annual payback and a lump sum. Ten payments of[[sterling]]1000 would be worth much more than on payment of [[sterling]]10,000 after tenyears because the annual payments can be used for other work. Accounting See Control and Monitoring. Accounts payable Current liabilities to be paid usually over one year owed to suppliers for service,supplies and raw materials. current liabilies Accounts receivable Are the claims upon customers that can be expected to be collected within the normaloperating cycle. Deducted from this is an allowance for doubtful accounts. The aount of accounts receivable is not the total amount owed to the firm, butthe amount it expects to collect. Accrual accounting 1. A). Revenue is recognised under the accrual basis of accounting when: all or asubstantial portion, of the services to be provided have been performed; 2. either cash, or a receivable, of some other asset susceptible to reasonably precisemeasurement has been received. B) Revenue earned and costs incurred are to be accounted for at the time they occur, not when cash is received or paid. Thus, anyamounts earned will be matched by the costs incurred in earning that income. 2. According to the accrual principle of accounting, revenue is recognised as soon as theeffort required to generate the sale is substantially complete, and there is areasonable certainty that payment will be received. The accountant sees the timing of theactual cash receipts as only a technicality. For credit sales, the accrualprinciple means that revenue is recognised at the time of sale, not when the customer pays.

This can result in a significant time lag between generation of revenue andreceipt of cash. Acid test (quick ratio) See quick ratio Acquisition financing Whether to use Debt or Equity to finance an acquisition; Watch for: *If the target is profitable can make use of the tax shield *Debt is typically cheaper than equity and has lower transaction costs (merchant bank feesetc.) *Equity, where it requires a call or issue to shareholders for more funds, has a signallingeffect which can be undesirable *If the asset type being purchase is high risk, the Free Cash Flows are unpredictable (risky)and debt should be avoided) Low beta businesses are good for debt. *High fixed cost businesses should not be financed by debt. Acquisitions See Mergers & Acquisitions. Activity based costing (ABC) The traditional view of cost accounting holds that products cause costs. Cost isgenerally seen as being driven by volume. ABC holds that products consume activities, which in turn consume resources. Activities are the cost drivers and they arenot necessarily volume based. The object is to look for the activity that actually causes a cost to be incurred, then determine how much of that activity a givenproduct requires. ABC systems have become more prominent as companies try to attune themselves to fixed cost businesses where more than 50% of costsare fixed and allocation becomes difficult. ABC is a model of resource consumption, not of spending (Cooper, R. 1990) If cost is definedin terms of spending, then frequently no instantaneous relationshipexists between activities and costs (therefore cutting one product from a range will notresult in a change in cost overall). However, if consumption is measured in thissituation, a change will be recorded.. Adjusted present value (APV) approach to company valuation APV approach values corporations by pieces. The basic piece is the value of teh firm asthough it is an all equity firm; on top of that, if the firm has debt, you add a piece that captures the PV of the tax shield benefit of debt; if there is risk offinancial distress, you subtract a third piece, the present cost of financial distress and so on. Where NPV is the value of an all equity firm, calculated using the cash flows to unleveredequity (i.e. as though the firm is all equity financed) and the unlevered costof equity for the firm (i.e. based on the asset beta, and not theequity beta of the firm. NPFV is the NPV of the effects of financing. The most common one is that associated with thetax shield benefits of debt (i.e. TcD, where the corporate tax rate isTc, the face value of the debt is D, and the debt is assumed to be perpetual. WACC, FTE, Valuation. Corporate valuation ADPCM See PCM-Pulse code modulation. Adults As Learners See Education and Learning. Advanced Mobile Phone System (AMPS) American and far east standard for cellular phones. Digital AMPS the new digital versionwill ultimately compete with the European systems GSM and PCN. AFNOR An acronym for Association Française de Normalisation - the French Standards Institute.See BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. Age Of Unreason (The) See Education and Learning. AI See Artificial Intelligence. Albitz Paul Author of the book "DNS And BIND". See Internet. Alliances See Strategic Aliances. Allocation See Chargeout.

2

Alpha The net risk-adjusted return form a portfolio. The alpha is calculated by measuring therisk adjusted return from the actual return: See Beta and Finance. Altiero Spinelli Author of the book "Battling For The Union". See Policy. AMADEUS, global alliances in CRS industry See Strategy. American Options See Options. Ami Pro See Lotus. Amortised, Amortized. The process of allocating organisation costs, as well as other intangible assets, isreferred to amortisation, which is identical in concept to depreciation. AMPS.-Advanced Mobile Phone System American and far east standard for cellular phones. Digital AMPS the new digital versionwill ultimately compete with the European systems GSM and PCN. An Introduction To OSI See Open Systems. Analog or Analogue See Networks. Analytic Approach To Marketing Decisions (The) See Marketing. Angel See Business Angel. Annuity A series of equal periodic cash flows is known as an annuity. The present value of a fiveyear annuity of $1,000 a year can be calculated by multiplying each of teh five cash flows by the appropriate present value multiplier. A formula for this is In which A is the size of the annual cash flow.(1000), r is the interest rate, P is presentvalue, n is the number of investments. Alternatively Present value at 15% Years Cash Multiplier (cash x multiplier) 1 1000 1/1.15 = 0.8968 869 2 1000 1/(1.15)[2]= 0.7561 756 3 1000 1/(1.15)[3]= 0.6575 657 4 1000 1/(1.15)[4]= 0.5718 571 5 1000 1/(1.15)[5]= 0.4972 497 Total 3.3522 $3,352 The relationship is: Present value = Annual cash flow x present value multiplier (3.3522 inthis example) ANSI American National Standards Institute. See Networks. Antennas Communications satellites carry one or more antennas. These radiate signals transmittedfrom the satellite and gathers signals transmitted from earth. The reflector collects signals from the earth and concentrates them to the transponder. Italso gathers signals from the transponder and aims a beam at a specified area of the earth. Anthony See Information Needs. Anthony's pyramid For organisations shows the different requirements within the organisation forinformation. At the top it is unstructured and comes from outside; at the bottom it is structured and comes from internal sources. See Simon's type Antonelli Cristiano Author of the book. "Economics Of Information Networks (The)". See Networks.

3

Apple An american maker of personal computers and software which popularised the graphical userinterface. Famous for the Apple I, II and III machines and the Macintosh and Powerpc PC's. The company was started by Steve Jobs (later of NeXTStep) andSteve Wozniak. Application See Computing and CASE. Approach See Lotus. Arbitrage The technique of using different prices on different world stock exchanges to make moneyby buying in one and selling in another. Architecture An architecture in computing parlance is defined by Duitsman and Pinelli as: the set ofrules necessary to build an object or to interface one object with another. An object can be anything. The ISO/OSI model uses a layering architecture todefine a common array of communications protocols. Bakers sometimes use a layering architecture in the construction of certain cakes. Architecturesare not automatically a standard. See Computing, CASE., Computer Network Architecture or GOSIP. Argyris, C. The assumption that people work opportunistically; so give signal by saying that theywill be checked (start with the view that people cannot be trusted). Clash between the worker with implicit knowledge of how to get things done and of the system,and the manager who wants to know what is going on. As he triesto find out, the worker thinks he is being distrusted and becomes resentful. Can be adangerous cycle. Build mechanisms on both sides based on mistrust whereperhaps none existed originally. Artificial Intelligence 1: Software that can use its accumulated knowledge to reason and in some instances learnfrom experience and thereby modify its subsequent reasoning. Examples include: natural language, visual recognition, and expert systems. 2: A broadbased technology that encompasses work in fields such as natural languages, language translation, computer vision, speech recognition and expert systems.See ExperTAX case. Artificial Intelligence In Accounting And Auditing See Control and Monitoring. ASCII An acronym for the American Standard Code for Information Interchange. It represents oneof the most basic computing standards because is specifies the machine codes which letters and numbers. This is now almost a universal standards -theglaring exception being IBM which uses its own EBCDIC system. Asset allocation Dividing investment funds among markets to achieve diversification or maximum return. Asset turnover Equals Sales divided by Capital employed. This ratio compares the level of sales acompany cana generate from a given level of capital employed. Capital intensive industries (eg. heavy engineering) will tend to have low figures for assetturnover. The asset turnover can be improved by generating a higher level of sales from a given asset base or by disposing of assets which are not productive. Assets The resources which are owned and controlled by the company. Assets = Liabilities +Owners equity. Assets are unexpired costs (Expenses are expired costs). The value of an asset is the sum of the expected future cash flows which an asset deliversdiscounted to the present day. See Finance and Cash Flow. Association Française de Normalisation See AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. ATM See Networks or Finance Industry. Auditing Is a process by which a competent, usually independent person accumulates and evaluatesevidence about an entity or unit for specified purposes (e.g.

4

financial, safety, environmental etc.) (Arens and Loebbecke 1991). Auditor The general who comes after the battle and shoots the wounded. See Control andMonitoring. aufsichtstraat German for supervisory board. See Corporate Governance. [[beta]] See Beta and Finance. Baby Bells The name given to the American regional telephone operators which AT&T was forced tocreate in 1984. Along with the long distance operators they have created a competitive telecommunications industry in the USA. These effects are nowspreading rapidly into other countries. See Networks. Backbone Network See Networks. Backtracking The process of going back to a state that has been tried. Backup The act of storing digital information (including programs) in a second place or form.The main reason is data security - so that you have a copy of the information which can can use to recover from a corruption in your computer environment. Balance of payments The orderly transaction between the citizens of one country and those of another.Transactions can involve Assets or goods and services. E.g. exports from US $319 billon in 1988 and imports of $446 billion. The export of services$108 billion and imports $93 billion. Net balance being $-112, plusunilateral transfers (foreign aid) gives a current account deficit of $127 billion. This ismatched by import of capital $219 billion and export $82. There is a net capitalimport (net borrowing by the states) of $137 billion. There are statistical deviations). Balance sheet The balance sheet is, in essence, an expression of the funamental accounting equation (A= L + OE). The double entry system is a manifestation of the accounting equation. The fundamental equation of accounting yields an expression of anindividual's or firm's financial position at a moment in time. When it lists specific Assets and Equities it is called a balance sheet. To prepare a balance sheet it is necessary only to sum the debits and credits in each accountand to list and clasify the accounts and balances. Balanced scorecard Standard methods for management to assess business performance have serious limitations.Companies should not be measured simply using financial data, they should be assessed according to whether or not they are progressing and performingin accordance with Strategy. One recent methodology is the Balanced scorecard, which uses financial data, operationalmeasures, customer satisfaction, internal processes annd the organisation'sinnovation and improvement activities (indicators of future financial performance). * Customer concerns tend to fall into 4 categories: time (lead time, time to quote etc),quality, performance and service, cost. * Internal measures should stem from the business processes that have the greatest impact oncustomer satisfaction: cycle time, quality, employee skills, productivity.Companies should also identify critical core competencies and try to guarantee marketleadership. * Innovation can be measured by change in value (employee value, shareholder value, percentageand value of sales from products less than x years old) * Financial measures should include obvious analysis, inventory turns, payable and collectionperiods etc. Balanced scorecards could be considered for different layers in the company, to show operatorsat different levels how what they do is important. They should bedeveloped, not from above only, but also by the operators themselves. Banker A UK based financial magazine which contains regularly profiles of countries, markets andpeople. One of the three best general international financial magazines currently available. See Institutional Investor and Euromoney. For more

5

specialist international finance information see Risk for detailed articles on pricing models and deal structures, International Financing Review for detailedarticles on market activities and deal structures. Banking In The Ec, 1991 See Financial Industry, The. Banking See Financial Industry, The. Banking Technology As A Competitive Weapon See Financial Industry, The. Bankruptcy The distribution of liquidation proceeds in bankruptcy is determined by the rights ofabsolute priority. At the head of the line are, the government for past due taxes and teh bankruptcy lawyers who wrote the law. Among investors, the first to berepaid are senior creditors, then general creditors, then subordinated creditors. Preferred stockholders and common shareholders bring up the rear. Because eachclass of claimant is paid off in full before thenext class receives anything, equity shareholders frequently get nothing in bankruptcy. Bar Code A coding system much in use in the retailing and manufacturing industries as it allowsthe automatic reading of items. Scanning devices are connected to computers and they can rapidly read the information contained in a bar code.In more recent times bar codes are spreading into other uses which require high speed or that deal with large inventories. Example includerailways and road transport where cargos and even drivers are being bar coded. Bar François Author of the book. "Information Networks And Competitive Advantage, vol. I: issues forgovernment policy and corporate strategy". See Networks. Barriers to entry One of Porter's five forces. There are 6 major sources of barriers to entry. 1. Economiesof Scale - This forces a new entrant to come in with high volume or accept a cost disadvantage. Affects all aspects of the business: research, sales,distribution, production etc. 2. Product differentiation. Brand identification creates a barrier to entry, forcing the newentrant to promote heavily 3. Capital requirements. Highly capital intensive busiesses are harder to enter. Capital isneeded for plant and equipment and for funding customer credit 4. Cost disadvantages independent of size. Learning curve + experience curve advantages heldby existing companies help guard against entry. Might also havepatent advantages and better access to raw materials and service/maintenance. 5. Access to distribution channels. Graphically demonstrated in the Japanese beer case. Alsoobvious in the fight for supermarket shelp space for new products. 6. Governement policy. Entry can be controlled by license requirements and limits on access toraw materials. Baseline A baseline is a coordinated project state to which everyone participating in the projectcan refer. When a project has reached a baseline, intermediate products are in well defined states. Checkpoints are those points in time when it hasbeen decided toassess whether a baseline has been reached. A phase is those set of actvities that take place between checkpoints. Basic Beginner's All purpose Symbollic Instruction Code. First programming language for nonprogrammers . Has now been lagely replaced by Visual Basic, an object oriented programming language. See Computing. Batch Processing A technique in computing where several computer tasks are grouped together and processedin one `batch'. Nowday's on-line processing receives all the attention but most mainframe computers still work on the basis of batch processing. Youjust don't notice this as a user because the machines are so fast or the application is built with features such as batch report processing. See On-lineProcessing. Battling For The Union

6

See Policy. Bear run Fast falling stock market Bear run See Finance. Beaud Paul Author of the book. "European Telematics : The Emerging Economy Of Words". See Networks. Beckhard Richard Author of the book "Changing The Essence". See Education, Learning and Change. Behaviorism Americas only home grown psychology. Aspires to develop a universal code of principlesunilaterally applied, which allow E, the experimenter, to condition the responses of S, the subject, by prepared schedule of reinforcements designed toreward and punish. . Such a science regards wants and motives of S as irrelevant and any reltionship between E and S as likely to contaminate the results. andany relationship between the two as contaminants to the result. Behaviourism has been highly influential in providing teh rewards of external wageincentives, stock options, and bonuses for behaviors sought by management. Belbin Team Roles R. Meredith Belbin was a researcher in the dynamics of team work. He developed a model ofteams and categorised team members into 8 roles: 1. Chairman. The controller of the team. Someone who co-ordinates the resources, maximisestheir effectiveness within the team and ensures that the objectives of the group are met. 2. Company Worker. Translates the concepts of the group and produces a practical plan formeeting them. Is a systematic and efficient executor of plans. 3. Completer Finisher. The one who focuses on areas which need close attention tosuccessfully complete. Keeps a feeling of urgency in the team. 4. Monitor Evaluator. A problem analyser who can evaluate ideas and make a balanceddecision. 5. Plant. The proposer of new ideas and strategies. 6. Resource Investigator. Handles external contacts for the group. 7. Shaper. Shapes the teams efforts and the way the group works. 8. Team Worker. Supports the other members of the team when difficulties are encountered. Agood communicator who fosters team spirit. One the most interesting implications of Belbin's ideas are that a successful team needs most,if not all, of the eight role types. Benchmarking Global Manufacturing See Manufacturing. Best practise A process of benchmarking against competition to find out how the best is done. At GEthis involves less of measuring and more of how the processes are managed. The GE approach teaches possibly complacent staff that other companies havethings they can teach GE. Involves Process mapping. Beta Equity Beta (levered) Asset Beta Beta is a coeficient of risk. Where ßE = Equity beta: ßA = Asset beta Equity beta = Asset beta (or business risk) + Asset beta * Debt equity ratio (financial risk),or:- Beta Measures the volatility of an asset relative to a broad market measure (such as a

7

diversified portfolio of world stocks). It is often abbreviated to the Greek symbol [[beta]]. A [[beta]] = 0 is risk-free (it doesn't change) and if [[beta]] = 1 thenthe change in the asset matches the change in the market measure. Many companies publish beta calculations based upon broad measures, both S&P and MorganStanley Investment Corporation publish such betas. See levered beta, unlevered beta and Finance. Beyond National Borders, reflections on Japan and the world See Policy. Big Bath, the Companies which accept financial losses in one single charge against income. IBM's 1992charge (and the resulting record loss) against reorganisation and redundancy costs was an example of this. Bill of materials (BOM) A diagram, or record, that shows all the components for an item, their parent componentrelationships, and their usage quantities. Billion Despite some british protests the American system prevails: 1 trillion = a million millions 1 billion = a thousand millions Bimbo Term describing a deal involving both existing and outside managers: buy-in/managementbuy-out. About half of all buy out deals are of this type. Black Friday In the financial community there have been a number of black friday's and other days ofthe week: Black Friday 24 September 1929 US stock market panic Black Monday 19 October 1988 World stock markets drop Black Thursday 22 October 1988 World stock markets drop Blue Chip The largest and safest companies are termed blue chip companies. Stocks in thesecompanies are called blue chip stocks. Bollinger See Reuters. Bond rating Independent companies assess the health of companies and judge on how risky it would beto buy their bonds. Ratings from AAA to CC; CC being junk bonds. The interest paid increases with risk. The government bond would be AA rated. Bonds Something sold by an organistion or company for money which is repaid at the end of astated term (eg. 5 years). May be interest paying, so that the buyer receives interest on the money paid, or interest free (zero rated). Similar function to aloan. Secured against either the company or some stated asset. Companies are bond rated, from A to C. Rating depends on the risk that the company willfold and not meet its committments. C rated bonds are known also as Junk Bonds. The lower the rating the higher the interest that has to be paid topersuade people to buy.Some bonds are Callable; they can be called back by the issuer, usually for a premium. This would happen if the companies rating rises orif interest rates change. Similar to notes, but differ in that the promise to pay is usually included in a more formallegal instrument and the term of the loan is usually longer. Can be either acurrent or a non current liability in the balance sheet, or both at the same time (portion duein one year being current, portion due in subsequent year being noncurrent). Book list Handy * 2 Agyris Galbraith Hermann Hess, the Glass bead game (C 1940)

8

Shapiro, E. & Carr, W. Peter Sage, the fifth dimension Book value vs Market value of a company. A balance sheet will show the value of shareholders equity which is alsoknown as the book value Book value has little real meaning because it reflects purchase price adjusted by depreciation which might not reflect true value(perhaps higher if the asset is land, lower if the asset is obsolete equipment).Shareholders invest for future value, not for present value, book value does not reveal this.Also a company will have many assets which do not appear in thebalance sheet, eg., patents, also reputation, management ability, available technology etc.Unrecorded liabilities include law suits, inferior managment. Market value of equity is calculated for quoted companies by multiplying the common sharevalue by the number of shares outstanding. Borrhus Michael Author of the book. "Information Networks And Competitive Advantage, vol. I: issues forgovernment policy and corporate strategy". See Networks. Boss Managing the boss. Managers who work effectively with their bosses seek out informationabout the boss's goals and problems and pressures. The actively test assumptions about the boss's capabilities and expectations. How does he likecommunications to come (a listener - brief verbally then send a memo, or a reader, brief via a memo then discuss). Is he a formal or and intuitive type. (fromManaging your boss, Gabarro & Kotter). Make sure you understand your boss and his or her context, including: * Goals and objectives * Pressures * Strengths, weaknesses, blind spots * Preferred work style Assess yourself and your needs, including: * Strengths and weaknesses * Personal style * Predisposition toward dependence on authority figures Develop and maintain a relationship that: * fits both your needs and styles * Is characterised by mutual expectations * Keeps your boss informed * Is based on dependability and honesty * Selectively uses your boss's time and resources Boston consultancy group See market growth rate. Bottlenecks Are 1. operations that limit output; also referred to critical resources. 2. Resources for which the requirements equal or exceed capacity over a specified period oftime. Managing bottlenecks: * what does it do that it does not have to do * is it making things that have not been ordered * what are the lot sizes * does all of its work need to be processed by it * are there quality problems, is work being done on parts which are already defective but

9

which have not yet been inspected. * does it do work well, or does it have to rework on poor output * how much down time is there (between work or because of breakdown) * can set up times be reduced Bottlenecks are often caused because it or its operators (or other processes) are evaluated ascost centres rather than the business unit as a whole being evaluatedon throughput. Bought deal When a deal maker provides all of the finance needed for a buy out deal, and then sellson or syndicates part of the funding to other investors later. Done by the larger providers of finance when speed or confidentiality are particularly importantfor the deal to succeed. Bridge financing Short term funding provided when a company is about to raise a new round of equity, or isabout to go public. Bridge See Networks. British Standards Institute See BSI, AFNOR, CEN, DIN, ETSI, ISO, ITU, and NIST. Broadband See Networks. BSA An acronym for Basic Service Agreement. See ONA. BSE An acronym for Basic Service Element. See ONA. BSI An acronym for British Standards Institute. See AFNOR, CEN, DIN, ETSI, ISO, ITU, andNIST. Bug An error, usually in a computer system, but especially in computer programs. Bugs usuallyare caused by the complexity of the systems and either: 1. incorrect or incomplete instructions given to the writer of the system or program. 2. mistakes by the program writer. A note for trivia fans is that the expression originated from the earliest days of computingwhen computers consisted of many thousands of valves. Bugs (the creepycrawly variety) occasionaly caused the computer tos misfunction when they crawled into thecomputer (which were the size of buildings in those days). Hence theexpression `there's a bug...'. See CASE. Building The Future Together See Policy. Building Total Quality See Management. Bull run Fast rising stock market Bull run See Finance. Burn out Common causal conditions (after Levinson, H). * Exposure to prolonged repetitive pressure, * engendered enormous burdens on the managers * promised great success but made attaining it nearly impossible * exposed the managers to risk of attack for doing their jobs, without providing a way forthem to fight back * aroused deep emotions - sorrow, fear, despair, compassion, helplessness, pity, and rage. Tosurvive the managers would try to harden outer shells to contain theirfeelings and hide their anguish * overshelmed the managers with complex detail, conflicting forces, and problems against whichthey hurled themselves with increasing intensity - but without impact * exploited the managers but provided them little to show for having been victimised. * isolation. * to do the job as prescribed is to commit career suicide Definitions (after Freudenberger, H) Burn out is follwed by physiological signs such as the inability to

10

shake colds and frequent headaches, as well as psychological symptomslike quickness to anger and a suspicious attitude about others. (after Maslach, C) Burn out refers to a syndrome of emotional exhaustion and cynicism thatfrequently occurs among people who do people work - who spendconsiderable time in close encounters. People suffering burn out generally have identifiablecharacteristics: 1, chronic fatigue; 2, anger at those making demands; 3.self criticism for putting up with the demands; 4, cynicism, negativism, and irritability; 5,a sense of being besieged; and 6, hair trigger display of emotions. Bush, Vannevar The founder of hypertext who wrote a seminal article on information in July 1945 titled`As We May Think`. Click Here to see the complete article. See also Engelbart, Kay and Nelson. Business Angel A wealthy individual or group of individuals who fund business start-ups. A source ofprivate venture capital. Business Data Communications See Networks. Business International A company of the Economist Group which publishes reports of interest to managers. Thereports are usually of high quality and have dealt with management of technology issues. Used to be called the Economist Intelligence Unit. Business Organization And The Myth Of The Market Economy See Policy. Business plan Document put together by managers to fustify their application for finance. Shouldcontain summaries of past and projected profit and loss accounts, balance sheets and cash flws. Also details of products and services, markets, future strategy,and profiles of the managers. A warning: should not be too optimistic or too long. Business portfolio concept Argues that relative competitive position and market growth are the two fundamentalparameters which must be considered in determining a strategy that a business should follow. Business Process Redesign See Reengineering. Business process reengineering The heart of reengineering is the notion of discontinuous thnking - of recognising andbreking away from the outdated rules and fundamental assumptions that underlie operations. Incremental progress is not reengineering.See ford example underAccounts payable, purchasing. IT should not be used to automate in these cases it should be used to enable a new process. Business process see reengineering. Typical processes in a manufacturing firm include: Operational: Product development Customer acquisition Customer requirements definition Manufacturing Integrated logistics Order management Post sales service Management: Performace monitoring Information management Asset management Human resource management Planning and resource allocation. In functionally orientated organisations, handoffs between functions are frequentlyuncoordinated. Often process and transfers which are not productive (do not addvalue) are in build. Process innovation demands that interfaces between functional or productunits be either improved or eliminated and where possible, sequentialflows become parallel.

11

Business Reengineering See Reengineering. Business systems planning (BSP) IBM program. Provides a general methodology for information systems planning similar toNolan's stage process. Business Television A television service within a corporation. Used for one way communications such astraining and corporate HQ messages. The advantages are that this traffic can use existing corporate network facilities. It is gaining popularity in large scaleretailing. See Videoconferencing. Business Value Of Computers (The) See Computing. Business value added the firm's total revenues (which it earns from selling its products and services), minus alltaxes and purchases (the cost of raw and finished materials, parts, energyand services, including interest payments. Business value added See Economics. Butt Case See H.E. Butt Grocery Company case. Buyer power One of Porter's five forces. Buyers are powerful if: 1. it is concentrated or purchases in large volumes. Large volume buyers are particularlypotent if the producer is in a high fixed cost business. 2. if the products it purchases from the industry are standard or undifferentiated. Buyers inthis example know that they can always go elsewhere. 3. If the good represents a high component of total cost in a manufactured product. Thesebuyers will shop around for good prices. 4. Low profit customers will presure the producer for good prices. 5. The product is unimportant to the buyers business. 6. The product does not save the customer money. 7. The buyer could integrate backwards of needed. Buyer readiness A decision to buy usually follows a series of steps. Each may be long or short dependenton the nature of the purchase and the complexity of the decision. 1. Awareness of the product. 2. Kowledge of the benefits available. 3. Initial interest andattraction. 4. Preference after selection from competing alternatives. 5. Decision to buy. 6. Purchase. 7. Satisfaction or otherwise. CAD/CAM An acronym for Computer Aided Design/Computer Aided Manufacturing. These are specialisedcomputers and applications for designing and then making a large variety of goods. CAD/CAM systems can merely be employed to help draw a design fora part or they can directly control machines which manufacture the part. This is basically the range of activities involving CAD/CAM. Call option The right to buy a given stock, commodity, index, or futures contract at a fixed price onor before a speficied date. Call Options See Options. Call provisions Virtually all corporate bonds contain a clause giving the issuing copany an option toretire bonds prior to maturity. See delatyed call Call See Option Callable Bond A bond which can be called back before its issue period is over. A bond sold for $1million dollars would be called back with a premium payment (for example $1 million 5,000). Canonical practise The method used for formal education and training which omits experience factors.Employees who have manuals seldom operate according to the rules if they are to be successful; they develop their own methods and adopt Non canonicalpractices.

12

Capability based Competitor Companies that combine scale and flexibility to outperform competition along 5dimensions: 1. Speed, to respond quickly to customer or market demands and to incorporate new ideas and technologies into products. 2. Consistency, to produce aproduct that unfailingly satisfies customer expectations. 3. Acuity, the ability to see competitive environments clearly and thus to anticipate and respond tocustomer evolving needs. 4. Agility, ability to adapt simultaneously to many different business environments. 4. Ability to innovate. Mediquip example (inHoward, R.) changing a no win (lose margin or lose share) situation into a competitive triumph by improved use of capabilities when linking service to sales. Honda's success in motorcycles came as much from dealer management as from build quality:providing training in business. It has been able to diversify intooutboard motors and mowers by using these capabilities. Lessons here for diversification. Capability see core competence, capability based competitor. Capacity requirements planning (CRP) Used in manufacturing (MRP). A technique for projecting resource requirements forcritical work stations, generated from scheduled receipts and planned order releases. Capacity strategy The capacity of a business unit is the capacity of the bottleneck. Two key questions: howdo you manage bottlenecks and where should the bottleneck be located. Capacity The ability of a database to handle requests for data. It is vital to plan a database forthe peak loads expected as volumes often vary over time. Commonly there are daily peaks at the start and end of the working day and before and after lunch. Capital Asset Pricing Model rasset = rmarket+ ß * market risk premium. Check this formula Capital employed The finance employed by the business. Seen fro the funding side it is the shareholdersfunds plus long term liabilities. Seen from the asset side it is thefixed assets plus working capital Capital investment Factors involved in capital investment decisions include: initial cost of the project,phasing of expenditure, associated working capital involved, estimated life of the investment, amount and timing of resulting income, effects on related operations ofthe company, risk and probability of obsolescence etc., company's cost of capital, expected inflation rates, government policy towards taxation, grants,allowances etc., the degree of postponability of the project, what happens if no investment is made. Capital Management See Reuters. Capital Markets: Institutions And Instruments See Finance. Capitalised, capitalized. A cost is capitalised when it is recorded as an asset. Can be tangible or intangible. Caps, Collars and Cylinders Clauses in buy out deals which limit the extent to which the interest rate charged onborrowed funds can rise or fall. A safeguard against borrowing costs rising to the point where they endanger the company. Such agreements usually have a limeted lifeof one or two years. The longer teh period of cover, the more expensive the collar or cap. Career systems Are the collection of policies, priorities, and actions that organisations use to managethe flow of their members into, through, and out of the organisations over time. It involves: 1, entry (including HR planning, recruiting, and selection), 2,development (involving socialisation, training, career planning, succession planning, and promotions), 3, exit (including retirement, layoffs, resignations, anddismissal). Models of career systems include: Carried interest A stake, typically 20%, taken in the investee company by the venture capital or buy out

13

fund managers. can be in the form of options. Carrier sense multiple access with collision detection (CSMA/CD) Protocol uses for LANs. Is the standard protocol for network software used in Ethernet. Alldevices on the network share a communication channel (Ethernet usesbus topology and baseband coaxial cable). When a node on the network has a message to transmitit first checks to see whether there is any other data on thechannel. If the channel is free the message is sent. If the channel is in use the node waits.Collision can occur if two nodes send at the same time. If this occurscollision detection is a means of listening to the line while the message is beingtransmitted. When a collision is detected the device stops transmitting, waits forcleanup and starts again. This is efficient since the entire message is not sent each time. Carry over effects Represent the influece of current expenditure on future sales. Two tyes of carry overeffects can be distinguished. Delayed response effects are the delays between time when marketing expenditure is made and purchase occurs (explained in the Scurve). The hold over effect arises from new customers created by marketing who remain customers for future periods. The holdover effect results fromthe difference between the customer retention rate and the customer decay rate. CASE See CASE. Case Is Software Automation See CASE. Case study A popular method of teaching used by business schools. A case is usually a short storyoutlining a situation faced by a business. Cases in General Always look at the logic of the case. That's the easy part. Then you have to look at the localcontent of the case. Think about such things as the politics, power andpeople involved. How do these effect the case? This is a lot more complex to do. Additional Resources ECONOMIC AND FINANCIAL KNOWLEDGE-BASED PROCESSING by PAU Louis F.,GIANOTTI Claudio. SeeFinance. EUROPEAN APPROACHES TO LIFELONG LEARNING OTALA Leenamaija. See Education and Learning. EUROPEAN CASES IN STRATEGIC MANAGEMENT HENDRY John,ECCLES Tony,GOSHAL Sumantra,JENSTER Per,WILLIAMSON Peter J. See Strategy. FLEXIBLE AND DISTANCE LEARNING Van Den BRANDE Lieve. See Education and Learning. LIBERATION MANAGEMENT PETERS Tom. See Management. MICROCOMPUTERS IN BUSINESS AND SOCIETY SCHATT Stan. See Computing. PRISONERS OF LEADERSHIP KETS DE VRIES Manfred F.R. See Management. STATE POLICIES AND TECHNO-INDUSTRIAL INNOVATION HILPERT Ulrich. See Policy. STRATEGIC ALLIANCES LORANGE Peter,ROOS Johan. See Strategy. STRATEGIC INFORMATION TECHNOLOGY MANAGEMENT: perspectives on Organizational Growth andCompetitive Advantage BANKER Rajiv D.,KAUFFMAN Robert J.,MAHMOOD Mo Adam. See Strategy. TEACHING AND THE CASE METHOD CHRISTENSEN by C.Roland. See Education and Learning. TOPPAN PRINTING COMPANY (B) NAVOTH Eran,KOSAKA Masaru. See Innovation. TRADE CONFLICT IN HIGH-TECHNOLOGY INDUSTRIES D'ANDREA TYSON Laura. See Policy. XEROX: AMERICAN SAMURAI JACOBSON Gary,HILLKIRK John. See Strategy. Cash Flow Time Line See Finance.

14

Cash flow Reports on changes in the cash position during a period of time. It tells how a companyacquired cash and what it did with it. It accounts for cash on hand at the begining of a period and that on hand at the end. Preparation of cash flows is conceptually simple. It is a summary of cash receipts anddisbursements - all transactions that affect the cash account. the transactionsare divided into three groups: 1. Operating activities, which include a fim's production, selling, and administrativeactivities. 2. Investing activities, which include teh purchase and sale of marketable securities, plantand equipment, and the payment and collection of loans to others. 3. Financing activities, which incorporate the issue and retirement of stocks and bonds andthe payment of dividends. See Finance. Cash flow statement Direct method The most important differences between direct and indirect methods of presenting cashflow statement occur under the first heading, cash flows from operating activities. The simple direct method shows how much went into the till, howmuch was paid out and what was left over. The indirect method begins with Net income, an accrual accounting number, the indirect method makes a series ofadjustments intended to transform net income into cash flows from operations. These adjustments are of three types: 1. Expenses not nvolving cash outflows are added back,2. cash outflows not treated as expenses are subtracted, and 3.revenues not involving cash inflows are subtracted as well. 1. Depreciation, deferred taxes, increased accounts payable, and increased accrued interestpayable are all expenses that do not involve cash outflows during heperiod. Hence they must be added back to net income to put it on a cash basis. 2. Increases in inventory correspond to cash outflows not recorded as expenses, and so must besubtracted from net income. 3. Finally, increased accounts receivable, increased accrued interest earned, and gain on saleof property are all revenues that did not generate cash during theperiod, and so must be subtracted. Whenever cash is generated by the sale of property it will appear on the cash flow statementas proceeds from the sale of property under the heading Cash flowsfrom investing activities. The gain on sale of property is the difference between the propertyselling price and its balance sheet value when sold. Cash flow statement indirect method. See cash flow statement direct method. Cash The term cash in the balance sheet refers to real cash and savings bank or commercial bakdeposits. CBOT Market Profile See Reuters. CCIR An acronym for Comité Consultatif International des Radio-Communications - theInternational Radiocommunications Consultative Committee. See AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. CCITT An acronym for Comité Consultatif International des Téléphonique - the InternationalTelegraph and Telephone Consultative Committee. See AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. CCITT See Networks. CCM See Control and Monitoring. CCPPO Cumulative, Convertible, Participating, Preferred dividend, Ordinary - shares. The bestshares you can have, often demanded by venture capitalists. Tend to overcome the 75% shareholding regulations giving the holder effective control of acompany. CD-I See Multimedia.

15

CD-ROM See Multimedia. CDA Spectrum See Reuters. CDPD An acronym for Cellular Digital Packet Data network technology. This is a standard fortransmitting packet data over cellular wireless communications channels. Cellular Communications See Networks. Cellular Digital Packet Data See CDPD. CEN An acronym for Comité Européan de Normalisation - the European Committee forStandardisation. See AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. Centralised Diffusion Decisions about diffusion, such as when to begin diffusing an onnovation, who shouldevaluate itt, and through what chhannels it will be diffused, are made by a small number ofofficials and or technical experts at the head of a change agency. In adecentralised diffusion system, such decisions are more widely shared by the clients and potential adopters; here, horizontal networks among the clients arethe main mmechaanismm through which innovations spread. In extr4emmmely decentralised diffuusion sysstems there mmay nott be a change agency;potential adopters are solely responsible for the self management of the diffusion of innovations. New ideas may grow out of the ppractical experience of certainindi iduals in teh client systems. Certainty equivalence A risky choice can often be compared with a no risk or certainty equivalent one. What isthe smallest value of money that I would accept in return for not taking the risk. CFO See Chief Financial Officer. Chaining Forward chaining It is a technique used when a program works from the initial statetowards the goal state. Forward chaining is a good technique to use when all or most paths from any one of manyinitial or intermediate states converges on one or a few states. Backward chaining The program is looking for a path through the problem by starting the goal state andseeing how it can be modified to bring it closer to the initial state. It is an efficient technique to use when any of many goal states will satisfy the requirementsof the problem while the initial state are few; the situation in this casepresents many goals converging on one or a few initial states. Challenge Of Strategic Management (The) See Management. Chamoux Jean-Pierre Author of the book. "Telecoms, La Fin Des Privileges". See Networks. Change Implementation The sofware case. Why organisations don't learn from success or from failure. Theimportance of habits, people used to heirachical structure and organisation will have great difficulty when trying to change structure. There are, however,flucturations in behaviour which can be used as the basis for innovation and change. Recognise the differences between bottom up ideas (which tend to be culturallyspecific) and imposed change by consultants or from top down. Changing The Essence See Education, Learning and Change. Chargeout An accounting method used to allocate cost-centre costs to profit-centres. In technologythis technique is often used when allocating computer centre costs to user departments. Chief Financial Officer Is generally responsible for long term financing, dividend policy, capital investments,

16

cash flow management and resource allocation. The CFO generally has three direct reports: Treasurer, Director of Internal Accounting and the Controller. TheTreasurer is primarily concerned with the management of short-term cash flows. Financial engineering of increasing numbers of financial productshas made the treasurer a sophisticated member of the global capital markets. Chief Information Officer The CIO is the person in a corporation with management responsibility for thecorporations information systems and their related resources. The CIO is not responsible for the day to day running of data centres - rather they tend to concentrateon strategic information issues. Chips Jargon for computer microprocessors. Computer circuits are miniturised and embedded onthe surface of thin waifers of silicon. They form the heart of modern computer controlled devices - from PC's to washing machines. See Computing. Chooser option As-you-like-it option which enables the holder to convert from one style of option to adifferent style of option over a preset period of time. Churning Stereotype of the Japanese approach to marketing. Typically they will enter second orthird into a new market after looking at existing products, identifying the best and improving it. They will enter with multiple products targeted at differentsectors and they will modify following careful product perforance analysis in the market. This recognises their strength as competitors in production and delivery. CIM An acronym for Computer Integrated Mnufacturing. This is a term applied to a hotch-potchof computer technologies - from accounting systems to robot factories - which are applied to manufacturing. The emphasis of these technologies is tostreamline the manufacturing process by: 1. automating the flow of information throughout the manufacturing process. 2. integrating manufacturing operations in separate, but co-operating companies. 3. linking the manufacturing process to other information systems in the company. See CAD/CAM and Manufacturing. Circuit Switching See Networks. Clearing house An affiliate of a futures or options exchange which matches and guarantees trades andholds performance bonds posted by dealers. Acts as a counterparty to every trade, reducing credit risk. Client/Server Computing See Databases. Co-operative Processing The use of distributed computer networks to process information. See Networks, Databases,Batch Processing and On-line Processing. COBOL COmmon Business Oriented Language. Programming language specifically designed forbusiness. See Computing. Coding System See ASCII. Collection period A control ratio. This reflects the success of a company in collecting its accounts receivables. Collins Timothy Author of the book "Les Alliances Strategiques / Teaming Up For The 90s". See Strategy. Comanor W.S. Author of the book "Competition Policy In Europe And North America: Economic Issues AndInstitutions". See Policy. Comer Douglas E. Author of the book "Internetworking With TCP/IP". See Internet. Comité Consultatif International des Radio-Communications See CCIR, AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. Comité Consultatif International des Téléphonique

17

See CCITT, AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. Comité Européan de Normalisation See CEN, AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. Commodity Options See Options. Common Prograammin Interface (CPI) IBM, specifies standards for the application generator. Common stock as an investment A common stockholder receives a return on his investment in two forms: dividends andpossible share price appreciation. If d0 is the dividends per share during the year and P0 and P1 are the begining of year and end of year stock price, theannual income earned by the stockholder is Dividing by the beginning of year stock price, the annual return is:- or:- Common stocks are an ownership claim against real assets. Common stock Is the residual income security. The stockholder has a claim on any income remainingafter the payment of all obligations, including interest on debt. If the firm prospers, stockholders are the chief beneficiaries, if it fails they are the chieflosers. The board of directors may elect to pay dividents from profit to stockholders. Common User Access (CUA) defines a set of three types of user interfaces for SAA applications to beimplemented regardless of differences in operating environment and hardware. Communication Is a process in which participants create and share information with one another in orderto reach a mutual understanding. This definition implies that communication is a process of convergence (or divergence) as two or more individualsexchange information in order to move toward each other (or apart) in the meanings that they ascribe tocertain events. We regard communication as a two way process of convergence, rather than as a one way, linearact in which one individual seeks to transfer a message to another.See Diffusion, Persuasion. Communications See Networks. Communities of practise Group of people with diverse views and experience who engage in real work with real toolsover a significant period of time to build, solve, invent, learn, negotiate meaning. They evolve, they cannot be regulated or designed; they tend to belocal. Compact Disk See Multimedia. Company Shareholdings Alternative to partnership. Has advantages and disadvantages. + Commitment from founders because of equity investment + Limited liability for founders + - Up front and fixed costs. Equity and maintenance - Inflexible - Hard to close - Hard to add new shareholders Any shareholding over 50% allows control over normal resolutions. Eg. payments to managers,appointment of directors, share holder agreements, ordinarydividends. Over 75% have control of constitution, and capital structure. Over 50% can forceout minorities by acquiring their shares (price agreement might have tobe by arbitration if dispute). Between 10.1% and 24.9 percent have minority shareholder protection. Does not give power butdoes give valuable protection. Venture capitalists may have flexible dividends, either fixed rate from the start orpercentage of profits, whichever is greatest. Equity should not be given in exchange for skill, it should be given for committment.

18

Compatability See Open Systems. Competence see core competence, capability based competitor. Competition Is rooted in the economics of the industry. (Porter, M. 1979). See Strategy. Competitiveforces go beyond the established combatants in a particular industry (see five forces) Competition Policy In Europe And North America: Economic Issues And Institutions See Policy. Competitive Advantage The ability to either sell a product or service at a lower cost than your competitors orthe ability to differentiate your product or service and charge a higher price. Competitive scope (the breadth of activities) is often used to find competitive advantage.Broad scope can allow you to exploit interrelationships between the valuechains in your different market segments. For example by sharing a sales force to sell twoproduct ranges. The value chain is the process of adding value to a good or service sold by a company. Therole of information technology in take value chain is discussed in "Howinformation gives you competitive advantage" by Michael E. Porter and Victor E. Millar,Harvard Business Review, July-August 1985. Competitive Edge, the semiconductor industry in the US and Japan See Policy. Competitive position Competitive position interacts with strategy in determining business performance in twoways (from Buzzel and Gale) * First, the strategy options available to a business depend on its "going in" position. Aprogram of extensive product innovation along with a policy of premiumpricing, that would produce outstanding results for a market leader, might make no sense for asmall share competitor. * Second, performance in a given time period is heavily influenced by beginning competitiveposition as well as by current strategy moves. This implies that, in orderto develop measures of how performance relates to strategy, we must disentangle the effect ofbeginning position and changes made during a given time. In appraising competitive position consider the following table The table assumes three equivalently sized companies in different markets (unattractive,average, attractive). Market growth rate, inflation, the role of majorsuppliers, and whether or not the industries are unionised all affect Return on Investment(ROI). Taken from Buzzell and Gale. The point of the illustration is thatpicking the right kinds of markets and products can make a big difference. See quality Compounding The process of reinvesting interest earned on principle so that the principle isincreased and in the next period interest is earned on interest. See Finance. Compuserve A network service based in the USA which has several million users. It provides a widerange of services from Email to financial information. Similar to Internet but without the academic emphasis and it is run for profit. Costs approximately$9 per month for membership. Computer And Communication Systems Performance Modelling See Networks. Computer Network Architecture See Networks[[ogonek]] Computer Networking Book (The) See Networks[[ogonek]] Computer program life cycle The standard process used to develop software, including: defining the problem totesting. Computer-Aided Software Design, build quality software with CASE See CASE. Computerization And Controversy, value conflicts and social choices

19

See Computing. Computers As Theatre See Education and Learning. Computers See Computing. Conceptual design rendering system (CDRS) Creates three dimentional models for car vehicle bodies, providing data to CAM decisions.Used by Ford for new car design and has cut three months of the model stage of new development. Concurrent Access The ability of two processes (programs) to use the same piece of data at the same time. Concurrent engineering The simultaneous execution of previously sequential tasks, as a normal working practice. Conjoint analysis Approach used to identify factor important in buyer decisions in the market place.Assists new product design and old product assessment of competitiveness.Connectivity See Open Systems and Networks. Consistency A consistent estimate is one whose range reduces as the sample size increases. Consistency concept The accounts must be prepared on the basis that similar items are treated in the sameway, both within the year being reported on and from one year to another. Consolidated Alliances In these, a company acquires a majority of the outstanding stock of another company whileleaving a significant portion of the day to day control of the newly consolidated company in the hands of existing management. Consolidated Physical Commodities See Reuters. Consolidation US companies with substantial ownership of other companies constitute a single overalleconomic unit that is composed of two or more separate legal entities. This is usually a parent subsidiary relationship where one corporation owns more than 50%of the outstanding voting shares of another corporation.. Consumer The person who uses the product or receives the benefit of the service (see customer) Conti Tito Author of the book "Building Total Quality". See Management. Continuity Equations Is the idea of controlling processes through targeting variables whose unit ofmeasurement changes as the process being controlled proceeds. In this context the control must be specified in terms of key control variables, transition rations andtheir stability. Continuous Control Monitoring See Control and Monitoring. Continuous Process Audit See Control and Monitoring. Continuous review system see reorder point system. Contribution Is the difference between variable cost of production and total revenues. Deduction fromcontribution of fixed costs leads to Profit before interest, tax (and other expenses). An a dvantages of using contribution as a measure is that it emphasisessensitivity of profit to variations in the use of capacity. This will tell whether or not the company is constrained by fixed or variable costs (volume sensitive ornot). A significant disadavantage is that the classification of costs into fixed and variable is entirely a matter of opinion (e.g. two different managers in thesame situation might classify labour either as fixed or variabl). Control (Financial) Consists of managements efforts to (1) prevent unwanted departures from planned resultsand (2) take action in response to signals that the plan is no longer appropriate or isn't being executed properly. Begins with formulation of the business

20

plan; next mangement follows results by directing, supervising and observing operations. Controls employed include: Yes/No controls, Steering controls(provide signals to reassuer that present course is satisfctory or to indicate need for some kind of action. Spotlight differences between actual and planned).Scorecard controls, (summary reports on the performance of (1) of various activities or organisation segments and (2) of the managers responsible forthem). Control ratio Really just an asset turnover measure for a particular asset. In each instance, thefirm's investment in the asset is compared to net sales, or a closely related figure. An example might be total inventory (a current asset):sales Controller See Chief Financial Officer. Controller The financial controller of a company compares the past performance of the company(Accountancy function) with the plans and budgets of the company. Convergence Between Communications Technologies See Networks. Cordless Telecommunications In Europe See Networks. Core competence The combination of individual technologies and production skills that underlie acompany's myriad product lines. (Hamel, G. and Prahalad, C.). This definition implies a skills based competence (e.g. Sony - miniaturisation, Cannon - imaging, Honda,small engines). However this might not be a good representation of a business's skills. Honda's success may have been more due to service centre management(see Capability based competitor). Competencies and capabilities represent essential and complimentary attributes Corporate Data Modelling (CDM) This is modelling exercise for data which determines, in simplest terms, what is locatedwhere, and what its relationships are with other data items and systems. Corporate Governance Is the control structure of a corporation. The governance system consists of "incentives,safeguards, and dispute resolution processes used to control and co-ordinate" (Harvard Business School, `Note on Corporate Governance Systems: the UnitedStates, Japan, and Germany', 1991) stakeholder actions. Three main systems exist today. The US: Is founded on the `one share one vote' principle where the shareholder is the sole owner ofthe firm. The board of directors is the corporate body accountable tosociety. Consequently most directors are people from outside the firm. [2]/3 of directors arealso CEOs. Relationships between employees, suppliers, lenders andthe board are kept at arms-length. 50% of shares are held by the public, the other 50% areheld by large institutions, with pension funds holding 25% of this amount.The emphasis is on contracts (the law) rather than trust. Hostile corporate takeoversoriginated here and the courts are used to resolve disputes (such as afterbankruptcies). Germany: There are two boards - the supervisory board (aufsichtstraat) with employee representatives,banks (hausbank) and shareholder representatives, and themanagement board (vorstand) with the senior management team. The banks have large proxy votingpower because they hold shares on deposit. Unions arepowerful Japan: The emphasis is on long-term consensus relationships with the emphasis on trust. Groups ofcompanies (keiretsu) dominate and there is horizontal movement withinthem. The boards are dominated by inside directors and personal relationships are primary.There are almost no hostile corporate takeovers and bankruptcies areinformally resolved. See Control & Monitoring. Corporate governance The nature and structure of: 1. incentives, 2. safeguards, 3. contracts, 4. dispute

21

resolution processes to control and coordinate the diverse interests of corporate stakeholders. The corporation is viewed as funamentally a nexus of a set of implicit and explicit contracts. Awareness of different forms of corporate governance and the economic purposes that thesevarious arrangements of ownership and control are intended to servewill better enable managers to contract abroad, structure joint ventures, and control foreigninvestments. The ability of the manager to maneouver within and acrossthese systems will, in part determine their success in the international business environment. In the US Corporate Governance seeks to maintain the accountability of corporate managers tocorporate owners, through the board of directors, and the proxyvoting mechanism. See Governance. Corporate Valuation This is an area of much contention in the financial community, especially in the wake ofsome of the 1980s takeovers which paid huge earnings multiples for firms and then financed these with debt. See Finance. Corruption of Data See Backup. Cost centre An organisational unit used in budgeting where the main cash flows are negative (i.e.costs) rather than positive (i.e. earnings). See Profit Centre. Cost of equity see imputed cost Cost of sales The direct costs of buying or providing the product or service. Cost push Inflation Unit costs of production push up prices (eg rising oil prices). If demand is stable therewill be reduced production, higher unemployment, and rising prices (inflation). The recession of the '70s was caused by this. Opposite of Demand pull inflation in which shows that inflation reduces unemployment. Cost value logic The use of economic definition of costs to reveal which parts of a business should beretained, sold or shut down and which should be kept or expanded: based onthe notion of opportunity cost and economic rent. Cost value logic See Economics. Country Analysis Framework A framework that takes the nation as the unit of analysis. Strategic analysis should address the following questions * what is the government's strategy (goals and policies) *what are the relative priorities among the goals *how are the policies interrelated? are they contradictory or re-inforcing *how will the policies contribute to achieving the goals. Goals commonly include GNP growth, price stability, full employment, and rising consumption.Political goals might include sovereignty, stability, preservation ofaparticular type of political system, or survival of a specific regime. Social goals mightinclude improving the population's educational levels or health status, orincreasing housing. Country Risk The risk relating to the country investment. For example an investment in a lessdeveloped country may involve the investor in bearing risk because the economic management of the country may effect the economic performance. Country riskmeans that a higher return will have to be earned in order to compensate the investor for the added risk. Covenants Normally creditors, including bondholders do not have a say in company decisions.Bondholders and other long term creditors exercise control through protective covenants specified in the indebenture agreement. Typically covenants includea lower limit on the company's current ratio, an upper limit on its debt to equity ratio, and perhaps a requirement that the company not acquire or sell majorassets without prior creditor approval. If the company breaks the covenant the creditors assume considerable power, including the ability to forcebankruptcy.

22

Coverage A term used in Finance to refer to the number of times which the assets of a companycover its debts. Coverage ratios These focus on the balance sheet value of liabilities. Relate, not to the size of debtbut on the companies ability to pay. To measure the annual finacnial burden placed on a company by its use of leverage, it isuseful tocalculate what are known as coverage ratios. The two mostcommon are Both ratios compare income available for debt service to some measure of financial obligation.The one tends to be too liberal, the other the reverse. Covered Interest Parity (CIP) Is the mechanism through which an equilibrium relationship is established between spotand forward exchange rates, and domestic and foreigh interest rates. This relationship is alsosometimes referred to as the interest rate parity theorem, orthe covered interest arbitrage condition. See Interest rate parity CPU See Computing. Crane Rhonda Author of the book. "Telecommunications Revolution (The". See Networks. Credit ratio Is the average payment period. This gives the amount of creditors (in days) outstanding at the year end. Creditor Equity See liabilities Credits See debits. Cricket Liu Author of the book "DNS And BIND". See Internet. Critical path method (CPM) A project planning method that is based on the assumption that all activity times areknown with certainty. Critical path The sequence of activities from the start of a project to its completion having thegreatest cumulative elapsed time, thereby determining the time duration of the entire project. Critical success factors (CSF) The CSF approach homes in on individual managers and their information needs. CSF for anybusiness are defined as "the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for theorganisation. They are the few key areas (usually 3-8) where things must go right. When first introduced by Rockart in 1979, its primary use was to help individual managersdetermine their information needs. It is now thought to be another tool,like IBM's business systems planning (BSP) or Nolan's stages to guide organisations in theinformation planning process. See MIS. MSS, DSS, EIS, SIS, Anthony's pyramid. Cross Border See Mergers & Acquisitions. Cross elasticity One way to find out what business you are in is to examine the so-called Cross priceelasticity of demand - the sensitivity of demand for your product, with respect to the price of related, competing products. High, positive cross elasticities ofdemand mean that if your competitor raises his price, an dyou don't, many of his customers will buy yours insead. see elasticity. Cross Patricia Author of the book "Adults As Learners". See Education and Learning. Cross Price Elasticity See Elasticity. Crowding out in macro economics. While individuals and businesses save, governments 'dissave'- spendmore than they earn. Hence when businesses go to the capital

23

markets to borrow funds for building plants and buying new machinery, they find apowerful competitor there; the governement, anxious to borrow money to pay for its deficits. The result is higher interest rates and lower investment. This isknown as crowding out. CRS An acronym for Computerised Reservation System. CSCW An academic acronym for groupware Culture Culture is one of the buzz words of the business guru. Peters and others claim thatstrong distinguishable culture is a key component of the excellent companies. Stacy (chaos frontiers) believes that strong corporate culture block grouplearning and therefore some innovation. Apparent culture: the culture which we see (executive toilets or open plan offices).Unconscious culture relates to subconscious behaviour patterns (expectedbehaviour). Unconscious culture is very difficult to change particularly if the culture is oneof take out what you can. Currency Options See Options. Current asset A current asset can be sold or transformed into cash and a current liability can besatisfied within one year or within the normal operating cycle of the business. Includes cash. Current liabilities Are expected to be satisified out of current assets (or through the creaton of othercurrent liabilities) whithin a relatively short tie, usually one year. Include: wages and salaries, payments to suppliers for service, supplies and raw materials (tradeaccounts, or accounts payable); to the government for taxes (taxes payable); and to banks or other lenders for loans (notes payable) and for interest onloans (interest payable) that is payable within one year. Current liability A current liability can be satisfied within one year or within the normal operating cycleof the business Current ratio see liquidity Cushing Barry E. Author of the book "Accounting Information Systems". See Control and Monitoring. Customer analysis The Decision Making Unit. The how, why and when of the buying decision. Customer Someone who purchases a product or service. What does a customer want: benefits, whichmay be. 1. financial (gain money or cost reduction opportunities. 2. Product related (e.g. proven reliability). 3. Socio-political (e.g. enhanced status).4. Personal (e.g. seen as a shrewd purchase. Customer The person or organisation buying the product or service (see consumer) Danthine A. Author of the book "Computer Network Architecture". See Networks. Data Communications Dictionary See Networks. Data Communications See Networks. Data Dictionary A matrix that links the field names, their aliases, formats, physical location, schemaand sub schema in a database. See also Schema and DBMS. Data Elements A bit is a 0 or 1. 4 bits = 1 nibble 8 bits = 1 byte

24

several bits = 1 field fields = 1 record records = 1 file files = 1 database databases = 1 database cluster. Data Model Is a set of tools to describe: * Data. The basic unit of the database. * Data relationships. The relationships between different items in the database. * Data semantics. The meaning of the data. * Data constraints. The context within which the data has meaning. The data model is simply the structure which defines these four items. Data models typically describe these four things in one of three frameworks: * Physical Data Models. The way that data is stored on the physical media (such as a hard disk). The linksbetween the data consist of physical addresses. This means that the view of the data is inflexible - if a piece of data is moved then all of the links to that datamust be changed. The main drawback with this view is that if an address is corrupted (i.e.. becomes unreadable to the computer), then the data will be lost(unretrievable). This model is almost no longer used in DBMS today. * Record-based Logical Models. The physical addresses are no longer important as all data is placed in records whichhave a unique name within the database. As long as you know the name of the record you can retrieve it. The names of the records are stored in a table and thelinks between data items are described in terms of relationships between these named records. Most databases will consist of a number of tables. * Object-based logical models. The most modern approach. the data is described purely in semantic terms. No descriptionis held of either the records or the physical addresses of the data. It is a logical description of how the data relationships are established. Constraintsare defined in terms of these objects. The main challenge of object-based modelling is describing the objects (called entities) so that the system understands whatyou mean. A data dictionary is used to tell the system what the entities are and the entities are described in terms of their data relationships and constraints. See Databases. Data See Information. Databank A collection of data on a specific subject or range of subjects. Database See Databases. Database System A computerised system whose overall purpose is to maitain information and make thatinformation available on demand. A further requirement is that the information supplied when you need it, in the place you need it and in a form that isusefull to the user. A database system has four components: * hardware * software * data * users. An important difference between a database system and a `normal' dataprocessing system is thatthe database system seperates data from the use of the data - inother words the data is (largely) independent of the applications which use the data. See Databases.

25

Datagram In datagram networks, a user simply pushes an information element into the networkbearing the address of the destination. Routing algorithms within each node do the rest. where a system has multiple nodes, and therefore multiple possibleroutes, all routes are taken simultaneously (as compared to the virual circuit approach of OSI). Datamation A U.S. periodical published bi-weekly giving information on the latest informationtechnology developments. The articles are typically short and aimed at a market between the expert user and popular computing magazines. Every June there is asurvey of the top 100 technology companies (The Datamation 100) and every April there is a survey of data processing budgets in large companies. DAVIS Roscoe K. Author of the book "Accounting Information Systems". See Control and Monitoring. DBMS-database management systems A specilised set of computer programs that manages data bases, The DBMS acts as theinterface between te data in a data base, the related application programs and the operting system. See Databases. DCC/DCS-Digital cross connect systems The interconnection points for terminals, multiplexers and transmission facilities.Connecting T1 and T3 lines is an emerging requirement among high volume trffic users, telcos, and interexchange carriers. Digital cross connect systems (DCSs)that electronically remap DS1/DS3 lines to various transmissionlevels are very much in demand. DCF An acronym for Discounted Cash Flow. See Discounted Cash Flow and Finance. De Meyer Arnoud Author of the book "Benchmarking Global Manufacturing". See Manufacturing. Dead mans spiral Term used by J Forrester to describe the misinterpretation of data and incorrectcorrective action which leads to disaster. The pilot who thinks he is in a dive and tries to correct by turning until the wings fall off. Used as an analogy to business. Deal flow The rate at which investment propositions come to the deal maker or financier. Many claimto select only one deal in 50, though deal flow numbers are treated by some as a sort of virility symbol. Deal Manager See Reuters. Dealing 2000 See Reuters. Debits Entries, in a double entry , which increase assets are referred to as debits. Those thatdecrease equities are known as credits.. Entries which increase equities are referred to as credits. Those which decrease equities areknown as debits. Use of debits to signify an increase in an entity's assets and credit to indicate an increasein its liabilities is important to understand. Debt capacity 1. companies with normal sustainable capital structures * affordable cash flow to interest divided by interest rate equals debt capacity. How much debt capacity to use is decided (principally) by the company taking into account * CAPEX (at NPV >0) * Dividend clientele * Competition and technology * Asset mobility 2. Companies in transition (ownership change: LBOs, recapitalisations, workouts) * lenders' criterion determines debt capacity: time to recover senior * how much can the company borrow such that it will pay interest it will amortise senior in a relatively short time and then become able to refinance junior in order to attain a 'normal' capital structure. 3. Using the EBIT multiple.

26

Debt Money owed. In Finance, debt is money owed by a company excluding equity (shares, etc.). Decentralisation Companies decentralise because they want divisional managers to act as though they weremanaging independent companies. Problems often associated with decentralisation include: managers act in the interests of the decenctralised unit andnot in the interests of the group; there is often duplication of function and therefore higher staff numbers. Decentralised Diffusion See Centralised Diffusion. Decentralised vs. Centralised See Structure. Decision 2000 See Reuters. Decision Analysis A modelling technique first developed in the 1960s to model decision makers multipleobjectives and alternatives. It attempts to model the complete decision making environment including difficult to quantify elements such as value judgements. SeeControl and Monitoring, Economics and Education, Learning and Change and System Dynamics.. Decision Support Systems Intelligent Decision Support System: a computer-based interactive tool of decision-makingfor well-structured decision and planning situations. Decision aids based on decision theory. For decision making: a) alternatives b) state descriptions c) relationship d) preferences. Influence diagrams (acyclic graph) Also called DSS. See Education, Learning and Change and Artificial Intelligence. Decision technology A marriage between System dynamics and Decision analysis. Using desktop computers, allowsan executive, to recreate his own business as an on-line case study. Instead of asking planners what-if questions and waiting weeks for an answerhe can do it himself. Deferred charges Outlays made in one period to benefit future periods. E.g. prepaid expenses. May beincluded among on-current assets if the life of the product puchased has a life of more than one year, otherwise appears in the current assets. Some prepaidexpenses could include legal fees which will benefit the copany over a long period. These can be Amortised, in a similar manner to depreciation of capitalassets, over a number of years. Deferred credits "Advances received from customers", "Revenues received but not yet earned". Prepaymentsfor services or goods become a liability until delivery of the goods or services. These can be classified as current or noncurrent depending on thetimescale for delivery. Delay is a measure of the time needed for a communication system to move data from the senderto the receiver Delayed call Means that a company may not call a bond back until it has been outstanding for aspecified period, usually 5 or 10 years. Government bonds do not have call options (see call provisions, bonds) Demand analysis Has the objective to Predict and to explain. Demand decomposition Salest = Nt.Tt.Rt Where N is the number of potential customers at time t; T is the % ofpotential customers transacting at time t; R is the rate or intensity of buying attime t (this involves the amount bought). The 4Ps of the marketing mix idea all influencesales through N,T and R. Before answering the question "what is the market" consider: Considering these questons leads to Market position.

27

Demand curve Shows changes in sales, in relation to changes in price, with all other demand factorsheld constant. Demand decomposition See demand analysis Demand pull Inflation Keynsian idea that if prices are rising there must be excess demand. As a consequenceouput/supply will rise and unemployment will fall. If supply is restricted and there is excess demand, prices will rise causing inflation. If there is spare supplycapacity prices will ultimately balance resulting in inflation, but less than if supply restriced. Following a recession there is likely to be spare capacity (2 shifts inproduction factory instead of 3). See Cost push inlation. Demand pull inflation is good for stock prices. Cost push inflation is not good for stocks. Indicators to distinguish cause of inflation are wages, unit costs (including interest rates),retail sales, disposable income, performance of the stock market. Cycle starts with demand, but as demand fuels supply wages increase and unemployment falls. Atsome stage inflation changes to cost push because demand stopsincreasing but costs are high. GDP stabilises and then falls as recession hits. Eventuallycapacity falls and unemployment rises as costs fall. The cycle starts again. Demogaphy The study of population and its characteristics. It is one of the most useful tools inlistening to the voice of the market, because it provides exceptionally useful information about buyers without the need of directly eliciting it from them. Demographics Used by advertising and marketing experts to refer to data about numbers of people inmarkets and their chacteristics - age, gender, family status, occupation, income, wealth, education, etc. Dependent demand In manufacturing. Demand for an item that results from the production decisions for itsparent items. An order for a parent part can only be completed if all of its components are available. Depreciation The process of allocating (spreading) the cost of an asset over its useful life.Depreciation on each individual asset or group of similar assets is computed separately, and the total amount accumulated is a function of the original cost, age andexpected useful life of the asset. Land is not depreciated. Derivative Financial term. A contract the value of which changes in concert with the price movementsin a related or underlying commodity or financial instrument. The term covers standardised, exchange-traded futures and options, as well as over thecounter swaps, options, and other customised instruments. Design computer system (DCS) Used by Ford. Significantly reduces product development times by allowing construction,manufacturing, project planning and other divisions to be closely involved with a model programme at the earliest design phase. Desktop Publishing The use of PC's to publish information which used to be done by publishing and printingcompanies. The desktop publishing (DTP) industry was started by Apple and Adobe Systems in the early 1980's when the Macintosh computer and Postscriptwere launched. Development capital Later stage capital for more established companies which are profitable or nearlyprofitable. Less risky generally than earlier stage finance. Dictionary Of Scientific Literacy Brennan Richard John Wiley And Sons 1/01/91 This dictionary includes over 650 scientific and technical terms, concepts and principles. Dictionary See: Dictionary Of Scientific Literacy IBM Dictionary of Computing in Computing Section.

28

Differentiation and SIS Information systems used to support of shape the firm's expected product do so withrespect to the marketing mix elements. * Product - is it modifiable, compatible, extendible * Price - is credit extended? are allowances made * Place - are customers' expectations met with respect to time of delivery, channel ofdistribution, quantity of product * Promotion - is advice available before, during, and after sales? + DIY paint and fabrics information systems are a good example of Proudct + Computer generated quotation systems enhance quote speed and allow for greater accuracy andlower cost (in quote preparation). + Analysis of delivery point. Differentiation Characteristics of a product which add value Diffusion (of innovation) Is the process by which an (1) innovation is (2) communicated through certain channels(3) over time (4) among the members of a social system. It is a special type of commincation, in that the messages are concerned with new ideas. SeeCommunication. Getting a new idea adopted, even when there are obvious advantages is often very difficult.There is a wide gap in many fields, between wwwhat is known and whatis actually put into use. Maany innovations require a lenngthy period, often some years, fromthe time when they become availeable to the time when they are widelyadopted. Diffusion success can be measured (in a worrd) by whether the innovation to be adoptedembodies inforrrmation that can reduce uncertainty about caause effectrellationships in problem solving. Try to frame diffusion ideas based on information anduncertainty. See Centralised diffusion, Decentralised diffusion. Manytechnologists believe that advantageous innovations will sell themselves. Unforrtunnately,this is seldom the case. Diffusion should be seen in a wide context; it is part of a large process that begins withperceived problem or need, through research and development and on to asolution. Then the decision by a change agent that this innovation should be diffused and thenthe diffusion itself. See Persuasion. Diffusion tends to be linear with one person trying to persuade another and so on (CEO tellsmanager tells department heads, tells supervisors etc) rather thanconvergence (in which tthe participants create and share information with one another tocreate a shared understanding and common parallel progress in adoption). Digital channel banks Convert analog voicetodigital code or vice versa and combine or multiplex the resultingdigital streams. Digital See Networks. Direct cost Costs which can be directly related to a product or service Direct data exchange (DDE) A virtual circuit mechanism, like OLE and Apple Events Director non executive In law has the same responsibilities as executive directors regardless of whether or nothe has shares or is paid. Particularly important to understand if a company is wound up or involved in action relating to recklessness. The only action a nonexec has when he has no shares or does not represent a shareholder, is to resign if he believes management is not acting as it should. Thissends a message to banks etc. Director of Internal Accounting See Chief Financial Officer. Discount Rate The interest rate used to calculate the present value of cash flows expected in thefuture. See Economics and Finance. Discount rate The rate at which the federal bank charges interest to commercial banks who borrow from

29

it (supplying loans, sometimes in cases of dire distress on the part of the borrowing bank). When the discount rate is raised, it signals commercial banksthat they too ought to raise their interest rates. When the US Federal Reserve raised rates from 5.5% to 6% in September 1987 some economists believe it causedthe stock market crash. The discount rate is a rather blunt tool for changing money policy, it is not suited for smallchanges in money supply or interest rate. See Open Market Operations Discount When the difference between the spot rate and the forward rate is positive(spot-forward<0) then the currency is trading at a discount. If the rate is for $ to [[sterling]], then the $ is trading at a discount and the [[sterling]] is trading at apremium. See Premium and Foreign Exchange Risk. Discount yield. In capital investment appraisal, discounts the future cash flows by a variety of discountrates until the net present value of the project is zero. This rate gives the time rate of return, i.e. that at which the present value of the cash flows justequals the initial investment. Discounted Cash Flow The net present value of future sources of cash. See Finance. Discounting Calculating the net present value of an amount in the future. See Economics and Finance. Discounting The process for identifying net present value of investments. Disk See Computing and Multimedia. Diversification The move into new products (see Vertical integration) Divestiture Sale of a portion of a firm to an outsider. Cash comes into the firm. The reverse ofacquisition Dividend cover This ratio measures the number of times the dividend forthe year could have been paid out ofthe year's earnings, It is a measure ofteh safety ofthedividiend.However, profit is not the only constraint on the ability of a company to pay a dividend. If acompany does not have enough cash a dividend is not possible. Dividend Growth Model States that where: P = price per share d = next dividend Ke = g = Dividends Payments made by the company to the shareholders. Divident yield This ratio indicates the current income yield provided for an investor in relation tothepresent market price of the share, assuming a tax credit at a 25% standard taxrate. DNS And BIND See Internet. Documents of value Normally means an IOU issued by a bank etc. Domain Consists of an SSCP and the network resources that it can control. Doorley Thomas Author of the book "Les Alliances Strategiques / Teaming Up For The 90s". See Strategy. Double entry system Is a manifestation of the accounting equation (see balance sheet). Every transation orevent that increases or decreases the left side of the equation (assets)

30

must increase or decrease the right side (equities) by an identical amount. Thus an increase in assets must be matched by an increase in claims against the assets eitherby creditors (Liabilities L) or by the owners (Owners equity OE). Seedebits and credits Drum buffer rope (DBR Goldratt answer to perceived weaknesses of JIT. Tie different processes to the speed ofthe rate limiting resource so that the entire process runs at the correct speed to keep inventory low. (taken from the idea of soldiers marching) DSS See Education, Learning and Change. Duck/Rabbit The classic example of two views of the same thing. Is it a duck or a rabbit? Dudley James Author of the book "1992 Strategies For The Single Market". See Policy. Due Diligence The process of checking that a company is really in the state which it claims to be in.An American term used by venture capitalists when they are looking at an investment. This is also a process to protect the venture capitalist from law suits byhis backers if the investment failed. Due dillegence Detailed analysis and appraisal of the background of tehentrepreneur and his businessplan. Dunlop Charles Author of the book "Computerization And Controversy, value conflicts and social choices".See Computing. Dyer Robert Author of the book "Analytic Approach To Marketing Decisions (The)". See Marketing. Dynabase A dynamic database that contains notes, sketches, papers and other documents created overa long period of time. Very difficult information retrieval if large. Wide Area Information Servers (WAIS) are designed for free text search. WAIS is a clientserver system; there are 200 on the Internet; public domain software is available for MAC, DOS, 'Windows etc. Earinings (Profit attributable to shareholders) Trading profit less interest, extraordinary items and tax. Earinings per share (EPS) The EPS is a stock market ratio widely used to measure changes from year to year Earn out Either a formula for relating to the final purchase price of a company to actual futureearnings, or a means of encouraging management to perform by payment on the basis of future performance. EBCDIC See ASCII. EBIT An acronym for Earnings Before Interest and Tax. See Finance. Economic evaluation Considers 4 factors: Profit contribution, Net income, Return on investment, Residualincome. Economic income The amount an individual or business can afford to spend during a period and be as welloff at the end of the period as at the beginning. See realised income.Economic Profit Defined as sales revenues minus operating costs, including an opportunity cost charge forcapital. See Economics. Economic rent Is a opportunity cost, a what could have been calculation: the difference between whatlabour or capital are actually earning and the most they could earn when used in some other place or company or investment. See Economics. Economics Of Information Networks (The) See Networks.

31

Economist Intelligence Unit See Business International. EDI An acronym for Electronic Data Interchange. This is the electronc exchange ofinstructions and documents between companies. Its aim is to increase effeciency and reduce paper work by streamlinig the flows of information. It is beingincreasingly used by industries as diverse as the automotive and banking industries. The main difficulty in EDI is agreeing on standards for these interchanges.The main EDI systemswhich exist today are those established between either a large manufacturer and its many suppliers (such as GM) or industries with largethroughputs such as port cargo handling in Rotterdam. Transactions with EDI become faster, with less errors and easier to administer. EDIFACT The ISO standards for EDI. EDP Electronic Data Processing. EDP-Electronic Data Processing An EDP system is oriented towards the automation of transaction processing, recordkeeping, and reporting, i.e. mechanical effiency. Effective exchange rate Is a multilateral rate that measures the overall nominal value of the currency in theforeign exchange market. The effective US dollar exchange rate com bines many bilateral exchange rates using a weighting scheme that reflects the importance ofeach country's trade with the US. Several institutions (e.g. the IMF, the Fed, Morgan Guaranty Trust Bank) regularly calculate and report the effective exchangerates. . See Foreign exchange rate, Purchasing power parity theory (PPP). Effective interest rate The ration of (1) the actual interest earned in a year to (2) the debt's beginning ofyear present value. When interest is compounded twice a year the effective interest rate is slightly higher than the Nominal interest rate. Efficiency The efficiency of an estimate is a measure of how an estimate is spread around its truevalue. Efficient market theory H Roberts has defined three levels of market efficiency (Brearly & Myers). * Prices reflect all the information contained in the record of past prices * Prices reflect not only past prices byt all other published information Information released to the public rapidly finds itself expressed in changes in share price. * Prices reflect not just public information but all theinformation that can be acquired bypainstaking funamental analysis of the cmpany and economy. EFTPOS An acronym for Electronic Funds Transfer at Point Of Sale. See Finance Industry. EIS See Artificial Intelligence. Elacticity The ratio of the percentage change in demand to a percentage change in price. Normallydemand will fall as price increases. Cross Price Elasticity is the change in demand for one good as the result of a change in the price for a competitorsgood. Price sensitivity is greater the more alternatives or substitutes there are. Elasticity is related to the demand curve. See cross elasticity. Electronic Data Interchange See EDI. Electronic Mail Messages which are sent over a network. Also called Email. Electronic Markets life cycle: 1. Autonomous EM's bias the market (American Airlines introduction of SABREled to increased sales of AA tickets). 2. Competitors' response to correct the bias. 3. Personalised EMs. Enacting an electronic market: special because the product is information. How to start.Difficult for the customer to test evaluate because he must have theinformation to test it. Once acquired it can be copied in a limitless fashion. A product likeMinitel needs critical mass for success (France Telecom had to give away

32

free terminals) and it still looses money. Elton Martin Author of the book. "Integrated Broadband Networks, the public policies issues". SeeNetworks. EMail See Electronic Mail. Employee buy out a deal involving not just the top management buy also all, or a large n umber of morejunior employees. The difficulty of involving large numbers of employees without disclosing a deal prematurely has meant that relatively few of these deals havebeen made. Employee share ownership plan (ESOP) A trust which is established to acquire shares in a company for subsequent allocation toemployees over a number of years Encryption The encoding of digital information so that only authorised people can read or use theinformation. End-user Computing The name given to the user of technology also being the controller of it., instead ofcontrol being given to a central computer department. Engelbart, Doug A founder of hypertext Enterprise Resource Planning (ERP) Products that attempt to achieve company wide integration of business and technicalinformation are known as Enterprise Resource Planning (ERP), or sometimes as Customer Oriented Manufacturing Management Systems (COMMS). Enterprise Transformation See Reengineering. Entities In a database is a group of related files stored together to minimise data redundancy andimprove access to data. The data held in databases relates to actual things of importance to an organisation. Customers and products are good examples. Indatabase terminology these are called entities. Files are related when there is a link between the data held about entities. Ephemeral Data Also called transient data. Data which normally only exists for a brief time. Typicalexamples are input data (transaction information) and output data (report information). Ephemeral data may become persistent data at a later point (i.e. by beingstored permanently in a database). There are no hard and fast rules to distinguish persistent from ephemeral data. EPS An acronym for Earnings Per Share. See Finance. Equations See Control and Monitoring. Equity carve out sale of a portion of the firm via a new stock offering to a group of outsiders, in otherworks, a new set of shareholders own a portion of the previously existing firm Equity The share capital of a company. See Finance. ERP An acronym for Enterprise Resource Planning. These are successor systems to MRP II(Manufacturing Resource Planning) systems used in CIM (Computer Integrated Manufacturing). ERP is touted as the next generation of MRP but with anadditional organisational focus. ES See Artificial Intelligence. ESOP An acronym used in the US for Employee Stock Ownership Plan. This is a corporate planwhich gives (usually preferential) access to stock for its employees. Under these plans employees are able to purchase limited amounts of the companies shares. ESPRIT See Networks.

33

Essinger James Author of the book "Banking Technology As A Competitive Weapon". See Financial Industry,The. Ethernet A widely used standard for LAN communications. See Networks. Eurobond A bond marketed internationally Eurodollar deposit Dollar deposit with a bank outside the US Eurodollar market A transaction is said to take place in the Eurodollar market when the currency employedis outside the control of the issuing monetary authority. Eurodollar markets are a free market response to regulated domestic financial markets. Competitionfrom the Eurodollar markets has pressured domestic markets to deregulate or lose business. Euromoney A UK based monthly financial magazine which contains many discussion of financialengineering and more general finance and banking issues. One of the three best general international financial magazines currently available. See InstitutionalInvestor and The Banker. For more specialist international finance information see Risk for detailed articles on pricing models and deal structures,International Financing Review for detailed articles on market activities and deal structures. European Committee for Standardisation See CEN, AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. European Options See Options. European Telematics : The Emerging Economy Of Words See Networks. Eurostat Statistical offices of the European community. Holds 5 million series of data relating toall members of the EC and other countries, currently moving towards harmonisation of geographical data for such applications as agricultural administration(common agricultural policy) Excel Real-time Spreadsheet See Reuters. Excel See Microsoft and Reuters. Exchange offer Basically an exchange of one tye of paper for another, e.g. debt for equity, equity forconvertibles. Exchange Rate The value of one currency expressed in terms of another. For example [[sterling]]1 =US$1.4875. See Spot Rate and Forward Rate. Exchange rate risk In business it is essential to understand risk exposure when trading in multiplecurrencies. Questions to ask. *Is the exposure long or short *What currencies are involved (the HK$ is tied to the $) *In a particular deal, what proportion is it of normal trading/profit *What range has the currency moved over in past 12 months *How does profit margin compare to the range *Should this be hedged *Consider Options Precautions When tendering or biding for work paid in a foreign country, look at the spread of exchangerate over a reasonable time, not just at the spot rate at the time. Lookalso at the prevailing forward rates. Can try to structure the bid to reduce the risk, byhedging with a company. Can try to share risk exposure with the tradingpartner (e.g. we take the first 2% swing, you take the next etc. Notes Long means: I have or will receive foreign currency.

34

Short means I have to deliver foreign currency (I am short of what I need). The decision to hedge should be made on risk, not on cost. Even if the cost is greater thanpotential profit, if the risk of loss from exchnage is greater, they shouldhedge. Two obvious methods for hedging: sell or buy forward. I.e. arrange to sell money in the futurewhich you don't have today. When payment and receipt of businesstakes place it is exchanged at the forward rate which is set. Alternatively can borrow in thelocal currency and exchange that at today's spot rate. Repay the localloan when payment is made. Don't forget interest. Exchange rates Spot: Premium and discount Forward A price todays for a future transaction. Published at 3, 6, 9 months and 1 year. The difference between spot and forward is either a premium or a discount. If spot - forwardis greater than zero, the dollar is at a premium and the pound is at adiscount. The reverse holds. Futures Only an academic difference to Forward. Forward normally trades between directcustomers OTC, Futures are also for future delivery but traded on theexchange in standard units, not direct to customers. There is a margin for futures so thatlosses have to be covered by the client and profits are passed back to thecustomer where they occur. In publications, the Pound, and the ECU is quoted direct, all other currencies are usuallyquoted indirect: ie $1.48 to [[sterling]]1, but FF5.82 to $1. Closing mid point is the end of day exchange rate between the buy sell. The spread depends onthe currency and whether it is volatile. Executive Good executives create customers: Great ones create markets Executive Information Systems See Artificial Intelligence. Executive information systems (EIS) Generally differentiated from DSS by being targeted at executives rather than managers.see MIS, MSS, SIS. Nolan's stage, Anthony's pyramid, Hybrid information systems. Rockart and Treacy define as needing: 1. Central purpose: the top executives who personally use computers do so as part of theplanning and control processes in their organisation. The provision ofinformation to senior management for such purposes is certainly nothing new; the reason forEIS is to support a more effective use of this information. 2. Information repositories: these are tailored, often idiosyncratic databases containingdetailed past, present, and future data - by business unit - on importantbusiness variables such as from the general ledger, sales reports, and industry statistics. 3. Methods of use: a) for access to the current status and projected trends of the businessand b) for personalised analyses of the available data. 4. Support organisation: a group of consultants, or EIS coaches, who provide ongoingassistance ot the top executive user team. Exit barriers Exit barriers, like very specialised assets or management's loyalty to a particularbusiness, keep companies competing even though they may be earning negative ROI Exit The point at shich the financier sells his holding in thebuy out company, either througha trade sale to a larger company, by the management buying out theother investros to assume complete control, or by a stock market flotation. It isessential the managers and their financial backers agree from the outset on the exit strategy. Expected value In relation to risk. Expected value is the product of the magnitude of the probabilityand the magnitude of the prize. Can be represented graphically with value (x axis) and probability (y axis). EV is the sum of the individual expected valuesfor each outcome (there may be more than two possibilities). Can also be calculated (See Maitel, S. ch. 8) Expense recognition Assets provide future benefits tothe firm. Expenses measure the assets consumed in

35

generating revenue. Assets are unexpired costs, and expenses are expired costs or gone assets. The critical question is "when do asset benefits expire- leavingthe balance sheet- and becoming expenses- entering the income stateent as reductions in owners equity. See expenses. Balance sheet Income statement Asset or unexpired cost Expenses or Expired costs (which reduce owners'equity on the balance sheet) Expenses Are the outflows of cash or other assets attributable to the profit directed activitiesof an enterprise. Expenses are a measure of the effort exerted on the part of the enterprise in its attempt to realise revenues. Revenue and Expense accounts arenot reported on a balance sheet. Expenses are expired costs: Assets are unexpired costs. See expense recognition. Expert Database System Also called a Knowledge Base Management System. A system for developing applicationsrequiring knowledge-oriented processing of shared information Merges the capabilities of DBMS and ES ES to contribute to: - problem-solving mechanisms (heuristic search algorithms) - classification of knowledge in strategy - a rich world of knowledge representation systems (frames, networks and rules). Expert System An intelligent computer program that uses knowledge and interfence procedures to solveproblems that require human expertise for their solution. See Artificial Intelligence. ExperTax Case Cooper's & Lybrand developed and implemented a tax accrual and tax planning system whichused expert systems techniques. The tool was developed centrally and deployed amid much resistance into the practices. The tax experts mainlyused the tool as a way to fill the TAPQ more efficiently rather than allowing ExperTax to use its knowledge base to assist in the tax accrual and planningprocess directly.Fabozzi Frank J. Author of the book "Capital Markets: Institutions And Instruments". See Finance. Facsimile An electronically transmitted message. Usually simply called fax - every office has one.The second generation of fax machines became incorporated into computers (as an add-in card). The third generation are becoming wireless devices orbeing integrated into other office equipment, such as a single machine for faxing, scanning, photocopying and working as an answering machine. Fame Relay See Networks. Familiarity Matrix Make or buy Make or buy, knowing what is involved. Faulkner David Author of the book "Challenge Of Strategic Management (The)". See Management. Fax See Facsimile. FCF An acronym for Free Cash Flow. See Cash Flow and Finance. FDM-Frequency Division Multiplexing These early multiplexers allocated one set of frequencies to each terminal. Used toultiplex numerous voice or data signals onto a single satellite transponder. Fed See Federal Reserve Bank. Federal Reserve Bank The US Central Bank. Consists, in fact of 12 banks located in 12 American cities with thehead office in Washington. Most power is kept with the chairman

36

of the Federal Reserve but the New York Federal Reserve Bank is responsible for foreignexchange market regulation. See Central Bank. Feedback model Models Feedback Prove the system is viable; no money for new product development until proved in given time 2years. At the end of the two years the system is viable but the timegap to update an ageing product line becomes a part of a closure decision. Fiber Optic See Networks. Fidonet Is a batch orient, public Email network of PCs, estimated to number 15,000. Bullitenboards exchange information using modems and batch mail transfer. See also Internet. FIFO First in first out method for valuing inventory. See FIFO Fifth Generation See Computing. Figure of Merit See Finance. Finance cycle "Is a recurring set of management and related data processing tasks directed at securinga steady flow of capital funds into and through an organisation." Barry E. Cushing and Marshall B. Romney, Chapter 20, Accounting Information Systems - AComprehensive Approach, fifth edition. See Finance. Financial accounting The collection of basic (raw) data, as in managment accounting, but treated in aprescribed and statue enforced format which emphasises the historic, custodial and stewardship aspects of the business. Financial Information There are literally thousands of sources of financial information available today -ranging from financial newspapers to specialist financial publications. See individual entries for The Banker, Euromoney, Financial Times, Institutional Investor,Risk and Wall Street Journal. Financial leverage The amount of debt used to finance the assets of a business. A company increases itsfinancial leverage when it raises the proportionof debt relative to equity used to finance the business. ROA and financial leverage tend to be inversely related. Acompany with low ROA will generally emply more debt financing and vice cersa. The most common measure of financial leverage compares the book value of a companiesliabilities tothebook value of its assets or of its shareholders equity. Thisproduces the debt to assets ratio and the debt to equity ratio see. Coverage Ratios Financial Magazines Country Magazine Australia Belgium Canada China Denmark Germany France Hong Kong India Business India Indonesia Japan The Netherlands Russia Switzerland Thailand

37

United Kingdom Euromoney Banker Risk United States Institutional Investor American Banker See Financial Information, Financial Times and Wall Street Jounal, Management Newspapers andManagement Magazines. Financial Newspapers Country Newspaper Australia The Financial Review Belgium Canada China Denmark Germany France Hong Kong India The Economic Times Indonesia Japan Nikkei Shinbum/Nikkei Weekly The Netherlands Het Financial Dagblad Russia Switzerland Thailand United Kingdom The Financial Times United States The Wall Street Journal Barrons See Financial Information, Financial Times and Wall Street Jounal, Management Newspapers andManagement Magazines. Financial statements are interesting because: A) Management is concerned with company profitability and liquidity. B) Trade creditors will be interested in the ability of the company to pay debts when due.Therefore they will be interested in liquidity. C) Load creditors will want to know if the company is likely to remain in business. Thereforethey will want to know about future profitability and cash flow and thelevel of risk involved. D) Investors will be interested in the return on their investment in terms of dividends andcapital growth. The following factors are therefore important Profitability,Liquidity, Solvency, Future potential. See Ratio analysis . Financial Times A UK based daily financial newspaper which contains many discussions of financialengineering, company and more general finance and banking issues. One of the two best general international financial newspapers currently available. See WallStreet Journal. For more detailed general information see the magazines Institutional Investor, Euromoney and The Banker. For more specialistinternational finance information see Risk for detailed articles on pricing models and deal structures, International Financing Review for detailed articleson market activities and deal structures. First Call See Reuters. Fishbone diagram A diagram that relates a product defect to the potential contributing factors so thatcustomer complaints can be readily traced to the operations involved. Fisher Effect

38

Links interest rates to inflation.. The interest rate i equals the real rate + expectedinflation. Countries with low inflation have low interest rates and strong currencies. See Interest rate parity, Purchasing Power Parity PPP. Five Forces Porters 5 forces which affect industry: New entrants, existing competitors, substituteproducts, buyers and suppliers. See strategy. The collective strength of these forces determines the ultimate profit potentialof the industry. Whatever their collective strength, the corporatestrategists goal is to find a position in the industry where his or her company can bestdefend itself. Fixed and variable cost businesses One of the most important management classifications in any business is between highfixed and high variable cost companies. The differences affect structure which affects profits, pricing and volumes. Different management policies are required. The major differences are: 1. break even is reached at a much higher level of output for thehigh fixed cost company 2. Its rate of contribution (marginal profit) is very much higher. 3. Its margin of safety(for volume cut-backs above break even) will be of much lower level of output.Fixed asset turnover A control ratio. This reflects the capital intensity of a business. Changes over time reflect whether or notmanagement is becoming more or less efficient in is use of fixed assets. Where net fixed assets are property plant and equipment. Fixed assets Resources which the business has acquired withthe intentin toretain them for use incarrying out its main activities, rather than for re-sale. These may be either tangible (e.g. plant) or intangible (e.g. trademarks). Fixed cost. What would be the zero volume costs of running a factory because even if the plant doesnot make anything, you still need to make some payments: licences, rent, upkeep, maintenance etc. These fixed costs do not vary withthe rate of production.Dangerous: consider also semi-variable costs. See also variable cost or Economics Flichy Patrice Author of the book. "European Telematics : The Emerging Economy Of Words". See Networks. Floating J Curve A business forecasts two or three years of flat or declining profitability, but then allof teh numbers would point upward. Tends to be a fantasy. Line tends to keep moving right without moving up. Floppy Disk See Computing. Flow to equity method (FTE) for valuing companies Estimates the cash flows due to levered equity, and discounts the cash flows to leveredequity at the cost of equity applicable to a levered firm. Thus there are three steps. 1. Estimate the cash flows tolevered equity. i.e. the after-tax and after interest payment cshflows to (i.e. equity [EBIT-Interest]*[1- Tc]) 2. Estimate the equity beta by taking into account the D/E ratio of teh firm, on an after-taxbasis: and compute the cost of equity based on this (often, it may be OK toassume that the debt betaßd, is equal tozero and use the simplified version of the formulaabove). 3. Compute the PV of equity using the cash flows and discount rates as described. See WACC, APV, Valuation. Corporate valuation Foreign currency In the cash flow statement: if a company holds foreign currency it will show its value atthe start of the year compared to the end with suitable adjustment for exchange rate variations. Foreign Exchange Risk This is a currency risk where a company has a long or short position in a foreigncurrency. For example a US company has a contract for

39

[[sterling]]1,000,000 in the UK. This position exposes the company to changes in the homecurrency amount (in this case US$) if the exchange rate changes. This is foreign exchange risk. Foreign exchange rate Is the nominal (as opposed to real) price of one nation's money in terms of another. Thespot rate is today's exchange rate. In actuality, this transaction is formally settled two business days after the date on which the spot transaction isentered into. The t-period forward rate is theexchange rate available today for transactions that you may wish to make at time t. That is, you can enter an agreementtoday for delivery of money in the future. Forward rates are crucially important in managing a problem that MNEs face, known as Transaction exposure control. The forward rate is conceptually similar to the futures rate. Actual forwar rates may differslightly from actual futres rates due to institutional features. The spot rateand the forward rate are different from the Expected future spot rate, which reflects theexpectation the market has about the price of a currency t days from now. See Effective exchange rate Forman Ernest Author of the book "Analytic Approach To Marketing Decisions (The)". See Marketing. Fortran FORmula TRANslator progamming language developed principally for mathematical problems.See Computing. Forward Rate The foreign exchange rate of a currency at a price agreed today but with a value date inthe future. See Spot Rate and Exchange Rate. Forwards See Hedging Four Ps, 4Ps See marketing mix. Fourth Generation See Computing. Fox Steven Author of the book. "Voice / Data Telecommunications For Business". See Networks. Fractional Banking The basis for most western banking systems where the banks are required to hold a portionof their funds in reserve deposits. This is a major tool in the regulation of the money supply in the economy. This is because of the multiplier effecton bank deposits. Framing Risks or probabilities can be expressed in two ways; (90 percent chance of sun or 10percent chance of rain). A tool often used by marketers Free Address A Japanese term for Hot-desking. Free Cash Flow See Cash Flow and Finance. French Standards Institute See AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. FRI See Reuters. Front end processor Specialised computer which, when attached to a mainframe central processing unit, handlescommunications, and administrative tasks for the CPU. FT1 Cheaper than T1. Allow end users to split uptheir traffic among different paths; forexample using two 24 circuit FT1 instead of one 24 T1. This allows for reroute backup. Full absorption system for profit and loss account: Full cost Describes the cost of producing a good, including full allocation of overhead costs andvariable costs. Full-duplex Signals in both directions symultaneously.

40

Future value The future value of a sum of cash is the amount to which that su will grow if it isinvested at a specified interest rate for a specific period of time. This relationship can be expressed mathematically: F1 = P(1 + r). In which P is the presentsum of money, r = the rate of interest and F1 is the future value 1 year ahead. For money left for 2 years this becomes: F2 = P(1+r)[2.]: Again, Fn = P(1 + r)[n]. FX See Foreign Exchange Risk. Fxcalc See Reuters. GAAP short for Generally Accepted Accounting Principals Gains and Losses Similar but not identical to revenues and expenses. Gains and losses are increases ordecreases in net assets resulting from transactions. e.g. suppose that a retail store sells office equipment that it used in its own accounting department. Thedifference between the selling price and its book value at the time of the sale would be recorded as a gain or loss. Gantt chart A chart that shows the scheduled start date and the progress of each job compared to itsscheduled delivery date. Garner John T. Author of the book. "Satellite Operations : Systems Approach To Design And Control". SeeNetworks. Gateway The computer which provides the bridge which links the host with the database (or othersystem) user. See Networks. GDP By how much did prices rise between 1982 and 1989? Tens of thousands of different goodsand services are produced, and each has its own price increase. It makes sense to construct an index of those prices, known as the GDP deflator. (becauseit is used to deflate the inflated value of GDP. This index is a weighted average of prices, with the weights determined by the importance of each productin overall national output. Betwen 1982 and 1989 prices rose 26.3% in the US. GDP rose 65%. This means that out of the 65%GDP rise 26.3 percent was due to rising prices. This impliesthat Real GDP growth was 31% The meaning of the Real value of 1989 GDP is this: it is the value of 1989 GDP, if the goodsand services made in that year had been valued at 1982 prices insteadof 1989 prices. Gearing, leverage. The ratio of debt to equity in a company's capital structure. Intermediate forms ofcapital, such as redeemable preference shares and convertible loans, can complicate the calculations and mean a variety of different ratios may be applied to thesame company. See also Solvency. General ledger The master file in which a record is maintained for each and every account in theorganisation's accounting system. General Motors Corporation See Integrated Factory and Case. Generation See Computing. Generic strategy According to Porter there are two bais generic strategies: Low cost leadership andDifferentiation (or focus). The two are not necessarily exclusive (eg Wall Mart) and a corporation, even a company can use both in the business for differentproducts at the same time (but this will have difficulties, particularly for structure and culture). Porter's graph which emphasises that a company should not get stuck between strategies. Nodata available to support this. But reflects the Sony decision not toincrease volume when they first entered the US market. This is the balance between investment

41

intensity and volume/turnover. Geodesic Network Ii (The) 1993 Report On Competition In The Telephone Industry See Networks. Geographic Information Systems (GIS) Use computer power to collate geographic and social data. Computer systems that usespatial and topographical data as an element, usually in a database. Sometimes called Graphical Information Science. Used, for example by the EC to map use ofagricultural land in an economic census. Geographic Positioning Systems (GPS) Provides local co-ordinates of a position fro satellite readings. A vet or animal healthinspector, for example, might carry a laptop, which can read a specific co-ordinate for the location of a herd with a disease. Also used in yachting fornavigation systems, and more recently for mobile security and anti-theft devices on cars. George K. Author of the book "Competition Policy In Europe And North America: Economic Issues AndInstitutions". See Policy. Georges Martine Author of the book. "Perspectives Pour Les Telecommunications". See Networks. Gille Laurent Author of the book. "L'industrie Des Telecommunications, options techniques et enjeuxindustriels". See Networks. Globerman Steven Author of the book. "Convergence Between Communications Technologies". See Networks. Globex See Reuters. Gnomes of Zurich A disparaging term used in the UK for financial speculators based in the Swiss city. Theterm came to prominance in 1964 when Brittain was forced to adopted harsh economic policies when the pound came under pressure from speculators. Theterm reflected the increasing interdependence of western nations and the tipping of the balance of power away from politicians to statelessbusiness interests. Goal (the) Taken from The Race, by Godratt and Fox. Goals Reaching goals involves three elements: Process How we produce the product. Content What we produce. People Who produces the result. Refer also to Objective Setting. Going concern concept It is assumed that the accounts will be drawn up on the basis that the business will bein existence for the foreseeable future. this implies that the assets of the company will be valued according to their anticipated use by the business, not at a sellof or scrap value which might be realised if the business were to be sold. Goodwill When the acquisition price paid for a company is more than the book value of the assets,the amount above the book value is called goodwill, or purchased goodwill. Often used to refer to particular intangible assets, like patents, trademarks,or brands. Goodwill is normally amortised. GOSIP-Governement open systms interconnection profile Driving the standardisation of OSI products, is a federal government procurement document forcomputer and networking technology specifying OSI internationaland draft standards. Could force govt. vendors to supply OSI products and force TCP/IP intoretirement. Gosip is a layered architecture which contains standardprotocols at each of the seven OSI layers: physical, data, network, Transport, session,presentation and applications (layers 1-7, OSI)

42

Governance See Corporate Governance. Governance The top level control structure, consisting of the decision rights possessed by the boardof directors and the CEO, the procedures for changing them, the size and membership of the board, and the compensation and equity holdings of managers and theboard. see Corporate governance Graphical User Interface Invented in the early 1970s at Xerox Parc, it was fist popularised by the Macintoshcomputers and today by Windows. Also called GUI. These represent programs and objects in a computer by small graphics (pictures) called icons. You use apointing device (usually a mouse or a pen) to perform actions on the computer. Green Paul, E. Author of the book. "Fiber Optic Networks". See Networks. Gross benefits A M&A term for the net benefits which an action gives you (for example buying a company). Gross domestic product (GDP) GDP equals Gross National Income (every time someone earns a dollar, someone else spendsone) or: ... . If imports exceed exports the figure for net exports will be negative. GDP or Gross National Income is disposable income plus Net taxes (gross taxes less transferpayments) Gross margin Total revenue minus direct costs. A very spurious measure because it depends on theclassification of overhead (fixed) and direct (variable) costs. Gross National Income see GDP. Gross profit Sales value less the direct costs incurred in buying or providing the product sold Group technology (GT) A manufacturing technique by which products or parts with similar characteristics aregrouped into families and machines are grouped into cells in such a way that high levels of repeatability are achieved. Group work Two or more people doing too or more tasks Groupware See Lotus. Groupware Software with is designed to help group work. A popular example is Lotus Notes. SeeLotus. Growth From products may come from a firms decision to lengthen, deepen or widen its product lines. From functions May come from integration forwards or backwards or by expansion geographically GSM See Networks. GSM System Mobile For Communications (The) See Networks. GUI See Graphical User Interface. H.E. Butt Grocery Company A Case in the Network Services course. A Texas Retail company is faced with the choice ofmoving to a satellite based company communications system. The major issues were: Half-duplex Signals in both directions Hammer See Technology. Hand-held Computer An emerging technology made popular in recent times by the Apple Newton. It is the

43

natural extension of laptop computing as they are the first truely portable, non-intrusive computers. Many hand-held computers do not have a keyboard butuse devices such as pens and even simply your finger. See Computing. Hands on. Hands off. The degree to which an investor in a buy out becomes involved in its management. a handson investor would normally nominate a non-executive director to the board, and might commit some of its other executives to help out if the company raninto difficulties. Hands off investors would have very little, or no, active involvement inthe company. Handy Charles Author of the book "The Age Of Unreason". See Education and Learning. Hard systems thinking Developed by engineers as a project management system; starting with the projectobjective (to make something). Differs from SSM which has no defined objective and which does not apply only to engineering type projects. Hardware See Computing. hausbank German for the main bank for a large corporation. See Corporate Governance. Hedging Buying one security and selling another in such a way as to produce a riskless portfolio. In a situation like that of JC Penney, the company raises foreign currency but exchanges itimmediately to dollars (because it wants dollars). It also agrees in advancewith the bank the exchange rate for the interest and principal payments during thelife of thebond (buying forward). Heuristic The application of common sense or domain specific knowledge of the problem at hand. High Speed Networks Are anything faster than X.25. See Networks. High Tec A High Technology company or industry is: 1. one which spends 5 - 10% of revenues on R&D. 2. you need a PhD in the field to understand the terminology. Horse Latitudes These were an area in the Atlantic sea where the tradewinds often died, becalming sailingships going to the Americas. When becalmed the ship had to lighten the ship by jettisoning as much as possible- cargo, cannon, etc. The worst becalmingsalso needed to abandon the horses - the most valuable cargo. When the horses were dropped over the side, the ship was light enough for the meager wind tomove te ship slowly on. The horses however were able to swim formiles before they eventually drowned. Their frightened screeams would haunt the superstitioussailors for the rest of the journey. Host A computer which gives on-line access to its database. Access to database data isnormally granted by a host and is then transmitted via a telecommunications service. Has two parts: the applications programs and the network interface. The hostcomputer: lets local users access the network resources as easily as local, lets remote users access local resources, removes networking details fromapplication programs. Hostile Takeovers See Mergers & Acquisitions. Hot-desking The emerging practice of companes not giving employees their own desk in the office.Instead there is a pool of desks that you use as required. Termed `free address' by the Japanese. House of quality Stereotype of the European/American approach to marketing. Evaluate the market beforefirst launch and try to match market informationn with technical capability. Huber Peter W.

44

Author of the book. "Geodesic Network Ii (The) 1993 Report On Competition In TheTelephone Industry". See Networks. Hunt Craig Author of the book. "Tcp/Ip, Network Administration". See Networks. Hybrid information systems Any system which would involve a combination of the defined information systems. see MIS,SIS, Hybrid information systems, DSS, Nolan's stage, Anthony's pyramid, EIS, MSS. Hybrid layout An arrangement of a facility with some portions designed as a product layout and otherportions designed as a process layout. Hybrid Switch Combines Packet switch, Frame relay and Cicuit switch. Hyper-rational Too rational, humans are not completely rational (called limited rationality). Assumingthat they are means that you are assuming hyper-rationality. Hypertext Electronic information which contains links to related information. See Information andComputing. Hypothesis See Control and Monitoring and Economics. IBM International Business Machines, the worlds largest computer company. The corporationeveryone loves to hate - sort of the JR of the computer world. Icon See Graphical User Interface. Imaging See Visualisation. Impact Analysis See Control and Monitoring. Implicit rent See Economics. Implicit rent The cost of using owned assets. There are tax benefits from renting ( business expense),implicit rent is not deductable and the lost benifit should be takeninto account Imputed cost The cost of shareholder capital which is not shown in the accounts by accountants.Similar to opportunity cost; the amount a company should recognise as being due to investors, Income sensitivity of demand A concept similar to price sensitivity of demand, reflecting how changes in incomeaffects demand for a particular product. Food would be income insensitive; restaurant meals would be income sensitive. Income statement Profit and Loss statement, operating statement, statement of profit and loss, income andexpense statement. The second part of the financial statement. The balance sheet shows net assets. The income indicates changes in owners' equity and thuschanges in net assets) over a period of time resulting from the operations of the business, excluding contributions or withdrawals on the part of theowners (ie stockholder changes). The income statement indicates the rate at which the equity of theowners is changing. Itreveals the revenues, the expenses and the resultant income for the period.See balance sheet, dividends. Incompatability The problem where either two computers or computer programs can not either: 1. work at the same time on the same computer. 2. exchange information. 3. work on the same type of computer. Incremental cost. See Marginal cost or Economics. Indirect cost Costs which are shared and therefore cannot be directly related to a single product or

45

service Industry analysis See five forces, competition, strategy, market analysis. Industry map Harvard developed map to show the position of companies within industries. For IT &services the map would chart on coordinates around Services, Products, Conduit, Content Inference Engine A computer program which uses a knowledge base to make a decision. See also KnowledgeBase. Inference See Control and Monitoring and Economics. Inflation adjusting Amounts reported for investments in assets and the cost of goods sold arebased onmeasures of historical cost. As a result expenses are likely to be understated. On solution alternative would be to measure assets, depreciation and thecost of goods sold at replacement cost. Not often used except when comparing performances from a numer of years. Inflation Persistently rising prices. It is very important as an investory to know if inflation iscaused by Demand pull inflation or Cost push inflation. Infobot A program in a networked computer which can automatically respond to an incoming message.A standard example is a program on an Internet server which can automatically send an aknowledgement to a request from another network user. SeeKnowbot. Information Needs An interesting way of looking at the information needs of organisations begins withAnthony's pyramid of organisations. Linking this with Simon's type of information and the types of computer systems results in the following view oforganisations: See also Computing. Information Networks And Competitive Advantage, vol. I: issues for government policy andcorporate strategy See Networks. Information Revolution, The The dramatic reduction in the cost of obtaining, processing and transmitting information. Information Systems Must be judged upon the revenues they generate and not their cost. If the cost ofgenerating the information is used as the basis of evaluation then a strategic misallocation of information resources is likely to result. The usefullness of theinformation is the paramount factor to tske into account. This concept is becoming increasingly popular in corporations. Barclays Bank in the UK hasallocated all information comsumers a budget from which they must payfor all the information they receive. It was surprising to see what people were willing to payfor - it caused a strategic change in their information flows and what wasbeing held and used within the organisation. Figure :The Four Stages of Growth in Systems Functions. DSS-Decision-Support systems An EDP system is oriented towards the automation of transaction processing, record keeping,and reporting, i.e. mechanical effiency. a DSS system, on the otherhand, has as its goal the improvement of the overall efficiency and effectiveness ofindividuals within theorganisation. Information systems "The information systems that did not provide the information wanted by management". Nowdefined as: Information systems that have as their primary function the processing of predefinedtransactions to produce fixed format reports on schedule. The principal use is toautomate the basic business processes of the organisation (typical function include: payrol,customer orders, purchase requests etc.). (after Wiseman) Conventional information systems provide automation of function using information systems as

46

shown below. See MSS, SIS, DSS, EIS, Nolan's stage methodology. Information The meaning of data. Often a loosely interchanged term with data. Information: cost Information econommies enable relatively knowledgeable firsm to acquire, produce, store,ship, or sell products at lower average cost per unit than relatively ignorant ones. Eg. information about risk allows for lower insurance premiums if theinsurer is intending on behaving oportunistically. Information systems can reduce the cost of inventory The American Express traavel management system to reduce thecost of wasted high fares, car hires ets.etc. Innovation climate index Matrix used to establish whether or not the company is likely to foster innovation.Scores the company from minus 5 to plus five on categories such as: leaders look for innovation: Reward for success, Punishment for failure: Resources available forinnovation: Heirachical structure: Centralised decisions: Formalised communication: Focused resource application: Tollerance to mavericks: Look for short termprofit. The matrix has negatives, like look for short term profit on the left hand side (-5) and thepositive on the right hand side, look for long term value (+5). Different parts of abusiness need to be managed in different ways: the mature 'cash cow' doesnot require innovation. But managing the new venture like a cash cowwould not work. Innovation Innovation is the whole process from: invention, development, pilot production,marketing, production. Invention is just invention. Innovation Involves the adoption of new products or processes. A product innovation satisfiescustomer needs or wants previously unmet. a process innovation improves teh efficiency or effectiveness of a process associated with a product. (Wiseman).Innovation may stem from technological, organisational or other sources. Innovation is the middle stage in a sequence that starts with invention (creation) andends with imitation. Innovation Is an idea, practice, or object that is perceived as new by an individual or other unitof adoption. It is only necessary for an idea to seem new to an individual for it to qualify as an innovation. Innovation Open ended situations (requirements) breed innovation. Groups learn and proposeinnovation and new strategy when faced with open ended situations. Must not confuse open ended situations with no direction situations. Instinet See Reuters. Institutional Investor A US based monthly financial Magazine which contains many discussion of finance andbanking issues. One of the three best general international financial magazines currently available. See Euromoney and The Banker. For more specialistinternational finance information see Risk for detailed articles on pricing models and deal structures, International Financing Review for detailed articleson market activities and deal structures. Intangible asset Is not a physical asset. Might be a patent or a brand name. Integrated Factory A Case on the General Motors Corporation. Integrated Services Digital Network ISDN. See Networks. Integration The ability of separate computer components to operate together. Interest cover This ratio measures the number of times profit before interest covers the interest charge. Itgives an indication of the relative safety of the loan interest. Interest payable

47

see current liabilies Interest Rate Parity Theory If you borrow in one country to invest in another with higher interest rates expecting toearn money on the differences, the exchange rates, and interest rates will move to equate the interest. (Ultimately). If interest rates in the US are higher than rates in the UK fwd > spot. The [[sterling]] is ata premium. See Fisher effect Interest rate parity Between national currencies. Stipulates that the expected rate of change in spot exchangerates equals the ratio of the prevailing interest rates in the two currencies. In the case of dollar sterling exchange rate, the interest parity conditionis expresssed as: where [[Delta]]S is the expected fractional change in the spot exchange rate during theforecasting period, and R$ and R[[sterling]] are the nominal yields during thesame period on comparable risk dollar and sterling denominated debt, respectively. If parityholds it follows that the appropriate sterling WACC to use fordiscounting purposes is the dollar WACC adjusted for expected exchange rate changes. Thus: Interest Tax Shield A financial use of a tax system where certain financial structures benefit from taxburden reductions. A common example is debt financing over equity financing. Debt financing will usually have an interest tax shield because the interestpaid on debt is normally at least partially tax exempt. See Finance. Interface The pysical connection between two communications devices. Industry standard is EIA-32.See Networks. Internal Control Cluster (ICC). A group of ICPs related to one or more type of error or activity. Internal Control Procedure (ICP). A single control measure - such as checking a control total. Internal Control System (ICS). A group of ICCs which make up a cycle of controls in an organisation. Internal Rate of Return The discount rate at which the net present value of an investment is zero. See Finance. International Currency Restrictions A yearly publication of the IMF which details the IMF members currencies. International Financing Review A UK based financial magazine which contains regularly profiles of countries, markets andpeople. Risk specialises in the international financial markets and contains many detailed articles on market activities and deal structures. One of thethree best specialist international financial magazines. See International Financing Review and Barrons. For more general international financial magazines seeInstitutional Investor, The Banker and Euromoney. International Insider See Reuters. International Radiocommunications Consultative Committee See CCIR, AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. International Telegraph and Telephone Consultative Committee See CCITT, AFNOR, BSI, CEN, DIN, ETSI, ISO, ITU, and NIST. Internet The worlds largest public access collection of interconnected networks. In 1993 it wasestimated to have: * 2 million computers * 20 million users * 135 countries * >8000 nets. Internet and Prodigy Figure : Email Growth in the USA. From Byte, March 1993. Internet services include: * Remote login (telnet) * Electronic Mail * Network News (Bulletin boards) * Archie (Software service)

48

* World Wide Web (WWW -a hypertext publishing system) * Wide Area Information Service (WAIS -a multimedia publishing system) See also Relevance Feedback and Networks. Additional Resources CONNECTIONS L. SPROULL AND S. KIESLER MIT Press, 1991. THE WHOLE INTERNET E. KROLL O'Reilly & Associates, Inc., 1992. This is a comprehensive guide to the services of the Internet, its history and etiquette.Highly recommended but the only way to know what is available via the net isto log on and see. BUILDING OF INTERNET (THE) Telecommunications Policy-Magazine 1/01/92 BAR François, HART Jeffrey A., REED Robert R. The Internet, a system of interconnected computer networks primarily in the USA, can be seenas an experiment in the development, deployment and use ofhigh-speed networks, and as such can provide guidance for the shaping of the future nationaltelecommunications infrastructure. Internet's significance lies not only inthe technologies it helps develop, but more importantly in the new usage dynamics it helpsuncover, the new network management mechanisms it tests and the newpolicy strategies it explores. PP 666-689 DNS AND BIND ALBITZ Paul,CRICKET Liu O'REILLY & ASSOCIATES 1/01/93 IT.31 037 This book discusses one of the Internet's fundamental building blocks: the distributed hostinformation database that's responsible for translating names intoaddresses, routing mail to its proper destination, and many other services. DNS is one of thedarker, more obscure areas of the network administration. This bookcovers all you need to know about DNS and its UNIX implementation. INTERNET COMPANION (THE) LAQUEY Tracy,RYER Jeanne C. ADDISON-WESLEY 1/01/92 IT.31 034 This book is a guide to the intricacies and unique culture of the Internet. In clear,nontechnical language, it introduces you to the worldwide community on theInternet, teaching you how to tap into university research databases, online archives, andvast social networks of up-to-date information. Internet Europe, Is Commercial Traffic In The Stars? Datacommunications, August 1992 INTERNET: GETTING STARTED MARINE April SRI INTERNATIONAL 1/01/92 IT.31 033 This volume describes how to join the Internet, as well as how to gain access to othernetworks that can communicate with the Internet. It will give you an idea ofwhat the Internet is, it has available, ans how you can take advantage of its resources. INTERNETWORKING WITH TCP/IP COMER Douglas E. PRENTICE-HALL 1/01/91 While this book is specifically about TCP/IP protocol suite, it is a good book for learningabout computer communications protocols in general. The principles ofarchitecture, layering, multiplexing, encapsulation, addressing and address mapping, routing,and naming are quite similar in any protocol suite, though, of course,different in detail... In this book, the author has taken the "bottom up" approach - startingnwith the physical networks and moving up in levels of abstraction to the

49

applications. WHOLE INTERNET (The) KROL Ed O'REILLY & ASSOCIATES 1/01/92 This book will help the reader to unlock the Internet's resources. It is a completer user'sguide to the Internet, covering everything from the basics, like electronic mailand newsgroups, to the newest developments. A large part of the book tells the reader how tofind the resources he wants. This is the first book to cover theInternet's new "research librarians": Gopher, WAIS, and the World-Wide Web. ZEN AND THE ART OF INTERNET KEHOE Brendan P. PRENTICE-HALL 1/01/92 IT.31 029 Page after page, this book summarizes how to use the net to its fullest advantage. Topicscovered include: - Today's networks, including the Internet, UUCP, and Binet. - Electronic mail - FTP, the primary method of transferring files over the Internet - Commercial services..... Invention Inventories Include both items available for sale to customers and raw materials, parts, ans suppliestobe used in production. They can be reported at the cost incurred to either purchase or pruduce them. But if the cost of replacing such items has declined,then the inventories may be "written down" to reflect the decline in value.Inventory All the money that the system invests in purchasing things that it intends to sell.Sometimes inventory must be defined as all the money that the system invests in things it intends to sell (thus including all labour costs invested during a processafter purchase). Inventory turnover A control ratio. An inventory turnover of 4 means that a company produces and sells 4 complete cycles ofproduct in a year from the given assets. Alternatively this means that anitem of inventory sits in stock for an average of 3 months. Cost of goods sold is used ratherthan sales value because it does not include profit markup which woulddistort the figure. Investment banking Investment bankers are the grease that keeps financial markets running. They are financespecialists who assist companies in raising money. Other activities include stock and bond brokerage, investment counselling, merger and acquisitionanalysis, and corporate consulting. Investment priority screen Matrix used by GE implement SBU reorganisation. Investments and other assets. Includes other assets. Include amounts owed to the company by outsiders that are not duefor at least one year, and amounts that the company has invested in other copanies. If a company ownes part of another company this would normally beincluded among Investments and other assets. Such interests in other companies may be classified under "Marketable securities" (a current asset), or asInvestments in subsidiaries (an non current asset). The decision as to how investments should be clasified depends to a large extent on the intentof the company's management; long term intent => non current asset,short term intent => current asset. Investments in subsidiaries A non current asset (see investments and other assets). IPO An acronym for Initial Private Offering. This is the first offer of shares of a companythat is going public. See Finance. ISDN See Networks.

50

Islands of Automation See Standardisation. IST-Interswitch trunks The comms circuits that link the packet switches. Most common are landline circuits basedon telephone technology. New high capacity fiber technology becoming more available. Other technologies are available, eg. radio circuits, to fillspecial needs. Also Satellite. IST is inherently an analogue system. Pulses on a wire or radiosignals are analogue and require processing to support datatransmission. For this reason IST's all have a modem at each end for analog transmission links or a digital interface unit (DSU) for digital or fiber transmission. I_CASE See CASE. J Curve See Floating J Curve. J Form See Corporate Governance. J.,Neumann Russel W. Author of the book. "The Telecommunications Revolution". See Networks. Jazz 1. Value for money. 2. An integrated program launched by Apple in the mid 1980s. It failed and disappeared fromthe market. Jiji Press See Reuters. Jobs, Steve See Apple and NeXTStep. Jockeying for position One of Porter's five forces. Rivalry among existing competitors. Tactics include:price,new product introduction, advertising. Intense rivalry is related to a number of factors: 1. competitors are numerous and roughly equal in size and power. 2. Industry growth is slow, precipitating fights for market share. 3. Product or service lacks differentiation or switching costs, which lock buyers and protectone combatant from raids on its customers by another. 4. Fixed costs are high or the product is perishable, creating strong temptation to cutprices. 5. Capacity is normally augmented in large increments. This leads to oversupply and pricecutting. 6. Exit barriers are high. Exit barriers, like very specialised assets or management's loyaltyto a particular business, keep companies competing even though they maybe earning negative ROI. Johnson Gerry Author of the book "Challenge Of Strategic Management (The)". See Management. Joint venture Usually formed between larger and smaller companis where the larger company seekstechnology and the smaller company seeks market share. Disadvantages include reluctance to share proprietary information. Need a new management between the partners. Often the venture is not so significant to thelarger partner and acquiring full attention is difficult. Should (must) negociate the terms of exit at the same time as entry) Forty percent last lessthan 4 years and end acrimoneosly. Of all ideas for joint ventures less than2% are long term successes. One third of ideas are thrown out, of the two thirds that lead toletters of intent, 70% do not progress. Reasons for failures. There is an absolute need for a win-win situation. Negociations between partners should notbe, or seem to be, negociations for best position. Jones Malcom Author of the book. "Satellite Operations : Systems Approach To Design And Control". SeeNetworks. Jouet Josiane Author of the book. "European Telematics : The Emerging Economy Of Words". See Networks. Junior debt

51

Unsecured loans which rank after secured or senior debt for repayment in the event of adefault. Junk Bonds See Bonds Just in Time systems (JIT) Production and inventory control systems designed to produce small lots and to producethe right items in the quantities needed by subsequent production processes at the right time. In the mid 1908s firms which successfully introduced JIT had the following characteristics: * Uniform assembly schedules. The use of JIT in repetitive manufacturing requires a stableassembly schedule. A uniform, continuous need for parts and componentsis essential. * Group technology. Utilising group technology cells takes advantage of high volumeproduction, even when the specific demand for parts produced at the cells islow per unit of time. * Flexible work force. The ability to use workers at a variety of operations helps toalleviate bottleneck operations and maintain a uniform flow of products. * Short set-up times. Permit small lot production, which is essential for low inventoryinvestment * Low rates of machine failure which disrupts the production process in a JIT system becauseof the low levels of inventory used to decouple the operations. * Low rates of yield loss or rework. Both disrupt the uniform flow of materials through themanufacturing process. See Kanban. Managerial considerations (according to Krajewski & Ritzman) Advantages * reduced space requirements * reduced inventory investment in purchased parts, raw materials, work in process, andfinished goods * reduce manufacturing lead times * increase productivity of direct labour employees, indirect support employees, and clericalstaff * increase equipment utilisation * reduce paperwork and require only simple planning systems * set valid priorities for production scheduling * encourage the participation of the work force * increase product quality. Disadvantages (most of which are advantages) * requires workers and supervisors to take responsibility for shop floor production controland productivity improvements * requires an atmosphere of close co-operation and mutual trust between the work force andmanagement. * requires actual daily production to approximate the daily schedule (closely) * Cannot respond rapidly to changes in product design, product mix, or large demand volumes(debatable) * requires a large number of set-ups and frequent shipments of purchased items from suppliers * requires parts to be produced and moved in the smallest containers possible * not well suited for irregularly used parts or specially ordered products (see Time basedcompetition, a development on JIT) * the layout of the factory may have to change to a cell based or product based system, ratherthan a process based system. * JIT by definition takes safety out of the process by reducing buffer stock, this causesstress on operators which can be extreme. Kaizen The Japanese term meaning continuous improvement. Tends to be associated with Time Basedcompetition. Concentrates on elimination of waste. There are two roads to improvement: Kaizen, principally involves incremental change,Innovation involves drastic improvement; both are important. Read Imai. The significance of Kaizen to the operation can be summarised in the figure below: from Omai. Example of no Kaizen (Corning Glass Case); successful Kaizen, (Soft Optics Case). Kaizen notenough (Soft Optics Case). Kanban See JIT. A ticket-to-produce, or card, used in Just in Time production, originally byToyata. The idea being to produce to order, not to capacity. Although

52

there are many types of card, two main types used by Toyota are the Withdrawl Kanban andthe Produciton Ordering Kanban. The Withdrawl Kanban specifies the item and the quantity the subsequent process shouldwithdraw from the preceding process and the stocking locations for eachprocess. The Production Ordering Kanban specifies the item and the production quantiy the precedingprocess ust produce, the materials required and where to find them,and where to store the finished item. Kay, Alan One of the founders of hypertext. See also Bush, Engelbart and Nelson. Kehoe Brendan P. Author of the book "Zen And The Art Of Internet". See Internet. Kellogg Michael K. Author of the book. "Geodesic Network Ii (The) 1993 Report On Competition In TheTelephone Industry". See Networks. King Peter J.B. Author of the book "Computer And Communication Systems Performance Modelling". SeeNetworks. Kling Rob Author of the book "Computerization And Controversy, value conflicts and social choices".See Computing. Knowbot A program which searches networks for information and programs and carries desiredinformation back to a user. See Internet. Knowledge Base The data, knowledge and rules used by experts to solve problems. Refer also to Inference Engine. Knowledge base management system The software that manages the knowledge base. See Artificial Intelligence andInformation. Knowledge base The data, knowledge, rules-of-thumb, and decision rules used by experts to solve aparticular type of problem. See Artificial Intelligence and Information. Knowledge organisation see Learning organisation Knowledge Tacit knowledge is the exclusive property of the individual (like the ability to bakevery good bread - it requires indefinable experience and feel). Formal or defined knowledge can be represented by a formula and can be the property of all. Movingfrom tacit to formal knowledge is very difficult and valuable. See Artificial Intelligence and Information. Knowledge Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information? from "The Rock" by T.S. Eliot See Artificial Intelligence and Information. Knowledge workers Are the new employees, supervisors and junior managers. They know more about their workthan their employers and are versatile; being able to do more than one task and being able to repair stoppages and to improvise. Having knowledgeworkers creates tensions because they knows more about their employers. They will tend to be proud and independent. They may not always work well withothers (Easy to live with can sometimes be inversely related to talent). Management of knowledge workers is difficult; they must be motivated and attracted. Theknowledge worker cannot work without the company, however, bothneed each other. The manager becomes a facilitator; creating an environment in which theknowledge worker can perform, taking away distractions, creating space,guiding not ordering. See Artificial Intelligence and Information. KROL Ed Author of the book "Whole Internet (The)". See Internet.

53

L'industrie Des Telecommunications, options techniques et enjeux industriels See Networks. LAN Local Area Network. See Networks. Languages Machine-level Languages. Binary code (strings of 0s and 1s) which can be directlyinterpreted by the internal circuitry of a computer. Symbolic or Assembler Languages. Machine-level instructions are made more English-like bybeing represented by symbols which relate to the instruction beingused. High-level Languages. Instructions which are translated into multiple machine-levelinstructions. Examples are COBOL and C. Fourth-level Languages. Languages which are easy to use (such as very English-like syntax).Examples are Database Query Languages, Report Generators,Program Generators and Statistical and Problem Solving applications. See Computing. Laquey Tracy Author of the book "Internet Companion (The)". See Internet. Laser A word which was in fact originally an acronym for Light Amplification by StimulatedEmission of Radiation. Laurel Brenda Author of the book "Computers As Theatre". See Education and Learning. Lazonick William Author of the book "Business Organization And The Myth Of The Market Economy". SeePolicy. Lead investor Venture capitalist or other deal maker with the largest share in the syndicatedinvnestment. He usually initiates the deal, and takes a hands on role on behalf of the other players. Leadership According to Andrews must include 3 components: organisational leadership, personalleadership and architech of organisational purpose. Learning Individual learning and group learning. Individual learning can be selective rather thanobjective. Group learning is essentially political; progress and decisions or outcomes will depend on power playing in the group. Particularly in open endedsituations. Learning models Model 1. Act on error to correct it. Model 2. Each act to improve only affects one symptom or one cause. There may be many causes(the idea of incremental progress would be an example). Learning organisation Learns from mistakes, encourages enterprise and responsibility and therefore allowsmistakes. A company is not a learning organisation unless it does things differently; to do things differently it must see things differently. This is very hardfor older managers who have grown up in the old economy. There will be tension and war with younger managers. Because of this need to see things differentlythere is no correlation between investment and productivity for IT investments. Learning Organisation, The See Education and Learning. Lease Is a contract whereby an owner (lessor) grants the use of property to a second party(lessee) in exchange for rental payments. Two major kinds of lease: Capital leases (financing leases), transfer substantially all the risks and benefits ofownership. They are equivalent to instalment sale and purchase transactions. The asset must be recorded essentially as having been sold by the lessorand having been purchased by the lessee. Operating leases, e.g. telephones are rented by the month and rooms by the day etc.. operating leases areaccounted for as ordinary rent expenses; no balance sheet accounts are affected by operating leases. Leased lines

54

Line leased from the public network carriers that enable both voice and datacommunication. Lefcoe G. Author of the book. "Teleports In The Information Age". See Networks. Lemons Bad deals and good. Bad investments usually go wrong before the goods one produce aprofit. The lemons ripen before the pums. Letch Robert A. Author of the book "Accounting Information Systems". See Control and Monitoring. Leveraged buy out Similar to a management buy out though usually applied to US deals where the transactionwill have been initiated by a financial group rather than the management. The name refers to the high level of borrowing which the company takes on,using the assets being purchased as leverage. When British buy outs seemed to going the way of their US counterparts, with large, highly speculative dealsbeing put together by city financiers, the term started to be applied to UK buy outs. Nowadays, th eidea of high levels of leverage is a distant memory. Levered Beta Also called the Equity Beta. See Beta and Finance. Levy Raymond Author of the book "Les Alliances Strategiques / Teaming Up For The 90s". See Strategy. Liabilities The resources owed to others. Often referred to as creditor equities. LIFO Last in first out method for valuing inventory; allows inventory to be costed atreplacement cost which is prefereably to FIFO Limited Rationality See Hyper-rational. Linear Programming See Control and Monitoring. Liquidity This ratio indicates the extent to which short term assets are adequate to settle short termliabilities. However a current ratio below 1.0 does not necessarily meanthat a company has liquidity problems, nor the reverse. This is because liquidity is primarilyconcerned with future cash flows whereas the current ratio considers theposition at a point in time. A high ratio may indicate poor investment policy. See acid test(quick ratio) Liquidity The ability to assets into cash. Assets can be current or non current (see current asset,current liability, non current asset) Lists, List processing See Living dead Companies which are just about trading profitably but are unlikely to do really well. Aslightly dated term used about investments the deal maers prefer to forget. Local Area Network See Networks. Local Loop or Subscribers Loop, the circuit with connects the subscriber into the subnet. SeeNetworks. Lock out agreement An agreement to give the buy out team time to negotiate the purchase of their companyfree of pressure from other bidders. Logistics In functional departments used in cross functional (project) processes, concentrate onthe individuals at the cross points, not the functional heads. Logistics The movement and storage of goods together with associated information flows from thebeginning tothe end of the supply chain. For a manufacturing firm, the supply chain extended from procurement of raw materials and components through allproduction processes to the final distribution of finished goods to either

55

end users or retail intermediaries. Long wave (Kondratieff cycle) the term used to describe the cycle of major capital goods expansions which takes placeevery 60 years with booms and depressions. Explained and accepted by J Forrester, using systems dynamic models. Lotus Lotus Development Corporation is a leading software developer founded in April 1982 byMitch Kapor. Lotus' first product was 1-2-3 for the newly launched IBM PC. Since then Lotus has puchased additional technology and become a majorforce in personal Computer. Lotus now includes wordprocessing (Ami Pro), groupware (Notes) and database (Approach) in its product line. LU-Logical unit represents an end user to an IBM network. An end user can be an operator at a terminal oran application program. M&A See Mergers & Acquisitions. Macintosh See Apple. MacKinnon Dennis Author of the book "An Introduction To OSI". See Open Systems. Maftoul Marcela Author of the book. "Teleports Et Zones De Telecommunications Avancees". See Networks. Mainframe See Computing. Maintenance Areas of potential loss or gain for businesses with maintenance issues: Product design, Risk of failure (waranty), service support, Repair Triggers (usage ie. numberof miles, number of copies), Prevention Triggers (dental reminders),Enhancement Triggers (software update reminders), Inputs (personnel, who did the work; Parts,which ones fail), Symptoms (running temperature, vibration), partsdistribution, Tools distribution, Service personnel distribution. MAN Metropolitan Area Network. See Networks. Management accounting The identification, measurement, accumulation, analysis, preparation, interpretation andcommunication of information and in a format that assists relevant internal personnel in fulfilling organisational objectives Management buy in An offshoot of the management buy out industry. The purchase of a business by one or moreoutside managers withthe help of a group of financial backers. The term was applied indiscriminately in the late 1980's to any bid involving a well nowncity figure, on the grounds that a buy in sounded more constructive than the hostile takeovers they usually were. Buy ins are now seen as being considerablyriskier that buy outs, because they involve an outside management team which does not know the copany as well. Many deals are neither pure buy ins or buyouts buy binbos Management Information System See Control and Monitoring and Artificial Intelligence. Management inormation systems (MIS) See Information Systems or Strategic Information Systems. Management Magazines Country Magazine Australia The Bullitin Belgium Canada China Denmark Germany France Hong Kong India Indonesia

56

Japan The Netherlands Russia Switzerland Thailand United Kingdom United States See Financial Information, Financial Times and Wall Street Jounal, Financial Newspapers andFinancial Magazines. Management Newspapers Country Newspaper Australia Belgium Canada China Denmark Germany France Hong Kong India Indonesia Japan The Netherlands Russia Switzerland Thailand United Kingdom United States See Financial Information, Financial Times and Wall Street Jounal, Financial Newspapers andFinancial Magazines. Management support systems (MSS) A primary function of MSS systems is to provide end users with query and analysiscapabilities. The principal use of MSS is to satisfy the information needs of managers and professionals, needs often closely related to decision making. Typical queryand analysis fuctions include searching a data base for an item of information, generating what if scenarios to test implications of planning models, and soon. (after Wiseman). Target managers and professionals rather than operatives and clerical staff. See MIS, SIS, Hybrid information systems, DSS, Nolan'sstage, Anthony's pyramid, EIS. Management value added Business value added - shareholder value added - direct operational and management costs.Allows the calculation of What are managers worth, average 50%. For Toshiba, for every dollar spent on managers two thirds of a dollar was added. Managing people Entrepreneurs must: * Lead and exert authority * Set high standards that embody their vision * Secure & sustain commitment totheir idea * Establish new working relationships * Weld theteam together * Learn to delegate without losing control * Address conflict head on (do not put it off toresurface later) * Cut losses early Therefore be prepared to spend time on people issues and make people decisions. People issues tend toget put off in favour of 'more important 'things: bad idea Manufacturers Hanover Bank See World-wide Network and Case. MAPI-Messaging API Like VPI, a program for assisting E-Mail, allows mail access to any program. Marginal cost The answer to the following question: how much will it cost me to produce one additionalunit of my product, or tosupply one more unit of my service. The

57

situation in which fixed costs have already been absorbed elsewhere and the need to makeprofit only demands that direct costs are exceeded (ie raw materials). See Economics. Marginal costing see marginal pricing. Marginal pricing Is a deliberate policy, whereby one agrees to sell at a price in excess of the marginalor variable cost buy which is below the total or full cost figure. Similar to marginal costing but the two should be kept separate because marginal pricing (as withother pricing) is primarily dependent on market forces rather than cost structures. Inevitably high fixed cost companies with spare capacity are tempted touse marginal pricing as a means of using the spare capacity. Dangerous, particularly if used long term. Marginal Revenue Is the change in total revenue resulting from a change in sales volume. MC=MR. Maria Ramirez See Reuters. Marine April Author of the book "Internet: Getting Started". See Internet. Market analysis Analytical techniques include: SWOT, Product life cycle, Business portfolio concept,PIMS. Market forces Whenever the market fails (Japanese car case) it become necessary for intervention(government intervention). Introducing laws for control. The market fails because of disparagement in information (Ciborra). Market growth rate Relates to long term underlying growth rates. High implies a young market, low implies amature market. A product with a high share of a growth market is a Star, one with low share of a growth market is Hopeful, a large share of a mature marketis a Cash cow, a small share of a mature market is a Dog. A company should examine its products and have a good mix (not including dogs, althoughthey too can be profitable). The Boston Consultancy Group model for porfolio analysis places products in a 4 square matrix with each of these categories.The major objective is to have stars and hopefuls coming through. Can use the matrix on countries and customers. See Market share Market positioning Involves two sets of factors: controllable and uncontrollable, and how they affect andinfluence customer perceptions. Controllable: Product specification, Advertising, Packaging, Price, Distribution, Serviceaftersale. Uncontrollable, Word of mouth, Distribution, Competitors, Way of use (which may be other thanintended), Use with complementary products, Economicconditions, Regulations, Politics, The environment. Positional analysis takes in 5 steps: 1, Given a target customer (whose perceptions are yougoing to represent?), 2. Given a set of relevant alternatives, 3.Hypothesise a set of relevant benefits, 4. Obtain positions, 5. Interpret results. Market research The worst way to learn about the customer. Market share A measure of absolute market share and also of relative market share (relative to majorcompetitors). To determine market share use the PIMS model - a market is determined by customers perceptions of substitutability. This means that aproduct which dominates a clear niche should be rated as having a high market share if the niche is distinct from the main market. See market growth rate. Market Signals Information which is passively passed between participants in markets. For example acompany which anounces that it is issuing new equity is also sending signals to the market that it needs new financing and that it prefers equity financingover, for example, debt financing. This may signal to other market participants that there are reasons why the company is not using debt financing. Forexample it may reflect internal managements expectations of future earnings.

58

A nice analogy to market signals is body language in individuals - you may be broadcastingmore than you think. See Finance. Market value see book value. Marketable securities A current asset (see investments and other assets). Marketable securities Shares of stock, bonds, treasury bills and commercial paper held as short terminvestments. Stated in the balance sheet at original costs. If less that purchase value this must be stated. Marketfeed 2000 See Reuters. Master Production Schedule (MPS) An expression of the operational plan of production by period, indicating the timing andsize of end item quantities (used in MRP). MPS receipt row: the row in a master production schedule that shows the quantities of an enditem scheduled for completion by specific dates. MPS start row: the row in a master product schedule that shows the dates production is tobegin for the quantities of end items specified.. Materials Resrource Planning (MRP II) Mathematics See Control and Monitoring. MATIF Marchè à Terme des Instruments Financiers, the french options exchange. See Reuters. Matrix organisation Organisational structure that co-ordinates accross product, function and geography in anorganisation. Maturity Matching The concept of a company matching the maturity of its assets with its debts. Theobjective is to minimise risk by matching cash flow sources and uses. See Finance. McClure Carma Author of the book "CASE Is Software Automation". See CASE. McCrum William Author of the book "An Introduction To OSI". See Open Systems. Measurement See Balanced Scorecard. Merger An ecomonic transaction that forms one entity fromtwo or more previous ones; ther istypically an acquirer and an acquired firm. It can be vertical, horizontal, or conglomoerate. Mergers & Acquisitions An area of banking which deals with the financing of company mergers and acquisitions. Ina successful M&A the shareholder of the target company (on average) gains 20 to 25%. The benefit to the bidding company shareholder is 0% to -4%.These results come from US studies in the 1980s. A hostile takeover is one where the target company actively resists its takeover. Cross border means M&A activities across national boundaries. In Japan most M&A activity involves either only Japanese companies or Japanese companiestaking over foreign companies. 10-15% of Japanese M&A has thetaker as a foreign firm, and most of these are foreign companies buying-out the Japanesepartners in a subsidiary operation. Mergerstat Review An American publican which now covers Europe and Japan which reports details of allpublic corporate acquisitions. Message Switching See Networks. Metal Bulletin See Reuters. Mezzanine finance Loans, usually unsecured, which rank after secured or senior debt buy before equity inthe event of the company failing. To compensate for the greater risk, they typically carry one to three percentage points above secured loans, and often carry

59

an equity "kicker" to give the lender a stake in theequity. Microcomputer See PC, SUN UNIX, or Computing. Microsoft The dominant force in personal computing today. Founded in the late 1970s by WilliamGates III who demonstrated a keen business instinct and a talent for software development unparalleled in the industry. Microsoft started off by making theDOS operating system for the IBM PC an now produces a wide range of software lines including Wordprocessing (Word), spreadsheets (Excel), databases(Access and Fox Pro) and their core business of operating systems (DOS and the Windows shell, Windows NT). See Lotus. Microworld Comprises maps of knowledge, words, diagrams, and computer models. Play and learn takesplace in the interaction of maps and mental models. Used in computer systems analysis. Microsoft The dominant force in PC and Mac-based computing operating systems and software. Miller Jeffrey G. Author of the book "Benchmarking Global Manufacturing". See Manufacturing. Miller, George A. A Harvard psychologist who wrote an important article in the 1950's called `The magicalnumber seven, plus or minus two,' which was about short term memory. It discovered that most people can only remember numbers up to about sevendigits. Most telephone numbers and area code systems are based on this work. MIME Approach to E-Mail providing a platform for groupware. Virtually an Internet standard formultimedia. Shareware. Friendly interface to X400. Provides one direction for groupware. Minicomputer See Computing. MIPS An acronym for Million Instructions Per Second. It is a measurement of how fast acomputer can work. See Computing. MIS See Control and Monitoring and Artificial Intelligence. Mobile Users Handbook See Networks Models See Control and Monitoring and Economics. Modem Modulator-demodulator. A device that accepts a serial stream of bits as input andproduces a modulated carrier as output (or vice versa) . Is inserted between the digital computer and the analog telephone system. See Computing and Networks. Modigliani Franco Author of the book "Capital Markets: Institutions And Instruments". See Finance. Modigliani-Miller Hypothesis States that in an efficient capital market (ignoring tax differences) the relativeportion of debt and equity in a company's capitalisation does not affect the market value of the firm. Monetary asset Has a fixed exchange rate to cash. examples would include accounts receivable or payable.see nonmonetary asset Money (US) The task of defining money involves deciding where to place a separating market on thecontinuum (by picking a minimum level of liquidity, so that any asset less liquid than this is defined as non-money, Assets to the left of it are money, to theright they are not. Such a marker is somewhat arbitrary. M1, includes currency, travellers cheques, demand deposits, and NOW (Negociable Orders ofWithdrawal accounts, which bear interest and are fully checkable) M2, is M1 plus: a number of savings instruments including savings deposits, money market

60

deposit accounts, some money market mutual funds and small timedeposits. Also includes certain liabilities such as repurchase agreements and Eurodollardeposits held by US residents, issued by banking institutions on an overnightbasis. M3, comprises M2, plus shares in money market mutual funds that are available only toinstitutions, time deposits with balances of at least $100,000, andrepurchase agreements and Eurodollar deposits with terms longer than one day. Money Market Services (MMS) See Reuters. Money supply See Money, Open Market Operations, Discount rate. Monitor See Computing. Monte Carlo analysis A sophisticated form of mathematical analysis that lets you come up with a range ofpossibilities or outcomes of possible actions. Whereas analysts most often predict results for the total project based on isolated changes in particular variables,MC analysis predicts results based on simultaneous changes in numerous variables. MC analysis is ideal for very uncertain situations; like the acquisition of acompany where future cash flows and synergies are not certain. See Research planning model Mouly Michel Author of the book. "GSM System Mobile For Communications (The)". See Networks. Mouse See Computing. MRP favourable environments Some environments favour MRP. Most useful in lumpy demand situations for demand dependentitems. The majority of MRP users are in fabricated metals, machinery, and electric/electronic industries. The relative superiority of MRP increaseswith more levels of manufacture (number of components in a parent)and larger lot sizes. Only 12 percent of MRP users in 1987 used continuous processproduction techniques (eg paper mills). MRP implementation issues Average cost of implementation was calculated at $700,000 in 1981, when 65 percent ofmanufacturing firms questioned had installed MRP rather than other systems. Some miraculous success stories, many nightmares. prerequisites for success include: * Computer support * Accurate and realistic data input * Management support * User knowledge and acceptance. Each week the average firm computes the time phased records for 13,000 items, which eachrecord having more than 38 time periods in its horizon. This massivedata manipulation requires precise handling and powerful computing. All decision supportsystems like MRP succeed only if data inputs are accurate. Inputs are: the master production schedule, bills of material (BOMs) and inventory records.Inventory records require the current on hand inventory balance, leadtime estimates, and lot sizing rules. When MRP fails it is usually the inputs data which iswrong. MS-DOS An operating system for IBM or compatible personal computers. Multi-point circuit In communications: where several terminals share a single dedicated circuit (old systemfor gaining efficiency) Multinational company A company with separate unconnected operations in many lands. Multiplexing To share circuit bandwidth a small fraction is given to each terminal. The multiplexerhandles the mixing of traffic and provides as many physical interfaces as there are terminals on the circuit. See frequency division multiplexing (FDM), Timedivision multiplexing (TDM), Protocols Multiprocessor Computers Computers with more than one CPU.

61

My word is my bond Since 1801 the motto of the London Stock Exchange (in Latin `dictum meum pactum') wherebargains are madewith no exchange of documents and no written pledges being given. Nakane Jinichiro Author of the book "Benchmarking Global Manufacturing". See Manufacturing. National Product Keynes. For the fiscal year April 1-March 31 1938 Keynes produced a calculation: Private & Government consumption apart from making good wastage & depreciation 4140 Making good wastage & depreciation 420 New investment 4850 Negroponte MIT character who believes that transmission problems can be solved in communications bychanging the current use habits. What uses wires (voice) will move to theair; what currently uses the air (chiefly viewo) will move to wires. The phonewill become wireless, as mobile as a watch; computer video will use fiber optic in a switched digital system as convenient as the telephone today. Nelson, Ted One of the founders of hypertext and the inventor of the Dynabook concept. See also Bush, Engelbart and Kay. Net income Company net income consists of the profit contributions of the various revenue segments(divisions) less the total of the indirect fixed costs. In a group of companies it is necessary to derive some means for apportioning fixed costs (eg EDP,Information systems management etc). Network driver There are great differences between the details of X.25, Ethernet or Token Bus networks;the network driver must cope with and isolate these details from the applications. The protocol software implements the standards needed for effective endto end or host to host communications Network interface is usually implemented by separate programs within the operating system of the hostcomputer of a network. Applications programs using the network can access networking software via idealised software interfaces. Within network softwarethere is usually a network driver, which deals with the network and the protocol software which deals with the remote host. The network driver incorporatesspecialised programs needed to operated theinterface hardware. Network marketplace Examples of approaches taken, stimulated by the need for control and the perception ofrequired control.: * Pharmaceuticals: McKesson has control by one large supplier, proprietary standards andprivate network. French Minitel for pharmacies establishes a cooperativemarektplace. * Textiles: Industry wide EDI standards. A concerted approach and mutual assistance jointamong partners. * Auto components: imposed systems by large manufacturers, non standard solutions, little helpfor small firms. Network technology deployment is not neutral to the marketplace. Policy will affect: * one or many network marketplaces ? * who controls the marketplace * who has access to the marketplace * who can learn from participating in the marketplace * does the marketplace favour large or small firms. Concepts compared: PTTs use ISDN. favouring open and fair market, universal but genericcoordinatin, much experimentation by individual organisations, assistshared learning (depth limited) USA, ONA: favouring closed market places, customised and framgmented coordination, a fewoptimised schemes (less generic) less learning but more depth.

62

(Beware!! sweeping generalisatoins in progess). Where to go depends on the control layer. New economy In the old economy there was an equation In the new economy Instead of working fast, companies must learn fast as well. Companies must focus on developingsolutions not processes. New entrants One of Porter's five forces. Newco The buy out is usually carried out through a newly created company reffered to as Newco News Bytes A news service that reports on technology related issues. NFS An acronym for Network Filing System. See SUN. NII See Super Internet. Nikkei See Reuters. Noam Eli. M. Author of the books. "Telecommunications In Europe" And "Telecommunications Revolution(The)". See Networks. Nolan Nolan's stage hypothesis, predicts the change of investment and costing of informationsystems in companies. Cosequences of the application gap and the move towards outsourcing. Nolan's stage methodology Nolan claims that organisations pass through various stages in their use of IT. * Initiation (computer acquisition) * Contagion (intense systems developent) * Control (proliferation of controls) * Integration (user/service orientation) In assessing the needs of an organisation, Nolan would map out the organisation by function ordepartment in three layers (strategic planning, management control,operation control - see Anthony's pyramid). He would then score each cell in the matrixaccording to potential computer (information system need) and availability.He would then prescribe a means for supplying. Concentrates on the use of computers and IT forautomating. see SIS, CSF Nominal interest rate The stated annual percentage divided by the number of compounding periods occurring eachyear.. See Effective interest rate. Non current assets Resources that cannot be expected to be sold or consumed within the normal operatingcycle of teh business. Normally considered to be long lived. E.g Plant assets. Property, plant and equipment are recorded on teh balance sheet at original cost.Deducted from each of teh assets, except land, is accumulated depreciation an allowance to reflect wear and tear and obsolescence. Nonassets and nonliabilities Contracts may stipulate payment over a period of time (eg a service contract or intereston a loan; although these are real assets or liabilities they are not recorded at the start, only as payment is earned. A loan, for example will become aliability, its interest will not. Noncurrent liabilities Includes all items owen, not included in current liabilities, such as long term Notes andBonds. Amounts paid to the company in advance for goods or services are liabilities and can be current or noncurrent. Nonliabilities See nonassets Nonmonetary asset Has no fixed exchange value to cash. Value depends on economic conditions. examples wouldinclude inventory and plant and equpment. Noothoven Van Goor J.M. Author of the book. "Teleports In The Information Age". See Networks. Notes

63

Documents of value. Loans requiring payment. The equivalent of the contract with a lenderstating when and how much money will be paid back. Can refer to either a current or a non current liability or both at the same time (portion due in oneyear being current, portion due in subsequent year being non current) Notes payable see current liabilies Notes See Lotus. ntegrated Broadband Networks, the public policies issues See Networks. O'Dell Peter Author of the book "Computer Networking Book (The)". See Networks[[ogonek]] Object Oriented Computing The complete name of this technology is Object Oriented Programming Systems, or OOPS forshort. It is a new way to make software. Everything in programs are now objects and the programming task becomes the combination of objects.Each object carries out specific tasks and the information passed between objects is in a standardised way. Looked at in this way OOPS are an extension ofthe structured programming techniques which are now almost universally used. This sounds like an inconsequential development but it is a very powerful method. Most OOPSare icon based and run under a GUI interface. The net result is adevelopment environment in which most information is presented graphically, making it easy todevelop in. The objects themselfs make it possible to speed updevelopment and deliver systems which can be very complex but easy to debug and maintain. This technology is spreading from the PC world into mainframe applications and across intomany types of applications - from OOPS based multimedia applicationslike Authorware to databases such as Ontos. Objective Management by Objectives Invites subordinates to set their own specific objectives against which they will bemeasured and rewarded n the period of time to come Objective Setting A useful technique for evaluating business objectives is the so-called SMART+ method. Arethe objectives: S Specific. Objectives should be a specific as possible. If you can visualise in your minda detailed image of what you want then the objective is probably specific enough. M Measurable. How will you know that the objective has been reached? A Achievable. Is the objective do-able? Is it worth spending your time and energy? R Relevant. Do you really want to do this. T Time-based. When do you want to achieve the objective? What are the milestones and whenwill they be reached? + Positive. Can you think of the objective in purely positive terms? Negatively visualisedobjectives will often result in you moving towards the negative image rather than where you really want to be. Refer also to Goals. Occupancy costs The cost of occupying space, offices, warehouses and factories (often the second largesbusiness cost). If the copany rents its space, those costs appear explicitly in cost statements. They should be charged even if the company owns itsbuildings. See Economics. OCR Optical Character Recognition. Software that can interpret text stored as images andconvert it into machine readable text. Refer also to PC. Ohmae Kenichi

64

Author of the book "Beyond National Borders, reflections on Japan and the world". SeePolicy. Okimoto Daniel I. Author of the book "Competitive Edge, the semiconductor industry in the US and Japan".See Policy. OLTP See On line transaction processing OMR See Reuters. On line transaction processing (OLTP) In databases, a technique for managing incomplete transactions that is most commonly usedin reservation systems and point of purchase applications. Not all applications demand OLTP capbility On-line Processing A computer task which is perfromed by the computer at the time the request is made.Examples include many application systems such as ATM banking transactions. See Batch Processing. ONA An acronym for Open Network Architecture. A U.S. term for the splitting of telephony intoBasic Service Elements (BSE) to encourage competition. The idea is now dead but competition in U.S. telecommunications lives on. The same concept iscalled ONP in Europe and ONC in Japan. Open collaborative Environment (OLE) Apple program compettor of MAPI, a program for assiting E-Mail. Open Market Operations The Federal reserve (Fed) controls the supply of money by controlling bank reservesthrough the purchase and sale of bonds. Selling bonds reduces the money supply by soaking up M2 (see Money), buying bonds increases money supply. The moremoney is available, the lower become interest rates (eventually), and the lower the value of the currency (ultimately). The Federal Reserve Open Market Committee influences the money supply by ordering "open marketoperations", the purchase or sale of bonds from or to thecommercial banks. In order to increase H (high powered money in reserve) an order is given tothe New York bond trading room to buy bonds. This causes thecommercial banks reserves "H" to increase, enabling them to expand their lending, in in turncauses an increase in the demand deposits held in the banking system. By law banks must hold reserves proportional to their lending (20% for example). Open Systems Handbook See Networks. Open Systems See Open Systems. Operating cycle Operating profit see Trading profit Operating System A complex set of programs which operate between the hardware of a computer system and theapplication programs. This is true of all computer systems from PC's to the most powerful mainframes: The operating system acts as an insulator between hardware and applications. To applicationsit can present a standard environment for the programs to run in. Sothe application doesn't have to be changed for every manufacturers hardware version orupgrade. The same is true for hardware which only has to interpretinstructions from one source - the operating system. Operating Systems Batch processing of single programs was used witha single CPU and one program at a time;very wasteful on processor time. This led to development of memory partitioning and multiprogramming, in which several programs are brought into themain memory they are cycled until the process is completed (Multiprogram of Batch Sequences). Time Sharing Multiprogramming allows users to connectthrough terminals and to converse as though the system was their own. Time Sharing: the slow speeds of theterminals allowed a large number of usersto be served by one computer. Time Sharing Multiprocessing is an advancement using more than one processor. Virtual Systems, the latest development allow

65

programs to be segmented to pages or sectors. They arebrought into memory regions for processing while other pages or segments remain in their disclocation (expensive and cumbersome). See Microsoft. Operational research See Systems analysis, hard systems thinking and SSM Operations A good operation is one through which goods, customers, or information flow withoutstopping or unnecessary transportation. A competitive operation is one which achieves the performance of a good operation with fewer resources. The focus of the operation must shift from the process to the product. Work groups shouldcomplete the product or task they handle. (de Treville personal opinion) Operations costs includes payrolls and depreciations, the cost of "everything that is essential forgetting today's goods and services produced and delivered to today's customers", together with management costs -- payments to managers, including bonuses andfringe payments. See Economics. Opportunity cost Logic that assigns an opportunity cost to money also puts a cost on space. If a dozensquare yards of floor spacein a factory can produce an item that generates $100 in profit, that profit becomes a hidden cost (or a foregone opportunity)if the space is used for another purpose. See Economics. OPT managerial considerations Advantages: * differentiates and identifies critical and non critical resources * specifies a schedule for each resource * simultaneously determines order releases and planned lead times * allows for transfer batches that are not equal to process batches * allows for varying process batches * enables management to fine tune schedules * can be used to analyse "what if" questions Disadvantages * software is proprietary, users must rely heavily on suppliers. It is a "black box". * assumes that the manufacturing process can be accurately modelled. * requires changes in typical manufacturing philosophy * potential for system nervousness (plans are unstable and in a constant state of flux) * does not specifically address cost. Whether or not all of these listed disadvantages are really disadvantages is highly debatable. Optical Character Recognition See OCR. Optical character recognition (OCR) Software that can interpret text stored as images and convert it into machine readabletext. Optical Fibre See Networks. Optimisation See Control and Monitoring and Economics. Optimised production technology (OPT) Data inputs for OPT are similar to those for MRP. Bills of materials, item routings, inventorystatus and demand requirements are all used. These files can becontinually updated to reflect changes. * The Buildnet module converts input data into a product process network. The network is amathematical model of the manufacturing process, which describeshow the product is made, the competition for resources, and the interrelationship betweenparts going into an assembled product. * Serve computes the average utilisation of each resource, using the demand requirements foreach product. It then sorts them by rank order from the most heavilyloaded to the lightest. Serve is essentially a modified MRP system. * The Split module divides the network into two parts: those resources affected by the outputof the bottleneck operations, and those that are unaffected. * The Brain module is the heart of the OPT system. It is a non interactive algorithm thatsolves the scheduling problem within some defined range short of theoptimum. It determines process batch sizes, production sequences, and buffer stocks for the

66

critical resources, based on their capacity limitations, to maximisethroughput. The output of Brain is used by Serve to develop schedules for non criticalresources. Driven by schedules for critical resources, Serve tends to schedulenon critical production in small batch sizes. see OPT managerial resources Optimised production technology (OPT) A technique for production scheduling and inventory control that recognises capacityconstraints (which MRP does not). The goal of OPT is to simultaneously increase throughput and decrease inventory and operating expenses. The approach differsfrom MRP and reorder point systems, which develop their schedules sequentially, first identifying the timing and size of order releases and thenmaking adjustments to account for capacity constraints. The basic concepts of OPT approach fall into two major categories: capacity and inventory. * Capacity: OPT recognises two types of resources in a manner similar to the method used in capacityrequirements planning (CRP) with MRP systems. A critical resource isone for which the requirements are equal to or exceed its capacity over a specified period oftime. A non critical resource is one for which the requirements are lessthan capacity. A resource is any element, such as people, machines, or space, needed toproduce a product. Lead time effects MRP determines the lead time for an item, it simply computes the longest time path through thebill of materials. It cannot recognise that two or more componentsmay need the same production process at the same time. OPT attempts to simultaneouslydetermine the release dates for orders and the sequencing of theircomponents, recognising the capacity constraints of the resources. * Inventory MRP recognises only one lot size for an item. OPT recognises two basic types of lot sizes. Atransfer batch is a quantity of an item that moves from station tostation. A station will not start work until it has enough work to complete a transfer batch.Parts will be released only in transfer batch sizes. Transfer batches canvary through the production system from resource to resource. The other lot size recognised by OPT is the process batch, which is the total number of unitsof an item processed at one time at a particular station. The processbatch consists of an integral number of transfer batches. The advantage in using the concept of process batches and transfer batches is that as atransfer batch is completed it will move to the next station, not waiting for thewhole lot. The process batches at the critical work stations can be chosen to minimise set-uptimes, thus increasing throughput at bottlenecks. Option analysis Similar to that used to value stock options. It provides a flexible aproach to valuingresearch investments because it allows the valuation of investments at successive stages of a project. Used properly it allows uncertainty into the analysis.Used by Merck in joint ventures with small Co.s (like biotech) where an initial payment is no guarantee of continued support. Option generator Wiseman tool for analysing targets for strategic thrusts (initiatives) Options Relevant to currency. Buy a choice, or sell a choice. The option can be exercised or not when the time comes. ACall option allows you to buy, An option to sell is a Put option. The price you pay to buy is the Strike Price. If we sell an option the Premium is what wereceive. When bidding for a contract (before winning it) can buy an option, a Put. If you decide to buyan option but do not exercise it you pay the premium, there is noobligation to exercise. The Premium is in effect an insurance payment. The higher the interest rates the more valuable the option. This because, instead of puttingall the money into the stock or currency the payment of the premiumallows you to invest the balance and earn interest. European option cannot be exercised except at the expiration date US options can be exercised at any time between taking it and the expiration date. The option allows you to guarantee a level of profit slightly less than the hedge but itallows profit increase if the exchange rate moves favourably. The price you have

67

to pay for the option means that you cannot make as much money as in the risk rich unhedgedsituation. Options would be exercised if the option price is greater than the spot rate. They would beallowed to lapse if the spot price is greater than the option price. Options These are financial contracts for the hedging of risk relating to a company's futureactivities. Options are most common is two economic areas: commodities and currencies. Options began in the early 1970s at the Chicago Mercantile Exchange.Commodity options involve goods such as pork bellies and wheat where future production and price are uncertain. It is beneficial to both the producerand buyer of these commodities to hedge against future price uncertainties. The same is true when converting money between currencies. A call option is an option to buy. A put option is an option to sell. The price at theexercise time is the strike price and the premium is the cost of purchasing theoption. American Options can be exercised at any time prior to or on the expiration date. European Options can only be exercised at the specified expiration date. European and American options have nothing to do with geography they are purely historicallabels and both are traded world-wide. Organisational models Model 1. Have all information for a given decision. Model 2. Decision making model. When new information comes, act on it immediately Model 3. People act opportunistically, it is not a perfect system (honest). People will holdback part or only give selected information so that they can have anadvantage. Model 4. Although people get new information they don't or cannot act on it. Organisational structure Galbraith, J., suggests that organisation depends on the complexity of the role, or thelevel uncertainty. Increased communication channels can be vertical or horizontal. Vertical would be a Managementinformation system to reduce the load on managers byautomation. Horizontal communication can be Liaison between people who don't want to have totalk to boss first, by formation of task forces, by formation ofteams or ultimately by introduction of matrix management organisation (for research typegroups at high levels of uncertainty). Decreased need for communication can be seen in divisionalisation of the organisation (e.g.GM) or by introduction of Slack (allowing late production or excessiveinventory). Slack can be a conscious decision (you don't need a high level of sophistication)or it can develop because a choice has not been made on a suitablestructure model. The assumption used by computer salesmen is that the computer will improve decision making byimproved communication. The treatise described is that this is notthe whole story. The story described does not include the role of the market (that isintroduced in Model three). OS/2 The GUI of IBM. It is in competition with Windows from Microsoft, the Apple Macintosh andUnix X-Windows. OS/2 has not been a great success and is not expected to be a dominant platform in the future. OSI Open System Initiative. See Networks. OSI-Open Systems Interconnection Reference model for data communications which consists of a 7 layer hierachy that definesthe electrical characteristics, communications standards, and software applications for computer systems Other assets See Investments OTISLINE Case Otis Elevator of North America develops and implements a computerised service system toimprove their service and thus differentiate themselves from the competition. The case concentrates on top management's viewpoint and neglects other important factors:

68

Refer also to Case. Outsourcing The contracting of an external company of a product or service which was previouslysupplied from within the organisation. Popular examples are the outsourcing of data processing and telecommunications services. Benefits of outsourcinginclude: Reduced costs Increased/Broadened services Over the counter markets. (OTC) Much less formal than the stock exchange. Any stock brokerage house anywhere in thecountry (US) can create an OTC market for a security by quoting a bid price at which it will buy the security and a higher asked price at which it willsell the security. The spread between the two prices is the brokers revenue. Owners equity The residual difference between a firms Assets and its Liabilities. The stockholders'equity section of the corporate balance sheet is typically divided into two main parts. 1. Capital contributed by shareholders (either at the time of formationof the company, or when additional shares of stock were issued). Companies may issue different types of stock: Common stock or Preferred stock. Often bothhave an arbitrary value (stated value) e.g. [[sterling]]1. The value has legal but not economic significance. Amounts that the company receives abovethe par values of the shares are categorised as additional paid in capital, or capital in excess of par, and those below as a discount on the shares issued.2. Retained earnings, indicates the accumulated earnings of the busines. P/E ratio (price/earnings ratio) This ratio gives an indication of the market's view of the company's growth potential,business risks involved and dividend policy. In general, the higher the P/E ratio,the more highly rated is the company by the market. Package See Software. Packet Switching See Networks. PAM-Pulse Amplitude Modulatio The first step to digitalise standard analoguevoicesignals. Once converted into a seriesof PAM pulses the next step is to digitalise using PCM Panopticon A universal observation machine hypothesised by John Bentham, an English philosopher. Par Value The nominal value of stock (shares) issued by a company. Has not significant meaningexcept that it helps to tell the number of issued shares. See Owners Equity. Paradigm Shift Is a fundamental change in our understanding of how something works. The concept wasfirst discussed in the 1962 book "The Structure of Scientific Revolutions" by the philosopher Thomas Kuhn. The application of this idea to the area ofinformation technology has most recently been discussed by Don Tapscott and Art Caston "Paradigm Shift - The New Promise of Information Technology",McGraw-Hill 1993. An example of a pradigm shift which we are currently experiencing is the inversion of wireover wireless technologies: TV: broadcast is changing to cable Telephone: wire is changing to wireless. Parallel development (simultaneous engineering) Design and production engineers at a company and at its suppliers work jointly frombeginning to end, not in a sequential manner. Parameter For example, take the following equation: y=ax, `a` is a parameter. See also Variable. Parent In manufacturing: an item that has one or more components. Parkinson's Law States that work expands so as to fill the time available for its completion. FromProfessor C. Northcote Parkinson, 1955 in The Economist.

69

Partner conflicts Questions that arise inclde whether parties * Share the same vision and sense of purpose (why are we doing this) * Are they bearing equal load * Do they compliment each other's skills * Are they growing withthe business (do they want to work in a big company with itsconcomittent order * Retain investor confidence and support * Feel isolated and misunderstood Thus communicate all the time Partnership Alternative to forming a company. has advantages and disadvantages + Can be easily disolved + Tax advantages for individuals who can offset losses against personal tax. + Easily disolved + Easy to add new partners - Hard to value - Liability, joint and several. Individuals, notably the most wealthy, can be personnallyliable to creditors. - Who owns what. See Company Partnership If a firm is not a corporation it is partnership if it is owned by two or ore parties.Owners equity for sole proprietorship or a parnership is shown in the balance sheet in a different way. Patent A right granted by governments giving the patent holder the exclusive rights to make andmarket a product. Pautet Marie Bernadette Author of the book. "GSM System Mobile For Communications (The)". See Networks. Payables period A control ratio. This reflects the success of a company in witholding payment to suppliers Payback method In capital investment appraisal the payback method is used to analyse the decision basedon How long does the asset take to pay for the original outlay. Ignores many of the factors that should be considered in Capital investment appraisal.See also return on investment method, time value for money, net present value, discount yield. See Finance. Payback Period See Finance. PBX-Private Branch Exchange Unlike the LAN PBX is the central control for a network. If there is a problem the entirenetwork can be affected. Has protocol converters.Once used to switchtelephone lines, PBX's no support both voice and data traffic. PC Hardware: For an overview of how computers work, refer to "How Computers Work", PC/Computing, February1993. The best place to buy PC and related equipment is Fry's Electronics in California: Refer also to Software. PC-NFS See SUN. PCM-Pulse code modulation Recieves PAM pulse stream and concerts to a set of bits. ADPCM a new development tomodulate anologue signals at a twotoone compression ratio. Persistent Data Normally all data which is stored in a database - even if the data remains in thedatabase only for a short time. There are no hard and fast rules to distinguish persistent from ephemeral data. Personal Computer See PC.

70

Personnel Management Can't we talk about something interesting? Perspectives Pour Les Telecommunications See Networks. Persuasion (as in persuading people to adopt new ideas) The shortcommings of persuasion (as a means of Diffusion of innovation) are: * Persuasion is seen as linear communication. An active source constructs messages in order toinfluence the attitudes and/or behaviors of passsive receivers. * Generally considered a one to many communication activity. More modern academics now thinkthat persuasion is not something one person does to another butsomething he or she does with another. * Tends to be action centred and issue centred communication. such as selling products,actions or policies. Largely ignored is the fact that an important part ofpersuasion is selling oneself and, perhaps other persons. It must be realised that oneobjective should be to enhance one's personal credibility in the eyes of others. * Persuasion tends to centre on changing attitudes rather than overt behaviour. Persuaders(people to have to persuade others) tend to concentrate on achievingadoption (getting a decison to use and implement a new idea) rather than implementation. Peter Principle States that in a hierarchy every employee tends to rise to his level of incompetence.From Dr Laurence J. Peter and R Hull's 1969 book `The Peter Principle - Why Things Go Wrong'. Petroleum Argus See Reuters. Pfeiffer Günter Author of the book. "Telecommunications In Germany". See Networks. PIMS Profit Impact of Market Strategy; a programme of empiracle research focused on thosestructural and operating characteristics of business that determine long term performance. Very useful approach to business planning. Planned order releases (POR) The dates on which orders for specified quantities of an item are planned for issue tothe shop or a supplier. Planning the process ofexecuting business practices to mminise the bite of taxes Platform Is a common base of technology upon which a range of information systems are based. Ithas a wider definition than architecture as it concentrates not just on standard interfaces (as architectures tend to do) but also on the sorts of facilities thetechnology is to deliver to an organisation. Plums Good investement, as opposed to bad. see lemons. Pocketwatch See Reuters. Poison Pill Defence measures installed by companies to prevent hostile takeover Pommes, Carlos de Author of the book "AMADEUS, global alliances in CRS industry". See Strategy. Portfolio analysis See Market growth rate Portfolio Management Portfolio planning recognises that diversified compnies are a collection of businesses,each of which makes a distinct contribution to the overall corporate performance and which should be managed accordingly. Putting the portfolio planningphilosophy into place takes three steps as the typical company: 1. redefines businesses for strategic planning purposes as strategic business units (SBUs),which may or may not differ from operating units. 2. Classifies these SBUs on a porfolio grid according to the competitive position andattractiveness of the particular product or market. 3. Uses this framework to assign each a 'strategic mission' with respect to its growth andfinancial objectives and allocates resources accordingly. Allows for numberanalysis. Used by PIMS Tends to be used by multidivisional companies rather than by conglomerates (see SBU).

71

Benefits:. 1. Companies gain a better understanding of each of their businesses. This allows them to makeappropriate strategic decisions. 2. Allows verbal analysis of the business as opposed to purely financial and thereby aidsbusiness understanding. 3. Improves allocation of resources 4. Improves operations because it encourages focus, objectivity and committment. Problems 1. Allocation of resources tends to focus on investment rather than other resources likepeople, research etc. 2. Tends to overlook long term issues in favour of todays performance. 3. Tends to inhibit diversification. see Generic strategy, SBU. Portfolio Planning Matrix A management planning technique developed by the Boston Consulting Group which involvesmanagement plotting each of the businesses on a simple chart. These are then rated as `stars', `dogs' or `cash cows' and invested in, divested out ofor took profits accordingly. See also Education, Learning and Change. POS An acronym for Point Of Sale. These are computing equipment which are placed where a saleis made. The reason for this is to offer computer support for the sale itself and to capture information about the sale at the moment of the sale. Thesales information enables OLTP and the very quick compilation and distribution of information in an organisation. A variant of this technology is EFTPOS. PostScript See Adobe. POTS An acronym for Plain Old Telephone System. Potts William F. Author of the book. "Data Communications Dictionary". See Networks. Preemptive right Common stockholder's right to anything of value distributed by the company Preferred ordinary shares Refers to the ordinary shares taken up by outside investors in a buy out. The rank aheadof the plain ordinary shares owned by the management in terms of dividiends and teh pay out in theevent of a winding up. Preferred shareholders See Preferred stock. Preferred stock. Have priority over common shareholders as to dividend payments. Virtually all preferredstocks are cumulative. If a firm passes a preferred dividend, the arrearage accumulates and must be paid in full before the company can resure commondividend payments.Control by preferred shareholders varies from none to the same as common. Preferred stock is not widely used. Sometimes it is seen as cheap equity. It gives managementmuch of the flexibility regarding dividend payments and maturity datesthat common equity provides. But because preferred shareholders have no right to participatein future growth, they see preferred stock as less expensive thanequity. Most people see preferred stock as debt with a tax advantage. Generally the option notto issue a dividend is not taken and because payments are not taxdeductable they present no advantage. Premises Property Finding suitable premeses for a new company is difficult * It always takes longer than planned to find suitable space * Companies rarely have enough space to grow (be prepared to pay more for a short lease) * Space can cost more than planned * It ties up valuable cash * If buying, chech planning restrictions for change of use (if you have to liquidate) * Check for location dependent development grants. Premium When the difference between the spot rate and the forward rate is positive

72

(spot-forward>0) then the currency is trading at a discount. If the rate is for $ to [[sterling]], then the $ is trading at a premium and the [[sterling]] is trading at adiscount. See Discount and Foreign Exchange Risk. Prepaid expenses Are services or rights to services purchased but not yet consumed. As they are consumedthey will be "charged off" as actural expenses. Present value The present value of a future sum of cash is the amount that must be invested now at thespecified rate of compound interest to grow to an amount equal to the future sum at the specified future date. Present value and future value are two endsof the same relationship. n is the number of years. P is the initial amount, r is the rate of interest, F is the value. Price Is the economic method for the distribution of of goods and services in a market economy.See also Elasticity. Prism See Reuters. Pritchard Wendy Author of the book "Changing The Essence". See Education, Learning and Change. Private placement Companies raise money in two broad ways: through private negociations with banks,insurance companies, pension funds, or other financial institutions, or by selling securities to the public. The former is known as a private placement, the latteris a public issue Pro Forma Statements A financial forcasting tool where forcasts are tabulated into the form of the standardfinancial statements for companies (Balance Sheet and Income Statement). See Finance. Process Control Concerned with error reduction. Increases the speed of set up times in production andmanufacturing. See Process management system (PMS) Process Management Systems (PMS) One stage further than Process control in that it is designed to anticipate faults toreduce down time. Process mapping A GE technique: Managers, employees, suppliers and customers must work on a map togetherto make sure that what the company thinks happens, does. Similar to critical path analysis or Hazard analysis, or critical control point analysis.Once steps are identified, weak points can be worked on for improvement. See Best practise. Process See Business Process. Product 1. At whom is it aimed 2. What need does it satisfy 3. How does it satisfy this need Product churn See Churning. Product costing Different systems determine the extent to and base fro which the various production costcategories are absorbed by the product output. All production output primarily enters stock. Major systems include: Full Absorption, with a) actual, b)normal, c) standard. and Variable absorption with a) actual, b) normal, c) standard. Product life cycle The life of a product from introduction, growth, maturity and decline. Product Platforms The hardware. IBM product platforms include PS/2, AS/400, System/390, System/370. Profit and Loss statement See Income statement Profit before interest and tax (PBIT) see Trading profit Profit centre

73

Is intended to function much like an independent business. It has 4 main characteristics:1, a defined profit objective. 2, its management has authority to ake decisions affecting the major determinants of profit. 3, its management is expected touse profit oriented decision rules. 4, its management is accountable to higher management for the amount of profit generated. A profit centre should: havefreedom to choose its customers; freedom to choose sources of supply for most of the aterials and other goods and services it buys; authority to decide how manypeople to use in pursuing its profit goals. This is often not the case in reality. Profit standards Are used for managerial evaluation or for economic evaluation. They must be attainableand realistic; different companies making the same things should have allowances made for age of equipment, differences in labour availability etc. Magagerialevaluation judges whether or not managers are doing a good job; economic evaluation takes no consideration of the managers but judges whether a plantshould operate at all. Programming The art of making a set of computer understandable instructions. See Object OrientedProgramming and Computing. Project planning Project planning is a question of creating a balance. Every project is a compromisebetween costs, duration and quality. Often the project group finds itself so tht it can only regulate on product quality; cost and duration are prespecified byothers. The plan should always be in writing and it should contain evaluation criteria and procedures.The plan should document the expectations of the project so that it ispossible to document expectations and check that they are in balance (not conflicting). A baseline is a coordinated project state to which everyone participating in the project canrefer. When a project has reached a baseline, intermediate products arein well defined states. Checkpoints are those points in time when it has been decided toassesswhether a baseline has been reached. A phase is those set of actvitiesthat take place between checkpoints Projects should be transparent. A project is more or less transparent to a person or a groupdepending on how easy it is for the person to understand relevantproblems and possible actions. Transparency should be maintained throughout the project. Projects See Project Planning. Property Accounting in the cash flow statement see Cash flow statement direct method. Prophesy See Reuters. Protocol converters Not all data communications devices speak thesame language. pcs and/or emulators can behardware based, software based, or a combination of both which have the capacity to handle conversions. Protocol Procedure by which a bandwidth is shared by controlling terminals to transmit one at atime. Protocol software implements the standards needed for effective end to end or host to host communications Prototyping A technique to prove the concept of a computer application of piece of hardware byconstructing something which will feel and act like the planned system but which is not complete - and so costs less to make. Proxy contest An outside group seeks to obtain representation or control over a target company's boardof directors. Usually, not considered friendly. Prudence concept Ensures that accounts are prepared on the basis that anticipated income is onlyrecognised when it is in the form of an asset which is readily realisable into cash. Thus unsold stock is carried in the Balance sheet at its cost value, not at anyfuture sales value. However, once sold and converted to a debtor, this may be held at the sales value so long as there is a high likelihood of the debtor settling

74

in full Prycker Martin De Author of the book "Asynchronous Transfer Mode, solution for Broadband ISDN". SeeNetworks. Public Data Network See Networks. Public Good Any good whose utility does not change for other people when you consume it. For example- information is often a public good as one person can `consume' it and this will not effect its utility for another person. Public issue see private placement. Purchasing power parity theory (PPP) This theory enables us to understand the distinction between nominal and real exchangerates. See Foreigh exchange rate. Effective exchange rate, Exchange rate. Perhaps one of the most influenctial ideas in economics, establishes a formal link between acountry's price level or inflation rates (relative to another country's) andthe prevailing exchange rate between the two countries. Two well known versions. the Absoluteand the Relative versions. The absolute PPP relationship says that: P=eP[*] Where P is the domestic price level, P[*] is the foreign price level, and e is the exchangerate (direct quote) Relative PPP (or RPPP) expresses this arbitrage relationship in terms of price levels andexchange rates today (time 0) relative to our expectation for some futurepoint in time (time 1). PPP allows the definition of Real exchange rates, in terms of either absolute or relative PPP.The definition using absolute PPP is Where s is the real exchange rate, e is the nominal exchange rate, and P, P[*] are as definedabove. A similar definition, using relative PPP is where [[Delta]]s refers to the percentage change in the real exchange rate. There is also an Effective exchange rate, which is a multilateral rate that measures theoverall nominal value of the currency in the foreign exchange market. Purchasing The process for acquiring materials. Usually broken down into a chain of specialistfunctions, like accounts payable. A department requests purchasing to order who send information to accounts payable etc. Instead there could be a company-widedatabase of acceptable suppliers and the departments can order for themselves, registering the order on the database. Corporate staff can monitor theorders to negociate discounts which would normally be negociated by the purchasing department. Hewlett Packard claim 150% improvement in on-time delieveries,50% reduction in lead times, significantly lower costs. Put Options See Options. Put See Option Quality From Buzzell and Gale Definition of quality in the context of Business performance. * Superior perceived quality is achieved by developing a set of product specifications andservice standards that more closely meet customer needs thancompetitors. * Superior conformance quality is achieved by being more effective than competitors atconforming to appropriate product specifications and service standards (nopoint in investing in quality if the customer wont pay for it). * the most important single factor affecting a business unit's performance is the quality ofits products and services (relative to those of its competitors). In the shortrun, superior quality yields increased profits via prices which should be 5-6% higher thanrelative competitors (find out competitor prices) In the longer term quality leads to both market expansion and increased market share. The risein volume (in key products) leads to scale advantage and costimprovement. Selling price is a key issue.

75

* Companies with high rates of return are those with long term value enhancement programs.Quality improvement shold be an ongoing process. Quality hostile factors * We're smarter than our customers. We know what they really need * Our primary and overriding purpose is to make money, to produce near term shareholder return * Our key audience is the financial market, in particular, the analysists * The primary way to influence corporate performance is through portfolio managment andcreative accounting * Managers are paid to mae decisions. Workers are paid to do, not think * the job of senior management is strategy, no operations or implementation * If it is'nt broken don't fix it. (after D Nadler) Quango Originally a US term now more associated with the UK, Australia and New Zealand. Itstands for QUsi, Autonomous, Non-Government Organization. Quantitative Techniques See Control and Monitoring. Quantity theory of money Money times income velocity = price index times Real GNP. Velocity is the number of times money changes hands. Money times transactions = price index times velocity transactions. In hyerinflation, as velocity increases prices increase. This happens when inflation isexpected to rise, so people spend money when they get it before it devalues.Calculate velosity of transactions by taking a sum of total debits in MI accounts during amonth, divided by the average monthly balance in the account, multiplied by12 (for an annual basis). Quick ratio This ratio is similar to the current ratio. However, in this case the stock figure is excludedfrom the funds available to meet current liabilities on the grounds that stockmay take several months to turn into cash. Quotron See Reuters. RAM Random Access Memory. The main internal memory of a computer system where the CPU candirectly read and write information. Range of Earnings Chart A technique used in Finance to evaluate different financing methods. The method comparesdifferent financing methods against their expected impact on both EPS and EBIT. See Finance. Raster Graphics formats suited to different sorts of graphical information. Raster informationis easily scanned and expressed as dots or pixels on the screen. Raster deals well with solid blocks of colour but needs high volume storage. see Vector. Ratchet An incentive arrangement whereby the managers get a bigger share of the equity iftheventure performs well. Sometimes managers forfeit shares if they do particularly badly. See earn out. Ratio analysis Ratio analysis is the single most important technique of financial analysis. However, aratio is unlikely to provide any useful information in isolation. They should be used as a means of comparison (trends over time, vs figures from other companies).There are 3 main groups of ratios: 1. Performance ratios, Return on Capital Employed (ROCE), Profit margin on sales, and Asset turnover. 2. Financial statusratios, Current ratio, Acid test (quick) ratio, Debt/equity, Interest cover. 3. Stock market ratios, Earnings per share (EPS), Price Earnings ratio (P/Eratio), Dividend yield, Dividend cover. RBOT See Baby Bell. RDBMS See Relational Database. Real GDP See GDP.

76

Real value see GDP. Realised income Accountants measure realised income not economic income (increase in paper value) Recession Defined as a decline in real GDP that persists for at least two quarters. Recover See Backup. Redundancy Data redundancy is data which is repeated (duplicated) in a database. Much work in datamodelling is spent removing such redundanies. This ensures that data is stored uniquely in one place in the database. In earlier times this was importantbecause of physical storage limitations but it is still important for keeping data consistent. Redundancy is often re-introduced into a database in order toimprove the performance of a database - redundancy can reduce the amount of work which a database system must do when requested to transmit data. Reengineering Relational data base All data elements within the data base are logically viewed as being stored in the formof two-dimentional tables called relations. Each column or row can be extracted and combined with similare tables or rows from other files providing that thereare relations beteween the tables. It is therefore a collection of tables in whch the relationships among data have been reduced to their simplest form, The tablesserve as the building blocks from wich more compled relationships can be created. A DBMS is used to select or combine data elements fromone or more tables. Relevance Feedback A function of an information retrieval system (such as WAIS on the Internet) which letsyou tell the computer - `you have found me a piece of information, now go and find other information which is similar to this'. Reliability analysis A proposed technique to measurein probabilistic terms, the reliability of internalcontrol systems in processing a particular transaction or set of transactions. Of importance particularly in large companies using decentralised data storage systems. Renaud Jean-Luc Author of the book. "Convergence Between Communications Technologies". See Networks. Reorder point systems An inventory control system in which an item's inventory status is checked each time awithdrawal is made from inventory, and an order for a predetermined quantity is placed if the inventory position has reached a certain minimum level. Alsocalled Continuous review system. Repeaters in LAN Internetworking, repeaters provide for signal regeneration Repetitive Manufacturing The high volume production of standard, discrete products in relatively small lot sizes. Required return (on the market portfolio) See Cost of capital, Discounted cash flow approach. Using the formulae from discounted cash flow approach and dividing by earnings per sharesolving for k (shareholders required return, or cost of equity capital to thecorporation). Where payout1 = D1/EPS1 is the payout rate expected during the first year and PE1 is theprospective PE multiple. This can be applied to a diversified portfoliosuch as the S&P500 because the growth of dividends and earnings are close to each other (inthe US, both are equal to 2.7%. This is, of course, an averageapplicable to portfolios; individual companies will always show variances. Research planning model Linked to Monte Carlo Analysis. Marries science and Finance at Merck. Takes all of therisks in the company and shows how they are deployed accross the entire portfloio of research projects. There is an estimate of a projects scintificviability then marketing an maunfacture are factored in. Then economic constraints such as pricing, inflation and cost. The model is used by senior managers forresource allocation. It shows gaps in competency where increased resources should be targeted and where projects should be shut down. Reserves

77

Amounts reflecing the growth in the value of shareholders interest in a business, eitherthrough retained profits or through changes inthe value of the business' long term assets such as property. Residual income A variant of return on investment, defined as divisional net income less an investmentcarrying charge, determined by multiplying divisional investment by an interest rate based on the costs of capital. Main advantage over ROI is that it placesbudget versus actual diferences (variances) on equivalent scales. Response analysis In relation to buyer decisions. Consider Need arousal in the customer, Awareness,Information search, perceptions; Evaluations, perceptions. Purchase, choices' Post purchase behaviour consumption. Response Time Usually means the time a computer application or system takes to respond to a usersaction. A common benchmark for large corporate systems run on mainframes is that 90% ot the time, the response time should, on average, be less than1.5 seconds. Retained earnings The second part of the stockholders equity section of a corporate balance sheet.Indicates the accumulated earnings of the business - profits that are retained in the company rather than distributed to shareholders. See Economics. Retained profit Earinings retained in the business after dividends to shareholders have been deducted Return on assets (ROA) Shows the effects of profit margins and inventory turns.This is a basic measure of theefficiency withwhich a company allocates and manages its resources. It differs from ROE in that ROA measures prfit as a percent of total assets as opposed toprofit as a percent of shareholders equity only. ROA = profit margin * Asset turnover. Return on Capital Employed (ROCE) The relationship between ROCE, margin and asset turnover: Thus a change in return on capital employed can be analysed into a change in margin and or achange in asset turnover. Return on Equity (ROE) The most popular yardshick of financial performance. ROE is used as a measure of the efficiency with which the firm employs owners' capital, oralternatively, the percentage return to owners on their investment inthefirm. Three determinants: ROE = Profit margin * Asset turnover * financial leverage Improve profit margin, improve asset turnover, change the amount of debt used to finance theassets (financial leverage) Note that the three factors correspond to the main financial statements. profit marginsummarises income statement performance, asset turnover and financialleverage do thesame for the left and right sides of the balance sheet. Is ROE a reliable financial yardshick Three problems: 1. Timing, 2. Risk, 3. Value. 1. Timing. A company that has heavily invested in new products or processes with view for long termprogress will have a point in time low (depressed) ROE. 2. Risk ROE says nothing about risk. High ROE may look good but be representative of a high riskstrategy which may fail. see RONA 3. ROE also represents return compared to book value, not market value. A high ROE may notsignify a good return for investors. Replacing book value withmarket value in the equation gives us earnings yield. Earnings yield suffers from a major problem. Timing. Share price represents expectations forfuture yields and may have little to do with present performance.Turning this around produces the P/E ratio P/E measures the amount of money investors are willing to invest for one dollar of currentearnngs, and this is used to standardise stock prices to facilitate

78

comparison among companies withdifferent earnings. See return on investment (ROI) Return on invested capital (ROIC) Helps to overcome the weakness of using ROE as a major measure of company performance. Although accounts payable represents a source of finance it is excluded because it carries notcost to the company. In essence RONA is the rate of return earned onth etotal capitaal invested in the firm without regard to whether that capital is called debtor equity. Two identical companies might have different leverage and therefor produce very differentpictures using ROE or ROA. This problem is solved in this picture. Return on Investment (ROI) The most widely used measure of divisional profit performance. Is intended to be used in twoways: to direct top management's attention to segments thatpersistently earn less than thetarget return on investment. To show how viable thesegment islikely to be on a continuing basis. It can be a very poor tool because high margin divisons can be managed very badly and stillachieve targets for ROI. A typical misconception.is that 'profitablecompany must be well managed' . Also poor ROI in one division might be the result of poorperformance in another (more profitable?) division (I.e. responsible forsales in a particular area). Numbers and ratios like ROI should not be used out of context. Return on investment method Different capital investment proposals are put together and assessed for profitabilityand life. Priorities returns are evaluated and decisions taken. Ignores time rate of return criteria which judges investment based on net present value Return on net assets (RONA) Reuter Business Report See Reuters. Reuter News Graphics Service See Reuters. Reuter News Pictures Service See Reuters. Reuter Technical Analysis See Reuters. Reuter Terminal Graphics See Reuters. Reuter Terminal See Reuters. Reuter World Service See Reuters. Reuterlink See Reuters. Reuters Newmedia Inc. A daughter company of Reuters to exploit the market for financial information outside ofReuters traditional financial industry market. See Reuters. Reuters Television See Reuters. Reuters The world's premier supplier of on-line financial information. They collect informationfrom about 180 exchanges and over-the-counter markets in the form of 4000 customers who supply information and its own staff of 1,200 journalists. Reuters has a number of services which include: Service Description Money 2000 foreign exchange rates, metal prices, treasury debt, and short term financial instrumentprices are shown in the system. The product is aimed at foreign exchange dealers, deposit and derivative dealers. Debt 2000 money market and treasury debt instruments, sovereign, mortgage-backed and asset-backeddebt, corporate debt, and equity linked securities. The product is aimed at fixed income dealers and portfolio managers. Treasury 2000

79

A combined service of Money 2000 and Debt 2000. Securities 2000 Equities, equity-linked securities, mutual funds and unit trusts, and corporate debt.Five years of history on 28,000 equities listed on 25 markets. Also has data on company earnings and balance sheets. Energy 2000 Energy and energy-related instruments. The product is aimed at all participants in theworlds energy markets. Commodities 2000 Cash, futures and options prices from commodities markets worldwide. The product is aimedat all participants in the worlds commodity markets. Futures 2000 Futures and options prices for commodities and financials. The product is aimed at allfollowers of the worlds futures markets. Markets 2000 A combined service of Commodities 2000, Debt 2000, Energy 2000, Money 2000, Securities2000, Treasury 2000, and Futures 2000. Shipping 2000 Shipping reports aimed at participants in the shipping industry. Third Party Products Reuters uses information from Capital Management, Consolidated Physical Commodities, FRI,International Insider, Maria Ramirez, Money Market Services (MMS), OMR, Petroleum Argus, Strandard & Poor's, Toyo Keizai, Trendsetter, Jiji Press,Nikkei, Metal Bulletin, First Call, CDA Spectrum and Prophesy. News 2000 Text information from all major world markets which can be taylored to the users interestso that you only get the news which interests you. Also offered as REUTERSCOOP (Japanese-language). REUTERSCOOP The Japanese-language (kanji script) version of News 2000. Reuters On Demand Periodic information on market events. Ihe product is aimed at people who do not needon-line real-time market information. It can be taylored to the users interest so that you only get the news which interests you. Reuter Business Briefing Textual information on financial news including historical information. The product isaimed at the corporate executive. Reuter Insurance Briefing Textual information on financial news including historical information. The product isaimed at the corporate executive. Reuter East European Briefing Textual information on financial news including historical information. The product isaimed at the corporate executive. Reuter European Community Report Textual information on financial news including historical information. The product isaimed at the corporate executive. Reuter Textline Reuter historical information distributed to third party information suppliers such asData-Star, Mead Data Central, Dialog Information Services, FT Profile and M.A.I.D. Reuter Terminal A microsoft windows PC which is the basic platform for the delivery of Reutersinformation services. Triarch 2000 A digital information distribution system for trading operations. Triarch is an acronymfor Trading Information Architecture. It can be linked to Prism. Prism A colour switching system for smaller trading operations needing video based information.It can be linked to Triarch 200. Datafeeds Include Reuter Terminal, Triarch 2000, Prism, Marketfeed 2000, and Selectfeed. Reuterlink Closing and historical pricing information on 200,000 financial instruments from Reuters

80

and third party suppliers. Reuterlink can be used in conjunction with Trendlink. Pocketwatch A hand-held device service operating in a number of metropolitan areas which carries upto date financial information. Excel Real-time Spreadsheet A customised version of Excel which takes an information feed and is used for liveportfolio management. Fxcalc A real-time financial calculator. Reuter Terminal Graphics A Microsoft Windows-based charting and technical analysis package for displayingreal-time and historical data. Reuter Technical Analysis An analysis and charting tool for sophisticated technical analysis of the internationalcommodity and currency markets. Uses third party analytics from CBOT Market Profile, Stochastics and Bollinger. Decision 2000 A multi-currency quantitative and fundamental analysis tools which has a large databaseof three million fixed income instruments. Time and Sales A database of equity market trades with a 10 day history. The product is aimed at brokersand fund managers to reconcile for clearing and settlement of trades. Trendlink An analytic tool for analysing historical financial and energy pricing data. Deal Manager A transactions database which holds deal information to offer position keeping nd creditcontrols for customers. Links to the Dealing 2000 service to capture deal data and links to Reuter Terminal and Triarch 2000. Dealing 2000 A high speed communications network and an automated matching system for foreign exchangedeals. Links to Deal Manager. Globex A global after hours electronic trading system for futures and options. Jointly operatedwith the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT) and the french options exchange MATIF. Instinet Screen-based brokerage service for equity investments. It runs an electronic matchingservice with an analytic capability. Reuters Television The worlds largest television news agency. Reuter World Service General news service. Reuter News Pictures Service Photo news service. Reuter News Graphics Service Makes graphics for news stories. Reuter Business Report Business news service. Revenue Cycle Is a recurring set of business activities and related data processing operationsassociated with providing products and services to customers in exchange for revenue. Revenues Are the inflows of cash or other assets attributable to the goods or services provided bythe enterprise. More commonly revenues are derived from the goods or services sold by the company. Revenue and Expense accounts are not reported on abalance sheet. RISC Reduced instruction computing - chips that run powerful workstations. The basic principleof such systems as IBMs RS6000 is to place more of the operating system in the software of the computer rather than in the hardware. The latest generation

81

of RISC computers offer a significantly improved price/performance ratio over other PC technologies. The reason for this superior performance is because thereduced number of instructions sent to the hardware can be more quickly performed. See Unix, PowerPC and Computing. Risk A UK based financial magazine which contains regularly profiles of countries, markets andpeople. Risk specialises in the international financial markets and contains many detailed articles on pricing models and deal structures. One of the threebest specialist international financial magazines. See International Financing Review and Barrons. For more general international financial magazines seeInstitutional Investor, The Banker and Euromoney. Risk Exposure to change. In finance it is usually taken as the chance of losing money. SeeFinance. Risk Premium The additional return required on an investment necessary to compensate an investor forthe risk that the investment will not be returned. Risk premium The difference between the certainty equivalent sum and the expected value is the riskpremium. Roche Edward Author of the book. "Telecommunications And Business Strategy". See Networks. Romney Marshall B. Author of the book "Accounting Information Systems". See Control and Monitoring. Ryer Jeanne C. Author of the book "Internet Companion (The)". See Internet. SAA-System application architecture IBM's most ambitions architectural undertaking, because it attemps to organise many typesof compatibility and then implement full compliance in six leading operating environments (inc. VM/CMS, OS/400 and OS/2 EE). Defines specificcharacteristics and international standards to be used for SAA elements such as high -level language compliers, their supporting service programs and databases;supporting comms network and data flows; devp and testing tools; end user interface formats and all kinds of management systems, production cycles,program development cycles and networking. Sales order processing system 1, receiving customer orders. 2, checking creditworthiness. 3, checking productavailability, and arranging for delivery to customers. 4, billing and mainting records of amounts due from customers. Sapolsky Harvey M. Author of the book. "Telecommunications Revolution (The)". See Networks. Satellite Operations : Systems Approach To Design And Control See Networks. Satellite See Networks. Savage Charles M. Author of the book "5TH Generation Management". See Management. Scanner See Visualisation and Multimedia. Scenarios Are alternative views of the future. See also Education, Learning and Change. Schatt Stan Author of the books "Understanding Local Area Networks" and "Voice / DataTelecommunications For Business". See Networks. Schema A logical description of a database. Schindler Max Author of the book "Computer-Aided Software Design, build quality software with CASE".See CASE. Scientific chaos Is concerned with turbulent phenomena in systems - abrupt changes in weather, phasetransitions, complex reactions, irregular movements. 1. Order generates disorder. Such a system is like an attractions towards a number of

82

predictable states, the borders between which are disorderly and chaotic, farfro equilibrium. 2. There is order within disorder. 3. Order is bon from disorder. 4. The neworder of innovation, consensus and commitment will be short lived aftera change; periodic and difficult to maintain in continuously innovating systems. 5. Periodicnew order emerges at critical points in an unpredictable way through aprocess of spontaneous self organisation. Second round financing Sometimes needed to help buy outs which have run short of funds. Or it may be a sign thatthe business has done well and is raising new one for further investments. Secured creditors Are a form of senior credit in which the loan is collateralised by a specific companyasset or group of assets. In liquidation, proceeds from the sale of this asset go only to thesecured creditor. If the cash from the sale exceeds the debt to the securedcreditor, the excess cash goes into th epot for distribution to general creditors. If too little, the lender becomes a general creditor for the remainingliability. Selectfeed See Reuters. Self-Designing Organisation See Reengineering. Self-healing The ability of a network to automatically re-establish communications links when they arebroken. Senior debt Secured debt which ranks first in terms of repayments in the event of a default. Seejunior debt. Sensitivity analysis A method whereby critical parameters in a model are systematically modified to determinethe effects on the solution. Service All actions and reactions that customers perceive they have purchased (Federal Expressdefinition) Service centres Many organised units in decentralised companies are classified as service centres. Aservice centre is a unit providing services or support to other units in the organisation. The relationships between service centres and profit centres is shown inthe figure. Managers of service centres are managed on the basis of cost, quality and effectiveness, noton profit. Service routing transparent (SRT) Service routing transparent (SRT) protocols are available to overcome problems withbridges on expanded on Token ring networks. SGML An acronym for Standardised General Markup Language. This is a standard for theexchanging of sophisticated information (in the form of documents) between applications and platforms. See Hypertext and Multimedia. Shareholder equity Is the value of the company to those who own the stock which is eaqual to what thecompany owes (liabilities or debts), and what it owns (its assets); ie. what would be left if the company sold all its assets and used the money to pay of anyoustanding debts Shareholder value (SVA) Forecasts future cash flows and discounts them back to a rough estimate of current value,it is an attempt to make financial analysis more forward looking. Based on cash flows rather than on the activities that drive cash flows; this should beremembered. See value based planning Shareholder value added is the interest that shareholders could earn on their oney in an alternative investmentthat has equal risk. See Economics. Shareholder value total value of shareholder capital (Shareholder equity) X going interest rate cost ofcapital See Economics.

83

Shareholders funds Share capital and accumulated reserves of the business Shell Programme for making applications. See Artificial Intelligence. Sheppard Donald Author of the book "An Introduction To OSI". See Open Systems. Simlex carries information in one direction only Simon See Information Needs. Simon's type Like Anthony's pyramid, but relating to computer needs in an organistion. Unstructuredsystems at the top (EIS, executive information systems), Decision support systems in the middle (DSS) structured at the bottom (data processing). Simulation A technique used in many fields to imitate real life systems . The objective is to createa simplified model, usually in a computer, and then to play `what if' analyses to observe what happens to the system under different conditions. A popular useof simulations is in the analysis of financial forcasts. PC spreadsheets are built to find the probability of a future outcome and the sensitivity ofthis outcome to changes in the models variables. The main drawback with simulations is that they are always simplifications of real worldsituations and are only as good as the specification of the model. It is alsotrue that the main benefits of planning are often the action of planning rather than theresults of the plnning itself. Simulations let the computer do most of the workand so users of simulations may not gain as much real insight to the real system. See Finance. Single threaded Comms system in which a single connection to a destination will monopolize that systemsaccess link (eg normal telephon). Sinking fund Refers to money set aside to meet future obligations. Now refers most to direct paymentto creditors to reduce the debt principal. Depending on the indebenture agreement, there are several ways a firm can meet its sinking fundobligation. It can repurchase a number of bonds in security markets, or it can retire a certain number of bonds by paying the holders par value. When given the choicethe company will repurchase bonds if the market price of the bonds is below par value, someting that occurs whenever interest rates rise after the bond isissued. SIS See Strategic Information System. Sixth Generation See Computing. Slippage This is what happens when the buy out company starts to eat up more cash than expected,because development costs exceed budget or sales gorw too slowly. Sloan, A. Moved from Dupont to GM and introduced the idea of divisions into industry, rather than asingle hierarchy. (Sloan school of Management). Smart Modem Modems with compression algorithms to squeeze out data redundancy toreduce the number ofbits transmitted. Performance not predicatable. SMDS See Networks. Smith Terry Author of the book "Accounting For Growth". See Control and Monitoring. SNA-Systems Network Architecture SNA is IBM's master plan for communications among IBM computers, terminals and officesystems. Sociotechnical analysis & Variances Each job can be modelled in Disturbances analysed using a Variance control table Identify the variable: Who found the disturbance: What action: ...etc.

84

eg. Lack of materials The operator 1. buy more 2. Take from elsewhere Analyse the feedback loops and use this to design the new system. Can have other components inthe table, eg. who intervenes as a decision maker, what cost eachalternative (time, money, effect on other products). Second tool, the Variance Interdependence Matrix. List how each variable impacts each other. Amechanism for modelling bottlenecks and critical successfactors (critical control points) in a flow chart. This scheme does not recommend onstructure. Does not take into account opportunistic (model 3) factors. The report of variance has ahidden motive, or information on the variance is withheld or manipulated.Assumes candid information. Soft System Methodology (SSM) Is taking purposeful action in human situations regarded as problematical. It is anorganised process of inquiry based on systems models, which leads to choice of purposeful action. Crossland, P. (1985). It is a 'Singerrian inquirer, onewhich accepts tht inquiry is neverending and is intent, in 'an heroic mood', on both attacking and defending the status quo. The study should start by thinking in terms of solutions. The method is to record, preferablypictorially, the elements of structure in the situation (static elements suchas organisation and locations) the elements of process (the things continually happeningthrough or in spite of structure) and the relation between the two, the climateof the situation. Examination of structure and process reveals the crucial roles in thestituation, the behaviour expected in the roles and the values by whichperformance is judged. An impression of power is acquired, exercised, retained and passed onwill emerge. First step, to produce a "Rich picture" of the environment and its players. Second, todetermine Root definitions, third to build conceptual models etc. See Hard systems thinking, systems analysis, opertional research. Software Programs which run computer systems. Layer 1 Operating system Layer 2 Application language Layer 3 Application code Layer 4 Database management system Layer 5 Data from DBMS Layer 6 Data from the network Software-Hardware Gap, The The gap between the information produced and the ability to use the information. Sole proprietorship If a firm is not a corporation it is a sole proprietorship if it owned by a singleindividual. Owners equity for sole proprietorship or a partnership is shown in the balance sheet in a different way . Solvency A company with a low debt-equity ratio is described as having low gearing, whearas a highlygeared company is one which relies on borrowing for a significantproportion of its capital. An alternative is the Gearing ratio SONET-Synchronous Optical Network To be used with DCS (digital cross connect systems) and T3 multiplexers. Coincident withthe growth of DCS and SONET has been the decline in D4 chanel banks, manual cross-connects (DSX's), and 45Mbps multiplexers. Sources and uses Source and application of funds. The poor mans cash flow statement. Generated from twosimple steps. 1. place two company balance sheets for different

85

dates side by side and note all changes occurring. 2. Segregate the changes into thosethat generated cash and those that consumed cash. The result is a sources and uses statement. To decide which balance sheet are sources of cash: A company generates cash in two ways: by reducing an asset or by increasing a liability. Thesale of used equipment, the liquidation of inventories, and the reductionof accounts receivable are all reductions in asset accounts and are all sources of cash to thecompany. On the liabilities side of the balance sheet, an increase in abank loan or theslae of common stock are increases in liabilities, which again generate cash. A company uses cash in to ways: to increase an asset account or to reduce a liability account.Adding to inventories or accounts receivable or building a new plantall increase assets and all use cash. Conversely, the repayment of a bank loan, the reductionof accounts payable, and an operating loss all reduce liabilities and alluse cash. Total uses of cash over an accounting period must equal total sources; otherwise, the companywould be spending money it didn't have. SPARK, S*P*A*R*K Sotware designed to take a company through the process of identifying SIS opportunities.In its modes it allows the user to chose from three different methodologies including Porter's value chain and Wiseman's option generator.. Thesoftware has a database of examples to stimulate ideas. Spin offValuation: cross border valuation Following a merger or acquisition. A spin-off creates a new legal entity whereby sharesof the spun off entity are distributed to the existing shareholders of the parent company on a pro-rata basis. Split off A portion of the existing shareholders receive shares in a subsidiary in exchange for theparent company's stock. Thus, the new shareholders own the subsidiary, and not the parent. Spot Rate The foreign exchange rate of a currency at the current exchange rate. See Exchange Rateand Forward Rate. Spreadsheet A specialised computer application whose primary purpose is the manipulation of numericdata. SQL-Structured Query Language Is the most popular high level language for manipulating data stored in databases. SeeDatabases. SSCP-System services control point Resides in the comms access method of an IBM mainfram or in the system control program ofa small IBM computer. It contains the network's address tables, name to address translation tables, routing tables and instructions for thosetables. It establishes connections between nodes in the network and selects routes for comms between those nodes. It also controls the flow of information to ensurethe network operates efficiently. It effectively controls the network. Uses virtual routes. Stallings William Author of the book "Business Data Communications". See Networks. Standard Direct Variable system Standardisation The major world body for standard setting in industry is the International StandardsOrganisation (ISO). The effects of standardisation in corporations is the connection of islands of automation (vianetworks) has resulted in incremental (and increasing) standardisation ofthese islands as standards have been developed: Start up Entrepreneurs constantly underestimate * the speed of market acceptance for new products * the time it takes to do simple things * the time it takes to recruit good people * the way large companies make life easy and the diference between life in a big company (withsupport) and small companies

86

* the competing demands on time. Because of this, spend extra time on the business plan and identify one or two key measures tofollow once the business starts and time becomes too short. Butremember * forecasts are rarely accurate * sales fall below target (gaining market credibility is difficult) (plan the promotionstrategy carefully for cost effectiveness) (brochures are expensive) (there arelikelyto be false starts, stay listening and flexible) * costs are higher than expected * learning benefits are achieved slowly. Who to supply you best etc. * initial prices are set too low * margins get squeezed (try to start with 75%) Because of this most new ventures soo experience cash flow problems. Make sure accountspayable are very well controlled Building turnover doesn't always solve the problem * Entrepreneurs respond to problems by chasing turnover because:- * Our cost structure is fixed * We must grow tocover our overheads * Our problems will be solvedonce sales increase but: * Sales often increase at the expense of margin * Financial disciplines are often relaxed * The business can lose focus Never forget the 80/20 rule for profit andtrade, or that 80% of problems come from 20 percentof customers. Do not lose sight of objective by chasing customerswho don't fit Managing people is the biggest chanllence Start-up See Venture Capital. Statement of changes in retained earnings Reports changes in a firm's capital structure. Stochastics See Reuters. Stock turnover This gives the amount of debtors (in days) oustanding at the year end. If the figure is toohigh, the company will be bearing interest charges which could be avoidedby better credit control. If the figure is too low, the company may lose sales by not beingprepared to offer favourable credit terms to its customers. Stock Warrant Off-Balance-Sheet (SWORD) A financing arrangement known as stock warrant off-balance-sheet research and development(SWORD) has been used in the biotechnology industry to finance innovation. Biotech firms are so small that they often cannot diversifyinnovation risk internally across projects, and conventional internal financing of innovation is generally not possible. Since a SWORD is offered to the investment public,the innovation risk can be diversified across many investors and their portfolios. It is shown that a SWORD can promote innovation in a manner not possible whenmore conventional financial management techniques are used because a SWORD structures the innovation as a real option. SWORD financing is likely tobe successful in other situations, such as when product developement is technical in nature or obtaining financing is difficult because of thelarge risk of the product development or because of firm size. Strandard & Poor's See Reuters. Strassmann Paul A. Author of the book "Business Value Of Computers (The)". See Computers. Strategic alliances Intra or interfirm combinations designed to support or shape the competitive strategy ofone or more allies. Include: acquisition, joint venture, agreement. Strategic business unit (SBU) Original large companies became divided into function groups then into multidivisionalorganisations as they came to address the complex management issues.

87

Functions, like manufacturing etc. Problems with diversification, the difficulty of managingthe manufacturing, personnel etc of different products in the sameorganisational structure. This lead to company organisation by division. Like productstogether. Multidivisional companies then became too large and suffered from the same problems as thefunctional predecessor. To solve this the SBU concept was formed. The SBU or business unit (things that serve the common market area). Chracteristics of SBUscan differ from marketing similarities, manufacturing similarities etc,even collections of new products (no market or manufacturing similarities). Allowsdiversification and flexibility because they can be changed and new ones formed.They can cross divisions. Business units can be clustered accross division. The concept allowsfor business benchmarking and analysis. GE started PIMS to find outwhy parts of business units did well in one place and not in another. In PIMS the SBU is theunit of analysis. Position SBUs on the matrix grid to identify good business and where to divest or invest. Theaxis can change depending on preferences. Has limitations, there aremany successful business opportunities that do not fit in this picture and would not attractinvestment on this basis. At the point in time X the portfolio analysis would show two products at different stages oftheir life cycles: one attractive, the other not. Looking to the future thesecond is the more attractive but would not receive investment. The concept of Core competencies should not be overlooked. See Portfolio Management. Strategic group map Map competitiors using self defined criteria rather than a specific set of criteria.Examples: for computers virtical integration vs product line, can look at alliances, competences etc as well. A good way to get individuals from inside and outsidethe company to dig deep into their business analysis. From Porter. Strategic Information System Use of information technology that supports or shapes the competitive strategy of theorganisation. Strategic information systems (SIS) Are information systems in which the primary function of the system is either to processpredefined transactions and produce fixed format reports on scheduule or to provide query and analysis capabilities. The primary use of SIS is tosupport or shape the competitive strategy of the enterprise, its plan for gaining or maintaining competitive advantage or reducing the advantage of rivals.(Wiseman, C., 1988) Strategic marketing Should be very closely associated to Strategic planning of the business. The task shouldbe: 1. define corporate mission, 2. search for ways to secure permanent competitive advantage through target marketing and clear positioning. 3.Generation and evaluation of long term strategic marketing orientated programmes. 4. Design early warning systems to identify important and relevant turingpoints in the environment. 5. Encourage a perceptive workforce, managers, sales team, engineers, technicians etc. 6. Integrate all research and databases in order to forecast more effectively future consumer needs and likely competitive responses. 7. Develop short term corrective marketing efforts consistent withlonger term coals and future options. Evaluation is as important as planning. Strategic planning Identify the differences between strategic thinking and strategic planning. Strategic thinking is about synthesis. It involves intuition and creativity. The outcome ofstrategic thinking is an integrated perspective of the enterprise, a not tooprecisely articulated vision of direction. Strategic Planning by its nature is very analytical in nature, ha been and always will bedependent on the preservation and rearrangement of established categories -the existing levels of strategy (corporate, business, functional),the established types ofproducts (identified as SBUs) overlaid on the current structure (divisions,departments etc). Real strategic change requires more than rearrageing existing things.Planners lack managers' authority to make commitments and managers'access to soft information critical to strategy making. They do, however have time to analyseand are therefore critical to the process. Planning cannot generate

88

strategy but given a strategy it can program it. Vision is unavailable to those who cannot see with their own eyes. Real strategists get theirhands dirty digging for ideas, and real strategies are built from the nuggetsunnearthed. They are not people who abstract themselves from detail they are people who areintimate with details but who can abstract thestrategic messages fromthem. See Strategy. Strategy The essence of strategy formulation is coping with competition. (Porter, M. 1979).Competiion isn't beating the competition; it's serving the customer's real needs. (Ohmae, 1988)(lens shutter cameras, microwave/conventional ovens, pianos, coffeemakers). See competition, five forces, New entrants, supplier power, buyer power. Substitutes, jockeying for positoin. Having analysed the industry and the five forces: identify companies strengths and weaknesses.Where does the company stand relative to other companies in theindustry. Plan of action might include: 1. Positioning the company 2. Improve the company position in the market by reacting vs the forces. 3. Anticipate changes in the balance of the forces.. Structure Organisational structure Defined as: the design of organisation through which the enterprise is administered. Thisdesign, whether formally or informally defined, has two aspects. It includes, first, thelines of authority and communication between thedifferentadministrative offices and officers and, second, the information and data that flows through these lines of communication and authority. (Chandler, A). See Strategy Such lines and such data are essential to assure the effective co-ordination, appraisal, andplanning so necessary in carrying out the basic goals and policies and inknitting together the total resources of the enterprise. Structure follows strategy and that the most complex type of structure is the result of theconcatenation of several basic strategies. Structure Decentralised vs. Centralised. Decentralised allows to be focused, familiar to markets, flexible to need but excessiveoverhead, loss of synergy between products, resistant to long term investmentand development. Danger of lost corporate identity, people and companies work for themselves. The weaknesses of decentralistion are 'overcome' in Johnson & Johnson by the presence of an"Executive Committe" whose purpose it is to overcome disputesbetween companies and to resolve issues of resource competition. Structured Query Language See SQL. Subsidiary ledgers Include specif categories of accounts: accounts receivable; inventory, including rawmaterials, work in progress and finished goods; accounts payable; manufacturing overhead; selling expenses; and general and administrative expense. Substitutes One of Porter's five forces. Substitute products place a ceiling on the prices that anindustry can charge and thus limit the potential of that industry. Substitutes that deserve most attention strategically are: 1. those subject to trends improving their price-performance trade-off with the industry'sproduct. 2. are produced by industries earning high profits. Success Unsuccessful products Analyse failures and learn. Asssess new product failure on the basis of criteria: did youunderstand user needs; did it fit with strategy; competitive analysis; was it positioned properly; technical risk assessment; was it a priority; did it comply withregulations; were the right distribution channels used; did the company have ongoing committment to the market segment; was the project endorsed by topmanagement; did it receive organisational suport. Sugano Takuo Author of the book "Competitive Edge, the semiconductor industry in the US and Japan".See Policy. Sun

89

Sun Microsystems, a large American manufacturer of PC Workstations and UNIX software.Their computers are based on the idea of open systems nad they have a profitable business selling their Network Filing System, better known as NFS, apowerfull networking software package for connecting computers. Sunk cost The business equivalent of guilt. The equivalent to a membership fee which is lost if itcannot be used. They represent the money invested in a project which is already spent. Decisions should be based on the value of future investments and not onhow much has been spent. See Economics. Super Computers Computers with very high processing capacities. They are unsuitable for databaseapplications because their data representation is vector based as opposed to bytes in `ordinary' PC, mini and mainframe computers. Super Internet Visionary project for expanded Internet. A Super highway for information envisioned inthe US administrations National Information Infostructure (NII). Supplier power One of Porter's five forces. A supplier group is powerful if it is dominated by a fewcompanies and if it is more concentrated that the industry it sells to. If its product is unique or at least differentiated, or if it has built up switching costs.Switching costs are fixed costs buyers face in changing suppliers. There arise because, among other things, a buyers product spec. ties it to particular suppliers, ithas invested heavily in specialist ancillary equipment, or its production lines are connected to te suppliers manufacturing facilities. Suppliers Supplier relationships are demanding Identifying suppliers takes time Establishing your credit worthiness is dificult negociating reasonable payment terms is though, securing favourable terms comes only withtime. Maintaining reliability and quality of suppliers requires diligent oversignt ensuring that our needs aretakenseriously (as a very small company) can be difficult Swap A contract to exchange a stream of periodic payments with a counterprty. Swaps areavailable in and between all active financial markets. Swaption An option to enter into a swap contract. Switched multi-megabit data service (SMDS) Practical alternative to T1, but only in the states currently. A switched megabit data serviceproviding connectionless packet switching. Light control functions to saveoverhead. T1 and T3 rates 1.5 to 40 Mb/s. Used for MAN; attractive to multiple LAN users. Switching costs Switching costs are fixed costs buyers face in changing suppliers. There arise because,among other things, a buyers product spec. ties it to particular suppliers, it has invested heavily in specialist ancillary equipment, or its productionlines are connected to te suppliers manufacturing facilities. Switching See Networks. SWOT Strengths, weaknesses, opportunities, threats; analysis used in market and businessplanning. A tool, not a reporting style. Synchronised manufacturing Any systematic way that attempts to move material quickly through the various resourcesof the plant in concert with market demand. Synchronous Protocol e.g. HDLC (high level data link control), also knows as SDLC (IBM) or LAP-B (CCITT). HDLCimproves on transmission efficincy by allowing several blocks (called frames) to be transmitted before the first one is acknowledged. Allowssynchronous transmitting in both ways. Syndicated investment An investment which is too large and resky to be handled by one investor and whch needsto be shared among several partners. Fewer deals are syndicated in present market conditions; while syndicates also nvolve fewer participants, This is

90

partly because the smaller deals do not require so many players. buy it also means that, if trouble arises, fewer people have to be consulted to sort out themess. Synergy 1+1>2. The concept is based upon some sort of economies of scale or scope yieldingbenefits from combining activities. Frequently claimed in M&A activities. System Dynamics A modelling technique first developed in the 1960s by Mr Jay Forrester (the inventor ofcore memory in computers) of MIT. The technique involved rules and functions developed from control and feedback engineering (one of the most importanttheories for electrical and electronic devices) and were designed for playing `what if' games by manipulating the variables. See also Education, Learning andChange and Decision Analysis. Systems analysis Developed by the RAND corporation. Brings together ideas fro engineering and ideas fromeconomics and seeks to help a real world decision maker faced with carrying out a major project. assumes an objective. The process of analysisorganisations, use of resources, information flows etc. in order to remodel it into a more efficient or more effective shape. Now called operational research. Uses hardsystems thinking Systems software The foundation on which the application program is developed. Interprets the applicationprogram and tells the computer how to act. Includes operating systems. Systems thinking The first step towards systems dynamics (a sensitise to the process), does nothing exceptintroduces the concept to the uninitiated. T Account Method for recording credits and debits T-Carrier, T1 Copper based digital facilities that carry 24 simultaneous voice or data streams at64Kbps each. Many are based on fiber transmission rather than copper. T1 multiplexers Accept information from multiple data, voice, or videochannels and combine it fortransmission over a single T1 communications (or composite) link. T3 Provide theequivalent of 28 T1 cicuits. Can be used by private and public networks.Asynchronous: can use fiber, microwave and coaxial paths. Tacit knowledge Tacit knowledge, experience, common sense, the mental model; is not written down: asopposed to measured, objective knowledge which is specific and written down. Takeovers See Mergers & Acquisitions. Tangible asset A tangible asset has physical existence (e.g. buildings and equipment). see Intangibleasset. Tautology An expression which is true by definition. An example is the accounting equation OE=A-L. Tax compliance the process of filing forms and calculating taxes and required payments Tax in the company In the income statement goes a provision for taxes which represents money which will haveto be paid. In the balance sheet are representations of how this tax will be paid: deferred taxes, which will be paid in the long term (long term liabilities)and Accrued taxes which will have to be paid in the short term and tax benefits (allowances which reduce the total tax liability. Because some taxes are postpones not eliminated, they appear as an increase in liabilities inthe balance sheet. Effectively, tax deferral is an interest free loan from thegovernment because although the money has been shown as an expense in the profit and loss, ithas not been paid; the company can use it. Taxes payable

91

see current liabilies Taylorism Frederick Taylor TCP/IP The term designates a set of network protocols designed for thedefence advanced researchproject agency (DARPA) in USA. These protocols are tailored for heterogeneous local networks and have been embedded in UNIX systems; particularlyuseful for interconnection between LANs involving multivendor equipement (IP made for this). TCP has never been considered as an industrial standard.Although competitive and different there is not intrinsic antagonism between OSI and TCP/IP in lower levels. A layered approach to networking. Where OSI usesvirtual connections TCP/IP is based on Datagram which is the opposite. (see datagram and virtual connections). Although referred to by a singleacronym, TCP/IP is actually twoseparate protocols each occupying a different layer of theOSI reference model: TCP is an OSI level 4 transport layer: IP is alayer 3, or network layer. See Networks. TDM-Time division multiplexing With introduction of integrated circuits it became possible to apportion the bandwidth ona time basis, by assigning each terminal a fixed time slot. Possible to allocate time slots according to terminal charcteristics. Teams Correct construction of teams is important. Cross functional teams should not haveindividual members measured by their functional boss. Composition is key to success. The amount of time as a proportion of total work time is important; teamswhose members work for less than 50% of their time tend not to be successful (Davenport, T) (surely an exageration). Team leadership and management arekey. Teams will not function without a defined and capable leader. Technology development patterns. Research Management Three approaches to research and technology development that describe the process 1. Linear: Science discovers, Industry exploits, Men adapt. Not a real viability any more, aluxury to think this way. 2. The Social Constructivist Approach (Scot). Wiebe Bijker, Trevor Pinch: where the marketcannot or will not accept a development even if it is technicallysuperior but rather, chooses another (eg light bulb example, that emphasises the need toinvolve marketing, production etc in the research process) 3. The Network Approach: Bruno Latour: Where different actors. (e.g. the government asfinance, the engneer as research, the market as seller) combine 'andconfuser' the design or research process.Confusion when different networked inputs are notwell coordinated or managed with clear decisions that are notcompromises that please no party. 4. The Uses and Users Approach: Michel de Certeau Discrepency between the intended users (towhom the designers target) and those who use it in reality.Emphasises the need for developers, whoever they are, to try and understand possiblealternative uses of technology (as core competences that can be extended toother products and processes). Technology strategy Three typical approaches (de Treville). 1, cost based: how many people can we eliminate. 2, strategy of flow based: at the point where parts or customers wait, can we apply technologyto improve the flow?. can we use our technological skills to producea capability (Wall Mart cross docking, Sisu auto robots, Honda, service and distribution). 3. latest technology. Technology The application of science to the needs of humanity. The OECD difines it more narrowly as`the first application of sciencein a new way ... with commercial sucess', OECD 1971. For business it is important that technology is not neutral in an organisation. While problemsare usually organisational in nature the solutions are increasingly providedin the form of technology. The learning curve of technology is in fact a series of seperate curves linked by periods ofsaturation and bursts into new periods of growth:

92

"When you've got a new hammer - everything looks like a nail", so watch out for techies withnew equipment and software. It may not be solving a problem forwhich it was designed and for which it is not suitable! Telecommunications And Business Strategy See Networks. Telecommunications In Europe See Networks. Telecommunications In Germany See Networks. Telecommunications Revolution (The) See Networks. Telecomputer The multimedia machine; offering computer, video, and data transfer etc. E.g. Fox, a kindof supersmart TV that will play CD-ROMs, delete television advertisements, program the VCR, search databases for selected news items and answer thetelephone. Use is impaired by bandwidth. Telecomputing A term coined by Professor Jack Nilles (of USC) in the early 1970's for people who workfrom home and use technology to electronically communicate with their companies office. Telecoms, La Fin Des Privileges See Networks. Teleports Et Zones De Telecommunications Avancees See Networks. Teleports In The Information Age See Networks. Telework Here office bureaucracy is dismantiled in favour of people working at home, often througha different employment contract: market constraints re;lace a hierarchy. If the workers communicate with each other through the network this is aninstance of electronic teamwork. Teller Machine See ATM. Terminals take analogue continuous wave input and transform it into a digital stream. E.g. channelbanks and transcoders. Termination equipment Provide digital connectivity. Equipment includes three general categories: terminals,Digital cross connect systems (DCS's) and multiplexers The statement of changes in financial position Random list of pluses and minuses which is now called the Cash flow statement. The U curve. Shape of costs graph in manufacuring planning when costs fall with volume but thenincrease as volume increases. Caused by the investments needed to increase beyond a certain point. The weighted average cost of capital (WACC) to company valuation Estimates the cash flows due to unlevered equity (as with the APV calculation) anddiscounts these cash flows to unlevered equity at the weighted average cost of capital of the firm (considering the after tax cost of debt if interest paymentsare tax-deductible), where Where E is the market value of equity, D is the market value of debt, re is the cost oflevered equity (i.e. based on the equity beta, rd is the cost of debt, and tc is thecorporate tax rate APV, FTE, Valuation. Corporate valuation Thorne John Author of the book. "Geodesic Network Ii (The) 1993 Report On Competition In TheTelephone Industry". See Networks. Throughput The rate at which an organisation generates money through sales (not production). Time and Sales See Reuters. Time rate of return Used for evaluating capital investment, either by net present value or Discount yield

93

methods. Time Sharing The technique of allowing several users to use a computer at once. This is possiblebecause computers are very fast relative to users operating computer terminals. Techniques such as multiplexing and time-slicing are typically involved. Token passing Is the protocol used in the IBM Token Ring LAN. It works by passing a short message, thetoken, from one device to another along the communication channel. If the device wants to communicate it must wait until it has received the token. Token Ring See Networks. Toyo Keizai See Reuters. Trade accounts Current liabilities to be paid usually over one year owed to suppliers for service,supplies and raw materials. See current liabilies Trading profit Sales value less all the costs both direct and indirect relating tothe ordinary tradingactivities of the business. Trains See Networks. Transaction cost A method of operation valuation which directs attention to the resources consumed in theexecution of a transaction. Phases: search, contract, control/monitoring/modification, maintenance (social component). Allphases need information (better information, better transaction, butinformation can be unbalanced with either the seller or the buyer out of step. This can leadto windfall gains, e.g. Microsoft gaining control of DOS from IBM) Costs of search (how long and extensive, may find a partner but cannot trust him): cost ofcontract depends on the complexity of the deal (cost of defence contractcompared to cost of buying soap): control cost (who responsible for making sure the contractkept, bad social relationships can be a source of high transactioncosts. Most of these costs are information costs. More physical equipment (e.g. IT) will not solve orimprove a situation if trust is not present between partners (e.g.development of JIT with suppliers). Organisations as networks of transactions. Is the market an organisation, is the heirachy anetwork of transactions. Clans and Teams are also networks of transactions in an organisation. These will be opaqueorganisations based largely on trust. Entering organisations and marketsis easier or harder depending on its organisation; a Clan, for example might be hard to enterand hard to leave. IT can change the pattern The same matrix can be used to position the type of IT service in an information market. Inthis situation the degree of individual service is the top axes, the deliverychannel (moving from non to electronic) is on the side axes. Again, being off the diagonal isto be in the wrong place (individual treatment for a non specialisedproduct (top right). Where there are conflicts and/or transaction costs are too high the decision to make ityourself or buy becomes active. It may be necessary to move from ahierarchical or price control mechanism to one of greater trust. Information systems designed to help the different forms need to be appropriate; it is alwayseasier to automate the market that the process. MIS is just a tool for automating simple tasks, more often successful when applied to marketsthan processes. Strategic information systems are just ways ofautomating Tayloristic processes. Groupware can be appropriate to assist team relationships. Transaction costing Considers economic organisations as networks of exchanges. This allows: 1. the analysisof the economic efficiency of the matching of information technology and organisational structures. 2. The network of transactions between individuals andorganisational units is a useful concept for analysing and designing telematic, office automation and EDI applications and new systems to support groups. 3.It allows the contractual nature of the use of information in an

94

organisation where there is only a partial congurence of goals and interests amongmembers. (Ciborra, 1993). Transcoders Accepts two DSI rate input PCM channels and to code translate thetwo streams usingcompression techniques into a single DS1 standard. Properly called ADPCM transcoder. Equipment that takes 48 analogue voice calls, digitises them, and packsthem onto a single DS1 facility is also thought of as part of the transcoder family, though this is really a channel back (exactly called ADPCM channelbank) Transfer payments in macro economics. Government dips into national income by imposing taxes; at the sametime it augments incomes by paying out social security, unemployment insurance, and other forms of "transfer payments". see GDP. Transfer price Prices for interdivisional transactions. Should encourage motivation from both sides.Should be fair. Can be set at full cost or marginal cost providing motivation is not affected. Should take into consideration market price for equivalentgoods or services (motivation again). Transient. See ephemeral. Transmission groups Parallel SDLC links between two SNA nodes can be arranged logically into transmissiongroups, which comprose one or more parallel links withthe same transmission characteristics, such as data rate, delay, security, and likelihood oferror. Transnational company A company with operations integrated accross all countries (as apposed to a multinational Transparency A transparent system is able to transmit data exactly as presented by the user (ie noadded control instructions). Non transparent systems can be harder to use. Transponders Receive, amplify, convert and retransmit the signals that antennas collect and redirectthese signals to specific parts of the earth throughthe appropriate satallite antenna. Frequencies sent from earth are lowered before being returned. Treasurer See Chief Financial Officer. Treasury stock Stock in a company purchased back from the market and held in treasury Trendlink See Reuters. Trendsetter See Reuters. Triarch 2000 See Reuters. Trillion See Billion. Trunk circuit The trunk circuit: manages dataflow into and out of the subnet in a packet switch system,corrects interswitch data errors and coordinates net management and trouble shooting. Turing, Alan One of the founders of computing whose work enabled the first computers to be constructed. Hiswork during WWII concentrated on code cracking (breaking theGerman encryption systems) although he is now best remembered for the Turing Intelligence Testfor computers. Tuttlebee Wally H.W. Author of the book. "Cordless Telecommunications In Europe". See Networks. UbiquitousComputing A term used by Xerox PARC researchers for the dissapearance of computers into the fabricof our everyday life. They are refering to the embedding of computers in objects as diverse as light switches, automobiles and household appliances:

95

Unbiased Estimate One that on average is equal to its true value. Understanding Local Area Networks See Networks. UNIX An advanced operating system developed in the 1970s by AT&T's Bell Laboratories. It comesin many versions and runs on many platforms of computer hardware. It is very good at multitasking, communications and can manipulate dataefficiently. Unix is an open system and although gaining in popularity has yet to become a mainstraem technology in most corporations. Unlevered Beta Also called the Asset Beta. See Beta and Finance. User Friendly A term to describe the ease with which a computer system or application can be used. User interface The program that allows the user to communicate with the machine. Utilities Software to carry out commonly required organisation and data management tasks. Typicallymany features of utilities are quickly included into the operating software when subsequent versions of the OS are launched. Utility packages Include: program debugging aids, text editors, sort-merge programs, etc. VALLEE Alain Author of the book. "Perspectives Pour Les Telecommunications". See Networks. Valu e chain Process during which value is added. Raw materials + labour + etc. See CompetitiveAdvantage. Valuation. Corporate valuation The value of a company is: the base case net present value + the net present value ofsynergies. Corporte valuation is no different from valuation of any other asset. We want to find 1. thecorrect set of cash flows, 2. correct cost of capital ie. discount rate, 3.The NPV, where our decision will be to go ahead with the transaction if and only if the NPV isgreater than zero. Qestions to ask: 1. does the market over or undervalue the company 2. What is the value of synergies that come from the acquisition Commonly used corporate valuation approaches 1. Premiums paid analysis for valuation Looks at the percentage excess price paid toacquire a target firm's stock in transactions of asimilar type in similar industries. Has advantages but is crude andsubjective. Information in the US from the Mergerstat Review (may become available for Europeand Japan). 2. Valuation based on relevant share price multiples Looks at a few typical ratios: the price earnings ration (P/E), the price cash flow ratio(P/CF), and or the market to book ratio (M/B). The idea is to look at relevantmultiple for other firms in the industry (or other similar acquisitions), and use some kind ofaverage. Good back of the envelope method. For example: suppose the average P/CF ratio (CF = net income + depreciation, or earnings pershare + depreciation, or free cash flow ) in the global food andbeverage industry is 20 in 1991, and you are considering acquiring Perrier, which had 1991cash flow of FF70 per share. Given this cash flow, according to theglobal food and beverages industry P/CF multiple, you would value Perrier at FF 1400 pershare. If Perrier sells for FF1200 (as it was then) one can conclude that itis imdervalued. If you, as the acquirer, belie ed that the stock could do at least as well asthe rest oftheindustry, then you have a floor for your valuation. This methodis also crude. Earnings can be manipulated and distorted by accounting rules. Earnings can beaffected by debt equity ratios. 3. Valuation based on replacement/breakup value of assets Means you sit down and try to work out themarket price of every single asset in the balancesheet. Add them up and subtract the value of debts. Divide theremaining value (net asset value) by the number of shares outstanding. Useful method if you

96

think the firm has a number of undervalued assets 4. valuation based on discounted cash flow (DCF) techniques While methods 1-3 are useful a DCF should always be done. There are three DCF methods incommon use. * The adjusted present value method (APV) * The flow to equity method (FTE) * The weighted average cost of capital (WACC) Short methods of corporate valuations Dividends Growth Method This is basically the perpetual growth equation. Valuation: cross border valuation Key considerations specific to cross border valuation: * the choice of currency, foreign (local) or domestic (home), in which to execute the analysis * whether or not to discount foreign cash flows at the time theyare earned or at the time theyare remmitted home to the parent * whether or not to use foreign or domestic tax rates * the proper calculation of the cost of capital used to discount the cash flows. *the appropriate treatment of special risks unique to cross border investments such as foreignexchange risk, political risk, and so on. The most commonly practiced valuation technique is the discounting of expected free cash flows(FCF) by a Weighted average cost of capital. The rate at whichexpected free cash flows shouldbe depreciated is the Opportunity cost of investing capital inthe assets in question. Value added networks (VANs) Provide special communication and network management services over leased lines from thecommon carriers (public networks). Tymnet and Telenet are examples of companes providing the value added network services. The enhanced servicesinclude usually: 1, more efficient data transmission through the use of data packets with improved routing, error control and efficiency. 2, capability forinterconnecting computers and terminal with dissimilar transmission protocols and speed of transmission and 3, network management and maintenance services. Many companis chose VANs for long distance communications because of thecomplexitiy and costof attempting to manage their own long distancecommunications. Value based planning At the level of a business unit within a company, defining an appropriate measure of"value creation" is difficult. Business units do not pay dividends, nor do they issue common stock. Value based planning is the business unit equivalent ofShareholder Value. Value based planning means is that the effects of a proposed strategy should be measured interms of two components: * The cash flows that it is expected to generate over a period of time. Because these cashflows occur over a period of several years, they must be discounted atappropriate rates. * The change in the business unit's market value betweenn beginning and the end of theplanning period. since there is no actual market value for a business unit'sequity, an imputed value must be estimated, using a valuation model derived from an analysisof the factors that appear toaffect the company's stock price. Where: DCF is discounted cash flow, DFMV is discounted future market value. Value chain The value chain disaggregates a firm into its strategically relevant activities in orderto understand the behaviour of costs and the existing and potential sources of differentiation. A firm gains competitive advantage by performing these strategicallyimportant activities more cheaply or better than competitors. A value chain is embedded in a larger stream of activities called a value system. Gaining andsustaining competitive advantage depends on understanding not only afirm's value chain but how it fits into the overall value system. The activities are divided into primary and support activities Key points made by Porter include: technology and development are not restricted to the R&Ddepartment but is a company wide responsibility, as are HRD,Procurement and the infrastructure. Procurement is a key issue concerning whether to buy orbuild and which alliances to establish. Value creation

97

Chapter 1. & cultures of capitalism. 1. Making Rules and Discovering Exceptions. Organisations need rules, particularly for safetyand employee practice. Exceptions must be identified where theyreveal weaknesses and limitations. 2. Constructing and Deconstructing. Examine all processes, deconstruct and reanalyse them. 3. Making Communities of Individuals: Foster the needs of the individual and the community. 4. Internalising the Outside World: Be receptive to ideas generated in the outside world(don't fall into the not invented here syndrome) but remain receptive to theinside generation of ideas. 5. Synchronising Fast Processes: Parallel development of processes is essential for quickresponse time in projects. Easy for slow processes, difficult for fast ones. 6. Choosing Among Achievers: Reward contributions. Set sensible and measureable goals, measureby people who are not in competition with judged. 7. Sponsoring Equal Opportunities to Excel: Encourage and allow idea generation. Fair judgesfor ideas. Understanding the way cultures prioritise these 7 is important. There are tensions between theway priorities are set; the importance of the individual vs theimportance of the community etc. Value pricing Means providing buyers with cars that already have a full package of options, atattractive prices, eliniating haggling with dealers and reducing the need for costly rebates. Variable cost Subtract known fixed costs from total costs you get total variable costs or directmanufacturing costs. Dangerous because there are also semi-variable costs and definitions can be hard to make (see fixed costs). See Economics. Variable For example, take the following equation: y=ax, `x` is a variable. See also Parameter. Variance Interdependence Matrix see Sociotechnical analysis & Variances. VASARHELYI Miklos A. Author of the book "Artificial Intelligence In Accounting And Auditing". See Control andMonitoring. Vector Is graphics data expressed as lines or vectors. Every piece of data in a vector pictureis a line. This is suited to maps, drawings, building layouts, technical drawings. The conversion of Raster to vector is an extremely expensive process because ofthe intelligence needed to recognise shapes - for example a circle. Vendor finance Finance provided by teh vendor in the form of either a deferred payment or a retainedminority stake in the bought out company, usually in theform of loan notes. It allows thevendor to share in theprofits of tehcompany if it does well, and canalso be used to boost thesale price, thereby impressing the vendor's shareholders Venture Capital See Business Angel. Venture capitalist Deal maker who provides funds and advice to entrepreneurs, either starting a businessfrom scratch or staging a management buy out. Vertical integration The move into new functions by a business. (see Diversification) Videofax A new generation of facsimile (fax) machines which incorporate large LCD screens whichcan display incoming faxes without printing them out. Future enhancements are expected to include the ability to annotate faxes with pen computingequipment. Videotext An interactive information service operated often by a telephone or television company. Virtual channel Cells belonging to particular service are said to constitute a virtual channel (VC). ManyVCs may share a single link. VCs are in turn bundled into virtual paths VPs. A particular link will comprise one or more VPs.

98

Virtual circuit Can provide a virtual circuit interface. A virtual circuit provides a chanel between apair of hosts over which they may exchange information nearly transparently. In a connection path with many possible connection routes the virtual pathcould be any one of those possible; if one connection fails, others are available. Used in OSI systems. The opposite approach is used in TCP/IP Unix type systemswhich operate a Datagram approach (see Datagram Virtual paths Cells belonging to particular service are said to constitute a virtual channel (VC). ManyVCs may share a single link. VCs are in turn bundled into virtual paths VPs. A particular link will comprise one or more VPs. VPs exist for network managementreasons. They may collect all VCs belonging to particular customer wishing to use the public network to link parts of a private company network. Virtual Systems Computers which split programs into segments (called pages or sectors) and place theseinto memory for processing. This means that less memory is needed to process programs, thus saving memory which has been historically scarce. Virus A computer program which is designed to destroy information on other peoples computers. VISP-Voice Information Services Platform A multi-application voice processing platform. Voice / Data Telecommunications For Business See Networks. Voice Compression Process of reducing the number of bits per second required to reproduce a voice channel,thereby reducing the transmission bandwidth for that channel. Voice Mail A telephone system which can record and store human voice traffic and play the recordingback to the intended person on command. Voice Recognition Computer software (and often hardware) which is capable of interpreting the spoken word.Capabilities vary but the technology is becoming commonplace in telephone and similar applications. vorstand German for management board. See Corporate Governance. VPI-Vendor-Independent Messaging Like MAPI, a program for assisting E-Mail, allows mail access to any program. VSAT Very Small Aperture Satellite. See Networks. WACC An acronym for the Weighted Average Cost of Capital. where: re = cost of levered equity E = market value of equity D = market value of debt tc = corporate tax rate rd = cost of debt. See Finance. WAIS Wide Area Information System. See Internet. Wall Street Journal A US based daily financial newspaper which contains many discussions of financialengineering, company and more general finance and banking issues. One of the two best general international financial newspapers currently available. SeeFinancial Times. For more detailed general information see the magazines Institutional Investor, Euromoney and The Banker. For more specialist internationalfinance information see Risk for detailed articles on pricing models and deal structures, International Financing Review for detailed articles on marketactivities and deal structures. WAN Wide Area Network. See Networks. Weighted Average Cost of Capital See WACC and Finance.

99

Weighted average of prices see GDP. Weintein Franklin Author of the book "Competitive Edge, the semiconductor industry in the US and Japan".See Policy. Wheeler Tom Author of the book. "Open Systems Handbook". See Networks. Whole Internet (The) See Internet. Wide Area Information Servers (WAIS) Is an electonic publishing software set which allows search and retrieval of multimediainformation from distributed databases. Information can be drawn from data stored on the end user desktop, from computers distributed throughout anorganisation on a local area network or from information sources on public networks. From the company Thinking Machines. See dynabase. Wieland Bernhard Author of the book. "Telecommunications In Germany". See Networks. Windows See Microsoft. Word See Microsoft. Work flow automation in E-mail context. Advanced E-Mail that can be used for puchase order and invoiceprocessing, vacation and leave requests, creation of sales proposals, etc. Is a subset of Groupware, which also includes shared information systems such as LotusNotes. The difference is that Lotus Notes is a passive system that makes no effort to track who gets what information or what they do with it, whearas workflow systems play an active role in disseminating data to the people who need it. Work out A technique used at GE. The practical objective is to get rid of thousands of bad habitsaccumulated since the creation of GE. The intellectual objective is to put leaders of each business in from of 100 or so of their people, eight to ten times ayear, to let them hear what their people think about the ocmpany, what they like and dont like about their work, and about how they are evalauated. The idea isto redefine the relationship between boss and subordinate. Includes sessions without the boss to identify needs and problems. After the sessions, often 2days, the boss comes in and faces teh recommendations. He has to sayyes, no, or more information by.... Often his boss is watching, but out of eye contact range. Working capital cycle Taken from Analysis for Financial Management by R C Hughes A = Changes in equity B = Changes in liabilities C = Taxes D = Interest E = Dividends The simple model above summarises the operating cycle but does not include accounts payableetc which make the picture much more complex. Working capital Resources which are either cash or are intended to be converted into cash by the normaltrading activity of the business, less any amounts which the business owes in the short term. Workstation See RISC. World-wide Network A Case from the Introduction to Information Systems Management. Manufacturers HanoverBank was in the process of implementing a telecommunications network called GEONET. Wozniak, Steve See Apple. WYSIWYG What You See Is What You Get. A term used for GUI applications which display informationexactly as it will appear when you print it.

100

X-inefficiency The absence of tradeoffs. Resouces are wasted when more of something can be producedwithout makeing less of anything else. X.21 Is a protocol used to guide the design of a circuit switched network. Like X.25, it hasbeen accepted as the international standard. X.25 Is a protocol used to guide thedesign of packet switching networks. It specifies therules for connecting devices to a communication channel and for developing and transmitting packets, along with a number of other important features andfunctions of a packet switching network. Widely accepted as an international standard X.75 Is a protocol for connecting X.25 networks. It specifies guidelines for exchangingpackets between different X.25 networks so that the two networks appear to be a single networlk to users. X25 See Networks. X400 See Networks. X500 Is a standard which specifies network directory structures. The objective is to make itpossible for networks to automatically locate each other across the world. See Networks. Zen And The Art Of Internet See Internet. Zero rated Bonds Bonds sold to raise capital which don't pay interest. A firm would issue bonds to becashed after a fixed period of time for a sum (eg $1 million), it only sells them for 500,000. The buyer pays 500,000 and receives no interest during the term butresells to the issuer for $1 million at the end of the term

101