The Grey Chronicles

2008.August.23

Making Lakh Out of Nothing at All


Atom Henares (2006a) in his foreword to his father’s book series summed it all:

“. . . running of a manufacturing enterprise requires 4 M’s:—money, machines, materials, and the management which combines the first three M’s in productive and profitable relationship. The four pillars of a business enterprise are: the investor who provides the money for financing, the government which takes care of the business environment, the employees who provide the labor, and the consumer who buys its products. It is management that ties them all together – giving the investor an adequate return for his investment; the government the taxes that it needs to run the country; the employee a fair compensation for his work; and the consumer his wants and needs with the highest quality at the lowest price.”

The Saver-Investor. A good business manager is one who invest his own money, probably personal savings, in a profitable venture. He would reap considerable financial benefit— possibly break-even or just a small return to reinvest, and hopefully, a good deal of personal satisfaction, as well as. A typical example of this is an entrepreneuer, who saved some money and decides to a buy-and-sell of mosquito nets. The Saver-Investor‘s marketing technique would involve direct-selling.

The Kith-and-Kin Investor. A better business manager pushes ever harder to squeeze every last erg of performance from the money he and others invested in manpower, equipment, and methods. The others could be related by consanguinity—spouse, sibling, parent; a group of personal friends or even a flock of acquaintances with common or similar goals in life. This could be a logical step for the Saver-Investor. Now, adept on the selling of mosquito nets, the Saver-Investor might venture to sell bed covers and linens, by pooling money from his kith and kin. The Kith-and-Kin Investor‘s marketing technique would involve word-of-mouth advertising.

The Idea Investor. The much better business manager uses his mind, not the physical money, to entice a pack of anonymous participants including venture capitalists to invest. The Idea Investor would likely appeal to players in the stock market thereby broadening his capital base. The Idea Investor could also be called the Virtual Investor: a business manager using other people’s money. With a good idea: create a bedroom showcase—mosquito nets, bed covers, bed linens, pillows and pillow cases— and sell the idea of a good sleep or the ambiance and comfort of sleeping. The Idea Investor‘s marketing technique would have also evolved into multi-media advertising.

The Suave Investor. The greatest business manager uses his mouth, in local parlance: “laway lang ang puhunan” [free-verse translation: air supply], neither the physical money nor his intelligence, to invite banking and finance institutions to acquire another enterprise. The Idea Investor being enamored with sleeping, that he would then want to acquire a manufacturer of beds.

Maybe, the Idea Investor would have attend management classes to augment his business acumen, thereby increasing his knowledge on corporate financing. On one of his readings, he discovered that the academic literature, such as Porter (1992), Kester (1992), Prowse (1992) often favored bank-based systems. Although, the banking sector was hard hit prior to the Millenium Bug, see Levine (1997), the aftermath of which argued Maher and Andersson (1999) and Tsuru (2000) shows that bank financing were ever popular as in the early 1990s, thus he abandons the shareholders’ stock splits.

Surely enough, the Idea Investor having acquired a bed manufacturer in some third-world country through bank financing is easily transformed into a Suave Investor. Of course, the fully-charged Suave Investor would take the leadership of the new enterprise as the Chief Executive Officer or President supported by a Board of Directors composed of the bankers. The Suave Investor‘s typical method to selling could be: “I’ll give you a ten-percent discount for a $10 mosquito net, and throw in four (4) golden orange tie-strings for only $0.50 each from a regular price of $1.00 for each string! A great bargain, huh!” His marketing focus would be more on exports, as domestic taxes would prove to be too much. He might also create another company, managed by a long-distant cousin, to source raw materials for the new and improved mosquito nets, linens and beds.

He would try to get another syndicated loan to finance the operations of his newly-acquired firm. Then when the bankers ask for their initial payment, he would insist on getting some discount, just because he was prompt in paying. Air Supply singing in the background: “Making lakh out of nothing at all.


Notes:

Henares, Alfredo Tomas (2006a), Foreword to Give and Take, Make My Day – Book 9 by Larry Henares. Manila: Philippine Folio, 2006. pp. ii-ix. back to text

Porter, M.E. (1992). “Capital Choices: Changing the Way America Invests in Industry,” Journal of Applied Corporate Finance 5(2), 4-16. back to text

Kester, W.C. (1992). “Governance, Contracting and Investment Horizons,” Journal of Applied Corporate Finance 5(2), 83-98. back to text

Prowse, S. (1992). “The Structure of Corporate Ownership in Japan,” Journal of Finance 47(3), 1121-1140. back to text

Levine, R. (1997) “Financial Development and Economic Growth: Views and Agenda,” Journal of Economic Literature 35(3), 688-726. back to text

Maher, M. and T. Andersson (1999). “Corporate Performance: Effects On Firm Performance and Economic Growth,” OECD Working Paper (Paris). back to text

Tsuru, K. (2000). “Finance and Growth, Some Theoretical Considerations and A Review of the Empirical Literature,” OECD Working Paper Series, No 228. back to text

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