the magazine that fast-forwards your career.
Here's how to read the magazine:
by clicking the arrows at the side of the page, or by using the toolbar.
by clicking anywhere on the page.
by dragging the page around when zoomed in.
by clicking anywhere on the page when zoomed in.
websites or send emails by clicking on hyperlinks.
Email this page to a friend
Search this issue
Index - jump to page or section
Archive - view past issues
Real Business : Winter 2008
8 +#8; REAL BUSINESS+#8;ISSUE+#8;2,+#8;2008 B uy low, sell high – that golden investment rule – is turned on its head when we consider the process of short selling. In essence, this is the selling of a borrowed stock first and buying it back at a later date. If the price falls after it is sold, you profit from the differ- ence between the selling and buying price. “The main advantage of short selling is that it enables you to make money from declining share prices”, says Mark Leslie, private client adviser at Austock Securities. “Additionally, short selling gives you the ability to leverage up. For example, to buy 1000 Westpac (WBC) most popularly used business management strategy in the world. Motorola, of which Six Sigma is a registered trademark, now runs Green Belt training courses in conjunction with many respected universities, including the University of Melbourne. n hEads up BUSIneSSeS OPeRATInG UnDeR SIx SIGMA, IF ADHeRInG TO ITS STRICT GUIDeLIneS, SHOULD PRODUCe 3.4 DeFeCTS PeR MILLIOn OPPORTUnITIeS. In+#8;THE+#8;loop by stEwart bEll why do they do that? short sElling shares it would cost $25,000 (1000 × $25). However, if you were to short sell 1000 WBC you only have to provide your broker with margin cover of 20 per cent of $25,000 – that is, $5000.” Unfortunately, as a Japanese proverb says, the reverse side also has a reverse side. “The most obvious disadvantage is that in a short trade your potential loss is unlimited, while your potential profit is limited,” Leslie explains. “For example, in a long trade the worst that can happen is that you lose 100 per cent of your capital. However, there is unlimited profit opportunity, because there is no theoretical limit to how high prices can go. In a short trade, however, the best that can happen is that the price falls to $0.001, so you make 100 per cent on your capital. But, there is no limit to your potential losses, because there is no theoretical limit to how high prices can go.” With a history going back to the 17th century – and blamed as an aggravating factor in crashes such as that of the Dutch tulip market – short selling is hardly a new concept. But the steady increase in recent awareness may be just the influence of a bear market. “We have been hearing more a potted history six sigma A s of 2006, telecommunications giant Motorola has reported over US$17 billion in savings. This impressive figure, the company says, is the direct result of a business management strategy called Six Sigma. Developed in 1986 by Motorola’s Bill Smith, Six Sigma is essentially a method of improv- ing the quality and reducing the defects of a business organisation. It was inspired by six preceding decades of quality management strategies, such as quality control, TQM (total quality management) and Zero Defects. But, where these strategies failed to find main- stream approval, Six Sigma succeeded. By the late 1990s, almost two-thirds of Fortune Magazine’s top 500 American corpo- rations were using Six Sigma to reduce costs and improve quality. Most prominent among them were General Electric and Honeywell International, both of which still operate under Six Sigma systems. So, what makes Six Sigma so revolutionary? Like its predecessors, Six Sigma’s ultimate goal is to achieve total customer satisfaction. But, it differs from other quality management strategies by stressing the importance of the hierarchy within an organisation. It strives to engage all members of the organisation, not only those on the production floor and in the statistical department. It uses martial arts terminology to rank team members: Executive Leadership includes all top-level management. Champions are drawn from upper management. Further down the chain of command are Black Belts, followed by Green Belts, and at the lowest level are Yellow Belts. The martial-arts defined hierarchy cuts across all business functions in an organisa- tion, and can define promotion paths. Six Sigma has two key methodologies. DMAIC (define, measure, analyse, improve, control) and DMADV (define, measure, analyse, design, verify). DMAIC is used to assess and improve existing business proc- esses, while DMADV focuses on the creation of new processes and the evolution of an organisation as a whole. These ideals are at the core of the strategy. However, Six Sigma has not been without its share of criticism. Quality expert Joseph Juran condemned it for being “a basic version of quality improvement.” Other detractors claim that the system is only beneficial to certain types of business, and a Fortune Magazine article stated that “of 58 large companies that have announced Six Sigma programs, 91 per cent have trailed the S&P 500 since.” Nevertheless, Six Sigma remains the by rilEy straw nEt gains Check out what corporate titan Jack Welch has to say about Six Sigma http://www.youtube.com/ watch?v=anMULFcLuIM photolibrary
Issue 3 2008