4 discussion reply, 100 words each
songsongsong
db_6_1.docxDiscussion 1:
Felicia & Fred’s board has hired a new Chief Operating Officer (COO) to assist them in expanding their operations globally. A close friend of Fred’s from childhood, the new COO, has extensive experience in importing goods and maximizing value for shareholders through outsourcing activities, and recently left a large Fortune 500 company to join Felicia & Fred. Logistics and supply chain are of primary concern, as the demand for the company’s handbag product line has grown steadily. Rather than expanding the inventory as well as the need for additional warehousing space and working capital, the COO believes that inventory turnover may be increased through quicker replenishment and shipment directly to stores rather than to a centralized warehouse, and indicates that previously, he was able to take an approach with a manufacturer that was successful. He has not articulated the plan as yet, but assures Fred that it can be done.
A few weeks after the COO is hired, you meet a marketing department colleague in the cafeteria, who confides the following: “I read something unusual in the Financial Times today. It appears that the company from which our new COO hails is being investigated for potential violation of the Foreign Corrupt Practices Act. It is speculated that the company paid bribes to local officials in Hong Kong, classifying these as ‘commissions,’ in order to gain access to various manufacturing plants’ idle capacity at short notice. It seems to me that this would be a supply chain responsibility. It did not mention any names, but the investigation is ongoing.”
Do you have any concerns regarding the background of the new COO’s background, or questions regarding his potential approach to maximizing inventory turnover?
In the context of the CFA Institute Code and Standards, would there be any required action on your part to take to investigate further the potential plans of the COO? How might you assess whether the approach is legitimate?
REPLY 1: (100 WORDS)
Hello all,
•Do you have any concerns regarding the background of the new COO’s background, or questions regarding his potential approach to maximizing inventory turnover?
Regarding the COO background, I would only like to see that he had the experience is the same kind of matter we are dealing with our hand bags. As far as the investigation that is no way of know he was involved and unless there was legal action against him directly it should not effect this position. Of course if later on there was legal action against that would be a different story. That being said I would like to see his plan laid out with number supporting his methods. That way we can compare to Stcure the supply chain with more inventory and additional warehouse space. See which option is actually better for the company.
•In the context of the CFA Institute Code and Standards, would there be any required action on your part to take to investigate further the potential plans of the COO? How might you assess whether the approach is legitimate?
Yes, I would be required to investigate further the potential plans of the COO and make sure they do not violate any laws. “Members and Candidates must understand and comply with all applicable laws, rules, and regulations (including the CFA Institute Code of Ethics and Standards of Professional Conduct) of any government, regulatory organization, licensing agency, or professional association governing their professional activities. In the event of conflict, Members and Candidates must comply with the more strict law, rule, or regulation. Members and Candidates must not knowingly participator assist in and must dissociate from any violation of such laws, rules, or regulations (CFA institute,2014).” This means that it is our responsibly to make sure we are not breaking any laws. That is why we will need the plan laid out to check it with the laws.
Reference
CFA institute ( 2014) Code of ethics and standards of profession code information retrieved from:
https://www.cfainstitute.org/Translations%20of%20Code%20of%20Ethics%20and%20Standards%20of%20Pr/english_code.pdf
REPLY 2: (100 WORDS)
Do you have any concerns regarding the background of the new COO’s background, or questions regarding his potential approach to maximizing inventory turnover?
I am assuming that the company did a complete background check on the new COO before they hired him, regardless of his relationship to one of the owners, if not then shame on them. As for his plan, I would suggest that Felicia & Fred get a detailed strategy plan in place to not only to understand his plan but to assist him in making sure the plan meets the goals and objectives of the company. Felicia & Fred did not become successful for lack of planning and they should continue with what made them great prior to the arrival of the new COO.
In the context of the CFA Institute Code and Standards, would there be any required action on your part to take to investigate further the potential plans of the COO? How might you assess whether the approach is legitimate?
As the CFA is promotes adoption of professional standard, however they are voluntary. Therefore, there is nothing “required” to do to investigate the plans, but in the best interest of the company I believe it is the owners responsibility to make sure plan that the COO is implementing is legitimate. They can utilize several resources including the internet and industry leaders. Transparency and accountability of all leaders of a company is the new standard, no longer are the days when company owners can deny knowledge of a particular event thanks to the Dodd Frank Act.
Discussion 2:
Identify a futures commodity, exchange, stock, or interest rate. Use the internet to find a short history of the performance of this futures contract. Then research the possible reasons for this performance. What would you consider in investing in futures contracts? Given this research, are you encouraged or discouraged from this type of investment?
REPLY 1: (100 WORDS)
Class,
I decided to do a little research on gold futures, to see how they had been responding to the market recently. In particular, I looked deeper into GCG7. This is a gold future that has a delivery of February 2017. This future has seen a steady decline in price since the beginning of November, having fallen from $1,312.20 on November 2nd, 2016 to $1,163.70 on December 14th, 2016. This is a fairly substantial decline in less than 1.5 months, dropping almost 11.32% in that short time frame. This would be good if you had decided to take a short position on this future back on November 2nd, but very bad if you opted to take a long position.
After researching, it seems the stability of the commodity, and the fact that it’s a non-interest bearing investment, is currently the reason for its decline. As noted here, “the lower close for the yellow metal comes as the market braces for the Federal Reserve to raise interest rates for the first time in 12 months” (Saefong, 2016). When interest rates increase, investments like gold become less attractive. Investors are willing to take on more risk, and they seek investments that provide the opportunity to capitalize on higher interest rates. There was still gains to be had in this gold futures market, but only if you took the short position right before the price began to decline. Just as with other investments, it’s all about predicting the future.
Although futures contracts can be very risky, I think I would at least consider investing in them. The low initial margin deposit can make these investments very attractive, although the risk of losing everything due to an unexpected shift in the value of the underlying asset is something that should be considered before diving in. All in all, I think it’s encouraging that these investments are available. The market can benefit both speculators and hedgers, taking both short and long positions. As mentioned here, “the market could not exist and operate efficiently without either one” (Smart, Gitman, & Joehnk, 2013, p. 573). I do believe this market is better suited for more experienced investors, but the need for it definitely exists.
References:
Saefong, M. P. (2016). Gold Futures Mark Lowest Finish Since Early February. Retrieved from http://www.marketwatch.com/story/gold-resumes-losing-path-with-all-eyes-on-fed-2016-12-13
Smart, S., Gitman, L., & Joehnk, M. (2013). Fundamentals of Investing (12th ed.). Boston: Prentice Hall.
REPLY 2: (100 WORDS)
Traders buy and sell futures contracts on an exchange a marketplace that is operated by a voluntary association of members. The exchange provides buyers and sellers the infrastructure and legal framework (trading rules, arbitration mechanisms), contract specifications (grades, standards, time and method of delivery, terms of payment) and clearing mechanisms to facilitate futures trading.
I chose to look at oil futures as they have been making a lot of news lately. Currently OPEC and non-OPEC countries have come to an agreement to cut production in order to stabilize the struggling oil market. With five of the 14 non-OPEC countries in negotiations, including Russia, there is still lingering doubt as to if the agreement will work. There is concern among investors that other countries will take advantage of the cut in production and expand their market share, undermining the agreement. At the moment futures are trading higher and hoping to go over the $50 a barrel mark.
I would consider oil futures to volatile to invest in at the moment. Since the Fed rose rates Wed, Dec 14 this has pushed oil futures down. Add to that the nine other non-OPEC countries that are not participating in the cut in production and it makes for a risky investment.
Saefong, M. P. & Sjolin, S (2016, Dec 9). Oil futures settle higher for the session, edge lower for the week . retrieved Dec 15, 2016, from MarketWatch Web Site: http://www.marketwatch.com/story/oil-futures-jump-ahead-of-non-opec-weekend-meeting-2016-12-09
