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The HBS Blog offers insight on Delaware corporations and LLCs as well as information about entrepreneurship, start-ups and general business topics.

101: Supply and Demand Part I
By Gregg Schoenberg Tuesday, September 13, 2011

At the end of our last post, we discussed some of the factors affecting supply and demand in the commodities markets.  Supply and demand, of course, are not unique to the world of commodities; in fact, they are the forces that shape the market for all goods and services.  As such, it makes sense for small business owners to understand how these forces interact to affect the marketplace for their products.

We’ll start with a brief overview of supply and demand that should be familiar to those of you who made it through Economics 101.  If the thought of taking an economics course in college sounded about as appealing as taking a sharp stick in the eye, don’t worry, we’re going to keep things simple and no math will be required.

On the demand side of things, it is pretty easy to understand that price and demand have what is known as an inverse relationship.  If the price of a product falls, more people will be able to afford it, it will be more appealing compared to similar, higher-priced alternatives, and demand for it will rise.  The converse is also true, when the price of the product in questions rises, demand for it will fall.

How much demand will rise or fall given a specific change in price has to do with what economists call elasticity.  The more elastic that demand is for a particular product, the more demand for it will change given a change in price.  For a real-world example of a good with fairly elastic demand, imagine that you are a restaurant owner who regularly purchases large quantities of salt to season your food.  Given that you see very little difference in one brand of salt versus another, if one of your salt providers were to raise his prices even a little bit above what others are charging, you would be inclined to stop buying from him entirely and to switch to another provider offering similar, lower-priced salt.

The opposite of demand elasticity is demand inelasticity, which refers to the situation where even a large change in the price of a good has little effect on demand.  Health care, particularly critical care, is a classic example of an inelastic good.  No matter the price, if it will save your life, you’ll be willing to bear the cost.

The relationship between supply and price is best understood by thinking about it from the point of view of a supplier of goods.  Supplying goods to the marketplace costs money, and in order to be motivated to produce additional goods, a supplier needs to know that these goods will fetch a price that makes it worthwhile for him to supply them.  Thus as the price of a product rises, its supply will increase; this is known as a direct relationship and is the opposite of the inverse relationship that exists between price and demand.

As you might expect, the concepts of elasticity and inelasticity are also applicable to supply.   If a good is said to have highly elastic supply, then a small change in price will lead to a relatively large change in the quantity supplied.  If, on the other hand, a good has inelastic supply, then changes in price will not have as much of an effect on the quantity supplied.

In our next post, we’ll discover how supply and demand interact and look at ways that understanding this information can help you to make decisions about the quantity of goods to produce and the prices to charge in your business.

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Treat a Microphone Like a Gun | The HBS Blog
By George Merlis Monday, September 12, 2011

I’ve always found it particularly ironic, if not downright hypocritical, that some people try to teach children that honesty is the best policy by telling them a fib: George Washington chopped down a cherry tree and then ‘fessed up because he could not tell a lie. Somewhat less ironic is the teachable moment wherein people in the media training business try to impress upon clients the dangers of an open microphone. This lesson involves Uncle Don, host of a 1930s kids radio show who, thinking his microphone was off at the end of a particularly arduous broadcast, said aloud, and over the air, “there, that ought to hold the little bastards.”  Uncle Don, the legend goes, was summarily fired, declined into alcoholism and died a pauper.

Like Washington and the cherry tree assassination, Uncle Don’s gaffe never happened.  It was totally made up. And here’s the ironic part: the author of the mic mishap fable was a newspaper columnist in Baltimore (where Don’s show wasn’t heard).  So we have a fake news story about a blooper that never happened being used to teach news interview subjects to be wary of what they say in proximity to a microphone. I guess those who use the fable, like parents dispensing the cherry tree story, feel that the ends justify the means.

Years ago, I dispensed with Uncle Don in media training workshops when I learned it wasn’t true.  Besides the news, with great regularity, supplied me with real examples of people opening their mouths in front of open microphones and broadcasting thoughts that were better locked in their mental vaults.

Citing three or four of the most recent examples--they are endless--I tell my clients to treat a microphone like a gun. Anyone familiar with gun safety has been taught to treat all guns as if they are loaded. Similarly, I recommend treating all microphones as if they are on, recording or broadcasting live.   I like to add, “Never say anything in proximity to a microphone that you don’t want the world to hear.”

This may seem self-evident, but again and again we are treated to people who should know better -- including broadcasters -- saying stupid, embarrassing or counterproductive things in the presence of a microphone, only to have their off-the-cuff remarks become on-the-web curiosities and then in-the-news scandals.

There is an added caution to “Treat a Microphone Like a Gun.”  And that is, treat a reporter as if he is a microphone.  Just because a reporter has put away his pad, pencil and digital recorder doesn’t mean he’s off-duty.  He is recording you in his head.

In fact, when I was a newspaper reporter I found it useful to emulate the TV detective created by the late Peter Falk, Lt. Columbo, and to throw out a “one more thing” question as I strolled casually toward the door of an interview subject’s office.   Thinking the interview over, they sometimes responded with far greater candor than they had during the official, formal interview.

Incidentally, encountering a reporter in a restaurant or at a bar is still encountering a reporter.  When a good story is in the air, any reporter -- in any stage of relaxation -- will focus like a laser and begin making mental notes.  The French ambassador to the United Kingdom, Daniel Bernard, learned this the hard way.  At a 2001 dinner party at the London home of Lord Black -- at the time the owner of the third-largest newspaper publishing concern in the world -- the ambassador made a particularly undiplomatic and scatological reference to Israel.

For an ambassador to do something like this anywhere, anytime is dumb.  To do it in front of a room full of reporters is suicidal, at least career-wise.  There was no way that the many journalists at the dinner were going to ignore that one.  Knowing reporters, I suspect most of them had mentally written their stories before coffee and dessert.

So when around a microphone -- or a reporter -- emulate the real Uncle Don.  Don’t say anything  you don’t want the world to hear.

 

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101: Commodities
By Gregg Schoenberg Thursday, September 8, 2011

In our recently concluded two-part post on inflation, we examined the concept of inflation and explored its effects on small-business owners.  We’re now going to take a look at a special class of goods, commodities, some of which have experienced a great deal of inflation recently.

It is helpful to begin with a definition and an explanation of how commodity goods differ from other goods.  For our purposes, a commodity can be defined as having these two characteristics: it is a basic good used in commerce, and it is interchangeable with other commodities of the same type.  An obvious example would be oil: it is essential to a wide variety of different industries, and there is little difference in a barrel of oil from one provider to another.  Compare this with, say, television sets, which differ widely in quality, size, features, and price from provider to provider.

Commodities can be further divided into soft commodities (e.g. wheat, corn, rice), which are grown, and hard commodities (e.g. copper, gold, silver), which are extracted from the earth by mining.

If you happen to belong to the 95% of American households that own a car and/or you find it necessary to eat on a daily basis, you may have noticed that the prices of some of the commodities that we consume the most, gasoline and foodstuffs, have increased quite a bit in recent years. And if you run a commodity-intensive business you may be dealing with increased input costs and their subsequent pressure on your profit margins.

While there are many factors that come into play in determining the market price of different commodities, a common theme that has emerged in recent years is the growth of the large economies of the developing world, in particular those of China and India.  These two countries, with their combined population of 2.5 billion people, have experienced tremendous growth in industry and have seen per capita income and standards of living rise throughout the 21st century.

As the two most populous countries in the world expand the amount of goods they produce and as more of their citizens are lifted up out of poverty, it is not difficult to imagine what effect this is having on the prices of both the hard commodities used by industry and the soft commodities consumed by an increasingly better-off populace.  Clearly, this trend has led to an increase in demand for many different commodities, and if developing economies continue to catch up to the West, it is not unreasonable to expect the demand side of the equation to continue to rise for some time.

How well the world can keep up with this increase in demand remains to be seen; advances in agriculture have helped to feed a growing world population, and improvements in efficiency and extraction methods have enabled us to keep up with increased demand for energy. However, there is only a finite amount of each hard commodity in the ground, and when supplies are exhausted, they are gone forever.

If the future direction of commodity prices is a concern for your business, there are ways to protect yourself from changes in the prices of the commodities that affect your operations. Via the financial markets it is possible to hedge much of the risk stemming from the rise, or fall, in the price of most commodities.  The mechanics and wisdom of this, however, are beyond the scope of this column. If you think it may be to your benefit to hedge some of your commodity risk, you should speak with a reputable financial institution with expertise in the field of commodity hedging.

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Changing Behavior For Sales Performance Part II
By Tom Caso Wednesday, September 7, 2011

This is the second in a series of blogs; you can read Part I on this subject if you haven't yet done so.

The Man Behind the Curtain: The Place Where Beliefs Reside

“Pay no attention to that man behind the curtain.” Virtually anyone who is familiar with American film culture recognizes that famous line from The Wizard of OZ. Regardless of whether we recognize it or not, we all have a “man behind the curtain” who pulls levers, turns dials and throws switches that affect our behaviors and how we act in any given situation. This “man” lives within the realm of our sub-conscious that we at Integrity Solutions Inc. call the “I AM” dimension.

Let’s back up here a moment and start with a simple model to gain some perspective. Think of a snowman made up of three circles built on top of one another decreasing in size.

The head of the snowman is the “I Think” dimension. Here we accrue knowledge, process thoughts and use logic to make decisions and solve problems. This cognitive dimension is at work during consciousness to negotiate our daily living based upon our experience and perceived needs. It is where the Will and the Intellect are housed. Most education and what we call training are aimed at this dimension.

The next dimension deals with the realm of our emotions which we call the “I Feel” dimension. Our emotions drive us far more than most of us care to admit.  The range of emotions one experiences each day can range from the sublime to the primitive. They can affect our will and achievement drive, especially evident in a selling context. We feel good, we feel bad, we feel happy, we feel sad--we just don’t feel like making those sales calls today.  Sometimes we are at a loss as to where these feelings are coming from or why we are experiencing them at a given time. William James, the famous 19th century Harvard psychologist, stated that where emotions and will come into conflict, emotions will win out 85% of the time. Test that statement with your own life experience and see if that is true for you. If you have ever gone on a restrictive calorie diet you can relate.

The third dimension, the snowman base, is what we call the “I Am” dimension. Here reside our values, ethics, attitudes and beliefs. This is where our actions and behaviors are determined by our beliefs about how we see ourselves. These tapes play 24/7 regardless of our awareness. Our belief boundaries are circumscribed in this sub-conscious dimension. In a sales context that translates to matters such as how much we are capable of selling and how much we deserve to earn and enjoy. This man behind the curtain is powerful and determines our success or failure, our excellence or mediocrity, our winning or losing.  Expose“him, change him and use him in order to develop personally and professionally. Most so-called sales training fails because it does not recognize or handle this dimension. All three of these dimensions must be in harmony in order to maximize our full potential. How that is done will be the subject of the next several installments in this series.

 

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Consulate Legalizations
By Cortney Sharp Tuesday, September 6, 2011

Official documents are valid only in their own country. Therefore, to be recognized for use abroad, they have to be authenticated, legalized, or depending on the country, furnished with an “Apostille of the Hague.” The apostille is an international certification comparable to a notarization and is only valid in countries that are part of the Hague Convention (List of Countries). For all other countries not in the Hague Convention, consulate legalizations would be required in order to legalize your documents. Legalizations from the consulate involve dealing with 3 different State agencies.

The process of the legalization is broken into two parts. The first part is to obtain the correct legalization from the State of Formation or the State of Delaware. There are several different ways to go about consulate legalizations based on the type of document you are having legalized. Below is an outline of the different types of documents:

Documents Issued from the State of Formation

Documents such as good standings or certified copies will not require certification from a notary or additional certification from the State of formation as they are already considered certified. We will obtain the good standing or certified copy from the State of formation for you.

Documents Provided to Us by Your Company

Internal documents, such as operating agreements, resolutions or by-laws, will require a notary certification. We can provide a "confirmation of receipt," which states the type of document, when it was provided to us, and if the document was original or not. This document is signed by Harvard Business Services, Inc. and then that signature is notarized by a notary public. We will then obtain a notary certification from the State of Delaware which confirms the notary's appointment.

Documents Created by Us for Your Company

Other internal documents, such as powers of attorney or certificates of incumbency, can be obtained from us and then sent to the consulate for legalization. The documents created by us will contain a notary signature eliminating the need for a confirmation of receipt. However, a notary certification will still be required. Please contact our office to find out the requirements for obtaining a custom document from us.

The second part of the process is the legalization before the U.S. Department of State and the consulate of your choice. The documents must be legalized first by the Department of State and then by the requested consulate. This process can take anywhere from about 2 weeks to 1 ½ months depending on the consulate. The consulate will send the documents back to us by express courier. We will then email the documents to you for your files and courier the originals to you for an additional fee. The cost of the actual legalization from the Department of State and the consulate varies depending on the country that is required.

Please contact our office to inquire about pricing, 1-800-345-2677. Harvard Business Services can take care of the entire process for you and eliminate the hassle!

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