In a book called Private Empire – ExxonMobil and American Power, Steve Coll, the Penguin Press, 2012, Mr. Coll takes a look at Exxon and how it operates. In a book of over 600 pages – one of the overriding themes is risk management at Exxon. There is always a perception at the larger companies – they can risk their money or capital to stay large, however the reality is different. Paul O’Neill, the treasury secretary in the Bush administration often said, ” Capital is a coward, and capital is not going to go any place that is unfriendly.”  In terms of ExxonMobil even though it is one of the most profitable companies in the world, they are not going to risk their capital until many senior committees have vetted their concerns about the risk and the expectation of their internal rate of return. For example, if Exxon has a 20% internal rate of return expected, even though projects may make sense for a public relations point of view, Exxon will not go forward as other projects will make the scale first.

Another way to look at the quote is for North American dollars to go to another country, a top priority is to make more, the second one is to ensure the money flows back to the head office. It is one of the reasons, why large multinational companies which can trade anywhere, still latch themselves to their home country origin. In the case of Exxon, it is a multinational, but to outsiders it is seen as an American company which works with the White House. In reality sometimes it may and sometimes it does not for Exxon has its own agenda. Part of the agenda is thinking about 30 years plus and what will be happening. It is important to review the outlook just in case a basic assumption is not correct or has changed. No matter what the case whether Exxon and the government are working together or not, perception is the rule.

Linking to dividend paying stocks, in relationship to the phrase about capital being a coward, the first rule of having money is not to lose it. Then you want to make more, that means investing in existing profitable companies is a great strategy. Profitable companies share prices tend to more stable and when the hot items in the market cools, money flows back into profitable companies. Equally important profitable companies can pay dividends to its shareholders which is a good thing.

There are more questions than answers, till the next time – to raising questions

In a book called Private Empire – ExxonMobil and American Power, Steve Coll, the Penguin Press, 2012, Mr. Coll takes a look at Exxon and how it operates. Mr. Coll examines how foreign policy is mixed with oil and Exxon. By any financial standards Exxon is a tremendous success story – it is profitable, well run, has tight standards, high internal rates of return, continues to deliver dividends and for vast majority of people the stock should be a core stock holding. As the largest and most profitable oil company, Exxon has an interesting role to play in the world and US economy. Often times the Management Team thinks it is a world corporation without borders, however to the an outsider looking in, ExxonMobil is a successful US corporation. To the outsiders, which include the White House, Exxon is asked to do roles which benefit the US, sometimes in roles which Exxon would prefer not to do. However, when Exxon has a problem, it turns to the government and the White House to help it . It seems from Mr. Coll’s book it is very hard to be seen as a worldwide corporation rather than a US one.

Linking to dividend paying stocks, as a successful profitable company, the organization will have many conflicting demands put on it, including asking to be a leadership position to all kinds of events. It is important for the company to decided what it can and can not do. In the case of Exxon, they try to live by the contract with the government, supplying oil revenues, but has no desire to be the government. Outsiders looking in, seeing the profitable revenues the company makes, often assume more could go to the government, so the government can do more for its citizens. It is a tough balancing act.  For shareholders, making profits to pay dividends should be the first priority.

There are more questions than answers, till the next time – to raising questions

a book called Private Empire – ExxonMobil and American Power, Steve Coll, the Penguin Press, 2012, Mr. Coll takes a look at Exxon and how it operates. As the largest oil company and most profitable company, how the company operates is a very interesting story. The most famous Exxon oil tanker is called the Exxon Valdez – it ran into a reef and split oil, there was plenty of blame to go around for what happened, the least credible is the captain was drunk. However, the real issue is what did the company do after the spill? It turns out – the company and the state were in a stalemate about what should be done. Exxon is a company which prides itself in having procedures for everything as demonstrated by former President Lee Raymond when asked did Exxon do the right thing? His answer was I would be naïve to say we were always doing everything exactly right, however if you are asking me if there were any major decision points that we faced in how to respond that in hindsight we would go back and say we think we were wrong, I do not think there are any.

President  Raymond was asked about building more refineries in the US as a security protection, he answered, Exxon is not a US company, and I do not make decisions based on what’s good for the US. That was a strange response because just about everyone looking at Exxon does see US interests as does the the White House.

Linking to dividend paying stocks, President Raymond delivered great financial discipline and increasing cash flows, even though his public relations because of the Exxon culture was below par. When a company continues to deliver disciplined cash flows, maintains tight review of financial spending, whether the President has good public relations or not so good, as long as the dividend payments the public relations is a secondary concern.

There are more questions than answers, till the next time – to raising questions.

If you want to own a dividend producing company, one of the best companies to own over the past 100 years is Exxon, previously called Standard Oil. The founders including John Rockefeller who consolidated the oil industry at the turn of last century and made billions of dollars. From those early beginings to the present the oil industry at least Standard Oil has been very profitable. It turns of dividends – it has paid billions of dollars to its shareholders and it is hard to imagine that it will not continue to do so for the next 50 years plus. In a book called Private Empire – ExxonMobil and American Power, Steve Coll, the Penguin Press, 2012, Mr. Coll takes a look at Exxon and how it operates. The company does not make profits just because oil prices are high, it is a very disciplined company which prides itself and expects a superior record of project execution, budget management, and use of cutting-edge technology. Much of the oil industry is very capital intensive projects – Exxon expects to bring its projects under budget and on time. Those that like working for Exxon like and expect the culture of discipline and accountability. From an investor point of view – those attributes of the Exxon culture are music to the ears. However, as Exxon has interests around the world, sometimes those attributes do not necessarily include great listening skills. An internal part of Exxon is rate of return on capital – how much each project increased the shareholder capital. Similar to all oil companies, Exxon concern was to increase the corporation’s oil reserves and that lead to its buying of Mobil. Exxon had concentrated on western countries, Mobil was more international. As the dominant oil company in the world, how Exxon has managed is the story of the book.

Linking to dividend producing stocks, if you wish to own a consistent dividend producing company, ExxonMobil should be one of the companies you own or on your list to acquire. You may or may not understand how Exxon operates its relationship to other governments, but as a dividend producing it continues to do very well.

There are more questions than answers, till the next time – to raising questions

Avon is a one of the world’s leading beauty companies and today’s article is from the book called Avon, Building the World’s Premier Company for Women, by Laura Klepacki, John Wiley & Sons, Hoboken, New Jersey, 2005.The book offers good insight into how Avon operates and continues to be successful. In general there are some business lessons to be learnt from Avon:

Never forget who is responsible for your success – for Avon it is their sales force of women. The key is does the company show it and are people consistently going out and talking about Avon?

Keep up with significant trends, but stick to your values.

Remember what business you are in. Similar to all profitable dividend companies, a healthy cash flow means people want to spend it, Avon diversified into many categories and then came back to beauty products and direct selling.

Maintain a consistent message – whatever country Avon is in, people know that at is core, Avon is a beauty company that empowers women and supports women’s causes such as breast cancer.

Let you independent contractors do it their way. Avon puts few restrictions on how its sales representatives promote, advertise or operate their businesses. This freedom allows people to be creative to sell Avon, which means each business is unique.

Create and nurture your image – in case of Avon it started with door-to-door selling and has changed but it is still a person to person sale. Advertisements continue to tell consumers to call their Avon representative.

Use available tools effectively. – always invest in your future,

Build systems that support your business cycle – Avon has a quick spin cycle to continually introduce new products. Departments are structured to fit into the introduction of new products, it means it takes time for people to fit into the cycle and thrive.

Linking to dividend paying stocks, the above lessons can be used to viewing any company, the answers will vary.

There are more questions than answers, till the next time – to raising questions

Avon is a one of the world’s leading beauty companies and today’s article is from the book called Avon, Building the World’s Premier Company for Women, by Laura Klepacki, John Wiley & Sons, Hoboken, New Jersey, 2005. The book with approval from Avon is both a history of the company and some of the reasons why Avon which started in 1886 is still in business. There are a wide variety of distribution channels – to sell merchandise and Avon has been successful with women selling women – first door to door now face to face. Along the way the markup has been good with Avon controlling and doing a very good job from the research and development to bringing out the products. The beauty industry introduces many products to complement the fashion industry. For example scents or fragrances are introduced in the fall to allow for holiday sales. The new products are designed to entice buyers to see the products and allows the ability to buy other company offerings.

Avon offers a new brochure every two weeks in the US which means they retool their offerings 26 times a year. It can do this because of the strength of its product development machine – which introduces over a 1,000 products every year. To be fair many of them are novelty items, but comparing it to the competition – their newness is 15%, Avon is 40%. This means Avon which has a history or a culture of innovation does much of the development in house, following a very tight matrix of development.

Linking to dividend paying stocks, Avon pays a dividend and one of the methods to continually analyze the company is its ability to execute and bring out new products which are in demand. Every company has a competitive edge which they bring to the market, for there are other companies doing similar things, but the best ones do it better. Similar to every organization sometimes everything goes right, sometimes the obstacles in the system pop up, defining the competitive advantage of your company’s helps you determine how long you should own it.

There are more questions than answers, till the next time – to raising questions

Anyone who has every gone to a mall food court can recognize most of the restaurants as well as the other stores in the mall. Many of the stores are chain stores or franchises and if the mall is successful, the stores should be to. People come to the mall and go to the stores and all is good in the world of retail. How those chains started and achieved sucess are interesting stories. In the book Double Double, HarperCollins, 2012, Douglas Hunter writes about the Tim Hortons’ story. The theme that was taken from the book is the Quick Service Restaurant (QSR) is a very competitive business and a chain that achieves success today, may not be successful in a few years. The problem will become the expectations of existing customers and the need to continually attract people to the chain. Some will want very little change – they like the QSR as it is, some will want more change and some will try other places. When the routine of going to the QSR changes, people will reasonably quickly adapt to something else. Management besides attracting and maintaining people to work in the restaurant business must also do the balance act of their customers. For the chains that are successful, congratulations, but things change.

Linking to dividend paying stocks, there are methods to play the QSR field for their are companies which have made and continually make money such as McDonald’s, however there are many chains that are not as profitable – Burger King. Very talented people work for the chains and try to offer good products. There will be many reasons why a store or small chain did not become national and that can be a very good thing – a profitable regional chain is very good thing to own. When investing in QSRs see the long term profitability first, not the possible growth of expansions, then how does the chain make money? selling franchise fees – then it needs high growth or is it in the sale of products and advertising? are the franchisees reasonably happy with the franchise or are there lawsuits outstanding? do you like the franchise? the food business is a very competitive one, but there is opportunity to be found.

There are more questions than answers, till the next time – to raising questions

Anyone who has every gone to a mall food court can recognize most of the restaurants as well as the other stores in the mall. Many of the stores are chain stores or franchises and if the mall is successful, the stores should be to. People come to the mall and go to the stores and all is good in the world of retail. How those chains started and achieved sucess are interesting stories. In the book Double Double, HarperCollins, 2012, Douglas Hunter writes about the Tim Hortons’ story. The story is about the change of people’s eating habits to eating out or what is termed the quick service restaurant (QSR). For a long time, most people did not eat out and there were only a few chain stores, but society changed and if you ask around, a relatively high percentage will have eaten outside their homes this week. A 2000s figure of  77% of chains fail after 5 years means not all franchises are even close to being equal, which means investing in a franchise is not a sure thing. The old adage about location, location, location  is very important element.  How a restaurant goes from a struggling idea to an iconic way of life and maintains the ability to earn profits is a very interesting story.

Linking to dividend producing stocks, there are stocks which own restaurants which provide a dividend, if you eat at them you can technically get paid to eat there. You pay for your meal as well as many others, only you receive a dividend from the shares. It can be a good way to pick one of your stocks, but remember the restaurants have to appeal to many people not just you. The high failure rate for food franchises means most restaurants are not going to be chain stores but are independent and carve out their niche of the business. We need both types to ensure the chain stores continually change or be open to change of their businesses. If you look closely at your favorite chain food store – you should see changes over the years.

There are more questions than answers, till the next time – to raising questions.

It is amazing to think how the world has changed in the past 20 years and how new industries came forth when no existed before. An interesting history of such changes was written by Caroline Van Hasselt book High Wire Act – Ted Rogers and the Empire that Debt Built by John Wiley & Sons, Toronto, 2007. In the book, the author talks about cable which is the reason for the existence of the Rogers company but in the end they made the switch to where their greatest revenues come from – wireless or cell phones. The process of making the transition and the growth of the cell phone industry makes a fascinating read in relationship to the types of decisions companies have to make to ensure their survival and growth

Companies which specialized in the infrastructure are a very capital intensive business and to continually have the best technology that the rest of the world accepts is a very tough decision. If the companies get it right, they make millions, get it wrong and your business plans need a major adjustment For capital intensive companies – they live in a world which expects to have pricing of services in a monopoly like conditions For non capital intensive companies competing on price is a given. For Rogers as cell phones became smaller, the prices fell and the average person needed one, Rogers revenues zoomed up, the debt fell and soon they could and now pay a dividend. At the moment the industry is driven by the data to sell to your devices.

Linking to dividend paying stocks, when a company pays a dividend its management can not and is not expected to bet the company on new technologies – that is for growth companies. Management must change from an very entrepreneurial one that hates the competition to using its assets to the best of its abilities to achieve a monopoly like competition for the bulk of its revenues. Most companies are not successful in the transition, the type of management required is different, which makes the process interesting.

There are more questions than answers, till the next time – to raising questions