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Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985.  Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand (which is now part of PricewaterhouseCoopers).  She attended the University of Michigan and Wayne State University.


  • The Van Halen contract: "No brown M&Ms"

    [View:http://community.cengage.com/GECResource/themes/gew/utility/ :550:0] from youtube , posted by rockfan7777 "M&M's (WARNING: ABSOLUTELY NO BROWN ONES)." This is part of a rider, page 40, to the 1982 concert contract of the rock band Van Halen . It is sometimes joked about by those making fun of the excesses demanded by rock stars demanding diva treatment. But, according to band singer David Lee Roth, there was a good reason for this clause. Van Halen was the first band to travel with a huge number of big lights. They would contract for facilities that could deal with their electricity and space requirements, but sometimes they would get to a venue and find that one thing after another that was clearly designated as needed in the contract was not available. Therefore, the M&M clause was inserted as a " bright line test ." David Lee Roth explained: “If I came backstage and I saw brown M&M’s on the catering table, it guaranteed the promoter had not read the contract rider, and we had to do a serious line check.” Sources: " Van Halen explains the U.S .government " by Ezra Klein, Bloomberg News , April 30, 2013. Follow up: What is a "bright line test" or "bright line rule"? Give some examples from other situations. Note the disparity in reactions possible between hearing the short version of the M&M clause story, and the longer explanation. What miscommunications can occur from limited information?

  • Industrial terrorism...or just an another accident?

    image from nydailynews.com The tragedy in the fertilizer plant in West, Texas killed 12 people and injured 200 in a fire that turned into a blazing explosion that trapped workers. These statistics are worse than the statistics from the bombing at the Boston Marathon. Both events injured innocent people, who were occupied with tasks that had no political significance. Yet the Boston tragedy was immediately labeled "terrorism"; the tragedy in Texas was headlined as an "accident." Bruce Machart recalls his own grisly experiences with foreseeable industrial accidents, from 18 years ago when he was working in a factory. In industrial management, these accidents are called "LTAs"--"lost time accidents," a phrase which seems to belie their life-altering severity. Nevertheless, Mr. Machart points out that the devastation to families in Boston and families in Texas are not different. They both feel like terror. Yet, the media has spun the results a little differently. " Lives have been 'lost' in Texas," notes Machart , "but in Boston, by God--lives have been 'taken'." image from news.yahoo.com One thing for certain, "spin" has been a major player in the communication about these tragedies. Politicians have used the events to gain political capital. Barney Frank said that increased regulation--bigger government--might have prevented the tragedy in Texas. Commentators on the other side countered that small businesses can't afford the costs of increased safety and regulation. I don't know. Could more safety precautions have been taken? Or was the accident inevitable, as Machart implies was the case in the industrial setting with which he was experienced? Clearly, the language we use to talk about events can change the way we feel about them, and can influence the way we deal with the underlying causes of destructive events. There is debate about the ethical obligations that business have to maintain safety standards when regulations are not in place or are not enforced. Perhaps talking about these events as equally tragic is a way to influence corporate behavior regarding safety. Source: " Only an Accident ," by Bruce Machart, New York Times , April 23, 2013. " Democrats Invoke Boston, West To Defend Government's Role ," radio story by Ari Shapiro, National Public Radio, April 26, 2013. Follow up: Do you think that the bombing in Boston and the explosion in Texas should both be labled "terrorism"? Why or why not? What are the downsides of using inflammatory labels? Are there any positive effects?

  • Film Visual effects: Product quality up...but revenue down

    image from www.teamelf.com Digital Domain , Custom Film Effects , Rhythm & Hues , Frantic Films , Lowry Digital --these are all digital effects companies in Los Angeles that have either filed for bankruptcy or been bought up by a foreign competitor recently. The irony is--with high definition and increasingly realistic visual effects on Avatar , Life of Pi , The Avengers , and other films--an observer would think these businesses would be thriving rather than going under. [View:http://community.cengage.com/GECResource/themes/gew/utility/ :550:0] But foreign competition has driven the business out of the US market. This is partly due to industry subsidies by governments in Canada, Britain, and New Zealand, and partly due to cheaper labor costs in India and other Asian countries. Source: " Generating Stunning Visual Effects, But Not Enough Revenue ,"by Richard Verrier, Los Angeles Times , March 24, 2013. Follow up: When other countries subsidize an industry, do you think the US government should also subsidy the industry, to re-create a "fair playing field" on a world-wide basis? What would be the pros and cons of such subsidies? What industries are subsidized by the U.S. government? How does this help or hurt world markets?

  • Investors unhappy with Lululemon "transparency"

    This is what the Lululemon pants USUALLY look like... Usually, "transparency" is a quality that investors appreciate from the companies they've invested in. But a different kind of transparency has caused a serious problem for Lululemon Athletica Inc. ( LULU ), the high-end yoga-wear retailer and manufacturer. The problem? Black Luon pants had quality control problems that made them see-through. The pants were shipped at the beginning of March and pulled from the stores shortly thereafter, but because they constituted 17% of the inventory in women's pants, the effect on sales (and Lululemon's reputation) has been considerable. First quarter earnings will be even lower than expected. Shares in Lululemon have fallen 16% since the beginning of the year. Over that same period, the Standard & Poor's 500 Index is up 8.6%. Source: " Lululemon falls as pants deemed too transparent, "by Leslie Patton & Sapna Maheshwari, Bloomberg online, March 19, 2013. Follow up: What could Lululemon have done to prevent this problem? Since this is not the first quality-control problem that Lululemon has had, what actions do they need to take from the Management side? What about the Marketing side? What is the Standard & Poor's 500 Index? What information can it give an investor?

  • Faux "faux fur" causes hair to stand on end

    image from caninescorner.org: a Raccoon Dog What is a company to do if they can't get control of their supply chain? The demand for "faux fur"--high quality synthetic furry material--has been higher than supplies. Some companies have made a surprising substitute: the Real Thing. The retailer Nieman Marcus was recently caught advertising Burberry coats trimmed in "faux fur"...which turned out to be raccoon dog , an East Asian canine that looks like a raccoon. image from www.niemanmarcus.com The marketing problem is also a legal problem: some individuals have allergies to real fur, and others just prefer not to wear it for ethical or other reasons. A company can't advertise a product as "fake fur" and just substitute real fur. The Humane Society tested the suspected products , and reported their findings to the Federal Trade Commission (FTC). FTC officials reported that Nieman Marcus and the other retailers agreed to follow the law. Source: " A Faux Faux Fur Kerfuffle at Nieman Marcus ,"by David Weinberg, Marketplace, American Public Media , March 20, 2013. Follow up: Recently there was another case where substitutions had been made: horse meat had been substituted for beef. Research this substitution. Summarize who was involved in that case and what consequences occurred and were imposed. What are other alternatives manufacturers have (besides substitution) when they have problems getting supplies needed for production? What are the consequences of these alternatives? If you were the purchaser of a product in which there had been a substitution from what was advertised, what remedies would you expect would be fair?

  • Vehicle Sales and Production up World-wide

    The Canada-based multinational Scotiabank published its Global Auto Report earlier this month. Some of the news it reported included: Vehicles sales, globally, are up 13% over last year Chinese sales are up 49%, year over year since 2010 Overall Asian sales, compounded each year, are at 30% over the same period South American sales and production were up The U.S. housing market rebound caused an increase of 21% in pick-up truck sales Production in Thailand increased at a higher rate than production in China North American production increases are primarily in Mexico According to another source, Wards Auto/Automotive Compass, these rates of increase are not forecasted to continue over the next three years. Source: " Global Vehicle Sales and Production Surge in Early 2013: Scotiabank " from Joe Konecny, Scotiabank Media Productions, reported in the online Wall Street Journal , March 6, 2013. Scotiabank Global Auto Report [this is a .pdf file] Wards Auto/Automotive Compass data reported in the International Business Times , January 2013. Follow up: Look at the graph of projected vehicle sales and production over the next three years. What conclusions can you draw from that graph? Use some of the information from the linked article to inform your analysis. What is the difference between a graph showing "the changes in the rates of increase from one year to the next" versus a graph showing the "actual increases or decreases in production from one year to the next"? How can this mislead the reader? What does Scotiabank do? What companies in the USA are comparable?

  • Honeybee shortage and almond production

    image from thechronicleherald.ca The environment is not great for honeybees lately. That might not seem to mean anything to many of us, who don't care for insects, or think bees are only about honey. But bees and other "pollinators" have a huge impact on agricultural business operations, on food prices, on wildlife, on nature, and on all business operations relating to the environment. Without pollinators, many crops can't grow, there's less food for wild animals, and eco-systems fail. In case you haven't been following the stories, here is what has been happening with bees lately: From coast to coast, bee colonies have been dying off. Beekeepers are "lucky" if their losses are only at 30-50%. Some of the causes include a "drought in the Midwest, parasitic mites that feed on bee blood, and an unusually cold snap earlier this winter in California." In addition, the trend by some farms to plant more corn (because of the demand for high fructose corn syrup), which doesn't flower, means that bees that used to thrive during part of the year on other flowering crops, no longer have food to maintain and increase their hive size. The shortage of honeybees is a critical problem for almond growers in California. Honeybees are needed to transfer pollen from male almond trees to female trees, or nuts do not form. One grower, Paramount Farms, rents 92,000 bees to pollinate 46,000 acres of almond trees. It has to scramble to get its bees from 15 different states. There are not enough bees, due to the problems with bee colonies, for all of the almond growers in California to fully pollinate all of their trees. California produces 80% of the world's almond crop...and almond demand is growing world-wide. almond orchard from agsi.psu.edu. The trees are in bloom, but are there enough bees? Gordon Wardell, a bee biologist, thinks that the almond industry needs to solve the bee population problem if the industry is to thrive and grow. "It's our responsibility as stewards of the bees to figure out about what's going on and bring them back into balance," he said. Sources: " Honeybee Shortage Could Harm World's Supply of Almonds " (includes slideshow), by Wendy Lee, Take Two , KPCC, Southern California Public Radio, March 13, 2013. " Colony Collapse Disorder " Wikipedia. Follow up: Think of the "stewardship" of the bee colonies as being analogous to gaining "control of the supply chain" for a more industrial business. Can you think of other examples where "stewardship" of a resource is similar to assuring that a production essential is available when the business needs it for production? Check out a related story from the same Take Two program, about changes in the migration habits and populations of monarch butterflies. How do monarch butterflies affect the eco-system, and which businesses might depend on the eco-system that is affected?

  • Horse meat production now sounds even worse

    Recently, a company in New Mexico filed an application to slaughter horses for meat. Slaughtering horses for meat has been banned in the USA since 2007, but the law expired in 2011. Valley Meat 's application to begin this practice again was newsworthy...as well as being a jumping off point for various jokes...as well as outrage. Reading the articles about the application reminded me of a sight from an Italian grocery store, in the baby food section . It seemed unusual enough to my American sensibilities to warrant a photo: photo by Teri Bernstein It shouldn't have surprised me to read today's update to the article. Valley Meat, who has been operating a cattle slaughtering business to this point, has had several health and production violations over the last few years. According to the Federal Meat Inspection Act , the property of any slaughterhouse or meat processing plant “ must be maintained to prevent conditions that could lead to insanitary conditions, adulteration of product, or interfere with inspection .” Unfortunately, there have been violations documented by the New Mexico environmental department that Valley Meat has not filed an application to be a "composter" and has not properly disposed of animal waste and the by-products of the cattle slaughtering operation. Dealing with waste is always a component of an adequate production process. Read the article if you are interested in the grim details. Source: " Horse Meat Applicant's Food Safety is Questioned " by Stephanie Strom, The New York Times , March 13, 2013. Follow up: Do you think that a company with health violations regarding meat production should be allowed to expand its operations? Why or why not? What is the role of the Federal and/or State governments in regulating food production, in particular meat production, in your opinion? What is the level of compliance standards that you would want for yourself and your family? How should compliance inspections be funded? What should be the standards for determining what animals can be slaughtered for meat? Who should determine these standards? How do these standard affect the rights of businesses to operate and make money? Should companies be required to deal with its waste products as a condition for being licensed for production? Or is this unnecessary regulation?

  • Microsoft Office: Lease or Buy?

    Just this afternoon, I was visiting the Video-graphics department at the college where I work, and had this conversation with a classified worker: CW : "How much do you know about Word ?" me: "Less than I used to. What's up?" CW : "I haven't really been able to use it since the 2007 version got replaced." me: "Join the club! Do you know a fast way to change your header?" CW : "Nope. Do you know how to put in a watermark?" me: "Try INSERT ." CW : "That's where I am. No INSERT . And HELP is opening the Internet..." me: " PAGE LAYOUT ? VIEW ?" "elucidation" of the Microsoft Menu found at www.jenpowell.com Trial and Error seems to be a typical Word 2010 user process. And users are stuck with whatever version Microsoft is currently supporting. But there is only so much that a word processor can do. So, to generate new Sales, Microsoft has to "upgrade" its version. All they can do is mix up the functions and tuck them into different menus and more complicated toolbars. That way they can justify having a new version of their program to sell. Maybe that will change. The bad news is: there is a new version--Office 2013. The good news: Microsoft has a new Sales model that might decrease their need to make annoying cosmetic changes. Here's the new plan--not just for Word, but for the whole Suite of Microsoft Office programs--Excel, PowerPoint, Access, One-Note, and Publisher: Choice one: buy it outright--about $400 for the complete Office 2013 (the old model); or Choice two: Subscribe to "Office 365" for about $100 per year...and have the right to put it on up to 5 computers. Of course, your subscription would include any upgrades, but maybe Microsoft wouldn't have the incentive to make annoying cosmetic changes if the new Sales model--an operating lease--ends up improving their revenue stream. Meanwhile...does anyone know how to turn off "automatic formatting"? Source: " Subscribing to Office, Now and Forever " by David Pogue, New York Times , March 6, 2013. Follow up: Read the linked article. What are all of the new features of Office 2013? What additional "pot-sweeteners" is Microsoft offering to those who choose to buy the subscription to Office 365?

  • Oregano key to marketing healthier chickens

    image from article linked below Demand can create supply. When it comes to food, a growing number of consumers want to only eat meat and poultry products that have not been pumped full of antibiotics, which is a part of big farm food production. From the linked article: "Retailers like Costco, Whole Foods, and Trader Joe's, as well as some restaurant chains, claim they cannot get enough antibiotic-free meat." To meet the needs of this growing consumer population, Bell & Evans is mixing oregano oil into its chicken feed, as an alternative to antibiotics. Some "health nuts" claim that oregano oil can help cure colds and other viral and bacterial illnesses in humans, but there is scant scientific evidence to back up such claims. Nevertheless, Scott Sechler of Bell & Evans has been "medicating" his chickens with oregano-laced feed for about three years. His experience? Nothing has worked better as a substitute for antibiotics. The use of oregano oil is also complimented by several "best practices" in terms of hygiene. In addition, Bayer, a drug producer, did a study with pigs comparing the oregano oil product used by Bell & Evans with four of Bayer drug products. To the surprise of Dr. Lucio Nipoli, the Bayer product manager, oregano oil out-performed all of the drugs, and the pigs taking the oregano oil looked "much more healthy and were not so dehydrated and wasted." More testing will be required if alternatives to antibiotics are to be in wider use. Source: " In Hopes of Healthier Chickens, Farms turn to Oregano ," by Stephanie Strom, NYT, December 25, 2012. Follow up: Are you concerned with the use or over-use of antibiotics in food production? Why or why not? Would you be willing to pay more for antibiotic-free meat? Have you been aware of marketing campaigns involving antibiotic-free meat, poultry and milk? Did your family buy an organic turkey for Thanksgiving, or do you purchase rBST-free dairy products? What laws affecting the production and sale of these products could make marketing them more profitable?

  • Hostess Cupcakes and Twinkies--no more?

    image from skreened.com It is amazing that a food with very little nutritional credibility can engender such loyalty and passion. Twinkies are a real cultural icon. The maker of Twinkies , Hostess Brands, produced their last Twinkie on Friday, November 16, 2012. The "straw that broke the camel's back" was a breakdown in labor talks, so unions are taking the rap for the demise of this beloved product. The real story is a little more complicated--one of high finance and arbitrage. Private equity backers, who bought up Hostess--perhaps with the goal all along to close its doors--saddled Hostess with additional debt. Then management went into labor negotiations demanding concessions on top of concessions. When the baker's union finally decided to go on strike, management decided to stop production and liquidate the company. This was perhaps a melodramatic gesture, as many believe the brand still has value. It is possible that another company will buy up the trademark and resume production. Source: " As Labor Talks Collapse, Hostess Turns Out the Lights " by Michael J. De La Merced and Steven Greenhouse, NYT Dealbook, November 16, 2012. Follow up: What does "liquidate" mean? What are the steps in a company liquidation? Read more recent articles about this company. What is the most likely plan at this point? How do you feel about Twinkies and other Hostess products?

  • Is the Chinese economy crashing?

    image from China National Bureau of Statistics via nationalturk.com Though most of us still believe that the Chinese economic is growing at an unstoppable pace, analysts are looking at the reality of the numbers and seeing something else. It looks as though Chinese production in many sectors--"clothing, foods, steel and cement"--began falling last October. And observers predict that the Chinese will have a real debt problem if leaders do not begin to "rebalance" the economy soon. "The challenge," according to Michael Pettis, an economist at Peking University, "is that Chinese officials need to start sharing -- taking money hoarded by the state and putting it into the hands of real people, balancing who gets what." (from the article cited below) image from foreignpolicy.com If Chinese consumers continue to increase consumption, and Chinese production continues to slow down, it is possible that more US products could be exported to China. We'll see... Source: " Has China's Bright Future Turned Dim ?" by Rob Schmitz, Marketplace Morning Report , American Public Media, November 9, 2012. Follow up: What is the GDP and why does it matter? How does Chinese production affect the US economy?

  • Apple execs get sliced

    photo of Scott Forstall from the Business Insider article Apple chose to announce the termination of key executives just as the most treacherous storm of the century was gripping the attention of news junkies and casual observers. But not even Hurricane Sandy could keep this news under the radar. Scott Forstall, head of mobile software (iOS), and once thought to be the heir apparent to Steve Jobs, is leaving next year, against his will. John Browett, head of retail, was terminated immediately. According to the Business Insider piece, the reasons for Forstall's departure include: his abrasive personality his history of forcing out other Apple executives Steve Jobs, his mentor, is no longer around to protect him his poor relationships with Jony Ive (hardware designer) and Bob Mansfield (hardware engineering) two major product failures for which he had oversight responsibilities John Browett has been with Apple for less than a year. He made headlines when his staff cuts had a negative impact on retail sales and customer satisfaction. CEO Tim Cook will oversee retail operations until a replacement is found. John Browett Sources: " Apple announces executive shake up... "; by Hayley Tsukayama, Washington Post, October 30, 2012. " Why Apple's Mobile Leader Scott Forstall Is Out " by Jay Yarow for Business Insider, October 29, 2012. Follow up: What two project failures did Scott Forestall have responsibility for? What happened in each case? Who are the up-and-coming new executives at Apple? What impact do you think they might have on the company and its performance?

  • The business of Seeds

    photo by Sean Gallup for Getty Images Seeds are a commodity that have had value since the beginning of time. What is interesting from a business standpoint, is that seeds were cultivated, owned, and self-propagated up until a few generations ago. Now, because of science and research and--more particularly--genetic modification--seeds are now "rented" and are subject to patents. Even more of a game changer--many of these seeds produce plants that do not produce its own viable seeds, so seeds need to be repurchased from the corporation doing the genetic modification every year. In addition, legal ownership of the seeds remains with the corporation that genetically modified them...not with the farmer that grew them or collected them from his or her plants. Some people would just like to "opt out" of this Darwinian tangent...but that may not be possible because seeds in the environment can affect non-GMO (heirloom) seeds, altering the heirlooms to affect their attributes and their ability to reproduce. One of the experts interviewed for this piece was Janisse Ray, who wrote The Seed Underground . Source: American Public Media Marketplace, " The Science (and business) of Sowing Seeds " by Kai Ryssdal Follow up: Have you ever grown anything from seed? Describe your experience. Research and explain the difference between "hybrid" and "genetically modified".

  • U.S. auto companies doing GREAT!

    image from Detroit News link; photo by Charles V. Tines for The Detroit News Maybe the economic recovery is a little "iffy" as reported in the political press, but, according to Marketplace , the US auto companies are doing really well. What a comeback! Factories are operating at greater than 100% capacity! Wait a minute--How can something operate at greater that 100% capacity? That sounds crazy. But, using the principles of managerial accounting and standard costing, there is a "normal" capacity for operations for every business, and, really, every operation. For example, if you are a student, the "normal" number of units per semester is probably 15. But, you are still full time if you are taking 12 units, so a lot of students are in that zone. If you are a human being, the "normal" number of hours of sleep per night is eight. The "normal" amount is what is labeled "100% capacity." But it is totally possible to operate at above that level at any point. You can take more than 15 units. You can sleep more than 8 hours. The "over capacity" rating for the auto plants is based on a standard of two-eight hour shifts per day and and 5 day work week. Over capacity is anything more than that...i.e,: more than 80 hours of factory labor. Follow up: Check out the article in The Detroit News . What is the level of operations that the auto industry is striving for? Why is the auto industry important to the American economy?
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