Often regarded as the most badass specialization. Finance can take on many different faces. From being a Goldman Sachs IB analyst, which is pretty sweet, to the wonderful coupling of technology and financial instruments known as FinTech, and everything in between.

On your marks. Get set. Go! There is currently a race happening. The prize? To be the king of online payment processing.

As you may know when people think of finance, they think of a CFA. However, did you know that an MBA is often regarded as slightly more advantageous? Check out this article here for more debate on CFA vs MBA!

Opening your own investment portfolio and breaking free from the stereotypical mutual fund third party management is exciting! You have your future in your hands! I have used a couple online platforms and the best one I could find, especially for a beginner like myself is Questrade. They even have a great resource where you can practice, and trade on a fake market for free!

So go try it now and have some fun! I don’t mean buy a highly volatile stock on margin, I mean take it easy. Learn the ropes. You need to first establish your risk tolerance, are you risk aversive? Establish what you are comfortable with losing before you do anything.

Time is ticking so start now! digital_number_one_green_animation_clipart


Another key part of financial practices is forecasting- making educated future predictions. There is many methodologies of forecasting, here are some techniques that range from qualitatively to quantitatively specific.

In virtually every decision they make, executives today consider some kind of forecast. Sound predictions of demands and trends are no longer luxury items, but a necessity, if managers are to cope with seasonality, sudden changes in demand levels, price-cutting maneuvers of the competition, strikes, and large swings of the economy.

  • HBR Article- “How to choose the right forecasting method”

When making short term, liquid, highly volatile decisions- check out the resources below to stay better informed!

  • Bloomberg
  • Capital IQ
  • Datastream
  • SDC Platinum
  • Compustat
  • IBES
  • WRDS
  • Bureau van Dijk
  • Factiva

Have you ever wanted to trade at the big boy table? Representing funds of great size? Well if you meet the capital requirement for ISDA, you can have that opportunity! ISDA, is the International Swaps and Derivatives Association which  is a trade organization of participants in the market for over-the-counter derivatives. It is headquartered in New York, and has created a standardized contract (the ISDA Master Agreement) to enter into derivatives transactions.

FinTec is the discussion of the marrying of finance and technology. For example of how the online payment processing system Stripe and Plaid deals with ACH’s.

What is an ‘Automated Clearing House – ACH’

An automated clearing house (ACH) is an electronic funds-transfer system run by the National Automated Clearing House Association (NACHA). This payment system deals with payroll, direct deposit, tax refunds, consumer bills, tax payments and many more payment services.

The use of the ACH network to facilitate electronic transfers of money has increased the efficiency and timeliness of government and business transactions.

DEFINITION of ‘Electronic Payments Network – EPN’

An electronic automated clearing house (ACH) that serves as the sole ACH for the private sector in the United States. The Electronic Payments Network handles numerous types of credit transfers, such as payroll payments, dividends, etc., as well as debit transfers, such as loan payments and insurance premiums.

This really cool blog has all the details on this kind of stuff. Check it!

Now lets take a look at this:


Columns 1 & 2: 52-Week High and Low – These are the highest and lowest prices at which a stock has traded over the previous 52 weeks (one year). This typically does not include the previous day’s trading.

Column 3: Company Name & Type of Stock – This column lists the name of the company. If there are no special symbols or letters following the name, it is common stock. Different symbols imply different classes of shares. For example, “pf” means the shares are preferred stock.

Column 4: Ticker Symbol – This is the unique alphabetic name which identifies the stock. If you watch financial TV, you have seen the ticker tape move across the screen, quoting the latest prices alongside this symbol. If you are looking for stock quotes online, you always search for a company by the ticker symbol. If you don’t know what a particular company’s ticker is you can search for it at:http://finance.yahoo.com/l.

Column 5: Dividend Per Share – This indicates the annual dividend payment per share. If this space is blank, the company does not currently pay out dividends.

Column 6: Dividend YieldThe percentage return on the dividend. Calculated as annual dividends per share divided by price per share.

Column 7: Price/Earnings Ratio This is calculated by dividing the current stock price by earnings per share from the last four quarters. For more detail on how to interpret this, see our P/E Ratio tutorial.

Column 8: Trading Volume –
This figure shows the total number of shares traded for the day, listed in hundreds. To get the actual number traded, add “00” to the end of the number listed.

Column 9 & 10: Day High and Low – This indicates the price range at which the stock has traded at throughout the day. In other words, these are the maximum and the minimum prices that people have paid for the stock.

Column 11: Close – The close is the last trading price recorded when the market closed on the day. If the closing price is up or down more than 5% than the previous day’s close, the entire listing for that stock is bold-faced. Keep in mind, you are not guaranteed to get this price if you buy the stock the next day because the price is constantly changing (even after the exchange is closed for the day). The close is merely an indicator of past performance and except in extreme circumstances serves as a ballpark of what you should expect to pay.

Column 12: Net Change – This is the dollar value change in the stock price from the previous day’s closing price. When you hear about a stock being “up for the day,” it means the net change was positive.

Quotes on the Internet
Nowadays, it’s far more convenient for most to get stock quotes off the Internet. This method is superior because most sites update throughout the day and give you more information, news, charting, research, etc.

To get quotes, simply enter the ticker symbol into the quote box of any major financial site likeYahoo! Finance, CBS Marketwatch, or MSN Moneycentral. The example below shows a quote for Microsoft (MSFT) from Yahoo Finance. Interpreting the data is exactly the same as with the newspaper.


Investopedia: Stock Basics

Random definitions alert:

What is ‘AAA’

AAA is the highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has an exceptional degree of creditworthiness and can easily meet its financial commitments. Ratings agencies such as Standard & Poor’s and Fitch Ratings use the AAA nomenclature to indicate the highest credit quality, while Moody’s uses Aaa.

As bonds that are rated AAA are perceived to have little risk of default, they offer investors the lowest yields among bonds of comparable maturity. The global credit crisis of 2008 resulted in a number of companies, including General Electric, losing their AAA rating. By the end of 2009, only four companies in the S&P 500 possessed the coveted AAA rating: Automatic Data Processing, Johnson & Johnson, Microsoft and ExxonMobil.

DEFINITION of ‘Corporate Credit Rating’

The opinion of an independent agency regarding the likelihood that a corporation will fully meet its financial obligations as they come due. A company’s corporate credit rating indicates its ability to pay its creditors and gives investors an idea of how well or poorly the company’s securities are likely to perform. Corporate credit ratings are an opinion, not fact.

Corporate credit ratings are not a guarantee that a company will repay its obligations, but the overall, long-term track record of these ratings is strong. Standard & Poor’s says “the average five-year default rate for investment-grade corporate issuers was 1.07%, compared with 16.03% for speculative-grade companies.”

S&P, Moody’s and Fitch are the three main providers of corporate credit ratings. Each agency has its own ratings system that doesn’t necessarily equate to another company’s ratings scale, but they are all similar. Fitch and Standard & Poor’s use AAA for the highest credit quality, AA for the next best, followed by A, then BBB for good credit. Everything below BBB is considered speculative or worse, down to a D rating, which indicates default.

Since the ratings are opinions, ratings of the same company can differ among rating agencies. Investment research firm Morningstar also provides corporate credit ratings that range from AAA for extremely low default risk to D for payment default.

During the financial crisis of 2008, companies that had received glowing ratings from various credit rating agencies were downgraded to junk levels, calling into question the reliability of the ratings themselves.

Shoutout to Investopedia for providing us with these awesome definitions. Once again this is not my work- but a repost from Investopedia, because how interesting is this stuff!

Michael Porter is an industry leader in strategy.

Generic Strategies

These three approaches are examples of “generic strategies,” because they can be applied to products or services in all industries, and to organizations of all sizes. They were first set out by Michael Porter in 1985 in his book, “Competitive Advantage: Creating and Sustaining Superior Performance.”

Porter called the generic strategies “Cost Leadership” (no frills), “Differentiation” (creating uniquely desirable products and services) and “Focus” (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: “Cost Focus” and “Differentiation Focus.” These are shown in Figure 1 below.

Porter's Generic Strategies Diagram


The terms “Cost Focus” and “Differentiation Focus” can be a little confusing, as they could be interpreted as meaning “a focus on cost” or “a focus on differentiation.” Remember that Cost Focus means emphasizing cost-minimization within a focused market, and Differentiation Focus means pursuing strategic differentiation within a focused market.

The Cost Leadership Strategy

Porter’s generic strategies are ways of gaining competitive advantage – in other words, developing the “edge” that gets you the sale and takes it away from your competitors. There are two main ways of achieving this within a Cost Leadership strategy:

  • Increasing profits by reducing costs, while charging industry-average prices.
  • Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you’ve reduced costs.


Remember that Cost Leadership is about minimizing the cost to the organization of delivering products and services. The cost or price paid by the customer is a separate issue!

The Cost Leadership strategy is exactly that – it involves being the leader in terms of cost in your industry or market. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share.

You therefore need to be confident that you can achieve and maintain the number one position before choosing the Cost Leadership route. Companies that are successful in achieving Cost Leadership usually have:

  • Access to the capital needed to invest in technology that will bring costs down.
  • Very efficient logistics.
  • A low-cost base (labor, materials, facilities), and a way of sustainably cutting costs below those of other competitors.

The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost reduction are not unique to you, and that other competitors copy your cost reduction strategies. This is why it’s important to continuously find ways of reducing every cost. One successful way of doing this is by adopting the JapaneseKaizen philosophy of “continuous improvement.”

The Differentiation Strategy

Differentiation involves making your products or services different from and more attractive than those of your competitors. How you do this depends on the exact nature of your industry and of the products and services themselves, but will typically involve features, functionality, durability, support, and also brand image that your customers value.

To make a success of a Differentiation strategy, organizations need:

  • Good research, development and innovation.
  • The ability to deliver high-quality products or services.
  • Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.

Large organizations pursuing a differentiation strategy need to stay agile with their new product development processes. Otherwise, they risk attack on several fronts by competitors pursuing Focus Differentiation strategies in different market segments.

The Focus Strategy

Companies that use Focus strategies concentrate on particular niche markets and, by understanding the dynamics of that market and the unique needs of customers within it, develop uniquely low-cost or well-specified products for the market. Because they serve customers in their market uniquely well, they tend to build strong brand loyalty amongst their customers. This makes their particular market segment less attractive to competitors.

As with broad market strategies, it is still essential to decide whether you will pursue Cost Leadership or Differentiation once you have selected a Focus strategy as your main approach: Focus is not normally enough on its own.

But whether you use Cost Focus or Differentiation Focus, the key to making a success of a generic Focus strategy is to ensure that you are adding something extra as a result of serving only that market niche. It’s simply not enough to focus on only one market segment because your organization is too small to serve a broader market (if you do, you risk competing against better-resourced broad market companies’ offerings).

The “something extra” that you add can contribute to reducing costs (perhaps through your knowledge of specialist suppliers) or to increasing differentiation (though your deep understanding of customers’ needs).


Generic strategies apply to not-for-profit organizations too.

A not-for-profit can use a Cost Leadership strategy to minimize the cost of getting donations and achieving more for its income, while one pursuing a Differentiation strategy will be committed to the very best outcomes, even if the volume of work it does as a result is smaller.

Local charities are great examples of organizations using Focus strategies to get donations and contribute to their communities.

Choosing the Right Generic Strategy

Your choice of which generic strategy to pursue underpins every other strategic decision you make, so it’s worth spending time to get it right.

But you do need to make a decision: Porter specifically warns against trying to “hedge your bets” by following more than one strategy. One of the most important reasons why this is wise advice is that the things you need to do to make each type of strategy work appeal to different types of people. Cost Leadership requires a very detailed internal focus on processes. Differentiation, on the other hand, demands an outward-facing, highly creative approach.

So, when you come to choose which of the three generic strategies is for you, it’s vital that you take your organization’s competencies and strengths into account.

Use the following steps to help you choose.

Step 1:

For each generic strategy, carry out a SWOT Analysis of your strengths and weaknesses, and the opportunities and threats you would face, if you adopted that strategy.

Having done this, it may be clear that your organization is unlikely to be able to make a success of some of the generic strategies.

Step 2:

Use Five Forces Analysis to understand the nature of the industry you are in.

Step 3:

Compare the SWOT Analyses of the viable strategic options with the results of your Five Forces analysis. For each strategic option, ask yourself how you could use that strategy to:

  • Reduce or manage supplier power.
  • Reduce or manage buyer/customer power.
  • Come out on top of the competitive rivalry.
  • Reduce or eliminate the threat of substitution.
  • Reduce or eliminate the threat of new entry.

Select the generic strategy that gives you the strongest set of options.


Porter’s Generic Strategies offer a great starting point for strategic decision-making.

Once you’ve made your basic choice, though, there are still many strategic options available.Bowman’s Strategy Clock helps you think at the next level of details, because it splits Porter’s options into eight sub-strategies. You can also use USP Analysis and Core Competence Analysis to identify the areas you should focus on to stand out in your marketplace.

Key Points

According to Porter’s Generic Strategies model, there are three basic strategic options available to organizations for gaining competitive advantage. These are: Cost Leadership, Differentiation and Focus.

Organizations that achieve Cost Leadership can benefit either by gaining market share through lowering prices (whilst maintaining profitability) or by maintaining average prices and therefore increasing profits. All of this is achieved by reducing costs to a level below those of the organization’s competitors.

Companies that pursue a Differentiation strategy win market share by offering unique features that are valued by their customers. Focus strategies involve achieving Cost Leadership or Differentiation within niche markets in ways that are not available to more broadly-focused players.

Elements in Porter’s Value Chain

Rather than looking at departments or accounting cost types, Porter’s Value Chain focuses on systems, and how inputs are changed into the outputs purchased by consumers. Using this viewpoint, Porter described a chain of activities common to all businesses, and he divided them into primary and support activities, as shown below.

Porter's Value Chain Diagram

Primary Activities

Primary activities relate directly to the physical creation, sale, maintenance and support of a product or service. They consist of the following:

  • Inbound logistics – These are all the processes related to receiving, storing, and distributing inputs internally. Your supplier relationships are a key factor in creating value here.
  • Operations – These are the transformation activities that change inputs into outputs that are sold to customers. Here, your operational systems create value.
  • Outbound logistics – These activities deliver your product or service to your customer. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization.
  • Marketing and sales – These are the processes you use to persuade clients to purchase from you instead of your competitors. The benefits you offer, and how well you communicate them, are sources of value here.
  • Service – These are the activities related to maintaining the value of your product or service to your customers, once it’s been purchased.

Support Activities

These activities support the primary functions above. In our diagram, the dotted lines show that each support, or secondary, activity can play a role in each primary activity. For example, procurement supports operations with certain activities, but it also supports marketing and sales with other activities.

  • Procurement (purchasing) – This is what the organization does to get the resources it needs to operate. This includes finding vendors and negotiating best prices.
  • Human resource management – This is how well a company recruits, hires, trains, motivates, rewards, and retains its workers. People are a significant source of value, so businesses can create a clear advantage with good HR practices.
  • Technological development – These activities relate to managing and processing information, as well as protecting a company’s knowledge base. Minimizing information technology costs, staying current with technological advances, and maintaining technical excellence are sources of value creation.
  • Infrastructure – These are a company’s support systems, and the functions that allow it to maintain daily operations. Accounting, legal, administrative, and general management are examples of necessary infrastructure that businesses can use to their advantage.

Companies use these primary and support activities as “building blocks” to create a valuable product or service.

Using Porter’s Value Chain

To identify and understand your company’s value chain, follow these steps.

Step 1 – Identify subactivities for each primary activity

For each primary activity, determine which specific subactivities create value. There are three different types of subactivities:

  • Direct activities create value by themselves. For example, in a book publisher’s marketing and sales activity, direct subactivities include making sales calls to bookstores, advertising, and selling online.
  • Indirect activities allow direct activities to run smoothly. For the book publisher’s sales and marketing activity, indirect subactivities include managing the sales force and keeping customer records.
  • Quality assurance activities ensure that direct and indirect activities meet the necessary standards. For the book publisher’s sales and marketing activity, this might include proofreading and editing advertisements.

Step 2 – Identify subactivities for each support activity.

For each of the Human Resource Management, Technology Development and Procurement support activities, determine the subactivities that create value within each primary activity. For example, consider how human resource management adds value to inbound logistics, operations, outbound logistics, and so on. As in Step 1, look for direct, indirect, and quality assurance subactivities.

Then identify the various value-creating subactivities in your company’s infrastructure. These will generally be cross-functional in nature, rather than specific to each primary activity. Again, look for direct, indirect, and quality assurance activities.

Step 3 – Identify links

Find the connections between all of the value activities you’ve identified. This will take time, but the links are key to increasing competitive advantage from the value chain framework. For example, there’s a link between developing the sales force (an HR investment) and sales volumes. There’s another link between order turnaround times, and service phone calls from frustrated customers waiting for deliveries.

Step 4 – Look for opportunities to increase value

Review each of the subactivities and links that you’ve identified, and think about how you can change or enhance it to maximize the value you offer to customers (customers of support activities can internal as well as external).

Tip 1:

Your organization’s value chain should reflect its overall generic business strategies . So, when deciding how to improve your value chain, be clear about whether you’re trying to set yourself apart from your competitors or simply have a lower cost base.

Tip 2:

You’ll inevitably end up with a huge list of changes. See our article on prioritization if you’re struggling to choose the most important changes to make.

Tip 3:

This looks at the idea of a value chain from a broad, organizational viewpoint. Our separate article onvalue chain analysis takes different look at this topic, and uses an approach that is also useful at a team or individual level. Click here to explore this.

Key Points

Porter’s Value Chain is a useful strategic management tool.

It works by breaking an organization’s activities down into strategically relevant pieces, so that you can see a fuller picture of the cost drivers and sources of differentiation, and then make changes appropriately.





**This blog is not all original content- I do not own all the content. The purpose of this blog is to collect valuable insights across various channels, publications, and articles, and present them in a digestible and current way. Some material has been copied, and referenced in some articles, and should not be treated as original work.