A transaction cost is basically just the cost for each party in an economic, or financial exchange. While growing up I never really understood how many costs that there are involved in an every day setting. I was used to my parents buying me meals, my clothes, etc. I started to realized that my parents were not going to support me forever when I got into a car accident in high school. First, my parents made sure that I wasn't injured or anything, but their very next statement is what made things very clear to me, "Do you realize that your insurance is going to go up?" At the time, that question really didn't register, so I waited for their next statement, "You are paying for any damage that insurance doesn't cover out of your own wallet." By this time I did have a job, but it was only on the weekends, and I really didn't have too much money saved. The damage came out to around $1500, all of which I had to pay. From then on, I started to appreciate money a little bit more.
The next time that transaction costs started to affect my life was when I first set foot on campus here at the University of Illinois. I came to school with a lot of money saved from various jobs that I had in my high school career. The amount of money in my bank was more than I had ever possessed, and for that reason I was pretty comfortable that it would last me throughout the year. Little did I know that groceries only last a couple of weeks at a time, eating out is quite expensive, and not to mention, socializing can be extremely pricey as well. My funds started to trickle away as the semester went on. Each large transaction that I made at school was followed by a call from my dad saying something along the lines of, "How did you spend a hundred dollars at Wal-Mart?" My main point that I am trying to make here is that it costs a lot of money to live. Necessities start to mix with wants, and that is when transaction costs become more and more difficult to deal with.
This week in class we had some very interesting discussions, not only about rules of the class, but also about the structure of organizations, and the balance of powers between different employees within a certain company. I found the discussion about corporate America to be very interesting because I worked in an office that showed chain of command very well. Each person had their responsibilities, some people having more than others, and some people having more important responsibilities than others. That is how an organization is made to function fluently, and smoothly. There is a top tier level of employees (CEO, CFO, President, Vice President) then their is a middle tier of employees (Accounts Recievable, Sales, Controller, Marketing, etc.) and finally their are lower tier employees and interns. The difference in pay between each job title is different for every company, because some companies create more revenue than others, some companies are publicly traded, etc. I think that these types of real life business conversations will benefit all of the students in our class when we venture out into the corporate world. We touched on entrepreneurship for a little bit in class as well, and I am excited to look into that subject further as our class moves along.
Sunday, January 29, 2012
Sunday, January 22, 2012
Experiences with Organizations
This class seemed rather interesting to me because I am an economics major, and it is my senior year at the University of Illinois Urbana-Champaign. What that means is that I am working as hard as I possibly can to find a job once I graduate in May. Most of the companies that I have applied to, or the companies that I am looking to apply to, are large organizations. I think that by taking this course I will gain insight as to how exactly these large companies function, how they profit, etc. Basically, I think this class will show how an organization stays on top of every detail within the company, how each employee has a different task, or a different piece of the puzzle, and that when each employee is given incentives from the company, how well most employees respond, and function as one.
I wouldn't say I am overly experienced when it comes to knowing the process behind a successful organization, but for the past two summers I have interned at a pretty large publicly traded company. The company that I worked for is called CTI Industries, and I worked in the accounting unit at one of their branches in Lake Barrington, Illinois. I definitely gained some insight into the corporate world, because day in and day out I worked with the same people, and started to see how each one coincided with the next employee. While some employees are being paid more than others, and their position may be higher than someone else, I felt as if each person contributed in an orderly and even fashion. What I mean by this is that I saw a team of employees rather than a bunch of individuals. Every morning the controller and I did consolidations together, every afternoon accounts receivable was on the phone looking for payments, and at the same time the CFO was in meetings with future customers, etc. It was quite an enlightening experience, and I feel as if I really did learn a lot.
When I was looking at the selection of economics courses for the spring semester, I tried to look at the classes that would most benefit me in my future. This class stood out over the rest, because I know I will be able to take what I learn and use it in my hunt for a job, and once I find a career. It will be very nice to get to know all of what happens within a company that most people never get to see. The part of the class that I look forward to most is the general idea of entrepreneurship, solely because my best friends father opened up a golf and fitness facility that is now very popular, and quite successful, and by doing so he has influenced me in the sense that I now see that opening a company is possible. What I am interested in is how do you create a company that is both productive, and profitable. There are so many questions that go along with my last sentence; What incentives should employees be given? Who can you trust to manage your company? How do you get people to gain interest in your company? I just added this class so I have yet to attend a lecture, but I look forward to our discussion come Tuesday.
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