Global Roundup

On the global economic and financial front, despite the decrease of jobless claims in America and better spending by the consumers, the overall situation remained negative. In the forefront, the financial woes of Ireland have unsettled the entire banking and fiscal system of Europe with pointers that Portugal and Spain are poised to go down the same slippery path. Therefore from Iceland and Ireland to Greece, Portugal, Spain and other countries in the southern periphery of Europe, sovereign debts accompanied by gross mismanagement, speculation and malfeasance have shaken up the Euro, the so-called single currency. Only Germany seems to be floating high.

However, Chancellor Angela Merkel has opinionated that the private sector also has the duty to chip in and help stabilise a highly wayward financial situation in several Eurozone countries. Merkel's proposal has brought lot of criticism. Thus the fiscal fortunes of Europe continue to wobble interminably leaving little apparent hope for even a modicum of social and economic stability in Europe. Now fears have arisen that economic crises presently prevailing in Europe and indeed around the world are threatening to unravel and undo the very foundations of human civilisation itself.

The dollar went up against most of its major counterparts after North Korea and South Korea exchanged artillery fire, encouraging demand for the greenback as a refuge. Last week, China increased bank-reserve requirements following the fastest rise in consumer prices in two years.

(Image source: Worldbunkering.com)

Stimulus plan raises tensions

G20 leaders gathered in Seoul to discuss rising tensions surrounding global fiscal and currency imbalances. The Federal Reserve’s recent decision to buy US$ 600 billion in Treasury bonds came in for particular criticism from Germany and other export-dependent countries that worry about a weaker dollar. Although the American president usually does not comment on the actions of the Fed, Barack Obama defended the central bank’s move, saying its intention was to help the American economy to grow, not to influence exchange rates.

Even the IMF now favours judicious limits on capital surges, if nothing else works. But some capital controls are more excusable than others. To help distinguish good controls from bad, some dos and don’ts endorsed by the G20 might help. Over time, regulation of the capital account might become as respectable as banking regulation.

China’s new pragmatic consumers

They spend more in categories they highly value, and they generally trade down in less compelling ones....

Increasingly, Chinese consumers are behaving like their counterparts in the developed world. They are more demanding and pragmatic than ever as their horizons expand beyond basic concerns about product features. Also, they are willing to pay for better value and quality and are spending more time researching and are exploring product nuances. The country obviously offers some of the world’s biggest growth opportunities—but only for consumer product companies that understand and respond to this rapidly evolving marketplace.

Chinese consumers remain brand conscious but, unlike shoppers elsewhere, they focus on value so intensely that brand loyalty is often secondary. The needs or interests of their families have greater importance for them than for their counterparts in the developed world. Word of mouth has become a more significant source of product information than it is elsewhere, thanks largely to fast-growing use of the Internet, which Chinese consumers see as a credible information source.

Most intriguingly, though, China’s consumers prioritize purchases across different product categories by trading off among them: the Chinese maximize their buying power by spending more in the categories they care about most and less in others. Also, the size and reach of China’s far-flung markets mean that any trend’s impact may vary from place to place, depending on local circumstances.

These trends bear witness to a transformation in the behavior of the Chinese as they develop into some of the world’s most complex consumers. China is now the planet’s second-biggest economy, after the United States, and its consumer sector may be the healthiest of any major country. In the past, consumer companies could enter China with their existing products, strip them down to basics, and then sell them at low prices throughout the country, thus hitching their wagons to China’s double-digit consumption growth. Today, local consumers, like those in developed markets, appreciate and demand better products. Many companies that have struggled to find a niche in China may therefore now find a market for their products and attract partners. Conversely, companies that have relied on low-cost, low-quality business models may end up on the losing end of trade-off decisions and could require a shift to value.

Highlights of the major changes in Chinese consumer behavior:

• Fewer trips, bigger baskets
• More than the basics
• Brand appeal, but only at the right price
• The pragmatic trade-off
• Smarter shopping and word of mouth

(Source: McKinsey Quarterly)

Economic Roundup

On the global economic and financial front, barring such countries as China, India and Australia, there were constant bad news in most other parts of the world. President Obama has again announced another stimulus package of $50 billion to boost infrastructure investment in roads and transport, besides providing smaller investors and businessmen with more assistance in promoting their economies.

Germany remains the shinning star of the Euro Zone, but Germany cannot single-handedly rescue the deep economic malaise pervading over a wide range of the European economies. Japan continues to face the deflationary situation as the yen became stronger against the United States dollar at about 83 units, a 20 years high level. Therefore, with this anomalous situation and similar disparities between the various economies around the world, a double-dip recession in the USA appears unavoidable that could then trigger another global recession in its wake.

(Image source: Finalcall.com)

China's Renminbi goes slowly global

Great power shifts are usually accompanied by changes in the international reserve currency. So it is telling that China is taking steps to broaden the use of the renminbi among international investors. Dominance of the global economy, Beijing believes, goes hand-in-and with dominance of the global monetary system.

Measures to internationalise the renminbi are nothing new. Hong Kong banks have offered offshore renminbi accounts for more than six years, and currency swap agreements with foreign central banks have been in place since 2000. But they have accelerated in recent months. Restrictions on offshore transfers have been eased and a programme allowing companies to settle cross-border trades in renminbi expanded. Last week's decision to open up domestic bond markets was particularly significant. Until then there were few investment opportunities for international holders of renminbi.

These are, however, only small steps. Whether China will be able to stomach the rest of the renminbi's journey to reserve currency status is far from clear.

A reserve renminbi would have to be fully convertible, on the capital account as well as the current account. But this would imply opening up China to the whims of global capital – precisely what it has been protecting itself against (as its huge foreign exchange reserves attest). Freer capital flows may also prove destabilising for domestic banks, creating liquidity bubbles in good times and choking off the credit supply as conditions deteriorate. No longer would the banking sector be an effective instrument of macroeconomic policy, as it has been during the crisis with its government-induced lending sprees. It would be a source of, and not a remedy to, increasing economic volatility.

Even less palatable for the government is the prospect of losing control over the renminbi. Maintaining a currency peg in the face of massive capital inflows is extremely difficult. And if increasing foreign demand for the renminbi pushes up its value, China's export-led growth model – which relies on an undervalued currency – may become unsustainable.

China will become the world's largest economy in the next few decades. It is natural that the renminbi eventually attains reserve currency status. China should not push this process forward prematurely, lest it destabilises its economy. But the sooner it starts the domestic reforms that will prepare it for such a shift, the easier it will find its new international role.

(Source: Financial Times)
(Image source: Ibtimes.com)

Business Model Innovation and the Red Queen Effect

Most companies try to differentiate themselves from their competitors by better products or improved processes leading to a better cost structure. The problem is that their competitors do the same thing at the same time so after a firework of new products the situation is pretty much the same. You moved forward but your competitor also moved forward. If you do not move you fall behind. This effect is also called the Red Queen Effect. It takes all the running you can do, to keep in the same place. That is the typical situation most companies find themselves in. You move, you move but you gain no competitive advantage.

This trend will continue unless you make time to plan and carry out tasks that will enable your business to become more PRODUCTIVE and more PROFITABLE. If you fail to make business development a priority, then this cycle will only conclude when either you, or your business, collapse. There are literally hundreds of different things you can do to improve the productivity and profitability of your business. Some will take a long time to implement; others can be completed very quickly. Some offer only a small improvement to your business, while others can be nothing short of revolutionary.

Business model innovation is about building a new business model with which you can differentiate yourself within your business model you use.

(Image source: Mikefilsaime.com)

Vietnam discovers the consumer society

Vietnam began to liberalize its economy in the 1980s, when the country’s leaders launched doi moi (or “renovation”). It was only after President Clinton lifted the US trade embargo in 1994, though, that multinationals began to pile in. Since then, Vietnam has taken off. In 2007, it joined the World Trade Organization (WTO)—just in time for the global financial crisis. The country weathered the storm well, posting 5 percent growth in 2009. This year should be even better.

For retailers and consumer goods companies, Vietnam is an attractive market: the economy is growing briskly and sustainably, and the population is adding a million people a year. Even more important, the country’s middle class is growing fast: from 7 million households in 2003 to an estimated 25 million in 2013. Vietnam’s literacy rate is 92.5 percent, and from 2003 to 2008 the number of college and university students nearly doubled. The cities, though mostly small, are expanding rapidly. Six of them—Can Tho, Da Nang, Haiphong, Hanoi, Ho Chi Minh City, and Nha Trang—account for 40 percent of the country’s sales, according to AC Nielsen estimates from 2007.

The Vietnamese government estimates that retail sales reached $39.1 billion in 2009—almost twice as high as five years earlier. And the country has room to grow: per capita retail sales, at $450, are among the lowest in Asia. Setting up shop in Vietnam, however, isn’t easy. The market is fragmented and difficult to reach, and although 100 percent foreign-owned retailers can register for an operating license, they are generally allowed to open only one outlet. To expand further, they must pass an “economic needs test,” in which the government analyzes a new project’s economic impact.

Vietnamese consumers want the same things others do—good, reliable products that enhance their daily lives. What makes Vietnam distinctive, though, is how quickly consumers are moving up the ladder—“leapfrogging". Vietnam is one of the world’s fastest-growing economies, and there’s no reason to believe it will slow down. Its infrastructure is improving, and modern trade has made significant inroads. Asia’s youngest population and the rapid adoption of modern technology make Vietnam an exciting market. But it is by no means an easy one.

(Source: McKinsey Quarterly)

The contest of this century will probably be between China and India

In the recent issue of ‘The Economist’; the most discussed topic Contest of the Century, was the cover story.

China has officially become the world’s second-biggest economy, overtaking Japan. In the West this has prompted concerns about China overtaking the United States sooner than previously thought. But stand back a little farther, apply a more Asian perspective, and China’s longer-term contest is with that other recovering economic behemoth: India. These two Asian giants, which until 1800 used to make up half the world economy, are not, like Japan and Germany, mere nation states. In terms of size and population, each is a continent—and for all the glittering growth rates, a poor one.

As the years roll forward, the chances are that it will increasingly come down once again to the two Asian giants facing each other over a disputed border. How China and India manage their own relationship will determine whether similar mistakes to those that scarred the 20th century disfigure this one.

As China and India rise in tandem, their relationship will shape world politics…

Africa Unlikely to Follow China’s Goose

I was reading an article by Mr Andrew Batson on Chinese investment into African economies which I found it very interesting....

Can Chinese investment inject some Asian-tiger-like vigor into African economies? That’s certainly the hope of many – including World Bank President Robert Zoellick, who has urged Chinese companies to expand beyond infrastructure and resource-extraction projects and also invest in manufacturing in Africa.

Reuters And with China’s labor-intensive industries, like textiles, increasingly challenged by the rising salaries they need to pay workers, there is pressure for to shift to lower-cost locations.

That is, after all, a trend that aided China itself in earlier decades, when the textile and garment industries shifted from Japan and Taiwan as costs in those economies rose. Japanese scholars dubbed this phenomenon the “flying geese” model: One economy, like the first goose in a V-shaped formation, can lead other economies toward industrialization, passing older technologies down to the followers as its own incomes rise and it moves into newer technologies.

Something like this seems to still be happening in Asia, where countries that are poorer than China — such as Vietnam, Bangladesh and Cambodia — have in fact been picking up some of the textile and garment business in recent years as Chinese costs go up.

But a new short paper published by the Vale Columbia Center on Sustainable International Investment, at Columbia University, casts doubt on whether China’s low-end industries will actually shift to Africa in “flying geese” style.

First of all, say authors Terutomo Ozawa and Christian Bellak, China’s own hinterland is large and still relatively poor, which means factories seeking lower-cost locations can find them inland, before having to look abroad. “China’s own vast interior seems more attractive as new production sites than any faraway countries,” the paper says.

Second, China’s government seems in no hurry to give up labor-intensive industries to African or other countries. Pointing to the government’s policy of restraining its currency’s appreciation against the dollar, the authors say “China is not quite ready to dismantle labor-intensive industries that still provide much-needed jobs at home.”

And third, the authors argue, many African countries are not well equipped to take such Chinese investment even if it were on offer. “Infrastructural deficiencies (e.g., unreliable power and water supply, transportation, communication, poor governance, inhospitable regulatory environments, work ethic) in Africa are well known. This explains why foreign multinational enterprises in general, let alone China’s, have not yet seriously advanced into the continent in search of low-cost labor,”.

Building a better Pricing Structure

Well-managed companies already recognize the critical role pricing plays in driving performance. A foundation that underpins excellence in pricing is the key to realizing its potential...

Over the past two decades, most companies have recognized the bottom-line impact to be gained through effective pricing. Yet awareness by itself is not enough. Tapping the full promise of pricing requires an infrastructure to drive real and sustained pricing performance. With such a foundation, a company can establish and strengthen pricing activities by creating deliberate decision processes, a specialized pricing organization, mechanisms that appropriately measure and reward pricing excellence, and robust support tools and systems.

A pricing infrastructure can be difficult and costly to create. It requires investing appropriately, empowering the right people, articulating clear targets and goals, and managing risk. Yet the benefits of realizing true pricing excellence are worthwhile: a one-percentage-point improvement in average price of goods and services leads to an 8.7 percent increase in operating profits.
(Source: McKinsey Quarterly)
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Biodiversity: The next environmental issue for business

For most companies these days, the environment—which is synonymous with climate change for many executives—has become an important topic. But another key environmental concern is emerging: biodiversity, or the diversity of species, variety of ecosystems, and variability of genes. Biodiversity now occupies a similar position in the public debate as climate change did in 2007.

Biodiversity is the variation of life forms within a given ecosystem, biome, or on the entire Earth. Biodiversity is often used as a measure of the health of biological systems. The biodiversity found on Earth today consists of many millions of distinct biological species. The year 2010 has been declared as the International Year of Biodiversity.

Majority of executives, 59 percent, see biodiversity as more of an opportunity than a risk for their companies. The companies identify a variety of potential opportunities, such as bolstering corporate reputations with environmentally conscious stakeholders by acting to preserve biodiversity and developing new products or ideas from renewable natural resources. The positive outlook on biodiversity is in stark contrast to executives’ views on climate change in late 2007, when only 29 percent saw the issue as more of an opportunity than a threat.

Given that threats to biodiversity are getting more and more public attention, companies with any direct or indirect exposure to biodiversity issues will benefit from addressing them in some way. A collaborative, industry-wide approach is necessary for understanding issues such as biodiversity and exploring potential solutions.

(Reference: McKinsey Quarterly; Wikipedia)
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Creative Tension

In learning organizations, the leader's work starts with the principle of creative tension and includes building shared vision...

Leadership in a learning organization starts with the principle of creative tension. Creative tension comes from seeing clearly where we want to be, our "vision," and telling the truth about where we are, our "current reality." The gap between the two generates a natural tension.
Creative tension can be resolved in two ways: by raising current reality toward the vision, or by lowering the vision toward current reality. Individuals, groups, and organizations who learn how to work with creative tension learn how to use its energy to move reality more reliably toward their visions.

The principle of creative tension has long been recognized by leaders. Martin Luther King, Jr., said, "Just as Socrates felt that it was necessary to create a tension in the mind, so that individuals could rise from the bondage of myths and half truths, so must we create the kind of tension in society that will help men rise from the dark depths of prejudice and racism."

Without vision there is no creative tension. Creative tension can't be generated from current reality alone. All the analysis in the world will never generate a vision. Many who are otherwise qualified to lead fail to do so because they try to substitute analysis for vision. They believe that, if only people understood current reality, they would surely feel the motivation to change. They are then disappointed to discover that people "resist" the personal and organizational changes that must be made to alter reality. What they never grasp is that the natural energy for changing reality comes from holding a picture of what might be that is more important to people than what is.

But creative tension can't be generated from vision alone; it demands an accurate picture of current reality as well. Just as King had a dream, so too did he continually strive to "dramatize the shameful conditions" of racism and prejudice so that they could no longer be ignored. Vision without an understanding of current reality will more likely foster cynicism than creativity. The principle of creative tension teaches that an accurate picture of current reality is just as important as a compelling picture of a desired future.

Leading through creative tension is different than solving problems. In problem solving, the energy for change comes from attempting to get away from an aspect of current reality that is undesirable. With creative tension, the energy for change comes from the vision, from what we want to create, juxtaposed with current reality. While the distinction may seem small, the consequences are not. Many people and organizations find themselves motivated to change only when their problems are bad enough to cause them to change. This works for a while, but the change process runs out of steam as soon as the problems driving the change become less pressing. With problem solving, the motivation for change is extrinsic. With creative tension, the motivation is intrinsic. This distinction mirrors the distinction between adaptive and generative learning.

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Quadrant Crunching

Quadrant Crunching has proved to be a highly efficient and effective technique for generating an extremely broad set of alternatives when faced with very little data and high degrees of uncertainty. The technique is adapted from Alternative Scenarios forecasting and is extremely useful for discovering “unknown unknowns.” The primary benefit of the technique is that it helps analysts, policymakers, and military decision makers set priorities and generate specific sets of field requirements in response to highly ambiguous threats. The technique helps analysts think through how such an attack would be launched, what the most likely targets would be, and what signposts or indicators would suggest that a specific attack is in the early stages of implementation.

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The Delphi Technique

The Delphi Technique was originally conceived as a way to obtain the opinion of experts without necessarily bringing them together face to face. It was developed as a forecasting methodology. Later, the U.S. government enhanced it as a group decision-making tool. In recent times, however, it has taken on an all new meaning and purpose.

The Delphi Technique can be used to:
 Develop a number of alternatives.
 Assess the social and economic impacts of rapids community growth.
 Explore underlying assumptions or background information leading to different judgments.
 Seek out information on which agreement may later be generated.
 Correlate informed judgments on a subject involving many disciplines.
 Educate respondents on the diverse and interrelated elements of a topic.

The Delphi begins with the initial development of a questionnaire focusing on the identified problem. An appropriate respondent group is selected, and then the questionnaire is mailed to them. Each participant answers the questionnaire independently and returns it. The initiators of the questionnaire summarize responses, and then develop a feedback summary and a second questionnaire for the same respondent group. After reviewing the feedback summary, respondents independently rate priority ideas included in the second questionnaire, then mail back the responses. The process is repeated until investigators feel positions are firm and agreement on a topic is reached. A final summary report is issued to the respondent group.

(Image source: Boundless.org)

Predicting the Future

An interesting article been recently published in McKinsey Quarterly on how the strategy is getting redefined now.

Predicting the future is arguably the most important and hardest task facing strategists. One way of loading the dice in their favor: scrutinizing the demographic, technological, environmental, macroeconomic, and other long-term forces constantly shaping the global economy. The most eye-opening implications typically lurk at the intersections where multiple trends interact with one another, often in complex and not-so-obvious ways. Moreover, to analyze trends successfully, executives must develop a fine-grained understanding of the potential impact for specific geographies and industries.

How can company strategists spot the next big opportunity or looming threat in their industries before it’s apparent to everyone? There is a four-step methodology for making global trends part of a scenario-based strategic-planning process. By bringing together trends and their interactions, industry-specific insights, and problem-solving techniques, this approach helps create quantitative, actionable, and unbiased scenarios for what might happen in the next five to ten years. Better scenarios, in turn, can help companies challenge conventional wisdom, pressure-test existing business models, identify market opportunities, and develop more innovative products and services.

Four-step methodology
• Establish the reference frame
• Expand the solution space
• Define scenarios
• Quantify industry impact

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There is a difference between 'knowing someone' and 'knowing of someone'

There are companies who maintain an internal system where employees can create an on-line profile and be automatically notified of jobs that match their experience and interests. This system encourages not only internal promotions but lateral moves as well. Hiring from within requires a disciplined and thoughtful approach to internal interviews. Those companies encourage their managers to do substantive interviews with all internal candidates. Selecting a job candidate is often the most critical decision a manager can make. For this reason, HR team supports hiring managers to conduct rigorous interviews that include exploration of past experience, behavioral-based questions, and a discussion of the candidate's vision for the role.

There is a difference between 'knowing someone' and 'knowing of someone' and one such company who is following this principle is McGraw-Hill.

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Value-Leakage

While many companies may view the sale of a business as an important strategy for increasing capital or refocusing the organization, very few have mastered the complex procedure of executing a divestiture. An abundance of private equity capital and a robust debt market may have created an ideal environment for sellers, but nearly half of all companies still believe that they're selling businesses or product lines for below their true worth.

Findings indicated that the key factors behind not achieving the full potential of their sales were related to post closing issues, a lack of control over the sale-process time frame and purchase-price and closing-balance sheet disputes. While maximizing the return from a sale is the leading measure of success or failure, there are many other factors to examine when determining how to improve the sale process. Because value leakage continues to be a significant issue for sellers, even after a deal is closed, it's vital to address the largest potential exposures before contacting buyers.

The Value Leakage Model is an assessment tool for finding the opportunities within a company and thus improving the business processes. This Value Leakage tool balances the ‘hard’ measurements in financial values in terms of market difficulty and the ‘soft measurement of competence management, process maturity and corporate coherence characteristics. The Value leakage tool enables prioritization of the action plan for continuous improvement of business processes, using Procurement as point of reference. With this tool each company can develop a set of clear transparent objectives to work on from the business perspective and from the human, competence management and maturity management perspective. The latter will leverage its results by increasing the opportunities for improvement, cost savings and new revenues.

The value leakage model has proven to be a perfect instrument to better promote, control and develop the procurement function. After the necessary changes the model helps to explain the added value of procurement.

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Call Centers Use Behavioral Economics to Sway Customers

I came across an interesting article by Matt Dixon and Nicholas Toman on using Behavioral Economics while Calling Customers.....

Next time you're on the phone with a call center, listen carefully to what the rep says. Chances are you'll hear your name several times, hear a tone of empathy, maybe an "I'm sorry." It would be nice to think the rep really cares — but of course she's probably just following a script. That can be a bad idea, we've found. In a recent HBR article "Stop Trying to Delight Your Customers", they explored how customer service drives loyalty, including the role of managing the emotional side of customer interactions. Here's some further insight about that delicate dance.

Most companies still suffer from the checklist mentality when it comes to managing how their reps engage with customers. Use the standard greeting...check...say the customer's name three times...check...show empathy...check...ask if you've fully resolved the issue...check, check, and check.

Most companies will tell you it's all about consistency. But, let's face it, consistency breeds robotic interactions which fail to result in a tailored, low-effort customer experience. We've seen companies move away from this "one-size-fits-all" approach and creatively teach their reps to use simple word choice — and in some cases, approaches founded on behavioral economics —to radically shape how a customer perceives an interaction.

Take Osram Sylvania for example. They teach reps to simply avoid negative language (e.g., "can't," "won't," and the show-stopping "that's our policy") in their most common service interactions. This has helped them net a Customer Effort Score that is 18.5% below industry peers (the less work a customer must do to get a problem resolved, the lower the customer effort score. The lower the score, the greater the customer loyalty).

Recently, a series of experiments carried across two separate groups of customers to better understand the impact word choice can have on a customer interaction:

• In one experiment, the rep had to authorize a customer banking account before the customer could transfer funds. But the rep explaining "you can't transfer funds until you go through these steps to authorize the account" scored significantly lower than the rep explaining "let me walk you through these steps to authorize the account." While the language is subtly different, customers rated the latter as 82% higher quality and 73% lower effort.

• In another experiment, customers were told they had to bring their new bicycles to a certified repair shop. The performance of the rep who simply stated "you're best off bringing it into a repair shop" was rated significantly lower than that of the rep who noted that they'd "pass the customer's feedback to the engineering department," "check the database to see if a simple fix is possible," and "recommend the customer bring the bicycle to the shop." The latter scored 67% higher quality and 77% lower customer effort.

Such approaches go well beyond traditional soft skills. Instead, these rely on careful language choice to frame answers in the best possible way. This isn't simply being empathetic — it's calculated and anticipatory. They call it experience engineering.

Beyond simple word choice, other experience engineering approaches work well. For instance, LoyaltyOne practices an idea called 'alternative positioning'. This approach is premised on learning some basic information about a customer during the interaction, and then using that information to reframe a not-so-great option as an acceptable option.

Alternatives positioning isn't revolutionary — in fact, sales reps have been framing product features in light of customer benefits since commercial interactions began. But, applying this method to service scenarios is quite innovative and generally defensible.

For instance, imagine your 11:00 AM flight is cancelled and you need to be in Cleveland tomorrow morning. There's an evening flight that's open. Where most reps would simply say "I can put you on a flight leaving at 9:00pm" other reps, knowing full well the 9:00 PM flight was available but seeking to manipulate the customer's reaction, might say "well, I know I can put you on the 7:00 AM flight tomorrow, but let me see what I can do to put you on the earlier flight, which is at 9:00 PM tonight." This technique of experience engineering is more commonly called anchoring. A less-desirable option creates a mental anchor, making the best alternative seem more acceptable. Rather than be irritated that the 11:00 AM was cancelled, you'd probably be pleased that the rep has secured a seat for you on the evening flight.

Customer manipulation or savvy service…..what you think about using techniques like these in customer interactions?

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The Strategic Control Map

Lowell Bryan, a director in McKinsey’s New York office, describes the strategic control map, a framework that tracks the dynamics of market capitalization within industries.....

The strategic control map uses market capitalization dynamics to help companies identify their biggest opportunities and threats, as well as to boost their odds of hunting for acquisition targets rather than being hunted themselves. Developed in 1996 by McKinsey’s Vijay D’Silva, Bob Fallon, and Asheet Mehta, the framework tracks the relationship between the two dimensions of market capitalization by plotting a company’s size (measured by book value) against its performance for shareholders (measured by market-to-book ratio).

Companies mapped in this way fall into four groups, each with its own challenges and corresponding strategic imperatives. The large, high-performing companies in the upper-right quadrant are the least likely to be acquisition targets. Their challenge is to maintain a strong position by pursuing fresh opportunities without watering down returns. Companies in the lower-left quadrant, the most vulnerable to takeover, must improve the performance of their existing businesses or reinvest in others and divest losers. Companies in the upper-left quadrant often possess proprietary knowledge or skills that enable them to earn high returns from intangibles. They can largely maintain strategic control unless their performance drops, making them vulnerable. Finally, if large companies in the lower-right quadrant don’t improve their performance, they could become inviting cost-consolidation targets for even-larger, better-performing industry leaders.

The enduring power of the framework lies in its ability to visualize how changes in market capitalization affect the market for strategic control. You can see at a glance which companies in a given industry are likely to be acquirers and which are likely to be acquired. When companies map their or their competitors’ performance trajectories, they can get a sense of the combination of size and performance that will enable them to remain competitive and independent.
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Inflated Bandhs

I was reading an article by Deepak Shenoy and after reading that article I could not resist myself from penning down by view points…….......

Last Monday was "bandh", railing against the fuel price hike and 'mehengai' (rising prices).

We all know that the three basic necessities of "aam aadmi" - the common man are Food, Cloth and Shelter. The frustration seems to be over what we are seeing in the agricultural markets - prices of agri-products have risen tremendously over the last two years and that seems to be affecting the sentiment of the common man. Increase in rent or property prices every year and even for increase in clothing prices should have elicited calls for “bandhs” every year. But food seems a higher inflation fear which I failed to understand that why the common man does not reacts on increase in prices for the other two basic necessities.

I am not in support for calling “bandhs” but we should at least show our concerns for increase in rent or property and clothing prices.

Now let's take fuel prices. They were recently raised because international fuel prices have been going up....but a major percentage of fuel prices are taxes. If the government wanted to keep fuel prices at the same level, they could have reduced the tax and the subsidy at the same time.
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The Sales Funnel

Keeping control of your sales pipeline.

With the idea of the Sales Funnel, one uses the metaphor of a funnel (wide at the top, narrow at the bottom) to monitor the sales process.

At the top of the funnel are the "unqualified prospects" - the very many people who might need your product or service, but to whom you've never spoken. At the bottom of the funnel, many sales and delivery steps later, you have people who have received delivery of your product or service and have paid for it.

The metaphor of the funnel is used because people drop away at each stage of a long sales process: For example, many of your unqualified prospects may have existing suppliers with whom they're very satisfied. Others may have needs which other competitors are better-placed to satisfy. Still others may love your products, but not have the budget to buy them.

The sales funnel is not a new tool for the management of the sales process. Most sales managers use it to understand the sales pipeline and its status. However, the sales funnel can be an important tool in improving performance. It can help us identify areas for improvement and understand what actions can help the sales and marketing process to both increase deal flow and lower the cost of sales. Different sales executives define the sales funnel in different ways.

Sales and marketing management can be more of a science and using the sales funnel can help us understand what is happening, and why and how we can improve the processes. The results can increase revenue while lowering the cost of sales.
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The 4 Ps of Innovation

I was reading a blog by Scott Anthony on 4 Ps...... really interesting. Scott Anthony is the Managing Director of Innosight Ventures and has written three books on innovation.

Any marketer can quickly rattle off the so-called "4 Ps" of marketing (product, price, place, and promotion). Innovators should also be able to quickly recite the 4 Ps that capture their idea's potential: population, penetration, price, and purchase frequency.
Companies looking at a specific revenue target can simply multiply the addressable population, the penetration of that population, the price per purchase, and the purchase frequency to get to annual revenues. Typically he suggests people try to be quite precise about their target population, give their best estimate based on in-market analogies of the pricing and purchase frequency, then determine what penetration they would need to hit their targets.

This deceptively simple calculation neatly captures many of the elements of an idea's business model. Does the idea target a niche or a mass population? Is it an occasional or frequent purchase? What channel would support the target price point? What kind of support would be necessary given the purchase frequency?

Once you do the 4P calculation (and of course, if you add in a fifth — profit margin — you can look at profits instead of revenue), the focus shifts to finding systematic ways to determine whether the assumptions behind the calculation have any hope of being true.

The deep thinking that goes into creating complicated spreadsheets for ideas can be very useful. But it also can be a way to mistake motion for progress. Make sure you can answer the simple questions before you worry about the complicated ones.

(Image source: Business-strategy-innovation.com)

Emotional Response Marketing

Emotions are one of the most powerful influences we have. Think back for a minute and try to think of anything that you've purchased where your emotions haven't played a major part in the decision process. We use our emotions to help visualize ourselves benefiting from the purchase of a particular product or service. When was the last time you bought something that there weren't any emotions attached to the purchase? I don't think you'll find even one instance!

Emotions are brought to the surface by taking the benefits of your product or service and relating each one of them to a particular emotion. Since every product or service fills a particular need, you'll have to find the benefits and emotions of ownership for yours.

Here's a simple, three step process to help you define the benefits and emotions for your product or service:

1. List the Benefits of Your Product or Service
You want to be able to make a list of the benefits your particular product or service has to offer your target market. This should have already been done when you were doing your market research on your product or service. But if you didn't, take ample time here to know just what benefits your product or service is going to provide your prospective customers.

2. Take Each Benefit and Match the Emotions It Creates
Now take each benefit and match up the emotions that your potential customers are going to experience when they purchase your product or service. Remember not all of the emotions are going to be positive ones. You want to focus on the positive emotions as they are much more powerful.

3. Create Exciting Words and Phrases to Relate These Emotions
You want to create phrases and wording in your advertisements and sales letters that will bring out the emotions attached to the benefits in your prospects mind as they're reading your advertisements and sales letters. Remember you're tying to get on a personal basis with your prospect so don't forget to TALK WITH THEM & NOT AT THEM. Think as if you're sitting with your prospect and talking to them when writing your advertisements and sales letters so you'll be able to relate to them on a one to one basis. Use you and your, instead of me, or I in your advertisements and sales letters.

If you forget everything else, remember this: "The Buying Decision Is ALWAYS Based On An Emotional Response!"

(Source: Internet Marketing Issues)
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Nuclear Liability Bill

Monday’s verdict in the Bhopal gas tragedy case has made the present government to rethink against rushing to push the Civil Liability for Nuclear Damage Bill, which aims at creating a regime for compensation and accountability-fixing in the case of a nuclear accident. I personally think that the nuclear liability Bill should not be pushed in its present form.

Nuclear power, which is the fourth largest source of electricity in India at present, accounts for just four percent of total electricity generation capacity. Within next 25 years, India aims to increase this to nine percent of the total generated power. As a society, we want certain benefits, and we want risk takers to figure out better/faster/cheaper ways to obtain them. But if we're going to walk higher wires, we need stronger nets. It is inevitable that system will grow more complex, and that human beings will continue to take risks to meet their immediate objectives. The decision makers need to address the complex issues in simple ways.

(Image source: Canarytrap.in)

Brand Community

A brand community is a community formed on the basis of attachment to a product. Recent developments in marketing and in research in consumer behavior result in stressing the connection between brand, individual identity and culture. Among the concepts developed to explain the behavior of consumers, the concept of a brand community focuses on the connections between consumers. A brand community can be defined as an enduring self-selected group of actors sharing a system of values, standards and representations (a culture) and recognizing bonds of membership with each other and with the whole.

Marketers in a variety of industries are trying to increase customer loyalty, marketing efficiency, and brand authenticity by building communities around their brands. Few companies, however, understand what brand communities require and how they work. For instance, many managers think of a brand community in terms of marketing strategy. In fact, for a community to have the greatest impact, it must be framed as a corporate strategy. Another common misconception is that a brand community exists to serve the business. An effective brand community exists to serve its members, who participate in order to fulfill many kinds of needs, such as building relationships, cultivating new interests, and contributing to society. Strong communities work to understand people's needs and to engage participants by offering a variety of roles. Finally, managers often think that a brand community must be tightly controlled. In reality, a robust community defies managerial control.

(Image source: Metaphorstudio.com)

How to Stop the Blame Game?

Playing the blame game never works. A deep set of research shows that people who blame others for their mistakes lose status, learn less, and perform worse relative to those who own up to their mistakes. Research also shows that the same applies for organizations. Groups and organizations with a rampant culture of blame have a serious disadvantage when it comes to creativity, learning, innovation, and productive risk-taking.

That's why creating a culture of psychological safety is one of the most important things a leader can do.

A set of recent studies showed that merely being exposed to someone else making a blame attribution for a mistake was enough to cause people to turn around and blame others for completely unrelated failures. This is different from the "kick-the-dog" phenomenon, where a person is more likely to blame the person below them in the hierarchy when they, themselves, have been blamed by a higher-up. Instead, it appears that all you have to do to "catch" the blame virus is to be exposed to someone else passing the buck.

How to prevent the spread of blame in one's organization??? Here are a few practical steps:

• Don't blame others for your mistakes - The temptation is huge to point the finger elsewhere when you make a mistake. Resist it. Not only will you gain respect and loyalty from your followers, you'll also help to prevent a culture of blame from emerging.

• When you do blame, do so constructively - There are times when people's mistakes really do need to be surfaced in public. In these cases, make sure to highlight that the goal is to learn from mistakes, not to publicly humiliate those who make them.

• Set an example by confidently taking ownership for failures - Our findings showed that blame was contagious, but not among those who felt psychologically secure. So try to foster a chronic sense of inner security in order to reduce the chances that you'll lash out at others.

• Always focus on learning - Creating a culture where learning — rather than avoiding mistakes — is the top priority will help to ensure that people feel free talk about and learn from their errors.

• Reward people for making mistakes - Some companies are actually starting to incentivize employees to make mistakes, so long as the mistakes can teach valuable lessons that lead to future innovation.

(Source: Harvard Business Review)

Cultural Intelligence

Cultural intelligence, cultural quotient or CQ, is a theory within management and organisational psychology, positing that understanding the impact of an individual's cultural background on their behaviour is essential for effective business, and measuring an individual's ability to engage successfully in any environment or social setting.

Cultural Intelligence is an individual capability - This means it is not an aspect of personality or personal interests. It is a set of capabilities that leads to specific outcomes - such as decision making, performance, and adjustment in culturally diverse settings.

CQ is developed through:

Cognitive means: the head (learning about your own and other cultures, and cultural diversity)
Physical means: the body (using your senses and adapting your movements and body language to blend in)
Motivational means: the emotions (gaining rewards and strength from acceptance and success)

CQ is measured on a scale, similar to that used to measure an individual's intelligence quotient. People with higher CQ's are regarded as better able to successfully blend in to any environment, using more effective business practices, than those with a lower CQ.

(Image source: Effectivegloballeadership.com)

How to Be a Changemaker...

The leadership skills that worked in the past are quickly becoming irrelevant in today's fast-paced, change-is-the-name-of-the-game world. To be effective, you need to know how to adapt to and drive change. Here are the six core skills that can turn you into a changemaker:

• Bring people together who aren't connected.
• Design new business models by combining players and resources in new ways.
• Persevere with an idea until you see success.
• Don't rely on credentials, but on the power of your ideas.
• Persuade others to see the possibility of your ideas and join you in the pursuit.
• Empower others to also make change.
(Source: Harvard Business Review)
(Image source: Stevelutz.files.wordpress.com)

Having Ideas Versus Having a Vision

I read an interesting article in Harvard Business Review which I want to share with the readers of my blog.....

In the past decade, firms have been praised for ideas. Experts have celebrated the power of brainstorming and idea-generation techniques. Businessmen have been asked to improve their creative attitudes. And 2009 was named the Year of Creativity and Innovation by the European Union.

One consequence of a decade focused on idea generation is ideas are now more easily accessible, which has also made idea generation less of a differentiator in competition than it has traditionally been. When more than 30% of the population belongs to the creative class, ideas are not in short supply. And with the diffusion of open innovation processes, ideas competitions, and the like, executives are increasingly exposed to a wealth of ideas.

What is in short supply, are visionary thinkers who will be capable of making sense of this abundance of stimuli — visionaries who will build the arenas to unleash the power of ideas and transform them into actions.

Could the next decade be the decade of vision building? If so, we will witness a significant shift in the way we think about innovation, creativity, and leadership. Popular studies of creativity have equated it with the fast generation of numerous ideas (the more, the better); in contrast, visionary leadership requires a relentless exploration of one direction (the deeper and more robust, the better). Vision building is based on research and deep understanding. To generate fresh ideas we need to think outside of the box and then jump back in; vision building destroys the box and builds a new one. It does not play with the existing paradigms; it changes them. Studies of idea generation have lingered on variety and divergence, but vision building is based on convergence, on bringing others onboard.
(Image source: Visamaster.co.in)

The new Japanese consumer

The attitudes and behavior of Japanese consumers are shifting dramatically, presenting opportunities and challenges for companies in the world’s second-largest retail market.

After decades of behaving differently, Japanese consumers suddenly look a lot like their counterparts in Europe and the United States. Celebrated for their willingness to pay for quality and convenience and usually uninterested in cheaper products, Japanese consumers are now flocking to discount and online retailers. Sales of relatively affordable private-label foods have increased dramatically, and many consumers, despite small living spaces, are buying in bulk. Instead of eating out, people are entertaining at home. Workers are even packing their own lunches, sparking the nickname bento-danshi, or “box-lunch man.”

This fundamental shift in the attitudes and behavior of Japanese consumers seems likely to persist, irrespective of any economic recovery. That’s because the change stems not just from the recent downturn but also from deep-seated factors ranging from the digital revolution to the emergence of a less materialistic younger generation.

It also suggests the kinds of moves—such as rethinking relationships with customers and becoming more flexible about sales channels—that businesses must take to seize the opportunities created by Japan’s new normal.
(Image source: Dfslearning.com)

What’s next for global banks?

Banking giants in emerging markets will probably do well in any likely economic scenario. Other banks face a more challenging future.

In 2008, as the credit crisis broke, banks underwent near-death experiences on a massive scale. Last year, many enjoyed a recovery that was nearly as abrupt. In the intense uncertainty that ensued, bankers around the world have rightly shifted their focus away from growth and toward survival as they confront ambiguity about markets, risk, regulation, and demand.

Amid such extreme mood swings, long-term structural changes now under way will fundamentally affect banking in the years to come. To understand these changes, McKinsey undertook research that combined a historical view of the industry with an analysis of 25 global banks to see how various portfolios of banking businesses and geographic distributions would fare under different macro and regulatory scenarios. Among the findings:

 Under a scenario of lower global economic growth and tough regulatory restrictions, all but emerging-market banking giants will probably destroy value over the next four years. Funding costs will remain high, further hurting profitability.

 Without any management moves, banks of every type will need more capital—as much as $600 billion over the next five years for the 25 banks we modeled. That suggests a real danger of a capital crunch, further forced asset sales, and the need for additional government help.

 The range of performance by banks using similar business models will widen. Big European banking groups, for example, will see returns on equity (ROE) ranging from 9 to 18 percent.

(Image source: Ducharmes.com)

Countries compete to weaken their currencies

ONCE upon a time, nations took pride in their strong currencies, seeing them as symbols of economic and political power. Nowadays it seems as if the foreign-exchange markets are home to a bunch of Charles Atlas’s 97-pound weaklings, all of them eager to have sand kicked in their faces.

First the dollar took a battering in 2009 when the return of risk appetite, and the ability to borrow the currency at very low rates, sent money flowing out of America for use in speculative “carry trade” transactions. Then the euro got pummelled because of concerns about the euro zone’s exposure to sovereign-debt problems in southern Europe. Finally sterling hit the canvas this week because of concerns about the British government’s deficit and the policy gridlock that may result from a hung parliament after a general election expected in May.

Is there any sign that politicians and central bankers are upset by these depreciations? None at all. Mervyn King, governor of the Bank of England, seems to welcome sterling’s weakness as a boost to exporters. European politicians, such as Christine Lagarde, the French finance minister, have revealed their pleasure at the euro’s recent decline for similar reasons. The American authorities, while parroting their belief in a strong dollar, have done nothing to shore it up, neither raising interest rates nor cutting the fiscal deficit or intervening in the markets.

Nor has there been much sign of rejoicing in those countries whose currencies have tended to strengthen. The Swiss have intervened to hold down the franc. And Japan’s latest finance minister, Naoto Kan, has called for a weaker yen (although he received a rebuke from the prime minister for doing so).

The one country that most economists agree should let its currency rise is China (in theory, faster-growing countries should enjoy real appreciation over the long term). But the People’s Republic also resists the temptation, intervening to stop the yuan from rising against the dollar.

Why are weak currencies so much in favour these days? The answer seems to be that the interests of exporters are paramount, given the desperate scramble for growth that has followed the credit crunch and the global recession.
(Source: The Economist)
(Image source: Topnews.in)

Does India’s government pay any heed to its economic advisers?

ECONOMISTS like nothing better than giving advice to governments. But why do they, of all people, imagine that anyone listens? In their models economists assume that governments, like other actors in the economy, have objectives of their own, which they seek to advance as best they can. They are not disinterested servants of the public good. So governments will ignore a recommendation from their advisers unless it suits them, in which case they would have done it anyway.

In his book “Prelude to Political Economy”, published in 2000, Kaushik Basu of Cornell University wrestled with this paradox. “If, seeing high unemployment in an economy, a person… advises entrepreneurs to employ more labourers, or consumers to demand more goods, this typically causes economists to share a laugh.” And yet economists routinely advise governments to act in the economy’s interests rather than their own.

Mr Basu is now living the conundrum he theorised about. In December he became the chief economic adviser to India’s finance ministry, occupying an office amid the sandstone domes and colonnades of Sir Herbert Baker’s Secretariat buildings in Delhi. On February 25th he released the ministry’s annual economic survey, a day before the minister, Pranab Mukherjee, presented the budget. What advice did Mr Basu give? And did his boss upstairs pay him any heed?

Quintessential
The survey welcomes India’s remarkable escape from both the financial crisis and a disappointing monsoon. The economy is expected to grow by 7.2% in the fiscal year ending on March 31st and it should return to growth of about 9% in the medium term, the survey argues. This government, however, will not settle for any old growth. It has committed itself to “inclusive growth”. The phrase is often invoked, but rarely defined precisely. In the survey Mr Basu offers a “statistical summing up” of what inclusive growth might actually entail.

He proposes that the nation should measure its progress by the growth in per-capita income of the bottom quintile, or 20%, of the population. This simple yardstick gives due weight to both the poor and to growth. Mr Basu cites some figures crunched by S. Subramanian of the Madras Institute of Development Studies (see left-hand chart). They show India’s poor making what Mr Subramanian describes as “a modestly plodding climb out of considerable income deprivation”.

For growth to be inclusive, Mr Basu suggests, it is not enough that the income of the bottom 20% rise at the same percentage rate as the average. Instead, they should get an equal absolute share of the income the economy adds. If the economy grows by $100 billion in a year, the poorest fifth should get $20 billion. That is a high bar indeed. Certainly, it would be impolitic for the government to hold itself to such a demanding standard. But as Mr Basu noted in his book, the adviser’s objectives are not always quite the same as the government’s.

To help the poor plod a bit faster out of deprivation, the government will spend almost 1.9 trillion rupees ($41 billion) this year on social services and rural development—including education, health and a workfare scheme for the rural poor—by the end of this fiscal year. That some of this money has reached the poor, Mr Basu argues, is demonstrated by the rising price of the foods they buy. Indeed, inflation (or “skewflation”, as Mr Basu calls the lopsided rise in prices) is now the government’s biggest political headache (see right-hand chart).

One puzzle is why the government has not quashed food prices by releasing more grain from its overflowing stockpiles. There is, after all, little point holding a buffer stock if you never run it down. “If there are certain minimal amounts of grain that we are committed to holding at all times,” Mr Basu points out, “then it is the same as not holding them.” When the government has released grain, it has also made the mistake of doling it out in hefty batches to a handful of suppliers, who can then corner the market between them. In January the government sold smaller batches of grain to a larger number of traders, with far greater effect on prices. In this case, economic logic revealed a more effective means to the government’s chosen end.

Another way the government purports to help the poor is to subsidise grain and fuel, selling them at controlled prices through “ration shops” to the poor. Some propositions, Mr Basu writes, seem obvious with a little thought, but far from obvious with a lot of thought. Price controls are one of them. It seems clear at first blush that one can cushion the poor from the vagaries of the market by regulating the prices of basic necessities, like food, fuel and fertiliser. But a good economic adviser knows better. Mr Basu points out that ration-shopkeepers divert much of the subsidised grain on to the open market, adulterating the remaining grain with gravel. Reetika Khera of the Centre for Development Economics in Delhi has found that in some states, when market prices rise the poor paradoxically get less subsidised grain, because so much is diverted. It would be better, Mr Basu argues, to give the money to the poor directly, through food, fertiliser or fuel coupons, which they could spend anywhere they please.
Has his boss heeded any of this advice? The government recently decided to raise the price of urea, a fertiliser. Mr Mukherjee also increased import duties and production taxes on fuel. This will help him reduce the central government’s fiscal deficit to 5.5% in the next fiscal year, down from 6.7% this year. It also prompted the opposition and some of the ruling coalition’s own allies to walk out in the middle of his speech. Thanks to these measures, fuel prices will be higher—but no freer. Shortly before the budget an expert committee headed by another economist urged Mr Mukherjee to liberalise the prices of petrol and diesel. In his budget Mr Mukherjee left that decision to his cabinet colleague at the petroleum ministry. The government’s economic advisers, both in the finance ministry and outside it, may not be pleased by this dodge. But at least one of them should not be surprised by it.
(Source: The Economist)
(Image source: Zazzle.com)

Introductions Are Much More than Icebreakers

This is a case study published in Harvard Business Review.

Atul Gawande explains that complicated processes like surgery, where human error can lead to tragedy, require checklists. One of the most important, but often seen as superfluous, steps in his Surgical Safety Checklist is to make sure everyone in the operating room knows each other by name. Gawande found that when introductions were made before surgery, the average number of complications and deaths fell by 35%. He attributed this dip to the "activation phenomenon": Having gotten a chance to voice their names, people were much more likely to speak up later if they saw a problem.

Just as much as hearing or saying your name can boost your confidence, not hearing your name can hurt your performance. As leaders, it's imperative to surround ourselves with people who will voice their opinions. And, given the complex hierarchical constructs within our firms, we must grant them permission to do so. Lucky for us, as Gawande's experiment proved, empowering employees can be as simple as asking their names.
(Source: Harvard Business Review)
(image source: Weblo.com)

RMB - USD Exchange Rate once again creates Furor

Recently the RMB exchange rate against the dollar has raised a new round of confrontation between China and the United States. Last week, 15 members from the US Senate sent a letter to the Department of Commerce, asking the Obama administration to bring a transparency in the exchange rate; otherwise it would undermine manufacturing in the US.

The letter which was signed jointly by 10 Democratic senators and 5 Republican senators and sent to the Secretary of Commerce, Gary Locke said that, the Commerce Department did not properly investigate the issue of the RMB-dollar exchange rate, which has resulted in China manipulating the RMB exchange rate at a low level, so as to profit in the bi-lateral trade.

Although the United States has repeatedly put pressures on the Chinese government to free the RMB exchange rate, the Chinese government is very firm in the attitude of "holding stability" of the RMB exchange rate. Chinese industry sources point out that for every one percentage point of RMB appreciation, would mean a one percent reduction in net profit margins of labour-intensive industries and since at present these industries are netting a average net profit of just 3-5 percent in their operation, it would prove to be disastrous for the economic potential of the export sector in China.
(Image source: China-shjy.com)

Category Management

It’s been described as one of the most scientific approaches to decision-making in retailing because of its reliance on data. Grocery retailers across the world were the earliest to adopt it, but over the last few years retailers in all categories have looked at it as a tool for seeking sustainable competitive differentiation and advantage. The ‘it’ here is category management. And for the retailer striving to bring greater focus to the store and improve its management and measurement processes, category management is most often the answer.

So, just what is category management? Quite simply category management involves organising and managing promotions, merchandising and distribution activity around the way consumers view and buy a product. A more formal definition would be ‘Category management is a retailer-supplier process of managing categories as strategic business units (SBUs), producing enhanced results by focusing on delivering consumer value’. Which then brings us to the question – what is a category?

A ‘category’ is a distinct, manageable group of products or services that consumers perceive to be inter- related and\or substitutable. It must be noted here that the focus of both the category and category management is the consumer and providing her with a range of products and services that offer more value. Category management must not be run contrary to the will and interests of the consumer and should favour the consumer if need be: This is the Holy Grail of this aspect of retail management. Thus, the aims of category management are to:

• Satisfy the consumer
• Grow the category
(Image source: Dezeen.com)

Interactive Marketing

Interactive Marketing refers to the evolving trend in marketing whereby marketing has moved from a transaction-based effort to a conversation. The definition of interactive marketing comes from John Deighton at Harvard, who says interactive marketing is the ability to address the customer, remember what the customer says and address the customer again in a way that illustrates that we remember what the customer has told us (Deighton 1996). Interactive marketing is not synonymous with online marketing, although interactive marketing processes are facilitated by internet technology. The ability to remember what the customer has said is made easier when we can collect customer information online and we can communicate with our customer more easily using the speed of the internet. Amazon.com is an excellent example of the use of interactive marketing, as customers record their preferences and are shown book selections that match not only their preferences but recent purchases.
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Supply Chain Risk: It is Time to Measure It

The recent Toyota brake pedal disaster is an example of a massive failure in product design magnified by supply chain lead time. Current cost estimates total at least two billion dollars, not including future lost sales from the damage to consumer confidence.

When quality problems like this occur, supply chain lead time often determines the time required to resolve the problem. The cycle times in a vast global supply chain like that of Toyota further increase the problem.

The supply chain is the lifeblood of the corporation; it determines the overall health of your business. Sales revenue depends on the supply chain delivering product availability. Sixty to seventy percent of a firm's cost is typically controlled by the extended supply chain. Inventory is managed by the supply chain, and is at the heart of working capital levels. The supply chain also determines levels of physical capital by managing the utilization of factories, warehouses, and space in retail stores.

It follows that it's essential to have a disciplined process in place to identify, prioritize, and manage the wide range of risks that can impact you supply chain. But many supply chain executives often find themselves at the center of the storm, striving to balance very demanding operational objectives with the need to satisfy customers, cut costs and help grow revenue. They must find ways to operate successfully today, yet also improve rapidly to be competitive in the future. Improvement basically means getting projects done efficiently and fast, leaving little time to consider risk.

Since the life blood of the corporation flows through its supply chain, changes to it can carry huge risks. Supply chain disruptions can result in a devastating impact on shareholder value; with one study showing an average 40 percent decline in share price due to supply chain disruptions.

Clearly, it is extremely important that a supply chain outsourcing strategy identify risks. But in the research done by HBS, they find a lack of any process to identify, prioritize, manage, and mitigate risks. In our database of hundreds of companies, we frankly find that most firms ignore risks, sometimes with dire consequences. Our data show that when companies analyze global outsourcing decisions, they fall into three categories. Those who:

- add a risk assessment, 10%
- look at unit cost plus transportation only, 35%
- include inventory as part of the assessment, 55%

In other words, 90 percent of the firms do not conduct a risk assessment when outsourcing production. Yet, sourcing offshore carries myriad additional risks such as political instability, port disruptions, currency swings, demand swings, and more. Unforeseen events occur more frequently in very long global supply chains.

And it is not just the global environment that creates supply risk. There is plenty of it in almost every major initiative. For example, a supply chain professional from a toy retailer told of trying to implement a new fulfillment system that went far over schedule and budget. The Christmas spike exploded before the fulfillment system was complete, resulting in an inability to process orders. People throughout the company worked 50 days straight, including Sundays, to try to stay ahead, yet the firm was forced to send thousands of letters saying, "Sorry your toy order will not arrive before Christmas."

The evidence is overwhelming: Supply chain strategy demands formal risk assessments. So the question is ‘Do you have a supply chain risk management process in place?’
(Source: Harvard Business Review)
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One More Look at Layoffs During the Great Recession

Here's a brief update on some research that have been done on layoff practices.

For a decade it has been tracked who was likely to be fired in Europe during an economic downturn. Surprisingly, it was not generally the least productive managers. Over 40% of European managers said they would layoff an older manager even if that manager was a high performer. Twenty eight percent said they would fire younger workers even if they were cheaper or better performers than others. Less than a third of the Europeans surveyed since 1999 said they would fire the employee being called the "weak link," the older, expensive, average performer.

But the Great Recession seems to have changed Europe's attitudes to layoffs. Over the summer of 2009, it has been asked to 700 international managers the same set of questions. This time, nearly half of respondents targeted the weak link, the older, expensive, average performer. Second, 42% said they would choose to fire a younger manager, even if he was cheaper or better. The older, more expensive but high-performing managers were targeted for layoff the least, by only 10% of the responding executives.

Notably, younger managers were always more likely to fire older managers. But respondents over age thirty-five were about twice as likely as younger managers to fire a young, good, and cheap employee. The overall message seems to be: Work well, don't cost too much, and avoid middle age.

A close look has been taken at layoff practices across cultures. In the previous research, it has been found managers in Anglo-Saxon cultures typically fired the weak links, the least productive, mid-career stage managers. Germanic countries overwhelmingly laid off the youngest managers even if they were cheaper or better performers. Latin countries preferred to fire older managers, even if they were excellent.

In this most recent round of research, though, things have changed. Average performers are being targeted more across all cultures. The top two targets for layoff this time around were the older, expensive, average performer and the younger average performer.

Drilling down, the Dutch, Indians, and Germans are the most likely to target the average performers. The Italians, French, Austrians, and Polish were less likely to fire the so-called weak links. Americans, previously noted for ruthlessness in firing weak performers, now fall in the middle.

When it came to laying off high performers, though, cultures diverged. The younger excellent manager was the more common target in Germany, the U.S., Poland, and France. The older excellent manager was the more common target in Italy and India. If you're young and/or good, head for Holland or Italy.

Comparing these results to the previous results, the Great Recession seems to have focused businesses' firing practices more on performance, and less on age and cost. Lless divergence was seen in layoff attitudes and more agreement (though not total agreement) that weak links — highly paid average performers, especially older ones — should be the first to be laid off. More managers were willing to retain high-priced employees if those employees were high performers.
(Source: Harvard Business Review)
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