Monday, May 31, 2010

Meet the Boss- Rory Sutherland

Marketplace Content vs. Context


Social Networking Introductory Lecture

Social Network Lecture
This is Social Networks research and the lecture is about an hour. Its topic is HIV/AIDs but it really helps to introduce the basic topic which is extremely valuable for marketers. He also shares the kinds of software for conducting it. I you have time- give a listen.


Sunday, May 30, 2010

Entertain to Sell

Challenges for any new VP of Marketing

In both successful companies and in companies that have had difficulties, a VP of marketing must make sure all of the pieces are in place for effective marketing. A thorough review of systems, processes and people is in order but changes should be made only once you have grasped the larger picture. The basics are necessary in both scenarios but there are different challenges in successful versus challenged companies.


I think it should be accepted that only mythical companies make no marketing mistakes. Marketing is a creative and human endeavour which includes trial and error and misjudgement at small and greater levels. All companies have stumbled including, Apple, Google, and the rest of the top 10 most valued and most profitable companies. The longer a company has been around the more errors they have made and recovered from.

When coming in with fresh eyes as VP Marketing to a company with a successful marketing program there are pitfalls. The first of which is that the vision may already be firmly entrenched. It might even be quite stale but the fresh perspective and any changes need to be sold to both upper management and to staff . This could be met with resistance. The advantages of a marketing plan and budget in place along with an established target market, a clear and consistent message are huge. The brand recognition alone gives a huge boost. One should never underestimate the value of existing customers and their revenue stream. However, most plans can be improved and a constant review of market potential is important. Another pitfall when starting as a VP of Marketin is the temptation to change too much too soon and establish your expertise or stamp on the department. Ego must be held in check and improvements must be made to improve not just make change. It takes time to understand what has already been tried and why it succeeded or failed in the past and to assess whether conditions have changed.

When entering a company after a major problem a whole new set of problems may exist. These would include the need to stabilize and recover market share. You would probably be taking over in a crisis and the expectations would be high while many people would be in ‘duck and cover’ mode. Many of your staff would be the ones who made or had been party to the poor decisions in the past. Your job would be complicated by insecure people and failing budgets. Instant genius would be expected because the company’s future might be on the line and marketing would be the group expected to find customers and bring in revenue. In addition, the funds to make the necessary changes would not be easily available. You might have to do much more with much less. It also takes time to assess just what went wrong and why. Was it just a coincidental and uncontrollable event or something more systemic? How wide spread is the damage or the stigma? Is the problem solved in the organization or just masked? Are there more fires to put out or is it time to rebuild? In all, the problems of taking over after a marketing failure are immediate requiring quick decisions in a brand new environment. Hasty or wrong decisions would exacerbate the problems .Ensuring that legal oversight is in place for all products and all marketing is an imperative first step if it is not already accomplished.

In both situations you have to ensure that the basics are covered. Marketing plans and strategies need to be reviewed or designed. Is senior management on board to become customer focused or are you dealing with a company with another mindset? Is this company process oriented? Determining how to gain the relationships and the respect of all influencers has to be kept in mind. Market research needs to be conducted, updated and demand must be forecasted. Are outside experts available or frowned upon? It is important to connect with the customers and asses their sense of value, satisfaction of dissatisfaction, and their level of loyalty. Extensive analyses need to be conducted or reviewed to understand the consumer market (or business market) and identify the market segments or targets that are right for this point in time. Work has to go into building the brand and creating brand equity. Are you using the right brand positioning and are you dealing in the best possible way with competitive threats? It would also be important to review pricing strategy and all of the programs for service that you offer to determine if the products or services are optimally priced. Are all the value networks and channels of distribution doing their jobs at a sensible cost?

Once the inside is in line, next I would be looking at communication. Are all the communications integrated and is internal marketing in place and effective? Are sales forces communicating our message with clarity and do they have all the tools they need? Are the best advertising routes being used. Can we get closer to the customer in any other way? Is the advertising effective? What is the cost per thousand, what is the audience, what do consumers think of our ads, and do we know what actual purchasing behaviour is stimulated per exposure? Finally, what  are our plans for the future both short term and long term? Are we a global company or are we planning to expand into other countries. If so, do we have a country notebook and connections or staff in the country to make it all work?

I would keep in mind that everyone who works with me or for me is a knowledge worker. I would empower everyone that could handle it and trust them to achieve the work that was delegated to them without micromanagement. Failing is not wrong but people who do not learn from their mistakes must be encouraged to find something that fits them better.

Creative thinking gets results

Visual Impact in Advertising

Is anyone successfully fighting international corruption?

Psychology of Consumer Behaviour

Consumer Psychology


Friday, May 28, 2010

Keeping up

Grey Goose Vodka has figured it out

Are you familiar with  Def Jam Poetry? Have you been following the trend of poetry contests? This man 'Rives' actually presented one of his poems on the 'internet' at TED this year. Companies who are looking for ways to bring their products to consumers in a new and even viral way are following these trends. They are rewarding customers for their time and attention with entertainment and it is working. Here is Rives sharing what he is all about.

International Marketing and Advertising

This Cadbury commercial is an interesting perspective into another culture and what might be of interest there. It educates us as well.

Sunday, May 23, 2010

Why on Earth do We Trust Google?

Of all the companies in the world, which ones would you admit to trusting? It seems compulsory to hate big companies these days. The bigger they are the more people feel obliged to mistrust and fear them. Many times it is for good reason. The tendency of companies to ignore the needs of their people and the potential for abusive actions to make bigger profits, makes us all wary and down right sceptical. We do not even trust the list of ‘most ethical companies’ asking who is qualified to make up those lists anyway? Who really puts their trust into the magazines that the companies advertise in?

However, in a discussion about companies and their nefarious pasts which included some of the giants like Nestle, Pfizer, Philip Morris and many others, Google’s name came up but with out the vehemence and stories that the others evoked. Google is big and everyone has to notice an elephant when he wants to stand next to you. It’s a primal fear of just getting crushed but if he stands there long enough, he’s just one of us after a while.
Google Earth knows a lot about our location, our homes and the search engine knows even more about our lives and our interests. That makes people feel like they should be wary but they can’t quite muster up any real worry about it. Instead of us really believing that Google is “Big Brother” with the power to control and dominate us, we seem to feel like Google is “little brother” watching, observing, imitating and learning. It tags along almost everywhere we go now, but it’s not noisy, it doesn’t spoil our dates and sometimes it’s down right useful. The final note of the dialogues that I have been in lately is always the same: that for the average man Google is pretty good.

Google the Good makes our lives simpler. In a world of harried people where the news of the future is often complicated or fear inducing Google quietly helps us get through the day. It may be funny to think about it but we do trust Google. Recently, I began to ask myself why this was. Even though it is a mammoth entity with a great deal of power and even more access to our lives than government, Google is not that scary. They haven’t hurt us yet. They show no inclination to do so. Am I being na├»ve?

Admittedly, I do not have all the information. There is too much to get my head around. However, the information that I do have is pretty meaningful to me. Ranking first in the order of important facts is that they hired Dr. Larry Brilliant. Although he just retired, I think he likes to ally with like minds and good spirits and I think it unlikely that he could be easily fooled.

The initial entrepreneurial approach of Google seems to me to have been like trying to control an explosion that had no timing device but the founders sure tried and succeeded. Brin and Page knew that they had something amazing on their hands –like a key but they had to find the lock. They had a powerful insight into one half of what makes business work. They had a service that could propel the search for information. It took trial and error to find out how to plug in the tool that they had discovered. I guess that is not all they had in the beginning. They had access to a good network of minds- professors, literature and family support as well in terms of knowledge and feedback. They were at the right place (Stanford) at the right time in history. Venture capitalists were continually sniffing around then for the next great advance in IT.

I would call their entrepreneurial approach careful. Like many brilliant people they were conscious of what they did not know which as young men was a lot. They were forced to rely on their basic values to guide them in a world where everyone was pushing them in one direction or another mostly with dollar signs behind their motives.

They had a strong sense about how to treat people and they worked from the old adage to treat people as they would want to be treated and this, in no small part, led to their massive success.

Just look at their original motto: Don’t be evil. They knew that they had great power in their hands and they set one rule for the guidance of all. That’s a lot like “if it’s wrong don’t do it”. If you think about it, that should be enough for most of us. Their motto indicates to me that they were less cocky than has been attributed to them. They did not see themselves as “do gooders” but as decent men with a desire to make the most of what they had found. In addition, they offered their product to most of us for free and that allows us to be patient with them and allow them to improve with time – after all it isn’t costing us anything!

They were good to their friend and employees. That counts for something. (For the people who wanted a job from them and didn’t get one- its time to get over the grudge).

It makes perfect sense to me that they were trying to guide ‘their baby’ from the cradle to maturity and not hand it over to corporate daycare. They were guided by their values when they discovered a business model that worked far better than anyone could imagine. Targeted ads were every marketer’s dream fulfilled. They offered their valuable product for the use of the masses for free (like the original business model for TV) and they billed the advertisers. They were careful in every step and they needed to be because they were unleashing a force that would change the world. They kept everything as close to the vest as possible just as those that had found a diamond mine might. I do not believe that they would ever have gone public but that their initial generosity and initial need for capital forced their hand. I think this is very different from the planned and almost forced growth of Starbucks. They simply aimed and held on for the ride while doing their best to keep innovating.

As a mother of grown gifted kids, I am not surprised that they were once deemed customer unfriendly. That is simply a manifestation of the founder's own personalities. They did not see any upside to fame. They had too many balls in the air of innovation to want to stop for the things that they were ambivalent about. Just as the venture capitalists diagnosed their lack of knowledge and skill in organizational business matters and suggested a CEO, they also should have noted their ambivalence to ANY business model. They were not comfortable asking people for money. That ambivalence led to a better business model that changed the way business itself does work. Gifted kids tend to care about morality. They see the big picture and don’t always understand why others do not see what they see. Once they understood their limitations - Google the good was on track!

They do continue to innovate. Recently, they created a disruptive business model that will change the business again. It has been called the ‘less than free’ business model. Google’s free navigation feature is crushing GPS device businesses like Garmon and TomTom but that was not their real goal. By offering the service to cell phone users, they gain more data about every area of the planet and may be able to offer even more tailored advertising by location! To do so, Google will pay people to use their operating system. Anyone like Dell or HP that builds a notebook based on Google Chrome will create a revenue stream from advertising splits. WOW!

Google now has built an empire that is amazing to all. It is now trading at $562 as share with market capitalization of almost $179 billion. Not bad for a business that started less than 20 years ago. They are still guiding their baby and it’s just my guess but I think they want it to be an energy giant when it grows up.

Google people breathe the same air we do. They even give tracking capacity on the state of forests which help to generate our oxygenated air free to tropical countries to help preserve their forests. They understand that poor people have to use what they have unless someone gives them a better alternative. They also understand that finding a truly clean, inexpensive power source for the planet is a great thing.

To its efforts concerning green-energy vs. coal, I say BRAVO! I went on their website and they seem to be invested in the idea of harvesting power from the earth’s core and they suggest that it is feasible and practical for the large scale. Google Earth probably has no trouble translating the effects of the huge coal fired industries -in India (which has a wealth of coal and little in terms of power sources) and in China- on the environment through their day to day data. If they can show my house, they can see the pollution in Bombay and Beijing and measure its consequences. Perhaps Google will become an energy giant after all. If it does, I bet it will be trustworthy.

References:
Hartley, R. F., (2009) Marketing Mistakes and Successes, 11ed. Online version
Gurley, B. Google Redefines Disruption: The “Less Than Free” Business Model

Metrics in Advertising on the Internet

Metrics in Advertising on the internet


Business communication between departments

Business communication between departments


Saturday, May 22, 2010

The new Media- Make it something that Engages People

Druker's advice on how to develop a corporate Mission Statement

To develop a mission statement at the corporate level the following steps are suggested: (Drucker)


1. Establish a mission-writing group The writing group must be able to identify the company’s reason for existing, the primary customer, and what the goals and results should be. Members should include the chief executive, the board chairman or another representative of the board, a writer, a manageable number of additional members who represent different parts of the organization, and a facilitator.

2. Adopt criteria for an effective mission statement. Gather ideas and suggestions for first drafts. The writing group should adopt the criteria they will use to judge the effectiveness of the mission they are about to develop. Following the adoption of criteria, the group moves on to ideas and suggestions for the mission statement. Idea-generating techniques include:

• Open brainstorming: any thought or idea is welcome.

• Each group member finishes the sentence, “The mission should be…”

• Small teams “complete” in a very short time span to draft and nominate the “best” new mission statement

• Go around the group two or three times asking for the one word that must be in the mission statement.

• Each person quickly draws a picture of the mission, then “shows and tells.”

To conclude the exercise, the group:

• Posts and reviews all ideas and suggestions. The facilitator draws a circle around the words or phrases that appear most often.

• Discusses key ideas or themes the must be captured in the new statement.

• Discusses key ideas or themes that must not be part of the new mission statement.

3. Develop one or more draft statements. The writers along or with a small group develops drafts of at least two possible new mission statements.

4. Judge initial drafts against criteria and suggest revisions or new options. To judge drafts and make suggestions:

• The groups reviews the criteria for an effective mission statement.

• The first draft statement is posted in front of the group.

• Group members individually rate the draft for each criteria using the worksheet.

• The facilitator polls and records the group’s response for each criteria to determine the overall strengths and we4aknesses of the draft.

• The group discusses the merits of the draft and makes specific suggestions for how it might be improved. All suggestions are encouraged and recorded.

• The second draft statement is posted and steps are repeated.

• The facilitator instructs each group member to individually write their recommended mission statement. Members read their statement aloud, and give it to the writer.

• The group discusses whether it has developed an effective statement or whether the writer should develop a second set of drafts.

5. Develop second drafts. The writer or small subgroup develops a second draft of one or more possible new mission statements.

6. Gain feedback from outside the writing groups. The board chairman and chief executive decide who outside the writing group will be asked to give feedback. This may includes organization wide input or a few key people inside or outside the organization. Each individual group being contacted for their response is:

• Shown the criteria for an effective mission statement.

• Asked for a rating of each draft, based on the criteria.

• Asked for comments on the merits and weaknesses of the draft(s).

• Asked for ideas or recommendations for improvement.

7. Summarize feedback and distribute second drafts and summary to writing group.

8. Propose a draft mission statement. The writing group meets:

• Reviews the second draft(s).

• Discusses a summary of feedback from outside the writing group.

• Rates the draft(s) against criteria and cites merits and weaknesses

• Attempts group editing or rewriting.

• Approves its proposed mission statement..

9. Presents the proposed mission statement for board approval.

Consumer Sentiment drives the economy

Lest we forget.....

Tuesday, May 18, 2010

Kaplan's Balanced Score Card


Adapted from Robert S. Kaplan and David P. Norton, “Using the Balanced Scorecard as a Strategic Management System,” Harvard Business Review (January-February 1996): 76.

Friday, May 14, 2010

A Legend in Marketing

Levi Strauss and Company: Critical Analysis of Marketing


Levi Strauss & Co. (LS&CO.) a top manufacturer of brand-name clothing globally, sells jeans and sportswear under the Levi's, Dockers, and Levi Strauss Signature names in more than 110 countries. It also markets men's and women's underwear and loungewear. The company has demonstrated considerable but not always consistent brilliance in marketing. Levi Strauss, the founder, established the ‘red tab’ and the leather patch on the back of the pants so that every pair of pants on every working man told another who made them. Over a hundred years later, the company is still going strong and the Levi’s name has strong brand equity because of iconic cultural associations and the excellent use of media advertising. The Levi’s name is memorable, meaningful to many, adaptable in new countries and to new demographic segments and quite likeable. Most of the attributes of the jeans are protectable through diligent protection of trademarks. The brand has struggled at times to be transferable to other products but it has a fair degree of transferability to other countries. Levi’s jeans have the brand equity that is necessary to elevate an easily reproducible product to the status of a legend.

Levi’s brand symbols are easily recognizable. The red tab, the 501 name, and the ‘leather’ patch on the back of the jeans are all ingrained into our minds (at least if you are a baby boomer like me). The Dockers brand has a recognizable symbol and its advertising was more successful in the past than it is at this time. The Signature brand is Levi’s lower end brand which is sold in retail chain stores. It too is recognizable to many but has never had the advertising support in North America that it is enjoying in India where it is far more recognizable.

I got very interested in Levi's and their advertising approach and so did a blog where I organized the information and the commericals in a roughly chronological order for my pleasure and yours. Please see:


http://levistrauspowerpointplus.blogspot.com/

Rory Sutherland and Mobile Media- Context vs. Content

New Dangers and Perspectives attached to Brands

2009 but interesting assessment of the future

Strategic Branding Insights

Monday, May 10, 2010

What goes Viral?

As an adendum to the last post, I went on Youtube and found this compliation of things that have gone viral. I wonder if there is any insight to be gained in seeing the things that found the magic combination to become viral hits?


Controversy in a Business Class - Opinions?

How to Make Content Go Viral

Sunday, May 9, 2010

Marginalized Poor Can be The Best of Innovators

Gupta also worked with the government of India to establish the National Innovation Foundation, which holds national competitions to encourage new inventors and helps sustain them through the National Micro Venture Innovation Fund. Through his efforts, Gupta has uncovered groundbreakingly useful devices such as a pedal-operated washing machine, a micro-windmill battery charger, a hoe powered by a bicycle, and many more.


"The Honey Bee Network is one of the most remarkable organizations on earth, and if you have never heard of it, then you probably should."
Peter Day, BBC Radio 4

How Great Leaders and Great Companies Are Different

"As an ethnographer, we are in search of why but we actually ask what." Simon Sinek.
With an undergraduate degree in anthropology, most of Simon Sinek’s career has been spent in advertising. He joined Euro RSCG, with a stint at Ogilvy & Mather, working on accounts for Oppenheimer Funds, MCI, NASDAQ and DISH Network. In 2002, he started his own company, Sinek Partners. His book, Start With Why, outlines the basis of his current work in leadership consulting.


Sinek also contributes to several efforts in the non-profit sphere: He works with Count Me In, an organization created to help one million women-run businesses reach a million dollars in revenue by 2012, and serves on the Board of Directors for Danspace Project, which advances art and dance. He writes and comments regularly for several major publications and teaches a graduate-level class in strategic communications at Columbia University.

Borrowing Brand Equity- NIke Apple example

Social Media ROI

Is Social Marketing a Fad? - The Stats

Saturday, May 8, 2010

Managerial Ethics

Managerial Ethics


Ethics can be defined as a set of inner-guiding principles, values, and beliefs that people use to analyze or interpret situations and then to decide the appropriate way to behave. I contend that companies should not leave these sorts of decisions up to individual interpretation but should attempt to set a moral ethos for the company in anticipation of any such dilemmas. These should include ways to behave to avoid harming others, including customers and coworkers, the company itself and the world at large. While not every situation can be anticipated, a set of basic principles which are endorsed by the company should be able to communicate what the company expects. For example, a manager might believe in “doing unto others what she would have them do unto her”. Letting someone know that lay offs are imminent would offer an employee some time to prepare for a life changing event. This appears to conform to that idea of ‘doing unto others’ because anyone would really want to have forewarning of such an event. However, when we consider the manager’s obligation to the firm, we realize that early warning to even one person might not be contained and could have consequences for the stock price, credit ratings and a whole host of other unanticipated outcomes that might affect even more lives. A decision like this cannot be left up to an individual’s conscience because they might not have all of the information, may not have considered the ramifications and it is too great a stress for one person to have to bear. When the company clearly states its position, the individual has guidelines and expectations within which to operate. After all there will be other, more subtle ethical problems for managers to bear.

Managers find themselves in ethical dilemmas when they are faced with temptations for enhancing their own self interest, when they are responsible for actions of others, when they are pressured by expectations or when they are pressured by people in positions that are above them. Some will adhere to the letter of the law. Some will go with their own interpretation of ethics. Everyone should, however, take a few breaths and think things through. First, they should get the facts- to whatever extent is possible. Many times ethical decisions must be made with very little information and on tight time schedules. Slow things down as much as possible and get as much light on the situation as possible. Find out if there are different agendas at play. Find out if it is an ethical issue at all. Find out if it is an ethical situation that is yours to solve. Then, if it is yours, try to find someone to consult with. It should be someone outside of the problem, someone who might have a neutrality and perspective. Perhaps that person would be an old professor, a former boss in another firm, or even a lawyer. Once you have discussed it and it appears that it is a true ethical dilemma, one must then decide what course of action to take. Some things are easier to decide about than others. If something is clearly illegal and unethical the decision should be morally easy even if the process and the outcomes might be very painful. The right course of action is to report the problem to the authorities and the reality is that the consequences for not doing so might be very harsh indeed. This includes situations in which company employees enrich themselves at the expense of stockholders such as Enron, WorldCom, Tyco and Arthur Anderson.

Stakeholders can also be affected by unethical actions. Actions that hurt the company’s reputation hurt the stock holders. This too is an ethical dilemma because exposing wrong doing can result in a media scandal that hurts the reputation of the company but that is short term thinking. Managers are often in the position of having to juggle the interests of various stakeholders and the decisions can be stressful. For example, withholding a raise for a deserving employee leaves a bit more money for your own raise or for the conference you wish to attend. Suppliers and distributors can be a source of ethical dilemmas. They may be more favourably disposed toward your company after that weekend in the Jamaica but is that ‘buying’ their business? Conversely, you might be able to improve your bottom line by delaying paying them. My overall point in this section is that many of these problems could disappear if the company had solid policies on how the company handles such questions.

Organizational culture should include a mandate from the very top of the organization and a reinforced set of communications that let everyone know what is expected. Social responsibility should be expressed as the norm. Everyone should have easy access to the written code of conduct. Managers should be role models in this process. There should be an ‘ethics’ officer or an ombudsman who is a safe placed to report problems or to get advice. This person must not be a token but be empowered to act and to protect those who come forward. This ombudsman should have organization wide authority. People who risk coming forward should be considered a great asset to the company and protected from repercussions which might result from the report.

Managers faced with moral dilemmas should analyze the issues according to four ethical guidelines. Consider first the utilitarian rule and ask what will produce the greatest good for the greatest number of people? Then ask ‘What course of action protects the fundamental rights and privileges of the people involved’. Then compare and contrast the possible outcomes for an alternative which promotes the fairest outcome for all. Finally, ask yourself ‘Would an impartial observer find this outcome acceptable?’

Monday, May 3, 2010

The Japanese Pattern of Recovery

Learning from the Mistakes of Others


I was fascinated to read the box on page 134 of a book called Foundation of Financial Management. The headline “Why Japanese firms tend to be so competitive” was catchy. Given the glowing recommendation of Japanese leveraging and the competitiveness that results from it, I wanted to get some additional input so that I could understand the issue better.

The textbook article suggested that Japanese companies are highly leveraged both operationally and from a financing perspective. It stated that Japanese companies are the world leaders in high technology in their industries and that their governments support and encourage that pursuit. This pursuit of technology puts Japanese firms in a position of having high fixed costs and unlike in the United States, Japanese firms do not normally lay off their workers.

“The typical Japanese company has a debt-to-equity ration two to three times higher than its counterparts in the United States. The reason is that credit tends to be more available in Japan because of the traditional relationship between an industrial firm and its bank. They may both be part of the same cartel or trading company with interlocking directors (directors that serve on both boards).” (Emphasis mine). The textbook authors go on to state that “The key point is that Japanese firms have high operating leverage as well as high financial leverage and that makes them act very competitively”. “This, of course, may well be a virtue because it ensures that a firm will remain market oriented and progressive.”

I found this perspective fascinating and somewhat contrary to my own, so I went looking for an article on the Japanese situation and found one called “Japan’s Lessons for Managing the Crisis” by Nicholas Benes written in the Far Eastern Economic Review in October of 2008. While this is not a well-known journal, it has interesting points to make.
The article starts by pointing out that the financial crisis in the United States was preceded by a similar crisis in Japan during and that both crises were precipitated by the failure to rein in financial leverage and by the myth that real estate prices never fall. The article states that as of 2002, Japan had spent an amount equivalent to 20% of its GDP to clean up the resulting mess and that it is still not completely resolved. It goes on to state that even if Paulson and Bernancke got one trillion dollars in the States that would still be only 7% of the American GDP. As of the writing of the article the Nikkei Dow was down 34% while the Wall Street Dow was down “only” 20%. The author states that most analysts believe that the Japanese stocks are significantly undervalued and asks the valid question “Considering that the Japanese crisis is supposedly long over why aren’t world wide investors tripping over themselves to take advantage of undervalued stock?”

The author believes that answer lies in the behaviour of the American regulatory bodies as opposed to the Japanese authorities. The American market institutions and regulators are fully committed to a speedy adjustment of laws and regulations to ensure a speedy recovery. By contrast, 18 years after their bubble broke, Japan is perceived as having acted too slowly and without the will or transparency that is required. “It is as if the world has resigned itself to the fact that Japan will forever remain uncompetitive in the intermediation of capital- both domestic and foreign-and if this imposes a drag on the future growth of both the Japanese and world economies, nothing can be done about it”.

The author, a president of an investment bank in Tokyo, suggests several basic principles that could change this state of affairs and prevent the aging population of Japan from leaving this legacy to be born by the youth of Japan. These are:



1. Embrace transparency in the process.



2. Make concrete changes in the law rather than just hold discussions about it.



3. Spread out the shareholder meetings so that 97% do not occur in the same week.



4. Allow shareholders to send legitimate representatives to shareholder meetings.



5. Require companies to promptly and publicly report the results of votes on each resolution.



6. Require full disclosure by institutional shareholders with fiduciary responsibilities of the voting records when they have multiple and perhaps conflicting loyalties.



7. Legally require public company’s boards to have a majority of independent directors and empower them to be effective.





Many of these suggestions lead back to the quotes from the textbook article especially the ones pertaining to the relationship between Japanese companies and their banks. This investment banker author’s suggestions decry the lack of objectivity and transparency in these relationships. The fuller argument in the article makes the inbred relationships clear and their detrimental effects on Japan’s businesses and world wide reputation suffers from their cosy “cartel and trading company” lending practices.

Benes ends his article with the following warning:
“While tough times lie ahead for the American economy, the impulse to fully purge the dead assets from the system and undertake regulatory reforms serves the U.S. well. Japan’s apparent fate as a perpetually uncompetitive financial center serves as a stark warning to the costs of the failure to follow through.”

Too much leverage and too little transparency and regulatory oversight have consequences that go beyond the fate of a few companies and their samurai ways. While gambling can be exciting and a big wager has the potential to pay off in big money, there are down sides to excesses in every sphere. When the people at the top play too fast and loose others often pay the price. In Japan, the actions of the highly (and one might say over) leveraged companies have had a serious impact on the economy, the recovery, the confidence of world-markets and of course, the citizens of the country. Sometimes less is more.



References



Benes, N. (2008) Japan's Lessons for Managing the Crisis



Far Eastern Economic Review; Oct 2008; 171, 8; Downloaded from ABI/INFORM Global September 8, 2009.
Block, S., Hirt, G., (2009). Foundations of Financial Management (13th ed). NY: McGraw-Hill Irwin.

Degree of Operating Leverage-DOL. (2009). Investopedia.com. Retrieved September 7, 2009, from http://www.investopedia.com/articles/stocks/06/opleverage.asp.