Thursday, March 31, 2011
Wednesday, March 30, 2011
China Tops Global Clean energy Table
China tops global clean energy table
By Mark Kinver
Science and environment reporter, BBC News
Globally, solar energy enjoyed the "strongest growth" within the clean energy sector during 2010 Continue reading the main story
China remains the world's leading investor in low-carbon energy technology, a global study has shown.
The table, published by the US Pew Environment Group, showed that the Chinese invested $54.4bn (£34.1bn) in 2010, up from $39.1bn in 2009.While the US saw investment increase by 51% to $34bn, it still slipped from 2nd to 3rd in the ranking, behind Germany's $41.2bn.
However, the UK slipped outside the top 10 as investment fell by 70% in 2010.
Globally, the sector - which does not include nuclear power - attracted $243bn of investment, a 30% increase from 2009 and a whopping 630% rise since 2004.The authors also said that 40 gigawatts (GW) of wind and 17GW of solar energy were installed during 2010, taking the global clean power capacity to 388GW.
The report Who's Winning the Clean Energy Race, using data compiled by Bloomberg New Energy Finance, examined the clean energy sector's investment and technological trends in the G20 leading economies."Looking at global trends, the solar sector experiences the strongest growth among the various technologies," observed Michael Liebreich, chief executive of Bloomberg New Energy Finance.
"Declining prices and generous government support in key countries helped the solar sector achieve 40% of total clean energy investment in 2010," he added.
Clean energy investment top 10
Nation
Total ( in US$)
1. China
54.4
2. Germany
41.2
3. US
34.0
4. Italy
13.9
5. Rest of EU-27
13.4
6. Brazil
7.6
7. Canada
5.6
8. Spain
4.9
9. France
4.0
10. India
4.0
(13. UK
3.3)
(Source: Pew Environment Group; Bloomberg)
Action call on low-carbon future
The report outlined that as well as attracting the most investment, China was also the world's leading producer of wind turbines and solar energy units. The authors also pointed out that the country in 2009 overtook the US as the nation with the most installed clean energy capacity.In terms of year-on-year growth, Argentina topped the rankings as it saw investment grow by 568% in 2010 compared with 2009. Regionally, Europe remained the largest recipient of investment, attracting $94.4bn of investment. Asia/Oceania was the second most attractive region for investors, securing $82.2bn. Explaining the UK's slip in the rankings, Mr Liebreich suggested that it was a result of "policy uncertainty during a substantial part of the year".
In May, the UK general election resulted in a coalition government involving the Conservative Party and the Liberal Democrats. However, the deal was only struck after five days of intensive negotiations.
"With a new government in the UK, investors appear to be waiting on the sidelines until there is more certainty in the market," suggested Phyllis Cuttino, director of Pew's Clean Energy Program."Our research consistently demonstrates that strong policies attracts investments," she added."Nations like China, Germany and India, which all saw increases, were attractive to financiers because they have national policies that create long-term certainty for investors."Looking ahead to this year, Mr Liebreich said that he expected to see a slowing in the growth rate of investment in clean energy, yet he did expect to see a marked increased in generation capacity."Another thing worth watching is new technologies coming through," he told reporters.
"There was a surge in venture and private equity investment during 2005-08; and those companies have been under the radar because of the (economic) crisis. But you are now starting to see companies that have survived the difficult years... establish some commercial scale in their activities."
He concluded by saying that there had been a number of "black swans rocking the energy sector", such as the unrest in Middle Eastern nations and the aftermath of the Magnitude 9.0 earthquake in Japan.
"These things do change the landscape for clean energy," Mr Leibreich said.
"It is hard to recall the last time that clean energy caused a catastrophe of any magnitude. As thoughts about risk pervades policymakers' and investors' thinking, you are likely to see another strand of support for the clean energy industry."
By Mark Kinver
Science and environment reporter, BBC News
Globally, solar energy enjoyed the "strongest growth" within the clean energy sector during 2010 Continue reading the main story
China remains the world's leading investor in low-carbon energy technology, a global study has shown.
The table, published by the US Pew Environment Group, showed that the Chinese invested $54.4bn (£34.1bn) in 2010, up from $39.1bn in 2009.While the US saw investment increase by 51% to $34bn, it still slipped from 2nd to 3rd in the ranking, behind Germany's $41.2bn.
However, the UK slipped outside the top 10 as investment fell by 70% in 2010.
Globally, the sector - which does not include nuclear power - attracted $243bn of investment, a 30% increase from 2009 and a whopping 630% rise since 2004.The authors also said that 40 gigawatts (GW) of wind and 17GW of solar energy were installed during 2010, taking the global clean power capacity to 388GW.
The report Who's Winning the Clean Energy Race, using data compiled by Bloomberg New Energy Finance, examined the clean energy sector's investment and technological trends in the G20 leading economies."Looking at global trends, the solar sector experiences the strongest growth among the various technologies," observed Michael Liebreich, chief executive of Bloomberg New Energy Finance.
"Declining prices and generous government support in key countries helped the solar sector achieve 40% of total clean energy investment in 2010," he added.
Clean energy investment top 10
Nation
Total ( in US$)
1. China
54.4
2. Germany
41.2
3. US
34.0
4. Italy
13.9
5. Rest of EU-27
13.4
6. Brazil
7.6
7. Canada
5.6
8. Spain
4.9
9. France
4.0
10. India
4.0
(13. UK
3.3)
(Source: Pew Environment Group; Bloomberg)
Action call on low-carbon future
The report outlined that as well as attracting the most investment, China was also the world's leading producer of wind turbines and solar energy units. The authors also pointed out that the country in 2009 overtook the US as the nation with the most installed clean energy capacity.In terms of year-on-year growth, Argentina topped the rankings as it saw investment grow by 568% in 2010 compared with 2009. Regionally, Europe remained the largest recipient of investment, attracting $94.4bn of investment. Asia/Oceania was the second most attractive region for investors, securing $82.2bn. Explaining the UK's slip in the rankings, Mr Liebreich suggested that it was a result of "policy uncertainty during a substantial part of the year".
In May, the UK general election resulted in a coalition government involving the Conservative Party and the Liberal Democrats. However, the deal was only struck after five days of intensive negotiations.
"With a new government in the UK, investors appear to be waiting on the sidelines until there is more certainty in the market," suggested Phyllis Cuttino, director of Pew's Clean Energy Program."Our research consistently demonstrates that strong policies attracts investments," she added."Nations like China, Germany and India, which all saw increases, were attractive to financiers because they have national policies that create long-term certainty for investors."Looking ahead to this year, Mr Liebreich said that he expected to see a slowing in the growth rate of investment in clean energy, yet he did expect to see a marked increased in generation capacity."Another thing worth watching is new technologies coming through," he told reporters.
"There was a surge in venture and private equity investment during 2005-08; and those companies have been under the radar because of the (economic) crisis. But you are now starting to see companies that have survived the difficult years... establish some commercial scale in their activities."
He concluded by saying that there had been a number of "black swans rocking the energy sector", such as the unrest in Middle Eastern nations and the aftermath of the Magnitude 9.0 earthquake in Japan.
"These things do change the landscape for clean energy," Mr Leibreich said.
"It is hard to recall the last time that clean energy caused a catastrophe of any magnitude. As thoughts about risk pervades policymakers' and investors' thinking, you are likely to see another strand of support for the clean energy industry."
Monday, March 28, 2011
Presidential Address 2026 courtesy of Harvard Prof
By N. GREGORY MANKIW
The following is a presidential address to the nation — to be delivered in March 2026.
MY fellow Americans, I come to you today with a heavy heart. We have a crisis on our hands. It is one of our own making. And it is one that leaves us with no good choices. For many years, our nation’s government has lived beyond its means. We have promised ourselves both low taxes and a generous social safety net. But we have not faced the hard reality of budget arithmetic. The seeds of this crisis were planted long ago, by previous generations. Our parents and grandparents had noble aims. They saw poverty among the elderly and created Social Security. They saw sickness and created Medicare and Medicaid. They saw Americans struggle to afford health insurance and embraced health care reform with subsidies for middle-class families.
But this expansion in government did not come cheap. Government spending has taken up an increasing share of our national income. Today, most of the large baby-boom generation is retired. They are no longer working and paying taxes, but they are eligible for the many government benefits we offer the elderly. Our efforts to control health care costs have failed. We must now acknowledge that rising costs are driven largely by technological advances in saving lives. These advances are welcome, but they are expensive nonetheless.
If we had chosen to tax ourselves to pay for this spending, our current problems could have been avoided. But no one likes paying taxes. Taxes not only take money out of our pockets, but they also distort incentives and reduce economic growth. So, instead, we borrowed increasing amounts to pay for these programs.
Yet debt does not avoid hard choices. It only delays them. After last week’s events in the bond market, it is clear that further delay is no longer possible. The day of reckoning is here.
This morning, the Treasury Department released a detailed report about the nature of the problem. To put it most simply, the bond market no longer trusts us. For years, the United States government borrowed on good terms. Investors both at home and abroad were confident that we would honor our debts. They were sure that when the time came, we would do the right thing and bring spending and taxes into line. But over the last several years, as the ratio of our debt to gross domestic product reached ever-higher levels, investors started getting nervous. They demanded higher interest rates to compensate for the perceived risk. Higher interest rates increased the cost of servicing our debt, adding to the upward pressure on spending. We found ourselves in a vicious circle of rising budget deficits and falling investor confidence.
As economists often remind us, crises take longer to arrive than you think, but then they happen much faster than you could have imagined. Last week, when the Treasury tried to auction its most recent issue of government bonds, almost no one was buying. The private market will lend us no more. Our national credit card has been rejected.
So where do we go from here?
Yesterday, I returned from a meeting at the International Monetary Fund in its new headquarters in Beijing. I am pleased to report some good news. I have managed to secure from the I.M.F. a temporary line of credit to help us through this crisis. This loan comes with some conditions. As your president, I have to be frank: I don’t like them, and neither will you. But, under the circumstances, accepting these conditions is our only choice. We have to cut Social Security immediately, especially for higher-income beneficiaries. Social Security will still keep the elderly out of poverty, but just barely. We have to limit Medicare and Medicaid. These programs will still provide basic health care, but they will no longer cover many expensive treatments. Individuals will have to pay for these treatments on their own or, sadly, do without.
We have to cut health insurance subsidies to middle-income families. Health insurance will be less a right of citizenship and more a personal responsibility. We have to eliminate inessential government functions, like subsidies for farming, ethanol production, public broadcasting, energy conservation and trade promotion.
We will raise taxes on all but the poorest Americans. We will do this primarily by broadening the tax base, eliminating deductions for mortgage interest and state and local taxes. Employer-provided health insurance will hereafter be taxable compensation.
We will increase the gasoline tax by $2 a gallon. This will not only increase revenue, but will also address various social ills, from global climate change to local traffic congestion. AS I have said, these changes are repellant to me. When you elected me, I promised to preserve the social safety net. I assured you that the budget deficit could be fixed by eliminating waste, fraud and abuse, and by increasing taxes on only the richest Americans. But now we have little choice in the matter. If only we had faced up to this problem a generation ago. The choices then would not have been easy, but they would have been less draconian than the sudden, nonnegotiable demands we now face. Americans would have come to rely less on government and more on themselves, and so would be better prepared today. What I wouldn’t give for a chance to go back and change the past. But what is done is done. Americans have faced hardship and adversity before, and we have triumphed. Working together, we can make the sacrifices it takes so our children and grandchildren will enjoy a more prosperous future.
N. Gregory Mankiw is a professor of economics at Harvard.
The following is a presidential address to the nation — to be delivered in March 2026.
MY fellow Americans, I come to you today with a heavy heart. We have a crisis on our hands. It is one of our own making. And it is one that leaves us with no good choices. For many years, our nation’s government has lived beyond its means. We have promised ourselves both low taxes and a generous social safety net. But we have not faced the hard reality of budget arithmetic. The seeds of this crisis were planted long ago, by previous generations. Our parents and grandparents had noble aims. They saw poverty among the elderly and created Social Security. They saw sickness and created Medicare and Medicaid. They saw Americans struggle to afford health insurance and embraced health care reform with subsidies for middle-class families.
But this expansion in government did not come cheap. Government spending has taken up an increasing share of our national income. Today, most of the large baby-boom generation is retired. They are no longer working and paying taxes, but they are eligible for the many government benefits we offer the elderly. Our efforts to control health care costs have failed. We must now acknowledge that rising costs are driven largely by technological advances in saving lives. These advances are welcome, but they are expensive nonetheless.
If we had chosen to tax ourselves to pay for this spending, our current problems could have been avoided. But no one likes paying taxes. Taxes not only take money out of our pockets, but they also distort incentives and reduce economic growth. So, instead, we borrowed increasing amounts to pay for these programs.
Yet debt does not avoid hard choices. It only delays them. After last week’s events in the bond market, it is clear that further delay is no longer possible. The day of reckoning is here.
This morning, the Treasury Department released a detailed report about the nature of the problem. To put it most simply, the bond market no longer trusts us. For years, the United States government borrowed on good terms. Investors both at home and abroad were confident that we would honor our debts. They were sure that when the time came, we would do the right thing and bring spending and taxes into line. But over the last several years, as the ratio of our debt to gross domestic product reached ever-higher levels, investors started getting nervous. They demanded higher interest rates to compensate for the perceived risk. Higher interest rates increased the cost of servicing our debt, adding to the upward pressure on spending. We found ourselves in a vicious circle of rising budget deficits and falling investor confidence.
As economists often remind us, crises take longer to arrive than you think, but then they happen much faster than you could have imagined. Last week, when the Treasury tried to auction its most recent issue of government bonds, almost no one was buying. The private market will lend us no more. Our national credit card has been rejected.
So where do we go from here?
Yesterday, I returned from a meeting at the International Monetary Fund in its new headquarters in Beijing. I am pleased to report some good news. I have managed to secure from the I.M.F. a temporary line of credit to help us through this crisis. This loan comes with some conditions. As your president, I have to be frank: I don’t like them, and neither will you. But, under the circumstances, accepting these conditions is our only choice. We have to cut Social Security immediately, especially for higher-income beneficiaries. Social Security will still keep the elderly out of poverty, but just barely. We have to limit Medicare and Medicaid. These programs will still provide basic health care, but they will no longer cover many expensive treatments. Individuals will have to pay for these treatments on their own or, sadly, do without.
We have to cut health insurance subsidies to middle-income families. Health insurance will be less a right of citizenship and more a personal responsibility. We have to eliminate inessential government functions, like subsidies for farming, ethanol production, public broadcasting, energy conservation and trade promotion.
We will raise taxes on all but the poorest Americans. We will do this primarily by broadening the tax base, eliminating deductions for mortgage interest and state and local taxes. Employer-provided health insurance will hereafter be taxable compensation.
We will increase the gasoline tax by $2 a gallon. This will not only increase revenue, but will also address various social ills, from global climate change to local traffic congestion. AS I have said, these changes are repellant to me. When you elected me, I promised to preserve the social safety net. I assured you that the budget deficit could be fixed by eliminating waste, fraud and abuse, and by increasing taxes on only the richest Americans. But now we have little choice in the matter. If only we had faced up to this problem a generation ago. The choices then would not have been easy, but they would have been less draconian than the sudden, nonnegotiable demands we now face. Americans would have come to rely less on government and more on themselves, and so would be better prepared today. What I wouldn’t give for a chance to go back and change the past. But what is done is done. Americans have faced hardship and adversity before, and we have triumphed. Working together, we can make the sacrifices it takes so our children and grandchildren will enjoy a more prosperous future.
N. Gregory Mankiw is a professor of economics at Harvard.
2/3rds of US Corporations Pay Zero Federal Taxes: US Uncut Movement Builds to Make Them Pay Up
From coast-to-coast, more than forty cities joined in a day of action protesting the tax-dodging of massive corporations that they see as the real source of the country's deficit.
The following article first appeared on the Nation.com.
Saturday marked US Uncut’s second big nationwide protest. From coast-to-coast, more than forty cities joined in a day of action protesting the tax-dodging practices of massive corporations that they see as the real source of the country’s deficit.
“I’m tired of people calling for shared sacrifice and it’s all coming from the workers and nothing’s coming from the top,” says protester Dave Sonenberg. “I’m sick of companies like Bank of America not paying their taxes.”
Bank of America hasn’t paid a nickel in federal income taxes for the past two years, and in fact raked in an additional $1 billion in tax “benefits.” The bank is enjoying these profits after accepting $45 billion from taxpayers, which the company then got to count as a deduction when they paid back the money.Big corporations get to play by a whole different set of rules, says tax expert Bob Willens of New York-based Robert Willens LLC:
It's also not unusual for a company to pay no federal taxes, while still paying state and local taxes, Willens said. Items that can be deducted for federal purposes aren't always deductible for state and local returns, he said. State taxes can also be based on the amount of capital deployed in a state, not pre-tax income.
This is why two-thirds of corporations in America pay no federal income taxes. If they were forced to, we're told, the whole country would suffer. Jobs would be lost, salaries slashed. Thank heavens we’ve avoided such calamity by allowing corporations to shape legislation in their favor.
In 2010, Bank of America handed out $2.2 million in campaign contributions to Congressional representatives and PACs (36 percent went to Democrats, 64 percent to Republicans). By throwing around that much cash, huge companies like BoA have a big say when it comes to crafting legislation that permits them to escape paying taxes, according to US Uncut organizer J.A. Myerson.
“The reason it’s not illegal is because they have bought and paid for the people who make the laws. The laws are made to accommodate this sort of nefariousness,” he says, adding that the process is wrong, and ordinarily that would mean approaching Congress to ask them to fix it, but there’s no point in attempting that when the system is so heavily rigged in favor of the rich and well connected. “So what US Uncut is doing right now is not Capitol Hill lobbying because that doesn’t seem like it’s a fruitful avenue. It’s trying to directly undermine the ability of Bank of America to earn record windfall profits by depleting the public trust that they are an upstanding member of society.”
The rigged game has left citizens feeling burnt and angry. An activist named Sally says BoA’s practice of evicting people from their homes without the original mortgage notes is illegal, but that “illegal doesn’t seem to matter.”
The following article first appeared on the Nation.com.
Saturday marked US Uncut’s second big nationwide protest. From coast-to-coast, more than forty cities joined in a day of action protesting the tax-dodging practices of massive corporations that they see as the real source of the country’s deficit.
“I’m tired of people calling for shared sacrifice and it’s all coming from the workers and nothing’s coming from the top,” says protester Dave Sonenberg. “I’m sick of companies like Bank of America not paying their taxes.”
Bank of America hasn’t paid a nickel in federal income taxes for the past two years, and in fact raked in an additional $1 billion in tax “benefits.” The bank is enjoying these profits after accepting $45 billion from taxpayers, which the company then got to count as a deduction when they paid back the money.Big corporations get to play by a whole different set of rules, says tax expert Bob Willens of New York-based Robert Willens LLC:
It's also not unusual for a company to pay no federal taxes, while still paying state and local taxes, Willens said. Items that can be deducted for federal purposes aren't always deductible for state and local returns, he said. State taxes can also be based on the amount of capital deployed in a state, not pre-tax income.
This is why two-thirds of corporations in America pay no federal income taxes. If they were forced to, we're told, the whole country would suffer. Jobs would be lost, salaries slashed. Thank heavens we’ve avoided such calamity by allowing corporations to shape legislation in their favor.
In 2010, Bank of America handed out $2.2 million in campaign contributions to Congressional representatives and PACs (36 percent went to Democrats, 64 percent to Republicans). By throwing around that much cash, huge companies like BoA have a big say when it comes to crafting legislation that permits them to escape paying taxes, according to US Uncut organizer J.A. Myerson.
“The reason it’s not illegal is because they have bought and paid for the people who make the laws. The laws are made to accommodate this sort of nefariousness,” he says, adding that the process is wrong, and ordinarily that would mean approaching Congress to ask them to fix it, but there’s no point in attempting that when the system is so heavily rigged in favor of the rich and well connected. “So what US Uncut is doing right now is not Capitol Hill lobbying because that doesn’t seem like it’s a fruitful avenue. It’s trying to directly undermine the ability of Bank of America to earn record windfall profits by depleting the public trust that they are an upstanding member of society.”
The rigged game has left citizens feeling burnt and angry. An activist named Sally says BoA’s practice of evicting people from their homes without the original mortgage notes is illegal, but that “illegal doesn’t seem to matter.”
Pfizer- TEchnological, regulatory, Geographic scope,
It is unlikely that there is any industry today, with the possible exception of nuclear energy, which has more technological, regulatory or international pressures bearing on business decisions than the pharmaceutical industry currently faces.
Technological
When considering technology the advances in pharmaceutical sciences have been profound and Pfizer has embraced them. Biology and chemistry are changing as a result of high-powered computers, chemical information software tools and new database-searching algorithms. Technological advances in high-throughput screening hardware, combinatorial chemistry and information technology, in combination with high-value targets in the pharmaceutical industry, have created a cost- and time-efficient technology platform to screen a large number of compounds. With small research groups in biotechnology companies and academia as likely to establish priority and monopoly positions as large pharmaceutical companies, Pfizer knows the risks and the rewards. In addition, important insights into current and future changes in drug discovery and development are occasioned by successes in sequencing the human genome. Biological based drugs and targeted delivery approaches are two of the most anticipated revolutions in the business at this moment in time. Some recent developments are the development of spatial aggregation propensity for detecting protein aggregation (Trout, 2009, p1077), advances in drug-delivery technologies involving microencapsulation and nanocoatings, and tools to understand the risk of nanomaterials in drug-delivery systems (Li, 2009, p2554).
Ongoing improvement is crucial and research from MIT called the POPI study of 15 companies has been adapted with its best manufacturing practices for pharmaceutical manufacturing. The findings on manufacturing metrics (e.g. inventory and speed of production and manufacturing practices) demonstrated the strategic advantages of manufacturing to capture competitive advantages and for using existing and potential opportunities for cost savings. It led to innovative processes to move drugs through clinical trials and to speed up time to market by reducing the number of experiments required to determine the optimal manufacturing process. These changes are escalating in day to day operations. Pfizer is implementing a plan to transform its manufacturing organization into what the company terms a "vision-driven global supply chain network." That plan is part of Pfizer's overall strategy of refocusing and optimizing its patent protected portfolio, finding new opportunities for established products, growing in emerging markets, investing in complementary businesses, and instilling a culture of innovation and continuous improvement. Pfizer has embarked on a new manufacturing focus that features plant network optimization, increased outsourcing, and greater adoption of agile or lean manufacturing. Natale S. Ricciardi, president of Pfizer Global Manufacturing and senior vice-president of Pfizer referred to the importance of the Lean Six-Sigma mindset that Pfizer has adopted. This is fully aligned with other transformational strategies including sourcing, the transformation of the network, the adoption of new technologies, and the standardization of global business processes. Pfizer has completed various Six-Sigma projects with key vendors to address both quality improvements and efficiency opportunities with sophisticated analytics.
“The mission of Pfizer Global Manufacturing is to provide an innovative and powerful competitive advantage for Pfizer. To accomplish this, we have embraced several transformational strategies that will lead to a truly competitive global supply network with the right processes for 'make-or-buy' sourcing. This is a significant change from the traditional 'make-what-we sell' philosophy that had been in place historically as is typical in the industry and will require both operational and cultural change”: Riccardi (Van Arnm, 2008, p50). The cornerstone of the transformation has been an aggressive rationalization of the internal manufacturing network. This includes both active pharmaceutical ingredient and the finished product manufacturing drug substances. To date, the number of internal manufacturing sites has been reduced from just over 100 to 43.
A key part of subsequent increased outsourcing is that some of the facilities that were exited were engaged in a mutually beneficial strategic alliance with the new owners to provide an uninterrupted supply of the product. The role of central procurement has increased, specifically in the number of global category strategy managers engaged in sourcing APIs. As a larger percentage of APIs is outsourced, a broadening of the supply base and increased understanding of supplier capabilities are required. This transition has brought the need to increase resources and focus in the countries of China and India, which they have done by establishing a center of excellence team based in Singapore to work in those markets. These topics range from quality of product and services to practices, safety, regulatory compliance, reports, and metrics. Special considerations when working with suppliers in emerging markets are numerous. The first and foremost is product integrity and safety. Any potential supplier is evaluated on its ability to produce material in a manner that is fully compliant in all regulatory procedures. Other considerations when evaluating suppliers include the following: their ability to sustain supply in the long run; assurance of capacity and Pfizer’s ability to access additional capacity if needed; use of technology; research and development assets; continual improvement efforts; and cost competitiveness. This team works in concert with corporate strategy to optimize the internal plant network on the forefront of identifying opportunities and in planning. In a figure in World Pharmaceutical Frontiers, Nick Tryhall of Pfizer illustrated that off-shoring which he referred to as “low cost providers’ results in: 10% reduction in cost by component, 15% reduction in waste, a 35% expansion of alternative sites and a 40% reduction in oversights (emphasis mine).
"Drugs are usually developed with the criteria of how effective they'll be, and how well they'll bind to whatever target they're supposed to bind," said Bernhardt Trout, professor of chemical engineering at MIT, (Trout, 2009 p1073). "The problem is there are all of these issues down the line that were never taken into account." One of those issues is the possible elimination of the category of blockbuster drug which every major pharmaceutical company has dreamt of and made their fortunes upon in the last 40 years. With greater understanding of DNA, RNA and genomes, comes more specific drug expectations for individuals. No longer will “one size fit all”.
To apply even more pressure, the output of the industry's research and development efforts has slowed considerably, with only 26 Food and Drug Administration NCE (new chemical entity) approvals in 2008 - down from 40 in 1999. While the industry has historically relied on new product launches to drive growth and compensate for the loss of patent protection for existing products, IMS data indicate that adoption of new products in the United States has dwindled over the last decade. "We find as we look at launches done in 2008, the take-off curve is much lower, largely driven by the incremental controls imposed by stakeholders and payers.” (IMS, 2009).The change to more managed care and expert opinion in the choice of drugs for large groups of people has changed the playing field. Many of the innovations are prompted by regulatory bodies and others and, of course, by the industry itself.
Regulatory
An important initiative is taking shape at FDA's Center for Drug Evaluation and Research as officials seek to encourage manufacturers to apply modern process analytical technology to pharmaceutical production and quality control. The agency's goal is to reduce product quality problems while increasing the efficiency of manufacturing and quality assurance processes. CDER director Janet Woodcock believes that new technologies will permit manufacturers to shift from empirical to science-based standards for manufacturing process quality. According to Pfizer’s VP of Globalization, Industry and regulatory agencies around the world share responsibility for assuring the security of the pharmaceutical supply chain. The importance of a full and complete evaluation of a potential supplier or contract manufacturer by the pharmaceutical firm cannot be overemphasized. Once a supplier is approved for use, ongoing quality oversight is critical to ensure that the standards continue to be met. In developed countries suppliers operate within sophisticated regulatory environments and typically adhere to internationally recognized standards. They generally have effective quality systems that provide a high degree of confidence in the supply chain. Companies in emerging markets operate in a developing regulatory environment and may have less effective quality systems. Pfizer may need to work with these suppliers to upgrade their systems and standards. Regulatory agencies in developing countries share in the responsibility to educate manufacturers and health authorities in emerging countries.
Recently public opinion of large pharmaceutical companies has them on par with tobacco companies. This is leading to greater pressure to create and enforce regulatory measures. The documented terrible history of leading pharmaceutical companies in scandals involving knowingly selling and profiting from defective medical products and drugs while reaping large profits along with perceived price gouging and inbred relationships between doctors and pharmaceutical companies has turned the public sympathies. There is also great suspicion and scrutiny of marketing practices and lobbying by pharmaceutical companies. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity.
Europe moved to enact tighter regulations last year and in the USA Title VIII of the FDA amendments act was passed in 2007. In the United States, new pharmaceutical products must be approved by the Food and Drug Administration (FDA) as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following IND approval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and dosing in patients, and Phase III is a very large study of efficacy in the intended patient population. A fourth phase of post-approval surveillance is also required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Where pharmaceutics have been shown to cause side-effects, civil action has occurred, leading to large compensations. Recent controversies have involved Pfizer’s marketing practices, testing on ill informed human participants in Nigeria and Vioxx side effects. Pfizer endorses tort reform.
Questions continue to be raised regarding the standard of both the initial approval process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active. Depending on a number of considerations, a company may apply for and be granted a patent for the drug, or the process of producing the drug, granting exclusivity rights typically for about 20 years. However, only after rigorous study and testing, which takes 10 to 15 years on average, will governmental authorities grant permission for the company to market and sell the drug. Patent protection enables the owner of the patent to recover the costs of research and development through high profit margins for the branded drug. When the patent protection for the drug expires, a generic drug is usually developed and sold by a competing company. The development and approval of generics is less expensive, allowing them to be sold at a lower price. Often the owner of the branded drug will introduce a generic version before the patent expires in order to get a head start in the generic market.
In many non-US western countries a 'fourth hurdle' of cost effectiveness analysis has developed. This focuses on the cost and efficacy is fundamental in many countries. In England NICE approval requires technologies be made available to the NHS, whilst similar arrangements exist in Scotland, Australia and Canada where the drug must pass the cost effectiveness test to be approved for government formularies. Treatments must represent 'value for money' and a net benefit to society. There is much speculation that a NICE style framework may be implemented in the USA to ensure Medicare and Medicaid spending is focused to maximize benefit to patients and not excessive profits for the pharmaceutical industry. In the UK the British National Formulary is the core guide for pharmacists and clinicians. In Canada there are provincial formularies that will cover the cost of a generic unless the advantages of the name brand product can be proven. Add to these considerations that IMS began by conducting a systematic, qualitative analysis of current conditions in eight key mature markets: the United States, Canada, Japan, the United Kingdom, France, Germany, Spain and Italy. In all of the markets- particularly the United States - the role of the physician has changed significantly. Although physicians are still heavily involved in the prescribing process, their decisions are subject to layers of control from a growing number of stakeholders.
Pfizer faces regulatory problems in another arena. According to the EPA, Pfizer is among the top ten companies in America with the most numerous emissions sources. A landfill and two wastewater lagoons in Ledyard, CT near the Pfizer plant in Groton, Connecticut, are a source of groundwater pollution in the area. According to the Connecticut Department of Environmental Protection (CT DEP), the Pfizer site is active under the CT DEP Site Remediation program.]In June 2002, a chemical explosion at the Groton plant injured seven people and caused the evacuation of over 100 homes in the surrounding area. Pfizer may be closing plants for reasons other than simple efficiency
The Geographic scope
Pfizer’s business is truly global and significant earnings and production happens overseas. 79% of pharmaceutical sales happen in the G7 counties but IMS calls the BRIC nations plus Mexico, South Korea, & Turkey the “Pharmerging markets” and this is where 27% of the world’s pharmaceutical growth is expected in the coming years. Pfizer has embraced manufacturing in emerging markets. Demonstrating the extent of the current downturn though, emerging markets are forecast to post a mild contraction of -.0.2% for 2009. The 3% growth expected in 2010 would be the worst performance since the recession of 2001. China is expected to post a +5.6% growth in GDP and that will be felt in pharmaceutical sales. Emerging Asia is expected to post a 3.5% growth but that will not include Singapore or Taiwan which are expected to decline. Latin America is expected to do very poorly. Central and Eastern Europe are expected to see shrinking sales. The Pharmerging nations expect recovery to be weak but steady. Egypt, Qatar and Iran expect modest growth.
References
Andre Nel et al., “Understanding Biophysicochemical Interactions at the Nano–Bio Interface,” Nature Materials 8 (7), 543–557 (2009).
Bartlett,D. L., & Steele, J. B.,
Why Drugs Cost so Much/ The issues ’04:Why We Pay So Much for Drugs
Time Magazine, Feb. 2, 2004
Li, B. “Multilayer Polypeptide Nanoscale Coatings Incorporating IK-12 for the Prevention of Biomedical Device-Associated Infections,” Biomaterials 30 (13), 2552–2558 (2009).
Smart regulation: report on actions and plans. Ottawa: Government of Canada; Mar 2005.
Trout, B, “Design of Therapeutic Proteins with Enhanced Stability,” Proc. Natil. Acad. Sci. U.S.A. July 1, 2009, DOI 10.1073.
VanArnum, P. Manufacturing Insights: Pfizer
Pharmaceutical Technology. Cleveland: Jul 2008. Vol. 32, Iss. 7; pg. 50, 2 pgs
www.pfizer.com/pfizerinc/about/focus/research.htm
www.pfizer.com/locations/worldwidelocations.html
www.regulation.gc.ca/docs/report1/rap_e.pdf
Technological
When considering technology the advances in pharmaceutical sciences have been profound and Pfizer has embraced them. Biology and chemistry are changing as a result of high-powered computers, chemical information software tools and new database-searching algorithms. Technological advances in high-throughput screening hardware, combinatorial chemistry and information technology, in combination with high-value targets in the pharmaceutical industry, have created a cost- and time-efficient technology platform to screen a large number of compounds. With small research groups in biotechnology companies and academia as likely to establish priority and monopoly positions as large pharmaceutical companies, Pfizer knows the risks and the rewards. In addition, important insights into current and future changes in drug discovery and development are occasioned by successes in sequencing the human genome. Biological based drugs and targeted delivery approaches are two of the most anticipated revolutions in the business at this moment in time. Some recent developments are the development of spatial aggregation propensity for detecting protein aggregation (Trout, 2009, p1077), advances in drug-delivery technologies involving microencapsulation and nanocoatings, and tools to understand the risk of nanomaterials in drug-delivery systems (Li, 2009, p2554).
Ongoing improvement is crucial and research from MIT called the POPI study of 15 companies has been adapted with its best manufacturing practices for pharmaceutical manufacturing. The findings on manufacturing metrics (e.g. inventory and speed of production and manufacturing practices) demonstrated the strategic advantages of manufacturing to capture competitive advantages and for using existing and potential opportunities for cost savings. It led to innovative processes to move drugs through clinical trials and to speed up time to market by reducing the number of experiments required to determine the optimal manufacturing process. These changes are escalating in day to day operations. Pfizer is implementing a plan to transform its manufacturing organization into what the company terms a "vision-driven global supply chain network." That plan is part of Pfizer's overall strategy of refocusing and optimizing its patent protected portfolio, finding new opportunities for established products, growing in emerging markets, investing in complementary businesses, and instilling a culture of innovation and continuous improvement. Pfizer has embarked on a new manufacturing focus that features plant network optimization, increased outsourcing, and greater adoption of agile or lean manufacturing. Natale S. Ricciardi, president of Pfizer Global Manufacturing and senior vice-president of Pfizer referred to the importance of the Lean Six-Sigma mindset that Pfizer has adopted. This is fully aligned with other transformational strategies including sourcing, the transformation of the network, the adoption of new technologies, and the standardization of global business processes. Pfizer has completed various Six-Sigma projects with key vendors to address both quality improvements and efficiency opportunities with sophisticated analytics.
“The mission of Pfizer Global Manufacturing is to provide an innovative and powerful competitive advantage for Pfizer. To accomplish this, we have embraced several transformational strategies that will lead to a truly competitive global supply network with the right processes for 'make-or-buy' sourcing. This is a significant change from the traditional 'make-what-we sell' philosophy that had been in place historically as is typical in the industry and will require both operational and cultural change”: Riccardi (Van Arnm, 2008, p50). The cornerstone of the transformation has been an aggressive rationalization of the internal manufacturing network. This includes both active pharmaceutical ingredient and the finished product manufacturing drug substances. To date, the number of internal manufacturing sites has been reduced from just over 100 to 43.
A key part of subsequent increased outsourcing is that some of the facilities that were exited were engaged in a mutually beneficial strategic alliance with the new owners to provide an uninterrupted supply of the product. The role of central procurement has increased, specifically in the number of global category strategy managers engaged in sourcing APIs. As a larger percentage of APIs is outsourced, a broadening of the supply base and increased understanding of supplier capabilities are required. This transition has brought the need to increase resources and focus in the countries of China and India, which they have done by establishing a center of excellence team based in Singapore to work in those markets. These topics range from quality of product and services to practices, safety, regulatory compliance, reports, and metrics. Special considerations when working with suppliers in emerging markets are numerous. The first and foremost is product integrity and safety. Any potential supplier is evaluated on its ability to produce material in a manner that is fully compliant in all regulatory procedures. Other considerations when evaluating suppliers include the following: their ability to sustain supply in the long run; assurance of capacity and Pfizer’s ability to access additional capacity if needed; use of technology; research and development assets; continual improvement efforts; and cost competitiveness. This team works in concert with corporate strategy to optimize the internal plant network on the forefront of identifying opportunities and in planning. In a figure in World Pharmaceutical Frontiers, Nick Tryhall of Pfizer illustrated that off-shoring which he referred to as “low cost providers’ results in: 10% reduction in cost by component, 15% reduction in waste, a 35% expansion of alternative sites and a 40% reduction in oversights (emphasis mine).
"Drugs are usually developed with the criteria of how effective they'll be, and how well they'll bind to whatever target they're supposed to bind," said Bernhardt Trout, professor of chemical engineering at MIT, (Trout, 2009 p1073). "The problem is there are all of these issues down the line that were never taken into account." One of those issues is the possible elimination of the category of blockbuster drug which every major pharmaceutical company has dreamt of and made their fortunes upon in the last 40 years. With greater understanding of DNA, RNA and genomes, comes more specific drug expectations for individuals. No longer will “one size fit all”.
To apply even more pressure, the output of the industry's research and development efforts has slowed considerably, with only 26 Food and Drug Administration NCE (new chemical entity) approvals in 2008 - down from 40 in 1999. While the industry has historically relied on new product launches to drive growth and compensate for the loss of patent protection for existing products, IMS data indicate that adoption of new products in the United States has dwindled over the last decade. "We find as we look at launches done in 2008, the take-off curve is much lower, largely driven by the incremental controls imposed by stakeholders and payers.” (IMS, 2009).The change to more managed care and expert opinion in the choice of drugs for large groups of people has changed the playing field. Many of the innovations are prompted by regulatory bodies and others and, of course, by the industry itself.
Regulatory
An important initiative is taking shape at FDA's Center for Drug Evaluation and Research as officials seek to encourage manufacturers to apply modern process analytical technology to pharmaceutical production and quality control. The agency's goal is to reduce product quality problems while increasing the efficiency of manufacturing and quality assurance processes. CDER director Janet Woodcock believes that new technologies will permit manufacturers to shift from empirical to science-based standards for manufacturing process quality. According to Pfizer’s VP of Globalization, Industry and regulatory agencies around the world share responsibility for assuring the security of the pharmaceutical supply chain. The importance of a full and complete evaluation of a potential supplier or contract manufacturer by the pharmaceutical firm cannot be overemphasized. Once a supplier is approved for use, ongoing quality oversight is critical to ensure that the standards continue to be met. In developed countries suppliers operate within sophisticated regulatory environments and typically adhere to internationally recognized standards. They generally have effective quality systems that provide a high degree of confidence in the supply chain. Companies in emerging markets operate in a developing regulatory environment and may have less effective quality systems. Pfizer may need to work with these suppliers to upgrade their systems and standards. Regulatory agencies in developing countries share in the responsibility to educate manufacturers and health authorities in emerging countries.
Recently public opinion of large pharmaceutical companies has them on par with tobacco companies. This is leading to greater pressure to create and enforce regulatory measures. The documented terrible history of leading pharmaceutical companies in scandals involving knowingly selling and profiting from defective medical products and drugs while reaping large profits along with perceived price gouging and inbred relationships between doctors and pharmaceutical companies has turned the public sympathies. There is also great suspicion and scrutiny of marketing practices and lobbying by pharmaceutical companies. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity.
Europe moved to enact tighter regulations last year and in the USA Title VIII of the FDA amendments act was passed in 2007. In the United States, new pharmaceutical products must be approved by the Food and Drug Administration (FDA) as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following IND approval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and dosing in patients, and Phase III is a very large study of efficacy in the intended patient population. A fourth phase of post-approval surveillance is also required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Where pharmaceutics have been shown to cause side-effects, civil action has occurred, leading to large compensations. Recent controversies have involved Pfizer’s marketing practices, testing on ill informed human participants in Nigeria and Vioxx side effects. Pfizer endorses tort reform.
Questions continue to be raised regarding the standard of both the initial approval process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active. Depending on a number of considerations, a company may apply for and be granted a patent for the drug, or the process of producing the drug, granting exclusivity rights typically for about 20 years. However, only after rigorous study and testing, which takes 10 to 15 years on average, will governmental authorities grant permission for the company to market and sell the drug. Patent protection enables the owner of the patent to recover the costs of research and development through high profit margins for the branded drug. When the patent protection for the drug expires, a generic drug is usually developed and sold by a competing company. The development and approval of generics is less expensive, allowing them to be sold at a lower price. Often the owner of the branded drug will introduce a generic version before the patent expires in order to get a head start in the generic market.
In many non-US western countries a 'fourth hurdle' of cost effectiveness analysis has developed. This focuses on the cost and efficacy is fundamental in many countries. In England NICE approval requires technologies be made available to the NHS, whilst similar arrangements exist in Scotland, Australia and Canada where the drug must pass the cost effectiveness test to be approved for government formularies. Treatments must represent 'value for money' and a net benefit to society. There is much speculation that a NICE style framework may be implemented in the USA to ensure Medicare and Medicaid spending is focused to maximize benefit to patients and not excessive profits for the pharmaceutical industry. In the UK the British National Formulary is the core guide for pharmacists and clinicians. In Canada there are provincial formularies that will cover the cost of a generic unless the advantages of the name brand product can be proven. Add to these considerations that IMS began by conducting a systematic, qualitative analysis of current conditions in eight key mature markets: the United States, Canada, Japan, the United Kingdom, France, Germany, Spain and Italy. In all of the markets- particularly the United States - the role of the physician has changed significantly. Although physicians are still heavily involved in the prescribing process, their decisions are subject to layers of control from a growing number of stakeholders.
Pfizer faces regulatory problems in another arena. According to the EPA, Pfizer is among the top ten companies in America with the most numerous emissions sources. A landfill and two wastewater lagoons in Ledyard, CT near the Pfizer plant in Groton, Connecticut, are a source of groundwater pollution in the area. According to the Connecticut Department of Environmental Protection (CT DEP), the Pfizer site is active under the CT DEP Site Remediation program.]In June 2002, a chemical explosion at the Groton plant injured seven people and caused the evacuation of over 100 homes in the surrounding area. Pfizer may be closing plants for reasons other than simple efficiency
The Geographic scope
Pfizer’s business is truly global and significant earnings and production happens overseas. 79% of pharmaceutical sales happen in the G7 counties but IMS calls the BRIC nations plus Mexico, South Korea, & Turkey the “Pharmerging markets” and this is where 27% of the world’s pharmaceutical growth is expected in the coming years. Pfizer has embraced manufacturing in emerging markets. Demonstrating the extent of the current downturn though, emerging markets are forecast to post a mild contraction of -.0.2% for 2009. The 3% growth expected in 2010 would be the worst performance since the recession of 2001. China is expected to post a +5.6% growth in GDP and that will be felt in pharmaceutical sales. Emerging Asia is expected to post a 3.5% growth but that will not include Singapore or Taiwan which are expected to decline. Latin America is expected to do very poorly. Central and Eastern Europe are expected to see shrinking sales. The Pharmerging nations expect recovery to be weak but steady. Egypt, Qatar and Iran expect modest growth.
References
Andre Nel et al., “Understanding Biophysicochemical Interactions at the Nano–Bio Interface,” Nature Materials 8 (7), 543–557 (2009).
Bartlett,D. L., & Steele, J. B.,
Why Drugs Cost so Much/ The issues ’04:Why We Pay So Much for Drugs
Time Magazine, Feb. 2, 2004
Li, B. “Multilayer Polypeptide Nanoscale Coatings Incorporating IK-12 for the Prevention of Biomedical Device-Associated Infections,” Biomaterials 30 (13), 2552–2558 (2009).
Smart regulation: report on actions and plans. Ottawa: Government of Canada; Mar 2005.
Trout, B, “Design of Therapeutic Proteins with Enhanced Stability,” Proc. Natil. Acad. Sci. U.S.A. July 1, 2009, DOI 10.1073.
VanArnum, P. Manufacturing Insights: Pfizer
Pharmaceutical Technology. Cleveland: Jul 2008. Vol. 32, Iss. 7; pg. 50, 2 pgs
www.pfizer.com/pfizerinc/about/focus/research.htm
www.pfizer.com/locations/worldwidelocations.html
www.regulation.gc.ca/docs/report1/rap_e.pdf
Saab CEO stepping down
The chief executive of Saab is stepping down as the carmaker continues to struggle with weak sales and large losses.Saab suffered a 218m euros ($308m; £191m) loss last year, according to parent company Spyker Cars.
Jan Ake Jonsson has worked for Saab for about 40 years.
As chief executive during the last six years, he was instrumental in saving Saab from closure.
"He's done an incredible job getting Saab back on track," Victor Muller, owner and chairman of Saab, told BBC World in an interview.
Mr Jonsson said: "The last three years have of course been very demanding and forced me to focus on one thing only - my work."Now it is time for me to also spend some time on other things that had to stand back for my duties to Saab."
'Experienced manager'
The company is still struggling, however.
Spyker is selling its sportscar arm and will focus on expanding Saab Saab sold only about 30,000 cars last year, a slight improvement on 2009.
It hopes to sell about 80,000 this year, though the departure of Mr Jonsson will make this target harder to achieve, analysts said."This is certainly a negative," said Martin Crum at AEK."He is a very experienced manager and it will be very difficult to find a proper replacement. It will make it more difficult than before."
Mr Muller said the focus should be on profits rather than volume.
"We are constantly being confronted with sales targets, and this is logical because they're easy to measure," he said."But I'd rather sell 50,000 cars and make a profit."
Sportscar division sold
Spyker and its owner Mr Muller bought Saab last year from General Motors following major restructuring at the US car giant.Mr Muller insisted Saab is recovering and pointed to new models coming on stream soon."The launch of new products, the real pivot in this business plan is the launch of the new 9-3 in October 2012. That's the tipping point," he said."The company will have the widest and the newest product range the company has had in its entire 64 year history," said Mr Muller.Last month, Spyker announced plans to sell its sportscar arm and focus instead on expanding Saab.
It signed a provisional deal to sell the business to UK-based, Russian-owned, CPP Global Holdings for some 32m euros.
Jan Ake Jonsson has worked for Saab for about 40 years.
As chief executive during the last six years, he was instrumental in saving Saab from closure.
"He's done an incredible job getting Saab back on track," Victor Muller, owner and chairman of Saab, told BBC World in an interview.
Mr Jonsson said: "The last three years have of course been very demanding and forced me to focus on one thing only - my work."Now it is time for me to also spend some time on other things that had to stand back for my duties to Saab."
'Experienced manager'
The company is still struggling, however.
Spyker is selling its sportscar arm and will focus on expanding Saab Saab sold only about 30,000 cars last year, a slight improvement on 2009.
It hopes to sell about 80,000 this year, though the departure of Mr Jonsson will make this target harder to achieve, analysts said."This is certainly a negative," said Martin Crum at AEK."He is a very experienced manager and it will be very difficult to find a proper replacement. It will make it more difficult than before."
Mr Muller said the focus should be on profits rather than volume.
"We are constantly being confronted with sales targets, and this is logical because they're easy to measure," he said."But I'd rather sell 50,000 cars and make a profit."
Sportscar division sold
Spyker and its owner Mr Muller bought Saab last year from General Motors following major restructuring at the US car giant.Mr Muller insisted Saab is recovering and pointed to new models coming on stream soon."The launch of new products, the real pivot in this business plan is the launch of the new 9-3 in October 2012. That's the tipping point," he said."The company will have the widest and the newest product range the company has had in its entire 64 year history," said Mr Muller.Last month, Spyker announced plans to sell its sportscar arm and focus instead on expanding Saab.
It signed a provisional deal to sell the business to UK-based, Russian-owned, CPP Global Holdings for some 32m euros.
Sunday, March 27, 2011
EU agreed to restructure financial bail-out fund
European leaders have agreed a restructuring of a financial bail-out fund that they hope will resolve the bloc's debt crisis.Eurozone ministers bowed to German demands to renegotiate the time-frame for contributions to the massive fund.But the deal was overshadowed by concerns about Portugal and a growing row that the UK may be forced to contribute to a financial bail-out.Portugal says it does not need aid, but many analysts say Lisbon is in denial.
The eurozone debt deal follows months of negotiations."We decided a comprehensive package of economic measures... Today almost all the strands of this enterprise have come together," European Council President Herman Van Rompuy said.The new plan provides for the creation of a permanent fund in 2013, the European Stability Mechanism, to help troubled eurozone countries.
A major sticking point was the speed with which countries had to pay cash into the 700bn-euro (£615bn) fund.
"There is increasing tension between the bankrollers and the bailed-out... three months of uncertainty lie ahead” Gavin Hewitt. The agreement requires 80bn euros of cash provided by eurozone countries in five equal annual instalments. There will be a further 620bn euros in guarantees. Originally, eurozone finance ministers agreed to put 40bn euros into the fund immediately it is created in 2013.There had been expectations that the two-day summit in Brussels would agree a resolution over rescuing Portugal's stricken economy.But Portuguese ministers said they had no intention of following Greece and the Irish Republic in tapping the bail-out fund.
Even so, analysts believe it is only a matter of time before other countries are forced to provide support to the ailing economy.
UK Prime Minister David Cameron refused to respond to suggestions that Britain may have to pledge billions of pounds to any emergency funding.He said: "It's not right to comment and speculate on another country's finances, and I'm not going to do that."He has faced angry calls from his own Conservative MPs to refuse to contribute British money towards a bail-out. "Can I remind you that we have just had an austerity Budget?" said former frontbencher Bernard Jenkin in the Commons on Thursday."Can you imagine how absolutely furious British voters would be if it turns out that the British taxpayer has to continue contributing to the bail-out of euro countries, even though we are not a member?"European Commission President Jose Manuel Barroso insisted that member states had not discussed bailing out Portugal.
"We [EU leaders] expressed confidence in the capacity of Portugal to overcome the current situation and also to find the funding the country needs in the months to come."The financial markets are also worried as Portugal must repay a large chunk of debt to lenders in April.
On Friday, Standard & Poor's downgraded Portugal's credit ratings by two notches to BBB and warned it could cut it further.
S&P followed a two-notch cut by Fitch on Thursday.
The eurozone debt deal follows months of negotiations."We decided a comprehensive package of economic measures... Today almost all the strands of this enterprise have come together," European Council President Herman Van Rompuy said.The new plan provides for the creation of a permanent fund in 2013, the European Stability Mechanism, to help troubled eurozone countries.
A major sticking point was the speed with which countries had to pay cash into the 700bn-euro (£615bn) fund.
"There is increasing tension between the bankrollers and the bailed-out... three months of uncertainty lie ahead” Gavin Hewitt. The agreement requires 80bn euros of cash provided by eurozone countries in five equal annual instalments. There will be a further 620bn euros in guarantees. Originally, eurozone finance ministers agreed to put 40bn euros into the fund immediately it is created in 2013.There had been expectations that the two-day summit in Brussels would agree a resolution over rescuing Portugal's stricken economy.But Portuguese ministers said they had no intention of following Greece and the Irish Republic in tapping the bail-out fund.
Even so, analysts believe it is only a matter of time before other countries are forced to provide support to the ailing economy.
UK Prime Minister David Cameron refused to respond to suggestions that Britain may have to pledge billions of pounds to any emergency funding.He said: "It's not right to comment and speculate on another country's finances, and I'm not going to do that."He has faced angry calls from his own Conservative MPs to refuse to contribute British money towards a bail-out. "Can I remind you that we have just had an austerity Budget?" said former frontbencher Bernard Jenkin in the Commons on Thursday."Can you imagine how absolutely furious British voters would be if it turns out that the British taxpayer has to continue contributing to the bail-out of euro countries, even though we are not a member?"European Commission President Jose Manuel Barroso insisted that member states had not discussed bailing out Portugal.
"We [EU leaders] expressed confidence in the capacity of Portugal to overcome the current situation and also to find the funding the country needs in the months to come."The financial markets are also worried as Portugal must repay a large chunk of debt to lenders in April.
On Friday, Standard & Poor's downgraded Portugal's credit ratings by two notches to BBB and warned it could cut it further.
S&P followed a two-notch cut by Fitch on Thursday.
Saturday, March 26, 2011
Global Supply Chains at risk because of Radioactivity in Tokyo Harbour
Fearing the potential impact on crews, cargo and vessels worth tens of millions of dollars, some of the world’s biggest container shipping lines have restricted or barred their ships from calling on ports in Tokyo Bay over concerns about radiation from the damaged Fukushima Daiichi nuclear power plant.
Meantime, ports in China are starting to require strict radiation checks on ships arriving from Japan. And in California on Friday, the first ship to reach the Port of Long Beach since Japan’s earthquake was boarded and scanned for radiation by Coast Guard and federal customs officials before being allowed to dock.
Big Japanese ports much farther south of Tokyo, like Osaka and Kobe, are still loading and unloading cargo. But the Tokyo Bay ports of Tokyo and Yokohama are normally Japan’s two busiest, representing as much as 40 percent of the nation’s foreign container cargo. If other shipping companies join those already avoiding the Tokyo area, as radiation contamination spreads from Fukushima Daiichi 140 miles north, the delays in getting goods in and out of Japan would only grow worse.
The shipping industry’s fears have escalated since port officials in Xiamen, China, earlier this week detected radiation on a large container ship belonging to Mitsui O.S.K. Lines and quarantined the ship. The vessel had sailed down Japan’s northeast coast and reportedly came no closer than 80 miles to the damaged nuclear power plant; the official Xinhua news agency said on Saturday afternoon that the vessel had left a berth at the port on Wednesday afternoon and then anchored briefly at sea.
Hapag-Lloyd, a German container shipping line that is one of the world’s largest, halted service to Tokyo and Yokohama after the tsunami swamped Fukushima Daiichi. The shipper has not resumed service to those ports. “We put safety ahead of everything else,” said Eva Gjersvik, the company’s senior director for corporate communications, adding that the company was reviewing daily whether to resume sailings to Tokyo. euters reported that another German shipper, Claus-Peter Offen, has also stopped calling at Tokyo and Yokohama.
OOCL, a shipping line based in Hong Kong, said late Friday that the company had decided to halt all traffic to Tokyo and Yokohama. OOCL will take Tokyo-bound containers to Osaka instead and send them overland from there, said Stanley Shen, the head of investor relations. The company has also drafted contingency plans to prevent its containers from traveling even overland to Tokyo if radiation levels increase in the Japanese capital, Mr. Shen added.
Merchant vessels may have to be scrapped if quarantined even temporarily for radioactivity, because they would face extra coast guard checks for years at subsequent destinations, said Basil M. Karatzas, the managing director for projects and finance at Compass Maritime Services, a ship brokerage in Teaneck, N.J.
The extra inspections make it hard to keep a schedule. “The charterers in the future will try to avoid the vessel because of the likelihood it will be delayed again,” Mr. Karatzas said.
It is not only commercial ships that are giving the radiation region a wide berth.
A senior nuclear executive said on Friday evening that the United States Navy had moved nuclear-powered vessels like the Ronald Reagan aircraft carrier far from the Fukushima Daiichi nuclear power plant after officers became concerned that radiation from the plant could enter the ships’ air ducts.
The worry is not that the radiation would pose a threat to the vessels’ crews, but that even trace contamination of the ducts could create problems in the extremely sensitive equipment aboard nuclear-powered vessels that is intended to detect any hint of a radioactive leak from onboard systems, said the executive, who insisted on anonymity to protect business connections.
Shippers, even if they can avoid radiation exposure, know that cargo coming from Japan is now subject to new delays.
Meantime, ports in China are starting to require strict radiation checks on ships arriving from Japan. And in California on Friday, the first ship to reach the Port of Long Beach since Japan’s earthquake was boarded and scanned for radiation by Coast Guard and federal customs officials before being allowed to dock.
Big Japanese ports much farther south of Tokyo, like Osaka and Kobe, are still loading and unloading cargo. But the Tokyo Bay ports of Tokyo and Yokohama are normally Japan’s two busiest, representing as much as 40 percent of the nation’s foreign container cargo. If other shipping companies join those already avoiding the Tokyo area, as radiation contamination spreads from Fukushima Daiichi 140 miles north, the delays in getting goods in and out of Japan would only grow worse.
The shipping industry’s fears have escalated since port officials in Xiamen, China, earlier this week detected radiation on a large container ship belonging to Mitsui O.S.K. Lines and quarantined the ship. The vessel had sailed down Japan’s northeast coast and reportedly came no closer than 80 miles to the damaged nuclear power plant; the official Xinhua news agency said on Saturday afternoon that the vessel had left a berth at the port on Wednesday afternoon and then anchored briefly at sea.
Hapag-Lloyd, a German container shipping line that is one of the world’s largest, halted service to Tokyo and Yokohama after the tsunami swamped Fukushima Daiichi. The shipper has not resumed service to those ports. “We put safety ahead of everything else,” said Eva Gjersvik, the company’s senior director for corporate communications, adding that the company was reviewing daily whether to resume sailings to Tokyo. euters reported that another German shipper, Claus-Peter Offen, has also stopped calling at Tokyo and Yokohama.
OOCL, a shipping line based in Hong Kong, said late Friday that the company had decided to halt all traffic to Tokyo and Yokohama. OOCL will take Tokyo-bound containers to Osaka instead and send them overland from there, said Stanley Shen, the head of investor relations. The company has also drafted contingency plans to prevent its containers from traveling even overland to Tokyo if radiation levels increase in the Japanese capital, Mr. Shen added.
Merchant vessels may have to be scrapped if quarantined even temporarily for radioactivity, because they would face extra coast guard checks for years at subsequent destinations, said Basil M. Karatzas, the managing director for projects and finance at Compass Maritime Services, a ship brokerage in Teaneck, N.J.
The extra inspections make it hard to keep a schedule. “The charterers in the future will try to avoid the vessel because of the likelihood it will be delayed again,” Mr. Karatzas said.
It is not only commercial ships that are giving the radiation region a wide berth.
A senior nuclear executive said on Friday evening that the United States Navy had moved nuclear-powered vessels like the Ronald Reagan aircraft carrier far from the Fukushima Daiichi nuclear power plant after officers became concerned that radiation from the plant could enter the ships’ air ducts.
The worry is not that the radiation would pose a threat to the vessels’ crews, but that even trace contamination of the ducts could create problems in the extremely sensitive equipment aboard nuclear-powered vessels that is intended to detect any hint of a radioactive leak from onboard systems, said the executive, who insisted on anonymity to protect business connections.
Shippers, even if they can avoid radiation exposure, know that cargo coming from Japan is now subject to new delays.
GlaxoSmithKline wins Canadian Pandemic Flu contract
GlaxoSmithKline has been awarded a $425.9-million contract to make sure Canadians have enough vaccine to fight a flu pandemic in the next 10 years.
The federal government announced the contract Friday.
The contract with GlaxoSmithKline of Mississauga is meant to reduce delays in delivery and distribution of pandemic vaccine and ensure access at a competitive price if needed, Health Canada said.
The company will make the vaccine at its plant in Ste-Foy, Que.
Sanofi Pasteur Ltd. of Toronto was awarded a three-year, $33.1 million deal to provide vaccine for more vulnerable populations during a pandemic, including pregnant women and those suffering from a chronic disease. "We have worked with our provincial and territorial counterparts to provide governments with a broader range of vaccine products for seasonal flu and to deliver on the commitment to have a long-term pandemic vaccine contract in place before the current contract expires," Health Minister Leona Aglukkaq said in a release.
The current contract, also held by GlaxoSmithKline, expires March 31."Our new primary pandemic vaccine supply contract provides timely, cost-effective access to a secure domestic supply of vaccine for Canadians in the event of an influenza pandemic," Aglukkaq said.Some provincial health officials said vaccine distribution was slow during the H1N1 outbreak that got underway in 2009.
In December 2010, a federal report said vaccine rollout needs to be smoother. A Senate committee also recommended Canada adopt a backup supplier for pandemic vaccine. Friday's announcement also included a three-year contract with Novartis Pharmaceuticals Canada Inc., worth $49.9 million, to provide the provinces and territories with vaccine for their annual influenza immunization campaigns.
"In 2001, Canada was the first country that actually put in place an overall strategy for pandemic vaccine supply," Dr. John Spika, director general of the Public Health Agency of Canada's Centre for Immunizations and Respiratory Infectious Disease, said in an interview.
"Being the first, we didn't do things perfectly. With 2009 H1N1, we've learned a lot. And I think the new contract really incorporates some of those learnings." GSK is the supplier for half of the seasonal vaccine, and Sanofi and Novartis will provide the other half, Spika said.
The federal government announced the contract Friday.
The contract with GlaxoSmithKline of Mississauga is meant to reduce delays in delivery and distribution of pandemic vaccine and ensure access at a competitive price if needed, Health Canada said.
The company will make the vaccine at its plant in Ste-Foy, Que.
Sanofi Pasteur Ltd. of Toronto was awarded a three-year, $33.1 million deal to provide vaccine for more vulnerable populations during a pandemic, including pregnant women and those suffering from a chronic disease. "We have worked with our provincial and territorial counterparts to provide governments with a broader range of vaccine products for seasonal flu and to deliver on the commitment to have a long-term pandemic vaccine contract in place before the current contract expires," Health Minister Leona Aglukkaq said in a release.
The current contract, also held by GlaxoSmithKline, expires March 31."Our new primary pandemic vaccine supply contract provides timely, cost-effective access to a secure domestic supply of vaccine for Canadians in the event of an influenza pandemic," Aglukkaq said.Some provincial health officials said vaccine distribution was slow during the H1N1 outbreak that got underway in 2009.
In December 2010, a federal report said vaccine rollout needs to be smoother. A Senate committee also recommended Canada adopt a backup supplier for pandemic vaccine. Friday's announcement also included a three-year contract with Novartis Pharmaceuticals Canada Inc., worth $49.9 million, to provide the provinces and territories with vaccine for their annual influenza immunization campaigns.
"In 2001, Canada was the first country that actually put in place an overall strategy for pandemic vaccine supply," Dr. John Spika, director general of the Public Health Agency of Canada's Centre for Immunizations and Respiratory Infectious Disease, said in an interview.
"Being the first, we didn't do things perfectly. With 2009 H1N1, we've learned a lot. And I think the new contract really incorporates some of those learnings." GSK is the supplier for half of the seasonal vaccine, and Sanofi and Novartis will provide the other half, Spika said.
Thursday, March 24, 2011
The Untapped Power Of Smiling
Guest Post Written by Ron Gutman
Ron Gutman is founder and CEO of HealthTap. He also serves as the Curator of TEDxSilicon Valley. This column was adopted from a presentation at the most recent TED conference.
Recently I made an interesting discovery while running – a simple act that made a dramatic difference and helped carry me through the most challenging segments of long distance runs: smiling. This inspired me to embark on a journey that took me through neuroscience, anthropology, sociality and psychology to uncover the untapped powers of the smile.
I started my exploratory journey in California, with an intriguing UC Berkeley 30-year longitudinal study that examined the smiles of students in an old yearbook, and measured their well-being and success throughout their lives. By measuring the smiles in the photographs the researchers were able to predict: how fulfilling and long lasting their marriages would be, how highly they would score on standardized tests of well-being and general happiness, and how inspiring they would be to others. The widest smilers consistently ranked highest in all of the above.
Even more surprising was a 2010 Wayne State University research project that examined the baseball cards photos of Major League players in 1952. The study found that the span of a player’s smile could actually predict the span of his life! Players who didn’t smile in their pictures lived an average of only 72.9 years, while players with beaming smiles lived an average of 79.9 years.
Continuing my journey, I learned that we’re part of a naturally smiling species, that we can use our smiling powers to positively impact almost any social situation, and that smiling is really good for us.
Surprisingly, we’re actually born smiling. 3-D ultrasound technology now shows that developing babies appear to smile even in the womb. After they’re born, babies continue to smile (initially mostly in their sleep) and even blind babies smile in response to the sound of the human voice. A smile is also one of the most basic, biologically uniform expressions of all humans. Paul Ekman (the world’s leading expert on facial expressions) discovered that smiles are cross-cultural and have the same meaning in different societies. In studies he conducted in Papua New Guinea, Ekman found that members of the Fore tribe (who were completely disconnected from Western culture and were also known for their unusual cannibalism rituals) attributed smiles to descriptions of situations in the same way you and I would.
Smiling is not just a universal means of communicating, it’s also a frequent one. More than 30% of us smile more than 20 times a day and less than 14% of us smile less than 5 times a day. In fact, those with the greatest superpowers are actually children, who smile as many as 400 times per day!
Have you ever wondered why being around children who smile frequently makes you smile more often? Two studies from 2002 and 2011 at Uppsala University in Sweden confirmed that other people’s smiles actually suppress the control we usually have over our facial muscles, compelling us to smile. They also showed that it’s very difficult to frown when looking at someone who smiles.
Why? Because smiling is evolutionarily contagious and we have a subconscious innate drive to smile when we see one. This occurs even among strangers when we have no intention to connect or affiliate with the other person. Mimicking a smile and experiencing it physically helps us interpret how genuine a smile is, so that we can understand the real emotional state of the smiler.
In research performed at the University of Clermont-Ferrand in France, subjects were asked to interpret real vs. fake smiles, while holding a pencil in their mouths to repress the muscles that help us smile. Without the pencils in their mouths, subjects were excellent judges, but with the pencils (when they could not mimic the smiles they saw), their judgment was impaired.
These findings would not have surprised Charles Darwin, who in addition to theorizing on evolution in The Origin of the Species, also developed the Facial Feedback Response Theory, which suggests that the act of smiling actually makes us feel better (rather than smiling being merely a result of feeling good).
This theory is supported by various recent studies, including research out of Echnische Universität in Munich Germany. In a 2009 study, scientists there used fMRI (Functional MRI) imaging to measure brain activity in regions of emotional processing in the brain before and after injecting Botox to suppress smiling muscles. The findings showed that facial feedback (such as imitating a smile) actually modifies the neural processing of emotional content in the brain, and concluded that our brain’s circuitry of emotion and happiness is activated when we smile!
Smiling stimulates our brain’s reward mechanisms in a way that even chocolate, a well-regarded pleasure-inducer, cannot match. In a study conducted in the UK (using an electromagnetic brain scan machine and heart-rate monitor to create “mood-boosting values” for various stimuli), British researchers found that one smile can provide the same level of brain stimulation as up to 2,000 chocolate bars; they also found that smiling can be as stimulating as receiving up to 16,000 Pounds Sterling in cash. That’s 25 grand a smile… it’s not bad…at 400 daily smiles quite a few children out there feel like Mark Zuckerberg every day!
And unlike lots of chocolate, lots of smiling can actually make you healthier. Smiling has documented therapeutic effects, and has been associated with: reduced stress hormone levels (like cortisol, adrenaline, and dopamine), increased health and mood enhancing hormone levels (like endorphins), and lowered blood pressure.
If that’s not enough, smiling also makes us look good in the eyes of others. A recent Penn State University study confirmed that when we smile we not only appear more likeable and courteous, but we’re actually perceived to be more competent.
So now we know that:
•When you smile, you look good and feel good.
•When others see you smile, they smile too.
•When others smile, they look good and feel good, too.
Perhaps this is why Mother Teresa said: “I will never understand all the good that a simple smile can accomplish.” What’s the catch? Only that the smile you give has to be big, and genuine!
In my fascinating journey to uncover more about smiling, I discovered something far greater than just a way to get through a challenging run – I found a simple and surprisingly powerful way to significantly improve my own life and the lives of others.
So now, whenever you want to look great and competent, improve your marriage, or reduce your stress…or whenever you want to feel as good as when you’ve enjoyed a stack of high quality chocolate without incurring the caloric cost, or as if you randomly found 25 grand in the pocket of a jacket you hadn’t worn for ages…or when you want to tap into a superpower and help yourself and others live longer, healthier happier lives…SMILE
Ron Gutman is founder and CEO of HealthTap. He also serves as the Curator of TEDxSilicon Valley. This column was adopted from a presentation at the most recent TED conference.
The Environment of Global Trade
Capital movements (not trade) are driving forces of the world economy
Production is ‘uncoupled’ from employment e.g security guards in India using webcams
Primary products have become uncoupled from the industrial economy e.g steel from South America into Europe
the world economy is in control
75-year contrast between capitalism and socialism is over
Barriers to Trade
Tariff barriers - direct taxes on imports
Bahamas has 30% on all goods
Australia and US impose on cars and agricultural goods e.g Japanese manufacture in Australia
Average now 5% was 25% in1945
Non-tariff Barriers
Increased govt. participation, US wheat subsidy
Customs entry procedures
Quotas (quantitative restriction) US textile imports from China
Forms of Market Agreement
Free Trade Area - remove all tariffs amongst members
e.g NAFTA USA/Canada Mexico
e.g EEA (European Economic Area) EU, EFTA and LAFTA
Customs Unions - as above but with common external barriers
e.g EC prior to 1993.
Common Market - as above but also the free flow of all factors of production
e.g EU since 1993
Economic Union -
common market characteristics are combined with the harmonisation of economic policy.
Supranational authority to design policy for a group of nations
objective of Maastricht Treaty in 1991. EU was formed in 1993.Monetary Union commenced in 1999. Now political union in 2000’s? More convergence and less national autonomy?
Competitive Rivalry
Entry is likely
Substitutes threaten
Buyers or suppliers exercise control
Competitors are in balance
There is slow market growth
Global customers increase competition
There are high fixed costs in an industry
Markets are undifferentiated
There are high exit barriers
Competitive Rivalry - motor industry
Buyer power
There is a concentration of buyers
There are many small operators in the supplying industry
There are alternative sources of supply
Components or materials are a high percentage of cost to the buyer leading to “shopping around”
Switching costs are low
There is a threat of backward integration
Bargaining power of buyers - Wal-Mart
Supplier power
There is a concentration of suppliers
Switching costs are high
The supplier brand is powerful
Integration forward by the supplier is possible
Customers are fragmented and bargaining power low
Bargaining power of suppliers - Bill Gates - Microsoft
Threat of substitutes
Substitutes take different forms:
Product substitution - Bt for Orange
Substitution of need - international not local calls (satellites not wires)
Generic substitution - mobiles for land based telephones
Doing without - no communication
Threat of substitutes - KFC China
The threat of entry
Dependent on barriers to entry such as:
Economies of scale
Capital requirements of entry
Access to distribution channels
Cost advantages independent of size (eg the
“experience curve”)
Expected retaliation
Legislation or government action
Differentiation
New Entrants - Citibank
Citibank - ‘Firstmover’
High brand recognition
More positive brand image
More customer loyalty
More distribution
Longer market experience
Country- Specific Advantages (CSAs)
E.g low cost production of Volkswagens in Portugal
Comparative advantage - e.g France apples, UK lamb
International Product Cycle (IPC) - Raymond Vernon 1966
USA production shifted over time to new locations
USA begins to export goods and technology
Countries such as Korea then become low cost producers and export back to USA
Porter’s Determinants of National Advantage (1990)
National Competitive Advantages
Factor conditions e.g skilled labour, infrastructure
Demand conditions e.g. ‘home’ demand for the product of service
Related and supporting industries e.g raw materials, components
Firm strategy, structure and rivalry
Wednesday, March 23, 2011
China plane maker Comac targets global market
The C919 is expected to be 15% more fuel efficient than similar existing models. Chinese plane maker Commercial Aircraft Corporation of China (Comac) is planning to take on established players such as Boeing and Airbus as it targets the global aircraft market.The company is expecting orders from international clients to start arriving as early as this year, its general manager Chen Jin told the BBC.Comac is promoting its narrow-body C919 jet at the Hong Kong airshow.It is due to have its first flight in 2014 and enter service two years later.
Regional growth
US and Europe have traditionally been the biggest air travel markets in the world. It is no surprise then, that US and European plane manufacturers are among the biggest players in the industry. But as the air travel industry in the Asia-Pacific region grows, the situation could change. “Over the next 20 years, for the Chinese market alone, we are forecasting an increase of 2,900 aircraft” Chen Jin Comac
Passenger numbers in the region are forecast to grow by 5.8% in the next two decades, according to Airbus, which will mean growing demand for planes to carry them. Airbus estimates that Asia will account for 33% of all aircraft orders in the next two decades, compared with a 26% share between 1990 and 2009.
Domestic demand
While it harbours international ambitions, Comac is fully aware of the potential for growth on its home turf.
China is forecast to be the fastest-growing market for air travel by 2014, according to the International Air Transport Association.
Mr Chen told the BBC that the company had very clear priorities. "We are going to serve the China market first," Mr Chen said. "Over the next 20 years, for the Chinese market alone, we are forecasting an increase of 2,900 aircraft," he added.Comac's first customers have been the main Chinese carriers.
Last year, it announced that Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines were the among six companies that had signed deals to buy the C919 planes.
The company said it had received orders for 100 aircraft.
Regional growth
US and Europe have traditionally been the biggest air travel markets in the world. It is no surprise then, that US and European plane manufacturers are among the biggest players in the industry. But as the air travel industry in the Asia-Pacific region grows, the situation could change. “Over the next 20 years, for the Chinese market alone, we are forecasting an increase of 2,900 aircraft” Chen Jin Comac
Passenger numbers in the region are forecast to grow by 5.8% in the next two decades, according to Airbus, which will mean growing demand for planes to carry them. Airbus estimates that Asia will account for 33% of all aircraft orders in the next two decades, compared with a 26% share between 1990 and 2009.
Domestic demand
While it harbours international ambitions, Comac is fully aware of the potential for growth on its home turf.
China is forecast to be the fastest-growing market for air travel by 2014, according to the International Air Transport Association.
Mr Chen told the BBC that the company had very clear priorities. "We are going to serve the China market first," Mr Chen said. "Over the next 20 years, for the Chinese market alone, we are forecasting an increase of 2,900 aircraft," he added.Comac's first customers have been the main Chinese carriers.
Last year, it announced that Air China, China Eastern Airlines, China Southern Airlines and Hainan Airlines were the among six companies that had signed deals to buy the C919 planes.
The company said it had received orders for 100 aircraft.
Airbus faces manslaughter charges over Rio crash
All 228 people onboard were killed when the Air France plane crashed in 2009. A French judge has filed preliminary manslaughter charges against European aircraft maker Airbus over a crash in 2009.All of the 228 people onboard were killed when an Air France flight from Rio de Janeiro to Paris came down in the Atlantic Ocean on 1 June that year.
The preliminary charges pave the way for further investigation.The cause of the accident is not known, though sensors on the aircraft sent faulty speed readings to pilots.Airbus says no one can know for sure what happened as the so-called "black boxes", which monitored events during the flight, have not been recovered.
Next week, a fourth attempt to find the voice and data recorders will get underway. The search involves dives to depths of up to 4,000 metres (13,120 feet) to examine the ocean floor between Brazil and West Africa.
Special robots will be used in the search.
"We are convinced if we find the black boxes we'll be able to reconstruct what really happened on this tragic flight," said Airbus chief executive Tom Enders.The search will be financed jointly by Air France and Airbus. The new search is estimated to cost $12.5m (£10.9m).
Tuesday, March 22, 2011
Minsky and Exprapolation
Investors, banks, companies and consumers all tend to be guilty of the sin of extrapolation; they assume the future will be like the recent past. After several years of steadily growing output and low inflation, people develop a misguided confidence that such benign conditions will continue. They are thus happy to borrow, and lend, more. As they do, the riskiness of the system steadily increases. Minsky divided the process into three phases. In the first, investors take on little enough debt that they have no trouble meeting their capital and interest payments. In the second, they stretch their finances so they can only afford the interest. In the third, or Ponzi, phase they take on debt levels that require rising prices to be safely financed; the homebuyers who took on 125% mortgages at the peak of the property boom were a classic example.
When markets reach this fantasy land, a small change in the fundamentals or in investor attitudes can be enough to cause the system to unravel. Once prices start to drop, borrowers start to default on their loans, or seek to sell their assets, causing prices to fall further.
The cost of capitalism, to use the title of a new book* that draws heavily on Minsky’s work, is first, that financial bubbles are created and second, that governments are forced to rescue the sector when those bubbles pop. Those who believe blindly in free markets are thus mistaken, in the view of Bob Barbera, a Wall Street economist and the book’s author.
Government action is inevitable. In conventional industries, the demise of companies leads to “creative destruction” with capital being reallocated to more productive areas. But in banking and finance, a crisis leads to “deflationary destruction” as capital is eliminated. Businesses, investors and consumers lose confidence; borrowers are unable to repay their lenders, who suffer as well. But by stepping in to rescue markets when they wobble, central bankers create asymmetric risk. Hence Mr Barbera rejects the idea, popular in the era of Alan Greenspan, that central banks should do nothing to burst asset bubbles. Instead, he suggests that central banks should build the level of corporate-bond spreads into their models. When spreads are low, risk appetites are high, as they were in 2005-06. That should lead central banks to tighten monetary policy. When spreads are high, they should ease.
Whether that would have stopped the housing bubble is open to question. The Federal Reserve did indeed raise rates in 2005-06, albeit in a steady and unthreatening manner. Nevertheless, the current crisis suggests that monetary and fiscal policy cannot be driven exclusively by economic fundamentals such as inflation and unemployment. When interest rates are low, consumers and businesses do not just borrow money; they borrow money to buy assets, setting up a feedback loop that can eventually lead to a bubble. When such a bubble is inflating, government revenues (in the form of taxes on capital gains, bonuses, corporate profits and property sales) tend to be strong. As governments are now discovering, such revenues collapse very quickly when the bubble bursts.
But it is easy to get carried away during a boom; the strength of financial markets tends to be seen as a signal that the economy is soundly based. Those who work in the financial system are assumed to be the best and the brightest. Even the government seems to be in their thrall. In a recent article, Simon Johnson, a former chief economist of the IMF, points out the parallels between emerging markets, where governments are dominated by the economic elite, and America, where officials glide easily between Wall Street and the Treasury. What is good for Goldman Sachs might turn out to be good for America, but it might be best if the government could make an independent judgment. If we accept Minsky’s idea that financial markets are not always right, then we might be willing occasionally to act against Wall Street’s interests, however loudly bankers would complain.
When markets reach this fantasy land, a small change in the fundamentals or in investor attitudes can be enough to cause the system to unravel. Once prices start to drop, borrowers start to default on their loans, or seek to sell their assets, causing prices to fall further.
The cost of capitalism, to use the title of a new book* that draws heavily on Minsky’s work, is first, that financial bubbles are created and second, that governments are forced to rescue the sector when those bubbles pop. Those who believe blindly in free markets are thus mistaken, in the view of Bob Barbera, a Wall Street economist and the book’s author.
Government action is inevitable. In conventional industries, the demise of companies leads to “creative destruction” with capital being reallocated to more productive areas. But in banking and finance, a crisis leads to “deflationary destruction” as capital is eliminated. Businesses, investors and consumers lose confidence; borrowers are unable to repay their lenders, who suffer as well. But by stepping in to rescue markets when they wobble, central bankers create asymmetric risk. Hence Mr Barbera rejects the idea, popular in the era of Alan Greenspan, that central banks should do nothing to burst asset bubbles. Instead, he suggests that central banks should build the level of corporate-bond spreads into their models. When spreads are low, risk appetites are high, as they were in 2005-06. That should lead central banks to tighten monetary policy. When spreads are high, they should ease.
Whether that would have stopped the housing bubble is open to question. The Federal Reserve did indeed raise rates in 2005-06, albeit in a steady and unthreatening manner. Nevertheless, the current crisis suggests that monetary and fiscal policy cannot be driven exclusively by economic fundamentals such as inflation and unemployment. When interest rates are low, consumers and businesses do not just borrow money; they borrow money to buy assets, setting up a feedback loop that can eventually lead to a bubble. When such a bubble is inflating, government revenues (in the form of taxes on capital gains, bonuses, corporate profits and property sales) tend to be strong. As governments are now discovering, such revenues collapse very quickly when the bubble bursts.
But it is easy to get carried away during a boom; the strength of financial markets tends to be seen as a signal that the economy is soundly based. Those who work in the financial system are assumed to be the best and the brightest. Even the government seems to be in their thrall. In a recent article, Simon Johnson, a former chief economist of the IMF, points out the parallels between emerging markets, where governments are dominated by the economic elite, and America, where officials glide easily between Wall Street and the Treasury. What is good for Goldman Sachs might turn out to be good for America, but it might be best if the government could make an independent judgment. If we accept Minsky’s idea that financial markets are not always right, then we might be willing occasionally to act against Wall Street’s interests, however loudly bankers would complain.
Monday, March 21, 2011
Sunday, March 20, 2011
MBA Marketing Reflective Journal
Throughout the course, you will keep a journal with a minimum of one entry per week. Remember that each entry should contain reflections and analysis of the weekly readings and discussions. References to concepts in the textbook should be included. The journal should be written from a first-person perspective but with a level of academic writing (vs. casual “journal” tone). The journal will not be handed in until the end of the course and should contain a cover page, footnotes for references to the text, and proper paper formatting (including page numbers, date, etc.). Each entry should be a minimum of 1.5 pages.
Session 1 For this week’s entry, visit a local coffee shop or Starbucks and compare your local visit to the services provided in the opening vignette of the chapter. Does your local Starbucks or coffee shop contain wireless Internet access? What is the climate of the establishment—friendly or hurried? Is marketing prevalent in this establishment? If so, how and to what extent are they exposed to marketing messages—keep a list of every marketing message you encounter.
Starbucks, which is open on one side to Chapter’s bookstore has changed significantly since my last visit. There were fewer deep comfortable seating options and they were placed along the perimeter mostly facing inward rather than toward each other in groupings. They had removed the larger tables with many chairs surrounding them and had brought in small tables with three chairs around each. This was a significant change in decor. It is my impression that the capacity for seating had doubled and that the intimacy of the seating arrangements was significantly diminished. I sensed that this was because of the direct competition of Tim Hortons in the plaza directly across the parking lot. The point of these observations is that in order to compete in the industrial town with a small university in the heart of Tim Horton’s birth place, Starbucks seems to be less Starbucks than it used to be. That might be a mistake. The menu had also changed. There were still very few edible options and they were pricey. They had opened a second service window, which was primarily for the purchase of specialty ground coffee beans but would accommodate overflow of beverage customers. The choice of beverages had grown. They catered to exotic tastes. In addition, the consumption of tea is exploding due to its association with health benefits. This proliferation of beverages was appreciated by the customers as I observed no two identical orders. Unlike the girls in the textbook, most people were not as exposed to marketing messages during the time I was in Starbucks.
While people did still linger to enjoy their beverage many more took their drinks to go. I counted 37 different beverages and each beverage could be customized to the consumer’s preferences. Counter service remained prompt, pleasant and the process was easy to understand. I saw no evidence of up selling from staff. However, the design of the menu and the general offerings were in themselves conducive to choosing the more expensive item. In terms of other products, Starbucks has maintained a strict focus on beverage related products at this store. I did not see CD or games as I had in the past. Even the gum offered in small designer cans was tailored to meet the needs of consumers post beverage. Coffee machines were still offered for sale as were designer cups, branded travel and home cups and glasses as well as designer thermoses. They offered trays for carrying beverage related items. Every item was consistently on theme. Branding was obvious and ubiquitous.
The one additional marketing source was the proximity of Chapter’s bookstore. I remember in the past that Chapters had to put their foot down because Starbuck’s customers were using the bookstore stock as a library. They would get their favourite magazine and settle in with a cup of their favourite beverage. Still, every time they come to Starbucks they are exposed to the marketing messages and brilliant book jackets of a cornucopia of reading material. Chapters also stocks a variety of impulse items. This co-marketing is a wonderfully advantageous relationship for both companies. Starbucks benefits from the erudite association of the bookstore and Chapters benefits from the increased traffic of those who simply wanted a pause in their day and a cup of coffee but soon realized that a book might just hit the spot too.
Starbucks and Tim Hortons are fine examples of creating wants that do not satisfy physical needs. Who needs coffee? Who needs donuts? In the end though, they satisfy the compelling wants of a place to go with friends and the comfort of a warm beverage for many people of all ages.
Session 2 For this week’s entry, reflect on your experience with one of the main internet sites (Ebay, Amazon.com, Landsend.com etc). What are your experiences with these providers in terms of customization? Interview at least five other people and ask for their opinions of the same site. Analyze how the opinions differ or are similar? Does this conform to what the intent of the marketing plan? Explain.
Most of my experience with on line purchasing has been through Amazon so thatIs the
topic of this week’s entry. I like shopping online. I like the convenience and the p
process. It is convenient and in a funny impersonal way it is personal. They know my
name and they anticipate my needs and wants. I can shop at midnight. I can send my
purchase to a sick friend in Minnesota without dealing at this moment with the Canadian
exchange rate. They help me find the perfect book. When I punch in ‘inspirational’ they
remind me of other books that I have purchased in this genre and make suggestions that
I would never have known existed. They ask me if I want it gift wrapped and they give me
a choice of how quickly to get it to her. In the end, I bought a book at a reasonable price
only to pay twice as much to get it wrapped and sent to her. I was willing to pay for the
appearance of being a friend who cared enough to send a gift right now when she was ill
rather than waiting a few days for the regular mail. Amazon knew that that is a human
need and they marketed to me in a way that allowed me to fill that inner need. Pretty
astute!
When I use my home computer, the site welcomes me and takes me right to the
bookstore. When I log on from my work laptop, the experience is quite different because
it has no history with me there. I go to main site that recognizes that I am Canadian and
displays a Canadian flag (which feels a bit over the top). It reminds me of upcoming
events like Mother’s Day (I hope my kids visit the site too!) and shows me an assortment
potential gifts. I see that there are new Ipods, a new Harry Potter book coming out and
DVDs.for sale. I am surprised to be reminded of all the sorts of products that Amazon
offers. I had forgotten that they offer clothing, saunas, food and gourmet items. I see too
that they have alliances with Fidelity investments and links to Target. The uncustomized
site is busy but understandable. It is like a circus with things to look at everywhere. I can
find out the top 10 books updated hourly or specify my interests immediately by clicking
on the right category in browse or by typing in my want in the top bar. The customized site is
more familiar and rather comforting. For me it is all about books and I actually have to think
about how I would get to all of the other products if I wanted to. It makes me wonder if it has
over customized for me. Who says that someone who has only purchased books to date might
not decide on clothing or perfume next time?
I did contact my friends for an interview and learned something which
surprised me a bit. I think having kids has done me good! That may seem irrelevant but this is
the logic. All of my friends who are my age or older have very little experience with on line
purchasing and in fact are rather insecure and doubtful about the entire process. How ‘hip and
modern’ l feel in light of their revelations! Seven contacts and seven reports that it was ‘just
not their thing’, Therefore, I learned that ladies of a certain age (plus 50) have to have other
infuences (like their children in their lives) to overcome their pessimism about internet buying.
Plan B was to ask my younger friends. The women 30 to 50 had far more input. Some shop
often, some seldomly but all have done it. Some love it and some do not. Customization
seems to be an issue. Some welcome it and some do not. It seems to be in direct proportion
to their exposure to and use of computers. Tasha loves the customization but worries about
the potential for the abuse of information. Mary likes the recommendations and finds them
useful. She loves ordering gifts on-line through Amazon because of the convenience and
prompt delivery even at Christmas. Mel is the most experienced and loves Amazon’s
site. She had just ordered a book and noticed customization that included “Mel’s Store”. To
quote her: “LOL, obviously this has been customized to me and I think it’s just great.
Seriously, I am very enthusiastic- I totally fall for this kind of stuff and appreciate being treated
well by companies who want my business. There is even another option to help the site
improve your recommendations by showing you how to rate books and mark books you
already own. Totally cool”. She immediately emailed again saying “I just tried to log out and
had to use the help section to figure out how. I am much more comfortable being able to log
out and keep my personal information private even on a home computer. This site wants to
customize so much that the logging out process is not user friendly and in fact is also
discouraging. I still think the customization is terrific.”
I cannot imagine Amazon ever allowing its brand to slip with their CEO onboard. However, I have read that businesses are not so easy to pass along to the next generation so even with all of the great work being done there they still have to pass the test of time.
Session 3 For this week’s entry, read the article under Syllabus/Materials regarding The Apprentice TV show. Perhaps you may have seen the episode referred to on Microsoft Office Live Meeting. Use this article as background on the subject of "integrated marketing". There are many definitions of "integrated marketing" as you will read in the text. The definition I want you to consider is the integration of content (brands, products, etc) into this TV show's format. Many large consumer brands have participated on The Apprentice over the past two years including: Home Depot, Staples, Yahoo, Microsoft and the Pontiac Division of General Motors, etc. We don't know the fees involved to participate so don't worry about a cost/benefit analysis type of response. Question: do you think that The Apprentice provides a good forum for companies to showcase their brand/products to effectively reach and impact their respective target audiences.
I think that The Apprentice is an outstanding marketing forum for certain kinds of products as long as they do not mind playing second fiddle to Donald Trump the man and the brand. Products that are associated with luxury and an upscale lifestyle for men are particularly well suited to the association. In the first year of the show all of the products were about the lifestyles of the rich and famous. Executive jet services were featured with specific episodes on how to market such products with sexual innuendo and slick ad campaigns. Part of the show’s interest was the combination of a peek into the world of privilege, a peek into how to make it big and a glimpse of the working style of ‘The Donald.’
The man is a genius at co-marketing and or self promotion. Every show featured him and his buildings, his homes, his possessions, his opinions and tactics. He is utterly purposeful and shamelessly unapologetic that his entire focus is on his next buck. Parts of the world perceive him as the quintessential American. From his signature hairstyle to his catch phrases, no branding of an individual has ever been more successful.
Trump uses the two themes of integrated marketing which are use many different activities to communicate and to deliver value and secondly coordinate the marketing activities to maximize their joint effects. Who does this better than Trump on the Apprentice? At every turn one of his products is reinforced and every one compliments the other and everything magnifies his NAME.
Part of his co-marketing message that everyone in his company must embrace is “Its all about The Donald”. No one ever contradicts the Donald. It is clear that in the end everyone must agree with his opinion. In fact, when Caroline, one of the two leaders in his company who sat in the boardroom on the show, started to promote herself and began to use the fame she had gained from the Apprentice in the world of golf, she was fired. George, his long time friend and associate was replaced by Trumps adult children who he might tolerate in the light with him. On the show, when executives of major companies are introduced, Trump does not even appear to know their names and expects them to introduce themselves. I think they should consider that when they decide whether Trump has their products best interests at heart. I even heard him put down General Motors on their own segment for losing market share!
4 Ps of marketing are product (solution), price (cost), place (convenience), and promotion (communication). They must influence the trade channels and the final consumers. Donald certainly does this well and the products on the show should have leadership who ensure that their product fits the demographic that is likely to view the show or they will have paid to promote Donald Trump rather than their product. Not only that but the product must be in the luxury category to really get a boost. The medium of television, especially in a reality show, can show the good and the downside of anything. I think Burger King placements are misplaced on the show. Microsoft office may be fairly well placed because many who watch are hoping to learn the ropes of business.
I think there are traps in co-marketing certain products with Trump. For example, after the conflict with Martha Stewart and his name calling with her, many women who had been observing his new found television career with some reservations were no longer interested in giving him the benefit of the doubt. Advertising products of particular interest to women would probably constitute a poor fit. After his name calling with Rosie O’Donell and the firing of Caroline, not to mention his treatment of his previous wives, many women would never buy any product associated with Trump’s name. To them Trump means, self-absorbed misogynist who has no self-control or decency and any product associated with him may have the connotation of caring nothing about women or women’s needs or wishes. Many women have the impression that women are of no value to Trump who routinely calls people losers with conviction.
Session 4 For this week’s entry, product differentiation is essential to the branding process. In choosing to differentiate a product, a marketer has the choice of form, features, performance quality, conformance quality, durability, reliability, reparability, and style. Collect examples of currently produced products that have been differentiated and branded for each of these design parameters. Analyze and discuss your example.
Form: Gillette Venus razor is an excellent example of a product distinguished by form. There has been a revolution in men’s razors with one blade morphing into two and then multiple blades became the standard for the industry. Razors have been thought of as men’s tools for generations but think about the large portion of a woman’s body that is touched by a razor on a daily basis. Far more square inches of a woman’s body than a man’s body are served by a razor so it is about time that the designers considered the ways a woman holds the razor, how to reach different parts of the body and the hand positions involved. Ergonomics is the science that can inform the designer of the requirements and Human Factors is the science that helps designers understand the interaction between technology or mechanical items and human thinking. Marketing should take the logic behind the changes and the design and demonstrate to the consumer that the new and improved product is considering the consumers needs and wants in a way that is unexpected or particularly thoughtful. By designing a razor with a new form that fits the woman’s hand and maneuvers in a way that a woman’s body moves the marketer can communicate a message of advancement, of a company concerned about it consumer and simple consideration.
Features: Toyota sedans have far more features today than 10 years ago and set the new standard. In a car, almost more than any other product, features can be the deciding factor. The list of options can be almost endless and this is a place where bundling can make the sale. Some people are interested in choosing specific options but smart marketers have bundled car options tailored toward different customer profiles. Sporty packages can include hub cap styles with stereo and braking packages. Luxury packages can include seat warmers, on star, luxury interiors and finishes. Bundling can make the customer accept more add ons than they would otherwise order.
Performance Quality: Ferarri “The engine lights up over 5000rpm and revs on to 8600rpm, true, but at lower crankshaft speeds it still pulls firmly and can accelerate meaningfully from under 2000rpm, emitting a throaty gurgle from its eight intake trumpets as if it were running on a quartet of twin-choke Webers. Variable cam timing and a variable-volume intake plenum chamber are the keys here. The throttle response is electric - literally, thanks to two drive-by-wire throttle bodies under the control of a 'master and slave' pair of Bosch ME7 Motronic management systems. And the F430 sounds just fantastic, like two snorty four-cylinders screaming in unison and helped by a valve which bypasses part of the silencer system above 3600rpm. You'll be searching out every tunnel.”
I put this quote from a Ferrari site in to illustrate the issues that are of interest to Ferrari connoisseurs. Its all about performance (and perhaps appearance).
Conformance Quality: Arm and Hammer Baking Soda: Quality of Conformance" describes the extent to which the product conforms to the design. Services too may be judged for Quality of Conformance by asking the question, "How closely does performance match the promise that was made." (Arm and Hammer website) When you go to bake a batch of muffins, or your Mom’s heirloom recipe you do not even think about the baking soda but it has to be perfect if your recipe is to turn out perfectly. It cannot be one way one time and another way another time. It has to be dependable every time. That is the line that I would use to advertise baking soda.
Durability: Samsonite luggage!
Samson is a biblical character known for his extraordinary strength. It was where Samsonite derived its name. It never failed
Samson when it acquired his name because they have lived up to what he was known of – his strength.
Samsonite is the largest and most popular luggage maker all over the world. They are popularly known for providing high quality
bags and top-of-the-scale durability.
Reliabilty: Parker Pens are known for reliability. They promise that every time you reach for a parker pen it will write and write well. Reliability is the most important feature of a variety of products. It is that much more important in something that is simple and so hands on. A customer feels a deep sense of frustration if something that is needed on the spur of the moment doesn’t work. Even though they hardly notice when things go right every time, they sure do notice if it doesn’t.
Repairability: Mountain bikes must be repairable. They are used hard and used often. They are used by people who want to challenge themselves and their equipment. Consumers expect the bikes to be sturdy and strong but they know that they put these bikes through torture. When they break, the fun stops. It is vital that they be repairable and easily repairable. That is the measure of a great bike. In the midst of the forest or on the side of a steep incline, that a bike can be given first aid and the fun can continue.
Style: Women’s handbags and shoes. No quality is more important in a woman’s handbag or shoes than style. Whether it is Manolo Blahniks or Payless shoes women shop for style. Style is personal but it is also shaped by advertising. What’s in? What’s not? It all has to do with MARKETING!
Session 5 For this week’s entry, based on the chapters under this weeks review, analyze in your opinion what the key success features are of Amazon.com. The analysis should conclude with recommendations going forward.
I think that there are several keys to Amazon’s success. They chose to have the very best in technology. “technology, technology, technology" is the key to his business, and not "location, location, location," as is said to be the case in retail. Amazon's location on the web is not only better than anyone else's, it is better by a significant degree. To illustrate, the figures below show incoming links to the respective web sites. In Amazon's case, the majority of these links are affiliate or wish-list based. In effect, Amazon has the largest sales force on earth, having enlisted millions of sites to provide virtual locations. Location, it seems, has much more of an effect on Amazon's success:
Amazon - 56,040,453
Microsoft - 29,768,089
Yahoo - 14,227,915
Ebay - 1,495,703
Expedia - 1,012,636
Napster - 337,880
They deal with the products of a whole host of suppliers and they can be the “store front” for all of them without ever having to touch or stock a single thing.
The second key is their strong focus on customer experience, which is infused throughout all levels of the company and includes all aspects of the buying process. Everyone from engineers to delivery people are trained to think about the customer experience and customer reaction to their actions. They are trained to consider what an ecologically minded consumer would think of the packing material. They use the concept of a 360 degree experience. Amazon takes listening to and responding to customers very seriously.
They do not just think about customer service, they monitor it with ongoing statistical analyses. "Metrics are super important. It's not just measuring, but measuring the right stuff and understanding it." "…we correlate our measurements with changes we've made on the site, to see what's driving what, how to position things on pages, and which features to delete." Jeff Bezos Amazon.com founder and CEO. They measure such things as conversion rates, visitors, purchases and even what was considered that was not purchased.
New apparel site has 400 different brands and merchants selling goods through Amazon’s platform and that even includes Target.com.
Amazon also makes the delivery process easy but they could continue their branding in their delivery packaging.
Recommendations for the future:
Returns are not easy and that needs to be improved.
The site appears to be visually cluttered and that will confuse and defocus the buyer.
It is clear that Amazon takes a lot of time in training to instill the very best qualities in their customer contact people and to help people who are no where near a real customer realize that what they do ultimately matters in the customer’s experience through internal marketing.
Session 6 How does cause or corporate societal marketing affect your personal consumer behavior? Do you ever buy or not buy any products or services from a company because of its environmental policies or programs? Why or why not?
Finalize your journal and submit it by Saturday of Session 6. Include a summary of what you learned from this course and whether you believe that your writing has improved. If not, what can you do to insure on-going improvement?
I am a practical woman. I like to multi-task. As I have aged, I find that I have more time for researching and for exercising my ideals. Perhaps it is that I am the mother of 5 and that somehow I feel that in a way my residency on the planet will be unending through my progeny. As I raised my children and taught them values, my own were cemented. I think we all have not only a carbon footprint but also a contribution footprint that no one will ever measure but that will leave our world either enriched or depleted by our presence. I do believe in supporting people who are doing good where ever I can and that includes supporting businesses that are willing to link with good causes. Cause-related marketing is a powerful marketing tool that business and nonprofit organizations are increasingly leveraging. According to the Cone Millennial Cause Study in 2006, 89% of Americans (aged 13 to 25) would switch from one brand to another brand of a comparable product (and price) if the latter brand was associated with "good cause". The same study also indicated that a significant percentage surveyed would prefer to work for a company that was considered socially responsible. Studies by Cone indicate an upward trend in the number of Americans who associate their own buying habits with cause marketing as well as an expectation that companies to be "good corporate citizens". Numerous other studies have also been conducted to show that cause-related marketing has helped to increase a company's profits. For example, in the cause marketing campaign by American Express (to which the term "cause marketing" is attributed), the company saw a 17% increase in new users and a 28% increase in card usage.
If I have a choice between two products that are similar in price and quality I will always purchase the one from the company I know to be more ethical or more socially active. I know that many businesses embrace CSR as a business ploy. If I think that the social cause gains even moderately I do not care much. I want the net result to be positive. I care about all things that effect my kids, their future, the planet and the overall total level of goodness and justice on the planet. It is not religiosity. Iit is conviction that good is more likely to prevail when this woman does what she can. I do not look to see what others are doing. Their footprints are in the shifting sand just as mine are. I will however, actively work to block injustice or unkindness where I find it if it is within my power. The world I create with my actions is the world I leave for my children to live in. This world is my nest, and I feather it where I can and I will not knowingly cooperate with its spoiling.
Session 1 For this week’s entry, visit a local coffee shop or Starbucks and compare your local visit to the services provided in the opening vignette of the chapter. Does your local Starbucks or coffee shop contain wireless Internet access? What is the climate of the establishment—friendly or hurried? Is marketing prevalent in this establishment? If so, how and to what extent are they exposed to marketing messages—keep a list of every marketing message you encounter.
Starbucks, which is open on one side to Chapter’s bookstore has changed significantly since my last visit. There were fewer deep comfortable seating options and they were placed along the perimeter mostly facing inward rather than toward each other in groupings. They had removed the larger tables with many chairs surrounding them and had brought in small tables with three chairs around each. This was a significant change in decor. It is my impression that the capacity for seating had doubled and that the intimacy of the seating arrangements was significantly diminished. I sensed that this was because of the direct competition of Tim Hortons in the plaza directly across the parking lot. The point of these observations is that in order to compete in the industrial town with a small university in the heart of Tim Horton’s birth place, Starbucks seems to be less Starbucks than it used to be. That might be a mistake. The menu had also changed. There were still very few edible options and they were pricey. They had opened a second service window, which was primarily for the purchase of specialty ground coffee beans but would accommodate overflow of beverage customers. The choice of beverages had grown. They catered to exotic tastes. In addition, the consumption of tea is exploding due to its association with health benefits. This proliferation of beverages was appreciated by the customers as I observed no two identical orders. Unlike the girls in the textbook, most people were not as exposed to marketing messages during the time I was in Starbucks.
While people did still linger to enjoy their beverage many more took their drinks to go. I counted 37 different beverages and each beverage could be customized to the consumer’s preferences. Counter service remained prompt, pleasant and the process was easy to understand. I saw no evidence of up selling from staff. However, the design of the menu and the general offerings were in themselves conducive to choosing the more expensive item. In terms of other products, Starbucks has maintained a strict focus on beverage related products at this store. I did not see CD or games as I had in the past. Even the gum offered in small designer cans was tailored to meet the needs of consumers post beverage. Coffee machines were still offered for sale as were designer cups, branded travel and home cups and glasses as well as designer thermoses. They offered trays for carrying beverage related items. Every item was consistently on theme. Branding was obvious and ubiquitous.
The one additional marketing source was the proximity of Chapter’s bookstore. I remember in the past that Chapters had to put their foot down because Starbuck’s customers were using the bookstore stock as a library. They would get their favourite magazine and settle in with a cup of their favourite beverage. Still, every time they come to Starbucks they are exposed to the marketing messages and brilliant book jackets of a cornucopia of reading material. Chapters also stocks a variety of impulse items. This co-marketing is a wonderfully advantageous relationship for both companies. Starbucks benefits from the erudite association of the bookstore and Chapters benefits from the increased traffic of those who simply wanted a pause in their day and a cup of coffee but soon realized that a book might just hit the spot too.
Starbucks and Tim Hortons are fine examples of creating wants that do not satisfy physical needs. Who needs coffee? Who needs donuts? In the end though, they satisfy the compelling wants of a place to go with friends and the comfort of a warm beverage for many people of all ages.
Session 2 For this week’s entry, reflect on your experience with one of the main internet sites (Ebay, Amazon.com, Landsend.com etc). What are your experiences with these providers in terms of customization? Interview at least five other people and ask for their opinions of the same site. Analyze how the opinions differ or are similar? Does this conform to what the intent of the marketing plan? Explain.
Most of my experience with on line purchasing has been through Amazon so thatIs the
topic of this week’s entry. I like shopping online. I like the convenience and the p
process. It is convenient and in a funny impersonal way it is personal. They know my
name and they anticipate my needs and wants. I can shop at midnight. I can send my
purchase to a sick friend in Minnesota without dealing at this moment with the Canadian
exchange rate. They help me find the perfect book. When I punch in ‘inspirational’ they
remind me of other books that I have purchased in this genre and make suggestions that
I would never have known existed. They ask me if I want it gift wrapped and they give me
a choice of how quickly to get it to her. In the end, I bought a book at a reasonable price
only to pay twice as much to get it wrapped and sent to her. I was willing to pay for the
appearance of being a friend who cared enough to send a gift right now when she was ill
rather than waiting a few days for the regular mail. Amazon knew that that is a human
need and they marketed to me in a way that allowed me to fill that inner need. Pretty
astute!
When I use my home computer, the site welcomes me and takes me right to the
bookstore. When I log on from my work laptop, the experience is quite different because
it has no history with me there. I go to main site that recognizes that I am Canadian and
displays a Canadian flag (which feels a bit over the top). It reminds me of upcoming
events like Mother’s Day (I hope my kids visit the site too!) and shows me an assortment
potential gifts. I see that there are new Ipods, a new Harry Potter book coming out and
DVDs.for sale. I am surprised to be reminded of all the sorts of products that Amazon
offers. I had forgotten that they offer clothing, saunas, food and gourmet items. I see too
that they have alliances with Fidelity investments and links to Target. The uncustomized
site is busy but understandable. It is like a circus with things to look at everywhere. I can
find out the top 10 books updated hourly or specify my interests immediately by clicking
on the right category in browse or by typing in my want in the top bar. The customized site is
more familiar and rather comforting. For me it is all about books and I actually have to think
about how I would get to all of the other products if I wanted to. It makes me wonder if it has
over customized for me. Who says that someone who has only purchased books to date might
not decide on clothing or perfume next time?
I did contact my friends for an interview and learned something which
surprised me a bit. I think having kids has done me good! That may seem irrelevant but this is
the logic. All of my friends who are my age or older have very little experience with on line
purchasing and in fact are rather insecure and doubtful about the entire process. How ‘hip and
modern’ l feel in light of their revelations! Seven contacts and seven reports that it was ‘just
not their thing’, Therefore, I learned that ladies of a certain age (plus 50) have to have other
infuences (like their children in their lives) to overcome their pessimism about internet buying.
Plan B was to ask my younger friends. The women 30 to 50 had far more input. Some shop
often, some seldomly but all have done it. Some love it and some do not. Customization
seems to be an issue. Some welcome it and some do not. It seems to be in direct proportion
to their exposure to and use of computers. Tasha loves the customization but worries about
the potential for the abuse of information. Mary likes the recommendations and finds them
useful. She loves ordering gifts on-line through Amazon because of the convenience and
prompt delivery even at Christmas. Mel is the most experienced and loves Amazon’s
site. She had just ordered a book and noticed customization that included “Mel’s Store”. To
quote her: “LOL, obviously this has been customized to me and I think it’s just great.
Seriously, I am very enthusiastic- I totally fall for this kind of stuff and appreciate being treated
well by companies who want my business. There is even another option to help the site
improve your recommendations by showing you how to rate books and mark books you
already own. Totally cool”. She immediately emailed again saying “I just tried to log out and
had to use the help section to figure out how. I am much more comfortable being able to log
out and keep my personal information private even on a home computer. This site wants to
customize so much that the logging out process is not user friendly and in fact is also
discouraging. I still think the customization is terrific.”
I cannot imagine Amazon ever allowing its brand to slip with their CEO onboard. However, I have read that businesses are not so easy to pass along to the next generation so even with all of the great work being done there they still have to pass the test of time.
Session 3 For this week’s entry, read the article under Syllabus/Materials regarding The Apprentice TV show. Perhaps you may have seen the episode referred to on Microsoft Office Live Meeting. Use this article as background on the subject of "integrated marketing". There are many definitions of "integrated marketing" as you will read in the text. The definition I want you to consider is the integration of content (brands, products, etc) into this TV show's format. Many large consumer brands have participated on The Apprentice over the past two years including: Home Depot, Staples, Yahoo, Microsoft and the Pontiac Division of General Motors, etc. We don't know the fees involved to participate so don't worry about a cost/benefit analysis type of response. Question: do you think that The Apprentice provides a good forum for companies to showcase their brand/products to effectively reach and impact their respective target audiences.
I think that The Apprentice is an outstanding marketing forum for certain kinds of products as long as they do not mind playing second fiddle to Donald Trump the man and the brand. Products that are associated with luxury and an upscale lifestyle for men are particularly well suited to the association. In the first year of the show all of the products were about the lifestyles of the rich and famous. Executive jet services were featured with specific episodes on how to market such products with sexual innuendo and slick ad campaigns. Part of the show’s interest was the combination of a peek into the world of privilege, a peek into how to make it big and a glimpse of the working style of ‘The Donald.’
The man is a genius at co-marketing and or self promotion. Every show featured him and his buildings, his homes, his possessions, his opinions and tactics. He is utterly purposeful and shamelessly unapologetic that his entire focus is on his next buck. Parts of the world perceive him as the quintessential American. From his signature hairstyle to his catch phrases, no branding of an individual has ever been more successful.
Trump uses the two themes of integrated marketing which are use many different activities to communicate and to deliver value and secondly coordinate the marketing activities to maximize their joint effects. Who does this better than Trump on the Apprentice? At every turn one of his products is reinforced and every one compliments the other and everything magnifies his NAME.
Part of his co-marketing message that everyone in his company must embrace is “Its all about The Donald”. No one ever contradicts the Donald. It is clear that in the end everyone must agree with his opinion. In fact, when Caroline, one of the two leaders in his company who sat in the boardroom on the show, started to promote herself and began to use the fame she had gained from the Apprentice in the world of golf, she was fired. George, his long time friend and associate was replaced by Trumps adult children who he might tolerate in the light with him. On the show, when executives of major companies are introduced, Trump does not even appear to know their names and expects them to introduce themselves. I think they should consider that when they decide whether Trump has their products best interests at heart. I even heard him put down General Motors on their own segment for losing market share!
4 Ps of marketing are product (solution), price (cost), place (convenience), and promotion (communication). They must influence the trade channels and the final consumers. Donald certainly does this well and the products on the show should have leadership who ensure that their product fits the demographic that is likely to view the show or they will have paid to promote Donald Trump rather than their product. Not only that but the product must be in the luxury category to really get a boost. The medium of television, especially in a reality show, can show the good and the downside of anything. I think Burger King placements are misplaced on the show. Microsoft office may be fairly well placed because many who watch are hoping to learn the ropes of business.
I think there are traps in co-marketing certain products with Trump. For example, after the conflict with Martha Stewart and his name calling with her, many women who had been observing his new found television career with some reservations were no longer interested in giving him the benefit of the doubt. Advertising products of particular interest to women would probably constitute a poor fit. After his name calling with Rosie O’Donell and the firing of Caroline, not to mention his treatment of his previous wives, many women would never buy any product associated with Trump’s name. To them Trump means, self-absorbed misogynist who has no self-control or decency and any product associated with him may have the connotation of caring nothing about women or women’s needs or wishes. Many women have the impression that women are of no value to Trump who routinely calls people losers with conviction.
Session 4 For this week’s entry, product differentiation is essential to the branding process. In choosing to differentiate a product, a marketer has the choice of form, features, performance quality, conformance quality, durability, reliability, reparability, and style. Collect examples of currently produced products that have been differentiated and branded for each of these design parameters. Analyze and discuss your example.
Form: Gillette Venus razor is an excellent example of a product distinguished by form. There has been a revolution in men’s razors with one blade morphing into two and then multiple blades became the standard for the industry. Razors have been thought of as men’s tools for generations but think about the large portion of a woman’s body that is touched by a razor on a daily basis. Far more square inches of a woman’s body than a man’s body are served by a razor so it is about time that the designers considered the ways a woman holds the razor, how to reach different parts of the body and the hand positions involved. Ergonomics is the science that can inform the designer of the requirements and Human Factors is the science that helps designers understand the interaction between technology or mechanical items and human thinking. Marketing should take the logic behind the changes and the design and demonstrate to the consumer that the new and improved product is considering the consumers needs and wants in a way that is unexpected or particularly thoughtful. By designing a razor with a new form that fits the woman’s hand and maneuvers in a way that a woman’s body moves the marketer can communicate a message of advancement, of a company concerned about it consumer and simple consideration.
Features: Toyota sedans have far more features today than 10 years ago and set the new standard. In a car, almost more than any other product, features can be the deciding factor. The list of options can be almost endless and this is a place where bundling can make the sale. Some people are interested in choosing specific options but smart marketers have bundled car options tailored toward different customer profiles. Sporty packages can include hub cap styles with stereo and braking packages. Luxury packages can include seat warmers, on star, luxury interiors and finishes. Bundling can make the customer accept more add ons than they would otherwise order.
Performance Quality: Ferarri “The engine lights up over 5000rpm and revs on to 8600rpm, true, but at lower crankshaft speeds it still pulls firmly and can accelerate meaningfully from under 2000rpm, emitting a throaty gurgle from its eight intake trumpets as if it were running on a quartet of twin-choke Webers. Variable cam timing and a variable-volume intake plenum chamber are the keys here. The throttle response is electric - literally, thanks to two drive-by-wire throttle bodies under the control of a 'master and slave' pair of Bosch ME7 Motronic management systems. And the F430 sounds just fantastic, like two snorty four-cylinders screaming in unison and helped by a valve which bypasses part of the silencer system above 3600rpm. You'll be searching out every tunnel.”
I put this quote from a Ferrari site in to illustrate the issues that are of interest to Ferrari connoisseurs. Its all about performance (and perhaps appearance).
Conformance Quality: Arm and Hammer Baking Soda: Quality of Conformance" describes the extent to which the product conforms to the design. Services too may be judged for Quality of Conformance by asking the question, "How closely does performance match the promise that was made." (Arm and Hammer website) When you go to bake a batch of muffins, or your Mom’s heirloom recipe you do not even think about the baking soda but it has to be perfect if your recipe is to turn out perfectly. It cannot be one way one time and another way another time. It has to be dependable every time. That is the line that I would use to advertise baking soda.
Durability: Samsonite luggage!
Samson is a biblical character known for his extraordinary strength. It was where Samsonite derived its name. It never failed
Samson when it acquired his name because they have lived up to what he was known of – his strength.
Samsonite is the largest and most popular luggage maker all over the world. They are popularly known for providing high quality
bags and top-of-the-scale durability.
Reliabilty: Parker Pens are known for reliability. They promise that every time you reach for a parker pen it will write and write well. Reliability is the most important feature of a variety of products. It is that much more important in something that is simple and so hands on. A customer feels a deep sense of frustration if something that is needed on the spur of the moment doesn’t work. Even though they hardly notice when things go right every time, they sure do notice if it doesn’t.
Repairability: Mountain bikes must be repairable. They are used hard and used often. They are used by people who want to challenge themselves and their equipment. Consumers expect the bikes to be sturdy and strong but they know that they put these bikes through torture. When they break, the fun stops. It is vital that they be repairable and easily repairable. That is the measure of a great bike. In the midst of the forest or on the side of a steep incline, that a bike can be given first aid and the fun can continue.
Style: Women’s handbags and shoes. No quality is more important in a woman’s handbag or shoes than style. Whether it is Manolo Blahniks or Payless shoes women shop for style. Style is personal but it is also shaped by advertising. What’s in? What’s not? It all has to do with MARKETING!
Session 5 For this week’s entry, based on the chapters under this weeks review, analyze in your opinion what the key success features are of Amazon.com. The analysis should conclude with recommendations going forward.
I think that there are several keys to Amazon’s success. They chose to have the very best in technology. “technology, technology, technology" is the key to his business, and not "location, location, location," as is said to be the case in retail. Amazon's location on the web is not only better than anyone else's, it is better by a significant degree. To illustrate, the figures below show incoming links to the respective web sites. In Amazon's case, the majority of these links are affiliate or wish-list based. In effect, Amazon has the largest sales force on earth, having enlisted millions of sites to provide virtual locations. Location, it seems, has much more of an effect on Amazon's success:
Amazon - 56,040,453
Microsoft - 29,768,089
Yahoo - 14,227,915
Ebay - 1,495,703
Expedia - 1,012,636
Napster - 337,880
They deal with the products of a whole host of suppliers and they can be the “store front” for all of them without ever having to touch or stock a single thing.
The second key is their strong focus on customer experience, which is infused throughout all levels of the company and includes all aspects of the buying process. Everyone from engineers to delivery people are trained to think about the customer experience and customer reaction to their actions. They are trained to consider what an ecologically minded consumer would think of the packing material. They use the concept of a 360 degree experience. Amazon takes listening to and responding to customers very seriously.
They do not just think about customer service, they monitor it with ongoing statistical analyses. "Metrics are super important. It's not just measuring, but measuring the right stuff and understanding it." "…we correlate our measurements with changes we've made on the site, to see what's driving what, how to position things on pages, and which features to delete." Jeff Bezos Amazon.com founder and CEO. They measure such things as conversion rates, visitors, purchases and even what was considered that was not purchased.
New apparel site has 400 different brands and merchants selling goods through Amazon’s platform and that even includes Target.com.
Amazon also makes the delivery process easy but they could continue their branding in their delivery packaging.
Recommendations for the future:
Returns are not easy and that needs to be improved.
The site appears to be visually cluttered and that will confuse and defocus the buyer.
It is clear that Amazon takes a lot of time in training to instill the very best qualities in their customer contact people and to help people who are no where near a real customer realize that what they do ultimately matters in the customer’s experience through internal marketing.
Session 6 How does cause or corporate societal marketing affect your personal consumer behavior? Do you ever buy or not buy any products or services from a company because of its environmental policies or programs? Why or why not?
Finalize your journal and submit it by Saturday of Session 6. Include a summary of what you learned from this course and whether you believe that your writing has improved. If not, what can you do to insure on-going improvement?
I am a practical woman. I like to multi-task. As I have aged, I find that I have more time for researching and for exercising my ideals. Perhaps it is that I am the mother of 5 and that somehow I feel that in a way my residency on the planet will be unending through my progeny. As I raised my children and taught them values, my own were cemented. I think we all have not only a carbon footprint but also a contribution footprint that no one will ever measure but that will leave our world either enriched or depleted by our presence. I do believe in supporting people who are doing good where ever I can and that includes supporting businesses that are willing to link with good causes. Cause-related marketing is a powerful marketing tool that business and nonprofit organizations are increasingly leveraging. According to the Cone Millennial Cause Study in 2006, 89% of Americans (aged 13 to 25) would switch from one brand to another brand of a comparable product (and price) if the latter brand was associated with "good cause". The same study also indicated that a significant percentage surveyed would prefer to work for a company that was considered socially responsible. Studies by Cone indicate an upward trend in the number of Americans who associate their own buying habits with cause marketing as well as an expectation that companies to be "good corporate citizens". Numerous other studies have also been conducted to show that cause-related marketing has helped to increase a company's profits. For example, in the cause marketing campaign by American Express (to which the term "cause marketing" is attributed), the company saw a 17% increase in new users and a 28% increase in card usage.
If I have a choice between two products that are similar in price and quality I will always purchase the one from the company I know to be more ethical or more socially active. I know that many businesses embrace CSR as a business ploy. If I think that the social cause gains even moderately I do not care much. I want the net result to be positive. I care about all things that effect my kids, their future, the planet and the overall total level of goodness and justice on the planet. It is not religiosity. Iit is conviction that good is more likely to prevail when this woman does what she can. I do not look to see what others are doing. Their footprints are in the shifting sand just as mine are. I will however, actively work to block injustice or unkindness where I find it if it is within my power. The world I create with my actions is the world I leave for my children to live in. This world is my nest, and I feather it where I can and I will not knowingly cooperate with its spoiling.
Labour Relations Terms explained
So just what is collective bargaining?
The Bureau of Labor Statistics defines it as the:
Method whereby representatives of employees (unions) and employers negotiate the conditions of employment, normally resulting in a written contract setting forth the wages, hours, and other conditions to be observed for a stipulated period (e.g., 3 years). The term also applies to union-management dealings during the term of the agreement.
Collective bargaining agreements are the contracts between a union and an employer. Employees have much more power when it comes to negotiating their employment if they can do so together. And unions are where this togetherness takes place.
"Collective bargaining creates a certain level of due process and equal protection for employees," said Ellen Dannin, a professor at Penn State's Dickinson School of Law and a former trial attorney with the National Labor Relations Board.
The fanfare surrounding collective bargaining has its roots in the National Labor Relations Act, which was passed in 1935 after Congress looked at the Great Depression and decided that the "inequality of bargaining power" between nonorganized employees and their employers was keeping wages down and generally depressing business. (Read more about the National Labor Relations Act here.)
Today, destroying collective bargaining rights is a means of taking power from unions.
Walker has said his bill is necessary to balance Wisconsin's budget by giving local governments the ability to single-handedly make changes to public-sector pay and benefits. Opponents say it's a political attack on Democrats, who are generally supported by unions.
"[The bill] has greatly weakened a major financial supporter of the Democratic Party," said Ronald G. Ehrenberg, a professor at Cornell University's Industrial and Labor Relations School. "This is clearly just a political action."
Evidence pointing to this is the fact that the bill does not apply to police and firefighters, who tend to support Republicans.
Binding Arbitration
A key ingredient in union-employer relationships is binding arbitration. When the two sides cannot agree on certain aspects of a discussion, they will often be required to present their cases to an arbitrator (or panel of arbitrators), who then decides on a course of action.
"A common understanding by the parties in all cases, however, is that they will be
bound by the opinion of the decision maker rather than simply be obligated to
'consider' an opinion or recommendation," according to the Office of Personnel Management.
Without this mechanism in place, the employer in the situation may only be held accountable to itself and could decide unilaterally to approve its own offer.
In Ohio, a bill that would eliminate binding arbitration for police and firefighters is being considered in the state House of Representatives after it was passed in the Senate. Police and firefighters are already banned from striking there, leaving them with little bargaining power.
However, "there is no evidence that arbitration has led to higher wages than would otherwise be the case," Ehrenberg said.
'Last in, First Out'
"LIFO," as it's known by its acronym, is the policy of firing the most recently hired first, also known as seniority. Most union contracts require seniority rules for layoffs. LIFO generally refers to teacher contracts.
Battles over LIFO are ongoing in several states nationwide. In New York, New York City Mayor Michael Bloomberg is pushing Gov. Andrew Cuomo for a reprieve from LIFO. And Florida, Idaho and Utah all passed bills eliminating LIFO this month.
Opponents of the policy say it gives undue priority to those who have been around longest, potentially requiring the firing of better teachers.
Joel Klein and Michelle Rhee, former chancellors of the New York City and Washington, D.C., public schools systems, respectively, explained their opposition in an editorial in the New York Daily News in January:
The policy has three major negative impacts: first, it removes many high-performing tenured and non-tenured teachers from the classroom, while retaining those that are less effective but have more years in the system; second, it causes a higher number of layoffs, since junior teachers are paid the least; and finally, it disproportionately impacts the lowest performing schools, which have the largest number of new teachers.
But proponents of LIFO, including teachers unions, say seniority is necessary to encourage teachers to enter and remain in the profession.
"From an economic point of view, there is some sense to it because if you are a senior person and you have job protection, you are likely to share with your younger colleagues everything you know," Ehrenberg said. "The cost arises if the old workers are not performing at satisfactory levels relative to what we'd like them to be performing at."
But even if that does occur, there are methods for removing unsatisfactory teachers through our old friend arbitration.
"Historically, people have gone into teaching because, though pay was lower, there was job stability," Ehrenberg explained. "And now we're talking about -- at least in some states -- taking it all away."
Merit-Based Pay
Several proponents of education reform are big fans of merit pay, by which an employer determines an employee's salary based on performance, not seniority, as is the case with many union contracts requiring step increases based on time in the job.
"In public education, the concern arises because our students just aren't doing as well as they used to do and we're just desperately trying to find a way to improve our system," Ehrenberg said. One of those ways is to encourage high performance by linking it to better pay.
But there are downsides to a seemingly simple idea. Employers can use merit pay to squeeze out individuals who would otherwise be hard to fire by reducing their salaries, for instance. And for teachers, a switch to merit pay would destroy yet another incentive to sticking around in a low-paying, difficult profession if sticking around longer didn't necessarily ensure a higher paycheck each year.
Value-Added Assessment
Another issue with merit pay is the question of how to assess an employee in the first place. How can you be sure than an objective evaluation is "stable"? Ehrenberg asks. Similarly, how can you be sure a subjective evaluation isn't biased?
And if your employee is a teacher, the question is even harder to answer.
Sponsored LinksIn the education debate, a new process is being touted as a method of evaluating teachers. Value-added assessments look at the progress of each individual student over time to determine how much he or she has learned in one year.
Each student takes a standardized test at the end of the year and the scores are compared to the year before. The progress the student has or has not made can then be attributed to the teacher.
The trouble with this model, say opponents, is that it encourages teachers to teach to tests and ignores mitigating factors that are external to the teacher's control -- factors such as economic status, familial involvement and just plan bad luck.
The Bureau of Labor Statistics defines it as the:
Method whereby representatives of employees (unions) and employers negotiate the conditions of employment, normally resulting in a written contract setting forth the wages, hours, and other conditions to be observed for a stipulated period (e.g., 3 years). The term also applies to union-management dealings during the term of the agreement.
Collective bargaining agreements are the contracts between a union and an employer. Employees have much more power when it comes to negotiating their employment if they can do so together. And unions are where this togetherness takes place.
"Collective bargaining creates a certain level of due process and equal protection for employees," said Ellen Dannin, a professor at Penn State's Dickinson School of Law and a former trial attorney with the National Labor Relations Board.
The fanfare surrounding collective bargaining has its roots in the National Labor Relations Act, which was passed in 1935 after Congress looked at the Great Depression and decided that the "inequality of bargaining power" between nonorganized employees and their employers was keeping wages down and generally depressing business. (Read more about the National Labor Relations Act here.)
Today, destroying collective bargaining rights is a means of taking power from unions.
Walker has said his bill is necessary to balance Wisconsin's budget by giving local governments the ability to single-handedly make changes to public-sector pay and benefits. Opponents say it's a political attack on Democrats, who are generally supported by unions.
"[The bill] has greatly weakened a major financial supporter of the Democratic Party," said Ronald G. Ehrenberg, a professor at Cornell University's Industrial and Labor Relations School. "This is clearly just a political action."
Evidence pointing to this is the fact that the bill does not apply to police and firefighters, who tend to support Republicans.
Binding Arbitration
A key ingredient in union-employer relationships is binding arbitration. When the two sides cannot agree on certain aspects of a discussion, they will often be required to present their cases to an arbitrator (or panel of arbitrators), who then decides on a course of action.
"A common understanding by the parties in all cases, however, is that they will be
bound by the opinion of the decision maker rather than simply be obligated to
'consider' an opinion or recommendation," according to the Office of Personnel Management.
Without this mechanism in place, the employer in the situation may only be held accountable to itself and could decide unilaterally to approve its own offer.
In Ohio, a bill that would eliminate binding arbitration for police and firefighters is being considered in the state House of Representatives after it was passed in the Senate. Police and firefighters are already banned from striking there, leaving them with little bargaining power.
However, "there is no evidence that arbitration has led to higher wages than would otherwise be the case," Ehrenberg said.
'Last in, First Out'
"LIFO," as it's known by its acronym, is the policy of firing the most recently hired first, also known as seniority. Most union contracts require seniority rules for layoffs. LIFO generally refers to teacher contracts.
Battles over LIFO are ongoing in several states nationwide. In New York, New York City Mayor Michael Bloomberg is pushing Gov. Andrew Cuomo for a reprieve from LIFO. And Florida, Idaho and Utah all passed bills eliminating LIFO this month.
Opponents of the policy say it gives undue priority to those who have been around longest, potentially requiring the firing of better teachers.
Joel Klein and Michelle Rhee, former chancellors of the New York City and Washington, D.C., public schools systems, respectively, explained their opposition in an editorial in the New York Daily News in January:
The policy has three major negative impacts: first, it removes many high-performing tenured and non-tenured teachers from the classroom, while retaining those that are less effective but have more years in the system; second, it causes a higher number of layoffs, since junior teachers are paid the least; and finally, it disproportionately impacts the lowest performing schools, which have the largest number of new teachers.
But proponents of LIFO, including teachers unions, say seniority is necessary to encourage teachers to enter and remain in the profession.
"From an economic point of view, there is some sense to it because if you are a senior person and you have job protection, you are likely to share with your younger colleagues everything you know," Ehrenberg said. "The cost arises if the old workers are not performing at satisfactory levels relative to what we'd like them to be performing at."
But even if that does occur, there are methods for removing unsatisfactory teachers through our old friend arbitration.
"Historically, people have gone into teaching because, though pay was lower, there was job stability," Ehrenberg explained. "And now we're talking about -- at least in some states -- taking it all away."
Merit-Based Pay
Several proponents of education reform are big fans of merit pay, by which an employer determines an employee's salary based on performance, not seniority, as is the case with many union contracts requiring step increases based on time in the job.
"In public education, the concern arises because our students just aren't doing as well as they used to do and we're just desperately trying to find a way to improve our system," Ehrenberg said. One of those ways is to encourage high performance by linking it to better pay.
But there are downsides to a seemingly simple idea. Employers can use merit pay to squeeze out individuals who would otherwise be hard to fire by reducing their salaries, for instance. And for teachers, a switch to merit pay would destroy yet another incentive to sticking around in a low-paying, difficult profession if sticking around longer didn't necessarily ensure a higher paycheck each year.
Value-Added Assessment
Another issue with merit pay is the question of how to assess an employee in the first place. How can you be sure than an objective evaluation is "stable"? Ehrenberg asks. Similarly, how can you be sure a subjective evaluation isn't biased?
And if your employee is a teacher, the question is even harder to answer.
Sponsored LinksIn the education debate, a new process is being touted as a method of evaluating teachers. Value-added assessments look at the progress of each individual student over time to determine how much he or she has learned in one year.
Each student takes a standardized test at the end of the year and the scores are compared to the year before. The progress the student has or has not made can then be attributed to the teacher.
The trouble with this model, say opponents, is that it encourages teachers to teach to tests and ignores mitigating factors that are external to the teacher's control -- factors such as economic status, familial involvement and just plan bad luck.
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