Get Out the List

I can’t really say that finding yet another situation in which American business interests have been running amok during this administration really came as a shock to me, although I have to admit that this one is even more despicable than usual. We’ve already seen companies getting the government to let them start dumping mine tailings (poison) into rivers and lakes, pushing to repeal even common-sense regulations on air pollution, trying to gain increasing support for failing industries like coal mining (which even our former coal customers don’t want anymore), and advocating for additional import tariffs that are now threatening several previously solid manufacturing sectors. But allowing the US-led infant formula lobby to interfere with U.N. World Health Assembly’s efforts to promote breast feeding is still a new low…

You can pick up the New York Times article here, if you really want to see things hit their worst, but don’t say I didn’t warn you. All the assembly was trying to do was pass a resolution saying that “mother’s milk is healthiest for children and countries should strive to limit the inaccurate or misleading marketing of breast milk substitutes.” This isn’t exactly a controversial statement; there are quite literally decades of evidence, from hundreds of studies, which support this position. On the other hand, it’s easy to see how the $70 billion formula industry, led by Abbot Labs here in the US, would consider such a resolution to be against their interests…

It’s hard to imagine how, exactly, the industry leadership would justify promoting their business interests over the health and welfare of millions of infants, and the HHS statement that this move was to prevent “stigmatizing” women who want/need to use formula isn’t particularly convincing. It’s even less convincing when you consider that American representatives at this same Assembly meeting were also threatening to withdraw international aide and military support from various small nations if they chose to support the resolution – starting with Ecuador, which was originally going to propose it. American delegates apparently also threatened to slash US funding for the World Health Organization…

Now, I wouldn’t want you to place all of the blame for the United States delegation behaving more like organized criminals than advocates for public health on the shoulders of a single, albeit gigantic, industry. During these same meetings, the Americans were also noted as advocating to limit the ability of countries with rising rates of obesity and diabetes to put warnings labels on sugary beverages, and opposing changes to patent laws that would make it easier for poor countries to gain access to potentially life-saving medications. It might be possible to argue that intellectual property rights and free trade without regulatory interference are good for business in every country, and therefore these other efforts are still slightly into the grey area, but those claims don’t hold up well when accompanied by threats of extortion…

There are times when it really does seem as though the people who are running this place have a checklist of completely disgusting things they want to accomplish, just to make sure that they don’t miss anything. I feel constrained to point out, however, that even if these mainly political moves made sense in a purely business-friendly context – and they really don’t – the degree of international resentment this kind of behavior is generating has potential long-term consequences that dwarf whatever immediate gratification these companies may be receiving. When things get to the point where the Russians have to step in and propose the resolution in support of breast-feeding because the Americans have been threatening everybody else you really know that the regular order of things has been upended…

In the simplest possible terms, we’re still going to have to live on this planet, and do business here, once the current administration finishes lining their own pockets and leaves office. That’s going to be really difficult to do if all of the residual goodwill we might still have had with the rest of the world gets flushed in order to sell more infant formual…

Wagging the Elephant

Some time ago in this space I brought you the story about how many “foreign” cars were now being built in the United States, like the Toyotas being built in Ohio, and how many supposedly domestic cars were being built from parts not made in this country. An investigation team had taken all of the parts from that model year’s Ford Mustang and Toyota Camry and sourced all of the parts, only to discover that while both cars were assembled within 500 miles of where I’m sitting right now, the supposedly foreign Camry had more American-made parts than the All-American Mustang. I wish I could tell you that it comes as a surprise that no one in Washington seems to have read either the original article or my commentary on it, but I’d be lying…

An article on the CNN Money page this week reports that the proposed (or threatened) steel and aluminum tariffs are projected to drive the cost of the Camry up by about $1,800 dollars for the next model year, and possibly more thereafter, depending on how the trade wars develop. There hasn’t been any word yet on how much the cost of a Ford Mustang will go up, but since these (and several other Ford products) use even more foreign metals and parts, it seems likely that the Mustang will be hit at least as hard. Toyota hasn’t said how much of the price increase they intend to pass along to the consumer via a higher sticker price, but unless they want to eat the entire increase out of their profits they are going to have to pass at least some of it on…

It’s hard to say what the overall effect will be on the US economy, let alone the world’s economy, but the impact on anyone in this country who wants to buy a Toyota Camry is certainly clear: they will have to scrape up another $1,800 plus whatever it costs to finance the increase. If a similar increase hits all of the other companies that manufacture and sell cars in this country, including Ford, GM, Chrysler, Hyundai, Honda, Mercedes, BMW, and others, it’s going to make it much harder for ordinary Americans to buy a car, and I can’t imagine that’s going to be good for the workers who build the cars, either. And that doesn’t even consider the effect that having all of those companies losing sales, all of their suppliers losing sales, and all of their employees having less to spend on consumer goods is going to have…

In theory, if this situation was protecting a similar number of workers and consumers it might be worth considering such an action. But with metals production in the United States continuing to drop, it isn’t clear if the developing trade war is going to save any jobs, let alone enough to replace all of the ones potentially at risk if the automotive industry in this country is thrown into a crisis. And I have to point out that cars are only one of the more obvious products that are made out of steel and aluminum in the US; if a similar effect were to cascade across all of the other sectors of consumer goods, the overall effect could make the 2008 economic crisis look like a minor inconvenience…

In politics, the expression “Wag the Dog” is used to mean a stunt intended to divert attention away from an unpopular action, but the term derives from the old saying about “the tail is wagging the dog,” which is more about a minor part of something taking on more importance than the whole. I would say that in this case both expressions apply; the health of one American industrial sector that has been in decline for decades is being given priority over dozens of other sectors, and goodness knows what this fiasco is supposed to keep us from noticing. Except that, when things get to this scale, it’s really more a matter of the tail wagging the elephant…

Down Four Lanes of Highway

I think we were all expecting to see some of the companies impacted by the developing trade war start moving production outside of the US. Whether or not the new tariffs on steel and aluminum will actually help the U.S. companies that produce those materials remains in dispute, but the retaliation coming from the EU, Canada and China does not – and those counter-punches are going to hurt. For example, Harley-Davidson is facing an estimated increase of $2,200 per unit it exports to Europe – which is an increase from 6% to 31% if that helps. Company and industry sources both claim that Harley-Davidson was already considering moving more production off shore, but this gave the idea greater appeal. It’s a predictable response to a difficult situation. Unless you’re the President of the United States, apparently…

Both the BBC and CNBC are reporting on the move, and both of them are citing a tweet from our President saying that he is surprised and disappointed that Harley-Davidson is “surrendering” instead of waiting for the supposed benefits of this trade war to help make up the difference. How, exactly, a trade policy that protects US steel and aluminum manufacturers from foreign competition will help a company that makes motorcycles is a little tenuous. Granted, American metals companies could lower their own prices if they had less “unfair” foreign competition, but in general, companies lower their prices as a result of greater competition, not less of it. And even if our domestic producers were somehow inclined to lower their costs, there is no reason to believe that they will – or that it would be enough to offset the tariffs being placed on motorcycles by the EU and other to follow…

A much bigger question, at least from where I’m sitting, is why anybody would find either of these developments surprising in the first place. Random, arbitrary, and inexplicably high tariffs are going to provoke retaliation, just like any other hostile action. Make them high enough, arbitrary enough, and combine them with enough ignorant and belligerent rhetoric, and people are likely to see such measures as economic warfare – because that’s exactly what it is. And while I will concede that there are some conditions under which tariffs (and other sanctions) are justifiable, or even sensible – a trade war is still a better idea than an actual war, in almost every possible case – suddenly declaring a trade war on countries that have been your stable trading partners for decades makes about as much sense as attacking them without warning any other way…

I realize that this post is drifting away from business and towards politics, which I would prefer the blog not do, but by the same token this is very much a matter of strategy, and in this case, applying the wrong ones. As a matter of international business or economics this move makes no strategic sense for anybody except a handful of American metals companies, and we should note that if there is an economic crisis because of this trade war their business will not prosper either. The only category under which this qualifies as an actual strategy is in the case of appealing to a reactionary political base, or rewarding owners of newly-protected companies who happen to be current or potential campaign contributors. Which is really the point…

To put it simply, I don’t comment (much) on politics because having business interests attempt to direct national policy is a colossally bad idea – and that is what is happening here. I do not have any evidence that would prove that members of our current administration are allowing their own business interests, or those of their political supporters, to direct our national policy towards a potentially disastrous trade that can’t possibly do anyone on either side any good, and may ultimately be bad even for the handful of companies supposedly being protected under such a policy. I just can’t fathom any other explanation…

This won’t end well. It never does…

Protection or Aggression?

There has been a lot of ink lately about the tariffs that our current administration is trying to impose on imports of steel, aluminum, and various other commodities that impact the personal wealth of people who donated to their election campaigns. Measures like this are generally referred to as Trade Protectionism, and are generally enacted to protect domestic producers from unfair foreign competition – cases where a foreign company can use cheaper labor, lower raw material costs, looser environmental regulations, or subsidies from their national government to achieve a price level American firms can’t match. In theory, import tariffs protect domestic companies and their employees, but in practice there are a number of issues with such measures that make their use risky, or even counterproductive…

The obvious problem with import tariffs is that other companies can impose them, too. In cases where we need the imports more than they need our exports, their tariffs can be more effective than ours, and the overall effect on our economy will wipe out whatever advantages our import tariffs might have given the “protected” industries. That’s not easy to determine in advance, either. In the case of the oil wars in the 1970s and 1980s, for example, many people assumed that the US could retaliate for the (seemingly) arbitrary price increases for petroleum with similarly punitive raises in the price of food products. Unfortunately, it turned out that we did need oil as much as the OPEC countries needed food – given that we were using petroleum-based fertilizers, petroleum-fueled farm equipment and delivery trucks, and oil-burning ships to export the crops in the first place…

In the current iteration of trade tariffs, it is harder than usual to see these measures as anything other than political, due as much to the fact that there have been no major changes in those industries or pricing structures in recent years as to the countries being targeted by the tariffs. There have been occasional cases of Chinese and Russian companies dumping cheap steel imports on the US market over the last decade, but our domestic steel industry has been declining for much longer than that, and even if those imports were a factor it’s hard to see how erecting tariffs against Canada or any of the other G7 countries would help. Even if those countries weren’t going to retaliate for our random imposition of tariffs, and they’re already doing so, there would still be negative effects within the US to explain away…

Consider, if you will, the case reported in March of this year by Reuters, about the impact of the steel tariff on a company called Novolipetsk Steel PAO, in Mercer County, Pennsylvania. Novolipetsk Steel imports large amounts of bulk steel from the company’s mills in Russia, which it then rolls and processes in plants in the US. The steel tariffs are expected to have a positive effect in the vestigial American steel industry, with a few idle steel mills being put back into operation, but it will have a much larger negative impact on companies like Novolipetsk’s US subsidiaries, wiping out as many as three times the number of jobs created. And that doesn’t even consider the jobs that will be lost in the American industries that actually still export goods…

It would be nice to think that these tariffs were really intended to protect American workers in general, or even that the effects would be a net positive for the country. As noted above, trade protectionism is generally not a viable long-term strategy, but if applied carefully and limited to cases where unfair competition (low-cost product dumping, for example) really is occurring, it can have some positive effects. In most cases, however, actual trade negotiations between countries involved will be more effective and generally more mutually beneficial. In cases where there are no such trade wars in effect, where the country attempting to erect the tariffs can’t begin to supply its own needs for the relevant commodity regardless of import price, or where the administration in power owes significant favors to people who own companies in the relevant industry, however, it’s difficult to see these actions as protecting anything in the public interest…

Yet Another Bad Choice

Several times over the past few years I’ve written in this space about the frequently baffling marketing programs attempted by the Burger King Corporation, and the backlash from both the consumers and their own franchise holders as a result of these occasional crimes against good taste. The “Freaky King” ads alone would be enough to make me want to fire my ad agency, but after episodes like the marginally obscene print ads for their foot-long burger and internal management fiascos like demanding that their franchisees sell products for below cost in order to align with national advertising campaigns, I have begun to question why the people running this company haven’t been committed for their own safety. And then I learned that the company had decided to open their newest overseas operation by insulting the royal family of the country they are just about to launch in…

According to an article on the BBC News site, Burger King is about to start operating in Belgium, and have been running an online ad that asks people to choose between a picture of the “Freaky King” mascot character and a picture of King Philippe, the actual monarch of that country, under the heading of “Who is the King?” Apparently, if you select the picture of the actual King, you get a pop-up message asking if you’re sure about that, considering that he’s not the one who will be cooking your fries. A spokesman for the Royal Family has issued a statement saying that they do not approve of this tactic, and would not have given permission for Burger King to make use of the King’s image if anyone had actually asked them…

I’m not familiar with Belgian popular culture, so I can’t tell you what level of offense this ad campaign with rise to with the people being subjected to it. There are places in the world where the royal family would simply ignore this kind of thing, and consider it nothing more than part of being a public figure in an increasingly vulgar world. There are other countries where this sort of campaign would result in the company being sued, banished from the kingdom, or just having all of their local assets confiscated and all of its local management team jailed. And there are other places in the world where this sort of thing might result in outraged subjects boycotting the company, marching in protest, setting fire to their in-country locations, or burning local managers in effigy (or possibly in person)…

What isn’t clear to me is why any company would take such an approach in the first place. In any nation where their actual king is a beloved figure this will be taken as a cultural insult, and in any place where there is a totalitarian government this would be considered an actual incitement to insurrection in the streets (which it actually might be). But regardless of the population’s actual relationship with their monarchy, it’s hard for me to imagine any circumstances under which this type of advertising would be considered a sly in-joke as opposed to yet another tone-deaf attempt by a particularly ugly American company to appropriate some part of the local culture in order to sell food products that are potential health risks…

I’ve read the same things you have about there being no such thing as bad publicity, and to some degree that might be true, but given the worsening relations between the US and Europe during the past few months, and the past week in particular, it just doesn’t seem like the best time to be going around calling attention to American arrogance and tone-deafness. Not that there is ever a really good time to do that, of course…

Missing the Point

I was reading an article online this weekend and reflecting that whoever wrote the article – or, at the very least, whoever wrote the headline – appear to have missed the entire point of the interview and the issue it was set up to cover. However, the gentleman being interviewed appears to have caught it on the first go, proving that he has a better grasp of the realities of business than the Fox News business department has ever had…

You can pick up the original story here, if you’d like, but the interview was with the Chairman Emeritus of the Marker’s Mark organization, who had been the CEO for the previous 35 years before handing the job over to his son. If you’re not familiar with the company, the Samuels family has been making bourbon (and related products) in Kentucky since 1780 or so, but the business has only been producing a premium product for the last couple of generations, and has only started offering new variations on the flagship product over the last decade or so. You might reasonably expect, as the Fox News people clearly did, that a multi-generational family company that make distinctly American alcoholic beverages would be upset by news stories claiming that the finest whiskey in the world is actually made in Taiwan…

According to the interview, however, Bill Samuels Jr., the Chairman Emeritus, is delighted by the international spotlight that has been turned on his industry, and is predicting that the attention from around the world will increase sales for all of the company’s products, including the new high-end beverages they have recently introduced. Leaving aside just for the moment how much additional business that such international acceptance will generate for the brand domestically, the fact remains that three quarters of the world’s economy and 94% of its population do not live in the United States. It is highly probable, in fact, that if the company’s product takes on the image of an internationally sought-after luxury product that domestic sales will increase, but even if they do not, it’s a big world filled with a lot of people who seem to like bourbon…

Now, to be fair, we should probably acknowledge that Bill Samuels Jr. has spent almost his entire life – from the day his father convinced him to abandon a career in aerospace and come to work for the family business – thinking about distilled spirits and ways in which to sell more of them. By contrast, the Fox News staffer who wrote the story has probably only considered the industry as a consumer, and may not actually have any business credentials to speak of. And by the same token, I don’t believe that it is a coincidence that the company decided to bring out its new Maker’s 46 and Cask Strength products just as international attention is starting to develop for this product category…

So why am I telling you about this, I hear some of you asking? You don’t necessarily run a premium distilling company, and you’d never believe that Fox News knows more about any industry than a guy who has managed a company in it for 35 years. The point I’m going for here is that anything that moves our company or its products from being a specialty product purchased by a limited subset of consumers in one corner of our industry to being part of an international competition for the best product in the industry, even if we did not win that competition, is a good thing. And assuming (as somebody at Fox apparently did) that news reporters for a major media outlet must somehow know more about an industry than someone whose family has been in that business for over two centuries, and who has devoted his life to the family business, is just another good way to get yourself mocked by scruffy bloggers from all over the Internet…

Already on the Street

In an amusing follow up to my Apple Watch post from earlier this week, CNN Money is reporting that cheap knock-off versions of the Apple Watch are already on the street in several major Chinese cities. Literally cheap, in this case; some of the knock-offs have been observed selling for as little as $40 US compared to a starting price of $349 for the cheapest model from Apple. The fakes aren’t that sophisticated yet; they’re mostly Android-based devices that don’t look anything like an Apple product or come anywhere near the performance level the Apple Watch is supposed to have. It’s hard to believe that these products are fooling anybody, especially considering that the real Apple Watch isn’t available for sale yet, but it does illustrate just how much of a problem knock-offs are becoming…

Traditionally, when you mention knock-offs, people will assume that you are talking about clothing or fashion accessories that have been made to look like a designer label but are actually just cheap copies made using inferior materials and/or workmanship. Depending on the complexity and quality of the original, it can take months or even years before the knock-off products achieve a fully convincing copy, but eventually many of these items will reach a point at which only an expert will be able to tell the real thing from a sophisticated copy. Knock-offs of electric or electronic products can work the same way, with black-market companies churning out cheap versions intended to fool the customer into believing they are getting the real thing, but there are also cases in which a competitor in the same industry will purchase the original product, take it apart, and then develop their own version of the same technology under their own brand…

How often this happens, and to what extent one product is an unauthorized copy of another, are legal questions that have kept battalions of lawyers busy over the years, and complicated international trade between countries that have strict laws against theft of patents and intellectual properties and nations that do not. What I find remarkable about the story linked above is the speed with which this seems to have happened, and the related factor of how easily the counterfeiters (called “shanzhai” in Chinese) have managed to produce a fake version of an Apple product. Even granted that the counterfeit products don’t begin to have the functionality or style of the real thing, it can no longer be denied that they have gone to market over a month before Apple will be ready to do the same…

Any time a large and powerful company takes forceful action to protect its designs, inventions, or brand image, there always seems to be some amount of push-back, as people assume that the company is being greedy and using its legal power (and money) to destroy potential competitors. And while, at least to some extent, that is probably true, it seems worth pointing out that sometimes the company really is being ripped off by small-time operators who know full well that they are stealing somebody else’s property. I don’t know what Apple is going to do about this rising trend in counterfeiting, or how it is likely to affect their sales in the future – but it does seem as though they should consider getting their products to market a little faster, or at least leaving less time between the introduction and the date the product is made available for sale…

Without the Word Cluster

A lot of questions popped up after the Malaysian airliner was shot down over the Ukraine – or over the disputed part of the country that a separatist group claims is rightfully part of Russia, depending on your point of view. People are questioning where the missile that brought down the plane was fired from, and by who; people have questioned how closely the Russians are involved in the supposed civil war, and what role this plays in Mr. Putin’s eventual plans for the region or the world; people have questioned whether the American satellite footage is real, and even if it is, what role this plays in Mr. Obama’s eventual plans for whatever it is people think the President is doing this time. The most basic question of all, I can’t help thinking, is why a civilian airliner was flying over a war zone in the first place – and, unfortunately, that’s even more complicated than most of the other questions…

A story this week from the NBC News site pointed out that there really isn’t any one agency with the ability to declare any particular airspace off-limits for reasons of safety or anything else. There is a United Nations aviation agency, the International Civil Aviation Organization (ICAO), headquartered in Montreal, that issues warnings and advisories to all member nations, but the ICAO has no ability to impose or enforce no-fly zones. Individual countries can declare their own airspace unsafe, but can’t be compelled to do so according to treaties dating back to the end of World War I, and Ukrainian authorities had declared the route Malaysia Airlines M17 was flying to be safe. Various military coalitions have declared no-fly zones over the years, but there is no such group involved in the Ukrainian civil war; The Netherlands are part of NATO, but Ukraine isn’t…

Ultimately, the only thing most pilots have to go on are temporary restrictions, usually called Notices to Airmen or NOTAMs, which can be issued by (or occasionally about) specific airports or air corridors by local air traffic controllers or national aviation agencies. No US carriers were flying through Ukrainian airspace at the time because the FAA had issues such a warning, but there is no consistency over what constitutes a credible threat from one country to another, or even one controller to another. And meanwhile, every airline in the world is under pressure to control costs (and keep fares low), which means using the fastest and more direct routes possible between destinations – even when that means flying over a warzone populated by trigger-happy pro-Russian idiots…

Now, we should probably note that with the exception of the United States and a handful of other countries, most national governments don’t have the intelligence assets available to assess the threat levels present along various air routes, let alone the airlines from that country. It might be possible to avoid all flight routes that pass through even questionable airspace, but only at the risk of driving airfares to a price level that will exceed what the public is willing to pay, thus losing all customers and eventually bankrupting the company. The truth is that air travel can never be made completely risk-free, and consequently every airline has to find a balance between risk and profitability that it is willing to accept. And with no International standard to follow, some companies end up making bad choices…

It’s easy to criticize Malaysia Airlines for flying over a war zone, but at this point in history the collection of local, national and international warning systems – none of which has any authority over anyone but the home country’s airlines – is so ridiculously complicated and miserably ineffectual that it can’t really be described without the use of the word “cluster” in there somewhere. And even if it becomes possible to appoint an international agency to actually restrict unsafe air corridors and give the definitive word on destinations, that still won’t protect carriers or their passengers from rapidly-shifting lines of battle, missile batteries that aren’t supposed to be in a given area, or idiots lobbing random projectiles into the general area of somebody else’s airport…

The Doughnut of National Preference

One of the ideas I try to get across to my students in my Business Policy and Strategy class is that different people in different markets and segments want different things, and pretending that they don’t – pretending that everyone in the world wants exactly the same things – is just as absurd as pretending there is anything wrong with that. I’ve often pointed out that people are people wherever you go, and that when it comes to the really big things (survival, security, acceptance, community, acknowledgements) we all DO want the same things, but when we get down to issues like consumer preference we’re no longer talking about what it means to be human; we’re talking about things like how much sugar is produced within a given consumer’s home country. I often make that point using a short story about doughnuts…

When I was a graduate student (both times, actually) I was part of a study group that met every week to go over some of the more impossible aspects of our course of study, and we all took turns bringing snack foods to the meeting. When it was my turn I would usually bring doughnuts, because they are filling, taste good, and can be economically obtained in large quantities. However, I rapidly noticed that different members of the group had different ideas about what constituted a good pastry. My friends from China, for example, told me that American people put too much sugar on everything – which makes perfect sense when you realize that neither sugar beets nor sugar cane are native to China. Accordingly, there is no local equivalent to the gooey pastry beloved of Americans and some European nations. From then on I made a point of buying plain cake doughnuts, without frosting or filling, and our Chinese friends loved them; they said it was the best snack food we had in America…

Our Korean students loved the doughnuts with the thick white icing and colorful sprinkles; even some of the women who had never been known to eat junk food (or much of anything else, actually) could be counted on to have one or two of these. Some of the Northern Europeans like icing and frosting more than anybody else, and I made sure to have some for them, while the Eastern European nations go in more for light and flaky pastry and fruit fillings – powdered sugar doughnuts, lightly glazed doughnuts or occasionally jelly doughnuts or apple fritters went over big here. And, of course, my fellow Americans love anything frosted with sugar, chocolate, glaze, icing, filling, cream, maple syrup, or all of the above at once, which made it relatively easy to round out my order…

Over the years I’ve come to refer to this as Belin’s Doughnut of National Preference – which is a reference to Porter’s Diamond of National Advantage; a well-known construct developed by Dr. Michael Porter at Harvard to account for why some nations are more successful in international trade competition than others. Unlike the better known Diamond construct, I can’t back my Doughnut up with anything more concrete than many years of personal observation, but there was an article this past week that does seem to support my thesis. The Viral Nova website published at list of foreign snack foods, complete with pictures, and I call your attention to #5 – the Dry Pork and Seaweed Doughnut offered by Dunkin Doughnuts in China – and to #12, the Wasabi Cheese and Seaweed Cheese Doughnuts offered by Dunkin in Singapore. While certainly not conclusive, this information does appear to support my contention that different people have different ideas about what constitutes a good doughnut…

Now, I don’t mean to suggest that this observation is particularly deep or especially profound; in fact, it’s about as simple an explanation of National product preferences as you could ask for. But then, that’s the point: finding out what your customers in a specific country, state or city prefer is a painstaking activity that will require considerable research; recognizing that they have unique preferences, and that these may very well NOT be the same as your own preferences, is as simple as sharing doughnuts with your colleagues on a rainy afternoon and watching what each of them likes to eat…

Getting More Complicated

If you tell people that the world in general, and the world of business in particular, are becoming more complicated all the time it’s unlikely that anyone will argue with you. Just in our lifetimes – and I’m not really all that old – we’ve seen things like the fall of Soviet Communism, the rise of e-commerce, and the development of a truly global economy, just to name three examples from the last twenty years. There was a time when all an American company needed to do in order to be considered a success was to develop a product (or reverse-engineer an existing one) and then sell it for a better price or with better features and quality for the same price than the competition. Today we have to contend with such diverse problems as the socio-political impact of our success or failure, whether our business is culturally, ethnically, ethically or ecologically sensitive, whether there is any way that our business could be considered a security risk by either Homeland Security or the NSA, and whether the Chinese government has decided to pick on our pricing decisions…

In case you missed it, you can find the original story on the Wall Street Journal site here; they have some good commentary and support information. Apparently, China’s state-run broadcasting network has started airing a 20-minute program attacking Starbucks for allegedly charging higher prices and gaining higher profits in China than they do in other parts of the world. Starbucks has replied that its pricing is based on a variety of factors, such as labor, real estate, and infrastructure in the country in which they are operating. The article doesn’t mention it, but given the company’s usual strategy involves moving large amounts of product from Seattle to wherever their store is, and requires a number of local commodities (notably water) that can be difficult or expensive to obtain in other parts of the world, they may even be telling the truth. What is unusual about the situation is that it’s a national government doing the criticizing, as opposed to the citizens voting with their feet…

Most places in the world that have free-market economies also have limitations on what price you can charge for goods and services – occasionally governmental regulations, but mostly just what customers are willing to pay for that product. You couldn’t get away with charging $500 a cup for coffee in the US – not because that’s illegal, but because no one would pay that. As I’ve observed in earlier posts, there are a few places in the US where you can find specialty coffees going for as much as $10 or $12 a cup, but that’s rare, with $2 to $3 being more common. Some people refuse to pay even that much, considering that they can make their own coffee at home for as little as a few cents a cup. But that’s because in the United States coffee is a staple food item that most people take for granted as part of their regular diet; in China things are a bit different…

Several of my colleagues from China have told me over the years that in their country, Starbucks is a luxury product, and indeed a status symbol. If you are drinking Starbucks in China you are clearly a person of sophistication and taste, not to mention wealthy and powerful enough to be able to afford a cup of coffee that costs as much as some people make in a whole day! The equivalent in our terms might be people spending $200 on a bottle of champagne – it’s an example of conspicuous consumption, if not outright wretched excess, but ultimately no better or worse than squandering your paycheck on any other high-status but non-essential purchase. If people in China are willing to pay those prices for the product then it is difficult to fault the company for charging them, and if people in China were not willing to pay such prices the company would have to lower them until a new price point appeared…

In a free-market economy, the idea of not charging more for a product in a place where people will pay that higher price literally makes no sense – this is why cups of beer that cost less than a quarter are sold for $7 at sporting venues, for example. If Starbucks was offering sub-standard products, or ones that were actively hazardous to their customers then the government would certainly have a point. But unless I’m missing something in the article, all the company is doing here is selling customers a product that they wish to purchase at a price that they are willing to pay. And yet, a national government is still taking them to task over it…

No doubt about it; the world is getting more complicated again…

Airline Follies International

I’ve spent a lot of time on this blog making fun of the airlines – partly because they make such an easy target, and partly because they give me so many opportunities to work with. It’s not really fair, of course; shoving 200 or more people into a narrow aluminum tube and then making them sit quietly in uncomfortable seats for a few hours isn’t easy at the best of times. When you include factors that are largely out of your control (such as the price of jet fuel, the price of gate use fees, the cost of food, the cost of unionized labor) and factors that are completely out of your control (the weather, gate delays, runway and taxiway delays, grounding of all flights because someone from a competitor has crashed their airplane into a mountain, grounding of all flights because a competitor hasn’t been doing the required maintenance, or grounding of all flights because some idiot thought it would be okay to smuggle something that might or might not have been a bomb into a random plane somewhere at the airport) it’s amazing that anyone ever has a favorable flying experience. But the reason these companies make such easy targets lies in the fact that after allowing for all of those unforeseeable factors, they still follow management practices that a six-year-old would know better than to allow – and, apparently, things get even worse outside the US…

Take for example the recent case (August 9) when Air Berlin, Germany’s second largest passenger carrier, managed to leave almost 200 items of checked luggage off of a flight from Stockholm to Berlin – every single bag that was supposed to be on the plane wasn’t. Right off the bat, this would have been a huge issue in the US, where every bag is required by law to be on the same plane as the person who checked it. But leaving aside the fact that both the FAA and the FBI would have been all over an episode like that, if an American company managed to lose that much luggage all at one go they’d most likely have realized that they were about to have a planeload of angry passengers raising cane, and done something about it – even if that was just a bunch of groveling emails and phone calls, and maybe a public apology online or in a full-page ad in a newspaper. Because Americans love some schadenfreude, and they would have wound up being mocked by thousands of commentators who aren’t obscure, scruffy bloggers. And also because in this country, telling someone you can’t find their property and can’t help them get anyone else to help either will get you sued…

Apparently things are easier in Europe, however, because in the linked Slate article there are cases of people asking the airline (via Twitter) for help and being told to call the airport lost-and-found – and, on being told that the lost-and-found isn’t responding, the airline refusing to help any further. It’s hard to tell without any connection more direct than the Slate story, but it sounds as if the airline is blaming the airport, the airport is blaming the airline, and neither one is allowing the passengers involved to have a voice number with which to demand an explanation. Unless there’s an equivalent to the FAA, or possibly the U.S. Attorney’s office, somewhere in the EU it may take a private lawsuit to break this Catch-22 cycle – and I’m not sure how that works in Europe, either…

Now, unless you’re a fairly active world traveler this may never be an issue for you. There are, after all, other European carriers you could select, and a number of the US airlines do business in Europe. It may take a bit of effort to avoid being routed onto an Air Berlin flight through the One World Alliance, given that several US carriers are part of that program, and sometimes you can’t control who will be operating the airplane on the next leg of your voyage. The real lesson here isn’t so much “airlines are idiots” (we’ve been over that) or even “European airlines are bigger idiots” (one episode isn’t really enough to go on, even one as heinous as this one), but rather that social media by themselves aren’t going to be enough to gain any competitive advantage, let alone sustain one…

(Continued…)

The Trouble with Outsourcing

In my class on Management strategy and policy, one of the subjects we cover at some length is Outsourcing, and specifically the positive and negative effects it can have when employed at various levels of business. The concept has gotten a lot of bad press in recent years, given that the term is usually used to refer to outsourcing production to other countries, which means a loss of jobs in whatever country, state or city the speaker is from. And, in fairness, it is sometimes possible to shift production or other activities to some place where labor is cheaper, required resources are more readily available, or various regulatory laws are less problematic, all of which remains wildly popular with the people responsible for containing costs. But unfortunately, the loss of job opportunity in the home country is really only the beginning…

Consider the case put forward by Nobel Economics Laureate Robert Mundell in a Forbes interview from earlier this month. One of President Regan’s economic advisors, and one of the key people behind “Reaganomics,” Mundell is now warning that the deterioration of the American manufacturing sector that has resulted from excessive outsourcing has left the U.S. without the technical or intellectual base needed to remain competitive – or even to maintain economic or military assets without foreign assistance. The article also cites Dominic Gates of the Seattle Times, and his description of the issues with the new Boeing 787 Dreamliner: apparently, Boeing outsourced the plane’s electronics to a French company, which then sub-contracted most of the work to a series of Japanese companies. This undoubtedly saved Boeing a great deal of money over having the work done in Washington State, but when the Dreamliner’s batteries began to over-heat and catch fire Boeing’s own engineers did not have the technical expertise to address the problem…

Now, as any MSU undergraduate (or, at least, any of the ones who have been subjected to Management 409 with me) can tell you, this issue happens all of the time and is considered to be one of the most common drawbacks of outsourcing production. In fact, even in cases where production activities are outsourced to other domestic companies and never leave the home country there remains an excellent chance that the original designer will lose the ability to create or service their own products. At best this is annoying; at worst it could negatively impact both the economy and the security of the home country. The real question is what to do about it…

Most Protectionist/Isolationist pundits would just tell you not to outsource anything – keep all of your production domestic, and if this results in higher final prices reaching the consumer, too bad! All true patriots will understand the need to keep your industry at home, and willingly make up the difference in cost! And, in fairness, “American Made” is a powerful selling point in the U.S., and might work for companies from other nations in their home countries as well. But if nationalism always won over price it would probably still be possible to purchase a television set manufactured entirely in U.S. territory (which it hasn’t been for over 20 years at this juncture). And with any commodity product there’s really no point in even asking…

Some companies will attempt to counter this problem by retaining part of the manufacturing process under their direct control, either by moving the final assembly of the product to a domestic facility, or by purchasing the offshore facilities where production takes place instead of outsourcing production to another company. But purchasing foreign companies – or even just their major production assets – can be risky, especially in uncooperative countries, whereas Boeing does perform final assembly of the Dreamliner at their facility in Seattle, and that does not appear to have helped them. Up until now the risk of losing control (or even understanding) of your own technology was just something companies had to accept in order to gain lower prices and higher margins, but if this trend continues that risk is going to become less and less attractive…

Lack of Imagination

I was reading a case on the Consumerist website last week about someone who had booked a hotel through Hotels.com in Croatia, only to arrive at the address specified and find no trace of a hotel. By itself this wasn’t a complete business failure; the company does not own any of the hotels it offers to book for you, and their site has plenty of disclaimers about what happens if they book you into a hotel that is unavailable on the day you’re supposed to check in. Where the situation became truly farcical – and what led to the inevitable mockery by thousands of scruffy bloggers as well as everyone who visits the Consumerist site – is that when the failure was reported to them, Hotels.com had no procedure in place for verifying the existence of the hotel, getting the customer to a different property for the night, refunding the booking fees, or anything else that might have satisfied the customer and defused the situation…

As a result, the customer wound up being put on hold for hours at a time while the company insisted that the hotel in question really existed, even though no one there ever answers the phone. This would be asinine enough if the customer had just called in and questioned the transaction from home, but Hotels.com was actually doing this while their patron was standing in front of the abandoned building, reporting the lack of a hotel being present. And while the customer did eventually get their money back for the booking that didn’t exist, they had to spend hours fighting with the company, and have still not been compensated for the International cell phone call they made on the night of the dud booking when they were trying to find the non-existent hotel…

Now, I’m not suggesting that this one lost booking is going to hurt the company; it’s quite possible that even the Internet mockery that has resulted and all of the hundreds (or millions; it’s hard to tell) of net citizens who will never do business with Hotels.com will have no effect on the company’s fortunes. But if this sort of thing keeps happening it will eventually harm the company’s reputation beyond any hope of the new series of animated cartoons being able to gloss things over, and eventually the company will destroy itself (and all of the people who work for it, sell things to it or own it) simply because whoever is running operations is not only too lazy to verify that all properties listed not only exist but respond to their customers, but also too lazy to train the customer service personnel on how to handle such a crisis…

Consider, for example, the steps it would take to deal with this sort of situation. Assuming that a toll-free number that works all over the world is outside your budget, simply giving your customer service people the ability to call someone back – and the authority to do so – will cut off both the International on-hold problem and the attendant costs (and demand for reimbursement). Having a policy of checking on the existence and quality of hotels you work with would cut down on the number of non-existent properties you book; so would having contract language that specifies how long your business partners have to respond to your calls – and the penalties they will pay if they don’t. And it certainly wouldn’t take much to develop relationships with back-up and substitute properties, so that if all else fails you can divert abandoned customers to somewhere that does exist…

If none of those things are possible (or economically viable; I don’t know how much tourist traffic goes to Split, Croatia in a given year), then at the very least you could have warnings on your website and disclaimers in your contract language regarding hotels in parts of the world for which you can’t guarantee performance – or, in extreme cases, existence. This won’t stop the occasional problem from slipping through the cracks, or keep the occasional lazy or stupid customer from looking in the wrong place for their hotel property, but it will go a long way towards ending this type of mistake and its attendant Internet mockery…

Of course, the key measure to take is giving your customer service personnel the ability to handle such cases in the first place, as well as the tools to do so. But that’s a discussion for another day…

Try the Chicken

I was reading a story on the Lifestyles page of the Forbes site about how real Kobe beef is not available for sale in the United States, and therefore anyone who has paid the absurdly high prices that some eateries charge for the stuff has been bilked, and reflecting that if you are rich enough to pay $50 for a burger (or $200 for a steak) then you don’t really have a problem yet. For millions of Americans, $200 is an entire month’s grocery budget, and in much of the world that’s enough to cover the total living expenses of a family of five for a month, which makes it seem a bit ungrateful for people to be carping about whether or not their super-luxury food products are the genuine article. But I think the more important point the author is making is about how this fraud is being perpetrated in the first place – and specifically how our Federal government is making it all possible…

First off, it’s important to understand that Kobe beef isn’t just a type of cow (like Angus), a cut of meat (like a porterhouse or skirt steak) or a style of dish (like a Florentine steak); genuine Kobe beef is raised in a single district in Japan (Hyogo, of which Kobe is the capital) from a base stock of cattle so elite that there are only about 3,000 head in the world, and all of them can be identified by genetic lines going back hundreds of years. The name “Kobe beef” is a trademark in Japan, along with Kobe Meat and Kobe Cattle, and using the name for any meat that wasn’t genuine would be considered fraud, at least by the Japanese. Currently there are no slaughterhouses or meat-packing companies in Hyogo that are licensed to export meat to the United States; in fact, there have been no imports of Japanese beef to the U.S. over the past two years. So if none of this stuff would be importable into the U.S. if you tried, why are there dozens of high-end restaurants in this country offering to sell you some?

Well, according to the Forbes article, a large part of it is because the U.S. does not recognize the trademark, or the patents for how the meat is bred, selected, raised, fed, or prepared. As far as the USDA is concerned, if the meat meets their standards for food safety and purity, they really don’t care if it is Kobe beef or not. The USDA maintains nine categories for beef, which just means that it is safe for human consumption; the top three grades in descending order are Prime, Choice and Select, and they’re the ones you’re probably used to seeing in the supermarket. Since there is no USDA standard for Kobe, sellers in the U.S. are free to call any old cut of beef “Kobe beef,” although a lot of people will try to leave themselves some leeway by calling it “Kobe-style” beef, or claiming that it’s an equivalent product, “recreated” in America using the same methods and techniques, or whatever. None of which changes the fact that most of this product is just ordinary beef with an elaborate back-story being used to jack up the price…

Now, as I said at the top of this post, I’m not terribly sympathetic to people who spend more on a meal with four of their friends than my household spends on food in a month. But I do think this story presents an interesting take on how much harm International patent and trademark violations can actually do. It may not matter to you if some Hollywood studio doesn’t get all of the money it wants because somebody bootlegged a movie and sold it on the street in Hong Kong, and it may not matter to you if some cattle farmers in Hyogo Prefecture get their trademark ripped off or not – but how would you feel if you spent extra to get some Kobe beef for a special occasion, and got some random cut of meat from Montana? The truth is, this sort of business practice hurts people on both sides of the Pacific – and the U.S. government that complains endlessly about foreign countries pirating works made in America apparently has no problem with people here defrauding a handful of Japanese cattlemen in exactly the same way…

It's enough to make you want to order the Free-Range Chicken instead - but that's a story for another day...

North of the Border

I was badly disappointed a few years back when GM discontinued the Saturn line of cars and shut down the plant in Spring Hill, Tennessee. I’d been following the progress of the Saturn division from the beginning, and it’s probably fair to say that I wanted it to succeed as much as anyone who wasn’t a major stockholder did. Saturn was General Motors’ attempt to apply all of the advanced management techniques that the competition had been using to gain various advantages over them for years to their own production lines. If successful, Saturn would have proven that an American company could not only adapt to new conditions and new strategies, but could actually compete with newer and more technologically advanced organizations on their own terms. Unfortunately, it didn’t…

Now, I’m not going to re-open the arguments for and against closing down product lines that are not turning a profit; we’ve covered that concept in this space often enough, and the simple fact is that while closing down the Saturn line was unfortunate for the people who worked there, and for the communities where they lived and all of the businesses that either supplied the line or were supported by the employees, it isn’t reasonable to expect GM to continue operating the plant at a loss. Even with the best will in the world, the company would only be able to keep going for a limited time before they went under, taking out all of their remaining factories and bankrupting their employees as well as their investors. Even if General Motors was some kind of idealistic crusade (and it’s not; it’s a business) there would be no point in harming millions of people in order to help a few thousand – especially if those few thousand would still experience the same results in the end…

So the company shut down the Saturn division, moved as many of its people as it could to other facilities, and began cutting costs wherever it could, including some highly unpopular ideas, such as using the NAFTA provisions to shift production of some parts to Mexico. It has been a bad time for a lot of folks in that industry, and not a good one for a lot of companies and their suppliers. So I was very pleased to stumble across a story in the New York Times business section about GM planning to re-open the Spring Hill facility. Part of it is just that the company is going to re-tool the factory to produce two new midsize designs, which will keep them from having to disrupt any of their current assembly lines and save on delay costs and similar issues, and part of it is that the new union contract allows for multiple tiers of employees, making it more economical to employ Americans in Tennessee than Mexicans in Mexico…

How all of this will work out – or whether it will work out at all – remains to be seen. The past year has seen some remarkable improvement from GM, and if they use the Spring Hill facility to produce vehicles with some of the new technologies they’ve been talking about (especially clean diesel, biomass diesel, plug-in electric hybrids, or hydrogen fuel cell technology) this could be the beginning of a new revolution in the industry; the 21^st Century equivalent of the rise of the original General Motors corporation. But if they can’t learn from the events of the past two decades, I’m very much afraid that they will be destined to repeat that same history at least one more time…

You Can’t Say That in Public!

This week another story popped up in our ongoing collection of examples that prove life in the Internet age really is different – and that anyone who believes that it isn’t is living in a fool’s paradise. Apparently, according to the story in the Minneapolis – St. Paul Star Tribune , a local contractor was having a dispute with a customer over the quality of some concrete work, and the whole thing had degenerated into a series of court cases, when the customer’s daughter decided to post a bunch of nasty comments about the contractor and his company on Craig’s List. This might have stayed in the grey area, except for the fact that the daughter used actual legal terms (such as “fraud”) in her Craig’s List post, and the terms were not supported by the company’s history or the court records. As a result, the contractor counter-sued for defamation and won…

If you’re a consumer advocate, you probably see this as a case of the company doing crappy work (the original customer won the original customer complaint) and then profiting when they counter-sued. If you’re a small-business advocate (the firm in question has only a few employees) you probably see this as a case of someone attempting to screw money out of the company by threatening to write nasty Craig’s List posts unless they get what they want – and then doing so. If the cases are being reported correctly in the linked article, it would appear that the company did offer to fix the problems, but the customer demanded that they refund their entire fee AND pay the “customer” an additional $800 into the bargain (for a total of $6,200), and the court would only allow the customer $440 for the repairs – which is when the customer’s daughter decided on a smear campaign online…

Now, you and I weren’t there when any of this happened, and we don’t have access to either the original contract or the court documents – but none of these points are being disputed by either party. If this is how it went down, then it does appear to be a customer making unreasonable demands on a company that is just trying to complete their obligations and make a living, and that both the customer and her daughter eventually got their just desserts. A much more interesting point, at least from where I’m sitting, is the complaint about the Craig’s List posting – and the subsequent judgment supporting that complaint…

In the days before there was an Internet, the client’s angry offspring would most likely have told friends, acquaintances, and anyone else in the community who would listen about how badly her mother was treated by this paving contractor, and how no one should ever do business with this company. This would be annoying and unfortunate for the company, and if enough people did it they’d probably have trouble getting new customers, but there wouldn’t have been anything actionable involved, and there would probably have been no occasion to counter-sue. Publicly accusing someone of a crime is another matter, however; even in the old days, you’d probably have been a bit more careful about calling someone a fraud in public, and you’d certainly hesitate before doing so in front of tens of millions of people…

Unfortunately, that’s exactly what you’re doing when you post such accusations on Craig’s List – or anywhere else online. As I’ve noted in some of our previous musings on the information age, in cyberspace everyone can hear your stupid, unfair and ultimately incorrect accusations of wrong-doing – which means that so can the person you’re maligning. And not only is that not likely to change any time soon, as more and more of the world becomes interconnected through the Web, the number of people listening to you rant is only going to get larger. So be careful about what you say in public, because I can almost guarantee you that if the people you’re excoriating aren’t watching you yet, they will be…

Is This a Great Country, or What?

One of the funniest stories I’ve read in the past decade hit this week, when the New York Daily News ran a feature about the merchandise commemorating the death of Osama bin Laden the day before. Most of the commentary about this – including the comments section at the bottom of this news story – has been highly negative, dwelling on how such commercial transactions (including the attempts to market them) are trivializing a momentous even in World History, or how these gleeful offerings are making light of the taking of a human life, or even that these ventures prove whatever the observer’s personal beliefs about crass commercialism happen to be. I agree with every one of these points in their entirety, and I also ignore them in favor of the subtle point these merchandising efforts make about people in general and Americans in particular…

Contrary to popular belief, the average person has no more desire to be personally involved in violent upheaval, trouble and danger (commonly known as “adventure”) than they do to being eaten by slugs; the fact is that most people would not seek a career with the Navy’s legendary SEAL teams or their Army or CIA counterparts even if they were physically able to do so. Most of us just want to survive, to be sure of living beyond the next day or so, to belong to part of a community or group that accepts us for ourselves, and (if possible) to be recognized for the things we do well. If these goals can be achieved by slapping custom lettering or graphics onto hats, t-shirts or commemorative plates (and at least two of them can be), then most people will see no problem with doing so at the highest profit margin possible. The people who make stadium blankets and custom crockery may grumble a bit, since it will take them a week or two to get their products ready to ship, whereas the people who make t-shirts and hats can be ready to go in a matter of hours, but even they will probably concede that these are merely the breaks of the game…

Then we have the curious prospect of people, most of whom would never wish death upon another human being (and many of whom could not find Pakistan, or possibly even New York City, on a map) cheerfully purchasing the hats, t-shirts, blankets, plates, artwork and goodness knows what else, and proudly wearing/displaying all of it. Most of them probably have some idea who Osama bin Laden was, and the majority could probably tell you that the 9/11 Outrages were his fault, but what the purpose of those attacks might have been, how either the man or his organization fit into the scheme of international politics, or what the long-term ramifications of his sanctioned killing might be are probably beyond the interests of most folks. All most of our countrymen really care about is that our armed forces tracked down and killed a terrorist (whatever that might mean) responsible for killing at least 3,000 Americans (and some number of less important people from less awesome places) and that means that we win, America rocks, and their lives (complete with the buying and selling of tasteless consumer products) will continue uninterrupted for the foreseeable future…

We’re simple people, Americans. All we really want is to be left alone, to go about our business making things and selling them to each other at a very reasonable price, and try and carve out a piece of the pie that’s just a little bigger than our parents had. For over two centuries now, everyone who has tried to interfere with that surprisingly mundane American Dream has ended up in the mud somewhere with a bullet in their heads, and the next morning the Americans he or they were trying to destroy have gotten up early and gone on with the business of trying to sell each other cheaply-made schlock…

It’s the greatest country in the world, and we laugh at anyone who tries to say otherwise – and then attempt to sell them a crappy t-shirt…

Legalize Cats!

Over the years we’ve heard a few news stories and the occasional television segment that make it clear that people in Japan are much fonder of cats than you might expect if all you know about that country is business-related. Last year we had the tale of the cat who became stationmaster of an otherwise automated train station, and this year we have the story about neko cafes (cat cafes) which seem to be catching on in Tokyo – unless the CNN Travel site is being hoodwinked by fake news generated to see just how gullible we Westerners really are again…

If the story is true, however, it would appear that people in Japan are shelling out the equivalent of about $12 USD per hour for an otherwise typical coffee house experience – which is to say, a clean, well-lighted place where one can sit, read, write, blog, converse with friends, consume food and drink, and have other forms of social interaction. The difference in this case being that the neko café also supplies cats – ordinary house cats, according to the pictures – which will lounge around with you while you do this. The concept certainly isn’t that strange – we’ve all encountered bookstores with a store cat, and I’ve seen several other businesses with a resident feline or two – but the idea of just socializing with cats present (and paying for the opportunity) may seem a little odd to our Western sensibilities. On the other hand, if you live in a densely-populated city where it is difficult to get permission to keep a cat of your own in an apartment, perhaps this idea makes sense – especially if the domestic cat has a special place in your culture…

I’m not sure this business model would work in this country; Americans aren’t good about paying for space to park themselves in the first place, and having cats in a food service establishment could cause problems with various health agencies. If you could get around the regulatory issues, and the obvious health and safety issues, I can’t help thinking it would be fun, though. You’d need enough staff people to make sure that none of your customers were harassing the cats – or being harassed by the cats – in the course of their visit, and you’d have to find some way of dealing with the feeding, dander, and sanitary issues associated with cats, but a lot of people would probably like the idea of having a friendly cat join them for a drink. Alternately, I suppose, you could try the same concept with other types of animal, if you (or your customers) aren’t cat fanciers…

To get a good mixture of animals, and keep them supplied with medical care and proper grooming, one possible option might be a joint venture with a pet store. Or perhaps you could consider working with a local shelter or rescue organization; they’d supply the animals and someone to look after them during operating hours, and in return they’d have a regular supply of people who might want a pet, or want to contribute to a rescue organization or shelter. If you or they had a problem doing this sort of thing every day you could have “cat days” or “dog days” or dedicated adopt-an-animal days; if you can work out the aforementioned health agency problems you could even allow people to bring their own animals in with them…

Now, the truth is, I don’t know if any of this would work, or if it would all just be a big, hairy (literally!) mess. What I do know is that with the proliferation of coffee houses, if you want to open a new one in your community, you’re going to need something that will cut through the clutter and distinguish your operation from all of the others – and resident cats might do that. The same goes for any other overcrowded business segment. I’m not saying that cats would get you noticed, let alone bring in an extra $12 per hour per customer; I’m just saying that if you don’t find some way of making your business stand out from the competition, you’re going to have much larger problems than someone who doesn’t especially like cats finding a hairball in their shoe…

Buy American?

Over the past few years I’ve had a number of arguments with people who seem to believe that, for whatever reason, they shouldn’t pay any attention to the 94% of Planet Earth that isn’t the United States. Some of it can probably be explained away as jingoistic nationalism, or willful ignorance (assuming there’s any difference between those categories), but some of it appears to be business people who genuinely believe that if your company has a purely domestic focus there is no reason you should ever consider what the various International markets are doing. It’s an amazing example of 18th or 19th Century thinking, and there’s no telling how many more companies it will do in over the next few years. And it doesn’t help that the people in Washington apparently don’t grasp this either…

As noted in this article from the Wall Street Journal Online last week, one of the provisions in our $787 billion economic stimulus package was a “Buy American” provision, which requires anybody receiving those funds to spend them on American-made goods (and services, one assumes) wherever possible. On paper, it looks like an entirely logical idea; since this is government funding, provided by America’s long-suffering taxpayers, as much of it as possible should be put back to work here, where it can provide jobs, stimulate the local economy, and hopefully help those same taxpayers to earn even more taxable income and keep the whole loop going. Unfortunately, this fails to take into account the fact that other countries (or at least the people who live in them) have feelings, too – and some of them are just as susceptible to jingoistic nationalism as we are…

The example given in the story is a firm doing business in both the United States and Canada, which is ideally suited for stimulus-package products, but is losing about 25% of its business because many of the Canadian cities and towns the company does business with are refusing to spend anything on American goods or services until this “discriminatory” practice is rescinded. While there’s no way to be sure how widespread this problem may become, the WSJ article notes that exports to Canada are down over $5 billion for 2009 – and the year isn’t over yet. Nor is there any way to be sure what other countries may also be curbing their spending on American-made products. All we know for use is that our country’s foreign trade imbalance has been a huge problem for several years now, and this is not going to help…

Of course, foreign trade relations has never been an American strong suit. From the early days of this country we seem to have been better at making excuses than at making healthy trade relationships. But in the 21st Century, it would appear that telling other countries that they should let us do whatever we want in foreign trade because we’re defending the free world with our nuclear arsenal, or because without us you’d all be speaking German (or Japanese), or because our manifest destiny demands that we be complete jerks to everyone that stands in our way, or that we’re still breaking free from the tyranny of King George, or any other lame excuse we can think of is no longer going to work. Whether the issue is pure food, product safety, or just being more diplomatic in how we phrase government money giveaway legislation, it might just be time for us to start caring about the International Markets…

Because, as I’ve noted before in this space, it doesn’t matter whether or not you believe in the Global Economy; the Global Economy believes in you. And if we don’t start being better neighbors, no amount of free money giveaways are going to stimulate our economy to do anything…

Mad Cows in Korea?

We haven't been hearing much about "Mad Cow Disease" in the U.S. lately, although the debate about unsafe meat packing plants and lack of USDA supervision rages on. Most Americans are probably worried about more immediate (or at least, newer) problems, such as $4+ per gallon gasoline ($5.25 per gallon of diesel, at one station I passed this morning!) or whether a person of African ancestry will ever be President of the United States if he doesn't wear the correct lapel pin, or even who's going to win on this season of "So You Think You Can Dance." Unless you are actually employed by a company in the meat packing, cattle ranching or food wholesaling industries, you're probably not thinking about "Mad Cow" anymore -- although you may be cooking your meat a little more thoroughly than you used to. Unfortunately, the same can not be said for all consumers of U.S. beef products...

South Korea had actually enacted a complete ban on U.S. meat products after the 2003 "outbreak" was detected -- although there is some justification in asking if three detected cases really constitutes an outbreak. The ban was lifted briefly last year, but quickly reimposed after bones and bone fragments (prohibited under the trade agreement) were found in some shipments. Then, earlier this year, South Korea elected a new, highly pro-U.S.A. President, and suddenly everything is fine again and the shipments of American beef products can resume. Only, it seems that the Korean public doesn't see it that way...

It turns out that the average South Korean is much more afraid of a horrible, fatal (if relatively rare) brain disease than they are of having a negative impact on the U.S. beef industry. South Korea was, prior to 2003, the third largest export market for American Beef, and it's hard to imagine that losing all of those sales has been at all good for the meat packing industry (already being hit hard by increases in fuel costs, a weak economy and lower consumer spending in the U.S., the resurgence of Spam as a main dish alternative and so on). In fact, if the public outcry is any indicator, consumers in South Korea are much less willing to take chances with the safety of their food supply than American or British shoppers, and the fact that the renewal of American beef imports is being seen as a pro-American politician caving in to pressure from Washington really ISN'T helping...

It's another really good example of how the global economy affects you, whether you like it or not. In point of fact, even if you are not employed by any company associated with beef production in the U.S., this issue will still have some impact on your existence, at least in the sense that another industry experiencing poor sales will contribute to the ongoing problems with the U.S. economy. The international tension doesn't help, either; the last thing we need is more countries where the people resent America and try to avoid buying the few exports we still have. The combination could easily lead to even more unemployment, an even worse trade imbalance with South Korea, and additional hits to an economy that is already lurching toward disaster...

Now I'm not suggesting that anyone reading these posts would ever do anything as stupid as engaging in unsafe business practices that allow a frightening disease to cross over from cattle into human beings, or anything as corrupt and evil as maintaining such a practice (and even bribing government inspectors trying to prevent it) in the face of incalcuble risks to both human life and safety and to our country's international reputation. I'm not even suggesting that anyone reading these words would run for public office, become a Lame Duck, and then maintain diplomatic policies that would place foreign consumers at risk while trashing our international relations, all to make a quick buck and curry favor with powerful political allies...

I am saying that what you don't know CAN hurt you. And if you aren't already reading the International Business news, you should probably consider starting...