Part I of this conversation is here. Part 2 is here.

MBA Student: Say for example, there is an opportunity for a multi-national corporation (MNC) to create a high-protein breakfast for a poor farmer in a developed country and to make cereals to be sold in a developed country. The business plans submitted both showed profits. However, the developed country business plan provided higher profits than the developing country business plan. Where would the money be invested? This is the essential point.

Continue reading "Email Conversation with an MBA Student, Part 3" »

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There are two stories that get told a thousand different ways in the business press but which never grow old. One is the saga of the underdog, the start-up run by the plucky entrepreneur who succeeds against the odds, who pulls off the impossible, who beats the big boys at their own game or at least awakens them from their lethargic complacency. The other is the turnaround, the ressurection from the corporate scrap heap and the return of former glory, the once-written- off who rewrites new rules of engagement. For anyone who regularly reads the business press, this observation likely comes as nothing new.

What may have escaped notice, however, is the propensity of so many business journalists to borrow so frequently from the same pop culture meme - Terri McMillan's 1997 NY Times bestseller, How Stella Got Her Groove Back, and the 1998 movie by the same name. Here's how Kirkus Reviews describes the novel:

Continue reading "Just Call it a Comeback" »

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If you seek a five forces analysis of Wal-Mart, please try this page.

Unless your profession involves Presidential security then chances are you have neither heard of Richard C. Weaver or known how and why he earned the nickname, "Handshake Man." Wikipedia explains:

Richard C. Weaver is a mysterious Californian man known by the nickname Handshake Man. Weaver has earned notoriety for the way he is frequently able to bypass the US Secret Service and shake the hand of the American President. Weaver has allegedly been able to personally shake hands with every US President since Jimmy Carter, in some cases even multiple times on different occasions. Not much is known about Weaver other than the fact that he is apparently a strong, possibly fundamentalist Christian of some sort. He is a self-proclaimed minister of a non-denominational church in Sacramento. His handshakes are often used as a way of passing "notes from God" to the presidents. According to his site, Richard C. Weaver is a born-again christian who...believes that God has directly spoke to him and calls him a "modern day prophet." On February 6, 2003 Weaver attended the National Prayer Breakfast meeting and was able to hand Bush an eight page typed letter about Iraq "from God".

Continue reading "The Handshake Men" »

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Ethanol, a flammable, colorless chemical compound found in alcoholic beverages and used increasingly as a fuel additive, has garnered much positive press attention lately. The example of Brazil, a country that has weaned itself off of Middle Eastern oil through its own three-decade long sugar-cane based ethanol program, is frequently held up as an example that America should follow. Many, however, remain skeptical that the Brazilian model can or should be applied in the US.

This hasn't stopped major automakers from initiating or increasing research on and commercialization of new ethanol-fuel technology. According to Greenswitch, both GM and VW have begun in earnest:

GM goes ethanol, VW kicks off ethanol research. General Motors is currently trying to promote their FlexFuel vehicles which can either run on gasoline or corn based ethanol E85. They have created a website ("Live green, go yellow") to promote E85. It´s a nifty, flashy site which features the "cornulator" where you can calculate how much gasoline you would save and the "stalk car race" which looks little bit like a pac man for car mechanics. Elsewhere, not nearly as playful but nevertheless interesting: Volkswagen has signed a letter of intent with Shell and the Canadian Iogen corp. to research and start German production sites for cellulose ethanol.

Continue reading "Beetle Juice" »

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Welcome "Gates of Vienna" readers. This blog has several posts that might interest you. Below you'll find a list of 15 recent "Middle East" and "Political Economy" related posts.

Mecca Cola: I don't buy it
Liveblogging Wolf Blitzer Live in Dubai
The Unions, The Senators, and the Ports, Part II
The Unions, The Senators, and the Ports
Port Authority II: Torrents of Arabia
Port Authority
My Students Speak about the Danish Boycott
Boycott of the Danes
Will the Boycott of Danish Goods Work?
An Iranian Mega Tourism Project
Marketing Corn Flakes to Muslim Girls
Sand and Deliver
The Road to Damascus is the Road to Serfdom
Clerical Error
The Economic Component of Victory In Iraq

As my "about" page tells, I have been teaching at the American University of Sharjah since the fall of 2005. All of my posts are not about the Middle East, however. I write on a variety of other business, strategy, management, and economics-related topics. Those of you familiar with FA Hayek's seminal work, 'The Road to Serfdom', might find interetsing my application of that work to Hurricane Hugo Chavez' "21st Century Socialism." Here's the link: Road to Serfdom Series. Though not update recently, my most frequently read category of posts relate to the continuing union-backed "War on Wal-Mart". Enjoy!

Finally, thanks to Dymphna for the link and the kind words!

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• Manifesto of the Fast Food Worker
• Disneyland on Steroids
• "Pay Per Click" fraud botnet discovered
• Le Charm Offensive: France's Attempts to Attract More Foreign Investment

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The Belmont Club has a brief, interesting and interestingly titled post today: "Select * from tblVeterans." It concerns this AP story about the loss or theft of personal records of 26.5 million U.S. Veterans:

Personal data, including the Social Security numbers of 26.5 million U.S. veterans, were stolen from an employee of the Department of Veterans Affairs this month after he took computer disks home without authorization, the agency said Monday. The secretary for veterans affairs, Jim Nicholson, said there was no evidence so far that the burglars who robbed the employee's home had used the material - or even knew they had it. The employee, a data analyst whom Nicholson would not identify, has been placed on leave "pending the outcome of an investigation," the agency said on its Web site. Nicholson declined to comment further on the incident. Congressional sources who were briefed on the theft said the employee had taken the data disks home to work on a project.

Continue reading "Comment on Belmont's "Select from tblveterans"" »

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In a lengthy essay recently published in Commentary, long-time Middle East observer Amir Taheri provides six tangible indicators of progress in Iraq, three social and three economic:

Since my first encounter with Iraq almost 40 years ago, I have relied on several broad measures of social and economic health to assess the country’s condition. Through good times and bad, these signs have proved remarkably accurate as accurate, that is, as is possible in human affairs. For some time now, all have been pointing in an unequivocally positive direction.

The three social indicators are (1) the number of Iraqi's fleeing into exile (2) the "flow of religious pligrims to the Shiite shrines in Karbala and Najaf" and (3) the readiness of Iraqis to "talk to the outside world." According to Taheri, all of these measures are trending impressively in a positive direction. Here are the three economic measures:

Continue reading "Economic Indicators of Progress in Iraq" »

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A recent Wall Street Journal op-ed begins with these two questions:

What can the Bush administration do to persuade Iran's leaders that their bid to develop nuclear weapons will exact an unacceptable price on their regime? What can it do, that is, short of launching air strikes?

The author, Brett Stephens, then goes on to detail four actions that the adminstration can take to "independently to alter Iran's calculations." Interestingly, three of the four were economic in nature. That is to say, they target Iran's economic rather than military or political assets and infrastructure. Two of the economic actions are clearly "sticks":

Target the regime's financial interests. Since Mr. Ahmadinejad came to power, (the) ayatollah-oligarchs have been running for financial cover: Capital outflows from Iran surpassed the $200 billion mark in the past year alone. Much of that money has made its way to banks in the United Arab Emirates, many of which have correspondent banks in the U.S. "We are preventing financial transactions going to the Palestinian Authority because banks are scared they'll be hit by U.S. terrorism-financing laws," says a source who closely tracks the Iranian economy. "Why can't we do the same thing with Iran?"

Continue reading "Carrots, Sticks, and Carrot Sticks" »

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Dymphna, over at Gates of Vienna, has an interesting post today about why blogs often provide reporting superior on the same story to that of their mainstream media counterparts. She makes her point by comparing two articles on Venezuela's proposed sale of F-16 fighters to Cuba and Iran- one appearing in the Chicago Tribune and the other on the "In from the cold" blog. The differences are stark, leading Dymphna to remark: "You yawn over the instantly-forgotten MSM account. The blogosphere version sticks in your memory...(and) You also learn a bit about the complexity involved."

Continue reading "Comment on Gates of Vienna's "MSM Scrapings vs. Real Reporting"" »

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Wikipedia defines an "Urban Legend" as follows:

Urban legends are a kind of folklore consisting of stories often thought to be factual by those circulating them. The term is often used with a meaning similar to the expression "apocryphal story." Urban legends are not necessarily untrue, but they are often false, distorted, exaggerated, or sensationalized. Despite the name, urban legends do not necessarily take place in an urban setting. The name is designed to differentiate them from traditional folklore created in preindustrial times.

Over the years I have developed a fairly keen eye for recognizing urban legends. Today I received an email from a student that contained what was clearly just such a false story. What I found interesting about it (and thus worthy of writing about) was the subject matter and setting: the story concerned managerial decision making and problem-solving at NASA, an organization with an unparalled record of accomplishments and, to be fair, a few very high profile disasters. Here's how it read:

When NASA began the launch of astronauts into space, they found out that the pens wouldn't work at zero gravity (ink won't flow down to the writing surface). To solve this problem, it took them one decade and $12 million. They developed a pen that worked at zero gravity, upside down, underwater, in practically any surface including crystal and in a temperature range from below freezing to over 300 degrees C. And what did the Russians do...?? They used a pencil.

Several things immediately give this story away. The first is the idea that NASA could put a man on the moon in 8 years but needed 10 to design a pen for him to write with. To fail to recognize this is evidence of ignorance of an important principle- that in engineering problem solving the greater invariably subsumes the lesser. Problems can be classified as more or less complex. Putting an astronaut into space and bringing him back is several orders of magnitude more complex than designing a writing instrument, even one as overbuilt as the story described. It is highly improbable that a group of engineers and scientists that could do the former would struggle with the latter.

Continue reading "Urban Legends and Management Myths" »

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Napster is the last of the Harvard Business School cases that I will no longer be using. This doesn't mean I won't talk about the firm any longer. To this day it continues to provide rich material for analysis using the four strategic frameworks that I teach: Non-market analysis (Baron), Industry analysis (Porter), Business Model analysis (Hamel), and the Resource-based view of the firm (Barney).

Lessons from Napster

This case highlights the importance of key institutions in the non-market sector- the courts- and the influential role that they can play in resolving issues of technological uncertainty. The RIAA pursued Napster vigorously in the courts and also forced other MP3 distribution outlets like MP3.com to forge agreements on terms highly favorable to the music industry. But what they may have missed was that that Napster, however defined, was only one of many different technologies with which they had to contend- some in the form of substitutes, some harnessed by new entrants, some which acted as complementary goods, some which were disaggregating the existing value chain with others comprising the building blocks for a parallel one. Napster was clearly a legitimate target for a lawsuit but was RIO, the maker of MP3 players?

Continue reading "Lessons of Napster" »

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• Wal-Mart seeks rights to smiley
  (tags: Wal-mart Walmart intellectual+property smiley logo)
• Wal-Mart to sell 'DIY' PCs
  (tags: Wal-Mart Walmart personal+computer Dell)
• Movie review: Wal-Mart: The High Cost Of Low Price
  (tags: UK Wal-mart Walmart Robert+Greenwald)
• Wal-Mart Tries to Enlist Image Help
  (tags: Wal-mart Walmart NYT New+York+Times Michael+Barbaro)
• "The High Cost of Low Price" is a must see documentary
  (tags: Ireland Wal-mart Walmart Robert+Greenwald Documentary)
• Wal-Mart 'turns to organic foods'
  (tags: BBC Wal-Mart WalMart organic+food)
• More On Wal-Marts Wikipedia War
  (tags: Wal-Mart WalMart Wikipedia)
• Whitedust: Wal-marts Wikipedia War
  (tags: Wal-Mart WalMart Wikipedia)
• Wal-Mart Leads Call for Online Marketplace for TV Ads
  (tags: Wal-mart Walmart advertising television)
• Wal-Mart crime magnet, foes say
  (tags: Wal-mart Walmart Walmart+Watch crime)
• Wal-Mart Managers Can't Sue as a Class
  (tags: Wal-mart walmart class+action)
• Wal-Mart Is Right
  (tags: Wal-mart walmart op+ed)
• Walk-in health clinics catch eye of Wal-Mart, Case
  (tags: Wal-mart walmart healthcare retail)
• The 800-Pound Ad Review: Wal-Mart
  (tags: Wal-mart walmart advertising)
• PC Parts and Wal-Mart? No Match
  (tags: Wal-mart walmart personal+computers PC)
• Is Wal-Mart good for america?
  (tags: Wal-mart walmart Documentary journalism pbs)
• Film Review: Wal-Mart: The High Cost of Low Price
  (tags: UK Guardian Wal-mart walmart documentary)
• Let Wal-Mart have its own bank
  (tags: Wal)
• Wal-Mart rolls back cost of living
  (tags: Wal-mart Walmart cost+of+living)
• The man who set out his stall against Wal-Mart
  (tags: Wal-mart walmart UK)
• Big-Box Organic: Natural foods industry braces for Wal-Mart's presence
  (tags: Wal-mart Walmart organic)

Continue reading "Wal-Mart Roundup, the Barcode Edition" »

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The Hospital Equipment Corporation case is one I have used for about four years. Here is it's description its the Havard Business School case catalog:

Hospital Equipment Corp. is a very successful maker of hospital beds. Due to outstanding performance in new product development, it grew to dominate its primary market and is searching for other opportunities to grow through new product development. It discovers that its internal system for identifying new, high-growth markets actually screens out some exciting growth possibilities.

The case was written by Clay Christensen, the man who is now Dean of the Harvard Business School. As such, the case is especially amenable to being analyzed by his now well-known theory of "disruptive technologies." As with several other cases used in past years, I plan to discontinue use of this fine case in my strategy courses. As such, I am now making public my "lessons of" notes that I formerly distributed to my students at the end of the session in which this case was discussed.

Lessons of Hospital Equipment Corporation

Firms frequently have more than one strategy process operating at the same time- one emergent (bottom-up) and one deliberate (top-down). This is not an inherent problem. But when patterns of resource allocation don’t mirror the stated strategy, people can get very confused about what the strategy actually is. The emergent strategy process operates continuously, comprehensively, powerfully. The only way a deliberate strategy can be effectively implemented is when the way and time money are spent on projects to develop new products, services, and capabilities is managed to exactly mirror the strategy which management intends to execute.

Continue reading "Lessons of Hospital Equipment Corporation" »

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The confectionaire Jacob Suchard was bought out by Phillip Morris in 1990 (and later by Kraft in 1993) after an ill-fated attempt to reorganize its country-centric business unit structure in preparation for the EU 1992 Common market. I have immensely enjoyed teaching this case but given that it was written in 1989, I will no longer be using it. Here is the last revision of the notes I have given my students on this case over the last few years.

Lessons of Suchard

Centralization vs. decentralization tradeoff:A fundamental problem in organizational design is how much to centralize to attain scale and scope economies or synergies by integrating the functions of different business units or decentralize to allow business units to be relatively independent in decision making and operations in order to respond better to different customer or market needs. This centralization- decentralization tradeoff is especially problematic in multinational corporations. Common structural arrangements that have arisen to alleviate the inevitable tensions include the global (very centralized across national markets), multi-domestic (relatively independent country units), and transnational (a network structure somewhere in between global and multi-domestic).

Structure should support strategy, and should change as strategy changes. Again, a company should create a structure (the formal organization chart as well as incentive, control, and reporting systems) that supports its strategy. But companies need to restructure as they change their strategy. Suchard, for example, had a structure that supported tailoring products to individual countries, at the expense of scale or scope economies. In 1989, it needed to reorganize when its strategy changed in response to political and economic forces in Europe. After 1992, Suchard believed it would be better to operate less like a multi-domestic company and more like an integrated global company in order to achieve better scale economies. This change was not without consequences for the organization and its culture.

Continue reading "Lessons of Jacob Suchard" »

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Newell-Rubbermaid is the company featured in the latest installment of "lessons" from Harvard Business Cases that I no longer intend to use.

Good Parenting. Newell provides a powerful example of the importance of making the whole worth more than the sum of the parts. An “acid test” for this is whether being part of a larger corporate entity adds value to a firm’s individual businesses, and whether that value creation continues over time. By every indication we have from the case, Newell has excelled at this.

Strategy Inside and Out. Effective corporate strategies must be consistent both internally and externally. Internally, corporate strategies are systems of interconnected elements that continually reinforce each other. Newell’s strategy started with a clear vision of how the firm would compete. To implement that vision, the company built the requisite resources, tailored its organization to the strategy, and entered a set of concordant businesses that had remarkably similar key success factors. As Daniel Ferguson said in an interview in the 1990’s “we are only in one business.” The products were different, to be sure, but the logic and the resources that were critical to competitive advantage were the same. Externally, the strategy positioned the firm to take advantage of the development of discount retailing. The company was prescient in identifying the trend (or so they say), and in developing a strategy that was consistent with those opportunities.