tag:blogger.com,1999:blog-11456069757273280372024-02-20T07:09:48.532-08:00The week before this weekMost new stories don't last beyond the week of first publication. So before they are gone forever here is a quick look back at some of last week or two's items on business, the economy and politics that caught our attention.Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.comBlogger57125tag:blogger.com,1999:blog-1145606975727328037.post-3369326818292364812014-09-10T03:58:00.000-07:002014-09-10T03:58:44.332-07:00Short Termism vs. Long Termism - in The Week before This Week<span style="font-family: Verdana, sans-serif;"><br /></span>
<h3>
<span style="font-family: Verdana, sans-serif;"><span style="color: orange; font-size: small;">Power to the People</span></span></h3>
<span style="font-family: Verdana, sans-serif;">It’s been a few weeks since I have been inspired to put digit to keyboard. Whilst there has been plenty going on in the world most of it struck me as “same old same old”. <b><i>TWb4TW</i></b> tries to spot an aspect of recent news stories from which we can all learn something useful. My feeling about most of the news over the last few weeks has been more “when will we ever learn”!<br />However last week the Times published an article from Sir Charlie Mayfield, Chairman of John Lewis, in which he advocates the need for a “surge in alternative ownership” of businesses. By this he meant, employee owned businesses like John Lewis, mutuals and family owned businesses where ownership is passed down the generations. His argument was that different forms of business ownership drive different behaviours with regards to whether a business is being managed for the short or long term. Sir Charlie believes this is largely caused by how value is realised from different forms of ownership. Even though long termism is regarded as a “good thing” and short termism a “bad or at least less good thing” for most owners the primary means of value realisation is to sell the business to another business or to the public market. It is therefore not surprising that many businesses are managed for short term results.<br />Because employee owned businesses like John Lewis can never be sold Sir Charlie claims that <i>“they have no alternative but to focus on future earnings. This means that every one of our 90,000 partners at Waitrose and John Lewis has an incentive to make this Christmas better than the last one. Because we don’t have the option of selling our shares and investing in another business, we have no option but to throw all our energy, passion and talent into making this one better. Year after year”</i>.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="color: orange; font-family: Verdana, sans-serif;">Now you see it, now you don’t</span><br />
<span style="font-family: Verdana, sans-serif;">Sir Charlie then goes on to make what for me is the most significant point in his article.<i> “That relentless focus on continuous improvement is a powerful competitive advantage …”</i>. However the point then disappears because he then asserts that only alternative ownership, employee owned, long-term family owned etc., fosters a culture of continuous improvement over the long term. Whilst I do agree that ownership models have an influence I do not agree that this means that one ownership model will lead inexorably to short-termism, whilst another will guarantee long-termism.<br />For example the Co-op had an alternative ownership model, being owned by its members/customers. It did have a long term perspective but this unfortunately went backwards over its 170 year history, resulting in inevitable decline and near collapse. Conversely here are examples of public market owned companies who practice and thrive on long termism.<br /><b>Berkshire Hathaway</b> - Warren Buffet ONLY invests for the long term. 30 years ago one share in BH would have cost you $1,000. Today one share will cost you over $200,000! Many employees are millionaires and his shareholders think Buffet is a god.<br /><b>ARM Holdings</b> - a great British technology success story that took on the mighty Intel and won. ARM chip designs power the world's mobile phones, tablets and many other technology products. Winning long term is the only game to play in their world. 5 years ago their shares were less that £2, today they are nearly £10, in spite of analysts from leading financial institutions and banks consistently talking the shares down. Employees who hold the shares and have become millionaires were delighted to prove them wrong.<br /><b>Next</b> - Simon Wolfson has consistently under promised and over delivered. Without a single acquisition and just sticking to its retail knitting in stores and online Next is now more profitable than M&S and shares have risen from less than £20 five years ago to over £70 now. This continuously improving profitability has delivered special dividends and share buybacks that have made Next shareholders very happy.<br /><b>Toyota</b> – need I say more!<br />A “relentless focus on continuous improvement” is the common factor driving the success of Berkshire Hathaway, Arm Holdings, Next, Toyota and of course John Lewis itself. The Co-op did not and got left behind.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="color: orange; font-family: Verdana, sans-serif;">The proof is out there</span><br />
<span style="font-family: Verdana, sans-serif;">So it is not necessarily the ownership model itself that determines whether a business is managed for the short or long term. I believe that the main reason and this is worrying, is just how few people understand just how powerful a “relentless focus on continuous improvement” actually is, just how big a competitive advantage this can create and just how much more profitable those few businesses that practice a “relentless focus on continuous improvement” can become.<br />You don’t need to take mine or Sir Charlie Mayfield’s word for that. More than 30 years ago Robert Buzzell and Bradley Gale proved the link between “relative perceived quality” and superior financial performance. This was not just their opinion or even their direct experience. It was from an analysis of the performance of over 450 companies in the PIMS (Profit Impact of Market Strategy) database at the Strategic Planning Institute. Read their book “The PIMS Principles” to find out more.<br />This analysis was reinforced by the work of Vinod Singhal, professor of Operational Management at the Georgia State Institute of Technology in Atlanta. Singhal studied the financial performance of 600 companies who had won the major quality awards – Baldridge, Deming, Shingo and best supplier awards from major US companies. He compared financial results over ten years of these award winners with those of 600 similar companies who had not had won awards. This involved the analysis of over 12,000 sets of accounts! This study demonstrated conclusively that the quality award winners outperformed the non-award winners by over 100% and more on all key financial measures. Yes more than 100%, twice as profitable, successful and sustainable!</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<span style="color: orange; font-family: Verdana, sans-serif;">If it’s not long term it will be short term</span><br />
<span style="font-family: Verdana, sans-serif;">Whilst there are many individual examples, experiences and anecdotal evidence that a “relentless focus on continuous improvement” creates powerful competitive advantage these are backed by solid in depth research and analysis that proves this to be a fact. However actually achieving a “relentless focus on continuous improvement” and reaping the rewards takes time, hence long termism.<br />My view is that the biggest influence on whether a business is managed for the short or long term is not the ownership model but whether the leadership, investors and other direct influencers of the business strategy actually understand that “relentless focus on continuous improvement creates powerful competitive advantage” and know why this works. Without this it is highly likely that the business will be managed for the short term, leading inevitably to underperformance and then failure over the long term.<br />Unfortunately not a lot of people know that, or more significantly understand that. Hence short termism rules!</span><br />
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<i style="color: yellow; font-family: Verdana, sans-serif;">So that was something from the week before this week that caught my attention. I hope you found some of the above thought provoking and useful for you and your business. I trust you had a good weekend and hope you have a great week this week - and through continuous improvement an even better week next week.</i>Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-18575818998443751782014-07-31T10:22:00.000-07:002014-08-01T02:16:35.503-07:00<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Tales
of the unexpected.</span></span></h3>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Looking
back over the last two weeks ago I was struck by how much can happen in a very
short time and by how much of this was not really expected. I suppose it is a big world with infinite
numbers of things going on in it so by the law of averages quite a lot can
happen that we don’t expect. In spite of
this most of us run our lives, relationships, work and businesses on the basis
that nothing unexpected will happen.<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Looking
at some of the big events one thing that continued entirely as expected is the
ongoing tragedy that is Gaza. One side
started shooting at the other a few weeks ago, predictably the other side
shoots back and away we go again. I find
it heart rending to look into the eyes of the children of Gaza on the news
knowing that there seems no hope at all of this ever stopping. Inevitably many of those young children will
be operating the rocket launchers in 5 years or so – unless something
changes. Yet most of the main players
involved just keep on doing what they have always done and expect the result to
be different. It seems to come as a
surprise when yet again civilians do most of the dying and nothing changes.<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">On
the subject of mindless violence what was not expected was the shooting down of
the Malaysian Airways airliner over Ukrainian airspace. I suspect that what many, like me, didn’t
expect was that airliners were still actually flying over this conflict zone at
all. If before passengers boarded the
flight they had been told they would be flying over a war zone, just how many
would still have boarded the flight I wonder?<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">This
unexpected and tragic event has triggered another unexpected event, namely the
EU agreeing to impose tough economic sanctions on the Russians. When I say “agreed” I think they have agreed
they will do this. However what they
will do, to whom and whether they will actually “do” something is, in the
tradition of EU decision making on anything other than the standard length of a
cucumber, still ongoing.<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">If
meaningful and tough sanctions really are imposed then this will have
unexpected and unpredictable consequences for business, energy supplies,
financial markets etc. Putin’s attitude,
and his government’s complete disregard for the rule of law meant that this
would inevitably blow up in someone’s face eventually. But I wonder how many governments and
business had factored this into their dealings with Russia.<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Here’s
a couple more surprises. Philip Clarke
the now outgoing CE of Tesco, said just a few weeks ago that “he wasn’t going
anywhere”. It would be reasonable to judge
him a little optimistic about his job security, but to be replaced so soon by a
man from Unilever who knows nothing about retail? In cricket England Captain Alastair Cook,
after a string of poor batting performances and test losses was universally
judged to be not up to the job and needed to be replaced, both in the team and
as its captain. There was the little
matter of a dearth of competent candidates to replace him but you couldn’t
argue with the stats. What happened
next? Cook scored 95 in his first
innings, 70 not out in the second and England won the test convincingly,
levelling the series with India.<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">So
as the last two weeks demonstrates the unexpected happens all the time, yet we
mostly base our own plans and schemes on what we expect will happen. But can you really plan for something you
don’t expect, for something you don’t know is going to happen? Well you can think about what might happen
and what you would do to cope with it if it does. You can also “prepare” for the
unexpected. Not for a specific event or
outcome but by having a mind-set that is ready to respond and to do this
fast. The most significant factor in
this mind-set is the willingness to accept the new reality the unexpected has
created and then to deal with it. And that's easier said than done!<o:p></o:p></span></span></div>
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<br /></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">So
what are you NOT expecting to happen in the next couple of weeks?</span><span style="font-family: Times New Roman, serif; font-size: 12pt;"><o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><i style="color: yellow; font-family: Verdana, sans-serif; line-height: normal;">So that was some of the two weeks before this week. I hope you found some of the above thought provoking and useful for you and your business. I trust you had a good weekend and hope you have a great week this week.</i></span></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-69957005759819758962014-07-15T09:13:00.000-07:002014-07-16T03:19:44.665-07:00Week ending 11th July 2014<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">The
value of experience.</span></h3>
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<span style="font-family: Verdana, sans-serif;">Looking
back through the business news over the last two weeks I found myself thinking
about “experience”.<span style="font-size: small;"> This is generally
perceived to be a “good thing”. Even
when things go wrong we comfort ourselves with the thought that we can “put it
down to experience”. However as I
mentioned last week the FA have failed to win the World Cup in 15 out of 16
attempts, with 2014 being yet another opportunity to “put it down to experience”. They must now be the most experienced (and
well paid) supposedly top flight football governing body at NOT winning the
World Cup that there has ever been!<o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">For
those of us with rather more grey hairs than we would like there is the comfort
that these are the result of years of acquired experience. We like to think that this experience is
valuable because that means we too must be “valuable”. </span>So here are few of last week’s business
stories where experience or the lack of it have played a part and from which we
can perhaps learn how to really get value out of experience.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Pounding
along</span></h3>
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<span style="font-family: Verdana, sans-serif;">Poundland
floated on the stock market earlier this year and unlike a number of recent IPO’s has proved successful. The shares
are up nearly 13pc on the IPO price with sales reaching almost £1bn in the year
ending March 2014. But it wasn’t always
like this. Poundland was founded in 1990
by Steve Smith but by 2006 its growth was stalling. The current Chief Exec Jim McCarthy was
brought in to turn things round. McCarthy
had been running Sainsbury’s convenience stores but had left the company to
return home to the Midlands because of family illnesses. He accepted an offer to become CE of
Poundland because they were based in Wolverhampton. So Poundland were able to attract a much more
experienced leader than otherwise they might have.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif;">However
McCarthy did not solely rely on his own experience, being experienced enough to
know he didn’t know everything. He
recruited directors with experience of working with other retailers and a new
Chairman, Andrew Higginson, former finance and strategy director of Tesco. He didn’t stop there. He travelled to the US to learn from the
experience of discount chain Dollar Tree.
Here he learned that Poundland had to learn to work with the biggest
suppliers, rather than treating them as the enemy. Today Poundland works with leading
fast-moving consumer brands to develop unique pack sizes that it can sell for
£1.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">So
experience, plus even more experience, plus a willingness to learn from other’s
experience delivers success.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Safe
pair of hands</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">Justin
King has now left Sainsbury’s leaving the business in far better shape than he
found it 10 years ago. He is handing
over to Mike Coupe the groups’ commercial director. He was one of King’s first appointments when
he joined Sainsbury’s in 2004 and has been his right hand man for nearly a
decade. So he certainly has plenty of
experience and quite possibly the right experience.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif;">However
the times they are a’ changing!
Sainsbury’s has now had two consecutive quarters of falling sales so is
feeling the effect of the intense competition.
In King’s own judgement growth in the sector will go largely if not
entirely to online, convenience and the discounters. Sainsbury’s is well positioned strategically in
the first two and with the announcement of its joint venture with Netto appears
to have created an opportunity in the discount sector. So the pieces are in play but they will have
to be played a little differently and at least one, Netto, is a new piece.<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;">Succession
at the top of well-established and currently successful business is a fine
judgment. Is it more of the same, which
Mike Coupe’s appointment seems to be, or do you need something completely
different? I think his challenge will be
can he do more of the same but differently enough to capture the growth that is
not going to come from his supermarkets.
He will need his own and others’ experience to do this.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Slippering
away?</span></h3>
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<span style="font-family: Verdana, sans-serif;">M&S
went through what is now becoming an annual festival of excuses for not quite
hitting the targets it has set for itself.
This time its online business was down 8% due to “teething problems”
with its revamped website, compared to double digit growth in retail as a whole. Apparently customers had “taken time to
establish how to use the new site”. So
this is all down to customers’ lack of experience it would seem and sales
should rebound when customers make the effort to use the new website properly.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif;">On
the other hand just maybe a lack of experience in online retailing within
M&S’ management is more the problem.
How else do you explain why existing online customers are required to
re-register just because you have spent £150m revamping your website?<o:p></o:p></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">One
interesting statistic slipped in by style director Belinda Earl was that one in
five British men is wearing M&S slippers.
Now given that one of their key challenges is to get the fashion offer
right I am not sure that boasting about how you are number one in men’s
slippers exactly squares with that. Is
the experience of conquering the slipper market really what’s needed here? Experience is all very well but it does need
to be the right experience.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<span style="font-size: 12pt;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">You
have got to be Kiddiecaring!</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">Morrison’s
is selling its Kiddiecare business taking £160m write off in the process. It bought Kiddiecare in 2011 in an effort to
boost its non-food and online offer. In
2012 it announced the business would double in size as it bought a number of
superstores from the failed electrical business BestBuy. However less than two years later it is
losing so much money, Morrison’s are having to offload it at a rock bottom
price.<span style="font-size: small;"><o:p></o:p></span></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
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<span style="font-family: Verdana, sans-serif;">Quite
rightly Morrison’s’ management recognised that it lacked “experience” in this
sector and decided the way to solve this was to buy someone else’s (Kiddiecare’s)
experience. That is all very well but as
this “experience” has shown to do this by buying into a sector where you have
no experience at all is not the way to do it.
It is one thing to recognise you need experience, it is another to
recognise what experience you actually need and how will you know it when you
see it.<span style="font-size: small;"><o:p></o:p></span></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">On
that note</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">Here
is a final thought from me. I have a lot
of experience in business from many years of getting things wrong in order to
learn how to get them right. That wasn’t
necessarily the plan at the time but it seems to have worked out and some people
have been kind enough to credit me with having a lot of experience. However I always caution them not to think
that all they have to do is to do what I did and they will get the same
result. The thing is that it is MY
experience and it was THEN. You are YOU
and the time is NOW. Some of what worked
for me then will work for you now but not all of it. So the final trick is to select what will
work for you now from other people’s experience. Something Jim McCarthy appears to be really
good at.<span style="font-size: small;"><o:p></o:p></span></span></div>
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Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-81782614892642584292014-07-01T02:22:00.001-07:002014-07-01T05:34:42.659-07:00Week ending 27th June 2014<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">It’s
all over for England – again!</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">A
lot happens over two weeks. For example
two weeks ago England were still in the World Cup, poised to achieve one of
their shortest survival times in this competition for many years. Much has and will be written and spoken about
why England did not do better. I am not
much of a football fan and certainly not a football expert but a few points do
occur to me.<o:p></o:p></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">First
we have been trying to win the World Cup for 64 years and have only managed to
do it once, back in 1966. The FA have
been in charge of the England World Cup campaigns throughout that time and have
failed 15 out of 16 times, yet it is assumed they will continue to be in charge
of future campaigns. If there was a
World Cup for doing the same thing over and over again but not getting a
different result, then the FA wins hands down.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">Second
this was probably the most highly paid squad of England players we have ever
sent to a World Cup. As a group their
combined earnings as professional footballers are higher than most if not all
of the teams from the other countries in the competition. Yet their skills, pace and all round
footballing nous are clearly not matching the standards of many other
countries’ teams. Even though we see
this demonstrated every four years no one in football will recognise that we
need to address the problem of “not being good enough”. Top dollar does not guarantee top
performance, in fact it is the other way round.
Consistent and continuously improving top performance will deliver top
dollar.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Juncker
Muncker</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">Talking
of not being good enough this is what our Prime Minister has been saying about
Jean-Claude Juncker, the ex-Prime Minister of Luxembourg who, in spite of Mr.
Cameron’s efforts has been nominated as President of the EU Commission. Juncker himself seems to think he was already
elected but there you go.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">Cameron
saw him as an arch-federalist who believes that more integration and regulation
from Brussels is the future for the EU.
As usual with this kind of appointment no one had ever heard of Juncker
when he was proposed for this post. He
ought to be grateful to Cameron because at least we all know who he is now – he
is the man in the grey suit with a drinking problem.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">In
the end only Cameron and the Hungarian PM voted against Juncker. EU leaders are now so used to fudges and
compromise that they appear incapable of any other kind of decision or is it
non-decision. They seem more upset that
Cameron forced a vote on the matter thus requiring them to make a decision than
by his actual objections to Juncker having the job. Whilst Cameron has had his critics for the
way he has handled this in my view he has actually started from the right
place. When something needs to change
but no one is prepared to recognise this then you have to confront those people
with the need for change. This is the
only way of getting people engaged, even if initially this engagement takes the form of resistance to change and being pretty upset with you. This is exactly what happened so I think Cameron has done this right.
My concern is does he know he has and does he know what to do
next? Or was he just being a politician
and playing to the Euro sceptic gallery in the Tory party?<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Tesco
and its officer corps</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">The
Tesco story continued with an understandably fractious AGM last week. However what
interested me more were two appointments made in the latest reshuffle of
Tesco’s top management. They now have a
“Chief Customer Officer” and a “Chief Creative Officer”. The latter position was filled by Matt
Atkinson, previously Chief Marketing Officer.
I hadn’t realised that Tesco had so many “Chiefs” and that they were all
officers. So many Chief Officers implies there must be
lots of other “officers” around who, whilst they may not be Chiefs must still
be officers and jolly important they sound too.<o:p></o:p></span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">On
the other hand though when a business is losing market share because it is
clearly losing touch with its customers and where all its other ranks/Indians are
looking thoroughly miserable is this Chief Officer stuff just a manifestation
of the problem? I mean I ask you, “Chief
Customer Officer”! Does that sound like
an answer to the problem?<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3 style="margin-bottom: 0.0001pt;">
<span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Strong
pound – last thing we need!</span></h3>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">With
the British economy growing faster than any other in the so called developed
world and good news coming so fast and so often that it almost becoming boring,
there had to be some bad news in the mix somewhere. It is creeping up on us in the form of a
strong pound. With the economy
performing well and the prospect of interest rates increasing the pound will
strengthen, making our exports more expensive with the risk that this will
choke off both the recovery and the rebalancing of the economy towards exports.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;">For
some reason in this country we seem to think we need to have it both ways, strong economy and a weak
currency. The fact is that if you have a
strong, vibrant economy then you are going to have a relatively strong currency
to go with it. If we can only export
successfully on the back of a weak currency then the reality is that we are
just not competitive enough to achieve the long term and sustained rebalancing
of our economy towards exporting.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">The
key factor is our productivity. GDP is
only just back above the point it reached before the financial crisis. Spare capacity in the economy has so far
provided all the productive capacity to achieve this. Whilst there is now some tightening in
certain sectors, overall businesses are still saying that they have
capacity to fill. What does not seem to
be kicking in is an improvement in our economy’s ability to produce –
productivity. Interestingly studies show
that successful exporters are often amongst the top performers in their sector
– because they have had to be. Exporting
is good for your business because it forces you to be a better business, to
cope with challenges like a strengthening currency. </span>If a stronger pound makes our exports too
expensive then the problem is not with the currency, it is because we just
aren’t good enough, like the England football team.</span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal" style="margin-bottom: 0.0001pt;">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the two weeks before this week. I hope you found some of the above thought provoking and useful for you and your business. I trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-86933836316829425672014-06-18T09:45:00.002-07:002014-06-19T01:35:44.758-07:00Week ending 13th June 2014<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Verdana, sans-serif;"><i><span style="line-height: 107%;">This
week's <b>TWb4TW</b> looks back over the last “two weeks before this week”, partly due
to me being on holiday.</span><span style="line-height: 107%;"> </span><span style="line-height: 107%;">I could extend
this to “three weeks before this week”, but if I missed that deadline the next
opportunity would then be “ten weeks before this week”.</span><span style="line-height: 107%;"> </span><span style="line-height: 107%;">That is not going to work, so as long as
something from the last two weeks inspires me to put digits to key board <b>TWb4TW</b>
will continue to look back over the last one or two weeks.</span></i></span><br />
<span style="font-family: Verdana, sans-serif;"><i><span style="line-height: 107%;"><br /></span></i></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><span style="color: orange; font-size: small;">When
will they ever learn?</span></span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">War
has been a feature of the news over the last two weeks, especially with 70<sup>th</sup>
anniversary of the D-Day landings and 100 years since the outbreak of World War
I. Also a little known group of
religious fundamentalists conquered a third of Iraq in a weekend, helped by the
opposition simply running away! I don’t
mention a particular religion because the combination of “religious” and
“fundamentalism” has consistently meant big trouble throughout human history. These people seem to be able to build an
effective fighting force from a disparate bunch of people, united only by a
common cause which makes some kind of sense to them, however twisted that sense
might be. The UK equivalent would
perhaps mean recruiting from a group of people who go to the same dodgy pub, support
the same continuously underperforming football team and like fighting.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">What
this has done is to throw years of Western diplomacy in the Middle East out of
the window. Suddenly we are best mates
with Iran. After this and the Ukraine
crisis, which is still rumbling on, you wouldn’t think there would be anyone
left who does not now know why we need to push on with fracking and nuclear
power. However there are plenty left who
will continue to oppose this. I can only
think that, even in this 70<sup>th</sup> year since the D-Day landings, these
people still don’t understand that people just like them could have stopped
Hitler in the 1930s, but they chose not to.
I wonder if any of the troops who jumped off those landing craft on to
the Normandy beaches ground their teeth in frustration at having to do that job
for them – the hard way!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">It
were better in my day</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Talking
of battles there has been a lot of news and comment about UK retailers over the
last two weeks – who is up, who is down and who is going round in circles. Tesco reported the biggest drop in sales
(3.7pc) in the whole 40 years of CE Philip Clarke’s career with the
retailer. You would think this would
lead Clarke straight to the exit but he announced “I’m not going anywhere”. The analysts, commentators and Tesco’s major
shareholders just about came down on his side for the time being, saying it is
too early to judge whether his turn round strategy will work or not. Bit like my tennis at the moment! However for me there is one single thing that
will tell me if and when Tesco has really changed. Right now the staff in their stores do not
look like they really want to be there.
If one day they do, then the strategy is working. But if they continue to look like they have
left most of their brains and motivation at home, then Tesco’s decline will
also continue.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Former
CE Terry Leahy announced that “as a shareholder I am very disappointed”. You have to give full marks to Leahy for executing
a strategy that built the Tesco ship into the world’s third largest
retailer. He gets less than full marks
for not judging when this strategy had to change due to unforeseen rocks, such
as discount supermarkets, online, Justin King at Sainsbury’s etc. Same goes for launching the good ship Fresh
’n’ Easy in the US that went straight down the launching ramp and under the
water. He can probably quietly award
himself full marks for handing over the ship just before anyone noticed these
rocks. He gets no marks at all for not
keeping his mouth shut!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Morrison’s
also had its previous Chairman and now Life President Sir Ken Morrison laying
into current CE Dalton Philips after the company reported a loss of £176m and
warned that profits this year would be half what the city had been
expecting. Sir Ken didn’t mince words
saying that Phillips strategy was bulls**t and that he wasn’t capable of
running the core business much less a chain of convenience stores.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Sir
Ken conveniently forgets that it was he who was leading the company when
Morrison’s bought Safeway. Whilst the
company could run the Morrison’s business effectively as it was then, it was
not capable of pulling off the integration of Safeway, which dragged on for
years. Morrison’s antiquated systems,
quite literally pen and paper systems in many cases were wholly inadequate for
the larger business. This produced a
drag on the business that Sir Ken’s successors have been wrestling with ever
since. The consequences have included
being very late getting into convenience stores, still having no online offer
in spite of the fanfare announcement of the deal with Ocado and completely
forgetting what used to make the business successful.</span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">This is a classic illustration of a business
that only finds out what its limitations really are when it has gone past
them. Dalton Phillips may or may not be
the man to turn it round but in his shoes my response to Sir Ken would be “you
are right about the bulls**t, I am still digging” and Philip Clarke might say
“me too”.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><span style="color: orange; font-size: small;">No
guarantees</span></span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Two
weeks ago the shares of online fashion retailer Asos lost a third of their
value after a fresh profits warning. However to put this in context Asos was
trading at more than 100 times earnings, compared to Next, one of the most
consistent retail performers whose shares trade at just 17 times earnings. Fear and greed rule on the stock market with common sense only making rare and brief appearances. Clearly greed drove the Asos share price to an unreal and unsustainable over valuation as if future growth was guaranteed. Fear has kicked in now the totally predictable has happened. We may be in for a brief period of common sense at which point the Asos share price will be about half of what it was at its height.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">I
sometimes wonder what it would be like to be the CE of a company where you know
the market has massively overvalued your company. It seems most go with the flow. One who does not is Simon Wolfson of
Next. He has consistently down played
market expectations and then consistently out-performed them. I know where I would put my retail
investment.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Is
there a right business model for a retail business?</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Current
opinion amongst retail industry analysts and commentators on retail is that the
only viable retail business model now is multi-channel - a combination of in store, online, click
and collect etc. It follows therefore
that as Asos is only online it may be vulnerable to the likes of Next with
their multi-channel offer. British
fashion brand Ted Baker has a multi-channel offer and recently reported a 19pc
rise in sales with online sales up by 48pc.
So more support for the “multi-channel is the way to go” argument. However Primark, whose sales grew by 14pc is
about to close a deal to buy the Pavilions shopping centre in Birmingham. Half the centre will be a Primark store (three times the size of its current Birmingham store) with
the rest sub-let to other retailers.
This is a £60m investment in traditional bricks and mortar retail space
from a company that has no online sales at all.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">What
this all tells us is that concentrating continuously on making your business
better and better is the only fundamentally viable business model for any
business in any sector. In today’s
fiercely competitive and fast moving business world if you are not getting
better you are getting worse. This is
what Next, Ted Baker and Primark understand and Tesco and Morrison’s really
don’t. As for Asos it is more difficult
to tell because that third of the share price that was lost was clearly never
really there in the first place. So we
will have to wait and see how they respond.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><i style="color: yellow; font-family: Verdana, sans-serif; line-height: normal;">So that was some of the two weeks before this week. I hope you found some of the above thought provoking and useful for you and your business. I trust you had a good weekend and hope you have a great week this week.</i></span></div>
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-19472320909933351892014-06-03T07:53:00.000-07:002014-06-03T08:05:34.325-07:00Two Weeks ending 30th May 2014<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Verdana, sans-serif;"><i><span style="line-height: 107%;">No
time for an article last week so looking back on the last 2 weeks in this week’s
<b>TWb4TW</b>.</span><span style="line-height: 107%;"> </span><span style="line-height: 107%;">Here are some quick thoughts on:</span></i></span><br />
<span style="font-family: Verdana, sans-serif;"><i><span style="line-height: 107%;"><br /></span></i></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">UKIP
if you want – and a lot of people did.</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">UKIP’s
success in both local and EU elections was even bigger than many commentators
had predicted. It appears that the
electorate is fed up with smart talking politicians in sharp suits so they
voted for Nigel Farage. Of course he is
a smart talking politician who wears a sharp suit but he also drinks pints. This seems to have persuaded people that he
is “just like us” which of course he is not.
However he has picked on two big issues that many people believe really
affect them, immigration and the EU. His
argument is very simple. We can’t do
anything meaningful about controlling immigration whilst we are required to
follow EU rules and regulations. So
leave the EU and hey presto we can reduce immigration.</span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Immigration is a topic
where opinion is driven above all by emotion, with fear being predominant. Many people feel deeply uncomfortable about a
“multi-cultural” Britain which they perceive has been imposed on them. Add a widespread feeling of resentment
towards the EU and the UKIP offer of a simplistic solution to make the fear go
away appeals to a lot of people. This is
why so many think Farage is “just like us”.
Many voters have decided they can trust him even though he has done
nothing really to win that trust. It’s
just that the others have done everything to lose it.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">For
me this is a reminder that “how people feel” can be a significant driver of
people’s opinions and actions. This
something that has been ignored by the “we know what’s good for you” politicians
and bureaucrats and many voters have demonstrated they have had enough. For us in business it is a reminder that we
don’t always know best with our customers, employees, shareholders etc. and
maybe we should look and listen more carefully and perhaps with a little more
humility.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Is
the EU doomed?</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
result in the UK was reflected across Europe where anti EU parties on both the
left and right gained seats. The
exception was Italy which was about the only country where a pro EU party won
the most seats in their EU parliamentary election. As usual Italian politics are impossible to
explain, so I won’t try.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Whilst
the message to the politicians in the EU establishment is that voters want
change the question that has to be asked is not what should change, but is the
EU actually capable of changing in any meaningful way. I have an awful feeling that the whole thing
has now got so big and complex that is beyond human capability to bring about
the change that is needed in an orderly way.
This means that either Europe continues into gradual but terminal
decline or, because change will come whatever, the wheels fall off and it will
get very messy. For me this is the one
compelling argument that says being out of it might just be a good place to be.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">India
shows what can be done.</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
election in India, where the BJP party led by Narendha Modi won a landslide
overall majority is interesting not just for the result but for how the
election was conducted. The 551m votes
cast were counted by 1.8m electronic voting machines. Turnout from 815m eligible voters was over 66%
with the use of the new technology virtually eliminating electoral fraud. This in turn has improved trust in the process
and consequently in the election result.
For once the losers are not running around shouting “fix”.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">We
on the other hand are still putting crosses in boxes on a piece of paper, then
folding it and putting it in a box. Whilst
the world’s biggest democracy is demonstrating that it is possible to use new technology
to run elections, we still use the same old ways and wonder why we can’t get
electoral fraud under control in places like Tower Hamlets and parts of
Birmingham. No one who should be taking
responsibility for this appears the least bit bothered. It is this sort of thing that destroys trust in the electoral system and why people turn to parties like UKIP.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><span style="color: orange; font-size: small;">Exclusive
inclusive event</span></span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Prince
Charles, BoE Governor Mark Carney, IMF MD Christine Lagarde and Bill Clinton
were keynote speakers at the “Inclusive Capitalism” conference last week,
attended by 200 specially invited business leaders. The theme of the conference was economic inclusion
and the integrity of the global financial system. This all sounds like worthy stuff and Prince
Charles managed to slip in quite a bit on climate change. However it doesn’t sound like a very “inclusive”
event to me. You couldn’t buy a ticket
so if you weren’t invited you couldn’t come.
The Inclusive Capitalism strap line is “building value, renewing trust”. Holding a highly “exclusive” conference doesn’t
sound like a good way to start doing this.
Whilst this may be well intentioned until these “exclusive” people start
to see themselves as the rest of us see them, they are not going to make much
of a difference, because we won’t trust them.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Win/lose
</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Halfords
is the latest company to put the screws on its suppliers by demanding a
contribution to its investment in new and refurbished stores equivalent to 10%
of suppliers’ sales to Halfords over the last year. Their (rather thin) argument is that the
suppliers will benefit from increased sales from the investment in stores and
should therefore contribute to it.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">First
of all this demonstrates an astonishing lack of understanding about their
suppliers businesses. Most of them will
be doing well to making a profit before tax of 10% of sales so the contribution
is the equivalent of handing over all their profit on their business with
Halfords.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Far
too many big companies are trying this on and in almost all cases the demands
are retrospective on already agreed contracts.
It is not clever, though the companies that do this must think it is,
because the proposition is always win/lose which destroys trust so almost
always results in everybody losing in the long run. It is possible to create a proposition of
this kind that works on a win/win basis and that could potentially
benefit all parties. However
because this requires more effort and the benefits are longer term, too many
companies that should know better can’t be bothered and go for the short term
hit.<o:p></o:p></span></span><br />
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<h3>
<span style="color: orange; font-family: Verdana, sans-serif; line-height: 107%;"><span style="font-size: small;">Co-op
“committeed” to values</span></span></h3>
</div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">On
the subject of good intentions the Co-op Bank announced that Laura Carstenson a
former partner in law firm Slaughter & May had joined their board and would
be Chairman of their new “values committee”.
The Co-op successfully promoted itself for years as the “ethical bank”
which did give it an edge and made it one of the most trusted brands in retail
banking. However the latest Which? Money
Savings Satisfaction Survey published in April showed that the Co-op bank’s
rating had dropped by 14% to 49%, below the average of 52%.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
bank’s recent high profile troubles have clearly diminished the level of trust
it previously enjoyed. So something needs
to be done, but I am not sure a “values committee” is the answer. Is this committee just a symbol of good
intentions or is it actually being charged with achieving specific goals, such as restoring
customer satisfaction ratings for its savings products? Time will tell but given the Co-op Bank’s
recent track record of failure to live up to good intentions, I am not
confident.</span></span><br />
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Last
one out turn the lights off</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Centrica
is now short of a finance director and a managing Director for British Gas and will
lose its Chief executive when the current CE Sam Laidlaw leaves later this
year. There has been some comment in the
business press that given the stick that Centrica top management gets from the
media, government and just about everyone else it is not surprising that its
top people find jobs in other lower profile companies attractive.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">However
there was an interesting comment from Martin Brough an analyst at Deutsche
Bank. He is calling for a change in
strategy to focus on the core British Gas energy supply business in the UK and away from oil
and gas exploration and production in Norway and the US. At first sight this appears an odd
proposal as Centrica have focused on these areas precisely to counter
difficulties in its British Gas business where it is under unprecedented
political pressure over profits and prices.
Mr. Brough argues that a “reinvigorated” British gas could “engage more
effectively with the British public on energy issues than the political parties
and could focus on selling home energy products”. A “trusted and growing” British Gas could be
worth 100p more per share claims Mr. Brough.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">I
do not know if Mr. Brough would be proved right or wrong about this, but there’s
that “T” word again, “trust”. Something
that can take years to build but can be lost in no time at all, as the Co-op
has discovered, but which mainstream politicians in the UK and the EU have yet
to recognise. The thing about trust is
that it is not about good intentions, however worthy, it is about delivering on
those good intentions. To deliver you
have actually have to have the capability, so be careful what you promise (Mr.
Farage) you might actually be called upon to deliver it.<o:p></o:p></span></span></div>
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<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><i style="color: yellow; font-family: Verdana, sans-serif; line-height: normal;">So that was some of the two weeks before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></span></div>
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Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-32736941114558554192014-05-20T07:51:00.001-07:002014-05-21T04:18:39.638-07:00Week ending 16th May 2014<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif;">INTERESTing
Times</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">With
the Bank of England delivering its latest quarterly Inflation Report last week
it was no surprise that the business and political media was focused on what it
would say about interest rates. The
level of unemployment had already dipped below the 7% point that BoE Governor
Mark Carney had previously indicated could be a trigger for a rise in rates.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">In
the event Mr. Carney effectively quashed speculation that rates could rise before
the end of this year. He conceded that
the day Bank Rate would start to rise is getting nearer but now was not the
time to raise rates and when they did start to rise they would only do so
gradually. In the BoE’s judgement that
there is still enough slack in the economy to enable it expand further without
triggering inflation. This is
based on information from the network of BoE agents based all over
the UK who talk to local business people about the prospects for their business
and the sector they operate in. The feedback
is that generally most sectors are still highly competitive with capacity to
fill and little prospect of being able to raise prices.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
exception seems to be the housing market. Much has been written
and said about this in recent weeks and what this could mean for interest rates
and what the authorities should/can/can’t/want to do about it. The British have national obsession with
house ownership and consequently the prospect of even a small increase in interest
rates is portrayed as apparent personal and national financial Armageddon. In spite of all the speculation and bright
ideas Mr. Carney repeated what should by now be the “bleeding obvious”. Whatever the BoE can or can’t do about
interest rates to influence the housing market, the core problem is that we are
just not building enough houses to meet demand.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">We
have not been building enough for 30+ years and we know we haven’t. This has not been for want of trying, or at least
for want of target setting for house building by successive governments. Whatever they said and whatever they intended, it just didn’t happen. Yet still we have
the Labour Party announcing it has the answer because if elected they will
build 200,000 houses a year to 2020.
Well, what a brilliant idea, and thank God we have the Eds Milliband and
Balls to think of these things for us!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
truth is that they have no more idea than their predecessors on how to actually
achieve this. There was a time when we
could build houses at that sort of rate, so the conclusion is that we should be
able to do it again. However so much has
changed since those times that the same approach will not deliver today. And that is the real problem. After so many years of repeated and almost
continuous failure in this area there is only one possible conclusion. As a nation we simply don’t know how to
deliver enough houses to meet demand. We
did once but we clearly don’t now. Now
all is not lost because it is possible to find out. However that is not going to happen until our
political leadership actually recognises and crucially admits that it doesn’t
know but that it has a plan to find out.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Sadly,
with an election coming up next year finding a politician who will admit to not
knowing how to do anything is about as likely as finding the Holy Grail. In the meantime though for the rest of us,
when we come up against a problem we just don’t seem able to solve, however
hard and often we try, then maybe it’s time to ask ourselves if we actually
know how to do what needs to be done. If
we can identify what we don’t know how to do then we can start the process of
finding out. Even the most complex
problems and challenges can be tackled effectively if we start by admitting and
identifying what we don’t know. Try it
sometime!</span></span><br />
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif;">ONS
on us</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">On
the subject of house prices, last week the Office of National Statistics (ONS)
informed us that twenty percent of adults who hold at least one university
degree now have wealth totalling at least £1m.
Apparently the number of millionaires has risen by fifty percent in four
years despite the recent financial crisis and almost a tenth of British adults
own assets worth more than £1m. The
flipside of this is a stark gap in wealth between people with different levels
of education, with only three percent of people with no formal education
qualifications worth more than £1m. This
gap is widening.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">David
Willets the universities minister seized on this as justification for coalition
policies to charge higher university fees and to push more school leavers to go
to university. They also seem to be
pushing more people into apprenticeships which is a bit contradictory. But as long as they are pushing the rest of us
somewhere they seem to be happy. The
Labour party were a bit slow off the mark to pick up on the increasing gap
between the wealthy and poor, but don’t worry they will!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Strangely
the figures from the ONS take no account of liabilities, mortgages and other
loans and debts. This renders the
figures meaningless. A pensioner living
in Middlesborough who has paid off their mortgage and with no other debt could actually have greater
net wealth than someone living in London with their house mortgaged up to the
hilt and in danger of paying a mansion tax.
They don’t FEEL like millionaires whatever the ONS says and that is what
really matters for real people.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
ONS has a record of publishing statistics that are either late or wrong or
both. It has now added meaningless to
its track record, except of course for politicians. As we are paying for the ONS to do its work,
we should expect something useful to come of it.<o:p></o:p></span></span><br />
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif;">Pfizer
- all pfizzle?</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">By
the time you read this Pfizer’s bid for AstraZeneca may well have petered out,
at least for the time being. Last week
both companies’ top management appeared in front of the Business Select
Committee. Pfizer boss Ian Read was vague
on detail about potential job cuts and reductions in R&D investment, though
he admitted there would be some. His
main argument appeared to centre on the combined businesses being “bigger” and
therefore by definition “better”. He justified the unquantified cuts to jobs
and R&D as “part of being efficient”.
As with “bigger” he appears to view the word “efficient” as a "good thing" so no need to spell out what it might actually mean. He also insisted that Pfizer was a “company
of high integrity focused on patients and delivering drugs to patients”. He seemed oblivious to a track record that
gives the perception of exactly the opposite.
His 36 years at Pfizer were definitely showing.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">If
I was an AstraZeneca shareholder that performance would be enough for me to say
“no way”. Of course that is not the only
consideration. AstraZeneca’s insistence
that they would be better off as an independent company is founded on their
claims for their research pipeline of products in development. If a reasonable proportion of these reach the
market then the future would look good for AstraZeneca. The problem is that it is very difficult with
pharmaceutical companies to predict whether this will happen.</span></span><br />
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span>
<br />
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">However there is one party involved that must
believe that these developments will be successful and that party is
Pfizer. Why would they be bidding to buy
AstraZeneca now if they did not? If they
can buy them now before the pipeline is proven then they would win handsomely
and put off the evil day when their own under investment in new product
development catches up with them. It
means if Pfizer can buy AstraZeneca at or around their current offer they will
either win, or not lose because they could hack out enough savings to redress
any shortfall from the product pipeline.
All the more reason for AstraZeneca shareholders to say no, or at least
to hold out for a substantially improved offer.</span></span><br />
<br />
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif;">Meanwhile</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
French government has moved quickly to block the GE bid for Alstom by creating
new powers to stop foreign takeovers of “strategic” industrial groups. In fact they moved so fast I wonder if they
are using some sort of “app”. Something
called “Legislation a Grande Vitesse” (LGV) perhaps. You just put in what you don’t like the look
of and then the app searches through the legal statutes to come up with the
necessary legislation for you to put it right.
It also dates everything at around 1849 so it is very difficult for the
EU commission to argue against.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Industry
Minister Arnaud Montebourg stated “With this reform, France will have a clear
and efficient legal framework comparable to other open economies within and
outside Europe”. Whilst our government
talks about what they should/can/shouldn’t/can’t do the French just do it and
then issue statements like this with a straight face! As I said last week it helps if you know
clearly what you want.<o:p></o:p></span></span><br />
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif;">You
heard it here first</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;">In my previous article I said I did not like the look of the proposed Dixons Carphone Warehouse
merger. Well it seems I was not alone because
when they officially announced the proposal for the merger last week, Dixon’s
shares fell more than 10 percent and Carphone Warehouse 8 percent. David Alexander, retail analyst at Conlumino acknowledged
that “Although there are plenty of reasons to view the merger in a positive
light, the history of M&A is littered with the corpses of failed unions”. Says it all for me.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-size: 12pt; line-height: 107%;"><i style="color: yellow; font-family: Verdana, sans-serif; font-size: medium; line-height: normal;">So that was some of the week before this week. I hope you found some of the above thought provoking and useful for you and your business. I trust you had a good weekend and hope you have a great week this week.</i></span></div>
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<br /></div>
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<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
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Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-44957407319839769282014-05-12T05:39:00.000-07:002014-05-14T11:37:18.618-07:00Week ending 9th May 2014<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">M&A
Pfizzing!</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">For
some time one of the frustrations for the UK government as they attempted to
kick start the economic recovery was the huge cash balances being hoarded by
many businesses which they seemed reluctant to spend. Not only was this holding back growth, but
also preventing the emergence of a more balanced economy.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Now
with confidence returning companies in the UK and in other countries, notably
the US are starting to invest again.
However they are not focusing so much on new plant, new premises,
developing new markets etc. but rather on merger and acquisition. M&A activity is now at its highest for
over 6 years. There were a number of big
M&A’s making the business and political headlines last week with the real
biggie on both counts being the Pfizer bid for AstraZeneca.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">When
I first heard about this I was puzzled as to why a fizzy drinks company would
want to buy a pharmaceutical business. Then
I realised of course that Pfizer is actually a global pharmaceutical business,
famous for those little blue pills that help gentlemen stand to attention even
when all they want to do is go to sleep!
Apparently a Charles Pfizer was one of the co-founders of the company,
so hence the name. Quite an appropriate
name when you think about the little blue pills!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Although
a dominant force in the global pharmaceutical industry for decades Pfizer faces
challenges as its patents run out. The
patent on its biggest selling drug Lipitor ran out in 2010. To counter this since 2000 Pfizer has pursued
a strategy of growth by acquisition, the last being Wyeth for US$68bn in 2009 and
now it is after AstraZeneca. Most
analysts and business commentators judge that this strategy has destroyed
shareholder value rather than created any.
Much has been written in the media last week about how Pfizer cut jobs
and research capacity and investment as it chased the “synergies” from each
acquisition. Furthermore in 2009 Pfizer
broke all records when it was fined $US2.3bn for illegal marketing of its
products. This was the fourth time it had
been found guilty of this and similar illegal practice.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">This
is the core of the concern over the bid for AstraZeneca. Do we really want to
let a company with this kind of brutal post acquisition track record and
contempt for legal, never mind ethical business practice into our
backyard? To be fair to Pfizer it has
new leadership today, but in spite of this and all the assurances from Pfizer
if the fox is still a fox will we end up with a lot less chickens?</span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Should
government intervene?</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">It
is not surprising that this has become a political hot potato. Even though AstraZeneca is an Anglo-Swedish
company, run by a Frenchman, chaired by a Swede with operations in 100
countries, the Pfizer bid is being portrayed as an assault on British jobs and
the British science base. Ed Milliband
has accused the government of “cheer leading” the bid and has called for a
“national interest test” to be applied on all foreign bids to takeover British
companies. As usual with his bright
ideas Milliband does not spell out exactly what a national interest test would
be and he really needs to be careful what he wishes for. If a national interest test had been applied
to him, then he might well not be leader of the opposition!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
government is trying to give the impression that it is taking a “hard-nosed”
approach to seeking assurances from Pfizer on jobs and research investment. The question is how much can they trust
Pfizer to deliver on its assurances? The
answer to this question is not a lot if at all.
Apart from the track record we have the wonderful answer given by Pfizer
CEO Ian Read to a question put to him last week. When asked whether Pfizer would break up
AstraZeneca he replied “we will conserve that optionality”. Now that tells you all you need to know. The cunning fox is still a fox and if you let
it into your backyard it will do what foxes do to your chickens, if and when it
thinks it can get away with it. So the
only safe assumption is that Pfizer will at some point behave exactly as it has
in the past. So the question is can government
do anything about it?<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">If
AstraZeneca shareholders want to sell then there is not much strictly legally they
can do to stop this and in a free society nor should they. However this is where “having an industrial
policy” comes into play. This government
and its predecessors claim to have one but it is difficult to see what it is
exactly. However in this case the
implications are simple. If you do not
have a policy you just let whatever is going to happen, happen and use the desirability
of preserving a free market as your excuse.
If you do have one then you can sit down with the parties involved and
spell out the rules of the game.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">One
of the attractions of this deal for Pfizer is that they can move their HQ to
the UK and enjoy our now low business tax regime. Our government should tell Pfizer that whilst
we are happy to welcome overseas businesses to the UK to enjoy the lower tax
regime it is not available to just anybody.
In exchange for lower taxes we expect them to create extra value for the
UK in terms of jobs, investment, skills and knowledge. Where having an industrial policy comes in is
that you can spell out clearly what that means when applied to a particular
situation.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Government
does not have a lot of “hard power” for this, but it does have buckets of “soft
power”, if it cares to use it.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">The
French do this differently</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Running
almost unnoticed under the Pfizer/AstraZeneca story is a $US17bn bid from GE for
French company Alstom’s turbine business, which includes its nuclear facilities
and power grid businesses. In spite of
the Alstom board agreeing to the deal, assurances from GE on French jobs that
go way beyond anything Pfizer has so far promised with AstraZeneca, the French
government has said “Non”. Any government
that can declare a yogurt maker a “strategic industry” as the French did when
blocking a bid for Danone a few years ago, is always going to say “Non” to any deal
on Alstom.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">They
have gone further by demanding an “equal partnership” deal with GE (whatever
that means!) and bringing in the combination of the two companies rail
businesses. As a final piece of confusion
they have brought in Siemens as a counter bidder. This seems to have come as bit of a surprise
to Siemens who have enough problems of their own right now, without adding Alstom’s
to them.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">The
French have an industrial policy which is very simple. It’s going to be all or at least mostly French. They are subject to the same rules and
regulations as the British Government in all this, but the difference is that
the French don’t think they apply to them.
In fact they KNOW they don’t. This
is the only explanation for why Peugeot Citroen are still in business. Whilst I would not advocate going to the extremes
that the French government employs it does demonstrate how the skilful use of “soft
power” can get you what you want, if you know what that is.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">L’Entente
Impossible</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">10
months ago two of the world’s biggest advertising agencies, New York based
Omnicom and Paris based Publicis announced they were to merge. What’s more it was be a “merger of equals”. Now this is a French company and an American
company proposing to merge as “equals”.
What are the chances of that coming off?
Well last week it was confirmed that there was no chance when the whole
thing was called off. They couldn’t even
agree on who should be the Chief Financial Officer of the merged group. Perhaps Omnicom did not understand that
Publicis meant CFO would stand for Chief French Officer!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">If
it had come off it would have created the world’s biggest advertising
agency. Well it has achieved that, only
it is Sir Martin Sorrel’s WPP that has retained this title. While negotiations dragged on, costing
millions, WPP picked up clients like Vodaphone, M&S, Compare the Market and
others from Publicis and Omnicom. Samsung,
the biggest advertising brand spender in the world has placed its account with
Publicis under review. Publicis and
Omnicom have managed to destroy value without even merging!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Another
outcome is that the financial advisors involved were likely to be on a “no deal
no fees” deal. As both parties have
called this off it is estimated that around $US70m won’t be paid to
advisors. Perhaps there is a God after
all!<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">CarphoneDixons</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Well
this is one “merger of equals” that looks like it could actually come off. Whether this is a good or a bad thing for shareholders
and customers, only time will tell. However there is one reason why I am not optimistic. In the past I have consistently criticised Dixons for their abysmal customer service. Equally consistently they announced time
after time that they were tackling this, but customers did not see a difference. In the last 12 months or so I have discerned
an improvement. Staff in their stores
actually seemed to know something about the product and even where the product
you were looking for might be. It wasn’t
brilliant, but it was better and clearly something has changed.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">Now
they are merging with Carphone Warehouse to become CarphoneDixons. Carphone’s own reputation for customer
service was probably even worse than Dixons, which means they must have been
trying hard to be that bad. Given that post-merger
performance standards tend to fall to the lowest common denominator rather than
rise to the best, will Dixons nascent customer service improvement be strangled
before it becomes fully established? <o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;"><br /></span></span></div>
<h3 style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="color: orange; font-family: Verdana, sans-serif; font-size: small;">Why?</span></span></h3>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: Verdana, sans-serif;"><span style="line-height: 107%;">After
reading the above you may be thinking “why do they bother”? Well that is a good question. The one aspect of M&A that is never
mentioned is the fact, and it is a fact, that it usually </span><span style="line-height: 17.1200008392334px;">doesn't</span><span style="line-height: 107%;"> work. Research over many years has consistently
shown that whether in good times or bad at least 50% of M&A deals result in
destroying value and this can be as high as 80%. So all the above with all the millions
involved has at best a 50% chance of success.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="line-height: 107%;"><span style="font-family: Verdana, sans-serif;">For
any of you who are currently in or are contemplating an M&A project here
are some tips.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 3.0pt; margin-right: 0cm; margin-top: 0cm;">
</div>
<ul>
<li><span style="font-family: Verdana, sans-serif; line-height: 107%;">If anyone mentions the
word “synergies” take tight hold of your wallet</span></li>
<li><span style="font-family: Verdana, sans-serif; line-height: 107%;">If they go on to
produce spreadsheets to demonstrate these synergies, suddenly remember you have
to be somewhere else.</span></li>
<li><span style="font-family: Verdana, sans-serif; line-height: 107%;">If the value to the
customer is not clearly set out and explained early in the proposal, forget the
whole thing. This will save you a lot of
time and money.</span></li>
</ul>
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. I hope you found some of the above thought provoking and useful for you and your business. I trust you had a good weekend and hope you have a great week this week.</i><br />
<br />
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Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-42364260633724704202013-08-27T09:34:00.000-07:002013-08-28T01:43:30.191-07:00Week ending 23rd August 2013<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The silly season continues.
Most of the business stories in the media are about the possibility of
various football clubs paying vast sums of money for certain players. However in the absence of meatier news to
dissect the silly season does allow us time to ponder on matters that we would
perhaps ignore at other times of the year.
There is one topic that most of us ignore most of the time.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Must try harder!</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In last week’s <b><i>TWb4TW</i></b> I introduced you to the “productivity
puzzle”. This puzzle is that in spite of recent encouraging
signs that economic growth is gaining some traction the fact is that on an
output per worker basis <st1:country-region w:st="on">UK</st1:country-region>
companies require more staff to produce the same amount now than they did
before the financial crisis.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">But what is actually meant by “productivity” in this
context? In the boom years between 2000
and 2008 the economy was apparently able to produce more goods and services to
meet the growth in demand, without price or wage inflation kicking in. However much of this was achieved through
cheap imports and cut-price foreign labour.
So whilst production and consumption of goods and services grew the
actual “productive capability” of the <st1:country-region w:st="on">UK</st1:country-region>
economy did not, or at least not to the extent that it really needs to.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This is because we seem to think of productivity as being
about “doing more” rather than “doing better”.
Ministers are telling us that we now have more people in work than ever
before. But is that really as good as it
sounds? I talk to businesses who, in
spite of lower sales and profits than before the recession and not giving their employees a pay rise for three years tell me they are now
“doing well”. But is this kind of “doing
well” what these businesses really need to be achieving? We know that in the NHS, in spite of huge increases in spending and treating more patients than ever, productivity has been going backwards.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So do we just need to “try harder”, maybe get some
“efficiency experts” in and tighten up those KPIs? After all there are examples of high
productivity companies out there; surely more of us could be like them? Well in my experience it is worth looking at
those companies, but it is not about what they do, it is about how they think.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">A different way of thinking</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Some years go I was lucky enough to spend some time at
Toyota Manufacturing UK at their Burnaston plant near <st1:city w:st="on">Derby</st1:city>.
I will always remember two statements from the then Operations Director
when explaining how <st1:city w:st="on">Toyota</st1:city>
thought about productivity.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>“Everyone at Toyota Manufacturing knows they have two
jobs. One is to make vehicles and the other is
to find better ways of making vehicles.
The working day and the business processes are designed and structured
to enable all our people to do these two jobs”.</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>“This way we can reduce the costs of making vehicles,
enabling us to lower the price to customers who then buy more of our vehicles
which lowers our costs even further”.</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">For me these two statements embody the principles required
for achieving true productivity growth. These principles can be seen in the
thinking of every “excellent” business I have been fortunate enough to have had
contact with. These organisations think
first about how they can “do better” knowing that this is the route to achieve
the sustainable capability to “do more”.
This “different thinking” is the key to the productivity puzzle.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Regrettably too few UK businesses think this way and even fewer
areas of the public sector, where the primary purpose seems to be to exist
rather than actually change anything. This is in spite of the fact that research has proven consistently that businesses that achieve superior productivity growth are at least twice as profitable as the average. Until
the thinking changes I fear that the prospects for our economy achieving the
level of true productivity growth we need to provide the standard of living we
would all like in this country are remote.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-30065198859436681832013-08-19T09:27:00.001-07:002013-08-19T09:27:06.003-07:00Week ending 16th August 2013<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">The silly season</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Since returning from a week’s holiday in what turned out to be
a very sunny <st1:city w:st="on">Norfolk</st1:city>,
I have been scanning the media for any stories that contain interesting topics with angles that could be worth exploring for the benefit of my discerning
readers. At first I found it difficult
to find anything that caught my interest, until I realised that we are now in
the “silly season” so it is not surprising there isn’t much to work with. A sign of how silly it is was that the only
reason Ed Milliband made the news at all last week was because a man threw eggs
at him. EM missed a trick by not having
John Prescott with him at the time as this would have guaranteed the front
page. However amongst the silliness I
found some news on the improving prospects for the UK economy that have
potentially interesting and challenging implications for all of us in business.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Consumer confidence – of a sort</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Only a few months ago official stats indicated we were in or
about to enter a triple dip recession.
However since April things started to change. First revisions to the
figures showed there had been no triple dip and cast doubt on whether there had
been a double dip. If the authorities were to continue this trend we may discover
there was no recession after all, just a cunning plan by Cameron and Osborne to
be able to keep “dissing” the previous Labour government.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">More recently the news seems to just get better and
better. This is more in line with what
my own network had been reporting previously on buoyant sales and general
optimism about the way things were shaping up.
Consequently I am inclined to believe what is now being reported in the
official stats. One exception to this
had been bricks and mortar retail, which still seemed to be struggling. Recently however both sales levels and
footfall have been increasing in many of the <st1:place w:st="on">UK</st1:place>’s shopping centres with even
town centre vacancy rates dropping from a record high in April.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So is this a sign that that elusive consumer confidence is
really beginning to return? Well as far
as retail sales are concerned only up to a point. Incomes are still not keeping up
with inflation so consumers need a very special kind of confidence to start
spending more of the cash they have less of.
What has provided this special confidence on this occasion is the
weather. We endured a cold and miserable
spring but suddenly since early in June we have actually had a summer. This means we became more confident that we
were actually likely to wear the summer clothes we bought. We could see ourselves actually using the new
barbecues and garden furniture. Most
importantly the sunshine just makes us feel better about nearly everything and
we become even prepared to actually “go shopping” as a leisure activity rather
than through necessity.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However this kind of confidence will last only as long as the
sun shines, if that. In fact if the sun
shines for too long sales of winter merchandise will suffer and energy companies will
start muttering about having to increase prices because we aren’t using enough
of the stuff. At least global warming
evangelists will feel vindicated. The
key point of all this was articulated a couple of weeks ago by Simon Wolfson
Chief Exec of Next. He said that whether
influenced by weather or anything else consumers are deciding if to buy, what
to buy and where to buy at much shorter notice and that this mindset was here
to stay. Those retailers who understand
this and can provide what their customers with what they want, the way they
want it and when they want it will be the winners. There are already examples of winners are who
are achieving this and proving the point. This is more important for the future prosperity of the UK's retail sector than sales growth in the short term.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Growth is good for us. Or is it?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In the great British tradition of reacting to good news by
searching out the downside the business media last week were quick to find
one. The downside of all this better
economic news is that it may result in interest rates increasing sooner rather
than later. Mark Carney, our new
governor of the Bank of England had previously signaled that interest rates
would remain low for some time to come and at least until unemployment drops to
below 7pc (currently 7.8pc). However all
this good news is beginning to persuade markets that this could be achieved
sooner than Mr. Carney had planned for, thus forcing up interest rates earlier than
he would like.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Furthermore some commentators don’t like the shape and smell
of the recovery that is taking place.
They point to a recovery led by consumer spending and rising house
prices inevitably fuelled by debt which can only lead us back to where we
started. Clearly if that is all we get
then it is not what we need. What we
need is growth from investment and exports and a rebalancing of the economy
away from government and consumer spending.
This is a difficult course for Mr. Carney to steer. In particular he needs to keep interest rates
and the value of the pound low but he has to do this without increasing inflation. The key to this is finding the answer to:</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">The productivity puzzle</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In a short article last week in the Thursday’s Daily
Telegraph Philip Aldrick highlighted the “British productivity puzzle”. This puzzle is <i>“Why do companies require more
staff today to produce the same amount they did yesterday? On an output per worker basis, the <st1:country-region w:st="on">UK</st1:country-region> is now 4pc less productive than it was in
early 2008, has underperformed the G7 average and is way off the pace set by
the <st1:country-region w:st="on">US</st1:country-region>”</i>.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Mr. Aldrick points out that no one really knows the answer
to this puzzle and Mr. Carney
has been wise to accept he doesn't either. Setting the 7pc unemployment trigger before consideration of interest rate
rises may provide the opportunity for him to get clear on what is really going
on. If the economy grows without a fall
in unemployment this will mean the <st1:country-region w:st="on">UK</st1:country-region> is making up the productivity
lost ground and interest rates can stay low.
If unemployment falls fast then it means the economy has permanently
lost potential and consequently inflation is a real threat. However this would enable BoE to recalibrate
monetary policy to tackle what is really wrong with the patient.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">If the latter turns out to be the case, then taking the
medicine will not be pleasant. I will be
exploring this productivity issue further in next week’s <b><i>TWb4TW</i></b> as I feel it is
a crucial challenge for all businesses. In
the meantime read Philip Aldrick’s full article <a href="http://www.telegraph.co.uk/finance/bank-of-england/10243499/Mark-Carney-ties-interest-rates-to-the-UKs-known-unknown.html">here</a>.</span></div>
<br />
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
<div class="MsoNormal">
<br /></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-89191112175374274462013-07-30T04:51:00.000-07:002013-07-30T04:55:10.621-07:00Week ending 26th July 2013<h3>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Bound to end in tears</span></span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><st1:country-region w:st="on">China</st1:country-region>
provides a news item most weeks but last week was a little different. Instead of the focus being on the economy the
big headline was about the accusations from the Chinese authorities that GSK
executives in <st1:country-region w:st="on">China</st1:country-region>
had been bribing doctors and other medical professionals to prescribe GSK
drugs. This caused me to think about the
nature of selling and sales people.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">For many years there has been a school of thought amongst
many business leaders and especially sales managements that sales people are
primarily motivated by money and status.
The money being both the means of acquiring and of demonstrating
status. So generous sales commission
schemes are devised often including other “perks” such as top of the range company
vehicles and access to exclusive events in the name of corporate entertaining. In many sales driven businesses such as the
drug companies, computer systems and banks in recent years, sales people are seen as the king and queen pins and their reward packages and status in the company reflect this.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This has bred a culture where as long as you got the sale
any questionable practices around how you got the sale would be overlooked or
even encouraged. If you incentivise
people to earn a lot of money in a short time don’t be surprised if that is
exactly what they go and do. And, don’t
be surprised about HOW they go about doing it!
Because it is all about money, moral and ethical considerations just get
lost.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">I believe GSK’s Chief Exec Andrew Witty is genuinely
disappointed and shocked by what some of his people in <st1:country-region w:st="on">China</st1:country-region> have been
up to. However when he looks closer he
should not be surprised. The cause and
effect from the incentives for his sales people in an environment where medical
professionals cannot make a decent living unless they accept kickbacks meant it
was bound to happen. What is more this
is a classic example of how unethical practices will eventually turn round and
bite you. When appointed earlier this
year President Xi Jinping announced that cracking down on corruption would be a
priority for his administration. So a
crackdown involving a high profile foreign owned global business is just what
the Chinese authorities would have wished for and will use to maximum effect.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Is there another way?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This leaves us with a question, just how do you motivate
sales people? If financial reward
carries the risk of encouraging bad practices with expensive consequences just
how do you get your sales force out of bed in the morning?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In my career I have come across a number of very successful
sales people who do not seem to be motivated primarily by money. Because they are successful they earn
plenty of it, but it does not seem to have been their primary motivation for
working hard and winning business.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">What they seem to have in common is the conscious or
unconscious understanding that selling is about understanding the customer’s
problem first and then offering a solution.
They seem to be particularly skilled in “needs identification”, really
getting to understand the customer’s needs and in many cases helping the
customer to understand what their needs really are, as opposed to what they
think they are. These kinds of sales
people seem to get a real buzz out of how this builds relationships with their
customers and how this in turn drives sales success.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This switches the focus away from me and my needs on to the
customer and their needs and this is what changes the moral and ethical
dimensions in the relationship. The
process changes from “selling to” to “getting bought by”. Ah, I hear you say what if the customer’s
need includes a free holiday in the <st1:country-region w:st="on">Bahamas?</st1:country-region> However sales people who “get bought” seem to
have the ability to differentiate between the needs of the customer as opposed
to the personal needs of the individual buyers involved. They seem to be able to spot when these cross
the line when a buyer’s personal needs and motivations may be detrimental
to the customer’s needs. They become
skilled in handling these situations, including being prepared to walk away from
“bad business”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Sales people who “get bought” invariably in my experience
are amongst the top performers in most sales forces. However when they are
successful a strange thing can happen.
Far from encouraging them to keep on doing whatever it is they are
doing, their employers start making life harder for them. Because they are earning lots of money from a
commission structure designed to motivate the average performer to work a bit
harder, they find their targets are increased whilst others are
left alone. They are required to report
to managers who are far less experienced and competent than they are. Often this involves them being subjected to
sales performance management systems that have little to do with sales or
performance management.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Inevitably this leads to these top performers leaving,
either to retire early, join a competitor or set up their own business in
competition with their previous employer.
Often this means they take the business with them because they have the
relationship with the customers, their employer doesn’t. They also know what their customers did not
like about their previous employer’s offer, giving them an immediate
competitive edge if they set up their own business.</span></div>
<div class="MsoNormal">
</div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Why does this happen?
Well I believe this is a demonstration of what happens when opposing
moral and ethical outlooks collide. The
people who understand that doing the right thing and doing it really well
delivers the best results vs. those who believe that doing whatever it takes to
deliver results for them and now is the way to do things. The lessons only get learnt when the
consequences of the latter approach become apparent, possibly in the shape of a
Chinese anti-corruption official. By
which time of course it is too late!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-12246617692692980722013-07-23T01:32:00.000-07:002013-07-23T01:32:00.701-07:00Week ending 19th July 2013<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Don't even mention more taxes!</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week began with Dalton Phillips, Chief Exec of
Morrison’s backing Sainsbury’s Jason King’s call for an online sales tax as a
way of leveling the playing field between online retailers and those with
physical shops.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Now the treasury is quite capable of dreaming up new taxes
without any help from the rest of us. I
fear that Treasury officials will already be licking their lips over this one,
so don’t encourage them. Governments of
all political persuasions just cannot resist taxing us any way they can and
spending the money on our behalf. They
especially like taxing business because businesses do not have a vote.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So whilst George Osborne trumpets his reductions in
corporation tax to “one of the lowest levels in the OECD” by 2015 he does
nothing about business rates and employment taxes. For those retailers that are physical space
intensive and employee intensive these taxes are far more significant than
corporation tax, and it is not dissimilar for many other sectors. As business people and as individual voters
we must hold government to task on the totality of the tax take. Whilst recognising the need to tackle the
deficit now in the longer term a “real” low tax economy for individuals and for
business is a more likely means of securing and sustaining economic growth.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Dropping BRICs</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">It seems like only yesterday that we were all being urged to
“rebalance” the economy and focus on the fast growing economies in Asia, South
America and <st1:country-region w:st="on">Russia</st1:country-region>. Forget tired old Europe and clapped out <st1:country-region w:st="on">USA</st1:country-region>, they said,
the BRICs are where the action is.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Well <st1:country-region w:st="on">Brazil</st1:country-region>’s
growth has ground to a halt as the commodities boom fades. <st1:country-region w:st="on">Russia</st1:country-region>’s economy is entirely
dependent on raw materials and energy exports with little sign of any reform of
its business and industrial practices. <st1:country-region w:st="on">India</st1:country-region> is
bedevilled with a political culture that is 30 years behind the game it now
needs to play to fulfill its potential.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">That leaves <st1:country-region w:st="on">China</st1:country-region>. At the beginning of last week it seemed that
Chinese growth figures were coming in a bit higher than feared. Mind you we seem to get Chinese growth
figures of various kinds about twice a week, so which ones we should really take
notice of is anyone’s guess. What
doesn’t help is the growing suspicion that the official figures are painting a
much rosier growth picture than is actually the case. (Surprise, surprise - or should that be
supplies?) By the end of the week some
commentators were talking of just 2% growth or even that the Chinese economy
was reaching the point of deflation.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The challenge for all the BRIC countries is that what has
got them to where they are now is unlikely to get them much further. What is needed is reform, political, economic
and cultural. However, as in <st1:place w:st="on">Europe</st1:place> the politicians seem completely unable to face up
to this, much less actually do anything.
So anything could happen, but it could be sudden, uncontrolled and not
good for any of us.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Insurers opting out</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The moral and ethical bankruptcy in the banking world that
led directly to the financial crisis seems also to have infected the
insurers. Last week one of the countries
biggest insurers Swinton was fined £7m by the Financial Conduct Authority
(FCA). This was for selling “add-ons" to
customers that they had to opt out of.
This was not made clear to customers and Swinton made an extra £92m from
selling policy add-ons that customers neither wanted nor needed. To quote the FCA “Swinton did not place the
customers at the heart of its business <i>(no actual “heart” detected – my insert)</i>. Instead it prioritised profit”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The next day esure’s house broker JP Morgan announced that esure’s
revenue growth this year would be two-thirds lower due to a regulatory market
review into the sale of add-on opt policies.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In other words, “if the Swinton fine means esure are
prohibited from stiffing their customers then they probably won’t make as much
money”. Are things that bad that the
only way they can think of to make money is to cheat their customers and the
only reason they might stop doing this is if the regulators ban them from doing
it? If financial services are to
continue to be a significant component of our economy then this sort of
behaviour has to stop. Major reform is
needed but will we get it? Don’t hold
your breath.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Co-op blues</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Talking of stiffing customers the caring sharing Co-op is
having to stiff a large number of pensioner bond holders in a desperate attempt
to rescue the Co-op bank. Who would
imagine that the Co-op, the mutual which has been held up as the “ethical bank”
is now punishing pensioners for being silly enough to believe that they were
investing in a low risk investment with the Co-op. I mean come on who ever heard of “high risk”
and the Co-op being in anyway synonymous!
Even if you read the small print you wouldn’t believe it.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Just when you might have thought it couldn’t get much worse
for the Co-op, it did. Last month in
their retail business, in spite of sales rising by 0.2pc after four months of
decline, the Co-op’s market share fell from 6.6pc to 6.4pc. The continuing loss of market share means
that the Co-op is the worst performing major grocery retailer in the <st1:country-region w:st="on">UK</st1:country-region>.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Things are bad for the Co-op. It is by no means certain that they can get
agreement to the rescue package for the bank and now that its core business is
in decline, you can actually see the writing on the wall. Again major reform will be needed, but is
this organisation up for that? Probably
not.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Kate does the right thing</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">No not that Kate, but Kate Bostock, former head of M&S
clothing who moved to Asos 6 months ago as head of product and trading. Ms. Bostock has decided that “Asos isn’t the
right place for me” and has left the online retailer.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Whilst she won’t be short of other offers I say respect to
Ms. Bostock for realising she was in the wrong place and doing something about
it. No severance package either,
bankers, the BBC, SFO, NHS and nearly everybody else take note!</span></div>
<br />
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One thought occurs.
Ms. Bostock has spent her career with bricks and mortar retailers like Next,
George and M&S. Does the fact that
she found she could not adapt to a rapidly growing, highly innovative online
business with a fast moving culture say something about why a number of established
businesses have struggled with their online offers. In order to create a different business successfully
do you actually need a completely new business with new people?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-6037382892643799042013-07-10T11:44:00.003-07:002013-07-11T06:29:27.474-07:00Week ending 5th July 2013<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">What’s Ocado?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week’s theme for <i><b>TWb4TW</b></i> was the reality of unreality in
business, economics and especially politics today. Along similar lines a few of last business
stories I noted prompted the thought “what is really going on here?”. The first of these concerned Ocado the online
grocer.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Launched a decade ago and yet to make a full year profit Ocado
claimed it would revolutionise the supermarket sector. The foundation for the launch of the business
was the deal with Waitrose. This gave
Ocado some scale in its early days and provided Waitrose with a short cut into
an online business. This all looked good
at the time but since then Ocado somehow never seems to be quite getting
there. It is always the next investment,
systems, distribution centre or whatever that will crack it, but still no
profit.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So some excitement a few weeks ago when Ocado announced its
deal with Morrisons giving them more or less the same leg up into online as it
provided for Waitrose. On the face of it
this could provide the extra scale through Ocado’s operations to lift it into
profit. One small problem could be
Ocado’s existing contract with Waitrose.
“Not a problem” they say, “we will have to look at this carefully” say
Waitrose. What this has prompted though is
a change of view on where the value is in Ocado. Perhaps it’s not in being a
stand alone online supermarket, but in its technology, systems and the
facilities that Ocado have developed to power an online business.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Ocado Chief Tim Steiner has previously hinted that his
company has developed superior systems and facilities to other online
supermarket businesses. I say “hinted”
because he has not really spelled out precisely what is the competitive
advantage this gives Ocado. Nor have we
seen a clear demonstration of this competitive advantage in action. Perhaps Morrisons have seen it which is why
they have done the deal with Ocado, although they have been surprisingly quiet
since the deal was announced.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week Tim Steiner said that since the Morrisons deal
Ocado has been visited by companies from around the world and “there was a lot
of interest” from those looking to launch their own online ordering
services. So what is going on? Is Ocado a stand alone online grocer or could
it become a service provider? Is it
worth more for what it does or what it knows?
If it is worth more for what it knows does it know how to turn that into
shareholder value? So far it has failed
to prove itself in this respect as an online grocer or service provider, a
problem often found in businesses that are uncertain of what they are there for
and what they are good at.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Battersea déjà vu</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week we had the latest launch of an £8bn redevelopment project for Battersea power station, attended by the Prime
Minister, Mayor of London and the Prime Minister of Malaysia. The latter attended because last year a
Malaysian consortium bought the derelict site for £400m.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">David Cameron promised that this time the redevelopment will
definitely happen. Mr. Najib the Malaysian
Prime Minister declared “we are partners in prosperity”. Boris asked “Does anyone seriously doubt that
this amazing scheme is actually going ahead? No is the answer”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Well Boris, I for one do have doubts, because some of us are
old enough to remember we have been here before - several times. Since being decommissioned 30 years ago there
have been three previous failed redevelopment proposals that never passed go and
numerous discussions with interested parties that got nowhere either. The main parts of the existing building are
listed and some of the scaffolding on the site has been there so long it is
probably listed as well by now.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So my question is what is so different this time? What is going on with this deal that makes it
any more likely to proceed and to be completed than any of its predecessors? There was nothing in the political rhetoric
at the launch last week that even hinted at what this might be and the event
itself was no different to those that have preceded it.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One question I would like to know the answer to is has the
Malaysian consortium actually paid over the £400m for the site? They may well have in which case that would be the first step completed, some of the previous attempts didn't get that far. Or they may not have, which
may be for perfectly good reasons at this stage. However when projects like this unravel it is
not uncommon to find that the basic first steps were never completed so
unreality never got close to becoming reality.
We really need to know if this significant and important redevelopment
project, with all the implications it has for jobs and growth has more than
Boris’ enthusiasm behind it.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Business rates – the elephant on the high street?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Bricks and mortar retailers are getting hot under the collar
about business rates. Boots, John Lewis,
Tesco and Sainsbury’s have all called for a rebalancing of the system, claiming
the current system unfairly penalises retailers with physical stores compared
with online retailers.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week Sir Philip Green, owner of Top Shop and <st1:place w:st="on">Arcadia</st1:place> waded into the
argument at a hearing of the Commons Select Committee on Business. However rather than just continuing with the
“unfair” line, he claimed that government is using the uniform business rate
mechanism to keep business rates high and ensure they don’t lose any
revenue. For years retail property rents
went only one way, upwards and upward only rent reviews were common in rental
agreements. Business rates went the same
way as they were linked to valuation which in turn is determined by rental
yield. Time went on and business rates became a major source of government
revenue. No one seemed to question this,
even though it was clearly unsustainable.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This was proven to be unsustainable when following the
financial crash in 2008, valuations and rents on retail properties in many
areas went down, as tenants threatened to close units if landlords did not
lower rents. However business rates did
not because, as Sir Philip pointed out the government “can inflate the uniform
business rate above RPI, so keeping their tax revenues in line. They fix it so they don’t lose any
revenue”. He gave the example of one of
his stores where the rent has come down from £500, 000 to £125,000 over a 5
year period but the rates have stayed the same at £277,000. Sir Philip believes this should now be nearer
£50,000. He also proposed a business
rates freeze and that small retailers should only pay a nominal sum, both of
which could be achieved without any legislative change.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The government claims to be concerned about the decline of
the high street and has put up £1.2m under the High Street Innovation scheme to
finance a number of “Portas Pilot” projects to revitalise a number of selected
high streets. Also the Chancellor has brought forward phased reductions in
corporation tax claiming that this will give the <st1:country-region w:st="on">UK</st1:country-region> one of the most competitive business
tax regimes in the developed world. However as Alex Gourlay, Chief Exec of
Alliance Boots pointed out that for his company of the total of corporation
tax, business rates and employment taxes, two thirds is now made up of the
indirect business rates and employment taxes.
Reducing the tax on profits which the government is making more
difficult to earn by inflating occupancy and employment taxes is not a low
business tax regime.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So what is going on? Has
it not occurred to those in government that they can reduce costs of occupancy
and employment for shops? Or perhaps it
has occurred to them but they want to preserve the tax revenues, so teaming up
with a TV personality to launch yet another “innovation” scheme is an attempt
to distract us from what is really going on?
Sir Philip may well have lifted the lid on something really significant
here. Namely that it is the government
itself that is making the disparity in operating costs between physical shops
and online greater than it needs to be.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">One for the Guvnor</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Once again the BoE left base rates at an historic low. On the face of it the first act by the new
governor Mark Carney was to do exactly what his predecessor has been doing. However there was a big difference because he
followed up by stating clearly that interest rates would remain low for some time
to come. The reason for this is that the
economic recovery remains weak so any upward move in interest rates would be highly
detrimental for the foreseeable future.</span></div>
<br />
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So in stark contrast to his predecessor who never commented
on the future path of interest rates, Mr. Carney has told us plainly what is
going on and why. What is more it all
makes sense so a good start from the new governor.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-82291060075349256622013-06-30T09:33:00.000-07:002013-06-30T09:33:49.589-07:00Week ending 28th June 2013<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">We didn’t really mean it</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><b><i>TWb4TW</i></b> is back after a well earned holiday for me and then a
longer period of catching up than I had anticipated.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One of the things I noticed when I returned from holiday was
that the FTSE100 which had been a galloping over the 6,600 mark before I went
away was now retreating towards 6,000.
This is doing my pension pot no good at all. I expected you all to be able to sustain a
rose tinted view of the markets a little longer.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This change of sentiment has apparently brought on by the <st1:country-region w:st="on">US</st1:country-region> authorities stating that they would begin to
pull back on quantitative easing as the <st1:country-region w:st="on">US</st1:country-region> economy improved and that this
could start sooner rather than later.
Now my understanding of the need for QE as that given the dire state of the
world economy governments have been forced to print money before we all ran out
the stuff altogether. So I naively
thought that news from the <st1:country-region w:st="on">US</st1:country-region>
that their economy could be improving to the point where QE was no longer
necessary might be good news. Not so
because the financial world has been gorging itself on virtually free money and
it can no longer imagine how it could manage without it. </span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">By Tuesday things were getting so bad that the old line
about <st1:country-region w:st="on">Italy</st1:country-region>
needing a bail out was being trotted out.
This always seems to happen whenever the financial world takes
fright. I am beginning to suspect that
this a means of getting governments to panic and reverse any necessary but
unwelcome decisions they may have made.
“Oh no not <st1:country-region w:st="on">Italy</st1:country-region>
we must do something”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So by the end of the week the <st1:country-region w:st="on">US</st1:country-region>
authorities were frantically rowing back saying that reducing stimulus measures
would depend on the <st1:country-region w:st="on">US</st1:country-region>
economy recovering. Quite why this was
different to what they had said previously I am not clear on. However it appears to have done the trick as
the markets have recovered to a degree.
It really is a question of which unreality you would like to believe in. What this also demonstrates is that you need
not worry if you don’t like the unreality you have now; there will be another
along soon.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">All out at Yahoo</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Talking of unrealities, the Yahoo share price has increased
by near 70% since the latest CEO Marissa Mayer joined the company 12 months ago.
Even so she found herself on the receiving end of a vote from two significant
pension fund share holders calling for the whole board to be removed. Given the speed at which directors
arrive and then depart at Yahoo (4 CEOs in 4 years and 11 of the 12 current
directors only joined in 2012) you could be forgiven for asking “which board of
directors exactly?”</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So what do these shareholders want, blood? Mayer has cut 1,000 staff and bought Tumblr
so she has been active. However Yahoo
shows no sign of actually getting good at anything. They recently made a mess of taking on Sky’s
e-mail operation in the UK (one of my business partners is still trying to
recover) and lost an existing BT e–mail contract due to concerns about
security. Both pretty basic you would
think and if Yahoo can’t get this right what can they do right?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The issue is where and how Yahoo is going to find a way of
growing but there is no sign of any clear direction on this from the Yahoo
board. Pension fund investors are not
going to be happy to let that situation continue for long. However they should not worry if they don’t
like the current board, because given Yahoo’s track record there will be
another one along soon.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">My bonus, now you see it now you don't</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Continuing with the unreality theme it was announced First Group's accounts published last week that CE Tim O’Toole has waived a bonus of 70% of his salary. This is
the second year running he has done this. Very good of him you might think given First
Group’s difficulties and perhaps a good example to others.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Hang on a minute how an earth could a CEO who has presided
over a 37pc drop in profits and been forced into a rights issue to avoid a
damaging downgrade of its credit rating qualify for a bonus in the first
place? Perhaps the idea is to award your
CE a bonus so that they can then turn it down and make themselves and the
company look good. Either way it seems that when it comes to reward for work done there is still the real world for most of
us and then the unreal world inhabited by senior public company executives and
their remuneration committees.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Reality catching up with Google?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In <b><i>TWb4TW</i></b> at the end of May I said that the high profile
wrestling match between Google and the Parliamentary Accounts Committee over
the amount of <st1:country-region w:st="on">UK</st1:country-region>
corporation tax it doesn’t pay was changing consumer perceptions of the
company. It’s “do no evil” mantra is
looking increasingly fragile and at some point customers will find a way of
punishing Google.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Well just a month later this is what has started to
happen. In 2012’s branding survey from
M&C Saatchi Google was named fifth most desirable brand. In 2013’s survey it has fallen out of the top
twenty and was the worst performing media brand in the <st1:country-region w:st="on">UK</st1:country-region>, even worse
than the BBC after the Savile scandal. A
similar survey In Australia reported Google’s brand desirability dropping 20pc,
again due to the tax avoidance factor.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So even though we like a lot of what Google offers us we
don’t actually like Google as much as we did.
This is what happened with Tesco and what Starbucks realised was
happening to them. So wake up Mr. Google,
maybe reality is about to catch up with you.</span></div>
<br />
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Mind you I don’t suppose the name “Saatchi” will be all that
desirable either after Charles Saatchi’s treatment of his wife as captured on
camera recently.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-79254825933261638962013-05-29T04:43:00.001-07:002013-05-29T04:48:35.257-07:00Week ending 24th May 2013<h3>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">Change is coming – but what change?</span></span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Either because there really are some positive signs of
growth in the economy or because everyone is bored with being miserable the
media are beginning to talk about the possibility of better times ahead. However, just in case optimism breaks out our
attention is also being drawn to some of the implications of economic recovery.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One of these is interest rates. BoE base rate has been at a record low of
0.5pc for four years now. Should
economic activity pick up then how long can this continue? The BoE allowed price inflation
to rise as they judged correctly that this was unlikely to produce wage
inflation whilst the economy remains subdued.
However if the economy really does start to grow then wage increases
are likely to be one of the consequences.
If this was to happen the BoE would have to increase base rates to
dampen demand so as to head off inflation.
Even base rates of 2 - 3 pc, previously regarded as low could, on the
face of it, have significant implications for many already stretched consumer
and business borrowers.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So are we damned if we don’t grow and damned if we do? Well as with many aspects of this recession and
its aftermath little is straightforward.
Mortgage lending fell for an unprecedented fourth consecutive month in
April with householders paying off £241m more than they borrowed. There appears to be a change in mindset
amongst consumers resulting in little appetite for borrowing. Similarly with businesses, whilst investment
intentions amongst SMEs appear to be on the up this is mainly for replacing
older plant rather than for expansion. A
combination of lack of confidence about growth prospects plus a lack of trust
in their banks appears to have blunted business’ appetite for borrowing as
well.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So an increase in interest rates may not have the effect we
might expect. Furthermore the actual
interest rates being paid by many consumer and business borrowers are much
higher than the low base rate would imply and was supposed to bring about. A combination of restricted supply of credit,
lenders being more risk averse and attempting to increase their margins has
pushed rates up. Of course if base rate
rises then lenders will attempt to pass on the increase to borrowers but this
may not be so easy to do. RBS alone
currently has £20bn of deposits for lending to businesses but can’t find any
takers.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">What it all adds up to is that some change is coming but
what changes and what the effects will be are far from certain and very
difficult to forecast. We did not know
what the effect of a record low base rate would be or of printing money on the
scale we have been. Now we do, but we
don’t know what will happen when (and it is when and not if) these measures
start to be reversed. We don’t know
because we have not been here before.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Now is the time to test your business model against a range
of possible change scenarios. Ask what
might go up, what might go down, what would the effects be on your business
model and could you respond fast enough? The option of just sitting there and waiting
to see what happens is now a high risk strategy.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Getting “radical” at M&S</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Talking of sitting and then talking and then talking some
more but not doing anything, I noted some comments last week from M&S
Chairman Robert Swannell in connection with the underwhelming annual results.
He declared that the changes being made in the business were “one of the most
radical transformations in British retail or indeed in European retail, any
European business of scale”. He didn’t
quite go on to add “or in the world or even the universe”, but what he did say
was “the board has spent the last two and a half years talking about this
plan”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Two and half years “talking” about this plan! I know that oil tankers can take a while to
turn round but if you spend two and a half years talking about the plan to turn
it round you will likely discover that when you come to turn the wheel you are
already stuck on the rocks. When
competitors like Zara can get new lines into their stores in two and half
weeks, how on earth can the M&S board think it has the luxury of two and
half years to talk about its plan for change!
If that’s”radical"”, then I am a left handed teacup! Change is coming, get ready now.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Yahoo promises not to screw up</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Talking of “radical” in an unprecedented statement on the
acquisition of blogging website Tumblr for $1.1bn, Yahoo’s (latest) CE Marissa
Mayer promised “not to screw it up”. By
this she meant Tumblr would be operated independently, founder David Karp would
remain as CEO and generally they would be left to get on with what has made
Tumblr successful to date. That success
however does not include making anything much in the way of profit.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Yahoo’s problem is that they don’t any longer have an
audience. Their strategy now is to buy
other peoples’ audiences, which in addition to Tumblr has included Astrid,
described as a “get it done” app (or diary to you and me) for an “undisclosed
sum” and of course Summly, the mobile news app for $30m. However Ms Mayer’s promise not to “screw it
up” refers to Yahoo’s previous acquisitions which include Flickr, Delicious,
Broadcast.com and Geocities. Remember
them, probably not.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The real challenge for a corporate such as Yahoo is that it
is not so much will it screw up the business but will it screw up the
people? Tumblr especially is all about
David Karp and his team. Ms Mayer has
already upset many Yahoo employees by banning working from home. With $250m in his bank account how long
before Mr. Karp gets fed up with being required to be “in the office” whenever
Ms Mayer wants him there? Saying one
thing and then doing something which is completely at odds with what you say
will screw up the people faster than anything else you can think of.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">He saw it coming, but wasn't watching</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Talking of screw ups last week saw the departure of Nick
Buckles, CE of G4S. In spite of the
botched attempt to acquire ISS and the Olympics fiasco, Mr. Buckles had
retained the backing of shareholders.
However a recent profits warning that took 15pc off the share price was one
“misfortune” too many and he realised he had to go. He went so fast (his successor has only been
in the business seven weeks!) that I think he had been expecting that his time
at G4S did not have long to go in any case.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The curious thing about Mr. Buckles track record at G4S is
that overall it is not bad. The share
price has outperformed the FTSE by 174pc during his tenure. So what went wrong?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">My take on this is that he did not know when to get involved
in the detail to make sure a robust process was in place and working to get the
intended result. I know he was the boss
of a very big company but there are times when you have to get more closely
involved in the ball game in order to win.
On the Olympics I find it staggering that on such a high profile
project with huge risk both financially and to reputation if it went wrong that
Mr. Buckles was not monitoring it closely day by day. It is clear that the failings were as big a
surprise to him as to anyone.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This is not about doing other people’s job for them but it
is about making sure they are doing the job you expect them to do.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-84360348962178420142013-05-21T07:43:00.000-07:002013-05-21T08:11:44.915-07:00Week ending 17th May 2013<h3>
<span style="font-family: Verdana, sans-serif;"><span style="font-size: small;">I know best</span></span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The National Audit Office’s (NAO) job is to monitor
government spending on behalf of MPs. It
does this rather well, producing robust, well researched reports which in many
instances highlight government mismanagement and waste. The NAO maintains its independence from government
and tells it like it is. So the NAO is a
really good thing or least you would think so. Well it would be if governments took any
notice, but they don’t. They just
receive the reports and completely ignore them.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week the NAO produced a report on HS2 which casts
serious doubt on whether any of the benefits claimed for this £37bn project
would ever be achieved and on whether the project can be delivered within the
time frames that have been set.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">It also criticised the DfT for basing the business case for
HS2 on data more than ten years old.
Previously my concern was that by the time it was built, the basis on
which the investment decision was made could be ten years out of date. It now appears it already is 10 years out of
date.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The response from Patrick McLoughlin, the Transport
Secretary was to accuse the NAO of depending “too much on out of date
analysis”, so you can see how much notice he is going to take. The message to the voters and tax payers is
that HS2 is good for you so that is what you are going to get (and pay for).</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Not listening by politicians and business leaders is
starting to stir up forces that could have unexpected consequences, for
example.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Who likes the EU?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The EU has once again moved to centre stage in British
politics. However a survey published
last week indicated that <st1:country-region w:st="on">UK</st1:country-region>
voters are not alone in having doubts about the benefits of EU membership. This revealed that the proportion of Europeans
with a favourable view of the EU has fallen from 60pc to 41pc. The French are now more Eurosceptic than us
Brits with backing for the EU falling to 41pc compared to 43pc in <st1:country-region w:st="on">Britain</st1:country-region>.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This indicates that we are all members of a club that the
majority of us now don’t much like. However
with a few exceptions the political and civil service classes (hard to tell the
difference these days) throughout the EU still seem as keen as ever on the
“European Project”. Even in the <st1:place w:st="on">UK</st1:place>
whilst the Tory party is clearly split, Labour and the Lib Dems are adamant
that our future is within the EU.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Politicians often accuse each other of “being out of
touch”. However is it more that the
political classes as a whole are now out of touch with the rest of us? The
tensions between voters and politicians are growing and could produce very
different kinds of election results as voters seek to punish politicians who
they feel no longer represent their interests and don’t listen to their
concerns. This could produce a very different
political landscape to that we have been used to with the current coalition
government being just the first taste.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Google play on words</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">A sign that someone is having difficulty maintaining an
argument that they had thought previously was cast iron is when they start to
fall back on semantics to justify their position.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week Matt Brittin, VP of Google’s northern <st1:place w:st="on">Europe</st1:place> operations was back in front of the Public
Accounts Committee having his soft bits squeezed yet again on how much tax
Google does not pay. Since his last
visit a number of whistleblowers have come forward claiming that Google does
carry out sales activities in the <st1:country-region w:st="on">UK</st1:country-region>.
This is contrary to the company’s claims that all its European
advertising sales are routed through its European HQ in <st1:country-region w:st="on">Ireland</st1:country-region>. Mr. Brittin acknowledged that “clients may
well feel that we are selling [in the <st1:country-region w:st="on">UK</st1:country-region>]. But what is very clear is that no one in the <st1:country-region w:st="on">UK</st1:country-region> can execute
a transaction”. He refused to admit
that an earlier statement that “nobody is selling” had been misleading. He said “The UK team are selling, but they
are not closing”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Oh dear Mr. Brittin, you really are getting desperate. If it wasn’t for the politicians on the PAC
not understanding what the terms “selling” and “closing” mean and HMRC being
completely out of its depth when dealing with big multinational corporations
you would be dead meat by now. It is not
just the politicians that are out of touch and not listening, it is business
leaders like Mr. Brittin as well. Watch
out Google because the rest of us will eventually find a way of punishing you,
even if we can’t think how to do that right now.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">And if anyone was wondering what happened to the £20m
voluntary contribution to the Exchequer from Starbucks, well it hasn’t been
paid yet but according to a Starbucks spokesman they are “on track” to make the
payments.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Rising Sun</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">A few weeks ago I mentioned the huge monetary easing ($75bn
a month!) launched in <st1:country-region w:st="on">Japan</st1:country-region>
as the strategy for finally defeating more than 20 years of economic
stagnation. At that time no one could
predict what would happen as nothing on this scale has been attempted before.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Now we know a bit more as the first thing that has happened
is the Japanese have repatriated funds to enjoy a boom at home rather than
investing in foreign bonds, but this may be about to change or it may not. It is early days and anything could happen. What else has happened is that <st1:place w:st="on">Japan</st1:place>’s
economy grew by 3.5pc in the first quarter, the Nikkei Index is up by 70pc
since October and the yen has devalued by over 30pc against the dollar, yuan
and euro. This is causing concern for
other Asian exporting economies, especially for <st1:country-region w:st="on">China</st1:country-region> and if the Germans aren’t
worried yet then they should be. So not
only do we not know what is going to happen, when it does we have no idea what
the consequences will be.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>And finally</i></span><br />
<span style="font-family: Verdana, sans-serif;"><i><br /></i></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Burning issues</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The French have come up with a new economic indicator,
burning vehicles. Whenever the French
express dissatisfaction with the EU or anything else it often involves setting
fire to vehicles. I saw a report last
week that they manage to burn between 42,000 and 60,000 vehicles annually. I don’t know how we do by comparison but I am
pretty sure we don’t match (no pun intended) “l’incendie francais”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Apparently, as the French economy deteriorates the rate of
vehicle burning is increasing, with nearly 1,200 vehicles reported burned over
News Year’s Eve and New Year’s Day alone.
It is feared that growing social unrest could hamper the French
government’s ability to push through the economic reforms that are required.
However as President Hollande’s entire political philosophy is based on not
doing what is required in this respect this is hardly relevant. On the other hand if they burn enough
vehicles then this could spark (again no pun intended) a revival in French car
manufacturing leading to economic recovery.
<i>Aux barricades citoyens!</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">A facetious conclusion perhaps and not to be taken
seriously? Well I hope I have
illustrated above that there are economic and political forces stirring that we
have not experienced for many years, if at all.
Stranger things than burning your way back to economic growth could
happen with unexpected consequences that we will have to respond to. <i><b><a href="http://www.businessbreakthroughcoaching.com/changeability.html">Changeability</a></b></i> for businesses and business
people has never been more significant for determining who will be the winners
and who the losers.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-47790649558361859822013-05-13T07:35:00.001-07:002013-05-13T07:51:14.829-07:00Week ending 10th May 2013<br />
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Feeling flat</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Looking back on last week, apart from Leicester Tigers
beating Harlequins to go through to the Aviva Premiership final I found little to get excited about. We had the
Queen’s speech at the state opening of parliament but this was so uninspiring
that now I can’t remember what was in it.
We discovered that we did not after all have a double dip recession and
were therefore never in danger of having a triple dip. However I can’t feel inspired or even
relieved about something that didn’t happen, even if this means something else isn’t
going to happen. The FTSE 100 climbed
back over 6600 for the first time since October 2007, but so what, after all we
have been here before. We might or we
might not have a referendum on our membership of the EU and we had yet another
report, this time from the Transport Select Committee on what to do or not do
about a third runway at Heathrow.
Wouldn’t it make a change if just for once someone produced a report on
what to do and we just got on and did it!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So, from what for me was a week that I have already almost
forgotten, here are a few items that I believe do merit some attention.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">It’s the productivity stupid!</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Politicians and the media do seem to get excited over 0.1pc
differences in GDP, one way or the other.
However what really matters is the actual growth potential in the <st1:country-region w:st="on">UK</st1:country-region> economy. Currently that growth potential is only about
2pc per year. Anything over this, whilst
it can feel good in the short term, risks overheating, which manifests itself
in inflation and/or some form of bubble, such as in property or the financial
sector. This is because we just don’t
have the economic <a href="http://www.businessbreakthroughcoaching.com/competitivestrengthdefinition.html">“competitive strength”</a> to sustain growth much above this
level, because our national productivity is not increasing sufficiently to
underpin higher growth levels.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So 0.1pc is a whole twentieth of our current growth
potential, which is or should be a bit alarming if you think about it. Even if we could achieve and sustain growth
of just 2pc per year this would still mean a steady long term decline in living
standards, so the productivity issue really matters. For government improving productivity would
mean that instead of just producing reports on a third runway we would actually
build one. For the individual business
it means continuously improving everything you do – people, processes, customer
satisfaction to deliver long term sustainable growth in financial returns. Now that would be a bit more exciting!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Delicate <st1:country-region w:st="on">China</st1:country-region></span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Still on the growth theme reports last week indicated that <st1:country-region w:st="on">China</st1:country-region>’s
economic growth is beginning to falter again.
Everything is relative so even though the economy grew by 7.7pc in the
first quarter which may look a lot to us this was lower than expected. Lead indicators point to further slowing of
growth which could take GDP down towards just 6pc. This is the point at which the Chinese
economy would struggle to deliver the rate of growth in living standards that
the Chinese Communist Party (CCP) sees as being essential to its own long term
survival.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Not so long ago most economic experts believed the question
was not if but when the Chinese economy overtakes the <st1:place w:st="on">US</st1:place> to become the biggest in the
world. That view is now changing to
maybe never. Loss making and inefficient
state owned enterprises continue to dominate key sectors and have grown
fourfold since 2003. The ageing
population means that the workforce actually contracted by 3.5m last year. The growth from “catch up growth” based on
cheap exports and imported technology is fast running out of steam.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Huge cultural and structural changes in the economy and
politics will be needed to counter these headwinds. Whether these will be achieved will depend on
the outcome of a power struggle between reformists and anti- reform hardliners
in the CCP. We may well need to revisit
the <st1:country-region w:st="on">China</st1:country-region>
factor. It is not just the economics,
the politics really matter, much more so than in our own economy.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Be careful what you wish for</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">More than 20 years ago when I was working as a management
consultant I had a meeting with a senior director of Co-operative Insurance
(CIS). He believed the organisation
needed to change but was not hopeful that it ever would. The huge inflow of premiums on millions of
small policies from millions of policy holders had created a highly complacent
culture. “What we need” he told me “is
one really bad year”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Well it has taken over 20 years but last week we learnt that
they finally achieved this. It may have
taken a long time but they really have tried hard. First they merged CIS with the Co-op bank for
no apparent good reason and then in 2009 acquired Britannia Building Society,
again for no apparent good reason. Finally
they went for the 632 Lloyds branches under Project Verde.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Two weeks ago Co-op pulled out of Project Verde citing the
worsening growth prospects in the <st1:place w:st="on">UK</st1:place>.
Last week it had to admit to problems of its own mainly with the
Britannia commercial property portfolio, resulting in impairment provisions of £469m. There was also the little matter of £250m spent
on a new IT system. So finally they
achieved their “really bad year”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Unfortunately this was such a bad year that the Co-op has
gone from “challenger bank” to a bank with a big hole in its capital base and
“definitely not needing a government bailout” in just 2 weeks. It may be that the only solution for the
Co-op will be to sell off the bank, but with rather a lot of banking businesses
(around 10) likely to come into play over the next year, the prospects for a
sale are not encouraging.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The Co-op’s “ethical banking” positioning appealed to a lot
of customers and there is no doubt it achieved a high standards of customer
service which are valued by its customers.
In spite of this the bank did not achieve the level of <a href="http://www.businessbreakthroughcoaching.com/changeability.html">“Changeability”</a>
it needed to make a success of the projects it embarked upon. Lloyd’s staff and
regulators working on Project Verde found that the integration of Britannia had
barely begun and there was no concept of what had to be done to fix the
business. Thus proving once again that
whilst it is right to be “doing the right thing” in banking as in any other
business you have to do it really well if it is to pay off.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">BT’s sporting bet.</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week BT announced that it would be offering its 3 new
sports channels “free” to BT broadband customers.
In spite of losing a little ground on fears of a price war with Sky, BT’s
shares are at a 5 and half year high.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The bet they are placing is that in return for making little
or no profit from its TV business it will attract large number of customers to
its broadband service. Whilst not
perfect, the BT broadband service is better than most and certainly as good as
any so the platform is there.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Also like Sky they understand that if you attach football to
a media offer for some reason it seems to work.
BT will show 38 Premier League matches a season, the first time these
games will have been available free since the foundation of the Premier League. So this is a game changer and it remains to
be seen how Sky will respond.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">What is a first in my view is that BT has actually finally come
up with a commercial proposition that could make real sense to a lot of
customers. This really is about winning
and keeping customers not just about managing a decline in its customer
base. So has the giant finally awoken? Well there are still those call centres to
sort out!</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-69039783218642232382013-05-07T08:28:00.001-07:002013-05-07T08:28:14.825-07:00Week ending 3rd May 2013<br />
<div class="MsoNormal">
<i><span style="font-family: Verdana, sans-serif;">The purpose of <b>TWb4TW</b> is to comment on business
related stories from the previous week so as to highlight the lessons these
contain for the rest of us, before the stories and the lessons are gone and
forgotten.</span><span style="font-family: Verdana, sans-serif;"> </span><span style="font-family: Verdana, sans-serif;">Here’s a few from last week.</span></i></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">City Link decoupled (finally!)</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week Rentokil finally got rid of its loss making
parcels delivery business City Link, selling it for £1 to Jon Moulton’s private
equity group Better Capital. Rentokil took
a further £40m loss on the deal, taking total losses and write downs to over
£300m since it acquired City Link in 1993.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The problems with City Link really started in 2006 when
Rentokil acquired Target Express for £210m and attempted to combine the two
businesses. However whilst both delivered
parcels, the two businesses were very different. For a start City Link was a franchise
business, so the franchises needed to be all brought in-house. Then it had to integrate 70 different IT
systems with the Target systems and then rationalise the depot structure as
many depots were not suited to handling the volumes needed to make the
acquisition work.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Chief Exec Alan Brown arrived in 2008 to turn round Rentokil
and has been predicting a return to profit at City Link since 2009. However this was not to be and recently the
company were forced to admit that losses would continue in 2013.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However at least Brown and his team managed to get City Link
into a state where it could be sold, even if it was for £1. They are to be congratulated on recognising
the reality that they had to get rid of this business and focus on what they
are much better at. Having done all the
hard work it is tempting to carry on to reap a reward that looks within reach,
but in reality is unlikely to be achieved.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The biggest lesson from all this is why did Rentokil ever
get into the parcels delivery business in the first place? Their main businesses are in pest control,
hygiene services and work wear, all of which are services, using people with vehicles
to deliver the service to customers. So
on the face of parcels delivery is pretty similar. However Rentokil’s other businesses are based
on a contract model. For the most part
they know what they have to do, who for and where and when they are required to
do it. The parcels business is
different. The customers could be
anyone. The parcels could be all shapes
and sizes, to be picked from and delivered to almost anywhere. Even contract customers’ business involves
significant variables to cope with.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">When you have made a mistake (or your predecessors have) and
you have managed to extricate yourself from the consequences it is not enough
just to say “we won’t do that again”. It
is well worth looking at exactly what you did, how you did it and why. Hindsight, as they say, is a wonderful thing,
so don’t ignore the lessons it provides.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">I didn’t expect that!</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The most astonishing news from the Eurozone that I came
across last week was that the Germans are drinking less beer. Beer sales slumped to their lowest level in
20 years in the first quarter of 2013.
What is even more astonishing is that this is not due to German
consumers choosing to spend less, but that they are switching to alcopops
instead, despite a tax aimed at curbing sales.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">It just goes to show you cannot rely on anything in this
world. Who would have thought that
German drinkers would switch from beer to alcopops of all things? The picture of buxom frauleins with two fists
full of Bacardi Breezers just does not work somehow.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">What is actually happening is a combination of an ageing
population and younger drinkers changing their drinking habits. Quite simply beer is going out of fashion and
if that can happen in <st1:country-region w:st="on">Germany</st1:country-region>
then something similarly unthinkable can happen anywhere. What this illustrates is that change is going
on all the time and that nothing is for ever.
Changes often manifest themselves some time after the forces that
brought them about actually came into play.
So ask yourself these three questions</span></div>
<div class="MsoNormal">
</div>
<ol>
<li><span style="font-family: Verdana, sans-serif;"><i>Why do the customers you have today buy from you and why
would they still buy from you tomorrow?</i></span></li>
<li><span style="font-family: Verdana, sans-serif;"><i>Who might tomorrow’s customers be and what will they want to
buy?</i></span></li>
<li><span style="font-family: Verdana, sans-serif;"><i>Have you got the <a href="http://www.businessbreakthroughcoaching.com/changeability.html">Changeability</a> to respond?</i></span></li>
</ol>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Supermarket King</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">When Justin King took over as Chief Exec of Sainsbury’s in
2003 a city analyst sniffily remarked “King has good retail experience but
whether he has the credentials for a more radical task is open to
question”. An odd remark considering
that Peter Davis, King’s predecessor as CE who had no retail experience spent
£3bn on new distribution centres and IT whilst
letting the retailing basics deteriorate to the point where Sainsbury’s lost
their number two position to Asda. Last
week it was reported that King will announce sales up 1.8pc and profits 5pc
when he reveals annual results this week.
This is nine consecutive years of rising profits.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">It’s the word “radical” in the above remark that interests
me. I am not sure what was “radical”
about King focusing Sainsbury’s on “great quality food at fair prices” or
listening to customers, or simplifying the supply chain or offering bonuses to
staff for high store standards, or cutting prices and improving stock
availability. These seem to me (with no
retail experience) to be what you need to do to be successful as a mass market
retailer. However what was radical,
within Sainsbury’s anyway at the time, was that King helped the business learn
how to execute effectively, how to actually deliver what it needed to and what
it said it would do.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This didn’t just fix the problems the business had created
for itself but it also helped it acquire the <a href="http://www.businessbreakthroughcoaching.com/changeability.html">Changeability</a> to deliver
effectively on “radical” opportunities like convenience stores, online selling
and introducing general merchandise and clothing which is growing at three
times the rate of food sales.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So the lesson I draw from Sainsbury’s and Justin King is
that if you can identify the simple things that will lead to success and get
really good at doing them this will also set you up to tackle the “radical”
challenges effectively.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">UKIP – tipping point?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In the end UKIP’s success in the local government election
last week came as no surprise. However
what we may have forgotten is that just a few months ago, especially before the
<st1:place w:st="on">Eastleigh</st1:place> by-election, it would have been
considered a surprise. </span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Sudden and significant change like this can be a long time
coming. The first signs of this emerged
in 2010 when the electorate decided not to give a mandate to any one party to
form a government, resulting in a coalition.
For the ordinary voter <st1:country-region w:st="on">UK</st1:country-region>
politicians have continued to behave as they always do and give the impression that it was the voters who got it wrong. The excesses and
nonsense coming out of the EU, especially from their politicians have become
more and more frustrating and alarming.
We have seen similar behaviour from shareholders where after years of
acquiescence they have now started to punish directors for failure.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So I don’t see the success of UKIP as a “protest vote” in
the conventional sense which is then expected to right itself at a general
election. It is more an indication that
more and more of us are getting so hacked off with our leaders
that we have started to hit them where it hurts to get them to take notice.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">What this will actually mean for <st1:country-region w:st="on">UK</st1:country-region> politics is impossible to
predict at this stage and we will probably only discover what this is to be at
the election in 2015. The only certainty
is that there is more change coming and we will all need high <a href="http://www.businessbreakthroughcoaching.com/changeability.html">Changeability</a> to
respond to what it brings with it.</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-31119815699361894272013-04-29T08:47:00.000-07:002013-04-29T09:00:22.256-07:00Week ending 26th April 2013<br />
<div class="MsoNormal">
<i><span style="font-family: Verdana, sans-serif;">A year ago it looked as though the end game was in sight for
the euro, then things quietened down.</span><span style="font-family: Verdana, sans-serif;">
</span><span style="font-family: Verdana, sans-serif;">The general view was that somehow the Eurozone would muddle its way
through to a solution over time.</span><span style="font-family: Verdana, sans-serif;"> </span><span style="font-family: Verdana, sans-serif;">However
the Eurozone reappeared last week in the business, economic and political
sections of the media and it seems nothing much has changed or is likely to and
the slide continues.</span></i></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Mrs. Merkel mentions the war</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><st1:place w:st="on">Spain</st1:place>’s
unemployment has continued to rise and hit a new record of 27% with 57% of under 25s out of work. <st1:country-region w:st="on">Italy</st1:country-region> has finally cobbled together a
government which includes Silvio Berlusconi’s party so not much change there.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Stern Auntie Angela is once again pushing for stricter
Europe-wide control over national budgets, still pursuing the idea that if only
everyone could be more like the Germans then all would be well. This is diametrically opposed to the French
position that wants banking union or in other words if only everyone could be
more like the French then …. Well you get the picture.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The ability of the Eurozone politicians to come up with
policies and proposals that effectively cancel each other out is not altogether
surprising if you look at European history.
Differences like this arose regularly sometimes leading to war which
would sort it out one way or the other.
Now that option is not available (thankfully) but the Eurozone doesn’t seem
to have found an alternative that works so the differences and the problems
they cause rumble on.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Of course this is what the euro was supposed to be all about. A common currency leading to “ever closer
union” would be the mechanism by which all differences would be resolved. Indeed Auntie Angela has warned sternly of
the risk of a return to conflict between European countries if the euro fails. However it is clear from a number of
developments from last week that the pressure on the euro is building.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Austerity light</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">With GDP throughout the Eurozone falling and even the German
economy feeling the pinch it seems everyone (apart from stern Auntie Angela) is
questioning whether austerity has gone too far.
Almost any country that cares to ask is being granted an extension to
deficit reduction targets. The IMF came
out with a strange argument that George Osborne was “playing with fire” by
pursuing the current rate of deficit reduction in the <st1:country-region w:st="on">UK</st1:country-region> and that there is the “fiscal space” in the <st1:country-region w:st="on">UK</st1:country-region> to indulge
in a bit of “fiscal loosening”. The
mood appears to be swinging towards the idea that some sort of “light touch”
austerity is the answer because austerity itself has become the problem.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">All this is a classic and big scale example
of tackling symptoms rather than the core problem which is the euro
itself. In fact it’s worse than that. When you tackle symptoms and this produces
consequences you don’t much like this causes you to tackle these symptoms as
well, so you get further and further away from the core problem.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">No FTT no €30bn</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">An example of the Eurozone focusing on symptoms and not the
problem is the attempt by <st1:country-region w:st="on">Germany</st1:country-region>
and 10 other countries to introduce a Financial Transactions Tax (FTT). As the tax will apply to trades across the
world if they originate in one of these 11 countries it is not surprising that many other countries including the <st1:country-region w:st="on">US</st1:country-region>
and <st1:country-region w:st="on">UK</st1:country-region>
are against it. A Swedish minister has
warned that it will be a disaster and will not work. He should know as he actually introduced it
in <st1:country-region w:st="on">Sweden</st1:country-region>
and found it was a disaster and didn’t work.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week Jens Weidman President of the Bundesbank no less
announced that “From a monetary policy point of view, the FTT in its current
form is to be viewed critically”. He
also warned that it could raise the costs of government borrowing and outweigh
the revenues raised by the tax. I think
we can take that as a “nein”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The only argument I have found in favour of the FTT is that
it could raise up to €30bn which would be used to …lower government deficits! Well perhaps, but if it raises borrowing
costs then once again the EU will have cancelled itself out and long since lost
sight of the real problem.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">George Osborne has taken to matter to the European
courts. It would be rather good if he
could get the European Court of Human Rights to rule against FTT. Would be almost worth putting up with Abu Qatada to win that one.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Whatever it takes or whatever it costs?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One of the moves that kept the lid on the whole mess for a
while was the European Central Bank (ECB) becoming in effect the lender of last
resort in the Eurozone. Last summer it
launched its emergency rescue strategy, Outright Monetary Transactions (OMT), buying
up the bonds of countries like <st1:country-region w:st="on">Spain</st1:country-region>
and <st1:country-region w:st="on">Italy</st1:country-region>
and bringing about a spectacular fall in their borrowing costs. This followed Mario Draghi’s statement that
he would do “whatever it takes” to deal with the Eurozone’s sovereign debt
problems.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However he omitted to mention that his plan required the
German taxpayer to “pay whatever it takes”.
Last week the Bundesbank having poo pooed the FTT did the same to OMT,
taking it apart point by point. <st1:country-region w:st="on">Germany</st1:country-region>’s
constitutional court is due to rule on the legality of OMT in June. If it rules against OMT it pretty much means
the end of the euro. With stakes that
high the markets seem confident the court will find some formula to avert that
kind of crisis. However it does show
just how close run this is all getting.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Italian job</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Now that we have a new Italian government perhaps we will
see some action to stop the Italian economy choking to death. However be careful what you wish for. Strangely <st1:country-region w:st="on">Italy</st1:country-region>
is not fundamentally a basket case, its problem being lack of competitiveness
brought about by letting its labour costs race 30pc ahead of <st1:country-region w:st="on">Germany</st1:country-region>’s. In particular it has a primary surplus of
2.5pc of GDP (something George Osborne can only dream about currently). This means <st1:place w:st="on">Italy</st1:place> could leave the EMU and
regain competitiveness without facing a funding crisis.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So why doesn’t <st1:country-region w:st="on">Italy</st1:country-region> do just that? Mainly because its political leaders have not
so far been prepared to play rough. The
latest PM Enrico Letta does
not look like the man to change that and the government he now heads is
unlikely to last long enough to achieve anything meaningful. But even with a PM who was very nearly named
after a cup of weak coffee, you never know.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Why does all this matter</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">You may be wondering why I am boring you all to death with
this stuff. Last week the UK GDP figures were published
and apparently we managed a whole 0.3pc growth in the last quarter, avoiding
the triple dip, which sounds more like the latest offer from KFC than a meaningful
economic concept. Also it was reported
that many businesses are sitting on mountains of cash and are reluctant to
invest and even more reluctant to borrow to invest. Behind the flat economy and reluctance to
invest is uncertainty and that uncertainty is all about what’s going to happen
in the Eurozone. Even when nothing does
happen what might happen is scary enough to keep most CEs and FDs awake at
night and holding on to their cash cushions.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So the crisis and the uncertainty are set to continue. The <st1:country-region w:st="on">UK</st1:country-region>’s and indeed
the world economy cannot recover properly until the EU faces up to the fact
that the euro in its current form just cannot work.</span><br />
<span style="font-family: Verdana, sans-serif;"><br /></span>
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-64714815405304806092013-04-22T05:22:00.001-07:002013-04-22T05:29:05.910-07:00Week ending 19th April 2013<br />
<div class="MsoNormal">
<i><span style="font-family: Verdana, sans-serif;">Whenever you look back on the previous week, whether it’s
your own week or the world’s in general it has usually been a series of ups and
downs and this is the theme for <b>TWb4TW</b> this week.</span></i></div>
<div class="MsoNormal">
<i><span style="font-family: Verdana, sans-serif;"><br /></span></i></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">What goes up must also come down.</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This has certainly applied to two particular investments
recently, gold and shares in Apple. Last
week gold hit a two year low and is down over 20pc from its previous record
high of $1,921, dropping almost 13pc in just two days. Apple shares, having hit $700 in September,
making it the world’s most valuable company went below $400 last week.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This demonstrates once again that human emotion can be a
much more significant factor than the realities of supply and demand, economic
conditions, or even world events. For
example investing in gold is supposed to be a means of “storing wealth”, to
protect its value against inflation, currency devaluation and other economic
and financial shocks that can reduce the value of cash and other
investments. So fear causes investors to
buy gold to protect their wealth. This
causes the gold price to rise. Then the
greed factor kicks in and it becomes not about protecting wealth but about
increasing wealth so more and more investors pile in. Then someone notices that some of the
underpinning assumptions no longer apply or different factors have emerged such
as <st1:country-region w:st="on">Cyprus</st1:country-region>’
proposals to sell its gold reserves to finance its bailout. Fear takes over again and the price goes
down, often quite rapidly.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In the case of Apple it was the greed factor that drove the
share price up on the assumption that it could produce blockbuster new products
and profits on a more or less continuous basis.
Then it dawned on people that Apple is run by human beings not some
super race and the likelihood of new I phones, pods or pads generating ever
increasing profits for ever and ever was, in a word, unlikely. The adjustment to this reality was bound to
happen when the fear factor kicked in.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">If you can stand apart and observe the greed and fear at
work you have a chance of making rational decisions. However this is more difficult to do than you
might think as illustrated by legendary Wall Street investor John Paulson. He made billions from betting against the <st1:country-region w:st="on">US</st1:country-region> sub-prime
bubble. However his bullish stand on the
gold price is estimated to have cost him hundreds of millions of dollars over
the past two weeks. So if even people
like John Paulson can go up and down so can almost everything else.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Facebook – down and staying down?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week Sheryl Sandberg, Facebook’s COO, made a rare visit
to their HQ in <st1:country-region w:st="on">Britain</st1:country-region>. Ms Sandberg has recently published a book and
judging by the content of her press conferences and interviews promoting her
book was the main reason for her visit.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One thing she did not appear to comment on was Facebook’s
share price. Just about a year ago it
carried out an IPO at $38 a share. Since then
the shares have mostly gone south and ended last week at $26.59. Greed having driven the rush to buy the
shares soon turned to fear when it became apparent Facebook did not know how to
make money out of mobile phone content.
This was actually apparent before the IPO but was ignored in the rush to
get in on the “next big thing”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Apart from announcing that <i>“To say that mobile is important
to Facebook is the biggest under-exaggeration of all time”</i> Ms Sandberg was
giving nothing away. I suspect that this
is because there is nothing to give away and that we are left with just fear
and greed to determine where Facebook’s share price goes next.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Tesco- down but maybe going up?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Staying with the emotional theme Tesco is not one of those businesses that people like, but many still shop there. Many of the people who vehemently oppose a new Tesco superstore still go and shop there when it opens based on an unemotional judgement about convenience and low prices. Consumers
don’t “love” Tesco like they “love” John Lewis so many have been quietly
pleased to see them struggling recently.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week we learnt that Tesco had taken the unemotional and
rational business decision to pull the plug on its <st1:country-region w:st="on">US</st1:country-region>
venture and to write down the value of its land bank in the <st1:country-region w:st="on">UK</st1:country-region> as they
called a halt to further large scale store expansion here. Given both the financial and emotional
investment involved this is a text book example of business brain over ruling heart. Big as the losses are Tesco
can afford to do it right now, so right now is the time to do it.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">CE Charles Clarke stated that <i>“I have been working for Tesco
for nearly 40 years and I can tell you this – it already looks, feels and acts
like a different and a better business”.</i>
However if Tesco is really to
become a <i>“different and better business”</i> then Mr. Clarke will have to find a
way of getting to rest of the business to share his enthusiasm and excitement
for his vision of the future. Tesco has
done the hard nosed, rational and unemotional business stuff very well for
years. What people are looking for now
is something that makes them feel good about spending their money with Tesco
that is not about fear and greed.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">What this tells us is that rational business logic on its own
is never enough. You need the emotional
factors as well and the trick is to get the balance right and that is the challenge for Tesco to get back to growth.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Dell – going down to get back up</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Earlier this year Dell Computer founder Michael Dell put
forward an offer to take Dell private at $13.65 a share. The logic is that as a private business removed
from the pressure of quarterly results, Michael Dell will be more able to take
the decisions and actions needed to switch the company’s focus from PCs to
faster growing software sales and services.
This is because in the strange world of public companies shareholders
will often not tolerate the adverse short term consequences of decisions that
need to be taken in the longer term interest of the business.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Michael Dell’s offer took
account of the fact that in order to go back up you may first have to go
down. So inevitably some shareholders
complained he was buying the business on the cheap. It also prompted private equity firm
Blackstone to put in a rival bid at $14.25.
However after the slump in PC sales worldwide in the first quarter Blackstone
withdrew their offer. This pretty much
vindicates Michael Dell’s proposition and even though he still has to persuade
some shareholders to accept his chances are looking better.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Michael Dell clearly has considerable emotional investment
in the company he founded so he has both personal and financial motivation to secure its future. However in order to make the hard and rational
business decisions needed to turn the company round he must first remove it
from an arena where the emotions of fear and greed rule.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-60757828479290742222013-04-14T08:25:00.000-07:002013-04-17T03:54:59.496-07:00Week ending 12th April 2013<br />
<div class="MsoNormal">
<i>Last week the death of Margaret Thatcher pushed every other
story about almost anything else off the front pages. Even Fat Boy Kim who is threatening to blow
up the world was relegated to the middle pages, which won’t have improved his
temper I fear.</i></div>
<div class="MsoNormal">
<i>So I will not attempt to add more to what has already been
written and broadcast about Margaret Thatcher.
However if there is one thing from her life and career that I think holds
a lesson for us all it is that she knew what she was there for. Everything she
did she did with a clear purpose to achieve a clear outcome and this is the
theme for this week’s <b>TWb4TW</b>.</i></div>
<div class="MsoNormal">
<i><br /></i></div>
<h3>
<span style="font-size: small;">Two speed M&S.</span></h3>
<div class="MsoNormal">
Sales at M&S for the 13 weeks to March 30<sup>th</sup>
squeezed out a 0.6pc overall increase, down 3.8pc in clothing but up by 4pc in
food. The drop in clothing was not as
bad as feared and M&S shares rose by 4.3pc in response.</div>
<div class="MsoNormal">
Food is now 55pc of total sales and is growing faster than
the grocery sector as a whole, in spite of not selling online. Commentators were unanimous in being
perplexed by how M&S can get their food offering so right but their
clothing so wrong. In food they continue
to innovate whilst their competition can only emulate. By contrast in clothing they flounder and
watch the competition speed past them. You can see clearly what M&S food is there
for but as for their clothing, you wonder why they still bother.</div>
<div class="MsoNormal">
CE Marc Bolland says he needs more time to turn round the
clothing division and has bought in a new team including Belinda Earl as the
company’s first style director. A number
of commentators and retail analysts are urging Mr Bolland to replicate the
success of the food business in clothing – summed up as directional, not trying
to do everything for everyone and value for money but skewed towards the high end of
the market. Whilst this may well be part
of the answer I am not sure it is the entire problem.</div>
<div class="MsoNormal">
When you have a problem the temptation is first too look for
the new, different idea that will solve the problem. However M&S dropped the ball in clothing
about 20 years ago, just about the same time it picked up the ball in food and
started to run with it. Whilst it was
some time before this showed in the numbers they gradually lost sight of what
their clothing division was there for, whilst becoming steadily clearer about
what they were there to do in food.</div>
<div class="MsoNormal">
I would suggest that Mr. Bolland needs first to understand
how M&S lost its way on clothing whilst at the same time finding its way on
food. How did the present situation arise?
What was it that used to work and now does not and why? This process would also help him discover
what purpose would be served profitably and who for by the clothing division
today and then the problem and the solution will become clear. Perhaps M&S only has one ball!</div>
<div class="MsoNormal">
<br /></div>
<h3>
<span style="font-size: small;">PCHP</span></h3>
<div class="MsoNormal">
Talking of sales figures global sales of personal computers
fell by 14pc in the first three months of the year, the biggest fall since
1994. HP which is still the world’s
biggest PC seller saw one of the biggest falls, shipping 24pc less in the first
quarter.</div>
<div class="MsoNormal">
Clearly a big change is going on and if you are the biggest
loser in a product area that has “loser” written all over it you had better
sort yourself out pretty soon or you’re dead.
Here are some of Meg Whitman’s (CEO of HP) responses last week.</div>
<div class="MsoNormal">
<i>“We are aggressively pursuing a multi-form strategy” –
“In the end I would very much like to be in smart phones” – “I worry about
Lenovo and all of HP’s competitors”.<o:p></o:p></i></div>
<div class="MsoNormal">
And on her claim of accounting improprieties at Autonomy
when HP bought them.</div>
<div class="MsoNormal">
<i>“When the news about Autonomy broke the remaining
employees were unsettled – that’s the best word” – “HP is still incredibly
committed to Autonomy” - “This is
terrific technology. It’s almost magical technology. What it allows customers to do is to
understand all the unstructured data, the application of legal and compliance –
it is terrific technology”.<o:p></o:p></i></div>
<div class="MsoNormal">
So that’s all clear then. Can you spot what Meg Whitman is
there for and what the purpose of HP is to be?</div>
<div class="MsoNormal">
<br /></div>
<h3>
<span style="font-size: small;">Swann song</span></h3>
<div class="MsoNormal">
I have written about Kate Swann previously but it is worth
looking again at her remarkable record at WH Smith as she hands over the reins
to her successor as CE, Steve Clarke.
She has turned WH Smith from a loss making, uncompetitive near basket
case with no clear reason to exist into a highly profitable business that knows
what it’s doing and why.</div>
<div class="MsoNormal">
Swann was very clear about her purpose at WH Smith which was
to make profits. She was not afraid to
take difficult, contrary decisions to achieve this. Taking out low margin entertainment products
actually reduced sales, almost a blasphemy in the retail world, but she showed
how concentrating on higher margin products made much more money.</div>
<div class="MsoNormal">
She is ready for another challenge and she won’t be short of
offers. However whoever gets her needs
to understand she will do the job her way, she’ll be clear about that. Does that remind you of someone?</div>
<div class="MsoNormal">
<br /></div>
<h3>
<span style="font-size: small;">French disconnection</span></h3>
<div class="MsoNormal">
If there is anything worse to be in than the PC market at
the moment it is the French economy. The
economy contracts, competitiveness evaporates, taxes go ever higher and their
sovereign debt accelerates to over 90pc of GDP.
Francois Hollande has managed to become the most unpopular President
ever, even though voters still think they should continue to receive all the
benefits the French state can no longer afford.
This also reminds me of something.
Oh yes I remember, the state of the British economy before Margaret
Thatcher.</div>
<div class="MsoNormal">
<br /></div>
<h3>
<span style="font-size: small;">And finally</span></h3>
<div class="MsoNormal">
I read last week in an article by Sun Baohong in the
Telegraph that when Coca-Cola first entered the Chinese market its name was
represented by the Chinese characters that meant “Bite the wax tadpole”.</div>
<div class="MsoNormal">
I can’t help feeling that somewhere there is a product for
which the brand “Bite the wax tadpole” would be perfect. Any ideas, I would be pleased to hear them.</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-74977108959751814832013-04-08T09:16:00.002-07:002013-04-08T09:16:43.320-07:00Week ending 5th April 2013<br />
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Just imagine …</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">You are the finance director of a large conglomerate. You joined the business over 2 years ago
as part of a new senior team to turn the business round. It has proved a mammoth task and although the
business is stable it is showing little sign of getting back on to a growth
track. This has been reflected in the
share price with two recent downgrades.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This was an old fashioned conglomerate with everything
controlled from the centre by a large, bureaucratic and very expensive head
office. Managers running the trading
businesses felt all they were there for was to feed this monster and just did
what they thought they were being told to do.
You have made some progress in reducing the size and scope of the head
office. Along with your CEO and Chairman you have been telling the managers
that you want them to be freed up to run their business units with as little
interference from head office as possible.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Your Chief Accountant who you inherited from the previous
FD’s team has put forward a proposal for a major new “enterprise wide” IT
system. He has proved to be competent
which is why you kept him on and his proposal appears to have a solid business
case behind it. He is confident the
system will produce major savings at head office at the same time as providing
up to date and accurate information on all the trading divisions.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The business logic seems to add up but it will require big
changes in all the trading divisions which will take a lot of management time
to implement. Right now you want those
managers to concentrate on increasing sales and profits in the businesses they
lead. They are showing signs of
responding positively to the new freedoms they have been given. However you are concerned that they may not have
yet developed enough <a href="http://www.businessbreakthroughcoaching.com/changeability.html">“changeability”</a> to take on this new IT system as well and
you feel it may send the wrong message, more control from the centre rather
than less. After careful thought you
take the brave decision not to go ahead with the IT project but to focus on
supporting the trading units in growing their businesses.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Meanwhile back in the real world …</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week HMRC implemented the biggest change to PAYE for
decades when the new “Real Time Information” (RTI) regime was launched. Instead of reporting on wages and salaries
and tax and NI deducted annually businesses are now required to report every
time they run a payroll. This will be a minimum of 12 times a year but for many
businesses it will be more often than this.
Failure to comply will result in fines.
HMRC claim they will make big savings in their costs and from increasing
the tax they collect.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Now this may be true and I don’t argue that our tax system
and regime need bringing up to date. However
given the extremely challenging business and economic climate and the
exhortations from government to grow, export and all that good stuff is this
really the right time to be introducing something like RTI? Especially as this government has been
banging on about how it is backing business and cutting red tape. How does that rhetoric match with the
requirement to do at least 12 times as much work complying with a PAYE
regulation as there used to be?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Did I say something about back in the real world?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Going against the accepted wisdom</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Recent readers of these articles will be familiar with my
view that what really matters is getting the “business model” right. I came across a good example of this last
week in an unexpected business sector.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Currently about 18 pubs are closing each week, the victims
of successive recessions, cheap alcohol from supermarkets and high beer
duties. The majority are those that only
served drinks. The accepted wisdom is
that you cannot make money in pubs on drink sales alone and certainly you need
a food offering if you are to grow. Food
is the “engine” for driving sales.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However a pub group called Amber Taverns set up in 2005 and
which now has a portfolio of more than 80 pubs only sells drinks. They don’t allow children in their
establishments either which goes against that part of the accepted wisdom that
says you have to attract families to make money.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">There have been plenty of pubs coming on the market which is
part of the business model logic so Amber can be picky. They look for pubs within easy walking
distance for a good number of people, with plenty of footfall and passing
trade. They refit the pub with good
modern fittings and an array of TV sets tuned to the sports channels. They offer their beer at competitive prices,
nearly half price or less than a “gastro pub” and their managers know their
regulars by name. So you have what Amber owners describe as the modern social
club for the 21<sup>st</sup> century.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">A time of change always offers opportunities and the growth
of Amber taverns is an example. However
it is not just based on being able to acquire pubs at a good price. It is based on a solid business model that
delivers what a certain kind of customer wants and makes it easy for them to
get it. The right business model is a
key component of <a href="http://www.businessbreakthroughcoaching.com/competitivestrengthdefinition.html">“competitive strength”</a>.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">I wonder if there is an opportunity for a pub chain that
does not allow children AND doesn’t have TV sets either!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Eastern promise</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">It’s worth paying some attention to what is going on in <st1:country-region w:st="on">Japan</st1:country-region>. This is a country whose economy, despite
being one of the largest in the world, has been going nowhere for years in
terms of growth. Well if the bank of <st1:country-region w:st="on">Japan</st1:country-region> (BoJ) has
anything to do with it that’s about to change as it plans a massive hike in the
country’s monetary base from 29% to 56% of GDP by 2014. To show what an upside down world it is one
the BoJ’s targets is to get inflation “up to” 2% in 2 years.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Monetary easing on this scale is so huge and unprecedented
that none of the experts can really say what the consequences might be so I am
not even going to try. However one
effect already has been that the yen has depreciated 32% against the euro since
last July. Is anyone going to buy a
Peugeot ever again?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">And finally</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Nearly another 3 weeks gone and <st1:country-region w:st="on">Italy</st1:country-region> still doesn’t have a
government!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-34391484013567990962013-04-02T09:45:00.002-07:002013-04-02T09:45:48.913-07:00Week ending 29th March 2013<br />
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>This week’s <b>TWb4TW</b> is more politics than business for
a change, though as always there are lessons we can learn. </i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Aspiration Nation</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This week sees the start of some of the biggest changes in
decades for the NHS. These changes are
made even more significant given that the Tories said in their election
manifesto that this is one thing they would not do. We are used to politicians not doing what
they promised but this may be a first where they do what they promised
not to do.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">As a precursor to these changes there has been a rewrite of
the NHS “constitution” as the framework for the new look NHS. Robert Francis in his report on the
Mid-Staffs hospitals scandal recommended that patients’ rights be formally
enshrined in this new constitution. He
wanted to make it explicit that “patients are put first” and that “everything
done by the NHS should be informed by this ethos”. A good idea would be the response from most
of us I suspect. However all that Jeremy
Hunt the Health Secretary has come up with is that the health service will
“aspire to put patients first”.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Yes I kid you not, these are the actual words that have been
written in to the new NHS constitution and published last week. Coming hard on the heels of George Osborne’s
“aspiration nation” budget speech it seems that “aspire” is the new theme for
this government as the alternative to actually delivering a result. After all it has a loftier almost spiritual
feel to it when compared to “doing your best” or “trying hard”. In fact as long as you are “aspiring” you
don’t even have to bother with either of those.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The other thought that occurred to me was if the patient has
not been at the core of the NHS constitution previously than what was? Could it have been?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>“The NHS exists to enable doctors’ receptionists to satisfy
their need to exercise complete power and control over the rest of the human
race”.</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Or</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>“The NHS exists to increase the income and egos of medical
consultants in equal proportion for ever and ever”.</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Or</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i>“The NHS exists for politicians to mess about with, even
when they say they won’t and so they can feel they have done something worthwhile”.</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">OK I am using 3 stereotypes to make a point (and get a cheap
laugh) but to actually put the words “aspire to put patients first” into the
NHS constitution is just as big a nonsense.
The question is how could this happen?
I have a horrible feeling it is because:</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Clever people do clever things</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">A lot of clever people would have worked on the new NHS
constitution, politicians, lawyers, civil servants, representatives of medical professional organisations and so on.
We know these people are clever because they all have firsts from top
universities and say things the rest of us can barely understand. They will have worked far in to the night to
produce a set of words about patients that would ensure that it would be
difficult or even impossible to be held to account for anything that actually
happens to them. The person who came up
with the word “aspire” may well feature in the next honours list!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However what has got lost amongst all this cleverness is a
clear sense of purpose. Without a clear
sense of purpose which everyone involved can understand and relate their own
role to then the project is doomed to fail.
This has been proven in research and practice time and time again in
both private and public sectors but still clever people almost invariably get this wrong. The
problem is that for clever people having a clear sense of purpose is just too
simple and keeping it simple is not what clever people do.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"> </span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">I don’t like your attitude</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The Francis report on the Mid-Staffs scandal is an
example. Whilst the recommendation for
patients’ rights to be enshrined in the NHS constitution is spot on, Robert
Francis and his inquiry team could not resist going further and coming up with
no less than 290 recommendations on how to do this. Now if
you want to make something actually happen 29 would have been too many and 290
introduces such an enormous drag factor on change that any meaningful change is
unlikely to be achieved.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The number of recommendations is a product of getting into too
much of the detail of what should be done, rather than focusing on what needs
to change and then holding people to account for making that change
happen. The Mid-Staffs scandal is being
used to demonstrate that the standard of patient care throughout the NHS is
sub-standard and that this in turn is down to the “attitude” of nursing staff
in particular. One recommendation for
fixing this is that nurses should spend a year on the wards caring for patients
including feeding and washing before they qualify. I suspect like me many people were surprised
to find this did not form part of current nursing training. However the inference here is that this will
sort out the “carers” from the rest and fix the “attitude” problem, at least Jeremy Hunt seems to think so.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The very worst place to start trying to
change people’s attitude is to tell them it needs to change. What is more the attitude of rank and file
staff in any organisation is a direct result of the attitude of the leadership. Consequently attempting to change attitudes
amongst staff without first changing the thinking and behaviour at the
leadership level is bound to fail, as all the research and practice again
demonstrates. For the NHS this
leadership “attitude” problem goes right up to the top political level. Perhaps if any politician “aspiring to reform”
the NHS was required first to work for a year on the wards, caring for and
washing patients, we might get better outcomes for the NHS and all of us who
use it.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Arising from the ashes</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Back to business now and one good story last week was the
news that Jessops photographic shops will be returning to the high street. TV dragon Peter Jones acquired the brand,
stock and other assets from the administrator in a joint venture with restructuring
specialists Hilco.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The return to the high street was a surprise as Jones was
expected to relaunch Jessops as an online retailer only. He is smart enough to know that in spite of
the best efforts of previous managements and owners Jessops is still the
leading brand in the specialist photographic equipment market. What’s more because, as Jones himself says
Jessops sells a “technical product” the click and collect model that a combined
high street and online presence enables is best suited to the core Jessops
customer’s needs. So absolutely the
right business model and Jones expects to have around 40 stores open by the end
of April enabling him to cover the UK with click and collect and to offer the
technical advice that the Jessops customer values. Half the 500 staff will be previous Jessops
employees.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The only slight doubt I have is that Jones is to be both
Chairman and Chief Exec. Given his many
commitments it will be a challenge for him to give the attention to detail that
will be needed to make this all work. He
will need to find leaders amongst his management and staff to help him with
this.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">And finally</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Congratulations to Nick D’Aloisio the 17 year old who sold
his app Summly to Yahoo! for £20m. Apparently
this app detects the key points in news stories and automatically rewrites it
to fit on to an Iphone screen. Even
though this is still bigger than the average Sun reader’s attention span Yahoo! is very excited about it and maybe they are right to be. However as they are also the company who took
over the management of the Sky e-mail service last week and promptly emptied
over 10,000 old e-mails from my business partner going back years into my two
mail boxes, I am not so sure. </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good Easter break and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-43717531689024769142013-03-24T09:52:00.000-07:002013-03-25T04:25:15.096-07:00Week ending 22nd March 2013<br />
<div class="MsoNormal">
<i><span style="font-family: Verdana, sans-serif;">The budget dominated the business, economic and political
news last week.</span><span style="font-family: Verdana, sans-serif;"> </span><span style="font-family: Verdana, sans-serif;">You will be pretty fed
up with reading about it by the time this week’s </span><b style="font-family: Verdana, sans-serif;">TWb4TW</b><span style="font-family: Verdana, sans-serif;"> is
published.</span><span style="font-family: Verdana, sans-serif;"> </span><span style="font-family: Verdana, sans-serif;">So apart from a small mention
at the end this is a budget free zone.</span></i></div>
<div class="MsoNormal">
<i><span style="font-family: Verdana, sans-serif;"><br /></span></i></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Cunning Foxtons</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">One positive sign that maybe an economic recovery could be stirring
is a revival of interest from investors in Initial Public Offerings (IPO) or
“floating a company on the stock market” to you and me. Investors are encouraged that both Esures and
estate agents Countrywide’s IPOs got away smoothly last week and have even
begun trading above their float price, which is a first for some time.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This has prompted reports that another high profile firm of
estate agents, Foxtons, are considering a potential £780m IPO. You may remember Foxtons prospered during the
<st1:city w:st="on">London</st1:city> property boom and became famous for the
brightly painted Minis it provided to its staff which promoted its brand as
they hurtled round the streets of <st1:place w:st="on">London</st1:place>. Foxtons expanded rapidly on the back of the <st1:city w:st="on">London</st1:city> property
boom. However, whilst it was high
profile it was not very highly thought of by people who had bought or sold
property with them. Over optimistic
valuations and putting sold signs on properties that were not yet sold to boost
their apparent sales success were just two examples of practices their clients
complained of.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In 2007 BC Partners (BCP) paid £375m for the business of
which £300m went to Jon Hunt the founder.
Then the <st1:city w:st="on">London</st1:city>
residential property collapsed and so did Foxton’s profits. The deal had loaded the company with debt and
initially the banks involved took control with a debt for equity swap and BCP
writing off a significant proportion of their investment. However, surprisingly BCP then decided to buy
back both the debt and the equity.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Perhaps not so surprisingly.
The buy backs were achieved at an advantageous price as the banks were
happy to get rid of the problem. The
timing was good as the <st1:city w:st="on">London</st1:city>
residential property market recovered and Foxton’s high market share enabled
them to deliver record sales and profits.
So it would not be surprising if the next stage of BCP’s cunning plan
for Foxtons is an IPO. If they were to
achieve £780m this would be a pretty good return despite the earlier problems. But what would investors be getting?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Now even my dog knew that the first property market to
recover would be <st1:place w:st="on">London</st1:place>. So, on the face of it you would be investing
in the dominant player in a resurgent <st1:city w:st="on">London</st1:city>
property market which sounds pretty good.
However Buzzel and Gale in their book “The PIMS Principles” demonstrated
that whilst high market share is indeed highly beneficial to profitability, it
depended on “how” that market share had been achieved as to whether that
profitability could be sustained. Market
share achieved through delivering “superior relative quality” of product and
service to the customer would sustain high profitability. Market share achieved through other means,
such as opening lots of estate agent offices, contains inherent weaknesses which
eventually become detrimental to profits.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This was backed up by Zook and Allen in their examination of
the long term performance of over 2,000 companies in 2001 and then repeated in
2011. They concluded that:</span></div>
<span style="font-family: Verdana, sans-serif;"><i>“A common misconception is that rapid, sustainable growth can only occur in “hot” markets—markets that are growing rapidly—and that being in a hot market is the best way to generate high profit levels. Our data refutes that. A variance analysis of our database demonstrated that relative competitive position within an industry is more than four times more significant than the choice of industry in determining the economic returns of companies. In other words, it’s how you play the game that matters, not which game you play”.</i></span><br />
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">All the commentary around the possibility of a Foxtons IPO
centres on the “hot” <st1:city w:st="on">London</st1:city>
residential property market as the key to success. If Foxtons have also upped their game on the
quality of service they provide their clients, the acid test being would most
of their clients definitely recommend them to others, then you would have the
best of both worlds, a quality company dominating a currently hot market. However if not much has changed at Foxtons
then an IPO would be no more than an opportunity to have a punt on the London
residential property market. Each is a
valid proposition provided it is clear which one you are being offered. Is it real <a href="http://www.businessbreakthroughcoaching.com/competitivestrengthdefinition.html">"competitive strength"</a> or just high and possibly temporary market share advantage? So beware the cunning Foxtons and look
carefully at the other IPOs being lined up for launch this year.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">ARM – keeping cool in a hot market</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In case anyone has not heard of ARM they are a <st1:city w:st="on">Cambridge</st1:city> based company
that designs microchips and generates its revenues from licensing these designs
to those that wish to incorporate them in their products. Its chip designs are used in nearly all the
world’s mobile phones and you won’t find a hotter market than that.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">ARM was created from a spin off from Acorn computers, a company
that prospered for a while but just could not keep up with the big boys in PCs. However what they did know was that could
design better micro chips than Intel and others. Because they did not have experience or
facilities for manufacturing they came up with the licensing model. This has proved to be spot on and so resilient
that ARM safely worked its way through the dotcom boom and volatility in semi-conductor markets. In 2012 they
achieved £577m of sales and £221m of profit.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">ARM is an outstanding example of how <a href="http://www.businessbreakthroughcoaching.com/competitivestrengthdefinition.html">"competitive strength"</a> creates the <a href="http://www.businessbreakthroughcoaching.com/changeability.html">"changeability"</a> that delivers even more <a href="http://www.businessbreakthroughcoaching.com/competitivestrengthdefinition.html">"competitive strength"</a>. They demonstrated this again last week when their CEO Warren
East announced he would be leaving after 12 years in charge,
handing over to Simon Segars who has been with ARM even longer than East. Given that the opportunities for ARM to go for
another major phase of growth have never been better it is perhaps surprising
that East has decided to go now. His reasoning
is that as it will take 6 years for ARM’s next design blueprints to be in
products and with the company being in a strong financial and market position
now is the right time to make this change.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This is a superb example of clear thinking and the
understanding that it is not the “hot” market that really matters but the
company’s ability to successfully exploit the opportunities. East has ensured ARM can do this in every
respect, right down to deciding that a change of leadership was required. We don’t have enough people like him in top
positions in <st1:country-region w:st="on">UK</st1:country-region>
businesses.</span></div>
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<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Italian Job</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">The financial crisis in <st1:country-region w:st="on">Cyprus</st1:country-region> was a big economic and
political story last week. The Cypriot
government is trying to raise the €6bn it needs to secure an EU bailout and
proposed to do this by taking a slice out of citizens and exp-pats’ bank
accounts. Tactically actually having a
government is where the Cypriots may have put themselves at a disadvantage in
their negotiations with the EU. Let me
explain.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">By contrast it is now more than a month since the Italian elections and
they still haven’t actually got a government.
In fact as 25% of the vote went to a party that said it would not be
part of any government Italian voters in effect voted not to have government
and that’s what they got, or didn’t get.
This confirms the observation of a previous <st1:country-region w:st="on">UK</st1:country-region>
ambassador to <st1:country-region w:st="on">Italy</st1:country-region>
that <i>“it is not difficult to govern the Italians, it is simply unnecessary”.</i></span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So <st1:country-region w:st="on">Italy</st1:country-region>
is probably a country that can get by perfectly well without a government. When
it comes to negotiating with the EU (or <st1:country-region w:st="on">Germany</st1:country-region> to be more accurate) this
puts them at an advantage as the Italians have contrived a situation where
there is no one for the EU to talk to.
This leaves the EU with little choice but to carry on as before which
suits the Italians, both voters and politicians perfectly. <st1:country-region w:st="on">Cyprus</st1:country-region>
and maybe <st1:country-region w:st="on">Spain</st1:country-region>
take note!</span></div>
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<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Rhyming slang</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Briefly on the budget I was struck by George Osborne’s
little catch phrase, “aspiration nation”.
This sounded like a trial run for the Tory election slogan in 2015. Ed Milliband countered with “a degraded
budget from a degraded chancellor”. However
without the little rhyme it isn’t memorable enough to be an election slogan.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However the overall reception from <st1:country-region w:st="on">UK</st1:country-region> business to
the budget was that we are an “anticipation nation”. In other words we are still waiting for George
Osborne to redress the balance between just making announcements and actually
doing something. Even some of the things
that sounded like they might be about to doing something are not planned to
happen for 12 months or more. A bit less
of the politics and a bit more focus on the day job of getting the <st1:country-region w:st="on">UK</st1:country-region> economy
moving is what business is still looking for.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0tag:blogger.com,1999:blog-1145606975727328037.post-81656758468577629662013-03-16T03:55:00.001-07:002013-03-19T10:15:14.484-07:00Week ending 15th March 2013<br />
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;"><i style="font-weight: bold;">TWb4TW</i> <i>is back. Sorry for the gap, have had a very busy two months (good) plus some health problems with immediate family (not so good) that took up a lot of time. So here we go with some of last week's news.</i></span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Is there a nasty side to John Lewis?</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Last week John Lewis Partnership (JLP) was accused by the
Forum of Private Business (FPB) of bullying its suppliers when it was revealed
it was demanding a “growth rebate” of up to 5.25% from its suppliers. JLP’s argument is that its exceptional sales
performance is due to its investments in new stores, refurbishments and its
growing e-commerce operations. Therefore
it is only reasonable that suppliers who benefited from increased profits through
efficiencies provided from the increase in volumes should make a contribution
towards the investment that brought this about.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">On the face of it this does look as though JLP, who are
often praised by government as a model British business, love their customers
and love their staff, but are just as capable of putting the boot into their
suppliers as any of those nasty supermarket people. I am not going to try to resolve the argument
between JLP and FPB in this article as this is a case of “they would say that
wouldn’t they” on both sides. What it
has made me think about though is the relationship between suppliers and
retailers.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Manufacturers and suppliers of consumer goods have one
fundamental challenge. Their expertise and assets are in developing and
producing the products. However even if
you have invented and can produce the best mousetrap in the world if you do not
have the means to put in front of customers in a way that enables them to buy
it, then you don’t have a business.
Retailers provide the space to stock and display product, the footfall
of customers who might buy the product and the means of making the transaction. If a consumer goods supplier cannot find an
alternative way of doing all this themselves then they have to work with a
retailer, otherwise no sales!</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">These suppliers need to think hard about what this means for
the balance of power in the relationship.
Apart from a few “must have” products and brands (a costly position to
achieve and often temporary) this generally means the balance of power is
always going to be with the retailer, so don’t be surprised if the retailers
use it.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">James Dyson had to face up to this some years ago. Even though he had invented the best vacuum
cleaner on the market, the expectations of customers for household electrical
goods were that prices did not increase and over time they reduced. Dyson’s retailers had to respond to this if
they were to compete and so did Dyson.
This is why he closed his <st1:country-region w:st="on">UK</st1:country-region>
manufacturing facilities (much criticised at the time) and moved to <st1:country-region w:st="on">Malaysia</st1:country-region> to
lower his costs. Because Dyson faced up
to the reality of the market in which they operated and adjusted their business
model to compete effectively they are now a global brand and business and
employ more people in the UK than they did when they manufactured here.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So if you are a JLP supplier and feel they are now showing
their nasty side, which you didn’t see coming, then ask yourself this
question. Would you rather have them as
a customer who, with their <b>“competitive strength”</b> can invest and change to meet
the new challenges in the market or would you rather have been a supplier to
HMV and Jessops whose lack of “competitive strength” meant they couldn’t and didn’t?</span></div>
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<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Zara – another way</span></h3>
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<span style="font-family: Verdana, sans-serif;">Talking of retailers the world’s largest clothing retailer
is the Spanish company Inditex, best known in the <st1:country-region w:st="on">UK</st1:country-region> for its Zara fashion shops. In spite of the global financial crisis and
economic chaos in <st1:country-region w:st="on">Spain</st1:country-region>
the company’s value has grown from €37bn in 2007 to €65bn now. Profits increased by 22pc in 2012 alone.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Inditex is not only the world’s largest clothing retailer
but also one of the largest clothing designers and manufacturers. The company produces more than half of its
products itself and every item of clothing passes through its Spanish
manufacturing and logistics facilities.
All this started when Inditex’s founder and owner Amancio Ortega opened
a shop in <st1:place w:st="on">La Coruna</st1:place>
to sell products from his nearby factory.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">So it’s another business model but in Inditex‘s case it’s a
fast fashion model, capable of taking a design from catwalk to shopfloor in two
weeks. What’s more if a design does not
sell it can be withdrawn, the lessons learned and then replaced in the same
time frame.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Contrast this with the situation at M&S where the only
change they have made to their clothing business model was to move their
British based supply chain offshore.
M&S are desperate to get their clothing business right but the next
opportunity they will have is not till they launch their Autumn Winter ranges
later this year.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">This is not to say that the answer for M&S is to move
into manufacturing. What this and the
Dyson example illustrates is the crucial importance of getting your business
model right, taking full account of all the challenges involved, including the
possibility of your customers demanding retrospective discounts. I so often hear about business ideas and
business plans, but not so often about how a business is supposed to work. Successful businesses have robust business
models and you can see why they work.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Morrisons – why are we waiting!</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">Another retail struggler is Morrisons who last week reported
sales down by 2.1pc and profits by 7.2pc.
CE Dalton Phillips blamed this on lack of an online business, limited
presence in the fast growing convenience store market and failure to promote
the points of difference. All very well and
“bleedin' obvious” Mr. Phillips but when are you actually going to do something
about it?</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">He has had a bit of luck with the convenience stores as
other retail failures have enabled Morrisons to acquire 62 sites to expand the
“M Local” stores. On the
points of difference they have hired that irritating Geordie pair Ant and Dec (not all Geordies are irritating, just Ant and Dec) to front an advertising campaign to promote the fact that Morrisons are the
second biggest manufacturer of fresh food.
This has been reported on repeatedly in the business and trade media but
no actual sign of the campaign itself yet.
Morrisons also failed to capitalise on the horse meat scandal, with only
a few press adverts and the odd interview with Mr. Phillips being the sum total
of their efforts.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">On the internet he has stated “ we have a specific plan on
the proposition and how we will be different” but no more details as these are
apparently “commercially sensitive”.
This appears to be still stuck somewhere between the idea and the
planning stage.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">All this points to a lack of “changeability” in Morrisons’
culture and business processes. This was
evident in spades when they bought Safeway and the integration of the two
businesses took forever. They don’t seem
to have shaken this off and until they do I don’t see them overcoming the
challenges they are creating for themselves.
If Morrisons start demanding rebates from their suppliers before they
have delivered sales growth then this won’t be a sign of smart business, just
one of desperation.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Merve swerves but Heseltine on the money</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In an interview last week Mervyn King, the soon to retire
governor of the Bank for <st1:place w:st="on">England</st1:place>
actually said that economic recovery is now “in sight”. Coming from the biggest misery guts in the
whole economy I take this as the strongest signal yet that we can actually look
forward to better times and that they are not too far off.</span></div>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">However far more significant for me was a radio interview
with Michael Heseltine earlier in the week, as part of the usual “what do think
will/ought to be in the budget” run up to the actual budget. Heseltine replied that “what government, the
public and private sector, in fact everyone in this country has got to realise
is that we have got to do everything much better than we have ever done in the
past”. The big theme for the budget is
“growth” but whether we get anything that is really about growth is another
matter. However I am pleased to find
that Lord Heseltine agrees with me (note agrees with me) that growth is about “getting better” not
about “getting bigger”. Take note
Morrissons, M&S and any of you JLP suppliers feeling hard done by.</span></div>
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<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<h3>
<span style="font-family: Verdana, sans-serif; font-size: small;">Quote of the week</span></h3>
<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif;">In a party political broadcast last week David Cameron
stated that he had not gone into politics to be “the popular guy”. My first thought was “that explains a lot”
but my second was could this signal a new direction in political
campaigning? After years of politicians
trying and failing to make themselves popular has Cameron spotted a truly left
of field strategy for electoral success?
If so he will have sidestepped Ed Milliband who is desperate to make
himself popular (or even for people to know who he is) and Nick Clegg who
thinks he must be popular because what’s not to like about a fair minded Lib
Dem like him. Perhaps the killer ticket to capture the "unpopular vote" at the next election could be David Cameron and Ed Balls?</span></div>
<div class="MsoNormal">
<br />
<i style="color: yellow; font-family: Verdana, sans-serif;">So that was some of the week before this week. We hope you found some of the above thought provoking and useful for you and your business. We trust you had a good weekend and hope you have a great week this week.</i></div>
Steve Goodmanhttp://www.blogger.com/profile/12614859380224442732noreply@blogger.com0