July 2011 - Global Economic Watch

Digital Marketing Strategy and Using Social Media in Conjunction with Websites, and not In Place Of

07-29-2011 7:49 AM with no comments

The rise of social media is bringing out a lot of new creative tools and ideas for marketers.  SMStrat Sujata Ramnarayan, is a believer in social media as a game changer in the brand-customer relationship, and he sure likes getting customers to like brands on facebook pages.  But he also warns marketers not to devote all their attention to social media.  The Web, he says, still matters. At Marketing Profs, Rumnarayan writes:

Central to all of your digital media strategy is your website. This is because what you are trying to do with the use of all of these tools (and they are really technological tools) is to solve the fundamental marketing problems of how to get the customer or prospect become aware and interested in your product or service, how to get them to purchase and purchase again, and how to get them to recommend your product to others.

As is evident with the disappearance of MySpace and the recent appearance of Google+ as a formidable competitor to both Twitter and Facebook, these tools will continue to change. Your website is where you have complete control. Your website is here to stay for the long term, and it is where customers can get a complete understanding of your products or services. When using these new social media tools, you have to remember what they really are and that these tools  will continue to change. Fundamental marketing issues, though, stay the same.

Use them as technologies to map your problems to solutions. What these tools provide for is greater context, greater reach, and a way to generate greater trust in your product or service. This trust happens at two different levels. One level is when you see a reference or recommendation directly from a friend. There is a second level that comes from reading reviews and experiences of other customers.

Read Why Your Website Still Matters (Even With Social Media) here.

Posted by Graham Griffith

Some Clarity on the Debt Ceiling

07-28-2011 1:57 PM with no comments

We have a listening assignment for you.  If you have had trouble sifting through the political wrangling over raising the debt ceiling to find clear economic analysis, then we recommend yesterday's roundtable discussion on The Diane Rehm Show (without Diane Rehm, as it turns out--Susan Page moderated).  Alive Rivlin brings a lot of clout and experience to the conversation.  She's senior fellow at Brookings now, but she was the first director of the Congressional Budget Office and was also director of the White House Office of Management and Budget under Clinton, and vice-chair of the board of governors at the Federal Reserve.  AEI's Norman Ornstein and Sudeep Reddy of the Wall Street Journal both contribute mightily to the conversation as well. 

Take a listen here.  For more information, and to read the transcript, click here.

Posted by Graham Griffith

Head of Facebook's Developer Network on Social Design and Disruption

07-28-2011 9:33 AM with no comments

Knowledge@Wharton has an interesting interview with Ethan Beard, director of Facebook's Developer Network.  Beard responds to questions about privacy and Facebook's growth potential. But what we found compelling in this interview is Beard's belief in "social design" as the driving force for Facebook.  Beard sees social design as a user-centered disruptive force that extends far beyond the Facebook platform.  Take a look:

Posted by Graham Griffith

Back to School Shoppers Spending Less

07-27-2011 9:31 AM with no comments

The National Retail Federation is projecting a 3% drop in back-to-school spending this year.  Given last year's big jump in spending, the drop is a big disappointment for retailers, especially in the electronics sector.  While parents and students will focus most of their back to school spending on computers and other electronics, they will on average spend 11% on those goods than last year. 

The NRF surveyed nearly 9,000back-to-school shoppers and found some interesting, if not entirely surprising, ways in which the slow economic recovery is affecting their consumer choices.  Here are the results:

Read the press release for the NRF report here.

Posted by Graham Griffith

Fast Food Franchises Learning from Food Truck Entrepreneurs

07-27-2011 7:43 AM with no comments

The popularity of food trucks continues to climb, and the business world has been taking notice.  While once the domain of streetwise entrepreneurs with culinary chops, investment bankers and established fast food businesses are getting into the game as well, according to Entrepreneur Magazine's Jason Daley:

The food-truck craze--whether it's a bubble that will eventually burst or a new fixture on the American culinary scene--is pulling in big numbers. In a 2010 survey by Chicago-based food industry research and consulting firm Technomic for American Express, 26 percent of Americans said they had visited a food truck in the last six months, despite the fact that most trucks are concentrated in a few big cities. A popular Food Network reality show, The Great Food Truck Race, in which seven mobile gourmands try to outsell each other, has primed millions of people for mobile dining.

"Ten percent of the top 200 restaurant chains will have a mobile presence in the next 24 months," says Aaron Noveshen, co-founder of Mobi Munch, a Los Angeles-based company that helps develop mobile platforms and runs several food trucks in California. "I can already count eight that do."

Even if the hipster sheen fades from the gourmet food trucks, Noveshen believes they'll still find a customer base at colleges, corporate campuses and other areas where full-service restaurants aren't viable. Food trucks offer something that is always appealing: convenience.

"People are more time-starved than ever," Noveshen says. "Mobile food will serve that need. It's a fundamental thing that never goes away."

Read Franchises Hop on the Food-Truck Trend here.

Posted by Graham Griffith

US Employment-to-Population Ratio Dropping

07-26-2011 11:40 AM with no comments

The employment-to-population-ratio for the US has come to much more closely resemble that of Western Europe, according to New York Fed researchers Christian Grisse, Thomas Klitgaard, and Ayşegül Şahin. Writing at Liberty Street Economics, Grisse, Klitgaard, and Sahin highlight the narrowing of what they call the employment gap:

Between 1980 and 2000, the employment-to-population ratio was on average about 10 percentage points higher in the United States than in Europe. Part of this difference was attributable to higher labor taxes, higher minimum wages, and better benefits for unemployed and retired workers in Europe. In particular, higher labor taxes discourage people from working and higher minimum wages contribute to joblessness among unskilled and young workers. In addition, more comprehensive unemployment insurance discourages unemployed workers from accepting less desirable jobs, the lower cost of higher education reduces employment among student-age workers, and more generous pension systems encourage workers to retire earlier.

However, as the chart below shows, the gap between the employment-to-population ratio in the United States and Europe (defined here as the fifteen countries in the European Union before the 2004 expansion into Eastern Europe) has declined significantly in recent years, narrowing from 10.5 percentage points of the population in 2000 to 4.8 percentage points in 2007. The gap narrowed further during the global financial crisis and recession and had almost vanished, at 1.7 percentage points, in 2009.

Read The Vanishing U.S.-E.U. Employment Gap here.

Posted by Graham Griffith

Learning to Love Algorithms

07-26-2011 10:20 AM with no comments

Could it be that the financial services industry is really just one ongoing game of hide and seek?  Kevin Slavin says much of the stock market is essentially made up of algorithms.  Some of them are trying to hide.  The others are trying to find the ones that are hiding. 

Slavin, founder of cross-platform game maker Area/Code, goes a long way in explaining the importance of algorithms in business, and in life in general, in this TedTalk:

Posted by Graham Griffith

McKinsey Researchers Explore Potential 'Globalization Penalty'

07-26-2011 8:01 AM with no comments

Top global businesses appear to be less healthy than their locally focused counterparts.  That's the finding of McKinsey researchers Martin Dewhurst, Jonathan Harris, and Suzanne Heywood, who matched organizational health scores--from McKinsey's own organizational-health index database--with top performing multinationals and top local companies.  And they found this: 

The authors write, in the McKinsey Quarterly:

To understand what lies beneath these findings, we interviewed executives at 50 global companies. Those interviews, while hardly dispositive, suggested a relationship between organizational health and a familiar challenge: balancing local adaption against global scale, scope, and coordination.

Almost everyone we interviewed seemed to struggle with this tension, which often plays out in heated internal debates. Which organizational elements should be standardized? To what extent does managing high-potential emerging markets on a country-by-country basis make sense? When is it better, in those markets, to leverage scale and synergies across business units in managing governments, regulators, partners, and talent? One global company, hoping to realize the benefits of scale and, simultaneously, of focusing intently on India and China, recently started deploying business unit “CEOs,” whose responsibilities cut across both of those high-growth markets.

Complicating matters further, our interviews suggested that, for most companies, about 30 to 40 percent of existing internal networks and linkages are ineffective for managing global–local trade-offs and instead just add costs and complexity. Many companies, for example, can’t identify transferable lessons about low-income consumers in one high-growth emerging market and apply them in another. Some struggle to coalesce rapidly around market-specific responses when local entrants undermine traditional business models and disrupt previously successful strategies.

Read Understanding your ‘globalization penalty’ here.

Posted by Graham Griffith

Dani Rodrik on the New Economic Powers and Global Economic Growth

07-25-2011 4:37 PM with no comments

While Europe and the US are struggling with low growth and calls for austerity, some key developing economies are thriving.  In a commentary at Project Syndicate, Dani Rodrik points out that, unlike their counterparts in most developed economies, "[p]olicymakers in China, Brazil, India, and Turkey worry about too much growth, rather than too little."

As is often the case, fiction best reflects the changing mood. The émigré Russian novelist Gary Shteyngart’s comic novel is as good a guide as any to what might lie ahead. Set in the near future, the story unfolds against the background of a US that has slid into financial ruin and single-party dictatorship, and that finds itself embroiled in yet another pointless foreign military adventure – this time in Venezuela. All the real work in corporations is done by skilled immigrants; Ivy League colleges have adopted the names of their Asian counterparts in order to survive; the economy is beholden to China’s central bank; and “yuan-pegged US dollars” have replaced regular currency as the safe asset of choice.

But can developing countries really carry the world economy? Much of the optimism about their economic prospects is the result of extrapolation. The decade preceding the global financial crisis was in many ways the best ever for the developing world. Growth spread far beyond a few Asian countries, and, for the first time since the 1950’s, the vast majority of poor countries experienced what economists call convergence – a narrowing of the income gap with rich countries.

This, however, was a unique period, characterized by a lot of economic tailwind. Commodity prices were high, benefiting African and Latin American countries in particular, and external finance was plentiful and cheap. Moreover, many African countries hit bottom and rebounded from long periods of civil war and economic decline. And, of course, rapid growth in the advanced countries generally fueled an increase in world trade volumes to record highs.

Still, Rodrik is not too quick to dismiss the possibility that some developing economies will become effective engines for global growth.  He is, for example, generally pleased to see  improved economic governance in the new economies.  But, he warns that moments of high growth for sizable economies will remain just that: moments. 

Read The Future of Economic Growth here.

Posted by Graham Griffith

Lessons from the Fall of Borders

07-25-2011 11:29 AM with no comments

Dateline: Ann Arbor, Michigan, where the talk about the fall of the Borders Books retail giant takes on a decidedly local tone.  Borders was started in Ann Arbor in 1971.  It grew to become a thriving local business, as the Borders brothers found great success through an innovative software system they developed for tracking inventory.  The story of Borders' as a dominant national chain is essentially two decades long.

But the future of Borders will now be in B-school case studies.  PBS Newshour broke down the story of Borders' decline last week, with help from Slate's Annie Lowry:

Watch the full episode. See more PBS NewsHour.

Click here for a good timeline of Borders' history at AnnArbor.com.

Posted by Graham Griffith

MarketingProfs: Email Design Tips

07-25-2011 8:38 AM with no comments

So maybe the teenagers in your life roll their eyes when you mention email, as if it were an extinct form of communication.  But for the moment email still matters, and a lot of marketers are finding it remains an important outreach tool, especially when used as part of a wider digital marketing strategy.  And because email now largely exists within a digital context for most consumers, design matters more than it did when emails were essentially online news letters and press releases.  John Murphy, president of ReachMail, has an interesting article on email design for MarketingProfs.  Murphy shares the following "do's and don'ts" of email:

1. Do maintain a balanced ratio of text to images in your emails

2. Do assume that embedded images won't appear properly

3. Do provide a backup option for emails with image-rich backgrounds

4. Don't kick HTML to the curb

5. Don't avoid using a table of contents for emails with multiple sections

6. Don't leave out a call to action

Read Murphy's explanations for these do's and don'ts here.

Posted by Graham Griffith

Why Small Businesses are Exposed to More Credit Troubles in Times of Crisis

07-25-2011 8:11 AM with no comments

Even in good times, small businesses have access to fewer credit sources than medium-sized or large businesses.  As a result, they are looking for loans in same markets as general consumers.  Recently, that has meant small businesses see their credit opportunities tied to their real estate holdings.  So when we see a housing crisis of the sort we've been trying to get through, the credit flow is interrupted. 

James Wilcox--professor of economics and finance at the Haas School of Business, and a visiting scholar at the Federal Reserve Bank of San Francisco--argues that policy makers need to recognize the "particular vulnerabilities of small business to financial crises" in order to better manage credit opportunities to a vital segment of the US economy.  In a recent Economic Letter, Wilcox shares this graph:

And he writes:

Since the onset of the crisis, the credit environment for smaller nonfinancial firms has been much different than for larger nonfinancial firms, due partly to the decline in the values of commercial real estate and the meager rebound in CMBS securitization. Figure 2 shows recent issuance of corporate bonds, CMBS, and non-real-estate ABS. New issues of corporate bonds, an important credit source for large businesses, dropped sharply in 2007 and 2008 before recovering somewhat. While corporate bond issuance has yet to consistently surpass its 2006–07 peak, its average during 2010–11 was higher than it was before the pre-crisis credit boom.

The figure also shows that ABS issuance collapsed during the crisis. Issuance rebounded after 2008 to about half its 2007 level. The ABS 2009 recovery was probably due in part to the Fed’s Term Asset-Backed Securities Loan Facility program, which provided loans to ABS investors. The recovery may also have reflected the fact that these securities were backed by assets other than real estate, such as vehicles.

Figure 2 also shows that, during the crisis, CMBS issuance—the chief avenue through which small businesses connected to the broader credit markets—halted almost completely and has remained virtually nonexistent since. Declines in residential and commercial real estate prices and uncertainty about future prices may continue to reduce investor willingness to fund loans collateralized by real estate. Thus, small businesses may find that their real estate collateral won’t support the volumes of credit they used to, at least in the immediate future.

Read the full article here.

Posted by Graham Griffith

Significant Growth in China's Outward Investment in Europe

07-21-2011 7:41 AM with no comments

Over the last decade, China has expanded its investments in other economies.  The bulk of that investment has been in Asian and African economies.  In comparison, China has put very little into Europe.  But as The Economist points out in this multimedia slideshow, China's investment in Europe is "gathering pace":

For more of The Economist's coverage of Chinese businesses expanding into the West, click here.

Posted by Graham Griffith

The Curious Case of Older Workers and Employment During the Recession

07-20-2011 11:26 AM with no comments

Casey Mulligan has a very interesting post at the Economix blog today, based on this surprising graph:

So older workers have either been more successful at keeping their jobs.  Or many have had to return to work or work longer because of diminishing funds in retirement accounts--in which case they have had more success than younger workers at finding employment.  Or both.

Read Why Hasn’t Employment of the Elderly Fallen? here.

Posted by Graham Griffith

Thinking Like an Innovator

07-20-2011 8:41 AM with no comments

Jeff Dyer, professor at  Brigham Young University's Marriott School of Business, studies "disruptive innovators."  And he says other business leaders can learn a lot by studying the ways in which these innovators come up with disruptive ideas through experimentation. 

In this Harvard Business Review IdeaCast, Dyer discusses techniques to introduce more innovative thinking in the workplace:

Posted by Graham Griffith