Teri Bernstein, MBA, CPA has been teaching full time in the Business Department of Santa Monica College since 1985. Prior to that, she worked in Internal Audit and Special Financial Projects for the 1984 Los Angeles Olympics, CBS, Inc., and Coopers & Lybrand. She attended the University of Michigan and Wayne State University.
image from vimeo of additional social media predictions from 2Factory
Social media. Who would have thought, ten years ago, that this would be a major focus for marketers? In 2013, young people tired of Facebook...but that is partly because of the newer products and trends on the horizon. One take on what is coming up:
Who knows what will grow in 2014...
Source: "5 things to expect in social in 2014," by Jennifer van Grove, CNet news, December 31, 2013.
Follow up:
image from the Business Insider online
New Year's resolutions are easily broken, but creating life-long intentions that one revisits and renews each year can help an individual achieve personal, financial and other goals. The Business Insider published Woody Guthrie's list as an inspiration.
Source: "Woody Guthrie Really Knew How To Do New Year's Resolutions," by Rob Wile, the Business Insider, December 27, 2013.
image take by Liu Jin AFP/Getty images via Marketplace
"Exfoliating your skin" has been marketed as a positive grooming behavior for several years. Companies have made this easy by putting microbeads--made of plastic--into their soaps. The problem is: these tiny beads make their way through processing plants into the ocean. There they have made changes to the ecosystem, according to several studies.
Unilever has taken what it sees as a pro-active stance: they have made a commitment to eliminate these microbeads from all of their products by 2015. This environmentally sustainable stance is being incorporated into their marketing strategy. Peter Zuniac, an investment analyst for Liberum Capital, explains it this way: “They say if they achieve their sustainability targets, and no one else follows they will have failed. So their objective is that other organizations, nonprofits as well as the competition will eventually follow.” He also said that, as a leader in this area, Unilever might be able to attract investment funds directed as sustainable business practices.
Source: "Unilever to dump microbeads from soap," by Peter O'Dowd, Marketplace American Public Media, December 28, 2013.
image from kdwn.com
It could happen almost anywhere these days: Target had a security breach. Its public relations announcement in reaction to the incident reassured customers that their PINS had not been stolen. Molly Snyder, a Target spokesperson said: “We remain confident that PIN numbers are safe and secure. The PIN information was fully encrypted at the keypad, remained encrypted within our system, and remained encrypted when it was removed from our systems.”
However, that turned out not to be true.
Crooks were already selling the data on the black market when Target had to make a second announcement that was more accurate: the PINS had been stolen as well. Major banks had already reacted as though this might have been the case--placing caps on withdrawals, for example.
Was it a public relations mistake to give false reassurance at the outset? Possibly. It may have been more reassuring to customers if Target had over-compensated for the breach. But it is also possible that customers are becoming jaded about breaches and do not expect honest information from corporate public relations announcements.
Forty million customers were affected.
Source: "Target’s Nightmare Goes On: Encrypted PIN Data Stolen" by Nicole Perlroth, New York Times, December 27, 2013.
image from the NYT
Many magazines are struggling or failing (Time, Newsweek) . But the niche magazines for hobbies and special interests are still doing well. Here are some examples:
Even slightly-off-the-mainstream niche magazines like "Real Simple" and "The New Yorker," seem to be holding their own. Passionate communities make the difference.
Here are some of the magazines around my house:
Source: "Loyal Subscribers Keep Hobby Magazines Afloat," by Christine Haughney, New York Times, December 27, 2013.
image from compliancex.com
The SEC filed a case again Cincinnati's Fifth Third Bank and its former CFO, Daniel T. Poston early in December 2013. The SEC asserted that Poston delayed the write-off of $1.5 billion in bad loans in 2008, violating generally accepted accounting principles (GAAP). Both the bank and Poston settled the case straightaway (without admitting guilt). The bank paid $6.5 million and Poston paid $100,000 out of his own pocket. The fact that the SEC got Poston to pay out of his own pocket is significant in terms of enforcement options. However...the fine was far short of the "executive pay clawback" provisions of the Sarbanes-Oxley Act (SOX). The SEC's unwillingness to pursue the additional penalty is indicative of the difficulties of that level of prosecution and punishment.
SOX section 304 delineated a reasonable penalty: if there were earnings misrepresentations that resulted in stock, bonus and other compensation to a responsible executive, then the executive should have to pay that compensation back. Easier said than done. In the Fifth Third Bank case, there was a misstatement that led to about $350,000 in extra compensation to Poston. But there was a technicality--the timing of the compensation determination vis-a-vis the write-off.
In fact, there are three requirements that must be met to bring forward a successful suit under SOX:
Management can claim that the inflated values were appropriate, delaying or avoiding an official write-down, and making clawback prosecution impossible. However, the SEC received 557 whistle-blower complaints in 2013...and some of these might force more timely write-offs, which then might lead to clawback prosecutions.
Source: "Clawbacks? They’re Still a Rare Breed," by Gretchen Morgenson, New York Times, December 28, 2013.
Jimage from www.PatentlyApple.com
"Without compelling new products in big new markets next year, worries will grow that Apple's days as a hot growth company are over, limiting future gains for the shares," asserts Alistair Barr in an analysis of information technology companies at the end of 2013. "2014 is the year he [Tim Cook, Apple CEO] has to deliver, according to investors and analysts."
What might be included in a new product line for Apple? According to Tony Sacconaghi, an analyst at Sanford C. Bernstein, possible products include:
But, according to Brian Marshall, an analyst at ISI Group,"We need something revolutionary from Apple that will move the needle and iWatch and iTV won't do it."
Another analyst, Adnaan Ahmad of Berenberg Bank, suggested in October that Apple acquire Tesla Motors to get back into the forefront of innovation. Tesla is run by Elon Musk--a known innovator and visionary thinker [PayPal and SpaceX as well as Tesla]. Because the potential sales in the auto industry--$1.6 trillion annually--are much bigger than the revenue pool in the crowded phone and TV markets, Ahmad also suggested that a path for Apple might better be directed toward the iCar...especially since the auto market is growing in the hybrid and electric markets.Where will Apple be at this time next year?
Source: "2014: Apple's crunch year to prove innovation chops," by Alistair Barr, USA Today, December 23, 2013.
The five-year birthday for Bitcoin is January 3rd, 2014. Bitcoin's "daddy" is a group of hackers named "Satoshi Nakamoto." Five years ago "Nakamoto" set up the currency to be outside of any government's control. Bitcoin's software is set up to allow anonymous currency transactions. According to the explanatory essay that accompanied the currency's launch, bitcoin's purposes included:
Many libertarians were attracted to the independent-of-government aspects of bitcoin. And some financiers have invested in bitcoin as they might hedge investments in any "foreign" currency. But to bitcoin enthusiasts, such as Elizabeth Ploshay, bitcoin not just money, it's "a movement." Tradehill co-founder Ryan Singer has opined that just as email supplanted snail-mail...bitcoin will supplant traditional banking.
One source of information for those wishing to keep up with this rapidly changing currency platform is Bitcoin magazine, which has the stated mission to be “the most accurate and up-to-date source of information, news and commentary about bitcoin.”
Source: "The Bitcoin Ideology," by Alan Feuer, the New York Times, December 14, 2013.
Image from www.thrillist.com
Pepsi has reached a deal to be the soda and snack food supplier to the rapidly growing Buffalo Wild Wings restaurant chain. This caught my eye for several reasons--not the least of which was that my alma mater, the University of Michigan, is playing in the Buffalo Wild Wings BCS Bowl game this holiday season (against Kansas State).
This new deal means that Pepsi products--the colas, and Mountain Dew--will be supplanting any Coca Cola products in the restaurant from here forward. In addition, other Pepsi brands, such as Doritos corn chips, will be incorporated into the menu items at Buffalo Wild Wings, just as Doritos have been incorporated into the menu at Taco Bell.
What will we see in the future? A "Dorito-encrusted wing" or a "Mountain Dew cocktail"? Hmm.
Spokespersons for Buffalo Wild Wings (Sally J. Smith) and PepsiCo (Kirk Tanner) said that they look forward to taking advantage of Pepsi's relationships with entertainers and sports players as well as increasing the tie-ins with fantasy football. PepsiCo’s chief executive, Indra K. Nooyi, agrees with pursuing these strategies. The new partnership will be following some of the marketing synergies that have worked between Pepsi and Taco Bell.
Source: "Pepsi Deal Underscores An Emphasis On Snacks," by Stephanie Strom, New York Times, December 11, 2013.
image from momstownblog
Toward the end of the year, many people resolve to do in the upcoming year what they have put off before. For the entrepreneurial person, that might mean deciding to start a new business. Forbes Magazine's Entrepreneurs Group recently published an article listing seven questions any would-be entrepreneur should ask themselves before starting up:
Read the linked article for more details on these topics.
Source: "7 Questions To Ask Before Starting Your Own Business," by Entrepreneurs group, Forbes, December 9, 2013.
image from www.businessinsider.com
The global scandal resulting from the National Security Agency's (NSA) indiscriminate surveillance of individual and corporate communications and data could be a major factor in declining business performance.
In particular, Cisco Systems, IBM, Microsoft, and Hewlett-Packard have seen their business decline in China and other Asian countries. Cisco Systems saw Sales in its top five emerging markets decline between 18% and 30% from last year to this year, as of the end of September. Cisco had been rolling out new routing and switching platforms when the NSA spying scandal struck.
Cisco's decline occurred just as there was an 8% increase in China's economy for the third quarter. And IBM has seen a 22% decline in its China sales.
Trust is an essential component in business relationships. It remains to be seen whether the U.S. can rebuild business relationships moving forward.
Source: "NSA spying hurts business of large U.S. hardware makers," by John Shinai, USA Today, December 9, 2013.
image from bloomberg.com
JPMorgan Chase is in trouble again...this time involving the preferential hiring of relatives of Chinese officials.
image from democracychronicles.com
The Securities and Exchange Commission (SEC) is investigating these JPMorgan Chase actions:
Were these relatives the most qualified applicants for a posted job? Or did JPMorgan Chase hire these young adults to gain access to business connections and the public offering of the China Railway Group stock?
The U.S. business community in China has been surprised by this investigation. Many think this type of preferential hiring is "business as usual"--an expected practice if U.S. businesses expect to gain access to Chinese business markets. Perhaps the person's "qualification" for the job would be political connections (ethically iffy, but not illegal). But if the salary amounts to de facto payments to officials by way of the offspring's paycheck, there would be a difficult-to-prove legal issue. More demonstrably illegal would be verbal or written "quid pro quo" agreements. We will see what this SEC investigation turns up.
Hiring relatives in exchange for business favors would amount to bribery under the Foreign Corrupt Practices Act (FCPA). And it appears that, recently, the federal government is pursuing these cases more vigorously. According to Jack Massey, a partner at Sutherland, Asbill & Brennan:
“The biggest FCPA prosecutions have involved energy, defense and engineering firms, because they operate globally, they put a lot of people on the ground in the developing world, and they have to deal with corrupt sovereigns. In the new era, however, as more firms do business abroad, the government is turning its sights to the likes of Wal-Mart, JPMorgan and Hollywood studios, demonstrating its increased commitment to enforcement.”
Source: "Did JPMorgan commit bribery by hiring the kids of Chinese politicians? ", by Neil Irwin, The Washington Post, August 19, 2013.
image from www.citytowninfo.com
Brian Halligan is the CEO of HubSpot, an "inbound marketing software platform." His experience is that all of his brilliant ideas arise either when he is falling asleep or just waking up. Even though these epiphanies arise only once or twice a month, it is important to him to nap on a regular basis, and he encourages his workers to do the same.
Much of his workforce is part of "Generation Y." He has rethought the business culture and his management style in terms of what motivates and nourishes those in this generation. Some of the preferences Halligan tries to cater to include:
Halligan's philosophy about Human Resource management seems radical, but he seems to have been willing to adapt with the times--an important attribute in an information-technology-based company.
Source: "Brian Halligan, Chief of HubSpot, on the Value of Naps," by Adam Bryant, The New York Times, December 5, 2013.
image from nursingcrib.com
According to a recent Gallup poll, advertising professionals and stockbrokers are thought to be just slightly more honest than politicians and car salespersons. One probably wouldn't expect that businesspeople of any type would be ranked very highly. At best, a business transaction is "quid pro quo." There is what is perceived to be an equal exchange of value: $130 to a retailer in exchange for a cashmere sweater, for example. There is no altruism or charity involved--it is an even trade. In accounting terms, debits = credits.
If one side of the business transaction decides to misrepresent things--with a phony $20 as part of the cash tendered--or a 30% orlon sweater sold as 100% cashmere--then we are in the realm of dishonesty. And some businesspeople seem to be in the business of misrepresenting their products.
Here are the results of the survey:
What would it take for advertisers and car salespeople to be perceived as more honest?
Source: "Congress Retains Low Honesty Rating," by Frank Newport, Gallup Politics, December 3, 2013.
image by Roberto Gonzales for Getty Images, via Marketplace website
The image above depicts SpaceX's Dragon spacecraft. It is on top of a Falcon 9 rocket that is lifting off from Cape Canaveral Air Force Station in Florida. This commercial space launch is not providing any new science, but SpaceX is showing up as a viable competitor because it is offering its launch "product" at a significantly lower price.
Its competitors are European and Russian launch companies. But SpaceX is trying to build a good track record so that it can become a launch supplier to the U.S. military's billion+ dollar contracts. At the present time only the United Launch Alliance is approved for launching military satellites.
Source: "SpaceX heads to the stars," interview with John Logsdon by Ben Johnson, Marketplace, American Public Media, December 4, 2013.
image from Sock of the Month Club
Lately "subscribing" seems to be all the rage in marketing. Gym memberships have long been marketed as a monthly cost, and "book of the month" clubs and "wine of the month" clubs preceded internet marketing. Lately, even non-profits want you to give on a monthly basis. I wrote a few months ago about a shaving club subscription model.
The convenience seems to appeal to consumers, and the regularity of the revenue stream appeals to the sellers.
Sock-of-the-month clubs are now in vogue. I was a little disappointed when I first saw this article, because the sock clubs first addressed were for men--for example Soxiety, Sock Panda and Ankle Swagger. Men's online sock sales have risen 29% (and store sales have risen 4%) over the last year! As it turns out, women's sock clubs have helped increase sales even more. One interesting marketing tidbit in this arena is that women buy more when there are abundant choices, and men buy more when there are fewer choices.
There are now so many different sock club subscription services, it will be interesting to see how they differentiate themselves as competition increases.
Source: "Sock-of-the-Month Clubs Rise Online, Bringing Subscriptions to Feet," by Andrew Adam Newman, The New York Times, December 3, 2013.
image from wallstcheatsheet.com: Leonardo DiCaprio as Jordan Belfort
Here's a movie that might be of interest to business majors: "The Wolf of Wall Street" directed by Martin Scorcese. It is a story of the real-life Jordan Belfort, who did prison time for defrauding investors in a 1990's Wall Street and corporate banking scam.
Not only is the subject matter of the movie finance-related, the circumstances under which it is being released are also interesting in terms of risk and marketing.
The movie, produced by Paramount Pictures, was finished last Wednesday, but they still plan to release it on Christmas Day, which would make it eligible for the 2013 Oscar season. In some years, big studios go for the big dollars, and let the independent films soak up most of the Oscar honors. But it looks as if the end-of-the-year-release-in-time-for-awards-competition is producing a crowded movie marketplace this holiday season.
There are some other issues with this movie that make it a risky release for the holidays:
The writers of the article pose a question which is probably in the minds of Paramount studio executives as well, "Will the picture...do for crooked stock traders what Mr. Scorsese’s 'Goodfellas' did for the mob?"
We'll see...
Source: "A Scorsese Film Gets In Under the Oscar Wire," by Michael Cieply and Brooks Barnes, The New York Times, December 1, 2013.