• 2012 Predictions

    What should managers expect from the business environment in 2012? In this Slideshare presentation, futurist Ross Dawson predicts the global themes for 2012. What will change in 2012? What will stay the same? Which of these predictions do you think will be most important to managers?

  • BofA Improvements in 2012

    Bank of American (BofA) plans to improve risk-management practices in 2012. Bloomberg News obtained a copy of a BofA year-end letter to employees from chief executive Brian Moynihan posted to an internal employee Web site. In it, he said, "We greatly strengthened our risk culture in 2011, and that work has laid the foundation that will carry us through whatever turbulent times may lie ahead." The bank is "simplifying our business model and organization, continuing to shed non-core assets and businesses, and reducing risk-weighted assets."

    Shedding assets could improve BofA's capital levels ahead of the stricter Basel III international standards. Basel III is in response to the global financial crisis. Many banks were undercapitalized when the crisis hit, thus massive bailouts and recapitalizations by governments were necessary to save the banking system. The international community came together in Basel, Switzerland to determine bank capital requirements or how much of their capital structure should consist of common equity, retained earnings and other high quality assets. It is an effort to set minimum capital requirements, internationally, for banks. The implication is that many banks will have to raise equity and sell low quality assets in order to meet the new capital requirements. The Federal Reserve has indicated that the United States will adopt most of the recommendations.

    Moynihan wrote, "We can focus all our energy and $3 billion in technology investments -- the 'peace dividend' that derives from no acquisitions/integrations -- on increasing the pace of innovations and improving service."

    What does he mean by the 'peace dividend'? How does this relate to BofA improving service?

  • Countrywide - Not a Good Deal

    Bank of America's acquisition in 2008 of Countrywide Financial, the largest mortgage lender, has turned out to be one of the worst business deals in history. It has resulted in tens of billions of dollars in losses for Bank of America. In addition, Countrywide has become a symbol of the housing boom and collapse. "Countrywide's actions contributed to the housing crisis, hurt entire communities, and denied families access to the American dream," said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division.

    The Justice Department announced the largest residential fair-lending settlement in history on December 21, 2011. Bank of America will pay $335 million in compensation for victims to settle allegations that its Countrywide Financial unit discriminated against black and Hispanic borrowers in their mortgage lending from 2004 through 2008. This was before Bank of America purchased Countrywide.

    The Justice Department determined that from 2004 to 2008, Countrywide did not have a system to comply with fair-lending rules. Countrywide's policy gave loan officers and brokers the discretion to alter the terms for which a particular applicant qualified. Lending data showed that Countrywide charged Hispanics and African-Americans more, on average, than white applicants with similar credit histories. Furthermore, brokers and employees "steered" applicants who qualified for regular mortgages into riskier, more expensive subprime loans. Bundling and reselling subprime loans as securities was one cause of the 2007 financial crisis.

    Attorney General Eric Holder said, "The department's action against Countrywide makes clear that we will not hesitate to hold financial institutions accountable, including one of the nation's largest, for lending discrimination. These institutions should make judgments based on applicants' creditworthiness, not on the color of their skin. With today's settlement, the federal government will ensure that the more than 200,000 African-American and Hispanic borrowers who were discriminated against by Countrywide will be entitled to compensation."

    Federal civil rights laws, including the Fair Housing Act and Equal Credit Opportunity Act, make a lending practice illegal if it has a disparate impact on minority borrowers. What is disparate impact? What can a manager do to discourage disparate impact in lending practices?

  • AT&T and T-Mobile Hang Up

    German based Deutsche Telekom AG wants to sell T-Mobile USA. AT&T wanted to merge with T-Mobile to improve its cellphone network. However, the Federal Communications Commission (FCC) and the Department of Justice were against the merger.

    AT&T and Deutsche Telekom withdrew their merger application from the FCC after the FCC released a staff report concluding that the merger was not in the public's interest because it would be likely to lead to higher prices, fewer jobs, less innovation, and overconcentration of market share and wireless spectrum among remaining competitors. But, Jim Cicconi, AT&T Senior Executive Vice President of External & Legislative Affairs, posted a rebuttal to the FCC on AT&T's public policy blog.  

    The companies turned their focus on the antitrust lawsuit filed by the Department of Justice. The Justice Department reported, "On Aug. 31, 2011, the Justice Department filed a lawsuit in U.S. District Court for the District of Columbia, to block the transaction, which would have combined two of the only four wireless carriers with nationwide networks. State attorneys general from California, Illinois, Massachusetts, New York, Ohio, Pennsylvania, Puerto Rico and Washington joined the United States as co-plaintiffs. The department coordinated its review of the proposed transaction with the Federal Communications Commission."

    On Monday, December 19, 2011, the Justice Department issued the following statements.

    Deputy Attorney General Cole said, "This result is a victory for the millions of Americans who use mobile wireless telecommunications services. A significant competitor remains in the marketplace and consumers will benefit from a quick resolution of this matter without the unnecessary expense of taxpayer money and government resources."  

    Acting Assistant Attorney General Pozen said, "Consumers won today. Had AT&T acquired T-Mobile, consumers in the wireless marketplace would have faced higher prices and reduced innovation. We sued to protect consumers who rely on competition in this important industry. With the parties' abandonment, we achieved that result." 

    The Wall Street Journal reported that "The deal's failure is a setback for AT&T's top executives, who exuded confidence about the takeover beginning with its announcement on March 20. For Mr. Stephenson, AT&T's CEO, the bid for T-Mobile was the biggest gamble in a tenure devoid of the sort of blockbuster deals that were a hallmark of his predecessor, Ed Whitacre. Mr. Whitacre created today's AT&T over more than a decade of deal-making that pieced together fragments of Ma Bell and rolled up several wireless companies."

    Now, T-Mobile will look for another buyer, and AT&T does not have access to a wireless-spectrum network. It will take years for AT&T to build it.

    Consumers could benefit if wireless services were more accessible. The merger would have made AT&T bigger, but is big always bad? When is big good?

    Jobs might have been lost, but moving data quickly and affordably could result in new jobs. How could economies of scale and other technological and procedural efficiencies have led to new products and services?

  • Holidays are Social

    Mr. Youth, a marketing firm, surveyed 4,500 adults about their holiday shopping. Then, Mashable developed an infographic or visual presentation from the data.

    Chief Marketing Officers (CMOs) should be interested in the findings.

    Social media interactions with friends and family are a key driver of holiday gift purchases

     Recommendations from social media users are two times as likely to lead to a holiday gift purchase

    52 percent of users are willing to pay more for brands they trust

    Interaction with consumers over social media can make them feel special

    View the full infographic at Mashable. How can managers use social media to make consumers feel special?

  • Virtual Meetings

    Businesses meet to inform managers of plans. Then, managers go back to their locations and inform employees of what is to come. Before the Internet, large and/or geographically dispersed businesses held meetings at one geographic location. The company would pay for travel, hotel, food, and entertainment for the managers. With the Internet, many businesses now meet in cyberspace.

    Virtual meetings or e-meetings occur solely online instead of in person, face-to-face. Attendees can be in distant locations, which saves businesses travel time, as well money. Some virtual meetings are audio only; others include a video component where attendees can see each other. Meeting attendees may log into a Website and pose questions electronically. Some managers conducting meetings allow questions to be posted online so others see what gets asked. Others view posted questions and decide which to answer.

    When companies want to cut costs, switching meetings from face-to-face to e-meetings is one place to start. However, some feel that e-meetings are a bad idea because face-to-face meetings are more valuable. Others feel that e-meetings are just as valuable, if not more, than face-to-face meetings, because all employees can be involved, not just specific managers. Generally, it takes several managers, as well as many employees, to run a business at each location, but company finances allow only one manager to attend.

    As a manager, would you rather attend a face-to-face or e-meeting? What do you feel are the pros and cons of both?

  • A Day in the Life of a Social Media Manager

    SocialCast has developed an infographic  to depict a day in the life of a Social Media Manager.

    Which of your skills match those required by social media managers?

  • Wrap It Up!

    During the holidays I want to find the perfect gift for a family member or friend and wrap it so that the package looks beautiful and inviting. I shop in stores and online. Many stores offer gift-wrapping or sell gifts pre-wrapped. It is possible to have gifts purchased on the Web wrapped, also. Some look great and some are a little disappointing. One gift I ordered was just a white box with a red ribbon, no bow. It was not very exciting.

    Web shoppers, just like store shoppers, are delighted when they open a beautiful gift. Packaging is all the activities of designing and producing the container or wrapper for a product. It serves not only the practical function of containing and protecting products as they travel through the distribution channel, but it is also a container for promoting the product and making it safer and easier to use.

    Most of us like the small decorative touches that convey personal attention. Products can be wrapped in colorful tissue paper or ribbon before being placed in shipping boxes, to keep them secure. A handwritten note can be placed on top, so it's the first thing the recipient sees when opening the box. The shipping box should be big enough to keep the gift from pressing against the sides but snug enough so nothing moves around.

    Managers make decisions on packaging. For example, personal care items - like razors, deodorant, body wash, soap, lotion, etc. - have become more popular to give as gifts in recent years. One reason these have become popular gifts might be because everyone uses them every day - it is a practical gift that the giver knows the receiver will use and will get their money's worth. Another reason might be because companies like Proctor & Gamble package these items in beautiful gift boxes that are ready to give as gifts. The giver doesn't have to spend extra money on gift packaging.

    Pre-packaging personal care items is a great example of bundling. The manufacturer pre-packages several items that go together, like lotion, body wash, and body spray, and sells it at a bundled price. This way, they are selling 3 items instead of just 1. Many times shoppers want the package because it can be reused, like a bag or a tin box. If the items weren't packaged together, customers might not be inclined to purchase the additional items. Furthermore, if the items weren't bundled as a gift, shoppers might not buy them at all to give as gifts.

    When you get something in the mail, do you want it to feel like a present, whether you bought it for yourself or not? What products have you bought because of the package?

  • Sales Promotion to Increase Demand

    The highest-rated talk show in television history was the Oprah Winfrey Show. A popular holiday tradition on the show was "Oprah's Favorite Things," which aired before Christmas. Everyone in the show's audience received all of the gifts. Even though the show ended last season, Oprah's favorites continue.

    This year O Magazine ran the "12-Day Give-O-Way!" in which 12 lucky participants won every item listed in the Favorite Things gift guide. Oprah and the magazine's team of experts - including Martha Beck, Dr. Mehmet Oz and Peter Walsh - selected the products they'd love to give and get. The approximate retail value of more than 70 gifts was $7,252 per winner, as well as $2,175 in cash, which winners could use to help defray any tax consequences incurred for acceptance of the prizes. Thus, the total prize package was $9,427 per winner.

    The sponsor of this promotion was Hearst Communications, Inc.  Specifically, the managers at Hearst decided to use sales promotion, marketing activities--other than personal selling, advertising, and public relations--that stimulate consumer buying. Sales promotion is generally a short-run tool used to stimulate immediate increases in demand. Popular tools for consumer sales promotion include contests, free samples, premiums, trade shows, vacation giveaways, and coupons.

    The contest was short, just 12 days. For a chance to win the "12-Day Give-O-Way" contestants visited the Web site, www.oprah.com/12days. Once there, they had to give their first and last name, address, city, state, zip code, email, telephone, and birthdate.  Furthermore, they were asked, "Would you also like us to send you a free trial issue of O, The Oprah Magazine?" No purchase was necessary to enter or win. People gave Hearst their personal contact information in return for a chance to win.

    After the contact information, visitors read the following. "If you like what you see, you'll get 11 more issues (12 in all) for just $ 18 - that's 67% less than others pay on the newsstand.  If not, return the bill marked "cancel" and keep the first issue with no obligation. You'll still be eligible to win the sweepstakes. " Of course, many people agreed to the free trial of the magazine.

    Contestants could enter the contest every day for 12 days. The day after entering the contest, the entrant received an email with instructions of how to pay online.

    Why did the managers at Hearst want to collect all of that contact information? How successful do you think the "12-Day Give-O-Way" was at stimulating an immediate increase in demand for O Magazine?

  • Does an airline have a competitive edge?

    JetBlue Airways, the largest U.S. airline without service to Dallas/Fort Worth (DFW) International Airport, announced December 7 that non-stop service between Boston and DFW begins May 1, 2012. Tickets go on sale December 13, 2011. JetBlue is a low fare carrier with more amenities than many of its competitors. For example, the planes have more legroom in coach, as well as free TV. Furthermore, JetBlue offers its own Customer Bill of Rights, "with meaningful and specific compensation for customers inconvenienced by service disruptions within JetBlue's control."

    "With JetBlue entering the Dallas/Fort Worth market, another important destination from Boston will be served by a low cost carrier,'' said Ed Freni, Director of Aviation for Massport, which owns and operates Boston Logan. "Competition lowers fares which benefits passengers and the region. We support JetBlue on its continued growth as Boston's largest airline.''

    JetBlue's announcement came shortly after American Airlines (AA) filed for reorganization under Chapter 11 on November 29, 2011. AA is headquartered in Dallas/Fort Worth. Furthermore, it came just a few days after Southwest Airlines CEO Gary Kelly's letter to employees - RE: American Airlines More Challenges for Southwest than Opportunities. An excerpt from his letter follows.

    Lets look back to 1989 the year Southwest became the newest member of the old major airline club, based on annual revenues. All the majors from 1989 have gone bankrupt. Pan Am. Eastern. Braniff. Continental. America West. TWA. US Air. United. Delta. Northwest. And now, American. Every single one failed. Why? Not because of Customer Service, but because of high costs. Great Customer Service cannot overcome high costs. That is the imperative I wrote about a decade ago: low costs.

    Southwest Airlines is the only major airline from 1989 that has survived this tumultuous industry without bankruptcy. Why? Because our low costs have preserved our profits. Period.

    Harvard Business School Professor Michael Porter explains competitive advantage in his "Five Forces" of competition, a tool for developing strategy.

    The Five Forces That Shape Industry Competition

    • Threat of new entrants - New entrants in an industry can raise the level of competition.
    • Suppliers' bargaining power - The fewer vendors a company has for its supplies, the more those suppliers can charge.
    • Buyers' bargaining power - If customers don't like one airline's offerings, they can choose another airline.
    • Threat of substitute products - Flyers may not be loyal if they find a cheaper ticket price. But, if someone has flown one airline for many years, he or she might be reluctant to switch.
    • Competitive rivalry within an industry - All the forces above combine to reflect on the airline industry's attractiveness. If customers cannot differentiate among competitors' offerings, the fiercer those companies' rivalry will be.

    All of the five forces are strong in the airline industry. As a result, airlines are on the bottom of the profitability of selected industries. How can an airline achieve superior performance in the face of competition? What can an airline do to improve competitive advantage?

  • Southwest Sees American as Threat

    Southwest Airlines perceives American Airline's bankruptcy as a threat, rather than an opportunity. Historically, Southwest has had lower costs, but that has changed as other airlines emerged from bankruptcy. Gary C. Kelly, Chairman of the Board, President and Chief Executive Officer of Southwest Airlines, warned, in a memo to employees, that Southwest must lower costs and improve productivity. (A copy of the memo is attached.)

     "Our labor rates are now, far and away, the highest in the industry. Through bankruptcy, very large New Airlines have emerged with lower rates than us and better productivity. Next to fuel, labor is our highest expenditure. We can't have lower overall operating costs if our labor costs aren't lower. We can't have lower labor costs if we aren't more productive. The good news is that we have a lot of opportunities to improve our productivity, eliminate waste, and preserve our pay rates and benefits for the foreseeable future. It's crucial that we take advantage of those opportunities."

    Productivity is defined as the relationship between the amount of input needed to produce a given amount of output and the output itself. The Airline Data Project (ADP) at the Massachusetts Institute of Technology (MIT) presents "the most important airline industry data in one location in an easy-to-understand, user-friendly format." ADP assesses productivity as available seat-miles (ASMs), the number of available seats multiplied by the number of miles flown, (output) per employee (input) for all employees and flight employees. Then, ADP takes that analysis a step further and assesses the number of ASMs produced per dollar of labor compensation. "Calculating the output per employee is only one part of the equation. It is equally important to understand the cost of that output. Often the two produce very different results."

    How do you think Southwest can increase productivity?

  • Holiday Parties at All Time Low

    We spend a lot of time at work with our co-workers, so it is natural to want to celebrate with them.  Holiday parties provide an opportunity for everyone in the organization to have fun. But, Amrop Battalia Winston, a global executive search firm, reports that "fewer of the nation's businesses will hold holiday parties this year than at any time in nearly a quarter of a century." The company has conducted an annual survey of corporate America's holiday party plans for 23 years.

    In 1988, the first year of the survey, most companies (95 percent) had a holiday party. This year, only 74 percent of the companies polled will have parties. Most of the companies not celebrating said the party was not in the budget. Dale Winston, Amrop Battalia Winston's chairwoman and CEO, said, "The trend is downward and we're seeing that once a company does away with them, parties rarely get back in the budget. In many cases, the holiday party is the last vestige of company sociability. Some young people entering the job market may never see a corporate holiday party."

    So, if the company isn't celebrating, managers should celebrate life events with employees (birthdays, marriages, and births of children) and acknowledge their achievements. Remembering important events and achievements with celebrations is a morale booster.

    "What is the best way for a manager to handle celebrations at work?" Eilene Zimmerman asked Steve Harrison, the author of "The Manager's Book of Decencies: How Small Gestures Build Great Companies" and the chairman of Lee Hecht Harrison, a global career management consultancy in Woodcliff Lake, N.J. Mr. Harrison answered, "The best celebrations are small, spontaneous and creative. It needs to be intimate. On the group level you all know each other, and that makes celebrations rich and culturally important. These are not the stuff of policy manuals; they are unscripted and have their own charm, depending on the character of the department or group." (See "Forced Fun? The Limits of Office Celebrations," The New York Times, May 20, 2007.)

    How would you like to celebrate at work?


  • Bankrupt but Business as Usual

    Braniff Airplane and Flight Attendants

    Last Tuesday, I received an email from American Airlines announcing that even though it had filed for bankruptcy, "it will be business as usual at American throughout our reorganization process." (See a copy of the email attached.)

    I live near the Dallas/Fort Worth (DFW) International Airport. American Airlines is based here and is one of the largest employers in the area. So far, employees have kept their jobs and passengers have been served. It does seem like business as usual.

    Also, I lived here in 1982 when Braniff declared bankruptcy. Braniff used the slogan "When you've got it, flaunt it" in one advertising campaign. Many thought that saying rang true for Braniff. Management was known as innovative. The company was the first to have colorful airplanes and Pucci and Halston designed flight attendant uniforms.

    Immediately upon declaring bankruptcy, Braniff ceased operations, leaving about 10,000 employees out of work. Customers were stranded with worthless tickets and had to buy tickets on other airlines. Most employees could not find comparable work for many years, if ever. It was a painful time for employees, as well as the DFW area.

    Today, bankruptcy no longer means a company will cease to exist. Other airlines that have declared bankruptcy include America West, Continental, United, US Airways, Delta, and Northwest. Subsequently, US Airways merged with America West; Delta merged with Northwest; and United merged with Continental. Now, all are profitable.

    Bankruptcy should help American Airlines achieve competitive costs. But, the customer must be satisfied in order for American to become successful. As a customer, what kind of air travel experience do you want? What would you recommend to improve the customer's experience to American's management?

  • Is email dead?

    Visible gains has designed an infographic about how people communicate. They wanted to know if social platforms, especially Facebook and Twitter, were making email obsolete. Visible Gains concludes that email is here to stay.

    What do you think? When you meet a new friend, do you add them to Facebook? Do you follow anyone on Twitter? When do you use email? What about at work? Should a manager ever use Facebook and/or Twitter instead of email? When should a manager use email?

    Is Email Dead? [Infographic]

    courtesy of Visible Gains
  • SWOT Analysis

    SWOT analysis is the second step in the strategic planning process. It involves analyzing the internal and external environment. Managers analyze the current situation and search for Strengths, Weaknesses, Opportunities, and Threats. They hope to balance the internal and external environments of the organization.

    Strengths and weaknesses are primarily due to the internal environment.

    What are our strengths? What are our weaknesses?

    • Location?
    • Facilities?
    • Technologies?
    • Research and Development?
    • Manufacturing?
    • Workforce?
    • Market share?
    • Reputation?

    Opportunities and threats are primarily due to the external environment.

    What are our opportunities? What are our threats?

    • Competitors?
    • Resources?
    • Customers?
    • Regulations?
    • Substitutes?
    • Economy?

    Mindtools has a good explanation of SWOT Analysis, as well as a video at http://www.mindtools.com/pages/article/newTMC_05.htm. Attached is their SWOT worksheet. Use it to complete a personal SWOT analysis.

  • American Airlines Strategy

    American Airlines (AA) is the last legacy airline to seek bankruptcy protection. Since emerging from bankruptcy, United, Delta, and Northwest have been more competitive with lower cost structures. Thus, AA has a cost disadvantage.

    Also, AA has a revenue disadvantage. Competitors have higher revenues than AA. American Airlines has a "cornerstone" strategy,   focusing on five markets: Dallas/Fort Worth, Miami, Chicago, New York, and Los Angeles. Most AA flights begin or end in those cornerstones. Some of American's routes are not profitable.

    A strategy is a course of action created to achieve a long-term goal. Strategic planning produces fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it. It requires broad-scale information gathering, an exploration of alternatives, and an emphasis on the future implications of present decisions. Top level managers engage chiefly in strategic planning. They answer such questions as "What is the purpose of this company?" "What does this company have to do in the future to remain competitive?"

    Top level managers clarify the mission of the company and set its goals. They answer many questions. What does the customer want? What is the competition offering? What can be done with resources? What might be done with resources? What must be done with resources? Strategic decisions must balance internal resources with external environment.

    Management at American Airlines says that cost control is the key to survival. Is cost control the key to AA's survival? After emerging from bankruptcy, how will AA be more nimble and better able to compete?