Hiring a CEO

A CEO role is very critical for the present and future of any company, we still talk about Jack Welch (former GE CEO) and Steve Jobs (Apple CEO) who defined new direction and the future of the company (Simply put, turned-around the company). The question widely remains open on who could be the successor. When it comes to hiring of CEO, firms past and present outlook is equally important. Typically, board of directors (BOD) look for candidates from these groups – Insiders, Outsiders, Former Executives, Member of Board of Directors and Insider-Outsiders.

Relation between Health of the company and CEO hiring –

Insider – If company is healthy then BOD’s prefer insiders to be the next CEO. They will continue the same cultural and take a step forward in the same direction. Transition won’t be a challenge.

Outsider – If company is in serious crisis then BOD’s prefer outsiders. Outsiders break the cultural barriers and see to it that decisions are made and implemented across the company. It’s a tough task for an insider to pull the trigger as he becomes the part of the cultural.
Former-executive – They come to rescue if the company is in crisis, we have seen that in case of STARBUCKS, APPLE, DELL, etc.. They understand company’s culture and can quickly identify the problem. But the problem with former executives is once retired they do not look for a comeback to start all-over again.
Member of BOD – Member of Board of Directors is usually the last option if unable to find a replacement. They can be a good replacement as they understand the problem in the company, but often the last resort. No member BOD wants to a CEO, they play other roles and responsibilities which keep them busy.
Insider-Outsiders – Insider-Outsiders are the people who join as a President or a COO and will be promoted as a CEO in another 18months. They work with different business units and understand the cultural and process of the company. This 18months period gives candidate the time and exposure required to become the next CEO of the company. Interestingly, a survey carried by XXX on CEO’s belonging to S&P 500, performance of CEO’s increased by people belonging from Insider-Outsiders. This combination allows executives to learn company culture and the business model so that he can start delivering from the movement he steps in as CEO.

The only disadvantage I see in this process is the Deputy CEO/President may also think like the current CEO. Ideally, firm needs a CEO who understands the existing process and at the same time brings innovation and his past experience.

“Are we in a Recession?” – It this the right question?

Hmm….I don’t think Main Street is asking that question anymore. How about this - what measures do we have to take during Recession? – Is this the correct question? – YES!!!!

By now my readers got the answer on whether we are in a recession or not, Definition of Recession – “Some economists and journalists define a recession as two consecutive quarters (three-month financial periods in the year) in which the gross domestic product (GDP) decreases.” (Source – Internet), but I believe recession definition is much more beyond than looking at GDP numbers that is calculated every 3-months. We might be already in a recession, but our “economists” cannot confirm right now because GDP numbers are not in yet. Let’s look at current market – Increase in unemployment (Oct, 2006: 4.4%, now Oct, 2008: 6.5%. Source – “U.S Department of Labor”), Consumer Price Index is negative (Oct, 2005: 0.2%, now Oct, 2008: -0.1%. Source – “U.S Department of Labor”), Auto sales are down, Housing industry is down, Oil demand is low, Big Companies are disappearing – looking at this disappointing and heart breaking numbers, its time to redefine Recession.

I came-up with a list of recommendations that can help us to survive during this tough period.

Cut down your expenses – Buy things that you need the most and avoid unnecessary expenses.
Cash is God – Always keep liquid cash in hand; make sure you have sufficient cash to survive for next 8-12months without a job.
Bank accounts – I “strongly” recommend to close your accounts in banks that are not protected by FDIC (Federal Deposit Insurance Corporation). FDIC provides/protects consumer account deposits that are less than or equal to $100,000, anything more than that amount is not insured. Move your extra savings into another FDIC insured bank so that in case your bank is out of business you are still protected.
Credit Card Payments – Don’t pay your credit cards in full amounts; make sure you have enough cash in your hands all the time. And also, avoid late payments.
Online shopping –Online shopping provides a good relief during this holiday season. Its offers a wide variety of products, competitive price and free shipping options.
Gift Cards – Almost every retailer offer Gift Cards, but many are closing down or at the verge of collapse. Before that happens please use these gift cards completely.

As the old joke goes: "When your neighbor loses his job, it is called an economic slowdown. When you lose your job, it is a recession. But when an economist loses his job, it becomes a depression. Economists who ignore the recent rise in unemployment deserve to lose their jobs." Good Luck and Play Safe!

Recession, Boon or Bane for Online Retailers?

Recently, majority of economists (Wall Street) agreed that we are already in a recession (according to the survey), and predicted that economy will continue to deter further. This obviously is a very bad news for everyone, but not so for online retailers. Recent survey concluded that online shopping has increased in this period (recession). Internet usage has increased tremendously in a short period of time (it’s reported that 80% of the current population has broadband, and more than 70% of the population is online), there is no more a question or debate on whether retailers should start investing in online shopping stores.

With the help of internet, customers are getting more options to choose from various online shopping websites, and they are also cost effective (saving gas prices to drive to the store, free shipping), than walking into a regular store. What this means to online retailers? They should anticipate this shift and now look at other opinions to attract customers than online ads alone. It’s not a viable option for them to cut down the quality and reduce prize to attract customers. Customers are not only looking at the price but also learning more about the product and the company through reviews of the product, and read blogs about the company. Even the slightest error by the online retailers can create repel effects to the product and company. Apart from that, customers have lots of choices to choose from as everything is on the internet.

From brick-and-mortar retailers to the “mom and pops” stores, virtually everything is available on the internet. Anyone who is in the online retailing business has to follow two fundamental rules, “Maintain quality & don’t over promise” and “keep a close eye on the pricing”. If product is not up to the quality or standards claimed by the retailer, then it can ruin his business in a short span of time. Customers are quick to share this information in form of reviews, blogs or networking groups, which are readily available to everyone on the internet. Online shopping has given customers many more options to choose from than any regular store where they have limited options to choose from what is available in that store. There are different websites that give price comparison of the same product, which makes customer to visit different online stores in a matter of seconds. Online retailers need to be vigilant all the time to make sure that they are not losing customers, and have come-up with a pricing model that very competitive.

Compared to the previous US recession, this recession gives some relief to consumers as they can take advantage of internet to shop around. Inspite the recession fears growing, online retailers are still seeing new customers who are interested to shop online to manage their shrinking budgets.

Online Branding Secrets

Whenever a customer thinks about a product they always tend to relate it to a company, for example – First thing that comes to mind when I think about cool drink is “Pepsi” or “Coke”. Branding helps to identify products or services, which sets it apart from competitors that offer the same. There are different forms of medium to reach the customer, idea remains the same but medium is different. Research indicated that consumers who shop online prefer brand names, so it’s important for any firm to not only just build a website for shopping online, but also present it in a way that customers cannot forget the experience. There are many ways to achieve online branding and learning-styles strategy is one of them.

Visual Learners – the TV Infomercial Watchers, This category of customers often believe in “see to believe” approach before buying a product. They’ll find it hard to surf a website that has too much of content and graphics. Not only it takes more time to load but also makes it difficult for customers to locate the product. To avoid these issues, try to keep the website simple with less content and few products on display for every page. Embedding videos with-in the display to highlight specific product (Youtube, Podcast can be good source of putting on videos on the web) works extremely well. In the case of offering services, we can use slide show tutorial with graphs and explanation. This kind of approach will lead to increase response to the online brands.

Auditory Learners – the Talk Radio Fans, They like to “hear to believe” before buying the product. Online-retailers should be very careful before adding clustered noises in their websites; they can annoy and distract customers. Instead of forcing them to listening everything, websites should be designed in a way that customers can ask questions and hear the response. And also, set-up a decent customer service that doesn’t mind answering questions/queries that are repetitive. To increase response to your online brand, it’s important to speak to the customers.

Kinesthetic learners – the Do It Yourselfers, This category likes to learn through their own experiences. Websites should allow the users to customize the information they want to see. Websites should contain information that is interactive, and also interesting to the customers. Some of examples of being interactive are – holding question and answer sessions, online forums, creating networks, choosing their own templates or suggesting matching items based on the items select in the shopping cart.

Today we see every company using rich media (TV, Radio, and Newspaper ads.) to promote their brand. Customers who visit these websites are coming on their own interest, so it is very important for online-retailers to offer rich user experience which will not only helps to promote their brand but also increase of return user traffic.

Online Networks - The New Focus Groups

I came across an article recently on Wall Street Journal about "Online Networks" and how companies are utilizing them to perform market research for their products. This article inspired me so much that I decided to write a blog on this topic - Hope you'll find it interesting!!!.

Initially, online communities were first launched by tech and video game firms to do their market research, but over the period of time many companies from different industries have started using online communities to understand customer needs. These sites are very similar to any social-networking sites where users interact and socialize. "Del Monte Foods", a food company has created an online community called “I Love My Dog", which consists of nearly 400 members/customers of Del Monte Foods. Market research team is using it actively to interact with customers and share their experiences about the existing products, and also get some insights on what they want in their products. Recently, Del Monte Foods planned to launch a new Breakfast product for dogs, instead of conducting a typical full length survey it sent out a post to the online community on what the dog owners most wanted to feed their pets for Breakfast. Based on their response it developed a product that reflects the needs of the customer.

Many companies are working towards developing online communities, and they are growing at a faster rate. With the help of these communities, marketing team can chat with the customers and get their feedback on newly launched and existing core products. They are creating profiles on well know social-networking sites like Facebook.com and myspace.com, and others like P&G have created their own networking site. These kinds of communities help focus groups to work with the customer directly and also build a strong relationship, which is very important.

One of the common challenges faced by many companies is – consumers in general visit these places to socialize and interact with people but not talk about the brands/products. To ensure that the users participate actively and not lose interest, companies are offering users free coupons, adding online games, sneak peak at new products and many other incentives. They are also working with private firms (MarketTools and Passenger) on how to use Web to assess and shape the way consumers think about the products. For example, Sylvan is planning to launch a new advertising campaign for which it is working with MarketTools to survey a group of mothers.

These kinds of networks reduce the guesswork for marketers, and help them to understand customers better. Companies like Del Monte foods are launching new products by reducing the product-development life cycle (Typically it takes 12months to launch a new product, now it takes 6 months). Apart from that, creating and maintaining online communities requires a small piece of total investment that goes in Market-research spending. According to the firm Inside Research, in the year 2006, the over-all investment to build online network communities by the companies in US was approximately $40 million, and projected to grow $69 million the following year.

China + India: The Power of Two

Recently, I read an article in Harvard Review Magazine (Dec 2007 Issue) that tries to focus on the advantages of working with these two countries (India and China) for India, China and all multinational companies around the world. India is known for its Services sector and China for Manufacturing and infrastructure, they both should start working together as one business nation for mutual interest. Western countries often debate that these two countries can never work together as both are competing with each other to become the undisputed superpower in Asia. Indo-China war that took place in 1962, China support to Pakistan (not liked by India), and India allowing Tibetan refugees (which China resents) provides more evidence to support the argument about India-China relations were never better.

The tensions between India and China are real, but they both started to understand the importance of working together. China-India together form 2.4 billion population, economists predict that by 2016 they will account to 40% of world trade compared to 15% in 2006. China changed its global business polices or strategy in 1978, and as of now it is very strong in manufacturing and infrastructure sector. In contrast, India changed its policies in 1990’s, and its now global leader in services and Information technology sector. Both countries have appetite for oil, coal, and iron ore, for which they compete fiercely, and also fight for capital and foreign investments from North America, Europe and Japan.

There are three good reasons to believe that these two countries can complement each other – one historic, one economic, and one strategic. Historic – Before India-China war, both countries used to share strong culture, business relation, and free trade. The relationship between China and India was one of with mutual respect and admiration. Economic – They have started to trade, and do more trade than any other nation. Recently, committee that was set-up suggested that bilateral trade could touch $50billion by 2010. As of today, these neighbors do 40% less trade than they should. Apart from that, trading is more balanced between them then China’s trade in USA and Europe. Strategic - China – Strong manufacturing and Infrastructure, India – Service and Information Technology, they chosen different routes to enter global economy. What is China is good at; India is not – vice versa.

So, the kind of industries that flourish in China and India are very different. Already, Indian and Chinese companies started to work with each other and cashing on each other strengths. It's time for multinational companies to review its strategy, in which they treat these two countries as one big nation with two different models. It’s a huge task for multi-national companies to make the best use of both nations, but it’s not impossible. GE and Microsoft are very good examples of implementing this strategy of working with both countries, and bringing best out of them. In the end, author quotes – “Instead of balking at the inevitable expansion of economic power beyond New York and London, companies will do well to recognize the complementarities between Beijing and New Delhi and, in a fast-changing world, try to wrest competitive advantage from them”.

Ethics Case(HBR CASE) - Starbucks and Conservation International(CI)

Harvard Business Review Case Study - Starbucks and Conservation International(CI).

The ethical issue/s you see in the case -

The ethical issue here is whether Starbucks is really committed to their statement of social responsibility and their commitment to protect the environment. In mid-2002, Starbucks collaborative efforts with the environmental nonprofit Conservational International(CI) to promote coffee-growing practices that would enhance the environment and produce high quality coffee beans.

Starbucks, CI, Coffee producers, Coffee drinking customers, and environment are the affected stakeholders.

Starbucks - announced new coffee-purchasing guidelines developed in partnership with CI and aimed at supporting its commitment to purchase coffee grown and processed by suppliers who meet the environmental, social, economic, and quality standards. It will be benefiting by the publicity factor as it is more committed to the business. But it has played a key factor is changing the mindset of other coffee retailers around the world by joining the hands with CI.

CI – Its earned valuable experience and success after the Chiapas project. It is in the process to developing more conservation coffee projects in the additional countries and was in the early stages in Columbia and Costa Rice.

Coffee Producers – All the coffee producers sooner or later have to change their coffee making process in order to meet the needs of the customers like Starbucks and new regulations that are emerging in the coffee industry.

Coffee drinking customer’s – Due to the change in coffee-growing practices to enhance the environment, taste of coffee has changed over the period of time. Companies like Starbucks are continuously working hard and stressing the coffee producers on improving the quality of the coffee. Taste is the key factor of Starbucks for attracting their customers; change in taste can affect the Starbucks business as people might get the same taste, which they used to get from non shade-grown coffee.

Environment – After the huge success of Chiapas project success, CI is taking the initiative to develop conservation coffee projects, which eventually focus on the protecting the environment by growing shade-grown coffee.

Final Verdict -
Starbucks claims itself as a socially responsible company, which might not be true in this case. I believe Starbucks is more utilizing the publicity factor to promote their products. In one of the context referred in the paper were “The efforts with the farmers and their cooperatives had produced significant results. Since 1998, the coffee-growing land incorporated into the CI conservation program increased 220%. In the first year of the collaboration Starbucks bought two containers of shade-grown Mexican coffee from the cooperatives. The company held a small news conference to announce its introduction of shade-grown Mexican coffee and, company got an enormous amount of coverage: 45million news impressions, including USA today”. It was not Starbucks initiative to grow shaded-grown coffee; it just joined hands with CI who took the initiative. For Starbucks point of view, they strictly came-up with coffee maintaining standards irrelevant of the cause for which the CI is fighting. But, at the end day, Starbucks trying the take the credit of CI by announcing itself as an environmental friendly firm.

**Information provided above is purely for academic purpose only and not be used for any real time situations/analysis.