Source: Business Week Online November 19, 2008
Author: Reena Jana
Concept: Discretionary spending, recession
Brief Synopsis: This article is interesting in that it talks about spending on toys and how this spending is affected during a recession. With the holiday season in full swing toy makers expect to see constant sales. According to the article, although adults tend to cut back on discretionary spending, such as gadgets and "toys" for themselves, they tend to continue to purchase toys for their children. As a result, the toy industry is known as recession resistant, even recession proof.
My Thoughts: This is something that I've never really thought about, probably because I've never seen the economy as bad as it is now. However, I find it interesting that the toy industry can endure recession. Then again, looking back at my childhood my parents always did without so my brother and I could have nice things. Even today my mom will go without buying new clothes to help me with my cost of living if needed. Reading this article got my mind racing wondering what else weathers the storm. Obviously bad habits such as smoking and drinking tend to remain the same-as these industries are highly inelastic and something people become dependent on. However, other than the necessary items, I can't think of discretionary spending habits that would remain constant in a depression. Perhaps movie rentals would increase if people get rid of cable to save money?
Thursday, November 20, 2008
Dems to Detroit: No Bankruptcy
Source: Business Week Online November 20, 2008
Author: David Kiley
Concept: Bailouts, Bankruptcy (revisited)
Brief Synopsis: This article follows up after the Detroit automakers went to Congress and came back without the $25 billion bailout they were hoping for. They do have another chance to ask for the money on December 8th, but according to the article, if the companies do not come up with a clear cut proposal of how they're going to use the money and show financial viability they will not get the money. And, although Ford is doing the best among the three auto makers, if Chrysler and GM fail, Ford will inevitably see an end as well. Consumers are standing back and seeking auto companies that are not posing failure.
My Thoughts: I think that in order to help these auto companies people who originally bought from these three should continue to seek their products if they want the companies to succeed. Consumers always act out of fear. For example, we hear recession and get rid of all our stocks. We hear a company might be going out of business, and instead of buying its products to keep it afloat, we seek out alternative companies. However, if people believe the quality of the products are valuable, they should continue to purchase them so the company does not fail. Our fear is really what hurts these companies and the economy. Congress can give these companies money, but will it really work? If consumers don't have confidence in the companies they will not purchase its vehicles, which would make the bailout pointless. Our country and it's citizens really need hope for the future....
Author: David Kiley
Concept: Bailouts, Bankruptcy (revisited)
Brief Synopsis: This article follows up after the Detroit automakers went to Congress and came back without the $25 billion bailout they were hoping for. They do have another chance to ask for the money on December 8th, but according to the article, if the companies do not come up with a clear cut proposal of how they're going to use the money and show financial viability they will not get the money. And, although Ford is doing the best among the three auto makers, if Chrysler and GM fail, Ford will inevitably see an end as well. Consumers are standing back and seeking auto companies that are not posing failure.
My Thoughts: I think that in order to help these auto companies people who originally bought from these three should continue to seek their products if they want the companies to succeed. Consumers always act out of fear. For example, we hear recession and get rid of all our stocks. We hear a company might be going out of business, and instead of buying its products to keep it afloat, we seek out alternative companies. However, if people believe the quality of the products are valuable, they should continue to purchase them so the company does not fail. Our fear is really what hurts these companies and the economy. Congress can give these companies money, but will it really work? If consumers don't have confidence in the companies they will not purchase its vehicles, which would make the bailout pointless. Our country and it's citizens really need hope for the future....
Sunday, November 16, 2008
Sex, Lies, and Subprime Mortgages
Source: Business Week Online November 13, 2008
Authors: Mara Der Hovanesian
Concept: Corruption, business practices, whistleblowing
Brief Synopsis: In light of the failures of the mortgage industry, recent corrupt practices have come to the surface. This article discusses how mortgage wholesalers would trade sex and sexual favors to get more loans, or get subpar loan applications approved. People in the industry were also said to have fixed loan applications by creating false information, inflating people's actual incomes, and creating job descriptions that heightened loan approval. One woman says that she would deny subprime loans that seemed suspicious, but would be overridden by her superiors. As a result, she was denied her bonus and was given more work on religious Holidays-she is very religious. Not only that, but whistleblowers also felt the same reprecussions and saw lower commission checks.
My Thoughts: One would think after the Enron scandal that major companies would learn a lesson. However, as they say, History has a way of repeating itself, and this can definitely be seen with the mortgage failures. I just find it hard to believe that all this corruption and bribery was going on and not one person was able to speak up and let this out. There are laws protecting whistleblowers. Basically, the people who said they weren't participating in the corruption are just as much to blame as those who were. However, after learning about all this, it makes me think none of these companies should be bailed out.
Authors: Mara Der Hovanesian
Concept: Corruption, business practices, whistleblowing
Brief Synopsis: In light of the failures of the mortgage industry, recent corrupt practices have come to the surface. This article discusses how mortgage wholesalers would trade sex and sexual favors to get more loans, or get subpar loan applications approved. People in the industry were also said to have fixed loan applications by creating false information, inflating people's actual incomes, and creating job descriptions that heightened loan approval. One woman says that she would deny subprime loans that seemed suspicious, but would be overridden by her superiors. As a result, she was denied her bonus and was given more work on religious Holidays-she is very religious. Not only that, but whistleblowers also felt the same reprecussions and saw lower commission checks.
My Thoughts: One would think after the Enron scandal that major companies would learn a lesson. However, as they say, History has a way of repeating itself, and this can definitely be seen with the mortgage failures. I just find it hard to believe that all this corruption and bribery was going on and not one person was able to speak up and let this out. There are laws protecting whistleblowers. Basically, the people who said they weren't participating in the corruption are just as much to blame as those who were. However, after learning about all this, it makes me think none of these companies should be bailed out.
Friday, November 14, 2008
GM Failure: The Shockwave
Source: CNNMoney.com November 14, 2008
Authors: Peter Valdes-Dapena
Concept: Bailouts, Bankruptcy
Brief Synopsis: This article discusses the effects that will be seen if GM fails. It points out that a domino affect will occur, where suppliers will be hit first and the hardest, potentially closing their doors as a result. Next would be the the dealers, followed by the dealer competitors. GM is seeking Government assistance rather than filing Chapter 7 bankruptcy to reorgranize the company. But will the government bail them out? And where do you draw the line?
My Thoughts: I think that something does need to be done for GM, otherwise it is scary to imagine what will happen as the dominos start to fall. However, I also feel that the government, and ultimately tax payers, can not continue to bail companies out. We can barely keep our individual households above water, why are we expected to help major companies out? Not only that, but when does the Government say enough is enough? If one company gets bailed out everybody is going to feel entitled to a bailout. Where does all the funding come from? Eventually it will have to end somewhere.
Authors: Peter Valdes-Dapena
Concept: Bailouts, Bankruptcy
Brief Synopsis: This article discusses the effects that will be seen if GM fails. It points out that a domino affect will occur, where suppliers will be hit first and the hardest, potentially closing their doors as a result. Next would be the the dealers, followed by the dealer competitors. GM is seeking Government assistance rather than filing Chapter 7 bankruptcy to reorgranize the company. But will the government bail them out? And where do you draw the line?
My Thoughts: I think that something does need to be done for GM, otherwise it is scary to imagine what will happen as the dominos start to fall. However, I also feel that the government, and ultimately tax payers, can not continue to bail companies out. We can barely keep our individual households above water, why are we expected to help major companies out? Not only that, but when does the Government say enough is enough? If one company gets bailed out everybody is going to feel entitled to a bailout. Where does all the funding come from? Eventually it will have to end somewhere.
Thursday, November 6, 2008
IMF Says Global Outlook Has Deteriorated
Source: Fox Business.com November 6, 2008
Author: Donna Fuscaldo
Concept: Financial Outlook, Recession
Brief Synopsis: This article talks about the world economic position and predictions for the future. In the future, it is believed that the economy will contract for a full year period. A recession occurs when growth declines two quarters in a row. Basically--the article notes the world is inevitably heading toward a recession so we need to get prepared.
My Thoughts: I believe that this has been a long time coming and I am surprised that people are just now beginning to say a solution must be found. I've read other articles that say Obama's entrance into the White House will be much like that of FDR and I believe this is necessary to turn the economy around. Obama has a lot to take care of going into the Presidency but I believe he can be the one to turn things around and give people faith in the economy again.
Author: Donna Fuscaldo
Concept: Financial Outlook, Recession
Brief Synopsis: This article talks about the world economic position and predictions for the future. In the future, it is believed that the economy will contract for a full year period. A recession occurs when growth declines two quarters in a row. Basically--the article notes the world is inevitably heading toward a recession so we need to get prepared.
My Thoughts: I believe that this has been a long time coming and I am surprised that people are just now beginning to say a solution must be found. I've read other articles that say Obama's entrance into the White House will be much like that of FDR and I believe this is necessary to turn the economy around. Obama has a lot to take care of going into the Presidency but I believe he can be the one to turn things around and give people faith in the economy again.
Sunday, October 26, 2008
Risky Loans: Harley Hits the Slick
Source: Business Week; October 27, 2008
Author: Matthew BoyleConcept: Financing, Market Share
Brief Synopsis: This article discusses how Harley Davidson, in an attempt to gain market share against other lenders, used in-house financing to chase after subprime borrowers. The Harley-Davidson Financial Services (HDFS) now makes over half of all retail loans for Harley. With loan deliquency rates on the rise as early as last year, Harley is beginning to see trouble. Even though they cut production in response to slowing sales, they still continued to go after subprime borrowers. Now, Harley retains $54 million in loans and as a result, sales are still down and jobs are being cut.
My Thoughts: I believe Harley deserves what it gets. Obviously, continuously lending money to people who couldn't afford these $20,000 motorcycles was a big mistake on Harley's part. Not only that, but they actually promoted in-house lending by giving incentives to any dealer who directed buyers to Harley's financing services. If they were smart they would have let the banks do the lending--but then they wouldn't have been able to make as many sales. Stock shares have lost over half the value in the last two years because of these bad business decisions, and people are losing faith in the Harley Davidson company. Of course, Harley has always been known for shotty craftsmanship, and has had to spend much of the previous years building a better reputation for quality bikes--but that could be another article in itself. Might as well go buy a Honda!
Monday, October 20, 2008
A World Awash in Bonds
Source: Forbes.com
Author: Parmy Olson Concept: Bond Issuance, Debt coverage
Brief Synopsis: This article discusses how governments are going to raise most of the money for the bailout by issuing bonds rather than raising taxes. For the most part, investors would be foreign buyers. However, at-home demand is still necessary and somewhat questionable. If demand doesn't cover supply the US will have to lower the price of the bonds, thus creating more debt in the long-run with greater interest rates as a result of lower prices. Basically, fixing one problem could potentially create three more unpredicted problems, including increased taxes in the end.
My Thoughts: I believe it is a good idea to issue bonds to raise money rather than raising taxes, but if this solution is only going to create higher taxes and a greater deficit in the long run, it hardly seems worth the trouble. As much as everybody would hate to see it, I think it would be more beneficial in the long run to raise taxes now, thus getting rid of the potential problems in the future that bonds would create.
Sunday, October 12, 2008
Democrats Call For a Massive US Economic Stimulus Plan
Source: Reuters October 12, 2008
Authors: David LawderConcept: Economic distress, recession, stimulus
Brief Synopsis: This article discusses the current economic state of the United States and the recession that American's may soon be facing if something does not happen soon. Recently, an economic stimulus plan took place giving American's several hundred dollars hoping this money would be plowed back into the economy. Now, Democrats are planning on creating more jobs by boosting spending on the infrastructure including roads, bridges, and water projects.
My Thoughts: I believe this is a good idea, but I think it's good as just that-an idea. Sure it would be great to create new jobs, decreasing the unemployment rate and putting more money back into the economy. But the United States is already in enough trouble financially. My question is, who is going to fund this billion dollar project to restore the economy? We can only go more into debt by doing this and overall I do not feel that is really what the United States needs now. Granted, I don't have any better ideas, but this one just doesn't seem to make complete sense to me. Maybe that's just me though, but I'd like to hear their idea on how to fund this plan--maybe then I'd be more fully supportive of it.
Wednesday, October 8, 2008
Wachovia: A Split May Boost the Banking Industry
Source: Business Week October 6, 2008
Authors: Dean FoustConcept: Asset value
Brief Synopsis: This article discusses the ongoing bidding for Wachovia between Citigroup and Wells Fargo. The article discusses how this battle between Citigroup and Wells Fargo could convince the markets that the banking crisis panic has gone too far by demonstrating there are still valuable assets from these failed banks that are, in fact, worth fighting for.
My Thoughts: I believe this article sugarcoats the entire banking crisis a little too much. Sure Wachovia may have some salvagable assets, but the company failed, as did many other banks. How can this legal battle over Wachovia lead to a bettering market. It won't. I do however, believe splitting Wachovia between Citigroup and Wells Fargo would be a great idea because some financial burden would be lifted off of the shoulders of all us taxpayers.
Wednesday, October 1, 2008
Getting Inside the Customer's Mind
Source: Business Week September 22, 2008
Authors: Burt HelmConcept: Specific targeting
Brief Synopsis: This article discusses the data research shop Dunnhumby, a company that crunches the data from stores sales to determine what products are popular and what product retain customers. In this way, stores are able to cater to the local community. Recently, in this recession, Macy's has hired Dunnhumby to help with its store by store strategy.
My Thoughts: I believe catering each store to the individual community is the way to really satisfy customers. Consumers shopping at Wal-Mart in rural America don't want the same things that consumers in cities want. Therefore, it is necessary for retailers to cater to individual communities to be profitable. Insight to consumer buying habits can only better profitability and inventory turnover!
Monday, September 22, 2008
Bringing Broadband to Rural America
Source: Business Week September 18, 2008
Authors: Erik Hesseldahl
Concept: Target Markets, Segmentation
Brief Synopsis: This article is interesting in that it poses the idea of bringing broadband internet connection to rural areas that currently are only able to get the slow dial-up connections. There are many companies and business persons who live in rural areas and desperately need the broadband connection to operate and help customers. There is one company that is dedicated to getting broadband connections to rural areas by tracking demand and holding meetings in rural areas. However, the path to getting this accomplished is bumpy as companies aren't willing to cut profit margins for rural areas.
My Thoughts: I think this is a great idea. Personally, I grew up in a small town in rural Illinois and was only connected through the local dial-up server. My parents also own their own business in rural Illinois and have the same problem. I would need the internet for school projects and would have to spend hours longer than people who could get DSL in town. Likewise, my parents have to use the internet to place orders with some wholesalers since they no longer take orders over the phone. This takes up way too much time considering they are trying to run a business and have hundreds of other things to get done. The way technology is developing, it is almost necessary to extend broadband to rural internet users.
Authors: Erik Hesseldahl
Concept: Target Markets, Segmentation
Brief Synopsis: This article is interesting in that it poses the idea of bringing broadband internet connection to rural areas that currently are only able to get the slow dial-up connections. There are many companies and business persons who live in rural areas and desperately need the broadband connection to operate and help customers. There is one company that is dedicated to getting broadband connections to rural areas by tracking demand and holding meetings in rural areas. However, the path to getting this accomplished is bumpy as companies aren't willing to cut profit margins for rural areas.
My Thoughts: I think this is a great idea. Personally, I grew up in a small town in rural Illinois and was only connected through the local dial-up server. My parents also own their own business in rural Illinois and have the same problem. I would need the internet for school projects and would have to spend hours longer than people who could get DSL in town. Likewise, my parents have to use the internet to place orders with some wholesalers since they no longer take orders over the phone. This takes up way too much time considering they are trying to run a business and have hundreds of other things to get done. The way technology is developing, it is almost necessary to extend broadband to rural internet users.
Monday, September 15, 2008
Learning From the Olympics
Source: Business Week August 18, 2008; Pg. 36
Authors: Reena Jana, Frederik Balfour and Oriana Schwindt
Concept: R&D, Marketing
Brief Synopsis: This article discusses how many companies are using the olympics to showcase new technologies and use the coverage as a free way to market products. Also, new products are tested and feeback from athletes and trainers are used to help R&D teams to improve the existing product. Companies display products from varying categories, ranging from medical scanning systems, to swimwear, shoes, tracking chips, and vitamin-enhanced energy foods! The olympics seem to be a great way to test and market new, innovative products. For instance, General Electric has been able to rack up $700 million in sales from the Games alone.
My Thoughts: I think that the companies who are using the olympics to test out new products have the right idea. Not only do these companies get feedback from the best athletes on their products, but they also get free media coverage which promotes their products to the public. If Michael Phelps is wearing the newest goggles from Speedo, you can count on swimmers everywhere going out and buying the same pair--and all that coverage was free (during the Games at least!) The Games give great insight to products, though. If a product in unsatisfactory for an athlete or trainer, the company can take that feedback to the R&D department for more work. For example, another article following this in Business Week talks about Nike's new equestrian boots that look more like "hooker boots". Clearly, Nike made a mistake by trying to modernize a sport that does not want to be modernized. But now they can go back to the drawing boards and change the look of the boot, if they want to try to compete with the skilled hand-cobblers!
Authors: Reena Jana, Frederik Balfour and Oriana Schwindt
Concept: R&D, Marketing
Brief Synopsis: This article discusses how many companies are using the olympics to showcase new technologies and use the coverage as a free way to market products. Also, new products are tested and feeback from athletes and trainers are used to help R&D teams to improve the existing product. Companies display products from varying categories, ranging from medical scanning systems, to swimwear, shoes, tracking chips, and vitamin-enhanced energy foods! The olympics seem to be a great way to test and market new, innovative products. For instance, General Electric has been able to rack up $700 million in sales from the Games alone.
My Thoughts: I think that the companies who are using the olympics to test out new products have the right idea. Not only do these companies get feedback from the best athletes on their products, but they also get free media coverage which promotes their products to the public. If Michael Phelps is wearing the newest goggles from Speedo, you can count on swimmers everywhere going out and buying the same pair--and all that coverage was free (during the Games at least!) The Games give great insight to products, though. If a product in unsatisfactory for an athlete or trainer, the company can take that feedback to the R&D department for more work. For example, another article following this in Business Week talks about Nike's new equestrian boots that look more like "hooker boots". Clearly, Nike made a mistake by trying to modernize a sport that does not want to be modernized. But now they can go back to the drawing boards and change the look of the boot, if they want to try to compete with the skilled hand-cobblers!
Thursday, September 11, 2008
iPhone: More Fun Than Phone
Source: Business Week September 1, 2008; Pg. 20
Author: Olga Kharif
Concept:Customer Value
Brief Synopsis: People who have bought the iPhone are less than pleased with all it has to offer. For some, up to 40% of calls are being dropped. A source close to Apple blames it on a chip from Infineon that manages wireless communications, while Infineon spokesman says the chip performs smoothly with Samsung phones. iPhone owners have turned to using a different phone, mainly the Blackberry, as their primary phone and keeping the iPhone for internet searching and video viewing. According to the article, the iPhone is a cool toy, but it's a phone and that is what people need to to be first. Instead, Apple should change the name to iTablet.
My Thoughts: From the article, it seems as though Apple has not been successful at creating value for its customers with its iPhone. Likewise, customers do not perceive this phone as having value. In all reality, most of the users, according to the article, aren't even using the iPhone as a phone, but instead as a device for surfing the web on the go. Considering the price of the iPhone, one would expect to be able to make phone calls without having them dropped a little under half of the time. I suppose if a person only bought the iPhone for web surfing purposes value could be perceived, but I believe the iPhone is unsuccessful at creating value for the majority of its owners--Apple needs to watch out for competitors who will undoubtedly design a similar phone that *gasp* actually makes phone calls!
*I personally do not have an iPhone but after reading the article I don't plan on getting one. Hopefully those of you reading this who have this phone have had better luck than those in the article!
Author: Olga Kharif
Concept:Customer Value
Brief Synopsis: People who have bought the iPhone are less than pleased with all it has to offer. For some, up to 40% of calls are being dropped. A source close to Apple blames it on a chip from Infineon that manages wireless communications, while Infineon spokesman says the chip performs smoothly with Samsung phones. iPhone owners have turned to using a different phone, mainly the Blackberry, as their primary phone and keeping the iPhone for internet searching and video viewing. According to the article, the iPhone is a cool toy, but it's a phone and that is what people need to to be first. Instead, Apple should change the name to iTablet.
My Thoughts: From the article, it seems as though Apple has not been successful at creating value for its customers with its iPhone. Likewise, customers do not perceive this phone as having value. In all reality, most of the users, according to the article, aren't even using the iPhone as a phone, but instead as a device for surfing the web on the go. Considering the price of the iPhone, one would expect to be able to make phone calls without having them dropped a little under half of the time. I suppose if a person only bought the iPhone for web surfing purposes value could be perceived, but I believe the iPhone is unsuccessful at creating value for the majority of its owners--Apple needs to watch out for competitors who will undoubtedly design a similar phone that *gasp* actually makes phone calls!
*I personally do not have an iPhone but after reading the article I don't plan on getting one. Hopefully those of you reading this who have this phone have had better luck than those in the article!
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