Out with the old in with the new. Microsoft recently replaced its 20-70-10 employee ranking system with a new system that will place more emphasis on “personal performance and teamwork.” The old system led to the lowest 10% of employees being categorized as under-performers who were, more often than not, fired. While it makes use of coercive power, firing 10% of workers should provide more than adequate motivation for workers to not end up in the bottom10%, thus leading to increased overall success for the company. To see the proof of firing as a motivator one only need look to Jim Pattison who used to fire the lowest grossing salesman each month. Is it really such a bad model? Yahoo does not seem to think so as they are rumoured to have adopted it. As for Microsoft, only time will tell if its more team-based, egalitarian model will be the answer to the company’s employee performance and retention problems.  Or perhaps the company’s problems do not lie with its ranking system but rather with its corporate culture —  and this friendlier approach is only a charade to put some gloss on the company image as a ruthless competitor.

Image: http://pennyherscher.blogspot.ca/2012/07/employee-ranking-is-innovation-killer.html

For corporations social media has the power to be both friend and foe. Allowing users to hash tag, like pages, or comment on walls can yield different results. The first is positive free advertising and an expansion of a company’s customer segment. The second, and much for frequent case is when users use the hash tags and opportunity for dialogue that companies have given them, and take advantage of it leading to hilarity for netizens and embarrassment for the company. Recent cases include Burger King’s ill-thought-out #WTFF, McDonalds #McDStories, and most recently JP Morgan’s #AskJPM.  The result of those three campaigns led to the company pulling the plug within hours of the campaigns release – apparently these corporations do not believe the phrase that there is no such thing as bad publicity.

Let these three failed attempts at jumping on the social media advertising band wagon be warning to future companies considering it. What makes social media different from traditional advertising, besides the wide reach, is that contrary to TV or newspapers where the message is set in stone, netizens can interpret and modify the message for their own purposes. In the case of these and other large companies a bit of caution and a contingency plan is warranted before devoting time and resources to social media campaigns.

Image: http://abcnews.go.com/Business/jpmorgan-chase-admits-twitter-qa-bad-idea/story?id=20887665

Turning down a $3 billion dollar offer takes guts, and maybe a bit of naive innocence, but that did not stop Snapchat’s 23-year-old founder and CEO, Evan Spiegel, from doing just that. This week Snapchat was offered $3 billion cash from Facebook for the company.  They refused. Perhaps they rejected this offer because of the $4 billion offer from Chinese company Tencent holdings. Or perhaps Snapchat is suffering from overconfidence where they believe that their two-year-old company is more than a passing fad and is instead based on a sustainable business model which will be valued more than the current offers. And with a strong hold in the “teenage audience [which is] is also the most-coveted in all of social media,” this could be the best decision. Looking at Twitter, valued at $25 billion, perhaps Mr. Spiegel believes that his company can achieve the same value.

The first of what I am sure will be many big value choices has been made by Mr. Spiegel. So now, just watch and wait – will Snapchat succeed, thrive, and be bought at an inflated price?  Or will the gnat-like attention span of the teenage market move on to a different app, leaving Snapchat as nothing more than a relic?

Image: http://www.smartinsights.com/digital-marketing-platforms/examples-snapchat-campaigns/

In Comm101 we discussed the differences and benefits between a large, full-priced airline such as Delta or United and a cheap, discount airline such as Ryan Air or Air Berlin. When one flies with the discount airlines one expects to be nickeled and dimed for the extras – booking a seat ahead of time, bathrooms (thank goodness that one was rejected), and overweight luggage. In a December 2011 blog by Christopher Elliot he comments on how the Air Berlin “luggage scales [are] a scam” as they are rigged to show a greater weight than the bag actually is. Terrible – but when the discount airlines already try to make money wherever they can this is not unexpected. This seedy money grab, however, is not expected from Delta or United.  In Arizona airports this November, 29% of scales used by airlines such as Delta, United, and American Airlines were tampered with, did not have signage for overweight luggage, and were not synchronized to zero, leading to travelers needlessly paying for overweight baggage.

So travelers, a 2011 blog from a discount airline traveler and a 2013 blog for business travelers convey the same message for upscale and economy airlines: don’t trust the scales, no matter the reputation the airline will try to rip you off.  So weigh your bag at home and do not be afraid to ask for a different airport scale.

Image: http://www.independenttraveler.com/blog/index.php/2011/01/20/how-accurate-are-airport-luggage-scales/

Gracia Chua stated that “[in China] Government officials ought to clamp down on unethical businessmen and thoroughly check through their products before allowing them to be sold in the market.”

Some research into the milk scandal showed that, as a result of it, the Chinese Government  cracked down on food safety and corruption leading to better quality goods on store shelves. These intense initial measures led to major company officials being sentenced to death.

Only a year later, in 2011, over 4,900 businesses had been shut down and 2,000 suspects had been arrested. The election of Xi Jinping in 2012 led to an even more extreme anti-corruption campaign that resulted in the arrest and prosecution of top level officials, such as Bo Xilai, who in September was sentenced to life in prison for bribery and corruption.

After research and seeing the immense changes happening in China I have rephrased Gracia’s sentence to read:

“In China Government officials are clamping down on unethical businessmen and are thoroughly checking their products before allowing them to be sold in the market.”

New tougher laws, new leadership and follow-through will lead China to be a better, less corrupt superpower allowing it to better function on the worldwide market.

Image: http://www.forbes.com/sites/kenrapoza/2011/10/25/why-an-occupy-china-wont-happen/

Video: https://www.youtube.com/watch?v=ngccz1kq_Bg

In Olivia Krieger’s blog post she comes to the conclusion that the effectiveness of the Dove Campaign for Real Beauty ads is limited because the company is under the umbrella of Unilever – the company with “arguably the most degrading ads towards females on TV.” What Olivia fails to recognize is that Unilever follows in the example of Taiwan’s Quanta industries, a company that manufactures computer products for competing computer companies, including Dell, Compaq, Apple, Hewlett-Packard, IBM, Sony, Sharp, Fujitsu, and Siemens. In the mind of the consumer the fact that all of the computer brands are manufactured by the same company is irrelevant and, quite frankly, invisible. The target audience is different and neither audience is likely to care about the “guts” behind the brand. For example, Apple’s target market includes a younger clientele who want efficiency, easy socialization, and a light-weight product. In contrast, IBM’s target is the business market. Each company targets its marketing campaign towards a different target audience, and each uses a product manufactured by a company that few if any of the end users have ever heard of. Just as Dove appeals to self-conscious young women and axe appeals to hormone-infused young males, the ads reflect the difference in demographic, neither of which is likely to care about the corporate entity behind the products they use. The two brands might stem from the same company, but in the mind of the consumer they are two separate entities and thus the actions of one does not affect the other.

Image Citation:

http://laurahamilton.theworldrace.org/?filename=same-same-but-different

On October 3rd Twitter announced its IPO. The share price is expected to be $20.62, which values the company at $9.7billion.

On one hand Twitter appears to be the poster child for an IPO-ready company: increasing revenue growth from “$28 million in 2010 to $317 million last year;”increasing active users from 151 million to 218 million in the same time period; and receiving more than 65% of its advertising revenue from mobile devices.

On the other hand there is an overwhelming amount of data that suggests that Twitter may be too quick to follow in the steps of big brother Facebook, and that the IPO will not be as successful as its backers and supporters hope.

In its seven years of operations the company has increased profits, but it has also been steadily increasing losses.  Conversely Facebook reported lower losses leading up to its IPO.

Furthermore, there is confusion and some doubt among potential advertisers who point out that many people “just don’t get Twitter.”  If Twitter is eventually going to go the way of the dodo, it is not something a company wants to spend millions of precious advertising dollars on.

As well, revenue and user growth at Twitter has stalled at 7% annually.  Is a time of static growth the time to launch an IPO? Even Twitter admits that to expand more overseas in terms of users and advertisers would “require a significant investment of time and resources.”  The question then becomes whether it is good timing to invest in a company immediately prior to its biggest capital outlays, especially a company that has experienced accelerating losses since its inception.

Facebook’s IPO was a disappointment and a bit of a $104 billion gong show that is just now getting on its feet after a year and a half of share price mayhem.  Twitter is treading on weaker ground than Facebook was in 2012.  Ideally Twitter should solve its operational and financial issues before going to the public markets to prove it is a long-term player in the social networking space.

But, the Fed is printing money, the markets are hot, we are in high tech’s period of seasonal strength, and the naïve investing public is infatuated with tweeting.  In other words, the time is ripe for yet another public fleecing where, in a year or so, Joe and Mary Investor will wonder why the Twitter stock their advisor sold them is floundering.

Maybe their broker can be reached in his Maserati with a tweet.

Citations:

The Economist. The Economist Newspaper, 4 Oct. 2013. Web. 06 Oct. 2013.Tate, Ryan. “Twitter Opens the Books, But Facebook’s IPO Looked So Much Better.” Wired.com. Conde Nast Digital, 02 Oct. 0013. Web. 06 Oct. 2013.

Image Citation:

“Twitter Preps for IPO with Acquisition and New Conversation UI.” SiliconANGLE. N.p., n.d. Web. 07 Oct. 2013.

With 7.7% unemployment the UK is going through tough economic times.  Competition for business is getting downright nasty, with price-cutting becoming a key component of business survival.  And no business is excluded from the fray.  Just ask the prostitutes. A recent article in The Economist points out that spending on luxury goods has decreased by 4% since 2007 — and the purveyors of paid sex, a luxury service by all definitions, have felt the financial impact of this decrease.

In the current recessed economy British prostitutes have had to survive with fewer customers in the market and competition from foreign nationals.

But there are some bright spots for those willing to innovate in the world’s oldest profession.  To retain what market share they can, the innovators have diversified to expand their appeal.  For example, they have joined niche markets such as dominatrices, diversified their service portfolio to include phone and web-cam sex, and changed their target audience to include those with less-deep pockets. Apparently, as much as most stores would love to be Saks Fifth Avenue, the real money is made at The Dollar Store.

Perhaps newer suffering industries could take a lesson from the world’s oldest profession.  After all, thousands of years of prosperity are at least an indication that a service provider is doing something right.  Success in business starts with a product that is high in demand,  but market share can be retained or increased by implementing sound business principles, including expanding the service offering, expanding the target market, and keeping costs in line.

Citations:

“Sex Doesn’t Sell.” Http://www.economist.com/news/britain/21578434-old-industry-deep-recession-sex-doesnt-sell. N.p., 25 May 2013. Web. 6 Oct. 2013.”United Kingdom Unemployment Rate.” TRADING ECONOMICS. N.p., July 2013. Web. 06 Oct. 2013.

Image Citation:

“Street Credibility.” The Guardian. N.p., n.d. Web. 07 Oct. 2013.

Shaun McCutcheon is in a legal battle with the Federal Elections Commission (FEC). He believes that the FEC limit on individual political donations of a measly $123,200 diminishes his “core political speech.” His main argumentis that the current legislation “prevent[s] folks who want to get involved from having the same ability to get involved and support candidates that big union [Political Action Committees] have.” (1)

While Mr. McCutcheon has a valid point that the restrictions on political spending by individuals limit their rights to get involved with as much money as they might want to contribute, the limits are within reason to reduce the possibility of elections being bought by a small group of wealthy individuals. Is there corruption in the current system of PAC funding that allows unlimited donations to PACs and Super PACs, as long as the donor is revealed?  Certainly, it is politics after all, where the animal kingdom is dominated by snakes, rats and weasels. But corruption in one system does not provide an argument for the creation of other systems with equal or greater potential for corruption.

To quote Meredith McGehee, “if the Supreme Court sides with McCutcheon, all it will have done is open new routes for corruption without closing the old ones.”

Siding with McCutcheon will only increase the corruption that comes from unlimited funding. If McCutcheon wants to give more money he should stop wasting his time on legal fees and focus his resources on a Super PAC that reflects his views.

Citations:

(1) Mears, Bill. “Money and Politics High Court’s First Big Case This Term.” CNN. Cable News Network, 06 Oct. 2013. Web. 06 Oct. 2013.

“Quick Answers to General Questions.” Quick Answers-General Questions. N.p., n.d. Web. 06 Oct. 2013.

Image Citation:

“Getting Money Out of Politics: Putting the Public First.” Living Green Magazine. N.p., n.d. Web. 07 Oct. 2013.

The US Prosecutors’ case against SAC Capital Advisors LP brings up multiple questions about what exactly is being taught to business school students in terms of ethics.  For those unfamiliar with the case, Steven Cohen has been one of the most successful hedge fund managers in the US, routinely earning more than $1 billion per year.  With a work environment that allegedly promoted results above all other considerations, with only token nods towards governance and ethics, SAC is accused of using insider information to trade in public companies. The result was “insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry,” the indictment said. (1) Although Cohen has not personally been charged, his firm is in danger of being brought down.  SAC is one more Wall Street firm to show that it values money over all other considerations – there have been 70 convictions and guilty pleas on Wall Street over the past 7 years.

No wonder Warren Buffet said this:
If a graduating MBA were to ask me, ‘How do I get rich in a hurry?’ I would not respond with quotations from Ben Franklin or Horatio Alger, but would, instead, hold my nose with one hand and point with the other toward Wall Street. (2)

Works Cited
1.Herbst-Bayliss, Emily Flitter, Svea, and Jonathan Stempel. “U.S. Charges SAC Capital with Insider Trading Crimes.” Reuters. Thomson Reuters, 25 July 2013. Web. 11 Sept. 2013.

2. “Warren Buffett Quotes.” Warren Buffett Quotes. N.p., n.d. Web. 11 Sept. 2013.

1 Reuters.com web site

2 Quoteswise.com