The Financial Post reports that Hostess claims the main reason behind its financial troubles was the union, more precisely the union’s demand for pay increases, pension obligations, and strike. However, union workers attribute the bankruptcy to Hostess’s failure to innovate. This bankruptcy draws parallels with the 2008/2009 financial problems of the Big Three.

Hostess’s claim seems quite reasonable. For instance, as discussed in class, the Big Three in Detroit suffered financially due to “legacy costs”(mainly pension obligations), which partly prevented them from innovating due to lack of capital. Perhaps, pension obligations prevented Hostess from innovating their plants and products. Moreover, Hostess failed to move with the trend towards healthier food, instead it continued to brace junk food, which is losing popularity in the US. Likewise, while during the last decade the market trend for vehicles shifted towards more fuel efficient vehicles, the Big Three did not make the switch, which resulted in a loss in market share. Additionally, the strike also cut Hostess’s “oxygen”(cash flow), which contributed to the bankruptcy of the company.

However, as discussed in class, Hostess, like the Big Three, had promised its workers’ pensions, which they legally have to provide. It is the workers choice to have their pensions cut. Therefore, Hostess is responsible for making promises it could not keep. Additionally, Hostess’s inability to innovate cannot be entirely blamed on the union.

This blog post is in response to Jeremy Stickland’s blog post about Starbucks ethical practices.

In the blog post, it is stated that Starbucks uses the C.A.F.É. system, which helps to enrich the lives of farmers through means like micro-loans; when fairtrade is not an option. In my opinion, this practice is ethical because Starbucks coffee beans have a long supply chain, where the earlier part is not under Starbucks control and thus, difficult to control. As a result, Starbucks cannot ensure ethical practices through the entire supply chain. However, the company does make an effort, through the C.A.F.E. system, to benefit the farmers. Whether Starbucks coffee is actually more ethical depends entirely on the successful implementation of the C.A.F.E. system.

 Jeremy also mentions that Starbucks would lose revenue if the company is seen as unethical, a point I completely agree with. Perhaps brand perception is a motivating factor for Starbucks to ensure that its coffee meets high ethical standard. This raises a question about the real impact of Starbucks initiative. If the company is more concerned with brand perception, it is possible that they could get away by throwing random stats and certificates at customers about the “high ethical standards” of its coffee; while the actual impact of its initiatives is minimal – a claim made by Oxfam. This could be avoided by consumers awareness.

I was impressed with UrtheCast, especially with the fact that it will be able to reap the full economic benefits of a satellite without spending hundreds of millions to develop one. However, UrtheCast is at the mercy of the Russians, who have granted the company access to their facilities in space. However, if the Russians do not renew the lease agreement with UrtheCast, the company will be finished, since it will no longer have the ability to offer its services. The Russians could possibly decline to renew the lease agreement if a Russian company pops-up and wishes to use the same facilities.

However, UrtheCast could take potential steps to prevent Russia from declining to renew the lease agreement. UrtheCast could make powerful Russian businesspersons and politicians equity holders in this venture. UrtheCast would then be able to leverage the influence of these individuals and prevent Russia from declining to renew the lease agreement. Additionally, selling equity to Russian businesspersons and politicians would generate capital, which the company desperately needs to survive. However, there is an ethical implication in making politicians equity holders in the business, since a conflict of interest would arise on the part of these individuals.

This blog is in response to Lara Hon’s blog post about recognizable brand names.

After reading the blog post, I partially agree with Lara Hon opinions. A brand(like Kleenex) that has become synonyms with a product(like facial tissue) might suffer. It could become victim to “identity theft”. A competitor could benefit from the marketing and product promotion carried out by the prolific brand, which will result in the competitors gaining market share. Moreover, since consumers strongly associate a product with the brand, it might be difficult for a company to control its public perception because it cannot control what its competitors are doing. For example, if Kleenex’s competitor lets defect facial tissue into the market, Kleenex could suffer because consumers associate Kleenex strongly with facial tissue.

However, in my opinion brands like Kleenex also immensely benefit from their strong association with a product. For example, consumers will be more willing to purchase Kleenex facial tissue simply because they are more familiar with the brand. Additionally, competitors are limited in the ways they can market their product. For example, Kleenex’s competitors cannot use the word Kleenex to refer to facial tissue, while most consumers do, so they will not be able to connect with consumers as well as Kleenex.

This blog post is a response to Edgar Blanco’s blog post about supply chain sustainability. 

Edgar Blanco, on his Forbes blog, analyzes Nike’s corporate sustainability initiative, which partly involves making their supply chain greener. Blanco associates the process of Nike making their inbound logistics and transportation(supply chain) more environmentally friendly with a marathon.

I found marathon to be the perfect metaphor for Nikes endeavors  A marathon is not easy and neither is making changes in supply chain. For Nike making changes in the supply chain would be difficult because they would have to get the changes implemented through logistic and transport companies that ship Nike’s goods, which is takes a lot of work; since every company would have to participate. Additionally, making the supply chain greener is difficult since it is expensive(especially in the short-run). However, it is important to note that the costs decline in the long-run. Moreover, a marathon’s “long-run” outlook makes it a suitable expression for Nike’s endeavor because it involves the long run rather than the short run. Nike’s goal is long run, since they set it in 2003 and hope to achieve it by 2020. Additionally, the overwhelming complexity of the supply chain ensures that significant changes cannot be made overnight and, thus must be made in the long run.

How Canada’s retailers discounted the rise of the dollar store

The above article analyzes the rapid growth of dollar stores in Canada. The economy is the main reason behind the rapid rise of dollar stores. The poor economic conditions cause shoppers to purchase cheaper goods. Dollar stores are reaping the poor economic conditions because they follow a cost-leadership strategy. This strategy allows them to attract customers who are looking for cheap prices.

Larger stores like Wal-Mart, Targets, and Canadian Tire, in a bid to attract customers, are beginning to further pursue the cost-leadership strategy –Canadian-Tire launched “dollar deals”. However, according to CIBC retail analyst, Perry Caicco, the larger stores have not been very successful in pursuing the dollar store strategy. A possible explanation for this could be that the dollar stores are more suited for pursuing the cost-leadership strategy, since they are incredibly specialized. For instance, they could have a more efficient distribution channels or more efficient manufacturing, both of which could be the result of greater experience with the cost-leadership strategy. Additionally, the larger retail store pursue many different strategies(they are “stuck in the middle”), which is not as effective as pursuing a single strategy. In that sense, dollar stores have an advantage because they follow a single strategy.

http://www.benzinga.com/news/12/10/2974294/general-motors-wooed-by-wall-street#

In class, we have discussed the Big 3 American companies quite a few times; especially in regards to their failures. However, the Big 3 have managed to achieve success over the past few years. The article, linked above, discusses GM’s success over the past years and its dealings with Wall St(in terms of getting financing).

Financing, as discussed in class, is using outside money to fund something. GM has been getting both debt financing (credit line) through JP Morgan and equity financing from its IPO. Is it responsible or safe to finance a company that just a few years back went bankrupt and is still not considered “investment grade”? I would say that since GM has made significant progress on its cars, financial practises, and brand perception; GM is a safe investment for financiers. Moreover, as the economy has improved, the car industry as a whole has improved and become attractive. For instance, according to the Porter’s Five Forces Model of Industry(http://www.quickmba.com/strategy/porter.shtml), growth in the market will result in higher revenue for the company. Therefore, as the market improves, GM becomes a more attractive investment option.  However, GM must continue to innovate to stay ahead of competitors.

http://www.business-standard.com/india/news/has-mcdonalds-bitten-off-more-than-it-can-chew/488790/

The above article discusses McDonald India’s plan to expand their menu. Currently, McDonalds India primarily focuses on cheap and preassembled food items. However, they plan to expand their menu into more expensive “high-end” food items, which take longer to assemble.

This decision could hurt the company. Currently, McDonald India’s point-of-difference is that it is much faster than other Western fast-food chains like Pizza Hut and KFC. This POD gives the company an upper hand over its competitors, but by increasing the time it takes to assemble foods, it will lose that POD and, thus lose its upper hand. Moreover, one can get a meal at McDonalds for less than $3. These low prices attract many middle class customers. However, by raising their prices McDonalds could become unattractive for the Indian middle class, which drive McDonald’s growth in India.

In North America, McDonalds has been very successful in upgrading its menu and expanding into food that is more expensive(ie McCafe), which could possibly be the motivation to replicate a similar strategy in India. However, as mentioned in class, strategies that work in one market will not necessarily work in another market.

http://www.bbc.co.uk/news/magazine-19550067

The above BBC article mentions that although Coca-Cola wants global consumers to perceive its brand as a “global brand”, many consumers (particularly in the Middle East and parts of South America) continue to attach Coca-Cola’s brand with “America” and the “west”. This brand association shows how a company cannot always control how consumers perceive its brand. However, Pepsi another American company does not have a strong brand association with “America” and the “west”. Consequently, Pepsi has had an upper hand in many markets, like in the USSR, and currently in the Middle East and other parts of the world, where there is strong anti-American sentiment; which has resulted in the boycott or discontinuation of Coca-Cola. Pepsi’s upper hand shows that brand perception is important because it ends up defining the product(in the mind of the consumer) and is a strong determinant of the success of the product. This is why companies spend a lot of money on shaping its brand identity.

However, in the USA or in countries where there is a strong support for America, Coca-Cola’s brand association with “America” could be a point-of-difference, which could help sales.

Wonga: the real cost of a payday loan

(Wonga 2011 Ad)

I came across advertisement for a company called Wonga, a payday loan company that provides short term, small amount, and high interest loans. Later, I read an article(linked above)that raises points about the ethics associated with Wonga’s practices.

Wonga’s marketing strategy is an ethical concern raised by the article, which claims that Wonga advertises student loans(with APR of 4,214%) that can be used for holiday flights or other loans(1% a day interest) that can be used for buying anniversary gifts. In my opinion, Wonga’s marketing strategy is unethical because it is encouraging people, who are poor and do not have access to interest- free loans, to spend money on non-essential items, which produces Wonga profits.

Furthermore, the article mentions that by encouraging poor financial practices, Wonga is potentially helping drive their users further into poverty and creating larger financial issues for them. Consequently, Wonga is possibly raising the chances that their users will default, which produces risk for the shareholders, results in loss value in the business, and violates the stakeholder theory put forward by Edward Freeman(https://www.youtube.com/watch?v=bIRUaLcvPe8). Therefore, Wonga’s marketing is unethical as the shareholders could lose money.