Equanimity

A few weeks ago I wrote about Groupon and how it has flourished as an entrepreneurial business. Groupon serves two groups of customers: the consumers who buy the coupons, and the small businesses that run deals with Groupon.

Posie's Cafe and owner Jessie Burke

While Groupon does a pretty good job of satisfying the first group, there are a few recent incidents that have emerged putting Groupon’s relationship with its small business partners in the spotlight. Portland-based Posie’s Cafe ran a “$6 for $13 of Bites and Beverages” deal in March 2010, and with almost 1,000 vouchers bought, the owner made claims that she lost over $8,000 at during one month of the process. Groupon also sold 2,000 vouchers for a photography business in Marietta, GA, when it emerged that, not only could the business possibly serve that many consumers in a year, but the owner was advertising with stolen photographs.

Groupon’s blog post in response to Posie’s brought up a good point that had been lost on me as a consumer: Groupon is essentially an advertising service, more so than a coupon/discount provider. Small businesses pay (or sacrifice) by splitting 50% (usually) of the coupon’s revenue with Groupon for getting its name out there to Groupon’s massive emailing list/network. The profits only roll in once Groupon customers become repeat ones or buy more than the $13 of discounted products.

This, in my mind, begs the question: are all of Groupon’s business practices ethically sound? The situation with Posie’s raised the point that Groupon takes 50% of a deal’s revenue for a pretty low value-added service. Regardless, it is the responsibility of business owners to critically consider the opportunity costs of offering a Groupon for their business. Hopefully they will learn from Posie’s and others before making any rash business decisions.

Case 3 brought to my attention Ambush Marketing, an interesting and relevant topic with respect to the various major sporting events that have occurred in the past year. By its nature, ambush marketing can take on many different forms and faces, but at its foundation, it involves a company associating its brand with an event without paying sponsorship dollars for the association.

Some amusing guerilla marketing from FedEx

Related to ambush marketing but slightly different is Guerilla Marketing, which involves the use of unconventional and often stealthy campaigns capitalizing on “time, energy and imagination”. Since guerilla marketing and social media pretty much go together like Dell and UPS, it’s not surprising that it’s found its way onto Twitter. Hey, if it worked for Obama…

A couple days ago, a company bought promoted tweet hashtags #apple, #mac, and #macbook – but it wasn’t Apple. Hewlett-Packard did some sneaky guerilla marketing on Twitter by buying the hashtags and then linking the tweet to its online computers store. The article states that it’s an old marketing tactic, but I was personally surprised to learn this was occurring on Twitter.

HP hasn’t been the only company to use Twitter as an advertising war platform – Google and Microsoft went head-to-head with simultaneous promoted tweets a couple weeks ago too. It’s easy to see why guerilla marketing is so well supported by social media: when a campaign is successful or buzz-worthy, it can be widely discussed and spread via social media, thus further amplifying the campaign’s triumph.

While social media is still in its relative infancy, it will be interesting to see how far marketers push the envelope in social media for their campaigns. With any luck, one day it’ll be me creating and carrying them out 😀

Over the last decade, there has been an undeniable trend towards promoting environmental sustainability, both for consumers and corporations. Environmental Leader (so, a somewhat biased source) states that the majority of consumers prefer to buy products from eco-friendly companies. Not only that, but employees also prefer to work for environmentally responsible employers.

But since we’re talking business, an important question to consider is: does sustainability translate to profitability?

This Vancouver Sun article talks about six B.C. businesses who would say yes. One of the examples is Vancouver-based Mountain Equipment Co-Op (MEC), about which the article said this:

In the case of MEC, a decision to ship its outdoor recreation equipment and clothing by train rather than truck led to a relative 38-per-cent reduction in greenhouse gas emissions and some cost savings.

Furthermore, MEC was nationally recognized for its environmentally sustainable practices in 2008. Another business mentioned in the article, Jawl Properties, improved building efficiencies in heating, ventiliation, air conditioning and controls programming, leading to cost savings of “23% with a four-to five-year payback on capital investment.”

"This symbol indicates {MEC} products that contain at least 50% organically grown cotton or recycled polyester, or are completely PVC-free."

MEC’s simple switch in transportation methods illustrates that it is not difficult for businesses to make the eco-shift, which could result in not only economic profit, but also a positive PR image, a winning point of differentiation with consumers. Moreover, MEC and other businesses have demonstrated that shifting to eco-friendly practices can lead to cost savings. Hopefully one day, sustainability will be the norm, rather than the exception.

As I sit with my trusty iPhone beside me every day, it’s not often that I ask myself where it came from and how it was manufactured. However, a week or so ago, I came across an article someone linked in my Twitter feed titled “The Man Who Makes Your iPhone”.

The article itself is pretty groundbreaking – it represents the first time Foxconn, the megapower in technology supply manufacturing in China, granted access to Terry Gou, its founder and chairman. The article is more of an extended profile of Gou himself, and how he raised the company from the basement to an empire, than an in-depth look at the business practices of Foxconn.

Nonetheless, it did highlight the recent suicides of 11 employees, which spurred Gou and Foxconn into PR action. I found it intriguing to learn about the work campuses of Foxconn – they operate like cities, with bookstores, pools, restaurants, and living accommodations. I also found it curiously intriguing that, in response to the suicides, Foxconn installed mesh netting on buildings to catch jumpers.

Steve Jobs vs. Terry Gou

Of course, it shouldn’t have gotten to that point in the first place. There are a multitude of reasons why these employees felt the need to take their lives, and perhaps they did not all point to the job/Foxconn itself. Nonetheless, with pressure from Apple, HP and the public/investors in general, Foxconn felt the need to take responsibility. I’m not sure if the motivations were right, but if the end results prove as a solution, then maybe it doesn’t matter. Of course, the best step would be prevention, and I think this needs to start with ensuring fair wages, work conditions, fair treatment from managers, and social events for employees. Unfortunately the article doesn’t provide too much insight into these factors, but there’s certainly always room for improvement, if anything. Let’s just hope that a year from now, we’ll be reading about Foxconn’s innovations in technology, not suicide prevention.

Yellow suicide prevention netting strung around Foxconn buildings

On July 19, 2010, the NJ Devils announced the re-signing of Ilya Kovalchuk to a monstrous $102 million, 17-year deal, and thus the Kovalchuk Saga began.

Now, I am no expert on the collective bargaining agreement (CBA) and only quickly educated myself about cap circumvention for the purposes of this post.

Ilya Kovalchuk

During my TOK course in the IB program in high school, we defined ethical issues as basically violating a legal or established set of rules. In this case, the ethical issue was the length of the contract, but more importantly, how the length affected the average cap hit of Kovalchuk. The contract was “front-loaded” with the first few years paying Kovie $11.5m, $10.5m, $8.5m and so on, and only $505,000 in the last 5 years of the contract, for an average cap hit of $6m over the 17 years (which would put him at age 44). Obviously Kovie would not play to that age, so many (including the league) saw the final 5 years as “tacked on” solely to lower the average cap hit, which is known as cap circumvention (the main ethical issue).

As we know, the league rejected the contract and renegotiated a new one with the NHLPA/NJ, and a new “Kovalchuk Amendment” was added that stated players’ cap hits must be $1m from ages 36-40 if their average hit is $5.75m+ (like Kovalchuk). The NJ Devils were also fined $3m and 2 draft picks for the attempted circumvention. In this day where lifetime contracts are seemingly becoming the norm, I think it was good of the league to actually set precedent and enforce their CBA with the initial rejection, but the fine seems a bit overboard.

I’m just glad they didn’t reassess Luongo’s contract in the end – I don’t think we could handle another 1.5-month long saga.