Vinashin là vấn đề thế kỷ

Hai vấn đề nhân dân cả nước đang rất quan tâm và cũng vừa được phản ánh nóng bỏng ở Quốc hội là Vinashin và Bauxite Tây Nguyên, với tư cách là một nhà kinh tế, ông Nguyễn Trần Bạt đã có những nhận xét đáng quan tâm xung quanh vụ đổ vỡ Vinashin.

Vinashin là loại dự án, không chỉ liên quan đến kinh tế, mà là loại vấn đề liên quan một cách toàn diện đến tương lai cấu trúc sống của xã hội chúng ta,vì thế xã hội quan tâm một cách rất riết ráo đối với chuyện này. Vinashin cũng là một vấn đề chiến lược. Bởi vì nó là kết quả của một quá trình thí nghiệm mô hình tập đoàn kinh tế. Cương lĩnh của chúng ta nói đến tập đoàn kinh tế, khu vực kinh tế Nhà nước như là một lực lượng chủ đạo. Điều này đang gây ra các tranh luận khá rộng rãi trong xã hội, làm cho vấn đề các tập đoàn kinh tế trở thành một vấn đề nóng bỏng. Cho nên, vấn đề Vinashin, ngoài ý nghĩa về sự thua thiệt về mặt tiền bạc thuần tuý, nó còn có một ý nghĩa rất quan trọng, đó là vai trò của khu vực kinh tế nhà nước đối với toàn bộ tiến trình phát triển kinh tế và xã hội Việt Nam. Đấy là vấn đề rất lớn, mà nói cho cùng là vấn đề thế kỷ. Bởi vì nói đến thời kỳ quá độ tiến lên CNXH mà người Trung Quốc nói rằng phải mất hàng trăm năm nữa thì đấy tức là những vấn đề thế kỷ.

Vinashin là một vấn đề thế kỷ, do đó cần phải có một thái độ thế kỷ đối với vấn đề này. Nhưng thái độ đối với vấn đề này phải rất thực tế.

Trước hết, chúng ta tìm ra các khuyết tật của quá trình hình thành dự án này và chúng ta phải có tiếng nói với Đảng, Quốc hội, Chính phủ trong việc quan niệm cho đúng thực trạng tâm lý xã hội đối với sự xuất hiện các vấn đề. Vấn đề Vinashin các đại biểu Quốc hội thường chỉ mới nhìn những khía cạnh thất thoát tài chính, còn các ý kiến về cấu trúc các tập đoàn, cấu trúc về phương diện quản lý các tập đoàn, cấu trúc của các vấn đề quản trị tài sản quốc gia mà các tập đoàn nắm giữ chưa được làm rõ trong quá trình thảo luận.

Mỗi một lực lượng xã hội khi tham gia vào quá trình tranh luận phải có một thái độ khiêm tốn vừa phải và tôn trọng lẫn nhau. Và người bắt đầu phải là Chính phủ vì Chính phủ có quyền lực, Chính phủ có địa vị cao hơn trong đời sống xã hội. Ví dụ, tôi hơi chạnh lòng khi nghe được tuyên bố của Chính phủ rằng tháng 11 này chúng ta có một Vinashin mới. Chúng ta đã từng có một Vinashin với tất cả các khuyết tật của nó và khuyết tật của thể chế quản lý nó, các khuyết tật của kinh nghiệm quản lý nó… nhiều khuyết tật hùn vào mới sinh ra hậu quả như vậy. Chúng ta chưa lý giải được sự thất bại của nó mà chúng ta lại muốn có ngay một cái mới. Câu hỏi có thể đặt ra là “đến bao giờ chúng ta lại phải bàn về Vinashin mới giống như chúng ta đang bàn về Vinashin cũ?” Có lẽ Chính phủ nên thận trọng hơn khi đưa ra các thông báo như thế.

Chính phủ của chúng ta từng khá thận trọng về chuyện này. Nhiệm kỳ trước Chính phủ mới chỉ giới thiệu khái niệm tập đoàn. Chính phủ mới dọ dẫm thí điểm hai tập đoàn Bưu chính viễn thông (VNPT) và Than khoáng sản. Mặc dù có không ít vấn đề nhưng VNPT khá thành công, đưa được vào Việt Nam một ngành công nghiệp hiện đại. Kinh doanh viễn thông bây giờ trở thành một hoạt động kinh doanh rất có lời và ổn định, trong đó chống được thế độc quyền bằng sự xuất hiện của các công ty viễn thông khác nằm ở các địa phương khác nhau như Hà Nội, thành phố Hồ Chí Minh. Tập đoàn này tương đối yên ổn và các công ty bưu chính viễn thông trở thành một tập đoàn có không khí cạnh tranh và nó phá vỡ thế độc quyền. Phải nói rằng xét về mặt thị trường thì bưu chính viễn thông là thị trường tương đối lành mạnh trong tất cả các thị trường chúng ta có ở Việt Nam.

Việc thể nghiệm tập đoàn ở giai đoạn gần đây có lẽ hơi vội vàng. Có lẽ Chính phủ chưa quan niệm rằng xây dựng một tập đoàn chính là xây dựng một thị trường kinh doanh mà tập đoàn đó đảm nhiệm. Trong quá trình nghiêm cứu lịch sử hình thành khái niệm này tôi đa phát hiện ra điều đó. Chúng ta gọi nó là tập đoàn nhưng chúng ta chưa xây dựng được qui chế cho nó thì đó là một khuyết tật, nhưng đấy cũng chưa phải là khuyết tật chính. Cái khuyết tật chính là ở chỗ chúng ta chưa xây dựng nổi thị trường cho nó. Song song với việc hình thành một tập đoàn như một quả đấm thì chúng ta cần phải xây dựng một thị trường có sức cạnh tranh một cách bình đẳng để nó hạn chế sự cực đoan của một tập đoàn. Bản chất của việc xây dựng tập đoàn là xây dựng thị trường. Mà xây dựng thị trường là xây dựng cả thị trường ổn định và thị trường phát triển. Không có thị trường ổn định là phiêu lưu, còn không có thị trường phát triển là không có triển vọng.

Chúng ta còn có một cái sai thứ ba, đó là chúng ta không quan niệm được quy mô thí nghiệm. Bây giờ để tìm ra những thị trường khác nhau để tiếp tục thành lập những tập đoàn là không còn nữa, hay nói cách khách là tất cả những lĩnh vực kinh tế, những thị trường kinh tế, thị trường ngành có thể lập tập đoàn thì chúng ta lập hết rồi. Tức là sau khi kết luận về thí điểm thì chúng ta không có cái gì để làm thêm, bởi chúng ta thí điểm hết các vùng, các ngành kinh tế mà chúng ta có.

Còn vấn đề thứ tư nữa quan trọng hơn trong việc nghiên cứu Vinashin chính là chúng ta bỏ rơi thị trường nội địa. Chúng ta có một ngành công nghiệp đánh cá và chế biến hải sản với một số lượng xuất khẩu chiếm không biết bao nhiêu % của GDP. Nhưng phần lớn các tàu đánh cá của chúng ta không có năng lực để đánh bắt cá xa bờ, không có năng lực tự vệ trước thiên tai và không có sức đề kháng đối với sự mất an ninh phi truyền thống ở ngoài biển , thậm chí chúng ta không giải quyết nổi cả vùng săn bắt của nền công nghiệp đánh bắt và chế biến hải sản. Hay nói cách khác, chúng ta bỏ quên thị trường rất truyền thống. Đáng ra, việc đầu tiên mà Vinashin phải làm là đóng tàu, không phải những con tàu vài chục tấn, mà là tàu đánh cá để phát triển ngành công nghiệp đánh bắt và chế biến hải sản mà thiên hạ đã đi rất xa rồi. Chúng ta biết rằng có những con tàu mà chi phí để làm ra nó không lớn lắm, nhưng mỗi năm nó làm ra hàng triệu đô la, ví dụ như các tàu đánh bắt cua ở biển bắc, tàu đánh bắt cá ngừ…

Tóm lại, đóng tàu mà không nhìn ngó thị trường nội địa để vực dậy các khu vực kinh tế khác có thể liên đới là một sau lầm về mặt chiến lược. Chúng ta mua những con tàu, con phà để làm sướng mắt, sướng chỗ nằm của một số người, đó là cách nhìn hoàn toàn phi nhân dân trong một chính sách vĩ mô. Tiếng kêu cứu, tiếng khóc về bão tố, về mất an toàn, mất an ninh phi truyền thống của ngư dân diễn ra liên tục trong hàng chục năm nay. Vậy tại sao Vinashin không coi đấy là thị trường để cung cấp dịch vụ đóng những con tàu có khả năng đề kháng cả với cướp biển? Trong báo cáo của Vinashin không hề có bất kỳ sự nghiên cứu nào để phục vụ các ngành công nghiệp trong nước cả, mà chỉ có những ảo tưởng về chuyện đóng những con tàu viễn dương.

Nhân chuyện Vinashin, tôi đề nghị báo chí phải nhìn nhận lại, đừng truy đuổi những trách nhiệm chính trị quá lớn mà hãy truy đuổi những khuyết tật chính trị, khuyết tật quản trị để từ đó cung cấp cho Đảng, cho Quốc hội và Chính phủ những gợi ý xây dựng để phát triển

http://chungta.com/Desktop.aspx/ChungTa-SuyNgam/Hanh-Dong/Vinashin_la_van_de_the_ky/

The commodity crunch in consumer packaged goods

Packaged-goods companies have been socked by rising commodity prices. Executives in other industries can learn from their experience.

For almost 40 years, the US consumer goods sector was among the safest of havens for investors. It rewarded them with annual returns well above the market average—second only to those of the energy sector—and in a bumper period from 1985 to 2002 outperformed the S&P 500 index by almost 20 percent annually. Since then, the sector has barely outpaced the index, despite persistent attempts by companies to find winning strategies. While inadequate cost controls and a failure to deliver significant value from a wave of mergers and acquisitions haven’t helped, one factor is the dominant culprit for the current malaise: the industry’s response to changing commodity prices.

Losing control

From 1985 to 2002, consumer-packaged-goods companies regularly passed on to consumers increases in the price of inputs (including aluminum, cereals, oil, and paper) while holding the line on prices when raw-material costs declined. In this way, these companies maintained profit margins when input costs rose and enjoyed expanding margins when they fell. In fact, we estimate that between 1996 and 2002, the strategy of passing on commodity price increases was responsible for two-thirds of net margin expansion in the sector, or roughly $10 billion in value.
The tables turned in 2002. From that year until 2007, industry players passed on price increases of just 15 percent as cumulative commodity costs grew by 40 percent (exhibit). As a result, we estimate that the failure to pass on commodity price increases was responsible, during that period, for 75 percent of the sector’s margin contraction, which cost about $70 billion.¹

A return to the days of passing commodity price increases on to consumers won’t come easily. The structural shifts that dampened the industry’s pricing power remain: consumers are increasingly value conscious, and large discounters still dominate the retail landscape. These retailers, using detailed analysis of data available from their point-of-sales systems and shopper research, today have a sophisticated understanding of the prices they want and of their ability to demand those prices.
The net result is that the industry continues to face downward pressure on prices. Some of the solutions aren’t complicated, but they are extremely difficult to implement and probably hold lessons for companies—in sectors ranging from consumer electronics to industrial chemicals to medical devices—currently facing an unfavorable and volatile environment for raw-material costs and pricing.

Regaining the initiative

Many economists and financial-market forecasters believe that continued price volatility amid a general rise in commodity prices is likely as the world economy recovers, so companies across many sectors may easily destroy value in the years ahead. Suppose that in consumer packaged goods, commodity prices increase by about 20 percent during the next five years, and companies hold prices constant in a quest to maintain market share. In that case, up to 4.5 percentage points of margin could be lost—or about 33 percent of current earnings before interest, taxes, depreciation, and amortization (EBITDA). Avoiding this fate will require iron-willed pricing resolve, which may be richly rewarded if the environment turns slightly more favorable. If commodity prices fall by 5 percent in the next five years but companies hold product prices steady, for example, we estimate that industry margins will increase by around 1 percentage point, and EBITDA will jump by 8 percent, reversing the current trend.
Conceiving, developing, and marketing category-changing products that consumers crave has long been the lifeblood of leading consumer-packaged-goods companies—and, for that matter, a priority for companies in a great many industries. An important question for all is how to capitalize on the opportunity that such innovations present to reset prices upward across relevant product categories, as P&G managed to do when the company introduced its Swiffer cleaning product.² Capitalizing on innovations isn’t easy. But in an industry like packaged goods, it’s probably critical for companies that aim for a financially sustainable innovation pipeline, for consumers who seek a steady stream of new products that satisfy new needs, and for retailers that hope to benefit from greater demand for new and existing products.

 https://www.mckinseyquarterly.com/Retail_Consumer_Goods/Strategy_Analysis/The_commodity_crunch_in_consumer_packaged_goods_2719?gp=1

Why Can't Kmart Be Successful While Target and Walmart Thrive?

What drives some companies to succeed while others languish? Successful companies develop a system of a few truly unique capabilities that help them create differentiated value for their chosen customers.
Retailers provide many case studies in capabilities-driven success, one of the most compelling of which is the big discounter triad of Walmart, Target and Kmart. And in this fourth-quarter retail season, we thought it would be helpful to take a closer look at what really distinguishes these competitors because they provide valuable insight into the key components of a winning corporate strategy.
We believe that all successful companies — Walmart and Target included — know precisely how they provide value for customers. They make a deliberate choice about their "way to play" in the market, guided primarily by what those companies do uniquely well: their distinctive capabilities. We define capabilities not as "people capabilities," but as the interconnected people, knowledge, systems, tools and processes that create differentiated value.
They then select a set of products and services that best leverage those unique capabilities and optimally suit their chosen way to play. Most important, they avoid markets, products or services that require new or disparate capabilities, and thus threaten the company's focus.
Focus for us, therefore, is not about picking just one market, but rather about choosing one coherent way of competing. The true story about Walmart's and Target's success is that they have gone to great lengths to focus internally on building capabilities and product offerings that suit their way to play. Kmart, by contrast, has failed to develop a unique or differentiated way to play, and all that goes with it.
Let's take a closer look.
Walmart's success doesn't just stem from impressive logistics, aggressive vendor management and its position as a low-cost retailer. What really underlies Walmart's advantage is a coherent and differentiated approach to the market.

• Their well-defined way to play focuses on "always low prices" for a wide range of consumer items, from food to prescriptions to electronics.
• They support their low-cost way to play with an integrated system of capabilities, including: real estate acquisition; no frills store design; and superior supply chain management involving among others expert point-of-sale data analytics.
• Their product and service mix is kept tightly aligned with their way to play and capabilities system: avoiding big-ticket items (e.g., furniture or large appliances) where it has no cost advantage, or where new service capabilities might be required. And it innovates constantly within its chosen constraints: e.g., tailoring product assortments to local trends.

Target caters to a similar "money-saving" market, but offers a very different value proposition, focuses on different capabilities and has a different product portfolio.

• Target's way to play emphasizes design-forward apparel and home decor for image-conscious consumers. Everything from store layout to advertising to inventory conveys an eye for style.
• Its capabilities system supports this way to play with image advertising, "mass prestige" sourcing (with the use of private brand and exclusive offerings), pricing, and the management of urban locations.
• In product and service mix, Target is similar to Walmart in many ways, but Target satisfies the needs of its younger, image-conscious shoppers by stocking more furniture, clothing and exclusive designer merchandise than Walmart.

Kmart, the least successful of the group, is struggling to define its way to play, describing itself as a "mass merchandising company that offers customers quality products through a portfolio of exclusive brands and labels." Yet, that definition could describe just about any retailer. As a Walmart customer, you know you'll save money and still feel welcome. At Target, you know you'll get fashionable products at prices that feel reasonable. What, then, is Kmart's niche?
Walk through a Kmart store and you'll discover designers like Jaclyn Smith in the low-budget ambience of a warehouse. They carry Kenmore appliances, which may require high-touch sales assistance that many Sears customers expect and many Kmart stores lack. In short, Kmart has not established an identifiable way to play that reflects both customers' needs and its own capabilities. Harry Cunningham, the founder of Kmart, allegedly admitted that Sam Walton (the founder of Walmart) "not only copied our concepts, he strengthened them."
The lack of a clear concept about how to reach the market, in our view, is the single most important factor in explaining why Kmart's fortunes have fallen so far, compared to its two rivals. Without a clear way to play, and capabilities to support it, a company cannot achieve the coherence it needs to truly excel at what it does, and thus outpace competitors.

http://blogs.hbr.org/cs/2010/12/why_cant_kmart_be_successful_w.html?

You Can't Multitask, So Stop Trying

The year end is a busy time for almost everyone. As we use our smartphones to confirm online gift orders, we're also trying to wrap up those work tasks we should have finished in November. We feel overwhelmed but also productive, pleased with our ability to juggle so many things. In reality, however, that sort of behavior makes us less effective in our jobs and our lives.
Based on over a half-century of cognitive science and more recent studies on multitasking, we know that multitaskers do less and miss information. It takes time (an average of 15 minutes) to re-orient to a primary task after a distraction such as an email. Efficiency can drop by as much as 40%. Long-term memory suffers and creativity — a skill associated with keeping in mind multiple, less common, associations — is reduced.

We have a brain with billions of neurons and many trillion of connections, but we seem incapable of doing multiple things at the same time. Sadly, multitasking does not exist, at least not as we think about it. We instead switch tasks. Our brain chooses which information to process. For example, if you listen to speech, your visual cortex becomes less active, so when you talk on the phone to a client and work on your computer at the same time, you literally hear less of what the client is saying.
Why do we try?
Our brains are wired to respond strongly to social messaging, whether it is verbal or non-verbal. Knowing and improving our status, expanding awareness of our group, is important to us, and as a result information that helps us do that is often processed automatically, no matter what else we are trying to focus on.
Remote distractions, the ones aided by technology, are often unaware of current demands on us. People who call you at work, send you emails, or fire off texts can't see how busy you are with your current task. Nor can Twitter feeds or email alerts. As a result, every communication is an important one that interrupts you.
Also, we crave access to more information because it makes us comfortable. People tend to search for information that confirms what they already believe. Multiple sources of confirmation increase our confidence in our choices. Paradoxically, more information also leads to discomfort, because some of it might be conflicting. As a result, we then search for more confirmatory information.
What can we do about it?
Technological demands are here to stay. What can you do to avoid overload?
First, make an effort to do tasks one at a time. Stick with one item until completion if you can. If attention starts to wane (typically after about 18 minutes), you can switch to a new task, but take a moment to leave yourself a note about where you were with the first one. Then give the new task your full attention, again for as long as you can.
Second, know when to close your door. In the "old days," people did this when they had to work hard on something. Doing the same thing to the electronic equivalent is perhaps even more important if you want to be productive and creative. Set aside time when people know you are going to focus.
Third, admit that not all information is useful. Consider which communications are worthy of interrupting you, and what new data you should seek out. When doing a Google search, ask if you are just accessing links that confirm what you already believe or those that challenge those beliefs. Similarly, know the difference between social networks, which are likely to confirm your choices and therefore make you feel good, and knowledge networks, which might challenge them, and therefore help you make a better decision.

http://blogs.hbr.org/cs/2010/12/you_cant_multi-task_so_stop_tr.html?

What is McDonald selling?

AUGUSTA, Ga.—More than 100 items crowd the menus at Dee and Christine Crawford's five McDonald's restaurants, ranging from familiar Egg McMuffins to newfangled fruit smoothies. The family franchisees recently added oatmeal and caramel-mocha beverages. Next up for consideration: frozen strawberry lemonade.
In certain restaurants around the country, McDonald's Corp. is testing flatbread sandwiches and "garden" snack wraps—chicken and vegetables wrapped in a tortilla.

"Change is a part of our business, to keep up with customer demands, and there have been a lot of changes," says Dee Crawford.
Though McDonald's is practically synonymous with burgers, the chain's appetite for change has helped make it the nation's best-performing restaurant company during the economic downturn. Since early 2003, the company has posted 30 straight quarters of same-store sales increases. During the worst trenches of recession, in mid-2008, global same-store sales at McDonald's rose by 6.1%.
An increasingly diverse menu, with some items priced at a dollar and others as high as almost $5, has lured more cost-conscious customers while preserving profit margins. That's a departure from the days when McDonald's largely catered to so-called heavy users—customers who queue up to eat fast-food several times in a week. Today, many of those 18-34 year-olds, hit by the economic slump, can no longer afford to binge on Big Macs.
To help boost traffic, the company is keeping more restaurants open 24 hours, has spiffed up thousands of stores, created double-lane drive-throughs and now offers free Wi-Fi in most locations. The new menu choices are so plentiful that the Oak Brook, Ill., company has been running ads to remind customers that it still sells Big Macs and Quarter Pounders.

But as the changes mount, some franchisees and analysts are cautious about the chain's ability to sustain growth.
The chain's peak lunch-hour business has been flat for five years, according to a company email reviewed by The Wall Street Journal. A McDonald's spokeswoman declined to comment on the content of the memo, but said in an email response, "it's important to note that our entire business has continued to grow."
Pushing sales higher is a constant battle. "You may be leading the industry," says Jeffrey Bernstein, restaurant analyst at Barclays Capital. "But if you have a deceleration from where you were...investors might rather pursue a greater risk/reward scenario" with the potential for "more meaningful upside."
One reason for all the menu tweaks: the shifting landscape of fast-food, and food purchased by consumers on the go. Just a decade ago, chains like McDonald's and Burger King were a natural choice for people wanting a quick bite. Today, with more types of chains serving more types of fare, the big franchises are chasing market share from competitors such as 7-Eleven, coffee shops like Starbucks, smoothie outlets like Jamba Juice, and even gas stations that carry prepared food.

As business evolves, the franchisees who operate about 90% of the company's 14,000 U.S. stores bear the brunt of upgrade and expansion costs. With multiplying new demands in the kitchen, operations are more complex than ever, threatening slower service and mistakes in orders.
Several franchisees interviewed for this story declined to comment. Some worry that their investments will never pay off, according to an October franchisee survey by Janney Montgomery Scott analyst Mark Kalinowski. One franchisee polled said new McCafé coffee drinks are selling so poorly that, "we are not even paying for the electricity to run the machine."
"Our business is driven by keeping things simple and being able to deliver in a fast and efficient manner," says a McDonald's franchisee in the Southwest interviewed by the Journal. "So the more complexity you bring into the system, the more challenges you'll have," he says.
The introduction of snack wraps, for example, represented such a change in food assembly that one Augusta franchisee sponsored a snack-wrap making contest to give crew members extra practice. The winners received gift cards to retail stores.
With musts like a new $13,000 frozen-drinks machine, "the question always is, 'is the next dollar worth the next amount of investment and hassle?'" says the Southwest franchisee. "In most cases, so far, yes it has been, but not in every single store."

The company says the coffee drinks are a success. And McDonald's USA President Jan Fields says it's taking care not to repeat past mistakes. "I don't want it to feel burdensome to add new menu items, but we have to stay relevant."
Now that consumers are starting to open their wallets again, it's more tempting to be everything to everybody. "If McDonald's sticks to one thing, consumers will go somewhere else," says John Glass, restaurant industry analyst for Morgan Stanley. "It's a delicate balance between being simple and not responding to what consumers want."
The Golden Arches have been down this road before. In the late 1990s and early 2000s, the chain got into trouble opening new restaurants at a breakneck pace. Some offerings, like the Arch Deluxe, famously flopped. Service suffered, sales slumped and McDonald's then-CEO, the late Jim Cantalupo, vowed in 2003 that the company would "do fewer things and do them better."
Over the last three years, the company discovered that items consumed between traditional meal times, such as snack wraps, have become the fastest-growing part of McDonald's business. To capture more grazers, McDonald's began keeping its doors open longer. Today, about 37% of U.S. McDonald's operate around the clock and nearly all open earlier and close later than in previous years.
For customers who wanted an early morning coffee or a late-night snack, "It used to be that convenience stores were the only option," Ms. Fields says.
Being open 24/7, though, means higher staffing costs—and doesn't make sense for every store. The Crawfords learned this the hard way. They tried the all-hours approach at one location in a depressed area of Augusta, but "the labor was killing us," Dee Crawford says. "The business just wasn't there."
Mother Dee, 67 years old, bought her first McDonald's in Beaufort, S.C., in 1987, before adding four more to her empire. She's in the process of handing them all over to Christine, 38, who joined the family business in 2003. Since then, the Crawfords, like other franchisees, have needed to adapt considerably.
When Dee Crawford bought her second McDonald's, on Walton Way in downtown Augusta, Ga., in 1990, it offered so few products that she tallied inventory by hand. She had a one-lane drive-through and chicken sandwiches hadn't yet hit the menu. When she needed to restock, she ran out back to an outdoor freezer.
At the company's urging, she rebuilt the restaurant in 2007. Now, a two-lane drive-through funnels cars from a busy street past a menu board splashed with photos of salads, coffee drinks topped with whipped cream and snack wraps. The old exterior, with its red mansard roof and white walls, was replaced with a modern flat roof and stucco facade.
Sleek flat-screen televisions now hang from the walls and people linger with laptops, thanks to free Wi-Fi. Unlike the old days, a corporate distribution center handles inventory and two or three truckloads of food are delivered to each of the Crawfords' stores weekly.
With extra chores and more customers to serve, some of the Crawfords' restaurants now have as many as 18 staffers during peak hours—almost double the work force of a few years ago.
The Walton Way store was rebuilt specifically with the McCafé drink station in mind—one of the biggest and most expensive changes McDonald's franchisees have had to make in recent years. Located between the pick-up window of the drive-through and the inside counter, the space is equipped with a coffee brewer, a blended-ice machine, a specialty coffee machine and a tea brewer.
"There was a time when McDonald's coffee was considered the best, but somewhere along the way we lost our way on it," Ms. Fields says. "We didn't pay attention to details like temperature, packaging and freshness. We noticed a significant decline in our coffee sales while customer demand for coffee was going up."
Once McDonald's improved its drip coffee and saw sales react, it decided to branch out into specialty coffee drinks. Some franchisees balked, partly because of the price tag. The stations cost roughly $100,000 to install, with McDonald's covering only about $30,000 of the total expense.
The Crawfords placed McCafés in each of their five restaurants and figure it will take two to three years before they recoup their investment. In the mornings, a dedicated staffer mans the McCafé station.
Initially, Dee Crawford worried that fancy coffee drinks wouldn't go over well with her clientele. "Just the pronunciation of frappes and lattes was new," she says. "I thought customers might be intimidated."
She was encouraged by a visit to a McDonald's in Columbia, S.C., with similar demographics—lower-income and predominantly African-American—where customers were embracing the new drinks. When her own stores began selling them, she introduced them by offering free samples at community events.
This past summer, when McDonald's told franchisees to start selling berry smoothies, the Crawfords and other local franchisees paid the city of Augusta to have downtown water fountains churn out fuschia-hued water to coincide with the introduction of the new products.
Ms. Fields says the company tries not to stray too far afield with new items. In 2005, McDonald's halted testing of Oven Selects submarine sandwiches, partly because they took too long to make, partly because "market data told us that it's not a product customers recognize McDonald's for," Ms. Fields says. "We tried pizza at one time but people didn't recognize us for pizza, either."
Company executives decide how to alter menus based on changing consumer desires and areas where it suspects it may be missing opportunities, Ms. Fields says. Several years ago, the company noticed that a lot of drive-through customers already had drinks when they arrived. Limited choices and outdated packaging were among the reasons people weren't purchasing McDonald's beverages with their meals, McDonald's discovered.
"We said, 'We need to get more contemporary with our beverages and not just have Coke, Diet Coke and Sprite,"' Ms. Fields says.
A franchisee in the South saw how customers were going to a competing chain offering sweet tea. So McDonald's began testing its own version regionally. It became so popular that it's now offered nationwide.
Rising demand for healthier products prompted McDonald's to create fruit smoothies. Consumers' busy work schedules, longer commute times and a craving for convenience persuaded the chain to create more products that can easily be consumed on the go and at nontraditional meal times.
Some new items are made by re-purposing existing ingredients. Chicken snack wraps feature the same chicken tenders that make up a Chicken Selects meal of white meat chicken pieces. The chicken is then wrapped in the same tortillas used to make breakfast burritos. The multi-use strategy makes preparation simpler and reduces costs, McDonald's says.
To keep up with all the menu iterations, the Crawfords have still needed to increase staffing and open hours: one of their locations is still open around the clock, seven days a week.
Sometimes, all the changes—from the food to the imagery—can leave customers befuddled. The Crawfords recently removed window posters that touted a national Monopoly promotion and a sweet potato pie offered only in the South. The two messages, says Christine Crawford, seemed to clash and came off as confusing. " At a certain point it becomes white noise," she says.
Write to Julie Jargon at julie.jargon@wsj.com


http://online.wsj.com/article/SB10001424052748703531504575624741901256252.html

Behind Firm's Default: Vietnam's Growth Mania

HANOI—State-owned shipbuilder Vinashin's default on a $600 million loan late last week is just the latest crisis challenging Communist-run Vietnam's ability to get its economy under control after years of pell-mell growth and spiraling inflation.
The company, officially named Vietnam Shipbuilding Industry Group, failed to make a $60 million initial repayment on the syndicated loan to international lenders, saying it will make only interest payments, says a person familiar with the matter. The company has agreed to meet with creditors in mid-January to discuss repaying the loan, although some lenders privately have said they are uncertain whether Vinashin has sufficient resources to do so.
In defaulting on the debt, Vinashin has added to a catalog of problems afflicting Vietnam, once one of the world's hottest emerging markets.
Over the past decade, the country's economy has expanded from crater-pocked rice paddies to erect gleaming new factories and towering skyscrapers, prompting development economists to extol the country as a model for other frontier markets. On the narrow streets of Hanoi, Rolls-Royce and Bentley cars now compete for space with rickshaws and motor-scooters.
In the past few weeks, the cost of Vietnam's poorly policed transformation has become alarmingly clear, offering food for thought for investors seeking rising returns elsewhere on the frontier-markets map. Economists say the country's worsening problems, and the impact they could have on its dwindling currency, might also worry textile and agricultural producers in countries like Thailand and Indonesia which compete with Vietnam in those sectors.
Inflation is soaring, reaching 11.75% year-to-year in December, while Moody's Investors Service, Standard & Poor's and Fitch Ratings have all downgraded Vietnam's credit ratings because of its relentless focus on pumping up growth in the past six months. The government, meanwhile, appears set to continue its rolling devaluations of Vietnam's dong currency while ordinary people scramble to stock up on U.S. dollars or gold. Since mid-2008, the dong has lost around a fifth of its value as Vietnam floods the banking system with money.
Vinashin's escalating debt problems are a fresh flash point, threatening to further raise the government's borrowing costs overseas just when it hopes to raise funds to improve the economy's creaking infrastructure.
Vinashin borrowed aggressively with the encouragement of the government in the hope of becoming a global player in the shipbuilding industry. It was part of a government-directed plan to keep large chunks of the Vietnamese economy under state control. But this summer Vinashin nearly collapsed with $4.4 billion in debts, leading to the arrest of top executives for allegedly mismanaging the firm, one of Vietnam's biggest employers. The outcry was sufficient to prompt Prime Minister Nguyen Tan Dung to acknowledge his own mistakes in failing to properly supervise Vinashin, which internal government documents describe as "out of control."
Some analysts see Vinashin's default as potentially a make-or-break moment for Vietnam. By choosing not to bail out the company, says Kevin Grice, an economist with London-based Capital Economics, Vietnam's government is sending a message to other large state-owned enterprises to put their own houses in order and to root out the inefficiency that plagues the state sector here.
"By not standing unilaterally behind Vinashin, the government is reducing the issue of moral hazard in Vietnam and it is also ensuring that investors will become more selective," he says.
But he and other analysts caution it will work only if Hanoi toughens the way it supervises the state sector, which constitutes about a third of the economy and diverts resources from more efficient private firms. Vietnam also needs to move quickly to curb inflation and wean itself off its long-standing emphasis on promoting rapid growth whatever the cost. "The longer they delay reform, the worse it will be when the markets force them to do it, but old habits die hard," Mr. Grice says.
Prospects for a wholesale shake-up seem dim. Ju Wang, a credit-markets strategist with UBS AG in Singapore, says reducing the moral hazard might be on the government's mind, but so too might be Vietnam's paltry foreign reserves. The $14 billion the International Monetary Fund reported Vietnam as having at the end of September is "barely enough to cover short-term debt of around $6 billion to $7 billion and a wide trade deficit of $12 billion" that the government projects for this year, the strategist says.
Vietnam has a chance to change course and adopt a more prudent growth trajectory at the Communist Party's Congress which begins Jan. 11. The meeting will select a new party chief and also recommend a new president of the country's rubber-stamp legislature while determining whether the key figure, the premier, Mr. Dung, keeps his job for a second, five-year term. The meeting will also set the country's economic-policy direction for the next five years.The World Bank and the International Monetary Fund, among others, are urging the country's leadership to put the brakes on rapid economic growth and focus instead on curbing inflation and buttressing the dong, which has also been taking a beating in recent weeks with the black-market rate for dollars sometimes reaching 21,500 dong compared with Friday's official rate of 18,498 dong—a premium of around 15%.
But people familiar with the party's policy discussions, say the country's top rulers are unwilling to make a break from their high-growth policies. "The changes at the top—if there are any—won't mean a thing if the policies remain the same," says a person with knowledge of the deliberations.Some outsiders, meanwhile, say they are fascinated by the way Vietnam's economic planners have had numerous opportunities to learn from the experiences of other developing economies and avoid their current problems. In Asia during the 1980s and 1990s, for instance, many countries ramped up growth rates and flooded their economies with easy credit only to trigger a financial crisis that swept the region in the late 1990s and forced the restructuring of scores of state-backed conglomerates. Vietnam has taken much the same approach, with the central bank estimating credit will expand 28% this year from 2009, according to the central bank.
"It seems that countries have to learn from their own mistakes, not those of others," Capital Economics' Mr. Grice says.
Carlyle Thayer, a professor at the University of New South Wales at the Australian Defence Force Academy and a veteran Vietnam observer, says he expects very little substantive change to emerge from the congress and perhaps even less debate. A crackdown on dissidents and bloggers in the lead-up to the event, which is held every five years, has stifled the atmosphere in what is already one of the world's most repressive countries, he says.
"The best intellectual talent in this country is pulling out its hair at the moment," says Mr. Thayer, who says there was greater momentum toward reform at the previous congress in 2006. "People were openly asking the party for change then. None of that's happening now," he says. Economists say part of the problem is that the party promotes officials based on their ability to hit growth targets, fill quotas and complete five-year plans. Often they hit these targets with little regard for the inflationary consequences or the spread of corruption that many analysts say is endemic here.
"Growth is the only thing the party understands, so that's what everybody chases," says a government official who asked to remain anonymous. "Nothing will change until a new generation of leaders comes in, and that's not going to happen yet."There are some Vietnamese analysts who think the government is heading in the right direction. Independent analyst Kien Thanh Bui worries that tightening monetary policy as the IMF suggests could stall growth in the private sector while doing little to arrest the problems in the state-owned enterprises. He reckons cracking down on corruption would do more to help relieve inflation because graft pushes up costs at every stage of the supply chain in Vietnam.
Other Vietnamese analysts are more pessimistic, especially as the government has only nudged up its benchmark interest rate, to 9% from 8%, since November 2009, despite a rapid uptick in inflation.
"The government people are talking about targeting inflation to some extent, but their target is 7%, which is the same target they had for this year," says Nguyen Quang A, who headed Vietnam's only independent think tank before its founders closed it under pressure from the Communist Party. "The pro-growth fixation here is a kind of mania," he says. "Vietnam is dancing on a razor blade."

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Case study: A Tough Sell at Sears

This holiday season, Sears and Kmart, which merged in 2005, are pushing a single message: Buy with layaway, buy with coupons, buy now and pay later, buy with loyalty rewards points — but please, just buy.

Five years after the merger, Sears Holdings is beleaguered, with sales markedly worse than its competitors’. The company’s revenue dropped more than 10 percent from 2005 through 2009, the most recent full fiscal year. In the same time period, Wal-Mart’s sales rose almost 31 percent, Target’s more than 24 percent and Macy’s about 5 percent. Sales at J. C. Penney’s declined by about 6 percent.
Recently, too, as shoppers seem to be cautiously loading their carts again, Sears Holdings has not benefited. In the first three-quarters of this year, Sears Holdings’ sales are down about 1.9 percent compared to the same period last year, while the competition moved into positive territory.
Edward S. Lampert, the billionaire hedge fund manager who engineered the merger and is chairman of the company, has promised that Sears Holdings will be “unrecognizable” in 30 years. To drive sales, it is emphasizing online shopping, mobile apps and an Amazon.com-like marketplace with other vendors, along with heavy promotions in stores.
Still, its long-term strategy remains murky, analysts say. Sears Holdings is primarily a physical retailer, and many of its 2,200 stores in the United States are run-down and in undesirable locations. Among discount stores, Kmart lags Wal-Mart and Target. Sears is trying to edge out Lowes and Home Depot in appliances on the one hand, and Macy’s and J. C. Penney in apparel on the other.
“People assume that Eddie’s got some magic formula,” said Gary Balter, an analyst with Credit Suisse. “If you’re Sears, you’ve got a problem because you’re trying to sell a product in a dilapidated building,” he said. And Kmart stores are “about a quarter the sales productivity of Wal-Mart,” he said. “How do you compete?”
When Mr. Lampert combined Kmart and Sears in an $11.9 billion deal that went through in 2005, many of the same analysts considered it a smart move.
Mr. Lampert, who became the majority owner of Kmart after it went into bankruptcy, said then that he wanted to combine the best of both, putting brands like Kenmore and Craftsman into Kmarts, and building Sears’s presence outside of malls by turning some stand-alone Kmart stores into Sears stores. Some attractive store locations, particularly in urban areas, led analysts to believe he could sell those to competitors for premium prices.
But the sudden consumer pullback in 2008 led to lots of empty retail space, at less expensive prices than Mr. Lampert’s. Today, Mr. Balter said, Sears Holdings still has some showcase spots, in high-end, high-traffic areas like Bergen County, N.J.; South Coast Plaza in Costa Mesa, Calif.; and in Manhattan and Bridgehampton, N.Y.
But much of the remaining real estate in older, decrepit malls is a problem, Mr. Balter said. “Of the 2000, there’s 1,500 that you don’t want to be in, that nobody’s going to buy,” he said. (It also has a growing division of about 1,600 specialty stores, like small hardware stores and outlets. ) The better locations “are where Sears and Kmart are making their money — if you sell those, what are you going to be left with?” Mr. Balter said.
Mr. Lampert has also not invested much in the stores themselves, analysts said. In 2009, capital spending only amounted to 0.82 percent of sales. That is about half of Macy’s spending, at 1.51 percent of sales, and a fraction of the spending at Target, Wal-Mart, J. C. Penney and even publicly traded dollar stores, all of which are at 2 percent and above.
In an interview, David Friedman, Sears Holdings’s new senior vice president and president of marketing, played down the importance of appearance.
“The customer’s experience is made up of lots of pieces,” he said. “The in-store experience is one of those that matters a lot, and we believe that the physical plant is one piece of it, but we believe the associates and the products drive the in-store experience.” Sears Holdings is experimenting with new layouts and fixtures and will introduce those more widely if they are shown to improve sales. And Tom Aiello, a Sears spokesman, said in an e-mail that brightness and cleanliness were priorities, and noted that customer-satisfaction scores had risen this year.
The stores’ products pose another challenge.
Sears has long commanded the appliance world, but Home Depot and Lowes are formidable up-and-comers. In 2009, Sears still led the group with a little more than $7.1 billion in major appliance sales, according to This Week in Consumer Electronics magazine and the Stevenson Company. But its appliance sales fell 8.2 percent that year. Lowes came in second, with $4.5 billion, up 3.8 percent, and Home Depot was in third with $3.4 billion, a 4.3 percent decline.
“That’s increased the competition for sure,” Mr. Friedman said, but he added that Sears’s employees and price-matching gave it an advantage. Sears is also now selling some exclusive brands outside its stores. Craftsman tools, for instance, are available at some Ace Hardware stores.
It is also trying to figure out apparel sales. In its high-performing stores, it has been able to sublease space to the teenage retailer Forever 21, and it is trying to lease other spaces to other brands.
New exclusive brands, like a fashion line by the Disney star Selena Gomez at Kmart, and ones by the British brands Next and French Connection, are the latest efforts to lure shoppers.

“When you have things that are more on trend,” Mr. Friedman said, “aligned with people that are more compelling, they’re more willing to take a separate trip to your store.” 


But exclusives may not hold the same cachet anymore. Kmart may have signed Selena Gomez, but Target has Demi Lovato, Wal-Mart has Miley Cyrus, Kohl’s has Britney Spears and so on.
Transforming Sears or Kmart into fashion destinations will be difficult, said Jason Asaeda, a retail analyst at Standard & Poor’s.
Mr. Friedman said that customers were “more willing to purchase fashion at a Sears than at a mass merchant,” and described Kmart’s fashion efforts as having a “very good response.”
Aside from working on appliance and apparel, Sears seems to be putting the most weight behind its promotions and Internet efforts.
Through a program called AdYourWay, shoppers can choose an item online and direct the site to notify them when it reaches a certain price, or ask the site to recommend products. Mygofer lets people shop online for basics like eggs or bread along with tools or gifts, and pick up those items in a store the same day. Sears Holdings has several mobile applications to help people choose gifts or order items. Earlier this year, it formally announced Sears Marketplace, where more than 18 million products were available via third-party sellers. And a single login and profile can be used across all Sears Holdings sites, like LandsEnd.com or TheGreatIndoors.com.
Analysts said that while they were impressed with the company’s forays online, they did not see the Web sites as a cure-all. The retailer is also trying to lure shoppers with promotions. It extended its popular layaway program this year, and is also running no-interest offers on the Sears credit card and buy-now-pay-later plans with monthly payments. It began a rewards program at Kmart last year and Sears this year, offering points for buying and activities like writing reviews online. It is also offering holiday-season promotions, like offering Black Friday-level pricing on weekends beginning in October, and keeping Sears and Kmart stores open on Thanksgiving day.
For longtime shoppers like Linda Formicola, the rewards are a nice bonus, but it is Sears’s history and good discounts that bring her in.
“We’ve been shopping at Sears since I can remember,” said Ms. Formicola, 43, of Franklinville, N.J. Her husband is a mechanic, so he picks up tools there while she looks at clothes and supplies. “If stuff’s on sale, it’s pretty much the same price as you’d buy at a Wal-Mart,” she said, adding she believed the quality was better at Sears.
Bill Dreher, an analyst with Deutsche Bank, acknowledged that the company had maintained some loyalty among shoppers, but said he was puzzled about its future. While an asset mix including brands like Kenmore and Lands’ End, real estate holdings and the successful Sears Canada division may be valuable, retailing magic seems to be lacking in Mr. Lampert’s vision, he said.
“He’s got this huge conglomerate of retailing which is really not doing very well right now, and frankly, if it weren’t for Sears Canada, would be in a real mess,” Mr. Dreher said. “He’s focused so much on reducing costs and driving cash flow, and not focusing on sales and market share.”
Cheryl Thomas-Gorny, a mother of three in McRae, Ark., may not be concerned with Mr. Lampert’s market share strategy, but shoppers like her contribute to Sears’s diminishing popularity and sales. Although she said she sometimes shopped at Kmart, she criticized the quality of its goods, and said she often found the employees disagreeable.
“Honestly, I’d rather go to Target,” she said.

http://www.nytimes.com/2010/12/22/business/22sears.html?pagewanted=2&_r=1&partner=rss&emc=rss

For Activist Funds, a Long-Term Approach to Investing

Cevian Capital isn’t exactly a hedge fund, though it classifies itself that way in public filings.
It takes significant ownership stakes in companies for three to five years, but it isn’t really private equity, either.
Cevian, a $3.5 billion firm that is based in Europe with mostly American investors — Carl C. Icahn and the Florida Teachers Pension Fund among them — calls itself an “operational activist fund.” It is among a growing body of investors who eschew the limelight and push for longer-term operational changes at companies.
Funds like Cevian don’t grab headlines the way that investors like Mr. Icahn or William A. Ackman do, but some of them have done very well this year. Cevian is up 34 percent so far this year, after ending 2009 up about 35.7 percent. ValueAct Capital, based in San Francisco, which manages about $4.5 billion in assets, and Barington Companies Equity Partners are posting similar gains.
Activist funds are nothing new, of course. Where Cevian says it differs is its strategy, long lockup period and relatively low-profile approach and desire to get into the business and alter strategies and operations — not just shake up management.
About two-thirds of its roughly 150 investors are not allowed to withdraw their money for three to five years, a longer period than most activist hedge funds, Cevian says.
Cevian owns pieces of eight to 12 companies at a time, including Volvo and Demag Cranes of Germany.
“One great thing about the environment we’re in — everyone is super short-term focused,” said Harlan Zimmerman, a senior partner at Cevian who is based in London “They’re just reading the headlines and moving as quickly as possible.”
Other activist funds agree that with pressures on funds to produce short-term results or risk having their investors ask for the money back, those that can stay in for the long term can have a competitive advantage.
“It’s been the perfect environment for us,” said Jeffrey Ubben, founder of ValueAct. “I don’t think a lot of activist investors do what we do, because they either don’t want to get illiquid or don’t want to go as long.”
But hedge funds, even activist funds, face a challenge in being able to gain access to a stable capital base.
“That’s where everybody would like to be in the activist world, but it’s a tough balance,” said Damien Park, managing director of Hedge Fund Solutions. Sometimes managers have to give up their fee structure, he said, in exchange for longer lockup for capital.

Still, it is difficult to persuade investors to agree to long-term commitments. Many of them want the ability to withdraw money from hedge funds when there is turmoil. During the financial crisis, a number of investors found themselves unable to take out money.
The influential CFA Institute suggested recently that endowments and foundations, which provide a substantial portion of hedge funds’ assets, consider limiting or restricting investments in hedge funds that tie up capital.
The Investment Management Code of Conduct for Endowments, Foundations and Charitable Organizations warned that “such arrangements may affect future members’ ability to effectively manage the financial resources to meet the funding needs of the organization.”
To avoid the difficulty of long lockups, firms have adjusted. More hedge funds are creating so-called special purpose vehicles, highly specific investments tailored to just one acquisition, say lawyers who work with hedge funds.
“It’s happening more than it has in previous years,” said Marc Weingarten, a partner at the law firm Schulte Roth & Zabel. “Investors are more willing to lock up for that kind of play with the right manager.”
Other hedge funds are trying different approaches.
Philip Falcone, the embattled manager of the hedge fund Harbinger Capital Partners, bought a public shell company to avoid the whims of flighty investors. With the stable capital base of a public company, he doesn’t have to worry about redemptions, which can force managers to sell investments on the cheap.
Cevian likes to distinguish itself from other activists in the field by emphasizing its long-term commitment to the companies it invests in. Cevian executives typically spend six to seven months examining a company before they invest, speaking with managers, competitors, workers, suppliers and even those who have left the company.
Of course, they can also employ the same set of tools available to other activists, like layoffs, sales and public fights, and have not always been welcome among their target companies.
The downside is that their strategy is volatile and highly concentrated; in short, like most activists, they’re not very hedged.
“If you’re going on the board,” Mr. Zimmerman said, “you can’t be shorting companies.”
The coming year looks to be a good one for activist investors. A recent survey conducted by Schulte Roth and Mergermarket found that respondents expected shareholder activism to increase over the next 12 months.
That sort of activism stands to benefit operational activists as well as those who focus more on the balance sheet end of the spectrum.
Still, some analysts think that operational activists have a more sustainable model than hedge funds that agitate for change but are less inclined to go beyond financial engineering.
“Companies are getting more and more sophisticated about how to deal with activists, and so the number of sitting ducks is decreasing,’ said Michael Armstrong, an analyst at Monitor Group who studies activist investors. “If you really are going to create value going forward, you have to find a way of creating value above and beyond just agitating for change.”
That’s not to say that the more conventional activists won’t do well for themselves, and potentially for shareholders.
“There is fair amount of research that suggests the existence of a large, knowledgeable shareholder in the capital structure of the company has great benefits to smaller shareholders,” said William N. Goetzmann, professor of finance at Yale University School of Management. “Having an activist investor on your side by owning the same class of shares that you own — that’s a good thing.”

http://dealbook.nytimes.com/2010/12/20/for-activist-funds-a-long-term-approach-to-investing/?partner=rss&emc=rss

Rediscovering the art of selling

Even after researching products on their own, many customers enter stores undecided about what to buy. For retailers, that’s an opportunity to improve off-line sales in an increasingly multichannel world.

Retailers as far back as the legendary pioneer Marshall Field once focused intensely on clinching sales once customers walked into stores. But recently, the industry has been missing opportunities to make sales. New technologies, extensive retailer Web sites, mobile-shopping tools, and in-store Internet kiosks have separated customers from sales associates. Content to let consumers research products independently, many retailers have been reducing in-store sales staff and eliminating commission-based models. This approach has resulted in lower costs, but it has also reduced incentives for those left on the floor to make sales.
Many retailers assume that customers walk into stores for purely transactional purposes: they know what they want and just need to buy it. Yet McKinsey research indicates that as many as 40 percent of customers remain open to persuasion once they enter a store,¹ despite undertaking extensive product research, reading online reviews, and comparing prices on their own. Retailers that fail to have knowledgeable staff on hand to help customers make decisions, or even to create arresting in-store visual marketing materials, are losing sale after potential sale. More than ever, retailers need a sales-driven mind-set focused on having the right number of sales staff; ensuring those staff are knowledgeable, well-trained, and motivated to sell; and providing the right in-store experience for customers.

Bolstering the sales staff

Many retail executives argue they can’t afford to provide high-value sales help. Simple arithmetic suggests they can’t afford not to. It’s true that adding frontline staff that can sell effectively is costly and takes time, and we’re not suggesting a return to an old-fashioned, expensive, labor-intensive sales system. But there’s a powerful and straightforward business case for investing in frontline sales staff: when done correctly, adding salespeople offers one of the more attractive payback opportunities in retail.
Consider the case of home electronics sold through discount stores—the ultimate self-help format, where consumers typically undertake product comparisons independently before ultimately going to a store to make a purchase. With an average selling price of $200 and an average gross margin of 10 percent, or $20 per sale, the cost of hiring a good salesperson is recouped by selling just one additional product per hour on the floor. When the profit margin from up-selling or cross-selling accessories is added, just one additional sale every two hours is needed. At one self-help apparel company, for example, providing extra sales assistance during select hours increased the conversion rate by 1.5 to 2 times, driving fitting-room use 37 percent higher and recouping the cost of the extra human help within an average of 10 to 15 minutes during normal selling hours.

Building the right frontline sales force

Watch skilled salespeople at work and you soon realize that while selling is an art that can be approached in a variety of ways, it boils down to four basic steps: open, ask for needs, demonstrate, and close. Surprisingly few frontline sales associates know these steps well, and fewer do all four consistently. At one retailer, for example, we found that associates failed to ask to close the sale 86 percent of the time. Having staff that understand and enjoy the sales process is paramount, and that means attracting the right employees, training them effectively, and rewarding them appropriately.
Effective sellers share common traits: they are motivated by helping customers, have extroverted personalities, and are passionate about their work. Our research indicates that, at most, 45 percent of frontline employees across multiple retailing sectors have the personality and attributes to be effective sellers (for examples of right and wrong behaviors in frontline sales, see the interactive, “Secrets of making the sale”).² Retailers need to redesign the way they hire and deploy staff into selling roles to attract employees with the personality and attributes required to succeed. In addition, we found that few retailers provide training with the specificity and quality to effectively support sales associates in their mission to sell more. That leaves even natural salespeople often unable to answer basic questions about their products from potential customers who are increasingly informed (in some categories, more than 75 percent appear in the store having done extensive independent research).

Improving the in-store experience

Better visual merchandising can make a big difference in helping consumers make certain buying decisions, accelerating the payback on frontline staff. Consider one self-help retailer that simplified its point-of-sale signage for digital cameras to make comparing products easier for both consumers and sales staff. Rather than using technological jargon such as megapixels and zoom sizes, the retailer instead used “photo-enlargement sizes” and “distance to picture object.” Memory cards emphasized the number of photographs a card could hold, rather than describing them in gigabytes. Because sales staff could use the visual displays as a way to sell products to customers without having to memorize technical details, they were more confident and achieved more sales per hour.
Examining the way consumers make decisions also makes a difference. At one leading personal-bath-care chain, for example, executives realized that people preferred to shop by “scent” rather than “function”—they preferred all vanilla products in one area, rather than all shampoos in one area and all soaps in another. Reorganizing the entire merchandising layout from a function-based to a scent-based display resulted in increased category sales, as customers bought multiple products with the same scent, rather than just one. It was a simple but effective change reflecting how consumers actually shop. Paying attention to these kinds of customer behaviors remains invaluable, despite the unprecedented access to product information, reviews, and prices that consumers have online.

https://www.mckinseyquarterly.com/Organization/Strategic_Organization/Rediscovering_the_art_of_selling_2677

 

How the growth of emerging markets will strain global finance

Surging demand for capital, led by developing economies, could put upward pressure on interest rates and crowd out some investment.

Short-term doldrums aside

, the world’s corporations would seem to be in a strong position to grow as the global economy recovers. They enjoy healthy cash balances, with $3.8 trillion in cash holdings at the end of 2009, and they have access to cheap capital, with real long-term interest rates languishing near 1.5 percent. Indeed, as developing economies continue to pick up the pace of urbanization, the prognosis for companies that can tap into that growth over the next decade looks promising.
Yet all those new roads, ports, water and power systems, and other kinds of public infrastructure—and the many companies building new plants and buying machinery—may put unexpected strains on the global financial system. The McKinsey Global Institute’s (MGI) recent analysis finds that by 2030, the world’s supply of capital—that is, its willingness to save—will fall short of its demand for capital, or the desired level of investment needed to finance all those projects.1 Indeed, household saving rates have generally declined in mature economies for nearly three decades, and an aging population seems unlikely to reverse that trend. China’s efforts to rebalance its economy toward increased consumption will reduce global saving as well.
The gap between the world’s supply of, and demand for, capital to invest could put upward pressure on real interest rates, crowd out some investment, and potentially act as a drag on growth. Moreover, as patterns of global saving and investment shift, capital flows between countries will likely change course, requiring new channels of financial intermediation and policy intervention. These findings have important implications for business executives, investors, government policy makers, and financial institutions alike.

Surging demand for capital

Several economic periods in history have required massive investment in physical assets such as infrastructure, factories, and housing.2 These eras include the industrial revolution and the post–World War II reconstruction of Europe and Japan. We are now at the beginning of another investment boom, this time fueled by rapid growth in emerging markets.
Across Africa, Asia, and Latin America, the demand for new homes, transport systems, water systems, factories, offices, hospitals, schools, and shopping centers has already caused investment to jump. The global investment rate increased from a recent low of 20.8 percent of GDP in 2002 to 23.7 percent in 2008 but then dipped again during the global recession of 2009. The increase from 2002 through 2008 resulted primarily from the very high investment rates in China and India but reflected higher rates in other emerging markets as well. Considering the very low levels of physical-capital stock these economies have accumulated, our analysis suggests that high investment rates could continue for decades.
In several scenarios of economic growth, we project that global investment demand could exceed 25 percent of GDP by 2030. To support growth in line with the forecasters’ consensus, global investment will amount to $24 trillion in 2030, compared with about $11 trillion in 20083 (Exhibit 1). When we examine alternative growth scenarios, we find that investment will still increase from current levels, though less so in the event of slower global GDP growth.

The mix of global investment will shift as emerging-market economies grow. When mature economies invest, they are largely upgrading their capital stock: factories replace old machinery with more efficient equipment, and people make home improvements. But the coming investment boom will involve relatively more investment in infrastructure and residential real estate. Consider the fact that emerging economies already invest in infrastructure at a rate more than two times higher than that of mature economies (5.7 percent of GDP versus 2.8 percent, respectively, in 2008). The gap exists in all categories of infrastructure but is particularly large in transportation (for instance, roads, airports, and railways), followed by power and water systems. We project global investment demand of about $4 trillion in infrastructure and $5 trillion in residential real estate in 2030, if the global economy grows in line with the consensus of forecasters.

A decline in savings

The capital needed to finance this investment comes from the world’s savings. Over the three decades or so ending in 2002, the global saving rate (saving as a share of GDP) fell, driven mainly by a sharp decline in household saving in mature countries. The global rate has increased since then, from 20.5 percent of GDP in 2002 to 24 percent in 2008, as household saving rebounded in mature economies and many of the developing countries with the highest rates—particularly China—have come to account for a growing share of world GDP. Our analysis suggests, however, that the global saving rate is not likely to rise in the decades ahead, as a result of several structural shifts in the world economy.
First, China’s saving rate will probably decline as it rebalances its economy so that domestic consumption plays a greater role. In 2008, China surpassed the United States as the world’s largest saver, with the national saving rate reaching over 50 percent of GDP. But if China follows the historical experience of other countries, its saving rate will decline over time as the country grows richer, as happened in Japan, South Korea, Taiwan, and other economies (Exhibit 2). It is unclear when this process will begin, but already the country’s leaders have started to adopt policies that will increase consumption and reduce saving.4 If China succeeds at increasing consumption, it would reduce the 2030 global saving rate by around two percentage points compared with 2007 levels—or about $2 trillion less than China would have accumulated by 2030 at current rates.

Moreover, expenditures related to aging populations will increasingly reduce global saving. By 2030, the proportion of the population over the age of 60 will reach record levels around the world. The cost of providing health care, pensions, and other services will rise along with the ranks of the elderly. Recent research suggests that spending for the retired could increase by about 3.5 percentage points of global GDP by 2030.5 All of this additional consumption will lower global saving, either through larger government deficits or lower household and corporate saving.
Skeptics may point out that households in the United States and the United Kingdom have been saving at higher rates since the 2008 financial crisis, especially through paying down debt. In the United States, household saving rose to 6.6 percent of GDP in the second quarter of 2010, from 2.8 percent in the third quarter of 2005. In the United Kingdom, saving rose from 1.4 percent of GDP in 2007 to 4.5 percent in the first half of 2010. But even if these rates persist for two decades, they would increase the global saving rate by just one percentage point in 2030—not enough to offset the impact of increased consumption in China and of aging.
Together, these trends mean that if the consensus forecasts of GDP growth are borne out, the global supply of savings will be around 23 percent of GDP by 2030, falling short of global investment demand by $2.4 trillion. This gap could slow global GDP growth by around one percentage point a year. What’s more, sensitivity analysis of several scenarios suggests that a similar gap occurs even if China’s and India’s GDP growth slows, the world economy recovers more slowly than expected from the global financial crisis, or other plausible possibilities transpire, such as exchange-rate appreciation in emerging markets or significant global investment to combat and adapt to climate change (Exhibit 3).

Implications

Our analysis has important implications for both business leaders and policy makers. Businesses and investors will have to adapt to a new era in which capital costs are higher and emerging markets account for most of the world’s saving and investment. Governments will play a vital role in setting the rules and creating the conditions that could facilitate this transition.

Higher capital costs

Nominal and real interest rates are currently at 30-year lows, but both are likely to rise in coming years. If real long-term interest rates returned to their 40-year average, they would rise by about 150 basis points from the level seen in the autumn of 2010. The growing imbalance between the supply of savings and the demand for investment capital will be significant by 2020. However, real long-term rates—such as the real yield on a ten-year bond—could start rising even within the next five years as investors anticipate this structural shift. Furthermore, the move upward isn’t likely to be a one-time adjustment, since the projected gap between the demand for and the supply of capital widens continuously from 2020 through 2030.
Capital costs could easily go even higher. Real interest rates can also include a risk premium to compensate investors for the possibility that inflation might increase more than expected. History shows that real interest rates rise when investors worry about the possibility of unexpected spikes in inflation. Today, investors are beginning to anticipate higher inflation resulting from expansive monetary policies that major governments have pursued.
Finally, as the recent crisis demonstrated, short-term capital isn’t always available in a capital-constrained world. Companies should seek more stable (though also more expensive) sources of funding, reversing the trend toward the increasing use of short-term debt over the past two decades. The portion of all debt issued for maturities of less than one year rose from 23 percent in the first half of the 1990s to 47 percent in the second half of the 2000s. Financing long-term corporate investments through short-term funding will be riskier in the new world, compared with financing through equity and longer-term funding. To better align incentives, boards should revisit some of their inadvertent debt-oriented biases, such as using earnings per share (EPS) as a performance metric.

Changing business models

If capital costs increase, companies with higher capital productivity—greater output per dollar invested—will enjoy more strategic flexibility because they require less capital to finance their growth. Companies with direct and privileged sources of financing will also have a clear competitive advantage. Traditionally, this approach meant nurturing relationships with major financial institutions in financial hubs such as London, New York, and Tokyo. In the future, it might also mean building ties with additional sources of capital, such as sovereign-wealth funds, pension funds, and other financial institutions from countries with high saving rates.
Moreover, for companies whose business models rely on cheap capital, an increase in real long-term interest rates would significantly reduce their profitability, if not undermine their operations. The financing and leasing arms of consumer-durables companies, for example, would find it increasingly difficult to achieve the high returns of the recent past as the cost of funding increases. Companies whose sales depend on easily available consumer credit would find growth harder to achieve.

Shifting investor strategies

Investors will want to rethink some of their strategies as real long-term interest rates rise. In the short term, any increase in interest rates will mean losses for current bondholders. But over the longer term, higher real rates will enable investors to earn better returns from fixed-income investments than they have in the years of cheap capital. This change could shift some investment portfolios back to traditional fixed-income instruments and deposits and away from equities and alternative investments.
For pension funds, insurers, endowments, and other institutional investors with multidecade liabilities, the world’s growing infrastructure investment could be an attractive opportunity. Many of these institutions, however, will need to improve their governance and incentive structures, reducing pressure to meet quarterly or annual performance benchmarks based on mark-to-market accounting and allowing managers to focus on longer-term returns. This change would be required as institutions come to manage portfolios with a growing proportion of less liquid, long-term investments, since volatility in market prices may reflect market liquidity conditions rather than an investment’s intrinsic, long-term value.6
Emerging markets, though they may present attractive opportunities, also pose many risks and complexities, and returns could vary significantly across countries. As incomes in emerging markets rise and capital markets develop, nonfinancial businesses can expect healthy growth from investing in both physical and financial assets. Returns to financial investors are less certain, however, particularly in countries with low returns on capital or savings trapped in domestic markets by capital controls or a “home bias” among domestic savers and investors.7 These countries will remain susceptible to bubbles in equity, real-estate, and other asset markets, with valuations exceeding intrinsic levels. Foreign investors will need to assess valuations carefully before committing their capital. They will also have to take a long-term perspective, since volatility in these bubble-prone markets may remain higher than it is in the developed world.

A call for government action

Governments will need to encourage the flow of capital from the world’s savers to places where it can be invested in productive ways while minimizing the risks inherent in closely intertwined global capital markets. Governments in countries with mature markets should encourage more saving and domestic investment, rebalancing their economies so they depend less on consumption to fuel growth. Policy makers in these countries, particularly the United Kingdom and the United States, should start by putting in place mechanisms to sustain recent increases in household saving. They could, for instance, implement policies that encourage workers to increase their contributions to saving plans, enroll in pension plans, and work longer than the current retirement age. Further, governments can themselves contribute to gross national savings by cutting expenditures.
To replace consumption as an engine of economic growth, governments in these countries also should adopt measures aimed at boosting domestic investment. They could, for example, provide accelerated tax depreciation for corporations, as well as greater clarity on carbon pricing—the current uncertainty is holding back clean-tech investment. They should also address their own infrastructure-investment backlog, although this could require them to revise government accounting methods that treat investment and consumption in the same way.
In emerging economies, governments should promote the continued development of deep and stable financial markets that can effectively gather national savings and channel funds to the most productive investments. Today, the financial systems in emerging markets generally have a limited capacity to allocate savings to users of capital. We see this in these countries’ low level of financial depth—or the value of domestic equities, bonds, and bank deposits as a percentage of GDP.8 Policy makers should also create incentives to extend banking and other financial services to the entire population.
At the same time, policy makers around the world should create the conditions to promote long-term funding and avoid financial-protectionist measures that obstruct the flow of capital. This will require removing constraints on cross-border investing, whether through restrictions on pension funds and other investors or on capital accounts. Policy makers must also create the governance and incentives that enable managers of investment funds with long-term liabilities, such as pension funds, insurance companies, and sovereign-wealth funds, to focus on long-term returns and not on quarterly results that reflect market movements and can deviate from long-term valuations.
At this writing, global investment already appears to be rebounding from the 2009 recession. The outlook for global saving is less certain. A climate of costlier credit will test the entire global economy and could dampen future growth. The challenge for leaders will be to address the current economic malaise and simultaneously create the conditions for robust long-term growth for years to come.

https://www.mckinseyquarterly.com/Corporate_Finance/Capital_Management/How_the_growth_of_emerging_markets_will_strain_global_finance_2715?gp=1

http://i-connectx.net/node/185

Why It's Better to Be Smart and Wrong than Just Silent

I'm always amazed when I hear about smart, talented people going to their supervisors to ask for guidance using phrases like, "What do you think I should do?" Or, "How should I...?"
Let's assume that you've gotten to where you are in life precisely because you're smart, well-educated and have considerable experience in your field. Or, you're young, ambitious and a good problem-solver. Either way, the question, "How should I ____?" should never leave your lips.
As a young professional or junior executive, it's not crazy to think you won't know what to do all of the time. Having limited or bad information is a reality many of us face on a regular basis. What we do in that situation, however, is up to us.
When you're not sure what to do or how to proceed, don't start with a blank slate and ask for help. Instead, start with what you do know, state your intended direction (and rationale behind it) and then get the buy-in or feedback of your manager. I've suggested this before, but here's an example of how it could work:
Meet Jonathan, a young analyst at an accounting firm. Jonathan was working on building out financial projections for a start-up business and he was stumped. Jonathan didn't have good information for making revenue growth or profit margin assumptions. It would be easy for Jonathan to get frustrated and just call up his boss and ask him what to do.
But if I'm Jonathan's boss, I don't want to do the legwork for him to figure out what he should do. I want him to come to me with an opinion. I want him to put a stake in the ground and give me an idea of what he thinks he should do. I want him to lay out his argument for or against going in a certain direction or using a certain set of assumptions, and then get my feedback or opinion on whether that's the right course of action.
Let's say Jonathan comes to me and says:

I want to talk to you about the financial projections for the Zeller project. There isn't much information available from Zeller to help us build out revenue growth rates and profit margins. However, I've looked at some comparable companies, and I think a revenue growth rate of 4% a year is reasonable and a profit margin of 25% is a good ballpark number, and I think we should go with that. How does that sound to you?

If Jonathan is right and I agree with him, he's just showed me how smart he is.
If I disagree with him, he's still done himself a favor by demonstrating his thought process and making his opinion heard.
Here's what I might say:

Actually, Jonathan, I think 4% is probably low. Based on the company's product development efforts, I think you should assume a more aggressive growth rate of about 7% and hold margins constant at 22%.

How does Jonathan sound now? Does he sound dumb because I disagreed with him? He doesn't. Jonathan's analysis turned out to be wrong, but at least it had merit — it was well thought-out and based on research.
Even though I didn't agree with Jonathan, at least I knew he put some thought into the problem. His suggestion also likely made it easier for me to respond and give advice. I didn't have to run the initial numbers myself; I could simply integrate the additional information I had at my disposal to come up with a better answer. In effect, he helped me get part way towards the right answer.
Contrast this conversation with the one is which Jonathan comes to me and says:

I need some help with the Zeller financial projections. There's limited information available and I don't know what assumptions to use for revenue growth rates and profit margins.

What can I possibly think of Jonathan in this conversation? Is he smart? I have no idea. Is he lazy? Maybe. Is he a good problem solver? Your guess is as good as mine.
I'd take the guy whose wrong any day over the one who comes to me with nothing at all and asks me to do his work for him. So don't keep quiet. Put yourself out there. Think through your issue, come up with some thoughts or ideas around what to do and then put a stake in the ground. Being wrong isn't terrible. Being passive is.