My Views on Business and Technology: Consumer Spending - Are we looking at the right consumer?

My Views on Business and Technology: Consumer Spending - Are we looking at the right consumer?

Today in WSJ : Drug Firms See Poorer Nations as Sales Cure

Finally, it looks like atleast drug companies are starting look into emerging markets alias poorer nations to boost sales. Very pertinent to the view I expressed in my earlier blog post on who is the consumer?

Click on this link for WSJ Article : "Drug Firms See Poorer Nations as Sales Cure"

Thanks
Nagesh
The views represented in this blog are my personal views and are not a "reflection of" or "Opinions of" any of the institutions I am associated with or have worked for

IT Hardware (Servers, Mainframes, Storage) - who is the future buyer ?

My Views on Business and Technology: IT Hardware (Servers, Mainframes, Storage) - who is the future buyer ?

Couple of months ago, I had posted a blog entry who is the Buyer of IT Hardware - The link is posted above. Additionally I had commented on "Cloud Computing - What is so disruptive about it?"

Today, a colleague of mine shared the following post on Yahoo!Finance titled "The Cloud Computing Disruption". If you had read my previous posting on these subjects and still had lingering questions, please read the following post. It may help you reach some conclusions that I came to months ago.

http://finance.yahoo.com/news/The-Cloud-Computing-ms-4217976398.html?x=0&.v=1

If you have any feed back please respond by posting a comment, I will appreciate it and respond back with my opinion.

Thanks for reading.

Thanks
Nagesh
The views represented in this blog are my personal views and are not a reflection of or opinions of any of the institutions I am associated with or have worked for.

Consumer Spending - Are we looking at the right consumer?

Recently there have been many reports on weak outlook for global economy. Additionally, concerns have been raised on "Lack of Consumer Spending" and that the better report on "Unemployment Claims" is kind of misleading, as this could due to folks losing umemployment benefits after 26 weeks rather than actually folks finding a job.

No matter how we look at it - It does not look like the fundamentals are improving and the reason why the market is way higher than 52 week lows is probably driven by factors like increased government spending (stimulus) or the fact investors sitting on sidelines are feeling a sense of lost opportunity and moving into the market.

Whatever is the cause, whether we feel we are on the right track or we are faltering, I think caution rather than exuberance is probably the right recipe for the current situation.

Having said that, Lets now get back to the question, I actually wanted to answer today:- Consumer Spending - Are we looking at the right consumer?

This question made sense to me as I was on vacation to India for the last few weeks, just looking around it is obvious, and there are very few signs of a slowdown. It is just amazing to see the investments into infrastructure, new retail malls and outlets. Looks like everyone around you is an entrepreneur and is confident of making it big.

However when you look at the products that are in your face (either Billboards or when you walk into a retail outlet or what people are buying:

Consumer Electronics: you find Samsung / Sony and other non brands made in Korea or China Durables goods: you find LG
Communication (Cell Phones): you find Nokia
Automobiles (Cars and Bikes): you find Honda/Yamaha / Suzuki Bikes; Suzuki, Toyota, Tata Cars
Soft Drinks (hot country): you find Coke / Pepsi and lot bottled water and fresh fruit juices
Shoes: you find Bata / Nike

What is concerning in this picture is the obvious lack of focus by American Companies in markets where there is real money being spent. Except for in Soft Drinks, Bottled Water and Shoe Segments, it is hard to find find real American Products. We are starting to see some cars from Big Three but really, should they not be aggressive? As a very good friend of mine suggested - "Maybe American Companies no longer make what consumer buy, they own the IP or make what is inside these consumer products". There may be some truth to that but I am not sure that is the answer.

My Take:

It is time for American and other global companies to start focusing on where the consumers are still spending rather wait for the American Consumer to start spending. Historically, these emerging markets posed a challenge for cutting edge consumer products, in terms of

1.) Pricing: Inability to extract high margins on leading edge products, spending on older versions was not worth it. Hence very little focus on emerging markets

2.) Size of Market: Though the population is huge, the segment of population that could actually afford these products was low due to low wages. May be it is time to re-look whether this is really true?

3.) Complex: Rules/Regulations and other government functions were more of a hindrance to business than friendly? May be it is time to look at how the Asian and European Competitors are cracking the code?

3.) Technology: The specification for the Markets (Infrastructure, Temperature, Energy, Roads etc. ) pose significant barrier that will need R&D and adaptation ? Probably time to revisit the assumptions, As they may not hold good any more.

4.) Supply Chain Management: Historically, it may have been impossible to manage global supply chain for rapid global releases. However, Reduced Product Life Cycles are a reality today nobody wants version n-1 consumer products. Hollywood has figured it out, so have the Asians and Europeans, so shouldn't the most technologically advanced society figure it out?

5.) Language/Culture Barriers: There may be a perception that dealing with countries like india is like dealing with many countries and many regulations. This may still be true to certain extent but is it really that bad?

In summary, it is necessary for any global company, American or not, to really look at what was the reason not to aggresively focus on Markets like India and re-evaluate validity of their assumptions. If they don't, they risk losing out attracting one of the worlds largest customer base and relegate themselves to irrelevance.

Lastly, over the last decade or couple of decades, I feel the American Consumer has done his fair share of spending to keep the world economy growing, it is now time to for the American Consumer to Save and for global companies to focus selling in markets beyond America to be successful !

Your feedback is appreciated. Please feel free to respond by posting a comment and I will respond if I can. Thank you for reading

Thanks
Nagesh
The views represented in this blog are my personal views and are not a reflection of or opinions of any of the institutions I am associated with or have worked for

Equating Outsourcing to Losing Jobs - Is that Right?

My Views on Business and Technology: Equating Outsourcing to Losing Jobs - Is that Right?

University of Texas professor James Galbraith, makes references to Jobs and Productivity in this inteview on Yahoo!Finance. Since I made reference to Productivity in my previous post. I felt it was a relevant to listen so posting the link to my blog.

The Link to News: http://finance.yahoo.com/tech-ticker/article/252247/"In-Every-Way-a-Good-Thing"-Upside-of-Soaring-Federal-Budget-Deficits?tickers=%5EDJI,%5EGSPC,SPY,DIA,TLT,TBT,UDN?sec=topStories&pos=9&asset=&ccode=

Thanks
Nagesh
The views represented in this blog are my personal views and are not a reflection of or opinions of any of the institutions I am associated with or have worked for

"Wake Up - If you did not already know you should"

My Views on Business and Technology: "Wake Up - If you did not already know you should"


Jim Collins in the Business Week article this month on his latest book "HOW THE MIGHTY FALL AND WHY SOME COMPANIES NEVER GIVE IN" stated that it started with the Question - "Is America renewing its greatness, or is America dangerously on the cusp of falling from great to good?"


For any one, who read my inital post on this subject, this BusinessWeek article and video link in the article provides insight that is very thought provoking whether you look at it from National Perspective, Enterprise Perspective or and Individual Perspective.


Relevant Link - Business Week Article : http://www.businessweek.com/magazine/content/09_21/b4132026786379.htm?campaign_id=rss_daily



Thanks

Nagesh

The views represented in this blog are my personal views and are not a reflection of or opinions of any of the institutions I am associated with or have worked for

My Views on Business and Technology: Equating Outsourcing to Losing Jobs - Is that Right?

My Views on Business and Technology: Equating Outsourcing to Losing Jobs - Is that Right?

Some additional Reference Posts that I read after I published the previous post, and felt they help us understand and refine perceptions further on the above post

1. How the Mighty Fall and How to Stay on Top - Jim Collins in Business Week. Book Review
2. The 2009 Global Outsourcing, Special AdSection - Fortune 500 Magazine (May, 2009)
3. HUGE PROBLEMS AHEAD by Sandy Leeds
4. Trying to Curb the Wrong Compensation by Sandy Leeds

Thanks
Nagesh
The views represented in this blog are my personal views and are not a reflection of or opinions of any of the institutions I am associated with or have worked for

Equating Outsourcing to Losing Jobs - Is that Right?

This recent article in yahoo finance/business week goes to the extent of equating "Outsourcing" to Losing Jobs for American's http://finance.yahoo.com/career-work/article/107048/Where-Your-Job-Could-Be-Outsourced and some addtional comments by Administration regarding encouraging protectionism really got me concerned and thinking.

I do not get the connection between the statements, articles and the outcomes being discussed, so figured it is a topic that I wanted to research and take an a position on my blog

My First Stop : Definition of Outsourcing in wikipedia

"Outsourcing is subcontracting a process, such as product design or manufacturing, to a third-party company.[1] The decision to outsource is often made in the interest of lowering cost or making better use of time and energy costs, redirecting or conserving energy directed at the competencies of a particular business, or to make more efficient use of land, labor, capital, (information) technology and resources[citation needed]. Outsourcing became part of the business lexicon during the 1980s. It is essentially a division of labour."

Analysis of definition clearly shows no mention of moving jobs to other countries just for moving jobs or because some one loves Bangalore, India or Buenos Aires, Argentina vs. creating the same function New York, US. It however is very clear that outsourcing is driven by business to

• redirect energies to core competencies
• make more efficient use of land, labor, capital, technology and resources

These drivers make perfect sense to me - not sure why all of a sudden there is so much negativity about outsourcing. The fact is - what is non-core to one business is core to some else's business. If every business is focussed on improving its core then we should get closer the ideal Macro Economic goals of "Profit Maximization".

Theoretically, this sounds good but then why is it that off late, outsourcing is getting more defined as moving jobs to countries India, China, Russia, Brazil, Poland from US or Europe, referred also as "offshoring"

My Take#

1. We are failing to recognize the rate of change has accelerated dramatically. Which implies, As we have moved from farming to manufacturing to service to now knowledge based economy, the time it takes innovations to disperse across the globally connected economies is faster then ever before. This puts pressure on rate of innovation expected from the underlying economy to sustain growth and prosperity. if you still are unconvinced see this video - http://www.youtube.com/watch?v=cL9Wu2kWwSY


2. Assuming Quality of life in US and other modern western economies is at least 3x better then third world countries. If that is true of Bangalore, India and New York, Businesses should expect value of at least 3x more for having the same job function in New York vs. having it performed in Bangalore, India. (Note - I am saying value not just labor cost ... ). If not businesses will be overpaying which is not good and not sustainable in the long run.

So what am i really saying ... we have some basic choices which we can make

1. Choice 1: Unlike the past, where innovation led to jobs that led to jobs that lasted 20 years, 10 year or 5 years now thanks to technology they cannot lock-in the productivity gains for those long periods. So we have to innovate / change continuously that creates value. Implication -> Encourage entrepreneurship more than ever before and do not raise barriers


2. Choice 2: We have start getting used to lower standards of living - (loss of jobs or reduction in salaries), reduce spending or sacrifice benefits we have become used to taking for granted so that business do not find value in moving jobs off-shore. Implication -> Lot smaller economy that will need to support the growing population.


3. Choice 3: Raise barriers for business to be global using government controls or extend subsidies to businesses by borrowing. Implication -> This is not sustainable as business are like water, they will eventually find a better home or dry up (belly up) when the government cannot sustain the subsidies or controls.

So far – Businesses seem to be focused more on Choice 2 and Government on Choice 3 rather than collectively focusing Choice 1. This is a scary trend, we should figure out a way for businesses, citizens and government to focus on Choice 1. We know this can be done. To prove it, we need to look no further into history then leaders like Henry Ford, who increased wages (sharing profits) at the same time setting goals (innovation) to reduce the price of car so that all employees (increase sales) can afford a car - improving quality of life of everyone.

Thanks

Nagesh

The views represented in this blog are my personal views and are not a reflection of or opinions of any of the institutions I am associated with or have worked for.