The value of thin air

Well, perhaps not so thin. Procter and Gamble has turned Febreze into a $1billion a year brand, no small feat if we consider that we are talking about, well, air fresheners. But what Febreze has developed is a product for (almost) every situation, increasing not only the number of users but the number of opportunities for use by each individual.

The runaway Prius and Sandra Bullock’s Oscar

I have to confess I did not watch the Oscars last Sunday, but I have read that Sandra Bullock won an Oscar for best actress for her work in “The Blind Side”.  I bet managers at Toyota wish they could be spending their time watching the Oscars and movies, instead of worrying about runaway Priuses, stuck accelerator pedals and floormats.  But the parallel between Toyota and Sandra Bullock goes deeper than that.  Surprised?  Let me explain.  Last Saturday, the night before the scars,  Sandra Bullock was awarded a Razzie Award for worst actress for her acting in “All About Steve”.  Best and worst?  Yes, Sandra Bullock is a great actress but she can deliver really bad performances.  Just like Toyota.  Some consumers (and analysts) used to worship the brand, just like many consumers (and analysts) demonize it now.  In every company there are periods when products and services do not meet expectations, but most important is what they do about it over the long run.  Do they learn from those mistakes to become an even better, more competitive, more open organization?  Do they bury their head in the sand and hope for the bad times to pass or do they face their problems head on and take advantage of them to steal a march on their competitors?  Sandra Bullock seems to understand that.  Does Toyota?

And for the sake of disclosure, at the time of writing this posting I do own Toyota stock (but not a Toyota car)

PIIGS

Portugal, Ireland, Italy, Greece, Spain.  PIIGS.  Not the nicest of acronyms, but it does not reflect something nice.  These are the countries within the European Union and the Euro Zone with the weakest public finances.  Risk default spreads for these countries’ debt has shot up lately, reflecting the perception in the markets that the situation of their public finances, with double digit budget decificts, is unsustainable.  This perception is a bit of a puzzle.  Budget decicits are also well into the double digits in other countries, notably the US and the UK.  And accumulated goverment debt is still within reasonable levels, with the exception of Italy.  So what is the difference?  I do not know.  And that is the key.  We do not know that the numbers reflect the reality of their finances.  We do know that at least in Italy they do not and in Greece they do not come even close.  With the possible exception of Ireland, none of them has a government able and willing to reign in their budgetary excesses or unleash the productivity potential of their economies.  And the European Eunion (and the European Central Bank) could not and (should not) come to their rescue, although in case of trouble they willprobably try, making the situation even worse.  In any case, what do I know?

Obama and the jacket

Well, it seems now we know the brand of the jacket President Obama was wearing when he visited the Great Wall of China in November (http://www.nytimes.com/2010/01/07/business/media/07garment.html?hpw).  It was a mystery that had the country, the world in suspense looking for an answer.  Right?  Hmmmm…no, not really.  I do not think many people ever noticed anything special about his jacket.  Except the Weatherproof Garment Company, that is.  And now they are using a picture of the presidential jacket (with presidential filling) in their advertising.  A smart move?  Or the dumbest ever?  This is one of those cases fun to analyze using game theory.  Now that the ads are out there, the White house can do one of two things: either not respond (or respond mildly or with an injunction to remove the ads, in which case Weatherproof would get phenomenal publicity even after retiring the ads), or crush the company (despite all the publicity) and damage the presidential image (with and without jacket) in an election year.  The best reaction for the White House, therefore, is to react in a measured way, and as a consequence posting the ads was a smart move for Weatherproof.  Unless…

The previous analysis assumes a one-shot game.  But this is not a one shot game.  It might be for Weatherproof (it is unlikely we will see the president wearing their jackets again), but the White House may have to deal with similar incidents in the future, and creating a reputation for passivity would encourage them.  To avoid creating that reputation, the White House would have to lash out and make sure there is a perception that tactics like Weatheproof’s carry negative consequences.  Maybe Weatherproof’s move was not that smart after all…

China-ASEAN Free Trade Agreement

The largest free trade agreements in terms of trade values are the European Union and NAFTA, but a China-ASEAN FTA would be the largest in terms of people affected (close to two billion people) and third in value terms.  Furthermore, it would make life easier for companies (especially western and Japanese) with long supply chains extending into several countries in south east Asia, in addition to China.  This regional approach to free trade always brings back the old question of whether bilateral and regional trade agreements are a stepping stone towards global trade liberalization or a stumbling block, creating relatively small networks of countries freeing up trade inside themselves but erecting barriers against outsiders (or not bothering to lower them, which would be similarly damaging).  Or put another way, will something meaningful some out of the Doha round of negotiations at the WTO?

A BEGINNING

This is the start of a new blog (like we didn’t have enough).  In it I will publish my thoughts on business, and especially global business, as they happen.  If you enjoy what you read, please let me know.  If you don’t, please let me know too, we learn more from disagreement than from a greement.  And if it gets someone thinking, I will consider this blog a success.