Saturday, December 16, 2017

How to Break Corporate Silos

Silos can limit cross-functional decision making and allow inefficiencies to creep in. Silos occur when departments don't communicate well with each other limiting their overall ability to function as a single business entity. The more barriers that are created, typically the more inefficient the business. At the core issue of silo creation is often the leadership team and their desire to create their own fiefdoms.

It is natural that as people rise in position they seek more control and additional opportunities to choose their own courses of actions. The department becomes an extension of its senior management. If the wrong tone and culture arises it can limit the interaction between the departments.

Limited information sharing leads to decisions within isolation. That means decisions won't be well thought out or take into consideration the skills, needs and abilities of other departments. The organization slowly looses its ability to compete against others that have more efficient operations and ability to share information and resources.

This is something that can be fixed but it takes some thoughtfulness by key leaders. Each company has their own unique challenges and will have to cater their turnaround efforts based on the uniqueness of the entity and the characteristics of their market.

1. Create cross-departmental teams: Teams from different departments will help ensure that core decisions such as product lines and general operations take into account other departments and the needs of the entire organization.

2. 360 Performance Appraisals: Cross department 360 performance appraisals for managers encourages them to work with other departments and be accountable to each other.

3. Total Management Compensation Packages: Part of key executive management should be based on how the entire company operates. Bonuses that are associated with the organizations health help them understand the need to take care of the entire organization.

4. Shake up the Core Team: Get rid of silo executives that refuse to work with others and find replacements that are more collaborative in nature.

5. Culture: Encourage and reward behaviors that work with others. Create an empowered egalitarian environment.

6. Revamp Processes: Revamp processes so that approvals of other departments that are impacted are needed. Make sure that processes make connections between departments.

7. Information Networks and Corporate Communication: Disseminate information to others and create communication networks based on cross-department needs.

Monday, December 11, 2017

Creating an Export Oriented Cluster

Export environments have characteristics that set them apart from other locations. To move products out of an area and to allow for resources needed for manufacturing to come in it will require infrastructure that moves resources as efficiently as possible. Infrastructure reduces costs for companies and helps to attract more manufacturing as clusters develops. The proper infrastructure, attracting new industries to create cluster growth, encouraging companies that produce products, and serving those products leads to creating a stronger export environment.

Export Infrastructure: Roads, Internet, ports, rails, highways, and electrical grid all contribute to the ability to exports. Products must move quickly and efficiently to export locations and sent overseas. Any delays or bottlenecks in these systems are seen as time and money wasting for industries. When companies evaluate an area they will seek understanding of the infrastructure and how it contributes to their profit margins.

Attracting Industries into Clusters: Cities will need to actively seek out investment by international and domestic companies that are producing goods for the global market. Some of this cluster growth is through brand awareness of the city's benefits, infrastructure improvements and environmental/tax structures.

Export Oriented Manufacturing: Industries should be export oriented to dominate the global market. American businesses should be able to products with higher quality and progressive pricing in order to dominate the market. While domestic producing companies are highly beneficial an export orientation will need to move these products overseas.

Enhancing value through Global Service: Raising value of products also means providing the service quality of a demanding customer from a global perspective. Returns, questions, concerns, and protections are part of raising products value. American businesses that work in a global market will need to support their products so that the "guarantee"' of their quality is high.

Thursday, October 12, 2017

International Supply Chain Management Positions

The world economy consists of millions of large and small networks that span from one country to the next. Ports-of entry and exit are key determinants of product flow and economic strength. The same process works in reverse for ports-of-exit. The strength of a nation's supply networks, and its position within the global supply chain, helps determine its ability to growth economically through the movement of products and goods.

Ports, railroads, airports, and highways influence economic growth potential as products find their way in and out of the country through the most efficient and cost effective pathways they can. Connectivity in the world-system increases spatial polarization toward global cities in a way their favors economic activities (Friedmann, 1986). Better connections attract more traffic that in turn increases business opportunities.

Cities that have placed themselves strategically, or by good fortune were geographically located in an advantageous locations such as rivers and trade routes, have historically found themselves more wealthy and more cosmopolitan centers of innovation and development. The principles that have applied in the past continue to apply today in a way that influences the wealth and viability of nations.

Globally oriented cities think of their ports, airports, highways and railroads as an important pieces of the puzzle of becoming a global shipping center. Investment in these areas leads to greater economic growth when significant internal industrial and business networks have been fully developed. Networks reach to other major shipping networks and centers that connect international economies together.

Supplies and products come in, are converted to higher value goods, and shipped throughout the country. In reverse, raw goods and parts come from the region, are converted into a higher value products and shipped to overseas markets. The business ability of each city will determine what type and how much value they can create.

China found that after they invested in the development of their ports they also realized significant economic growth throughout the region (Song & Geenhuizen, 2014). These infrastructure investments had spill-had effects that reached into various areas of the country. Increased import and export activity opened new opportunities for regional businesses that further justified increased investments.

Think of the world as a round sphere of railroads, highways, shipping lanes, and air traffic routes.

Connecting a city to global networks does take some analysis. Such cities should have a solid manufacturing and technology base to improve and convert incoming and outgoing products. Investments in shipping infrastructure should be based on the needs of the international market and the capacity of the cities current position within existing global supply networks. Likewise, constant development of internal networks is necessary for value building for distribution to markets.

Friedmann, J. (1986) The world city hypothesis. Development and Change, 17 (1): 69–83.

Song, L. & Geenhuizen, M. (2014). Port infrastructure investment and regional economic growth in China: Panel evidence in port regions and... Transport Policy, 36

Wednesday, September 27, 2017

Using Online Strategies to Attract and Retain Customers

Online marketing can be difficult for businesses and knowing which strategies to use can be helpful in making an online presence. Ensuring you have the right strategies can make a big difference in your online success. There are marketing approaches that reach potential customers and there are strategies that retain them to the company. Employing both attracts and keeps customers for the highest potential sales volume.

Potential online marketing strategies (Kung & Zhang, 2011):

Segmentation-Select customers
Advertising Networks-Specialized marketing locations
Email Marketing-Using email to contact customers
Internet Marketing-Using online advertisements
Affiliate Marketing-Paying for referrals
Viral Marketing-Referrals, reposts, and reviews
Blog Marketing-Posting content on specific blogs
Social Network Marketing-Group and friend based purchases
Search Engine Networking-Top search ranking strategies

Customer Retention Strategies:

Website Functionality-Easy to use websites
Personalization and One-on-One Marketing-Catering the message
Customization and Customer Co-Creation-Changing to product to match customer needs
Customer Services- Handling customer issues.

Kung, M. & Zhang, Y. (2011). Creating Competitive Markets for Small Businesses with New Media and E-Business Strategy. International Journal of E-Business Research (IJEBR), 7 (4).

Monday, September 18, 2017

Export Patterns Through the Creative Destruction Process

Some companies are more likely to go global and make their way into a larger world of economic activity. An article in The Journal of International Trade & Economic Development Journal seeks to help us understand what the global landscape looks like (Hansen, et. al. 2015). From the study we find that there are a number of factors that help identify what export environments look like:

Market Equilibrium: To gain financial foot hold and be an established company often requires three product innovations. Once these are gained and finances meet production needs a company can consider moving to supplying the needs of the global economy.

Labor Equilibrium: When there is sufficient skill available in the market to build new products and feed production. Highly developed industries need an educated and skilled labor force that fill open positions and compete on a global scale.

Big and Little Innovators: Some companies will invest heavily into product innovations that lead to global exports and some companies will be focused on smaller innovations that are within their financial and personal expertise that contribute to overall knowledge.

When companies have the financial strength and access to the capital they need they are more likely to innovate. They will then need to match that innovation with the labor skills available to build the products. Some companies will do this better than others and will hit the global market stronger than others. The market environment will have big and little innovators.

Hansen, J. et. al. (2015). Creative destruction and export patterns. The Journal of International Trade & Economic Development, 24 (3).

Monday, September 4, 2017

The Stress of Innovation According to Schumpeter

People must continually update their skills or a large percentage of society will find themselves unemployed. Schumpeter believed that as innovation increase people's lives would be impacted by creating stresses that test our skills and abilities. Some will move to higher standards of living and some will lose their jobs and opportunities. He called these unpleasant actions vicissitudes as they inherently disrupted society and create chaos that eventually leads to a better life but can be a painful transition experience.

Sometimes people will be alienated and pushed to the side while at other times they will move to the center and be more connected.  Those who do not have the necessary skills to compete will feel angry and upset as their income and opportunities dwindle. They will begin to question the legitimacy of some institutions and demand change.

Schumpeter believed that government should encourage entrepreneurial activity to enhance their economies and arrest decline. While change occurs government also has the responsibility to push for greater education and training to meet market needs.  Without continuous change there is a slow decline in society. He so eloquently expresses the decline of people as....

"A] process of degeneration, of degradation of large circles (of society) accompanies the upward
movement … Large circles see their economic basis being pulled away. This does not happen
abruptly, but gradually. Through generations, the people affected live a deprived existence full of
hopelessness. Their moral and intellectual powers dwindle, the more so the more the economic
atmosphere they find themselves in is darkening. (Schumpeter, 1912 [2006], p. 503)"

As the pace of change increases so will the need to retrain and educated people. Global competitive skills will be sought through reformation of the higher education system and public school systems. Long-time educational institutions will need to adjust to meet market demands and needs or otherwise the nation will loose competitiveness and large swaths of society that doesn't have access to higher levels of education will be forced into poverty.

A system that continuously changes requires constant innovation based on opportunities full of individual choices and actions. Entrepreneurs will seek to push and adjust society and will succeed in materializing change when they challenge, establish, and defend their market power (Schumpeter, 1942, p. 105). The perpetual need to personal mastery of the market leads to constant risk taking and turmoil.

In the "Shumpeterian" approach it is necessary to help people catch up to the market by encouraging them to find new ways of competing in the market. While entrepreneurs will start new businesses it is the people and their skills that are needed to fill available positions. Markets that have high growth potential also have a skilled and educated work population that can take positions. Revamping our educational system from primary school all the way through college will help ensure that the classes most likely to be impacted by change can adjust to new market realities. Adults will need access to physical and online education in order to ensure continually training.

Schumpeter, J. A. 1912 [2006]. Theorie der Wirtschaftlichen Entwicklung, facsimile of the 1st edn,
Berlin, Duncker & Humblot

Schumpeter, J. A. 1942 [1976]. Capitalism, Socialism and Democracy, London, Routledge

Schubert, C. (2013). How to evaluate creative destruction: reconstructing Schumpeter's approach.
Cambridge Journal of Economics, 37 (2)

Monday, August 14, 2017

Applying the 4 P's of Marketing to Ebay and Amazon

EBay and Amazon are powerful online e-commerce sites that offer small businesses opportunities to reach out into bigger international markets. As much as 60% of all online sales originate from these two mammoth marketplaces and those business that are not online are most likely to flounder. Price, Product,  Promotion and  Place can be applied to these electronic realms.

As you work on creating your business model you will want to consider how these Ps apply to the online world. Evaluate your business to ensure you are working on each of these P's until you can find improvement. When all four are in the best possible place you have a viable business.

Price: Markespaces are highly competitive because people compare prices quickly. Many customers will instinctively pick the lower price 90% of the time but this isn't always the case. Balancing your price with quality and service to the optimal selling position is helpful.

Product: Because Amazon and Ebay have lots of sharks selling all types of things it can be difficult to find products to sell. Either sell something everyone wants or move into unique and niche products no one else offers.

Promotion: Promoting your product through sales, auctions, descriptions, pictures, and great titles can go a long way in converting people to purchasing your product. As your conversion rate goes up you will notice that accuracy in your information leads to higher customer satisfaction.

Place: Place refers to the place the product places on the marketspace site. If it has the "buy box" or it is ranked on the first page it has a great place. If it is ranked low one will need to improve on customer reviews, price, and overall sales volume.

Thursday, July 27, 2017

Narrowing America's Skills Gap

American jobs are partially filled by domestic hands as employers increasingly rely on immigrant labor and foreign operations to patch shortfalls and maintain  profit margins. The skills gap at U.S. businesses may become a hefty problem if not tackled prudently. Experts predict that by 2018 there will be an expected 46.8 million open jobs with 30 million of these jobs requiring post secondary education. The problem has become so pervasive there is a projected 3 million person deficit whereby 60% of employees won't have the necessary skills to function fully in those positions (Achieve, 2012).

Not having the proper skills limits the capacity of U.S. businesses to keep up with production and technological advancement. Markets that have excess capital of labor are more appealing for investment and growth. Importing these skills can help fill this gap but doesn't solve the problem developing homegrown skills through more robust higher education and training programs.

A study of available literature argues that three things must happen to improve the skills issue  (Elkins, Bell & Hartgrove, 2016):

-Easy access to education and training.

-Investments in science and technology.

-Spur investments in American industries.

A larger group of students must reach into the halls of higher education and this will be difficult under our current system. Online education and certificates will help keep working professionals in the labor market as new skills are developed. Students without the capital to stay in dorms or enter elitist schools can find affordable education opportunities that make a dent in this gap.

Further investments in science and technology requires a solid commitment to creating a business environment through thoughtful legislation and tax reform as well as better partnerships between universities and industry. As intellectual capital grows the opportunities for new start-ups and industry cluster development also rises.

Broad investments into national growth are based on the international competitiveness of our cities and hubs.  Large fund money comes through long-term stability of the market and the projected value of companies within a larger network of competitive companies that indicate the market will need those products and services in the future. Macro-economic solutions to cluster functioning encourages attraction of profit seeking ventures.

The development of the labor force relies heavily on national policies. Industry and labor grow together and separating them is acceptance of a limited perspective. Workforce development is only possible when jobs are available and jobs are only available when companies invest in markets with educated employees willing to meet the challenges of modern society. They must rise together in a way that leap frog over each other. Filling serious educational gaps moves beyond political arguments and into the actual activities that raise brighter minds for better tomorrows.

Achieve, Inc. (2012, September). The future of the U.S. workforce: Middle skills jobs and the growing impor- tance of postsecondary education, 1(28). Retrieved from: \

Elkins, S. et. al. (2016). Industry cluster pathways: a focused approach to regional workforce development. SAM Advanced Management Journal, 81 (1).

Friday, July 14, 2017

International Marketing Process

International marketing is becoming increasing important and will likely be the main way in which people engage in commerce over the next thirty years. The world will choose between greater connection or protecting their sovereignty. Despite this choice, there will be more coordination because money is to be made in the international market.

As with each new market comes new cultures and those cultures also create different ways of looking at products and services. Any company that wants to succeed in the global market must have global awareness and be able to interact with those cultures in a way that resonates with their core customer.

Before moving into a new market all companies should go through at least a basic process of determining the best methods of reaching their target market. Failure to not do so could cost corporations a lot of investment money.

1. Conduct marketing research.
2. Determine the goals of communication.
3. Determine effective messages for the target market.
4. Determine the best media.
5. Evaluate and allocate necessary resources.
6. Complete the campaign.
7. Evaluate the campaigns success or failures.

Cateora, Graham, & Gilly (2017). International Marketing (17th Edition). Boston, MA: McGraw-Hill Higher Education

Monday, June 26, 2017

How Governments Spur Innovation

Governments seek to create innovation within their districts to develop a more robust economy. The process of doing this can take many forms but at the root of their strategy is innovation. It is believed that innovation leads to economic growth and the employment of more people. An article in the International Journal of Innovation Science helps us understand what many governments are doing (Jacknis, 2011).

Many of the strategies governments use were based in the Industrialization Age where hard products were created. The modern age is more technological and service oriented. It is my perspective that better online collaborative communities are likely to spark that innovation at a fraction of many of the previous programs.

The methods in use service specific functions such as either sparking, transferring, or rewarding innovation. The author cites the following approaches:

Copy-write and Patent Protection: Legally protecting new developments to reward the inventor. While not cited in the article it is beneficial to reign in infringements in nations like China.

High speed Internet: Local governments are creating high speed Internet infrastructure that encourage increasing information transference.

Tax Credits: Property for relocation, sales and research tax credits.

Investments: Encouragement of investment into regional research centers, new technology and investment loans. There are some governments which invest public pension funds.

Prizes and Rewards: Offer prizes and rewards for entrepreneurs, innovators and inventors that work for the government or contract through them.

Knowledge Transfer: Universities that received federal funds will transfer their new technology to the private sector to encourage greater innovation.

Jaknis, N. (2011) Government's Role In Facilitating An Innovative Economy. International Journal of Innovation Science, 3 (3).

Wednesday, June 14, 2017

Branding the Downtown District Through Cultural and Functional Spaces

The downtown for small and medium towns are an important center of commercial activity but are ill-prepared to take on the challenges of a more modern global environment.  As city leaders decide the fate of the future of their towns by considering the benefits of downtown revitalization projects, it is helpful to move beyond just commerce and services to see how a downtown can also be a cultural center that creates new opportunities in business, values, and branding.

Research on medium sized towns found that it is beneficial to include cultural space in the overall efforts of revitalizing downtown districts (Pazder, 2011). Business districts should be seen through a lens of commerce and culture to help ensure they are vibrant and functional. Cultural identity becomes part of the town's heritage and can make it attractive to new businesses.

Small and medium towns should seek ways to differentiate themselves from larger cities that attract their own demographic. Small town success is rooted in its ability to offer something unique that can't be easily copied by competing areas. Connecting the business district with its historical past blends the new and the old in a way which creates a sense of deep value for residents.

The world is changing through acculturation and globalization. When towns can formulate a sense of identity and a functionality that is attractive to new business and residents, will have an easier time rejuvenating. Skill professionals are often attracted to cultural based cities that provide a valuable lifestyle and business are more likely to invest when the commercial district offers the best chances for success.

Across the country, the old downtown that has sustained commerce for hundreds of years must change to meet modern demands. Transforming the city center into a cultural and functional space offers new opportunities for branding and investment. In turn, that branding can be used to market the town to regional, national and international stakeholders that can put dollars in where common sense city management prevails.

Pazder, D. (2011). The Conception of Cultural Space Revitalization as a Way to Increase Downtown Attractiveness, A Case Study of chose Medium-sized Towns in the Wielkopolska Region. Quastiones Geographicae, 30 (4).

Friday, June 2, 2017

Improving Worker Satisfaction by Promoting Skilled Employees

Bosses and their ability to connect and inspire employees are an important consideration for job satisfaction. Research also indicates that managers who are highly skilled also raise job satisfaction lending support to the idea that those who can step into their employee's jobs, as well as do their own, are seen with high esteem and have an impact on employee retention. Should you pull the next manager from the ranks?

Job skills come from those who have done the job!  Companies should not be afraid to promote their highest performing and most knowledgeable employees. It is believed that promoting technicians to management resulted in disaster and exodus of employees because of lack of emotional intelligence. This exodus apparently is not always the case.

Certainly, there are technicians that do not have the right traits or personality to be bosses. They lack the management and social skills to function with others in higher pressure situations. When given an opportunity to promote a technician with practical skills or an outside boss without specific job skills, the former is more beneficial.

The study looked at over 27,000 people and came to the conclusion that job satisfaction is positively correlated to job skill. People see such bosses in higher light because they respect their abilities. In essence, the boss has credibility because they have functioned the job before. Knowing that your manager knows your work tasks seems to bring a level of comfort and esteem.

The application can be practical for promotion and recruitment. The study indicates that universities should promote performing faculty into administrative positions, star I.T. employees to supervisors, and trained manufacturing workers into bosses. Internal promotion can help with retention and job growth as skilled and experienced employees are capable of moving up the ranks to create positive results with more satisfied employees.

Artz, B., Goodall, A. & Oswald, A. (2017). Boos competence and worker well-being. ILR Review, 70 (2).

Monday, May 29, 2017

Revitalizing a Small Town-Making Sure You Understand the Stakeholders

Revitalization downtown areas is an important public policy initiative based on the declining Midwestern towns displaced by globalization and migrations to metropolitan areas. The study entitled How to Revitalize a Small Rural Town? An Empirical Study of Factors for Success. University-Community Collaboration with a Small Historic Rural Tourism Town in the Journal of Rural and Community Development offers valuable information on how university-community collaboration can impact the revitalization of small towns (Grunwell & Ha, 2014).

Public officials of Dillsboro, NC reached out to local university staff to help it with staggering declines in economic activity as a result of the tourist train no longer stopping at their station. Local employment consisted of education, healthcare, social assistance, entertainment, art, recreation, food services, and public administration. With limited business attractions and an average household income of $33,500, 8% unemployment rate, and many of its shops closed it needed help in sparking new growth. 

To understand what stakeholders needed and wanted university staff to put together three questionnaires to help gauge the fundamentals of decline. The questions were directed toward:

 (1) town business owners, 
(2) university faculty/staff and students,
(3) visitors to the town.

By cross-examining the similarities of the three different survey results, it was found that people wanted the return of the tourist train, consistent business hours, occasional extended hours during events, stronger marketing campaigns, additional entertainment, a variety of businesses, visible town signage, and enhanced attractions.

Based on these results and university analysis it was determined that the town needed a more robust marketing strategy, business plans that spurred local growth, and many more activities that attract visitors. The marketing strategies that seemed to attract the most people were signage, regional magazines, newspapers, signage, and word-of-mouth. 

Creating small towns of interest relied heavily on the community business owners collaborating under a formal plan and agreeing that each should move in the same direction so that all members can reach higher levels of growth and wealth. They bought into the marketing plans and pushed for greater awareness. Different types of shops that offer were encouraged to join the area, and a partnership with the train company was created to bring it back to town. 

Grunwell, S. & Ha, I. (2014). How to Revitalize a Small Rural Town? An Empirical Study of Factors for Success. University-Community Collaboration with a Small Historic Rural Tourism Town. Journal of Rural & Community Development, 9 (2).

Friday, May 19, 2017

Global Awareness Fosters International Expansion

Companies that desire to compete on a global scale should learn to develop intellectual abilities beyond the capacities of most domestic businesses. Managers with global knowledge are a highly sought after commodity during this expansion process. American employees often lack international exposure due to limited travel and overseas assignments. Without this knowledge recruiting managers sometimes find that they must rely on immigrants and new comers to society to support their international operations. Consider research on what pressures are likely to push companies to expand internationally in the Journal of International Business Studies (Dastidar, 2009):

1. Companies with high technology and/or marketing based resources.

2. Small home markets with higher production capacity.

3. Managers with global knowledge and experience that can accelerate the process.

Global awareness and knowledge are necessary components to competitiveness and if businesses forgo learning or recruiting this knowledge they may not be aware of international opportunities or how to capitalize on them appropriately. Poor attempts to further overseas expansion investments could waste precious resources.

While businesses need technology, marketing, and higher production capacity to expand overseas they won't be able to effectively do it without proper guidance. Having the necessary resources and capacities is one thing but knowing how to do it is another. However, the major intellectual capital component is employees and managers with international business knowledge. They are the workers that experienced global operations, understand different market segments, and have a systematic way of handling far reaching operations.

Protiti Dastidar, “International Corporate Diversification and Performance: Does Firm Self-Selection Matter?” Journal of International Business Studies 40, no. 1 (2009), pp. 71–85.

Tuesday, May 9, 2017

Strengths and Weaknesses of Small & Medium Businesses on the Global Supply Chain

Moving products from one area of the globe to another in an efficient manner is difficult. Ensure that inventory is accurate and supplies arrive when needed is also difficult. Small and medium size enterprises (SMEs) often lack the competence and skill to manage their supply chains well.  A study Dr. by Mohd Rahman discusses some of the challenges in supply chain management (SCM) faced by small businesses in Malaysia. 

A few decades ago Malaysia was an agricultural center but grew to prominence in the business world.  In 2005, approximately 29.6% of all companies were geared toward manufacturing exports. SME’s are 92% of registered companies and constitute 90% of manufacturing companies that contribute to 65% of employment. SMEs within Malaysia provide a strong case study of the difficulties SMEs have with SCM.

SMEs are often a strong catalyst for growth when they can effectively obtain resources and convert those resources to export products. Despite their benefits, many SMEs have a hard time achieving growth due to limitations on resources and knowledge. Understanding their strengths and weaknesses helps in tackling limitations to create a stronger business environment. 

Advantages of SMEs:

-Flat structure and short decision making that allows companies to adjust quickly.
-Flexible culture adaptable to change.
-Chances of improved success with organic vs. bureaucratic culture.
-Higher levels of innovative activities.

Disadvantages of SMEs:

 -Lack of skills and knowledge.
-Lack of financial resources.
-Owner controlling everything.
-Improper systems and processes.

The study indicated that SMEs are limited by both internal and external environmental issues. Some of these issues include cooperation with other parties in the supply chain, management supports and data transformation.  Such businesses don’t often cooperate for mutual benefit, have enough management knowledge to run certain programs effectively and lack acute ability to understand and use data.  The study found that the top five SMC dysfunctions in SMEs are 39% inefficient inventory management, 30% ignoring uncertainties in the supply chain, 26% incorrect inventory assessments, 26% lack of communication, 23% inaccurate use of data.

Rahman, M. (2012). The effective implementation of global supply chain management in small to medium-sized companies in Malaysia: An empirical study. International Journal of Management, 29 (3).

The Application of Keynesian Theory: Benefits and Detractors

Keynesian economic theory has been under increased scrutiny as the U.S. national debt load increases and the economy suffers from a long period of recession. The theoretical standpoint of the Keynesian model is one of a mixed bag where those elements that would have a positive impact are often drowned out by inefficient governmental waste, political favoritism, and the cost of servicing the debt. Under certain circumstances the policies can help stave off economic collapse but fail to bring about positive benefits the longer it is used.

According to the U.S. Census Bureau an era between 1790's to 1930's only saw deficits in government spending in approximately 38 years. Most of this debt was short-term and a direct result of increased costs of war or economic downturns (Lee, 2012). Total federal budgets ran at approximately 3.2% of GNP when compared to nearly 70% of GNP today (The 2012 Long-Term, 2012). At such a high debt-to-earnings scenario the Keynesian approach loses its power to encourage future economic benefits.

To Dr. Dwight Lee, from the University of Georgia, most recessions were relatively small before the Great Depression of the 1930's (2012). They were small because market forces moved in to clear up slack in the economic system and create more productivity. He further makes the argument that Keynesian economics work best when running a surplus for many years and then used to spur economic growth in a quick paced fashion. However, running a long-term deficit and then applying additional debt on top of old debt creates higher levels of inefficiencies and costs. It dilutes the potential positive power of each dollar spent and increases its costs.

One problem with Keynesian economics result from the political process that filters effective action through multiple competing interests and short-term results that create fiscal irresponsibility (Lee, 2012). What could have been considered effective government spending is often wasted in unrelated expenditures that do little to solve economic problems. This often occurs as decisions are filtered through the political process and sifted to those who support that process. It is always easier to spend then it is to save or ask for a tax increase.

It can be beneficial to see how poorly designed spending matched with political favoritism can impact the effectiveness of taxpayer liabilities. Accordingly, natural disaster legislation has shown that in the past nearly half of the funds were allocated based upon political interests versus that which actually aligns with the needs of victims (Garrett and Sobel, 2003). Such wasteful activities dilute much of the potential benefits of a stimulus that encourages recovery and growth by inappropriately allocating resources to the least effective entities and pinning them to taxpayer debt.

It is this political favoritism that has made economic policy more dangerous. For example, the multiplier effect is based upon the concept of Keynes statements, “to dig holes in the ground" can benefit society (Keynes, 1936). In this concept, as money is paid for employment purposes it impacts secondary services through the economic chain passing resources to small businesses, companies, and other entities. However, if only a percentage of that money makes it through to these secondary entities its overall impact is diminished.

The end result of misguided economic applications of Keynes theory will result in higher taxes and greater expenses on debt (Barro, 1974). Someone will need to pay back the money. In most cases it will be the next generation and the one thereafter. The costs associated with debt servicing rises above the original costs creating ever increasing problems for the future. It is this future that is short changed for current needs.

The concepts of Keynesian economics works well under certain circumstances but can be disastrous if inappropriately applied in the long term. Positive applications of Keynesian economics occurs when the nation has been running a surplus for a number of years and uses this surplus to spur economic growth through liquidity that fosters cash flow and lending. Such monies will need to be effectively and efficiently allocated only to those areas where it is likely to have the most beneficial and long-term impact. As political favoritism, debt servicing costs, and inefficiencies rise the effectiveness of the financial economic injection diminishes.When used appropriately with assurances of proper expenditures in strategic entities it has the ability to increase economic activity in the short run.

Key Points:
-Keynesian Economics comes with benefits and risks.
-Money spent should have an immediate impact with long-term potential.
-The economic chain and spending decisions should avoid all waste.
-The cost of debt rises over time.

-Keynesian policies work in the short-run to counter quick shocks to the market.
-Political favoritism diminishes its impact.

-Economic activity would need to pick up much more than the costs associated with debt and misspending when compared to low debt and efficient spending in order to justify such policies.
-The risks and benefits of using such policies should be carefully analyzed and calculated.

Garrett, T., and Sobel, R. (2003) The Political Economy of FEMA Disaster Payments. Economic Inquiry 41 (3): 496–509.

Lee, G. (2012).  The Keynesian Path to Fiscal Irresponsibility. Kato Journal, 32 (3).

Keynes, J. M. (1936) The General Theory of Employment, Interest and Money. New York: Harcourt, Brace and Co.

The 2012 Long-Term Budget Outlook. (June 5th, 2012). Congressional Budget Office. Retrieved January 14th, 2013 from

Wednesday, April 12, 2017

Can Arrogance Damage Your Company?

We have watched the news and experienced arrogant behavior at the top. We may wonder how some people can actually believe they know it all and are all to everything! In their own eyes they cannot make mistakes and treat others as pawns to their own malignant personality. Research in the The Industrial-Organizational Psychologist helps us understand the problems arrogant people create that is only a matter of time before real damage occurs to an organization.

What is arrogance? It is a person who engages in behaviors intended to exaggerate their sense of superiority by putting others lower. They want to seem omnipotent and invincible but at a deeper level they are covering feelings of inadequacy.

Higher levels of arrogance are associated with lower self-esteem, lower general intelligence, poorer performance and lower team building skills. It is the opposite of what it intends to portray because it acts as a cover for deficiencies.

The pitfalls to arrogance is the toxic environment it creates where collaboration turns into stress, poor relationships, and in-fighting. As the arrogant person continues to engage in maladjusted interactions with others they end up creating fight and flight responses that lead conflict.

It is important for organizations to work as a social group. It can be argued that their fundamental strength is the ability to pull people together to complete important work. Arrogance destroys social cohesion and creates a whole host of functional problems.

Arrogant leaders have a difficult time learning from their mistakes or gaining feedback from their environment. They become pathological in their thinking and are blindly willing to take large risks that lead to costly mistakes. Critical thinking is nearly non-existent.

The impact on poor relationships, toxic environments, and heightened risk-taking has serious consequences for organizations. While these leaders are hired for their skill they are often fired for their personality. By the time they are gone the damage has already been done and it is up to the next person to pick up the pieces. Arrogance and confidence are two separate personality traits and hiring managers should be aware of the difference.

Silverman, S., et. al. (2012). Arrogance: a formula for leadership failure. The Industrial-Organizational Psychologist, 50 (1)

Wednesday, March 22, 2017

Raising the Economic Value of Human Capital

Understanding how human capital is utilized in society and how that human capital is measured is important for understanding economic underpinnings.  A study by Olimpia Negu delves into comparing human capital attainment throughout 28 OECD countries and the market benefits of that capital (2012). This measurement helps to show which countries have the highest human capital development. It may also start to highlight where economic growth is most receptive.

Before analysis it is important to understand what human capital actually is. Human capital is complex and hosts concepts such as biological capital, educational capital, social skills, and health capital (Neagu, 2010). The total human being and their ability to be productive in the environment entail their ability to be productive.  Laroche et. al. (1999) indicates that human capital has some generalizations:

-Non-tradable good embodied in humans.
-Individuals are subject to human capital decisions made by parents, society, and government. Individuals who make their own choices internalize those choices.
-Human capital is qualitative and quantitative.
-Human capital can be used for multiple purposes and is transferable among businesses.
Because human capital can be complex and difficult to measure across nations most researchers use time in education. There is a basic assumption that education raises the ability of people to compete and be productive on the market. The more productive people in a nation the greater the national output.
Collective productivity turns into the Gross Domestic Product (GDP) of the nation and can be broken down into the GDP of the individual. The cost of education is important in determining the effective value of that human capital. Judson (2002) expanded on previous calculations to create measurements of human capital per worker (h) based upon cost of education:
 Human capital can be studied and used as an imperfect measurement across nations. These measurements are important because they can impact whether or not a society even has the potential to grow.  The authors found that the human capital value of 28 OECD countries between 1999-2008 were led by the U.S., Australia, and Austria and trailed by Mexico, Czech Republic and Hungary. The market leading nations had economic value of their population's skills and abilities. 

Laroche, M., et. al. (1999). On the concept and dimensions of human capital in a knowledge-based economy context. Canadian Public Policy - Analyse de Politiques, 25(1)

Judson, R. (2002) Measuring human capital like physical capital. Bulletin of Economic Research 54 (3).

Neagu, O. (2010). Capitalul uman _i dezvoltarea economic_, Cluj Napoca: Editura Risoprint.

Neagu, O. (2012). The market value of human capital: an empirical analysis. Economic Science Series, 21 (2).

Monday, March 20, 2017

Adams Smith's Role of Limited Government in Business Formation

Adam Smith, the father of economics taught us in his book The Wealth of Nations, that laissez-faire approaches to the market encourage the highest levels of growth. Government is limited in its role and provide the greatest freedom to business without unnecessary restriction. As we experienced during the advent of globalization, companies regularly choose nations with lower input costs and fewer restrictions. Newly formed clusters will need to offer something more than simply "cheap" costs and instead push for maximum growth opportunities through cultivating environments that supersede advantages of low cost manufacturing localities.

The market system will determine where companies will invest in operations, where they will hire employees, and how they will contribute to the global economy. Low cost copycats will be drawn to cheaper locations, while innovators will be attracted to places that spark the greatest opportunities for the development of new services and products.

One seeks to to focus on a low cost strategy that uses available technology. The other seeks to dominate the market by leading it through transitions with new products and services. Companies that seek innovative strategies will inherently look for locations that have the right elements that foster knowledge accumulation and intellectual capital.

A cluster exists within a local economy with inherent benefits that allowed these clusters to form in a one location over another. Governments create market conditions by attracting or deterring business investments through government policy making. Business-minded global companies do not invest locally out of patronage or loyalty but because they believe they can achieve the greatest advantages by doing so.

Adam Smith states, "Its not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from the regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages (Smith, 1776)."

As a profit oriented enterprises, governments should move beyond traditional approaches to economics by thinking from the perspective of would be corporate interlopers. What are they looking for, what type of environment are we providing and how do we provide it are essential questions to strong cluster management.

Of course we have choices, and one of them is to not change or adjust our governance to a global marketplace. We can use the same methods, continue to lose corporations, and watch our national debt rise and incomes decline. The role of government is to create polices that are in the best interest of their citizen stakeholders and thus have a responsibility to adjust their thinking when necessary.

Proper cluster management offers opportunities for government to be an environment creator but not seek to fight against the forces that allow are swirling through the global economy. Fighting these forces leads to greater decline. However, they can create local advantages by rethinking some policies that are hurting the ability of business to flourish while at the same time still protecting the needs of citizens.

Nationalism and loyalty are powerful motivators for local businesses but international companies have options where countries are often seen more as tax and cost incentives than believing in a particular national causes. While it is difficult to calculate the amount gained or lost due to corporations moving operations overseas, the amount is likely in the trillions of dollars in tax revenue. Creating strong market driven clusters helps to draw these businesses back to the U.S. because it is their best interest to do so to maintain their profit margins.

Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations. London: W. Strahan. Book 1, Chapter 2.

Tuesday, February 21, 2017

Location Can Influence Business Success

What advantages does close proximity of businesses have for product and firm development? According to a study conducted on the Hsinchu District in Taiwan, close proximity results in knowledge spin-offs as a result of people moving and sharing of knowledge between firms. Proximity influences innovative development in technology firms in a way that creates synergy and higher growth (Hu, Linand Chang, 2005). Proximity also increase the likelihood that products will move from the conception to production stages.

Innovation is a messy process where knowledge interacts with available resources in a way that leads to new product development. A significant portion of this growth rests on a person's social networks and the ideas those networks generate. Social learning becomes part of the process of how tightly woven clusters develop to overcome market challenges. 

"the close spatial clustering of technology firms favour repeated knowledge agent spinoffs and high-tech personnel mobility that then clearly influence the innovative activity of technology-based firms (Hu, Linand Chang, 2005)." 

As skilled people move from one company to the next they carry with them product development lessons in a additive manner. They can apply this knowledge to their new jobs in ways that connect corporate intellectual capital. Within their networks companies share information and build off of ideas through social construction that results in developmental synergy. 

While some industry knowledge seeps across international borders the highest states of development occurred with the confines of local clusters. Proximity in this case was an important catalyst to growth. A business that wants to succeed in a particular industry should consider the merits of working next to other businesses to soak in their innovative development.

As an added bonus, clusters made the movement from product conception to mass production more likely. It was a function of how closely they interacted to increase likelihood. When inventors and builders interact together at social clubs, restaurants, bars, and sports lounges things start to happen. Walking across the street and handing an engineer a set of plans can make a big difference. 

The study helps us understand that proximity and social interaction in places like the Hsinchu District of Taiwan produce opportunities for innovative synergy that results in new product development. When clusters are designed with innovative growth in mind, proximity should be a major consideration to help them associate through formal and informal channels. Highly skilled technology workers socialize with other like-minded individuals and share knowledge and resources in an informal manner. They also switch to new companies and carry that knowledge with them. Great minds working in the same are seem to have an additive process to get their creative juices flowing.

Hu, T. ,  Lin, C. and Chang, S. (2005). Role of Interaction between Technological Communities and Industrial Clustering in Innovative Activity: The Case of Hsinchu District, Taiwan. Urban Studies, 42, (7), 1139–1160.