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 http://www.cbo.gov/publication/43288