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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: AC Flyer who wrote (40063)	10/23/2003 4:26:00 PM
From: Maurice Winn	Read Replies (1) \| Respond to of 74559

<I remember the endless hand-wringing in the mid to late 80s regarding corporate America's lamentable focus on the quarterly numbers versus Japan Inc.'s enlightened long-term perspective and how this would lead to Japanese world domination.> Me too, and at the time I thought that was a good point. But now I favour continuous disclosure with real-time accounts, sales and all the guff. The theory causing worry about obsession with quarterly numbers was that USA companies did silly things to try to make the numbers look good, without worrying about future earnings. There's some truth to that and I can speak from personal experience. For example, we used to have managers getting trucks to fill service stations on the last day of the month to get good sales for the month. Which of course meant once that was done, transport efficiency had to forever be disrupted every month, and excess inventory held, to avoid a subsequent drop in "sales". Of course the reality was that until a customer drove onto the forecourt and bought the fuel, there hadn't been a sale. The managers were stuffing the pipeline and thinking they were doing well. It used to drive me nuts. Similarly, there would be sales competitions, which would be won by the simple expedient of getting a friendly dealer to lend a warehouse for a month into which large "sales" would be delivered. Those "sales" could be credited back the following month or would be left as an overhang for subsequent months of low "sales" as the stock was worked through. It happened time after time after time. Mindless management has a lot to answer for in the corporate world. Enlightened long-term perspective is crucial as well as short term. In 1986, when Shell brought out Formula Shell [blundering in the process, which was fun to watch], I had to explain to BP management why BP didn't have something to match. I explained how the R&D budgets since 1981 had been scaled and gutted to maintain profits. The person at fault was the one who cut the budgets. That was at a meeting of about 15 senior management people in Britannic House in London and I'd only been in the job about a week or two and didn't know the background but did have the R&D data as that was part of my job. Well, the guy interrogating me was a teutonic German bullying sort, but what I didn't know was that he was in charge of the R&D budgets back in 1981. Hahahaahahaha!!! That was fun. I wondered why there was silence when I explained the situation. There wasn't much he could say. As it happened, I pointed out that Formula Shell would crash because they'd done a cheapskate job - bringing in Spark Aider but not simultaneously increasing octane number by a couple of numbers, which would have given more bang for the buck and some marketing fizz. Fizzers are no fun and Formula Shell was a fizzer, costing a few 100 $$$ million. They got engine knock, which wasn't surprising given the onset of warm weather co-incident with the product launch and the speeding of ignition due to the additive. It was like advancing the spark, which causes knock if it's done too much. Now there are electronic engine management systems so they wouldn't have had the problems. It was an example of mindless marketing flim flam management taking a good R&D idea then wrecking it. I could imagine that once the big-shots got hold of it, some poor little broom-cupboard technical geek might have explained what needed to be done, but he'd be over-ruled by big-shots once the blood lust was up and the marketing programmes going and noise levels rising and reputations were being tied to it and many hands grabbing a piece of the action. No nattering nabobs of negativism would have dared pop their head above the parapet to raise some doubts. Unfortunately, I was involved in a vastly larger similar blunder and it took a huge amount of my own money; a veritable fleet of Tonka Truckloads of loot. That was Globalstar. I warned and warned and warned and explained and explained and explained but they didn't change their marketing ideas and destroyed $10bn in market capitalisation and $4bn in actual expenditure. Everyone was far too important and had hot-shot marketing ideas. They wouldn't listen to ideas about real-time pricing using an auction to set prices, starting really low in price and only increasing prices when the system was becoming overloaded. Or at least just starting with really low prices to ensure marketing success. No way! They knew the telecom mantra that price destruction is bad and that one should start high and lower prices over years, or never if possible. They knew that "Customers don't like complex pricing" and other stupid marketing cliches and slogans. The slogan they didn't know was "Don't let a slogan do your thinking for you". The slogan they forgot was "People love a bargain". They could have thrown in "Stack it high and sell it cheap" and thought of the success of WalMart. They wanted to sell each minute in separate wrapping, from a glass case in a premium store. I couldn't believe that they didn't see the light as things started going bad and change their marketing ideas to get sales moving. Nope. They drove it into the ground, like an AC Flyer overloaded with some fat, greedy-pig pilot with excess baggage, ignorant of laws of physics and markets and what makes the world tick. Despite my experience, I couldn't believe people would be so myopic and resistant to changing their plans in the face of impending doom.* Gee I've really got myself steamed up now!! I was just going to write a little post agreeing with the need to cover short term profits as well as long term profits. Mqurice * Jay will be nodding sagely and saying to himself, "Yes, Mq and you are in a bigger TeoTwawKi right now and reaching TPonRr while similar ignorance is brought to bear [ha!] on a global scale. You have seen up close and personal how even International Marketing Hot-Shots can goof things up on a grand scale, so why is it so hard to imagine that J6P, W3C, S2B and K2F [Kiwi 2 Flagons] will demand their politicians crash the world into the ground? You have seen India vote itself poor for half a century of Glorious Freedom, Independence and poverty. You have seen your own Once Were Winners country vote itself to the bottom of the OECD league and into socialistic carnage as K2F selected MAD [mutual assured destruction] over capitalism, freedom, private enterprise and deregulation. Why is it so hard to imagine that the other 6 billion will do even worse?"