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Beyond Greece, Eurozone Has Other Achilles’ Heels

April 29, 2010 14 comments

By Marquis Codjia

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The current brouhaha over Greece’s budgetary mischance and its alleged adverse effects on Europe are an epochal episode in the history of the emergent European economic zone, but these are not the decisive areas where decision-makers, including political leaders and financial markets participants, should pay heed.

Greece’s debt pains would ultimately be resolved, because Eurozone behemoth Germany will strategically come in line with its continental peers; also, supranational channels – such as the European Central Bank and the IMF – will be coerced into using their balance sheets to provide liquidity to cash-strapped Hellenes.

The real fear presently is contagion – avoiding that the ambient financial pandemonium metastasizes into other economically comatose countries within the union. If any of these countries, clustered under the unflattering acronym of P.I.G.S. (Portugal, Italy, Greece, Spain), is downgraded by rating agencies – as was recently the case for Spain and Portugal who lost a few notches, the potential bailout costs and risk premia will rise stratospherically.

Eurozone leaders should swiftly settle Greece’s problems because of perception risks. No doubt the country is a financial and geostrategic dwarf (2% of Eurozone GDP and no major federal institution headquartered). Plus, other ‘weakest links’ such as Spain and Italy possess far greater self-financing capacities and have a different debt structure (domestically held vs. 95% of Greek debt held by foreigners). Notwithstanding, if trans-European perception is that Eurozone will not show geo-economic solidarity vis-à-vis its members in times of uncertainty, then the concept of political union loses its relevancy, and economic agents, including financial markets, will certainly reflect their despondency by driving the single currency lower.

Broadly, other systemic inefficiencies continue to thwart progress within the Eurozone.

First is the lack of a clear political structure in the federation. European leaders, particularly those from prominent countries (UK, Germany, France), seem at this point more content with a federal hierarchy replete with political figures (preferably from minor countries) who pose no leadership threat to them, and a plethora of bureaucratic institutions filled with functionaries picked on an unwritten pro-rata rule to satisfy member states. This strategic stance of an elusive political union grounded in an economic zone is antithetical to the very concept of federation that subtended the initial EU agreement.

To illustrate this, let’s consider a simple example: whom would current U.S. President Barack Obama or China Premier Wen Jiabao negotiate a strategic partnership with if either leader needs a European counterpart? Would they call upon the current President of the European Commission José Manuel Durão Barroso? Or the current President of the European Council Herman Van Rompuy? Or the current (6-month rotating) President of the Council of the European Union José Luis Rodríguez Zapatero? Or EU heavyweights French President Nicolas Sarkozy or German Chancellor Angela Merkel? Or a combination of all of these leaders?

Second, the lack of a clear, single political leadership begets an absence of a uniform socio-economic agenda in the union. It seems as though European leaders want the pros of economic integration, but abhor its cons altogether without attempting to minimize or obliterate them. EU citizens must define what the Eurozone stands for: is it a free-trade area, similar to NAFTA (North American Free Trade Agreement) or ECOWAS (Economic Community of West African States), where partner countries retain their political, economic and social independence, and can compete against each other? Or is it a political and economic union steered by broadly uniform national social policies, similarly to a single country? Or is it, rather, something in between, or neither?

Third, European Central Bank’s powers must be broadened beyond price stability. Unlike the U.S. Fed, the bank’s only primary mandate at the moment is to keep inflation low, with other objectives subordinate to it. The ECB should intervene further in the regional economy, and help avoid systemic disequilibria if need be. In sum, the institution should be allowed to use its gigantic reserves to calm jittery markets in times of uncertainty, among other roles.

Fourth, Eurozone membership should be reviewed; this includes not only the admission process, but also membership conditions and stipulations for exclusion. Understandably, the political undertones of this process call for some diplomatic verbiage, but overall, countries seeking membership in the privileged “Club Euro” must meet stringent criteria, and such criteria should be thoroughly enforced. The current Stability and Growth Pact, which aims to limit budget deficits and debts, is a good start but the ineffective control scheme around it permitted the kind of statistical fraud that Greece authored when seeking admission nearly a decade ago. In sum, sound economic fundamentals and strict governance rule, in addition to geography, should be the rationale for co-opting new members into the Eurozone.

Finally, the EU enlargement process should pay special attention to two key dossiers: U.K. and Turkey. The argument here is not in favor of a quick admission (in Turkey’s case), but for a clearer acceptance framework, more effective than the current 31-chapter “Acquis Process”.

Both dossiers are complex and politically charged, but their quick resolution will do more good than harm to the EU. Turkey has many woes (human rights concerns, Cyprus dispute, perception of Islamism despite the country’s secularism, business regulation, etc.), but its advantages are also interesting. It is 16th largest GDP in the world – per IMF’s 2009 ranking, outpaced in the Eurozone only by Germany, U.K., France, Italy and Spain. This means that, out of the current 27 EU members, it ranks 6th on GDP measurement. The country is geographically larger than any EU member and its ca. 73 million citizens are outnumbered only by Germany’s ca. 82 million; this may open up potential new markets for growth-seeking EU businesses. Politically, Ankara is an important geostrategic ally of the West and a member of such key organizations as G-20, OECD and NATO.

As for the U.K., a current EU member that opted out of the Eurozone, its Labor Party-led government defined in the late 1990s five economic tests that must be met prior to adopting the Euro as national currency, either via parliamentary ratification or referendum. Euro adoption remains a domestic hot button issue and thus may not be addressed for many years. But, it’d be interesting to see how politicians and business leaders will react once the euro reaches parity with, or gradually outpaces, the pound sterling. So far, the euro has risen 65% vs. the pound, from a low of 57 cents in 2000 to 94 cents a decade later, briefly nearing parity late in 2008 (.98 in December 2008).

Risks and Rewards of Using Facebook and How They Affect Corporate E-Commerce Tactics

April 7, 2010 31 comments

By Marquis Codjia

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The estimated half-billion Facebook current users form a gigantic market for global business and a chief barometer in other sectors, including politics, mass media, sports and charitable undertakings. Given its user diversity and geographical expansion, the leading social portal constitutes a digital populace akin to a global organization.

In fact, Facebook has morphed lately into an “online United Nations” – if nothing else, when factoring the fraction of the world’s population that is computer-literate.

Facebook users can be cross-analyzed in multiple ways, based on the aim of the analysis; however, for the sake of simplicity, two areas can be retained to depict the membership diversity.

The first area is anthropological, and is indissolubly tied to basic human gregarious instincts. Members can register as individuals and invite friends – and friends of friends – to create and maintain their own social groupuscules, or networks. With other fans, they share their admiration for a company, a brand, a product, or an individual. They show their commitment for a cause by joining groups or forums. If they feel playful, they indulge in games, quizzes or other entertainment conduits available on the website.

Second area is socio-economics. Members can identify as individuals – that is, consumers, or the demand side – or organizations – that is, producers, or the supply side. The latter group can be further divided into businesses, non-profits, politicians and entertainers.

To individual users, Facebook offers many an advantage. Users can search for new or old friends, interact with them, and expand their networks to other individuals who share their likes and dislikes – via friends of their friends or groups in which they maintain membership.
They access helpful information that otherwise may be unavailable to them – academic work, research papers, web premieres of electronic products, etc. Members can also share pictures, video and audio content, and in that process, use the portal as a powerful dating or matrimonial agency.

Such intermingling is useful because it allows users to fearlessly communicate with acquaintances as well as strangers, and provides an empirical illustration of the six-degrees of separation theory.

The six-degrees of separation theory – also called the “Human Web” theory – explains that everyone is at most six steps away from any other person on Earth, because each person is one step away from another person they know and two steps away from each person who is known by one of the people they know.

Disadvantages to Facebook individual users relate mainly to privacy and productivity.

Unmistakably, the risk of public exposure is inherent in any online presence, be it social portals or other forums; Facebook members thus relinquish part of their privacy simply by registering and posting status updates on their “walls”, since no one knows with a high degree of certainty how member data is managed. This privacy breach is compounded by inadequate privacy settings that most users, especially minors and the elderly, have in their accounts, leaving them vulnerable to online predators and other mischievous acts. Members – unwillingly and unbeknownst to them – can be tagged in pictures and writings that provide an uncanny or inaccurate depiction of their personality, views or interests.

Simply put, Facebook can erode or destroy one’s reputation over time unless a member controls strictly how their information is disseminated.

Privacy infringement can also occur via the portal’s plethora of applications; these tools are formidable marketing conduits to collect valuable information – including emails – about members, which can then be monetized with legitimate businesses or illegal organizations (e.g. spammers). For example, think about a quiz like “What will your wedding dress look like?” and how respondents, credulous that they’re partaking in a game, can unawares provide useful data to a vast number of players in the wedding planning industry.

On the productivity front, Facebook usage favors a climate of procrastination and addiction that comes with the various features (e.g.: games) existing on the portal. This behavior is however excellent for the company because the more time users spend on the site the better.

For organizations and celebrities, including politicians, a Facebook presence offers many rewards and relatively few, if any, negligible risks. This absence of detriment is a consequence of the sophistication of risk management and brand promotion techniques that these entities use, and the built-in features available on the site. Since corporate persons have full control of their accounts, they view their Facebook pages as natural extensions to their websites or intranets.

The rewards to this group relate primarily to the enhancement of their brand appeal and their online commercial strategy. A Facebook presence furthers a paradigm shift in e-commerce tactics. Organizations can gauge their “online market share” and popularity level by their number of fans vis-à-vis the competition, and slice it demographically into desired niches or strata, even though such number may arguably not be reflective of actual market size and characteristics, and may not translate necessarily into real consumers.

Having admirers listed on their pages or related groups is precious because businesses and celebrities have at their disposal a free and valuable database of potential, loyal customers to whom they can pitch their new products or services. Newsletters, quizzes, and applications from Facebook offer a direct way to conduct market research cheaply and collect firsthand consumer feedback. For example, a firm may test a new concept with Facebook fans, or a representative portion thereof, prior to advancing its R&D process and launching a new product.

Formal announcements can also be directly disseminated, in real-time, to vast swathes of the clientele. Other interesting features are Facebook Ads, a service that allows sponsors to target specific demographics, and Marketplace, a digital market where products can be marketed directly to patrons.

Can Google Live Without China?

March 25, 2010 72 comments

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By Marquis Codjia

Op-eds in prominent newspapers around the world are discussing profusely the latest decision by Google to disengage from China in a move that epitomizes the search engine’s level of camaraderie with communist censors.

While few viewpoints offer a holistic examination of a complex issue that goes beyond the business sphere, the majority applaud Google’s shift as salutary to enhancing democracy in the Asian country.

The query nowadays in the western hemisphere is whether China can live without Google.

Many respond by the negative, citing, among others, the infancy of the country’s technology infrastructure and its limited number of qualified engineers; some even posit metaphorically that Beijing will be “in the darkness” after such exit.

Truth be told, China needs Google far less than the opposite. Hence, to the inverse question – can Google live without China? – the reasonable answer becomes yes.

Strategically, there is a superfluity of arguments attesting that the Mountain View, California-based technology mammoth is following the wrong path in handling its Chinese conundrum. Some of these arguments are specifically endogenous to the firm, whereas others are more varied in nature and closely inherent to the macro-environment in which the firm evolves.

Google does not divulge the size nor the profitability of its China business but it can be inferred, from the country ca. 400 million internet users, that Google.cn – its local portal – contributes a hefty part of the overall bottom line.

Gauging the firm’s scope of business in Mao’s republic implies factoring not only core search revenues but also the ancillary business derived from joint-ventures in Asia and Google’s own commercial undertakings.

The firm cannot ignore the potential cash-cow that Chinese internet users represent and the competitive pre-eminence that a local presence can proffer. The recent announcement from Google to move its local servers from the mainland to Hong Kong and end its censorship of searches does a disservice to the firm’s core business strategy because Google needs to be in China to win in the Chinese market, irrespective of the notorious practices of the nation’s economic climate.

Therefore, Ed Burnette is accurate in reiterating this viewpoint.

It is very momentous to acknowledge that China’s economic practices are far from fair and its socio-political system may at times be antithetical to paradigms experienced in other parts of the world. That China is not a democracy is commonplace rhetoric, yet many, if not all, Fortune 100 companies are keen to put basic tenets about free speech into oblivion and open a Chinese subsidiary.

Geostrategic factors at the macro-economic level are those that Google should pay thorough attention to. The firm is a leader in its industry and possesses reliable friends within the Obama administration – Andrew McLaughlin, its former head of global public policy, is currently the Deputy U.S. Chief Technology Officer in the Executive Office of the President. Yet, a company by itself cannot represent a major strategic player in the much larger and complex continuum of US – China relations.

Politicians are very economical with the truth when it comes to China. While they occasionally resort to rhetorical dissent vis-à-vis Beijing’s transgressions on democracy and issues relating to free speech, they all keep legendarily mum when it comes to coupling business with ethics.

They shouldn’t be necessarily blamed because there’s a variety of sibylline elements that make up transnational relations, and bi- or multi-lateral issues are not always simplistic with crystal clear solutions.

If Google pulls out of the mainland, it stands to lose billions of dollars in core revenues and collateral business. It will lose its dominance in the regional search business and such economic void will attract other rivals, which in the end will cripple the firm’s global market share.

This doom scenario is far from a Hollywood sci-fi episode. If Google exits, locals (such as Baidu) and major rivals like Microsoft’s Bing and Yahoo will doubtless grab the manna. Alternatively, new entrants may easily imitate the firm’s search model and take advantage of local authorities’ reprimand and develop their business.

There is a long list of Western multinationals operating in the mainland despite repeated protests from human rights activists. Think McDonald’s, Wal-Mart, Carrefour, Citibank, etc.

Collateral losses for Google are already reflecting China’s angry reaction after the search engine made its announcement; news media reported so far that Chinese mobile phone companies will drop Google or Android, its new mobile operating system.

Goodbye Haiti, Hello Chile!

Back in January, we wrote about the risks surrounding financial assistance to Haiti in the wake of its earthquake if the international media turned their emotional eyes to other directions or upon the occurrence of another terrestrial catastrophe.

Now that we see the calamity in Chile and its deleterious consequences on the country’s infrastructures and the ineffable death toll, the concern is even higher that two countries in a relatively similar geographical zone will fight for limited aid resources.

The international community and donors in the North should forget neither country.

Lady Gaga and Kim Kardashian in High School?

It’s pretty interesting lately to see that the blogosphere is abuzz with pictures of both celebrities reportedly taken while they were in high school. The question many bloggers ask is whether the public needs to know that our divas did indeed graduate from high school. Or more importantly, what can be revealed as far as their prior behavioral trait in their teen years?

Another question is whether the picture leak was systematically staged by both stars as a way to get back in the news.

All this is ongoing when millions are dying in Chile and Haiti….

Olympics Closing: Wonderful Vancouver

The Closing Ceremony of the Vancouver 2010 Winter Olympics at BC Place drew the usual tens of millions of viewers and replenished for some time municipal and corporate coffers in the Canadian province.

Many countries participated, including top contenders USA, Russia, Germany, and Canada. Not to mention a surprising team from South Korea. Similar to previous editions, this year saw a massive presence of athletes from the northern hemisphere and a scarce showing of their southern hemisphere’s counterparts.

Olympics officials need to broaden the field professionally and technically if the competition is to survive financially in the near future. Talks are already ongoing about the possible cancellation of Women’s Hockey games due to poor performance.

Eyes will now turn to the next edition in Russia. It’d be interesting to see how profitable the Canadian organization turned out to be and how Olympics officials will thoroughly review the next game logistics, especially amid the current economic crisis.

Leveraging neural brainstorming to cost-effectively launch new products

February 23, 2010 20 comments

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By Marquis Codjia

Launching new products nowadays should no longer be a strategic corvée for corporate boardrooms. Contrary to current consensus among many marketing managers and advertising specialists, erstwhile methods used in designing, testing and launching new products appear either outdated, pricey or lagging when compared with the dynamics which govern contemporary global markets.

Ergo, new techniques must supersede or be added to existing schemes for metamorphosing a budding product idea fresh out of the mind of an entry-level engineer into a finished good palatable to customers.

The internet, with its increasing ubiquity and digital omnipotence, should be at the epicenter of these techniques if business enterprises are to remain competitive.

Traditionally, firms relied on an impressive and sophisticated panoply of frameworks and departments to administer their innovation and R&D process. Depending on the industry and the product cycle, among other factors, entire armies of scientists populating R&D departments may partner with marketing and advertising agencies to find that perfect new product.

In the same vein, employees are often invited to share their insights via brainstorming sessions whereas customers’ opinions are actively collected and studied through written or online surveys, telemarketing procedures, trade fairs, or customer service encounters.

Four relatively cheap and fairly accessible sources of neural brainstorming are available to most companies at the moment. These sources rely heavily on global internet data to construct a body of artificial intelligence that can be analyzed and computer-simulated to presage potential future trends of customer wants and needs.

Depending on the size of the company and its financial might, sophisticated analytical tools or simple spreadsheets can be employed to extract invaluable statistics.

Company website

Firms can leverage their own internet portals more efficiently by creating or revamping their e-commerce platforms and ameliorating website ergonomics. Merely collecting purchase data when patrons enquire about products or place orders is no longer sufficient; they must devise an astute tactic for drawing higher client responsiveness. An example of cheap survey tactic is to adjoin 2 or 3 “forward-looking” questions at the end of the purchase process (e.g.: what would make product X better? Are you more likely to buy product Y if we add new features?). Another idea is to offer free items when customers rate current or ready-to-launch products.

Google and other search engines

When used efficiently, Google can be a powerful quantitative tool to use as organizations attempt to tap into the global collective psyche and unearth good ideas that will be precursors to upcoming bestsellers.

Best of all, it’s free. Aside from the customary “Google Search” bar and functionalities, other features are readily available at Google Trends. That’s where the magic resides. Firms or even entrepreneurs can harness that “digital bounty” and use data-simulation as well as other sophisticated computing utensils to analyze that information based on their industries, geographical zones or customer characteristics. The same is true for other major search engines such as Yahoo! Buzz and Microsoft’s Bing Xrank.

Online forums or discussion groups

Companies can utilize the strategic advantage of anonymity to test new product potential in online forums or discussion groups that relate to their target niche. Given the plethoric number of such sites, it can be extremely fruitful to interested companies if they can ably zero in on their specific group of interest and exploit the past and current general mood of such a constituency. One simply idea to gauge that morale is to start a discussion on a topic closely related to the company, its products or a specific industry in general.

Facebook and other social portals

Finally, Facebook and other social portals of analogous popularity and magnitude offer a number of interesting, user-friendly features that firms can harness to augment their market visibility and collect useful data from current and potential clientele. On Facebook specifically, firms can open an Organization Page, a regular page and various discussion groups to promote their brand and ultimately use those conduits as data-gathering means.