Gerald (Jerry) Zezas

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Monthly Archives: January 2013

Shortcomings

The most suspicious among us are often those of whom we must be suspicious.

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Advertising is not Marketing. It’s only part of it.

I find that many people conflate advertising with marketing. They are not interchangable.

Marketing is the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large. (American Marketing Association Approved October 2007)

For instance, marketing also entails how to distribute the product and how best to package the item. Gathering data is another marketing field, from issuing surveys to holding consumer focus groups. Other issues include in-house marketing. This pertains to devising strategy, assessing which price is best for the product and outlining the objectives of campaigns, promotions and other marketing endeavors.

Examples of marketing strategies include:

*The objective to be achieved, or the criterion by which success or failure of the strategy is measured.
*Customer targets, such as income level, age, location (demographics)
*Competitor targets, or the products which will compete with yours.
*Differentiation, or what will make a customer buy your product over another.
*Marketing mix is the decisions about price, distribution channels and customer relationship management.

Merchandising is sales promotion as a comprehensive function including market research, development of new products, coordination of manufacture and marketing, and effective advertising and selling.
Merchandising is a subset of marketing. Merchandising is the direct sales pitch to the consumer conducted in an immediate, often face-to-face manner. Thus, display cases, in-house consulting and sample issuance are just a few examples of merchandising techniques. The goal of merchandising is to compel the consumer to buy the product.
Merchandising seizes on the typically brief opportunity to sell directly to the customer; the parties responsible for successful merchandising include the salesperson and the layout of the store itself. The salesperson engages directly with the customer by providing a sales pitch or demos of the product. The layout of a store is a highly influential method of merchandising: Having a product directly at eye level, for example, can make the difference between a sale or the customer not seeing it and therefore walking away.

Advertising is a single component of the marketing process. It’s the part that involves getting the word out concerning your business, product, or the services you are offering. It involves the process of developing strategies such as ad placement, frequency, etc.

Advertising includes the placement of an ad in such media as newspapers, direct mail, billboards, television, radio, and of course the Internet. Advertising is the largest expense of most marketing plans, with public relations following in a close second and market research not falling far behind.

The best way to distinguish between advertising and marketing is to think of marketing as a pie, inside that pie you have slices of advertising, market research, media planning, public relations, product pricing, distribution, customer support, sales strategy, and community involvement. Advertising only equals one piece of the pie in the strategy. All of these elements must not only work independently but they also must work together towards the bigger goal.

Marketing is a process that takes time and can involve hours of research for a marketing plan to be effective.
Think of marketing as everything that an organization does to facilitate an exchange between company and consumer, advertising being only a very small part.

Transformational vs Transactional Leadership

Transformational vs Transactional Leadership

The transformational style of leadership offers vision, enthusiasm, and creates a path for those who are following to do so. It enlarges the interests of employees and generates an acceptance of the mission of the group (Hay, n.d.).

Jack Welsh of GE was acting in a transformational manner when he introduced Six Sigma manufacturing to the company, (originally developed by Motorola). This concept used the statistical metric of six standard deviations from the mean as the standard (not just the goal) of the level of acceptable defects in manufacturing at GE. He also established the doctrine of divesting GE of companies in which GE was not first or second in the market. This took GE from a $14 billion company in 1980 to a $ 410 billion company in 2000 (GE, 2012).

Another transformational leader, irrespective your political leanings, is Barack Obama. His willingness to risk his entire Presidency on passing The Affordable Care Act was visionary and courageous. The impact this law will have on future generations is as immeasurable as was Social Security and Medicare when they were first passed. Some say it will benefit the country, others say it will not. Notwithstanding personal views on the matter, the passage of that act was transformational (Healthcare.gov, 2012)

George Bush spoke in transformational rhetorical terms and attempted to become a transformational leader by using the 9/11 attacks as having “changed the world”. Yet he used transactional remedies to this ostensibly new threat by simply going to war with two countries, one of which for suspicious, indeterminate and poorly articulated reasons. This has been a common response throughout history and ended up having little effect on the nature or cause of terrorism. It simply suppressed it for a period of time by virtue of force. Nothing has been transformed (Bush Center, 2012)

Leaders of companies, in general, who believe that slogans, catch phrases, (we’re Number 1!) and oft repeated mantras of using the “highest quality products” and “exceeding your expectations” are attempting to use transformational rhetoric as a substitution for genuine transformational messages. These leaders seek to manipulate and deceive rather than motivate and encourage.

They are not leaders. They are frauds.

References
Bush Center. (2012) http://www.bushcenter.com/
G.E. (2012) http://www.ge.com/company/history/bios/john_welch.html
Hay, I. (n.d.). Transformational leadership: Characteristics and criticisms. Retrieved from http://www.leadingtoday.org/weleadinlearning/transformationalleadership.htm
U.S. Government. (2012) http://www.healthcare.gov/law/full/index.html

The Gold Standard and the Dollar

With all the talk of Fiscal Cliffs, Debt Ceilings and the like, it seems as if everyone is an armchair economist, suggesting things like “If I have to balance my checkbook, the government should do the same”, or “The government just keeps printing money, it has no value anymore”, or some such or other complaint of the fact that we’re no longer on a “gold standard”, as if anyone really knows what that is.

Here are what I consider to be some of the fundamentals of our economy. Some will consider me insane to suggest the things I do, but these are so fundamental as to be overlooked by most. First, some background about money. To wit:
The value of money is an illusion. It is extrinsic in nature. It is valuable because we decide it is. The fact that we’ve decided that a small sheet of high cotton content paper varies in value based on the number that is printed on it is, on its face, ridiculous. That sheet of paper with a $100 in the corner has no more actual value than the one with the $1 in the same corner, yet we are willing to give 100 times more for the former than the latter. Well, you say, it’s not the face value, really. It’s the fact that it represents that much in gold. Keep reading…

The value of gold is an illusion. It, too, is extrinsic. It is a useless metal, (other than some limited use in electronics and dentistry, but there are many substitutes) and doesn’t have any major uses other than for the purpose of frivolous adornment. The fact that the price of gold has gone from around $300 per ounce to about $1600 per ounce in 12 years is not the result of a shortage of gold. It is not the result of some new technology for which gold is an essential element. It is not the fact that that metal has changed in chemical structure. It is because someone with a lot of financial clout decided that since the world was in such turmoil, he’d better obtain a horde of it as some presumed hedge against the coming world financial collapse, so he started buying it en mass. This led others, having seen his fear of the unknown, to commence doing the same, leading to a slow, methodical increase in its value, and we followed along. That’s it.

Now, I’m not suggesting that there is anything wrong with this. A common currency is essential to the workings of any society. In the days of the cave-man, various rocks were reportedly considered valuable, to the point they would be placed on the outside of the cave, to indicate the relative wealth of those residing within.

Now, as with any commodity, relative rarity is also a factor in its value. The easier it is to acquire, the less it is likely to be worth. So, by extension, once the market has more of that commodity than it can use, its value drops.
But our money is “backed” by gold, is it not? Well, actually, nope. As stated above, gold has increased in value by a factor of 5 or more in the last 12 years.* So if that bill in your wallet was worth $10 in 2002, then it would be worth $50 today, correct? If the gold is worth more, then the money it backs should be worth more, yes?

If you were to find out that Fort Knox had been robbed last week and that all the gold was gone, would you take all the money in your wallet and burn it? After all, its value has just been lost to thieves, right? It’s no longer worth anything, correct?

Well, of course you wouldn’t, because it would still be worth its face value to you, to the corner grocer, to the cable company, to Amazon and to everyone else you pay. The only way that this presumed value of the dollar can be its actual value is if we, society, determine the value of that bill. What is stored at Fort Knox or the Federal Reserve Bank in NYC really means nothing other than to give us a good feeling that our paper money actually represents something that weighs a lot. Hogwash. The dollar is worth a dollar because others will give us a dollar’s worth of goods and services for it.
Now the promised treatise on the economy.

Any government can print money. It’s what governments do. It’s what gives them the power to regulate commerce. The perpetual question is: how much is too much money?

That question rarely gets answered based on empirics. Instead, various pundits throw out a multitude of calculations based on the cost of bananas in Bogota and the price of a box of Creme-of-Wheat in Peoria.

The perpetual cynics of the world will always say that too much is being printed. Most of us think it wrong to be able to print money, irrespective of how much gold is “behind” it. (See above). It just seems too easy, so there must be something sneaky about it. Like unprotected sex, it’s assumed that sooner or later it will catch up to you and you’ll end up with some nasty disease.

The licentiousness of printing money ad infinitum is based on long-held beliefs that you can’t make something out of nothing. In truth, however, you can. You just have to be big and powerful and have a really expensive printer.
The United States is in a unique position globally. It is the financial powerhouse, whose currency is the standard of the world. US Treasury bonds are always in demand, as evidenced by the fact that the reduction by the S&P of our bond rating 2 years ago (as a result of the last time Congress resisted raising the debt ceiling) has had no effect on the rates our bonds pay-the world ignored the downgrade and kept buying.

So, how do we know when we have printed too many dollars? How do we know when their value is becoming diluted? You already know this one. It’s called inflation.

Inflation, as most with a 7th grade education can tell you, is when there are too many dollars chasing too few products. Like snowballs to an Eskimo and sand to an Afghani warlord, the more dollars I have, the less I value each of them. It follows that if the dollar becomes less valuable in the eyes of the merchant, (having nothing to do with any shiny metal), he will require more of them to buy the same thing. A box of cereal that cost $5.00 yesterday might cost $5.10 today, since today’s $5.10 is worth yesterday’s $5.00. The cost of the item has inflated.

But if you look at our inflation rate, it’s incredibly low. In January of 2013 we are below 2% annual inflation. That means that our currency is maintaining its value quite well throughout these 4-5 years of financial turmoil. It means that there are not too many dollars flooding the financial markets. It means that we can print more dollars, build more infrastructure, and spend on healthcare, military and the other things a powerhouse like the US requires. We can print money until the rate of inflation starts to rise, and then we can back down. The fact that inflation is low says that we have not printed enough money!

Now, your gut may tell you that this is somehow wrong. That just printing money can only lead to no good. But, try and remember the last time you relied on your gut and turned out right.

Gambling, relationships, drug addictions and bar-fights are usually the result of one following his gut. How many people win at the roulette wheel, what percentage of relationships turn into successful marriages, how many drug addicts became so intentionally and how’d that last bar-fight work out for ya?

Facts, not home-grown, grade-school economics are what drive financial markets. We need to ignore those who think that managing a $15 trillion GDP has any resemblance to balancing your personal checkbook.

*This does not begin to address the fact that gold doesn’t wear out, and more gets mined every year. This should indicate that the supply of gold increases every year, yet the price doesn’t drop, as it would with any other commodity. This should be another indicator of the manipulation of the value of gold, having no relevance to any market conditions.

Accusations and Imagination

The depths to which you accuse me of descending may only serve to reveal the limits of your own imagination

The Folly of the Mission Statement

In this paper I will copy and analyze some mission statements from Fortune 500 companies. I use them exclusively since they are presumably the best at what they do, and so it would be reasonable to assume that their mission statements are some of the better ones available.

Advanced Auto Parts
It is the Mission of Advance Auto Parts to provide personal vehicle owners and enthusiasts with the vehicle related products and knowledge that fulfill their wants and needs at the right price. Our friendly, knowledgeable and professional staff will help inspire, educate and problem-solve for our customers.

This statement basically suggests that profits are of no concern to Advanced Auto Parts, as long as their customers are happy. It also includes what many mission statements do, that is, run on sentences. It was suggested by someone, somewhere, that mission statements should be limited to one or two sentences. But what if the company’s mission is more complex than that? Is the statement more important than the actual mission?

American Standard Company (plumbing products)

American Standard’s mission is to Be the best in the eyes of our customers, employees and shareholders.

This is at least a bit more honest, in that it includes employees and shareholders, thereby suggesting that profits actually count. But it doesn’t say what they want to be the best at. Quality of products? Delivery on schedule? Biggest selection? Cheapest price?

AmerisoureBergan (pharmaceuticals)

To build shareholder value by delivering pharmaceutical and healthcare products, services and solutions in innovative and cost effective ways. We will realize this mission by setting the highest standards in service, reliability, safety and cost containment in our industry.

This is one of the best ones yet, save for the run-on sentences. They address shareholder value, cost effectiveness, and it actually describes how they intend to achieve their mission.
Anadarko (oil and gas exploration and production)

Anadarko’s mission is to deliver a competitive and sustainable rate of return to shareholders by developing, acquiring and exploring for oil and gas resources vital to the world’s health and welfare.
Once again, an excellent mission statement because it is extremely honest, without all the “the customer comes first” or “exceeding your expectations” drivel.

Becton, Dickenson and Company (medical supplies and equipment)

To help all people live healthy lives.

If this company where a “not-for-profit”, I would understand this mission statement. Since it is not, this statement is simply a lie meant to put the company in a more pleasant light than it should be. This is like my lawn care company’s mission statement being “to keep Florida’s lawns green, even if we lose money doing it”

MGM Mirage

MGM MIRAGE (NYSE: MGM), one of the world’s leading and most respected hotel and gaming companies, owns and operates 24 properties located in Nevada, Mississippi and Michigan, and has investments in four other properties in Nevada, New Jersey, Illinois and the United Kingdom. MGM MIRAGE has also announced plans to develop Project CityCenter, a multi-billion dollar mixed-use urban development project in the heart of Las Vegas, and has a 50 percent interest in MGM Grand Macau, a development project in Macau S.A.R. MGM MIRAGE supports responsible gaming and has implemented the American Gaming Association’s Code of Conduct for Responsible Gaming at its properties. MGM MIRAGE also has been the recipient of numerous awards and recognitions for its industry-leading Diversity Initiative and its community philanthropy programs. For more information about MGM MIRAGE, please visit the company’s website at http://www.mgmmirage.com.

This is not even a good imitation of a mission statement. It’s a bragging statement, along with a commercial. They don’t tell you what they want to do; they tell you what they’ve done. It’s horrible.

My point is to suggest that, even among Fortune 500 companies, the biggest and most profitable on the planet, the differences in the style and substance of the mission statements tend to suggest that they are largely irrelevant; otherwise you would tend to see some type of pattern in them. My opinion of mission statements is that they satisfy the fantasies of those who write them, and no one else.

Competitive Advantage and Globalization-R-A Theory

Competitive Advantage and Globalization

It has been said that a firm has competitive advantage when its creative strategy is not being implemented by a competitor, and sustained competitive advantage is when its competitors are unable to duplicate the benefits of this strategy (Barney, 1991).

Global competitive advantage can be elusive when there is homogeneity of resources among global competitors, without, in many cases, first mover advantages, which allows one particular company to gain early and/or exclusive access to distribution channels, develop early goodwill with customers and build a reputation of trust in the industry (Barney, 1991).

True advantage typically requires heterogeneous resources, (such as access to abundant, cheap labor, or inexpensive, plentiful natural resources), that are either not readily available to competitors or not sufficiently mobile for them to obtain it at reasonable cost (Barney, 1991).An example of this would be a steel mill whose competitors are closer to sources for iron ore and coke. This mill would need to find competitive advantage in other areas, such as human resources or access to inexpensive transportation of those other resources to its mill.

In order for a firm to achieve or retain competitive advantage within a global framework, knowledge of local market for resources is critical, as is the ability to leverage whatever other resources are available locally for the purpose of obtaining that advantage (Seggie, Griffith, 2008).

Resource-advantage, or R-A theory, views companies as combiners of heterogeneous and imperfectly mobile resources, addressing the methods through which companies obtain advantages over their competitors by leveraging these resources to their greatest benefit.

R-A theory suggests that most resources needed by competitive firms and heterogeneous and not readily mobile, therefore the firm that can access these resources either before their competitors or to the exclusion of these competitors in a particular area of the world will obtain a resource-based competitive advantage. An example of this would be a beer manufacturer purchasing exclusive rights to the water from a natural spring, thereby gaining a sustainable competitive advantage so long as it can exclude competitors from using that resource (Shelby, 1997).

Developing these resources on a global scale is a critical function of companies like soft drink and beer manufacturers (water), clothing manufacturers, (inexpensive labor, fabric, raw materials) petroleum producers, (access to underground oil reservoirs) and the like. The more heterogeneous and imperfectly mobile these resources are, the more critical to sustained competitive advantage.

Resources
Barney, J. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99-99. Retrieved from http://search.proquest.com/docview/215258436?accountid=34899
Seggie, S. H., & Griffith, D. A. (2008). The resource matching foundations of competitive advantage. International Marketing Review, 25(3), 262-275. doi: http://dx.doi.org/10.1108/02651330810877207
Shelby, D. H. (1997). Resource-advantage theory: An evolutionary theory of competitive firm behavior? Journal of Economic Issues, 31(1), 59-77. Retrieved from http://search.proquest.com/docview/208840061?accountid=34899

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