Will XM & Sirius radio create a monopoly?

There have been several articles lately about the possible merger between XM and Sirius radio. A current article in Forbes discusses the situation and the possible outcomes. The argument is if XM and Sirius merge, will a monopoly be created? I think that the answer to this question is no. However, it may depend upon what time horizon is looked at. Currently, satellite radio, in my eyes, is considered to be a competitor to land-based radio, I-Pods and other hand held devices, and internet radio. It seems that if a business takes customers away from another business, they are competitors. So, if XM and Sirius merge, they are still left with competition. Thus, they would not become a monopoly. However, this may change depending upon the future. If satellite radio is the future of radio and other music devices, then this possible merger may be the beginning of a monopoly. On the other hand, many people do not like the idea of paying for radio. Because of this market segment, it might not be possible for XM and Sirius to create a monopoly. Free radio and other music devices may always be in demand. In the end, it must be determined who satellite radio competes with.

Pet Food Recall

I was reading an article this morning in the New York Times about a recall on over 60 million cans of pet food by Menu Foods, a pet food manufacturer for companies including Proctor & Gamble, Nestle and Colgate-Palmolive. Gravy-style pet food that was made between December 3 and March 6 is being recalled due to ten pet deaths so far. Kidney disease is the cause of death among these animals and has been linked to the pets eating Menu Foods manufactured pet food. The cause? They do not know for sure but the timing coincides with a change in supplier of wheat gluten; however, Menu Foods will not name the supplier. Menu Foods is taking responsibility for this incident, whether it is the suppliers fault or because of something that happened inside their own plant. The recall and compensation effort is estimated to cost Menu Foods $30 to $40 million. When they announced these figures, stock prices dropped 26%. While this is surely going to hurt Menu Foods right away, I think it will help them in the long run. People who love their pets enough to buy them gravy-style pet food are going to appreciate Menu Foods for taking responsibility and trying to reconcile the mistake (whether ultimately theirs or not). It reminds me of the major Tylenol recall by Johnson and Johnson in the 1980's. This time we are obviously dealing with pets rather than human lives, but isn't dog man's best friend? I think this is a good move on Menu Foods part. It will help them to keep big names like Proctor & Gamble as customers. I think Menu Foods needs to be generous to the grieving pet owners, which will keep them out of court and better their image for the future. Consumers trust responsible companies.

No Smoking...In Casinos?

An article in USA Today talks about the ban on smoking in Atlantic City, the second biggest gambling city in the United States which brought in $5.2 billion in revenue in 2006. New Jersey has previously outlawed smoking in all bars, restaurants and other working places. Beginning in April, smoking will only be allowed in a designated 25% of the gambling floors and proposals are currently underway to outlaw smoking altogether in New Jersey casinos. Colorado, Rhode Island, Pennsylvania, Illinois and Lake Tahoe are not far behind New Jersey in putting bans on smoking. Many are arguing that this ban on smoking will hurt these casinos profitability and make them unable to compete against casinos in other areas that permit smoking. I personally don't think that it will hurt business that much, in fact from other information I've looked at banning smoking has actually increased business. Maybe some avid smoking activists will travel to other destinations that allow smoking, but how many new non-smokers will come out to the gambling floor because they won't have to worry about that constant overhead cloud of smoke and go home smelling like a bar? As long as there are designated smoking areas, even if outside, I think the casinos will be economically better off and a much better environment.

Bill Gates' Visa Petition

For years there has been an argument about the border system. Many people feel that the U.S.A. should close its borders to all immigrants, whereas others believe that we should allow everybody to enter. It seems that the Chairman of Microsoft Corporation, Bill Gates agrees with the latter group. In a recent petition to congress, Gates pleads that the high-tech industry in the U.S.A. needs all the brilliant, and educated minds. He felt that many of the bright scientists of the world are being sent away from the U.S.A, because of the strict visa policy in our country. Gates feels that there should be an "infinite" number of H-1B visas, which allow well-educated foreigners to work in the United States for several years. Recently, people have spoken out against Gates for his opinion. People with a knowledge of economics feel that an increase in the wages for the domestic workers would help bring supply and demand of high-tech jobs back into equilibrium. This argument seems to be a double edged sword. If the U.S. companies were to employ more immigrants, then the domestic market will suffer the loss through increased unemployment. However, if the U.S. companies increase the pay for the workers, then the U.S. consumers would probably pay a higher price for the domestic goods. It is an issue of economics, and I think that Bill Gates is right. We need to bring all the brilliant minds in to keep the U.S.A. competitive, it is the best business decision for America. It may lead to higher rates of unemployment, but it might also force people back to school and then once again into the high-tech industry. I think that the U.S.A. needs to stay ahead in this industry.

J.C. Penney, Back in Fashion?

I recently read an article in Business Week about a strategy that the CEO of J.C. Penney hopes will bring life to the slowly declining image of the department store. According to the article, J.C. Penney has had the image of being, “your parents store.” The CEO has introduced a trendier line of clothing in an effort to attract younger crowds that are more fashionable. The new line of clothing has already caused a slight increase in the companies’ profits. I think that CEO has made a good move in introducing a new line of clothing. I do not know that the increase in profits will be sustainable however. According to the article, Kohl’s is J.C. Penney largest competitor. In reaction to J.C. Penney’s new product line, Kohl’s has introduced its own trendy product line that is back by celebrity endorsement. Do you think J.C. Penney has a chance at reviving its image? Do you think they have made a good move? If not, what would you suggest that a company do to change its image?

Practice What You Preach

Ever since I started studying in the U.S.A the same topic has been coming up a couple of times now: Developing a mindset that will make you financially successful in life. Next to individuals trying to live the American dream there is a growing interest in what factors influence employee attitudes, especially the kind that stimulates financial success. In a book excerpt of ‘Practice What You Preach’, by David H. Maister, it is explained how important it is to be able to create a culture that supports the drive for success. His research has shown that as companies get bigger a lot of the key profit drivers such as valuing input, listening, trust, practicing what you preach, etc suffer and loose ground in the companies culture.
Even though this research did not include any financial performance data it seems obvious that the bigger the organization the harder it is to achieve the employee attitudes that drive success.

http://www.businessweek.com/smallbiz/content/nov2001/sb20011109_069.htm

Best Buy

I read an article recently about Best Buy called, "Smashing the Clock". The article states that Best Buy has totally rearranged how they work. The company used to be run by hard-nose executives that thought success only came about by hard work and long hours. Now they have reenergized the company with a so-called new experiment. They call this experiment, "ROWE". It stands for, "result-only work environment". They are not the first to come up with this idea, but they are the first to be successful at it. The whole idea is to give employees the freedom they deserve. They are not evaluated on how many hours they put in a day, but on their performance only. Some employees are able to work at home, or come in the office only for a few hours a day. The only thing that matters is that the job is done efficiently and effectively. Once the job is complete, the rest of the day is theirs to do what ever. How would it be?
Best Buy did not want to hit a plateau like most companies. The article stated that most large companies fail to grow with inflation because their employees fail to work as hard as before. They see their success and basically stop performing. This experiment has really worked for Best Buy. Since starting the experiment, the employees have become more productive and happier with their jobs. In return, Best Buy is not hitting a plateau, but are finding themselves more effecient. This is why they are the nation's leading electronic retailer. However, the question I find myself asking is "Will Best Buy's employees be able to continue to self motivate and how can Best Buy help them stay motivated?". Other companies have tried this before and failed.

Minimum Wage Increase May Not Cause Inefficiency

CNN (http://www.cnn.com/2007/POLITICS/02/16/minimum.wage.ap/index.html) and other news sources have reported on the House and Senate passing a bill that would increase the minimum wage from $5.15 to $7.25 over the next two years. Minimum wage is clearly a price floor, which can cause an inefficiency in the market if it is set above the free-market equilibrium. I do not think the minimum wage increase will affect the market equilibrium. Most people in the lowest income bracket are already being paid above minimum wage. Even companies in Cedar City -- like Smead, Convergys, etc -- who primarily hire unskilled individuals without a college education, are paying above minimum wage. Also, many states have higher minimum wages -- also called living wages. I don't think the increase to $7.25 exceeds the free-market equilibrium and should not cause excess supply of labor. I think that the only companies that may see an excess supply of labor and a higher labor cost is fast-food restaurants, which primarily hire high school students at the minimum wage.

Starbucks vs. Ethiopia

In a recent article entitled “Starbucks vs. Ethiopia” Stephan Faris explains that for a $26 bag of premium coffee sold in the United States, Starbucks only pays the growers in Ethiopia $1.43. The debate lies in the words Starbucks uses to ensure the coffee’s premium status. The words Starbucks uses are the names of the places where the beans are grown in Ethiopia. This means Starbucks can charge a premium and not pay a premium on a name they don’t own. This does not sound fair and according to the article Ethiopia is taking the issue to the United States Patent and Trademark Office in order to trademark the names of the regions where the beans are grown. Starbucks argues that this is unconventional for a region to use a trademarked and is pushing for Ethiopia to protect its products by using geographic certification instead. I support Ethiopia in its decision to go after the trademark and if it fails, they should push for a geographic certification because in my opinion something should be done.

Airline Food

If you have flown on a commercial airline recently, you may have noticed that there are no free airline meals on most airlines. The Capital Freedom Blog discusses this point and concludes that airlines must have found that passengers are very price sensitive about the cost of their seats – much more so than about the amenities on flights. Many airlines are charging $1 to $5 for snacks and meals aboard flights. Personally, I think this is a great change. Even when airline meals were free, I almost always preferred not to eat them. Now, I know that I am not paying for an amenity that I am not consuming. The article also cites Continental Airlines as being one of the last holdouts to offer meal service on domestic flights. Their research (very limited) indicates that while there may be a slight cost difference between airlines with and without meal service, the flight options (timing and number of connections) are still the #2 factor in deciding between airlines, with price being the #1 factor. For me, that is about right, although #1 and #2 are pretty close. I suspect when it really comes down to it, most consumers care very little about meal service, and the airlines were very wise to cut it as a cost-cutting measure. This will allow them to build their business with very price-sensitive consumers.

Gaming System Skirmish

I don't own a gaming system but was fascinated by an article that I read from a magazine in my boss's office. It focused on the power struggle between the three major companies; Sony, Nintendo, and Microsoft. First, Microsoft launched the XBox 360 for the Christmas of 2005 in order to beat Sony and Nintendo in the release of their most current gaming systems, and hopefully steal some of their market. They focused on building a strong on-line connection between gamers. The PS3 and the Nintendo Wii both came out this past Christmas. The PS3 incorporated Sony's new Blue Ray technology and felt that graphics were the key to gaming systems sales. Nintendo, on the other hand, forewent graphics and focused their research and development on a more interactive game controller.
Sony Playstation has held market dominance since they introduced their first playstation. When they launched the PS3, it seemed as if they didn't account for what the XBox had done with on-line interaction or what the struggling Nintendo was doing with their new interactive controller. They seemed to think that just because they always have had market dominance by having better graphics that they would continue to hold their market strength.
Nintendo was considered dead in the water after the Nintendo Game Cube failed. They responded by NOT trying to keep pace with Sony's graphics. It could have been the perfect response. The Nintendo spokesman may have stated it best when he said, "people want fun not graphics" (Electronic Gaming Monthly, March 08).
The Nintendo Wii has made twice as much as the PS3 in the past few months. Has Nintendo taken the right approach with their new game controller or is it just a novelty? Will we start seeing Nintendo Wiis resold on ebay in a year? Is Sony's focus on technology more profitable in the long run?

Illegal Immigration & Capital Spending

A column in the Washington Times recently cited the many negative effects that illegal immigration has on U.S. citizens. Lower wages for all workers due to illegal immigration makes sense from an economics standpoint. When the quantity supplied increases, the price will decrease. Businesses can also be hurt. For example, in the construction industry, companies that do not hire illegal workers are expected to compete with companies who do hire workers for whom they do not face such costs as workers compensation. The most interesting effect cited was one I had never considered. The author claimed that a supply of cheap labor served as a disincentive for companies to invest in technology. Why should a company invest in capital, if they have a large supply of cheap labor? In the long run, this can hurt the entire U.S. economy. This has become a very hot issue lately and the reemergence of white power groups (yes, even in southern Utah) is alarming. However, I think these points would allow a productive discourse to begin.

Hualapai Antics at the Grand Canyon.

I read this article about the Skywalk created at the Grand Canyon by the Hualapai Tribe. This Skywalk was created to allow visitors to have something new and exciting to see at the Southern Rim of the Grand Canyon. The main reason the Hualapai Tribe decided to do this was to help boost their struggling economy. The Hualapai hope that this new attraction will cause more people to want to come and take part in the Grand Canyon experience on the Southern Rim. Though this seems beneficial for the Hualapai, environmentalists have expressed their dislike for the Skywalk. They say that it tarnishes the beauty and natural look of the Grand Canyon.

I think that the Skywalk is a great idea. It does change the look of the Canyon where it stands, but allows many people to see a part of the Grand Canyon that was almost impossible to see before. I think that this is a wonderful thing! It should, in my opinion, increase the demand of that tourist site. I think that providing something like this increase the demand by providing better sight-seeing possibilities is a very smart economic move. Also, I think that no matter what venture one chooses to take, there will always be people who will want to take issue with what is being done. Often times environmentalists are more concerned about providing negative externalities than with trying to see the benefits of what is being done. I feel that this is the case with the Skywalk. It will only enhance peoples experience at the Grand Canyon--and that is a great thing.

Click HERE to learn more about the Hualapai and the Skywalk.

Technology Today!

I read an article about "anywhere marketing".
The article talks about how new technology is giving companies more of a competitive advantage. Technology today allows us to run a business from home, or on the road. It allows companies to hire across the country and their employees will never have to go into the office. Laptops, mobile internet, and cell phones make all the difference. Technology is changing the business world, and for the most part it is doing alot of good. Companies are catching on and are drastically increasing their profits by becoming more efficient. This is a good thing, but I see that there can be alot of disadvantages too. Does new technology make running a business easier or harder and in what ways?

Why Toyota is Afraid of Being #1

I read an article recently in Business Week entitled, "Why Toyota is Afraid of Being #1." This link, Business Week, takes you to the article. In the article, Toyota expresses the concern that becoming the number one car company in America may cause some Americans to become upset over the fact that they are not an American company. In my opinion, Toyota makes a quality car at a relatively inexpensive price. I do not see anything wrong with a foreign car company becoming the #1 car manufacturer in America. The article reports that the American born GM is upset over the possibility that Toyota is on its way to being #1. Well what are you going to do about it GM? What do you all think? Should we be concerned that more and more Americans are beginning to prefer foreign made cars to American made cars? Should be concerned that a foreign car company is on its way to being #1 in America?

I read an article recently in Business Week entitled, "Why Toyota is Afraid of Being #1." This link http://www.businessweek.com/magazine/content/07_10/b4024071.htm?chan=globalbiz_asia_more+of+today's+top+stories takes you to the article. In the article, Toyota expresses the concern that becoming the number one car company in America may cause some Americans to become upset over the fact that they are not an American company. In my opinion, Toyota makes a quality car at a relatively inexpensive price. I do not see anything wrong with a foreign car company becoming the #1 car manufacturer in America. The article reports that the American born GM is upset over the possibility that Toyota is on its way to being #1. Well what are you going to do about it GM? What do you all think? Should we be concerned that more and more Americans are beginning to prefer foreign made cars to American made cars? Should be concerned that a foreign car company is on its way to being #1 in America?

U.S. Compaies Exporting Jobs to Foreign Companies

I recently read an article in USA Today, about companies that have started in the United States and have subsuquently moved their operations to foreign countries to take advantage of the cheap labor. I can understand from a managers perspective the advantages of the having low costs labor producing the parts and doing the services for a fraction of the costs that U.S. employees cost, but at the same time I have a problem with the fact that many jobs that could be done by U.S. citizens are being given to foreign workers. I do not have a solution to what I consider a problem. It is a fact that in most cases, U.S. employees expect more money for their time and services than foreign workers do. I do not think that that can be changed. So therefore, I don’t know what to suggest. Does anyone else have a problem with U.S. companies exporting jobs to other countries? If so, what can be done to prevent U.S. companies from exporting the jobs?

Corporate On-site Health Care

Different approaches have been taken to increase the demand for healthy lifestyles in order to decrease insurance costs. The government uses tax dollars to implement programs like Gold Medal Schools and educational websites. Companies have been shifting the burden of insurance costs to employees and then subsidizing employees when they live a healthy lifestyle. Other companies have taken the bull by the horns and provided health facilities for their workers.

Whole Health Management is a company that manages on-site primary care and fitness centers for dozens of corporations. On-Site health care clinics are a growing phenomenon for medium to larger companies as shown in this CNBC video from the Whole Health Management website. According to an article in the Washington Post the convenience of the clinics increases demand and not only gives direct savings in health care costs, but helps eliminate lost work time because a cold does not turn into bronchitis or high blood pressure does not turn into a stroke and so forth. Even a company with only 1500 workers and having a workforce that was considered young was able to save $1000 per employee in the first year.

The more I look for companies to work for the more I see a divergence between companies that treat employees as assets and others that treat employees as an expense. If an employer is going to have to pay for the new engine in the end, would it not be beneficial to pay for and make sure there were regular check-ups?

Go Nissan!

In a rather short artical "Nissan to build factory in India" I was surprised to read that Nissan is doing so well. It wasn’t long ago early nineties I think when Nissan was going through some tuff times. Along came the Renault merger and within a few years Nissan’s back making high quality cars and expanding to emerging markets. Hurray for capitalism. Go Nissan! You never know maybe Ford and GM have a chance?

How Moral Is Capitalism?

I recently read an article from the February 12th issue of Forbes magazine entitled, "How Moral Is Capitalism?". In this article, the author, Rich Karlgaard was attacked by a blogger calling himself "Adam Smith". "Adam Smith" was accusing him and all businessmen of being money grubbers- too wrapped up in the pursuit of money that they are not interested in some of the natural gifts of life. Thus, they have missed out on the purpose of life. Rich brings up some interesting questions about capitalism with a bi-partisan political system. Consider some of the following:

The first is that capitalism makes the fruits of individual labor available to the masses, and thus makes life better for all invovled. Is this the true purpose of capitalism? Is this the reason why we choose to participate in this economic system?

Second, is capitialism is as moral as it could be? Do some do without while others thrive? Is it moral for the government to regulate the incomes of private citizens and redistribute their "surplus"?

Lastly, Rich quotes the real Adam Smith's definition of self-interest (the reason why capitialism works) from his book "The Wealth of Nations",

"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to theor own interest."

Rich points out that Smith felt that self-interest is the psychological need to win favor within one's society. He goes on to conclude that self-interest and moral sentiments are the same thing. Therefore, at least, capitalism by definition is moral. Do you agree or disagree with these arguments? Can we count on the need of other's to succeed to be the moral fiber in capitalism? Can we count on the government to level the playing field by means of distribution of income surplus? Can we trust politicians to carry out on their promises to do so once voted into office? If not, how can we ensure that our system is moral? What free-market economic principles teach us the value of morals in capitalism? Does capitalism even need morals?

I personally feel that the author is correct in many of his assumptions, and that we cannot count on the system to be moral, we must count on the people invovled in the system. What do you guys think about some of these questions?

For more topics by Rich Karlgaard.