I read an article in Business Week about the growth of Google. The article, which you can find HERE, talks about the incredible growth that Google has had and continues to have. They are even outstripping their own projections for growth and are leaving their competition, Yahoo and MSN, far behind. As I read this article I tried to determine which stage of the business cycle Google is in right now. At first glance I had thought that it was in a more mature stage because Google has been around for a long time and has seen tremendous success and should be reaching a point where their growth will start to slow. However, I later decided that it is most definitely in a growth stage. Not just because of the growth they are now seeing, but because they are constantly doing what needs to be done to ensure that their company will not reach a stage of maturity and decline. Specifically, they are outstripping competition because they are being innovative, not because they are just lucky. They are constantly improving their software and adding new features that are appealing to customers. This is very inspiring because when I think of Google, I think of a company that is constantly striving to better meet the needs of its customers. That is a refreshing thing, and definitely a principle that is taking Google to new heights!


Average Americans and Experts Differ

I recently read an article found in Business Week entitled, "The Economy: Why So Gloomy?" The author of the article made the point that many experts of the U.S. economy and the average consumers do not see eye to eye on the current trend. Over the last three months of the year, the market has been a relative rollercoaster, with some very high days and a large amount of extreme low days. People question whether or not we will head into a recession within the next year, and the buzz has touched my interests. I have never lived through a recession that I can remember, but the idea scares me a little. The experts on the market are optimistic in the face of the declining consumer spending that has occured over the past few months. Some people feel that the consumer spending will drop from 3.6% growth from the end of last year to 2.5% growth for the remainder of 2007. This may not sound like much of a decline, but consumer spending accounts for around 70% of total G.D.P. Where is the market going? Are the experts right? Will the economy continue to grow over the next two years or are the scared consumers foretelling the inevitable future? I think that the consumers are trying to see into the future and may be right on this matter. We should probably prepare ourselves for a recession.

Follow-up on Menu Foods

Earlier in the semester I published a post concerning Menu Foods and their recall of approximately 60 million cans of pet food. I was curious what had happened and how the situation was looking for Menu Foods so I decided to follow up on it. They definitely did the right thing on recalling the pet food. Melamine, a fertilizer used in Asia and aminopterin, a rat poison were found in tests done on Menu Food products. As of March 20, 14 pets were declared dead by the FDA because of tainted pet food produced by Menu Foods. The original recall was on March 16. Since then the recall has been expanded twice to cover all of the suspect gluten used in various Menu Foods plants and products. An article in USA Today says that a “clerical error” was to blame for all of the contaminated gluten not being discovered the first time. While Menu Foods appeared to be taking the necessary steps to be socially responsible, they are now facing several law suits because they failed to properly track and record their shipments.


Google buys ad firm DoubleClick for $3.1 billion

I recently read an article about Google acquiring DoubleClick for $3.1 billion in cash. According to the article this purchase is Googles largest purchase yet, which far surpasses its previous largest purchase of the online video company YouTube for $1.65 billion. Googles stock price recently closed at $466.29/share. According to the article Google is planning to pursue acquiring several other companies. My question is; is there any end in sight for Google? They seem to be everywhere and known by everyone. Similar to Wal-Mart, Google has grown so large that I wonder if they will be able to sustain the growth and momentum they have created? What do you think? Do you think that management will be able to create ways of sustaining and maintaining the growth? Do you think that it is possible for a company to become so large that they can no longer sustain or maintain their operations?

Jobs, Not Subprime, Continue To Drive Foreclosure Rates

I recently read an article on Yahoo entitled, “Jobs, Not Subprime, Continue To Drive Foreclosure Rates.” In this article, the author states that California leads the nation in sub-prime loans, yet its foreclosure rate is below the national average. The author of the article suggests that California’s ability to create new jobs is the reason for not having a foreclosure rate similar to or higher than the national average. I find this article very interesting, because there have been many media sources lately that have been blaming home foreclosures on the sub-prime market. In fact, most sub-prime lenders have recently shut their doors because so many of their loans have gone into default. My opinion after reading this article is that sub-prime borrowers are not entirely to blame for loan defaults, but the lack of jobs is the primary reason for foreclosures. Many companies in the United States are moving their operations overseas in an effort to cut costs. In my opinion, I think that this may be the cause of many foreclosures. I think that if we want to keep our economy strong and avoid foreclosures we must continue to create jobs and offer incentives to companies to keep their operations in the United States. What do you think?

Trade Gap Narrows

In the article “Trade gap narrows, but consumers wary” it points out that for the past two months the trade deficit has gone down, but not fast enough for Democrats. Now that Democrats have control of the House and the Senate they plan on increasing tariffs and putting pressure on WTO. I think it is great to try and close the trade gap but I don’t think we should try to limit products that we import, as much as try to increase the amount of valuable products we can produce.


Low saving rate in U.S. seen as danger

A recent article entitled “Low saving rate in U.S. seen as danger” the European Union’s monetary chief said “the United States low savings rate and large budget deficit pose a risk to the global economy”. He went on to say that “the world’s largest economic powers should take advantage of current prosperity to reform their economic policies”. I completely agree with the European Union’s monetary chief’s statement. I think running a deficit should be reserved for recessions. The United States should run a surplus during times of economic growth such as now.

Low U.S. saving rate

A recent article entitled “Low saving rate in U.S. seen as danger” the European Union’s monetary chief said “the United States low savings rate and large budget deficit pose a risk to the global economy”. He went on to say that “the world’s largest economic powers should take advantage of current prosperity to reform their economic policies”. I completely agree with the European Union’s monetary chief’s statement. I think running a deficit should be reserved for recessions. The United States should run a surplus during times of economic growth such as now.


Who is Right: The People or the Professionals?

I just read an article in business week about the economy in the US today. It talked about the direction our economy is moving presently in relation to how it is viewed by the general public. The article stated that most professionals are optimistic about our economic future and feel that the current low unemployment will continue to remain low for a while. The public, however, feel very differently about this. Specifically the lower income segment of the United States, those below $40,000 a year, view our economy much more pessimistically. The article went on to state that often times the public has been right regarding future economic downturns. This makes sense considering that the people who have these feelings about the market are the same people who influence the market through their buying habits. Personally, I agree with the article when it stated that many of these people are pessimistic about the future economy of the US only because it is an uncertainty and they are afraid of that uncertainty. I think that when people don't know the outcome of something they become more afraid in relation to that thing. With this in mind, people are afraid of what the economy might do in the near future because they are not positive of what it will do. I think that if we look at the economy today, it seems to be moving in a very good direction and I, for one, see that as a positive sign that it will continue to be good in the future.

Supreme Court Ruling

As of this month, the Supreme Court has found that the EPA has shirked its responsibility to regulate carbon dioxide emissions from vehicles. The article “Court Turns Up the Heat on Global Warming” states that the Supreme Court has ruled carbon dioxide a pollutant, and as a pollutant, it falls under regulation by the Clean Air Act of 1970. Environmental groups view it as “a crucial step in the path to federal carbon emissions legislation”. It is obvious that consumers that drive vehicles are not paying the full cost of their action, and they are putting a negative externality on society. I argue that this ruling by the Supreme Court could be a step in the right direction.

2008 Fundraising

2008 Fundraising.

A recent article in New York Times dated April 4, 2007, indicated that fundraising was more than four times higher than this same time period in the 2003 political campaigns. “The staggering sums are an indication that the American people want a conversation.” I disagree. Most of the money comes from big businesses who want a politician in their pocket. The majority of the American’s care but not enough to separate cash from their wallets to help the campaign member of their choice. I believe that this is supported by the lack of news the younger generation absorbs (recent reports indicated newspaper sales and T.V. news viewing are down; understandably they may be getting their news from the internet but I could find no statistics to back that claim) and by the numbers at the polls. Also, this same article clearly states that Obama’s money comes from selling a personal story in two best-selling books. This early in the race the different parties just use the amount of money generated to signal to the media that they are more wanted by the American public then the party with lower funds. Which is not necessarily the case, especially this early in the race.

Is Wal-mart a monopsony?

Traditionally a monopsony represents a buyer who buys less in order to force prices lower. Wal-mart uses their huge buying power to force prices lower. On the surface, this appears as a benefit to society and the end user or consumer appears to have an increased surplus – in the short run. I challenge that it in fact is a detriment to society. Wal-mart prides themselves on being the low cost leader and driving prices down. In order for a company to continue to have their product sold through Wal-mart, they must continue to cut their own costs in production. There are only so many cuts that can be made, and still make a profit, before the quality of the product starts to suffer. End user surplus is not increased in the long run due to cheaper products falling apart sooner and increasing the ‘durables’ replacement frequency rate. So the low price, cheap deal is not always the best deal. For an example, if I buy a pair of levi’s (red tag) at Target I will pay $50 and they will last a good six months. If I buy a pair of levi’s (orange tag) at Wal-mart for $30 they will last less than three months. So in one year I can spend $100 or $120 for the same time coverage for a product. Levi started the color tag to differentiate its product because it could not meet Wal-mart’s demands on price and keep its high quality standards, so it created a new lower standard for their product sold only at Wal-mart and continued to keep its high quality product that was sold at other retail outlets. If you go to Levi’s website , they won’t even list Wal-mart as a retailer that sells their merchandise. there is a point where a good name and quality go hand in hand. I hear (from teenagers) the new name is Wal-mart Fall-apart (the same name consumers gave K-mart in the late 80's).

Patents and Trademarks

In Chapter 8 we talked about Intellectual Property and using copyright and patents to protect that knowledge. Patents and copyrights protect an investment and are seen as a barrier to entry. However, at least one company and one industry are proving that the opposite is in fact true. Coca Cola has registered their trademark but has NOT patented their ‘real thing’ recipe. Copyrights only afford protection for 20 years. If Coca Cola had patented their recipe it would now be up for grabs and by not obtaining a patent they have been in business for over 100 years. The fashion industry also has trademarks. However, the clothing design itself is not patented AND there was a Supreme Court Case in 1941 that states that the practices of patenting styles was a violation of antitrust laws. So if you design a new jean and it becomes a new fashion trend, you can expect very quickly for other companies to copy your design and slap their own trademark or logo on it and start competing with you. Normally, this would be seen as an industry that you would not want to enter because it is too easily copied and there is no way to differentiate your product and protect it. However, the fashion industry is decidedly fickle. Cool is only cool until uncool people start to pick up on the trend. Then a new trend has to be designed and marketed, and if successful, then copied. This trend for the fashion industry is successful because clothes are out of style before they are worn out necessitating the need for a high frequency rate of replacement. So in this case, the lack of intellectual property protection actually promotes the fashion industry, challenges them to come up with the next fashion trend, and charges them with continuous business. Quoting from a New York Times article “In some cases, it appears that lack of protection can lead to more vibrant and dynamic industry.”

Higher Wage for Higher Age

In America, it is traditional that the longer you are with a company the higher salary that you will make. Therefore 50 and 60 year olds make more than 20 and 30 year olds. This tradition gives a surplus to society by allowing American salaries to keep pace with increasing living standards and to cover higher mid life expenses such as college tuition for children. There was a recent article in the New York Times about how Circuit City laid off 8% of its workforce because their workers were being paid too much. So they eliminated jobs and will replace the laid off employees with new employees who will accept lower salaries. Obviously, they laid off the older workers rather than the younger workers. This is not an employment law class so I won’t go into detail about age discrimination. Economically, we know that paying workers based on ‘time on the job’ isn’t the most productive way to have a salary base. Paying a salary based on performance or productivity makes more sense. Those with more experience would receive higher pay due to prior knowledge and learning curve that in turn would relate to a higher output. The move by Circuit City however, is a very aggressive move to cut costs. 3,400 people will now no longer be able to afford their product and the PR nightmare that will ensue is going to cost them in advertising and legal fees. So is this a good move? I am sure there are a lot of companies that will be watching Circuit City real close in the upcoming months to observe the fallout of this attack. If Circuit City escapes unscathed then more companies will follow suit and start eliminating higher paying positions and then rehiring those same positions at a lower wage. I seriously doubt that the overall benefit to society is going to be positive. Less pay to Americans leads to a lower living standard. We are so worried as a county about increasing every other country’s standard of living, maybe we need to look in our own backyard first. When did increasing the dollar to the shareholder become more important than the dollar to the worker who produces the product? How is the shareholder going to get that dollar if no one can afford to buy the product?


Tee Time?

To some executives in the business world, golf plays a major factor when cutting deals and making contracts. It gives business men and women the opportunity to wine and dine their current or future clients. However, I recently read an article in the Salt Lake Tribune about how golf may be losing popularity. The article stated that for the first time, more courses closed in the United States last year than were opened. It also stated that approximately 600,000 people in the United States make a living from businesses related to golf in one way or the other. Because of the recent decline, many of "the game's movers and shakers have been doing a lot of soul searching to find ways to get golf growing again." These efforts include free lessons, new products, marketing professionals such as Tiger Woods, and other ways to attract new golfers. Because I am a poor college student, the only way I would play more golf is if the green fees were reduced. However, there are many people who are willing to pay much more than myself. So, what is causing the decline in golf and what will it take to become more popular? As far as I am concerned, it is the cost. I think that even if new golfers are attracted, they may not have a motive to keep with it if the cost continues to rise.

Is the Luster of Luxury Cars Waning?

I recently read an article from the online version of BusinessWeek entitled, "Luxury Cars Losing Luster?" The picture at the right is an automobile of the super luxury class called a Maybach. It is produced by Mercedes Benz, which is owned by DiamlerChrysler, and can be purchased for a mere $1.4 million. This vehicle leads the pack as one of 2007's most expensive super luxury vehicles. This automobile is designed to be the answer to pulling up luxury car sales from a slump. The article states that in the 1990's many of the car manufacturers were looking to release models into the super luxury market (over $100,000 in price) due to the economic prosperity being experienced at the time. But, even despite record pay bonuses, sales even the luxury class sales have drifted downward. How can offering a more expensive product attract more customers? The answer given by car manufacturers to cure lack luster sales is the super luxury class, which will concentrate on great design and the feeling of exclusiveness for the buyer. The introduction of a super luxury class basically boils down to product differentiation. Each car manufacturer is trying to gain monopoly power by making the most exclusive automobile. But, can the market support rising price tags and unlimited customization? Or, will a super luxury class further dampen sales for luxury vehicles? In theory the product differentiation strategy should work to the advantage of luxury car manufacturers, but only time will tell. What do you think?


Red Hat's Ideas for the Future: Linux for a Price.

I just finished reading an article about the company Red Hat, the leading distributor of Linux software. The article talks about the dilemma Red Hat is faced with as they try and sell software that is free. I was very interested in this article because I love Linux software and I've heard nothing but good about it. One very large selling point, of course, is that it is free. This article talks about what Red Hat is doing to try and make profits by selling this product. from what I understand of the article, Red Hat is starting to sell subscriptions to a new operating system. The article states that the operating system is an advanced version of Linux. Red Hat is specifically marketing this product to larger corporations with the hope that they will buy the product for its added benefits and better service capability. I am very concerned about the strategy because I question a company trying to make a profit off a product that has always been free. I think people love Linux because it is a wonderful product that doesn't cost them anything. I think that if consumers are going to have to pay for the higher-quality versions of Linux and only have low quality versions for the free price, demand for the Linux operating system will drop drastically. It's true that only moderate profits are realized now through tech support and services, but I think that is a much better plan than starting to charge for a service that is so famous because of its very attractive price.


Grad Salary

I read an interesting article found here. It talked of the rise of offers for certain graduates. This is of particular interest as I am about to graduate college and one wonders what all that time and energy spent on school work was for. Some of the biggest increases were in Marketing and Engineering. I think this is due in turn to the low unemployment rate that the nation is experiencing. With more and more employers looking for workers, it naturally causes the price paid for the workers to go up. An easy adjustment to the supply and demand curve. The low unemployment is also apparent in that more and more employers are looking at colleges for employees. With such a low unemployment, companies know that they are not going to be able to hire an already experienced employee, and thus turn to these graduates for employees. I am glad for the low unemployment and the benefits that it offers.


Focus on Global Warming Poises Firms to Profit

A recent article on CNN's economic news page describes how the increased focus on global warming is increasing demand for technologies that reduce greenhouse gasses, the generally-accepted culprit of the so-called crisis. Companies who have developed or are developing such technologies are well-positioned for high profits if this demand continues to increase. Just this week, the Supreme Court recognized the Environmental Protection Agency's authority to start acting to reduce greenhouse gasses, and large amounts of legislation regarding greenhouse gasses is also imminent. Some of these technologies simply create power more efficiently, so they could possibly pay for themselves in the long run. However, one new type of power plant (IGCC) costs 30% more to build than a regular power plant. The company developing this technology has received over $30 million in incentives to date. This is another example of a company making decisions that benefit all of society (no matter your take on global warming, less pollution is probably good for society), but only after incentives are provided to do so.


Raise Taxes!

Raising taxes is a necessity if we are to fix health care. This is what many Democrats will say in order to justify their wants of raising taxes. Republicans have usually said that by raising taxes the economy will fall. So, how do we fix health care? In an article I read the author says that all we need to do is take the costs of health care that businesses pay, which is around 500 billion dollars a year, and let the government assume the responsibility of paying it. After that there needs to be a tax that is equal in amount to pay for the newly acquired debt. The author suggests that the government could impose taxes in various forms such as carbon taxes. The tax would also help environmentally as well. This plan simply shifts the cost of health care from businesses to the general public. This plan should actually help businesses because it is cutting a big portion of their total costs. This idea may seem quite crazy, but it is one that is being discussed even as we speak.


Tax Time! Standardizing

There are some of us that are willing to dig deep to get a greater refund as we prepare our federal tax return. The one-time credit relating to a federal telephone excise tax is an example. An article in late January describes how individuals are willing to do great amounts of legwork to get a higher refund. For me I was willing to take the standardized credit instead of pulling phone bills for the past ten years and adding them up to see if I could achieve a higher refund for past payments of the federal excise phone tax.

Needless to say, time is valued differently for each of us. Some might assume that the government added all of the past federal telephone excise tax, estimated the number of returns to be filed and then set the value for each number of exemptions. For myself I would assume that the government estimated the value per exemption based on a price that would create a higher demand for taxpayers to take the standard credit and not do the legwork that would reveal the higher refund that they could achieve, meanwhile still having the greatest amount of surplus for government as possible. The government may seem greedy, but one may also say I am not greedy enough!