Category Archives: Market Intelligence

No Valentines Day for the Cadbury Oompa Loompas

I’ve been following the rather hostile takeover of Cadbury by Kraft for months now, just waiting for the hammer to fall. And this week it did.

400 Cadbury’s workers sacked after Kraft confirms factory will close just ONE WEEK after U.S. firm promised to keep it open.

I guess that says it all. For a history of the takeover (bid), here are direct links to some of the more relevant articles over the past few months:

  • Nov 19, 2009: Hershey in joint talks for Cadbury bid
  • Nov 19, 2009: “Kraft, Cadbury, and Hershey: A Not-So-Sweet Deal”? (HBR.org)
  • Dec 18, 2009: “Cadbury to slash procurement spending” (Procurement Leaders)
  • Jan 05, 2010: Buffett votes against Kraft bid for Cadbury
  • Jan 19, 2010: Kraft reaches $19 billion deal for Cadbury
  • Jan 19, 2010: Will Kraft Takeover Mean Job Losses in Cadbury Supply Chain?  (atrisk.net)
  • Jan 21, 2010: Loss of Cadbury’s independence ‘very sad’  (Procurement Leaders)
  • Jan 25, 2010: Procurement cuts to save Cadbury jobs (Supply Management)
  • Jan 25, 2010: Kraft’s Cadbury purchase highlights new logistics market (Transport Intelligence)

Want to Get Your Message Out There? Avoid the Social Butterflies!

The MIT Technology Review just published a great post on “the physics arXiv blog” that covered some recent research from Maksim Kitsak et. al. that found that the best connected individuals are NOT the most influential spreaders in social networks.

In a social network, most of the nodes (people) are not linked to each other, but most can still be reached by a small number of steps, according to the small worlds network theory. (In fact, recent research indicates that the average separation is now less than 5, and not 6.) In these networks, some nodes are much better connected than others. Traditional thinking is that these so-called hubs play a correspondingly greater role in the way information and viruses spread through a society. But traditional thinking has just been proved wrong!

Kitsak et. al have found that in contrast to common belief, the most influential spreaders in a social network do not correspond to the best connected people or to the most central people. This might seem counterintuitive, but, on reflection, it does make perfect sense. For example, many of the “best connected” people typically exist on the edge of the network, and, as a result, have minimal impact on the spreading process through the core of the network. In contrast, “a less connected person who is strategically placed in the core of the network will have a significant effect that leads to dissemination through a large fraction of the population“. Or, in other words, it’s not how many hits a site gets, it’s who hits the site. There are influencers and followers. If most of the readers hitting a site are followers, the message will not get spread beyond those readers. But if most of the readers are hitting a site are influencers, the message will spread far and wide with only a fraction of the hits!

Share This on Linked In

Yet Another Feather in Private Equity’s Cap

A recent article in CNNMoney.com on “best places to work” (CNN Money, Jan 26, 2010) pointed out that if you look at Fortune’s latest list of the 100 Best Companies to Work For, you’ll note an interesting trend: you can’t buy stock in four of the top five. In fact, 9 of the top 20 best companies are privately held and 40 of the top 100 do not have stock you can buy and sell on the NYSE or Nasdaq. There are also 15 non-profits, 2 partnerships, and 1 cooperative. In all, only 42 companies of the top 100 are public.

What gives? The author’s theory is that without having pesky shareholders to satisfy, these firms can probably worry more about keeping employees happy than satisfying the whims of Wall Street. And, more importantly, these employees can, in turn, worry more about keeping the customers happy, which generally boils down to better products and better services, which they can focus on instead of trying to meet artificial sales numbers or profit estimates. After all, the “over-promise now, make up later” strategy generally only results in under-delivery, which triggers cancelled contracts or bad publicity, which lowers profitability, which in turn demands layoffs, which stresses out the people who are left, who either leave or perform worse, which exacerbates the situation and puts the company into a funk it might not recover from.

So when you’re upgrading that platform or looking for world-class consulting services, remember this: just like bigger is not better, public is not necessarily better either. In fact, this recent survey on “the voice of experience” in the McKinsey Quarterly indicates it might actually be worse!

Share This on Linked In

Bob Farrell’s Market Rules Are Good For Supply Managers Too

An article this summer in Canadian Business by Jeff Sanford on the “Burden of Truth” referenced Bob Farell’s top ten market rules which have a a lot of bearing on supply management. Bob Farrell was the Chief Stock Market Analyst at Merrill Lynch for 25 years and knows a thing or two about the market.

  1. Markets tend to return to the mean over time.
    So if you beat up your supplier when times are tough for them, don’t be surprised if they do the same when times get tough for you, which they eventually will.
  2. Excesses in one direction will lead to an opposite excess in the other direction.
    Thus, a market surge for your product will likely be followed by a rapid market contraction. Make sure you’re not stock-piling inventory, because early warning signals may only come weeks in advance in today’s fast moving markets.
  3. There are no new eras — excesses are never permanent.
    A rapid market expansion will always be followed by a rapid market contraction, and the longer the excess goes on, the worse the contraction will likely be.
  4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.
    A miracle will not happen. You have to be ready to ride it out.
  5. The public buys the most at the top and the least at the bottom.
    No matter how many price cuts you make, you won’t create a surge in demand or increase market size. So while you will have to be competitive to maintain your relative market share, don’t bankrupt yourself trying to serve a market that isn’t there.
  6. Fear and greed are stronger than long-term resolve.
    If they weren’t, we wouldn’t be in this mess!
  7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names.
    So don’t believe all the hogwash the big vendors are spewing about how good “consolidation” is as they buy up all the little guys and end support for the new, innovative, offerings the little guys were offering.
  8. Bear markets have three stages — sharp down, reflexive rebound and a drawn-out fundamental downtrend.
    This says odds of a quick turnaround are not in your favour — so don’t bank on one.
  9. When all the experts and forecasts agree — something else is going to happen.
    If markets were predictable, we’d all make money in the stock market all the time. But they’re not — and they’re least predictable when everyone seems to agree. So if everyone says gold is going up $50 an oz tomorrow, don’t bank on it.
  10. Bull markets are more fun than bear markets.
    ‘Nuff said.

Share This on Linked In

Are You Ready For The Next China?

A recent article over on the Harvard Business Review on “China Myths, China Facts” reminded me how China is starting to change and how my advice in my recent post on overcoming cultural differences in international trade with China to take time to get to know the people you will be dealing with because their behaviour may be nothing like the usual behaviour of the country in which they reside is becoming truer and truer by the day in some parts of China (that deal regularly with the west).

According to the article, which isn’t entirely accurate (just ask our resident Global Trade expert) the following are myths:

  1. Collectivism
    According the article, Individualism is the reality. While this is becoming true of the emerging “New China”, especially in the urban middle class, the “Old China”, which still makes up the majority of China, is still collectively oriented and, as the article points out, decisions, particularly in the business world, are still made in groups.
  2. Long-term Deliberation
    According to the article, real-time reaction is the reality. While the “New China” that has been dealing with the west for the last two decades (or so) has learned to “react” at western speeds, there is still a lot of deliberation that goes on behind the scenes, and quick decisions are often the result of policies that were decided as the result of long-term deliberations.
  3. Risk Aversion
    According to the article, risk tolerance is the norm. Well, this one is half true. The reality is that the Chinese are neither risk-averse or risk-tolerance. They are what I’d call “risk-comfortable”. You have to remember that China is one of the oldest civilizations on the planet. They can trace their history back millennia, while we struggle to trace ours back a few centuries. They are more aware of risk and used to dealing with it than we could ever imagine. It’s just another part of everyday life to them … that sometimes comes and goes in waves. They know that some risks can never be completely mitigated and that others can never be predicted. As a result, they don’t feel the need to needlessly analyze something to the nth degree when they know nothing will be gained from the exercise. So they make a decision, execute, and accept what comes. We could learn a thing or two from them.

What’s happening is that, just like Japan transformed itself from the “Old Japan” to the “New Japan” over the last few decades, China is in the process of transforming itself from the “Current China” to the “Next China”. This will happen over the next few decades as it claws its way back to global supremacy. So, are you ready?

Share This on Linked In