Jenna

Wal-Mart’s Effect on Local Economies

Built on the formula “buy cheap, sell for less than the other guy, and make a profit on high volume and fast turnover,” Wal-Mart today is the world’s largest retailer – and one of the most controversial.  Founded in 1962 by Sam Walton, the company’s key focus is selling goods at the lowest price possible, with the slogan “Save Money. Live Better.”  Saving money to help people live better is the goal Sam Walton envisioned when he created the first Wal-Mart (Wal-Mart Corporate).  For Americans with tight budgets, Wal-Mart has become a staple place to shop – a place for people to enjoy the products they need and love, at a price they can afford.

The Wal-Mart effect, in essence, is when a big box retailer comes into town, reshapes the shopping habits of consumers, drives prices down, and ultimately creates a “race to the bottom” among businesses (Fishman, 2006).  Today, Wal-Mart’s ubiquitous presence has subjected the retailer to considerable attention over its effect on local economic activity.  From an economic perspective, Wal-Mart is criticized for “infiltrating small-town America” while offering an extremely large variety of consumer goods at very low prices (McCune, 1994).  Many critics argue that this strategy undermines the ability of small, locally owned businesses to compete, forcing many to close.  Additionally, Wal-Mart has an extensive history of using public money to aid in financing its rapid expansion across the United States.

Up until now, the local and state governments have done little to address the phenomenon known as the “Wal-Mart effect.”  I believe state and local governments need to play a much bigger role in protecting their community’s future.

The Power of Smiling

“Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring — all of which have the potential to turn a life around.” – Leo F. Buscaglia.

How often have you had one of those days where everything just seems to not be going your way?  You’re walking down the street, feeling kinda sad…but then someone smiles at you and you start to feel a little bit better. It’s amazing how that works.  That’s right — my 60 second idea to improve the world is as simple as this: SMILE!

There is a real power associated with smiles, and it’s something I think we take for granted too often.  Smiling is one of the easiest and quickest things someone can do to not only make themselves feel better, but to also make others feel better.  That’s right: it has actually been proven that smiling can make you and others around you happier.  According to an article about smiling, even when we fake a smile, our body releases the “happy” hormones serotonin and dopamine, which instantly lift our mood. Another one of the greatest things about smiles is that they are contagious, meaning it’s likely that if you smile at someone, they’re more likely to smile at another person.  In addition to being infectious, smiling also makes any person seem more attractive, approachable, and friendly. Studies even show that people who smile are more likely to be remembered than a person who doesn’t smile.

So go ahead, start smiling — you will not only feel better, but you will look better. Smiling costs nothing, but it can be worth a million bucks to someone who is having an off day.  Make that difference in someone’s life.

You have such a dirty mind…

Okay, how many of you were a little freaked out when you first read the title of my blog? Don’t worry, this is a PG rated post.  After walking into the library (apparently it’s National Library week?) I found a bunch of books on the shelf having to do with libraries.  The first one I picked up was called “How Green Is My Library” —  and while this seemed like an interesting read, I wanted to find something a little more exciting.  I kept looking through the books on display in the front of the library and found one called “Dirty Minds: How our brains influence love, sex, and relationships” by Kayt Sukel.  This should be entertaining…

After flipping through the book a little more, I was right: it was entertaining. Sukel writes, in the inside cover of the book, “philosophers, theologians, artists, and boy bands have waxed poetic about the nature of love for centuries.  But what does the brain have to say about the way we carry our hearts?” This particular quote caught my attention because everyone once in a while I wonder why I, or other people, act a particular way in certain situations.  Especially ones that have to do with love.  The truth is, there is a lot more going on in our head than what we think.  In sixteen powerful chapters in the book, Sukel examines the “intricate dance between the brain and our environment” and attemps to explain why love can torture us one day and transform us the next.

Some of the chapters in “Dirty Minds” include: The Neuroscience of Love, The Chemicals Between Us, His and Her Brains, The Neurobiology of Attraction, Making Love Last, and The Greatest Love of All.  While those are only a few of the chapters included in the book, Sukel claims that after reading the entirety of the book, we will “never look at romance the same way again.” For a more in depth summary of the book, check out the video below of Sukel discussing the chemical effects love and sex have on our brains:

Kayte Sukel, “Dirty Minds”

I realize this book probably won’t be at the top of the reading list for guys, but after skimming some of the chapters, it definitely looks like a fun read.  Although my free time seems incredibily limited these days, I am nevertheless going to check out this book and hopefully read some of it this weekend.

The Wal-Mart Effect: is it really worth the price?

Built on the formula “buy cheap, sell for less than the other guy, and make a profit on high volume and fast turnover,” Wal-Mart today is the world’s largest retailer.  Founded in 1962 by Sam Walton, the company’s key focus is selling goods at the lowest price possible.  Wal-Mart places what seems like a fanatical emphasis on the slogan “Always low prices.  Always.”  Although this business strategy may appear to be very appealing in a consumer’s point of view, Wal-Mart has faced significant criticism for the way it operates.  Over the years, Wal-Mart has appeared to favor one group of stakeholders: its consumers.  Wal-Mart has placed so much emphasis on satisfying one group of stakeholders that it has neglected the other groups of stakeholders, like employees, or other businesses.  Wal-Mart has affected communities and businesses both nationwide and worldwide, but one big question remains – is Wal-Mart worth really worth price? In other words, does the money consumers save ultimately translate into a better quality of life for the majority of people?

In order to fully understand the criticisms of Wal-Mart, one must first grasp the phenomenon better known as “The Wal-Mart Effect.”  In The Wal-Mart Effect and a Decent Society: Who Knew Shopping Was So Important, Charles Fishman discusses what the Wal-Mart effect is and how it is shaping everyday life in both the United States and around the world. Fishman says that the “Wal-Mart Effect” is this:

“It is when Wal-Mart comes into town, reshapes shopping habits, and drains the viability of traditional local shopping areas or mom-and-pop shops.  It is the relentless downward pressure on the prices of everyday necessities that a single vast retailer can exert on behalf of customers.  It is the suburbanization of shopping; the downward pressure on wages at all kinds of stores trying to compete with Wal-Mart; the relentless scrutiny of unnecessary costs that allows companies to survive on thinner profits; the success of large business at the expense of its rivals and the way in which that success builds on itself” (Fishman, 2006).

Clearly, Wal-Mart effects more people than simply those who shop at the stores.  Fishman furthers his argument about the Wal-Mart effect and claims that the effect can be felt both directly and indirectly.  “Those who never shop at Wal-Mart typically pay 5% less for their groceries if Wal-Mart is in their town” (Fishman, 2006).  When a Wal-Mart opens in a surrounding area, businesses are forced to compete with the lower prices, and thus will lower their prices as well.  Even if people never set foot in a Wal-Mart, they still reap the benefits – specifically, lower prices (Fishman, 2006).  However, the real question is about how much Wal-Mart really saves the consumer, and whether or not those saving dramatically offset the costs of the Wal-Mart effect.

It is clear that Wal-Mart has a significant impact on businesses and communities in the area, but what is it that makes Wal-Mart so unique?  In other worlds, how are they able to lower prices to unprecedented amounts?  According to Professor Edna Bonacich of U.C. Riverside, featured in the Frontline documentary “Is Wal-Mart Good for America?” Wal-Mart operates by using something called the “pull system”.  Essentially, this involves retailers, like Wal-Mart, deciding what is being sold, collecting information on what is being sold, and then telling manufacturers what to produce and when to produce it (Frontline, 2004).

According to John Lehman, a former Wal-Mart store manager, this kind of business is apparently very one-sided.  In the documentary, Lehman discusses how Wal-Mart doesn’t leave much room for negotiation.  Essentially, Wal-Mart tells a company what price they want to sell something for, and then the manufacturer must find a way to make the product such that they can meet this demand. If a manufacturer cannot meet these expectations, Wal-Mart will find another manufacturer who can fulfill their needs.  This usually means outsourcing to Asian manufacturers, where they can meet these needs because standards of living are much lower, and companies can produce goods at a cheaper cost.  Skip Hartquist, an attorney at Five Rivers, mentioned in the documentary, discusses how outsourcing is affecting American manufacturers.

“It’s not fair trade. It’s not free trade. The Chinese are pricing their products in a manner contrary to the obligations they undertook when they joined the World Trade Organization a few years ago. The Chinese system has built-in advantages that no one else in the world has. Their currency is undervalued by, we estimate, about 40 percent. Their workers are not treated fairly in terms of worker rights. The government provides subsidies to Chinese producers at preferential interest rates that may not even have to be repaid. It’s a rigged system” (Frontline, 2004).

While Wal-Mart is now the leading retailer in the United States, their business model is not sustainable as they favor only one group of their stakeholders: their consumers.  Wal-Mart must operate as a social institution, not just a corporate system.  In other words, Wal-Mart must realize the connections between the private troubles and public issues in order to create a harmonious balance between stakeholders.  Connecting private troubles and public issues is imperative for companies, as discussed in The Sociological Imagination, by C. Wright Mills.  In this case, Wal-Mart is the public sector and its stakeholders make up the private sector.  The sociological imagination, according to Mills, is the capacity to shift from one perspective to another (Mills, 1959).  Wal-Mart must shift their paradigm and realize that focusing solely on low prices comes at the cost of many people.  People are not just consumers – they also need to earn a living as well.

In order to be a sustainable company, Wal-Mart must find a balance among its stakeholders.  In Stakeholder Theory of the Modern Corporation, Ed Freeman argues its management’s duty to look after the health of the corporation.  This means paying attention to anyone who is a stakeholder of Wal-Mart.  As companies get bigger, other groups of stakeholders, such as governments, NGOs, critics, etc. become equally as important.  Although Wal-Mart started out as a small company, it has grown to be the largest retailer in the United States.  Since the company has grown significantly, their responsibilities have grown as well.  According to The Wal-Mart Effect and Business, Ethics, and Society, Wal-Mart cannot view its stakeholders purely in economic terms.  R. Edward Freeman argues that Wal-Mart is focusing its business strategy only within the context of the traditional stakeholder theory – maximizing profits.

One example of a similar company that has managed to find a harmonious balance between stakeholders is Costco.  Costco’s business model is simple: sell a limited number of items, keep costs down, rely on high volume, pay workers well, have customers buy memberships, aim for upscale shoppers, and don’t advertise (Cascio, 2006).  The fundamental difference between Wal-Mart and Costco is that Costco delivers low prices in a more stainable manner, by focusing on satisfying all stakeholders, rather than just favoring one group of stakeholders, like Wal-Mart.  Costco not only pays its employers higher than the average Wal-Mart employee, but Costco also has better relations with their suppliers.  While Wal-Mart is notorious for having very one-sided relationships with their suppliers, Costco has a different approach.  According to Wayne Cascio in Decency Means More than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club, Costco is tough on its suppliers to keep prices low, but instead of refusing to do business with a supplier if they can’t exactly meet Costco’s needs, Costco simply warns suppliers not to offer other retailers lower prices than what they get (Cascio, 2006).  Furthermore, Cascio warns that Wal-Mart’s cheap-labor model is very costly in the long run.  “It can lead to poverty and related social problems, and transfer costs to other companies and taxpayers, who indirectly pay the health-care costs of all the workers not insured by their frugal employers” (Cascio, 2006).

In conclusion, The Wal-Mart effect is not a new phenomenon, nor is it going away any time soon.  Indirectly or directly, people who live in an area with a Wal-Mart store feel the effects of the retailer.  Although Wal-Mart prides itself on its ability to set the precedent for low prices, the reality is this: low prices come at the cost of many people.  Moving forward, Wal-Mart must recognize that favoring one group of stakeholders is both unsustainable and unethical.  Wal-Mart should adopt a business model more similar to Costco’s – one that balances the interests of all groups of stakeholders.

Bibliography

Cascio, Wayne F. Decency Means More Than “Always Low Prices”: A Comparison of Costco to Wal-Mart’s Sam’s Club. Academy of Management Perspectives (Aug.,       2006), pp 26-37.

Fishman, Charles. The Wal-Mart Effect and a Decent Society: Who Knew Shopping Was So Important? Academy of Management Perspectives, Vol. 20, No. 3  (Aug., 2006), pp 6-25. Published by Academy of Management. Article Stable URL:             http://www.jstor.org/stable/4166248

Freeman, Edward. “Stakeholder Theory of the Modern Corporation.” General Issues in Business Ethics: 39-49. Print.

Freeman, R. Edward. The Wal-Mart Effect and Business, Ethics, and Society. Academy of Management Perspectives, Vol. 20, No. 3 (Aug., 2006), pp 38-40. Published by: Academy of Management. Article Stable URL: http://www.jstor.org/stable/4166250

Frontline. 2004. Is Wal-Mart Good for America? November 16. Retrieved from http://www.pbs.org/wgbh/pages/frontline/shows/walmart/view/ on April 3, 2012.

Mills, C. Wright. “The Sociological Imagination.” Oxford University Press (1959). Print.

Wal-Mart: It gives, and it takes

One of the topics in this class that I’m particularly interested in is the whole debate about whether or not Wal-Mart is helping or hurting our economy.  “The Wal-Mart effect” has come up in a couple of my classes, and while I’ve read some material about the debate, I thought it would be interesting to dig deeper into the subject to see if I could find out more information.

First, I looked at the works cited page from the Wal-Mart case study we read (the one titled “Wal-Mart’s Business Environment”).  Two authors, Nancy Cleeland and Abigail Goldman, were referenced several times in the works cited page.  Before I performed the cited reference search, I figured it would be useful to Google these two authors to get some background information on them.  When I typed in their names, I noticed that Cleeland and Goldman, along with a few other staff members at the LA Times, were awarded a Pulitzer Prize in 2004 for the staff’s “engrossing examination of the tactics that have made Wal-Mart the largest company in the world with cascading effects across American towns and developing countries.”

After finding out that these two authors had written so much on Wal-Mart, I immediately I knew I was on the right track, and figured I would be able to find a bunch of quality articles dealing with this topic.  One in particular, titled “An Empire Build on Bargains Remakes the Working World” looked like it might be helpful to me.  Written by Cleeland and Goldman, the article focuses on the impact of Wal-Mart, on a personal level and on a broader level.  For some people, like 26-year-old Chastity Ferguson, Wal-Mart is her favorite store because the prices can’t be beat anywhere else.  For Ferguson, it’s a no brainer to shop at Wal-Mart since she only makes $400 a week and wants to save as much money as possible wherever she can.  However, for others like Kelly Gray, who have lost their job because Wal-Mart has taken business away from the local stores, it is hard not to resent the store.

In a broader sense, Cleeland and Goldman discuss how Wal-Mart both gives and takes away.  Although the company has grown tremendously and created jobs all over the world, it has come at a heavy price.  By relentlessly cutting prices, Wal-Mart has helped hold down the inflation rate for the country, according to U.S. economists.  Consumers are undoubtedly reaping the benefits, but what about the employees and local business owners trying to compete with this competitive business model?

This article is only one of the many written about this particular topic.  Using the cited reference search allowed me to find trusted, quality sources that could help me dig deeper into this subject, and I look forward to reading stories from both ends of the spectrum.

South African Memories

I’d like to consider myself a worldly person.  Growing up, I was fortunate enough to have a set of parents who absolutely love to travel.  I mean, LOVE to travel.  Every couple of years, my whole family would go on a cool trip to some unique part of the country or world.  From staying at a dude ranch in Colorado, to getting our scuba diving certifications in Hawaii, to going on a safari in South Africa – the Lotkowictz family has seen many sides of the world and learned about several unique cultures.

While every trip and every place has its own special memories, somewhere that I’m dying to re-visit is South Africa.  Thinking about my South African trip brings back so many memories – some good and some not so good.  Most of the better memories have to do with the amazing 5-day safari in Kruger national park we went on (and spotting my favorite animal – a giraffe!) and surfing in the (freezing!) waters of Cape Town.  Despite all of the wonderful memories I associate with South Africa, something that I will never be able to get out of my head is the disturbing poverty level.

Anyone who has been to Cape Town knows how beautiful the city is.  However, anyone who has been outside of the city knows how devastating the poverty level is.  What’s crazy is that South Africa practically has no middle class; it’s like everyone there is either fairly wealthy or very poor.  I was looking through some articles in the Center for Global Development think tank, and I came across one that had an interesting piece of data – in 2005, only 7% of the South African population was considered to be in the middle class, with most of the population under the poverty line.  According to the article, the middle class, in socio-economic terms is defined as “the segment of society with a degree of economic security that allows it to uphold the rule of law, invest, and desire stability.”

Much of the inequality and the poor state of the economy can be attributed to South Africa’s apartheid regime.  Essentially, South African apartheid was a system of racial segregation that was enforced by the National Party governments between 1948-1994.  Every non-white South African citizen faced intense discrimination, as they were not able to experience the same rights as white people, who made up the minority of the population.  Strict race law prevented blacks from owning businesses, living outside designated areas, or even having a telephone. Needless to say, both the economy and the majority of citizens in South Africa suffered during this racist regime.

Fortunately, in 1994, the apartheid regime ended.  According to a USA Today article I found on the Center for Global Development site, a sizable black middle class has emerged since apartheid’s end.  The South African economy continues to struggle, but it has undoubtedly made huge strides forward.  Overall, from the Think Tanks I was able to find great information about some of the topics I discussed in my blog post.  I particularly liked the Center for Global Development and would recommend this Think Tank as it has lots of quality information that is easy to find!

I hope someday I am able to go back to South Africa.  Sometimes it’s so easy for me to take things for granted, and having traveled to a place where so many people live under the poverty line gave me a new perspective on life.

Conflict of Interest(s) at Seattle Grace Hospital

Grey’s Anatomy has been one of my favorite shows since its debut in 2005.  Okay, I’ll admit, part of me watches the show only to stare at McDreamy’s hair or McSteamy’s washboard abs, but the other part of me thoroughly enjoys the ethical dilemmas that the cast faces each episode. For those of you who are not familiar with the show, I’ll catch you up with some brief background:

Grey’s Anatomy (no, not Gray’s Anatomy, the book) is a medical drama television show created by Shonda Rhimes, who also created the spinoff called Private Practice. Grey’s Anatomy takes place in Seattle, Washington and follows the lives of several interns, residents, and patients as they attempt to balance their medical careers with their personal lives — something that is not always easy. Inappropriate relationships, breaches in patient confidentiality, and intense conflicts of interest are not uncommon at Seattle Grace Hospital.  The doctors continually face moral dilemmas and are at constant war with each other about what the “right” thing to do is.

One of the main characters, Meredith Grey, is known for making reckless decisions.  Although these decisions are usually viewed as the unethical, it’s sometimes hard to completely disagree with her actions.  For example, in season seven, Meredith tampers with Dr. Shepherd’s Alzheimer’s trial by switching the paperwork so that the Chief’s wife Adele Webber will receive the Alzheimer drug that Dr. Shepherd is administering to several patients. Adele’s condition seemed to be deteriorating quickly, and since the Chief has acted as a father figure throughout the years, Meredith figured she would help him out.  After all, Meredith’s mother passed away from Alzheimer’s, so she experienced first hand how devastating the disease can be.  Did Meredith do the wrong thing?

Of course Meredith didn’t do the “right” thing.  But on the other hand, part of me was rooting for her as I sat and watched the episode, hoping she would go through with it despite how risky it was. Nevertheless, looking back on her action today, I can say with complete confidence that she did the wrong thing.  The whole point of clinical trials are that they are designed and conducted with great care to ensure valid results that are free of bias. Proper randomization of patients and making sure they don’t know if they are administered the trial drug or the placebo are crucial to preventing bias.  Although Meredith was trying to help a friend, if we all tried to help a friend in this kind of matter, chaos would ensue.

I’m not sure that this story directly relates to any of the material we’ve read for class, but it is a good reminder that acting ethically and doing the right thing is imperative.  I suppose it kind of reminds me of the Enron case where the company started to cut corners and not follow the rules, ultimately leading to Enron’s collapse.  Hypothetically of course, if Seattle Grace Hospital always cut corners, it would most likely have some sort of collapse itself.

Long story short: as much as you sometimes want to help out a friend, its costs might not outweigh its benefits.  You might actually be hurting more people than helping.  If we expect others to act ethically, we must do the same.

Blog Council Report

This week’s blog proposal about identity and racial issues brought up a lot of very insightful and interesting posts. Amanda’s “Pass me the ball, I’m open!” post we felt resonated well with the women in the class, especially those who have been on sports teams. Another post that sparked class interest was Lauren’s post about the rules of dating between men and women. Ben’s “High School Track in the ‘Burbs” told a great story about his experience with racism on the track team, while Caitlin’s story about growing up as an equestrian was informative and she threw in a daughter-dad story to make it a real tear-jerker. Derek provided a different way of looking at the issue, by blatantly saying he did not want to talk about it, but was still able to write a high-quality piece. As always, Joey provided some very intuitive media examples of racist comments among politicians, and we feel the class benefited from his strong opinions. Will a champion of Republican ideas step up?  The gauntlet has been laid down.

But WHO was the winner??

Our criteria for the best blog of the week was:

1. It is insightful
2. It contains many personal examples
3. It takes an idea and questions it

The blog of the week award goes to Beth, for her “Pass the Chicken Nuggets” post. We found it to be entertaining, thought-provoking, and extremely honest. We enjoyed the way Beth used so many personal examples from her finance internship over the summer, and we found it to be a very real issue that women just want to be seen in the same light as men. Beth also writes in such a way that she takes an idea, poses a question to analyze, and then does so. We found her post to be entertaining, yet inquisitive, and highly realistic.

“Chink in the armor”

“Linsanity” — how many times have we all heard this phrase, either on TV or in the news?  Even if you’re not an avid NBA follower, which I certainly am not, I’m sure at least some of you have heard this phrase at least once within the last couple weeks. However, for those of you who aren’t familiar with Jeremy Lin, I’ll give you some background information:

After graduating from Harvard in 2010, Lin went undrafted into the NBA.  That summer, Lin played for the Dallas Mavericks on their Summer League squad before signing a two-year contract with the Golden State Warriors, his local NBA team growing up.  In early December of 2011, Lin was picked up by the Houston Rockets, but was later waived to the New York Knicks, right before the new year.  Lin saw some action in the beginning while playing for the Knicks, but by no means was he a standout player.  Nevertheless, Lin received a shot to prove himself after the Knicks faced a losing streak, and was promoted to starting point guard.  Lin excelled on the court, and went from being a barely known basketball player to one of the most famous athletes in the NBA overnight.

The linsanity phenomenon has created so much media attention, both in the US and abroad.  Many sports critics argue that the amount of media attention Lin is receiving is mostly because of his race.  On the contrary, some people argue that all this attention Lin is receiving is simply because he is excelling on the court.  Regardless of what people believe, the fact is that most of the media attention Lin is receiving is centered on racial stereotyping.  ESPN, probably one of the most well respected American sports networks, was forced to apologize for an anti-Asian slur directed at Lin, following one of the Knicks’ losses.  Written by Anthony Federico (who has since been fired), the headline “Chink in the armor” appeared TWICE in an online story about the Knicks’ loss.

You’d think that anyone intelligent enough to land a job at ESPN would know that making racist comments is completely unacceptable.  An article written by Hadley Freeman at The Guardian points out something interesting about racism:  while it certainly isn’t anything new in sport, Freeman argues that racism against Asian Americans is different, compared to racism against African Americans, for example.  Her claim is that because racism against Asians is not confronted as much, it is somehow seen as acceptable.  People might even be totally clueless to the fact that what they’re saying is hurtful to someone of the race, perhaps because Asian Americans are barely represented culturally.

Jeremy Lin has had to face stereotypes not only from the media, but also other businesses, like Ben & Jerry’s ice cream.  Like ESPN, the ice cream company admitted they made a mistake with its Jeremy Lin-inspired ice cream flavor.  Apparently, the company received a great deal of criticism for adding fortune cookies to the flavor — an act that many people viewed as politically incorrect.  According to a Yahoo News article, Ben & Jerry’s stated that they weren’t trying to offend anyone with their limited-edition “Taste the Lin-Sanity” flavor.  Maybe Hadley Freeman is right — are people just completely oblivious to what is okay and not okay to do or say regarding the Asian race?

Thinking back to the initial prompt for this week — I don’t think everything is OK when it comes to racism.  I think the US has made a lot of progress in this category, but on the whole, racism still exists today.  I think the Jeremy Lin example is so interesting and relevant to this debate.  Can no one be appreciated for just being good at something? Or do people always need to stereotype.  It shouldn’t matter where someone is from or what they look like.  If they’re good at whatever it is — sport, in this case — nothing else should matter.  Someone shouldn’t receive more or less attention because they are male, female, black, white, whatever.  I hope people start to appreciate Jeremy Lin more for his talent, instead of focusing on where he is from.

Scott Forstall: The Sorcerer’s Apprentice at Apple

Admittedly, what comes to mind when I think of Apple is the former head honcho, Steve Jobs.  But then again, who doesn’t?  As creative and innovative as Jobs was, there are many powerful brains that contribute to the success that Apple has had over the years.  Perhaps one of the most noteworthy contributors is Scott Forstall: Senior Vice President, iOS Software.

Before joining Apple, the Stanford grad worked at an American computer company called NeXT, Inc. where he developed core technologies.  In 1997, Forstall joined the Apple team when Apple purchased NeXT.  Today, Scott Forstall is the Senior Vice President of iPhone software at Apple.  Bloomberg Businessweek, in an article published in October 2011, named Forstall as the Sorcerer’s Apprentice at Apple.  Undoubtedly, Forstall has transitioned from once being a behind the scenes computer science genius to a much more visible member of Apple’s leadership team, particularly after the death of CEO Steve Jobs.  Not only is Forstall responsible for Apple’s mobile software division, which accounts for 70% of Apple’s revenues, but he is also the youngest senior executive at Apple.  Pretty remarkable, don’t you think?

Fast Company certainly seemed to agree, as they listed Scott Forstall as number two on their 2011 list of “The 100 most creative people in business.” In today’s world, Apple is known for their cutting edge innovations.  The company’s slogan, “think different” certainly describes the business model well.  Without a doubt, Apple’s success can be attributed to the company’s ability to innovate products that are not demanded by consumers.  This is not saying that these consumers don’t want Apple’s technologies, but rather that they don’t know they want them…yet.  According to an Outside Innovation article, Jonathan Seybold praises both Apple’s ability to look at where technology is going and the ability to innovate a new product that is not only better than an existing product, but one that is much different.  Not to mention, Apple is always a step or two ahead of the competition.

Over the past few weeks we’ve spoken a lot about the stakeholder theory and what responsibility a company has to its stakeholders.  It’s clear Apple’s identifies its stakeholders as Edward Freeman believes a company should.  Freeman believes that business must figure out how to create value for their customers, rather than solely focus on maximizing profits.  Apple operates by constantly innovating and creating value for their customers.  Although customers cannot imagine all of the new possibilities of products, Apple nevertheless spends each day finding ways to make their existing products better.  Steve Jobs once said, “we put ourselves in the customer’s shoes and ask: What do we want?”

Undoubtedly, Apple has created a powerful brand by never being complacent and always working to improve their existing products.  By putting themselves in the customer’s shoes, Apple has innovated products consumers never even imagined they could want.  Companies who struggle to create value should look up to Apple.  While not everyone on the Apple team can be recognized for their pivotal role in value creation, I’m very pleased that Scott Forstall had the opportunity to gain recognition for all of his hard work and dedication to the company.

TOMS: one for one

As I was cleaning my room, thinking about what item I should write my next blog on, I came across a pair of TOMS that I had purchased over the summer.  Immediately I knew this would be the perfect company to write about as their story is quite unique.

It all began in 2006 when Blake Mycoskie decided he wanted to help less fortunate children in developing countries.  After traveling in Argentina, Blake noticed how many children did not own shoes.  Sadly, one of the leading causes of disease in countries like Argentina is soil-transmitted diseases, which are easily contracted by improper care of the feet — or in this case, lack of shoes.  Realizing something had to be done, Blake created a company called TOMS.  It was then that the company’s One for One movement was born — with every pair purchased, TOMS will give a pair of new shoes to a child in need.

 Since 2006, TOMS has grown significantly.  Children in more than 20 countries worldwide are now receiving shoes and the hope for a brighter future.  Today, over 1 million pairs of shoes have been given to children in need around the world.  Companies like this amaze me.  People who give back are those who make the world a better place.  Now that you know all of the good this company is doing, maybe you’ll rethink what kind of shoes to purchase the next time you go to the mall.  Hey, I could use a third pair of TOMS…

super PACs

The 2012 election is unlike any other when it comes to campaign funding.  As a result of two Supreme Court rulings in 2010, unlimited contributions by corporations and unions can be made to the presidential campaign.  Where does this money go?  It goes to super PACs (political action committees).  These loosened restrictions allow corporations, unions, and advocacy groups to have the ability to raise and spend unlimited amounts of money to advocate or oppose hot topic issues.  Essentially, these groups help spread their candidate’s message to the public better than if the candidate were to act alone.

The catch? The law prohibits a super PAC from coordinating its efforts with a candidate’s campaign.  However, it can be difficult to regulate if these donors are really abiding by the law or not.  In The Caucus blog on the New York Times website, Senator Charles E. Schumer argues that super PAC funding is a “disaster for our democracy” and is a “poison corroding the deep roots of our democracy.”  Perhaps this poison that Schumer is referring to is how the people who are donating these large sums of money do not have to disclose their identities.  Their reputations are not at stake, no matter how much money they give or how they choose to support their candidate.

According to Ruth Marcus of the Washington Post, super PACs are troublesome for several reasons.  Many people have associated super PACs as being the “evil twin” of campaigns because they are not accountable to voters since there are no identity disclosure laws.  A great deal of negative and brutal ads have surfaced, attacking the candidate’s opposition.  Essentially, super PACs have done the dirty work for the candidates because no reputation is at stake.

While I’m no expert in the world of politics, this Supreme Court ruling creating super PACs makes me question the ethics behind it.  I’m sure the funding has been used in positive ways, but the more I read about the subject, the more I hear about all of the negativity associated with it.  If someone has something negative to say, don’t hide behind the no disclosure aspect of it.  Play nice.

Enron — one of the greatest frauds in American history

The Enron fraud scandal is undoubtedly unparalleled to any case of its kind.  After a 56 day trial, former CEO and president Jeffrey K. Skilling and former chairman Kenneth L. Lay were found guilty of hiding more than a billion dollars of debt, manipulating energy markets, bribing foreign governments and wiping out their shareholder equity.  Now, a textbook example of how not to conduct business, the case of Enron stands at the center of business ethics.

Google “biggest business ethics scandal” and what comes up? Enron, of course.  The Enron scandal severely damaged the reputation of corporate America.  The downfall began when Enron failed to accurately report their financial statements.  Instead of admitting the company wasn’t performing as well as in previous quarters, executives jumped through several loopholes to modify the company’s balance sheet to portray a favorable depiction of its performance.  Moreover, the company’s accounting practices became sketchier when they chose not to release their financial statements.  What did they have to hide?  Well, apparently a lot.

By the late 1990s, Enron appeared to be performing quite well — or so people thought. Its stock was trading for about $80-$90 per share.  Then, strangely, CEO Skilling quit, citing that he wanted to spend more time with his family and that it had nothing to do with the fact that Enron was about to collapse.  Later in trial, Skilling argued “on the day I left, I absolutely and unequivocally thought the company was in good shape.” Sure he did…

Needless to say, the company fell apart.  Enron declared bankruptcy and shareholders lost around $70 billion dollars — all because of a deliberate ignorance to fraud and ethics.  Now because of the Sarbanes-Oxley Act (SOX), there is more protection for the investors by improving the accuracy and reliability of corporate disclosures.  Hopefully with more responsibility placed on the top management team, an Enron-like scandal will never occur again.  Moral of the story: do the right thing!