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October 2009
Welcome to the first issue of the new look GIBS Review.
Everyone in business shares one problem: there is a flood of information, much of it irrelevant but some of it crucial. Since we all need to keep a competitive edge, information needs to be sifted, but none of us has the time.
In both this and future editions of the GIBS Review we will be bringing you a round-up of the cream of business and management thinking from around the world, distilled with a South African environment in mind. You can rely on the executive summary that the GIBS Review presents, or you can click-through to read the original article.
In addition to the new content, we will continue to feature those articles which you have come to know well in the past, reviews of the latest business books to hit the shelves, as well as a calendar of upcoming GIBS events and links to our GIBS FN podcasts – all aimed at continuing to ensure that the GIBS Review remains an informative and relevant read for you, our valued reader.
I believe that the GIBS smorgasbord of current business thinking and analysis will become a crucial part of your intellectual diet, and I hope you enjoy the latest issue.
As always, we welcome your comments on any of the content or the format of the new look GIBS Review and encourage you to e-mail us at gibsreview@gibs.co.za.
Kind regards,
Professor Nick Binedell
Director: Gordon Institute of Business Science
Sasol Chair of Strategic Management
Issue Focus: Banker 'greed'
There has been a wave of revulsion at major banks resuming the controversial practice of lavish bonuses, amounting to some $170bn, writes WMG Media. Commentator Simon Jenkins, in The Guardian, says this should come as no surprise, since the bailout came free of regulatory restrictions. Instead of the stimulus lending that was intended, the money was used to improve the bottom line. 'Economic policy in the 1970s was directed at saving steel, coal, cars and ships. It is now directed at banks. Without a shred of evidence or justification, they are asserted to be too big to fail.'
The Guardian: We are paying an enormous price for the myth that banks are too big to fail
There are threats of a 'windfall tax' in the UK and the Obama administration has branded the bonuses as 'offensive'. The reality, though, is that it is a legally fraught process to claw back bonuses, notes The Times, London.
The Times: Government steps lightly around ‘minefield’ of windfall bonus tax
Nevertheless, some bankers are running for cover. The CEO of Bank of America has bowed to pressure and agreed to forgo his salary and bonus, reports The New York Times. Goldman Sachs has scaled back the proportion of revenues set aside for employees and hired a philanthropic consultancy in order to consider a big charitable donation. The Royal Bank of Scotland said rumours of bumper bonuses was 'totally without foundation,' since it has not yet decided them, reports The Independent. The RBS – which only survived thanks to state handouts – said bonuses will be structured over three years and 'claw-back' clauses will allow it to reclaim money from underperforming employees.
The NYT: Bank of America chief forgoes pay for 2009
The Independent: Goldman faces bonus fury as staff rewards top $16bn
Not everyone is as outraged as some believe they should be. A columnist in The Boston Globe said that President Obama is 'far too absent of outrage' and that the financial support banks are giving the Democrats might be part of the reason. At least half the bonuses should be commuted into donations to long-established charities. Instead, 'all that has happened thus far is that Wall Street is rolling again; a steamroller once again flattening the American people.'
The Boston Globe: Don’t bail on Wall Street outrage
The MBA into the future
The financial crisis sparked some high-profile criticisms of business schools, but The Economist finds that 98% of US corporates are satisfied with their MBA hires and that MBAs continue to command a salary premium. Students, however, are becoming far more conscious of getting value for money.
The Economist: Employers and MBAs: Opportunity in adversity
This appears to be confirmed by the Financial Mail's annual MBA survey, which found that 41% of SA employers offered higher salaries to MBAs, especially valuing their strategic insight, their leadership ability, their intellectual and research abilities.
GIBS rated in the top three on the strength of its core courses and its electives, and for having the highest number of face-to-face teaching hours.
The FM raised the perennial issue of whether access to the MBA should be made more difficult, to which GIBS marketing director Sue Swart responded: 'It would be a shame if people were to be prevented from taking part for lack of formal academic qualifications. We rejected one woman for our programme but she kept applying and got in at the third attempt. She went on to be top of her class. What is important isn't high entry requirements but high exit requirements.'
Financial Mail:The 2009 Financial Mail MBA rankings
The Wall Street Journal notes another MBA trend, that of social entrepreneurship – building a for-profit company with a social conscience. Oxford's Said Business School has increased its electives in social entrepreneurship and has established a venture fund its students can tap for worthy projects. Dean Colin Mayer says 'Doing good business can promote real change in economically depressed regions.'
The Wall Street Journal: MBAs seek social change: Enterprises with a cause gain ground on campus
The curriculum change most needed, according to GIBS part-time lecturer Bertie du Plessis on his Fin24.com blog, is to imbue students with a better sense of history to understand that economic life is a series of opportunities and crises, booms and bust. 'Business schools should foster scepticism and cynicism. Graduates have accepted far too readily the notion that clever financial engineering could somehow abolish risk and uncertainty, when it probably made things worse.'
Fin24.com: More history, less number crunching!
Africa comes into fashion
As the developed world takes a pounding in the financial crisis, there has been a new interest in emerging markets, especially Africa, writes WMG Media. Vijay Mahajan, author of Africa Rising: How 900 Million Consumers Offer More Than You Think, says in a Wharton Business School interview that Africa has enough consumer power to give China and India a run for their money. Although Africa is not a homogenous market, Mahajan says that the marketing challenge is no different from in any developing economy. Two key strategies that he recommends to multinationals: use the African diaspora and get up close and 'walk the market' – Africa cannot be understood at a distance.
Knowledge@Wharton: 'Walk the market':Tapping into Africa's 900 million consumers
Five years ago, CK Prahalad published The Fortune at the Bottom of the Pyramid, in which he argues that multinational companies not only can make money selling to the world's poorest, but also that undertaking such efforts is necessary as a way to close the growing gap between rich and poor countries. Key to his argument for targeting the world's poorest is the sheer size of that market – an estimated four billion people. Despite initial scepticism, companies as diverse as Microsoft, ING, DSM, GSK and Thomson Reuters have successfully implemented his BOP (Bottom of the Pyramid) strategies.
Knowledge@Wharton: New approaches to new markets - transcript and Podcast
World split over climate change
The recent UN Framework Convention on Climate Change (UNFCC) talks in Bangkok showed a split between developed and developing countries over the importance of the Kyoto Protocol and a protest walkout from the conference signals SA's growing closeness to Asia, writes WMG Media. Developed countries, led by the US, want to leave Kyoto by the wayside and negotiate a totally new treaty, a move that has angered developing countries such as SA, China and India, reports the Mail & Guardian Online.
For the sceptics, the UN Environment Programme (UNEP) has released a definitive new report, Climate Change Science Compendium 2009, which reviews 400 major scientific contributions to understanding climate change through peer-reviewed literature or from research institutions, over the past three years.
Mail & Guardian: Stumbling blocks threaten Kyoto, Copenhagen
UNEP: Climate Change Compendium
South Africans all a-twitter
South Africa has become the 10th largest user of Twitter in the world, while the country has the most Facebook users on the continent, even surpassing Egypt, says a report on the IOL site. It quotes Nancy Williams, MD of the social media marketing consultancy Tiger Two, saying that businesses must use the new social media. 'The fact is, conversations are already happening online about their business or product, so they need to be involved with that.' Because social media is a conversation rather than a broadcast, it's a hugely effective marketing tool, she says. 'Most people will respond more positively to a two-way conversation with a brand instead of being shouted at with yet another marketing message.'
IOL.com: SA tweets its way to tenth place in world
Twitter, the micro-blogging site, has signalled that it may soon allow advertisers access to its more than 45 million monthly visitors, reports Marketing Week UK.
Marketing Week: Twitter opens the door to advertising
So what are the most important maxims for brands using the Twitter service? Twitter users told the Financial Times – in 140 characters or fewer – what they thought. The selection of their top tips, in their own words, is listed in the article online.
Financial Times: Twitter do’s and don’ts for brands
China takes the gap
In what is described by Jeff Gable, head of research at Absa Capital, in the Financial Times, as 'an amazing shift', China has leapfrogged to become SA's biggest trading partner. Rising demand for SA's minerals contrasts with a slump in orders from traditionally more important markets – Germany, US, Japan and the UK – harder hit by the financial crisis and economic slowdown. The shift may have helped ease the severity of the SA recession, writes the FT, 'and it underscores growing South African corporate interest in China and more generally in Asia.'
Financial Times: China tops S Africa’s trade league
China has invested $552 million directly in Africa in the first half of 2009, despite trade between China and Africa dropping 30.5% to $37.07bn in the same period, reports Ghana Business News.
Ghana Business News: China invests $552m in Africa in first half 2009
Southern Africa shines
Southern Africa outperforms north Africa in the delivery of public goods and services, finds the Ibrahim Foundation governance survey. The survey rankings – launched three years ago by Mo Ibrahim, a Sudanese philanthropist – are led by Mauritius, Seychelles and Cape Verde. South Africa (5), Botswana (4), Namibia (6) and Lesotho (9) all make the top 10.
Mo Ibrahim Foundation: The Ibrahim Index
The Ibrahim Foundation prize of $5m for African ex-leaders who have shown good governance – the most valuable individual annual award in the world – is not being awarded this year, reports the BBC. 'This year the prize committee has considered some credible candidates. However, after in-depth review, the prize committee could not select a winner.'
BBC: African leadership prize withheld
Skype changes the job interview
Get ready for a close-up: your next job interview might be on webcam, reports Time. Looking to save time and money, companies are turning to video-chat software as a 'cheap, low-hassle way to vet job candidates'. Time gives some guidelines to how to interview on webcam:
- First off, realise that we perceive people differently through a camera than we do in person.
- Next, think about framing. Sitting flush with a plain white wall will make you look like you're in a police line-up.
- Don't forget that this is still a job interview. Even though you're not meeting face-to-face, dress as though you are.
Time: How Skype is changing the job interview
Waiting for the tipping point
Just as the Kindle arrives in SA, the Financial Times analyses the likely effect of electronic readers on the traditional publishing industry. Digital books are expected to reach about 20-25% of the market over the next decade as publishers await their 'iPod moment' – the device that gives the digital book 'the same volcanic momentum that transformed the consumption and business of music'. Pointing to the pincer threat represented by Amazon and Google, Benedict Evans of Enders Analysis comments: 'Book publishing is moving from a slow-moving, localised, opaque, oligopolistic and often highly uncommercial world to an open, global, highly liquid and highly commoditised world.' He adds with dry understatement: 'This is not a shift that we would immediately associate with higher profits for incumbents.'
Financial Times: Brought to book
Slow growing but fast driving
Throughout the global crisis, China defied recessionary pressures. Although growth cooled from double-digit rates, many now predict that China may be the first major economy to recover, reports the Far Eastern Economic Review. But 'the storm is far from over', with manufacturers and retailers confronting 'a more complex and brutally competitive landscape'.
Far Eastern Economic Review: Growth in a slower-growth China
Despite widespread hope that China will help pull the world out of recession, foreigners are finding it as arduous as ever to do business there, reports The Economist. While many foreign firms are doing well, especially at the two extremes of the value chain – luxury goods, fibre-optic cable and aeroplanes on the one hand, and oil, ores and recyclable waste on the other – in between, 'both explicit legal impediments and hidden obstacles continue to hamper access to Chinese customers, despite China's promises of reform'. Firms that have overcome the obstacles tend to do three things, according to The Economist: they produce locally, produce a large variety of products and tend to charge high prices.
The Economist: Selling foreign goods in China: Impenetrable
Among those finding redemption in China are luxury motor manufacturers. Luxury-car sales grew seven percent in the first half of 2009 at a time when the rest of the planet was shunning luxury purchases, reports The Wall Street Journal. Overall car sales have been climbing strongly, up nearly 20% over the same period, turning China into the largest vehicle market in the world in 2009.
The Wall Street Journal: Driven to Extremes: Can China single-handedly save the luxury car industry?
To achieve more, do less
Around 70% of US employees work beyond scheduled time and on weekends and more than half blame 'self-imposed pressure', reports the Wall Street Journal. Now, a new Harvard study suggests many reached the point where a paradoxical truth applies: To get more done, stop working so much. Some firms, like KPMG, have introduced 'wellness scorecards' to track whether employees are working too much overtime or skipping holidays.
Wall Street Journal: If you need to work better, maybe try working less
Harvard Research: Making time off predictable – and required
Another way of avoiding becoming miserable is to stop trying to find the very best option, reports Ideas@Work. Sheena Iyengar of Columbia Business School revisits a 50-year old theory on the difference between satisficers and maximisers in the modern context of looking for a job. Satisficers look for an option that is good enough and then end their search. Maximisers try to find the option that is the very best. Iyengar's research found that although maximisers did get more job offers and higher pay, they were less satisfied with their jobs and soon looking for a new one. That brings up an ethical question, says Iyengar: 'What should we seek to maximise – peoples' material welfare or their psychological welfare?'
Ideas@Work: The pursuit of happiness
Columbia GSB: "Doing better but feeling worse: Looking for the 'best' job undermines satisfaction"
Cinema: Capitalism: A Love Story, directed by Michael Moore
Michael Moore, the anti-establishment polemicist who made his reputation with Fahrenheit 9/11, sets his sights on the entire capitalist system this time, writes WMG Media. Apparently not even the fans have been impressed, with takings well down on expectations. The Economist hails a few funny trademark stunts, like putting crime-scene tape around the headquarters of bailed out Wall Street firms, but laments Moore's 'characteristically simplistic' arguments and his 'inability to articulate a plausible alternative to the capitalist system he loathes'.
The Economist: False profits or false prophet?
Time magazine concedes that the material is, as always in Moore movies, 'efficiently and amusingly marshalled to serve the larger theme: that the establishment thrives by cheating ordinary Americans' but doubts that it will spur 'the rabble to revolt'.
Time: Michael Moore's Capitalism goes for broke
Jump-starting progress
There is a Twilight Zone episode where a businessman makes a pact with the Devil to go back in time so that he can capitalise off of his knowledge about the future. It turns out that his knowledge is so superficial that he cannot jump-start any technological advances. How well would you do? Test your technological knowledge.
The Universe As.com: Quiz
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