In an old seaport city near its Osaka headquarters, Sharp Corp. is building a $9 billion factory complex the size of 32 baseball stadiums to make liquid-crystal-display panels and solar panels. The complex will be the world's largest LCD and next-generation solar panel plant.

Sharp is making a huge bet that keeping manufacturing of LCD and solar panels in-house will give it a big competitive advantage. There are big risks. Prices for LCD panels have been steady so far, but several companies are planning new plants that will significantly increase global supplies, which could lead to price declines. What's more, some rivals like Sony Corp. also are developing next-generation technologies like the organic light-emitting diode, or OLED, which could eventually make LCD technology obsolete.

Still, if Sharp continues to be successful, the focused-manufacturing strategy could be a model for other Japanese electronics makers, which find the alternative outsourcing model a turnoff and are still trying to figure out a way to remain a manufacturer while growing its profit in an industry that is rapidly commoditizing.

The new plant, is designed for both LCDs and solar panels, which share a similar manufacturing process, and will include factories for its major suppliers including Asahi Glass Co. and Corning Inc., which makes the glass for the panels. Even the gas and electric companies will have facilities on the premises. Source: The Wall Street Journal; 07/09/08

Many executives hold an unwavering belief in innovation as a strategic imperative, counting on innovation to spur growth and yield positive financial returns. However, profitable innovation remains an elusive goal. Chief executive officers such as Sun Microsystems’ Jonathan Schwartz, recognize innovation as “the key to survival,” but they are still wondering how to get innovation to pay off.

A Boston Consulting Group study concurs; whereas 74% of 940 executives surveyed expected to spend more on innovation than in previous years, more than half the respondents were dissatisfied with the returns on their investments. Indeed, executives who have chosen to focus on quantity find themselves lamenting their decision: “There’s actually an innovation glut. The real shortage is profits” reports innovation guru Peter Schrage. Moreover, some commentators decry the riskiness of innovation and even caution managers that going after breakthrough innovations may be glamorous, but mounting evidence suggests that’s the last growth strategy you should try.

Researchers from Texas A&M and the University of Illinois at Chicago examined how breakthrough and incremental innovations affect three different facets of firm performance: normal profits, economic rents, and total firm risk. They concluded that each of these metrics is of independent interest to shareholders and managers but that examining one without the others results in an incomplete picture of the true financial value of innovation.

Using data on more than 20,000 new products from consumer packaged goods industries, the researchers found that breakthrough innovation is associated with increases in both normal profits and economic rents and that, on average, each breakthrough innovation in the sample is associated with an increase in firm value of $4.2 million. Breakthrough innovation is also associated with increases in the risk of the innovating firm, but this higher risk is offset by above-normal stock returns. In contrast, incremental innovation is associated with increases in normal profits only and has no impact on economic rents or firm risk. Source: Journal of Marketing Vol. 72 (March 2008)

Drugs firms, once rich and the favorites of investors, are urgently seeking cures to a variety of ailments.

One is the erosion of patent protection. Not only are the copy-cat manufacturers of cheaper generic drugs becoming emboldened by cost-conscious politicians and legal rulings in their favor, but big pharmaceutical companies are also facing an unprecedented wave of patent expirations over the next five years. Pfizer alone will lose some $13 billion in revenue a year when Lipitor, its blockbuster cholesterol drug, goes off-patent as early as 2010.

The industry's best hope lies in innovation, its traditional strength. But it is finding it extremely difficult to come up with new blockbusters. The global industry saw 24 new drugs approved by the US Food and Drug Administration in 1998 on the back of $27 billion spent on R&D. Last year, the industry spent $64 billion, but only 13 new drugs were approved by the regulator. Drugs firms are needing to come up with new business models that go beyond the industry's traditional and largely vertically integrated approach to developing, manufacturing and selling drugs.

A sign of this happening is a recent move towards outsourcing. When times were good, drugs firms refused to outsource manufacturing because doing so, they argued, would result in quality problems and risk giving away trade secrets. That strategy is being rethought. AstraZeneca, a big British drugs firm, recently announced that it will start shifting manufacturing operations to Asia as part of a cost-cutting drive.

Firms are not only changing how they make drugs, but how they market them—especially in America. On one estimate, big drugs firms spend less than a fifth of their revenues in America on R&D, but over a third peddling pills.

Lots of big drugs firms are moving into biotechnology to fill their product pipelines. Earlier this year Astra Zeneca bought MedImmune, an American biotechnology firm, for about $16 billion. A takeover battle may soon erupt over Biogen Idec, another large American biotech firm.

Roche, another Swiss firm, has made a hostile bid for Ventana, a medical-diagnostics company in Arizona, and other firms are moving in on makers of medical devices and non-prescription drugs.

Such deals go herald a dramatic new convergence of drugs, devices and diagnostics which could lead to innovation and new opportunities for growth. This would be good news indeed for an industry sorely in need of rejuvenation. Source: The Economist; 10/25/07

The concept of strategic integration and fit is a vital one to understand and apply in business today for companies to achieve sustainable competitive advantage. Too often we find that companies are not bound together with a common cause, or that energies are channeled to one particular effort to the detriment of other interdependent aspects of their business. This leads to dysfunctional operations, mixed messages, inefficient processes, waste, bureaucracy and poor results.

Strategy is about setting yourself apart from the competition. It’s not just a matter of being better at what you do - it’s a matter of being different at what you do. Increasingly, the companies that will be the true leaders will be those that don’t just optimize within an industry, but that actually transform their industry. The fundamental truth about strategy is that a company simply cannot be all things to all people and do a very good job of it.

The nation's jobs outlook is not a pretty picture. Employers eliminated 62,000 jobs last month, 438,000 since January. Fewer teenagers and new college graduates have found work. The percentage of unemployed adult workers, age 25 and older, went up for the second month in a row in June.

The number of workers unemployed for six months or more jumped to 1.6 million -- up 37% in the past year. Put another way, more than 18% of the unemployed have been looking for work for more than half a year. To add to the misery, average weekly wages were up only 2.8% for the 12 months through June, while the CPI was up more than 4%. Source: The Bureau of Labor Statistics; 07/05/08

Boards today have specially tough decisions to make. Here are some tips for revisiting your corporate strategy in light of current threats.

As board members wade through today's grim business headlines of massive layoffs, tumbling stock prices, and chief executive officer terminations, many are asking themselves what they should do differently. Are there critical items that need to be on the next boardroom agenda? Should they be rolling up their sleeves and really digging in to help the company weather the storm? If financial results have them rattled, should they follow the lead of AIG in firing the captain and having someone from the board try to steer the ship? Here are four critical things boards must consider in responding to today's tough business environment.

Revisit Your Corporate Strategy
If your corporate strategy was set six months ago or earlier, you should look at whether it's best to stay the course or make some critical changes to respond to the tough new economic environment. Take the time to examine to the underpinnings of the strategy. What are some of the new threats that weren't present at the time the strategy was developed? Does the change in the economic environment actually create any opportunities for the company? How is the business positioned relative to competitors to withstand these threats or respond to these opportunities?

Identify Your Risks
Specifically look at your risks. Focus on five major risks facing the company. How might they have changed in view of the current economic environment? What is the potential impact of these risks? How are they being managed? Should they be managed differently from six months ago? Engage key business-unit leaders with responsibilities for managing these top risks—be they financial, environmental, customer-related or whatever—to in the dialog. This enables the board to talk directly with the executives who have responsibility for these key risks and to get a sense of whether these folks are really on top of the situation.

Keep Those Sleeves Down
It's only human nature when a company hits a really rough patch, as many find themselves in now, that board members will want to help. To some, "help" means rolling up their sleeves and getting into detailed cost-cutting discussions or designing an organizational restructuring. Unless the CEO has specifically invited the board, or individual directors, to get involved in this way, it's really not that helpful. It's micro-management. And it tends to add to the CEO's burden in an already challenging business climate. As board members, you must ask yourselves: Do we have confidence in the CEO and the management team to lead the company through this tough economic situation? If the answer is no, then it's time to pull an AIG. If the answer is yes, then it's important to let the CEO manage and keep the board members governing.

Pulling the Plug
When losses mount and big investors rattle their sabers, boards always feel pressured to fire the CEO. Whether you should take the plunge goes back to the earlier question: Does the board still have confidence in him or her? If the answer is no, the board must consider the timing and ramifications of pulling the plug. AIG's board had a viable backup plan for then-CEO Martin Sullivan the minute Robert Willumstad joined the board as chairman in 2006. In Willumstad, AIG had a director with the requisite background and experience to take the helm if they needed him.

Few boards are so well positioned. Most have one or two retired CEOs who might be able to fill in for a short period while they search for a permanent replacement. Other key executives often respond by jumping ship—just when you need them most—and the whole organization loses focus, wondering about the future and typing up their own CVs at a time when the company desperately needs all hands on deck.

So here's a key strategic discussion for your next executive session: If your board did lose confidence in your CEO — or if another board decides to poach your CEO to fill its leadership gap — who could step into the breach? How credible would this person's leadership be to the company and to Wall Street? What key executives would it be critical to retain — and how would this be accomplished? If they left, how strong is the bench? Are there implications from this discussion for director recruitment, executive development, or executive compensation?

Tough times call for some tough boardroom discussions. Make sure your board steps up to them in the right way — your shareholders deserve nothing less. Source: BusinessWeek; 07/03/08

Consumers are confused, concerned, and uncertain about their health insurance and financing needs. Companies should listen to them.

In the quickly changing health care financing sector, decision-making power and financial responsibility increasingly fall to individuals instead of companies. But many consumers aren’t accustomed to shopping for health insurance, so they are not prepared for this additional responsibility. Feeling confused, concerned, and unprepared, they want personalized support to help them make and manage complex decisions—in particular, more relevant, understandable, and accessible options. This portrait emerges from a 2007 McKinsey survey, which questioned some 3,000 people — who have the option of choosing a health insurer — about their health care concerns, perceptions, and purchasing behavior.

The results reveal substantial opportunities in the health care financing sector for many current and potential players, including incumbent payers, financial-services providers, technology “infomediaries,” and health care providers. Retail health consumers constitute a market worth hundreds of billions of dollars annually, where revenue growth and profit margins are 2.5 and 1.5 times higher, respectively, than those of the more traditional group-sponsored health insurance markets. Currently, 116 million consumers have a choice of health insurance, and that number is expected to reach 151 million by 2011. To win the business of these consumers, players in the health care financing sector will have to listen carefully to them and provide better support.

And the demand is very much real. Among consumer concerns, the cost of health care is paramount. Indeed, respondents are more concerned about the financial repercussions of injury or illness than about injury or illness itself. But this state of mind has done little to help them prepare financially for health problems. Of those who are concerned, 48 percent report being prepared for common medical problems but only 15 percent for more disruptive medical scenarios, such as becoming impaired and requiring long-term care. Notable differences in concerns appear across age groups. Young people (ages 18 to 34) are more concerned about their dental needs (44 percent) and protecting themselves from the consequences of major accidents (38 percent). Seniors tend to be much more concerned about managing major medical events (49 percent) or the requirements of long-term care (47 percent).

Companies that pay careful attention to the needs, desires, and habits of these consumers stand to gain a significant advantage over the competition in this quickly burgeoning market. Clearing away the confusion among consumers will be a critically important step in transforming their anxiety and latent demand into sales. A focus on educating consumers will help them better understand the nature and magnitude of the risks they face. Building a trusted brand is also essential, since many consumers consider only two options when choosing insurers. A brand should be strong enough to be among the first names consumers consider when they shop. Source: McKinsey Quarterly; June 2008

The securities industry is taking its lumps. Citigroup has announced it is getting rid of more than 6,000 workers. Bank of America has announced cuts of 3,650 workers. Lehman Brothers is laying off 1,425 workers. As many as half of Bear Sterns' 14,000 workers could lose their jobs in the takeover by J.P. Morgan Chase & Co. The downsizing has people on edge. Some are bitter and are suing their former employers. Bonuses traditionally make up a big part of pay (75%) on Wall Street. Employees work incredible hours for those bonuses. This year some downsized employees were offered bonuses of only 5% of their previous year's bonus plus 20 weeks of severance. To many that meant they were barely paid and they are fighting back. Source: The Wall Street Journal; 04/12/08

The House Committee on Oversight and Government Reform held a hearing on executive compensation on Friday, March 7. On the hot seat, were E. Stanley O'Neal, former CEO of Merrill Lynch, Charles O. Prince III, former CEO of Citigroup, Angelo Mozilo, founder and CEO of Countrywide Financial, and the chairmen of the compensation committees of all three companies. Angelo Mozilo was the brunt of many of those exchanges.

Separately, Towers Perrin tried to clarify its position and answer criticism of its role as a consultant at Countrywide Financial. The committee has evidence (board meeting minutes, internal e-mails, etc.) that two consulting firms hired by Countrywide said Mozilo's compensation was inflated. They recommended cutting back. After Mozilo objected, a third consultant was hired. The third consultant created a more lucrative compensation package for Mozilo and, according to some, appeared to be serving as a "personal adviser" to Mozilo rather than consultant to the board. Source: The Wall Street Journal 03/08/08

In the executive fall-out from the subprime mortgage mess, E. Stanley O’Neal, CEO of Merryl Lynch walked away with a severance package worth about $161 million. Citigroup’s Charles O. Prince III gets some $68 million, with a cash bonus of at least $12.5 million, an office, a car and a driver for the next five years.

Mr. O’Neal lost his job at Merrill Lynch on Oct. 30, six days after the firm announced a record $8.4 billion in quarterly write-downs tied to subprime-mortgage-related securities and bad loans; Mr. Prince was shown the door at Citigroup, which also took a beating and has lost $64 billion in market value over the last four years. To paraphrase F. Scott Fitzgerald, the rich fail differently than you and I. Source: The New York Times; 01/13/08

Private-sector jobs fell by 101,000 in February. The private-sector loss, however, was offset by a gain of 38,000 jobs in government. Ergo, the economy suffered a net loss of 63,000 jobs, the worst job loss in five years. The manufacturing and construction sectors took the biggest hits. The unemployment rate edged down from 4.9% in January to 4.8% in February, but only because some job seekers quit looking for work. Source: The Washington Post, 03/09/08

Registered nurses will be the No. 1 in-demand job through 2016. The Bureau of Labor Statistics projects almost 600,000 new openings over the next decade. Nurses' aides, orderlies, home health aides, and personal care aides will add another 600,000 jobs. Other in-demand jobs include customer service representatives, retail sales staffers, food service personnel, college-level faculty, and janitors. Source: The Bureau of Labor Statistics; 01/04/08

More people are being pushed into part-time jobs in place of full-time work for economic reasons. The number rose by more than 100,000 in February alone. According to the Bureau of Labor Statistics, 4.79 million people are working part-time, the highest number since 1993. The nature of part-time work is changing and getting tougher. More people are holding multiple part-time jobs out of economic need. Also, many part-timers' work schedules are tied to customer traffic, which means schedules are changing constantly. Add in lower pay (10% to 20% less than comparable full-time work), few if any benefits, and little job security. Source: The Wall Street Journal, 03/09/08

Execution is taking precedence over profit and top-line growth as a focus for CEOs around the world, according to a global survey of chief executives released today by The Conference Board.

In a survey of 769 global CEOs from 40 countries, chief executives chose excellence of execution as their top challenge and keeping consistent execution of strategy by top management as their third greatest concern. Sustained and steady top-line growth, which led the pack last year, now ranks second, with profit growth fourth, and finding qualified managerial talent fifth.

Finding qualified managerial talent (sixth place) and top management succession (seventh place) have become the dominant people issues for U.S. CEOs, replacing last year's top HR concern, healthcare costs. The two concerns are closely intertwined because competition for talented managers will become even fiercer as many baby boomers depart the "top of the house" to move into "third-stage careers" and retirement.

After ranking seventh last year, the challenge of employee healthcare benefit costs slipped out of the U.S. top 10 in 2007. Its lower ranking as a greatest concern is most likely due to the downward movement of average annual rises in employee premiums for employer-sponsored health coverage, illustrating successful implementation of cost containment innovations. Source: The Conference Board; 10/04/2007

The Conference Board measure of chief executive officer confidence, which had declined to 45 in the second quarter of 2007, edged down to 44 in the third quarter; a reading of more than 50 points reflects more positive than negative responses.

The survey Includes about 100 business leaders in a wide range of industries. CEOs' assessment of current economic conditions was less favorable, with 14% claiming economic conditions had improved, down from 23% last quarter. In assessing their own industries, business leaders were also less optimistic.

Approximately 17% claim conditions are better, down from approximately 23% in the first quarter, CEOs, however, are moderately more optimistic about the short-term outlook than last quarter. Now, approximately 20% of business leaders expect economic conditions to improve in the next six months, up from 17% last quarter. Expectations for their own industries are also more upbeat, with 27% anticipating an improvement, up from 17% last quarter.

Some 24% of business executives report increases in their companies' capital spending plans since January of this year. while 13% have scaled plans back, based on a supplementary question asked each year in the third quarter. This is a moderate change from the 2006 survey, when 28% of respondents had increased their capital spending plans and 9% had made cuts. Source: The Conference Board; 10/05/07

In his new book Competing on Analytics, Thomas Davenport asserts that competitive advantage can come from sophisticated exploitation of business intelligence and predictive analytics. Online video rental company Netflix, for example, has used its algorithm-driven movie recommendation engine to blossom into a $1 billion business that competes with brick-and-mortar operations like Blockbuster Inc.

Davenport defines an analytical competitor as an organization that uses analytics extensively and systematically to out-think and out-execute the competition. The analytics are in support of a strategic distinctive competency and they argue, persuasively, that without a distinctive capability you cannot be an analytic competitor.

The book outlines four pillars of analytical competition - a distinctive capability, enterprise-wide analytics, senior management commitment and large scale ambition. It lays out 5 stages of analytic competition from "analytically impaired" to "analytic competitor". The importance of experimentation is made clear and the book repeatedly emphasizes the need for companies and executives to be willing to run the business "by the numbers".

11 signs that you are doing it right

Analysts have direct, nearly instantaneous access to data.

Information workers spend their time analyzing data and understanding its implications rather than collecting and formatting data.

Managers focus on improving processes and business performance, not culling data from laptops, reports and transaction systems.

Managers never argue over whose numbers are accurate.

Data is managed from an enterprise-wide perspective throughout its life cycle, from its initial creation to archiving or destruction.

A hypothesis can be quickly analyzed and tested without a lot of manual behind-the-scenes preparation beforehand.

Both the supply and demand sides of the business rely on forecasts that are aligned and have been developed using a consistent set of data.

High-volume, mission-critical decision-making processes are highly automated and integrated.

Data is routinely and automatically shared between the company and its customers and suppliers.

Reports and analyses seamlessly integrate and synthesize information from many sources.

Rather than having data warehouse or business intelligence initiatives, companies manage data as a strategic corporate resource in all business initiatives.

Source: Competing on Analytics: The New Science of Winning by Thomas H. Davenport; Harvard Business School Press, 03/06/07

Law firms are now going Public. Australian class action law firm Slater & Gordon was listed on the Australian Stock Exchange earlier this year, making it the first law firm in the world to go public. The prospectus warns investors that they are third on its list of priorities behind duties to clients and the courts.

Law firms in the US have hit the $1000 billable hour mark.

Entry level Associates in top New York firms earn about $160,000 per annum and the forecast is that it may be $250,000 in 5 years time.

Partner productivity is now a main item on the agenda. Firms are becoming less tolerant of underperforming partners; stripping Partners of their equity is now a growing trend. Chicago's Mayer, Brown, Rowe & Maw earlier this year announced a major restructuring calling for the termination -- or "de-equitization" -- of 45 of its partners, around 10 percent of its total. This 1,500-lawyer firm said it was restructuring its partnership despite strong financial results in 2006, with revenue up 11 percent to $1.1 billion and profits per partner over $1 million for the first time. It said the move was "designed to enhance the firm's position among the world's leading law firms," noting that other firms that had taken similar steps in the past "have achieved significantly improved health and competitive position."

Offshoring legal services is now in vogue. Outsourcing commodity type legal work to people in other countries is one way companies (and law firms) cut costs these days. India alone has become a major provider for offshore legal services with over 100 third party legal services providers operating out of India alone. So many in-house counsel or top law firms hire a team to do certain work that paralegals can handle in other countries for rates as low as between $10 - $90 USD per hour. Companies like Cisco, Dupont and General Electric now run their in-house legal departments in India. Source: Africa News Service; 10/16/07

Should shareholders in a company care if the chief executive's child dies? What if the mother-in-law passes away?

Such things don't normally figure in investment decisions. But maybe they should, according to a recent study by three finance professors. Mining a trove of Danish government data on thousands of businesses, they were able to track links between CEO-family deaths and the companies' profitability over a decade.

It slid by about one-fifth, on average, in the two years after the death of a CEO's child, and by about 15% after the death of a spouse. As for an executive's mother-in-law, the old jokes seem to hold: The researchers found that profitability, on average, rose slightly after her demise.

The study is part of an emerging -- and controversial -- area of financial research that delves into the lives and personalities of executives in search of links to stock prices and corporate performance. The trend is an outgrowth of the tendency to lionize CEOs as critical to the businesses they lead. If their performance is so vital, the researchers say, investors should want to know anything that could affect it.

Other academics have found underperformance, in both profits and stock prices, at companies led by executives who received awards such as best-manager kudos from the business press. The theory: Once they become stars, some CEOs may pay more attention to writing memoirs and sitting on outside boards and a little less to running their companies.

Two Penn State professors recently attempted to rate CEOs of technology companies on their degree of narcissism. They looked at things like the size of executives' photos in annual reports and how often they use the first person singular in press interviews. The authors concluded that narcissistic executives tended to take greater risks, leading to bigger swings in profitability of their companies. The study, called "It's All About Me," is to be published in Administrative Science Quarterly. Source: The Wall Street Journal; 09/05/07

Social networking, popularized by teens sharing information with their friends online on Web sites such as Facebook is now blooming in the business world, thanks to new social networks that enable professionals and executives in industries such as advertising and finance to rub virtual elbows with colleagues.

Millions of professionals already turn to broad-based networking sites like LinkedIn to swap job details and contact information, often for recruiting purposes. Business executives also have turned to online forums, email lists and message boards to sound off on information related to their industries. Now, online services are trying to promote a more personal type of business networking.

Unlike relatively simple message boards that are open to all, these new sites -- including Sermo.com for doctors and INmobile.org for the wireless industry - have features such as profile pages showing professional credentials; personal blogs that function like a kind of online diary; links to "friends" online; electronic invitations to real or online events; and instant-messaging.

Social networking is just one of many consumer technologies, including blogs, wikis and virtual worlds, to cross over into the corporate world. It is happening as social networking is moving more into the mainstream. Leading consumer social-networking sites attracted more than 110 million unique monthly U.S. visitors in July, up more than 40% from the previous July, according to comScore Inc.

For a variety of reasons, social networking has been slower to take off in the business world. Employees are wary of disclosing too much to potential competitors, and loose-lipped executives can easily embarrass themselves and their companies online. Policing these services' memberships to weed out impostors can be difficult, and the sites are still in the early stages of turning their networks into sustainable businesses. Also, business users typically have less time to devote to socializing online and are willing to do so only if they believe they are getting a unique benefit from the site. Source; The Wall Street Journal; 08/28/07

The U.S. is facing a severe nursing shortage. Already, an estimated 8.5% of the nursing positions in the U.S. are unfilled - and some expect that number to triple by 2020 as 80 million baby boomers retire and expand the ranks of those needing care. Hospital administrators and nurses' advocates have declared a staffing crisis as the nursing shortage hits its 10th year, the longest stretch in 50 years.

So why aren't nurses paid more? Wages for registered nurses rose just 1.34% from 2006 to 2007, trailing well behind inflation. The answer is complicated, influenced by factors from hospital cost controls to insurance company reimbursement policies. But another factor is often overlooked: Huge numbers of nurses are brought into the U.S. from abroad every year. In recent years nearly a third of the RNs joining the U.S. workforce were born in other countries.

Critics say this is a short-term solution that could create long-term problems. The influx of non-U.S. nurses allows hospitals to fill positions at the low salaries they prefer to pay. But it prevents the sharp wage hike that would encourage Americans to enter the field, which could solve the nursing shortage in the years ahead. Source: Business Week; 08/28/07

Patent examiners, who scrutinize applications for patents and determine whether they ought to be granted or not, are used to poring over diagrams of complicated contraptions. But now the patent system itself, just as complex in its own way, is under increasing scrutiny.

The number of applications has soared in recent years, but patent offices have been unable to keep up—resulting in huge backlogs and lengthy delays. Standards have slipped and in America the number of lawsuits over contested patents has shot up. In an attempt to fix these problems, the United States Patent and Trademark Office (USPTO), Britain's Intellectual Property Office (IPO) and the European Patent Office are evaluating a radical change: opening the process up to internet-based collaboration.

The scheme, known as “Peer to Patent”, was created by Beth Simone Noveck, a professor at New York Law School. It applies an unusual form of peer review to a process which traditionally involves only a patent applicant and an examiner. Anybody who is interested may comment on a patent application via the internet. The scheme was launched as a one-year pilot program in the US on June 15th. Source: The Economist; 09/07/07

The Inspirational Story of Breaking the Color Barrier in American Business

In America's long march toward racial equality, small acts of courage by men and women whose names we don't recall have contributed mightily to the nation's struggle to achieve its own ideals. This moving book details the story of one such little-noted chapter. In the late 1940s and early 1950s, as Jackie Robinson changed the face of baseball, a group of African-American businessmen - twelve at its peak - changed the face of American business by being among the first black Americans to work at professional jobs in Corporate America and to target black consumers as a distinct market.

The corporation was Pepsi-Cola, led by the charismatic and socially progressive Walter Mack, a visionary business leader. Though Mack was a guarded idealist, his consent for a campaign aimed at black consumers was primarily motivated by the pursuit of profits -- and the campaign succeeded, boosting Pepsi's earnings and market share. But America succeeded as well, as longstanding stereotypes were chipped away and African- Americans were recognized as both talented employees and valued customers. It was a significant step in our becoming a more inclusive society. Wall Street Journal Books/Free Press; New York, 2007; ISBN-10: 0743265718

The median salary and bonus for corporate commanders advanced 7.1% to $2,598,284, concludes Mercer Human Resource Consulting’s proxy analysis of 350 big U.S. corporations. The upturn in cash compensation matched the 7.1% increase a year earlier to a median of $2,408,665.

Median base pay for chiefs in 2006 grew 4.1%, compared with 3.6% in 2005. Raises for the No. 1 boss outpaced those bestowed on their white-collar associates. Paychecks of nonunion employees climbed 3.7%, their fastest clip since 2002 and following a year in which they rose 3.6%. (Overall U.S. wages and benefits rose 3.3% last year, slightly ahead of the 3.2% seen in 2005). Thanks to a 14.4% jump in company profits, surveyed chief executives enjoyed an 8.1% boost in their bonuses to a median of $1,553,200. In 2005, bonuses expanded 8.4% to a median of $1,437,150.

Total direct compensation for those covered by the Mercer analysis climbed 8.9% last year to a median of $6,548,805. That figure now covers salaries, bonuses, other annual incentives as well as the value of restricted stock, stock options and other long-term incentive awards at the time they were granted. Based on this revised definition, the median equaled $6,008,368 in 2005; the precise size of the gain was unavailable.

Total direct compensation for those leading the five companies with the highest shareholder returns zoomed 42.8% to a median of $5,278,755, Mercer found. The heads of the five companies with the poorest returns saw a modest 6.5% climb, but achieved a higher total direct compensation of $12,442,773. The median total shareholder return, or TSR, which equals the stock-price change plus reinvested dividends, equaled 15.1% for surveyed businesses, compared with 6.8% in 2005.

Last year, 185 chief executives cashed in options for a median gain of $3,299,193. In 2005, 192 did so for a median gain of $3,493,440. Sizable increases in profitability and the stock market helped expand these rewards. The number of corporate leaders getting options slipped to 246 from 265 in 2005. Source: The Wall Street Journal; 04/09/07

45 million people in the US are not covered by health insurance and 40 percent of US companies do not offer health care coverage to their workers. The issue of healthcare continues to be at center-stage of political, policy and competitiveness debate.

Wal-Mart and GM illustrate that employee benefits is not just a human resource issue but a core competitiveness one. The world’s larger retailer currently faces the grim reality that unabated, benefits costs could consume an incremental 12 percent of total profits in 2011, equal to $30 billion to $35 billion in market capitalization. GM struggles with a per-car medical expense burden five times that of Toyota, and projects a future pension obligation of $89 billion, default of which could cripple the Pension Benefit Guaranty Corporation.

Indian investors and pharmaceutical industry leaders were astounded by the June 11 announcement that Ranbaxy's CEO and managing director, Malvinder Mohan Singh had sold his family's 34.8% stake in Ranbaxy Laboratories to Japanese pharmaceutical firm Daiichi Sankyo. To be sure, the markets were aware that something was afoot between Ranbaxy, India's largest pharmaceutical company, and Daiichi Sankyo, Japan's second largest, but investors were expecting no more than a sale of a strategic stake of about 10% or so to shore up an alliance between the two companies. The sale of the Singh family's entire stake came as quite a shock. Asked one journalist after the announcement: "Haven't you sold the family silver?"

Singh contends that this is just what the doctor ordered. "[This] puts us on a new and much stronger platform to harness our capabilities in drug development, manufacturing and global reach," he said. "Together with our pool of scientific, technical and managerial resources and talent, we will enter a new orbit to chart a higher trajectory of sustainable growth ... in the developed and emerging markets, organically and inorganically. This is a significant milestone in our mission of becoming a research-based international pharmaceutical company." The combined company will be worth about $30 billion. The acquisition will help Daiichi Sankyo to jump from number 22 in the global pharmaceutical sector to number 15.

The combination has significant benefits for the Japanese company. It gets a stake in a major player in generics, an area that is becoming increasingly important in Japan. According to the 2008 Japanese Pharmaceuticals & Healthcare Report, the country's pharmaceutical market is currently valued at $74.4 billion and is the most mature in the Asia-Pacific region. By 2012, the market will grow to $82 billion. The country's generics sector is one of the most promising. "In an effort to control ballooning healthcare costs, the ministry of health plans to raise the volume share of generics within the total prescription market to at least 30% by 2012," says the report. "The current value of the sector is $5.5 billion, which equates to 7.3% of total medicines sales. Changes to prescribing procedures and the influx of foreign firms with low-cost goods will provide a stimulus to the generic drug sector." The comparative figures of volume share of generics for the U.S. and the UK are 13% and 26%, so there is some way to go.

Ranbaxy will gain easier access to the much-coveted Japanese market by operating from within the Daiichi Sankyo fold. Ranbaxy could bypass a lot of European and U.S. companies that are finding it difficult to enter the Japanese market, where safety and testing requirements are a lot higher.

For Daiichi Sankyo, there are huge benefits in getting access to Indian research capabilities; it is banking not just on the cost advantage Ranbaxy would bring, but also its intellectual capital depth. Japanese companies don't have enough scientists and India has them in abundant supply right now and many are shifting a lot of their R&D to India. Source: India Knowledge@Wharton; 06/12/08

How did UBS, a Swiss bank whose core business is the staid one of wealth management, manage to lose $38 billion betting on American mortgage-backed assets, battering its core capital and share price in the process? Shareholders, out in force at the bank’s annual meeting on Wednesday April 23rd in Basel, asked just that question.
The mystery is being resolved. On Monday the bank released a summary of an internal investigation into the causes of the write-downs that had been demanded by the Swiss Federal Banking Commission. The 400-page report is now being chewed over by the regulator. Rivals should read it too. The report gives three broad explanations for the bank’s woes. The investment-banking arm’s preoccupation with growth, the reliance of the control team on flawed measures of risk and the culture of the bank. Source: The Economist; 04/23/08

Microsoft has made a $42 billion bid to buy Yahoo. There have been calls to raise the bid. Microsoft has resisted. "Flight insurance" may be the reason it has resisted. Yahoo has about 14,000 employees. Many of them enormously talented. Microsoft will want to keep the employees on board, and that means some sort of broad-based employee retention program. That could cost billions of dollars. For example, last May Microsoft bought Tellme Networks for $800 million. It put another $100 million in an employee retention program. Tellme had 330 employees. The money set aside amounted to more than $300,000 for each worker. Source: The New York Times; 04/17/08

Home Depot is restructuring its human resources department. After the changes, there will no longer be a human resources manager in each store. Human resources supervisor positions at US stores also will be eliminated. About 2,200 employees will be affected by the changes. About 1,000 jobs will be cut. Home Depot will create 230 new district HR teams that will have a manager and three full-time people reporting to that person. In addition, about 200 people will be hired for a new HR service center in the Atlanta area that will handle most store-level HR needs by telephone. This new structure is intended to cut costs and put more workers on the sales floor. Source: The Wall Street Journal; 04/07/08

Peter Löscher, the tall Austrian brought in as chief executive of Siemens last July, has a big job on his hands. His goal, and the hope of 400,000 employees at Siemens, is that the steady flow of allegations about bribery and corruption will soon dry up—and with them the damaging investigations. Since November 2006, when police raided the group's offices across Germany, hardly a week has gone by without new allegations of wrongdoing by company officials in places from Botswana to Beijing. Siemensianers, as employees were once proud to call themselves, are fed up with being the butt of jokes about slush funds and secret accounts in Liechtenstein. Mr Löscher's job is to purge the company from top to bottom, so that Siemens can put the scandal behind it and enjoy its position as one of the world's leading companies, and one of globalization’s great winners. Most recently, on March 1st, he appointed legal officers to each of the sprawling engineering group's divisions. He wanted to emphasize that obeying the law is a vital aspect of every operational decision.

Investigators allege that there was a culture at Siemens, endorsed by senior managers, to use bribes and slush funds to win contracts, especially in its communications and power-generation divisions. Last year Klaus Kleinfeld, then chief executive, and Heinrich von Pierer, his chairman and predecessor, resigned under pressure from shareholders. (Both have denied knowledge of any corruption.) One former board member is being investigated, and others are expected to share his fate. And because of its New York listing, Siemens is being investigated by the much-feared Securities & Exchange Commission, which can impose much heavier sanctions than the €660m in penalties Siemens has paid in Europe so far.

Appointing Mr Löscher, an untainted outsider, was an effort to draw a line under the scandal. He had previously headed divisions at GE, Siemens's great rival, and Merck, a pharmaceuticals giant. Over Christmas he warned top managers in a letter that ignorance and loyalty were no excuse for having broken the law. Managers were offered an amnesty until January 31st—later extended by a month—to encourage them to spill the beans. And they have been doing so: 110 came forward, giving investigators dozens of new leads.

None of this seems to have dented Siemens's ability to make money and win new contracts—so far, at least. Most of its units met their target operating margins in the most recent quarter, and order books are fuller than they were a year ago.

Siemens shareholders are generally pragmatic: they have been more concerned about streamlining the business than the corruption scandal. The share price has responded favorably to news of a share buy-back program, and the announcement in January that Mr Löscher had spent €4m of his own money buying Siemens shares. His fellow board members promptly bought €1.5m-worth of shares themselves, suggesting that they too are confident in his ability to stop the rot.

Ferdinand Piëch is two steps closer to realizing his dream: the creation of a new European automotive giant. On March 3rd he and his colleagues on the supervisory board of Porsche Automobil Holding gave the go-ahead for Porsche, a maker of sports cars, to buy another 20% of Volkswagen (VW), Europe's biggest carmaker. Porsche already owns 31% of VW, so this will give it a controlling majority. A few hours earlier VW itself, of which Mr Piëch is chairman, announced a takeover of Scania, a Swedish truckmaker, paying €2.9 billion ($4.4 billion) to increase its stake from 31% to 68.6%.

The resulting concern, under the umbrella of Porsche Holding, will have sales of around €120 billion and will sell 6.7m vehicles a year. Its biggest markets will be Europe, Asia and South America; cracking North America may be a job for the 70-year-old Mr Piëch's successor. MAN, a truckmaker in which VW owns a 29.9% stake, may be rolled in later. Source: The Economist 03/07/08

It's called the Nano, for its high technology and small size. It's cute, compact, and contemporary. It's a complete four-door car with a 623-cc gas engine, gets 50 miles to the gallon, and seats up to five. It meets domestic emissions norms and will soon comply with European standards. It's 8% smaller in outer length than its closest rival, Suzuki's Maruti 800, but has 21% more volume inside. And at $2,500 before taxes (value-added taxes increase the price by about $300), it is the most inexpensive car in the world. Starting this fall, the Nano will roll off the assembly lines at a Tata Motors plant in Singur, Bengal, and navigate India's potholed roads.

The Nano has broken ground on many different levels—in price, in size, in distribution, and technology. By using lighter steel, a smaller engine, and having longer-term sourcing agreements with parts suppliers, Tata was able to keep the price of the Nano down. Its length of 3.1 meters, width of 1.5 meters, and height of 1.6 meters, with wheels at the outer corners and engine, gears, and transmission in the rear, creates space inside the car.
Finally, the distribution of the car will also be an innovation. Just like a bicycle, it will be sold in kits that are distributed and serviced by the entrepreneurs who will assemble it for the consumer. Tata won't elaborate, and will only say "the distribution system will be a variant from the norm. It will remove some of the layers in distribution and service." Source: Business Week; 01/10/08

General Motors Corp. Chief Executive Rick Wagoner said the auto maker could see "significant" profit increases in two to three years, a rare bright outlook in an industry grappling with soft sales and economic concerns. Mr. Wagoner, whose three-year-old plan hasn't yet brought GM back to profitability, asked investors for more patience despite the company's sliding share price and worsening economic expectations. He told Wall Street analysts yesterday that the improved results in coming years would result from a new labor contract and growth in overseas sales.

Mr. Wagoner said the company expects to cut labor costs by as much as $5 billion by 2011 thanks to the UAW deal. The contract is buttressed by clauses that allow GM to hand over its enormous hourly health-care liability to the UAW and replace workers with hires who earn lower wages and benefits.

An attrition plan will be offered to 46,000 workers next month. By 2012, GM expects fixed structural costs to represent 23% of revenue. It also expects to arrest the punishing inflation in material costs.

Much of GM's hope hinges on a rebound in the U.S. market. Even though the company argues its liquidity and financing are in good enough shape to weather a significant downturn in the U.S., its chances of finding black ink in a smaller U.S. auto industry are bleak. Source: The Wall Street Journal; 01/18/08

Well, it depends who's paying. Put yourself in the position of Microsoft. For all that power and money, your company looks, frankly, old hat compared to the world of social networking. So what do you do? Buy a piece of the action - without fretting too much about the pricetag. Which is exactly what Microsoft did this week, taking a 1.6% stake in Facebook for pounds 117m. At that rate, the entire company is worth $15 billion.

That doesn't mean Mark Zuckerberg (the 23-year-old who created Facebook) is about to sell his baby. Nor is Microsoft going to buy it up - not yet, anyway. But its chief executive is on a shopping spree: a few days ago, Steve Ballmer declared Microsoft would buy 20 start-ups each year, for the next five years. In the internet's new gold rush, this is a form of prospecting. Google is doing something similar - as is Yahoo, which last year offered to buy Facebook for around $1bn. Cheapskates.

As these giant firms have money to burn, how much should they pay for Facebook? Well, $15bn is way too high, being 500 times its estimated earnings for this year. These prices smack of the 90s dotcom bubble - and we know how that ended up. But of the social networking websites, Facebook certainly looks a good prospect. It already has more than 50m users and adds another 200,000 daily. That is far stronger growth than its arch-rival MySpace (which Rupert Murdoch bought two years ago). But what really marks Facebook out are its moves to compile users' profiles into an online directory, a kind of phone book of the web. Enthusiasts believe that will lead to lucrative advertising; cynics mutter about a new age of junk mail. Source: The Guardian; 10/27/07

Former Sprint Nextel CEO Gary Forsee could collect a severance package worth more than $54 million after stepping down under pressure on Monday. The company declined to discuss Forsee's severance package but said it would be based on terms spelled out in the company's last proxy statement. It could include accelerated vesting of stock options worth about $42 million. It is unclear whether Forsee will receive a $2.5 million bonus for integrating Sprint and Nextel and whether he is eligible for a $2.5 million award for meeting performance targets. He will receive medical benefits and some other perks for two years but will not have access to the company plane. Source: The Washington Post; 10/10/07

Merrill Lynch & Co.'s announcement Friday that it would take a $5.5 billion hit to third-quarter earnings is exposing the weak oversight exercised by top Merrill executives as it became a big force in the mortgage-securities business.

Wall Street has been reeling from the recent credit crunch tied to questionable home mortgages, with several companies taking multibillion-dollar write-downs. But Merrill is taking the biggest charge and is the only major U.S. firm so far that has said it will report a loss for the third quarter.

The announcement gave a boost to Merrill's shares, which rose $1.89, or 2.5%, to $76.67 in 4 p.m. trading Friday on the New York Stock Exchange. That reflected investors' relief that Merrill is trying to put the problems behind it. The broader stock market was also higher, with the S&P 500 index hitting an all-time high. The Dow Jones Industrial Average gained 91.70 to 14066.01, just shy of a record.

Merrill Lynch, best known for its symbol of the bull and its "herd" of 16,000 brokers pitching stocks to retail investors, had become deeply involved in the mortgage business by this year. That was despite an assurance to investors just three months ago that its exposure was "limited" and "contained." At one point, Merrill had amassed a portfolio of at least $25 billion in risky assets, people familiar with the situation say.

The ballooning exposure to these assets, which fell in value amid spreading defaults by homeowners, prompted the firm on Wednesday to oust two of its top credit-market executives, Osman Semerci and Dale Lattanzio. The executives believed the crunch was "just a hiccup," but Merrill Chief Executive Stan O'Neal concluded that their estimates of the assets' value were overly optimistic, people familiar with the firm said.

The actual losses are even greater because they have been reported after fees, offsetting hedges and gains recorded by the financial firms due to declines in the value of their own debt. At Merrill, the bulk of the $5.5 billion hit was a $4.5 billion write-down, after offsetting hedges, on collateralized debt obligations and subprime mortgages. The remaining $967 million, which was reduced to $463 million by offsetting fees, reflected losses on loan commitments for buyouts. Source: The Wall Street Journal; 10/06/07

Normally, a 40-year-old sandwich would be something to be avoided.

Unless you're one of millions who flock to McDonald's each year to chow down on a Big Mac. The triple-decker burger, which helped breed America's super-size culture and restaurants' ever-expanding jumbo meals, is turning 40. For some fast-food junkies, that's cause for celebration.

The Big Mac was first introduced in 1967 by Jim Delligatti, a McDonald's franchise owner in Uniontown, Pa. A year later, it became a staple of McDonald's menus nationwide.

McDonald's estimates 550 million Big Macs are sold each year in the U.S. alone. Do the math and that's about 17 per second. Weighing in at nearly a half-pound, with 540 calories and 29 grams of fat each, that's enough to make nutritionists cringe. Source: The Associated Press; 08/24/07

Toyota has decided to slow down its US expansion and factory building program. The company has a number of concerns, including rising labor costs. Toyota has matched UAW wages for tens of thousands of its workers. In Georgetown, KY, for example, the average wage is $26 an hour. That is only a bit less than UAW workers get at GM and Ford. But bonuses that Toyota doles out twice a year more than make up the difference. Generous pension and health benefits are what puts the Big Three at a competitive disadvantage. As part of its effort to rein in rising labor costs, Toyota plans to align hourly wages for new hires more closely to prevailing manufacturing pay in regions where its plants are located. New hires will be paid no more than 50% over the prevailing manufacturing wage in the area. In Tupelo, MS manufacturing wages pay about $14 an hour. So, wages at a new Toyota plant will be in the $20 an hour range. Source: The Wall Street Journal, 06/20/07

Halliburton is relocating its headquarters from Houston to the Persian Gulf, a move that seems much more a reflection of geographic shifts in the petroleum industry writes the Wall Street Journal.

Halliburton's plans caught the energy world, the city of Houston and members of Congress by surprise, the Houston Chronicle reports; it is the No. 2 oil-services company in the world with more than 38% of its $13 billion oil-field services revenue in 2006 coming from the East, where 16,000 of its 45,000 employees are based.

Halliburton's move is a new chapter in the evolution of Dubai as a center for trade, regional investment and oil-industry deals; another sign of what The Wall Street Journal calls shifting alignments in the global oil order. Dubai puts the company's leadership closer to the region's national oil firms, which more and more prefer dealing directly with oil-services contractors rather than going through the multinational petro-giants, the Times of London notes. Dubai has prospered by making itself a place where business executives from any part of the world can work comfortably. And Halliburton, by focusing on Dubai, is expressing a need "to make up ground lost in recent years to Western rivals and increasingly ambitious Chinese oil-field service companies," the Journal says. Source: Wall Street Journal; 03/12/07

Starbucks it was once said is more in the business of community than coffee. But now with 13,000 stores globally, Chairman Howard Schultz is pondering whether the associated commoditization of the brand has damaged the experience. Has Starbucks essentially sold its soul he rhetorically asks CEO Jim Donald in a recent internal memo now widely availably on the Internet?

Schultz laments the loss of “romance and theater” with the transition to the more efficient automatic espresso machines, the sensory void created by aroma-less flavor locked packaging and neighborhood ambience being increasingly superseded by chain-store outlet designs. “We desperately need to look into the mirror and realize it's time to get back to the core and make the changes necessary to evoke the heritage, the tradition, and the passion that we all have for the true Starbucks experience” he implores in advance of the Companies upcoming strategic planning cycle.

In strategy one need to find competitive uniqueness and then build your business around this. As businesses grow, competition intensifies or discontinuity hits straddling of position often occurs. This is a downward spiral to mediocrity or worse. Schultz is correct to surface the issues; ignoring it would only cause the straddling to perpetuate. It would have been more prudent though not to have done so in writing and expose the company to public disclosure of internal debate.

Mini USA, the American branch of BMW's Mini Cooper line, tracks everything being said about its brand everywhere on line - in blogs, discussion groups, forums, MySpace pages and much more - then uses what it learns to guide advertising campaigns.

At Hewlett-Packard, 50 executives log into their individual blogs each morning to join the ongoing online conversation about each of their product lines, immediately responding to customer problems and concerns.

Ernst & Young recruits many of the 3,500 college graduates it hires every year using a career group on Facebook, where it not only posts job information but also answers individual questions from prospective employees. And Del Monte Pet Foods uses a private online community to regularly "chat" with 400 pet lovers whose opinions help shape new products.

These are all examples of companies savvy enough to participate in the groundswell of social networking; a social trend in which people use technologies to get the things they need from each other, rather than from traditional institutions like corporations.

The more you know and understand the individuals who make up the groundswell around your brand and your company, the more you can use the new social networking phenomenon to your advantage. Such understanding comes from going well beyond traditional user surveys, however. Too few companies study how people actually interact with the web and utilize online collaborative tools, yet much of today's Internet revolves around individual users, the content they create, the communities they form and the transactions they choose. Looking more carefully at people's behavior on the Internet can can uncover surprises, sometimes calling into question basic assumptions.

To help companies target their Internet strategies, technology consulting firm Forrester utilizes a "social technology ladder," which classifies consumers based on their participation in various types of social networking. At the lowest rung of the ladder are the "inactives," some 44% of all U.S. American adults who were online in 2007. Higher up are the "joiners," the 25% who visit social networking sites like MySpace; collectors, an elite 15% who collect and aggregate information; and critics, those who post ratings and reviews as well as contribute to blogs and forums. Only 18% of all online Americans actually create content, publishing an article or a blog at least once a month, maintaining a web page or uploading content to sites like YouTube.

The power of such a classification lies in giving organizations a clear understanding of how consumers are behaving online. Any successful strategy to tap into the groundswell has to begin with assessing customers' social activities. Then you can decide what you want to accomplish, plan for how your relationship with your customers will change, and finally decide what social technology to use. Source: Knowledge@Wharton; 07/09/08

The rise in inflation across the world is a big worry for central bankers and policymakers. This week the OECD announced that consumer prices for all items in its 30 member countries increased by 3.9% in May compared with a year earlier, the highest rate since 2001. Energy and food prices are the main contributors, rising by 14.6% and 6.1% respectively in May. If these are excluded, the rise in prices is a far more moderate 2.1%. Source: OECD; 07/01/08

Climate change has become a business reality, and executives should get ready for a major shift in the economy. The value at stake is huge.

Some companies will be winners and others losers in the gradual transition to a global low-carbon economy—a transition driven by regulation and structurally higher energy prices. A drive to reduce greenhouse gas emissions in existing infrastructure and products, coupled with the emergence of new low-carbon business models and value chains, will provide many opportunities for business.

A shift to a low-carbon economy is already under way and business must get ready for it, especially in energy, transport, and heavy industry - the heart of today’s carbon-intensive economy - and in many other industries as well. If current climate science holds true (and there is considerable uncertainty in the estimates) global greenhouse gas emissions should ideally decrease from today’s levels by 90 percent as of 2050 in order to contain global warming below two degrees centigrade. To reach this ambitious goal, taking economic growth into account, the global economy’s carbon productivity would have to increase by 5 to 7 percent a year, compared with a historic rate of just 1 percent, in the days when carbon emissions were not an issue.

During the past five years, society at large has awakened to the climate issue. Climate change and the environment are higher on the minds of consumers around the world than any other sociopolitical question. Executives across a broad range of sectors have started to recognize that this mind-set is a business reality - whether they believe in the science or not.

Although there is great uncertainty about how the shift to a low-carbon economy will play out, the value at stake over the next two decades and beyond is going to be enormous. Some companies will be clear winners, others clear losers - in fact, the outcome may be as unambiguous as it was when the industrial revolution shifted business from manual labor to energy-intensive factories. To help companies benefit from the coming transition, their managers should carefully begin to reposition them for a low-carbon landscape. Three related developments provide the starting point for this analysis and for any strategic response.

First, there will be efforts to optimize the carbon efficiency of existing assets and products: infrastructure (buildings, power stations, data centers, factories), supply chains, and finished goods (automobiles, flat-screen TVs, PCs). This optimization will involve measures to improve energy efficiency, as well as a shift to less carbon-intensive sources of power, such as nuclear, wind, solar, and geothermal.

Second, demand is growing for new low-carbon solutions that can meet the need for sustained, drastic emission reductions. Value chains that disrupt existing industries and create new ones will spring up - industries based, for instance, on the large-scale supply of biomass to power plants and on second-generation biofuels. New business models that reward suppliers and end users in the power and transport sectors for consuming less energy will be as important as new technologies.

Third, public policy and the widespread belief that higher energy prices are here to stay are driving both of these developments. The coming economy-wide discontinuity may be the first one driven largely by regulation. Source: McKinsey Quarterly; April 2008

Healthcare accounts for a remarkably large slice of the U.S. economic pie. Each year health-related spending grows, often outpacing spending on other goods and services, meaning that the size of that slice also increases.

These cost increases have a significant effect on the way households, businesses, and government agencies conduct their affairs. Among other things, health inflation puts pressure on businesses who offer insurance coverage to their employees, inhibits individuals from purchasing their own coverage, can be a major financial burden to families, and takes an increasing share of government budgets and taxpayer dollars. Key statistics include:

In 2005, the U.S. spent $2 trillion on health care, which is 16 percent of GDP and $6,697 per person.

Health care costs have grown on average 2.5 percentage points faster than U.S. gross domestic product since 1970.

Almost half of health care spending is used to treat just 5 percent of the population.

Prescription drug spending is 10 percent of total health spending, but contributes to14 percent of the growth in spending.

While about 26 percent of the poor spent more than10 percent of their income on health in1996, the number increased to 33 percent by 2003.

Many policy experts believe new technologies and the spread of existing ones account for a large portion of medical spending and its growth.

Source: The Henry J. Kaiser Family Foundation; 08/08/07. Full Report available at www.kff.org

Social Networking has been described as “a social structure in which technology puts power in communities, not institutions”. These technologies have seen a rapid adoption – 22% of adults now read blogs at least monthly, and 19% are members of a social networking community. Even more amazingly, almost one third of all youth publishes a blog at least weekly, and 41% of youth visit a social networking site daily.

Forrester categorizes Social Computing behaviors into a ladder with six levels of “Social Technographics” participation – Creators (13% of US adult online consumers who publish web pages, publish or maintain a blog and/or upload video to sites like YouTube), Critics (19%; comment on blogs, post ratings and reviews), Collectors (15%; use RSS, tag web sites), Joiners (19%; use social networking sites), Spectators (33%; read blogs, watch peer-generated video, listen to podcasts, and Inactives (52%; none of above).

But while growing numbers are interesting, they don’t give companies an idea of which technologies, if any, they should use for marketing purposes. Many companies approach Social Computing as a list of technologies to be deployed as needed — a blog here, a podcast there — to achieve a marketing goal. But a more coherent approach is to start with your target audience and determine what kind of relationship you want to build with them, based on what they are ready for.

Rather than pursue social computing based on fashion, companies need to think about how they want to engage with their prospects – and create content, features and functionally that create a path for participation. Source: Forrester; 04/19/07

Adieu, conspicuous consumption. Meet the new cultivated consumer.

A shift in consumer preferences is one of the premises of a new study that aims to define this increasingly powerful subset of affluent Americans, and to examine its behavior and lifestyle preferences.

A new study commissioned by the magazine Vanity Fair sought to define and track what Women's Wear Daily describes as the increasingly powerful subset of affluent Americans known as the "cultivated consumer."

The study found that 28 percent of American citizens between the ages of 21 and 54, and with a household income of over $100,000, fit into the cultivated consumer category. That translates into 9,199,680 people, with disposable income and eclectic interests, a thirst for exclusive knowledge, a preference for an authentic experience, social responsibility and the need to surround themselves with a network of experts.

According to the study, "The Cultivated Consumer is a significant, emerging segment of the affluent population. Culture is not something to be just observed and experienced — instead the cultivated consumer creates their own personal culture. They cultivate a highly refined personal sensibility — a 'critical eye' that they apply to how they consume media, goods and experiences. The path to their wallet is through this filter." Source: Women's Wear Daily; 05/30/07

The number of uninsured Americans reached 43.6 million, or 14.8% of the population, in 2006, according to the US Centers for Disease Control and Prevention. Almost all of the increase occurred in the nonelderly adult population as employers cut back on coverage. Texas had the largest percentage of people without health insurance, Michigan the lowest. The CDC is one of three federal agencies that estimate the number of Americans without health insurance. The Census Bureau puts out what is perhaps the best-known number. That number is due to be released in August. Source: The New York Times; 06/27/07

Each year since 1985, the editors of THE FUTURIST have selected the most thought-provoking ideas and forecasts appearing in the magazine. Over the years, these forecasts have spotlighted the emergence of such epochal developments as the Internet, virtual reality, and the end of the Cold War. The current top 10 forecasts are:

Generation Y will migrate heavily overseas.
Dwindling supplies of water in China will impact the global economy.
Workers will increasingly choose more time over more money.
Outlook for Asia: China for the short term, India for the long term.
Children's "nature deficit disorder" will grow as a health threat.
We’ll incorporate wireless technology into our thought processing by 2030.
The robotic workforce will change how bosses value employees.
The costs of global-warming-related disasters will reach $150 billion per year.
Companies will see the age range of their workers span four generations.
A rise of disabled Americans will strain public transportation systems.

Read The Futurist’s explanation of each forecast…

Employers are paying the typical four-year college graduate 75% more than they pay high-school grads. Twenty-five years ago, they were paying 40% more.

Employers insist on ever better-educated, skilled workers. So this is partly a story about demand. But it is also about supply. The stock of educated workers isn't increasing fast enough to keep up with rising demand.

One in five American 18-year-olds hasn't graduated from high school. About two-thirds of new high-school graduates are in college the following fall, but many drop out before completing even a two-year degree or a certificate. The 2000 U.S. Census shows that 43% of those between ages 22 and 34 who report any college attendance didn't get any degree; 13% didn't even finish a single year of college. Source: Wall Street Journal 4/19/07

The number of baby boomers in America is estimated at 78.2 million.

Approximately 7,918 Americans turn 60 each day. That’s about 330 every hour or more than four million a year in 2006.

Within 20 years, the age profile of America will match that of Florida – about one in five Americans will be older than 65.

Boomers who reach age 65 in 2011 can expect to live, on average, at least another 18 years.

Four out of 10 boomers have less than $10,000 in retirement savings.

One-third of boomer households today have at least $100,000 in investable assets.

About one-third of baby boomers think they will have enough money to live comfortably once they retire.

Four out of five boomers intend to keep working and earning in retirement. Half of boomers plan to launch into an entirely new job or career in retirement.

Only one in seven baby boomers say they plan to collect Social Security benefits at age 62.

The unpredictable cost of illness and healthcare is by far boomers' biggest fear. They are three times more worried about a major illness (48%), their ability to pay for healthcare (53%) or winding up in a nursing home (48%), than about dying (17%).

Source: “The Boomer Century: 1946-2046” by Richard Croker, Springboard Press (April 30, 2007)

More than a quarter of U.S. businesses have failed to plan for the effects of the aging American workforce, according to the results of a new national survey.

Despite reports that the U.S. faces a shortage of millions of workers within the coming decade as baby boomers retire—taking with them years of experience, talent and expertise and leaving fewer new workers available to take their place—The National Study of Business Strategy and Workforce Development, conducted by the Boston College Center on Aging and Work, found that many U.S. businesses are unprepared for changing workforce demographics.

Key findings include:

Only 37% of employers had adopted strategies to encourage late career workers to stay past the traditional retirement age, despite the fact that late career employees "have high levels of skills and strong professional and client networks, a strong work ethic, low turnover and are loyal and reliable."

60% of the employers indicated that recruiting competent job applicants is a significant HR challenge.

40% indicated that management skills are in short supply in their organizations.
Only 33% of employers reported that their organization had made projections about retirement rates of their workers to either a moderate (24.1 percent) or great (9.7 percent) extent. The researchers stress that flexibility resonates particularly with older workers.

The full report/summary report can be found online at www.bc.edu/agingandwork.

Global atmospheric concentrations of carbon dioxide, methane and nitrous oxide have increased markedly as a result of human activities since 1750 and now far exceed pre-industrial values determined from ice cores spanning many thousands of years. The global increases in carbon dioxide concentration are due primarily to fossil fuel use and land-use change, while those of methane and nitrous oxide are primarily due to agriculture.

Warming of the climate system is unequivocal, concludes scientific research sponsored by the World Meteorological Organization (WMO) and the United Nations Environment Programme (UNEP) citing evidence from observations of increases in global average air and ocean temperatures, widespread melting of snow and ice, and rising global mean sea level.

The growing need for talented managers in China represents the biggest management challenge facing multinationals and locally owned businesses alike, surveys show. Demand for skilled managers will grow more quickly than the supply of qualified candidates.

In a recent AmCham Shanghai survey of US-owned enterprises there, for example, 37 percent of the companies responding said that recruiting talent was their biggest operational problem—more than the number who cited regulatory concerns, a lack of transparency, bureaucracy, or the infringement of intellectual-property rights. Separately, 44 percent of the executives at Chinese companies surveyed by consulting firm McKinsey reported that insufficient talent was the biggest barrier to their global ambitions.

Continued strong economic growth in China over the next several years will further fuel demand for good people. On the supply side, the gap is widening at all levels in China. For entry-level corporate positions, there is an ongoing mismatch between the sort of graduates most Chinese universities turn out and the type of candidate who would interest local and regional companies, to say nothing of multinationals. People who prove themselves effective will have increasingly high expectations of their current employers, and if those expectations aren’t met they may easily be tempted by lucrative rival offers. The market for experienced hires is even more challenging, especially when international experience beyond China and Asia is required.

Local companies and multinationals therefore increasingly fish in the same small pond of high-potential graduates and experienced managers with the right functional capabilities, leadership potential, and language skills. Many local companies are willing to match or exceed the multinationals’ compensation packages.

Companies that are successfully addressing the talent challenge in China stand out in a number of ways, including their ability to localize techniques that have worked in other parts of the world. The most effective companies have a clear strategic view of their talent needs four to five years out, identify gaps at all levels of the organization, and segment their executives carefully. They develop and operate both a sophisticated external-recruiting machine and an internal-development and -training program adapted to the local Chinese environment. Companies that get the solution right will create a real source of competitive advantage. Source: The McKinsey Quarterly; July 2008

Success in a global marketplace requires a fine balance of two essential capabilities — a global approach to the business and a local view of the customer.

Leading retailers know and understand their customers exceptionally well. But when it comes to global retailing, the sheer diversity of customers can confuse the best of brands. Success in a global marketplace requires a fine balance of two essential capabilities — a global approach to the business and a local view of the customer.

Winning companies view their organization as a single worldwide entity. They build standardized, integrated back-office operations to secure the economies of scale that can handle the complexities of selling in multiple markets. Even more importantly in such a customer facing industry, they take a view of the customer that leverages the core brand and offering in each local marketplace.

It may not be the right strategy for every retailer. Nor does successful globalization require a presence everywhere. Each new market presents different tax, labor and real estate environments and regulations. Heavily regulated retail sectors may actually be barred from entering some countries. And restrictions on foreign owners can be so onerous that setting up in certain geographies just isn’t worthwhile. Even when it is, compliance issues associated with operating internationally pose huge challenges; US firms must comply as well with SOX, GAAP and other international standards.

It’s also important not to over estimate the growth potential of rapidly emerging markets, however enticing they may look. Recent independent research suggests, for instance, that the actual value of retail sales in China may be only about half official estimates. Equally, companies should avoid under estimating the enormous effort involved in approaching new markets successfully.

Despite these caveats, the case for globalization is compelling. Accenture research on high performance businesses reveals that international expansion is integral to the “relentless growth agenda” that distinguishes high performance in the retail industry. Successful globalization can significantly boost retail revenues and eventually profitability as well. It can also help repel unwanted suitors. An international expansion strategy originally designed to prevent a Wal-Mart takeover, has became key to Tesco’s remarkable growth, for instance. The UK retailer is now active in 13 European and Asian markets and recently opened in the United States. Source: Accenture Outlook; 07/09/08

A new global middle class is rising up from poverty in emerging economies around the world, providing competition for labor and resources, but also enormous promise for multinationals that tailor products and services to the burgeoning ranks of first-time consumers. 

Coca-Cola's newly appointed chief executive Muhtar Kent sees this market as critical to his company's future and describes the scale of the opportunity as equivalent to adding a city the size of New York to the world every three months. The World Bank estimates that the global middle class is likely to grow from 430 million in 2000 to 1.15 billion in 2030.

A look at the geographic distribution is striking. In 2000, developing countries were home to 56% of the global middle class, but by 2030 that figure is expected to reach 93%. China and India alone will account for two-thirds of the expansion, with China contributing 52% of the increase and India 12%, World Bank research shows.

As a result, multinationals that have so far viewed developing nations largely as a cheap source of labor, are now poised to benefit again as many of the workers they paid to build their products are increasingly able to afford Western consumer goods.

Bill Amelio, CEO of Lenovo, the Chinese firm that merged with IBM's personal computer business, notes that China is now the world's largest market for television sets and cell phones and the second-largest market for automobiles and personal computers.
The McKinsey Global Institute, the consulting firm's independent economic research arm, projects India's middle class will grow from 50 million to 583 million people in the next two decades. At the same time, the country will advance from the world's 12th largest consumer market to the fifth.

Meanwhile, China is expected to become the world's third-largest consumer market by 2025 as an expected transition from an investment-led economy to a more consumer-focused model brings about continued growth. The McKinsey Global Institute projects China's middle class will grow to 612 million by 2025, up from 43% of the population to 76%.

Clearly this broad expansion of a middle class with discretionary income to buy more than life's necessities presents a remarkable opportunity for multinational corporations. For example, Coca-Cola has a layered strategy for China in which Coke is sold in urban areas at only a slightly lower price than in Western markets. As a result, Coke is established as a brand to which new consumers aspire. At the same time, Coke is sold in the countryside for less, but consumers must drink their beverage on the spot and return the bottle to the vendor - a strategy that saves costs and drives down the price. In addition, bottles are smaller than those in the West.

Distribution is an important consideration for companies hoping to reach the emerging middle classes. Roads and airports are underdeveloped, particularly in India, a situation that presents a significant challenge -- and opportunity -- for companies that want to create innovative distribution systems.

While the growth of the global middle class is predicted to continue at a rapid pace, forces exist that could derail the process of global expansion for Western multinationals. One factor to consider is the differences in income distribution between countries and within nations. What is interesting is the dynamic character of social class, certainly not stable on a global basis and quite variable on a country-by- country or region-by-region basis. While statistically speaking, there is an emerging global middle class, we need to look carefully at the various indicators on a more fine-grained basis in order not to miss the variability.

This includes the caution against making assumptions that the world's new middle class will act exactly as prior generations of middle-class consumers have around the world. This is important, because we tend to assume all middle-class people have certain values. The common assertion is that people rising into the middle class will press for democracy, but that does not seem to be happening in China where people may be willing to accept more autocratic regimes in return for stability and middle-class lifestyle. An assumption that there's a link between capitalism and democracy, and that as incomes rise and people become educated, they will increase pressure for democracy and freedom and civil liberties may or may not be true. Source: Knowledge@Wharton; 07/09/08

Retail is one of the fastest growing and evolving sectors in India. With a market size of over $336 billion in 2007 and a year on year growth of 30-35%, it is no surprise that this sunrise industry is envisaged to grow to a market size of over $590 billion by 2012. The sector which has hitherto been characterized by unorganized and fragmented retailing is now witnessing tremendous growth in organized Retail.

Organized retail which is just about 4% of the Indian market today, as against an average of 50% to 85% in more developed economies, is poised to grow to more than 12% by 2012. In terms of sheer size however, traditional retail will continue to dominate the market with a market size of $493 billion as against organized/modern retail with a market size of $97 billion.

There are several factors that are contributing to this phenomenal growth. Economic reforms of the last decade, rising incomes, changing consumer attitudes, cross border and cross cultural influences, changing demographics and new born consumer confidence is driving the buoyant growth of organized retailing in India.

A large youthful population – more than 50% of India population is below 25 years - and growing affluence among the working youth is also contributing to the growth of the retail sector. The country is also witnessing the emergence of the New Consumer in India. A discerning consumer who is not shy about spending, consuming and investing in his or her mental or physical comfort, who values lifestyle who wants complete information before making a decision.

It is without a doubt that with so many factors driving India’s growth, rapid transformation is bound to happen in the consumer market as various areas/segments in retail would grow with changing preferences and tastes of consumers.

The buoyancy in the markets and the potential for growth is attracting more and more investments in the sector. Over the next 5 years investments of over 30 billion US dollars are projected in the sector. With such high growth rates and market sizes, investment in supply chain and logistics, the retail backbone, has become imperative.

The major investment areas in retail supply chains lie in the area of sourcing, distribution centers warehouse, cold storage), transportation networks, inventory (both store level and warehouse), supply chain information systems such as warehouse management systems, planning, forecasting, inventory management, etc.

Retail chains can choose to own or outsource one or more areas in the back end starting from inbound transportation, distribution centers, or even further upstream, value adding operations. Currently, some of the retail chains like Subhiksha have outsourced most of their back end, while some, such as Reliance, are investing heavily in the supply chain network.

Others are positioned in between owning part of the activities in the back end. Outsourcing is done mostly in inbound transportation to independent trucking companies, or to 3PLs (third party logistics companies), who may also provide other services as warehousing.

Currently the retail sector employs over 50 million people in India. The additional new investments in organized retail alone are expected to generate additional requirement of 500 million sq. ft of space. At a most conservative estimate it is anticipated that over 2 million new jobs will be created in the organized retail sector in the next 5 years - new jobs will also be created in the unorganized sector. Source: Technopak; 2008

The financial industry has become more global just as the manufacturing sector has become more global. Deals take place all over the world. So, what can Wall Streeters expect when they pack their bags for Dubai, Shanghai, or Moscow? They can expect generous packages, often tailored to their destinations. In Shanghai, a car and chauffeur are standard. In Hong Kong, packages often include maids and a club membership. In Colombia and some Middle East locations, personal security, a bulletproof car, and insurance against kidnapping are standard. Other benefits can include a nanny, the payment of private school fees, language lessons for the family, cultural training, etc. Needless to say, relocating employees is an "expensive procedure." Source: The New York Times; 04/02/08

In Germany, labor unions traditionally have had seats on corporate boards. At Japanese firms, dozens of loyal managers cap off careers with a stint in the boardroom. Founding families hold sway on Indian corporate boards. And in China, Communist Party officials are corporate board fixtures.

Just as different nations have developed languages, foods and local customs, they also have adapted their own forms of corporate governance and board structures. Now, as business continues to globalize, new pressure from international capital pools and government regulators may diminish the local and national flavor of corporate boards.
Companies around the world are increasingly converging on a model developed largely in the United States in response to the growing power of global capital investors. As a result of new technology and liberalization of government controls on capital flows, massive pools of investment can move in and out of countries more freely than ever before. Companies that globalize operations or ownership know that adoption of internationally accepted governance standards would help them compete against other firms.

Perhaps the central focus of corporate governance is the structure of the corporate board. In general firms are moving to create boards that are more independent from management, populated by non-executive members and organized around committees overseeing management, compensation and auditing. All these factors point to good governance and thus the company becomes more attractive to investors and legitimate in the eyes of suppliers and customers. An investment manager anywhere in the world looking to put cash in the stock of a company in Lithuania or Italy will come at the company with an eye to whether it is following good practices.

Another force driving convergence is regulation. Following the passage of the Sarbanes-Oxley Act of 2002 in the United States, other countries enacted similar regulatory provisions that also focus on some of the key elements of board structure and overall governance. For example, the United Kingdom's Combined Code on Corporate Governance, adopted in 2003, sets out standards for good practices. The Code does not demand compliance in the way Sarbanes-Oxley does, but it requires companies to disclose how they conform to the Code's standards and where they differ.

The international investment community is the force that will drive convergence if it happens. Companies that want that money will have to play by their rules. So the question will be: How much commonality will they want across systems of governance? Most likely they want the same outcome around the world, which is transparency with respect to finances. As long as they get that, exactly how it occurs is less important. Different national practices can still exist if they provide acceptable levels of transparency.

It is not so much the path to transparency that matters, but that companies and countries protect shareholders and generate higher returns over time. Even small steps that lead to marginal improvement could have an important impact on the global economy. Over millions and millions of shares, that can make a difference. If hundreds of thousands of companies become just a little better governed and a little higher performing, the world would be a better place. Source: Knowledge@Wharton; 01/09/08

Over the past four years of historic economic growth, leaders in India have come to realize that to emerge as a global economic superpower, the country must invest in its social fabric - in particular, education and health care. These investments are all the more necessary, as India is expected to become the world’s most populous country by 2035. It is already the youngest: home to 20 percent of the world’s people under 24 years of age.

A scan of the provider landscape reveals a chronic shortfall: the country has only 1.5 beds per 1,000 people, for instance. That is much lower than the average - three to four beds per 1,000 people - in developing economies such as Brazil, China, South Africa, and Thailand and far behind developed areas (like the United States and Western Europe), which have four to eight beds per 1,000 people. Moreover, with 0.6 doctors and 0.08 nurses per thousand people, India has significantly fewer of them than the world average: 1.2 doctors and 2.6 nurses per 1,000 people, according to a recent World Health Organization report.

In a country where 70 percent of the population lives in rural areas and the poor rely on the public system for preventive and inpatient care, such shortages pose a significant challenge: public institutions handle 93 percent of immunizations, 74 percent of prenatal care, 66 percent of inpatient bed days, and 63 percent of delivery-related inpatient bed days. Such challenges are worrisome because, according to current estimates, government spending on hospital infrastructure will probably increase at a rate of only 2 percent a year over the next decade - lagging far behind society’s needs. Source: The McKinsey Quarterly; January 2008

Medical issues are the No. 1 concern of most Chinese citizens, according to a survey of over 101,000 households by the National Bureau of Statistics. People are concerned about the cost of medical care, about an antiquated system that has failed to keep up with demand, and about inequalities in care between rich and poor patients and urban versus rural patients. Health officials have vowed to do better and remove all inequalities to basic health care by 2020. Last year, the Chinese government spent $8.7 billion on health care, a 277% increase over 2006. Source: The Washington Post; 01/10/08

In China and Turkey, the separation between work and personal life is not so clear cut as compared with western societies, according to a joint study by Singapore Management University and Sabanci University in Turkey.

The research involved semi-structured interviews with 30 Turkish and 30 Chinese employees working for a variety of large-scale organizations. The interpersonal trust relationships are examined from three perspectives – horizontally between peers, and in vertical relationships both upwards and downwards between seniors and subordinates.
In the study, Turkish and Chinese employees were asked to define trust and identify a supervisor, a peer and a subordinate with whom they had developed a strong relationship. They were asked what factors affected their trust development and how these influenced their work relationships. The respondents were also asked to narrate an incident marking a milestone in the building of trust.

Common to both Chinese and Turkish cultures was a blurring of the line between personal and professional lives. Their collectivistic cultures facilitated the spillover effect from professional to personal, such as the sharing of personal information, time and space which served to bond employees in their professional domains.

The study found that trust in supervisors was formed or reinforced predominantly in a professional context. For both countries, benevolence was the most significant attribute in both personal and professional contexts. The Turkish sample viewed benevolence in a variety of ways. In the professional context, it took the form of career guidance, showing understanding, being forgiving of subordinates' mistakes or being unselfish -- for example, encouraging the respondent to take a better job offer. Chinese respondents did not view benevolence as the only condition for building trust, but also included attributes such as delegation and reciprocity, highlighting the importance of mutual obligations and reliability of team members in achieving work deliverables within a collectivistic culture.

The major findings in this study are that benevolent motivations drive most trust building efforts especially for trust between peers and, to a lesser extent, for trust in supervisors where notions of justice and fairness also matter. With respect to subordinates, predictability and ability drive trust building efforts for supervisors. Source: China Knowledge@Wharton; 01/02/08

Over the next 20 years, India will likely grow to become the world’s fifth-largest consumer economy.

A study by the McKinsey Global Institute suggests that if India can achieve 7.3 percent annual growth—a reasonable assumption if economic reforms continue—consumer spending will quadruple, from about 17 trillion Indian rupees ($372 billion) in 2005 to 70 trillion rupees in 2025. The dramatic growth in India’s middle class, from 50 million to 583 million people, will power this surge.

Spending patterns will shift dramatically as expenditures grow rapidly on discretionary items ranging from personal products to consumer electronics. Incumbents will have to fight to retain their market dominance, while attackers could find lucrative ways to exploit the evolving tastes of India’s massive new middle class.

With such growth on the horizon, it is unclear which companies will win in most product categories. Opportunities will blossom as millions of first-time buyers step up to cash registers and as the bulk of consumer spending moves from scattered, hard-to-reach rural areas to more concentrated, accessible urban markets. Indian consumer spending will shift substantially from the informal economy, with its individual traders, to the more efficient formal economy of organized businesses. That transition will lower prices and further boost demand.

But neither incumbents nor attackers will have an easy time. Bureaucratic hurdles and well-recognized infrastructure shortcomings will frustrate many strategies. In addition, while aggregate spending will rise tremendously, it will be spread across hundreds of millions of households, many with very modest incomes (by the standards of developed countries) and high sensitivity to price and value. Finally, in many consumer markets both Indian and multinational companies already compete intensely for customers. While the opportunities will be enormous, the challenges will force companies to be more dynamic by adapting their products, services, and business models to the rapidly changing needs and incomes of Indian consumers. Source: The McKinsey Quarterly, 2007, Number 3.

It used to be a cushy ride. Companies thought they had to "bribe" employees to leave all that was familiar and comfortable and take assignments in foreign countries. There are all manner of perks and life was good, very good. But that has changed. Corporate cost cutting, changes in the tax codes, and the falling dollar have eroded the lifestyles of executives and their families overseas. The Weekend Journal looked at living costs in eight cities that are home to lots of expats. In Mumbai, high-end homes rent for $6,400 a month, a Toyota Camry costs about $60,000, and a glass of Bombay Sapphire gin and tonic about $20. In London, a two-bedroom flat in Chelsea starts at more than $1,600 a week, a Camry costs $32,500 to $46,000, and dinner for two at a nice restaurant (no wine) will set you back $160 to $250. In Sao Paulo, a two bedroom apartment rents for about $1,200 to $2,000 a month, a Camry retails for $80,000, and a short-sleeve Ralph Lauren shirt goes for $85. The other profiled cities are Moscow, Hong Kong, Dubai, Tokyo, and Beijing. Source: The Wall Street Journal; 10/26/07

The United Kingdom is home to 17% of Europe's high net-worth individuals, defined as anyone with more than $1 million in financial assets, such as private-equity holdings, stocks and bonds, according to a survey by Merrill Lynch and Capgemini. The group is growing. Last year, the number of high net-worth people in the U.K. surged 8.1% to 484,580, faster than Germany or France.

Of the U.K.'s 10 richest people, just three are originally from there, according to the Sunday Times newspaper's annual list. The country's two wealthiest individuals are the Indian-born chief executive of ArcelorMittal, Lakshmi Mittal, who paid $141 million for his London mansion, and Russian oil magnate Roman Abramovich. About 65% of houses sold in central London for $8 million or more last year were purchased by people born outside the U.K., estimates British real-estate company Savills PLC.

Behind the surge of money pouring into London is the globalization of wealth. As new multimillionaires are minted in Russia, India, the Middle East and Europe, many are coming to London, drawn by a combination of low taxes, historical ties and a geographical location that makes the city attractive for people doing business in Eastern Europe, Asia and the Middle East.

The U.K. taxes foreigners who claim their true home, or "domicile," is elsewhere only on the money they earn in, or bring into, Britain. All assets elsewhere aren't taxed. The U.S., by contrast, taxes residents on their world-wide income. Many rich foreigners settle in London because of the ease of doing business in both U.S. and Asian time zones, a key consideration as developing markets gain in economic importance.

London now rivals New York as a center of international finance. In a nod to London's success, the Partnership for New York City, a nonprofit group that promotes New York as a financial center, recently hired a Briton to run a new office dedicated to maintaining New York's competitiveness in financial services.

Some people question whether the bubble in London is starting to show signs of cracks. British consumers are taking on more debt and interest rates are rising. Financial and business services account for a third of London's jobs. There are some signs that the boom is slowing down. Some bankers say the current turmoil on financial markets is making them brace for layoffs and low bonus payments in the year to come. Last month, the Royal Institution of Chartered Surveyors reported the first drop in British housing prices in 22 months, and said there was a 20% chance of a 10% drop in London house prices over the next year.

Still, London's wealth has a range of sources -- from Russian oligarchs and Indian billionaires, to American and European financiers as well as Arab oil sheiks -- which could help cushion any downturn, observers say. London's property market cooled after the financial crashes in Asia and Russia in 1998 and after September 11, 2001, but recovered quickly in both cases. Source: The Wall Street Journal; 10/05/07

Self-insured businessman Larry Shaw found out he needed heart surgery - blocked arteries. His first call was to find out was how much it would cost. The surgeon would cost $1,500 to $2,000. But the angioplasty plus one night in the hospital would cost $47,000, not including anesthesia. Larry's next calls were to Thailand and India. A few weeks later, Larry had a successful angioplasty in Bangkok's private Bumrungrad International Hospital. Cost: $6,400. Thus, Larry joined the ranks of medical tourists. In 2005, medical tourists made an estimated 19 million trips and spent $20 billion. That number is expected to double by 2010. People are looking for reasonable prices, treatments that are not yet available at home or widely practiced at home, and personalized service. As a side benefit, to countries like Thailand and India, medical tourists also tend to stay on for an extra few days to a week to truly be tourists. Source: The Washington Post; 09/09/07

Chinese wages are on the rise. There are no reliable government figures. But factory owners and other experts say businesses are having a hard time finding able-bodied workers and have to pay the workers they can find more money. For example, Zhang Jingming now makes the equivalent of $263 a month working at a bicycle factory. As recently as last February he was making just $197. The increases will lead to higher prices. In fact, some companies are already passing along their higher costs. The whys and wherefores.... Parts of China are experiencing labor shortages. Employers are struggling to hire and retain workers. Higher wages are the price employers must pay. In a land of many, labor shortages seem odd. But factory owners do not like to hire workers over age 35 or 40. And China's one-child policy has reduced the number of workers in the 20-to-24 year old range. Source: The New York Times; 08/29/07

Along with China, India and Russia, Brazil is a country overflowing with opportunities to attract foreign capital. Brazil is the leading the way in Latin America’s economic development. In 2006, it was the third-largest economy in the western hemisphere and the 11th largest in the world. The economy has stabilized, the legislative reforms of the Lula Da Silva government are boosting cooperation between the public and private sectors, imbalances are improving, and the high valuation of markets is attracting the attention of foreign investors. As a result, the Brazilian currency, the real, as well as the country’s stock market are both at all-time highs.

One of the keys to Brazil’s international success is the political stability of its government. The reform programs being carried out have been a success, enabling the country to lessen its vulnerability. The huge size of the market, the successful privatization program, the remarkable diversification of its manufacturing and export sectors, and its strong political democracy have become the pillars of Brazil’s dynamic economy and society.

For more than 20 years, Brazilian capital markets were characterized by protectionism and underdevelopment. Following the improvement in the economy, capital markets began to modernize. Lately, Brazil has been benefiting from a favorable external environment. On a global level, it has significant liquidity. In a broad range of financial markets, prices have risen at a brisk pace and the country has growing economic ties with developed economies. Internally, its monetary policies have enabled it to contr