THE ENTERPRISE
CONVENIENT MEDIA BLINDNESS/MUTENESS
I am amazed at the mainstream media. It was screaming for the heads of everyone in the White House in the Joseph Wilson-Valerie Plame "leak" case. Now most major news networks have buried the news that the "leaker" was not Karl Rove, not VP Dick Cheney, but rather, Colin Powell's deputy secretary of state, Richard Armitage--and that special prosecutor Patrick Fitzgerald knew it all along. And he let the controversy rage on. Let's prosecute him.
THE BIGGER THEY ARE, THE HARDER THEY FALL
That's a cliche' from the boxing world, but applies to business and government too. Nature has proven that trees can't grow to the sky, and companies that get too big suffer some of the same problems of big old trees. Another characteristic of our country has been a tendency for both government and special interest groups to make targets of large successful companies. Wal-Mart is suffering from both at the same time, plus a number of other competitive problems.
ONE FORMULA DOESN'T FIT ALL
Wal-Mart is withdrawing from Korea and Germany. it's business model just wasn't competitive in those two countries. It is being beaten by Carrefour in China, perhaps because Carrefour has had a longer time to learn how to develop in under-developed markets. Wal-Mart is under attack in various states for its non-union posture, its wage and benefit structure and it's zoning/new store location practices...and more. Bottom line: It's hell being a dominant market leader. Everybody is shooting at you, not just competition.
PARALYSIS BY ANALYSTS--NOT MERCHANTS
Meanwhile, there may be the beginning of Wal-Mart losing its market/customer sensitivity. There are many things in business that can be formulatized and analyzed, but there is also the merchant's "touch," and instinctive, subjective assessment of what does (and doesn't) excite consumers. As it grows, Wal-Mart's relentless push for lower prices (often from Chinese and other faraway sources) has become an obsession. Hordes of bright young buyers know how to crunch the numbers. How many of them know how to visit stores, look at the merchandise and merchandising and "tweak it" just so--to please its consumers.
CUSTOMIZATION BY FORMULA IS TRICKY
For almost a decade, it has used a "Store of the Community" merchandising system to tailor mix to buying habits and consumer demographics. Now Wal-Mart claims it will develop a half-dozen unique formats targeted to the consumer profiles shopping those stores. If any company has a database capable of doing that, Wal-Mart does. I wonder how it will handle store like the one on Morse Road (East side of Columbus) very close to Easton (the areas premier lifestyle shopping center). Easton traffic consists of very upscale shoppers, frequenting stores like Nordstrom, Crate and Barrel, Henri Bendle and most of the Limited's assortment of stores (Limited's HQ is less than a mile away). BUT--the actual traffic in the Wal-Mart just 1/4 mile south is decidedly lower-middle income and heavily minority families. How do I know? I shop both places and see it--more clearly than any computer could tell me. Do they?
THE BIGGEST JOKE--GM + FORD
Anyone who has studied math learned that adding together two large negative numbers yields and even larger negative number. Is the analogy clear? I almost died laughing at the prospect of GM & Ford talking about agreeing on anything--except that both are in deep trouble. Both have costs that are too high, legacy costs that are "millstones around their necks" and too many brands of not-exciting-enough vehicles. Those things they have in common. The other thing they have in common is that both are burning through cash, and taking too long to "bite the bullet" and really make themselves over ... into competitive car companies. So let's cooperate? On what, a discount on bankruptcy counsel? A plea for government aid? (Maybe!)
GM & FORD--BRANDS TO KEEP AND BRANDS TO KILL--ASAP
Everybody says both have too many brands of cars and trucks and combination vehicles. OK, I agree. here is my lineup of which ones to keep and which ones to kill.
GM--keep kill (or sell off) FORD--keep kill (or sell off)
Chevrolet Pontiac Ford Mercury .
Saturn Saab ---------- Jaguar .
Buick (cars/xv only) Hummer (model for GMC) Volvo --------- .
Cadillac ---------- Lincoln(fewer models) .
GMC (Lg. SUV & trucks only) Land Rover (SUVs only)---------.
Anything Pontiac either is already or can be merged with Saturn models. Jaguar is a great old brand, but the new/small "Ford-like Jags" are not fooling anyone--they are re-badged Fords. Mercury has been dead a long time, and no one noticed. Sell the Saab brand back to the Scandinavians or to Subaru (whose platforms are under 1/2 of the Saabs anyway). And who is Hummer kidding? Send the big ones back to the Army and make the smallest one a "model" in GMC's line. Standardize the inside parts (drive-trains, engines, electronics, etc.) and customize the outside parts for each brand's image and identity (and customers).
SLASH COSTS, CLOSE PLANTS, CUT PEOPLE, AND DEALERSHIPS
IF both could do this FAST, they could strip millions (maybe billions) out of their costs in overhead and duplication of plants, capacity, tooling, maintenance, dealer organizations, etc. etc. The only thing they might want to work together on is to put the arm on the US Government to carry part of the financial impact of what must be done--either tax credits (but there is not profit to tax) or special pension arrangements (but the line will form to the left, led by the airlines for that one.
WHY DO THIS?
Because if no one prunes an overgrown tree, it eventually falls over and dies of its own bulky and weight...which is what is about to happen. But will anyone do this? I doubt it. Big trees fall in storms all the time, then they get cut up. Only a few are "managed" and pruned to extend their lives. I wish it were otherwise, but nature--and global competition--is a harsh master. If we do not learn from our mistakes we are destined to repeat them. Remember that line?! It is only too true.
Best, John
PS: US major airlines are living in a temporary, but similar problem. There are too many, unless more of them merge or collapse.
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