Archive for the ‘Business’ Category

A very German approach to advertising

I love wandering around cities. In my younger days and earlier travels, I did it because it was always cheap and, largely, did not require communication. I have got myself into a bit of bother doing this. One can find oneself alone on an uncomfortable street with the sun going down. Athens springs to mind.

In Munich, where I spend quite a bit of my time, I have a “favourite” street. Actually it is a busy thoroughfare – a four-lane highway to-and-from the centre. What I like about it is that it seems to sum up the real city. I come from a wholly unattractive city, so I am used to finding beauty in things that are not generally regarded as beautiful. It is not an attractive street – it has more petrol stations on it than you can shake a stick at. It is dotted with mid-range hotels. There are more pharmacies on it than in the whole of the UK. And it has advertising hoardings in abundance. When I want to check out the latest cigarette advertising (one of the main draws to this blog, I have to say), this is the place to go.

In recent weeks, the cigarette companies have been keeping a low profile. They have been rolling out posters from20150504_143351 earlier campaigns; for example, JSP (right). Yesterday, we were walking along this street to a supermarket, something which we do often. I was keeping my eyes peeled for cigarette advertisements, but saw nothing. However, I did see the poster for…a sex toy (above left). My partner was oblivious. But it just  hit me in the face. It is a clever one, too. It draws on football – the concept of “extra time” or “Nachspielzeit”. 15 per cent discount as well. Extraordinary.

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Fracking as a metaphor

HydroFracI was reading in the Guardian newspaper an article by comedy screenwriter Ian Martin (In the Thick of It) about how we are all being fracked as corporations find new ways of extracting more and more from us in pursuit of profit. Fracking, for those unfamiliar with the process, is the extraction of gas from rocks by using high pressure jets underground to break them up to the release the gas. Firms that are seeking licences to do this on a commercial scale are experiencing serious opposition from local people, not least because of the likelihood of toxic chemicals contaminating water courses and hence threatening human health (see graphic above left).

Moreover, the Murdoch newspapers take the position that that fracking is some sort of panacea – cheap, plentiful energy, produced locally and not subject to the whim of international diplomacy. Russia, for example.

I had not really thought of a metaphor of blasting rocks with  high pressure jets. Fracketeering, as Martin calls it. So how are we being fracked? Here are a couple of examples from the article:

  • estate agents’ “client progression fees”, where the buyer has to pay the estate agent to make the offer to the seller, even though the seller has already paid for this “service”;
  • admin fees paid on online transactions – such as concert tickets – where the marginal cost is near to zero and where we, the customer, have already spent 20 minutes of our valuable time getting to the screen that tells us that we will have to pay for the privilege of paying (for our tickets).

Here are some that I am subject to, seemingly.

  • In order to get online with my internet provider, I have to have a phone line that I do not need or want. The phone line costs the same as the broadband. No phone, no Broadband.
  • paying to upload to this blog pictures of an illuminated Eiffel Tower that I took with my own camera;
  • not being able to roll over digital credit from one month to the next on my dongle. Have I bought my 3Gb or not? Why can I not pay again when I have used it?

Graphic: “HydroFrac” by Mikenorton – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons – https://commons.wikimedia.org/wiki/File:HydroFrac.png#/media/File:HydroFrac.png

An outsource too far?

John_Lewis_fasciaI was casually scanning the pages of the Guardian newspaper yesterday and came across a link to a story that suggested that John Lewis, the co-operatively-owned department store with a reputation for excellent customer service, has been outsourcing some of this activity to decidedly dubious third parties with potentially disastrous results.

Firms outsource, ultimately, to save money. Listed firms to this to maximise the return to their shareholders. It is the logic of capitalist business. But John Lewis is supposed to be different. Its owners are its employees, though its management is most certainly professionalised (in contrast with the Co-operative group which is now in some financial difficulties after gross mismanagement by amateurs).

So, to which outsourcing companies has John Lewis entrusted its reputation? When I discovered the identities of said firms, I needed a sharp intake of breath. Wait for it…Hermes couriers, who pay between 45 and 55 pence – PENCE – per delivery to self-employed delivery people, and Capita who seem to handle John Lewis’ complaints.

I have already ceased trading with firms that use Hermes. The service is appalling, for sure. But it is the business model that stinks. Whilst it is possible to avoid this by picking up ordered items at John Lewis and Waitrose stores, handing over any money to these charlatans is bad for society. It legitimises them.

Apple’s cash mountain

2015-02-01 13.44.12I am not an Apple fan. I do not like the design. I do not even like the font they use on their iOS interface. I hate the hype. But the results announced last week suggest I am in a minority. Apple reported profits of $18bn for the third quarter of 2014 generated by selling 34,000 iPhones per hour for the whole of that quarter. Mind boggling.

Apple now sits on a $180bn cash pile, a good amount of it is stashed in a bank account in Ireland selected so as to avoid paying tax on it in the United States of America. Good citizenship if ever I saw it.

So how does Apple reward its shareholders – ultimately the owners of the company? Well, apparently, according to the BBC’s Ian Jack (his explanation can be heard below), Apple is borrowing money in order to buy back its own shares so that shareholders pay a lower tax rate – capital gains tax rather than income tax.

It has been pointed out by the likes of Mariana Mazzucato in her book The Entrepreneurial State that, notwithstanding the immorality of avoiding paying tax, buying back shares also diverts money away from investment in new products, processes and technologies. Essentially, these companies not only avoid paying tax in the countries where they trade and/or are based, but they also get subsidised by the public sector through universities that make up the shortfall in basic research that should be done by the firms that utilise that research for new products and services. A double injustice.

Ched Evans – rape and re-habilitation

WH_webI was not going to comment about this case. I’m not particularly qualified in terms of the law and the crime, but three things in particular have prompted this post. First, some background for readers not familiar with the case. Ched Evans was a footballer for Sheffield United, a third league club in England. He was convicted of rape in 2011 and sentenced to 5 years imprisonment. He served half of his sentence and is now ‘out’ on licence and seeking to relaunch his football career. It is clear that his old club was keen to take him back, but sponsors pulled out and the negotiations ended. Oldham football club then took up the case and was offered guarantees against losses incurred if sponsors pulled out by Evans’s future father-in-law, Karl Massey, a rather wealthy businessman. That has now fallen through after pressure on the club and its employees. The precise details are unclear. Evans insists he is innocent of rape. He had not offered apologies to his victim whose identity has apparently changed 5 times since the crime. Since the Oldham contract fell through, Evans has now apologised for the effects of his actions, but still protests his innocence. Then yesterday some extraordinary things happened. First, Gordon Taylor, the head of the Professional Footballers’ Association – the trade union for footballers – likened the case, wrongly, to victims of Steve_Brucethe Hillsborough disaster where 96 people were crushed to death because of police incompetence and then blamed for it after a police cover-up. Taylor has since apologised. Then the Manager of my club, Steve Bruce (right), inexplicably waded in saying that he had looked at the evidence himself and he thinks that there is a case for appeal. Mr Bruce, Hull City are in trouble at the bottom of the league. Concentrate on that, and leave well alone of Ched Evans. And then to make matters worse, a so-called academic – wrongly claiming to be from my university – engages on a debate on the issue and not only advocates for Evans but also says that people from ‘lower classes’ are more likely to engage in criminal acts. On the former he is quoted as saying in the Argus newspaper “it would be ridiculous to allow the conviction to ruin Evans’ career”. All of these three men have one thing in common. They do not get it. At the very least, can I suggest all three listen to the clip from BBC Woman’s Hour. And then listen to it again. I’m not a great fan of Hadley Freeman from the Guardian, but this is as good an exposition as I have heard or read.

. Pictures: top – screen grab from Woman’s Hour website; Steve Bruce: Ronnie Macdonaldhttp://www.flickr.com/photos/ronmacphotos/6270169911/in/photostream

Spectacle Hut being crass

2014-11-02 18.51.17This is Spectacle Hut in Hastings, UK. Nothing special, just one of those high-street opticians. They are open 7 days a week and there are eyesight test appointments available on Sundays. And how do we know this? Well through a crass poster (right).2014-11-02 18.51.02

Now I’m an atheist and certainly no friend of the Catholic Church; but this is just insulting. Put a fully made-up model in a nun’s habit and hey presto, point made. Spectacle Hut, if you are going to stoop this low, at least use a real nun.

The entrepreneurial state

Entrepreneurial StateProfessor Mariana Mazzucato’s book, the Entrepreneurial State, contains some interesting observations about the role of the state in fostering innovation and hence creating wealth. It is evident that the private sector relies on public sector investment in research for its ideas, frameworks and technologies. The internet is a good example. Many drugs have their origins in publicly-funded laboratories (recent discussions around AstraZeneca and Pfizer have been caught up in this). Google is built on it. And even if the ideas, prototypes, patents do not originate in public research/educational establishments, the minds behind them do. The problem is, it seems, the private sector’s ability to appropriate these public goods for itself.

Professor Mazzucato’s  recent lecture on this topic can be seen here: http://www.sussex.ac.uk/newsandevents/sussexlectures/2014?lecture=116&fmt=youtube; it was one of the best professorial lectures I have witnessed in recent years (notwithstanding Jonathan Chapman’s at the University of Brighton on Sustainable Design, 22 January 2014: http://www.youtube.com/watch?v=iBECx-L55Fg). Mazzucato demonstrates a number of indicators of disingenuousness on the part of knowledge-rich firms. One of the most startling and worrying is buy-backs. Large firms that spend their cash on buying back their own shares rather than investing in research are painted as villains. In the past, the exemplars were Xerox and Bell with their investment programmes that brought us spinouts such as Adobe, 3-Com and Lucent amongst many others in technology.

Buy backs take out investment from the economy. They put the burden on the public sector to do the risky stuff. Firms have become increasingly ‘financialised’. Pfizer, she argues, is just one example. There are many more spanning hi-tech industries across the globe. She explains this around 24 minutes into her lecture.

And so to remedies. Professor Mazzucato argues that states should be able to claw back some of the benefits accruing to firms when they win on the basis of public funding. Professor Mazzucato’s recommendations include: “golden shares of IPR and a national innovation fund”, “income-contingent loans and equity” and “development banks”. Stian Westlake of NESTA, the UK innovation investment fund, by way of critique, notes the following:

  • Essentially, they all involve the government retaining a financial interest in companies that develop innovations based on public funding, with the idea that this money can be recycled to back more radical innovations. As far as I can see there are three problems with this idea: It would be nightmarish to administer It imposes costs on exactly the wrong businesses, creating both a presentational and a practical problem It’s worse than an already existing option – funding innovation from general taxation.

The full debate can be accessed here: http://www.nesta.org.uk/blog/how-not-create-entrepreneurial-state#sthash.eJoHD7wz.dpuf

 

The Co-operative’s new era

cooperativelogoSo, the members have voted to accept the Mynors recommendations for a new structure that will limit the influence of the regional societies. Hence the CEO of the largest of the regional societies, Ben Reid of the Midcounties, has resigned from the national board (now leaving three vacancies). Despite the criticism of Reid, his own society has recently reported revenues of £1.2bn, suggesting they are doing something right and against the trend in the national society with its £2.5bn loss. Reid received particular criticism by Mynors as a member of the Audit Committee of the Co-operative Bank when the £1.5bn shortfall was revealed.

So, we may ask, what is about to happen? Already it is clear that the local societies will no longer occupy their 30 per cent or so of seats. Instead, the intention is to ‘professionalise’ the Board. The new members will be professional executives and no longer voluntary. This business is so big, goes the argument, it cannot be managed by non-professional co-operators. It is indeed they that got the Co-operative into its fix in the first place (see post 24 April 2014: https://weiterzugehen.net/2014/04/24/what-is-going-on-at-the-co-operative/).

The proposals are, according to the Guardian newspaper, the following:  the creation of a board of directors that is qualified to run a business the size of the Co-op; the creation of a structure that holds the board to account; the principle of one member one vote; and provisions to avoid demutualisation.

The latter is quite interesting. It confirms that asset strippers – or carpet baggers as they were known in the era of building societyCarpetbaggers demutualisations in the 1980s- will not be tolerated and will not gain advantage by such conversion. That is inherently a good thing. One-member-one-vote also has merit, though professional Boards do not always practice such equivalence. Structures clearly should be such that executives are held to account. However, more important is the skills mix on a board to know what that means. (As we have seen from Banking, some executives are ‘infallible’ and charismatic, professional or not.) But being a co-operator should not disqualify one from membership of the Board of the Co-operative.

Image and further details about carpetbagging: http://news.bbc.co.uk/2/hi/special_report/1999/02/99/e-cyclopedia/297982.stm

 

What is going on at the Co-operative?

Hull_coop_storeWhen I was growing up there was the local Hull Co-operative Society with its flagship department store (left) in the centre of the City. Local supermarkets were dotted around the suburbs. All rewarded customers with dividend stamps. My grandmother collected them – I built a record collection out of them. The insurance company functioned through agents. As a family, we had various policies. There was even a soft drinks delivery service. The ‘pop man’ caDivi-stamps-4-228x230me on a Monday and delivered a bottle of something chosen by my mother.

The Hull Society basically collapsed in the early 80s. The department store closed leaving a building to fall into dereliction. The supermarkets also closed.

My time in South Yorkshire was punctuated by visits to department stores in Barnsley. And in coop_NuneatonNorwich, the East of England Society plodded on. Not so good in Brighton where the department store closed a few years ago. The shop was eccentric. Land in Brighton, however, is highly prized. The empty shop has not lingered too long. The façade has been retained with student accommodation being built on the land. From what I can see, the most powerful regional society, The Heart of England, still manages department stores. For example in Nuneaton (above left).

It has often been quite difficult to be with the Co-operative. The food shops were always lacking something. The bank, despite its ethical mission, ripped off savers. I left. When I bought a van, the insurance company was one of the few that would insure van as a non-commercial vehicle, but I still needed the endorsement of the agent. A bit of a nuisance.

The Co-operative’s difference was its ownership and management structure. It is notionally owned by the members (I am a member, though clearly insufficiently active) and managed by them.  To quote John Harris in the Guardian, “At the base are around 48 area committees, each with 10 to 12 elected members who put in three-year terms. These people, in turn, elect seven regional boards – which duly elect 15 of the 21 members of the national group’s board of directors. Of the remaining six, five come from big regional Co-ops, and there is also an independent director.” (http://tinyurl.com/n3yjznb) In recent years, the governance structure has failed.

coophq_MenziesThere seems to be something about size. In 2002 retail and wholesale were merged and housed in a hubristic new HQ in Manchester (left). Growth had traditionally been organic – from within rather than by acquisition. Both the bank and the supermarkets seem to have cast that principle aside. The bank failed its due diligence on buying the Britannia Building Society. Had someone looked closely they would have seen ‘sub-prime’ bad debts and walked away. So far the bank has been bailed out to the sum of £1.5bn with another £400m needed. It is now 70 per cent owned by hedge funds and private equity.

The supermarket in 2009 financed a takeover of the failed Somerfield supermarket chain. Somerfield had been a basketcoop_Peter_Marks case for many years, but for some reason the Co-operative’s chief executive, Peter Marks (right), convinced the board that speedy expansion was necessary and a takeover of Somerfield the right vehicle. The Somerfield assets have been written down by over £260m and a percentage will be sold.

Last week the Co-operative announced a loss of £2.5bn. Whilst the bank claims a good part of that, the other parts of the group are also ‘underperforming’. Turning this around is not going to be easy. I for one am not convinced that it will survive as an entity. Some of the more influential local societies such as the Heart of England Society have rejected such a plan put forward by Paul Mynors, now himself resigned from the Board. The AGM on 17 May 2014 will be one to watch.

Ironically, the analogue for the Co-operative, the John Lewis Partnership, is built on department stores and food retailing. Its management structure is very different. It is run as a PLC with the employees, as partners and members, sharing in the profits rather than managing the generation of profits.

Picture credits 

Hull store: http://hullvalley.blogspot.co.uk/2011_10_01_archive.html

Stamps: http://150.co-operative.coop/150-to-150/our-collegues-113

Peter Marks: http://en.loadtr.com/Peter_Marks-493978.htm

Co-op HQ: Walter Menzies

 

coop_Peter_Marks