Chesapeake Bay Candle Struggles to Open U.S. Factory

Chesapeake Bay Candle is a major player in the multibillion dollar scented candle industry.  In spite of its name, all its candles are made in Vietnam and China.  Recently, due to increasing wages in those countries and high shipping costs, the company decided the time was right to start making candles in the U.S.  What the company did not account for was how much more expensive it is to build a factory in the U.S., with many laws and codes to comply with.  The factory is now over budget and delayed, and the founders are wondering whether the U.S. is ready to compete with Asia for manufacturing business.

Chesapeake Bay Candle Struggles to Open U.S. Factory

Skin-Deep Gains for Amazon Tribe

The plant on the left is urukum, which is used to make a pigment dye for Uruku lipstick, made by Aveda on the right.  Aveda, a unit of Estee Lauder, buys Urukum from the Yawanawa Indian tribe in Western Brazil, where they have used urukum to make body paint for a long time.  Aveda joins a long list of companies, including Starbucks, Ben & Jerry's, Whole Foods, and The Body Shop, which uses cause-related marketing to convince consumers that their product are eco-friendly and can lead to sustainable community living as well.  The Yawanawa, however, don't make enough money selling the dye to Aveda to support themselves.  The project has become simple philanthropy for Aveda, not the sustainable business model it had hoped for.


Skin-Deep Gains for Amazon Tribe - WSJ.com

GE Remodels Businesses in India

Like many multinational companies, GE has struggled with India.  High levels of bureaucracy, corruption, and differing consumer needs and tastes made commercial success difficult in the wide array of industries GE competes in, from locomotives to jet engines to medical equipment.  Now, the company is starting to see results from a turnaround that started with a realignment of the business.  The company started by creating a separate P&L for all of India, something the company rarely does at the country level.  Then, it focused not just on marketing and sales, but also on research and development for low-cost products for India as well as other developing countries.  The company sells a baby warmer, for example, for $3000 to hospitals throughout India and other parts of the world, while incubators in the U.S. sell for four times that price.

GE Remodels Businesses in India - WSJ.com

Fiji Water to Leave Fiji

Fiji Water, makers of high-end bottled water from the Pacific island of Fiji, is a privately held company owned by a billionaire couple from California, the Resnicks, who also own POM Wonderful and a few other well-known brands.  Fiji Water is often criticized for the huge expense and energy cost of shipping empty containers to Fiji to fill up with water and then shipping it around the world to affluent consumers.  Fiji Water, on the other hand, argues that its operations create jobs for hundreds of Fijians who would otherwise be unemployed.  Fiji underwent a military coup in 2006 and is now widely viewed as a state in decline with a dictator in charge.  The country recently announced it was increasing the "extraction tax" on water from 1/3 of a Fijian cent to 15 cents a liter.  The company has responded by announcing that it will shut down its operations and pull out of Fiji, demonstrating that human rights abuses and a military dictatorship aren't enough to stop business, but an export tax will do it.

Fiji Water to Leave Fiji - TIME NewsFeed

Wal-Mart International Chief McMillon Seeking Growth in China, Brazil

Wal-Mart, the world's largest retailer, sees more opportunity in emerging markets than in Europe, according to the company's International CEO, Doug McMillon.  At the top of the list is China, followed by Brazil.  The company is looking overseas for growth as sales in the U.S. stagnate and slow down.  Wal-Mart operates 4100 stores in 41 countries outside the U.S., with annual sales topping $100 billion.  Its most recent entry is to purchase 51 percent of South Africa's Massmart for approximately $2.3 billion, stopping short of buying the entire company due to objections from local unions.  Hit the link below for a video interview with McMillon in which he explains the company's international expansion strategy.

Wal-Mart's McMillon Interview - Video - Bloomberg

Japan’s Farmers Oppose Pacific Free-Trade Talks

Japan maintains a 777% tariff on imported rice, as well 252% on wheat, 360% on butter, 320% on sugar, and 38.5% on beef.  As a result, Japanese consumers have to pay some of the highest prices in the world for basic foods.  Now, Japanese industry groups are urging the government to reduce tariffs in return for greater market access to big economies such as the U.S.  Japanese farmers, however, are terrified that dismantling the tariffs will lead them to ruin.

Japan’s Farmers Oppose Pacific Free-Trade Talks - NYTimes.com

Jili Journal - Silk Craft Fades in Village That Clothed Emperors

The Chinese village of Jili was once known throughout the world as a producer of extremely high quality silk.  Using traditional methods of sericulture, villagers produced silk for emperors and royalty everywhere.  Now, industrialization means most silk is produced in factories.  Environmental degradation means the water in Jili is no longer clean enough for sericulture.  And higher wages in booming cities elsewhere means there are no longer any young people willing to learn the craft of silkmaking in Jili.  Within a few years, the town will probably close its last silk mill, as the NY Times reports.

Jili Journal - Silk Craft Fades in Village That Clothed Emperors - NYTimes.com

Volkswagen Aims At Fast Lane in U.S.

German automaker Volkswagen says it wants to overthrow Toyota to become the world's biggest carmaker.  In order to do that, it has to do something to improve its sales in the U.S., which at 2.2% market share are behind even Kia.  Now, VW says it's about to do something it's never done before -- tailor its cars for mainstream American driving tastes.

Volkswagen Aims At Fast Lane in U.S. - WSJ.com

Seeking Closure: Plastic Stoppers Crack 400-Year-Old Natural Cork Monopoly

For centuries, wine bottles have been topped by cork harvested from trees, especially from Portugal. The cork is naturally spongy to permit squeezing into a bottle, and expands to form a tight but breathable seal. Scientists discovered that cork can sometimes ruin wine, and a search for alternatives was on. In the U.S., innovators have developed plastic corks that are cheaper and just as effective as natural cork, leading natural cork producers to search for a strategy to differentiate their product.

Seeking Closure: Plastic Stoppers Crack 400-Year-Old Natural Cork Monopoly - WSJ.com

On China’s Hainan Island, the Boom Is Deafening

Imagine a beach resort town where five star hotels charge $1500 per night for their hotel rooms, golf courses charge $180 per round, and where apartments with sweeping sea views and bathtubs on balconies are being sold at $885 per square foot. It's not the French Riviera or Miami beach -- it's all happening on Hainan Island, China's newest playground for the thousands of newly rich Chinese who have, literally, bags full of money to spend. As this slide show demonstrates, the resulting property boom on Hainan is being watched with a mixture of awe, envy, and horror.
On China’s Hainan Island, the Boom Is Deafening - NYTimes.com

Geely Buys Volvo

I can still remember that morning in 1999, waking up to NPR's Morning Edition announcing that Ford had bought Swedish car company Volvo. Like the vast majority of Ford employees that day, I had no idea about the deal, and it was great. Volvo was a terrific brand and the company was flush with money, so why not? Even the $6.5 billion price tag didn't seem too outlandish at the time.

Fast forward a decade later, and once again Volvo has switched owners. This time, a Chinese car company that virtually no American has heard of, Geely, has purchased Volvo for $1.8 billion. Here are my thoughts on what this means for the three companies.

First, for Geely, it's a bold move. Geely is ambitious and wants to sell more motor cars. To enter important markets in the U.S. and Europe, it could create a brand identity, establish dealer and supplier networks, and gradually build consumer confidence. Others have done it -- think Lexus, Infinity, Acura, even Hyundai -- all built their brands and operations from the ground up. It takes money, time, and a lot of patience. And you only get one chance to get it right -- think Yugo. Or, Geely could just buy an existing company. By buying Volvo, Geely has catapulted itself as a major worldwide automotive company. There's no doubt a lot of celebrating going on in China right now.

For China Inc., it's another prize to crow about. I always joke about working for the Chinese one day -- that day just came for a lot of Swedish workers. It'll come to America too - just ask anyone who works at IBM's former Thinkpad division about what it was like to go for working for IBM to working for China's biggest computer company, Lenovo.

For Volvo, I think it's a good move. Volvo suffered a bit of a brain drain after the Ford acquisition, as many Swedish employees chafed under American management. As long as Geely keeps its hands-off promise, Volvo may be able to grow as an independent Swedish company again. There's some risk for Volvo because it benefited handsomely from Ford's global product portfolio, and many existing and new Volvo products were co-developed with Ford and Mazda to spread out engineering and tooling costs. Once those programs phase out, Volvo will be on its own to develop product again, which is very expensive. If Geely is successful at raising Volvo's volumes, however, product development should continue at a healthy pace at Volvo.

For Ford, I think it was a bad decision. Getting rid of Jaguar, Land Rover and Aston Martin made sense for many reasons, but Volvo was different. In spite of struggling to help Volvo turn a profit, Ford benefited from Volvo's product safety engineering and manufacturing expertise. The sale price was paltry and will hardly make a dent in Ford's $20 billion+ debt load. I think the benefits of hanging on to Volvo outweighed the costs of keeping it, and for that reason I would not have sold it.

Hummer Bites the Dust

Hummer is dead. During GM's bankruptcy reorganization, the company decided to ditch slow-performing brands such as Saturn, Pontiac, Saab, and Hummer. Smaller companies interested in bidding for those brands all fell through on their commitments except Saab. Hummer's buyer, an unknown Chinese company, offered about $100 million for the brand but yesterday GM cancelled the sale after the buyer was unable to obtain approval from Beijing's central government for the acquisition. Hummer will therefore join Pontiac and Saturn this year in that brand graveyard in the sky and generations from now, people will look back and say "what was that?" when they see a picture of one.

Hummer's likely demise disappoints its SUV-loving fans - Drive On: A conversation about the cars and trucks we drive - USATODAY.com

Asian Economies Continue to Boom

Last week Singapore and Japan both reported stronger-than-expected economic growth, and this week Thailand and Taiwan followed the same trend. Thailand's GDP grew at the quickest pace in 10 years, expanding 3.6% in the fourth quarter. On a seasonally adjusted annualized basis, the Thai economy grew 15.3%.

The pace in Taiwan was even more startling. Fourth quarter growth was 9.22%, yielding an annual growth of 18%.

U.S. companies like Huntsman and Goodyear are seeing dramatic growth in multiple Asian countries, and much slower growth in Europe and the U.S. Expect the trend to continue, with more and more companies attracted to high growth markets in lieu of smaller and slower economies.




Thailand, Taiwan Post Strong GDP Growth - WSJ.com

Google Ad

Amidst the Dorito-filled coffins and houses built from beer cans, Google ran this minute-long commercial during the Super Bowl last night. Reaction across the net has been hugely positive, but I have to confess being a little nonplussed. I think it's great that Google chose an international flair for its first television commercial, but aren't we supposed to hate the French?

Made in USA

Do people care if something is made in the USA anymore? That was the subject of much debate in class this week. A student pointed out that New Balance shoes are made in the USA, and the company tries to capitalize on that in product marketing. It's true that 25% of shoe production for the company is still in the USA. My question is, do consumers care? Is there empirical evidence that proves that a sneaker shopper will purposefully choose New Balance over Nike or Reebok, simply because it's made in the USA and for no other reason? The company hopes so, as the ad above amply demonstrates.

Chinese Glass to Adorn New World Trade Center

It used to be that low cost, high bulk items were made close to the customer. After all, shipping adds a lot of cost to an item and there comes a point where shipping it from across the world doesn't make economic sense. Thus when carmakers go abroad the first things they look for locally are low cost, high bulk items like tires, batteries, and seat foam.

Does glass count? Perhaps. A lot of glass is still made in the United States, especially in Ohio. As a great NYT article yesterday points out, though, the tipping point where it's cheaper to outsource even glass may be arriving. The first 20 floors of the new World Trade Center (pictured above) require a special blast proof glass. When the call for bids went out, the cheapest bid came from, and went to... Beijing Glass. That's right, a Chinese company will supply the glass for these floors. An American company won the bid to supply the glass for the rest of the floors.

There's a trade war brewing on this front. American glassmakers have filed dumping petitions, hoping to gain some relief from Chinese imports through a temporary import tariff. Even if that happens, though, the jobs that have been lost in the U.S. are unlikely to reappear. In the last 9 years, glassmakers in the U.S. have shed thousands of jobs, cutting employment by more than 30 percent.

Glassmaking Thrives Offshore, but Is Declining in U.S. - NYTimes.com

Container Shipping Companies are in Trouble

Globalization of markets and globalization of production means that producers from all over the world can sell goods to customers from all over the world. Part of what made this possible was the containerization that took place in the 1960's along with the development of supertankers to ship those containers. Now, the industry is in serious trouble. The 20 or so major carriers, all Asian or European, lost $20 billion in 2009. Analysts don't see a recovery until 2012 at the earliest.

More Ships Than There Are Containers to Fill Them - NYTimes.com

To Make a Bicycle

Sourcemap.org is a really cool idea. The website allows users to submit "sourcemaps," which are essentially supply chain diagrams of common products. The site's platform is completely web-based, and allows all kinds of customization. The whole idea behind Sourcemap is to drive transparency into the supply chain so that you, the consumer, knows what it took to make your iPod, Mac and Cheese, etc. Environmental impact is particularly important, as it allows you to calculate carbon emissions in each step of manufacturing, including delivery to your final destination.

Obviously Sourcemap isn't going to have any really sensitive or confidential information on real suppliers or pricing. And it depends entirely on user contributions for content. With time, though, I hope this project takes off. It's a great example of web technology enabling transparency in global manufacturing.

Here's a good example of a Sourcemap. It looks even better on the website, where you can play around with different options and see a description of the components. Check out the site to see one for an Ipod and Mac n Cheese!

Globalization in a Commercial

It's been almost a year since this commercial hit the airwaves in Europe. When I worked in London for a summer back in 2000 (wow, almost 10 years ago!), I lived out in Crawley and often took the commuter train in to Liverpool Street Station, a major connecting hub in central London. I can't imagine what I would have done if I was there when this commercial was being filmed. It turns out that this is one of Ad Age's top 10 viral videos in 2009.

So here we have -- a German telephone company, familiar to Americans, in a dance commercial in London, featuring dancing to American pop songs. Sometimes globalization can be delicious.