Salvatore's American Corporation History Blog

Corporate Layoffs: Result of and Cause for a Bad Economy

While the economy seems to be picking itself up with a somewhat recovering market, unemployment is still very high.  Until employment picks up there is only so much that can be done to save the suffering economy. With all of the economic downturn in the past couple years many people have lost jobs, but I can’t help but wonder where is the line drawn between laying off workforce for true economic reasons and taking the opportunity to lay off workers due to the economic panic. 

I have a number of acquaintances that work for various companies that have lost their jobs.  Some were employed for organizations that truly tanked.  However, some worked for companies that are still making high earnings.  There is no doubt that some corporations start cutting workers as soon as the economy shows any sign of being grim, regardless of how the company itself is performing.  The working staff of any given organization is typically the most costly commodity of that company, but obviously the most essential as well.  It seems to me that firing workers as soon as the economy starts going south is a prescription for disaster. 

Obviously there is the big picture here.  As the economy weakens corporations start eliminating workforce.  With almost all companies jumping on the firing band wagon unemployment of course rises, thus negatively affecting almost every facet of the market.  This seems to be a catch 22 in the world of free enterprise.  The individual company may prepare itself for a financial downturn, but the combined contribution of all organizations laying off workers results in tough economic times for everyone. 

I have worked in places before where as soon as a tough financial year is predicted there is a “reorganization” of the workforce, AKA numerous layoffs.  Ironically, within a few months, half of those folks are brought back but in different positions.  It seems strange to me that so many organizations consider the efficiency of their structure only when the economy gets tough.  Most probably presume that if the company is performing well then don’t fix what is not broken.  Yet, as soon as clouds loom on the economic horizon the first thing to go is workers. 

I suppose that the economy is, like so many in this class often say, only what our joint imagination makes it.  In this case though the joint panic of all involved always results in difficult economic times.  The looming economic crisis is often exploited by the imagination of corporations themselves.  Perhaps cutting the workforce does salvage the company as a whole in some cases, and perhaps only when things get tough to some organizations do serious self-reflection and see the inefficiencies of their labor force.  Some no doubt just take advantage of the panic to slash where they can.  In any case, it all results in further economic downturn so the entire ship sinks for everyone!

Here is an interesting article about big corporation layoffs from this past January:

http://articles.latimes.com/2009/jan/27/business/fi-layoffs27

New Phones Don't Flip!

Well, my wife just bought a new phone (she is a chronic phone loser) and it is one of those touch screen things with all kinds of internet applications.  I still have my little Nokia phone that does not flip, does not have internet, has a crappy camera and can play MP3s, but otherwise is just a phone.  So far I have not been interested in upgrading since I can actually TALK on my phone. I feel that it serves the purpose of a phone. 

I got into the cell phone thing rather late; I resisted the urge to get a cell for quite a few years.  I actually did not want a phone since I was perfectly happy with the idea that nobody could get in touch with me if I was not at home or in the office (I still wish life were that simple).  Well, I finally bought a cell phone about 3 years ago.  It was a Motorola Razr, which was, in my opinion, the coolest phone available when I bought it. 

About three days after buying the Razr the flip phone went out of style.  Some new expanding thing came out and was all the rage.  Then three days after that some new touch screen was the cool new thing.  So, now we have phones that are basically mobile computers.  After buying my Razr I lost any interest in having the latest and greatest phone, or any product that so quickly becomes obsolete and un-cool. 

With any kind of technology things change extremely fast.  Not only does the technology change quickly but so does the look.  Things seem to become sleeker and more appealing to the eye.  I think companies may spend as much money on developing the look as they do the technology.  The improvement of looks is a clear indicator at what a marketing scheme the whole industry is.  Humans like to have the best of any given thing and this tendency gives technology industries a means of unlimited profit opportunities. 

As consumers most people buy right into this.  Before the idea of having internet available on a phone was reality we all seemed to do fine without that feature, did we not?  But, once available, it is certainly a nice capability to have, so we buy it.  To be honest with myself, even though I refused to buy a cell phone for so long, now that I have one I don’t know what I did without one before.  So, as consumers, our expectations certainly change and corporations are well aware of this and cater to our desire for ever improved technology.

So, as smart consumers should we not try to see past the shiny objects and consider what we actually need from a product?  If internet on a phone can be utilized then ditching the old flip phone for an online phone makes sense.  However, if all you will ever do with a phone is answer it when it rings (unless you are avoiding the person who is calling) then be a wise consumer and stick with your current outdated and un-cool phone and put those dollars towards something more worthwhile, like a flat screen TV!

RoboCop and Corporate America

When I was a kid one of my favorite movies was RoboCop.  What more could a boy want in a movie.  Lots of guns and violence, a half man/ half machine super hero, a giant robot that looked very cool for the time, etc…  Well, a few weeks back RoboCop was on one of the movie channels and I watched it for the first time in many years, probably the first time since I was a kid.  Well, the violence and action were as I remembered.  The characters were all true to memory.  The effects now appeared quite outdated, yet the movie was still thoroughly entertaining.  However, as an adult I picked up on a much more serious message in RoboCop that obviously went over my head as a child.  I realized for the first time that RoboCop was about more than cool robots fighting bad guys; it is also, more importantly, about the dangers of privatizing police and military forces.

 

RoboCop is one of the many goofy sci fi movies that do indeed have a not-so-hidden message.  This particular movie predicts a future in which the police force of Detroit is turned over to a private corporation.  Needless to say, this experiment turns out to be a disaster.  It does appear that a movie which came out in the 1980s warns against privatizing police and military, and now we hear many debates raging over the utilization of private contractors in the war on terror. 

 

In the movie a corporation called OCP is building developments in Detroit and somehow becomes involved in managing the Detroit police force.  The writers/producers of RoboCop are obviously no fans or large corporations.  Throughout the movie the hero, RoboCop, a mutilated police officer who is turned into a robot by OCP, fights crime in a most entertaining way.  He becomes aware of his past and he goes after the drug lords who took his previous life from him.  However, the movie makes it very clear that the drug dealers that RoboCop brings to justice are only the little fish, far eclipsed by the evils of OCP.  RoboCop finds out about the corruption in the company that created him and in one of Hollywood’s finest moments (in my opinion) kills the corrupt OCP vice president at the grand final of the movie. 

 

Ironically, RoboCop says a lot about Americans.  It reinforces the sad fact that we like violent entertainment.  It confirms once again that we like to see the underdog take down “The Man.”  And, finally, it declares that we do not trust big corporations!

 

Here is a link to a CNN article discussing the use of private contractors in Iraq.  I have not seen anything about them using robots though!

 

http://www.cnn.com/2006/WORLD/meast/06/12/iraq.contractors/index.html

Philanthropy and Expensive Coffee

Well, I found this week’s book, Creating the Corporate Soul, to be quite fascinating and what struck me after reading this work is just how the same tactics, invented decades ago, still permeate corporate imagery and public relations.  While perhaps not as much about employee welfare is heard today since so much corporate regulation has been instituted in the past decades, the public relations and imagery campaigns still seem to be going strong.  However, things have changed as well.  While many companies were weary of doing philanthropy type work early on in the quest to create corporate soul, there seems no lack of corporate charity today.

 

Just look at Starbucks for example.  It seems that every other day Starbucks is donating money to another, often obscure, charitable cause.  I find it so fitting that a company which charges such absorbanant prices for coffee (although most other coffee places do the same) spends money on many charities.  However, the money spend on this philanthropy is certainly minuscule compared to the profit margins of Starbucks and certainly the hype this company garners from these showy displays of benevolence are well worth it. 

 

While such charitable work certainly parallels many of the case studies read about in this week’s reading, I think companies like Starbucks are doing more than trying to further their corporate soul.  Perhaps knowing that some portion of money, despite how diminutive a percentage it might be, of the exorbitant cost of that cup of coffee is going to charity makes consumers feel better about themselves. 

 

So, despite the adverse nature of companies towards philanthropy in the early 20^th century, large corporations seem to embrace it fully today, and the more attention it gets the better.  Perhaps the days of worrying about the development of creating a corporate soul are over and now there is a contest for who possesses the most generous soul.  I dare say, however, that this generosity proves most profitable.  Here is a quick article about one of Ford’s philanthropic moves.

 

http://media.ford.com/article_display.cfm?article_id=30234

Let's Build Something Together

A point raised in this week’s reading about the sale of china and pottery of different kinds inspired my thought process.  In Imagining Consumers the author points out that these early 20^th Century pottery companies found success by offering affordable alternatives to expensive European type of wares and it gave everyone the opportunity to have a certain element of class in their home.  This general theme has certainly granted many corporations success since these observations were made by pottery companies in the early 20^th century. 

 

I believe companies like IKEA furniture certainly fall into this category.  IKEA sells furniture for much lower prices than most furniture outlets.  Arguably IKEA sells products of considerably low quality compared to other outlets, but, for much lower prices.  I have known a lot of people who by huge items from IKEA.  Huge entertainment centers, huge coffee tables, etc, etc.  There seems to be a consumer trend related to stores like IKEA.  The individual walks in to the enormous store, is dazzled by the sheer quantity of products on display, and inevitably walks out after purchasing far more than intended. 

 

So, what are the principles that these early pottery, dishware, and other home goods companies established that are still utilized today?  Well, I think IKEA and stores like it give the average consumer the opportunity to own large quantities of home furnishings for an affordable price, despite questionable quality, so that everyone can deck out their home in a “classy” way.  This consumer trend to deck out one’s house is obviously nothing new based on what we have seen in the readings thus far.  Humans have an innate drive to spend money and time on their living quarters and the capitalism on this habit is obviously well established. 

 

In order to see just how prevalent the trend to fancy up the home is one need only turn on the television.  All over stations such as TLC, Discovery, and obviously HGTV, programs abound about how to make drastic improvements to the home with relatively little expense.  This, again, is simply a market that has been around for some time and is continuously exploited.  Lowe’s tag line is “you can do it, we can help.”  Home Depot says “Let’s build something together.”  All nice ways of saying “please purchase your fix it up products here.”   There is no doubt that catering to the human tendency to ever improve the residence is a money maker. 

Salesmen and Cars: Why the Charade?

Well, this week I found Birth of a Salesman quite interesting and the tactics and “science” involved in making sales has quite a history.  I know this is truly a personal prejudice that should be overcome, but I have always hated dealing with salesmen.  When entering a retail facility of any kind I can immediately tell when a salesperson works on commission.  No sooner does one set foot through the entrance then someone immediately approaches and asks “how can I help, are you finding everything ok,” etc…  Nowhere is this more annoying than on a car lot.

 

Perhaps my approach to buying expensive items such as automobiles is rare, but before shopping for a vehicle, or any other expensive thing, I do all the research and go to the lot knowing EXACTLY how much I should be spending on the given item in the given shape that it is in.  Probably all of you reading this do exactly the same thing, but it is obvious that many people are not doing their homework.

 

There is no doubt that the ability of the salesperson to build desire for the item in the potential buyer is a part of the science that Birth of a Salesman refers to and it is still going strong.  It is obviously effective because the routine of a car salesperson is always the same.  Before even discussing price they want you to drive the car, hoping that you will be so enamored by the vehicle that your price range magically expands.  Then they show you the best aspects of the vehicle (those that have been best restored on a used vehicle) and again hope for your magical transformation to a higher price point. 

 

While this strategy appeals to the basic trend towards materialism all humans are guilty of it does surprise me that these tried and true strategies, which Birth of a Salesman identifies as being around for many years, are still so effective.  In a day and age when anyone with internet access can go to Kelly Blue Book and identify the value of a vehicle in every category this tactic is still effective.  So even though this information is available to almost all American consumers, the method of dangling the carrot in front of a potential buyer’s face still works well. 

 

Then the haggling phase begins.  It always amazes me that the haggling process is still such an essential part of buying certain items in this day and age of competitive pricing between retailers and technology that provides instant access to price comparisons.  This is obviously a remnant of the barter system that is still alive and well.  Although price comparisons flourish online, I am sure people leave the car lot on a daily basis paying far too much!

Tube Sound and American Rock and Roll

After reading Endless Novelty this week and Wheels for the World last week I have been thinking about the current state of American industry and production.  Certainly the world is a different place than the time period covered by Endless Novelty.  Specialty production, however, seems to be thriving in at least certain industries. 

 

One such industry that I actually know something about due to the fact that I am a musician is guitar amplification, and this field is actually quite interesting when analyzing it in terms of the industrial aspects we have covered in this class.  Let me explain some of the odd things about guitar amplifiers that make them an interesting case study about industry and marketing.

 

First, guitar amplifiers are one of the few machines still being produced with vacuum tubes.  Yes, that’s right, tubes.  The things that they used in primitive computers that took up entire rooms.  Many musicians feel that none of the modern technologies have improved upon, or even rivaled, the sound of tube amplifiers.   This is a hotly debated topic, but none the less, there is a thriving industry of tube amp producing companies.  I am often convinced that, while there may be some sonic advantages for certain applications, the tube love affair is also marketing hype.  Guitarists will spend twice the money on a tube amp for a machine that has all kinds of reliability issues because it supposedly sounds better.  Again, this is sometimes the case but not always!

 

Second, guitar amplifiers are a product still benefitting from the ideal of “American Manufacturing.”  While the American auto industry tanks the far smaller industry of American made guitar amplifiers is doing quite well.  While some American based companies have certain product lines produced overseas these budget lines are always looked down upon by “serious” musicians.  Does that mean that all of these budget lines are of low quality?  I doubt it, but the “Made in USA” tag demands respect and a HIGH price on guitar amplifiers. 

The only large American instrument amplifier company that has not outsourced any product lines to overseas production is a company called Mesa Boogie.  (This company became popular in the early 70s when Carlos Santana started using one of their prototypes)  Mesa Boogie is considered almost unanimously among guitarists to be the best amplifiers available before boutique products.  Mesa Boogie amps are much more expensive than most other large company amplifiers.  They are, however, known to be absolutely reliable and of course, they sound good. 

 

So why do so many musicians pay 2-3 times as much money for Mesa Boogie amps then they would for something with comparable features that are produced overseas?  Is the quality of workmanship truly that much better to warrant such drastic price differences?  I would say there is at least a slight quality difference.  If nothing else there seems to be at least a consistency of quality present in American made amps, at least with very high end companies like Mesa Boogie.  However, I think there is more to it than simply more consistent quality control. 

 

A large factor in choosing an American made amplifier among musicians is name brand recognition and this is certainly a major factor in all of industries.  If you play a Mesa Boogie fellow musicians know that you spent a lot of money and therefore, in theory, are serious about what you do.  This is, in my opinion, the single biggest factor in the guitar amplifier industry.  I have personally used overseas products that I have felt are just as good as American made products, but there is no name brand recognition in an amplifier produced in China.  Even the good Chinese players I have seen play Mesa Boogies or something made by the United Kingdom based company Marshall Amplifiers.  If you play a Mesa Boogie other musicians take you more seriously.  With that said, I have heard many poor guitarists playing Mesa Boogies and many great ones playing cheap overseas things.  But, while I love driving a Toyota, for now I prefer playing a Mesa Boogie!

 

While on a musical topic, here is a link to an article analyzing the differences between a Mexican made Fender Stratocaster and an American made Fender Stratocaster.  The Stratocaster is a very popular guitar invented in the 1950s and has become an icon of modern music.  So, for your reading pleasure:

 

http://www.minyanville.com/articles/fender-guitar-cbs-hendrix-stratocaster-telecaster-ensenada/index/a/24093

Take Your Own Road!

A few folks are talking about advertising and buying this week on the blogs so I have some observations on this as well.  About a year ago I visited the small Fairfax museum with my father who happens to be the only member of my family who shares my love for history.   Every time he visits me we take advantage of the abundance of history in the area and visit a few things.  Anyway, while in the museum my father pointed to an ad for some kind of 50s model car.  He asked me “what is different about this ad compared to the ones you see today?”  So, after a few seconds of inspection I realized what he was referring to.  The ad from the 1950s was about the car.  Car commercials today are not about the car.  The 50s add had only a picture of the car, no people in the picture.  It listed the engine specs, the interior room, and other car specific information. 

 

Fast forward 50 years.  What do car commercials today show.  They show hip looking people driving fast.  They show other people looking at the people in the car in an awe-struck way (you will notice this even with KIA commercials, not just Lexus or BMW!).  They promote some kind of social independence with tag lines like “Take your own road.”  They promote the idea that the car becomes a part of a person’s image and personality.  They tell people that whether it is a 12,000$ economy car or an 80,000$ BMW the vehicle is an investment in their own social status and good for their sex appeal. They show NOTHING about the car. 

 

What can be gathered from this change in marketing strategy over the last 50 years?  Have corporations changed to adapt to a new society of materialism or was this trend always present and companies have just learned to exploit this human trait recently?   Is attention specifically being drawn away from the product due to the competition of many comparable products?  Has society simply become far more self-indulgent and lost sense of practicality when shopping for any given item? 

 

So, exactly when did this change happen?  Well, from what I can see it has been a gradual change.  Check out this commercial from 1986 featuring James Garner.  So, at that point there was celebrity appeal in advertising, but notice he was still talking about the car!

 

http://www.youtube.com/watch?v=-h3dtweyAwg&feature=related

 

 

Down the Yellow Brick Road

Well I truly enjoyed Hugh Rockoff’s article “The Wizard of Oz as a Monetary Allegory” in which he explains an apparent reference to the gold standard in the classic book.  Rockoff does acknowledge that Frank Baum, the book’s author, never indicated this allegory in any way, so it could perhaps simply be a coincidence that some modern historians give too much credit to.  However, the argument that this allegory is intentional can be quite convincing, especially considering the seemingly blatant symbolism of metals in the story as pointed out by Rockoff.  The debate over the gold standard in the late 1800s was certainly foremost on many people’s minds and the notion that this quandary would influence the creation of one of the most popular children’s tales of all time is perhaps believable. 

 

Of all the remarkable imagery pointed out by this article in Oz I find especially intriguing the reference to the end of the “Yellow Brick Road.”  While Emerald City (Washington DC, according to Rockoff) lay at the end of the road in the story, it is ironic that indeed Washington did stand at the end of our nation’s yellow brick road, the gold standard.  As argued by Ahamed in Lords of Finance the reliance on the gold standard set the stage for the Great Depression.  At the end of this road was truly found Washington’s increased activity in the economy.  The Wonderful Wizard of Oz was written several decades before the depression, yet it eerily seems to point to the end of the Yellow Brick Road.  Certainly Baum did not see this result by the time of writing The Wonderful Wizard of Oz, but perhaps it could be argued that he sensed increased federal involvement as the outcome of the gold standard debate.

 

Rockoff’s analysis of the characters in the tale certainly can fit their projected references, but again, whether or not this was indeed the intention of the author may never be known.  However, going along with the proposed allegory I found the Tin Man especially interesting.  The working class, becoming part of the machine, certainly was a notion of that time as the United States industrialized.  This character I find especially convincing and even if the gold standard was not the true parable of the story, I can easily understand the reference of the Tin Man to the industrial working class that was a substantial American population at the time of the writing.

 

When reading all of these works I am amazed how financial matters throughout history tie together so intricately.  When studying the characters of Oz from this sort of allegoric perspective one could argue that the work is simply an analysis of the different economic classes in America at the time.  The farmers, the industrialized working class, etc…, all point to the different slices of the American population in the late 19^th Century.  So, whether an allegory of the gold standard debate or not, The Wizard of Oz was certainly a work reflective of the times.  Oh, and it is a great child’s story as well! 

 

Here is a link to an article that analyzes The Wonderful Wizard of Oz in a slightly boarder political sense-

 

http://www.usagold.com/gildedopinion/oz.html

Railroads: Still a Major Player?

After reading this week’s work I was amazed by the profound influence the advancements in transportation have had not only on the individual, but on business.  As The Visible Hand makes clear the railroad industry was the birth of modern business, but I found particularly interesting the fact that it was the railroads that really fueled the evolution of all other business enterprise. This obviously makes sense, but it appears to be another aspect of the business world that surrounds us that is taken for granted in a time when almost anything can be shipped anywhere rather quickly.

 

 As The Visible Hand points out, mass production and mass distribution were made possible by this new form of mass transit.  I have to wonder how this ability to transport materials and finished products continues to fuel the economy and influence modern corporations, or is it simply a technology that is now so implemented that the operation of shipping is simply not a major factor in business decisions.  I think back to the recent hikes in gas prices and the influence this had on the cost of certain commodities, so it seems evident that shipping problems can still lay a heavy hand on modern industry.

 

In our current world we have mass transit and shipping available by rail, road, sea, and air.  Certainly we think little of it, but when analyzing the role played by transit it is easy to understand the crucial role the railroad industry played in increasing all other industry.  Even on a very small level we can utilize reliable shipping today.  If we buy or sell something on EBay, Amazon, or any other buying/trading site, we can have it shipped in any number of ways.  When we buy an item it usually shows up without incident within days of purchasing. This is certainly a luxury of the modern world.

 

 I can only imagine what it must have been like to make products in a small shop, ship them on a wagon over horrendous roads to a port of some kind, and get these products on a ship.  If sending goods to Europe in the colonial era one was looking at several months rather than several days.  When considering these limited forms of transporting manufactured goods, or the resources needed to produce those goods, it is easy to understand how the railroad industry revolutionized every aspect of industry.

 

An interesting point to note is where the railroad industry stands today when there are so many more forms of shipping available.  While certainly diminished from the role it once played, I was surprised to find that a very large percentage of manufactured goods, and especially a large percentage of raw materials, are still transported by rail.  The trucking industry has certainly reduced the reliance on rail transportation, but the railroad industry holds on, especially in the areas of transporting coal and other fuel materials.  Here is a link that shows a very interesting comparison of shipping between truck, rail, and other methods.  Certainly the ability to ship materials and finished products is still the life blood of corporations.

 

http://www.nationalatlas.gov/articles/transportation/a_freightrr.html