What's Ahead for the Stock Market -- and Quant Funds
After weeks of skittishness and fear, investors showed signs on Tuesday of settling down. "Yesterday was one of the dullest days in the market that we've had in a while, and that's good in many ways," says Wharton finance professor Jeremy Siegel. Investors have been reeling from widespread problems in the subprime sector, stocks have fallen, yields on Treasury securities have dropped and some companies are finding it hard to borrow money -- all of which spurred the Federal Reserve last week to announce a cut in interest rates. Meanwhile, the upheaval has shown that quant funds, despite their computer power, aren't immune to mistakes and market downturns. So what can we expect in the weeks ahead?
Finance and Investment
(Podcast with Transcript)
Looking for a Company to Run? Search Funds Could Be the Answer
For those entrepreneurs who want to run a company but prefer to skip the start-up stage, search funds offer a possible alternative. A specialized form of private equity first launched in the mid-1980s, search funds are becoming increasingly popular -- and their supporters claim they can offer investors attractive returns and business owners a compelling exit strategy. What does this trend in private equity mean for investors, and for small businesses that might be acquisition targets for these funds? Robert Befidi, Jr., and Mark Sinatra, managing directors of Gordian Capital in New York City, spoke to Knowledge@Wharton about the pros and cons of search funds.
Law and Public Policy
Trouble in Toyland: New Challenges for Mattel -- and 'Made in China'
Mattel's recall of more than 10 million toys in the U.S. over the past three weeks has done more than focus attention on the company's wide array of products, which include such household names as Elmo, Ernie, Big Bird, Barbie and Batman. It has also further raised public awareness of quality control problems in China and the relentless push to cut costs along every step of the supply chain. Knowledge@Wharton looks at Mattel's response to the crisis, its potential liability and the consequences for China.
Rivals Set Their Sights on Microsoft Office: Can They Topple the Giant?
It's open season on Microsoft Office. Google is distributing Sun Microsystems' StarOffice and also has its own web-based productivity suite. Apple has a new spreadsheet called Numbers to compete with Microsoft's Excel. Open source suite OpenOffice, along with several web-based products, are attacking as well. All these challengers emerge at a time when Microsoft's dominance in productivity software -- Microsoft Word, PowerPoint and Excel -- remains strong. So why try to overthrow the leader? And how vulnerable is Microsoft to this assault?
'If Brands Are Built Over Years, Why Are They Managed Over Quarters?'
Wharton marketing professor Leonard Lodish admits he is somewhat to blame for the erosion in brand pricing power that has hit many consumer-goods companies -- but not entirely to blame. In 1993, as store-level scanning data started to become widely available, Lodish coauthored an article outlining its power to gauge the effect of price promotions on revenue. But he also warned that these tools were not the only determinant of brand power. In a new paper, Lodish and co-author Carl F. Mela show how widespread adoption of easy-to-harness, short-term measures has altered consumer behavior and made it harder for brand managers to compete.
Finance and Investment
The Art and Science of Measuring CEO Performance
The long-term performance of a company's stock may be the ultimate test of a CEO's talents. But that's not the only measurement used by boards of directors to gauge how well the boss is doing. Experts at Wharton and elsewhere say that companies use many different metrics -- all of which can be fine-tuned to fit a company's circumstances.
Leadership and Change
Talking with the Receptionist, Pausing When You Speak and Other Secrets of Leadership Success
Several years ago, while visiting a regional branch of Lee Hecht Harrison, a global career management services company, then-president Stephen Harrison was stopped short by "Ray," his COO. "You didn't greet the receptionist," said Ray, who went on to explain that "a receptionist is a corporate concierge. They will talk to more important people in a day -- suppliers, customers, even CEOs -- than you will talk to all year." Harrison, speaking at the recent 11th annual Wharton Leadership Conference, contends that small acts like this are part of what makes for an ethical corporate culture. He was joined at the conference by public speaking coach Richard Greene, author of Words that Shook the World: 100 Years of Unforgettable Speeches and Events.
Finance and Investment
A Fish Tale on a Macro Scale: How Sushi Has Changed Globalization (and the World)
Over the past two decades, sushi -- a familiar, accessible and immensely desirable food that can be found in supermarket aisles and fast food outlets as well as high-end restaurants -- has become a staple of cultures around the globe. Indeed, far from signaling the snobbery of those who eat it, sushi today belongs to the masses. Yet sushi also says something important about how wealth, taste and markets interact, according to Sasha Issenberg. In his new book, The Sushi Economy: Globalization and the Making of a Modern Delicacy, Issenberg argues that sushi reveals the "complex dynamics of globalization" and shows, against all odds, that "a virtuous global commerce and food culture can exist."
Articles From Around the Network
Responding to the Rising Rupee: Why Indian Firms Must Rethink Their Business Models
In recent weeks, many Indian companies and industry organizations -- especially those that are export-oriented -- have been complaining about the strong rupee's negative effects on their operations. Some have urged the Reserve Bank of India to intervene. Jitendra V. Singh of Wharton's management department -- who takes over as dean of Singapore's Nanyang Business School on September 1 -- has a different view. In this opinion piece, Singh argues that Indian firms should use the rupee's strength to their advantage by adapting their business models in innovative ways, much as Japan's automakers did during the 1980s.
Despite Good Intentions, China's New Labor Law Leaves as Many Issues Unresolved as It Addresses
The passage of a sweeping new labor law in late June by the Standing Committee of the National People's Congress (NPC) followed public outcry over the brick kiln slavery scandal in northern China's Shanxi Province. The new law aims to provide more protection for lower-level, unskilled workers by emphasizing written contracts, equal pay and long-term job security. Yet businesses operating on thin margins worry about increasing labor costs, and some multinationals fear they might be at a disadvantage when they observe the law while local competitors flaunt it. Although the two-year legislation process has been noted for its balanced inclusion of different views, labor law experts still hotly debate the validity, applicability and enforceability of the new law.
Customer Versus Supplier Expectations: Bringing in Value Beyond Just the Widgets
In a highly competitive world where the customer expects to be king, why are so many firms unhappy with the products they purchase, sales staff who over-promise and don't deliver, and less than optimal after-sales service? In a recent paper published in the Journal of Marketing, Singapore Management University marketing professor Kapil R. Tuli and Emory University professors Ajay K. Kohli and Sundar G. Bhardwaj shed light on what appears to be a fundamental mismatch between customer expectations and what suppliers think their customers want.
Articles and Links from Knowledge@Wharton Sponsors
GE Commercial Finance:
ITAA, IAOP and Wipro Technologies:
Rodrigo González Fernández
Renato Sánchez 3586