Knowledge at Wharton

The day after Michael Dell’s visit to Wharton on August 29 2006 the Wall Street Journal published a front-page article entitled ”Consumer Demand and Growth in Laptops Leave Dell Behind.” The article replayed the drumbeat of bad news that has recently hit the $56 billion PC maker -- a 51% decline in second quarter earnings from the same period a year ago a stock price that is down 60% from its high in 2000 the exodus of key executives to rival manufacturers -- and suggested that the company’s strategy of ignoring the consumer market plus its failure to maintain an efficient customer service operation have hurt its competitive position especially with respect to rival Hewlett Packard. But Dell himself in an interview with Knowledge at Wharton brushed aside the numbers and focused on the upside. He highlighted the company’s success in emerging markets its record market share new tools and training to beef up customer service and his confidence that the preference of consumers to buy online will continue to grow.

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Roberto Civita is chairman and CEO of The Abril Group one of Latin America’s largest and most influential communications companies. Based in Sao Paulo Abril publishes nearly 100 magazines including its flagship Veja launched by Civita in 1968 and now the world’s fourth largest news weekly. The publication well-known for exposing political corruption in Brazil has been instrumental during the past year in bringing about the resignation of President Luiz Inacio Lula da Silva’s inner circle. At the recent Wharton Global Alumni Forum in Rio Civita spoke on ”The Role of the Press in an Emerging Economy.” In an interview last week with Knowledge at Wharton he talked about corruption in Brazil old media vs. new media the U.S.’s obsession with quarterly earnings the importance of education and the coming tide of investors among other topics.

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When making a purchase a consumer has a choice between using frequent-flier miles cash or some combination thereof. Which will he or she choose? Another consumer has an opportunity to participate in a special program to get a free car wash after paying for a certain number of washes. What’s the best way for the car-wash owner to motivate the customer to participate? Such questions are serious business for airlines hotel chains credit-card companies and other corporations that offer loyalty programs to customers. Wharton marketing professor Xavier Drèze and Joseph C. Nunes of the University of Southern California’s Marshall School of Business have spent several years studying how these programs can be structured to generate the most revenue for companies offering them.

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Two Wharton researchers have developed a mathematical model that they say will allow companies for the first time to predict at what pace new products will gain acceptance in markets where purchasing decisions by knowledgeable influential customers sway the buying habits of others. Wharton marketing professor Christophe Van den Bulte and doctoral student Yogesh V. Joshi say their model can be put to use in industries as diverse as movies music pharmaceuticals and high-technology. Their findings are presented in a paper titled ”New Product Diffusion with Influentials and Imitators.”

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Floyd Landis’s potential as a product endorser dropped faster than a cyclist speeding down a mountain road when he tested positive for synthetic testosterone after winning this summer’s Tour de France. Sports columnists denounced him even as the companies that had invested tens of millions in him and his team dropped their sponsorships. Landis of course isn’t the only celebrity or athlete who managed to misbehave this summer. Consider sprinter Justin Gatlin French soccer player Zinedine Zidane actor Mel Gibson and Philadelphia Phillies pitcher Brett Myers. Yet as marketing experts and others note celebrity wrongdoing is more than just fuel for gossip columns. Athletes and celebrities push all manner of products and services and their downfalls can tarnish the brands and companies they endorse. ”The perils of these endorsements are consistently underestimated ” says one expert.

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After 17 consecutive interest rate hikes during the past two years the Federal Reserve’s open market committee decided on August 8 to leave the federal funds rate unchanged at 5.25%. While stocks immediately rallied in response they fell back as it became clear that inflationary pressures persist and they could prompt more rate hikes in the future. What does this mean for markets and investors? Wharton finance professor Jeremy Siegel told Knowledge at Wharton that Fed chairman Ben Bernanke met expectations and ”meeting expectations is very positive for stocks.”

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Body parts are big business in the United States. Tissue organs tendons bones joints limbs hands feet torsos and heads culled from the dead are the cornerstones of the lucrative and important business of advancing scientific knowledge and improving medical technique. Few people however think to ask where the material that sustains this enormous industry comes from. Journalist Annie Cheney is a timely exception. In Body Brokers: Inside America’s Underground Trade in Human Remains (Broadway) Cheney chronicles her quest to find out how human remains are procured processed marketed and used. It’s a complicated detailed and disturbing tale.

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Canadian writer Giles Slade was checking out a touring exhibit called ”Eternal Egypt” with his 10-year-old son a few years ago when he had an epiphany. The Egyptians he realized designed great monuments to endure for countless generations while here in North America nearly everything produced is made to break. And that’s no accident. Slade’s Made to Break: Technology and Obsolescence in America (Harvard University Press) looks at 20th century technology through the lens of disposability a concept born bred and nurtured in America. Made to Break traces the history of an industrial strategy that has come to define this country -- a strategy that has taught us to buy throw away and buy again and that now must change because we have run out of room to safely dump all our unwanted used-up or obsolete possessions.

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The tired old adage ”You are what you eat ” acquires new life in Michael Pollan’s compelling book The Omnivore’s Dilemma: A Natural History of Four Meals (The Penguin Press). Tracing our food back to its sources in feedlots and fields Pollan convincingly argues that modern Americans are made of corn -- and that this is a very bad thing for our health our economy and our environment. According to Pollan corn underwrites a national eating disorder even as Americans’ lack of a centuries’ old cuisine makes us exceptionally vulnerable to fad diets trendy nutritional advice and fast food.

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Peter Killing and Thomas Malnight are professors of business strategy at IMD the Switzerland-based business school and Tracey Keys is a consultant. In their book Must-Win Battles: How to Win Them Again and Again published by Wharton School Publishing they argue that rather than spreading their resources too thin companies must focus on three to five key challenges -- must-win battles (MWBs) that are crucial to achieving their business goals. A well-chosen MWB the authors say must make a real difference be market focused create excitement be specific and tangible and be winnable. An excerpt from the book’s conclusion highlights what can be learned from successful and failed MWB journeys.

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