Knowledge at Wharton

Big buyout firms like the Blackstone Group and Kohlberg Kravis Roberts do headline-grabbing transactions and collect eye-popping paychecks. But when the economy slows down and lenders turn wary those mega-deals are the first to dry up. Meanwhile the modest middle market -- typically deals in the $500 million to $1 billion range -- keeps plugging along. In fact according to panelists at the 2008 Wharton Private Equity Conference middle-market investors are to some extent insulated from the current credit crisis and other economic ups and downs. ”We’re delighted with the credit crunch ” one speaker said.

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It would be hard enough under any circumstances to become the first outsider named to lead a 161-year-old global conglomerate but Peter Löscher faced a unique challenge last summer when he assumed the reins at Siemens AG -- the German-based engineering and healthcare giant. During a recent Wharton leadership lecture series Löscher openly acknowledged that his first and most difficult task was dealing with the aftermath of a scandal that included allegations of bribes to foreign governments and union leaders. In his presentation Löscher emphasized the importance of corporate culture and standards. Corruption he said at one point ”is not a sustainable business model.”

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As the price of wireless transmissions drops telecom carriers need to focus on new applications that will engage consumers more deeply with their mobile devices -- and encourage them to pay a premium for wireless services according to speakers at the recent Wharton Business Technology Conference whose theme was ”Enterprise Agility: Lead with Speed.” 

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The term ”emerging markets” is now more than 25 years old and has come to define wide swaths of the world undergoing rapid economic change. Dozens of countries fall under the label even though they are evolving at their own pace and with their own twists on economic development. Now as many emerging markets show signs of a strong and growing middle-class population observers wonder whether the term has lost some of its meaning. What qualifies a country as ”emerging”? While some say measures based on income or other statistics are critical factors others place an increasing emphasis on the way business is conducted with rules that are transparent and apply equally to all participants.

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The U.S. presidential race has reached a critical juncture. The Republicans have a confirmed nominee in John McCain; as for the Democrats Hillary Clinton has bounced back while Barack Obama retains a marginal lead in terms of delegates. How the presidential race evolves will be shaped in part by the increasingly worrisome state of the U.S. economy. Though it has not yet gone through two consecutive quarters of negative growth -- the common definition of a recession -- signs of a slowdown are evident everywhere. What lies ahead for the U.S. and world economies? What is the right strategy for investors in this environment? Knowledge at Wharton discussed these questions and more with finance professor Jeremy Siegel author of The Future for Investors.

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Congress and the White House recently settled on an economic stimulus package with unusual speed pushing the throttle to pull the economy out of a nosedive. Is this just election-year grandstanding or does economic stimulus really work? While some experts argue that priming the economy now is unnecessary or even counter-productive others support the $168 billion package and its emphasis on low and moderate-income recipients. As for the health of the economy overall experts agree that no economic boom is in the near-term forecast.

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Delta Airlines is reportedly about to merge with Northwest Airlines in a deal that’s likely to set off a major round of consolidation in the airline industry. Wharton experts say that other major airlines are likely to fall in line with their own consolidation plans. Or so the speculation goes. But this scenario has been talked about before. Is the latest consolidation dance for real? And what are the implications of such mergers for consumers low-cost carriers and the economics of the airline industry overall?

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Failing to manage your company’s talent needs says Wharton management professor Peter Cappelli ”is the equivalent of failing to manage your supply chain.” And yet the majority of employers have abysmal track records when it comes to the age-old problem of finding and retaining talent. In a book coming out in April titled Talent on Demand: Managing Talent in an Age of Uncertainty Cappelli offers a fundamentally different paradigm for thinking about talent management one that takes many of its lessons from just-in-time manufacturing.

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In 2005 about two years after Autumn Bayles became the first chief information officer at Philadelphia-based Tasty Baking Company a supply chain executive quit the company. ”As a part of my technology work I was very involved with that side of the operation ” said Bayles who was hired to be part of president and CEO Charles Pizzi’s turnaround team. ”I raised my hand and said ’Why don’t you let me do this?’” They did and she succeeded. Volunteering for new responsibilities and continuously growing in your job were two of the suggestions that Bayles now senior vice president strategic operations offered her audience at the recent Wharton Women’s Conference.

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As fallout from the subprime lending crisis continues a number of remedies have been proposed to deal with it. One is legislation to curtail predatory lending which is generally thought to be a factor behind the issuing of so many subprime loans to borrowers with poor credit. What qualifies as predatory lending? And what are the conditions that make it flourish? Wharton finance professors David Musto Philip Bond and Bilge Yilmaz analyze predatory lending in a new paper titled ”Predatory Lending in a Rational World.”

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