Small Business Labs

Emerging Markets and the Global Economy

Interesting piece by the Economist Intelligence Unit covering the increasing importance of the developing world on the global economy.  Key quote:

"Emerging markets, with their fast growth and hunger for imports, are sustaining the developed economies. If this continues, the global economy will achieve a soft landing. Yet many of these markets are showing signs of overheating: monetary tightening, or indeed the maintenance of high global commodity prices, could depress them and take the developed economies down too."

The EIU predicts a soft landing and positive global economic growth in 2009.  They also point the risks to this forecast due to rising commodity and energy prices and inflation in general.

Also interesting is how they describe different countries growth rates for the first quarter of 08.  According to the article, the eurozone showed "perky" growth of 0.7%, Japan managed "blistering" growth of 0.8% while the "sickly US chalked up a respectable annualized rate of 0.9%." 

Cell Phones, Market Data and Rural Farmers

The New York Times reports on a new service from Reuters called Market Light, which provides pricing information for rural farmers in India via cell phone text messages.  From the article:

"Reuters has dispatched about 60 market reporters to the region to report on the going price for, say, oranges or onions, and to package the data into a text message that is sent to subscribers."

The service is for profit and Reuters is treating it like any other new business.  Key quote from the article:

"The brass at Reuters has approved money to operate Market Light for three years.  After three years, “it will be either a very healthy business, or it won’t exist,” said Amanda West, head of Reuters Innovation."

Better access to price and market data can greatly improve the efficiency of small businesses and small farmers in developing countries.  The article discusses one study on this topic and more information can be found at our post The Economist and NY Times on Mobility.

Disclosure:  We've done work for Reuters in the last year.   

eBay Sellers Express Their Unhappiness

eBay Live was last week and eBay sellers used the event to express their discontent - even to the extent of booing eBay executives.  This is quite a shift from just a few years ago when eBay execs were were treated like heroes.  Attendance was also way down from prior years, in part due to a boycott by eBay sellers. 

There are many reasons why eBay sellers are upset, with a big one being changes in eBay's reputation system.  For more on this topic see Kevin's Harmon's StartupNation blog post on this topic, which includes entertaining YouTubes of angry participants.  The UK's Online Times also has a good summary called eBay's Small Sellers Rebel.

It is a tough time for eBay.  Search engines have made it much easier to find good deals online and consumers prefer the simplicity and ease of buying fixed cost products over participating in auctions.  Because of these changes, auctions are a shrinking percentage of eBay's business and many eBay sellers are choosing to sell from their own websites or other online malls and marketplaces. 

Obviously it's never good to reach the point where your business partners are upset enough to boo you in public.  But anyone who shops on eBay knows they have to change to continue to thrive.  If anything the changes are overdue, and I hope they haven't waited too long. 

The Beer Industry and Small Brewers

The beer industry continues its global consolidation with Belgium based InBev making a $46 billion offer for US brewer Anheuser-Busch.  It is expected the bid will be rejected, but regardless of the outcome of this corporate battle, most beer industry analysts expect to see more mergers.

While the global beer giants merge, small craft brewers are having a greater competitive impact on the industry.  MSN has an interesting article on this topic called Will microbrews kill the King of Beers.  The gist of the article is the growth of craft brewers (small, independent brewers that produce less than 2 million of barrels of beer per year) is putting a lot of competitive pressure on big beer companies. 

In our most recent forecast report we use the beer industry as an example of an industry moving to a barbell structure comprised of relatively few global giants, lots of small firms and very few mid-sized firms.  In 1980 the US beer industry had fewer than 20 craft brewers with a negligible share of the US beer market.  Today there are over 1400 and combined they own about 6% of the US beer market. 

In 1980 there were roughly 35 national beer companies that controlled about 70% of the US beer market.  By the end of this summer, 2 companies (Anheuser-Busch and the combination of SABMiller and Molson Coors) will control over 85%. 

We're seeing this structure happening in almost all industries.  The need for global scale and investor and competitive pressures are driving big companies to get bigger (see our recent post Will Large Corporation Survive).  And small firms are exploiting the growing number of niche opportunities either too small, too specialized or not attractive to the giants.

We expect this trend to continue over the next decade with more industries having a barbell structure.

 

Big Companies Using Psychics?

Newsweek has an article on a corporate psychic who has a thriving practice advising large corporations.  The psychic's name is Laura Day and according to the article she charges $10,000 per month for "unlimited 24 hour access."  My favorite quote is about her 16 year old son:

""I don't want to see what he did with that girl until 2 a.m.," she says. "But I can.""

My personal experience with both my mom and watching my kids try to hide things from my wife is keeping things from a mom is pretty tough even if she's not psychic.  Imagine how hard it must be when she is.

As someone who does forecast and planning work, I often tell people that no one can predict the future.  I think I am right about this.  But based on this article, I may need a new line of work. 

Lessons From the Inc. Fast Company SMB Market Summit

I had the opportunity to participate in the Inc./Fast Company SMB Summit last week. The summit was a highly interactive event focused on exploring ways to reach and communicate with small and medium sized companies.  What made the event so interesting was the group combined executives from both big and small companies in a format designed to encourage discussion and interaction.  While lots of good stuff was covered, two key lessons jumped out at me:

1.  Defining and segmenting the small business market is key.

The summit started with Mansueto (the publishers of Inc. and Fast Company) providing an overview of their detailed, quantitative research on the small business market.  This was followed later by a great discussion between the small business CEOs and the larger company marketing executives around how well big companies understand small business needs.  The view from the small business CEOs was that their businesses and business needs are not well understood by big corporations.  The big company execs did not disagree.

No great surprise here, but a lot of the issues seemed to come down to segmentation.  As the Mansueto data showed, the SMB market is very diverse.  But it seems to the small business execs that too many big companies offer undifferentiated "small business" products and programs without thinking through the needs of the wide variety of small business segments and types.   

2.  The increasingly quantitative nature of marketing.  Execs from Netsuite and Intuit presented on how they market to SMB's.  Both companies use a mix of quantitative methods to design, test and track their on and offline marketing programs with a strong focus on clear, measurable results. 

Online marketing in particular allows for the use of analytics and Jay O'Connor, SVP of marketing for Netsuite, provided some great examples of how they test advertising and marketing offers to improve campaign results.  They do this, of course, using their own Netsuite product line.

We're constantly amazed by the number of small businesses we see using advanced marketing analytics.  The Internet provides the opportunity to take advantage of marketing analytics, and companies like Netsuite are providing increasingly sophisticated marketing tools to small businesses.

It was a great event and look forward to the next one.

   

 

 

 

Escape From Corporate America

The book Escape from Corporate America by Pamela Skillings is a What Color is My Parachute for the new economy.   It is focused on helping disenchanted corporate workers find jobs, careers and work options that better fit their life goals and aspirations.  While the book covers a wide range of career options, it stresses leaving big company jobs for entrepreneurship and small business. And like “What Color is My Parachute,” it is full of advice and exercises that help the reader plan for their new career.

The book is positive and upbeat about self-employment and small business, but without the over the top sugar coating and hyperbole that usually comes with “how to” entrepreneurship books.   Skillings even points out that there are a lot of good corporate jobs and corporate employers. This is good because the decision to leave a corporate job and head out on your own should not be made lightly.  And not everyone is cut out for and/or ready for entrepreneurship. 

Escape from Corporate America does a nice job of helping the reader think through and plan career change decisions.  While targeted at unhappy corporate employees, the book is useful for anyone thinking of changing careers.  I also think corporate execs and HR managers should read this book.  It does a great job of describing why so many corporate employees are unhappy.

Spending on Pets Continues to Grow

We have 4 dogs and 1 cat in our family.  How this happened is a long story, but between food and health care (2 of the dogs are old) we spend a lot of money on our pets.

According to the Yankelovich Monitor Minute, we are not alone.  Key quote:

"In 2007, Americans spent $41.2 billion on their pets, an increase of 142% from the $17 billion spent in 1994."

Some of the more interesting pet related small businesses mentioned by Yankelovich:

• Dogcars.com - a blog on pet friendly cars and travel.
• Eddies Wheels for Pets - wheel chairs for handicapped pets.
• The Barkely Pet Hotel and Day Spa - exactly what is sounds like. 

The Yankelovich Monitor Minute is quite interesting and covers a wide variety of consumer research and trends.  Well worth reading and/or subscribing to.   

U.S. Services Exports and Small Business

The Dallas Federal Reserve Bank has an essay called "Opportunity Knocks - Selling our Services to the World" in their annual report.  Lots of good data, insights and case studies on U.S. services exports.  Key quote:

"We export more services than any other nation—by a long shot. Better still, most of what we sell abroad are highly valued services—industrial engineering, entertainment, health care, and the work of architects, lawyers and other professionals. Our growing services trade supports many well-paying jobs."

According the report, U.S. services exports have grown substantially over the last few decades and should continue to grow.  From the report:

"Goods still account for the bulk of U.S exports, but services have gained ground, rising from 19.6 percent of total exports in 1980to 29.8 percent in 2007."

The report is much more positive about service jobs than the popular press, stating:

"Services are often dismissed as the provence of dead-end jobs and low wages.  Nothing could be more wrong.  Many of our services workers and well educated, commanding high pay because of their ability to add value to what they produce."

This is good news since services make up 4/5ths of the U.S economy.

Small service businesses are increasingly exporters.  For example our mom and pop small business, Emergent Research, is a services exporter.  As the report points out, the Internet and other technologies greatly enable service exports.  And strong overseas economic growth provides growing markets.  Add in a weak dollar it is a good time to be a small services exporter.   

Healthcare Costs Will Continue to Increase

Emory University has both a top rated business school and an outstanding medical complex, so it is not surprising that the Knowledge at Emory site would have a good article on health care costs.  Key quote:

"...total U.S. healthcare spending in 2007 was $2.3 trillion, or 16% of the country’s gross domestic product (GDP). By 2016, that number is expected to reach $4.2 trillion and represent 20% of the GDP. The U.S. Labor Department recently reported that healthcare benefits make up 30.2% of employers’ compensation costs. Last year, employer health insurance premiums increased over 6%—twice the rate of inflation—and the annual premium for an employer health plan topped $12,000 (for a family of four)"

Health care costs also contribute significantly to consumer bankruptcy.  From the article:

"A recent study by Harvard University researchers not only found that 50% of all bankruptcy filings were partly the result of medical expenses but that nearly 70% of those who filed for bankruptcy had health insurance."

Scary stuff.  The article goes on to discuss a number of options for improving care and/or reducing health care costs but makes it clear solutions won't be quick or easy. 

For small businesses health costs will continue to be a major issue.  The National Association for the Self Employed recently released a study on this topic.  Key quote from the study press release:

"..high cost continues to be the most significant barrier to offering health insurance.."