In the UK the word “sorry” has been very much in the news lately. After over ten years in power and a mountain of claims about the strength of the UK economy to withstand any global recession people think they should accept some responsibility for the current mess the UK economy is in. More important in reality is to be able to lay out the background to what is going on and to be able to develop policies from an understanding of the bigger picture.
In management terms this is called putting things in context. Understanding the context is often an excuse for senior academics not to help you in my experience and they just say “it all depends on context”. But in trying to get a feel for the strategic issues and ability to step back and see the big picture is vital for a business just as much as it is for a government.
Some of my own thoughts on the recession and its implication for industry are in the talk I gave in India in February which you can read by clicking on the link on the front page of the web site. There are three aspects to doing this sort of analysis and as in most of marketing none can be categorized as particularly difficult.
– Read and study widely so that you are up to date with what is going on in the world, in different parts of the economy, in technology and in as many areas as you have time and interest. For me this is about picking up all sorts of newspapers and magazines while travelling around the world and having regular subscriptions to certain newspapers and magazines. The Internet helps a lot as does just being inquisitive.
– Continuously do macro environmental analysis of situations and businesses. When I started in industry this was normally a chat over coffee, or more likely a beer or two. Then we learnt about this thing called a PEST analysis (Political, Economic, Social and Technical) to which later was added Environmental and Legal. So now some people call it a STEEPLE or PESTEL. To me is the first hour or so of conversation you have when you meet Don Roberto Palomo, the founder of ADOC in EL Salvador. He was my boss in the 1970s and one of the best you can find. I only meet him rarely now if he comes to the trade show in Bologna or we go back to Salvador on holiday but I treasure those moments and can find no better way to describe the foundations of the macro-environmental analysis than listening to Don Roberto discuss what is going on and how it effects his business locally and internationally.
– Consider networks. The term “network” is very much abused these days and had to be counted as a weasel word as a consequence. From nipping off to breakfast meetings or cocktail hours to “network” in search of clients or a new job to the impact of relationships in localized industrial clusters the term network gets thrown in at every turn. Yet if you look at www.impgroup.org you will recognize that for the last 35 years a senior group of academics have been working on the way that businesses interact in a network environment. The essence of this is that “no man is an island” and that every business is part of a network, indeed viewed certain ways it can be a number of networks, and that its control of its destiny is limited by what else is going on the network. A company can do many things to improve its network position but it has to recognize that others in the network will observe and react, and that events like recessions and major currency changes will impact the network and its various actors in different ways. Observing and analyzing these networks is part of business strategy but generally companies tend to look at the network areas that are quite close in. The networks do actually spread out globally but it is natural that a company with limited time and resources only examines the area it considers most relevant. This we call the network horizon. In times of global financial problems such as now senior executives need to widen their network horizons and look much wider than normal for the activities that might impact on their business.
So this is your starting point after which you do all the other marketing things such as estimating your strengths and weaknesses and those of your competitors and building your new or adjusted strategy.
For our government we have three things which have happened. A housing crisis, a banking crisis, and a stock market crisis. Frankly speaking I think we all saw that in some countries, especially the UK but also places like the US, New Zealand and earlier in the decade the Netherlands where house prices were overheated. All through the decade the Economist has been publishing the average cost of a house against the average wage for various countries and highlighting where some correction was needed. I seem to have been lecturing about it in my course at Bath University for years. How in ten years the UK moved from a save to spend to a borrow to buy society more like the US. Students end University owing £15000 to £20000 then need to buy a car and they have no chance of saving a deposit for a house or of getting a mortgage to buy one on any acceptable multiple. This is important for marketers as it shows how in the last fifteen years society has changed. The young marry later, have children later and buy houses later. Since they have to have a life they spend money differently from their parents. Holidays, automobiles, eating out, clothing and footwear are all consumed in different ways. Important for all marketers to know, not just those involved in consumer marketing.
So we let our housings get over-valued yet encouraged our banks to lend cheap money to people to keep on buying and to lend at 100% and more so they would money extra to go out and keep the retail economy ticking over. Don’t tell me this was not seen as a risk – it was a constant discussion over dinner for the last five years. So if the housing bubble bursts then the banks will suffer from people not being able to pay off loans and mortgages and the stock market will suffer as employment or the fear of it leads to a reduction in consumer spending. And no one saw it coming? Tell me another. It is not financial knowledge that was missing, it was basic macro-environmental analysis that any marketer can do in their sleep.
I heard the government was putting out a PR contract for £300000 to help with the London G20 meeting in April. If they had spent a few hundred on any decent marketer three or five years ago to look at the bigger picture we would all be better off.