Archive for August, 2004

Fear Factor

Monday, August 30th, 2004

By Dean Whittaker

The intention of our newsletter is to share with you what we at Whittaker Associates are learning in hopes that you may benefit from the experience. Each of us writes an article for each month’s newsletter.  It benefits us by encouraging us to learn something new each month in order to have something to write.  I happened to spend the last month on sabbatical, sailing solo on Lake Michigan. Though it might not seem directly tied to economic development, I can share with you what I learned about fear and sailing.

Life at Seven Knots

Sailing addicts know that the trip is not about getting there, but about the process of getting there… somewhere… anywhere.  Oftentimes we set a course and then change our plans or timing when we determine that wind and heavy seas are in our way.  In my case, weather became a HUGE factor in my plans and I quickly became acutely aware of my environment–the shape of the clouds, the direction and velocity of the wind, the passing cold fronts, warm fronts, low pressure areas, high pressure areas and what each of these could produce relative to winds and seas. I had to be in the moment in the most fundamental way, intensely conscious of the natural elements around me.

Last month presented challenging weather often, with strong 20-30 knot winds and high 5-7 foot seas. While Serendipity, my 34 ft. Sabre sail boat, was up to the task, its sole occupant (me) had to overcome my fear of death and the unknown.  My first task was determining whether it was fear or prudence keeping me anchored in a quiet harbor, safe from the bucking bull-ride high seas and strong winds offer.  Fear plays a valuable role in our lives. It keeps us out of harm’s way and often shields us from injury or death. It was put there to protect our evolution as a species, and this evolutionary process has helped me survive to write this article.

However, fear is also a great preventer.  It prevents us from taking risk, and taking risk is what allows us to move forward, to explore, to learn and to grow. Overcoming my fear of leaving the security of the calm harbor enabled me to explore the abandoned lighthouse on South Fox Island. It allowed me to experience the spectacular sunsets and the canopy of stars.  I learned that my tolerance for fear is abetted by my curiosity and need for uncertainty (adventure) in my life. One of our basic needs is our need for certainty. We go to great lengths (and expense) to achieve certainty. We want our lives to be predictable. At the same time, we want our lives to have variety.  In fact, we probably watch “reality shows” so that we can experience variety through the lives of others (while forgetting to live our own).  Overcoming our need for certainty takes courage, but the rewards can be great.

Fear has been said to be “false evidence appearing real.” We live in very uncertain times. Fear of terrorists causes us to make only short term plans. It allows our government to take from us those freedoms that the Constitution gave us. It gives others who understand the nature of fear control over our lives.

Lots of thinking happens when you spend five weeks alone, traveling at seven knots (about ten miles per hour) subject to the whim of the weather. Seven knots is slow enough for time to ponder, which is rare at the hectic pace we set for our everyday lives. Sabbaticals give us time to take the long view, and see the fear in our lives from a more objective standpoint.

Economic development practitioners are by their nature and task change agents. They are tasked with improving the economic well being of the areas they serve. Helping their communities overcome the fear of leaving safe, familiar anchorage to explore the unknown of the global economy is a challenging task. Step into the fear. After all, it is only “false evidence appearing real.”

Where Does Your Community Rank?

Monday, August 30th, 2004

By Pete Julius

How important are rankings? Do they really matter? Which rankings are most important? Who publishes the best, most widely used rankings? And where does your community rank? One answer to these questions can be found in Area Development’s recent publication of its annual Corporate Survey, which highlights six of the most important ranking criteria for development. The top ranking factors included state and local incentives, labor costs, availability of skilled labor, highway infrastructure, construction costs and favorable tax structures.  All of these criteria are becoming much more important with the increasingly popular trend of offshore outsourcing.  In Expansion Management Magazine’s July 2004 issue, their 2nd annual Mayor’s challenge compares all 331 MSAs for its own six categories.

The rankings were tabulated by deriving quotients for each of the six categories.  The six categories were

  1.  Public education – an evaluation of 2,800 school districts nationwide
  2. College-educated workforce – both in terms of quality and quantity
  3. Health care costs and availability – measured availability of quality care and cost
  4. Quality of life – affordable housing, low cost of living, crime rates, etc.
  5. Logistics infrastructure – infrastructure, workforce, and taxes/fees
  6. Government taxes & spending – tax structures that are more business-friendly

The Mayor’s challenge is broken out into four different rankings: 1) all 331 MSAs, 2) MSAs with greater than 2 million people, 3) MSAs with between 1 and 2 million people and 4) MSAs with between 250,000 and 1 million people.  Visit Expansion Management’s web site to see where your community stacks up.

Of course this is just one of the many magazines and other publishers that rank communities based upon infrastructure and business activity.  One ranking may not be better than another, but if your community continuously ranks pretty high, then your community is probably very competitive, especially amongst the availability of skilled labor and the overall costs of doing business.

Sources:

Area Development (www.area-development.com)

Expansion Management (www.expansionmanagement.com)

Food Industry Trends

Monday, August 30th, 2004

By Jeff Vedders

Although the food industry does not draw the same attention or press as biotechnology, nanotechnology, and even high-end electronics, it is still an important target for many communities.  If you are targeting food companies, there are a few trends you may want to keep in mind that are greatly impacting food businesses.

One of the biggest trends impacting food manufacturers today is the trend towards healthier products.  By now, everyone is familiar with the low-carb diet fad represented primarily by Atkins.  Consumer demand has been so great that many food companies have responded with the development of low-carb products.  These products include everything from low-carb candy to low-carb snacks to even low-carb cola.  This trend towards healthier foods is not a new idea.  In fact, food companies first began to address the health craze back in the early 1990s with low-fat foods.  Low-carb foods are a natural evolution of this trend.  According to Standard and Poor’s, ten years ago, less than one percent of a food company’s portfolio was geared towards healthier foods.  Today, the proportion is around 5%, with many companies moving towards 10%.  Producers of nuts and eggs saw dramatic sales increases in late 2003, while pasta and bread manufacturers reported significant declines in sales.  The trend towards healthier eating is likely to continue as the population ages.  However, are unhealthy foods likely to go away any time soon?  Of course not.  According to Burt Flickinger, a consultant with the Strategic Resources Group in New York, “Americans are work-stressed, time-stressed, and they’re eating out more.  Sugar and fat is tasty and it gives immediate gratification.” 

Another trend greatly impacting the food industry is the need for convenience foods.  Today’s lifestyles are so hectic that it is essential that meals are easy and quick to prepare.  Part of this is due to the trend towards more women in the workplace as well as single-parent families and families with two breadwinners.  In response to this trend, ready-made and convenience foods are one of the fastest growing product areas in the industry.

As the minority segments of the U.S. population continue to grow, ethnic foods are also fast becoming a high growth area for the food industry.  The Hispanic and Asian populations are the fastest growing minority segments in the U.S.  The purchasing power of Hispanics alone is predicted to grow at twice the rate of the overall population over the next decade.  In response to the growth in minority segments, food companies have increased their selection of ethnic foods, especially Mexican foods.

The other major trend impacting the food industry is Wal-Mart.  According to Standard and Poor’s, Wal-Mart is now the largest food retailer in the United States with over 13% total market share.  Wal-Mart offers manufacturers the largest distribution channels anywhere.  For PepsiCo, Wal-Mart business represents 10% of the company’s global net revenues.  Kraft, General Mills, Kellogg, and Hershey all have over 10% of their total sales through Wal-Mart.  Wal-Mart is now in a position where they can dictate requirements to manufacturers.  For instance, Wal-Mart is now requiring its largest vendors to utilize radio frequency identification (RFID).  RFID technology is basically the use of microchips and antennas in plastic product tags.  It is much more advanced than current barcode technology as it doesn’t require a direct line of sight.  In addition, RFID tags can store additional data including when and where the product was made.

Sources: 

Standard and Poor’s Industry Surveys, “Foods & Nonalcoholic Beverages,” Richard Joy, June 10, 2004.

“Low-carb bubble about to burst?” Parija Bhatnager, March 22, 2004, money.cnn.com

The Outsourcing Rebound

Monday, August 30th, 2004

By Leigh Howe

I think a story is published every day about thousands of jobs being outsourced to India, China, or Taiwan.  The writer typically laments that foreign companies continue to take jobs away from Americans.  These jobs include call center positions as well as more “tech”-related activities such as writing computer code and providing technical support.  Many companies–General Motors, Delta Airlines, Microsoft, and Hewlett Packard, just to name a few–have outsourced to India or to other offshore locales.  In fact, the U.S. lost more than 540,000 tech jobs in 2002 alone, according to the Labor Department.  Forrester Research claims that outsourcing was responsible for nearly 300,000 of those jobs.

However, a new trend tagged as “reverse offshoring” is taking shape and starting to give U.S. workers a bit of hope that jobs will be available at home. Driving this trend is not only the bad publicity and unhappy U.S. customers that result from offshoring failures, but more importantly, the strategy of foreign companies to have a base in such a lucrative U.S. market. Foreign firms want access to the wealthy U.S. marketplace and customer base.  Also, new regulations such as the Sarbanes-Oxley Act require executives at companies to ensure the reliability of their IT systems and financial reporting upon threat of prison–a health incentive to keep your outsourcers nearby.

Foreign companies in the outsourcing magnets such as India and China are starting to hire U.S.-based consultants and technical workers.  In fact, foreign investment in the U.S. doubled to $82 billion from 2002 to 2003.  The Organization for International Investment (a trade association based in Washington, D.C.) claims this translates into about 400,000 U.S. jobs.  So the U.S. could begin to even out the job loss to foreign outsourcing.  If this trend continues, maybe the U.S. would even start to see a net increase in jobs. The global economy can work for the U.S., too.

Please share your thoughts on the outsourcing and “reverse offshoring” trends.  What is happening in your communities? Are you seeing more inquiries and activity in your area from foreign-owned companies? Should you start actively recruiting Indian, Chinese and other foreign companies?  As always, we welcome your feedback and comments.  Please email me directly at leigh.howe@whittakerassociates.com.