Japanese failing to buy hulking left-hand drive American gas guzzlers = protectionism according to the imbecile Trump.

Close links between Japanese business and government are the stuff of legend. This week, Shinzo travels to the United States to press the interests of Japanese automobile manufacturers in the face of President Trump's reflexive protectionism. Remember, he's already made a previous visit to Trump Tower shortly after Trump's election victory. Perhaps sensing this was not enough, Japan Inc. has sent Abe Stateside again:

Honda has expressed hopes that a visit to the US next week by Shinzo Abe, the Japanese prime minister, will help ease Donald Trump’s “misunderstandings” that have led the US president to take a critical stance towards Japanese carmakers.

“We have pursued a consistent policy of producing cars locally in America,” said Seiji Kuraishi, Honda’s executive vice-president, noting that 70 per cent of its cars produced in the US were sold there. “There seems to be a gap between the various things said on Twitter and the reality so I hope the misunderstandings will be resolved,” Mr Kuraishi added.

The comments by Japan’s third-largest carmaker highlight the increasing anxiety among Japanese businesses after Mr Trump threatened Toyota with a border tax for its plan to build a new plant in Mexico, and criticised Japan for what he described as a closed market for US cars. Akio Toyoda, the president of Japan’s largest carmaker, met with Mr Abe on Friday evening and they are believed to have discussed Japan’s visit to the US and Mr Trump’s policies.

During the November 2016 visit, Abe had some fantasy that the Trans-Pacific Partnership could be revived. Subsequently disabused by this fanciful notion, he and the Japanese have further been put on notice by Trump reviving 1980s-era rhetoric about Japan's trade unfairness. In trade parlance, these are "non-tariff barriers":

U.S. President Donald Trump on Monday said Japan was engaging in unfair practices on auto imports and exports, a topic that could come up when he meets Japanese Prime Minister Shinzo Abe as early as February...

"If, as an example, we sell a car into Japan and they do things to us that make it impossible to sell cars in Japan ... we have to all talk about that," he said. "It's not fair."

While Japan imposes no tariffs on U.S.-made cars, the U.S. levies a 2.5% import tax on Japanese vehicles. But American automakers feel that environmental regulations in Japan and other factors still limit their access to the market. Ford logged lackluster sales in the country before its exit last year.

Actually, the Japanese are buying a lot more foreign cars than they used to. Nearly a tenth of sales are now accounted for by foreign makes. However, American automakers have been unable to make products attractive in this market. That is, if the Japanese were so protectionist as Trump says, then all other foreign makes would be discriminated against, while clearly isn't the case anymore:

Foreign vehicles now hold a record share of the Japanese auto market even as U.S. President Donald Trump assails what he sees as unfair access hurdles, a sign that the struggles of some car companies have more to do with appeal than legal barriers...

Foreign automakers sold 295,114 vehicles in Japan last year, up 3.4% from 2015, according to the Japan Automobile Importers Association. Foreign imports' share of all registered vehicles rose to 9.1%.

But American cars have not shared in this growth. Ford Motor pulled out of the Japanese market in 2016. General Motors sells only around 1,300 vehicles a year here. U.S. automakers accounted for more than 30% of Japan's vehicle imports in 1995, but last year that figure was around 5%.

Moreover, Shinzo Abe understands this situation. To be blunt, Americans have made next-to-no effort to market cars that are suited for Japan.

Asked in parliament if Japan was doing anything to prevent the entry of U.S. cars, both Abe and his trade minister, Hiroshige Seko, pointed out there are no tariffs on American vehicles.

"It’s not only President Trump, but U.S. officials at all levels often bring this up," Abe said. "I tell them, if you go outside, you will realize that there are quite a lot of European cars, but no American cars and there are reasons for that. There are no dealers, they don’t exhibit at the Tokyo Motor Show and they don’t advertise on the television or in newspapers."

"Makers from some countries make an effort by switching the steering wheel to the other side," he said. "If there is a misunderstanding about this, I will of course explain it to the U.S. side."

If the Yanks expect to make a tidy business selling left-hand drive only, gas-guzzling behemoths made for the (less sophisticated) US market unsuited for Japan with its right-hand drive, dearer fuel, and space-constrained roads and parking, they are delusional.

There's no mystery here: US cars are profoundly unsuited for the needs and tastes of Japanese car buyers. European automakers that try hard to understand what Japanese motorists want have succeeded. On the other hand, no amount of heavy-handed US government intervention will persuade these motorists to buy quite frankly inferior models.

That's largely all there is to it. As the post title says, Trump should understand that the Japanese buy foreign cars, just not American ones. Next up: equally idiotic complaints about Japanese "currency manipulation'.

Why tomorrow's king of the (virtual) road may be Google, not Tesla.

There's a wide-ranging interview in Vox of automobile commentator Edward Niedermayer on that ever-popular topic, the future of the automobile. In contrast to many of today's journalists, Niedermayer is skeptical of Tesla. Especially with its myriad of quality control issues born of, well, not really having the experience of being a full-fledged car company, he views its business model as fundamentally flawed. (Also see Consumer Reports' scathing reappraisal.) As Tesla moves down the price range, these shortcomings may become more evident as those relying on these vehicles for everyday transportation will be less forgiving of their cars' foibles:

Cars have become so reliable and so easy to use that we think about them less than we ever have in the 100-plus-year history of the automobile. This is one reason we don't appreciate this depth of complexity. Not only are cars different from software in very fundamental ways, they're much more complicated than anything else consumers buy.

Cars use a wide variety of materials, built into components and subassemblies by massive global supply chains. Car companies have to choose and develop the right materials and components, maintain their uniformity and integrity throughout that supply chain, and ensure that they operate reliably in almost every imaginable condition on Earth.

A great example is the problem of mold growing from inside the Model S's roof, particularly in Norwegian cars. Because its large panoramic sunroof is difficult to manufacture and install to a precise specification, Model S roofs often leak. A lot of those leaks are so small that customers might not notice. But because Tesla used an organic-fiber pad at the edge of the sunroof, aggressive molds invade at alarming rates in certain climates. This kind of complex, cascading defect is why automakers value their accumulated institutional knowledge and spend years testing vehicles.

Google, on the other hand, Niedermayet is more sanguine about. Despite ostensibly coming from the same "Silicon Valley" culture, Google has the foresight to enlist actual car guys instead of assuming they know better, and this supposedly makes all the difference:

Google's strategy is the counterfactual that makes me especially nervous about Tesla. Google's core technology is the autonomous drive capability, and I think they have to be closely watching Tesla and the struggles they've had. So Google has hired some very high-profile people from the car business. They have former Ford CEO Alan Mulally on their board. Lawrence Burns, the former research and development boss for General Motors, is a consultant for them. The head of their autonomous car program is John Krafcik, one of the auto industry's most respected veterans.

It's a dream team of real tier-one automaker experience. With their accumulated knowledge — and looking at Tesla's struggles — they know that building their own car is a fool's mission. They also recognize that Silicon Valley culture is fundamentally different from manufacturing culture...

What fundamentally sets Google apart is that these auto people know how hard building cars is. It is not only an intellectual challenge, it's a discipline challenge. Managing that level of complexity requires a certain amount of accumulated knowledge; building that from scratch is incredibly difficult.

But the legal liability risks are very high. It's very easy for people to make mistakes and blame the car for their mistakes. So in some ways that's an incentive to go full autonomy. But even for a company like Toyota with $80 billion in the bank, there could be liability issues that could challenge the fate of the company. So they are incredibly conservative about deployment, and they will not deploy anything unless it works in 99.9 percent of use cases. That contrasts with what Tesla is doing, a public beta test. They say they are. They admit it...

I personally tend to like Toyota's approach, because they accept and own the conservative nature of the business. So they don't fool themselves that they're going to do this leapfrog approach.

It's food for thought--especially if you're contemplating a Tesla or Google car in the future.

Apple and India don't mix--or rather Apple and protectionist retail policies.

India remains one of the last few large economies worldwide that remain avowedly protectionist in the retail sector. Even in the modern era, lawmakers have sought to appease mom-and-pop operators from the rigors of market competition. It's a small-time mentality that the government upholds with bureaucratic ferocity. "Multibrand" retailers, or large foreign retailers in particular carrying a wide range of branded products, have been subject to restrictions on entry, foreign ownership and local content requirements. Witness the earlier travails of Walmart. As a result, retail inefficiencies result in smaller selection and higher prices. not a good combination.

Now, the retail battle against all sorts of foreign devils has moved on, pitching the world's second-largest corporation against the world's second-most-populous country. With nearly nothing it currently sells being made in India--China yes, India no since it doesn't specialize in electronics assembly and manufacture--Apple is hard-pressed to meet the 30% local content requirement there:

US company's proposal to set up Apple Stores under the singlebrand policy has been approved without any relaxation in the sourcing conditions, two officials privy to the development said. Apple can set up single-brand retail stores in India but it will have to meet the 30% local content sourcing requirement, they said. "Apple's proposal is acceptable to us but we cannot make an exception for it and forego the sourcing requirement if it wants to set up its own stores here," a senior government official said.

Apple had applied for the relaxation under new foreign direct investment rules for companies bringing cuttingedge technology to India. The policy allows the sourcing condition to be waived for cutting-edge technology, a term that hasn't been clearly spelt out. The government has set up a panel to clear proposals seeking relaxation of this norm...

According to revised norms announced by the Department of Industrial Policy & Promotion in November 2015, companies that bring cutting-edge and state-of-the-art technology to India can open singlebrand outlets without meeting the local sourcing norm, subject to government approval.

In some respects India has moved forward; in retail it remains decidedly stone age--and that's not good news for modernizers like Apple.

Actually, the flip phone won't die in Japan, just the proprietary OS.

The "Galapagos Syndrome" is the term coined to describe standards and technologies that have emerged only in Japan, not to spread to the rest of the world. This, of course, draws from the Galapagos Islands in Ecuador that have hosted wildlife not found in the rest of the world. The "Galapagos Syndrome" is a negative term denoting how Japan has, in recent years, become quite insular in developing consumer products. Whereas Japan was once an exporting powerhouse, some believe that it has become increasingly inward-looking. It's a downscaling of expectations: Japan Inc. aimed to sell to the world before but now it mostly looks to sell at home.

I would doubt that statement, of course, since Japan has always had some peculiarly Japanese product categories like kei cars with a maximum displacement of 660cc sold nowhere else in the world. Still, homegrown Galapagos phones are supposedly endangered even in Japan itself: does anyone else still use flip phones? Apparently these remain popular among older Japanese, of whom there are many. But all things must come to an end, and so must these phones:

Japanese manufacturers from 2017 will end production of conventional mobile phones with custom operating systems, bringing an end to once-pioneering technology that led to the world's first Internet-able cellphones. The operating systems and other core technologies of conventional devices, used primarily for phone calls and texting, are developed jointly by handset makers and wireless carriers. With the rise of smartphones, development of those operating systems have become a drag on their earnings.

Manufacturers will continue producing handsets that look and function much like conventional phones, due to the enduring popularity of flip phones with keypads among older consumers, but these will be loaded with Google's Android operating system. NEC currently supplies conventional phones to Docomo. It will stop developing new models in March 2016 and end production in March 2017. This will mark a complete withdrawal from the mobile phone market, as it bowed out of the smartphone business in 2013. For now, the company will continue to service products it has already sold.

There remain any number of cell phone makers only for the domestic Japanese market, but they will be thinning over the next few years:

The spread of smartphones has left older-style devices almost entirely confined to Japan, where they have been dubbed "Galapagos phones," evoking an isolated environment housing unique species. Japanese electronics makers and mobile carriers have ramped up joint handset development since the late 1990s. In 1999, Docomo rolled out i-mode, the world's first service allowing mobile phones to connect to the Internet. Japanese telecommunications and electronics companies were pioneers in the field.

But the situation changed after Apple released the iPhone in 2007 and Google worked with phone manufacturers worldwide to launch Android devices from 2008 onward. Smartphones exploded in popularity. Conventional-phone specialist Nokia sold its handset business, while Japanese companies were forced to restructure. Japan's shift toward smartphone technology will mark another step in the field's division into Apple and Google camps.

It makes me kind of sad, but it's another episode of the iOS versus Android juggernaut steamrolling the previously more diverse Japanese telecoms ecosystem. The aging customer base aside which is not fond of apps and assorted frippery, Galapagos phones have other advantages, such as battery life and durability:

There are several ways to explain this rise. One could be the demographic changes Japan is undergoing. As is well-known, Japan has a low birth rate coupled with an aging society. And obviously old folks here would have more trouble navigating the touch screens and the various apps of a smart phone. Most only need to use two basic functions in a cell phone: calling and texting. Another reason explaining the comeback of flip phones is that it’s simply cheaper than a smart phone.

The other reason is durability. The phones are notoriously difficult to break and Delphia Putinsky, a bilingual tour guide in Japan, says she keeps her flip-phone precisely for that reason. “Drop you iPhone without a cover, and you get the spiderweb of death—the screen gets cracks which spread and spread. You can throw your garakei across the room, hit the wall, and it still functions like new.” Finally, there’s also undeniably one thing that flip phones surpasses the smart phone in: holding a charge for more than one day.

This WSJ feature is sponsored by, er, Shell.

Environmentalist activists are not infallible despite being ostensibly well-intentioned. Common failings include impractical courses of action as well as those which actually make the situation worse. With regard to the latter, Greenpeace has some history with energy titan Shell. In 1995, Greenpeace singled out Shell for the planned sinking of an exhausted oil platform, Brent Spar. Greenpeace argued that it was better to bring the platform on land and dispose it from there at considerable additional expense. After making a huge racket, Shell eventually bowed to the environmentalists. However, this action was foolish and misguided. In a study published in the prestigious journal Nature, it was explained how sinking the platform into the sea as originally planned was actually the ecologically-friendly alternative:

However, the true scandal may have never made it to the public: In June 1995, a study was published in the scientific journal “Nature”. This study stated that the impact on the environment by sinking the Brent Spar would have been minimal and the authors even said it would have been a gift to the eco-system. In September 1995, Greenpeace had to publish publicly that the 5,500 tons of leftovers of oil they assumed to be in the Brent Spar, was too much. In October 1995, the assessment of the Brent Spar by a Norwegian independent institution found that it was only 75 to 100 tons of oil. This is 1.36% – 1.82% of the amount assumed by Greenpeace. In retrospective, it seems to be true that sinking the Brent Spar would have been the best option, also ecologically.

Good job, Greenpeace. Nowadays, we have "Brent Spar Round 2" as Greenpeace has singled out Shell again for its role in Arctic drilling and targeted Lego for creating toy sets which feature Shell gas stations and the like via a viral YouTube video. Always loving irony, the WSJ feature on this incident was preceded by--you guessed it--a Shell video playing up its alternative energy portfolio (see picture above). Anyway, on to the matter...

A 1-minute, 45-second video has ended a long-term relationship between Lego and Royal Dutch Shell. The Danish toymaker said today that it will not renew a co-promotion deal with Shell, after a Greenpeace video linking Lego with the oil company’s Arctic drilling program went viral.

The video, which shows an Arctic landscape built of Lego blocks being swallowed up in a pool of black oil, “may have created misunderstandings among our stakeholders about the way we operate,” Lego Chief Executive Jørgen Vig Knudstorp said in a statement. Greenpeace has been pressing Lego to end a partnership signed in 2011, in which co-branded Lego toy cars are sold at Shell stations in some countries.

Greenpeace, in a statement on its website, called the decision “fantastic news.” In a statement issued by its London press service, Shell said it did not comment on contractual matters. “Our latest co-promotion with Lego has been a great success and will continue to be as we roll it out in more countries across the world,” the statement said.

I myself have some distaste for Arctic drilling, but I certainly don't think that targeting Lego is ideal. After all, remember that Lego pieces are made of acrylonitrile butadiene styrene (ABS). ABS is a petroleum-based product, i.e. a "petrochemical" derived from fossil fuels.

Lego disowning petroleum-based products is like McDonalds disowning meat production. Ironic, and worst of all, dumb. First off, Greenpeace should not have targeted Lego, a marketer of petroleum-based products. Second, Lego was doubly stupid to give in since it undermines the whole business model of selling petrochemical-based toy elements. Makes you sad, doesn't it?

Will Facebook and Twitter "save" America? you must be joking.

You may say it's rich for someone with an online-only presence to say that "the Internet doesn't matter," but even the somewhat more qualified "...but social media does" doesn't say much. To demonstrate the futility of the Internet in generating economic growth, much less any sustained prosperity, we can always resort to that poster country for downward mobility, the United States. Having gone nowhere since the turn of the millennium, it's easy to debunk triumphalist claims that the Internet "changed everything." Ever-so-delusional Americans seem to gradually grasp the obvious that future generations will be worse off than they are as median household incomes fall year in and year out. Isn't the new economy reviving America? We can now use its laughable ineptitude to disprove the even hoarier idea that social media matters. Hype aside, how do Yanks really view it?

When many companies joined Facebook in the late 2000s, they used it as another brand website where they provided links, contact information and monitored consumer gripes. Then, they got caught up in the numbers game, trying to rack up raw masses of fans and followers, believing they were building a solid marketing channel. But that often wasn't the case. Social media are not the powerful and persuasive marketing force many companies hoped they would be," concludes Gallup Inc., which on Monday is releasing a report that examines the subject. 

How lame is social media? In their poll, Gallup [summary here] found that nearly two-thirds of consumers didn't consult social media while making purchases.

Gallup says 62% of the more than 18,000 U.S. consumers it polled said social media had no influence on their buying decisions. Another 30% said it had some influence. U.S. companies spent $5.1 billion on social-media advertising in 2013, but Gallup says "consumers are highly adept at tuning out brand-related Facebook and Twitter content." (Gallup's survey was conducted via the Web and mail from December 2012 to January 2013. The survey has a margin of error of plus or minus 1 percentage point.)

The story is largely the same worldwide. Facebook, Twitter, blogs, QR codes...pretty much useless and not taken seriously:

In a study last year, Nielsen Holdings NV found that global consumers trusted ads on television, print, radio, billboards and movie trailers more than social-media ads. Gallup says brands assumed incorrectly that consumers would welcome them into their social lives. Then they delivered a hard sell that turned off many people.

To have spent so much on social media to discover that, gee, people put more stock in old media is pretty pathetic. Social media reflects its inventors, the Americans--much hype, little substance. (No wonder the  Obama likes it so much.) Don't get me wrong: the Internet in general and social media in particular is great for wasting time and writing about how globalization is subprime--which it really is. But for more serious endeavors--like raising productivity--it is seriously lacking.

Azeri petrodollars bankroll the mighty Atleti.

Football and authoritarianism have a longstanding history. One of this year's Champions League finalists, Real Madrid, received much favoritism during the reign of Generalisimo Francisco Franco. The obvious attraction with authoritarianism in sport is that these regimes pony up wads of cash without giving a damn about political opposition complaining about human rights and all that goody two shoes stuff. Witness, for instance, Qatar hosting the 2022 World Cup despite endless accusations of bidding irregularities--let's see the world's top footballers deal with Middle East hear at the height of summer--and exploitation of migrant workers who are literally dying by the dozens to build the stadiums for that event. 478 Indian workers have died over the past two years, but Qatari authorities call this "normal." Meanwhile, Dubai literally funds European football--see the Pele/Ronaldo Emirates commercial if you haven't already..

The latest energy-rich country to sponsor football to help improve its global image (hopefully) is Azerbaijan. Chronologically speaking, of course, oil was discovered much, much earlier in Azerbaijan than in the Middle East. (Also consult Daniel Yergin's epic history The Prize.) However, its eventual absorption into the Soviet Union ruled out  its commercial presence in the West until the USSR's collapse.

Taking the playbook from the Qataris and Emiratis, Azerbaijan has become a sponsor of world football (read: Europe's top teams) in a really big way. Indeed, they recently hit a gusher with Real Madrid's intercity rivals Atletico Madrid thumping Russian oligarch Roman Abramovich's Chelsea (AKA Chelksi) in the Champions League semifinals to reach the main event in Lisbon. Showing once more that you don't need to go far for IPE-relevant material, from the Associated Press c/o Yahoo:

Atletico Madrid's stunning run to the Champions League final also announced another new player on European football's biggest stages. Atletico's players will walk out to face Real Madrid — and an expected global television audience of 175 million — with "Azerbaijan Land of Fire" on their shirts in Lisbon on May 24. For Azerbaijan, that's a jackpot payoff for a sponsorship deal that's part of a wide-ranging effort by the oil- and gas-rich former Soviet Union republic to become more visible to global football audiences...

Expect to see a lot more of it at future UEFA [European football] matches. From Sept. 7, the name SOCAR (State Oil Company of Azerbaijan Republic) will feature on pitch-side advertising at most 2016 European Championship and 2018 World Cup qualifiers in Europe. Its brand will also appear at all 51 Euro 2016 matches in France after signing up as a top-tier sponsor with UEFA. And Azerbaijan's top aim could be achieved on Sept. 19 if UEFA chooses Baku among 13 host cities for Euro 2020.

Like Qatar before it, greater exposure for Azerbaijan from spending sovereign wealth to project a softer image through football will also bring more scrutiny. The country of 9.5 million people nestling next to the Caspian Sea, bordering Russia and Iran, has long been criticized by human rights and anti-censorship groups. The long-term football project in Azerbaijan was requested by President Ilham Aliyev, who succeeded his father in 2003 and later abolished term limits.

The sports world's faith in Azerbaijan is not shared by activists alleging restrictions on free speech and elections, plus corruption levels that are among the worst in Europe, according to Transparency International. [Azeri sports commissioner] Mammadov pointed to financial and political stability, suggesting: "I don't see any reasons for some of the people to consider us as a negative."

Ah, fun with Photoshop and someone else's logo.

Something that's piqued my curiosity about the Heartbleed virus which is designed to, well, bleed through security layers is that it's always presented with a catchy logo in the media. Think about it for a moment: why would someone lend a corporate image to a thing as deplorable as a virus? Nobody ever thought of providing a catchy logo for, say, demented livestock for mad cow disease or virus-bestriding poultry for SARS. But there it is again and again for this computer virus: a heart whose edges are bleeding.

As it turns out, this is by design. Codenomicon, an Internet security firm whose services involve testing the robustness of security solutions for online transactions, has been behind it all. Indeed, I wasn't even aware that they've put up a heartbleed.com site describing the security vulnerabilities exploited by this virus. The kicker, though, is of course Codenomicon's freely distributed logo. It's sheer marketing genius! The virus's name matches the logo, and the alarm the firm has raised about the virus surely drives business their way from the street cred gained from discovering it in the first place.

So partly it's Codenomicon making money out of their discovery. Again, there's nothing essentially wrong with that. Yet there's also a public service component in warning the rest of the world about it. How did Codenomicon attract attention to the virus? Through naming and branding, of course:

The Heartbleed flaw is being fixed more quickly because of the decision to give the bug a memorable name and a cute logo, according to the firm that first identified it. The flaw was caused by a simple coding error which resulted in passwords and security credentials being leaked from affected websites. "I really believe that the name and the logo and the website helped fuel the community interest in this," says David Chartier, the CEO of Codenomicon, the security testing firm which found the bug on 3 April.

"The IT community and the press have been important players in getting the word out, and so many people affected have fixed their stuff already," Chartier added. "This went extremely quick, and I think that the fact that it it had a name, had a catchy logo that people remember, really helped fuel the speed with which people became aware of this." Others agree. "The Heartbleed logo is probably one of the highest ROI [return on investment] uses of [approximately] $200 in the history of software security," writes Patrick McKenzie, founder of Kalzumeus Software.

Again, marketing matters:

"Why spend the extra money for a logo? Because it suggests professionalism and dedicated effort, because it will be used exhaustively in media coverage of the vulnerability, because it further deepens the branding association of the vulnerability, the name, the logo, and the canonical web presence, and because it also suggests danger." The logo, as well as the accompanying website which explained in readable English exactly what Heartbleed entailed, were both created in the days between Codenomicon warning authorities of the bug and it being officially patched.

Readers with a background in business management will recognize the use of marketing concepts to encourage prosocial behavior: social marketing. What Codenomicon did was make Heartbleed seem even more of a threat than it may be by promoting awareness of its potentially dire effects, like SARS and MERS rolled into one for natural, not programming, analogies. Here's a short blurb describing social marketing in more detail from a health perspective:

Social marketing was "born" as a discipline in the 1970s, when Philip Kotler and Gerald Zaltman realized that the same marketing principles that were being used to sell products to consumers could be used to "sell" ideas, attitudes and behaviors. Kotler and Andreasen define social marketing as "differing from other areas of marketing only with respect to the objectives of the marketer and his or her organization. Social marketing seeks to influence social behaviors not to benefit the marketer, but to benefit the target audience and the general society." This technique has been used extensively in international health programs, especially for contraceptives and oral rehydration therapy (ORT), and is being used with more frequency in the United States for such diverse topics as drug abuse, heart disease and organ donation.

Like commercial marketing, the primary focus is on the consumer--on learning what people want and need rather than trying to persuade them to buy what we happen to be producing. Marketing talks to the consumer, not about the product. The planning process takes this consumer focus into account by addressing the elements of the "marketing mix." This refers to decisions about 1) the conception of a Product, 2) Price, 3) distribution (Place), and 4) Promotion. These are often called the "Four Ps" of marketing...

My takeway? Again, design matters in making your message heard. Hence my recent blog redesign. Perhaps I'd still retain some readers if the IPE Zone looked as amateurish as the Drudge Report, but I sincerely doubt the message would come across.

UPDATE: Eric Levenson of Atlantic's The Wire demurs, however, pointing out that ordinary users did not go out of their way to change passwords despite widespread awareness of this bug. Point taken: I think it's mostly enterprises that reacted.

Everybody Wangchuck [L] Tonight and Meet the Jetsun [R].

Us Asians are routinely amused by Westerners buying our dear neighbor Bhutan's schtick hook, line and sinker. You see, Bhutan is famous the world over for measuring "gross national happiness" instead of the materialistic, output-oriented measures us unenlightened folks use like GDP and GNP. King Jigme Khesar Namgyel Wangchuck is certainly not averse to playing along. Especially among self-styled "progressives" this is taken as evidence for their enlightened stance in the place of mammon-worship common to the rest of us.

Take, for instance, this travelogue from Canada's Globe and Mail:

I was in the Kingdom of Bhutan, a small, mountainous country sandwiched between the giants of India and China. Protected all around by the snow-capped Himalayas, this is a place with its own distinct culture, ruled by a 34-year-old king who loves romantic comedies and Elvis, and guided by the principles of Gross National Happiness. While it may not be the easiest travel destination – Bhutan requires a prepaid daily minimum spend in order to secure a visa, and a trip from Canada will involve at least three separate flights – visiting this kingdom in the clouds can feel like a journey to another world, an almost-mystical destination that’s even more difficult to leave.

At this point I should also mention Jetsun Pema, formerly a student in London who now outdoes Kate Middleton by virtue of her exalted status as queen opposed to just a princess. Like Princess Catherine, she has become tabloid fodder. (Surely it helps draw the tourists?) I guess the glamor got to our Globe and Mail correspondent who goes about tossing lots of softballs Snowden 'n' Putin-style until he elaborates on this part:

The Bhutanese government requires visitors to spend a minimum of between $200 (U.S.) to $250 a day in order to issue a visa. The funds include basic hotel, guide and meals and must be prepaid to an approved tour operator. Visitors are also welcome to spend more, and have many opportunities to do so at one of the country’s luxury lodges. For more information, visit [...]

Wait, wait, wait: In the middle of all these paeans to the progressiveness of being more concerned with happiness than material possessions, we learn that Bhutan does not welcome travelers on a shoestring budget. Shouldn't Bhutan be "sharing" all this happiness with folks of lesser means? What's more, doesn't encouraging a minimum spend contradict the notion of being anti-materialistic? Bhutan's tourist information also points this out:

The minimum daily package for tourists travelling in a group of 3 persons or more is as follows: USD $200 per person per night for the months of January, February, June, July, August, and December. USD $250 per person per night for the months of March, April, May, September, October, and November

So much for Bhutan being the world's biggest hippie commune. To be fair, though, there are two lines of argument here:

1. Bhutan is populated by money-grubbing hypocrites (see above); or
2. The minimum spend provision has to deal with promoting sustainable tourism. Backpackers and the sort are not welcome since they go it alone and are more likely to be insensitive to polluting the environment, observing modest behavior, and generally acting ugly. By providing fewer guests with guides, this sort of inappropriate conduct is avoided for the benefit of all.

Bhutan obviously takes the second line:

The royal government has always been aware that an unrestricted flow of tourists can have negative impacts on Bhutan's pristine environment and its rich and unique culture. The government, therefore, adopted a policy of "high value-low volume" tourism, controlling the type and quantity of tourism right from the start.

All that's well and good, but isn't it all a tad elitist and materialistic?

So far, the government’s objective of maximizing foreign exchange earnings while minimizing the potentially adverse cultural and environmental impacts of tourism has paid off. The number of tourist arrivals has increased from just 287 in 1974 to close to 41,000 high-end tourists [my emphasis] in 2010. There was also a 56% increase on 2009 figures in high-end arrivals from neighbouring countries, especially India, highlighting the importance of the regional market.

Actually, Bhutan does not restrict tourist numbers, which would make sense ecologically speaking. So, combine a minimum daily spend with unlimited arrivals and it's hard not to question all these "green" and "post-materialist" marketing gimmicks that ever-so-gullible Westerners keep lapping up. Whatever your opinion of the matter, let's just say that economic considerations are not totally out of the picture. They're quite hard-nosed about all this travel business, actually. Plus, it makes me wonder why Bhutan is included in the Lonely Planet guide when the country is definitely not marketing itself to travelers on a shoestring budget.

The Qoros 3 looks quite handsome, but...

...what more abroad? There has been a certain fear factor--especially from less competitive European mass manufacturers alike Citroen/Peugeot, Fiat, Ford, Opel and Renault--that Chinese would be the next to undercut their already-dwindling sales with cheap products after the Japanese and South Koreans of the not-so-distant past. Moreover, it has been widely assumed that they would be at the forefront of China's forthcoming march into PRC-branded goods.

Actually, no. Or at least not yet. In reality, Chinese cars are taking a beating at home from foreign automakers viewed as having more desirable nameplates. The current bone of contention concerns requiring foreign automakers to partner up with Chinese ones in selling vehicles in the PRC. The Chinese automakers are adamant that they will be wiped out if the foreign automakers are allowed to go it alone in China:

Chinese brands will be “killed in the cradle” if the government allows foreign automakers to become more independent from their domestic partners in the world’s biggest car market, the country’s main auto group said.

The China Association of Automobile Manufacturers voiced its warning yesterday as it reported that Chinese brands in January extended market-share losses, falling 4.9 percentage points from a year earlier to 38.4 percent, while foreign companies such as General Motors Co. (GM) benefited from record industry sales. Geely Automobile Holdings Ltd. (175) alone saw deliveries tumble 47 percent.

“Relaxing the current foreign ownership restrictions will wipe out Chinese brands,” the state-based auto association said in a statement in Beijing. “Foreign companies can totally use the competitive advantage of their global supply chains to support a price strategy to kill Chinese brands in the cradle.” 

What's prompted the fear factor?

The comments escalate concerns that the auto group has voiced since a Chinese commerce ministry official said at a forum in October that automakers should prepare for the day when the foreign stake limit is relaxed. Since China opened up its factory floors to foreigners decades ago, companies from GM to Volkswagen AG (VOW) have poured billions of dollars to build cars in the country, as long as they set up joint ventures and kept their ownership capped at 50 percent. 

"Killed in the cradle" is precisely the infant-industry argument.  What's more, even if the 50-50 rule is not followed, Chinese automakers are already feeling the heat as generous subsidies of the past are being rolled back in line with official policy to reduce manufacturing subsidies and ensure that fitter enterprises survive:

Chinese carmaker BYD Co. (1211) may be getting some bad news as it prepares to start selling in the U.S. next year. A planned reduction in government subsidies and a phase-out of interest-rate controls threaten to raise costs for it and thousands of companies across China. 

Chinese manufacturers are going to lose a lot of subsidies they used to have. As labor costs rise, the yuan is also appreciating, while cheap credit and energy is increasingly a thing of the past. Sure it's not easy, but what does it say about Chinese automakers if they have been at the losing end in their home market having all of these advantages in place over the an extended period? After these advantages are removed or greatly reduced by government fiat, what more of a chance do they have in overseas markets?

In automobiles at least, the fears about China wiping everyone else out seem misplaced. Being emotive, big-ticket purchases, automobiles are more emotive buys than most other things. As it so happens, it is precisely in branding and marketing that the Chinese are weak.

You needn't be a movie star to enjoy Butterbeer,; just head to Orlando FL

Here's another example of the fallibility of what you read on the Internet--this time from, er, me. Three years ago, I thought that the development of a Harry Potter theme park in Orlando, Florida based on the world-conquering series of books and cinematographic adaptations was a bad idea. Why? Simply put, it deals with location, location, location. If the series were set in a sunny and humid climate where the protagonists wore beach shorts and flip-flops all the time, then there would be no problem. As it is, however, the series is set in a dark, dank, and damp England.

So, kudos are due to Universal Studios since things have turned out very well. They took risks and have been handsomely rewarded. All the same, the secret weapon behind its success is an unlikely one: Harry Potter happens in a virtual (non-existent) space you must reach by boarding a fictional train. However, the evocative appeal of hypothetical foodstuffs being served in this realm have long attracted attention from fans and foodies alike. Use "Harry Potter cookbook" for your search terms on Amazon and knock yourselves out. As it so happens, much of Universal's financial success has to do with being authentic--in spirit at least--to foodstuffs from the movie.

For the first time ever, we have an excerpt from Tourist Attractions & Parks magazine on food theming:

Yet, despite these three different [ride] thrills, the real story behind the success of Universal’s Harry Potter world centers around the less publicized but higher profit food, beverage, and merchandise operations that seem to have cast an irresistible spell on guests and their pocket books...

According to Brent Young, the president of Super 78, a visual solutions company with deep roots in the theme park industry, “it is well known in the creative community that theming food and beverage creates a consistent guest experience and park attendees are much more likely to want to interact with the themed environment in a real way.” This is what makes the food and beverage operations at the Wizarding World even more impressive:  Universal was able to take an existing concept, themed dining, and transform it into part of the overall “storyline” while still making mounds of money in the process.

Take, for instance, "butterbeer":

Up until the Wizarding World debuted, the fascinating drinks and meals that Rowling created in Harry’s World had been intricately described by the author but never really tasted.  After all, these dishes and beverages never actually exist beyond the pages of the novels [but see my rejoinder above on unofficial themed cookbooks].  This meant that, in developing the culinary side of Harry Potter’s world, Universal had to transform fictional items to real-world tastes.

An easy and less expensive route could have been to de-emphasize the culinary authenticity of that part of the Wizarding World.  Sources close to the project, though, explain that [series author J.K.] Rowling would have none of this.  Her dictate was that all aspects, not just the attractions and physical buildings, must transport the guest into Harry’s world.

As a result, Universal spent large amounts of time and money to refine the recipe for the iconic Butterbeer beverage from the Potter novels.  Numerous recipes and taste tests were held to refine every aspect from the first sip to the final aftertaste.  This was all done to insure that Butterbeer was not too sweet nor too bitter, not too syrupy nor too watery.  Not too everything nor too everything else but instead the perfect replication of a heretofore fictional drink.

The end product was one of the amusement industry’s most expensively designed beverages ever, and, according to these same sources, one of the most financially successful ones ever.  Indeed, this investment has yielded amazing revenue for Universal, more so than even their most optimistic expectations.

As far as I can tell, the shortcomings of the Orlando climate in mimicking that of England are more than made up for in the minds of punters (Brit-speak for paying customers) by authenticity to fictional foodstuffs. They stand in line for minutes and are more than happy to do so. Go figure; I guess there are good reasons why I'm not in the theme park business.

Given the truckload of goods China makes for the rest of the world, it may seem odd that the Chinese are concerned with their inability to develop homegrown brands: Why should you develop your own brands when Apple/General Electric/Samsung and whoever else have you have done the heavy lifting of brand-building for you as a contract manufacturer? It's certainly not easy, either--none of the world's top 100 brands are mainland Chinese. The answer is as simple as it is clear: actually making consumer goods constitutes an ever-decreasing share of the profits--if any. The higher value-added activities come from branding, marketing and goodwill which emanate from (surprise!) building up a brand name. In other words, the Chinese get the grunt work and the industrial pollution, while Western companies get the cushy high-salaried jobs and clean air.

Just in time, the FT has an article discussing how the Chinese perpetuate this lamentable situation themselves by preferring imported to local brands. In sociology, it would be classified under "colonial mentality" or believing that former colonizers--be they the Japanese or the Europeans--are superior. After all, they managed to colonize you, right?

Chinese consumers want foreign goods. Whether sports shoes or cars, televisions or mobile phones, cosmetics or nappies [diapers to non-Brits], surveys show that foreign brands predominate. Shaun Rein of China Market Research Group says people trust foreign brands not to cut corners and associate them with more of an established heritage than their domestic labels.

This spells trouble for China as its people become more middle-class and spend more on non-essential items. The more that they buy foreign goods, the more that the proceeds of China’s progress will accumulate to shareholders elsewhere. It will also mean fewer profits for Chinese companies to reinvest in innovation and expertise at home in electronics, for example.

Moreover, there is the matter of "sham" trade surpluses (the image above comes from the ADB Institute): trade figures aside, once you adjust for the actual value-added of Chinese exports, the results look rather less impressive:

Its lack of popular brands is already visible to some degree in its trade balances with other countries. China may run a large nominal surplus but when economists adjust those numbers for the value that it adds or gives away in making goods that are consumed at home or abroad, the numbers tell a very different story.

For example, its total trade surplus with the US drops from $189bn to $127bn on a value-added basis, according to calculations by economists at BBVA, the Spanish bank. Most of this reduction is due to value given away in electrical and optical equipment, textiles and clothing.

Consider it as a warning sign. Sometime ago, I wrote a journal article together with a marketing scholar about the pressing need for the likes of China to develop brands of its own. Suffice to say that message has gone unheeded, and things may get worse in terms of prospects for Chinese development going forward if this matter is not addressed:

If China can follow its neighbours and develop its own powerful brands like Samsung of South Korea, or Toyota of Japan, it can sell not only to its own 1.35bn people but to billions of others all over the world.

He thought he was the King of America
Where they pour Coca-Cola like vintage wine

In 1986 Elvis Costello penned the lyrics above to the first song of his album King of America, "Brilliant Mistake." I thought it was pretty crafty way back when, but even then, the snobbery against drinking carbonated beverages was their cultural unsophistication as Costello intoned. Nowadays, of course, we are more concerned with the unhealthy amounts of sugar and caffeine they contain. Such concerns have caused cola consumption to steadily fall Stateside since 2005, but it remains a highly saturated market with the average American drinking a whopping 714 8 oz servings of carbonated beverages in 2012.

Supersaturation of the home market has caused both Coca-Cola and Pepsi to take on a two-pronged strategy. The first is developing ostensibly healthier drinks. The second, of course, involves going abroad in search of new or undersaturated markets. Reflecting the latter concern, it is unsurprising that the current heads of these venerable American brands are foreign-born and that they gained their reputations by growing business abroad: India-born Indra Nooyi has been Pepsi CEO since 2006 and Turkey-born Muhtar Kent has been Coca-Cola CEO since 2009.

Together they have been duking it out in cola wars waged around the world in a battle for carbonated supremacy. Compared to the 714 colas each American consumes, there is room for much sales (and waistline) growth elsewhere. Nowhere is this competition as intense in Southeast Asia as Myanmar. Returning to this market for the first time since Eisenhower was president after decades-long US sanctions were lifted. Coke finds challenges and opportunities in equal measure. While Pepsi was first to re-enter Myanmar last year, it has had to up its pace in market development with the entry of Coke by signing new bottling agreements. Over a third of Pepsi revenues are now in the developing world. OTOH, Coke's Muhtar Kent compares Myanmar opening up to the world to the fall of the Berlin Wall, and fellow MNC Unilever likens it to "another Vietnam" in terms of possible future returns. (Should we be glad that "Vietnam" is now shorthand for promising new markets as opposed to unpromising battlefields?)

The stage is thus set for another battle royale for the hearts and waistlines of the Burmese consumer. (Coca-Cola counters with CSR efforts on the latter point, though.)  Indeed, the only ones losing out economically may be domestic firms that grew during the years of international isolation (see the clip above). Local firms are going into a cost-leadership strategy from what I can tell while ceding the foreigner / upscale segments to the MNCs. Either way, there may be no greater beverage grab of this magnitude to come for years unless North Korea opens to the world, too.
***

NPR has a very interesting write-up concerning Myanmar's isolation: Coca-Cola went back to its promotional strategies during the 1800s to account for ways to gain product attention in a "media dark" environment:

[Southeast Asia Marketing Director Shakir] Moin says he started to go back in the Coca-Cola archives. He was looking at how the company marketed its product before the internet, before TV, even before radio. Eventually he found his perfect model for Myanmar, place where nobody knew anything about Coke — Atlanta, 1886.

Back then the hot advertising trend was wall posters. Moin noticed that in the beginning, Coke didn't use the posters to talk about friends or happiness or style. It talked about what the product tasted like. It simply described it. Moin pulled out two words in particular that would form the core of his Myanmar campaign — "delicious, refreshing." Those two words from the 1800s are now on the Myanmar bottle, and on the billboards and fliers that advertise the product.

Moin pulled another trick from the early days of Coke. They offered free samples. Samples has brought people into the pharmacy soda counters in Atlanta in 1886, now free samples attract crowds at Buddhist festivals in Myanmar. It's a way to get people to taste the product, but just as importantly, it's a way to show off Coke at its best.

Since I am currently writing up some tourism-related research, two recent articles about the global industry catering to Chinese travelers caught my eye. While there is some debate going on as to whether tourism is the world's largest industry, we can safely conclude that it is a very large one. Combine that fact with China becoming the second-largest economy in the world and the embrace of Chinese tourism is only natural: As early as the mid-Nineties, I remember visiting Parisian luxury boutiques and seeing the effects of the first wave of PRC tourists as most had salesladies who were fluent in Mandarin. However, that is pretty much a baseline expectation nowadays.

(1) To be sure, the cruise ship industry has been hurt by high-profile incidences of American liners alternatively sickening and killing their passengers. Fortunately, its tarnished reputation is not (yet?) global. There are pockets of opportunity alike China. Again, it's only natural that the Chinese would take to the open sea since they have the world's busiest seaports--the infrastructure is already there. What has been lacking, however has been marketing: Chinese with an interest on going on cruise ships cannot be away for too long since they probably are too busy making money (unlike, say, their American counterparts who can go on decade-long cruises if there were some Wall-E style). Hence the popularity of short trips around East/Southeast Asia:

When the Mariner of the Seas arrived in Shanghai in June, it became the largest ocean liner with a home port in China — a 138,000-ton mega-ship that boasts an ice rink, 10 pools, a rock-climbing wall and a mini golf course. But the 3,800 passengers it can carry don’t get long to enjoy the array of amenities. The ocean-going giant, owned by Royal Caribbean International, mostly makes three- and four-night trips to South Korea that start at about the equivalent of $500 per person. 

The preference for such short cruises is one of the major challenges international cruise lines face as they focus more resources on luring Chinese customers, says Zinan Liu, the Shanghai-based managing director for China and Asia for Royal Caribbean, whose parent company is the world’s second-largest operator, with slightly more than 23 percent of all cruise passengers. (Carnival Corp. is the largest, with a little more than 48 percent.) 

If Chinese take to cruising in the same way as North Americans and Europeans, they could provide as many as 40 million cruise guests a year, according to a 2010 market analysis by Royal Caribbean. That is twice the number of passengers expected worldwide this year. But unless they work for international companies, most Chinese take vacations only during the public holidays clustered around traditional festivals like Chinese New Year, usually a week or less at any one time.

(2) However, all is not just moneymaking with PRC tourists. Whereas the rest of the world once had to deal with loud, brash Americans and pack-rattish Japanese, today the accusations of poorly-mannered tourists are aimed at the Chinese:

Now it is China’s turn to face the brunt of complaints. The grievances are familiar — they gawk, they shove, they eschew local cuisine, and last year, 83 million mainland Chinese spent $102 billion abroad — overtaking Americans and Germans — making them the world’s biggest tourism spenders, according to the United Nations World Tourism Organization.

Their numbers have also placed them among the most resented tourists. Mainland Chinese tourists, often laden with cash and unfamiliar with foreign ways, are tumbling out of tour buses with apparently little appetite for hotel breakfast buffets and no concept of lining up [...]

But the greatest opprobrium seems to be coming from fellow Chinese. In May, a mainland Chinese tourist in Luxor, Egypt, discovered that a compatriot had carved his own hieroglyphics on the wall of a 3,500-year-old temple. “Ding Jinhao was here,” it declared. A photo of the offending scrawl spread rapidly on Chinese social media, and outraged citizens tracked down the 15-year-old vandal. The uproar subsided after his parents issued a public apology. 

Embarrassed by the spate of bad press that month, Wang Yang, China’s vice premier, publicly railed against the poor “quality and breeding” of Chinese tourists who tarnish their homeland’s reputation. “They make loud noises in public, scratch graffiti on tourist attractions, ignore red lights when crossing the road and spit everywhere,” he said, according to People’s Daily. 

Last Thursday our home computer running Windows XP was infected by a fairly old autorun.inf virus. For, we accidentally brought home an infected USB thumb drive from the workplace, which has computers running unpatched versions of XP. Unfortunately for us, we were also running copies of Microsoft Security Essentials for our antivirus, which I belatedly found out to be a pincushion for viruses that detects next to no threats. It took me hours to find a solution to cleaning up our infected home computers, and one of the programmes I found most useful was Bitdefender's USB Immunizer. Seeing how well it worked, I became curious about their antivirus software and discovered that it was very highly rated. (I guess that shows you how much I knew about antivirus programmes...)

So Bitdefender Free is now our antivirus programme of choice for an XP and a Vista machine we still find useful despite their age. Though I did not know it at the time, it turns out that Bitdefender is a Romanian firm. By coincidence, I too am playing a video game from a Hungarian developer right now, The Incredible Adventures of Van Helsing. While rather derivative, it boasts offbeat humour of its own along with class-leading graphics. As with most things, it is no accident that Eastern Europe is becoming a hotbed of software development since these are not isolated examples. Avast! antivirus from the Czech Republic has literally topped Download.com's charts for years and years. Video game enthusiasts should also be familiar with Polish CD Projekt's Witcher 2 from a year and a half ago that won a lot of "Game of the Year" plaudits from critics.

To be sure, Eastern Europe' emergence as a hotbed of software development has been a long time coming. The educational systems there are strong in science, engineering, technology and math (STEM )subjects--partly as a reflection of the Warsaw Pact era (go ask Google's Sergey Brin). As early as 2007, Eastern Europe was already being touted as the next India. As far as Western Europe is concerned, instead of outsourcing to India, some have found it more convenient to "nearshore" to Eastern Europe where both physical and cultural distance are not as great. Indeed,  2013 may be the year Eastern Europe gains the attention it deserves with such outstanding software titles becoming evident to the global community of computer users.
  
In the past, I've written about the challenges Asians have--China and India especially--in creating homemade brands with global recognition. With all due respect to our Indian colleagues, they haven't developed antivirus software or games of their own recognized in global markets unlike the Eastern Europeans. By contrast, the latter have the chops in incorporating their culture into their products and they know how to market these worldwide. Just as the Chinese are very good at manufacturing goods to others' specifications, the Indians are obviously talented when it comes to programming software tailored to specified needs. However, when it comes to incorporating folk tales into cutting-edge video games alike Witcher 2--or devising tongue-in-cheek Diablo knock-offs like The Incredible Adventures of Van Helsing--let's just say us Asians aren't quite there yet in terms of branding and marketing. Nor are we in the running for most downloaded (Avast!) or outright best-performing antivirus software programmes in the world (Bitdefender).

The post title also said something about Eastern Europeans spanking the Yanks in software development. I have already alluded to the incredibly poor performance of Microsoft Software Essentials, but as it turns out, it is the absolute worst at virus detection, bar none. (Yeah, go America!) As for video games, the US er, "boasts" of having the world's largest game publisher, Electronic Arts. For two years in a row, though, it's been named not just America's worst video game company but its absolute worst company, period. Microsoft and Electronic Arts are miniatures of modern-day America: having been innovative firms in the past, they've since grown fat, dumb and happy. Meanwhile, there are dozens of lithe, hungry, and infinitely more deserving software labs in Eastern Europe literally waiting to spank these moribund American giants.

They say competition improves the breed, and I'm certainly glad that our choices are not limited to US crapware. Hopefully, these Eastern European upstarts can show the Americans how fat, dumb and happy they've become before it's too late.

Just imagine how much better Windows 8 would have been if the task of developing it were left to the Eastern Europeans...we can only hope for a better world of computing.

UPDATE: Other antivirus test results are of similar opinion in that Bitdefender is tops, while Microsoft Security Essentials is deemed (gasp!) non-competitive.

Here's an interesting feature I somehow missed given my interest in the intersection between marketing and international political economy. Nowadays the "American Dream" is a punch line to a sick joke only the most delusional and gullible of USA#1 cheerleaders actually fall for. (And the joke's on you, buddy, as they would say.)  But once upon a time, there was a shining idea of "America" before the world crushed its spirit of smug self-superiority. In reality, 20% of these impecunious wastrels are now worth less than zero.

Those were the days: In the commercial realm there was Raymond Vernon's "product life cycle" theory (PLC) in which the most advanced products would emanate from a highly industrialized nation (like the United States) before being sold as exports to other nations including less developed ones. Eventually, they would even be made there as the "lead" nation moved on to ever-newer innovations.

Unlike ever-decreasing living standards in the US of A, however, there is still lively debate about whether it continues to innovate. That said, it is no longer a given that whatever new products are developed in the USA and other developed countries will eventually "trickle down" to LDCs. For, the implicit assumption underlying PLC is that developed countries remain the most dynamic and cutting-edge of markets. Simply stated, when America and Europe are quite broke, there is not a whole lot of folks to buy all this innovation. It's all a bit Marxist in logic, but hey, I guess he was right about something after all.

Hence, the latest trend given (a) moribund consumer markets in the West and (b) dynamic, fast-growing markets in the developing world is that more innovations are emanating from the latter. What's more, since products coming from LDCs obviously are better attuned to the needs and wants of consumers of more modest means, hard-up Western consumers are increasingly becoming targets for products designed for LDCs and not the other way around as PLC theory and the like would suggest. Let us first remind ourselves of how badly America "existence" stinks before moving on to the opportunity...

But even in one of the world's richest countries the hard-up represent a huge and growing market. The average American household saw its real income decline between 2005 and 2009. Millions of middle-class Americans have been forced to “downshift”, as credit dries up and the costs of college and health care soar. Some 44m Americans live below the official poverty line ($21,954 a year for a family of four). Consumer spending per household fell by 2.8% in 2009, the first time it had fallen since the Bureau of Labour Statistics started gathering data in 1984.

In response, marketing to what I call Brokebank Yanks is not an entirely new skill. Firms from both developed and developing nations have become adept at meeting the needs of marginal-income consumers for the longest time, so why not transfer these valuable skills to hard-up America? It is an eminently transferable skill:

Adjusting to this new world can be hard. Companies have long assumed that America would always be a land of mass affluence and upward mobility. But the American economy was undergoing a structural shift even before the 2007 financial crisis, with galloping rewards at the top and stagnation for many of the rest. Some economists expect the malaise to last for years. Few companies have thought much about the implications of this...

The optimists' complacency creates opportunities for nimbler and gloomier competitors. It also creates an opening for companies from the emerging world, many of which have frugal innovation in their DNA. TracFone Wireless, a subsidiary of Carlos Slim's América Móvil, has sold more than 3m phones in America since 2008 to pre-paying customers. MedicallHome, a Mexican company that provides medical advice over the phone for $5 a month, as well as access to its network of 6,000 doctors, is expanding north of the border. Emerging giants such as India's Tata and China's Haier regard America as a natural market for their frugal products. The bottom of the pyramid is wider than most people realise. Firms that offer ultra-low prices will find themselves as much in demand in Detroit as in Delhi.

I guess you might as well make the best of what's around even if America is increasingly becoming a dissipated wasteland. Make no mistake: there is still money to be made if you're smart enough to cater to the American nouveaux pauvres (newly impoverished) as the Economist calls them. Those Brokebank Yanks are legion.

I am verily annoyed by an FT op-ed by neoconservative stalwart Christopher Caldwell that so happens to be the most-read article in the opinion section at the moment, so please indulge me in starting off the year with a critique. (This remains a blog, after all.) I do not need to reiterate how Americans are among if not the most insular of people, profoundly unconcerned with the rest of the world. Caldwell's best-known work is a me-too "Eurabia" book peddling apocalyptic scenarios about the forthcoming takeover of Europe by Muslim migrants. It is curious how most of the authors of such books tend to be American; the implicit fear is that Europe is but a step on Islam's global takeover with the US next in line.

After unconvincingly "enlightening" us on Islamic culture's presence in Europe, Caldwell now turns his  attention to the phenomenon of Psy as a spearhead of the Korean Wave of creative industries. Displaying characteristic American insularity of the white-as-snow variety, he is rather late to the game alike his compatriots. In the rest of the world, K-Pop has been a phenomenon over a decade old which stretches from music to TV series to movies. (Lest you think I exaggerate about his cultural blinders, he even mistook Justin Beiber as an American in the op-ed prior to numerous readers pointing this out; see the correction at the bottom of the article.) Interestingly, the FT which he writes for gets this point right via Lex:

President Barack Obama has talked about it. Madonna and Ai Weiwei, among many others, have danced to it. That would be the K-wave, or the overseas export of Korean culture. This was the year that rapper Psy made the world aware, Gangnam style, of a long-running Asian phenomenon [my emphasis]. According to a survey, those who like K-Pop were more disposed to try other Korean products. It is no surprise then that Seoul convened a panel this year to see how to keep surfing the wave.

Last I checked, the Asia-conquering "Winter Sonata" telenovela began production in 2002. Moreover, I recall pirated DVDs being hawked in Los Angeles' Chinatown shortly thereafter of this and other Korean series that had become popular throughout Asia before torrents dealt away with having to mess around with disks.

However, the most profound and insightful misunderstanding from Caldwell that instead demonstrates the white man's blindness is his attribution of the success of American cultural products to its economic might. By the same token, we should see the emergence of more global cultural artifacts like Psy (or at least in America that are evident to white people) as the US becomes mired in economic stagnation:

What the US has is not a national genius but wealth, prestige and glamour. The world is always curious about how wealthy, prestigious and glamorous people dance, fight and fall in love. If this is correct, then the American misjudgment of what other people are really buying from them is going to turn out to be a costly mistake. Obviously, the producers and venture capitalists who drive the entertainment industry will happily turn their focus towards any country that can produce blockbusters...

Should the US reputation for mismanagement, profligacy and trillion-dollar government deficits continue to grow, non-US corporate executives will at some point ask why they are paying an architect to design a conference room like those in Manhattan. Why not get one like they have in Pudong? By the same token, why not ask how people are dressing in Gangnam rather than in South Beach? Culture follows wealth, prestige and glamour. As the US share of these declines, the world’s viewers may come to prefer Sleepless in Seoul to Sleepless in Seattle.

If wealth determines pop culture success, how would Caldwell explain the following:

• As he himself understands, "Gangnam Style" does not laud the lifestyles of the rich and famous in South Korea but is rather a critique of self-important residents in one of its tonier locales;
• Rap music (without which "Gangnam Style" would not have emerged) as a critique of inequality and racism in a supposedly egalitarian, equal opportunity society;
• Reggae music emerging from the country of, er, Jamaica--not exactly high on wealth, prestige or glamour but rather poverty, crime and homicide;
• Rhythm and blues, jazz, soul, and other African-American genres receiving massive international success instead of, say, square dances and barbershop quartets;
• For an Anglo idiom, how about punk which sneers at Caldwell-esque notions of whitebread well-being.

In other words, ascribing the success of cultural products to keeping up with the lifestyles of the rich and famous is dubious. If we followed the simplistic Caldwell recipe for the success of cultural exports, why is the world's richest nation in per capita terms, Qatar, not a powerhouse in music and movies? If he were enrolled in a cultural studies course and presented this inept argument, Caldwell would get an "F" straight away.

To me, there are many more things that help determine pop culture success--including deft marketing. In reality, much K-Wave is alike its American equivalent in being superficially attractive but ultimately vapid. Interestingly, this line of criticism often emanates from Koreans themselves. Of course good-looking people singing and dancing tend to catch the eye more. What the Koreans have done which many of their Asian peers have not really achieved is to imbue entertainment products with high production values--choreography, cinematography, costumes, lighting and so forth that approach the best global standards. That they happen to be (mostly) in Korean language doesn't necessarily mean that Korean culture is ascendant, but again that they are able to combine high production values to messages Asians can relate to which Westerners occasionally get, Oppa Gangnam Style. Ever bothered to read its lyrics translated into English? We're not exactly dealing with KRS-One here. It's mostly commerce; that's all.

I tired long ago of people living in their whitebread world trying to explain everything else in Amerocentric terms whether in IPE or elsewhere. That's part of why this blog exists--to present an informed (non-white) counterargument. Caldwell is clearly among the worst offenders.