Meet the Wal-Mart Board of Directors

David D. Glass
Chairman of the Executive Committee of the Board of Directors of Wal-Mart Stores, Inc. since February 2000. Mr. Glass served as Wal-Mart's President and Chief Executive Officer from January 1988 to January 2000. He has been a member of Wal-Mart's Board of Directors since 1977.

Stanley C. Gault
Retired Chairman of the Board of Directors of Goodyear Tire & Rubber Company from June 1991 to September 1996 and Chief Executive Officer of the Goodyear Tire & Rubber Company from June 1991 to January 1996. Mr. Gault previously served as Chairman of the Board of Directors and Chief Executive Officer of Rubbermaid Incorporated. He is also a director of Avon Products, Inc. and The Timken Company. He has been a member of Wal-Mart's Board of Directors since 1996.

S. Robson Walton
Chairman of the Board of Directors of Wal-Mart Stores, Inc. He has been a member of Wal-Mart's Board of Directors since 1978.

Roland Hernandez
Retired Chief Executive Officer and Chairman of the Board of Directors of Telemundo Group, Inc., a Spanish-language television station company from August 1998 to December 2000. From March 1995 to August 1998, he served as President and Chief Executive Officer of Telemundo Group, Inc. He is also a director of MGM Mirage, The Ryland Group, Inc., and Vail Resorts, Inc. He has been a member of Wal-Mart's Board of Directors since 1998.

M. Michelle Burns
Executive Vice President and Chief Financial Officer of Delta Air Lines, Inc. since August 2000. Prior to this appointment, she held various positions with Delta Air Lines, Inc., including: Senior Vice President - Finance and Treasurer, from January 2000 to August 2000; Vice President - Corporate Tax and Treasurer, from September 1999 to January 2000; and Vice President - Corporate Tax, from January 1999 to September 1999. From 1991 to January 1999, she was a partner in Arthur Andersen, LLP, an accounting firm. She is also a director of Orbitz, Inc. and Worldspan L.P. She has been a member of Wal-Mart's Board of Directors since 2003.

Jose Villarreal
Partner in the San Antonio office of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P. since August of 1994. He has been a member of Wal-Mart's Board of Directors since 1998.

John T. Walton
Chairman of True North Partners, L.L.C., which holds investments in technology companies. He has been a member of Wal-Mart's Board of Directors since 1992.

John Opie
Opie had a 39-year career with General Electric (GE). He also served on the GE Board of Directors. Opie serves on the boards for the Delphi Corp. and Stanley Works, is on the Board of Trustees of Michigan Tech University and has received the university's Board of Control Silver Medal and an honorary doctorate degree. He has been a member of Wal-Mart's Board of Directors since 2003.

James W. Breyer
Managing Partner of Accel Partners, a leading venture capital firm. He is also a director of RealNetworks, Inc. He has been a member of Wal-Mart's Board of Directors since 2001.

Jack C. Shewmaker
President of J-COM, Inc., a consulting company, since 1994, and a rancher. He is also a former Wal-Mart executive who retired in 1988. He has been a member of Wal-Mart's Board of Directors since 1977.

J. Paul Reason
President and Chief Operating Officer of Metro Machine Corporation, an employee-owned ship repair company, since July 2000. From December 1999 to June 2000, he served as Vice President-Ship Systems for Syntek Technologies, Inc., a technical and engineering professional services firm. He is a retired four-star Admiral in the U.S. Navy. He served as Commander-in-Chief of the U.S. Atlantic Fleet from December 1996 to September 1999, ending thirty-four years of Naval Service. He is also a director of Amgen Inc. and Norfolk Southern Corporation. He has been a member of Wal-Mart's Board of Directors since 2001.

H. Lee Scott, Jr
President and Chief Executive Officer of Wal-Mart Stores, Inc. since January 2000. Prior to this appointment, he has held various positions with Wal-Mart Stores, Inc. since September 1979, including: Vice Chairman and Chief Operating Officer, from January 1999 to January 2000; and Executive Vice President, President and Chief Executive Officer, Wal-Mart Stores Division, from January 1998 to January 1999. He has been a member of Wal-Mart's Board of Directors since 1999.

Dawn G. Lepore
Vice Chairman of Technology, Operations and Administration for Charles Schwab Corp., a financial holding company, since March 2002. Prior to this appointment, she has held various positions with Charles Schwab Corp., including: Vice Chairman of Technology and Administration, from December 2001 to March 2002; Vice Chairman and Chief Information Officer, from July 1999 to December 2001; and Executive Vice President and Chief Information Officer, from October 1993 to July 1999. She is also a director of eBay Inc. She has been a member of Wal-Mart's Board of Directors since 2001.

Thomas M. Coughlin
Executive Vice President and President and Chief Executive Officer of Wal-Mart Stores Division and SAM'S CLUB USA since August 2002. Prior to this appointment, he has held various positions with Wal-Mart Stores, Inc. since August 1978, including: Executive Vice President, President and Chief Executive Officer, Wal-Mart Stores Division, from January 1999 to August 2002; and Executive Vice President and Chief Operating Officer, from January 1998 to January 1999. He is also a director of ChoicePoint Inc. He has been a member of Wal-Mart's Board of Directors since 2001.

Source: Wal-Mart.

Manufacturing Gaining Some Steam

With the latest Institute of Supply Management (ISM) report showing the fourth consecutive month of expansion in manufacturing activity, the economic firm Global Insight believes that the industrial sector is poised for a rebound. The Purchasing Managers’ Index (PMI) for October came in at a surprising 57.0. Not only was this substantially higher than the 53.7 seen during September, but it was the highest level since December 1999. (An index reading above 50 indicates expansion.) This report also echoes anecdotal information seen across a wide number of industrial sectors and individual manufacturers—business activity has indeed picked up.

The latest orders data also support this optimism. September’s new orders for all durable goods increased 0.8% from August. Year to date, they are 0.5% above last year’s pace. Some of the major segments driving this orders growth: machinery, up 1.7%; computers and related products, up 12.2%; nondefense capital goods excluding aircraft, up 5.5%; and defense capital goods, up 27.3%.

For manufacturing to truly recover, though, investment must also ignite. After being constrained for more than two years, there is proof that business investment is about to come back to life. Investment includes spending on everything from high-tech equipment and transportation equipment to structures and traditional machinery. While all of these investment categories are expected to improve substantially over the next two years, the timing of their takeoffs will differ. Some categories like high-tech equipment, namely computers and related equipment, are already experiencing healthy growth.

Go here to read more.

Minnesota Employment Data Advances

Minnesota state employment officials have advanced their Employment Security (ES-202) data to the city-level. This is a big step in understanding micro-geographic growth trends across the state and in counties and metro areas. This data can help answer the question: "How many jobs is the central city in the region losing to the suburbs?"

Good for them. Other states should move in the same direction. Ohio, it's worth a look!

Go here to learn more.

Tampa Studies Convention Options

Tampa officials are knee deep in studies and plan proposals for a new convention center to help the city and region capture more business meetings. Consultants are studying costs and estimated economic impact of the proposed facility. Like most cities, money is tight and financing has to be more creative. This is another one to watch.

Meanwhile, back on my homefront, city and business officials are saying that maybe voters in March will be given a second chance to pay for a new convention center in downtown Cleveland. Cleveland Mayor Campbell was unwilling to take the issue to the voters this Fall because of the city's pressing fiscal problems and lack of agreement about what should be done.

Source

Jobs Growing in California

In a sign that the economic recovery is finally adding jobs, California gained almost 35,000 new jobs in October, the biggest job growth gain since December 2000, according to figures released Friday by the California Dept. of Employment Development Department.

Statewide, unemployment dropped to 6.6 percent in October, down from 6.8 percent a year ago but up slightly from a revised 6.5 percent in Septem-ber.

In October, there were34,800 jobs added in California, the highest one-month gain in job growth since December 2000, when 38,700 jobs were added, according to EDD statistics.

This is a good sign for both California and the nation. Let's keep our fingers crossed.

Go here to read more.

Richard Florida Tells His Story in Toledo

Holy Toledo, Toledo, use your creative talents! That is the message to the regional leaders and citizens of Toledo from Richard Florida, who continues to do his stump talks on the role of creativity in regional economic devleopment.

I think it would be interesting to hear what Toledo officials had to say in response to Florida's speech. He has ben telling every city in America to 'get creative.' What are Toledo's best opportunities to use its creative talents to spark economic development? That's the real question.

Go here to read more.

Ohio Releases New Metro Employment Forecasts

The State of Ohio recently released its new 2000-2010 employment forecasts for the state's metro areas. The news for some regions, especially Toledo, is not so good. Here are some clips from a recent Toledo Blade article on the Toledo growth forecast.

Job growth in metro Toledo through 2010 will be the slowest of Ohio’s top six cities, with declines in manufacturing and most gains occurring in the service sector, according to a state forecast released yesterday.

The local labor market is expected to grow by 28,480 jobs, or 8.4 percent, to 369,100 by 2010, the Ohio Department of Job and Family Services predicted.

Metro Columbus is expected to see an increase twice as large. Forecasts for Cincinnati, Akron, and Cleveland all anticipate increases of more than 10 percent. Among Ohio’s 11 largest metro areas, only Youngstown-Warren and Mansfield are forecast to have weaker job growth than Toledo through the end of the decade.

Go here to read more.

UK Development Group Strengthens U.S. Presence

I have written a couple earlier articles about how the Fairfax County ED Authority in Northern Virginia is aggressively working with UK development groups to work collaboratively. A second British group has now opened an office in the area.

The British Midlands initiative, an economic development effort created to help American companies expand into Europe, formally opened its office in Reston, Va., late last week.

The organization, which represents central Great Britain around the cities of Birmingham and Nottingham, will help U.S. companies find partners or customers in that region. British Midlands is just the latest U.K. economic development group to establish offices in the Washington, D.C., area, particularly in Fairfax County, Virginia.

Invest.UK, London First, the South East England Development Agency and the Welsh Development Agency all have offices or representation in the area. “The size and diversity of the technology community in this area is very impressive, and we want the community to know more about the excellent opportunities available to them if they choose to expand to Britain or Europe,” noted William Brickley, vice president for business development at British Midlands. Brickley will lead the organization's Reston office.

Go here to read more.

Top 100 Young Innovators

Technology Review has just picked its third class of 100 innovators 35 or younger whose technologies are poised to make a dramatic impact on our world. Go here to find out who made the list this year. When communities talk about talent, these are the types of people places are competing to keep and attract.

Wal-Mart: The Next Microsoft?

As Wal-Mart's power grows, some analysts are starting to wonder: What if allegations and lawsuits against it proliferate? What if its growing control over suppliers turns them into subjects that survive only at the discount king's whim?

Outfits like Safeway and Albertson's in groceries, Toys 'R' Us, and lower-end department stores have started to blame disappointing financial results on Wal-Mart's competition. What if they were to fall victim to the giant's steady expansion?

If these complaints continue to build, might they transform the behemoth of Bentonville, Ark., into the discount equivalent of that other colossus, the one in Redmond, Wash.? If it isn't careful, Wal-Mart could take Microsoft's place as both the target of endless government probes and a symbol of heavyhanded corporate practices.

Go here to read more.

America's Largest Private Companies

There are still many US companies that are privately-held. To see which ones made the Forbes 2003 Largest Private Company list, click here.

Who are the top ten?

1. Cargill
2. Koch Industries
3. Mars
4. Publix Super Markets
5. PricewaterhouseCoopers
6. Ernst & Young
7. Bechtel
8. C&S Wholesale Grocers
9. Meijer
10. HE Butt Grocery

Swagelok: Modern Manufacturing Success Story

When you think of manufacturing and product innovation success stories, Solon, Ohio-based Swagelok comes to mind. In this time of change, it is important to remember that the U.S. still has enormous potential in manufacturing. From the Swagelok story we learn many lessons, but one stands out: someone with vision and the will to make that vision a reality must lead the company.

Swagelok Company, founded in 1947 in Cleveland, began with a single product—the tube fitting—and grew into a global manufacturing corporation that delivers thousands of types of fluid system components through a network of more than 200 exclusive, independent sales and service centers on six continents.

The company was founded by Fred Lennon, whose vision created the foundation on which the company grows today. Read more about Lennon here.


Fred Lennon, 1905-1998

Swagelok Company is now based on Solon. The company develops and manufactures fluid system components used in analytical and process instrumentation, biopharmaceuticals, oil and gas, petrochemicals, power generation, semiconductors, shipbuilding and other industries. Products include fluid systems components such as fittings, valves, manifolds, hoses, filters, gauges, and lubricants. The company's products are marketed on six continents through a network of over 200 independent sales and service centers, supported by over 25 Swagelok manufacturing, technical service and distribution facilities in North America, Europe and Asia.

Swagelok Products: Through the years, we have made reliable products that industry knows and trusts: Swagelok tube fittings, hose, and quick connects; Whitey® process and instrumentation valves; Nupro® high-purity and industrial valves and filters; Cajon® weld, pipe, and high-purity fittings; and Sno-Trik® high-pressure components. In 1998, all of our products, services, and operations were unified under the Swagelok name.

In 2000, Swagelok acquired Jensen Fittings Corporation of North Tonawanda, New York. Through this acquisition, Swagelok also manufactures and markets sanitary fittings, valves, and related products for the biopharmaceutical, food and beverage, and dairy industries.

Swagelok Associates: Swagelok employs about 3000 associates, worldwide.

Net Sales: Approximately $1 billion (USD)

Swagelok Company
Corporate Office
29500 Solon Road
Solon, Ohio 44139 U.S.A.
Phone: 1.440.248.4600

Corporate Execs Taking Stronger Public Stand

If you haven't noticed, corporate executives across America are gearing up with their money and influence to shape the public policy agenda for economic development. I'm seeing the signs of increased attention to these issues in several places, including Cleveland, Denver, Phoenix, Philadelphia and the Bay area, just to mention a few.

Here are a few examples. Yesterday, Peter B. Lewis, the Chairman of Progressive Corporation in Cleveland announced he was willing to commit up to $12 million to get George W. Bush out of the White House. Also in Cleveland, the Greater Cleveland Growth Association said last week it plans to increase its pressure in the local and state political arenas to get the public sector aligned with marketplace.

Denver CEOs, through their new regional economic development initiative, plan to increase their say on regional infrastructure priorities and other public policy initiatives. In Phoenix, the Greater Phoenix Economic Council and the Phoenix Area Chamber are looking at new ways to shape the state and local policy arena.

A recent survey of Bay area CEO's reveals they see a need for more attention to political issues given the state's fiscal crisis, the ousting of Gray Davis from office and other issues.

An article in yesterday's Philadelphia Business Journal examined the role of business money from both inside and outside the City in influencing the recent mayoral race.

Do we have a trend here? I think we may. What's going on? In a nutshell, the past three years have been hell for most CEOs and their companies. Because of the economic drought and other events, economic development has pretty much come to a sreeching halt. Now, the economy is showing good signs of growth. Most companies face some very tough choices in the next six months about how and where best to grow. A growing number of CEOs are frustrated by the inability of public sector leaders on all levels to make the right economic policy decisions. A number of key state and local political races are coming up in 2004. So, I think that is what is prompting this latest flurry of political activity by CEOs across the country.

Stayed tuned.

Michigan Moves Development Bills Forward

The Michigan Senate unanimously passed a package of bills extending one of the state's key MEGA business tax credits through 2009. The four bills approved Wednesday reauthorize the Michigan Economic Growth Authority tax credit. The credit is one of the tools the Michigan Economic Development Corp. uses to attract new businesses and encourage existing ones to expand or stay.

Meanwhile, a Senate committee considering a separate package of bills aimed at helping the tool and die industry stopped action on half the bills after hearing recently from state Treasurer Jay Rising. Rising said the tax incentives included in those bills would cost the financially strapped state $500 million.

Go here to read more.

IT Enables Outsourcing

Brookings Institute released an important study on the effects on IT on regional economic development earlier this year. I wrote an earlier ED Futures article about it, but want to return to the study because of its relevance to the business outsourcing issue that nearly every US region is facing now. In a nutshell, what the Brookings study says is that IT has "enabled" economic growth in many communities nationally and globally, and is also "disabling" growth in those economies where business functions and jobs are being outsourced.

Information technology (IT) saturated American business in the 1990s, and countless new companies sprang up around Internet applications. In response, economic development officials across the country have tried to catch the "tech" wave by stimulating the growth of high technology companies and "clusters."

The IT revolution extends far beyond the technology sector, after all. All kinds of firms--not just "tech" companies--are finding ways to cut costs dramatically by automating tasks, outsourcing certain functions, and linking customers to the factory floor. IT is also accelerating the ongoing fragmentation of large firms into separately located functional units, and the establishment of strategic relationships with other firms to perform functions formerly kept in-house.

In view of these changes, this report seeks to give readers a look inside companies to see how they are using IT, and to begin a conversation about what regional leaders can do to support technology-based development. The study builds on interviews with the chief information officers (CIOs) and information architects of 28 firms located in five metropolitan areas--Atlanta, Cleveland, Minneapolis/St. Paul, Phoenix, and Seattle. Ultimately, it seeks to clarify the nature and direction of key trends in order to explore their implications for public policy.

Several key insights emerge from the Brookings' analysis that shed light on the impact of IT on regional economic development:

1. Both "new" and "old" economy firms are embracing IT, which means that both Sunbelt and Rustbelt cities and metropolitan areas can benefit from the technology revolution. Several U.S. metropolitan areas--such as Seattle, Austin, and Washington, D.C.--have become well-known centers for high technology companies, and others continue to emerge. However, success in the new economy does not depend solely upon attracting or growing high tech clusters. Traditional industries in diverse sectors of the economy are also integrating new technologies into their operations. Companies like Parker Hannifin, a Cleveland engineering firm, employ computers and computer-controlled tools to design and manufacture products, and they increasingly use web-based purchasing technologies. That means that even manufacturing regions need to recognize companies' shifting needs, and ensure that their economic development strategies respond to them.

2. IT enables the "fragmenting firm" to split off key functions throughout the U.S. and abroad, which presents both opportunities and challenges. The cluster phenomenon is still alive and well, but it increasingly revolves around portions of firms and functions within firms--from data processing to distribution--rather than whole companies and industries. Federated Department Stores, for example, maintains its headquarters in Cincinnati, but has located its design and product development operation in New York City, and its data and financial management group in Atlanta. Similarly, the Boeing Company recently moved its headquarters to Chicago, but left its commercial airplane production facilities in Seattle and Southern California--traditional sites for aerospace manufacturing. The upside of this trend is that metropolitan areas now gain an opportunity to specialize. All regions can now focus on and compete for key firm functions, whether they entail manufacturing, research and development, logistics, or sales. The downside: Cities like Seattle or Cleveland may lose high-powered intellectual capital--as well as beneficial civic leadership--as top executives move to headquarters meccas like New York and Chicago.

3. IT generates new criteria for firm locations, which may bring competitive advantage to some regions. Intel, for example, maintains a list of prerequisites when it chooses a site in the United States or abroad that includes a qualified, educated workforce; quality of life factors; infrastructure; availability of land; and tax incentives. Possessing extensive broadband capacity, a skilled labor force, and a good environment in which to live and work can give U.S. regions the edge they need to compete--not only domestically, but against developing countries that may have cheap labor, but lack technology infrastructure and other locational advantages.

4. IT helps firms go "global," increasing the need for U.S. regions to market themselves internationally. To be sure, the globalization of manufacturing has been taking place for decades. But IT has also enabled financial and other business services firms to go global. Companies are increasingly outsourcing key functions to obtain a higher level of efficiency, profitability, or competitiveness. This means U.S. metropolitan areas must compete with regions all over the world for firms, portions of firms, and employment. Regions with particular niche capacities, and the ability to market them globally, have an opportunity to cultivate linkages with corporations abroad and improve their ability to compete on the international playing field. These global relationships may facilitate specialization in higher skill/higher wage operations, while at the same time reveal new markets for companies-- products or services.

According to Brookings, cities or metropolitan areas can do relatively little to reduce the likelihood--accelerated by IT--that firms will globalize, fragment, or relocate headquarters. Regional leaders can, however, work to create a competitive setting for all business' survival and success in a high tech era. This means investing in IT infrastructure; providing the right education programs at adequate scale to meet new skill requirements of employers; supporting innovative firms with research and development programs at universities and institutes; and assuring adequate venture capital for startup companies. Leaders also need to insist that their own organizations lead in the effective use of new technologies, and that their metropolitan areas build strong relationships with regions abroad.

Those metropolitan areas that understand the changing nature of business--and respond nimbly to its demands--will create the best environments for firm and economic growth.

Download the Brookings study here.

How Smaller Regions Can Ride the Tech-Economy Wave

Concerned that the tech-economy wave may have bypassed your small to medium-sized region? There is something to learn from how Bellingham, Tacoma, Spokane, the Tri-Cities, and Wenatchee in Washington state met this challenge.

According to research by the Brookings Institute in Washington, DC, the tech boom of the 1990s created many successful companies, significant wealth, and expanded job opportunities in a new and growing sector of the nation's economy. However, the benefits of technology development have largely accrued to a relatively small number of regions nationwide leaving many other communities both envious of this success and interested in replicating it.

These five Washington regions are located in different parts of the state, have varied economic bases, and somewhat different goals and strategies for expanding their respective technology sectors. Their efforts to grow or attract new companies provide insights on strategies that may be useful in other regions outside the major "techpoles" that want to pursue similar opportunities.

Although they are not likely to achieve the spectacular success of Silicon Valley, Seattle, Boston, or Austin, there is a role for an IT strategy in smaller cities. Based on a review of economic data, and in-depth interviews with company executives and economic development leaders in the five Washington communities, the authors have several suggestions on how communities around the country can enhance their own economies through technology-based development:

1. Invest in broadband and other telecommunications infrastructure necessary for technology development. Adequate broadband capacity is a prerequisite for IT growth. Meeting demand can be achieved in creative ways based on an expansion of utility systems used for power system management, augmentation of public sector systems, negotiations with existing telecommunications companies, or fostering startup telecommunications operations.

2. Focus on "grow your own" strategies for technology development. Given the history of the techpole regions in this country, entrepreneurial development deserves far more attention relative to marketing and recruiting-based strategies. The establishment of robust networking, mentoring, and startup capital programs, combined with improvements to infrastructure, education, and real estate offerings are key to enhancing the competitiveness of local firms.

3. Find ways to link research institutions to the local economy. Research institutions play an important role in fostering and supporting technology-based development through the generation of commercially viable ideas, training sophisticated workers, and problem-solving for local companies. Branch campuses, cooperative extensions, and other outreach programs can play an important role in bringing the benefits of the research university to smaller communities.

4. Continually monitor and evaluate strategies and results. Regional leaders must carefully monitor and evaluate their efforts to ensure that the results achieved are commensurate with the resources invested to extend the benefits of technology into their communities. Understanding what is working, and what isn't, is essential to ensuring that programs and policies evolve appropriately over time.

5. Work with state level research, education, and infrastructure development efforts. Local technology development strategies need to be supported by state level polices and programs that are tailored to each local community. Leadership at the state level is also necessary to provide a sense of direction and project a positive outside image that can powerfully complement local efforts.

According to Brookings, ultimately the most successful communities will be those that employ a rich and varied mix of economic development strategies that capitalize upon local industries and assets. These small and medium-sized regions have a real opportunity to build a niche for themselves in the high tech economy, and to reap some of the benefits such development can generate.

Download the report here.

New Tribal Casino Opens in Palm Springs

Amid hopes for a revitalized downtown and some controversy, the Agua Caliente Band of Cahuilla Indians has opened the $95 million Spa Resort Casino here. After 11 months of construction, the casino officially opened with a ribbon-cutting ceremony November 6 after a quieter opening earlier last week.

"The fact that it's downtown is what's really going to give it major impact for Palm Springs," said Jessica Scarffe, executive director of the nonprofit Palm Springs Economic Development Corp.

Not everyone in the city is as excited about the new casino. A group of citizens is suing the city and its redevelopment agency over a land deal with the tribe, saying it violates state law by giving public money to a gambling casino.

Go here to read more.

Whirlpool to Close Arkansas Operation

Following Whirlpool’s announcement Monday that it will move some of its Fort Smith, Arkansas production to Mexico. Benton Harbor, Michigan-based Whirlpool Corp. outlined earlier this week plans to “strengthen the company’s global operating platform.”

Whirlpool’s Fort Smith plant was the only plant where production losses are expected. Production at seven U.S. Whirlpool plants — Evansville, Ind.; Oxford, Miss.; Clyde, Findlay and Marion, Ohio; Tulsa and LaVergne, Tenn. — will expand.

The extent of the Fort Smith production loss is unknown. Whirlpool spokesman Christopher Wyse said details about potential job losses and the amount of production to be moved from Fort Smith to Mexico will not be released until early 2005. Whirlpool employs about 4,500 people in Fort Smith.

Go here to read more.

Delaware Gets with Clusters

Delaware officials are looking to clusters for a boost to state economic growth. The state has adopted five clusters for Delaware: automobiles, chemicals, tourism, financial services and insurance, and life sciences and biotechnology. Two other clusters will be led by other state agencies: Agriculture will be under the Department of Agriculture, and corporate and legal services will be under the Department of State. The cluster segments grew out of recommendations from the Governor's Strategic Economic Council

Go here to read more.

San Antonio to Study Creativity Gap

San Antonio officials want to do something about their creativity gap. The community is especially concerned about connecting young people to the community, especially in the creative sector. Go here to read more.

Bay Area Business Confidence Growing

For the third quarter in a row, there is increasing confidence of a regional economic recovery among Bay Area business executives, according to a survey released Tuesday by the Bay Area Council.

Of the 515 CEOs and senior business executives confidentially surveyed between Oct. 15 and Oct. 30, the number who said Bay Area economic conditions are better now than six months ago jumped 18 points (from 23 percent in July to 41 percent in October 2003). Expectations for improvement in the next six months jumped 15 points from last quarter (from 50 percent in July to 65 percent in October 2003), according to the survey. Additionally, the number of respondents reporting currently worse conditions in the Bay Area dropped 15 points (from 26 percent in July to only 11 percent in October 2003).

Asked about four specific business climate factors, respondents said that the effect of the high "cost of housing" had the greatest negative impact on their business, followed by the "cost of labor," then "taxes," and finally "transportation and traffic." Again, very large employers (with 10,000 or more Bay Area employees) rated all four factors as having a much greater negative impact than small businesses; for example, on a one-to-10 scale ("1" being "not at all negative" and "10" being "highly negative"), very large employers rated "taxes" at an 8.47, but small business operators rated "taxes" as a 7.37.

Source.

New Denver EDO Focuses on High-Impact Economic Development

A new regional development group has taken shape in the Denver area. Within five years, the effort hopes to raise as much as $15 million in private contributions and bring 100,000 new jobs to metro Denver.

The organization, which is to be called the Metro Denver Economic Development Corp., will replace the Metro Denver Network and aims to represent the Denver metropolitan region on the national stage. It will serve as the primary source of demographic and economic information to companies and professional corporate relocation consultants.

And -- in a move that harkens to the mid-1980s -- the EDC will raise money to influence key infrastructure votes that officials say are crucial to securing plant expansions and business relocations. It's the first time in a decade that a major, regional economic development group has not only recognized the importance of influencing the voting public on major public works and but taken steps to pay for the political effort.

I think the Denver folks are onto something.

Source.

Personal Income Seeing Slight Growth

Personal income for the nation, which is measured only in current dollars, grew 0.8 percent in the second quarter of 2003, the same as in first quarter and up slightly from the 0.6 percent increase of the fourth quarter of 2002. According to estimates released today by the U.S. Bureau of Economic Analysis, six of the ten fastest growing states were in the Plains and Rocky Mountain regions while 4 of the 10 slowest-growing states were in New England and all of the Great Lakes states were in the bottom two quintiles.



Nationally, earnings grew in every industry except durable goods manufacturing and leisure and hospitality. Financial activities accounted for 0.28 of the 0.8 percent growth in earnings and contributed the most to earnings growth in 24 states.

Because quarter-to-quarter changes in state personal income are subject to large swings, it is also useful to look at the change in state personal income in the current quarter relative to the same quarter a year ago. Chart 2 shows the year-to-year growth rates of quarterly state personal income from the second quarter of 2000 through the second quarter of 2003.

Year-to-year growth in personal income was higher in the top-quintile states than in the bottom-quintile states in eight of the past nine quarters. In addition, the growth rate of the top quintile increased steadily in the past two quarters whereas the bottom quintile grew more slowly in the second quarter of 2003 than in the first quarter.



Source.

County Employment and Wage Growth Trends

In March 2003, Placer County in California had the biggest over-the-year percentage increase in employment among the largest counties in the U.S., according to preliminary data released today by the Bureau of Labor Statistics of the U.S. Department of Labor. Placer County experienced an over-the-year employment gain of 4.9 percent, compared with a national decline of 0.3 percent. Marin County, Calif., had the biggest over-the-year gain in average weekly wages in the first quarter of 2003, with an increase of 10.7 percent. U.S. average weekly wages increased by 1.5 percent.



Of the 315 largest counties in the United States, 167 had rates of over-the-year employment growth above the national average in March 2003, and 145 experienced declines in employment greater than the national average. Average weekly wages grew faster than the national average in 208 of the largest U.S. counties, while the percent change in average weekly wages was below the national average in 99 counties.

Among the Nation's largest counties, those with employment levels of at least 75,000, Marin County, California, led the nation in growth in average weekly wages with an increase of 10.7 percent between March 2002 and March 2003.



Source.

New Study Says Jobs Coming Back, But Lower Pay

A new study for the US Conference of Mayors, conducted by Global Insights, analyzes job loss between 2001-2003 and the expected job gain from 2004 – 2005. Furthermore, the report shows an economic expansion that will end the “jobless recovery” with job growth of 1.3% in 2004 and 1.7% in 2005, resulting in a slowly reduced unemployment rate.

The average wage of new jobs created during the 2004-2005 period is forecast to be $35,855, which is significantly lower than the $43,629 average wage of those jobs lost between 2001-2003, resulting in a wage gap of 18%.

The report says that employment gains will be modest in the fourth quarter of 2003, but this growth will pick up somewhat in 2004, expanding at a rate of more than 1%, which will slowly reduce the unemployment rate. Real GDP will expand by 4.2% in 2004, and 3.7% in 2005, as the US economy achieves its potential rate of expansion for the first time since 2000. This expansion will, at last, end the ‘jobless recovery’, with payroll growth of 1.3% in 2004 and 1.7% in 2005.

In 2004, U.S. employment is expected to recoup the losses experienced over the previous three years. These losses totaled a net 2,380,000 jobs. These job gains, however, will not return in the same sectors where they were lost. Many of these sectors, such as manufacturing and information, have seen these jobs moved overseas due to outsourcing. The average annual wage of jobs in the sectors which lost jobs during the 2001-2003 period, $43,629, will not be matched by the average wage of jobs in the growing sectors between now and 2005, $35,855. Thus job gains will come in sectors whose wages average only 82% of those in the sectors hit hard by the recession.

This gap reflects the higher than average wages paid in the declining manufacturing sectors. Over the 2001-2003 period, annual wages lost in the declining sectors totals $182 billion. This is $26 billion greater than the annual wages we project will be earned in the advancing sectors. To be sure, the economy as a whole will experience wage gains of $269 billion in the 2004 expansion.

The manufacturing sector has been the hardest hit in terms of lost jobs and wages. Indeed, many of these jobs are not expected to return during the recovery. The nondurables sector is expected to continue to lose jobs throughout the forecast period while expected job gains in durables manufacturing will be minimal. Durables manufacturing lost 1,675,000 jobs from the first quarter of 2001 to the second quarter of 2003. These jobs, which pay an average of $45,300 annually will continue to decline year-over-year until early 2005 when auto plants such as Toyota’s truck manufacturing plant in San Antonio, TX are expected to begin production.

A trend in auto production that continues with Toyota’s new Texas plant is the shift in location from the traditional Great Lakes region (Detroit, MI, Ann Arbor, MI) to new plants in the South (San Antonio, Jackson, MS), moving closer to potential consumers. Boeing, which is planning a new jet, the 7E7, to compete with the best Airbus has to offer, is considering sites in Brownsville, TX, Charleston, SC, Kinston, NC, and Savannah, GA in addition to Seattle, WA and Wichita, KS, where the company already has a stronghold.

In the case of nondurables manufacturing, production plants are moving to Mexico and Asia to take advantage of inexpensive labor. In the U.S., non-durables jobs pay an average of $40,560 annually. The sector lost nearly 732,000 jobs from the beginning of 2001 to mid-2003. Apparel, Textiles and Food production have been hardest hit by the job losses. In the past two years, Levi Strauss, which operated plants in El Paso and San Antonio Texas, closed all manufacturing facilities in the U.S., opting to purchase products through independent contractors based overseas. Fertilizer and chemicals producers, primarily based along the Gulf Coast, have been forced to shutter operations due to the high cost of natural gas.

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New Survey on Outsourcing: Don't Worry, Be Happy

Job losses in the US due to outsourcing of financial services and technology work to low cost destinations like India will be offset by new employment opportunities in emerging sectors of the American economy, says a survey conducted by leading London-based research firm Datamonitor. The report says customer relationship services will continue to be outsourced by US firms to cut costs, but its impact on the US labour market will be limited.

The survey seeks to allay fears of increased job losses due to a rush among companies to outsource back-office jobs to low-cost overseas destinations like India, China and the Philippines.

Currently, communications, financial services and technology account for over 65 per cent of the total number of outsourced agent positions in the US.

More than a quarter of Fortune 500 companies like General Electric, American Express, British Airways, HSBC and Citibank are shifting their back office operations to India.

According to Datamonitor, currently one out of every 24 callcentre agents serving US customers is outsourced to a "near outsourcing centre" in Canada and Mexico or an "offshore centre" in India or the Philippines.

It predicts that by 2008, one in 15 agent positions will be outsourced to a foreign market.

"The incessant pressures to cut costs and reduce capital outlay have triggered the offshore and near-shore exodus in the US customer relationship outsourcing industry," said the study.

Source.

Outsourcing of Business Logistics Growing in Asia

Outsourcing of logistics began in the United States and Europe, where it is now prevalent, with many organizations turning to dedicated third-party logistics providers that offer better costs control and more efficient customer response, alongside shorter delivery times, to match the required product cycle. They are able to develop customer-specific logistics solutions that meet the requirements of individual customers.

In the US today, approximately 400 of the 500 largest manufacturers (or 80%) use third-party logistics. This represents tremendous growth in the outsourcing of logistics services from, say, a decade ago when fewer than 185 of the largest manufacturers engaged third-party logistics providers.

In Asia, the outsourcing of logistics is still in its infancy, but the trend is definitely beginning to take shape. In the forefront of this new wave are multinational companies (MNCs), with larger local manufacturers close on their heels. Particularly in Malaysia, many organisations have begun to utilise third-party experts to manage their storage, processing and distribution activities.

What is interesting about logistics outsourcing in Asia is the growth of a niche sector, namely that of the provision of temperature-controlled logistics services. This caters mainly to products such as perishables that require relatively low and stable temperature throughout the supply chain – from the point of source to the end customer. By maintaining “no break in the cold chain”, product freshness is assured and product life extended.

Source.

Mexico to Get Raytheon Jobs From Witchita

Hundreds of Wichita jobs are going to Mexico. Raytheon announced a plan to outsource work. About 350 jobs at Raytheon Aircraft's Wire Harness Shop in Wichita are leaving town. They're going south of the border. Those are the jobs held by Raytheon employees who put together wire harness bundles for all the aircraft's electrical systems.

A Raytheon spokesman says the company is trying to return to profitability and says outsourcing work to cheaper suppliers is the only way left to become profitable again.

Source.

Outsourcing: The New Maltese Falcon

When European companies think of outsourcing locations, English-speaking Malta comes up on their radar screen.

Malta as an IT Outsourcing Centre was the theme of a seminar held in London last week. Hosted by the Malta High Commission and jointly organised by Malta Enterprise and the High Commission, the seminar focused on Malta's competitive edge as the ideal location for the provision of high quality software services.

Malta's geographic location and fluency in English permit it a high level of interface with its European clients and, as such, can relate to its clients quicker and better than its competitors. The key to success is clearly good communication, reliability and the ability to build relationships, which Malta's workforce has proved it can do.

Source.

UK Perspective on Outsourcing

Outsourcing is a concern not only here in the United States, but also in the UK, Australia and other developed countries that are seeing their job base being exported to low-cost locations such as China, India and the Philippines. Here are a few salient points on the issue from the UK perspective:

1. The UK, US and Australian governments are continuing their support for businesses with the full knowledge that those businesses are replacing local workers with offshore labour. It is hard to fathom whether these governments have been hoodwinked by business lobbyists or genuinely believe that what amounts to a sacrifice of a certain section of professional workers is highly desirable for the rest of their citizens. What is easy to fathom is that displaced high tech workers were also good spenders and good taxpayers and that a loss income to these people will have consequences right across the local economy.

2. It has been predicted that only about 500,000 U.S. IT jobs, roughly 5% of the workforce, will move offshore by 2015. It is difficult to know who to believe when others are saying that 10% or even 20% of IT jobs could disappear from the US in the next five years. Whichever figure is correct, it still means a double-whammy because the number of unemployed IT professionals will increase and there will be fewer jobs to employ them.

3. Information technology is becoming another utility, much like electricity or water, and like with most utilities, the cost is seen as more important that the quality, at least until something serious goes wrong. It is cost more than anything that is driving the jobs offshore to countries where the knowledge is comparable or even better t certain levels. The simple truth is that any almost job that can be done solely by telephone or data link is a candidate for offshore outsourcing.

This article is very good reading. Source.

Outsourcing: The Philippines' Gain

ED Futures has been giving special attention to the business outsourcing issue, which is rapidly becoming one of economic development's most controversial issues. Here is a perspective from the Philippines.

Like India, Pakistan and Russia, the Philippines has a growing share of the world's high-tech jobs that have fled high-cost places, such as Massachusetts and California's Silicon Valley. But even workers filling customer orders, with few skills, have trouble competing with the $300 a month that is paid in the Philippines, one-fifth of what a worker in the United States would get for doing the same job.

Lured by lower costs overseas that enable them to increase profits in tough times, companies like Dell Computer, Procter & Gamble, American Express and Citibank employ 20,000 Filipinos to answer phones. The Philippine government says that call center jobs will double over the next year.

Filipinos also are competing for high-tech jobs like software development and engineering, the kind of work U.S. firms have been sending to India.

Stay tuned.

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How to Respond to Outsourcing and the Zero-Sum Economy Trap

This article will require you to stretch your thinking a bit. I'm looking for a way to respond to the negative effects of business outsourcing. At the same time, I am looking for a way to help local and state economies break the hold of the "zero-sum economy trap," which is a non-sustainable strategy for growth and development as economies worldwide continue to integrate and grow new connections.

First, some definitions. Outsourcing is a business strategy that is designed to help companies remain competitive and increase profitability by sourcing goods and services from external suppliers that are located either in the U.S. or offshore. It's far from a new idea. Outsourcing, in the minds of most business executives, is a response to global competition and the need to position themselves for global market opportunities.

The "zero-sum economy trap" is the prevailing model of local and state economic development that is based on the view that local economies must defend and advance their economic interests at any cost, including fighting globalization and other processes that are transforming local economic landscapes everywhere. The model assumes that community X, in many cases, must satisfy its economic needs, at the expense of other communities' economic needs. This is simplistic "win-lose" thinking. "Win-win" solutions are possible, but they require us to think and act differently than we are right now.

Most economic developers across the country have outsourcing on their brains. It affects everybody, and little can be done about it. Chalk it up to productivity and global competitiveness as most companies do, but there is a local job loss to pay by communities for most off-shore business outsourcing decisions. While outsourcing is a real issue in its own right, it is a component of a much larger process called "globalization." Understandably, most economic developers are looking for a way to solve job and business loss problems created by the business solution called "outsourcing." They should be giving more attention to the larger globalization issue.

In my assessment, outsourcing is a phase of business adaptation we are going through, and nobody knows what things will really look like on the other end once we complete the phase. Businesses will continue to outsource goods and services as long as it creates more benefits than costs for them. Most community officials fear that outsourcing will cause them to have fewer manufacturing and service jobs in the future. Some see outsourcing as a malicious plot by large corporations to take their economic base away from them. China-bashing has become fashionable, even in economic development circles. From the business perspective, outsourcing is not the end game, rather it is a means to a larger end. Communities should recognize that outsourcing is occurring because broader economic and business forces are driving it.

History says that there is a counter-trend to every trend out there. I suspect that is the case with outsourcing in business. Only so much can be shifted to China, India, Mexico, Singapore and other developing nations. I suspect that political risk, social instability, and rising costs will be the counter-trends in this case that eventually put the brakes on outsourcing. In my judgment, these countries are rife with conflict and still prone to sudden change. When these developments occur, businesses will pull up stakes and seek greener pastures elsewhere.

Look at what has happened in Korea in recent years, which everyone expected to become the next Japan. Korea is in pretty bad shape right now. Political and social problems have hobbled the country. Business investors are not comfortable with the country right now. And yes, look at Japan. Few expected Japan to tumble as hard as it did in the 1990's after its miraculous growth in the 1970's and 1980's. Political and social problems led the way to Japan's economic decline in the past decade. Mind these words: "Japan is rebuilding itself."

As I put the outsourcing phenomenon in perspective, I see outsourcing as one of many prices that corporations and America are paying for the unbridled and reckless growth we saw through most of the 90's. Yes, we made too much to do about nothing. The Internet was and will remain a major source of growth for many industries. In my view, we simply attacked the Internet opportunity the wrong way. Too many bad investments in flimsy tech startups that promised the world and delivered no discernible or sustainable value. We have to be very careful not to do the same thing with the life sciences--the poster child industry of this decade.

The other thing that happened in the 1990's is that the United States became increasingly disconnected from the rest of the world--a situation that changed suddenly with 9/11 and subsequent events. No longer can we afford to have a distant relationship with the rest of the world. Outsourcing is an evolutionary process that re-connects us to other parts of the world.

The U.S. market remains the most stable, the most integrated and the easiest to serve of all markets worldwide. I don't think that is going to change very much in the next decade. As long as our local and state economic development strategies don't cause a "mass polarization" of states and regional economies. That is an issue we need to think about in economic development. While every community, region and state across the country wants to advance its economic base, every local economy must assume some responsibility for sustaining the "whole," or the overall marketplace. Our local political economies can only continue to survive if we maintain a strong integrated market.

I read an interesting article this morning about how outsourcing is perceived in New Jersey. I was struck by how similar the views and ideas about outsourcing are to other places across the country. The article concluded also that little can be done to stop the outsourcing trend, other than help workers to adjust.

What should we do? I suggest that we try a new brand of economic development strategy to respond to the outsourcing issue. Let's try what I call the "interdependent growth model," which says that the growth of local economies nationally and even internationally to a degree requires interdependence and collaboration. Until now, we have relied upon businesses to serve as the "bees" that cross-pollinate local economies across the country and the world. They will continue to do that very thing. Is there a role for the economic development organization to serve as a cross-pollinator that ensures local economies across the world make the right connections to support their future growth in a productive manner? I think there might be.

Where do we begin? We have spent the last decade creating a greater consciousness of "clusters" as economic frameworks to build local competitive advantage in a national and global context. Clusters are a global phenomenon. Nearly every nation has some focus on clusters as growth engines for the future. Now that we have this global network of clusters in place, perhaps the next step is to utilize that network to create new business, technology and job collaborations among and between clusters. That seems to me a way to ensure local economies remain connected to each other, and it could also create greater balance in which parts of local economies are shifted (outsourced) to other world locations.

Can national and international cluster collaborations overcome all the problems discussed above? Not hardly, but I think they can put us on the right path in building more sustainable local economies that can ride the global waves and survive and grow in the future because they have stronger connections around the world. This is a starting point.

As always, I welcome your thoughts on this ambitious idea.

U.S. Foreign Direct Investment Data

Looking for the latest data on foreign direct investment in the United States? Look no further. Click here and access the Bureau of Economic Analysis (BEA) FDI data. This is useful data by country, industry and U.S. state location.

Who's Investing in China?

Who's investing in China? Maybe a better question is who isn't? This article is a must read in understanding the depth and breadth of corpoate investment in China from all countries.

More than 400 out of the world's leading 500 corporations have started businesses in China and set up nearly 400 research and development (R&D) centers throughout the country, a senior Chinese legislator said on Thursday.

Cheng Siwei, vice-chairman of the Standing Committee of China's National People's Congress (NPC), made the announcement at a forum for the leaders of industry and commerce, one of three forums within the World Economic Development Declaration Conference (WEDDC), a two-day event that offered a platform for business people and officials to exchange views on the world and the Chinese economy.

More and more multinational corporations, whose businesses range from computer, telecom products and pharmaceuticals to petrochemicals and power generation production, have extended their production network into China, Cheng said. The capital- and technology-intensive projects funded by these overseas investors have also increased exportation among China's high-tech products. Cheng said that investment from multinational corporations has increased in recent years. A number of corporations have set up their Asian-Pacific regional headquarters in China or founded regional research and development centers and regional operation centers in China, gaining unexpected economic returns.

In 2002, China used US$52 billion of foreign direct investment (FDI), making it the largest FDI absorber among all the developing countries for nine years in succession, Cheng said, adding that relevant government departments have undertaken studies for the overseas-funded enterprises to set up financial companies and obtain import and export rights.

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Can International Joint Ventures Last?

Do international joint ventures make it in the long haul? Ask NACCO Industries in Cleveland and they will tell you it is possible. Read on. This is a good case study if you are working to promote JV's through your economic development program.

In a perfect world, the most efficient way for a U.S. manufacturer to enter a specific overseas market would be to initiate a joint venture with an indigenous company already established in the region. In the real world, however, cross-border joint ventures are usually just disasters waiting to happen.

The vast majority of joint ventures either implode or are ripped apart within four to seven years of inception. Only a minuscule number survive to the ripe old age of 10, and only a tiny fraction of those make it to 15.

How, then, to explain the ongoing relationship of NACCO Industries Inc. of Cleveland and Japan's Sumitomo Heavy Industries Ltd. -- an alliance that has thrived for more than three decades?

One of the longest-lived of all existing U.S.-Japanese joint ventures, the NACCO-SHI 50-50 partnership has withstood a series of increasingly knotty and potentially lethal challenges over the years. These have included differences in culture and language, changes of corporate ownership and direction, radical readjustments of individual responsibilities within the joint venture, currency fluctuations -- just about everything but famine and pestilence.

Read more here.

Social Factors Also Important to Luring Japanese Investment

Southeastern states have been successful in attracting automotive manufacturing away from its traditional home in the Midwest through economic factors, including incentives and lower labor costs, according to Japanese auto manufacturers at last week's Japan-Southeast U.S. Joint Meeting in Osaka, Japan.

But social factors, including the availability of Japanese schooling and supportive legislators, have also played an important role in the attraction and maintenance of Japanese companies to the region, they said.

Kentucky was quick to learn the importance of "service after the sale" when it succeeded in attracting Toyota Motors North America Inc.'s first solely owned U.S. plant, according to Barbara McDaniel, media relations manager with the company.

The state established the Japan Business Advisory Council of Kentucky, which brings 10 Japanese companies with operations together with state officials each year to discuss economic issues.

Midwestern states, like Ohio, have learned exactly the same thing in working successfully with Japanese companies.

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