Economic Development Futures Journal

Saturday, November 12, 2005

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Asians Follow U.S. Supply Chain Lead

If it’s any consolation to American supply chain managers, while U.S. companies are looking to Asia for sourcing and manufacturing, Asian companies are looking westward for supply chain expertise. By a margin of almost 3-to-1 compared to their counterparts in the U.S. and Europe, business leaders in Asia are turning to outside experts to manage their supply chains, according to a survey conducted by Harris Interactive and sponsored by UPS.

Having embraced the outsourcing of supply chain management, the Asian business leaders are much less likely to view "customer loyalty" as a business problem. Some 14% of the U.S. and European executives surveyed listed "customer loyalty" as the most important business issue they face compared to only 2% of the Asian executives. The latter say a much more important business issue facing them is "expanding to new markets."

Read more here.

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Future of Green Building Looks Hot

McGraw-Hill Construction (MHC) today released a report indicating the environmentally responsible green building market will reach $10-$20 billion over the next 5 years. The report was released at the U.S. Green Building Council (USGBC) Greenbuild conference in Atlanta.

The analysis, Green Building SmartMarket Report, is part of a larger effort by MHC to take a leadership position in the green building movement. This includes:

* Launch of a new online green construction resource center, "GreenSource," at (www.greensource.construction.com).
* The integration of the USGBC's LEED (Leadership in Energy and Environmental Design) registered projects into MHC's proprietary Network project data.
* Custom green building research through MHC's architect panel and research group.
* Designation of building products that have been labeled as "green" in MHC's new Network for products, which will launch in 2006.
* In conjunction with USGBC, MHC has organized a pilot workshop at one of the nation's top universities to identify ways to introduce green building into the college and university curriculum.
* Established green custom publishing capabilities.

Read more here.

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Ford Land Development: One to Watch

Ford Motor Land Development Corp. (commonly referred to as Ford Land), the company responsible for Ford Motor’s corporate real estate portfolio as well as additional development properties, has employed the same principles in the operation of the 241 million square feet Ford Motor Co. maintains and occupies globally.

To say that the real estate professionals working for Ford Land are as reliable and responsible as the safety engineers that test Ford cars is not overshooting the truth. Ford Land has made a name for itself as an innovator in the global development and management of office, manufacturing, and research and development facilities - as well as in master-planned communities.

Part corporate real estate service provider to Ford Motor, part development company, Ford Land has honed the skills and strategies required in real estate to manage workplace needs, improve the bottom line, and implement sustainable practices - all while considering the welfare of the communities where it resides.

Read more here.

Friday, November 11, 2005

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Nissan to Move U.S. Headquarters to Tennessee

Did you hear this one?

Nissan Motor Co. announced this week it is moving its North American headquarters and nearly 1,300 jobs from California to the Nashville area to take advantage of the lower cost of doing business in the Southeast. This is quite catch for both Nashville and Tennessee.

Headquarter moves are not that frequent these days. What does this say about Nissan's future U.S. business strategy? Wanting to be closer to its manufacturing base is one objective. Avoiding California's higher costs of business is another. But what else? Could there be larger changes ahead in the Japanese automotive industry? Will Nissan make a play for other pieces of the auto industry that are centralized in the Mid-South and Midwest? This move is signal from my standpoint, and it's about more than just saving money. Stay tuned.

"The board of Nissan decided to relocate our North American headquarters, and we're coming to Tennessee," Nissan CEO Carlos Ghosn said at a news conference at the state Capitol attended by Gov. Phil Bredesen and other top state officials.

The headquarters, which has been based in Gardena, Calif., will relocate to Williamson County, a suburban area south of Nashville.

Industry analysts say the move could threaten Southern California's dominance as a hub for Japanese automakers and strengthen the Southeast's standing as a major vehicle manufacturing center. I think this is quite possible.

Ghosn said the company will invest $70 million to build a new headquarters building in Franklin, which is expected to be complete by 2008. The first employees will transfer to Tennessee next summer and work out of temporary offices in downtown Nashville.

Tom Libby, an automotive analyst with JD Power and Associates, said Nissan's relocation could make other Japanese automakers in Southern California--Honda Motor Co., Mitsubishi Motors Corp. and Mazda Motor Corp.--consider moving.

Read more here at the Washington Post.

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Trade Gap Widens in September

Attention all export promotion programs out there! You have some serious work to do. Listen up.

The United States trade deficit widened by a surprisingly large 11 percent in September, reflecting both a surge in energy imports after Hurricane Katrina and a steep drop in airplane exports because of a strike, the government reported yesterday. The trade gap with China also set a record.

The United States imported $66.1 billion more in goods and services than it exported in the month, breaking the record of $60.4 billion set in February, the Commerce Department reported.

The trade deficit in the first nine months of the year totaled $529.8 billion, about 18 percent higher than in the first nine months of 2004. That figure itself was up 21 percent over the period in 2003.

Economists had expected the trade deficit to widen to $61.5 billion in October, according to a survey by Bloomberg News. Some analysts said the gap would narrow in the coming months but others were not as sanguine, saying the deficit would have been wider even without the one-time effects seen in September.

Read more at the NY Times.

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Business Failure Versus Closure

Here is a research tip you might want to keep in mind if you are using business closure data in tracking local business trends in your area.

New firms are believed to have high closure rates and these closures are believed to be failures, but two U.S. Census Bureau data sources illustrate that these assumptions may not be justified.

The Business Information Tracking Series (BITS) showed that about half of new employer firms survive beyond four years and the Characteristics of Business Owners (CBO) showed that about a third of closed businesses were successful at closure. The CBO also made it possible to compare results of models of business survival and business success, but because of non-response bias logit models were used.

Similar to previous studies, firms having more resources – that were larger, with better financing and having employees – were found to have better chances of survival. Factors that were characteristic of closure – such as having no startup capital and having a relatively young owner – were also common in businesses considered successful at closure. Hence, few defining factors can be isolated leading to true failures.

The significant proportion of businesses that closed while successful calls into question the use of “business closure” as a meaningful measure of business outcome. It appears that many owners may have executed a planned exit strategy, closed a business without excess debt, sold a viable business, or retired from the work force. It is also worth noting that such inborn factors as race and gender played negligible roles in determining survivability and success at closure.

Download the paper by researcher Brian Headd here.

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Small Business and the U.S. Economy

During the third quarter, the U.S economy continued to expand despite the ramifications of Hurricanes Katrina, Rita and rising petroleum prices.

Measures of optimism were mixed, and the unemployment rate fell to 4.9 percent in August but rose to 5.1 percent in September after the hurricanes, based on the Office of Advocacy’s quarterly indicators. In an attempt to stabilize the growing economy the Federal Reserve continued to raise interest rates.

Thursday, November 10, 2005

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Wisconsin Looks at Manufacturing Competitiveness

The Wisconsin Manufacturing Study includes a series of recommendations to improve and strengthen the state's industrial sector:

-Build on Wisconsin’s driver industries and help them adapt to a new manufacturing economy. Driver industry supply chains should be targeted for improvement services with original equipment manufacturers supplier consortia playing a key role.

-Create structural change to heighten the focus on manufacturing. One way this can be accomplished is through the creation of a bipartisan manufacturing task force in the state legislature. Another would be regular assessment of best practices of competitive and growing firms.

-Take immediate action to address skill shortages. Wisconsin should aggressively promote manufacturing as a high-tech industry with a strong future and high quality of life jobs. The state also should integrate manufacturing into public school education and expand internships for students and teachers to learn about manufacturing’s career opportunities.

-Prepare a broad-scale legislative package based on a close examination of the policies affecting driver manufacturing industries and their industry clusters, as well as issues related to healthcare, availability of skilled workers, taxation and regulation.

Read more here.

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Fed Bank Study: Agglomeration Economics (Clusters) Important to Cities in Future

Read this. It speaks to the future role of clusters in future urban economic development. Note the shifts. They are important.

Agglomeration economies will continue to play a large role in the life of 21st century cities. But unlike in earlier times, today’s agglomeration economies have turned cities into centers
for consumption, rather than places for manufacturing goods. In turn, this shift in focus means that cities now tend to attract more highly skilled and highly paid workers—people who want
more consumption options. Consequently, modern cities must offer a wide choice of amenities to attract the high-skill workers needed in this new type of agglomeration economy.

Public policy can play a significant role in attracting and retaining highly skilled workers. Even though the productivity advantages that cities offer to firms may have waned in recent decades,
the nation’s largest urban areas retain many advantages in providing consumption benefits that people value. Glaeser and co-authors’ 2001 study suggests that local policymakers need to focus on lifestyle issues because they are important in attracting and retaining high-skill workers. One such policy is providing good public schools. Other policies might focus on reducing urban crime and providing amenities such as clean streets and public parks.

Download the paper here.

Wednesday, November 09, 2005

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Hey Cisco, Hey Poncho...

Yes, we are talking about Cisco Systems. Here is the latest.

Cisco Systems Inc. is on track to report solid quarterly revenue, but also is trying to inject life back into its stock, which investors increasingly see as a reliable yet staid portion of their portfolios.

Sales for the company's 2006 first quarter are expected to hit $6.6 billion -- strong, but flat compared to the previous quarter. That is too slow for investors who seek edgier stocks when they invest in the technology market, analysts said.

"People come to tech for that extra-special sizzle, not for the steak," said Stephen Kamman, an analyst at CIBC World Markets. "By buying into Cisco they're buying into a market that's more moderate."

The company is looking to its six "advanced technology" businesses as a way to shed the perception that its shares are on their way to being considered the technology industry's version of a "value stock."

This is a heads up if Cisco is an important player in your area.

Read more here.

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Five Keys to Successful Teams

I ran across this neat article on leading teams and thought it was worth passing along to ED Futures reader.

"Richard Hackman is an interviewer’s dream: Mallory Stark has only to ask a short question to elicit a detailed answer enlivened by Hackman’s personality. We start the interview with the background information that in his book, Leading Teams: Setting the Stage for Great Performances, Hackman argues that five conditions exist for successful teamwork: A team must be real, not nominal; it must have a compelling direction; its structure is well-designed to enable the team; it operates within a supportive organizational context; and it has expert teamwork coaching. The interview questions draw out the author on what leaders can do to cultivate these five conditions.

No one right way exists, says Hackman, but to succeed in encouraging teamwork, leaders need to “know some things”, “need to know how to do some things, and need superior emotional maturity and political acumen. Although the third of these may sound challenging, the first two sound simple and easy. Not so. Based on his research, Hackman claims that what most leaders think they know about teamwork is simply wrong. It’s not feasible to judge this claim without reading the book, but his example – the belief that “harmony helps teamwork” – has been challenged often enough in the business literature. “Know how to do some things” involves leadership skill in balancing control and authoritative guidance. Hackman’s statement that leaders should be insistent about not specifying how the team should go about achieving the ends clearly set by the leader seems too sweeping, though may well be more nuanced in his book.

Getting the five conditions in place also calls for emotional maturity – one aspect of which is detailed in an excerpt from the book. Here Hackman notes that complex organizations typically can only be shifted in new directions during temporary periods of turbulence and instability. The leader therefore must be like a lion who holds back, only to pounce at the right time. We might think of this as a kind of rational/strategic procrastination. Just in case any leaders think “lying in wait” is an excuse to take it easy, Hackman explains the kinds of detailed preparation work needed to get ready. He also notes some important aspects of political acumen, many of which can be put into play during the waiting and preparing phase. You’ll find plenty of other well-made points in this piece, including Hackman’s view of the biggest challenges faced by most team leaders; where most organizations go wrong with teamwork; and how his focus on the performance of real-time teams (cockpit crews, music ensembles, surgical teams) highlights lessons for more forgiving teamwork contexts."

Source: Many Worlds

Does your economic development team meet this litmus test? If not, maybe you have some team-building work ahead.

Tuesday, November 08, 2005

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Are You Thinking This Way About Economic Development?

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Trying to Attract Major Specialty Retailers to Your Area?

All specialty retailing industry sectors are heavily dependent on consumer spending. Since, consumer spending represents two-thirds of the U.S. economy these specialty retailers become extremely vulnerable to wide economic swings.

Specialty retailers are heavily dependent on sales during the Christmas selling season. This period is measured as the time period between Thanksgiving and Christmas eve. In fact, some retailers generate over 50% of their profits during the year at this time period. This has become an extremely important barometer for a retailers success. Yearly profits hinge on their performance during the Christmas selling season. These retailers must do a good job of managing their inventory levels, personnel needs, and style/fashion trends to ensure they will not lose a consumers' business during this period.

An important performance measurement in the retail industry is same store sales. Same store sales are defined as sales at stores that have been opened at least one year. Same store sales provides an important gauge on which to compare the growth of established stores. If same store sales are rising for a retailer, it may indicate that the firm has enhanced its production, warehousing , purchasing, or promotion efficiency. Declining same store sales may be an indication of poor physical distribution management or an economically declining geographical region or locality.

Specialty Retailers ( as well as General Retailers) face significant business risk as follows:

-Weak or no price flexibility
-Little Customer Loyalty.
-Unpredictable Sales
-Intense Price Competition
-Low barriers to Entry
-Overcapacity of Retail Units
-New Channels of Distribution
-Difficulty in Attracting and Retaining Labor.

Contact ED Futures for a price quote on a full pharmaceutical industry profile. Email: dtia@don-iannone.com. Tel: 440.449.0753.

Monday, November 07, 2005

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Consumers Hurting and For Good Reason

Wall Street is worried about you. Yes, you. The one they call "The Consumer." From the trophy-arrayed corner office of the richest CEO to the windowless cubicle of the most junior analyst, your immediate future is a pressing concern. What will you get for Christmas? How much will it cost to heat your house this winter? Will you get a raise next year?

But now you're just not spending the way you were. You aren't buying as many cars as you used to -- October auto sales were the weakest for any month since mid-1998. Your interest in home buying has hit its lowest level since 1991.

Your debt has increased. Outstanding balances on credit cards have risen to more than $800 billion, or $7,200 per U.S. household. The United States debt-to-income ratio rose as much in the past five years as it did in the previous 15 years, according to Merrill Lynch.

This is a real concern. Consumers are 2/3 of the economy. More here.

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Richest U.S. Cities

See the recent issue of Forbes about this topic.

The richest cities in the U.S. are glittering metropolises where super-wealthy people gather and even relatively modest homes costs millions of dollars. Or so one might think.

According to Forbes "Newer cities also have higher median incomes than more established places, like Boston or Chicago, because they are growing and have people moving in rather than out. "

Source: www.forbes.com

Sunday, November 06, 2005

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ED Futures Newsletter, November 6, 2005

Dear ED Futures Subscriber:

Welcome to November and the first issue of the ED Futures newsletter for the month.

I just returned from teaching at the Economic Development Institute (EDI) session held in Indianapolis this past week. It was a great re-charge for me. EDI is a special experience. I deeply value my 18-year affiliation with the Institute. It was a very good session in terms of programming, attendance, and fun.

Click here to learn more about future EDI programs. If you have not experienced EDI, you should.

If you would like to receive a copy of my presentation slides, please send me an email. Happy to share a copy with you. I teach the EDI courses on Principles and Practices of Strategic Planning and Advanced Strategic Planning Concepts. Don Iannone: dtia@don-iannone.com

I hope you enjoy the latest issue of the newsletter. Drop me an email. I would enjoy hearing from you.

Here are a couple issues you might find interesting:

Latest on Offshoring

Biologistics

Honda Profile

Turnaround Artists and Business Liquidators

Sincerely,

Don Iannone
Publisher, ED Futures Journal

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Building Competitive Communities in Regional and Global Economies

The Northeastern Economic Developers Association sponsor an interesting report on strategies to build more competitive communities in the future.

I especially liked Walt Plosila's (from Battelle Institute) discussion on the past 40 years in state science and technology initiatives.

Download the report here.

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Sustainable Prosperity for New England

A.T. Kearney recently prepared a insightful analysis for the New England Council on economic development policies and strategies that the New England region should consider adopting to create greater prosperity in the future.

Several examples of directions to head in are drawn from Southern states, including North Carolina.

Lots of nice graphics included that make you think.

Download the report here.

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ED Salary and Benefit Survey for Mid-American Economic Developers

While a very small survey size, a recent survey by the Mid-America Economic Development Council sheds some insight into economic developers' salary and benefit conditions.

For example, 70% of respondents make between $50,000 and $100,000. Another tidbit: 70% of respondents do not have a contract. One final observation: only 70% of the respondents spend 100% of their time working on economic development activities. I would venture a guess the remainder of their time is devoted to planning or community development activities.

One observation I'd make: we have a long way to go in professionalizing our field and gaining the respect, pay, and benefits that many deserve in this field.

Note: Majority of the respondents work for smaller ED organizations.

Download the survey here.