Situation Assessment: Today’s Economy

17 June 2009
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I think this time of accelerated economic transformation and creative destruction is presenting incredible opportunity for strong management and strong strategy. Whereas most mass media talk about the economy as a monolithic entity, it is not, and that is also not a productive view for a person to take. The economy is a landscape of peaks and valleys – a varying terrain that offers rewards to those who know how to navigate it.

I ground my consulting work by starting with a discovery process, to assess the situation. Having read a fair amount about positive thinking and positive leadership in the last few years, I found myself last October needing to keep my mindset positive, since I wasn’t able to do that with mass-media news. So, I started looking for news clips that I could use to focus on things getting better, and people getting rewarded for navigating their market landscapes effectively.

I thought a good place to start this blog would be to share those clips, which together form a kind of Positive Situation Assessment on today’s economy. For me, these facts show (1) how there continues to be opportunity for businesses to succeed, and (2) how management, strategy, and business evolution make a difference in the big picture.

In these times, success is earned, and deserved, and comes from talent, hard-work, skill, and experience. So, when I look at the news clips below, I see two things: (1) management teams who are managing their opportunities and their businesses effectively, and (2) opportunity for each of us to capitalize on.

Here is what I found:

  • Based on the official unemployment rate, about 90% of U.S. workers have a job. If you use a more realistic number (see www.shadowstats.com, it’s still 80%.
  • Businesses hire about 4MM people each month (it was 4.4MM in January and 4.2MM in November). 2MM people quit their jobs in January to pursue better opportunities. (http://www.bls.gov/jlt/)
  • Sales of jeans were up 2% and tights were up 11% in the three months ending in February, according to NPD Group.
  • Over 80% of small-business owners with less than 100 employees expect 2009 sales to be up or about the same as 2008, according to the Ad-ology Small Business Marketing Outlook. 26% plan to spend more on advertising – especially online – and another 60% plan to spend about the same as in 2008.
  • IBM earned a profit – profit, mind you – of $4B in 4Q08, and has projected a profit of about $13B in 2009
  • McDonald’s same-store sales in the U.S. were up almost 8% in November, during the height of the credit crisis last year.
  • NetFlix ended 2008 with 25% more subscribers than it had at the end of 2007. As a result, revenues for 4Q08 were 20% higher, and profits were up 45%.
  • Hershey’s 4Q08 profits were 50% higher than 4Q07.
  • In December, Starbucks said same-store sales were running at normal levels in all but 5 states, with higher demand in northeastern states.
  • People spent almost $7B at Amazon in 4Q08, and Amazon’s free cash flow for the quarter was up 16% to over $1B
  • Michigan-based Perrigo Co. had sales about 30% higher in 4Q08 than the year earlier.
  • Wal-Mart sales were 2% higher in January than the year before.
  • People spent about $7B on Coca-Cola products in 4Q08, and Coke earned about $1B in profit
  • RIMM, the maker of Blackberry, announced in 1Q09 that it is recruiting 3,000 new workers to keep pace with demand.
  • Nestle’s food and beverage business grew 8% in 2009.
  • Sales of certified pre-owned vehicles for 7 luxury brands were up about 30% in January, according to the Wall Street Journal.
  • People spent over $2B at upscale retailer Nordstrom in 4Q08, and the company made $68M in profit.
  • In 4Q08, Northern Trust Bank saw the biggest increase in private-client new business since 2000.
  • U.S. spending on search-engine marketing will nearly double from $12.2 billion in 2008 to $23.4 billion by 2013.
  • Credit card data from J.P. Morgan Chase showed that cable TV spending and book sales were both up year on year in 4Q08.
  • Nielsen reported recently that not only did the percentage of households paying for TV go up through 2008, but the portion subscribing to premium extras like HBO or digital video recorders also increased.
  • According to the Wall Street Journal, business is booming for people who record telephone messages that bill collectors use to pursue delinquent customers. One such professional is doing 4 times the business she was in 2007.
  • In February, Wal-Mart’s U.S. sales rose 5% and climbed 5.9% at Sam’s Club. Grocery, health and wellness items and entertainment led the gains, with home products and hardlines goods also posting positive results. At Sam’s Club, sales were driven by fresh food, dry grocery and consumables. Shoppers’ eating and entertaining more at home lifted housewares sales. Family Dollar Stores Inc.same-store sales jumped 6.4% in February. (Andria Cheng, MarketWatch)
  • Teen retailers saw good results in February.  Hot Topic Inc. said sales jumped 11%, more than double analysts’ average estimate. The Buckle Inc, also a teen retailer, posted a 21% jump in sales. Aeropostale Inc. saw a better-than-expected 11% jump in sales, helped by demand for its spring merchandise (Andria Cheng, MarketWatch)
  • Exxon-Mobil Corp. will boost spending on energy exploration and production by 11% to $29 billion this year, according to the Wall Street Journal.
  • People spent about $3B on ConAgra’s food products in 4Q08, up 6% from the year earlier.
  • Michigan-based Online Tech grew revenue by about 30 percent and hired 10 people in 2008, according to the company. (Crain’s Detroit)
  • People and businesses spent $5B on Eli Lilly products during 1Q09, with US sales rising 13%. (Wall Street Journal).
  • People and businesses spent $5.5B with Google in 1Q09, up 6% from last year.

Murray Rothbard, Austrian-School economist, said, “The depression, then, far from being an evil scourge, is the necessary and beneficial return of the economy to normal after the distortions imposed by the [credit-induced] boom. The boom then requires a bust.”

So, we are leaving the time of debt-based consumption and financial-alchemy economics that supported unneeded businesses and poor management for too long. As a management consultant, that seems like a good thing. There are lots of businesses and managers creating and capitalizing on new opportunities – and this economy is creating more good opportunities, businesses, and managers every week. I’m looking forward to benefiting from their success, and contributing how I can.