Archive for February/2010

Even though considered as one of the world’s leading business school, IE has much more to offer than management related degrees as you will find out during the upcoming QS World Arts Fair in Kuala Lumpur, Singapore, Shanghai, Seoul and Tokyo.

… or in case you don’t have time, just browse through the following presentation and explore the links at its end.

On behalf of the entire IE Community – Professors, Staff, students and alumni – we wish you a good start into the Year of the Tiger!

By Fernando Fernandez, Professor at IE Business School

As the decline of macroeconomic indicators finally starts to ease, some can now see light at the end of a tunnel. But we are not out of the woods yet.January has not brought much new information or many original comments. Except, perhaps, the fact that the international press is becoming increasingly critical, to the point of irony, of Spain’s economic policy. And of course we also have Spain’s European presidency which, while Spain continues to systematically breach Community policies (e.g. the sanctions for the takeover of Endesa or resignation in the face of the sanctions that will come as a result of transposing the services directive), is actually daring to ask for a more effective sanctions system. And this despite the years it takes to earn a good reputation in Brussels.

Elsewhere, the main indicators continue their downhill trend (this week we have had inflation, unemployment and industrial production), even if the fall is being cushioned. For some, it is a sign of the end of the crisis; for others, it is a sign of the continued destruction of employment and the industrial fabric. Perhaps the best summary has come from the Secretary of State for the Economy: we will not return to the levels of employment we had before the crisis in the next five years. Nor will we see previous levels of economic activity or consumption or retail sales for some time. And we will have to wait even longer to return to previous levels of tax collected because the flexibility of public revenue has fallen dramatically.

It is also an optimistic scenario and one that implies an automatic pendulum effect. But that effect is an illusion. It does not exist. The economy does not bounce back automatically. For example, the public deficit will not correct itself and the government will have to choose between continuing into further debt with the risk of entering into an explosive situation on markets that are becoming increasingly concerned with the public debt, or seeing sense and proposing a serious plan for fiscal consolidation.

The same will happen with the real estate sector: either prices fall by at least 30% or the excess supply will take many years to be absorbed by a population whose available income is falling as interest rates rise. If we continue to deny the problem and try to save the sector with state-subsidised housing and bookkeeping protection mechanisms, the crisis will last 10 years. Not to mention the financial sector, which is in urgent need of adjustment. Not only does it have problems with stocks, failed assets related to the real estate bubble and the over-eagerness with which certain corporate transactions were financed, but it also has a serious cash flow problem.

Even in the optimistic macroeconomic scenario described above, revenue will fall and costs will increase, a large number of banks will file losses and need injections of capital. Mergers are one way of dealing with the problem, but only if they imply significant reductions of installed capacity and running costs, and a reduction in political meddling in management processes, which is the opposite of what is happening with the consent of the competent authority.

But the worst thing for the future is the potential fall in the GDP, which is the result of a reduction in the working population by a further two million people since the beginning of the crisis. Many economists think that the Spanish miracle was basically due to the incorporation of six million workers. If we lose two million forever, we can only resign ourselves to growing on a smaller scale in the future, knowing that the aforementioned problem will get even worse. The only alternative left now is that of implementing a labour reform to make hiring workers an attractive proposition again.

“Does Marketing Run through your veins?” This was the slogan for this year’s Novartis Masterminds Challenge, a marketing competition sponsored by the leading farmaceutical company with the objective to search for professionals with management skills and passion to demonstrate their talent, lead and execute a marketing plan in the healthcare sector.
Our Master in Management students Kelly Fung (Master in International Management Oct09), Leen Rimawi (Master in International Management Oct09) and Patr Bhalakula (Master in Telecom and Digital Business Oct09) won 2nd prize in this important and challenging competition, and received a cash prize of 4000 Euros. The wining team was from LBS and 3rd prize was awarded to IESE.

It was a two-step Pharmaceutical Marketing Constest in which five Business Schools took part of: IE, IESE, Insead, ESADE and LBS. In the first phase there were over fifty teams composed of three students each that submitted the application. In this step, students had to create a Marketing Plan for the Zelisar brand and design the strategy for managing the Novartis cardiovascular portfolio. Six teams were selected among the fifty to continue with the second phase: the best team of each Business School and the second best team among all. Representing IE were Kelly, Leen and Patr, also the only non-MBA students. The challenge now was to creat the strategy to convert Zelisar (an hypertensive product) into a first line treatment and provide recommendations to improve the health care industry.

The final presentation was held on Jan 29th, in the Headquarters of Novartis in Barcelona, the jury was conformed by some of the members of the PEC (Pharma Excecutive Committee) and Professors from IESE.

“We decided to name the team The Challenger because for us it was a real challenge from the beginning and even until the end…specially because we were the youngest participants and competing with MBA profile students from other recognized universities” said Kelly Fung. The Committee found the proposal from IE´s Master in Management students very fresh, innovative and different from the others and were impressed of finding such young talent.

By Enrique Dans, Professor at IE Business School

Many people use their mobile phone for much more than speaking, with the result that mobiles are now designed to fit well in your hands rather than against your ear. They’re no longer phones. They’re computers.I have always been particularly interested in adaptation processes where technology is concerned, especially those that happen at great speed. And I am lucky enough to live in a time when they happen quite often. Mobile telephones are a clear example: from being somewhat inconvenient and expensive, justifiable only in special cases, we are now in the situation where the number of mobiles in some countries is clearly higher than the number of users. The penetration level of mobile telephones in Spain is greater than 111%. In countries such as the United Kingdom, where it is 122%, and Hong Kong, where it is 150%, citizens presumably carry a mobile phone in each pocket.
However, the way in which they are used is particularly interesting. Many mobile telephone users still use the telephone for its original function, the one that made them start carrying the appliance in their pockets in the first place: making and receiving telephone calls. This would seem logical, except for the fact that any similarity with the “building bricks” that were popular at the beginning of the 1990s is now mere coincidence: today, the appliance many customers carry in their handbags or pockets is, let´s say… something else.

Let´s analyse the way they are used and let´s take two popular appliances, such as the BlackBerry or the iPhone. If we look at their users, what do we see? If we are talking about a BlackBerry, a person who holds the mobile between his/her index fingers in both hands while pressing the keys with both thumbs. In the case of the latter, we see a user who holds the telephone with one hand while moving the index finger of the other hand around the touchscreen. Each form of interaction has its supporters and detractors, but both cases have one thing in common: the mobile spends more time in the user´s hand than next to his/her ear. Many users spend more time reading messages, looking at websites, consulting maps and other operations that require them to look at the screen than speaking on the telephone with the speaker next to their ears and the microphone next to their mouths. This far down the line, the 1989 Fortune article that mentioned the Motorola MicroTAC and predicted that “portable phones won´t get a lot smaller than this one, because after all, they have to reach from your ear to your mouth” brings a smile to our face at the very least.

So why do many users normally use their mobile phone for something other than speaking on the phone, and why are they are designed to fit better in the hand and not next to the ear? The fact that what those users carry around with them is still called a “mobile telephone” is a kind of throwback to its original purpose, because now it is actually something else. What those users carry with them is a computer. Small, but a computer nonetheless: with its microprocessor, its ROM and RAM and its hard drive, etc., offering much the same scope as a computer. Not many people use this type of terminal to write long texts, but replying to an e-mail, searching the web, reading the newspaper, going over the restaurant menu or finding the location of their destination is pretty common. There are still those who buy the latest mobile because “it is very sophisticated” and use it for speaking on the telephone. And there are those who deny everything and say that “the telephone is for speaking on the telephone” and “I´m not going to live life stressed out looking at the screen every two or three minutes”, as if carrying it with them means that they have to check their e-mail and browse the web every 10 minutes. When all is said and done, it is simply a question of adaptation.

Of course, this kind of change needs many other things to change too. It requires a change in data rates to encourage use, and a change in attitude as far as web design is concerned to enable access from this type of appliance. Wanting to log on to your company´s website from a mobile phone and finding that you can´t because it has some absurd piece of Flash is frustrating – try it. Our “mobile telephone” is no longer just a mobile telephone: speaking on the telephone is only one of its functions. The mobile telephone has grown and taken us into another age.

By Prof. Javier Carrillo, Professor at IE Business School

The inability to reach an international agreement which would bring continuity to the current Kyoto Protocol is incomprehensible, from both an environmental and business perspective.After 12 days of intense work, last weekend saw the closure of the 15th Conference of the Parties (COP 15) of the United Nations Framework Convention on Climate Change (UNFCCC), which took place in Copenhagen. Thousands of delegates from 193 countries again tried to reach, again unsuccessfully, an international commitment to the continuity of the current Kyoto protocol when it expires in 2012. Once again, the commitments were postponed and hopes transferred to later negotiations, which will take place later in the year, before the next summit in Mexico in December. The importance of clearing up the uncertainty concerning the post-Kyoto regime as quickly as possible is of great importance not only for the environment, but also for business. The lack of sufficiently clear price indications for reducing emissions after 2012 is having a negative effect on current business decisions concerning investments in mitigation measures, increasing risk premiums and the cost of finance. The continued postponement of national commitments and the resulting lack of decisive action by companies have particularly negative effects on capital-intensive sectors, such as electricity, in which investments must be made over a timeline of between 25 and 30 years. In this context of relative uncertainty, the predominant attitude among businesses will continue to be that of diversifying their activities for controlling emissions, including the purchase of emission rights and involvement in the clean development mechanism, where applicable, depending on the costs of the various options. There will also be greater emphasis on the lines of business that are profitable regardless of whether or not emissions are reduced, but may as well reduce the emissions anyway. The uncertainty is also causing a delay in more important investments, which, paradoxically, will prevent the assumption of more demanding commitments to reducing emissions in the future. Alternatively, if the tighter restrictions are adopted later, the time lost will mean greater investment efforts, which will undoubtedly imply higher costs for reducing emissions than if the reduction process had been more gradual. It is necessary to make urgent and significant progress in the definition of a post-Kyoto system in at least two directions. There is an urgent need to define and agree on emission reduction targets on an international scale, as well as the mitigation instruments designed to ensure said targets are met. In particular, there is a need to guarantee continuity and extend the scope of the international emissions trade system provided in the protocol itself, in order to meet global reduction targets at a cost lower than that of other direct regulation instruments. Accordingly, in environmental but also in business terms, it is appropriate for the European Union, and Spain as a member state, to continue to lead the negotiation process to reach an international post-Kyoto mitigation agreement within the framework of the UNFCCC that provides those two basic elements: targets and instruments. In short, generic, non-binding commitments are not suitable for guaranteeing an attractive context for investment in new technologies and mitigation projects. Establishing targets and instruments sufficiently in advance plays a key role in providing a long-term indication of the price of carbon. If the aim is to meet the targets set in the current system, it is both urgent and essential to convince investors these targets will be maintained.