Toyota, the just-in-time spirit is alive and well

IE Focus | By Daisy Escobar, Professor at IE Business School

Toyota has been shaken to its very foundations by the mechanical faults detected in some of its models, but it has managed to react fast, with improvements that are reminiscent of its just-in-time breakthrough.A company with faulty products is nothing new. Situations in which the fault affects its products en masse are not quite so common, but the business annals now contain several notorious cases, some of which have been solved more successfully than others.

The problem is therefore not a new one. The difference lies in that it is happening to Toyota, the company renowned for manufacturing fault-free products, that demonstrated the cost of ´no quality´ and that continuously works to eliminate any kind of wastefulness. Indeed, the concept of faulty product is what the company focuses on most in order to eliminate it from its plants. Toyota invented the famous poka-yokes, the alarms and controls that warn of errors so that they can be corrected before they become faults, in other words, before they are found by customers.

The mechanical problem affecting the accelerator pedals on some of its models and the brake pedals on others has struck the very heart of Toyota´s ideology: its commitment to quality. The company has not had long to wait to feel the effects of the problem: more than ten million cars recalled for a service; around two million dollars in costs (estimated figure); and a somewhat tarnished image as far as its customers are concerned

Details

Mobiles and children

IE Focus | By Enrique Dans, Professor at IE Business School

If you still think the main purpose of your mobile phone is voice transmission, and you can’t understand why younger users seem permanently obsessed with their mobile screens, then you are missing out on something.For those of us who are at a certain age, it is a challenge for the memory to put some perspective on the technological advances we see as completely normal and as an intrinsic part of our everyday life today. One of the best examples is the mobile telephone, a device that has found its way into thousands of millions of pockets of people all over the world who never leave home without it. 

One recent study in the United States shows that the average age at which children get their first mobile telephone has now fallen to 12 years. Depending on the purchasing power of these children´s families, the penetration levels in the upper-middle-class segment are higher than 87%. If we look back in time, many of us would find it hard to remember that when we were 12 years old, not only did we not have a mobile telephone, but there was also no possibility of us having one. Not only that, the vision of anyone speaking apparently on their own in a car or while walking down the street would have made us immediately think that they had some kind of mental problem. The telephone was a device connected to the wall by a cable, with two different parts joined together by a coiled cable. It had a dial (show one to today´s children… they take knowing what to do with “that” as some kind of challenge) the use of which was also strictly limited as far as we were concerned. 

Details

The future of the Chinese economy

IE Focus | By Rafael Pampillón, Professor at IE Business School

One of the major landmarks of the 20th century has been China’s spectacular awakening, but the country now faces a series of challenges that will require deep change to maintain rates of growth.The economic boom in China is one of the most important events of the 21st century. The boom has come on the back of China’s great demographic potential (with a population of 1,350 million), its high internal rate of saving and the way it has opened up to the rest of the world, turning it into the biggest exporter on the planet. 

Since 1978 the economy has been gradually freed up and prices have been progressively deregulated. There has been encouragement for foreign investments and the private ownership of businesses has been made legal. In 2001, foreign trade was deregulated when it joined the World Trade Organisation. Since then, China´s trade relations with the rest of the world have grown spectacularly.

As pointed out in a recent article by Enrique Fanjul, former trade director of the Spanish Embassy in Peking, China´s economy still has an unquestionably high level of state intervention and state businesses continue to play a key role. However, it cannot be considered as a socialist economy: most of the production takes place under private-sector conditions and products are marketed at free prices. There is a tendency towards a growing importance of private players in the economic system

Details

Apple and Google in the headlines

IE Focus | By Ricardo Perez, Professor at IE Business School

Apple and Google go head to head in the race for mobile dominance. Apple is pushing for pay-per-click services while Google defends flat rates.Apple and Google have been making the headlines with revolutionary product launches these last weeks. American news programs once again held Steve Jobs up as as a champion of innovation, design, envy, advanced technology and anything else you might like to name.

Meanwhile, the boys at Google haven’t been idle. They have launched their own telephone to compete with the iPhone and Nokia and RIM (Blackberry) intelligent phones. What started out as a close collaboration and agreement between companies trying to “reinvent the game” in their respective markets is now morphing into direct competition. Their view of the growing convergence of communication networks, technologies and social behavior leads to collisions in key markets like content consumption, mobile technologies and entertainment. Let’s analyze their collision courses.

Details

PwC/IE Public Sector Center underscores the role of innovation in a sustainable economy

The PwC/IE Public Center presented ‘Towards a sustainable economy’, a report focused on the role of innovation in promoting a sustainable economy, environment and social well-being. The report was authored by IE Business School professors Javier Carrillo and Totti Könnölä, and Pablo del Río of CSIC, an included a prologue by Jordi Sevilla, senior advisor…

Details

Spanish Real Estate – Promotors of the crisis

IE Focus | By Barbara Huerta, Professor at IE Business School

Real estate promoters have been largely responsible for the crisis that has affected their sector so badly, and now they are finding out exactly where their business plans went wrong.´Own less to owe less´. With these words, Rafael Santamaria, CEO of Reyal Urbis, summed up his new business strategy at the end of 2008. The liquidity shortage and extremely high debt payment commitments meant that all real estate companies in the country had to let go of their assets. But how did this change in fortune come about in a sector that was heavily in debt only two years before taking on ambitious corporate projects? With a view to answering this question, I did a research project that led to my writing the book Promotores de la Crisis (Promoters of the Crisis) (Lid). In the book, I analyse the impact of the international financial crisis on the financial system and real Spanish economy and its impact on leading Spanish real estate businesses. 

When did they start to blow air into the real estate bubble and why? Everything began with a positive macroeconomic environment, low interest rates and consumers who wanted to consume. But could such an illusion ever have been maintained indefinitely? We would soon see that it couldn´t. Those responsible for the monetary policy, albeit somewhat late, took measures to prevent overinflation by upping the interest rates. What would happen when the higher rates translated into an increase in the financial burden on homes and enterprise? The highest rates reduced the amount of income available to families. In addition, from mid-2007, families that were overwhelmed by the credit crisis started to encounter difficulties in obtaining mortgage loans and consumer credit. Liquidity was short, prices were still high, there was a general lack of confidence and the outlook for the deceleration of the construction and real estate sector was less than optimistic. 2008 confirmed expectations: the situation was getting worse.

Details

Imperfect markets

IE Focus | By Enrique Dans, Professor at IE Business School

The barriers to entry that have plagued the music industry for decades have made it the perfect example of an imperfect market. The internet can put an end to this situation, but there are plenty of people who don’t want it to happen.An imperfect market is when the supply and demand are conditioned or altered so as to prevent normal development. Imperfect markets are often the result of monopolies, exclusivity, obstacles, blocks, etc. caused by many situations that usually lead to inefficiency.

One typical example is the music market. For many years the supply was conditioned by the “selection” process that a small number of leading record companies applied to talent. You could be a genius, propose something that was original and interesting or sound incredibly good, but if you did not pass through the record company´s filter, it was more or less impossible to access the market. The filter could depend on the mood of the person listening to your demo, your sponsors, all kinds of commercial criteria or even what you were willing to do to pass the first stage of the selection process, but if you did not pass it, your possibilities were very low indeed. The capacity for self-production was minimal, the capacity for distribution was almost zero and for promotion it was just pie in the sky: demand was also controlled and manipulated through access to the media.

Details

A… telephone?

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…

Details

Hedge funds and short sales. An open debate

IE Focus - Hedge FundsIE Focus | By Rafael Hurtado, Professor at IE Business School

The collapse of the stock market has highlighted the shortcomings of the hedge fund system of short sales and fuelled debate on the need to set limits and rules for this type of operation.In recent months, and in particular after the great crash of the stock markets as from September 2008, the hedge fund system of short sales has been a subject of analysis and debate by many players on financial markets. The consequences and system of short sales are a source of great controversy in the financial sector.

Short sales take place through the loan of securities. A short position (short sale) takes place through the sale of an asset that is not held by the investor, but borrowed through an intermediary and later bought to pay the loan. The profit is obtained if the initial sale is completed at a higher price than the purchase price. With a short sale, the investor obtains greater profit if the price of the asset falls.

On many occasions, hedge funds not only involve short sales, but also use a significant amount of leverage. For a short sale, an intermediary must lend a certain number of shares. Some companies say that they have uncovered signs of their shares being lent as part of a chain. This type of transaction involves further risk.

Details