Archive for September, 2008

Last week, my small local bank collapsed under the press from the global finance crisis, falling house prices and a building industry in deep problems.

In the wonderful country of Denmark it has been 20 years since we last time used the word crisis. We are not custom to this state and we live in a disbelief and small terror. All the news medias talk about it daily – and all the noise makes more noise.

It is big numbers, big worldwide consequences and internationally concerning – but hardly something the average person should put so much on his mind as he has now.

Loans will be more expensive, unemployment will go up, inflation etc. But it does not change the world for the common Dane.

“One person’s death is another person’s bread”

There are many sayings for bad times – another one is “nothing is as bad, that it is not good for something”. One industry is having good times – as they have had it during all the crisises before now. During times of trouble, people eat chocolate!

It can be hard to believe, but no matter how poor people become there is no reason to not take the wonderful luxury of chocolate. BBC News have investigated the phenomenon and found some interesting conclusions.

Maybe I should consider the chocolate business? !?

See the broadcast from BBC online here (opens in new window)

I have up to recently been living in Vilnius, Lithuania, and developing my company Imaginess. That was of course not the sole reason for me being there – it was of course because of my Lithuanian fiancée.

We just moved to Copenhagen and continue running the company.

As I was in Lithuania, which is a “emerging market”, I was looking around and considered many business concepts and models that had great success in Denmark and considered if the same success could be gained in this market.

I believe many entrepreneurs and companies have used this tactic – but not always with equal success. It is surely not given, what works in one country also works in another.

There are a few fits that needs to be considered. Some are:

– Culture

– Technology

– Need

– Competitors/substitutions

– Size

An example of a “business transition trap” is the huge market for web shops in Denmark. Everybody buys all kind of stuff online. In Lithuania only a very small percentage have a credit card that can be used to paying online. Often people borrow credit cards to be used.

Many people walk around with debit cards which cannot always be used as payment online. This is a significant risk and challenge for any online business in Lithuania.

Seeing at Lithuania, the biggest general challenge for many West European business models is the size and purchase strength of the businesses and consumers in the country. Only a very limited amount of the 3.5 million people have the money to buy things more than basic needs.

So from this can be learned. Going to an emerging market can be tough. Sometimes the business will have a tough start as the technology and growth (purchase power) emerges. But first mover advantage is always a big strength toward coming competitors. With a long enough horizont, this is mean the difference between failure and succes.

The end of a 1.400 year old family business

I think a great way to start this blog is by looking back. Looking so far back that things like marketing, advertisment, HR, corporate social responsibility didn’t exist.

Have you ever wondered, what the oldest existing business is? Can you guess?

The world’s oldest continuously operating family business ended its impressive run 2 years ago. Japanese temple builder Kongo Gumi, in operation under the founders’ descendants since 578, succumbed to excess debt and an unfavorable business climate in 2006.

Few industries could be less flighty than Buddhist temple construction. The belief system has survived for thousands of years and has many millions of adherents. With this firm foundation, Kongo had survived some tumultuous times, notably the 19th century Meiji restoration when it lost government subsidies and began building commercial buildings for the first time. But temple construction had until recently been a reliable mainstay, contributing 80% of Kongo Gumi’s $67.6 million in 2004 revenues.

Keys to Success

Kongo Gumi also boasted some internal positives that enabled it to survive for centuries. Its last president, Masakazu Kongo, was the 40th member of the family to lead the company. He has cited the company’s flexibility in selecting leaders as a key factor in its longevity. Specifically, rather than always handing reins to the oldest son, Kongo Gumi chose the son who best exhibited the health, responsibility, and talent for the job. Furthermore, it wasn’t always a son. The 38th Kongo to lead the company was Masakazu’s grandmother.

Another factor that contributed to Kongo Gumi’s extended existence was the practice of sons-in-law taking the family name when they joined the family firm. This common Japanese practice allowed the company to continue under the same name, even when there were no sons in a given generation.

So if you want your family business to last a long time, the story of Kongo Gumi says you should mingle elements of conservatism and flexibility—stay in the same business for more than a millennium and vary from the principle of primogeniture as needed to preserve the company. The combination allowed Kongo Gumi to survive some notable hard times, such as when it switched temporarily to crafting coffins during World War II.

Burst Bubble

The circumstances of Kongo Gumi’s demise also offer some lessons. Despite its incredible history, it was a set of ordinary circumstances that brought Kongo Gumi down at last. Two factors were primarily responsible. First, during the 1980s bubble economy in Japan, the company borrowed heavily to invest in real estate. After the bubble burst in the 1992-93 recession, the assets secured by Kongo Gumi’s debt shrank in value. Second, social changes in Japan brought about declining contributions to temples. As a result, demand for Kongo Gumi’s temple-building services dropped sharply beginning in 1998.

By 2004, revenues were down 35%. Masakazu Kongo laid off employees and tightened budgets. But in 2006, the end arrived. The company’s borrowings had ballooned to $343 million and it was no longer possible to service the debt. In January, the company’s assets were acquired by Takamatsu, a large Japanese construction company, and it was absorbed into a subsidiary.

To sum up the lessons of Kongo Gumi’s long tenure and ultimate failure: Pick a stable industry and create flexible succession policies. To avoid a similar demise, evolve as business conditions require, but don’t get carried away with temporary enthusiasms and sacrifice financial stability for what looks like an opportunity. These lessons are somewhat contradictory and paradoxical, to be sure. But if sustained success came easy, then all family businesses would have a 1,428-year run.

Source: Business Week, April 16, 2007

Hello world!

– and welcome to my new homepage design and layout.

Let me use the first post to write a bit about the purpose of the site here. First of all, it is my personal domain and therefor my personal site. The purpose is partly to present me and partly for me to express and debate my views on current business, management and marketing topics.

If you want to know more about me, then please go up in the menu and select the area of your interest.

I have an educational background as business development engineer from Aarhus University in Denmark and I have a MBA in innovation and international marketing from Baltic Business School in Kalmar, Sweden. So, this is my acedemical background. On top of this, I have a strong personal interest in marketing and business management theories.

So this blog will present some old theory known from people like Porter, Kottler, Hammel to name a few. I will attempt to keep most of the references used correct and to the respect and honour of the author.

My final hope for the blog and my writing is, that someone will read it – and enjoy my perspectives – and comment on my articles, wrong or right.

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