Term Paper Proposal: Technological Warfare

In a generation categorized by the constant presence of and access to technology, it is safe to say that much of our economy centers around the world of digital media devices (computers, tablets, cell phones, etc.) and content consumed by those devices. Companies at the forefront of the consumer electronics industry like Amazon.com and Apple, Inc. are prime examples of how successful business models and effective marketing strategies can lead businesses through the maze of uncertainties in an industry characterized by its ever-changing nature.  In my paper, I will analyze the business strategies of Amazon.com and Apple, Inc. and show how they attribute to long-term success. As a subset of my broader argument, I will profile the tablet market, and show how these two companies' different approaches to tablet development and sales reflect their overall mission. By examining strategic plans, I will assess what makes or breaks a technology company and what practices can be utilized to secure a long-term footing in the industry.

Bibliography

Carmody, Tim. “Amazon’s Future Is So Much Bigger Than a Tablet.” Wired.com. Condé Nast Digital, 6 Sept. 2011. Web. 17 Nov. 2011.

Carmody focuses on the future of Amazon, discussing its tendency to charge full speed ahead, despite facing criticism from technical analysts. Following its perfection-with-time philosophy, Amazon continues to develop it’s Kindle line and the content pool to back it up, growing stronger and stronger, although not as rapidly as a company like Apple. Carmody predicts not only that the Kindle Fire will be a success, but that Amazon could have a healthy future with prolonged long-term success.

Grossman, Lev. "How Apple Does It. (Cover Story)." Time 166.17 (2005): 66-70. Academic Search Premier. Web. 17 Nov. 2011.

In this article, Grossman profiles Apple at a pivotal point in it’s history—just after the release of the first iPod with video-playing capabilities. The company’s innovation, Grossman writes, is partly a product of its vertical integration, a strategy that, according to Smithian economics, is often inefficient. Its success for Apple lies in the company’s focus on collaboration (everyone works on developing the same product at the same time) and control by the company’s management, which at the time was led by CEO Steve Jobs. Jobs was notorious for pushing the development of products that other people believed would not be successful in the market. Although it is a few years old, this article offers a valuable window into Apple’s central operating method and talks about the success of the iPod, which took Apple to new heights in the market and did for Apple what the Kindle did for Amazon – gave the company a place in history as being the first developer of a certain type of portable electronic device.

Streitfeld, David and Jenna Wortham. “Amazon’s Tablet Leads to Its Store.” NYTimes.com. The New York Times, 28 Sept. 2011. Web. 15 Nov. 2011.

This article has buried within it several pearls of wisdom about Amazon’s long-term development, hitting on more than just the Kindle Fire Appstore, as its title implies. Streitfeld and Wortham reveal that part of Amazon’s business approach is to develop its electronics as “services” with the ultimate goal of using them to sell more of something else – content. For this reason, Amazon can actually take a loss on their devices. This loss for the sake of the consumer aligns with one of the points of Amazon’s four-part strategy, outlined by Ted Treanor in one of my other sources. As a part of their conclusion, Stretfeld and Wortham write: “more than most companies, Amazon thinks in terms of years and decades rather than quarters.”

Topolsky, Joshua. “Nook Tablet, Amazon Kindle Fire ‘mini-tablets’ will shake up market.” WashingtonPost.com. The Washington Post, 9 Nov. 2011. Web. 10 Nov. 2011.

With the release of Amazon’s first tablet e-reader, the Kindle Fire, and the new Barnes & Noble Nook Tablet, Topolsky speculates that “mini-tablets” will have an affect on Apple’s position of dominance in the tablet sector. Topolsky writes that lower prices and better partnerships will result in a revolution of how users think about media content. This article offers an overview of the tablet market, which I will profile in my overall analysis of tech-company business strategies. It can sort of be viewed as a preface to another source, which discusses how Apple and Amazon differ in their company approaches to media content sales.

Treanor, Ted. "Amazon: Love Them? Hate Them? Let’s Follow The Money." Publishing Research Quarterly 26.2 (2010): 119-128. Academic Search Premier. Web. 16 Nov. 2011.

In this article, Ted Treanor examines Amazon.com’s success in becoming an e-commerce industry giant, focusing mainly on the company’s book/media sector, which had an overall profit of $5.96 billion in 2009 (two years after the release of the company’s first Kindle e-reader). He specifically reviews Amazon’s series of acquisitions (18 in book-related fields alone) and how they contribute to Amazon’s push to deliver the best customer-desired content at the lowest prices across the board. Furthermore, Treanor outlines Amazon founder Jeff Bezos’ four-part strategy for the company: customer obsession, inventiveness, long-term thinking, and treating each day as a chance to “start all over again.” Treanor attributes Amazon’s long-term success to its philosophy of customer first, product second and its willingness to sacrifice short-term profit for long-term return.

Wingfield, Nick. “Once Wary, Apple Warms Up to Business Market.” NYTimes.com. The New York Times, 15 Nov. 2011. Web. 17 Nov. 2011.

Steve Jobs, the late chief executive of Apple, Inc. did not have a keen interest in catering his company’s products and services to the business world. However, Wingfield reports, the advent of the iPad and the iPhone have made Apple more of a business-friendly company, with 92 percent of Fortune 500 companies buying and distributing iPads and 93 percent doing the same with iPhones. Wingfield attributes some of this success to consumerization, a pattern in which companies are becoming more receptive to the use of “consumer technology like social media.” Wingfield’s analysis suggests that Apple’s long-term strategy may be shifting somewhat. It is uncertain what the outcome of this shift will be, but it will have an affect on Apple’s future market share.

Growing Up Technological: The Economy of Electronics Markets

I have a confession to make: I am one of those stereotypical suckers for new technologically-advanced portable devices. Despite the fact that I try my hardest not to be allured by Apple's latest iPod or iPad release or Amazon's newest Kindle design, I am inevitably intrigued by the "latest and greatest" tablet or e-reader every single time. Guilty, I know. But, having grown up in the generation of technology, where the Internet is an entitlement and having a cell phone by age 7 is the norm, can you really blame me?

I read a couple of really interesting articles in The Washington Post this morning about the most recent wave of tablet releases and their effect on the national "electronics market."  They got me thinking about how truly fascinating the economics of the electronics industry is and I started asking myself:

• To what extent does competition help or hurt the electronics industry?
• What does it take to change the dynamic within the electronics industry?
• What keeps consumers going back for more?

Competition is the name of the game in a free market economy; it is desired in nearly every market to bring prices down and provide consumers with more options. Case in point: the entire point of airline deregulation (which I researched for my second essay) was to minimize barriers to entry so that more competitors could be introduced into the market and drive fares down. On the surface, it would appear that competition would be both desirable and helpful (as it is in most markets) in the electronics market; however, when you consider that Apple has held a predominant advantage in the tablet market, despite the fact that the industry is overflowing with other tablets produced by a plethora of other companies, you have to wonder if competition is having its usual effect. Why do people consistently buy more iPads than tablets produced by Apple's competitors? Apple is an incredibly trendy company well-known for the innovativeness, quality, and high-performance of its products and, yes, this must play a big factor in people's decisions about who to buy from. But Apple should not be defying competition's "invisible hand" and it appears to be doing exactly that. My theory is that, to some extent, competition hurts electronic markets, because the more choices that are introduced and the more similar they are to one another, the more people are inclined to "just go" with the one made by the most "popular" company. Sort of a "well, if they all do the same thing, then it doesn't matter where I buy mine from" mentality that a dominant company like Apple benefits from greatly.

That could be changing, though, and this brings me to my second question. The articles I read this morning postulate that the emerging key to shaking things up on the tablet scene is the introduction of the so-called "mini-tablets," like Amazon's new Kindle Fire and Barnes & Noble's Nook Tablet. According to one article, these devices are capable of doing about 80% of what the iPad is capable of for roughly 50% of the cost, offering lower-spending tablet cravers a more viable option. Suddenly, the devices being pitted against each other aren't so alike (certainly the differences in hardware and operating systems differ greatly between a device like the Kindle Fire and the iPad). This makes the choice for consumers more difficult and puts price at the forefront once again, reestablishing some competitive balance to the market. It takes something revolutionary, yet still directly competitive with existing products to change the dynamic. Technology writers are predicting that Amazon may have just the revolutionary product needed.

Finally, what keeps consumers going back for more? It is that tantalizing draw that I confessed to being a magnet for at the beginning of my post. The nature of the electronics market is that it is in a state of constant evolution; each new product has only a fleeting moment in the spotlight before it is out-shined by a newer, even better model. The industry benefits greatly from a media advertising culture that tells us we have to own the best or else we are behind the times. To upgrade your products is the only way to stay ahead. That's the true for the developers of these products; why shouldn't it be true for consumers as well?

Wow, this post ended up being longer than I intended, so I'll wrap it up. But I think it would be really interesting to look more into the electronic market phenomenon by examining some numbers from economists. How obsessed are we? What percentage of our economy is dependent upon the success of these sales? What effect does the introduction of new products have on the behind-the scenes folks, such as software writers? All interesting questions that would be fun to answer at a later date. For now, I think I will go check out the Kindle Fire...

Here are the two WP articles. This one is about mini-tablets shaking up the market:

http://www.washingtonpost.com/business/technology/nook-tablet-amazon-kindle-fire-mini-tablets-will-shake-up-market/2011/11/09/gIQAjK5d6M_story.html?hpid=z5

And this one is more of a profile on the Kindle Fire, to give you some perspective on how it will compete with iPad:

http://www.washingtonpost.com/business/economy/amazons-kindle-fire-sets-the-stage-for-major-disrpution-in-tablet-space/2011/09/28/gIQAgotC5K_story.html

Mow the Grass or Put Out the House Fire?

To make up for my struggle to complete everything I needed to at the end of last week (for those of you who didn't notice, I did not have my usual Thursday / Friday post), I decided to include a "bonus" post this week. Pretty much everything I have been following in the realm of economics over the past week and a half has had to do with budget deficits and national debt; for my third paper, I researched and wrote about the significance of budget deficits in determining the overall economic stability of the United States and, as all of you know, our recent class discussions have centered around the ongoing debt crisis in Greece.

Continuing in that vein and fresh off of my research endeavors, I thought some of you might be interested in what the actual significance of deficits in the US is. Additionally, you might be able to use some of the information to draw comparisons to Greece. So...a quick overview: there are two dominant sides in the budget deficit debate. One side, the more conservative, harps on large deficit statistics, strongly advocates for a balanced budget, and fears leaving a legacy of debt to the future (our) generation. The more liberal side views deficits as a secondary indicator of progress, claiming that they take a backseat to more pertinent economic issues, such as high unemployment, foreclosures, and elevated personal indebtedness. Dean Baker wrote that focusing on the deficit projections for the future is like fussing over the yard not being mown when the house is on fire.

What conclusions can we draw (and I know I only gave you a tiny bit of background, but I will link some articles you can read if you are interested)? Basically, the US can still afford to take on debt and not have its economic stability suffer. Deficits are not irrelevant and they shouldn't be left unchecked. But they should also not be viewed out of context. When you consider the broader economic needs we are still facing because of the 2008 crisis, I tend to side with the liberals and say "let's focus on fixing our economy, then worry about cutting down the deficit." Because a strong economy will enable us to do that more efficiently. A strong economy will benefit everyone!

For those of you have been intrigued by my ramblings and wish to read more, here is a great overview about the debt ceiling/deficit debate/debt issues, etc. from The New York Times:

http://topics.nytimes.com/top/reference/timestopics/subjects/f/federal_budget_us/index.html?scp=1&sq=budget%20deficits&st=cse

And here is a great article from Dean Baker that I used for my paper (really fun read!):

http://www.huffingtonpost.com/dean-baker/budget-deficits-and-blow_b_179261.html

Happy reading! Feel free to comment and ask questions. I will follow-up in my post at the end of the week.

Occupy Your Homes and Nowhere Else

Although I don't have the time I would like to follow popular media, I have been doing a moderately good job keeping up with reports on the "Occupy Wall Street" protesters. I found it interesting that the majority of the people participating, according to various polls, including one I viewed in New York Magazine, flat out don't know about what they claim to be protesting against. They don't know the names or terms of certain economic policies influencing their "area of attack," they know hardly any economic terminology, and most did not vote in the most recent mid-term elections. And yet, they are out on Wall Street and in cities across the United States and the world fighting for change. It is my opinion that if you are going to give up an indefinite amount of your time to literally just wait around outside (think of all the other things you could be accomplishing), then you should...at the very least...take a little more time to do some research about the subject of your protest!

I don't mean to make this post a pure rant. I'm sorry I don't have specific articles to offer (I have been quite sick all week, so I'm a little behind in my work and reading and there are too many out there for me to sort through now), but I do think this would be an interesting topic to look more into. What are the specific economic issues the occupiers are attempting to address? Is it purely about too much intervention into the economy by the financial sector? If so, what specific evidence exists to suggest that the financial sector is who we should really be targeting with our complaints?

The bottom line for today is this: I don't claim to know the answers to all of the questions I just posed. But I am also not occupying Wall Street right now. It is my belief that if you ARE going to bring attention to an issue, you need to have an understanding of that issue.

The Insecurity of Social Security

I must begin this post with a confession: I was among the vein of people who thought (some still think) that Social Security was on its way out the door. I foresaw only a disastrous downfall for the program within the next 20-25 years, with a complete stoppage of all benefits. It came as a great relief to find out that, even assuming the Social Security trust fund is completely depleted by 2036 as predicted by the 2011 trustee's report, the program would not cease its distribution of benefits altogether; it would not be able to pay full benefits at the same rate it is now, but it would still function nonetheless due to the fact that it could still draw from its income-tax revenue. Relief, therefore, was my first reaction to Kathy Ruffing's report.

Having said that, after reviewing the information Ruffing provides, I do still have some doubts about the total security of Social Security. Because the demographic of both workers and beneficiaries is constantly shifting, it is impossible to ground Social Security in income-tax revenue alone. Something much more stable must be in place to ensure its foothold, thus the reason there is a trust fund in existence in the first place. The depletion of that trust fund would mean no cushion to fall back on and with no stabilizing mechanism in place, Social Security's effectiveness from year to year would surely falter. So...will benefits stop? No. Will benefits be surrounded by uncertainty and will their amounts fluctuate greatly? Most likely.

It is the changing demographic that most frustrates me. For the most part it seems to me that Social Security has not adapted quickly or efficiently enough to the rapid increase in the average death age and the influx in the working population. Longer life spans mean more individuals simultaneously receiving benefits, which in turn means more payouts for the program. A greater working population would theoretically counter this issue, but flaws in the program, such as the three-year gap between cost-of-living adjustments, have created what I see as an avoidable deficit. If it is not avoidable, it is at least possible to keep it to a minimum.

I also raise my eyebrows at the great increase in people who "qualify" for disability benefits. Although I understand Ruffing's justification, I just don't think that the number of disability qualifiers should have DOUBLED in the last 16 years. You see this a lot: people who needed benefits at one time, but then become comfortable with the convenience the system provides and continue taking advantage of it even after they no longer need assistance. As a part of Social Security reform, I think the means used to evaluate people's continuing eligibility for disability benefits should be examined and modified.

As usual, I don't pretend to know a lot about what I write about on this blog. But writing is intended to stimulate conversation, just as reading is intended to stimulate thought. Ruffing's report definitely got me thinking. Hopefully, this post will get you talking. I welcome your responses.

"People you know"

I don't know much about the financial sector or about the functions of the big banks in our economy. In fact, I learned a lot just by listening to "The Breakdown" podcast. But even with my limited understanding of the so-called financial economy, I feel like I can safely answer the question of whether or not production and the middle-class are "held hostage" by it. And my answer is, simply put, yes they are. As the podcast addressed, there are several underlying reasons for this and you could write a book explaining them in detail. But the most obvious and interesting one to me is that the restructuring of banks has removed an essential part of doing business: people. Personnel and the personal attention they can pay to consumers goes a long way. It's something we've lost with the emergence of international banks that operate in massive downtown skyscrapers and on the Internet. Consolidation and buy-out of local banks has turned an industry that depends entirley on the people's trust and willingness to surrender their livelihood (their savings, mortgages, etc.) into an impersonal business. This to me seems fundamentally wrong.

As was pointed out in the podcast, one of the banking industry's primary functions is the transfer and management of money. Without banks, people would have no central place to store their money and no way to access it whenenver they needed to complete a transaction. A world where everyone stored their money in their homes and had to constantly guess how much they would need to carry with them any given day sounds like complete chaos; thus banks serve a very crucial purpose. But what happened to your central storehouse being your friendly, community savings and loan officer? Whatever happened to the scnerio desrcibed in the podcast where the man interested in opening a pizzaria walks into his local bank and the banker determines whether he is a worhty candidate for a loan based on personal experience? I bank with a local bank in upstate South Carolina, The Commercial Bank, which consists of a headquarters office and four branches. By today's standard, this is like a flashback to the pre 1980 days. The Commercial Bank's slogan is "People you know." I can honestly attest to the fact that I really do know the poeple in my home branch and that the local, "people you know" approach is effective in making me want to continue doing business with The Commerical Bank. I think it is time we returned to the model of banking portrayed in "It's a Wonderful Life," where the bank helps out its patrons and its patrons help out the bank.

I also think that we need to migrate away from the current mindset of play the game to make short-term profits and deal with the consequences later. Wrenching not-yet-realized profits into the present sounds awfully speculative to me and yet banks allow and encourage this! Practices like this ARE bringing our economy down. END OF STORY.

All in all, the podcast a) taught me about the difference in structure of banks pre-1908s and banks post-1980s, b) confirmed my belief that smaller, local banks are better for the economy, and c) made me even more wary of the speculative way we do business these days. Hopefully, history will repeat itself and America will return to the "people you know" montra of the good 'ol days.

Update to 9/27 post

Ok, so the trillion dollar coin idea...AWESOME! Being a movie buff, I find the movie inspirations particularly great. But seriously, why wouldn't this work? It is a solution that injects mega money into circulation for the purpose of helping the government's debt issues that does not involve printing more paper money, which seems to be a big turnoff for a lot of people. And, as Emily said on her blog, 2 of these trillion dollar coins would also be much easier to guard than a large quantity of coins of smaller denominations, which is another option for accomplishing the same purpose. It sounds like a winner to me.

Give the people what they want: more money

Although I had never heard of a babysitting co-op (I didn't know that people actually started those), I was fascinated by Krugman's comparison of the economy to the one in Washington D.C. And I think he is right; I think the comparison is valid and that we CAN learn much from the co-op's recession, as it were.

In reading how the co-op worked its way out of the slump (by simply putting more coupons in circulation), I was reminded again of this notion that a "money injection" or a little bit of controlled inflation may not be a bad idea for our nation. This is something I've pondered since the idea was first presented in one of our earlier readings. If the people have a tendency to hoard something that is in short supply, then wouldn't increasing the supply of that commodity make the appeal to hoard less? I'm aware that too much money could lead to hyperinflation, but might a little do more good than damage?

Many of the writers we have read point out flaws in economic ideology, but I feel like they fail to answer the question of where those flaws come from in the first place. Sumner says that NGDP is not often considered when gathering and reporting on statistics and he makes a very good case for why it should be. But why is it not already? If people like Sumner have these things figured out, why haven't others caught on?

I think the answer to that is that there could be several ways to "fix" economic "problems" like the Fed's practice of inflation targeting. There is no right answer. There are pros and cons to so many different possible solutions. But I think a good starting place would be to at least include NGDP targeting, even if we don't want to shift to it exclusively. In other words, focus on NGDP in addition to RGDP + inflation rate. Focus on all three elements! Sumner may be on to something in suggesting a closer look at and focus on NGDP increase rate, but the current system focuses more on RGDP + inflation rate. Instead of trying to make the system completely alter its way of thinking, just add a piece to the puzzle. It makes sense to me.

Regardless of its failures to see the 2008 crisis coming, I believe the Fed still has an opportunity to repair our economy. I think they need to read Krugman's article and ponder, as I have been, the potential benefits of injecting society with more dollars. Unlike babysitting, the demand for money is not seasonal; until people are confident that it's safe to let go of their precious savings, they will continue to sit on them season after season and that seems like a big negative to me.

The Shrinking Stomach Effect

I like Krugman's notion that one of the dangers of the recession we are currently in, is that the more manufactures decrease and the longer the unemployed remained that way, the harder it will be for the economy to recover. I see the economy like a stomach; once you have undergone gastric bypass surgery, a procedure that (in its simplest explanation) shrinks your stomach, or once you lose a lot of weight in a short amount of time, it is nearly impossible for your stomach to expand to the size it was before the surgery or weight loss.

Since my oldest brother has his bachelor's degree in construction management, I find Krugman's analysis of the housing market and the role it plays in determining interest rates, inflationary rates, etc. especially interesting. My brother was unable to find a job in the construction field until just this summer ( he graduated from college in 2009) and even now his job is in college facilities, not "traditional" residential or commercial construction. I understand if there is a shortage of funds for construction projects and companies are suffering fiscal losses that we simply can't build new homes or commercial high-rises and the like; however, I think it is safe to say that despite the financial struggle, the demand for homes is rising as the population continues to increase. With construction at a low, demand is going to drive the prices of the limited supply of homes up and that doesn't seem like a win for anyone.

On the Sumner post: I agree that Obama should have taken more economic advice from more people earlier in his term. I do not particularly care for the notion that Obama has created a hostile workplace for women at the White House (I was glad to see that Sumner said he was in no position to make a judgement claim). The new book sounds like a toilet-side reader made for the gossip stands at Bi-Lo checkout lines - one of those infuriating rants that are made popular by media hype. I think promoting garbage like this that might give the average American the wrong impression about a lot of things is a negative role played by our media. I would hate to think that this might be John Doe's only look at Obama's economic discussions and policy progress (or lack thereof). But I have turned this into a "face of American media" rant. I guess that's why I am a communications studies major. :)