Monthly Archives: August 2007

Chocolate, Flip Flops and Toys

Well a busy day for recalls, also a rather gross day. 

Now I never think of China when I think of chocolates but then that’s just me.  But for some unlucky shoppers in South Korea, they found a little something extra in their chocolates and it wasn’t a caramel center.  It was worms.

  

This is just breaking so it is hard to say where the worms entered into the chocolates, but it is still raising questions and the manufacture’s less than up front stand, only raised more questions.

  

A woman bought some flip flops from Wal Mart, only to experience what she says is basically a chemical rash burn on her feet.  According to some news sources, Wal Mart is finally pulling these off the shelves.  You can view the woman’s site, but I’ll warn you, it’s kind of gross at times.  

And finally, paint sets and crayons are being recalled, again, made in China.  I’ve lost count of how many children’s items have been recalled but the fact that it is in the millions already, is shocking enough.  And the fact most of the Christmas toys are already on their way, means we can probably expect a lot more.    

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Filed under Branding, Business, China, Consumer Activism, Consumerism, Customer Satisfaction, Food, Globalization, Health, International Trade, Marketing, Recalls, The World, Trade

Hedge Fund Managers Top the Earnings List

Often people attack CEO’s as being over paid, and that may be true for some, but in comparison to private equity and hedge funds, it looks like peanuts.

 

Hedge funds and private equity firms often pay the 15% federal capital gains tax rate, they do this by claiming their earnings as capital gains not income.  So they pay about the same tax rate as someone who makes between $7,500 and $30,600 dollars in income.  If the hedge funds and private equity guys were paying at the rate the CEO’s get paid, that would be an additional $6.3 billion dollars in taxes.  The average income of the top 25 hedge fund managers was $570 million, each.  The total compensation for all the top 100 paid CEO’s in my state of MN was $397 million, that’s combined, not each.

 

Hedge fund and private equity firms are lobbying hard to keep them from paying their share of the taxes in income that the rest of us do.  We know it is income, that 5% fund management fee is income, not capital gains.  The profits they make on the investments are income, unless it is their money, then it is capital gains but the rest is income.  They also get paid a lot more than most of us do.  Do you really think someone who makes $570 million should be paying less of a percentage in tax than the secretary?  I don’t, write your congressmen and senator and tell them to ensure these guys pay their share in taxes.  There is no reason they should not be paying the same as the CEO’s pay. And here’s more of a reason why I think so.

 

There should also be tighter controls on these industries as we saw with the credit scare two weeks ago, hedge funds making bad investments were at the center of this.  Essentially what they did was, they went to Vegas, gambled and lost their shirt, when it came time to pay up their real bills, they didn’t have anything to pay them.  So they ended up having the government bail them out to the tune of a few billion.  So an additional $6.3 billion in taxes out of them sounds like a fair trade to me.  If we have to fund their mistakes, they should have to pay at the federal rate of salaried people.

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The Toxic 55

A fellow WordPress blogger has put together a list of the “55 Famous Toxic Foods From China.”  Worth a look since this blogger does focus a lot more on China than I do.  I’ve been reading his blog for a while and what he says is often inline with independent source of my own.

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Filed under Business, China, Consumer Activism, Consumerism, Food, Globalization, Health, International Trade, The World, Trade

Flamenco

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The Mattel Recall

Brand is the big key in marketing and business these days; it is how you interface with customers.  Everyone interacts with your brand on a daily basis in the consumer goods world.  But what happens when you screw up and the mask is pulled back and we find, the brand is more smoke and mirrors than reality? 

 

I saw the interview of the Mattel CEO talking about “our products.”  I had a little smile on my face when I heard that, because they don’t actually make the products, they manage the brand!  As long as nobody looks beyond the brand the illusion works just fine, but when you have a major screw up like millions of toys being recalled, people are going to look beyond the brand and take a close look at the nuts and bolts and realize, there is a disconnect between brand and product.  Mattel is not a toy manufacturer anymore; they are a branding company of toy products.  They used to make toys, but in the case of the recalls items in question, they are a branding company, must like Nike is.  The design a toy, send it off to a 3rd party who manufactures that product, that’s Mattel.

 

There is nothing wrong with being a brand company as long as you have a good brand message that is authentic to who you really are.  But in this case, it appears many consumers do not see Mattel as a brand company but a manufacturing company, it may really come back to hurt Mattel.  Mattel built its brand on the good name of its past.  The brand said “you can trust us to make quality toys for your children that are safe and reliable.”  We all grew up with a Mattel toy, we all have fond memories of those toys and Mattel knows this and plays it up.  That’s why it cost them 35 cents to a dollar to have made a Barbie doll yet sell it for $20 to $40 dollars.  The brand works well enough to demand that kind of mark up.  But now, we see the brand and the product are not the same.

 

Over the weekend I had my Google alert going to see what people were saying on this recall issue.  A lot of people feel mislead.  They feel they were lied to and they don’t like it.  Mattel was supposed to ensure quality and it didn’t.  Mattel created the image that they product their products, when in fact they do not.  People have a right to be mad at Mattel, they built up this brand relationship with consumers and now that image they painted for people looks a lot like a forgery. 

 

Keep in mind, Mattel is NOT the only one doing this; I am only singling them out because they are the latest to get caught.  I remember shopping for kitchen appliances last month and seeing a logo on a product that said “An American Company!”  It had American flags on the box and gave the impression that the product was American made.  But on closer inspection, it was made in China.  So this is not just Mattel, this is pretty widespread; I just don’t have the resources to go into it all.

 

The root of the problem is two fold; one is the race for the bottom in terms of cost.  This has pushed manufacturing overseas and into 3rd party producers to lower costs.  The more this happens, the more the brand image becomes important.  Nobody thinks of China when they remember their memories of playing with Hot Wheels or Barbie, so the brand becomes more an illusion than reality but at the same time it becomes more important as a means to sell the ideals the company wants to express, not so much the reality.  The benefit is profits.  Remember 5 years ago, Mattel had some rocky numbers, now they are doing just great.  This is mainly because of the lower cost of production.  Instead of producing goods themselves, they outsource it, it costs them less yet I believe the prices haven’t gone down, so no savings for consumers. 

 

So you have another corporate victim of their own desire to reduce costs without thinking things through.  Many consumer posts I read said they will not by Mattel products and want American made toys now.  I some how do not think Mattel is going to build a plant in the US to meet these new consumer demands.  Which raises the point that the brand is an illusion and the real goal is profit, not toys.  Now don’t get me wrong, I do know the people at Mattel and many of them love the toys they help sell.  It is not Mattel as this bad apple in the bunch.  It is the system itself where the big box retailers demand low prices and something has to give.  The leadership at Mattel could have taken a stand and not shipped jobs overseas and risk not having their products sold in Wal Mart or Target.  Now thousands of jobs are at risk as a result.  That’s a hard pill to swallow as a CEO.  Which leads me to the other root cause.

 

As consumers, we have a power to influence the market.  Cheap products are great, I like a deal like anyone else.  But we have to look at the situation beyond the basic cost up front.  A study years ago, showed that those cheap bikes on sale at Wal Mart for $100, lasted a year or two.  An American bike for $300 would last years.  At the end of 5 years, the American bike with the higher price tag up front ended up costing less in the long run.  The repair and replacement cost of the cheaper bikes ended up costing more.  Low prices alone should not be your driving factor.  If you want to save money, think long term use.  A quality made product with a longer life is often going to save you money in the long run.

 

Also, think about where you money goes.  I always buy local, I like to go to lunch at locally owned restaurants, for example.  Why?  Because more of the money is staying locally.  Even better is the place that sources their ingredients from local farms.  When you keep your money local, you help improve the quality of life over all.  When you buy, think about where they dollar is going and how it is going to be used.  Is it going to China?  Wal Mart’s bank account?  Or the local shop owner who is then going to turn around and use that dollar to buy something else locally?  The latter often helps a lot more for you and your community.  Be proactive in your consuming of products!  Be an informed consumer, because informed consumers make informed decisions, and that will help prevent another Mattel situation.

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Not Made in China

A lot of people who are shopping for school clothing and supplies, are telling me how tired they are of everything being made in China.  They are just worried, are they sending their kids off the school with something that could harm them?  Well now you can buy your kids, or yourself, a shirt that is Not Made in China and makes a statement at the same time.  I love this idea! 

 Buy a shirt and make a statement! 

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Don’t Ask China to Change

We have seen a lot of recalls of products made in China this year, a lot!  The latest million plus product recall from Mattel just being the latest in a long line of and certainly not the last of recalls of China made products.  At this point we have reached a critical mass in terms of awareness and demand for changes in the system.  Many people around the world are now realizing just how little inspection is done on products being shipped.  Living in the US, I’m more concerned with the US market.  I expected the US government to do something to ensure confidence is resorted in imports yet they took the path of least resistance and of least impact. 

 

The US government decided the best course of action was to ask China to clean up the growing problems it has with bad imports.  And that’s it.  Now I do think it was the right thing to do to tell China they should clean up their mess, environment, air quality, etc…  But I think it was very wrong and reckless to stop at that.  The job of product safety is the job of the companies that import and the government that allows those imports into the country.  Instead it is now currently up to foreign companies and foreign governments to maybe play nice and follow our rules, a hand full of over worked inspectors and the consumers.  Essentially, buyer be beware is our import policy in the US now, a major step backwards.

 

I don’t have my figures in front of me but I worked out the number of daily and hourly shipments each US inspector would have to inspect at the current levels of inspectors which is decreasing.  It was in the thousands of shipments daily in order to inspect them all, which clearly is impossible to do.  So we have a government that isn’t doing its job of looking out for the citizens.  Understaffing our inspectors is bad for business as confidence erodes.

 

Companies claim to check for quality, but most do not tell you how they do it or make that information available to consumers so you just have to take their word for it and that’s just not good enough anymore.

 

The system and confidence in the system will not fix itself.  The response by government and corporations who choose to import is far lacking.  Consumer confidence is going to suffer and with it so will the economy and government and importing corporations will be the real root of the problem, NOT the consumers and not China.  Why not China?  Why are they going to change if we don’t change the rewards and consequences?

 

China is not going to change because we ask.  It is not in their interest to change if nothing else changes.  Consumers should act in their own interest and not buy from any company that is not open about where their products come from and how those products get to the consumer and the quality of the product and ingredients in them.  That’s how consumers impact change.  Corporations understand that mobilized consumers do take action and do impact profits.  Never sit back, always be mobilized, that’s your job as a consumer!

 

The government needs to get to work on restoring consumer confidence.  The best way to do this is hire more inspectors and ensure all imports are inspected and do meet the standards of this country.  That way, consumers can be sure they are buying something of quality and of authentic origins.  You can’t expect another government to do this.  If China or anyone else ends up with a lot of rejected products as a result, that’s their problem to fix, not ours.  Just as it is not their problem to fix our import issues.

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