Wednesday, July 28, 2010

A Tale of Two CEOs

Recently, there have been two very good examples of the perceived importance of CEOs: Steve Jobs' dealing of the iPhone 4's antenna issues (not to mention the way he has turned around Apple since he re-joined them over 10 years ago) and Tony Hayward's imminent departure from BP are two examples that seem to suggest that a CEOs actions can make or break a company. While the example of Jobs is clearly that of a CEO having a positive influence and Hayward's is an example of the negative influence of a CEO, they both suggest that a single person, at the top of a company, can have a disproportionate impact. The question that then arises is - is this true or not? Is Apple's success due to Steve Jobs? Is BP's failure Hayward's fault?

The truth is that it is impossible to say how much of a company's situation (positive or negative) can be attributed to factors associated with its CEO. Is a company's success attributable to its CEO or merely a result of circumstances? While, for obvious reasons, it should be impossible to conclude how much of a company's situation is directly the result of a CEO's actions, it seems that everybody has concluded that the role of a CEO is of paramount importance - the public, which has been demanding Hayward's head ever since the spill begun; the boards that decide to pay CEOs vast amounts of money; and shareholders who often make investment decisions based on management teams.

The importance of a good CEO and management team is undeniable but what is often ignored is that successes (or failures) that are sometimes attributed to the company's leader may simply be a result of context rather than personality. Will BP be better able to clean up the Gulf and its image now that Hayworth is no longer there? Are people willing to buy the iPhone 4 in spite of its call-reception problems solely because Jobs says that it is not that big of an issue? I, for one, am not so sure...

Monday, July 19, 2010


While Apple is seen as a company that produces great, stylish products, it has seemed (in the last decade or so, at least) that what Apple represents is more important than the products it manufactures and sells. The case of Apple's relatively recently released iPhone 4 is an example of this: it has becomes Apple's most successful product launch ever in spite of the fact that what apparently makes it so great is the fact that it finally encompasses several features that competing phones have long had (removable memory, multi-tasking applications, etc.). There has long been a feeling that Apple is in an enviable strategic position in which its superb marketing and its easy to use products have been enough to trump competition and build an enviably loyal consumer base with which it is able to fight off market forces that companies are normally weary of.

The highly publicized issue regarding the antenna of the iPhone 4, which was addressed by Steve Jobs in a press conference on Friday, will surely represent a formidable test to Apple's position. Regardless of whether the issue with the antenna is as real and cumbersome as has been reported by product review publications or as normal as Jobs made it out to be, it will be interesting to see whether it will have a discernible impact on sales as the iPhone 4 is released in new international markets in the upcoming weeks and months.

Monday, July 12, 2010

Making the right decisions

There has been recent discussions regarding whether or not Carrefour will remain in South-East Asia. Reports were published that suggested that Carrefour would be pulling out of all markets in which it is not number one - namely, Thailand, Malaysia and Singapore. While those initial reports have since been denied by Carrefour it still raises interesting questions regarding the motivation behind the decisions that businesses make. Standard corporate finance theory dictates that projects that generate positive net present value are worthwhile undertaking as they, by definition, add to the bottom-line; however, businesses sometimes ignore rational business thought and make decisions purely based on visions of industry domination and expansion. While it is understood that Carrefour has made this particular decision based on economic reasons (Carrefour has chosen to focus on the Indian market, for example, and may be using the proceeds from the sale of their South-East Asian assets to fund that expansion), are there examples of companies readily available that have made decisions not based on the underlying economics but rather a visionary target?