My piece on the Conversation has generated a bit of interest from business reporters. Here’s a piece from the Brisbane Times that resulted from a phone interview. I got to bandy around terms like “disruptive technology” and delve deeper into the scope for bricks and clicks to coexist (for some).
There has been much ink spilled in the hysteria about the level of executive compensation in Australia and elsewhere. Some vitriol has been justified in instances of overt incompetence or malfeasance, but arguments for legislative constraints on payment levels seem simply bizarre to me.
There has been a fascinating insight into the perceived value of one Aussie CEO in the past few days. Music and electronics retailer JB Hi-Fi announced long-served CEO Richard Uechtritz would be stepping down. Despite also announcing increased revenue, profits etc., the company’s market capitalisation dropped approximately $111m in the following hours.
Now, Uechtritz was on a salary of less than $1m a year (plus some pretty tasty share options – the firm has risen from $2 to a high of over $22 in 8 years). Even if half the share price fall could be attributed to some disappointment at the firm not exceeding profit expectations and the overall gloom within the retail sector, it would still put a market valuation of around $50m on his head.
Surely, he should have been receiving well in excess of his typical remuneration given the markets’ valuation of his impact?
Note: The author (happily) owns shares in said company.
The last couple of days has seen topics of a few previous International BS Blog posts back in the news. In reverse order of when we last spoke about them:
1. The spotlight has been turned on supermarket bargaining power again. Instead of Belgian chain Delhaize, this time its Aussie giant Coles who is squeezing its long-suffering suppliers even more:
“Buyers from Coles have been contacting suppliers to tell them of a 4 per cent increase in trading terms, the percentage of the cost of each item the supplier must pay back to the retailer. For many suppliers, this figure was in the mid-teens but it is being pushed closer to 20 per cent.”
Not a huge surprise in a virtual duopoly, particularly when Coles is under so much more pressure to economise than Woolworths.
2. Australian high-end menswear fashion house, Herringbone has been rescued by a German suitor. As we noted back in December, it is a lot harder to target this segment when incomes are under pressure. van Laack presumably scored these guys at a bargain, another instance of the scope to rationalise (and internationalise) in the current economic crisis.
3. And finally a firm we’ve lauded as the prime mover in the electronics hardware and software retailing pace, JB Hi-Fi has made some waves this week, en
tering both the ASX100 (i.e. the largest 100 listed firms in Australia by capitalisation) and Australia’s top 20 most valuable brands, both for the first time. Being a highly efficient, low-cost producer in the current climate seems a winning strategy indeed.
It was somewhat disheartening to see the always candid Gerry Harvey (Australia’s richest retail tycoon) lamenting the poor performance of his firm, Harvey Norman, in Ireland. A big box retailer of home electronics, furniture and white goods, Harvey Norman is one of the few Australian retailers to venture off shore in recent years (see my discussion of the few in a chapter I wrote last year for a book called The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation).
The firm has chosen an odd mix of locations – Singapore, Malaysia, Ireland and Slovenia (along with the obligatory NZ). The international adventure now makes up 24 percent of the business on a simple store count basis. As these stores are all company owned, whereas 98 percent of the Australian stores are franchised, they represent (potentially) a more significant source of revenue. The simple reason for the dramas is that the Irish economy is faring a lot worse than Australia. However, there are still question marks over Harvey Norman’s ability to build sufficient competitive advantage in its international operations.
In Australia the firm benefits from enormous economies of scale in both purchasing and marketing (the firm is one of the biggest media spenders in the country). Also, it utilises a distinct within store franchising system. A given store might include a furniture franchisee, a white goods franchisee, an electrical goods franchisee and a computer products franchisee. This allows appropriate specialisation from sales (and purchasing) staff and offers the usual motivation benefits of entrepreneurial franchisees. The Australia operations also has a nice side-business in property management and leasing.
It looks like very few of these competencies have been transferred offshore, with all stores company owned, and limited scale in a given country (beyond NZ). With troubles in the retail market at home, and Harvey Norman much more exposed to consumer timidity than their upstart competitor JB Hi-Fi (who sell a lot more software such as DVDs, video games and CDs rather than big-ticket hardware like TVs), it is hard to see Gerry and co diving into more international expansion any time soon. Looks like the paucity of Aussie internationalisers may continue, at least in the retail domain.
International BS Blog 
