Archive for August, 2009

Social Networking for Realtors

August 27, 2009


The Advantages of Social Networking

The Advantages of Social Networking

I just completed my Social Networking for Realtors Abstract; the full-length E-book will be published shortly. I’m incredibly proud of this project – when I have the link for the Abstract and E-book I will post them.

The information discusses the best ways to market yourself on social networking sites; topics covered include blogs, social bookmarking, social networks, social network hybrids, and microblogging. The full-length e-book will offer valuable marketing tips & tricks, including a “dos and don’ts” section, resources, “How Tos”, and the like.

I just created my Squidoo Lens!

August 22, 2009


Learn more about me at:

How Facebook Affected Consumer Behavior

August 17, 2009

On February 16, 2009 Facebook users, journalists, and members of other social media websites were alarmed when Facebook released its new Terms of Service (TOS) policy.

Unlike the former policy, the new TOS stated that:

“You hereby grant Facebook an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to (a) use, copy, publish, stream, store, retain, publicly perform or display, transmit, scan, reformat, modify, edit, frame, translate, excerpt, adapt, create derivative works and distribute (through multiple tiers), any User Content you (i) Post on or in connection with the Facebook Service or the promotion thereof subject only to your privacy settings or (ii) enable a user to Post, including by offering a Share Link on your website and (b) to use your name, likeness and image for any purpose, including commercial or advertising, each of (a) and (b) on or in connection with the Facebook Service or the promotion thereof.” (Walters, 2009).

This new policy allowed Facebook to profit from user information, by selling such details to third-parties. From a consumer privacy standpoint, it is easy to understand why the new TOS proved to be controversial. Some users – despite all warnings – post their addresses, phone numbers, and email addresses on Facebook. With the new TOS, Facebook could sell a user’s phone number and assigned metropolitan area to a third-party advertiser that had intentions to market local services to the user.

Through this new TOS policy Facebook created a footnote in consumer history. Facebook has 250 million members (Press Room, 2009). New consumer advocacy groups formed to protest the policy, even creating pages on Facebook itself. The groups gained momentum with individual users. In viral-marketing style, users began to share information about the new TOS with other users, who then became “fans” of the consumer advocacy groups. With a potential reach of 250 million members, the outcry against the TOS became unmanageable for Facebook. As a result, after three short days of backlash, the corporation decided to revert to the old Terms of Service policy as they work towards creating a new TOS that addresses user concerns (Boutin, 2009).

Never before has a social networking site been the recipient of such consumer ire on such a massive scale. Facebook users found a consumer cause and channeled the social networking site to spread information. With this campaign’s quick success, consumers learned that they can use the web to protest against corporate iniquities.

Another notable idea is that web-users may have enough wariness of third-party advertisers that they are absolutely unwilling to knowingly participate in any activity on the web that would relinquish private details. Third-party advertisers have been operating on the web for years, gathering information about users in order to develop demographic-specific advertisements. However, according to the response towards the Facebook TOS, we can determine that consumers may be tired of these perceived invasions of privacy. As a result, third-party advertising may have lost a major public relations battle.



Walters, Chris, 2009. Facebook’s New Terms of Service: “We Can Do Anything We Want With Your Content. Forever.” The Consumerist Online. [Internet]. 15 Feb 09. Available at: [Accessed 16 Aug 2009]

Press Room, 2009. Statistics.[Online] Available at [Accessed 16 Aug 2009]

 Boutin, Paul, 2009. Facebook reverts to old terms, promises to craft new TOS with user input. The Industry Standard Online [internet] 18 Feb 2009. Available at: [Accessed 16 Aug 2009].

Christopher K. Gridley v. State Farm: Unfair Titling Practices (2004)

August 16, 2009

The case stemmed from Gridley’s purchase of a four-door, 1998 Volvo S70, with a clean title, at an auction in November 1999. Five months after the sale, a mechanic discovered that the Volvo had been seriously damaged in a major accident prior to Gridley’s purchase, and stated the auto had been “improperly rebuilt”.

Christopher K. Gridley of Denham Springs, Louisiana, filed suit against State Farm in June, 2000. According to the lawsuit, State Farm declared the car totaled a month prior to Gridley’s purchase, but the company failed to obtain a salvage title.

According to information gathered, Gridley’s Louisiana Counsel discovered that similar claims against State Farm and other insurers had been filed elsewhere, forming the basis of a potential class action. The St. Louis firm of Korein & Tillery were brought in as part of Gridley’s Counsel, and the case was filed in Madison County Illinois’ Third Circuit District Court. (Korein & Tillery are among the most infamous class action plaintiff firms, having won the $10.1 billion dollar judgment against Philip Morris in Illinois. Madison County, Illinois consistently ranks at the top of the American Tort Reform Association’s annual “Judicial Hellhole” list for the size of judgments rendered and, in some cases, the apparent lack of forum connection to Madison County.)

The Gridley suit became significant for reasons other than State Farm’s titling practices. National backers of tort reform have consistently attacked Illinois Courts for their outrageous Plaintiff awards. The Plaintiff’s Bar has developed a huge industry of bringing Class Action suits to these courts, and are widely accused of court “venue shopping”. Gridley, a citizen of Louisiana, attempted to demonstrate that State Farm’s significant presence in Illinois supported his choice of geographic venue. The Illinois case went back and forth through the appellate process, with one court supporting Gridley’s choice of venue, another denying the Illinois forum.

The insurance industry, along with the U.S. Chamber of Commerce, tort reform lobbyists, and corporations previously hit by Illinois judgments have jumped in to the fray in support of State Farm. Numerous, extensive amicus curiae (friend-of-the-court) briefs were filed for Gridley  when it reached the Illinois Supreme Court, harshly criticizing the case as representative of national tort abuse. “The watchers of the case and the filers of the briefs hope that the court in the course of ruling affirmatively on the change of venue will formulate rules that “will put the brakes on” what they call Madison County’s ‘litigation industry’”.

The Gridley case is on the Illinois Supreme Court’s “Advisement Docket” for their January Term, 2005. It is unknown when this case will be heard again.

Broker Contingency Fee Research – 2005

August 16, 2009

Recently, insurers and brokers in several states have come under regulatory scrutiny for their joint participation in contingency fee arrangements. In these arrangements, a broker receives increased profit commissions from an insurer based on the volume of policies placed with an insurer, or on the low incidence of risk of the business placed. This practice, common in the insurance industry overall, is being attacked on two fronts: first, that these types of contingency fee arrangements create an inherent and impermissible conflict of interest for a broker, who by legal definition represents the consumer and his best interests in a transaction with an insurer; and second, that when a contingency fee arrangement does exist between an insurer and a broker, disclosure to the consumer of the arrangement is non-existent or at the best, weak and insufficient. Private causes of action, though currently limited, have also been initiated challenging contigency fee arrangements as inherently unfair business practices.

New York Attorney General Eliot Spitzer and regulatory officials in Connecticut and California are currently investigating contingency fees paid to brokers by insurers, based on profit. In April, 2004, Aon, Marsh & Mclennan, Willis Group, and Chubb all confirmed receiving subpoenas from the NY Attorney General’s office.  Hartford, Cigna, Aetna and Metlife, Inc. confirmed in late May that instructions were received from the New York Department of Insurance ordering the company not to destroy any documents relating to their dealing with brokers. In addition, another half-dozen insurers also may have received subpoenas. The subpoenas issued have stimulated a windstorm of anxious activity.  Following the subpoena, Aon Corp. shares dropped 8%.

Spitzer has attained notoriety for his Wall Street investigations of similar mutual fund industry agreements, allegations of improper trading in variable annuities, and conflicts of interest between investment bankers and stock analysts. Known for upstaging the Securities and Exchange Commission, Spitzer spearheads new investigations, with the SEC following up with their own inquiries.

The NY, CA and CT investigations of broker contingency agreements were pushed to the forefront by a few different factors.  A letter addressed to New York Attorney General Eliot Spitzer, New York Superintendent of Insurance Gregory V. Serio, California Attorney General Bill Lockyer and California Insurance Commissioner John Garamendi, written by the Washington Legal Foundation (WLF), a non-profit public policy think tank, discussed the conflicts of interest that exist within the insurance brokerage industry.  Two industry practices were cited for inquiry: Placement Service Agreements, also referred to as “revenue sharing” or “contingency agreements”; along with “leveraging” or “tying”.

 Placement Service Agreements (PSAs) or Market Service Agreements (MSAs) are contingent profit commissions paid annually to brokers based on volume of policies placed with an insurer, and the low incidence of risk of the business placed. “Leveraging” or “tying” refers to a related practice involving reinsurance contracts. Brokers will threaten to withhold referrals to an insurance company unless the insurer agrees to address reinsurance needs with that broker.

Non-Profits and consumer advocacy groups allege that contingency commissions are kickbacks for brokers, and that the consumer’s best interests cannot be primary in a broker’s profit incentive program.  In the event a broker was closing in on their volume target for an insurer, they might be enticed to place their next policy there, despite the consumer’s needs. Brokers often help their clients file and collect on insurance losses, and a PSA arrangement based on assessed risk might discourage a broker from reporting claims.

Insurance Brokers argue that when they perform well under contingent commission arrangements, the increase of low risk business placed with an insurer leverages better pricing conditions. “Brokers have had such agreements with insurance companies for many years to compensate the brokers for services they provide to the carriers and many of the major carriers have these agreements with brokers,” Willis Group stated in an April 23, 2004 press release. Compensating brokers does seem to be a long-standing industry custom: an Aon spokesman described the arrangements as an “age-old common practice”. A letter to Business Insurance by the CEO of a New York brokerage firm described commissions as “a reward system when a job is done right”.


Five years ago, the Risk & Insurance Management Society (RIMS) criticized the practice of contingent commissions – particularly brokers’ failure to disclose their financial involvement with insurers. According to the Executive Director of RIMS, “Our members appreciate what the broker is doing. They don’t care where the payments are coming from as long as they are disclosed.” RIMS eventually compromised by jointly developing with super-brokerage Marsh & McLennan a disclosure policy that notified a client of the broker’s contingency fees upon the client’s request.

Concurrently, in 1998 the New York Insurance Department issued a bulletin warning that undisclosed compensation is “sufficient to create the perception that brokers are conflicted in their loyalties and that such conflict may constitute a violation of Section 2110 (New York Insurance Code) as a dishonest or untrustworthy practice.” The Bulletin further described the methods of disclosure with which brokers and insurers must comply. A Wall Street Journal article concluded that the New York Insurance Department’s interest in the contingency fee issue stemmed from the brokerage industry consolidation of the period.

At this point, all brokers are engaging in disclosure practices. However, the practice is not specifically directed toward the client in many cases.

In a recent lawsuit in Illinois against brokerage Arthur J. Gallagher & Co, the appellate court said that the firm’s disclosure statement in their 10-K SEC filing was not sufficient.  The plaintiff argued that a client should not have to rely upon a disclosure statement contained within a lengthy financial statement such as a SEC filing.  The court supported this view, stating that although the 10K filing on public record might be considered disclosure, that the question was whether disclosure was “complete, full, clear and candid.”

In January, 2004, J.P. Morgan issued a summary regarding contingent commissions within a semi-forecast of the future of the P&C sector, and supported the idea that current disclosure practices are weak and incomplete. The securities firm believed that an active debate over the issue of contingent commissions would be launched in 2004, and those contingent commission fees would be negatively impacted. “Although the often-undisclosed contingent arrangements are legal, recent trends within the regulation of financial institutions suggest that such arrangements could well be prohibited, or significantly modified in the future. We believe the most likely outcome is greater disclosure requirements and an outcry for reform from insureds.”


In 2001, a Monterey, California attorney with Anderson Kill & Olick filed a lawsuit against the insurers in The Hartford group. This suit has gained in momentum and scale over the past few years – over 40 individual insurers have been named as defendants ( Allianz, American International Group (AIG), Continental, Chubb, The Hartford and all California-licensed subsidiaries) and a precursory examination of the listed court documents, orders, motions, and stipulations provide approximately 250 separate documents. The lawsuit is still in pre-trial discovery stage.

Anderson Kill previously targeted the major brokerages – Aon, Willis and Marsh – in a similar contingency fee suit, and settled out-of-court and off public record. The current San Francisco lawsuit names no brokerages as defendants, and specifically refers to the aforementioned brokerage firms as “excepted brokers”.

The Plaintiff’s Causes of Action under California Business & Professional Code (Subsection 17200 et seq.) demonstrate the Insurance Companies’ inherent unfair business practices involved with the payment of contingent commissions. Specific points include:

  • Commissions paid to brokers constitute a conflict of interest on behalf of the policyholder and unfairly negate the policyholder’s right to coverage;
  • Commissions paid to brokers provide incentives to unfairly conduct business with policyholders, such as failing to make claims on behalf of the consumer.
  • Policyholders pay premiums for specific, requested insurance coverages. The commissions paid to brokers by insurers come indirectly from the consumers’ premium payments. The cost of these commissions has been passed to the consumer. The restitution sought is a repayment of these premiums to policyholders.
  • The fees and commissions produced for brokers as a result of undisclosed contracts constitute undisclosed kickbacks to brokers of premiums paid to insurers by policyholders.

The remedies sought include restitution in the form of a refund to all policyholders. In addition, the “Plaintiff also seeks to enjoin the Hartford Defendants from selling any more insurance through certain brokers unless and until they fully inform all past and prospective policyholders of the kickback agreements.”

Limiting Risk

JP Morgan’s report of the broker commission issue stated that tighter protocol for disclosure would be in the future. Where would a disclosure statement to the consumer fall?  The Illinois appellate courts in the Arthur J. Gallagher suit found that disclosure statements in SEC filings are inadequate. If we began the practice of including a disclosure statement in an insured’s application or policy, these would come under the scrutiny of Insurance Regulatory officials who review consumer documents prior to issue.

The New York Insurance Department regulated disclosure of broker’s compensation in the past, and issued an advisory bulletin. Enclosed in the 1998 NY bulletin are the following recommendations for disclosure. Italicized language has been added, offering suggestions and notes for each state-mandated suggestion:

  • All compensation arrangements between an insurer and a broker should be reduced to writing and agreed to by both parties;
  • All such compensation arrangements should be disclosed to insureds prior to the purchase so as to enable insureds to understand the costs of the coverage and the motivation of their broker in placing the business;
  • All fees paid to brokers should be included as factors in the establishment of an insurer’s premium rates;
  • All fees paid to brokers (and reasons for such fee payments) should be included in a broker file maintained by the insurer; and
  • The insurer’s internal auditing procedures should include verification that all fees paid to brokers are proper and within the parameters of the New York Insurance Law and Department regulations.

Research may need to be conducted into the short term risks involved with XXXX Corporation’s brokers. Willis Group, one of the mega-brokerage holding companies involved in the New York regulatory investigation, has a small San Diego subsidiary that brokers Property & Casualty insurance.

Long term, a great risk would be a private action brought forth in civil trial. The subpoenas issued by the New York Attorney General for insurers (Aetna, Cigna, and Hartford) may only be information gathering with the purpose of attacking brokers’ disclosure practices. However, a recent national news agency article surmised that the subpoenas are part of a broad investigation “whether the fees that insurers pay brokers as an incentive to sell their products constitute a fair business practice or pose a conflict of interest.”  Risk also includes further litigation such as that in the San Francisco Anderson Kill suit, which has demonstrated the legal avenues the Plaintiff’s Bar might approach in their pursuit of insurers.

Reference Guide: 

(1)             “Aetna, Cigna Subpoenaed in Broker Probe

                   Associated Press – 6/11/04


(2)             “UPDATE – Hartford receives subpoena on broker compensation

                   Reuters – 6/10/04


(3)                “Birth of a Crusade: Spitzer Turns to Insurance Brokers

By Matthew Goldstein    4/23/04

(4)                “Now, insurance comes under regulatory fire

                   The Economic Times – 5/2/04


(5)                 “Payments to insurance brokers draw scrutiny

                   By Theo Francis

                   The Wall Street Journal   5/17/04


(6)                 “Contingent Compensation and Service Agreements Between Insurance 

                   Brokers and Insurers”

                   Insurance Information Institute May 2004


(7)                  “June 2: Commentary – Fatalism and Conflicts of Interest”

                   By H. Felix Kloman     6/2/04

                   Global Association of Risk Professionals (GARP) – Todays Risk eNews



(8)                  “RIMS and J&H Marsh & McLennan Agree to Contingency Disclosure


                   RIMS News Release 1/25/99


(9)                  “RE: Disclosure of Brokers’ Compensation

                   State of New York Insurance Department

                   Circular Letter No. 22 (1998)



(10)        “Marsh & McLennan Agrees to Disclose Contingency Fees It Gets From


                   Wall Street Journal – 1/26/99


(11)        “Payments to insurance brokers draw scrutiny

                    By Theo Francis  5/17/04

                    The Wall Street Journal


(12)         “Contingents May Be Smaller, But More Prominent in 2004

                    Insurance – Non-life

                    US Equity Research

                    JP Morgan Securities Inc.



(13)        “UPDATE – Hartford receives subpoena on broker compensation

                    Reuters – 6/10/04


E-Commerce Supply Chain Analysis

August 16, 2009

E-Commerce has altered business worldwide. Corporations offer products to businesses and consumers, and monopolize the global spread of the internet as a communications and search tool. Both Business-to-Business (B2B) and Business-to-Consumer websites specifically target their chosen demographic in order to generate sales, albeit with different, unique features common to each.

In the following analysis, this author will examine the supply chain relative to both B2B and B2C websites, offering a glimpse at the path a product may take as it is purchased and fulfilled through internet commerce.

First, it is important to note the unique commonality of both B2B and B2C transactions. In many cases, consumer purchases, either on behalf of companies or the individual, now eliminate middlemen, particularly the traditional brick-and-mortar retailer. Whereas a purchase of a Dell computer may once have taken place at a Best Buy outlet (by the consumer) or through contacting Dell’s corporate sales unit (by corporations for large-scale computing purchases), this step in the supply chain no longer exists. There are exceptions among B2B and B2C websites (drop-ship e-commerce websites, for example), but for the most part e-commerce has streamlined the supply chain with this middleman elimination.

However, other unique properties exist in the e-commerce supply chain, and this author will first discuss the B2B transaction. Specifically, B2B commerce deals with the business transactions that occur between businesses. While some businesses may directly purchase products online from a manufacturer for that business’ use, in many cases B2B transactions still have another end-user outside of the B2B transaction.

For example, a manufacturer of redwood playsets has established a website for its retail outlets to select and purchase merchandise for sale in brick-and-mortar stores. While Walmart, Target, and Toys R Us are the “consumer” in this B2B transaction, the ultimate recipient of this purchased product through the play set manufacturer’s website is an individual consumer visiting these retailers.

B2B commerce offers several advantages to both the supplier and the purchaser. First, business procurement specialists can select and compare products at their leisure. In some cases, B2B websites offer a dearth of information regarding the particulars of various products and allow the corporate procurement specialist to compare the advantages of one purchase versus another. Second, B2B commerce eliminates many of the responsibilities bourne by the corporate salesperson. In the past, corporate sales representatives visited potential clients and spent ample time educating these corporations about the offered products. In the case of B2B commerce, businesses can now eliminate many of these time-consuming tasks and streamline their sales departments. If a corporation has questions regarding a large-scale transaction, in most cases it is possible for a lower-level sales associate to handle these queries. Only in highly sophisticated product purchases are executive level salespersons required in a B2B transaction.

B2C commerce has taken consumer retail by storm. Individuals have the luxury to compare prices through price comparison websites and analyze products from the privacy of their home. From a supply chain standpoint, B2C commerce can be more complex, as many e-commerce sites are acting as the online representation of a brick-and-mortar retailer. However, the middleman relationship is not eliminated; many e-commerce companies do not warehouse products. In this “drop-ship” business model, the e-commerce retailer takes an order from a consumer. The order is sent to the manufacturer by the e-commerce retailer. The manufacturer then ships the product to the consumer. It is important to note that in the drop-ship model, it is standard that the e-commerce company will handle all aspects of customer service, including consumer problems experienced after receipt of the product.

Both B2B and B2C commerce have clearly affected business on a global scale. With readily accessible communication provided by the internet, companies and consumers can purchase products instantly. Increasingly sophisticated websites make product information easily available to consumers, allowing individuals and corporations to make better-informed purchasing decisions. While the supply chain part of B2B and B2C businesses are different, in many ways the supply chain has become better organized through the use of automation.


A-K Strategic Business Solutions (2001). “What Is The Difference Between B2B and B2C?”. Retrieved online November 17, 2007 from

Singh, M.P. (Nov.-Dec. 1999). “The End Of The Supply Chain?”. Internet Computing. Retrieved online November 17, 2007 from the EBSCO database, part of the University of Phoenix student library.

The Effects of Regional Integration

August 16, 2009

The ASEAN trading bloc was created in 1967 by five founding member countries: Thailand, Malaysia, Indonesia, Singapore, and the Philippines. As of today, ASEAN also has five other member countries – Brunei, Laos, Cambodia, Vietnam, and Burma. All countries part of the ASEAN alliance are vastly different in culture, demographics, economic resources, and political systems. These ten countries can meet together and establish a mutually beneficial economic partnership despite their diversity. In part, this partnership has been helped by regional integration. (Tan, M.; May 2007).

In the following analysis, this author will describe regional integration. By taking a look at regional integration, we will discuss both the advantages and disadvantages as demonstrated by various global trading blocs. This author will analyze the economic development stages of several countries in the ASEAN bloc. Lastly, the overall economic development of ASEAN has an effect upon global business, and this author will describe these ramifications.

Advantages and Disadvantages of Trading Blocs

When the North American Free Trade Agreement (NAFTA) was established on January 1, 1994, citizens of the United States, Mexico, and Canada were merged into one continental trading bloc. One disadvantage to NAFTA is its ability to displace individual countries’ workers and resources due to market integration. (Foreign Agricultural Service; n.d.).

For example, livestock and agricultural farmers in the United States now compete with products from Mexico. Due to inexpensive labor costs and inexpensive agricultural land, Mexico has a clear advantage when exporting their goods to the U.S. As a result, farmers and ranchers in the U.S. are forced to continuously search for ways to make their operations less expensive, in order to compete. (Knutson, R.D. & Ochoa, R.; Jan. 2004)

However, advantages are also brought forth by trading blocs. For example, after the Korean and Vietnam Wars of the 1950s, 60s, and 70s, much of Southeast Asia was left economically decrepit, with very little ability to exert market influence on the global economy. Since the creation of the ASEAN trading bloc, however, Southeastern Asia has successfully negotiated profitable trade agreements, therefore allowing the ASEAN countries to individually improve their economic progress. For example, luxury hardwoods, such as teak and bamboo, are now exported on a massive scale to industrialized nations, helping to manufacture flooring and furniture. These hardwoods are largely harvested from ASEAN countries such as Thailand.

Economic Development Stages

Thailand, one of the countries part of the ASEAN trading bloc, seems to be in the middle of the economic development stages. While the country has experienced fairly high growth rates (6.7% per annum), Thailand still seems unable to control internal market forces and anticipate external changes, in order to create a stable, functioning, dynamic economy. In particular, Thailand is internally held back by several factors. First, its financial, metropolitan, and trading center resides in the capitol city of Bangkok. This does not allow the country to diversify its economic center. If Bangkok isn’t doing well infrastructurally, then Thailand’s economic forecast will soon become gloomy. Second, Thailand still bears an unfortunate illiteracy rate. The majority of the population is employed in production (blue-collar) jobs, and this demographic does not lend itself to economic development. (Jitsuchon, S.; July 1991).

Another ASEAN country with a very different economic development stage is the nation of Brunei.

“The economy is a mixture of foreign and domestic entrepreneurship, government regulation and welfare measures, and village tradition. It is almost totally supported by exports of crude oil and natural gas, with revenues from the petroleum sector accounting for more than 50% of GDP Per capita GDP is $8,800, and substantial income from overseas investment supplements domestic production. The government provides for all medical services and subsidizes food and housing “ (ASEAN Association for Planning and Housing; n.d. Pg. 1 ¶ 4)

Brunei has succeeded in using its wealthy resources to improve the nation economically. Unlike other oil-producing nations in the middle east, Brunei, also a Muslim state, invests its earnings in both other, diversified economic development and in the improvement of the state. Brunei is at a significantly higher economic stage than its ASEAN counterpart, Thailand.

Global Effects of ASEAN Economic Development

ASEAN countries were once the most impoverished nations of the world. However, due to increasingly successful trading agreements and leveraged tariffs, the countries are quickly improving economically, despite their history of wars, internal strife, and political unrest. With the developed strength of the ASEAN bloc, other nearby trading blocs such as APEC may be affected. While APEC has several wealthy, industrialized nations as members, this may be a disadvantage to the trading bloc. On the other hand, ASEAN countries fall somewhere on the lower to mid-range scale of economic development. Due to their relative lack of development, ASEAN countries may be able to negotiate incredibly low bids for labor, and thus attract foreign companies interested in new production facilities.

Another global effect of ASEAN economic development revolves around the timber industry. At this time, many furniture and flooring manufacturers avoid using luxury hardwoods from the South American rainforests. ASEAN countries are providing an alternative, and many lumber countries in Sri Lanka, Thailand, and Laos are engaging in environmentally sustainable logging practices – a clear enticement to western interests. As a result of this developing industry, ASEAN countries could soon have a successful monopoly on luxury hardwood materials.


The ASEAN countries are not the most impoverished in the world, but are still seeking growth and improvement to begin a sound economic foundation. Through further work with trade agreements, tariffs, and diplomatic partnerships with industrialized nations, ASEAN countries can expect external forces to help them improve economically.


ASEAN Association for Planning and Housing (n.d.). “Planning & Development (Brunei)”. Retrieved online September 17, 2007 from

Foreign Agricultural Service (n.d.). “North American Free Trade Agreement”. Retrieved online September 16, 2007.

Jitsuchon, S. (July 1991). “Retrospect’s and Prospects of Thailand’s Economic Development”. Retrieved online September 17, 2007 from

Knutson, R.D. & Ochoa, R. (Jan. 2004). “Achieving Market Integration – North American Free Trade Agreement”. Retrieved online September 17, 2007 from

Soomer, J. (2003). “Why Regional Integration Benefits”. Retrieved online September 16, 2007 from

Tan, M.(May 2007). “Asean Plus”. Retrieved online from Michael Tan’s weblog Pinoy Kasi, part of the Philippine Daily Inquirer opinion column. Retrieved online September 15, 2007 from

The Organizational and Societal Functions of PR

August 16, 2009

In 1906, Upton Sinclair’s novel “The Jungle” shook Americans into fervor about their food. The book described the nauseating practices that were commonplace in Chicago’s meatpacking industry, and revealed a picture of where our meat comes from and what happens to it after slaughter and prior to packaging. As a result of the novel, President Theodore Roosevelt passed several food safety laws, one of which established the Food & Drug Administration (FDA). Since then, Americans may have felt that their food was now being safely prepared and packaged due to government oversight.Americans are wrong, and have many reasons to be concerned about the foods they consume. (Blackwell, J.; n.d.)

In the following discussion, we will analyze the importance of organizational public relations in the context of recent restaurant food poisoning outbreaks. Further, this author will discuss the societal implications of “Food Poisoning PR”, and elaborate how PR can be an effective tool to mislead the public.

“Three Washington children died and 600 others were sickened due to poisoning from E. coli 0157:H7 served in undercooked Jack In The Box hamburgers.” (Porterfield, E. & Berliant, A.; Jun. 1995. Pg. 1 ¶ 2).

While the 1993 Jack In The Box food poisoning scandal certainly gained notoriety among Americans, many other food poisoning incidences have occurred since. Several years ago, green onions from a particular produce farm were also tainted with E.coli, and the vegetable was pulled from the shelves at groceries and removed from Taco Bell products nationwide.

When prepared foods are the cause of illness or death, and a restaurant is targeted as the origin point of these tainted products, the public begins to fear food. According to Maslov’s hierarchy of needs, being safe and fed are our very basic, primal desires. When our food can kill or injure us, and when we question our ability to make safe choices among food products, this infringes upon our needs for survival. It is safe to say, from a psychological standpoint, that the public has every right to become inflamed, afraid, and angry when we discover our food choices aren’t guaranteed to provide us with basic sustenance.

In the event of a food poisoning scandal, public relations becomes an essential ingredient to maintain a restaurant’s ability to remain in business. As a result of the Jack-In-The-Box E.coli incident, many potential franchisees are still wary of opening up a unit in particular regions of the country – they recognize that the food poisoning outbreak is still recalled by fast food consumers in those areas, who refuse to purchase quick service food items from a Jack-In-The-Box store.

 Jack-In-The-Box had little to base a positive PR campaign upon, however. According to the resulting litigation documented in the The News Tribune, a Tacoma, Washington newspaper, the corporation’s business practices actually contributed to the festering of E. coli in the hamburger meat. The company believed that cooking beef to the recommended 155°F temperature made the meat hard, and often encouraged stores to cook their beef at lower temperatures. (Porterfield, E. & Berliant, A.; Jun. 1995) 

Jack-In-The-Box obviously did not have a talented PR staff to handle the food poisoning scandal, or the company would be more successful and wouldn’t have had so many locations close. During a tragic event such as a food poisoning scare, an effective PR team can assure the public that the company is doing everything possible to locate the cause of the problem; that the company will jointly work with food safety specialists to revise their operations guidelines; that the company will create an extensive employee training program for food safety; and that the company is working diligently to ensure that a food poisoning occurrence is never possible in the future as the company stands for highest-quality foods. 

While this type of PR would have been incredibly effective for the Jack-In-The-Box organization, the PR also has significant societal implications. While a corporation can revise its food preparation guidelines, and tell the public that they are creating a stringent food safety training program for their employees, it seems impossible to avoid food poisoning occurrences. Too many variables are involved in prepared food: its production, its transport, its storage, its preparation, and its packaging.

According to a report issued by the Centers for Disease Control (CDC) in 1999, 76 million Americans contract food poisoning each year. This huge statistic presents the conclusion that while the United States may be one of the World’s superpowers, we can’t effectively control the danger imposed by the food we eat. (Stout, D.; Sep.1999).

From a societal standpoint, it seems almost hazardous for a company to promise they will be able to control future food poisoning epidemics. This PR creates the illusion that corporations and the government are actively involved in efforts to make our food safer, and that these efforts are successful.


 Blackwell, J. (n.d.). “1906: Rumble over ‘The Jungle’. The Trentonian. Retrieved online August 18, 2007 from

OutBreak, Inc. (2005). “Jack In The Box E-Coli Litigation”. Retrieved online August 18, 2007 from

Porterfield, E. & Berliant, A. (Jun. 1995). “Jack In The Box Ignored Safety Rules”. The News Tribune (Tacoma, WA). Article located online, and retrieved August 18, 2007 from

Stout, D. (Sep.1999). “Study Puts U.S. Food-Poisoning Toll at 76 Million Yearly”. The New York Times. Retrieved online August 19, 2007 from

Total Quality Management: A Multiple Industry Perspective

August 16, 2009

In the following analysis, this author will compare three organizations from different industries. Motorola, Papa John’s Pizza, and the Illinois Environmental Protection Agency are very different in their company culture, strengths and weaknesses, and brand image. However, each company has adopted aspects of TQM in their focus on improvement. This author will describe each organization’s quality interest in light of customer satisfaction. Further, steps each organization took to affect quality and customer satisfaction will be outlined. As leadership is integral to organizational change, this discussion will include a comparison of the leaders in all three corporations that helped establish value-driven quality. Lastly, a brief chart detailing the differences between each organization in respect to their quality focus is provided.

 Motorola: Focus on Quality and Customer Satisfaction

 As a customer-driven organization, implementing a substantive quality improvement management scheme is an essential ingredient to success. Motorola, a long-term practitioner of the Six Sigma management discipline, presents several business practices that improved its quality, brand value, and customer relationships.

First, as one of the first organizations to wholly adopt a TQM management style, Motorola quickly realized that their long-term brand value was due to their customers. Any organization can create a popular product. Only a disciplined corporation can create products of the utmost quality, ensuring customer loyalty and retention throughout the product lifecycle. Motorola recognized that its product defects did not comply with its newfound customer dedication. In order to serve its customers, Motorola had to engage in enterprise-wide process improvement.

As a result of this quality-driven focus, Motorola derived its Six Sigma management theory.

“To accomplish its quality and total customer satisfaction goals, Motorola concentrates on several key operational initiatives. At the top of the list is “Six Sigma Quality,” a statistical measure of variation from a desired result. In concrete terms, Six Sigma translates into a target of no more than 3.4 defects per million products, customer services included”. (National Institute of Standards and Technology; Aug. 2001. Pg. 1 ¶ 7)

The greatest action taken by Motorola in its dedication to quality was its creation and adoption of the Six Sigma management theory. Motorola’s leadership felt TQM principles did not adequately serve its need for continuous process improvement. As a result, executives explored the areas that they felt were not being served by TQM. They realized that the furthest measurement of quality in the midst of production was better served by the Six Sigma statistical analysis. This challenging theory took the quality focus of TQM to the furthest scientific, quantitative level.

Motorola’s success was and is based on their need to satisfy consumers. Electronics, particularly cell phones, are becoming disposable goods. Cell phone owners in the U.S. constantly purchase the newer, better model. In order to continue earning customer loyalty, and retain their customers purchase every few years in lieu of its competitors, Motorola was required to constantly improve their processes in order to ensure they produced the most quality product possible.

Motorola’s leadership were the change drivers necessary for the organization’s achievement of six sigma. In its beginnings, the six sigma theory at Motorola was wholly organic and driven by the innovation and curiosity of the company’s leaders.

“The process improvement methodology invented by Geary Rummler and friends in the early 1980’s and first deployed at Motorola was quite different from today’s approaches. It started experimentally, on a small scale, and then eventually got applied to whole business units as the methodology matured. But in those early outings, there were no steering committees or design teams. The people we worked with were the executives. It was the leaders of the business who were the process improvers, the process owners, the process team.” (Ramias, A.; Dec. 2006. Pg. 1 ¶ 4)

By strength of persistence, Motorola leadership completely altered the face of business today in their quest for quality. Through the six sigma management theory, Motorola’s legacy to the world has been established.

Papa John’s Pizza: Restaurant Leader in Customer Service and Quality

         Papa John’s Pizza (Papa John’s), a U.S. quick-service restaurant leader, is equally focused on quality in light of their customer dedication.  With over 3000 units, Papa John’s is considered to be the third largest quick-service pizza company in the world, after Pizza Hut and Dominos, respectively. Papa John’s is wholly committed to their customers: for six consecutive years the company ranked #1 among the restaurant industry in a customer satisfaction poll developed by the American Customer Satisfaction index (Papa John’s International; May 2005).

In the restaurant industry, customer satisfaction is integral to the life of an organization.

“Three Washington children died and 600 others were sickened due to poisoning from E. coli 0157:H7 served in undercooked Jack in the Box hamburgers.”(Porterfield, E. & Berliant, A.; Jun. 1995. Pg. 1 ¶ 2).

As a result of the Jack-In-The-Box E.coli incident, many potential franchisees are still wary of opening up a unit in particular regions of the country – they recognize that the food poisoning outbreak is still recalled by fast food consumers in those areas, who refuse to purchase quick service food items from a Jack-In-The-Box store.

The taint that poor quality can exert upon an organization in the restaurant industry becomes clear when the Jack-In-The-Box scenario is recalled. Customers are deeply affected by poor quality in terms of food. According to Maslov’s hierarchy of needs, being safe and fed are among society’s basic, primal desires. Although killer food is an extreme example, it is still easy to recognize why people are so deeply bothered when a restaurant does not deliver a quality product. When food is toxic it permits consumers to question their ability to make safe choices among food products, thus infringing upon their basic need for survival. From a psychological standpoint, the public has every right to become inflamed, afraid, and angry when they discover food choices aren’t guaranteed to provide us with basic sustenance, and due to quality concerns, may in fact injure them.

Papa John’s focused on technological improvement in their search for quality. In order to become constantly apprised of changes within the organization, Papa John’s leadership invested in an enterprise business-intelligence system. While considered a huge expenditure, this technology enabled executives to receive information at a lightning pace, allowing them to monitor, evaluate, and recommend changes to day-to-day operations: a key operation part of TQM process improvement.  Papa John’s new business intelligence software equipped executives with information, a key part of conducting business at the pace the 21st century demands. However, the enterprise system also affected operations from the viewpoint of consumers:

“…generated tangible business results, such as a 10% reduction in ‘out the door’ time, and a significant improvement in order completeness”(Analysis Team; n.d. Pg. 1 ¶ 2).

Papa John’s also worked to achieve quality in terms of their labor force. The organization, like many others, realized that the consistent training and development of the workforce is essential to organizational success. In order to ensure this quality, Papa John’s invested in a leader for this training and development movement, titled the “Vice President of Training and Development”.

In many corporations employee training and development is a “softer” focus, with very little tangible changes made to the workforce. However, in the case of Papa John’s, training and development became formalized and left a lasting imprint on the organization. A developed training program identified employees for promotion. A well-respected leadership program was adopted. The organization also benefited from a simple change in structure. The training department moved from a centralized location to a decentralized location, in order to better serve Papa John’s global employee force (Snow & Associates; 2006. Pg. 1 ¶ 14).

         It is essential to note the role Papa John’s leadership took in the implementation of TQM. From the beginning, CEO and founder John Schnatter believed quality tied to a customer focus was the essential ingredient of a successful organization’s management scheme.  However, during the late 1990s, Schnatter began to realize Papa John’s growing pains. Through the implementation of a new measurement technique, CEO Schnatter realized the organization was not sustaining quality. 

“Papa John’s was shocked by its shortcomings. On a scale of 1 to 10, its pizzas averaged 5.1, customers waited on hold for an average 2.5 minutes and 24 percent of its pizzas took longer than an hour to be delivered. A nightmare was developing right before Schnatter’s eyes.”(Coomes, S.; Dec. 2006. Pg. 1 ¶ 4)

            Papa John’s founder John Schnatter was determined to repair the problems rampant in the organization. Despite his reluctance to re-assume the role of CEO, he realized that part of the problems lie in his leadership. The CEO at that time resigned, and Schnatter was placed in the CEO position again. Upon doing so, Schnatter urged Papa John’s franchisees to expend more financially in order to achieve quality; focusing on more adequate staffing and consistent food costs. In order to encourage this expenditure, Schnatter gave up one-third of his yearly salary – $200,000 – in order to pay incentive bonuses to high-ranking franchisees (Coomes, S.; Dec. 2006).

            While Papa John’s Pizza faces many challenges today, including a more health-conscious consumer base and declining consumer spending, the corporation continues to succeed due to its strong quality emphasis. Organizational leadership is determined to maintain its high-quality standards in order to serve its customers a consistently superior product.

Illinois Environmental Protection Agency: Pursuing Quality

While introducing TQM to a government bureaucracy can seem an impossible task, the Illinois Environmental Protection Agency (IEPA) was blessed in its acquisition of new talent. In 1992, Director Mary E. Hade introduced TQM to the state agency after learning about the management philosophy during her tenure with the U.S. Environmental Protection Agency.

Hade arrived at the IEPA and quickly assessed its current quality condition. While the agency was well-known for its strong pursuit of environmental regulation, it had also developed a reputation as a cantankerous, difficult group to deal with. Hade’s opinion:

“…the agency had built up 20 years of adversarial relationships with its customers and had a reputation for operating in a ‘highhanded’ way, as if ‘we came in and said do it our way, and if you don’t do it, we’ll nail you to the wall.’ She said that ‘one guy told us they used to have to draw straws in their office about who would call the agency’ because it was rarely a pleasant experience.”(Wojcicki, E.; Oct. 1993. Pg.5 ¶ 4)

The IEPA needed organizational change quickly if it wanted to improve its reputation with external customers. As with any organization, the IEPA relies upon a positive relationship with its internal customers in order to continue both receiving work and questions, to maintain its reputation as a thought-leader and a benchmark of best practices.  First, Hade and the other key leaders of the agency took part in an extensive TQM training program. Upon learning basic TQM principles, these leaders began implementing quality-oriented techniques in all of the business operations. Later, the remainder of the IEPA staff was given training in TQM so they were able to monitor and evaluate their own job processes.

One example of the effect TQM had upon the IEPA is the changes that took place in the organization’s FOIA department. In one case, an angry external customer complained that he was told by the agency that it needed 18 months to comply with his FOIA request. After the TQM training, the IEPA’s FOIA coordinator reported that the agency now responds to FOIA requests in only 5% of that time; a reasonable two to four week period. The IEPA attributes these changes to hard work and the quality training education received by agency employees (Wojcicki, E.; Oct. 1993).

Another business process affected by TQM was the IEPA’s archive system for tracking hazardous waste. A Bureau of Land employee brought the system to the attention of Director Hade, as he felt that their hard copy records were burdensome and did not keep IEPA employees aware of these places of interest in the state. Hade quickly initiated a TQM project to overhaul the IEPA’s outdated system. As a result, agency employees are now able to quickly retrieve this information, and are no longer burdened with the task of filling out new forms for a document archive (Wojcicki, E.; Oct. 1993).

Clearly IEPA leadership greatly contributed to the agency’s assuming TQM traits. Director Hade, impressed by the use of TQM at her former employer, the U.S. EPA, determined that the IEPA was in need of a focus on quality to improve its working conditions, business processes, and reputation. As a result of her direction, the IEPA operates more efficiently and has a positive, “customer first” focus.

TQM was originally the favored management theory by manufacturing companies that relied upon business process changes to eliminate defective product creation. However, as the theory gained strength among the business community, other sectors outside of manufacturing began to recognize its power. A customer, quality-oriented organization is focused upon the group that will continue to make an organization successful – its customers or consumers – and will continue to succeed due to a reputation for quality services or products. Motorola, Papa John’s Pizza, and the Illinois Environmental Protection Agency continue to embrace quality tools in order to maintain their reputation as industry leaders.


Analysis Team (n.d.). “Get It While It’s Hot”. Retrieved online October 27, 2007 from the EBSCO database, part of the University of Phoenix student library.

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Total Quality Management and the 21st Century Organization

August 16, 2009

Total Quality Management (TQM) is the management philosophy singularly focused upon a corporation’s customers. By continuously monitoring, adjusting, and creating new processes, companies are able to create the highest quality product for their consumer base, following the assumption that these consumers will then equate that corporation with quality products, therefore, establishing a superior brand image and forecasting future sales from loyal consumers.

In the following analysis, this author will discuss TQM as it exists in 21st century corporations, with a particular emphasis on the effect of globalization on TQM practices. A comparison of traditional management styles to TQM will follow. Lastly, this author will examine ways that TQM practices could affect XXXXX Corporation, a merchandiser for [Major Retailer] stores throughout the nation.

The Impact of Globalization on TQM

21st century globalization has greatly impacted TQM philosophies in organizations. U.S. corporations now carefully consider outsourcing production and manufacturing, as the labor costs in other countries is considerably less expensive than those of American workers. When a corporation chooses to either expand operations to a foreign country or begin selling products or services globally, two major conflicts may arise and disrupt TQM practices.

First, culture undoubtedly affects workplace behavior. It has been clearly identified that many societies during the post World War II period became accustomed to shoddy craftsmanship and inexpensive products that would not last over time. Due to this cultural shift in consumer behavior, it is entirely possible that other countries, long involved in the production of such inferior products, still retain this theory that products need not be well-made; instead, the quantity of products pushed out the door is the major focus.

For example, southeastern Asiatic nations such as Taiwan, Korea and China began manufacturing inexpensive consumer goods during the early 19th century. Products composed of plastics, ceramics, china, and pottery were produced on a huge scale, and exported to industrialized nations such as the United States. Despite the fact that American collectors now prize these “kitschy” products, during the 1970s consumers in the U.S. began to value product quality after a string of product recalls and a significant recession. Products needed to be crafted for longevity; Americans simply could not afford to purchase “throwaway” goods.  This cultural consumer behavior exerted upon Asian producers surely influenced their production techniques. In the 1980s Korean automobile manufacturer Hyundai unveiled several models to the U.S. market. After proving themselves to be of questionable quality, Americans soon believed Asian auto manufacturers could not compete, from a quality standpoint, with Detroit’s auto-makers (; n.d.).

However, in the late 1990s Hyundai autos resurfaced on the U.S. automobile dealership terrain. Offered with extensive warranties, the automobiles were first received slowly due to Hyundai’s reputation from the past. However, Hyundai and its subsidiary brand Kia now command an impressive market share of the U.S. auto market, and are considered by many American drivers to be a maker of inexpensive yet durable auto products (Haille, D.; Aug. 2006).

Companies that produce or offer products and services in other countries have an influence imposed upon their TQM practices due to cultural belief systems and past consumer experiences. Globalization exerts different forces upon corporations, and these influences can negatively impact company’s commitment to TQM philosophies.

Total Quality Management Compared to Traditional Management Philosophies

While TQM may be practiced by traditional organizations, it has very different focuses from that of traditional management philosophies. Several key tenets of TQM are virtually opposite that of the 20th century organization.

First, TQM is a customer oriented management style instead of a company-focused belief system. The conventional corporation is led by executives constantly seeking to improve the organization for the benefit of its internal and external shareholders. TQM is dedicated to the philosophy that an organization cannot succeed without satisfying its customers – their needs come first. This customer focus creates a very different organizational culture, as employees recognize which entity funds their salaries. While the corporation may write the paycheck, the financial strength comes from satisfied customers that continue to purchase products (Bacal, R.; n.d.).

Second, organizations practicing the TQM philosophy tend to have a more long-term focus. Classical management principles dictate that leaders are constantly observing and reacting to current data, with an eye for both solving crises quickly and producing financial successes immediately. TQM is a management theory poised towards future goals. Developing an organization to fully implement TQM principles is a lengthy and often expensive goal. From a value creation standpoint, TQM is worth the time and cost. An organization thoroughly practicing TQM, from production to marketing, is clearly setting its sights on future success. TQM at its heart is a long-term goal – both in embedding TQM in its value system and in its dedication to creating satisfied customers for their lifetime.

Sunbelt Services, Inc. and Total Quality Management

XXXXX Corporation is a merchandising organization servicing [Major Retailer] stores nationwide. The company relies upon manufacturing-like production goals in order to effectively place [Major Retailer] products in the proper spots. TQM could be a perfect fit for this production oriented service organization. Not only could TQM help managers evaluate, train, and communicate with field merchandising representatives, but the organization’s leadership may be able to center on the relationship between XXXXX Corporation and [Major Retailer]. In an organization with incredibly high turnover rates, employee retention could be achieved through the incorporation of TQM principles in XXXXX Corporation’s philosophy.


TQM is a non-traditional management style focused upon long-term customer satisfaction. While the 21st century wave of globalization has exerted new pressures on the TQM organization, the philosophy is bound by a belief system suited for the customer-oriented organization.


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