Innehållsförteckning för Spring 2008 från Rotman Management

THE LATESTBLACKBERRY; a country home; foreign travel. If you don’t already have these things in your life, chances are you want them. Many of us are caught up in a cycle of ‘work and spend,’ where consumption is our major form of reward for the long hours we work and the stress of daily life. Indeed, consumer expenditures are often the means by which we keep our frenetic lives going, whether it be stress-busters like vacations or restaurant meals, the contractingout of household services or the use of time-saving gadgets. Consumption has gone well beyond satiating needs or even fulfilling dreams to become an end in its own right. Globally, the inequalities are stark: the 20 per cent of the population in the highest-income countries accounts for 86 per cent…

ONE OF THE MOST SALIENT CHARACTERISTICS of the 1990s boom in North America was the extent to which income and wealth flowed to the top 20 per cent of the distribution. While this phenomenon has been widely studied, little attention has been paid to how this shift in wealth distribution affected developments in the consumer sphere. In my view, it is associated with a marked shift in both the ideology and practices of consumers, which I have termed ‘the new consumerism.’ The essential features of the new consumerism are a change in the operation of reference groups and a shift from a model of consumer emulation characterized by ‘horizontal’, or proximate comparisons, to one dominated by ‘vertical emulation’. This shift has enormous consequences for consumer satisfaction, social competition and ultimately,…

India’s rapid economic growth has set the stage for fundamental change among the country’s consumers. The same energy that has lifted hundreds of millions out of desperate poverty is creating a massive middle class centered in the cities. A recent study by the McKinsey Global Institute suggests that if India continues its recent growth, average household incomes will triple over the next two decades and it will become the world’s fifth-largest consumer economy by 2025, up from 12th now. Along the way, spending patterns will shift significantly as discretionary purchases capture a majority of consumer spending. India’s potential should make it a high priority for most consumer goods businesses, but to succeed in this complex market they must overcome some major challenges. Private consumption has already played a much larger…

What is the mission of Green Roofs for Healthy Cities? Our mission is to celebrate and encourage the transformation of the building industry, in all of its manifestations, into a powerful force for sustainability within a generation. The integration of living, organic systems with the lifeless elements of modern building design is essential to achieving this transformation – the ‘movement,’ if you will, towards a living architecture. Green roofs and green walls are proven systems that provide an unbelievably broad range of social, economic and ecological benefits to their owners and the broader community. After ten years, these technologies and their numerous applications continue to capture my energy and enthusiasm. Green Roofs for Healthy Cities: Questions for Steven Peck (Cont’d) How did you get involved in these issues? My background…

Individuals do not seem to have pre-existing dollar values for ordinary products and experiences. IN A FAMOUS PASSAGE of Mark Twain’s novel Tom Sawyer, Tom is faced with the unenviable job of whitewashing his aunt’s fence in full view of his friends who will pass by shortly, and whose snickering promises to add insult to injury. When his friends do show up, Tom applies himself to the paintbrush with gusto, presenting the tedious chore as a ‘rare opportunity.’ Tom’s friends wind up not only paying for the privilege of taking their turn at the fence, but deriving real pleasure from the task – a win-win outcome if there ever was one. In Twain’s words, “Tom had discovered a great law of human action, without knowing it – namely, that in…

In contrast to the industrial-market focus on finding raw materials and turning them into finished products, the focus today is on adding value through knowledge. WHEN I BEGAN MY ACADEMIC CAREER in the mid-1960s, the primary focus of marketing research was consumer marketing. Even then, however, most of my contemporaries recognized that the core principles of consumer marketing could be modified and applied to business-to-business interactions for goods and services, as well as to the sale of raw materials to industrial buyers. Despite some obvious parallels between them, in the early development of these fields it made sense for consumer and industrial marketing to advance independently. Unfortunately, my contemporaries and I were so successful in separating consumer and industrial marketing that we managed to create separate silos. The two fields…

The title of your latest book is The Paradox of Choice. What does this mean? Everything we have learned from economists and marketers tells us that the more options you give people, the better off they are. If people aren’t interested in the new options, they can ignore them; if they are interested, so much the better. It’s what economists refer to as a ‘Pareto improvement.’ The paradox is that it turns out not to be true. You can add options and have some really bad effects: you can paralyze people so that they don’t choose anything; and you can induce people to make worse choices. In an effort to simplify a choice, they may base their decision on things like brand and price, which are not necessarily the most important…

IN A SEMINAL PAPER WRITTEN nearly 30 years ago, SUNY Binghamton Professor Emeritus Philip Nelson proposed a distinction between two types of consumer goods and offered a theory of advertising based on this distinction: ‘Search goods’ were defined as products whose quality consumers can ascertain before purchasing (e.g., clothing, furniture, jewelry), while ‘experience goods’ were defined as products whose quality the consumer cannot determine until after buying and experiencing the product (e.g., foods, books, detergents). Nelson argued that advertising claims for experience goods are uninformative to the consumer because consumers cannot verify these claims before purchasing the product. Advertising spending for experience goods, however, is informative because consumers can rationally infer that products that advertise more are of higher quality than those that advertise less. By contrast, for search goods,…

IN THEIR DAILY LIVES, people often see human elements in non-human forms and events. For instance, who hasn’t looked at a cloud formation – or the moon – and seen a human face in it? This tendency to ‘anthropomorphize’ pervades human judgment. People even sometimes attribute human goals, beliefs, and emotions to animals, for example, when they interpret the dynamics between two birds as reflecting the loving attention of newlyweds. We see human characteristics not just in nature, but in artifacts as well: we may view our car as a ‘loyal companion,’ going so far as to name it; and people often argue with and scold malfunctioning computers, engines or gadgets. Products are sometimes seen as having an underlying ‘defining essence’ analogous to a genetic code, or features of their…

CANADA’S LARGEST RETAILER, Loblaw Companies Ltd. has experienced growing pains over the past year as it seeks to centralize its management and streamline its operations. On Jan. 15, Mark Foote (MBA ’91), president and chief merchandising officer of Loblaw, spoke to Rotman Professor of Operations Management Philipp Afeche about the company’s transformational operating strategy in a session of the Rotman Operations Strategy Speaker Series. With 1,690 supermarkets and 130,000 owners and employees, and operating under a variety of regional banners, Foote says that Loblaw’s greatest strength is the diversity of its retail offerings, which allows it to find a niche in any market, from discount to upscale. “Our decentralized structure also means that our various stores have been allowed to operate fairly independently, and with the ability to respond flexibly…

“THE PROBLEM WITH THE ENVIRONMENT is actually a design problem with our economy,” says Andrew Heintzman, president of Investeco, the first investment firm in Canada to be devoted exclusively to environmental companies and sectors. “We need a redesigned economy that encourages people to behave better environmentally.” On November 21, Heintzman and his colleague Greg Payne visited the Rotman School to share their vision as part of the Rotman Business of Green Speaker Series. The growing climate change crisis is due in part to the failure of our economic system, which encourages short term consumption over long term investment, says Heintzman. “Our environment is subsidizing our lifestyle and our economy. We are drawing-down resources that took millions of years to create in order to supplement current consumption.” Short term thinking is…

Describe your responsibilities as Chief Credit Officer, World Markets, for American Express. I’m responsible for credit policy and credit decisions for 15 markets around the World: Argentina, Puerto Rico, France, Spain, Netherlands, Sweden, Finland, Germany, Austria, Hong Kong, Taiwan, Singapore, Thailand, India and the International Dollar Card market. My daily decisions involve approving individuals for credit cards, determining what level of credit the customer should have, at what price we should sell products given the risk level, which accounts should be reviewed and what steps should be taken with them (i.e. increase credit, reduce credit, cancel the card etc.) All of these decisions are made using complex econometric models, decision science and business rules based on past experience. My larger role is to ensure that all of these decisions contribute…

MBA / MCOM / DBA Full & Part-Time 1965 MBA Class Champion: Cam Fellman Cam.Fellman65@rotman.utoronto.ca 1966 MBA Class Champion Gary Halpenny Gary.Halpenny66@rotman.utoronto.ca 1967 MBA Class Champion: Len Brooks Len.Brooks@rotman.utoronto.ca In Memoriam Jerry Dermer M.B.A., Ph.D., P. Eng. Dec. 26, 1941 – Jan. 23, 2008 After a long and courageous battle with lymphoma, Jerry passed away at Scarborough General Hospital with his family at his bedside. Predeceased by his parents Simon and Molly Dermer of Ottawa, he was the beloved husband and best friend of Anita (née Lamberti), the cherished father and mentor of Simon and Benjamin, and the dear brother of Bob Dermer. He will be greatly missed by many cousins in Canada and the U.S., as well as by the whole Lamberti family. For more than 25 years Jerry…

Over the last five years there has been a tremendous amount of leveraging and disintermediation, but I think there will be far less of that; in fact, I think we’ll see a reversal of this trend. Roger Martin: Global capital markets are in turmoil at the moment. What key challenges is RBC facing? Gord Nixon:We are living in a new world today – even relative to where we were just six months ago. We’ve been through a ten year ‘party’ where there’s been way too much consumed, and we’re now dealing with a hangover that is painful and will last a lot longer than people expected. Our key challenge in the short term is navigating through these choppy waters. Every day there are new challenges in the market – for…

IMAGINE THAT you are at a local theater to watch a movie: you make your customary stop at the concession stand to buy popcorn and drinks; when you ask for a large bag of popcorn, to your surprise, the person at the counter hands you the same quantity of popcorn in three smaller bags, saying that the large bags are out of stock. Would this odd encounter change the amount of popcorn you eat or the speed at which you eat it? Our research suggests that it would. Since the days of Ulysses, human beings have been devising rules to constrain undesirable behaviour. However, these rules are sometimes broken, leading to consequences that we would otherwise avoid. We recently studied situations in which individuals try to avoid consuming a given…

Over 40 per cent of our business is now in developing markets, which makes them bigger for us than Europe, and sales there are growing much faster. WHEN I WAS AN MBA STUDENT AT INSEAD in the early 1970s, subjects like ‘corporate responsibility’ and ‘sustainable development’ barely existed. The green movement that was emerging at the time was the province of politics and protest, not business. The idea that companies had responsibilities to society beyond making a few charitable donations had not yet taken hold. Today, as CEO of a leading consumer goods company, I am pleased to say that social responsibility and environmental sustainability are core business competencies, not fringe activities. There is growing recognition that the social and environmental challenges facing us in the 21st century are…

If a stimulus we care about suddenly improves, we will first experience a positive feeling, but with the passage of time the elevated feeling will fade. FOR THOUSANDS OF YEARS, philosophers and theologists have debated how to attain joy and avoid misery. In recent decades, the debate has expanded to include consumer researchers, psychologists and economists, who have accumulated empirical data and developed testable theories on happiness. In the realm of consumption, there are two general approaches to improving consumer happiness: 1. Enhance the magnitude of a desired external stimuli (e.g., the amount of income, size of home or number of shoes); 2. Find the optimal relationship between external stimuli and happiness The following analogy illustrates the distinction between these approaches: suppose a child loves wooden blocks and possesses…

For most companies, branding is about positioning, advertising, packaging, and catchy logos and slogans. That is no longer enough. Branding in today’s marketplace is about the total experience a customer has with your products or services. It is about enticing customers, gaining their trust, and making the experience so pleasant that they are proud of their choice and will tell others about it. Recently, I was in the market for a vehicle that would be safe and meet the needs of my busy wife and children. We narrowed the choice to two vehicles. I travel a great deal, so when one dealer promised that in the event of a breakdown he would pick up the vehicle immediately and take it in for servicing, my wife was sold. For the first…

The level of consumption that defines the North American lifestyle is both unsustainable and widely emulated. What hope is there in creating a prosperous planet without destroying the earth? There are a few things that should give us hope. First of all, we know that it’s possible to produce the goods and services we want with much less energy. There are countries that use much less energy to produce the same number of goods as the U.S. and Canada, for instance, and they enjoy the same degree of economic growth. We also know that at least the theoretical limits of energy efficiency are nowhere near in sight. Even doing things more or less the way we do them now, but more efficiently, can greatly reduce the environmental and climate impacts…

You have noted that around 320,000 food and beverage products are currently available, and that an average supermarket carries 30,000 to 40,000 of them. Is it possible to be an ‘informed consumer’ in such a crowded market? Not without a lot of work, and that is precisely why I wrote What to Eat. I spent a year in supermarkets trying to answer every question I could think of to help people figure out how to make reasonable choices in what has become an impossible situation. The bottom line is this: you have to pick your issues. Supermarkets provide a vital public service, but they are not social service agencies. Their job is to sell as much food as possible. Every aspect of store design – from shelf position to background…

In developed countries, people seek sanctuary in their wealth, and believe that it will protect them from most ills. Who are the New Consumers, and what do they want? New Consumers are people who are cash rich but time poor. In The Soul of the New Consumer, my co-author and I identify the three shortages of the New Consumer as time, attention and trust. People have very little time to spend on making shopping decisions; their attention span is quite short, simply because they have so little time; and quite often they are quite distrustful of advertisers, journalists, government, or any authority you can name. Accordingly, one of the great demands from the New Consumer is a measure of authenticity. They like products to be unique and original, to help…

FOLLOWING THE SALE of natural resource giants Inco, Alcan and Falconbridge, and amidst growing concerns about the ‘hollowing-out’ of corporate Canada, Richard Haskayne has become a vocal proponent of the need for ‘Northern Tigers’ – Canadian corporate champions that can compete on the world stage. The former chairman and CEO of Home Oil, TransCanada Pipelines, MacMillan Bloedel, and Fording Inc. shared his insights from the front lines of corporate leadership in an October 29 presentation at the Rotman School. According to Haskayne, recent anxieties about Canada selling out to foreign masters are not entirely unwarranted. “Do you think Vancouver is the same without MacMillan Bloedel?” Haskayne asked of the Canadian forestry company sold to U.S.-based Weyerhaeuser in 1999. “When the head office goes, its support network goes with it, and…

IN JUNE 2007, a first-of-its-kind scholarship was established at the Rotman School through a $1 million gift to The Martin Ossip Endowment Fund: The Martin Ossip Scholarship at the Jewish Foundation of Greater Toronto will be awarded to one or more Rotman MBA students each year who demonstrate outstanding contributions to the Jewish community and/or who exemplifies ethics and values consistent with traditional Jewish faith. “The Martin Ossip Scholarship is one of the largest scholarships available at the School,” says Dean Roger Martin. “It will grant deserving students the freedom to complete their MBA without carrying the financial burden of student loans and will help the School attract even more of the brightest students from around the world.” The award was established by David Ossip, founder and past-president and CEO…

Laura Manes (MBA ’06) Consultant, Bain & Company Lives and works in: Toronto BEST THING ABOUT MY JOB: The diversity of projects. Every few months I get to sink my teeth into a new industry, so there is always a lot to learn. MY BIGGEST CHALLENGE: Given that a lot of our clients are spread out across North America, there is often a lot of travelling required, which can be stressful. MOST IMPORTANT SKILLS FOR MY JOB: Learning quickly and bigpicture thinking. PROUDESTMOMENT:At the end of one of my recent projects, the client threw me a going away party and told me how much they would miss my contributions. It made me realize that even in a short time, I was able to make an impact and effect change within…

Some investments have higher expected returns than others, and by and large, they’re the ones that do the worst in bad times. There are lots of mixed messages out there for financial services consumers. In your view, what are the key steps to financial security? The first thing I would suggest is that people get good, realistic forecasts of where they’re likely to end up in retirement if they continue to do what they are currently doing. And by realistic, I mean taking into account not only how good it could be, but the bad and the ugly, so that they have some realistic view of their future if they continue to do what they’re doing. Having done that, they can begin to ask the hard questions: “Should I save…

WHETHER WE ARE EATING, drinking, switching on a light, talking on the telephone or attending a sporting event, consumption is the stuff of everyday life. While each instance of consumption is mostly routine and not much deliberated on, it can have far-reaching consequences. Taken together, all of the small, everyday decisions we make about whether and what to consume influence what is available in the marketplace. Although few people give much thought to the effect of their spending on national economic well-being, Americans were made aware of it following the terrorist acts of September 11, 2001. Amid fear and uncertainty and an ongoing economic downturn, President George Bush and New York City Mayor Rudolph Giuliani told citizens how they could do their part for the country: go out and spend…

ATNIGHT, THE EARTH’S CITIES are visible from space as chains of light in a sea of blackness, exuding energy. Acloser examination reveals complex webs of streets, enormous buildings, vehicles, and burgeoning populations – all of which require energy to build, use, and sustain. To meet these needs, cities draw energy from the world around them, with health, security, and environmental consequences for all. Even as industrializing nations seek to expand their economies to levels nearer those of richer nations, the Earth’s atmosphere and ecosystems are demonstrating real limits to our ever-increasing consumption of resources. As cities continue to expand, the enormity of their contributions to major social and environmental problems is only expected to rise. Cities in the future will bear the brunt of many challenges related to today’s unsustainable…

Following are eight types of consumption biases that serve as obstacles for maximizing happiness. 1. Impact Bias When asked to predict the experiential consequence of an event (e.g., moving to a larger apartment), consumers often ignore the power of adaptation and thereby overpredict the duration and the intensity of the experience. Impact bias can be attributed to two things. One is ‘neglect of ordinization:’ when an emotion-triggering event happens, people will make sense of it and make the event seem ordinary. Yet most people underestimate this ordinization effect. The second reason for impact bias is ‘focalism’: consumers pay too much attention to the focal event, overlook the dilution-of-attention effect and thereby overestimate the affective impact of the focal event. 2. Distinction Bias This bias arises because consumers are in different…

The asset that can be built online is permission: the privilege of marketing to people who want to be marketed to. You have written a lot about the ‘post-consumption consumer.’ Please explain this term. It is human nature to want to acquire as much as you can. What happened during the 1940s, 50s and 60s in North America is that as people acquired more and more wealth, they used it to acquire more ‘stuff.’ In the last few years it has become apparent that we have way more stuff than we need, but not enough time to enjoy it. This is the quandary of the post-consumption consumer. She really doesn’t need anything else: once you have 1,000 (or 10,000) songs on your iPod, another one isn’t worth much to you,…

Companies must become organizers of value creation, shifting their role from principal actor in the production system to co-producer of value. MORE THAN 35 YEARS AGO, IN HIS SEMINAL BOOK Design for the Real World, Victor Papanek stated the designer’s responsibility for creating sociallyand ecologically-responsible products, tools, and community infrastructures. It would be another 20 years before a study by the Dutch government suggested that a 90 per cent reduction of the global ecological impact would be needed by 2040 in order to preserve a sufficient amount of resources for the next generation. The Dutch report also issued a strong warning against expanding the western development model to developing countries. Despite this warning, to date the expansion of markets into new regions has been largely based on the expansion of…

Some people look at LEED certification as something altruistic, but there is actually a lot of common sense to it from a commercial standpoint. Fouryears ago, SAS Canada announced that it was committing $30 million to the development of an environmentally-friendly headquarters for its Canadian operations. Why did you decide to do this? This is a journey that we set out on over ten years ago. Originally it was more of a commercial venture than anything: we were growing rapidly, and real estate leasing costs in downtown Toronto were continuing to increase, so we looked at buying a facility. We were surprised to find that there was a hole in the Toronto market: we could actually own 123,000 square feet in downtown Toronto for the same price as renting one…

While still a graduate student at the University of British Columbia, you created the concept of the ‘Ecological Footprint’ with Professor William Rees. Please define it. An Ecological Footprint is the equivalent of an ‘ecological services account:’ in much the same way that your bank account indicates how much you spend and earn, ecological footprints indicate how much land and resources are taken up by your consumption of food, fibre and energy. Think of it as ‘ecological accounting.’ If you believe in the need for sustainable development, you are likely an advocate of the Ecological Footprint. The notion of sustainable development is based on the recognition of global limits; if there were no limits, we should have accelerated development. Implementing sustainable development depends on understanding how much of the planet…

DISCUSSIONS OF THE ENVIRONMENT usually focus on such large-scale solutions as a carbon tax for industrial emitters of air pollution, or a cap-and-trade system for exchanging CO2 credits. Yet such regulatory systems are difficult to apply to end users like residences and small businesses, who in Canada make up 70 per cent of the market for electrical power. For such consumers, vol untary action is a more realistic and promising path, according to Tom Heintzman, president and co-founder of Bullfrog Power. In a January 16 presentation at the Rotman School, Heintzman discussed the “The Importance of Voluntary Action in Addressing Climate Change” as part of the Rotman Business of Green Speaker Series. According to figures provided by the Inter Governmental Panel on Climate Change, Canada needs to achieve nearly…

LAST SEPTEMBER, nine international students at the Rotman School received significant financial support for their MBA studies thanks to a generous alumnus who has chosen to remain anonymous. Through planned giving, this donor and his estate have changed the lives of students for generations to come, with a $1.4 million endowed gift to create the International Student Fellowship at the Rotman School of Management. The donor was the son of a barber who emigrated to Canada. Growing up, he wanted to follow in his father’s footsteps, but his father insisted on his son’s education. He earned an Engineering degree and built a stellar career with the work ethic he learned from his father. Years later, he returned to the University of Toronto as an adult student to pursue a…

ENTREPRENEUR AND SELF-MADE billionaire Seymour Schulich has made a second career out of supporting post-secondary education, and is often placed in a mentorship role by students eager to share in his business wisdom. Inspired by them, the co-founder of Franco-Nevada Mining Corporation and chair of Newmont Capital has written a book called Get Smarter: Life and Business Lessons that captures his decision-making approach toward everything from marriage to closing a deal. On November 2, he visited the Rotman School to discuss the book and the insights he’s gained over his 42-year career. Looking back to his early years, Schulich recognizes he was not quite as smart or accomplished as he believed at the time: “At 20, I knew that I knew nothing; at 30, I knew nothing but thought I…

What is The Shopping Channel’s mission? First of all, I’m proud to say that we are celebrating our 20th anniversary this year. The Shopping channel is Canada’s only nationally-televised, 24-hour shop-athome service, available on a variety of cable channels across the country. We have the pleasure of servicing hundreds of thousands of Canadians each year by providing a wide product selection at competitive prices; we carry both brand-name items and unique ‘new to the market’ items that can’t be found anywhere else. Our products range from fashions to household items to Canada’s largest selection of jewellery. Our mission is to provide customers with high-quality, exceptional value and convenience – and we aim to do the same with our online offering, theshoppingchannel.com. Is there anything the Shopping Channel will not sell?…

Rotman Alumni Network on Tour Recently, Rotman alumni in cities around the world have gathered to meet with each other and touring students. In October, Rotman hosted “What is Really Happening in Private Equity?” for alumni and members of the banking community in London at the Savoy Hotel. Afterwards, alumni and visiting students were treated to dinner, conversation and an update on the School from Vice-Dean Jim Fisher. Current Rotman students were delighted with their reception from alumni abroad during three study tours in China (Hong Kong, Shanghai and Beijing), India and South Africa. As well, Dean Roger Martin and travelling Rotman professors hosted events with alumni throughout the winter and spring. As alumni, you’ll be contacted about any upcoming events in your region. If you want a sense of…

May 2008 May 12, 5:45-7:30pm Book Launch for “Who Owns Canada Now: Old Money, New Money and the Future of Canadian Business” Place: Fleck Atrium (ground floor), Rotman School Author: Diane Francis, Editor-at-Large, Financial Post May 22, 5:30-7:30pm Rotman Integrative Thinking Speaker Series Place: Four Seasons Hotel Chicago Author: Roger Martin, Dean and Professor of Strategic Management, Rotman School; Author Topic: “The Opposable Mind: How Successful Leaders Win Through Integrative Thinking” Session Sponsor: Doblin Group May 28, 8:00am-2:00pm Atlantic Business Summit Place: Fleck Atrium (ground floor), Rotman School Synopsis: the summit promotes “brain circulation” to enable Atlantic Canada and Toronto to benefit from the best of what each region has to offer through the free flow of capital, knowledge and creativity Co-Hosted by: Dalhousie University Faculty of Management; East Coast Connected;…