The  global Toyota car recall has been extensively covered in the mainstream media. Product recalls are not a new phenomenon in the car industry; even the highest quality marques have them.  So why has so much media commentary, particularly in the US, been full of delighted glee at Toyota’s misfortune? Simple - they’ve had 30 years of hearing and telling each other that US car makers (and by implication the US itself) are rubbish, having been resoundingly trounced by Toyota in market share, production methods,  quality and general admiration.  As Dave Segal wrote in the New York Times last week, “Life … is just high school writ large.”  Finally the smart Japanese kid who has beaten you year after year has failed a test. Schadenfreude.

However, if past experience is anything to go by, Toyota can turn disaster into success.  In the 1980s, Toyota suffered a massive and widespread quality failure in New Zealand.  In a country where cars don’t rust much (for reasons I don’t fully understand), it seemed that the entire Toyota fleet was rotting away, and people referred to their most popular models - Corolla and Corona - as Toyota Corrodas. Branding hell. After a slow start, cash-rich Toyota did something very few other companies could have.  It offered a free  panel repair/replacement to every Toyota owner with a car less than 5 years old (and didn’t quibble if it was several years older).  At the same time, Toyota developed and introduced a virtually rust-proof multi-layer galvanizing process to its body manufacturing, and announced a comprehensive long-term warranty on not just the body, but the entire vehicle.  A carefully-conceived, long-term advertising campaign shifted the Toyota brand positioning away from technical promotion to emotional connection.  The end-result - Toyota became more local than the locals and one of the most trusted brands in the country.

US automakers should watch out.  Toyota may be a bit slow to respond at first, but it has huge resources, and when it sorts itself out, then beware.  Toyota  will be back, and better than ever.

KPMG has published  a comparison of effective tax rates for people on US$100k a year in 86 countries (click here for the pdf file).  US$100k is the entry-point for internationally-mobile managers and mid-level professionals.  (KPMG also compares tax at US$300k for those further up the income ladder). The comparison excludes local government taxes and consumption taxes, and ignores what government provides in return (eg. healthcare). However, the figures are for a childless married income earner, not usually a big user of government services at this income level.

Once again, The Economist publishes an edited highlights graph.  For my English-speaking readers elsewhere:

• New Zealand income tax 32%, social security 1%, total 33%
• Australia income tax 29%, social security 1.5%, total 30.5%
• Ireland income tax 21%, social security 7.3%, total 28.3%
• Singapore income tax 9.3%, social security 10%, total 19.3%
• Hong Kong income tax 10.5%, social security 0%, total 10.5% (but just to make you really turn green, tax waivers can return some of that to you!)

When I was a kid, “Made in Japan” was a synonym for cheap shoddy knock-offs of Western products; but over time “Made in Japan” came to mean “lifetime quality” and “extras included“.  So the sneering changed: “Japanese only copy; they can’t innovate.“  Yet many of today’s smart design and manufacturing processes are modelled on techniques the Japanese developed.  Ah, those ideas already existed before the Japanese adopted them, I hear you say.  In nascent form, maybe;  but every new idea is built on what has gone before.  Anyway, the sustained dominance of Japanese firms in manufactured products from consumer electronics to industrial machinery demonstrates a highly innovative environment, not just in processes and product refinement. Much innovation in cars today comes from technologies pioneered in Japan.

I hear similar dismissive language applied to China now.  There’s even less basis for such myopia. Both nations had strong education systems and huge desire for economic change. China has a much deeper tradition of engineering and manufacturing.  It’s a theme Eric Drexler has touched on in a guest article for McKinsey on innovation:

To become a world-class center of technological innovation, a society must have three basic elements:

• drive—a culture that supports change and hungers for it

• human capital—the personal abilities that make world-class technology possible

• a capacity for mobilization—a society’s ability to pursue ambitious new goals

These basic elements are more fundamental than any current performance metric or economic trend, and they are durable.

China has all these in abundance.  I was particularly struck by Drexler’s comment on China’s mobilization capacity:

Drive and human capital are applied through organization, by both entrepreneurs and corporations, as well as national leaders and governments. India has been outstanding in its incapacity for reform and for interfering with entrepreneurship, though this is changing. China, however, has been outstanding in its capacity for learning from experience, radically transforming government policy, and unleashing a hyperentrepreneurial business culture.

As science and technology grow in importance, it becomes increasingly important for leaders to have a good understanding of these disciplines. Among US legislators, though, a background in science and engineering is exceedingly rare. In France, it is common. In Taiwan, many legislators have doctoral degrees in science or engineering. In China, of the nine members of the standing committee of the Politburo (the ruling body, which includes the president, the vice president, and the premier), one recently appointed member has an education in law. Previously, all nine had been trained as engineers.

… Perhaps the most robust indicator of change in the distribution of innovation potential is a change in the distribution of corporate research laboratories. Companies are opening new labs in China at an astounding rate. In software and electronics, NEC, Hitachi, Sony, IBM, and Microsoft all have established R&D centers in China; in pharmaceuticals, Roche, Pfizer, AstraZeneca, Novartis, and Eli Lilly have done so. This list is not exhaustive.

Despite this, many firms (and nations) are myopic about new competition from other countries.  Do you think they’re more realistic about competitors in the same region or city as themselves?  Sadly, no.  Even with familiar competitors, firms kid themselves with smug self-affirming generalisations.

Don’t get freaked out by competitors, local or global; but don’t fool yourself with uninformed complacency.  Otherwise, you’re just making your competitor’s job easier.

The Age reports that ANZ Bank is in advanced stages of planning a major brand update later this year and that ANZ’s Indonesian subsidiary Panin Bank was the pilot operation for the new look.

According to a briefing paper doing the rounds within ANZ last year, the bank’s brand did not resonate with women. Even the corporate colour of blue was considered “too male” by some respondents to a survey, thus the logic behind the bank’s high-profile sponsorship forays into netball and the Australian Open tennis, and a flower for a logo.

The Age also reports that, surprise surprise, executives are split over the change.  I’ve never seen a branding change with unanimous support.    Everyone’s an expert; arguments always rage over the new look, colours, logo, fonts and the need for a change at all.

… the M&C Saatchi-designed logo is meant to be a “three-petalled lotus” that represents the “trinity” of Australia, New Zealand and Asia, which are ANZ’s core markets.

Update: In the comments, Rob points us to this article and preview - better than I earlier thought it might look.

  I assume the new badge will be something like this (replace Panin with ANZ). Hmmm.

Most currency relative value tools look at some mix of goods in each country (purchase power parity). The Economist cuts through the complexity by looking at just one ubiquitous product sold by a single organisation - the McDonalds Big Mac.  Although the Big Mac index is really just a bit of fun, it has proved surprisingly effective over many years alerting people to significant disparities in currency fair values.

As with all international currency matters, the US dollar sets the base point.   In effect, this implies that the US dollar price of a good is fair value.  Clearly that’s not always so. The Europeans and, more recently, the Chinese have argued for an alternative, but there’s no sign of any real contender to be the new reserve currency.  With that caveat,  right now a Big Mac costs the Anglos and Japanese about the right price, the West Euros way too much, and most of the rest of the world way too little.  Sounds fairly accurate to me!

Struggling to get your head around current thinking on what governments are doing or should be doing to deal with the global economic crisis?  The New York Review of Books recently hosted a symposium with leading economics pundits Bill Bradley, Niall Ferguson, Paul Krugman, Nouriel Roubini, George Soros, and Robin Wells.  Reading the summarised text of their discussion will give you a reasonably straightforward understanding of the various camps’ viewpoints.  Although the participants do look at the bigger world picture, inevitably their discussion is somewhat US-centric.  However, the USA’s situation and policy responses will affect us all, and similar debates are happening in every country and in international forums. The NYRB article is well worth the time to read.  Just don’t expect a consensus conclusion: the debate still rages.

Thanks to SPD for the link.

The OECD has just issued its annual survey of tax on wages using 2007/8 data.  Some readers may be surprised at where their country of domicile ranks. However, these simple averages are misleading:

• GST, VAT, sales tax and local government taxes, etc. are not included.
• What about the higher earners, say 65 or 75th percentiles? For example, NZ’s higher tax rates rate kick in at very low $ levels, by comparison with other countries.
• And let’s not even mention the differences between countries regarding real wages, local purchasing power, and tax or tax breaks on interest, dividends and imputation, mortgage interest, pension contributions, capital gains, inheritance, house purchase stamp duty, fuel tax, road tax, etc, etc, etc.

It’s a bit like comparing airline fare deals.

Courtesy of Capital Chronicle, here’s Global Finance magazine’s list of the world’s safest 50 banks.  I’m glad to see that the list includes all the ones in which I have an interest, directly or indirectly.  The list shows great variety in size and ownership. As Capital Chronicle observes, “public ownership or a cooperative structure certainly do not guarantee prudence.” In that light, NZ readers will note one notable absentee from the list - the so-called “people’s bank”, government-owned KiwiBank.