BARVENNON.COM
20th September 2006
AUSTRALIAN DIARY
What
is "objective
analysis"?
-
COLES + KKR -
KKR
(Of "Barbarians at the gate" fame) have made an offer for Coles,
which is one of the three largest retail groceries in Australia.
Coles CEO Fletcher has stated that the offer of $14.50 is too low,
stating that the value is between $17 & $20.
Personally, I like Coles. They provide the specialty Cheese that
I like, and Kangaroo.
About a decade ago there were three large grocery retailer
chains in Australia. The smaller of the three then was Franklins
"no frills",
which by far offered the cheapest groceries. A Singaporean
moneybags
purchased Franklins and attempted to move it upmarket (in price) but
the Franklin's franchise with it's customers derived from low price,
and he bombed out, eventually selling his stores to Coles & Woolworths. (You could
see Coles & Woolies rubbing their hands at the prospect of
acquiring all of those Franklins customers.) The empty space at
the cheapest end of the market was soon filled by German company Aldi. Aldi specializes in
providing a very cheap line of good quality grocery in each
category. Their policies appear to be causing some angst at Coles
& Woolies.
As an impartial? observer I am not happy with CEO director
Fletcher. Coles took over Myer Department store of Melbourne in a
share swap which resulted in Solomon Lew (Previous owner of Myer)
exerting
management control of the group. Coles seems to have
performed less well since Lew was removed from the board. (by
Fletcher perhaps? Fletcher seems to be more the political genius,
less the business genius.) One of the Fletcher initiatives that I
believe was ill advised was the initiative which removed the policy
that gave shareholders a discount. A shareholder could apply for
a certificate, and on presentation of that certificate at the checkout
would obtain a 3% discount on the account. Another ill advised
initiative was the "follow me" venture into petrol discounting.
(A petrol discount of 4c/liter up to 100 liters, which is around 16c
per US gallon up to 25 US gallons, is provided to customers of Coles
& competitor Woollworths who spend $30 in a company store.)
It would have been better to follow the IGA initiative, and offer a
4c/liter refund on a petrol receipt when grocery purchases exceeded $30.
Fletcher has recently discarded the Myer chain, and has
mooted a development that includes a Coles metamorphosis to Wal-Mart
like Supercentres.
Wal Mart in the USA
has a formula. From observation & inference that formula
includes (1) lowest cost (& huge) premises. (2) lowest cost wages.
(3) lowest cost goods acquisition. (4) A large pool of customers within
(about) 15 minutes drive. Those low cost premises are
frequently an empty 10 hectare paddock in the middle of a farming
district, with the sole proviso that it be within 20 km of about 30,000
potential customers. Lowest wages are now possible (thanks to
J.Howard PM for the enabling legislation) and lowest cost goods are
essentially a function of buying power. Wal Mart does not compete
for the top end of the market. Wal Mart is Aldi with multiple
brands in every category.
The Wal Mart formula is not readily applicable to either closely
settled or sparsely settled regions. There is no Wal Mart store
in Manhattan. Wal-Marts are few and far between in Maine. A
large Wal-Mart supacentre is a factory like shed about 180 meter
long, 120 meters wide, located in the middle of a 2 - 10 hectare (5 -
25
acre) block of land that is sealed & marked and provides free,
unlimited
parking. Just inside the entry to the store there might be a few
concession shopfronts (McDonalds, medical) and then a row of (sometimes
automated) checkouts. Behind the checkouts are rows and rows of
shelves containing goods.
Typically, everything is cheaper (by about 20%) than anywhere else.
So if Fletcher does a Wal-Mart, what is he going to do with his small,
high cost Coles locations?
My suggestion to the Coles board is dump Fletcher, and find someone
like Sol Trujillo to run the company. Otherwise (I fear) KKR will
win, and we (the people of Australia) will end up paying higher prices.
Alternatively, the board could consider restoring the 3% checkout
discount to shareholders.
- NOAM
CHOMSKY -
In
general I have no respect whatsoever for liberal writers, most of whom
I consider to be disseminators of unresearched and frequently lethal
"facts". For instance, in Australia Phillip Adams and Richard
Neville spring immediately to mind. I wonder how many
people Adams has killed by declaiming back in the '90s words to the
effect that "AIDS was a disease transmitted exclusively between
homosexual men and IV drug users". Even then, medical science was
warning that heterosexual transmission could and did occur.
Richard Neville is more innocuous, although I found his fascination
with
serial uxoricide (or was it just femicide?) Sobrage to be somewhat
bizarre. (If these examples are rather old it is because I have
since avoided wasting my time reading columns over their byline.)
That said, it must be said that many conservative writers are also
disseminators of unresearched garbage. These writers can often be
spotted because they adopt the label "neocon". Mostly they are
ex-liberals who have
changed their stripe to keep in fashion.
Chomsky is different brand of liberal. A few weeks ago I borrowed
from a local library a copy of his most recent book, "Failed
States"(HH&C.FE2006). He erupts facts, (most of
which seem accurate). He does not always hew to the traditional
liberal
line. Like myself, he knew that (just like Bush's claim of
Saddam's WMD) the Clinton claim of Kosovo persecution
was unfounded,
and the bombing of Kosovo by NATO was therefore unjustified.
Chomsky has the intellectual rigor to admit & try to integrate
data that are inconsistent with his own politics. For
instance he castigates the US as committing war crimes, but quotes
Kissinger with approval for understanding and honesty (p87) in
recognizing the de jure situation, which is that the US is the only
state that can initiate force against states that pose a threat to
world peace.
Chomsky's objection to the Iraq invasion is that the US is riding
steelshod
over progress
towards an
international system based on cooperative security, multilateral
decision making, collective action, agreed norms and steadily growing
fabric of law. I recognize that as a
desirable objective, however have some impatience with the way that
individual
corruption of world leaders and a defective UN security
council seem to
be interfering with the process of establishing cooperative
security, multilateral
decision making, collective action, and agreed norms.
I also condemn
the invasion of Iraq, but from a different viewpoint. I
take Kissinger's view, that the US should intervene to right
wrongs. Admittedly, the US has not got clean hands, as
instanced by Haiti and various other central & South American
adventures. However I do not condemn the Iraq invasion
because there were no WMD, but because
the war has not succeeded in establishing a stable government in
Iraq. Iraq is a strategic objective, located as it is
between Iran and
Syria. I condemn the invasion because it was ill
prepared. Somebody with intelligence and foresight
was not directed to foresee the difficulties which might (and have)
emerged. After Vietnam, one would have thought that military
& political planners would have anticipated the eventuality that
occurred.
I believe that to win the war against terrorism, we must redesign our
democratic system. We do not have democracy, we have
democratically elected dictators. If we the people (of the so
called "liberal democracies") had real
democracy, we would have the power to directly legislate, and we would
also have the power to remove our elected representatives at any
time. In most ways, there is little to choose between the
dictatorships in Muslim countries and the democratically elected
dictators of the so called "liberal democracies", except that our
dictators are governing wealthier, more powerful nations.
We need real democracy. Just like the people of California.
Californians removed Grey. Californians make their own
laws.
Politically, Californians are probably
the most enlightened
people
in the world.
Waaay ahead of those noo yorkers, or
us in the land of oz.