Here’s the video (it seems a little slower to load than average, though):

The first one is an interview with three executives with different backgrounds. The 3 points of view are worth reading, but especially the comment of Kleiner Perkin’s partner (smart investor and gives us one more tidbit about Intuit’s culture, which we find more interesting by the day).

This other one on “taking the bias out of meetings” is also helpful (cites the previous one, a bit shallow in comparison with its straightforward/ “do’s and don’ts” style, but still worth 3 minutes as stimulus).

Finally, this one called “My Eureka Moment With Strategy” can be read from both the strategy and the investment decision making standpoints. It reminds us of one of the key tenets of great advertising, which is “protect the big ideas”. People’s experiences/shortcuts and the limited attention span/ information overload sometimes makes them prone to kill an idea by relying on prejudices/prejudgements.

Foreign investors are starting to catch on. At the latest Value Investing Congress – West, one presenter had AB-Inbev as his long case and said: “Amazing how unfamiliar the market is with the management story behind AB-InBev; like Rose Blumkin at Nebraska Furniture Mart.”

This is another example of looking at companies “globally”. From just this angle, that of the “local” investor: How could an US investor really understand Anheuser-Busch’s competitive environment if he ignored that such a revolution was going on in Europe? It was “common sense” in the US that Anheuser-Busch was “very efficient”, yet a closer look at what the InBev people understood as “efficient” would have made them reconsider. And the inverse is also true: how can a brazilian investor really understand a local company’s challenges if he ignores what’s going on in the world, best practices, trends and so on?

The payoff has always been clear to us, even before the authorization for local funds to invest abroad up to a certain percentage of the portfolio.

OTHER LINKS:

Luiz Fernando Edmond goes public, sort of – St. Louis Journal – April 28th, 2010

St. Louis Journal profiles Edmond and other key managers – April 24th, 2009

In fact, we probably wouldn’t point readers to this article if it wasn’t for the link to a free*, 143-page e-book with a selection of the best Harvard Business Review articles on Strategy and Execution. Enjoy!

* the e-book will only be made available for free until June 15th.

Doesn’t mean that the tool doesn’t work, it just means that you have to be careful using it. Talk about hitting your finger with a hammer!

Background: after the AmBev – Interbrew merger, the brazilian team’s cost-cutting efforts have surpassed European standards by far and that is rattling many cages. A strike has occurred, disrupting Stella Artois production, and competitors have jumped to the opportunity of reminding people that they’re “still Belgian”, in what must be ironic for the InBev guys. And now the management team has come to be a synonym for corporate greed. Wow.

But the usefulness of the Valor story for us is to highlight the huge gap between the unions’ speech and the interest of shareholders. Some of the quotes would read quite amusingly in the social and historical arena, if they didn’t lead to image problems that might eventually affect sales. That said, it’s crystal clear that the cost-cutting and cultural change efforts in course, if handled well, are in the best interest of shareholders in the long run.

We’ve tried to get an article in English that would translate the weirdness of the unions’ quotes and couldn’t capture them all in a single article, but here’s one from a pro-union site that has an infamous quote: “AB InBev are just thinking of their bottom line for shareholders, regardless of the social cost. There is no reason at all to fire people.”

Amazingly, the article describes the kidnapping of 10 senior managers at the plant as if it was the most normal event ever… “Social cost” indeed!

Apply it both in the big picture and the small picture – from the broadest strategic moves of your company to its tiniest daily processes. Now change the underlined word “company” for “department” if you want to go small, or “nation” and “regulatory system” if you want to go big. For extra fun, try “life”.

There was also an interesting (but misguided) issue raised about Buffett’s stance in this deal versus Berkshire’s bid for Burlington – see inside.

Kraft’s management was in a bit of a quandary last month. Because its original offer to buy Cadbury involved issuing stock representing more than 20% of its shares outstanding, the company needed shareholder approval to close the deal as per NYSE’s rule 312.03(c). Warren Buffett, Kraft’s largest shareholder, didn’t like the idea and said that Kraft’s stock was an expensive currency to use at that time. In a very public way, he declared a “no” vote on the issuance and recommended that other shareholders do the same. Given Buffett’s reputation, this was a very credible threat.

To steer away from him, Kraft needed desperately to raise enough cash to be able to cut the share issuance below the 20% threshold, thus avoiding the need for a shareholder vote. That’s where Nestlé came in. Over a weekend the company switched from being a competing bidder for Cadbury, to “helping out” Kraft by acquiring the company’s frozen pizza business. It’s reasonable to suppose that it got a good deal. Not only does it know the ins-and-outs of the food business, but it had the money on hand to act quickly – especially after the sale of Alcon to Novartis. Buffett’s commentary that the pizza sale was badly structured fiscally for Kraft only adds to the impression that the Kraft-Cadbury deal was a “marriage done at gun point”, rushed due to competition or perceived competition for Cadbury, where “minor details” were ignored in view of the bigger objective.

Check out our Q4 2009 report for our take on M&A in the “Merge!” section – this could very well be one example of the “shotgun wedding” we mentioned there.

LINKS:

Does Buffett’s vote on Kraft mean that Berkshire is fully valued? – Bloomberg, Jan. 11th 2010 – If Kraft’s shares are “very expensive currency” and Berkshire is using BRK stock in its bid for Burlington Northern, does it mean that Buffett thinks Berkshire shares are even better valued than Kraft’s? Not necessarily is the obvious answer. Buffett has always said that to pay for an acquisition with shares he must be getting more than what he’s giving away. He is therefore implying that this is happening in his bid for Burlington, while from the press release linked above it’s clear that he thinks that this is not the case in Kraft’s bid for Cadbury. Each deal must be analyzed separately.

LEX on Kraft/ Cadbury – Financial Times, Jan. 19th 2010 – LEX columns are a significant part of the FT.com’s value proposition and we highly recommend ponying up the cash for it. There’s a short video we couldn’t embed here and links to other LEX pieces on the subject.

Buffett’s Lost Vote – NYT’s DealBook blog, Jan. 21st 2010 – For an explanation in layman’s terms of the NYSE rule that would require shareholder approval for Kraft’s original bid for Cadbury.

One excerpt we feel is important to highlight:

” ‘We’re trying to do good. And we’re trying to make money. The more money we make, the more good we can do.’ – By this, he (John Mackey) had in mind not the traditional philanthropic argument that more money earned equals more to give away but, rather, that a good company–that is, his company–which sells good things and treats its employees, shareholders, customers, and suppliers well, can spread goodness simply by thriving. “

This “special bonus” is from Mr. Mackey’s editorial on health care in the Wall Street Journal (link below). It’s how he starts the piece and it’s a sentence by Margaret Thatcher, the UK’s former prime minister: “The problem with socialism is that eventually you run out of other people’s money.”

LINKS:

The Whole Foods alternative to ObamaCare – WSJ, Aug. 11th 2009 – The controversial op-ed on the Wall Street Journal about healthcare in the US. By stating that health care is no more of an intrinsic right than are food or shelter, Mr. Mackey made a lot of his “target customers” mad. This mix of personal and professional has led even Warren Buffett to shy away from personal views on issues with potential for backlash. One would think that Whole Foods has credit due to its long history of treating employees and suppliers well – as long as this last group complies with standards that ultimately raise the bar.

Did he jump or was he pushed? – John Mackey steps down as Chairman of Whole Foods – The Tree Hugger.com, Dec. 31st 2009

John Mackey doesn’t believe in climate change – The Huffington Post, Jan. 3rd 2010 – Almost funny in the way it chronicles Mr. Mackey’s fall-outs with Whole Foods’ “target customer” over his personal opinions. This particular blogger has had enough because of his environmental views.

Merry Christmas!LINKS:

Mr. Porter reviewed his original 1979 article in a 2008 article called The Five Competitive Forces That Shape Strategy.

Harvard interview with him right before the 2008 article. McKinsey Award video interview.

Skepticism pays: On Wikipedia, you can find a summary of the common criticisms regarding the 5 Forces theory. Nice starting point.

Useful YouTube links:

INSEAD Knowledge asks about the usefulness of long-term thinking in the midst of a severe downturn.

1-hour lecture on the competitiveness of a region and its urban areas (seems a bit off-topic, but is it really?)