Sunday, August 01, 2010

BP Branding Problem

With the spill in the gulf, BP has taken a PR hit. Most consumers don't do business with BP, but they do purchase products from BP branded dealers. Anecdotal evidence indicates that consumers are starting to shy away from BP branded dealers which is hurting the dealers volumes.

One solution is a PR campaign to repair the brand. Another is to shift to another brand name. BP gained a presence in the US by buying up US oil companies including Sohio, Amoco and ARCO. Since they own other brand names with long histories in the US, they could switch over.

Rebranding takes time and costs a fair bit. So does repairing a brand. The question for BP and it's dealers is which strategy has a lower cost and higher return.

(Yes ARCO is owned by BP. Here in the western US, ARCO is still the brand that they market under. The ARCO brand has come to mean low prices, cash prices, no credit cards and a fee for using a debit card.)

Usually a branded dealer pays a bit of a premium for the branded gasoline relative to the unbranded dealers in the market. In the short run, BP could compensate their dealers by lowering the price they charge them for gasoline to take into account the damage to the brand. I suspect that two cents a gallon relative to the competition will bring their volume back up.

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Debate on H-1B Visas

The Arizona Republic has a good article on H-1B visas in today's paper. It is worth a read especially with the immigration debate going on here in the state.

One of the questions is whether we need the visas at all. If US companies can't find enough qualified graduates here in the US, it would seem that a simple increase in salaries for those positions would fix the problem in a few years. A higher future income would induce more students to get the necessary education and training.

On the other hand (yes I am a two handed economist) if the wage goes up significantly in the US, then international companies will merely move the work offshore. Offshore design centers are already the norm for many of the businesses.

On a net basis, I'm not sure whether raising salaries would increase or decrease the total number of jobs held by Americans.

Once you've got the H-1B visas, then you have to deal with the unintended consequences. Both employers and employees get locked in while trying to secure a green card, and this reduces labor market flexibility.

I don't see any good options here.

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Good News and Bad News

If you're part of the sales staff for a sports team the good news is that your team just signed a super star. Your job just became a lot easier because now everyone wants to buy a ticket.

The bad news is that everyone buys a ticket, and you've got nothing left to sell. So you get laid off.

HT: Marginal Revolution