More from the Author

• Case | HBS Case Collection | 2012 (Revised from original 2005 version)

  The U.S. Current Account Deficit

  Laura Alfaro, Rafael M. Di Tella, Ingrid Vogel, Renee Kim and Matthew Johnson

  Investors and policymakers throughout the world were confronted with the risk of painful economic consequences arising from the large U.S. current account deficit. In 2007, the U.S. current account deficit was $731 billion, equivalent to 5.3% of GDP. The implications of the deficit were debated with intensity. At one extreme, it was argued that large deficits would eventually resolve themselves smoothly, even if they persisted for many more years. Former Federal Reserve Chairman Alan Greenspan was among those expecting a "benign resolution to the U.S. current account imbalance." Other analysts, such as economists at the World Bank, believed the large deficits raised the risk of a sharp and disorderly fall of the dollar and that necessary macroeconomic adjustment could be painful, for the United States as well as for the rest of the world. The Financial Times asked: "How long will foreigners be prepared to make such generous 'gifts' to the US?" In this environment, Berkshire Hathaway, run by legendary investor Warren Buffett, postulated that current account imbalances would lead to "some chaotic markets in which currency adjustments play a part" and announced to shareholders a plan to increase investment in overseas companies to protect against this risk. It remained to be seen what the short and long-term implications of the current account deficit would ultimately yield.

  Keywords: Macroeconomics; Borrowing and Debt; Currency; Foreign Direct Investment; Business and Government Relations; United States;

  Citation:

  Alfaro, Laura, Rafael M. Di Tella, Ingrid Vogel, Renee Kim, and Matthew Johnson. "The U.S. Current Account Deficit." Harvard Business School Case 706-002, October 2012. (Revised from original July 2005 version.)

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• Working Paper | HBS Working Paper Series | 2011

  The Flexible Substitution Logit: Uncovering Category Expansion and Share Impacts of Marketing Instruments

  Qiang Liu, Thomas J. Steenburgh and Sachin Gupta

  Different instruments are relevant for different marketing objectives (category demand expansion or market share stealing). To help brand managers make informed marketing mix decisions, it is essential that marketing mix models appropriately measure the different effects of marketing instruments. Discrete choice models that have been applied to this problem might not be adequate because they possess the Invariant Proportion of Substitution (IPS) property, which imposes counter-intuitive restrictions on individual choice behavior. Indeed our empirical application to prescription writing choices of physicians in the hyperlipidemia category shows this to be the case. We find that three commonly used models that all suffer from the IPS restriction—the homogeneous logit model, the nested logit model, and the random coefficient logit model—lead to counter-intuitive estimates of the sources of demand gains due to increased marketing investments in Direct-to-Consumer Advertising (DTCA), detailing, and Meetings and Events (M&E). We then propose an alternative choice model specification that relaxes the IPS property - the so-called "flexible substitution" logit (FSL) model. The (random coefficient) FSL model predicts that sales gains from DTCA and M&E come primarily from the non-drug treatment (87.4% and 70.2% respectively), whereas gains from detailing come at the expense of competing drugs (84%). By contrast, the random coefficient logit model predicts that gains from DTCA, M&E and detailing all would come largely from competing drugs.

  Keywords: Decision Choices and Conditions; Forecasting and Prediction; Investment; Brands and Branding; Marketing Strategy; Demand and Consumers; Mathematical Methods;

  Citation:

  Liu, Qiang, Thomas J. Steenburgh, and Sachin Gupta. "The Flexible Substitution Logit: Uncovering Category Expansion and Share Impacts of Marketing Instruments." Harvard Business School Working Paper, No. 12–012, September 2011.

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• Book | 2010

  Buy-In: Saving Your Good Idea from Getting Shot Down

  John P. Kotter and Lorne A. Whitehead

  You've got a good idea. You know it could make a crucial difference for you, your organization, your community. You present it to the group but get confounding questions, inane comments, and verbal bullets in return. Before you know what's happened, your idea is dead, shot down. You're furious. Everyone has lost: Those who would have benefited from your proposal. You. Your company. Perhaps even the country. It doesn't have to be this way, maintain John Kotter and Lorne Whitehead. In Buy-In, they reveal how to win the support your idea needs to deliver valuable results. The key? Understand the generic attack strategies that naysayers and obfuscators deploy time and time again. Then engage these adversaries with tactics tailored to each strategy. By "inviting in the lions" to critique your idea-and being prepared for them-you'll capture busy people's attention, help them grasp your proposal's value, and secure their commitment to implementing the solution. The book presents a fresh and amusing fictional narrative showing attack strategies in action. It then provides several specific counterstrategies for each basic category the authors have defined-including the following:Death-by-delay: Your enemies push discussion of your idea so far into the future it's forgotten. Confusion: They present so much data that confidence in your proposal dies. Fearmongering: Critics catalyze irrational anxieties about your idea. Character assassination: They slam your reputation and credibility. Smart, practical, and filled with useful advice, Buy-In equips you to anticipate and combat attacks-so your good idea makes it through to make a positive change.

  Keywords: Communication Intention and Meaning; Cost vs Benefits; Problems and Challenges; Interests; Value;

  Citation:

  Kotter, John P., and Lorne A. Whitehead. Buy-In: Saving Your Good Idea from Getting Shot Down. Harvard Business Review Press, 2010.

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