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CEO Daily Brief – Jan. 28, 2011

CEOs Look toward Emerging Markets for Growth CEOs are looking toward emerging markets – such as in the BRIC nations …

CEOs Look toward Emerging Markets for Growth

CEOs are looking toward emerging markets – such as in the BRIC nations (Brazil, Russia, India and China) – for growth opportunities, as the World Economic Forum takes place in Davos, Switzerland. Still, there are risks for inflation and political unrest that could hurt economic progress.

Emerging economies are responsible for almost 40 percent of global consumption, meaning a slowdown there "would deal a serious blow to the global recovery," the IMF said in a report issued this week.

Business leaders are far more optimistic than they were two years in the midst of an economic downturn. But there were voices of pessimism. Economist Joseph Stiglitz said Western nations were facing a “period of malaise” rather than “recovery.”

"The euphoria that you hear from some quarters is because part of the world is doing very well and most of the multinationals are involved in that part of the world that's doing very well," Stiglitz was quoted by Reuters. "But Europe and the United States are not out of the woods. Unemployment remains intolerably high.”

Inflation is a serious concern. Bank lending increased in China this month, leading to the government trying to contain price increases. India raised interest rates this week, with the government saying the price of food could remain high if output is not increased. In addition, the Bank of England said that inflation in the United Kingdom could soon be at 5 percent.

"Interest rates are zero today but they can only go up and higher interest rates will drive financing costs up as well," John Krenicki, chairman and CEO of GE Energy told Reuters. "It's not just inflation in energy but steel, cooper and general commodities."

European debt was another problem concerning the economic forum.

The forum is held for four days in the Swiss Alps, and includes 35 government leaders from across the world, and over 1,400 business leaders.

For more about the World Economic Forum, as reported by Reuters, please click here.


Social Media Companies Mature as LinkedIn Files for IPO

In a major sign that social media companies are maturing, LinkedIn has filed for an IPO. Several other new Internet companies may soon follow with their own initial public offerings.

LinkedIn has become a key networking and job search tool, and now has more than 90 million members. LinkedIn didn't specify how many shares will be offered or what they would sell for. LinkedIn is roughly valued between $2.5 billion to $3 billion, The Wall Street Journal reports.

"This is the deal that breaks the dam," David Menlow, president of IPOfinancial.com, told The Journal in reference to the potential flood of interest by investors in social media companies that may have only recently been start-ups.

Facebook is another social networking company that may offer an IPO in a year or two. It has been valued at $50 billion.

Another possible IPO is at Groupon, which specializes in local commerce.

CEOs and founders of these social media companies stand to reap financial rewards when their companies become publically traded. Even though the required reporting of company information can be a burden after an IPO, the income it gives to company founders is a large reason for the drive they display in the start-up process.

Another specific lesson from LinkedIn, according to The Journal, is that most Web businesses generate revenue only from online advertising but LinkedIn has three revenue sources: advertising, premium subscriptions and “hiring solutions for human resources managers who tap its database.” The “hiring solutions” segment represented 41% of company revenue during the first nine months of 2010. Diverse revenue sources are important for any company.

For more about the LinkedIn IPO, as reported by The Wall Street Journal, please click here.


Mature Workers Valuable for Companies

Automatic retirement of older workers is no longer seen as a positive for companies. Hans-Paul Bürkner, CEO of Boston Consulting Group, is advocating that companies keep their workers for more years but find responsibilities for them that benefit the companies and the employees.

"We have to give people a chance in their 60s and early 70s to continue to work," he told Fortune magazine. "We have to have different opportunities for them to expand their talents and to make the best use of their talents."

Bürkner said that organizations stand to lose skills when workers retire, quit or are fired. Some older workers have unique knowledge and training that cannot be replaced when companies replace mature employees with younger workers “because schools aren't preparing students for the kind of jobs that are being cut,” according to Fortune magazine.

Bürkner wants to see a "gliding path" to retirement for older workers. He wants creative uses for these workers, with that leading to new positions that offer value to the company.

The issue is particularly important in regions like Europe, the United States or Japan – with the aging of their workforces, more prominent than in other areas.

For more about delaying the retirement of older workers, as reported by Fortune, please click here.

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