Mark Graham's Blog

The Bank of Japan wants to introduce a big quantitative easing program that consist of buying 80 trillion yen ($705 billion US) every year until their economy is no longer at risk of deflation.  To put this in perspective, the estimate for the US quantitative easing program was $831 billion. A quantitative easing program is a program by the Central Bank of a country that buys government bonds that then increases the price of bonds and lowers interest rates. This allows people to borrow money at lower interest rates so they end up spending more money and the economy grows. Japan has struggled with deflation over the past couple of decades.  The deflation rate is hovering around 0% inflation (see picture below). Having low inflation/deflation is bad for the economy because it discourages people from spending their money, thus slowing economic growth (If you want to know why inflation is bad click here). The Bank of Japan’s governor said, “The stimulus measures this time show the Banks of Japan’s unwavering determination to exit deflation.”

Although introducing the quantitative easing program will help inflation it could do more harm than good. Quantitative easing programs can depreciate a countries currency and with Japan getting most of their energy through imports this could drastically decrease their ability import. Japan is forced to import a lot of their energy due to the earthquake/tsunami that destroyed a lot of Japan’s biggest nuclear power plants.

“Big Bazookas.” The Economist., 8 Nov. 2014. Web. 10 Nov. 2014.

<http://www.economist.com/ news/leaders/

21631028-central-bank-right-be-bold-now-prime-minister-must-follow-suit-big-

bazookas?zid=306&ah=1b164dbd43b0cb27ba0d4c3b12a5e227>.

A blog post by Kevin Kelleher called “US investors still don’t know what to make of Alibaba,” on the blog site Pando Daily caught my interest because it discusses how Alibaba does not need America to be successful. A large portion of North Americans had never heard of Alibaba before their historic IPO (me included) and a large portion still doesn’t understand Alibaba yet (if you are still one of those people that don’t know what Alibaba is click here).  In this blog Kevin Kelleher talks about how even Wall Street has difficulties projecting their revenue and profit figures of Alibaba by underestimating their profit and revenue.

To put Alibaba in perspective it has similar growing revenue as Facebook, it has a larger market value then Facebook (see picture below), and it is also trading at a lower P/E ratio than Facebook. Alibaba is growing at an extremely fast rate and is investing a great amount of money trying to grow its company. None of those plans, according to this blog, include expanding into America. This point makes sense when thinking about Jack Trout positioning theory because Amazon and eBay are already established in consumer’s minds as the go to e-commerce companies in North America. Alibaba would end up having to use a lot  of resources in order to squeezes themselves into consumer minds. It is better to stick to the foreign e-commerce markets because they are already extremely successful there. As of today Alibaba controls 80% of all online shopping in China and the China e-commerce market is estimated to grow by more than 2.4 times by 2017 (see picture below).

Wall Street Journal. Web. 5 Nov. 2014. <http://projects.wsj.com/alibaba/>.

Kelleher, Kevin. “US investors still don’t know what to make of Alibaba.” Pando Daily, 4 Nov. 2014. Web. 5 Nov. 2014.   <http://pando.com/2014/11/04/us-investors-still-dont-know-what-to-make-of-alibaba/>.

Although it is easy to point the finger and say using child labor is a terrible thing (which I agree with), you have to look from the perspective of this kids in third world countries before drawing a conclusion (To see a list of the biggest companies that have used sweatshops click here). In Florence’s blog “Business Ethics” he discusses that the child labor used in Apple’s supply chain is unethical and should never be done. It is easy to say from our perspective that it is unethical because kids shouldn’t have to work in bad working conditions while getting paid extremely low wages compared to our standards. The truth is that sometimes sweatshops are the only option for kids to survive. They don’t have caring families to meet their needs and feed them like we all had growing up. They have to fend for themselves and find ways to make money just to buy enough food to survive. According to an article “Sweatshops best alternative for workers in many countries” it explains that sweatshops generally pay better and the working conditions are much better than other jobs within third world countries. When companies get exposed for using child labor the company immediately comes in and gets rid to all of the children working in the factory. This action leaves the kids with no way to earn money  to buy food for themselves and no better alternative.

Weeks, Bob. “Sweatshops best alternative for workers in many countries.” Wichita

     Liberty. Web. Oct 23. 2014. <http://wichitaliberty.org/economics/ sweatshops-

best-alternative-for-workers-in-many-countries/>.

In Kevin Kriegbaum’s Blog “Tesla’s Unique Approach to Patents,” he highlights the fact that Tesla lets other companies use their patents without fear of lawsuits. I agree with this perspective. Kevin explained that this practice would help grow the electric car market by allowing more competition into it thus getting more exposure.  By adding Jack Trout’s Position theory to what Kevin is saying, Tesla doesn’t have to worry about the fact that more competition would take away some of their business. Tesla, in the mind of the consumers, was the first producer in the high-end electric car industry and it would take a lot of resources from other companies to shift the consumers’ mind. Also with more competition comes more marketing that will only give Tesla and other electric cars makers more exposure. This exposure is important because as of right now the electric car market only accounts for 1% of sales.

Elon Musk is not only allowing others access to Telsa’s patents for economical sustainability, but also to be environmentally sustainable.  Musk’s growing concern for global warming and wanting to get the mass market to shift to electric cars to stop global warming is a key motivator. Elon Musk said in a conference, “I don’t think people quite appreciate the gravity of what is going on with regard to global warming or just how much inertia the climate has. We really need to do something. It would be shortsighted if we try to hold these things close to our vest.”

Business Insider, 12 June 2014. Web. 15, Oct. 2014.

<http://www.businessinsider.com/tesla-is-opening-up-its-patents-2014-6>.

Many cities are left wondering after the Olympic torch goes out “now what?”  For every Olympics that happens the host city constructs grand and expensive buildings that they are left with once all the fans and athletes leave. Most of these buildings either lose money or are completely abandon. For example for the 2004 summer games in Athens Greece the majority of the two dozen new buildings constructed for the Olympics are now abandoned or used in limited capacity (see picture below). All of those new buildings cost billions of dollars that were never recovered. Although these are thought of as sunk costs and the price tag of construction should not be considered in future decisions it is hard to explain that to your voters. Most host cities don’t have plans early enough on how they are going to incorporate these building into the community in order to make money on them. Neirotti from George Washington University says host cities need to plan how they are going to utilize the buildings after the Olympics when they first make the bid for the Olympics.

Stump, Scott, and Eun Kyung Kim. “What happens to Olympic venues after the torch goes out.”Today. N.p., 22 Feb. 2014. Web 10. Oct. 2014. <http://www.today.com/sochi/ what-happens-olympic-venues-after-torch-goes-out-2D12152101>.

One of the biggest issues in Canada with respect to the First Nation people is the Northern Gateway pipeline. The Northern Gateway pipeline is an attempt to transport oil from the Alberta oil sands to tankers that are connected to Asia. The main issue that is preventing this from occurring is that a lot of the pipeline will go through First Nation land. People automatically associate profit with success in business, but sometimes it is hard to see a company’s failures on a balance sheet when it comes to their social and environmental responsibilities. The main argument for this pipeline is that it will create lots of jobs and promote economic growth, but at what expense to the stakeholders? To the First Nation people their land is sacred to them and the Northern Gateway will destroy a large part of it. Another cost they have to think of is the possible environmental effects of this pipeline. If there were any leaks in the pipeline it could cause disaster and huge costs to clean up the leakage. “We call this beautiful B.C., and that is what we want to keep it as,” said Martian Louie, Chief Councilor of the Nadleh Whut’en. For a company to be sustainable they have to insure that they are sustainable in an economic, environmental, and social sense to truly be sustainable. The Northern Gateway is only concerned with the economic side.

Laanela, Mike. “Northern Gateway pipeline: First Nations outline constitutional

challenges.” CBC. , 5 Oct. 2014. Web. 6 Oct. 2014.

<http://www.cbc.ca/news/canada/british-columbia/northern-gateway-

pipeline-first-nations-outline-constitutional-challenges1.2706376>.

As a consequence of the continued development and widespread use of the   Internet, many people are being watched and recorded almost every second of their lives. This is the reality with the growth of big internet companies like Google and Facebook. These companies are constantly recording information about everyone that uses their products. The motivation for these personal invasions is the opportunity to develop better-targeted and more effective marketing campaigns.   By tracking all of the searches that are completed on their servers, these companies are able to develop a profile on any one individual user.  This profile allows Google and Facebook to clearly identify likes and dislikes in the market place.

With the amount of information we now have available at our fingertips it makes it difficult for some companies to find their target audience through online ads. Since Google knows so much about individual preferences companies can pay Google to run ads to a particular type of person. This allows companies to find their target market with out having to spend large amounts of money to be all over the Internet to find their customers. This helps companies to focus in on their potential customers and to position themselves in away that appeals to these potential/actual customers despite the crowded market place.

Russia’s lower parliament has just passed a bill that requires all foreign Internet companies to store Russian personal data within Russia. The law was originally to be put into place on January 1, 2016, but the bill got moved up to January 1, 2015

It will be hard for he biggest internet companies to move their servers over to Russia in this shortened time frame and they risk losing tens of millions of users because of this. These internet companies make their revenue through the amount of people that see the ads on their site and with the lost of some of its users could effect their revenues. The recent acceleration of this bill has had a negative effect on some of the biggest Internet companies in the stock market with Facebook down 1.67%, Google down 2.20%, and Twitter down 2.85%. The bill still has to be approved by the upper chamber of parliament and the Kremlin before it can be put into place. The bill however is likely to pass the last steps and will most likely be put into place in the coming weeks.

Sonne, Paul, and Olga Razumovskaya. “Russia Steps Up New Internet Law.” Wall Street Journal 25 Sept.

2014: n. pag. Web.

The “No” campaign for the Scottish Referendum came out on top with a 55.3% of the total votes (Taub. “Scotland votes “no on independence will remain in the UK). Even though the idea of Scotland becoming its own country is a wonderful idea, in reality it would have spelled disaster. If Scotland were to ever separate it would put a lot of strain on Scotland’s economy because of their limited flexibility on their dependence on oil and the currency union crisis.

Since Scotland depends a lot on the oil industry through drilling in the North Sea its economy will depend greatly on the ever-changing price of oil. This variable pricing   would cause a lot of uncertainty in Scotland’s economy. In turn, this would scare off investors and business due to the uncertainty in the economy.

Scotland would also have a crisis over what currency to use. If Scotland chose to stay with the pound it would have no control over that currency. This would lead to a lot of uncertainty for investors looking to buy Scottish bonds. Adopting the Euro would not be good either because over the past couple of years many countries in the Euro zone have fallen on hard times or the countries that are struggling could drag down Scotland.

Although Scotland being an independent country sounds nice in theory, but when you look at in reality it is not practical as of right now due to there dependency on oil and not having their own currency.

Taub, Amanda. “Scotland votes “no” on independence, will remain in the UK.” Vox. N.p., 19

Sept. 2014. Web. 24 Sept. 2014. <http://www.vox.com/2014/9/19/6425379/

scotland-scottish-independence-vote-referendum-result-no>.

Buttonwood. “48 Hours.” The Economis., 16 Sept. 2014. Web. 24 Sept. 2014.      <http://www.economist.com/blogs/buttonwood/2014/09/scottish-referendum>.

Companies are always trying to cut costs. That way they can have higher profits, but sometimes companies do this by unethical means. Starbucks recently has been accused of tax avoidance in the UK. According to BBC Business, Starbucks has only paid 8.6 million pounds of tax in 14 years. Last year alone Starbucks generated 398 million pounds, but paid no corporate tax.  Although Starbucks has not done anything illegal they are not paying their fair share of tax. Starbucks is getting away with paying less tax by using some of their earned revenue in the UK to pay a royalty fee. A royalty fee has to be paid by all overseas Starbucks for use of its property and brand. What Starbucks is essentially doing is just transferring money between itself, which allows them to have a lot lower tax rate in the UK. It is hard for smaller coffee shops to stay competitive with Starbucks because the smaller coffee shops are paying the full rate of the corporate tax and Starbucks is paying a fraction of what they should. As said in the “What is Stakeholder Theory,” video, Starbucks is only focusing on the financial side of the business and forgetting about how their actions have made their customers very unhappy. R. Edward Freeman would define Starbucks as a company soon to be regulated into decline.

Work Cited

Gompertz, Simon. “Starbucks ‘paid just £8.6m UK tax in 14 years.'” BBC. Web. 9 Sept.

2014. <http://www.bbc.com/news/business-19967397>.