Andrew Choi's Blog

As I write  a concluding post about my COMM 101 experience, I find it appropriate to mention the one theme that shaped my perception of the course: Edward Freeman’s Stakeholder Theory. One afternoon, when a friend of mine asked me what the point of this course was, I asked myself the same question. Why were we presented with a business toolkit throughout the entire course? Today, I concluded that Sauder’s goal for me is to train me to use business for the benefit for the people. As my instructor Scott mentioned to us many weeks ago, “Business is about people”. Without people, how can we actually find purpose to do business? That’s why Stakeholder Theory appeals to me so much, because it revealed to me how businesses can and should meet the needs of every stakeholder.

Anyways, turning to the article at hand, anyone reading about the Heathrow-Gatwick Runway issue – whether or not new runways need to be built in metro London’s two airports – will be aware that the issue of satisfying all stakeholders is prevalent here. How do we satisfy airport authorities, companies operating through Britain, the British economy, international travelers, locals living near the airports, the surrounding natural environment, and – let’s never forget – the politicians executing the decision?

Photo from PA Images

The dilemma is difficult: expand in Heathrow and suffer noise pollution and a lack of easy travel access, or do we focus in Gatwick, but miss out on booming distant global markets like China and the European tourism industry? In my opinion, the verdict falls on whether the long-term gains of either option outweigh the estimated costs of construction. By those parameters, expanding Heathrow would be the more suitable choice. If both runways are constructed and used at the same time, the Heathrow runway will still be more useful after the few years of required construction. The increased demand for tourism and distant Asian markets asks for the logistic capacity to accommodate direct flights. While this may come at the expense of UK denizens, the expansion will also allow locals to access more direct flights, more business opportunities, and more goods that can be cheaply bought through e-commerce from distant manufacturers like China. Thus, in a scenario where unexpected costs require tough choices, the Gatwick runway should wait while Britain adapts to a rapidly changing global economy.

Iris Gu’s post on Alibaba‘s immensely successful sale day in China grabbed my interest. I haven’t considered the realm of e-commerce in my blog yet, and my interest in the subject piqued after friends at a debate tournament bragged about buying clothing at ridiculously low prices from Alibaba.

Alibaba’s “Single’s Day” campaign sounds quite familiar, bringing to mind the hurricane of consumerism during the USA’s Black Friday and Boxing Day.  The move seems logical; taking advantage of a rapidly growing middle-class market in China (growing annually by 25%!!!) is nothing more than common sense. It’s no wonder businessmen everywhere are learning Chinese. In China, political movements towards freer markets and consumerism are taking momentum. It’s only a matter of time before the world’s largest pool of consumers opens its gates for every hungry firm in the world (“27,000 global brands” – hooray for PEST analyses).

A diagram showing the difference in volume of the Chinese and American markets. Graphic by iResearch.

But while we can adore Alibaba’s impressive $9.3 billion in sales, the statistic that sets off alarms in my mind is the terrifying “278 million orders”. 278 million?! That’s over two-thirds of the population of the US (which is about 319 million)! While we stand with open jaws at these stats, one must raise an important point. The “Single’s Day” in China differs from Black Friday and Boxing Day in one critical area: it’s far, FAR greater in size. While markets in the US can form Industrial Concentration Ratios of greater than 50% with ease, the difficult geography and immense population of China will make logistics and market capitalization a pie too massive for any firm to swallow. The idea of a single e-commerce firm meeting the need of something the size of 3 Germany’s beckons immense logistical problems ahead. With the market in China growing far more quickly than any individual firm, it will be interesting to see what competition in a free capitalist market in China will look like, alongside how delivery firms like UPS will adapt to this tremendous opportunity. How will technology, regulations, culture, and economics shape the appearance of a mature Chinese market?

” If  the United Nations was fully funded, why would we need the Arc or social enterprise?”

The question is a fair one. It reminds us that although well-intentioned entrepreneurs are sprouting everywhere in the world, one can’t forget that the United Nations exists as well. So, if we already have a globally recognized institution with limitless resources supervising the world, why are social entrepreneurs still relevant?

The first thing I’ll say is that, well, the UN isn’t helping that much. Don’t get me wrong, the UN is a critical institution where nations convene together to solve pressing issues, like civil wars and human rights abuses. But the UN alone is too large and bureaucratic of an organization to fix the problems in our world today. I know this quite well because I’ve been an avid Model UN competitor for years and I study international relations passionately. I learned that diplomats and politicians are far too removed from the pains of normal society to tackle specific issues directly, mostly because their knowledge of any particular issue is fairly shallow. In addition, the politics of the organization makes problem-solving impossibly inefficient. To me, the UN is a place full of bickering and single-sided solutions, thanks to the fact that it must ultimately act as a single entity despite having a heavily divided interior.

Often in the UN, tasks cannot be accomplished until one committee sends a decision to another committee which can enact UN decisions, which often requires the approval and collaboration of other committees. TL;DR? Bureaucracy. Cartoon by Clay Bennett.

While politicians can talk smoothly about issues, entrepreneurs actually address them. Entrepreneurs work directly with affected people, experiencing problems first-hand and gaining genuine motivation to fight them. Sidestepping bureaucracy, these people allow the broader community to join in on solving issues; exchanging ideas and equipping stakeholders with techniques encourages contribution from the people. Having the UN solve problems alone prevents the actual people affected to have a say in the matter. Social entrepreneurship also allows people to specialize and focus on specific issues, diving deep enough to fix them effectively. Involving multiple entrepreneurs means that different businessmen will target specific issues that they care about most, leaving other entrepreneurs to deal with other issues. As a result, social entrepreneurship offers a flexible, efficient, and directly motivated effort to find solutions to social problems.

One thing I enjoy about COMM 101 is that there isn’t just a focus on large, famous firms, but also a focus on local small businesses. Learning about small businesses helps us understand all facets of business in a single firm. So, as I cruised around The Globe and Mail, I was happy to chance upon an article about a local business in Vancouver (which is also coincidentally written by Jeff Kroeker, a beloved member of the COMM 101 team) called Tealeaves. Tealeaves is a small business that is famous worldwide for its mastery in producing the world’s finest teas, working with renowned restaurants and hospitality like Mandarin Oriental and Four Seasons Hotel. The article is a case discussing how Tealeaves had to change its sales strategy from selling only to large venues like hotels to selling directly to individual tea drinkers, thanks to competitors reaching consumers first and positioning themselves with their brand names in the consumers’ minds.

Tealeaves is a Vancouver-based firm positioning themselves as the world’s leading experts of tea and its craftsmanship. Image from Tealeaves Logos.

I won’t spend this post talking about the business itself, but rather enter into my thoughts about the greater picture: is retail dying out? Many examples in class, like Dell’s successful virtual integration, seem to argue that relying on wholesalers and retailers is costing producers much money. On one hand is price, with original prices driven down so retailers have room to make a profit off of escalated pricing. Another aspect is operations, with direct sales reducing the risk of inventory turnover. This article reveals a third side: how direct sales strengthens a product’s marketing, giving it the ability to position itself as the best product in the consumers’ minds.

If financial, operational, and marketing advantages exist by cutting out the middleman, is there even a future for retailers anymore? Will our beloved department stores die? Well, maybe –  I hardly shop at The Bay anymore. But depending on the product, there is always room for retail everywhere. Think how ridiculous it would be if Coca-Cola only sold coke at Coca-Cola stores. Pretty impractical, and they’d lose large access to the market. They need convenience stores, wholesalers, and grocery stores to distribute their products to all consumers. In addition, e-commerce firms like Amazon and Shopzilla show how technology can streamline information and prevent inventory turnover, making e-commercial retail a potential successor to the conventional physical location model of retail.

In short, let’s give a sigh of relief for retail distributors. Reality needs them and technology saves them. It’s been fun thinking over cups of tea.