Category: Blog Post

Chinese Premier says country cannot grow in isolation

Why do countries trade? Countries trade for several reasons as the following:

1. To provide a variety and different quality of goods for consumers
2. To maintain good political relationships
3. Sharing competitive and absolute advantages
4. Recognition of domestic firms and more income are also why countries trade.

However,China has applied strong ‘economic policies’ which restricts countries to trade (more import) to China, so Chinese firms are exporting in a greater proportion than importing. And this is a big reason why China has been the world’s leading exporter, consisting of a low and stabilized currency helps the goods to other countries to remain cheap (which may seem like the quality is better). Since China has a big labour force, the labour market is very competitive; which in result causes the wages for general employees to be low. And this, is what I believe, I big advantage for domestic firms, because they will start off their businesses with lower costs but with better productivity workers and high labour forces. This results cheaper exports than other countries. Other than the cheap goods, China also puts on protectionism to protect their domestic firms and meanwhile concentrating on their exports. There are several protectionism in which a country like China may use:
Tariffs

Quotas

Protectionismare useful because it helps the domestic firms to maintain their production but at the same time allows some variety of goods for consumers; however these generally lead to a breaking relationship between countries. But I think it would not affect China as much since it has became a strong economy and especially in terms of exports, therefore other countries are less likely to put a large protectionism on Chinese made products.

Overall, China has ‘apparently’ decided to take away some of its policies and start to focus on its domestic goods, this means, other countries can be benefit because it will be less competitive. And in the future, if the Chinese government truly meant what they said, they will stop weakening its currency, lower their imports restrictions and allow more freedom in the market (such as investments, trading, etc).

South Korea’s unemployment rate rises to year high

Unemployment, also known as the workers that are willing and able to work but do not have a job. In Korea, even though the government has tried to recover the economy, but certain areas were not concerned. “The unemployment rate in South Korea rose to its highest level for one year in February.” As the article explained, although the economy recovery created jobs for the workers, but “the total workforce grew by 341,000 pushing the unemployment rate up.” The disadvantages of high unemployment rate are, higher crime rates, depression, living standars, etc. Thesse will definitely not help the economy development in the future. On the other hand, the inflation, the continuing upward trend in price of general goods and services during a period of time in an economy, was raising, this continues pushing the unemployees to seek for a job while increasing their usual spendings.

To fix this, firms will have to lower the wages while increasing the number of job opportunities for more workers, which is lowering the competitions (as indicated in the left diagram). And governments have to provide subsidies for firms in order to do this (as indicated in the bottom diagram), or even better, in the long run, provide educations or training sessions for the people to increase their skills and abilities for better jobs.

Original Article: Samsung Starting to Sweat

This blog post is a further analysis regarding Georgia’s blog post on Samsung’s ruthless labor abuse in China.

Georgia identified that Powerful multinational corporations such as Samsung nowadays may not be as ethical as they might perform in front of medias. For example, she clearly pointed out that especially in China, Samsung uses underage labor and its working environment is definitely below minimal requirements. Though labors are given with a place to live but it is usually around a standard toilet size.Obviously Samsung increases its profit by cost-cutting. However, due to China’s large labor supply in the market and labors usually do not consist of high education or skills, they can only be abused by firms because they need a job to maintain their standards of living.

On the other hand, what I believe the blog post can be strengthen with is more analysis rather than describing the situation. For example, instead of talking about the unethical issues existing around the world these days such as labor abuse, she may also think about the causes of such and then provide recommendations towards such issues. In this case, readers will understand the results of labor abuse and how can we prevent it.

Nike’s LeBron Sneakers to Test $300 Limit

Summary

Overall basketball shoe prices were up 9.4% compared with a year before as of June, according to market researcher NPD Group Inc., while soccer cleats jumped 15.5% and running shoes climbed 5.5%.

Analysis

Nike is one of the leading firm in the sports market. It is located in a high competitive market against other firms such as Adidas. So people might assume that as the price of Nike shoes increase, due to the law of demand, the quantity demanded will decrease since less number of consumers are willing and able to purchase the same product. This may be true for most of the consumers. However, Nike may still maintain or sometimes even increase its profit by increasing its products’ price levels. This may be caused by its strong reputation and publicity and its solid promotion support. For example, the current NBA super-star Lebron James is working with Nike which allows Nike to use his imagine and logos on its products, in this case, sneakers. By doing so, people are more willing to purchase the products even with a higher price because the product’s “value” is now considered higher. Such products become more of a “luxury” rather than a normal good. Thus, it becomes more competitive against Adidas. Moreover, the firm has such high-tech skills that makes its products more suitable to its target markets. For example, the basketball shoes nowadays are not only well-designed, but also, lighter, stronger, and comforter than before. This is a unique selling point in which other competitors find hard to copy and achieve.

Russia’s vodka drinkers get New Year headache

Summary

Minimum prices for vodka took effect in Russia on Friday as part of President Dmitry Medvedev’s campaign to combat alcoholism at a time when Russians traditionally drink heavily during the New Year and Orthodox Christmas holidays.

The price of the cheapest half-litre vodka bottle will nearly double to a new minimum of 89 roubles ($2.95 U.S.)

Analysis

The price of vodka was raised because governments are trying to reduce the demand for it. Alcohol is usually considered as a normal good that as the price increases, the number of consumers willing and able to purchase decreases. But for countries such as Russia where Vodka is more towards a “necessity”, there’s more demand for it. As the price of Vodka increases, most people tend to continue its purchase, while feeling negative towards the government for this “unnecessary action”, which may lead to depression, resistance, etc.

Another effective way to reduce the demand for Vodka would be increasing the health awareness of possible harms from drinking alcohol. Or the government can introduce policies to limit the quantity of Vodka that consumers are allowed to purchase. These solutions are more effective because it may change the consumers’ habits of drinking with a lower chance of the public’s resistances.

Chinese Milk Scandal

Summary

During summer 2008, San Lu, a local Chinese dairy company, was exposed by all kinds of media around the world for its unethical action. A series of illnesses among babies started to concern Chinese doctors and parents. The story begins with San Lu’s farmers, whom were seeking for a maximized profit to go after petty advantages: adding melamine, toxic chemical, in result increases the protein concentration in the milk product in order to pass the protein test. In result, 300,000 Chinese babies were affected and six died after developing kidney problems. After all the systematic tests, San Lu was found guilty by containing high level of melamine in their milk products and recalling over 10,000 tones of infant milk powder; hence the company not only was fined with a large amount of money but also its position in the worldwide diary market.

Analysis

San Lu’s unethical behavior resulted a significant damage to the society. Businesses nowadays seek for efficiency and productivity, thus morality is masked. In the short run, firms may still earn profit, but in the long run more and more consumers will leave the market which reduces the demand for milk and firms will lose its income. This may also

lower the public’s confidence towards both the firms and government. So there will be less investments. But most importantly, since consumers will be worried about the safety of food products, the competitors of San Lu will be affected as well. Thus, firms such as Fonterra should take crisis managements in order to minimize the damage it may cause to the firm. After the incident, Fonterra took all its quality tests again while providing the latest results of them to the government and, especially, to the public. Meanwhile, another team of the group organized several events with different charities around China to support those who were affected by the scandal. Some hospitals, heath centers, and even educational organizations were invested and taken care of by Fonterra to show its concerns towards the situation.