Comm 486

Article: The world Economy Calls(The Economist)

Kenya is seizing the opportunity to raise its employment rate by establishing a new spot in the business process outsourcing market. They hope to emulate India, but on the lower end of the BPO market because India has already saturated the higher end. Kenya has just received 3 international fibre optic cables that they plan on using as soon as possible to set up call centers. I think that establishing a a spot in the BPO market is a great idea because this will hopefully employ many graduates without jobs and hopefully boost the Kenyan economy. 

Kenya is also closer to Europe and North America therefore making it more of a prime geographical location than India. Hopefully taking this first initiative Kenya may spark interest in neighbouring countries to do the same. Thus growing the African economy slightly. Since Africa’s past has been quite gloomy in that aspect, this may be the break they need to take the first step in the right direction.

Personally, I don’t like the use of the word sweatshops. A negative image of poor working conditions and unethical business practices jump to mind. I would like to stress the idea of perception. There are always two ways to look at something. I’m just being the devil’s advocate here and introducing the other side to sweatshops. 

A sweatshop in south east Asia can also be perceived as an opportunity for a better living. In most of the regions where sweatshops are prominent, the wages that corporations like Nike and Wal-Mart offer, however low they are, are still better than all the other alternatives. For example, sweatshop employees can either be subsistent farmers, or worse, prostitutes. Sweatshops give them the opportunity to earn money and to support a family and raise their living standard slightly. Both ends benefit because the lower wages from outsourcing gives the corporation a competitive advantage when competing with other companies. 

This is another way to look at it. Although in western societies sweatshops are frowned upon, there is some economical advantages to them from both the CEO’s and the labourers. When people from North America compare the working standards here to working standards in South America or South East Asia they are shocked, but the truth is, is that most of the worlds working conditions are still relatively low compared to here.

More thoughts about the sponsorship

After discussing the Bell case in class I immediately thought of ways of how Bell could make the investment more worthwhile. Although Bell didn’t capture as much attention as they would have hoped to during the 2010 winter games, they still have a huge opportunity to gain revenue and market share. However, the market share probably won’t be from single customers like you and me. Rather they can market the credibility and the results for the fibre optic network and how well it operated during the Olympic games. Advertising the information and success to larger telecommunications companies can expand their market share because they can use their credibility and innovations as the product they are selling. The main problem now with Bell is that they aren’t advertising any of their successes anywhere. To find how well they did, people have to go online and research how they did and having potential customers do research is by no means good marketing at all.  I think that Bell should put together a better marketing campaign showing their reliability of the company and try to use that as a selling point!

My carbon foot print is currently at 4.25, which is well below the average of most Canadians. I think that one of the reasons that my it is so low is because I bike a lot during the summer, and that I only use a car when going on road trips during the summer. Otherwise I am either on the bus or on my bike for roughly 9 months out of the 12. 

Where I do add to my carbon footprint is my love of eating meat. I have a meat heavy diet and that, inadvertently causes my living style in give off more carbon. The meat itself isn’t giving off gases into the atmosphere, rather the process of preparing the meat emits roughly 13 times more than eating potato. 

To further cut down my carbon footprint I should focus on eating less meat and maybe try more vegetables. Although I am not doing poorly right now, there is always room for improvement. I do however, think that there are things that need to be more accurate when asking for measurements. Sometimes I feel that my answer doesn’t fall too strongly on the answers provided.

The Economist Magazine

Buttonwood: Apocalypse, not now

Although japanese bonds have the lowest borrowing rate in the world, their moment of reckoning may not be far away. This is because 2.4 trillion dollars worth of bonds are coming due in the near future. That amount accounts for 45% of the country’s GDP. The reason Japan has been able to hide their weaknesses in their financial sector is because they show their debt-to-GDP ratio based on gross figures produced by the governments assets. 

Investors still feel comfort financing more debt for the government because of the measures that Japan has been able to manipulate the way ratings agencies measure. Japan also keeps a majority of their financing national. They have very few foreign lenders. Sooner or later the day will come when Japan has to pay up and the fear of defaulting will be a very real possibility. Historically, countries that had high debt covered by the government usually defaulted. 

These financial issues didn’t occur over night, rather they have been building up over the past 20 or so years. The question is not so much emphasized by the what will happen, rather the when it will happen. It will be a good idea to see how investors react to this.

The most talked about reason for Chinese banks tightening their bank credit is the big threat of inflation. Since the Chinese economy is super heated, the bank is lending out more and more money to help fund these projects. At this rate the threat of inflation becomes more and more inevitable. 

The extremely large population of China is another problem that is mitigating the tight bank credits. How so you may ask? Since the population is so large, there needs to be a good amount of the population in the workforce. The only way to keep people employed is for the banks to lend out large amounts of money for projects that will keep people working. If the banks start tightening credit that may start unrest in the workforce and the chance of a revolution may occur. Due to the size of the population, an unhappy, revolting workforce is a top priority of threats.

The Chinese government is trying to find a nice balance between curbing inflation and keeping the population employed and away from an angry revolution.

Burger King recently opened up it’s first store in Russia in the hopes to scoop up some profit from McDonalds. Burger King’s entry into the new market is a great idea because the demand for fast food is there. After looking at McDonalds success in Russia, there is still plenty of profit’s for Burger King. 

A good indicator that the market is very healthy is the fact that the Pushkin Square McDonalds is the busiest in the world. The only reason for this is because McDonalds has no competition. With the introductin of Buger King, they can simply look at the success rate of their competitor and estimate accordingly. Also, the North American market is quite saturated with many competitors that have made the fast food market close to perfectly competitive. Thus limiting the opportunity for a big increase in their profit margin. 

Looking at the other side of things, Burger King has to take into account the stability of the consumers. Since Russia is relatively unstable as a country recovering from a rough past, the economic and political strength to have consistent growth may be limited. Furthermore, the opportunity cost of breaking into the Russian market is quite significant. All the expenses and costs that need to be accounted for can be invested into advertising and improvements in established markets. 

After taking all of the pros and cons into consideration, the move into Russia is one that holds an optimistic future, but on the same token, it is a long term investment that needs constant attention in order to produce any profit. Only time will tell if Burger King made the right choice in expanding their consumer base.

http://www.newyorker.com/talk/financial/2009/11/09/091109ta_talk_surowiecki

A price war is often counterproductive for any company that  chooses to take part in it. It is a classic example of game theory where all parties are worse off than they were before the price war started. Usually, the only way to win a price war is to not start one at all. After studying micro economics in Professor Gateman’s class I concluded that the use of cartels and collusion is the way to prevent price wars. 

Even though precautions like cartels take place price wars seem to start somehow. For example, Wal-Mart and Amazon had a price war over books. The price war was in now way a significant loss for either companies, rather they slashed prices to gain the attention of potential customers to become exposed to their website. In a sense they used their price war as a marketing and exposure strategy.

Personally, this is an extremely clever idea because the potential exposure may lead to impulse buys that will eventually counter balance the small losses on the price war. Furthermore, the price war is more so a long term investment in the company. There are always risks involved, but the decision to go forth with a price war is an extremely well calculated risk. Amazon and Wal-Mart will become a more prominent place to shop because of the attention they both received from slashing prices, which usually leads to a decrease in sales.

       An efficient supply chain is every companies goal. As the common focus shifts towards the environment companies such as GM are looking into having a more  environmentally friendly supply chain. The bonus for introducing a green supply chain are the following: lower training fees for waste disposal, fewer environmental permitting fees, often reduced material costs. GM first tried implementing these changes through reusable containers that they use between them and their suppliers. The slight cost reduction increases their profit margin to some extent. 

       Some challenges that a company like GM would face would be finding suppliers that are willing to go “green” with them. Since the auto industry relies heavily on a number of different suppliers for their cars the overall coordination of suppliers going green together is a big challenge. Also, the main component of GM cars is steel, and that is not green. Since steel makes up majority of the car having there isn’t a significant impact of having small portions of supplies being environmentally friendly.

http://www.businessweek.com/managing/content/mar2009/ca20090319_591214.htm

       The financial meltdown in the US  is tied to the stock brokers rationalizing their emotional distance between their transactions and the negative consequences that came with it. Upton Sinclair once quoted ” it is difficult for a man to understand something when his salary depends on him not knowing it,” This quote describes the case of enormous bonuses given out for each transaction. Like most competitive businessmen, the incentive of profit maximization was the rationalizing agent used by the brokers to follow through with it.

      For example the sub prime mortgage crisis, this crisis was the catalyst of the financial meltdown. The brokers were given bonuses for the number of transactions made rather than the quality of the transactions. Quality meaning how credible the person was in terms of being able to pay the loan. Ethically speaking, the brokers should have taken into consideration what could potentially happen from their transactions, but they didn’t because the money was too good to refuse. 

      In conclusion, the competitive nature of business sometimes gets the best of people in the industry  in this case, a enormous financial meltdown resulted because of their unethical behavior. They put aside their conscience, in a sense, to make themselves better off while leaving a majority of people homeless and in a financial mess.