Jenny Peng

Chinese Nexen – “Net profit”?

Source: http://www.cbc.ca/news/business/story/2012/10/25/nexen-cnooc.html

Nexen, a Calgary-based oil and gas producer, agree upon CNOOC’s takeover deal. This deal is considered as a deal that will gain “net profit” by the Canadian government. However it has been a long time since the agreement is made in the 23rd of July, and the takeover is still in process.

There are many concerns from the Canadian stakeholders. Security is one major concern. As CNOOC is a state owned company, it is possible that  the information of Canadian users being observed by China. As oil and gas are most important materials for production and daily life operation, people may feel uncomfortable for a foreign company to control the production of these goods. There is also a concern towards China’s economy in general. Its unique, fast-growing economy is different from what the Canadians understand and brings uncertainty.  In the other hand, China also is trying hard to understand the slow decision-making speed of the Canadian company.

The companies should work on clarifying the doubts in minds of the Canadian stakeholder, and emphasize on the benefit that this takeover would bring. they should also focus on forming a style of operation that suits both cultures.

Reference: http://www.ctvnews.ca/business/beijing-academic-says-chinese-baffled-by-government-concerns-over-nexen-1.1009915

http://www.theglobeandmail.com/globe-investor/nexen-profit-falls-expects-cnooc-deal-by-year-end/article4650804/

Housing in Canada

Source: http://www.ctvnews.ca/canada/canadian-housing-sales-up-in-september-but-numbers-down-from-year-ago-1.996064

According to the article, housing sales gone up in the past month. The increase in mortgage return may cause the demand of housing to fall. Housing sale did decrease in the past months, but there is a tendency that it will increase. Housing is a need for people, so the demand for it is inelastic. As the price of housing increases, the firms will likely to have an increase in sale over time.

Under this economic environment, it is likely that some company may try to decrease their price. However, the most important action for housing companies now may not be decreasing the price, but keeping the demand for their housing stable by non-price competition. Companies should use advertisement to specialize their housing. Even though all the housing companies has increased their price due to market force, companies can convince the customers that their housing has kept the price as low as possible. Also they can aim for high income customer group by making their housing appears to be with higher standard.

In an unstable economic environment, companies should set a suitable strategy and try to make themselves a place in the market.

Reference: http://www.ctvnews.ca/business/new-mortgage-rules-cooling-home-sales-canada-wide-report-1.969134

Replying to Kelvin Leung’s blog “Foxconn’s iPhone plant paralyzed as workers strike”

As Kelvin stated, China now faces a conflict in whether to increase the awareness of  labour or keep labour cost low to attract foreign firms. I believe that this is a problem that can only be solved by time and development. As China is still a developing country, regardless its high rate of growth, it still has people living in poverty and uneducated. The increase in development in the city draws more and more people from the rural area to urban and suburban for jobs. The only work that they can do are low-paid-manufacturing works. Also as China is a communist  country, there is no culture for the labour right movements.

There seems to be no perfect solution for this. However as the country develop, labour’s right will be brought into concern. Education is improving, and the out flow of agriculture labour to low-paid-assemble jobs will eventually stop as the production in agriculture decreases. So the increase in labour price is inevitable.

In the other hand, treatment of labour will be improved foreign companies will face pressure from the public. Also, China will not lose from higher labour cost due to its high efficiency and economy of scale.

Link: https://blogs.ubc.ca/kelvinleung/2012/10/07/foxconns-iphone-plant-paralyzed-as-workers-strike/

Nortel execs monkeyed with numbers

Source:

http://www.thestar.com/business/article/1263970–crown-says-nortel-execs-monkeyed-with-numbers

Nortel’s former executives manipulated the balance sheet to create a profitable scenario so that they can earn bonus as rewards.

The difficulties in financial statement, a negative income, is covered up by the accruals. This money are kept for future usage, which is different from the revenue. The executives are experienced business men, so they knew how to make it looks correct. This trial shows the false usage of the business knowledge.

Bonus is a money that is given to members of the business to reward good performances. However, in this case, it encourages the criminal action. The huge number of bonus creates a strong attraction. So it is important for a firm to decide what is an appropriate amount of bonus it should give. Controls by the executives is needed for the firm to run properly, but in this case, the executives are the ones that break the law.

External monitoring is needed to avoid the manipulation of the financial statements. Finance organizations should behave as a supervisor to the firms in terms of its financial statement to avoid actions against law. Regular check on the financial statements is needed within the business too.

Medicine producer made stiff in advertising by legislation.

Article Source:

http://www.themoscowtimes.com/business/business_for_business/article/advertising-and-marketing-medicines-how-does-one-adhere-to-the-law/468298.html

The restrictions on Medicine advertisement strongly limit differentiation that the firms use in positioning their products. Medicine producers are restricted in the usage of comparative advertising, plus that only the advertisement of non-prescribed medicine is promoted. So the variety of products is limited and they have many similarities, and only unified information overload happens.

However, is the restriction always bad? Legalistic restrict the firm to use any guaranty. This does limit the firms to induce demand in consumers, but at the same time, it helps the firms to avoid any problems later if the medicine does not work as it is guarantied in the advertisements. The requirement of warnings of side effects on the advertisements may reduce the information that the firm can communicate with the public; However at the same time, it may help the firm to build a good image of concerning the welfare of consumers.

So what can the firms do to promote their products?They can invent new products and try to occupy the first position in the market. The followers and relate to the popular firms. Also, naming with function is helpful in medical product. For example: Coldrex, Enlive!, and  Benefix.

On 8.29 mining accident in Panzhihua, China.

8.29 mining accident killed 45 people, due to high density of gas and over underground population. The mine manager ignored the alarm and kept on the production process.

Though safety checks are done and unsafe mines were shut down, death due to mining accidents in China is still 10 times that of USA(1,973 in last year). Small, private mine owners are more concerned about their profit rather than lives, and the investment in improvements are delayed. Some mines operate illegally after being shut.

As China’s economy is more centralized, the roll of government is crustal. Even thought the government realizes that modern and mechanized production should take over the high-risk labour production, punishments sometimes is inefficient due to corruption. Also, workers in small mines are uneducated and unskilled, so they rather take risks than being starved.

The government sent leaders for training in Logan Country, Virginia after this accident. Education is important for both improving the safety of mining, and widening the job selection for people.