Article: China, pollution and choices to end an addiction to coal in favour of LNG

The experience of Fog-tober may be over for us here in Vancouver but for the people of Harbin, China, daily life is just beginning to enter the harsh months of choking smog that envelops the city every winter. In a city with an average winter temperature of -18^oC, coal-burning power plants provide energy and citizens burn coal in their homes for heat. This practice has added Harbin to the list of just another Chinese city suffocating in smog – this month visibility was reduced to just 50m and air particulate recorded to be 40 times over international safety standards.

China is now in a frantic search for supplies of Liquid Natural Gas (LNG) as it finally turns away from its addiction to coal. The peoples’ health and wellbeing living in cities like Harbin exemplify the importance of Porter and Kramer’s notion of Creating Shared Value.

Since, China is still communist, the government is basically the firm. And with regarding the problem of smog from coal-burning as an externality for the past few decades they have finally come to realize that this practice is not only unsustainable, but is also actually an “internality”. The health of the citizen must be valued by the government because it is the backbone of China’s predominantly labour driven economy. Since sick people are unproductive people, the notion of Shared Value comes into play because the entire economy is better off when the government works to improve the citizens’ health by switching power plants to burn LNG instead of coal. Therefore, if China wants to continue to prosper in the future, this externality that became an internality must be dealt with in order to drive future profits.

Image: <http://www.vancouversun.com/news/world/cms/binary/9061828.jpg?size=620x400s>

Articles: Boeing Marketing Reorg Illustrates Hazards of Innovation, Has Boeing lost the battle for Japan?

The 787’s luxury cabin was great from a marketing standpoint.

Ten years ago, Boeing announced plans that it was going to differentiate itself from the competition by innovating a wildly new, exciting, and most importantly, futuristic aircraft for its airline customers. After numerous delays, it took nearly 10 years for the first 787 Dreamliner to finally be delivered and yet, by that time the idea of having a luxurious cabin and an aircraft designed nose to tail with state-of-the-art technology seemed to the airlines a mere recollection of the optimism of the past. With so many troubles plaguing the airline industry, and frustrations mounting from delivery delays and an infamous battery fire incident this past January that grounded the fleet for 3 months, the airlines that had originally placed orders for the 787 began looking for a substitute good enough to simply get the job done. They turned their back on Boeing and found solace in Airbus’s new A350. Japan Airlines (JAL), a once loyal customer of Boeing and key partner in the 787 development program, announced its decision this week to order 31 A350s – crushing news for Boeing.

I believe Boeing’s recent story has become a fine example of poor positioning strategy. They lost their edge to Airbus because they tried differentiating themselves with something that eventually became irrelevant to the airlines, whom this difference was costing, and with this difference out the window, the airlines held the buyer power. The airlines’ opportunity cost of holding on to the 787 eventually became so great that companies such as JAL finally responded by making the simple switch to the competition.

Airbus’s A350 [pictured] beat out the 787 in JAL’s recent fleet selection.

<http://www.hdwallpapersinn.com/wp-content/uploads/2012/08/Boeing-787-2.jpg><http://static3.businessinsider.com/image/51b61b2b69bedd5476000000-1200/heres-the-first-completed-a350-xwb-sporting-a-fresh-paint-job-in-toulouse-france.jpg>

One thing I have long been confused and ill-informed about is the automotive industry; the last thing I remember having occurred years ago when GM and Chrysler filed for bankruptcy. Since then I never understood why new Chevy’s, Jeeps, and all continued rolling out of the TV promos and onto my neighbourhood streets. The article Boom here, bust there was able to shine some light on the situation for me. Apparently the American auto industry is booming. Say what? Though nowhere near what it once was, it still has managed to pull off a decent recovery. Europe’s automakers on the other hand have been struggling to make ends meet for the past 6 years. Looking at the European automotive market from Porter’s Five Forces model, it became apparent to me that the industry has some interesting rivalry caused by various characteristics. Slow market growth is probably the largest reason for manufacturer rivalry as demand for cars has declined significantly especially in Western Europe where the urban population often lives comfortably riding public transit. The Europeans are also suffering from an industry shakeout where automakers have been over-producing cars for years and this over-supply leads to price wars, competition, and failure. Another reason for European woes are government barriers in exiting the industry, such as France and Belgium’s laws making it extremely difficult and costly for Renault and Peugeot to lay off workers and shut down factories. In contrast, the United States looks strangely healthy; a younger population, cheaper production costs, and a leaner product output that actually suits demand can explain the recent boom. Now I’m left wondering, why is Detroit still broke?