This post is a response to Jeremy Chan’s post on the aviation industry. In his post he discusses the supply chain crunch that both Boeing and Airbus face. With the increasing demand for planes, Boeing and Airbus face shortages for manufacturing resources. I agree with him in the fact that they cannot satisfy the demand, but I do not agree with the fact that there is no foreseeable change in the supply chain. The two companies must change their supply chain, otherwise they will lose millions of dollars. One option that I conceived was maybe a merger between the two companies. Because the two companies are in vulnerable situation, a new competitor could enter the market and thrive but if they merge they can eliminate that. If the merge they could also streamline they’re supply chain and operations and make it more efficient. The two companies could produce the best quality planes and keep the trust instilled within both companies from the airline companies. It is a win-win situation for both companies.

Sources:

https://blogs.ubc.ca/jdchan/

http://www.economist.com/news/business/21621851-fixing-one-supply-chain-problem-planemakers-may-be-creating-another-good-parts

http://www.freudenberg.com/en/Press/Pressereleases/Pages/Auftrieb-für-den-Airbus-A350.aspx

What effect will it have on the economy?

By now most people know the situation in Hong Kong. Thousands are protesting for greater democratic rights. The protests have been going on for almost a week and  I wanted to know how it has affected or will affect the economy. The protests have certainly affected the local economy because of the blockage of roads which is causing major delays in traffic. As a result, the protests have lost the support of some local business owners. Another immediate impact of the protests is the decline in the tourism industry which combined with the retail industry makes up to 10% of they’re gross domestic product. The fact that most businesses in Hong Kong have close relations with the mainland is causing adverse affects as well. With the mainland cracking down on corruption and the property market slowing down, the retail industry in Hong Kong is suffering. Combine that with the protests and it has been a sharp decline the past week. If the mainland were to intervene, then China’s economy would suffer. They would be seen as unstable therefore losing foreign investment in the country. Although the protests are for good reason, they are not without consequence.

Sources:

http://www.bloomberg.com/news/2014-10-04/economic-cost-spurs-some-in-hong-kong-to-oppose-student-protests.html

http://www.businessweek.com/articles/2014-09-30/hong-kong-protests-trigger-new-worries-for-chinas-economy

Tesco’s Accounting Scandal

It has recently been reporting that Britain’s largest grocer, Tesco, was involved in a massive accounting scandal. The company had overstated its first half expected profits by 250 million euros. The FCA is now investigating the matter to determine whether this was genuine mistake or a deliberate cover up. Tesco’s shares also dropped by 3%, marking they’re lowest stock level since 2003. This all happening under new CEO David Lewis who was forced to suspend four senior managers. This matter involves both managerial and financial accounting. As we learned in class, there are certain standards that must be adhered to with regards to financial accounting. These are standards are the same for all companies and are clearly outlined. I’m assuming that if Tesco deliberately overstated, it was because they’re sales must have been diminishing and in order to keep they’re stakeholders happy, they had no choice but to overstate. If FCA concludes that this was done on purpose, then some people could be in some serious trouble and face either hefty fines or jail time. This has an adverse affect on Britain’s economy because Tesco has almost 500 000 employees and is a blue chip stock.

Sources:

http://www.economist.com/news/business/21620227-booking-revenues-comedy-all-about-timing-not-so-funny

http://uk.reuters.com/article/2014/10/01/uk-tesco-probe-idUKKCN0HQ33L20141001

http://www.theguardian.com/business/2014/oct/01/tesco-investigated-fca-accounting-scandal