Speculated Deflation in the Chinese Economy

Since 2010, China’s economy began to experience staggering rates of inflation with gradual drops in producer prices.

Banks fear that potential deflation in the near future may lead to a “vicious cycle of contraction”. Relating to the idea of time value of money, deflation  would mean that less money circulates in the economy, leading to a rise in value of money over time. When money is worth more at a later time, debts become more expensive to pay, possibly causing consumers to cut down on spending and companies putting off investments. At the current stage, disinflation is not actually entirely detrimental, as lower prices of daily commodities allow families of average incomes to obtain those necessities more easily. However, in the long run, disinflation also indicates slowing economic growth, which poses a major problem for the world’s second largest economy.

As of now, there are several reasons leading to the falling producer prices. One being a general slump in the world economy along with reduced demand and consumption rates. Coupled with that, overproduction around the world are worsening the situation amidst diminishing demand. Although short term solutions such as cutting interest rates may ease the current circumstance, the problem at hand is difficult to solve in its essence. From my perspective, a long term solution would likely involve either limiting production or creating incentive for more consumption. Limiting production seems impractical as there is the tendency to produce more to profit more. Yet producing less, but of better quality, or even innovating new techonologies and discovering new consumer goods to produce could be a good start to changing the slowing world economy.


Many people may find it difficult to believe that a private business producing yarn can be highly profitable, but yes, pioneered by Laura Zander and her husband in 2002, the company Jimmy Beans Wool have achieved sales of up to 7 million in 2013. In consideration of Zander’s strategies and operations, there are several key actions that contributed to her business’s success. First, the company began from Zander’s personal interest in knitting. Zander was “thrifty” and “self-taught” when it comes to producing her product, which meant that the starting of the business involved relatively low costs. Furthermore, the Zanders had “strong views about the online customer service”. Not only did Mr. Zander, former software engineer, set up and design their own online website, but they also devoted much attention to establish good customer relationships in order to retain and attract interested customers.

Laura and Doug Zander: In August 2013, they had to stop taking paychecks.

Meanwhile, Zander also aimed to do “more with less”, allowing her to focus on specific aspects of the business to create a competitive advantage instead of “doing less with more” which would force her to examine a wide variety of sectors but dedicate less time and attention to each. Ultimately, producing more and expanding at exponential rates may become difficult for the small business to manage, which is what the Zanders faced in 2013. While it may seem beneficial to always think big, it proved to be the opposite for Jimmy Beans Wool. As Zander begin to expand her markets, directing her attention to other products such as fabric, she experienced sliding sales, and suddenly, the company was producing more than it can manage and sell. However, Zander’s prompt reaction to the issue continues to contribute to the business’s success. Upon staggering sales, she met with consultants to re-identify their fundamental values including value proposition and devised new strategies, such as opening up new stores or continuing building the brand online, to generate streams of revenue.

Market Research Funnel

Read more: Case study on Jimmy Beans Wool



Target Customers and Value Proposition

“Adidas Struggles in America: Too Much Fussball, Not Enough Football?”


One of the biggest sportswear company, Adidas dominates the Europeanmarket, but it is struggling to secure sales in the North American market. Since 1949, Adidas has implemented a focus differentiation strategy focusing on soccer and golf. Because of this strategy, Adidas enjoyed leading sales in regions where soccer was popular, including Europe and South America. However, to North America where other sports such as basketball is more popular, products offered by Adidas seem less appealing, especially with the presence of a strong competitor – Nike. In this context, Adidas’s strengths are also its weaknesses. They appeal to a specific group of customers, soccer fans and players, but this also limits them to that particular group. Threats, meanwhile, include rival companies including Nike, New Balance, etc., decreasing interest and demand in golf, and depreciating currency (rubles) that may curb revenue.In attempt to increase sales and to compete with Nike that takes up 95% of the North American market, Adidas plans to increase expenditure on marketing , which will help make adjustments to the value proposition sector. While it may be profitable to attract North American customers, I find it unecessary to expand Adidas’s focus on soccer gear to basketball or other sports gear. On the contrary, I think it is more effective to continue to focus on soccer, as it is still the most popular sport throughout the world, and develop and offer products that will increase demand for soccer gear instead.

On Relationships between Companies and First Nations

“Tsilhqot’in set to declare site of New Prosperity mine a tribal park” http://www.vancouversun.com/news/metro/Unilateral+park+declared+Tsilhqot+includes+Prosperity+mine/10192766/story.html#ixzz3FShRYWIF

“Taseko’s New Prosperity mine challenged by Tsilhqot’in park plan”


Facing numerous obstacles to open gold and copper mines, Taseko encounters yet another obstacle in launching their New Prosperity mine, as the Tsilhqot’in First Nation has declared to incorporate designated mining lands into a new tribal park to preserve cultural heritage and natural habitats. Similar to recent opposition to the Northern Gateway project, Tsilhqot’inopposition poses problems for Taseko in sectors including the company’s key resources and partner, as the mine is located near areas of Tsilhqot’in lands and the Tsilhqot’in Nation has been long against the New Prosperity mine as a major stakeholder. Therefore, it is essential for Taseko to perform key activities to negotiate with the Tsilhqot’in Nation in order to progress in their business. However, one of the primary concerns of the Tsilhqot’in Nation, besides the lack of respect and involvement in planning the project, is permanent environmental damages that can be brought to lakes and ponds in the area. Prior to the declaration of establishing the new tribal park, the New Prosperity mine had been rejected by court several times due to environmental hazards. Consequently, another key activity would be to address these environmental concerns through investigation and reports to ensure that harm to natural habitats is minimized. Despite the many activities that can be done to win the support of Taseko’s key partner, one issue remains. Although establishing mine will bring considerable profit, it will inevitably impact traditional lifestyle of the First Nations people, which becomes something that will be difficult for First Nations to compromise. According to Taseko’s vice-president of corporate affairs, Brian Battison, details on what the park will constitute and what may or may not be allowed is still unknown. As of now, what will become of the New Prosperity mine is still a question, but it will largely depend on government support of the project, court ruling for or against it, and consent of First Nations.

Business Ethics

In the article “Chinese Enterprises Baffled by Having to Practice Social Responsibility Overseas”, as more and more Chinese corporations invest overseas, problems are arising because they are neglecting the need to listen to the voice of the local people and to protect the environment. Most companies are only placing importance in negotiating with the governments of countries they are investing in. Chinese companies are indeed, according to Friedman, “increas[ing] its profits” while “stay[ing] with the rules of the game, in other words following local laws and “engag[ing] in free and open competition”, as they do communicate with and respect governments in order to operate a business in the country. However, Chinese corporations largely ignore the local people and NGO’s, who are one of the “stakeholders” in the Stakeholder Theory. Freeman states that the interests of all stakeholders need to go in the same direction for a business to be successful. In the cases for many Chinese companies, the managers and financiers have interests that differ from those of the community. The managers and financiers are concerned with maximizing profit, while the community is determined to protect their home and environment. The divergent goals of these “stakeholders” explains why Chinese corporations are facing an increasing number of problems in foreign investments.