Month: October 2011

An article from canadianbusiness.com is about the possible tradeoffs between the installation of the Keystone pipeline. One side argues that this massive projects create many jobs and the other side argues that it possibly an environmental risk. This article debates the issue of a tradeoff between an ethical issue versus an economic issue. The installation of this pipeline would cause a risk in destroying the fragile environment in which the pipe was proposed to be built. However I personally think that the American economy would benefit in the short term from the construction of this pipeline. Currently the US economy is in recession and the unemployment rate is high. With the construction of this pipeline, not only will it create jobs, but it would increase Americas GDP output which is benefitial for the economy. However in the long term, we would have to realise that the problem of the impact on the environment might come back to plague Americas problems. The US might have to spend additional money to rectify any environmental concerns which might not be cheap. Unfortunately, the US economy is in a critical state right now and it needs to employ effective measures to improve the ailing economy.

Source: (http://www.canadianbusiness.com/article/49503–environmentalists-pack-hearing-call-keystone-pipeline-bad-deal-for-u-s–page2)

An article by CNNMoney on the 7th of October 2011 struck a chord in me. The article seeks to inform that it is predicted that the more affluent segment of the population in the USA, would spend less during the coming holiday season. The article cites reasons such as changing mindsets to signify the changing consumer consumption patterns in society.

Personally, I think the holiday season promotes consumerism and excessive buying. With the annual gifting of presents, malls are usually packed with shoppers vying for good deals amidst fancy Christmas decor and display. The article tells us that the wealthy Americans did not have a decrease in wealth but rather a change in attitudes after the recession. The recession had made them realize that buying more is not necessarily the answer. However does this change in consumer spending habits exist in the less wealthy segments of society and also people in developing countries like China where the rise in nouveau riche has led to an increase in consumption. In my opinion, this would not hold true for the wealthy in developing countries and Asia where consumerism is seen as ‘popular’ and many people in developing countries have just been recently exposed to a wide variety of products and goods than they have ever before. It would take a massive change in culture of consumption in Asia before they would consider cutting back on spending during the holiday season. As for the less wealthy proportions of society in developed nations such as the USA, a decrease in spending during the holiday season would be expected as they were heavily affected by the economic downturn i.e. unemployment, sub-prime mortgage crisis.

Source: (http://money.cnn.com/2011/10/07/pf/holiday_gifts/index.htm?iid=HP_River)

The article from the financial times is about how the luxury fashion house Hermès started selling saris in India and how it sees India as a huge market for the brand to penetrate. Although the company has it doubts whether it would be successful in the country where the annual growth of sales is 20 percent.

Personally, I would think that Hermès is taking a huge risk here because the country already has well known sari designers that have been around longer than Hermès and also these designers are local and they know the market and changing trends better than Hermès would. However, this weakness might also be turned into a strength in a sense that more Indians would embrace the idea of the westerner company selling saris as it would be something new to them. However, I do not think that Hermès could control the luxury market by its saris. Rather it should aim to provide high quality goods of  a more western style and taste, its niche. Furthermore it is mentioned in the article that due to trade tariffs, these goods would be more expensive than if they were to purchase it abroad. This could be a deciding factor in which Hermès would make a profit in India as consumers would rather purchase these goods at a cheaper price overseas. Hermès is also establishing a brand presence by distancing itself from other luxury brands such as Gucci and Giorgio Armani by housing its stores away from the usual cluster of designer stores. This is an effective way of marketing a Veblen good and consumers wouldn’t mind paying more for a more exclusive brand. All in all, we would need to observe whether Hermès did the right thing to market its saris in India.

 
Source: (http://www.ft.com/intl/cms/s/0/5c73d1b2-f0bf-11e0-aec8-00144feab49a.html#axzz1a9Wflth7)