Category Archives: Uncategorized

Going back home to Singapore for the holidays I had quite a few possibilities in terms of which airline to choose. I chose to fly via Hong Kong on Cathay Pacific. However I did considered other places to stop over such as Shanghai, Beijing and Guangzhou. I now ask myself…would I have all of these options 3-4 years ago?

China Southern Airlines operates the Airbus A380 – one of the worlds newest passenger airplanes

Despite rising fuel prices, economic slowdown and other modes of transport (such as trains for regional travel) China’s civil aviation industry is still preditcted to grow over the coming years. Chinese airlines are sprawled amongst the global alliances. For example, China Southern Airlines, operating out of Guangzhou, is part of global alliance SkyTeam. The airline is even considering introducing flights to South America and Africa. A classic example of globalisation, who could have imagined that one day it’ll be possible to fly from Rio de Janeiro to Guangzhou on China Southern Airlines! China’s 12th 5 year plan promotes the development of the civil aviation industry. It is estimated that by 2015 China will have 230 airports allowing 80% of China’s population to be within 100km of an airport.

In Arya Radjendra’s blog post titled Garuda Indonesia Expansion. Calculated Risk or SImply Wrong? he gives insight unto Garuda Indonesia’s recent decision to re-operate to the USA and Europe. With the fourth largest population in the world and as one of Goldman Sachs Next Eleven countries we may see an expansion of civil aviation in Indonesia just like what is currently happening in China. As Indonesia and other Next Eleven countries becomes stronger economic players in the Asia Pacific Region we are bound to see further growth and development of their international transport companies. Who knows but perhaps in the future I’ll be more inclined to take Garuda Indonesia instead of Singapore Airlines/Silk Air to go to Jakarta or Bali…

Arya Radjendra’s Blog

Articles:

http://www.chinadaily.com.cn/cndy/2012-11/13/content_15920223.htm

http://usa.chinadaily.com.cn/china/2012-11/13/content_15922227.htm

One day whilst reading CNN’s business news I noticed a tab on the side saying “Business 360 Blog”. Opening the site, I noticed that Business 360 site is a gateway to many of CNN’s blogs about various different topics. There are a range of different blogs on the site such as Global Exchange which focuses on the effect of emerging economies on the global financial community. Another called Along the Silk Road looks at trade between he middle East and Asia focuses specifically on places such as Dubai, Hong Kong, Mumbai and Jakarta.

CNN’s Business 360 Blog’s allow users to comment and ask questions and links CNN news articles to the blog posts allowing readers to refer back to the original news articles. Some of the stories written in the blogs can be seen on programs on CNN’s new channel such as CNN’s Outlook Series which looks at particular countries in depth. For Example, their depth study on Singapore.The value of these blogs is that they are written by CNN’s international’s business anchors, corrospondents and reporters and include more of  a personal insight into the news from their perspective. For example, Richard Quest’s Blog page on Business 360 he writes about ways in which we spend money all over the world. In his post titled Cashing in on Convenience? he discusses how banks charge us more on currency conversion when we use our debit/credit cards overseas. The post is useful in understanding why we should pay in local currency rather than our home currency.

Links:     CNN News              Business 360 Main Page              Richard Quest

Walmart, high ceilings, massive trolleys and every product you can think of – on a recent trip to Seattle I learnt that Walmart even sells guns! Marian Fishman writes in her blog post titled Walmart monster in Costa Rica that introducing Walmart into Costa Rica will push many local business into bankruptcy. After reading the blog post, I remembered that I went to a Best Price wholesale store during my last visit to India in late 2011. Best Price is a wholesale store for small businesses which is owned by a join venture between Walmart and Bharti Enterprises. Currently, there are 17 of these wholesale stores and when I entered the warehouse, it definitely had a ‘Walmart feel’ to it with high ceilings and incredibly long isles.

Best Price in India

Recently, there has been news that Walmart will be introducing retail stores in India. The Indian Government has now eased the restrictions on foreign ownership of stores, allowing overseas supermarkets to own as much as 51 percent in local ventures. However, just as Marian said in her blog, this will cause local businesses to flop. Those that are against Walmart retail stores entering India say that if Walmart is allowed to come, the  employment crisis in India will worsen. However, it must be noted that the rules of the new foreign ownership agreement may actually benefit smaller businesses. The rules state that the foreign retailers must improve supply chain infrastructure and must srouce 30% of manufactured goods from local businesses. Perhaps, from a slightly different perspective, introducing Walmart may benefit the welfare of smaller businesses in India. We’ll have to wait and see…

Marian Fishman’s Blog

Best Price India

Articles:

http://www.huffingtonpost.com/2012/09/21/walmart-india_n_1903474.html

http://india.nydailynews.com/business/2e94bfda7567334592292f569021f7a8/inviting-walmart-will-aggravate-job-crisis-karat

http://www.bloomberg.com/news/2012-09-21/wal-mart-in-talks-with-bharti-after-india-eases-rules.html

A wave of anti-Japanese protests in China erupted following the Japanese government’s purchase of islands in the East China Sea. The islands were previously owned by a Japanese family but it is the nationalisation of the islands that is troubling the Chinese government.

One of the disputed islands

The violent protests resulted in many Japanese businesses temporarily shutting down and an overall drop in the demand of Japanese goods. Honda, Toyota and Nissan sales dropped. China is Honda’s second largest market and they reported a 40.5% drop in sales in September. Honda’s shares also dropped down to 9 month lows. Following all of this, Honda reduced their yearly forecasted profit by one fifth.

This story in the news is a clear example of how politics directly affects businesses. Honda’s sales are directly being affected by the territorial dispute. It’s interesting to see how people’s taste in product can change so quickly due to external factors. Honda had to revise their forecasted profit taking into consideration the unexpected change in demand. This is why forecasting demand is so hard; it’s impossible to know what sort of situation or problem is going to occur in the future that will directly impact a company.

Articles:

http://sg.finance.yahoo.com/news/honda-slashes-net-profit-forecast-031712823.html

http://edition.cnn.com/2012/09/24/world/asia/china-japan-dispute-explainer/index.html

Could the Chinese Yuan replace the US Dollar as the reserve currency?

Since the financial crisis back in 2008, many emerging economies in east Asia have been using the Yuan as the main reference currency. Countries such as Malaysia, Singapore and Indonesia have been reported to track the Chinese currency more closely than the American dollar.

Yuan vs Dollar

Why?

One of China’s many economic goals is to internationalise it’s currency; promoting international trade in Renminbi. It is said that currently, as both the US dollar and the Euro are under pressure, Investors are looking for a new reserve currency.

But, what would happen?

This article by Deutsche Bank Research,

http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000260162/Yuan+as+a+reserve+currency%3A+Likely+prospects+%26+possible+implications.PDF

gives a great insight into the advatanges and disadvantages of having a currency as the ‘reserve currency’.

However, there is one section that catches the eye. In short it says that China’s fall in dependence on the USA as an export market and the USA’s constraints in terms of financing its foreign debt will allow China to influence US economic and financial flexibility. This is likely to affect the USA’s political position in the world.

Will the USA allow this? What actions will they take to prevent/stop this from happening? International Relations and Global Politics will greatly be affected by this change in power and currently, it seems that with the US dollar and Euro in dismal situations, we may see this change in the next 5-10 years.

Cartoon depicting China helping the USA’s current financial problems.

Articles:

http://www.reuters.com/article/2012/03/18/us-china-currency-imf-idUSBRE82H02L20120318

http://europe.chinadaily.com.cn/business/2012-10/24/content_15840921.htm

Samsung has announced a mini version of it’s highly popular smartphone the Galaxy S3. In comparison to the normal Galaxy S3, the Mini version will have a 0.8inch smaller screen. This will give it the same screen size as Apple’s new iPhone 5. Technically, the Galaxy S3 mini will have various differences to the normal Galaxy S3, such as a reduction processing power and camera quality.

Galaxy S3 mini (left) and it’s big brother the Galaxy S3 (right)

Apple and Samsung are currently battling head to head in the smartphone market. It’s interesting to see that the Apple opted for a larger screen on it’s latest iPhone, much like Samsung’s larger screened smart phones. Now we also see that Samsung are going to implement a smaller screen, the same size as the iPhone.

In comparison to Apple, Samsung has a broad range of smart phones. In the ‘smaller screen’ smartphone market, the iPhone is arguably at the top of the ladder. However, when it comes to larger screen phones, Samsung is at the top. Following the announcement of the Galaxy S3 mini, should Apple consider making larger variants of it’s iPhone to compete with Samsung. The question now becomes, at what size does a ‘device with a screen’ become a tablet?

Samsung’s Galaxy S3 vs Apple’s iPhone

Articles:

http://www.bbc.co.uk/news/technology-19913940

http://in.reuters.com/article/2012/10/11/cellphones-poll-q3-samsung-apple-idINDEE89A09120121011

China’s GDP grew at a 3-year low of 7.6% in the second quarter of this year. Will the engine of the global economy continue to drive forward?

The Euro-zone crisis and a slow US economy has lead to a slump in Chinese exports. Domestic growth, especially investments have slowed down too. Nissan and Toyota have reduced their output in China due to a reduction in demand.

http://www.bbc.co.uk/news/business-19725269

A slowdown in China means that much of neighbouring South East asia will be affected. Even Brazil will feel the affects as the slowdown in Chinese demand for commodities will reduce Brazil’s exports dramatically.

http://www.bbc.co.uk/news/19709213

Is the chinese economy affecting the global economy? Or are global factors such as the Eurozone crisis affecting the Chinese economy? The world’s economies are too interdependent to run on their own – China has really established itself in a wide range of markets and as a key trading player, whatever happens to the Chinese economy can be felt throughout the world. If unfortunately the chinese economy was to cripple, who would drive the global economy? Amongst the current downturn, there are some exceptions in South East Asia such as the Philippines, Indonesia and Thailand have seen a boom in investment spending. Are these South East Asian markets the next global powerhouses?

Articles:

http://www.reuters.com/article/2012/10/08/us-worldbank-asia-outlook-idUSBRE89701420121008

http://www.bbc.co.uk/news/business-18815595

Vale, the largest iron-ore producer in the world, has faced a lot of trouble trying to get their iron ore to China. Currently, China is the largest iron ore importer due to its huge demand for steel.

How does a company in Brazil transport iron ore all the way to China and still hold competitive prices against other iron ore companies closer by? The answer — economies of scale. Vale, with the help of ship builders in Asia, has been able to acquire the largest capacity dry-bulk carriers on the planet. One of these ships is able to transport 400,000 tonnes of iron ore. Using these vessels from Brazil to China reduces transport costs by approximately 20-25%.

Largest ore carriers in the world

http://www.reuters.com/article/2012/05/21/vale-china-idUSL4E8GL38F20120521

However, following sending only one ship into the Chinese port of Dalian, Chinese authorities refused to allow these massive ore carriers to dock in any of its ports. The authorities enforced a limit on the size of the ships allowed to enter its ports. So now what? What does Vale do with 35 massive ships?

http://www.forbes.com/sites/greatspeculations/2012/09/04/vales-valemax-service-remains-grounded-in-china/

Vale now sends its 400,000 tonne ships to the Philippines and Malaysia. There, the ships are emptied into smaller vessels which then go onto the chinese ports.

Iron ore is transferred from the Valemax to a smaller ship

Is it better to have a transhipment hub to then send smaller ships to various locations around China? Or is it better to send the 400,000 tonne ships directly? With growth expected in other Asian countries in the near future and with a slowing down in China perhaps the transhipment hub will benefit Vale into tapping into other countries iron ore demands.

Come late October, Mumbai will have India’s very first Starbucks Coffee!

But here’s the catch…

Tata Starbucks

Starbucks in India will be known as Tata Starbucks. A 50-50 joint venture between the two massive companies. Now hold on a second, a JV between Tata and Starbucks? No of course not. Its a joint venture between Tata Global Beverages and Starbucks. Tata is not not only in the beverages market, but also in the coffee market with Tata Coffee Ltd – India’s largest producer and exporter of coffee. What isn’t Tata in? Steel, cars, power, internet, insurance, coffee…What else is left for them to stick their Tata label on?

The economic slump in Europe and the US has pushed Starbucks to try and tap into India’s emerging market. Partnering with Tata on their expansion is an interesting concept. Will we see more Tata – ‘Foreign company’  joint ventures in the future? Other foreign food/beverage companies such as Dunkin’ Donuts and Krispy Kreme have also got plans in the coming years in the Indian market.

Tata Starbucks will have a lot of competition in India’s coffee market with companies such as Costa Coffee, Barista and the current market leader Cafe Coffee Day. Will Indians go for Tata Starbucks instead of their trusted Cafe Coffee Day? Foreign brands tend to do quite well amongst Indian consumers so Cafe Coffee day might have some strong competition coming their way. But, a question still remains, will indian consumers associate Tata Starbucks with Tata or with Starbucks?

Articles:

http://www.bbc.co.uk/news/world-asia-india-19754584

http://www.livemint.com/Industry/3wb6oj2oBsFbrQU8XiJ2RI/Starbucks-to-open-first-India-outlet-in-Mumbai.html

http://www.business-standard.com/india/news/tatas-to-get-brand-royaltyjvstarbucks/463513/

At the end of October 2011, Qantas CEO Alan Joyce grounded the entire Qantas fleet. 108 aircraft stayed on the ground, over 50,000 people’s travel plans were ruined and Qantas’ reputation was left damaged. The reason Mr. Joyce grounded Qantas is very simple – to save Qantas. Since August that year, workers unions were taking industrial action against Qantas. Plans for restructuring and moving some operations to Asia would result in the loss of 1,000 jobs. The unions were not happy and wanted more job security…and so began intense strikes and industrial action against the company.

Qantas CEO announcing the grounding of all fleet

All flights CANCELED

A few effects of the industrial action on Qantas before the grounding;

• 600 flights disrupted
• 70,000 people affected
• $AUS 70 million of financial damage increasing at a rate of $AUS 15 million per week
• Reduction in number of people booking with Qantas

BBC News – Labour row grounds Qantas flights

There are 2 ethical issues associated with this event. The first is; did Mr. Joyce make the correct decision in grounding Qantas operations? The second issue is; were the union’s demands and actions justifiable?

We have to consider what drove Mr. Joyce to take such drastic measures? Look at the numbers. $AUS 70 million of financial damages and 70,00 affected passengers is no joke, especially in the highly competitive airline industry. It seems easy to say that he should have simply given in to the union’s demands but, realistically speaking, the workers were not looking to compromise and continued to escalate their demands. So Mr. Joyce had his reasons, but did he take the right action? It was a gamble. However, from an ethical point of view, Mr. Joyce showed great ethical integrity – he stuck with his decision knowing all of the risks. He also used his leadership to solve the problem to the best of his ability in the company’s best interest. However, it can also be seen that he went against the company’s best interest by stopping what makes an airline an airline, which is ethically wrong.

Now lets look at the workers unions. Their actions were directly against Qantas’ best interest, which is ethically wrong. However we should also take into consideration their disagreement with the companies future goals and targets, which in part justify their actions. But where is the limit? The unions threatened to continue their industrial action for an entire year and were not wiling to compromise. Their actions were destroying Qantas. Is that the role of workers unions?

Workers Unions on Strike

With the help of the Australian government, the issue resolved within a day. But there are so many questions that arise from such an event. Should workers unions exist and what role should they have? Should industrial action be legal? The airline industry is highly competitive and ever changing. For an airline to achieve their goals they have to make sure that their aims and their workers aims are in unison. In recent news, Qantas announced that it will be forming a partnership with airline giant Emirates – another grand decision that can be debated. Let’s see what happens…

Qantas – The Spirit of Australia