Get Summer 2014 Right First Time with tutor2u Exam Coaching & Revision Workshops
In 2012 Anthony Jenkins (nicknamed “Saint Anthony”) succeeded Bob Diamond and promised to clean up Barclays and eradicate the worst excesses of the banking industry. Speaking to those who received huge bonuses for unscrupulous behaviour, he said “my message is simple: Barclays is not the place for you. The rules have changed. You won’t feel comfortable at Barclays and, to be frank, we won’t feel comfortable with you as colleagues”.
Despite this, profit dropping 32% to £5.2bn, and making 3,700 jobs cuts last year:
- Jenkin’s himself pocketed just under £5m in shares
- Staff paid over £1m increased from 428 to 481.
- The bonus pool increased 10% to 2.4b
The justification for this? Many senior traders have left, or threatened to do so, and to keep hold of the top earners, he had to offer top pay. Had he not, the investment wing of Barclays would have plunged into a “death spiral”, with staff and high-value customers going elsewhere.
This is part of the bigger issue regarding European Commission’s rule to reduce banking bonuses, how George Osborne is fighting the decision and why, it would seem, he really didn’t need to as bosses of RBS (81% owned by tax payers) and HSBC also side-stepped the rule by giving large “fixed pay allowances” in the form of shares.
This story always provides great impetus for emotive debate on BUSS4 topics such as government intervention, culture, pay and leadership.
“students never really cognitively understand something until they can create a personal metaphor or model”
To help students understand how a business can overcome the many barriers to success in China, we used the metaphor of trying to gain the affections of a beautiful, foreign (but very high-maintenance) woman… called China! The analogy worked surprisingly well and we compiled the pros and cons on the attached PowerPoint.
To summarise, everybody loves China because…
- She’s beautiful
- She’s popular
- She’s rich (14% of global GDP in 2010)
- She has over 1 billion “things” to offer you
However, the problems are that…
- She’s very picky and discerning (48% of foreign businesses have failed within 2 years - WeberShandwick)
- She likes designer goods (“will purchase 20% of world’s luxury goods by 2015” - McKinsey)
- You don’t speak her language or know what she wants
- There are a lot of locals who do (35% of businesses feel comp from local is the 2nd biggest threat - The Economist )
- Her parents are strict and probably won’t like you (Hostile government - 32% see the Chinese government as the 3rd biggest threat)
- Her parents seem to prefer the locals (Protectionist approach – local businesses nurtured with fiscal and financial help)
So what do you do to succeed? The answer seems simple; learn why so many have failed, make sure you’re better than the rest, learn the language, culture and habits, give her what she wants and keep the parents happy!
This then led to application to businesses such as JLR, LinkedIn, KFC and Starbucks and what they did to build strong long-term relationships with the beautiful China.
This lesson worked as a nice way to consolidate students’ understanding of finance (and engaged the lads in the class more than ever). The Deloitte Football Money League ranks football’s top earning clubs and gives various infographics, reports and videos about their financial success. Very interesting in itself, but coupled with the fact that most of the teams listed are racking up millions in debt, it made for an interesting discussion about profit, loss, short term investment and long term success.
The PowerPoint (Football_finance_2013.ppt) is a research task and can be used as a lesson or homework. There are various extension questions and then a discussion about UEFAs Financial Fair Play (FFP) rule, which will supposedly "level the playing field" and stop the big clubs running up the kind of debts in the table below.
Does the inclusion of the image below breach copyright laws? Paramount Studios think so.
A young man (obviously with time on his hands) has had his Twitter account closed for tweeting individual frames of the film Top Gun, along with captions, every 20 minutes.
The BBC article explains that whilst it seems heavy-handed and mean-spirited, in terms of the law, even the frames are classed as the film. However, it does ask how the tweets could affect Paramount financially, and why YouTube accounts don’t face a similar fate.
In a previous blog I listed some other contentious copyright courtroom quarrels, could this be seen as the most absurd, as far from detracting from the studio finances, it potentially advertises and promotes the films further?
The attached PowerPoint (In_the_news_last_week_Gov_Int.ppt) links three current stories from sport, media and education and asks “should governing bodies intervene or should the invisible hand of free markets be left unchecked?”. In each case, students can discuss the merits and shortcomings of regulation in the respective industries, and explore the reasons for intervention in the first place.
The lesson works as a nice starting point and leads naturally to further research on Adam Smith and Milton Friedman.
Hope it helps!
This article about Mothercare asks whether it can be reborn, following a series of errors and decisions which have gone wrong. So it makes a very good case study from which students can identify decisions which were made, and turned out to be mistakes, and also actions which were not taken, and probably should have been. Their sales have been falling for years, they have restructured and reduced staffing, they issued a profits warning in January which led to £112mn being knocked off their share value, and now their Chief Executive has resigned - and yet they have a well-respected brand and the nature of their market means that their products are in constant demand.read more...»
My students were particularly interested in Facebook’s acquisition of WhatsApp for the ridiculously high $19billion. We used the previous blog, then delved deeper and found a few great related articles; one explaining why it was a good price ($42 dollars for each of the 450m customers) but bad strategy and the other predicting that WhatsApp will not help them succeed in China. To summarise the two:
- WhatsApp is pro-privacy and data-free
- WhatsApp CEO Jan Kuom is sticking to his “ad-ban”
- WeChat – China’s domestic messenger service already has 300m customers and better functionality
- WeChat helps China’s economy and is subject to Chinese law (meaning “they” can keep tabs on the content).
- Chinese government banned Facebook, linked them with an act of terrorism and state media claimed that “80 percent of China’s net users felt Facebook should be punished”
- The government don’t want Facebook siphoning money and talent away from China’s domestic social media industry, most notably Weibo (China’s Twitter), whose profits have just jumped from $2.4m to $44.5m!
Segueing seamlessly to a social networking firm that seems to have secured a way into China; LinkedIn is trialing it’s Chinese language site via joint ventures with Sequoia China, China Broadband Capital and the aforementioned Weibo and WeChat!
Chief Executive Jeff Weiner said the deal has raised “difficult questions” for him, and has been forced to make various concessions in order to adhere to the Chinese Government’s censorship requirements, but believes that “LinkedIn's absence in China would deny Chinese professionals a means to connect with others on our global platform,"
Overall, these combined articles give students relevant ammunition for each of the research “bullets” as it covers success, failure, methods of operation and ethical implications of entering the Chinese market.
It would appear that social network firms need to network with Chinese social network firms if they want to become social network firms that operate in China. Simple really.
The airline Cathay Pacific has just announced their 9th annual business awards competition, for" British businesses which have successfully capitalised on opportunities to operate in China and Hong Kong". The scheme is run with the China-Britain Business Council and sponsored by HSBC and The Daily Telegraph - and is valuable for BUSS4 students as the Telegraph's information about it has a number of case studies and stories of businesses which are former winners of the awards.
You can find out a little about 2012 winners Jaguar Land Rover (JLR), the business standards company BSI and the fair-trade Chinese tea producer Herbal Health, see why the CEO of Fired Up says that entering the Chinese market is essential for British business, and why the chief executive of the China-Britain Business Council says that he has his work cut out breaking down the misconceptions that surround doing business in the country, and bringing the real opportunities into the spotlight.
After Facebook’s acquisition of WhatsApp, I thought this made an interesting exam question. I've compiled a PowerPoint (Facebook_Whats_app.ppt) with graphs and hyper-links and asked students to research the facts behind the purchase. The main reasons seem to be:
- WhatsApp exponential growth was becoming a threat
- Facebook’s “determination to be the 'next' Facebook”!
- WhatsApp's comparative success in Europe
- Messaging companies becoming the social networks of choice for the young
- Google tried and failed
Whilst Facebook's share price fell and then recovered after the purchase, analyst Ian Maude stated "expensively buying every competitor does not feel like a long term strategy". Are Facebook, like Apple, losing their competitive edge?
Hope it helps.
Did you know that most train operating companies will refund 50% of your ticket for a delay of 30 minutes or more, and will double that if the delay is for an hour or longer? And that, if you are travelling by tube, Transport for London offers refunds if your journey is delayed by 15 minutes or more (although you won’t get a refund if the delay is caused by a security alert, “third party action” such as a strike or bad weather)? Most probably you didn’t, as a survey by the Office of Rail Regulation has found that more than 75% of rail passengers know “not very much” or “nothing at all” about what they are entitled to when services are disrupted.
The report also found that 74% of passengers felt that train companies do “not very much” or “nothing at all” to proactively provide information about compensation when there are delays. As Simon Gompertz found in this video report, there are plenty of ways in which the train operating companies could make the information available, whether through instructions on the back of the tickets and announcements on trains to use of technology through their websites or apps.
This poor standard of information for customers is now to be improved. The ORR will now oversee the development of a code of practice on provision of ticket retail information, which will be in place by the end of 2014 and will provide clarity on what information passengers can expect from their train companies, including information on the different types of fares, restriction, and key terms and conditions, such as compensation and refund rights.
The government are also making compliance with these requirements part of their new franchising arrangements, to add to the regulation of the industry.
In the meantime, if you have had a journey delayed recently and want to claim compensation, here’s some guidance on what you might be entitled to.
We all know that the statistics about China's growth are awe-inspiring: a new power station every week, a new skyscraper every five days, and 30 new airports and 26,000 miles of motorways have been built in China in the last five years. Chinese outbound tourists are set to spend over £310bn on their travels this year - and that alone is a huge injection into the economies of other countries. A report last month showed Chinese investment in London real estate has risen more than 1,500 percent since 2010, increasing from 54 million pounds to more than 1 billion pounds at the end of the third quarter of 2013.
While Britain has been in the grip of the worst recession in a generation, China's economic miracle has surged forward.
Without this extraordinary growth, the depth of the slump in the developed economies would have been even worse; China's low cost output and their foreign exchange reserves have helped to keep the global economy growing at a time when any stimulus has been most welcome.
But, as Robert Peston explains in 'How China Fooled the World', the vast majority of this expansion has been built on credit from the 'shadow banking' system. There are huge developments of housing which have been built and bought up by investors at inflating prices, but which lie empty. As a result, the Chinese economy now has huge debts and there are doubts as to whether much of the money can ever be paid back. This sounds horribly reminscent of the bubble which built up immediately before the credit crunch in 2007-8 - but on an unimaginably bigger scale. What will happen to the rest of the global economy, if China is no longer there to support it?
There is only another 7 days to watch this excellent programme on i-player, and it is really worth devoting an hour to at the end of half term - could be very useful for several of the bullet points for June's BUSS4, particularly the second - the risks and rewards involved in trading with or operating in China - and last - how business strategy might be affected by developments in China.
Robert Peston's blog also has a supporting article. - which you can find here.
The rate at which China's economy has grown in recent years (as measured by the growth in GDP) is slowing. China's economy is still growing - but slower - and this has significant implications for both domestic and overseas businesses in China as well as the rest of the world trading with China.read more...»
Ever wondered what happened to that old Nokia mobile phone that used to be your pride and joy. Or that Nintendo portable console that was your companion on many a long journey? If you disposed of them rather than (like me - keep them in a box in the spare room) then chances are your e-waste found its way to China.
This video clip highlights the significant amount of recycling of e-waste that is conducted in China. For the operators themselves it is a significant business opportunity, However, there are some important social costs involved too.read more...»
I'd love to see the investment appraisal calculations on this investment project by Marks and Spencer. The Independent reports that M&S has invested around £150m as it relaunches its new website as part of a broader £1bn project to improve its logistics.read more...»
What do Kanye West, a Flappy Bird and American footballers have in common?
I had no idea either, but it was interesting to have a go. I saw these three news stories this week and they seemed to cover the full gamut from money, sport, culture, fashion, business and (most importantly for the students) trainers.read more...»
I'm rather bitter that Eric Cantona one of Manchester United's best former players has been banned by The Advertising Standards Agency today.
Watch the clip and try to work out why this has happened.read more...»
We have blogged about Huawei several times recently. Huawei is a terrific, though controversial example, of a fast-growing Chinese business with global ambitions which poses an increasing competitive threat to established multinationals.
For example, in this blog entry we reported on how Huawei is investing heavily in innovation and new product development: 62,000 of its 140,000 staff work in research and development, and it has 23 R&D centres around the world.
Two recent news articles highlight how this investment in R&D is starting to bear fruit, even if (in the case of 5G the returns are still a few years away)
There has been much media attention recently about the roll-out of 4G mobile networks (thing Kevin Bacon strolling through the streets extolling the virtues of EE). However, Huawei already has its eyes on the next (5G) generation of mobile networks which offer the prospect of data speeds up to 1,000 times faster than the current performance. That's some prize for the successful developers and Huawei is investing over $600m into the research necessary.
5G mobile networks might be 5-6 years away, but a more short-term opportunity looks like the impending competitive battle for wearable technology. The Wall Street Journal reported yesterday on plans by Huawei to take on Samsung and (potentially) Apple by launching a smartwatch at an upcoming technology convention in Barcelona. Another example of Huawei's ambition to compete on the global stage, particularly in consumer electronics.
Whilst quoting Sun Tzu’s The Art of War is normally reserved for market traders and Gordon-Gekko-types, I’ve used the attached PowerPoint (Sun_Tzu_The_Art_of_Business.ppt) as a nice introduction to Strategic Planning (and, quite appropriately, expansion into China) with A2 students, and Business Planning with AS (a little tweaking may have to take place for the different year groups).
I’ve picked out a few choice quotes from the 2500 year old text and asked students to write down the business implications (or advice it gives) to businesses. Finally, students need to plot all of the factors a manager/general must take into account to ensure a strategy of success.
It can take as little or as long as required, but is an interesting way of getting students to understand that strategic planning is the key to success in war, competition, business and life.
Hope it helps.
It has arrived there somewhat later than its major competitors. However, McDonald's has finally open its first outlet in Vietnam. It is a significant moment for an icon of globalisation, not the least given the historical connection between the USA and Vietnam.read more...»
Sony’s embattled CEO Kazou Hirai and his Board have been reviewing their product portfolio in recent months and the result is a strategic choice to remove two “dogs”.read more...»
Here's a fun link, showing a variety of firm's building up revenue in real time. The winner clocks up $1m in little over a minute. Of course, revenue isn't the same thing as profit - but you can track net profit too, showing up some interesting issues. Coca-Cola earns more than PepsiCo despite fewer sales. Boeing and Airbus enjoy about equal revenue, but the American firm is much more profitable.read more...»
This article in Forbes is a useful example of a multinational that has decided that China is no longer an attractive business opportunity.read more...»
Does the combination of Apple’s falling sharing price and market share, their perceived lack of innovation post-Jobs and Samsung’s cross-licensing deal with Google spell trouble for Apple?
Attached is a 10 slide PowerPoint (Apple_V_Samsung_Research.ppt ) with infographics, hyperlinks, videos and questions that can be used to help students research the two tech giants.
As with the “Will Google rule the world” post, the lesson covers most of the following BUSS4 topics:
- Mission statements & corporate objectives
- Globalisation and emerging markets
- Technological change
Hope it helps!
Lenovo has agreed to buy smartphone manufacturer Motorola from Google for $2.9bn.
As Puneet Pal Singh from the BBC explains in his excellent analysis of the deal, this is not the first time that Lenovo has used an acquisition to accelerate its growth (a good example of "external growth).
Back in 2005 it acquired the desktop and laptop business of IBM which immediately catapulted it into the global top division of computer manufacturers. Now, Lenovo is the world's largest manufacturer of computers and it has set its sights on building global market share in mobile devices, particularly smartphones and tablets.
Overnight, the takeover of Motorola puts Lenovo into third place globally, overtaking Huawei, which itself also has global leadership ambitions. Regular readers of the business blog might also ask - where are Sony and Nokia? The answer, of course, is falling fast as competition intensifies.read more...»
Are the good old days over? Is the gold rush of multinationals into China at its end?
I think this is a very useful leader article in The Economist which ought to be part of the research notes for aspiring BUSS4 students looking at China.read more...»
The Year of the Snake proved a challenging one for major bureaucrats in China who had previously enjoyed a lavish lifestyle. However, a new focus on rooting out corruption amongst China's public servants, is catching up with corrupt officials. As senior public servants fall into line with the new, stricter regime, demand for certain luxury products is falling in China! In this video from the FT, Ben Marino examines the changes and the possible implications for businesses that have relied on lavish spending.
A great example of how a change in the political environment can impact directly on business!read more...»
Try this simple exam-style question. "List three ways in which an operator of cruise ships could increase the capacity of the business."read more...»
OUP is one of the country's major academic book publishers, and naturally enough it has commissioned and published new studies on the outbreak of the First World War. A new book 'Saving the City', by Richard Roberts, covers the financial crisis which broke out in Britain, after the assassination of Archduke Franz Ferdinand in 1914.read more...»
Google’s $3.2 billion purchase of Nest and current shopping spree into all things futuristic has made for an excellent BUSS4 case study. Attached is a 10 slide PowerPoint (Google_mergers_and_acquisitions.pptx) with videos, articles, hyper links and questions that can either be used as a homework task to start students on the road of research, a lesson in which students work independently and focus on the sections they find most interesting, or a catalyst for discussion about the similarities of Google, 1984 and Brave New World.
Whilst it focuses on acquisitions, by the end of the lesson all students were able to analyse Google in relation to the following BUSS4 topics:
- Mission statements, corporate aims and strategy
- Government intervention (or Google’s intervention with the government)
- Managing change
Most amusing is the Daily Mash's vision of a world run by Google... as if we have a choice!
Here are some notes from a talk given by Liu Xiaoming, Chinese ambassador to the UK at the Marshall Society economics conference in Cambridge in January 2014.read more...»
Here's another great example of the product life cycle concept.read more...»
What is wrong with this advert? Produced as part of a safety campaign by Cycling Scotland, the Advertising Standards Authority has banned it, so it can no longer be shown on tv.read more...»
Yesterday, David Cameron told the Federation of Small Business conference that more than 3,000 rules affecting business are to be scrapped or amended, saving more than £850m a year. BUSS4 students need '...a broad understanding of the scope and impact of legislation relating to business', and will be well aware that the legislation adds to business costs. Cameron is proud to say that his government would be the first in modern history to end a term in office with less regulation on the statute books than when it came into power.read more...»
You have a global brand. But, to maximise its strength in global markets, you need to take account of the local customer needs and wants. That is the essence of the concept of "localisation" and few global brands take this approach more seriously than Starbucks.read more...»
A very useful article here in Marketing Magazine which describes how British Airways (BA) has approached its strategy of penetrating the market in China.read more...»
The pollution problems that affect China are well-documented and they show little sign of going away. However, heightened public anger at pollution - and a growing political will to deal with the issue - has created opportunities for firms with the expertise to take a share of China's fast-growing clean-technology market.read more...»
“Success consists of going from failure to failure without loss of enthusiasm”
This is the perfect quote to accompany the story of Shaun Pulfrey and the Tangle Teezer. Despite failing (quite miserably) on The Dragon's Den in 2007, he went on to sell millions of products in over 60 countries.
Here is the link showing parts of his 2007 pitch, and a This is money article from last week. There are lessons in market research, patents, marketing, sources of finance and growth, but most striking is the power of perseverance.
The crackdown on corruption in China doesn't seem to be having much of an effect on demand for Rolls-Royce motor vehicles - perhaps one of the most obvious examples of conspicuous consumption.read more...»
The announcement of Google's takeover of smart home-appliance maker Nest for $3.2bn is potentially hugely significant for Google.read more...»
The challenges for businesses outside China gaining a profitable share of fast-growing markets in China have been illustrated by two recent announcements by leading multinational cosmetics firms - L'Oreal and Revlon.read more...»
In this six minute interview with The Economist, our good friend Tim Richards, CEO of Vue Cinemas, discusses the strategies the company has adopted as VUE has completed its massive investment in digital projection.read more...»
"I know what you're thinking. "Did he fire six shots or only five?" Well, to tell you the truth, in all this excitement I kind of lost track myself..,you've got to ask yourself one question: "Do I feel lucky?" Well, do ya, punk?"
A well known exchange from Dirty Harry led me to twist the title.
However, this presents an extreme by UK standards, example of niche marketing, from India, The Nirbheek revolver.read more...»
Retailing is a dynamic market, and firms which have been slow to adapt to changing technologies, falling real incomes, and different patterns of consumer behaviour have been losers rather than winners.read more...»
These two pieces of video evidence on South Korean multinational giant Samsung are pure business studies gold - particularly for students preparing their evidence for AQA BUSS4.
Samsung is a highly diversified multinational that is the most significant firm in the South Korean economy. It has achieved a strong record of improved profitability, quarter after quarter, as demand for its product portfolio has grown, particularly mobile devices. However, in January 2014 it announced that it expected to suffer a fall in profits, It expects to make an operating profit of 8.3 trillion won ($7.8bn; £4.8bn) for the last quarter of 2013, down 18% from the previous three months.read more...»
Demand for chocolate products in China is growing fast, but from a very low base. Nevertheless, the "Big Five" global chocolate firms are now all firmly focused on capturing their share of what promises to become one of the world's most valuable chocolate markets.read more...»
There’s just been a terrific book review in The Economist picking up on a great topic: corporate culture. The term is on everybody’s lips at the moment, helped by the current Leonardo DiCaprio movie ‘Wolves of Wall Street’, which is said to present a damning picture of the behaviour of some US banks.read more...»
Here's a great Guardian article to bring you up-to-date: Seasonal trading news from Britain's biggest retailers have underlined the many radical changes that are taking place in the way we shop and buy.read more...»
How does a young man buying a drink in England help a young man in Uganda achieve his dream?
Innocent Smoothies' new advertising campaign explains the connection, and in doing so, it helped my class to understand how to fully develop a point, this led to deafening applause from the whole class and a subsequent call of "Oh Captain! My Captain" whilst most students climbed onto their desks! An ancillary benefit was that they could justify which was better, Innocent's Corporate Social Responsibility or Innocent's Marketing Campaign.
The operations statistics look so impressive for parcel delivery firm Yodel which delivers parcels for a host of major online retailers including Amazon, Argos, Boots and Tesco Direct.
Yodel handled over 14 million parcels in the run-up to Christmas 2013, sorting over 860,000 parcels on its busiest day. It moved to seven day a week deliveries throughout December 2013 and operated an additional 13 sites to add capacity. It delivered over 52,000 bouquets of flowers on 23 and 24 December alone.
Yodel's Chairman has been quoted as saying:
"Feedback from our clients has been extremely positive and we are delighted that our partnership approach has worked so well".
So, what went wrong with Yodel's customer service last Christmas?read more...»
This interactive resource encourages students to map the position of the UK’s leading supermarket operators against two dimensions. This is a process called “market mapping”.read more...»