Manufacturing strategy: Is China losing its competitiveness?
Is China still a competitive location for overseas manufacturing? Certainly the nature of manufacturing in China is chaining rapidly, as this 4 minute video from the Financial Times explains. It features European firms that moved their production to China several years ago. However, as wages in China have risen rapidly in recent years, it becomes less cost-effective to make low value-added products in China.
read more...»External influences: the threat that is China
Most A2 Business students have their sights firmly set on BUSS3 this week, which is very much as it should be. However, next week their attention will turn to the wider world of BUSS4. In planning for that, it looks as if the three-part series of reports about China that Newsnight will be running this week would be very useful, and worth recording or at least picking up on i-player.
read more...»What’s gone wrong for Kodak?
Ever heard of Coca-Cola? How about Google, Microsoft or IBM? What about McDonald’s? They sound familiar, and the amazing thing (to me) is that even in the 1990s, you would have heard Kodak mentioned in a list of the world’s five most valuable brands. Kodak was the Google of its day and by 1976 it accounted for 90% of film and 85% of camera sales in America. How the mighty have fallen, with the announcement that Kodak files for bankruptcy protection.
I was reading about Kodak’s decline and here are some of the key points that made an impression:
read more...»The Boston Matrix, whisky and booming exports
Don’t know why I keep using alcoholic beverages as examples in my lessons, but a recent discussion of the famous Boston Matrix got us all thinking which drinks belong in which Boston Box category. We decided that Guinness probably represents a cash cow for its producer, Diageo. In Europe, the market for beers is stable, or shrinking. But Guinness is a popular brand, with a large market share. It’s a good earner for the drinks giant.
But the Boston Matrix hints that there are better marketing opportunities out there: like grabbing a large share of fast growing markets – and developing star products. And that’s what Diageo have done, with whisky exports to China of popular brands like Johnnie Walker rising so fast the industry is struggling to meet demand.
read more...»International operations decisions - Adidas trainers for $1?
This makes an ideal example for students considering the challenges of international location in operations management for which they must consider global
markets, cost reduction and avoidance of trade barriers. Here is my plan for the case study and questions which could be set on it:
Could Adidas make a profit from selling branded trainers for $1? Certainly not in any of their developed markets – but since 2008 they have been working on a market development (Ansoff!) strategy which would give them access to the vast market in rural India with a social enterprise venture at a price that local people can afford. The goal of the project, the firm says, is not to maximise profits but to “tackle social issues” by creating jobs.
read more...»Who is Britain’s biggest manufacturer? The answer may surprise…
The impact of the turbocharged emerging economies continues to grow and I was certainly surprised by the answer to this question. Having spent a long time thinking and reading about outsourcing and offshoring it’s easy to forget how the process runs in two directions. It’s not just that British firms have massive overseas investments – over the last few years foreign multinationals, many from the developing world, have been building up their bases here.
read more...»The world’s biggest car market
You guessed it. The rise of the emerging markets continues apace, with the US car market now in 2nd place behind China.
read more...»Fresh doubts about outsourcing
For the second time in just a few months, The Economist gives several column inches to debating the merits of outsourcing: the idea that there are big benefits to be had from passing work, once completed by a firm, to a subcontractor who takes on that role.
read more...»Beware of the Kunming’s Rotten Apple
Most manufacturers of expensive branded goods are aware of and manage the risks of having their brands imitated by counterfeiters. But has a firm ever found a fake store being opened by these unscrupulous people?
read more...»The Irresistible (?) Rise of the Super Rich
I wasn’t surprised to pick up on the news that the world’s wealthiest people are now richer than before the credit crunch. A striking feature of the last thirty years has been the emergence of a tiny group of people capturing a relatively enormous slice of national income. You may be astonished to learn that in the UK, the wealthiest 1000 people have assets worth more than £330 billion (that figure alone represents a sum equivalent to almost 40% of the entire debts of the UK government).
This raises a number of issues in Business. Firstly, you might focus on the marketing opportunities this offers to some firms. Equally, you might reflect on the CSR and ethical implications of this state of affairs. And finally: will it last? Might the tide be turning, with the next thirty years seeing attitudes change and tolerance for this situation coming under attack from electorates and their governments?
read more...»Evan Davis ‘Made in Britain’ - and a new trade data tool to play with
I am cross-posting this item from the Economics blog because it should be of great value to A2 Business students as well as those studying Economics.
The first episode of a 3-part series, Made in Britain, was shown on BBC 2 last night, and was a really useful hour for business students. It examined how and why Britain has lost thousands of manufacturing jobs over the last two or three decades in the low-value part of the sector, with some film of outsourcing shot in China as well as plenty of archive material from this country, but argued that the move to high-end, low scale manufacturing has become Britain’s area of comparative advantage in industrial manufacturing. This included Evan being taken for a test drive in the new McLaren sports car, which was clearly an amazing experience - watch the clip to see his reaction! And this surely emphasises the Economic Importance of Manufacturing to the UK economy - see this link to Geoff’s blog on this topic! Sadly this episode is not to be broadcast again, but is available on i-player for another 21 days and is thoroughly worth watching. I will certainly be setting the recording machine for the next two programmes, on Mondays at 9.00 on BBC2 - episode 2 is to focus on how innovation can help keep Britain ahead in the global economy.
read more...»A2 Business: Six key global trends that are shaping business strategy
Students who can point to some overriding trends which help shape strategic direction and choices are much more likely to write interesting, persuasive and evaluative essays. This new report by consultants Ernst & Young is a pinch of gold dust for such students, as it examines in a reasonably accessible way six broad, long-term developments which shape business around the globe.
read more...»The rise of Asia - some comparative data to play with
Preparation for BUSS4 includes some study of emerging markets, and students could take a break from textbooks to play with this graphic from the BBC. It allows you to compare countries in terms of wealth, health, life expectancy, education and energy consumption, between 1970 and 2006.There is an explanation of each of the sets of data and where it came from, and you can select two factors and up to 10 countries to compare.
For example you can examine questions like “As Asia’s wealth increases, how much longer are people living?” or “Is increasing wealth leading to better education?” in order to get a picture of how development and markets in the Asian countries compare with the UK and USA. Worth a look to get a feel for the potential for UK businesses to invest in expansion into these developing markets, and some of the limitations for them there.
Economic environment: Emerging Markets
We’ve lived through an extraordinary period in world economic history. Sustained economic growth outside the areas once seen as the ‘rich world’ - primarily Western Europe, the US and Japan – is reordering the global balance of economic power.
The ‘emerging markets’ is a term used by commentators to group together some of these awakening giants. You may have heard of the BRIC economies - Brazil, Russia, India and China - a label that serves as a handy acronym to remind you of some of the key players. But there are plenty more. What does this mean for business?
read more...»Luxury goods giant Prada looks east to cash in on Asian boom
According to The Guardian, in what is the latest sign that the luxury world order is shifting east, Prada (which has operated out of Europe’s fashion capital of Milan for nearly a century) is looking to sell shares in Hong Kong. It is trying to raise as much as £1.6bn from selling just a 16.5% stake in the company. The Italian fashion brand drew gasps, as this valuation makes the business worth some £9bn.
read more...»An end to outsourcing?
Could ‘Made in the UK’ start making a comeback? According to The Economist, American multinational manufacturers are moving back to home, as building factories offshore becomes less and less attractive. Might the same thing happen in the UK?
read more...»Economic environment: Oil and Petrol Prices
An earlier blog in this short economic environment series looked at inflation - the general tendency of the price level to drift upwards through time. A large part of recent inflationary pressure has come from higher energy costs. There’s also been discussion of the economic importance of confidence which is also influenced by the (highly visible) price of petrol. In fact, the price of oil (and petrol ... and energy in general) is one of the most significant issues firms face from the economic environment.
read more...»Tesco’s overseas strategy: next steps
You may have already taken an interest in Tesco’s strategy in the US and an article has come up in The Guardian in which it describes Tesco looking to overseas markets in order to make a ‘change of gear’.
read more...»Whitbread goes for organic growth
Whitbread plc emerged as one of the clear winners during the recent recession in the UK and it appears to be putting its competitive advantages to good use by announcing an acceleration of its internal (or “organic”) growth strategy. This is a terrific case study on growth to use with students - it covers so many specification areas and is especially useful for AQA BUSS4 students who need to gather some evidence-based research data for their Section B essays.
read more...»Triumph - A Classic Case of Niche Export Success
Many thanks to Allan Todd for spotting this superb article from the Independent which makes perfect reading for all our AQA BUSS2 & BUSS4 students in particular as they prepare for exams this summer. The article is about the boom in British motorbikes such as the Triumph and Royal Enfield Bullet who’s sales have defied the recession and growth in an ever decreasing market. BUSS2 students will latch on to the niche marketing and product range aspects with BUSS4 pupils being able to analyse the emerging market angle and the globalisation focus that is indicated in the article. A sample essay that Allan will practice with his pupils will be:
To what extent can successful marketing practices that Triumph, and any company that you have studied, defy a global recession or are other factors to be considered?
http://www.independent.co.uk/life-style/motoring/features/triumph-drives-brit-bike-boom-2269173.html
CSR - Responsible Jeans? Its a Blast…
Many thanks to Ian Pryer and Mike Slark for spotting this excellent, topical case study of CSR in action. The Telegraph article describes how retailers and clothing brands such as Asda, Diesel, Matalan and Primark are among those being criticised for selling jeans made using sandblasting, which can cause illness or even death.
As Ian pointed out to me during the BUSS4 revision workshop in Fulham on Monday, many students arrived at lessons during Comic Relief week in ‘worn-look’ jeans. Had they stopped to consider how the manufacturing process may effect the health of those involved in their production? Are their own jeans from a business like New Look or M&S who say they have already outlawed sandblasted jeans from their supply chain? Or are they from one of the firms being targeted by ‘Labour Behind the Label’? Lots of good CSR material to discuss here.
Are call centres the factories of the 21st century?
When you think about Business Production (or Operations Management) it’s always easy to imagine some type of factory setting. But I try to increasingly think about service sector environments, and when I saw that “More people have worked in call centres than ever worked in the mining industry, and I researched that in 1998,” (according to an author who wrote a novel based on his experiences in a call centre) I read on.
read more...»Barbie’s expansion problem
The Barbie ‘concept store’ in Shanghai has closed down after just two years. It serves to illustrate how hard it can be to transfer brands and business models internationally.
read more...»What are the secrets of IKEA’s success?
I should think you will have visited the store at least once and will have formed some ideas about the firm’s winning business formula. The business continues to grow rapidly. The Economist has an article discussing this point and identifies several key components of their approach, outlined here.
read more...»CSR - Project Shakti
A great (and now famous) example of CSR in action. We are looking at Unilever’s Project Shakti at our AQA BUSS4 CPD days next week. Looks of great research and analysis potential here for students.
read more...»The Politics bit of PEST analysis
When most students try to think in a PEST framework, they are usually pretty confident when it comes to the bit on social and technological trends. Economics is a bit more tricky (to begin with) but the really hard part seems to be politics. It shouldn’t be really – politics is going on all around us, often in the form of changes to the legal and regulatory environment. Sometimes it’s on an even bigger scale than that, especially on an international level.
read more...»CSR - Apple audits the supply chain
The headline in the Telegraph today doesn’t read well for Apple, but I wonder whether the underlying story is actually good news for the firm and enhances its reputation for CSR?
read more...»CSR - Avoiding the child labour hotspots
Several prominent businesses have been caught out when investigations have highlighted the exploitation of child labour in their supply chains. Primark and Apple are great examples that are likely to popular research examples for students preparing for AQA BUSS4 in June 2011. So the latest Child Labour Index will probably be required reading for businesses keen to avoid the reputational damage that can arise from being seen to profit from extremely low pay. As this Guardian article explains, the worst-offending countries include many of the emerging markets which have provided the source of low-cost supply for many multinational brands. India performs particularly badly. A good quote in the article from risk management specialists Maplecroft who produce the index makes an important point: [my emphases in bold]
“These large emerging economies are essential to the strategic interests of multinational business. Not only is child labour wrong but the existence of child labour within a company’s value chain can have significant impacts on reputation and profits and it is critical that companies undertake stringent monitoring of all suppliers.”
Exporting - No Thanks - We’re British
Here’s an interesting stat which students might use in an exam answer on growing a business through international trade. 70% of UK businesses don’t export - and nearly all of those have no intention of trying! The data comes from a survey of 8,000 UK firms reported by the Telegraph. According to the article, most of the firms which have rejected exporting explained that their products and services were unsuitable for consumption overseas, while a fifth were quite happy living off their existing sales (i.e. demand from the domestic market).
The survey indicates that a reluctance to export might also be a cultural issue for the Brits. That suggests an inertia that is harder to change. With the government trying (and needing) to encourage an export-led economic recovery, the survey findings must be disappointing news.
Commodity prices in action - soaring Copper
The Edexcel GCSE business unit 1 specification makes clever use of commodities as a way of introducing students to the core concept of how prices are determined by fluctuations in demand and supply. This article in the Telegraph provides a topical example of how the price mechanism is operating to push the global price of copper skywards…
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