As some of you may be aware the Cheltenham Horse racing festival came to a climax yesterday with the Gold Cup race. Given the race was run by a locally trained horse there is no doubt that my home town was party central last night. There appears to be a more pressing issue for local residents that looks set to rumble on for a while.

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The Final Countdown

The pressure is really on now with the final IB Economics papers only a matter of weeks away. During the coming weeks I will be posting daily revision blogs for both Higher and Standard level candidates. These will be a mixture of quizzes, presentations and revision sheets to aid your preparation. I will also be linking current economic news stories to the IB syllabus, remember that your examiners will be looking for your economic theory to be backed up by lots of real world examples. Do get in touch with any topics you would especially like covered, I will endeavour though to cover theory from all sections of the course.

Take Off for Air Asia - Finding Opportunities in a Recession

I have heard many presentations from business folk over the years and the last two years of our embryonic Entrepreneurship Society have been memorable for some superb talks. None has quite matched the impact and the quality of a talk given by Tony Fernandes, Founder and CEO of Air Asia last Thursday night.

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Pure monopolies in Japanese manufacturing

A big hat tip to one of my students Arno Albici for spotting a superb article in the Economist about a cluster of mid-sized Japanese manufacturers who continue to enjoy near pure-monopoly power in highly specific, high value-added businesses. decades of industry expertise and reinvesting profit to fund high levels of research and innovation continue to give these companies a remarkable competitive strength in the market. The barriers to entry for rival manufacturers are very high and this helps to explain the limited contestability in the global marketplace.

For example:

Shimano earns around $1.5 billion a year by supplying 60-70% of the world’s bicycle gears and brakes
YKK makes around half the world’s zip fasteners by value,
75% of motors for hard-disk drives in computers come from a firm called Nidec
90% of the micro-motors used to adjust the rear-view mirror in every car are made by Mabuchi

“Many technology products have become commodities, but certain components have not, since they require continual innovation. So entry barriers to the business of making them remain high, and although the margins on the final goods have deteriorated, the margins on specialised, high-end components are still juicy.: Much more here

IB Higher Economics - Improving your Exam Skills

Here is a streamed version of the presentation I gave to the Hong Kong CPD day, focusing on how IB Economics students can improve their evaluation skills:

Improving Evaluation Skills

Tata records sharp rise in profits

Tata Motors is part of the Tata Group - one of the most important industrial conglomerates to have developed in emerging market countries. It has started to build the Nano - a car that sells for around £1300 and is reputedly one of the world’s cheapest motor vehicles. Tata also moved into the luxury market in 2008 when it bought Jaguar Land Rover from Ford for $2.3bn. This BBC report looks at the latest profits news from Tata. Tata has said it will eventually make 500,000 Nanos a year.

Outline some of the economies of scale that can be exploited by producing such a huge volume of cars
Draw an appropriate cost diagram to show what might happen to Tata Motors’ long run costs of production
What factors will influence the level of market demand in India for their Nano vehicle?

Click here for BBC news articles on Tata

Book Price Wars - Do They Improve Consumer Welfare?

A well publicised price war has broken out in the United States between Walmart and Amazon. Wal-Mart’s $10 promotion applies to the top 10 books coming out in November but the company is also selling 200 best-sellers for 50% of their list price. In a move that has sent shock-waves through the book industry, Wal-Mart has announced it will be selling 10 forthcoming books for just $10 each including Sarah Palin’s autobiography. As is often the case when an aggressive price war breaks out in an oligopolistic market, online bookseller Amazon matched the price cut within hours causing Wal-Mart to cut again to $9. Amazon returned the favour and Walmart has sinced shaved one cent to $8.99! The FT reports that Walmart’s website, the second busiest in the US after Amazon, has also cut prices by 50 per cent on 200 best-sellers.

The battle comes at a time when both Walmart and Amazon are under pressure from Google who are rolling out an online site capable of delivering e-books to any device with a Web browser, with an initial library of about half a million titles.

How long the price war will last is open to question. The October-December season is a hugely important time for all booksellers - the festive period is the peak time for sales and the intense battle for market share comes at a time of great change in the industry - not least the rapid growth of e-readers and online libraries. Some book publishers fear a price anchoring effect on their industry - namely that Walmart slashing prices and rivals following suit will lead book-buyers to expect new titles to cost $10, a low prices that would force the publishing industry to re-scale its entire business, including the advances paid to writers and ultimately affect the range of titles on offer.

For the giants of the book retailing industry, the economies of scale and drive for hyper efficiency in getting products to the market are simply a way of reinforcing their market dominance.

But what about the impact on smaller independent booksellers most of whom can never hope to compete on price but who provide light and shade in the book selling industry.

It is a reminder that there are different types of efficiency. Allocative, productive, dynamic and social. The latter two may be damaged if the price war escalates and many smaller booksellers go under. This BBC world service news interview focuses on some of the cultural issues of the rise of the giant retailers. Chris Doeblin from the independent Book Culture shop in New York City accepts that supermarkets will bring the price of books down - as they have with food prices - but at a (social) cost to many of us.

Cheltenham Saturday 10th October

Last night I was looking through the brochure for this year’s Cheltenham Literature Festival. Aside from it having a cracking range of speakers it is also my home town so I always look to go back for a day. This year Saturday 10th October looks a great shout.

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Business Week in Pictures

I have stumbled across an excellent resource on The Guardian website. I am always keen that my students have a good awareness of current goings on in the world of business and economics. I try to devote one lesson a week to examining the business news. Ways in which I do this vary from watching BBC news video clips to getting them to do a tutor2u Biz Quiz. The resource I have found is the Business News in Pictures- 10 pictures and a piece of text with each that highlight the business events of the week. They should provide a good stimulus for class discussion.

The Rise of Twitter

As an avid Twitter user I was pleased to read of the continued rise of the site this morning.

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Marvel ous Deal

Following on from yesterday’s blog it is revealed in today’s Telegraph that the man who led Marvel away from near Bankruptcy, Isaac Perlmutter, is set to new $1.5bn over the next decade, following Marvel’s sale to Disney. Around 60% of this figure will come in the form of cash with the remaining 40% paid in Disney shares. Not a bad outcome for Mr Perlmutter!

Is the deal a good or a bad thing?

Marvel Deal

I spent yesterday afternoon putting up 100 postcards of classic Marvel comic front covers in the boarding house that I have taken over. I was interested to read today on the BBC website that Disney is set to buy Marvel in a deal worth $4bn. The deal will mean that Disney will take ownership of 5,000 Marvel characters. This deal may prove slightly risky for Disney as its profits are down more than a quarter due to a fall in film and theme park revenues as customers tighten their belts.

There is a BBC news clip to accompany the original article.

Article from The Telegraph.

Book of the Week

I am currently sat at my kitchen table trying to start thinking about the term ahead. Slow progress so far, especially as I have just been distracted by Radio 4’s book of the week.

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Great Peter Day Blog Post

There is a fantastic post by Peter Day on the Radio 4 blog looking back on his 21 years presenting In Business. He uses it as an opportunity to explore how the world of business has evolved over the last couple of decades. Well worth 5 minutes of your time.

2012 Toys

Hornby is the first hobby company to sign a lucrative deal to produce a huge range of London 2012 Olympic toys. The Airfix brand will produce kits of the Olympic Stadium, Scalextric will produce a velodrome cycling set (sounds fantastic, can I justify buying a set!?). The Hornby train set brand will produce miniature Olympic Park train sets.

Hornby is in need of a boost after profits plunged 32% last year.

Will a pub crawl be possible?

My brother and his girlfriend have come down to visit us in Devon for a few days. We are planning on visiting a few of the local watering holes of the coming days but will this be possible?

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Container Ships - global recession and economies of scale

An excellent video clip from the BBC that looks at one of the world’s largest container ships.

 

 

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