Friday, December 16, 2011

Borrowing Christmas

“What are you getting your family and friends this Christmas?” At this time of the year, you must have heard this question at least a thousand of times! Whereas Christmas should be all about spending time with your family and friends and, for some, to revive their faith, nowadays the holiday’s emphasis is mostly laid on the material aspect.

With the global economy staggering, the ‘giving’ aspect of Christmas because more difficult. A financial times report stated that many Britons will take on more debt to fund their Christmas expenses. However, banks remain hesitant in lending money to lower income households. This creates a situation where people find their extra 300 pounds or so they need for their holiday gifts by going to a payday lender.

These types of short-term loans have increased significantly both in the UK as well as in USA, as households need some extra cash to pay for their monthly bills, or in some cases, to fund their Christmas expenses. When they receive their next months’ pay check, they then pay back their loan and, according to several sources, a 15 percent charge. Because these payday loans are most often for small amounts of money – usually only a couple 100 dollars – borrowers don’t often realise the huge rates they pay for it. However, if payday loans are rolled over, the annual interest rate for their loans can be extremely high. 

To give you an understanding of how important this phenomenon has become, the annual US payday market is 40 billion USD and the annual UK payday market is 2 billion pounds. While these practices have been in place for a while, this year new US firms were founded aimed to entering this large market. What Symbius and other companies are trying to do is deliver small loans through employers of companies to their low-wage workers. By working closely with employers these start-up firms can look into how much the employees earn and can assess whether a loan should be granted or not. The amount plus a (lower) charge will be deducted from their next pay-check. These charges are considerably lower than a payday lender’s charges, because they operate with lower costs.

The main issue for these start-ups is to convince companies of the benefit of this service. A potential benefit could be that there is less stress in the workplace because employees know that there is now a cheaper way to get that extra cash they need than going to a pay day lender.

However, from an ethical viewpoint, are these services encouraging people to get into more debt? Shouldn’t it be better to not provide any loans and let people be more conscious about their expenses? Your expenses this month will be more or less the same the next month, so if you have to borrow money to make this month, you probably also have to borrow for next month. Especially at this time of the year, wouldn’t you rather give your loved-ones a warm welcome to your house during the festivities and know you are able to make your bills in January, than take on a new loan to fund your gifts? 

Monday, December 12, 2011

A sad tail

Tis’ the season of giving. With the multitude of charities that exist, I decided to donate to one called when I was recently introduced to a documentary film, The Cove. Released in 2009 and directed by former National Geographic photographer Louis Psihoyos, The Cove boasts an enviable number of awards and critical acclaim, namely an Academy Award for Best Documentary and audience awards at Sundance and the Directors Guild of America just to name a few.

This film follows former dolphin trainer Ric O’Barry in his quest to document and publicize the hunting and subsequent slaughter of dolphins in Taiji, Japan. The Cove received conflicting reviews to say the least. Some call it a shocking exposé of one of the biggest environmental cover-ups in the world, whereas others shrug it off as a piece of propaganda with a grossly racist portrayal of the Japanese.

Social engineering in Japan has long created the culture of nurturing obedient, hard-working factory and white-collar workers to fuel the economy. There is no doubt that eating whale and dolphin meat has been a part of Japanese culture for hundreds of years. And it is not surprisingly that some people may view this film as being critical and lacking tolerance of a more conservative culture. 

Putting the issue of racism and politics aside, we cannot deny that fisheries all around the world are being depleted rapidly, and the whale and dolphin meat being consumed by the Japanese contain unsafe levels of mercury. I will add that the Japanese are unaware of this fact, and because of this, the controversy of whaling and dolphin slaughter has become not only a humanitarian concern, but also an ecological and public health concern. 

However there is a lot of money to be made off the exploitation of dolphins and other cetaceans. One live bottlenose dolphin can be sold for more than $150,000 to any dolphinarium or exhibition center. SeaWorld alone, which owns 20 of the world’s 42 captive orcas, made $1.4 billion in profit last year. As long as these numbers keep going up, we can be sure that the problems of depleting marine life and increased numbers of mercury poisoning are only going to get worse.

We live in an era that believes that money makes the world go round. Trying my utmost to avoid sounding like a hippie environmentalist, taking a moment to look away from the glare of greens, sometimes the other things we see may shock us. Hate him or not, we’ve got to give it to Ric O’Barry. The man has a drive to fight and work for a cause he so passionately believes in, a trait lacking in our society today. 

Thursday, December 8, 2011

Free Water

I recently came across this video which showed me how a small simple idea can grow into a multi-million dollar non-profit organization. The video above pretty much explains the whole story. Anybody would be awestruck by such an ingenious plan to help so many people. Let me go into more depth.

Scott Harrison founded “charity: water” in 2006 when he was 31 with the motive of wanting more out of his life. Having previously been a NYC club promoter, he committed 2 years of his life studying the poverty situation through volunteer services. By tracing problems surrounding these situations, he deduced that a lack of clean water was a key factor. After which he began using his network to garner as much support for his cause as possible. As mentioned in the video, he started using the simple idea of giving up his birthday presents and asking people to give him a small sum of $20 instead.

When I first watched this video, I could only think how innovative this man was. How many people could honestly change so many people’s lives just by this simple idea? The truth is almost everyone. By creating awareness, the organization has raised over 40 million dollars as of July 1 2011 and this number continues to rise. The idea has struck so many people over the last 5 years that donations have been received from over 50,000 individuals and served about 19 countries in the world. People’s attention was captured since it was founded. So ask yourself, how do you start from scratch and grow to a multi-million dollar organization in such a short span of time?

Obviously if I had the answer to that above question, I wouldn’t be talking about it but rather getting on with the answer. The truth is that it’s easier said that done. However this example here shows us the importance of drive and passion when you’re trying to grow your company. Scott Harrison found a cause he believed in and it pushed him to “never stop” contributing to his organization. By aligning thousands of peoples interests with his own, he managed to do something huge for the people who require that simple resource that we take for granted everyday.

Inspiring don’t you think?

Monday, November 21, 2011

The end of bookstores?

During the past months there has been a lot of speculation about which e-book reader technology would become the most popular. Let us change gears for a moment and take a closer look at the book industry itself and at the future of independent bookstores more in particular.

Not only now do these independent bookstores experience significant competitive threats, but this has been the case for several decades. The first threat arose with the surge of large bookstore chains, which offered a larger selection of books. Afterwards, readers had the possibility to purchase their books cheaper via the internet. Consecutively, large brick and mortar companies started selling books at discounts. And most recently, it is e-book technology which challenges the existence of independent bookstores. What made these independent bookstores survive during the past decades and how can they remain competitive?

Identify your shop as a community cornerstone
The first option independent bookstores have, is to identify their shop as a key asset or centre point of the local community. To create community involvement, independent bookstore owners should organise book club meetings and arrange for appearances of bestselling authors. This larger community involvement will convince customers of the added value of paper books compared to e-books and will create a larger footfall to your shops and potentially drive sales.

Increase your product range to other products
If your core products, books, are in danger, leverage this exposure by offering other products. You should include convenience products, such as stationary products, near the counter so shoppers can look at them when they are queuing up. There even exist independent bookstores which offer almost completely different product lines next to their traditional ones. Other shop owners make their shop look unique or put nice sofas and coffee stands in it – assets which internet shops can’t offer. If your shop focuses on comic books, you can sell miniature versions of comic book heroes.

Control your costs
The major operating costs for an independent bookstore are labour and rental costs. It is important to control these costs as much as possible in difficult times. Next to this, take a closer look at costs related to your inventory and your book range. Define your shop image by determining the optimal inventory level and your selection of books by answering the next question: Will you attract more customers by offering titles which cannot be found in larger bookstores or does it make more sense for your shop to create a certain image by focusing on a particular genre of books?

Determine your optimal store format and image
It is funny how a decade ago, large bookstores out competed independent smaller bookstores because of their larger offerings and that now the situation has turned around because of the new competitive threats coming from large brick and mortar shops offering books at a discount, the internet and e-book technology. In this new competitive environment, it is not just the mega format which will be successful. As an example here is the bankruptcy of Borders earlier this year; this large bookstore chain operated with too large retail space while losing customers to e-book versions of many books. Clearly, nowadays there is also room for smaller store formats. In this way independent book stores can identify themselves as vendors of specialty books to attract a certain niche, while book stores in city centres still can afford to have a larger store format. What kind of niches are there? Basically all professions, hobbies and pastimes are documented in books. Organise your shop towards that particular niche.

In a nutshell, facing fierce competition of the book industry, independent bookstores can remain competitive by leveraging their importance to the community, by carefully assessing their location and its impact to the store size and lastly by identifying their shop as a specialty store focusing on a certain niche.

Finally it is useful to understand that the loss of independent bookstores will be detrimental for societies because they function as a cornerstone for general education and for social contact between community members. Next to this, I am sure that many of us have had the experience of wandering in a bookstore and, unexpectedly, finding a particular book which captures your strongest interests. Checking book titles on the internet can’t provide you with such a feeling. It is important for bookstores to emphasize these qualities in order to remain competitive. 

Monday, October 24, 2011

Occupy Wall Street

A recent Hagar the Horrible comic strip shows Hagar, our Viking protagonist, walking into a bar, where he meets a man who dressed like Robin Hood – green tunic, green hat with a feather stuck in it, and a quiver of arrows. “So what do you do for a living, stranger?”, Hagar asks. “Well,” the man replied, “I rob from the poor to give to the rich”. An incredulous Hagar retorts - “What kind of business is that?

“It’s part of the banking business”, the man snaps back, taking a patrician sip of wine.

It’s amazing how public perception of bankers have soured in recent years, especially since the Lehman Brothers saga. The recent – and ongoing – Occupy Wall Street movement, which brought a taste of the Arab Spring uncomfortably close to Uncle Sam’s own financial heart, captures this sentiment perfectly.

The movement has been portrayed by its advocates as a protest by an increasingly disenfranchised ‘99%’ against the current form of capitalism and its elite Brahmin class on Wall Street. But it is so new that the media and its pundits, from ignoring it in its early days, still can’t make head or tails of this sudden outburst. Much less the general public. Or even the protestors themselves. It’s definitely not just about making the rich pay more taxes. The overall sense is one of a general malaise within the system that no one is yet able to put a finger on.

And what we can’t diagnose properly, we can’t treat properly. The importance of keyhole economics, instead of vague, reactionary measures, cannot be stressed more – not unlike effective surgery on a very sick patient. It would be naïve to presume that there are simple solutions to complex problems, much less problems we cannot even clearly identify yet. We know something is wrong, but what exactly? And is there a better alternative that we can turn to?

President Obama hit the nail on its head when he spoke of the frustration of the people at a recent press conference, and this is perhaps the closest we can come to making sense of the movement, in a single, simple word. Frustration.

Looking at fresh developments of similar protests sprouting up in major cities around the world, against a backdrop of growing economic uncertainty in the global economy and rather deep-rooted shortcomings in the US and European economies, one can’t help but wonder, if Marx had been right all along, that this system is increasingly unsustainable?

The feeling of frustration is perhaps one arising out of a sense of being stuck in a rut – that we are stuck with this system as far as we can see, with its increasingly obvious shortcomings. The sentiment that there is no proverbial light at the end of an increasingly long, and dark tunnel.

The real question that this movement raises is quo vadis, America? Where to, America? Less importantly (to us, but maybe not to the millions of Americans), can America, and the American Dream, continue to provide leadership and inspiration to the rest of the world into this new century?

This is a worrying question. The problems of the system are perhaps glaringly obvious, but can we come up with an adequate solution? Can we fix it through keyhole economics, or is an entire systemic overhaul needed? And is there a political will to see it through, above the pragmatic, short-term interests of partisan politics? Change, we can?

There already is a growing sentiment – and body of evidence - that change is a must. Real change, not superficial change. And within any change is both opportunity and risk, which have to be managed carefully, and conscientiously. Then there may be light at the end of the tunnel – we just have to plan critically, tread carefully, act decisively, and keep our fingers crossed that it is not a speeding train.

Thursday, September 15, 2011

There goes the competition

The first thought that popped into my head when I heard about AT & T making a bid for T-Mobile a while back was “Uh oh, there goes the competition”. In recent days, however, it seems that the pending merger has since been blocked by the Department of Justice due to antitrust concerns. They claim that the merger would create a duopoly market, which would result in consumers facing “higher prices, less product variety and innovation, and poor quality services due to reduced incentives to invest”.

Many governments and consumers flinch at the words “monopoly” and “duopoly”, and understandably so. Monopolies and duopolies have been given a rather bad name in economic textbooks all over for being static, inefficient and basically lazy. Once in a monopoly position, organizations tend to slack off and be less innovative. In order to raise or maintain profits, they pump up prices rather than invent new methods to reduce costs – simply because it is the easier way out. Consumers have little choice but to accept anything that the organization throws at them, especially if the service it is providing is essential. Hence, the Department of Justice’s fears of slipshod service and higher prices following AT&T and T-Mobile’s merger are not unfounded. Still, can nothing good come out of it?

Contrary to popular belief, AT&T and T-Mobile’s merger may actually benefit consumers and increase competition rather than stifle it. By merging with T-Mobile, AT&T will acquire a lot of equipment and resources that are vital in helping them widen their network coverage and improve signal strengths. Since regulatory bodies often block moves by these types of carriers to expand their network bases, such a merger will help them move forward with improving service for their customers.

The merger also seems likely to spur innovation and create competition rather than suffocate it. AT&T aims to use this opportunity to drive the implementation of a nationwide 4G network that would be a strong competitor to landline broadband services.

Or so they say? Can’t blame the Department of Justice for being doubtful! As AT&T gears up to fight back against the lawsuit, it will certainly be interesting to see how things pan out. 

Friday, August 19, 2011

Is the answer to print?

Looking at America’s debt figures always comes as a shock. They are truly staggering and rather incomprehensible to a normal citizen. To date, America’s debt stands at approximately $15 trillion, and has topped 100% of GDP. Amazingly, these numbers look set to keep on rising. Some analysts predict that American debt will increase to $19 trillion by 2015. I thought to myself – How in the world are they going to pay up?

At present, America’s economic outlook is grim at best. Stubbornly high unemployment figures, a recent credit rating downgrade and shaky unconfident markets do not exactly paint a very pretty picture of the current state of the US economy. In the meantime, while their economy is spluttering along, other countries are coming up from behind looking to catch up.  Frankly speaking, they look very ill positioned to pay off anything.

Despite this, America still has an ace up its sleeve. When the time comes for America to pay its bills, it can actually just print more of the dollar. Of course, the Fed would not just churn out $15 trillion worth of currency, as the fact remains that paper money has to be backed by gold. Doing so without increasing their gold reserves would cause the greenback to become banana money – completely worthless. However, by printing dollars in a controlled manner, America will be able to pay off some of its debt, because it’s denominated in USD. Going by the basic demand and supply principles of economics, increasing the supply of the dollar would cause it to depreciate relative to other currencies. Although holders of American debt would be getting their money back, its true value would have decreased.

As it would no longer be as favourable to convert American currency into other currencies, the best way to make full use of these dollars would be to spend it in America. Its export markets will start to grow again, which will hopefully stimulate its economy further to generate more cash to pay up.

Obviously, printing obscene amounts of money is not a long-term solution, nor is it enough to pay off everything. Congress needs to start rolling out a series of policies and plans that will make the American economy structurally sound. Without a firm foundation to back it, even this ace will not be able to save them.

Wednesday, August 17, 2011

London Burning

Following the fiasco over the US debt ceiling, its subsequent credit rating downgrade, as well as the uncertainty over the Eurozone crisis in recent days, markets have been thrown into a panic. The British economy, although fraught with its own problems (such as tough austerity measures), was viewed as a sanctuary of some sort – strong in its credit ratings, comparatively liquid and hosting a relatively promising property market.

Unfortunately for the struggling British economy, this perspective has now been tarnished by the violence and unrest that was sparked off by the shooting of Mark Duggan, a 29 –year-old black man. The videos and images online are shocking – people in hoods looting shops, cars vandalized, windows smashed and fires ablaze. The riots have hit London especially hard, with violence and crimes not only occurring in the poorer areas of Tottenham, but also closer to the heart of the city – Camden, Hackney and so on.

The opinion of many is that the shooting had broken the floodgates of frustration of many impoverished Londoners. The austerity measures put in place in a bid to control Britain’s crippling debt have left many struggling to make ends meet, or even put a roof over their heads. After all, the riots began in Tottenham, which has the highest unemployment rate in London. Despite the speculation, the true cause of why the rioters are causing havoc has yet to emerge.

Whatever the reasons may be, it is time for the government to step in and put a stop to the chaos. The city plans to host the Olympics next year, and certainly cannot afford to have people lose confidence in the ability of the Metropolitan police to keep the peace. With its debt problems and hints of a double dip recession approaching, these riots could seriously damage Britain’s economy if not swiftly dealt with.

Should the root cause of the problem be poverty, how is the government going to help the frustrated and suffering while reining in its debt at the same time? Outreach programs and unemployment benefits all cost money that the British economy may not be able to come up with. As David Cameron puts it – “It is clear that there are things badly wrong in our society.” Question is, how are they going to right it and restore order to the once vibrant city of London?

Friday, August 5, 2011

The Importance of Tolerance

I admittedly frequently take tolerance for granted. I grew up in Singapore, a cosmopolitan and mostly harmonious city populated with a web of people of different colours and backgrounds. Growing up in such an environment has made it easy for a young Singaporean such as myself to forget that my country once struggled to achieve racial harmony as well – which is why I am often shocked by the level of prejudice there is all around us. 

Take the recent attacks in Norway for example. On July 22nd, anti-Islamist Anders Behring Breivik set off a car bomb in Oslo and proceeded to murder 69 people attending a summer camp on a nearby island. Although horrific on a multitude of levels, the sad thing is that the event was simply one of the many that has occurred over the history of humankind that showed that in spite of the human ability to love, much narrow-mindedness and hate exists in the world.

Although Singapore is a peaceful city, upon closer examination, we too are often guilty of intolerance (though no one has gone on a killing spree because of it). For instance, Singaporeans kicked up a massive ruckus over the building of a temporary dorm for foreign workers near a residential estate. As much as we like to proclaim that we believe in racial harmony and what not, a lot of underlying feelings of xenophobia were exposed during that episode.

We are now living in a shrunken world, where huge distances no longer have the same meaning as they did in the past. Air travel has allowed millions to criss-cross the globe and experience a variety of cultures. Countless businesses have operations in various countries, and it has become ever more imperative that we express tolerance and build acceptance to build strong working relationships with overseas clients.  

So the next time that you experience a negative feeling towards someone else because of a superficial quality such as the colour of his skin, or the sound of his accent, take a step back and rethink it - because the world could use a little more tolerance.

Sunday, July 31, 2011

Is it time for a new superpower?

Frankly speaking, I love the US. I have been there quite a few times before the financial crisis and the vibe of the country is amazing. The sheer expanse of land and the call of “FREEDOM!” in the air is almost intoxicating. Seeing as the American economy is an economic powerhouse that wholly embraces consumerism, I have always been content in having Americans “run the world”. However, several recent events have led me to reconsider and seriously question that.

In what can only be described as a display of American control over the world economy, a liquidity shortage in the US banking system sparked off the worst financial crisis since the Great Depression. The havoc that it caused is common knowledge – bailouts, bankruptcy, unemployment and uncertainty dominated the news. Countries struggled to pull their economies together. While some, such as China, managed to ride the crisis unscathed, others like Iceland were not so lucky. The crisis was of such an epic proportion that it spawned a debt crisis in the Euro zone that leaders are now struggling to contain.

Few predicted the widespread damage the greed of Wall Street caused. However, even as America is in the midst of trying to revive its stubbornly bleak economy, the antics and rigid bureaucracy of the White House threatens to engulf the economy in yet another crisis. This time, the repercussions are a lot clearer.

On 2nd August, America will run out of funds and will have to default on payments to one of its debtors. Instead of focusing on the problem at hand, however, the Democrats and Republicans have managed to embroil themselves in a deep argument with little room for compromise. If they do not reach an agreement soon, it is likely that many will lose confidence in the dollar and cause a slew of other problems for the world economy.

This entire fiasco has made me question how sensible it is for the world to let America lead things. The insatiability and excesses of Wall Street has already dealt a heavy blow to the foundations of the world economy. The Democrats and Republicans are deeply divided over almost every issue. Even when it threatens the livelihoods of their people, they are unable to put aside their differences to come to an agreement. With obstinately high unemployment rates, deepening debt and not to mention a war that is hemorrhaging money, America seems ill positioned to lead the world out of darker times.

Perhaps it is time for a new leader to be handed the reins. Any takers?

Thursday, July 14, 2011

Football and beer - a winning combination?

I participated recently at a football tournament which took place inside Beer fest Asia 2011 in Singapore. What struck me was that it has become such easy an association - beer and football. A strange mix of a healthy option of playing sports, while on the other hand associated with alcohol that is a root cause of illnesses.  Let’s take a step back and think about this strange association!

In which way does the association go? It is widely agreed that beer companies target football viewers. The three most popular beer brands in Singapore, Heineken, Carlsberg and Tiger, all target the male football fan as an important part of their advertising campaign. However, to a lesser extent, sports clubs bring newcomers to their clubs by offering alcohol. An example hereof is a certain organization in the US which wants to make football -or for them ‘soccer’- popular by associating the product more with the sport by offering “soccer newbies” free beer while introducing them to the sport.

Should we allow such a strong connection between alcohol and football? Is it justified that large beer companies sponsor sports events and major leagues? It is clear to see that their advertisements encourage people to consume more beer. A similar case to this one existed between F1 and cigarette companies. Even though, through public pressure, an advertisement ban has been imposed on this sponsorship, F1 still found other willing backers. In France there is already such a law which bans most alcohol advertising.  

The association of beer and football has become an easily made association and it is interesting to think about its implications. Should beer manufacturers be more conscious in how they channel their advertisement or should we take our own responsibility in what we consume? Where is the line between a healthy and responsible state and a nanny-state?

Thursday, June 23, 2011

Oracle vs HP and the consequences of this battle

Decisions have consequences. The more you wield, the larger the impact your decisions have on the people around you. This is especially true for Oracle or HP.

Oracle’s decision to stop making new versions of its database software based on the Itanium chip has severe consequences for HP, which had planned a future for its servers running on Itanium technology. HP also claim it was an illegal move performed by Oracle, forcing HP’s Itanium customers to switch to Sun servers, a company which was purchased by Oracle last year. Furthermore they claim that Oracle terminated a long term contract in the development of Itanium technology with HP. Therefore, HP has filed a lawsuit against Oracle. It is important to review the consequences of these industry changes.

As for HP’s server division, if their lawsuit turns out to be unsuccessful, the consequence consists in shifting focus away from Itanium technology servers towards different technologies. This also has consequences on selecting their industry partners to effectively support this new roadmap. Next to this, HP will have to encourage their existing Itanium customers in changing their Itanium server for different technology servers. This might result in a potential loss of customers and damage to its brand name.

Do you think Oracle’s actions are to be considered unethically or do they have valid arguments to state their recent decisions?  

The dispute between these two large companies has consequences for thousands of companies and governments far beyond their own industry and is a good example of the importance of competitive intelligence. Does your company have the processes in place to  keep you up to date with the latest insights on the market environment? Do you understand your competitors, customers, suppliers, regulators and distributors?

Wednesday, June 8, 2011

Balancing trust and innovation in the internet industry

During the last few months we have seen several security breaches into large companies’ online networks. Does this call for more regulation for internet companies? During the eG8 Forum in Paris last month, internet leaders and government regulators had the opportunity to exchange ideas concerning the future of the internet and whether it should be further regulated. The main discussion point is the boundaryless freedom enjoyed by internet companies and the huge amount of customer info captured in their databases that include both personal and financial details.

On the one side we have European telecom companies such as Vodafone and several national government bodies, arguing that there is too much at stake and that therefore trust, privacy and copyrights have to be guaranteed. Also from a fair practice viewpoint, telecom giants urge for regulation; why should internet companies be excluded from regulation when companies in all other industries aren’t?

Meanwhile the other side, including companies such as Google and Facebook, argue that innovation should be maintained. A McKinsey study revealed that the internet contributed during the last 5 years 21% of growth in mature economies. By imposing regulation on internet companies, they claim, this growth will level off. Furthermore, they argue, self-governing processes are present in many internet companies, such as eBay and Amazon.

Is there a middle ground between trust and innovation? Is it possible to implement a set of laws which prevents data misuse and enforces consumer rights, but at the same time allows for the internet industry to realize its full potential within a legal framework? Next to this, regulation often lags behind innovation. Basel III, for example, is a set of laws responding to those invented financial products which have caused the financial crisis of 2008. Should we be proactive or reactive when dealing with the new possibilities of the internet?

Tuesday, May 31, 2011

New legislation required for future online transactions?

In the last weeks of April, the largest cyber attack ever took place when criminals successfully hacked into Sony's two online gaming networks, PSN and Sony Online Entertainment. Financial details of millions of online customers worldwide were extracted during the cyber attack.

As an immediate outcome of this disaster, Sony faced several lawsuits. Also on a broader level, this disaster has provoked drastic consequences. In the US, Republican Mary Bono Mack, who heads the Commerce Committee's Consumer Protection Panel, said she would introduce a new bill. According to her and others, the existing legislation falls short in obligating companies to secure sensitive information and to timely inform clients about such security breaches. Because more and more people become active online purchasers, large online companies such as Amazon, Sony and Apple contain vital financial information of an increasing amount of people, to such an extent that legislation should become updated to make companies safeguard this valuable information. Not only is an increased security needed, but also concerns about privacy and the potential trade in personal data should be considered.

Does this security breach mean that online consumers should doubt the security of their online transactions on all e-platforms? Are iPhone users OK with the fact that Apple can track their users? This matter can also be applied for companies; should companies which purchase online services such as cloud computing also be worried?

Monday, May 16, 2011

Conflicts of interest and how to deal with them

There is seldom a case when conflicts of interest do not occur. These are situations in which an individual is involved in multiple interests, mostly a personal interest which does not align with his professional responsibilities.  Such a situation corrupts the actor’s decision making and arises in many fields such as politics and business. A high profile example of the last century is the Arthur Andersen – Enron story.  Or, a recent one is the accusation of Rajaratnam of insider trading, who made an illicit 63.8 million US dollars over the last years by trading on illegal insider tips.

The next example tells you that conflicts of interest arise in diverse contexts. Surgeons, having years of experience in their proper practice, are regarded as the best innovators in medical devices. And so they often engage in entrepreneurial activities and commercialise their own developed devices. Their reward: royalties on the amount of devices sold. Consequently this remuneration model encourages surgeons to sell as many of these devices as possible. Their personal gain of selling devices (royalties) conflicts with their interest as a surgeon, which exists in offering the best possible health solutions.

Conflicts of interest can be complex legal situations and, if handled incorrectly, they can have negative outcomes for the people involved. Companies have gained experience in coping with conflicts of interests and the following highlights practices to avoid or deal with conflicts of interest.

Avoidance of decision making

The best way to deal with a conflict of interest is removing them immediately once they are discovered. A recently elected politician might sell all his corporate stocks and resign from any corporate boards in order to remain neutral in his political judgement. This, however, is often easier said than done. A better way is to abstain oneself from making any decisions when one finds oneself in a situation of conflict of interest. A situation in which a manager does not participate in the decision-making of which legal advisory firm to hire because a family member of his is a senior member of a potential legal contractor, can be considered as way of avoiding such a situation of conflict.

Code of Ethics

Every company should have a Code of Ethics in which, among other sections, some important guidelines and imperatives of how a situation of conflict of interests should be addressed. This section should include topics such as the hiring and supervising of family members and in which way corporate gifts should be offered or accepted. Corporate gifts should be considered as a sign of commitment between two cooperating companies, not as a bribe. Therefore companies should offer these gifts publicly and with a broad audience.

Legal advice

When in doubt of how to act, companies can always seek legal advice, demonstrating transparency.

Corporate culture

The culture present in the company also plays an important role in how employees or board members act in a situation of conflict of interest. An open, transparant culture should be established which promotes individual responsibility and which is intolerant against conflicts of interest.

Over the course of the years companies have refined their social policies into a robust Corporate Social Responsibility, covering not only conflicts of interest but also environmental issues, health programs, community support etc. Even though some industries are more prone to conflicts of interest and companies will have their own emphasis on how to cope with them, the basic guidelines are in all present. “Prevention is better than Cure” is such one next to keeping things transparent and acting along one’s best intentions.

Monday, May 9, 2011

Towards a more comprehensive metric

Until now countries’ success has been measured by their GDP, Gross Domestic Product. In my opinion, purely economic growth can’t express completely the total well-being of a country’s inhabitants. Aren’t there other metrics to determine national wellbeing?

This social study area has been given renewed attention since the end of 2009 when Sarkozy commissioned Nobel Prize winners Joseph Stiglitz and Armatya Sen and many others to think about how to construct such a metric and to determine its possible hurdles. Out of such research, French policy makers should be able to deduct the determinants of people’s happiness on which consequently social policy can be build. Also, this metric should be taken into account when analyzing a country’s GDP and will increase therefore the importance of national wellbeing and sustainability in a country.

In my opinion, happiness increases when the unemployment rate decreases. When one has a job, one feels part of a larger group and has a reason to get up in the morning. Next to this, access to health and a good work – life balance seem to me other vital determinants of people’s happiness. Next to this I think with the installation of a happiness index, social policy will gain in importance at the expense of economic policy which has by far the upper hand in politics nowadays.

Let’s also think about what this phenomenon means for one’s personal life. If wellbeing and sustainability are more often addressed in future politics, we might also on a personal level value the non-economic parts of life stronger. This was an important topic of many parties ‘agenda during the General Elections of last week.

Tuesday, May 3, 2011

On international relations

Since the beginning of the New Year, we have read numerous articles about tensions between America and China. These issues tend to focus on the US accusing China of violating human rights, disagreements regarding currency politics, accusations of western companies being disadvantaged by ever changing economic policies and the ‘forced’ technology transfer in joint ventures with local companies in China. China, on the other hand, claims that international US economic policies are too protectionist.  These issues are to be viewed in an attempt of US to safeguard its position as largest economy and largest political power, while China wants to manifest itself as a major global economic power.

These tensions become more and more visible because China nowadays competes on more levels of the value chain with the western world. While having historic roots in low-cost manufacturing, Chinese companies are moving up in the value chain into more value added positions and are increasing their global presence, as witnessed by the acquisition of BorsodChem by Wanhua Industrial Group in Hungary.  And so many Chinese manufacturers are in direct competition with western companies. Next to this we are also seeing disagreements concerning access to natural resources as both countries attempt to safeguard their national interests.

This economic war, as it is lately often referred to, is detrimental for the global economy. The world would benefit from cooperation between the two countries pursuing mutual benefits and maintaining fair access to natural resources. Cooperation will not only balance the world economy, but it will also help enabling a more effective tackling of global issues such as climate change, terrorism and poverty.

The only way to accomplish such cooperation is in maintaining open international discussions. A ‘China vs. the world’ scenario can be avoided if China faces up to its responsibilities as an emerging global player and if the rest of the world learns how to adjust to China’s growing impact. 

Wednesday, March 30, 2011

Japan and the energy question

The earthquake in Japan and its triggered tsunami caused many casualties and a nuclear incident at the Fukushima plant. As the world deeply mourns for this tragedy, the debate is back on whether nuclear energy should be included in the energy mix of the future. Because there are both pros and cons about nuclear technology, this is a difficult to answer question.

This statement actually goes for all electricity generation technologies; there is no champion which is better than the others. Fossil fuel electricity generation causes climate change, nuclear power generation produces dangerous nuclear waste and finally electricity generation from renewable energy sources makes up for only a slight percentage of today’s energy mix. Renewables still need a lot of investment to gain economies of scale.

The incident in Japan makes us think about how the future of energy will look like. While Hidehiko Hishiyama’s, a director general at the trade ministry, states that renewable energy alone isn’t sufficient and that nuclear power is essential, one needs to take into account another important trend in the energy and utilities sector. This is the development of smart grids and smart meters. Smart meters make measurement possible. And that which can be measured, can be managed. Consequently, companies which have implemented an energy management system can save money and resources by reducing their carbon footprint.

If energy efficiency and smart grids will be part of everyday use in the future, (intermittent) renewable energy sources are a better fit to the energy demands than (bulky) nuclear power. However, if safety can be guaranteed with regard to nuclear power generation, also this can be considered as an interesting alternative. 

Wednesday, March 16, 2011

Megatrends already at play: Evidence from the Middle East

During the last couple of months of last year- 2010 - we evaluated the key megatrends that will have a significant impact on future societies and businesses. What we are seeing at the moment across the Middle East appears to be a reflection of many of these ‘trends’.

Over the past month and a half, we have seen revolts in Egypt, Tunisia and Libya; young students and professionals demonstrating, in some cases with arms, against what they perceive as an oppressive regime. The increased connectivity of the region coupled with an educated youth faced with unemployment rates of close to 30% has been driving force behind the demonstrations and echoes the ‘trends’ we discussed in our previous blogs.

The unrest in the Middle East has also clearly impacted the price of oil and it raises questions once again about our dependence on fossil fuels and how we ought to continue our focus to find more sustainable energies if we don’t want to be held to ransom by a volatile region.

It is fair to say that the ‘megatrends’ of the next 5 to ten years are evidently a reality now and the events in the Middle East are good example of them at play.

Tuesday, February 22, 2011

Balancing the retailer - manufacturer dynamic

As global retail chains increase their presence in the Asian markets, analysts question whether the battle for power between brand manufacturers and large retailers will also be fought here.

If pressure from retailers and their private labels continues on brand manufacturers, what are potential moves for manufacturers to alter a possible gloomy outlook of retailer dominance?

Create your own distribution network
If the mass channel becomes difficult to compete in, leverage your dependence away from that channel. Go in-house and target your customers directly. Using the franchise model is a relatively easy way for a quick expansion. McDonald’s uses this method to quickly expand its presence in new markets.

Engage in e-retail
Explore this as a serious option. Online retail has grown at a tremendous rate and there are no signs that this trend will change over the next years. Amazon, for example, has known an enormous success and has recently set up plans to start a free weekly home delivery service.

Provide your customers with a shopping experience
Don’t forget that shoppers see shopping as an important leisure activity. Focus on providing your clients with the best attraction in your category section in the supermarket or in your shop in the shopping complex. Apple experiences a lot of success in this way: shoppers can test and try Apple products, attend workshops and ask for advice from Apple ‘Geniuses’ about all kinds of products. Make your products stand out from the rest by experimenting with creative packaging, creating your own shelves, sample tastings and introducing innovative products. In this way, you essentially force the retailer to stock your products.

Be innovative
Many large brand manufacturers have spent decades creating an emotional brand value. Nowadays, as shoppers are more than ever aware of the huge amount of options they have, focus should shift towards creating innovative products and marketing them accordingly. Knowing how your shoppers shop and offering them a quality product will generate repeated sales. This focus readjustment to products can potentially prove to be effective against private label competition.

Cooperate with retailers
Work together and search for win-win situations.  Retailers and manufacturers are in it together to sell products. Retailers need brands in their shelves to create their own brand image. Look for symmetries between your brand and the retailers’ brand and establish safe long-term contracts to secure that collaboration.

Take these 5 guidelines into consideration and question yourself what they practically mean for your brand. We need to remember that the emergence of mass retailers is an effective channel for brand exposure and reaching your end customer, especially in the Asian markets where infrastructure is still developing.

Tuesday, February 15, 2011

Stephen Elop of Nokia is no ‘Jerry Maguire’ as Nokia’s share value drops

In a recent internal missive to senior executives of Nokia, that was ‘leaked’ to the wider public, the new Chief Executive, compared Nokia to that of a ‘burning platform’ fuelled further by its own adequacies:

‘We poured gasoline on our own burning platform. I believe we have lacked accountability and leadership to align and direct the company through these disruptive times. We had a series of misses. We haven’t been delivering innovation fast enough. We’re not collaborating internally.” 

We all appreciate frankness and plain-speaking and it’s good to ‘lay your cards’ on the table, but conveniently for Mr.Elop as he has only recently joined Nokia from Microsoft he is able to lay the blame for Nokia’s failings on his predecessors and incumbents. Now is this the right way to motivate and encourage a business that has been at the forefront of mobile technology for many years and still holds a deep affinity with the wider general public as the mobile phone of choice? Well several arguments laid down by Lucy Kellaway of the FT actually suggest yes honesty is the best policy in this case, though ‘bravest’ leaders admit to not only the burning platform, but being the ones who started it. (Talk like a loser and you might win - FT)

With the new strategic battle lines being outlined by Nokia it will be interesting to see how Mr Elop sees the way forward. A merger may be the only viable route to catch-up in a market that never slows down and could this see Nokia becoming another Google tool in their quest for world domination?

The deal... Feb 11th
In a move that has effectively taken over $7 billion dollars off the market value of Nokia in two days and threatens over 6000 Finnish jobs, a deal with Microsoft has been struck to make the Windows Phone 7 its primary mobile-phone platform, replacing its home-grown Symbian. Analysts and industry professionals are debating the wisdom of moving to a platform that is significantly behind its rivals, however there is also the flip side, which is what alternative did Nokia really have?

Now it will be Elop’s rhetoric that he hopes will galvanise Nokia behind the Microsoft deal to ensure long term stability, with the short-term gains very much taking a back seat. There will be many Symbian developers within the Nokia ranks who will also need to be quelled and cajouled down the Microsoft route as Elop drives his vision of the business forward.

Nokia is definitely one to watch this year with Elop in full voice, even if its competitors don’t think so... with Motorola describing the alliance as almost ‘a non-event’. Microsoft tie-up

Read the internal memo in full:

Monday, February 7, 2011

Do companies have a duty to undertake corporate social responsibilities (CSR) initiatives?

Guest Blogger Andrew Storey - Director of Institutional Relationships & Reporting for The Clinton Health Access Initiative (CHAI) writes...

It’s a question that seems to be increasingly debated in the media and an article in a recent edition of The Economist adds an interesting angle to the debate. ‘Milton Friedman goes on tour’ (January 29th 2011-  Milton goes on tour ) examines a recent report which asked members of the ‘informed public’ (define that as you will because the report certainly seems to, but generally the top quarter wage earners in their particular age groups and countries) what they think of Milton Friedman’s famous assertion that ‘the social responsibility of business is to increase its profits’.

The result of the report suggests that advocates of CSR still have a lot of convincing to do across much of Asia. In Singapore more than 60% of respondents agreed with Mr Friedman, with even greater numbers agreeing in South Korea, Japan, India and the UAE (apparently less than 1 in 5 of the ‘informed public’ in the Emirates would be inclined to disagree with that statement). This is in contrast to attitudes in the West where those in agreement with Mr Friedman seem to be in the minority (although only just in the USA).

Few can suggest that there is anything wrong for a company to seek profits, it’s their raison d’être after all. A well worn statement is that ‘The primary goal of any business is to increase shareholder value,’ but is this really to the exclusion of all other considerations? Need the concept of a business increasing profits and also being socially responsible be mutually incompatible or can a strong CSR program successfully marry these dual aims?

Hewlett-Packard (HP) is a good example of such an organization with a highly successful CSR policy. In November 2010 HP announced an alliance with the Clinton Health Access Initiative (CHAI) that will provide structural and systemic improvements in testing and treating more than 120,000 infants exposed to HIV/ AIDS in Kenya each year. With support from CHAI and the Kenya Ministry of Public Health & Sanitation, HP is investing more than US$1million worth of technology that will capture, manage and return HIV test results in just one to two days after results are ready – a significant improvement from the previous system, which took two to three months. The turnaround time for test results is especially critical, as infants diagnosed with HIV must begin anti-retroviral treatment as quickly as possible to ensure survival. Without immediate treatment, half of HIV-positive infants are unlikely to survive past age two.

In this case HP are partnering with a government and a nongovernmental organization to provide technology and expertise that is not only aligned perfectly with their core skills and abilities, but also is highly targeted and it is no exaggeration to suggest that their support will contribute to saving thousands of children’s’ lives each year. It will be interesting to watch other organizations follow the lead of HP and others as they build on their core skill to successfully find the way to be both highly profitable and have a strong CSR program. Perhaps this and other examples will help convince future survey respondents that businesses need not forget CSR in order to make money.

About the Author.
Andrew Storey is the Director of Institutional Relationships & Reporting for The Clinton Health Access Initiative (CHAI).  CHAI is a global health organization committed to strengthening integrated health systems in the developing world and expanding access to care and treatment for HIV/AIDS, malaria and tuberculosis. CHAI’s solution-oriented approach focuses on improving market dynamics for medicines and diagnostics; lowering prices for treatment; accelerating access to life-saving technologies; and helping governments build the capacity required for high-quality care and treatment programs. Additional information about CHAI is available at

Monday, January 31, 2011

Considering organic growth? Retailers don't forget to ...

As confidence heads back into the region, new and suspended growth strategies are reinvigorated and reinvented in attempt to capture market share.

While there are many challenges faced in delivering on any growth plans, a common conundrum often facing the business development directors, CFOs and CEOs is what is the right path to growth – do we take the organic or acquisition route?

In Retail, we often consider scale as a key winning metric and we tend to shoot for the stars when discussing store target numbers for years ahead. The reality is that delivering on these target numbers is often a hurdle too far for many businesses.

Having worked with clients across the region, the following points are not to debate the merits of either taking an organic or acquisitive route to growth but rather to highlight some of the elements that need to be on the radar when looking to expand your retail estate the organic way.

The little things add-up – control your costs
A costly decision on an individual store can be managed, once you roll-out this out over 20, 50 or even 100 stores this mistake can suddenly become a serious financial burden. Among others this could relate to fixtures and fittings or even site layout that impacts delivery of products. One client having procured a number of tailor-made gondola shelving for his estate, only then realized the depth was insufficient for his new product layout.

Location, location, location – do your due diligence
A good location now may not enjoy the same success in 12 months time and as this is always critical to the eventual triumph or failure of the store you need to be sure of the projected returns before investment is made. Understanding future property plans for the area and the possible competition needs to be assessed in depth. In markets across Southeast Asia where new malls and buildings are constantly being developed, it’s even harder to know the sustainability of a location in comparison to the mature western markets.

Be conservative with your numbers
Make sure your financial projections have the breadth that can incorporate all the variables that will have an impact on the overall cost of the store development. We are always keen to see positive returns on our plans and sometimes this can feed directly into the numbers we project; make sure they are given an objective view and all details are captured.
Do the detail, make sure the logic is there; first focusing on understanding the location, the impact of competition, the projected sales – average daily transactions, ticket values, days open etc – and then document all the capital costs and the back office needed to support the growth. With all projections make sure you provide at least 15 to 20 percent downturn on your numbers so that you’re not left high and dry should your sales not hit their intended target initially.

Connections – nurture key contacts
This is obviously country dependent, but we would be foolish to underestimate the influence of the authorities in any growth plans that may involve licensing, property or human capital decisions. Nurture these relationships and be proactive in networking with the right authorities and individuals to prevent those unforeseen time hurdles that will inevitably arise from ambitious growth targets.

Preparation is a key factor to driving a successful organic growth strategy and without the business platform, your targets will stay as targets but they just will not be met!

The points mentioned above are by no means exhaustive and there are many factors that lead to a winning organic growth strategy.

Thursday, January 27, 2011

Trends that are shaping the World – part 7

The final mega-trend that is likely to have a significant global impact over the next 10-15 years is the increasing role of governments as enablers of the globalisation of markets, labour and capital. The role and success of governments will be critical across three areas:

1. Realising growth - Governments are likely to play an increasingly important role in delivering the growth potential of BRIC and other ‘emerging’ economies. As compared to the US and Europe, Asia may have favourable demographics but significant investments in infrastructure, education and healthcare must be carefully managed and executed for projected growth to be realised. This is easier said than done, particularly in countries with high corruption and less than exemplary track records in managing such investment.

2. Legal and regulatory environment - We have seen several issues in the past 12 months surrounding this, namely Google in China and Research In Motion in the Middle East and India. As globalisation continues apace, there will no doubt be other points of friction between global companies and national governments.

3. Competitiveness -  Governments will play a critical role in driving individual countries’ competitiveness. How they level the playing field between local and foreign companies, corporate taxation as well as the social models they adopt will all have an impact on the types of societies they become, the kinds of companies they attract and ultimately the direction in which countries develop.

On the flip side, globalization is about increased integration on a global scale. It is about how governments will work together on global issues such as sustainability, climate change and terrorism, to name a few (and not how they develop their own countries). The enlargement of the G8 to G20 is a recognition of the fact that economic power is re-balancing globally, but with power comes responsibility. As such, the most important role of governments may well lie in addressing cross-border issues.

Tuesday, January 18, 2011

Trends that are shaping the World – part 6

Sustainability is the sixth megatrend that will have a significant global impact over the next 10-15 years. There will need to be a balance between fuelling the growth of emerging economies and the environmental impact that this will have, both in terms of socio-economic damage but also the depletion of finite resources. This will continue to be an important topic for the world’s largest economies to tackle which may even lead to a more protectionist approach as countries look to secure the necessary inputs to achieve economic development and growth.

From a business perspective, consumption of raw materials will continue to be driven by global growth which suggests that prices can only go one way. How companies manage their resource requirements and how these are sourced will increasingly become a competitive advantage.

Renewable energy growth, driven by Government incentives and increasing efficiency and affordability of technology is likely and as such, we are likely to see a shift away from a dependency on oil and a rise in the importance of renewable within the Energy mix.

Maximising the return on resources may well become one of the key business metrics of the future.

Monday, January 10, 2011

Trends that are shaping the World – part 5

This week I want to consider the term interconnectivity and what does it mean. Business provides this definition : “(Inter)connectivity is a measure of the extent to which the components of a network are connected to one another and the ease (speed) with which they can ‘converse’”. Current technology enables people and businesses alike to interact at an increasingly faster pace. Also the number of ways or channels companies can interact is growing. Social media networks are now a hotbed for businesses to drive positive marketing messages.

Many companies join these networks and make their own page in order to create word-of-mouth publicity to drive positive messages. A McKinsey study on “Unlocking the elusive potential of social networks” suggests making those people, who create positive word-of-mouth advertisement, seem important in their own network. The reasoning behind this is that recognition by your peers is a strong motivator. If this recognition is then publicised, this translates into strong word-of-mouth advertising. The study implies that this can be attained by issuing achievement badges that users can post on their profiles or by implementing an achievement table in which varying scores can be posted.

I believe that the most effective way for companies to use public media networks is to create their own profile on the websites and interact with interested members. New products and new promotions can be publicised on that page, questions can be answered and marketers can even engage with unsatisfied customers, preventing them from expressing negative publicity. Word of warning: Once you open up to a wide audience, be prepared for wide scrutiny.

Wednesday, January 5, 2011

Best Wishes

From all of us here at Point Consulting, we wish all our readers a very happy and prosperous New Year. Please stay in touch to read our upcoming blogs - beginning the week of January 10th!