Author: Charlotte Gill

Gazprom accused of unfair business practices

Posted on by Charlotte Gill

Gazprom, which supplies Europe with much of its natural gas, is being accused by the European Competition Commission of unfair competition practices and overcharging eastern European countries, reports Business Insider. Margrethe Vestager, the European Competition Commissioner, is expected to deliver the exact charges to Gazprom soon.

The majority stake of Gazprom is owned by the Russian government

Gazprom is the world’s largest producer of natural gas, and one of the largest companies in the world. Although a joint open stock company, the majority stake of Gazprom is owned by the Russian government, raising the potential for further tensions in Europe.

Many European countries are reliant upon Russian gas, often leading to geopolitical concerns, resulting in some countries boarding Russia to start seeking energy independence, such as Lithuania.

The decision coincides with reports from the Guardian newspaper that Alexey Miller, the gas giant’s CEO, is heading to Greece. The trip is nominally to discuss energy issues, but the fear is that Greece may turn to Russian funds if their current negotiations with EU lenders fail.

The levelling of unfair business practices at Gazprom comes only a week after Vestager announced that her office would also bring charges of unfair business conduct in Europe against Google. According to Business Insider, “Vestager has the power to order changes in companies’ business practices as well as to levy fines of, in theory at least, up to 10 percent of their annual global turnover.” However it is uncertain whether state-backed Gazprom would comply.

Japan increasingly shut out of overseas television markets

Posted on by Charlotte Gill

Not long ago, Japanese brands such as Panasonic, Toshiba and Sony dominated the global television market with shiny models that were the envy of many Western homes. But in a rapid change to consumer demand, buyers around the world have turned their backs on Japanese-made sets in favour of cheaper, high-spec versions from South Korea and China.

As a result of mounting price pressure, in February, Panasonic announced it would pull out of overseas markets. Panasonic’s lower-end product, Sanyo, which is sold in Walmart stores across the US, will be bought by Japanese counterpart, Funai Electric, in return for royalties. Toshiba will also stop making and selling televisions in North America from March for the same reason of being unable to compete with specifications and price. Sony Corp, meanwhile, is spinning off its television division into a separately operated subsidiary.

Japanese brands have emphasised quality, but have little actual capability in making the LCD and LED panels

Strategic thinking
“The reason the Japanese players are suffering is down to strategy”, says Peter Richardson, Research Director at Counterpoint market research firm. “Japanese brands such as Sony and Panasonic have also emphasised quality, but given that they have little actual capability in making the LCD and LED panels, they are not able to bring anything differentiated to market. Add to this typically convoluted and costly business structures, and it’s hard for the Japanese vendors to make significant returns”.

Panasonic and Toshiba will refocus their efforts on the domestic market, as the demand for their high-margin, large-screen models remains, albeit not as ferocious as it once was. Brand loyalty for Japanese televisions is strong and enables a 90 percent share of the domestic market: LG, on the other hand, has only a two percent share, while Chinese brands are virtually non-existent in Japan. Although Japanese brands are not contending with a price war as elsewhere, revenue has shrunk in the domestic market also, with unit sales dropping from 24.8 million in 2010 to 5.6 million last year.

Filling the void are South Korean companies such as Samsung and LG. Competitive prices and an aggressive marketing campaign by LG have caused worldwide sales to increase to KRW174bn ($153m) in 2014, from KRW800m ($705,408) in the previous year. “The Korean brands, Samsung and LG prioritise quality and leading-edge technology thanks to their in-house development capability. This means they’re able to charge a premium and generate reasonable rates of return on investment”, says Richardson.

Chinese brands, on the other hand, have won a greater market share due to a focus on low prices and slim profit margins. “There are a number of Chinese domestic brands launching affordable smart TVs with high definition and quality, such as Xiaomi TV and Leshi TV. They are very competitive with the international rivals, especially these relatively expensive brands”, says Ivy Jiang, China-based Research Analyst for market research firm Mintel.

Changing consumer demand
The evolvement of technology and home entertainment has also contributed to a change in the global market, with consumer demand adapting to the new systems on offer, yet for lower prices than ever before. “Mintel consumer data shows the Chinese TV ownership is rapidly moving from standard definition TV to HDTV and internet-enabled TV, presenting 55 percent and 36 percent of surveyed consumers having HDTVs and internet-enabled TVs [respectively], compared to the 33 percent ownership of standard definition TV in 2014”, says Jiang.

The feat of surpassing global leaders in television sales is truly impressive given the pressure facing South Korean exports, which are currently competing with a strong won against a weak yen. As a surprising twist to the challenges facing the South Korean economy (one of the world’s most export-reliant), in the battle for the global share of televisions, South Korea has won. Its Japanese counterparts are receding wholly to the domestic market; something no one could have predicted a decade ago when they dominated worldwide sales. With such a withdrawal, it is unlikely Japanese televisions will ever make a comeback. The lesson for electronics companies to learn from this dramatic transformation is that, with cutting-edge technology, competitive prices and dynamic promotion, any market can be theirs for the taking.

Five successful economic policies of US presidents

Posted on by Charlotte Gill

Eisenhower connects the country

The presidency of Dwight D Eisenhower is often associated with his Cold War foreign policy, known as the New Look. The five-star general-turned-president cut military spending in favour of using the nuclear bomb as a deterrent. This freed up government money for the Federal-Aid Highway Act. Replacing the dirt-packed roads criss-crossing America, the act created a national inter-state highway system totalling 46,000 miles. This ambitious project helped connect the vast expanse of America, easing the mobility of people and flow of commercial goods across the continent.

Kennedy tax cuts

Within his short time in the White House, JFK pushed for a change in America’s tax structure from 20-91 percent to 14-65 percent. Although the legislation – known as the Revenue Act of 1964 – did not make it through Congress until after his death, and was therefore signed by his successor Lyndon Johnson, it was the brainchild of JFK and is commonly referred to as the Kennedy Tax Cuts. While pushing for the reform, JFK justified them with the metaphor “A rising tide lifts all boats” – and lift it did. As NPR notes, “[b]y 1966 — the year that might have been the fifth of his presidency had he lived — Kennedy would have been presiding over an economy growing at a rate of 6.6 percent and an unemployment rate falling to just 3.8 percent.”

Reagan shoots down inflation

Of all the presidential administrations in living memory, Ronald Reagan’s is perhaps the most divisive. Liberals chide him for cutting taxes, creating a soaring deficit and increasing inequality, while conservatives celebrate his supply-side policies for laying the foundations of Americas second longest period – excluding wartime mobilisation – of economic growth. One successful economic policy, however, was his curbing of inflation. Inflation had been eating into the saving of Americans at a rate of 13.5 percent when the former actor assumed the presidency. Due to instituting high Federal Reserve interest rates, inflation eventually fell to 4.1 percent, as he left office.

Clinton balances the budget

Bill Clinton was the last American president to achieve a budget surplus and will most likely remain so for the foreseeable future. When Clinton entered the White House in 1993, America’s finances were firmly in the red. By 1998, through a mixture of spending cuts and tax hikes known as the Revenue Reconciliation Act of 1993, he had managed to achieve a budget surplus that peaked at $236bn in 2000. According to Professor Iwan Morgan from University College London’s Institute of the Americas, this surplus-balancing piece of legislation “reassured the bond markets and laid foundations for economic growth.”

Obama brings back Keynes

Current President, Barack Obama, had the misfortune of taking office just as America’s banks were in crisis and the economy was heading towards the worst recession since the Great Depression. Under fire from an increasingly polarised Congress, Obama instituted a bold economic plan to put Americans back to work. Known officially as the American Recovery and Reinvestment Act of 2009, this economic stimulus package committed roughly $800bn of federal funds to invest in education, infrastructure, healthcare and renewable energy. The rationale was to create jobs which, according to the Keynesian concept of the multiplier effect, would create further jobs. Unemployment growth began to slow, followed by an eventual turn-around with unemployment levels falling. In total Obama has presided over 58 consecutive months of job growth, resulting in unemployment levels returning to the pre-recession level of 5.5 percent in March 2015.

China plans Silk Road to Pakistan

Posted on by Charlotte Gill

On April 20, premier Xi Jinping received a jovial welcome as he arrived in Islamabad; the trip marks the first visit by a Chinese leader to Pakistan in nine years. The celebratory reception can be attributed to China’s upcoming investment in the China-Pakistan Economic Corridor (CPEC), a $46bn project that will stretch 3,000km and consist of a network of roads and railways. The infrastructure project shall also entail oil and gas pipelines, as well as alternative power sources, in a bid to lift Pakistan out of energy poverty – which will in turn further boost the country’s economic growth.

[A]round 8,000 state officials will guard Chinese employees working at the various sites

The CPEC will be connected from the Xinjiang region in western China to the Gwadar port in southern Pakistan, running through the latter’s poorly developed Baluchistan province and Lahore. Stakeholders expect that the transportation links will raise the economic development of various areas in Pakistan, while also providing a vital passageway for Chinese export to the Middle East and Europe.

“For the first time, China is going to become a strategic economic partner of Pakistan,” Bloomberg reports Pakistan’s Planning Minister Ahsan Iqbal as saying during an interview on March 30. “Gwadar is the shortest link to Europe, Africa and Middle East,” making it, “a very attractive proposition for China and for its competitiveness.”

Given Pakistan’s history of instability and terrorist attacks, the security of the CPEC has been marked as a top priority for discussions. According to Pakistan’s Express Tribune, around 8,000 state officials will guard Chinese employees working at the various sites.

Chinese funding for the project will be the largest ever received by Pakistan, far surpassing that which it has been granted from another ally, the US. Despite this, Pakistan seeks to preserve its relations with the US, particularly in terms of security. Given that both nations, as well as China, benefit from a stable Pakistan, it is unlikely that increased competition will disrupt this vital partnership with the US.

China and Pakistan have long maintained positive relations, largely due to a common source of tension in the form of neighbouring India. The huge injection of investment and soon-to-be established transportation links will considerably prop up the link and the level of mutual support between the two states.

This latest move indicates how China’s network of power and allegiance continues to strengthen in Asia, gradually replacing the US in terms of presence within the region. Together with the formation of the Asian Infrastructure Investment Bank, it seems that China is indeed steadily rising to become the world’s new superpower.

The resource curse: why countries that have so much, often have so little

Posted on by Charlotte Gill

An abundance of natural resources brings economic prosperity, particularly in developing countries where those raw materials often represent the single biggest contributor to state finances. Or so the theory goes.

On the one hand, countries rich in fossil fuels and similar such commodities have the potential to realise broad-based and sustainable gains, but the issues crippling those same parties suggest there are many problems associated with the issue. For years, it has been said that resource wealth plays a positive role in economic development, yet there is strong evidence to suggest those without often perform better than those with a lot of natural resources.

[A]cademics have largely failed to pin down the exact nature of the resource curse, as the situation varies extraordinarily from case to case

The resource curse hypothesis is used to describe just such a situation, whereby an abundance of natural resources can lead to corruption and stagnation, or even economic contraction. “It increases the exchange rate, thereby stifling other export industries. It breeds corruption and embezzlement. It deflects productive energy and talent towards rent seeking and away from innovation and entrepreneurship. It causes autocracy, civil war and international war”, says Francesco Caselli of the London School of Economics.

Stifling development
There is nothing inherently shortsighted about an economy that chooses to double down on its strengths, but doing so on non-renewable criteria contains risks inasmuch as those resources are finite. The simple truth that prices are, by their nature, unpredictable means there is often inconsistency when it comes to making policy decisions. Such is the complexity of the issue at hand that academics have largely failed to pin down the exact nature of the resource curse, as the situation varies extraordinarily from case to case.

“Managing natural resource wealth is fraught with difficulties – some economic, many political – and if not done well, can adversely impact macroeconomic performance in the short and long runs”, according to an IMF report entitled Boom, Bust, or Prosperity? Managing Sub-Saharan Africa’s (SSA) Natural Resource Wealth. “Data from the sub region suggests that such a curse has been present to some degree but has diminished since 2000, although the broad economic and social indicators point to continued weaknesses that could be attributed to poor natural resource management.”

Africa, particularly Sub-Saharan Africa, is the perfect example of how abundant resources can stifle development and distract governments from the central task of ensuring long-term prosperity. Looking only at the past 50 years, the continent has made a name for itself as a region rich in natural resources, though one where its citizens are severely handicapped by a low-growth climate and endemic corruption. With little incentive to raise taxes or focus on sectors aside from fossil fuels, plentiful resources have succeeded largely in crippling once-fruitful economies and shrinking government responsibility.

“Being resource rich is a challenge because there’s enormous potential for people to profit personally”, says Chris Beaton, Research and Communications Officer at the International Institute for Sustainable Development. “Political factions can grow around who-helps-who-get-rich and average citizens may not receive the full benefits of their country’s resources – or indeed, any of the benefits at all.

“In turn, this can lead to deep mistrust of government that is hard to reverse. The relationship between resource riches and corruption is very well documented. The greater the value of the resources, the greater the incentive for corruption, so fossil fuel resources, particularly crude oil, are of course often associated with poor governance. But it’s only a question of increased risk; it isn’t guaranteed the two will come hand-in-hand. Some oil-exporting countries, such as Norway, score amongst the least corrupt in the world.”

Venezuela, Iraq, Nigeria and Russia, for example, are all rich in oil, but all occupy low positions on Transparency International’s Corruption Perceptions Index for 2014. By choosing to over rely on the distribution of oil-derived revenues equally, guilty parties run the risk of throwing away opportunities for economic and social development. “Supporting populists who distribute largesse to the masses out of oil revenues may not pay in the long run, as, while they do so, the populists destroy the rest of the economy. When the oil riches dry up, the handouts end, and there is nothing else to turn to”, says Caselli.

Clearly, the natural-resources-equal-growth equation is far too simplistic, and the sensible management of these resources, or lack thereof, is the single-biggest determinant in bringing either success or failure. According to a report by the UONGOZI Institute, entitled Managing Natural Resources to Ensure Prosperity in Africa, “How natural resources and associated revenues are managed will have a profound impact – for good or for bad – on the course of African economies and the prosperity of Africans. For the depletion of natural assets to be converted into sustainable national development, a series of decisions have to be made sufficiently right”.

A Nigerian village chief looks at the site of a crude oil fire. Though rich in oil, Nigeria sits low on the Corruption Perceptions Index
A Nigerian village chief looks at the site of a crude oil fire. Though rich in oil, Nigeria sits low on the Corruption Perceptions Index

The bad
In Uganda, the realisation late last year that the country’s oil reserves were 85 percent greater than first thought brought a renewed focus on the country’s dealings, as those concerned looked to neighbouring nations for proof of how similarly impressive discoveries had failed to bring prosperity. The revised findings, which also showed evidence of commercially viable natural gas deposits, point to reserves of approximately 6.5 billion barrels and a host of new opportunities for the oil-rich nation. However, perhaps more significant is that the discovery has landed the East African nation in trouble even before production has come on line.

Since 2008, the Ugandan government has thrown a colossal amount of money at the oil and gas sector in the hope that doing so might bring a greater measure of development to the predominantly low-income nation. However, the dangers of relying on often-volatile and finite resources have become clear: falling oil prices have turned Uganda into one of the most heavily indebted countries on the planet. From 1990 to the early 2000s, Uganda was making steady progress, but its economic backslide and rising levels of corruption began in 2007, coinciding with oil discoveries. Following in the footsteps of Nigeria, Angola and the Democratic Republic of Congo, Uganda is the latest nation to suffer the effects of the resource curse.

“The wheel of fortune turns”, says Beaton. “Oil importers may currently be enjoying the benefits of low prices while resource-rich nations struggle, but they can be sure – perhaps not today, perhaps not tomorrow, but eventually – prices will go up again. They should use this time of good fortune to prepare well for the next time of need.” Similarly, resource-rich countries must use oil-derived revenues to develop human capital, improve infrastructure and expand upon sectors aside from fossil fuels.

The good
An abundance of natural resources does not necessarily condemn any host country to an ill fate, and there are numerous examples of governments that have succeeded in spreading the wealth more evenly. Norway is perhaps the most obvious pick. Top of the United Nations Development Programme’s Human Development Index and in the running for the highest GDP per capita in the world, sensible resource management has lifted the country’s prospects far and above what they were prior to any major oil or gas discovery.

Alaska is one of the lesser-known resource majors that have succeeded in more evenly distributing oil-derived revenues. In 1976, as the country’s pipeline construction neared completion, policymakers established the Alaska Permanent Fund to ensure proceeds would benefit sectors of the economy aside from oil. According to the constitutional amendment: “At least 25 percent of all mineral lease rentals, royalties, royalty sales proceeds, federal mineral revenue-sharing payments and bonuses received by the state be placed in a permanent fund, the principal of which may only be used for income-producing investments.”

The ‘wealth distribution experiment’, so-named by the Basic Income European Network, last year distributed a $1,884 dividend to over 640,000 citizens and, in doing so, lifted the total sum paid out over the fund’s life span to more than $37,000 per Alaskan. Though unconventional, the fund is now a tried and tested means of putting oil riches towards societal and economic gains, and the mechanism has transformed what were diminishing oil riches into a sustainable financial asset.

The fund is far from the only solution to fighting the resource curse, and, aside from generally good governance and sensible long-term planning, analysts have proposed alternative systems in which a share of the income is gifted directly to citizens. The Centre for Global Development believes abiding by this approach could create a “social contract” between citizen and state, “with a personal stake in the government’s budget, the citizens could then hold the government accountable for providing goods and services with their taxes”.

Choosing to distribute resource-derived profits more evenly means nations need no longer neglect unrelated sectors of the economy, and officials found guilty of hoarding or misspending resource capital will be held to greater account. Too often, natural resources put the state at the centre of the economy. Putting proceeds into the hands of citizens could instead reduce government corruption and create a more balanced economy.

Robbing robots want our jobs, but it’s not all bad

Posted on by Charlotte Gill

Chefs may soon face the chop. Using robotic arms created by ShadowRobotics, the company Moley has created a robot that can cook and prepare meals. As Tech Crunch notes, “the robotic arms are programmed to precisely replicate recipes. It’s not totally automatic – you still have to lay the ingredients out in a specific way – but in a demo for the IBTimes it seems like the robot was an able and patient cook. It took 30 minutes to make a soup dish with no human intervention.” It is not inconceivable then, that chefs could be replaced by such a robot, with only a human needed to lay out the ingredients. The phasing out of valued skills – those of a chef in this case – is nothing new.

Whenever humans have replaced certain tasks with machines, new industries have
popped up

In the early 19th century a group of English textile workers took it upon themselves to smash up mechanised weaving-looms. These men’s livelihood had been jeopardised by the replacement of their skill by what is now called automation. What these workers – known as luddites – feared was their own impoverishment due to machines making their skills obsolete. Yet with the Industrial Revolution still in its infancy, the idea of machines replacing human labour wholesale was unthinkable.

Robotic lawyers
In the present, there is much speculation – both fearful and celebratory – about just this; the replacement of humans in the workplace with robotic machines. There exist a diverse number of jobs which have been, or are at threat to be, replaced by automation. The replacement of manufacturing jobs – due to the constant technological revolution that is capitalism – has long been the case. Now, a wide variety of jobs, both blue and white collar, are under threat.

In Philadelphia city authorities have instituted the use of BigBellies Solar rubbish bins to deal with public waste. These new street bins are connected to wifi and equipped with sensors. Once the sensors determine that the amount of rubbish within a bin is at capacity, an alert is sent out and a team of rubbish collectors come to empty the bin. This, in contrast to regular scheduled collection rounds, has cut the amount of workers needed to collect public waste.

A few years ago Forbes magazine began using algorithms called ‘Narrative Science’ to write business news stories. The same software is also used by Big Ten Network to write sports reports. Technological advances, notes the New Statesman, mean that “machines are now getting very good at scanning long documents and picking out salient bits of information, imitating a cognitive skill traditionally thought to be unique to humans.” The result of this has been speculation that even lawyers could be replaced by robots, according to The Atlantic. Those tasked with identifying potholes in the road also face automation, as they could soon be replaced by an app which detects cracks in the road users may encounter while driving, sending a signal to the relevant authorities.

The encroaching upon jobs by robots – both potential and actual – into areas traditionally thought immune to automation has led many to predict a phasing out of humans in much of the workforce. In 2013 McKinsey & Company claimed in a report that by 2025, robotic machines have the potential to replace 15 to 25 percent of jobs in the West. As Paul Krugman notes, “the report suggests that we’re going to be seeing a lot of ‘automation of knowledge work,’ with software doing things that used to require college graduates.

More optimistically at Wired magazine, Kevin Kelly predicts that “before the end of this century, 70 percent of today’s occupations will likewise be replaced by automation.” One 2014 report suggests that 40 percent of jobs in Britain are under threat of automation. Further to the left, the ideal of communism is attempting to be revived off of the back of automation, under the slogan “Fully Automated Luxury Communism.”

A receptionist robot produced by Japanese company Kokoro
A receptionist robot produced by Japanese company Kokoro

Recurring Predictions
All of this is rather familiar. In the 1960s many expected the same process to take place. A newspaper report from the Sunday Citizen in 1964 spoke of automation resulting in only twenty percent of the workforce being required to work, resulting in societies having to create new attitudes towards leisure. A group in America called The Labour Committee for Full Employment predicted in 1963, that by 1974, 98 out of every 100 American workers would be replaced by robots. Yet humans still toil.

Perhaps we are on the cusp of a new era, where humans are no longer beasts of burden – even if that burden is relatively un-tiresome, such as tapping a keyboard or pressing a button. Or the optimists and pessimists of automation may be getting ahead of themselves. Whenever humans have replaced certain tasks with machines, new industries have popped up, taking in those replaced by robots. Just preceding the Industrial Revolution, mechanised agricultural techniques meant that fewer workers were needed to till the land. Yet at the same time a new form of work was emerging: waged-labour in factories. The Industrial Revolution absorbed surplus labour that agricultural mechanisation created. As traditional industry in the West began its slow decline in the mid-twentieth century, a plethora of other industries sprang up. Increased prosperity and access to consumer goods resulted in the rise of associated industries such as advertising. Increasing homeownership led to the proliferation of banking and insurance companies, while technological advances – mostly revolving around the internet – have led to the rise of a host of jobs associated with the digital economy.

Robots at Chinese restaurant 'Wall.E'
Robots at Chinese restaurant ‘Wall.E’

Netflix’s membership and share-price peak

Posted on by Charlotte Gill

Television viewing habits have been immeasurably altered. Less and less are viewers likely to sit down in the evening and catch a TV show. It is becoming more common that people will load up their laptop, connect to their broadband and stream – either legally or pirated – the latest television drama.

Part of the key to the company’s success has been the production of its own original content

Netflix has been able to capitalise on this shift. In April the paid-for online streaming-service surpassed membership numbers of 60 million. As a result Netlfix share prices soared by 13 percent on April 15, according to CityAm. Netflix profits in the first quarter of 2015 had fallen, but investors paid this no mind, certain that the streaming-service will be profitable in the long-term. The following day Reuters reported that “Netflix’s shares jumped as much as 20 percent to $568.75 – their highest ever. The stock, which has risen nine-fold in the last three years, was valued at 123 times forward earnings as of its Wednesday’s close of $475.46.” As a result of this rally in stock prices, CityAM notes, “Netflix now has a larger market value than traditional TV players such as CBS, Viacom and Newscorp at $32bn.”

Part of the key to the company’s success has been the production of its own original content. While producing its own television shows is costly, the popularity of such shows explains investors’ long-term optimism. Original content such as House of Cards have spawned a cult following, while its Unbreakable Kimmy Schmidt has proven to be one of the most popular sitcoms of 2015.

Other internet giants have tried their hand at producing original television shows for online consumption also. Amazon has seen success with its online streaming-service available to Amazon Prime subscribers, with the Amazon Studios produced Bosch. Likewise, Yahoo! has also launched an online television streaming-service called Yahoo! Screen. Neither has yet to match Netflix in terms of popularity or critical acclaim of its original content, but the market for it is certainly there.

Mattel and Barbie suffer another slump

Posted on by Charlotte Gill

Toymaker Mattel has kicked off the year by posting its sixth consecutive quarterly sales slump, again driven by less-than-impressive sales of its storied Barbie brand. The first-quarter figures show that revenue was down 2.5 percent, whereas Barbie sales suffered a 14 percent slide in the same period that, while still very much a concern, represents an improvement on last year.

The toymaker has some way to go yet before it restores Barbie to its former glory

Sales of the all-American doll make up a quarter of the group’s overall, though lack of innovation combined with changing cultural sensibilities mean that the product has struggled to find a place in today’s ever-changing market. Add to that stiff competition from what the market deems more innovative toys and Barbie’s standing has suffered a quite spectacular knock, with sales having fallen now for three straight years.

Mattel’s first quarter results come in the same month that Christopher Sinclair, formerly interim CEO and Chairman, was made permanent, and it appears that initial efforts to crack down on bureaucracy have paid dividends.

“In the first quarter, we took a number of steps to implement a rapid turnaround at Mattel,” said Sinclair in a statement. “We are already benefitting from better decision-making, alignment and enhanced accountability. And we’ve begun to refocus our culture on creativity, innovation and improving our speed to market. While we still have a lot of work to do, we’re starting to see progress with our core brands like Barbie and Fisher-Price, and I am confident we are making the changes necessary to perform better in the future.”

The toymaker has some way to go yet before it restores Barbie to its former glory, though the mere fact that first quarter results were better than expected has assured investors that the turnaround is beginning to gather momentum.

For a look at Barbie’s struggles to find a place in the modern market, read The New Economy here.

University medical-centres cushion America’s vulnerable cities

Posted on by Charlotte Gill

Since the 1970s, through a mix of industrial automation and outsourcing, many American cities have seen the heart of their local economies vanish, taking with them secure employment prospects; think cars and Detroit, rubber and Akron, Pittsburgh and steel. Industrial decline across the West Coast has been offset by the internet and technology boom. Other important cities such as New York or Chicago have been able to weather the decline in industry, becoming major business hubs. Numerous old former industrial cities and towns scattered from the Eastern seaboard to the Great Lakes have not been so lucky.

All across America, towns have been built around state or private universities

From shop floor to care ward
Coinciding with this industrial decline, however, has also been the rising economic importance – along with expansion of both private costs and federal funding – of the healthcare and higher-education sectors, since around the 1970s. Many of these depressed rust-belt cities have become economically dependent upon large medical centres that provide both healthcare to citizens and carry out academic medical-research and teaching.

That certain towns are centred around, and dependent upon, a large university is nothing new in itself. The town of Cambridge in Massachusetts is reliant on Harvard. All across America, towns have been built around state or private universities. There is a pattern of the cities deindustrialisation left behind becoming economically dependent upon what is called the University-Medical Complex.

The economic impact of the decline of the shipping docks in Baltimore was immortalised in the 2000s TV show The Wire. The Maryland city is also home to John Hopkins University and Hospital, which boasts the best medical school in America, according to US News and World Report. This university medical-centre is the largest private employer in the city and its purchase of goods from Baltimore business was totalled at “more than $387m, directly supporting more than 2,400 jobs with these companies” in the financial year of 2010. Further up the East Coast in the state of Connecticut, is the city of New Haven. Once a centre of industry, Yale University – with its medical school – is now the largest employer in the city. The same is also true for Cleveland, for which University Hospitals of Cleveland, along with other medical centres, provide a large bulk of employment. Indiana University Health was the second largest employer in Indianapolis, Indiana in 2014. Further west, in Iowa City, University of Iowa Hospitals and Clinics was the largest employer in 2011.

The grey dollar
There is much fretting about the increasing average age of the American population. America, it is said, is on its way to having an ageing population like that of Japan, which presents economic problems. The North East and Mid West also both have one of the largest percentages of citizens over the age of 65. However, as the ageing population grows – and presumably it will continue to grow in the aforementioned areas it is most dominant – towns with large university medical-complexes are likely to benefit.

Pittsburgh is also a former industrial city in which the local medical university is the largest employer; The University of Pittsburgh Medical Centre boasts 48,000 employees. Pittsburgh has greatly benefited from this change in age demographics. As Harold D. Miller, Adjunct Professor of Public Policy and Management at Carnegie Mellon University’s Heinz School of Public Policy and Management, notes in the blog Pittsburgh Future: “Due largely to the many seniors who live here, the Pittsburgh region derives more of its income from transfer payments than any other major region in the country. That made a big difference during the recession – while total personal income in most large regions dropped by at least a billion dollars from 2008 to 2009, Pittsburgh was one of only five major regions that actually saw a small increase in personal income in 2009. Workplace earnings and investment income in the Pittsburgh region decreased in 2009, so if it hadn’t been for our high and growing level of senior-driven transfer payments, there would likely have been even more job losses here.”

The benefits of such university medical-centres are felt throughout the country. “US medical schools and teaching hospitals are substantial economic engines in terms of jobs, state tax revenues and economic growth,” Association of American Medical Colleges (AAMC) president and CEO Darrell Kirch, MD, told Stanford Medical School in 2009. There is also a cumulative effect. Ricardo Azziz, M.D., M.P.H., M.B.A., President of Georgia Health Sciences University, writing for the AAMC website, says that “[t]hese institutions also attract residents (faculty, staff, retirees) with greater-than-average economic capacity. By supporting cultural offerings that enhance a community’s attractiveness to higher-income families, these individuals further support a city’s growth.” Likewise, according to a 2009 study by the Association of American Medical Colleges, across the country, university medical-centres “had more than 1.86 million full-time employees and were directly or indirectly responsible for 3.3 million full-time jobs—meaning that one of every 43 wage-earners in the country is dependent on an academic medical center or affiliated hospital for income.”

While large university medical-centres may not be the entire solution to these cities of fallen-fortune, they have cushioned the economic blow. The future longevity of Medicare and Medicaid – upon which many residents using the facilities in these cities rely upon – may be in question, but for now they continue be a major source of income and provide much needed job security, both directly and indirectly.

AGCO leads the way for precision farming

Posted on by Charlotte Gill

The agriculture industry is at a hinge point. Not since the advent of mechanised farming in the 1800s have we faced such a sea change in one of the world’s oldest and most vital practices. As the world population grows, the industry is more challenged than ever to meet increasing demand for food, fuel and fibre. Farms must increase production of food, fuel and fibre a staggering 60 percent by 2030 in order to meet this need, on the same amount of farmland that exists today. They can’t do it alone and they can’t do it using traditional farming practices. Welcome to the future of farming.

In the last 10 years, a new subset of the agricultural industry called ‘precision farming’ has seen accelerated growth, garnering increasing attention in the global economy. Precision farming is the practice of using telemetry, sensors, data, satellite positioning and other technologies to more precisely treat farmland and manage farm operations, using fewer resources at reduced production costs. The result is higher yields of crop output per acre. Analysts expect the global precision farming industry to grow 13 percent in the next seven years to over $6.34bn. Many players in the agricultural industry ecosystem are working hard to contribute on several fronts: seed and biochemical companies, agronomists, and technology and farm equipment manufacturers.

60%

Predicted increase in global food demand, 2012-30

We are still in the early stages of precision farming as a subset of the overall agricultural industry, entering the rapid acceleration phase for technology adoption. There are myriad solutions for farmers, creating numerous separate hardware, data formats and learning curves. This results in an often-overwhelming number of choices for farmers to make about precision farming product and service providers, and an even more overwhelming amount of data to contend with. The breadth and complexity of farm data generated can be a gold mine of information and insight – for those who have the time and resources to make sense of it – but it can be difficult to sort through it effectively. That’s right – even farmers are hitting the big data wall. Industry players are delving into that world of data, attempting to simplify and help farmers use it for science-based improvement of their operations.

Shifting the paradigm
AGCO, the world’s largest pure-play agricultural equipment manufacturer, is taking a fresh approach to the big data challenge, blurring the lines between technology and equipment in a way that puts farmers, and the daunting task of feeding the world, first. Traditionally, AGCO and other agricultural equipment companies have focused on iron: tractors, engines, planters, applicators and harvesting equipment. To be sure, machines are critical to the farming operation, and this space is still growing – especially in emerging markets that are just adopting mechanisation. AGCO is moving beyond that focus to address data and technology and their intersection with machinery.

With the proliferation of so many interested, diverse businesses in the precision agricultural mix, all pushing their own data and technology solutions to solve global farming challenges, AGCO has determined that a new model is in order. “Rather than forcing farmers into corners where they can use only a single brand of products and services in order to see maximum benefits of their farming tools, we’ve decided to help rather than hinder their ability to bring everything together”, says Eric Hansotia, AGCO Senior Vice President of Global Harvesting, Crop Care, Advanced Technology Solutions, and Dealer Technical Support.

AGCO is positioning itself as a facilitator with a truly customer-centric approach, helping farmers connect their operation, spanning brands, machines, fields, geography and throughout each phase of the crop cycle. In 2013, AGCO launched its global precision farming and machine management strategy, Fuse Technologies. It represents AGCO’s current and future precision tools and a commitment within the company and dealer network, to help farmers increase uptime and optimise, coordinate, and seamlessly connect their operations.

At the centre of the Fuse strategy is AGCO’s AgCommand telemetry system, which, in conjunction with operation-specific tools such as application rate and section control, GPS guidance, advanced sensors, yield monitors, grain bin dryer controls, and mobile apps for seamless management on and off the farm, gives farmers maximum control and visibility into their operation. This means they can spot trouble sooner, reduce downtime and run a more efficient operation. AGCO dealers can take this optimisation support to the next level for their customers, offering customised service packages for everything from overall operation consultation, off-season inspections and preventive maintenance to real-time monitoring, diagnostics and on-site parts support.

AGCO’s emphasis on mobile access and total fleet and asset management enables farmers to work more efficiently with the mix of brands and service providers of their choice, while making better use of their data and enjoying the level of privacy they want. In fact, AGCO’s approach to farm data sets it apart from other manufacturers: in order to afford farmers the level of privacy they desire, AGCO funnels data through two separate pipelines. Sensitive task data, such as how a farmer plants and treats his field, flows through a channel separate from machine data such as fleet fuel efficiency and engine performance. This allows farmers to choose what data they share with whom. “Other equipment manufacturers require absolute sharing of all this valuable data, and it doesn’t sit well with many farmers”, says Matt Rushing, AGCO Vice President, Advanced Technology Solutions Product Line. “We have no need for or interest in our customers’ agronomic data. However, if they’d like to share their machine data with their dealers and us, we can help analyse it to provide additional services and support, without accessing their agronomic data.”

Open approach
Another area in which AGCO is disrupting the traditional model is in its focus on developing strategic, long-term partnerships with others both in the agricultural industry (such as seed companies and farm technology manufacturers) as well as outside of it (such as mobile and software developers). AGCO also takes a leading position in industry associations that seek to advance precision farming practices for the greater good of agriculture and food production, such as standardising the data formats that machines and implements create and use. Establishing data connections through AGCO’s API is another key piece of the puzzle, enabling qualified software and service providers to help farmers transfer and use machine and field operation data.

Some meaty facts:

  • Global meat consumption is predicted to be four times higher in 2020 than it was in 2010.
  • That creates a huge energy demand; four times as much energy is required to produce one protein calorie as one carbohydrate calorie.
  • It also means the agricultural industry will need more water, because producing one kilogram of animal protein requires 100 times as much water as producing one kilogram of grain protein.
  • At the same time, the supply of crops is being put under pressure due to the additional demands for renewable materials such as biofuels.

AGCO calls this its “open approach” to precision farming, and it is unique in the industry. AGCO brings together the best suppliers, partners and developers for the benefit of the farmer, rather than undertaking all development in house, and forcing customers to use proprietary systems. The company believes enabling its customers’ ability to connect with their chosen brands and service providers, rather than limiting this, is the best way to help farmers optimise their operations with maximum flexibility, and feed that growing population.

“We took a long, hard look at what farmers need now”, says Rushing. “We took a step back and realised that, to truly advance our industry and our business, and help farmers feed the world, someone needs to bring all of this together. And that’s what we’re doing. We figured out most farmers do not use a single provider for every operation, and we don’t believe a single provider can create the best solutions for every aspect of farming. So our approach is to bring together the very best solutions and providers in each area to optimise what our customers can achieve with our machinery.”

Alongside what it integrates from strategic partners and third-party alliances, AGCO recently entered into a joint venture with software and electronics developer Appareo Systems called Intelligent Agricultural Solutions (IAS). “IAS is unlike anything else in the industry. It’s a self-funding R&D powerhouse for Fuse Technologies and it’s a faster way for us to bring new technology features and solutions to market”, says Hansotia. He says this open approach isn’t just resonating well with customers, it also makes good business sense, citing year over year gains in AGCO’s precision farming sales, even as the agricultural industry overall lags.

Sustainability on and off the farm
AGCO’s approach is underscored by a strong position on sustainability, both on and off the farm. It seeks to help farmers establish higher yield farming practices that produce more food with a lower environmental impact, helping farmers use fewer chemicals, less water and less fuel. Arable land being one of the finite resources used in agriculture, farmers and other stakeholders look at manufacturers such as AGCO to do their part in helping farmers do more with less.

The company also recognises the importance of sustainable business practices, calling sustainability a “business imperative” that “helps us build long-term value by supporting our mission and vision while helping to solve complex global issues”, according to its sustainability statements. The company’s approach to long-term economic, social and environmental sustainability is aligned with its overall vision to provide hi-tech solutions for professional farmers feeding the world. This approach, the company says, “challenges us to look for dynamic solutions to major issues that impact our business”, such as food security, farmer livelihood, and resource efficiency.

AGCO’s strategic corporate sustainability goals relate to each link in the company’s product life cycles, in four focus areas: operations, customers, suppliers and communities. These areas represent AGCO’s sustainability priorities, and they drive direction and focus through innovation, efficiency and long-term sustained growth. This means everything from minimising waste generated from its operations, raising the health and safety performance of its workers and helping customers improve their impact on water use and soil health, to fostering high performance quality, ethics and environmental standards with suppliers and enabling dealers and customers to have a positive impact on the communities in which they operate.

Even as the agricultural equipment industry faces a downturn in 2015 due to low global commodity prices, AGCO says it will continue to invest in the right areas to evolve towards the future of farming and feeding the predicted population of 10 billion people by 2050. The number of players in precision agriculture will increase as the industry reaches to meet those demands, and so will the amount of data that is generated. “It’s our mission to open as many doors as possible, facilitate productivity and reduce complexity”, says Rushing. “That’s how we can come together to help farmers feed the world.”

BMW

Posted on by Charlotte Gill

Approaching its centenary year, BMW continues to pioneer the automotive and engine markets. The firm is a stalwart of the German economy, is widely considered one of the most reputable companies in the world, and thrills a devout following of returning customers year after year with new and adventurous products. BMW has made great inroads to green ventures, hoping to offer a more sustainable and environmentally friendly product across Europe and other markets.

Scientists battle for gene-editing patent

Posted on by Charlotte Gill

The revolutionary gene-editing technique known as CRISPR, discussed recently in The New Economy, is thought to be potentially worth billions of dollars. Now a dispute has broken out between two sets of researchers over who was first to make the break-through with the technology that has been described as genetic scissors.

The University of California has contacted the US Patent & Trademark Office about a number of patents that were last year awarded to the Massachusetts-based MIT/Harvard Broad Institute, which it claims belong to them. It is likely that regulators will study laboratory notebooks in an effort to determine who uncovered the technology first, with potentially huge financial implications the result.

[R]egulators will study laboratory notebooks in an effort to determine who uncovered the technology first

According to MIT Technology Review, CRISPR-Cas9 was first described in public by University of California biologist Jennifer Doudna and French biologist Emmanuelle Charpentier. However, MIT/Harvard Broad Institute’s Feng Zhang won a patent for the technology last year because of notebooks he submitted that he claimed proved he invented it.

Speaking to MIT Technology Review, Greg Ahoronian, director of the Centre for Global Patent Quality, said that the stakes were high for such a revolutionary technology. “Expect this battle to be very expensive, very contentious, given the stakes involved. Given the stakes with CRISPR, I can see many hundreds of thousands of dollars being spent fighting this battle.”

The technology has become hugely anticipated by the healthcare industry, with many believing it could transform the way many diseases and conditions are treated. Diseases that include cancer, diabetes, and heart disease could be treated through genetic editing, with much more tailored and specific medicines being offered to patients.

CRISPR (Clustered Regularly Interspaced Short Palindromic Repeats), has seen leading healthcare companies like AstraZeneneca invest huge amounts into furthering research earlier this year, while Swiss-based pharmaceutical firm Novartis also announced funding for two US biotechnology firms that are developing the technology.