CranberryCo, the Ford example really highlights the issue well. You bring-up good points about Ford’s investment in building capacity in the US and investment overseas to hedge retaliatory isolationist policies. Unfortunately, the current situation may have more unintended consequences. The demand for new units in the US car industry is slowing down and manufacturers are seeing declining profits [link 1 below]. Therefore, forcing big car companies to invest in capacity in the US, may also force their hand on investing in manufacturing automation. The competitive market is forcing car makers to continuously improve their products while keeping prices low, causing them to replace employees with automation in manufacturing [link 2]. GM has announced plans to lay-off 4,000 workers, while Ford is planning to cut 1,400 jobs [link 1].
Nico, Tata’s socially responsible behavior seems to be well timed with changing global trends. After driving down global steel prices through surplus production, China seems to be the key player in increasing the very same prices [link 1 below]. More encouragingly, this has partly resulted through pressure from environmental agencies [link 2 below]. This interplay of supply and prices has resulted in a second favorable trend – shift towards recycling scrap steel vs. using iron ore for manufacturing new steel in China – which is likely to be further enhanced by 2020 [link 3 below]. Tata Steel may not have caused these changes in the Chinese steel industry, but the changes are consistent with Tata’s mission towards the global community and environment. So, while neither the Tata-led Indian steel industry, nor its bigger sized counterpart in China is de facto leading this environment friendly push, positive signs seem to be on the horizon.
Sean, this really is a pertinent issue. Especially so with recent trends in areas such as gold mining, where despite an abundance of investment funds, companies are reluctant to enter emerging or frontier markets. (https://www.reuters.com/article/mining-gold-randgold-rsrcs/gold-miners-must-invest-in-emerging-markets-for-future-randgold-idUSL2N1GL16A). Therefore, the final direction taken by the Indonesian government may turn out to be a precedent that changes the global mining supply chain permanently. Freeport’s troubles seem to be two-fold – near term decision on Indonesian government’s stand, and longer term modification of the industry’s supply chain. In the near term, I would argue there is merit in waiting out the 2019 general election. Realistically, the likelihood of a newly elected government to get organised behind a proposal to uphold the export ban within a 12-24 month timeline (i.e., prior to the initial 2021 license expiry for Freeport) is low, especially if Freeport is also making a local $20bn smeltering investment. The employment generated by the local investment should yield valuable political capital for Freeport. The longer term view on supply chain is more complex. There is mixed evidence currently out there. For instance, the Mongolian government’s recent ruling to further open up the country to potential copper and gold mining (https://www.cnbc.com/2017/05/23/miners-ready-for-new-mongolia-boom-with-one-fifth-of-the-country-to-be-opened-for-digging.html), vs. Indonesian government’s varying stance on the export ban. Both impact a mining companies ability to transport raw ore to cost-efficient destinations for processing. Dig a little deeper and it seems that moves by both the countries’ governments were driven by broader macro-economic cycles – the Mongolian government pursuing a $5.5bn IMF-led bailout, and the Indonesian government trying to correct a budget deficit. So, it seems that similar to demand for mining output, the fate of the global mining supply chains is also acutely tied to the economic performance of countries.
OEL, Huawei is an interesting example because it has managed to take environmentally sustainable measures while maintaining its market position. According to the latest IDC research, Huawei continues to be the third largest mobile phone company in terms of shipments (https://www.idc.com/getdoc.jsp?containerId=prUS43193517). Although, it is curious that Huawei is not promoting its green supply chain initiatives more prominently in marketing campaigns. Doing so could have dual benefits. First, it is likely to improve sales for Huawei, and perhaps even help it make gains in the North American market, which continues to remain elusive for Huawei. Second, it will create competitive pressure on its peers to undertake similar steps towards environment sustainability, thereby improving the carbon footprint of overall industry.
Shosha, this is a fascinating example of a new industry (Fintech) being disrupted be an even newer entrant (Leumi). To your point about serving older customers who may not be “adaptive to technology” – the hurdle in adopting Pepper may be more than technology. The two customer segments identified (millennials and older customers) are likely to have different banking needs. Millennials are more likely to value online transactions, mobile banking, etc. Whereas, the older customer is likely to seek additional services as well – home loans, other loans, credit cards, etc. Additionally, as the millennials of today get older, they are likely to have similar personal finance needs as the current older customers. Therefore, unless Pepper can expand its value offering, it runs the risk of losing customers in the long run to other full-service banks.
Vincent, I agree that businesses like SCCC need to embrace digitalization fully and rapidly, so that they can be at the forefront of infrastructure growth in emerging markets. However, I am concerned about the timing and direction of the digitalization trend for SCCC. Recent measures seem expensive and geared towards bringing modern innovation to the supply chain. However, the pressing need is to find solutions that reduce supply chain costs in the short term. According the SCCC’s most recent financial reports (7th Nov. 2017, https://www.siamcitycement.com/stocks/media/00134b.pdf), profit margins have fallen from 12% to 4%, largely due to slowing demand in Thailand, lower prices due to increased competition, and higher expenses related to electricity and coal. Therefore, SCCC may want to reconsider prioritising the “Control Tower” initiative, and instead find solutions to improve profitability now.