I do not necessarily agree that Ford’s migration of its Focus production to China was a risky move. In my assessment, I think the net benefit in tapping into the country’s technological talent and cheap skilled labor far outweighs any political backlash received in the U.S. The relocation better positions Ford to remain competitive in an industry that is becoming increasingly innovative and that requires a certain human capital profile to spur it along. As Grant mentioned, the American automotive industry has become less competitive over time due to increased technological productivity and a shift away from manufacturing. However, protectionism, which proved effective for Trump in Carrier’s case, can only be an ephemeral prescription to a more insidious problem in the American economy. The government’s focus should instead be on retraining workers who have lost their jobs to obsolescence for the jobs of the future: renewable energy, autonomous vehicles, cutting-edge biotechnology, software engineering, food sustainability and the like. Latching on to the past only delays the inevitable…
Great read. I believe the primary reason Nissan has been cavalier about the implications of Brexit on its UK operations is because of one thing: leverage! It has the largest operating presence in the UK of all its Japanese competitors (~$4 billion investment and annual production of ~500k cars, and countless jobs at stake) and as such, wields tremendous bargaining chips when dealing with government officials. As you mentioned, the automaker was able to secure a sweetheart deal with Theresa Mays, essentially shielding itself from any potential adverse effect Brexit may present. While it is lobbying the government to remain in the Customs Union and seeking to source more components domestically, I do not envision a scenario in which that is critical for the automaker. It called the UK’s bluff and they folded like a cheap suit. Case closed.
H&M’s sustainability efforts certainly sets the organization apart from its retail competitors (Zara and Forever21). However, it is still debatable whether these initiatives are a prominent criterion in its customers purchase decisions. It seems to me that the most salient factors at the top of likely consumers’ minds are aesthetic appeal, trendiness, and affordability. While H&M has made great strides in these sustainability efforts, the key question remains: who bears the costs for them as it tries to keep its prices competitive? Labor cost and materials costs invariably rise, at least in the immediate term, as organizations engage in CSR related initiatives such as these. As Jason suggests in his comment, my cynical intuition leads me to believe H&M is only engaging in this as a form of green-washing. I read an article a while back that details how the goal of sustainability and fast fashion by an organization the size of H&M, while noble, is inherently at odds. It manufactures at least 600 million items and has over 3,200 stores in 55 countries. Maintaining an enterprise of this scale requires a staggering amount of resources, from cotton, electricity, oil, and water…
One important gap that plagues Unilever’s attempt to address climate change is the lack of partnership with organizations that tackle climate change outside of the agriculture industry. According to the US National Climate Assessment, the larger impact of climate change will ultimately depend on altering large global market conditions and typical responses to local climate stressors. This will have to include farmers adjusting planting patterns in response to altered crop yields and seed producers investing in drought prevention initiatives. Given that climate change affects the larger ecosystem – oceans, coral reef, swamps etc., Unilever would be even better served creating a long-term strategy that addresses climate change beyond crop viability and increasing land yield via innovating farming techniques.
You are right! Most large-scale retailers today operate with a supply chain system based on an outdated linear model (vendor to distribution center to retailer) – primarily due to organizational inertia and nothing else. Amazon’s entry into the industry has upended the status quo and left large retailers such as Target scrambling to play catch up in their digitization strategy, lest they go extinct. A competitive advantage that Amazon holds is that it acts more as an intermediary than an actual producer with its vast network of fulfillment centers. As Section G TOM commented above, creating a network akin to this is a lot more feasible and economical than retrofitting 1800 stores. However, I would be curious to know if the better play for Target would be placing a greater emphasis on capitalizing on the treasure trove of data it already holds as that is its differentiating advantage to Amazon.
Although I wholeheartedly agree that greater digitization holds tremendous potential for Olam at maximum scale, similar to JS’s contention, I do think that the benefits for this tip the scale too far in Olam’s favor and less for the smallholder farmers. This, in turn, could have adverse ramifications on Olam’s supply chain later down the line. In African countries with expansive arable land, and especially in Nigeria, similar technological/digital initiatives that foster more intimate interactions between these smallholder farmers and large-scale agribusiness enterprises have not always been well received and in some cases, been summarily dismissed on arrival. Most of the farmers in these markets are either un- or under-educated and as a result, are very susceptible to exploitation by these corporations. Consequently, some governments view such schemes as encroaching on their regulatory purview of the agricultural space in those regions. My question to Juan is: although the merits for digitization are readily apparently for Olam, how does Olam ensure that it secures adequate commercial buy-in from all stakeholders (farmers, regulators, government, and the local community)?
Energy Analyst – thanks for the great energy analysis!
I do agree that the long-term viability of natural gas as a competitive fuel source is under great threat, but perhaps not to the extent that your analysis suggests. Renewable energy has historically remained uncompetitive vis-a-vis natural gas for a host of reasons: cost-prohibitively high transmission and distribution costs to the central power grid, fairly limited regulatory support, and tremendously cheap cost of coal and nuclear as a domestic and international fuel source. As these factors become further heightened, natural gas will become further entrenched as the preferred choice of electricity generation over other forms of fuel. With greater interest in curtailing and/or reversing the effects of climate change comes a greater interest in cleaner sources of fuel. As a result, coal as a fuel source for power generation has increasingly come under attack with the enactment of the Cross-State Air Pollution Rule (CSAPR), Mercury and Air Toxic Standards (MATS), and renewable portfolio standard rules across U.S. states. In the U.S. power markets, natural gas remains competitive as the cleanest form of power available to meet both baseload as well as peak power demand on the dispatch curve. Renewable energy will never be able to accomplish due to structural challenges. In practical terms, it will take a wind or solar farm situated on miles of land tracts to generate the same amount of a power as one combined cycle gas plant with an installed capacity of 500 megawatts. See EIA link below:
With the Paris Climate Agreement, developing markets shifting to cleaner energy sources (China recently introduced GHG cap and trade programs that favors natural gas), and deeper support in the U.S., natural gas is here to stay at least for the next 50 years.