Interesting situation to deal with! Judy, even though Boeing did not bid for the contract, the danger of another Airbus case that you mention is a more than sufficient reason for Boeing to ostracize Bombardier. In theory I agree with Messi that in the moment you have subsidies, you are not in the pure free-trade camp anymore, so if a government is involved on one side, it is fair that the other side government will be involved as well. However, as Judy mentioned, state subsidies are key in this industry, so this situation is trickier than others. For this reason, it is important that the Canadian and UK governments try to find an agreement with the US government, given also the fact that these counties are close allies with similar political views (except for Canada). Without a clear definition of intent from these governments, it is impossible to solve this issue.
If I were managing Bombardier, I would try to expand Bombardier outside of US, hoping that the government lobbying efforts are successful in the meantime. Strategies like M&A and supply chain expansion are not realistic, since the company is not able to support capital intensive initiatives. I would also avoid the collaboration with Airbus, since it might lead to a weaker control of your operations and possibly a future acquisition from Airbus.
In conclusion, Bombardier has the interest to enter the US market more strongly if it wants to become a major player in the industry, but it needs to have lower risk before doing it. It is a good strategy to temporarily expand outside US and encourage governments to get involved during this time. Such a tricky issue can’t be solved without governments being involved. Governments have great interests at stake in this issue as well, so Bombardier has good leverage to convince them to get involved.
I think that we need a broader view to understand companies’ behavior and their motives in this case. Ford, along with other major players in the car industry, was repeatedly cited by Trump in his campaign, and thus it was forced to do something. We can fairly assume that these companies were not that happy to finish in the middle of such a divisive debate.
I agree that Ford definitely benefits from free trade, but I think it is not alone in this “battle”. I would rather try to build a group of automaker leaders (like GM, FCA, Toyoya) that lobby internationally to promote the advantages of free trade for everyone. I think that car workers might not be responsive to an initiative promoting free trade, given the discontent caused by the shutdown of many US plants in the last decade, which was perceived as a result of increased competition from low-cost countries.
Right now companies are trying to stay in the middle of the two opponents, hoping that isolationism will be a transient phenomenon. Also, car companies might benefit from other aspects of Trump’s politics, such as the promises of low regulations and taxes. However, if isolationism will continue as a trend, they will be forced to take a stand, and it is in their best interest to advocate free trade for the good of their business, if not for the good of the economy in general.
Interesting! If I were managing Starbucks, I would worry about two main aspects: one is how to set new standards in the supply chain, the other one is reducing emissions.
Donations to farmers are a weak solution to the supply chain problem. You could try to add incentives, but it is hard to convince farmers that are deeply risk averse. Furthermore, comparing this case with my article, Walmart provides technology and research resources for suppliers who are willing to embrace the challenge. With this being said, I think that the best way to solve the issue is to increase control by pursuing vertical integration. I agree with Justine that this creates a risk of controversy, but I think it will be easier for Starbucks to implement some of the practices they have been testing in Costa Rica, using its much bigger resources, in terms of money and access to technology.
The other challenge they are facing is reducing carbon emissions. In 2008, Starbucks set the ambitious goal to reduce emissions by 25%. The results were disappointing; the company initially reduced its emissions, but in 2012 emissions started to increase again. The company increased its emissions from 1 million metric ton to 1,258,092 tons between 2012 and 2014. It is relevant to acknowledge that one of the causes of this trend was a change in Starbuck’s strategy: the decision to add heated food to the menu. As a consequence, it needs more refrigeration and ovens, thus more energy. Starbucks reacted to critics saying that it is working on improving oven environmental efficiency, but the it is difficult to believe that they will be able to reach their goals.
This is assuming that Starburks’ priority is to solve the issue rather than building its own image, as Tom mentioned. I think every discussion about climate change should start making sure that the company is really trying to solve the problem, otherwise all conversations fall into rhetoric and become empty.
It is interesting to make a parallel with my analysis on Walmart. I think Peter found the key of the discussion when he talks about sacrificing short-term gains to implement long-term complex plans. It is a tough decision to do, and sometimes you just can’t afford it, especially if you have a low margin business.
Moreover, differences in regulation are not the only cause of companies’ different behavior on climate change in the western world and in emerging countries. I think that these are the companies that don’t completely believe in the the potential of sustainability, or they just seek short-term gains in these areas where they are not under the lens of the public opinion of their countries.
In my article I mentioned a research that states that “Managing greenhouse gas emissions has also been shown to enhance brand and market value in some circumstances”. This might explain the different behavior when they are not watched by anyone.
It is important that companies understand that there is an economic advantage from embracing sustainability and reducing emissions. There are physical and regulatory risks that companies underestimate, and that will become more and more likely to turn into money losses over time. If nothing gets done, ultimately disruptive events will convince players that risks are real, but the goal is to anticipate that time.
Interesting article, the future of brick and mortar retail will probably be one of the main revelations of the next decade.
I fundamentally agree with Jason on the necessity to integrate online and brick and mortar. However, the model I have in mind is one where the store maintain its centrality, and the online experience is of the perks of the brand. When I say this I think about a model like Sephora.
Sephora have a virtuous integration of the online experience with the shop experience. It has a great application with excellent design, dynamic offerings, and many different ways to engage with the customer. The interesting thing about this model, is that you would assume that the customer ends up not going to the store. However, the store is actually the most significant part for Sephora (not in terms of revenue, but in terms of customer’s perception). The store embodies Sephora’s brand much more that the online website or applicaton. People go to Sephora even when they don’t need to buy anything, because the store provides great services, like make-up session to improve the customer experience, similar to the ones mentioned by Michael.
Furthermore, sometimes customers are brought back to the store because they earned a free service from buying online, and the free service happens in the store. This is a very smart way to ensure that people come back to your store.
I imagine how all these ideas can be used for Macy’s, even though I recognize this is a much bigger challenge. I would use the money from closing the stores to build a strong integrated strategy, which requires improvement of the online service, as well as continuous marketing ideas on how to integrate the two levels of the physical store and the online store.
Very interesting article! The benefits of digitization in the transportation sector are immense and still partially unexplored.
I want to provide some additional information about what is going on in New York at the same time, and what are the challenges to develop these technologies in a place like New York City.
The City of New York is leading some interesting initiatives towards the concept of smart mobility:
• “Midtown in Motion”: microwave sensors, traffic video cameras and EZPass readers are used to gather traffic flow information, then sent wirelessly to DOT’s Traffic Management Center (TMC), where real-time actions are taken to ease the traffic. Travel time was reduced by 10% in one year.
• “Traffic Signal Priority” system: it has a GPS and a traffic-control software built into the bus, and allows the driver to request priority as it approaches the intersection. TMC will modify the light pattern and prioritize the bus flow. Travel time was reduced by 20%.
These are interesting initiatives, but they do not solve New York’s massive traffic issues.
“On June 29, 2017 Governor Andrew Cuomo declared a state of emergency for the Metropolitan Transportation Authority’s (MTA) service area citing continuing failures of MTA infrastructure and their vast and deleterious impact on the region”. The main causes for these issues are two: the aging of a 112-year-old system, and a huge rise in traffic (from 1 to 1.8 billion people since 1990).
I was involved in a project, the MTA “Enhanced Station Initiative” (ESI), which is thought to modernize 31 subway stations, and increase the subway capacity to reduce congestion. The ESI project was largely advertised by Governor Cuomo and was really needed, but if you want to prioritize, what would really help solve the subway traffic is the signaling system. Most of New York trains uses the “block train” technology, a very obsolete system to coordinate the train movement. The City is (very) gradually trying to replace this system with a computerized signal system like the CBTC. This would allow the trains to run closer to each other and increase frequency. However, the process is complicated, and execution is extremely slow: it took 10 years to install the system on the L train.
To sum up, New York definitely needs a “bold stroke”, and technology and digitization is the way to go. The issue is not a lack of expertise, but rather a lack of courage to deal with the social and political consequences:
• These projects have massive impact on traffic flow: the best solution would be to do longer closings to finish the work more quickly, but it is difficult to do that in New York.
• These projects are extremely expensive, so it is a real challenge to fund them (could lead to new tolls or taxes).
• Governments often prefer to wait for a trauma before embracing innovation, and this is definitely New York’s case, since the subway traffic has become unsustainable.