Ricky Bachman's Profile

Part of the issue for General Motors is consumer sentiment. Should NAFTA end and GM’s costs rise (whether they stay in Mexico and pay the tariffs or relocate to the US and pay higher wages and operating costs), these costs will flow through to the consumer. Assuming both scenarios produce similar cost increases, the next question GM must ask is, “Will consumers care whether we are operating out of Mexico or the US?” And despite abundant rhetoric in the media, evidence shows that American consumers prioritize lower price far above American manufacturing origins.

All of this to say: if GM evaluates the two scenarios and finds that the costs are even slightly lower to stay in Mexico and pay the tariff, they should do that. And as Zeya pointed out, the world trends towards free trade. Even as America considers dropping out of NAFTA, Canada and Mexico are holding talks to continue their own free trade agreement. How long until that coalition strikes a deal with the EU? In the end, the inertia of the world’s top powers playing nice with each other leaves me believing that we will eventually make our way back into the fold.

Your questions about whether these measures will overload the Nigerian infrastructure, and whether local consumers will now be priced out, are important ones. The former is a longer-term concern, while the latter is something that the country will have to deal with almost immediately. It would be interesting to see the breakdown of Nigerian businesses that are today import-heavy and what their local switching costs are. The skeptic in me tells me that this plan will create strife in the short- and medium-term, and the risk is that the negative effects on the economy are so severe that the long-term benefits of this program are unable to pull the economy out of that hole. The government should consider subsidizing prices on any essential products whose prices are driven up as a result of this policy, to create a bridge measure that prevents short-term economic crisis.

To Sergio’s point about consolidated orders: I agree that we as consumers have to adjust our own buying culture if we want retailers to adopt these practices. As you said, minimum order sizes are annoying; companies are disincentivized to implement many of those measures or else watch their orders dwindle.

Gap might consider reducing emissions from their e-commerce business by holding more inventory in its local stores and partnering with on-demand platforms such as Roadie to bring orders from the local stores (versus distribution centers) to local customers. To offset this cost, they may consider offering this option as an additional delivery option at some extra cost, while being upfront about the beneficial impact you, as an individual shopper, can make with this delivery option. After a while, they can collect enough data on how many purchasers use that delivery option, to determine its longer-term viability.

In many cases, big companies are driven towards greener operations mostly due to changing costs, changing regulatory landscapes, and finally due to a need to boost their PR. For Walmart, I believe those PR benefits cannot be understated. The company may be primarily looking at this as a tool to positively boost its global image, and secondarily to create a sustainable advantage.

I agree that Arcelik needs to think about what level of digitization investment is appropriate for its goals of overall customer satisfaction and global efficiencies. Their customers want their products in stock and delivered as quickly as possible across their entire global portfolio. Assuming their initial investments achieve these goals in their primary market, Arcelik needs to think about weighing the (likely) marginal returns of increased digitization investments against the time and money saved in their secondary markets.

There may be three answers to address the economic viability question. First, Adidas is sitting on $2.1B in net working capital as of 2016 (calculated off their most recent financial statements). Second, Adidas has always marketed itself as a shoe for “serious, technical athletes,” so the investments in the Speed Factories are a natural fit for the company and will allow it to compete more readily against Nike in the US markets. Finally, it is possible that Adidas does not expect to ever have its entire 360M pairs of shoes (in the South Asian factories) created by Speed Factories. They may begin marketing the customized footwear as an entirely new product with a new price point designed to recapture some of the heavy investments they’ve made into the factories, without scaling up. It remains to be seen what the broad demand will be for these shoes, and how much the high-end consumer will be willing to pay.