*Walmart made an initial investment of about 7-8% of Seiyu’s shares in 2002, and ultimately acquired the remaining shares of Seiyu to turn it into a subsidiary of the Walmart group.
As we have talked in class, political risk tends to be a strong systematic risk that is hard to differentiate away, or even predict. With the current political environment in East Asia already tensed up by North Korea’s aggressive military actions, Lotte should try to diversify its investments and reach new contracts to support their business in China. As you mentioned in this case, the Chinese consumers tend to be the biggest market for Lotte, so it would be risky to leave the current market in order to seek even riskier markets like Thailand and Russia. I highly agree with you assessment of the short-term and medium-trend strategies, and I would add a long-term strategy to support your arguments. When Walmart attempted to move into Japan in the early 1980s, they were initially unable to transplant their operations to the island. Moreover, it was really hard for the company to understand the retail dynamics of a Japanese consumer, and their original plan to run Walmart-owned stores in the island had to be changed. As a result of a new long-term strategy, Walmart chose to enter a JV contract agreement with Japanese retailers and investors to deploy a reduced asset strategy. Thanks to this switch in strategy, Walmart has been able to influence Japanese retail via the Seiyu partnership, while also obtaining the support of Japanese consumers and investors.
One of the fundamental tenets of international trade theory is that countries obtain a net gain from trade in products/services favorable to their overall comparative advantage. To sacrifice long-term sustainability to follow Trump rhetoric would be a stupid mistake for a company that is so capital intensive, labor dependent, and vulnerable to external market influences (prices of key inputs like oil and steel). Whether it is Mexico, Canada, or Chile, Goodyear should focus their production in a way that favors their overall P&L, despite what Trump may call fair trade standards. At the same time, comparative advantage could benefit US workers by influencing a higher investment in innovation and modern manufacturing. As your note mentions, some producers in the US have raised the concerns that “US steel lacks the quality and price efficiencies” to be cost sustainable. What if the gains from trade obtained from producing abroad could be used to drive better designs for tires in the future?
Appreciate your question at the end regarding whether or not having a sustainable label sway consumers one way or the other. I would give Nestle the benefit of the doubt because it is truly impossible to have zero emissions as a result of making a product, be it a perishable good or a manufactured good. While Whole Foods has been certified by several “green-minded” foundations, their operations may hide the fact that organic products require specialized transportation techniques to reduce perishability. Gaining the stamp of approval doesn’t mean that your products are 0% “green”, it is rather a question about the source of the inputs and the techniques deployed to make the product.
At the same time, Nestle’s impact in the world is several times the average output of a single person or producing field. By being one of the top arbiters of consumer product creation and development, having an active campaign there could trickle down positive behaviors throughout the supply chain. Similar to Walmart’s campaign, Nestle will be using positive reinforcements to enact their green campaigns. I would ask you a follow-up question though: Do positive reinforcements alone urge companies to focus on negative externalities? If not, what can they do to truly motivate change across their complex supply chain networks?
Agreeing with a point raised already, I think that the net impact of this initiative might not necessarily reduce the amount of water required to frack new oil & gas reserves. While Pioneer is focusing their water use away from fresh water sources, they will simply go around the problem by buying cheaper “effluent” water. Given that Pioneer has a higher ability to afford untreated water, Pioneer would be moving interest away from water treatment options for the city of Midland, Texas.
In my opinion, a better way to treat this issue is to incentivize the company to invest in fracking technologies that require less water resources, or better yet, waterless extraction technologies. I’m not an expert in this engineering field, but if we have achieved superior extraction in deep waters through the benefit of incremental technologies, why can’t we develop new ways of extracting sublayer resources?
Based on my experience in data analytics at a retailer, I would be wary to put data on a pedestal like we often do in class. While I agree that better information across supply chain stakeholders has the potential to drive costs down, data itself is not the process, but rather it is an output and input of the medium. In my previous team, we were able to monitor the specific product health metrics for specific merchandise types, but our decision making ended up being the true bottleneck in our operational model. The main reason for this impact is that, frankly, most data is useless due to “noise” inputs that may occur while your record it. Most data analysts estimate that the amount of useful data in the world ranges in around 3-4%, with the majority of it being filler data. Noise can be anything from measuring the wrong “behavioral cues”, to outright recording unrelated environmental factors (speed vs acceleration analog).
While your article emphasizes the overall benefit to the supplier of the product by reducing the supply chain, the consumer side would not be necessarily better off with a 3D printed product. Why? Well, first of all, the set up time for each printing session may last in the order of several minutes, if not hours. In a world where people expect products and services to be provided “on demand” 3D printing offers sacrifice choice over ubiquity.
Also, the retailer utility of 3D printed products has been hotly debated in the past few months. While printing your own t-shirt, for example, may have a “cool” factor as a consumer, the overall cost per unit increases dramatically for the retailer. This happens because you cut away part of the economies of scale that benefit the producer of textiles and clothing, and you instead shift costs downstream in the form of expensive equipment ($160k), trained staff, retail space, and sourced materials. I agree that some retailers may be able to invest in these technologies, but I think that true adoption would be slow at the smaller retailer space because the current sourcing alternative is much cheaper and easier to use.