Posts in category Business


ApprovedBusinessBusiness and finance

The airline industry’s most outspoken boss goes global

AIRLINE bosses are often household names due to their attention-seeking behaviour—from the foul-mouthed rants of Michael O’Leary, chief executive of Ryanair, to the model-flanked antics of Richard Branson of Virgin Atlantic. But even in an industry filled with characters, Akbar al-Baker, Qatar Airways’ chief executive, stands out. He is known in the industry for behaving unpredictably at press conferences and for his colourful attacks on rival airlines. The word “crap” often comes up, as a description for new jets from Airbus and Boeing, and also (in a quote from July): “there is no need to travel on these crap American carriers” on which “you will be served by grandmothers”.

Mr Baker could do with some allies just now. Since June, Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have imposed a blockade on Qatar, banning its flag carrier’s jets from their skies. That has resulted in the cancellation of over 50 daily flights to these countries,…Continue reading

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ApprovedBusinessBusiness and finance

Many Japanese-made cars enjoy an afterlife in Myanmar, but not for much longer

Gridlock in Yangon

THE Japanese make cars that last but replace them relatively quickly. The average car in Japan is three years younger than in America. This combination of durable manufacturing and dutiful consumption of a prized national product works out well for the rest of the world; many countries import older Japanese cars in bulk. Secondhand vehicles fill vast parking lots in Japan’s port cities, awaiting shipment to New Zealand, the United Arab Emirates and elsewhere.

The third-most-popular destination is Myanmar, which imported over 80,000 used Japanese vehicles in the first nine months of this year, according to Japan’s International Auto Trade Association. Drivers believe that Toyotas, Hondas and Nissans can stand up to the country’s pockmarked roads, a faith not yet shown in South Korean and Chinese cars.

There is only one problem, which is that Japan drives on the left, Myanmar on the right. As a consequence, most of Myanmar’s…Continue reading

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ApprovedBusinessBusiness and finance

IKEA undertakes some home improvements

You snooze, you lose

ON A Sunday afternoon, just beyond London’s M25 ring road, shoppers participate in the ritual that is a trip to IKEA. Fuelled by a lunch of Swedish meatballs, they negotiate their way around the 400,000-square-foot maze of a store, past children playing hide and seek and couples arguing over the merits of a PAX over a HEMNES wardrobe. Hours later, they emerge, wearily pushing trolleys loaded with flat-pack furniture and far more tea lights than they had intended to buy. The joy of assembly still awaits them.

This experience has changed remarkably little since the late 1950s, when IKEA, which is still privately owned, set up its first store in southern Sweden and found that people would travel long distances for low-cost, self-assembled goods. IKEA has become the world’s largest seller of furniture, with over 400 shops around the world and €38bn ($42bn) of revenue.

But now it is acknowledging that customers might want to…Continue reading

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ApprovedBusinessBusiness and finance

A merger between CVS Health and Aetna could be what the doctor ordered

STANLEY and Sidney Goldstein would scarcely recognise their creation. In 1963 the brothers opened a humble storefront in Lowell, Massachusetts, selling health and beauty products. Determined to put customers first, they named their enterprise Consumer Value Stores. Today the Goldsteins’ startup, soon afterwards sold to a bigger firm, is nothing short of a health-care Goliath.

Revenues at CVS Health reached $177bn last year, riches which come from 9,700 retail pharmacies and from its operations in mail-order drugs and sales of more expensive speciality medicines. The firm commands nearly a quarter of the American market for prescription drug sales (see chart). It is also the biggest pharmacy-benefit manager (PBM) in America, a type of middleman that negotiates bulk discounts on drugs with large pharmaceutical firms on behalf of employers and insurers.

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ApprovedBusinessBusiness and finance

Japan Inc gingerly embraces more foreigners

MICHAEL WOODFORD, the first non-Japanese president of Olympus, likened the camera-maker’s board members who sacked him in 2011 to “children in a classroom”. Mr Woodford had confronted Tsuyoshi Kikukawa, the company’s imperious chairman, over a $1.7bn hole in its finances. Mr Kikukawa responded by orchestrating a show of hands in a boardroom coup that sent the Englishman packing. It all fitted a cliché of Japan’s boardrooms as an all-Japanese, all-male club where wizened bosses ruthlessly enforce wa, or harmony.

Gradually, the serenity is being disrupted. Nearly 15% of companies in the Nikkei 225 stock index now have at least one non-Japanese on their boards. That is still less than half the share in Britain’s FTSE 100, but it is up from 12% in 2013 and the trajectory seems set. Japan’s biggest bank, Mitsubishi UFJ, and Takeda, its largest pharmaceuticals company (which in 2015 appointed its first foreign chief executive, a Frenchman) announced the appointment of foreign directors this year. Of…Continue reading

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ApprovedBusinessBusiness and finance

Dark tourism spooks its way into the mainstream

ONE recent morning in Salem in the state of Massachusetts, a witch ran out of wands. Teri Kalgren, the owner of Artemisia Botanicals, an apothecary and magic shop, attributed the shortage to a witch-inspired boom. People have long flocked to Salem to learn about the infamous witch trials of 1692, in which Puritan hysteria led to the executions of 20 people (and two dogs). But since 1982 when the city introduced Haunted Happenings, a daylong Halloween festival for local families, the event has expanded to a commercial celebration lasting a month that attracts 500,000 tourists.

Last year tourism pumped $104m into Salem and funded some 800 jobs. The revenues have been increasing by 5-6% every year, says Kate Fox of Destination Salem, the city’s marketing arm. Tourists can buy a spell kit, visit a witch museum, take a walking tour (ghostly, feminist or literary-themed) and have their fortune told. On the opposite coast, Scott Michaels has watched his…Continue reading

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ApprovedBusinessBusiness and finance

Reports of the MBA’s demise are exaggerated

THE MBA is both revered and reviled. To boosters it has advanced the science of management and helped firms, and countries, to grow. Detractors say it offers little of practical value and instils in students a sense of infallibility that can sink companies, and knock economies sideways. The critics are currently the louder of the two, claiming that particularly the full-time, campus-based MBAs have reached saturation point, with too many mediocre courses chasing too few candidates. The Financial Times recently likened them to “the Grand Tour of business education in an age of Airbnb”.

There is a widespread feeling that full-time MBAs are on their last legs, concedes Sangeet Chowfla, the president of the Graduate Management Admission Council (GMAC), a business-school association. Decline is allegedly hastened by competing qualifications, such as the Masters in Management. MiMs have much the same syllabus as MBAs, but unlike them, take students…Continue reading

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ApprovedBusinessBusiness and finance

How leading American newspapers got people to pay for news

Past …

SOMETIMES it feels like the 1970s in the New York Times and Washington Post newsrooms: reporters battling each other to break news about scandals that threaten to envelop the White House and the presidency of Donald Trump. Only now their scoops come not in the morning edition but in a tweet or iPhone alert near the end of the day.

It is like old times in another way: both newspapers are getting readers to pay, offsetting advertising revenue relinquished to the internet. After years of giving away scoops for nothing online, and cutting staff, the Times and Post are focusing on subscriptions—mostly digital ones—which now rake in more money than ads do.

Their experiences offer lessons for the industry in America, although only a handful of newspapers have a chance at matching their success. A subscription-first approach relies on tapping a…Continue reading

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ApprovedBusinessBusiness and finance

American business schools dominate our MBA ranking

American business schools dominate The Economist’s 2017 Which MBA? ranking, taking 16 of the top 20 places. Northwestern University’s Kellogg School of Management returns to the top spot for the first time since 2004. Kellogg students praise its facilities and collaborative culture. Their career opportunities are among the best, thanks in part to one of the largest alumni networks in the world; 97% of students find a job within three months of graduation, pocketing a 72% pay bump. All of the top ten slots in the ranking are now occupied by large, prestigious American schools, for which students are happy to pay extra. Their average tuition fee is $134,600, and has risen quickly in recent years. Employers, too, are willing to shell out for the best students. Their average basic salary was $127,300, a 70% increase on their pre-MBA pay cheques. But life, like rankings, isn’t just about money. So we weight data according to what students tell us is important. The four categories covered are: opening new career…Continue reading

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ApprovedBusinessBusiness and finance

Aldi and Lidl grow despite ignoring the internet

THE aisles are wide, the lights bright and shelves low. Most obviously, however, the apples shine and the broccoli beckons. For those used to the cramped, dimly lit Aldi stores of yore, all expense spared, the new supermarket in Herten, Germany, is almost shocking.

Opened in April this is the prototype for a vast new renovation and expansion programme across Europe, Britain and America. It is the discount giant’s big bet on the future of shopping, all the more daring as the money is going almost entirely on bricks and mortar. Defying the conventional wisdom that customers want both in-store and online shopping (“omnichannel” in the jargon) Aldi wants to conquer the retail world by ignoring the internet. As too, to a lesser extent, does its great German rival Lidl. Plenty of other grocers reckon this may be the miscalculation that eventually brings them down.

Founded in 1945 and 1973 respectively, Aldi (split into two legally separate companies, Aldi Nord and Aldi Süd)…Continue reading

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ApprovedBusinessBusiness and finance

Apple should shrink its finance arm before it goes bananas

IT IS fashionable to say that tech firms will conquer the financial services industry. Yet in the case of Apple, it seems that the opposite is happening and finance is taking over tech by stealth. Since the death of Steve Jobs, its co-founder, in 2011, the world’s biggest firm by market value has sold hundreds of millions of phones with bionic chips and know-it-all digital assistants. But it has also grown a financial operation that is already, on some measures, roughly half the size of Goldman Sachs.

Apple does not organise its financial activities into one subsidiary, but Schumpeter has lumped them together. The result—call it “Apple Capital”—has $262bn of assets, $108bn of debt, and has traded $1.6trn of securities since 2011. It appears to be run fairly cautiously and is part of a thriving firm, but it still deserves scrutiny. Companies have a history of being hurt by their financial arms; think General Electric (GE) or General Motors (GM).

Apple Capital has lots…Continue reading

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ApprovedBusinessBusiness and finance

Fears that Xi Jinping is bad for private enterprise are overblown

FOR a moment it seemed China was reverting to Maoist economic management. On the sidelines of the Communist Party congress this month, an official told Xi Jinping that her village distillery sells baijiu, a potent spirit, for 99 yuan ($15) a bottle. Mr Xi, China’s most powerful leader since Mao, remarked that this seemed a bit dear. The chastened official thanked him and pledged to follow his guidance. But Mr Xi gestured her to stop. “This is a market decision,” he chuckled. “Don’t cut the price to 30 yuan just because I said so.” The audience, perhaps relieved that Mr Xi had no intention of dictating the price of booze, broke into laughter.

This rare spot of levity at the dreary five-yearly congress was telling. The occasion cemented Mr Xi’s unrivalled position at China’s apex. For companies, the question is what he will do with it. His vision can seem ominous. “North, south, east and west—the party is leader of all,” he intoned in a speech laying out his…Continue reading

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Business

Counting Down to ASC 606

There will be little New Year’s Eve celebrating but perhaps a lot of morning-after hangovers for U.S. businesses that haven’t begun preparing for ASC 606, the Financial Accounting Standards Board’s new rules about revenue recognition. They are set to go into effect on Jan. 1, 2018. The news is much the same for Europe, though there the rule’s name is “IFRS 15.” The change is hard to do.

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ApprovedBusinessBusiness and finance

Saudi Aramco’s IPO is a mess

THE proposal to sell shares in Saudi Aramco, the world’s biggest oil company, stunned the financial markets last year. Muhammad bin Salman, now Saudi Arabia’s crown prince, promised that it would be the biggest initial public offering (IPO) of all time, valuing Aramco at $2trn. It was to be the centrepiece of his plan to transform the Saudi economy, reducing its dependence on oil. It was meant to foster financial transparency and accountability in one of the world’s most hermetic kingdoms. Above all, it would cement the young prince’s image as a bold moderniser soon to inherit the throne.

Alas, youthful impatience appears to have got the better of him. His tendency to micromanage the IPO and vacillate over where Aramco should be listed has caused delay and confusion. Matters came to a head this week when advisers, speaking anonymously, and company executives doing the same, gave conflicting reports, suggesting a mutinous atmosphere.

The kingdom’s advisers say…Continue reading

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ApprovedBusinessBusiness and finance

Why Airbus’s tie-up with Bombardier is so damaging for Boeing

Alabama bound

LIKE an airliner in service, Bombardier’s C-Series programme has had multiple highs and lows. In 2008 the Canadian firm began its attempt to break Airbus and Boeing’s duopoly on smaller jets, spooking the pair into upgrading their own models. Costs and delays pushed it near bankruptcy in 2015, followed by a bail-out from the Quebec government worth C$2.8bn ($2.2bn). The next year an order for 75 C-Series jets from Delta, the world’s third-biggest carrier, kept the programme aloft. But decisions in September and October by America’s Commerce Department to agree to demands by Boeing, an aerospace giant, to impose a total tariff of 300% on importing those planes into America risked the C-Series project crashing once and for all.

On October 16th came a surprise surge. Bombardier said it would hand over half the project to Airbus, a European aerospace firm, free of charge. Bombardier and Investissement Québec, the province’s…Continue reading

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ApprovedBusinessBusiness and finance

A property billionaire rescues Harvey Weinstein’s studio

AS DISTRESSED assets go, the Weinstein Company (TWC) is uniquely distressing. Much of its value was bound up in the brands of its eponymous founding brothers, one of whom, Harvey Weinstein, has been accused of sexual harassment and of assault by dozens of women in the film industry in America and elsewhere. Amazon Studios, Apple and some television networks have hastened to cut ties with the studio, unwind production deals and remove Mr Weinstein’s name from credits. Mr Weinstein’s accusers may well sue the company. It was already heavily indebted after a recent string of box-office flops.

Who would see an opportunity? Aside from TWC’s particular troubles, independent films are a tough business, and the studio has had to haggle with creditors. But for a vulture investor some of the studio’s assets hold value. On October 16th Thomas Barrack (pictured above), chairman of Colony Capital, a private-equity firm, said he would immediately put an undisclosed sum of cash into TWC and look…Continue reading

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ApprovedBusinessBusiness and finance

A geopolitical row with China damages South Korean business further

Closing time came suddenly

IN A cosmetics emporium in central Seoul, rows of snail-slime face-masks sit untouched. Not long ago, visiting Chinese tourists would snap these up as avidly as a designer handbag in New York or anything from London featuring the Queen. Yet now their rejuvenating properties are failing to lure the country’s shoppers. Seo Sung-hae, a salesman, says business has slowed to a snail’s pace, because of a drop in the number of Chinese visitors. “We used to have 100 customers a day, but after THAAD, there are almost none,” he says.  

THAAD, or Terminal High Altitude Area Defence, is an American missile-defence system designed to guard against North Korea that was installed in South Korea starting in March. Chinese authorities protest that its radar could be used to spy on its territory. Chinese newspapers have encouraged consumers to boycott South Korean goods. The plan was to “bully” Korea into ditching…Continue reading

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ApprovedBusinessBusiness and finance

An Indian aviation visionary runs into bureaucratic turbulence

But India’s not rolling out the red carpet

ALL great aviation ventures start with mavericks willing to defy both the laws of physics and the scepticism of their peers. William Boeing, Oleg Antonov and Howard Hughes are some of the best-known examples. Next, perhaps, is Amol Yadav, who for much of the past decade has been building aeroplanes on the roof of the Mumbai flat he shares with 18 family members, and battling the Indian authorities to let him fly them.

Admittedly, only experts would be able to distinguish the six-seater propeller plane (pictured) Mr Yadav has designed from scratch from a run-of-the-mill Cessna. But his plane is the only one in decades with wholly Indian credentials, he says. Much larger outfits have tried but struggled to get an indigenous craft certified for production, including National Aerospace Laboratories, one of several state-owned aviation mastodons.

Self-identified visionaries are commonplace in…Continue reading

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ApprovedBusinessBusiness and finance

IBM lags in cloud computing and AI. Can tech’s great survivor recover?

TECHNOLOGY giants are a bit like dinosaurs. Most do not adapt successfully to a new age—a “platform shift” in the lingo. A few make it through two and even three. But only a single company spans them all: IBM, which is more than a century old, having started as a maker of tabulating machines that were fed with punch cards.

Yet after 21 quarters with falling year-on-year revenues (see chart), doubts had been growing about whether IBM would manage the latest big shifts: the move into the cloud, meaning computing delivered as an online service; and the rise of artificial intelligence (AI), which is a label for…Continue reading

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