Venturing Into China. Tasty Proposition, But Could It Be The Forbidden Fruit?

There is no denying it. In recent years China has been the location of choice, for many MNC's to establish themselves. It doesn't take much probing to see why. Companies benefit from cheaper labor rates, land, raw materials, tax benefits and the ability to gain access to a large up-and-coming consumer market. However the picture is not always as rosy as it is made out to be. There are many hidden pitfalls that lurk underneath the glossy surface.

Apple has established itself as a company that has become synonymous with success. It seems that in China, it has met it's match. The iPhone which has had revolutionary success in the United States and in Europe, has started its pursuit of trying to crack the Chinese market. This is proving to be a hard nut to crack. There are several issues that the iPhone faces: the threat from the large counterfeit industry which produces 'knock-off iPhones', the extremely strong bargaining power of the dominant mobile phone carriers as well as service limitations.

More Battles Ahead For IPhone in China

An article by 'PCWorld' reflects upon the 'trials and tribulations' that Apple are facing in China. The company's predicament is illustrated from the beginning of the article as although Apple has "emerged from winding negotiations with an iPhone deal in China", there will still be the ongoing issues of "government pitfalls and look-alike competitors in the country". After protracted negotiations Apple has finally managed to secure a deal with the local carrier Unicom. Amidst the cautionary rhetoric in the article, there is the admission that this deal "launches Apple into a huge market where its products have a following among fashion-conscious urbanites." From the outside this seems to be an extremely promising opportunity for the company as whilst China has nearly '700 million mobile subscribers', Unicom had 141 million subscribers at the end of July. These figures represent a large market share and appears to have all the right ingredients to create a lasting synergy between the local carrier and Apple. However this optimistic sentiment does not carry throughout the article.

In order to gain some credibility, the author quotes an analyst at Daiwa Securities who expects that "2 million iPhones will be sold in China each year, not far above the number sold in other countries". Apple currently sells approximately 30 million iPhones per year worldwide. If these sales expectations are accurate then this does not appear to be as lucrative an opportunity as once imagined. Another negative pitfall that needs to be accounted for is the threat of the 'black market' and competition from 'imitation handsets'. This is a more prevalent threat in China than most other countries and is a risk that cannot be ignored. With regards to the level of service provided there is another obstacle. The Chinese iPhone will "not be able to access Wi-Fi, a function China banned on mobile phones until this year and now only allows on certain handsets". In my opinion, this is a significant draw-back as a company like Apple should persevere to ensure that they offer their clients the same quality of service worldwide. Without this key feature, this ambition would not be realized.

There is a 'conflict of interest' problem on the horizon between Apple and Unicom. In order for customers to purchase songs or applications on the iPhone they have to use the App Store service of iTunes. However there are fears within Unicom that this would "draw users away from the carrier's own value-added services". This conflict of interest is not the only obstacle. There could also be problems related with billing, as Apple would require "a government license to accept download payments through Unicom."

After reading this extract, I wasn't too sure the future would be as bright for Apple in China as I'd first thought. However I was skeptical of cementing these sentiments until I had further evidence. Would this article prove to be filled with unrealistic pessimism? Or would it turn out to be a prophetic vision?

Apple and Its Iphone Get Fleeced in China, But Will Google Fare Any Better?

The second article I read on this issue not only confirmed what I had seen before, but it nailed the point home. You can tell how badly something has turned out, when it becomes a reference to failure. 'Venturebeat' pulls no punches in its reflection on the iPhones success in China. Although there is the acceptance at the start of the extract that, "China is the largest market in the world, it's consistently the fastest growing economy and there is a lot of money to be made there", there is also the illustration of the success at which "local entrepreneurs have found ways to fleece American companies bare". Like the first article there is the mentioned deal with Unicom, but describes it as "a pretty depressing deal".

'Venturebeat' refers to the 'black market' issue that the iPhone faces but puts emphasis not so much on the problems with competition but with reference to "creating confusion and dangerous brand dilution". This could occur in the event that a person in China buys the imitation and "gets turned off by phones that don't work, and may not buy the real thing when it does hit the market". The counterfeit industry is clearly a growing problem in areas like China and this can only work in creating greater obstacles and problems for MNC's like Apple.

Similarly to the 'PCWorld' extract, the 'Venture Beat' article mentions that with Apple's deal with Unicom, the company will gain access to 140 million subscribers. However it continues to mention, rather cheekily, that this pales in comparison to China Mobile's 600 million subscribers and 70% market share. This is proof that certain facts can be manipulated to push forth a certain view. One article could mention how Apple has done well in gaining access to 140 million viewers, another could use this as a negative aspect and say that they wouldn't be able to rival China Mobile's dominance.

Ultimately one can make out that China is becoming a little bit of a conundrum for large MNC's. There are many pitfalls and obstacles along the way when a country decides to enter China. However I still believe that this shouldn't dissuade these companies from entering. It should instead make them more aware that whilst they are entering a large market, they are entering a 'different market'. I feel the key to success in China is not trying to force a certain product upon the locals because this will never work. The key ingredient is to discover what the local consumer there wants. If a company manages to find the right mix between maintaining its traditional product and service yet catering to the local market and their requirements, then the sky really is the limit.

Websites Read:

http://venturebeat.com/2009/08/16/apple-and-its-iphone-get-fleeced-in-china-but-will-google-fare-any-better/

http://www.pcworld.com/businesscenter/article/171132/more_battles_ahead_for_iphone_in_china.html

No Singapore Is Not A Village In China.....

Having first moved to Singapore during the beginning of 1992, I have experienced first-hand the incredible growth that this city-state has encountered during the last couple of decades. The country has progressed leaps-and-bounds which is made all the more impressive considering it only achieved a position of independence as recently as 1965. Singapore is now considered as one of the leading financial centres in the world and an Asian economic power-house alongside Tokyo and Hong Kong.

The one thing that has frequently irked me during periods that I spend away from Singapore is the lack of knowledge and recognition that many people around the world afford to the country. I have countless memories about questions that people have asked, when they find out that I am based there. "Singapore? That's a city in China right?", "Really? But your not Chinese are you?", "Is that the capital? Oh.... or is it Beijing?" These are a few examples of the slighly more intelligent reponses that I've heard. In order to preserve the dignity or lackthereof of the responsible few, I won't post the rest. Therefore I have decided to reflect upon a few articles that I have read recently about the economic growth within the country. Hopefully this will provide a 'baby-step' in enhancing the country's visibility as well as minimising the irksome responses that I will have to encounter.

Whilst Singapore has become synonymous for it's strict governmental policies and has even earned the nickname of 'Fine City', there has been an easing of such restrictions to continue the country's rapidly growing economy. This has triggered large investment into the country with the construction of casinos, trendy restaurants and night-spots as well as theme parks. This was a necessary step in order for the government to succeed in its ambitious plans of making Singapore the number one financial and entertainment hub in Asia.

Lift on Singapore's Casino Ban To Encourage Economic Growth

An article published by 'AllBusiness' reflects how during 2005, the government legalized casino gambling in an attempt to further boost the economy. Similarly to the United States, Singapore has suffered from the growth of China and India as this has led to lost manufacturing jobs. The article reports the views of a consultancy expert who reflected, "This is really a bold move by a governement that has traditionally been conservative. Projections are that the GDP will grow by 1% just because of the casinos and 100,000 jobs will result from construction".

The expose from 'AllBusiness' is a rather brief extract but succeeds in presenting an interesting topic with enough information and analysis to be a credible source. The style of writing is 'informative' and although there is the inclusion of several quotes, there does not seem to be any bias towards one perspective or another.

Singapore's Growth Beats Estimates on Construction

An extract from 'Bloomberg' reported the rapid rate of expansion of the Singaporean economy. The opening line of the article was succinct, "Singapore's economy expanded 7.6% in the first quarter amid a boom in construction, exceeding all forecasts and increasing the likelihood that growth this year can withstand a U.S. slowdown."

'Bloomberg' highlighted the impact of the new casinos, as "builders broke ground on a $3.3 billion casino-resort last quarter, helping spur the fastest construction rate in nine years." It seems that the construction was not the only sector that was prospering as financial heavy-weights, "Merrill Lynch and Morgan Stanley are among businesses expanding operations, as the government cuts corporate taxes to lure international financial services companies and reduce the economy's dependence on manufacturing."

The article uses the inclusion of quotations of an economist at Standard Chartered Bank in Singapore to add some financial expertise to the equation. "The domestic growth story is extremely strong at this point in time, driven primarily by real estate as well as equities." When an expert gives his own perspectives on a given subject, this works to persuade the average reader that the results being presented can be verified by a specialist in the field.

Whilst there is no disputing that the world in general is dependent on the stability of the U.S. economy, it is a testament to Singapore's progress that they are far less reliant, which is a luxury that few countries in the world could claim. Their ambition of becoming a central hub in Asia seems to be gather pace. This is exemplified as, "Merrill Lynch is building an office block that will house 900 employees when it opens at the end of next year, making Singapore its largest center in Asia. Morgan Stanley will open a prime brokerage office this year to be closer to its hedge-fund clients". The introduction of companies with such a great prestige can not be undermined as this brings in foreign-investment and higher net-worth individuals. As the article correctly states, "this spills over to the rest of the economy."

The Paradox of Singapore's Economic Growth: Time and Income

After having looked over numerous articles reflecting up Singapore's successes and fascinating growth rate, I felt that the only way to present a balanced arguement, would be to uncover some of the negative aspects that can be attributed to such growth. I came across an article by 'The Temasek Review', which is a platform where news and opinions are presented from an 'independent perspective'. There are some captivating points highlighted and reflects upon 'the other side of the coin'.

The review starts off by mentioning how, "In a typical economic growth model, the assumption is that an economy that grows from a low income to a higher income suggests that the economic growth will bring along positive growth with regards to 'real incomes' and 'leisure time'." This means that due to the population earning a higher income, they should be able to possess a great level of 'purchasing power' as well as have the freedom to spend more time doing the things that they enjoy, as a result of a greater level of efficiency in work and technological improvements. The author points to the fact that this is not the case in Singapore. Whilst "an average income in Singapore in 2008 was 42 times more than that in 1960", there are still "fewer people calling their incomes as comfortable or sufficient". This perspective is hammered home with various arguements that suggests that Singaporean workers are being overworked with 'increased working hours', 'greater pressure to have two-workers in a family unit' and 'incomes unable to compete with rising costs'.

I have to admit that whilst I give credit to the perspectives put forth, I feel the article was written with an excessive amount of venom that prevented me from taking everything being said too seriously. Whilst the article was well presented, it would have given itself more justice if it had presented a countering arguement. In my perspective, it was obviously written by a local Singaporean who had experienced the influx of foreigners into the country and felt aggrieved by the inability to match their lifestyle. It is hard to determine what type of living standard is 'sufficient' and primarily depends on the expectations of the individual. One must sympathise with the locals as it is justifiable that many are maybe not given the same opportunities as a 'foreign skilled worker', but I have witnessed first-hand that the government has several measures in place to maintain and improve the quality of 'government housing' that the Singaporeans benefit from, which is significantly more cost-efficient and to a higher standard than most countries around the world are able to provide. It is important for the country as a whole to accept the fast-paced changes and embrace this level of growth, rarely seen in other parts of the world.



Websites Read:
http://www.bloomberg.com/apps/news?pid=20601068&sid=aUvv19DCPWVA&refer=economy

http://www.allbusiness.com/operations/facilities-commercial-real-estate/4423440-1.html

http://www.temasekreview.com/2009/09/23/the-paradox-of-singapore%E2%80%99s-economic-growth-time-income/

The Heat May Have Been Turned Down. But Still.... There Is Smoke Whenever There Is Fire.

Having just returned from a month long stay in Cuba, I've come to realise that if any country had the merit of being labeled 'news worthy', Cuba would be it. Unlike most destinations in the world, Cuba has no comparisons. It is just as much controversial as it is conflicted and despite all its trials and tribulations, the country maintains its colorful and rhythmic beat that pushes its people forward in the midst of a situation that few would envy.














One would find it rather difficult to talk about Cuba and the situation that is present within the country without mentioning the 'Trade Embargo' and the historically strained relationship that exists with the United States.

When first glancing over articles that have been written about the recent ties between Cuba and the United States, one wouldn't be blamed for having a slightly more optimistic outlook on the strengthening relationship. However having digged a little deeper, it seems rather premature to 'pop open the champagne' and rejoice at this 'new-found friendship'. Whilst it is undeniable that there has been vast improvements and substantially less tension between the two, seen during the 'Bush Era', there remains plenty to be done. The primary articles that I reviewed was one from the BBC, another from the 'New York Times' and a third from 'CNN'.

I felt compelled to investigate this matter as having spent a considerable amount of time there, I know that although one must respect Cuba for sustaining itself without the help of the outside world and its numerous attempts at reaching a level of 'self-sufficiency', the country would greatly benefit from the removal of the 'Embargo' as this would begin to stablise its economic situation and allow the country to start developing 'mutually beneficial' trade-relations with various countries around the world.

Obama Eases Cuba Travel Restrictions

The first article viewed was a publication by 'CNN'. The author takes a strong position of bias towards the current American administration. Throughout the entire article there is spurts of rhetoric against Cuba's political system and casts the view that the United States is the 'peace-maker' against the evil protagonist. This is illustrated with the inclusion of quotes from a Republican Senator who claimed that, "Raul Castro's dictatorship is one of the most brutal in the world. The U.S. economic embargo must remain in place until tyranny gives way to freedom and democracy." Another Republican senator allegedly was quoted as saying, "Over the past 50 years, the Castros and their secret police have been directly responsible for killing thousands of nonviolent, courageous pro-democracy activists and for jailing and torturing tens of thousands of others. And they continue to this day to perpetrate their brutal crimes". In the midst of these hard-lined quotes against the Cuban government, there was the inclusion of steps Obama had taken towards improving relations and went as far as suggesting, "Obama has a historic opportunity not to be the last president of the Cold War but the first president to turn the page in the US-Cuban relations".

Obama Opens Door To Cuba, But Only A Crack

In an article written by 'The New York Times', there seemed to be the acknowledgement that Obama was achieving progress in his ambitions at strengthening relations with Cuba, albeit 'only by a crack' and not as much as was first anticipated. The criticism towards Obama over the slower-than-expected nature of the progress visibly seen has to be put into perspective as the political conflict with Cuba is deep-rooted and it's important for any new president not to try 'step on any toes' so early into his campaign. The article mentions that "whilst he did not lift the trade embargo with Cuba, he is using his executive power to repeal Mr Bush's tight restrictions so that Cuban-Americans can now visit Cuba as frequently as they like and send as much money as they want, as long as the recipients are not Communist Party officials".

The article continues by emphasising how Mr. Obama is encouraging "telecommunications companies to pursue licensing agreements in Cuba, in an attempt to open up communications there by increasing access to cellphones and satellite television." This illustrates how the United States is beginning to change their mindset about Cuba. Instead of viewing them as the 'evil neighbour', they are beginning to work out how they could benefit from the 'opening up' of the country. Some may be critical of this approach and continue on their rants about the US playing the role of the 'imperialists' of the world and doing everything for their own political and financial gain but let's be honest here, which country doesn't look at how they can manipulate a given situation for their own personal gain?

Out of the three articles, I enjoyed the way 'The New York Times' article was written. It seemed to possess a diverse range of qualities. It had an optimistic tone, yet also put forth a cautionary message that whilst changes were being accomplished, it was important not to believe all 'the hype'.

'No Change' from Obama, Says Cuba

The 'BBC News' article was by far the most critical of the progress being made. The tone and direction of the article was established from the first line. "Earlier this week, Mr Obama renewed the embargo for another year". Short and sweet, direct to the point. The Cuban foreign minister, Bruno Rodriguez, was quoted as saying that "the Trade Embargo had cost Cuba $96 billion since 1962". Whilst Mr Rodriguez acknowledged that the easing of restrictions for Cuban-Americans to travel back home and the amount of money allowed to be sent back had been "positive" they had nothing to do with the embargo. The foreign minister then continued by declaring that whilst Cuba hoped for direct talks they would "not discuss its internal affairs with anyone, not with the US nor with any group of countries".

Having read the other articles, this put a dampener on any optimistic sentiments that lingered. If the US was only willing to consider talks with Cuba on the premise that they would work towards implementing a more democratic society and improve it's human rights record, and Cuba was only willing to consider talks without the mentioning of how they conduct 'their internal affairs', then what hope remains?




Websites Read:
http://news.bbc.co.uk/1/hi/8260104.stm

http://www.nytimes.com/2009/04/14/world/americas/14cuba.html

http://www.cnn.com/2009/POLITICS/04/13/cuba.travel/

Size Matters.

Recently there has been a widely-disputed debate about whether the global economy is still in the midst of a recession or if we have already seen the worst of the storm. Like anything, it depends who you ask. A key fundamental behind a market economy, is the feelings and confidence of consumers. The hype surrounding the easing of the recession, is likely to be a combination of truth mixed with a sense of hope.

UK economy is 'still not growing'

An article published on the BBC News website, illustrated how "contrary to expectations, the UK economy did not grow in the third quarter of the year" and this could be attributed to a "failure in registering growth in weak industrial activity". The article was written primarily from an unbiased viewpoint and gave little away in terms of the writers opinion. Instead the focus was fundamentally facts and quotes giving credit to the opinion of the 'Chief Secretary to the Treasury' amongst others. The article uses two primary sources to reflect the evidence presented. The first source mentioned is the 'National Institute of Economic and Social Research' or NIESR. The second source that is referenced is the 'Office for National Statistics' or ONS. Whilst these seem to be fairly reputable sources, I would have enjoyed reading the article more had their been not necessarily 'author bias' but atleast some sort of opinion or perspective on the facts and information that was being presented.

The NIESR calculated that from July to September 2009 there was an unchanged GDP within the UK. This didn't correspond to economist predictions that there would be a level of growth that would effectively signal the end of the recession in the UK. The NIESR went a step further by commenting that "predictions were less likely to be accurate than usual because of the current disturbed economic circumstances". These reports add further speculation as to when the UK economy will follow France, Germany and Japan out of the recession. To further portray this cautionary viewpoint, the article mentions how the ONS announced on the 6th October 2009, that the UK's industrial output had unexpectedly fallen 2.5% during the month of August from the previous few months. This information is relevant as "GDP figures are given prominence as a recession is generally shown by two consecutive quarters when the economic output is contracting".

UK Economy Already Out of Recession

There are however reports that attempt to portray a rather 'brighter' picture of the current economic situation. 'FinFacts' is a website that reveals global financial news. From the articles that I reviewed on the website, it seems to be the sort of media outlet which tries to impress with the use of large quotations, numerous statistics and complicated looking graphs.
The start of the article begins in a brash and convincing fashion, "UK consumer confidence rose to the highest level in more than a year in August as evidence mounts that the economy is emerging from the worst recession in a generation". The main source used in the article is the 'Nationwide Building Society'. To further emphasise this positive sentiment the source highlights a quote in italics from a senior offical, the Nationwide's 'Chief Economist':

"The moderate increase in confidence this month indicates that, for the first time since April, consumers are beginning to feel more positive, not only about the future, but also about the present situation. The rise in positive sentiment across all indices is no surprise as a number of key economic indicators continue to show that we may have reached the bottom of the current recessionary cycle".

I was rather sceptical when I read this article as it seems as though there is an underlying motive behind it's publication and didn't seem to possess a level of objectivity. In my opinion, the article seems to target investors or industry-related professionals as it constantly attempts to persuade and re-assure it's readers that things aren't as bad as they seem. With this in mind, I was not as receptive to the information presented as I was in the first article.

There appears to be a lack of cohesion or synergy between the information presented in the first and second article. In the first article, it clearly states that "GDP remained unchanged from July to September". However in the second article, it mentions that "the UK economy returned to growth in the three months ending August as it rose 0.2%, following a 0.3% decline in the three months to July". What was interesting was that both sources quoted statistics from the NIESR.

In order to get an objective and coherent indication on the validity of these sets of information, it would be most beneficial for the reader of these articles to use a third source and determine which is closer to the truth.


Websites Read:
http://news.bbc.co.uk/1/hi/business/8292958.stm

http://www.finfacts.com/irishfinancenews/article_1017849.shtml