Categories
Analysis

Why did Netflix fail to concur Russian online-cinema business?

Introduction

I will start with a phrase that may sound rather ridiculous to US citizens. Yes, in Russia only a very tiny fraction of people have a subscription to Netflix. In fact, many Russian people do not have a single subscription to an online-cinema. Due to some cultural backgrounds and ad technology in some distant parts of the country some people do not watch films online at all, and 93% of those who watch, use illegal resources. They are already a part of Russian culture; pretty talented people translate foreign films using jokes, irony and satire and make films only better! This is why many people hesitate to switch to official resources; they are adore foreign films that are modified a bit with Russian creativity.

But pirate websites is not the only problem Netflix faced when entering the Russian market. Low incomes, cultural backgrounds and heavy opposition joined forces.

Problems Netflix Faces

Firstly, on average, a standard Russian has an income of about 490 dollars a month. A subscription to an online video service costs anywhere from 3 to 10 dollars, an amount that is not negligible in this case when one has to consider all the other expenses people have to cover. With inflation hitting 6% a year, and salaries not growing by the same percentage, Russians are unwilling to spend money on content, which could be accessed for free through another source.

Secondly, not all Russian people adore the films that are suggested by Netflix: there is a very significant cultural difference between Russians and Americans. The times of the Soviet Union left a very large stain on Russian mentality. People do not want to see that some people lead a happy life somewhere in another part of Earth while they don’t. They want to see movies that reflect the problems they face. That is why genres such as arthouse are very popular in Russia. Netflix does not offer such films. Also, many Russian people, due to Soviet prejudices, are pretty intolerant, and they dislike the idea of seeing people of sexual minorities on their screens.

And thirdly, Netflix has to battle with three very serious opponents: Kinopoisk, OKKO and IVI. For many years, Kinopoisk was just a website about films, where people could discuss their opinions  and put marks —  it was like IMDB – but then it partnered with Yandex, one of Russia’s largest non-governmental companies to open a service that could try to fight with Netflix for the audience. Having an abundance of money and a very talented management, Yandex straight away started buying copyrights for Russian distribution of some of the most famous films and series, such as “The God Father”, “How I Met Your Mother”, “John Wick”, etc. It even received exclusive rights to show Warner Brothers’ “Justice League: Snyder’s Cut” from the first days of its release. Tigran Hudoverdyan, Yandex’s deputy CEO, uses the same tactics as he used when he single-handedly concurred Russian Taxi Business – he attracts customers by setting very small rates at first, and then lifting them when the customers are already acquired. Yandex are basically buying rights to distribute an abundance of famous titles from the largest American film companies, and even Netflix. Many films that one can usually find on Netflix can be found on Kinopoisk in Russia instead. The only issue is that Yandex is spending too much money, even considering the fact that is is Russia’s largest IT company. The question is whether Yandex will manage to gain enough from this business to cover all of the expenses.

Competitors of Netflix in Russia

The other two large companies: IVI and OKKO are less dangerous. Even though OKKO is controlled by Russia’s second biggest company, Sberbank, it is, most definitely, not the service they consider the most important due to great revenues from its banking investment and other IT businesses. But, OKKO has a lot of rights to distribute different sportive events such as the matches of English Premier League or the fights from Bellator MMA. IVI does not have such finances as the other two companies but it has a passionate collective. Opened by a former financier, IVI became a project of his life, and he desires to fight until the end with the giants that oppose him. Even though he does not have the money that his rivals have, he invests reasonably into content that would be unique to the service (something that OKKO and Kinopoisk also do, but rely on less). Also, the management of the company has plans to have an IPO on Nasdaq to receive money for the future development of the business. In 2019, the company already had more than 100 millions of dollars of revenue a year, and this number grew by 50% a year. At that time, IVI was the most popular Russian online media service. All of these factors made IVI an interesting company to invest into, but its IPO was shattered by the COVID-19 outbreak.

Conclusion

To conclude, the most important factors of Netflix’s failure to win dominance in Russia were low incomes, the cultural background of Russian people and heavy opposition from local companies. In my own humble opinion, the last factor is the most significant one.

Sources

Categories
Analysis

How does the history of Japan and America cause the difference between their current business strategies?

Introduction

Each country has its own unique history and background, but while some countries have existed since the BC era, other countries became nations only a few years ago. This article will focus on Japan, one of the oldest nations in the world, and America, one of the youngest. Despite their difference in age, America and Japan are known as developed countries that lead the world economy and business world. According to the GDP (gross domestic product), which shows the economic power of each nation, the United States is the country and Japan is in third place.

RankingCountryUnit: $1000000
1USA20,932,750
2China14,722,840
3Japan5,048,690
4Germany3,803,010
5UK2,710,970

Even though the two countries look similar in numbers, they have had completely different histories, cultures, and backgrounds. Such differences have a great influence on their individual business strategies and decisions as a nation, even still today.

Differences between the U.S. and Japan

One of the biggest differences is the “flexibility of companies”. Flexibility here refers to how typical companies in each country respond to new ideas and how they make decisions. In America, companies tend to adopt novel ideas, and/or techniques by receiving input from people with diverse perspectives and backgrounds. Such a management style can be described as innovative. On the other hand, people in Japanese companies are homogeneous, meaning that there are only very narrow perspectives. This may explain why Japanese companies tend to respect their existing techniques and work with their resources and do not implement new ideas as often or as easily. In fact, a survey shows that 35% of people said that America is the most innovative country whereas only 12% of them said that it was Japan. But how are these difference explained by the histories of Japan and the U.S.? 

First, we will take a look at how history affects the diversity of the two countries. For America, as widely known, Columbus found an American continent where native Americans had already settled. After his finding of the continent, many Europeans began migrating to the American continent and ultimately colonized the continent. This means that since its discovery, America has been a very diverse country, which it still is today. This in turn means that companies in America consist of a diverse community of people. As opposed to the history of America, Japan has developed with only a single race: Japanese. Because Japan is a small island country, not many countries have tried to invade Japan in its history. In addition, from 1639 to 1854, Japan was a closed country, which means that no one was able to come to Japan and there was no trade with other countries. Such conditions caused  Japan to become an even more homogeneous nation.

The second main difference is the ability of companies to adopt new ideas and approaches. In Japan, because the Japanese culture has been able to flourish for more than 2000 years without being confronted by other cutlures, there are many traditional ideas that people still respect, such as the existence of the natural state. One example of this is that some Japanese words that were first “invented” 1300 years ago to represent body parts and nature are pronounced exactly the same — examples of this are nose and flower as well as tooth and leaf. Because the idea of living “with nature” still penetrates widely in Japan, and there is a belief that long-lasting traditions should not be abolished, people tend to make more conservative decisions. Conversely, Americans have more realistic ideas of nature. For instance, Newton (even though he was from Europe) who found the existence of gravity considered the tree with an apple as an experiment objective, not something to see and enjoy the phase of the tree as the Japanese did. Also, because there are not many long-lasting histories in America because of the late independence, there would be less pressure for people to decide to adopt new, what could sometimes be seen as a bit risky ideas and/or techniques.

Conclusion

In this article, by unraveling the history of the United States and Japan, the huge role that the relevant history of the two countries plays in the business sector was discussed. History has greatly influenced each country’s business greatly, thus explaining the vast differences between the two countries. Based on this article, my suggestion is that businesses should be open to adopting new ideas and techniques, but at the same time, I do think that is important to follow some respected traditions at the same time and not abolish them. Generally, it is always interesting to see the connection between the history of the country and the current situation of the country and explore how the traditions have impacted such developments.

Sources

https://www.globalnote.jp/post-1409.html

Categories
Analysis

An Introduction to Demand & Supply

Introduction:

Economics is a study of people. By exploring economics, we are able to explain the production, distribution, and consumption of goods and services. Economics can be separated into macroeconomics and microeconomics, with the main difference being that microeconomics is the study of individual and business decisions, whereas macroeconomics is the study of decisions made by governments and countries. To fully understand economics, it is necessary to understand the base of decision making and how consumers and producers interact in regards to certain situations. This fundamental concept is known as “Demand & Supply”. 

Diving into Demand:

The law of demand states that the quantity of goods demanded varies inversely with price. Further explaining that, with an increase in the price of a good or service, there would be a decrease in the quantity demanded of that good or service, vice versa. An example of this would be: If the price of an ice cream cone was $5, one would buy 2 or 3. However, if the price of the ice cream was $15, people would only prefer buying one. This law is graphically represented through a demand curve, which is downward sloping. We can remember this by: “Demand dives downwards”! 

Scaling into Supply:

The law of supply states that the quantity supplied varies directly with price. Further, an increase in the price of a good or service, results in an increase in the quantity supplied of that good or service, and vice versa. An example of this would be: If there was a drought, the availability of strawberries would be lesser, causing the demand for strawberries to be larger than the availability of strawberries. Due to the lower availability and high demand of strawberries, sellers would increase the price of strawberries, thus increasing their profit. This would play as an incentive for suppliers (producers) to supply more strawberries. Therefore, an increase in the price of strawberries would cause the supply of strawberries to also increase. This law is graphically represented through a supply curve, which is upward sloping. We can remember this by: “Supply scales upwards”! 

Movements along a demand & supply curve:

A change along the curve is referred to as a movement. These changes occur due to a change in price, while all other factors remain constant. Therefore, if a change in the price of goods or services took place in a demand curve, the quantity demanded would simultaneously and inversely change. As shown in figure below, if the price increases, the quantity demanded would contract (decrease). But if the price decreases, the quantity demanded would extend (increase). 

The same way,  if a change in the price of goods or services took place in a supply curve, the quantity supplied would simultaneously change. In this case, an increase in the price of a good or service would extend (increase) the quantity supplied. While a decrease in the price of a good or service would contract (decrease) the quantity supplied. This is further shown in the figure below. 

Shifts:

A shift in the curve occurs due to changes in any non-price determinants/factors. This is shown through the quantity demanded changing while the price remains constant. Shifts can be both rightward and leftward depending on its situation.  

Shifts in a demand curve:

A shift in a demand curve would mean that the quantity demanded has changed without a change in the price. An example of a rightward shift in a demand curve would be: An increase in advertisements for Coke, shows more people the brand and builds desire for the product. This would increase the quantity demanded for Coke, while the price of Coke remains the same, causing a rightward shift. However, if there is a decrease in advertisements for coke, people are more likely to try other goods that are advertised, causing the quantity demanded to decrease (leftward shift). We can remember this by, increase: right & decrease: left. The table below shows various factors that cause a shift in the demand curve; both leftward and rightward. 

Non-Price Determinants Causing Shifts In The Demand Curve

Rightward/Outward ShiftLeftward/Inward  Shift
Increase in consumer incomeDecrease in consumer income
Fall in taxes on incomeRise in taxes on income
A rise in the price of substitutesA fall in the price of substitutes 
A fall in the price of complementsA rise in the price of complements
Change in consumer taste & fashionChange in consumer taste & fashion
Increased advertising for the product Decreased advertising for the product 
Rise in populationFall in population
Seasonal changesSeasonal changes 

The figure below shows the diagrammatic representation of both rightward and leftward shifts in a demand curve:

Shifts in a supply curve:

A shift in a supply curve would mean that the quantity supplied has changed without a change in the price. An example of a rightward shift in a supply curve would be: A more efficient printer in a newspaper factory would improve production efficiency causing the quantity supplied to increase, which is shown through a rightward shift of the supply curve. However, if there is a technological error in the printer, it will reduce the efficiency, decreasing the quantity supplied (leftward shift). The table below shows various factors that cause a shift in the supply curve; both leftward and rightward. 

Non-Price Determinants Causing Shifts In The Supply Curve

Rightward/Outward ShiftLeftward/Inward  Shift
Decrease in the cost of factors of productionIncrease in the cost of factors of production
Technological advancementsTechnological errors
Fall in the price of other products that the firm suppliesRise in the price of other products that the firm supplies
Imposition of indirect taxesGranting of a subsidy
Optimistic outlookPessimistic outlook

The figure below shows the diagrammatic representation of both rightward and leftward shifts in a supply curve:

Conclusion:

All in all, the base of economics demonstrates the relation between the price and decisions made by consumers and producers, in regards to their desires and decisions. What the law of demand and supply demonstrates remains very important to understand economics further: the law of demand portrays an inverse relationship between the price and quantity demanded while the law of supply portrays a direct relationship between the price and quantity supplied. Understanding why and how an event occurs in economics stands beneficial to understanding what happens after. 

Sources:

Categories
Analysis Discussion

What caused the 2007/2008 Financial Crisis?

Note: this article is part of our collaboration with Filmynomics. To find out more about the consequences of the 2008 Financial Crisis and how it affected people worldwide, please read their article here: https://www.instagram.com/p/CToYddwgX_t/ 

Introduction

The Financial Crisis of 2007 and 2008 led to the Great Recession (2007-2009), the worst economic downturn since the Great Depression of the 1930s. Additionally, the financial crisis caused the failure of multiple major investment and commercial banks and nearly caused the collapse of the international financial system. It is safe to say that everybody was impacted by the Financial Crisis in one way or another. What could have caused such a devastating crisis?

Role of the Federal Reserve (Fed)

Between May 2000 and December 2001, the Fed decreased the federal funds 11 times—from 6.5% to 1.75%. This meant that consumer banks were now able to offer low-risk borrowers lower interest rates. Furthermore, the lower federal fund also meant that banks were encouraged to lend more to high-risk borrowers, albeit at higher interest rates. As bank loans became easier to acquire, the housing market began gaining attention. People used these loans to purchase more expensive homes, causing the prices of homes to skyrocket. This created a so-called “housing bubble.”

Commercial Banks Perpetuate the Crisis

The “housing bubble” problem was aggravated because changes were made to the bank laws in the 1980s, allowing banks to offer mortgages with “balloon payments”. Loans with balloon payments have the largest payment of the loan due towards the very end of the loan period. As the prices of houses continued to increase, people who could not pay off the loan were able to borrow more money against the value of their homes. If these people were still unable to pay off the loans, the bank could resell the house for more than it was originally worth. 

Banks often sought to make profits, therefore more banks adopted the practice of giving mortgages to high-risk customers with few assets. The banks would take advantage of these customers, as they knew that they would not be able to repay the loan. Such mortgages are known as subprime mortgages and are often viewed as the main cause of the crisis by economists.

Securitization by banks

As the number of subprime mortgages and other consumer debt began piling up, banks started to sell these mortgages in capital markets as bonds (securities) to other banks and investors. Purchasers of bonds that were primarily based on mortgage-backed bonds (mortgage-backed securities, MBSs) were entitled to receive shares of the payments made on the original loan. By selling MBSs, banks could increase their liquidity and reduce the number of risky loans they owned, while banks that were purchasing MBSs could “diversify their portfolios and earn money.” As the housing prices continued growing, MBSs became increasingly popular.

Merging of Banks

In 1999, the Depression-era Glass-Steagall Act was repealed. This act prevented banks and insurance companies from involving themselves in each other’s markets and merging. The repeal led to banks growing and becoming “too big to fail.” In 2004, these huge banks were stimulated to buy and sell even more MBSs because the Securities and Exchange Commission decreased the ratio of capital that banks were required to have, preventing insolvency. This became problematic because the value of the MBSs was reliant on the indefinite increase of housing prices. 

Overconfidence of the people involved

Overall, government officials, economists, and bank executives were convinced that financial crises were things of the past due to the long period of global economic stability and growth. They believed the business cycle of a period of economic growth followed by a recession had finally been overcome. This meant that almost everyone was oblivious to the clear signs of the imminent financial crisis.

Conclusion

In summary, the 2007-2008 financial crisis can be attributed to a variety of factors. Although economists are still debating on the exact breakdown of the factors, and to what extent they were responsible, many people believe subprime mortgages and the banks’ risky behavior as the main cause. Do you agree?

Sources

Duignan, Brian. Financial crisis of 2007-2008, accessed through https://www.britannica.com/event/financial-crisis-of-2007-2008 (05.09.2021)

Jickling, Mark. 2009. Causes of the Financial Crisis, accessed through https://ecommons.cornell.edu/bitstream/handle/1813/77536/R40173_20090129.pdf?sequence=1&isAllowed=y (03.09.2021)

Field, Anna. 2021. What caused the Great Recession? Understanding the key factors that led to one of the worst economic downturns in US history, accessed through https://www.businessinsider.com/what-caused-the-great-recession (03.09.2021)

Categories
Analysis

An Inclusive Economic Recovery

The pandemic has had extreme impacts on economies and has reached almost every country in the world (with many in recession). Lockdowns and restrictions, high levels of unemployment, low productivity due to health risks, weak demand (drop in household spending), etc. have all had lasting impacts. However, the pandemic has impacted different countries, communities, groups, and demographics differently. Although recovery from the pandemic is looking strong in many parts of the world, with successful vaccination roll-outs and strict law enforcement, unfortunately, the impacts of the virus will remain in some economies for years to come. This presentation will explore why governments have roles to play in ensuring that economic recovery post-pandemic is inclusive and accounts for the hardships faced by all communities. I argue that a recovery that is focused on ensuring GDP/national income levels are back to pre-pandemic levels is NOT sufficient. Post-pandemic recovery planning is the perfect opportunity for global economies to create plans which focus on sustainable and socially supportive economic growth to ensure the highest possible degree of well-being for citizens.

Before discussing the topic of an inclusive recovery, I would like to briefly go through an important economic concept. The Keynesian Model in macroeconomic theory is different from that of the monetarist/new classical model. Whereas the new classical model
assumes that the economy will automatically tend back to the full employment level of output at potential GDP due to wage flexibility in the labor market, the Keynesian model acknowledges that in the real world, there are labor market rigidities that cause wage and price downward inflexibility. This means that when AD is low and the
economy is in a recessionary gap (where unemployment is higher than the natural rate and equilibrium GDP is less than potential GDP), there is no guarantee that the free market will return to full employment. Increases in AD (eg. from 1->2) need not
lead to an increase in the price level, which means that the economy can remain in this recessionary gap in the absence of government intervention. This model illustrates the role of the government in ensuring the economy can progress from the recessionary gap and tend back to potential GDP to stimulate investment and economic growth.

These are the 3 potential shapes of economic recovery that I will be looking at. The first indicates a sharp decline in national income followed by a quick sharp increase back to the same trajectory indicating increasing potential output. A U-shaped recovery is similar to a V-shaped recovery, but the process is much slower. The third one is a K-shaped recovery, in which some industries experience a V/U-shaped recovery but others continue to suffer. Economies around the world are experiencing recoveries which show similar characteristics to each of the shapes outlined here, but I will focus on the United States.

The United States has experienced a very sharp recovery in many aspects of the economy, so many argue that recovery has followed a sharp V-shape. The strong growth was mostly due to easing anxiety over the pandemic as vaccines have been rolled out across the country, boosting domestic demand and allowing businesses, such as restaurants and bars to reopen. The Biden administration has also released relief stimulus packages that have boosted household spending and accelerated economic growth, bringing the economy back to pre-pandemic levels when looking at figures like GDP or the stock market. However, this snapshot of the economy is not representative of the whole country and fails to account for many communities that continue to suffer. Therefore, I argue that the current shape of the recovery differs for individual demographics, and industries that were most affected by covid (leisure, hospitality) are generally made up of low-wage, minority workers. Thus, the recovery
for individuals which are undoubtedly dependent on their income from work, is strongly impacted by the industry they work in.

The diagram shows the economy in a recessionary gap when AD is weak and unemployment is greater than the natural rate. Government intervention is needed to boost AD (invigorate animal spirits and household spending). An inclusive recovery, much like any other economic recovery, would still aim to achieve this and get the
economy closer to potential output. The factors of production are the various inputs required for the production of g/s in an economy. The most important FOP for most firms tends to be labor. The reason why an increase in the quality/quantity of FOP causes long-term growth (increase LRAS) is because more FOP or more efficient FOP allow for more productive production and increases the production capacity of firms. This means that the potential output of an economy increases.

This data shows that although unemployment figures may seem promising (943000 jobs added in July, rate of unemployment 5.4%), there are still millions of unemployed workers continuing to struggle. Those included in the unemployed/displaced are mainly low-wage workers, who were already in economically precarious situations before the pandemic. They earned less than a third of the average hourly wage of the displaced mid/high-wage workforce, and many were living below 200% of the poverty line. The pandemic exacerbated the situation due to job losses, and this was disproportionately worse for low-wage workers as those industries impacted most by Covid (eg. services, leisure, hospitality, gig economy) which require face-to-face
interaction are predominantly made up of low-wage migrant workers. This data presents a need for an inclusive recovery, as it is inequitable and unjust to strive for a speedy and strong economic recovery when millions of workers who make up important parts of the economy are left behind. Therefore, I firmly believe that economic objectives for post-pandemic recovery should shift from ensuring we return to pre-pandemic levels of eg. GDP/employment to ensuring the economy comes out of the crisis better, stronger, and more inclusive.

The controlled racial pay gap is a comparison of pay between white men and people of color who have the same job and qualifications. As we can see, research into the racial wage gap shows us that racial bias persists in the U.S. workforce. Not only was this a large issue before the pandemic hit, but it has been severely exacerbated by the economic implications of the virus. This data that we have now seen on both racial bias in unemployment and wages show that there is clear potential gain for the economy if POC/minorities were to be paid fairly for their work. Many minorities work in positions that do not utilize their full skills, which can be thought of as a widespread underutilization of labor. Policies that advocate for fair pay across
ethnicities/demographics would make the most economic sense as this aims to increase the amount of labor (a FOP) available to use in the economy and will shift out the LRAS.

To summarise, the economic benefits of an inclusive recovery include achieving long-term economic growth as well as a lower risk of high inflation. Although neoclassical/right-wing economists may argue against an economic recovery focused on social objectives, there are clear reasons as to why an inclusive recovery is the most beneficial for society and does not necessarily involve neglecting economic objectives.

  1. In the Keynesian model, the long-run aggregate supply curve can shift outwards mainly when there is a greater quantity/quality of FOP, or due to improvements in technology/efficiency. An inclusive recovery aims at building a better workforce through training, education, fair remuneration, etc. Therefore, this can be thought of as an improvement in the quality/quantity of the most important FOP (labour) as the workforce becomes more able to complete the work most needed by the economy. Additionally, aspects of an inclusive recovery such as improved childcare support could even increase the quantity of labour, which would also cause an outward shift in the LRAS and thus long-term economic growth which increases the potential output that can be produced by an economy.
  2. Another benefit of long-term economic growth is that is reduces the inflationary consequences of short-term economic growth (aka. Short-term increases in AD). In the diagram, increases in AD without corresponding increases in LRAS increase real output as well as the price level. Sustained increases in the general price level is known as inflation, which has undesirable consequences if it exceeds the 2-3% range. However, if LRAS increases at the same time, short-term growth can be achieved without a subsequent increase in the price level (or at least with a lower increase). This helps avoid an inflationary spiral, which tends to be common following recessions.

Other than the economic benefits mentioned, an inclusive recovery is necessary for other reasons pertaining to social justice as well.

  1. First and foremost, it is immoral to strive for economic benefits that do not advantage (or at least do not intend to advantage) all citizens equally. Economies must ensure that wellbeing is a significant social objective, which can only be achieved if all demographics are given the same rights, resources, and opportunities.
  2. John Rawls’ theory of justice states that equal distribution of resources should be the desirable state of nature, as opposed to following utilitarian philosophies; holds that every individual has an equal right to basic liberties, and that they should have the right to opportunities and an equal chance as other individuals of similar ability.

John Rawls presented two principles of justice that self-interested and rational individuals would choose when separated by the veil of ignorance. The veil of ignorance is a method to work out the basic institutions and structures of a just society. According to Rawls, this demands that we think as if we are building society from the ground up, in a way that everyone who is reasonable can accept. The situation before any particular society exists; this situation = Original Position. Essentially, after this position, there are two justice principles: Principle of Equal Liberty & Principle of Equality. The former states that all citizens have an equal right to basic liberties, and the latter holds that economic principles should be arranged in a way to meet two requirements; ie. the least advantaged in society should receive

a) greater number of benefits + the economic inequalities should be arranged in a way that no individual is blocked from occupying any position, regardless of their social background.

b) The data we looked at before on the controlled racial wage gap in the US clearly indicates that workers with similar abilities are not given the same opportunities. Many POC are deprived of their right to a basic living standard as they are denied work based on their background, which they cannot change.

c) I strongly believe that this disparity highlights a role for the government to intervene and provide the necessary means for individuals of all backgrounds to receive justice and advance in society regardless of their race.

As we touched on earlier, the recovery isn’t affecting all workers equally. Just as Black and Hispanic communities have struggled with higher rates of infection and death since the beginning of the COVID-19 pandemic, communities of color are continuing to bear the brunt of high unemployment and economic insecurity, even as the overall numbers fall. These low-wage minority workers typically work in sectors such as retail and hospitality, which pose health risks during a pandemic and are therefore subject to shut down, and so we’re much closer to economic normalcy in sectors like construction and professional and business services than we are in sectors like leisure and hospitality. Ensuring an inclusive recovery must involve paying attention to these distinct disparities and ensuring that investment and grants are rightfully placed into these especially hard-hit sectors. Furthermore, policies that encourage career mobility and basic economic stability are also necessary to generate the right jobs and ensure they are available to those who need them. It is necessary to enhance education and training workforce systems to help workers adapt to changing skill needs while also strengthening worker protections and improving job quality, focusing on issues such as pay, stable and predictable hours, and adherence to health and safety standards.

Furthermore, many women have been impacted at far greater rates. Women make up 39 percent of global employment but account for 54 percent of overall job losses. One reason for this greater effect on women is that the virus is significantly increasing the burden of unpaid care, which is disproportionately carried by women. The lack of childcare available for working mothers means that they either reduce their working hours or leave their jobs entirely. The low wages associated with “pink collar” jobs have long contributed to the gender disparities within the labor force, and the shortage of affordable, high-quality childcare systems perpetuates the outdated stereotypes of women’s societal roles. COVID-19’s disruption to employment, childcare, and school routines has had considerable impacts on the economy and has pushed millions of women and families to financially unstable situations. Just as we mentioned how POC disproportionately represent low-wage jobs, the same applies to
women. Many single-parent families (in which single mothers are much more common) rely on a single stream of income which determines their living expenses; if parents are not fairly remunerated, it puts many households into poverty. The childcare and education systems need remodeling to change this disparity. Affordable and accessible childcare enables more women to either join or stay in the
workforce, which has several benefits to our argument. Firstly, it is much more equitable as women would then have the same opportunities as men when taking on jobs requiring more hours. Additionally, this adds more labor to the workforce, making the economy more productive and increasing the economy’s potential output. Solutions to this gender disparity should not exclusively focus on short term COVID-19 recovery, but should also make long-lasting changes that aim to close the wage gap, improve working conditions and family leave options, and better align the childcare and school systems to the needs of working parents so mothers who want to work can do so.

  1. The Families First Coronavirus Response Act (FFCRA) provided 12 weeks of parental paid leave and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) provided enhanced unemployment benefits that reduced poverty rates in America. The CARES Act also provided direct aid to states to address immediate problems in education budgets and provided the Child Care and Development Block Grant (CCDBG) with $3.5 billion to keep childcare providers afloat. But many of the most important provisions of these two pieces of legislation have expired, will expire soon, or were inadequate. And, these were just short-term solutions to a much more deep-rooted problem.
  2. Biden’s proposed 10-year, $1.8 trillion American Families Plan would spend $225 billion to improve child care. This funding would help providers improve the quality of programs; establish a $15 minimum wage; expand training for early childhood caregivers; and reduce the cost of care for low-income families. An additional $425 billion in Biden’s plan would go toward establishing universal preschool for all three- and four-year-olds. But while investment in public infrastructure tends to have bipartisan support, investment
    in “soft” infrastructure eg. childcare and education hasn’t received the same support from Republicans in the US Congress.
  3. The AFP also plans to extend or make permanent enhancements to several key tax credits that were in the COVID rescue bill → this reduces poverty and provides economic boosts to families with children. Many Republicans oppose the fact that this plan will be funded through tax increases on Americans, but these tax increases are only significant to the highest income bracket and large corporations (top 1%).

Apart from increasing living standards, the elements of the AFP have other impacts on
the economy.

  • Tax credits will increase the level of disposable income within households, thus shifting the AD curve rightwards. Government spending (an element of AD) will also contribute to this shift, due to the large amounts of investment into childcare and education.
  • The improvements in childcare will allow a) parents who worked less hours to be able to work more and b) parents who were previously not in the labour force as they tended to unpaid house work/child care to enter the labour force. Both of these points have the effect of shifting the LRAS curve outwards, thus increasing the level of potential output/GDP within the economy.
  • Increasing both LRAS and AD simultaneously results in the reduction of inflationary pressures normally brought about by increases in AD, which we discussed before.
  • Mid-recovery inflation (esp. in the US) has skyrocketed because the
    comparison to prices now versus a year ago when much of the country was in lockdown is very drastic. Although many argue that current rates of inflation are just transitory, if they get too high, IR’s will have to go up, which puts the economy at risk of recession again. Additionally, inflation rates are worrying as they can have lasting impacts on consumer confidence and spending ie. consumers believe that prices will continue rising so they spend now and save later. Therefore, it is in the economy’s best interest to reduce inflationary pressures and ensure the economy doesn’t overheat during its recovery.

Although the current policies which are being designed to tackle the issue of racial and gender disparities within unemployment figures have clear positive impacts on the economy, I also believe there are some other points that the US has failed to address. In regards to the childcare system, although tax credits and investment into childcare corporations may alleviate some pressures, there also needs to be more
systemic changes made to the system. High labor turnover rates in the childcare industry exist due to generally low wages. Childcare educators must be fairly compensated and trained in order to improve the quality, quantity, and stability of the industry.


When it comes to racial disparities, the racial gap in people receiving jobless aid persists despite enhancements to the unemployment system through the CARES Act. Supporting labor unions and collective bargaining ensures workers of all backgrounds can have more leverage to negotiate wages and other terms of their working conditions. The Biden administration can try to change labor laws to allow for “sectoral bargaining”, in which workers organize by industry to reach a collective agreement that covers all workers in a sector rather than across one firm. Additionally, there are other elements of recovery for racial minorities that can be introduced which are not related directly to economics. For example, acts like the George Floyd in Policing Act would aim to combat police misconduct, excessive force, and racial bias in policing. Such acts would give more power to POC and allow them to be treated the same way as their white counterparts.

A very important factor to consider when looking at building an inclusive recovery is to ensure you are equipping the unemployed with the necessary skills and knowledge they need to be able to find work. In addition to trying to get as many people looking for jobs into work as possible, it is also important for the economy to look beyond this
and try to build a sustainable and equitable framework to avoid distinct disparities within the unemployed. This can be achieved by addressing the main reasons why unemployed workers are finding it hard to get a job, and necessary government interventions to support and provide skills for the unemployed:

  1. Addressing specific employment barriers → Short-term strategies such as providing expanded unemployment benefits or increasing the number of capital projects may help ease overall unemployment, but interventions must address specific employment barriers for heavily affected segments. For example, workers without a college degree may need additional training and
    skills-based education to transition to new career pathways and ensure they have the skillset that firms are looking for.
  2. Tackling structural and technological unemployment requires the consideration of how the pandemic has catalysed the shift to technology-enabled business models in many industries, and how this will affect workers and future skill requirements.
  3. Enhanced training for those looking for work to gain the skills which the economy needs will also lead to long run economic growth, as the quality of labour is improved. Having a better trained workforce with the necessary skills for the future needs of the economy will increase productivity and help those who were greatly disadvantaged by the pandemic to become attractive candidates due to better education and skills.
Categories
Analysis

Economic Perspectives of Artificial Intelligence: Sales and Advantages

Experts have suggested that the next few decades will herald the fourth industrial revolution. The fourth industrial revolution will be powered by digitalization, information and communications technology, machine learning, robotics, and artificial intelligence. More decision-making will occur from machines rather than humans. The ensuing societal changes will have a profound impact on both personal selling and sales management research and practices. 

In this article, we will focus on machine learning and artificial intelligence (AI) and their impact on personal selling and sales management.

Focus on Artificial Intelligence – Sales and Advantages 

In the Artificial Intelligence Economy we can note an increasing interest in the rapid rise of the sharing economy, from both academicians and practitioners. 

Recent research has focused primarily on the relationship between sharing economy firms (service enablers) and customers (thanks to A.I.). Moreover, service enablers have primarily collocated their resources to acquire a critical mass of customers. This demonstrates a balanced two-sided customer relationship approach toward the dynamics of this triadic business model (service enabler – service provider – customer). To maintain this emerging economy’s fast-growth pace, service enablers should strive to acquire, retain, and win back profitable service providers and customers simultaneously.

I propose a conceptual strategic framework for the development of service providers and customers considering multigenerational aspects based on inferences from the literature, popular press, and interviews with members of the triad in the sharing economy. Based on this investigation, the sharing economy services are mostly adopted by Generation Y, whereas other generations are still in the early phase of adoption. Additionally, customer and service provider churn is high. I argue that this double-sided customer relationship framework will help firms take appropriate measures to keep all the actors involved in the process satisfied, loyal, and profitable in the long run.

Graphical Abstract

The nature of professional selling has been transformed profoundly over the last few decades resulting in a fundamental redefinition of the role of the sales force. 

Despite this evolution, there has been a recognition of the relevance of ‘traditional’ sales approaches, resulting in increasing polarization between transactional and strategic or consultative selling. 

Drawing on interview data with senior sales leaders, sales consultants and prominent sales academics, I show three key drivers for change and identify a set of core transformations sales forces are undergoing: The composition of the offer that suppliers bring to customers, the nature of the relationships between suppliers and customers, and the configuration of sales organisations and the role of sales people. 

The paper reveals the need to reconcile disparate approaches to managing sales forces if sales professionals are to become genuine enablers of customer development.

 It outlines the tensions that underpin the management of both transactional and strategic selling, suggesting the adoption of ambidexterity and paradoxical leadership in the management of modern sales organizations.

Source:

science.direct.com

Categories
Analysis

The Reaction to the Tokyo Olympics

Introduction

17 days after the opening ceremony of the Tokyo Olympics, the Olympics officially ended on August 8th. The Tokyo Olympics are considered to be the most controversial Olympics in history due to the COVID-19 outbreak. On July 13th 2021, about 35% of the Japanese population were in favor of canceling the Olympics, whereas 36% thought it should take place. The question remains, how did the world react after the Olympics? Did global viewers think the short-lived Olympic Games were successful?

Change in the opinion of Japanese people

Surprisingly, a survey conducted by a newspaper called Yomiuri Shinbun found that out of 2478 people in Japan, 64% of them answered that taking part in the Olympics was a good idea. On the other hand, 28% of them said that the Olympics should not have taken place. Compared to the survey before the Olympics, a significant number of people had changed their opinion during the Olympics. In fact, before the Olympics, the highest number of COVID cases in a day was 2520 cases in January 2021. However, on July 27th, the day after the opening ceremony for the Olympics, there were 2846 cases, 300 more than the previous record. Since then, the number of cases kept increasing with a new record high of 5042 cases on August 5th. The increasing Covid cases in Japan suggest that more and more people are challenging the lockdown and becoming more in favor of in-person events. But why are so many inhabitants changing their minds? There are three main reasons; the number of people who go out, feedback from Olympic parties, and COVID cases among Olympians.

Reasons for the change in opinion

According to NHK (Japan Broadcasting Corporation), significantly more people have chosen to stay at home rather than go out or travel since the Olympics started. On July 23th, a Japanese holiday, the number of people who left their homes in Tokyo had decreased by 17%, compared to the previous four weekends. While the exact reason is unknown, many people speculate that such a reduction had occurred as the Olympics had begun, people chose to stay home to watch Olympic games all day rather than go out. Another possible reason is that Japanese people may have wanted to make a good impression on the international Olympians and visitors. Before the Olympics, many people were concerned that athletes and visitors would not be able to enjoy their stay in Tokyo because of the COVID-19 restrictions. However, despite these concerns, the Olympic athletes seemed to have enjoyed their time in Tokyo. For instance, a journalist from Singapore tweeted the excellence of ice that he bought from a convenience store, and went viral with over 28,000 likes. Also, the UK’s gymnastic team — during a video call with President Johnson — praised the Olympic Village’s facilities, such as the dining room where athletes were able to eat anything anytime for free.

The final reason is that the number of COVID cases among Olympic parties remained relatively low. According to a report by NHK, there were only 458 positive cases related to the Olympic Games which included coaches, media, contractors, etc. in the 14 days that the Games lasted. Considering the 17,000 people who traveled to Japan for the Olympics, these 458 positive cases made up a mere 0.02%. These statistics are enough to show that Japan succeeded in protecting themselves and their visitors from the virus.

In addition to those factors, many Japanese people initially disagreed with the Olympics because the mass media was demonizing the games. However, once the Olympics had begun, all TVs stopped reporting negative side-effects and started broadcasting the results of the Olympics, cheering on the athletes. The people who regularly watch the news were thus more likely to change their minds as well once the news outlets shifted their opinion.

Graphs showing this change

Conclusion

Although each person in the world has different opinions about the Olympics, no one should not forget to respect all athletes who participated in the Olympics. All of them have done their best to win gold medals in the Olympics, and they showed us how great sports are with sportsmanship through the 17 days. Some people write defamations to athletes’ social media to criticize their performances, sometimes just because the athletes won a gold medal and the athletes from the people’s countries lost. Such things are unacceptable no matter if they oppose the Olympics or not, and should be punished. Despite Japan’s population divide due to the Olympics in the beginning, it’s fair to say that the majority of the inhabitants were pleased to host the games and welcomed thousands of athletes from around the world.

Sources

  1. https://twitter.com/MatthewMohanCNA/media?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1423957548923641864%7Ctwgr%5E%7Ctwcon%5Es1_&ref_url=https%3A%2F%2Fencount.press%2Farchives%2F205294%2F%3Fpage%3D2%2F 
  2. https://www3.nhk.or.jp/news/html/20210809/k10013191821000.ht
  3. https://www.yomiuri.co.jp/election/yoron-chosa/20210809-OYT1T50143/
Categories
Analysis

India’s Economic Transformation

Introduction

India’s Independence did not only awaken individual dreams, but also opened development opportunities — economically, socially, and politically. On the 15th of August 1947, the Indian peninsula had a new beginning as a country but there were many monumental tasks to be completed by the then-newly formed government. India’s independence was in itself a turning point for India’s economy and its transformation. Seventy-five years later, India seeks to join the $5 trillion club soon. As former prime minister Manmohan Singh put it: “The brightest jewel in the British Crown” was the poorest country in the world in terms of per capita income at the beginning of the 20th century. 

Pre-Independence

Before independence, the much prevalent British dominance drained the country of its natural resources, capital, and labour. India was hopelessly poor as a result of the constant deindustrialization by the British. The vivid social diversity and the exponentially growing unemployment and poverty rates questioned India’s survival as a nation itself. Cambridge historian Angus Maddison’s work shows that India’s share of world income shrank from 22.6% in 1700 (almost equal to Europe’s share in 1700 of 23.3%) to 3.8% in 1952. 

After Independence

Then prime minister, Jawaharlal Nehru, introduced an economic model that envisaged a dominant role of the ruling government as an all-pervasive entrepreneur and financier of private businesses. The Industrial Policy Resolution of 1948 proposed an economic system that would blend elements of a market economy with elements of a planned economy, free markets with state interventionism, or private enterprise with public enterprise: a mixed economy. Earlier, the Bombay Plan, proposed by eight influential industrialists including J.R.D Tata and G.D. Birla envisaged a substantial public sector with state interventions and regulations in order to protect indigenous industries. The political leadership believed that since planning was not possible in a market economy, the state and public sector would inevitably play a leading role in economic progress. 

The Planning Commission was set up in 1950 to oversee various aspects of economic planning, including resource allocation, implementation and appraisal of the five-year plans, and more. The five-year plans focussed on economic and social growth, modeled after those existing in the USSR. India’s first five-year plan was launched in 1951, and it centralized agriculture and irrigation to boost agricultural outputs as India was running out of its foreign reserves on food grain imports. The first five-year was successfully accomplished, with the economy growing at an annual rate of 3.6%, beating its primary target of 2.1%. 

Though shortly after, India suspended the five-year plans, drawing up annual plans between 1966 and 1969 instead. This was because India was not in a state to commit to long-term provision of resources. The diversion of capital to finance the war with Pakistan, the below-par growth outcomes of the Third five-year plan, and the then-ongoing war with China, had altogether left the Indian economy with little. The approaching monsoon showers worsened food shortages, causing a steep spike in inflation. The government needed to import food grains and seek foreign loans, and this posed a serious threat to India’s political economy: spiking inflation hand-in-hand with increasing foreign debt. 

India’s Economy Now

Though in recent years, the rise of the Indian economy is best depicted in BSE’s Sensex; the 30-share benchmark index. The 30 component companies represent segments of all the sectors of the economy. From a small 1,955.29 points in 1991, the Sensex touched an all-time high of 40,312.07 points on June 4, 2020. Even with the rising taxation on capital gains and investments, India is a country obsessed with cash-driven gold and real estate. These are slowly veering towards investing in a more formal and organized equitable market. Over the past decade, numerous start-ups have budded across the country as young entrepreneurs experiment with investments, technology, and sophistication all side-by-side. The rise of these start-ups has created an ecosystem of new partnerships, venture fundings, along with diversified patterns of consumption in Indian society.

Sources

  1. https://www.ciiblog.in/economy/the-evolution-of-the-indian-economy-since-independence/
  2. https://www.degruyter.com/document/doi/10.1515/9780804791021/html
  3. https://www.dailypioneer.com/2020/sunday-edition/changing-scenario-of-indian-economy–1947-2020.html
  4. https://oxford.universitypressscholarship.com/view/10.1093/oso/9780190128296.001.0001/oso-9780190128296-chapter-13

Categories
Analysis News

The Space Race — Is it worth it?

Introduction

On July 29th, 63 years ago, the US Congress passed the legislation, which established NASA, otherwise known as the National Aeronautics and Space Administration. NASA is a government established agency that is responsible for the technology and science related to space and air. As you may know, NASA’s purpose is not only to analyse and explore space, in case of Earth’s demise, providing alternative approaches to human survival beyond our atmosphere but also to protect the human race from the harms of space. An example of this would be detecting asteroids that could pose a threat to human existence if the trajectory proves to be heading towards Earth. However, it is questionable as to the necessity of space exploration. Annually, the US government provides NASA with a budget of $22.629 billion, and this number is ever-increasing. Although this only represents around 0.48% of the total of the US government spending, it is highly debated as to whether spending this amount of money is necessary, and could instead be directed to other means, e.g. building renewable energy sources to help reduce climate change. 

Applications of space research

However, it is important to recognise the necessity of space exploration for proving/disproving scientific theories that have previously been developed on Earth. These theories have brought us insights into gravity, the atmosphere, fluid dynamics, the geological evolution of other planets and most importantly it has shown us the connection between the sea, sun and moon. Thanks to Sir Isaac Newton’s discovery in 1687, we now know that tides are very long-period waves that move throughout the ocean in response to forces exerted by the moon and sun. Fishing, recreational boating, and surfing all rely on tidal data. Commercial and recreational fishermen alike rely on their understanding of tides and tidal currents to boost and improve their catch rates. According to the report published by Allied Market Research, the global fish farming market generated $271.61billion in 2018, and is projected to reach $376.48 billion by 2025, witnessing a CAGR of 4.7% from 2018 to 2025, and is therefore a staple part of our global economy. 

The Space Race and Jeff Bezos

Nevertheless, It could be argued that the race to space has become glorified, being used as an anchor for the economically elite to exhibit their wealth. The last century’s space race was a competition between the world’s great powers and a test of their ideologies. It would prove to be a synecdoche of the entire Cold War between the capitalist United States and the socialist Soviet Union. Has this desire to be deemed most rich and powerful continued into the 21st Century? On the 20th of July, Jeff Bezos, the richest man in the world, alongside three other passengers (his brother, Mark Bezos; Wally Funk, a storied aviator; and Oliver Daemen, an 18-year-old fresh out of high school), made the trip to space and back. Bezos stated that by going first, he wanted to prove that his technological advanced vehicle was safe, and that Blue Origin is finally ready to make its 11-minute suborbital trips, an experience people can buy. The $5.5bn journey raised the question as to whether this accessible technological advancement was a step in the right direction, or whether its consequence will lead to an even greater division between the top 1% and the remainder of the population.

Sources

  1. https://www.history.com/this-day-in-history
  2. https://oceanservice.noaa.gov/facts/moon-tide.html
  3. https://www.globenewswire.com/news-release/2021/01/13/2158043/0/en/Global-Fish-Farming-Market-to-Reach-376-48-billion-by-2025-AMR.html 
  4. https://news.sky.com/story/bezos-branson-musk-the-new-space-race-explained-as-virgin-galactic-prepares-to-launch-12347249
Categories
Analysis

What can Japanese businesses do during the COVID outbreak to survive?

Introduction

On July 9th, the Japanese prime minister Suga declared a state of emergency for the fourth time. With this declaration, all stores are required to close by 8 pm and are not allowed to serve alcohol under any circumstances. In fact, Japan has been in a state of emergency for roughly ⅔ of 2021 already. Due to these conditions, there have been 3,044 bankruptcies from January to June 2021. The question now is, should companies in Japan really follow the state of emergency laws and put themselves in danger of bankruptcy? Can they do anything to save their own business and make a profit while not breaking the rules?

Context: Restrictions in Japan

Before talking about the business system in Japan, let’s start by getting some context on what Japanese people think about the government and the state of emergency itself. The truth is that the feeling of discontent towards the Japanese government has risen since the start of 2021 for two reasons, namely the frequency of state of emergency declarations and the lack of compensation for business owners. Japanese people are starting to think that the government has declared a state of emergency too many times. The below chart provides justification for such claims. It shows the number of COVID-19 infection numbers in Tokyo in 2021, and shows that the government announced the newest declaration on April 25th, only a month after the second declaration had been lifted. The COVID-19 cases at that time in Tokyo were 635, which was far less than the number of cases on January 7th when the second declaration was declared (in January there were 2447 cases). The second reason is the lack of consideration for those who follow the rules. For example, in Tokyo, the government provides subsidies for all businesses — but only around 500 dollars per day, 1000 dollars at the most. However, if the store makes 2000 dollars per day on average, and gets only 1000 dollars as through from the government, then in theory the store would be losing 1000 dollars a day. 

How businesses adapted

In such a harsh situation, business owners developed creative solutions to keep their stores afloat. For example, restaurants offered delivery services and many retail stores turned to online shopping with delivery opportunities Many shops were thus able to survive the duration of the first state of emergency from April of 2020. However, once people became accustomed to those ideas, they stopped showing interest, leaving business owners scrambling to develop new solutions again and again. In reality, there have not been many novel ideas recently,  so it is time to think about what they should do not only from a business perspective but also from an ethical one. For instance, they can open the store until midnight, and serve alcohol hypothetically because the Japanese government doesn’t have the capacity to enforce the law everywhere, but if people see such a store, they might post the name of the store to social media and the store could easily be bombarded with criticism. What can Japanese companies/industries do to keep the economy going, but not contribute to the spread of the virus at the same time?

Outlook to the future

One idea for some businesses to keep making money is to seek opportunities outside of Japan. Some countries like China and the United States have reached the point of resuming a pre-pandemic lifestyle. For instance, at the major league baseball game (MLB) last June no players or audience members present in the stadium wore a mask because the vaccination rate at the time was already higher than 55%. Resuming a pre-pandemic lifestyle in these countries means that the demand for products such as Japanese food and cars would increase due to an increased number of people who want to and do go out. There is a survey that asked 2,722 Japanese companies who are interested in overseas business about the impact of COVID-19. In FY2020, 64.8% of 2,722 companies answered that there was a “negative impact” on overseas sales. However, in FY2021, the number of companies saying this decreased to 27.3%. The survey shows that the demand from overseas for Japanese goods has begun increasing again. By exporting Japanese goods and/or food, Japanese businesses have the potential to grow again.

 The other idea, especially for small businesses which don’t have a chance to trade with foreign countries, is cooperation between companies. This would mean that some small companies can work together to overcome this unprecedented economic challenge. As small companies do not have as many resources as big companies do they should work together by gathering the know-how of each company. For instance, if a small manufacturing company knows how to make high-quality products but doesn’t know how to advertise their products, and a small advertising agency knows how to do so, then those two small companies can be a good match to help each other getting through these challenging times together.

Conclusion

During the COVID-19 outbreak, the majority of people in Japan did and do their best to still continue with their lives and at the same time cooperate with the country’s government to decrease the number of cases. To decrease the number of people who suffer from economic problems, there are some potential solutions for Japanese companies, such as seeking out opportunities abroad or working together with other companies. Hopefully, the business conditions will improve soon not only in Japan but in other countries around the world as well.

Sources