Categories
Analysis

The Economics of “Black Friday”

Introduction

Black Friday is always on the Friday after American Thanksgiving and fell on the 26th of November this year. Originally, Black Friday was an American tradition that started with New York’s apartment store “Macy’s” in the early 1900s. More recently, however, Black Friday has spread across the world and is very popular due to its characteristic low prices. This leads one to question how it is possible for Black Friday to still be so profitable for retailers.

Loss Leader Marketing

Loss Leader Marketing is a marketing tool that businesses use to gain brand loyalty and to attract new customers, especially on Black Friday. The strategy behind loss leader marketing is that customers are incentivized to enter a store through the promotion of a special discounted item. This discounted item is placed toward the back of the store so that customers walk past many other products (these often aren’t discounted) in order to reach the product. Customers often end up buying more than just the discounted item, which means that the total sales of all the products make up for the loss the store incurs through the discounted item. Consumable items — items with higher margins that are repeatedly purchased — are often marketed using this loss leader marketing strategy. 

For example, the retail giant Costco has established a reputation as being a low-price distributor among consumers. Costco achieved this reputation by selling some discounts on items such as gasoline, food, and in-store items. This brand image means that consumers often first think of Costco when considering whether or not to make a purchase, which increases the total sales Costco makes.

Price Discrimination Strategies

Price discrimination is another marketing strategy that aims to make use of the various amounts consumers are willing and able to pay. In a retailer’s perfect world, every consumer would pay the maximum amount they are willing to pay for the product, meaning that producer surplus is maximised. This marketing strategy is also used on Black Friday by retailers to break into new markets and draw in new consumers. Companies may price discriminate by setting their products at different prices in different stores, depending on the income of people who are most likely to pass that store.

2021’s Black Friday

Early observations have revealed that there were most likely fewer people out physically shopping on Black Friday in 2021 than in previous years. Instead, more and more people seem to opt to shop online instead. The National Retail Federation predicted an increase in sales between 8.5% and 10.5% from 2020 while early data from Mastercard Spending Pulse revealed that Black Friday sales may have actually been up by 12.1% in the US.

Conclusion

Due to COVID-19, fewer and fewer consumers are shopping in physical stores and many have switched to online retailers instead. This is bad news for smaller firms who cannot compete with “super-retailers” like Amazon. As there is a shift towards online retail, shopping bots have also become more and more popular among consumers to ensure that they will be able to get a pair of those rare sneakers. Finally, there has also been a trend in recent years to not limit Black Friday Deals just to Black Friday. Increasingly, more and more retailers are offering Black Friday discounts much earlier, some as early as October.

Sources


Discussion Question: What is your experience with Black Friday discounts?

Categories
Analysis

Singapore’s sustainable packaging industry

Introduction

Packaging can be made from any material and is used to contain, protect, handle, deliver, or present goods. A large proportion of Singapore’s domestic waste is packaging waste. In 2018 about one-third of disposed domestic waste consisted of packaging. Approximately 55% of the packaging waste was plastic packaging, whilst 25% was paper packaging. The remaining 20% was made up of other types of packaging materials, such as metal and glass. As packaging is so common yet hardly reused, we need to find ways to reduce and consume it more sustainably.

Sustainable packaging includes recyclable mono-polyolefin packaging, recyclable paper packaging, and degradable/compostable plastic packaging. Sustainable food packaging can help secure the safety of the food consumed and reduce the amount of food wasted. This in turn benefits Singapore’s food security, and, at the same time, provides solutions to solve plastic pollution.

The Singapore Packaging Agreeement

The Singapore Packaging Agreement (SPA) is a joint initiative started in 2007 by the government, industry, and non-governmental organizations (NGOs) to reduce packaging waste. Since its inception more than 200 organizations in Singapore have worked together to cut down on packaging waste. As of 2019, they have cumulatively reduced about 54,000 tonnes of packaging waste, resulting in estimated packaging material cost savings of $130 million for locally consumed products.

Supporting ground-up movements

One such initiative was Zero Waste SG’s Bring Your Own (BYO) campaign, supported by the Call for Ideas Fund. This initiative aimed to encourage consumers to use reusable bags and containers when they buy takeaway food, beverages, and groceries. Since 2017, more than 400 retail outlets have joined the campaign, providing incentives for customers to bring their own reusables. This has saved approximately two million pieces of plastic disposables and packaging. Leveraging the success of BYO, the NEA supported Zero Waste SG with the Partnership Fund to further develop the campaign in 2019 into Bring Your Own Bag (BYOB) to focus on reducing disposable plastic bag usage.

The packaging waste management roadmap

Packaging is not all bad. It extends the shelf life of food and protects new products from damage during transportation. However, the problem is excessive packaging. Mandatory reporting of packaging data and 3R plans for packaging were introduced in 2020 and legislated under the Resource Sustainability Act. This builds on an existing mandatory waste reporting framework for large malls and hotels, which will also be expanded to all large industrial and commercial premises, including large convention and exhibition centers. The mandatory packaging reporting framework means that producers of packaged products and supermarkets with an annual turnover of more than $10 million will be required to report data on the packaging that they put on the market and their 3R plans for packaging.

The mandatory packaging reporting framework will also lay the foundation for an EPR framework for managing packaging waste, including plastics. This ensures producers are responsible for the collection and recycling of the materials they use to package their products. The aim is to have the EPR system for packaging waste management in place no later than 2025.

Closing the plastics loop

The use of plastics is prevalent in our daily lives – many of our beverage bottles, takeaway food containers, and grocery bags are made of plastics. While plastics can be useful, they are often used in excess and discarded in large amounts.

Plastic has become an issue of significant concern globally as countries re-examine how to sustainably manage their plastic waste. In Singapore, we incinerate all our general waste, minimizing the amount of plastic that ends up as litter both on land and in the oceans. At the same time, because of the drive towards a circular economy to replace the “take-make-dispose” linear economy, and the push to reduce industrial carbon emissions, there has been an increasing interest in the industry to explore more advanced technology to close the plastics loop.

Take, for example, the adoption of chemical recycling to turn plastic into feedstock or fuel. Apart from the current prevalent technology of using mechanical recycling to recycle plastics, chemical recycling technology involves converting separated or mixed plastics back into pyrolysis oil, naphtha, methanol, and syngas. These products can either be converted back into building blocks that can be used to make new plastic products or converted into fuel to replace fossil fuel sources. In particular, there are opportunities for mixed or dirty plastics to be recycled. This is crucial as these mixed and dirty plastics cannot currently be recycled. As a petrochemical hub, Singapore is well-placed to harness this new growth area to close the plastics loop.

Imposing a charge for single-use plastic bags may divert demand to paper or bio-degradable bags, which may not be more resource-efficient from a lifecycle perspective. This is because the production and disposal of all materials have some degree of environmental impact. Therefore, we will have to work on managing excessive consumption of all types of packaging and disposables.

Sources

  1. https://www.businesstimes.com.sg/government-economy/initiative-to-build-industry-capability-in-sustainable-management-of-packaging
  2. https://www.euromonitor.com/packaging-industry-in-singapore/report
  3. http://www.packaging-partnership.org.sg/past-event/sustainable-packaging-our-shared-future
Categories
Analysis

The importance of a “prototype” in the business world

Introduction

There are numerous directions a person can take in order to succeed. In many cases, an important factor that determines someone’s success is the techniques and skills a person has, such as dribble skills for soccer players and teaching skills for professors. However, in the business field, especially when you make new businesses/products, and promote them, one of the most important indicators of a success is a good prototype. By definition, a prototype is “the first example of something, such as a machine or other industrial product, from which all later forms are developed”. The word prototype is usually used for computer programming, cars, or trains to make sure that the products are safe enough to operate in the real world. To some it may seem as if prototypes are not related to the business field, but it is a vital component of a successful business.

When you start a new business, what you want to do is promote your startup by showing your brand’s strengths. While doing this, there are thousands of factors people should consider, starting from the business concept to more in-depth details. By developing some prototypes, a business is able to convince potential investors and customers of all the benefits their startup brings. A good prototype is like an insurance for business owners that mitigates the risk of their business failing. This is why making prototypes is crucial. At the same time, because the prototype is usually developed before a company starts to sell products, it should be done rapidly with minimum costs to prevent a large loss.

Methods of developing prototypes

Mainly, there are two ways to make prototypes: digital and physical

  1. Digital Prototyping

Digital prototypes are usually used when developers would like to check apps or homepages that people use on their device.

A digital prototype can be made by using existing resources, such as Figma or Wix. By utilizing those, developers can check how the apps work on consumers’ devices step by step. That way, they can improve their business from the users’ perspectives. Because those resources are specialized for prototypes, it is less time-consuming, and they have many features that other prototypes do not have, such as a size controller for each type of smartphone and templates for apps and homepages. The disadvantage is that they have to pay extra fees to acquire better features. Also, it is sometimes too complicated to manage all the steps if there are many pages or buttons.

(Below is an example of a digital prototype on Figma)

The other way a digital prototype can be made is by using physical materials to test the online service. This is a more analog way to make prototypes for apps or homepages, but by utilising physical elements, people are able to edit them easily by erasing things, or adding graphs with a pencil, etc. It sounds like a simple way, but obviously, it is less expensive than using paid services. Usually, such a physical prototype is enough for the entrepreneurs to get an understanding of how consumers will experience their product once it is launched.

(Below is an example of a digital prototype made by paper)

2. Physical Prototyping

The other type of prototypes is called physical prototyping. Physical prototyping is used when people are trying to make a new physical product and not a digital product. A physical prototype can be “anything from a single handmade model to a fully operational model, representing how the conceptual design will correspond to real-world conditions”. For instance, the backpack shown below looks easy to be broken and made with papers and tapes. However, by making it and carrying it, the developers can realise detailed problems that they might not be able to notice without such a prototype, such as the position of pockets of the backpack, or simply the appearance of the product.

On the other hand, the prototype of a vacuum looks like a real one and is detail-oriented, but it is still a type of physical prototyping. Thanks to the invention of 3D printers, it has become easier for people to make more realistic physical prototypes with less time-consuming, and less money. Even if the entrepreneurs don’t have enough money to buy such an expensive 3D machine, people can still make physical prototypes by utilising things that are around them, such as stationery, furniture, or food.

Conclusion

Even though factors such as personal connections, good business strategies, and financing are important for the success of a new business, it is essential for new business to have a good prototype to make sure that their new product or service works well. Thanks to the development of new digital techniques, and resources becoming more readily available, it has become much easier for entrepreneurs to make prototypes than before. In summary, if you are looking into starting a new business in the future, I strongly urge you to not forget to make a prototype before you actually launch your business.

Sources

https://www.steveglaveski.com/blog/12-types-of-prototypes-to-test-your-idea

https://www.interaction-design.org/literature/article/prototyping-learn-eight-common-methods-and-best-practices https://waykenrm.com/blogs/physical-prototype/

Categories
Analysis

Female Marginalisation in the Informal Economy of Punjab

Introduction

Female marginalisation is a part of gender marginalisation. It is the presence of strong gender discrimation, persecution and subjection in all societies. The focus of this article is the informal economy of Punjab, which is the part of the economy that is not covered by any rules and regulations. The informal economy is also not monitored by the government, causing the rights of the informal workers to be taken away. Punjab is a state in northern India with a population of 30,451,858 people and its economy is around 80-90% informal. The cause of the female marginalisation in Punjab is the gender disparity, gender inequality, confining of females, and violence against women. Gender disparity is known to be a cause because there is a large difference in the population of men and women in Punjab.  As the age increases, the number of females decreases. This demonstrates that women do not receive proper health care and are even killed sometimes because they are labelled as being a liability. Gender inequality is shown through the difference between the wages the two gender groups earn and ill-treatment. Women often go through violence at workplaces, whether it be sexual or physical.

Why does Gender Inequality Exist?

Gender inequality exists because men are known to be more competent. For instance, family business are usually overtaken by sons instead of daughters as society believes that women are rather incompetent to run a business, which causes men to be in a superior position compared to women. The female marginalisation includes the inequality of the rights, the physical and sexual abuse and the gender disparity. There are 2 rape cases reported in Punjab every day, and most rape cases are not even reported. The female marginalisation in Punjab  has been there for years and it continues to be present. It was recently aggregated through the pressure of globalisation as there was an increase in the number of jobs available, however women were labelled too incompetent to take part in any of those jobs. The reason why female marginalisation is still present is because of the sexist mindset that has been adopted, the lack of education to combat sexism, and the lack of opportunities for women.

Superiority Bias & Stereotypes

This study shows us that women are socially identified through social and cultural norms. Through the perspective of the Punjabi Women, they are categorized by their gender (that they are females), their level of education, and level of income (which is extremely low). There are two groups that are known to be more superior than them, which are: men in the informal economy and people in the formal economy. The difference between men and women in the informal economy is only the gender but men in Punjab are perceived to be superior in general. Therefore, even if a woman is well-educated, it is overlooked as they are believed to be inferior to men. People in the formal economy differ as they have a higher level of education and a higher level of income. The conflict in Punjab is caused due to the stereotyping of Punjabi women. The stereotypical mindset of women being less educated, less succesful, and incompetent does not let them recieve basic rights, formal jobs, or even higher wages. The effect of the stereotyping is that this conflict will never come to an end, due to the fact that it is normalised. When the stereotype of a women in the informal economy of Punjab is known to be incompetent, many rights are snatched away from her immediately. Therefore, a conceited stereotype is one of the causes of the conflict and as long as this stereotype of women remains in people’s mind, the problem of female marginalisation will too.

Social Schemas

People perceive Punjabi women inferior to men because it fits their schema. Schemas are a cognitive framework or concept that help organize and interpret information. The idea of women being less educated, lower in the hierarchy, and incompetent is what fits in to the schema of Pubjab’s society. It’s the mindset that has developed over the course of many years. The question is where this schema comes from. Firstly the cultural norms. A lot of importance and value is devoted to the birth of a male child and a female child is often just viewed as an extra child to feed. This mindset is what makes women incompetent and due to the incomeptence, they are not educated. Punjabi Pop (Punjabi Music) is another reason these schemas have been aggravated. A lot of the lyrics of Punjabi music enforce the notion of masculinity and therefore, are revived in an aggressive manner that keeps women vulnerable. Lastly, the patriarchal society of Punjab perceives men to be the head of the house keeping women at a lower position.

Conclusion

All in all, the ideology of a women being inferior in comparison to a man, or stereotyping females to be incompetent, results in the marginlisation of women and does not let them rise up to the formal economy. It all roots from the schemas that individuals conceive about females, and the only solution to this issue is education. It is vital that these stereotypes are broken down, with the help of education in schools around Punjab.

Bibliography

  1. Azhar, Ume. “Women and Informal Economy: Home-Based Workers Most Neglected in Dealing with Coronavirus Pandemic | Political Economy | Thenews.com.pk.” Www.thenews.com.pk, 17 May 2020, http://www.thenews.com.pk/tns/detail/659184-women-and-the-informal-economy. Accessed 13 Dec. 2020.
  2. Feminism, Satvinderpal Kaur, et al. “MR Online | Navigating Educational Empowerment through Life Conditions: A Study of Rural Women in Indian Punjab.” MR Online, 9 Oct. 2019, mronline.org/2019/10/08/navigating-educational-empowerment-through-life-conditions-a-study-of-rural-women-in-indian-punjab/. Accessed 13 Dec. 2020.
  3. “Formal and Informal Economies – Regional Economic Development – Eduqas – GCSE Geography Revision – Eduqas.” BBC Bitesize, http://www.bbc.co.uk/bitesize/guides/z3spj6f/revision/1. Accessed 13 Dec. 2020.
  4. Gill, Anita. “Agricultural Credit in Punjab: Have Policy Initiatives Made a Dent in Informal Credit Markets?” ResearchGate, Feb. 2016, http://www.researchgate.net/publication/314696755_Agricultural_Credit_in_Punjab_Have_Policy_Initiatives_Made_a_Dent_in_Informal_Credit_Markets.
  5. Government of Punjab. Economic and Statistical Organisation. 2020.
  6. Guha, Sriparna. “Women and Development in India: An Issue of Marginalization of Female Labour.” Catalog.ihsn.org, 2012, catalog.ihsn.org//citations/9675. Accessed 13 Dec. 2020.
  7. “Informal Economy in the Philippines (ILO in the Philippines).” Ilo.org, 2020, http://www.ilo.org/manila/areasofwork/informal-economy/lang–en/index.htm.
  8. “Introduction.” Cambridge University Press, Cambridge University Press, 2017, http://www.cambridge.org/core/books/global-health-crisis/introduction/FD357851113C3299CDF1D307B1F408B1/core-reader. Accessed 2 Apr. 2021.
  9. Jodhka, Surinder. “In the Name of Development: Mapping Taith-Based Organisations’ in Maharashtra.” ResearchGate, Jan. 2012, http://www.researchgate.net/publication/289785120_In_the_name_of_development_Mapping_taith-based_organisations%27_in_Maharashtra. Accessed Jan. 2012.
  10. Joy. “What Is Power Distance?” Organizational Psychology Degrees, http://www.organizationalpsychologydegrees.com/faq/what-is-power-distance/#:~:text=Power%20distance%20refers%20to%20the. Accessed 13 Dec. 2020.
  11. jules. “Microfinance & Women Empowerment :A Case Study of Punjab.” SlideServe, 3 Oct. 2014, http://www.slideserve.com/jules/microfinance-women-empowerment-a-case-study-of-punjab. Accessed 13 Dec. 2020.
  12. Kaur, Manjinder. “Gender Marginalization and Gender Discrimination in Punjab, India: The Study of Son Preference and Lower Status of Girl Child in Two Villages.” Isaconf.confex.com, Isaconf, 18 July 2018, isaconf.confex.com/isaconf/wc2018/webprogram/Paper92334.html#:~:text=Gender%20marginalization%20is%20by%20now. Accessed 13 Dec. 2020.
  13. Manav, Harish. “Punjab Sees 21% Rise in Crime against Women amid Lockdown.” Https://Www.outlookindia.com/, 23 Apr. 2020, http://www.outlookindia.com/website/story/india-news-punjab-sees-21-rise-in-crime-against-women-amid-lockdown/351333.
  14. Mirza, Wasim. “Walls of Poverty & Marginalisation Weaken Women’s Voice in Pandemic Governed Economy – the New Leam.” Https://Www.thenewleam.com/, 4 Sept. 2020, http://www.thenewleam.com/2020/09/walls-of-poverty-marginalisation-weaken-womens-voice-in-pandemic-governed-economy/. Accessed 13 Dec. 2020.
  15. “Population of Punjab 2020- Current Population of Punjab India.” Www.indiaonlinepages.com, http://www.indiaonlinepages.com/population/punjab-population.html. Accessed 13 Dec. 2020.
  16. “Punjab Population Sex Ratio in Punjab Literacy Rate Data 2011-2020.” Www.census2011.Co.in, 2020, http://www.census2011.co.in/census/state/punjab.html. Accessed 13 Dec. 2020.
  17. Pushkarna, Mridula. Gender Disparities in Punjab. Jan. 2016.
  18. Service, Tribune News. “Masculinity Continues to Be the Norm in Punjab.” Tribuneindia News Service, 20 Feb. 2016, http://www.tribuneindia.com/news/archive/comment/masculinity-continues-to-be-the-norm-in-punjab-198550. Accessed 13 Dec. 2020.
  19. Wikipedia Contributors. “Informal Economy.” Wikipedia, Wikimedia Foundation, 8 July 2019, en.wikipedia.org/wiki/Informal_economy.
Categories
Analysis

Meet the Doughnut!

Introduction

“The Doughnut” offers a vision of what it means for humanity to thrive in the 21st century – and Doughnut Economics explores the mindset and ways of thinking needed to get us there. First published in 2012 in an Oxfam Report by Kate Raeworth, the concept of “Doughnut Economics” rapidly gained traction internationally. Examples are the UN General Assembly and the Occupy movement. Released in 2017, “Doughnut Economics: seven ways to think like a 21st-century Economist” by Kate Raeworth further explored the economic thinking needed to bring humanity into the Doughnut, drawing together insights from diverse economic perspectives in a way that everyone can understand. The book soon became an international bestseller and has now been translated into over 20 languages.

What is “Doughnut Economics?”

They say a picture speaks a thousand words, so let us see the state of humanity just in a single image – the Doughnut of social and planetary boundaries is just the compass we need for creating a safe 21st century.

The outside of the doughnut economic model represents the unsustainable impact on the environment while the hole in the centre reveals the proportion of people worldwide falling short on essentials, such as food, water, healthcare and political freedom of expression. Thus, the challenge here on the part of humanity is to get everyone out of that hole. At the same time, we cannot afford to be overshooting the outer crust of the doughnut, so that we safeguard the life-giving systems of the Earth – such as a stable climate, healthy oceans and a protective ozone layer, on which all our well being fundamentally depends.

The 21st Century Mindset

The starting point of Doughnut Economics is to change the aim of endless GDP (Gross Domestic Product) growth to thriving in the model of the Doughnut.

 At the same time, begin the economic analysis by seeing the big picture and recognising that the economy is embedded within. An embedded economy emphasises the interdependence of economic activities and the social world. Doughnut Economics highlights the fact that all economies are fundamentally dependent upon society and the living world. Moreover, this theory recognises that human behaviour has the potential to be nurtured – to be cooperative and caring, just as it can be competitive and individualistic. Therefore, a shift from capitalist thinking to a more collaborative approach is desirable. It also recognises that economies, societies, and the rest of the living world, are complex, interdependent systems that are best understood through the lens of systems thinking. Lastly, Doughnut Economics recognises that growth is a healthy phase of life, keeping in mind of course that nothing grows forever.

The Case of Amsterdam Embracing this Economic Theory

In April 2020, during the first wave of COVID-19, the city government of Amsterdam announced that it would recover from the crisis and avoid future ones by embracing the theory of “doughnut economics”. Amsterdam has the vision to become a thriving, regenerative and inclusive city for all its citizens while respecting the planetary boundaries, which makes the city a pioneer of such systemic transformation. In this spirit, the City of Amsterdam has joined the Thriving Cities Initiative (TCI), a collaboration between C40, Circle Economy, and Doughnut Economics Action Lab, which works with cities pursuing such a transformation.

The key tool of the TCI is a City Portrait based on the Doughnut of social and planetary boundaries. It is a holistic snapshot of the city and serves as a starting point for big-picture thinking, co-creative innovation, and systemic transformation, rather than as a comprehensive assessment of the city. In the past, the city has been recognised for its ‘Amsterdam Approach’ to collaborative innovation, which connects neighbourhood initiatives, start-ups and civil society with the established institutions of government, business and knowledge institutions. Furthermore, the city is home to a dynamic network of changemakers that have already begun using Doughnut-inspired thinking to drive systemic change. With such an opportunity, Amsterdam can be a pioneer of what it means to become a thriving city and in doing so inspire cities worldwide on their journeys of transformation.

How will Amsterdam implement this theory?

Amsterdam is using this framework to explore what it would mean for Amsterdam to:

  1. Thrive within its natural habitat
  2. Respect the wellbeing of people worldwide
  3. Respect the health of the entire planet

Having the ambition to bring all of its 872,000 residents inside the doughnut, Amsterdam wants to ensure everyone has access to a good quality of life while at the same time not putting pressure on our planet. Guided by Raeworth’s organization, the Doughnut Economics Action Lab (DEAL), the city is introducing massive infrastructure projects, employment schemes and new policies for government contracts to that end. Meanwhile, some 400 local people and organizations have set up a network called the Amsterdam Doughnut Coalition to run their programs at a foundational level.

What Would it Mean for Amsterdam to Thrive?

What defines whether the population of a city is thriving or not? The best answer surely comes from the people themselves – based on their local context, aspirations, culture, and values. The many components of wellbeing are clustered into the following four areas: 

What defines whether the population of a city is thriving or not? The best answer surely comes from the people themselves – based on their local context, aspirations, culture, and values. The many components of wellbeing are clustered into the following four areas: 

  • healthy: food, water, health, housing
  • enabled: education, energy, income and employment
  • connected: mobility, community, digital connectivity, and culture 
  • empowered: social equity, political voice, equality in diversity, and peace and justice

Looking into the thoughts of the residents of Amsterdam and their visions and priorities for a thriving Amsterdam, several valuable insights emerged.

When asked “what makes you thrive?” the most popular response from participants focused on connecting with nature. One of Amsterdam’s residents stated: “I hope that the City can create more green spaces while the city is growing so rapidly. It helps biodiversity and gives the possibility of meeting other Amsterdammers.”

In terms of thriving in its natural habitat, urban designers in Amsterdam are integrating biomimetic designs into the fabric of their buildings. Some are creating habitats for species directly in the fabric of buildings, such as by using bee-hotel bricks, and ensuring retaining walls include places for nesting birds. Incorporating green roofs and walls that help to connect fragmented habitats supports more native species, and creates pollinator corridors. The City of Amsterdam is likewise taking action to significantly reduce air pollution with its Clean Air Action Plan, expanding the current low-emission zones, culminating in a complete ban on petrol and diesel cars and motorbikes in the city by 2030. The Clean Air Action Plan would encourage the city to set goals that match the ability of a nearby thriving forest to capture particles and create clean air. Pursuing such aspirational and scientific aims could restore the sense of purpose of the community and ensure the wellbeing of all.

Sources

https://doughnuteconomics.org/about-doughnut-economics

https://time.com/5930093/amsterdam-doughnut-economics/

Roworth, Kate. “The Amsterdam City Doughnut,” March 2020: Amsterdam.

Categories
Analysis News

AUKUS: Why is it such a big deal?

Introduction

Before answering the question of why the AUKUS agreement is such a global issue, we must first understand its background and contents. Over the past couple of decades, ever since the end of the Cold War between the USSR and the USA, a new nation has been rapidly expanding its influence on the world. That nation is China. In response to China’s growing power, many alliances, notably the World War II-era “Five Eyes” alliance (consisting of the USA, UK, Australia, New Zealand & Canada), now seem to be overwhelmingly focused on Beijing. Announced on the 15th of September, 2021, the AUKUS agreement has become the newest addition to the long list of actions taken by the West to counter China.   

Motivations for AUKUS

AUKUS has been described by analysts as one of, if not the most significant security arrangement between the US, UK and Australia since World War II. According to the states involved in the agreement (USA, UK & Australia), the focus of AUKUS is to maintain “a free and open Indo-Pacific,” with the help of nuclear-powered submarines on patrol. The new security partnership will supply Australia with nuclear-powered submarine technology which will be provided by the USA and UK. While it may take over a decade for the Australian Navy to deploy the first submarine, the agreement represents the USA’s mission to form a stronger threat in Asia and the Indo-Pacific to offset China’s rapidly modernizing military. Even though Australia has tried to remain balanced concerning her ties with the USA and China, the recent barrage of disciplinary trade reprisals from Beijing has drastically shifted Australia’s stance on the matter.

China’s Reaction

What does China think of this agreement? Unsurprisingly, Beijing has consistently lashed out at what it calls a “Cold War mentality,” denouncing anti-China partnerships. Chinese officials have stated that the AUKUS agreement will cause an arms race in the Indo-Pacific. From the Chinese perspective, the agreement was not created for competitive purposes, but instead is a deliberate attempt to impede China’s development. Relations have become increasingly tense, even before AUKUS. President Joe Biden’s administration has continued to put effort into preventing China’s economy from pulling ahead. Furthermore, Beijing has sparred with the UK over Hong Kong and Canada over detained citizens while Europe has called China a “systemic rival”.

Reaction of other countries

China is not, however, the only nation that has been upset by AUKUS. France, and many other NATO member states, such as Germany, have denounced the agreement. France suffered the most, losing a $37 billion deal between France and Australia concerning diesel-powered submarines. Adding insult to injury, France – a very old ally of the West – found out about the new pact just a few hours before it was announced to the public. The Asia-Pacific is a key strategic and economic region for France as 1.65 million French citizens reside on islands including La Reunion, New Caledonia, and French Polynesia. The cancellation of a deal that would reinforce such a region is a great loss for France. The French Foreign Minister, Jean-Yves Le Drian described AUKUS as a “stab in the back”. As a response, France has recalled her ambassadors to Washington and Canberra for the time being.

Conclusion

All is not lost, however. In a joint statement, President Joe Biden of the USA and President Emmanuel Macron of France have agreed to work on creating “conditions for ensuring confidence and proposing concrete measures toward common objectives”. The two leaders have said they will meet in Europe towards the latter half of October to further mend the damaged diplomatic relations.

Sources

  1. BBC. “Aukus Pact: France and US Seek to Mend Rift.” BBC News, 23 Sept. 2021, http://www.bbc.com/news/world-europe-58659627.
  2. —. “UK, US and Australia Launch Pact to Counter China.” BBC News, 15 Sept. 2021, http://www.bbc.com/news/world-58564837.
  3. Chazan, Guy. “Aukus Security Pact Is ‘Insult to a Nato Partner’, Says Merkel’s Adviser.” Financial Times, 24 Sept. 2021, http://www.ft.com/content/dfc4f860-c178-4c2a-a46c-c5f4e5595b1a. Accessed 26 Sept. 2021.
  4. Prof. Nursin Atesoglu Guney. “ANALYSIS – Third Front of New Cold War Expanding in Asia-Pacific.” Www.aa.com.tr, 24 Sept. 2021, http://www.aa.com.tr/en/analysis/analysis-third-front-of-new-cold-war-expanding-in-asia-pacific/2373757. Accessed 26 Sept. 2021.
Categories
Analysis

Why did Netflix fail to conquer 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

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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

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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:

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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)