Category Archives: General

What British voters might not have considered: 3 shortfalls of BREXIT

I should start saying that there are many other shortfalls but, for the ones below, I would say that not even 1% of the British voters have thought of:

  • Privacy regulations

Until now, UK was able to share data with systems in any of the other EU countries. Not any more! UK has two choices: 1) become a trusted entity (something like Switzerland); or 2) pass new privacy laws copy-pasted from the EU General Data Protection Regulation (GDPR). Worst case scenario, if none of the above is done, firms operating in the UK will need to move their data to EU data centers.

  • Financial services

European banks probably celebrated the vote. It is most likely that the UK’s banks may lose access to the “passport” rule that allows financial firms regulated in one EU country to operate in every other EU country. EU businesses will most likely not be able to use British banks so European banks will be stepping in.

  • Availability of goods

Firms like H&M, Ikea, or Zara will spend time and money on trade rules because firms moving goods between the UK and the EU may face customs tariffs and will bear the cost of international trading bureaucracy. Customer experience will suffer as this is one of the variables they will not have margins to invest and the cost of goods will go up. One may argue that this is a chance for UK to grow local business but I would say this is idealistic. The immigration policy will change and the work force will be more expensive and hard to find. For instance, CIOs will find it even more difficult to recruit already-scarce developers and engineers. Moreover, technology-based start-ups will be set up in other European capitals over London.

I wonder how many voters have considered this step with a pragmatic approach…

History in pictures: behind Adidas’s Success

Adi Dassler, a keen sportsman, started his shoe company with his brother Rudolf. Adi observed athletes, talked to them about their needs, and then experimented with novel ways of solving their problems. Business is not only about innovation and we have probably never heard this story if it wasn’t for Rudolf who was keen on selling. Later on, the story gets split into Adidas and Puma. strategy+business has published a series of pictures featuring Adidas’ success:

http://www.strategy-business.com/The-History-Behind-Adidas-Success-In-Pictures

Enjoy!

strategy+business

For some time I’m working on the KM integration of Strategy& (former Booz & Company) with PwC and I can say there is more than finance about this acquisition. They are good. PwC has probably acquired the best in strategy consulting.

You can make your own mind by having a look at their magazine – strategy+business (s+b). Forbes nominated it among the top 25 websites for CEOs and its readership now spans more than 1,000,000 business leaders around the world. The magazine publishes ideas from chief executives, prominent business thinkers, academics from leading universities, and subject matter specialists from across the PwC network.

In s+b‘s latest reader survey, 90% of respondents reported taking action after reading an s+b article. You may also find it to be an insightful resource.

Seize Megatrends Opportunities: What made McDonald’s persevere in China?

In one of the latest “Strategy+Business” articles, the authors are asking a very powerful question for anyone looking into seizing megatrends opportunities: “What made McDonald’s persevere in China, and why did its U.S.-centric marketing approach succeed?” Here is their answer:

Because its leaders were early to recognize an opportunity in the interplay between two global megatrends. The first was the shift in economic power toward Asia. In 2000, less than 2 percent of global middle-class consumption occurred in China and India. By 2013, that proportion had reached almost 10 percent, and it is predicted to multiply several times by the middle of this century.

The second megatrend involved cultural transformation stemming from demographic change. The prevalence of smaller families under China’s one-child-per-family policy, which has been in place since 1979, has led to a stronger emphasis on children’s well-being.

Together, these two trends suggested that a huge number of Chinese citizens would gain a noteworthy (albeit small by Western standards) increase in their discretionary income. With relatively few children to spend it on, and more opportunities to learn about cultures outside China, they would aspire to the lifestyle of their traditionally more affluent Western counterparts. Well-known Western brands would suddenly be an attainable status symbol.

In 2004, many Western fast-food brands were struggling in their home countries, where they faced highly competitive markets and shifting public food preferences. So McDonald’s seized the Chinese market. The chain put in place subtle variations to its basic menu, such as locally popular sauces, and adopted a few tailored innovations, such as take-out windows for drinks, and of course the McWeddings. The chain also kept adjusting its offerings to reflect the responses it observed from its customers. In this way, the company gained a substantial foothold in the vital China market.

With a clear idea of the interactions among large-scale trends and how they will play out during the coming years, your company could gain a similarly strong advantage.

What’s your city of opportunity?

For a long time I considered London as the city I would’ve enjoyed living in. Some things have changed in the meantime but I was not prepared for the “test” I’ve taken today:

cities of opportunity 2014 interactive modeler results

Also  London finished first in technology readiness, economic clout, and city gateway – all measures of its stature as a thriving center of the world economy, it seams that, according to my own criteria, my city of opportunity is Stockholm. Somehow I doubt, however, that I would adapt to the climate…

I’ve modeled my result out of a recently published PwC research – Cities of Opportunity 2014. It includes 30 cities, selected by criteria such as: cities which are capital market centers, represent a broad geographic sampling, and comprise both mature and emerging economies. The cities are measured across 10 indicators constructed with a robust sampling of 59 variables.

In case you want to model your own chart according to your own criteria, you can do it here.

 

What Bill Gates wants for Christmas

29184c9There has been a change in priorities for Bill Gates for the last couple of years. He left the firm’s management over to paid executives and concentrates his own efforts in developing countries, not as an investor but rather in social activities.

In one of his latest post, Bill Gates talks about what he really wants for Christmas and I must say I fully agree with his view:

“I’m touched that people think to send holiday treats. It’s a fun tradition (…) But I can’t help thinking that the money spent on these gifts could go to people who need it more than I do.”

It almost looks like a paraphrase of Luke 14: “When you give a luncheon or dinner, do not invite your friends, your brothers or sisters, your relatives, or your rich neighbors; if you do, they may invite you back and so you will be repaid. But when you give a banquet, invite the poor, the crippled, the lame, the blind, and you will be blessed. Although they cannot repay you, you will be repaid at the resurrection of the righteous.”

There is only one aspect I would underline here. Luke also wrote about a rich man that came to Jesus and asked Him how can he inherit eternal life.  Often when we read the story we only keep in mind the first part of Jesus’ answer but there are actually two things he would need to do: “Sell everything you have and give to the poor, and you will have treasure in heaven. Then come, follow me.” (Luke 18:22).

I wish you all blessed holidays!

Interview with Stephen A. Elop, President and Chief Executive Officer of Nokia

You may find below the interview with Stephen Elop, President and Chief Executive Officer of Nokia conducted as part of PwC’s 16th Annual Global CEO Survey. In this video, Stephen shares his insights on technology as a driver for growth, Nokia’s corporate culture, and planning for disruptive events.

A new direction for global M&A

Investment Conference
(Photo credit: Salmaan Taseer)

The geography of deal-making is changing fast. Over the last five years there have been more deal value flow from the largest high growth markets (HGM) to mature market economies than in the other direction. Between 2008 and 2012 HGM companies invested US$161 billion into mature market companies, outstripping the opposite flow of US$151 billion. In 2012 alone, HGM companies closed deals for mature market targets worth US$32.6 billion, almost three times the amount they invested in 2005.

In a recent report, PwC looks at how dealflows are changing and we also consider how new types of HGM investors are turning to M&A and the factors driving their investment choices. Large and mid-sized private companies have now joined the state-backed investors who were among
the first to acquire mature market targets. HGM investors’ scope is also widening, with HGM to mature market M&A activity ranging from energy, raw materials and engineering to media, retail and consumer goods companies.

The past is no guide to the future

In some regions, inflated valuation expectations are based on past deals. Some investors can be keen to dispel the notion that they are prepared to pay ‘over the odds’ and may be more recalcitrant about their price. This may have been a factor in Qatar National Bank’s bidding for Franco-Belgian owned Denizbank, which operates in Turkey. Denizbank’s parent, Dexia, also received a bid from Sberbank of Russia. Despite assumptions about Qatar’s readiness to spend, they did not increase their offer and Russia’s state-owned savings bank won the deal. Buyers from the Gulf Region typically do not like public transactions and, where this is unavoidable, will not want to be perceived as having paid more than fair market value. Some Gulf investors are able to deploy larger amounts of capital for longer periods of time but they expect the deal terms to reflect this, in their favour. However, ability and willingness to pay are very different and indeed, Chinese and Indian buyers are just as keen as their developed market counterparts to win deals on the most favourable terms they can achieve.

Perspectives

Deal-making is always a complex mix of strategy, economics and personalities. Cultural differences add another layer of complexity; competition for investment is also growing, as mature market companies are far from being the only targets HGM companies are considering. PwC suggests that HGM to mature market M&A has the potential to grow a very long way and we will see acceleration in this type of M&A over the coming years. A better understanding of the make or break areas – valuation mismatches; differing completion timeframes; the need to connect with decision makers; and process differences – can only improve the chances of a successful deal. The HGM buyers and mature market sellers best prepared for those differences may have a lot to gain.

The slight line between risk management and innovation barriers

I admit I’m usually in the critics side when it comes to new ideas. I like to challenge them against possible risks (looking at issues from a number of angles ?!) but I also enjoy the “out of the box” thinking. Split personality? Just a balanced approach, I hope :)

Here’s why:

The London Olympic Games – a two sides bet

I was looking with great interest to the economical figures of London Olympic Games and I’ve heard too many times that the British “Olympic Games bet” is not in UK’s favour. I’ve heard how investments went from an estimated £9.3bn to an actual £15bn and how disastrous this is during (I would avoid to say global) economical downturn.

Ever since I’ve seen, a few years ago, the development plans London intended to make for this event, I knew it was a smart move, regardless of the short term outcome. The East side of London was always seen as the underdeveloped part of the city and the opportunity to bring it up in such a short time with only a small percentage of local contribution is a side of the story I see most of the analysts are overlooking. Let’s see some of the figures, as presented by Financial Times:

Some other important figures:

  • over £7bn contracts have been awarded to British companies which means workplaces and in the end, money returned into the national economy;
  • almost £10m event tickets sold. Needless to say, the cost of the event ticket is a very small fraction of the attendance cost which makes an exponential increase in the overall British income.

I’m looking at the event costs comments and, unfortunately, I see a very narrow “what do I get today” mindset. Let’s take a look further. Let’s say the Olympic Games are over and the actual income did not reach the actual spent.

A smart eye would see the following:

  • The East-end of London (Lower Lea Valley near Stratford) now has a brand new 80,000-seater Olympic Stadium for future events.
  • 5,000 homes have been built as residence for many families following the conversion of the Olympic Village after the games.
  • The transport links to the east of London have been significantly upgraded – £1bn improvement to London East line, extensions to the DLR, 45% capacity increase for the Jubilee line.
  • New venues have been built in the East London: Olympic Park stadium (athletics, hosting opening/closing ceremonies), Olympic aquatic centre (swimming and diving events), Olympic velodrome (track cycling), Olympic hockey complex, Olympic multi-sport complex (basketball, handball, volleyball, modern, pentathlon events),  Greenwich Peninsula hall 1 & 2 (badminton, gymnastics, table tennis), Broxbourne (canoe slalom), University of East London (water polo facilities), Olympic tennis complex.

All these are resources to bring more events than hosted at the 2012 Olympic Games in the future. London has built up in East London a money-making Olympic machine. Not for today but for future generations as well. Need I say more?