world peace

In a not so surprising report, by Stockholm International Peace Research Institute (SIPRI), US was named as the biggest exporter of weapons in the entire world. Guess who was the biggest importer? No prizes…it is China followed by India. US exports 30% of the entire world export.
The volume of imports by India and Pakistan is increasing steadily and is expected to rise for another five to ten years until they agree an a permanent solutions.
The SIPRI said combat aircraft accounted for 27 per cent of the volume of international arms transfers during 2005-2009. Orders and deliveries of these potentially destabilizing weapon systems have led to arms race concerns in the following regions of tension: the Middle East, North Africa, South America, South Asia and South East Asia. Leading peace activists are finding it difficult to control this hike in weapon transaction in spite of well established protocols and platforms for discussion. It is just like a prisoner’s dilemma! Country ‘A’ buys weapons to become stronger than ‘B’ and vice verse. Thus increasing the expenditure for both. This is because the cost of not being strong enough to counter the opponents attack is much more than spending to become strong. However, if both do not spend,  both can survive without defense expenditure.Wow! so simple and yet so difficult to implement!

Rogues

Rogues

Rogues

However, there were few emerging nations which believed in basics of economics and regardless of the school of thought, sailed through the turmoil without toppling. India and China are among these few nations. India’s Q2 GDP growth at factor cost increased to 7.9 against the world trend. It is not surprising to see that this growth has been fueled by growth in agriculture by 1.9, Industry by 8.2 and services by 9.3. It is not that India has attained the perfect balance but it is going in the right direction. Pre slowdown India was promoted as a developing nation with the statement ‘India Shining’ and it was seen apprehensively by many. Post Slowdown again the numbers show that the shine factor has not diminished. If we try to do the SWOT analysis of India we see that their biggest strength is their population and the opportunity in services that they are exploiting goes well with their strength. Another reason for the shine factor is that the latent strengths make it sustainable. India’s large mineral deposit is still to be exploited at developed rates which would further increase the shine factor in future. Now, the threat which is bothering India is the shadow of towering debts around the world. The recent Dubai crisis and other such incidents might reduce the inflow of goodies which in turn may dampen the shine. One weakness which is acting as the biggest resistance to growth is the conflicts with its neighbors. Few years ago it had Pakistan, now it has China and Srilanka. These week links in the chain can be the biggest enemy of the shine factor.

Let us hope that the growth drivers of the world reach the balance soon.

Rogues

A survey from 2007 to 2009 in 135 countries by Gallups revealed that 16% of the worlds adult population would like to leave their home country for a country of their choice. This 16% converts to 700 million people and that is more than adult population of entire North & South America!

The most desired country was found to be US, Canada, UK, Germany, Saudi Arabia and Australia. Out of these 700 million majority would like to migrate to North america. Among the countries from where people would like to migrate, Africa tops the list along with other developing countries.

Why is this disparity between countries? Why does the grass on the other side seem to be greener always?

In this context we could say that the people from emerging nations aspire to live one day in a country as developed as US or UK. The IT/ITES revolution of this century have increased the awareness about what a developed country is all about. The standard of living, the ease of transportation and the predictability play major roles in setting a benchmark for choice of a country. People believe that sometime in future their country will emerge as a country of their dream. However, the waiting time for such transformation is huge in most of the cases. This urge of shortening the waiting time can be one of the reason for these 700 million to dream of switching the country.

Rogues

Shall we or shall we not?

A single bottled water in a developed nation like the US may cost as high as $100! People in developing nations do not prefer to pay such huge sums for a bottle of pristine water. Why?

People in Developed nations like U.S. and U.K. have a different set of lifestyles and values. There they perceive

pure water as a very precious product because they have seen a phase where almost all of the available water was promoted, through word of mouth publicity, as not pure. However, in todays context branded water industry is still riding on this wave. The consumers of branded water have adjusted to the fact that bottled water is the only safe water, neglecting the fact that the municipal water available in U.S. is of higher specifications than specified by the law. The standards are so high that this public water is one of the purest among all the nations. And still people buy bottled water.

What are the various factors for such behaviour?

1. Lifestyle: people are proud of buying a premium bottled water

2. Peer Influence: Everybody buys it, so I should follow

3. Convenience: It is available in a portable pack (everywhere)

4. Safety: Because it is the safest water

5. Affordability: I can afford it!

6. Taste: It tastes different

What reason do you have for drinking bottled water?

A recent study has shown that transportation of the bottles account for more than 50% of the cost of each bottle and another 25% for the packaging and promotions. The actual processing costs are negligible. So, you are responsible for paying for the pollution caused by the transportation of millions

of liters of so called safe drinking water.

Rogues

Let us conceptualize it:
1.      Make your product identifiable if you believe in your product
2.      Promote the identification mark to inform your customers
3.      Reap the benefits of increasing revenues!

The evolution of traditional branding:
Branding evolved steadily along with the evolution of industries. Tobacco manufacturers used different bags in 1800s with differentiable labels. This was because the flavor of tobacco varied significantly with the change of climate in which it is cultivated. To ensure that the customers got their favorite flavor, the companies branded the products based on the country produced in. Branding got a boost when countries initiated changes in trademark laws in favor of manufacturers. The modern branding started with the introduction of a star on candles produced by Procter & Gamble. Customers almost always asked for this star mark before buying candles. This forced the company to put this mark consistently on all their candles produced. Thus, a brand was born. Further, National biscuits, Heinz and Coca-Cola lead the branding game to astronomical levels. Today Coca-Cola’s brand value is more than $64 billion!

Which products can be branded?
The answer lies in the fact that any thing can be branded and is being branded and will be branded. Chinese silk, Indian Spices, German technology, Arabian horses and other regional products are associated with the country of origin. The bottled water industry is a classical example of branding. Bottles are branded based on the source of water like spring water, mountain water, glacier water, with each relating to different level of perceived purity of water. The air you breathe can also be differentiated like air of Beijing and air of Amazon. By the name people can evaluate the quality of air. Even the services provided by companies like Infosys, Taj Hotels and HSBC bank are used to distinguish certain products. Guess why do companies use brand ambassadors for branding?

Rogues

shift of power

While the world is struggling to recover from the devastating financial crisis, China seems to be full of events. Japan’s news revolve around the flat interest rates, in U.S. the fiscal deficit is still hot and in rest of the world the news revolve around investments. China’s news agencies on the contrary are busy publishing on the royal celebrations for completion of 60 years, boom in retail markets and China’s contribution to other third world countries. This Fatherly behavior of China makes the developed countries feel like a child. McKinsey & Company, in a recent report has predicted that China’s domestic spending will reach 12 trillion Yuan by 2015!

The integrated commercial and traffic complex for World Expo at Shanghai is being decorated in full swing. It is also planning to spend half a trillion Yuan in developing the country’s western region.

Not to forget that China is also controlling imports of goods like polyamide chips by imposing anti-dumping duties.

To sum up, China is showcasing power of money, weapons and personal relations to signal the world about its growth and maturity (like a father).

Rogues

what is manufacturing?

It is value addition to the various raw materials like ores, chemicals, wood etc. Mechanical and chemical operaions like segregation, reaction and size reduction are some of the important operaitions which add value to raw materials. This large scale value addition to the raw materials is termed as manufacturing.

why china is the leader in manufacturing?

Raw material+Utilities+Manpower+Technology = Finished Product

China has the largest and the cheapest manpower in the world. The cost of utilities are still the cheapest in this country. Another factor is automation, which leads to low manufacturing costs.Though this has not reached the levels of a developed country, the cheap manpower and other abundant natural resouces of China makes the overall manufacturing cheaper. China may not be the leader in technologies but world’s technology leaders like Intel outsource most of their manufacturing to this country. Taiwan Semiconductors of Taiwan, worlds largest independent semiconductor manufacturer, gets most of the production done in China. To remain competitive, the best and the largest companies of the world have knocked the doors of China for manufacturing. 50% of world cameras, 30% airconditioners and 25% of the washing machines are made in China. 70% of the metallic lighters sold in the world are made in the city of Wenzhou, China. No wonder China is the manufacturing hub of the world.

So What?

Most of the developed countries like US and UK are facing increased trade deficits of more than 5% after decades, thanks to the sustainable competitive advantage of Chinese manufacturing companies. Most of the companies have made it the rule of the thumb that manufacturing can be cheap only in china. This change in the strategies of outsourcing have increased the bargaining power of China as a whole. Now China has earned the power to negotiate with the most powerful economies of the world, not with weapons but with supply of goods. China has gained what weapons of US could not!

Rogues

This project will cost China $64 billion! much more than the controversial Three Gorges Dams project. However this project will diverge 44.8 billion m3 annually to the northern part of the country. This figure is equivalent to the annual water flow of the Yello river. The project will involve construction of thousands of kilometers of canals including many tunnels and under river passages. The project is expected to be completed by 2050.

History says that such mega moves are important for long term competitive advantage over other countires. Great ports and airports gave advantages to many developed countries like US, UK and Japan. Infrastrucre projects are the most controversial and the most difficult to implement in this environment conscious world. And China has the capabilty and determination to work against the odds. Time will tell how correct these decisions are and how beneficial such projects are for the worlds largest population.

Rogues.