Global Trade, earthworms and potatoes

Posted on August 6, 2011 by aviyer2010

A Saturday essay by Charles Mann (Wall Street Journal, August 6, 2011) provides a fascinating story of the impact of stowaways as a party of global trade. He describes how earthworms made their way as part of the English dirt used to grow tobacco in Virginia (itself imported from the Amazon). The earthworms had disppeared from the US Midwest and New Englad during the Ice Age. These newly imported eathworms flourished and changed the nutrient structure of the soil, wiping out some native plants at the time (wild oats for example). As a result of the nutrient rich soil, the eathworms changed US agricultural productivity. He describes how potatoes that we imported into Ireland enabled a jump in productivity of farms and enabled it to supplant grains.  But centuries later, potato blight wiped out these firms and, in Ireland, killed two million people in two years.  Global trade has unforeseen impacts over time, both positive and negative. How should individual companies and nations plan their trade choices or regulations to aniticipate such impacts ? How much of the liability for such accidental traffic should be imposed on the individual company supply chain ?

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Toyota’s Toyotag and engaging consumers

Posted on August 3, 2011 by aviyer2010

A New York Times article (August 2, 2011) describes Toyota’s use of Toyotags – a “logo inside a ring” that permits customers with smartphones to get specific product information from the mobile bar code, but also permits use of a standard mobile phone.  The goal is to find ways to get information directly to the consumer about cars, maintenance plans etc, while also gathering information about end consumers.  Is Toyota’s attempts to go downstream to the end consumer as an extension of its supply chain an effective use of the web by a durable goos manufacturer ? How far can Toyota go with its reach without creating a channel conflict with its dealers ? Should the Toyota link to customer be expanded to include customer feedback regarding product performance and use ?

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“Better Place” battery swapping stations in Denmark and the future of EVs

Posted on August 2, 2011 by aviyer2010

An article in the New York Times (July 29, 2011) describes recently opened battery swapping stations by “Better Place” in Denmark. Oweners of electric vehicles lease batteries and drive into swap stations to replece batteries. A robot operated device removes the old battery and replaces it with a new one in under five minutes. By keeping charged batteries ready in inventory and leasing them to customers, the station decreases wait time to levels similar to gas stations.  But efficient operation will require car manufacturers to adhere to some standards – something that has yet to happen.  Will a leased battery approach enable faster adoption of electric vehicle technology ? Should these bettery swapping stations, that cost more than $ 3 million each, be subsidized to cover the environmental benefit they generate ? Should governments or other standard making entities step in to coordinate battery location and access standards across competing auto manufacturers ?

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“Tide Dry Cleaners” as P&G takes downstream role

Posted on August 2, 2011 by aviyer2010

An article in the New York Times (December 8, 2010) describes dry cleaning stores opened by Proctor and Gamble to popularize its Tide products.  A similar effort focuses on Mr Clean Car washing locations.  The goal is to use these outlets to spur revenue growth in the U.S.  But competition in local retail markets for dry cleaning and car washing is fierce, based on cost and service.  Will P&G be able to compete effectively to survive in these markets ? Is going downstream into retail an effective approach to grow product demand ? Can efforts to compete lcoally assist with brand growth thorugh new product introduction ?

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China’s new products – high end pearls using high tech methods

Posted on August 2, 2011 by aviyer2010

A New York Times article (August 1, 2011) describes fine pearls being developed in China to compete with Tahitian pearls, but at 10-15 % of the price.   Using proprietary technology and custom equipment to sort pearls enables the Chinese firms such as Grace Pearl, the firm manages to compete for high end products.  Newer technologies developed by the firm, some in collaboration with Zhejiang University, use genome sequencing of mussles and live tissue to develop purple, pink and bronze pearls that do not use dyes to get their color.  Does this approach – development of proprietary technology and use of high end equipment, suggest a different China manufacturing capability ? Given the need to protect home grown technologies, should we expect a greater enforcement of intellectual property in China ? Does the industry- university collaboration for technology development, described in the article, portend a new research direction in China ?

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Making the case for “cost effectiveness” of new drugs

Posted on August 1, 2011 by aviyer2010

A story in the Wall Street Journal (August 1, 2011) describes the challenges in launching new drugs, given the “cost effectiveness” concern by health authorities. This means that new drugs have to be effective in treatment, but also deliver sufficient enough value over existing treatment plans, given increasing frugality by insureres and governments.  Such demands impact pricing and the hurdles for new drugs. In addition, such approvals for ‘cost effectiveness” are done separately by each country.  Furthermore, physician worries about the liability of  potentially unknown side effects of drugs has further slowed adoption. How will such worries impact the drug company incentives for new product launches ? Will such trends decrease prices for new drugs or decrease R&D spending on new drug development ?

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Walmart’s plans to buy vegetables and fruits locally

Posted on August 1, 2011 by aviyer2010

A Wall Street Journal article (August 1, 2011) describes plans by Walmart to double its local purchase of fruits and vegetables by 2015 – with local defined as purchases from the state the store is located.   Thus Walmart buys jalapeno pepper from 30 states while about 10 years ago Florida provided most of the product.  The higher local prices are compensated by avoided transportation costs and is also in line with locavore movements.   But growing in different climates requires use of pesticides to maintain quality.  Local farners get volume commitments that makes their business viable.  But is Walmart’s decision driven by a response to consumer needs or a cost reduction strategy or both ? Is a local procurement level of 9 % for perishables by 2015 a significant local push or a marketing tool for Walmart ? Do you expect greater product variety – like heirloom tomatoes – as a response to such a local procurement strategy ?

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WalMart’s “Sustainability Index” challenges

Posted on July 30, 2011 by aviyer2010

A Fortune article (July 25, 2011) titled “The Trouble with Green Product Ratings” describes the challenges faced by WalMart as it tried to deliver on its stated goal, two years ago, to provide an index between 1 and 10 for all products.  The main issue was that possible measurements of a product’s supply chain were full of tradeoffs – for example, replacing recyclable packinging with cups made from plants that go into a landfill generated fewer emissions, fixing the feed for cows whose milk went into organic yoghurt was the key to reduce cow burps and the associated methane emissions, switching to organic cotton caused the amount of water used to be significant.  Thus, a recent statement from WalMart just suggests more information for customers to make choices rather than an index.  Should sustainability be described by a series of measurements (like nutrition data) rather than an index ? Should there be a national standard rather than adhoc individual standards ? Should some “bottle bill” like scheme be developed to encourage consumers to care about environmental impact by charging for end of life costs ?

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“Piccolo bello” fims in Italy and regulation

Posted on July 30, 2011 by aviyer2010

A New York Times article (29 July 2011) describes the challenges faced by small Italian firms (“piccolo bello”) which form the backbone of the industry in Padua, Italy.  Firms face the need to work with 10 to 20 different government organizations to start a business, with a new store opening requiring at leat five years of planning and approvals.  The guild system requires firms to outsource payroll checks requiring an outsourced cost of 50 euros a check, beyond the government mandated paperwork and black market and corruption issues.  Successful small firms have resorted to accessing global capacity to survive. Given Italy’s need for growth, is a focus on decreasing regulation the path to success or would it only drive more revenues into the black market ? Is the era of the small firm over, and should mechanisms be evolved to encourage larger firms that can be more easily monitored ?

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Pipeline capacity location and demand-supply matching

Posted on July 30, 2011 by aviyer2010

A Wall Street Journal article (29 July 2011) describes the reduced demand for pipeline capacity from the Midwest and Canadian locations to the Northeast (with capacity reported to drop by 44 %) as increased gas is shipped from the Marcellus shale locations in the Northeast itself.   In West Texas, prices have dropped as more gas is shipped south.  With pipelines being infrastructure assets that cannot be relocated, the pressure to fill the pipe with alternative flows suggests new materials such as NGLs, projected to have demand growth, and which are mixed into fuels or used as ingredients in plastic.   How will these supply-demand mismatches for pipeline capacity across the US be resolved Should the industry move to contracting like the electricity grids to better manage its capacity ? Should the industry move to support consideration of the entire environmental cost of gas generation to maintain its capacity utilization (i.e., focus on the cost of fracking) ? IS there a coordinating role for the Federal government to ensure long term capacity availability ?

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