Saturday, January 31, 2015

The Greeks gone Left

The Greek general election earlier this month saw a change in the government of Prime Minster Antonis Samaras and the left wing Syriza gaining 149 seats out of the 300 in the parliament. The win of Alezis Tsipras led Syriza s deemed by many as a changing point in European politics. It seems to answer the question why the left has failed to reemerge despite the growing economic tensions in the EU. The question at hand is what will be the outlook of the new anti-Austerity Greece be.

Election result

The Syriza needs two more seats in the parliament to form an absolute majority but it has formed coalition with Right wing Independent Greeks. The coalition might seem unlikely as the two parties have entirely different ideologies but it is very clear that both partners agree on what matters most in the Greek agenda: Anti- Austerity measures.

What is Austerity?

For those of us who might find the term unfamiliar it refers to the government policies to reduce the budget deficit at times of financial crisis.
A state of reduced spending and increased frugality in the financial sector. Austerity measures generally refer to the measures taken by governments to reduce expenditures in an attempt to shrink their growing budget deficits.



The Grexit?

Will the Greeks leave the Euro? Will the EU let it leave? The International World is waiting with all eyes on the Greece-EU discussions.
The Euro crisis began in Greece 5 years back and the economist finds it fitting that it is where the denouement is played out. All parties involved including Prime Minister Tsipras have declared that they won’t leave the Euro, but the Grexit seems to be at hand.
Right now the main question is will others follow the Greeks? The Spanish, the Portuguese, the Italians are also looking for their way out of austerity. If they too follow the Grexit the Euro might be no more.

2 out of 3 for Greece

The Economist shows that the current government got 2 out of 3 big things right. But the one big thing they got wrong might be there undoing.
1.      Europe’s Austerity has been excessive:
The Germans have led the EU for the last few years and Chancellor Merkel has been the main figure behind EU’s actions. However it is now becoming clear that the Austerity in Europe is excessive. The policies are now troubling the EU. The economies are failing and deflation has ushered in throughout the euro zone
2.      Debt Unpayable:
The Greek owe 60% of its debt to the Euro Zone and finds a debt of 175% of the national GDP over the past six years despite tax raises and spending cuts. One cannot be optimistic in this outlook and thus to be realistic the debt is unpayable.
3.      Abandon reforms at home

The Syriza got this wrong or so the economist believes. The plans to rehire 12000 public sector employees, abandon privatization and raising the minimum wage might just not work for the Greeks

Is the Grexit on the table?

On realistic grounds it seems to be on the table. Mrs. Merkel has declared that there will be no debt cuts and yet still urges the Greeks not to leave the Euro. Mr. Tspiras has shown his confidence in the ability to reach an agreement with the creditors over repayment.
However the new finance minister Varoufakis has refused to work with the “Troika” of global institutes which comprise of the European Commission, The World Bank and the IMF. 
On a positive note the EU Economic and Financial Affairs Commissioner has said to the BBC that "We believe that the place of Greece is in the Euro Zone, the Euro nedds Greece and that Greece needs and wants to be in the Euro Zone."


Greek economy in numbers
       Average wage is €600 (£450: $690) a month
      Unemployment is at 25%, with youth unemployment almost 50%
        Economy has shrunk by 25% since the start of the eurozone crisis
        Country's debt is 175% of GDP
        Borrowed €240bn (£188bn) from the EU, the ECB and the IMF
                                                                                          (BBC)

Why make the sudden noise?

Of course the Greek debt crisis and the Euro financial crisis has been on the table for the last half a decade but the collapse of the right wing Greek government and the rise of the far-left populists Sysriza seems to have threatened the Euro Zone’s higher powers.

This is the reason why Greece started to make headlines yet again. One can feel as if the outcome of the Greek policies that may threaten the existing powers’ advancement is the only concern of them. The bailout in 2012 also came with much debate only as the Germans did not want the blame on itself. But right now it might be clear that the concern is not on the struggling Greeks but their own personal national economies. 

Wednesday, January 14, 2015

The Oil spill in the world market

From the beginning of 2010 till the mid 2014 the prices of the oil barrel remained fairly stable at around $110 per barrel. However since June, 2014 the global markets have experienced a dip in the global oil prices which now at a staggering lowest since May, 2009 at less than $50 per barrel. The worlds’ top oil producers seemed to have pushed the red panic button, yet no major action has been taken to stop the dip.

Who are affected?

Russia is one of the largest oil producers in the world and is hugely dependent on its oil exports. It exported 4.72 million barrels per day in 2013 and current price fall is affecting the Russian economy adversely. The interest rates are already at a high 17% and the rouble has been falling since the mid of last year. Despite the crisis the Russian Energy Minister has refused to cut the oil prices. "If we cut, the importer countries will increase their production and this will mean a loss of our niche market," said Energy Minister Alexander Novak.
Hugo Chavez’s Venezuela certainly misses its great leader as his replacement Nicholas Maduro has evidently failed live up to his predecessor’s reputation. Even before the fall of global oil prices the country was facing difficulty due to economic mismanagement according to the BBC. The crisis seemed to be a hit on the face for Venezuela, as it too is one of the largest global oil suppliers. It is also interesting that the country accounts for the lowest domestic fuel prices by government implemented subsidies.  The government still hasn’t considered cutting subsidies despite the crisis.
Saudi Arabia is the world’s largest oil producer and holds a strong economy with reserves as high as $700 bn, which gives it the ability to withstand for a bit more. It is the most influential player in the Organization of Oil Exporting Countries (OPEC) and has not shown any signs of cutting down its supplies to balance out the excess supply.
The oil production has seen a rapid increase in the recent years. The US energy companies have been a major cause in the current dip of the prices. The hydraulic fracking of the Shale has been the main reason befind the price fall. This increase of production at relatively less costs than the conventional oil producer have created the crisis, and the US seemed to be affected less than its counter parts.
The Asian giants are facing mixed results. China is exploring massive economic gain as it is set to become the world’s largest oil importer. Japan depends on the imports for all its oil supplies but yet the price drops result in drop in inflation thus obstructing Prime Minister Abe’s economic agenda, thus giving mixed outcomes for the Japanese. India will find its economy strengthening if the oil prices continue at this rate or dip even further considering its oil imports and is expected reduce its expenses on subsidy.  

Why is the oil price dropping?

The economist highlights four key reasons affecting the low prices. Initially the fall of demand in the global market has resulted in the drop of the prices. In simple economic terms of “Demand and Supply”, because the demand falls with constant supply as no exporter has limited its supply, the prices are dropping. Secondly, the political crisis in the Arab world hasn’t had the expected effect on its oil output. Libya and Iraq mainly going through a rough patch in its politically divested backyards still manage to continue its vast supplies of oil into the global market.
Thirdly, the increasing growth of the Oil production in the US. The oil companies in North Dakota and Texas have set about in extracting oil from Shale formations and have completed drilling around 20,000 wells since 2010, which is nearly as ten times more than that of Saudi Arabia. As mentioned above the increase of oil production in the US has affected the global market with the increase of supply as well as the decrease of the demand. The imports of oil to US have dropped with its increase in production. Finally, no major oil producer is willing to let go. Saudi Arabia, UAE and Kuwait seen as the most stable oil exporting nations have refused to sacrifice their market shares to restore the market prices. Saudi Arabia holds a strong reserve of $700 billion and an oil barrel costs are very little. Yet, it still hasnot make any decision to restore the oil prices.
The OPEC holds monopoly over 40% of the oil production of the world but has not been able to tackle the crisis. Saudi Arabia holds major influence in the cartel and has not made any movement. The OPEC worries of losing the market share as an whole to the non OPEC exporters as they cut the supply.  

The world is waiting eagerly to see what the major exporters will do with regard to the oil price dip. Will there be anyone ready to sacrifice itself? Or Will the crisis go on pass the point of no return?


Friday, January 9, 2015

Sri Lanka: The Dawn of the "Maithree" Era

I pen these words as it has been declared the Common candidate has emerged victorious at the Presidential election 2015. It is important to have a look back at his victory.



A month ago this result would not have even been in the wildest dreams of any Sri Lankan, but today the mighty President Rajapakse has seen himself been defeated at the hand of his former ally. The leader who quenched thirty years of war is no more at the helm of the country. It has dawned upon the country to be a new era with a lot of changes as Maithripala Sirisena is going to ascend to presidency.  
However I guess that was the easy part. The difficult part is took keep his 100 day promise. Maithripala Sirisena comes in with a huge and broad coalition, to satisfy all is seems a near impossible task. Getting them all on one stage seemed impossible as well. On the other hand the recent political outcomes have shown that nothing is impossible. The conclusion of the war of terror in 2009, defeating a man whom was considered unbeatable, winning an election no one would have expected Mr. Sirisena to win under any other conditions.
The opposition
Mr. Sirisena found himself in the hot seat as the common opposition candidate, as many saw him to be the best candidate to fight against the regime of the Rajapakses. The government has dominated by the Rajapakses, who held top positions from the President himself up to provincial chief minister and rugger team captainship. Mr. Sirisena was one of the closest allies of the Rajapakse. The general Secreatry of the Sri Lanka Freedom party, Minister of Health and despite speculation trusted partner of the President left the government about one month ago. And the opposition simply rallied around him. The much unpopular former president Chandrika Bandaranayake, the misunderstood opposition leader Ranil Wickramsinghe, Sinhala Buddhist nationalists and war time activist Jathika Hela Urumaya, most venerable Maduluwawe Sobhitha and the Veteran war hero and former opposition presidential candidate General Sarath Fonseka  rallied along to shift the trend away from Mr. Rajapakse. The JVP with its new charismatic and much popular leader Anura Kumara Dissanayake hinting its support indirectly, Maithripala found himself on the cross roads of making history. With time his campaign got stronger. The strategies were much firm than the former opposition candidates and it seems that Mr. Sirisena knew the weak points of the Rajapakse regime a point too well. The shift looked strong as a group of new generation artists rallied around and governments’ strong muslim leaders Hakeem, and Rishad joined the campaign. The TNA marked its support ensuring the ethnic minorities voted for  Mr. Sirisena.
Why not Rajapakse?
The main reason for the rallying opposition for President Rajapakse was his family regime which seemed to be heading towards dictatorship routes. The 18th amendment to the constitution which ensured the unlimited ability to run for presidency as well as much enhanced executive authority seemed to be the main opposition argument. It is important to note that the 18th amendment was backed by the current victor as well. The government was mainly led by members of the Rajapkse family. The much appreciated Defense Secretary Gotabaya, the speaker of the Parliament Chamal, Minister for Economic Development Basil, Chief Minister of Uva Province Shashendra, MP Namal, National Rugger team captain Yoshitha as well as many other noted members of the family found themselves seated in the comfy seats in top offices in the government. This to many seemed to a sign of a leader heading towards dictatorship. The president was called “The King” and the 18th Amendment laid the initial foundation to restore a kingdom in Sri Lanka. It was however evident that most of the top government politicans including Mr. Sirisena were frustrated by the emergence and domination by the Rajapakses’. This was the major reason for the breakaway and it has now led to their demise.
Among other reasons were the increase levels of corruption which seemed to be quite evident with the high costs of development projects. The government ministers, officials too were accused of the corruption and fingers were pointed at the ignominious behavior of government representatives. The accusations direct from Drugs to rape and murder. The ill-treatment to the public in various parts of the country seemed have paid off against the President Rajapakse’s campaign.
Now what?
Maithripala Sirisena is now faced with a huge challenge to turn the country around, to bring back the good governance and reestablishment proper institutions in the country as well continue with the vast development agendas of the President Rajapakse.
First he needs the consensus of his partners in the constitutional reforms. He has promised a reduction in the powers of the executive president, thus ensuring that the Presidency will be answerable for the parliament as well enrich the reach for the parliament in the countries affairs. But, the question lies if he will be able to get the census from his allies. The Buddhist nationalists, Tamil and Muslim leaders together with the right wing UNP Mr. Sirisena will have a hard time agreeing on one constitution. So the first challenge at hand is to get his allies on to one platform.
Secondly he needs the parliament to back the reforms. President Rajapakse had 2/3rd majority, yet at the moment no political party holds such power. But the majority of the parliament is still with the UPFA of President Rajapakse.  The president-elect has promised to appoint the UNP leader as the prime minister, yet for that he will require some of his former allies of the UPFA to back Ranil Wickramasinghe. If Mr. Wickaramasighe is to appointed as the Prime minster then 2/3rd majority might not be far ahead.
Third challenge might be the more important for the three is to convince the public of his intensions. Yes, he did win the presidential election. But, the majority of the Sinhala Buddhist voters supported President Rajapakse, while Mr. Sirisena was blessed with an overwhelming majority of minority voters. Mr. Sirisena needs to convince the majority of Sinhala Buddhists that he will ensure the unity of the country and the trust of the public not adhering to the pressures of the Tamil diasporas or Islamic extremists.
Lessons learnt
Nothing is impossible. This was first taught to us by the outgoing president Rajapakse as he led the nation towards the end of the 3 decade long terrorist crisis, which many deemed impossible. Not that long ago, the defeat of President Rajapakse it self was deemed impossible at least in near future. But Maithripala Sirisena showed that nothing is impossible and that it is the power of the Common people that matters.  The election showed that democracy prevails and democracy gives the power to the people to make the change when it’s needed. It also highlighted that fact that no individual should be given power for too long, as power corrupts people.
The people of Sri Lanka have decided. Time is ripe for change.
If it’s for the better or for worse we await to see. For now the President of the Democratic Socialist Republic of Sri Lanka is Maithripala Sirisena.


On behalf of the President Sirisena let me remind him that the people have placed great trust in him and we all hope for the best.

For the president to keep in mind.
“The greater the power, the more dangerous the abuse”
Edmund Burke


Friday, December 26, 2014

Branding: Emergence of a new global trend

Try to remember the last time you went out for a walk. What do you remember seeing? Probably the buildings, vehicles, trees and so on. Yet another thing that will come up in your mind is the advertisements you saw. Advertisements are the most visible method used in branding. Yet it is nothing new. Branding dates back to the ancient days where men used to brand the cattle and the sheep and since then Brands have evolved into some what it is today, something that actually matters.
The branding world has been dominated by western brands over the past years. However it is noticed that this domination is shifting gradually from the west to the east. Samsung, a South Korean smartphone brand provides the best example as it holds the highest market share in the smartphone industry outclassing stiff competition from the more established brands of the Economic north. Similarly the world is witnessing the rise of new brands especially from the ‘Tiger Economies’ of East Asia and the Latin American innovators. We will take an insight view on the branding possibilities of the emerging markets.  
What is a brand?
“A brand for a company is like a reputation for a person. You earn your reputation by trying to do hard things well.” – Jeff Bezos
Philip Kotler, author of “Marketing Management” defines a brand as a name, term, symbol or design or a combination of them, which is intended to signify the goods or services of one seller or group of sellers and to differentiate them from those of the competitors.
To put it simply it is the unique identity of the good or service in the market.
Why do we need branding?
The brand name is the identity or the personality a specific good or service holds in the consumer market and it is what that urges the consumer to choose that specific brand over the other similar brands.  Over the years the world has globalized in such a way that consumers around the world seek for brands which have established themselves as leaders in their specific industries. Therefore it is essential for firms to brand themselves.
Evolution
Branding is not a new concept in the human civilization, yet branding as we know began to evolve in around the 16th century. The British ceramist Josiah Wedgwood and the French designer Rose Bertin are acknowledged for the establishment of the earliest known brands. And since then brands have come a long way. In the status quo brand names holds more value than the tangible assets of the company, as it was for Kraft in 1988 when Philip Morris paid most of the 75% investment on the intangible assets on the powerful brand names of Kraft. The economic boom and sophistication of lifestyles began through the industrial revolution which spread from the Great Britain to Europe and the US. And since then the Western world has managed to hold a tight grip in the world’s top brands. However with the success of the emerging nations as serious contenders in the global market many Asian and Latin American brands have managed to establish themselves as top companies. Samsung, Toyota, Concha y Toro and Prada can be introduced as few of the brand from the emerging world which is threating the more established brands. It is a known fact that the companies which have managed to brand themselves in the markets have managed to be more innovative as well as risk taking, and each day the emerging and the developing markets are introducing brands which challenges to status quo.
Recipe for Emerging Brands from the Emerging World
The global markets have been dominated US and European brands for the last couple of centuries. However the many researchers have noticed a shift in this trend. When we study the markets we can clearly identify that developing countries have managed to produce brands that are challenging the more established brand names.
Establishing yourself
There different paths to establish new brands in the international consumer market. Firstly firms tend to follow the trend set by Toyota, by releasing good enough products cheaply and then allowing them to raise the price as well as the quality. Another is to target Diasporas of their mother countries. Indian business giant Reliance launched a highly successful cinema chain in USA which facilitated Bollywood Blockbusters attracting the Indians living in USA. The wide ranges of cuisines hailing from different parts of the world have been part of this branding strategy where companies such as Jollibee used to promote their own food cultures globally.
It is crucial that the developing nations of these emerging brands manage to develop a good reputation about the country as the firms need to escape the image of the developing world in being of poor quality. Firms as well as the governments should use ways to improve the image of the country in the international community. Brands also attach themselves to the unique local cultures as well to the natural beauty of the developing countries
Building up the brand
A brand which hopes to succeed in the higher echelons among the international brands needs to stabilize and establish itself in the domestic market. Amitava Chattopadhyay and Rajeev Batra, authors of “The Emerging Market Multinationals” introduce four strategies for building markets for new brands.  It insists that these brands exploit the advantages of economies of scale and local knowledge to establish their brands among the local consumers. The economies of scale lead to a reduction of costs in the long run which allows the expansion of firms. Also the local knowledge gives an insight to the firm to create opportunities for it to insert its influence to attract the domestic consumer basis.
Secondly, the firms should focus on developing and promoting market strategies which will address the specific market segment which will allow it to be world class. For example, Lenovo which is cited as an upcoming brand initially targeted the corporate clients before addressing to the necessities of the general consumers, thus targeting a specific group of clients that are more likely to be favorable towards their brand gave Lenovo the edge to become an emerging brand in the global economy. The third strategy is innovation. They rightfully argue that the brands from the emerging world needs to innovate new paths to climb the ladder of success as it is not a simple task to challenge the more established brands from the developed world. FastCompany a leading progressive business media brand ranked Safaricom, a Kenyan web based company as the ninth most innovative company in the world in 2013 above the likes of more renowned brands such as Apple and Coca-Cola. It has given the poverty stricken Kenyans an opportunity to call one-on-one with doctors and is recognized for bridging the health care gap with telecom.
The final ingredient is to engage in traditional brand-building, through marketing and advertising. The marketing strategies should be to attract the eyes of the consumers using marketing as we know it and promote the brand. It may be through using the company name as IBM or Toyota does or through the names of different brand under the parent company like Procter & Gamble who promotes individual brands from Gillette to Duracell. The emerging companies can merge with existing brands or even buy prevailing brands in order to establish themselves. Tata’s acquisition of Jaguar is one such example.
Globalization and new brands
There is little doubt on whether globalization has actually begun to alter the course of the human civilization. The rapid development in the field of Information Technology along with the liberalization of world markets has laid an interconnected and interdependent web entwining the whole of humanity together. The emergence of brands from the emerging world is seen as an inevitable result of globalization. The process has given way for prevailing multinational brand to access the labour and resource markets in the developing world. The prevailing successful brands sought to outsource production of good and services to emerging markets with cheaper labour resources and thus created opportunities to the local firms to develop. These outsourced companies initially became financially stabled and later began to develop on its own. The globalized market structure allowed these emerging brands to establish themselves through promoting their innovations to the global consumers. Samsung, HTC and Lenovo are few such brands from the emerging markets that have found themselves up the ladder and are now climbing the steps.

The domination of western brands is gradually decreasing with the emergence of new brands from developing countries and they progress to increase their market share in the world.  The progress of these brands provides a formidable foundation for the rise of the domestic economies of the developing countries. The innovative branding techniques followed by them will play a crucial role in establishing a new order in the global market. This rise of the fresh brands provides hope for the dependent economies of the developing countries to surface as stable and independent economies.

This article was published in the "Exposition" magazine published by the Department of Industrial Management of the University of Kelaniya, Sri Lanka