Week 7: Alcohol Industry PDF

Week 7: Alcohol Industry Part 1 - The Business of Alcohol Video Lecture: Gin and rum most politically impacting GIN CRAZE Dutch introduced Genever in 16th century British shortened it to Gin British people like french wine and brandy In l...

Week 7: Alcohol Industry Part 1 - The Business of Alcohol Video Lecture: Gin and rum most politically impacting GIN CRAZE Dutch introduced Genever in 16th century British shortened it to Gin British people like french wine and brandy In late 1600s due to british-french war, King of england imposes tariffs to stop the british from buying french alcohol and instead switch to Gin Gin was inexpensive to produce and became very popular Gin is very potent so there was a lot of public drunkenness Backlash from too much alcohol consumption, resulted in Gin Act of 1751: ○ Hard to get licence to produce and excise tax on production In 1800s Gin popularity recovered since it was mixed with quinine water as an anti malaria potion RUM Rum distilled from molasses Popularity rose in the late 1600s, especially the 1700s Large sugar plantations from French and British colonies in the Caribbean Led to increase in importation of African slaves RUMS IMPACT 1731 British sailors required to drink a daily pint of Jamaican rum for each man and a half. Same for Canadians Americans were not allowed to drink on ships Americans decided to produce whiskey CUBA Rum and Coke called “Cuba Libre” Bacardi became supplier of Rum to Spanish royalty from the 1880s Cuba Castro caused conflict with Bacardi which led to Bacardi moving to Puerto Rico Bacardi still seeking compensation for this  Part 2 - "Every day's a Sunday" - the Temperance Movement and Prohibition Video Lecture: PROHIBITION: RESTRAINING THE LIQUOR TRADE Prohibition is any restrictions on Alcohol Based on Protestant moral beliefs and economic arguments PROHIBITION MOVEMENTS IN CANADA Influenced by British and American Two major Canadian Organizations: Dominion Alliance for the Total Suppression of the Liquor Traffic and the Women’s Christian Temperance Union Prominent for Women, tied to suffrage movement THE POLITICS OF PROHIBITION Sir John A against prohibition Liberals/reformers favoured the act THE 1898 REFERENDUM Wilfrid Laurier government had a lot prohibition supporters Big following in Quebec who was against prohibition Decided to hold a non binding referendum (vote) Close vote but resulted in favour of prohibition All provinces voted for prohibition except for Quebec Laurier decided to do nothing WW1 AND PROHIBITION In 1901 PEI introduced prohibition which lasted until 1948 Other provinces started in World War 1 except for Quebec Seen as patriotic and conserving food 1918 federal government stopped the manufacture and import of liquor Loopholes for “medical purposes” Na Poo was soldier slang for “no more” (prohibition) DEMON RUM: ALCOHOL IN THE TRENCHES Most Canadian soldiers received a rum ration which was seen as a moral booster for men Controversial and attempted to be removed PROHIBITION POST WW2  After the war most began to think prohibition violated their rights and it was unfair Criminal distribution also came to be seen as a problem THE AMERICAN EXPERIENCE 18th amendment brought upon prohibition (1920), 21st amendment repealed prohibition (1933) Prohibition negative due to job loss LACK OF SUCCESS Prohibition shut down many Ontario breweries Resulted in job losses, vanished legacies Business of alcohol driven to the black market END OF PROHIBITIONS 1927 Ontario ends prohibition, replaced with government control Laws became more liberal over time Prohibition remained in the US making Canada a tourist destination LCBO LCBO created to give government monopoly Allowed people to drink alcohol but more reasonable restrictions Premier Ferguson believed it promoted sobriety, personal liberty, and respect for the law Article: Buzzkillers: A History Of LCBO Origins of LCBO Opened first store in 1927 (came 11 years after prohibition) Process was designed to be as shameful as possible for customers, there was strict rules and limits Purchasing System Customers had to pass a morality check to get a permit to buy alcohol Purchase process involved filling out order form that had to be reviewed by a clerk Clerks had authority to limit and refuse purchases, and to keep track on buying history Violations could lead to customers being banned Regulations and Control LCBO aimed to prevent alcohol abuse from limiting purchases, claiming it benefited families economically Prejudice was practiced with woman, visible minorities, and first nations Easing Restrictions 1950s-1970s The permit book system was replaced by wallet cards in 1958 Self service began in 1969 Modernization Former Toronto Police Chief Jack Ackroid with the help of Mcdonalds marketing executive Gary Reinblatt created modernized LCBO Part 3 - Trends In The Alcohol Industry Video Lecture: BRAND GROWTH Global markets is controlled by a small number of MNEs Largest MNE in alcohol industry is AB InBev In 2004 AB InBev was created through a merger of AmBev and Interbrew United Latin America, Canadian, and European brewery interests 2016 merger negotiated with African rival SABMiller to create Ab InBev AB InBev merger was the third largest in corporate history Company sold a good amount of the beer worldwide DIFFERENCES BETWEEN ALCOHOL MNE’S AND OTHERS Growth of Alcohol major companies is driven by heritage brands and familiar names TENSIONS BETWEEN HEALTH AND PROFIT Profits rely on increased consumption but that is not healthy RESTRICTING ADVERTISING Both voluntary and nonvoluntary restrictions, voluntary is not effective LOI EVIN: FRANCE’S REGULATION OF ALCOHOL MARKETING Prohibiting advertising on TV and sponsorships No images of people or lifestyle drinking alcohol, only information about the product Advertising was allowed in some print media for adults and some radio channels and billboards Health message had to be included (ex: alcohol is dangerous to health) LOI EVIN SUCCESS More successful with tobacco control  Producers have seeked to influence politicians (lobbying) to rollback some of the limitations MNE’S AND REGULATION Smaller jurisdictions can find it difficult to put forth regulation in large jurisdictions, lobbying can limit regulatory success Article 1: Gradual Catch Up and Enduring Leadership In The Global Wine Industry Authors Dominance Shift European countries, especially France and Italy, dominated the wine market until the 1980s Market Changes: Decrease in consumption by traditional wine-drinking countries Entry of new, inexperienced consumers Increasing influence of large distribution networks Latecomer Countries: The USA and Australia were early market challengers, gaining significant market share in both volume and value Emerging countries like Chile and South Africa also increased their share at the expense of incumbents Australia's Slower Growth: Although Australia gained market share, its growth was slower compared to other latecomers This slower growth created opportunities for newer entrants, such as Argentina and New Zealand The slowdown in Australian wine sales in the late 2000s was a result of appreciation of Australian dollar made the wine too expensive Incumbent Innovation: Some incumbents, especially Italy, innovated to compete with France, particularly in the USA market Analysis Focus: The article examines the global wine sector from the 1960s to 2010, looking at export volumes, values, and unit prices  It highlights the rise of latecomer countries and the relative decline of incumbents, with a focus on shifts in market leadership Article 2: Brand Stretch: How Alcohol Brands are Pushing Marketing Boundaries Introduction Brand stretching describes when alcohol brands extend into non alcoholic products like food or clothes Boosts brand visibility by associating it with everyday items Commercial use of brands developed during industrial revolution Brand Growth and Consumer Recognition Familiarity plays a critical role in forming brand preferences ○ Individuals recognize the brand through other products before they are legally allowed to purchase alcohol (Jack Daniels BBQ sauce) ○ Establish brand loyalty early and encourages future buying Changing Marketing Techniques There has been a shift from traditional advertising (TV) towards more “below the line marketing” ○ Social media promotions, competition, sponsors, celebrity endorsements Brand Extensions Line extensions ○ Variations of a brand within its existing category ○ Carry lower risk compared to entirety new products ○ Example: Diet Coke Category extensions ○ Applying a brand name to a completely different category ○ The goal is to transfer positive brand association to the new product ○ Example: Virgin expanding into airlines, Jack Daniels clothing and sauces For extensions to exceed, the product must align with the brands image Alcohol Branded Merchandise Study shows that youth who own alcohol branded merch are more likely to initiate drinking compared to their peers Alcohol Concern Cymru’s Research Study revealed that extensions are concentrated among well established luxury brands (ex: Baileys, Guinness, Jack Daniels) Role of Marketing Fit Successful brand extensions on average provide an increase in shareholders returns  The perceived fit between the core brand and the new product is crucial for a product extension Displacement Marketing Tobacco companies used non tobacco products to maintain brand visibility Extensions are like a loophole to marketing restrictions Concerns and Risks There is concern that brand extensions familiarize children with alcohol brands leading to future drinking behaviour Article Presentation 1: Ontario & Alberta’s Differing Liquor Boards Alberta’s Privatization (1994): Replaced government liquor stores with private ones, simplifying alcohol tax and increasing competition. Led to layoffs of 1,800 union workers Ontario’s LCBO Modernization (1998–99): Upgraded stores, improved customer service, and focused on high-margin products, increasing per-visit spending Economic Context: Alberta (1993) had a decent sized deficit and high unemployment; Ontario (1996) faced a very large deficit and marginally lower unemployment Cultural Factors: Alberta's privatization reflected a populist, pro-business culture; Ontario’s LCBO reforms aligned with a history of state intervention and social conservatism Article Presentation 2: Litigation and Lobbying Scotch Whisky Association (SWA): Protects Scotch Whisky’s authenticity and quality globally. Legal Protection: 1933 and 1969 Acts define Scotch Whisky as Scottish-produced, addressing misrepresentation. Economic Risks: Imitations and inferior products damage Scotch Whisky's reputation and sales Global Comparisons: Similar challenges in protecting authenticity exist in Parmigiano Reggiano, Tequila, and Ontario Wine. Cultural and Economic Value: Protecting authenticity supports local economies and cultural heritage Week 8: Travel and Tourism Industries Part 1 - Seeing and Selling the World - The Business of Tourism Video Lecture: ROMAN HOLIDAY 2 things must exist for tourism to occur: ○ Security to travel without fear ○ The resources to do so Roman version of grand tour, including: southern Italy, Greece, Troy and Egypt to cruise the Nile PILGRIMAGES Christianity, Buddhism and Islam all featured a call for pilgrimages THE GRAND TOUR 17th century England, young men spent two-three years touring France, Italy and Greece Only the rich could afford this Banks would arrange letters of credit with European Banks THOMAS COOK TRAVEL Company inherited by Cook’s grandons in 1899 Sold in 1928 to Belgian company that ran Orient Express During WW2 was taken over by the British railway companies Nationalized after war Privatized in 1970s Bankrupt in 2019 POST WORLD WAR 2 TRAVEL AND TOURISM Air travel was expensive until deregulation trend of late 1970s and creation of discount carriers End of Cold War meant new destinations and travellers HOW IMPORTANT IS TRAVEL AND TOURISM TO THE GLOBAL ECONOMY Uptrend in 2024, large projection towards global economic contribution for the sector Part 2 - Tools of Tourism - Commercial Cruises Video Lecture: CRUISE SHIPS TITANIC TO QUEEN MARY Beginning of passenger cruise ships, not just a means of travel, ship was part of attraction, began in 1844 with the Oriental Steam Navigation Company Advertised sea tours to destinations such as Gibraltar, Malta and Athens, sailing from Southampton MAURETANIE AND LUSITANIA Owned by Cunard Line of England Lusitania and Mauretaine launched in 1906 Largest ships ever built at the time Carried 50% more passengers than largest competitor Designed for speed in response to competing shipping lines Started tradition of dressing up and advertised romance of the voyage Lusitania torpedoed in May 1915 by a German U-Boat killing 1200 people TITANIC Luxury cruises, as opposed to simple transportation, became increasingly competitive THE “UNSINKABLE” Business, theatre and social leaders were travelling in first class Among them were countless millionaires and important people of the time 3rd class passengers had fewer amenities SINKING OF THE TITANIC Titanic left Southampton, England in 10 April 1912 Sunk 14 April, 1500 died THE INDUSTRY CONTINUES Large jet liners in 1960s caused decline in transatlantic and transpacific cruises 1980s, only Cunard Lines served a small clientele on the Queen Elizabeth 2 CRUISE LINES Cruise ships are organized like floating hotels Caribbean and Alaskan, along with other tours focus more on the journey rather than the destination EXPANSION OF THE CRUISE INDUSTRY 1970, about 500,000 people went on cruises, 2013, number higher than 20 million The TV series “Love Boat”, helped to popularise the idea of taking a vacation at sea on a ship. Article: Exchange --- Heard on the Street: The Math Behind The Megaships --- The cruise industry is bringing a whole new meaning to the phrase 'economies of scale' Using tax havens and employing thousands of workers from developing countries has helped keep the cost of cruises down In 1980, there were 1.4 million oceangoing cruise passengers Operators keep ticket prices low enough to reach full occupancy because a substantial part of their cost is the vessels themselves, and their fuel  A lot of revenue came from onboard spending Icon of the Seas, new biggest ship, five times as large as Titanic. Powered by relatively clean liquefied natural gas New ships more cost and energy efficient During COVID carnival took some 38 ships out of service Part 3 - Tools of Tourism - Commercial Aviation Video Lecture: COMMERCIAL AVIATION Jan 1, 1914, the St. Petersburg - Tampa Airboat Line became the world’s first passenger airline service First pilot: Tony Jannus, first passenger: Abram C. Pheil Limited to one passenger at a time AIR TRAVEL 1930’s, Clipper 314 flew 74 passengers distances up to 3500 miles WW2 interrupts the expansion of commercial air travel, but advances technology THE BOEING 747 Goes into service in 1970 Carry passengers more than 8000 miles without refueling Article 1: The History Of Commercial Flight: How Global Travel Took Off First passenger flight took off in May 1908 1920s, Lawson C-2 introduced, which was specifically built to carry passengers Aircrafts from this time would land frequently and fly at lower altitudes due to unpressurized cabins 1935, Qantas first international passenger flight travelling from Brisbane to Singapore Number of airline passengers increased between 1930 and 1934 Douglas DC-3, 1935, was a larger and more reliable aircraft compared to its predecessors Boeing 307s featured the first pressurized cabin in the late 1940s Pan Am was the first airline to fly worldwide Concorde, the world's first supersonic aircraft Laker Airways, founded in 1966 by Freddie Laker, was one of the first airlines to start offering a budget alternative by adjusting its inflight offer Largest low cost carrier today is Southwest Airlines Article 2: The Rise Of The All Inclusive Resort Two convergent strands in the history of the modern resort  ○ Idea of seaside living ○ Spa, Roman origins Modern all inclusive resorts began in Britain; the most developed European country of the 1930s Holdup Problem: Your reluctance to enter into a contract when you don't know whether one party to the contract will revise the terms of the deal in a very unfavourable way Resorts profit margins are almost twice as high for the all inclusive deal All inclusive resorts create jobs Very little of the revenue generated by the resort stays locally Article Presentation 1: Why Latin America has Embraced Ecotourism Ecotourism Definition: Responsible travel to natural areas aiming to conserve the environment and support local communities. Key Issues: 1. Balancing Conservation and Economic Development: Ecotourism funds conservation but can also threaten ecosystems (e.g., Galapagos Islands). 2. Overtourism: Leads to environmental degradation, waste, and resource overuse (e.g., Amazon). 3. Mislabeling of Ecotourism: Some ventures misuse the label without genuine benefits. Ecotourism’s Dual Impact: Can support conservation and local communities, but also cause environmental and social issues. Conclusion: Ecotourism requires careful management to balance conservation and economic benefits, with true sustainability practices and community involvement. Article Presentation 2: Our Dollars are Celebrities Abroad Tourism as Soft Power: Post-WWII American tourism promoted US culture, boosted foreign economies, and fostered goodwill, but sometimes led to resentment due to cultural insensitivity. Dollar Gap: Post-WWII shortage of US dollars globally, addressed by the Marshall Plan and tourism, with the US dollar's strong value increasing reliance on it. Travel Gap: European economies improved, reducing their spending in the US, leading to a growing US deficit in balance of payments (50% by 1964). Week 9: Global Finance Part 1 - The History Of Global Finance Video Lecture: WHAT IS MONEY Money is any generally accepted medium of exchange which enables a society to trade goods without the need for barter MORE SPECIFICALLY Coins: Valued for metal content or as representative tokens Paper Money: Issued to represent value. From ancient China to modern societies Digital Currency: Exchanged as information, rather than physical money KINDS OF MONEY Commodity Money: Gold and silver coins, but also things like shells, grain, or other items of agreed value. Token Money: Coins or paper that can be exchanged for the face value of gold or silver. The “gold standard” is an example. Fiat Money: Money issued by a company to a government that is not backed by gold or another commodity but rather by declaration of the issuing government. POTOSI AND SILVER Potosi was the first city of capitalism, as it provided silver Spain enslaved them, forcing them to produce IMPACT Influx of gold and silver from South/Central America changed the economies of the world Transition to cash in Europe developed capitalism based on exchange of money rather than barter Spanish silver changed the nature of trade with China and other parts of Asia. Influenced other European countries to seek colonial opportunities AN ASIDE Potosi in Bolivia, world's leading sources of lithium WHAT IS A BANK?: BANKS AND CENTRAL BANKS Bank of England formed in 1694 Designed to raise money to finance a navy Lots of money raised, in return the Bank could issue notes against government bonds. BANK OF ENGLAND By end of 18th century Bank issued currency, managed public debt, and became “the bankers bank” holding enough gold to cover currency issued by itself and other banks in England OTHER CENTRAL BANKS USA: Federal Reserve, created in 1913 Response to the financial crisis and a desire to ease fluctuations in the economy Purpose: ○ Centralise control of the monetary system ○ Regulate banks ○ Lender of last resort for banks ○ Set interest rates Panic of 1907 meant New York banks may not achieve a cash call JP Morgan fixed the Panic of 1907 with 30 Million USD (not his money JP Morgan’s death results in the US Federal Reserve Three roles of US Federal Reserve - Maximize Employment - Stabilize Prices - Moderate long term interest rates BANK OF CANADA Great Depression changed Canada’s perspective of the Central Bank Canada abandoned the gold standard to stimulate the economy The Royal Commission established in 1933 to study the issue Bank of Canada established in 1935, and held central control of monetary supply Initially controlled by private interests but transferred to federal government control in 1938 Became Arms-Length institution: Government institution designed to be free of political influence Standardized currency established 1950 CHARTERED BANKS IN CANADA They take deposits and make loans Operate under charters issued by the federal government Originally issued their own bills, supported by their holding of gold or other assets CHARTERED BANKS IN BRITISH NORTH AMERICA BMO established 1817, Bank of Nova Scotia established 1832. Heavily regulated. Limits on the amount of debt in relation to deposits Conservative nature of chartered banking in British North America resulted in a branch banking system Different approach from the US, where fear of centralized authority and monopoly resulted in a loose system of many banks EVOLUTION OF BANKING IN CANADA Bank failures most common before 1923 Home Bank failure in 1923 led to much stronger regulation, important when depression hit in 1929  1964, the Royal Commission on banking and finance (Porter Commission) recommended “a more open and competitive banking system,” and its suggestions led to major reforms and changes The 1967 Bank Act revision lifted the six per cent annual interest-rate ceiling banks could change on personal loans and allowed banks to enter the mortgage field Part 2 - The Euro Shaking Up Global Finance YouTube Video: A Short History Of The Euro All EU states are legally bound to adopt the Euro one day, aside from Denmark, which has obtained a formal opt out Treaty of Rome, 1957, created the European Economic Community (EEC) Bretton Woods exchange system took over 1969 Hague Summit, plan to replace Bretton Woods system was created due to its instability 1970 Werner report, highlights the gradual replacement of national currency with a common european currency. This rests upon: ○ Stronger coordination of economic policies ○ Free movement of capital ○ Fixed exchange rates and common system of central banks Germany and the Netherlands (economist approach) believe that countries should first align their economies before adopting a shared currency. France, Belgium, and Luxembourg (monetarist approach) think that using a single currency will automatically help countries' economies become more similar over time 1971 marks end of Bretton Woods system 1972 creation of currency snake. This pegged the member states' currencies to each other. 1973, Denmark, Ireland, UK, joined the EU 1978, European council Copenhagen, in favour of a European Monetary System (EMS) 1979, European Monetary System enters into force, based on two key elements; ○ Virtual European currency unit (replaces the dollar as the pivot of the system) ○ Exchange rate mechanism based on fixed but adjustable rates Currencies can fluctuate by 2.25% above and below the central rate 1986, Single European Act, established a fully fledged monetary union. 1989, Delors Report proposes the implementation of the economic and monetary union in three steps: ○ Step 1: Coordination of economics and monetary policies Free movement of capital ○ Stage 2: Monetary policy gradually transferred to EC European System of Central Banks (ESCB)  Narrower fluctuation bands ○ Stage 3: Monetary competence transferred to EC Fixed exchange rates European currency ‘Economist’ Approach - Economic convergence before monetary integration. ‘Monetarist’ Approach - Monetary integration leads to economic convergence. 1992, Maastricht Treaty, creation of EU. UK negotiates an opt out that allows the country to remain outside of the monetary union Maastricht convergence criteria: ○ Exchange rate stability ○ Limits to public deficit and debt ○ Durable convergence ○ Price stability 1992, Denmark referendum rejects Maastricht treaty Causes the Italian Lira and British Pound to leave EU monetary system and forcing remaining countries to widen the fluctuation band to 15% from 2.25%, making it a flexible rate system 1994, creation of European Monetary Institute 1999, Euro introduced as virtual currency 1st January 2002, Euro starts to circulate Article: Euro visions; The International Role Of The Euro Issuing a currency that foreigners want to hold can make it easier for governments to raise money from them at cheap rates. That in turn drives down the cost of borrowing for firms and banks About 2 dozen countries link their own currency to the Euro’s About half of all euro banknotes by value are held outside the euro area 20% of all foreign exchange reserves owned by central banks are denominated in Euros, 60% by the dollar By 2007 the euro even became the most popular currency in which to issue foreign-currency-denominated debt Two changes in circumstances mean there is a chance the euro could gain ground ○ First is America's changing attitude to international economic policymaking In March euro-zone leaders said that boosting the currency's international use would help them achieve "strategic autonomy". ○ The second was a result of the pandemic The swift actions of the ECB, and national governments to support their economies were well received  The EU has made changes to make the euro more appealing to investors. They created a program called NGEU, where they issue bonds (loans people can invest in). These bonds are backed by all EU countries together. That’s important because some countries, like Germany, are very reliable, while others, like Italy, are riskier. It’s a safer way to invest in euros, similar to how the U.S. Treasury bonds work The last NGEU bond will be issued in 2026, though many think the scheme will be extended in some way The euro area lacks some of the important elements of a coherent financial union, for example risk-sharing if banks totter Part 3 - Currency Exchange YouTube Video: Exchange Rate Systems Explained FREE FLOATING EXCHANGE RATES Value is set purely by market forces No intervention by central bank Not a target of monetary policy A country’s interest does not affect the value of the currency Deprecate and appreciate MANAGED FLOATING EXCHANGE RATES Supply and demand factors drive the currency value Central bank may intervene occasionally (buy to support currency, sell to weaken) Currency becomes a key target of domestic monetary policy Brazilian Real, Singapore Dollar and Indian Rupee are examples FIXED EXCHANGE RATES Central bank fixes the currency value - pegged to one or more currencies Revaluation and devaluation Hong Kong Dollar pegged to USD CURRENCY BOARD SYSTEM An exchange rate regime in which a country's domestic currency is fully backed by a foreign reserve currency or a specific foreign asset, typically held in a fixed exchange rate relationship Domestic currency is issued only when there are corresponding foreign currency reserves to back it up, and the currency in circulation is fully convertible into the foreign reserve currency at the established fixed exchange rate Article 1: The World Is Seeing How the Dollar Really Works Financial sanctions slapped on Russia's Central Bank following Russian President Vladimir Putin's invasion of Ukraine demonstrated the extent of U.S. financial sway. Russia’s imports have been squeezed to barely more than half their pre-crisis level. Russia, China, and India would look to build an alternative currency system in order to be less reliant on the US China, rather than asserting its dominance as an alternative center of the world economy, is seeing a hemorrhage of foreign capital at a rate faster even than that during the crisis period of 2015-2016 Dollar liquidity is abundant and cheap, and the currency is universally accepted If the dollar rises, anyone who has borrowed in dollars faces more painful debt service charges A surging dollar also raises the global cost of exports priced in dollars, making them less competitive 1 percent rise in the dollar is thought to knock around 0.7 percent off global trade within a year Since the middle of 2021 as the Fed has pushed up rates, the dollar has surged by 15 percent against a basket of currencies Fed tightening cycle has the predictable effect of cutting off weaker economies in the dollar system from access to vital imports, forcing the rationing of fuel and electric power, and tightening their access to credit in an unbearable way The World Bank estimates that nearly 60 percent of low-income borrowers are at danger of debt distress or already in it 2020, more than 30 percent of low-income countries debt was on a variable interest rate basis Big emerging-market economies like Brazil and Thailand have learned that it is better, if you are going to take money from foreign lenders, to borrow from them only in your own currency  The United States, United Kingdom, and European Union agreed at last year's United Nations climate conference to provide financial support to South Africa in the financial restructuring of Eskom, its ailing power utility If the U.S. economy remains robust, then the Fed will have to resort to higher interest rates, redoubling the squeeze. In that regard, news of a slowing U.S. economy is good news for the dollar system, because it means that the Fed may be able to ease off further interest rate increases later this year. The best case would be a mild U.S. recession with inflation coming down rapidly—the so-called soft-landing scenario. Article 2: Is the Big Mac Index a Good Guide for Currency Speculators PPP suggests that a dollar should have the same purchasing power in any country after converting it to the local currency. 2020, Hong Kong’s monetary authority has been forced to sell Hong Kong dollars repeatedly since April to stop the currency strengthening too much Hong Kong dollar was undervalued by almost 54% in July 2020 which suggests no urgent need for it to fall The Big Mac Index highlights the notion that the fair value of a currency should reflect its power to buy goods and services. Economists claim that modest deviations from fair value halve every one to three years. Deviations from Purchasing Power Parity can narrow in two ways: ○ Through fluctuations in the exchange rate ○ Via movements in prices Article Presentation 1: The History of Black Management reveals an overlooked form of Capitalism Black Management History: Focuses on Black business leaders' strategies from the late 1800s to early 1900s, highlighting resilience and innovation despite systemic racism. Systemic Racism: Black professionals faced barriers in leadership, resources, and market access, leading to underrepresentation in business history. Resilience and Innovation: Black entrepreneurs developed cooperative, community-focused business models to overcome obstacles and foster success. Alternative Business Philosophies: Emphasizes cooperative strategies over profit-driven models, offering a contrast to traditional business practices. Call for Inclusion: Advocates for integrating Black leaders' contributions into mainstream business history to promote diversity and reshape management practices. Broader Implications: Promotes diversity, equity, and social impact in modern management practices, encouraging inclusive and cooperative business models. Article Presentation 2: Citibank 1. Great Depression Context: Stock market crash caused widespread bank failures and high unemployment, leading to economic depression. 2. New Deal Acts (1933): Introduced banking regulations to limit competition but led to low profitability for banks, pushing them to offer credit cards. 3. Marquette vs. First of Omaha (1978): Supreme Court ruling allowed banks to charge interest based on their charter state, creating regulatory loopholes for banks like Citibank. 4. Credit Card Issues: Loopholes in credit card regulations led to high interest rates, increased consumer debt, and worsened economic disparities. 5. Vaneta’s Views: Deregulation weakened consumer protections, trapped people in debt, and created a "race to the bottom" as states competed to attract banks. 6. Examples: ○ BNPL (Buy Now, Pay Later): Similar issues to credit cards, like consumer debt and privacy concerns. ○ Fintech: Innovations like PayPal challenge traditional banking, with regulatory and trust issues. ○ Cryptocurrency: Market volatility and fraud, with lessons on engaging regulators. ○ Subprime Auto Lending: Risky lending post-2008 crisis showed poor risk management and transparency issues. 7. Takeaways: Financial innovation needs to balance profitability with consumer protection, address regulatory gaps, and build trust through transparency. Week 10: The Textile Industry Part 1 - Cottons, Textiles, and Backgrounds Video Lecture: A T-SHIRT Usually inexpensive Controversial ethics of manufacturing EARLY COTTON Cotton has grown and been used by people in South and Central America as early as 5000 BCE 3000 BCE, grown and spun in Indus River Valley In Egypt, cotton was known, but linen was the norm ○ Climates were good for cotton SPREAD OF COTTON TO EUROPE Europe and early Greece used clothing made of wool ○ Europe climate was not ideal for cotton ○ Were not exposed to cotton Like silk, cotton made its way west through trade and war “A wool exceeding in beauty and goodness that of sheep” - Herodotus Alexander the Great invaded India and his men found cotton clothes of the conquered more comfortable than their own MIDDLE AGES, COTTON IN EUROPE Muslim traders and later conquerors, spread spinning and cotton use to Spain and Sicily ○ Brought technology to spin cotton Spreads into Europe Columbus finds cotton in the Bahamas which the natives are using for clothing, he is impressed by the colours By 1500 is becoming more common in Europe ○ People like how it is light and comfortable ○ Most part, it is inexpensive BEGINS TO GROW IN AMERICA End of 1610s cotton is grown in Virginia ○ British were looking for inexpensive sources of cotton Spanish had grown it in Florida even earlier In Virgina it expands the slave economy that already existed with tobacco ○ Tobacco and cotton require a large inexpensive workforce to produce it which is why slavery became so popular INDIA MAJOR SOURCE OF SUPPLY India had a large supply, a work force and the secret of dying cotton ○ India had many trade secrets They supplied most of Europe in exchange for gold, in the 1600s and the early 1700s India was the source of mostly all of British cotton Supply is limited by price and limited technology ○ East India Company changed the dynamic in a bad way for India BEIC AND COTTON BEIC began to import cotton in 1690s, Calico a brightly coloured version became very popular As the BEIC grew in power it was able to sell cotton back into India after processing it in England ○ Sell it for less  The advent of colonial cotton in American and the Caribbean also led to an expansion of English cotton use and production THE RESTRICTIONS Cotton had to be combed to remove the seeds or it went bad ○ Cotton seeds need to be combed out quickly to get finished product Cotton needed to be spun into thread in order to be turned into cloth Thread needed to be loomed to create the cotton fabric INDUSTRIALISM CHANGES EVERYTHING Spinning had been a ‘craft’ taking place on a wheel in workers homes, Cotton was spun into thread In 1764 James Hargreaves invented the Spinning Jenny which could do 8 spindles at once ○ Reduces the work of 7 people Thread still a bit weak, but improving RICHARD ARKWRIGHT Arkwright added a water powered system which made a much stronger thread This was required if industrial production was to be possible One person could do the work of many ○ Took away jobs 1768 angry mob destroys Arkwright’s factory POWER LOOM 1785, Reverend Edmund Carwright patents powerful loom which was improved over the years to allow faster weaving of more thread 1800, the introduction of steam power at each stage made massive productivity possible NEED MORE COTTON Restriction created by the need to ‘comb’ the cotton meant only slow increases in yield even in the new American fields The solution would be the cotton gin presented by Eli Whitney ○ Turn the crank which spins the cotton in minutes RESULTS OF THE FIRST INDUSTRIAL REVOLUTION IN ENGLAND Increased production levels Cotton cloth output 21 million yards in 1796 347 million yards in 1830 Allows Britain to dominate world cotton industry for decades 1770 the cotton industry was worth 600k euros and by 1805 it is worth 10.5 million Euros and by 1870 38.8 million Euros ○ Manchester went from 2 cotton mills in 1790 to 66 in 1821 WORK FORCE England children and women were prime sources of labour Inexpensive and compliant ○ Success is achieved by underpaying the workforce 1833 Factory Act banned children from working in tactile factories under the age of 9 ○ 9 to 13 were limited to 9 hours a day and 48 hours a week ○ Kids saved businesses money and time to help clean machines while still operating ○ 14 they are considered adults and are likely replaced ○ No one enforced the regulations CONCLUSION Cotton facilitated the transition of England into the first industrial power, their technology allowed them to mass produce cotton fabric and gave them global control of this commodity That strength allowed them to dominate the economies of countries like India It created an expanded middle class, but at the expense of horrible working conditions for women and children AMERICA GETS IN THE COTTON BUSINESS Throughout the late 1800s and early 1900s American industrial spies roamed British isles seeking new machines and skilled workers to run machines ○ British wanted to keep their advantage ○ England made it illegal to export machines and for skilled workers to leave England Francis Cabot Lowell talked his way into a number of British mills and memorised the plans to the Cartwright power loom LOWELL’S MILL GIRLS Lowell, Massachusetts named honour of Francis Cabot Lowell was founded in early 1820s to manufacturer textiles 1840 the factories in Lowell employed more than 8000 workers, primarily women and children from farming backgrounds around new england ○ Gave workers more power compared to workers in England because they could leave DECLINE AT LOWELL 1830s cloth prices dropped and wages are cut, hours extended After lowell sells this trend continues Three occasions girls went on strike until 1845, Massachusetts passed laws to help them which were ignored Wave of poor Irish immigrants replaces the more independent in the late 1840s-1850s KING COTTON 1850s cotton accounted for more than 50% of US exports Late 1850s US accounted for: ○ 77% of the 800 million pounds of cotton consumed in Britain, accounted for ○ 90% of the 192 million pounds used in France ○ 60% of the 115 million pounds spun in Zollverein ○ 92% of the 102 million pounds manufactured in Russia US CIVIL WAR ‘Slavery stood at the centre of the most dynamic and far-reaching production complex in human history’ - Sven Beckert South was more for it than North CIVIL WAR-FIRST INDUSTRIAL WAR 1861-1865 Created chaos in the world cotton market Lost access to American cotton caused England to look to India and Middle East ○ North restricted trade The South loses, slavery ends END OF THE WAR Sharecropping replaced slavery ○ When a farmer works on land owned by someone else and gives a portion of the crops to the landowner as rent TRIANGLE TO RANA PLAZA Triangle Shirtwaist Factory New York March 25, 1911 fire destroys factory ○ Work is largely performed by women, working conditions are bad ○ 2 guys owning the factory were afraid of women stealing from them and padlocked the doors ○ Paid compensations ○ Increased political focus and regulation changes ○ 2 men kept moving south and south but each state kept doing regulations so they moved to Mexico Fire caused death of 146 workers-123 women, 23 men who died from jumping, smoke and fire RANA PLAZA AND THE COST OF COTTON May 2013 a clothing factory in Rana Plaza, Bangladesh had faulty construction despite indications it was unsafe workers were sent back to work ○ Cracks form and noises cause people to leave but owners refused Collapse killed 1134 people Launched huge debate about responsibility of western consumers and merchants The U.S. Energy Information Administration (EIA) defines spare capacity as the volume of oil production that can be brought online within 30 days and sustained for at least 90 days. Michigan State University Business Center 4 Part Articles: Article 1: The Evolution of the Textile Industry Series Introduction It is estimated by anthropologists that humans began wearing clothes somewhere between 500,000 and 100,000 years ago Earliest trade hubs of textiles can be found in ancient China, Turkey, and India Two primary demand drivers in the textile industry: ○ Consumer tastes ○ The cost of products The primary driving factors for a company’s success in the textile industry are the ability to operate efficiently and securing contracts with clothing marketers for their products. Article 2: The Silk Road: The International Ramifications of Ancient Textile Trade Ancient Chinese silk was one of the catalysts for the formation of the world’s first international commercial highway. Silk Road, or Silk Route, was an ancient network of trade routes spanning from China through India and Central Asia. Connected China and Rome The main routes of The Silk Road began being established around 100 to 200 BCE. Silk was in high demand in Rome Silk clothing was far more comfortable than the standard woolen Roman clothing and was also viewed as a luxury and status symbol The manufacture of Silk was a Chinese state secret. Up until around 300 AD, China had a monopoly on the production of silk The Silk Road was one of the first connections between Western and Asian cultures and resulted in the spread of their respective ideas, philosophies, and religions. The Silk Road is also believed to be the primary facilitator of the Black Plague, which made its way from Asia to Europe in the 14th Century and went on to kill over 20 million Europeans, which accounted for approximately one-third of the population. Article 3: The Textile Industry During the Industrial Revolution The Industrial Revolution began in England in the 1700’s. England was a colonial power, and used its colonies in the Americas and Asia to provide resources such as silk, tobacco, sugar, gold, and cotton The value for trade motivated Britain to produce more ships and goods, and Britain’s ports, population, and supply of water and coal made it the perfect place to industrialize  By the late 1790s, 57% of British exports went to North America and the West Indies, and 32% of British imports were provided by these regions Before the Industrial Revolution, textiles were made by hand in the “cottage industry” New technological innovations such as Hargreave’s “spinning jenny”, Richard Arkwright’s water frame, and the Boulton and Watt steam engine improved the quality of thread and the speed it took to produce 1780s, Samuel Slater brought English technology to the United States Eli Whitney’s cotton able to further benefit the production of textiles; the cotton gin separated seeds from the cotton more quickly than before so that the United States was able to produce fifty times more cotton Before the Industrial Revolution, over 80 percent of people lived in rural areas and by 1850, more people in Britain and the United States lived in cities than in rural areas Another aspect of the Industrial Revolution that we can still see today is the rise of the middle class Women were introduced to the workforce during the Industrial Revolution Article 4: Working Conditions in the Textile Industry The textile industry generates $450 billion and employes over 25 million people across the globe It's estimated that over 120 billion pounds of textiles are made each year Cotton consumption rates feature all-time highs, with an annual demand of over 120 million tons As of 2007, only $3 billion of the $450 billion—0.5%—of the revenue generated by the textile industry is considered “fair trade or environmentally stable” Sweatshops: Factories where workers endure unhealthy and exploitative conditions, such as long hours, unventilated workspaces, low pay, or exposure to toxic materials In Cambodia, the textile industry represents 80% of their export earnings, 75% in Bangladesh Estimated that up to 60% of garment production in China and Latin America is done by homeworkers Part Two - Modern And International Trends In The Textile Industry Article 1: Why Were Indian Textiles Banned By The British? British colonial authorities strategically employed policies that severely impacted the Indian textile industry A primary reason for the British ban on Indian textiles was to safeguard the interests of the British industrial and manufacturing sectors Imposing restrictions on Indian textiles, the British aimed to secure a steady supply of raw cotton from India The British government implemented tariffs, taxes, and import duties on Indian textiles  Britain was exploiting India creating an economic drain. Reduced Indian cultural identity through imposing restrictions The ban on Indian textiles by the British colonial authorities was part of a larger plan to subjugate India’s economy, culture, and society for the benefit of the British empire. Article 2: Fashion History Lesson: The Origins of Fast Fashion Fast Fashion picked up speed during the Industrial Revolution Patented in 1846, the sewing machine contributed to an extremely rapid fall in the price of clothing and an enormous increase in the scale of clothing manufacturing Massive textile mills allowed the U.S. and European companies to save millions of dollars by outsourcing their labor. Leaders in the fast fashion industry today, including Zara, H&M, TopShop and Primark ○ H&M is the longest running of these retailers The inability to keep stores stocked with a huge variety of new merchandise in the span of weeks has led to the rapid demise of mall stores. Kate Middleton and Michelle Obama have been spotted in dresses from retailers like Zara and H&M Major problems with our current fashion system include, unjust labor practices and catastrophic amounts of waste Article 3: Empire of Cotton In 1862, fully 20 million people worldwide—one out of every 65 people alive—were involved in the cultivation of cotton or the production of cotton cloth Late 1850s, cotton grown in the United States accounted for 77% of the 800 million pounds of cotton consumed in Britain The United States more than any other country had elastic supplies of the three crucial ingredients that went into the production of raw cotton: labor, land, and credit Ample supplies of fertile land and bonded labor had made the South into Lancashire's plantation, but by 1860 large numbers of Americans, especially in the northern states, protested such semicolonial dependence The day of reckoning arrived on April 12, 1861. On that spring day, Confederate troops fired on the federal garrison at Fort Sumter, South Carolina Exports to Europe fell from 3.8 million bales in 1860 to virtually nothing in 1862 By deserting plantations, withdrawing their labor power, giving intelligence to federal troops, and eventually taking up arms as Union soldiers, American slaves pressed to make a sectional war into a war of emancipation When the guns fell silent on the North American continent in April 1865, the greatest turmoil in the 85-year history of a European-dominated cotton industry came to an end Article Presentation 1: Zara Intidex Inditex's Fast Fashion Model: Rapid response to consumer trends, constant supply adjustments, and vertical integration to make fashion quickly and widely available. Disruption of Traditional Fashion: Moving away from seasonal collections, using real-time consumer feedback, and adjusting supply based on current demand. Globalization Impact: How trade liberalization and globalization in the late 1980s enabled Inditex to innovate and compete globally. Vertical Integration: Controlling key production stages in-house (e.g., design, critical production) while outsourcing labor-intensive tasks to improve speed and flexibility. Operational Efficiency: Minimizing advertising costs and relying on word-of-mouth, as well as optimizing production to avoid overproduction and maintain profitability. Supply Chain Innovation: Real-time market adjustments, just-in-time production, and efficient distribution systems to maintain competitiveness and avoid inefficiency. Article Presentation 2: Indian Fashion Industry Content and Focus of the Article Timeframe: Covers the evolution of the Indian high-end fashion industry from the mid-1980s to 2005. Development: ○ Indian high-end fashion becomes a distinct industry. ○ Emergence creates a contrast with the Western high-end fashion industry. Role of Entrepreneurs: ○ Highlighted as key players in shaping the Indian industry's identity. Factors Analyzed: ○ Cultural, social, and economic dynamics. ○ Tensions between traditional Indian craftsmanship and globalized, modern demands. Balancing Cultural Identity with Globalization: Designers face the challenge of preserving Indian cultural heritage while appealing to global markets, complicated by the growing Westernization of preferences. Consumer Perception of High-End Fashion: Early resistance to premium pricing and lack of understanding of craftsmanship hindered the industry's growth and recognition as a legitimate luxury market. Importance of Tradition vs. Global Appeal: Maintaining Indian identity in high-end fashion is essential but can limit international growth and cultural exchange opportunities. Resistance to Paying Premium Prices: Consumers undervalue traditional craftsmanship, affecting both artisans' livelihoods and the industry's financial growth.  Economic Impact: Growth of the fashion industry can generate jobs, boost India's GDP, and enhance the country's position in the global luxury market. Key Takeaways: ○ Cultural identity is vital but limits global appeal. ○ Educating consumers about craftsmanship can drive industry growth. ○ Balancing tradition with modernity is crucial for the industry's global potential. Week 11: The Oil Industry Part 1 - The History Of The Oil and Gas Industry Video Lecture: WHAT IS GASOLINE Initially gasoline was a byproduct of the refining of oil into kerosene INTERNAL COMBUSTION In Germany, internal combustion cars were developed in the 1870’s and by the mid 1880’s Karl Benz had begun commercial production The necessity to use gasoline created a new market for what had been declared in the past WAYS TO CONSIDER GLOBAL IMPACT William Knox Darcy who developed the oil industry in Persia and elsewhere in the middle east Founded what became British Petroleum JOHN D.ROCKEFELLER Founded standard oil Had used gasoline as a fuel to heat oil in the refining process Internal combustion gave him a huge new market Standard oil becomes a virtual monopoly TECHNOLOGY The power of gasoline made internal combustion engines much superior to other type Henry Ford’s Model T made the car more widespread In agriculture tractors replaced steam engines SOCIETY Cars require the expansion of networks of gas stations CHANGES IN THE OIL BUSINESS Increased markets for gasoline mean increased exploration for sources In Canada this means exploration in Alberta Globally the Middle East becomes more important WAR Gasoline becomes an essential tool of war Tanks, ships, planes, and transport all need it As a strategic resource it becomes a cause of conflict as well POLITICS Iranian Premier wanted to more royalties and was too sympathetic to the Soviets In 1953 the CIA and the U.K. organised a coup in Iran, against Iranian Premier Mohammad Mossadeq, to replace the popular government with one more amenable to the oil and gas industry OPEC The Organisation Of Petroleum Exporting Countries The oil embargo (an official ban on trade) they launched in 1973 caused a recession in the western economies ENVIRONMENT Production in refineries Transportation of product Land issues with pipelines CANADA Imperial Oil, founded in Ontario, a branch of Rockefeller’s Standard Oil PETRO CANADA To create a Canadian presence in the oil and gas business Started as a Crown Corporation during the economic crisis in the 1970s Was to be a “window on the industry” Article: What Is Petroleum? Why It's Important and How To Invest in It Petroleum, also called crude oil, is a naturally occurring liquid found beneath the earth’s surface that can be refined into fuel Petroleum is used as fuel to power vehicles, heating units, and machines, and can be converted into plastics The extraction and processing of petroleum and its availability is a driver of the world's economy Types of Petroleum companies: ○ Upstream: Identify, extract, or produce raw materials  ○ Downstream: Engage in the post-production of crude oil and natural gas ○ Midstream: connect downstream and upstream companies by storing and transporting oil and other refined products Pros of petroleum: ○ Stable energy source ○ Easily extracted ○ Variety of uses ○ High power ratio ○ Easily transportable Cons of petroleum: ○ Carbon emissions are toxic to the environment ○ Transportation can damage the environment ○ Extraction process is harmful to the environment Mutual funds: ○ Vanguard Energy Fund Investor Shares (VGENX) ○ Fidelity Select Natural Gas Fund (FSNGX) Petroleum Alternatives: ○ Wind ○ Solar ○ Biofuels Part 2 - The Oil And Gas Marketplace Article: Oil And Petroleum Products Explained Economic growth is one of the biggest factors affecting petroleum product Petroleum products account for about one-third of total world energy consumption OPEC can significantly influence oil prices by setting production targets for its members OPEC attempts to manage its member countries' oil production by setting crude oil production targets, or quotas, for its members In general, the main factors determining OPEC's ability to influence oil prices include: ○ The extent to which OPEC members comply with production quotas ○ The ability or willingness of consumers to reduce petroleum consumption in response to higher product prices ○ The competitiveness of non-OPEC producers when oil prices change ○ The efficiency of OPEC producers to supply oil compared with non-OPEC producers The "call on OPEC" is the amount of oil needed from OPEC countries to balance the market when demand exceeds what non-OPEC producers supply. This happens because OPEC holds most of the world's spare oil production capacity and adjusts output to stabilize supply  Saudi Arabia, the largest OPEC oil producer Major oil price shocks, related to political events: ○ Arab Oil Embargo in 1973–74 ○ Iranian revolution ○ Iran-Iraq war in the 1980s ○ Persian Gulf War in 1990–91 Conflicts and political events in the Middle East, the Persian Gulf, Libya, and Venezuela have contributed to world oil supply disruptions that have resulted in higher oil prices Weather plays a significant role in crude oil supply Futures Contract: An agreement to buy or sell something at a future date at a set price Spot Transactions: On the spot purchases of a single shipment for prompt delivery at the current market price Article 2: OPEC (brief history) Founding members of OPEC include Iran, Iraq, Kuwait, Saudi Arabia and Venezuela agreed to create an organization that could bring some degree of stability to the world oil market In the 1950s, the Soviet Union had increased output of crude oil as a result, members of The Seven Sisters had to drop their price to compete with the Soviet oil in several markets. The Seven Sisters were the largest oil companies of the time: Esso, Mobil, Standard, Gulf, Texaco, BP and CFP 1960s OPEC established its place in the world oil market 1962 meeting of the members, a battle broke out over export limits Six-Day War in 1967 when Israel launched a preemptive military action against its Arab neighbors Syria, Egypt, Jordan, Lebanon and Iraq Many of the Arab members of OPEC wanted to boycott Israel Venezuela and Iran, did not support the sanctioning of Israel 1968 OPEC released the Declaratory Statement of Petroleum Policy in Member Countries which allowed every nation to have complete sovereignty over their natural resources for the purposes of national enrichment and development 1969 five additional member nations had joined OPEC: ○ Qatar (1961) ○ Indonesia (1962) ○ Libya (1962) ○ United Arab Emirates (1967) ○ Algeria (1969) 1973, OPEC expanded October of 1973, Egypt and Syria launched an attack against Israel which came to be known as the Yom-Kippur War U.S. intervention in the Yom-Kippur War on the side of Israel had a disastrous effect for the US economy  OPEC has never had a monopoly over the oil market Other players in the market have great influence Conflict within OPEC member nations creates difficulty in coming to census (individual needs) 1980’s, fear of crude oil becoming scarce and price increase Countries dependant on OPEC oil began to switch to (in order to mitigate risk): ○ Coal ○ Nuclear power ○ Natural gas The Iranian Revolution (1979) and the Iran-Iraq War (1980-1988) restricted the supply of oil from Iran, their production had collapsed 1973, the USSR had become the top oil producer worldwide, further eating into OPECs share of the market In response to rising oil supply, OPEC sought to force a rise in prices by placing a quota on its members. Saudi Arabia and Iran increased production in an attempt to capitalize on the void. Other member countries later agreed and decided to leave OPEC for this reason 2022, Venezuela has the most proven reserves, with 298.4 billion barrels Article 3: NOT ALL OIL IS EQUAL: EXPLAINING PRICE DIFFERENCES Lighter oils generally receive higher prices than heavier oils, because they are easier (and cheaper) to process in refineries “Brent” oil — a global benchmark used by oil markets “West Texas Intermediate” (WTI) oil is another benchmark used by oil markets, representing oil produced in the U.S. Important benchmark price in Canada is known as Western Canada Select (WCS) Royalties are about Albertans (as owners) getting the value of our resources when they are produced and sold The oil Alberta produces is simply of a lower quality than Brent or WTI, and is located further away from customers Article Presentation 1: History of BP Overview of BP and Analysis Contributors The article reflects expertise in energy economics, corporate strategy, and political history, focusing on BP’s historical trajectory. Key themes include: ○ BP's ties to the British government during WWI. ○ Role in Middle Eastern oil development. ○ Navigation of the 1970s oil crisis. ○ Insights into geopolitical and market disruptions. Key Historical Events: Iran Nationalization (1932): Loss of oil concession due to Persian nationalism. 1970s Oil Crisis: Loss of control in Libya and Nigeria. Saudi Aramco Nationalization: Peaceful resource reclamation by Saudi Arabia. Strategic Shifts: Privatization in the 1980s. 1990 Project: Cost-cutting and diversification into chemicals. Recent Challenges: Leadership misconduct affected reputation. Shift back to oil focus due to geopolitical instability. Lessons for Business: Adaptability: Crucial for surviving economic and geopolitical shifts. Ethics: Long-term success relies on ethical conduct. Nationalization: Negotiation is more effective than conflict. Strategic Patience: Avoid over-ambitious goals that harm credibility.. Article Presentation 2: Energy Policy in Canada 1. Shale Revolution: ○ The US reduced oil imports and focused on energy independence after 2008 due to advances in hydraulic fracturing and horizontal drilling. 2. Oil Reserves and Production: ○ Canada has large oil sands reserves (167.8 billion barrels) but is heavily reliant on the US for exports. ○ The US has smaller reserves (61.2 billion barrels) but has dramatically increased domestic production. 3. Energy Security: ○ The US prioritizes energy independence due to past geopolitical crises (e.g., OPEC embargo, Iranian Revolution). ○ Canada’s smaller population and vast resources shielded it from similar energy security pressures. 4. Pipeline Infrastructure: ○ The US built 80,000 km of pipelines (2008-2018), while Canada built fewer due to domestic policy and environmental concerns.  5. Canada-US Energy Integration: ○ The US and Canada have had an integrated energy market for over a century, with Canadian oil exports to the US growing significantly. 6. National Energy Program (NEP): ○ Introduced in 1980 to achieve Canadian energy independence, but it faced strong opposition from Alberta and strained US-Canada relations. 7. Keystone XL Pipeline: ○ The proposed Keystone XL pipeline to transport Canadian oil to the US faced delays due to environmental opposition and political changes. 8. US Energy Policy: ○ The US incentivized domestic oil production through key legislative acts and lifted the 40-year ban on crude oil exports in 2015. 9. Canada’s Pipeline Challenges: ○ Canada faced regulatory hurdles, environmental opposition, and Indigenous rights issues that stalled pipeline projects like Keystone XL and Energy East. 10. Differences in Policy Focus: ○ The US focused on increasing domestic oil production and energy security, while Canada prioritized environmental policies and faced internal political fragmentation. Conclusion: The shale revolution boosted US energy independence, while Canada's focus on environmental policies and regulatory barriers limited its ability to diversify and expand its oil export market. Week 12: The Service Industry Part 1 - An Overview Of The Service Industry Video Lecture: Service industry deals with providing intangibles Deindustrialization is the decline of an industry GDP composition by sector: What proportion of the gross domestic product is made up of different parts and their size in relation to each other Services play a large/growing role in both developing and developed nations (service sector is 50% of all employment) It is more difficult to make a service more productive than it is a product DEINDUSTRIALIZATION OF DETROIT Detroit is the birthplace of the automobile industry  Detroit's deindustrialization was a result of their dependence on a single industry: the automobile industry 1950, Detroit was the 4th largest city in the U.S In the 70’s and 80’s, U.S automakers did not pay attention to competition from Japan, like Toyota and Honda In the 1940’s and 1950’s the automobile industry began to see job losses Wide spread, poverty, inequality and social issues, that culminated with the city going bankrupt in 2013 PITTSBURGH: STEEL TO HEALTHCARE 1875, Andrew Carniege opened Edgar Thomson Works, which later joined the U.S steel corporation (at one point, the largest private company on the planet) 1910, Pittsburgh was manufacturing 60% of America’s steel In the 1980s Pittsburgh saw a rapid decline in steel jobs There was a spike of unemployment between 1980 and 1983 By 1990 the population had halved Healthcare took the place of steel because the younger people left to work elsewhere leaving the older, retired workers who were sicker, and in need of care There was an increase in female workers due to the nature of the job and the making up for the lost wages of husbands 1980, healthcares surpass steel for the largest employer in the area By 2010, healthcare was as large as steel was in the 1950’s Healthcare jobs were less secure, not unionized, and received less compensation GLOBAL CITIES The returns in service based economies are often u shaped rather than bell curved. Service work tends to either be really well paid or not well paid at all Global cities that emerged in the 1980’s, New York, London, Tokyo. Known for advanced services such as law, finance, and accounting Specialised jobs emerged in global cities, low wage workers cleaned, cooked, and provided child care Article: The World Counts The service sector is over twice as big as the industrial and manufacturing sectors combined U.S., largest service sector The 5 I’s to define a service: ○ Intangibility ○ Inseparability ○ Inventory ○ Inconsistency ○ Involvement  Supplying and consuming services can have serious social and environmental consequences. Ie, the tourism and transportation industries have negative environmental effects One of the dirtiest businesses of the service sector - the cruise industry Cruise ships burn waste at sea, emitting toxins into the atmosphere Quaternary sector (largest sector of economy) consists of the knowledge-based part of the economy including information technology, consultation services, research & development, education, financial services, design, culture, media & entertainment and so forth Quinary sector is much smaller than the quaternary sector and is made up of activities that involve top-level decision making (mainly consists of CEOs and top-executives from Government) 59% of the economy is taken up by quaternary and quinary sectors in the Western world Part 2 - Offshoring, Outsourcing And The Global Economy Video Lecture: Offshoring: The location of productive facilities outside a firm's home market, for the purpose of making goods to be sold in that home market Differs from foreign direct investment because offshore facilities are not built to produce goods for sale in the country in which they are located Outsourcing occurs when a company purchase goods or services from an independent foreign supplier that could've been procured domestically Offshoring and outsourcing cause advanced economies to experience deindustrialization Offshoring first took off in the U.S. after ww2 due to: ○ Institutions (GAT facilitated reductions in trade barriers, IMF promoted currency stability, World Bank supported economic development of Global South) ○ Technology (Transportation, shipping, and radar created faster and more efficient global freight networks) ○ Communications US companies begin offshoring production in east Asia, beginning in the 1960s Due to offshoring, the U.S. took a protectionism approach meaning they placed barriers to trade. To combat this Japan set up factories in East Asia specifically, Hong Kong and Taiwan where wages were much cheaper 1970’s, clear global production model had been established 1980s, many firms embraced global production: a strategy of spreading different stages of production across multiple countries Con of global system of production: ○ If something goes wrong in one part of the process, it can mess up the whole thing  ○ Splitting up phases of production can cause inefficiencies Focus on custom products means labour cost aren't always the biggest factor and choosing where to produce ○ Different areas allow for specific skills or technology that are not available at home The idea behind global production was the higher skill jobs would stay in rich nations and lower skill jobs in poorer countries OFFSHORE FINANCE De Beers case (1906) presents idea that a business can be taxed as a resident therefore businesses move their headquarters to foreign countries The De Beers case showcases an example where a British company had their production process fully in South Africa however were fully taxed under British residence and law Offshore finance means moving banking out of the control and regulation of the country It was often for minimizing or avoiding taxes and escaping regulations on any number of things A country is an offshore financial Centre when that country or jurisdiction provides financial services to non-residence on a scale that is incommensurate with the size and the financing of its domestic economy Panama maintains a huge financial centre primarily consisting of foreign money An advantage of offshore banking is secrecy The Panama papers are leaked documents which highlighted all kinds of wealthy individuals, corporations and political figures worldwide, which use these offshore entities to hide assets, evade taxes, and launder money Panama can be seen as a tax haven CONNECTION Offshoring practises accelerated rapidly at the same time in the 1970s, following the collapse of the Brentwood system, as well as the end of a process of decolonization in much of Africa and Asia Article: Get Ready for the Next Supply Disruption Companies must build the capabilities to anticipate, detect, diagnose, activate resources for, protect against, and track known and unknown-but-knowable risks (ADDAPT) ADDAPT capabilities help companies understand the causes of supply disruptions and their immediate and long-term effects Loblaws had emergency plans to deal with things such as fires or strikes, but they did not include supply disruption triggers with widespread effects such as pandemic or large scale, natural disaster  Loblaw's leaders quickly pulled together a pandemic task force composed of senior supply chain managers to provide the capacity and knowledge needed to field a coordinated response The task force used data from the demand management system to predict product shortages, relying on their understanding of the logistical network's capabilities and past experience to address internal issues like employee safety and staffing To manage the supply chain disruption, the task force needed to activate resources on an exception basis ANTICIPATE: Systematically remember known triggers and foresee unknown but knowable triggers, and imagine why and how they could cause supply disruptions DETECT: Recognize and be warned when a supply disruption trigger interrupts the physical flow of goods, ideally at the exact instance it occurs DIAGNOSE: Understand a supply disruption holistically in terms of (1) the risks that would cause flows of goods to be interrupted, (2) the nature of the interruption, and (3) the options available to restore the flow of goods to the expected level as quickly as possible ACTIVATE: Efficiently and effectively marshal the relevant resources to implement responses to a supply disruption PROTECT: Prevent supply disruptions triggered by known and unknown-but-knowable risks TRACK: Continually monitor and update the leading indicators of supply disruptions and their triggers Article Presentation 1: Are you In this Country? Context of the Article 1. Globalization in Business: ○ Focus on the growing influence of globalization on fields such as telecommunications, finance, and retail. ○ Began in the late 1990s, accelerated into the 21st century. 2. Offshore Call Centers: ○ Emerged as a strategy to reduce operational costs by outsourcing customer service roles to countries like: India The Philippines Eastern European nations ○ Purpose: Lower labor costs while ensuring cost-effective global service delivery. 3. Relevance: ○ Reflects modern business trends and globalization's evolution. ○ Raises concerns about the socio-cultural, economic, legal, and ethical impacts of globalization. Cultural and Interpersonal Skill Gap: Offshoring technical tasks is easier than offshoring customer-facing roles due to issues with accents, dialects, and cultural differences, leading to dissatisfaction. Customer Backlash: Customers in the UK demanded UK-based representatives, often reflecting racial undertones and highlighting the need for cultural alignment in customer service. Economic and Legal Challenges: Wage disparities, offshore work conditions, and legal barriers in international data exchange complicate offshoring. Globalization’s Limitations: Offshoring customer-facing roles is not always beneficial, as it can lead to poor service quality, customer dissatisfaction, and damage to brand loyalty. Best Shoring Strategy: Routine tasks should be offshored for cost savings, while complex customer-facing roles should remain onshore to maintain quality and cultural fit. Blanco’s Experience: Highlights the risks of poor offshoring decisions, such as damaging brand reputation and customer satisfaction due to cultural mismatches. Strategic Implications: Companies must carefully evaluate which tasks can be offshored, considering the balance between cost savings and service quality. Future of Globalization: Business strategies must account for cultural, legal, and ethical factors, with technological advancements shaping global supply chains. Article Presentation 2: Walmart Goes to Germany Entry into Germany:  Walmart entered Germany in 1997 with high expectations due to Germany's large population and strong retail sector. Challenges Faced: Intense Competition: Struggled against established local retailers like Aldi. Cultural Misalignment: Walmart's American business model clashed with German consumer preferences, especially in terms of customer service and operational practices. Regulatory Constraints: Strict zoning laws and limited store hours, combined with labor union conflicts, hindered Walmart’s ability to operate as in the U.S. Supplier Relationships: German suppliers preferred long-term partnerships, which contrasted with Walmart’s transactional, cost-cutting approach. Outsourcing and Offshoring: Outsourcing: Walmart’s U.S.-based cost-cutting outsourcing strategy did not resonate in Germany, where suppliers valued collaboration. Offshoring: Walmart’s focus on cheap offshore manufacturing conflicted with German preferences for high-quality, locally sourced products, harming its reputation. Stakeholder vs. Shareholder Capitalism: Walmart’s shareholder-focused model, which emphasized cost-cutting, clashed with Germany’s stakeholder-oriented economy that prioritized collaboration and mutual benefit. Lessons Learned: Adapting to Local Markets: A one-size-fits-all strategy doesn’t work globally; businesses must adapt to local cultural, regulatory, and consumer expectations. Tailoring Strategies: Success in international markets, as seen with companies like IKEA and McDonald’s, requires customization to local norms and practices.