business

One to Watch – SONY

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SONY announced plans this week to enter into a Joint Venture with Shanghai Oriental Pearl, a Chinese State owned media company to facilitate the manufacturing and selling of the PS4 to a fraction of 1.3bn potential new consumers. I know some of you are wondering why this is such a big deal. Well, for the past 14 years in Mainland China there has been a ban on foreign made games consoles being sold to the citizens of the country. This was ended in January and now it seems like SONY want to tap into the Chinese gaming market – a market which saw revenues grow 38% year on year to $13.75bn, the largest growth rate since 2009 according to the China Games Industry Annual Conference.

Firstly lets look at how those revenues are broken down:

•65% is derived from client-based PC games
•15% is down to online browser-based games
•Mobile gaming accounts for 13.5% (with Apple’s iPhone and iPad take a quarter of Chinese      
mobile games revenues) and finally
•6.5% are as a result of the sales of Game consoles 

Is this a good move for SONY? No doubt about it – 100% yes in my opinion. There is a huge multibillion that can be tapped into legitimately (Playstations and Xbox Consoles have been available on the black market in the country for a very long time at over inflated prices) and could lead to long term strategic growth for the company. Microsoft are one step ahead of SONY after they announced their Joint Venture with BesTV New Media and have plans to launch the Xbox1 in September. The advantage SONY have on their American competitors is their price to value. They have been able to offer a console roughly £100 cheaper without compromising on the main specifications of the console. The value for money obtained if translated into sales could prove very profitable for the company in the long run. There is a huge market of multiplayer online role-playing gamers in the country for console producers to tap into – 129 million to be precise which accounts for 73% of all Chinese gamers. Games such as Final Fantasy proving to be best selling RPG’s on previous consoles, so if SONY can repeat their success with upcoming games the future looks bright for the company. How has the markets reacted to the news? As you can see on the below chart the share price went up by 3% when the news was announced so it was definitely viewed as a positive signal.

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It will be interesting to see how this developes over the next year or so – will SONY be able to break into the Chinese gaming market? Only time will tell.

@Capitalmoments

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The economic recovery – Return of the pound?

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The economic outlook of the UK has had an impact on the Foreign Exchange markets. The pound sterling is strengthening against many currencies in both the developed and emerging markets however in this blog I’m going to focus on the relationship between the pound and the dollar and the positives/negative impacts as a result of this. First of all what does it mean for the pound to strengthen against the dollar? Basically you get more dollars for every pound when you go to exchange it at your local bureau. What has caused this in the markets? Well it is a combination of the following – the outlook on monetary policy and economic recovery.

Monetary policy in a nutshell is the setting of interest rates. The Bank of England Base Rate has been set at a record low 0.5% for 5 years now primarily down to the recession that had plagued the country for years. This was to enable businesses (and banks) to borrow from banks to fund operations and create new employment opportunities to compensate for all the jobs lost during the difficult period post 2008. In 2009 GBPUSD was trading at 1.3505, a 23 year low! The Bank of England announced earlier this year that they expect the Base Rate to increase by 2nd Quarter 2015. Due to the positive correlation between interest rates and foreign exchange rates, this led to the pound strengthening against major FX currencies and emerging market currencies. In fact $11bn was removed from emerging market funds by the end of February primarily down to the positive outlook investors had on developed markets (source:Bloomberg)

The economic recovery has also played a part in strengthening the pound. UK unemployment fell by 63,000 to 2.33 million in the three months to January 2014, according to the Office of National Statistics. Lower unemployment will inevitably lead to an increase in a country’s GDP which symbolises growth and is one of the many signs of recovery. The budget especially the reforms relating to ISA’s and pensions were seen by the public as great news (more details check here)

The strengthening of the pound great news for people like me who want to get as many dollars as possible to use to spray at Nigerian weddings this summer but is bad for British investors in UK blue chip companies, as many of these firms report their profits and deliver dividend payouts in dollars. Capita Asset Services released a report recently arguing that the pound’s strength will wipe £3.5bn off the value of dollar denominated dividends of UK based firms.

With the weaker than expected US first quarter GDP growth (0.1% Actual v 1.1% Expected) and the manufacturing sector purchasing managers’ index reaching five-year highs this week,this will provide the impetus for investors to capitalise and invest in the Pound, before it’s too late and there is a ‘correction’ in the market.

GBPUSD is currently trading around 1.68-1.69 (i.e. 1 Pound = 1.6878 Dollars) – which is a 5 year high for the currency pair. Who knows the days where you’d get a 2 dollars for every pound may soon be back on the horizon – only time will tell….
@capitalmoments

Primark – London Firm American Dreaming?

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Primark announced plans for more international growth by opening stores In America. They plan to open a superstore in Boston next year along with 8 smaller stores and a warehousing site on the north east of the States. The company owned by Associated British Foods (ABR) beat analysts expectations with revenues (sales) up 14% to £2.278bn and posted operating profits of £298m. This is primarily down to the retention and expansion of the customer base, playing on the fact that the retail market (excluding high end brands) has experienced a shift from quality to value. This shift has led to the emergence of Poundland, Aldi, Lidl, but also has enabled Primark to have a solid market share and be one of the stronger performers under the ABR umbrella. This has also given Primark to expand in the E-commerce space, as they tied up a deal with ASOS to sell clothes on their platform.

Now the next big step for the company is tackling America. This is no easy feat just ask the following British stores. 
1 – Tesco’s US chain Fresh & Easy has filed for bankruptcy. The retailer has agreed to sell the majority of its US stores to Ron Burkle, lending his investment vehicle £80m to take on about 150 stores. The redundancy packages for about 400 permanent staff, the store closures and the loan being given to Mr Burke will cost Tesco £150m, taking the total cost of its failed US adventure to around 2 Billion pounds. (Source: Telegraph)
2 – Marks & Spencers got rid of US grocer King’s in 2006 to focus on its struggling operations back in Britain. Two-thirds of its investment was lost when it sold the New York based clothing chain Brooks Brothers in 2001.
3 – Laura Ashley Sold its entire US chain for $1 in 1999 after a string of profit warnings caused by over-ambitious expansion. (A profit warning is a public announcement made by companies to let people know that profits won’t be as high as expected)
What do Primark need to do to not follow down the footsteps of the above? In my opinion they first need to improve on how they are perceived by the general public. Corporate Social Responsibility plays a big part nowadays and is in some industries the only reason why customers choose company A over B. I have seen various comments across the net from different individuals talking about the unethical conditions the factory workers have to contend with which led to the Rana Plaza disaster in Bangladesh this time last year. staff were ‘told to return to work’ despite a large crack in the factory wall and this negligence led to 1,129 people losing their lives and another 3,000 injured. Something must be done to show that the lessons have been learnt and the mistakes won’t be made again to improve the perception people have on the company, especially the people that have boycotted purchasing items from any of their stores. 
Their price advantage gives them a huge competitive edge and Primark need to play on that if they want to successfully break into the US. Sound out the competition and provide better value for money. Zara, H&M and Topshop who hail from Europe have all been able to successfully break into the US fashion market so Primark will be hoping to follow in their footsteps.
Finally they need to ramp up their social media presence. With a constantly evolving market the onus is on the company to keep up to date with all technological advancements and capitalise on them to obtain a competitive advantage. Trends are shared on sites such as Instagram and Tumblr, so it needs to ensure their potential American market, which is definitely more diverse, are constantly reminded of the brand through the applications on every young persons smartphone.

let me know your thoughts? Do you think America is a step too far for Primark or do you think they will be successful?
@capitalmoments

One to watch – Angola

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One of the emerging countries in Africa to watch out for in 2014 should be Angola. It’s located in south – central Africa and is close to Congo, Zambia and Namibia. In 1975 independence was achieved having been an overseas territory for the Portuguese since the 16th Century and the country is now entering a new phase in its development, a decade after the end of a 30 year civil war. The economy grew 18% in 2005, 26% in 2006 and 17.6% in 2007, and then the country experienced a period of slow growth due to the global financial crisis and also the Oil price crisis of 2008 which affected investors’ confidence in both developed and emerging economies. The Angolan economy is slowly but surely improving, recording a 7.4% increase in the GDP in 2013 in comparison to 2012 (Source: Ministerio das Financas Angola). During the 13 year period between 2000 and 2013 the Angolan GDP Growth Rate averaged 11.2%, peaking at a record high of 23.2% in December 2007 and a record low of 2.4% in December 2009. GDP otherwise known as the Gross Domestic Product is the market value of all officially recognized final goods and services produced within a country in a year (Source: Wikipedia).
The civil war had a profound effect on the country. The consequences of 30 years of violence and brutality and the deterioration of the rural economy were the catalysts for the decline of the country’s infrastructure with respect to the production and exportation of coffee, tobacco, cassava, cotton etc. The agriculture of Angola is currently expanding due to the end of the Civil War in 2002, and the growth of foreign investment in the sector. However, the return to productivity in rural areas has proven to be difficult and slow.
The country’s economy has been heavily dependent on its production and exportation of oil in order for the country to have a stability and sustainability – oil accounts for nearly half the country’s GDP, 90% of exports and around three-quarters of the government revenue. They are also the third largest producer of diamonds in Africa, however due to diamonds smuggling and corruption revenues from this sector are much harder to accurately account for. The country’s over reliance on oil is not necessarily a good thing. It is only favourable if the price of Oil goes up in their favour. It is also a good thing for Angola if the price doesn’t change much. However the country is vulnerable to volatile movements in the market and shocks to the oil price which could cause prices to fall drastically. A 5 million dollar Sovereign Wealth Fund was created late 2012 to further diversify the economy and provide protection from the devastating financial impact a fall in the price of oil would have.
In December 2012 in a memo read from the Swiss Global Enterprise conference there were officially 276,000 Chinese citizens residing in Angola and another 150,000 Portuguese citizens obtaining visas to work in the country – something that has never been seen before in recent history.
The main challenge rests on the ability of the government to ensure transparency of the country’s earnings from its Natural resources. The government needs to be responsible for the fair distribution of the earnings primarily into the redevelopment of the country. As Angola continues to obtain financing to meet assist with their long term development needs and expansion in the exploration and production of its natural resources, the government will need to guarantee that the country’s sustainability is not put at risk with respect to the amounts owed to other countries, primarily China. Analysts from the International Monetary Fund and the African Development Bank have predicted that the country, Africa’s third strongest economically after South Africa and Nigeria, will maintain this growth rate for years to come. If this statement holds for the next few years, along with investment into the accessibility of drinking water, improvement of infrastructure and the easing of barriers to entry into there will definitely be good times ahead for the country.

Preparation for leadership

Preparation for leadership

In all areas of life, at home or work, school or university, there are people who are called to be leaders and there are people who follow. Most of the time people want to be the ‘boss’ but some may not do a very good job at it because they do not have the personality or attributes of a leader. Below are attributes generally associated with leaders.

1 – A leader has an abundance of courage. A leader without this attribute would not last long as this will not install confidence into the team of their abilities to guide the group through the task ahead

2 – A leader has to have self control. A leader who can’t control themselves would not be able to control others

3 – A leader must ensure that they are not unjust. They should be able to treat people the same and be fair when providing opportunities to shine amongst the group.

4 – A leader must be confident and steadfast in their decision and also in their thought process and planning. If you fail to plan, you plan to fail

5 – A leader strives to exceed expectations whereas a follower is content with being at the level expected of them.

6- A leader is more likely to be respected if they have a pleasing personality. They express this personality by showing sympathy and understanding to people’s problems and aim to find solutions.

7. A leader needs to know every single detail. They need to be able to think outside the box when it comes to issues and see things other people wouldn’t. A person not keen on mastering every detail wouldn’t hold on to a leadership position for long.

8. Most importantly a leader is ready to take full responsibility of work done by the people he/she presides over. If one of the workers fail, the leader has failed. However if the worker has done well the leader gives the person full credit and celebrates the team work.

I hope after reading this you try to position yourself for leadership positions. Also use this to self evaluate yourself – do you hold a leadership position at uni/work/sports team? Do you have some or all these traits? Share your thoughts …

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