You bring up a really interesting point. There does seem to be this fear, especially across many developed markets, of privacy invasion and breaches increasingly going too far. I wonder to what extent exactly citizens (or in the private sector: customers) care about privacy breach if the outcome is somehow more efficient, low cost options for them. In other words, I believe there is a price everyone is willing to pay for a certain degree of perceived benefit. Perhaps you are willing to pay the “cost” of privacy as you perceive the expected reward to out way the cost. If giving my name and email address to an online retailer for a 15% discount means that I perceive this discount to be worth allowing the company to send me targeted emails and track my online searches. I think privacy, like everything else, can be “sold” for a certain price and it’s the responsibility of the country (or company) to understand the willingness to pay.
I agree that sustainable packaging should be a huge focus for Nestle. If we think about Nespresso’s single-serve aluminum espresso pods, the effort to source coffee from sustainable farms is offset by the waste this packaging creates. In fact, Nestle will not even disclose how many pods are recycled (1). This lack of transparency is fishy and calls into question just how committed Nestle is to fighting climate change.
Moreover, as late as September 2017, Nestle was being accused of contributing to severe plastic pollution in the Philippines. Nestle, together with Unilever and PT Torabika Mayora, was responsible for 1.88 million metric tonnes of mismanaged plastic waste in 2016 in the Philippines (2). Philippines like other emerging market nations are “sachet economies”, in which consumers rely on goods in smaller sizes as a way to increase affordability and accessibility. Nestle should be thinking about how to help consumers adopt more sustainable practices – such as creating reusable sachets.
The fact that in 2016 Nestle admitted that seafood suppliers in Thailand were using forced labor and essentially conducting modern day slavery was shocking and not to mention, a huge PR blow. If the Company had the right supplier vetting procedures in place then this would not have happened. Beyond packaging, they need to do a better job of selecting and monitoring suppliers.
Lastly, with over 8,500 brands and presence in 80 countries, Nestle is a company that should leverage its size across brands to impact sustainability efforts. In other words, it should not take a siloed approach to fighting climate change at the brand level, instead sustainability should be a mandate from the parent company. I am not sure Nestle is encouraging its individual brands to collaborate and work together in this department.
This article is yet another example how climate change will negatively impact corporations and if companies do not take a long-term view on climate change, they are risking their entire business. While Campbell has seemingly made great strides in improving their sustainability practices, I can’t help but question whether the percentage improvements cited look impressive because the baseline sustainability practices were almost non-existent – it is easy to improve metrics such as water usage when the comparative base figures may imply extreme water wastage. Regardless of this, it is good to see Campbell tying their business operations to sustainability efforts and not simply viewing sustainability as a corporate social responsibility (CSR) / PR stunt.
I also question whether the rise of GMO options for Campbell’s raw ingredients may derail their sustainability efforts. With GMO technology, food can grow in tougher climates, e.g. with less water (1). The proliferation of GMO and thereby the ability to reduce a crop’s dependence on water leads me to question whether companies will learn to do more with less rather than invest heavily in fighting climate change.
As for your question regarding Campbell’s ability to pass rising costs on to consumers, I do not think this is a viable option for the company given the space they play in. Their assortment of brands do not easily lend themselves to premium pricing. I think they must view this investment in sustainable practices more as a capex investment that will bolster their supply chain and defend it from impending resource scarcity.
Very interesting article that raises an important question, one that is not limited to Nigeria but relevant to several countries in Africa. In my opinion, protectionist measures will not suffice in driving local manufacturing and development of supply chain capabilities – at least this has been the case in Mozambique. I believe a much more organic approach needs to be taken. By simply limiting MNC’s in their ability to import finished goods does not in and of itself encourage creation of domestic companies to rival MNCs, which I believe is needed for long-term, sustainable economic development. More stringent regulations on MNCs means that they could choose to pull out from a country rather than stay and invest, especially if staying implies a strain on margins.
Nigeria and other African countries should not rely on MNCs to build out local supply chains but rather provide subsidies and other benefits to local companies to help them invest in manufacturing facilities and production processes. The Nigerian government should focus inward on fixing corruption as this would shore up funds to support local business. Nigeria scores very poorly on the Corruption Index with a score of 28 out of 100 (0 equals highly corrupt, 100 equals very clean), ranking it 136 out of 178 in the world (1). Prices for basic goods are far too high relative to the purchasing power because many goods are imported. Investment in local industry will in the long-term reduce prices for locals, and this is something the Nigerian government should prioritize for its citizens.
Interesting article! Great recommendation regarding integration of functions across the company.
I wonder what type of “edge” Delta would have over competitors given that any major airline could employ this same predictive analytic approach. As early as 2014, United had a “collect, detect, act” system that analyzed 150 variables in a customer’s profile to customize offerings (1). Big data insights definitely seem to have a marginal impact (by securing more ancillary revenue by understanding what services consumers care about), but does big data have the power to shift the industry from a negative/low margin industry to an attractive one?
Securing talent as you mention is one hurdle, but I believe the fact that “big data skills” are transferable across industries, more and more people will be willing to invest in developing these skills. So while people with IoT / big data skills will be in more demand, I believe the talent pool of qualified people will grow over time as well.
I also wonder if there are other analytic approaches to refining airline offerings. As we saw in the United case, sometimes aggregating data to find trends is less telling than diving into the data and picking out a few sample routes to focus on to draw insights regarding optimal routing. Less data, not more, can sometimes be more effective for root-cause analysis.
Lastly, I would argue that airlines cannot even predict the cost side of the profit equation because fuel costs represent such a large percentage of operating expenses. According to an IATA report published in June 2017, fuel represented roughly 20% of operating expenses for airlines in 2016 (2). In that report there is a clear inverse correlation between fuel prices and airline profits, so I wonder whether the big data hype is going to be impactful enough to insulate the industry and offset swings in commodity prices – I doubt it.
The last question posed by the author is an important one – how easy it to replicate the M. Gemi model? I believe it’s actually quite easy. I do not see the M. Gemi model as one with high barriers to entry or replication. In fact we have recently seen a proliferation of these types of apparel or footwear start-ups that are vertically integrated and do not have a traditional brick-and-mortar presence, opting instead for “showrooms”. Bonobos, MM LaFleur, Acustom Apparel, Paul Evans, and J Hillburn are all examples of brands that have so called “fit shops”. From a cost perspective, this is beneficial as traditional physical stores require much more inventory on hand and require overall more capital investment, but how can a brand differentiate their in-store experience.
Specifically, how can M. Gemi digitalize its fit shop experience? Some companies like Acustom Apparel provide full-body scans to perfect sizing and shape. I wonder if M. Gemi can similarly digitalize their in-showroom experience by scanning a customer’s foot to customize their shoes.
Ultimately, despite M. Gemi’s digital supply chain, in my opinion it is not poised to be a lasting brand. Their use of customer data to refine offerings is not a novel idea – I would argue that most e-commerce companies understand the benefit of tracking customers and are investing in using this data to enhance decision-making. Lastly, the idea of releasing shoes on a weekly basis seems excessive, not to mention contrary to the idea of durability (associate with quality) and sustainability.
The article poses an interesting question. Ultimately Boeing needs to understand that its position as a $150+ billion market cap firm and iconic American company gives it enough leverage to stand against Donald Trump’s nationalist threats. As Trump loses credibility with his voter base and even his own political party, his baseless threats are becoming less and less believable. Despite Trump’s heavy criticism of Ford Motor Company’s plans to expand two plants in Mexico, Ford chose to go ahead with their plans and will invest $2.5 billion in their construction as well as employ 3,800, which pales in comparison to the 700 jobs the Company committed to creating in Michigan, an action Trump praised on Twitter (1).
The article does not mention that Bombardier is not just a rail company but in fact it gets more of its revenues from aircraft sales than it does rail. In fact, Trump has favored Boeing in the decision to slap tariffs on Bombardier aircraft sales to airlines in the US, which effectively taxes aircraft purchases from Bombardier at 300% (Bombardier is partly owned by Airbus) (2).
The question whether Boeing should emulate Bombardier’s JV strategy is a good one and I believe Boeing is already doing this. They announced a $33 million JV with COMAC in October 2017 to complete their 737 plant in China. There hasn’t seem to be much backlash from this decision in the US thus far…
The article brings up a salient point – I had not considered the Amazon-ization of the pharmacy industry before, but the traditional pharmacy model is on the verge of extinction. While CVS is planning to offer free one-day delivery nationwide by 2018, one must ask at what cost? This is an expensive undertaking but clearly a “need to do”, not a “nice to do”. Amazon could surely provide this delivery service cheaper, especially in more remote areas, given its expansive distribution network and economies of scale. I believe Amazon may squeeze out players like CVS and Walgreens in the long-term but with so many sprouting ideas under its umbrella, it is unclear where e-pharmacy is on Amazon’s list of strategic initiatives. The trouble with Amazon as a competitive threat is that it is a very reputable, reliable brand in the eyes of consumers so there is likely going to be little push back from end-consumers – as long as they get their correct medications on-time.
To your question of how actors across the healthcare industry are going to react to the increasing digitalization of the pharmaceutical supply chain – there are rumors on Wall Street that the health insurer Aetna and CVS may merge. This would help CVS in its fight to reduce competitive threat from Amazon entering into the space as a merger with Aetna (valued at $70 billion) would give CVS more leverage in its price negotiations with drug makers (1).
Jeff Bezos’ original concept for Amazon was for it to become an “everything store” and seems that pharmaceutical offerings would be an important part of achieving this aspiration.
Interesting article. It was quite naive of Lotte to think that passive messaging/marketing towards Chinese consumers would change their mind and win them over. Moreover, I believe CindyHuang’s suggestion above that Lotte should have shown investment in China as well is something they have already done – Lotte has invested $5 billion in China and employs 25,000 people (1). In the grand scheme of the $11.2 trillion (2) Chinese economy, however, this is peanuts. The JV structure proposed by the author is an intriguing solution. Though in my experience, while JVs often make sense on paper, they can be difficult to structure and execute as there can be power struggles between the two entities – and who would have controlling ownership, Lotte or the Chinese counterpart? JVs are quite useful when a company is looking to expand geographically but has little local knowledge or does not have the capital to make a full investment, both of which are not the case for Lotte. I would think the new Moon Jae-In administration, who seems to have chaebol-friendly policies, should show a unified front along with conglomerates like Lotte towards the Chinese. Maybe South Korea can afford to alienate China at the Lotte level, but it certainly cannot alienate their powerful neighbor at the geopolitical level. The implications of this Chinese boycott are of grave concern if this sentiment is to spread beyond Lotte.
Lotte is well-positioned to benefit from geographic diversification because of its wide range of businesses – from hotels to candy to petrochemicals. Its recent announcement of a partnership with Peugeot to invest $6 billion in India. Lotte plans “to invest in retail, chemicals, food processing and real estate, as well as develop railway platforms in the country” (3). Lastly, I do believe this boycott is part of a rising economic nationalism movement, on the back of slowed economic growth in China. We’ve seen local players benefit from protectionist policies and eclipse their US or international competitors: Baidu for Google, RenRen for Facebook, Weibo for Twitter, Alibaba for Amazon, and Didi for Uber (4). But one must ask if this economic nationalism ultimately hurts the local Chinese consumer who has less choices at potentially higher prices.