Monday, September 18, 2006

China's Growth: How It Affects You

“You have got to be kidding me!” “Damn, these prices are high!” For a while now, these have been some of the more common phrases that people think or say when driving into a gas station as their car is trying to utilize every last drop of gas in the tank. Gas prices are, and have been for a while, very high. I was curious as to why the prices would rise so dramatically compared to ten, or even five, years ago. To search for answers, I searched other blogs through Technorati to see what other academics might have to say about the issue. I found two blogs having to do with China and its economy that gave me some answers as to why gas prices were so high. Captain’s Quarters gave a very in depth analysis as to why China is exponentially increasing the demand for natural resources. While Green Car Congress discussed the heightened production of passenger automobiles in China, I analyzed how this growth affects the gas prices in the U.S. I have commented on both of these blogs, giving more insight into the issue.

Monday, September 11, 2006

Uganda's Economic Success: Building Itself from the Ground Up

Unfortunately, many people associate Africa with famine, starvation, corruptness, disease, and death. Yet, within this continent that is made up of hundreds of millions of people who are affected by these tragedies, there coexists areas that can provide a refuge for a struggling economy. Uganda, a country that borders Kenya in sub-Sahara Africa, “is ground zero for a startling transformation of African agribusiness that’s spawning scores of entrepreneurial opportunities. Uganda boasts two growing seasons, ample rain, rich volcanic soils, and millions of small farmers eager to expand production of cash crops. Output of everything from fish to rice, vanilla to sunflower seeds, roses to potatoes is soaring. Overall, Ugandan farm output increased nearly 50 percent during the past decade.” This boom is mostly on the back of small-scale farmers, some of them not owning more than half a hectare, that are willing to work for low wages and to sell their crops to foreign food processors as long as the farmers are making a good profit.

Two of the major crops that have been leading this success are vanilla and rice. Luckily for Uganda, but not so lucky for the victim, Cyclone Hudah destroyed Madagascar’s vanilla crops in 2003, which accounted for a large majority of the vanilla sold in the world market, and caused vanilla prices in Uganda to sky rocket. Some “80,000 small-lot farmers are currently reaping the benefits” by growing massive amounts of vanilla, or “green gold” to the Ugandans. At the peak of vanilla's upward spiral to success in 2003, vanilla beans sold for $200 a pound. The success of vanilla has improved the lives of many farmers in Uganda. Now, many more citizens are able to send their children to better schools, which is also positive for the country because Uganda will have a more educated generation to continue the prosperity.

“Rice offers even larger potential gains. Uganda’s rice production has doubled in the past five years and is projected to more than double again by 2011.” This is extremely good for the country, as well as the continent, because now, neither is forced to import rice at high prices. This will hopefully cut down on the number of starving people because rice will become more affordable. “‘Uganda is still five years away from becoming a major exporter,’ says Robin Kuriakose, the rice manager in Uganda for Singapore-based trading firm Olam. ‘But entering the market now can bring profits from domestic demand.’”

The sudden prosperity that Uganda is experiencing is definitely turning heads, but there are certain problems that need to be taken into account before companies dive into this economic opportunity head first. There is one aspect to keep in mind when deciding whether or not to bring business to Uganda: Africa is still, well, Africa.” Those five words sum up all of the problems that one might encounter when exploring a business venture in Uganda—corruption, guerillas, climate change, war, disease, famine, thievery, electricity, and limited materials. A big problem that involves rice production is countries like the U.S., Japan, and Korea all pay their growers heavy subsidies which restrict the market for smaller, less wealthy countries.

Even though Uganda might not have a smooth road to becoming a global power, there are definitely a lot of positive forces that could further its success. For example, rice and vanilla are not the only two resources that Uganda has to offer to the rest of the world and not all items are subsidized like rice either. Fish has become a major export out of Uganda because of the European and American desire for fresh and exotic foods year round. Many European and American companies have gone to Uganda and flown fish thousands of miles to the rest of the world. The same is true for roses. “Thanks to near-perfect growing conditions, low labor costs, and an influx of international expertise, Uganda is on its way to becoming a world power in roses,” which is one of the highest grossing crop in the world’s flower market.

As for the rest of the problems, with foreign investment and further development of the land, Uganda’s economic problems will diminish greatly. Hopefully this will lead to a more politically and socially stable nation, which in turn leads to a more stable business atmosphere. Modernization and wealth can alleviate some of the problems that Uganda is facing. The environmental problems are unpredictable, but that is no reason for companies to sit back and let a good opportunity go to waste. Calving Burgess, a real estate developer who lives in the United States, says “‘Americans are crazy if we don’t come…Opportunities like this around the world are rare indeed.’”

Although Uganda faces many obstacles politically, economically, and environmentally, if these obstacles are managed correctly, then Uganda will be able to continue to thrive and rank among some of the top exporting powers.

Tuesday, September 05, 2006

Super Companies Collide: May the Most Innovative Win

Wal-Mart has come under a lot of scrutiny for the way it puts many smaller companies out of business when they are unable to compete with Wal-Mart’s infamous low prices. Therefore, it might seem amusing to some when Wal-Mart needs to retreat for a short time to be on the defensive after a company invades a niche of the retail market that they have dominated and bullied many companies out of.

So, who is this David that is pushing the Goliath of the retail industry back on its feet? The answer is Apple, who is going to start offering movie downloads that customers can get off of iTunes. In response, Wal-Mart has appointed David Porter to visit all of the big studios to dissuade their participation in Apple’s new venture so Wal-Mart can protect their title as the largest seller of DVDs and still “account for roughly 40% of the $17 billion in DVDs that will be sold this year.”

Is meeting with studios enough to stay competitive though? Although Wal-Mart and Apple engage in healthy competition in music sales, Apple’s new innovative path will make it mandatory for Wal-Mart to act with extreme measures if it wants to continue to dominate the DVD retail market and keep up with Apple’s new and continually improving technology.

Ever since Apple created the iPod and iTunes, it has been a game of catch-up for Wal-Mart to stay competitive. In December of 2003, Wal-Mart created its own online music store with which offers music downloads in a Microsoft format to compete with Apple’s iTunes. A little more than a year later, Wal-Mart and Apple became retail partners when Wal-Mart started to sell the iPod Mini in its stores. Now, more than a year and a half after this partnership, Apple is threatening to take away a large market share of retail movies. If Apple is successful in signing all of the major studios, they will have such an advantage because they will be getting movies for a $14 wholesale price when Wal-Mart currently gets DVDs for a $17 wholesale price. Wal-Mart’s slogan of “Always Low Prices, Always,” isn’t going to help them in this situation because they don’t have the lowest prices to offer their customers.

Wal-Mart needs to take action in order to retain its dominance of the movie retail market. Even though Apple has only signed Disney on to this new business venture, there are other major studios teetering on the wire waiting to see what action their competitors take. Because of this, Wal-Mart should continue to meet with all of the studios to dissuade them and even threaten to stop carrying their DVDs if they decide to follow Disney to Apple’s new age of movie purchasing. But there is still more that needs to be done. Wal-Mart should also add on to their own website to enable customers to purchase movie downloads. Wal-Mart has also expressed to studios that it “wants marketing help when it launches its own planned download site.” This is a positive step because when Wal-Mart launches the addition to their music downloading site, they will still be behind due to the delayed response. As a result of this, Wal-Mart is going to need all of the marketing help it can get in order to stay competitive in the online movie market.

Ultimately, Wal-Mart will need to be the innovator if it wants to get an extra leg up on the new competition. However, since Wal-Mart is not a technology company, for now it is going to need to lower prices and follow the lead of Apple in order to stay competitive in the movie retail industry.