According to John Quelch, Senior Associate Dean at Harvard Business School, Ford has finally woken up to what Toyota knew a long time ago: The power of a single global brand.
Over 20 years ago, Harvard professor Theodore Levitt praised Japanese manufacturers for their focus on "what every consumer in the world is seeking: world-class modernity at affordable prices." Since, then, Toyota, Nissan, and Honda have been selling standard products under a single brand umbrella.
For decades, Ford adapted its manufacturing platforms, features, and model names from one country to another. The results: added manufacturing and supply chain costs that strained consumers' willingness to pay; a balkanized bureaucracy in which regional managers exaggerate the need for local adaptations to defend their turf; and a deteriorating market share, financial performance, and stock price.
Ford was once one of the 10 most valuable brands in the world. They're no longer on that list, but Toyota now is. How did Toyota — and the other nine companies — do it? There are five characteristics that all top global brands have in common:
1. The same positioning worldwide. This provides a combination of functional product quality and innovation with emotional appeal. Think Coca-Cola and Disney.
2. A focus on a single product category. Think Nokia and Intel.
3. The company name is the brand name. All marketing dollars are concentrated on that one brand. Think GE and IBM.
4. Access to the global village. Consuming the brand equals membership in a global club. Think IBM's "solutions for a small planet."
5. Social responsibility. Consumers expect global brands to lead on corporate social responsibility, leveraging their technology to solve the world's problems. Think Nestlé and clean water.
Ford has a proud history. But, Low volume management distractions, including Jaguar, Land Rover, and Volvo will be sold off; they're now meaningless. US-based models like Mercury will be discontinued.
Thus, John Quelch asks - can Ford recover?
My reply is YES. Ford, by all means, can resurrect, provided it aims at doing so, whole heartedly. It's not necessary that if some Japanese companies have been "commoditizing" cars for the world, Ford should also be joining the bandwagon for no good reasons. Ford believes in catering to the differentiated needs and wants of its customers. And, there is nothing wrong in catering to those needs and wants. Ford just has to take care of its manufacturing and supply chain costs, and its bureaucracy. The results: a better market share, a better financial performance, and a highly respectful stock price will automatically fall in place. It's high time Ford should prove to the world what Ford is!
Tuesday, May 27, 2008
Monday, May 26, 2008
Mobile Virtual Network Operators
As per the Gulf News, Mobile Virtual Network Operators (MVNOs) have dramatically changed the telecom landscape in many countries. The MVNO business model has enabled a variety of companies to expand into mobile telecommunications.
By the definition, MVNOs are "virtual" operators, that is, they don't own a mobile network, but, instead, buy capacity from an existing Mobile Network Operator (MNO) on a wholesale basis, then package and sell it under their own brands. The MVNO, typically, becomes the largest single customer of its partner MNO.
Further, by focusing and specializing on serving a particular segment of the market extremely well, MVNOs are actually important strategic partners of MNOs, especially in a maturing market, which requires a multi-segmented market approach, in which different segments are targeted with a customized proposition.
There are currently no MVNOs in the UAE. MVNOs are a natural part of mobile market evolution, and have already been introduced in Europe, North America, South America, Asia, and Australia.
Therefore, it's fair to expect that MVNOs will also arrive in the UAE at some point, but this requires a decision from the Telecommunications Regulatory Authority (TRA) of the UAE.
The limited number of ISPs in the UAE no doubt has an impact on the internet penetration, as more competition, typically, drives affordability, as well as ensures that more players are involved in educating the market. However, the UAE government is becoming more and more advanced in its use of the internet.
In my view, culture is likely to play a much bigger role in the growth of e-commerce. In the Middle East, the human contact and interaction, while doing business, is more visible and important than is in the other parts of the world.
Therefore, I believe there's a longer adoption cycle in the Middle East, and in the UAE, specifically, for adopting e-commerce than, for example, it is in Europe.
The UAE should benefit from the presence of expats from countries where e-commerce has achieved a significant mass.
By the definition, MVNOs are "virtual" operators, that is, they don't own a mobile network, but, instead, buy capacity from an existing Mobile Network Operator (MNO) on a wholesale basis, then package and sell it under their own brands. The MVNO, typically, becomes the largest single customer of its partner MNO.
Further, by focusing and specializing on serving a particular segment of the market extremely well, MVNOs are actually important strategic partners of MNOs, especially in a maturing market, which requires a multi-segmented market approach, in which different segments are targeted with a customized proposition.
There are currently no MVNOs in the UAE. MVNOs are a natural part of mobile market evolution, and have already been introduced in Europe, North America, South America, Asia, and Australia.
Therefore, it's fair to expect that MVNOs will also arrive in the UAE at some point, but this requires a decision from the Telecommunications Regulatory Authority (TRA) of the UAE.
The limited number of ISPs in the UAE no doubt has an impact on the internet penetration, as more competition, typically, drives affordability, as well as ensures that more players are involved in educating the market. However, the UAE government is becoming more and more advanced in its use of the internet.
In my view, culture is likely to play a much bigger role in the growth of e-commerce. In the Middle East, the human contact and interaction, while doing business, is more visible and important than is in the other parts of the world.
Therefore, I believe there's a longer adoption cycle in the Middle East, and in the UAE, specifically, for adopting e-commerce than, for example, it is in Europe.
The UAE should benefit from the presence of expats from countries where e-commerce has achieved a significant mass.
Saturday, May 24, 2008
Reasons For the "Fire" to the Oil
What are the main reasons for the current “fire” to the Oil? I know of the three most important reasons:
1) Nagging concerns about stagnating output in Russia and other producers that are outside the Organization of Petroleum Exporting Countries (OPEC).
2) Oil prices are driven upwards because of the weakening dollar which prompted investors to use oil as a hedge against the falling currency, creating a vicious cycle.
3) American consumers are actually sitting on a record amount of cash, although that's exactly the problem. They're just holding it, not spending or investing it. The amount of readily available consumer cash jumped as much as 18 percent in the past year to hit a record level of almost $8.5 trillion. This cash balance includes saving deposits, institutional money markets, time deposits of less than $100,000, and retail money market funds.
1) Nagging concerns about stagnating output in Russia and other producers that are outside the Organization of Petroleum Exporting Countries (OPEC).
2) Oil prices are driven upwards because of the weakening dollar which prompted investors to use oil as a hedge against the falling currency, creating a vicious cycle.
3) American consumers are actually sitting on a record amount of cash, although that's exactly the problem. They're just holding it, not spending or investing it. The amount of readily available consumer cash jumped as much as 18 percent in the past year to hit a record level of almost $8.5 trillion. This cash balance includes saving deposits, institutional money markets, time deposits of less than $100,000, and retail money market funds.
The Common Sense of Marketing
I was reading through the blogs of Seth Godin, and there I encountered some Marketing tips, which he asks to proliferate. I have edited, removed, and added to his list. You can feel free to adapt the list, provided you give courtesy to him.
The Common Sense of Marketing:
1) Anticipated, personal and relevant advertising always does better than unsolicited junk.
2) Making promises and keeping them is a great way to build a brand.
3) Your best customers are worth far more than your average customers.
4) Share of wallet is easier, more profitable and ultimately more effective a measure than share of market. But, share of market should not be overlooked at any cost.
5) Marketing begins even before the product is created.
6) Advertising is just a symptom, a tactic. Marketing is about far more than that.
7) Low price is a great way to sell a commodity. That’s not marketing, though, that’s efficiency.
8) Products that are remarkable get talked about.
9) Marketing is the way your people answer the phone, the typesetting on your bills, and your returns policy.
10) You can’t fool all the people, not even most of the time. And people, who are not fooled, talk about the experience.
11) If you are marketing from a fairly static annual budget, you’re viewing marketing as an expense. Good marketers realize that it is an investment.
12) People don’t buy what they need. They buy what they want.
13) What people want is the extra, the emotional bonus they get when they buy something they love.
14) Business to business marketing is just marketing to consumers who happen to have a corporation to pay for what they buy.
15) Traditional ways of interrupting consumers (TV ads, trade-show booths, junk mails) are losing their cost-effectiveness. At the same time, new ways of spreading ideas (blogs, permission-based RSS information, and consumer fan clubs) are quickly proving how well they work.
16) People all over the world and of every income level, respond to marketing that promises and delivers basic human wants.
17) Good marketers tell a story.
18) People are selfish, lazy, uninformed and impatient. Start with that and you’ll be pleasantly surprised by what you find.
19) Marketing that works is marketing that people choose to notice.
20) Effective stories match the world’s view of the people you are telling the story to.
21) Choose your customers.
22) A product for everyone rarely reaches much of anyone.
23) Living and breathing an authentic story is the best way to survive in a conversation-rich world.
24) Marketers are responsible for the side-effects their products cause.
25) Reminding the consumer of a story they know of and trust in is a powerful shortcut.
26) Good marketing guys measure.
27) Marketing is not an emergency. It’s a planned, thoughtful exercise that started a long time ago and doesn’t end until you’re done.
28) One disappointed customer is worth ten delighted ones.
29) In the Google world, the best in the world wins more often, and wins more.
30) There are more rich people than ever before, and they demand to be treated differently.
31) Organizations that manage to deal directly with their end-users have an asset for the future.
32) You market when you hire and when you fire. You market when you call a Tech Support and you market every time you send a memo.
33) Blogging makes you a better marketer because it teaches you humility in your writing.
34) Obviously, knowing what to do is very, very different from actually doing it.
35) You should be marketing even after selling.
The Common Sense of Marketing:
1) Anticipated, personal and relevant advertising always does better than unsolicited junk.
2) Making promises and keeping them is a great way to build a brand.
3) Your best customers are worth far more than your average customers.
4) Share of wallet is easier, more profitable and ultimately more effective a measure than share of market. But, share of market should not be overlooked at any cost.
5) Marketing begins even before the product is created.
6) Advertising is just a symptom, a tactic. Marketing is about far more than that.
7) Low price is a great way to sell a commodity. That’s not marketing, though, that’s efficiency.
8) Products that are remarkable get talked about.
9) Marketing is the way your people answer the phone, the typesetting on your bills, and your returns policy.
10) You can’t fool all the people, not even most of the time. And people, who are not fooled, talk about the experience.
11) If you are marketing from a fairly static annual budget, you’re viewing marketing as an expense. Good marketers realize that it is an investment.
12) People don’t buy what they need. They buy what they want.
13) What people want is the extra, the emotional bonus they get when they buy something they love.
14) Business to business marketing is just marketing to consumers who happen to have a corporation to pay for what they buy.
15) Traditional ways of interrupting consumers (TV ads, trade-show booths, junk mails) are losing their cost-effectiveness. At the same time, new ways of spreading ideas (blogs, permission-based RSS information, and consumer fan clubs) are quickly proving how well they work.
16) People all over the world and of every income level, respond to marketing that promises and delivers basic human wants.
17) Good marketers tell a story.
18) People are selfish, lazy, uninformed and impatient. Start with that and you’ll be pleasantly surprised by what you find.
19) Marketing that works is marketing that people choose to notice.
20) Effective stories match the world’s view of the people you are telling the story to.
21) Choose your customers.
22) A product for everyone rarely reaches much of anyone.
23) Living and breathing an authentic story is the best way to survive in a conversation-rich world.
24) Marketers are responsible for the side-effects their products cause.
25) Reminding the consumer of a story they know of and trust in is a powerful shortcut.
26) Good marketing guys measure.
27) Marketing is not an emergency. It’s a planned, thoughtful exercise that started a long time ago and doesn’t end until you’re done.
28) One disappointed customer is worth ten delighted ones.
29) In the Google world, the best in the world wins more often, and wins more.
30) There are more rich people than ever before, and they demand to be treated differently.
31) Organizations that manage to deal directly with their end-users have an asset for the future.
32) You market when you hire and when you fire. You market when you call a Tech Support and you market every time you send a memo.
33) Blogging makes you a better marketer because it teaches you humility in your writing.
34) Obviously, knowing what to do is very, very different from actually doing it.
35) You should be marketing even after selling.
Friday, May 23, 2008
Management Innovations 2.0
Here is my personal response to the four issues that have been raised by Gary Hamel. In case, if you don't know what issues I am talking about, please refer to my last blog to know the management issues at hand.
According to me, the deep-seated impediments and their corresponding solutions are:
1) Businesses are, to a large extent, hypocritical about the growth of their employees. They are, by and large, focused on only about earning short-term numbers and meeting short-term deadlines, even if it means, at times, at the expense of the long-term growth of their businesses and their employees. In short, people management is poor at most of the organizations across the world. The solution lies in partnering closely with the academics and with educational institutions for the continual growth of the employees - especially for the senior management people, who generally belong to the old school of thought, and are reluctant to get out of their comfort zones in order to “hog” on the new ideas and to embrace even positive radical changes, if need be.
2) Senior management doesn’t show much confidence in its sub-ordinates. It is not much heedful of ideas generated by the sub-ordinates. Most of the times, senior management takes its sub-ordinates for granted, thinking that they are novice who have not much idea about the business.
3) Senior management doesn’t take time out to educate its people about the business in which they are. Until and unless, people fully understand their businesses, they just can’t innovate. They need to be tuned to think the way they should be in order to be innovative and to be productive at their businesses. And, who else can teach the employees better than the senior management itself?
4) Usually, senior management is out of sync with the world’s demands for talents to do businesses. The today’s world needs Specialist Generalists. Things are getting extremely cross-functional. And, it is just not possible to hit the “obscene” amount of growth by being a specialist of just one thing. People need to think cross-functionally to achieve a big deal out-of-the-box. So, to get in sync with the reality, senior management has to realize this big time. And, to breed Specialist Generalists, it has to keep moving its employees across functions and domains. This might involve sending some of the bright prospects to school, once again, or might involve “bringing” school to the organization, or might even involve creating school at the organization itself. Whichever may be the feasible way, but one of them has to be embraced gracefully.
5) Management has to prove to its employees that their innovative ideas, if implemented, will be rewarded proportionally. And, the reward MUST be high enough to make the juice worth the squeeze.
6) Even not-currently-possible-to-implement ideas should not be shrugged off right away. All those ideas need to be maintained properly so that, if in the future the situations change – which will be, undoubtedly - to become more favorable to the business, they can be picked up for cutting the mustard, anytime.
7) Performance appraisal systems need a big time overhauling. The onus of appraisals should not lie only in a few hands, which could become “dirty” in this greedy world, anytime. Organizations have to shield themselves from this type of catastrophe, because loss of great, honest people can never be compensated, and the damage caused by “dirty” hands can never be completely undone – no matter how hard you try, the world will just not let you forget about the damage. So, what I think the solution to this problem is that we need to make appraisal systems completely transparent and cyclic by 360 degrees. When I say transparent, it means all the people in the organization know about the progress made by the other people in the organization, so that when the bounty is distributed, nobody has any grudges, or gets surprises. This transparent system shields innocent, honest performers from “dirty” hands, if there are any in the organization. Moreover, this type of appraisal system fosters positive competitiveness in the employees. And, who doesn’t want recognition and a pat on her back for all her good work?
8) In the coming days, management doesn’t need to typically manage its employees. The employees are already self-motivated and highly ambitious. Management should trust its recruitment process for a change. If it cannot trust its recruitment process, it should revamp the recruitment process to make it bankable. The main focus of management should be on facilitating the work as smoothly as possible, so that the productivity of the entire organization shoots up. Management should always try to keep enough on its employees’ plates, so that everybody is always charged up with some meaningful work. Over all, the role of management is not going to be of a supervisor, but of a facilitator.
9) The whole essence of management can be summarized in a few adjectives. Organizations just need to be heedful of these adjectives: honest, fair, upfront, respectful, loyal, transparent, caring, supporting, egalitarian, ethical, and innovative. Once these adjectives are very well taken care of, the company’s till will always be ringing loud enough to be heard by the whole world.
According to me, the deep-seated impediments and their corresponding solutions are:
1) Businesses are, to a large extent, hypocritical about the growth of their employees. They are, by and large, focused on only about earning short-term numbers and meeting short-term deadlines, even if it means, at times, at the expense of the long-term growth of their businesses and their employees. In short, people management is poor at most of the organizations across the world. The solution lies in partnering closely with the academics and with educational institutions for the continual growth of the employees - especially for the senior management people, who generally belong to the old school of thought, and are reluctant to get out of their comfort zones in order to “hog” on the new ideas and to embrace even positive radical changes, if need be.
2) Senior management doesn’t show much confidence in its sub-ordinates. It is not much heedful of ideas generated by the sub-ordinates. Most of the times, senior management takes its sub-ordinates for granted, thinking that they are novice who have not much idea about the business.
3) Senior management doesn’t take time out to educate its people about the business in which they are. Until and unless, people fully understand their businesses, they just can’t innovate. They need to be tuned to think the way they should be in order to be innovative and to be productive at their businesses. And, who else can teach the employees better than the senior management itself?
4) Usually, senior management is out of sync with the world’s demands for talents to do businesses. The today’s world needs Specialist Generalists. Things are getting extremely cross-functional. And, it is just not possible to hit the “obscene” amount of growth by being a specialist of just one thing. People need to think cross-functionally to achieve a big deal out-of-the-box. So, to get in sync with the reality, senior management has to realize this big time. And, to breed Specialist Generalists, it has to keep moving its employees across functions and domains. This might involve sending some of the bright prospects to school, once again, or might involve “bringing” school to the organization, or might even involve creating school at the organization itself. Whichever may be the feasible way, but one of them has to be embraced gracefully.
5) Management has to prove to its employees that their innovative ideas, if implemented, will be rewarded proportionally. And, the reward MUST be high enough to make the juice worth the squeeze.
6) Even not-currently-possible-to-implement ideas should not be shrugged off right away. All those ideas need to be maintained properly so that, if in the future the situations change – which will be, undoubtedly - to become more favorable to the business, they can be picked up for cutting the mustard, anytime.
7) Performance appraisal systems need a big time overhauling. The onus of appraisals should not lie only in a few hands, which could become “dirty” in this greedy world, anytime. Organizations have to shield themselves from this type of catastrophe, because loss of great, honest people can never be compensated, and the damage caused by “dirty” hands can never be completely undone – no matter how hard you try, the world will just not let you forget about the damage. So, what I think the solution to this problem is that we need to make appraisal systems completely transparent and cyclic by 360 degrees. When I say transparent, it means all the people in the organization know about the progress made by the other people in the organization, so that when the bounty is distributed, nobody has any grudges, or gets surprises. This transparent system shields innocent, honest performers from “dirty” hands, if there are any in the organization. Moreover, this type of appraisal system fosters positive competitiveness in the employees. And, who doesn’t want recognition and a pat on her back for all her good work?
8) In the coming days, management doesn’t need to typically manage its employees. The employees are already self-motivated and highly ambitious. Management should trust its recruitment process for a change. If it cannot trust its recruitment process, it should revamp the recruitment process to make it bankable. The main focus of management should be on facilitating the work as smoothly as possible, so that the productivity of the entire organization shoots up. Management should always try to keep enough on its employees’ plates, so that everybody is always charged up with some meaningful work. Over all, the role of management is not going to be of a supervisor, but of a facilitator.
9) The whole essence of management can be summarized in a few adjectives. Organizations just need to be heedful of these adjectives: honest, fair, upfront, respectful, loyal, transparent, caring, supporting, egalitarian, ethical, and innovative. Once these adjectives are very well taken care of, the company’s till will always be ringing loud enough to be heard by the whole world.
Concerns of Management Innovators
Gary Hamel, who is referred to as the world’s leading expert on business strategy by the Fortune Magazine and is called the world’s reigning strategy guru by The Economist, challenges the world to ponder on the below mentioned four issues that management is facing, or going to face acutely in the near future. If you think, you can answer to any, or all, of his questions; you can reply to him on his blog site. Unlike many scholars, however, he has promised to give you the credit for your own ideas!!! You can definitely count on him for his words!!
1. What are the deep-seated impediments, or “design flaws,” that limit the capacity of organizations to adapt (to change without trauma); to innovate (to mobilize the imagination of everyone, every day); and to engage (to create environments that inspire extraordinary contributions).
2. Given these systemic impediments, and the new demands that will confront organizations in the years ahead, what should be the agenda for 21st century management innovators? That is, what are the “moon shot challenges” that must be addressed if we are to create organizations that are truly fit for the future?
3. Can we imagine, even in outline form, some potential solutions to these challenges, and if so, what sorts of experiments might be useful in helping us to test these ideas in real world settings?
4. More generally, what could be done to help accelerate the evolution of management in the years to come, that is, what is it that limits the pace of management innovation and how might these limits be overcome?
1. What are the deep-seated impediments, or “design flaws,” that limit the capacity of organizations to adapt (to change without trauma); to innovate (to mobilize the imagination of everyone, every day); and to engage (to create environments that inspire extraordinary contributions).
2. Given these systemic impediments, and the new demands that will confront organizations in the years ahead, what should be the agenda for 21st century management innovators? That is, what are the “moon shot challenges” that must be addressed if we are to create organizations that are truly fit for the future?
3. Can we imagine, even in outline form, some potential solutions to these challenges, and if so, what sorts of experiments might be useful in helping us to test these ideas in real world settings?
4. More generally, what could be done to help accelerate the evolution of management in the years to come, that is, what is it that limits the pace of management innovation and how might these limits be overcome?
Oil Fire
There is no magic solution to the problem of rising oil prices. In the 90s, the OPEC received very strong advice from consuming countries to let the market decide prices of oil, so, since then, that's what is going on.
Today, Oil price has surged to US $135.04 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Saudi Arabia, the world's largest oil producer and most influential member of the OPEC, announced a unilateral 300,000 barrel-a-day output increase, on May 16, 2008, in response to a request from the US President George Bush, citing customer demand.
The OPEC has kept production unchanged at its past three meetings in the months of December, February, and March, saying the market is well-supplied.
A Goldman Sachs’ Analyst said in a May 16, 2008 report that "the possibility of US $150 – US $200 per barrel seems increasingly likely over the next six to twenty four months."
Investment banks should stop publishing Oil price forecasts because the market is reacting, and investors are chasing those "projected" gains. The price of oil is, certainly, out of control!!!
Today, Oil price has surged to US $135.04 a barrel in after-hours electronic trading on the New York Mercantile Exchange.
Saudi Arabia, the world's largest oil producer and most influential member of the OPEC, announced a unilateral 300,000 barrel-a-day output increase, on May 16, 2008, in response to a request from the US President George Bush, citing customer demand.
The OPEC has kept production unchanged at its past three meetings in the months of December, February, and March, saying the market is well-supplied.
A Goldman Sachs’ Analyst said in a May 16, 2008 report that "the possibility of US $150 – US $200 per barrel seems increasingly likely over the next six to twenty four months."
Investment banks should stop publishing Oil price forecasts because the market is reacting, and investors are chasing those "projected" gains. The price of oil is, certainly, out of control!!!
Dell Is Ringing Its Till Loud in the UAE
Dell Inc. will be opening a new hub and distribution centre in Jebel Ali, Dubai, on June 16, 2008, to bring its products faster to the UAE region, with hopes to accelerate its ability to deliver products to the growing market of the UAE.
A new retail outlet will also be coming soon to the Festival City, Dubai. The company will also be investing in a call centre for the region, so consumers can have easy access to direct support from the company. The US-based firm is enjoying a 110 percent annual growth in the UAE, with market share at 15.5 percent at the end of the first quarter. Dell's notebooks have seen an annual growth of 208 percent, with current market share at 14.5 percent.
A new retail outlet will also be coming soon to the Festival City, Dubai. The company will also be investing in a call centre for the region, so consumers can have easy access to direct support from the company. The US-based firm is enjoying a 110 percent annual growth in the UAE, with market share at 15.5 percent at the end of the first quarter. Dell's notebooks have seen an annual growth of 208 percent, with current market share at 14.5 percent.
Latin America Is Catching Up With the World
In the last few years economic stability has started to take hold in Central and Latin America, resulting in unprecedented growth in the region's real estate sector. The robust development of capital markets in Mexico, Brazil, Argentina, and Costa Rica has increased liquidity, a clear indicator of positive, economic progress. A long-awaited period of sustained economic growth is finally occurring in much of Latin America.
Thursday, May 22, 2008
Things India Should Ponder On
India is currently a $1.2 trillion economy, and is likely to almost double in size in next six years, even if it grows at a modest 7 percent increase in the GDP.
This $2 trillion economy will need 64 million skilled workers. But, currently, we have only one million people that are a mix of skilled and semi-skilled people. How are we going to meet this shortfall? This is really astonishing to know that the second largest populated country in the world, with more than 1.1 billion people, has only one million skilled workers!!! Dudes, please study!!! Save the country!!
This $2 trillion economy will need 64 million skilled workers. But, currently, we have only one million people that are a mix of skilled and semi-skilled people. How are we going to meet this shortfall? This is really astonishing to know that the second largest populated country in the world, with more than 1.1 billion people, has only one million skilled workers!!! Dudes, please study!!! Save the country!!
Saturday, May 17, 2008
A low-carbon Economy
As per the McKinsey Quarterly, the EU Emission Trading Scheme (ETS) and similar regulatory mechanisms, the total value of the emission rights in the EU scheme is about €40 billion a year.
Only a fraction of that value is traded now, but it is a growing fraction. Many roles are attractive—buying or selling for speculative purposes, for example, or creating clean-development-mechanism projects that would help companies outside the system reduce emissions at low cost and then profitably selling the emission rights in the market.
In parallel with efforts to optimize the existing infrastructure’s carbon performance, there will be major moves to develop radically more effective low-carbon solutions for new infrastructure. Emissions can usually be reduced at lower cost by building new houses, factories, or cars than by retrofitting existing assets. Indeed, regulation will have to encourage these new low-carbon solutions, for they could only match a predicted doubling of global GDP by 2030 with a significant and simultaneous decrease in greenhouse gas emissions.
The need to decouple emissions from economic growth will reinvent industries. In forestry and bio-energy, for example, a major new value chain seems likely to appear around the large-scale supply of biomass to power plants. Another value chain may build on cellulosic ethanol, which could significantly change the supply patterns of transportation fuels if its cost comes down as quickly as many predict. Power companies and property owners could form new alliances to generate distributed power, provided, for instance, by rooftop solar panels, if regulatory conditions were right.
A recent McKinsey Global Institute (MGI) analysis of the economic sectors most responsible for the end use of energy indicates that overall demand, which has increased by 1.6 percent a year for the past decade, is on track to grow by 2.2 percent annually over the next 15 years. Developing countries such as China account for the largest part of this growth. Curbing demand for energy in the emerging world would mean asking its consumers to reduce their newfound expectations of comfort, convenience, and economic growth—an unacceptable proposition for them.
Is there an escape from the vice grip of finite supplies and surging demand? We believe there is. Both developed and developing economies could use energy more productively by reducing the raw-materials inputs required to produce a given level of energy use, increasing the quantity or quality of the economic output from a given set of energy inputs, or both. These approaches wouldn’t call for reducing the benefits that energy’s end users enjoy.
MGI defines energy productivity as the ratio of value added to energy inputs. Energy prices, business practices, market forces, and government policies all influence energy productivity. Japan leads the world here. Thanks to consistently high energy prices and strict government energy efficiency standards based on the best practices of leading companies. Japanese gas- and coal-fired power plants are 70 percent more energy productive than Russian ones, and Japan’s 2007 standards for room air conditioners are nearly 50 percent stricter than their Chinese counterparts. The Arab Gulf, by contrast, is among the least energy-productive parts of the world as a result of large, sustained energy subsidies, and an energy-intensive growth model. Similarly, US cars are 15 percent less energy efficient than European ones in the same class, partly because European gasoline taxes are roughly seven times higher and partly because US regulatory exemptions have long helped automakers market SUVs as light trucks, which are subject to less stringent fuel-efficiency rules than passenger vehicles.
Only a fraction of that value is traded now, but it is a growing fraction. Many roles are attractive—buying or selling for speculative purposes, for example, or creating clean-development-mechanism projects that would help companies outside the system reduce emissions at low cost and then profitably selling the emission rights in the market.
In parallel with efforts to optimize the existing infrastructure’s carbon performance, there will be major moves to develop radically more effective low-carbon solutions for new infrastructure. Emissions can usually be reduced at lower cost by building new houses, factories, or cars than by retrofitting existing assets. Indeed, regulation will have to encourage these new low-carbon solutions, for they could only match a predicted doubling of global GDP by 2030 with a significant and simultaneous decrease in greenhouse gas emissions.
The need to decouple emissions from economic growth will reinvent industries. In forestry and bio-energy, for example, a major new value chain seems likely to appear around the large-scale supply of biomass to power plants. Another value chain may build on cellulosic ethanol, which could significantly change the supply patterns of transportation fuels if its cost comes down as quickly as many predict. Power companies and property owners could form new alliances to generate distributed power, provided, for instance, by rooftop solar panels, if regulatory conditions were right.
A recent McKinsey Global Institute (MGI) analysis of the economic sectors most responsible for the end use of energy indicates that overall demand, which has increased by 1.6 percent a year for the past decade, is on track to grow by 2.2 percent annually over the next 15 years. Developing countries such as China account for the largest part of this growth. Curbing demand for energy in the emerging world would mean asking its consumers to reduce their newfound expectations of comfort, convenience, and economic growth—an unacceptable proposition for them.
Is there an escape from the vice grip of finite supplies and surging demand? We believe there is. Both developed and developing economies could use energy more productively by reducing the raw-materials inputs required to produce a given level of energy use, increasing the quantity or quality of the economic output from a given set of energy inputs, or both. These approaches wouldn’t call for reducing the benefits that energy’s end users enjoy.
MGI defines energy productivity as the ratio of value added to energy inputs. Energy prices, business practices, market forces, and government policies all influence energy productivity. Japan leads the world here. Thanks to consistently high energy prices and strict government energy efficiency standards based on the best practices of leading companies. Japanese gas- and coal-fired power plants are 70 percent more energy productive than Russian ones, and Japan’s 2007 standards for room air conditioners are nearly 50 percent stricter than their Chinese counterparts. The Arab Gulf, by contrast, is among the least energy-productive parts of the world as a result of large, sustained energy subsidies, and an energy-intensive growth model. Similarly, US cars are 15 percent less energy efficient than European ones in the same class, partly because European gasoline taxes are roughly seven times higher and partly because US regulatory exemptions have long helped automakers market SUVs as light trucks, which are subject to less stringent fuel-efficiency rules than passenger vehicles.
Friday, May 16, 2008
The Basics of Currency Fluctuations
Exchange Rates reflect the balance of supply and demand for currencies. Two key factors affecting supply and demand are interest rates and the overall strength of the economy. Economic indicators such as GDP, foreign investment, and the trade balance reflect the general health of an economy, and are, therefore, responsible for the underlying shifts in supply and demand for that currency.
The total return on an international investment is based on two factors:
1) The Return on Investment (ROI) in local currency, and
2) Gain or loss because of currency fluctuations.
For example, suppose, you purchase an Indian stock whose price increases 10 percent in one year in terms of INR. If during that same year, the INR increases in value by 5 percent compared to the US dollar, your total return - Net ROI - would be 15 percent that is because of gain of 10 percent from the surge in the stock price plus gain of 5 percent from the currency fluctuations. However, if the INR decreased in value by 5 percent, your total return would be only 5 percent.
When the US dollar declines compared to the other currency, your investment increases in value, because more dollars are then required to purchase the investment. An increase in the US dollar compared to the other currency means your investment decreases in value.
Most countries use a system of managed floating exchange rates. Supply and demand factors set the exchange rates most of the time, as international banks, investors, tourists, consumers, and multinational companies buy and sell foreign currencies and goods. Governments typically only intervene to prevent massive fluctuations in exchange rates.
Demand for a particular currency is determined by many factors, including a country's inflation, interest rates, political and economic outlook, monetary policies, and speculation. The US dollar does not move uniformly against all currencies - it can be rising against one currency, while it is declining against another.
In general, a rising dollar makes it less expensive for Americans to travel abroad, to import foreign goods, and to purchase foreign investments. However, US companies may suffer since cheaper imported goods hurt sales of domestic products. When the dollar is declining, it becomes more expensive for Americans to travel abroad, and to import foreign goods, but US goods become more competitive on international markets.
When considering international investments, consider these tips about currency fluctuations:
1) Foreign bonds are subject to more currency risk than foreign equities.
2) Currency fluctuations tend to be more moderate in parts of the world where political and economic factors are stable and the local currency is strong. Avoid areas where inflation rates are extremely high.
3) Diversifying your investments by country and region can help reduce the overall effects of currency risk.
The total return on an international investment is based on two factors:
1) The Return on Investment (ROI) in local currency, and
2) Gain or loss because of currency fluctuations.
For example, suppose, you purchase an Indian stock whose price increases 10 percent in one year in terms of INR. If during that same year, the INR increases in value by 5 percent compared to the US dollar, your total return - Net ROI - would be 15 percent that is because of gain of 10 percent from the surge in the stock price plus gain of 5 percent from the currency fluctuations. However, if the INR decreased in value by 5 percent, your total return would be only 5 percent.
When the US dollar declines compared to the other currency, your investment increases in value, because more dollars are then required to purchase the investment. An increase in the US dollar compared to the other currency means your investment decreases in value.
Most countries use a system of managed floating exchange rates. Supply and demand factors set the exchange rates most of the time, as international banks, investors, tourists, consumers, and multinational companies buy and sell foreign currencies and goods. Governments typically only intervene to prevent massive fluctuations in exchange rates.
Demand for a particular currency is determined by many factors, including a country's inflation, interest rates, political and economic outlook, monetary policies, and speculation. The US dollar does not move uniformly against all currencies - it can be rising against one currency, while it is declining against another.
In general, a rising dollar makes it less expensive for Americans to travel abroad, to import foreign goods, and to purchase foreign investments. However, US companies may suffer since cheaper imported goods hurt sales of domestic products. When the dollar is declining, it becomes more expensive for Americans to travel abroad, and to import foreign goods, but US goods become more competitive on international markets.
When considering international investments, consider these tips about currency fluctuations:
1) Foreign bonds are subject to more currency risk than foreign equities.
2) Currency fluctuations tend to be more moderate in parts of the world where political and economic factors are stable and the local currency is strong. Avoid areas where inflation rates are extremely high.
3) Diversifying your investments by country and region can help reduce the overall effects of currency risk.
Thursday, May 15, 2008
What Is Engineering?
Engineering is all about “engineering” life. How do you define engineering? I define engineering as the art of maneuvering that leads you to success in anything that you do in life. So, you engineer a situation; you engineer problems; you engineer difficulties; you engineer solutions; you engineer failures so as to succeed thereafter. While engineering, you use all your knowledge that you have acquired so far. Engineering is all about manipulating obstacles, so as to achieve the goals, perhaps, at any cost or at the cost that you can afford. That’s engineering for me. What about you?
I am an engineer by education, by profession, and by choice. I love myself for being an engineer. It gives me immense pleasure in replying to someone who asks me – what do you do for a living? By and large, I reply, with a bit of “tashan”, that I am an engineer. I just love the word engineering. I feel I am a gamer and the world is my amphitheater. I have to show the world how I play the “game.” At times, I play by the rules, and at other times, I make the rules. I write protocols, for others to follow. I just love what I do. I am sure for my entire life I would be engineering – or call it maneuvering, in layman term.
Then there are several fields of engineering. You see, when you have many players, you have to give them their own space to play. :-) They need their own rules to play. Just imagine the world without engineering!!! It would look so ugly. We would go to the ancient times, wherein, we didn’t have any tools. The world will come to a grinding halt without engineering. So, there you agree with me. Right? Thus, engineering makes the world move.
So, next time, if somebody asks you – what do you do? Reply with some “tashan” that you engineer.
I am an engineer by education, by profession, and by choice. I love myself for being an engineer. It gives me immense pleasure in replying to someone who asks me – what do you do for a living? By and large, I reply, with a bit of “tashan”, that I am an engineer. I just love the word engineering. I feel I am a gamer and the world is my amphitheater. I have to show the world how I play the “game.” At times, I play by the rules, and at other times, I make the rules. I write protocols, for others to follow. I just love what I do. I am sure for my entire life I would be engineering – or call it maneuvering, in layman term.
Then there are several fields of engineering. You see, when you have many players, you have to give them their own space to play. :-) They need their own rules to play. Just imagine the world without engineering!!! It would look so ugly. We would go to the ancient times, wherein, we didn’t have any tools. The world will come to a grinding halt without engineering. So, there you agree with me. Right? Thus, engineering makes the world move.
So, next time, if somebody asks you – what do you do? Reply with some “tashan” that you engineer.
Wednesday, May 14, 2008
Winning
A couple of months back, I finished reading a book called “Winning” by Jack Welch. I found this book very useful and extremely informative. I suggest you to read this. It would be worth the effort and time.
Here is the gist of some important points adapted from that book. I hope to incite enough enthusiasm in you that you “hog” on to it right away. No, I am not publicizing the book for Mr. Welch. I want well-educated co-workers around me. :-)
What leaders do?
1) Leaders relentlessly upgrade their teams, using every encounter as an opportunity to evaluate, coach, and build self-confidence.
2) Leaders make sure people not only see the vision, but also live and breathe it.
3) Leaders get into everyone's skin, exuding positive energy and optimism.
4) Leaders establish trust with candor, transparency, and credit.
5) Leaders have the courage to make unpopular decisions and gut calls.
6) Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with action.
7) Leaders inspire risk taking and learning by setting the examples.
8) Leaders celebrate.
Here is the gist of some important points adapted from that book. I hope to incite enough enthusiasm in you that you “hog” on to it right away. No, I am not publicizing the book for Mr. Welch. I want well-educated co-workers around me. :-)
What leaders do?
1) Leaders relentlessly upgrade their teams, using every encounter as an opportunity to evaluate, coach, and build self-confidence.
2) Leaders make sure people not only see the vision, but also live and breathe it.
3) Leaders get into everyone's skin, exuding positive energy and optimism.
4) Leaders establish trust with candor, transparency, and credit.
5) Leaders have the courage to make unpopular decisions and gut calls.
6) Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with action.
7) Leaders inspire risk taking and learning by setting the examples.
8) Leaders celebrate.
Tuesday, May 13, 2008
Shortcomings of the CMM Standards
Carnegie Mellon's CMM and the other standards don't address some sources of waste, such as ineffective allignment between businesses and IT, the unavailability of the right resource at the right time, or architectural complexity. Moreover, CMM treats human resources as commodities - this conceptualization is engrossly wrong, because humans differ from each other and they cannot be solely judged on the quantifiable parameters of inputs and output.
Three big challenges are in focusing on:
1) changing behaviour.
2) broadening the focus from the specifics to general principles.
3) setting up the right incentives.
No transformation can sustain itself without the proper metrics and incentive systems that ensure change. In application development, "function points" measure the level of efforts devoted to a project. A successful lean transformation requires new metrics to identify waste and to set goals for reducing it. A lean transformation is a journey well worth the effort.
Lean, of course, isn't a technology, but rather a methodolgy applied to processes -- originally in manufacturing operations but increasingly within services, including IT.
Three big challenges are in focusing on:
1) changing behaviour.
2) broadening the focus from the specifics to general principles.
3) setting up the right incentives.
No transformation can sustain itself without the proper metrics and incentive systems that ensure change. In application development, "function points" measure the level of efforts devoted to a project. A successful lean transformation requires new metrics to identify waste and to set goals for reducing it. A lean transformation is a journey well worth the effort.
Lean, of course, isn't a technology, but rather a methodolgy applied to processes -- originally in manufacturing operations but increasingly within services, including IT.
Sunday, May 11, 2008
Financial hoopla in the UAE
According to the Gulf News, the fund management industry in the Gulf is expanding like never before. The reasons are: rising wealth from the states, fast growing economies, regulatory reforms, and increasing investor appetite for the region.
In the past 18 months, significant levels of foreign investment have flowed into the GCC stock exchanges, as international investors look for insulation from global economic turbulence. The MSCI GCC composite index has risen by 40.5 percent since the start of 2007, outperforming the MSCI World index by 38.0 percent and the Emerging Markets Composite by 8.7 per cent. Over the same period there has been a rush of fund managers going into the region to chase a slice of the lucrative market, which comprises of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman, and the UAE.
Total managed assets of foreign and domestic investment managers were more than USD $1.6 trillion in 2007. More than 90 percent of foreign fund managers' businesses are institutional, focusing largely on sovereign wealth funds and, to a lesser extent, on family offices.
The region's small market, but growing mutual fund market was estimated to be worth $100 billion at the end of last year, and is expected to grow by 15 percent over next five years. Certainly, the asset management industry is young, but it is growing rapidly.
Access for foreign investors to the region's equity markets is difficult and exposure to a specific company or sector can be limited, while in Saudi Arabia the equity market is closed to international investors.
Rasmala, which has $1.3 billion assets under management, is launching a fund of funds that it plans to list on AIM this month. It is the first fund of funds focusing on the Gulf to list on the London Stock Exchange, and aims to raise capital of $200 million.
The GCC Equity Opportunity Fund, which will invest in GCC equity markets through locally-managed funds, will give foreign investors exposure to equities in the region. It is aimed at endowments, pension funds, and family offices.
A new trend has emergerd amongst the local investors - local investors who have benefited from the oil wealth are now looking to invest in their own region rather than in abroad markets.
The six nations of the GCC earned $381 billion from their exports of oil in 2007, according to the Institute of International Finance. Since the terrorist attacks on the US in 2001, Middle Eastern investors have been repatriating their assets and reinvesting in the region, particularly in infrastructure.
The fund, which has raised $83 million since the end of March, is aimed at retail and institutional investors, and is invested in locally incorporated funds, mainly in equities with some cash.
Although the region is often perceived as a single jurisdiction by overseas investors, the level of regulation varies between the six states. The credibility of local fund managers has been enhanced by the establishment of local regulatory frameworks in Dubai and Qatar, and by the continued development of existing regulation in Bahrain, while the development of financial centres in the other GCC countries has been accelerating for the past four years.
For transparency, there is a well developed culture for asset management in Kuwait, and Dubai and Bahrain are just following. There are problems in Saudi where it is difficult to find good institutional fund managers.
One of the world's biggest money managers, Franklin Resources, which operates as Franklin Templeton Investments, has also been eyeing the region. Last September it took a 25 percent stake in Algebra Capital, a Dubai-based asset manager, to gain greater access to managing money in the region.
The strong interest in the region shown by foreign investors is likely to be sustained as long as the oil price does not take a huge dive, and as long as valuations do not rise too far above those of the other emerging markets.
In the past 18 months, significant levels of foreign investment have flowed into the GCC stock exchanges, as international investors look for insulation from global economic turbulence. The MSCI GCC composite index has risen by 40.5 percent since the start of 2007, outperforming the MSCI World index by 38.0 percent and the Emerging Markets Composite by 8.7 per cent. Over the same period there has been a rush of fund managers going into the region to chase a slice of the lucrative market, which comprises of Saudi Arabia, Kuwait, Qatar, Bahrain, Oman, and the UAE.
Total managed assets of foreign and domestic investment managers were more than USD $1.6 trillion in 2007. More than 90 percent of foreign fund managers' businesses are institutional, focusing largely on sovereign wealth funds and, to a lesser extent, on family offices.
The region's small market, but growing mutual fund market was estimated to be worth $100 billion at the end of last year, and is expected to grow by 15 percent over next five years. Certainly, the asset management industry is young, but it is growing rapidly.
Access for foreign investors to the region's equity markets is difficult and exposure to a specific company or sector can be limited, while in Saudi Arabia the equity market is closed to international investors.
Rasmala, which has $1.3 billion assets under management, is launching a fund of funds that it plans to list on AIM this month. It is the first fund of funds focusing on the Gulf to list on the London Stock Exchange, and aims to raise capital of $200 million.
The GCC Equity Opportunity Fund, which will invest in GCC equity markets through locally-managed funds, will give foreign investors exposure to equities in the region. It is aimed at endowments, pension funds, and family offices.
A new trend has emergerd amongst the local investors - local investors who have benefited from the oil wealth are now looking to invest in their own region rather than in abroad markets.
The six nations of the GCC earned $381 billion from their exports of oil in 2007, according to the Institute of International Finance. Since the terrorist attacks on the US in 2001, Middle Eastern investors have been repatriating their assets and reinvesting in the region, particularly in infrastructure.
The fund, which has raised $83 million since the end of March, is aimed at retail and institutional investors, and is invested in locally incorporated funds, mainly in equities with some cash.
Although the region is often perceived as a single jurisdiction by overseas investors, the level of regulation varies between the six states. The credibility of local fund managers has been enhanced by the establishment of local regulatory frameworks in Dubai and Qatar, and by the continued development of existing regulation in Bahrain, while the development of financial centres in the other GCC countries has been accelerating for the past four years.
For transparency, there is a well developed culture for asset management in Kuwait, and Dubai and Bahrain are just following. There are problems in Saudi where it is difficult to find good institutional fund managers.
One of the world's biggest money managers, Franklin Resources, which operates as Franklin Templeton Investments, has also been eyeing the region. Last September it took a 25 percent stake in Algebra Capital, a Dubai-based asset manager, to gain greater access to managing money in the region.
The strong interest in the region shown by foreign investors is likely to be sustained as long as the oil price does not take a huge dive, and as long as valuations do not rise too far above those of the other emerging markets.
Saturday, May 10, 2008
IT is the promise of the UAE
Information technology business in the UAE crossed USD 2.01 billion last year, growing at 10.1 per cent. The UAE's IT sector is the fastest growing in the world, according to industry experts. And, the market will grow at the same rate till 2010, when it will reach $2.5 billion.
This success saw the light because of the UAE's zero income and corporate tax policy, strong legal framework, robust and effective intellectual property protection system, and the free flow of capital, information, and people. Now, the UAE is looking forward to bring in investment for the semiconductor sector.
The UAE needs basic technology tools and services but the position of the market in the life-cycle curve is at expansion stage. The average annual growth rate of the Middle East and North Africa region's IT and communication sector will be 9.9 per cent until 2010.
While the region's growth in the sector is the highest globally, there is a lot more potential since the industry is in the infancy stage. The way is paved for innovation and options in comparison to more mature and saturated markets. The average increase in IT expenditure and investment in the Gulf and Middle East stands at about 8.5 percent until 2011 compared to a 4.3 percent of other market.
Overall, the UAE looks poised to absorb a lot of investment in IT and communication, promising a far superior Return On Investment (ROI) to investors.
This success saw the light because of the UAE's zero income and corporate tax policy, strong legal framework, robust and effective intellectual property protection system, and the free flow of capital, information, and people. Now, the UAE is looking forward to bring in investment for the semiconductor sector.
The UAE needs basic technology tools and services but the position of the market in the life-cycle curve is at expansion stage. The average annual growth rate of the Middle East and North Africa region's IT and communication sector will be 9.9 per cent until 2010.
While the region's growth in the sector is the highest globally, there is a lot more potential since the industry is in the infancy stage. The way is paved for innovation and options in comparison to more mature and saturated markets. The average increase in IT expenditure and investment in the Gulf and Middle East stands at about 8.5 percent until 2011 compared to a 4.3 percent of other market.
Overall, the UAE looks poised to absorb a lot of investment in IT and communication, promising a far superior Return On Investment (ROI) to investors.
International Trends To Watch Out For
Here are the trends that the McKinsey Quarterly predicts to watch out for in the years to come. I am presenting you the gist of the entire situation, coupled with my own elaborations, wherever I could. Please refer to the full article for your enhanced understandings of the situation.
The following trends look set to continue during the years ahead, long after the present turbulence in the world capital markets gets settled down:
1) The continued growth and deepening of global capital markets as investors pour more money into equities, debt securities, bank deposits, and other assets around the world. This will, inevitably, come true, as smart investors see troubles as opportunities for future growth. “Small” investors back off when the prospects of troubles loom large.
2) The soaring growth of financial markets in emerging economies and the growing ties between financial markets in developed and developing countries. This seems obviously true, as developed economies are comparatively saturated, and are hard to grow in. Thus, reaping “obscene” amount of success in developing economies is relatively easier, and worth giving a shot by all standards.
3) The shift of financial weight in Asia from Japan toward China, India, and the other fast-growing emerging markets. Diversity of any sort is, in general, good. Moreover, diversity by itself does hedging to some extent, giving rise to stability and competition.
4) The growing financial clout of the euro zone countries and the significance of the euro. The European Union is going to be a big phenomenon to watch out for. Collectively, it can take anything head on, be it either adversity at large or shared prosperity.
5) The burgeoning role of oil-rich Middle Eastern countries as suppliers of capital to the world, along with the rise of new financial hubs in the Middle East to complement the rapidly growing hubs in London and Asia. The UAE is one of the most important sources of international capital. It invests its “extra” petro-dollars in developed and developing economies. After all, the UAE also needs to do hedging for the future. Its “liquid money” is drying fast, and the size of the “family” is growing at a fast pace. Last year, somewhere close to 65% of the UAE’s GDP was earned from non-oil products and services. The UAE’s oil reserves are depleting. Now, it is heavily relying on tourism for its own survival and growth. That’s one of the precise reasons that the UAE’s culture and rules are quite “tolerant.”
While these trends reflect a shift in financial power from the United States toward the other parts of the world, the sheer size and depth of the US market will give it a leading role on the international financial stage for years to come. Apart from this, the UAE will play a major role in infusing the world with a lot of capital inflows. It is certainly a smart investor, with a lot of petro-dollars at its disposal.
The following trends look set to continue during the years ahead, long after the present turbulence in the world capital markets gets settled down:
1) The continued growth and deepening of global capital markets as investors pour more money into equities, debt securities, bank deposits, and other assets around the world. This will, inevitably, come true, as smart investors see troubles as opportunities for future growth. “Small” investors back off when the prospects of troubles loom large.
2) The soaring growth of financial markets in emerging economies and the growing ties between financial markets in developed and developing countries. This seems obviously true, as developed economies are comparatively saturated, and are hard to grow in. Thus, reaping “obscene” amount of success in developing economies is relatively easier, and worth giving a shot by all standards.
3) The shift of financial weight in Asia from Japan toward China, India, and the other fast-growing emerging markets. Diversity of any sort is, in general, good. Moreover, diversity by itself does hedging to some extent, giving rise to stability and competition.
4) The growing financial clout of the euro zone countries and the significance of the euro. The European Union is going to be a big phenomenon to watch out for. Collectively, it can take anything head on, be it either adversity at large or shared prosperity.
5) The burgeoning role of oil-rich Middle Eastern countries as suppliers of capital to the world, along with the rise of new financial hubs in the Middle East to complement the rapidly growing hubs in London and Asia. The UAE is one of the most important sources of international capital. It invests its “extra” petro-dollars in developed and developing economies. After all, the UAE also needs to do hedging for the future. Its “liquid money” is drying fast, and the size of the “family” is growing at a fast pace. Last year, somewhere close to 65% of the UAE’s GDP was earned from non-oil products and services. The UAE’s oil reserves are depleting. Now, it is heavily relying on tourism for its own survival and growth. That’s one of the precise reasons that the UAE’s culture and rules are quite “tolerant.”
While these trends reflect a shift in financial power from the United States toward the other parts of the world, the sheer size and depth of the US market will give it a leading role on the international financial stage for years to come. Apart from this, the UAE will play a major role in infusing the world with a lot of capital inflows. It is certainly a smart investor, with a lot of petro-dollars at its disposal.
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