globalEDGE Blog Archive September 2016

After the Brexit, the pound fell immensely, by 8.4% in one day, to its lowest since 1985, which was the biggest one day fall on record.  Since the morning of the referendum result, the pound has deprecated by around 11% against the dollar without any large fluctuations in the last two months. The depreciation of the pound could be seen as a double-edged sword. It caused a significant boost in exports in several industries in the United Kingdom due to British prices becoming relatively lower for the world, but prices of imported goods, such as raw materials, have and will continue to rise.

On Wednesday, OPEC reached an agreement that will cut its output of oil for the first time in eight years. The current rate of production is 33.24 million barrels per day; the new aim is 32.5 million barrels per day. The decision came to fruition at a two-day OPEC meeting in Algeria. However, it is not yet an official deal. Specific details have not been released yet, and decisions regarding individual countries' output will not be discussed until late November. Plus, there are several more related proposals from OPEC affiliates that warrant discussion. If an official deal is eventually reached and put into effect, it will undoubtedly raise oil prices (which have been cripplingly low over the past year) and help combat the global oversupply of crude oil.

Chaos flooded the streets of Berlin. 80,000 protesters gathered, while up to 320,000 others held organized protests in seven other major German cities, to express their strong opposition to the proposed Transatlantic Trade and Investment Partnership (TTIP) between the EU and the US. In 2013, the EU and the US began negotiating a trade deal, hoping to create the world’s largest free trade market of 850 million consumers. The proposed deal promises to lower tariffs, and hopes to promote economic growth overseas. Protesters fear the deal will lead to an increase in outsourcing and unemployment, as it favors industrialized agricultural processes over non-GMO privatized food production. This prioritization would likely cost thousands of jobs and could potentially compromise food safety and employment standards.

The latest segments from the globalEDGE Business Beat take a look at a new business trade book, Second Shift: The Inside Story of the Keep GM Movement. Tomas Hult, along with David Hollister, Ray Tadgerson, and David Closs, wrote the book detailing how Lansing, Michigan was able to save its auto plant from closing. The six new segments from the Business Beat feature Tomas Hult discussing the book and accompanying film with each of the co-authors, examining how the Second Shift Model was successful and pointing out key takeaways for others in the business world.

The world is facing its worst refugee crisis since World War II. According to the United Nations Refugee Agency (UNCR), there are 21.3 million refugees across the globe. A vast majority of these refugees come from Africa and the Middle East, with Syrians accounting for nearly one-fourth of the total refugee population. Many of these refugees are flocking to the nation of Turkey, which is currently playing host to 2.5 million refugees, nearly one million more than any other nation. These refugees flock to Turkey with the hope of eventually journeying to the developed economies of Europe.

In the age of information, the mind-boggling amount of data available at our fingertips can seem daunting. Yet, handled in an efficient manner, it can also be immensely useful. Big Data—referring to the use of nontraditional analytics to examine vast amounts of data—has become an increasingly important part of the business landscape. Over the past few years, several prominent corporations have invested in Big Data analytics and are incorporating them into their business strategies—UPS ostensibly spends $1 billion a year on Big Data analysis strategies. Specifically, many are looking at Big Data as a way to further optimize logistics and increase efficiency of commerce. Those who currently utilize Big Data analysis find it essential, warning that other companies who do not adapt to the technology may find themselves left behind.

E-commerce has become more and more popular, but some warehouses cannot keep up with the consumer expectation of instant gratification. Online shopping gives consumers the idea that if something is purchased over the internet, it should be delivered quickly and efficiently. Many facilities are still using the man-to-goods model, where the employee goes throughout the warehouse looking for the item(s) purchased by the consumer. Companies like inVia Robotics are changing that.

Research conducted by Goldman Sachs predicts that the global commercial drone market is expected to grow to $20.6 billion USD and the compound annual growth rate is supposed to grow by 41% from 2016-2021. In North America alone, the industry is forecast to have 1.4 million commercial drones in use by 2025. 

With all the growth in the logistics industries, “several companies are racing to develop airships they hope will transform air travel.” Amazon, for example, has struggled keeping up with the high demand, especially with Prime members who get free two day shipping. Using airplanes to transport items will significantly increase the company’s shipping speed and help Amazon continue to grow.

Disruptions in supply chains are unwanted, but can sometimes be unavoidable. New technology introduced to logistics functions has helped to lessen these disruptions, increase efficiency and responsiveness, and also meet the ever-growing expectations of customers. Since the affordability of these technologies has also increased, they are becoming more and more available to companies wishing to improve their logistics functions. Experts anticipate that over the next few years, the Transportation Management System (TMS) will become more heavily used, autonomous vehicles and drones will increase, and the use of robots will also increase.

China has gained a valuable foothold in the nuclear energy industry as Britain’s new Prime Minister has given the green light for a power plant to be built in Hinkley, England. The project is worth a reported $24 billion and has many people worried about the economic ramifications of allowing China and France to fund this large scale project on English soil. “In response, the U.K. has set out new restrictions on the project's builders, saying the companies would not be able to sell their stakes in the plant without prior approval from the government. Going forward, the British government will take a stake in all nuclear power projects, giving it control over a change of ownership.” (CNN) The restrictions that the UK has put on this project eases the fears of many, but some still are worried over the consequences of this act.

The European Union (EU) is working strenuously to stop giant American companies from avoiding taxes in its region. EU regulators have been studying tax arrangements between its member countries and US companies such as Apple, Amazon, Google, and McDonald’s. Just last week, the European Commission (EC) ruled that Apple owes Ireland €13 billion ($14.6 billion) in back taxes.

Venezuela has one of the largest oil supplies in the world, and oil serves as the primary source of income for Venezuela’s economy. The large drop in prices has severely hampered its ability to import products, and has prompted a rapid rise in inflation. The IMF is forecasting that inflation will hit 700% by year end 2016, compared to the Venezuelan government’s forecast of a 180% increase in inflation.

International trade is an exceptionally important driving factor for corporate and economic growth. Following a two year decline in international trade figures, the Organization for Economic Cooperation and Development (OECD) finally reported growth in the second quarter of 2016. Members of G20, an exclusive group of 19 countries and the European Union, showed an increase in combined exports and imports after a run of declines. The majority of G20 countries' export economies rose by at least 1.5% in the second quarter of 2016. Unfortunately, a few major countries such as Argentina, Canada, and China failed to experience export growth.

After suffering a drop in soybean yields due to a drought this past year, Brazil is now facing a large shortage in its corn harvest. While many farmers had planted the corn seeds during good weather conditions, more hot and dry weather hit Brazil causing the second harvest of crops that were in the process of forming to die out.

Since March 2014, the European Union has continuously levied various forms economic sanctions against Russia. Initial injunctions were imposed in response to Russia's forced annexation of Crimea and the consequential violence that ensued in Ukraine. These measures included asset freezes and travel restrictions on certain prominent officials, bans on imported goods, investment, and tourism services to and from Crimea, and restrictions on economic cooperation. Russia retaliated in August 2014 with a food embargo on all other nations that joined in sanctioning Russia, including the United States. Since the introductory sanctions, both sides have held firm in their restrictions and have often taken measures to extend them. The EU is the latest to do this, having recently extended their asset freeze and travel ban policies.

With the world population more than doubling from 3.035 billion people in 1960 to today’s global population of approximately 7.347 billion, and with UN projections estimating a global population of 9.7 billion by 2050, there has been much rhetoric and concern over the social, environmental, and economic impact of this growth. Many of the fastest growing nations in the world have gone as far as implementing government policies and programs aimed at stemming this rapid growth, the most notable of which was the Chinese one-child policy, which was introduced in 1978 and began to be phased out only last year. While there is no questioning the legitimacy and seriousness of the issues caused by rapid population growth, there is also a myriad of other issues, equal in severity, that stem from the fact that the world population is not growing fast enough, particularly in developed nations. The focus of this article will be on the latter set of population growth issues, those which can be linked to the insufficient population growth.

Last week Amazon announced a reduced work week plan where employees will only work 30 hours a week, in an effort to improve productivity, employee happiness, and recruitment. The plan follows a recent trend among some businesses to make working hours more flexible, or even reduce the amount of time spent in the office. The idea behind the trend is that reduced hours will not have a significant impact on productivity, as studies have shown that work performance decreases as the number of hours spent working increases. With Amazon’s announcement, the reduced working schedule is moving from small companies and startups to the mainstream.

It is not a coincidence that there is a positive trend between companies that do good in their community and company success. With this generation of consumers and employees placing more importance on community consciousness than ever before, it makes sense that the companies that are giving back are the ones attracting the most business.

After economic sanctions were lifted off of Iran, many countries quickly began trade talks and one of the first countries to jump on this was Germany. Large German companies, such as Siemens AG, have already announced plans for large industrial projects in Iran. German companies hoped that the removal of the embargo on Iran would reignite old trade deals that had reached $5bn in yearly exports. Although exports have jumped since January, the results have left Germans disappointed.