In the growing clamour to recognise the opportunities and threats posed by emerging markets in the BRIC countries, commentators are starting to question if the list of economic powerhouses is too short, or even if it is correct. We have noted before on Biz/ed the qualms over Russia’s ‘membership’ of the elite group of four.
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It is widely understood that of all the mega-issues facing us in the 21st century, the power exerted by China is one of the most significant. While like most developing countries, it relied on foreign direct investment (FDI) to drive its economy forward initially, China has been looking to invest outside its national boundaries for some time. Its ‘Going Out’ policy, which was instigated a decade ago, is worth examining a little further.
When Media Sports Investment (MSI) bought a controlling stake in Corinthians, a football club in Sao Paulo, Brazil in 2004, it set in train a series of events that continue to roll on to this day. This is despite it being four years since MSI terminated its association with the club. The on-off transfer saga surrounding Carlos Tevez is wrapped up in this controversial story, as are the rights to other players and the ownership of entire football clubs.
Continuing from yesterday’s entry, let’s look a little deeper into the imbalance between the three main revenue streams available to football clubs in Brazil. I mentioned in the previous part of this series that European clubs are shared between the major sources as follows: TV 40%, matchday 30%, commercial 30%. In Brazil, matchday sources average around 15% of total revenue.
Yesterday’s blog entry began a final series this academic year by looking into football finances in Brazil. Spurred by an article in the FT that suggested currency movements were reversing the trend of Brazil’s young soccer stars moving from their domestic league to Europe, I decided to investigate a little further.
Not so long ago, footballers from Brazil arrived in Europe in their droves, seeking incomes that few could dream of back in their homeland. According to an article in the FT that I read today, though, the tables are turning. The article reported on new-found wealth entering the game in Brazil, with investment, sponsorship and broadcasting income rising swiftly. This final run of blog entries of this academic year ends with a look at Brazil’s football economy.
Hard on the heels of my recent blog entry on foreign takeovers of firms in China comes news today of another potential western-backed buy-out of a big Far East player. But just as I noted that there are key political dimensions to any overseas acquisition of Chinese business, this one will also only go ahead with the official sanction of China’s commerce ministry as well as that of company shareholders and market regulators.
Following up on my initial entry on foreign takeovers and ownership of China-based companies, today’s focus is on the Chinese internet industry in general and the Alibaba Group in particular. Alibaba was founded in 1999 by a group of business people including Ma Yun, also known by his western name of Jack Ma. The story of Alibaba’s development involves western investment, ownership and controversial transfer of assets. It shows how sensitivity to foreign ownership can be a universal phenomenon.
A few weeks ago, I followed some stories on mergers and acquisitions (M&As), analysing some of the deals of the day. You can reflect on what I had to say by going here for the first entry, focusing on profile and finance-raising by firms like LinkedIn and takeovers of firms like Skype by Microsoft.
In an earlier entry to this blog I noted China’s growing power in many commodities markets, notably those for rare earths. China took control of these markets from the mid-90s, when it flooded the market, bringing the price crashing down. This made other suppliers of rare earths instantly unprofitable and mining of these metals dried up outside of China.
One of the most notable pieces of international economic news this week wasn't the vote by the Greek authorities to accept a new package of austerity measures, in order to trigger the next tranche of IMF/EU rescue money. In my view this was as inevitable as will be the eventual default of Greece on its sovereign debt. The news that sparked my interest was from the other side of the world, with a report from Reuters on the battle over elections in Thailand this weekend.
Of all the battles involving an oligarch and the Russian state, the example of Yukos and its CEO Mikhail Khodorkovsky stands out. Like many mining, energy and exploration companies, Yukos was created in 1993 from the privatisation of struggling state-owned firms in the period after the fall of the Soviet Union. By increasing production and modernising Yukos’ Siberian oil fields and its Volga refineries, Khodorkovsky increased the company’s value from a buying price of around $1.5bn to almost $30bn by 2003.
I ended yesterday’s blog entry on Oleg Deripaska who controls Rusal, the world’s biggest aluminium firm. Deripaska was noted as having returned from near financial-collapse after global downturn of 2008-09. As with many businesses at the time, Rusal had over-borrowed in order to grow. Finding itself with upwards of $20bn of debt and prevented by the credit crunch from accessing affordable new borrowing, it was helped to continue trading by the Russian authorities.
In my recent blog entry marking the start of a run of pieces on Russia’s oligarchs, I said I’d track the development of Russia’s oligarchs. These individuals emerged as the former Soviet Union’s economy collapsed, building their wealth by trading natural resources and dealing in foreign exchange.
In yesterday’s In the News entry I outlined the drive towards the rapid exploitation of shale gas reserves in the US and around the world. Other than the supposed ‘green’ credentials of this fuel source, one of the prime reasons for this push is a desire for energy security. This means avoiding becoming reliant on fossil fuel suppliers that are prone to geo-political instability.
After blogging about inflation measures and mining company performance iseparately n the last few days, I saw this Reuters story that brought together the two themes. In fact this article synthesises numerous business and economics topics, revealing the inter-connectedness of the subjects. It’s helpful sometimes to reflect on a case that illustrates that no topic exists in isolation.
While researching into the activities of Vale, Brazil’s multinational mining company and the world’s largest iron ore producer, I was interested to read about the company’s diversification strategy since 2000. One step on the road to successfully implementing these plans was the takeover of a key mining company, Inco – a firm based in Canada.
In the market for new pharmaceutical products, research and development costs are a formidable barrier to new entrants. The skills, expertise, high tech equipment and laboratories are expensive to acquire or build. This is not to mention the costs of testing and the long wait for approval to bring new preparations to market. But once these sizeable hurdles have been cleared, pharmaceutical firms have the chance to make high profits, with patents protecting their inventions for up to a decade, depending on the country studied.
Apple’s 2011 Supplier Responsibility Report is a fascinating 25-page tour of the world of globalised business. Contained within, and inspired by Corporate Social Responsibility (CSR) standards, are sections on training and development, foreign contract worker protection, preventing firms employing underage staff, and the use of toxic chemicals in products. It is interesting how many of these areas of enquiry have been insisted on by external parties who make it their business to monitor what Apple gets up to in its business.