Stay abreast of what’s happening internationally with developments in corporate public affairs. Here is news that you may find useful and interesting:
The Business Case for PurposeND
EY, Harvard Business School, 2015
The EY Beacon Institute funded a global survey of 474 executives to determine company’s willingness to embed ‘sense of purpose’ in the way they make decisions or determine motivations. The survey defined organisational purpose as “an aspirational reason for being which inspires and provides a call to action for an organization and its partners and stakeholders and provides benefit to local and global society”. Eighty nine per cent of executives surveyed said a strong sense of collective purpose drives employee satisfaction, eighty four per cent said it can affect an organisations ability to transform, and eighty per cent said it can help increase customer loyalty.
The report determined that the companies surveyed fell into three categories prioritisers, companies that already have a clearly articulated and understood purpose (39 per cent); developers, companies that do not yet have a clearly articulated purpose but are working to develop one (48 per cent); and laggards, companies that have not yet begun to develop or even think about purpose (13 per cent).
For more information see: http://www.ey.com/Publication/vwLUAssets/ey-the-business-case-for-purpose/$FILE/ey-the-business-case-for-purpose.pdf
MPs slam ‘freeriding’ gig economy companiesND
Josephine Cumbo, Financial Times, 1st of May 2017
The Commons work and pensions committee in the UK have described companies who operate in the gig economy as “free riders’ on the welfare state. The committee singled out Uber and Deliveroo as drivers of the gig economy, which is seen as driving the growth of self-employment in the UK to 5 million (or 15 per cent of all British workers). This rise in self-employment has been combined with an overall reduction in the availability of benefits and tax credit income while companies operating in the gig economy contribute far less to the welfare state through national insurance contributions.
The decisions of the committee will have nock-on-affects to the continuing pressure for gig economy companies to recognise staff as employees or workers in Australia and elsewhere.
For more information see: www.ft.com
A lack of competition explains the flaws in American aviationND
The Economist Print Edition, 22nd of April 2017
Comparing US air carriers to European air carriers is clear cut with European operators gaining on average $7.84 profit per seat compared to $22.40 in the US, quality suffers as a result. Only one operator based in the USA can be found in the world’s 30 best carriers, compared to 9 European based carriers.
This is argued to be down to competition. The biggest four carriers in America control 80 per cent of the market, compared with just 48 per cent a decade ago. The top four carriers in Europe have around 45 per cent of the market. This is due to European regulators preserving competition between carriers for example blocking mergers between Ryanair and Aer Lingus and preventing single airlines from dominating airports.
Combined with the preservation of competition between EU-based carriers, the EU allows airlines with a non-EU owner that has a stake of up to 49 per cent to fly anywhere within the bloc, compared to America which caps foreign ownership at 25 per cent. The EU also encourages competitions between different airports and their operators, seen through London’s three separately owned airports.
For more information see: www.economist.com
Macron and Le Pen advance to the second round of the French electionND
The Economist, 23rd of April 2017
The French first round vote resulted in Emmanuel Macron (pro-EU centrist) and Marine Le Pen (far right member (or not) of the National Front) continuing to the final round of the French election. Macron is seen as pro-establishment serving the economy minister under Francois Hollande, but running as an independent, gaining 23.7 per cent of the vote while Marine Le Pen, the daughter of Jean-Marie Le Pen who previously made it to the final vote against Jacques Chirac and anti-immigration proponent gained 21.9 per cent of the ballot.
Macron goes into the second vote as a ‘firm favourite’ with polls predicting he will beat Le Pen by 20 points in a head-to-head contest. Although recent results (Brexit, Trump) show polls should not be trusted as an absolute.
For more information see: www.economist.com
Amazon breaks silence on Australian retail plansND
Sue Mitchell, Australian Financial Review, 20th of April 2017
Amazon will launch invitations for local retailers to join its global marketplace on Thursday, confirming the company’s goal to roll out a full retail offering in Australia over the next few years. The company is currently looking for a large distribution and fulfilment centre in Australia with the company already having close to 1000 staff within the country.
Amazon is predicted to gain a 44 per cent market share of electronics sold in Australia, 19 per cent of physical and electronic media, 11 per cent of sports and outdoors supplies, 10 per cent of clothing and apparel, 5 per cent of tools and garden supplies and 2 per cent of pharmaceutical products. The introduction of the service will disrupt prominent bricks and mortar retailers like JB Hi-Fi, Harvey Norman, Myer, Dymocks, Super Retail, Big W, Kmart and Target and online retailers who haven’t experienced as much competition like eBay, Booktopia and The Catch Group. Citigroup’s head of research Craig Woolford estimates that Amazon’s Australian sales could reach $4 billion within five years representing about 14 per cent of all online sales and 1.1 per cent of total retail sales.
For more information see: www.afr.com
India’s ID system is reshaping ties between state and citizensND
The Economist, 12th of April 2017
The Aadhaar identification system utilised in India is becoming a crucial part of everyday life for billions of people. The scheme has amassed the fingerprint and iris scans of 1.1 billion people since 2010 representing 99% of the adult population. Visibility to the government is assumed in developed nations with personal details taken for tax or other reasons being very hard to avoid for the average citizen. The fingerprints and iris scans are taken and matched to a unique 12-digit identifying number which is a massive step forward when you accept that India registers less than half of all births.
India is already benefitting from its system, with ‘leakage’ in subsidy payments resulting in only 27% of the money ending up in the right hands, discovering that the electoral role in Punjab had 800,000 fictitious voters and that up to 30% of driving licences are fake (many of them duplicates to avoid driving bans). The Aadhaar system has obvious downsides, including the author’s description of a potential Orwellian panopticon and the issue of labourers chafed fingers preventing proper fingerprinting.
For more information see: www.economist.com
How Amazon works - and why Aussie retailers are at risk of getting crushedND
John McDulin, Australian Financial Review, 12th of April 2017
After years of speculation it appears, again, that Amazon will make it to Australia. Watching Amazon’s rapid ascent to dominance in the UK first hand suggests that without innovation Australian retailers will struggle. The company has recently taken out 250 trademarks covering 30 classes of goods in Australia which has not gone unnoticed with Harvey Norman boss Gerry Harvey describing the US based company as ‘parasites’.
Amazons success comes from its business model which prioritises low prices, loyalty and playing the long game. The CEO Jeff Bezos explicitly does not prioritise profit or profit margins instead championing an ‘intergenerational approach’, prioritising free cash flow over traditional net income. Bezos takes the cash created through Amazons retail operations and reinvests it back into Amazon's infrastructure and logistics to ensure a positive customer experience. Australia’s population has a high level of disposable income and companies which have very healthy margins that Amazon plans to undercut.
For more information see: www.afr.com
The rise and fall of American leadership
Martin Wolf, Australian Financial Review, 31st May 2017.
Trump has undeniably changed the way we see the USA. Four months has transformed the nation builder into a relationship destabiliser. It has taken four months for Trump to damage the diplomatic position of the USA with his proposed 29 per cent cut ($12bn) to the budget of the state department and the international development agency. The prioritisation of hard power while lowering taxes are traditionally Republican, but the predominately white working class voters who placed Trump in power have little to gain from it. In fact, they have nothing to gain as they face the loss of health care coverage.
Angela Merkel’s statement that the USA can’t be depended upon is true, with growing polarisation of the American voter occurring while the media face of the country pushes a NATO prime minister out the way. The first four months of the presidency have undeniably not been positive; the refusal to accept the danger of climate change at the G7 meeting suggests the impact of the Trump presidency may not be temporary.
For more information see: www.afr.com
Video of United Airlines passenger creates furore in China, too
Javier C. Hernandez and Cao Li, The New York Times, 11th of April 2017
The now infamous incident of Dr David Dao being forcefully removed from a United Airlines flight has taken another, worse, turn. The hashtag ‘United forcibly removes passenger from plane’ received more than 550 million views and more than 240,000 comments on the Chinese social media platform Weibo. Chinese state broadcaster CCTV showed photographs of the passengers face with the title ‘savage’ above while People’s Daily (the ruling Communist Party’s leading newspaper) also scolded United for failing to condemn the man's treatment instantly. The event is likely to affect United’s growing business in China with 96 weekly departures from mainland China and Hong Kong. The New York Times notes that Chinese news media frequently highlights episode of violence and racism in the United States as evidence of what it perceives to be a hypocritical double standard surrounding human rights.
For more information see: www.nytimes.com
Loss of coral reefs caused by rising sea temperatures could cost $1tn globally
Ben Doherty and Christopher Knaus, the Guardian, 12th of April 2017
The loss of coral reefs caused by rising sea temperatures could cost $1 trillion globally according to a report from Australia’s Climate Council. Queensland’s Great Barrier Reef alone could lose 1 million visitors a year, placing 10,000 jobs into question and draining $1 billion from the economy. The only way to protect the Great Barrier Reef the report argues is to reduce greenhouse emissions, which the U.S.A are currently achieving, Chinas emissions are flat-lining, while Australia has increased its emissions by 0.8% in 2016. The federal and state government planned to spend $200 million annually to protect the reef; this is however juxtaposed by their support of the Carmichael coal mine in Galilee Basin in Queensland.
For more information see: www.theguardian.com
Apple faces serious penalties after anti-competitive 'error 53' repairs
Yolanda Redrup, Australian Financial Review, 6th of April 2017
The Australian Competition and Consumer Commission is launching a Federal Court case against Apple due to the ‘Error 53’ messages. Error 53 messages occur after a device has been serviced by a third party, which is ‘unauthorised’ by Apple. Apples closed business model prevents anyone but Apple from doing repairs to the handsets, the handsets can also essentially be ‘bricked’ if the phone is fixed by a third party while the warranty is simultaneously voided. The watchdog is seeking penalties, injunctions, declarations, compliance program orders, corrective notices and costs. This case comes at a bad time for Apple with rising competition from Android manufacturers.
For more information: www.afr.com
An Australia that can say no to ChinaND
The Economist, 6th of April 2017
Australia has escaped recession for 25 years thanks partially to Chinese demand for coal from Queensland and iron ore from Western Australia. China currently is raising its stake in the Australian economy with 160,000 Chinese students studying in Australia, annual beef exports about to exceed $1bn and Australian wine exports were near $500m in 2016, and growing steadily at a rate of around 50% each year.
The issue arises with Australia’s relationship with ‘the indispensable strategic power in the region’, the U.S.A. The difficult situation Australia finds itself in has been routinely seen, most recently through the detention of Feng Chongyi, the Australian based academic, receiving no statement from Malcolm Turnbull. Further to this the clear, and public rejection, of the Australian-Chinese extradition treaty by the Australian parliament shows a separation between the working parts of the Australian government and its public face.
For more information see: www.economist.com
United Airlines incident: What went wrong?
Joel Gunter, BBC News Washington, April 2017
United Airlines has found its corporate reputation sink to a level lower than refusing to allow teenage girls from travelling in leggings. The busy CEO Oscar Munoz came out to barely apologise to the man (who claimed to be a doctor) for being assaulted on a flight for which he had bought a ticket. While overbooking is a common practice for airlines which regularly factor in the amount of people who will miss the flight, which ultimately costs the airline money.
On Sunday passengers were informed that four of them would be required to give up their seats for four United Airlines staff members. The passengers were initially offered $400, a hotel room for the night and a flight the next day, this was turned down, so the offer was increased to $800, this was also turned down.
Due to the rejection, four passengers were selected (with priority given to frequent fliers and higher-fare-paying customers to continue on the flight). Three passengers accepted being selected and voluntarily left the plane, while the fourth who said he was a doctor refused as he had to see patients in the morning. Due to this, he refused to comply with the airline manager, resulting in him being manhandled off the plane.
Of course, in 2017 all passengers on the aircraft had phones to video and photo the bloodied man being dragged off the plane by the Chicago Department of Aviation. Being onboard the aircraft increased the poignancy of the images taken by other travellers, if United Airlines needed to remove customers it should have never occurred inside an aeroplane, but at the gate. The man who was dragged off the plane was never offered the maximum possible $1,350 compensation or had his occupation as a doctor taken into account. Mr Leocha, the founder of the passenger advocacy group Travelers United, stated "The only lesson here for passengers is when security get on throw up your hands, because otherwise, you're going down the aisle with a fat lip”. This incident is now a globally shared advert for both United Airlines and the way the Department of Aviation handle disputes.
For more information see: www.bbc.com
The ROI Communication Benchmark Report 2017
The 2017 communication benchmark report incorporates ROI’s experience working with Fortune 500 companies over 15 years, with the report compiled from the responses of 115 leaders representing 4.5 million employees. The benchmark report uses a framework to evaluate the effectiveness of communication organisations. The benchmark model consists of three components, Leader and Manager Communication, Open Communication Culture and, Communication Infrastructure.
Findings of the benchmarking project showed a changing, and challenging environment for executive leadership. ROI found that only 27% of participant organisations provide managers with communication training, which explains why the number of employees who perceived there ‘managers as credible sources’ went down from 81% in 2015 to 68% in 2017. The changing executive climate is mirrored by employment trends with participants in the ROI benchmark report having on average 3.8 full time employees per 10,000 employees.
ROI Communications developed three recommendations from the data collected,
1. Develop and implement a manager communication strategy: With manager credibility progressively getting lower supporting and enabling managers to be strong communicators is essential.
2. Create a measurement strategy that supports your goals: Measurement has to be a priority to improve practices and to predict financial performance.
3. Make your content count: Quality and consistency is essential to gain views, capture the attention of your employees to actively communicate.
The full report is available at: www.roico.com
How Pharma Can Fix Its Reputation and Its Business at the Same TimeND
Damiano de Felice, Harvard Business Review, February 2017.
Pharmaceutical companies are under steadily growing pressure. Drug discoveries are becoming less commonplace with investment in R&D becoming a less rewarding proposition. To counter this profit is being found through consistent price increases, with Credit Suisse discovering 20 leading global pharma companies gained 80% of their growth in net profits in 2014 from price hikes. Due to this, public perception of pharma companies is at an all-time low with US citizens holding no other industry in lower esteem (August 2016 Gallup Poll).
The mix of low potential for growth and exceptionally low levels of reputation has placed pressure on management to move away from a price-focused strategy, to facilitating higher levels of access to products. With emerging markets predicted to contribute 50% to 75% of potential growth in the next four years working with governmental bodies to allow greater accessibility to these markets and ensure sustainability of demand appears to be a win-win opportunity.
This plays strongly into the requirement for the industry to stamp out unethical or exploitative practices to gain and maintain access to markets in areas with higher levels of government control. To obtain access to these markets pharmacology companies will be required to enhance their corporate reputation in both the developed and developing world, and also gain access to the best talent and regain public trust.
For more information see: www.hbr.org
Travis Kalanicks Uber-apology
The Economist, March 2017
Maintaining good corporate reputation is a challenge. From PWCs Oscar disaster to Kalanick’s swearing at an Uber driver, the maintaining of reputation is challenged in unforeseen and undermining ways. An accountancy giant failing to maintain organisation over two envelopes, and a CEO of a service designed to empower workers previously seen as being in servitude of unjust taxi companies swearing at an employee, is a bad week for both PWC and Ubers corporate reputation.
Uber has experienced the perfect storm, from the #deleteUber, to growing reports of sexual harassment and Kalanicks un-ceremonial resignation from Trumps Business Advisory Council, consistently undermining Ubers reputation. Uber requires a good public face as it fights regulators throughout the world, and contemplates an IPO. A Chief Executive verbally dressing down an employee is not going to buy any favour.
For more information see: www.economist.com
It's no wonder we view Coles as a faceless food factory that it's OK to rip off.
The Sydney Morning Herald, Holden, February 2017
The self-checkout machine has become a more and more common sight in supermarkets around the world as we march slowly towards a dystopian future. We have been slowly trained to scan our food and then use a loyalty card to save $.000000001 cent per $1,000 spent while simultaneously allowing our movements and purchase history to be traced by faceless corporations.
You may have sensed, like the writer Holden, I am not a fan.
The checkout line at a supermarket gives one if not two people employment who would potentially struggle to find it elsewhere, while also facilitating, a necessary, bare minimal amount of actual social contact.
The act of implementing the self-checkout has predictably led to the theft of stock becoming entirely commonplace, and the unintended adversarial atmosphere between customers and supermarkets. Removing social interaction in traditional areas will affect both the people who worked these jobs, (traditionally individuals with lower levels of education working part time) and people living in cities who interact with others at a constantly diminishing rate. This trend is terrible business practice. Bring back supermarket cashiers.
For more information see: www.smh.com
The world’s biggest gamblers
The Economist, February 2017
Gambling is one of the economy’s most innovative and fastest moving sectors. The average Australian is predicted to lose $990 per year (40% higher than Singapore), because of this it is also a lucrative industry. Due to Australia’s relatively small population of around 29 million losing $18.3 billion annually the level of loss is high by global standard. The vast majority of this money is lost through automated gambling machines which are relatively unregulated when compared to the rest of the world. The USA still suffers the largest losses, posting $116.9 billion USD in losses annually while China is not far behind with $62.4 billion USD lost annually. Both these nations lack the advancements of the Australian industry with US regulations around online gambling being strict and forcing sports betting into illegal channels. China similarly has clamped down on gambling due to extensive corruption crackdowns, essentially drying up the casinos of Macau with the nation's gambling dropping by 20% in 2015. The future of gambling it appears is yet to be exploited in Japan with casinos recently being allowed in the country, leading H2 Gambling Consultancy to believe that the Japanese market will swell by up to 50% within the first year. Good for operators, less so for the punters.
For more information see www.economist.com
Why Sydney property is cheap compared with Shanghai.ND
Grigg & Murray, Financial Review, March 2017
Both Sydney and Melbourne have seen a surge in Chinese buyers purchasing apartments. This has led to the question, why? Australia appears relatively affordable compared to China's major cities. In China, median apartment prices in Beijing, Shanghai and Shenzhen are at least 15 percent higher than those in Sydney, and 50 percent higher than in Melbourne (albeit with poor quality public spaces, air quality and drinking water).
For more see: www.afr.com.au
Is It OK for a Bunch of Men to Lead a “Women in the Workforce” Initiative?
Wittenberg-Cox, February 2017
Pinkwashing, the act of a company presenting itself as being supportive of female issues to promote its products or services is not new. While 75% of corporate CEOs currently put ‘gender’ and female representation on their agenda of top 10 issues, little appears to be adequately addressing the problem of women in leadership. This has occurred to the extent that men must actively invest time and effort to ensure higher levels of diversity on strategic roles. EY is regarded as one of the most progressive organisations, yet it still has only three women out of 17 in the most senior positions, who all occupy staff jobs (such as HR).
Wittenberg-Cox breaks down companies into three categories of how they approach gender issues; the progressive who have a mix of genders in all roles, the pretending, those that claim but don’t do, and exploit the image of gender representation and the attitude that ‘anything is better than nothing’ and, the plodding, those that just refuse to engage.
The current political environment in the US does little to enhance the case of gender disparity with Donald Trumps cabinet consisting of four women (out of 17), and Betsy DeVos being one of the four, a major Republican donator, and by far the least qualified. Issues like this are common with Audi’s recent Super Bowl advert about gender equality forgetting that people possess Google and could easily see that the Audi board is 100% male. With 55% of American university graduates being female, and Australian and UK University output being similar gender equality at the high level will be required to attract qualified graduates. Also, above all, the attitude and thinking of men is changing rapidly with knowledge of equality throughout society being unavoidable.
For More Information see HBR.com