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US–China Trade War

Based on the article by Ning Nanshan, writer for the Zheng He Island WeChat Wemedia Account and covers news on economics and business.

Key Quotes

  • “In 2017, Chinese citizens spent about ¥50 trillion [$7.32 billion]. Consumption is still the primary driving force of the country’s economic development.”
  • “From a US perspective, this battle with China is a difficult one to fight. China’s market is too big and too interlocked with the American economy. If the United States strikes lightly, China feels nothing. If the United States strikes hard, it suffers heavy damages itself.”
  • “Relocating parts of a supply chain is a long, tedious procedure. China’s manufacturing expertise and advantages were built over decades. You’re not relocating a cellphone factory with an annual manufacturing capacity of 10 million units; you’re relocating a factory that has the capacity to manufacture hundreds of millions of electronic devices.”

Executive Summary

Under Trump administration (January 2017), the United States has been threatening China with trade tariffs. Concerned about a possible US–China trade war scenario, economists and analysts from government and private institutions has developed financial models to predict the potential impact of various tariffs on the economy of both countries. These institutions arrived at almost similar conclusions that is the impact of the trade war on both countries’ economies is unlikely to exceed a 1% drop in China GDP. 

If the United States impose a tax rate of 15%, 30% or 45% on Chinese imported goods, China’s exports to the United States would fall by 21%, 46% and 72% respectively, according to Chinese securities brokerage firm Industrial Securities; by 21%, 46.5% and 72% according to Morgan Stanley. That means China’s overall export would fall by about 4%, 8% or 13%, respectively.

In July 2018, the US imposed 25% tariffs on Chinese goods, totaling $50 billion in trade value. As a result, experts predict, China’s GDP will drop by around 0.2%, taking direct and indirect impact into account. If China retaliates with the same tariffs on equal value goods, the US economy would dip by 0.1%. The United States is also putting tariffs on imports from Europe and other regions. A global trade war with all parties would add a 10% tariff on global trade, and the global economy would fall by 1.4% which is unlikely to happen.

Since a trade war with China will inevitably hurt the United States economy as well, it will likely keep a rein on these tariffs. After China announced that it would retaliate, the United States announced tariffs on another $200 billion worth of goods but lowered the rate to 10% instead of 25%. This shows that the United States is exercising some restraint to contain the impact on its own economy.

Both tariffs are lower than the 30% and 45% that the analysts used in their calculations.

In order to protect American companies that rely on Chinese goods, the United States allows companies to apply for exemption from the tariffs. Such exemptions apply to products, not individual companies. If one company’s application is successful, all Chinese companies can export that product to the United States without paying the fee. Many companies will apply for product exclusions, so the extent of the trade war won’t be as large as it looks on paper.

Fighting a trade war with China is no easy task for the United States, since the two countries’ economies are intertwined. In fact, China’s top export companies (with the exception of Huawei) are Taiwanese, American and Korean companies, such as Foxconn, ASUS and Micron Technology. The United States must take into account how tariffs on these companies will affect business at home. Therefore, the United States didn’t impose tariffs on Apple’s China-made products. Foxconn in Zhengzhou, China, is currently the world’s largest production base for iPhones, producing nearly half of all iPhones that Apple sells across the world. Chinese factories also produce most of Apple’s other electronic devices. Apple would have to cover the import taxes itself and face a decline in profits or pass on higher costs to consumers by rising its product prices which in turn risking the loss of market share to Apple’s competitors. Of course, Apple could move its supply chain to countries such as Vietnam or India, but it would be a herculean task. The costs of negotiating with the foreign country, choosing locations, building the factory, and training or transferring employees would be immense, not to mention that most host government would require these multi-national companies to employ a minimum percentage (%) of locals for the companies operation in order to be allowed for business operation. Other countries may not have the government support or production capacity and may lack economic and political stability to be a viable option. Any dip  in efficiency could have detrimental consequences in terms of profit and market share. For example, it took Samsung more than seven years to move its supply chain to Vietnam from China, which in turn see its global smartphone market share suffered in the process. The United States is warring with an understanding that if it really were to punch China in the gut, America itself would bleed a great deal. Under these circumstances, the trade war is unlikely to spin out of control for it is a double-edge sword.

Looking into what alarmed the Chinese people most is the US ban of Chinese telecom equipment manufacturer ZTE  and not the import tariffs. Though the United States has agreed to lift the ban under certain conditions, it cost ZTE more dearly than the United States. This also shows that the United States could hold other Chinese companies hostage in the same way.

If this case, China can retaliate in several ways. For example, China buys three-quarters of the world’s chips and semiconductors supply, and the United States is a big supplier of semiconductors with Qualcomm and Micron ranking 4th and 6th largest in the world. Beijing can target Qualcomm and Micron the same way the United States targeted ZTE. Chinese sanctions would hurt Qualcomm and probably bankrupt Micron overnight. The Chinese government could instead source these technologies producers in Japan, South Korea, Taiwan and Europe instead.

Another example is China could also deliver a blow to the American automobile industry via new-energy vehicles. Tesla sales in China doubled from $1.06 billion to $2.03 billion from 2016 to 2017, making China the largest and fastest-growing market for Tesla outside the United States. American cars are on the list of products the Chinese subjected to retaliation tariffs. Since Tesla doesn’t have a factory in China yet, its prices increased sharply which undoubtedly hurting sales.

China’s bargaining chips also include its monopolies on 17 types of rare-earth elements that it exports to the world. Finally, China could devalue its currency to buffer the effects of the tariffs. Within two months from May 2018, the Chinese yuan depreciated about 5% compared with the US dollar. However, this tactic is harmful to Chinese companies with stakes abroad.

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Don’t fail fast — fail mindfully

This is a wonderful Ted Talk with lots of lesson to be learnt.

The Talk Transcript for just in case.

[This talk contains mature language Viewer discretion is advised]

If we traveled back to the year 800 BC, in Greece, we would see that merchants whose businesses failed were forced to sit in the marketplace with a basket over their heads. In premodern Italy, failed business owners, who had outstanding debts, were taken totally naked to the public square where they had to bang their butts against a special stone while a crowd jeered at them. In the 17th century in France, failed business owners were taken to the center of the market, where the beginning of their bankruptcy was publicly announced. And in order to avoid immediate imprisonment, they had to wear a green bonnet so that everyone knew they were a failure. Of course, these are extreme examples. But it is important to remember that when we excessively punish those who fail, we stifle innovation and business creation, the engines of economic growth in any country.

Time has passed, and today we don’t publicly humiliate failed entrepreneurs. And they don’t broadcast their failures on social media.In fact, I think that all of us can relate with the pain of failure. But we don’t share the details of those experiences. And I totally get it, my friends, I have also been there.

I had a business that failed and sharing that story was incredibly hard. In fact, it required seven years, a good dose of vulnerability and the company of my friends. This is my failure story.

When I was in college, studying business, I met a group of indigenous women. They lived in a poor rural community in the state of Puebla, in central Mexico. They made beautiful handmade products. And when I met them and I saw their work, I decided I wanted to help.

With some friends, I cofounded a social enterprise with the mission to help the women create an income stream and improve their quality of life. We did everything by the book, as we had learned in business school. We got investors, we spent a lot of time building the business and training the women. But soon we realized we were novices. The handmade products were not selling, and the financial plan we had made was totally unrealistic. In fact, we worked for years without a salary, hoping that a miracle would happen,that magically a great buyer would arrive and she would make the business profitable. But that miracle never happened.

In the end, we had to close the business, and that broke my heart. I started everything to create a positive impact on the life of the artisans. And I felt that I have done the opposite. I felt so guilty that I decided to hide this failure from my conversations and my resume for years. I didn’t know other failed entrepreneurs, and I thought I was the only loser in the world.

One night, seven years later, I was out with some friends and we were talking about the life of the entrepreneur. And of course, the issue of failure came out. I decided to confess to my friends the story of my failed business. And they shared similar stories. In that moment, a thought became really clear in my mind: all of my friends were failures.

Being more serious, that night I realized that A: I wasn’t the only loser in the world, and B: we all have hidden failures. Please tell me if that is not true. That night was like an exorcism for me. I realized that sharing your failures makes you stronger, not weaker. And being open to my vulnerability helped me connect with others in a deeper and more meaningful way and embrace life lessons I wouldn’t have learned previously. As a consequence of this experience of sharing stories of businesses that didn’t work, we decided to create a platform of events to help others share their failure stories. And we called it Fuckup Nights.

Years later, we also created a research center devoted to the story of failure and its implications on business, people and society and as we love cool names, we called it the Failure Institute. It has been surprising to see that when an entrepreneur stands on a stageand shares a story of failure, she can actually enjoy that experience. It doesn’t have to be a moment of shame and embarrassment, as it used to be in the past. It is an opportunity to share lessons learned and build empathy. We have also discovered that when the members of a team share their failures, magic happens. Bonds grow stronger and collaboration becomes easier.

Through our events and research projects, we have found some interesting facts. For instance, that men and women react in a different way after the failure of a business. The most common reaction among men is to start a new business within one year of failure, but in a different sector, while women decide to look for a job and postpone the creation of a new business. Our hypothesis is that this happens because women tend to suffer more from the impostor syndrome. We feel that we need something else to be a good entrepreneur. But I have seen that in many, many cases women have everything that’s needed. We just need to take the step.And in the case of men, it is more common to see that they feel they have enough knowledge and just need to put it in practice in another place with better luck.

Another interesting finding has been that there are regional differences on how entrepreneurs cope with failure. For instance, the most common reaction after the failure of a business in the American continent is to go back to school. While in Europe, the most common reaction is to look for a therapist.

We’re not sure which is a better reaction after the failure of a business, but this is something we will study in the future. Another interesting finding has been the profound impact that public policy has on failed entrepreneurs. For instance, in my country, in Mexico,the regulatory environment is so hard, that closing a business can take you a lot of time and a lot of money.

Let’s begin with the money. In the best possible scenario, meaning you don’t have problems with partners, providers, clients, employees, in the best possible scenario, officially closing a business will cost you 2,000 dollars. Which is a lot of money in Mexico.Someone who earns the minimum wage would have to work for 15 months to save this amount. Now, let’s talk about the time. As you may know, in most of the developing world, the average life expectancy of a business is two years. In Mexico, the process of officially closing a business takes two years. What happens when the average life expectancy of a business is so similar to the time it will take you to close it if it doesn’t work? Of course, this discourages business creation and promotes informal economy.

In fact, econometric research has proved that if the process of declaring bankruptcy takes less time and less money, more new firms will enter the market. For this reason, in 2017, we proposed a series of public policy recommendations for the procedure of officially closing businesses in Mexico. For a whole year, we worked with entrepreneurs from all over the country and with Congress. And the good news is that we managed to help change the law. Yay!

The idea is that when the new regulation comes into force, entrepreneurs will be able to close their businesses in an online procedurethat is faster and inexpensive.

On the night we invented Fuckup Nights, we never imagined that the movement would grow this big. We are in 80 countries now. In that moment, our only intention was to put the topic of failure on the table. To help our friends see that failure is something we must talk about. It is not a cause of humiliation, as it used to be in the past, or a cause of celebration, as some people say. In fact, I want to confess something. Every time I listen to Silicon Valley types or students bragging about failing fast and often like it’s no big deal, I cringe. Because I think that there is a dark side on the mantra “fail fast.”

Of course, failing fast is a great way to accelerate learning and avoid wasting time. But I fear that when we present rapid failure to entrepreneurs as their one and only option, we might be promoting laziness. We might be promoting that entrepreneurs give up too easily. I also fear that the culture of rapid failure could be minimizing the devastating consequences of the failure of a business. For instance, when my social enterprise died, the worst part was that I had to go back to the indigenous community and tell the women that the business had failed and it was my fault. For some people this could be seen like a great learning opportunity for me, but the truth is that the closure of this business represented much more than that. It meant that the women would stop receiving an incomethat they really needed.

For this reason, I want to propose something. I want to propose that just as we put aside the idea of publicly humiliating failed entrepreneurs, we must put aside the idea that failing fast is always the best. And I want to propose a new mantra: fail mindfully. We must remember that businesses are made of people, businesses are not entities that appear and disappear magically without consequences. When a firm dies, some people will lose their jobs. And others will lose their money. And in the case of social and green enterprises, the death of this business can have a negative impact on the ecosystems or communities they were trying to serve.

But what does it mean to fail mindfully? It means being aware of the impact, of the consequences of the failure of that business. Being aware of the lessons learned. And being aware of the responsibility to share those learnings with the world.

Thank you.

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Steps to Becoming a Thought Leader in Your Industry

Thought leadership sometimes gets a reputation as just another buzzword. Especially when it’s thrown around to describe anyone with more than a few thousand followers on Twitter, then it can come across as an empty marketing vocabulary word.

But when done right, thought leadership can transform your brand. It can position you and your company as leaders in your industry, opening doors to new opportunities, and build lasting trust with the people in your audiences who matter most to your company.

However becoming a leading expert in your field doesn’t happen overnight. Here is the here are seven steps to get started to build your thought leadership and lead your industry :

1. Figure out what you’re an expert in.
It’s time to be honest: As smart as you are, you don’t know everything and only fools think that they knows everything. In this aspect, you don’t need to know everything to be an effective thought leader.

But you do need to know what you know (your knowledge / personal skill inventory).

Great thought leaders understand their niche well. They know where their expertise is most helpful and what their audience values most, and they connect those two excellently.

Ask yourself: What do I love? What have I built my career around? What fulfills me? What am I more passionate about than my peers?

2. Create content that speaks in your voice.
Of course, your expertise is only half of what makes you a great thought leader. The other half is you. When you’re creating content to reach your audience, use your expertise and your own personal voice.

Readers can spot disingenuous content from a mile away. You don’t need to be a great writer or speller, but you do need to be able to project your personality.It’s what makes you different from all the other people in your industry.

It’s what makes you different from all the other people in your industry.

3. Drop the self-promotion.
Using your own voice doesn’t mean you should spend all your time talking about yourself. Seventy-nine percent of online publication editors say that over-promotion is the biggest problem they see with contributed content. Thought leadership content can build your brand and impact your company’s bottom line, but that doesn’t mean you can just talk about your company all the time. Focus instead on bringing value to readers by educating them, sharing new ideas, and being helpful.

Focus on giving rather than receiving.

4. Be consistent.
If you’re going to be a thought leader, people have got to remember you. They won’t if you’re not publishing content on a regular basis. Even if you provide a few strong, memorable articles, it won’t be enough to establish you as a leader. You’ve got to commit to consistent content creation if you’re serious about building your brand.

5. Understand how video can be used.
It’s no secret that video content is in high demand. Just look at the advancements Instagram and Facebook have made toward becoming more video-friendly platforms. If you’re going to become a modern thought leader, it’s crucial to understand how you can speak to your audience using video content. “Video engagement is fairly steady up to two minutes,” according to Jordan Lung at JL Video, so just make sure you keep it short and sweet.

Make your videos short & sweet

6. Don’t limit yourself.
Your company blog is a great and necessary place to publish, but its reach only goes so far. It’s tough to bring in new audience members if your work is all hosted on a site they’ve never visited before. The best solution is to get your work published on the sites they frequent.

Find out what publications your audience is reading and what websites are popular in your industry, and submit your content for publishing there. Don’t limit yourself to one type of content, either. Try articles, videos, podcasts, infographics — whatever works for your message and your audience.

7. Surround yourself with a good team.
Don’t let any of what I’ve said fool you into thinking that thought leaders do this all themselves. They don’t. They can’t. If you want to be an effective thought leader, it’s critical that you enlist the help of a smart support team.

Make sure that your team members all take part in the creation process and that they understand the goals you’re trying to reach by building thought leadership. They can pick up slack where you fall short (as my editors will attest), and they’ll make your life a whole lot easier.

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Embracing the dark side in marketing

In order for a brand to be strong, it need authenticity, and that can be found in a brand’s shadows, or its darker attributes. This is what market researchers call “negative equity” and brand managers typically try their hardest to hide. However, it is noteworthy that the few brands that have searched for strength in their shadows have found great success.

Ivory soap has been bringing “good, clean fun” to families for more than a century. Along with other classic brands such as Sears, Kraft, and Tropicana, Ivory has spent decades presenting a vision of life that’s all sweetness and light. That vision is also simplistic, cloying, and quickly losing its draw.

This is because today’s consumers don’t really trust the artificial, two-dimensional ‘life is perfect’ images that used to work in ads. Sadly, many brand managers have not figured this out. They are still selling fairy tales in a reality-TV world. They have not learned that imperfections can actually be a source of great appeal. It’s not that people are drawn to products’ shortcomings but it’s that they’ve grown suspicious of things that seem too perfect.

A magnificent example of “shadow branding” is the London police force’s dramatic recruitment campaign in 2000. The effort eschewed the traditional trappings of recruitment advertising. It didn’t promise an exciting career, valuable skills, or the respect of schoolchildren. Rather, it showed how difficult the job actually was. One ad featured Simon Weston, a badly scarred Falklands veteran whose artillery boat had been bombed. The war hero wept, asking viewers to imagine “going round to someone’s house…to tell a man that his wife and child have been killed in a car crash.” Another commercial asked viewer to envision how horrible it would be to have to respond to a call about a baby who had died in his sleep—to collect the child’s teddy bear in a plastic evidence bag as the inconsolable mother watched. These ads depicted police work as distressing, and yet they attracted recruits.

Part of the appeal was that the ads issued one big professional dare: Are you brave enough to be a police officer? But something deeper was at work. The people who had seen the ads were twice as likely to “respect the police” as those who hadn’t. The difficult part of policing, its dark and scary shadow made the London police brand more authentic and thus more appealing.

The lesson here?

Perfection is perfectly dull. In our personal lives, we’re hardly ever attracted to slick virtue; we love people with all their faults and flaws and contradictions. Likewise, with brands. In acknowledging their shadows, brands target the right people, and they do so convincingly. Their shadows shall make them stronger by being more authentic.

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Tips for defining SMART objectives

When defining your project objectives, think SMART.

smart-goals1-1.jpg

Each objective should be:

  • Specific. Clearly defines the details of what is to be accomplished.
  • Measurable. Gauges success using either quantitative or qualitative assessments.
  • Action-oriented. Identifies concrete behaviors or processes.
  • Realistic. Can be achieved given existing constraints, such as time and resources.
  • Time-limited.  Is accomplished within a specific time frame.

 

 

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What is a negotiation?

A negotiation is an interactive process through which two or more parties seek to come to mutual agreement. You typically negotiate when you want something from someone and when someone wants something from you. A negotiation may be a formal affair in which you debate the terms of a contract. Or it may be less formal, such as a hallway discussion between you and another about a work assignments.

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How to differentiate your product from others?

In order to differentiate your products, you need to understand why should someone buy your product? The best reason is because it fulfills a need and is different from what anyone else is offering, or in other words, it should have a unique selling point, something that make it different or better.

Therefore, in order to differentiate your product, you need to –

  • Focus on benefits. Customers buy solutions, not features. Although at time, these feature are the solution to a specific problem our customers are having. A mobile phone, for instance, becomes popular because it’s intuitive to use. Coated aspirin sells not because of its outer shell, but because it’s easier to swallow.
  • Explore design. Customers gravitate toward styles that appeal to them. Good design is not only eye-catching, but can improve function and create emotional connections that help build product loyalty. Designs of our product shall be customer-focused, meaning it should cater to our customer needs, and we need to highlight it as such.
  • Offer value. Customers are always looking for more quantity, function, and durability for less money. Present our products in such a way that it is value exceed the price tag that we set, and by doing that, at times it is better to set a well-recognized brand as a benchmark to our claim (just a hint of the well-recognized brand shall be sufficient, we don’t want to go into full blown court-case).
  • Raise the service level. Installation, training, and service are key selling points for products that are technically complex.
  • Provide speed or convenience. Many customers value instant access and features that save time and hassle.

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The buying journey

In the past, marketing experts usually envisioned the buying process as a linear funnel.

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David C. Edelman. “Branding in the Digital Age: You’re Spending Your Money in All the Wrong Places.” Harvard Business Review, December 2010.

Today, the buying process looks more like a journey rather than a linear funnel. Consumers seek information at every step of the journey by asking their friends, visit websites, checking reviews online or in the marketplace and go to stores to test product. These explorations don’t stop after purchase. In fact, a successful experience with one product will often trigger more research on the rest of the company’s offerings.

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David C. Edelman. “Branding in the Digital Age: You’re Spending Your Money in All the Wrong Places.” Harvard Business Review, December 2010.

In the “buying journey” climate, it’s more effective to enable consumers to make educated decisions rather than to simply push a product. This usually lead to better customer loyalty and retention.

Invest your marketing resources so that customers can easily find the following:

  • Information. The basics about the product. Especially details on what does it do, what does it cost, and what distinguishes it from the competition? If your product is something used by internal customers, create a wiki or other private web page where company “clients” can access information.
  • Positive opinions. Consumer recommendations are among the most powerful forms of endorsement for your brand. Can your customers find reviews or endorsements from other consumers? Have you cultivated loyalists who can spread the word?
  • Brand support. Make available service or sales representative who can answer questions, assuage concerns, and refer shoppers to purchase locations.
  • Product experiences. Ensure that your customer can easily touch, see, and experiment with your product. Many items require direct experience—can you imagine customers buying fragrance without smelling it, or a car without a test drive?
  • Product reviews. In the event of relatively new products with few reviews available, the organization shall opt to give-away a few of the products for a free reviews.

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Push vs. pull marketing

Marketing communications aim to influence the consumer in one of two ways, that is either they “push” or they “pull.”

In push marketing, you “push” the product out into the marketplace by directly soliciting customers to buy from you.

Examples of push marketing include:

  • Sales calls
  • Mass emails
  • Direct mail
  • Incentives for retailers to stock your product

Be a bit cautious with push marketing since too much of it would annoyed your customers. Customers are increasingly resentful of intrusive direct-sell tactics and skeptical of aggressive product claims.

In contrast, pull marketing engages the customer and creates a desire to use the product. Such marketing efforts aim to “pull” the customer closer to the brand.

Examples of pull marketing include:

  • Advertisements
  • Social media content
  • Coupons or promotions
  • Charitable initiatives which associate your brand with good deeds

When done skillfully, pull marketing builds a dialogue between your customers and your brand. It creates demand, and that’s ultimately healthier for your business than simply pushing merchandise.