Category Archives: Market Intelligence

The New China – The New Global Meltdown?

Last year, China overtook the US as the world’s largest economic powers measured by PPP — Purchasing Power Parity. This may have received little attention, as most people focus on GDP — Gross Domestic Product — where the US still has a commanding lead, but since PPP measures the relative value of different currencies, this is a significant metric.

As a result, this places China at the centre of the global economy as any economic decline in China will send ripples around the world. As one of the biggest consumers of natural resource, the success of many global economies depends on the success of China and its need for natural resources.

And this decline may be coming. As per this recent article over on Business Spectator that asked “what can we expect from China in 2014”, not only has the country lost some of its lustre as of late, but this tarnish on the silver has not escaped the watchful eye of the World Bank, whose chief Economist went on record last month stating that the global economy is running on a single engine … the American one. This does not make for a rosy outlook for the world.

So why the loss of lustre after almost three decades of growth? Simply put, with rapid growth in an economy comes rapid growth in the growing pains associated with rapid growth, which typically include burgeoning local and national government(s) (as cities, provinces, and federal overseers struggle to keep up with growth), excess industrial capacity (once the tipping point where there is enough capacity to meet demand is reached), and a stagnant real estate sector (once the majority of the market that can afford their own homes have them). China has all of these problems. But that’s not the reason that China is loosing its lustre, as many other countries, including the US, have these problems. The real reason is shadow banking.

There is a significant amount of local government and corporate debt in China as these local governments and corporations have borrowed heavily from both the banking and shadow banking sectors to finance their growth. How significant? Standard & Poor’s estimates that total outstanding corporate debt in China was around $14.2 Trillion US at the end of 2013, compared to $13.1 Trillion US debt held by American corporations at the same time. And while exact numbers are not known, local government debt has increased an average of 20% over the last three years and the total government debt level in China is estimated as about 54% of China’s GDP — and that’s just the official debt. The real debt level could be higher when you consider shadow banking and private lenders.

Now, this is a lot of debt, but as the level of government debt is not yet at the level of US national debt or UK national debt which exceeds GDP, it’s not alarming — yet. But it’s enough to cause the World Bank and International Monetary Fund to think twice about China’s rating and if China decides that it’s time to reign in and get the debt under control and significantly curbs spending across the board, a lot of economies that are currently being boosted by China’s spending spree are going to take a big hit.

This will be good and bad news for your Supply Management activities, depending upon where you are in the supply chain. If a company loses a major China supplier, the power shifts back to the buyer and there will be good deals to be negotiated. However, if you lose a major China client and your demand declines, so does your bargaining power and the power shifts back to the supply base. And then there’s the currency hedging to think about. Is the expected drop in currency exchange good or bad for you? (For more about this issue, refer back to our currency damnation post.)

Nova Scotia is the Greatest Nearshore Location of All and Halifax is Still the Best Place to Do International Business in North America

And if you haven’t caught on to this profitable little secret yet, you should!

What is the doctor referring to?

Way back (but no so far back that one requires the wayback machine) in the beginning, the doctor penned a post informing you that the best place to do international business in Canada is Halifax, Nova Scotia (which he remind you of six years later). The reasons for this were many and included (compared to other major Canadian cities) low operating cost, low cost of living index, low crime rate, low unemployment, an award winning international airport, the Port of Halifax, a perfect time-zone (4 hours ahead of Los Angeles and 4 hours behind London), a lot of culture, even more education, and a plethora of leading and innovating companies to help you get to where you want to go. Moreover, a study a few years ago found that Halifax offers a company the cheapest headquarters location in North America in addition to all of these other benefits (with an average cost 8% below the US low point in the Indianapolis-Carmel-Fishers area and 30% less than one of the the US high points in New York City).

But now it seems that the secret is coming out of the bag, as per this recent post over on the industry leading outsourcing blog Horses for Sources (HfS) that recently publicized that Nova Scotia is the greatest nearshore location of all. (Which means that you’re running out of time to act ahead of your peers and take advantage of all of Halifax has to offer at incredible savings that will go straight to your company’s bottom line.)

According to HfS’ post, Halifax, which exists in a region with 10 universities and 13 community college campuses producing over 10,000 graduates a year, presents a great opportunity for outsourced IT and BPO services (and that’s why IBM hosts its service centre, specializing in data analytics, in Halifax). (And despite the comment, you don’t need a canoe to get around. We have a good transportation infrastructure, but you can keep the canoe if you really want to.)

For cost reductions and efficiency improvements across the board, maybe you should look to the North.

Infographics 101

There are a lot of different ideas out there on what makes a good infographic. However, regardless of what philosophy you ascribe too, there are a few key points that should always be kept in mind if the goal of the infographic is to sell something.

1) Focus on the core points you want to make

The goal of an inforgraphic is to distill a significant amount of information into a simple visual that allows the viewer to quickly understand your intent and the key takeaway of your message without having to do a lot of reading.

2) Include distinctive information

If the goal of the infographic is to convince the reader that the idea or solution being sold is better than the alternative, then make sure the infographic calls out whatever is distinctive about your idea or solution. Otherwise, why should a viewer give it a second chance?

3) Make it clear to a reader of average education

If one looks at the 2009 Census Data, 85% of adults in the United States have at least a high school diploma or GED and 28% have at least a bachelor’s degree, 32% have an associates degree and approximately 60% have 1 or more years of college education without a degree. This says that if the goal is the population at large, you at least want it understandable by someone with only some college, and if the target audience is a professional in the workplace, you may not be safe in assuming your audience will have at least an associate’s degree, depending on the type of professional you are seeking. (If you are targeting doctors, lawyers, engineers, scientists, etc., then you can probably safely assume at least an associate’s degree, but if you are targeting sales, marketing, procurement or operations personnel, where a decade in the trenches is often more valuable than a degree at many companies, you may not be able to make such an assumption.)

In addition to these key points, Sourcing Innovation would also argue that, if you are trying to sell something, then an organization should be careful that they

4) Do Not Oversell the Idea or the Solution

Case in point, here in the great white north, Nova Scotia Business Inc. just released an infographic trying to promote our 360-degree defence and military expertise and our unique ability to support research and development for land, air, and sea projects — being home to 40% of all Canada’s military assets, 65 boat building yards and 26 regional ports (including the Port of Halifax which is situated in the second largest natural harbour in the world and capable of expanding to handle more capacity than any East Coast port if the demand is there), and over 80 defence and aerospace firms including 6 of the top industry leaders.

All of this is true, and Halifax offers, in not just Sourcing Innovation’s view*, an average company the greatest logistics potential of any city in North America right now (especially with CN putting in direct lines to a number of North East and Central US distribution hubs with transit times of only 2 to 3 days) as well as the greatest potential for building new commercial and defence products that capitalize on our world leading expertise in sonar, hydrodynamics, and navigation technology. However, instead of focussing on the huge, untapped potential sitting in the Halifax Regional Municipality (HRM) right now, Nova Scotia Business Inc. in their latest infographic decided to focus front-and-center on the fact that our defence sector generates $1.5 Billion a Year in revenue. So what? The GDP of Canada is about 1.8 Trillion. This means our defence sector contributes less than a paltry 0.1% to the economy from a GDP perspective while the GTA (Greater Toronto Area) area across all sectors contributes about 20% of Canada’s GDP which means that, using industry averages**, it’s defence sector contributes at least 1.2% of Canada’s GDP. In other words, not only would the GTA defence sector contribution break into the full percentile range, but it would be more than ten times Halifax’s contribution. In this light, the HRM looks pretty shoddy, even though it likely represents the greatest potential in all of North America for may of your Supply Chain projects. There’s a reason that Horses for Sources just called Nova Scotia the greatest nearshore location of all.

* More in our next post!

** Overall defence sector in Canada accounts for about 6% of GDP as per a recent AIAC study.

Who Wins, Who Loses in the Twitter/Google Deal?

A recent post over on VentureBeat on who wins, who loses in the Twitter/Google deal attempted to analyze the Twitter/Google deal to make sense of it. In the deal, Google is allowed to index all tweets and Twitter gets revenue in addition to more traffic from Google. According to the author, Google is getting really valuable time-sensitive content to put ads against which will help it super-serve its users and, as such, acquires a real-time pulse of the world because Twitter remains the only place you can connect with smart, influential people on things you care about.

At this point SI has to say WTF? While there are some smart, influential people on Twitter, there are a number of fallacies to this statement. First of all, not every smart, influential person is on Twitter. Not even close. And many of the smartest, most influential people on Twitter barely tweet, and if they do, due to the 140 character limit, they aren’t saying much. Secondly, what kind of idiot do you have to be to believe that Twitter remains the only place you can connect with smart, influential people? Not only are Facebook and LinkedIn still mega-big (unlike Google Plus), but there is one location that trumps them all when it comes to connecting with smart, influential people. The Real World. (And not the MTV show. I mean offline where you’ve been able to, in the right forums, find smart, influential people for tens of thousands of years.)

As a result, since SI assumes that any conclusions made by the author are all hogwash as the assumptions from the get-go are wrong, SI is going to tell you who really wins, who really loses — and why.

Biggest Winner: Sentiment Analysis Companies

Social media marketers have corporate marketers convinced social media marketing and, more importantly, social media reputation is the most important thing and that these corporate marketers have to track that daily. And how are these corporate marketers supposed to do this? By way of sentiment analysis which can, of course, only be done by web-scouring sentiment analysis software offered by a handful of companies. And once they can get real-time data through Google, their analysis will, of course, be more current and relative than ever (and, as such, their prices will justifiably go up). Or at least that’s what they’ll claim.

Next Biggest Winner: Twitter

Twitter has struggled to monetize it’s network since the beginning. A regular, big, check from Google is a really good thing. First of all, it’s money in the bank. Secondly, in Twitter’s view, it’s verification to investors that it is the social network of choice because Google has deemed it worthy of payment for its data. And it’s likely that its investors will believe this spin, praise Twitter’s executive team, and continue to support its growth.

Biggest Loser: US!

When we do a search, Google will now be inundating us with useless Tweets in our search result. Twitter decreases our IQ and makes a twit out of all of us (proof). Twitter may even be downfall of the western world. (There’s a reason why SI hails the fail whale.) At the end of the day, we all lose.

All Hail the CPO. Wait, what?

You want to be a CPO. But do you know what are the requirements for the job? Especially when the number of companies with CPO positions is still few and far between? (Recent stats from a CapGemini study found that only 9% of Procurement organizations have a CPO that sits at the C-Suite table. In SI’s view, unless the head of Procurement sits at the C-Suite table, it’s not a real CPO position.)

Chances are you don’t, especially since a search for CPO job descriptions yields few and not all are consistent (since each organization has their own view on what a CPO is and what the CPO needs to do during the first year or so). But more importantly, chances are you don’t know what is required to fulfill both the written, and more importantly, the unwritten requirements of the job.

But you don’t need to be in the dark. the doctor and the maverick, in their latest collaboration, have assembled a typical CPO job description and a multi-part series explaining the written and unwritten requirements, in detail, so that you, an aspiring Procurement professional, know exactly what is required to be a CPO. The first four parts of this series are now online on the new Spend Matters CPO site (in addition to the first parts of the Agenda series and the Lean / Six Sigma series). Check them out! They will be worth your time. (Part I: The Job Description and Part II: Examining the Job Description, Part I, Examining the Job Description, Part II, and Examining the Job Description, Part III.)