Tag: Business

Ritual contrition

THE probe in 2015 into one of Japan’s largest-ever accounting scandals, at Toshiba, an electronics and nuclear-power conglomerate that has been the epitome of the country’s engineering prowess, concluded that number-fiddling at the firm was “systemic”. It was found to have padded profits by ¥152bn ($1.3bn) between 2008 and 2014. Its boss, and half of the board’s 16 members, resigned; regulators imposed upon it a record fine of $60m.

Now its deal-making nous is in doubt too. In December 2015—the very same month that it forecast hundreds of billions of yen in losses for the financial year then under way, as it struggled to recover from the scandal—Toshiba’s American arm, Westinghouse Electric, bought a nuclear-construction firm, CB&I Stone & Webster. One year on, on December 27th, Toshiba announced that cost overruns at that new unit could lead to several billions of dollars in charges against profits.

Its shares fell by 42% in a three-day stretch as investors dumped them, fearing a write-down that could wipe out its shareholders’ equity, which in late September stood at…Continue reading

IN THE Bible, seven years of feast were followed by seven years of famine. For banks there have been ten lean years. Subprime-loan defaults started to rise in February 2007, causing a near-collapse of the industry in America and Europe. Next came bail-outs from governments, then years of grovelling before regulators, mass firings of staff and quarter after quarter of poor results that left banks’ shareholders disappointed. Now, a decade later, the moneylenders are quietly wondering if 2017 is the year in which their industry turns a corner.

Over the past six months the FTSE index of global bank shares has leapt by 24%. American banks have led the way, with the value of Bank of America rising by 67%, and that of JPMorgan Chase by 39%. In Europe BNP Paribas’ market value has risen by 52%. In Japan shares in the lumbering Mitsubishi UFJ Financial Group—the rich world’s biggest bank by assets—have behaved like those of a frisky internet startup; they are up by 57%. Predictions about global banks’ future returns on equity have stopped falling, note analysts at UBS, a Swiss bank. Some of the biggest casualties of the financial crisis are even…Continue reading

LARGE food companies have long been among the world’s most solid, with reassuringly consistent returns even in hard times. None would seem steadier than Nestlé, based in the Swiss town of Vevey, on a lake near snowy peaks. For its 150th anniversary in 2016 it opened a new museum filled with corporate heirlooms: the first written notes about a new product called milk chocolate, laid out in black cursive; an old tin of Nescafé, used by soldiers as a stimulant in the second world war; and an early can of Henri Nestlé’s infant formula, which in 1867 saved the life of a premature baby.

It has come a long way since then. It sold goods worth nearly $90bn in 189 countries in 2015. Of the 30,000 cups of coffee sipped around the world each second, Nestlé estimates, one-fifth are cups of Nescafé. But the industry it presides over is in upheaval. On January 1st a new chief executive, Ulf Mark Schneider (pictured), took over. He is the first outsider to get the top job since 1922, and his background—running a health-care firm, not selling chocolate bars or frozen pizza—suggests the main source of worry for the business.

More and more…Continue reading

The holiday season’s hold on Americans is getting weaker. In 1994, according to the Census Bureau, retailers earned $82bn (in 2015 dollars) more in sales during November and December than they would have without the seasonal effect of the holidays. That worked out at $310 per person. In 2015 seasonal sales during these months were just $76bn, or $240 per person. The decline in seasonal shopping is steepest in December. For that, blame three things. The growth of e-commerce has made it easier for people to shop for seasonal gifts whenever they want. Gift cards under the Christmas tree push purchases into January. And millennial shoppers are having an impact on sales: they tend to prefer experiences to yet more stuff.

“LOOK up there,” says Edward Armishaw of Walkbase, a Finnish retail-analytics firm, as he points to a small white box above a column clad in mirrors. The sensor—and over a hundred others like it hidden around this department store in London’s Oxford Street—tracks the footsteps of customers through the pings their smartphones emit in search of a Wi-Fi network. Quite unaware, a shopper in a silver puffa jacket ambles past and over to the fitting room. Whether she moves to the till will be logged by Walkbase and its client.

Think of it as footfall 2.0. For many years shops used rudimentary “break-beam” systems—lasers stretched across their entrances—to count people in and out. Only recently have they begun to follow customers inside their buildings, says Nick Pompa of ShopperTrak, an American firm whose work with 2,100 clients worldwide, including malls in Las Vegas and in Liverpool, makes it a giant in the area.

Tracking technologies are ingenious. Some flash out a code to smartphone cameras by means of LED lighting; others, such as IndoorAtlas, a startup with headquarters in California and Finland, monitor how devices…Continue reading

IT WAS in 1942 that Joseph Schumpeter published his only bestseller, “Capitalism, Socialism and Democracy”. The book was popular for good reason. It was a tour de force of economics, history and sociology. It coined memorable phrases such as “creative destruction”. But it was a notably dark book. At a time when people were looking for hope during the life-and-death struggle with Nazism, Schumpeter offered only gloom. “Can capitalism survive?” he asked. “No, I do not think it can.”

This column was inspired by the young Schumpeter’s vision of the businessperson as hero—the Übermensch who dreams up a new world and brings it into being through force of intellect and will. On its debut in September 2009, we argued that Schumpeter was a perfect icon for a business column because, unlike other economists, he focused on business leaders rather than abstract forces and factors. But as Schumpeter grew older, his vision darkened. He became increasingly preoccupied not with heroism but with bureaucratisation, and not with change but with decay. The same is true of the outgoing author of this column.

It would be…Continue reading

THE Institute of Social Human Capital in Tokyo is an unusual sort of business-training school. Those who attend it (two-thirds are men) have mostly quit or taken redundancy packages from big Japanese firms, and are trying to start again. Shedding the habits of a lifetime begins by breaking down barriers: former salarymen laugh nervously as they share a bento-box lunch with strangers, blindfolded (the idea is that they must use their other four senses to communicate).

The way to prepare them for a second career is to get them interacting as individuals, not as corporate workers or business partners, says Matsuhiko Ozawa, a director of the Institute, which specialises in this sort of course. In a country that sets great store by formal introductions, the students have not even exchanged business cards. Names, titles and personal information are banned (the ex-salarymen use made-up names) to avoid reproducing the old office hierarchies that exist outside the classroom. “We start from scratch and help these people find themselves again,” says Mr Ozawa.

For years, the salarymen rode a career escalator that rewarded them less for skills than…Continue reading

THERE are two ways to sign up to Jio, a new and irresistibly priced mobile-telephony service which Mukesh Ambani, the boss of Reliance Industries, a conglomerate, launched in September 2016 and which is luring tens of millions of new customers each month. One way requires a wad of documents, multiple signatures and plenty of patience, since Jio takes days or weeks to go through “know-your-customer” procedures. The second way is magically simple: the person rests a finger on an inch-wide scanner, and if the print matches the identity the customer is claiming, Jio downloads the information it needs from the Indian authorities and activates the phone line within minutes.

Jio is tapping a database called Aadhaar, after the Hindi word for “foundation”. It is a cloud-based ID system that holds the details of over a billion Indians. The government’s purpose in setting it up in 2009 was to help the state correctly direct welfare payments to those entitled to them. By early 2017 all Indian adults should have provided their fingerprints, iris scans, name, birth date, address and gender in return for a single, crucial, 12-digit number.

In the public…Continue reading

IT IS a short walk from a tiny shop with peeling yellow paint in downtown La Coruña, in northern Spain, to a dazzling five-storey store, opened in September by Zara, by far the world’s most successful purveyor of “fast fashion”. In this stroll across three city blocks, the career of Amancio Ortega unfolds: from teenaged apprentice in the corner shop, Gala, a men’s clothing business, to Europe’s richest entrepreneur, the majority owner of one of its best-performing firms.

According to one employee of Zara who works with him, “the true story of Amancio Ortega has not been told.” Mr Ortega, the son of an itinerant railway worker, who started at the corner shop aged 13, had a basic upbringing: an ex-colleague says he talks of meals of “only potatoes”. He has lived mainly in Galicia, a relatively poor region with no history in textiles. Yet there, in 1975, he founded Zara—a manufacturer-cum-retailer that, along with its sister brands, has over 7,000 shops globally.  

Mr Ortega (pictured) is now 80 but he remains energetic and involved in the business (if uninterested in wearing trendy clothes). He owns nearly 60% of…Continue reading

Who’s the daddy?

“IF THEY resented me they didn’t talk to me about it,” says a young German manager at a media firm in Frankfurt. Still, he says it was noticeable that when a subordinate 20 years older than him thanked him for buying lunch he had to swallow twice before adding the word “boss”.

Older workers sometimes begrudge being managed by a callow colleague. Precocious youngsters, too, can feel awkward about bossing their elders around. But in Germany a shortage of skilled workers means that such situations are becoming ever more common.

The country’s population is projected to shrink. Among rich-world countries, only in six nations including Japan and Greece are populations expected to decrease faster. As more Germans retire, fewer youngsters are entering the workforce to replace them. As a share of the working population the number of 15-to-24-year-olds has fallen by ten percentage points since the 1980s, says the German Federal Employment Agency. Firms competing to retain young talent are tempted to promote them earlier as a result. A paper by professors at the University of Cambridge and WHU, a…Continue reading