Greece's Problem is that the European Union is Speaking Greek

July 12, 2015 By in Economy Tags:

The language used in discussing Greece’s economic dilemma is getting in the way of a solution. In business negotiations it is usually quite useful to look at the major issues and try to reframe them. This is no different when talking about economies.

Issue 1: The Greeks “rejected austerity.”

Reframe 1: The Greeks rejected the controlled austerity offered by the EU in favour of the chaos that the current Greek government has ensured for its citizens. This reframe is extremely important as the structure of the Greek government’s referendum was negligent and potentially fraudulent: they did not offer their citizens an explicit choice between two courses of action, instead they allowed one of the choices to be implicit. By doing so the Greek government betrayed their own people by hiding the risks from them.

What comes out of this reframe is that the gap in reality as understood by the Greek government and its citizens needs to be narrowed and even eradicated. This will take a lot of courage from the Greek government.

Continue reading →

Dear Forbes: Dubai is more than alcohol and bikinis on the beach

July 3, 2015 By in Economy Tags: ,

A recent article in Forbes asks whether the Dubai government is entrepreneurial in nature and if so whether the government is more entrepreneurial than the people. These are important points to consider and are a frequent topic of conversation. Unfortunately the Forbes article got it wrong.

The article lists four points as to why the Dubai government is entrepreneurial. I will rebut each one and then make my argument as to what is happening.

Continue reading →

Tim Clark and Emirates Airlines get Proactive with a Three Pronged Counter-Attack

July 1, 2015 By in Leadership Tags: , ,

Emirates Airlines, headed by Tim Clark, are taking the role of a modern-day Rocky Balboa, climbing against all odds to the top of their business and getting attacked for it. Tim Clark’s proactive response is a relative first for a GCC company. As other regional companies grow globally they too will be faced with aging, inefficient behemoths that will try to spin doctor them out of their markets. These nascent GCC companies could learn a thing or two from Mr Clark and Emirates Airlines.

Wild unsubstantiated allegations against the GCC and playing to the xenophobic tendencies of certain groups are nothing new. What is completely new is the response. The modus operandi so far has been for the victims of such spin doctoring to meekly withdraw and try to protect their interests via back channels.

Tim Clark and Emirates decided to fight fire with fire and just as they have dominated the global long haul airline industry they look set to dominate this public debate.

Continue reading →

Is the Dubai Hospitality Sector Building for the Right Tourists?

June 21, 2015 By in Hospitality Tags: ,

ArabianBusiness reported last month that STR Global data showed Dubai hospitality supply increased 5.6% and demand also increased a whopping 8%, with occupancy up 2.3%. The average daily rate, however, fell 8.5% with a corresponding revenue decrease of 6.4% per available room.

When demand goes up but revenue goes down, the issue is rarely increased competition. It is a decrease in demand from the earlier, higher price point in favour of a new lower service price point.

In other words, either Dubai’s visitors all suddenly got poorer, or the economic demographic of Dubai’s tourists is sliding down the price curve. Given the number of fine dining restaurants that have elected to participate in all you can eat and drink brunches, my bet is on the latter.

What does this mean for Dubai hospitality? Build more three and four star hotels, or risk having five star hotels selling rooms at three star prices.

Shale Oil Producers: Swing Producers or Price Takers?

June 21, 2015 By in Oil Tags: ,

The new narrative in the oil markets is that shale oil producers have usurped the Saudis as the swing producers. What a dangerously naïve idea.

A swing producer is one that intentionally changes its production levels to achieve its objectives. If oil prices drop and Saudi Arabia decides to reduce production so as to stabilise oil prices then that is the action of a swing producer. In other words, a swing producer can intentionally move prices.

A price taker is a producer that sells oil at whatever price it is given. It has no market pricing power. If oil prices drop and shale oil producers are forced to stop production because they are registering massive losses then they are price takers.

Just because shale oil producers become profitable at USD 100 and come online at that price does not mean that they are swing producers. As in any other market massively high costs means that you are at the bottom of the food chain. Costs that are 30 to 50 times that of the largest oil exporter in the world indicate that shale oil producers are not only at the bottom of the oil production food chain, they might very well be buried deep underground.

Saudi Arabia remains, by a large margin, the most important producer of oil globally.

How Steve Jobs and Apple Dominated the World

June 16, 2015 By in Entrepreneurship Tags: ,

Steve Jobs is a modern day, corporate equivalent of Ghengis Khan, and Apple was his horde. This is the story of how he did it.

If I asked you what business Avis or Budget were in you would probably say car rental. Although this is true it is not the most effective way to think of these companies. A far more profitable way to think about them is as mass producers of second-hand cars.

Continue reading →

State-owned enterprises can learn from family businesses

June 9, 2015 By in Corporate Governance Tags: , ,

State-owned enterprises (SOEs) are controlled subsidiaries of a government which undertake commercial activities. SOEs are globally common and are involved in a wide variety of activities such as mail services, telecommunications, airlines, airports, railroads, natural resources, broadcasting and healthcare.

Sometimes it is easy to forget that SOEs form an important component of the economy. Just think of the UK’s BBC, Manchester airport, London Underground and London Rail. SOEs are usually connected to natural monopolies and infrastructure thus giving them an even greater influence over the economy.

Since SOEs are expected to act with their commercial interests as their main goal they can learn a lot from the private sector. There is one area though that does not crossover well from the private sector to the SOEs and that is corporate governance. Being a fully owned subsidiary of a government creates unique challenges not least because a government does not hold commercial interest as its overriding goal.

Continue reading →

UAE Labour Policy and the Health of the Economy: Ying & Yang

June 2, 2015 By in Economy Tags:

The phrase “UAE dependence on foreign labour” is a mainstay of any discussion about the UAE’s economy. It sounds self-evident, doesn’t it? I, however, refuse to believe an opinion that is stated as fact, regardless of how authoritative the statement might sound.

The implication in the statement is that if foreign labour were to leave the UAE then the economy of the UAE would be negatively impacted. This misses the point that the factors affecting an economy are many, and are dynamic. For example, the statement does not address how easy to it is to replace labour. But that is for another article.

In this article I’ll look at what the relationship between foreign labour and the economy are, which of these leads and which of them follows and what this means to the UAE.

So how should we investigate this? I have heard it said that a picture is worth a thousand word. Let me present three.

Source: The World Bank

Source: The World Bank

Continue reading →

Mover’s Advantage: Of Sony, Google and Emirates Airlines.

May 26, 2015 By in Strategy Tags:

Sony was a first mover in personal stereos. Emirates is a last mover in airlines. Which strategy has the advantage: First Mover or Last Mover?

When I was a child, I was frequently admonished with the old adage that “The early bird catches the worm.” I analysed this and one day responded to my teacher “But doesn’t the early worm get eaten by the early bird?”

In the 1970s teachers were not enamoured of 8 year olds talking back to them. Worse was if said 8 year old eloquently blew apart a foundational aphorism that the adult world depended upon to mould young minds with.

To my chagrin, when I turned thirty and even more now that I’m in my forties, people continue to resent logic intruding into their personal reality.

Continue reading →

What your mother-in-law can teach you about performance reviews

May 19, 2015 By in HR Tags: ,

Here is a secret – managers do not dislike employee performance reviews because the reviews are difficult, but because the managers are usually decent people.

Formal performance reviews are presented as a positive feedback mechanism that helps employees develop. The reality is that performance reviews usually happen once a year, and that is far too infrequent to be of any use. Even the most aggressive review programme maxes out at four times a year, still too infrequent to be of any use.

In a normally functioning company, useful feedback to any employee is in the form of continual informal feedback over the whole year. A formal review adds no real value to employee development over and above an informal feedback process.

Continue reading →