Tài chính doanh nghiệp - Chapter 16: Global industry profiles

Chapter 16 Global industry profiles1Lecture planSectoral trends and prospects for three global industries:grain automotive telecommunications 2Grain industry Historical overviewProduction and consumptionIndustry structureGrain tradersGovernment roleGrain trade and investmentProspects for the grain market 3The world grain productionWheat & feed grain production dominated by about 8 major suppliers, mostly developed countries (around 75% of world’s grain production).Rice production is dominated by Asian countries (China, India, Indonesia, Philippines, and Bangladesh).Long periods of oversupply interrupted by brief periods of shortage.Accumulation of stocks by protectionist policies (e.g. EU, US) 4World grain consumptionStrong population growth (+2 m. over 1971–97)Changing diets in developing countries favour grain-intensive foods.Income growth (income elasticities in low-income countries tend to be > than in high-income countries). Overall, world demand for grain has slowed down over last 2 decades, mainly due to slow down in population. 5Grain importersChronically food deficient countries: Singapore, Japan, Middle East Import requirements reasonably stable and predictableCountries whose import requirements are small and confined to specialist needs (UK)Countries relying on imports to close gap between production and consumption (China, ex-USSR, Saudi Arabia)6World grain exports* in 2003 by main grains (%). Total value: US$37.2b* SITC 041–045Source: ITC UNCTAD/WTO7Grain prices Prices are volatile; reasons:weatheroil prices (influencing costs for farmers)value of US dollargovernment policies (EU, US)political events (wars, nuclear accidents)Not necessarily volatile incomes for farmers, or large price fluctuations for consumersLong-term decline in real grain prices (Engel’s law) 8Trade policiesTrade dominated by private firms, but governments have major roleProtectionist policies in exporting and importing countriesUruguay Round committed major exporting countries to liberalisation 9Major grain trade playersPrivate traders– Cargill (Tradax), (Continental), Louis Dreyfus, Andre (Garnac in US), Bunge & BornState/farmers trading organisations – Canadian Wheat Board, Australian Wheat Board (privatised), Middle East  Trade BoardsState importing organisations  – Iran, Egypt, Iraq10Futures contracts Standard quantity and qualityFuture month for deliveryTraded at central exchanges (Chicago, Kansas) ‘Sell’ contract can be settled by a ‘buy’ transaction, and by delivering the commodity against the contract.Enables users of futures to protect their cash positions by hedging (e.g. taking equal and opposite positions in cash and futures markets)11Futures tradersBusiness men who produce, market and process various commoditiesSpeculators who voluntarily risk their capital with the expectation of making profits12Marketing policiesTraders cannot significantly influence international prices, but they ‘make money’ at any level of price.Price is the most important factor in the marketing mix programs.Futures and options used—does not eliminate risksPromotion: seminars, investment in processing facilities or storage capacities13Prospects of the grain marketMore stable pricesgrowing populationtrade liberalisation (Uruguay and Doha Rounds) global warminglow productivity growthBiotechnology? (may increase supply)China prospects?Food security? (good prospects)14The automotive industryTariffs27%QuotasStandards15Brief automotive historyEarly 1900s: Henry Ford’s company brought standardised parts, mass production and use of a continuous assembly line into operationThrough strategies of foreign direct investment, Ford and GM obtained strong market positions in Europe and North America.Assembly of passenger motor vehicles (PMVs) commenced in Australia in 1925. Post-World War 2: boom in European production by such companies as Fiat (Italy), Renault (France), and Volkswagen (Germany).Further economies of scale brought about by European economic integration.16Brief automotive history cont.Japanese automotive expansion1960s: 27Australia’s automotive trade with regional groups, A$m, %, 2003Regional groupExportsA$ millionImportsA$ millionBalanceof tradeA$ millionExports as % ofimportsNAFTA5651120–55550.4%European Union (15)984085–39872.4%ASEAN (10)123916–79313.4%Source: adapted from DFAT, Composition of Trade28Future MNEs’ business strategiesManufacturing flexibilityBeing profitable at lower volumesMore production alliances and joint venturesRationalisation of components suppliesEmphasis on design and marketing29Future of independent automotive suppliersMore opportunities in supply of partsRationalisation and specialisationSubcontracting to big companiesDirect investment in areas of growth(East Asia and Latin America)Impact of new technologies: the electric car; the hydrogen-fuelled car30Telecommunications industry31Composition of global telecom trade(total 1996: US$115b) 32Telecom privatisations,1984–1996% share by regionTotal value: US$158.5bSource: based on ITU33Global telecom market revenue (US$ billion), number of main telephone lines vs mobile cellular subscribers (millions),1991–2002Source: adapted from ITU34Traditional mode of operation of telecom monopoliesAccounting rate = the price agreed upon by two national carriersSettlement rate (1/2 the accounting rate)Collection rate = what the national carrier charges customers)System expected to break down with deregulation35Comparative performance of the top 22 telecom and 25 automotive firms (1999)36Comparative performance of the Fortune top global telecom and automotive firms (2003)Source: adapted from Fortune, July 26, 200437TELSTRA’s ranking in 200323th largest telecom company in the world with revenues of US$2.6bProfits: US$2.0b (rank 120/500)Profits as % of revenue: 16% (rank 6/24)Profits as % of assets: 5 (rank 5/24) 38