Juan Quiroga Ponce

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On December 1, 2017, Juan Quiroga Ponce commented on H&M Leads the Way for Sustainable Fast Fashion :

Great article, Melissa! I think that the similarities between H&M and IKEA in terms of the underlying strategic reasons for their sustainability actions is remarkable. Just as IKEA, H&M is taking a “first mover” approach to setting sustainability standards in this industry. By being a founding member of the Sustainable Apparel Coalition, they are able to decide the objectives for the industry in this regard and their timeline of implementation, which gives them an interesting competitive advantage. This is very similar to IKEA being able to define the parameters governing sustainable wood certification. Consumers are becoming increasingly more aware of the environment and demanding sustainable products increasingly more, especially in developed markets. It’s a question of time before the industry adapts, and by being a first mover H&M is gaining the priviledge of sitting at the small table that decides when and how to comply with this.

On December 1, 2017, Juan Quiroga Ponce commented on How the leading Latin American airline affects and is affected by climate change :

Great article, David! I acknowledge that LATAM has achieved great fuel consumption reduction, which make it 8.3% more fuel efficient than the industry average (1). However, this is very aligned with the company’s own strategic interest: fuel represents ~34% of its operating cost structure (2), which means that this gap in fuel consumption vs. the industry alone represents a 2.8% cost advantage. The expectation for the airline industry is to achieve carbon neutral growth by 2020. Given that the airline industry generates 2% of manmade CO2 emissions, and considering the serious consequences of climate change that we are well aware of, I strongly believe that regulation should set the bar higher for this industry. Critics might argue that asking the airlines to further subsidize their carbon footprint with measures like reforestation or shifting to alternative fuels is unrealistic. However, I think it’s worth pointing out that LATAM has achieved carbon neutrality in Peru and Colombia through reforestation programs (3), which is far beyond what is expected from the industry. This shows real commitment to environmental sustainability, and sets a good example of where regulation should ask companies in this sector to head towards in the future.

(1) Latam Airlines Sustainability Report 2016. file:///C:/Users/MBAUser/AppData/Local/Microsoft/Windows/INetCache/IE/88FSJTQ4/LATAM-Sustainability-report-2016-EN.pdf
(2) Latam Airlines Annual Report 2016. file:///C:/Users/MBAUser/AppData/Local/Microsoft/Windows/INetCache/IE/O3XH075B/38-Estados-Financieros-ESP.pdf
(3) Latam Climate Change Policy. https://www.latam.com/es_ar/conocenos/sostenibilidad/cambio-climatico/

On December 1, 2017, Juan Quiroga Ponce commented on Wal-Mart’s Sourcing in the Age of ‘Unfair Trade Deals’ :

Great article, JB! As you outlined, potential changes in US foreign trade policies add significant risk to Walmart’s business model. In response to this, I believe that Walmart should stick 100% to its key strategic focus of providing the lowest possible cost to consumers. Committing to “Made in USA” would restrain Walmart by commiting it to something that is not necessarily coherent with its strategic focus, in a context in which it should pursue greter flexibility to accommodate the aditional risk (instead of more restrictions). If Walmart further diversifies its supplier base in order not to be so reliant on imports, it could gain flexibility to shift towards US or foreign suppliers in the future depending on how the discussion on foreign trade policies turn out. Publicly commiting to local suppliers, however, would do nothing else but decrease Walmart’s flexibility to react to the context.

On December 1, 2017, Juan Quiroga Ponce commented on The battle for the skies: Is free trade losing ground to protectionism? :

Great article, Sergio! I would like to add two points:

I believe there are arguments to believe that the scenario in which current producers of regional jets in emerging markets (like Embraer in Brazil) pose a threat to Boeing and Airbus’ monopoly is not very likely. Developing a new airplane model takes significant time and resources. For instance, the 787 program took Boeing more tan 10 years and a total investment of more tan U$32B (1). If one of the smaller players were to launch a larger airplane model, its development costs would probably be higher and the timeline would be longer, as the manufacturer would have to go through a steeper learning curve than Boeing. As we discussed in the FRC Boeing case, only in 2016, with more than 600 units delivered, the 787 project was reaching its projected unit cost. Given the complexity and scale required to make such a project sustainable, the risk for smaller manufacturers to try and break this duopoly that has been standing for decades is very significant.

As for your suggestion that Airbus should “double down its offshoring strategy”, I think that it entails a huge risk that should not be ommitted. Geographical diversification already makes Airbus’ supply chain very complex and risky. Manufacturing in countries in which the risk of trade policies being an obstacle to imports/exports is significant makes its supply chain significantly more vulnerable.

(1) “Boeing celebrates 787 delivery as program’s costs top 32 billion”, The Seattle Times, September 2011. https://www.seattletimes.com/business/boeing-celebrates-787-delivery-as-programs-costs-top-32-billion/

Great article, Katie! The point you raise on how sustainable is the role of traditional middlemen in the agribusiness valuechains is key in the context of digitalization. Traditionally, this players have added value in three main ways: connecting a fragmented base of growers with consumers, handling the physical flow of agricultural products, and leveraging their full visibility of the supply chain to gain efficiencies.

While the management of the physical flow will continue to be a barrier of entry for new players, digitalization is already eroding the value of connection and visibility that these players have traditionally enjoyed, since, as you suggest, a new “Agribusiness Amazon” could perfectly take their role. However, I think this is mostly true for the largest agricultural value chains, like soybean, corn and wheat. Smaller value chains in non-traditional markets, on the other hand, will still involve a complex flow of information and growers with limited access to resouces and technology. This will let traditional agricultural retailers to continue to add value in this kind of markets. In my article “Olam: sustaining supply-chain competitive advantage in agribusiness through digitalization”, I described how Olam’s competitive advantage lies in fully managing 47 of this smaller supply chains, mostly in emerging markets (e.g. cashews, peanut). Even when its competitive advantage will be eroded with digitalization, the intrinsic complexity of these value chains will still create opportunities for Olam to add value in ways that an “Agribusiness Amazon” could not.

One key way in which traders can stengthen their competitive advantage to differentiate themselves in this digital context is by adding more value to farmers and letting them go through “Phase 1” and “Phase 2” innovations in ways that an “Agribusiness Amazon” could not. Olam has launched a system called OFIS that connects its base of growers, helps them manage their inventory, provides them with personalized best practices based on the agricultural data they input, and even enables virtual payment and transactions (“Phase 2”). They will also be key in enabling growers to implement “Phase 1” innovations in the future, as they would be able the ones with the financial capability to invest in drones, sensors and other technologies which are currently not in use in the value chains they work with.

On December 1, 2017, Juan Quiroga Ponce commented on Rio Tinto – Digging into the Data and Autonomous Vehicle Technologies :

Interesting article, Andrew! I would like to add two key issues to automation in mining, which I think are crucial obstacles that need to be tackled in order to achieve a successful implementation:

– Safety: this is definitely one of the top concerns for any large mining player. Autonomous vehicles need to be calibrated and integrated into complex operations in which the human element is very significant. Premature implementation of such technologies, without an adequate people management strategy and enough trials, could jeopardize the safety of the mines. This is exactly what happened in BHP’s Jimblebar site (1): a self-driving truck collided with a manned vehicle, causing significant damage to both. The accident was caused by human error, as the driver failed to understand what the autonomous vehicle was intending to do. The human element is often the cause of automation-related accidents, what emphasizes the relevance of training and change management in this kind of initiatives.

– Acceptance from unions: having worked in mining in South America, I have experienced the power that unions have in emerging markets and how influential they can be on any decisions that affect the working dynamics at the site. They will certainly be against this kind of initiatives as they directly reduce the mine headcount, and this is a key factor to be considered for implementing automation in mines in emerging markets.

(1) “Mining automation: The be all and end all?”, Australian Mining Magazine, September 2015. https://www.australianmining.com.au/features/mining-automation-the-be-all-and-end-all/