Matija Pecotic

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On December 1, 2017, Matija Pecotic commented on Danone: Operating within the Tragedy of the Commons :

Interesting post, EMC!

As a fan and consumer of Danone, I was happy to learn more about the company and the challenges that it faces. I too wrote about climate change, and learned about the serious implications that it could have on business and supply chain management.

You highlight the direct effect that climate change has on water supply, livestock behavior (who would have known!) and CO2 concentration, and the things that Danone is already doing to deal with these challenges. I am concerned with the time frame of some of the suggested changes, reducing water supply by 60% in the next 3 years and completely eliminating paper from some deforested areas by 2020 seems like a tough task for Danone to complete, although it might very well be achievable.

You correctly highlight that customers are price sensitive after a certain point, and they will simply switch to other products that offer more competitive prices. I wonder whether the industry will follow or suffer from the tragedy of the commons and continue to deteriorate the environment that feeds them.

In your long term plan, you mention lobbying for change with governments, although I wonder how effective that could be unless it is industry-wide. Through my own research for this assignment, I learned that capping carbon emission not do much for the CO2 that has already been released into the environment, and it would take close to 80 years if the world stopped producing CO2 tomorrow to see 0.001% improvement. It might be better for them to use their resources elsewhere and think about different farming practices or partnerships with farmers as you suggest rather than fighting difficult government for a change that might not lead to much improvement for the environment. To your point about farmers, what I do know is that they have incredibly strong lobby groups and their own incentives to remain non-integrated with larger corporations like Danone, because Danone might start squeezing them after a couple of years. I don’t see Danone fully integrating with famers in the future.

On December 1, 2017, Matija Pecotic commented on Make Oxford Great Again: An Elite University in the Era of Protectionism :

Monsieur Manil,
You pose a very relevant question in light of UK’s secession from the EU and highlight a possibly a much less diverse and prosperous future for Oxford University. Academia, a filed that is highly funded by grants, fellowships and donations, is heavily reliant on external sources of funding in order to continue producing groundbreaking research and remain competitive in the academic arena.

My thoughts currently are that while some Europeans will be deterred to go, Oxford will simply start to attract more non-EU students, particularly from Asia. I think Oxford’s reputation is still one of the greatest in the world, and this will not deter non-EU students from coming to the University.

On the question of funding, this one may be more difficult. If BREXIT does indeed lead to tougher economic realities within the UK, academic research may be one of the first things to be underfunded. I think EU-UK relations will be key for the future of Oxford and its growth and relevance on the world stage. You also alluded to this in your research, but Oxford could use this as an opportunity to reinvent itself as a more relevant and modern university, focusing more on business, growth and entrepreneurship as opposed to some of the more traditional fields of academia it is known for. I do also think that companies within the UK will be interest to develop new partnerships with the university as they have a symbiotic relationship with academic institutions that provide research and innovative ideas.

I think your article also brings about a broader concern for Brexit and attracting talent. One of the most important benefits to members of less economically developed EU states was the ability to move to Western Europe and share their knowledge and have more opportunity than they might have had in their own country. (Poland, Croatia, Romania) etc. The same is true of the US, which has used its ability to issue H1-B visas to attract some of the greatest scientists, engineers and inventors from around the world (India, former USSR, China) The implications of this are too real, and Oxford, as well as the whole UK needs to resolve this issue before the talent it was attracting finds other routes and forms a new trend of moving to other nations (USA, Canada, Germany)

On December 1, 2017, Matija Pecotic commented on Race to the Last-Mile: Challenges to Wal-Mart E-Commerce Deliveries :

Very insightful. Who would have know that the last mile is such a complicated one to travel for big online retailers?
I do have some concerns with Wal-Marts proposed practices for the future. I wonder whether asking customers to pick up at Wal-mart will be a problem for Wal-Mart in the future? As a consumer, the entire purpose of buying online is so that I do not have to drive to the store, usually the free times that I do have are during rush hour traffic or time that I would rather spend for myself. Once I make the commitment to get to the store, I might as well spend the extra half an hour to buy the items.

My other concern is, what if the people who buy on Wal-Mart are buying online because they cant get to a Wal-Mart, do not have a car, do not live near a wal-Mart. This might really cause problems and lose a lot of customers for them long term. My last point would be, what happens if this Uber/Lyft thing takes off, and suddenly you need a lot more drivers to be able to keep up with delivery demand. I think of my own purchases, and when I go grocery shopping, usually half the car gets filled. Let’s be conservative and say 1/3 of the car is filled, so you can essentially deliver groceries for 3 families or households. Now for a fourth delivery, Wal-Mart needs another car, and if there say 600 deliveries, you need 200 cars to deliver, since majority of ride sharing drivers have regular size vehicles. Furthermore, will a drive prefer to pick up 3 passengers, rather than spend time loading/unloading your stuff and will you be willing to pay an additional delivery fee and unloading fee to the driver. I worry for wal-mart that they need a better solution than what they are suggesting now.

On December 1, 2017, Matija Pecotic commented on Associated British Foods: Mmmmm…Brexit :

You raise a major concern about ABF’s future in light of BREXIT and the UK’s secession from the European Union. Although ABF operates in the UK, 2/3 of its sales are outside the UK as you mention, and that makes up a significant portion of their business.

Your first point about BREXIT’s impact on trade is very important. In a business such as ABF’s, which generally does not have the highest margins on many of its SKU’s, the price of raw materials and input costs is incredibly important. Having spent time in the Balkans when there were trade disagreements between Serbia and Western Europe, I understand the detrimental effects that this can have on complex customs processes and more expensive import/export duties. Nightmare!

I do however, believe that there is hope for the UK. I think the UK is still too large of a market and too powerful of a player in the EU. Although lots of agreements with the EU are still pending, I believe that the EU and the UK will reach a favorable agreement on customs and trade by the time the UK formally withdraws in March 2019. I also believe that the UK is still too big of a market for many European producers to stop trading with. This will cause many European producers to put enormous pressure on legislature that ensures that their supply chains are not effected in a material way. Furthermore, the trade rules between UK and EU may revert back to WTO rules in case either side does not wish to sign the trade agreement that will be proposed. Reverting back to the WTO rules will provide more stability for trade between UK and EU and be more similar to what was in place before BREXIT.

To answer the first of your questions at the end, I do believe that business, particularly those as large as ABF does have the right to lobby governments. With such a large amount of people that could be effected and total distribution and supply systems that face serious risk, it is the role of the government to listen to its people and understand the effect that it would have.

Loved reading this post about Lazada and the potential threats that it faced from the current behemoth of our world – Amazon. I have two comments to make about the points that you bring up, and I can use my experiences from my limited time in Asia for some additional insight.
You correctly argue that Amazon has these incredible prediction capabilities (which I knew nothing about until reading your article!) and that having the patent that was filed in the US given them a strong competitive advantage in the US Market. I only wonder whether Lazada needs to be threatened by this in the Asian markets, particularly in some of the relatively undeveloped countries which it serves and whether this poses a real threat to Lazada’s business model. From what I saw in Asia, there are very different logistical structures and systems that push product around from online shopping. Although Amazon has certainly mastered the developed US market, I am not sure what their patent and predictive technology would even do in the scattered delivery system in Asia. If the countries where Lazada primarily operated in had developed logistical system with the same tech as the US, I would be more concerned than I currently am. Although as Asia continues to get wealthier and pour more and more money into its expansion, the logistical systems of delivery will undoubtedbly also rise, and that is when Lazada should really be threatened by Amazon.

Secondly, I wouldn’t rule out Jack Ma and his boys. As we saw in class, Alibaba has a way of ruling the world of the East in ways that the West has not yet figured out, and I would argue might not do so for quite some time. I remember from the Alibaba case in class, when e-bay came into China for the first time, and Alibaba forced them to move out in a matter of two years. From this article you can see that have thought about trying to compete with Lazada, but have had to withdraw on more than one occasion. With an internet economy that is predicted to grow to over $200 Billion by 2025, I don’t see Alibaba giving that up, and with their knowledge of the local markets and logistical system, I think Amazon is years behind them for now.

On December 1, 2017, Matija Pecotic commented on Acciona Energy: Saving the world, a risky affair? :

I thought you brought up a very relevant topic – the effect of climate change on providers of renewable energy. You show how Acciona Energy is a key player in the modern world that is effected by climate change and in a world where there seems to be great consensus regarding the need to find alternative sources of energy. You make a great point however, that Acciona is not immune to the same risks that more traditional providers of energy are facing due to climate change, specifically the impact on their generation capacity, availability and intermittency.

I thought you gave a thorough analysis of the effect that climate change would have on the physical asset, the prices and the product and how that will have a great impact on the supply chain, and Acciona’s ability to accurately predict future demand and operations. I also thought your point about Acciona’s failure to treat climate change as a tangible business risk, rather than just a part of the social responsibility, casts serious warning to Acciona and the severity of the issue. I read up a little more on the impacts of climate change on renewable energy sources and came across this article that highlights exactly what you are saying. The risks to Acciona could actually be greater than what they might currently believe, and your article certainly opens up that conversation and highlights the urgency of planning around climate change, even to a company that works in the renewable space.

It would be worth questioning whether Acciona has many alternatives in the renewable space moving forward, whether they simply need to adjust to these changes or whether they may even consider moving towards other sources of energy in the future in order to remain relevant in the energy market as they begin to experience more efficiencies. Is there a way for them to prepare better for what is to come?