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Nissan’s strategy to lean forward on the UK operations seem enormously risky to me and highlight the dangers of not sufficiently diversifying – although they cannot be blamed for not foreseeing what seems to be an emotional decision taken by the nation.

I wonder if the Nissan CEO’s strategy to double-down on UK production is driven by the sunk cost fallacy. The decision of what to do next should be driven by the NPV moving forward which I believe is negative for the following reasons:
1) The tariffs essentially squeeze out export profitability for a largely export-driven business. As labour supply in the UK decreases due to no influx of cheap labor from eastern Europe, labor costs might rise and squeeze profits further.
2) Nissan’s operations and I suspect their profitability were tailored to JIT manufacturing – which essentially is at risk owing to the border customs – requiring increased inventory costs and/or rethinking manufacturing – both of which are big bets.
3) Massive uncertainty around other implications of the 2-yr Brexit negotiations could lead to other unforeseen impacts. If Nissan continues to double-down on the UK in the short term, it might lose the opportunity to take the right long-term call after the negotiations are over. A massive economic downturn in the UK for example, might shrink the market, increase costs, drive away suppliers,etc.
4) The government Nissan is negotiating with is a nascent and unproven entity – it is a massive bet to hinge the future of the company on vague assurances especially since the government seems to be unstable and might be replaced in the upcoming elections.

On December 1, 2017, Nidhi commented on Delhi, my grandmother cannot breathe! :

Thanks for bringing this up!
Having traveled to New Delhi/Gurgaon nearly every week for the last 2 years, I can attest to this issue having exacerbated to the point where vehicular visibility was often reduced to <25metres as we waited for hours in traffic.
1) Regulating passenger vehicles: I want to argue that inspite of passenger vehicles contributing to <10% of the pollution, this was an impactful move. The AAP mentioned by Azeez in his comments, did enforce controversial time restrictions on vehicles (popularly called the even/odd rulle where even license plates could only ply on certain days of the week). While, this did temporarily have some minor impact on emissions, I think the larger impact of this was the conversation it successfully ignited bringing people's attention to the issue.
2) Need to educating people on clean air being a human right: The larger problem in Delhi is the shocking absence of an outcry over such a massive issue impacting every segment of the society – rich and poor – indiscriminately. This problem needs a step-change solution and in the current political climate in India – it can only come from a massive public movement. Today, absence of awareness, prevents people from attributing responsibility of this issue to the public health authorities – allowing them to be largely complacent.
3) Finding long-term solutions that will align with short-term power: Unlike a city like Beijing where the government is stable and can enforce long-term measures, the disadvantage of a multi-party democracy is the urgency to take immediate, short-term action and not take long term actions. There is a lot to learn from the success of Beijing but it needs to be re-interpreted to the Indian context.

On December 1, 2017, Nidhi commented on A Perfect Storm: When Hurricanes Hit the Medicine Supply :

Hi Daniel, Thanks for bringing this issue to light! However, I wonder if the FDA is the right body to be held responsible for this issue – it feels to me more like a central/state ministry/government issue.
I also struggle with the question of who should be paying for this – taxation is designed by the government with the explicit purpose of influencing market behavior. To hold the companies accountable for doing exactly what the tax structure required of them, acting in shareholder interests and optimizing their profits and not creating buffers for what is obviously an unforeseen event does not seem fair. This is a failure of public planning and I believe, requires another tax structure overhaul to incentivize the drug manufacturers to drive the behaviors you have mentioned in your recommendations. In the current economic environment, a macro lens needs to be taken and the right balance needs to be set between keeping companies competitive, safeguarding PR’s economy and between preparing for these climatic events.

Hi vlookup90,

Thanks for the research you put into this article! I found it very interesting to see how both countries implemented protectionist policies that have resulted in so much price volatility in the US.
As mentioned in the comments above, would be very interesting to actually evaluate the economics of BOF vs. EOF, from my reading, it seemed like while scrap steel is more expensive, the costs largely even out eventually. The key decision making factor, seems to be low capex and ability to customize and the differential volatility in raw material prices of scrap steel and iron ore.
To make the BOF shutdown decision I would consider the following:
1) What do customers want:
As in the connectors case we studied today, there is value in moving upstream that could justify shutting down the BOFs – but we need to understand the market demand for customization. Is there a large enough demand for this? Do our current customers want this? Are we going to have to completely change our target customer?
2) What are we good at?
While we currently do EOF, is customization and innovation our core competency for us to completely divest our BOF business?
3) Impact of shrinking capacity:
How will this impact our supplier relations? Raw material prices? Investor perceptions?


On December 1, 2017, Nidhi commented on Why Wal-Mart will Beat Amazon in E-Commerce :

Very interesting article Andrew! It compelled me to think hard about whether Walmart can prove to be a legitimate threat to Amazon. And while I do believe that Amazon has such an incredible head-start and such an incredible driving force in Bezos that competing against it with a legacy company will be a mammoth task.
However, the game is not won yet as the e-commerce story has just begun. Only 5% of retail in the US (incl.F&B) is e-commerce-led and Amazon is ~45% of that. This means that companies like Walmart, still hold considerable market power, mind-share and brand share and customer pull.
Walmart can be a strongest contender against Amazon – in the very least, this can be a duo-poly:
1) Massive experience in sourcing and margin power – Walmart has decades of experience squeezing margins and developing white-label products and having deep relationships with suppliers.
2) Merchandising and reliability is a value-addition: There is such a thing as too much choice. As e-commerce becomes more and more cluttered there is a case to be made for merchandising, curated products. This will help the long-tail of consumers who trust Walmart’s judgement on products and price as all products will be sourced by it.
3) Omni-channel is an advantage on both the demand and supply side: Not only is the Brick and Mortar experience great from the customer side (people still want the shopping experience) but also advantageous from the supply side. Stores can function as warehouses, if executed well, deliveries can be made faster and a Walmart experience can theoretically trump the Amazon experience. While Amazon has purchased Whole-foods, whole-foods plays at the semi-premium end of the grocery business – a completely different and somewhat more niche customer value proposition.
4) Categories: Main revenue streams of Amazon are today derived from electronics which have wafer thin margins and are very prone to recessions and swings in the economy. Walmart is more dependent on staples like groceries and house-hold goods potentially helping it weather storms better than Amazon.

On December 1, 2017, Nidhi commented on How Big is Amazon’s Opportunity in Healthcare? :

Hey! Thanks for this piece. Very interesting to read about Amazon’s entry into this space. Dozens’s of online pharmacy businesses mushroomed in India in 2015 and promptly faced the wrath of regulators (Indian pharmacies require pharmacists to physically validate the prescription) and had to be shut down or change their business models.

A behemoth like Amazon entering this space will push regulators to adapt and ultimately lead a multitude of benefits for the customer and the industry at large: (1) increase transparency and affordability of out-of-pocket medicines particularly in a country like the US where drug prices are high and generics are still not the majority of sales. (2) encourage sales of generics as their visibility could be improved (3) reduce the power and role played by the pharmacist (3) increased convenience – eg. an Amazon dash button for medicines

However, I question if this is the best option for Amazon as I believe that it does not allow Amazon to leverage many of its strengths and adds a host of risks. I agree with the point of view in some comments above that Amazon would be better served chasing some other low-hanging fruits.
1) Regulation and legal liability: Drugs are completely different in my view from consumer goods where the impact of a wrong order, expired drugs, drug defects can be much higher and lead to significant legal implications for Amazon. Today Amazon does not take responsibility for the products it sells – will Amazon take responsibility for its drug sellers? Will Amazon enter the business itself? This is not Amazon’s current skill-set.
2) Legal implications of aggregating data, reviews and showing ads: One value proposition of using Amazon is the availability of reviews, ratings and “recommendations” based on past user data. However, prescriptions are very sensitive data. While there is a massive data arbitrage opportunity – for everyone from insurance providers to pharma cos, it is unlikely Amazon will be allowed to do anything beyond being a simple website where drugs can be searched and sold. Unlike CPG, drug purchases are not an individual’s decision and are completely controlled by the doctor. Any attempts by Amazon to influence the patient’s decision can lead to legal liabilities for Amazon.
3) Pricing: Price opacity in the pharma industry is intentional and the transparency that Amazon introduces, while great for customers, could be met with opposition by pharma cos owing to pressure from other channels – esp. for biologics and non-OTC chemical drugs competitive. Additionally, a lot of Amazon’s pricing power comes from its ability to influence the customer via position on site, ads, etc – so in this case, my hypothesis is that Amazon will have scale power but for the above-mentioned reason, no influencing power.

B2B is a whole different ball-game compared to B2C – owing to the business being focused on negotiations, customization, etc. For similar reasons to the B2C, I think B2B for CPG/Industrial supply chain is the first thing Amazon should focus on, fine tune the model before even considering B2B pharma.