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Thanks for a very interesting analysis on a market that is certainly impacted by climate pressures. I think the other dimension I would add is contextualizing LATAM’s response within those of its competitors. Ultimately its decisions will impact its cost and competitive positioning in both the short and long-term. Investing in renewable resources may yield benefits over time but there is a notable lag time associated. If LATAM is confident in its ability to maintain its dominant competitive positioning in the short-term, this may be a way to cement its positioning in the long-term, particularly as smaller players are unlikely to make similar investments.

The investment in a new fleet should carry a similar consideration. LATAM will need to place an order for new planes with OEMs with several years of advance notice. They will need to assess both how efficiency gains from more fuel-efficient aircraft will correspond with changing prices of oil and other energy sources over the production period. LATAM should be well aware of how its competitors (both smaller regional airlines and dominant inter-regional players) are responding to the threats of climate change. Their perspective on how the competitive set will evolve in the short and long-term should impact the duration of the investment alternative they choose to pursue.

Thanks Jon for an interesting analysis. I fully believe that Baxter should find opportunities to spread these costs out among other players in the supply chain. Ultimately, Baxter will not be the only company in its competitive set that will face these challenges in their manufacturing and sourcing operations. However, their approach to responding to them will change their competitive positioning. If Baxter shoulders the full costs of these changing conditions, it will mitigate its cost-competitiveness and erode its positioning over time.

Instead, Baxter should demonstrate to other players in the supply chain the way in which these changing conditions will diminish their ability to operate effectively. They should work with downstream players to identify collective solutions. These may involve adjusting supply routing or fundamental delivery operations. Based on the locations of downstream partners, their analysis may inform shifting geographic locations to mitigate the impacts of climate change across their existing footprint. In any alternative, it is critical that Baxter find ways to respond to these threats in coordination with supply chain partners as opposed to shouldering the cost burden alone.

Thanks Maud for a very interesting analysis. While Airbus thinks about managing risks imposed by increased isolationist policies, it should also look towards the opportunities that this new political reality presents. To build on TS’ comments, governments like the US have demonstrated that they are willing to engage in direct negotiations with companies around tax breaks (and even favorable regulatory treatment) in exchange for the relocation of manufacturing facilities and the promise of jobs. Isolationism creates a system in which different government actors are negotiating against each other to drive private fund flows and employment. This marketplace is less efficient in an isolationist world because trade agreements typically make such partnerships and negotiation terms more transparent. From this inefficiency is an opportunity for Airbus to leverage its size and market potential to yield effective deals by moving its manufacturing operations.

Airbus will need to think about this on national as well as regional levels. They will need to weigh the economic and political cost and benefit across their portfolio of operations and development projects. If they are able to do this effectively and proactively, they can drive a competitive advantage in this rapidly changing geo-political ecosystem.

On December 1, 2017, VK commented on Isolationism, the Antithesis of Innovation :

Thanks for this very interesting analysis on a meaningful topic. To your question, I do believe that private corporations should feel a responsibility to assist in managing global health issues. Even outside of the clear social benefits, it is in their profit motivations to do so. We are living in a rapidly globalizing world and economy (this trend continues in general despite the recent isolationist policies of certain western countries). The success of even national or regional companies will be inextricably linked to managing and optimizing a global talent pool and in engaging with foreign markets (both with suppliers and customers). While isolationist policies clearly serve a detriment to such business needs, global health threats pose risks to companies ability to manage talent and partnerships in a similar vein.

I think that individuals and private companies will need to think about how we can engender the underlying factors or practices that fuel global health advancements despite the political realities of isolationist policies and underfunding. What are the economic synergies derived from collaboration and how we can allow those synergies to incentivize collaboration in other ways (whether in terms of business partnerships or knowledge transfer) despite regulations that mitigate them? I believe that the solutions will come from interested parties who are able to identify these continued synergies and communicate their merit effectively to a broader ecosystem.

On December 1, 2017, VK commented on The Disruptor: the Costco of the Internet :

Thanks Kaye for an interesting analysis. As noted, Jet’s initial competitive differentiation was driven from its ability to manage price reductions to creative sourcing and bundling of products, minimizing shipping costs. Maintaining this differentiation will require a both geographically pervasive and digitally connected supply chain network. Leveraging the existing Walmart distribution network will undoubtedly present a significant cost and speed advantage vs. a new build. The additional e-com sales volume driven by Jet will enable Walmart distribution centers to maximize capacity and yield greater levels of efficiency, which will reduce marginal costs for both Jet and the core Walmart retail business.

However, unless Jet / Walmart are able to digitally connect these operations to consolidate both e-com and retail fulfillment, it will face significant challenges in yielding the necessary cost savings and delivery thresholds. Beyond delivery, Jet is going to need to find additional ways to compete with an e-commerce giant that is so quickly diversifying to be a required component of American life and purchasing habits. Jet should find ways to leverage its Walmart affiliation towards this end but the combined entity will need to look further to develop a long-term competitive positioning against the Amazon behemoth.

On December 1, 2017, VK commented on UnitedHealth: Losing Ground to New Entrants :

Thanks Faraz for a great analysis of an interesting problem. I think you do a great job of delineating the challenges UHG faces, both from a shifting eco-system as well as from new technology savvy entrants like Oscar and Bright. To your question on UHG’s ability to implement these changes at scale, I am not bullish. Part of the inherent problem is that the degree of integrations required with clinical partners (hospitals, physician groups, etc) are somewhat contrary to the way in which UHG has grown. As many large health insurance companies, UHG has developed scale via acquisition and, as such, has the difficulty of managing interoperability of technology systems and data platforms across its empire. This poses challenges as hospital systems try to merge or integrate platforms with UHG, relying on technology operations that are rooted in both regional subsidiaries as well as at the corporate parent.

Start-ups like Oscar and Bright will be able to accomplish this better at regional levels because they have recently built their tech stacks and have fewer platforms to consolidate. Given their regional focuses, they are able to focus resources on deeper integrations with partners in key markets. While it will be a long time until they can pose a risk to UHG at scale, similar to the disruptive innovation model referenced, they will be able to win share through incrementally better offerings in core markets, with their competitive threat growing over time.