US investment bank Goldman Sachs recently revised its forecast of inflation in China from 4.5% to 6.8%. They further predicted that inflation could actually hit double digits in the coming months. This comes on the heels of China's Central Bank predicting the same, citing increased prices of food, which makes up 1/3 of China's CPI as the root cause.
This couldn't come at a worse time as Chinese stock market analysts are predicting a burst in China's stock market bubble. Investors are cashing in on the government's perceived unwillingness to step in to control the market before the 2008 Olympics. Many expect the government to begin regulating the market immediately after the Olympics and are planning to cash out just before that happens. A mass exodus from the market would cause a correspondingly large correction. Further, in a market without rules or regulatory agencies to speak of, that correction could have a devastating affect on Chinese businesses and the investments of those that will not be able to find buyers for their shares.
It will be interesting to watch this play out. As the US and Chinese economies have become increasingly intertwined, the domestic economies of each country are having a larger and larger affect on the global economy. The US Federal Reserve is desperately trying to fight off a recession in the wake of the "Mortgage Meltdown". China has played a major role in keeping the US economy moving by pegging the Yuan to the Dollar and financing the US national debt by buying US Dollars. An economic slowdown in China could have a dramatic effect to the US economy, which in turn would amplify the problems China is facing.
Harsh Winter in China
During a recent informational interview, I had the opportunity to discuss the impact of this winter in China with a local Chinese business man. We haven't heard much about it here in the US, but the severe weather in China has had a devastating impact on the middle kingdom. Farmers are reporting massive crop losses, and according to this video, the extreme cold is having an enormous impact on the Chinese power grid.
Chinese Market Information
Here's an interesting market research PowerPoint prepared by Ogilvy. It's got some very compelling information about the market in China.
Microsoft’s Purchase of Yahoo: An Effort to Remain Relevant
My takeaway from business strategy class was that even the best planned mergers and acquisitions usually fail. Redundancy or resources, overlap of product, and personnel/culture clashes are usually key to the failure of any M&A, and this deal has an abundance of each issue. I think Microsoft’s bid to purchase Yahoo! is not well planned at all, and is almost guaranteed to fail, but not for the same reasons many other critics think.
This deal signals desperation in the management of both Yahoo and Microsoft. Yahoo has been steadily losing market share to rival Google. And with continued innovative services and the G-phone looming in the future, the death rattle of Yahoo is only a matter of time. Microsoft is probably the only company with the assets to bail Yahoo out. But just because you can do something doesn’t necessarily mean you should.
From the Microsoft perspective, Yahoo’s misfortune is a gift from heaven. Microsoft management has apparently been looking at the global marketplace through the rose-colored glasses of its own marketing machine and completely lost track of reality. Focusing heavily on its software suite, Microsoft has missed the continued evolution of the internet and the convergence of technologies it is creating. Microsoft products are not stable, are not reliable, and consume massive amounts or processing. Add to this exorbitant licensing fees and a licensing strategy that has been compared to “entrapment” by some foreign courts (Taiwan, for example), consumers have been searching for alternative products.
Open source software has been a popular option for much of the world outside the US. But Google became a threat to Microsoft’s “cash cow” of software sales when it began to offer a free online alternative to some of Microsoft’s most popular products: Outlook, Word, Excel, etc.
The truth is, Microsoft got lazy and now it is struggling to remain relevant. Microsoft did not pay attention to its online business (MSN), allowing Google to run circles around it. Dominating the online world and understanding (or spearheading) the move to “Web 2.0″ Google is now threatening Microsoft in a way that they can’t really respond to. This isn’t a battle over price… it’s a battle over the hearts and minds of the consumers. Microsoft is grasping at straws in its bid to take over Yahoo, trying to erode Google’s revenue base. I believe they are too late. At this point, Microsoft has so much more to lose than Google. Going toe-to-toe, Microsoft will at best get hurt more than it can hurt Google.
This deal signals desperation in the management of both Yahoo and Microsoft. Yahoo has been steadily losing market share to rival Google. And with continued innovative services and the G-phone looming in the future, the death rattle of Yahoo is only a matter of time. Microsoft is probably the only company with the assets to bail Yahoo out. But just because you can do something doesn’t necessarily mean you should.
From the Microsoft perspective, Yahoo’s misfortune is a gift from heaven. Microsoft management has apparently been looking at the global marketplace through the rose-colored glasses of its own marketing machine and completely lost track of reality. Focusing heavily on its software suite, Microsoft has missed the continued evolution of the internet and the convergence of technologies it is creating. Microsoft products are not stable, are not reliable, and consume massive amounts or processing. Add to this exorbitant licensing fees and a licensing strategy that has been compared to “entrapment” by some foreign courts (Taiwan, for example), consumers have been searching for alternative products.
Open source software has been a popular option for much of the world outside the US. But Google became a threat to Microsoft’s “cash cow” of software sales when it began to offer a free online alternative to some of Microsoft’s most popular products: Outlook, Word, Excel, etc.
The truth is, Microsoft got lazy and now it is struggling to remain relevant. Microsoft did not pay attention to its online business (MSN), allowing Google to run circles around it. Dominating the online world and understanding (or spearheading) the move to “Web 2.0″ Google is now threatening Microsoft in a way that they can’t really respond to. This isn’t a battle over price… it’s a battle over the hearts and minds of the consumers. Microsoft is grasping at straws in its bid to take over Yahoo, trying to erode Google’s revenue base. I believe they are too late. At this point, Microsoft has so much more to lose than Google. Going toe-to-toe, Microsoft will at best get hurt more than it can hurt Google.
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