Following on to last week's "2021 China Frustrated Big Companies", we continue to look at several "frustrated big companies" around the world.
The criteria for this selection still revolve around the keywords of "2021" and "large companies", of which some "expected" companies are not selected. On big topics like antitrust, platform governance, and privacy data protection, the global theme is consistent with China, but it hasn't yet had a substantial performance impact on google, Apple, and other truly "big companies," so we just put it in the nominations and left more time to a few other companies that are really upset. For example, the split general electric, its case in this year is particularly commemorative and discussed.
For domestic companies and industries that are closely related to individuals, everyone's perception is often sharper; but for global topics, unless you are an international news enthusiast, or your work has been seriously affected, some important and far-reaching changes are often easy to ignore. Therefore, we also hope that this program can play a small role in "checking and filling in the gaps" in a larger field of vision.
Finally, we briefly discussEd Turkey, which is experiencing severe inflation and debt pressures. This is not a corporate case, but the discussion of "why things are the way they are" is also in line with an idea we mentioned earlier - if you look at some of the operations of governing the country from the perspective of economic laws, you may find that this is not much different from governing a complex company.
In the new year, you are still welcome to listen, support and feedback.
General Electric
Everyone may not have a deep perception of GE. But GE in its heyday was really all-encompassing and influential, and if the company's products disappeared out of thin air, humans probably wouldn't be able to last 24 hours.
After geelectric split in 2021, it has three main businesses: aircraft engines, medical technology, energy industry equipment, and important grid equipment vendors. GeElectric invented incandescent lamps and has long been a leader in the global lighting industry; it was once a major manufacturer of telephone sets, once the world's largest manufacturer of home appliances, and invested in the NBC television network.
To sum it up in one sentence: it is the ultimate form of multinational corporations in the industrial age.
But it was one such company that had been in decline for the last 10 years, selling out various businesses, and finally in November 2021, it announced that it would split into three companies, namely medical, energy, and aircraft engines, ending the era of integrated industrial groups.
From a business perspective, GE has always been known for its management. So many businesses, so many products, so many markets, can be placed under the umbrella of a company, and the requirements for management capabilities are extremely high.
When Gewl's legendary CEO Jack Welch retired, it was the peak of GE, when it was the 8th in the world's top 500, with revenue of $140 billion, net profit of $14.1 billion, and Welch's own retirement expenses alone were more than $400 million. But after that, GE gradually went downhill, until it went to breakup.
One of the biggest turning points in the process was the financial crisis that began in 2007, which hit GE Capital, one of GE's biggest profit cows and the core of its business model, the financial sector.
Once a third of GE's profits were provided by the financial sector, which lent money to GE customers. GE sells very expensive things such as aircraft engines, medical equipment, and large equipment, and customers will have a hard time buying them in one go, so GM will lend you money to buy my things, or lease my equipment to you, which is the so-called financial lease.
Because these customers are developing well, General Capital's credit rating is very high, it can obtain funds at a very low financing cost, so it becomes a very rich and competitive financial institution, with money, you can do more investment, bigger and bigger, and GE's products are selling better and better. This is why GE is able to expand as a diversified group.
However, the financial crisis caused GM Capital to suffer heavy losses, rising financing costs, fewer customers, and the economic downturn, the flywheel could not turn. GE can only gradually sell non-core, or no leading edge, or less profitable business, such as its old lighting, home appliances, financial business is also forced to separate from the group due to regulatory requirements.
The financial crisis is the direct cause of GE's decline, but in fact, if you look at it from a larger perspective, the decline of diversified industrial companies such as GE is also a trend of the times.
In 2008, the first year of the founding of CBN Weekly, we wrote a general electric-related report called "Bird's Nest Butler Scramble". In the construction process of the Bird's Nest, the main venue of the Beijing Olympic Games, there was a large order of more than 100 million yuan to be tendered - the intelligent management system, which was still very new at the time. Competitors include General Electric, Siemens, Honeywell, and Johnson Controls, all of which are multinational industrial conglomerates.
At that time, these large industrial companies were at the end of their peak, and in a market like China, which was still developing and rapidly urbanizing at that time, many major industrial projects were the only ones that could provide the most advanced and comprehensive products and services. Iconic projects such as the Bird's Nest, which at the time were still the crown jewels that these companies were bound to win, were used to show their strength. In that Nest Butler Scramble, honeywell won the final bid, which was also spun off in 2018. In addition, in 2021, Toshiba will also be split into 3 companies.
If you only look at the business model, the era of these big companies is indeed over. With the deepening of digitalization, the Silicon Valley giants represented by Google have both a strong brand appeal, a very high market share, and a very high profit margin, and can easily expand to more fields with their existing advantages.
It is difficult for industrial groups to do these things at the same time, and their original diversification value is not much, they face fiercer competition in various fields, and the management of large groups consumes a lot of resources. While each of their industrial products is still very competitive, very important and admirable, GE as a whole is indeed obsolete.
Adidas
How bad is Adidas' performance in 2021? Let's look at the two simplest sets of indicators.
One is the stock price, in 2021, Adidas in Europe stock price fell by about 14%, while the stock price of friends are rising, Nike has 20%, Puma has 18%, Lululemon has 12%, the gap has suddenly opened.
The other is revenue and profit. Adidas' revenue in the first three quarters of 2021 actually rose every quarter compared with the same period in 2020, with an increase of 20%, 52% and 3%, but by the fourth quarter, the performance outlook has directly predicted that revenue will fall, and the company's profit margin has not been up to analysts' expectations.
The impact of the Chinese market on Adidas is obvious. In the first quarter, Adidas made a very good start due to the impact of the New Year's promotion, with revenue up 156%. However, in the middle of the year, revenue fell significantly, and the company was able to maintain the face of global revenue growth, mainly relying on emerging markets such as the Middle East to make up for the loss of the Chinese market.
In addition, Adidas Greater China's previous head, Gao Jiali, left at the end of 2020, and he stayed in this position for 10 years. 2021, equivalent to the year after the new coach took office, many business directions and personnel arrangements are being adjusted, and geopolitical controversies have been encountered, which is indeed a headache.
In Asia in 2021, Adidas is not only headaches for the Chinese market, but also Vietnam. In 2021, due to the impact of the new crown epidemic, many foundries in Vietnam have experienced short-term shutdowns, including Baocheng Group, a foundry giant that receives orders from Adidas and Nike all year round, because it cannot achieve the "three locals" required by the Vietnamese government: local eating, local production, and local life. According to media reports, Apple and Samsung's Vietnamese factories have maintained production by barely allowing employees to live in the factory.
A public relations director at Adidas told CBN magazine that 43 of the 100 pairs of Adidas shoes sold worldwide were made in Vietnam. That's equivalent, as soon as the Vietnamese factory is shut down, 43% of Adidas' sneaker business may be in the water.
In fact, Adidas is a very aggressive company in terms of production management. In the early days, it put a lot of production capacity in China, and it also had its own factories in the country, but because it wanted to control costs, it began to move to Southeast Asia. On the other hand, it is engaged in the so-called fully automatic factory - Speed Factory, trying to use all machines to make shoes, spending a lot of money, but the current effect is not ideal.
In 2021, Adidas also has a hard-to-say thing, that is, it finally sold Reebok in August. Reebok is also a brand that Adidas tried to adjust several times and has not been able to find a feel. When I bought Reebok in 2006, it was very expensive, it cost $3.8 billion, and now it can only sell $2.5 billion, plus the money spent for Reebok, Adidas can be described as a "blood loss".
Adidas has made several direction adjustments to Reebok: athleisure, women's market, fitness training... All have been the direction of Lululemon and UA card, if it is not All In resources to do things, with the brand power of Reebok, obviously can not beat these featured brands. Coupled with the impact of the new crown epidemic in 2020, offline stores can not even open the door, Adidas can only stop losses in time.
Finally, Adidas and Nike recently had a lawsuit over technology patents. On December 8, 2021, Nike filed a patent infringement lawsuit in federal court in Oregon, alleging that Adidas infringed three patents related to Nike's Flyknit upper technology. In a court document, Nike directly turned on the mockery mode, saying: "Unlike Nike, Adidas gave up independent innovation. ”
Nike said that this Flyknit is a technology that uses a thread to weave the entire upper of the shoe and can be shaped like a sock. Flyknit was launched ahead of the 2012 London Olympics and cost more than $100 million in technology research and development. Adidas launched the similar technology Primeknit, also in 2012, but 5 months later than Nike. Since then, the two sides have been fighting over the ownership of this patented technology.
In fact, if it is two things that are very similar, then what the name of the technology is not important to consumers at all, what matters is the original brand preference, or which brand can come up with a product that is more advanced and more suitable for itself. Therefore, the patent war between Adidas and Nike is essentially competing for consumers. But if you really lose, the cost should be more tragic.
Volkswagen
Volkswagen's frustration is actually nothing in the whole list, the most important indicator of the auto industry - new car sales, Volkswagen in the first 11 months, down only 1.7% year-on-year. However, considering that sales in 2020 have been reduced by more than ten percent due to the impact of the epidemic, this performance is equivalent to Volkswagen's failure to recover in 2021.
What are the main reasons? Two words: missing core.
The severe shortage of chip supply has caused Volkswagen to have to reduce its production capacity throughout the year. The lack of cores in the automotive industry actually began at the end of 2020, and the industry is expected to continue in 2022, with significant improvements to the second half of 2022 – this is still a forecast in the absence of a particularly large recurrence of the epidemic and without affecting production.
Volkswagen's situation can serve as a proxy for the automotive industry, and it shows that the chip crisis has begun to change the way the automotive industry manages supply chains.
In a large category, there are many parts of the car, one is indispensable, without any one, the car can not be built. With the electrification of automobiles, the change of electronic and electrical architecture and the increase in the proportion of software, there are more and more chips on the car, the original traditional cars are about five or six hundred, and the number of electric vehicles may reach more than 1500, which also means that there are more risk points.
But if you put it in the entire chip industry, the automotive industry is not a particularly large demand market, and many people are reluctant to do it. Compared with consumer electronics, its volume is not so large, but the requirements are particularly large, especially the requirements for safety, reliability and consistency. To supply car companies, chip factories have to invest more costs in the early stage, so the number of companies that supply chips to the auto industry has not been very large. Some niche chips, which may be one or two major suppliers, are easy to get stuck in the neck once something goes wrong.
Another problem is that in the process of consumption recovery, the demand for consumer electronics and communications is also very much, so the demand for chips is all-round increase, and there are many general-purpose chips that have been squeezed out of supply by other industries.
Coupled with natural disasters, such as the repeated outbreak of the new crown epidemic in Southeast Asia in 2021, many chip factories have suddenly cut off supply, resulting in a large-scale suspension of production by automobile companies represented by Volkswagen in October and November 2021.
The combination of these factors has led to a lack of cores in the automotive industry.
In the past, car companies actually did not care much about these chips, and many times they did not even need to know who the supplier was, because most of these chip manufacturers belonged to the second, or even third, and fourth level suppliers, and these chips and other components were integrated into a large assembly of components, and then sold to the car companies by the first-level suppliers, such as Bosch and Continental. When something went wrong, the car company let the Tier 1 supplier fix it. However, if you go to find a large supplier at the first level, the latter has many customers, you have to solve the problem, and it is easy to get stuck.
So, a lot of auto companies are now mentioning one word: supply chain resilience. Specifically, there are two levels, one is to reform the management of the supply chain, such as using more digital means, so that their management tentacles can reach the most upstream suppliers; the other is to find more spare tires in the chip field, such as in China, many companies have begun to find or support some local companies, which is also a big benefit to the chip industry.
If it is only the production reduction brought about by the lack of cores that reduces market share, then Volkswagen is not necessarily the most miserable. Attributing it to a frustrated big company, in fact, there is also the problem of this company, that is, the internal friction of management, or instability.
To put it simply, from 2020 onwards, the CEO of Volkswagen Group, Diess, was wrestling with the opposition forces on the board of directors and almost resigned. By November 2020, the wrangling had a temporary outcome, with Diess retaining the CEO's seat and taking over the entire group's software business, but losing several very important positions of real power – the CEO of the Volkswagen brand and the head of the Chinese business were in the hands of another director representing the union or the traditional power of the Volkswagen Group.
In large companies, the struggle for power and profit within the executives is normal, but Volkswagen's struggle is actually involved in the contradiction between the more radical reformists and the conservatives who are more concerned about the interests of local and workers, and it is a matter of development line.
Volkswagen proposed a very radical reform plan in 2020, to invest hundreds of billions of euros, transform electric vehicles and intelligence, and clearly propose to narrow the gap with Tesla. But there are some opposition voices within Volkswagen, arguing that the transformation cannot be too drastic, because too fierce will involve layoffs, consolidation, and affect short-term profitability, which unions and some shareholders do not want to see.
The openness of this internal struggle has made the outside world realize once again that when large companies face challengers, the pace of turning around will be slower than expected, and the existing baggage will be heavier than imagined. The transformation of the automobile industry is not only a change in technology, it cannot be solved by investing a lot of money and recruiting many engineers, but it must also be accompanied by a major adjustment in the management mechanism. This is precisely the most difficult problem that the traditional giants represented by Volkswagen need to solve.
SoftBank Group
SoftBank Group, a Japanese telecom operator, debuted Apple's first smartphone, the iPhone 3G, in Japan in 2008, and suddenly rushed to the top of the industry, and later acquired Japan Telecom and Vodafone KK. After that, under the leadership of Son Zhengyi, the company's foreign investment also increased, and under the name of "SoftBank", two listed companies were split, one is Softbank Corp, which is mainly telecommunications business, and the other is Softbank Group, which is mainly investment business.
SoftBank is an interesting company. Everyone cares about it, basically just to see what companies it has invested in, how these companies are invested, and whether Son Zhengyi is not the richest man in Japan.
In 2021, Son Zhengyi is indeed not the richest man in Japan, falling to the third place in Japan. Bloomberg's "Billionaires Index" shows that Son's assets are currently $19.8 billion, shrinking by $8 billion a year in 2021.
SoftBank Group is the managing party to the Vision Fund. Before the Vision Fund, Son was better known for his success story at Alibaba. After 2017, the Vision Fund had a lot of Middle Eastern money, mainly from Saudi Arabia and the United Arab Emirates. SoftBank Group itself has $28 billion in it, which is more than the average fund manager holds in its own funds. And the Vision Fund has a maximum investment period of 14 years, which means that it can invest in some projects that may not be developing quickly.
In terms of investment strategy, the Vision Fund doesn't seem to have any special ideas. A slightly clearer direction is to invest in large platform companies, such as ByteDance, Uber, Didi, Shell, Grab, all of which are of this type.
However, anti-monopoly review of large companies and platform companies is the main theme of global government regulation. Alibaba and Didi were investigated in 2021, and the market value quickly evaporated, which will also be reflected in the books of SoftBank Group. According to SoftBank Group's own disclosure data, the Vision Fund previously invested $12.073 billion in Didi, and by November 5, 2021, it had shrunk to $7.864 billion, with a net loss of $4.2 billion.
In fact, we can also simply think of SoftBank Group as a stock account. Through it, Son Zhengyi bought a lot of hot stocks, but these stocks fluctuated a lot, so they either made a lot of money or lost blood. For example, in the third quarter of 2021, SoftBank Group lost 825.1 billion yen, equivalent to about 45.7 billion yuan.
In 2020, SoftBank Group also lost 788.6 billion yen in one quarter, mainly on wework, which failed in its IPO. In 2021, in addition to the impact of several Chinese stocks, there is also a South Korean e-commerce platform called Coupang that has also dragged its feet. Coupang is positioned as the "Korean Amazon", and the South Korean government treats it like An Amazon, investigating monopoly problems. Coupang went public before it was profitable, and its stock price kept falling, so six months after going public, SoftBank Group began to sell its shares.
Of course, SoftBank Group actually has a relatively long-term holding case, such as arm, a chip design company bought in 2016, which has not been delivered to NVIDIA by the end of 2021. The deal was originally bought at $32 billion and sold at $80 billion, both of which set record deal sizes in the semiconductor industry. However, some time ago, the US Federal Trade Commission (FTC) was blocking the deal on the grounds of antitrust, and the situation was not very favorable for SoftBank Group.
If Nvidia doesn't buy it in the end, SoftBank Group will only get a $1.25 billion "break-up fee." For arm, a large asset, it is necessary to find a way to re-list and revitalize. But the global IPO market in 2021 is very poor, bursts abound, and it is difficult to guarantee the current $80 billion valuation with bubbles.
The same is true of The Southeast Asian ride-hailing giant Grab, which SoftBank Group has invested in itself, and went public with an SPAC model at a valuation of $40 billion, and the stock price fell by 20% on the same day. After the Japanese stock market opened overnight, SoftBank Group's stocks suffered a sell-off, falling 3% intraday.
A research manager at a Japanese securities company commented that as long as there is bad news in the market for companies related to SoftBank Group, "investors can only continue to wait and control their desire to buy SoftBank Group shares." "Otherwise a new round of price cuts and sell-offs will soon come again, and you will never be able to wait to the end."
Of course, Son himself and some activist investors feel that SoftBank's stock price should not be so low. So on the one hand, SoftBank Group has been buying back the company's shares. The last round of buybacks was actually just done at the end of April 2021 and cost $23 billion. This round of buybacks is a little smaller, with $8.7 billion; on the other hand, SoftBank Group is also adjusting its strategy to reduce the proportion of investment in the Chinese market and turn back to the Japanese market to find emerging companies.
But overall, SoftBank Remains at the Center of the So-Called "Blizzard." It is also an investment institution with an aggressive strategy, and if the positioning itself does not change, it will often be exposed to "cold waves".
Turkey
The last company had to be put in quotation marks because it was a country — Turkey.
In fact, the state can also be regarded as a company, and there are some indicators that can judge its operating conditions, such as the familiar GDP, per capita disposable income of residents, taxes, liabilities, and the price of money. Turkey's economic frustrations – a bit smaller, but rather a crisis – are manifested in two main ways: the government is heavily indebted and the currency is depreciating rapidly.
As of December 31, 2021, Turkey's currency, the lira, has depreciated by more than 50% in 2021. On January 1, 2021, 7 lira could be exchanged against 1 US dollar, and now it is 16 lira against 1 US dollar. If the timeline is stretched, from 2007 to the present, Turkey's lira exchange rate is a simple downward slope, depreciating more than 10 times all the way. Meanwhile, in November 2021, Turkey's government debt was as high as $200 billion, while its annual GDP was only $700 billion. As the lira depreciated, inflation in Turkey became more and more serious, and prices soared, triggering social unrest.
All this is mainly because of President Erdogan's "honey juice" operation. From September to December 2021, Turkey's central bank cut interest rates by 500 basis points in a row, that is, a 5% reduction in annual interest rates. This directly triggered a sharp depreciation of the lira.
Here we will talk about a simple economic law, if a country raises its own interest rate, then its exchange rate will generally be adjusted accordingly, and vice versa. So in general, if a country wants to raise the exchange rate and curb currency depreciation, it should raise interest rates, that is, raise interest rates, not cut interest rates. This is also the case within the country, if the price is too high, if you want to suppress inflation, it is generally a rate hike. When the interest rate on savings becomes higher, people are more willing to save money than to spend and borrow. To use the roughest analogy, there is too much water in the pool, so turn off the faucet a little smaller.
But Turkey is the opposite. Erdogan has his own set of economic ideas, he believes that high interest rates will make corporate loan interest rates higher, drive up the cost of businesses, and lead to price increases. There is also a saying that he just thinks that high interest rates are not good, that it is not feasible, and even that it is sinful.
Erdogan will strongly intervene in the decision-making of turkey's central bank, demanding a rate cut and, if not, removing the head of the central bank. In this case, the market has formed an expectation that the government will continue to cut interest rates, and confidence in the currency will continue to decline, so it has triggered a vicious circle of rapid depreciation.
In fact, Turkey has always been known for its serious currency depreciation, its current currency lira should actually be called the new lira, because before 2005 there was an old lira, which was the most depreciating currency in the world, the largest face value is 20 million, the minimum is 500,000.
This seriously plagues the daily lives of Turks. So in 2005, Erdogan, who had just come to power at the time, introduced a new lira. Since then, Turkey has also entered a period of rapid economic growth, belonging to the new economy of global attention, so the exchange rate of the new lira has stabilized. It's just that the good times are not long, and several factors have caused the lira to start depreciating again.
One is the global financial crisis, and the other is the U.S. sanctions that began in 2018. The deeper reason is that Turkey's internal economic development is not enough, and when it was growing at a high speed before, a lot of money was spent on excessively advanced infrastructure, especially some government buildings and public facilities were very luxurious. Many of the debts mentioned earlier are actually the debts of private companies, especially the construction industry, and they borrow using us dollars, so once the currency depreciates, it will be insolvent in an instant. Then the state also has to come to the rescue, the national economy is very dependent on government-related investment, exports and consumption have not been pulled up.
Of course, compared with a company, the governance of a country is still much more complicated, and the economic account is only one of the accounts, and it is still very difficult to calculate, but some basic economic laws are actually still common.
These are the 5 companies in our 2021 frustrated big company inventory of the global chapter. In 2021, it is actually more difficult to do this inventory, because there are too many large companies that are not satisfactory. Under the heavy shadow of the epidemic, most people, companies and economies are not satisfied. But after a little analysis of unsatisfactory companies, we can at least separate emotions from facts.
Lan Xiaohuan, an associate professor of economics at Fudan University, said in an interview with this journal that we think is very suitable for everyone to cheer up: At the stage when the public feels the worst, the situation may have begun to improve.
Business in 2022 may be the same.
| Anchor |
Xiao Wenjie | the chief writer of CBN magazine
Xu Bingqing | Chief writer of CBN magazine
| You can hear about | in this episode
02:03 The "ultimate form of the industrial group" represented by GE has passed
09:46 Adidas headaches for the Chinese market and Southeast Asian factories
17:37 The automotive industry, which has changed from "acute disease" to "chronic disease", lacks a core tide
26:26 Global investment inflated SoftBank Group and reduced its market value
34:13 Why Turkey has once again fallen into a vicious circle of inflation
GE and the Belief in Management Magic
In response to the end of the era of industrial groups represented by GE's spin-off, the Wall Street Journal gave the view that management is important, but the economic and business cycles are often more important.
"Bird's Nest "Butler" Scramble"
"CBN Weekly" reported in 2008 that the world's four major electrical giants competed fiercely for the bidding for the intelligent management project of only 165 million yuan for the "Bird's Nest".
Why Manufacturing is Driving Vietnam’s Growth
Vietnam is increasingly competitive in terms of trade and has become an attractive manufacturing hub in the world. But the covid-19 pandemic is hurting many factories and the global brands behind them.
"Extraordinary Times, Self-Help and "Winter" in the Automobile Industry"
CbN reported in the April 2020 issue of CBN magazine that it did not expect the impact of the new crown epidemic on the automotive supply chain to be so far-reaching that in 2022, we can still discuss the issue of "supply chain resilience".
Research Report | 1,350 billion yen! Why Does SoftBank Lose So Much Money?"
In April 2020, when SoftBank Group first saw its book assets shrink due to investment mistakes, we had some discussions about this peculiar Japanese company (and Son himself).
Turkish currency and debt crisis 2018-2021 - Wikipedia
Yes, on Wikipedia, there is a separate entry dedicated to Turkey's turbulent economic situation in recent years.
"When the public feels the worst, things have begun to improve"
An interview with Lan Xiaohuan, an associate professor at Fudan University and author of the best-selling book "Inside the Matter" in the December 2021 issue of CBN magazine. As you can see from this title, he still has a lot to look forward to in 2022, and I hope you too.
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