December 2011 Archives
The UK's last train-making factory was yesterday thrown a lifeline - for now at least - after winning a contract worth £188 million to assemble 130 new rail carriages for the Southern franchise.
The plant, now owned by the Canadian multinational Bombardier after numerous ownership changes and accompanying underinvestment, has been under threat since the government controversially selected the German firm Siemens as the preferred bidder for a huge (£1.4 billion) Thameslink trains contract earlier this year.
The latter deal prompted Bombardier to announce over 1400 job cuts at Derby, roughly half of its workforce, leaving many to wonder if the much-hoped for 'rebalancing' of the economy had quite literally hit the buffers.
However, the resulting furore over that Thameslink deal has also forced the government to look again at how it awards such contracts, and has left the Department for Transport somewhat desperately scrabbling around to find contracts that could offer Bombardier's Derby plant a short-term lifeline. Hence yesterday's announcement, which involves a £80 million 'subsidy' from the Department.
This is the blog version of my Birmingham Post print edition column from 15th December 2011
The greatest film ever made, I think, is the supposedly highly festive Frank Capra classic, It's A Wonderful Life, starring the equally great Jimmy Stewart. It is, in fact, much darker than most realise.
Right from its first moments, it is based around a man (a banker) who attempts to commit suicide, faced with financial ruin for himself and his family - and prison.
The film is also the best business movie ever made. It certainly speaks to our straightened economic times.
Along with Mary Poppins, it is one of a very few films to feature a bank run.
It explores two competing views of economics and business. One focuses on Jimmy Stewart's building society banker, George Bailey. The other focus is the banker and monopolist, Henry F. Potter (who outdoes business villains JR and pre-reformed Ebenezer Scrooge any day of the week). Fred the Shred probably took him as his business hero.
It further explores how the two models develop over decades in the typical American small town of Bedford Falls. As the film opens, one model has triumphed at the intense personal destruction of the film's hero.
George acts as one of the great silver screen advocates for a business world which gains success from human-focused activity and delivery.
Speaking earlier in December at a Design Council Debate Dr Tim Bradshaw, Head of Enterprise and Innovation at the CBI strongly supported the need for a national design strategy.
"With economic growth stalling, the public deficit at 7.9% of GDP and debt at 84% of GDP and growing the UK needs a design strategy that is active and ambitious, setting a clear direction of travel; developing our competitive advantage both across all areas of government and in terms of all of its interactions with the public and wider economy."
Music to my ears was Dr Bradshaw's emphasis on the need to break the link, either explicitly or implicitly equating design with just the so-called 'creative industries'.
Jaguar Land Rover's quest to find a Chinese partner has taken a step closer after it emerged that the firm has formally applied to the country's National Development and Reform Commission to set up a joint venture (JV).
JLR is now waiting for a response from the Commission, but that hasn't stopped JLR shifting some key staff over to China in preparation for the setting up of production. According to recent Chinese media reports, JLR has most likely chosen the firm Chery as a partner in the joint venture. If you haven't heard of it, Chery is the seventh largest Chinese car maker, selling some 700,000 units in 2010.
Choosing the right route to market is critical for success in any market and can easily mean the difference between success and failure. Getting it right can spell increased sales and profits, while getting it wrong can lead to headaches and frustrations and ultimately, wasted time and money.
You may decide to control your destiny and sell direct. But the most common routes to market, especially in Europe, are through commercial agents or distributors.
In using either you need to look at three key factors: the risk you are prepared to take; the control you need and the flexibility offered.
Of course, having the right product in the first place is essential. It needs to be fit for market, meet market regulations and have some kind of competitive advantage.
The next step is to choose your market and acquire a good understanding of the dynamics of that market from supply chain to final customer.
Many companies opt for a commercial agent to help sell their goods. The right agent helps a company save on overheads and gain key information through the agent's local knowledge and contacts. This route also allows the company to be in control of the sale and to pay on results.
These are all valuable benefits. But the use of agents isn't without pitfalls. Agents need to be properly managed with good communication, clear guidance and a robust, legally enforceable agreement specifying, for example, if the agent is to be the sole agent for your product. If things go wrong, a bad agreement can be costly. It's worth remembering that as the seller (commonly known as 'The Principal') you retain the 'Title of Goods' and therefore carry all the risk associated with any transactions.
To help you with drawing up a template for an agreement, have a read of 'The EU Commercial Agents (Council Directive) Regulations 1993'. It sets out the duties and obligations for both you and the agent, and provides some guidance on remuneration, terminations, compensations and restraint of trade.
An alternative to an agent is a distributor. This route can meet a need to achieve sales volume and economies of scale from productivity and financial accounting while also having the advantage of offering a local facility for stockholding and infrastructure to handle delivery and after sales service to a multitude of consumers.
However, in a distributor agreement, the 'Title of Goods' normally passes to the distributor. This can lead to a loss of your own deeper knowledge and understanding of the market, a reduction of margin income and less control in product pricing. This means you need to be more diligent in understanding pricing models and marketing and to provide good marketing and advertising support.
Whatever the route to market, clear and robust agreements are key. It's essential to take professional advice and have your agreements prepared, checked and approved by professional legal advisers.
You then need to manage those agreements by keeping close records and having regular review meetings with your agents/distributors.
Other key routes that can be considered are licensing, joint venture, incorporation, acquisition overseas or even greenfield investment overseas - but that is for another time.
At UK Trade & Investment we provide free, expert advice on how to get started and which routes to market may be best for you. If you'd like to find out more, contact my colleague Hari Rai at firstname.lastname@example.org
So, after all the pre-event hype (or in truth downplaying), COP17 in Durban finally closed its doors last week after 11 days hard negotiating on climate change and the actions the world must take to avert disaster.
Patrick Fuller, Chairman, Weston Beamor is interested in how you change market dynamics... "I'm always looking at how to change the way markets operate," is how he puts it. And it's something he can speak about with some confidence given his past experience.
Meeting him in the jewellery quarter I am instantly impressed by his distinctive yet effortless taste, the abundance of striking artworks hanging on his head office walls, the immaculate condition of the manufacturing facilities and offices, and the imagination and attention to detail put into their jewellery displays - a glittering range of exhibits greeting you on entering their showroom. Last year they invested £100k or ½% of turnover in this facility and they're currently undertaking a similar commitment to their trade counter in London.
The events in Brussels last week with the British 'veto' exercised have had their well choreographed consequences among our own political classes - the spirited bulldog barking gleefully in one corner while toys are hurled liberally from a pram in another. It's interesting to speculate a little on how this is seen on a wider world stage and I have drawn on recent exposure to Chinese perceptions to draw some tentative conclusions.
In a period of difficult economic recovery what the UK needs most is sustainable growth. However if this is to be truly sustainable, we need to both rebalance and decarbonise our economy. The problem is that policies in these two areas are often pulling in different directions:
On Friday, it still looked like there would be little breakthrough at the Durban Climate Talks. However, Connie Hedegaard, the Commission Climate Minister and previously one of the youngest politicians to enter parliament in Denmark, has secured a landmark victory at the 11th hour.