See previous publications for a broader and contextualised analysis.
Executive summary of September is that the month is almost exactly the same as August, only slightly worse with geopolitical tension of (Gaza and Scotland peaking) but with further accelerations elsewhere esp. Islamic State. Bond yields in Europe are crashing due to expectations of QE with oil collapsing due to increase supply (Arab countries such as Libya but also American shale gas) and reduced demand from China and the Eurozone.
The document starts with macroeconomic developments, moves onto microeconomic developments, trivia and finally ends with a broad assessment (SWOT) of the world economy and individual sectors of the economy (HRF).
Macroeconomic developments;
Eurozone;
The ECB cut interest rates from 0.15% to 0.05% and bank-deposit rates to minus 0.2% in order to try and boast lending (and inflation indirectly via increased consumption and investment). Growth forecasts were also cut on this day, Thursday, 4th September.
ECB TLTRO was lower than expected on Thursday, 18th September suggesting a liquidity trap…
Germany
Germany has had its first budget surplus since reunification in 1991 further supporting the idea that it is the dominant power in Europe. (Monday, 1st September).
As predicted happy smiley faces is not an economic strategy as Italy announced on Tuesday, 9th September that growth will be 0.0% in 2014 echoing my calls for reform to actually start…
France;
Meanwhile France has finally woken up and realised that it doesn’t have any money and on Wednesday, 10 September announced €21bn of public expenditure cuts.
Mr Valls, the primeminister, survived a confidence vote on Tuesday, 16th September.
French GDP was confirmed at 0.0% on Tuesday, 23rd September.
UK;
The UK saw a fall in inflation from 1.6% to 1.5% over supermarket price wars and a stronger pound which helped lower energy prices. (Tuesday, 16th September).
The Bank of England voted 7-2 on interest rates again on Wednesday, 17th September.
USA;
The USA made a fantastic decision of putting Stanley Fischer on the Committee for looking for asset bubbles – hopefully it will have powers to stop and prevent them. (Friday, 12th September).
US growth figures were upgraded from 4.2% to 4.6% on Friday, 26th September.
Australia kept its Interest rates at 2.5% amid a slowdown (caused by China’s slowdown – Australia sells a lot of raw materials to China). (Tuesday, 2nd September).
Swiss GDP was far below expectations on Tuesday, 2nd September with weaker exports and reduced investment spending blamed. It is one of the most economically integrated economies and the results show the effects of the Geo-Political tensions.
Ireland;
Ireland asked to pay back the IMF early showing confidence in its ability to borrow money and to also save money. Announced on Monday, 8th September.
Ireland announced a 7.7% year-on-year, GDP growth on Thursday, 18th September but fears of a housing bubble started after it was announced that Dublin house prices went up 24%.
Shocking results about Japan’s GDP figures showing a 1.8% decline in GDP for the April to June period. Abenomics needs to focus more on fiscal incentives and structural reform (tax, trade etc.) otherwise it will just create excess credit and a bigger asset bubbles which was the problem in the first place. (Monday, 8th September).
Venezuela announced inflation of 63.4% on Wednesday, 10th September…. The next political crisis?
South Africa cut growth forecasts on Thursday, 18th September over industrial problems with raw materials but also due to the EM currency crisis of 2014.
The Russian Central bank announces inflation at 7% and warns of further inflation problems over Ukraine. (Friday, 12th September).
China;
China announces a $81.4bn stimulus over a slowing down economy on Tuesday, 16th September.
China and India met on Thursday, 18th September to discuss trade and foreign policy issues. A new trading bloc forming?
In Sweden the Social Democrats won but fears over the rise of Fascism were high. It will probably more socially liberally than the previous government and may restart Keynesian infrastructure projects. (Monday, 15th September).
On Monday, 29th September Brazilian shares crashed 5% over fears that the president would be re-elected… (Socialism never works..)
Microeconomic developments;
Cars;
Uber was banned (as predicted in previous editions) and unbanned in Germany during the same month.
Record car sales were recorded in the UK on Thursday, 4th September with improved confidence and cheap credit blamed.
Ford reduces profit guidance over American Currency issues and a weak demand from Europe on Monday, 29th September… other firms will also be hit.
Petroleum;
BP was found guilty of ‘gross negligence’ with Halliburton and Transocean found ‘negligent’ on Thursday, 4th September. This obviously opens the door to more fines and lawyer fees.
The Big Six energy companies in the UK market share has fallen from 99.8% in 2009 to 92.4% in 2014 proving that (budget) competition is always available and that monopoly structures can’t last for ever1.
Gambling;
Betfair experienced a 30% increase in revenues due to the World Cup, announced Thursday, 4th September.
The Lego advert disguised as a film helped boast net profits and revenue by over 10% as announced on Thursday, 4th September.
Alcohol;
SAB Miller attempted to buy Heineken, rebuffed and was seen as a possible tax-over target… (Monday, 15th September).
Airlines;
Italian Air Traffic Control and Lufthansa pilots both went on strike on Friday, 5th September over pay and conditions. Air France followed on Monday, 15th September.
Ryanair, the world’s greatest company in the world, bought 100 new Boeing 737 Max’s with an option for 100 more. It has 197 seats (just shy of the golden 199 seat number; every 50 passengers requires an extra cabin crew member) and is cheaper for energy use and operation costs. Ryanair will expand heavily into North Africa, the Middle East and further into Eastern Europe and hopefully destroy all the Socialist flag carriers. Announced on Monday, 8th September.
Ryanair also upgraded passenger and profit guidance on Thursday, 25th September.
Air France scrapped plans to build up a low cost airline (Transvania) over pilot striking… (Monday, 22nd September).
New revenue opportunities for airlines were being formed after EASA (European Airline Safety Agency) announced a relaxation of mobile telephone laws on Friday, 26th September).
Printing money (literally);
De-La Rue gets the deal to print plastic UK banknotes… what is the point of durable currency…Announced on Monday, 8th September.
De-La Rue again, with shares down 25%+ after a £20m profit guidance fall, divided slash amid new competitors. A new CEO is coming on the 13th October… (News announced on Friday, 26th September).
Technology firms;
Technically a brand, but Apple launched its next line of expensive tat on Tuesday, 9th September with the Iphone 6 (+), Apple Pay and the Apple Watch. All very expensive with the brand (often associated with new, cool, ‘first’ and unique) being hit with accusations of bendy phones, technically inferior products to Samsung, faulty security and a ‘boring square watch’.
Microsoft buys Minecraft maker and promises to use the game on all of their available platforms. (Wednesday, 10th September).
Yahoo to be fined $250,000 per day over failing to hand the USA data. (Friday, 12th September).
Phone’s 4U collapsed with all the major UK phone operators leaving them to sell directing to customers. (Monday, 15th September).
ASOS shares crashed on Tuesday, 16th September due to fire, profit warning and infrastructure spending improvements.
Sony continued its remarkable ability to never make money with a huge loss announced on Wednesday, 17th September echoing fears of a mobile phone slowdown and rumours of a split.
Oracle misses estimates and Larry Ellison resigns as Chairman on Thursday, 18th September.
Alibaba debuted the stock exchange on Friday, 19th September.
eBay and Paypal announce a split on Tuesday, 30th September.
Netflix to debut first film in 2015 coinciding with an IMAX release… Announced on Tuesday, 30th September.
Microsoft 10 was released on Tuesday, 30th September because obviously 7 8 9 meant that it had to skip the number 9. The return of the smart button and a few more ‘user-friendly features’ were included.
Philips announces that it is to split into two on Tuesday, 23rd September.
Banking;
Currency trading was boasted by the uncertainty over the Scottish Referendum.
Santander chairman dies with his daughter taking over on Wednesday, 10th September.
Barclays got a new chairman on Friday, 12th September.
PIMCO founder Bill Gross left PIMCO in questionable circumstances on Friday, 26th September…
Lloyds suspends people over LIBOR on Monday, 29th September.
UBS warns of a Foreign Exchange manipulation fine on Monday, 29th September.
Sports Direct did well with sales up 12.2% and group profit up 11.8% empathising that people still like cheap stuff with the obvious implications being that Lidl, Aldi and Primark etc. will also do well during this economic period. (Wednesday, 10th September).
Manchester United announced a 17% increase in revenues on Wednesday, 10th September but Champions League will hit them by £50m. Rumours are out that mid-week friendlies are on the cards.
Tottenham Hotspurs was rumoured to be a takeover target based on hope of a top-four finish? (Friday, 12th September).
J.D.Sports announces further expansion on Wednesday, 17th September.
In confectionary, Thortons, announced a profit increase of 60% due to store closures and selling directly inside supermarkets. A new model for their future… Wednesday, 10th September.
Supermarkets;
Morrison’s was heavily hit with half-year profits down 51% and like for like sales down 7.4%... Aldi and Lidl are killing the Big Four.. (Thursday, 11th September).
Also on Thursday, 11th September, Ocado sales were up 15.5% but average order size fell amid price competition…
Again, Thursday, 11th September, Waitrose sales were up 1.3% including a 54% increase for online.
Tesco’s over-reported profits by £250m… on Friday, 19th September. A new CFO was announced on Tuesday, 23rd September.
As expected fantastic results from Aldi on Monday, 29th September.
Pharmaceutical;
GSK was hit by a £397m in China over bribery on Friday, 19th September.
New proposed American tax inversion laws hit some of the pharmaceutical companies as these were suggested to be possible targets.
Trivia;
Football clubs are loaning players instead of buying them out directly to avoid Financial Fair Play (FFP) rules.
Edinburgh has a new tactic to boast tourists of simply pretending that the Panda is pregnant.
Positive narratives are the way forward in politics with Alex Salmond changing the Scottish Referendum vote from Yes-No to Yes-Devolution Maximum. FICC was boasted by the uncertainty caused by the Scottish vote.
Legos films is a brilliant advert for Lego products with a similar thing down with superhero characters whereby television programmes were made specifically to sell characters.
Warm weather helps retail sales and the internal holidays for the UK at least as noted by ABF’s Premier Inn sales announced on Monday, 8th September.
With the UK rocked by the voice-mail phone hacking scandal (further continued on Wednesday, 24th September over allegations that the Daily Mirror was also involved..), it now turns out you can steal their naked photos as well… Obviously (internet) security is going to receive a massive boast.
Vacuum sales boasted department stores as the EU bans certain types of models.
THE WORLD ECONOMY (September 2014)
The Main Problems effecting the World Economy;
The model country (in v. simplistic terms with a lot of factors missed out);
Freedom and respect for the individual over the collective as a basic principle.
Private property rights and easy planning / building laws.
Low taxes and low government spending i.e. limited government and no bureaucracy.
Free trade and a flexible exchange rate.
A good and focused education and a basic welfare safety net.
A non-rigid class system structure.
Low barriers to entry for most businesses but also a patent system.
Good industrial relations (i.e. no class war between unions and businesses).
Good international relations i.e. no wars or possibilities of war.
Strong and stable governments.
Geo-Political Risks.
Scotland.
Salmond wants Independence and Britain wants to keep the union.
Devolution Maximum (Devo Max) has already been agreed in all but name and will over time come into place regardless of the outcome.
The outcome of the referendum will mainly concern defence and currency (inc. Scotland’s ability to borrow as an independent country).
Ukraine – Russia.
Ukraine had a civil war and Russia intervened when they were effecting Russian born people.
Many saw it as an occupation and sanctions are under way to cripple the Russian economy into surrender… (Tit-for-tat retaliation has also been seen).
Inflation is very high in Russia due to the weakening international competitive pressures and a devalued currency but the issue is seen as cultural and not economical in Russia, at the moment.
Israel – Palestine.
Hamas was blamed for kidnapping three Israeli teenagers and Israel responded as to make sure that it wouldn’t happen again.
Rocket fire was exchanged and a cease-fire is underway.
It has happened a couple of times in recent years and Israel is determined for it to not happen again.
Islamic State (ISIS or IS).
IS essentially want to take over Iraq and Obama was concerned over a possible genocide, thus launching airstrikes.
The problem could of course spread throughout the region.
Continuations of the Arab Spring.
Most notably Syria, Libya and Egypt.
Iran and Pakistan are ripe for revolution.
Senkaku Islands (China – Japan).
Japan and China are ‘fighting’ over islands as a matter of principle.
Nothing has happened yet but things could go wrong very quickly.
Other countries.
Thailand, Turkey, Brazil, Argentina, Venezuela and a couple of others have had rioting problems largely connected with Socialism.
Ebola, malaria, AIDS and other diseases are effecting African growth.
Things of course could get worse.
Monetary Policy.
Major countries;
USA.
QE is expected to continue to be reduced by the end of 2014 but may be delayed until the first half of 2015.
Interest rates to rise afterwards depending on inflation and unemployment.
Japan.
QE may expand if inflation expectations and actual inflation aren’t met.
China.
Facing a credit bubble and further expansion which of course will feed into a housing bubble.
Very similar to USA 2000 – 2007 economy.
Eurozone.
Deflationary expectations are weakening German opposition to QE and further credit easing is expected (interest rates were recently cut to 0.05%).
ABS version of QE is expected.
UK.
QE on hold at £375bn.
Interest rate hikes are expected soon albeit in a catch-22 scenario along with the Scottish problem.
Worldwide monetary policy is currently ignoring the mandate of low stable inflation and instead preferring unemployment and long term health objectives.
Currency fluctuations are also responsible for capital flight problems.
Once spare capacity is eaten up, inflation is the result under Keynesian analysis and obviously looking back at the 1970s expectations can also change which can cause further problems esp. with unions.
(On a side note Fama’s Efficient Market Hypothesis relies on perfect information which of course means interest rates (the price of credit) and other prices to not be distorted. Central Banks use ‘decree’ and not the Investment/Saving model and thus can cause Mal-Investments.)
The Euro Currency.
The Euro Currency is not a Optimal Currency Area since the labour market is not entirely flexible due to language and cultural constraints.
The Eurozone economy is essentially following Japan’s ‘Lost Decade’.
The Japanese asset price bubble of 1986-1991 is a prime example of what happens when monetary policy allows the expansion of credit into mal-investments which then collapsed with the onset of five interest rates hikes by a central bank (to combat monetary inflation).
This then damaged Japan's ‘over-leveraged’ banks.
A liquidity trap and deflation followed…
‘Abenomics’ as the solution?
Reform (trade, working practices etc.)
Monetary stimulus.
Fiscal stimulus
Exchange Rate Fluctuations.
Asia 1997 ~> South America (and Russia and a few others) 2014 Asia 1997;
Inflation problems in the USA caused the USA to increase interest rates (or expectations of increased interest rates).
Capital flight occurs between Asia with money moving from Asia to the USA.
Money is borrowed in Asia using US Dollars (because local currencies are crap / not trusted by western financial markets).
Most currencies in this system use a fixed exchange rate system to reduce currency risk. Meaning that increased interest rates have to be used to bring back some of the capital flight and maintain the fixed rate.
Increase interest rates then damage the domestic economy…
George Soros then speaks… and your currencies is forced to float…
(Asia 1997 reduces the demand for Russian oil. Oil prices plummet and Russia defaults in 1998 bringing down Long-Term Capital Management (LTCM) with it).
‘Dithering Idiots’.
Essentially everyone who just talks for a living without actually doing anything.
Positive thinking is not a strategy.
Country Analysis;
Using SWOT analysis.
Strengths.
Weaknesses.
Opportunities.
Threats.
Germany;
Strong manufacturing economy (and apprenticeship programme), good industrial relations, austerity implemented (Hartz reforms under Agenda 2010), excellent Mittelstand (SME) model and stable leadership (two way coalition with Merkel).
Reliant on the Chinese credit bubble and a weak Eurozone threatens to derail the entire European Union as well as Germany. Energy is currently very expensive (due to the Green energy commitments). Lack of independent monetary policy (Euro Currency).
Can benefit a lot from a revival of European competitive esp. in the Austerity countries but also of wider economic growth in Asia and Africa.
The ending of the Chinese credit bubble and the Eurozone crashing are the main two threats.
France;
Long term cheap energy in Nuclear power (Messmer plan).
A weak and divided (Free market versus Socialism, Valls/PM confidence vote) Socialist government, limited fiscal movement allowed (Growth and Stability Pact), can’t devalue (Euro Currency) and very poor industrial relations (lots of strikes). 57% of GDP is government spending.
If everything Hollande did was undone, France may survive.
Hollande and the Eurozone crashing.
Italy;
None but deflation will help competitiveness. (Reduce price and wage pressure helping price competitiveness).
Practically everything with a weak and dithering government (Renzi’s promise of reform hasn’t happened), slow legal system (too long and complicated), tax evasion, Mafia, poor industrial relations etc. etc.
The Mafia honestly can’t really do a worse job.
Eurozone economy but also lack of reform.
‘Club Med’;
(Greece, Spain, Portugal etc.)
Implemented austerity and will regain competitiveness soon. Tourism and exports (Tourism is a huge export) should start growing as well after the negative PR and civil war images fade out.
Fragile governments (coalitions but also breakdowns due to austerity) and industrial relations (inc. Civil Unrest).
Tourism and manufacturing.
Eurozone again but most likely civil war and Fascism / Communism (The Extremes have benefitted from weak governments and austerity. Blaming others is the easy rhetorical action).
UK;
Low corporation taxes (will be the lowest in the G8 at 20%) and independent monetary and exchange rate policy (compared to the euro currency.
Divided on EU membership, reducing disposable incomes and high energy costs from a devalued sterling. Carney is also a problem (see, Catch-22 situation above).
Exports will pick up with wider Eurozone growth (providing the currency stays devalued) but has a cultural advantage with the Commonwealth / Empire countries esp. India (although India are slow and hostile for foreign markets and money).
Eurozone, Carney and credit bubbles turning into housing bubbles.
Nordic countries;
(Sweden, Norway, Finland and Denmark?)
Strong governments, lack of Fascism / Communism (for the time being) and good industrial relations.
Finland in a triple (quadruple?) dip recession, Norway reliant on high oil prices, Sweden slowing down (new government was elected in September 2014) and Denmark getting hit by Russia – Ukraine.
EU membership and will pick up when the Russian market comes back (esp. Finland).
Finland, Eurozone, Russia – Ukraine and collapsing oil prices (esp. Norway).
Eastern Europe;
(Czech, Slovenia, Latvia, Poland etc.)
Improving from the ‘Shock Doctrine’ of the early 1990s. Privatisations and Deregulations.
Russia – Ukraine. Property rights.
Further market based reforms (‘Thatcherism policies) and EU membership.
Russia – Ukraine and Putin.
Russia;
Medvedev Modernisation plan and lots of oil and natural gas.
Putin, lack of diversification from the energy sector and lack of reforms. Inflation from a devalued currency and domestic pressures.
Reform and improved international relations would help. China and Asia are friendly…
If oil falls below $80/b they are screwed. International sanctions of Ukraine.
Japan;
Good industrial relations (Japanese culture) and cheap credit.
Cheap credit threatens to create more financial bubbles (ABCT). Twenty years of stagnation (‘Lost Decade’).
Trade reform and general liberalisation.
If Abenomics doesn’t work… and war with China (over the islands, see above).
China;
Ultra Strong government (dictatorship) and huge potential.
Reliant on cheap credit and the transition from an investment based economy to a consumption based one. (The problem with China in the move from investment to consumption. Under Keynesian analysis increasing investment will also increase the total capacity available for production thereby leading to non inflationary economic growth. Obviously increasing consumption without capacity leads to inflation. That it is problem facing China…)
The opportunities are endless.
The credit bubble creating a housing bubble and inflation causing interest rates to increase which in turn will collapse the mortgage and Shadow Banking System. War with Japan.
India;
Huge potential with Modi (the Prime Minister) having a mandate for reform.
Reform needs to be implemented and special interest groups will stop it being done. Should open up the economy more to foreign investors and money.
Can quite easily rival China if it copies exactly the same reforms.
If Modi becomes lazy or complacent.
Other Asian countries;
Did reform after Asia 1997 (followed neo-liberalism). Will benefit from China’s rise (and if Abenomic’s ‘works’, Japan as well).
Reliant on China to a huge extent. Thailand has been undergoing political instability.
Can create an economic / political bloc similar to the European Union.
China.
Middle East;
Lots of oil and money. Arab Spring has helped individual freedom and should help the development of a free press. (The Arab Enlightenment?)
Huge political instability and wars. Currently wastes a lot of money on buying football teams and could use it to develop Social reforms instead… Oilmypia and reliance on high oil prices (1973 - mid 1980s again? 1973 of course was the Yom Kippur war which in turn led to new discoveries of oil in Norway and the UK, alternative fuels being used and efficiencies increasing along with the Japanese car industry. In the mid-1980s Saudi Arabia was forced to slash the price of oil to protect its market share and influence.)
Can become the energy centre of the world and develop their economies with Social reforms in education.
Political stability, collapsing oil prices (the mid-1980s price cutting led to the rise of radical Islam to a certain degree) and wasting money / time.
Israel
Very high tech based economy, paranoid (‘only the paranoid survive’) and highly educated. Good relations with Egypt and Jordan (peace agreements).
War with Arabs and America’s move towards Shale gas. Eurozone as well. Iran and nuclear weapons (threatens World War Three).
Can act as a broker between the West and East. Diamond / Gold industry will benefit from increasing Asian and African wealth.
BDS movements, Another Arab war and reducing support from America.
Australasia;
(Australia, New Zealand etc.)
Lots of natural resources.
Reliant on huge Chinese pulling up prices. Competition from Africa for the natural resource industry.
The Solar energy industry can grow and expand along with Asian trade. The Commonwealth.
Natural disasters (forest fires), the possible collapse of the Chinese Credit markets and Abbott (Australian leader) could do something stupid.
Africa;
(Kenya, South Africa etc.)
Can only really improve… and natural resources.
Needs lots of development, infrastructure and huge reforms.
Everything.
Corruption, crap governments, lack of Social reforms in Healthcare and Education, civil unrest etc. etc.
South America;
(Chile, Argentina, Brazil etc.)
Lots of Natural Resources and Chile is OK. Football is good.
Argentina and Brazil are Socialist economies. South America was heavily involved in the Emerging Market Crisis of 2014 (see above for Asia 1997). Reliant on a strong world economy to grow their industries.
If reforms get implemented then they could rival Eastern Europe as the next growth bloc.
Cheap energy (shale gas) which has helped manufacturing.
Hugely reliant on cheap credit. Obama and foreign policy. Corporation tax is a joke in America (35% on worldwide taxes). Debt Ceiling crisis (currently suspended due to Mid-Term elections).
If they start simplifying (or removing) government, thinks might actually get done.
Running out of spare capacity (non-inflationary economic growth) and subsequent monetary policy effects.
Canada;
Generally everything is OK except the weather. Can develop an energy industry (Canadian oil sands).
Reliant to a certain extent on European and American markets for trade.
The development of an energy industry.
American monetary policy and if Quebec leaves Canada.
Individual Sectors of the Economy.
HRF analysis (Past-Present-Future);
Brief History.
Recent changes.
Future direction.
Healthcare and Pharmaceuticals;
Largely started out as chemists and bought new products in food, drink, chemicals etc. and expanded into body care as well.
Large mergers and buy outs to consolidate the industry with each firm specialising in different areas. The rise of generic drug makers.
Further consolidation and buying technology / patents with acquisitions. Further developments of food, drink, chemicals, body care (female and male expansion) but could see team-ups with petroleum firms. Cannabis, drugs and tobacco-free smoking to rise.
Financial;
Small regional banks developed and structured by regulation to form large multinational and multidimensional firms. Split between hedge funds, commercial banks, investment banks and various asset buying firms along with accountancy and actuarial houses.
Recent crises include Dot Com 1, credit bubble ~> housing bubble, Eurozone crisis and EM 2014. Large fines over manipulation of gold, FX and LIBOR etc. New regulations in Basel III (esp. capital ratios), commodity trading etc. FICC hit by QE, low interest rates, regulation, fines and lack of volatility. Gold, silver and oil have not experienced massive increases in price considering a devalued US Dollar and Geo-Political risks. In banks, Barclays and RBS are focusing on Commercial, Santander have a new chairperson, Banco Epsirito Sanco threatened to destabilise the ‘Club-Med’ banking system, problems in the Bulgarian banking system and huge fines for investment banks.
Corporate bonds, IPOs, M+A to expand and catch-up from 2007. Buy backs and other tax avoiding instruments are growing. Some banks will expand into accountancy, consultancy and the rest will consolidate worldwide.
Construction;
Large family firms expand and skyscrapers helped demand.
A housing bubble hasn’t helped buy Help to Buy (UK) and Fannie / Freddie (USA) will expand home ownership and presumably building as well. House building is very high in the UK due to the v. high prices. Construction firms listed in Dubai have affected the entire stock exchange due to worries over the cost and affordability of most projects in Dubai.
HS2, infrastructure and the rebuilding of cities will boast demand.
Technology inc. Communications (esp. NASDAQ);
Largely hedge fund or angel investors backed ‘new-technology’ firms with an emphasis on the first wave of technology (the internet, the microprocessor and software emphasis).
Now, it has developed into 21st Century technology of Web 2.0 (interactions with social media) instead of the internet, cloud technology instead of client servers, 3D printing (mass consumption instead of mass production), Green Energy cars replacing petrol and diesel cars, Big Data (instead of basic statistics), online shopping instead of in store shopping, 3D modelling instead of static modelling for computer games, algorithmic trading instead of fundamental or technical analysis, Social Media and mobile phones replacing landlines and tablets (instead of desktops and laptops) are part of this change. Currently experiencing a technology bubble similar to Dot Com 1 (Austrian Business Cycle Theory, ABCT, explains this). Internet privacy, cross border tax and data protection issues are expected to grow.
Psychology and Big Data will help drive the changes necessary for the future (Psychologists with data will take over the world leading to Web 3.14). Phablets could take over the mobile and tablet business. Google and Bing are declaring wars on cross platforms. The reduction in the barriers to entry and increasing globalisation of the industry will help see cross-platform consolidations and the rise of bigger technology giants. Viral and social interaction advertising will be key for brand awareness and marketing.
Airlines and Airports;
Air travel used to be for the luxury of the rich and famous with large state owned carriers being brand ambassadors for the countries. Strike prone and inefficient, they were privatised and the industry heavily deregulated.
Southwest, Easyjet, Ryanair and low cost carriers in general dominate short haul and domestic travel. Long haul travel has yet to experience low cost competition. Price on the basis on low costs seems to be the key for large passenger numbers and huge profits. High oil prices, unions, Air Traffic Control (ATC) and Air Passenger Duty (APD) are hurting the industry along with ash clouds and other weather problems but increasingly terrorism esp. 9/11. Virgin and Qantas are currently both in a self-defeating price war. Tourism subsidies are commonly given to airlines to encourage passengers (airports are largely owned by local and national governments). Ryanair is undergoing a branding and business focused transformation to create a ‘nicer airline’.
In the future low cost long haul flights should take place with airport capacity flat due to government planning laws. Ryanair will dominate European short haul flights and low cost travel will go across borders with further deregulation, worldwide standard adoption and Air Traffic Control simplification. In-flight entertainment and a move for ancillary revenue will accelerate. Night flights will increase along with noise reduction.
Cars;
Ford built the Model T and Sloan developed branding and customer segmentation. Toyota created the Toyota Production System and developed Lean manufacturing as well as Just-In-Time.
The automobile crisis in 2008 led to a massive protectionist bailout. Energy efficient and alternative fuels (to replace diesel and petrol) are accelerating.
Driverless cars are expected soon.
Consumer brands inc. Fashion;
Largely role-model association and mass PR tactics esp. with sport and movie ‘stars’. The Swiss watch industry stole the fountain pen model of linking the product back to history and elegance. The cult leader model was followed by Steve Jobs etc. etc. See, ‘Syrup film trailer’ because branding is essentially about buying class or a lifestyle with animals and ‘stars’ promoting them.
The 2007 financial crisis led to a backlash against exuberance in the Western World but Asia and Africa are growing on the back of ‘aspirational people’. The fashion industry follows the ‘pyramid model’ with the top layer being £3m jewels, the second layer being £1000s of dresses and the third layer being handbags, simpler clothes, perfume and wallets etc. The first two layers are advertising and marketing for the ever crucial Vogue Magazine with the third layer being the money maker. Nike use Nike-Air technology to interact and engage their customers. Coca-Cola use names on the bottles to spread the message on social media. Disney’s policy of no sex/nudity, swearing and violence combined with Spielberg’s talents are the two brands currently in films (Christopher Nolan is currently developing one).
Psychology will dominate the world. The law of product diffusion used by Apple will spread to other industries as well. Most brands rely on sizeable disposable incomes which can create a problem during economic hardship periods.
Tobacco;
Largely seem as a stable product, it now changing to an unhealthy and expensive product for addicts only.
Tax, regulation and brand visibility is being attacked by both sides of the political spectrum in the Western World. The Eastern world is experiencing the branding and uptake in constant and rising in these regions.
E-cigarettes are booming but WTO comments threaten the rise with the possibility of taxes and regulation. Tobacco-free cigarettes are a possibility along with flavourings.
Alcohol and soft drinks;
Branding and lifestyle associations with sport star endorsements seem to be common route of development. Wine is common with the middle classes and Champagne for celebrations.
Energy and ‘healthy’ drinks are rising along with consumption in the Eastern World. The Western World is subject to branding and advertising constraints. Taxes and regulation are common to combat binge drinking, health and social problems. China is cutting down on excess.
The development of other forms of drink (brain fuel, muscle building etc.) will come. The formulation and professionalism of the wine industry is almost certain. Consolidation of the industry is also almost certain. Africa and Asia are the new growth regions.
Mining and raw materials;
Vertical integration for the petroleum industry and government sponsored projects.
Oil fluctuates with wars, OPEC, the world economy and alternative energies. China and Asia are now the huge buyers with Africa and South America being hugely involved in the commodity business. More globalisation and consolidation of the industry is expected.
New products, increased efficiency, new technology and US / Chinese foreign policy will shape this industry in the future.
Defence and Aerospace;
Again government sponsored origins with each side supporting each other.
Boeing and Airbus in a plane war over safety, capacity, energy efficiency and cost. Military cuts are common in the Western World with the Eastern World picking up the tab esp. Saudi Arabia and China.
Mars exploration and cyber warfare/security to be the new big industry.
Supermarkets;
Grocery stores turning into food stores.
The development of price tiers, mass advertising, customer segmentation, different types of stores, a non-food esp. clothing product ranges, and free online delivery are new innovations. Other products such as café’s, insurance and own brands are now common. The horsemeat scandal led to a dip in confidence with the UK Big 4 brands and paved the entry for Aldi and Lidl to be trusted.
Low cost and foreign brands such as Aldi and Lidl seem to be the way forward. Online as well along with quality segmentation will be the way forward.
Entertainment;
Before the internet CDs and DVDs were common along with B movies, film rentals and live TV.
Now online streaming, illegal streaming, Blockbusters, recorded Television, clubbing, (live music) festivals, foreign holidays, concerts and live European football (developed to avoid a splinter European League) are common. In the UK Sky and BT are offering landline, broadband and football TV packages together. Cinemas are opting for established franchises and brands following the Summer blockbuster, Spring Oscar season, Autumn Tat and Winter family model.
House parties and foreign parties to overtake clubbing. (Most club chains will go bankrupt). More sports such as frizz bee and chess (along with extension brands such as Formula E) to be shown live. The Music industry to be dominated by online sales and concert tickets. Fan merchandise and branding to grow. Theatres will be flat and foreign holidays will extend to long haul providing the airline industry gets a move on. Edinburgh zoos model of a fake panda pregnancy to be extended in other industries. PR and branding will be key for success and focus on emotion manipulation or psychology.
Media;
It used to be dominated by radio and newspapers by government organisations.
Now it magazines, internet and Social Media by anyone that is now common. Viral advertisements and personalised adverts from data collected by computer cookies are being used.
In the future, the death of generic newspapers in favour of online and specialised publications. Click baits and advertorials will be increasingly more common.
Energy;
Coal to petroleum began in the early part of the 20th Century. The Arabs benefitted a lot from oil and also from the OPEC (1973 to the mid-1980s).
After 1973, alternatives fuels such as solar, wind, nuclear etc. were being developed along with efficiency incentives and worldwide exploration were common. After the oil crisis of 2008 and the Arab Spring, shale / natural gas are now in vogue.
Further exploration in alternative energy and energy efficiency. Price and government policy to be a key determinant in the development of each energy resource. Green energy and green energy in cars seem to be the key focus.
Sports (largely football);
It used to be match tickets that helped clubs.
The football Premier League led to a clubbing together of the major footballs clubs to develop a competitive and rich league. TV, online, sponsorship of everything, endorsement of everything, match day tickets and foreign owners are now common. Loaning to avoid Financial Fair Play is also becoming increasingly common.
The development of a European super league, player branding, team branding (Busby Babes, Fergie’s Flingers etc.), Middle East and Asia focus (match times and players bought for advertising reasons) and the release of football to the rest of the world. Nike and Adidas to kill each other over sponsorship along with BT and Sky for television rights.
1 The Kinked Demand Curve theory relies on the assumption that the cost base is the same for both companies. In Airlines, a cost base of £10 / flight can charge £15 / flight and obviously undercut a competitor with a £20 / flight cost base and the same principle applies for all other industries as well with efficiency and alternative products being a main instrument for changing industries (dynamic equilibrium / creative destruction).
