The “Brangelina” Story as a Business Model

The story of Angelina Jolie and Brad Pitt can be compared a lot to that of Daimler-Benz and Chrysler merger although the first one lasted 3 years longer than the later. At the time it happened, it was considered a merger made in heaven between 2 big superpowers and at the time it was over it was deemed worthless. For the sake of our story we will consider Brad Pitt to be Daimler Benz and Angelina to be Chrysler.

When Brad “merged” with Jolie he had a small foothold in America (Jennifer Aniston) which was somewhat not fully satisfying him. Brad (Daimler) wanted to expand his reach in America and he came across Jolie (Chrysler) a luxurious, flashy and highly in demand brand at the time and they both clicked. During the years that ensued, Brad went on to strengthen his foothold in America (Daimler building factories in the USA) while Angelina drifted away from her core business (less movie appearances) and did not increase her territory (Chrysler failed to expand into Europe at the same pace that Daimler expanded in the USA). During that tenure Brad was rumored to have had some flings (Daimler’s stake in Mitsubishi and Hyundai motors) but both were ended or denied. Trouble kept coming with Angelina (Chrysler) suffering the most – nervous break downs, double mastectomy and eating problems (Daimler Chrysler merger came to an end in 2007 just one year before the financial crisis when Chrysler took bailout money from the US federal government)

So now what?

For Brad: He will probably keep moving along and searching for bigger and smaller stakes here and there to try to polish his image (Daimler has a small share in the Nissan Renault alliance to help the German manufacturer in building small cars and EVs) Ironically he is rumored to have cheated on Angelina with a French actress (anyone else sees the humor here?) or to increase his reach in unexplored territory (50% stake in the Chinese automaker BYD and 12% in Chinese BAIC as well). He is unlikely to find another “Chrysler” or to settle back to a “small foothold” but he will be “everywhere” (Daimler has operations in 16 countries!)

For Angelina: the “old” lady will have to wait for a Sergio (CEO of FIAT) to come along; someone who wants her for her great past and who hopelessly believes that this past will push him forward to grandiosity; he will be happy enough to carry her big debt (6 children) but unfortunately he won’t get anything. Sure enough every now and then she can give him a “jeep” but that won’t cover the investment. She will drag him in to what she has always done and he will fumble along still thinking that he can get a bigger foothold in America (Sergio Marchionni still hopes he can revive FIAT in USA through Chrysler.)

In the world of business, mergers in the “same line of business” either face spectacular success or fail spectacularly. Unfortunately the 2nd option prevailed for our 2 actors in this case just like the Daimler Chrysler case; and as in most failure cases one gets out damaged more than the other and so far it seems that Angelina has had the shorter end of the stick. As the wise man once said “if it is too good to be true, then it probably is!”

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USA, Cuba and Russia, the Everlasting Threesome

“War and Economy: The All Time Best Friends” is a term that will always hold true no matter what era the world is living in nor what situation is occurring. Money, wealth and the need for more resources for cheaper costs have and will always propel the world, not necessarily forward but it definitely is a pushing force.
In 1962, the world held its breath as the standoff between the USSR and the USA nearly wiped off the modern world in a nuclear war; the star of the story back then was Cuba. Ruled by the communist hard liner Fidel Castro and euphoric from its previous success in fighting off the Americans in the Bay of Pigs incident, Cuba was considered a direct threat to the “communism paranoid” USA. As a communist regime, it was just normal that Castro would align with the USSR. As part of the ongoing political war between the USSR and the USA, the Russians tried to benefit from the situation by trying to deploy a set of nuclear missiles that would put Washington D.C. within their reach. After a few tense days, Russia agreed to remove those missiles and secretly the USA agreed to do the same by removing some missiles they had deployed in Turkey just at the borders of Russia.
In 1962 the 2 world superpowers were the USSR and the USA, the Castro’s were in power, President Kennedy was a democrat and both powers used Turkey and Cuba in their stand-off. In 2015, a democrat is in the white house, Putin who’s a former KGB (the offspring of the USSR) has been steering Russia since 1999, Cuba is still ruled by the Castro’s and the USA has used the NATO as a cover to redeploy a defensive missile system in Turkey. So the scene is still almost the same minus the Russian missiles in Cuba.
In an interesting twist of events, President Obama announced in the beginning of 2015 that USA was going to ease restrictions against Cuba and allow more trade exchanges with the isolated island. There are many reasons that can interpret such a move but only one reason is the most valid and it’s the economic one. The proof lies in the set of rules that allowed for exchanges and money transfers.
To begin with, the ailing US airlines can find a new travel line where they can actually make money and profits since they are losing on their own turf (the CEO of Delta Airlines recently went ballistic in his criticism of some Arabic airlines and claimed that that’s where the September 11 terrorists came from and that no Arabic airlines should come to the USA) and as Mexico becomes more and more of a dangerous place, Cuba can be the next ideal destination for spring breakers. The always suffering US car industry is thirsty to reenter a market it has lost more than 50 years ago. Images coming from Cuban streets show them bustling with good old American cars, question is will the Cuban consumers like what the new American car industry looks like?
In recent years the US economy has been coming under lots of pressure from outsourcing jobs, to foreign competition to a larger and alarming budget deficit – most of which is owed to communist China, another country aiming at being a superpower but with no luck yet. This explains why the USA is in dire need of finding new markets, but Russia is not standing and watching, they too want a piece of the Cuban pie. A recent report announced that the trade embargo imposed on Russia by the European Union has cost the old continent about 21 billion dollars in losses and although Russia has been so secretive about the effects on its economy but a weakening Ruble and a statement by Putin that the country needs 2 years to get out of this mess is a clear indication. In short, both countries need an escape plan.
So both economies are in trouble, and both are looking for new markets. The Middle East is already set ablaze, and although Africa is a promising market it is for now left for the Japanese and Chinese to feud over it. China and Japan in their turn are expected to have slower growth than what was initially estimated and India is still struggling to find its identity. Europe shot itself in the foot when they imposed the sanctions on Russia and Australia – as always – seems like a continent on a different galaxy (too much sun can have it effects if you know what I mean). This leaves very few options for the two giants and makes Cuba seem the most interesting of them all.
As USA tries to aggressively enter the Cuban market by easing business and travel restrictions to American citizens combined with more freedom of capital flow from and to the mysteriously romantic island, Russia is not willing at all to sit on the side bench and they have already set plans for Cuba. In recent years, the once communist nation has been opening up to globalism but not in the terms of allowing multinational companies in as much as it was by trying to compete on the international scene although they have not been a great success so far. Russian Automaker Avto Vaz is now a part of the Nissan-Renault conglomerate which has significant meaning for an automaker that has been one of the very few to survive the post soviet era and might now become a global player. On the telecom front, The Wall Street Journal ran an article late in 2012 about the Russian Telephone maker YOTA which was planning an aggressive entrance to the already crowded telephone industry. So far their presence has been limited and just recently they signed a deal to enter the Chinese market which is highly dominated by local makers. One should not forget that the makers of the Kalashnikov are one of the largest exporters of weapons. Although they are not major yet, those moves are significant signs as to where the country is planning to head to.
Perhaps the most significant indication is the recent news that Russia is in talks with a group of investors from Abu Dhabi to partner up in a $200 million dollar investment that includes the development of a major airport and might include later a seaport and a railway. This announcement has sent messages in all directions; first it was announced in a military trade exhibition signaling Russia’s aggressive strategy to earn a market share in an area that has been predominantly an American turf. The second is a loud message by the Russians that they are still at the center of action in whatever happens in Cuba, and the third and probably the strongest message of them all is that Russia is dealing with Arabic Countries as trade partners and allies rather than just customers as has been the custom before- something that Uncle Sam has not done before (remember in 2006 when Dubai Ports company was forced to drop a deal to manage some US ports terminals just for being an arab company? What is it that they say about Karma?)
In terms of politics, Putin has loudly announced many times that the missile system in Turkey and many countries of the Eastern European block are an act of aggression against his country, he has shown resilience and unwavering determination is Syria, was among the first highest ranking officials to visit Egypt after the presidential elections which brought an army general back to the presidency and has shown ice cold nerves in the recent Ukranian crisis and was able to hurt the already ailing European economy. Cuba will not be any different; there are no signs that the Russians are willing to give the country up no matter what. During the soviet era, they supported the country in billions of dollars and there is no reason for why they should stop now.
After all, just like the USA is surrounding them they have a great interest in returning the service to uncle Sam; the Cuban market is thirsty for investments, the democrats are still in the white house, the castro’s in Cuba, the communist ghost in the Kremlin and the missiles in Turkey. It is obvious that little has changed in the last 50 years or so……

Forget about China, Africa is the Next Big Thing

Throughout the path of history sailors, traders, merchants and industrialists have searched the world looking for 2 things: resources and cheap production possibilities. And throughout that same path we all witnessed how the industrial revolution sailed off of European shores and became like a gypsy – relocating every once in a while to a new place until it has recently that is the last decade occupied the vast and big China. Ironically, this revolution has sailed around the African continent numerous times without ever landing on its shores despite the fact that it is the oldest known continent to humanity (Poor Columbus almost lost his life digging for resources in new found lands and ignored the richest continent in natural resources).

In the cartoon movie – Madagascar Escape 2 Africa, an interesting conversation takes place between Gloria and the Famous King Moto Moto, where she asks “any water?” and he replies in his funny voice “No, just more diamonds and gold” Of course we tend to laugh whenever Moto Moto says something and of course this is just an animation movie; but the message there is so strong and so striking with its truth. Africa has forever been the world’s mine for natural resources whether be it oil or precious stones and rare earth metals; even at the highest political and security risks oil and jewelry companies have been finding ways to have a presence in the troubled continent and maintain a constant and steady flow of these resources to the world. So the question is: “if those 2 industries have been able to perform well and even strive in Africa, why can’t other industries follow their lead? Creating work opportunities will decrease the number of fighters and cut the way for military recruiters who try to coerce men either by temptation or threats. And let’s be real for an instant, like I mentioned in my previous blog “War and Economy, the All-Time Best Friends” war will never end simply because it is simply the best engine to propel economies forward so the excuse of war and instability become invalid here.

It is true that the risks are high in Africa in general – Highest HIV rates in the world, civil wars plaguing most countries, lack of the proper infrastructure, and shortage of educated labor among other risks, but so are the rewards and the opportunities. Geographically speaking, the African continent is almost equidistant to all continents which makes its seaports the favorite target for all export oriented companies; an important factor for all companies that face logistics challenges and high transportation costs. Being one of the most densely populated continents, there will be no shortage of labor although most of it will be unskilled and uneducated but isn’t that the same case of most factory workers in China yet with an advantage, French and English are widely spoken on that continent which helps in eliminating the language barrier that is present in China – Even Portuguese is present! And the cherry on top of the pie would be Africa’s natural resources, almost every known and needed natural resource is present somewhere in the land of the Nile. One last thing to add; maybe if we go there we can finally figure out why Africa dominates all running sports!

“Everybody wants to go to China, but the Chinese are going to Africa”, in the last 15 years or so, China has dominated the global labor and industrial markets with manufacturers and companies flocking in from all over the world and this has helped in miraculously expanding, enlarging and enriching the Chinese economy, but when the Chinese themselves became big and experienced enough to spread their wings, they landed in Africa and started investing heavily in return for access to natural resources. Many African countries have made deals with China in which the latter invests heavily in the infrastructure of the country in which they are present. Does this model seem familiar? Well if you are having a déjà vu it is because almost the same strategy happened between USA and most Gulf countries in the early 90s at the wake of the fall of the Soviet Union. The problem is that USA didn’t take a similar approach in Africa and now the Chinese are doing it.

As a result, it was no surprise at all when China got all furious after the Japanese prime minister kick started his 2014 by visiting 3 African countries in the first visit for a Japanese prime minister to the forgotten continent in 8 years. That move, although not so significant, had many subtle and hidden messages in it and signaled the beginning of the race to Africa and an indirect confession that this is where the future is. Japan pledged more money to be invested in Africa and more investments in the troubled continent, the Chinese were so appalled by it that they went as far as accusing Japan of dreaming in reviving their colonization plans. It will be interesting to see how the fight between those 2 historic foes will unfold. Personally I think that the winner in all cases will be Africa since they will both be racing there to invest and to earn a bigger share. The rising yen is pinching Japan badly and for the first time ever they are in a serious need to find cheaper production alternatives. Although previously the countries of choice for the Japanese companies alternated between Indonesia, Thailand and Malaysia; this is no more the case as the competitor is now China and not the USA anymore.

Africa is known for its legend like success stories, and it will always be this mystical and magical place that will inspire for more legends from presidents who survived excruciating prison conditions to football players who overcame miseries and hardship and became sport icons all over the globe. Maybe – and as the song says – the time has finally come to “this time for Africa”

This is Why Lenovo should purchase Blackberry

When I came back home to Lebanon for Christmas vacation in 2009, I was amazed by how popular Blackberry was in my little country especially among kids and teens, the most unlikely customer base for the most popular business phone. 8 months earlier when I first left, the smart phone was virtually non-existent in our market. I returned back to the USA after the holidays just in time to witness Blackberry’s downward spiral in Northern America while at the same time their global market share peaked. Blackberry’s 5 minutes of fame was short lived and what was once an owner of 43% of the US mobile phone market is now struggling to sell a few million devices with studies showing that they now barely control a little of 3% market share. Imagine yourself skydiving and for some reason the parachute doesn’t open; this is how fast Blackberry went down. Attributing this decline to the I-phone is not accurate or nowhere near the truth because in 2010, apple’s iconic product had already been there for 3 years and it was struggling for taking the scraps of blackberry.

Of course the ailing giant is now an easy target for interested investors but for some reason it is not really attractive. Those who seriously considered making a bid can be counted on one hand; a main reason behind that is the Canadian’s Government intervention and their close eye on all possible candidates. The reasons are obvious; it is still the device of choice for all Canadian and US governments and for most North American companies which raises lots of flags related to safety, security and confidentiality.  One of the biggest candidates – Microsoft – is out of the game after they purchased the Finnish Panda Nokia. I called Nokia a Panda because just like the Pandas, they were on the brink of extinction due to continuous failures in delivering competitive new products and losing market share so fast and they still are not officially saved. Of those candidates, 2 names stand out: Fairfax Financial Holdings and the Chinese computer company Lenovo. Not surprising at all is that the Canadian government favors Fairfax because it is a Canadian company first and second because they have bitter memories from when the Chinese targeted another Canadian giant – Nortel – and tore it down until it filed for bankruptcy in 2009.

Yet, the wise decision would be to allow such a transaction to happen if the Canadians are serious about saving the company. Unlike the late 90’s and early 2000s when Chinese companies were merely copycats (remember the fake nokia, sunny and many others?); Chinese companies have recently proved that they are hungry to develop themselves, differentiate their products and invest more in R&D to become more creative and the best part of it all is that they have tons of cash and/or access to massive funds when needed.

Lenovo specifically is a great example because what was formed originally by the Chinese government to organize the selling of imported computers in the Chinese market evolved into a giant that ended up purchasing IBM’s personal computer division with all the benefits and privileges that came with such a purchase. 8 years after the purchase, Lenovo has not destroyed IBM’s Think Pad as some skeptics might think; instead Lenovo prides itself with owning the best business laptop currently in the market. And this is exactly why the purchase makes perfect sense. Ever since rolling out its first smart phone with push email service on it in 2000, Blackberry enforced its image as the provider of the cell phone with the best business solutions and strongly capitalized on this image. It was a regular phone with all the other features that cell phones at the time had including games (remember the long hours you spent playing brick breaker and almost breaking the phone whenever you missed a ball?). To make a long story short: the business pc maker will be marrying the business cell phone maker, a happily ever after story?

One of the reasons behind blackberry’s demise is their failure to acquire big market shares in the big and growing Chinese market, whether it was because of a weak marketing network or in failure to appeal to the young Chinese consumers, Lenovo can circumvent that with its strong marketing network and its privileged position that it currently enjoys. It can increase brand awareness in China and it definitely has more access to a wider sales network.

In 2009, President Obama imposed a 35% tariff on Chinese tires imported to USA, the direct reason was to implement a safeguard provision to protect US manufacturers that were under the threat of losing their jobs. Of course the real reason is very different from that and it has to do with the silent economic war going on between the 2 countries; those same reasons banned a Chinese company from buying Hummer from troubled GM in 2009 and banned Huawei and ZTE from competing for US government contracts. By purchasing Blackberry, Lenovo will be able to avoid any possible embargo and enjoy better access than its Chinese counterparts to the North American market.

It is true that Lenovo does currently have a mobile device unit, but how many of you have actually heard of it? What is its market share? And what are its sales numbers? If Lenovo wants to be successful in that division and obviously this is where the future is now, they need to differentiate themselves and have a unique product. With its unique features and massive amount of patents, Blackberry can be Lenovo’s answer. Sure they can use android OS just like Samsung, LG, ZTE, Huawei, Sony, and Motorola….. Should I go on?

A few days ago, Blackberry announced that it has scrapped its plans to sell itself and instead they have resorted to re-financing themselves and try to save the company on their own through a cash flow offered by Fairfax. But despite that had they gone forward with their selling plan, most probably the Canadian government would have interfered to stop the sale to Lenovo because of their tight relationship with the Chinese Government. But for once, this would have been a purchase that would have actually made sense and would have worked – Anyone following Volvo’s news recently?