You ever find yourself sitting in class and having only a slight idea of what the teacher is talking about? This actually used to happen to me a lot. I would look around the classroom praying that someone would explain it to me a lot more clearly. So I took to the Internet to clarify a lot of the things that were being spoken about in my business classes. I realize now that what I needed was someone who would be able to “dumb down” the material in these business articles and explain it to me in such a way that I would fully understand what is going on. Well, I’m going to attempt to give you what I didn’t have. So here is my attempt to give you the bare basics of this week’s most important business world events and stories!
Facebook:
Facebook has recently been using a lot of cash and stocks to acquire companies. Facebook has a lot of cash that it isn’t currently using for anything. Just recently Facebook spent $19 billion in cash and stock to purchase WhatsApp. WhatsApp is a fairly small company with 5 employees. So the question is why is this scary? When a company is just sitting on mountains of cash usually the company has no need for that cash. Facebook is doing very well. Unfortunately it seems that companies with a lot of excess cash tend to make acquisitions that may not be totally beneficial to shareholders in the end. In the case of WhatsApp, Facebook isn’t even sure how they want to use it. It was almost an impulse buy on behalf of Facebook. Maybe there is potential for some kind of growth but it is still very unclear exactly what their potential is. It is too much power in the hands of the CEOs. Investors, such as Carl Icahn, who are activist investors, try to pressure and encourage the companies to give that money back to shareholders as dividends. Facebook has yet to give into those types of demands.
Andrea Jung:
Check out this hard-working woman making her way to the top of yet another company. The former chief executive officer of Avon products is putting her skills as a successful woman in the business world to pull other fellow entrepreneurs up with her. Andrea Jung has recently begun working with Grameen America. This is a microfinance organization. Microfinance is a financial service and banking service that is provided to unemployed and low income people or families. The goal is to provide these people with a way to give them back their autonomy by giving them the opportunities and the funds to do so. Jung is now working for them in providing more than $140 million in small loans to more than 23,00 women since 2008. The group was founded in Bangladesh by the Nobel Peace Prize winning microlender, Muhammad Yunus.
Gap and Chinese Markets:
It is an increasing challenge to expand globally in other markets. Gap is attempting to expand into the Chinese market in Shanghai. It is all about reading and understanding the shift in the culture of shoppers and their habits as well as learning to work in a different environment. Mr. Kirwan has been running the company for three years as its Chinese head has recently met with the Wall Street Journal and has said that he “believes that there is room for brand expansion, with the physical stores and online.” However professional analysts have a bleaker outlook. Bringing brands into already very competitive markets can be extremely risky. The Gap is trying to expand by bringing in some of its other brands, such as Old Navy. Old Navy however tends to be directed at a different type of consumer. This can cause issues in the success of the expansion because there may be a lot of already mature competition in that particular sector. Mr. Kirwan said, “when were deciding to bring Old navy into China, we looked at our brands, Old Navy and Banana Republic, and we really though the decision was which was going to be the easiest and which would be the biggest payback and [what presented] the biggest opportunity. When we size the market and looked at the addressable customer we could serve, the largest impact we had was an opportunity for Old Navy.” There are still a lot of questions for how this company will do in the Chinese market but only time will tell.
I hope this gives you guys a little look into the business world. Just some basic issues and things to think about when reading the paper or checking on the news of certain companies!
Article Sources:
http://online.wsj.com/news/articles/SB10001424052702303532704579478282050663184?mg=reno64-wsj
http://online.wsj.com/news/articles/SB10001424052702303847804579481683309654694?mg=reno64-wsj
http://www.investopedia.com/terms/m/microfinance.asp
Photo Sources:
http://fr.wikipedia.org/wiki/Wall_Street
http://www.juncturemag.com/2010/11/12/gap-china/