Browse by Tags

Global Economic Watch » All Tags » profits (RSS)

KnowNOW!

Global Economic Watch

Syndication

Recent Posts

Tags

View more

Other Useful Blogs

Archives

  • Revisiting the Role of Business in Society

    Forty years ago this month, Milton Friedman critiqued the "doctrine of social responsibility" for business in a New York Times op-ed, writing: It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a "fundamentally subversive doctrine" in a free society, and have said that in such a society, "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." In short, as Friedman's title put it, "The Social Responsibility of Business is to Increase its Profits." It was a controversial and influential piece, and the Carnegie Institute revisited the debate with students and business educators earlier this month , asking, "What is the role of business in society today. Here are two interesting excerpts from their discussion:

  • General Motors Announces 2nd Quarter Profits, New CEO

    What a difference a year makes. This morning, General Motors announced second quarter earnings of $1.3 billion. That would seem to be good news for American taxpayers, who own the majority of the automaker. The Takeaway 's Celeste Headley spoke with New York Times auto reporter Nick Bunkley shortly after the report came out: And now we have the news that Edward Whitacre, who took over as CEO of General Motors at the beginning of the year, is stepping down at the end of the month. The move is not inconsistent with Whitacre's public statements all along that he would go back into retirement once righting the ship at GM, but does the second quarter turnaround suggest all is well with GM? Fortune 's Alex Taylor III writes that Whitacre's replacement, Dan Akerson, has his work cut out for him: The biggest risk for GM going forward is a slowing of the economy in the U.S and the rest of the world. Car buying is directly connected to consumer confidence, which in turn is connected to unemployment. As long as the jobless rate stays stuck in the high single digits, car sales are likely to remain at low levels. Such macroeconomic factors are expected to weigh heavily on any GM IPO. Since the automobile industry is a cyclical slow-growth business, professional investors treat auto stocks as trading vehicles -- not long-term buys. Thus they buy them in anticipation of a turnaround in the economy when prices are lowest, and then sell them as their prospects improve. But since the global economy appears to be headed downward, or at least flattening out, there is little reason for the usual investors to buy the shares, making the timing for an immediate GM IPO less than optimum -- especially with a new CEO at the hel m. Read Ed Whitacre drops a monkey wrench in a GM IPO here .

  • Viet Nam Ranks Atop Global Business Optimism Survey

    Viet Nam's GDP grew 5.3% last year. And the government is projecting 7% growth this year. Given the strains of the slow global economic recovery, this is a growth rate that most economies would welcome. And so it is not surprising that Viet Nam's business leaders are highly optimistic. According to a recent survey by Grant Thornton , 92% of Viet Nam's businesses are anticipating profits for 2010. That is the highest rate of any country in the survey. Business Week 's Vanessa Wong reports on the survey: The report was based on surveys of 7,400 managers of medium-to-large privately held companies in a broad range of sectors—mainly cleantech, food and beverage, construction and real estate, hospitality, transport, manufacturing, retail, financial services, health care, and technology—in 36 countries to gauge which holds the greatest upside potential for 2010. Vietnam scored highest in three forward-looking growth categories: employment, revenue, and profitability. Further categories included overall optimism (Chile ranked No. 1, with Vietnam fourth) as well as exports and research and development. Of 150 companies surveyed by Grant Thornton in Vietnam, 95% expect higher revenues and 92% say profits will increase in 2010. The global average was 54% and 47%, respectively. A new survey by HSBC of small-to-midsized enterprises also puts Vietnam on top for business confidence in Asia. Ken Atkinson, managing partner at Grant Thornton Vietnam in Ho Chi Minh City, says: "People are pretty optimistic about this year." Citing new roads and power plants under construction, Atkinson has noticed in recent months an increase in due diligence in mergers and acquisitions. "I expect more companies will be working at full capacity [this year] than previously." Read the full article here . And take a look at Business Week's Best Profit Outlook slide show, with some good country-specific detail, here . Details on the Grant Thornton survey are available here .

  • As Airlines' Financial Picture Gets Rosier, Industry Leaders Call for Less Regulation

    Only a month ago, there was much talk of airlines going out of business. The ash cloud from the Eyjafjallajoekull volcano in Iceland shut down travel through much of Europe after the global recession had already cut deep into revenue. But now the International Air Transport Association (IATA) is releasing update projections for 2010, and they show the airline industry turning a profit this year. Here's a look at the change in projections from March to June, from the IATA report : Not that the ash cloud has had no long term effect. The IATA projects profits for every region except Europe, where the projections show $2.8 billion in losses this year (adjusted down from a projected $2.2 billion in March). In his State of the Air Transport Industry speech yesterday, IATA Director General Giovanni Bisignani said that global air traffic had returned to pre-recession levels, and that there was much reason for "cautious optimism." But he called on industry members and government bodies to work together to make air traffic, as a business, more sustainable--pointing to 0.5% profit margins as too low. We overcame challenges with change and we have the passion and commitment to build a sustainable future. But we cannot build that future alone. The changes we need are not always within our control. Governments over-regulate our business and under-appreciate our role. Who can change the attitude of governments? Voters. The same voters that are our customers. Today, we have 2.4 billion potential industry advocates and the number is growing rapidly. To turn them into real activists, we must improve our industry’s value proposition: price, speed and quality. We have the price right. Flying today is 40% (36) cheaper than before deregulation (37). We made travel more accessible but speed and quality suffered. Infrastructure has not kept pace and the result is queues on the ground and delays in the air. And new security processes have created new hassles even as we are Simplifying the Business. Now, our challenge is to gain the support of our customers to hold governments accountable for their actions. Can we do it? Yes we can. But it means facing the future with the courage to change. My 2050 vision for aviation is built on four cornerstones: profitability, infrastructure, a new energy source and the customer. He does seem to bank a lot on customers feeling pleased with airlines these days. Read Bisignani's full speech here .

  • Shirky Says Facebook Change Follows Familiar Pattern

    One of the biggest business stories this week is also a social media story, and a story of consumer influence. Following pressure from consumer groups and direct complaints from users, Facebook founder Mark Zuckerberg announced new privacy controls for the world's largest social media site . Clay Shirky says this week's events follow a pattern for Facebook--"overstepping their bounds, apologizing and scaling back." But, he points out, the site always wins because the scaling back never goes beyond where they were before they "overstepped their bounds." So Shirky is not concerned for Facebook:

  • Facebook's Status as a Business Gets a Thumbs Up as Revenue Starts to Outpace Costs

    September 2009 should go down as an historic turning point for social media, as Facebook is now bringing more money in than it is paying out. That doesn't necessarily mean that is is profitable yet, as Douglas MacMillan writes in BusinessWeek : Rather, the cash it generates from advertising and other forms of revenue now exceed the cost of servers and other capital expenditures required to keep Facebook running. One-time costs, like the reported $50 million acquisition of Friendfeed last month, and operational expenses like personnel, are not included in this equation. Outside investments in the company, like the $200 million it raised from Digital Sky Technologies in May, are not accounted for either. Facebook has never disclosed its revenues, but board member Marc Andreessen recently told Rueters that the site is on track to generate over $500 million in revenues this year. The same day it announced its cash flow milestone, Facebook said it has added 50 million users in the past two months — bringing its total user base to 300 million and its signup rate to roughly 806,000 users per day. That’s a huge amount of traffic to support, and the site’s accumulating stockpile of photos, videos, and other content requires an ever greater number of expensive servers. This was a serious problem for Facebook as recently as March, when my colleague Spencer Ante reported that it was seeking $100 million in debt financing directly related to server costs. Now, it appears that economies of scale are working in the company’s favor: the more members it attracts, the less it has to pay to support each one. Read the full article here . And listen to, or download, Marketplace radio's coverage of the news here .

  • Top 1000 Banks: Western Banks Dominate, and Bring Down the List with Massive Profit Declines

    The Banker has released its list of the Top 1000 Banks around the world. The top banks are all familiar names: JP Morgan, Bank of America, Citigroup, Royal Bank of Scotland, and HSBC make up the top five. Of course, any cursory reading of the front page these last 10 months would help one realize these banks have had a tough stretch. And indeed the The Banker's report reinforces that notion--this is the first time in four decades that the top 25 banks on the list have registered a loss. While the Top 1000 as a group brought in $780 billion in profits for last year's report, they made a combined $115 billion in this year's report. That's a drop of over 85%. The losses were built up by banks in the West, while banks in Asia primarily propped up the Top 1000's profits. The Banker's Geraldine Lamp writes: US banks made an aggregate loss of $91bn, the EU 27 an aggregate loss of $16.1bn, and the UK’s banks lost, on aggregate, $51.2bn. In terms of return on capital (ROC), the disparate fortunes of the world’s banks is equally as startling. On aggregate, China’s banks in the Top 1000 chalked up an ROC of 24.38%. This compares with an aggregate ROC of -15.32% for UK banks and -10.32% for US banks. Japan’s banks in the Top 1000 achieved an ROC of 4.43% and Brazil’s 15.98%. The inexorable rise of Asia, excluding Japan, is also played out in the composition of the Top 1000. The number of banks in the rankings from Asia has risen from 174 two years ago to 193 this year, as the number of banks from the US has dropped from 185 to 159, and from the EU 27 from 279 to 258. But Lampe adds that this does not mean that the top banks--Western banks--are ready to hand over the reins to banks from emerging economies yet: With next year’s profits largely determined by the ability of Western economies to emerge from recession and generate growth, it may seem axiomatic that China’s banks – and those from other emerging economies that are weathering the downturn a little more smoothly – will climb even higher up the Top 1000. This cannot be taken for granted. For one thing, the very creativity that got the West’s banks into this mess will be the thing that gets them out of it. Over and over again, Western banks have displayed a remarkable ability to reinvent themselves to keep pace with global change. You can read the report here . And watch Lampe discuss the Top 1000 with Brian Caplen , editor of The Banker, below:

  • Top Small Businesses for 2008

    In an effort to look for what kind of business can handle the challenges of a recession, Small Business Trends has been tracking data from companies that use Sageworks accounting tools. They have crunched the numbers to come up with the most profitable types of small businesses for 2008 , and the numbers back up the notion that, in a recession, it is good to be in a business providing a service that people need in good times and bad. Here's the list:
    Filed under: ,