Posted: January 1, 2017 |  AUTHOR: KEN FOX | CONTACT ME

 

To My Readers

The Global Galaxy blog has been on a hiatus since June 2016. This time-gap has provided a needed break since I began posting in May 2011. A lot has happened over the past six months to change the face of international business. This includes England’s announced Brexit from the EU, the continuing mishaps in the Middle East, a rebellion in Turkey, Russia’s involvement in Syria and the Ukraine, and the election of Donald Trump. These events, among other changes in foreign government policies and the financial environment are sure to make the next few years challenging for global business expansion planning.

This issue highlights 8 global companies viewed as benefitting from near term local government initiatives, visionary corporate leadership and expected global changes in government priorities, industry trends and economics. Best wishes to all for a prosperous New Year.

1. CEMEX (NYSE: CX)( Mexico)
Whether Donald Trump decides to build “the wall” on the U.S. southern border with Mexico or not, Cemex will benefit from his presidency. The U.S. will need cement to build and repair roads, build new structures and the like. Cemex, based near Monterey, is among the world’s top cement manufacturers and closest to the U.S. It had sales of $15.7 billion in 2014.
The devaluation of the peso relative to the U.S. dollar since Trump’s election win and the proposed elimination or changes to the previous NAFTA agreement may hurt Mexico, longer term. CEMEX revenue may rise based on global demand and new ventures, such as their successful launch of a new subsidiary, CEMEX Holdings Philippines.

2. Haier (China)
This company exemplifies growth from a visionary leader, CEO Zhang Ruimin. It is now the world’s largest white goods (appliance) manufacturer, after acquiring GE’s home appliance division in January 2016 for U.S.$5.4 billion. Ruimin has instilled an admired corporate culture which will help promote growth in its existing and new global businesses. As an example, the company encourages the formation of internal micro-enterprises to make the company more innovative.

Haier continues to acquire new companies to grow such as buying the household appliance businesses of Japan’s Sanyo Corporation in: Japan, Indonesia, Malaysia, The Philippines and Vietnam. Haier also plans to grow by entering new businesses with the help of GE in healthcare, Internet related and advanced manufacturing

3. Softbank (Japan) (OTC: SFTBF)
Softbank’s CEO, Masayoshi Son met with President Elect Donald Trump to announce a U.S.$50 billion investment in the U.S. which would eventually “create 50,000 new jobs.” Softbank is a large Japanese telecommunications and internet conglomerate which had annual sales of U.S.$72.7 billion in 2015. The company has grown aggressively. It owns 80% of Sprint, has a joint venture with Alibaba and Foxconn to produce robots which speak and understand the spoken word. Softbank also has a joint venture with IBM to bring Watson technology to Japan, and also has multiple joint ventures in India related to clean energy.
The company has unsuccessfully tried to merge (troubled) Sprint with T-Mobile U.S. Sprint (Softbank) had to drop a bid for T-Mobile after U.S. regulators indicated they would not approve the plan. Perhaps making friends with Donald Trump may help this merger to gain approval.

4. Zhejiang Geely Holding Group (China)
Geely designs and manufactures automobiles, motorcycles, vans, engines and related auto parts. It sells cars under the Geely and Volvo brand names. Its Geely Panda is a very popular car in China. The company offers over 30 car models, and operates a Geely automotive research and design institute in China. The company acquired Volvo from Ford in 2010, and separately owns the London Taxi Company since 2012. Geely had annual global sales of U.S.$3.3 billion in 2014.

Geely is currently building its first North American Volvo assembly plant in Ridgeville, South Carolina, USA. The plant will exclusively produce the new S-60 sedan, to be shipped globally from the Port of Charleston, starting in 2018.

5. Raytheon (USA) (NYSE: RTN)
This major U.S. government defense contractor, based in Waltham, MA, generated revenue of U.S.$23 billion in 2015. Raytheon, with 61,000 employees, develops defense systems such as the Patriot missile, is involved in cyber security protection and intelligence services, among others.

Some recently awarded contracts include:
$255 million for the next generation landing (gear) contract by the U.S. Navy (October 19, 2016)
$9 million contract from DARPA (Defense Advanced Research Projects Agency) to protect the Pentagon power grid from cyber attacks (December 5, 2016)
$225 million contract for work on the Patriot missile defense capability by an undisclosed client nation (November 28, 2016)

6. Foxconn (Taiwan)
Formerly known as Hon Hai Precision Industry Co., Ltd, Foxconn is the largest electronics and computer contract manufacturer in the world. Until recently, it was Apple’s primary assembler for its iPhones and iPads. Foxconn acquired 66% of Sharp for $3.8 billion in April 2016. The company will benefit from Sharp’s leadership in advanced screen technology. It will facilitate the increased development of OLED (organic light emitting diodes) for use with future Apple products.

However, Terry Gou, Foxconn’s CEO is seeking growth beyond technology manufacturing. This includes a major initiative into medical devices, where the company has already acquired an undisclosed stake in a San Diego (USA) medical device start-up, Sotera Wireless, which makes body worn devices to monitor vital signs. Additionally, Foxconn is in discussions with other U.S. based medical companies, such as Varian Medical Systems (Palo Alto, CA) which is involved with x-ray technology, radio surgery and digital image detection, and Soundhawk (Cupertino, CA) which makes an ear wearable.

Trump has been in discussions with Apple to implement some type of future manufacturing facility in the U.S. If this happens, it is hypothesized Apple may partner with Foxconn to make this happen.

7. Goodbaby International Holdings, Ltd. (China) (1086.HK)
Young Chinese families currently have higher discretionary incomes. Spending on new born babies and infants has always been a priority for Chinese families, perhaps carried over from the previous one child only requirement. This company researches, designs, manufactures, markets and sells quality travel systems, including strollers, gates, soft carriers, car seats, cribs and high chairs. They own eight R&D centers located in Asia, Europe and North America. Goodbaby acquired U.S. baby product company EvenFlow (Piqua, Ohio) and German company Cybex in July 2014. Besides EvenFlow and Cybex, they sell under other global brands: gb, Rollplay, CBX, Urbini, Geoby, and Happy Dino.

They became the largest supplier of strollers in North America and Europe in 1999. Their products are sold online and in stores. Their first Goodbaby retail store opened in Chengdu, China in August 2016. The stores and baby clothing lines look like French designer stores and clothing. The public company has 13,000 employees and is traded on the Hong Kong stock exchange. It was founded in 1989.

8. Inditex SA (Spain) (BME.ITX)
One of my first blogs covered Zara, owned buy Inditex, in May 2011. Zara continues to evolve and grow from brand and line extensions. Inditex has other store brands including: Massimo Dutti (706 stores), Pull & Bear (898 stores), Bershka (1,006 stores), Stradivarius (910 stores), Oysho (575), Uterque (66 stores) and outlet stores called Lefties (80 stores). One Bernstein analyst, Jamie Merriman, sums it up by saying: We believe that Inditex has the best business model in apparel.

The Zara division has 2,000 stores globally, and distinguishes itself by its value chain and ability to generate quick (and limited) turnover of store merchandise. Its stores keep no inventory. It is vertically integrated with most (60%) of its merchandise designed, manufactured, labeled and shipped from Spain, or nearby countries (Portugal). Zara clothing styles are unique, and because design ideas stem from weekly calls to headquarters from store managers on what customers seem to want and need.

The Zara brand has been successfully extended to recent divisions: Zara Kids, with 162 stores in four countries, and Zara Home with 437 stores.

Inditex is based in La Coruna, Spain, and has, in total, about 7,000 stores in 90 countries (with only 55 in the U.S.). The parent company had annual sales in 2015 of U.S$22.1 billion.

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©2017, The Global Galaxy blog is produced by The Soundings Group, LLC, Charleston, South Carolina, USA, www.thesoundingsgroup.com. The company is an international business consulting firm, specializing in new market assessments, market entry strategies and marketing guidance. The scope of Global Galaxy is to cover timely international trends, issues and business building ideas. Its purpose is to educate, inform and stimulate thinking for business opportunity analyses.

 

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