Opinion: What the Adidas backlash says about how consumers can reclaim profits from multi-national capitalists

An Adidas 'all yours' billboard in Auckland. The logos on the jersey have been taped over.

By Bernard Hickey

I was surprised when I saw this defaced billboard (pictured) on the corner of Park Rd and Kyber Pass in Auckland over the weekend.

Someone had gone out of their way to deliberately and carefully put black tape over the Adidas logo on the 'all yours' billboards advertising the new All Blacks jersey.

It wasn't the act of an impulsive teenager or a reckless vandal with a spray can or a boot. It was a restrained act of protest that shows just how badly the Adidas brand has been damaged in New Zealand.

It got me thinking about what Adidas did wrong and why the reaction has been so visceral. It got the to point last week where Adidas removed the three stripes branding from sales reps' cars. See more here at NZHerald. Socialist protestors even burnt an effigy of the Adidas brand outside Eden Park, although that had more of the feel of a stunt about it.

So why are New Zealanders so grumpy about this and what does it say about our world?

Firstly, Adidas is playing with fire in New Zealand because it is the only visible sponsor of the All Blacks whenever they play.

Adidas 'owns' the All Black jersey, yet it is a piece of national symbolism that New Zealanders feel intensely proud and proprietorial about.

Every New Zealand boy, including me, dreams of one day wearing that jersey. At 44 I realise my chances of becoming an All Black long gone, yet I still wonder if only I went to the gym more often and was slightly more talented...(well maybe a lot more talented) I could be called in as a late replacement for Ali Williams. I'm 6ft 5 inches so I harbour vain hopes.

Our heroes speak in hushed tones about how they feel when they are given their first jersey for their first test. The players often talk about honoring 'the jersey' and those who have worn it beforehand. I believe the likes of Richie McCaw when he says these things.

Despite being deeply embedded in a professional era, playing for the All Blacks and wearing that jersey seems a lot more real and honorable that just playing for any team or pay cheque.  We believe this and it's why we care about who gets in the team, how they play and whether they win.

It is special and it's no doubt why Adidas wants to connect its brand to that jersey. So Adidas and the New Zealand Rugby Union need to be careful about what they do to and with that jersey. To be fair to them, they have been until now. Apart from an ugly period in the 1990s when Steinlager was plastered across the middle, the jersey hasn't looked too much like a billboard. That's good and much better than the teams the All Blacks play against and regularly beat.

Brands are collections of emotions attached to products, services and experiences. When it works it's great.  But this attachment can cut the other way and hard. Which is what has happened over the last week and with a speed and severity that clearly caught Adidas and the Rugby Union unawares.

I think Adidas didn't quite realise how the mood about multi-national capitalism is changing and how much the power balance has shifted. It's partly about the use of new technology and access to information, but it's also about a deeper awareness of how global supply chains work and who benefits.

The social contract

New Zealand and New Zealanders have in the past embraced the openness of our economy, at least since it was opened up in the mid 1980s. We liked that we could import whatever we wanted. An entire retailing empire, The Warehouse, was built on importing cheap clothing and knick-knacks from the factories of southern China and shovelling it on cheaply.

We knew 'the deal.' Manufacturing jobs would be lost here, but we would get the benefit of cheaper imported goods.

It's even more 'the deal' when we see the New Zealand dollar rising. Yes, we would lose exporting jobs, but we would get cheap imports in return.

We also understand how multi-national corporations work. They shift their costs to the cheapest place and pass on at least some of the benefits to consumers in the form of low or lower prices.

The trouble is we're starting to work out how this shuffling of costs and assets is starting to affect jobs in the developing world and how 'the deal' isn't working for consumers in the developed world anymore. There's always been questions about whether it worked for the workers in the developing world. Some say it has helped drag hundreds of millions out of poverty. The lively debate going on inside China about the momentous social changes and disparities of wealth between the factory owners and the rural migrant workers in those factories suggest it's not wildly popular there either.

More and more of the gap between production costs in China and the selling price in America or Australia or Europe or New Zealand is being captured by the owner of the 'brand' controlling that supply chain, and ultimately their shareholders and managers.

Adidas reported on August 5 it expected earnings per share growth of 15% in 2011 on a 10% rise in sales. It expects profits to be as high as 684 million euros (NZ$1.2 billion) this year. It expects a gross profit margin of 48% of sales and an operating profit margin of 7.5% to 8% this year. See more detail here at Adidas' investor relations site.

Adidas even boasted that its tax rate had fallen two percentage points in the first half of the year to 27.5%.

Adidas' financial strength and the way it does business is emblematic of the problem gripping the global economy at the moment.

Large multi-national corporates are cutting costs to increase profits and doing so by laying off higher paid middle class workers in America and using lower wage workers in the developing world. But instead of reinvesting those profits, they are being hoarded in cash piles by shareholders worried about increasingly weak consumer spending in developed economies. It is an ominous feedback loop.

Cost cutting reduces consumer incomes. Lower consumer incomes reduce retail sales. Companies react by cutting costs by moving more production offshore. You get the drift.

See more about the problem of hoarding here in my piece from the weekend.

These companies are also increasingly playing countries off against each other to get the best tax treatment or shuffling their activities to reduce their overall tax rates. These apparently stateless companies seem to bare little allegiance to anyone except their executives and shareholders. Countries, workers and the governnents they have connections to are of a lesser importance.

We're losing faith in the model

Where once we saw the benefits of globalisation, now we're beginning to wonder.

So the least we can do is take advantage of those same forces of globalisation to 'source' our own imports from the cheapest places. We're also keen to avoid paying consumption taxes within our own borders.

This is where the real anger arises in this story.

Savvy New Zealanders know there is a huge gap between the production costs, reported to be around NZ$8 per jersey, and the recommended retail costs of around NZ$220 per jersey.

What is so surprising is that Adidas has allowed huge variances to arise between the prices online and its recommended retail price. Worldrugbystore is offering All Blacks jerseys for US$79.99 (NZ$96.00 at current exchange rates), while the same jersey retails in New Zealand for NZ$220. It surprised retailers here too, including Rebel Sports' boss Rod Duke and Champions of the World owners Gary Marshall, who both cut their retail prices. See more here at NZHerald.

This story really took off when Adidas blocked the sale and shipping of such jerseys from such websites to New Zealanders. How dare they!? That decision has since been reversed and only after a real outcry. See the Stuff story here.

What's the point of globalisation if the only ones who can 'globalise' their costs are the manufacturers, wholesalers and retailers?

In a world where it is just as easy to buy online as to go down to the store, the globalised supply chain was caught napping by its own globalisation and efficiency.

Two can play at this game and we were all rightly outraged at Adidas' attempt to create a little 'Fortress New Zealand' for its New Zealand pricing.

Where's the benefits?

The other underlying current of disatisfaction is the apparent refusal of many importers to pass on the benefits of a higher exchange rate to consumers.

As the benefits of globalisation start being questioned and as consumers become grumpier about higher living costs and stagnant incomes, globalised companies should be a lot more careful about how they operate.

Particularly when they 'own' brands as special as the All Blacks jersey.

It's not 'all yours'.

It's ours and the cartoon below by Emerson in the New Zealand Herald last Tuesday seemed to sum up how we felt.

The real question though is when does this anger widen into something larger about the way the global economy is organised.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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78 Comments

I think people are just starting to wake up and realise:

a) they don't want to buy cheap crap from China anymore 

b) they would rather buy from their own country (if it was at a reasonable price)

c) sick and tired of these multi nationals making $$$$'s of dollars and screwing all of us

The only solution is too stop buying from China and start bringing manufacturing jobs back to the west.

Amen.

a) Cheap but not necessarily crap....sure there is crap made there.....but there is reasonable and even good stuff made there as well....

b) I do where I can, I also support vegie farmers markets directly now, bypassing the supermarkets. It isnt just globalisation thats screwing the producer or the consumer, all the supply chain is.

c) Yes very much so.

Moving jobs back, if it were only that simple, it isnt see my b).

regards

I think the main reason China makes any good stuff, is because these companies have gone over and shown them how to do it properly, and have decent quality control in place.

I do blame the subcontracting out of product manufacture to china, as one of the main reasons the western economies are in such trouble. We have make china rich and strong, and we are now ripe for the picking, as chinas money now comes into NZ to buy our businesses. It was short sighted to think we could save money by subcontracting out to china in the long term.

I now try to avoid  NZ companies who do their manufacturing in china, especially if they are still charging the same prices as when they did it in NZ, as it means they are doing it to make a larger margin at teh cost of NZ jobs. I won't be buying a poppy next time either, after they subcontracted out that work to china.

Agree with you that the iPhone and iPad are really crap. They made those in China.

HP

My wider family and myself stopped buying China rubbish  AND  American goods a long while ago,  just principle. It takes sometimes time to read labels and  a bit of search.

A friend in the building industry used to have a $700 German made electric hammer drill until it got stolen. Bought a $200 chinese made job from Bunnings. It failed inside the 12 month warranty period. Fortunately he kept the receipt. Has now had 6 years and 7 replacements. They all lasted about 10 to 11 months. He makes sure he keeps the receipts. Will probably keep happening for the next 10 to 20 years. He's ok until the day one of them holds out until the 13th month.

Your mate's committing a form of warranty fraud. There is no warranty on warranty outside the orginal item's guarantee period.

If he wasnt in the trade, yes the CGA should cover him outside the warrantee period..it has to last a reasonable length of time....Otherwise strange he can get away with it. 

hmm If a diy tool is lasting a tradesman 11 months with continious use maybe is not a bad diy buy.

regards

Generally the reciept will show the purchase date, and the manufactuers warrenty shouldn't be extended. It is the retailers fault if they aren't following things correctl. However if they are all failing like that, they should ask to be upgraded to a more reliable brand at no cost, as that could suggest a quality control problem.

The inference  of the story is quite clear. But you do highlight a more moral issue with where do you draw the line between responsibility of the retailer and the obligations of the purchaser. To suggest that even clearly though this builder has knowingly purchased a item that he knew wouldn't last and fit the bill, then to expect an upgrade by your reckoning, most likely to the orginal one he lost, all at no cost is absurd. 

Some of the cheap  products from Bunnings such as Ozito comes with 3-year replacement warranty. Not too bad. Obviously can't compare $200 product to a $700 one.

I rarely buy American, except when there is no choice.

regards

What does America make?

They manufacture " Corelle " .. which everyone knows , is good quality china .

I had a American car once, except that the engine and drive train was from Japan and the car was assembleed in Canada.   I also had a Japanese car once with a General Motors drive train assembled in Indiana.     Should I also mention my American cowboy boots made in China wth the soles proudly stamped "Made in New Zealand"?  I bought them on Amazon.com.

Lesson:  Stop wasting your time worrying about what country things are made in.   You'll just confuse yourselves trying to apply simplistic formulae to a world that is far more complex than you realise.   

Oh, and all that IT kit and software that you like so much and spend so much time using?  I'll bet most all of that was invented and sold by an American company.  America truly dominates IT like nobody else.   

Our you can just try Juche like the North Koreans.  How's that working out for them?

I never buy American food or fruit, anything with fractose in it....GE, chemicals, attitude...dont need it.

regards

The point of this article is not about American companies.

I'm talking about the way supply chains have developed and the way capital (and labour) is applied in the new world...

cheers

Bernard

Great article.

I suggest you read David Korten How to Liberate America from Wall Street Rule, quite a small a pdf file online. Korten is the author of When Corporations Rule the World and the Post Corporate World, Agenda for a New Economy and The Great Turning.

Have you heard of The World Economics Association? Embarrassed by their own profession, these economists formed the association in May 2011. The journal has an article on it by founding member Edward Fullbrook which quotes what the media said after economists failed to forecast the global financial crisis of 2008.

Also James Galbraith said "Leading active members of today's economics profession, the generation presently in their 40s and 50s, have joined together into a kind of politburo for correct economic thinking. As a general rule — as one might expect from a gentleman's club — this has placed them on the wrong side of every important policy issue, and not just recently but for decades. They predict disaster where none occurs. They deny the possibility of events that then happen. They offer a "rape is like the weather" fatalism about an "inevitable" problem (pay inequality) that then starts to recede. They oppose the most basic, decent, and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not re-examine their ideas. Instead, they simply change the subject."

More info on that here

http://www.worldeconomicsassociation.org/WEA/PR.html

cheers

Bernard

Yay, finally us nay-sayers are gaining some traction. So for once and for all to the multinationalist muleskinners and the corporate puppeteers, phhhhhhhwwwwwwttt.

Globalization was and is flawed.

The social cost has been huge as has the profits leaving individual countries. It has created loss of jobs, loss of taxable revenue for the country, lack of job prospects for the youth and now finally NZers are starting to question it after their Warehouse / Bunnings tool broke for the 6th time and after getting it replaced again walked out to their car as an unemployed youth ran from their broken into car and headed up the street with the cash he needed to feed his child because his dole was cut by the present governments privatized US management company that now looks after our social services.

HHMM globalization i think it has become a crime

Its all part of the Illuminati plan to bring in a New World Order/One world government. This is just the begining. However do not fear, look at history, all attempts eventually fail. Difference this time is its very stealthy and being done through economics and sophisticated means to take away the sovereign status of countries and reduce government to mere administrators. The man made global warming myth is a big part of this plan. Even though the world temps are now starting to cool again, they are desperate to get carbon tax through in every developed nation.  www.friendsofscience.org     

I think your examples are exagerating in some ways.  The thrust is correct however...globalisation has and is damaging the planet, its being pillaged at an ever increasing rate  that cant be sustained to feed more and more of us....thast not going to end well..

I just went into Warehouse and bought some cold weather gear.....two of them are 3M products, not exactly a trash maker...Warehouse does sell good brands....yes sure I dont tend to buy their own brands....

Which bunnings tools? Ozitos?  I had a Bosche sanding tool that lasted me 18months and cost $120. The same type of tool as an ozito cost me $35 and lasted 40 odd months, they even replaced the velcro pad free of charge at one stage (which I expected to be a consumable)....Its replacement an ozito was $40 and is 4 odd years old and still working fine....Now the heavier use tools I buy Makita, Dewalt, or Bosche Pro true...and they should last 15+ years so are worth the extra....

regards

 

Globalization in itself is not the problem. It's the lack of planning and preparation. Developed countries like us should always keep one step ahead by moving to higher skilled, higher precision, higher technology side of things. Do things that we can have an edge over the low-cost countries. 

Just see how the Japanese, Singaporean , South Korean and Taiwanese play the game.

Well they shouldn't be complaining about the criticism they are getting, because it's just the free market at work, that thing they love so much.

Just as they are free to go and make a shirt $10 in China then sell if for 20X the price, people are free to criticise Adidas in the media as much as they like, and bocott Adidas, and hopefully they will.

That seems like a whole lot to project from just one shirt!   Globalisation isn't a policy.  It's a fact.  Time to get over that and figure out how play the cards we are dealt.   

Globalisation will die off soon, the cost of transportation energy that was a marginal cost before and allowed the use of cheap labour will be significant in the future negating that advantage....

Time to figure out the new rules.

regards

Don't underestimate the ingenuity and sophistication of the global logistics industry.  Over the past decades it has become very, very efficient.  Just visit a big container port in Hong Kong or Singapore and get the picture.   

Also don't forget about the globalisation of services, particularly white collar (read high-paying jobs).  In the IT space, the Indians and Chinese are losing their labour arbitrage advantage to the Philipines and Vietnam.  No shipping costs there.  Just bits. 

First the Japanese made good, cheap cars.  Now it's the South Koreans.  Soon the Chinese and the Indians.  Who knows?  Maybe the Africans will be next.   

Let's face it.  Nobody really knows where this is going, but nobody every really has anyway.  

So cheer up, mate!

It's OK , bozobit , we keep that guy around here to remind us all how ridiculous we can be if we take political correctness / peak-oil / and anything from Al Gore-Michael Moore-Greenpeace , seriously . .. He's a treasure !

.. you're right , mate ... globalisation has the potential to enrich us all . But we do need to cross borders with some international regulations , particularly in the finance & banking industry .

GBH, clueless as usual....

regards

I used to visit container ports all the time.....I used to be a ship's engineer.

It is indeed pretty efficient, the fat has I think long ago been removed, the problem now is the rise in cost of bunker fuel.

IT services, indeed, lots of other countries are moving into this market, I dont think India has an open field any more....however this is as you say a 1 and 0 bit mover....It isnt manufacturing.

Cheap cars etc, but the problem is not Labour as I said.....its transport energy....

"Knows where its going", I disagree....I think there are some real clear trends....it wil be back to localisation....

Oh Im happy.

regards

I get that fuel is more expensive, but prices go up and down.  Oil used to be $145 a barrel, but that didn't stop global trade or even slow it down much.   You analysis may work for a barge full of concrete, but a container full of TVs or diapers or memory chips...  well your mileage may vary!

I stand by that nobody knows.   You can make an eductated guess (we all can do that), but applying straight line forecasting has it's pitfalls.   We might be at 'peak oil' for instance.  I don't really know.   Or we could discover another Bakken formation, improve hydraulic fracturing, get a breakthrough in nuclear and then not be at peak oil.   Stuff happens.  Experts can be wrong.  

But just in case you really do know, would you please tell me what stocks I should buy?  I;m not above making a few bucks off your magic powers!

I don't go in for that historical determinism stuff.   Karl Marx tried that, some people then actually believed it as "science" and ended up getting lots of people killed. 

Dude, that's much more serious than a black jersey from China.

bozobit,

Many thanks. That's sort of the point I'm making. Consumers have worked out how to use the system for their own ends. The story really took off when Adidas tried to block the online sites from selling in New Zealand.

cheers

Bernard

I think that has been the case for a while. IIve been buying books via Amazon for a decade, sometimes I saved money but often because I got newer editions as the same or slightly less price.  Glasses seem to be another area, huge savings on line....any where were the margin is obscene......Books I now get "in NZ" but the last one was shipped from the UK...Whitcouls etc just are not competing by a long way.....choice and cost.

Whats really interesting is the backlash en mass, its great IMHO....not just the odd person like me saying "no, I'll go elsewhere or do without", but mass protest...

regards

 

 

Whats the carbon footprint from those books Steven ?

Well the market does find a way.   I order from Amazon, too, but I only shipped a Kindle to me once.  Now it's just bits.  

It's funny to me that globalisation is the very force that has enabled the transparency needed to expose the discontinuities.  Some of us just shrug and say that's the way it is (my view).   Others get fired up and want to protest.    

To each their own, but "globalisation" doesn't care what we think. 

Well, they deserved it -- less for being greedy but more for being stupid. 

I think if you dig deep enough, you will find the IRB getting a good cut and hence it standing beside Adidas

In which case the sh*te sticks to them as well.....reputation is long to build and quick to damage.

regards

Firstly, where are these "slave-made" imports you speak of? Slaves are inherently less productive than paid workers so any countries/companies engaging in the practice will be at a competitive disadvantage.

Secondly, much of our "manufacturing sector" was heavily reliant on government subsidies and tariffs, policies that made every consumer poorer while taxing the industries and companies able to get by without taxpayer largesse.

Thirdly, most of the borrowing has gone to New Zealand's inflated housing market (caused by restrictive land-use regulations), not to buying so-called "slave-made" imports from the Warehouse. 

Fourthly, people who choose to borrow more than they can afford to repay are not "slaves", even if they may be fools. 

Finally, I agree our monetary system is a mess (although for different reasons to what you suggest) but free trade is overwhelmingly better than protectionism, regardless of what kind of money is in use.

I stopped watching Rugby when it became professional and pay per view, but then I have usually been ahead of the pack with my thinking.

If consumers in this country had any brains BP would have gone broke here long ago, short memories I guess. I have ceased to use them since the first email protest did the rounds, when the seond came around after the gulf spill I didn't have to boycott them as I already was.

When you see what is coming, there is the uneasy feeling that some are going to deserve what they get.

Thank you for your comment S .Regarding the running youth I was simply using the poor sod to highlight a point about no jobs no future(look at the UK)and what is happening here and in other parts of the world due to globalization.

Adidas is at best a very average brand that we simply need to boycott.

 

What an excellent time for an 'alternative' shirt to be produced.

Vary the fern slightly..... drop the 'sponsor' completely....

Bang it out via the web....with a 'Made In New Zealand' label sewn in.... 

Anyone got a sewing machine? 

Sew sad that we don't have the machines and skills to do it in NZ.

That shirt - unadulterated - must be worth more than a poxy replica with a crappy brand name on. 

Sad...

I think you’re drawing a pretty long bow trying to argue this is anything to do with globalisation, Bernard. But you’re been drawing a lot of long bows lately haven’t you?

I think the easier explanation for what’s going on here is that you have a monopoly supplier of a product who has gouged the price in one of its markets because it knows that there is a) a controlled supply - and no alternative suppliers - of product in that market and b) a high demand for it. And tough titties for Addidas that it has been caught out and has done irreparable damage to itself and its brand as a result. You don’t need globalisation or multinationals in order for that to happen. Being too greedy and taking your market for idiots will do that for you every time. In fact you could argue that it is globalisation and its benefits that have allowed this scam to be uncovered. And I'm sure there are plenty of home grown examples of that phenomenon as well.

I learnt very early on in research science that it is the simplest explanations that were most likely the correct ones.

Actually thinking about this a bit more, I wonder who was responsible for actually setting the price of the shirts in New Zealand? Was it Addidas in Germany, or Addidas New Zealand? Knowing the extent to which a New Zealanders nature is that of a cheap greedy grasping gleeful little pig, I have a hunch it’s Adidas New Zealand that’s pulled this own goal off.

Knowing the extent to which a New Zealander's nature is that of a cheap greedy grasping gleeful little pig....

Ouch.

David B,

I agree that most things are cock ups rather than conspiracy.

I'm not suggesting a conspiracy here (or accusing any New Zealanders working for Adidas of being greedy for that matter....) but I am saying there a re some problems with globalisation.

Here's Princeton Economics Professor Alan Blinder with his apostasy at the Washington Post in 2007

http://www.washingtonpost.com/wp-dyn/content/article/2007/05/04/AR2007050402555.html

If we economists stubbornly insist on chanting "Free trade is good for you" to people who know that it is not, we will quickly become irrelevant to the public debate. Compared with that, a little apostasy should be welcome.

David B

And you imply something else which has become very important and true.

The globalisation of companies often means that local decisions are made at global head offices.

That means they often stuff it up.

A lot of middle managers working in New Zealand for foreign owned companies will be familiar.

Time and again they propose local solutions for local problems (or to compete with more nimble locally owned companies) and are rejected by head offices.

Or more often, decisions take forever to be delivered. In the end the good local managers leave to work at head office itself in London or Sydney or Melbourne or New York or wherever, or they leave to set up their own businesses in New Zealand.

I'm in that second category... ;)

cheers

Bernard

I previously worked for EDS....so I can/will concur with this view.  Further NZ is a small market, stuffing up here is seen as un-important....If its 1% of your turnover and you knacker it by 50% its 0.5% globally, who cares...and others in head office probably wont even notice.

We also get used as an experimental base....small and cheap but english speaking, white, educated european style test bed and of course we have ACC to cover for stuff serious ups and we cant sue back easily....and withdrawing from the market costs stuff all..

regards

Could a family survive on buying NZ made?

No ! .... ..  Unless you live up in the hills ,..  in a cave , ... recycling your own ear-wax to make candles , ...using wild-spaniards or onga-onga  as toilet paper ,....  and chewing on matagouri roots ..........

........ hey steven ..... how goes it with you and the kiddies  , cobber ?

Nothing wrong with my ear wax gummy, and its renewable:-P

"Could a family survive on buying NZ made?"

Could NZ survive not buying NZ made? I don't think so.

An economy stands on a four legged stool. Labour, capital, resources and  innovation. What you loose by allowing the trade balance to run negative for decades - as we have - is a run down of capital. This accelerates the process as a significant trade surplus is now required each year to meet the interest bill on what you bought last year. Even a record billion dollar trade surplus is dwarfed by the "invisibles" over ten billions flowing to overseas owners of capital. We are loosing capital and the process is accelerating..

That loss must be made up by the other legs, hence the call for more mining, but we now, apparently, lack the capital to develop it ourselves. The vast potential of our minerals is siphoned off to the offshore owners of capital - we're only left with pennies in the dollar royalties and a run down in irreplaceable resources.

Then there are attacks on labour, as we are seeing, to make up for the loss of capital. Thirdly, innovation is undeveloped, again due to a lack of capital.

What to do?

How about: Incentivise saving, cut immigration to the "best of the best" only, tax luxury imported goods and no sales of key assets (land, power stations, mining rights etc) to overseas interests.

 

You've actually got it backwards, a current account deficit means a capital account surplus. So foreigners are supplying the capital and savings we have, for whatever reason, failed to produce ourselves. In fact, foreign investment might just be the only thing keeping us afloat.

This is a pricing disaster and they could have avoided it SO EASILY.

Determine the demand and price sensitivities in your major market(s) i.e. NZ, set the price accordingly and inflate the price in secondary and tertiary markets to raise the threshold for arbitraging to a level where the saving isn't worth the effort.

I mean - how many people in the US/Canada/UK are going to buy an AB shirt compared with NZ? Those who REALLY want one are going to be price-insensitive and the forefeited revenue from the price-sensitive will be more than compensated by the profit from their major markets.

They'd of course need to align the individual country/region sales incentives to avoid marginalising the sales-reated bonuses, but that's easy enough.

Look at how Gillette manages its global razor blade pricing - same price (+/- 5%) in the USA, Germany, UK, Thailand, india and New Zealand.

Market potential in India? Massive. Risk to the brand value as a premium product if you cut the price to exploit the market volume? Infinite.

I think companies in NZ have pretty much always over-charged NZers....Im just looking at tools at the moment and the price difference to the US is often huge.....ditto TVs though that's shrunk a bit I think. 

regards

 

What a monumental load of $#@#%$% about nothing. Get you gran to knit you a rugby jersey using black sheep wool and be a man...who needs the fake one made in China from synthetic crap. An while we're on about synthetic shite...time to go back to a leather ball with a pigs bladder....then you'll see some real rugby.

 "New Zealand Comfort Group general manager Chris Taylor said Dunlop Living's furniture division had been devastated by competition from cheap imports and the global economic downturn and its bed manufacturing would be shifted to Sleepyhead's plant at Otahuhu." herald

The thing to ponder...how can NZCG sell at higher prices than imports and why do people think cheaper means a better deal.!

A cheap bed that is crap to sleep on after a couple of years...or one that does not change shape and is still good after twenty.......So Sleepyhead need to get that message across...and maybe flog their quality product on a pay as you sleep basis cutting out the finance rorts in the process....it is the marketing that is not up to standard!

Throw in a real effort to improve productivity at the NZ factory...

Aaaaah! The Value Proposition!

The only way to differentiate your product from the commodities.

But as a consumer how do you determine whats a enuinley better product and whats pure marketing hype?  very hard to tell IMHO.

regards

Does NZCG give a 20 year guarantee for the sleepyhead product?

Good points Bernard. The gap between the prices here in NZ and the prices internationally for many goods can't be explained simply by distance or economy size. We might expect it to be a little more with the exchange rate and transport costs but when somewhere like Adidas is alleged to have intervened to prevent competition then something is broken. In a sense it is great that the public's attention has been focused on the issue by an iconic and loved 'brand' - the All Blacks.

Intervention to prevent internet sales is foolish and anti-competitive. I think there is  gross hypocrisy when Australian stores like Harvey Norman kick up a fuss across the Tasman that the internet is killing their business and demand steep online taxes. The reality is that Harvey Norman swallowed or passively drove plenty of small business competitors out of business during their high growth stages. They cannot cry foul when a new business model has potential to cut their margins. They need to adapt.

Interestingly, in the USA you find retail (especially department stores) have learned to co-exist to some degree. The best example of this is that American stores will have online presence, but consistently advertise the best, rock-bottom deals in store to bring the foot traffic back. It works.

 

Good points.

regards

Good article

I think it all comes down to keeping shareholders happy.

Pay good dividends shareholders happy,

Long term thinking and sustainable practices that pay average dividends over a longer period will pay poor short term dividends.

Most people want to get rich now, not have a secure income in the future, (even I might by a lotto ticket this week.)

I need to make my employers a profit; I do this by sourcing the cheapest possible product and keeping staffing costs to a minimum.

In my personal dealings I always consider sustainability.

If I bring this mindset to work I will blow my budget and consequently get sacked.

Globalization with capitalism will result in a terminal condition.

The only cure (sustainable practices) will not be taken because it reduces profits.

ok gummy, so globalization can work if we have strong pan-national legislation.

do you honestly think pan-national legislation can be achieved? (remember you would need everybody to sign up for it to work)

i like the idea of a global village. i just don't think it's achievable anymore. you're always going to get undercut by someone acting in their best interests.

"you're always going to get undercut by someone acting in their best interests"

They call this the market 

If you want any BBC programmes dont buy it here,  go onto the BBCshop.com site and they are less than half price even after the shipping.

If you want any BBC programmes dont buy it here,  go onto the BBCshop.com site and they are less than half price even after the shipping.

This is another wedge into the beginning of the end of globalisation. The western developed economies model of cheap imports at the expense of jobs at home no longer works....because the cost of unemployment has become too high to cover up with continuous budget deficits. The world finally realised that these money borrowed will never be paid back.....that';s why we have GFC 1 and GFC2 now.

Both deficit cutting policies and money printing by US and ECB will only make the matter worse....as devalueation caused the poor unemployed (now even poorer) life worse...ergo riots in UK...soon in other parts of Europe (already by not serious enough) and the US.

US and Europe will soon go into protectionist mode...despite protestation by the moneyed and political elite....because the ground is just not in the mood to compromise anymore...ergo Tea Party in US and soon more right wing parties in EU...ergo Marian Le Penn in France etc. 

A downward spiral into Great Depression II is unavoidable...with the favourite whipping boy China and Russia plus other non US/EU aligned countries.....why do you think France and allies are invading Libya by proxy even though they know they cannot win ?? 

At a more basic level I would have thought that preventing the online outlet from selling to NZ was an anti-competative and restrictive trade practice, which is, I thought, against the law.  Addidas are after all trade through their NZ company (non profit, non tax paying), and they effected the shut down of a compedative outlet.  Somebody please correct me if I am wrong, I really would like to know if this is right.  If it is illegal, I want to know what the Commerce Commission is going to do with the formal complaints that have been made.  I suspect that they will fudge it and do nothing.  Great justice system isn't it? Take a 75 cent disc home for work purposes and you loose your job.

The guy taking the 75 cent disk had received 2  previous warnnigs and was caught having made a special trip to his work to up lift the disk

I think globalization had given NZ companies like Miramar and Fonterra  the opportunities. That's good isn't it.

To a point. But when you can buy NZ butter in the UK for less than you can locally, you have to wonder what is going on...

I can buy 1 litre cartons of NZ UHT milk for 62 pesos , less than $NZ 2 .... way way out on a far flung island in the Philippines ...  All the little stores I've been to sell Kiwi milk cheaper here than you guys at home can buy it !

Fonterrific ! ... good job Helen Clark .. stomp all over the Commerce Commission's recommendations , a big fat monoploy is the way to go , Fonterrible .

... yeah , right !

History tells us the trade is the greatest source of prosperity  

Colin

Really?

Britain's amazing growth of the 1700s and 1800s was built on the back of trade protection and colonialism. Americas amazing growth the late 1800s and early 1900s came on top of all sorts of tariffs and rules.

China's amazing growth of the last decade was built on the back of an undervalued exchange rate and capital controls.

Who really benefits from completely unfettered trade?

cheers

Bernard

As you point out , Bernard , these countrie's governments used unfair advantage , to snatch market share . This is not a failure of capitalism , but a failure of governments .

... the current Chinese dictators need to be forced by the international trading community to works towards fully floating the renminbi . It is a huge impost on other countries  , to put up with China's dirty tactics .

The gutting of the manufacturing base of many developed economies is just one casualty of the Chinese game .

... until some governments grow big kahunas , band together  , and stand up against this nonsense , we'll all suffer some dis-advantage .

And that goes for the stupid Euro too , out with it .

Trade is indeed the way in the world today. The large corporates are actually operating larger operations overseas than here in NZ, after all they can operate just about anywhere that they draw stock from.

Globalization -----develop or be developed so as to make possible international influence oroperation : [ trans. ] communication globalizes capital markets [ intrans. ]building facilities overseas is part of the strategy of every company that aims to globalize.

Does this cause loss of jobs and taxable revenue. Possibly and in NZ's case more than likely.

NZ did have a wonderful clothing industry till 1994/6?.

We had our own cloth mills and many companies nation wide producing wonderful garments and exporting to select markets.

Then the government of the time cut a deal and opened our market up to Indonesia, we no longer have the mills and only a few of the companies manufacturing survived ,but those who did went to China and Indonesia for manufacture and made many redundant and turned into a Brand, and that reflects what globalization can do.

 

Adidas are no different, they are a global giant that has very little empathy with their  market but are more driven by the spread sheets appeasing the shareholders  and clever marketing creatives who make sure that the brand stay's high on the shelves.

They did unfortunately upset New Zealanders and it will be a long time before real Kiwis forget.