Starbucks: Serving So Much More than a Cup of Coffee

Starbucks was not kidding around when they dropped the word “coffee” from the logo. As of Wednesday, November 14^th Starbucks Corporation has acquired Teavana Holdings Inc. for about $620 million. Entering the tea market is the latest strategy of the company to satisfy a growing global consumer demand for caffeinated beverages. In the words of Starbucks CFO Troy Alstead, “[tea] is the second-most consumed beverage in the world, second only to water. We should be leading in tea.”

Expanding into different beverage markets is a logical next choice for the company, which has seen a drop in domestic store presence by 440 locations within the last four years. Teavana marks the largest of a string of acquisitions by the coffee giant, including a $30 million deal with fresh juice brand Evolution Fresh Inc. and a $100 million purchase of La Boulange Bakery (Bay Bread LLC) last year. This is not the corporation’s first foray into the tea market. Tazo Tea was acquired in 1999 is now worth approximately $1.4 billion annually in pre-packed tea bag and drink sales. The two brands, however, will not create an Apple-like cannibalism of sales; Starbucks maintains that the two brands are “complementary” and company leadership has yet to decide if they will both be sold in Starbucks locations.

The company has released a plan to open 1,000 new Teavana stores in the US within the next five years. Will these new locations maintain Teavana’s trademark brand image loose-tea and its pottery shop ambience, or will the consistent packaging of a Starbucks experience be present in the new Teavana stores? While this remains to be seen, company heads have stated that their coffee will not be sold within Teavana shops.

This is likely to be an image and not a monetary decision for the corporation. Besides ownership of the entire drink experience- coffee, tea, juice- and the pastry on the side, Starbucks also earns billions each year in sales of its retail bottled beverages and juices at grocery stores and quick stop shoppes. Furthermore, the coffee king is planning to extend its reach into far-flung markets favoring tea, particularly in China and India where tea is consumer up to 16 and 7 times more often than coffee, respectively. Teavana, having recently expanded past North America and into Kuwait, will certainly get more face time on the global market as a result of one of Starbucks’ “smartest acquisitions” yet.

 

Posted by: Sophia Higgins

Sources: Bloomberg News, Reuters, Starbucks Corporation

Photo credit: Black Coffee and Tea in White Cup is Hot @ epSos.de’s photostream courtesy of Flickr user epSos.de

Will the US Ascend the Oil Throne by 2020?

The International Energy Agency predicts that by 2020, the United States will surpass Saudi Arabia as the world’s largest producer of oil. Furthermore, the agency forecasts that by 2035 the US will achieve energy self-sufficiency. These facts follow a trend of 14% growth in crude oil production as well as a 10% increase in natural gas production between 2008 and 2011.

Behind these developments are increases in private land production and new technological innovations such as hydraulic fracking, a controversial oil extraction method from shale rock formations. In addition to less expensive gas and electricity prices, the American oil and gas industry has a competitive edge against Russia and Saudi Arabia, the current top producers. Though the IEA foresees the US becoming a net exporter, it does not see the US exceeded either country in energy exports due to large domestic demand that will require about 93% of US production. US output is currently at 6.7 million barrels a day and is expected to reach nearly 12 million by 2020. Current import levels of 20% are expected to steadily decrease as the US satisfies its own demand.

The international community is contributing to the overall rise in oil production as well. By 2035, China, India and the Middle East will account for 60% of growth in the industry and help fulfill a world-wide need for almost 100 million barrels per day. Still, the IEA emphasizes that there is more to be done to maximize known reserves across the globe. Exploration must be prioritized to leave no environmentally-sound opportunity untapped. Additionally, energy efficiency measures should be implemented with new industry fuel standards to encourage cleaner energy use to fill gas energy gaps.

Ultimately, the US is no longer on the oil decline. Rather, this is a growing industry strongly based at home and has the energy to develop further. Contemporary foreign policy has stressed the importance of energy independence and the opportunity is now in American hands. A reversal of the energy trend has come, and the United States may take the crown.

The World Energy Outlook report is published annually by the IEA in Paris.

Posted by: Sophia Higgins

Sources: IEA, Reuters, Bloomberg, CNN Money

Photo Credit: Triple_Divide_Oil_Gas_Pipeline6 @ photostream courtesy of Flickr user Public Herald

Public-Private Partnerships in Space sees the return of the First Commercial Space Cargo Flight

The newest competitive marketplace is out of this world, literally. Space is the newest investment frontier for companies following the retirement of NASA’s spaceshuttle fleet. Space exploration now relies on a private-public partnership between the Space Administration and companies such as California’s Space Exploration Technologies (SpaceX) and Virginia-based Orbital Sciences Corp.

The most recent partnership is the SpaceX Dragon capsule which returned from its “historic mission” to the International Space Station on Sunday October 28^th. Its return is marked as “mission accomplished” for all parties as Dragon successfully became the first commercial cargo flight in space. The capsule, unmanned for the duration of its trip, is also the first robotic spacecraft ever to return cargo to Earth.

Launched on October 7^th by SpaceX in California, the capsule carried 882 pounds of supplies including scientific equipment, crew supplies such as clothes and fresh apples, and hardware to the station. Dragon returned safely with cargo and test samples from the astronauts manning the space station, landing in the ocean off of the Southern California coast. The success of this mission bodes well for the 11 commercial flights scheduled to resupply the station, the next of which departs in January. These flights comprise a $1.6 billion contract between SpaceX and NASA.

The future is full of continued business relations between NASA and American companies. Alongside Space X, Orbital Sciences Corp is under a $1.9 billion contract with NASA to launch 8 rocket and spacecraft missions with the first launching before the new year. Additionally, a current NASA contract to launch manned orbital flights is considering bids from companies Sierra Nevada and Boeing. These partnerships have led to meaningful experimentation and the products of multilateral research reflect “American ingenuity” states SpaceX. Certainly, space exploration has entered a new age and with the success of Dragon, the future appears bright for NASA and their private partners.

Posted by: Sophia Higgins

Sources: SpaceX, Space.com, CNN, Voxxi

Photo Credit: Dragon Splashes Down @ photostream courtesy of Flickr user NASA Goddard Photo and Video

We’re the Biggest, but are we the Best? U.S. Global Competitiveness falls from 5th to 7th place

According to the newly released 2012 Global Competitiveness ranking by the World Economic Forum (WEF) the United States has fallen from 5^th place to 7^th place of 144 economies. This marks the fourth year of decline for the U.S., which last year fell from 4^th to 5^th place. The Geneva-based WEF cites the GDP to debt ratio, concerns over January’s upcoming “fiscal cliff”, institutional mistrust by the business community, and a lack of macroeconomic stability as the major reasons for the decline. Additionally, the nation’s 2011 credit downgrade by Standard & Poor from an AAA to AA+ is seen as a reflection of national struggles with these same issues which have also decreased its global competitiveness.

Jennifer Blanke, Chief Economist of the WEF, sought to explain in more detail this ranking, stating that there is “continuing concern about the macro-economic environment, continuing debt levels – the inability to get the spending under control and really political deadlock about how to even deal with this issue. And, this is leading to concern about political institutions in general.” Despite these causes of decreasing U.S. stature, economists do highlight the high score of the United States in innovation and productivity. According to the report, the United States is still considered a premier model for other world economies in these areas and has the potential to improve in all other sectors.

The WEF’s Global Competitiveness Report has been conducted annually for over 30 years and ranks national economies based on 12 influential pillars. Some of these factors include measuring and comparing infrastructure, innovation, technological readiness, higher education and training, and financial market development. Recently adjusted for social and environmental sustainability, the report created a measurement for the ease of citizens maximizing their potential to contribute to economic prosperity and a measurement for overall institutional efficiency in the management of resources.

Who ranks above and below the United States? Western Europe dominates the top 10: Switzerland, Singapore, and Finland round out the top three ranks, followed by Sweden, the Netherlands, and Germany, respectively. Other rankings of interest are Japan in 10^th, China in 26^th, and the rest of the BRIC emerging economies coming in with Brazil in 53^rd, India in 55^th, and Russia trailing in 66^th place. Greece, weakening still, now ranks at 96^th, and Yemen remains in last place at 144^th.

As the United States remains the world’s largest economy we can hardly count out America as a major economic heavyweight and innovator. Still, the slip is seen by some as a serious concern, especially in tangent with the potential fiscal cliff coming in January. No matter who is elected in November, Washington certainly has economic policy changes to make to regain its stature as a top global competitor in the eyes of the World Economic Forum.

Posted by: Sophia Higgins

Sources: CNBC, World Economic Forum, the Hill, Outlook Series

Photo Source: no name @ Gates Foundation photostream courtesy of Flickr user Gates Foundation

STEM Visa Bill Defeated in Congress but Debate Goes On

One of the most talked about measures to improve the competitiveness of the United States in the area of technology and innovation is the STEM Jobs Bill. On September 20^th, the bill, put forth by Republican Congressman Lamar Smith of Texas, was defeated in the House, failing to receive two thirds of the votes.

The Bill would enable 55,000 students with a doctorate or a master’s degree in one of the STEM subjects to apply for a Green Card upon graduation. If enacted, the STEM Jobs Bill would have discontinued the Diversity Visa Program, or Green Card Lottery, which currently allocates 55,000 Green Cards to people from countries with low levels of immigration to the United States. The Bill was struck down mostly by Democrats unwilling to eliminate the Diversity Visa Program. Two more bills are on the table, one by Democratic Congresswoman Zoe Lofgren of California, the other by Democratic Senator Chuck Schumer of New York. Both of these bills aim to keep the Diversity Visa Program alive while introducing the STEM Visa program simultaneously.

Politicians on both sides, as well as heads of industry all agree that something needs to be done in order to not lose highly educated workers to other countries. Without the ability to stay and work in the United States, these foreign students are forced to leave and end up working for companies overseas. These students are especially important to the future of the US economy because of the low rates of American students who decide to go in to science and engineering, only about 5% of graduates.

Solving the issue of talent leaving the US will be essential in order to ensure America’s continual success in leading the world in technology and innovation in the 21^st century. If Congress can manage to cooperate across the aisle and reach a compromise, the STEM Jobs Bill would supply hi-tech companies with much needed workers and boost the US economy.

Progress is being made, but a lot more has to be done in order for the United States to reverse the current trend of lagging behind other countries in competitiveness. Ultimately, the problem of American students lacking interest in studying science and engineering has to be tackled in order to ensure future prosperity.

Posted by: Samuel Benka

Sources: Forbes, Politico, The Huffington Post

Photo Credit: US Capitol Courtesy of Flickr user katieharbath

Techonomy Conference 2012: Objectives of Technology-Driven Economic Revitalization

On Wednesday, September 12^th business leaders, political figures, and technology experts came together for the annual Techonomy Conference in Detroit. Hosted by the Detroit Economic Club, the conference’s agenda focused on the role of technology as a vital component of achieving social progress and economic growth.  This single day program is especially committed to the issues of “reigniting U.S. competitiveness and economic growth, creating jobs, and revitalizing cities in a technologized age”. Featured speakers included Grady Burnett, the Vice President of Facebook’s Global Market Solutions, James Dougherty, an Adjunct Senior Fellow for Business and Foreign Policy on the Council of Foreign Relations, and Justin Fox, the Editorial Director of the Harvard Business Review. They addressed the crowd on topics ranging from challenges in the era of globalization to the democratization of finance and product development to the future of manufacturing and its impact on employment. Audience members were also greeted by the founder of Techonomy, David Kirkpatrick, and treated to speeches on individual entrepreneurial development and other related topics.

The conference took a local look at Michigan and Detroit’s economic struggles for revitalization and at the challenges faced auto-mobile industry. Described as the Silicon Valley of an “earlier era”, Detroit is said to represent the larger issues facing American cities, including adapting to changes in education, employment, and infrastructure brought on by an increasingly globalized market society. Some have questioned the conference’s location of Detroit due to current economic struggles. Techonomy’s founder sends a different message, citing Detroit’s troubles as emblematic of cities that have missed the opportunities of technology in the past but have the potential to resolve these issues. Even a recently hurting automobile industry, a defining characteristic of Detroit, stands to make substantial gains from strengthening its tech culture of efficiency and educational achievement.

What were the goals and expectations of Techonomy? The event sought to utilize the revitalization of industry through technological advances, entrepreneurship, and innovation as major strategies for economic recovery. A focus on the increasing globalization of business and industry practices seemed also to be an objective of the conference. Intent on keeping America pushing the technological envelope, speakers discussed the future of expanding innovation and inspiring competitive growth. Complementarily, lecturers represented a diverse background of national industry and intellectual leadership, to address the concern of declining US competitiveness in detail and tackle the issue from unique viewpoints.

What can the public expect to come from this meeting of multi-disciplinary minds? Perhaps policy-makers will be influenced by the incredible support from the business community for this technology initiative as a means of creating jobs and stimulating urban development. Another possible outcome is a renewed emphasis on education for current and future generations to establish a more highly-skilled workforce with improved techno-literacy. Finally, perhaps Americans will see more pressure for regulatory reform easing start-up business restrictions. Ultimately, conference publicity should push technology to the forefront of economic recovery initiatives as a tool for improving US competitiveness and improving urgent urban issues to speed along city development.

Forbes highlights examples of innovative entrepreneurs in the Detroit area who exemplify these aims and serve as best-practice models for aspiring start-up companies. With the help of the Techonomy and its conference speakers, the American public may be able to look forward to more success stories like these.

Posted by: Sophia Higgins

Sources: Techonomy, Forbes, CNBC

Photo Credit: 2010_08_05_techonomy_105 @ Techonomy courtesy of Flickr user dserals

 

The national debt hits $16 trillion: where is the debt coming from and who is it affecting?

On Tuesday, September 4th, the Department of the Treasury reported that the national debt has topped the $16 trillion mark. After a series of debt auctions near the close of business on Friday, August 31st, the gross debt rose from $15.991 trillion to $16.016 trillion. What does this number, once imaginably enormous and now alarmingly tangible, mean for American citizens and the economy?

Taking a closer look at where exactly our debt had been auctioned off to is an important first step

to answering this question. A breakdown of our current debt reveals that about 70% of the $16

trillion (about $11.273 trillion) belongs to both foreign and domestic investors and the Federal Reserve, representing an increase of almost $60 billion in a single day. The remaining 30% is inter-governmental transfers. Specifically, a little less than $5 trillion is owed to the trust fund for Social Security and federal pension systems.

Of the over $11 trillion owed to foreign investors, China owns $1.16 trillion but is closely followed by Japan with $1.12 million. In fact, though China has been vilified as the largest foreign holder of US debt, their holdings have decreased from $1.31 trillion in June of 2011. Other world powers including Russia, the United Kingdom, and Brazil together hold significant portions of the national debt as well.

Now that the debt has been categorized, we can see possible implications for American citizens. So much of the debt is held by American institutions and American citizens who require the services of those federal funds. Borrowing $5 trillion from Social Security’s trust fund may have a significant effect on the future functioning and stability of the pension system, and therefore a powerful impact on care for coming generations. Pension funds could see cuts if borrowing options are restricted in the future,impacted by the downgrading of US credit. In the presidential debate and current political arena, obtaining the financing for enacting policies like the Healthcare Reform through deficit-spending remains a major controversy and fault-line between the Democratic and Republican parties.

Another potential effect of this is the strong possibility of a changing, for better or for worse, our relationship with our foreign investors. How much influence on America does the Republic of China have as it reigns as the largest holder of US debt? Will our policy decisions in the future favor not necessarily who our friendly relationships are with, but with which nations hold the biggest shares of our deficit?

These questions and many more remain to be answered. Perhaps we will find the answers before meet the next trillion dollar marker.

Posted by Sophia Higgins

Sources: US Department of the Treasury,Washington Times ,CNN

Photo Credit courtesy of Flickr user Photo Gallery

 

What the Apple-Samsung Case May Mean for Innovation & Competitiveness

In a case that has garnered much attention by the media, Apple claimed that Samsung had infringed on several patents on the iPhone and iPad.The San Jose jury unanimously agreed with Apple in its verdict. However, a similar case in South Korea found that Samsung infringed only one Apple patent while Apple infringed two Samsung patents.

More important than the $1 billion that Samsung must pay to Apple for its infringements (which is a mere 1.5 percent of Samsung’s annual revenue) is the message Apple conveyed to companies with regard to basic design elements in electronic devices.    The case of Apple versus Samsung is just the first of several claims by Apple of patent infringements by other companies.  Most threatening is the message sent to device makers who use Google’s Android operating system.  Apple has surprisingly chosen not to sue Google likely because it is much easier to make a case for monetary damage against companies like Samsung that sell hardware to consumers versus a company like Google, which doesn’t charge device makers for its software.

The impact this case will have on future competition is yet to be seen, as some lawyers argue that Apple isn’t the only company that can come up with innovative designs-and its court victory could encourage more innovation by competitors.  However, others argue that this verdict could stifle innovation as it may force device makers to slow or abandon product development in fear of breaching Apple’s intellectual property resulting in less smartphones and tablets on the market and higher production costs and prices for consumers.

Samsung stated, “It is unfortunate that patent law can be manipulated to give one company a monopoly over rectangles with rounded corners or technology that is being improved every day by Samsung and other companies.”

Perhaps this case, which is one of the largest patent damages verdict on record, will encourage others to, “think outside the box” (no pun intended) and develop more unique designs in the future.

 

Posted by: Elizabeth White

Sources: The NY Times, The Wall Street Journal & CIO Journal

Photo Credit: apple-samsung Courtesy of Flickr user diTii

The Affordable Care Act and the Economy

While our focus here at the PAGE program is on areas such as innovation, education, manufacturing, immigration, and other areas that help America compete in an increasingly globalized economy, health care spending accounts for 18% of this country’s economic output and we would be remiss if we did not briefly examine the Affordable Care Act’s effect on the economy, now that the Supreme Court has ruled on the law and declared that it can be implemented essentially in its entirety.
It terms of the overall economic effect, the ACA will expand coverage to tens of millions of people (the White House estimates 32 million) which will naturally increase demand for health-services and boost health expenditures like hospital visits and medications. This increased spending should fuel growth, at least in the near-term. The legislation is financed partly by additional taxes, especially on higher-earners and their investment income. The tax hit could stifle consumer spending, offsetting the jump in health expenditures. Then again, Americans with higher incomes tend to save more cash, so it’s also reasonable to think taxing them could divert money from savings accounts to spending — boosting the economy. The overall macroeconomic effect will most likely not be discerned as positive, negative or neutral for some time.
Regarding the economic topic of the day, job creation, the effect of the legislation again, is hard to read. As noted above, spending in the health sector is likely to increase if for no other reason than tens of millions more consumers in the market so it is not unreasonable to assume jobs will be created in the health sector. On the other hand, there is much anecdotal evidence (though little empirical, since the Act’s main provisions are not yet in effect) of businesses downsizing or putting off hiring because of the new employer-provided insurance regulations. The incentive and regulation structure for businesses is complex though, with varying rules and subsidies depending on the size and nature of the business so it is hard to forecast how hiring in the private sector at-large will change if at all.
The mostly hotly debated economic factor is how the ACA will affect the deficit. As President Obama reminds anyone who will listen, the Congressional Budget Office scored the legislation as a net deficit reducer (to the tune of $140 billion) over the next ten years although conservatives have quibbled with how the bill was scored. The Court ruled on June 28th that the Federal government cannot force the states to expand Medicaid as the bill had originally intended (specifically, the Federal government could revoke a state’s entire allocation of Medicaid funding if it did not expand Medicaid coverage) so it is possible that conservative governors will not move ahead with expanding Medicaid since they are no longer compelled to. This, no doubt, would be a huge factor in both Federal and state budgets.
Of course, Mitt Romney, Paul Ryan, and the Republicans in Congress have vowed to repeal the Act as soon as they have the chance and should President Obama stay in office, the law will not be fully in effect until 2014 at least. As a result, at this point, the only thing the American people can be sure of is that they and their economy will be affected in some way, simply due to the sweeping nature of the law and the outsized role health spending plays in our economy.
Posted by: Sean Norris

Sources: The New York Times, The Wall Street Journal, The Congressional Budget Office, http://www.healthcare.gov

Photo Credit: Protect the Law courtesy of flickr user Brett Davis

Chinese Investment in Africa and the Woes of Western Aid

Over a year ago, Secretary of State Hillary Clinton issued a severe warning to Africa’s emerging economies, “beware of China’s new colonialism.” Clinton stressed how important it is for Africa’s emerging economies to resist the old colonial practices of foreign investors looking “to come in, take out natural resources, pay off leaders and leave.” She also urged African nations to apply the same investment standards to the Chinese as they would to Americans and Europeans, reminding the people of Sub-Saharan Africa that the Obama Administration is genuinely interested in helping their economies grow and prosper.

However, economist Dambisa Moyo argues that Chinese foreign investment in Sub-Saharan Africa is favorable to the continent and pure in its intentions. She prefaces her argument by pointing out that China has now surpassed the United States as the continent’s single largest trading partner, increasing foreign direct investment to the region from $100 million to $12 billion in eight years. Moyo recognizes how this staggering increase in Chinese foreign investment has made many western powers wary, but refutes the notion that Africans are being exploited by the Chinese with data from 2007 Pew Research Poll which shows that 91% of Kenyans feel that China’s involvement in their economy is beneficial, against just 74% who feel America’s has any influence. She further disputes the claim that China is using its own workforce in Africa by highlighting that the ratio of African to Chinese workers in Zambia is now 13 to 1.  Moyo does however mention that human rights abuses should receive appropriate investigation but that China should not be generalized as hostile with regard to its approach toward Africa.

Moyo concludes her criticism of Secretary Clinton’s assertion by claiming that maybe it’s not such a bad thing that Western aid to the region has decreased, citing that aid has been a primary hindrance of  democracy and has harbored the corruption which has kept the region’s economy stagnant for so long. She suggests that America’s efforts will only prove beneficial once they put the onus of government accountability and responsibility on local governments instead, summarizing that “foreign investment and job creation are the only forces that can reduce poverty and stave off the sort of political upheaval that has swept the Arab world. And China’s rush for resources has…created a large market for African exports-a huge benefit for a continent seeking rapid economic growth.”

Posted By: Jonathan Sherman

Sources: Huffington Post, New York Times

Photo Credit: Dambisa Moyo @ Canada 2020 courtesy of Flickr user Canada.2020