http://www.chinadaily.com.cn/china/2008-06/02/content_6729822.htm
(Xinhua)Updated: 2008-06-02 22:35
BEIJING - More details of the long-anticipated China telecoms industry reshuffle were revealed on Monday as China Unicom, the country's second largest mobile service provider, said it would acquire fixed-line operator China Netcom Group Corp. with a share swap deal.
The deal was valued at 439.17 billion Hong Kong dollars (US$ 56.34 billion), based on Monday's closing price of China Unicom at 18.48 Hong Kong dollars per share.
China Unicom said in a statement that each China Netcom share would be valued at 1.508 new China Unicom shares, while each American Depository Share of China Netcom would be valued at 3.016 American Depository shares of new China Unicom.
The merger is expected to introduce more competition into the telecoms industry, as part of the overhaul planned by the State-owned Assets Supervision and Administration Commission of the State Council and the Ministry of Industry and Information.
China Unicom also announced it signed a deal on Monday with China Telecom, the country's largest fixed-line operator, to sell its code-division multiple access (CDMA) operations and network for 100 billion yuan (US$ 14.49 billion).
The new China Unicom, by incorporating China Netcom, would focus on its global system for mobile communications (GSM). China Unicom originally operated both mobile networks.
China Unicom said following the CDMA sale, the company would be able to concentrate on development of its GSM technologies for the third-generation high-speed wireless services (3G).
China Mobile Communications Corp. (CMCC), the first to reveal the broader plan for the whole industry, released on May 23 plans for its acquisition of fixed-line operator China Tietong Telecommunications Corp. (China Tietong).
Analysts believe that the five state-owned companies in the telecom sector, namely China Mobile, China Telecom, China Unicom, China Netcom and China Tietong, will be restructured into three groups, each able to provide both mobile and fixed-line services.
They had also expected the restructuring to give impetus to the country's preparation for the long-awaited 3G technologies, which require huge investment.
Reflection
As mentioned in the article, China Netcom provides fixed-line operators while China Unicom is a Mobile service provider, so the products of these two firms are not exactly subsitutes of each other. and therefore the cross elasticity of demand is low. Fixed-line carriers are now struggling to attract new businesses as customers are passing up traditional service in favor of mobile phones, hence in order to secure market share and remain competitive, China Netcom and China Unicom chose to merge.
The type of merger between these two giant chinese telecom is lateral integration, as these two firms provide differentiated service in the same industry. The merger brings about much benefits for the two firms; Firstly, their market share would increase overnight as their targeted customers are two different groups.
The merger would also allow the new firm to have more fund to pour into R & D, specifically 3G technology, which requires a lot effort and money to support. If 3G technology is successfully developed and widely used,
The two firms' decision to merge would trigger responses from the other 3 telecoms, China Tietong, China Mobile and China Telecom, because the chinese telecom industry is an oligopoly, and there are interdependence among these five firms.
To be editted later...
Tuesday, June 17, 2008
Thursday, May 29, 2008
Is oil taxes feasible?
Article:
http://money.cnn.com/2008/05/06/news/economy/oil_profits_tax/index.htm?postversion=2008050612
Reflection:
According to the article, there has been a debate as to whether a tax on oil profits is feasible. Personally, I’m against a tax on the oil profit to a larger extent. By imposing such a tax, both the producer and supplier will suffer. Having taxes mean that cost of production increases and this will raise equilibrium price. Oil having a price inelastic demand will causes consumers to suffer the most from the taxes as more of their consumer surplus will be eliminated. This is shown from the incidence of taxation. The more price inelastic the demand, the greater the incidence of taxation on consumers.
To add on, with taxes in place, firms will have less incentive to carry out research and development. This will then means there will be fewer efforts to search for new oil resources. Even in the past, the search for new oil sources have been extremely costly and most seem to be futile efforts. This will means that supply of oil will be lower to a much greater extent. This will in turn cause the equilibrium price to increase to a new high. Hence, this will cause consumer to have a even harder time as they will have to absorb most of the increase in price. Hence, if a tax is to be imposed, the producer will only incur a small portion of the cost but still continue to earn supernormal profits. Thus, the aim of imposing such a tax will prove to be useless.
Gerald
http://money.cnn.com/2008/05/06/news/economy/oil_profits_tax/index.htm?postversion=2008050612
Reflection:
According to the article, there has been a debate as to whether a tax on oil profits is feasible. Personally, I’m against a tax on the oil profit to a larger extent. By imposing such a tax, both the producer and supplier will suffer. Having taxes mean that cost of production increases and this will raise equilibrium price. Oil having a price inelastic demand will causes consumers to suffer the most from the taxes as more of their consumer surplus will be eliminated. This is shown from the incidence of taxation. The more price inelastic the demand, the greater the incidence of taxation on consumers.
To add on, with taxes in place, firms will have less incentive to carry out research and development. This will then means there will be fewer efforts to search for new oil resources. Even in the past, the search for new oil sources have been extremely costly and most seem to be futile efforts. This will means that supply of oil will be lower to a much greater extent. This will in turn cause the equilibrium price to increase to a new high. Hence, this will cause consumer to have a even harder time as they will have to absorb most of the increase in price. Hence, if a tax is to be imposed, the producer will only incur a small portion of the cost but still continue to earn supernormal profits. Thus, the aim of imposing such a tax will prove to be useless.
Gerald
Sunday, May 25, 2008
May 23, 2008 7:33 AM PDT
Ballmer is trying to rewrite Microhoo history
Steve Ballmer is changing the script in the Microhoo saga.
During a speech Ballmer made Friday at a tech conference in Moscow, Reuters reported him as saying, "Yahoo was never the strategy we were pursuing, it was a way to accelerate our online advertising business...We will spend money on some acquisitions. You can do a whole lot of things with 50 billion dollars."
The money must be burning a hole is his pocket, given how ready he was to hand it to Yahoo, when he now says that the combination was "never the strategy."
If Yahoo was never the strategy, what was the last three-and-a-half-month pursuit of Yahoo for nearly $50 billion? It makes Ballmer look like a flip-flopper, distancing himself from his previous hot pursuit of the Internet portal. In his initial letter to Yahoo's board on January 31, which was clearly not a love note but a business solicitation, Ballmer wrote:
While online advertising growth continues, there are significant benefits of scale in advertising platform economics, in capital costs for search index build-out, and in research and development, making this a time of industry consolidation and convergence. Today, the market is increasingly dominated by one player who is consolidating its dominance through acquisition. Together, Microsoft and Yahoo can offer a credible alternative for consumers, advertisers, and publishers. Synergies of this combination fall into four areas:
• Scale economics: This combination enables synergies related to scale economics of the advertising platform where today there is only one competitor at scale. This includes synergies across both search and non-search related advertising that will strengthen the value proposition to both advertisers and publishers. Additionally, the combination allows us to consolidate capital spending.
• Expanded R&D capacity: The combined talent of our engineering resources can be focused on R&D priorities such as a single search index and single advertising platform. Together we can unleash new levels of innovation, delivering enhanced user experiences, breakthroughs in search, and new advertising platform capabilities. Many of these breakthroughs are a function of an engineering scale that today neither of our companies has on its own.
• Operational efficiencies: Eliminating redundant infrastructure and duplicative operating costs will improve the financial performance of the combined entity.
• Emerging user experiences: Our combined ability to focus engineering resources that drive innovation in emerging scenarios such as video, mobile services, online commerce, social media, and social platforms is greatly enhanced.
From that letter, it would appear that Yahoo was a strategy, and it went beyond just search.
Perhaps Ballmer's remarks in Moscow could be construed as a way to avoid uttering the "Google" word. Yahoo may not be the grand ultimate strategy, but preventing Google from getting in bed with Jerry Yang and company is--hence, Ballmer's continued pursuit of Yahoo's search business.
In speaking with CNET News.com on February 20, Chairman Bill Gates laid bare the Yahoo bride, revealing Microsoft's real strategy (as opposed to "the" strategy) around Yahoo, which it is now pursuing:
We have a strategy for competing in the search space that Google dominates today, that we'll pursue that we had before we made the Yahoo offer, and that we can pursue without that. It involves breakthrough engineering. We think that the combination with Yahoo would accelerate things in a very exciting way, because they do have great engineers, they have done a lot of great work. So, if you combine their work and our work, the speed at which you can innovate and get things done is just dramatically more rapid. So, it's really about the people there that want to join in and create a better search, better portal for a very broad set of customers. That's the vision that's behind saying, hey, wouldn't this be a great combination.
When Yahoo played too hard to get, Ballmer came to realize that swallowing Yahoo whole perhaps wasn't as good a strategy for Microsoft as it was for Yahoo shareholders. Doing anything to stop the fast-growing Google, which will generate about half the revenue Microsoft does this year, is the strategy. Hence, pursuing Yahoo's search business on one end and Facebook on another front to create more inventory and ride the social-networking wave.
It all sounds a bit desperate. Perhaps it should be looked upon as an "evolving" strategy. What's clear is that Ballmer and Yang never had the kind of relationship that could lead to a marriage. In the end, emotion trumped "the" strategy.Reflections
The merger between Yahoo and Microsoft was a very big thing in the technology sector as they are 2 of the biggest firms in the search engine. It will be a horizontal integration as both companies are in the same stage of production, which is the search engine market.
However, even if they were to merge, their market share would still be lower than Google which has around 60% of the market share for search engines so they will not be able to monopolise the market. Despite of this, by commanding a higher market share, they will be able to set their price better.
The factors for merger that the article has given is similar to what we study in the lecture. There will be significant internal Economies of Scale for Microsoft if they were to merge with Yahoo. This will lower their cost and in turn earn more profits. The factors given are Technical, Knowledge, Adminstration and Risk-bearing.
This merger has not taken place yet because the Board for Yahoo is trying to demand for a higher price. However, as Yahoo is not doing well at the moment, its share prices have been dropping due to this negative news and thus it is not advisable for them to hold out.
-Xiang Jing
P.S. It's a little late
Thursday, May 22, 2008
PETROL :D
Straits Times Article: KL plans subsidy cut for higher grade of petrol
Owners of high-end vehicles will have to pay more for their fuel under a government plan to reduce subsidies for a grade of petrol used by performance cars and sports utility vehicles (SUVs), Octone 99.
The other grade often used by motorcyclists and cheaper cars, Octane 95, wil be sold at a lower price, said Domestic Trade and Consumer Affairs Minister Shahrir Samad.
The subsidy on petrol may be revised with the bulk going to the regular petrol type so that prices will be kept down for the average motorist, Datuk Sharir was quoted as saying by the New Sunday Times newspaper.
He said the Octane 95 grade could be used in most vehicles but the government would also offer Octane 99, a more costly premium fuel that is usually used in higher-end cars. Both grades have not been introduced in Malaysia.
“The goal is to have subsidies targeted and more focused at those who need it, such as the lower- and middle-income groups, and give a choice to the rich on what petrol they want to fill in their tanks,” said Datuk Shahrir.
“I was informed by Proton that a majority of cars can use Octane 95. The rich who use Octane 95 in their Mercedes, BMWs and SUVs would not get the performance that comes with the higher quality Octane 99,” he added.
He said the government would save costs by mainly subsidizing one type of fuel, Octane 95 as opposed to subsidizing two types of fuel.The proposal is being considered following meeting of the Cabinet Committee on Inflation chaired by Prime Minister Abdullah Badawi recently.
Reflections:
I feel that this is a really smart way of providing subsidy to the people in the country. Due to the rising oil prices, the Malaysian government gives subsidy based on the type of good purchased. Though both products are petrol, the types of petrol (Octane 95 - lower grade and Octane 99 – higher grade) are different. This subsidy allows consumers to pay a lower price and exchange a higher quantity. For the case above, Octane 99 is a higher- grade petrol. It can be seen as a luxury good. Only people with a higher purchasing power (OR rich people) are able to buy this good. However, the question would be how willing would they be to buy this good? Two main factors would determine how willing they would be to buy Octane 99. It is a question about car performance versus savings. Would they want to compromise on the performance of the car? As said in the passage, “The rich who use Octane 95 in their Mercedes, BMWs and SUVs would not get the performance that comes with the higher quality Octane 99”. However, if they downgrade their petrol grade to Octane 95, that would mean loads of savings for them.
The government subsidizes those that use Octane 95 with an assumption that its consumers would be those from lower-income groups/ motorists/ possess lower-end vehicles. However, this might not be true as people using higher-end vehicles (e.g. BMWs, Mercedes) might also go for the lower grade petrol. The government does not directly subsidize the lower-income groups, who are the people who are really in need of this subsidy. “The goal is to have subsidies targeted and more focused at those who need it, such as the lower- and middle-income groups, and give a choice to the rich on what petrol they want to fill in their tanks”, what would happen then if a large proportion of the rich people choose to fill their tanks with the lower-grade petrol? The government might just end up subsidizing most of the petrol-consumers again, which brings us back to square one.
Secondly, we all know that subsidies from the government come from taxes paid by tax payers. To the extent that tax revenues are used to finance the subsidy, there will be a transfer of income from taxpayers to the consumers. This decrease in subsidy on petrol would also mean that the tax payers would have to pay lesser taxes (as compared to the previous situation in which the government subsidized both the higher and lower grade petrol types). The lower income group would be very happy, as this would mean that they would still receive the subsidy without paying much tax. However, for the higher-income group, they would suffer a loss as they would still have to pay tax without receiving any form of subsidy. The tax which they pay would not benefit them in any way at all should they use the higher-grades of petrol.
In conclusion, this measure taken would help the lower-income group to a large extent, and the higher-income group to only a small extent. But, this is fair :)
-Gaomin-
Owners of high-end vehicles will have to pay more for their fuel under a government plan to reduce subsidies for a grade of petrol used by performance cars and sports utility vehicles (SUVs), Octone 99.
The other grade often used by motorcyclists and cheaper cars, Octane 95, wil be sold at a lower price, said Domestic Trade and Consumer Affairs Minister Shahrir Samad.
The subsidy on petrol may be revised with the bulk going to the regular petrol type so that prices will be kept down for the average motorist, Datuk Sharir was quoted as saying by the New Sunday Times newspaper.
He said the Octane 95 grade could be used in most vehicles but the government would also offer Octane 99, a more costly premium fuel that is usually used in higher-end cars. Both grades have not been introduced in Malaysia.
“The goal is to have subsidies targeted and more focused at those who need it, such as the lower- and middle-income groups, and give a choice to the rich on what petrol they want to fill in their tanks,” said Datuk Shahrir.
“I was informed by Proton that a majority of cars can use Octane 95. The rich who use Octane 95 in their Mercedes, BMWs and SUVs would not get the performance that comes with the higher quality Octane 99,” he added.
He said the government would save costs by mainly subsidizing one type of fuel, Octane 95 as opposed to subsidizing two types of fuel.The proposal is being considered following meeting of the Cabinet Committee on Inflation chaired by Prime Minister Abdullah Badawi recently.
Reflections:
I feel that this is a really smart way of providing subsidy to the people in the country. Due to the rising oil prices, the Malaysian government gives subsidy based on the type of good purchased. Though both products are petrol, the types of petrol (Octane 95 - lower grade and Octane 99 – higher grade) are different. This subsidy allows consumers to pay a lower price and exchange a higher quantity. For the case above, Octane 99 is a higher- grade petrol. It can be seen as a luxury good. Only people with a higher purchasing power (OR rich people) are able to buy this good. However, the question would be how willing would they be to buy this good? Two main factors would determine how willing they would be to buy Octane 99. It is a question about car performance versus savings. Would they want to compromise on the performance of the car? As said in the passage, “The rich who use Octane 95 in their Mercedes, BMWs and SUVs would not get the performance that comes with the higher quality Octane 99”. However, if they downgrade their petrol grade to Octane 95, that would mean loads of savings for them.
The government subsidizes those that use Octane 95 with an assumption that its consumers would be those from lower-income groups/ motorists/ possess lower-end vehicles. However, this might not be true as people using higher-end vehicles (e.g. BMWs, Mercedes) might also go for the lower grade petrol. The government does not directly subsidize the lower-income groups, who are the people who are really in need of this subsidy. “The goal is to have subsidies targeted and more focused at those who need it, such as the lower- and middle-income groups, and give a choice to the rich on what petrol they want to fill in their tanks”, what would happen then if a large proportion of the rich people choose to fill their tanks with the lower-grade petrol? The government might just end up subsidizing most of the petrol-consumers again, which brings us back to square one.
Secondly, we all know that subsidies from the government come from taxes paid by tax payers. To the extent that tax revenues are used to finance the subsidy, there will be a transfer of income from taxpayers to the consumers. This decrease in subsidy on petrol would also mean that the tax payers would have to pay lesser taxes (as compared to the previous situation in which the government subsidized both the higher and lower grade petrol types). The lower income group would be very happy, as this would mean that they would still receive the subsidy without paying much tax. However, for the higher-income group, they would suffer a loss as they would still have to pay tax without receiving any form of subsidy. The tax which they pay would not benefit them in any way at all should they use the higher-grades of petrol.
In conclusion, this measure taken would help the lower-income group to a large extent, and the higher-income group to only a small extent. But, this is fair :)
-Gaomin-
M18 GAMES! :D
Article from Straits Times: M18 games: Prices unlikely to go up
Distributors plan to absorb 80-cent sticker fee, starting with Grand Theft Auto IV. Extra costs arising from the implementation of the new M18 video classification will not be passed on to the consumer.
That is what the distributor of Grand Theft Auto IV (GTA IV), the first game to be affected by the revamped system, said.
The game will be released for Play Station 3 and Xbox 360 machines on April 29, a day after the new rating takes effect.
The additional expense stems from the Media Development Authority’s (MDA) 80-cent charge for every M18 label issued.
So for game distributor Infocomm Asia Holdings (IAH), which plans to import 20,000 copies of GTA IV, this means an upfront payment of $16,000 to the MDA.
“The regulations of the new system were announced after we submitted our suggested retail price. WE are keeping to it,” said Mr Jonathan Sze, assistant director of IAH’s product management division.
Sales volume will help determine whether the company will absorb the additional charges for other games. For GTA IV, 80 per cent of the 20,000 copies have been pre-sold
A Sunday Times check with other major distributors such as Microsoft, Atari, Maxsoft and Electronic Arts revealed that most of them plan to absorb the new charges, though nothing has been finalized yet.
Only New Era, another big player, has confirmed that it will not pass on the fee to the consumer.
This move has got the thumbs up from retailers.
“It would be best if distributors were to absorb the sticker fees” said MR Ong Jenn Long, 30, a purchasing communicator at video retailer G3. “This way, we do not have to burden our customers or incur possible losses at the end”.
But retailers are worried that they could be charged fees similar to those currently imposed on DVD and VCD retailers.
DVD and VCD retailers pay a one-time fee of $30,000 as a security deposit and an annual fee of $1200.
If these fees are levied on video-game retailers, the likely result is that consumers will feel the pinch
“We would have to charge around $5 or more for each game,” said Mr Koh Kew Siong, 38, manager of The Software Boutique. “We might not carry M18 games then.”
Purchaser Easter Seah of Comics Connections, another games retailer, shares her sentiments.
“ If that really is the case, we won’t carry M18 games anymore,” she said.
The move to introduce M18 and another category – Age Advisory – is meant to open up more choices for consumers.
Without the new regulations, GTA 4 would most liklet be banned, just as GTA I, II and III were.
Reflections:
This article talks about the incidence of taxes, which is the division of tax between the consumers and producers.
This new game, GTA IV that would be launched in the market soon, has yet to test the market of its receptiveness towards this game since GTA I, II and III were all banned. This would officially be the first time that GTA IV gets launched in the market, as the move for M18 games were open to provide “more choices for consumers”.
It is clear why the extra costs arising from the implementation of the new M18 video classification will not be passed on to the consumer. Firstly, the demand for such game softwares is highly price elastic. There are many cheaper and better alternatives that the consumers can turn to. Due to large scale of the computer games market, there is a lot of competition in the industry. Therefore, firms need to have an upper hand advantage by reducing the cost incurred from the classification in order to draw more consumers to purchase its goods.
Secondly, such video games are deemed as a luxury good. People are often not willing to pay extra for such goods. Besides, since it’s the first launch of GTA IV, the success and value of the game has not been guaranteed. No one has ever played this game before, so no addiction towards this game has been formed. This firm thus, does not have a fixed pool of people that would be hooked on the game and buy it no matter what price it would be. Therefore, in order to ensure that the consumers would support this game, the firm definitely needs to use a low price as a luring factor.
Since the demand for GTA IV or any gaming software is price elastic, the greater the incidence of taxation would be on producers. It was also mentioned in the passage that absorbing the sticker fee by the software firm would be beneficial to both the consumer and producer as they “do not have to burden customers or incur possible losses at the end (by producers)”. Raising the price of the software might deter many from buying it. In addition, the consumer size has been sized down to those above 18 years of age, due to the addition of a new category M18. Therefore, it is more important to capture the remaining consumers left and persuade them to choose this game over the rest. If the price is raised, it might cause consumers not to “carry M18 games anymore”.
This new sticker fee would also serve as a barrier to entry for new emerging gaming firms. As said in the passage, if “game distributor Infocomm Asia Holdings … (would have to pay) an upfront payment of $16,000 to the MDA”. Having less firms in the market, would mean less competition in the market. GOOD news or BAD news for the consumers? IT DEPENDS :D
-Gaomin-
Distributors plan to absorb 80-cent sticker fee, starting with Grand Theft Auto IV. Extra costs arising from the implementation of the new M18 video classification will not be passed on to the consumer.
That is what the distributor of Grand Theft Auto IV (GTA IV), the first game to be affected by the revamped system, said.
The game will be released for Play Station 3 and Xbox 360 machines on April 29, a day after the new rating takes effect.
The additional expense stems from the Media Development Authority’s (MDA) 80-cent charge for every M18 label issued.
So for game distributor Infocomm Asia Holdings (IAH), which plans to import 20,000 copies of GTA IV, this means an upfront payment of $16,000 to the MDA.
“The regulations of the new system were announced after we submitted our suggested retail price. WE are keeping to it,” said Mr Jonathan Sze, assistant director of IAH’s product management division.
Sales volume will help determine whether the company will absorb the additional charges for other games. For GTA IV, 80 per cent of the 20,000 copies have been pre-sold
A Sunday Times check with other major distributors such as Microsoft, Atari, Maxsoft and Electronic Arts revealed that most of them plan to absorb the new charges, though nothing has been finalized yet.
Only New Era, another big player, has confirmed that it will not pass on the fee to the consumer.
This move has got the thumbs up from retailers.
“It would be best if distributors were to absorb the sticker fees” said MR Ong Jenn Long, 30, a purchasing communicator at video retailer G3. “This way, we do not have to burden our customers or incur possible losses at the end”.
But retailers are worried that they could be charged fees similar to those currently imposed on DVD and VCD retailers.
DVD and VCD retailers pay a one-time fee of $30,000 as a security deposit and an annual fee of $1200.
If these fees are levied on video-game retailers, the likely result is that consumers will feel the pinch
“We would have to charge around $5 or more for each game,” said Mr Koh Kew Siong, 38, manager of The Software Boutique. “We might not carry M18 games then.”
Purchaser Easter Seah of Comics Connections, another games retailer, shares her sentiments.
“ If that really is the case, we won’t carry M18 games anymore,” she said.
The move to introduce M18 and another category – Age Advisory – is meant to open up more choices for consumers.
Without the new regulations, GTA 4 would most liklet be banned, just as GTA I, II and III were.
Reflections:
This article talks about the incidence of taxes, which is the division of tax between the consumers and producers.
This new game, GTA IV that would be launched in the market soon, has yet to test the market of its receptiveness towards this game since GTA I, II and III were all banned. This would officially be the first time that GTA IV gets launched in the market, as the move for M18 games were open to provide “more choices for consumers”.
It is clear why the extra costs arising from the implementation of the new M18 video classification will not be passed on to the consumer. Firstly, the demand for such game softwares is highly price elastic. There are many cheaper and better alternatives that the consumers can turn to. Due to large scale of the computer games market, there is a lot of competition in the industry. Therefore, firms need to have an upper hand advantage by reducing the cost incurred from the classification in order to draw more consumers to purchase its goods.
Secondly, such video games are deemed as a luxury good. People are often not willing to pay extra for such goods. Besides, since it’s the first launch of GTA IV, the success and value of the game has not been guaranteed. No one has ever played this game before, so no addiction towards this game has been formed. This firm thus, does not have a fixed pool of people that would be hooked on the game and buy it no matter what price it would be. Therefore, in order to ensure that the consumers would support this game, the firm definitely needs to use a low price as a luring factor.
Since the demand for GTA IV or any gaming software is price elastic, the greater the incidence of taxation would be on producers. It was also mentioned in the passage that absorbing the sticker fee by the software firm would be beneficial to both the consumer and producer as they “do not have to burden customers or incur possible losses at the end (by producers)”. Raising the price of the software might deter many from buying it. In addition, the consumer size has been sized down to those above 18 years of age, due to the addition of a new category M18. Therefore, it is more important to capture the remaining consumers left and persuade them to choose this game over the rest. If the price is raised, it might cause consumers not to “carry M18 games anymore”.
This new sticker fee would also serve as a barrier to entry for new emerging gaming firms. As said in the passage, if “game distributor Infocomm Asia Holdings … (would have to pay) an upfront payment of $16,000 to the MDA”. Having less firms in the market, would mean less competition in the market. GOOD news or BAD news for the consumers? IT DEPENDS :D
-Gaomin-
Tuesday, May 20, 2008
Now services
May 15th 2008 SAN FRANCISCO
From The Economist print edition
Having bested Dell for the time being, Hewlett-Packard takes on IBM
DURING the first half of this decade Carly Fiorina, then boss of Hewlett-Packard (HP), was forever answering the same frustrating questions about Dell and IBM, HP's two more successful rivals. Dell, she said, offered computers that were “low-tech and low-cost”, whereas IBM offered “high-tech and high-cost”. Only HP, she said, was preparing to give customers “high-tech and low-cost”.
It was easier said than done. When Ms Fiorina tried to buy the computer-services arm of PricewaterhouseCoopers in 2000 to compete with IBM, the leader in that field, IBM beat her to it. And when she bought Compaq to take on Dell, the leading PC-maker, shareholders revolted. In 2005 the board fired her and hired Mark Hurd, a disciplined operations type, to focus on execution rather than vision.
Three years on Mr Hurd has mostly done that. HP, having fully digested Compaq at last, has surpassed Dell to become the world's biggest PC-maker. This means that Mr Hurd is now ready to take on IBM, which has more than 7% of the $748 billion market for services, such as running the data centres of large companies and governments, or handling entire functions, such as personnel or claims processing. The second-largest services firm, Electronic Data Systems (EDS), has much lower profit margins. HP lags in fifth place.
Mr Hurd's answer, announced this week, is to buy EDS for $13.9 billion. He is getting a big name: EDS, founded by Ross Perot in 1962, pioneered the business of outsourced data-management. But the company has been through turbulent times. Mr Perot sold EDS to General Motors in 1984—an unhappy combination that ended in 1996, when EDS was spun off. It then suffered during the technology bust and made a big loss. Under a new boss, it went into profit again, but with unimpressive margins. Its subsequent boss, Ronald Rittenmeyer, will now become head of the combined services arm of EDS and HP, which will be almost as large as IBM's.
The prospect of digesting yet another big acquisition after Compaq may seem daunting. Middle managers at HP still subscribe to the gentle, collegiate “HP way” of doing things. The culture is that of Silicon Valley—relaxed and casual—and the cafeteria is big on ahi tuna. At EDS, based in Plano, Texas, the style is “military, buttoned-down, and staid,” says Rick Sturm, the founder of Enterprise Management Associates, a consultancy. People wear ties. The cafeteria is full of steak and fries. Compared with other services firms, which increasingly hire and operate in India, EDS is overwhelmingly American.
Mr Hurd, who came to California from Ohio, is likely to feel the culture clash less than his colleagues in the ranks. His demeanour makes him “an EDS guy sitting on top of the HP way,” says one consultant. Culture aside, EDS's big selling point is to be the largest services firm that is independent of any hardware or software vendor. It will continue to advise clients to buy systems from all vendors, says Mr Hurd, but those clients are now likely to pay more attention when the boxes come from HP.
Nonetheless, the deal marks another step in HP's impressive comeback. This week Mr Hurd increased his estimate of this year's revenues to over $114 billion, despite the weak economy. The verdict on Mr Hurd is that he has skilfully executed the strategy of his flamboyant predecessor. The verdict on that predecessor, Ms Fiorina, has also improved. Her idea was controversial, but apparently right. Fittingly, Ms Fiorina seems to be making her own comeback now. As a supporter of John McCain, she is playing a bigger role in his presidential campaign by the week.
Article Review:
The merging between HP and EDS is considered as a horizontal integration in the service sector. The merging will be able to increase their service arm to as big as the IBM’s, which means HP will have the similar market size in the service sector and therefore be able to compete with IBM in terms of market power.
The purchase will allow HP to enjoy internal EOM and reduce the production cost. In this case, the company will most likely to enjoy marketing economics. As the firm size increase, it can increase its scale of advertising and do bulk distribution which lowers the unit cost because of the large output level.
It will also be able to do more research and development in the long run as it will have larger profit to invest in. This is critical to HP if it wants to take on IBM who is famous of its ‘high-tech’.
However, on the downside of this strategy the merger may be just another failure as the previous one between HP and Compaq. The most serious problem would be the brain drain caused by axing thousands of well qualified people and cutting research funding in order to pay the purchase of EDS. This will seriously reduce the competitiveness of HP as compared with IBM. Now HP is nothing but another white box vendor like Dell. If HP cannot make its own identity there is no way for it to beat IBM.
Also as said in the article, the clash in the different cultures between HP and EDS may be another problem. It will take some time for the two styles to integrate which may lower the efficiency of the company.
From The Economist print edition
Having bested Dell for the time being, Hewlett-Packard takes on IBM
DURING the first half of this decade Carly Fiorina, then boss of Hewlett-Packard (HP), was forever answering the same frustrating questions about Dell and IBM, HP's two more successful rivals. Dell, she said, offered computers that were “low-tech and low-cost”, whereas IBM offered “high-tech and high-cost”. Only HP, she said, was preparing to give customers “high-tech and low-cost”.
It was easier said than done. When Ms Fiorina tried to buy the computer-services arm of PricewaterhouseCoopers in 2000 to compete with IBM, the leader in that field, IBM beat her to it. And when she bought Compaq to take on Dell, the leading PC-maker, shareholders revolted. In 2005 the board fired her and hired Mark Hurd, a disciplined operations type, to focus on execution rather than vision.
Three years on Mr Hurd has mostly done that. HP, having fully digested Compaq at last, has surpassed Dell to become the world's biggest PC-maker. This means that Mr Hurd is now ready to take on IBM, which has more than 7% of the $748 billion market for services, such as running the data centres of large companies and governments, or handling entire functions, such as personnel or claims processing. The second-largest services firm, Electronic Data Systems (EDS), has much lower profit margins. HP lags in fifth place.
Mr Hurd's answer, announced this week, is to buy EDS for $13.9 billion. He is getting a big name: EDS, founded by Ross Perot in 1962, pioneered the business of outsourced data-management. But the company has been through turbulent times. Mr Perot sold EDS to General Motors in 1984—an unhappy combination that ended in 1996, when EDS was spun off. It then suffered during the technology bust and made a big loss. Under a new boss, it went into profit again, but with unimpressive margins. Its subsequent boss, Ronald Rittenmeyer, will now become head of the combined services arm of EDS and HP, which will be almost as large as IBM's.
The prospect of digesting yet another big acquisition after Compaq may seem daunting. Middle managers at HP still subscribe to the gentle, collegiate “HP way” of doing things. The culture is that of Silicon Valley—relaxed and casual—and the cafeteria is big on ahi tuna. At EDS, based in Plano, Texas, the style is “military, buttoned-down, and staid,” says Rick Sturm, the founder of Enterprise Management Associates, a consultancy. People wear ties. The cafeteria is full of steak and fries. Compared with other services firms, which increasingly hire and operate in India, EDS is overwhelmingly American.
Mr Hurd, who came to California from Ohio, is likely to feel the culture clash less than his colleagues in the ranks. His demeanour makes him “an EDS guy sitting on top of the HP way,” says one consultant. Culture aside, EDS's big selling point is to be the largest services firm that is independent of any hardware or software vendor. It will continue to advise clients to buy systems from all vendors, says Mr Hurd, but those clients are now likely to pay more attention when the boxes come from HP.
Nonetheless, the deal marks another step in HP's impressive comeback. This week Mr Hurd increased his estimate of this year's revenues to over $114 billion, despite the weak economy. The verdict on Mr Hurd is that he has skilfully executed the strategy of his flamboyant predecessor. The verdict on that predecessor, Ms Fiorina, has also improved. Her idea was controversial, but apparently right. Fittingly, Ms Fiorina seems to be making her own comeback now. As a supporter of John McCain, she is playing a bigger role in his presidential campaign by the week.
Article Review:
The merging between HP and EDS is considered as a horizontal integration in the service sector. The merging will be able to increase their service arm to as big as the IBM’s, which means HP will have the similar market size in the service sector and therefore be able to compete with IBM in terms of market power.
The purchase will allow HP to enjoy internal EOM and reduce the production cost. In this case, the company will most likely to enjoy marketing economics. As the firm size increase, it can increase its scale of advertising and do bulk distribution which lowers the unit cost because of the large output level.
It will also be able to do more research and development in the long run as it will have larger profit to invest in. This is critical to HP if it wants to take on IBM who is famous of its ‘high-tech’.
However, on the downside of this strategy the merger may be just another failure as the previous one between HP and Compaq. The most serious problem would be the brain drain caused by axing thousands of well qualified people and cutting research funding in order to pay the purchase of EDS. This will seriously reduce the competitiveness of HP as compared with IBM. Now HP is nothing but another white box vendor like Dell. If HP cannot make its own identity there is no way for it to beat IBM.
Also as said in the article, the clash in the different cultures between HP and EDS may be another problem. It will take some time for the two styles to integrate which may lower the efficiency of the company.
Monday, May 19, 2008
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