1. What is 5G (CNBC)

5G is a new, faster network with the potential to revolutionize the Internet. The obvious application of 5G is, it will bring faster downloads (your 3 hour film in 6s?) and faster interaction in video games, Awesomeeee!. However, the heretofore impact of this upgrade is the huge boost in data processing and real-time updates, which will fuel the development of self-driving cars and IoT.

2. Outsmarting the 5G smartphone challenge: How telcos can reinvent their handset business (McKinsey)

While the handset expenses have already strained the margin, the 5G upgrade cycle will bring a cost-management challenge for operators. One solution could be assigning a dedicated executive senior to manage end-to-end device life-cycle, which they have not done before as hardware device is only an ancillary revenue stream.

This E2E management approach includes 7 activities: Fund, Range, Buy, Distribute, Sell, Return and Repair/Resell. Most outstanding examples are presented in these three key activities:

• Fund: Securitization and Financing. For example, operators can off-load portfolios or tranches of their smartphone-related balance sheet to a financing company, which in turn sells bonds secured on the smartphone receivables to private investors.
• Sell: Insurance, accessory, and connected devices sales. (1) Offer a branded insurance plan that usually is bundled with additional value-added services such as password protection and cloud storage. (2) outsource insurance-related work to specialized providers. (3) Improve bundling and cross-sell. (4) Embed subscriptions such as screen insurance, annual updates and streaming videos. 
• Repair/resell: Re-commerce strategy. Ex: serve as strategic partners to OEMs to help distribute used phones in developing markets

3. How Huawei became America’s tech enemy No. 1 (Quartz)

Huawei has grown to become the world’s top provider of Telecom equipment, with over $100B in revenue. The article illustrates the summary of all Huawei’s activities in the US since 2011, with a number of collaboration with US telecom firms, along with “also” many privacy violation accusations. Huawei is now viewed as the poster child for the anxiety of Chinese hacking. The worst came when in 2019, Trump made an order that blacklisted the company and cut it off from US supply chains.

1. #retail Retail stock fell today (The Motley Fool)

The exacerbated Coronavirus impacts US retail companies in 2 different aspects. First, These companies depend on Chinese manufacturers  for everything from apparel, to furniture and electronics. Then the outbreak has the potential to upset the supply chain and delay shipments. Moreover, many of the top retailers count on international tourists (esp Chinese visitors) for a significant part of its business. Therefore, when China suspends all in and out flights, sales are expected to go down.

2. #tech IBM stocks plunged by 5% today (The Motley Fool)

The reason: IBM announced the leave of their CEO, Virginia Rometty this April. Rometty has made bold changes to IBM, building up its hybrid cloud, security, AI,…but lost 22% of its stock :)) why S&P 500 increases by 15%.

3. #analysis Why Some Platforms Thrive and Others Don’t (HBS)

Whether or not a digital platform can thrive depends on its ability to manage five fundamental properties of networks: networks effects, network clustering, risk off disintermediation, vulnerability to multi-homing, and bridging to multiple networks

The strength of network effects grows when firms leverage from same-side (“direct”) network effects to cross-side (“indirect”) network effects. Direct network effects mean the value of service simply goes up/ as the number of users goes up. For instance, at the beginning of Amazon, as the number of products on the site increased, users became more likely to visit Amazon. Indirect network effects mean the value of the service increases for one user group when a new user of a different user group joins the network. Since Amazon’s marketplace allowed third parties to sell products to Amazon users, it generated cross-side network effects, in which buyers and third-party sellers attracted each other, then the added value started to grow more disruptively.

The more a network is fragmented from local clusters and isolated from one another, the more vulnerable a business is to challenges. Taking Uber, for example, the fact that its drivers in each area care only about in-town riders makes it easy for another carpooling competitor such as Lyft to dominate the market in another city in which Uber has not strengthened its network. Airbnb, differently, is one large, global cluster because travelers do not care much about the number of Airbnb hosts in their home cities but in their planned-to-visit cities. Therefore, breaking into Airbnb’s market becomes much more costly.

Disintermediation can be a big problem for any platform that captures value directly from matching or by facilitating transactions. Homejoy was shut down after 5 years because of this issue when a customer stopped returning to the platform after they found a good period-hired house cleaner. To address these risks by enhancing the value of conducting business on their platforms such as providing insurance, payment escrow or communication tools. Others, like Alibaba, chose to capture value through other streams: advertising revenues and sales of storefront software that helps merchants manage their online businesses 

Some measures could be taken to tackle “multi-home” when users or service providers form ties with multiple platforms at the same time and makes it difficult for a platform to generate a profit from its core business. For example, Uber and Lyft provided drivers new requests for pickups very close to current passengers’ drop-off location, reducing the drivers’ idle time and hence the temptation to use other platforms. Another example could be the video game industry, in which console makers often sign exclusive contracts with game publishers or increase subscription services price to reduce players incentives to multi-home.

In many situations, the best growth strategy for a platform may be to bridge different networks to one another. Alibaba successfully bridged its payment platform, Alipay, with its e-commerce platforms Taobao and Tmall, providing a much-needed service to both buyers and sellers and fostering trust between them. Alibaba has also taken advantage of transaction and user data from Taobao and Tmall to launch new offerings through its financial services arm, Ant Financial—including a credit-rating system for merchants and consumers. These networks mutually reinforce one another’s market positions, helping each network sustain its scale.

When evaluating an opportunity involving a platform, investors should analyze the basic properties of the networks: ways to strengthen network effects, and the feasibility of minimizing multi-homing, building global network structures and using network bridging to increase scale while mitigating the risk of disintermediation. 

On the last day of this month, after passing all the news but not interested in any of them, I decided to read successful case studies of rising startups on the internet, then this one blew my mind. 

Shihuituan – Scaling Community Group Buy in China’s Lower-Tier Markets

Shihuituan (十荟团) is a community fresh group buy e-commerce platform. It copies the model of Pinduoduo, but brings to low-tier cities and focuses on fresh food instead of mass products. The company has secured ~$80B investment from the internet colossus Alibaba.

Three main questions answered in this analysis are “How does Shihuituan solve the two critical cost problems of every e-commerce: logistics and customer acquisition”, “Why is WeChat the KSF for this platform?” and “What are challenges we may face when implementing the model in Vietnam?”

How does Shihuitan solve the two critical cost problems of every ecommerce: logistics and customer acquisition ? They use community builders – who collect all the orders of residents in highly populated areas, then distribute them to the front door of each customer. This will bring down logistics costs. Besides, these people are active WeChat users who feel freely introduce products to their customers and gradually build trust with them, then customer acquisition costs are nearly zero. Shihuitan only needs to provide a fixed commission for these community builders, around 8-10%.

Why is WeChat the KSF for this platform?

• WeChat is where people cluster in China (1.15 MAU, omg..), socialize and share products information
• WeChat integrates with WeChat Pay, then purchasing in e commerce is no longer a problem

What are challenges we may face when implementing the model in Vietnam? The answer is infrastructure, including a place for people to cluster, and an ewallet that everybody uses (mobile payments are necessary for scaling business in terms of managing data and transaction. In Vietnam, both of these types of platforms are not popularized among local people, and the market is fragmented with no dominants. This makes it hard for Vietnam companies to leverage this model and create value for customers.

1. #tech Apple, Facebook and Microsoft is on stage  with insightful analysis today, click here to subscribe Finimize – my favorite newsletter

Facebook reported better-than-expected Q4 profit yesterday, with the increase in both MAU (advertiser’s customer” and revenue/MAU, which are statistics that investors care the most. So does Microsoft, with cloud computing lifted it up, but also brought two challenges: unpredictable large contracts and pushing-up costs. With Apple, it is the second largest public company in the world, just after Middle Eastern oil firm Saudi Aramc, $2B valuation and 2x Apple revenue.

2. #AI AI in China: TikTok is just the beginning (Fortune)

China is threatening the US on the kingdom of AI development as the world’s most populated country has advantages in data and support from the government sector. First, China has a massive treasure trove of data collected from 1.4B people, more than any country in the world. Also, the government shows strong desire to the development of this sector by the national champions program. In 2017, the central government selected five leading tech companies as “national champions” in A.I., instructing each to pursue a specific avenue of A.I. research. In return for picking up the mantle, the champions receive government support, such as access to finance, preferential contract bidding, and sometimes even market share protection. Also, the government implemented talent acquisition strategies to attract AI talent from all over the world.

3. #tech Apple beefs up supply chain in India (Nikkei)

The second-largest companies in the world does this for 2 reasons. First, they need to minimize the price of iPhone in the world most price-sensitive market. Also, India stiffs 20% tariffs on imported products, which makes iPhone here among the most expensive worldwide. Local sourcing and manufacturing will reduce the selling price significantly. Second, investing in China is a back-up plan for Chinese among the tension of trade world with the US.

1. #economics The impact of coronavirus across business and finance (FT)

The emergence of Coronavirus – a đeadly respiratory infection has far-reaching ramifications on the corporate world: luxury, leisure, airline, tech, banking to F&B,…Some largest chain closed their store as a precautionary action and some others made various pledges of support to Chinese Government

2. #F&B Better Buy: CocaCola or P&G (Fool)

This article illustrates P&G and Coca Cola’s different strategy in recent years to increase dividends purchasing to shareholders. P&G focused on its core product portfolio by diversifying more than 41 beauty brands. Meanwhile, Coca Cola put its effort on increasing profitability by refranchising its company-owned bottling operations.

3. #economics Davos 2020: Top Ten Impressions

Rich Lesser, CEO of BCG recap Davos 2020 (the annual world economic forum where leading politicians and business leaders gather to discuss the most critical world business issues)  with ten impressions. 

• Climate urgency
• Nature-based solutions for carbon capture 
• Aligning multi-stakeholder measures
• The power of inclusion
• AI’s promises – and challenges 
• Building bionic companies
• Geopolitics: Brexit and US-China first deal
• Geopolitics: US-Europe tensions
• Preparing for the decade ahead
• Davos:  a thank you to the organizing committee

1. #economics Oil prices has slumped by 10% due to Corona Virus (CNN)

The reason is investors are worrying that preventing the outbreak will slow down the economy and send the demand down.Last December, OPEC and Russia agreed to deepen production cuts in an attempt to prop prices, but they still need to…deepen further because of Coronavirus. In China, the second largest oil-consumption country in the world, the government imposed restrictions on transportation. This would crimp demand for products made from crude oil, such as jet fuel. Then when demand decreases, oil price will continue to fall

2. #competitiveadvtheory Why fierce competitors become frenemies? (HBS)

The article is typical in defining competitive advantage in the marketplace: it is based on the company’s core strength. The example is Apple selling Ipad with Ibooks and ebooks on it, while Amazon is selling Kindle with ebooks, also. Although they are direct competitors, they chose to collaborate (Kindle App is put in IPad) as the core product of Apple is IPad, and for Amazon is ebooks. Then it’s reasonable for both companies to sacrifice the sales of their peripheral segments: ebooks of Apple and hardware of Amazon.

3. #economics Corporate Asia: A capital paradox (McKinsey)

A huge wave of capital has vaulted Asian corporate to rapid growth, but this influx has not been accomplished by the economic returns. While investment has tripled over the past ten years, Asia has gone from an average economic profit (profit-cost of capital) $152B (2007) to an economic loss of $207B: a turnaround of $359B. The key to this profit paradox is how Asia allocates that capital, mostly to low-capital return industries like energy and material sectors.

1. #microchips Intel have a powered-up outlook and Amazon jumps in (Finimize)

Intel reported it beating-investor-expectation performance, which draws a bright 2020 future. Its bread-and-better division, microchip manufacturing is selling more to Amazon, Microsoft and Google as they are rushing up to build their data center to meet rising demand. Also, the old school division: PC business got a boost-up as people are looking for upgrade their PC in the untimely demise of Window 7. However, two giants are challenging their growth: AMD -rival chipmakes poaching their share and Amazon -with its newest announcement unveiling its own data chip

2. #oublichhealth US and Europe is working on a trade deal, or US will…slap EU with 25% tariff on cars (Morning Brew)

I mentioned a foreseeable trade war between US and Europe in my Jan 22 post. Yeah, it is about to happen,Trump met with European Commission President Ursula von der Leyen in Switzerland, and the pair said they’d work on a deal. Three topics are hammered out:

• Food safety: The U.S. isn’t happy the EU won’t import its hormone-treated beef and “chlorinated” chicken. EU officials are looking for a way to import more American shellfish as a compromise, Bloomberg reports.
• Taxes: Several EU countries are weighing digital services taxes and carbon taxes that would impact U.S. firms. Last week, France agreed to pause its digital tax as it works with the U.S. to avert a tariff showdown.
• Brexit: Trump could prioritize talks with the soon-to-be-Brexiting U.K., but those tough EU food safety standards and access to the National Health Service could complicate negotiations. Plus, the U.K. is also negotiating trade terms with the EU

3. #coronavirus China to World: Everything Is Not Fine With Coronavirus (Morning Brew)

Experts point out two reasons leading to Coronavirus’s intensification. First, A bureaucracy that discourages local officials from reporting problems early. Second, decentralized regulations that failed to supervise livestock markets like the one where the virus is believed to have originated (yesterday, Beijing temporarily banned the trade of wild animals)

1. #genderbalance Goldman Sachs said that it won’t take company public without at least one woman in their board (CNBC)

This article impressed me as I do not usually think that gender balance is that much important in company control. Goldman Sachs CEO confirmed that companies with a diverse member board have performed significantly better than their counterparts within this four years.

2. #economics Corona comes at the worst possible time for China, and what people buy more? (Morning Brew)

The dangerous virus comes at the busiest travel year for the most crowded country in the world. Stocks of hospitality and travel companies sank yesterday. In this dark time, people tend to buy three more things: (1) Face masks (with janked-up price); (2) Macabre video games (same like SARS) and (3) Safe haven assets like gold and US Treasury

3. #economics How e-commerce and the gig economy is transforming Southeast Asia (McKinsey)

Reuben Lai (MD of Grab SEA) mentions four mega challenges and three recommendation for companies in SEA to tackle those challenges.

Four mega challenges include economy, physical infrastructure, financial infrastructure and people. First, with a population higher than the US and a growth higher than China, SEA owns massive growth opportunities. Second, we need to use technology to invest in, expand and transform physical infrastructure to fuel the growth chance. Third,  70% of the population are unbanked and 400M people (larger than size of the US) need to join in the financial ecosystem, that poses a question of how to serve them with new techniques?. Finally, a young population, ⅗ population under 30, is tech savvy and looking for opportunities to leapfrog new technologies to make their lives more efficient and better

Three recommendations are focus, partnership and technology. First. All companies should focus their resources to resolve these challenges with the government. Second, a partnership-led approach is wise in the situation of a fast.-changing economy. Third, to unlock these opportunities, it’s better to focus on technology. For example, Grab utilize their ecosystem to collect customer data, crunch and make sense of it.

It was 2 hassle days for me (Tet holiday in Vietnam), then I decided to listen to podcasts and videos instead of reading e-news.

My list for these Tet holiday: Rửa bát. All of them are related to the aviation industry.

1. What’s next for the airline industry? (Goldman Sachs)

The podcast answers 3 questions: (1) What is the biggest problem in the aviation industry, (2) What comes after Boeing Max 747 toll? and (3) What are trends in the upcoming decade. To (1), it’s still the cost problem, with the categories ranging from ground maintenance, labor to fuel,…To (2), declining revenue, definitely, and also recurring cost from cancelled flights.. To (3), they are consolidation (mostly for cost synergy purpose); diversification of product offerings: more seat options and more in-flight services and the upsurge of business travel.

2. The future of air travel (McKinsey)

After listening to the podcast, I remember three major differences between air travel today and years ago. Firstly, after many years, the aviation industry has experienced five profitable years, more than any other period before. The catalyst is the structural change in revenue management when most of the profits come from ancillary revenue (in-flight services, advertising, frequent flyer programs, seat upgrade,…). Second, while airline is a capital, fix-cost heavy industry, it is the only one that can pull down its cost year by year, making air travel accessible to everyone. Thirdly, companies are diversifying their product offerings: more seat type, more in-flight service,…)

Besides, the guests also talked about two rising trends in the future: flyskam and flying taxis. Flyskam (a campaign opposing commercial travel as it contributes largely to global carbon emission) is a threat to European companies, as the expense of a weekend regional flight is nearly equal to the expense of staying at home and going to pub/ a football match. Flying taxis is expected to happen in the near future (at least ten years from now) due to the lack of energy density in the current electric battery.

3. Why don’t we have electric planes yet (CNBC)

Electric airplanes are the future with many life-changing applications: air taxis, more affordable regional flights and more environmentally friendly long-haul flight. However, it will not come soon due to the burden of electric battery: we cannot produce the E-battery which is able serve regional flights for the next 10 years.

4. Why Airbus and Boeing dominate the sky? (CNBC)

Both of these companies are the first-mover in the industry, Boeing from America and Airbus from EU. (2) They excel other competitors, esp new entrants in capital capacity and technology knowledge. (3) They are supported by governments (lobbying for a long time)

      5. Biggest US airline companies reported earnings (Finimize)

Southwest experienced a loss as the ground of Boeing 747 Max has continued to take it toll on the carrier. Follow the loss, but fewer is American Airlines, and Delta is the winner when all of its fleet originating from Airbus. 

6. Do Airlines make money from first-class? (CNBC)

Yes. They do, and this revenue stream even accounts for a large pie of their top line. However, in recent years, these seat types are exposing to threats from the shift from physical meetings to video conferencing, leading to the decreasing number of business travel.