CHINA's HIGH Purchasing Power Parity PPP GDP as an indicator

quote: "Success is a thought process", "Positive thoughts create positive outcome"

The USA has the highest nominal GDP followed by EU, Japan and China. However once you calculate GDP using the Purchasing Power Parity (PPP) method, China comes to 2nd place at around 8 Trillion USD.

If we try to understand the way in which PPP was computed, it looks at a baskets of goods and services in which a person who earns a certain income in a certain can afford to buy locally. The underlying principle is that of an efficient market theory such that a similar product that is produced and being sold at any where in the world should be sold at the same price. But we all know that the market is distorted from time to time and inefficient and of course, no one product can span the entire globe, so naturally we can only compare and group similar goods and services without regard for brand and quality.

In other words, China produces the known basket of goods and services defined under PPP in a way that it’s people can afford. As China’s PPP is almost 3 times that of the GDP, this goes to say that China as a country is not short on finished products and goods and services for it’s people and does so affordably too as compared to many countries on the PPP list. (See Note 1)

In this respect, it would be premature to say that if China produces say 1 TV, that TV would be the same as 1 TV produced in the USA for instance. There are of course brand, quality as well as features differences amongst many other attributes. But, it would be fair to assume that for most basic goods, China has the productive capacity to produce them cheaply. (As we can conclude that only China has a big PPP to nominal GDP gap, in would be fair to assume that even if countries that import china made goods do tend to sell them with some degree of mark-up as there is no significant increase in purchasing power, parity in those countries. However, even if the PPP GPD is high, it could also mean they have high local productive capacity rather than being able to import and sell at low prices. However more studies may be needed.)

In saying so, these Chinese companies that are producing these products cheaply are surviving on the local China market. Low price is of paramount concern. Hence, once they realize the potential of trade, they will export relentlessly in search of new markets as margins are generally slim. In essence, once a foreign market can accept a China made substitute good, given the huge price differential, the sales of these companies will take off and profits will also rise for these exporters. (See Note 2)

The rest of the Chinese manufacturers will also find its way to these markets and hence price will again become depressed in markets being invaded by cheap chinese goods. With low prices, China products will gradually kill the local industries. The only ones to survive are those that has intellectual property protection, those that have innovative products as well as branding to differentiate themselves from the Cheap Chinese goods.

However, the China exporters will face huge pressures amongst themselves and some of these companies will gradually move up the value chain by innovating or upgrading their products. Some of these companies will become bankrupt due to overtrading and negative capital spread. Also
cheap manufacturing capacity in the form of China exports will cause some raw materials to become scarce (at least temporarily), and eventually these prices increases will have to be passed on to the consumer. In a fiercely competitive environment, these companies usually do not have pricing power, the companies that have key differentiators will attract more customers and once the many of their competitors are bankrupt, they will be able to command better prices and upgrade.

The increased value adding of the products will lead to better pricing power, followed by a rise in real GDP. Therefore, the gap between the REAL GDP and the GDP using the PPP measure will close.

Hence I consider the PPP as a leading indicator of the future economic progress in GDP of a country. But on the other hand, high GDP ppp versus real GDP means that China products still have some quality and branding issues to bridge.

Hence, it would be safe to say that China export boom will continue for some more time to come. The only problems that would potentially stop such growth will be trade barriers (internal or external), war or natural disasters.

Note 1: Other countries that do not have the productive capacity would have to resort to importing the/a product. If the product is not available in a low cost country, importation with it's many layers of middlemen tend to make the end sale price high thereby reducing the purchasing power. Though imports/outsourcing can often reduce pressures on increase on CPI in the case of the USA, because a lot of industries are no longer efficient, importation actually helped the USA control their CPI else real GDP growth would be negative.

Note 2: However these companies do undertake big risks in currency fluctuation, changes in raw material prices as well as many other bureaucratic and legal hurdles just to name a few. Due to the large number of chinese companies exporting, these companies tend to also compete in the foreign market and hence they do not normally have pricing power.

APPENDIX 1
http://english.people.com.cn/200404/12/eng20040412_140147.shtml
Dismal Scientist (for 2006)
1 United States 12455.83
2 Japan 4567.44
3 Germany 2791.74
4 China (Excluding Hong Kong) 2234.13
5 United Kingdom 2229.47
6 France 2126.72
7 Italy 1765.54
8 Canada 1132.44
9 Spain 1126.57
10 Brazil 795.67

APPENDIX 2
http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
PPP GDP 2005
(millions of
Ranking Economy international dollars)
1 United States 12,409,465
2 China 8,572,666a
3 Japan 3,943,754
4 India 3,815,553b
5 Germany 2,417,537
6 United Kingdom 1,926,809
7 France 1,829,559
8 Italy 1,667,753
9 Brazil 1,627,262
10 Russian Federation 1,559,934
11 Spain 1,133,539
12 Canada 1,061,236
13 Korea, Rep. 1,056,094
14 Mexico 1,052,443
15 Indonesia 847,415
16 Australia 643,066
17 Turkey 612,312
18 Argentina 558,755
19 South Africa 557,971b
20 Thailand 549,265
21 Iran, Islamic Rep. 540,207
22 Netherlands 537,675
23 Poland 533,552

References: -
1. Dismal.com
2. http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
3. http://english.people.com.cn/200404/12/eng20040412_140147.shtml
4. http://siteresources.worldbank.org/DATASTATISTICS/Resources/GDP_PPP.pdf
5. OECD; http://www.oecd.org/faq/0,2583,en_2649_34357_1799281_1_1_1_1,00.html#1799075
6. U.S. Real GDP vs. Nominal GDP (1929-2003); http://faculty.hacc.edu/jhuang/econdata/htm/rn_gdp/rn_gdp.htm

Telecom Operators and who supplies their network - Under Construction

I am constructing a database (for my work, as well as for my own use) a list of operators and which vendors supply to which part of their network. This is essentially a repository (a hard disk) for me. They are all public domain knowledge, but it is hard to get all of them in one place.

If you know some information, please give me your feedback via comments, I will update this article.

Singapore

Singtel (GSM, GPRS, EDGE, UMTS, HSDPA)
- Core Network - Ericsson
- Radio Network - Ericsson
- Intelligent Network -

Starhub
- Core Network -
- Radio Network - Nokia
- Intelligent Network -

MobileOne
- Core Network - Nokia
- Radio Network - Nokia
- Intelligent Network -

Vietnam
Vietel
- Core Network - Ericsson?
- Radio Network - Ericsson
- Intelligent Network - ZTE/Huawei
- Voice Mail - Ericsson?

MGSM DEBATE in Managing for Innovation module: Debate Innovation is process driven rather than people-driven.

quote: "Success is a thought process"
By Jerery Wong, Victor Lee, Teng Choon Ming

I like to commend Jeremy and his team for a well written piece of article/proposition. As most people would have assumed that being the proposition for a topic like Innovation being process-driven is like driving a horse cart up a slippery slope, slippery and hard.

But, no beers for guessing correctly that my team of 2 people suffered defeat at Jeremy's hand and now I have invited Jeremy to put up his piece of great work to constantly remind myself of my defeat. (No hard feelings, I like this article so much that I have to show this to you what a brilliant piece of work this is)

For current new and future MGSM students, there is no other place that gives you such fun, flexibility as well as an intellectually stimulating experience. There is a lot of hard work as well, but it has been worth it.


Topic : Innovation is process-driven rather than people-driven.

Jeremy Wong

1. We the proposition would like to make the case to you, that innovation is process-driven rather than people-driven.

2. We define innovation as creativity in action. Looked at in this way, innovation is a strategic lifestyle choice.

3. By claiming that innovation is process-driven, we mean that innovation is spearheaded by processes that have been put into place.

4. As my 2nd and 3rd speakers will elaborate, innovation, for the most part, can be nurtured.

5. Put it another way, among a variety of factors, in this case, between processes and people, processes are dominant to the extent that their effects can and often will supercede those of the other factor – people.

6. My 2nd and 3rd speakers will show you conclusively that innovation is predominantly process-driven because both formal and informal factors that make up the external environment can either kill or nourish innovation.

7. The formal element of the external environment which greatly influences the level of innovation in any given context is the rules, policies, and procedures that are officially put into place.

As my 2nd speaker will prove to you, official rules, policies, and procedures can either inhibit or unleash creativity which drives innovation.

In doing so, my 2nd speaker, will among other things, explain to you how purposeful attention being paid to the thinking process, working styles, and individual motivation can all contribute to substantially fostering innovation in any given context.

8. The key informal element of the external environment which has a very high influence on innovation is culture.
As my 3rd speaker will expound, culture is something that can be consciously shaped and re-shaped.

As underscored by Wilson and Hoppe in the article “Managing Across Cultures”, “culture strongly influences how one behaves and how one understands the behavior of others, and cultures vary in the behaviors they find proper and acceptable”.

In other words, culture both determines and reflects values and norms which guide goals and actions.

My 3rd speaker will prove to you how culture is often an overwhelmingly powerful force, simply because it is highly pervasive by nature. Culture, be it that of society at large or that of an organization, is also something that is always there – it is not something you can turn on and off.

Given the immense influence of culture, and given that culture is essentially a human construction, culture can be shaped and re-shaped by human processes over an extended period of time.

Culture after all, is dynamic, not static.

9. Ladies and gentlemen, the opposition today will obviously have you believe, that ultimately, people need to be innovative, and hence innovation is people-driven – since even the processes implemented to ensure innovation must be not just logical and coherent, but also, to some extent, innovative.

We the proposition do concede that for innovation to work, you do, to some extent, need the right people, but this should be no different from the people initially deemed competent enough to work for the organization.

Innovation is therefore NOT people-driven because, the external environment is almost always more powerful than individual persons, and the external environment can either stifle or unlock people’s ability and desire to innovate.

And make no mistake, this external environment can and must be consciously created and modified by human processes for the promotion of innovation.


Victor Lee

Innovation through a formal process to create a sense of wonderment

1. Requires rules and procedures and policies

2. This can either inhibit or unleash creativity which drives innovation

3. Further more you have to deal with diversity of conflicting ideas and even egos. Important point here is not to loose the target objective which can be reliably controlled though clear objectives in the process

Evidence of innovation as a process is clearly seen in 2 areas:

a. Techniques in thinking processes
i. You can brain storm but you still need a formal process to discipline the entire creative process and converge to the critical state of the art innovation.

ii. Playing devils advocate – We think that playing devil’s advocate is an important. But if there isn’t a process to control the devil’s advocate coming in at the right time, ideas can be snuffed out too early.

b. Styles of working
i. The Garage tool kit - Flexibility and accommodation built in.

ii. Making sure the end objective is clear while ensuring the approach and means are allowed to room to move.

4. Institutionalizing the right motivation to innovate.

Examples to cite:
1. IDEO – “Yellow Creative” ideas from the people are structured through a “Blue / Green Framework” in order to diverge and converge the creativity.
2. IDEO – “ Process is managing the creativity of people. Dave allowed the staff to be creative while ensuring that they work within processes to ensure the energies are channeled correctly.
3. Aussie Farmer and water – You can have creativity but if you don’t complete the structured process to optimize the creative spirit, you are not innovating.

Models to apply:
1) Amibile : How to kill creativity
i. Enterprise must include New Idea Mechanisms to manage the creativity

2) Kanter : The change Masters : Important to establish, from the beginning, ground rules and boundary conditions
i. Out of bound Markers are created from which creative ideas are not allowed to cross over in order to manage and develop innovation.

3) Organisational Control of Innovation:
a. Robert Simon: “Control in the Age of Empowerment”
i. When there is hunger for innovation e.g. STSS case, there is control to ensure that decisions made are based on sound judgements and decisions with the key stake holders though processes in place to ensure discipline and control of the Hunger.

Potential Counter Question: Won’t process stifle creativity?
Choon Ming

Innovation through an Informal Processes and Conclusion

1. Re-emphasize the meaning of Innovation (Creativity in Action; Creativity Implemented).

2. For an innovation to materialize into a product for the masses, frameworks and processes present the avenues for collaboration within a diversified work force to combine their area of expertise. Without the processes, an idea is just well an idea at the back of a person’s head.

3. Without the processes, a good idea may not appear eye pleasing if the diversified workforce failed to work together closely (designer and engineer).

4. Innovation demands managing an intricate balance of many moving parts and the influence of many players while manoeuvring in a constantly changing environment.

5. Culture within an organization has great influence on innovation and it can be consciously shaped and re-shaped to suit the ever-changing environment.

6. Culture in an organization can be in the form of working atmosphere, vision of the organization / CEO, norms and values that an organization was in existence in the 1st place.

7. Even in a company like IDEO, (one of the world Top 25 Most Innovative Company in 2006) there are creative processes that the company adopt for them to remain competitive. Innovative without losing sight of the top-level organization goals.

8. Focus chaos strategy; where the process may appears messy to an outsider however it never divert them from their main tasks. Being playful is considered an attribute required in the company. Again without the necessary processes in place, how much can a company benefited from their employees playfulness.

9. Tolerant to failure and error; top management support “Fail often to succeed sooner”. Failure is termed as “enlightened trial and error”.

10. Studying of the workplace interactions is considered an alternative in getting informal feedback from the employees in optimizing the office design (hang-up bicycle at one’s work space).

11. Encouraged to walk around when encountered mental blocks.

12. Ending with David Kelley’s quote “ We’re not good at innovating because of our flawless intellects, but because we’ve done thousands of products, and we’ve been mindful”.