Welcome to teachers’ elections, offering a weekly selection of FT articles and for the faculty of the Business School to connect classrooms with current events and develop the critical thinking of students.
Read all presentations in www.ft.com/bschoolpicks. Save this link in Myft to receive emails that alert each new edition. Look for the relevant topics to illustrate the teaching points. Encourage students to join the debate in the comments section under the article.
Comments or contributions? Contact profpicks@ft.com
Commerce, geopolitics
Summary: These three pieces of analysis suggest that we are entering a completely new phase in global politics and economy. Rachman enters details of how the Trump administration’s commercial policy is a deviation from long -standing American action and how the global commercial regime will change forever. We are moving to an international economic environment much more fractured with immense consequences for private and public actors. Edward Luce shares his opinion that Trump does not know the scale of the changes he is unleashing and its effects both in the United States and the global economy. The new policy will be highly inflationary, it will not produce the desired results for the US economy and will simply destroy the value. On the contrary, Oren Cass describes one of the great visions behind the new foreign and economic policy of the United States: America is much less dependent on external demand, with allies that assume a much greater part of global security and a semi -permanent containment of China.
Classroom application: Understanding the direction of geopolitics and geoeconomy is essential for corporate leaders who seek to build or lead sustainable businesses in the 21st century.
Questions:
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What are the drivers behind the changes in politics in the United States?
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Are these temporary or structural changes?
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What are the implications of Trump’s tariffs and others in the way business behaves?
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Are there ways to cover the risk that arises from the growing volatility of policies and markets?
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What opportunities, if any, present this new economic environment for companies?
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What type of commercial leadership does this geopolitical/geoeconomic landscape require?
Manuel MuñizProvost, IE/President of IE New York College
Economy, risk management and uncertainty
The ECB reduces 2.25% rates in the middle of Trump’s commercial war
Tags: Central Bank, interest rates, inflation, tariffs
Summary: The European Central Bank (ECB) reduced its reference interest rate at 0.25 percent to 2.25 percent, is lower in more than two years, in response to the economic uncertainty of the United States commercial tariffs. The president of the ECB Christine Lagarde cited deteriorating the growth prospects and volatile markets. The decision, seen as Dovish, points out more cuts. The analysts warned about the inflation risks of the fragmentation of the supply chain and the increase in government spending, although current inflation trends remain down.
Classroom application: This article provides a platform for the faculty and students to discuss the role of central banks with respect to inflation, including objectives, tools and tactics, all in a context of geopolitical and macroeconomic uncertainty.
Questions:
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What is the BCE inflation objective and how does it compare with the objectives of another central bank?
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What is the intention of a central bank by reducing its reference interest rate?
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In what circumstances could the reference interest rate of a central bank go below zero?
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Why each of the three external factors cited in the article would have the effect of reducing inflation in the eurozone: the lowest prices of energy; a stronger euro; Increase in China imports?
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What direct impact does the increase in rates and commercial barriers in inflation in general?
Tom DavisClinical Assistant Professor, Joseph M Katz Graduate School of Business, University of Pittsburgh
Mergers and acquisitions
Article: Goal had ‘monopoly power’ after buying rival applications, says FTC
Tags: Monopoly Power, Killer Acquisitions, Antimonopoly, Strategy, Fusion and Acquisition
Summary: The Federal Commerce of the United States (FTC) accused the goal of obtaining the “monopoly power” through its Instagram acquisitions in 2012 for $ 1 billion and WhatsApp in 2014 for $ 19 billion, as argued in a trial of the Washington district court. The FTC states that these acquisitions stifled the competition, citing the market share of 85 percent of the time of the time spent on its internal applications and communications of Mark Zuckerberg, indicating a “purchase or bury” strategy. Meta denies having the monopoly, arguing that its market participation is less when it includes competitors such as Tiktok and YouTube, and states that the quality of Instagram and WhatsApp improved. The trial could lead to the goal to relax these acquisitions.
Classroom application: This article provides opportunities to discuss the “murderous” or preventive acquisitions made by companies, mainly to avoid the next competition, either by their own companies or by the rival companies that acquire them. In general, this happens at an early stage, so antitrust regulations are not effective at the time of acquisition. Classical assessment does not play a role in these cases. Even the typical negative price reactions of the acquirer’s shares around the transaction announcement can be interpreted differently: without buying, the acquirer could lose more in the long term. In addition, the article exemplifies the difficulties in defining “the market”, here for social networks, which is the classic argument in antitrust cases.
Questions:
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What could have happened to Meta/Facebook in the event that Google Buy Instagram and WhatsApp? How does the acquisition of WhatsApp in the light of these arguments?
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What would they say to Facebook investors that they care about a decrease in the price of shares after the transaction becomes public?
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Is there any way that antimonopoly authorities intervene in these preventive acquisitions of early stages?
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Do European antitrust authorities need the power to relax acquisitions as in the United States?
Michael Grote, Professor, Frankfurt School of Finance & Management
Global trade, international entrepreneurship, international strategy
Gulf Petastate Kuwait tries to initiate oil diversification
Tags: Kuwait, political, political and economic diversification, sustainability
Summary: Kuwait is ready to borrow for the first time in eight years after approving a delayed public debt law, indicating a potential change towards economic diversification in a country that has been largely depending on oil income to finance its extensive welfare state. The political stagnation has caused Kuwait to stay behind his regional neighbors, such as Saudi Arabia and the United Arab Emirates, who have implemented ambitious reform agendas. To overcome this, Emir Sheikh Mishal suspended Parliament to promulgate the reform. To finance significant infrastructure projects and reduce Kuwait dependence on oil, which remains the pillar of its economic strategy despite the growing fiscal tension, the new law allows borrowing up to $ 97 billion. Critics emphasize that the government needs to provide a clear and strategic vision for sustainable development beyond hydrocarbons, although optimism is growing and is reflected in a robust stock market.
Classroom application: This article provides an opportunity for teachers to discuss how and why a country just a little larger than New Hampshire (although with a GDP of almost $ 300 billion) is behind some of its Arab neighbors that have been more aggressive in economic and political reform. It is also surprising that a country with such a large GDP now has to borrow money and adopt sustainability.
Questions:
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After eight years of delaying, what are the advantages and disadvantages for Kuwait of the loans of world debt markets?
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What possible macroeconomic effects could Kuwait’s efforts have to achieve economic reform in the country’s growing debt / GDP ratio?
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What potential effects would the Kuwait economic transformation plan have on its ability to compete in the Gulf Cooperation Council (CCG)?
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What obstacles should Kuwait overcome to create and implement a convincing national economic strategy?
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The question of why Kuwait is to terminate the citizenship of so many residents is beyond the reach of this document (in a country of 1.5 million people), but see the FT coverage here: The state of the Gulf purging tens of thousands of its citizens.
Positioning of the discussion of cases: This is a wonderful opportunity to focus on changes in one of the smallest gulf countries, which is happening in real time. On the one hand, does it matter what Kuwait does, while on the other, it could be a main indicator for other Arab nations? There are many changes in the region, including Syria, The renewable energy market Out of China and Political jocket.
Gregory StollerMaster Professor, Boston University Questrom School of Business
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