Economist 5/18/14

  1. Although Asia’s emerging economies are slowing, the rise of their middle classes is continuing.Rising incomes mean rising demand for health care.Indonesia has only nine for every 10,000 people and the Philippines ten. America and Britain each have 29. Siloam is part of a booming private business for hospital care in Asia. A bidding battle is under way for Healthscope, an Australian hospital firm which runs pathology services in Malaysia, Singapore and Vietnam. HCA of America, the world’s biggest hospital firm, is reportedly prepared to pay $5 billion to outdo Fosun, a giant Chinese conglomerate. Last month a consortium agreed to pay $461m for Chindex, which owns a chain of hospitals in China.  China, which boasts that it has extended basic medical coverage to 97% of its people, continues to make reforms. The Philippines is in the midst of a rapid expansion of insurance. Indonesia is in the first year of a plan to bring health coverage to the entire population by 2019.IHH is now the largest hospital company in Asia and the second-largest in the world by market value. Its business stretches from Abu Dhabi to Vietnam. Many obstacles lie in the path of Asia’s ambitious private hospital companies. The first is simply that doctors and nurses are scarce. Second, regulations can be treacherous.he third obstacle is uncertainty.
  2. AlixPartners v Eric Thompson and Ivo Naumann, which was filed last month, will probably not become a Hollywood film. The mundane truth is that AlixPartners is a professional-services firm specialising in corporate restructuring and that Mr Thompson and Mr Naumann, the defendants, now work for McKinsey, a firm of consultants.Nonetheless, the case illustrates the heating-up of competition between corporate-turnaround advisers and strategy consultants. Companies in or near insolvency could not afford this luxury, and both AlixPartners and its bigger peer, Alvarez & Marsal, were founded in those years to cater to them.In order to diversify, Alvarez & Marsal set up a division to serve private-equity investors. AlixPartners founded a strategy-consulting arm of its own. Today, a minority of their revenue comes from turnaround work. Nonetheless, it remains their forte and a lucrative niche: Alvarez & Marsal earned $627m from the Lehman Brothers case alone in the four years after the bank went under. In 2010 McKinsey set up a Recovery and Transformation Services (RTS) practice. For McKinsey, the turnaround business is unfamiliar turf.
  3. In just ten years, according to the Centre for Asia Pacific Aviation (CAPA), low-cost carriers’ share of the Asia’s aviation market has soared from almost nothing to 58%. In Europe, where cheap airlines have been flying for much longer, easyJet and its fellows account for only about 40%.Of the world’s 15 busiest low-cost international routes, nine are in South-East Asia. All this demand requires aeroplanes: CAPA says South-East Asia is the only region where there are more planes on order than in existing fleets.However, the expansion of airlines’ capacity seems to be getting ahead of the growth in demand. Some low-cost carriers are struggling to fill their seats.On May 2nd Singapore-based Tigerair announced a loss of $177m in the year to March, up from $36m the year before. Several of its national affiliates, notably in Indonesia and Singapore, have fared particularly badly. Carriers’ costs are not as low as they would like. Most of South-East Asia’s showy, expensive airports are running at full capacity. Scoot, the low-cost arm of Singapore Airlines, and Cebu Pacific of the Philippines have also been exploring this business.
  4. La Michoacana ( ice-cream parlours ) is a Mexican business success story, possibly as well known as Dunkin’ Donuts is in the United States. But it is not a corporation, nor a brand, nor a franchise. It is a confetti of independent, family-owned ice-cream parlours. To find its roots, you must travel to Tocumbo. people from Tocumbo have set up ice-cream shops around Mexico (and even in America) and sent money home. They also epitomise Mexico’s stubborn attachment to smallness in business. The OECD says Mexico has more businesses with ten workers or fewer, as a share of the total, than any other big economy in Latin America: 95.5%, compared with 80-90% in Argentina, Brazil and Chile. Small firms are much less productive than large ones, and only a handful are exporters or integrated into modern supply chains. cKinsey talks of “two Mexicos” moving in opposite directions: a modern, export-oriented one, and a traditional one of small businesses where productivity is plunging by 6.5% a year.Staying small has other benefits, besides facilitating tax avoidance.any companies choose to avoid banks altogether: the banks’ association says that more than half of SMEs do not want a loan.Most lack electronic payment systems and have failed to branch out into the sale of mobile airtime and other billing services that are highly profitable for Oxxo and its peers.
  5. On May 9th a terse joint statement from their bosses confirmed that Publicis and Omnicom, two advertising giants, would not be getting married after all.  Corporate marriages often go wrong, but mergers of equals—in which two firms of roughly similar size combine, there is neither buyer nor target and typically no cash changes hands—account for a disproportionate share of the most notorious failures. In May 1998 Daimler and Chrysler announced their union, creating a giant German-American carmaker. The marriage struggled on until May 2007, when a divorce was announced. Worst of all was the merger in January 2000 of Time Warner, a media giant with 70,000 staff and revenues of $27 billion, with AOL, an internet firm whose 12,000 employees generated less than $5 billion. In 2009 AOL was spun off. So why does anyone enter into such a deal? Both firms tend to be big and similar, which holds out the possibility of lots of lucrative cost-saving. The rare merger of equals that succeeds, such as the creation of Lockheed Martin, a defence firm, in 1994, or of ConocoPhillips, an oil giant, in 2001, tends to have a detailed integration plan agreed in advance,
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