Collection – The Dalai Lama Has Been the Face of Buddhism for 60 Years. China Wants to Change That

Morning has broken on the cedar-strewn foothills of the Himalayas. His Holiness the 14th Dalai Lama sits in meditation in his private chapel in Dharamsala, a ramshackle town perched on the upper reaches of North India’s Kangra Valley. Rousing slowly, he unfolds his legs with remarkable agility for a man of 83, finds the red felt slippers placed neatly beneath his seat and heads outside to where a crowd has already gathered.

Around 300 people brave the February chill to offer white khata scarves and receive the Dalai Lama’s blessing. There’s a group from Bhutan in traditional checkered dress. A man from Thailand has brought his Liverpool F.C. scarf, seeking divine benediction for the U.K. soccer team’s title bid. Two women lose all control as they approach the Dalai Lama’s throne and are carried away shaking in rapture, clutching prayer beads and muttering incantations.

The Dalai Lama engages each visitor like a big kid: slapping bald pates, grabbing onto one devotee’s single braid, waggling another’s nose. Every conversation is peppered with giggles and guffaws. “We 7 billion human beings — emotionally, mentally, physically — are the same,” he tells TIME in a 90-minute interview. “Everyone wants a joyful life.”

Ruven Afanador for TIME

His own has reached a critical point. The Dalai Lama is considered a living Buddha of compassion, a reincarnation of the bodhisattva Chenrezig, who renounced Nirvana in order to help mankind. The title originally only signified the preeminent Buddhist monk in Tibet, a remote land about twice the size of Texas that sits veiled behind the Himalayas. But starting in the 17th century, the Dalai Lama also wielded full political authority over the secretive kingdom. That changed with Mao Zedong’s conquest of Tibet, which brought the rule of the current Dalai Lama to an end. On March 17, 1959, he was forced to escape to India.

In the six decades since, the leader of the world’s most secluded people has become the most recognizable face of a religion practiced by nearly 500 million people worldwide. But his prominence extends beyond the borders of his own faith, with many practices endorsed by Buddhists, like mindfulness and meditation, permeating the lives of millions more around the world. What’s more, the lowly farmer’s son named as a “God-King” in his childhood has been embraced by the West since his exile. He won the Nobel Peace Prize in 1989 and was heralded in Martin Scorcese’s 1997 biopic. The cause of Tibetan self-rule remains alive in Western minds thanks to admirers ranging from Richard Gere to the Beastie Boys to Democratic House Speaker Nancy Pelosi, who calls him a “messenger of hope for millions of people around the world.”

Yet as old age makes travel more difficult, and as China’s political clout has grown, the Dalai Lama’s influence has waned. Today the Chinese Communist Party (CCP) that drove him out of Tibet is working to co-opt Buddhist principles — as well as the succession process itself. Officially atheist, the party has proved as adaptive to religion as it is to capitalism, claiming a home for faith in the nationalism Beijing has activated under Xi Jinping. In January, the CCP announced it would “Sinicize” Buddhism over the next five years, completing a multimillion-dollar rebranding of the faith as an ancient Chinese religion.

The Dalai Lama delivers a lecture from his throne on Feb. 18 to mark Losar, the Tibetan new year.

The Dalai Lama delivers a lecture from his throne on Feb. 18 to mark Losar, the Tibetan new year.
Ruven Afanador for TIME

From Pakistan to Myanmar, Chinese money has rejuvenated ancient Buddhist sites and promoted Buddhist studies. Beijing has spent $3 billion transforming the Nepalese town of Lumbini, birthplace of Lord Buddha, into a luxury pilgrimage site, boasting an airport, hotels, convention center, temples and a university. China has hosted World Buddhist Forums since 2006, inviting monks from all over the world.

Although not, of course, the world’s most famous. Beijing still sees the Dalai Lama as a dangerous threat and swiftly rebukes any nation that entertains him. That appears to be working too. Once the toast of capitals around the world, the Dalai Lama has not met a world leader since 2016. Even India, which has granted asylum to him as well as to about 100,000 other Tibetans, is not sending senior representatives to the diaspora’s commemoration of his 60th year in exile, citing a “very sensitive time” for bilateral relations with Beijing. Every U.S. President since George H.W. Bush has made a point of meeting the Dalai Lama until Donald Trump, who is in negotiations with China over reforming its state-controlled economy.

Still, the Dalai Lama holds out hope for a return to his birthplace. Despite his renown and celebrity friends, he remains a man aching for home and a leader removed from his people. Having retired from “political responsibility” within the exiled community in 2011, he merely wants “the opportunity to visit some holy places in China for pilgrimage,” he tells TIME. “I sincerely just want to serve Chinese Buddhists.”

Despite that, the CCP still regards the Dalai Lama as a “wolf in monk’s robes” and a dangerous “splittist,” as Chinese officials call him. He has rejected calls for Tibetan independence since 1974 — acknowledging the geopolitical reality that any settlement must keep Tibet within the People’s Republic of China. He instead advocates for greater autonomy and religious and cultural freedom for his people. It matters little.

“It’s hard to believe a return would happen at this point,” says Gray Tuttle, a professor of modern Tibetan studies at Columbia. “China holds all the cards.”

The boy born Lhamo Thondup was identified as the 14th incarnation of the Dalai Lama at just 2 years old, when a retinue of top lamas, or senior Buddhist Tibetan monks, followed a series of oracles and prophecies to his village in northeastern Tibet. The precocious toddler seemed to recognize objects belonging to the 13th Dalai Lama, prompting the lamas to proclaim him the celestial heir. At age 4, he was carried on a golden palanquin into the Tibetan capital, Lhasa, and ensconced in its resplendent Potala Palace. A daily routine of spiritual teaching by top religious scholars followed.

“Sometimes my tutor kept a whip to threaten me,” the Dalai Lama recalls, smiling. “The whip was yellow in color, as it was for a holy person, the Dalai Lama. But I knew that if the whip was used, it made no difference — holy pain!”

It was a lonely childhood. The Dalai Lama rarely saw his parents and had no contact with peers of his own age, save his elder brother Lobsang Samden, who served as head of household. Despite his tutors’ focus on spiritual matters, or perhaps because of it, he was fascinated by science and technology. He would gaze from the Potala’s roof at Lhasa street life through a telescope. He took apart and reassembled a projector and camera to see how they functioned. “He continually astonished me by his powers of comprehension, his pertinacity and his industry,” wrote the Austrian mountaineer Heinrich Harrer, who became the Dalai Lama’s tutor and was one of six Europeans permitted to live in Lhasa at the time. Today the Dalai Lama proudly describes himself as “half Buddhist monk, half scientist.”

The Dalai Lama was only supposed to assume a political role on his 18th birthday, with a regent ruling until then. But the arrival of Mao’s troops to reclaim dominion over Tibet in 1950 caused the Tibetan government to give him full authority at just 15. With no political experience or knowledge of the outside world, he was thrust into negotiations with an invading army while trying to calm his fervent but poorly armed subjects.

Conditions worsened over the next nine years of occupation. Chinese proclamations calling Lord Buddha a “reactionary” enraged a pious populace of 2.7 million. By March 1959, rumors spread that the Dalai Lama would be abducted or assassinated, fomenting a doomed popular uprising that looked likely to spill into serious bloodshed. “Just in front of the Potala [Palace], on the other side of the river, there was a Chinese artillery division,” the Dalai Lama recalls. “Previously all the guns were covered, but around the 15th or 16th, all the covers were removed. So then we knew it was very serious. On the 17th morning, I decided to escape.”

The two-week journey to India was fraught, as Chinese troops hunted the party across some of the world’s most unforgiving terrain. The Dalai Lama reached India incognito atop a dzo, a cross between a yak and a cow. Every building in which he slept en route was immediately consecrated as a chapel, but the land he left behind was ravaged by Mao’s disastrous Great Leap Forward and Cultural Revolution. Hundreds of thousands died. By some reckonings, 99.9% of the country’s 6,400 monasteries were destroyed.

Tibet’s desire to remain isolated and undisturbed had served it poorly. The kingdom had no useful allies, the government of Lhasa having declined to establish official diplomatic relations with any other nation or join international organizations. The Dalai Lama’s supplications were thus easy to ignore. Tibet had remained staunchly neutral during World War II, and the U.S. was already mired in a fresh conflict on the Korean Peninsula.

“[First Indian Prime Minister] Pandit Nehru told me, ‘America will not fight the Chinese communists in order to liberate Tibet, so sooner or later you have to talk with the Chinese government,’” the Dalai Lama recalls.

Around 300 devotees line up early at Tsuglagkhang temple to offer the Dalai Lama traditional khata scarves and to receive his blessing.

Around 300 devotees line up early at Tsuglagkhang temple to offer the Dalai Lama traditional khata scarves and to receive his blessing.
Ruven Afanador for TIME

When Tibetans first followed the Dalai Lama into India, they lived with bags packed and did not build proper houses, believing a glorious return would come at a moment’s notice. It never did.

Four decades of conversations between China and exiled Tibetan leadership have led nowhere. Consolatory talks began in the 1970s between the Dalai Lama’s envoys and reformist Chinese leader Deng Xiaoping and continued under Deng’s successor, Jiang Zemin. The talks stipulated that Tibetan independence was off the table, but even so, the drawn-out process was suspended in 1994 and after briefly resuming in the 2000s is again at a standstill.

Meanwhile, Tibet remains firmly under the thumb of Beijing. The U.N. High Commissioner for Human Rights has lamented that conditions are “fast deteriorating” in the region. In May, Tibetan businessman Tashi Wangchuk was jailed for five years merely for promoting the Tibetan language. In December, the government issued a directive to stop Tibetan language and culture from being taught in monasteries. Once known as the “abode of the gods,” Lhasa has become a warren of neon and concrete like any other Chinese city. Although the U.S. officially recognizes Tibet as part of China, Vice President Mike Pence said in July that the Tibetan people “have been brutally repressed by the Chinese government.”

Many allege their cultural and religious freedom is under attack by the Beijing government. Some in Tibet resort to extreme measures to protest their treatment. Since 2009, more than 150 Tibetans — monks, nuns and ordinary civilians — have set themselves ablaze in protest. Often self-immolators exalt the Dalai Lama with their final breaths. Despite his message of nonviolence, the Dalai Lama has been criticized for refusing to condemn the practice. “It’s a very difficult situation,” he says. “If I criticize [self-immolators], then their family members may feel very sad.” He adds, however, that their sacrifice has “no effect and creates more problems.”

Beijing vehemently refutes accusations of human-rights violations in Tibet, insisting that it fully respects the religious and cultural rights of the Tibetan people, and highlights how development has raised living standards in the previously isolated and impoverished land. China has spent more than $450 million renovating Tibet’s major monasteries and religious sites since the 1980s, according to official figures, with $290 million more budgeted through 2023. The world’s No. 2 economy has also greenlighted massive infrastructure projects worth $97 billion, with new airports and highways carving through the world’s highest mountains, nominally to boost the prosperity of the 6 million ethnic Tibetans.

This level of investment presents a dilemma to Tibetans stranded in exile. The majority live in India, under a special “guest” arrangement by which they can work and receive an education but, crucially, not buy property. Many toil as roadside laborers or make trinkets to sell to tourists. And so large numbers of young Tibetans are making the choice to return, lured to a homeland they have never known. “If you want a safe and secure future for your children, then either you go back to Tibet or some other country where you can get citizenship,” says Dorji Kyi, director of the Lha NGO in Dharamsala, which supports Tibetan exiles.

At 83, the Buddhist leader reflects on a life spent away from his native Tibet.

At 83, the Buddhist leader reflects on a life spent away from his native Tibet.
Ruven Afanador for TIME

Many of the returnees are armed with better education and world experience than their peers who grew up in Tibet. “Some of them do well,” says Thupten Dorjee, president of Tibetan Children’s Village, a network of five orphanages and eight schools that has cared for 52,000 young Tibetans in India. “But if they get involved in political things then they land into trouble.”

Tibet still has a government-in-exile, the Central Tibetan Administration (CTA) in Dharamsala, but it is dogged by infighting and scandal. Exiles are instead forging their own path. Last September, the Dalai Lama himself was filmed at his temple telling young Tibetans that it was better to live under Beijing’s rule than stay as “beggars” in exile. Speaking to TIME, he said it was “no problem” if exiled Tibetans chose to return to China.

Even those who have achieved prosperity elsewhere are opting to return. Songtsen Gyalzur, 45, sold his real estate business in Switzerland, where his Tibet-born parents immigrated after first fleeing to India, to start China’s Shangri-La Highland Craft Brewery in 2014. Today his award-winning brewery has an annual capacity of 2.6 million gallons of lagers, ales and porters. He recruits 80% of the staff from orphanages his mother set up in Tibetan areas in the 1990s. “Tibet has so many well-educated, well-trained professionals abroad who could have a real impact on people’s lives here,” he says.

Despite the “Lost Horizon” legend, the kingdom was never a spiritual and agrarian utopia. Most residents lived a Hobbesian existence. Nobles were strictly ranked in seven classes, with only the Dalai Lama belonging to the first. Few commoners had any sort of education. Modern medicine was forbidden, especially surgery, meaning even minor ailments were fatal. The sick were typically treated with a gruel of barley meal, butter and the urine of a holy monk. Life expectancy was 36 years. Criminals had limbs amputated and cauterized in boiling butter. Even the wheel wasn’t commonly employed, given the dearth of passable roads.

The Dalai Lama has admitted that Tibet was “very, very backward” and insists he would have enacted reforms. But he also emphasizes that traditional Tibetan life was more in communion with nature than the present. Tibet hosts the largest store of fresh water outside the Arctic and Antarctic, leading some environmentalists to term its frozen plateau the “third pole,” and especially vulnerable to the choking development unleashed by the Beijing government.

“Global warming does not make any sort of exception — just this continent or that continent, or this nation or that nation,” the Dalai Lama says. Asked who is responsible for fixing the crisis, he points not to Beijing but to Washington. “America, as a leading nation of the free world, should take more serious consideration about global issues.”

The Dalai Lama meditates in his private chapel inside his residence on Feb. 18.

The Dalai Lama meditates in his private chapel inside his residence on Feb. 18.
Ruven Afanador for TIME

The Dalai Lama is a refreshingly unabashed figure in person. His frequent laughter and protuberant ears make him seem cuddly and inoffensive, and it’s difficult to overstate how tactile he is. He appears equally at home with both the physical and the spiritual, tradition and modernity. He meditated within reach of an iPad tuned to an image of a babbling brook and mountains and a few minutes later turned to Tibetan scriptures written on wide, single sheets, unbound. He retires at 6 p.m. and rises at 4 a.m. and spends the first hours of his day in meditation.

“Western civilization, including America, is very much oriented toward materialistic life,” he says. “But that culture generates too much stress, anxiety and jealousy, all these things. So my No. 1 commitment is to try to promote awareness of our inner values.” From kindergarten onward, he says, children should be taught about “taking care of emotion.”

“Whether religious or not, as a human being we should learn more about our system of emotion so that we can tackle destructive emotion, in order to become more calm, have more inner peace.”

The Dalai Lama said his second commitment is to religious harmony. Conflicts in the Middle East tend to involve sectarian strife within Islam. “Iran is mainly Shi‘ite. Saudi Arabia, plus their money, is Sunni. So this is a problem,” he says, lamenting “too much narrow-mindedness” and urging people of all faiths to “broaden” their thinking.

Buddhism has its own extremists. The themes of Buddhism, as a nontheistic religion with no single creator deity, are more accessible to followers of other faiths and even ardent atheists, emphasizing harmony and mental cleanliness. But the Dalai Lama says he is “very sad” about the situation in Myanmar, where firebrand Buddhist monks have incited the genocide of Rohingya Muslims. “All religions have within them a tradition of human loving kindness,” he says, “but instead are causing violence, division.”

He keeps a sharp eye on global affairs and is happy to weigh in. Trump’s “America first” foreign policy and obsession with a wall on the southern U.S. border make him feel “uncomfortable,” he says, calling Mexico “a good neighbor” of the U.S. Britain’s impending exit from the European Union also warrants a rebuke, as he has “always admired” the E.U.

Six decades on, the Dalai Lama still hopes he will visit his birthplace again.

Six decades on, the Dalai Lama still hopes he will visit his birthplace again.
Ruven Afanador for TIME

In his ninth decade and moving with the help of assistants, the Dalai Lama continues to explore human consciousness and question long-held shibboleths. During a series of lectures in February to mark the Tibetan new year, he pontificates on everything from artificial intelligence — it can never compete with the human mind, he says — to blind deference to religious dogma. “Buddha himself told us, ‘Do not believe my teaching on faith, but rather through thorough investigation and experiment,’” he says. “So if some teaching goes against reason, we should not accept it.”

This includes the institution of the Dalai Lama itself. Even as a young boy, his scientific mind led him to question the idea that he was the 14th incarnation of a deity king. His former tutor recalled that he found it odd that the prior Dalai Lama “was so fond of horses and that they mean so little to me.” Today the Dalai Lama says the institution he embodies appears “feudal” in nature. Leaving the spiritual element aside, he says he doesn’t believe any political authority should be conferred when he dies. “On one occasion the Dalai Lama institution started,” he says. “That means there must be one occasion when the institution is no longer relevant. Stop. No problem. This is not my concern. China’s communists, I think, are showing more concern.”

Indeed they are. In a blow to the Tibetan exile community, China has set about bringing the leadership of Tibetan Buddhism into the party fold. When the Dalai Lama named a Tibetan child as the reincarnation of the previous Panchen Lama in 1995 — the second highest position in Tibetan Buddhism after himself — China put the boy into “protective custody” and installed a more pliant figure instead. The whereabouts of the Dalai Lama’s choice remain unknown.

So when the Dalai Lama leaves this plane of existence, it’s highly likely a 15th incarnation will be chosen by the godless CCP. “It’s pretty obvious the Chinese state is preparing for it, which is absurd,” Tuttle says. Tibetan Buddhists will be forced to choose between the party’s Dalai Lama and the selection of Tibetan exiles. On this point, at least, the incumbent is very clear. Any decision on the next Dalai Lama, he says, should be “up to the Tibetan people.”

No doubt the party’s desire to name a Dalai Lama stems from the fact that there are 244 million Buddhists in China — a cohort that dwarfs the CCP membership by 3 to 1. The party craves legitimizing its power above all else and believes yoking it to the institution of the Dalai Lama will provide that. But Beijing clearly also hopes it will be a symbolic final nail in the coffin of Tibetan self-rule, completing the absorption of Tibet into the People’s Republic of China that began seven decades ago.

So in a twist of irony, it seems the incumbent God-King’s wish will eventually be granted. One day a Dalai Lama will return to China — in this body or the next, with his blessing or without.

Correction, Mar. 7

A photo caption in the original version of this story misidentified a group of people waiting to see the Dalai Lama. They are devotees, not Buddhist monks.

By Charlie Campbell

Full link: http://time.com/longform/dalai-lama-60-year-exile/?utm_source=time.com&utm_medium=email&utm_campaign=the-brief&utm_content=2019030711am&xid=newsletter-brief&eminfo=%7b%22EMAIL%22%3a%221eLQ3nz9tkRy7AoaFTE5osEFAz5azrR8%22%2c%22BRAND%22%3a%22TD%22%2c%22CONTENT%22%3a%22Newsletter%22%2c%22UID%22%3a%22TD_TBR_27D13C79-0BBE-48EE-B2CC-33613116D9C4%22%2c%22SUBID%22%3a%22120794911%22%2c%22JOBID%22%3a%22942467%22%2c%22NEWSLETTER%22%3a%22THE_BRIEF%22%2c%22ZIP%22%3a%22%22%2c%22COUNTRY%22%3a%22VNM%22%7d

Collection – The Ultimate Cheat Sheet for Mastering Mobile Marketing

mobile-marketing

As of 2018, there were 3.7 billion people who accessed the internet through a mobile device, according to Statista. That’s more than half the world’s population.

Aside from the astounding growth of mobile, many countries are witnessing people purchase smartphones first, bypassing PC ownership as their first means of internet connectivity. And marketers need to adapt.

How do inbound marketers leverage the power of the mobile device to provide a personalized experience for the user while not intruding in their day-to-day lives? The answer lies in not thinking of the mobile device as another PC, but rather another limb for your busy, active customers and prospects.

Here’s a comprehensive list of tips and tricks every marketer should know to master mobile marketing.

What is mobile marketing?

Mobile marketing uses any and all digital, social, and related content marketing channels to reach an audience via their mobile devices. In a sense, it takes a marketing strategy — its messaging, design, and target audience — and optimizes it for delivery through a smartphone or tablet.

While mobile marketing limits the use of some marketing channels you might focus more on outside of mobile, it also presents several new ones. The following is a list of marketing channels you can include in a mobile marketing strategy — we’ll go over each of them in more detail in this guide.

Responsive Website

A responsive website is one that might’ve been developed originally for PC, but has been optimized for navigating to and from on a mobile device. This “responsive design” allows users to reveal buttons, text, and webpages within the website they might not be able to see on a mobile screen had it not been optimized correctly.

Making your website responsive allows it to remain a critical marketing channel when your audience switches from computer to mobile. Learn how to make your website mobile-friendly using this guide.

Mobile Search

More than 60% of Google searches take place on a mobile device, as opposed to a computer. With such a high percentage of searches done over a smartphone, search engine optimization (SEO) should be just as a big a part of a mobile marketing strategy as it would in a broader digital marketing strategy. Learn about some of the most important Google ranking factors here.

Email Marketing

Did you know mobile users check their email three times more often than non-mobile users? Not only that, but mobile is responsible for at least 50% of all email opens, according to data we collected from Campaign Monitor. Make sure the email newsletters you deliver to your subscribers are optimized for viewing on most mobile email platforms — we’ll go over how to do this in a few minutes.

Social Media

Not only is social media enjoyed on mobile at least as much as it is on PC, but some social networks are designed for mobile. Instagram, the mobile photo-sharing platform, has more than 1 billion monthly active users — and all of them are required to upload photos via their mobile device. Implementing an Instagram presence — in addition to social networks like Twitter and Facebook — into your mobile marketing strategy is a no-brainer (if your audience is on Instagram, that is).

SMS Marketing

SMS marketing is another term for text marketing, which uses text messages to reach an audience with messaging related to their business. Texts aren’t often associated with brands, and therefore texts from anyone other than a person’s known contacts can be dicey. Nonetheless, there are types of SMS messages that are appropriate coming from a business. I’ll elaborate later in this blog post.

Mobile App Development

It sounds like a big undertaking, but with just a few engineering resources, you can attract your audience through app marketplaces native to various smartphones. What sorts of apps should you create, you ask? That depends on what your goal is. Got an event coming up? Deliver the event schedule to attendees through a mobile app. Are you in the software business? Your customers might crave a mobile version of your product — you just don’t know it yet.

Virtual and Augmented Reality

Virtual and augmented reality are two of the newest opportunities in digital marketing, and in some cases, all a user needs is a smartphone to enjoy it.

Whereas virtual reality (VR) simulates entire environments through a smartphone, augmented reality (AR) literally “augments” the appearance of what’s in front of a user when they look through their mobile screen. Numerous companies have already taken advantage of this technology to offer branded experiences to their customers and even help them make better purchase decisions. Home decor vendor, Wayfair, for example, recently created an AR feature as part of its mobile shopping app that lets its customers see what an item might look like in a certain spot in their home.

How to Launch a Mobile Marketing Strategy

To launch a mobile marketing strategy through the channels outlined above, you’ll do three things right off the bat:

  • Identify your mobile users. See if site visitors are indeed using mobile devices to visit your site and what devices they are using most frequently. Knowing the devices used to visit your site most frequently, such as an iPad, Android, Blackberry, or iPhone, will help you prioritize optimization efforts toward those devices.
  • Set measurable and realistic goals. If you’re just getting started with mobile marketing, this will help you determine if your tactics are working. For example, if you’re looking to start an SMS campaign, a good first goal would be to build your opt-in database. If you’d like to optimize your site for mobile, consider starting with the content assets that drive the most leads to your site as a way to dip your toe in the mobile waters.
  • Create a test base. Identify some loyal customers on which to test new mobile campaigns. Mobile requires customization, and a short test phase in which users can give you feedback will help catch glitches and create a better user experience before a large-scale rollout.

Mobile’s Limitations

As I mentioned earlier, optimizing a marketing strategy for mobile devices should take into account the things users won’t have access to when switching from PC to mobile. Here are a few of those things to remember when launching your mobile marketing strategy:

  • Customize for mobile, not desktops. While mobile devices have capabilities beyond the desktop computer, also keep in mind their limitations when designing a mobile site or app. Create content and designs for a small screen, no mouse, and a device on which extensive typing is unwieldy.
  • Don’t require users to sit through renderings of large images. Not only can it be expensive depending on their data plan, but it can also waste their time and will probably result in site abandonment.
  • Create short forms. You can ask users to fill out forms, but pare down the fields as much as possible. Typing on a smartphone is a nuisance at best and difficult at worst, so shortened forms and those with pre-filled options the user can scroll through are ideal.
  • Don’t hide content behind multiple clicks. If a user would click three times to get to a webpage on their desktop, they might only put up with two clicks on a mobile device before giving up.

Mobile’s Capabilities

  • Use features specific to mobile devices. Take advantage of all the great features of today’s mobile devices when thinking of mobile marketing campaigns. For example, you can use GPS to let users check in at your establishment (you can even provide a reward for those who do), offer click-to-call functionality, and provide provide QR codes that lead to a targeted landing page. These features make for great mobile marketing because they address the needs of mobile users in a way traditional internet marketing cannot.
  • Create content tailored to small screens. Shorter content that is formatted in bitesize chunks is ideal for the mobile experience. Be succinct, and embrace bold headings, bullet points, and numbered lists to break up longer paragraphs and make it easy for the reader to find what he needs.
  • Add big buttons and calls-to-action (CTAs). You might’ve been told to make your product-focused website buttons a vibrant color to encourage visitors to click on them. Well, on mobile, size is just as important. People need to be able to easily tap on their phone’s screens when navigating a website, and thumbs come in all shapes and sizes. Enhance the size of your most important conversion points just a little bit so your visitors can easily select the button they intended to select.

Making Your Email Marketing Mobile-Friendly

Create plain text and HTML email versions.

Some email clients will default to plain text and give readers the option to show pictures, while others will load pictures automatically. Be prepared by ensuring your emails render quickly and clearly in either scenario.

Write descriptive alt text.

Alt text, or alternative text, is the text that displays in lieu of an image when graphics can’t render. If your email header is an image with a generic name, change the alt text to something that relates to the subject of the email.

Craft a crystal clear subject line.

When mobile users have a few minutes to check their email, they commonly divide their inbox into three categories: “read now,” “delete,” and “save for later.” With a vague subject line, you’re sure to end up in the “delete” category. Create a clear subject line to get your email read immediately, or at least starred for later.

Be an identifiable sender.

However your reader is most likely to know you, identify yourself as such in the sender field. This will help alleviate any confusion that would otherwise put you in their trash bin.

Integrate Mobile With Your Existing Inbound Marketing Strategy

If you already have a marketing strategy in full swing, how do you go about updating it to incorporate mobile? In addition to optimizing your website with responsive design, and enhancing your social media presence to include mobile-specific platforms like Instagram, you can also do the following:

Integrate mobile campaigns with your CRM.

As with any other campaign, you can and should track and nurture leads that come through mobile campaigns using your existing customer relationship manager (CRM). Don’t have a CRM? You can use ours for free.

Use mobile to move leads through your funnel.

They’ve opted in to your campaign or pulled up your site, so they’re already interested in you. Take advantage of that knowledge by providing content and a user experience tailored to their needs on a mobile device. For example, those in retail or ecommerce can optimize online checkout for mobile and provide easy access to reviews. B2B marketers can let users register for and listen to webinars on their mobile devices.

Include calls-to-action.

Mobile browsing should be more streamlined than desktop browsing, but calls-to-action are still a must. Compile the CTAs you’re using across all marketing campaigns, and select those that make sense to use in your mobile campaigns to create a congruent user experience.

Integrate paid search.

Your mobile marketing strategy can include a paid search component by posting Google Mobile ads through your Google Ads account. Be sure to use strong calls-to-action tailored to your mobile searchers.

Customizing the Mobile Experience

It’s one thing to take a marketing campaign mobile, but it’s another thing to make this campaign unique to your brand. Here’s how you can customize the mobile experience to your unique audience:

Use both mobile apps and mobile sites.

There’s a lot of debate around whether or not mobile apps are better than mobile sites, but there’s room for both. Think of mobile sites as a way to reach a wider audience and bring in people through the top of your funnel, and use mobile apps as a way to increase engagement among people in the middle of your funnel. Use your mobile site to encourage readers to download your mobile app.
mobile marketing for ipads

Develop a mobile app.

The iPad floats somewhere between the PC and a mobile device. If you find tons of users are using an iPad to access your site, develop an app for them that is more robust than what you might offer someone on a smartphone.

Test different devices and browsers.

Just like you test your site in multiple browsers and check how emails render in multiple email clients, test your mobile campaigns on multiple devices and in multiple browsers to ensure the experience is consistent throughout.

Create content that addresses the needs of mobile users.

If you have a storefront and directions, then click-to-call functionality is important. If you sell products, make it easy to find a coupon code. Mobile users know what they are looking for, so anticipate those needs when creating content. And if you aren’t a mind reader…ask them!

Leveraging SMS Marketing

Like I said earlier, SMS marketing (a.k.a. text marketing) can be a difficult channel to get just right. Mobile users are receptive to branded text messages, but only in special circumstances. When done right, though, they can be a boon for your brand awareness across your industry. Here are a few examples:

Use SMS for voting and polls.

SMS stands for short message service, and it’s an easy way to receive feedback and increase engagement from your audience if you had a recent interaction with them or an ongoing relationship wherein you earned their phone number. Send your audience texts that allow them to vote or fill out a poll that helps you improve your service offerings.

Get a short code.

You know those screens that say “Text 12345 for your 10% off coupon”? That sequence of numbers is called a short code. Get your own short code for use in SMS marketing campaigns. Then, distribute them to your customers after they perform a certain behavior on your website, like claiming a reward or subscribing to updates from you. Here’s an example:

Opt in mobile marketing via an SMS text message

Use SMS for alerts.

If you don’t think the short code campaigns are up your alley, you can still use SMS for customer alerts. Give people the option to sign up for an alert when a product on backorder is available, or to receive a reminder when the webcast they signed up for is broadcasting.

Keep in mind text marketing, just like email marketing, is largely unwanted if you attempt to reach people by contact information they didn’t personally give you. Make sure all of your lead-generating campaigns request email addresses and phone numbers before using them.

Be Legit

With great power comes great responsibility. Mobile marketing channels like SMS and app development can give you more data on your customers, and that data must be protected. Here are a few ways to do so:

Make opting out easy.

Be as legit with mobile marketing campaigns as you are with everything else. If you’re using SMS or a multimedia messaging service (MMS), make it clear how to opt out and if any rates may apply if the user engages in your campaign.

Be secure with user data.

If users are submitting sensitive information over their mobile device — such as credit card information, email addresses, or physical addresses — ensure you’ve taken precautions to protect that data from unauthorized use or distribution. Learn how to comply with GDPR, Europe’s latest data privacy law, on this page.

Make terms and conditions clearly visible.

If a user has to agree to terms and conditions before participating in a mobile marketing program, ensure it’s easy for them to understand what those are. It is also illegal to automatically check that box for them, so there’s extra incentive to make the legalese crystal clear.

Implementing Mobile Marketing

Ready to get started? Here are some parting thoughts …

  • Let people choose to use mobile browsing. There are some sites that have optimized for mobile, but the functionality we know and love from a desktop browsing session hasn’t made the cut. Make sure you give your users the option to switch to back and forth from mobile browsing so they can get back to a more familiar format if they feel confused or limited by their options.
  • Train employees on mobile functionality. If other employees will be interacting with users of your mobile site, mobile app, or SMS campaigns, ensure they understand the campaigns so they can answer questions and understand their value proposition.

While mobile marketing is a widely accepted approach to business growth, not every channel will be right for you. Continue monitoring what works and what doesn’t, and refine your own best practices to fit the needs, interests, and location of your buyers.

By Corey Wainwright

Full link: https://blog.hubspot.com/blog/tabid/6307/bid/28776/The-Ultimate-Cheat-Sheet-for-Mastering-Mobile-Marketing.aspx?utm_campaign=Marketing%20Blog%20-%20Daily%20Emails&utm_source=hs_email&utm_medium=email&utm_content=70550203

Collection – 4 Simple Ways to Invest in Real Estate

Buying real estate can be more than just finding a place to call home. Most people have to do a real estate transaction at some point in their lives, and some find it an intriguing opportunity for capturing and creating value. Real estate has become a common investment vehicle, and it continues to be popular despite a very rocky market correction in 2007-09.

Although the real estate market has plenty of opportunities for making a profit, buying and owning real estate can be a lot more complicated than investing in stocks and bonds. In this article we’ll go beyond buying a home and introduce you to some of the basic real estate investments.

The Power of Leverage in Real Estate

Before we dive into types of real estate investments, it is worth looking at one of the main attractions it holds for investors. Investing in real estate gives you one tool that is not as easily available to stock market investors: leverage. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order. Even if you are an individual investor buying on margin, the amount you can borrow is still less in total than what you can easily access for a real estate purchase.

A traditional mortgage generally requires a 20% to 25% down payment. However, depending on where you live, there are many types of mortgages that require as little as 5% down. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value up front. Of course, your mortgage will eventually pay the total value of the house at the time you purchased it (plus a not insignificant amount of interest), but you control the whole asset the minute the papers are signed.

This is what emboldens both real estate flippers and landlords. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that income from tenants pays the mortgage or wait for an opportunity to sell for a profit, they control these assets, despite having only staked a small part of the total value.

1. So You Want to Be a Landlord

Ideal For: People with DIY and renovation skills and an aptitude for dealing with tenants

What It Takes to Get Started: A healthy amount of capital to ensure access to financing and cover up-front maintenance costs and vacant months

Pros: Rental properties can become new sources of regular income if the investment is successful. They also maximize your available capital through leverage. Moreover, many of your expenses are tax deductible, and any losses can offset gains in other investments.

Cons: Rental properties tend to be hands-on investments unless you use a property management company. Rental property owners often must choose between being ready to field a tenant call at any hour and forgoing income (or taking a loss) to have someone else do it for them.

Rental real estate is an investment as old as land ownership. Basically, you buy a property and rent it out to a tenant. The owner is now a landlord, responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs with enough left over to produce a monthly profit right from the start. However, depending on the rental market, a landlord may have to be patient and only charge enough rent to cover expenses or even take a loss to keep a property occupied. Although this can be uncomfortable and requires a capital cushion to absorb periods of loss, landlords tend to invest for the long term. After all, once the mortgage has been paid on a rental property, the majority of the rent becomes profit.

Of course, the monthly income from a property is not the only focus of a landlord. As with all real estate, the property can appreciate over the course of the mortgage, leaving the landlord with a more valuable asset. According to U.S. Census Bureau data, sales prices of new homes – which can be used as a rough indicator for real estate values – consistently increased in value from 1940 to 2006 before dipping during the financial crisis. Sales prices have since resumed their climb, surpassing pre-crisis levels.

Source: Survey of Construction, U.S. Census Bureau

There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. There is also the matter of finding the right property. You will want to pick an area where vacancy rates are low and choose a place that people will want to rent.

Perhaps the biggest difference between a rental property and other investments is the amount of time and work you have to devote to maintaining your investment. When you buy a stock, it simply sits in your brokerage account and, one hopes, increases in value. If you invest in a rental property, you also acquire the mountain of responsibilities that come with being a landlord. When the furnace stops working in the middle of the night, it’s you who gets the phone call. If you don’t mind handyman work, this may not bother you. Otherwise, a professional property manager would be glad to take the problem off your hands – for a price, of course.

2. Real Estate Investment Groups

Ideal For: People who want to hold rental real estate without the headache of running it

What It Takes to Get Started: A capital cushion and access to financing

Pros: This is a much more hands-off approach to real estate that still provides income and appreciation.

Cons: There is also a vacancy risk with real estate investment groups, whether it is spread across the group or owner specific. In addition, management overhead can eat into returns.

Real estate investment groups are similar to a small mutual fund for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you.

In a typical real estate investment group, a company will buy or build a set of apartment blocks or condos, then allow investors to buy them through the company, thus joining the group. A single investor can own one or multiple units of self-contained living space, but the company operating the investment group collectively manages all the units, taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups, but in the standard version the lease is in the investor’s name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive some income even if your unit is empty. As long as the vacancy rate for the pooled units doesn’t spike too high, there should be enough to cover costs. In extreme cases investors may be asked to pay back in if costs exceed income for a longer period of time.

Of course, the quality of an investment group depends entirely on the company offering it. In theory it is a safe way to get into real estate investment, but real estate investment groups are vulnerable to the same fees that haunt the mutual fund industry. More important, they are sometimes private investments where unscrupulous management teams take investors for a ride and leave them with nothing but legal proceedings to look forward to. To avoid unpleasant surprises, it is critical to do your research on the company and conduct a thorough review of the details in the investment offering.

3. Real Estate Trading (Better Known as Flipping)

Ideal For: People with significant experience in real estate valuation and marketing

What It Takes to Get Started: Capital and the ability to do or oversee repairs as needed

Pros: Real estate trading has a shorter time period during which capital and effort are tied up in a property. Depending on market conditions, there can be significant returns even on this shorter time frame.

Cons: Real estate trading requires a deeper market knowledge and a bit of luck. Hot markets can cool unexpectedly, leaving short-term traders with a loss or a long-term headache.

Real estate trading is the wild side of real estate investment. Like day traders, who are distinct from buy-and-hold investors, real estate traders are an entirely different breed from buy-and-rent landlords. Real estate traders buy properties with the intention of holding them for a short period of time, often no more than three to four months, after which they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or in a very hot market.

Pure property flippers will often forgo putting any money into a house for improvements; the investment has to have the intrinsic value to turn a profit without alteration or they won’t consider it. Flipping in this manner is a short-term cash investment. To take advantage of potentially large returns, flippers have to have cash on hand or access to other people’s money, as traditional financing doesn’t generally work for this type of transaction.

If a property flipper gets caught in a situation where he or she can’t unload a property, it can be devastating because these investors generally don’t keep enough uncommitted cash to pay the mortgage on a property for the long term. This can lead to continued losses for a real estate trader who is unable to off-load the property in a bad market.

A second class of property flipper also exists. These investors make their money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment depending on the extent of the improvements. The limiting feature of this investment is that it is time intensive and often only allows investors to take on one or two properties at a time.

4. Real Estate Investment Trusts (REITs)

Ideal For: Investors who want portfolio exposure to real estate without having to go through a traditional real estate transaction

What It Takes to Get Started: Investment capital

Pros: REITs are essentially dividend-paying stocks whose core business is commercial real estate – an area where long-term, cash flowing leases are the norm.

Cons: REITs are essentially stocks, so the leverage available to traditional rental real estate investors is absent.

Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it’s not surprising that Wall Street has found a way to turn real estate into a publicly traded instrument.

A REIT is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges, just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as a REIT. By doing this REITs avoid paying corporate income tax, whereas a regular company would be taxed on its profits and then have to decide whether or not to distribute its after-tax profits as dividends.

Much like regular dividend-paying stocks, REITs are a solid investment for stock market investors who want regular income. In comparison to the aforementioned types of real estate investment, REITs allow investors into nonresidential investments, such as malls or office buildings, that are generally not feasible for individual investors to purchase directly. More important, REITs are highly liquid because they are exchange traded. In other words, you won’t need a realtor and a title transfer to help you cash out your investment.

REITs are, in practice, a more formalized version of a real estate investment group. The number of REITs has grown from 34 in 1971 to 222 in 2017. The market capitalization of these REITs, which is mostly a reflection of the value of the underlying real estate, has similarly grown from $1.5 billion in 1971 to $1.1 trillion in 2017.

When looking at REITs, it is important for an investor to distinguish between equity REITs that own buildings and mortgage REITs that provide financing for real estate and dabble in mortgage-backed securities (MBS). Both offer exposure to real estate, but the nature of the exposure is different. An equity REIT is more traditional, in that it represents ownership in real estate, whereas the mortgage REITs focus on the income from mortgage financing of real estate.

Of course, Wall Street has gone far beyond REITs when it comes to financial innovation in real estate. In comparison with some of the other innovations, a REIT is a plain vanilla gambit, whether equity or mortgage. And unlike MBS, REITs have never starred as a key player in a real estate bubble and subsequent burst. In fact, the financial crisis did bring to light some differences in REIT capital structure and how too much leverage can cause REIT share prices to swing much more wildly than expected. So REIT investing isn’t entirely painless, but the research and analysis required is in line with that of any income stock.

The Bottom Line

We have looked at several types of real estate investment but have only scratched the surface. There are countless variations within these examples and many more types that don’t really fit the definition of simple. As with any investment, there is profit and potential within real estate whether the overall market is up or down.

Of course, this does not mean that investing in real estate is an assured gain. Hopeful real estate investors need to put in the work of becoming conversant with major market indicators and investment-level metrics before diving in. We all tend to put a lot of thought and planning into a home purchase. A real estate investment requires that same diligence without promising the same emotional payoff of living in your dream home. Not that getting a nice financial payoff from being smart about real estate isn’t also an emotional high.

By 

Full link: https://www.investopedia.com/investing/simple-ways-invest-real-estate/?utm_source=personalized&utm_campaign=bouncex&utm_term=16210209&utm_medium=email

Collection – 3 Strategies to Survive the Looming Liquidity Crisis

Stock market liquidity, which offers the ability to buy or sell shares with minimal delay and minimal impact on the price, will trend sharply downward over the next decade, raising the risks for investors, per a detailed report from investment management firm Bernstein, as reported by Business Insider. In a worst-case scenario, constrained market liquidity can spark a meltdown in stock prices that sets off a new financial crisis. Three major recommendations from Bernstein are summarized below.

3 Ways to Survive the Liquidity Crunch

  • Increase cash allocations
  • Avoid unduly large positions and be wary of crowding risk
  • Develop active strategies to exploit the negative impact of liquidity

Source: Bernstein, as reported by Business Insider

Significance for Investors

The rationale for increasing cash allocations is straightforward. The same is true for reducing risk by avoiding unduly large portfolio positions and by being wary of crowded trades with the potential for severe selling pressure once market sentiment turns. Investors should also know how many trading days it may take to close a position in an orderly fashion, without having to dump shares at distressed prices.

Meanwhile, strategists at Jefferies recently identified stocks with heavy ownership by high-turnover hedge funds, as reported by CNBC. These stocks are at risk of coming under sudden and intense selling pressures once these funds head for the exits.

On their third recommendation, Bernstein says that the rise of passive investing is reducing liquidity. While they offer no specifics, they believe that active investment managers, like themselves, have the stock-picking expertise to thrive in this environment. However, a growing majority of actively-managed funds are underperforming their passive benchmarks, per research by Morningstar.

Bernstein identifies five forces that are draining liquidity. First, a combination of high frequency trading (HFT) and regulation have been factors spurring a drop of nearly 75% in bid-ask spreads during the last 10 years, but they say that volumes and turnover also have decreased.

Second, fewer investors in the public markets are driven by fundamentals. Instead, investors are turning to passive vehicles such as ETFs. “It can also pressure the more liquid holdings of investors if a larger share of their assets are tied up in illiquid positions that cannot be sold,” as Inigo Fraser-Jenkins, head of global quantitative and European equity strategy at Bernstein, writes in a recent note to clients, as quoted by BI.

The third and fourth forces are the reversal of quantitative easing (QE) by central banks such as the Federal Reserve and rising corporate debt. The fifth and final force is the slowing of the economic cycle.

Plunging liquidity also is a major concern of analysts at Deutsche Bank. They see worrisome parallels today with the opening stages of the 2008 financial crisis and warn that a surge in market volatility is a likely consequence. Marko Kolanovic, global head of macro quantitative and derivatives research at JPMorgan, foresees a “Great Liquidity Crisis” in which the disappearance of willing buyers turns a stock market selloff into a full-blown crash.

Looking Ahead

A longstanding best practice for active traders is to be aware of average trading volumes and average bid-ask spreads. Trading in illiquid stocks with wide spreads is risky in normal times, let alone in times of market panic. Moreover, a trend towards lower liquidity market-wide also has ramifications for buy-and-holdinvestors who anticipate long holding periods, since eventually the day may come when closing a position is warranted.

By 

Full link: https://www.investopedia.com/3-strategies-to-survive-the-looming-liquidity-crisis-4588690?utm_source=news-to-use&utm_campaign=bouncex&utm_term=16209934&utm_medium=email

Collection – A Guide to Managing Foreign Exchange Risk

Exchange rate fluctuation is an everyday occurrence. From the holidaymaker planning a trip abroad and wondering when and how to obtain local currency to the multinational organization buying and selling in multiple countries, the impact of getting it wrong can be substantial.

During my first overseas assignment in the late 1990s and early 2000s, I came to work in Hungary, a country experiencing a huge transformation following the regime change of 1989, but one in which foreign investors were keen to invest. The transition to a market economy generated significant currency volatility, as the chart below highlights. The Hungarian Forint (HUF) lost 50% of its value against the USD between 1998 and 2001 and then regained it all by the end of 2004 (with significant fluctuations along the way).

US Dollar/Hungarian Forint Exchange Rate

With foreign currency trading in the HUF in its infancy and therefore hedging prohibitively expensive, it was during this time that I learned firsthand the impact foreign currency volatility can have on the P&L. In the reporting currency of USD, results could jump from profit to loss purely on the basis of exchange movements and it introduced me to the importance of understanding foreign currency and how to mitigate the risk.

The lessons I learned have proved invaluable throughout my 30+ year career as a CFO of large, multinational companies. However, I see many instances still today of companies that fail to properly mitigate foreign exchange risk and suffer the consequences as a result. For this reason, I thought it useful to create a simple guide to those interested in learning about the ways one can counter currency risk, and the menu of options companies face, sharing a few of my personal experiences along the way. I hope you find it useful.

Types of Foreign Exchange Risk

Fundamentally, there are three types of foreign exchange exposure companies face: transaction exposure, translation exposure, and economic (or operating) exposure. We’ll run through these in greater detail below.

Transaction Exposure

This is the simplest kind of foreign currency exposure and, as the name itself suggests, arises due to an actual business transaction taking place in foreign currency. The exposure occurs, for example, due to the time difference between an entitlement to receive cash from a customer and the actual physical receipt of the cash or, in the case of a payable, the time between placing the purchase order and settlement of the invoice.

Example: A US company wishes to purchase a piece of equipment and, after receiving quotes from several suppliers (both domestic and foreign), has chosen to buy in Euro from a company in Germany. The equipment costs €100,000 and at the time of placing the order the €/$ exchange rate is 1.1, meaning that cost to the company in USD is $110,000. Three months later, when the invoice is due for payment, the $ has weakened and the €/$ exchange rate is now 1.2. The cost to the company to settle the same €100,000 payable is now $120,000. Transaction exposure has resulted in an additional unexpected cost to the company of $10,000 and may mean the company could have purchased the equipment at a lower price from one of the alternative suppliers.

Example of foreign exchange transaction exposure

Translation Exposure

This is the translation or conversion of the financial statements (such as P&L or balance sheet) of a foreign subsidiary from its local currency into the reporting currency of the parent. This arises because the parent company has reporting obligations to shareholders and regulators which require it to provide a consolidated set of accounts in its reporting currency for all its subsidiaries.

Following on from the above example, let’s assume that the US company decides to set up a subsidiary in Germany to manufacture equipment. The subsidiary will report its financials in Euros and the US parent will translate those statements into USD.

The example below shows the financial performance of the subsidiary in its local currency of Euro. Between years one and two, it has grown revenue by 10% and achieved some productivity to keep cost increases to only 6%. This results in an impressive 25% increase in net income.

However, because of the impact of exchange rate movements, the financial performance looks very different in the parent company’s reporting currency of USD. Over the two year period, in this example, the dollar has strengthened and the €/$ exchange rate has dropped from an average of 1.2 in Year 1 to 1.05 in Year 2. The financial performance in USD looks a lot worse. Revenue is reported as falling by 4% and net income, while still showing growth, is only up by 9% rather than 25%.

Example of foreign exchange translation exposure

The opposite effect can of course occur, which is why, when reporting financial performance, you will often hear companies quote both a “reported” and “local currency” number for some of the key metrics such as revenue.

Economic (or Operating) Exposure

This final type of foreign exchange exposure is caused by the effect of unexpected and unavoidable currency fluctuations on a company’s future cash flows and market value, and is long-term in nature. This type of exposure can impact longer-term strategic decisions such as where to invest in manufacturing capacity.

In my Hungarian experience referenced at the beginning, the company I worked for transferred large amounts of capacity from the US to Hungary in the early part of the 2000s to take advantage of lower manufacturing cost. It was more economic to manufacture in Hungary and then ship product back to the US However, the Hungarian Forint then strengthened significantly over the following decade and wiped out many of the predicted cost benefits. Exchange rate changes can greatly affect a company’s competitive position, even if it does not operate or sell overseas. For example, a US furniture manufacturer who only sells locally still has to contend with imports from Asia and Europe, which may get cheaper and thus more competitive if the dollar strengthens markedly.

How to Mitigate Foreign Exchange Risk

The first question to ask is whether to bother attempting to mitigate the risk at all. It may be that a company accepts the risk of currency movement as a cost of doing business and is prepared to deal with the potential earnings volatility. The company may have sufficiently high profit margins that provide a buffer against exchange rate volatility, or they have such a strong brand/competitive position that they are able to raise prices to offset adverse movements. Additionally, the company may be trading with a country whose currency has a peg to the USD, although the list of countries with a formal peg is small and not that significant in terms of volume of trade (with the exception of Saudi Arabia which has had a peg in place with the USD since 2003).

For those companies that choose to actively mitigate foreign exchange exposure, the tools available range from the very simple and low cost to the more complex and expensive.

Transact in Your Own Currency

Companies in a strong competitive position selling a product or service with an exceptional brand may be able to transact in only one currency. For example, a US company may be able to insist on invoicing and payment in USD even when operating abroad. This passes the exchange risk onto the local customer/supplier.

In practice, this may be difficult since there are certain costs that must be paid in local currency, such as taxes and salaries, but it may be possible for a company whose business is primarily done online.

Build Protection into Your Commercial Relationships/Contracts

Many companies managing large infrastructure projects, such as those in the oil and gas, energy, or mining industries are often subject to long-term contracts which may involve a significant foreign currency element. These contracts may last many years and the exchange rates at the time of agreeing to the contract and setting the price may then fluctuate and jeopardize profitability. It may be possible to build foreign exchange clauses into the contract that allow revenue to be recouped in the event that exchange rates deviate more than an agreed amount. This obviously then passes any foreign exchange risk onto the customer/supplier and will need to be negotiated just like any other contract clause.

In my experience, these can be a very effective way of protecting against foreign exchange volatility but does require the legal language in the contract to be strong and the indices against which the exchange rates are measured to be stated very clearly. These clauses also require that a regular review rigor be implemented by the finance and commercial teams to ensure that once an exchange rate clause is triggered the necessary process to recoup the loss is actioned.

Finally, these clauses can lead to tough commercial discussions with the customers if they get triggered and often I have seen companies choose not to enforce to protect a client relationship, especially if the timing coincides with the start of negotiations on a new contract or an extension.

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Natural Foreign Exchange Hedging

A natural foreign exchange hedge occurs when a company is able to match revenues and costs in foreign currencies such that the net exposure is minimized or eliminated. For example, a US company operating in Europe and generating Euro income may look to source product from Europe for supply into its domestic US business in order to utilize these Euros. This is an example which does somewhat simplify the supply chain of most businesses, but I have seen this effectively used when a company has entities across many countries.

However, it does place an extra burden on the finance team and the CFO because, in order to track net exposures, it requires a multiple currency P&L and balance sheet to be managed alongside the traditional books of account.

Graphical illustration of a natural currency hedge

Hedging Arrangements via Financial Instruments

The most complicated, albeit probably well-known way of hedging foreign currency risk is through the use of hedging arrangements via financial instruments. The two primary methods of hedging are through a forward contract or a currency option.

  1. Forward exchange contracts. A forward exchange contract is an agreement under which a business agrees to buy or sell a certain amount of foreign currency on a specific future date. By entering into this contract with a third party (typically a bank or other financial institution), the business can protect itself from subsequent fluctuations in a foreign currency’s exchange rate.

    The intent of this contract is to hedge a foreign exchange position in order to avoid a loss on a specific transaction. In the equipment transaction example from earlier, the company can purchase a foreign currency hedge that locks in the €/$ rate of 1.1 at the time of sale. The cost of the hedge includes a transaction fee payable to the third party and an adjustment to reflect the interest rate differential between the two currencies. Hedges can generally be taken for up to 12 months in advance although some of the major currency pairs can be hedged over a longer timeframe.

    I have used forward contracts many times in my career and they can be very effective, but only if the company has solid working capital processes in place. The benefits of the protection only materialize if transactions (customer receipts or supplier payments) take place on the expected date. There needs to be close alignment between the creasury function and the cash collection/accounts payable teams to ensure this happens.

  2. Currency options. Currency options give the company the right, but not the obligation, to buy or sell a currency at a specific rate on or before a specific date. They are similar to forward contracts, but the company is not forced to complete the transaction when the contract’s expiration date arrives. Therefore, if the option’s exchange rate is more favorable than the current spot market rate, the investor would exercise the option and benefit from the contract. If the spot market rate was less favorable, then the investor would let the option expire worthless and conduct the foreign exchange trade in the spot market. This flexibility is not free and the company will need to pay an option premium.

    In the equipment example above, let’s assume the company wishes to take out an option instead of a forward contract and that the option premium is $5,000.

    In the scenario that the USD weakens from €/$ 1.1 to 1.2, then the company would exercise the option and avoid the exchange loss of $10,000 (although would still suffer the option cost of $5,000).

    In the scenario that the USD strengthens from €/$ 1.1 to 0.95, then the company would let the option expire and bank the exchange gain of $15,000, leaving a net gain of $10,000 after accounting for the cost of the option.

    Currency option example

    In reality, the cost of the option premium will depend on the currencies being traded and the length of time the option is taken out for. Many companies deem the cost too prohibitive.

Don’t Let Foreign Exchange Risk Hurt Your Company

During my career, I have worked in companies that have operated very rigorous hedging models and also companies that have hedged very little, or not at all. The decision often boils down to the risk appetite of the company and the industry in which they operate, however, I have learned a few things along the way.

In companies that do hedge, it is very important to have a strong financial forecasting process and a solid understanding of the foreign exchange exposure. Overhedging because a financial forecast was too optimistic can be an expensive mistake. In addition, having a personal view on currency movements and taking a position based on anticipated currency fluctuations starts to cross a thin line that separates risk management and speculation.

Even in companies that decide not to hedge, I would still argue it is necessary to understand the impact of currency movements on a foreign entity’s books so that the underlying financial performance can be analyzed. As we saw in the example above, with the German subsidiary, exchange rate movements can have a significant impact on the reported earnings. If exchange rate movements mask the performance of the entity then this can lead to poor decision-making.

For companies choosing a financial instrument to hedge their exposure, remember that not all banks/institutions provide the same service. A good hedging provider should carry out a thorough review of the company to assess exposure, help to set up a formal policy, and provide a bundled package of services that address every step in the process. Here are a few criteria to consider:

  • Will you have direct access to experienced traders and are they on hand to provide a consultative service as well as execution?
  • Does the provider have experience operating in your particular industry?
  • How quickly will the provider obtain live executable quotes and do they trade in all liquid currencies?
  • Does the provider have sufficient resources to correct settlement problems and ensure that your contract execution happens in full on the required date?
  • Will the provider provide regular reports on transaction history and outstanding trades?

Ultimately, foreign exchange is just one of many risks involved for a company operating outside its domestic market. A company must consider how to deal with that risk. Hoping for the best and relying on stable financial markets rarely works. Just ask the holidaymaker faced with incurring 20% more than expected for their beer/coffee/food because of an unexpected exchange rate movement.

By  PAUL AINSWORTH

Full link: https://www.toptal.com/finance/interim-cfos/foreign-exchange-risk?utm_campaign=Toptal%20Finance%20Blog&utm_source=hs_email&utm_medium=email&utm_content=70560395&_hsenc=p2ANqtz-848muwRb7JSxb6pQkS7jjtTfpJlZDMtESkqAywi_meXOODef_4hQSkBhAWDC4qdXrU9_PEK4dbOM1YOUH-p4FsABgoxQ&_hsmi=70560395

Collection – Reimagining mobility: A CEO’s guide

Our mental models about mobility—individually owned cars, gas stations, traffic jams, the driver’s license as a rite of passage—are on the verge of disruption. Mobility is about to become cheaper, more convenient, a better experience, safer, and cleaner—not 50 or even 25 years from now, but perhaps within a dozen.

We describe the coming transformation as mobility’s Second Great Inflection Point, because it has the potential to be as profound as the one that put horses to pasture and revolutionized industries and societies worldwide. A defining characteristic of the new world taking shape is that the automotive industry, which has operated for more than a century alongside but decidedly disconnected from other components of what transportation has come to mean, will blend into a more interconnected, customer-centric ecosystem. That shift boosts the odds that the momentous changes afoot will affect your business, even if the closest you currently get to a car is your morning commute.

How will things change? Think mainstream electric vehicles; robots reading maps; interconnected, intelligent infrastructure networks; and “pay per use.”

In a companion article, we describe the pressures on the old model, the bursts of innovation (ranging from vehicle autonomy and connectivity to electrification and ridesharing), and the evolving expectations that are propelling us toward the second great inflection point (see “Mobility’s second great inflection point”). Here, we drill down on what lies ahead: How exactly will cars, roads, and the customer experience soon be changing? (Think mainstream electric vehicles [EVs]; robots reading maps; interconnected, intelligent infrastructure networks; and, for a growing number of situations, “pay per use.”) What does that portend for competitive dynamics across the broadening mobility ecosystem? (As profit pools reorder and business models transform, opportunities will arise for a wider array of players, challenging OEMs’ notions of their competitive sets.) What are the implications for society, and what speed bumps may we hit along the way? Finally, how should leaders who aren’t yet immersed in the mobility revolution prepare for its imminent arrival? Fresh thinking about industry borders, adjacent opportunities, transport and logistics, and partnership possibilities are all needed.

Part 1

Glimpses of the near future

For the past century, the automotive sector has been siloed—on multiple dimensions. Out of the approximately $8 trillion to $10 trillion spent each year on the transport of people and goods, “only” about a quarter comes from what is commonly understood as the car industry. Those businesses are as massive as they are separate. Fuel and energy, financial services such as insurance and financing, and maintenance all represent more than 10 percent of the total pie. You can’t use your car without them—and yet they are all disconnected from the automotive industry itself.

Automobiles also are disconnected from one another. Cars cannot be tracked and therefore cannot be guided. Traffic jams are one major result. Another is congestion pricing (fast lanes for those who can afford them). Pollution, made worse from idling and the search for parking, is another severe consequence. Car accidents, injuries, and fatalities—overwhelmingly the result of human error—occur every day. The second great inflection approaching will break down silos, with profound consequences that start with our cars, roads, and the customers who use them.

Cars

The more interconnected mobility system starts with the cars themselves. Electrification and vehicle autonomy, which are coming fast, stretch the capabilities of traditional OEMs. Less than 5 percent of vehicles sold in 2016 were equipped with EV power trains. Major OEMs have announced that they’re aiming to bring that number above 50 percent by 2021.

By 2030, EVs will be mainstream—and not just within the premium segment, as they are today. Nor, for that matter, will EVs be confined to passenger automobiles. Electric buses, trucks, and other delivery vehicles are rolling toward commercialization at an accelerated rate. (For more, see “The public–private imperative in urban mobility: A view from Canada,” forthcoming on McKinsey.com.) The changes won’t be “one-offs.” To the contrary, they will be magnified by shifts across entire fleets because of the lower costs of electricity as opposed to gasoline, the lower maintenance costs, and the lower overall total cost of ownership.

But that’s just the start. In 2016, only about 1 percent of vehicles sold were equipped with even partial autonomous-driving technology. As of this writing, however, eight of the ten largest OEMs plan to have highly autonomous technology road ready by 2025. Google’s Waymo has already launched a commercial taxi service made up of autonomous vehicles (AVs), in 2018; Uber plans to do so this year, and Lyft in 2021. By 2030, 80 percent of Chinese, European, and US miles will be at or approaching self-driving. That’s not just “hands off the wheel”; it’s drivers’ minds off the road. Indeed, since the function of driving will increasingly be performed by the car itself, cars will no longer need to be designed around the driver, except to the extent that, through advanced artificial intelligence, vehicles will be made to intuit what each passenger wants.

China-based OEM start-up Byton aims to launch its luxury EVs this year.

In many respects, a car will not even look like a car, at least as we know it today. As Carsten Breitfeld, CEO of China-based luxury EV OEM Byton, points out, without an internal-combustion engine, key elements of the interior (including the dashboard and the center air-conditioning console) can be shifted in radically space-saving ways (see “New carmaker on the block: Byton’s CEO on China’s car of the future,” forthcoming on McKinsey.com). With autonomous, connected, and shared vehicles, the changes will go much further. When a vehicle does not need to be designed around a driver, many fundamental tenets of auto design will go by the wayside. Why have a steering wheel? A driver’s seat? For that matter, will you need so much steel when safety requirements change? The design possibilities are fascinating—and the second-order effects for nonautomotive industries could be massive.

Roads

Disparate roads and highways—as well as different forms of transportation (buses, trains, airplanes, and even micromobility solutions, such as bicycles and scooters)—will increasingly converge into integrated networks. Early examples are already appearing in Singapore and Barcelona, where strategically placed sensors receive, process, and integrate enormous amounts of data to improve traffic flow, rationalize parking, and keep environs cleaner. Mobile apps such as Germany’s moovel and Finland’s Whim can now analyze a range of public- and private-transit options to identify the fastest and cheapest route from A to B and let mobile users reserve and pay for their journey. That kind of functionality will be scaled and available for consumers around the world by 2025.

Customers

Ecosystems, by definition, arrange themselves around the consumer. This makes it easier, faster, and cheaper for people to choose what they actually want. Consider, for a car, “freedom” and “machine.” Which element matters most? In a highly consumer-centric system, people can have freedom—indeed, even more freedom—without having to buy their own vehicles, search for parking, and pay for fuel (and a list of other expenses). Order pizza, get to work, take the family to the beach—when these use cases can be addressed with a swipe, the make or model of the car involved may matter less. (For more on the changing nature of automotive brands, see “Snapshots of the global mobility revolution,” forthcoming on McKinsey.com.)

What will matter—what has always mattered—is customer experience. As more people come to “consume mobility,” that experience will include:

  • on-demand, pooled autonomous ridesharing as a part of the public-transportation system
  • mobile games for commuters to play against one another en route, while the data generated by those games is used to help optimize traffic in real time
  • more vehicles on the road moving more quickly, sped along by a municipality’s intelligent traffic-management tools
  • air-quality sensors, which track specific sources of pollution and regulate traffic and construction accordingly

That’s fact, not fantasy. These examples are starting to happen in major cities around the world.

Part 2

Competitive dynamics

In the past, OEMs competed primarily with one another. In the years ahead, consumers will focus more on different mobility operators, intensifying competition between OEMs and other mobility providers on dimensions such as utility of the interior, quality of the service, and sophistication of the connected-car experience.

Those new competitive dynamics will take place in the context of drastic changes in the economics of mobility. Today, OEMs are making about one cent in profit per mile driven. New mobility services have the chance to up this by a factor of ten to 25. Automotive companies are also very well positioned to capture monetization opportunities from car data. Our research finds that, so far, automobile consumers around the world are highly willing to share their data when they experience value in return.

Today, OEMs are making about one cent in profit per mile driven. New mobility services have the chance to up this by a factor of ten to 25.

That said, it won’t be easy to gain a defensible position across the critical technologies of autonomy, connectivity, electrification, and shared mobility. By our analysis, a company would have to invest nearly $75 billion, much of it going toward electrification and autonomy, to do so. While the new technologies will doubtless generate enormous value, no one can say where the economic profit will flow—and when. At any inflection point, value shifts quickly and unpredictably, and consumers tend to capture more of it.

This is especially so in the digital age. Encyclopedias, newspapers, camera film—when products turn into services, people pay a lot less. In fact, they may not pay at all. In the United States alone, the internet provides consumers about $100 billion of free welfare gain every year. It’s quite possible that a similar dynamic will play out as mobility becomes less about the car and more about a service. As happened with the mass adoption of both the internet and smart mobile devices, the life changes will seem almost imperceptible at first—then overwhelming, and inevitable.

Part 3

Societal shifts

An inflection point is not an end point. It’s a redirection—the launch of a new trajectory. We can already see the pace of change begin to quicken. EVs, outside of the premium segment, have become commercially relevant only within the past three to five years. As late as early 2013, few were searching for “Uber” on Google.1 Carsharing was novel, too. Developments such as these will further speed up the change dynamics, both because adoption is driven by B2B and B2G enterprises rather than B2C businesses and because “ticket size” is much smaller.

The sum of individual decision making—choosing to pay fractions for a trip instead of many thousands for a car—will have enormous effects in the aggregate. Just as mobility’s first great inflection point reshaped society in ways initially unimaginable, the changes this time will reach far beyond the cars we drive (and increasingly, the vehicles in which we are driven). Those effects could include:

  • Where people live. If things break right, commutes will be faster (for more, see “The road to seamless urban mobility”). Suburbanization will increase in many areas, a consequence of the first great inflection point once again in vogue.2At the same time, because in-city congestion will be more manageable and parking less of an issue, urbanization—especially among younger people—will rise even faster.

The time saved by commuters worldwide could add up to a staggering one billion hours—every day.

  • How people live. Riders will be safer and will have more free time, both during their journeys and as a result of the cumulative hours saved from digitally connected roads driven by AVs that are optimally paced, optimally spaced, and free from human error. Commutes will no longer be an exercise in frustration. In fact, work itself will change. As more people become able to start their workdays in the car, commuting time will increasingly count toward the eight-hour workday—enabling people to spend more time on other things, or more time working. Our colleagues estimate that the time saved by commuters worldwide could add up to a staggering one billion hours—every day. That’s twice the working hours it took to build the Great Pyramid of Giza.
  • How people consume. The separate steps between contemplating a purchase and actualizing it will be compressed into a few swipes. Mobility has always had enormous implications for retail (the first pizza delivery was made in the 19th century). Just as Amazon has had the effect of increasing volumes shipped, a more integrated mobility ecosystem will make near- and far-distance purchases easier and faster. It will also make them cheaper: our colleagues in McKinsey’s Consumer Packaged Goods Practice estimate that fully autonomous vehicles could reduce grocery-delivery costs by 50 percent. With OEMs, ridesharing providers, and others investing significantly in solving the “last mile”—or “last 50 feet”—link of mobility, customer satisfaction will greatly increase. Consumers will come to use AVs to shop for everything from groceries at the local supermarket to accessories at the Apple Store downtown.
  • What life looks like. When London experienced its precar “Great Horse Manure Crisis,” in 1894, there were 50,000 horses in London; find one there today, and you have found a tourist attraction. Just as the car transformed what the world looked like after the first great inflection point, our world will change, too. Slowly at first, but then much more rapidly, we will see gas stations, parking lots, and traffic jams become things of the past. Fumes and emissions will diminish. “Big digs” for mass transportation will be scaled down as well, since on-demand AVs can be at least as efficient. Air and ground shipping could converge if delivery drones and droids become mainstream. All in all, life should be greener, cleaner, safer, and, we expect, better.

Still, changes are rarely seamless, and big changes can be especially bumpy. Net-net, the benefits will decisively outweigh the costs. The harder question ultimately is not whether these changes will happen (they will) or when they will start (in many cases, they already have) but what the best ways to manage the transition are.

The shift to a mobility ecosystem will doubtless hit some speed bumps. Some of these we can probably foresee and, ideally, prepare for, such as cyberattacks on transportation systems or accidents resulting from systemic failures. Additional risks—more likely earlier in the inflection—include the perception of major failures and the unfortunate tendency for a wired-in, social-media world to sensationalize small incidents beyond reasonable proportion. The loss of millions of jobs for truck drivers and taxi drivers is unquestionably a cost, even as the transformation will create a range of new employment opportunities with potential for higher earnings and greater value creation, such as AV and EV technicians, and even trained attendants for disabled and elderly persons traveling by AV (for more, see sidebar “Redefining what it means to be a ‘car person,’” in “Mobility’s second great inflection point”).

Finally, beyond any futurist’s vision are the “unknown unknowns.” Is there such a thing as being too connected? How will geopolitics realign if oil is no longer the prize? What comes next in our collective imagination when stylish rides are replaced by more utilitarian use cases? Sooner or later—and probably sooner—we will find out.

Part 4

A call to action

As the second great inflection takes hold, many businesses that do not consider cars to be close to their core industry will find themselves confronting an increasingly far-reaching mobility ecosystem.

There are some obvious first-order effects, starting with how business gets done. Logistics costs will be reduced—in certain cases, dramatically (our colleagues estimate that autonomy in delivery could reduce costs by upward of 40 percent). Long-haul routes will be shortened, too, as 3-D printing reduces the need for some long-distance shipments. Shippers can transport to fulfillment centers or urban drop-off zones, and smaller, purpose-built AVs will be able to handle things from there. Moreover, businesses will be able to become more agile—a capability that they will need in order to meet the demands of their customers, who will expect more products more quickly.

But the implications of the second great inflection point extend much further. Within a decade, the developments we’ve been describing will start having strategic ramifications for a wide array of companies. Here are some early priorities for everyone:

1. Adjust your sideview mirrors

Clear industry borders and siloed business sectors won’t stay that way for long in the new mobility ecosystem. For leaders outside of the automotive, transportation, or energy sectors, those changes can spell both threats and opportunities. Threats, because new competitors and attackers can appear from wildly unexpected directions: just consider the impact that advanced digital mapping had on publishers such as Rand McNally or, for that matter, the consequences that a growing market for EVs can have on the prices of laptop computers (the batteries of both rely on lithium, which tripled in price over a recent ten-month period). And opportunities, because the expanding mobility ecosystem can bring new customers and markets.

The first order of business is to figure out your role in the new mobility ecosystem. Ask yourself and your team where your business might fit in this new landscape—and who else might be entering the picture (for more, see sidebar, “Can auto insurance—and insurers—keep up with the changing nature of mobility?”). Focus on your core sources of value and key customer relationships. How can these be used to your advantage in a multidimensional game? The onus to scenario-plan can’t be on the C-suite alone. Encourage those closer to the front lines to do the same. Expect some internal resistance—“our business has always been this way.” It’s hard to get your team to think and act creatively to prepare for the threats and opportunities of the coming inflection point, and simply passing along the information won’t cut it. Embolden your employees to imagine what they would do differently under different circumstances. Incentivize them to get in front.

2. Objects are closer than they appear

Does it seem like just yesterday that you saw your first iPhone? So near in time—and yet such an epochally different world. Keep that frame of reference in mind as you prepare for mobility’s second great inflection point. Relatively speaking, it won’t be long before AVs deliver at a click, commuting patterns change, and car travel becomes “always on” and “wired in.” To a surprising degree, we know the future; we just don’t know—and are more likely to under- than overestimate—how soon it will arrive. Take advantage. Test out pilots where you can gain knowledge in connected businesses (there’s no lesson better than first-hand experience); track your progress with actionable timelines and incentives; and acquire and develop talent prepared for the coming changes.

3. Merge ahead

Tricia Griffith

Both the fluidity of ecosystem dynamics and the agility needed to meet customer needs rapidly mean that your competitors—present and potential—may be active in different business models and multiple technologies. No single player will have the resources or capabilities to capture, defend, and win in manufacturing, designing, mechanical engineering, software development, artificial intelligence, and all the other areas associated with the mobility changes. Meeting your customers’ needs will require serious collaboration, which many companies aren’t prepared for. Start by identifying the “white spaces” you need to fill, the partners that can best help with those gaps, and the “gives” and “gets” genuinely required. Most of all, think strategically about how to best position yourself—and with whom.

4. Share the road

Social factors have always been a significant part of the mobility equation. Henry Ford prioritized an affordable wage and created a base of loyal car-buying employees, which had a multiplier effect on sales. Environmental responsibility turns EVs into premium brands. And Waze built its business by building a community. As the second great inflection point approaches, social considerations and public–private cooperation will take on outsized importance. Consider safety protocols, for example: no single player will be able to set the safety standards alone; nor can a government simply dictate them without a deep understanding of player capabilities. Or pooling and robo-shuttles for people and goods: governments and communities will determine mundane but mission-critical details, such as designated pickup, drop-off, and parking spaces. To win in the second great inflection point, develop a well-considered perspective on present and future regulations. And more: Think about how your success ties into the benefit of others. Ecosystems are inherently interconnected. Those that bear societal considerations in mind will be the most connected of all.


As mobility becomes cheaper, more convenient, more attuned to human and business experience, cleaner, and safer, business and society will be transformed. We’ve seen seismic change of that order unleashed when Henry Ford popularized mass production and Alfred Sloan took the organizational construct to new levels. The 20th-century disruption was swift and certain—not just for carmakers but for businesses around the world. Yet few saw those changes approaching. Now, about 100 years later, we’re at the precipice of a second great inflection point. While much uncertainty remains, the transformation is, in many respects, already here. It’s clear that those who aren’t prepared will risk failing one of the 21st century’s early tests.

By Kersten HeinekeAsutosh PadhiDickon Pinner, and Andreas Tschiesner

Full link: https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/reimagining-mobility-a-ceos-guide?cid=mobility-eml-alt-mcq-mck&hlkid=0943476879bd40e0a1a36b51d82281b1&hctky=2618809&hdpid=5eee025c-6344-4921-bc04-4adb8d41557d

Collection – Can ‘womenomics’ achieve better work–life balance?

Japan’s policies to increase women’s employment are finally bearing fruit, especially by allowing female university graduates to continue working during child-rearing years. In 2017, the percentage of first-time mothers who are university graduates in long-term employment rose to nearly 50 per cent, from below 30 per cent in the early 2000s. This trend accelerated after Prime Minister Shinzo Abe started his ‘womenomics’ policy in 2013.

The shoes of female job seekers are seen as they listen to an employee give a presentation at a company's booth during a job fair held for fresh graduates in Tokyo, Japan, 7 December 2013 (Photo: Reuters/ Yuya Shino).

Rather than labour participation, the important ratio is women in long-term employment. Long-term employees are paid far more than non-regular employees. Re-entering long-term employment positions in middle age after being out of the workforce is difficult. A rise in long-term employment implies an increase in the pool of female workers enjoying promotion possibilities.

The government aims to increase female employment without affecting the country’s already low birth rate. ‘Womenomics’ policies focus on changing Japanese corporate culture and improving access to day-care centres to help workers of both sexes achieve a better work–life balance. Six-hour working days for employees with children under the age of three was first mandated at firms with more than 100 employees, and then to all employees. This policy is successful — first childbirth statistically increased for women at mandated firms by 30 per cent after 2009.

The Diet passed three laws concerning childcare in 2012. It aimed to re-coordinate childcare facilities and kindergartens (previously administered by the Ministry of Education, Culture, Sports, Science and Technology as educational facilities) with day-care centres (previously administered by the Ministry of Health, Labour and Welfare as welfare facilities). More kindergartens are encouraged to offer full-time day care. Subsidies for day care also have been extended to small day-care centres and kindergartens. While shortages are still evident, the number of childcare facilities in urban centres is increasing faster than ever before.

Despite these reforms, breaking down or transforming entrenched gender norms at home and in the workplace still has a long way to go. University-graduate males working at large firms — the group with the best income prospects — continue to have the lowest share of housework and childcare responsibilities. This is significant because the timing of second births in double-income families tends to be delayed unless husbands do more child-rearing.

In 2016 the government passed another law mandating firms with more than 300 employees to gather gender-related statistics including hiring, managers, work hours and tenure years. They must disclose some of these statistics to the public, along with their action plans to improve the status of women workers. But the information disclosed is insufficient and misleading because firms can choose what information they make public.

Previously, the government aspired to increase the proportion of women in managerial positions in government and the private sector to around 30 per cent by 2020. That goal was later modified, with more modest targets adopted in some areas. The 2020 target for the number of women in senior managerial positions in the private sector, for example, was reduced to around 10 per cent in 2015. But even this are not expected to be reached. The proportion was still only 6.3 per cent in 2018. While a statistically significant increase of women managers after 2013 is seen, the gap remains large.

Another reason for Japan’s significant gender wage gap is the large share of female workers in non-regular employment that pays less than regular employment. The percentage of non-regular employees who are young women is noticeably high. Of never-married women aged 25–39, 40 per cent of high school graduates, 28 per cent of junior college graduates and 21 per cent of university graduates had non-regular jobs in 2017. In comparison, the percentage of high-school graduate, non-married males in non-regular employment was 24 per cent.

A law mandating the principle of ‘same work, same pay’ — where workers are paid equally for the same work regardless of their employment status — will be implemented from April 2020 for larger firms and from April 2021 for smaller firms.

While the up-take of this principle will be an important step forward, its impact remains unknown. If an employee is not in a job where they can be relocated or ordered to work overtime, for example, as in most long-term employment at large firms, the work may not be considered equal in Japan where commitment to work is enshrined as a defining characteristic of ‘long-term employment’. Married women in non-regular employment also voluntarily limit their work hours to enjoy coverage of social protection for dependent spouse without paying social security tax, and they may not be eager to earn more income.

In October 2016 the social security law was amended to shorten work hour criteria to include more part-time workers at firms with more than 500 employees in the Employees’ Pension Insurance system. Due to labour shortages, more married women than expected were included. In 2017, it was found that inclusion in the pension system encouraged a larger number of part-time status women to work longer hours and gain higher incomes. Though yet small in numbers, it shows an important policy direction for change.

The percentage of high-school graduates who go on to university is increasing (56.3 per cent of males and 50.1 per cent of females in 2018), reflecting ambitions for better futures among Japanese youth. Among them, about 40 per cent have student loans. Repaying loans is not easy, especially for those in non-regular employment. Since a significant portion of women still enter non-regular employment after childbirth, repayment burdens are becoming an obstacle for family formation. One possible solution may be income-contingent student loans.

The Japanese labour market is slowly adjusting to a rise in double-income families. More new mothers are no longer choosing to quit work to raise children, instead continuing as long-term employees. ’Womenomics’ policies are facilitating this transformation. But elements of a system that supports a bread-winner model of family life remain firmly in place, and there is a long road ahead for Japan to fully overcome these.

Author: Nobuko Nagase

Full link: https://www.eastasiaforum.org/2019/03/08/can-womenomics-achieve-better-work-life-balance/