Commercial Awareness Update 19th December by Ben Triggs

1. Christmas strikes

Workers across a range of sectors will strike over the Christmas period causing disruptions to transport and the postal service just before the holidays. Today 3,000 employees at Crown post offices will walkout over concerns over pension changes, job security and cuts. The Post Office continues to make wholesale changes to modernise its service and become more efficient. They have reduced losses from £120 four years ago to £26 million last year, and aim to break even next year. 

Meanwhile, rail strikes continue on Southern as conductors walk out for two days this week. Earlier this year Southern announced it would be down-grading the role of conductor on its services, as new trains with driver operated doors are set to be introduced. The RMT Trade Union claim the strikes are necessary to protect customer safety, as well as the jobs of their members. For those planning to travel around Christmas, there’s more bad news as British Airways cabin crew members belonging to union Unite, will strike on Christmas and Boxing day. However, both sides hope the row over pay can be solved and the strikes called off – talks are ongoing. 

These strikes will be problematic for many in the UK, but compared to times of mass-industrial action these are relatively small-scale. Before Thatcherism, the Trade Unions had much more power and it wasn’t uncommon for whole industries to strike – many of which were state owned. In 2015, fewer days were lost to strike action than any other year since records begun in 1965. The Winter of Discontent and other strike action led to 29 million working days lost to industrial action in 1979, compared to just 170,000 last year.

Questions to ask yourself… Do the unions still have too much power to strike? Could the strike action mean the public turn against the unions? Does this strike action suggest an attitude of gloom within Britain?

2. Boost for the banking sector

Last week the FTSE 100 rose above 7,000 points, as shares in leading banks made significant gains. Royal Bank of Scotland closed 4.7% up and Barclays’ share price rose by 2.4%, helped by the announcement of increasing interest rates in the US. On Wednesday the Federal Reserve announced it would hike its benchmark interest rate by 0.25% to the range of 0.5% to 0.75% - with three more increases planned for 2017. 

This is unlikely to affect customers directly, but the higher interest rates will allow banks to charge more for lending to other banks. In general, higher interest rates are good for banking as it gives them the opportunity to make more profit. It’s only the second time in a decade interest rates have gone up in America.

In other banking news, Barclays have sold their French retail banking division to private equity firm AnaCap. Barclays are selling off their assets in Europe as they aim to streamline operations. Earlier this year, the bank sold its African operation and have scaled down in Italy, Spain and the Middle East.

Questions to ask yourself…  What is the long term impact of increases in interest rates? Is this a good thing for the global economy?

3. Apple and Ireland to challenge European tax ruling

Apple and the Irish Government are set to challenge the European Commission’s ruling that the US tech giant has to pay Ireland €13 billion in back taxes. The Commission ruled the tax deal Apple did with Ireland was illegal because it allowed Apple to pay much less than other companies in the country. Apple’s European headquarters is in Ireland, where corporation tax is set at 12.5%. 

Apple are set to challenge the ruling claiming the European Commission has overlooked the advice from Irish tax experts. The Irish Government will also challenge the ruling, claiming EU regulators have interfered with national sovereignty and have misinterpreted Irish tax law. It may appear odd for Ireland to challenge something which will increase their tax receipts, but the Government maintaining a pro-business stance and maintaining good relations with Apple could be more beneficial in the long run.

Questions to ask yourself… Should countries be giving favourable tax deals to large corporations?  What are the disadvantages of Apple having their European headquarters in Ireland?

4. JustEat’s spending spree

Food delivery app JustEat has announced plans to acquire rivals Hungry House and Canadian company SkipTheDishes. They claim to have reached a deal with Hungry House’s German owners Delivery Hero to acquire their competitor for £200 million – which could rise by £40 million dependent on performance.  

JustEat has acquired a number of its competitors in 2016 as they grow their global market share. In August they bought the assets of British start up takeaway.com and have also acquired takeaway delivery services in Spain, Italy, Brazil and Mexico. JustEat reported a 59% increase in revenues to £171.6 million in the first six months of 2016.

The Critical Importance of a Commercial Perspective

Football and business – two great passions of mine, and surprisingly to some, two sides of the same coin. Neither can exist without the other, but why is that the case?
It seems that for students looking to enhance their commercial capabilities, we can look no further than to the beautiful game for inspiration. At every level of the chain of command, individuals demonstrate time and time again their tremendous knack of making lots of money for themselves, or for the organisations they represent.

CEO’s are the standard bearer for commercial awareness, simply because it is their job. For example, Ed Woodward, of Manchester United, who in 2014 agreed a world record $559m shirt sponsorship deal with Chevrolet, which originated from an innocuous meeting with the global marketing manager at a roadshow event at Kuala Lumpur. Managers are commercial too, typified by Alex Ferguson’s £40m NET profit on player transfers during his two decade tenure. But these feats are eclipsed by the guile and cunning displayed by footballers themselves.

I am particularly appreciative of the subterfuge displayed by Sergio Ramos of Real Madrid in the most recent transfer window. With a year left to run on his contract, he expressed a desire to join another team, which accordingly prompted them to make a bid, which was rejected by his current club, and resulted in him earning a bumper new contract – this was always his intention. One can also admire Papy Djilobodji, Bebé and Iago Aspas’ technique of compiling videos of their best bits, and sending them to scouts who naively think they have found the next Messi, when in reality they are no better than the Norwich and Norfolk Sunday League. I am aware these names are very obscure, but they are all millionaires in their own right because of their understanding of how the system works, and how they can gain from it.

I think the point I am getting at is, the people who accomplish their commercial objectives, have a clear understanding of how to leverage their own capabilities in particular industries. It is, in a sense, taking your skills and strengths, and making these as valuable as possible.

So when you are next applying for a job, or heading to an interview, have a clear focus on creating value – think about what makes you valuable, what are they looking for and how that will translate into added value for that company.

- Conor Bell

What Is Commercial Awareness?

Commercial awareness is a concept with many different definitions. At UEA Commercial Awareness Society, our interpretation is that it is essentially an understanding of your business environment. It is knowing and appreciating a business's needs, sector, clients, competitors and current issues. To be commercially aware, you must keep-to-date on current affairs and think about the effect they have on your business.

Commercial awareness is useful for any profession, however it is vital for anyone with a position in a company or firm. It is something that is guaranteed to come up in an interview or assessment day, and being able to confidently have a discussion makes the difference between getting the job and not.

So, how do you show that you are commercially aware? It's fairly simple, you basically have to read the news and form an opinion about how current events affect your employer or sector. You can also demonstrate that you reflect on your own work experience from a business point of view or that you hold a position of responsibility or explain a situation in which you had to determine the most efficient way of doing something.

UEA Commercial Awareness Society will be using this blog as a platform for members to post their ideas and discuss current affairs. It is an opportunity to develop and show your commercial awareness.