A new year means three things: lots of people are going to sign up for gym memberships they won’t use in three months, others will keep writing the wrong year on all their correspondence, and of course there are a plethora of new trends and predictions to look out for in the year ahead.

We’re going to focus on the last of the three.

What should you look out for or expect in the international business world in 2017? Let’s take a look and see what could be dominating the headlines you read over the next twelve months.

1. The future of the EU

The outlook for the EU is grim for 2017. UK Prime Minister Theresa May is expected to trigger Article 50 to begin the formal process to leave the EU, and Italy’s recent referendum has brought the country’s support for the union into question.

France and Germany also both face elections in 2017, which could result in new anti-EU governments who may want to follow the UK’s example.

If the UK, Italy, France and Germany are all led by Euro-skeptics by the end of 2017, the entire future of the EU will come into question.

2. U.S. trade under Trump

During the 2016 election, Donald Trump’s claims for his presidency ranged from refusing to sign the TPP and leaving NAFTA, to setting prohibitive tariffs on imports from China and Mexico.

While many have speculated that some of his proposals, most notably the sizable tariffs on China and Mexico, would be illegal according to WTO rules, it remains to be seen how closely his rhetoric will match his actions on trade.

Whatever he does, positive or negative, will affect countless American and international businesses.

3. Technical innovations in agile manufacturing and last-mile delivery

The ability to create manufacturing parts or entire products with nothing more than a computer and a 3D printer gives companies far greater agility in their manufacturing efforts, and offers opportunities for rapid innovation.

Drones are offering the possibility of rapid delivery to customers. While most tests have been focused on home delivery, some have even experimented with using GPS tracking to deliver directly to people based on their phone location, wherever they may be at the time.

Both technologies, as well as several others, are still in their infancy, so 2017 could be a year of major breakthroughs.

4. Big mergers between major trade companies

While 2016 did not match 2015’s extraordinary number of massive mergers and acquisitions (three mergers and acquisitions deals worth over $100 billion USD were completed in 2015), there were still several notable deals. These included chemical company Bayer’s purchase of Monsanto for $66 billion USD, pharmaceutical specialists Shire buying Baxalta, and Microsoft’s recent $28B purchase of LinkedIn.

2017 is expected to match 2016’s rate of M&As, with pharmaceutical/healthcare, telecoms and finance among the industries that are most likely to see big deals. Will any of them affect your business or your industry competitors?

5. Blockchain in trade finance

Blockchain could be a true game changer in the world of international trade, allowing buyers and suppliers to make online transactions accurately and securely without involving middlemen.

While it has so far been used mainly for Bitcoin transactions, it has the potential to transform supply chains, and revolutionize trade finance.

If corporations begin to use the technology more frequently throughout 2017, it could be the beginning of a new era of global trade transactions.

6. Thinking smaller

Micro-targeting in marketing efforts, product adaptation, and market entry has been an increasingly hot trend over the past couple of years, empowered by the collection, analysis and optimization of oodles of data.

Thinking small comes from a customer-centric approach to business, focusing on building experiences for customers that are as personalized and responsive as possible. These efforts can really pay off in client satisfaction, leading to repeat business and brand loyalty, and can increase purchasing frequency.

As analytics, customer management software and automation get more sophisticated, we will see this trend grow into 2017.

7. The future (or lack thereof) of free trade agreements

2016 was a big year for free trade agreements, with major developments in deals that have been in negotiations for years.

The Trans Pacific Partnership (TPP): The 12 member deal, officially signed by all parties on February 4, 2016 will go into force once ratified by all signatories by February 2018. However, incoming U.S. President Donald Trump has said he will not ratify the TPP and has also threatened to tear up or renegotiate NAFTA, throwing the future of both FTAs into question in 2017.

The Transatlantic Trade and Investment Partnership (TTIP): In negotiations for almost a decade, this FTA between the U.S. and EU has met fierce opposition from American and European citizens. The U.S. considers the deal a companion to the TPP, and with President-Elect Trump coming into power early in the new year, and the EU going through some major upheaval, this deal is also being thrown into question.

Comprehensive Economic and Trade Agreement (CETA): Canada’s Minister for International Trade, Chrystia Freeland made headlines in October 2016 after she arrived in Belgium to sign the Canada-EU treaty, only to be informed that the EU could not sign due to opposition from the region of Wallonia. The intra-Belgian disagreement was quickly resolved and the agreement was signed on October 20, 2016. CETA is now awaiting ratification from all parties over and could begin to be implemented early in the new year.

WTO Trade Facilitation Agreement: The TFA contains provisions for expediting the movement, release and clearance of goods, sets out measures for effective cooperation between customs and other authorities on trade facilitation compliance issues and contains provisions for technical assistance and capacity building among signatory nations. Negotiations concluded on the WTO TFA in 2013 and 103 nations have now signed on to the agreement, most recently Canada on December 16, 2016. With only seven more nations needed to ratify the agreement before it is officially implemented, we could see some new developments in 2017.

8. The growing world of e-commerce and drop shipping

According to analysts, online sales will increase from $335 billion in 2015 to over $523 billion in 2020, a rise of almost 10% per year, though the current annual growth rate is actually closer to 14%.

Brick and mortar retailers’ worlds have been rocked by the skyrocketing success of online shopping. E-commerce leaders are making strides in optimizing their strategies and will continue to do so into 2017. Many are predicting the end of frenzied buying on traditional shopping holidays such as Black Friday and Cyber Monday, as an increased focus on real-time customization takes over.

We’ll have our eye on the blossoming arts of predictive data analysis, the Uber-ization of shipping and an increase in the use of artificial intelligence in this area into 2017.

9. Future of ocean shipping

More than 90% of internationally traded commodities are transported over an ocean. In 2017, we expect to see strides being made in the use of automated “smart ship” technology, major increases in port capacity and changes to global shipping routes.

2016 has been a year of turmoil and challenges for the shipping world, with mergers, bankruptcies (Hanjin is still fresh in of our memories), port strikes and trouble filling ships to capacity. But into next year opportunities abound for innovative shipping companies.

10. The importance of professional certification

The trend of increasingly competitive job markets is one that won’t be going away in the year ahead. It will continue to be important to stand out from the crowd of applicants seeking work in 2017. According to Credforce, studies show that 94% of HR professionals will make some form of professional certification for specialized personnel, making skills validation through designations more than just an asset next year.

In the past year we have seen an increase in employers and government departments increasing funding available for employees to gain certification and this is a trend we see sticking around.

The post 10 global trade trends we’ll be watching in 2017 appeared first on Trade Ready.

Shock rippled through the ocean freight community in late August as lenders refused additional financial assistance to the seventh largest container shipper, Hanjin Shipping Co. As a result, Hanjin has had to seek stay orders in 43 countries to protect its vessels from being seized, in addition to going into receivership in its home country, South Korea.

This latest occurrence adds fuel to an already beleaguered ocean freight market that has struggled since the global recession hit eight years ago.  Even after the end of the recession, the global economy has only grown sporadically due to uneven growth in Europe and a slowdown in China.

Bigger ships, bigger worries

In 2011, Maersk ordered 20 ships of 18,270 Twenty Foot Equivalent Units (TEU) at Daewoo Shipbuilding & Marine Engineering in South Korea. The goals of these large vessels focused around three main principles: economy of scale, energy efficiency and environment, so the series was named Triple-E.

Beginning in 2013, Maersk began taking delivery of these vessels. However, these ships only provide increased efficiency if they are fully loaded. As global trade volumes have declined over the past year due to a number of factors, such as China’s economic downturn, the demand for shipping simply isn’t there.

As a result, it’s been a struggle to fill ships to capacity. Orient Overseas Container Line noted in 2015 that its vessels were only 72% full. However, other container lines followed suit and ordered larger and larger ships, even while demand for capacity has remained low. In fact, the global fleet is forecast to grow 4.6% this year, but demand is only forecasted to grow between 1-3%.

As a result of the overcapacity, shipping rates have fallen. In 2015, spot rates declined by more than 50% from Shanghai to Rotterdam, and more than 70% between Hong Kong and Los Angeles.

Lack of profitability fueling mergers and alliances

Unsurprisingly, many container lines are finding their profit margins shrinking and some are facing heavy losses.  Research firm Drewry predicts industry losses of at least USD $5billion in 2016.

As a result of overcapacity, companies in the ocean freight market have been trying to consolidate to protect their bottom lines through mergers.

A.P. Moeller-Maersk A/S said earlier this month that it’s conducting a review that may lead to the breakup of the 112-year conglomerate.

CMA CGM SA, the world’s third-biggest container shipping company, bought Singapore’s Neptune Orient Lines Ltd. for $2.5 billion this year in the industry’s biggest acquisition since 2005.

Hapag-Lloyd AG and United Arab Shipping Co. said in June that they have agreed to merge to become the fifth-largest container shipping company. That came after Hapag-Lloyd AG bought the container business from Chilean rival Compañía Sudamericana de Vapores (CSAV) in 2014.

In 2015, China merged China Ocean Shipping Group and China Shipping Group to form China Cosco Shipping Corp. as part of the government’s efforts to shrink industries plagued by overcapacity while creating globally competitive businesses.

Along with mergers, new alliances have also been announced this year – The Alliance and Ocean Alliance. The aim of these alliances is to improve efficiency, because lines can share box space on each other’s vessels.

But, the U.S. Federal Maritime Commission is seeking additional information. Together the 2M alliance and the Ocean Alliance would effectively control 51.2% of global ship capacity. The FMC is concerned about the effect this would have on the vendors.

Canada’s West Coast ports are feeling the pinch

For Canada’s West Coast ports, demand has slipped for the first half of this year. In Prince Rupert, total TEUs are down 1.7% for the first six months, while in Vancouver  they are down 4.8%. The declines reflect the overall sluggish global economy.

The effects of the Hanjin collapse will also be felt at the two ports. Hanjin added Prince Rupert to its Pacific Northwest Express service in 2011. As of August 30 of this year, Hanjin was refused entry into the port because of its financial situation; however, cargo began being discharged on September 8^th. Meanwhile, a Hanjin ship remained anchored at Vancouver as of September 15.

As the ocean freight market churns, ports will need to adapt in order to assure shippers their goods will be delivered in a timely manner.

The Hanjin collapse should serve as a timely reminder, not only for shippers, but ports as well, that preparing for disruption is crucial to surviving in global business.

The post Hanjin the latest victim of turmoil in the ocean freight market appeared first on Trade Ready.

Corporate mergers

Oftentimes, a corporate merger will be the largest event in a company’s history. They can be worth tens, or even hundreds of billions of dollars.

Because these events can make or break companies, it pays to know what has made some of the biggest mergers in history succeed or fail, so you can apply these lessons to your own business, whatever size it may be.

Here are some examples of major mergers, and why they resulted in success or failure:

1. Apple and NeXT

After Steve Jobs was forced out of Apple, the company he co-founded in 1985, he went on to start another computer company called NeXT.

While Jobs was building NeXT, Apple started to have problems upgrading its operating system for its Macintosh Computers.

NeXT had largely shifted from making hardware to making software, and created a successful operating system called NeXTstep.

Recognizing the need for a top-notch operating system for its computers, Apple acquired NeXT for $429 million in 1996.

This merger led to the complete invigoration of the Apple Macintosh computer line through the birth of the Mac OS X operating system, which was largely based on NeXT software.

The success was the springboard that would launch Apple into stratospheric heights with win after win, from the iPod to the iPad to the iPhone and more.

Essentially, by acquiring NeXT, Apple completed two major tasks which forged the path for success. First, they obtained a huge missing asset in their company: a premium operating system.

Second, they regained the visionary who helped inspire the company in the first place, and who would help carry the company into the future: Steve Jobs.

2. Anheuser Busch and InBev

In 2008, two of the largest alcoholic beverage companies, Anheuser Busch and InBev, merged to form a single massive beverage company, Anheuser Busch InBev.

The merging of Anheuser Busch, an American company, and InBev from Belgium proved to be enormously successful. In fact, today Anheuser Busch InBev is the biggest brewing company in the world.

Many of the most globally recognized beer brands are Anheuser Busch InBev products. These brands include Budweiser, Stella Artois, Corona, Beck’s, Hoegarden, and Leffe.

These brands helped the brewing giant to achieve a global revenue of roughly $47 billion in 2014. The company also experienced a five year sales growth of nearly 13 percent from 2009 to 2014.

In short, the merger between these two companies has been very successful. There are several reasons that may help to explain the success of the Anheuser Busch Merger.

First, both InBev and Anheuser Busch already had successful brands going into the merger. InBev’s Stella Artois and Anheuser Busch’s Budweiser, for example, were already profitable, well-known and easily marketable.

These brands turned out to be very compatible, and with the combined force of Anheuser Busch and InBev, they grew even stronger.

Second, instead of trying to dominate each other in their own respective markets, Anheuser Busch and InBev recognized that partnering with one another would help each company grow stronger.

In part, this happened because each company could save money that it might have otherwise used to compete with the other.

Each company could also help the other gain a stronger foothold in foreign markets by sharing information, distribution channels, and customer bases.

Rather than trying to compete for the same customers or market themselves in the same way, the new company continued to market and sell its individual beer brands to their desired market segment and therefore cover a wider range of the market overall.

All of these things added up to make the merger between these two companies a roaring success.

3. Quaker Oats and Snapple

The merger between Quaker Oats and Snapple is one of the most famous failed mergers of all time. In the early 90’s, Quaker Oats was having immense success with its Gatorade sports drink brand. Gatorade sales in 1992 were around $700 million.

These sales dramatically increased the revenue of Quaker Oats, so the company wanted to purchase a new similar company in order to repeat the success.

In 1994, Quaker Oats acquired the fruit drink company Snapple. The price tag to acquire Snapple was $1.7 billion, considered by many to be an astronomical sum.

Just a little over two years later, they sold Snapple for only $300 million dollars, essentially, taking a $1.4 billion loss on Snapple.

There are a number of reasons why this merger was such a failure. First, Quaker Oats tried to change the sales strategy for Snapple by using the relationships it had already developed with grocery stores to try to move more Snapple products.

However, a significant portion of Snapple sales came from convenience stores and gas stations, so Quaker Oats’ decision turned out to be a big strategic mistake.

Instead of building on what was working for Snapple, they took a risk on a new plan, which did not work out. Snapple sales decreased as a result.

Quaker Oats also failed to properly plan for future competition. Shortly after Quaker merged with Snapple, two of its major competitors, Pepsi and Coca Cola, begin to compete more heavily with Snapple, introducing new products of their own. This drove sales down even further.

Finally, perhaps the most important mistake that Quaker Oats made with this merger is that their valuation to acquire Snapple was way too high.

Considering the fact that a little over two years later, the company sold for only $300 million, a valuation almost six time that amount at $1.7 billion was a costly miscalculation.

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