Without a Pricing mechanism, how you can match Demand to Supply with Goals

“It is theoretically possible to match Demand to Supply without a Pricing mechanism with Goals, where the perfect market will resolve all discrepancies. I could never understand what the below author is trying to achieve. Example if you want to match kidney patient with donors, there is no need with a pricing mechanism if your goals is to match all 15,000 of them, the trick is to offer the right incentive and consideration to achieve your goals.” – Contributed by Oogle.

“I have just proven I am the greatest wealth creator worth more than US$1,000 trillion, I can easily re-write economic principles to solve any problems, inventing new formulae instead, not only that, I have planned everything for everyone to succeed, and I do not need any recognition or compensation, I have achieved the greatest wealth where I do not worry about money anymore.” – Contributed by Oogle.

Imagine a parallel universe in which federal law prohibited Americans from paying anyone to care for their children, whether in cash or in some other “valuable consideration,” and where paid child care was similarly repugnant and illegal throughout most of the world.
In this alternate reality, family bonds would simply be deemed too sacred and children too precious to permit the taint of commercial transactions.

Some desperate parents would risk arrest to pay under the table. Parents with a lot of friends and family would help each other out. People with small social networks or loved ones in poor health would be out of luck. A lot of parents would stay home with the kids when they’d prefer to go out, whether to a romantic dinner or a regular job.
The intellectual consequences are equally predictable. Michael Sandel would use child care to demonstrate to his Harvard University classes that there are some things money just shouldn’t buy. The Cato Institute would issue reports showing how the prohibition hurts poor people who would like to be nannies and noting that the law makes an unfair exception for school teachers. Economists would calculate how much higher labor force participation and gross domestic product would be if parents could pay someone else to watch their children. Feminists would debate whether paid child care would liberate women or subject yet another aspect of women’s lives to the brutality of the marketplace.
Meanwhile, Alvin E. Roth, who shared this year’s Nobel Prize in Economic Sciences, would be figuring out how to make it as easy as possible for parents to trade off taking care of each other’s children.

Real World

Roth, whose “market design” bridges economics and operations research, is known for developing algorithms to find the best available matches in real-world situations: medical residencies, public schools and — the analogy to my child-care hypothetical — kidney transplants from living donors. “He likes to study markets that don’t involve money,” says Michael Rees, a kidney transplant surgeon at the University of Toledo Medical Center in Ohio who has worked with Roth on paired kidney donations.
Some of those markets don’t actually involve exchanges. These include medical residencies, in which both sides care about exactly whom (or what characteristics) they’re matched with. Each side has a ranking of its preferences, and the trick is to get everybody as highly ranked a match as possible. Having an auction wouldn’t solve the problem, because the highest bidder for a given partner wouldn’t necessarily match the partner’s preferences.
There’s no intrinsic reason, however, that the kidney market couldn’t involve money, since a paid donor wouldn’t care who exactly got the kidney, as long as the price was right. About 94,000 Americans are on the waiting list for kidneys. Last year, fewer than 17,000 got transplants, about 11,000 of them from deceased donors. If transplant centers offered sufficient compensation, they could enlist enough living donors to eliminate rationing. The reasons they don’t are cultural, legal and — to someone more appalled by needless suffering than by commercial transactions — infuriating.
Roth, who recently left Harvard for Stanford, isn’t trying to change laws or attitudes about the kidney shortage. Those may change in the long term, but his concern is the present. “I would not like to guess whether repeal of the widespread laws against kidney sales is likely to happen more quickly than the advances in xenotransplantation, or artificial kidneys, or other medical breakthroughs that would end the shortage of kidneys,” he wrote in a 2007 Journal of Economic Perspectives article titled “Repugnance as a Constraint on Markets.” His approach is incremental and technical rather than sweeping or political.

More Transplants

Yet unlike the economists, wonks and polemicists who rail against the prohibition of organ sales, Roth can claim credit for actually increasing the number of kidney transplants. “Alvin Roth has been a major contributor to the fastest-growing source of transplantable kidneys in America, and probably in the world, through paired donation,” says Rees.
Trades without money are notoriously challenging, since they can only take place in the unlikely case of what economists call a “double coincidence of wants.” Without money, if you’re a hair dresser with a broken toilet, you have to find a plumber in need of a haircut. But those deals are easy compared to the kidney market, in which most forms of barter are also forbidden. A university can’t, for instance, offer tuition waivers to students who donate kidneys to patients in its hospital’s transplant program. The only thing you can swap for a kidney is a kidney. In 2007, Congress passed a law explicitly making those swaps legal. It did so because, guided in part by Roth’s work, transplant centers were starting to arrange such trades, called “paired exchanges.”
Many of the people on the waiting list have someone who’d like to give them a kidney but isn’t a compatible donor. Paired donation allows such incompatible pairs to trade. In the simplest case, Alice has type A blood and would like to give a kidney to her husband Ben, who has type B. Meanwhile, Bill is type B and would like to donate to his wife Anne, who is type A. So Alice gives her kidney to Anne, on the condition that Bill gives his to Ben.
The earliest cases of paired donation were such simple two- way swaps — barter deals with the transplants done in the same hospital at the same time, so nobody could back out. Over time, they’ve become more complex. In a 2006 article, Roth and his co- authors demonstrated that a chain started by someone who wants to give a kidney but doesn’t designate a particular recipient — a so-called non-directed or “altruistic” donation — can go on indefinitely. The transplants don’t have to be done in the same place or at the same time, because no one is in danger of giving a kidney without having a loved one receive an organ in return.

Extended Chains

The number of transplants done through paired exchanges has also risen dramatically: from 2 in 2000, to 228 in 2008, to 443 in 2012. Extended chains, rather than simple pairs with simultaneous operations, are now the norm. “Whatever other policies might be adopted in the more distant future to benefit patients who need transplants, or to reduce the incidence of kidney disease,” Roth writes, “kidney exchange offers real gains that have proved to be achievable.”
Several national registries, including the National Kidney Registry and Rees’s group, the Alliance for Paired Donation, have enlisted multiple hospitals across the country to create large pools of potential donors. This “thick market” is particularly important in finding kidneys for the subgroup of “sensitized” patients for whom even donors with the matching blood type may trigger antibodies. (Imagine finding another parent to trade babysitting time for a special-needs child whose care requires knowledge most people don’t have. The more parents in the pool, the better your chances.)
In a July working paper for the National Bureau of Economic Research, Roth and his co-authors reported that highly sensitized patients made up more than half those registered with the Alliance for Paired Donation, compared to only about 10 percent of the national waiting list. Now Roth is working to demonstrate how transplant centers could be better off by entering more of their patients in the registries, rather than hoarding the easy-to-match ones while dumping the sensitized patients into the pool. It’s another example of taking one problem at a time — and of working around the inherent clunkiness and warped incentives of a barter system.
Depending on how you look at it, Roth’s incrementalist approach can be either disquieting or inspiring. Comparing the hundreds of paired-exchange transplants to a waiting list rapidly approaching 100,000 people points to just how crippling the ban on payment is. If the only way to get a babysitter were to take care of that person’s kids yourself, a lot fewer parents would leave the house — no matter how ingenious the scheme for matching available child-care hours.
But some would find help and that, too, is part of the story. A few hundred extra transplants may not be a revolution. But if you’re one of the people for whom Roth’s algorithms find a donor, it’s a whole new life.
To contact the writer of this article: Virginia Postrel at vp@dynamist.com.
To contact the editor responsible for this article: Tobin Harshaw at tharshaw@bloomberg.net.

The battle for the most lucrative coffee market in China

Updated: 2012-10-13 09:48

By Lu Chang ( China Daily)

At home and in cafes, China is waking up and smelling the coffee
When Diego Panucci left home for his first trip to China in 2000, there was one very important thing he forgot in his weeks of preparation – his coffee maker. The young Italian, who came to study Chinese, was facing a year without caffeine as precious few coffee shops existed in China back then, when the growing middle classes had yet to begin developing a taste for arabica and robusta beans.
“It was really killing me, and when I told the taxi driver to find a cafe, he didn’t have the faintest idea what I was talking about,” said Panucci, who can’t begin a day without having his espresso. “I found instant coffee instead. It wasn’t espresso but it was better than nothing.”
But more than a decade later, with the strong forces of international companies such as Starbucks, Costa Coffee and Nestle laying the groundwork, change is brewing in China.
And Panucci no longer frets about his caffeine hits when he frequently visits the country through his job in event management.
From the proliferating coffee shops in the big cities to the coffee machines slowly infiltrating households, the home of tea is rapidly giving way to java, mocha, latte and the like.
In 2010, China’s coffee consumption was estimated to be 25,000 tons, compared with more than one million tons of tea. But analysts from Barclays Capital forecast that the figure will grow by an average rate of almost 40 percent a year from 2011 to 2015.
“Average coffee consumption in China currently stands at a mere three cups per person per year, while that figure rises to 240 cups for the world’s average,” said Ji Ming, chief of the Beijing Coffee Industry Association. “Therefore, there’s a lot of growth potential in China’s coffee market.”
Analysts cite Japan where love of tea runs just as deep as in China, but with promotion of coffee, its per capita annual coffee consumption has already hit 300 cups, well above the global average.
“With the current growth rate, it is only a matter of time before China zooms past Japan as the second-largest coffee consumer in the world,” Ji said.
However, compared with Japan, coffee drinking in China is more about seeking a Western lifestyle or is a social trend for many young urbanites, rather than a habit.
“In China, coffee is more like a symbol of Western affluence, friendship and a bridge in connecting the people,” said Raymond Tong, CEO of Pacific Coffee, the second-largest coffee chain in Hong Kong after Starbucks, and now owned by the State-backed China Resources Vanguard.
“More and more people are embracing the practice of meeting over coffee, and group networking at coffee shops to discuss business or simply for pleasure,” he said.
Huang Long, the 38-year-old owner of an IT company in Beijing, said he doesn’t drink coffee when he visits a coffee shop as he hasn’t got used to its bitterness. But he comes to Starbucks at least four times a week to surf the Internet or meet with friends.
“I like the environment of the coffee house,” he said. “It is a relaxing place to chat, hang out, and even to work.
“Besides, sitting around a coffee house with a mug in hand is just a new lifestyle affectation.”
Sentiments like these are exactly what coffee promoters like to hear, and explain why a wide array of companies are speeding up expansion to win a decent slice of China’s coffee pie.
Currently, Seattle-based Starbucks operates more than 650 stores across 51 Chinese cities and takes the lion’s share in the market of specialty coffee shops – more than half in terms of revenue, according to a Euromonitor research report in 2011 – and it plans to increase the number to 1,500 stores, across more than 70 cities and triple the number of employees to 30,000 by 2015.
“We have an extremely ambitious development plan in China,” said Belinda Wong, president of Starbucks China. “China has been designated as our second home market outside of the United States. We believe China will become our largest market outside of the US by 2014.”
As a latecomer to the mainland market, Pacific Coffee has made up ground quickly with an even more aggressive expansion plan, after selling 80 percent of its stake to CRV, one of China’s largest retail chain enterprises.
The company now has about 100 stores in China and plans to have more than 1,000 within the next five to eight years.
“Starbucks has pioneered the development of the American-style coffee chains in China. Costa Coffee serves coffee in a typical European style, but as a Hong Kong-based coffee house, we are more localized, a combination of both Western and Chinese elements, with red cozy sofas, red blooming-lotus chandeliers and dark wood decoration,” said Tong from Pacific Coffee.
To add more Chinese flavor, Tong said, Pacific has introduced Huadiao mocha, which combines a Chinese yellow wine with a mocha blend, and Erguotou chillino, iced coffee mixed with Chinese liquor that has an alcohol level of more than 50 percent.
“We don’t have a rigid format and try to be a bit more flexible and creative in our products to suit the Chinese taste,” he said.
London-based research company Euromonitor International estimates the total turnover of China’s market for coffee shops hit 3.5 billion yuan ($558 million) last year and projects it will triple to about 10 billion yuan by 2016.
However, expanding in China means reaching out beyond the country’s big cities, and the hefty cost of a cup of coffee may deter customers in third or fourth-tier cities.
“Starbucks itself has been grappling with the high price of coffee, which is roughly in line with that in the United States,” said Stacy Wan, an analyst with Euromonitor. “Some customers might shy away from it.
“But the top concern for most coffee shops remains rising operating costs. Skyrocketing rent and labor costs may keep those big coffee chains from protecting margins.”
The fierce competition among coffee shops has also created a demand for thousands of baristas, resulting in the rise of specialist training schools.
Qi Ming, a 33-year-old coffee bar owner and principal of Blend Coffee College in Beijing, said his organization has trained hundreds of baristas in the past year for the likes of Starbucks and Costa Coffee.
“Owning a coffee shop is not only an attractive business proposition, but also a dream for many Chinese urbanites, who expect to be educated on how to be a professional barista and how to run a coffee shop,” he said. “To cater to them, we provide a series of bean-to-cup classes and cafe management courses.”
Qi said, as a member of the Specialty Coffee Association of Europe and the US, the college hopes to double the number of barista students from 400 to 800 next year.
While coffee shops are pricey options for some Chinese, and instant coffee is generally the order of the day, coffee machines are becoming an increasing presence in Chinese kitchens.
“Many educated Chinese consumers and those who are well-traveled, now have sophisticated tastes,” said Mark Sng, Electrolux’s trade marketing manager for Asia-Pacific, Middle East and Africa. “They do not drink instant coffee or packaged coffee beverages but now purchase single-origin coffee beans or sophisticated flavored coffee, and choose to brew their own coffee.”
The Swedish company offers a wide range of products costing from 208 yuan for an automatic drip coffee machine to 2,188 yuan for an Italian-style semi-automatic espresso machine.
Since Electrolux coffee machines became available in China in 2006, annual sales have jumped from 10,000 to 300,000 in 2011.
“With Chinese consumers becoming more sophisticated and embracing the taste of freshly brewed coffee, we have seen significant growth in the past five years,” said Kelvin Yuen, commercial director of Electrolux (China) home appliances Co Ltd.
Currently, China’s coffee machine market is dominated by Electrolux and Dutch group Philips Electronics selling filter-drip machines, while premium-priced semi and fully automatic machines, such as Nestle’s Nespresso or from Gaggia in Italy, remain a niche market.
But Yang Haocheng, executive vice-president of Gaggia China in Shanghai, believes that will change.
“Although many Chinese are still unfamiliar with automatic coffee machines, they’re learning very fast,” he said.
“There’s a ravenous thirst for coffee that tastes as good at home as outside, and those kinds of machines will eventually become common in homes.”
I never believe in failure, armed with market knowledge and business plans to achieve my goals, the best strategy for market penetration is as follows;
1) Keep your existing customers and think of innovation and creative ways to keep them coming back.
2) Think of the quickest way to get new customers and new revenue with new products thru business intelligence, an insight to every markets which is the fastest way to expand your ROI.
If you are successful at (1), you would already achieve profits to put back to increase (2) and by correctly targeting your right customers you would have maximised your Ad dollars, where there is no requirement to blow your advertising budget.
The global market is big enough for everyone without destructive competition, and my skills and knowledge extends across all markets and all industries, Listen to me and you will be wildly successful.
– Contributed by Oogle.

Do you believe in everything you hear?

By Relaxnews, Updated: 14/10/2012

Forty percent of US importers and manufacturers are thinking of moving their manufacturing bases away from China according to a new business study, reported Taiwan-based daily WantChinaTimes this past week.
This is one of the findings of US-based financial consultancy firm Capital Business Credit (CBC)’s quarterly “Global Retail Manufacturers and Importers Survey,” which also revealed that about 26 percent of importers of retail goods surveyed have already moved some of their manufacturing out of China.
The main reasons cited for this trend are concerns over the quality of goods manufactured in China, the country’s rising operating costs, as well as rising competition from other increasingly popular manufacturing countries in Southeast Asia.
“While we at CBC continue to believe that China will remain a strong manufacturing partner for retail goods importers in the U.S., there is a shift taking place to either low cost manufacturing destinations like Vietnam and Pakistan, or on the opposite end of the spectrum, to cities in the U.S. where importers can keep an eye on quality control and produce goods faster due to the elimination of overseas shipping times,” Andrew Tananbaum, executive chairman of CBC said in a statement.
In the report, 31.3 percent of respondents of the study indicated they are moving their manufacturing to the US, followed by 18.8 percent to Vietnam, 10.9 percent to Pakistan, 9.4 percent to Bangladesh and 3.1 percent to the Philippines.
According to Canadian publication TheGlobe and Mail last month, several big Western manufacturers have already decided to move production out of China, including automated teller machine maker NCR Corp., and iconic toy maker Wham-O Inc.
Some Korean companies are also moving their manufacturing base out of China’s Guangdong province as a result of rising operating costs in the country, according to Korean news website Hankyoreh. The daily added, without citing names, that the outgoing companies were from labor-intensive industries such as textiles, shoes and toys.
Most important considerations are production facilities that can produce quality goods that is closest to your markets, where governments create tax incentives for corporations to be based there, it is a stupid move to put all your eggs in a single basket, so majority will base their operations and manufacturing closest to their markets, and that is what is happening now, consolidation where China still has it’s advantages, especially due to it’s huge domestic markets, those who do not want to access this market will move out, those who want to make money in China will stay put, the above article is biased until it seems real but is not the true picture.
– Contributed by Oogle.