Econ blog of 08S6D

Done by Evelyn, Jiahui, Olivia, Sabrina and Jiayi. =)

click HERE to download the ppt.

Since I love sports so much, I should blog something that is related to sports.. which is NIKE!.. my favourite brand! (:

Currently, Nike is facing some real tough competition in the basketball sneakers industry. So, here it goes:

Budget sneakers are tripping up Nike's basketball business

Like the National Basketball Assn.'s top-tier Dallas Mavericks, Nike Inc. continues to display a potent offense. Its recent second-quarter profit surged 8%, to $326 million, and sales jumped 10%, to $3.8 billion. The stock, up about 15% over the past 12 months, continues to fly high. "The brand is strong," Nike CEO Mark Parker told analysts in December. "The company is growing."

But the sporting goods giant is facing a full-court press at the heart of its U.S. business: basketball footwear. Industrywide unit sales of basketball shoes dropped 16% last year, says market research firm SportScanINFO. And Nike, which counts on basketball gear for an estimated 30% to 40% of its U.S. revenues, acknowledged last month that footwear inventories were 15% higher than a year ago. Running shoes and the apparel business remain strong, but John Shanley, who tracks the industry for Susquehanna Financial Group, says Nike will have to sell a lot of shoes in the coming weeks or suffer a possible hit to earnings. Nike CFO Donald Blair told analysts he believed the inventory overhang would not "have a material negative impact."

Nike has been the king of the basketball sneaker since the 1980s, when Michael Jordan-branded shoes first became a fashion statement on and off the court. But the current Jordan line is losing some cachet among suburban and inner-city kids. While a new release of the Air Jordan Retro did well over Christmas, some of the latter-day Jordan models are being sold at unusually deep discounts.

Nike has been betting on NBA up-and-comer LeBron James to help it make the transition from the Jordan era. In 2003 the company announced it would pay the Cleveland Cavaliers forward $90 million over a decade to promote its shoes. But while the new Zoom LeBron IV shoe has sold well, James is not a Jordan-caliber endorser, in part because the NBA is not the draw it was when Jordan was a star.

It's no secret that for the past few years, kids have been trading in their high-tops for skateboarding shoes made by the likes of Vans, dc, and Skechers . But the big news in the sneaker world is the advent of the cheap basketball shoe. Case in point: the Starbury One, which sells for $14.98. Made and sold by the discount clothing chain Steve & Barry's, the sneaker is endorsed by New York Knicks guard Stephon Marbury, who says 3 million pairs have sold since its August debut.

The Starbury and its ilk have the potential to undermine Nike's basketball sneaker business. According to researcher npd Group Inc., the low-cost shoe market—sneakers under $50—has grown nearly 9% over the past two years and now makes up more than half of the $16.5 billion of branded athletic footwear sold each year in the U.S. Nike sells its own cheap sneakers, but doesn't have much traction against such low-cost entrants as the $35 Amp runner, a creation from Payless ShoeSource . "If I were a branded athletic company right now, I'd be reconsidering my whole approach," says Jeffrey Bliss, president of Javelin Group, a sports marketing firm.

Nike has overcome big challenges before. It continues to dominate the basketball sneaker market and still sells 95% of $100-plus shoes. It has a hit with the Converse Inc. Dwayne Wade, a sneaker endorsed by the Miami Heat guard that retails for $100. Thanks to strong demand for the shoe, Nike says revenue at its Converse unit rose nearly 50% during the most recent quarter. The question for Nike is whether the current hunger for cheap sneakers is building long-term momentum or is little more than a fad.

Conclusion:
Nike will most probably survive this war due to the strong brand name it has established over the years.

-by jiahui

Factors Contributing to High Costs and Inequality in China's Health Care System
is post by Junjun

Factors Contributing to High Costs and Inequality in China's Health Care System
Houli Wang, MD; Tengda Xu, MD; Jin Xu, MD
extracted from http://jama.ama-assn.org/cgi/content/full/298/16/1928?ck=nck

JAMA. 2007;298:1928-1930.

China, the largest developing country in the world, has experienced great economic development in recent years. Since reform and the opening-up policy were implemented in 1978, the national economy has grown at an average rate of 9.6% each year, and in 2005 China's gross domestic product (GDP) per capita reached US $1698. Along with economic development have come social challenges. The gap between rich and poor has widened. In 2005, China's Gini coefficient, an indicator of income distribution difference, was estimated at more than 0.48 (for comparison, the US Gini coefficient was 0.45 in 2004). Although the proportion of the population with incomes below the poverty level has decreased dramatically over the past 3 decades, about 21. million individuals are absolutely poor (annual income
The first widespread health care reforms in China began in 1985, and since that time a market-driven economy has operated in the health care sector. During the past 2 decades, China has made great strides in improving the health status of its population. In 1978, there were 1.08 physicians and 1.93 hospital beds per thousand population compared with 1.51 and 2.57 in 2005, respectively.6 In 2004, the neonatal death rate was 1.54%, the maternal mortality rate was 48.3 per 100 000, and the life expectancy at birth was 71.8 years. In developed nations, these figures are on the order of 0.5% (neonatal death rate), 20 per 100 000 (maternal mortality rate), and approximately 80 years (life expectancy). According to the World Health Organization (WHO), "Overall, people in China are living longer and healthier lives. . . . The disease profile resembles that of the developed countries: 85%-90% of deaths are due to non-communicable diseases and injuries."

Along with this progress has come an increasing burden of medical expense and difficulty with access to medical services. The present public health system cannot provide effective primary health care services to the population. Low-income families find it difficult if not impossible to afford the expensive medical costs. Prior to the 1985 reforms, the patient-physician relationship was generally considered strong and trusting, but since 1985, this relationship appears to be under increasing strain.

The high cost of health care, health care inequality, and the tension in the patient-physician relationship are due to multiple factors. First, the allocation of health care resources between urban and rural China is uneven. The population of China reached 1.3 billion at the end of 2005 and accounted for 22% of the world's population, while its total health care expenditures account for only 2% of the total medical expenditures of the world. About 800 million individuals live in rural areas, but 80% of the medical institutions are concentrated in cities. Furthermore, high-quality medical resources tend to be congregated in large-capacity hospitals. This uneven distribution of medical resources has worsened significantly during the last 2 decades. In the 1970s, approximately 3.5 million medical personnel were working in rural areas but this has declined to about 500 000 in the last decade.13 Patients in rural areas have a difficult time receiving timely medical assessment and care, leading to more advanced disease at diagnosis and subsequent higher medical care costs.

A second major factor is that government investment in the health care sector has been inadequate during the past 2 decades. National Health Accounts data show that total health expenditure has increased more than 40-fold over 2 decades to US $91.8 billion in 2005, accounting for 5.55% of China's GDP.12 However, while governmental investment in the health care sector has increased annually, its share of total health expenditure has declined from 36% in 1980 to 17% in 2004. The government's underfunding of the public health system has had a major influence on the prevention and treatment of epidemics and common illness, making it difficult for individuals, especially the poor living in remote rural areas, to access primary health care.

A third factor is the government's weak supervision and administration of the health care sector over the last 2 decades. The central and local governments have offered limited financial support to hospitals. Approximately 94% of hospital revenue comes from patients' medical care expenditures. In addition to increasing investment in infrastructure, hospitals have strived to introduce modern technologies and new drugs from developed countries. However, because there are no legislative or official administrative rules or regulations to guarantee physicians' performance, some physicians have ordered repeated unnecessary examinations and prescribed potentially unneeded and expensive drugs. Medical costs often exceed the economic capability of low-income families. In addition, the relatively high prices of drugs, including many common and essential drugs, have also increased patients' economic burden for health care.

In the United States, the Food and Drug Administration approved 148 new drugs in 2004, while an astoundingly high number of "new" drugs (approximately 10 000) were registered in China during the same period by the State Food and Drug Administration, a system that remains lax. Although the Chinese government attempts to control drug prices by administrative means, drug prices remain high. As a result of the approval of potentially ineffective and dangerous medications, poor and relatively uneducated individuals may be more susceptible than their urban counterparts to exploitation by charlatans and also improperly treated by inadequately trained health care practitioners.

Fourth, the majority of the Chinese population is not effectively covered by any form of health care insurance system. The Labor and Social Security Administrations of central and local government agencies are the mainstay in the provision of health insurance. According to the 2003 census, 45% of residents in urban and 80% in rural areas were not covered by this public system.17 Government officials, civil servants, and those working in state-owned companies are usually enrolled in the public health care insurance system but few of the absolutely poor, especially those in remote rural areas, are brought into this system. At the same time, the commercial health insurance market is quite underdeveloped, and in 2006, represented only 6.7% of China's total commercial insurance business.

Among the 5 performance indicators cited in the World Health Report 2000, China's health system ranked 144 among 191 WHO member countries. Highlighted in the report was the lack of fairness in financial contributions to the health system. From 1980 to 2004, household payments for medical costs increased from 21.6% to 53.6% of the total health expenditure. An overreliance on household payments to finance health care operating costs has led to even greater inequalities in access to health services, since more individuals cannot afford to pay the cost of their most basic medical bills. Some low-income families have become absolutely poor due to the expense of a single catastrophic illness in the family. To ensure the fundamental rights of the poor to receive adequate health care, the government must establish a more broad and reasonable health care insurance system.

As is the case in much of the rest of the world, the aged proportion of China's population is increasing. The population older than 65 years included 100.4 million persons, or 7.69% of China's total population, in 2005 and is expected to increase at an annual rate of 3.28% during the next 14 years to peak in the 2030s. With this increased aged population, total health care needs and expenditures will increase as well. China's proportion of GDP allocated to health care, currently about 5.55%, is likely to increase steadily to become closer to that of developed countries, most of which have comparable rates of 8% to 11%, up to nearly 16% in the United States.

Improving the health care system will require the Chinese government to take more responsibility for health care equality among its citizens. China's decision makers face a difficult challenge balancing the differential financial contribution of the government against the disproportionate amount the poor and middle-class nongovernment employees pay for health care. This cannot be achieved easily by simply increasing investment in the public health system. As most poor individuals are not covered by the public insurance system and they cannot afford commercial insurance, the public health care insurance system should be modified to include the majority of its population, especially the poor. Middle- and higher-income individuals should be encouraged to purchase commercial insurance.

The contribution of the Chinese government cannot replace the responsibility of each household to bear some of its medical costs. While commercial insurance companies can and should play an important role in providing more equal health care services in the future, policies and financial incentives are needed to promote the development of health care insurance companies and private hospitals to broaden China's medical resources. This will require time, dedication, and fiscal discipline in all sectors, but if China can build a prosperous market of private health care services and commercial health insurance, the government's burden should be alleviated, and more government resources can be used to ensure that all the poor in China may benefit from the fundamental human right of health care.

analysis
Since reform and opening up, China's per capita income rose rapidly, the people's living standard has also significantly improved. Economic growth also brings income distribution difference among Chinese. This results economic inequality in the health care system.
Recently in China medical treatment costs and the price of medicine rose too fast. The poor became unaffordable to see doctors or have medical treatment. The problems even got worse due to the government's weak supervision and administration of the health care sector and less money government put in. Hospitals joint together as a monopoly power to push up the price of medicines and medical treatments to maintain high profit. In addition there are no legislative or official administrative rules or regulations to guarantee physicians. Some physicians have ordered repeated unnecessary examinations and prescribed potentially unneeded and expensive drugs. This even made the middle-class increased patients' economic burden for health care.
Now China’s government is finding ways to solve the problems. In the article the existing public hospitals are profit-making monopoly of the country, public hospitals should be strictly defined legal status of public service to non-profit purposes, and to support a reasonable income distribution system, to mobilize the enthusiasm of doctors and resolve The development of public hospitals. In addition, intensify supervision and severely punish acts of arbitrary charges and fees, medicine price transparency of high medical costs is a feasible way.

Just a lame joke about Jia Ning and Zhang Qin (true life story) B-)

One day, Jia Ning and Zhang Qin were walking along the road together.
Suddenly Zhang Qin saw some shit before him. Then he said to Jia Ning: “Hey Jia Ning, if u eat some shit, I’ll give you $100.”
Jia Ning thought for a while and agreed. He ate some shit so Zhang Qin gave him $100.
But Zhang Qin felt that it is worthy to earn $100 for eating some shit. While Jia Ning felt unbalanced for eating some shit. So Jia Ning asked Zhang Qin to eat some shit and give him $100 as well. Zhang Qin agreed.
Finally, neither of them earned any money but they both ate some shit. But most importantly, they contributed to Singapore’s economy. They helped to increase our GDP by $200.

post by Junjun

Adidas tries new format to lift market share
By Alexandria Sage ReutersPublished: February 5, 2008
Extracted from http://www.iht.com/articles/2008/02/05/business/adidas.php

LOS ANGELES: The German sporting goods maker Adidas is changing the format of its fast-growing global chain of Adidas Originals stores, focusing on customized design and interaction among shoppers to increase market share.

New stores in New York and Berlin opened this past week and feature the new design that will eventually be rolled out in the company's 83 stores worldwide in what Adidas calls its largest marketing campaign ever at its Originals brand.

"In the next 12 to 18 months I think we will have the new format everywhere," said Hermann Deininger, chief marketing officer for sports style at Adidas, the biggest European maker of sporting goods.

The new Originals stores, which sell athletic lifestyle fashion rather than performance gear, will feature workbench-type tables, shoe molds and shoes on display that are split open to show their inner workings.

Shoppers can customize their own shoes, choosing from an array of colors, materials and design options, through interactive computer displays.

Nike, the industry leader, has touted customization at some of its stores, but Deininger said Adidas's move was not a competitive reaction to its larger rival. Adidas had already featured interactive design at its chain of performance-focused stores and through mobile units brought to sporting events, he said.

"It's a permanently evolving concept, the customization, and deeply rooted in the Adidas DNA," Deininger said. "That other brands have similar ideas, that's normal in a competitive environment."

The new marketing strategy and the campaign are starting during New York Fashion Week, which is attended by thousands of journalists.

"Of course, we expect this will have further positive impact on the U.S. market," Deininger said, "and it will strengthen our brand profile here for sure."

Adidas hopes to open 80 to 100 more Originals stores throughout the world this year, Deininger said, adding that the rollout has accelerated because of the popularity of the brand in emerging markets like China and Russia.

Adidas has also teamed up with the jeans brand Diesel to sell co-branded premium denim at the Originals stores. The jeans, designed jointly at both companies, will cost between €160, or $237, and €210.

Analysis:
According to the report, Adidas decided to focus on customized design and interactions with shoppers to increase market share. As we know, Adidas has already had a strong brand reputation what it is doing now is to further specialize its products in order to increase the market demand. They are putting up new designs to attract customers, if not to lead a new surge of popularity of athletic stylish shoes. The popularity/preference, one of the determents of demand, will help increase sales. Moreover, Adidas is aiming on more personal services that shoppers can customize their own shoes, choosing from an array of colors, materials and design options, through interactive computer displays. This will differentiate new Adidas shoes further from other band shoes, hence to reduce the price elasticity.

Labels: posted by Danhong

you guys can judge for yourself whichever is better. product differentiation! haha.

- evelyn