Cutting government loans as a solution to the rising tuition and college debt?

The college debt bubble has gotten everyone a little mad and crazed up. So if the government, the largest lender of college loans were to exit college loans what would happen?

This might cause less people to attend college and make paying for college harder on the ones continuing to attend. This would lead to some compounding effects such as; less people enrolling into 4-year universities;  an increase in enrollment of technical/trade schooling,; lowered tuition prices … which doesn’t sound too bad considering the 1.2 trillion dollars of college loan debt and the $30,000 average debt of college graduates.

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Making the decision to go to trade school seems easier now considering that economists describe nurses and teachers as having the most economically sound and guaranteed post-secondary educational investment.

Without government loans I would not be attending a 4-year university. If everyone in my situation were to drop out of school, there would be a severe decline in number of students and future enrollment. With less people attending 4-year universities, schools would not make enough profit to finance their institutional payments (paying teachers, programs, faculty ). This could be a big problem for schools if all of a sudden they were only making half of what they made last year. Even wealthy schools like USC could be hurt considering that if they wanted to keep me and everyone in my boat, they would have to loan each of us  $40,000 a year.

Even if USC had the amount of capital to fund every student’s tuition, it wouldn’t happen without USC programs, teachers and its financial sector taking a hard hit. So maybe USC might give higher grants or just as equally effective, lower their tuition price so to retain as much students as possible. If this were to happen we could  all go back to class with a smile while USC survives the event with a cut in their tuition-based income.

But, what would it mean for students that are entering college next year? Well, there will be less students making the decision to pursue private education over a cheaper tuition. Public schools would get overcrowded and the Department of Education would have to provide greater funds. Which sort of sounds OK. Considering that in 2013 alone the Department of Education made $41 billion dollars from college loans which is enough to pay for 3 million students to attend the public schools that have an average public university tuition price of $13,000. Regardless of that rather pointless hypothetical, there is still no doubt that this would cause private schools like USC to lower their tuition. Then UCLA would have to lower their tuition in order to remain equally as financially attractive as before.

… which might get me thinking about going to school again.

If such an event were to occur, an economist might describe this as a free(er)-market of institutions that are dealing with a shorter number of demand (lower number of enrolled students) and therefore dealing with an abundance of universities that are competing to be the cheaper university. Of course, rankings and brand name universities would allow certain schools to retain some leverage.

Did I just solve the answer to college debt? Nope, probably just my debt. But damn when you are facing $75,000 in debt by graduation you’ll be looking at any solution as the right solution.

… Which brings me to my next thought.

What if the government were to bail out all of our debt just like they did for Wall St.? I should end it here but NO.

The department of education would still have their $41 billion profit from 2013 and Sallie Mae would still have its $900 million. No student would be in debt and could begin to afford buying houses. The public would spend more allowing more circulation of money. This would raise interest rates, but that would make going to college more risky. Maybe colleges might lower tuition to even out the risk. Or…

 

A New Brew for Millennial Drinkers

From bartop to supermarket aisle, the familiar bottles of Heineken, Budweiser, and Tsingtao are no longer alone. These recognisable brands, hailed by purists for their age-old recipes and whose advertisements reach everywhere from the Super Bowl and to frat parties, now rub shoulders with a whole slew of new beers. From hipster, moustache-sporting micro brewers to unfamiliar liquor-instilled brews, the beer industry is undergoing an unprecedented change.  Faced with a stagnant global economy and shrinking market share, global brewers like Anheuser-Busch InBev, SABMiller, and HEINEKEN International are stepping up efforts to find viable alternatives to beer and recapture the changing palette of their drinkers.

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“Historically, beer has not been an innovative industry,” says at HEINEKEN’s Director of Innovation Xavier Mahot in an interview for Bloomberg. “But this is changing, and the new generation of drinkers that is coming are looking into other categories.”

Millennials make up  a rising figure of more than 26% of drinkers and 35% of beer drinkers, according to Nielsen. Recapturing this consumer segment has become a major priority for brewers across the board. As Mahot points out however, the changing tastes, lifestyles, and demands of millennials demand that the mainstream and historically traditional brewers change their tune.

The New Bud Light Lime-A-Rita line combines a light beer flavour with stronger fruity tastes.

In response to this, many brewers have begun introducing their own varieties of beer mixed with other flavours, alcohols, or spirits. In the U.S. AB InBev put $35 million behind the launch of its new lime-flavoured Bud Lime product. Its Bud Light Lime-A-Rita variations have shown “strong growth” and are “key drivers” of the company’s beer-only segment, according to the its Q3 2013 earnings report. At the same time, the brewer’s Shock Top brand is the highest performing ‘craft’ beer in the country commanding 16% of the craft beer market share.

AB InBev’s Shock Top beer is not made by a ‘craft beer’ microbrewery but is the fastest selling ‘crafty’ beer in the U.S.

Across the pond, HEINEKEN International’s Desperados brand, which blends French beer and Mexican tequila to appeal to young-adult drinkers, grew by 26% in 2011 compared to just 5.4% volume growth in the Heineken brand. In addition, HEINEKEN debuted the Radler brand – a lemon soda and beer mix – to 19 markets around Europe last summer. Though the brand’s financial results remain unclear, HEINEKEN touts it numerous times in its 2013 annual report citing it as the “cornerstone” in its strategy to get 6% of sales a year from new products.

An advertisement for Amstel Radler reads ‘double refreshment’ and touts the product’s all natural ingredients

In the U.S. market HEINEKEN plans to launch several new brands including Amstel Radler, Dos-A-Rita, Dos Equis Azul, and two ciders similar to Strongbow. In Asia, HEINEKEN’s Indonesian arm called Bintang is planning to move into the soda market in response to increasing alcohol bans.

Across the board, the global brewers are adapting to meet the demands of a new generation of drinkers. As more and more millennials peer into drinks menus for the first time, the question remains whether the traditional taste of beer will succeed in beating out its stronger and more sophisticated counterparts in the spirit and wine industries.

The Fizz is Gone: Will Coca-Cola One Day Be Soda-Less?

While their advertisements continually convince me that the world is at peace and everyone loves drinking Coke, the truth is always revealed in the numbers: the company’s stock may have rose 3 percent last week and overall revenue increased, but heavy marketing costs and increased health concerns over the fizzy drinks of yesteryear may signal a downswing in the carbonated drink industry as we know it, calling for Coke to adapt its business.

Globally speaking, Coke’s actual soda sales dropped in their last quarter for the first time in fifteen years. American health advocates cheered, as not only less Coca-Cola was sold in the U.S., but Europe and Mexico. In the latter, historically the biggest market for Coca-Cola, a recently imposed soda-tax probably did most of the damage, and may lead the way for similar taxes in other countries.

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“Healthier” alternatives like Diet Coke have not proved sustaining either, as claims against the beverage’s use of potentially dangerous artificial sweeteners have sunk sales.

So where does this revenue bump come from? Coke’s ‘still drinks’, like Powerade, Dasani, and Minute Maid, provide reliable backup, generating over $1 billion for the company every year. In the previous quarter, sales rose 8 percent for the company’s still drink brands. Also, while soda sales have fallen in big markets like Mexico, Eastern markets like China and Japan are starting to carry the foreign carbonated burden, and 80 percent of the company’s volume is still overseas.

Coca-Cola CEO Muhtar Kent plans to focus on the balance between the still and carbonated brands under their flagship, while also massively increasing marketing spending, adding $400 million to already billion dollar costs. Competition like Pepsi Co. are doing the same. That said, increased marketing may not offset the health side of the equation in the long run. The time could come where Coca-Cola’s name brand product will have to take a back seat to the less-carbonated brands. #DasaniIsBeautiful just doesn’t have the same ring, does it?

Comeback of Subprime Loans

Wells Fargo’s first-quarter earnings brought into light a driving force of America’s economic recovery. Its 14-percent hike in profit was fueled in part by a surge in auto lending. The financial giant may have found the next recipe of profitable subprime lending.

The San Francisco-based company originated $7.8 billion in auto loans during the first quarter, a 15-percent upswing from the same period last year. Nationwide, auto loan debt per borrower has seen jumps for a consecutive of 11 quarters, according to report complied by TransUnion. Overall outstanding car loans have ballooned by a quarter from $700 billion in 2010 while mortgages and credit-card debt moved downward.
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It was new auto sales that have boosted consumer spending during the past four years, says Professor Mian, of Princeton University, and Professor Sufi, of The University of Chicago. Their study shows spending on new autos increased by 40 percent in nominal terms from 2009 to 2013, twice the growth in other spending categories. When they take autos off the list, growth in nominal retail spending last year turns out smaller than that of a year earlier. See chart below for new auto sales and all other retail spending:auto leads spendingauto spending 12-13

The professors, however, dubbed the surge in auto purchase “another debt-fueled spending spree” because the rise is not justified by growth in income. Taking out a car loan could be an action prompted by greater confidence in the U.S. economy, but the fact that other lending sectors remain weak defies this assumption.taking credit

Another possibility is banks are tapping just another hefty market to beef up profit. Even though Wells Fargo lowered its minimum credit score requirements on loan from 640 to 600 as an encouragement for first-time and low-income home buyers, its mortgage originations dropped nearly 67 percent from the first quarter a year ago. Meanwhile, the company has been active in originating subprime loans to used car buyers. These loans generate higher returns but are granted to borrowers with low credit scores.

Last year, credit bureau Experian Automotive reported 27 percent of those who took out loans for new vehicles were borrowers with spotty credit, a record proportion since 2007. The figure was only 18 percent in 2009.

Fortunately for now, overall delinquency rate for U.S. auto loans has remained quite stable at about 1.14 percent during the past few years. But the subprime delinquency rate hiked to 6.12 percent in the fourth quarter of 2013, up from 5.73 percent a year earlier, according to TransUnion’s report.

Reviving Baseball in Inner Cities

Fewer African Americans are playing in Major League Baseball today than 20 years ago.  In 1995, 20 percent of Major League Opening Day rosters were black. But by 2014, that number had declined to eight percent. It’s no secret that inner cities have faced a tough battle promoting the game of baseball to African Americans with fewer African-American baseball heroes to look up to. Major League Baseball continues to work hard to revive baseball in inner cities, but with declining viewership in all demographics, and a game fundamentally opposite of the fast-paced digitally disrupted media landscape, reaching African-American boys in inner cities might be more important than ever.

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Let’s put the decline of African-American baseball players in context: If eight percent of Major League baseball players are black, that means about 70 started on Opening Day rosters in 2014. (856 players: 30 teams of 25 active players plus about 100 players who started on the disabled list). Now, take the handful of African-American players who are All-Stars and you’ll better understand how it’s hard for black boys in inner cities to see signs of success in the Major Leagues. Less interest in baseball from African Americans leads to lower television ratings, more empty seats at the ballpark and less advertising revenue.

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But Major League Baseball has setup a taskforce to increase interest. This taskforce has three initiatives: expand Major League Baseball’s existing urban leagues and academies; improve and modernize coaching; and market African-American baseball players more aggressively.

“As a social institution, Major League Baseball has an enormous social responsibility to provide equal opportunities for all people, both on and off the field,” said Major League Baseball Commissioner Bud Selig.

Yet, the problem might be bigger than Major League Baseball and any effort by the league to stem the tide, might be futile. Young athletes from low-income families make a financial decision when choosing which sport to pursue. Since Division I college baseball only offers 11.7 scholarships, which are divided among more than 30 players, it’s an easy and sound economic decision to choose basketball or football, which offers full scholarships.

“Take me, for example,” said New York Yankees’ pitcher C.C. Sabathia. “If I had a choice, I would have to go to college to play football, because my mom couldn’t afford to pay whatever the percent was of my baseball scholarship. So if I hadn’t been a first round pick, I would have gone to college to play football, because I had a full-ride.”

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Thus, athletes from low-income families in inner cities aren’t choosing to play baseball for a variety of reasons. Yes, Major League Baseball isn’t doing a good enough job marketing its best African-American baseball players, such as Andrew McCutchen and Matt Kemp. But going to college on a partial scholarship is impossible for many inner city athletes and add to that the growing number of inner city baseball fields that are being bulldozed over and its no wonder the number of African American baseball players has steadily declined over the past 20 years.

But Sabathia brought up another reason beyond the philosophical and practical issues that Major League Baseball will confront when trying to revive the sport in inner cities; an issue that might be beyond their reach.

“Baseball is a sport where you learn how to play catch with your dad,” Sabathia said. “There’s a lot of single-parent homes in the inner city, so it’s hard to get kids to play.”

Sources: NY Times, Business InsiderMLB

Measuring the Sanctity of Education

Comparing my college experience in the 2010’s with my father’s in the early 1980’s I was shocked that it seemed that the value society places on education and its sanctity has eroded over the years. Then again, much has changed: skyrocketing tuition rates, the explosion of college sports, the national resurgence of Greek life, the decrease of funding for public university systems. Which of these are simply corollaries rather than indicators of the perception that the sanctity of education has become devalued? This past week an article appeared in Slate that drew attention to the staggering contrast between the percentage salary growth of college sports coaches and college professors.

A Chart About College Coach Salaries That Will Make Academics Weep

In economics “prices” communicate value. Salaries are a form of prices that communicate the value of individuals, in this case, at a university. The word “university” comes from a Latin word meaning “the whole.” There is no doubt that the university experience as a whole should encompass educational, social, and athletic elements. I think however there is a problem when the resource allocation does not reflect a balanced whole. Often I’ve heard the complaints that few are the students who go to college for the purpose of learning for the sake of learning. That students prioritize socializing and attending athletic events over academic pursuits. While this indicator alone doesn’t substantiate those complaints it does make me wonder why I often hear people excited about the next party and the next game but almost never about going to their next class. I wonder if a university professor was paid a seven figure salary how amazing their class would be.

Should More Nonprofits Merge?

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Nowadays, there are a large number of nonprofits around the world. No matter these nonprofits are large or small, they all share the same characteristics that are to provide services to people and to help people live better lives. However, during nonprofits’ growth and development, they may face many problems in funds, human resources, managements, policies, etc. To many nonprofits, they are facing two choices. One is to attempt to develop on their own, and the other is to merge with other nonprofits. However, whether or not more nonprofits should merge always remains a controversial question.

Merging is actually an effective and efficient way for nonprofits to better serve the community and realize their missions. Even though people may be concerned that the merger will bring conflicts between the two organizations, a merger can potentially bring more benefits than negative effects as long as the two nonprofits share similar missions and visions. According to Dr. B.J. Bischoff, if two organizations share a close mission, then they have the potential to merge. There have been approximately 1 million nonprofits in the United States so far. Many of those small nonprofits actually provide similar or almost the same services. The record from National Council of Nonprofits indicates that the majority of the nonprofits sector is small- and mid-size organizations; “82.3% of the filing nonprofits have expenditures of less than $1 million.” Therefore, due to these nonprofits’ small sizes, it’s difficult for them to carry out their goals and make a difference. Some of them may even struggle to survive during economic downtowns. As a result, it will be a wise decision for nonprofits with similar missions to merge. In this way, such combined forces after merging will allow nonprofit organizations to enable stronger entities. Thus the merged nonprofit will be able to better serve the people in need. 3b3fb3ef7f0b3b0447986ecc989de220For instance, Shelter Network and InnVision the Way Home are both nonprofits in California providing services and help to homeless people. They merged as one organization, InnVision Shelter Network in July 2012. Because of the merging, InnVision Shelter Network has become one of the largest nonprofits for homeless people in Northern California, and has the ability to help more than 20,000 homeless people every year.

In addition, when a merger takes place, the resources and expertise of the two organizations are shared. During economic downturns, combined funds and resources can help the merged nonprofit find solutions to financial problems. Although people who don’t support nonprofits’ merging may think that it is easier for smaller organizations to reduce cost, actually the resources and funds a small nonprofit has are quite limited in the first place. Without sufficient funds and resources, a nonprofit is unable to provide clients with good services and even finds it hard to survive or grow due to financial difficulty. Besides the financial advantages that come from the merging, the combined human talents and skills among the merged organization will be another beneficial power to help development. With shared operating concepts, administrative strategies as well as expertise, the merged nonprofit can compare and thus figure out a new operation model which will enable them to provide the best services to clients. HomelessMan640For example, Minnesota Coalition for the Homeless and the Affirmative Options Coalition merged during the last economic crisis. Due to the terrible economic situation and a rapidly increasing number of poor, the constantly decreased funds could not support the two nonprofit organizations to help the poor. For this reason, they chose to merge. With combined funds and employees, they were able to provide more and better services to support the poor.

Furthermore, merging can also serve as a tool for nonprofits to ease competition. Although some people may consider that competition only exists among for-profits and is not necessary for nonprofits, nonprofits actually face much pressure from competition in terms of acquiring funds and resources, performance, etc. Merging can help nonprofits become more competitive in its field, and thus ease their pressure from competition. Two nonprofits may choose to merge if they “identify critical strengths in differing areas.” As a result of the merger, they can expand their services and improve their skill sets, instead of being limited in only one area. Thus, they will be able to grow more strategically and competitively.

More importantly, as long as a nonprofit starts the process to explore whether it is suitable for merging, it’s quite beneficial for this nonprofit to get a better understanding of itself and thus to enable improvement, even without the decision to actually merge. However, nonprofits which seek to merge should carefully study their own situations, and thus figure out a way to realize best outcomes from the merger.mergersnonprofit

 

Inside Job, the Conflict of Interest

inside-jobInside Job is such an inspiring film with so many issues worth thinking hard and doing further research on. Here I just want to share with you some of my takeaways from the film, mainly focusing on the issue of conflict of interest.

First let’s look at some disturbing facts. First, during the late 1990s, many IB promoted risky stocks of Internet companies that appeared to be very uncertain in terms of financial strength, which resulted in law suits and $1.4 billion settlement. Another fact is that famous credit rating agencies such as Moody’s, S&P, and Fitch provided high-risk CDOs with triple-A credit ratings which attracted numerous investors that ended up losing their shirts. Fact number three: very few academic economists foresaw the financial crisis, and even afterward, some continued to argue against reforms. Fact number four: The SEC claimed that Goldman Sachs had misstated and ignored very important facts when selling CDOs to various investors; the case was settled for $550 million but Goldman Sachs did not admit to any wrongdoing.

The way I see it is that all those facts are caused by the issue—conflict of interest, which, by definition, means that a person has a private or personal interest which is sufficient to influence the objective exercise of his or her official duties as a professional. The film mentioned four types of people that have such issue – analysts of investment banks, credit rating agencies, academic professionals, and of course, executives in Wall Street.

Analysts in investment banks are greatly motivated to report virtual-high ratings for stocks to attract clients because their firms paid them based on the level of business that they brought to the firms but not on how accurately they rate. This wicked compensation system drives the analysts to focus on creating profitable deals instead of creating safe deals. Moreover, they would rather sacrifice safety in order to bring profitable deals. This phenomenon is hard to change as long as the organizational structure doesn’t change.

The rating agencies are expected to provide unbiased professional opinions about investment. Their words are very important references for investors, so being trustworthy should be their top ethical standard. However, according to some journal articles I read, the rating agencies emphasize heavily on immunity to accountability in their operational ideas. As the excerpts from congressional hearing in the film shows, agencies defend their ratings as simply opinions that should not be relied on. In that case, it is obvious that rating agencies may also prioritize profitability over accuracy. It would appear that they are only interested in trading opinions for money.

Academic conflict of interest comes in a similar way. Many leading economists were paid consulting fees by financial service firms to shape public debate and policy. It is unnecessary for them to be accurate, because “accuracy is not something to expect in this fluctuating market anyway”, so why not just take the money from financial service firms and say what they want to hear? An example from the film would be the report written by Mishkin titled Financial Stability in Iceland, which described the exact opposite side of the truth.

wall streetLast but not least, conflict of interest of the executives in Wall Street is a big one. They somehow manipulate the market to their interest so that they could continuously feed their fat wallets, and they could walk away with huge size of bonus when things didn’t go well. Here I will just simply mention their conflict of interest in terms of fiduciary duty. To fulfill such duty, one must put client’s interests first, act in good faith, disclose everything of all materials, remain neutral, and confess if there is a conflict of interest. However, this is only an ethical code but not a requirement, and what’s worse is that, it’s an ethical code that kills income.

In short, humans are greedy. This is an unfortunate but very well-accepted fact. The conservation of resources on the earth decides that when some people get richer, others get worse. With that in mind, my conclusion would be that as long as the conflict of interest exists, which is always true, and as long as it is not regulated by force, which means law that violating will cause huge penalty, investors should always keep in mind that the financial market is full of lies and dark transactions.

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Who Moved My Cheese

Three months into 2104, Chinese investors announced they’ve snapped high-tech deals worth more than $6 billion in the U.S. The figure, which is greater than the combined total in the past four years, marks a giant leap in high-tech investments made by private companies from China. But instead of welcoming new jobs and R&D grants, business communities across America are advised to be wary of the innocence of Chinese companies.

A recent report published by The Rhodium Group and Asia Society concludes Chinese buyers may have set out to target high-tech industries in the U.S. While the number of deals has dropped since 2011, the value of China-U.S. high-tech transactions took a jump in the first quarter this year. Overall, Chinese direct investment in the U.S. reached a record high of $14.1 billion last year since taking of in 2008, according to the report.

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The boom can be seen across America and in a variety of sectors. A majority of Chinese investors, as graphic below shows, unsurprisingly struck deals with technological communities in California. There was a lot of Chinese money going into IT equipment when Chinese PC maker Lenovo bought IBM’s personal computer business in 2005. But the appetite for software and IT services has prominently grown in the past few years.by region 00-13

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Setting numbers aside, a primary issue the report addresses is how to react to the rise of Chinese takeover of “valuable” technological brands made in the U.S. At a conference held in L.A. on Thursday, most bankers and lawyers who helped handle high-tech transactions for their Chinese clients in the past voiced their major concerns: American companies should look out for possible technology theft, and the U.S. government should make efforts to beef up cyber security.

The big-ticket sales capture a shift in China’s economic ambition and could be a prelude to the country’s departure from being a global manufacturer. But being on a learning curve doesn’t mean the nation’s transition must be an evil breed. In nature, purchasing IBM’s personal computer business was no different from Facebook’s buying WhatsApp: both indicate the parent company sees some value in the subsidiary, and pays money to learn from it. It is fair bargain as long as both sides shake hands on the price.

The $6-million deals made in the first quarter include three major components: Lenovo, after it purchased IBM’s PC business years ago, is spending another $2.3 billion buying a server unit of IBM. Earlier, it purchased Motorola Mobility from Google for $2.91 billion. China’s Wanxiang Group took in luxury carmaker Fisker in February.

They all have eye-popping price tags, but the health of the three subsidiaries show Chinese buyers are tasked with turning failing American brands around before they move on to harness, if any, new technologies. Fisker had been in huge financial loss and filed for bankruptcy when Asian buyers emerged at the end of last year. Google paid $12.5 billion for the acquisition of Motorola Mobility to obtain the patents it needed to ward off lawsuits from Apple (and they weren’t accused of technology theft), and dumped the “perpetual money-loser” a year later. IBM’s PC unit was, again, losing money when Lenovo bought it in 2005, yet the latter has come back for more. The low-end server business Lenovo is taking from IBM has posted seven quarters of losses.

To the other end, The Committee on Foreign Investment in the United States (CFIUS) has guarded national security well. It guarded it so well that Chinese telecommunication giants had to shift their U.S. business from installing network equipment to selling smartphones to survive in the U.S. market.

In 2011, Huawei Technologies Co., China’s biggest network equipment maker, was barred from participating in building a nationwide emergency network. A year later, the U.S. House Intelligence Committee chairman discouraged U.S. companies from doing business with Huawei and ZTE Corp, for fear of intellectual-property theft and spying. The Committee also noted in a report that CFIUS “must block acquisitions, takeovers, or mergers involving Huawei and ZTE given the threat to U.S. national security interests.”

From selling handsets, ZTE had a market share of 6 percent in the U.S. last year. The CEO of ZTE’s U.S. division touted the company’s decision to drop network business in the U.S. “a strategic move” and “an adaptation to America’s legal framework.”

The second-largest telecommunication manufacturer in China has opened 14 offices and five R&D centers in the U.S. It hires about 380 local employees. It has invested $350 million in its U.S. business. It remains at the mercy of geopolitics.

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TOMS Shoes – A “hand-out” vs. “hand up”

TOMS Shoes first surfaced 7 years ago with a new responsible and sustainable business model: Buy One Give One (BOGO) – when you buy a pair of shoes TOMS gives a pair to a poor child in an underdeveloped country.

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Blake Mycoskie, founder and CEO of the company, first came up with the idea in Argentina when he realized barefoot children, who accounted for over fifty percent of the children, weren’t allowed to go to school. Mycoskie contacte a local shoemaker in Argentina and ordered a few hundred pairs to sell, with BOGO model in mind, in his hometown Los Angeles. Soon, the shoes became a phenomenon, a movement some call it. It’s one of those companies that has a positive image in almost all consumers minds, and the first that comes to mind when thinking about socially conscious purchases.

In 2011, after selling millions of pairs of shoes, the company branched out to eyewear, promising to give out one glass in the developing world for every purchase. Last month, the company announced they’re expanding into the coffee market – Mycoskie stated that for each coffee bag purchased ($12 per bag), they will give a week of clean water to someone in need. Their new product will be available for purchase on their website, café, and Wholefoods stores nationwide.

Although the coffee market is a very crowded one today, Mycoskie says that they picked up on the current trend in America of artisanal coffee roasters, and argues that they will have a better hand since people feel better about themselves with purchasing from a business with BOGO model. He believes that “the same conscious consumers that love his slip-ons will dig his beans.”

However, TOMS Shoes has been the target of a backlash from consumers and philanthropists who criticize the company’s business model for not being helpful in the long run. Now with their new venture, they are sure to receive more criticism from the same people claiming that the giving people a fish and teaching them to fish are two different things and the latter is more effective in the longer run.