Global commerce, M&A, geopolitics, economics
Welcome to professors’ picks, offering a weekly curated selection of FT articles by and for business school faculty to connect classrooms to current events and to develop students’ critical thinking. Read all submissions at www.
ft.com/bschoolpicks. Save this link in myFT to receive emails alerting you to each new edition. Search the tags for relevant topics to illustrate teaching points. Encourage students to join the debate in the comments section beneath the article. Comments or contributions? Get in touch at profpicks@ft.com Summary: These three pieces of analysis suggest we are entering an entirely new phase in global politics and economics. Rachman goes into details of how the Trump administration’s trade policy is a departure from long-standing US action, and how that will change the global trading regime forever. We are moving into a much more fractured international economic environment with immense consequences for private and public actors. Edward Luce shares his view that Trump is unaware of the scale of the changes he is unleashing and of their effects on both the US and the global economy. The new policy will be highly inflationary, will not produce the desired outcomes for the US economy and will simply destroy value. By contrast, Oren Cass outlines one of the grand visions behind the new US foreign and economic policy: an America far less dependent on external demand, with allies who shoulder a much larger share of global security, and a semi-permanent containment of China. Classroom application: Understanding the direction of geopolitics and geoeconomics is fundamental for corporate leaders seeking to build or to lead sustainable businesses in the 21st century. Questions: Manuel Muñiz, Provost, IE/Chair of IE New York College ECB cuts rates to 2.25% amid Trump trade war Tags: Central bank, interest rates, inflation, tariffs Summary: The European Central Bank cut its benchmark interest rate by 0.25 per cent to 2.25 per cent, its lowest in over two years, in response to economic uncertainty from US trade tariffs. ECB President Christine Lagarde cited deteriorating growth prospects and volatile markets. The decision, seen as dovish, signals possible further cuts. Analysts warned of inflation risks from supply chain fragmentation and rising government spending, although current inflation trends remain downward. Classroom application: This article provides a platform for faculty and students to discuss central banks’ role with respect to inflation including targets, tools, and tactics — all against a backdrop of geopolitical and macroeconomic uncertainty. Questions: Tom Davis, Clinical assistant professor, Joseph M Katz Graduate School of Business, University of Pittsburgh Article: Meta had ‘monopoly power’ after buying rival apps, FTC says Tags: Monopoly power, killer acquisitions, antitrust, strategy, merger & acquisition Summary: The US Federal Trade Commission has accused Meta of gaining “monopoly power” through its acquisitions of Instagram in 2012 for $1bn and WhatsApp in 2014 for $19bn, as argued in a Washington district court trial. The FTC claims these acquisitions stifled competition, citing Meta’s 85 per cent market share of time spent on its apps and internal communications from Mark Zuckerberg indicating a “buy-or-bury” strategy. Meta denies having a monopoly, arguing its market share is lower when including competitors like TikTok and YouTube, and claims it improved Instagram and WhatsApp’s quality. The trial could lead to Meta having to unwind these acquisitions. Classroom application: This article provides opportunities to discuss “killer” or pre-emptive acquisitions done by firms, mainly in order to prevent upcoming competition either by the start-ups themselves, or by rival firms acquiring them. Typically, this happens at an early stage, so that antitrust regulations are not effective at the time of the acquisition. Classic valuation does not play a role in these cases. Even the typical negative share price reactions of the acquirer around the announcement of the transaction can be interpreted differently: without buying, the acquirer might lose more in the long run. Additionally, the article exemplifies the difficulties to define “the market” — here for social media — which is the classic argument in antitrust cases. Questions: Michael Grote, Professor, Frankfurt School of Finance & Management Gulf petrostate Kuwait tries to kick-start diversification from oil Tags: Kuwait, Oil, Political and Economic diversification, Sustainability Summary: Kuwait is poised to borrow for the first time in eight years after passing a long-delayed public debt law, signalling a potential shift towards economic diversification in a country that has remained heavily reliant on oil revenues to fund its extensive welfare state. Political stalemate has caused Kuwait to lag behind its regional neighbours, such as Saudi Arabia and the United Arab Emirates, who have implemented ambitious reform agendas. To overcome this, Emir Sheikh Mishal suspended parliament in order to enact reform. In order to finance significant infrastructure projects and reduce Kuwait’s reliance on oil, which remains the mainstay of its economic strategy despite mounting fiscal strain, the new law permits borrowing up to $97bn. Critics emphasise that the government needs to provide a clear, strategic vision for sustainable development beyond hydrocarbons, even though optimism is growing and is reflected in a robust stock market. Classroom application: This article provides an opportunity for faculty to discuss how and why a country only a little bit larger than New Hampshire is behind some of their Arab neighbours who have been more aggressive at economic and political reform. It’s also surprising that a country with such a large GDP now is going to have to borrow money and embrace sustainability. Questions: Case discussion positioning: This is a wonderful opportunity to focus on the changes in one of the Gulf’s smallest countries, which is happening in real time. On one hand, does it matter what Kuwait does, while on the other, might this be a leading indicator for other Arab nations? Many changes are happening in the region, including Syria, the renewable energy market outside China and political jockeying. Gregory Stoller, Master Lecturer, Boston University Questrom School of Business Got feedback on professors’ picks or willing to contribute? Get in touch at bschool@ft.com or add your selected articles and questions in the comments below.
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