Juncker’s legacy in tatters as Eurozone growth rates slashed in chief’s final forecast – News 247

 EU Commission officials have suggested the previous period of economic growth will start withering in the coming years The bloc’s economy “looks to be heading towards a protracted period of more subdued growth and muted inflation”, the Autumn 2019 Economic Forecast will say The forecast is the last of Jean-Claude Juncker’s five-year tenure as European Commission President  Gross Domestic Product has been forecast to grow next year and in 2021 but figures have been significantly revised down on previous predictions  The Eurozone single currency bloc is expected to feel the brunt of the slump with GDP growth predicted to be lower than forecast in the summer  In 2020, growth has been forecast at 1.1 percent and at 1.2 percent for the following year  Whereas an EU-wide prediction claims GDP will rise by 1.4 percent in 2019, 2020 and 2021  The report will say: “With Global GDP growth set to remain weak, growth in Europe will depend on the strength of more domestically-oriented sectors ” It adds: “Domestic growth drivers alone are unlikely to be sufficient to power strong growth ” Italy’s ailing economy is once against driving fears across the euro area, with the country’s mounting debt pile a major concern  Rome’s government debt has been forecast to increase from 136.2 percent of GDP this year to 137 4 percent in 2021. But overall the economy is predicted to just about show signs of signs of growth, according to the Commission’s forecasts  Growth of 0.1 percent this year will increase to 0.4 percent in 2019 and 0.7 percent in 2021  Elsewhere, the Eurozone’s public debt-to-GDP ratio is forecast to continuing declining to 84 1 percent in 2021. The report will, however, say: “Government balances, by contrast, are expected to deteriorate slightly ”  This is down to “somewhat looser discretionary fiscal policies in some member states”, it adds  In a forecast that will panic Brussels, Germany’s top economic advisers have slashed growth forecasts for the bloc’s financial powerhouse  The Council of Economic Experts have cut its growth predictions for this year from 0 8 percent to 0.5 percent and 1.7 percent to 0.9 percent next year. Germany has averaged annual growth of 2 percent in the past five years  But that trend is set to end as the economy stalled and is now on the brink of a technical recession after shrinking by 0 1 percent in the three months to June.  Trending  Volker Wieland, one of the Council of Economic Experts, told the Financial Times: “We are dealing with structural change Global trade is stalling and there is digital disruption – does this mean the long boom for Germany is over?” Another member Isabel Schnabel said: “The long-run trend in most advanced economies is a slowdown of productivity growth, but what makes it more serious in Germany is that we also have rapid demographic change that is more acute than elsewhere eventually leading to a shrinking workforce ” The council urged the Berlin government to scrap its commitment to a balanced budget rather than allowing fiscal policy to boost the economy amid the slowdown  Professor Wieland said: “The Schwarze Null has been a pretty good political agreement while we’ve been in a boom phase, with rising employment, tax income and expenditure  “But it is not something you need to stick to in more difficult times.”

Number of employed in Korea up 310-thousand in July

The number of people in South Korea’s workforce
was up 310-thousand in July compared to the same month last year, mainly due to a pick
up in the manufacturing sector. According to Statistics Korea Wednesday, the
employment rate increased slightly to 61-and-a-half percent. The unemployment rate stood at three-point-five
percent last month, same as the previous year, and the number of unemployed fell below the
one-million mark. But the youth unemployment rate rose slightly,
recording nine-point-three percent.

Why does Xiaomi limit its profits to 5%?

This video is sponsored by Skillshare. You might have recently seen headlines like
this, declaring Xiaomi some sort of communistic charity club for voluntarily voluntarily giving up all of its
profits above 5%. And if anything in you went like wait a second,
that’s not how anything in capitalism works, then congratulations, your bullshit detectors are working. I’m Marton from TechAltar, you are watching
the 34th episode of The Story Behind series and let me untangle this fascinating PR campaign. Because that’s what this actually is. Okay so the first question is: Why does Xiaomi voluntarily limit its profits to just 5%? The answer is, to make more money. Sounds confusing, but it isn’t. There are really three pillars of the Xiaomi
business model. 70% of their revenues come from phones, a
bit over 20 % from the rest of their hardware stuff, like air purifiers, power banks and
internet routers, and the final 9% come from what the company calls internet services. These include things like a music subscription
service, a cloud storage service, a Xiaomi App store, advertisements on their phones,
and so on. Xiaomi’s CEO only vowed to keep net profits
of the first two categories below 5%, but not the third one. Now you might be saying that, given their
weight, that’s kind of the same thing, but it’s not. See, Xiaomi calls itself primarily an internet
company. They said so in their IPO documents, in fact,
they have consistently said so since their launch, and they even claim that one of the
meanings of their name is mobile internet. So why would they choose to focus on this
small part of their business? Because they are a for-profit company, not
a charity club. See, here is a comparison between the gross
margins of hardware and services in Xiaomi. And gross margins don’t even include things
like marketing expenses, taxes, overhead costs, and so on. Xiaomi probably actively loses money on hardware,
while margins on internet services are pretty healthy. Making smartphone hardware is a pretty lousy
business, because still only Apple or Samsung have figured out how to make a proper profit out of it. But making internet services is a fantastic business,
as Amazon, Facebook, Google, Microsoft, Alibaba, Tencent, and a million other very profitable
companies have proven. So Xiaomi desperately wants investors to think
that their main business is making internet services. The difference is that traditional phone companies
try to make their profits when the customer buys the hardware, and then largely leave
customers alone when they use their phone, while Xiaomi accepts basically zero profits
from the hardware purchase, but then tries to make money from their customers during
the usage period. Now, this to me sounds like the hardware equivalent
of freemium software. We used to pay for software outright, but
then companies figured out that giving it away for free at first, and then making money
from the users later, by making them pay for a subscription, or loot boxes, or showing
them ads, is great business. Xiaomi making no profits on hardware is essentially
the same as Facebook and Google making their services free, or Amazon discounting phones
that have lock screen ads on them. It’s not charity or communis. It’s a business model. Okay, question two, why do I think
this was a brilliant PR campaign? Well, I hope it’s pretty clear by now that
Xiaomi never really made or wanted to make money from their hardware anyway, because
higher phone profits means fewer users, less money from services, and finally, lower profits
overall. So, the 5% limit is artificial and wouldn’t
have been meaningfully passed anyway. This was just a statement, not a change to
their business model. But, with this statement, they convinced consumers,
who never read past the flashy headline, that Xiaomi is just a benign, trustworthy company
that just doesn’t want high profits, but also investors, who totally get the business model,
that Xiaomi is an internet company with much better profit potential than simple hardware
makers. One statement that in reality didn’t change
anything makes consumers more likely to buy Xiaomi phones and investors more likely to
invest in Xiaomi. Good PR can create value out
of seemingly thin air. And the third question then is how low hardware
profits work in practice. Well, internet services and freemium apps
have kind of shown us the blueprint already. This kind of business has two goals: acquiring
as many new customers as possible, and then making sure that those customers spend as
much time and money on the platform as possible. Obviously low hardware prices do the magic
for step 1, but step 2 is all about software. Namely MIUI, the company’s own version of
Android, and it’s no wonder that Xiaomi takes its software so seriously. People must love this UI, become loyal to
it, and spend as much time with it as possible for Xiaomi to be able to sell them their services,
or serve them ads. And this business model has good and bad sides
for consumers. The good stuff means that Xiaomi, unlike most
Android phone makers, actually has financial incentives to frequently update their phones
and give them relatively long software support. Xiaomi has also built a large, engaged online
community around MIUI, where people can do things like vote on features to be put into
MIUI. On the bad side though, Xiaomi is also incentivized
to push its own software even if it means duplicating apps or creating bloatware, and
like any other freemium software player, Xiaomi has incentives to invade your privacy and
to lock you into their ecosystem. Cause you have to keep paying those subscription
fees and seeing those ads for as long as possible for this model to work. Aaand last question is: will this work? And while I find Xiaomi’s business model new
and genuinely exciting, I also think that from a purely business perspective, there are a few weaknesses here. First of all, at 9%, the profitable part of
Xiaomi is very small, which means that right now, Xiaomi’s strategy isn’t really working. People are happy to buy cheap Xiaomi hardware,
but most of them don’t want to pay for Xiaomi services. Even the company itself admitted that they
have to increase this rate, but last quarter the opposite happened, where hardware grew
significantly faster than services at Xiaomi. Not a good sign. The services business is also relatively small. Just for scale, Xiaomi made 1.5 billion dollars
from services last year, while Apple made over 9 billion in just the last quarter. And that’s on top of the massive revenue and
profits Apple has made from hardware! So, Xiaomi has to grow their services business
significantly to reach a truly global scale. Second, Xiaomi’s business model has only been
proven in China. It sort of works there, because Google services,
including the Google Play store are blocked in China, so people are often happy to use
services form their smartphone maker, even alternative app stores. But as Xiaomi is becoming increasingly international,
it will have to compete against Google. Google Apps are installed on nearly all international
phones, which instantly makes Xiaomi apps less useful, so there will be lower engagement
and lower income per user, and customers might even be annoyed by duplicate apps, instead
preferring a phone with clean, stock Android. It’s kind of enough to have Google spying
on you and filling your phone with crap apps you’ve never asked to use, but getting this
treatment from two companies at once is not a great experience. In fact, Xiaomi did ask their users in a poll
what they preferred, and embarrassingly enough, their own fans voted for stock Android. Aaaand then Xiaomi deleted the poll. Ouch. And the third problem is that people who buy
cheap phones, also tend to use cheap, or even free software, which is not what Xiaomi needs. So in order for Xiaomi’s business model to
work, Xiaomi will need to invest a lot more into making really premium phones like the MiMix,
and attract more wealthy consumers, and then also make internet services that truly outclass
those of Google. Not an easy task for a company on such tight margins as Xiaomi. But none of that makes Xiaomi’s fantastic
PR move any less impressive. Tech enthusiasts often see PR and marketing
as mysterious or magical forces, but the concepts that make it all work are fairly easy to understand
if you know where to look. Like this excellent course on branding from
Skillshare that I can personally recommend to my viewers. Skillshare is an awesome online learning community
with more than 20,000 classes on basically any topic you can think of. From marketing and business to graphic design
and photography, and much more. With 2 months of free premium access for TechAltar
viewers, you can get unlimited access to all of their classes, so whether you are a geek
trying to understand business, or someone in business who is interested in technology,
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for free and thank you to Skillshare for sponsoring this video.