China: The 2008 Olympics as a Major Activist
Fidelity Investments has sold off more than 90
percent of its holdings in Chinese state-owned oil
giant PetroChina, Fidelity announced May 16. Although
the company declined to explain the sale, it almost
certainly is related to pressure from human rights and
Activists argue that, as the primary oil field
operator in Sudan, PetroChina is propping up the
Khartoum regime responsible for the genocide in
Darfur, so putting pressure on PetroChina is viewed
as a way to pressure the Sudanese government
indirectly. Fidelity's move marks an important strategic
turning point in the battle between human rights
groups and China over the Darfur region, and sets the
stage for a far more powerful strategic thrust that will
emerge during the summer -- one in which Darfur
activists move from a financial divestment campaign
to one focused on the 2008 Olympic Games.
Activists have long sought effective pressure
points on China, and the Olympics look to be the
answer. More specifically, activists are eyeing the list
of Western corporate sponsors that are investing tens
of millions of dollars in the Olympics and in
companion marketing campaigns designed to run
before and during the Olympics.
Olympic sponsorship in 2008 means more than in
most past years. For Beijing, giants such as Kodak,
Coca-Cola, McDonald's and General Electric are not
simply the means to put on a good show; they are
integral to its efforts to radically change international
perceptions of China and establish its new place in
the world. Beijing can control most of the variables
that come its way -- the protesters, media
investigations into corruption and other potential
public relations problems that usually come with
hosting the Olympics. And, with the sites chosen and
no backup available, it can largely ignore the
International Olympic Committee. What Beijing cannot
control, however, are the decisions of the games'
sponsors and the pressures placed upon these
companies in the West.
Through the Olympic sponsors, activists have
determined that the year leading up to the Olympics
offers a unique opportunity to use market
mechanisms to change Beijing's policies. The first
Western movement to begin to capitalize on this
vulnerability is the Save Darfur Coalition, which turned
Sudan into a pariah state with which no Western
company will do business only to have its efforts
undermined by Chinese state-owned enterprises.
Many other issues could have taken this mantle, but it
appears that Darfur-focused activists have taken the
lead on exploiting Olympics-related vulnerabilities --
and will manage the most effective Western campaign
to change China's policies.
The coming year will determine whether activists
can actually make Beijing blink. Moreover, it will
determine how groups active on issues other than
Darfur deal with the likelihood that the more focused
Darfur coalition will overshadow their use of this
The decision to become an Olympic sponsor is a
strategic one for companies. The price of sponsorship
is steep -- estimated at roughly $55 million -- but that
pales in comparison to the broader investment these
companies make. The largest and most familiar
sponsors have attached their most valuable asset,
their brands, to the games, and have built long-term
marketing plans in which the Olympics play an
With so much invested, Olympic sponsorship has
always brought tension. The 2004 Athens games,
which were twice threatened with a move to an
alternate city due to poor organization, created stress
among investors. Sponsors now have established
offices in future Olympic cities, where they work as
closely as possible with municipal authorities to
ensure that the logistics and setup are on track.
In the years since 2001, when the 2008 games
were awarded to Beijing, the games have carried an
added political dimension for sponsors. Beijing
recruited sponsors not just as sources of money, but
as partners, and for large multinational corporations
trying to learn how to operate in China the opportunity
to work with Beijing was tempting. Those who signed
on as sponsors see the success of these games not
only as an opportunity to build their market share in
the West, but also as a way to increase their presence
in China. Beijing also subtly offered improved market
access and other preferential treatment to companies
that threw in behind the 2008 games.
Beijing, in order to assert itself on the international
stage, has spent billions of dollars preparing for the
games. It brought in the best stadium architects to
build venues and hired Stephen Spielberg to
choreograph the opening and closing ceremonies. In
addition, the Chinese have razed entire
neighborhoods to ease transportation and shuttered
industries to clean Beijing's air. If it can be bought,
Beijing is buying.
The support and presence of high-profile Western
companies provided one thing that Beijing could not
buy: legitimacy. The thinking is that the participation of
major corporate icons will give a degree of continuity
with previous Olympics, and that by extension China
will be seen as a modern country rather than a
developing one or, more negatively, as the killer of
Tiananmen Square, the violator of human rights and
the repressor of basic freedoms.
Activists who succeed in portraying corporate
sponsors of Beijing's Olympics as supporters of
China's behavior would undermine not only the
companies' marketing efforts, but also Beijing's plan
to use the games as a coming-out party
The human rights controversy surrounding the civil
war in Darfur has been growing since 1998.
Khartoum's operations in Darfur mostly target
Christians, and the issue surfaced from the concerns
of evangelical Christian organizations active in Africa.
By 1999, Darfur had emerged as a mainstream
human rights concern, and organizations such as
Amnesty International and Human Rights Watch
joined religious groups in calling for the United States
and other Western governments to impose sanctions
on the regime in Sudan.
Sudan essentially was a pariah state by the late
1990s, so it was obvious even at the beginning of the
movement that diplomatic pressure on Sudan would
be of limited value. Instead, recognizing the country's
dependence on its southern oil production -- and on
the companies that turn the resource into revenues for
the regime -- activists focused on the corporations.
With the flight of most Western companies in the first
half of this decade, Khartoum, rather than lose its oil
revenue, turned to China. Thus, through PetroChina
the Asian giant has managed Sudan's oil operations
and kept the money flowing into Khartoum.
Beyond the funding aspect, however, PetroChina's
entry into Sudan has stood as a major symbol for
Western human rights activists, who have come to
view state-owned oil and resources companies as the
most significant barrier to their ability to use market
campaign pressure to change policies in developing
In response to the globalization of corporations'
operations and the rise of the World Trade
Organization, human rights groups have come to rely
increasingly on codes of conduct and other
marketplace initiatives, such as the Extractive Industry
Transparency Initiative, to hold corporations
accountable for their activities in developing countries.
Western companies in particular are sensitive to
allegations that they are complicit in human rights
violations. State-owned enterprises abroad, on the
other hand, are insulated from these pressures, and
have begun to thrive in those places that Western
companies dare not operate.
In human rights discussions, this is termed
the "parastatal problem." It is the chief unsolvable
barrier to successful efforts by nongovernmental
organizations (NGOs) to use corporations as
instruments of change in developing countries.
Bumping up against the parastatal problem, the
Save Darfur Coalition has begun to build toward using
Olympic sponsors as leverage against Beijing. In a
Wall Street Journal op-ed article published in late
March, actor and activist Mia Farrow and her husband
called for a boycott of the Beijing Olympics. The threat
will fall on deaf ears, as the vogue of boycotting
Olympics -- started by U.S. President Jimmy Carter in
1980 and re-tried in 1984 by the Soviets -- had no
diplomatic effect and only made the boycotters'
The Farrow op-ed, however, contained a more
serious threat: As long as China's state-owned
enterprises remain in Sudan, the coalition aims to
attack Olympic sponsors directly and rebrand the
2008 games as the "Genocide Olympics" (a term first
used by Amnesty International to describe China's
internal human rights record and the human rights
implications of its foreign policy). More sensationally,
the coalition threatened to name Stephen Spielberg
the "Leni Riefenstahl of the Beijing games," a
reference to the German filmmaker whose
documentary of the 1936 Berlin games glorified the
Nazi regime in the broader context of the Olympics.
Spielberg now publicly calls for China to change its
policy toward Sudan.
The threat to boycott is idle talk, but the threat to
change the perception of the games is not. The Save
Darfur Coalition includes many of the most talented
corporate campaign groups in the world, and the
realistic opportunity to change the situation in Darfur is
attractive to Western activists of almost all stripes. In
addition, the public has a high level of awareness of
Darfur as a controversial issue, and most U.S.
consumers recognize that China has a controversial
human rights record. Sponsors are likely to be
sensitive to allegations that they are supporting
a "Genocide Olympics" and will take their complaints
to Beijing. Given these factors, then, the campaign
has an excellent chance of attaining at least some
degree of success.
That said, defining "success" is a difficult task.
China cannot simply stop the genocide in Darfur with
a wave, and it must make a move that simultaneously
satisfies its critics, has a chance of changing what is
happening on the ground in Darfur and results in
China's continued presence in Sudan. (Sudan
supplies more than 5 percent of China's oil.) One
problem is that China remains one of the last
countries with any leverage against Sudan, so it is
valuable to activists and governments alike as a point
of communication with Khartoum. If pushed too hard,
Khartoum could simply open to another state-owned
company immune to Western public condemnation,
kicking China out. Ultimately, China has few options. It
could agree to try to convince Sudan to allow more
U.N. and Africa Union peacekeepers into Darfur, but
that would end the campaign only if the Save Darfur
Coalition agreed that such a deal was sufficient.
In focusing the "Genocide Olympics" campaign
squarely on Darfur, however, human rights groups are
using a one-time opportunity to achieve a relatively
modest goal -- and are passing up a unique moment
to effect major change in China.
Falun Gong is another group that appears to
recognize the unique opportunity the Olympics offer.
This summer, Falun Gong is planning a wave of
protests and actions that will bring world attention
directly to China's human rights record. Other
organizations -- labor, environmental, religious -- also
could try to swoop in and use the Olympic moment.
China might be able to manage activist
campaigns effectively and relatively peacefully.
However, should pressure on internal fronts -- from
Falun Gong or other human rights, democracy or free-
expression activists -- get too high for Beijing to
handle temperately, it could consider using Darfur as
a public relations safety valve. Giving in and basically
agreeing to work with NGOs on Darfur would satisfy
critics by addressing what is for Beijing a third-tier
Source: Bart Mongoven Strategic Analysis
Note: The following analysis is much different
than anything I have posted in this column before, but I
thought it well done, timely and of interest.
|Utah Economic Snapshot
Economic Snapshot - First Ten Months
- Sales and Use Taxes (Gen Gov't) +2.6%
- Individual Income Taxes (Education) +8.6%
- Corporate Franchise Taxes (Gen Gov't) +7.3%
- Motor Fuel Taxes (Transportation) -1.5%
- Severance Taxes (Gen Gov't) -5.3%
Source: Utah State Tax Commission, 5/15/07
- Jobless Claims
- U.S. initial jobless claims fell by 5,000 down to
293,000, continuing to defy expectations.
- Risk of Recession
- The Moody's Economy.com probability of
recession eased in April to 19%, from March's 21%.
The decline in unemployment insurance claims in
April signals that there is little slack developing in the
labor market. The improvement in equity markets thus
far this month is also an encouraging sign. Still, the
sharp moderation in consumer confidence and an
inverted yield curve are the clearest signs that the risk
of recession still looms.
- Weekly Natural Gas Storage Report
- Underground storage of natural gas increased by
95 billion cubic feet during the week ending May 11.
This was in line with expectations for an injection of
about 97 Bcf. Inventories are now 20.6% above the
five-year average. This report will have a neutral effect
- Business Employment Dynamics
- Gross job creation declined to 7.36 million during
the third quarter of 2006, the weakest pace since
1993. Meanwhile, gross job cuts increased to 7.34
million. Thus, the third quarter could mark a turning in
the labor market, consistent with the weakening in the
- Oil and Gas Inventories
- Crude oil inventories rose by one million barrels
for the week ending May 11, according to the Energy
Information Administration. Gasoline stocks rose by
1.7 million barrels. Refinery activity improved modestly
to 89.5%. Soaring gasoline imports are helping
bolster gasoline stocks. Distillate inventories rose
one million barrels. This release will likely help put
some bearish pressure on oil and gasoline
- MBA Mortgage Applications Survey
- Mortgage demand decreased 0.8% in the week
ending May 11. Purchase applications decreased
1.4% and refinance applications remained at last
week's level. Even the ten basis point decline in
adjustable rate mortgages was not enough to
significantly impact the number of homeowners
refinancing out of adjustable rate mortgages. The
demand for purchase applications appears very
sensitive to changes in 30-year fixed mortgage
- ABC News/Washington Post Consumer
- Record high gasoline prices seem to have caught
up with consumer confidence. The ABC
News/Washington Post consumer comfort index fell
four points to -7 in the week ending May 13. The index
now matches its low for 2007 and future
improvements will be difficult to muster. The details
were weak with a six-point decline in the economic
component leading the overall charge lower.
- Consumer Price Index
- The seasonally adjusted consumer price index
was up 0.4% in April, following a 0.6% increase in
March. Slower growth in energy prices led to the
weaker topline inflation over the previous month. The
core index, excluding food and energy prices,
increased 0.2% in April, following a 0.1% increase in
March. Over the past year, core CPI inflation has run at
a 2.4% pace. The overall number was below
consensus; the core number was at consensus.
Today's report is consistent with moderating inflation,
the result of below-potential economic growth.
- Chain Store Sales Snapshot
- Chain store sales rose 0.8% in the week ending
May 12 as more favorable weather trumped record
gasoline prices. Year-over-year growth jumped to
2.6%, the strongest in five weeks.
|This Weeks Leads:
- Maurices, Inc. trades as Maurices at 600 locations
- The women's apparel stores occupy
spaces of 5,000 sq.ft. in power and strip centers.
- Plans call for 50 openings nationwide during the
coming 18 months.
- Typical leases run seven
- A vanilla shell is required.
cotenants include Kohl's and Target.
demographics include a population of 50,000 within
five miles earning $50,000 as the average household
- For more information, contact
- Tom Karis,
- 105 West Superior
- Duluth, MN 55802;
- 218-727-8431 Ext.
- Fax 218-720-2138;
- Web site:
- Orscheln Farm & Home Supply
- Orscheln Farm & Home Supply operates 143
locations throughout AR, IA, IN, KS, KY, MO, NE and
- The stores, selling auto parts, lawn and
garden supplies, and outdoor clothing, occupy spaces
of 25,000 sq.ft. to 40,000 sq.ft. in freestanding
- Plans call for 15 to 20 openings in
existing markets and throughout IL and OH during the
coming 18 months.
- A land area of 3.5 acres, vanilla
shell and specific improvements are
- Preferred demographics call for a
population of 10,000 in a 15-mile radius earning an
average household income above
- Preferred cotenants include discount
stores and supermarkets. Major competitors cited as
Tractor Supply and Rural King.
- For more information, contact
- Orscheln Farm & Home Supply,
West Coates Street,
- Moberly, MO 65270;
- Fax 660-269-2590;
- Email: email@example.com;
- Web site:
- Zumiez, Inc. trades as Zumiez at 253 locations
throughout AK, AZ, CA, CO, DE, FL, ID, IL, MN, MT, NJ,
NM, NV, NY, OK, OR, PA, TX, UT, WA, WI and WY.
- The stores, offering young men's and women's
apparel, accessories and items related to
skateboarding, snowboarding, wakeboarding,
motocross, etc., occupy spaces 2,500 sq.ft. to 4,000
sq.ft. in malls and outlet centers.
- Plans call for 15 openings throughout the existing
markets during the coming
- Typical leases run 10
- Preferred cotenants include teen retailers
and food court retailers.
- For more information, contact
- Zumiez, Inc.,
- 6300 Merrill Creek
Parkway, Suite B,
- Everett, WA 98203;
- Fax 425-551-1595;
- Email: firstname.lastname@example.org;
- Web site:
- For more information
regarding expansion throughout the eastern region,
- Adam Ellis, 425-551-1550.
- Tiger Schulman's Karate Centers
- Tiger Schulman's Karate Centers operates 45
locations throughout CT, FL, NJ, NY and PA.
karate centers occupy spaces of 3,000 sq.ft. to 15,000
sq.ft. in freestanding locations, entertainment and
power centers and urban/downtown areas.
opportunities are sought throughout CT, NJ, NY and
PA during the coming 18 months, with representation
by JW Burke & Co.
- Typical leases run 15 to 20 years.
improvements are required.
- Preferred cotenants include movie theaters and
- Preferred demographics include a
population of 60,000 to 75,000 within three miles
earning $100,000 as the average household income.
- For more information, contact
- JW Burke & Co.,
- 350 Lexington Avenue
- New York, NY 10016;
- Fax 212-557-1631;
- Web site: www.tsk.com.
|REITS Race to Russia
The race is on for American retail REITs to enter
Cleveland, Ohio-based Developers Diversified
Realty Corp. became the first U.S. REIT to announce a
major development initiative targeting the Russian
Federation and Ukraine this week.
It might have
some company soon, though, as Indianapolis-based
Simon Property Group disclosed during its first
quarter earnings call in late April that it is in the early
stages of working out a deal to enter Europe's largest
Russia, along with other former Soviet
bloc nations, appears to be ripe for more foreign
In Developers Diversified's case, the REIT is
forming a $300 million joint venture with Hamburg-
based ECE Projektmanagement G.m.b.H. & Co.KG, a
German real estate development and management
The joint venture plans to leverage the fund
by up to 75 percent, giving the partnership investment
potential of up to $1.2 billion that it will invest over the
next five years developing shopping centers in urban
markets west of the Ural Mountains in Russia and in
Kiev and other major cities of Ukraine.
Source: Retail Traffic Online
|Next Week: Anatomy of a healthy corporation
How can business leaders embed "healthy"
thinking in the organization?
- Executives generally appreciate the
importance of monitoring the underlying health of their
companies and of taking action to improve it. Impeded
by a variety of cognitive and other traps, however, they
seldom practice what they preach.
- The challenge is to embed healthy thinking at all
levels of the organization. The first step is to
understand the attributes of a healthy company-in
our experience, one that shows resilience to shocks,
executes well, aligns employees around a common
purpose, focuses on renewal, and ensures that its
practices complement one another.
- Businesses can work toward this elusive goal by
regularly analyzing the way they allocate resources,
striking a balance among different types of initiatives,
developing appropriate metrics to test their health,
adapting their core processes, and reinforcing healthy
attitudes through performance contracts.
Attributes of health
Monitor the way you allocate resources
Integrate into core processes
Have the metrics to match
Reinforce through performance
Source: McKinsey & company
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