1. Corporate Management
in T b l t Ti
i Turbulent Times
By Dr. Allen Yeh,
Dec 29th, 2008/12/28
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2. “In turbulent times, an enterprise has to be managed both to
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withstand sudden blow and to avail itself of sudden unexpected
opportunities.
opportunities
This means that in turbulent times, the fundamentals have to
be managed, and managed well”
--Peter F. Drucker, Managing in Turbulent Times 1980
Peter Times”-1980
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3. The Year 2008 will go down in history as one of the most turbulent
period since WWII, if not since the 1930 “ Great Depression”
-Just look at some examples:
In July 2008, oil was trading at an all time high of 147USDs/barrel-and is around
40USDs at the moment-projected to go down to mid 30’s in early 09
Daily chartered rate for large bulk cargo ship a few months ago, was close to
240,000USDs/D, and is now only about 1% of this-a reduction of 99% in less than
6 months
In stock markets, the decline is also un-unprecedented -if you buy 1,000USDs of
Delta Airline a year ago, you would have 49.0USDs left today; -If you had
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purchased 1,000USDs worth of AIG one year ago, you would have 33.0USDs today
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The prices of world’s major commodities, such as steel, aluminum, etc are also
declined by more than 50% in a short 6 months span
How can an organization cope with changes of such magnitudes? H
H i i ih h f h i d ? How
does “Corporate Manager” manages during time of extreme “Volatilities”
and “Turbulent”
Turbulent
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4. The Five Key Fundamental Forces
y
I. The emergence of the new world order/regional
economic blocks
II.
II The Environmental Impacts on Industrial
Development /Cross Boarder Trade-How to Manage
“Sustainability”?
III. The Transition from Petroleum based economy to
“Renewable/Bio Energy”??
IV.
IV The global warming/impact to industrial development/
cross border trade
V. The re-structuring of world financial system
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5. I. The emergence of a new world order/regional
economic blocks.
The 21th century will over turn many of our basic
assumptions about economic life
The end of European domance of global politics
and economics
The decline of America as a economic super
power
Emergence of the new economic powers: China
China,
India, Russia and Brazil etc.
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6. I. The emergence of a new world order/regional
economic blocks.
World Population from AD 1 to 2001
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7. I. The emergence of a new world order/regional
economic blocks.
Population Growth from 1950 to 2050
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8. I. The emergence of a new world order/regional
economic blocks.
Human Population in the Developed and
Developing Countries from 1950 to 2005
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9. I. The emergence of a new world order/regional
economic blocks.
Economic Activity by Region in 2000 and 2050 (projected)
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10. I. The emergence of a new world order/regional
economic blocks.
Annual Growth Rates from 1990 to 2005 vs.
Income Level in 1990
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11. II. The Environmental Impacts on Industrial
Development / Cross Border Trade
The current trajectory of human activity is not subatainable
Population growth and consumption of resources such as farmland
farmland,
water, commodities will put severe strains on the world’s eco-system.
Rapid rate of consumption in energy resources, particularly oil—the
emerging of large population centers such as China, India, Brazil etc will
put further strain on world’s energy sources-
Environmental Mandates, such as restriction on use of hazardous
Mandates
chemicals in manufacturing processes and the EU’s WEEE recycling
mandates etc are all measures to regulate cross border trade.
The emergence of “CO2 abatements” are an important economic and
industrial policies
Globally,
Globally the trends of production and retail trades increasingly focusing
on issues such as :
-Global Warming; g
-Sustainability
-CO2 labeling 11

12. III. The Transition from Petroleum based economy to
y
“Renewable/Bio Energy”
“Oil is the world’s biggest and most pervasive business, the
greatest of the great industries that arose in the decades of
19th century. As we look toward the 21th century, it is clear
that mastery will certainly come as much as from a
y y
computer chip as from a barrel of oil…Until some alternative
source of energy is found, oil will have far reaching effects
found
on the global economy; major price movements can fuel
economic growth or contrarily drive inflation and kick off
growth,
recession.”
“Daniel Yergin” – President, Cambridge Energy Research Associates
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13. III. The Transition from Petroleum based economy to
y
“Renewable/Bio Energy”
The drilling of oil from black rock for the making of
“Kerosene” in a small town called “Titusville” western
pennsylvania in 1850’s served as the origin of modern
petroleum industry, with Standard Oil Co then
dominated not only the US but the world’s petroleum
production and trade for many decades
decades.
Up until 1970’s US was the largest oil producer in the
world with d il outputs exceeding 10 MM b
ld i h daily di barrels/D.
l /D
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14. III. The Transition from Petroleum based economy to
“Renewable/Bio Energy
Renewable/Bio Energy”
The Oil Shocks:
“ In 1861 oil was selling for 10USDs/barell, and quickly dropped to
0.5USDs due to lack of demand.
1. The 6 days war of 1967 -the 3rd Arab-Israeli War-oil flow was cut by
more than 60%,-Arab oil producers using “Oil” as weapon
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2. The second Arab-Israeli War of 1973-the Oil Embargo, oil prices
went from 5-6USDs/barrel to over 20 USDs as a result of the supply
disruption.
di ti
3. The 3rd Oil Shock: Oil price peaked around Nov 1985 to
31.75USDs/
31 75USDs/ barrel to 10.0USDs/barrel.
10 0USDs/barrel
4. The 4th Oil Shock: 2008-in July oil hit the historical height of
147USDs/ barrel and quickly dropped to around mid 30’s by Dec
08.
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15. III. The Transition from Petroleum based economy to
“Renewable/Bio Energy
Renewable/Bio Energy”
Crude Oil Discoveries
15

16. III. The Transition from Petroleum based economy to
“Renewable/Bio Energy
Renewable/Bio Energy”
Crude Projections of World Oil Production
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17. III. The Transition from Petroleum based economy to
“Renewable/Bio Energy
Renewable/Bio Energy”
Crude Oil Pricing Trend
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18. III. The T
III Th Transition f
iti from Petroleum based economy t
P t l b d to
“Renewable/Bio Energy”
Fundamental questions:
1. Are we running out of oil? How long before the oil
stocks is depleted? -what are the alternatives?
2. What would be the long term price level of crude oil-
and its impact to the global economy?
3. Is this transition from the petroleum based economy to
an global economic order based on Renewable /Bio
energy”?
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19. IV. The global warming/impact to industrial development/
cross border trade
The long term trend of “Global Near Surface Temperatures” increases-
from 1850-2005
f 18 0 200
The rapid rise of “Atmospheric Carbon Dioxide”
Human activities have greatly increased emissions of some greenhouse
gases (called “Anthropogenic Greenhouse Gases”).
Global warming causes p
g polar ice to thaw, sea levels to rise, and
, ,
increases the severity of extreme climate events (droughts, floods,
tropical storms).
The main anthropogenic GHGs are:
-carbon dioxide (CO2)
-methane (CH4)
-nitrous oxide (NO2)
-hydrofluorocarbons (HFC)
-perfluorocarbons (PFC)
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-sulfur hexafluoride (SF6)

20. IV. The global warming/impact to industrial development/
cross border trade
With the objective of mitigating climate change most of
change,
the world’s countries signed the United Nations
Framework Convention on Climate Change (UNFCCC) in
1992, and the Kyoto Protocol in 1997.
Two t
T types of market:
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1. A regulated market has greenhouse gas (GHG) emission limits
set by a regulatory body. Emitters have emission reduction
targets and can buy carbon credits to meet such targets.
2. A voluntary emission reduction market exists outside of any
regulatory mandate (e.g. the Kyoto Protocol), but there are
common understandings regarding project types, documentation
to be presented, etc.
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21. IV. The global warming/impact to industrial development/
cross border trade
Global Average Near-Surface Temperatures from 1850 to 2005
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22. IV. The global warming/impact to industrial development/
cross border trade
Atmospheric Carbon Dioxide
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23. IV. The global warming/impact to industrial development/
cross border trade
Human Dominance or Alteration of Several Major
Components of the Earth System
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24. IV. The global warming/impact to industrial development/
cross b d t d
border trade
By Industry:
Energy
26% Landfill Efficiency, Fuel
Switching &
1033 as of May 2008 Registered
Composting,
Coal Mine & CH4 Chemical Cement CDM Projects
Avoidance 4% 15%
Oh
Other
1%
Renewable Energy 54%
Renewable Energy 54%
Perfluoro- By GHG:
carbon 0% HFC
Nitrous Oxide 2%
3%
26% Methane
Carbon Dioxide
69%
Source: UNEP Risoe CDM Pipeline, March 2008
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25. IV. The global warming/impact to industrial development/
cross b d t d
border trade
Source: State of the Voluntary Carbon Market, 2008, p. 7
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26. IV. The global warming/impact to industrial development/
cross border trade
Benefits of GHG Redaction to Corporation
Contribution to climate change mitigation, society & sustainable
mitigation
development
Generate extra income for projects that reduce GHG emissions
and lead to achieve sustainable development goals
May improve process
May reduce costs
May demonstrate leadership
May fulfill corporate objectives
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27. V. The re-structuring of world financial system
The global financial impacts to the US sub-prime sector and the subsequent
demises of some of the world’s first tier investment firms and banks, such as
Bear Stern, Lehman B th
B St L h Brothers, AIG, Fortis and many others have resulted in
AIG F ti d th h lt d i
hundreds of billions of loses across all sectors
The sever impact of “liquidies” of financial institutions not only cause the strain of
liquidies
the entire financial world, but also severely impacting sectors that are highly
dependent on “Financing” such as housing, auto, leasing, large purchases,
leverage buyouts, hedging, M/A transitions, etc. For instance, in the US it is
believed that between 20-30% of the decline in auto sales can be attributed to
the shortage of “Financing Facilities”.
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During the past 12 months, investor confident of financial service industries have
reached all time low, which are severely impacting the future of many of the
financial products promoted by world’s financial institutions.
Longer term, it is inevitable that a “Restructing” and “New Mode of Operations”
and “Hi h R
d “Higher Regulatory St d d ” will b i tit t d t ensure a much
l t Standards” ill be instituted to h
transparent and accountable financial system throughout the world.
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28. Recommended Reading List
Jeffrey D. Sachs Common Wealth-Economic For a Crowed Planet, the Penguin Press
(NY), 2008
Ethan S H i Bem B
Eth S. Harris, B Bernanke's F d the Federal Reserve After Greenspan, Harvard
k ' Fed, th F d l R Aft G H d
Business Press, 2008
Daniel Yergin The Epic Quest for Oil Money & Power the Free Press (NY) 1992
Yergin, Oil, Power, (NY),
Al Gore, Earth In The Balance: Ecology and the Human Spirit, Houghton Mifflin Co,
1992
Lester C. Thurow, Dangerous Current: The State of Economics, The Ramdom House,
NY, 1983
Peter F. Drucker, Managing in Turbulent Times, Harper Business Press, 1980
MT: E Neumayer, Weak versus Strong Sustainability: Exploring the Limits of Two
Opposing Paradigms 2nd edn; J Kahn The Economic Approach to Environmental
Paradigms, Kahn,
Resource Economics, Dryden Press, 2005
A Hoffman, Competitive Environmental Strategy: A Guide to the Changing Business
, p gy g g
Landscape, Island Press, 2000
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