Financial situation of the Hypermarkets in Spain

During 2010, the activity of the retail sector was affected by the economic situation. The increasing unemployment plus the less confidence of the consumers conduced to a reduction of the household’s consumption. In addition, the companies were forced to reduce their prices with aim to gain competitiveness and increase sales.

In Spain are around 440 hypermarkets. Carrefour and Eroski have the 63% of the total hypermarkets.

 

 

 

 

 

 

 

It is important to point out Only 7 hypermarkets control more than the 70% food sales in whole Spain: Alcampo, Carrefour, Mercadona, El Corte Inglés, Eroski y Dia.

Carrefour and Eroski where the two companies that opened more stores during the last 4 years. Since 2008, the sector faced a

Carrefour is the leader. It came to Spain on 1973 (Barcelona) with the Pyrca Supermarkets. Today it has the 44% of the total hypermarkets on Europe. Since 2000 it has opened 49 more stores (that represents a grown of 42,2%). In 2010, Carrefour in Spin registered sales of 12.679 millions of Euros, that represents the 42% of the total European sells and just the 14% the worldwide sell.

The financial crisis had affected the financial behavior of the whole sector. For example, the sales fell 3.3% in 2010 as the result of a decline in purchasing frequency among customers and a deflationary trend that negatively affected hypermarket grocery sales. So, the impact on profitability from the downturn in sales and the decline in profit margins as a result of commercial investment, particularly in Spain, was partially offset by disciplined management of general corporate expenses, especially in Spain and Poland. Operational investment in Europe totaled 452 million Euros, representing 1.8% of sales.

Eroski situation is similar. At end of 2010, Eroski presented an operational result (EBIT) of 100.000 million Euros, a 17% higher than in 2009. This could be explained because the “extraordinary” incomes increase 18%, besides the reduction of the cost (goods 2,5% and administrative 1,5%), despite the decreasing of their sales (3%). Nevertheless the net profit still negative (-64,6millions), although is better than the one registered in 2009.

The financial debt (long and short term) had an important decrease (454 million Euros). For this reason the liabilities were reduce 8% (5,2 billions Euros). The equity was about 1 billion Euros and so, the assets were 6,2 billion Euros.

At the contrary, Mercadona increased their sales from 14,4 millions Euros to 15,2 millions Euros (6%), that permitted an operational result (EBIT) of 560.000 Euros and a positive net profit almost 400 million Euros, result quite higher than the presented in 2009. Their liabilities were around 2,8 billions Euros, in which is important to point out an increase of 70% of others liabilities in non-current account. Both, the short and the long term debt were reduce (8% an 3% respectively). The equity increased by a 20% (2,2 billion Euros); the assets were of 5 billion Euros and 11% higher than 2009.  In this case, the company had an aggressive sales strategy, improving their own brands, specially on beauty, & clean products.

Sources:

http://www.carrefour.es/grupo-carrefour/carrefour-en-espanya/

http://consultoraempresarialbestrongretail.blogspot.com/2011/08/hipermercados-2010-el-fin-de-una-era.html#!/2011/08/hipermercados-2010-el-fin-de-una-era.html

www.eroski.com

 

Comments Off on Financial situation of the Hypermarkets in Spain / 02 Dec 2011 por Diana Patricia Sanchez Barajas
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Environmental Accounting: Case Study Analysis

Imagine a factory located upstream that pollutes a river. It produces steel for the automotive industry. Downstream, local fishermen find they catch less fishes due to the pollution.

Both are flourishing businesses that produce wealth and prosperity for the community. But there is a problem environmental economists must deal with:

1. Can you suggest any criteria that could be used to decide on who has the right to use the river? The factory, the fishermen, both?

There are several criteria that could be analysed in this particular case, and they include the level of dependence on the river for the fishermen, in comparison to that of the factory. The history of the two parties’ experience with the river should also be taken into account – e.g. who was using the river first and for how long? How important has the river been to each parties’ business? What is the percentage of income generated from using the river? In addition, the magnitude of the pollution in the river caused by the factory can also be studied to understand its environmental effects, such as what element is causing the decrease in number of fishes and whether it will also have an impact on other animals or human beings living in the vicinity of the river. An important criteria that should also be considered are the laws governing the use of the river and other rules or regulations that are enforced, such as natural laws, or environmental laws, in the area where this case takes place.

In many places, a river is generally assumed to be public property and is accessible to the public for multiple uses, such as swimming, fishing, boating, and other activities. In such situations, the river and its running water can be utilized over and over again by the people who use it, as long as the fishes can survive and the quality of the river’s water is maintained.

In this case study, it is obvious that the lives of the local fishermen are dependent on the river as they use it to fish and make profit. The way they practice their fish-catching activities have also been quite safe for the river as the fishes have managed to survive all this while, before the river was polluted by the factory. The cleanliness and well-being of the river is also vital to the rest of the community because a badly polluted river is more likely to cause disease, endanger the lives of fish and other wildlife, produce malodours, and will certainly be an eye-sore to the residents living nearby the river.

On the other hand, the factory is not dependent on the river to make profit. If the river becomes overpolluted or dries up some day, the factory could change the location of their dumping site and this action would have little effect on their business. By dumping their waste into the river, the factory is causing the quality of the river and the area around it to deplete as it gets polluted. Therefore, the factory’s use of the river is causing damage to public property, as the areas around the river, including any residential areas nearby the river are also receiving the negative affects of the pollution. The polluted river becomes detrimental to the community or public as people will not be able to use the river anymore since it is deemed unsafe. The potentially hazardous waste that has been dumped into the river may also leak into the drinking water of the community, and its chemicals may poison animals and other wildlife that utilize the river.

With regard to the economic prosperity that both businesses are contributing to the community, the continuous dumping of waste into the river would mean the end of business for the fishermen, which would greatly affect the local fish market and the economy. However, if the factory can come up with another solution to manage their industrial waste without dumping it into the river, both businesses can continue to flourish and the community can still benefit from the economic activities of both parties.

From the criteria mentioned and the brief analysis of the case above, it can therefore be concluded that the fishermen should have more right to use the river as compared to the factory.

2. Can you propose any instrument or agreement to solve the problem?

A cost-benefit analysis could first be adopted to analyse the costs and benefits of each party’s use of the river. Then for the short term, I would propose the use of regulation, or enforcement of the law to solve this problem. The factory should be fined for polluting the river and causing damage to public property, ordered to stop their dumping of the industrial waste into the river or they would have to shut down the factory, and perhaps some compensation should be extended to the fishermen as well, because their business was badly affected by the pollution, which caused the number of fish in the river to decrease.

For long term, I would suggest the incorporation of extended accounts such as that of the NAMEA into the national account as it takes into consideration the multi-dimensional aspects of the environment and relates it to the economy in efforts to develop sustainably. It could be used to measure the impact of certain cases on the environment, such as the case discussed above, and provide statistical analysis that can be further studied to decide on the best ways to handle future cases concerning the environment.

Comments Off on Environmental Accounting: Case Study Analysis / 01 Dec 2011 por Syafrina Sharif
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Strategy- MARS ICE CREAM: DISTRIBUTION STRATEGY PROBLEMS

From the launch of its first product in 1989, Mars did build a European Market share, reported as being between 5 per cent and 10 per cent of the total market, with a share of between 10 per cent and 20 per cent of the chocolate ice cream bar segment.

Mars´ share of the European ice cream market was achieved through the launch of a range of products that largely build on its well-known confectionery products which are pan-European in branding and widely distributed. The ice cream products are all branded exactly the same across Europe and are nearly all produced at one factory in eastern France.

Ice Cream Mars was the first of the product range, followed by others from its confectionery range such as Snickers and Opal Fruits. Its chosen strategy deliberately used high-quality ingredients, such as real cream and real chocolate, the use of significant advertising support across Europe and the establishment of a new premium-price category in the market place.

European ice cream distribution:

In addition to its confectionary branding revolution, Mars invested considerable effort in freezer distribution as part of its business strategy. Its excellent and long-standing relationships with the grocery trade meant that it had no major difficulty in this sector in obtaining distribution for its multipack items. However, problems did arise in other sectors of the trade account for a substantial share of the ice cream market.

Ice cream distribution to retail outlets involves high costs because the need for frozen storage and vehicle transport. This is made worse by several factors:

• The low unit cost of the items carried. Therefore, it makes necessary to sell many items to balance out transport costs.
• The small drop sizes of orders to non-supermarket outlets. Small shops can only sell limited numbers.
• The related difficulty of making up economic loads within a sufficiently compact geographic area.

As a consequence, all ice cream manufacturers have devoted considerable time and expense to ice cream distribution. In the UK, Ireland, the Netherlands, Germany, Denmark, Spain and Greece, long time competitor Unilever followed a policy of offering free freezer cabinets to retailers for the exclusive use of its products. Large supermarkets and multiple retailers have generally not taken up this offer but many small outlets have done so. In countries where it has some distribution strength, Nestlé followed the same policy where possible. It even did this where it was clearly in a weaker position than Unilever.

Mars ice cream distribution strategy:

Mars has faced an uphill struggle to gain distribution. Essentially, the company has been denied access to Unilever and Nestlé freezer cabinets in many European markets.

All retailers had the options to install their own freezers. Mars was forced to operate schemes either to make loans or sell freezers, depending on the outlet. It has also attempted to negotiate distribution agreements with companies that were in second or third position in various national markets across Europe. In the UK, it had a deal with Lyons Maid before the company was taken over by Nestlé. In France, it negotiated an arrangement with Miko before it was bought by Unilever.

From the viewpoint of a retail customer, Mars´ strategy is not always attractive because it does not sell dessert ice creams, bulk packs or children´s novelty ice creams, for which there is also demand. The retailer thus has to seek alternative suppliers of these items and Mars has to allow them into its cabinets in order that a complete range is stocked.

Overall, it is not surprising that the Mars company said that it had made no profit on its ice cream activities up to the mid 2000s. It was unclear whether its chosen strategies would overcome this difficulty in the coming years.

Case questions:

1) How would you resume the strategies adopted by Mars to launch its ice cream products?

According to text below (without the inclusion of external information) the mars strategy was focused on:

1. High-quality (and furthermore, a high cost production)
2. Very concentrated production (only 1 factory located in France).
3. Higher prize due to quality and the advertising
4. The idea to establish a social status. Because of the prize and quality, people who eat its ice cream couldbelong to a particular “social status”.
5. Selling in multipack items would reduce the distribution cost. It is, a priori, cheaper because of it is possible to include more ítems in one truck (However, this multipack packaging turns out to be one of themost important problems in the distribution stage)
6. High efforts (and costs) for frozen.
7. After the loss of the market, Mars tried to deal with the competitors in order to maintain its sales.

2) Do you think that Mars will ever make significant profits from its ice cream operations? Why? How?

From my point of view, the initial strategy of Mars lacked a deep analysis about the real possibilities of itsproduct. Apparently they did not consider either not analyzed properly, the Rivalry between competitors and the threat of the entry of new competitors and the entry of substitute products (Porter, ME, 1979).

Although the idea of developing a high quality product has an important value, it also increase the production cost. In other markets such as clothing, the price itself can be a major factor for belonging to a particular “class” or social status but on the ice-cream market is different. We value the taste, which it sometimes is not directly related to its quality.On the other hand, the idea of selling a multipack, limits the sales market. It is necessary to operate in different formats or include one in particular according to the market opportunities. I believe that Mars focused on in the retails outlet as a potential market not considering enough the complications for the retailer’s distribution. The lack of forecast supposes, as discussed above, great difficulties due to the excessive costs per unit, and the complexity to recover the economic burden associated with the distribution for each geographic area.

Thus, Unilever (and its associated brands like Mini and Beng & Jerries “) and Nestlé (with its brands such as Nestle Crunch, Extreme, Maxibon …) introduced on the market a wide range of products. The possibility to purchase in various formats and the free freezer cabinets delivery was a major advantage compared to the limitations of Mars. The inclusion of “exclusivity” in the freezer ensured a huge market share to Nestle and Unilever and the need of Mars for negotiating the possibility to include its product. It is also important to point out that sellers need to sell products for all possible markets, such as dessert ice creams, children´s novelty ice creams, and the type and format of Mars ice cream did not offer such alternatives.

Finally, from my point of view, I think Mars might make a profit from its ice cream through the following marketing strategies:

1. One possibility is to adapt the product to the future market. One possibility would be to reorient itsstrategy to focus more on produce (and communicate) a more healthy and suitable for whole year consumption. This would ensure the sales (not just in summer) and let the company to put efforts in healthy ice creams.
2. Company also should improve the distribution and format possibilities. It should adapt to the real needs of each market distribution.

Resource: (Porter, M.E. ;1979) How Competitive Forces Shape Strategy, Harvard Business Review, March/April 1979

Comments Off on Strategy- MARS ICE CREAM: DISTRIBUTION STRATEGY PROBLEMS / 01 Dec 2011 por Carlos Cerdan Infantes
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Finance: Hypermarket situation in Spain

The basic strategy of big supermarkets would be based on the bulk buying of the goods they retail. By doing this they have a lot of power in the negotiations with their suppliers which accept longer term paying conditions. Now, the supermarkets have lots of inventory on credit this means they haven’t played for, and they sell it really fast. This way they are making profits without using their money. Allowing them to have big positive cash flows and inventory rotation, while having high current liabilities from the debt to their suppliers.

 

 

This strategy however has a down side especially when the economy slows down, this means that hypermarkets can face a situation where their sales reduce thus slowing down inventory rotation and their cash flow. This might make it a bit difficult to face their current liability affecting the company’s liquidity. In this type of situation would be better for the hyper markets to take a more of a just in time approach in their strategy making sure that what they are buying gets sold immediately, besides a lot of the products their dealing with are perishable goods.

 

Comments Off on Finance: Hypermarket situation in Spain / 01 Dec 2011 por Javier Solano Palacios
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STRATEGY ASSIGNMENT AND BUSINESS CASE

As we have been analyzing in the first 3 sessions of the course, strategy is the pattern or plan that integrates an organization’s major goals, policies and action sequences into a cohesive whole. Business Strategy is concerned with an organization´s basic direction for the future: its purpose, its ambition, its resources and how it interacts with the world in which it operates. Business strategy is basically about competitive advantage, the plan that enables an organization to gain, as efficiently as possible, a sustainable edge over its competitors.

Obviously, the purpose of this course is to equip you students with the core concepts, frameworks and techniques of business strategy. The good strategist analyzes the industry environment and the internal generic conditions of its competitors in order to get conclusions about the concrete situation of his company and design all the possible ways to compete within its industry.

Since we have examined each of the different components of the business strategy and the basic tools of strategic analysis, now it is time you show me that you have understood the basic frameworks and techniques of business strategy.

The business case has been sent by mail.

Each one of you has to upload a post answering to the two case questions. If you have any doubt, don´t hesitate to contact me via e-mail.

I profit to send you a couple of very interesting and enlightening links. The first one is a debate between longtime Fortune magazine technology writer and guru David Kirkpatrick and Mark Zuckerberg, co-creator of the social networking site Facebook, of which he is Chief Executive and President:

Pinche aquí para ver el vídeo

The second one is a lecture by Dr. Patrick Dixon, a world famous and renowned author and business consultant, one of the most influential business thinkers around the world:

http://www.youtube.com/watch?v=_kZl15houUc

From Jon Icazuriaga, EOI´s teacher.

1 comentario / 01 Dec 2011 por evacurto
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Environmental Accounting. Factory pollution and Fishermen.

Imagine a factory located upstream that pollutes a river. It produces steel for the automotive industry. Downstream, local fishermen find they catch less fishes due to the pollution.

Both are flourishing businesses that produce wealth and prosperity for the community. But there is a problem environmental economists must deal with: 1. Can you suggest any criteria that could be used to decide on who has the right to use the river?  The factory, the fishermen, both? 2. Can you propose any instrument or agreement to solve the problem?

The July 28 of 2010, the United Nation General Assembly approved a resolution that recognizes the drinking water as a “basic human right”. However, although the problem proposed is not about drinking water, in my view, everyone has the right to use a resorce.

The river is a resource that both (the factory and the fishermens) can use as long as they use it bearing in mind the sustainability requirements. Therefore, in this case the factory loses its status of “user” because of it is changing the ecosystem in a non-sustainable manner, polluting, killing fishes and consequently avoiding the fishing. From my point of view, both may use the river but solely in a sustainable manner, without altering the system and thinking about the future generations.

In this case, because of the use of the river by the factory is to pollute and also the river is not able to assimilate this pollution, it does not make sense that the factory has the right to use the river. The “property to use a resource has to be linked to a “proper” use.

Regarding to the second question, and taking into account that sometimes the environmental and social cost sometimes is incalculable, I would propose the following solution:

1. Remove the contamination. The first point would be to remove immediately the contamination focus.
2. Economic and Social Analysis. In parallel, an expert (such as a consultant/ researcher) should calculate the economic and social impact during the days that the fishermen cannot catch enough fishes. The economic analysis is relatively easy while the social impact, in this case, could be included as an economical impact.
3. Environmental Analysis. Once the contamination focus has been removed, and in parallel to the economic and social analysis, I would propose to carry out a project in order to evaluate the current status of the river. I will analyse the different necessary actions and the estimated time until the fish population was similar to the previous situation (or at least, a stable that allows a controlled and stable fishing).
4. Payment. After the Economic, Social and Environmental Analysis, I would force the factory to pay for each day that the fishermen cannot catch enough fishes (multiplying the economic analysis with the necessary time to recover the ecosystem)
5. Regulation. Finally, once the fish population has been stabilized and based on the Environmental Studies, I would set an emissions limit and pollutants that allow the sustainable exploitation of the river. Furthermore, if the company exceeds these emissions/contaminatin limits, it could face to criminal sanction due to its liabiloty. Thus, forecasting future impacts and problems, and taking advantage of existing studies developed, I will apply a captures limit to avoid a future possible overfishing.

To sum it up, both sides are entitled to use the resource as long as they have as a common goal the sustainability; it is considering not only the economic factor, but also the social and environmental factors. However, a doubt arises; Is it possible that the cost of theses studies are not payed by all the taxpayers? Maybe…

Comments Off on Environmental Accounting. Factory pollution and Fishermen. / 01 Dec 2011 por Carlos Cerdan Infantes
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Managerial skills. Final Blog

Learn about how humans should behave depending on the situation presented, is something that seems to philosophical and at the same time to simple. On the one hand, it is related to the intersubjective constitution of human’s beings.  It means, the necessity of others for life and the capacity to communicate and deal with others. On the other hand, it is just about “living the life”. It is about being consequent between what we want and what we do. We know that the way of communication and relation that we have, change depending on the situation that we afford. It sounds obvious that if we want to go to a party we should try to convince mama about it, before starting a fight. And we know that the “language” that we need to use is quite different (maybe polite), than the one we use with our friends.

I said these because, as more simple, more important. But this is something that we usually forget.

Learn (or re-learn) things like the importance of being aware of what happens outside (society, clients, workers, etc) and inside (us), the relevance of the “why” and the “how” besides the “what”, the creation of value over the destruction of it, and the recognition of the other, transcends the aim of the preparation for being a successful leader to the cultivation of values and ethics in humans.

For this, I appreciate the opportunity given. It was great and I am completely sure that this is an important input to improve the abilities needed on the professional camp and for the personal life.

 

Comments Off on Managerial skills. Final Blog / 30 Nov 2011 por Diana Patricia Sanchez Barajas
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Managerial Skills Evaluation

When I saw for the first time, what topics we are going to cover I was a little bit afraid that the class would be boring and basically I will repeat the same things I’ve learned doing my bachelors. But fortunately for my peers and me it wasn’t the case. Managerial class turned out to be a great experience from which all of us could benefit a lot. In class we covered three main topics: How to be a good presenter? How to negotiate? How to be a successful leader? Before attending this class all of us knew something about it, but it helped us to structure our knowledge and what is more important how to implement into practice i.e. our future professional life.

Our teacher Christopher Metcalfe was great and knew how to deal with our weaknesses and make us better in what we do. A sentence that really stayed in my head was what Abraham Lincoln once said: “Whatever you are, be a good one”. It really made me think how people are doing a lot of things. They do their task not because the believe in what they do, but they do their tasks only to get over with them. It is something I will definitely try to change in my behaviors.  As far as the presentation are concerned I’ve acknowledged what mistakes am I making and how to change that. I am also able to introduce the methods of preparing the presentation how to plan speeches, essays and any kind of dissertation, oral or written. Negotiation gave me a basic notion of what it is, but with little time we had it was impossible to become good in it. However, we became AWARE… My favorite part was about leadership, because it is the most applicable knowledge that we got. I really liked the Pickle Jar theory, which I’ve already started to implement into organizing my time. The only problem I may have is with setting priorities.

Depending on what the famous point B was, people whether got there or not. For me point B is to being aware of the basic rules and characteristics of a good manager. So I can proudly say: I’m now at point B!

 

Comments Off on Managerial Skills Evaluation / 29 Nov 2011 por Piotr Adam Lubiewa-Wielezynski
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D.P.# Politicians and Rulers: are they working for the development of countries?

In my texts I’ll discuss the role played by our current politicians in the social development of the countries in the world. Before starting, there are some assumptions that have to be clear. First of all, this is a general topic, obviously there are differences between countries, but the considerations are applicable to most of democratic systems around the world. Second, the aim is not to define development, but we will assume that development is not the same as wealth or economic power.

To begin, it’s important to point out that in the inception of the organized States and democratic governments, they were considered to be a way that people could live in society and fulfill their basic needs of security. Greek Plato, in his book called “The Republic”, introduced an idea of justice and Form of Good, mentioning the government as a way to promote this. Since then, fighting for power became the main purposes of most prevailing states in the world, regardless the historic context.

However, in the second half of last century, the world reached a point that was unknown in its history. The population grew fast, the natural resources were extensively consumed and the gap between rich countries and poor countries became more evident, as well as the gap between rich people and poor people. The first relevant public concern about this came up at the end of the 60’s, when the Club of Rome¹ presented a study² conducted by Jay Forrester, professor at MIT, in which he affirmed that the main problems in the world were generated by growth, not only population growth, but also economic growth.

Obviously, governments refused this theory and the economy kept growing, widening the abysm between rich and poor, extensively damaging our environment and promoting conflicts around the world. The preferences for local and short-term results have intensified, becoming the mainstream trend for government policies and private actions. Taking consumption as an obsession, governments argued that it would lead us to economic growth, which by itself would lead us to the development, the equality, and using a metaphor, to the “greek Form of Good”.

Unfortunately, facts have shown us that the world reached an unsustainable consumption level, the poverty is widespread as it has never been in absolute terms and the environment is asking for help. And how is the world facing this challenge? With more attempts toward economy growth!!! Day after day, countries are provoking artificial economic growth, based on credit concessions and huge fiscal deficits. As the results of these policies indicate, the current economic model has clearly got to a dead end and the leaderships are all covering their faces to avoid seeing it, preferring to leave these concerns to be dealt in the future. In next posts, I intend to explore what are the principles that avoid our governments to face it properly and if there are changes coming ahead.

Finaly, I’d like to add a very short video about the main idea presented in the document “Limits to Growth”, that resulted from Jay Forrester’s team work, regarding the Club of Rome’s request. It’s amazing how the time has reinforced their conclusions.

 

¹ Club of Rome: Founded in 1968, it’s an independent non-profit organization, which mission is “to act as a global catalyst for change through the identification and analysis of the crucial problems facing humanity and the communication of such problems to the most important public and private decision makers as well as to the general public.” The organization relies on the work of its almost 100 members, from the scientific, political, business, financial, academic, religious, cultural and civil society communities.

² Forrester, J.W. 1971, World Dynamics, Portland, Oreg.: Productivity Press.

 

Sources:

Meadows, D. 1999, Leverage Points: Places to Intervene in a System, Hartland, VT.: Sustainability Institute.

Club of Rome. [online] Available at: <http://www.clubofrome.org/>. Accessed on Nov.29th, 2011.

Comments Off on D.P.# Politicians and Rulers: are they working for the development of countries? / 29 Nov 2011 por Fabio Pinto Almeida
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Environmental Economics: Rivers, public goods, same value?

Water is a resource which everyone can value, as for everyone uses it. The value of each person will depend on the importance and different uses that people give to it, becoming in this sense subjective topic.

What happens when an industry upstream pollutes water? Instead of being available to drink, it becomes risky or mortal. If it meant an economic source for families, it ends being a resource not available anymore. In this sense, no one favors from the contamination of it, and value changes whenever pollution enters into the game. Fisherman will give more value to it once they understand their source is exhausted (whatever becomes scarce acquires more value), same thing will happen to the people who benefited from being able to drink the water, cook or just take a clean recreational bath. Respecting to biodiversity, it’s a pity we can’t ask the lives involved in it, but I’m sure they will have given their value and their complaint. On the other hand, industry will still use water to its original purpose- getting rid of the waste- and value it the same way, in the sense that things keep on going the same way for the factory.

Science the topic becomes subjective and the wildlife involved cannot be included for evident communication issues, real value is not measurable. As humans, we can quantify the economic loses of the fisherman if we look at the sector in an economic and historic way. The alterations of price in the water market can also be registered- again, if clean water becomes scarce, the prices in the water market would rise as a natural consequence.

Considering what can be measured, we can make the company pay for what’s measurable. It’s evident that, even if we cannot assign value to water (it’s subjective), water is something we all benefit from (we cannot live without it). From this point on, pollution must be prohibited, loses must be compensated and a waste disposal facility must be built by the company in order to keep operating. For this, State can offer the company financial sources. This alternative can only be considered so that the company can pay the damage and build the necessary facilities to keep running, so it doesn’t keep making the damage worse, cooperating by so not increasing water prices for society.

It’s difficult to arrive at this issue with just one point of view. Depending on the different externalities that are related to the main problem (the river is now polluted), Pigouvians, Coasians and Environmentalists will approach accurately at some pints. Nonetheless, it’s clear that externalities have to be covered, reason why effectiveness emerges as a main factor for the decision making among the resolution of this issue. Money arises with the issues alone, but all approaches considers it, in this sense, all of them get even to have at least a point in common.

Comments Off on Environmental Economics: Rivers, public goods, same value? / 28 Nov 2011 por Rodrigo Capriles Mazzei
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