London/Paris: Unique Challenges & Trends Faced by Luxury Industry

During the past week, our study tour has visited 10 companies in the retail sector. They are mostly in the luxury industry but ranging from very different categories. I have noticed a few key trends and challenges they are facing as retailers and thought it would be interesting to share with you.

First of all, branding is the key to success for luxury retailers. Customers are looking for a story and special heritage from them. The Director of Savoir Beds called it “a touch of magic”. There must to be some kind of exclusivity and bespoke aspects to make products luxurious. A good example of this would be the fine jewelry collection at Vancleef. Every piece of jewelry is unique and only available to its VIPs. Pricing is not even allowed to be disclosed at the boutiques, making it the ultimate luxury for its clients. 

Another trend in the luxury industry is to go online. In 2017, e-tail accounted for 10% of global luxury goods consumption, and it is forecast to continue to grow. Luxury brands are slow to the game because it is difficult to replicate the luxury shopping experience you get from stores when shopping online. It is also buying higher price point items; therefore, consumers might not be willing to spend that much buying goods online without seeing in person. There are certainly solutions to address these issues but can be costly for smaller players. A large amount of money will need to be spent to create a great website experience. They have to make sure that delivery is done seamlessly in a short period of time and have to leave room for a higher rate of return. Brands are hiring dedicated digital and social media team to engage the growing numbers of online shoppers and this would definitely be a competitive advantage if done right. 

Multiple companies we visited mentioned that they have started to put extra attention on Chinese customers who have large spending power. New payment methods, such as WeChat Pay and AliPay are installed for the ease of payments. Sales associates are becoming more diverse and have to know how to speak Mandarin. Tailored holiday products and store decorations are done to welcome Chinese customers to stores and websites. There are lots to be done to manage the rise of shoppers in Asia but brands are seeing the importance of tailoring to shoppers from around the world.

Lastly, fashion industry is moving fast. Consumers change taste quickly and are expecting new designs and products coming out every season. As mentioned at the Vancleef presentation, fine jewelry has always been a slow process but they now notice that customers are asking for more and more. Brands must know how to balance creating new products versus maintaining the value of products to maintain the luxurious image.

Margaret Hung (CBS ’19) is an MBA student at Columbia Business School

The Last Days of Chazen China

After a packed Thursday, including an evening alumni cocktail event overlooking the Bund, Friday was our last day of company visits.

Our first stop, Sequoia Capital, needs no introduction. As we walked pass the “Wall of Fame,” which included Paypal, Google, and Apple, we gathered around the conference room to hear Trency Gu eloquently describe the differences between Sequoia US and Sequoia China and TMT and healthcare investing. Unlike the US fund, Sequoia China does not exclusively invest in TMT; it also invests in healthcare, consumer, and industrials. While describing the healthcare investments, Ms. Gu said, “China is very good at the basic research science, but there are major gaps from basic science to translation into application and commercialization. China needs to put more effort into filling that gap, we need to get better at tech transfer.” This gap provides ample investment opportunity for Ms. Gu and Sequoia. After a moment for viewing pictures along the wall of fame, we thanked Ms. Gu for her time and traveled to our last group lunch.

Throughout the whole trip, the members of the Chazen group often found ourselves saying “Why don’t we do this in America,” or “We should bring this back home.” One of our favorites was the mass utilization of Lazy Susans. A Lazy Susan is welcoming in its efficiency, beautiful in its simplicity, and stunning in its functionality. Intellectual conversations are not interrupted by “Alex, can you pass the hoisin sauce?” or “Alex, can you pass the dumplings?” People are not embarrassed to eat the last piece of spicy Szechuan chicken because it is in Ernie’s reach zone, they can merely swirl the Lazy Susan and grab that piece of chicken. Ok, my ode to the Lazy Susan is now complete, had to share.

After lunch, we split into two group for a visit at iZhaohu. One group went to the corporate office and the other went to a care home. At the corporate office, we entered a room filled with flat screens tracking accident rates, the movement of elderly, morning wake up times, and various other metrics. We were shown IoT enabled home furniture and beds to track such metrics, the bed included an “Alexa” like screen that talked to senior citizens. We were impressed by the integration of AI and by all the technical advances on display. During the Q&A sessions we were told many of the objects shown in the promotional videos and in person were merely concepts and yet to be fully integrated. We were also informed that iZhaohu was able to grow from a handful to 70 locations in less than five years because the government provided cheap or free land/housing—another example of the intertwinement of government and private enterprises.

The two Chazen groups switched, and my group was off to the care home to see how much of the technology was implemented. The home is a short-term care facility for the elderly with injuries or those whom need monitoring for three to six months. As we walked through the facility, we saw vast similarities with US care facilities. The home was not for the mases, it was for those that could afford luxury. We were disappointed to see that many of the “wow” aspects of the videos were merely promotional and not implemented. Clearly iZhaohu has valuable ideas and technology, but implementation is not the norm. We look forward to following the iZhaohu story and someday adding their technological ideas to the list of “we should bring this to the US.”

At the end of the iZhaohu tour, we had a goodbye dinner for our fearless faculty advisor, Lorraine Marchand. Afterwards, it was time to entrench ourselves in the local culture and blow off some steam. We went out on the town and bonded as a group on the dancefloor and later in room 1012 over some late-night snacks. The next morning, a thin crew went sightseeing, but in the afternoon, almost everyone came to the lobby of the Shanghai Tower for the 45.8 mph elevator ride to the 118th floor observatory, 1791 feet in the air. We were fortunate that the smog and clouds were gone that day and we could see far into the distance. This was the last planned group event; standing on top of the world’s second largest building was a great way to conclude a wonderful trip.

Immersing in Chinese Healthcare Companies

After an epic day of sightseeing, we checked out of our hotel and headed to our last office visit in Beijing: DIH Technologies (“DIH”).

The pre-arrival bus discussion focused on how the scope, size, and geographic reach of DIH was not clear via publicly available information. The group was intrigued by how a company could focus on pharma and physical rehab innovation.

However, once we poured into DIH’s massive boardroom, our doubts were quickly squashed. The presenters explained the various rehabilitation machines and the separate pharmacy delivery machinery (the “Pharma Division” was more of a pill dispensing robotic division). We learned that DIH is indeed a global company with offices in Boston, Switzerland, and Hong Kong.

As with many growth stage healthcare companies, DIH referenced innovative use cases for artificial intelligence (“AI”) in combination with their currently available machinery. Typically, I roll my eyes when a company dedicates a significant amount of a company introduction to AI; while it has the capacity to be revolutionary, the revolution is not happening yet. However, there was something different about DIH. Maybe it was the numerous use cases or the multiple video clip examples, but it felt as if DIH’s AI revolution was just around the corner while most companies were barely ready to start. DIH believes that rehabilitation from injury should be a full body experience facilitated by their 360-degree full screen. AI puts the patient in the real world and has them perform tasks in a controlled environment (typically wearing a harness to avoid falling).

We left the boardroom  and wrapped up our visit with a quick show room tour of the various machines. Traditional Chinese Medicine (“TCM”) cares greatly about how the body interacts with the environment and this is a focus of DIH. Rehabilitation has always been a focus of TCM and it appears DIH will have a place in the rehabilitation ecosystem for many years to come.

Before boarding the bullet train to our next destination, we scattered around the train station for traditional train station food, Pizza Hut and McDonalds. After a clean, smooth, and enjoyable ride (a.k.a., the anti-Amtrak) we arrived in Shanghai. With no group dinner planned, we split up to dine at various locations and get a good night sleep before a packed day filled with three company visits.

The first stop was Shanghai Pharmaceuticals Holding Co Ltd (“SPH”), China’s number two pharmaceutical company. Many of us tangentially knew about SPH, roughly an $8 billion market cap, but walked away with a detailed understanding of how a Shanghai/HK dually listed publicly traded company that is 33.6% owned by the State operates in China. Regardless of the minority ownership, the State controls the board and thus, controls the company. The State, specifically the mayor of Shanghai’s office, must approve purchases above 300 million RMB. Regardless of this intertwinement of government and industry, SPH appears to be a successful pharmaceutical R&D, manufacturing, and distribution company. SPH might have the word “Shanghai” in its title, but it is a global firm with offices in San Diego and Philadelphia. Many pharma companies are global companies with headquarters in a certain location and domiciled in a certain country, but have a global culture, SPH clearly hopes to mimic such a model.

After a quick lunch, we headed to Lily Asia Ventures (“LAV”), one of the biggest early stage biotech-focused VC firms in China. Founded in 2008 as the corporate venture arm of Eli Lilly, it is now completely independent of its former pharma parent. There were rumblings that the Chazen group was feeling the angst of “case withdrawal” after a week away from school; fortunately LAV understood the needs of a business school audience and prepared three case studies to present. LAV did a phenomenal job at walking the group through actual investment theses without losing the group in deep scientific details. After learning about the biotech investing side in China, it was time to visit the Chinese arm of one of America’s innovative biotech companies.

Fosun Pharma (“Fosun”) is an integrated healthcare company with pharmaceutical, distribution, device, and aesthetic divisions. We met with the CEO of FosunKite, Fuson’s joint venture with Kite Pharma, part of Gilead Sciences after its August 2017 acquisition for $12 billion. Kite’s Yescarta is approved in the US; FosunKite is diligently working for CFDA approval. We learned the similarities and differences of the Chinese regulatory body. The CEO described how FosunKite is not merely a Yescarta in-licensed company, but also they are an R&D enterprise leveraging the intellectual talent of the Chinese universities and organizations. The group debated the cost of Yescarta, specifically where cost reduction could occur, and whether the Chinese market would react differently than the US market if a similar $375k list price is published. FosunKite provided a strong understanding of how an American biotechnology can symbiotically partner with a Chinese healthcare conglomerate. Based on what the Chazen group witnessed, many US companies would want to form similar ventures as FosunKite.

The future of Brazilian capital

One short flight later and we landed in Rio de Janeiro, iconic postcard child of Brazil, painted in pastel colors and white buildings. As we pull up to our beachfront hotel in Copacabana, the beach permeates the air: locals and foreigners flock to enjoy agua de coco by the water on the black-and-white tiled boardwalk. In some ways the beach is the great equalizer: we, as well-off tourists, enjoy the enormous crashing waves as much as residents from all walks of life in this beautiful and unequal society we’ve been so fortunate to explore over the past week.

Our study group strikes a pose on a film set on Globo’s campus.

As we kicked off our company visits, the theme of a self-contained market resurfaced. At Grupo Soma, a multi-brand retail giant in the country, we learned how they are slowly testing expanding outside Brazil in three American cities before deciding to globalize the brand. Globo, the monolithic media conglomerate that reaches 100M viewers daily, is focused almost exclusively on viewership in Brazil.

By now, almost every company has mentioned that Brazilian capital markets are underdeveloped and it is holding back the economy. Individual business owners make decisions not to invest and growth is impaired. The representatives at private equity firm Patria Investimentos cited a lack of local investors and long-term savings as major reasons for this underdevelopment. Moreover, the level of international financing is low. Liquidity is further constrained by historically high interest rates in Brazil that are meant to curb inflation but practically imply that when there are savings, people would rather park their money with the government and enjoy risk-free returns of up to 14%. This all makes sense and is relatively uncontroversial in theory, but in practice, it is expectedly complicated.

Roller coaster rates show a recent historical low of ~6%.

Nevertheless, the low desire for long-term investments has another if not bigger cause: the looming specter of ballooning pension liabilities. While the current system has been in place for decades, the sheer volume of liabilities is hitting a terrifying crescendo: R$300B in 2018, equivalent to 4% of GDP. Combining a young retirement age with a large young population, pension liabilities represent a time bomb in Brazil’s government finances.

Over the week, an underlying tension has become clear to us: the business community we’ve spoken with almost unequivocally supports some sort of pension reform, while many Brazilians most hit by potential change vehemently oppose it. Jair Bolsonaro, Brazil’s current and frighteningly controversial president, has managed to play both sides of the game by making campaign promises to leave pensions alone yet pushing forward reform once in office. The financial services firms we met (Patria Investimentos, Redpoint Eventures, and BNDES) all expressed skepticism about whether reform would pass but agreed that investment capital would be unlocked on a massive scale if it did.

In this scenario, available investment capital would increase in tandem with risk-taking and long-term investing. Brazilians can no longer enjoy a 14% return on savings and short-term lending. They will need to buy risk in other ways moving forward. Increasing willingness to take financial risk almost certainly would energize the start-up ecosystem and the growth of the small-to-medium business sector. Brazil’s massive national development bank, BNDES, believes an important role they play in the economy is counter-cyclical credit availability assurance, especially for small-to-medium business; this role would only increase in importance with a national rise in investment. From the business perspective, this is quite a rosy picture of what may happen if pension reform succeeds.

I get the sense that we are encountering an economy—and country—on a precipice. The option to maintain the status quo is running out. Pension reform is moving through the legislature as both support and opposition reach a fever pitch. Indeed, as we left the BNDES corporate offices in Rio’s downtown business district, we were handed flyers to join a protest against pension reform and other austerity measures. While pension reform may unleash more money to flow through the economy, what is the social cost of these reforms? We unfortunately haven’t gotten a good understanding this week from the business community about the socioeconomic impact on the country. Yet between the ongoing protests and the notorious difficulty of pushing these reforms through, it’s obvious that pension reform won’t be unequivocally good. The country seems paralyzed at this decision moment. Will paralysis continue until crisis precipitates change?

Protesters march against pension reform on March 22, during our study tour.

Yet even in an environment of uncertainty, we met with large companies that recently have taken major risks in order to stay market leaders. Havaianas is taking the plunge to expand internationally – considered a bold move for a largely Brazilian brand – and has an internal disruption engine called “Big Bets”. Cielo is repositioning itself into wraparound IT services from simply payment processing to increase their value prop for clientele. Suzano, Brazil’s dominant pulp and paper company, completely reimagined the way they move their products in-country. They integrated distribution functions to become more agile with customers and gain immense pricing power. After a number of brand acquisitions, Grupo Soma overhauled their supply chain to decrease process volatility and implemented a digital transformation to connect all their brands on a single back-end platform and customers on the front-end. These market leaders have demonstrated substantial risk appetite and willingness to change in order to keep potentially undifferentiated products attractive.

It’s inspiring to see companies this size employing a founder’s mentality. Moreover, it says good things about the economy and these companies’ internal organization that they’ve been able to implement change swiftly and effectively. Yet many of these companies we met are heavy hitters, enjoying the accompanying incumbent advantage and free cash flow that makes transformational change possible. The real test of the Brazilian economy will be when SMEs are able to take big risks like this. Will it happen before, during, or after reform? Only time will tell.

Navigating the stark inequality in South Africa

A shantytown in Cape Town. (Photo by Jonnelle Marte)

Twenty-five years after the end of apartheid, the economic opportunities in South Africa are still very much divided along racial lines.

White people in the country make up a sliver of the population but own most of the wealth. A small number of black people have gained significant wealth since the end of apartheid, but they are in the minority. To add some numbers, the top 1 percent of South Africans – most of whom are white — own 71 percent of the country’s wealth. The bottom 60 percent of the population hold only 7 percent of the wealth.

Many of the executives we met with on this trip referenced the stark inequality as a distinct challenge that limits economic growth and shapes the identity of the client they work with. At the investment firm Investec, for example, most of their customers are middle-aged white South Africans. The firm has a philanthropic division aiming to close the gap by supporting education and entrepreneurship. But as one employee told CBS students, there are many issues to tackle related to racial inequality and all of them are equally important, making it difficult for well-meaning people to know where to start.

Apartheid was a discriminatory policy that segregated black South Africans from white South Africans and barred non-white people from working certain jobs and owning property. Families were forcibly removed from their homes and relocated into townships. Their opportunities were limited, and interracial relationships were prohibited.

Another hot issue mentioned by most of the business leaders we mentioned is the question of land reform. Some politicians and activists are calling for land to be returned to the South Africans who were robbed of their property during the apartheid era. The uncertainty over the future of land ownership is causing some people to hold back from making investments in agriculture and other industries that are reliant on land.

A neighborhood with colorful homes in Cape Town.. (Photo by J.C. Hay)

The unequal distribution of land is notable across the country. Some people have large homes, as well as access to good education and quality doctors. Many others, including the majority of black people in the country, are struggling to find jobs, let alone a place to live. Many reside in poor neighborhoods known as “townships.” In some shantytowns, people live in homes with a tin roof, cement walls and limited access to electricity.

The stagnant economy is making things worse people on the low end who are desperate to find work. With an unemployment rate of 27 percent, jobs are so scarce that agriculture firms hold back from automating tasks just to keep those jobs open. For example, sugar cane is harvested by hand, exposing workers to scorpions, snakes and other hazards. The work is difficult but there are people willing to take the risk for a paycheck.

The government has moved to support the poor by providing stipends and subsidizing education. But the efforts fall short of solving the inequality problem.

More businesses are starting to target consumers on the lower end by introducing financial products that more tailored to their needs. CBS students met with Michael le Roux, the founder of Capitec, a bank that launched in rural areas and grew rapidly by offering a simple account and lower rates on cash loans. The bank is now facing more competition from other companies targeting the low end of the market.

Discovery Limited, an insurance company that offers discounts to people who meet health targets, is launching a digital bank this month. The account will pay higher interest rates to people who adopt financially healthy habits, such as saving and paying off debt. TymeBank is another digital bank entering the market that will not charge monthly fees, arguing that it will save money by not offering physical bank branches, instead offering cash machines inside of grocery stores.

It will be interesting to see if these companies succeed.

— Jonnelle Marte ’19

Argentina – Polo & Tango

Buenos Aires has been as interesting and charming as we expected it to be. Its beautiful architecture and cozy neighborhoods are catching the attention and capturing the hearts of Chazen travelers. The general feeling on the trip is a mixture of surprise and love for the city. Over the past two days we were able to visit the Financial District, called “Microcentro”, Vicente López, Palermo Hollywood, and Almagro. Every corner of the city has a different story to tell and activities to offer.

Monday was all about company visits. We started the day in the Argentinian Investment & Trade Agency (Agencia Argentina de Inversiones), with an excellent overview of the country’s economic and political status. Afterwards, we headed to Vicente López to visit La Nación, one of Argetina’s main newspapers, and listen to Jose del Río’s insights on the recent corruption scandal, known as “La Causa de los Cuadernos.” This scandal has been a main concern in Argentina over the past six months, especially with elections looming next October. We finished our day at Vista Oil, where one of the founders Gaston Remi, gave an excellent summary of the company’s short and incredibly successful history. He also talked about Vaca Muerta’s recent shale reservoir discovery and business development.

Tuesday was one of everybody’s favorite days so far. We started by visiting Tenaris’ seamless pipe production plant in Campana. As we walked around the production line, Nick Singer from Cluster B’20 commented: “This feels like being inside the ‘How It’s Made?’ TV show.” Marcelo Irizibar, Tenaris Corporate Planning VP, shared a brief story of the company’s origins and the most recent developments in the Oil & Gas Industry. After the company visit we headed to Polo One in General Rodriguez, to enjoy polo lessons from Martin Garrahan. After riding horses while trying to hit a small white ball with large mallets, (a task that proved quite difficult) we were excited to take a break and enjoy a tasty Asado while watching an exhibition match between two semi-professional teams. They made the game look easy! As if the day wasn’t busy enough, we finished at La Catedral Club un Almagro, for a bohemian Tango lesson. Although challenging, learning the dance was really fun!

Thomas Amaral G’19

4 Intense Days in CDMX

The Mexico City (CDMX) portion of our trip was intense and a great combination of company visits, site tours and cultural activities.

The first meeting that we had was with Metrobuildings, a local multifamily company that is one of the pioneers in the industry in Latin America. One of the founders, Francisco Andragnes (CBS Alum), walked us through the macro aspects of the industry and gave us a very informative site tour of one of his new projects in the Polanco neighborhood. We learned about what is driving the multifamily industry in Mexico and also about every small detail about the design of the apartments.

Multifamily development site – Metrobuildings

Another amazing meeting was with CBRE Mexico. There we had a great presentation made by Lyman Daniels, Mexico’s Country Manager, where he went through the Office, Retail, Hospitality and Housing industries in detail.

CBRE Real Estate Outlook presentation

In a similar tone, we visited Morgan Stanley, and were able to go through a deep macro and market analysis, with a special focus on FIBRAS (the Mexican equivalent of REITS). We had deep discussion over regulation and the outlook of the real estate market in Mexico. We also discussed the current political shifts with the election of the new Mexican president (AMLO) and the effects of the Trump’s election on the NAFTA agreements.

Both CBRE and Morgan Stanley presentations were extremely useful for all of use to gain a better understanding of the markets and a better base to approach the other company visits.

Morgan Stanley Real Estate Division

Another interesting presentation was the one with O’Donnell, industrial developer in Mexico. David O’Donnell, founder and CEO, invited us for lunch at Club the industriales (business club) were we heard his perspective on the world’s industrial development and how Mexico has great conditions for this specific market. He also gave us some professional advice, and after lunch we walked through the Club and were able to see some paintings from Diego Rivera and Frida Kahlo.

Club de Industriales – Business Club (O’Donnell meeting)

The trip has been great so far and all the information and knowledge that we are absorbing is coming together. It has been challenging to be able to stay concentrated but all meeting have been very interesting and have kept all of un engaged.

Valentina Pardo CBS’19

London/Paris: Experience the Truly Luxury in Paris

While EuroStar had to cancelled some of the trains due to strike in Paris, we were lucky to arrive without delays. Our tour guide picked us up at the EuroStar station and took us to hotel to settle down. We had a pretty busy yet exciting schedule on the last day of the trip in Paris. Our wonderful organizers, Victoria and Eleanor, arranged three company tours – Christofle, Dior and Vancleef & Arpels.

We kicked off our last day with Christofle, a fine silver flatware and home accessories based in France. It was founded in 1830 by jeweler Charles Christofle. Prior to the trip, I didn’t know much about the brand and the silver flatware industry but it was surprisingly interesting. We were lucky to have the VP of Marketing to speak with us about their three year plan on rebranding Christofle into a truly luxurious retail brand. The presentation covered very detailed strategy plans and timeline to implement the changes. It’s amazing to learn about how a brand decided to go into transformation and I look forward to seeing the new look and feel of Christofle in the coming years.

We were all very excited about our next company visit with Dior after seeing its exhibition at the V&A in London. We went over the Dior house history and current structure before diving into the most exclusive visit to its archive museum. We were not allowed to upload any pictures of the museums online but the experience was definitely one of a kind. We had a lady from the archive museum to take us through all the old collections they bought back from their customers. Items in the museum includes old heels, clothing pieces, perfume and scratches preserved in temperature controlled environment. We were all amazed by the incredible collections of archives and felt really thankful to have the opportunity to visit Dior. 

Last but not least, we visited the workshops at Vancleef to end our trip on a high note. We were introduced to the house’s history first before we were taken through a security door to enter the actual workshops where fine jewelry is made in house. There are multiple stations and steps needed to create a piece of fine jewelry from creation, molding, cutting and assembling. Each and every steps are carefully managed to create a unique piece of art. After seeing the process of fine jewelry making, I learned to appreciate jewelry and the amazing teamwork behind the scene. It was an unforgettable experience to visit Vancleef and the brand truly represents the ultimate luxury in fine jewelry.

Paris was short yet a transformative experience for all of us.

Margaret Hung (CBS ’19) is an MBA student at Columbia Business School

Chazen South Korea 2019 – Final Thoughts

As we wrapped up our final dinner before heading back to New York, we reflected on the diverse experiences and learning that we will be taking away from South Korea. 

The Organizing Team with the Chairman of Lotte Corporation

Starting with business lessons – we knew beforehand that chaebols were the main show in town, and this trip further reinforced that idea.  Columbia Business School’s connection with Lotte Corporation is a visceral example of the far reach of chaebols that we could only read about prior to our visit.  During the morning of the company visit I drank a Lotte iced tea from the Lotte Mart and left the Lotte hotel to go to the Lotte Tower, the highest tower in Korea, which sits next to Lotte World, the world’s largest indoor amusement park.  While the impact of each conglomerate can be seen in almost every aspect of life, business and government is beginning to open up to entrepreneurship and social impact businesses, albeit slowly and in their own style.  During our visit to the Lotte Accelerator (note that conglomerates are even involved in startup incubation) we were given presentations from three portfolio companies that have all been marked at multiples of their invested value.  As an interesting aside, all three founders were Samsung alumni.  Regarding Social Enterprise, our visit to the co-working space Heyground gave us a look into the social impact organizations focused on solving specific issues such as child adoption, child care, and others that the current business environment is not addressing.  As the global trend towards using business to solve societal issues continues, I would expect start ups and impact focused companies to continue to proliferate in South Korea.

The Chazen Team Visits Startup My Music Taste

Korean economic success has also led to the exportation of culture in the form of K-Beauty and K-Pop.  While the growth and size of both industries was obvious, we gained a greater appreciation for the global influence of South Korean style and beauty sensibilities and the importance of these industries in burnishing the country’s image abroad, recent scandals aside.  The Korean beauty ideal of skin maintenance and health is a departure from the standard skincare/beauty philosophy and has been embraced in Asia as well as western countries.  K-Pop’s approach to making music borrows from the global entertainment business’ standard practices but the outcome is uniquely Korean and is clearly a hit for certain demographics.

L&P Cosmetic Office Tour

In between company visits we learned about Korea’s dynastic history, its relationships with North Korea and its love for baseball.  While visiting Gyeongbokgung, the largest palace of five palaces in Seoul, we learned about the Joseon period which ruled Korea for over five centuries.  The Korean historical progression prior to 1900 showed remarkable stability, with The Silla dynasty ruling Korea for almost 300 years and the Goryeo dynasty ruling for almost 400 before the Joseon dynasty took power.  During our visit to the Demilitarized Zone, we learned about past efforts at reconciliation between the two Koreas including the Sunshine Policies of the 1990s and the Kaesong Industrial Zone.  We came away with a sense that the South Korean Government and Business community is eager to promote reunification.  Finally, we attended opening day for the Korean Baseball Organization – Korea’s professional baseball league.  The first notable characteristic is the sponsorship of each team by a major company – the game we watched was the Doosan Bears vs. the Hanhwa Eagles.  The second and more enjoyable characteristic is the constant energy and coordinated cheering from fans throughout the game. The experience was more akin to a rock concert than a MLB-style baseball game. 

Gyeongbokgung Palace
Go Bears!

Seoul has been a wonderful place to explore and learn about.  I know I speak on behalf of the group in thanking the organizers for their tireless efforts to create this unique experience.

Vincent Su (CBS ’19) is an MBA Candidate at Columbia Business School


In case you missed them, take a look at our prior posts.

As I write, I’m overlooking the waves crashing on the Malecón – a 5-mile sea-wall esplanade separating Havana from the waters of the Florida Straits. For so many Cubans who fled the island in decades past, the Malecón was a final point of contact with familiar land before risking so much at sea. Those who chose to stay continued to face a harsh reality under the Castro regime and, although individual freedoms have increased in recent years, daily life in Cuba still requires the ability to resolver.

Waves crashing on the Malecón

We’ve had the privilege of meeting with a wide variety of cuentapropistas (private business owners) across Cuba – from owners of paladares (private restaurants) to casas particulares (small hotels operated out of individuals’ homes). Building a profitable enterprise is a challenge in and of itself, but the complexities and erratic nature of Cuban law make it all the more difficult for cuentapropistas.

Coming from the United States, it’s easy to take for granted a robust wholesale market and access to supplies. Raw materials for nearly any business can be found domestically or imported fairly easily. Supply chains in Cuba, however, require a bit more resolver.

El bloqueo (the blockade, as the embargo is referred to on the island), effectively restricts cuentapropistas from purchasing anything directly from the US. Business owners with US visas, however, are able to travel to the United States, purchase goods, and carry them back as luggage. As such, the international arrivals terminal at Havana airport is littered with bundles of foreign goods destined for private homes or businesses in Cuba. This workaround is effective, but a single traveler can only carry so much and is forced to purchase goods at full retail prices in the US.

Those without US visas can purchase goods from popular intermediary markets in the region such as Panama or Mexico. Regardless of country of purchase, there are tax limitations to this import policy. Each Cuban citizen is limited to 120kg of tax-free imports per year. Imports on a larger scale introduce further bureaucratic complexity and financial burdens. For those unable to leave the country, a black market exists – but the prices become even more punitive.

Rather than craft a workaround for imports, many choose to resolver by using supplies found on the island. Clandestina, a local fashion producer and retailer, sources all its fabrics in Cuba. Their latest line – for example – includes clothing crafted from window curtains. They purchase the curtains in Cuban state-owned stores and repurpose the material into button down shirts, bandanas, and more.

Mediterráneo, a restaurant in Havana, is proud to be Cuba’s premier farm-to-table paladar. Given the massive food shortages on the island (the Cuban government imports ~65% of the food provided to citizens) and limited agricultural resources (lack of agricultural diversity and technology), it’s quite impressive that our meal at Mediterráneo was one of the best on the island.

Without significant reform on both sides of the Florida Straits, it is unlikely that life as a cuentapropista will become any easier. A lifting of the US embargo and reform of Cuban import regulations would massively improve the chances of success for private businesses in Cuba, but – until then – the Cuban people will have to fall back on their ability to resolver.

Casey Buckley is a 2020 MBA Candidate at Columbia Business School