The Business

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Living la vida Ikea

Ikea may have persuaded the world to chuck out its chintz, but can it persuade Europeans to live in Ikea cities? The Swedish flat-pack giant envisages that Strand East, the 10.5-hectare district which its property subsidiary LandProp is building close to London's Olympic Stadium, will one day have 1,200 rental homes, cafés, restaurants and offices for creative companies.

Buoyed by interest in the scheme, Ikea now plans to buy wasteland in other European cities including Warsaw and Krakow in Poland, and Hamburg in Germany. The Hamburger Abendblatt recently reported that LandProp is looking for a plot the size of eight football fields in the city centre or near the airport.

Harald Müller, a business development manager at Ikea, said LandProp wants to build an entirely new district. Naturally, the notion has got the Germans hot under the collar. The country is considered the most Ikea-friendly on earth but German legislation governing property development would try even a Swede's patience.

Ikea also plans to open a Europe-wide hotel chain and is looking at 100 locations including Manchester, Barcelona, Madrid, Berlin, Amsterdam and Warsaw. The aim is to create a range of budget hotels that offer a boutique experience at an affordable price. The hotels are not expected to use the Ikea name and will be run by an established hotel operator.

Russia takes a tablet

A research and production cluster based at a Moscow University has unveiled a prototype of the first-ever Russian tablet computer which is expected to debut by the year-end and will cost around 15,000 roubles (€375), according to the state news agency, Interfax.

The tablet will run on RoMos (Russian Mobile Operating System), which is modified from Google's Android operating system. According to Andrei Starikovsky, director of the project, the tablet will be produced in Russia at the Central Research Institute of Economics, Informatics and Control Systems, although most parts will be foreign-made.

Two versions of the computer will be produced, one for consumers and one designed for military purposes which will be shock and water resistant. Starikovsky said the new tablet will have a 25cm screen, Wi-Fi capability and will be able to run the Russian GLONASS and GPS navigation systems.

With internet usage in Russia surging - it has already passed 60m users - the government is keen for the country to become a major digital power and for home-grown internet firms to chip away at America's dominance.

Patent protection pending

Thousands of European entrepreneurs and inventors will soon be able to protect their inventions across the region at one go, cutting costs enormously. A common patent and a single court in which to defend property rights is being thrashed out between the European Parliament and European Court of Justice, with the European Commission expecting a solution "by the autumn".

Benoît Battistelli, president of the Munich-based European Patent Office (EPO), which will administer the new unitary patent, says it will be 70% cheaper than the €30,000-€35,000 it now costs to protect an idea across the EU. Europe's splintered patent system has been blamed as one factor behind the region's failure to match other regions in commercialising science.

Currently, inventors can apply to the EPO for a patent but it has to be validated in each member state, and litigation is country by country. At a time when competition is increasing not only from Silicon Valley but also from Asia, Battistelli is convinced a single patent is an important tool for innovation.

The upfront expense is only part of the story. With no centralised patent court, small firms also have to fight off litigants who can shop around to challenge patents in multiple jurisdictions, all potentially delivering different verdicts.

Nevertheless, while the common patent will be a major step forward, it will be far from perfect. A political compromise means the new patent court will be split into three, with its headquarters in Paris but with London handling life-science disputes and Munich engineering. Moreover, Spain and Italy have so far refused to back a deal because the new regime stipulates the official languages for patents as English, French and German.

Face-Off: Zara v. H&M

Amancio Ortega, founder of Inditex - the worlds biggest clothing retailer - has been named by Bloomberg as the world's third richest man, with a personal fortune of €37.5bn. Inditex, which owns Zara, has tripled its stock market value over the past three years with profits up 30% on 2011 for the first quarter of this year.

Even in Spain, Inditex has increased sales by a modest 1% while competitors such as Mango saw profits fall by 38.5% in 2011. Spain's economy is so starved of good news that Ortega's rise in wealth saw Inditex stock surge and even investor confidence in the Spanish stock market took an unprecedented climb in August.

The only cloud on the horizon is fashion phenomenon H&M, which still trumps Inditex's Zara in terms of number of shops. H&M has just announced it is to open its first store in the southern hemisphere next year as it continues an aggressive push into Latin America and Australia. The new flagship store in Santiago de Chile will follow an even bigger shop opening in November in Mexico. And while Inditex has 5,618 stores across all its brands in 84 countries, only 1,631 of those are Zara stores, compared with about 2,600 shops in 44 markets for the Swedish giant. H&M is aiming to increase the number of its stores by 10-15% annually - last month it signed a lease to open its biggest store yet on New York's 5th Ave.

Back to Basics for Italy Food Co

Italian food conglomerate Barilla has decided that in times of economic hardship people are more likely to stock up on cheap, basic food like pasta rather than fresh fruit juice and premium confectionery. So the company, headquartered in Parma, is offloading a veritable pantry of brands it has acquired over the past decade to focus on its core pasta business.

The company says that sales of non-core assets will free cash to finance expansion into the US and Latin America. Italians consumed 26kg of pasta each last year, whereas Americans only managed 9kg each.

The company hopes to boost its brand recognition in the US by launching a chain of Barilla-branded restaurants next year.

But there are still major opportunities in Europe. Crisis-ravaged Greece saw the biggest increase in dry pasta sales in the first quarter of 2012, rising 3.5% from 2011, compared with stable sales in Italy and Germany.

Barilla's new chief executive, Claudio Colzani, is focusing on other back-to-basics ventures, including building up Barilla's bottled pasta sauce franchises around the world. Despite the new direction, Colzani only expects 2012 sales to grow by 2% as he says margins remain tight.

In Digits

6.2%
China's year-to-date trade growth at the end of August. Beijing set a target of 10%

725%
The rise in global CEO compensation between 1978 and 2011, according to the Economic Policy Institute

€10bn
The amount Procter & Gamble chief executive Bob McDonald needs to cut in operating costs by 2016

150
The number of daily thefts from Italian farms, according to the Italian Farmers Confederation. Thefts include grapes, chickens, tractors and copper

Health Czechs

People are adopting healthier lifestyles in the Czech Republic - albeit begrudgingly. The recession, combined with significantly increased taxation, has led to a significant drop in the sales of spirits on the Czech market. According to the Czech Republic's Union of Spirits Producers and Importers, sales dropped by a huge 7% in the first half of 2012 continuing a three-year trend.

Speaking on Radio Prague, Petr Pavlík, head of the union and CEO of the country's biggest spirits producer, Stock Bozkov, said that to counter the fall, spirits producers are diversifying into fruit liqueurs with lower alcohol content. This, he said, appeals to the 40-plus crowd who "previously would have ordered a couple of beers and a round of shots" and the over 25s "who want to have fun and enjoy the party but not get completely drunk".

Many Czech companies are also having to market themselves abroad. Stock Bozkov, for example, has begun exporting one of its signature drinks, a peppermint liqueur known as zelená, to the US. Meanwhile, Czechs may be getting healthier still. The country is finally contemplating a ban on smoking in restaurants - a step that would put the country on par with many of its EU peers. According to a survey in May by Prague's Charles University, 78% of Czechs were in favour of a complete ban. In the Czech Republic, three in 10 people older than 15 years are smokers. Of Czech youths aged 15-18 years, 40% are smokers.

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