Jeremy Warner's Outlook: DSG's John Clare is in as tough a space as they come, but his response seems just right

Brown gets the Bollywood treatment; Now EADS may need a cash call
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Journalists like nothing more than to write about themselves, so there has been no end of comment and analysis in the press about the impact of the internet on the printed word, much of it, I suspect, not terribly instructive. The effect on other businesses tends to get much less written about, yet in many instances it is likely to be just as profound, if not more so. DSG International, the former Dixons, is one company already feeling the heat, and, as far as I can see, getting its response largely right.

Dixons began life as a chain of high-street electrical outlets which for years flourished as a value-for-money retailer of all the latest electronic gadgetry. It was among the first to tap into low-cost Asian sources of supply, vanquishing many established electrical brands in the process.

Yet the formula hasn't in truth been working for some years now. Constantly deflating prices, wafer-thin margins, and persistently rising high-street rents are proving a deadly combination. Just as bad, other retailers, from Marks & Spencer to B & Q and Tesco, have been muscling in on DSG's territory, particularly in big-ticket items such as flat-screen TVs.

There was a shock reaction in the stock market yesterday to news that what is now the main UK chain, Currys - DSG has rebranded virtually all its Dixons retail outlets as Currys.digital - achieved sales growth of just 1 per cent over the Christmas period. The City expected much better. Yet, in my book, that looks a pretty good performance, given where DSG now finds itself.

The response by John Clare, the chief executive, to these structural changes has been to make Dixons into an entirely online brand. This bit of the company seems to be developing well. The bigger, out-of-town Currys stores and PC Worlds, with economies of scale to compensate for the tiny margins, also look to have a viable future. It's what to do with the long tail of high-street outlets that is the problem. Quite a lot of the smallest ones have already been closed. The news yesterday is that leases on the remainder are unlikely to be renewed as they fall due.

As the likes of Dixons move out, the only people very obviously moving in are the coffee shops, drinking holes, banks, estate agents and the convenience-store concepts of the major supermarket chains. Much city retail space may eventually end up as residential property. There seems to be a great deal more demand for living than retail space.

As for DSG, it seems unlikely that a growing online presence is going fully to compensate for the high-street retreat. Yet there is little point in sales for the sake of them. If they are unprofitable, they have to be chopped, or captured through a lower-cost online presence. By moving into services through such concepts as Tech Guys, Mr Clare is meeting the structural challenges faced by DSG just as he should - with entrepreneurial endeavour that matches the changing needs and spending patterns of his customers.

The shares were down nearly 12 per cent yesterday. Make no mistake: structural change puts DSG in just as bad a space as newspapers. Yet it seems to be doing most of the right things to meet those challenges.

Brown gets the Bollywood treatment

It is perhaps a sad reflection on our times that the Indian press appears to be far more interested in our future Prime Minister's views on racist taunts in the Big Brother household, a subject which I am quite sure he knows nothing about, than on globalisation, on which he is a world expert.

Yet, in a curious sort of way, the Big Brother story is actually what globalisation is all about. An Indian actress over here to star in a British reality TV show, a pig-ignorant series of remarks by trailer-trash whites which are conveyed at speed around the globe and cause the burning of effigies on the other side of the world - there could be no better illustration of the connected, global village we now live in.

Britain is one thing. The Chancellor must by now be used to having his policies knocked off the front page by popular TV. But of all places, India must have been the very last the Chancellor would have expected to be upstaged by Big Brother. It was the Indian development story he had come to learn about. Instead he's been sucked into a Bollywood nightmare. The serious purpose of his visit none the less deserves at least a few column inches, so here are a couple of thoughts.

One is that the excitement which currently surrounds the emerging markets of China and India, though fully justified in some respects, is in danger of becoming overblown. The reality of India is very different to the explosion of growth opportunities many Western business leaders anticipate. India has a myriad of different social and economic problems, which mean that change of the type anticipated by market-hungry businessmen in the developed West is not going to happen overnight. It will be a slower, more painful, process than generally imagined.

This in itself makes you wonder about much of the hype that surrounds the emerging-markets phenomenon. I've been guilty of this myself, so I should watch what I say, but some of the same, starry-eyed, new-economy nonsense that we heard so much of during the madness of the dotcom boom is now regularly trotted out with regard to India and China to justify the idea that the business cycle is dead and a glorious future of never-ending growth beckons. Regrettably, this seems quite unlikely.

At some stage, though probably not quite yet, there will be a slowdown, and possibly even a recession. Despite all the talk of Asia taking up the baton of growth, India and China won't be able to save us from this downturn when it comes. Indeed, the bubble conditions that now reign in these regions make the probable impact of a global slowdown in the developing world a great deal worse than it will be for us.

All that said, Mr Brown was right, in Bangalore yesterday, to make the case for urgent reform of global institutions such as the United Nations and the International Monetary Fund so as better to reflect the emerging new world order. This is not just a desirable aim in itself, but an absolute necessity if serious disharmony in world affairs is to be avoided in future.

It is patently absurd that these organisations are still dominated by the developed West with a Western, often overtly American, agenda to match. For Mr Brown to prioritise these issues as part of a new foreign policy for the UK is a smart move, which, whatever the short term damage Big Brother has done to relations with India, should stand Britain in good stead to reap the continued benefits of a fast-globalising economy.

British foreign policy needs urgently to be refocusing away from the distractions of Iraq and the Middle East and on to the myriad opportunities and challenges posed by Asia. Mr Brown seems to get this in a way that Mr Blair does not.

Now EADS may need a cash call

If further vindication were needed of BAE Systems' decision to to sell out of Airbus, it was provided in spades yesterday by the European aerospace company which bought the Airbus stake, EADS. The company's third profits warning since last June was accompanied by the admission that there may need to be some form of new equity issue before the year is out to recapitalise a now loss-making business.

This was always BAE's biggest fear and now it seems to be coming to pass. In the past, Airbus has been able largely to fund the development of new aircraft from the cash flow generated by existing models. The two-year delay to the super-jumbo means not just considerable cost increases and hefty financial penalties for late delivery, but also that there is no money coming in from the super-jumbo to fund the development of the A350. Now free of these worries, BAE's Mike Turner might be forgiven a touch of schadenfreude.

j.warner@independent.co.uk

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