SCU International Business Network

International exchanges

2005-11-20T19:49:00.000-08:00

Just found this site which lists various international exchanges.

Paul Denlinger - speaker for Oct 7

2005-09-30T10:26:00.000-07:00

Paul Denlinger, Principal, China Business Strategy

Mr. Denlinger holds an MA degree in linguistics from the University of
St. Andrews in Scotland and has held management positions in marketing,
advertising, TV production, and information technology. He has a
native-language command of both Mandarin Chinese and English and has more
than 20 years of management experience in Greater China, working with key
corporate accounts and partners including:

Shanda Interactive Entertainment
Unilever
Philips Electronics
TSMC (Taiwan Semiconductor Manufacturing Corp.)
Acer Peripherals (now BenQ)
Walt Disney
McDonald's
BMW
Xinhua News Agency
America Online
Sun Microsystems
Intel
China Unicom
Lenovo Computers (formerly Legend)
Microsoft
Asiainfo
Nokia

About the firm:

China Business Strategy is a strategic consulting firm and business
advisory service which focuses exclusively on the China (PRC, Taiwan and
Hong Kong) markets.

Website: www.china-ready.com

Evite for Oct 7 event

2005-09-28T23:43:00.000-07:00

We are getting ready for our Oct 7 event. We'd love to have you there. Click for the evite. All the details that you need are in the evite.

Sep Newletter Online

2005-09-21T09:58:00.000-07:00

So the Sep Newsletter is now online. For some reason I wanted to try my hand at latex to do typesetting for this newsletter. Well the results are in front of you. For some reason the links are all messed up. So here is a copy of the newsletter in in blogger so you can read it directly.

Event Update
As you might already know we have our event, which is co-hosted by CABC,
scheduled for Oct 7, 2005. See the blog for all details. Don't miss it.

Blog Update
Some new articles on the blog relate to Economic Freedom of countries and
some notes about the China trip that happend as part of SCU's Study Abroad
program in Summer 2005.

If you have interesting ideas, please don't hesitate to post here.

SCU now has a link of student, faculty and alumni blogs at
http://www.scu.edu/business/news/business-school-blogs.cfm

Chinese Yuan
Since the last newsletter the revaluation of the Yuan has been the biggest
news in the world of international business. The official annoucement is available. There is come pretty good reading about it too.

The official name of the new currency management system to be used by the
central bank in China is managed floating exchange-rate regime.

For this with access to the Economist's premium content, the following story
is highly recommended

A paraphrase follows.

Essentially this story discusses ways of calculating a currencies' fair value. The oldest one is Purchacing Power Parity. The idea is that, in the long run, the echange rate should equalize in any two countries, the prices of a basket of commonly traded goods and services. So for example, if a Big Mac costs 59% less in China that in US, PPP would conclude that the Chinese Yuan is 59% undervalued vis-a-vis the US dollar.

[see the Big Mac Index below].

A second approach to valuing currencies is Fundamental Equilibrium Exchange
Rate(FEER). This is a rate consistent with both external
balance(sustainable current account balance) and internal balance(full
employment with low inflation).

There is a third method yet, called Behavioural equilibrium exchange
rate(BEER). To use this economists determine which economic variables have
played into establishing the exchange rate in the past and plug the current
values into the equation to get the current exchange rate. For China,
econometric tests have detemined that China's productivity growth, budget
balance relative to other countries and its net foreign assets.

Big Mac Index

The Economist has a Big Mac Index to try to explain foreign exchange
currency theories. Check it out.

More News about China

Dresdner Bank's Chief Economist editorial Michael Heise proposes one way on how to react to the current trend of Chinese companies' takeover bids: don't. By not reacting, Mr. Heise believes the market's invisible hand will get to work in achieving the following positive effects: 1. Increased global business efficiency as a whole 2. Promote a market-based approach in China's economic decision making which currently is still influenced by China's local political considerations.

It would be interesting to hear different opinions on how to see this trend; voice out your opinions and findings at our blog.

Link to Heise's article. ²

For those who want to predict which industry will experience the next wave
of Chinese takeover bids, look up Steve Rosenbush article: Ready for
Chinese Merger Mania?

The following industries seem to be the most logical targets for takeover
bids:

1. Natural Resources (especially oil and lumber): needed to stoke the fire
in China's giant manufacturing foundries.
2. Consumer goods: an effect of the rise of consumerism among the
increasingly affluent Chinese.
3. Manufacturing (especially Autos and Railways): China's next step in
climbing the high-tech manufacturing ladder.
³

Call for links and Ideas

Looking to hearing from all of you about new ideas that we can cover in our
newsletter. If you have any links please send them to me at aseem.asthana
AT gmail DOT com. If you like send a line or two with your thoughts
about the story that you are sending. However, don't have to do that if you
don't want to.
⁴

Footnotes

... http://www.iht.com/articles/2005/09/11/opinion/edheise.php)²: submitted by Johan Sulaiman
... ladder.³: submitted by Johan Sulaiman
... to.⁴: Compiled by Aseem Asthana

IBN Fall Event Details

2005-09-18T23:25:00.000-07:00

Here is the list of the short listed panelists that will be participating in the panel discussion.

China Team:

1. Terilynn Perez
2. Wilson Winner
3. Sanjai
4. Manoj Batra
5. Joe V Kalla

Germany Team:

1. Kerry Washington
2. Melinda Hamilton
3. Steve Ubelhoer
4. Alka Abbi

Here is the tentative agenda:
6:00pm – Welcome address by the IBN President
6:05pm - Kickoff speech by Leanna Christie
6:15pm - Guest speaker invited by CABC speaks on the topic (name of speaker & topic to be confirmed soon)
7:00pm - Panel discussion starts
8:00pm - Q & A Session
8:15pm - Raffle to give away gifts
8:30pm - Event Concludes

Note: Snacks-n-Drinks will be served! We also encourage you to bring in your friends and spouses.

Rules:
The event will be moderated by one of the IBN execs
Each speaker will have 2-3 minutes each. Start off by giving a bit of your background, thoughts on international business,etc. Then share your experience of the country you visited and answer the following questions.
What are some of the business opportunities you saw while on the trip?
How do you think businesses in the US could counter the threat from overseas competitors?
How does culture affect the workplace?

More questions from the IBN members are welcome before 9/30.

Economic freedom of countries

2005-09-11T12:18:00.000-07:00

The Fraser Institute has published a study on economic freedom of countries. The top spot is taken by HK (sure HK is not a country but, special enough). Next comes Singapore and the third spot is taken by New Zealand, Switzerland and US. China and India respectively are at 86 and 66 positions. Mexico and Canada are at 59 and 7th positions.

The report is at http://www.fraserinstitute.ca/admin/books/chapterfiles/EFW2005ch1.pdf#

A top level link is http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=789

The first link has a nice discussion about the concept of economic freedom. They list four corner stones of economic freedom.

personal choice rather than collective choice,
voluntary exchange coordinated by markets rather than allocation via the political process
freedom to enter and compete in markets, and
protection of persons and their property from aggression by others.

Towards the end of the report they show positive corelation of economic freedom with various factors of human development such as unemployment, incore share of the poorest 10%, life expectancy, investment and income per capita.

Interesting read.

Updates from SCU Study Abroad trip 2005 - China

2005-08-12T11:35:00.000-07:00

Having recently returned from China, after a wonderful two week trip, I just wanted to share my notes.

The two week program was a part of SCU Global Business program. The two professors who were heading it were Prof. Calkins and Prof. Johnson. Prof. Posner, the dean, was also there for a while in both Beijing and Shanghai. The program was really wonderfully coordinated by Leanna Christie. And there were twenty students in the program.

The first week was in Beijing and the second week was in Shanghai. Apart from the cultural tourism, this trip enabled us to look at some companies in China.

We started the official trip by visiting William Brekke who was the commercial counselor in the US Embassies' commerce department. He gave a brief update on the economy of China and the condition there.

Then we visited ZParkGlobal which is a very nice looking incubator for high tech firms. They provide quite a lot of services to the clients located in their premises. If interested, you can check out their site. On the same site, we had a leadership panel, which was moderated by Prof. Posner. The other attendees were Zhou Fang, General Manger of PeopleSoft's China subsidiary, Jennifer Pan, Vice President of ZSP and Lenny Chang, Chairman of SinoVoice.

The discussion in the leadership panel mostly centered around leadership differences in China and US. Its hard to summarize a one hour(or was it longer) discussion in a short space, but its safe to say that the outcome, to my mind, was that while there are similarities, one would do well to be aware of cultural nuances.

We then visited Blue Focus. Blue Focus is a mid size Chinese company focusing on public relations in China. While they have international clients, they only focus on the Chinese market. They have relations with the government department dealing with media. That helps them in their business since media is still quite heavily regulated by the government. They also advice their clients against certain campaigns, if those are determined to be culturally insensitive.

One anecdote which they shared, and which I found quite interesting was that one of their clients, Nippon Paints wanted to do an ad show featuring a couple of dragons climbing up some temple pillars. While one of the dragons was successful, the other one kept slipping. The point that Nippon Paints was trying to make was that the pillar, on which the dragon kept slipping, was painted by their paint, and it was very smooth. Considering that dragon is almost considered a national icon in China, and the present, or even past relations between China and Japan, this campaign was quickly nixed, for the imperialistic overtones that might be read into it.

HP was another stop. They kept referring themselves to CHP and it took me a while to figure out that they were not talking about California Highway Patrol but China HP.

HP has a presence in China since the last 20 years. In fact, Mike Hurd recently visited HP for their 20 year celebrations. One of the first things I was struck with was how fancy the building was. While the Palo Alto office campus is nice, this office was in a high rise and chrome almost seemed a commodity in the lavishness in which it was used.

We were met with two senior manager there. Both of them had worked with the government of China earlier and have transitioned to the private sector. They mentioned how fast HP was growing and how they keep hiring. One of us asked how is it that they managed to keep the HP Way spirit alive with this rate of incoming employees. They gave a stock answer about training and brining their employees from smaller cities for training programs etc.

Next stop was Tsinghua University. This is a very prestigious university in China. We met with some students from their business program and had some interesting conversations. We had a presentation by their incubation services director. This was comparable with the zParkGlobal incubator.

In Shanghai we met with a lawyer from Morrison & Forrester Law Firm. Their office was in of the many high rises looking over the river. Nice view. He gave a brief presentation about their practice in Shanghai. They currently only have 8 lawyers. It struck me as a quite small number.

Another Chinese company we visited was Ctrip. Actually most of our trip was booked via ctrip. They are also listed on NASDAQ(CTRP). Quite a nicely run business.

We were supposed to have another leadership panel in Shanghai, but unfortunately two of the three participants could not make it.

Another set of companies was LinkTone and 51Jobs. But are Chinese firms’ servicing the Chinese market. LinkTone is a service provider for Value Added Services for Chinese Mobile services. They seem to be doing quite nicely. And 51jobs is somewhat akin to moster.com. However, they also have their own print publication which they distribute along with local newspapers. Their offices were quite nicely appointed, giving the impression of the days of the Boom.

Finally we visited Intel and SMIC. Intel of course is quite well known. And SMIC is a contract fabricator and has grown tremendously in the last 4-5 years and seems set of more growth. Intel does not have a fab plant in China yet. While they did not officially cite IPR issues as the reason, it was felt that that was the real reason. They have mostly what they referred to as A/T plants, which stand for Assembly and Test plants. SMIC does have many fabrication plants in China and seem to be doing business for the world's who' who of chip manufacturers.

Some common themes came up during the trip and in the questions I have been asked about the trip after it. One of the biggest, during the trip was Intellectual Property Rights(IPR). Much can be found out about the issues surrounding it on the web. Suffice to say that it featured quite animatedly a number of times in our discussions.

Secondly pollution. That was another big one while in China. Pollution was not so bad in Beijing as in Shanghai, at least from an anecdotal standpoint.

And of course English. It seems people in China are making efforts to learn English. We actually met with a gentleman in Beijing(at zpark) who spoke no English earlier, but had started learning it quite late in life. And he seemed quite conversant.

Finally, what I think many of us had not realized before going to China was the lack of middle managers. We heard this complaint from a number of people who commented on how difficult it was to find middle managers in China. Maybe the situation will be changing with the popularity of MBA in China rising.

All in all it was quite a memorable trip. If there are any questions please comment on this blog, or come to the IBN sponsored event!!

International Business Network, Issue 3, May 2005

2005-05-11T23:18:00.000-07:00

Evaluating potential Markets

Before entering foreign markets, evaluating their potential for generating adequate return on investment is a heavy duty task. To help ease the burden, many indicators and indexes exist. One such index is Michigan State Universities’ market potential indicator.

The most recent version of the Market Potential Indicators is found at http://globaledge.msu.edu/ibrd/marketpot.asp. Previous versions of the indicators are at http://ciber.msu.edu/Research/MPI/default.asp.

The indicator is a weighted average of many factors. Market size, which is measured by Urban population and electricity used has a weight of 20%. Other dimensions are Market Growth rate, Market freedom and Country Risk.

The Economic Freedom index is published by The Heritage Foundation. This years economic freedom index can be found at http://www.heritage.org/research/features/index/countries.cfm. This page sorts countries in four different categories, Free, Mostly Free, Mostly Unfree and Repressed. More details about each country can be found by clicking on its name. For example, Brazil, Russia, India and China all are classified as mostly unfree.

Political freedom index is published by Freedomhouse and can be found at http://www.freedomhouse.org/research/survey2005.htm

The Economist of course has a long standing weekly indicators. The Economic and Financial Indicators are at http://www.economist.com/markets/indicators/index.cfm?page=Economic%20and%20Financial while their Emerging Market indicators are at http://www.economist.com/markets/indicators/index.cfm?page=Emerging%20Market. The organization is nice too. They have a summary before throwing a whole bunch of data at you.

A very interesting fact that almost jumps out at you from the Financial Market indicators of The Economist is that the short term interest rates are close to 20% in Brazil. This makes you wonder, what is the impact of this on growth rates. On the page for Economic indicators, Brazil’s GDP growth is listed at 4.9. This does fall in the bottom quartile of the growth rates listed there. In China they are 2.3% while in India it is 5.1%. Honk Kong and Taiwan have rates close to 1.5% each.

Tidbits

The Economist

They used to have separate sections for free and premium content articles. Now, it appears that they have combined the two into one. If a visitor is not a subscriber to their print edition, the visitor has the option of viewing an ad to get a free one day pass to access all of their content. This is a good step.

Monitoring Indian Economy

The Centre for Monitoring Indian Economy (and no, the spelling for centre is not a typo – that’s how they spell it in India), is an independent economic think tank headquartered in Mumbai. They specialize in monitoring and researching the Indian economy providing databases and research reports.

Monitoring Hong Kong’s Economy

The Hong Kong Monetary Authority, is a government office which reports to the Financial Secretary of Hong Kong.

Special Economic Zones in India

India is planning special economic zones for foreign entities. You can read more about it at http://news.bbc.co.uk/2/hi/south_asia/4531703.stm.

Perspective on China

A perspective piece on BBC about China makes for a nice read. http://news.bbc.co.uk/2/hi/business/4508287.stm

IBN-CABC combined event - Prof. Delacriox

2005-05-09T20:02:00.000-07:00

Prof Delacroix presented about fast and dirty archival research as opposed to clean and lengthy(and probably more expensive).

There are basically three kinds of business related research. a) Find out what others have written about X, Y, and Z. b) What is the relation between X, Y and X and c) Find out X, Y or Z.

He spoke mostly about the third kind.

His quick and dirty research is mostly a quick fix - when the boss tells you on thursday, "I think we should do this. Get back to me before monday meeting to tell me if it makes sense". This is when you need to use fast and dirty methods to use the facts accomulated by others(archival info). In this context, you are looking for

A) Plausibility, and,
B) orders of magnitude.

A very often comes from B.

The goal in this kind of resarch is not being right as to avoid being very wrong.

Some steps that he pointed out.

General Preparedness Need to be aware of what's going on in the world. Things like WSJ and Wolrd Almanc, and Book of facts are pretty good tools for general preparedness. In fact, he thinks they are the single most important investment. The goal here is be aware of things that are going on around you. So when you encounter various statements, they will have a ring of truth about them, or not, depending on their veracity. The goal with general preparedness is to develop such a gut feeling, or instinct. Also, there are a lot of quick, instantaneous references, which can help with checking out plausibility.

He then talked about various resources that can be checked out to cross reference many of the worlds area references. Many of these are UN websites and country specific websites and tables. If any of them are in a language you don't understand, look again - you probably will understand more of the stuff than you think. The reason is quite simple - many table headings and all numbers will be in english!!

He pointed to an article written by him using these quick and dirty methods. The topic of the article was Capitalism. I have sent him an email asking for a ling to the article. When I get it, link it here.

Life insurance in China

2005-05-08T18:00:00.000-07:00

A McKinsey article about life insurance in China makes for interesting reading. While I had known, somewhere in the back of my mind that savings rate of Chinese households is pretty high(and I think that is true of most Asian countries) the report claims it is as high as 40%. That's a big number.

First IBN Event - A Success!!

2005-05-06T15:47:00.000-07:00

IBN Inaugural Event
May 3rd, 2005

The first event was well attended. Things went according to our plan and it turnedout to be a good panel discussion. Dean Posner was the first one toshow up, followed by the guest speakers.

For those of you who attended the event, I'd like to ask you to please fill out a 2-minute survey and give us your valuable feedback.IBN First Event Survey:http://www.zoomerang.com/survey.zgi?p=WEB224BVARTSJP

For those who could not attend the event, you can read the details onthe panel discussion on our blog website.http://scuibn.blogspot.com/2005/05/opportunities-and-challenges-faced-by.html

We got some positive comments (un-edited) from the MBA office:"Congratulations on putting on a great event last night. It was verywell organized, you had a great attendance, and the speak panel wasvery informative.

The International Business Network would be a great asset to thecurrent MBA Networks. Keep up the good work and we look forward tohaving the International Business group approved as an officialNetwork."

We are now looking for volunteers who would like to activelyparticipate in the event planning and marketing process of the future events. Please contact me directly if you would like to be a activemember of IBN.

Thanks,
Sumit

Opportunities and Challenges faced by managers due to Globalization (Notes from Panel Discussion : 05/03/2005)

2005-05-06T14:39:00.000-07:00

Dr. Olga Saginova:
Introduced the notion of being global and at the same time thinking local. Started with a discussion on how local brand should reflect globalization. Should a manager dealing with local brand care about globalization? She gave two examples. The first example was the name of a company that had a very successful portfolio of brands. This company had a name that sounded very much like Wimbledon, illustrating an increasingly globalized approach. In Russia, Foreign names have a stamp of quality.

The second example was about a very successful local juice brand that was being sold only in the Russian national market. However it has a name J7, (signifying the 7 different flavors of juices that the company started with) which was not a very Russian sounding name. There were 2 reasons why it was named like that.
1. It was a local, national brand, but targeted for young successful professionals with global outlook and the name had to have an international or global concept in it.
2. Apart from setting the perceptions of the current Russian consumers, the brand was named “looking beyond today” as she puts it.
Even when you look at J7’s commercials, you will never know which country it came from because it shows wind surfing, beach volleyball, romantic dates at the sea side, adventurous rafting etc., that a successful young professional associates himself or herself with. Event the sound track is in English based on the theme of “freedom”

Why should a Russian company producing a brand for a local market focusing on Russian consumers do this kind of global communication: because they are looking beyond today. They hope that apart from catering to the current Russian consumers it also will be as viable in Silicon Valley shop (for example) and as popular as it is in a Moscow store. Hence being global and thinking local or being local and thinking global is an important decision to be made by managers and these decisions have to be future-ready and shouldn’t be taken at face value. Any decision dealing with individual perceptions and individual people should take into account the local people’s culture, their history etc.

Dr. Irina Skorobogatykh
The central point of her discussion was “Internationalization of Education”
We came to know the meaning of her last name Skorobogatykh, which is “to get rich quicker”. Dr. Skorobogatykh started commenting on the people she was seeing in Santa Clara University. She felt the crowd here is truly international since she could find people from various countries and backgrounds here. She then spoke about the changes in Russia since its Soviet Union days in the context of globalization. Russians were good in technology, software and military production. But there was not much depth of education in mathematics, biology, management and marketing. So she and her other co-professors decided to create exchange programs with foreign universities like those in US to create the new generation managers to take on the fast paced international environment. Realizing that there was a lack of good English and good exposure to international marketing and in order to prepare the students for exchange programs, she started teaching English and marketing in the beginning of the90s. As an example she mentioned her own son and daughter who took the “Double Diploma program”. However after the program, her daughter decided to focus more on the finance side and her son went in the marketing line. One of his projects involved doing a market feasibility study for B2B services.

She then spoke about the Double Diploma program itself. All instruction would be given in English. Students would spend 2 years in Moscow in an international environment, followed by one or two semesters in institutions in other countries in Europe. Students from other universities in Europe also came to Moscow to study together in the same process. The education received by students was very advanced from an international point of view. Exams for all the subjects and all programs can be taken from any of these countries and would be the same. However, she admitted that it was not easy to incorporate all the programs, processes and descriptions the same way in different countries. Currently there is a 3-nation program. Students would do one semester each in Moscow, Germany and France. The students practically get three valid degrees valid in each of these countries.

Dr. Karen Fox
Dr. Fox had worked with Dr. Irina and Dr Olga and the three have together co-authored 8 papers, one of which was published as a special issue in the History of Marketing Thought. This paper spoke about the impact of globalization on academic collaboration and about the opening up of the Soviet Union. Karen had started with a question. In Soviet Union business was a bad word and there was no marketing concept. But she came to know about Soviet Union business schools teaching marketing, she wondered about the people who taught marketing course: who were these people? what were they doing before and what kind of education do they have? She started interviewing some of the instructors. She started from the University of St. Petersburg. There were three categories of background from which instructors of marketing courses came:
1. Background in Applied Economics: These people worked in military state enterprises, studied economics, mathematics and quantitative model.
2. Professors of Linguistics: Dr. Olga and Dr. Irina were two examples of people from a language background getting into marketing.
3. Background in Marxism-Leninism: Since 1961, Marxism-Leninism was a required course. After 1991 it became optional. Professors who are teaching marketing now were teaching Marxist-Leninist Political economy.

Dr. Fox then spoke on the topic of Services Marketing in different countries. US has been a services economy since long. People in R&D, marketing, teaching or in In-N-Out burger were all in the services sector whether they knew it or not. Dr. Fox provided the “fish in the water” metaphor, to convey that without knowledge, many of us are involved in services. She then gave the example of a class in France in which students were required to pick a service business and give a report about services marketing concept. One student said, “French people do not like to work a mc because they have to smile and be nice to people”. In Soviet Union on the other hand, there was this notion of controlled economy. 99.99% of services marketing concepts such as service quality, smile, customer orientation etc. was missing in the Soviet notion of controlled economy. Most of the Soviet services were mass-produced with big factories, big laundries etc. There would be one big factory for the entire city with multiple drop-off centers. There was too much handling, mostly in government offices. Once the economy opened up, there is a lot of demand for services in the current Russia. Lot of multinational corporations have opened up operations in Russia. There is more demand for services such as auditing etc. for these firms.

Rajesh Rangnekar:
Rajesh gave the perspectives of a manager. He spoke about three big concepts:
1. The world is changing as we are sleeping. Hence as managers, we need to be aware of what’s going on around us. We have the choice of availing the dynamically changing opportunities or to ignore them and face the consequences
2. Decisions without borders: Rajesh reminded us to take notice of the assumptions that we make in making our decisions. Many times we make assumptions from what we have seen within our own borders, from the people that we are familiar with. However, in the increasingly interconnected international environment of today, our decisions have no borders and can have impact, positive or negative, outside the borders.
3. Collaborating across borders: Today’s managers find themselves working in a collaborative manner across borders. The biggest challenge faced in such distance collaboration is that of “building trust”. For this Rajesh encourages personal visits.

Rajesh gives one example from his own company. Oracle started its India operations with 5 people and now has grown to 6000. While attrition is a big challenge in Indian work force, his unit has been having 0 attrition in the last few years. This was made possible only due to concerted efforts on building trust.

Prof. Fabio Caldieraro
Prof. Caldieraro gave some very useful insights on how managers can deal with uncertainty and complexity caused by the increasing globalization. His approach to this problem would be to make use of what you know to address what you don’t know. He admits that there are lots of differences and wide variety among people in different countries and cultures. Same products have to address the needs of markets that are different. However, he points out that there are more similarities than differences among the people of different countries. It is important to contextualize your framework and find out what is common. For example, distributors in different countries may have different driving forces. However all distributors have a need for incentives. If we provide the right incentives to the distributors, they are going to sell the product. The right question would be what are these incentives. The answers may be different for different countries. However the questions are the same. Wherever we go, we need to know the consumer, our competition and our market in order to succeed. We need to make use our knowledge.

Prof. Martin Calkins
Prof Calkins introduced the notion of different classification of cultures”
1. Linear-active people: Want to do only one thing at a time. Their thought is very serially aligned. Such people can concentrate on the task entirely only for the period they have scheduled for it. The next task does not begin until the task in the hand is completed. Such people are introvert, patient, quiet, plan ahead methodically etc. Ex: Germans, Swiss etc.
2. Multi-active people: These are flexible people, and feel more fulfilled when they do several tasks at once, work any hours, timetable is unpredictable. They are also called jugglers. Body language plays a major role in communication. Ex: Brazilians, Sub-Saharan Africa etc.
3. Reactive people: These people are good in listening with focused concentration. They try to ascertain the speaker’s complete viewpoint and reflect silently before reacting. They work flexible hours, are punctual, react to partners’ schedules, see the whole picture. Ex: Vietnamese, Chinese etc.

By using some of these cultural stereotypes as guidelines we can prepare ourselves to understand the differences across cultures to be ready for the globalized economy.

event planning picks up steam

2005-04-22T09:46:00.000-07:00

The planning for May 3 event is picking up momentum.

The evites have been sent out (if you did not get one, let us know via the mailing list, or send an email to Raju)

Johan went to the Digitial Divide presentation at Meyer's theatre and has been a lot of good words about thier setup. We have been discussing a few of those among ourselves. To quote Johan,

So what happens is that right outside the theatre they have exhibits
displayed and also about 8-10 iBook laptops open displaying the blog.
Participants are encouraged to enter their comments into those iBooks during
breaks between panels. Also many attendees are bringing their laptops. Each
of us is given a username and password to wirelessly connect to the network,
and those with laptops can also post their comments and questions into the
blog throughout the conference.

I know it is realtime because I left midway through the conference to go to
the computer lab during panel 2, and when I checked the blog they keep on
adding new content with about 10 minutes lag between what the speakers said
and their blog summary.

They also handed out Q&A flash cards which are then given to the moderator
who can pick the most interesting questions to be discussed by the panel.

Hopefully we will learn a few tricks from these guys. They also have a blog.

The speaker list is finalized and is as follows,

1. Prof Karen Fox
2. Prof. Martin Caltkins
3. Prof. Irina Skorobogatykh
4. Alumni, Rajesh Rangnekar
5. Prof. Fabio Caldieraro
6. Prof. Olga Saginova

and the agenda is as follows

4:00-4:10 - Networking time for the students and the panel +
refreshments
4:10-4:15 - IBN President addresses the audience and introduces the
IBN executive team followed by introduction of the panel of guest
speakers.
4:15-4:20 - Dean, Barry Postner talks and kicks off the event
4:20-5:15 - Each speaker speaks for a maximum of 10 mins on his/her
research area in the field of international management, international
marketing, international business etc and ties the speech to the main
topic of the event.
5:15-5:30- Q&A from the audience and final words by the IBN president

All the members of the IBN team have been assigned duties for the event. I don't have to do anything, right guys :)

We are working on the menu's for the event - seems to be the most troubling aspect. To eat or not to eat, is the question!! We'll don't worry, we'll definately have something. And if you have menu ideas, use the comment link!!

Microlending

2005-04-17T19:38:00.000-07:00

I find the below article about microlending interesting because it tells a story about how bottom-of-pyramid population in developing countries cope to gain credit for their modest but high-volume businesses when there is no credit rating system to qualify them for initial funds. This article helps us understand more about the different characteristics of a big segment of the customers we are going to face in the multinational context.

http://www.aworldconnected.com/article.php/976.html

Social Entrepreneurs
Macro Success through Microfinance
by Sam Wardle

Type the words "microfinance" or "microloan" into any search engine, and you'll be inundated with tales of once hopelessly impoverished people exiting poverty. A person living on next to nothing suddenly becomes a successful entrepreneur, able to feed her family, send her children toschool, and make improvements on her home. She does this by taking out a tiny loan, usually no more than two hundred dollars (and often as little as forty dollars).

A loan that size is peanuts in the developed world, but to someone living on a dollar a day, that amount could allow someone to open a shoe stand orstart a small restaurant. A little money could enable someone to buy acarrying mule, or a cell phone she can loan out to neighbors for a small profit.

Currently, there are thousands of "banks of the poor" or Microfinance Institutes (MFI) operating worldwide. Some MFIs consist of a person in a hut with a cashbox and a receipt book. However, others have become sophisticated enough to service thousands of clients. These institutions have served anywhere from 30 to 50 million people. Today, somewhere in the neighborhood of 2.5 billion dollars is being loaned out to start-up entreprenuers--all in tiny amounts with interest rates ranging from 25 percent to 100 percent.(For more statistics on microfinance, check out the UN Capital DevelopmentFund.)

Critics of microfinance charge that the high interest puts MFIs on par with loan sharks and moneylenders. Proponents of microlending counter that interest rates are high because poor people often have no collateral withwhich to take out a loan. This makes the risk of loan-default higher. And in most developing countries, property rights are not protected, which makes securing loans much more difficult in general. That said, MFIs may be the best current option for development. (Read more about how Institutions Matter.)

Given the overwhelming evidence, it appears that microfinance does some good. A study in Indonesia showed that microcredit borrowers were able to increase their incomes by 12.9 percent, whereas a control group showed only3 percent growth. A different study, done on Bank Rakyat Indonesia's loans to people on the island of Lombak, reported that clients increased their income by an unbelievable 112 percent and that nine out of ten recipients moved out of poverty. An eight-year study in Bangladesh demonstrated that, among the poorest in the country, only 4 percent were able to pull themselves above the poverty line without assistance. Recipients of loans from the Grameen Bank, a global leader in microlending, escaped poverty at a rate of 48 percent.

The Grameen Bank makes an interesting case study in the world ofmicrofinance. It was unofficially started in 1976 by Dr. Muhammad Yunus, an economics professor. Dr. Yunus became taken with the idea that the extremely poor, particularly women, could escape poverty by taking out miniscule loans. He launched this concept with his own money.

From these inauspicious beginnings came the Grameen Bank of Bangladesh, officially founded in 1983. The Grameen Bank serves almost four million borrowers a year, helping 10,000 families escape poverty every month. TheGrameen Bank recently gave birth to the Grameen Foundation, a US nonprofit that assists MFIs worldwide in implementing the successful model created by Dr. Yunus.

Perhaps the most compelling reason for imitating the Grameen Bank on a global scale is its incredible loan recovery rate. Grameen borrowers have repayed their loans at a rate of 99 percent, which is higher than credit cards, student loans, or home mortgages.

"Although the borrowers are poor, they are proud," says Kay Hixson ofGrameen Foundation USA. "They feel an obligation to repay their debts because they see fast results." For example, Hixson explains, a woman can borrow forty dollars to purchase a grain-milling machine, which she can start using for a profit immediately.

Interestingly, 95 percent of the Grameen Bank's clients are female. Hixson asserts that the reason for such a positive repayment rate is simple. "Women are the best poverty fighters," she says, "because as soon as they get their business going, they take care of their children. Thus, their nutrition gets better; thus there is less illness; thus, there are less medical expenses.They can pay school fees and the children get an education. The next generation moves up."

Last year, Hixson traveled to the Philippines to see firsthand one of their more successful microlending partners. One woman she met had started a business drying, curing, and selling fish that her husband caught. Demand became so great for her product that she hired additional workers and began to use fish caught by her neighbors. Her success eventually led to twenty employees in her community. The benefits of microlending, Hixson says,"often become circular and supportive in this fashion."

In addition, Hixson attributes the Grameen Bank's success to its peer group networks. Rather than loaning to one woman in a community, the Grameen Bankloans to a number of women in one village. The loan payments are due once aweek, at the same time for everyone. All of the Grameen Bank borrowers meet, where they discuss their businesses' successes and failures. This allows banks to spread out their liability and reduces the risk of loan default.

The veteran borrowers, many of whom have already repaid their loans, often advise the group. If someone is unable to make their payment that week, they owe an explanation to the group. This, apparently, is a more powerful incentive than high interest rates or late payment penalties. "Peer support and peer pressure," Hixson says, "are the things that make the repayment rates so high."

"Some of our businesses have grown too large to continue with microloans,"Hixson says. "They've moved up to what some call small business loans, but these people often want to continue going to the meetings for the group support. They help each other."

Grameen Foundation USA is currently working with partners in over 20 countries, from Africa to South America to Asia. They assist their partners in everything from setting up nutritional goals for their borrowers, to teaching the lending agencies how to use computer databases.

Though microfinance serves an enormous number of people already, demand is still largely unmet. The World Bank estimates that only 4 percent ofworldwide demand is currently met and nearly a half a billion of the world'smost impoverished people are still without access to microfinance.

Once again, the Grameen Foundation has an interesting answer to this problem- private investing. "Revolving loans won't cut it," Hixson says, referring to the amount of money needed to reach the world's most impoverished people."The demand is just too great." The Grameen Foundation is currently trying to group microfinance loans into large amounts so that investors will beable to see a reasonable return in a short time.

The driving ideal behind the Grameen Foundation, and microlending in general, is self-sustainability. "That's why the Grameen Foundation's partners give loans, not grants," Hixson says. With microloans, people understand that they are being given something they have to pay back and there are strong incentives to prosper.

"It's fascinating how much borrowers can do with so little," Hixson says,"and the difference it can make."

(For a slightly different perspective on microlending, check out this op-edby Brian Hooks and Steven Daley, both of the Mercatus Center's GlobalProsperity Initiative.)

More event planning

2005-04-17T10:38:00.000-07:00

The date is finalised - May 3. The Santa Clara University, International Business Network will hold its first event. Flyers have been prepared - and you'll soon see them in the aisles around the school. The guests are as follows,

Prof. Martin Calkins
Department of Management

Prof. Fabio Caldieraro
Department of Marketing

Rajesh Rangnekar
Sr. Manager, Oracle Corp.
SCU Alumni

Prof. Karen Fox
Department of Marketing

Prof. Olga Saginova
Department of Advertising,
Director of Graduate Programs
from Russia

Prof. Irina Skorobogatykh
Department of Marketing
from Russia

The dean, Prof. B. Posner will kickoff the event.

Of course, all the logistical issues have not been sorted out yet - the event room still has to be decided!!

New way to look at current account and trade imbalances

2005-04-14T16:33:00.000-07:00

McKinsey has an interesting writeup on a rather novel approach to calculate trade deficits. While they are not arguing against working to reduce the trade deficit in the traditional manner, they do mention that the way the trade deficit is measured is quite dated.

The methodologies and ideas to talk about Current Account and Balance of Payments, were envisioned in the 1940s. In its simplest form, it is the difference of imports and exports. A key, and often silent, assumption, is that the firms are domestic in nature. In other words, a lack of multi-national companies from the equation.

When you add multi-national companies in the melee, things get understandably complex. How does one account for a foreign subsidiary of an American firm that is producing items in a non-US production plant, and shipping them back to US? Is that importing stuff into US? According to current Current Account managers, yes! But not so, according to the article by McKinsey. And the reason is simple. The items were produced by an US firm for sale in US, but only outside US. To quote,

Any negative net impact that corporate activities abroad have on the US trade balance must be weighed against the overall economic value they create.

Now, what this article presents is an idea of re-evaluating how the measurement is done. In theory there is nothing wrong with that - it is a good idea to evaluate ones metrics from time to time. However, what is also important is that we don't get swayed too much by the end result - reduce trade deficit, so as to load the metrics.

Does this way of looking at current accounts for production activity by foreign subsidiaries make sense? Comments by people who might have had more macro-economics?

The Opportunity to Gain a Worldwide View of Business

2005-04-11T22:29:00.000-07:00

There has been a recent increase in provision of business coursesoffering a specific international flavor, developed both in USinstitutions and overseas. Indeed, universities previously offeringonly traditional subjects are showing great interest in thisexpanding and exciting field of study, with some institutionsenrolling as many as 50% of business students in new internationalbusiness programmes.

Numerous collaborations are taking place across universities from allcorners of the globe, and Business Schools are beginning to respondto calls from employers for the promotion of a world view ofbusiness, providing the necessary skills for the increasing number ofglobal managers now required in industry. Large organisations recruitfrom Europe, the US and Asia, and many US companies are specificallylooking towards European Business schools to fill their recruitmentquotas.

Why study International Business?

Of current importance is the development of the multinationalenterprise and the impact of foreign direct investment as a vehiclefor the increased globalisation of business activity. Foreign directinvestment has become the fastest increasing productive unit in theUK Economy recent investors in the UK including Toyota, Samsung andNissan. None of these multinationals are confined to solely Japanesemanufacturing companies, as the impact of new global technology andinformation systems is leading to a wider range of opportunities.Indeed, Numura securities in the Finance section, as well as theFrench car company, Peugeot, provide an example of the diverse rangeof Multinational Business activities in the UK alone.

Further liberalisation of trade has taken place through the variousround of GATT and European Union, with these trading blocs arecommitted towards full removal of tariff and non-tariff barriers, andallowing the free movement of labour and capital in the creation of asingle market. Similar agreements are taking place within the US,Canada and Mexico, as well as Japan and the association of South EastAsian Nations. All these developments highlight the importance ofunderstanding international business in the 21st century.

Additional Opportunities

Students also gain many other benefits arising from the study of anInternational Business degree, besides increased job prospects. Someof these stem from the opportunity to work on projects in crosscultural groups, learning new techniques arising from working withpeople with a wider range of business cultures. In terms ofcurriculum units, the International Business degree offers theopportunity to gain fluency in another language such as Japanese,French, German, Spanish or Italian. Particular emphasis is placed onthe acquisition of a foreign language in the business context, andsome institutions offer the opportunity to study two languages.There is, however, much more to an International Business Degree thanforeign languages. The study of International Business includes thedevelopment of skills whereby students learn to think in the businesscontext of another trading nation. There is much to be learnt fromhow business is carried out across a wide range of newly emergingmarkets, as well as gaining an understanding of various businesspractices in the more affluent nations, including European countries,Japan and the US. A wide range of international options are availablefor study, including Global Environment Management, InternationalMarketing and Global Information Technology.

McKinsey compares India and China

2005-04-11T19:55:00.000-07:00

This was sent to me by a friend. McKinsey compares India and China.

Planning for the first meeting

2005-04-11T19:53:00.000-07:00

Planning for the network's first event is in full swing. Members are contacting professors, ideas are being thrown around, and the works. The topic decided is Oppurtunities and Challenges in a Global context and the date is expected to be May 3!!

International Business Newsletter, Issue 2

2005-04-05T19:48:00.000-07:00

Welcome to issue of IB newsletter, issue 2. The format has changed a little bit this time around. And it is still not cast in stone. If you have suggestions about what you'd like to see in future, or even what you'd like NOT to see, please let us know.

This time, there are two surveys of concepts that are (atleast, loosely) associated with the trade of international business. The of course there is the resources section, which I have kept, as is from the last time.

Foreign Branding

We all have come across examples of foreign branding, even if we have not caught on to it as such. How about about the ice cream - Haagen Daaz. Notice it has an umlaut in its name. And the name itself. Does it not seem reminiscient of some Nordic language. Well, that's foreign branding for you. In reality, Haagen Daaz is born in New York.

Foreign branding is the practice of creating brand awareness by associating a product with a foreign concept, or maybe even an ideal.

Another obvious example of foreign branding is the association of fashion and cosmetics with France. This shows through in all those French sounding cosmetic companies.

Other obvious example of foreign branding is association with France of fashion conscious people. Many cosmetic and fashion brands in the United States use French names.

Another example of implying association with a foreign concept is Ikea's use of the umlaut in their tagline, Unboring(sorry could not figure out how to make an umlaut in text).

The umlaut looks pretty incongrous in an english speaking country. Because of that it makes one stop and look again. And that is the first aim of marketing!

The creative directors of Ikea are Crispin Porter + Bogusky. While not directly related to the idea of foreign branding, it is worthwhile to note that Crispin Porter + Bogusky(based in Miami) have worked on promotions of MINI Cooper car too.

If most of you have taken Mgmt 501, you'd remember the discussion of sterotyping. Foreign branding is one area where a positive use of sterotyping is made. This is because, if you think about it, all that foreign branding is doing is trying to associate a domestic product(maybe not owned or manufactured domestically, rather available domestically) with a positive foreign stereotype. Of course since a product is something the firm hopes to sell, the operative word here is "positive" streotype!

Atleast one study makes a distinction in the type of product that will benifit by foreign branding. Leclerc, Schmitt, and Dube-Rioux divide products into hedonistic and utilatarian. It seems that hedonistic products seem to benifit more from foreign branding than otherwise.

Market Entry strategies for foreign Markets

Many firms will just bring their existing market entry strategies with them when they approach a new foreign market. If there is congruence between the home market of the firm, and the target market, this approach might work. However, if there is a large disparity in any of essential indicators of the two markets, or even in the broad psychological makeup of the markets, these strategies are not geared to yield fruit.

A market entry strategy consists of components such as tailoring products for the entire line of market, from the high end to low end, to evaluating the supply chain, and investing time and resource to understanding local business and consumer sentiment.

There is empirical evidence, cited in many studies, for the fact that the firm's knowledge of economic and cultural factors of the target market will affect its performance. And this is not even a surprising conclusion.

A framework to evaluate the distance of a market from the firm's home market is the CAGE analysis. The CAGE distance framework consists of the following - Cultural, Administrative, Geographic and Economic distance.

Experience gained from operating in a near-market can be essential. A near market denotes affinity of two different and distinct markets which share many common factors. One might even say that a market can be considered a near market to another one if the CAGE distance between the two is relatively small.

It can be said that cultural affinity of the target market to the firm's domestic market does not matter in the long run. In the initial market entry a firm can leverage this, but in the long term, what will matter is the organizational knowledge the firm of near markets.

Resources

Some links and studies that were used in the survey articles above,

http://www.mckinseyquarterly.com/article_page.aspx?ar=1581&L2=16&L3=17&srid=17&gp=0
http://www.globalbrands.org/resources/online/academic/foreign.pdf

Whose culture matters? Near-market knowledge and its impact on foreign
market entry timing Debanjan Mitra; Peter N Golder

Outsourcing: Myth and Reality
http://www.nbr.org/programs/globalization/outsourcing.htm

IBM Creates Retraining Fund To Blunt Outsourcing Impact
http://www.ecommercetimes.com/story/33012.html

Does Globalization Lower Wages and Export Jobs?
http://www.imf.org/external/pubs/ft/issues11

Globalization Cures Poverty: Study
http://www.globalpolicy.org/globaliz/econ/2002/0709poverty.htm

IBN Newsletter, Issue 1

2005-03-01T19:39:00.000-08:00

Welcome to the first issue of International Business newletter. To set the record, we will try to get this newsletter out on a periodic basis. The periodicity has not bee decided yet - but rest assured, it will be periodic.

The format, for now, will include pointers to come stories on the web which deal with business in an international context. In addition there will be a resources section. User participation is welcome and HIGHLY encouraged. Please send across any links and thoughts that you might have about things that you'd like covered in the news letter.

Markets
Fragmented Retail markets

Retail markets in many developing countries are fragmented. For example, http://www.thehindubusinessline.com/praxis/pr0303/03030060.pdf discusses the nature of fragmentation in India. The writeup is also interesting from the perspective of discussing fragmentation in general.

The Chinese retail market is analyzed in this writeup. http://retailindustry.about.com/library/uc/uc_chung1.htm. However de-gragmentation is not a panacea. For example, this Mc Kinsey report discusses european retail grocers.
http://www.mckinseyquarterly.com/article_page.aspx?ar=1257&L2=20&L3=73. Meanwhile, elsewhere, http://www.mckinseyquarterly.com/article_page.aspx?ar=1549&L2=20&L3=73, there is a discussion of strategies for marketting consumer goods. From the above article, an excerpt, which deals with the strategy for growth, lowering prices of some branded items Serving value-conscious consumers in mature markets is also increasingly necessary. This notion might seem counterintuitive, since many companies have focused on introducing expensive innovations at the premium end of their markets. Nonetheless, though the premium segment is growing in many categories, the shift toward value is a more important trend for companies that mainly target the mass market. Retreating to a narrow premium segment might make sense in categories such as vodka but would prove self-defeating in household cleaners. In addition, price competition stalks the premium segment: a growing number of retailers, such as the United Kingdom's Tesco, excel at offering consumers premium private-label alternatives. Creating a service for an existing, probably, branded product, is a another strategy. Nestl's Nespresso systemgourmet coffees individually packaged for use in special espresso makers and sold through the mail and boutiquesis a service that extends a product. A lot of software companies already do this!!

Web Resources
Doing business internationally - customs etc
http://www.executiveplanet.com/ is a good site that carries a primer on customs, cultures etc from many countries. While http://www.hg.org/guides.html is a site that carries business and law guides for many countries. These are mostly links to other sites. In most cases the link to the Law library of congress for each country is pretty nice.

International News Sites

Some international news websites for various regions are as follows.

China
http://www.xinhuanet.com/english/
http://www.chinadaily.com.cn/english/home/index.html
http://www.topix.net/world/china

India
http://www.samachar.com/
http://www.hindustantimes.com/
http://www.indianexpress.com/

Singapore/SE Asia
http://www.channelnewsasia.com/
http://about.reuters.com/malaysia/

Japan
http://www.asahi.com/english/english.html
http://mdn.mainichi.co.jp/
http://www.japantoday.com/

Goodbye!
Hopefully you have found some value in this newsletter. Feedback, any feedback, is eagerly solicited. Any ideas about what would be useful in future is greatly appreciated. In the future expect more directed analysis of various segments, as they relate to international business.

Thanks for reading!!