The Answer to the Salt Riddle

If you did not get a chance to read the previous entry about salt and its historical importance, read it here.
I appreciate all the reader contributions.  It is the readers who make this blog successful and the comments create a fantastic forum for discussion and I urge you to subscribe, continue commenting, and take part in the discussion.

The answer after the break.

Biopiracy is the Next Big Issue

Charges of biopiracy -- the illegal use of one nation's natural resources for the economic gain of another are often extreme and are therefore relatively easy to reconcile.  But what happens when pharmaceuticals are involved and people's lives hang in the balance.

Culture Dimensions

Cultural awareness is key in any international business activity.  Cultural divides should be accounted for in marketing, negotiations, product design, and other important decisions.  One must analytically consider the best way to promote a product given the target audience.

It is argued that differences among cultures can be explained according to four dimensions of culture:

Marketing Management Column #2 - Part 2

A continuation of my second column in Marketing Management. 
Read it after the jump.

Marketing Management #2 - Part 1

The first part of my second column in Marketing Management. 
Read it after the jump.

Adaptation is Key

This is a preview of my new book, Global Business: Positioning Ventures Ahead to appear with Taylor and Francis in June of 2010. I will be posting little snippets from the book every once in a while. I encourage you to read, comment, share, and your thoughts to the comment section. And look for the book in June.
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Firms expanding into additional global markets must tackle distribution systems, pricing, and address a wide range of ethical issues such as legal systems related to monitoring pollution, maintaining safe work environment, copying of technology or trademarks, and coping with demands for bribes.As the 2008 attacks in Mumbai show, terrorism continues to pose a risk. 

Marketing Management Column #1 Part 2

A continuation of my first column in Marketing Management.
Today’s column presents research on the dimensions which will shape the future of Global Marketing.
Read it after the jump.

U.S. Leadership Is Essential

This is a preview of my new book, Global Business: Positioning Ventures Ahead to appear with Taylor and Francis in June of 2010. I will be posting little snippets from the book every once in a while. I encourage you to read, comment, share, and your thoughts to the comment section. And look for the book in June.
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As we write this, governments worldwide are working to counteract the 2009 economic crisis by developing stimulus plans. The efforts of any one nation will have an impact globally because national economies are intertwined, but economic activity is highly concentrated among a few players – the U.S., European Union, Japan, China and Canada – who account for more than 75 percent of the world’s economy. That clout makes it critical for U.S. companies to become more involved in international marketing, whether it is export-import trade, licensing, joint ventures, wholly-owned subsidiaries, turnkey operations, or management contracts.

Please Comment:  Do you think the protectionist measures that are being enacted as a part of the stimulus plans will help or hurt domestic economic recovery?  What is the best way for governments to react to the recession?  Do you think that a global outlook is key to recovery?

Marketing Management Column #1 - Part 1

The first of my columns in Marketing Management. 
Read it after the jump.

MTV's Cross Cultural Reach

During the crisis in Afghanistan, teenagers in 375 million households from Boston to Berlin to Bombay tuned in to hear U.S. Secretary of State Colin Powell field questions on military maneuvers.  For young people all over the world, MTV is not just the first stop for music, but for breaking news and views that shape their interpretation of cultural events.  MTV has vast global reach on par with brands like Coke and Levi's.  Though admired for it's vast influence, it draws the ire of some who accuse the teen-savvy network of cultural imperialism, trampling over regional values and preferences as its airwaves rock the world.

MTV, meanwhile, sidesteps such criticism and downplays its role as a conduit to export American culture.  While it's 64 channels world-wide feed teens' hunger for American music, they play local stuff too.  In fact the network insists on 70 percent home-grown content.  That means local veejays in Bombay belt out Bollywood soundtracks.  In Shanghai, MTV plays Chinese opera arias.  Looking outward, MTV scours the world for emerging local bands and exposes them to international audiences.

MTV is not alone in its discovery that global markets want more than homogeneous, plain vanilla content.  Instead, it's shows that are in tune with regional cultures that really sell.  Everyone from CNN to Disney is "de-Amercanizing" their global channels.  In addition, international programming is making its way onto the U.S. airwaves.  Globalization is growing.

GM Needs A Global Strategy to Survive

The U.S. government now owns 60 percent of General Motors. Some say that the company really belongs to the taxpayers ― but just have them try to sell some of ``their'' GM shares ― they'll quickly see how limited their ownership rights are. U.S. officials now have a new mandate that is familiar to business executives: meet increased sales goals in an ever-expanding sales territory. If GM is to succeed, global sales and operations, not just American, must be a priority.

In an industry that is among the most competitive in the world, GM's future will inevitably be linked to global markets and how well it does as an Asian car company.

Of course, this is not lost on GM. Indeed, at the same time as the firm filed for Chapter 11 protection, CEO Fritz Henderson said that ``China remains a key part of our business. Our ventures in China are a critical part of the new GM ― unequivocally. Our business in China continues to grow at a very fast, even torrid pace and remains a critical part of GM going forward.''

As GM pares down its presence in Europe with the sales of Opel and Saab, the company has expansive ambitions in Asia.

China is GM's largest growth market. The firm has more than 20,000 employees, enjoys booming sales and occupies the leading position among global automakers with market share of about 12 percent in the region. The China Daily reported that GM plans to open a new factory and double sales in China over the next five years.

Another significant Asian market for the new GM will be South Korea, where it is the majority owner of GM Daewoo Auto & Technology, Korea's third largest automaker. Elsewhere in Asia, auto markets have been more depressed by the economic crisis, yet GM has plans for growth throughout the region with emphasis on Thailand and India. In India, look for GM to engage Tata's Nano in competition with its own version of a mini car. India should be a hot market as the country continues its strong economic growth. With 95 percent of the world's customers living outside the United States, GM must look overseas for long-term expansion.

The growing needs of Asian markets will require adjustments in production capacity and product. Consistent with the product cycle theory, over time, established products are produced in new locations with more local advantages.

Asian production sites with lower cost structures and locally based R&D are essential for the new GM to fulfill its mission. To succeed in its post-bankruptcy life, GM will need to rationalize its global production platform to maximize economies of scale and eliminate waste.

While GM will need to temper its ambitions to avoid mistakes of the past, it must compete globally or be marginalized as a niche competitor. However, global efficiency becomes particularly sensitive if GM uses overseas production facilities to import cars to the United States

Indeed, the U.S. administration's rescue plan for GM is contingent upon producing more cars in the United States, even as it closes factories and eliminates jobs at home. Yet, inefficient production is one of the principal reasons for GM's Chapter 11 filing and should not be championed under the guise of protecting American jobs.

Utah Gov. Jon M. Huntsman, the designated U.S. ambassador to China, has his work cut out. He will be confronted with competitive realism while supporting American idealism. But he's the right man for a tough job.

The Obama administration may not intend to be an active manager of the new GM but its policies on trade, foreign investment and taxation will shape the company's future. Government policies must allow and even encourage GM to be competitive not just at home, but also abroad. Don't expect administration officials to go on commission, but, whether they like it or not, they have a new obligation to help GM increase sales. Asia is the smart place to look.

Cultural Context Orientation - Part 1

Culture is extremely important to take into account when conducting business internationally.  Culture is defined as "an integrated system of learned behavioral patterns that are characteristic of the members of any given society.  Culture is inherently conservative, resisting change and fostering continuity.  The process of aculturation - adjusting and adapting to a specific culture other than one's own - is one of the keys to success in international business operations.

One of the distinguishing characteristics of culture is context orientation.  In high context cultures, the context of a communication is at least as important as what is actually being said.  In low context cultures, most information is contained explicitly in the words.  Unless one is aware of the difference, actions could easily be misunderstood.

For example, consider the exchange of business cards.  In China or Japan, high context cultures, the card is presented carefully with both hands.  Foreigners are expected to study the card when it is handed to them and place it on the table before them.  The behavior of an American executive who proffers a travel-worn card or, worse still, makes notes on the card he or she is given, is considered offensive, even insulting.

The following graph ranks major cultures according to their contextual orientation:

 

Academic Freedom

Academic freedom is close to the hearts of many. Being able to teach what "needs" to be taught, to speak out and to pursue thoughts to wherever they may lead are some of the most crucial components of academia. In light of this accepted axiom it is surprising to learn about opposition to the free exercise of higher education around the world.

Many countries are held back by vigorous resistance from their own universities. In their Statement on Behalf of Higher Education Institutions Worldwide, university associations from around the world proclaim fundamental disagreement with international competition: "Trade frameworks are not designed to deal with the academic, research, or broader social and cultural purposes of higher education." 

There are several reasons why universities don't want open markets for themselves. 

First is the reluctance to accept a role in an existing global framework. Administrators and professors around the world have consistently assured me that university issues are so special, specific and unique that the application of industry approaches to them would be heresy. As the editor of an important business journal put it, "Reviewers generally reject the notion that higher education is a 'service.' " 

Second is an overwhelming unwillingness by universities in most nations to consider the benefits of an entrepreneurial system. Rewards for university management come for the ability to manage coalitions and increase subsidies, rather than the capacity to raise funds or be market responsive. There are very few rewards for academic process innovation. 

Third is an ingrained opposition to competition and market forces. Little confidence exists in the power of the market to assure quality. To the world, the evidence is quite clear that central planning has not worked. Yet for ideological and historical reasons, many universities around the globe remain the last vestiges of central planning. 

Past centuries have seen few shifts in university structures and processes. There still is the classroom with the cathedra from which the professor expounds great thoughts and the seats from which students claim to listen. There still are the volumes to read, the papers to write and the ritualized exams to take. Mostly, one professor still offers only one field at one university, and most students still receive their knowledge in one-course increments which, as if by magic, last exactly one semester, and obtain their degrees from only one location.

All this in an era characterized by technology-driven knowledge generation and information dissemination, global reach, cross fertilization of fields, substantial productivity enhancements and Six Sigma quality-control levels. It might appear as if higher education has not innovated at the same pace as other industries. 

Universities need more funding, more competition and more insights from around the globe. Student mobility around the world needs to be reinvigorated. Professors and researchers should move about more. Program content should be internationalized with increasing ease through distance learning and online education. Universities should be able to open up branches abroad or join forces with foreign entities. Competition for resources and students between the best institutions with a minimum of governmental inhibitions must let ventures succeed or fail. Global market forces will lead to rapid improvements and growth in education. Education should be the next large expenditure category for all the TARP funds.

International Trade is Crucial to Revival of Global Economy

President Obama concentrates on his economic stimulus plan. Nations around the world attempt to stabilize their economies as well. Typically, each nation’s emphasis rests with domestic issues. Though politically understandable (GM is more important to us than Toyota), a successful plan must reflect the powerful influence of international trade on the national economy. In the U.S., for example, trade related activities comprise more than 25 percent of its economic activities – which is more than the housing and banking sectors combined. Trade also accounted for the entire U.S. economic growth in the past year. Trade issues definitely qualify for the major leagues, but seem to be neglected so far. 

The world depends on continuity in trade. The global economic outlook, competition and consumer choice are shaped by trade flows and currency values. Competitive devaluations, for example, provide unfair advantages to exporters. For us, the promotion of U.S. exports must have a central place in the economic recovery package. 

The national debate about economic recovery includes many lessons from the Great Depression. The clearest of these is to avoid the beggar thy neighbor policies and the protectionism of the Smoot Hawley tariffs that turned a market crash in the U.S. into a global Great Depression. 

Global leaders give lip service to this conventional wisdom but there is a gap between communiqué language and on-the-ground practices. Indonesia and Russia have already begun to raise their protection of domestic industries – to the detriment of global trade. The Doha Round of international trade negotiations continues to be stalled – even though eight years of negotiations have placed great benefits within reach. 

The U.S. experiences some difficulties in its global position, but around the world there is hope, expectation and willingness for a re-emergence of US leadership. There is growing concern among U.S. trading partners that the new leadership in the Congress and in the White House might introduce a new era of U.S. protectionism. Global markets are parsing any announcement for signs of what the Obama Administration will mean for them.

The world economies are intertwined. Any stimulus measure of one nation is likely to rapidly affect others, and trigger responses. Economic activity is highly concentrated among a few players. The United States, European Union, Japan, China and Canada account for more than 75 percent of the world’s economy. A good domestic stimulus should not become an international distortion. Subsidies paid to farmers in one country, for example, can affect dairy related industries around the world. Once introduced, protectionism can quickly become contagious and be emulated around the world. 

The economic recovery plan is both an opportunity to send a signal to markets about what they can expect in terms of U.S. trade, and a chance to reassert U.S. leadership on a global stage. Discussions of U.S. economic improvements must include a focus on global recovery. Countries must be able and willing to buy each other’s goods – in an increasing quantity – if economies are to blossom. 

Here are some recommendations :

• Countries need to make unambiguous, consistent and clear statements that industry bailout packages will not include protectionist measures. In the U.S., the newly appointed performance czar should assess economic stimulus measures by the U.S. and its trading partners for any inappropriate subsidies of exports or discrimination against imports.
• We need a renewed commitment to the World Trade Organization and its stalled Doha Round of trade negotiations. Rules need to be consistent and strong. The key players in world trade need to re-energize the negotiations by making major commitments and taking “early harvest” of potential agreements on a plurilateral basis. One first step could be the elimination of tariffs on environmental goods and services.
• The U.S. must lead its economic partners on the basis of trust and fair play – applied to trade and investment rules as well as to currency values. We’re in this together. Many policy objectives – be they health care, education, retirement – require a sound economy which depends on global collaboration on trade.

Trade success can provide the momentum which keeps the U.S. economy from stalling out before the rest of the stimulus can kick in. Trade issues must move up to the front burner.