Japan is the world’s third largest economy and the United States is the largest economy in the world ranked by GDP. But, these two huge economies do not have a free trade agreement, which strikes the question – why not? Obviously, there are a lot of reasons why these two great nations have not struck a deal yet, but one could be on the horizon.
globalEDGE Blog - By Author: William Nunnold
On April 4th, the Bank of Japan shocked the world by unveiling a stimulus package that plans to inject $1.4 trillion into the Japan economy over the next two years. This large stimulus package is designed to help Japan out of a deflationary cycle and end two years of stagnation.
Entrepreneurship is an important facet of every economy across the globe due to the fact that many times, these new businesses find success when going abroad. The most obvious form of entrepreneurship is starting a new business. Other forms exist as well including revitalizing a mature organization in response to a new opportunity or when large organizations spin off a part of their company, making a new company.
With underdevelopment and currency volatility in the emerging markets, the biggest players have set out to fix those problems. The BRICS leaders met in late March in South Africa to plan out objectives for a new bank that would help fund infrastructure expansion, which is set to reach $4.5 trillion in the next five years. Talks also included discussing pooling foreign currency reserves to resolve currency volatility.
Imagine a company that cares profoundly about the well-being of its customers, treats its suppliers as part of the family, with the same care and love as it shows to its own employees and customers. Imagine a business where those who are lucky enough to be employed, rarely, if ever, leave and every employee is committed and passionate about their work.
If you’re saying to yourself, “not possible, unreal,” you're part of the majority. But, the management paradigm shift is catching on and it could turn the classic management style upside down.
Have you been exposed to a company advertisement or website that translated their message word-for-word and missed the mark, instead of focusing on the marketing translation? Google Translate does this for many websites because many companies do not have a specific website for a particular language. This is a huge problem as businesses try to enter new foreign markets. Their messages do not communicate the correct message because language is not based purely on word translation; it also involves cultural meaning, context, style, and connotation. Localization and a global marketing strategy are becoming key drivers for companies as globalization expands. Getting your message across in a word-for-word translation is the wrong approach, but transcreation can be the solution.
One third of the world’s population is now connected to the internet, a surprising statistic considering where we started not too long ago. As more people become connected, consumer consumption patterns around the globe are changing. The mediums people use to consume content are changing as well, caused by cultural differences as well as different regulations across countries. Many regions, such as Scandinavia and India, are a much different market than the United States. We will explore these differences by analyzing how they affect consumption patterns and their impact on business in a global context.
The traditional model for young start-ups has been to establish a foothold in the United States for a couple years, before branching out to Europe and Asia. These traditional models are out of date and only constrict your company's growth potential.
The United States used to be worth twice as much as Europe and three times that of Asia. Times have changed though; the world is becoming one market, a global market. The language of this global market is currency, which can take on multiple forms, but it's uniting all. If you aren't doing business in Europe and Asia, that's 2/3's of your potential revenue streams you are missing out on.
Latin America, a region once plagued with high inflation, has seen a drastic shift in spending and consumption trends in the past decade. This shift of consumption has been due to multiple factors, particularly the economic boom and declining poverty of the region. In the past decade, 50 million people in Latin America have joined the middle class according to a World Bank study.
Globalization has provided the world economy with an enormous amount of wealth and expansion since it first began in the 1970’s. It slowly progressed throughout the 1980’s up until the fall of the Berlin Wall, which led to a doubling of the global free-market labor force. Since then, the Dow Jones Industrial Average has climbed from 800 in 1979 to over 13,000 by 2007. The era of financial globalization went into effect in 2003, when financial services accounted for 30% of stock market earnings. For the past 3 to 5 years though, we have seen a different trend in globalization and the free flow of capital across borders.
Mexico has reached a tipping point; it is no longer the poor nation it once was a generation ago. But, it also has a long way to becoming rich. The nation’s economy is the 13th largest in the world, but many experts claim that Mexico has been running under the radar in respect to a strong business investment for many international business investors.
Many analysts anticipated the growing possibility of the 3rd largest economy falling into recession in the short future and the time has now come. The analysts expect that Japan will stay in recession in the final quarter of the year due to sluggish trade to China, a strong yen, and the effects of the tsunami that ravished the country over a year ago.
Official data on Monday morning showed Japans economy contracted during the second quarter this year by .03% and then by another .09% between July and September. The increasing contraction trend of the economy is putting more pressure on the government and Bank of Japan to take more steps to boost the economy.
Doing business in India can be difficult for the new executive sent on assignment to India. As the world’s second largest country based on population, India is expected to become one of the biggest economies by 2050, projected by PriceWaterhouseCoopers. What is strange is that India does not have a truly national language, unlike the other large economies such as China and the United States.
The theory that the internet has greatly lowered barriers to entry into many markets is well established. Many companies have greater access to distribution channels coupled with low capital costs to start up a business in the 21st century. You can add another advantage of doing business in the digitized age: Big Data.
Data is everywhere you look; from the UPC code on your Starbucks coffee cup, down to the GPS in your phone. It has been dubbed by the Harvard Business Review as “The Sexiest Job of the 21st Century.” Experts now point to a 4300% increase in annual data generation by 2020. All of that data is creating quite the hassle for businesses though. This industry, and its implications on international business are so new that many companies do not know how to attack the problem. They know being able to analyze and come to conclusions from their massive amounts of data is important but many companies have not developed a strategy yet.
Globalization can be seen in every crack and crevasse of the earth now that we can communicate globally at unprecedented speed. To be a thriving, growing business, most would argue that once you are well established in your domestic nation, the next logical plan is to take your business internationally.
There are many studies that point to the idea of globalization and how many cultures are mashing together into one as the world becomes more technologically advanced. While technology plays a large part in this, do younger generations have an impact on narrowing the cultural differences between two nations?
As most of Europe still feels the fiscal repercussion’s from the debt crisis, some companies are leveraging this to target the fiscally conservative consumer. Consumer spending power has declined which means companies are pressed to find ways to squeeze every penny out of the consumer. Many companies are changing the packaging of products to accomplish this.
Way back in 2001, Jim O’Neil coined the term “the BRIC countries.” These countries were to be the building blocks of the “post-American world.” Businessmen and investors flocked to these locations to see what the future held.
Fast forward to 11 years later and the story is a very different one. Uncertainty now resonates throughout the BRIC (BRICS if you want to include South Africa) countries due to an increasingly slow growth rate, coupled with widespread corruption, political failure and currency woes. This paints a familiar picture to some who witnessed the former “American Killers” such as Europe (1960), Japan (1970) and the Asian Tigers (1990) unable to sustain steady growth during those times.
Alternative currencies have been around throughout history, mostly in times of economic crisis or during times of war. The situation throughout the Euro Zone is no different at the current moment. Countries including Spain, Greece and Portugal all have alternative currencies in some form, floating around in their economy. More people are turning to these alternative currencies because they are used locally and allow people to trade services for goods or services for services. The currency is calculated in terms of hours, allowing someone who, say, taught piano lessons, to buy a haircut with the hours she accrued teaching the piano lessons.
The Academy of International Business is holding a conference this week focusing on rethinking the roles of business, government and NGOs in the global economy. The conference is sponsored by George Washington University and the University of Maryland. Every year, AIB members from 77 countries partake in conferences and activities that involve discussions, key-note speakers, and networking opportunities from professionals and academics around the world. To learn more about this year’s conference or become a member yourself, see our AIB page.
According to Merriam Webster's Dictionary, ethics is the principles of conduct governing an individual or a group. This is an interpretive definition; it changes depending on culture, and that is why teaching ethics for a globalizing economy is rather difficult for current business schools.
This past week, ratings agency Standards & Poor’s warned India that it risks a sovereign debt downgrade which would result in the country falling off the list of an investment grade country. Currently, India is rated at the lowest investment grade rating – BBB. Falling below this level would mean that India bonds would be considered junk bonds. Much of the blame is assigned to the Prime Minister, notes S&P, pointing out specific problems with the political system “that has more gridlock than the United States,” coupled with high inflation and a falling currency and GDP.
In China, the domestic economy is struggling just like the rest of the world with slow sales and declining construction. The cost of labor has also increased drastically, with wage rates increasing upwards of 15% in some cases, year over year. Compared to May of last year though, exports have increased 15.3 percent, twice as fast as economists had predicted. How are Chinese companies finding success when Europe is in a debt crisis and the United States is still recovering from rampant unemployment though? Easy – exporting and automation.
Earlier this month in Washington D.C., Ambient Technologies was one of several companies recognized for their efforts to increase exports in the United States. They received the Presidential E Award for their efforts to export their company’s services abroad, with help from the Export Assistance Centers of the U.S. Department of Commerce.
Earlier this month a report from The Brookings Institution was released with some useful data. The data, while slightly obvious, came to the conclusion that the majority of our cities and metro areas are the factories of our nations export output. Some of the notable data points include:
- 100 metro areas generated 84% of U.S. exports in 2010
- Exports increased 11% in 2010, the fastest increase since 1997
- Jobs supported by exports rose 6% in 2010, while the overall economy lost jobs during 2010.
On almost any business team, confrontation is something that is part of every meeting. It is a way to get ideas out on the table, and usher in new innovative solutions. Even at the university level, students are taught how to confront peers in correct ways, to empower team members and not scare them off. However, in the context of a team made up of multiple cultures, this typical American stance on confrontation could be viewed as downright rude and inconsiderate.
No. Well, at least not for a while, according to Xu Xiaoping. Xu ranks among China’s most prominent angel investors. He is also CEO of a NYSE-listed education company called New Oriental Group that helps prepare people from China to study overseas. There are many reasons why innovation has been lacking in China. Many of these reasons deal with cultural differences in comparison to other countries, where innovation is encouraged and embraced.
Social media has come a long way since its inception. It began as a simple way for communication as a user would send a basic email to another computer close by. Now, social media has transformed how people consume news and communicate with each other around the world. It has also empowered the masses, which before never had an outlet or an easy way to communicate and organize ideas. Before, top media companies controlled what issues would be covered, and the view that would be expressed. With social media, this idea is turned upside down. Millions of people with the same view can determine what is important and bring attention to the issue. Examples of this include the revolution in Libya, Egypt, Syria, and the Occupy Wall Street movement.
Africa is a land with vast natural resources, but they come at a high price. Africa is known for having some of the most unstable countries in the world. Even with these dangers, China has broadened its exposure in the region to secure the natural resources needed by the factories and businesses of the world’s fastest growing economy.
In many of the leading construction markets, the market for sustainable construction is expanding rapidly. This standard started in the mid 2000’s with the introduction of the LEED certification for buildings. LEED stands for Leadership in Energy and Environmental Design and was developed by the United States Green Building Council. This standard has started to transform the construction industry and is now taking off elsewhere in the world as well.
Entrepreneurship is risky. Entrepreneurship is for the naïve. Entrepreneurship rarely succeeds. All of these assumptions make entrepreneurship sound like a bleak place only for the most risk-averse; the de facto position from many people is that corporate life is the way to go. But this conventional position is far from true. Building new companies is far more sensible than one may think.
When was the last time your employer told you to play a video game on the job? For many, the answer may be never, up until now. Recently, some top French companies, including Paribas, Orange, and Alcatel-Lucent, have been using role playing games to teach crucial management teamwork, and sales skills to their sales staff and managers; a very important skill to have in the competitive world marketplace.
In 1982, China was just beginning to open up to capitalism when the government decided to use a plot of land in a rural town of Yiwu to use as an open-air market. What started off as a rural, poor city has turned into a vibrant Trade Mart which now covers 988 acres. To put this into perspective, you could fit 10 Mall of America’s in the same space.
28 percent of all US organizations are using cloud computing according to a software supplier based out of Illinois that conducted a poll last month. Many other forecasters, such Gartner, are estimating that the cloud computing market could be a $150 billion market by 2013; A pretty sizable amount indeed for a still-growing sector.
Cloud computing did not have such an optimistic outlook just by being the new technological bubble. The implications cloud computing bring to international business vary and are far reaching. The changes have already started occurring with many organizations switching to cloud file storage, email, and web and video conferencing.
India, the world’s tenth largest economy according to the International Monetary Fund, is seeing troubling signs in the short-term outlook. Recently, India has seen a slowing growth rate in GDP, increase in inflation to 9.1%, and a decrease in local investment. Many economists attribute these worrisome signs to the corruption and scandals plaguing the growing nation. In recent months, the central government has been struggling to get the economy back on track.
Amid speculation of tax reform in the near future as Tim Geithner has stated, many critics have wondered what the United States will do to curb the appetite for our cash hungry government. Many have brought up that the U.S. has the one of the highest tax brackets amongst the OECD (Organization of Economic Cooperation and Development). This statement is true; the United States is almost at the top of that list with 35 percent as its top corporate tax bracket, trailing only Japan that tops out at 39.5 percent. This statistic is actually misleading though. While the U.S. has one of the highest statutory tax rates, its marginal tax rate is 27.1 percent. This is due to all the loopholes and tax break incentives the current tax code offers. Many other countries do not offer such tax breaks to companies. To put this figure into perspective, here is a list of other OECD countries and their marginal tax rate in 2008:
The largest earthquake ever to hit Japan had detrimental effects on its economy. It also crippled Japan's top automakers, causing millions in lost revenue and almost a complete shutdown of the automakers' plants. What caused this supply chain disaster was the Just-In-Time production model that many automotive manufacturers have turned to in the recent years to decrease carrying costs and inventory. For the most part, this model is very safe but during times of supply shortages, having little on hand causes a big problem. As such, one vehicle contains roughly 50 to 100 microchips that control everything from brakes to navigation systems. To continue the car on the assembly line, not one part can be missing. During the earthquake, the main vendor of microchips had damage at its production facility creating a large shortage of a very hard to manufacture product. This shortage of microchips caused the automotive companies to cut production down to 20 to 50 percent of full operating capacity. Consequently, Japanese automakers are losing market share to American car manufacturers because of this shortage.
Think about it, when the economy is in a downturn, what tech startups can find funding to develop a new business model? The innovative companies of course! You know, the ones with different ideas that stray away from the normal? It’s these innovative companies that strive in this harsh economic atmosphere, and that is just what happened in the recent economic downturn. The economy weeded out the basic, cookie cutter businesses and unearthed the gems beneath. Some of these gems include the likes of Spotify, Twitter, FourSquare, and Tesla Motors. All four of these companies have a stake of their business abroad too which means that these successful tech startups understand the importance of going global. How have they done business abroad? Glad you asked!
As many travelers still feel the pinch of the recession on their wallets, a new market begs for attention as it couples the price tag of a hostel, convenience of a hotel and the homey feel of a bed and breakfast. This new way of travel accommodations is basically a social networking bed and breakfast and has expanded in the past years in Europe. Half a dozen startup companies have emerged in this market in the past two years including the likes of Crashpadder.com, iStopOver.com, ArBnB.com, and Roomorama.com. With this new market opening up, international businesses are looking to reap the rewards of this new type of traveler and hoping it will increase business abroad.
As of today (July 1st), Japan has significantly relaxed the visa restrictions for tourists allowing the single fastest-growing group of overseas travelers, the Chinese, to be able to travel to Japan. These new regulations will enable another 16 million households to be able to apply for a trip to Japan. This is 10 times the amount of tourist visas that were available before the new regulations. Up to now, Japan had strict regulations regarding visitors from their neighbor to the west; only allowing wealthy Chinese with high annual incomes to travel to Japan. The massive influx of Chinese travelers will hopefully result in a jump in income for many local shopping centers in Japan.