globalEDGE Blog Archive October 2008

This is probably not the best economy for European luxury brands such as Versace, Louis Vuitton, Armani, Bulgari, and Gucci. A recent report discussed the impact of Japanese consumers on these major European fashion houses. After the U.S., Japan is the next biggest market for luxury goods. Fashion houses are targeting this market to increase sales. Louis Vuitton is taking steps to form an extra special relationship with their wealthy Japanese customers. However, this strategy will not solve the loss of thousands of Japanese secretaries who used to pay off the most recent handbags in credit card installments. The European fashion houses are going to have to develop a new strategy to keep their middle class customers in Japan during these rough economic times.

The globalEDGE website is run by MSU-CIBER, which is one of 31 CIBERs across the U.S. CIBER stands for Center for International Business Education and Research. Another CIBER at George Washingon University in D.C. recently held a discussion on the origins and implications of the current global financial crisis. It was a very interesting panel discussion with some extremely bright individuals offering a unique perspective not influenced by the mass-media. There is a video you can watch here: http://business.gwu.edu/financialcrisis/. Be sure to check it out!

Last week I attended a luncheon hosted by the Global Business Club of Mid-Michigan, which focused in part on the importance of free trade. Erik Magdanz of the U.S. Department of State was the keynote speaker, and he had sparked my interest in some current free trade issues. One statistic in particular caught my attention – in 2006, countries that the United States has free trade agreements with accounted for only 7.5% of world GDP, yet they accounted for 42.6% of U.S. exports.

The week of November 17-23, 2008 will be the first ever Global Entrepreneurship Week. The week will be a coordinated effort of dozens of countries across the globe coordinating activities aimed at young people. Why? To think big. To turn their ideas into reality. To make their mark. Additional details such as participation in the various activities and/or sponsorship opportunities can be found on the following website: unleashingideas.org. Also check out their blog: unleashingideas.org/blog/.

Recently President Bush and heads of state from 11 other nations in the Western hemisphere met in New York to sign the Pathways to Prosperity in the Americas initiative. The agreement focuses on further cementing regional “trade and investment liberalization, social inclusion, development, rule of law, and democracy.” Although the agreement is largely symbolic at this point, talks are planned for the end of the year to discuss possible policy changes that can advance the goals of the initiative. In his formal announcement of the agreement, president Bush declared that the deal provided “a forum where leaders can work to ensure that the benefits of trade are broadly shared,” and expressed optimism that cooperation would enhance and strengthen the relations between all signatory nations.

Medical tourism refers to people who go to foreign countries to get medical help. In recent years, the popularity of medical tourism has been increasing. There are many factors that have contributed to this – high costs of healthcare in industrialized countries, waiting lists in countries with public healthcare, ease and affordability of international travel, and better technology across the world.

The domination of English literature and jounalism did not stop users of other languages from contributing to the diversity of global communication. Arabs are a good example of this. Taking advantage of wealth from oil export, they are making efforts to ahieve the popularity of Arabic literature worldwide. For example, on Oct 15th, Bloomsbury announced at the Frankfurt Book Fair that it will launch an Arabic Language publishing house in Qatar. Another multimedia centre is going to be stationed in Abu Dhabi, the United Arab Emirates' capital. The purpose of these centres are to train and develop Arabic talent in jounalism, publishing, or broadcasting, who can hopefully build to the success of Egypt's Alaa Al-Aswany and Afganistan-Born Khaled Hosseini; both of them have been international bestsellers. In fact, lots of western readers have interest in Arabic literature, and the recent promotions of Arabic literature are to fulfill "the desire of ordinary people in the west and in the arab world to engage with each other."

Full article can be found here www.guardian.co.uk/world/2008/oct/16/middleeast-germany.

In the midst of a housing bubble, sub-prime mortgage crisis, an unpopular war, and the stock market steadily declining, it stands to reason that many Americans, nay, citizens of the world are worried about the future of the financial world. Our business world has been built on the "magic of the market" and "success of the fittest," which provided the booms throughout the century that shaped the contemporary market. However, in an article by Breitbart, Australian Prime Minister Kevin Rudd argues, the global economic crisis is a result of the "comprehensive failure of extreme capitalism."

For many years Americans looked at Europe as a place for vacation and not as a place for economic innovation. However, recent events have proved them wrong – Europeans have proven themselves better at solving financial problems.

Many Europeans feel very triumphant now as Leon Brittan, who served as Home Secretary under Margaret Thatcher and was a top official at the European Commission, says that "There’s no doubt that it was a British plan that was copied by the U.S." As the financial crisis deepened, Europeans came up with a bailout plan that has set up the pace for Washington. This was clear when the Treasury Department decided to depart from its own bailout plan and invest up to $250 billion in banks across the United States. And that outcome left Gordon Brown, the British prime minister, and Nicolas Sarkozy, the French president, in something of a commanding position to claim the title of wise men.

Organized crime has been an issue for many years in Bulgaria. However, ever since the country became a part of the European Union, there has been a lot more pressure on the politicians to root out the organized crime. Prime Minister Sergei Stanishev’s party was accused of taking $170,000 from people being accused of being a part of a criminal network. The European Union has been investigating this group and because of their suspicions has decided to cut off $670 million to Bulgaria which will hurt the country since it is the poorest nation in the bloc.

Amidst fears of a global slump, and the assumption that the Middle East will not be immune to it, the property developers of Dubai, located in the United Arab Emirates, continue to build, build, and build some more. As businessmen in the world’s hottest real estate market, who can blame them? Dubai’s annual growth rate has been a steady-near 18% since 2001, and it doesn’t seem to be slowing down anytime soon.

Forget the change of socks; business travelers may need to pack a change of laptop. 

In mid-July 2008, United States Customs and Border Protection passed the “Policy Regarding Border Search of Information” concerning the search of information contained in documents and electronic devices.  The Policy sets forth the legal and policy guidelines within which officers may search, review, retain and share certain information possessed by individuals crossing the United States border.  The policy applies to anyone entering the country – citizens and noncitizens alike.

What does this mean for international business people?

Over the past few weeks, the globalEDGE team has been revising the Country Insights pages to provide you with the most current information available. We’re happy to announce that the Country Insights section is 100% up to date! This includes all statistical data provided by the CIA World Factbook and the background notes from the State Department.

Companies are starting a new trend of offering to their employees custom designed classes right inside their four walls. There is no need for employees to relocate to a university far from their home and work to take classes. This makes higher education convenient for employees who have families and other limitations. Many companies want their executives to gain skills and acquire experience in real world environments, as well as get up to date on corporate standards. At the same time, companies don’t want to disturb executives’ work schedules by sending them to colleges in distant countries.

Football, or soccer as the Americans call it, especially in England is the second most important thing after family in life; it is like a religion. Europeans follow it closely because it is part of their lifestyle. But what happens when t-shirt sponsors go bankrupt? When team sponsors suffer huge financial setbacks because they hold stakes in Icelandic banks?

An attempt by Iranian President Mahmoud Ahmadenijad to change the Iranian economy through the implementation of a new sales tax was met with heavy opposition by Iran’s merchant class, the primary bearers of the new tax.

According to the Washington Post, angry shopkeepers refused for the second straight day to open their stores in the central bazaar city of Esfahan. Shopkeepers in other Iranian cities such as Tehran, Mashad and Tabriz also refused to sell goods.

While the United States has been experiencing financial crisis for the past few weeks, Zimbabwe has been experiencing economic crisis for the past several years.

Zimbabwe boasts the highest inflation rate in the world. At 11.2 million percent inflation rate, the country is scrambling to find a solution. Since 2006, Zimbabwe has issued new currency, printed higher denominations of currency and removed 10 zeros (10 billion ZWD becoming 1 ZWD), all to no avail.

You may be shocked to learn that the liabilities of Iceland’s colossal banks are several times larger than the country’s GNP. Prime Minister Geir Haarde recently addressed the nation and warned that in the worst case scenario, Iceland “could be sucked with the banks into the whirlpool and the result could be national bankruptcy”. You certainly weren’t beating around the bush with this statement, were you Mr. Haarde? The very fact that the country’s leader made a comment with this strong language points to the gravity of the present situation.

Unfortunately things did take a turn for the worse this morning, with major credit lines to Icelandic banks being closed. Trading at the Iceland Stock Exchange was suspended due to the crisis. Citizens around the world are justifiably worried about their financial security, but it seems that Icelanders may have the most to worry about.

I had almost given up on news that isn’t somehow related to “credit crunch” or “bailout,” until I stumbled upon a thought provoking topic in a recent issue of The Economist: "The world has a water shortage, not a food shortage."

My immediate reaction was: "WHAT?" But the numbers seem to make sense – while people only drink about 2 liters of water a day, almost 3,000 liters of water goes into the food people eat every day (add a few more liters for the meat that takes far more water to produce). The article focuses particularly on the inefficient use of water by farmers based on today’s methods of agriculture. In fact, the International Water Management Institute (IWMI) predicts that as population grows and incomes rise, 2,000 cubic kilometers of additional water will be needed each year to keep everyone fed!

As gas prices remain unpredictable and other environmental issues become a greater concern, there has been much more talk about electric cars. Yes, the electric car is real! Innovations in lithium ion batteries and the materials used to make them have increased the range of electric cars and decreased the amount of time needed to recharge them.

Various municipal and university fleets now have electric cars in use, however, the problem of recharging them still remains a valid concern. What is needed is an infrastructure for recharging them on the go. The problem with this is that many investors are hesitant in investing a huge amount of money in building a widespread system of recharging units for electric cars without being sure that it would pay off. On the other hand, consumers are reluctant about buying electric cars when there is a lack of places to “fill them up." At least there is a lot more talk about electric cars now than there was a decade ago. Analysts warn though that profits are years off. They give hybrid cars as an example - hybrids have been around for years but are still not profitable.

Despite rising gas prices, a global financial crisis, increasing unemployment rates, and numerous reports proclaiming that they cause cancer, cell phones remain as popular as ever, and the mobile phone industry is even expected to boom in the next five years! According to ZDNet, although average revenue per user is expected to decline, the number of users will rise.

The reason? Growth in emerging markets for cell phones is astounding. An analysis conducted by Portio Research predicted that the percentage of the world’s population that  uses of mobile-phones will increase to 80% in 2013 from the current 50% now, which amounts to 5.8 billion people. The expected number of cell phone users is expected to reach 4 billion this year alone!

President Bush achieved one of his top legislative priorities Wednesday, but the magnitude of the occasion may have been obscured by other news. What I’m referring to, of course, is the US-India civilian nuclear agreement.

The nuclear deal is the culmination of an initial joint statement between President Bush and Indian Prime Minister Manmohan Singh, which was signed in 2006. For the past two years President Bush and Prime Minister Singh have trudged through domestic opposition, international hurdles, and legal bureaucracy to produce a finalized agreement. The pact allows full nuclear cooperation between the United States and India, as well as opening up the Indian market to US nuclear technology suppliers. The necessity of the seal of approval by the Nuclear Suppliers Group also makes it a de facto recognition of India’s status as a legitimate nuclear power, despite their abstinence from the NPT.

Animal friendly products or the new thing on the market? Salads that are on a blue table or salads on a red table? Loaf of bread or sliced up bread? Cheese slices wrapped in plastic or not?

Dutch lab researchers try to figure out what people eat and how to influence their habits. They study the influences on eating in order to be able to find ways to make products more appealing and to direct consumers to healthier choices.

The $4.5 million Restaurant of the Future is run by scientists of Wageningen University and Research Center, working with Sodexo, an international catering firm, and the Noldus software company, to answer questions from the food industry and behaviorists.