globalEDGE Blog Archive November 2012

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.

A major trend in international education is the increase in students studying abroad and enrolling in universities outside of their home countries. Each year billions of dollars are invested in educating bright minds and building relationships by sending students abroad for a well-rounded educational experience. Not only does this movement have profound impact on the future landscape of education, but the exchange of students is giving host countries an economic boost. A recent report by the National Association of Foreign Student Advisors found that international students contributed nearly $22 billion to the United States economy in the school year 2011-2012.

Just about two weeks ago it was reported that Hewlett-Packard had to write down somewhere in the neighborhood of $8.8 billion, stemming from an acquisition of a United Kingdom based software company, Autonomy. Accounting improprieties within the acquired company seem to be at the heart of the issue and HP claims the fraudulent numbers account for over 5 billion of the write down. Two of the “Big Four” accounting firms were brought in to perform due diligence for the deal but the inconsistencies still managed to slip through. This is an extremely public example that calls into question the different accounting standards practiced in different countries and how those should be reconciled.

The European Union is pushing back the implementation of the global banking reforms, which were supposed to take place on January 1st. It has been delayed at least six months, with talks that it may get pushed back even further. Basel III is the name of the reform plan, and it is a global response to the financial crisis from 2007-2009. Basel III is a critical step to protect large institutions against future financial shocks. Until the European Union can agree on the plan, the delay holds a risk of throwing off the recovery process. However, if the regulations in Basel III are too harsh, it could risk cutting economic growth and an increase in unemployment.

In today’s interconnected and globalized world, receiving investments from abroad is a major factor contributing to economic growth for countries all across the world. Spain has recognized the importance of international business and foreign investment by implementing strategies to change the flow of investment. In the late 1990s, many Spanish companies began investing in Latin America and also started a vast amount of business operations there. Now, Spain is looking for investments to flow in the complete opposite direction.

The Indonesian economy is known globally for many things: tourism, agriculture, and defense.  But maybe transport manufacturing should be added to the list.  The production of Indonesian factories were most efficient all year last month; According to a report by Markit Economics and HSBC Bank, the purchasing managers’ index (PMI) for Indonesia's manufacturing sector increased from 50.5 in September to 51.9 in October.  Any reading above 50 on a PMI indicates expansion, which can be attributed to a multitude of variables.  However, the prime conclusion has been that the increase in PMI is a direct reflection of higher order intakes.  This is most apparent in Indonesia's auto industry.

The customer is always right. This golden rule of business even resonates with giant corporations—the consumers are the main priority, because without their support, revenue will stop pouring in. For example, if the consumer wants businesses closer to home, that’s what they’re going to get.  The distance problem has initiated a recent trend in outsourcing that can be seen in countries all over the world, most recently India and the United States.

Foreign and domestic investment are spiking for Canadian Corn because of global warming and a drought in the Corn Belt region of the United States.  Climate change and the resulting increase in temperatures in the last 50 years have extended the growing season in Canada’s Prairie Provinces approximately two weeks.  The Prairie Provinces: Alberta, Saskatchewan, and Manitoba have long been big producers of wheat, but are now beginning to incorporate and in some cases completely switch to corn.  This is due to a decrease in corn supply in the drought-ridden Midwest region of the United States, high demand for the crop, and the fact that corn has a higher yield than wheat on a per acre basis.

In a global economy marked by unemployment, it might be surprising to hear that one industry is actually booming with career opportunities. That industry happens to be Big Data and business analytics. By 2018, the United States alone could face a shortage of 140,000 to 190,000 people with deep analytical skills. According to a McKinsey Global Institute report, the big data industry will also need over 1.5 million people in the next few years capable of analyzing data that enable business decisions. Global companies have begun the search for employees with complex skillsets and the ability to analyze large amounts of data. As you can see, big data is becoming ever so important for international business.

So far in this blog series, the reader has heard about how Big Data is the future of international business and all of the positives that are associated with it. While there are many positives for using Big Data, there are also many negatives. Further, those negatives may expand beyond just international business and into society as we know it.

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.

Big Data is increasing the amount of information that is collected about a person or demographic and companies have begun to notice. In an ever more competitive global market, companies are looking for any advantage and Big Data is showing big signs of potential. By collecting and connecting big data, companies can identify traits about potential customers that they themselves may not even know. Behavior is much more predictable than you may suspect and this bodes well for companies who lead in collecting such data. Consolidating facts about a person in seemingly unrelated areas paints a remarkably accurate picture of their habits and how they behave. The question for companies is not if they will use this data but how they will use it.

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.

On November 9th at the Business College Complex at Michigan State University, Eli Broad spoke to students of The Eli Broad College of Business about his views on business, philanthropy, and the future of education. Eli Broad funded the The School of Business at Michigan State University, and has continued to support his alma mater throughout his life. Through his many different careers he gained a vast amount of knowledge in many aspects of business, helping to facilitate his long and successful run in the business world.

Our globalEDGE Country Comparator is now up! The Country Comparator allows our users to compare up to twenty countries across a variety of economic indicators (up to five at once) including GDP, inflation, and exports. It can be accessed by pulling up any country’s page and clicking on the Country Comparator, or by following this link: http://globaledge.msu.edu/Comparator. Please check out this new interactive tool and let us know what you think by leaving a comment below!

A significant percentage of China’s wealthy citizens, especially those looking to retire, have decided that they no longer want to live in China.  Instead, these members of the upper and middle classes in China are expressing serious interest in emigrating to the United States, Canada, and Australia.  These three countries are appealing to wealthy Chinese because of their open spaces, clean air, consistent medical care, and relatively stable political systems.

After an exhaustive Tuesday night of speculation and predictions, Barack Obama managed to hold his position as the President of the United States for another four years. Foreign support for the President rained in on Wednesday through countless newspaper headlines, and it became apparent that allied nations have a tall order for the reelected President. They expect him to start his term off with a strong foreign policy with hopes to quell the global debt crisis and help boost emerging markets.

With people finally returning to North Africa and increasing destination trips to Eastern Europe, international tourism worldwide grew four percent in the first half of the year. Over 705 million tourists traveled abroad in this period, and if accomplished it will be the first time that over one billion people have traveled internationally. Areas such as Central and Eastern Europe, Southeast Asia and Central America had the highest growth in tourism. Egypt had a large increase after the social problems were solved, and Japan also did after the nuclear contamination concerns were solved. Interestingly enough, countries such as Sweden, South Africa, and South Korea had increases on a smaller scale, but saw the income from tourism increase by over twenty-five percent.

While tourism to the culturally prominent cities of Casablanca and Rabat is increasing, Morocco’s aggregate economy is slowing.  Recently, the King Mohammed VI of Morocco staged a week-long tour of the Arabian Gulf to rally support as the European-dependent economy falters in the wake of the global crisis.  Morocco has strong relations with the Arabian Gulf nations stemming from centuries old historical, religious, even and linguistic ties, while Rabat and Casablanca (and other major cities) have been largely influenced by Europe, particularly Spain and France.

International trade is a very important aspect of the world’s economy in the globalized business climate of today. Less than one percent of all United States businesses export and according to research, the main reason for not exporting is the lack of confidence in selecting the best market for U.S. products. To help solve this issue, the U.S. International Trade Administration has published a book titled Free Trade Agreements: 20 Ways to Grow Your Business available for download on iTunes.

One of the major events affecting the world right now is the tropical cyclone in North America known as Hurricane Sandy. Hurricane Sandy was the largest ever Atlantic hurricane by diameter and affected many parts of the Caribbean and Mid-Atlantic including the countries of Jamaica, Haiti, Cuba, the Bahamas and the United States. Early estimates vary significantly, but most suggest total economic damages attributable to the storm to be over $50 billion, which would make Sandy one of the most destructive hurricanes on record. As of the publication of this post, over 150 fatalities have been confirmed as a result of the storm. The majority of damage from the disaster occurred on the United States east coast, where Hurricane Sandy made landfall in New Jersey and New York City. The impact on the economy from this disaster can be enormous, as natural disasters have been proven to drop GDP and economic growth significantly. The impacts due to this devastation in the world’s largest economy will have a profound impact on international business.

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?

Just as products and companies have brand images associated with them, countries also have built perceptions in the minds of people around the world. A country’s “brand name” can be based on a variety of rankings and its overall perception in the minds of businesses definitely has an impact on its success. If a country’s brand perception is favorable, that can translate into foreign investments alongside commercial and economic development. Businesses are also more likely to conduct operations in a country with a positive brand image. To help us identify the top country brands in today’s globalized economy, FutureBrand has released the Country Brand Index. The results are very interesting and the country at the top of the list might just surprise you.