globalEDGE Blog Archive October 2013

Greenland’s government embraced a major policy change last week that could greatly impact the country itself, as well as its relationship with other major countries. On Thursday, legislators narrowly voted to allow for mining of radioactive substances and iron ore on the Arctic island. In a 15-14 vote, Greenland’s parliament lifted a ban on mining uranium and rare-earth minerals, a decision that could significantly change Greenland’s economy and role in international trade. In another move, parliament gave London Mining PLC a thirty year license to mine for iron ore in hopes that the project will bring jobs and investment to Greenland.

Today we are featuring our group on LinkedIn. For posts and discussion on current international business issues join the group! Anyone with a LinkedIn account is able to join and once a member you are able to post and facilitate discussions within the group yourself. 

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The country with over twenty-five percent of its population unemployed has finally climbed out of recession with third quarter growth up 0.1 percent. With an economy that is driven mainly by the tourism sector, automobile industry, and the energy industry, Spain has managed to slow down its rate of poverty and unemployment enough to stop the recession.  The bailed out banking sector is still far from cured and the giant amount of debt will still hold them back in the years to come, but the government has taken steps in the right direction in gaining control of these areas of the economy.

In a recent study done by Chatham House, a world-leading source of independent analysis based out of London, it was found that large amounts of Nigerian crude oil was being stolen. The research discovered that at least 100,000 barrels of oil per day, or around 5% of total output, were stolen in the first quarter of 2013. The extensive network of exported stolen oil includes thieves, financial centers, commodities traders, politicians, and international trade.

The Director of the Michigan Department of Agriculture & Rural Development, Jamie Clover-Adams, and the International Marketing Program traveled with Governor Snyder on a ten-day trade mission to China and Japan in September.

People around the world are questioning the objectives of China and Saudi Arabia, who are vying for seats this week on the United Nations’ Human Rights Council. The members of the General Assembly elect the members to the council’s forty-seven seats. The inquiry of these countries to the council comes on the grounds that the General Assembly is supposed to take into account the contribution to the promotion and protection of human rights, while China and Saudi Arabia may be considered to some, two of the most infamous violators of human rights.

In 2012 alone, piracy in Somalia cost shipping companies $6 billion.  Teresa Stevens and her husband have come up with a product that aims to make it a lot more difficult for pirates to board ships.  The product is called the Guardian Anti-Piracy Barrier.  It is a simply-designed plastic barrier which fits over the rails of a ship and makes it nearly impossible for pirates to board ships using ladders or grappling hooks.  This invention has the potential to lead to huge cost savings for global shipping companies and have a positive impact on neighboring African countries’ economies. 

While the European economic crisis appears to be gradually resolving, the International Monetary Fund (IMF) is insistent that the improvement being observed is not actual. Although the deficits of struggling economies such as Greece, Portugal, Ireland, and Spain are contracting, this is due to a collapse in imports as a result of the recession, not an increase of trade exports. The IMF has also taken note of lowering labor costs, but attributes the decreases to mass unemployment rather than pay cuts for workers. Consequently, even though economic indicators are showing signs of improvement, these events could be causing an even larger cyclical downtown for Europe. Since European banks have allowed large amounts of loans to be taken out, they too are unable to invest in businesses which might support infrastructural growth. As a result of this, the United Kingdom in particular is seeking help from international business partners to mitigate the issue.

The development of cloud computing has certainly helped businesses to reach new heights but can it also do this for countries? The connectivity that is available from cloud computing can be far more valuable to those who lack resources than those who have an abundance of them. In many ways cloud computing acts as an equalizer and has the potential to accelerate economic growth in Africa as a whole.

Businessmen go to Africa with hopes of profitable investment opportunities, but often they forget the level of diversity present among African countries. “You can’t treat Africa as one single market. So choosing where to play and where you will get the best return is the critical question,” said Michael Wood, the co-founder and director of consulting firm Aperio.

Many companies target the continent’s biggest economies, such as Nigeria, South Africa and Kenya; because they think these markets have mature economic structures. However, Wood suggests that companies new to the African market should first enter a smaller country. A small market usually provides investors with a lower risk of failure, less competition, and more approachable customers.

As the world continues to integrate the globe becomes more interconnected with complex supply chain systems. This becomes even more important now that countries are becoming evermore specialized in one industry or another. An interesting development where countries are specializing is in the arena of patents.

When a business expands into a new international market, many obstacles and uncertainties stand before it. Although Africa is the fastest-growing continent today, managers in the region must deal with a variety of questions in order to achieve continued growth. In a market that has a volatile history like Africa, managing uncertainty effectively has been a critical aspect for many companies. International business managers also deal with many uncertainties as regulatory differences and political disputes are common when a company operates in several markets. Analyzing how managers in Africa deal with uncertainty can provide us with great insight on how to successfully manage an international business.

As the 21st century has trudged on into its second decade, the increasing rate of globalization that has encouraged integrated global markets has also brought emerging markets into the spotlight of international business. Although strong economies like China, India, and Brazil have captured most of the international community’s attention, sub-Saharan African countries are beginning to make their impact on the global economy. Sub-Saharan Africa is now home to 6 of the world’s top 10 fastest growing countries in the world, and these countries have been projected by the IMF to grow between 5 and 6 percent each year over the next two years. Additionally, U.S. exports to the region now exceed $21 billion per year. Clearly, the African continent of over 1 billion people and vast natural resources has tremendous potential for investors in a global economy, but one question remains: How exactly do you approach a market place as, frankly, notorious as sub-Saharan Africa?

In a recent series of blog posts in the Economist, the Schumpeter columnist compared start-ups in two European cities: London and Berlin. Both are major cities in Europe that are popular to tourists, but are less well known for being leading cities for start-ups. Comparing the two, Berlin has only recently seen an increase in digital start-ups. In contrast, London has seen a large increase in tech start-ups during the internet boom in the late 1990’s. Increases in technology and international business could result in more cities beginning to experience tech start-ups.

The United Kingdom’s membership in the European Union could be coming to a crossroads within the next few years, as Deputy Prime Minister Nick Clegg admitted Tuesday he no longer is fighting to keep the referendum off the ballot. Clegg is a fierce opponent of leaving the EU, relating it to “economic suicide,” but said on Tuesday that he now plans on showing the importance and benefits membership brings to the British economy, in hopes that he can convince voters to stay in.

In the last five years, many economies around the world went through a recession or had their growth stunted significantly due to the financial crisis. Although Europe seemed to have the worst economic effects from the crisis, the new 2012-2013 Global Competitive Index produced by the World Economic Forum reported that European economies are still the strongest economies in the world. Switzerland grabbed the top spot in the rankings, and Europe was well represented towards the top of the list.

As of late, the Philippines have experienced robust economic growth coupled with low inflation.  These positive economic indicators, among other factors, have led Moody’s Investor Services to give the country an investment-grade rating.  An economic growth rate of 5.2% in 2006 has continued to climb and currently is at 7.6%- a rate that is consistent with the fastest growing countries in the region and high-growth emerging markets around the world.

Ernst & Young, a Big Four accounting firm, conducted a fraud survey across the Asia-Pacific region, finding that there is a large disconnect between company policies, enforcement, and execution that is obstructing efforts to diminish fraud. The survey consisted of 600 senior level executives from companies in countries including, Australia, China, Indonesia, Malaysia, New Zealand, Singapore, South Korea and Vietnam.

The effect of time zones has been a little-known but important issue for international business. Country time zones have been historically influenced by trading patterns and partners. Setting the same time zone to a partner makes it easier to conduct trading since business hours match. Different time zones force businesses to factor in time zone conversion when dealing with international business and can negatively impact worker productivity.

Since 1999, the music industry has experienced years of decline and for those who care about the industry, the past decade has been nothing short of a nightmare. With piracy increasing and record sales diminishing, many were worried that the music industry would never recover. However, recent reports from the International Federation of the Phonographic Industry (IFPI) shed rays of hope for the music industry. According to these reports, for the first time in 14 years, the global music industry experienced slight growth in trade revenues—increasing by 0.2 percent in 2012. Perhaps better news is that revenues are on pace to grow yet again this year in 2013. Could this signal that the global music industry has finally turned the corner and is poised to experience a new day & age of growth and profits?

On Sunday, China opened a new, 28 square kilometer free trade zone in northern Shanghai. The zone will feature loosened restrictions compared to greater China, such as more freedom for banks and the opening of several industries. Foreign investors and companies hope the new zone will allow for easier access to the Chinese market, but the Chinese government has released few specifics on the regulations and rules of the zone. This has brought along skepticism on whether the zone will have any meaningful impact.

With a population of 5.4 million people crammed into 274.1 square miles, the country of Singapore could be considered a slightly smaller version of New York City. The country is a center for business offices, commercial buildings, retail stores, and residential apartments. However, a mounting need for space is becoming imminent as experts project Singapore’s population to grow to 6.9 million people in the next 15 years—a 1.5 million increase. Presently, the struggle for land has caused military camps and old residences to close down in order to make room for residential and industrial real estate development.