globalEDGE Blog Archive December 2013

As the Eurozone Crisis has progressed and European Union countries have continued to struggle to devalue their currencies, with the goal of making exports less expensive for importing markets, many countries are now adopting "Americanized" labor policies of dismantling workplace protections to reduce labor costs. In Portugal, the 1.9 million workers that were protected by collective bargaining agreements have now diminished to merely 300,000, while Spain has agreed to ease restrictions on collective layoffs and unfair dismissal. The motive for these actions, as encouraged by the German government, European Commission, and the International Monetary Fund, is to restore competitiveness, increase employment, and recover solvency.

In recent findings, scientists have discovered how to turn a stream of algae into bio-crude oil, a  possible game changer for the role oil plays in global business and global dependencies. The high-tech pressure cooker that reaches temperatures around 660 degrees Fahrenheit and pressures of 3,000 pounds per square inch, is licensed by a Utah-based biofuel company Genifuel, who are now working with industrial partners to build a pilot plant.

With the current state of the global economy, the Eurozone crisis, and the large numbers of countries that have left similar unions in the past, a new currency union would not seem like an appealing idea to most regions of the world. However, six West African countries, including Ghana, Guinea, and Nigeria, have all decided to adopt the eco as a common currency by 2015. Members of Africa's current currency union, the West African Economic and Monetary Union (UEMOA), have also decided to adopt the eco by 2020. Similarly, five countries of the East African Community (EAC)—Kenya, Tanzania, Uganda, Rwanda, and Burundi—have all signed an agreement on forming their own monetary union in a decade. There are several potential advantages to these proposed unions, however these could also lead to several big problems for Africa.

In recent years, the financial markets have seen the introduction of a digital currency called bitcoin. Bitcoin is a digital currency that is called cryptocurrency, making it very difficult to replicate. Currently there are about 21 million bitcoins in circulation, each one being valued at about $500 today. In recent months, a bitcoin was valued at $1,200, but new regulations in China made it difficult to exchange the yuan for bitcoins. Some global trends in digital currencies include regulations, buying goods with digital currencies, and using it as an alternative to national currencies. One question many economist ponder is if digital currencies could one day replace national currencies.

Corporate governance is a hotly contested issue of late. With the global economy still reeling from the 2008 financial crisis many have tried to answer the question what can prevent this from happening again? Better corporate governance has been proposed as a piece of the solution.

Corporate governance is an encompassing term that refers to the system by which corporations are directed and controlled. Within this there are many different ways to govern corporations and depending on a variety of factors, companies will differ in their structures. This is apparent when looking across cultures around the world. One of the most overarching differences is between the western way of corporate governance in comparison to emerging economies.

The Michigan Department of Agriculture and Rural Development (MDARD) is offering Michigan food companies multiple opportunities to exhibit within Michigan Pavilions at the Food Marketing Institute (FMI) Show and the National Restaurant Association (NRA) Show. The shows offer businesses a unique, helpful, and affordable way to showcase products under the Michigan name, known globally for outstanding quality. In previous years, over $600,000 in actual sales were reported with $3 million in anticipated sales!

After a 4 day meeting in Beijing, party leaders agreed to make changes to the infamous one-child policy in China. This previous policy allowed one child to be born into each family unless both parents were only children, in which case they may have another child. Additionally, couples in rural areas were allowed to have a second child provided that their first was a girl. Although theoretically this law was implemented to combat poverty by decreasing the total amount of births, the result instead was a long-term imbalance of genders and a capped labor force. Consequently, the Chinese government has altered the policy to ensure continual manufacturing growth in the coming years.

On paper, it appears that Ireland has fared particularly well through the government’s tough austerity program, which was a condition of the 67.5 billion euro international loan it received during its severe banking crisis.  For example, interest rates on 10-year bonds have fallen from 14.5% to 3.5% and newspaper headlines continue to announce the creation of new jobs.  However, the austerity program has taken a large financial toll on many Irish citizens, many of whom are barely holding on. 

Businesses are becoming increasingly global, causing teams to be spread around the world. This leads to greater success along with some unique challenges. In order to lead these teams, managers must learn to balance different cultures, time zones, computer software, and relationship styles.

When it comes to managing different cultures in a team the best way is to learn and immerse one’s self into the culture, this will allow complete understanding of where others come from. If you learn the country’s cultural tendencies, you will understand why team members are doing certain things. In some cultures for instance, people do not waste time in e-mails with small talk. E-mails are very direct and to the point. If one does not know that is a cultural norm of this person, they may feel uncomfortable in the situation, and take offense. It is a good idea to take note at the beginning of the project, of team members’ communication and working styles that way everyone is familiar and comfortable working with each other.

As the world becomes increasingly globalized, workers from around the world are experiencing increased opportunities to work abroad. This is exactly what is occurring in Canada. As the province of Alberta continues to boom economically, Canadian companies are in need of a labor supply. With too few Canadians to fill the extra jobs needed, Canadian firms have begun recruiting internationally. The international recruiting strategy has been very successful as Canadian companies were able to find an abundant supply of workers from the United Kingdom and Ireland. This development in Canada is a testament to the many benefits of international business.

Latin America has taken big steps in the last 15 years in terms of financial stability. Since 1998, the average frequency of crises in Latin America has fallen from 0.7 crises per year to 0.29 crises per year. Economists attribute this to better fiscal management, with gross domestic product becoming less reliant of government spending and outside help. The economies are starting to run with less assistance, generating a more stable financial situation with fewer crises. Latin American economies are on an upward trend nowadays, but there is still one major setback: Crime.

With one third of the world’s poor population located in India, the emerging country of India has been striving to help its people achieve a better standard of living. Thanks to the programs that are provided by the government to alleviate poverty, India’s economy has grown steadily over the years. When the government noticed that the world’s most extreme poverty rates fall in rural Orissa and Bihar, it began to focus on farm subsidy programs, with hopes of lifting the economic level of these rural regions. However, its farm subsidies are challenging the World Trade Organization's (WTO) ability to keep an important international trade deal on table.

Last week the 2013 Corruption Perceptions Index was released. The Corruption Perceptions Index, or CPI, is an index of 177 countries in the world and their corruption levels. The rankings are based on perceptions of the country and how much illegal activity or scandals in the public sector exist as well as many other factors. Countries are scored in two ways. The first is on a scale from 0-100. A country that has a score of zero is considered to be extremely corrupt and a country with a score of one hundred is perceived as being very clean or not corrupt.

In a world with a clearly-defined gap between developed, larger countries and small countries categorized by political turmoil and radical militant groups, it is difficult to recognize the growth of peace and stability. United States based companies often view currently developing countries as risks due to economic instability. Nevertheless, these low-to-middle income countries are increasingly becoming more stable and present the potential to be beneficial business associates.

International relations are extremely important for developing countries. Without support from abroad, funding infrastructure projects and economic development would be nearly impossible. This is exactly the case in Zimbabwe where government officials have turned to China for help. Recently, China has lent Zimbabwe $319 million to ease electricity shortages by expanding its Kariba hydropower station. Although this project will take an estimated four years to complete, it can have dramatic effects on the development of Zimbabwe and international relations in Africa.

The small Caribbean nation of Grenada lies around one hundred twenty-five miles north of Venezuela, between the Caribbean Sea and the Atlantic Ocean. It has always had an economy built off of its island paradise lifestyle with its beautiful blue water, beaches, and landscape. This style of economy for such a small nation can only carry it so far, but Grenada now has other plans to help it make an international presence.

Recently, Standard & Poor downgraded Netherlands' sovereign debt from a coveted AAA rating to a AA+ rating. The downgrade came as S&P sees a weak growth outlook, even though the Netherlands is seen as part of Europe’s healthy economic core. Also, S&P raised its outlook on Spain from negative to stable, showing that some of the struggling southern European countries may be recovering. As many southern countries continue to improve economically, some of the northern countries are suffering from poor growth prospects.

Standard Chartered, a British bank with more than 1,700 branches in over 70 countries, has officially opened its first branch in Iraq.  This branch will be located in Baghdad.  The British bank plans to open another branch this year in Erbil, Iraq and another next year in Basra, Iraq.  These Iraq-based branches are being established to meet the needs of Standard Chartered’s global clients working in the oil, telecommunication, and infrastructure industries.  Standard Charter also intends for these branches and their personnel to aid the Iraqi Government, its ministries, and the Iraqi Central Bank in an advisory role.