globalEDGE Blog Archive October 2016

The Trans-Pacific Partnership (TPP) is a major trade deal meant to strengthen economic ties among its twelve member nations (United States, Japan, Vietnam, Malaysia, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Peru, and Chile). If the TPP were to pass in every country involved in the trade deal, it would give the countries with smaller economies the opportunity to grow at a rapid pace. This trade deal would eliminate tariffs between the member nations. Countries with cheap manufacturing labor like Malaysia and Vietnam would benefit immensely from being able to export to the massive consumer markets in the United States and Canada without any tariffs being imposed. Many of the smaller countries are looking to see if the United States will ratify the TPP.  Singapore’s Prime Minister has said that America must ratify the Trans-Pacific Partnership to show it is serious about doing business in the Asian-Pacific market. Currently, it seems unlikely that the TPP will be ratified by the US Congress during Barack Obama’s presidency and both of the major US presidential candidates oppose the TPP in its current form.

Have you had the chance to visit the globalEDGE Business Beat recently? These brief audio segments feature conversations between globalEDGE Director Tomas Hult and prominent members of the international business community, covering a wide variety of interesting topics. In the most recent segments, Tomas talks with both of Michigan’s US senators, Gary Peters and Debbie Stabenow, on the auto industry and education.

Visit the globalEDGE Business Beat page today to hear from experts in the realm of global business and to expand your international business knowledge!

For the past five years the European Union and Canada have been negotiating the terms of a comprehensive free trade agreement. The Comprehensive Economic and Trade Agreement, or CETA, would effectively eliminate 98% of tariffs between Canada and the EU, leading some experts to predict an increase in trade of over 20%. CETA was in its final form, with a signing ceremony scheduled for this Thursday, October 26th, but the deal was blocked at the last minute by Wallonia, the French speaking region of Belgium.

Researchers have found that the quality of the air that we breathe can affect how we perform in the office. As pollution increases, labor productivity may decrease due to the fact that inhaling polluted air can hinder our “respiratory, cardiovascular, and cognitive function”.  China, along with many other industrialized countries, have experienced a decline in worker productivity due to the extensive air pollution and climate change.

Consumer prices surged this September in the United Kingdom, rising at the fastest annual pace in two years. A seasonal rise in clothing prices, increasing hotel stay prices, and a spike in gas prices are all contributing factors to this inflation. According to the Office for National Statistics, the Consumer Price Index has risen by 1.0% as of September in 2016, the highest increase since November 2014.

In an age where low and negative interest rates dominate the central banking scene for most of the developed world, one major nation has a target interest rate of 14.25%. The country in question has been all over the news in the past few years, from the World Cup and the Olympics, to the impeachment of a president and a deep recession. It is Brazil whose official interest rate stands at 14.25%, which is entirely counterintuitive given the information that Brazil is mired in a deep recession. Brazil has to maintain such a high official interest rate due to the fact that they are facing issues with inflation that have persisted for years. Since 2000, Brazil has only had three years where average inflation in the country ran below 5%, and in both 2015 and year to date 2016 Brazil has seen inflation run above 9%. The inflation issue has hampered Brazil’s ability to encourage growth through monetary policy and as such Brazil’s recession, which now spans over 2 years dating back to 2014, has persisted. In recent months, however, Brazil’s economy has hit several key targets and as such a rate cut is officially on the table.

Consumers today have more options for buying than ever, which can sometimes lead to information overload and increased insecurity. As a result, consumers are seeking out a brand with the values, quality, and authenticity they can remain loyal to. According to CNBC, there are seven important keys to help build a strong brand:

Expanding overseas to new markets can be one of the most crucial decisions a business makes. Often, expanding internationally is what can make or break a business. International expansion consists of more than simply setting up shop in a new country. The expansion process must be purposeful and must be prepared for, otherwise the business will see more money being drained through this new exploration than made. The following is a collection of observations and tips regarding challenges in global marketing and expansion.

Brand is bond in the world of business. The first thing we think of when someone mentions a company name is not their most recent financial statements or their internal initiatives to cut costs or boost R&D. The first thought is of the brand that company has built. Take for example, Nike. When someone mentions Nike, by and large it conjures images of cutting edge athletic wear and oozes cool. It is clear that brand is crucial to a company’s success, and while scores of other factors go into success with international business, one of the key components is building a global brand. You don’t want, however, to automatically assume that one broad brand for the entire world will be the perfect strategy for your particular company. Instead, in most cases it makes much more sense to approach different markets in varying ways.

In a blog post for Cisco, EMEA & Russia marketing director Dr. Christine Bailey explained the omnipresence of digital marketing in the current business landscape: "we’re no longer doing ‘Digital’ Marketing, we’re simply marketing in a digital world." In other words, the appellation 'digital marketing' has become unnecessary; the world is so thoroughly digitized that all corporate marketing actions must align with digital spaces, not just run parallel to them. To be a successful global business in the 21st century, competent utilization of digital platforms is essential. This means not only a complete understanding of analysis and content strategy principles, but awareness of these concepts as they pertain to countries the world over.

This week, the globalEDGE blog is taking a look at international marketing and its implications for businesses, in a five part series. For companies conducting business in several countries, a strong marketing strategy can be extremely beneficial, connecting the brand with ideas about the company, such as trust or innovation. An effective strategy can bring about cost savings and introduce competitive advantages, which can be crucial for a company attempting to move into new markets.

Two of the world's most valuable technology companies, Facebook and Alphabet (by means of its subsidiary Google), are working with TE Subsea Communications (TE SubCom) and Pacific Light Data Communication (PLDC, a subsidiary of China Soft Power Technology) to construct the world's fastest trans-Pacific submarine cable. The 12,800 kilometer (8,000 miles) submarine cable will enable a speed of 120 Terabits per second and connect the United States and China by way of two major cities: Los Angeles and Hong Kong (where PLDC is based). The cable, known as the Pacific Light Cable Network (PLCN), will utilize fiber-optic technology to create the fastest possible telecommunication channel, covering twice the speed of the current-fastest undersea cable. The goal of the PLCN is to increase bandwidth and reduce connection delays in the Asia-Pacific region. According to Google, the cable should be built and functioning by 2018.

Global economic growth has been held back in recent times and many factors play into this; however, political uncertainty has been at the forefront. Unpredictable political outcomes, such as the general election season in the world, instability in the Middle East, the Brexit, and China’s leadership reshuffle, have created considerable doubt and uncertainty in global markets.

With the economic struggles of many emerging markets, Indonesia has been one of the few bright spots. The economy is expected to meet expectations and grow 5% this year, the fourth highest rate among emerging markets. The fact that Indonesia has been able to keep its economy growing is impressive, especially with the many outside factors that have significantly impacted other emerging markets.

The economic impact of natural disasters can be witnessed on a global scale. These disasters often set in motion a variety of chain reactions, negatively impacting and in some cases decimating sectors of the global economy. "In 2014, 72 percent of global losses classified as "disasters" were caused by extreme weather events: hailstorms in Europe, drought and severe winter weather in the U.S., hurricane damage in Mexico to typhoon damage in the Philippines, and disastrous flooding in the U.K., India, Pakistan, and Afghanistan." 

These are some of the most infamous natural disasters with respect to their economic repercussions:

Earlier this month on October 5th, Brazil’s congress approved the key points of a polarizing bill, which would allow foreign investment in the nation's offshore oil fields. The bill overturns parts of a 2010 bill which was aimed at increasing government control over the lucrative oil fields. This law mandated that the state-run oil company, Petrobras, be the lead operator and hold a minimum of a 30% stake in any offshore drilling operations in so-called “pre-salt” fields.

The Paris Agreement focusing on the reduction of emissions and overall achievement of climate neutrality has initiated efforts to reduce carbon emissions throughout the aviation industry. Airlines are one of the major emitters of carbon dioxide, and air travel is forecast to double by 2030. However, aviation had not been included in the agreement until now. 

Second Shift captures the dynamic, collaborative management model that essentially saved a U.S. manufacturing city - Lansing, Michigan. The "Second Shift Model" has now been codified in a book and a documentary.

When car-making giant General Motors decided to close its plant in Lansing, Michigan, in 1996, one person – the city’s newly elected mayor, David Hollister – stood up and said “no.” Hollister’s “no” began a five-year competitive, collaborative, strategically intricate process to keep GM in town.

In efforts to dominating the global mining industry, Canada has made tremendous attempts to promote mining overseas. With increased international mining initiatives, many Canadian corporations have been fueling their resources to expand globally. According to the Huffington Post, “Ontario-based Carube Copper said it acquired ‘over 500 square kilometers of the most prospective ground in Jamaica based on historic showings.’” 

Nigeria is currently in a recession after unpegging from the U.S. dollar, and the decreased dollar supply has reduced output and created obstacles for companies to pay their debts. A challenge that Nigeria is trying to overcome is the lack of investment in infrastructure during the oil boom years which would have allowed for more sustainable growth.

A stated goal of Singapore’s Ministry of Trade and Industry is to increase trade relations with the countries in Africa, which currently make up only 1.5% of the country’s total international trade. The continent’s economic potential and recent investments by other Asian nations has led Singapore to explore an expansion of trade, with an initial focus on free trade agreements. Singapore currently has very few agreements with any African nations, but in August, the country was able to work out small agreements with Nigeria, Ethiopia, and Mozambique.