International Business Isbn-9780273766957 - Points-counterpoints

Executive MBA 2014-2015

International Business (ISBN-13: 9780273766957)

Hicham QAISSI - [email protected]

Chapter 1. Point-counterpoint - Is Offshoring Good Strategy?

The manufacturers offshore because they have best conditions abroad, such as tax benefits,

credits, licenses facilities that they don't have in their source countries. The local governments

are upset about the manufacturers' leak, but they take apparently no actions to stop it, despite

there are many actions to do, such as changing/easing off the laws and licences bestowal and so

on to dissuade manufacturers going abroad setting up their plants...

I've read an interesting article about a promise of the U.S. government to make offshoring less

attractive for U.S. companies:

http://articles.chicagotribune.com/2012-01-29/business/ct-biz-0129-outside-opinion-

outsourcing-20120129_1_outsourcing-tax-rates-minimum-tax

I have some opposed opinions from many researchers on some related points :

- About heavy industry, offshoring it could be a profitable option and may not damage the

manufacturer's quality image, I can mention the case of Mercedes Benz, offshoring an important

amount of replacement parts for modern cars in China.

- About offshoring services, since the culture's wise, services need a closer contact. The best

example is outsourcing client services of national (Spain) Telecommunication companies, setting

up their client services in other countries with cheapest work force. I have to say, that is only

since the culture's point of view...

Without a doubt, the counterpoints or drawbacks most to be taken into account of offshoring

are the following:

- Offshore in countries under dictator regime or communist.

- Offshoring in countries with no respect to the environment.

Most final consumers, often buy domestic products without looking where they have been

made... I think it has to be taken into account depending on which country the product is

offshored in.

I'm really caught between two stools, I find it difficult to choose between offshoring or not..., I

have gathered some offshoring cons:

- Low quality and brand damaging (not systematically!!).

- Environmental degradation when offshoring in countries with no respect to the environment,

companies there are often cutting back costs by simply dumping their toxic chemicals.

- Impossibility to access the local market. For instance, China allows the entrance of capitals and

inverters, but hampers the distribution of the products made by outsourcing companies, even if

they are made in China.

- Empowering political impairments, especially in countries under dictatorship atmosphere.

- Political climate changes, changes in government policies can increase the expense leading in

many cases to give up the set up plant.

- In many cases, supporting "slavery" labour and child labour with little kids spending more than

12 hours a day in labour "concentration camps" depriving them from fair education and

childhood...

- Become vulnerable to energy costs rises in case of offshoring in Asia. Inditex is outsourcing in

North Africa (Tangier), smart gimmick...




- Losing control of the manufacturers' intellectual property and risk of exposing confidential

data. The outsourcing company they work with will know some of the manufacturers’

confidential information.

Likewise, making the long story short, the offshoring is not the best of both worlds; it has its pros

and cons.




Chapter 2. Point-counterpoint - Does International Business Lead to Cultural Imperialism?

First, let us shed light on what is cultural imperialism. Cultural imperialism is the fact of

promoting a more powerful culture over another less powerful, less known or desirable culture,

creating and maintaining an unequal relationship between both.

Since countries involve themselves in international business, the exchanges are not only limited

to goods or services, but there is an intrinsic cultural exchange too. Today, manufacturers are

focusing more than before on understanding their customers culture. They design their

marketing strategies and advertising campaigns with an extreme carefulness. For instance, a

simple message or commercial statement may be suitable for origin country but may be deemed

negative or offensive in the host country. The following figure (Figure 2.5. Page 26 of the 2nd

chapter) would be so impressive to the last statement:

One of the categorical proof and embodiment that business would never led to cultural

imperialism are the adhering politics of McDonalds in Islamic countries, McDonalds has adapted

its habits to Islamic culture and for instance, in the fasting month, they offer typical eaten food

in this month accompanied with burgers and Coca Cola. That have had a huge acceptance, and

local people have not felt evaded culturally. This could a liable evidence that cultures evolve,

what is occurring is the development of hybrid cultures, diversifying culture in two or more

directions, but always under the shelter, hedge and safeguard of the mother culture, and this

fact does not mean cultural imperialism.

Nowadays, from a commercial viewpoint, the borders are being easing to be crossed. Moreover,

firms’ managers have to design smart strategies when introducing their products in foreign

countries with a sensitive culture to avoid the reject of their products. Likewise, the acceptance

of their commodities depends not only on the conditions within the foreign culture but also on

the implemented policies of the company in each country to be conquered. Thus, for instance,

to introduce a new product in Saudi Arabia and United Arab Emirates, the more likely, the

company have to adopt different policies in both country, having into account the both of them

are neighbours and with extremely similar cultures.

After this heavy and humdrum sermon, my answer to the question "Does international business

lead to cultural imperialism" is a convincing and rotund "ABSOLUTELY NOT".




Chapter 3. Point-counterpoint: Should Political Risk Management Be an Active Strategy?

Well, to invest in a foreign country or not is a sensitive and subtle issue, and before deciding to

take the first step or not, it extremely needful to know how risky it is. Nevertheless, investors

often disregard the most capital first step in the process of international investing. This first

phase is no more than determining the riskiness of the investment climate in the country under

consideration. In commercial terms, country risks refers to the political, legal, cultural and

economic risks that are unique to the specific target country.

Surely, there are specialized experts in economy, sociology and politics and even in international

laws developing reports about the following issues:

• Tax politics and their future forecast.

• Legal environment and their future forecasts.

• Political environment and their future forecasts.

• Forecasts of cultural behaviour toward specific products.

Being sincere, there is an investment trend in countries with weak freedom but with a notable

political steadiness. Some firms prefer to invest even in countries under a dictatorship regime.

For many, it is not worth to invest in developed countries, because of the labour’s high cost and

the not suitable tax policies. There are few countries with a democratic political system where

international firms can find affordable workforce and competitive tax conditions.




Consequently, nowadays, for strong firms with a sizeable capital to be invested, carrying out a

passive political risk management is an evidence of lack of proficiency and prowess that all

managers should have as a basic skill in international business. Even though, there are countries

with unlikely future political changes, but with more chances to undergo legal ones. Perhaps in

this case, we can soften our active political risk management to adapt it to the risk rate.

BTW, I have found a pair of interesting book about this subject, they are a bit more technical

than necessary (maybe, a bit boring) but they have significant analysis inside (I have read only

some chapters).

Book : Climate change Policy and Global Trade (link).




Chapter 4. Point-counterpoint - Is growth good in International Companies?

There are different opinions about the growth’s approach. Detractors are altogether against

economic growth arguing that it is impossible to achieve infinite growth in the planet with finite

resources. On the other hand, supporters argue that we grow infinitely because of the continue

renewability of resources and growth is beneficial, profitable and essential in eradicating

poverty and enhancing the human being's life quality.

Perhaps, I would be retrograde and have no ripeness if I say that growth is bad or economic

growth is unsustainable. Even so, I would be irresponsible by upholding growth at any price and

any circumstance. I wwill develop my point of view giving some brushworks about the

drawbacks and the avails of growth and reflecting on the both stances:

Uncontrolled growth drawbacks:

• Environment costs. I can mention dozens of countries longing and yearning for growth

under any environmental circumstances.

• Inflation. Demand increases too quickly that we get a positive output gap and firms push

up prices.

• Boom Economic Cycles. If economic growth were unsustainable then high inflationary

growth would be followed by a recession.

• Possible Reduced Inequality. Economic growth have often-increased inequality because

growth can benefit a small section of society more than others.

Growth benefits:

• Higher incomes: consumers enjoy more goods and service, and hence, better standard

of living.

• Incitement to invest more: growth encourages investors to be less cautious and

thoughtful on investing their capitals.

• Improving the public services by boosting tax revenues.

• Low unemployment.

• Lower of loose government borrowing.

• Business and fiscal dividends. The Government finances are at the mercy of growth.

What is clear, the current long-lived economic recession make us reflect deeply about the extent

of growth our society and economy are able to bear without damaging ourselves. In short,

growth is something good, what we have to do is only moderate it pursuant to our necessities.

If growth is balanced and sustainable then it can occur without harmful effects. There is a

difference between abundance and growth. If the growth surpass abundance, here we have a

real problem. A phrase that I found online and resume how growth should be is “Sufficiency is

a more realistic goal that perpetual growth”, it is without a doubt, a phrase that makes us reflex

deeply about uncontrolled growth.




Summing up my point of view, the growth could be good only if it is controlled, adapting,

adjusting and aligning it to the necessary economic growth forecast. I have made a simple figure

that can help understanding the concept of The Tempered Growth Control.




Chapter 5. Point-counterpoint - Are Top Managers Responsible When Corruption Is Afoot

All companies are exposed to corruption regardless its activity sector and many of them, years

ago have begun to develop some practices and strategies to reduce corruption, chiefly, in

sensitive sectors like defence, construction or even public services. Although, some others are

just waking up to the risk and some others connive or even practice corruption seeking markets

and opportunities in unfamiliar markets.

Corruption is a cancer for the economy growth, it chokes the growth and undercuts the

business’s existence and bring about a loss of trust among customers as well as businesses.

Actors with some power inside corporation abuse their mightiness and sway to personal gain,

and that causes a huge detriment to the own company and society as a whole.

Well, after this boring introduction, let us go through the question under study; are Top

Managers Responsible When Corruption Is Afoot?

Let us begin the debate with a reflexion, if the top managers responsible when corruption is

afoot, that means the offender isn’t guilty or blameable? Does the top manager have to be

blamed for acts committed by others?

The easiest answer to the entire question is “Depends”, I am sorry but I have no choice: It’s

depends on cases and circumstances.

Individuals who are employees of a company are responsible for their own standard of conduct.

I can go further, employees must report all suspicious behaviour or fraudulent act to a

corresponding officer (some MNEs have their own best practice/misconduct codes

department).

On the other hand, we all know that the companies’ policies and goals are established by their

COEs in collaboration with a teamwork or associates executive and those goals are daily

monitored. The COEs meet frequently with their officers to make sure the company is going on

and managed in accordance with their own principles.

However, what explained in the paragraph above is not easy to apply and has its counterpoint.

The COEs delegate some of the job to others officers, who in turn delegate several

responsibilities like the authority to oversee other executives who manage departments and

implement the company’s guidelines on a day-to-day basis. This is the evidence that top

managers should be questioned of the corruption committed by others in their company but

not responsible for.

Others say that the top managers are responsible of corruption when is practiced within their

own company and it is because they are the responsible for the company ethics to be followed

and strictly implemented by their employees.

The Stockholm School of Economics developed some best-practice guidelines against corruption

in companies. The guideline consists of applying the following rules:

• Make anti-corruption a strong part of company culture.

• Raise awareness.




• Train your employees.

• Update and inform.

• Increase control.

• Reinforce zero-tolerance policies.

• Specify gift policies.

• Be transparent.

• Assess risk.

• Engage constructively.

• Follow the leaders.

United Nations, European Union and OECD have developed their own Anti-Corruption Ethics

and Compliance Programme for Business.




Chapter 6. Point-counterpoint - Should Nations Use Strategic Trade Policies?

Well, this time, I think this unit's point-counterpoint has a straightforward response since we

are talking about a whole country's interest.

The work & duty of all governments is to protect the interests of their own nations and enhance

its economy.

Without Strategic Trade Policies, the countries' trade is unprotected and vulnerable, having into

account the allowed fierce rivalry by globalisation.

First thing to do, we should distinct between import trade policies and export ones. To compete

globally, a nation must have industries that are competitive towards the global market, on the

other hand, a country can (have I said can? not should or must?) protect its scant or poor

industry from foreign imports to allow it to wax, develop and reduce costs and implant itself as

the first choice internally. I have to say that protect an industry from foreign import does not

mean to ban those imports, but by directing their efforts on enhancing the internal production

to make it the first choice and, why not, help it to become an export one.

One of the most important points in the political governments' agenda is target the strongest

and weakens industries.

A government strategic trade policies could be established through (measures):

- Sanction: apply on internal industries satisfying the internal demand and longing to export. The

opposite way is to grant taxes benefits.

- Restriction: in both ways, for imports and exports depending on the interests of the country.

Even though, I think it is not altogether a democratic measure.

- Quotas: To be reconsidered periodically depending on trade’s forecasts.

- Enhancement: Taking necessary measures to help and protect the weakest industry and help

the strongest ones to find more market worldwide.

- Subsidies: Especially for weakens industries.

By the way, when I say weaken industries, I mean those industries, even having national natural

resources and raw material are not able to supply the host markets and make the difference.




Chapter 7. Point-counterpoint - Should Governments Impose Trade Sanctions?

Since I am not a good knower of what economic sanctions causes on both sanctioning and

sanctioned foreign firms and countries, I will base my intervention on real cases.

According to the tens of cases and experiences among countries, economic and trade sanction

rarely work. For instance, the U.S. often uses its economic puissance and dominion (perhaps,

not only economic but almost all sort of power…) to bias and influence other countries by

restricting and tying down their trade. However, these actions cost the U.S. economy $12 billion

yearly.

At first, the question that comes to mind: Why impose sanctions. Sanctions are put in place for

a many reasons. For example, all UN and EU sanctions contain information about their reasons

and detail what their aim is. The main purpose of trade sanctions is to change the behaviour of

the target country’s regime, firms, groups, or individuals in a political or economic way. The last

objective of a sanction varies according to each situation.

There are many sorts of sanctions, the most frequently applied ones are:

• Embargoes on exporting or supplying arms and associated technical assistance, training

and financing.

• A ban on exporting equipment that might be used for internal repression.

• Financial sanctions on individuals in government, government bodies and associated

companies, or terrorist groups and individuals associated with them.

• Travel bans on named individuals. Those individuals could be firm’s sanctioned

executives.

• Bans on imports of raw materials or goods from the sanctions target.

• Import licencing banning certain goods.

• Ban specific goods or goods manufactured by a sanctioned foreign firm.

• Denying import licences for foreign appliers.

• Etc.

Let us cite some real cases of countries that have suffered the U.S. trade sanctions and their

results:

Cuba: Sanctions begun in 1963 and were made to garble Fidel Castro’s Communist regime. Cuba

then has strived economically over the years until today, and after the 51 years, the regime

hasn’t been torn down and stayed in power. The U.S. realised 51 years later that economic

sanctions has not worked, and, the President Obama has called for “a new chapter” in U.S.-Cuba

relationship announcing the end of sanctions.

Myanmar (Burma): U.S. sanctioned economically Myanmar after a military crackdown in 1988.

The sanctions were hardened in 2007 after protesters repression. After 26 years of sanctions,




nothing has changed and the Secretary of State Hillary Clinton announced recently that U.S. is

looking for other ways to bias Burma’s government.

Iran: In 1979, Iranian radicals seized 66 U.S. hostages and U.S. imposed economic sanctions that

were hardened because of Iran’s nuclear program. Iran’s capacity to export oil has been harmed.

I can affirm that, without a doubt, economic and trade sanctions rarely work.




Chapter 8. Point-counterpoint - Is CAFTA-DR a good idea?

CAFTA-DR has as many detractors as supporters. No one can demonstrate with great certainly

weather CAFTA-DE is harmful or profitable and to who. Time surely will tell. All signatories seek

ways to take advantages of the agreement. It is deferent to remember that, there is no enduring

friendship, nor enduring hostility, but there is always enduring interests, though.

Making the long story short, in my intervention for this unit, I limit myself to mention the

agreement's benefits and drawbacks and liabilities.

CAFTA-DR’s avails:

• Reciprocal tariff treatment from both sides.

• Growth in Central American countries apparel industry and advantages for exporters in

the U.S. whose products are used in their manufacturing. Fifty six percent of the apparel

exports from the Central American region are produced from textiles imported in the

United States.

• The agreement boost the competitiveness among the members.

• The agreement helps the members to export freely their remaining after manufacturing

the local needs.

• Raising rates of economic growth especially in the poorer members.

CAFTA-DR's drawbacks:

• Maybe, the benefits certain CAFTA-DR countries gain will come at the expense of other

participating countries.

• Critics suggest that CAFTA-DR will create job shifts that will lead to thousands of job

losses in the manufacturing and the agricultural sector.

• Lack of worker-protection clauses in the agreement.

• The agreement increase some barriers to free trade. I mention the case of Guatemala;

the agreement makes it harder to obtain access to affordable lifesaving medicines

because of stringent intellectual property clauses included in the agreement.

• CAFTA-DR is a bad move for labour and workers’ right. It will likely provoke the loss of

manufacturing jobs in the United States and agricultural jobs in Central America. Maybe,

it will trigger an imbalance in the members’ economies natural functioning.

• This kind of agreements often-hinder wages growth, which had been 9 percent over the

last 30 years compared to the 80 percent in productivity. This fact disservice the

developing Central American Nations, where wages have grown only 12 percent since

1980, compared to 80 percent during the period between 1960 and 1979.

• No clauses in the agreement protect the workers or ban the child labour.




• The agreement do not please all parties equally. It benefits members more than

another’s.

• Free traders are disappointed because it exempts two domestic industries that are

protected from overseas competition - sugar and textiles - and delays the elimination of

some trade barriers by a decade or more.

Consequently, the CAFTA-DR agreement has its own benefits and drawbacks, so it is not the best

of both worlds. I am really caught between two stools; I am cautious and cannot affirm weather

CAFTA-DR is good or bad…




Chapter 9. Point-counterpoint - Is it OK to speculate on currency?

To break the ice, let us define what speculation is. The speculation is a practice of engaging in

financial transactions in a risky way with the yearning to profit from fluctuations in the market

value of a tradable asset such as financial instrument. While it is often confused with gambling,

the key difference is that speculation is generally tantamount to taking a calculated risk and is

not dependent on pure chance, whereas gambling depends on very random outcomes or

chance.

Currency speculation exists whenever someone buys a foreign currency, not because he needs

to pay for an import or is investing in a foreign business, but because he hopes to sell the

currency at a higher rate in the future (in technical language the currency "appreciates"). This is

nothing more than the old rule of buying low and selling high—only with foreign money.

As mentioned in the book, the currency speculation is not for the faint of heart. The abrupt

political shifts outside the speculators’ forecasts and control and can turn losses to profits and

vice versa within days or even hours.

Currency speculators have their own strategies; they always have under surveillance weak

currencies that continue devaluating and only buy it when they think it reaches its floor and it is

ready for a possible soon rise. Nonetheless, they always have the riddle of WHEN it will rise and

with WHICH RATE. Even the most skilled brokers and stock exchange experts are not able to

forecast the financial shifts with exactitude. Many speculators pay little attention to the

fundamental value of a security and instead focus purely on price movements.

Speculating with currency or financial transactions is not necessarily bad or imply speculators

are doing something illegal or doing a fraud. If the brokers invest their or others’ money in

foreign exchange to make profit for themselves or their clients, why speculate with money

would be bad? It is the same.

Nobody tells trading in shares is illegal when it is also a sort of speculation. As long as markets

are transparent and free and information is available, traders are ought to be able to earn (or

loose…) their own money on their own skilfulness on the future’s forecasts. The simplest

question that comes to mind is: if we can buy and sell basic need assets and is legal, why not

make a profit doing the same with money?




Chapter 10. Point-counterpoint - Should Africa Develop a Common Currency?

Like a bottom line, my standpoint differs from many I have seen online, and here you have my

development:

The African common currency (the “Afro”, though many prefer call it the “Afriq”) would benefit

Africa by hastening economic integration in a continent that desperately needs to increase

market size to achieve more trade and growth.

Currently, Africa has already three economic cooperation and two of them are pure currency

cooperation: Economic and Monetary Community for Central Africa (EAEMC) and West African

Economic and Monetary Union (WAEMU).

The African Unions is doing its best to establish some building blocks for monetary unions in five

existing regional economic communities. These regional unions would be an intermediate stage,

leading ultimately to their merger, creating a single African central bank and currency, and why

not, a common African currency.

It was in 2003 when the Association of African Central Bank (AACB) Governors proposed the

plan for the single currency to be materialized by 2021. The idea was initially proposed by the

Libyan leader Muammar Gaddafi, who envisages a unified Africa with single currency, single

military force and single passport, plans that I see too improbable.

Personally, I see it doubtful to be achievable by 2021, and here you have my reasons:

• Africa still has many areas with strong political conflicts.

• Until now, many African regions suffer from war, diseases and poverty.




• Africa has still a marginalised presence in the global economy.

• There is a hard fight among the main countries to take over the leader role (Egypt,

Morocco and South Africa, among others).

• A common currency will be followed (logically) by a free citizens' circulation, but Africa

still suffers from diseases such as VIH, a fact that impedes this action.

• The ethnic and religious divisions are still troubling the continent.

• There are still African countries ruled under an extremely dictatorship system like

Equatorial Guinea.

• Even Africa is one of the richest continents, it is the worst managed.

• The presence of local capital and domestic consumption is very low.

• Broadly, many African countries are often economically strongly dependent on rich

world.

• It is unimaginable that the African countries will be able to transfer taxes revenues from

one country to another.

• It is difficult to transfer goods among African countries because of transportation and

mingy infrastructures.

Summarising, the single African currency will perhaps unite the African countries both

economically and politically. Having a unique currency would presents a one voice of Africa- an

Africa speaking with the voice of 900 million people, and thus presenting a greater force and a

formidable line of defence. Creating a single Central Bank with a unique currency for all Africa

would be a powerful hope for a new flourishing and prosperous new Africa. However, will be

easy? No at all even though it is not impossible. I have my doubts about this fact will be

attainable the next two generations and the blame for this consideration is the current political

landscape. Finally, is there any chance for the common African currency? Probably not, but I will

comfort myself if the selective expansion of existing monetary unions could be used to induce

countries to improve their policies.







Chapter 11. Point-counterpoint - Value Chains: Real or Virtual?

The discussion about whether or not the Value chains is real or virtual is a very controversial

one.

Nobody have doubts about the importance and primordially of value chain as a powerful tool

that helps managers evaluate their feebleness and mightiness, detect tracks and tricks to

enhance costs and blue-pencil mistakes and ineffective processes and broadly: mapping the

steps and sequence of “primary activities”.

I am absolutely against the idea of attenuating cardinally the meaning and traditional concept

of the value chain. The very small company needs a value chain analysis, is not it?

The concept of the value chain was primarily targeted toward manufacturing firms, in which the

value activities are mostly concerned with the physical flow of material like the acquirement of

raw material, manufacturing products, distributing and marketing products, etc. In the so

present digital age, the majority of forms are planning to conduct their business electronically

and the value chain analysis take every time more virtual shape by the use of the IT tools.

Nevertheless, due to the globalisation, the steady grown in the countries’ economy as well as

the people's living standards and the takedown of economic and cultural boundaries, times have

changed and operations need to be settled every time in less time. On the other hand, in e-

commerce, more and more activities become information based and performing them

electronically becomes indispensable rather than conducting this function physically.

Today’s organizations are dealing with digital information provision and this has created another

approach to customers, suppliers and business partners. Thus, nowadays, we could not carry

out the mapping and analysis of “primary activities” without harnessing new benefits that bring

the new virtual world leaded by the internet.




Chapter 12. Point-counterpoint - Should companies operate in and send employees to violent

areas?

Setting up a business abroad has always been risky, and not just financially, the risk could be

diseases (for example, in Congo, today, malaria is a far bigger risk for expatriates than murder),

kidnapping, violent crime, terrorism and even psychological risk due to the culture differences

and population behaviour or racism.

In a first step, let us reveal who are those who accept the challenge and put their lives at risk:

• Those who simply want high compensations.

• Those who are naïve and unaware of the risk.

• Those who are called the “thrill seekers”, who simply find it challenging.

• Those who are misled by their companies or simply not told the full truth

I am against the practice of sending workers to dangerous areas, I think It is not ethical neither

moral at all, but regrettably legal. Nevertheless, I agree with the fact that where there is risk,

there are usually rewards and risk-taking wins markets.

The only way I can accept the practice of sending workers to dangerous zones it is under the

following conditions:

• Tell them the truth and make clear that is a mission in a risky country and their lives

would be in danger (because for most employee, health and safety issues are generally

about avoiding minor injuries and malfunctions).

• Insure their security.

• Give them a countervailing salary or a danger bonus corresponding to the risk it takes

to travel to those areas. For instance, the typical salary for a KBR (Kellogg Brown & Root)

truck driver in Iraq is around $80,000 a year.

• Grant them greedy insurance policies.

• Guarantee the freedom to leave when things get rough.

• Guarantee their repatriation at the slightest sign of danger.

• Contracts no more than 2 years.

• Guarantee them come back home X times per year.

• Guarantee them a lifetime job once they are back.

Here you have the world’s most dangerous countries (with

statistics): http://www.garfors.com/2013/01/the-worlds-most-dangerous-countries.html

Anecdotally, and to finish my standpoint, the 10 safest countries and their homicides per

100,000 people are:




1. Palau: No homicides

2. Monaco: No homicides

3. Iceland: 0.3 per 100,000

4. Singapore: 0.3 per 100,000

5. Japan: 0.4 per 100,000

6. Brunei 0.5 per 100,000

7. Bahrain 0.6 per 100,000

8. Norway 0.6 per 100,000

9. Austria 0.6 per 100,000

10. Slovenia 0.7 per 100,000




Chapter 13. Point-counterpoint - A dirty dilemma: Exporting hazardous waste?

E-waste could be composed of mobile phones, game consoles, screens, and computers and, by

and large: electronic devices. We are all aware of the growth of this issue in both seriousness

and quantity especially when the information era is in its plain effervescence.

Exporting e-waste to recycling centres throughout the world seem be a growing problem. Our

consciousness must be open-eyed and on permanent alert about whether recycling centres are

doing their job or not.

First world countries do not accept recycle e-waste on their own lands and they consider it

promoting landfills (The U.S. generates approximately the 60 percent of worldwide e-waste)…

Moreover, United Nations and wealthier countries’ governments are aware about the danger

that suppose speculator recyclers, because about 80 percent of the collected e-waste nippy find

its way to a developing country like China, Vietnam or Pakistan. On the other hand, developing

nations have no choice and are seeking recycling e-waste opportunities from wealthier countries

like oxygen canisters to keep alive their economies.

I cannot pass up this opportunity without call upon and highlight the importance that the

manufacturers should go on and take responsibility for the hazardous materials used to build

their devices and take over the task of recycle the gadgets they have manufactured once. I know

that many giant manufacturers begun to move in this direction, inspect their material, and

sponsor campaigns on defence of the environment, even though I have my doubts about the

outcome...

Let us shed light on the main pros and cons of e-waste:

Pros:

• The reuse of important elements in electronics increasing their lifetime.

• E-recycling is emerging as a profitable industry for both developing and developed

countries.

• Metals can be melted down into fine riches and be reused.

Cons:

• Concerns about where the e-waste is processed and who by.

• Even though The Basel Convention and U.N. are doing their best, there are no safety

laws.

A pair of questions come to mind and I want to throw both of them on air:

• Will come a day when all countries would be responsible by law of their own e-waste

and recycle it inland their frontiers?

• Will come a day when manufacturers would be responsible of recycling their own e-

waste (the devices made by them)? I stand ready to pay an extra on the real price of the

gadget under the condition that the manufacturer be accountable to its recycling...a

kind of recycling canon.




Here you have an interesting map that shows where the e-waste ends up:




Chapter 14. Point-counterpoint - Should Governments Limit Foreign Control of Key Industries?

First, in order to warm my standpoint up, let us define what's a "Key Industry":

• An industry whose output is essential to the successful operation of many other

industries. A good example is the manufacturing of machinery tools.

• An industry that is peppy, essential and vital (sometimes, the survival) to the economy

in a country. A good example is the oil and gas industry in many Arab Gulf countries and,

in the US, the financial services industry is a key industry because it supports many

American jobs.

It should be stressed that companies in a key industry are often major employers in an area and

usually have a great deal of political power.

The key industries are broadly divided into three ranks: Primary, secondary and tertiary. These

ranks or categories are further arranged into numerous sectors to form units of production, and

when these sectors are considered in a specific way, we could say that it can be referred to a

country sector. Furthermore, the primary sector involves Production activities that transform

natural resource into usable products; the secondary sector involves manufacturing and

construction and the tertiary sector involves services that supplement the production and sale

of goods such as transportation, distribution and retail sales.

Another point of interest is to remember the policies (tariffs and non-tariffs ones) the countries

use to introduce barriers and protect their industries:

• Custom Tariffs:

o Specific tariffs.

o Ad valorem tariffs.

o Compound tariffs.

• Non-tariffs barriers:

o Quotas.

o Exchange control.

o Administrative barriers.

o Boycotts

o Subsidies.

o VER (Voluntary Export Restraint).

o Etc.

Arriving here, the two questions that arise is why do firms aim to take over key industries in the

host country and why do governments control their own key industries? It is a fruitful study the

topic of the power balance between the MNE and the host country in the concept of strategic




position. It is obvious that host country interests are fuelled and spurred by the MNE’s relative

ability and capacity to: 1) offer employment and tax revenues, 2) share in foreign trade or

replacement of imports, and 3) contribute to domestic economic growth.

A choking limitation would not serve the economic growth’s interests and the other end would

not do or would have another negative effects. In other words, letting foreign companies camp

with absolute freedom with no legislative neither economic control would make the host

country loses its sovereignty and national icons. On the other hand, limiting the expansion of

foreign countries would have the opposite impact slow down (in many cases, palsy) the goals of

growth described previously.

Here you have a pair of interesting link that show the key industries by country:

https://www.cia.gov/library/publications/the-world-factbook/fields/2090.html

http://iepd.iipnetwork.org/country_stats/characteristics




Chapter 15. Point-counterpoint - The superior organizations: Hierarchy or Hyperarchy

Without a doubt, the hierarchy structure has shown along the last two centuries that it is an

efficient structure and MNEs can achieve their international expansion plans applying it (Firms

like DuPont, Total, Standard Oil and General Motors have developed through hierarchy formats).

I cannot pass up this opportunity without remember Harold GENEEN quote: “Hierarchy

structure makes people as predictable and controllable as the capital resources that they‘re

responsible for”.

The neoclassical managing structure format, the Hyperarchy (term that does not exist in the

dictionary, by the way. Even though, It’s understood as the opposite of Hierarchy) structure or

ODM (Open Decision-Making) structure is a relatively young structure that represents the self-

organizing community structure and it could be defined like the constellation of Business Units,

departments and managers and even employees that interact on the basis of networks held by

technology, social relationship, experience interchanging and legal ties. Hyperarchy embraces

self-organizing which promotes intrinsic motivation of workers and multiple path flow of

information. In Hyperarchy structure, like real online social networks, actors are connected in a

direct or indirect relationship. The typical example is the LinkedIn professional network relations

among job applicants and business managers. Another helpful example is the open-source

software community in which the software source-code is open and whoever want to interact

to solve bugs or develop new releases is welcomed and encourage by the whole community,

and of course, these facts make the network infinitely large.

Hierarchy structure advantages:

• Efficiency in arranging roles, relationship and responsibilities.

• Clear managing control panel: Authorities allocation, responsibilities assignment and

procedures execution.

• Unsurpassable policies clearness.

Hierarchy structure drawbacks:

• Decision making slowness.

• Growth slowness.

• Wastage of front-end manager’s experience.

• Decisions less adjusted to the battlefield features.

• Unjustifiable cautiousness in decision-making.

• Slowness in relationship and unnecessary work’s complexity.

• It leashes the intrinsic employees’ motivation.

• Slows information flow

Hyperarchy advantages:




• Easiness of information flow.

• Abundance of information processing.

• Makes the whole MNE a globally integrated company.

• Make employees feel more participating in the whole company managing.

• Encourages innovation.

Hyperarchy structure drawbacks:

• Leeds to chaos and disorder if roles are not well allocated.

• Sometimes, decisions are not aligned to the whole company strategy.

The following graphical illustrates the both of them:

Along the last years, experienced CEO on Hierarchy and Hyperarchy gives many opinions

towards the superiority of an organization and we are witnessing a significant shift in the

governance model of MNEs. Nowadays, Hyperarchy is a cutting edge in business managing

structure and is still in a beta version and, time will tell whether the outstanding endeavours on

Hyperarchy are worth or not…

Making the long story short, even Hyperarchy does not solve MNE’s immediate problem, the

experience got managers thinking about the democratic process and how this process, once

affected by technology could enhance intricacies managing in branches and even in the

headquarters.

Personally, I prefer the hybrid Google strategy in managing structure: Foreshadowing

organisations that respect the past but engages the future…




Chapter 16. Point-counterpoint - Should developed countries prevent their companies’

marketing in developing countries?

Many experts suggest that governments should regulate their companies’ Marketing in

developing countries for several reasons. One of them because they promote their products in

less mature markets that their home countries have banned. Again, I am a bit caught between

two stools, but I do not coincide altogether with this statement. Nevertheless, we should have

into account which products are promoted abroad and which less, cause’ in many cases those

products could not be promoted internally because of their dangerousness (or hidden gloomy

motives) but widely accepted in developing countries: bear in mind that in many countries, the

lack of reliable information because of the political unconcern, consciousness and simply the

neediness and agnosticism prevent people from making good and ready-witted decisions and,

of course, we have the duty to prevent other countries from the presumptive danger of our

products.

In developed countries, MNE pay too attention to customers’ needs and they create products

quite suitable to the need of wealthier customers who, of course, can afford them. Nevertheless,

they do not do the same with developing countries customers. I will not miss the opportunity to

mention the example of developed countries that export the used batteries to developing

countries that have weakest pollution laws and the increasing promotions of tobacco companies

in developing countries when is banned in developed countries. Nonetheless, is accepted as

“irrefutable truth” by the overwhelming majority that conditions between developed and

developing countries are disparate that pitifully they have disparate regulations and laws. One

of the statements that jumped out at my view is the following: “If developed countries don’t

regulate to protect consumers in developing countries, who will do?”… Unbelievable but

regrettably true, developing countries are in God’s hand…

However, not only governments should react against unethical marketing campaigns of

developed countries’ MNE in less developed ones. The case of Nestlé would serve as example:

a boycott was launched in the U.S. on 1997 against the Swiss-based Nestlé Corporation. The

boycott promulgated in the U.S. and expanded into other developed countries in the early 1980.

It was prompted by concern about Nestlé’s belligerent and bold marketing of breast milk

substitutes, singularly in less developed economically countries. The boycott was cancelled and

the organizers encourage the practice of new-born nutrition.




It would be interesting that developed countries’ government work programs up to educate

their MNE’s managers in international marketing ethics: Marketing ethics is an area of applied

ethics, which deals with the moral principles behind the operation, and regulation of marketing.

In this vein, obviously, governments in developed countries could not intervene MNE marketing

policies, but they should be vigilant against any unethical marketing policy to, if not afflict their

MNE, give them a warning. I can go further and say that developing countries leaders should

ban unethical MNE’s marketing practices, but it could be restriction of freedom of expression…




Chapter 17. Point-counterpoint - Should companies outsource innovation?

At one time or another, most of us have wondered what innovation is. Innovation has many

definitions and there is not enough ink to include them all in a paper, but let us shed light on it

in a general manner: Innovation is the process of translation an idea or invention into a service

or good that creates more value for the customer. In general, innovation is an act of introducing

something new or doing something in a different way. One idea, to be called innovation, it must

satisfy a specific need and, might be replicable to an economical cost. Innovation usually jumbles

meditated application and blend of information and imagination in deriving greater value from

resources. There is a growing trend towards cataloguing and bewildering imitators with

innovations. Imitators take les risks because they usually draw out with a real innovator product

or service and take more gaudy approach, and sometimes enhance it. The most vivid example

that comes to mind is Compaq with its cheaper PC’s cloning IBMs ones, and Dell with the still-

cheaper clones against Compaq.

Is an act of survival that companies use innovation to face competition and, great firms put

under international competition have no other outcome than innovation. Nowadays, innovation

is considered the real engine of economic growth in the global economy. Multinational

companies, by implementing innovation as their culture, they may obtain products and services

with enhanced quality features, implement new production processes and newer and better

management methods.

Only few years ago, outsourcing has had a negative connotation in developed countries, but

things change (and fortunately, thoughts and minds too). Products and goods complexity

increases and every time it is not easy for companies to do everything inward. Few international

business experts suggest that companies should not innovate abroad and, my question is: if

companies are using suppliers for components and subsystems, shouldn’t use them for

innovation? If anyone might heed me, there is no denying that innovation makes sense when

(and only under the following circumstances):

• Sourced innovation is not a key innovation to the company nor is it a factor key success

(likely, great and wealthy companies take over their own innovations).

• Innovation supplier has specific equipment that are unachievable by the company.

• Outsourcing innovation is more expensive that doing it in-house.

• Outsourcing less important tasks that are complementary to home-innovated mother

tasks.

• International companies should never set aside their own country essence importance

of the innovation authorship.

Here you have a list that I have just rescued from Forbes web site about the most interesting

companies (under my own significant action) about the world most innovative companies (most

known ones):




*The Innovation Premium is a measure of how much investors have bid up the stock price of a

company above the value of its existing business based on expectations of future innovative

results




Chapter 18. Point-counterpoint - Should U.S. companies be allowed to close the GAAP?

Honestly, before reading the 18th chapter, I’ve never heard about the different guidelines for

financial accounting and committees and financial organizations: GAAP (Generally Accepted

Accounting Principles), IFRS (International Financial Reporting Standards), IASB (International

Accounting Standards Board), FASB (Financial Accounting Standards Board), IASC (International

Accounting Standard Committee), IAS (International Accounting Standards), IOSCO

(International Organization of Securities Commissions). So, since I feel dizzy with so many new

acronyms, as a first step, let’s make things clearer:

GAAP (Generally Accepted Accounting Principles): Are a collection of commonly used

accounting and financial rules and standards for financial reporting. In addition, GAAP rules

contain many concepts and detailed definitions as international trade rules. Its end goal is to

make sure that financial reporting clear and could be understood by others. It should be pointed

out that there is no universal GAAP and the specifications vary from one geographic location to

another. In U.S., the SEC (Securities and Exchange Commission) mandates that financial

reporting adhere to GAAP specifications and requirements.

IFRS (International Financial Reporting Standards): Are a set of financial and accounting

standards developed and set up by an independent non-for-profit organization called IASB

(explained later). Its goal is to provide a common framework for how public companies prepare

and process their financial statements. IFRS do not set rules for industry-specific reporting, but

provides general guidance for the confection of financial reporting. IFRS is usually confused with

IAS (International Accounting Standards), which are older standards that IFRS has come to

replace.

IASC (International Accounting Standard Committee): Is a unique international agency forum

to coordinate, policy, development and decision-making involving the key United Nations

partners. It was created in 1973 by the accounting bodies of 140 countries that develop and

promoted the use of IAS (International Accounting Standards). It was succeeded by the

International Accounting Standards Board (IASB).

IASB (International Accounting Standards Board): Is the independent standard-setting body of

the IFRS Foundation. Its aim is to develop a single set of high quality, understandable,

enforceable and globally accepted financial reporting standards based upon clearly articulated

principles.

FASB (Financial Accounting Standards Board): Is a private, non-profit organization whose

primary purpose is to establish and improve generally accepted accounting principles (GAAP) in

the U.S. in the public’s interest.

IOSCO (International Organization of Securities Commissions): Is an association of

organisations that regulate the world’s securities and futures markets. IOSCO’s importance has

reached the point that has members from over 100 different countries, who regulate more than

95 percent of the world's securities markets




Having clarified acronyms, let us discuss whether U.S. companies should be allowed to close the

GAAP or not. The response may be clear once comparing the U.S. GAAP and IFRS accounting

systems.

If a company is investing abroad (especially in emerging countries), they financial managers

should handle with main accounting systems: GAAP and IFRS. GAAP is principally used in the

United States and the SEC (Security and Exchange Security) make efforts to switch it to IFRS by

the beginning of 2016. Both accounting systems have few differences between them that may

conduct to confusions and result alterations in financial reports. IFRS were established in 2001

and adopted by the European Union by 2004. The European Union’s hope is that all the world’s

businesses move to these standards to help investors and financiers all over the world to

understand the European financial solution.

Overall, both GAAP and IFRS philosophies are quite similar, even though, there are some

differences:

Balance sheet:

• IFRS: Obligates to separate current and noncurrent assets and liabilities.

• GAAP: Only recommend this separation.

Minor interests:

• IFRS: Included in equity separately.

• GAAP: Included in liabilities as a separate line item.

Documents included in financial statement:

• IFRS:

o Income statement.

o Balance sheet.

o Cash flow statement.

o Equity's changes.

• GAAP:

o Income statement.

o Balance sheet.

o Cash flow statement.

o Equity's changes.

o Statement of comprehensive.

Deferred taxes:

• IFRS: Shown as separate line items in the balance sheet.




• GAAP: Included with assets and liabilities.

Bank overdrafts:

• IFRS: Could be included in cash flow.

• GAAP: Charged as a financing activity.

Few of these differences likely cause major changes in any company’s financial reporting and

results; it may happen that a company with great results under GAAP will not look terrible under

IFRS. Hinge on these differences, undoubtedly, the response to the question under study is

obvious…

Here you have a map with countries already adopting IFRS and those are pursuing adopting it:




Chapter 19. Point-counterpoint - Should Offshore Financial Centres and aggressive tax

practices be eliminated

Tax heavens or Offshore Financial Centres (used to soften the tone…) generally exist to protect

offshore profits and keep them at secret from governments. OFC are a tax-avoiding loophole

that sends money overseas where there is no or little tax. This trend has become the go to move

of some of the top corporations worldwide.

Tax havens and OFCs are closely related, although not every jurisdiction would fall into both

categories.

I list below the benefits, drawbacks and myths about tax heavens and OFC:

Benefits:

• They offer a range of taxation levels from which to choose.

• Strong privacy legislation.

• Allow for the creation of offshore entities.

• Complex and detailed legislation protecting their investors’ assets.

• There is no obligation to have a yearly financial report.

• Possibility to create companies at distance.

• Full freedom of capital movement.

• They usually be countries enjoying political stability.

• There are no restrictions on investors’ nationalities.

Drawbacks:

• Sometimes, because an offshore jurisdiction has zero tax, it is not necessarily the best

tax haven to suit the investor’s needs.

• People worry about the inaccessibility of their money as it is located in a faraway

offshore country (even though, things are changing with technology).

• Generally, government and governmental agencies do not accept tenders from these

types of offshore entities.

Myths:

• Offshore tax heavens are just for criminals: Even the tax heavens are the desired

destination of laundered money and money of illicit origin, the majority of individuals

and businesses that use these locations are completely legitimate. It is even that a

recent study into the proceeds of criminality stated that the majority of illegal funds are

actually held in banks and financial centres in non-tax heavens countries.

• Offshore tax heavens are all exotic islands: Some tax heavens are located in nice and

warm countries but many are not. Isle of Man (self-governing British Crown dependency




located in the Irish Sea) and Delaware in the United States are considered as tax heavens

and could serve as an example.

• Tax heavens have all zero tax: There are varying levels of taxation in different offshore

financial centres and some tax havens have zero tax, others have a lower rate of tax and

a minority have a ‘standard’ rate of taxation.

Solutions to Tax heavens

The way out to this unsolvable situation is adopting the “territorial or federal tax system”. The

territorial tax system prevent multinational companies from shifting their money to tax heavens.

The territorial tax system would persuade the multinational companies from shifting their

outside profit to offshore tax heavens, because they will pay income taxes only to the countries

where they have earned profit. What countries will gain from this policy? Nothing, but at least

the multinational companies fortunes will keep in national banks.

It comes to my mind the following question: Is there anything wrong with not collecting large

amounts of taxes? OFC and tax heavens do not collect taxes because of the simple reason that

they do not have large economic burdens like military budgets, civil service budgets, etc.

Furthermore, those countries are not obliged to collect higher taxes only because the high-tax

countries are at disadvantage in attracting huge fortunes. Because, ultimately, it is a matter

pertaining to national sovereignty.

Therefore, since tax heavens and OFC will never be eliminated, the only thing I would prefer is

to be a bit more transparent against money of illegal origin and collaborate more with

international fraud agencies. Governments, in turn, should soften their crushing income taxes

(even, as I’ve explained before, it would be better to eliminate taxes for outside benefits with

the federal tax system), in such a way, persuade international companies to be obsessed with

repatriate their funds to OFC and tax heavens.

Here you have a map of all (supposedly) tax heavens countries:




Chapter 20. Point-counterpoint - Is learning a foreign language still useful?

The point to brainstorm in this unit is an open question and give room to scroll up whatever we

want. However, let us focus on the international business world.

The last decades, the world has been becoming more and more interconnected, new

technologies make the world smaller, and boundaries vanish. For those reasons, it is essential

for business managers to learn to deal and communicate with people from different

backgrounds. Nowadays, countries are dependent on importing goods and services from

overseas locations instead of staying with domestic products. Being able to communicate fluidly

with other suppliers, customers and partners undoubtedly will help international business to

achieve their global goals and grow to its ceiling potential and open doors to more foreign

markets. Today, evidences and figures suggest that as many as three out of four multinational

companies manage networks of twenty or more overseas countries. Coordinate such a burden

and managing such culturally, geographically and linguistically diverse scope is unmanning.

Once managers take the decision to learn foreign language for the purpose of business, the

election of which language to learn should the best fit. There are certain languages that are

crucial and more beneficial for managers than others and the election will depend on the vision

and the target markets to the business. Moreover, the question that arises here is: are the most

spoken languages the most important for business? In all probability not always. Many suggest

that the Chinese today is the most important language, I do not think so and the evidence is

when international traders make business in the very China, they do it in English (the own

Chinese business men learn and speak English, Spanish make business with French in English,

Russians trade in Japan communicating in English, etc.). For sure, someday, the Chinese

language’s worldwide dominance will arrive, but not anytime soon and I am afraid that I will not

see it. Indeed, even in powerhouse China, more people are currently studying English than in

any other country. An incredible 100,000 native English speakers are currently teaching there

and I think this figure is really too few having into account China’s dwellers. English will maintain

and grow its dominance, moving from “a marker of the elite” in past years to “a basic skill”

needed for the entire workforce. Indeed, the British Council reports that by 2020, two billion

people will be studying English worldwide. Nevertheless, – for better or worse – for sure, English

may be the most essential language for global business success now. Notwithstanding, the

hegemony of English should not be an excuse for monolingual native speakers to slack off.

Let us cite some reasons why should we learn a foreign language:

• Study or live overseas.

• For sure, become open-minded.

• Discover new cultures.

• Enhance the employability.

• Improve decision-making skills.




• Be more confident.

• Deal with new markets.

There are roughly 6.500 spoken languages in the world today. However, about 2.000 of those

languages have fewer than 1.000 speakers. The most popular language in the world is Mandarin

Chinese (1.200 million People in the world speak that language). I insist, not the most

important… not yet).

The ten most spoken languages and their native speaker numbers (in million):

1. Mandarin: 1.200.

2. Spanish: 405.

3. English: 360.

4. Hindi: 310.

5. Arabic: 295.

6. Portuguese: 215.

7. Bengali: 205.

8. Russian: 155.

9. Japanese: 125.

10. Punjabi: 102.

Here you have a map with spoken languages (percentage) per continent: