BA 447 – day 8 & 9

Feed back: what would you do …

• If you faced a Tienamen-like situation• First of all, you might have considered the risks

before hand, i.e. no surprise?• Second, safety of personnel, ex-pats in

particular because they are not “natives”• Third, what to do with investment?

– Security of the facility or investment– Find out what is happening, scenarios, etc. e.g. call

your friendly government official, contacts, etc.– Report to head office and obtain guidance

Recap

• Understand issues in global arena

• Use Flat World as a jumping off point to identify what these issues might be

• Flat World is familiar:– web-enabled playing field– new players– business applications, e.g. supply chains

Flat World

• It has assumptions about entry of new players and implications– open economies– how these opened up– who benefits from this new environment– those who are not part of the "party“

• It has assumptions about, or can lead us to conclude behavior of businesses

Flat World: for further investigation

• Governance and corruption deals with how these “open” economies are managed

• Understanding sources of instability in a country or "threats" to businesses

• Resource issues that may create constraints - energy, environment

• Role and function of agencies such as WTO• Issues you identify, find interesting, e.g. specific

issues like e-waste and take back laws, WTO related conflicts, activists

Value to global business

• What must I know to function effectively in a specific country? Global arena?

• What can impact a global business? Country specific? Regional?

• Response when one is in a situation that requires understanding of the country?

• Coverage of issues may help provide background basis for understanding prospects or lack of it in a target country

Overview: Governance, corruption, terrorism

• Review ch 11– Discussion

• Review ch 12– Discussion

• Questions raised

Chapter 11

• What are major conclusions?

• What are key assumptions?

• Your opinion?

Chapter 11 – Other side of “flat world”

• Technological optimist or historical determinist: the brave new world and its dark side/history repeats itself

• The reality of poverty and efforts reduce it– Too sick – disease and underdevelopment– Too disempowered - marginalized– Too frustrated – ideological, religious– Too many Toyotas – what if we did succeed in

making people well-off?

Poverty statistics

• Poverty rates in selected countries– http://www.worldbank.org/data/countrydata/countrydat

a.html

• Poor are most vulnerable to natural disasters: tsunamis; typhoons; hurricanes; earth quakes

• Poor most vulnerable to disease outbreaks– Sanitation– Access to health centers

Poverty

• Poverty alleviation: decades-long goal– http://web.worldbank.org/WBSITE/EXTERNA

L/TOPICS/EXTPOVERTY/0,,contentMDK:20153855~menuPK:373757~pagePK:148956~piPK:216618~theSitePK:336992,00.html

– http://www.makepovertyhistory.org/– http://

www.globalissues.org/TradeRelated/Debt/USAid.asp

Poverty and prosperity

• Mansions, high rises, and slums

• Benefits to elite (Philippine rates)– Caddies: $10 a game– Household helps: $55 a month– Driver (stay-in): $130 a month– Secretaries starting pay: $300 a month– Call center pay: $300 a month

• Living wage and minimum wage

Too disempowered

• The rural vote: in developing countries, to the extent that elections are honest, elections are dictated by the masses.

• Economic growth often does not trickle down.

• What are the arguments?– Global populists argue that the poor do not

stand a chance

Anti-globalization

• Western-driven movement composed of:– Upper-middle class with guilt complex– Rear-guard push by the old left– An amorphous group: neoludites?– Anti-americanism (power is a magnet for

criticism)– Serious groups focused on “how we globalize”

Response to anti-globalization

• Reform retail - - • Local government focus; we can not

ignore national government.• Village by village effort• Role of multinationals

– HP’s efforts to help villagers articulate what they needed

– Microsoft program providing computers– “Community relations” projects

Another view of poverty reduction

• Targetted approaches, for example– http://www.usaid.gov/– http://abcnews.go.com/International/wireStory?id

=1205776

• The World Bank shifted to reducing corruption. – Corruption = lack of or poor governance– Poor governance perpetuates poverty

Islam and terrorism

• Frustration due to authoritarian regimes and lack of economic opportunities

• Islamist fringe and its supporters– Terrorist acts as directed against “trust”– The “West,” particularly the US, as a

convenient target for dissatisfied Muslims– Establish an Islamist state– Feed on frustration due to humiliation - if

Islam is that great, why are we poor

“Muslim Problem”

• Centuries old issue of dealing with Muslim population in the Philippines - through Spanish, US, Japanese occupation

• 10% of the population, mainly in South• Secessionist? Anti-Christian?• Factions within the population

– MILF, MNLF, Abu Sayaf as splinter group– Families and clans also fought each other

• Terrorist acts - kidnappings, bombings– Attract attention to their cause– Collect “taxes”

Day 9

• Finish Ch 11– Continue with “Too frustrated”– Too many toyotas

• Continue with Ch 12• Cover following issues with more depth

– Terrorism– Islam– Traditional conflicts– Internal conflicts– Governance and corruption & relation to previous four

Bin-Laden’s Cause

• Well before Sept 11– http://news.bbc.co.uk/1/hi/world/south_asia/15

5236.stm• Western infidels on sacred ground - foreign troops

in Saudi Arabia during Kuwait war• Corrupt Saudi Arabian government• US support for Saudi Arabian government• Depletion of natural resources - oil

• Why conduct attacks on US soil?• Al-quaeda as a loose confederation

Terrorism in general

• Objectives:– Attract attention/support for a cause– Destabilization of status quo

• Methods – A small bomb, big bang in the press– Guerilla-style efforts, including suicide bombers, can

tie up a whole army. Therefore, cost – benefit is in their favor

– Harassment=leverage for whatever ends they may be working for, e.g. extortion, support, etc.

Islam

• Shares common “tradition” with Judaism and Christianity. Qur’an as correcting Jewish and Christian scriptures – One God– Abrahamic roots

• http://en.wikipedia.org/wiki/Islam

Religion and Government

• Separation of church and state– People are free to worship– Government can not dictate/interfere

• Some democracies have informal relationships between church and state

• Other governments have closer ties

Decision making in IRAN

• Iran-Decision Making Structure.xls

Growth and natural resources

• What if China’s middle class actually grew? Or India’s? What type of lifestyle would they emulate?

• Rise in crude oil prices in 2004 partly attributed to unexpected growth in Chinese demand for oil.

• The growth of Chinese requirements for oil (and commodities) may subside a bit in next few years.

• Are there limits to China’s growth?

Resources

• Broad topic, which includes among others– Energy

• Renewable• Non- renewable

– Commodities, e.g. steel, agricultural products– Environmental issues

• Pollution as we know it• “Technological” pollution, e.g. unsafe technology

• We will cover these later

Quick exercise

• List all conflicts between countries– Which have resulted in actual invasion?– What is root of conflict?

Ch 12: The Dell Theory of Conflict Prevention

• Supply chain management means that production in different countries are linked

• For a particular country, this means foreign direct investments, jobs, etc.

• War or any violent conflict that disrupts economic activity can disrupt supply chain

• Such a conflict can also cause investments to move to more peaceful locations

Back to terrorism

• Destabilization or terrorist acts may be targeted at “discouraging” investments

• If the economics are right, a company may opt to deal with “terrorists” by paying “taxes”

• In some areas, terrorists often does enough damage to increase uncertainty and extract rent. This is good “business.”

Historical Conflicts

• China (People’s Republic of China) and Taiwan (Republic of China)

• India and Pakistan

• Japan and China, and Korea

• UK and Ireland

• Eastern European “hotspots”

• South America??

Roots of Conflict

• Religion as in the case of India and Pakistan– Was one country and broke up after

independence

• Ideology – China and Taiwan

• Economic (capture resources) – Japan in World War II

• Political with religious undertones (Ireland)

Internal conflicts that spill over borders

• Tribal/ethnic conflict

• Religion– “Frustration”– Control of the country

Some conclusions

• Friedman is right part of the time– Business interests will lobby for restraint– Economic fall out can be significant– In addition, business interests can be the link

across countries, e.g. “overseas chinese”

• In some cases, economic interests are outweighed by political or religious causes

Discussion within Groups

• What are the issues raised that are– Interesting personally?– Have relevance to an international company?

• Why?

• What do we need to learn more about?