BA 447 – day 8 & 9

1. BA 447 – day 8 & 9

2. 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

3. 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

4. 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

5. 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

6. 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

7. Overview: Governance, corruption, terrorism • Review ch 11 • Discussion • Review ch 12 • Discussion • Questions raised

8. Chapter 11 • What are major conclusions? • What are key assumptions? • Your opinion?

9. 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?

10. Poverty statistics • Poverty rates in selected countries • http://www.worldbank.org/data/countrydata/countrydata.html • Poor are most vulnerable to natural disasters: tsunamis; typhoons; hurricanes; earth quakes • Poor most vulnerable to disease outbreaks • Sanitation • Access to health centers

11. Poverty • Poverty alleviation: decades-long goal • http://web.worldbank.org/WBSITE/EXTERNAL/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

12. 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

13. 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

14. 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”

15. 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

16. 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

17. 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

18. “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”

19. 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

20. Bin-Laden’s Cause • Well before Sept 11 • http://news.bbc.co.uk/1/hi/world/south_asia/155236.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

21. 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.

22. 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

23. 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

24. Decision making in IRAN • Iran-Decision Making Structure.xls

25. 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?

26. 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

27. Quick exercise • List all conflicts between countries • Which have resulted in actual invasion? • What is root of conflict?

28. 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

29. 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.”

30. 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??

31. 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)

32. Internal conflicts that spill over borders • Tribal/ethnic conflict • Religion • “Frustration” • Control of the country

33. 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

34. 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?