constructive criticism of Friedman’s The World is Flat

Over the holidays I took some downtime to catch up on reading a book I should have read a long time ago, Thomas Friedman’s The World is Flat. Far be it for me to criticize a guy as smart as him, but I do think he missed a few things.  The book is essentially a treatise on the threat to supply chains world-wide, with which I wholeheartedly agree.  Where I diverge is the way he presents his findings & how he positions some of the changes on which he reports.

Friedman stirs up a hornet’s nest by couching his observations as a supply side threat while the flattening of the world is just as much a demand side marketing opportunity.  The way Tom presents it, the only 1’s who are leveraging the opportunities of the flat world are the Indian offshoring companies which are growing like gangbusters.  If the world is flat for them, it’s just as flat for us.  The difference is they’re taking advantage of it & we’re not.  That has to change.

Friedman describes a lot of big American companies which outsource more & more critical functions to India, China, & eastern Europe & talks about some of the big companies in those countries which are taking advantage of the flattening world as well.  He mentions a few small companies which are being threatened by the new environment, but very few which are leveraging flatness.  Again, the opportunities in a flat world are even more available for small companies these days, but he mentions only the threats & not the opportunities.  They’re there.  I think he simply spoke with his circle of contacts who are primarily from big companies & used them as a proxy for everyone else.  Small companies are becoming more & more important today, so we need to recognize the  world is not just flat for the big guys.

Finally, I think Friedman understated the global price effect of the proliferation of the internet, coinciding with China, India, & eastern Europe all coming on line at the same time.  Whether we realize it or not, it’s created a paradigm shift downward in prices for all products & services because of the recent cheap production/service capacity dumped on the world market.  Whatever can be done more cheaply abroad will be done, which can now be done simply & easily because technology enables it.  I’ve had numerous conversations with potential partners from these countries & the dilemma I keep running into is:  I have bills to pay @ developed economy levels in $US.  They earn @ developing economy levels & have to pay me many of their billable hours for 1 of mine.  They have huge price advantages & are leveraging them as much as they can.  Their cost advantages are showing up everywhere & it’s not going to stop anytime soon.  We need to think about how to adapt to it.  The Germans & Italians continue to focus on adding value to manufacturing with increased specialization, skills, etc.  We’d be wise to consider doing the same.

history/future of free trade in the Americas

I lunched with visiting professor Ralph Folsom again when he talked about Nafta & Free Trade in the Americas: Prospects for the Future @ his 9th annual lecture @ John Marshall law school.  Here’s what he had to say:

The Andean Community kicked off the free trade movement by bringing together Bolivia, Colombia, Ecuador, & Peru in 1969, but broke down under political conflict.  Its main goal was to reduce dependency (dependencia) on capital, investment, & technology from the US.  Decision # 24 imposed foreign investment & mandatory joint venture controls by foreign investment commissions on foreign direct investment coming into those countries.  Controls were imposed on technology transfers as well.  Governments regulated contracts, required mandatory exports, & even levels of royalties.  Ancom appears to be collapsing.

Brazil brought together Argentina, , Paraguay, & Uruguay to form Mercosur in 1991 in an attempt to clone the European Union.  It’s a customs union with a common external tariff & common trade agreements.  Chile & Bolivia joined in 1994 & Venezuela has been knocking on the door for years, but Lula of Brazil doesn’t want to let Chavez of Venezuela in.  Led by Brazil’s strength, Mercosur seems to be strong.

GHW Bush’s hope for a Free Trade Area of the Americas had not materialized.  Chavez put together the ALBA group consisting of Venezuela, Cuba, Bolivia, Ecuador, Nicaragua, & Honduras.  ALBA has grown due to lots of barter trade between its members.

NAFTA came out of the Canada-US Free Trade Agreement when Mexican President Salinas was rebuffed by the Europeans for a Mexican-European free trade agreement, so he approached GHW Bush with the concept.  The Canadians saw it as a threat & opportunity to renegotiate some terms of the US-Canada FTA.  Many NAFTA terms have preceded World Trade Organization terms by 12 months, such as the TRIPS intellectual property guidelines, which has worked to the benefit of the Americans many times over.  NAFTA’s local content requirements have led to many factories & jobs being located in North America.

CAFTA (Central American Free Trade Agreement) was proposed (& authorized by a very slight majority in the US congress) in 2005 including Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, & the USA.  It improves upon NAFTA by including intellectual property, but does not allow for the free movement of people between countries.  Foreign investment is protected against government acts “tantamount to expropriation.”  Metalclad, Ethyl, & Methenex cases have resolved/arbitrated a few disputes to clarify what is meant by “tantamount to expropriation.”

The US has yet to ratify free trade agreements with Colombia & Peru in the region.  Presidential fast-track authority for these treaties has expired, so progress towards their conclusion is slow.  Given the lack of support for trade in the current downtrodden economic situation, it’s questionable how high a priority these treaties are for the US government.

IVCC tour around the world

The International Visitor’s Center of Chicago hosted an evening featuring a tour around the world with Dieter Klagge, an intrepid traveler who has visited 119 countries. Dieter gave an old-fashioned slide show which whirled us around the globe in rapid fashion. Here are tidbits I pulled from his presentation:

• Kanchatka in Russia has 29 active volcanoes to which you can get very close
• a volcano erupted in Montserrat, so there’s nothing/nobody left to see there anymore
• Le Paz, Bolivia is the world’s highest city, altitudenly
• Antarctica was 57 degrees in January with no darkness
• the wife of Spain’s former king was German & spoke Deutsch with Dieter when he was there
• the famous minarets in Moscow are now a museum
• Muslim women wear no veils in Uzbekistan
• a lake encountered on the Siberian Express from Moscow to Urtusk contains 1/6 of all the fresh water on the Earth
• the Chasa palace in Tibet has 6,000 rooms
• wandering sand dunes swallow trees in Dubai
• North Korea has springs which emit effervescent water & the Chinese have built a lot there
• Namibia is a former German colony where residents lived better then compared to now
• Greenland is 5 X as big underwater
• Vlad Dracul (Dracula) kills in Romania
• Slovenia is beautiful

Q&A revealed:  North Korea & Cuba are misrepresented by the media & are not as bad as the media portrays them to be. The people in both countries as are nice as in any other. Although Dieter travels with 2 passports (German & American), & the North Korean police did take some of the photos (& x-rayed others) he took there, he maintains these countries are misunderstood.

To catch more of Dieter’s slide shows, keep your eyes on the event calendar @ the Wilmette Library.  fyi-I worked with Dieter @ my 1st job out of college many years ago @ Xerox when we were both account managers.  He was responsible for Sears & all of its subsidiaries @ the time.  We’ve crossed paths many times the past few years @ events @ the Goethe Institute, IVCC, & others.  Dieter is a great guy & he tells great & amusing stories @ his presentations.  Check them out when you can.  The IVCC needs hosts for foreign visitors, so register with them as well.

Kraft’s acquisition of Cadbury

I caught with interest this article on Kraft’s acquisition of Cadbury Kraft’s bid has Brits cheesed off by Henry Chu.  I find it somewhat amusing how all this posturing goes on that really doesn’t make a difference.  It’s ridiculous that on 1 day a transaction is labeled a “hostile takeover,” & a “sweetheart deal” the next.  Chu claims that Hersheys in America is a corollary to Cadbury in Britain, but I don’t get the warm & fuzzies from Hershey’s, which makes me wonder if the same is really true about the Brits.  When you get right down to it, all of the politicians, workers/unions, consumers don’t matter when an acquisition offer is on the table.  Everything that’s said is simply for negotiation purposes.

I will admit that there truly are differences in chocolate from country-to-country.  When I was living in Germany & flying home to the US, & perhaps stopping in Belgium, I would pick up some M&M’s in each country & do a comparison when I got home.  I’m a bit embarrassed to admit that American M&M’s are sweeter than the European variety, but I do have a sweet tooth, so I still prefer the American version.  The European chocolates are smoother, but I like my sweets strong & fast, & American chocolates smack you in the face with their sweetness by comparison, so I remain by my native tastes.

Perry Yeatman, author of Get Ahead by Going Abroad & whom I interviewed last year , is in charge of investor relations for Kraft.  She has been ecstatic that Kraft is finally expanding its footprint globally.  Typically conservative Midwestern Kraft had been slow to approach the rest of the world, but with the Cadbury acquisition will have access to many markets with 1 fell swoop that would have been much more difficult & expensive to build on their own.

Granted, maybe Cadbury is a British icon, but they all still fall prey to economic realities.  The bottom line is this deal makes business & financial sense.  The distribution networks are complementary.  All that matters is the British shareholders held out for more money, & as soon as they got it, they were satisfied.  For better or worse, with global M&A, it’s still the numbers that matter more than anything else.

google exiting China?

The potential of Google exiting China has raised a furor lately & begs for my comment.  Here’s the announcement which started the firestorm:  A new approach to China 1st:  we need answers to many questions this post raises:

• what other large companies were attacked?
• whom does the evidence indicate conducted the cyberattacks?
• how long have Chinese human rights activists’ gmail accounts been accessed by 3rd parties & by whom?
• what specifically were Google’s objectives when they entered China?

Aside from this blog entry, there are a few other issues relevant to this incident:

• Google’s market success & profitability in China & prospects for the future
• Google’s U.S. executives familiarity with China

At the risk of commenting before all of the facts come out, here are my thoughts:

• The implication is the government is behind these cyberattacks, but this should be no surprise, though it’s doubtful explicit links can be proven. That whoever led these attacks went after gmail accounts outside of China is the most egregious act.
• While these attacks in all likelihood were intended to silence Chinese human rights advocates, attacking their e-mail accounts is a bit tardy. The e-mail messages have already gone out.  Since it’s so easy to open free gmail accounts, hacking these accounts won’t prevent them from speaking out in the future either.
• Hat’s off to Google for trying to get the Chinese government to loosen its restrictions on free speech on the internet.  But in some ways, I think this is simply grandstanding on Google’s part to exit a marginally profitable market.  They put on the presentation that they are taking the high road, but the situation remains that Baidu holds the same market share over Google in China that Google holds over everybody else in the U.S. & that’s not changing much.
• I have no doubt that Google’s executives are pretty familiar with how things work in China, but even they should know they probably won’t win when confronting the Chinese government.  I think Google could have much more positive influence by working within the system than trying to buck it.  If Google does leave China, the government will have won, & have 1 less venue to censor.  In some ways, the US government should even lobby for Google to remain.
• The biggest losers could be Google.cn users in China.  If Google leaves, they’ll have little choice but to revert to the dominant local competitor Baidu.com  Google should stay in China & try to work more closely with the Chinese government to foster change from within rather than from the podium.

international search interview

I caught this interview in B2B Marketing magazine International search offers opportunities which I think is very helpful for a lot of technology marketers.  Here are a few highlights in my eyes:

• I’m not sure that pay-per-click advertising rates have necessarily reached their ceilings in English-speaking markets.  I’d like to learn his source for that.  I think there’s still lots of room for growth in terms of numbers of customers as well as how much they’ll pay.
• translation tools are of limited value, because translations still need to be seen by human eyes, even native speaker eyes.  I still speak pretty good German, but would not want to take responsibility for naming keywords in German.  I don’t know if it was the interviewees mistake or the editor’s, but they didn’t even translate some German in the interview correctly.
• when I interviewed John Lee of Hostway for the eprairie.com Q&A: Founder John Lee of Chicago’s Hostway on Web Site Localization ,he verified the difference in Asia’s proclivity towards more busy webpages.  It might seem “foreign” to us, but it’s very comfortable to them.  I suspect it might have something to do with the fact that they use kanji characters instead of the roman alphabet & thus they look at their verbiage differently than we do.

In general, internet search is all about finding the right words, & just translating the words directly from language to language is not enough.  All those words are most effective in context, & translating them without context wastes money by ending up with the wrong words in translation & many times missing the correct words, which costs you in lost opportunities.

This simply underscores the fact that even technology firms which depend on 0’s & 1’s/bits & bytes have to pay attention to language differences, break down, & pay specialists to translate stuff.

impending chinese century?

The Chicago Council on Global Affairs hosted this event THE CHINESE CENTURY? A NEW AGE IN U.S. – CHINA ENGAGEMENT Here’s what they have to say:

Niall Booker of HSBC said there may be a financial bubble in China because there are some toxic assets there, but the authorities are aware of the risks.  There is some indiscriminate credit, but the government controls the flow of credit & they’ve seen it before, but there is still the potential for asset bubbles.  There is not yet a flight of manufacturing back to the US because cheap Chinese goods have subdued inflation here & manufacturing flight to China benefited service industries here.  There could be shortages of skilled workers.

Cheng Li of Brookings China Center admitted wireless could be a solution for healthcare in China.  How much Chinese can contribute to the world economy depends on the government’s plan.

Evan Osnos, formerly of the Chicago Tribune & now of The New Yorker, piped in on healthcare, saying ther have been cases of violence against doctors exhibiting the gap in care for the rich & poor.  It’s politically volatile as babies are 7X as likely to die in the provinces compared to Beijing.  Bad pollution ratings are 100;  forest fires are 300; Beijing rates 500.  He also described a media personality (Pu So Li?) who started a publication (Tai Jing?) which became too provocative & profitable & was ultimately shut down.

On Brazil, Booker indicated devaluation is not the way to go.  Consumption in China, Japan, & Germany combined is still only $6.5B while in the US it’s $10B.

Li said Obama has changed bilateral & trade relations profoundly.  He wants dialogue & no longer points fingers.  Cooperation is not a choice, rather a necessity.  Osnos chimed in that the Chinese did not expect Obama to get elected because he had so little experience, although he did win the American Chamber of Commerce election by a greater margin than in the US.  Bush asked China to be” a responsible stakeholder,” while Obama is more productive conducting talks behind closed doors.

In wrapping up, Booker noted in 1820 China comprised 1/3 of the world’s GDP, so their sway is not new to them, but they do have a huge infrastructure to build, so we shouldn’t demonize them.  Li reiterated there are 6 major divisions in China, including intellectual, geographical, & social.  China is not monolithic, so we need to keep their domestic situation in mind when dealing with them.  Osnos countered that they are promoting clean energy & has increased it energy research 50X.

Q&A

• re:  modernizing the military,Li said there are transparency issues & China is still critical of military sales to Taiwan.
• Osnos said investments in the law are resulting in the poor being able to access the courts to fight pollution issues.  The problem remains that successful lawyers are sometimes disbarred.  Li contributed that we have too many lawyers here in the US while in China they had too many engineers, but are now producing 100K lawyers/year.  The rising generation has law degrees rather than engineering degrees.
• Osnos maintained that innovative new ideas still come from the US & offered evidence that while the # of research articles has increased from China, they are rarely cited.  Osnos informed us that China is working diligently to secure oil & water supplies, & is seeking alternative energies.  Li popped in that there are many books on innovation in Chinese bookstores.  Their need for water is increasing 30X because of industrialization.  Booker encouraged Americans to invest more in education to maintain our edge.  Although China holds 10+% of US debt, they never take more than 20% of any single issue.  China is leading an evolving model of centralized direction in the world.

bosnia-herzegovina’s ascension to the eu

I attended this event BOSNIA AND HERZEGOVINA: ON THE PATH TO EUROPEAN UNION featuring Eldin Kajevic, Consul General of Bosnia and Herzegovina (BH) in Chicago & hosted by the Niagara Foundation.  BH has a population of 4.4M & is 1/3 the size of IL.  BH is part of the Adriatic Charter of NATO & is a UN Security Council member.  They are drafting a new constitution which will replace the peace agreement of 1994.  Since starting this process, reform has stopped.  There are 3 obstacles which stand in the way of BH ascending to the European Union:\

1. the Dayton Peace Accords-these stopped the bloodshed, but did not leave a viable administrative solution.  BH has 3 presidents, 1 for each ethnicity, Bosnian, Croat, & Serb.  Despite this, the representative to the EU is the most important position in the country.  The government consumes 50% of the country’s GDP.
2. BH’s ethnic composition-has changed & solidified since 1991.  There are now clearer majorities in many regions, which have accentuated the walls as ethnic dividers.  1/3 of ethnic intermarriages are not recognized.  There are still quotas for jobs by ethnicity.
3. EU’s inconsistent approach-originally the EU set down stipulations for ascension, but now identifies the problems & directs locals to solve them themselves.  This has led to legislative stalemates & administrative catharsis.

BH has a common goal:  economic progress with a growth rate of 5.5%.  The currency is pegged to the Euro & bonds are rated B+ by S&P & B2 by Moody’s.  BH is a part of the Central European Free Trade Agreement.  In Sarajevo, you can find a church, mosque, & synagogue within 4 blocks of 1 another.  They are breaking down walls.

Q&A

• The Dayton Peace Accords worked until 2006 when BH started work on a new constitution, but has been a problem since then.
• Displaced refugees have gone all over the world, to North America, Western Europe, & other countries in Southeastern Europe.
• Other nearby countries have offered automatic citizenship in their countries to ethnic Serbs & Croats, which creates a problem in BH because those other countries have better functioning constitutions than in BH.
• Technically, the EU has listed specific criteria to ascend to the EU, but the reality is the current deadlock has not allowed BH to realistically address them.

global midwest clean tech conference

I attended the Global Midwest Clean Tech conference which was sponsored by the Global Midwest Partnership.  There were many sessions given over 2 days, so it’s not possible for me to summarize everything was presented, but here are some snippets of the international aspects covered there:

• Illinois is ranked #44 in entrepreneurial activity.

Chet Culver, the governor of Iowa, pursued foreign investment aggressively by speaking abroad in Germany & Spain on a number of occasions & learning from foreigners experiences in driving public policy by simply mandating it.

The “Show me the money” session, sponsored by the Canadian consulate:  Ontario passed the Green Energy Act which created the 1st feed-in-tariff in North America with standards for certification, labeling, & packaging.  R&D investment tax credits act as a form of subsidy.  Hydro, & nuclear power can get rid of coal.  On the Toronto Stock Exchange (TSX) there are stringent requirements to get listed.  There are typically 5-8 analysts for $50M companies.  It’s easier to access brokers at the TSX.  The annual cost for remaining a publicly traded company is about $10-15,000 annually for a 75M company.  To help small-medium sized entrepreneurs expand globally, they need t0:

• identify strategic partners in foreign countries
• establish credibility
• mine partners’ deep pockets to fund local projects
• leverage partners to access local markets
• industrial companies use debt while software companies do not
• use banks to facilitate partnerships

David Weisberg of the Arava Institute stated Israel is #14 in # of patents issued worldwide

Ed Erickson of Erickson consulting advised using local partners to reach customers in foreign markets.  Linda Lin of FuelTech informed that fossil fuels still dominate power in China & coal plants are upping their capacities.  When marketing products in China, you need to be fast to bringing them to market.  Only contracts signed in China are valid in China.

The US Dept of Commerce sponsored the “How in the world can I do this?”  session.  They estimate clean tech will be a $40B industry & create 50,000 new jobs by 2020.  There are as of yet no SIC codes for clean tech, so it’s difficult to track statistics for it, which crosses 13 industrial sectors.  Worldwide governments have provided $150B in stimulus funds for renewable energies.  Global issues for clean tech are:

• intellectual property
• local content
• transparency
• local procurement
• regulatory uncertainty
• bureaucracy

The World Bank, in which the US is a 27% stakeholder, has a $6.3B multilateral target for Climate Investment funds because climate change is a barrier to investment in developing economies with transnational impact.  They are leveraging their relationships with regional banks to create a Clean Tech fund, Strategic Climate fund, etc.  They will allocate these funds at the country level to lower carbon ouputs & greenhouse gas emissions.

invest in Turkey?

I was invited by the Association for Corporate Growth in Chicago to attend this breakfast briefing Investment Climate of Turkey in the Aftermath of the Global Economic Downturn featuring the President of Turkey’s Investment Support & Promotion Agency, Alpaslan Korkmaz.  He didn’t give a presentation, but here’s what he had to say:

Foreign direct investment has ballooned in Turkey from $1.8B in 2002 to $18B in 2008, & attracted more than India in 2007.  Turkey has the 6th largest economy in Europe & 15th largest in the world.  It has a large population of 72M which is quite young.  The average age is 28 & 50% of the population is 24 years old or younger.  20M are students, so education is Turkey’s top budget item.  The young population is interested in new technologies, so GSM penetration reaches 66M & the internet reaches 30M.  Although Turkey is not part of the BRIC nations, it is part of the N11, or Next 11.  Productivity growth is the highest in Europe @ 7%.  Turkey’s main competition for FDI these days is eastern Europe, but offers other advantages, such as a large market of 72M & per capita incomes of $3-10,000.  They expect growth of 3-4% next year, the highest expectation in Europe.

Q&A

• Turkey has a secular government which is distinctly separate from Islam.
• Turkey is an economic partner with the European Union, but not yet a full member.  This means Turkey’s agricultural products do not work under Europe’s common agricultural policy& Turks require visas to travel in Europe.  Turkey is a logistics hub for the EU & Europe has contributed 70% of FDI in Turkey.
• A SWOT analysis of 400 Turkish companies led to changes in how to set up businesses in Turkey.  A telephone hotline was created to facilitate permits.  Set-up can happen within 1 week in 270 industrial zones, but it takes longer outside of those zones because of land ownership issues
• Inflation is now under control in single digits, so Turkish businesses can finally plan 3-5 years & not worry about plans falling through.
• Private equity/investment bankers are investing in renewable energies (2nd best wind map in Europe) & automotive.  Istanbul airport renovations were 100% privately funded.  Financing is available for middle-market companies.
• Turkey’s biggest challenges are matching the last 6 years’ growth, resisting bureaucracy, & sustaining education.
• Labor laws are more liberal than the European Union & eastern Europe.  They work the most hours/week in Europe, 53, with the lowest absenteeism.  There have been 0 automotive strikes in 30 years.

russian conference in chicago or how not to go global

I attended the 1st day of this Russian National Exhibition @ McCormick Place.  I was invited by & RSVP’ed to World Business Chicago, but when I introduced myself at the registration desk, they had no record of my registration.  They gave me a badge upon which to write my name & sent me on my way.  I attended the 1st conference to give me a feel for the economy in Russia today which started a 1/2 hour late “because of the weather in Chicago.”  I found a sparsely attended session given mostly in Russian, with softly worded simultaneous translation provided.  I walked the barren exhibition floor, spoke briefly with the organizers, & stuck around for the cocktail reception.  They trotted out the typical appetizers as we were greeted with a musical extravaganza right off of a Las Vegas stage.  Scantily clad dancers made many many costume changes & danced to many different styles of music.  I can honestly say this was the 1st time I’ve seen a show quite like this.

My distinct impression is this was an event organized by a foreign group who took very little input from local organizers.  It appeared to be a conference by Russians for Russians, but Chicago is 1000’s of miles from Russia.  Because much was done in Russian, my thought was maybe the organizers were targeting Russians living in Chicago, but according to people with whom I spoke, that wasn’t the case.

Hand-written name badges are not the professional standard at McCormick Place.  Weather in Chicago is not a valid reason to waste people’s time & start late.  Normally simultaneous translators are in a booth so that you can’t hear them.  At the conference they were in the corner of the room & had to speak so softly that we couldn’t hear them well at all through the headsets.  (1 of the translators actually said “I don’t know this business dialogue.”)  The online catalog contains numerous misspellings (can you figure out what “metallutgy,” &  “farmacy” are?) & grammatical errors.  All of the advertising in the hardcopy catalog is in the back, about which I would not be happy if I were an advertiser or even a reader.  The organizers said they had budget constraints in promoting the exhibition, but there’s a lot that can be done for free.

Some decent content was provided in the conference, & I feel a little bad about not writing about it here, but the bigger story is how not to put on an event in a foreign city.  The organizers seem to have run the event just like they would in Moscow, but that’s not the way things are done in Chicago.  I heard Mayor Richard Daley attended an event in Russia earlier this year & this event was supposed to be Chicago’s act of reciprocity.  I fear many American firms do the same thing in other countries & it doesn’t reflect well on us as this doesn’t reflect well on the Russians.  The lesson of this story is:   listen to the locals.  They know best how things are done.

Renewable Energies in Emerging Markets

I checked out this event Renewable Energy in Emerging Markets hosted by the American Chamber of Commerce in South Eastern Europe held @ IIT.   Here are the presentations made that day:  AmSECC slides for IIT event final & RES final.

Nikola Milivojevic and Igor Stamenkovic of RES Technologies didn’t really have much more to say in addition to their slides, so you can check out what they had to say there.  Russell Gilchrist of Skidmore, Owings & Merrill LLP extrapolated a bit beyond his slides:

• The Pearl River Tower has not yet achieved energy self-sufficiency.
• CO2 in China today is like the US 150 years ago.
• Some of their design they learned from the aviation industry.
• Chinese building codes are more stringent than those in the US.
• The building faces the wind directly, so that the wind is sucked through & speeds up the apertures, & this creates negative wind pressure on the leeward side.
• Micro-turbines are the holy grail in renewable energy, but they’re only used 40-50 of 160 hours/week.
• Radiant heating is a better solution than forced air because water is a better medium to conduct heat than air is.
• They’re unable to use geothermal energy because the water temperatures are in not right for it.

Q&A

• They started with 36 strategies, such as trying to get as much natural light into the building as possible,  to get the design to net 0 & 22 survived.
• Wind turbines provide a great payback.
• LEED certifiers should now adopt light, medium, & dark green designations to reflect the changes in green building.
• Paybacks vary by location because raw materials & photo-voltaic differ
• Green buildings require an 8-10% premium in additional cost, but there is still a very short payback

what’s up down under

The Business Network Chicago international group hosted the Australian Trade Commissioner based in Chicago Ian Smith who made this presentation: Australia – A Dynamic Economic Partner 1109

Here’s what he had to say in addition to the presentation:

• Foster’s lager is not even available in Australia because the brand is brewed by Miller Coors in Milwaukee.
• 60-85% of the Australian population lives within 30 miles of the coast.
• 30% of Australia’s GDP is exported-2/3 of what they produce is exported.
• Melbourne has the most Greeks outside of Athens, Greece.
• Boat people are creating problems when floating over from Indonesia.
• Australia is proportionately strong:  despite only having .5% of the world population, it accounts for 1.37% of GDP.
• Australia has not suffered from the global recession.  Mining there has contributed to China’s growth.  Their banks had few bad loans, so they’ ve maintained stability.
• Baxter, Caterpillar, & John Deere are successful Illinois companies down under.
• Due to vast experience with droughts, Australia is strong in water conservation.  Boeing is investing in biofuels there.  Wind & solar power are growing.
• YellowTail wine is a great example of an Australian success story.  They’re a small family-owned firm from a town with a population of 600.  They planned on shipping 20,000 cases their 1st year , but did 100,000.  1/3 of all Australian wine comes to the US.

Q&A

• Australia sports a world-class wireless infrastructure, although rural coverage is an issue.

Similarities/differences with Americans:

• Aussies are too modest to mention world changing technologies
• friendship comes before business there, the reverse of America
• while it’s tough to reach decision-makers in the US, Aussies consider it rude not to reply
• Aussies suffer from the fallacy “if I can just get 1% of the market…”
• intellectual property issues are typically bigger in the US than down under.

EBRD is open for business

The International Trade Association of Greater Chicago hosted a talk given by Varel Freeman of the European Bank for Reconstruction & Development (EBRD) @ the offices of Baker McKenzie. Here’s what he had to say:

The EBRD was formed to transition the economies of the former USSR into open market economies & now has offices in 30 countries in  central-eastern Europe to central Asia.  They offer debt & equity financing in the form of guarantees, shares, etc., (but no grants) to finance infrastructure/power projects (25-30%), agribusiness (10%) projects, & 1/3 is with other financial institutions.  They financed 5B Euros last year (30% equity), & are on track to finance 8B Euros this year.  The EBRD has 61 shareholders, including the US (10%), & European Investment Bank.  They are a risk-taking commercial partner who make business decisions, not political ones.  They don’t even deal with politically-connected people.  They don’t displace or compete with local banks, but 20% of their activity is with governments.

Q&A

• The EBRD does do trade financing through commercial banks, but that fell off a cliff with the economic downturn.
• EBRD headquarters are in London & English law applies for legal purposes, but can work with offshore holding companies.
• The EBRD has mainly European clients, but wants more from the US.  They are seeking capital expansion because demand for financing is increasing.
• The EBRD assures they will foreclose against the wishes of a shareholder if need be.  They will be hard-nosed & won’t roll over.  Their goal is to have an enforceable framework.
• They do 150 background checks for 350 transactions each year to ferret out politically connected people.
• They do provide financing to distressed industries, i.e. automobiles, but very carefully.  They financed a JV which is now profitable.  They are open to restructuring troubled loans.
• Bank credit ratings are informal, supplemented by credit ratings.
• The EBRD charges market rates for renewable energy projects & can lend in many currencies.
• The EBRD doesn’t exist just to help Westerners.
• There is some overlap with Export-Import Bank & OPIC-Overseas Private Investment Corp.

They don’t have any offices in the US, but you can contact them directly or through the US Dept. of Commerce.

German Wind conference

I attended the Germany WindEnergy Business Conference & reception.  They are making all of the information that was presented available on their website, so click on to see all of the presentations & video.  I’ll summarize the Q&A so that you don’t have to watch all of the video just to get to those portions.

Wind Energy in Germany:

• The current energy mix includes 15% renewables in Germany.
• Small energy providers compete with the big guys by forming local cooperatives with only a few large banks involved.  Renewable energy is not driven by large utilities.
• Competitive price determination results in ROI’s of 5-10%.
• There are different tariffs for different energy sources which depend on the site & time frame.
• Grid system operators pay for the grid’s expansion.
• Power plant certification only takes weeks rather than months.
• There are few service technicians & little special vocational training, so there are some turbine maintenance issues.  This is complicated by the fact that there are different work standards across Europe.
• R&D focuses on bigger turbines which can work more hours each year.
• Turbines are not permitted on buildings in Germany.
• The key to reduce greenhouse gases by 40% by 2020 is changing consumption by using energy efficiency plus renewables.
• Only Massachusetts & Vermont have feed-in tariffs & California is considering 1.

Wind Energy in the US

• re: key success factors; Europe has better tolerances because they’ve been building their wind industry supply chain for 30 years; GE has 30 casting companies, but none in North America; consistent quality is a given; cash for growth is required; openness & localization help.
• Germany’s feed-in tariff differentiates itself from the US
• States are giving grants to support R&D & manufacturing
• US wind projects are bigger than most others so banking relationships & the size of the projects are key.  It’s easier to sell small projects directly to utilities, but there are extremely large & small projects.  There actually should be small-, medium-, & large-sized wind projects.
• New technologies should bring greater transmission quality to eliminate 7-8% leakages.  Larger, lighter, cleaner, more reliable turbines, with better diagnostics & aesthetics will come.

 

us international trade court speech

I caught The 8th Annual Dominick DiCarlo United States Court of International Trade Lecture featuring The Honorable Timothy C. Stanceu, United States Court of International Trade  LITIGATION OF TRADE-RELATED DISPUTES IN CHALLENGING ECONOMIC TIMES: A JUDGE’S PERSPECTIVE at John Marshall Law School.  The annual DiCarlo Lecture is named for Judge Dominick L. DiCarlo, who served on the US Court of International Trade from 1984-1999 and was chief judge from 1991-1996.  Here are the main points I pulled out:

This court has local jurisdiction-US law applies.  It provides predictability, transparency, & expedience.  Its founding offered resolution through consultation, which led to rules-based litigation.  Tariff classifications are now harmonized.  We have a sound system, but it’s not perfect.  We can get meaningful judicial review which is not always available elsewhere.  It requires equal access, independent judiciary, standards of review, & meaningful remedy (court with power).  The US fulfills all of these.  Anyone can access the court.  Article 3 assures independence & remedy.  The deNovo standard addresses standards.  The court can still be improved like so:

• speed-goal is 90 day resolution
• access for small litigants-need to try to keep costs down
• broad/varied jurisdiction-ex. workers displaced by trade
• they listen intently to the bar & bar association
• citizen-citizen cases in addition to government cases

Q&A

the Michelin tire decision (ref section 421) & China’s ascension to GATT/WTO addresses trade protectionism

deNovo standards on questions of law addresses standards of review re:  Title 7 & the Chevron case.  The principle is agencies fill the gaps.  The court takes 1 of 2 steps

1. dismiss (rarely happens)
2. if 2 conflict, defer to agencies with a checklist

judges can sit on other courts, i.e. 2nd circuit court of appeals.

 

how’s your cultural intelligence?

Big Frontier hosted this event Leading with Cultural intelligence featuring David Livermore, a specialist in this area.  Here’s his presentation Livermore Big Frontier Ldg CQ Test your CG here & check out his video here.  Here are the highlights:  He defines cultural intelligence as the capability to function effectively across cultural, ethnic, & organizational cultures.  It can be likened to emotional intelligence, recognizing that you can’t know everything about all cultures.  CI’s strengths are it fits in any context, it’s not 1 size fits all/accepts individual personalities, & recognizes that assumptions & stereotypes go both ways.  There are a number of important reasons to increase CI:

• better decision-making, especially in consumer & customer-focused activities
• more employee satisfaction/ less burnout
• higher performance
• greater profitability
• 70% of international ventures fail, at least partly due to cultural differences
• foreigners are coming here

To develop CI:

1. define the drive/motivation
2. define knowledge to be learned
3. develop a strategic plan
4. implement an action plan for adoption

To enhance CI:

1. make a commitment to reading, immersion, become more aware
2. create diverse teams
3. hire trainers/consultants in these areas
4. use CI in hiring/promoting employees
5. weave CI values into the organization

Mobium conducted a survey which found that 83% of North American & 93% of foreigners felt the US has a foreign policy problem.  Further, 20% of foreigners are moving away from American brands, 30% of them because of foreign policy issues.

Q&A

• there is constant demand for CI consulting in Asia, India, & China
• this is becoming required training for federal employees
• although “people are still people,” starting with what we all have in common helps, but the difference in levels of humility varies across countries.
• Lula was in Kopnhagen for the whole week campaigning for Rio in the 2016 Olympics-Obama was there for less than a day.  What does that say?

My take:  I wholeheartedly endorse all this stuff.  My only criticism is that this doesn’t go far enough.  Americans are encultured to be insular & parochial.  In school, English & state history are required.  We  need to encourage the study of foreign languages & world history.  We need to emulate big cities in small countries like Amsterdam, Kopnhagen, Hong Kong, & Singapore.  In these places, they must learn about the rest of the world because their home markets are small.  Residents learn foreign languages from a very young age, & are able to travel to foreign countries that are close by, creating opportunities to learn about other cultures.  The biggest problem in the US is everybody recognizes it’s a problem, but no one is willing to spend any money to solve it.  Until we adopt a more open educational system & culture, we’ll always remain a close-minded society.

the wall’s fall

The Chicago Council on Global Affairs hosted this event THE LEGACY OF 1989 which was a trip for me.  I lived in Germany for 2 years up until a year before the Berlin Wall fell, so this topic was near & dear to my heart.  Here’s what they had to say:

Archie Brown:  Gorbachev let Central Europe follow the Sinatra doctrine & “do it its own way” which led to change.  350,000 Soviet troops stayed in their barracks on 9 Nov.  Had they been roused, history would be very different.

J.D. Bindenagel:  Gorbachev gave a speech in December, 1988 which spelled out glasnost & perestroika, which presaged future events.  The biggest question was “Would the Soviets intervene?”  At a diplomatic reception the night the wall fell, no 1 had a clue what would happen that night.  Egon Krenz changed the travel laws on 6 Nov. which contributed greatly to the change.  No one could understand a particular DDR (Deutsche Demokratische Republik-German Democratic Republic) statement.  Tom Brokaw posed the question, “Is the Berlin Wall open?”  The answer came back, “Yes,” but visas were still needed, which were supposed to have been started to be administered on 10 Nov.  Then the question became, “Would guards defend the checkpoint?”  That night the checkpoint was simply overwhelmed.

Kori Schake:  She did not report that the DDR would change when working in security for the US government.  To provide a frame of reference, Helmut Kohl was in a race against the clock to unify Germany.  He positioned it as better for the USSR, while being a good deal for Germany in a short period of time.  He was dismissive of central European fears, but approached the Russians differently.  There were 3 policy issues:

1. James Baker made it a prerequisite for a reunified Germany  to be a NATO member-the Germans would trade anything to unify
2. a European Union-wide centric strategy was necessary to prevent fears of creating an overbearing Germany again
3. exchanging west German Deutschmarks on a 1-to-1 basis for east German Reichsmarks “assured parity” in a statement of political equality.

Q&A

Boris Yeltsin wasted many opportunities post-reunification.

The Germans are still timid in some foreign relations.

Vladimir Putin was in the DDR embassy the night the wall fell & described it as the worst night of his life.  He was prepared to call in the troops.  Kohl was pushing because DDR citizens were marching in Hungary & elsewhere.  Actual unification talks didn’t begin until the following February, but change was so fast it was like watching video on fast-forward.  The choice was simply between funding a bankrupt DDR or go counter to glasnost & perestroika.

Margaret Thatcher was actually opposed to German reunification because she was suspicious of the Germans.

The panelists differed on the role economics played in the upheaval.  Bindenagel said it was critical in driving people to leave because they saw no future.  Keeping currencies on par kept the Ossies in the East.  Schake cited the deeply corrupt & repressive regime as bigger reasons than economics for the change.  Brown thought lack of freedom was the most important motivator for change.

My take:  Given my history in Germany, I freely admit I’m biased in placing these events in historical context.  The Poles claim their strikes for Solidarity in the early 198o’s set the table for these changes, but they were so far removed, they’re not as significant.  You could argue the ratchet effect on Russia was even bigger, but that didn’t happen as dramatically.  On a longer time horizon, I don’t think there’s any question the Soviet economic system was breaking down, so change was inevitable.  But the singular event of the wall falling created the impetus for the whole system to come down.  Regardless of how you see it, these events 9 November, 1989 changed the world for the better, & it was the long reviled Germans who initiated it.  Hats off to them.

finance & manufacturing in Brazil

The Chicago Council on Global Affairs hosted this breakfast presentation Brazil’s Moment in the Spotlight? Here’s a summary of what Paulo Vieira da Cunha said:

strengths

1. Brazil emerged from the crisis with its banking system intact & entrenched as an institution.
2. a historical break in policy-making occurred in 1999 when a new” holy trinity” was established:  stable exchange rates, fiscal responsibility, inflation targeting.
3. a decade of fiscal adjustment led to Brazil becoming a net creditor of foreign exchange
4. it shed its external sin, so now can take on more external debt
5. a stronger central bank leads to stronger financial institutions
6. policy can be counter-cyclical-i.e. an enlarged safety net can reduce reserve requirements

negative aspects

• Brazil is a large insulated closed economy
• it’s difficult to increase productivity & reduce competition
• it still has an overblown public sector-42% of GDP, (& spending is up 14% this year) making it more comparable to economies in Europe rather than in the Americas
• the “holy trinity” was accomplished on the back of 10% higher taxes over a decade from 26%>36%

Now Brazil’s economy is recovering rapidly with increases in consumption, exports, currency appreciation.  The yield curve is steep, so there is worry about inflation kicking up in the 2nd or 3rd quarter.  Elections are coming in 2010.  There is still a need for fiscal adjustments.  The Lula legacy is:

• the expansion of the safety net to include the new middle class
• the transition to an economy with a large state
• Brazil is becoming more like Europe, but doesn’t have the same efficiency yet.

Luis Mateus noted:

There have been big changes in Brazil since the 1990’s.  The middle class has emerged to fuel consumption & demand.  Automation has increased productivity & cut into the informal economy.  There are still many challenges:

• high & complex taxes (differs by state)
• becoming a high cost country-ex. raw materials & electricity
• labor laws make it costly to right-size in Brazil
• bureaucracy bogs things down.

Q&A

• Exports are growing to the US & EU, but with different composition
• Brazil is now the world’s largest exporter of food
• Lula has been a surprise on monetary policy, although there has been no progress in making the central bank an independent entity.
• There is a need for better energy infrastructure-green laws exist, but enforcement is lax.
• It’s tough to find qualified people in Brazil.  The quality of schooling is poor.  The system can’t differentiate between good & bad universities, so they spend a lot, but get back very little.
• Physical security can still be a problem, but isn’t as bad as in Mexico City
• Brazil is open for foreign direct investment with no foreign exchange restrictions, but there is still lots of protectionism.  Import duties are high on steel making it uncompetitive.  This is bad for the long-term because none of the inefficiencies are taken out.  Import subsistution distorts production structure.

invest in bosnia herzegovina?

The American SouthEast Europe Chamber of Commerce hosted this event  INVESTMENT OPPORTUNITIES IN BOSNIA AND HERZEGOVINA’S DEVELOPING SECTORS, which featured a presentation by Consul General Eldin Kajevic, (here’s his presentation  Invest in BiH) & a presentation by John Freeborn of Freeborn Development Group which was basically a commercial for opportunities they uncovered in Bosnia-Herzegovina.  To learn more about the potential of investing in this part of the world, check out the Foreign Investment Promotion Agency of BH. Little known fact:  BH is a land of beautiful bridges.  For ex., there is an Eifel Bridge (like the tower) in Sarajevo.  Some were destroyed in the 1990’s.  They are on the path to membership in the European Union & will submit their candidacy in 2010.  They’ve signed the Adriatic Charter, will join NATO, & are already a member of the Security Council of the United Nations.  Bosnia is 1/3 the size of the state of Illinois & there are 300,000 Bosnians in the US.  IT opportunities are very political because the government controls the networks & they are heavily regulated.  Labor costs vary by region & industry, but $4-5,000/year is average & the minimum salary is 160 Euros/month.  The GDP/per capita is 3600 Euros per person.  Skilled labor earns $3-7/hour.

manpower hr exec on world labour markets

The Chicagoland Chamber of Commerce seems to be beefing up its international resources to pick up the slack of their recently departed officemates from the now closed World Trade Center Illinois.  In that vein, the CCC hosted a luncheon featuring David Arkess, Manpower’s President of Corporate & Government Affairs who discussed Understanding And Developing Labour Market Strategies,Here And Abroad Here’s what he had to say.

The recession hasn’t really changed anything:  it just accelerated attention on the financial sector.  Connectivity has risen & people are moving, resulting in social shifts & economic imbalances which are causing divergences everywhere.

On a quick tour around the world, in the Asia-Pacific region, China will dominate in 30 years.  The low value of their currency allows the to export with impunity.  These days they are really seeking access to global talent.  China loves the fact that India is democratic because democracies move more slowly.  Japan is still a disaster.  Europe is to socialistic & becoming more so as a result of bad policy decisions.  There is a correlation between the facts that it’s the most difficult to fire an employee in France & France has shown the least growth since WWII.  Germany & Switzerland are accelerating out of the recession with exports.  The new UK Prime Minister will forge closer ties to the US.  Unemployed youth are the problem in Middle Eastern countries.  Central Africa is drawing aid, but it’s not working.  In North America, the stimulus worked in Canada, but the US needs Stimulus Package #2 creating grants & rebates to create new jobs.

There are 3 global HR issues:

1. scarcity of talent-the US has 2M unfilled jobs, while Europe has 3.2M.  There is a mismatch of supply & demand in labor markets & demographics (losing 20M workers with retiring baby boomers) are killing the G20 countries.
2. globalization-forget work/life balance:  it’s too competitive today.  Everyone’s work day/week/month/year is getting longer.
3. productivity-is increasing in our virtual world as we focus more on skills rather than tenure.  Performance is a result of work, discipline, & practice.

Q&A

Global labor mobility could solve some of these supply & demand mismatches but local politicians get in the way.  The International Organization of Migration a UN organization, is the only organization that focuses on immigration.  Otherwise individual states control immigration with multi-& bi-lateral agreements.  The alternative is black/gray labor markets, i.e. criminal activity.

fyi-I interviewed Manpower CEO Jeff Joerres awhile ago part 1 part 2

hire an international intern?

I caught this presentation @ the Chicagoland Chamber of Commerce, former location of the World Trade Center Illinois How to Lead in a Global Economy: Why You Can’t Afford Not to Hire International Interns Here’s the presentation that Larry sent over J-1 International Intern and Trainee from Interexchange.  Like most presenters these days, Larry simply read his slides, so I can’t add much to that.  I can lend my personal experience.

When I ventured abroad for the 1st time many years ago, it was under the auspices of a professional internship program focused specifically on Germany, which was then known as the Carl Duisberg Gesellschaft, now called CDS International.  Their role is to arrange visas & work permits for foreign interns in Germany in exchange for visas & work permits for Germans in foreign countries. I still had to find a position on my own, but this was extremely helpful for me because I could apply to German firms in Germany & say, “I’m well educated from Thunderbird.  I have good experience with Xerox.  My work permit is taken care of.  What can I do for you?”  This enabled me to get a good position with Deutsche Bank & an even better position with Siemens, both in Muenchen.  I still had to deal with the bureaucrats at the Aufenthaltserlaubnisamt (residence permit office) & Arbeitserlaubnisamt (work permit office) from time-to-time, but otherwise my experience was pretty transparent.

If you know me at all, you know that I’m a deep believer in deep & meaningful international experiences.  International internships are a great way to acquire these experiences.  They’re great for employers because they accrue all of the benefits Larry’s presentation mentions.  They’re just as great for interns because they learn an incredible amount by living & working in a foreign culture as I did many years ago.  I wholeheartedly endorse these kinds of experiences because the learning that goes on for both sides provides immeasurable value to both.

I provide 1 caveat though.  The University of South Carolina International MBA program requires all candidates to complete an international internship, which is fine.  The only thing is, these internships are only 3 months & you can’t learn much about a country, culture, or business in just 3 months.  My suggestion is if you’re going to pursue/hire an intern, don’t do it for less than 12-18 months.  Everyone will get much more out of it in those timeframes.

US China global brand summit

I was invited to attend this event US China global brand summit which I could only attend the 2nd of 2 days.  At the close, we were told that the presentations would be made available on the website, but I haven’t seen them you, so I’ll summarize what I saw.

Michael Morley, formerly of Edelman Worldwide on “living the brand” which consists of 6 V’s:

1. (I missed it)
2. values-no bribes
3. vitality-HKSB is the world’s local bank
4. veracity-truthful & honest, but cultural differences distort these
5. victory-& have an edge
6. volunteerism-be a part of the social network

As an example, Lenovo @ the 2008 Beijing Olympics mirrored Sony @ the 1964 in Tokyo & Samsung in Korea in 1988, but with an international team instead of a local one.

Chen Fukuo of Interbrand on “Chinese brand development trends” highlighted the balance between tradition & modernity.  China has changed a lot in 30 years:

• GDP $305B->$25TR
• urban population 18%->45%
• rural Gini coefficient .2->.5
• overseas travelers 0->40M
• internet users 0->338M
• credit cards 0-> 150M cards for 40M people
• credit consumption 42%/$1.2TR

1/2 of Chinese brands in the 1990’s have now diminished.  The influence of the internet is rising.  IT companies like sina.com are changing the social structure.  State-owned enterprises now have more competitors, although the government still exerts significant influence.  The Chinese are strong in verbal PR & propoganda but weak in the visual.

Wu Xiao Bo of Ping Cheng Advertising Co. on “New media, new idea, new brand” noted that 35 year olds are the biggest internet users & 100M shop online.

Gao Jun of Meikao Advertising Co. on “Chinese elements & Chinese brands” intimated Easterners & Westerners use different ends of the quill pen to write.  Our gods & goddesses differ.  We have different definitions of beauty & rituals.  We eat differently-in the east they mix lots of foods together, while in the west we eat each portion separately.  Medicine is practiced differently:  ying/yang vs. diagnosis  & use herbs vs. drugs. So brand success is very culturally dependent.  Symbols like dragons & tigers are deeply rooted in people’s minds & people respond to them instinctively.

Panel discussion

Scott Markman of the Monogram Group researched US perceptions of Chinese brands & found Americans don’t know them (5% recognition).  When they were given western names, they were remembered 3X more.

Bridget Lee of the Hong Kong Trade Development Council informed China has:

• 45% mobile phone penetration
• 100M tourists by 2010
• 600M consumed wine in 2009
• sold 9.8M cars (vs. 9.6M in US)

Ma Quan of Tsinghua U. said the Chinese lack the ability to manage rapid change & Chinese artists/designers have difficulty balancing the conflict between creativity & commerce.

Michael Teng of HDT noted Baidu is #1 in Chinese search, but there are 56 ethnicities which speak 100 dialects, e.g. 7-UP is supposed to mean 7-happiness but means “go to hell” in Shanghai.   Nestle preferred a Chinese account rep instead of 1 from Hong Kong.  Our accounting systems differ-we send accounts to bad debt after 3 months, but Chinese companies pay in 6-9 months.

For China fans, I’m sure this was a good conference.

strategic overview of the global financial crisis today

The Chicago Counicil on Global Affairs hosted this event NAVIGATING GLOBAL BUSINESS IN THE NEW ECONOMY featuring David Nelms, CEO of Discover, Carlos Cabrera, former CEO of UOP, & moderated by Paul Laudicina, Chairman of the Board of A.T. Kearney.  They had some interesting insights on how the world is fairing in the global financial crisis.  Laudicina led off by noting there have been 120 actions by WTO countries to battle the financial crisis since the WTO’s November, 2008 meetings, so the world has been working on getting its finances back in order.  AT Kearney’s framework looks @ 5 drivers:

1. globalization
2. demographics
3. natural resources/environment
4. changes in consumer preferences
5. activism/regulation

He noted there has been an explosion in productivity, which is what happens when you fire lots of people & force those who remain to do the same work.  Also for every 5 years baby boomers work rather than retiring, it contributes $1T of economic benefit to the economy.

Nelms offered a few interesting tidbits:

• American savings has risen from 0 in 2004 to 7%
• debit card use is up 50%
• lending capacity has been cut so there is less credit available @ higher prices, resulting in less debt & risk:  the new normal should result in lower interest rates

Cabrera posited:

• there is a standstill in investment in oil, resulting in supply problems
• since fossil fuels provide 95% of energy world-wide & there is a “cap” of 10-15% for non-fossil fuels, the argument isn’t about carbon, rather “how do we change our energy diet?”-substitution or diversity?
• China is worried about its environment, but 80% of its energy comes from coal & they have no scale in distribution/transportation.

issues are:

• sources of lithium for electric cars
• wind turbines require magnets of which the raw materials come from China
• the US is the biggest supplier of natural gas in the world, but all oil reservoirs only use 30% of capacity
• electricity users will see relief if nuclear power comes online
• demand in the future is coming from the developing world
• think diesel, not gas

Q&A

short/medium/long-term outlooks-

• Nelms-most worried about Fannie Mae/Freddie Mac
• Cabrera-worried about a China intervention to securing energy sources

Nelms-the fed has done a fine job, but mortgage rates will rise to bite us again & holiday spending will be flat

Cabrera-new energy discoveries are coming:  technology will create opportunities

My last word-Nelms really only addressed domestic issues, but why host a speaker who only talks about the US @ a GLOBAL affairs event?

is world unemployment or a worker shortage the issue?

I saw this presentation by Dr. Edward Gordon organized by the Independent Writers of Chicago (IWOC): Taming the Talent Revolution: Thriving in the Brave World of Work.  He posited that despite rising unemployment in much of the world, the most pressing problem is an impending labor shortage.  The bottom line is the future is in technology & our workforce is not yet trained to handle many technology jobs.  There are 3 trends at work which create a jobs paradox:

1. technology raises the bar for skills & we are missing the middle layer of technicians trained by career academies/trade schools
2. baby boomers can no longer afford to retire (15% of college graduates are functionally illiterate, but the #1 major these days is communications)
3. globalization is leading employers to export good jobs abroad.   Intel couldn’t find 2000 qualified engineers in California & Texas, so they had to go to Dresden, Germany to find the talent they sought.  Ironically, the dual education system in Germany is dying so that now German students can more easily change academic tracks.  1/2 million workers are returning to India & China, but only 60 of 600 engineers in China & 100 out of every 400 in India are well-qualified.

There are currently 3 million vacant jobs for which there are no qualified applicants, which will balloon to 12-24 million in years to come.  Gordon gave the example of Santa Ana California, which lost many jobs in the 1990’s.  The local chamber of commerce organized a Community Based Organization (CBO) of 300 public & private organizations to work together to solve the employment problem.   He proposes these CBO’s as the bridge to the future.

Q&A

• overeducated applicants is not the problem because there will be labor shortages soon.
• while 20,000 journalists are out of work, the future lies in tech writing.
• despite the number of authors writing books is increasing, we are creating an anti-writing culture.
• breakthroughs in green technologies will create opportunties
• better teaching is needed
• potential new markets are:

1. repairing bad websites
2. working with foreign businesses
3. writing for corporate training

 

global midwest alliance sets up shop & hosts clean-tech conference

I checked out Business Network Chicago international group ’s meeting featuring the Global Midwest Alliance, (GMA) a new organization formed by by Gail Longmore, formerly of the Illinois Global Partnership, under the auspices of the Economic Development Council.  Apparently the World Bank has ignored the US, in that up until the GMA roped them in, the World Bank’s Private Sector Liaison Program had no representation in the US.  GMA has rectified that.  Here’s her presentation:  Business Network Club Final 100809

They are hosting the Midwest Clean Tech Conference the last week of November.  Here are the details:  Midwest Clean Tech 2009 Summary This is an expansion of last year’s smaller 1/2 day event.  I’d like to add more comments, but pretty much everything is contained in the presentations.

international panel @ Human Resources Technology conference

I attended this panel discussion Going Global Panel: Lessons From Executives Who’ve Been There at the Human Resources Technology Conference which was more interesting than I thought it would be.  Here are some of the points they brought out:

• Interpretation of HR feedback varies across countries.
• There is a variation of extremes in orientation from a focus that is all local to all headquarters oriented, but it’s even more complex than that.  Google tests user feedback on all sorts of orientations.
• Language is an issue because going beyond English only opens a multilingual can of worms.  For Kelly Services, it depends on the level of the employee & media employed. HP goes even further to say it varies by individual.  Their engineers speak better English than employees @ Citigroup (where she was employed prior to HP).  Regardless, Americans should do a better job of learning local languages.
• Global performance measures are hard to come by.  For Google, in-country performance measures vary.  It’s difficult for foreign managers to know whether to be critical or praiseworthy.  Different leadership styles complicate evaluation, but are predictable on a country-by-country basis.  HP seeks quantifiable goals, while Google warns that focusing on either extreme of qualitative vs. quantitative measures is destined for failure.  You really need some combination of both.
• In working with vendors, Google builds everything themselves, so they “can’t eat others’ cooking,” but notes that what business wants isn’t always what business needs.
• HP is cutting costs by making all HR employees report to 1 global HR department & not individual business units to that they can leverage the function.  Global processes are leveraged by technology.  Others have 1 global center for HR plus local organizations or 1/2 & 1/2 split between HR & business units.
• Kelly Services agreed that American workforce development for the global economy is woefully inadequate.  It’s a huge issue & affects how we are perceived around the world.  We don’t socialize & educate to be globally-oriented.  However this is changing with younger, more digitally engaged generations.  Google noted they seek international things out.  Google seeks this kind of experience in their leadership teams.  They embrace those who know cultures & languages with recognition of the importance of relationships & respect.

another SDL Global Information Management conference

I attended another SDL Global Information Management Conference which was a bit of a disappointment because some of the material presented was a rehash of their events earlier in the year.  Anyway, there are some new tidbits, so there is still some value in checking it out.  Here are links to the presentations that were presented:

• SDL’s GIM evangelist Andrew Thomas’  introduction
• They did take my suggestion after their last event & add a small-business example, Jason Arnsparger of Caridian BCT.
• Larry Arnold was back from Garmin with an updated presentation from what he presented earlier this year.

The most substantial trend which came out of this is the advent of DITA, (Darwin Information Typing Architecture), which uses .xml to design, write, manage, publish information by topic rather than by document, etc.  This is significant because it unhooks content from traditional sources & makes it more easily accessible in other formats, media, etc.

My assumption is SDL invited a new & different set of attendees to this event, but still, I would think they have enough customers that they should be able to find someone else to present who hasn’t presented before.  That way they can engage the same attendees with new material.  SDL is good & big, & good at what they do.  I expected more, & was disappointed I didn’t have the opportunity to learn more new stuff instead of what we saw a number of months ago.

European & emerging markets presentations @ global supply chain conference

I attended these sessions to see the attached presentations  at the Council of Supply Chain Management Professionals (CSCMP) Global Conference:

• Global Supply Chain Developments presentation: Logistic Trends in Europe V1 090922 Q&A:  Globalization is closing the gaps between the have- & have-not countries.  Despite the fact that most top-level managers speak English, demanding citizens still prefer to communicate in their local language.  It’s still difficult to penetrate Europe from the outside.  Even working from the UK is not enough.
• Where in the World? presentation:  CSCMP Where in the World Q&A:  opportunities in China in some ways are limited because land titles were burned long ago, so land can only be leased.  Evaluating total landed cost vs. least cost is always an issue.  Discrete inventories, depending on which modeling tools you use, are not always cost-optimal.

• Why Multi-layered distribution works best in Europe presentation: GWfinalCSCMP Annual Global Conference sep 2009 abe4 no time for Q&A

• Eastern European Infrastructure I requested the presentation of the presenter, but haven’t received it yet, so I’ll summarize briefly here.  The 5 largest ports, (all of which are expanding, btw),  handle 80% of Europe’s cargo traffic.  Hamburg relies on Asia.  It’s difficult to serve continental Europe from the UK as well as the reverse.  Central/Eastern Europe is getting more congested.  Distribution centers are expensive, but make sense there.  Russia is another dilemma.  You can’t bring product to the customer’s doorstep, so you don’t know where it ends up.  You can’t simply transplant your US system in Europe.  It requires study & planning.  Turkey offers incentives for product coming in & going out.  Recommendations:  do your homework-learn the tariff & non-tariff barriers.  Eastern Europe is not North America-there are differences in infrastructure, Value-Added-Taxes, etc.  Rivers are big & key transport means.  North American assumptions don’t hold.  Get professional help from freight forwarders-an auto parts company set up a distribution center in Antwerp, Belgium, only to find all of their customers were in Germany.  Q&A:  Because all European countries maintain their autonomy, security can be a problem.  Antwerp can be a better gateway to France than LeHarve.  Digital infrastructure now pervades, but companies don’t share information up & down the supply chain.  Despite the fact that the Soviets invested nothing for years, infrastructure in Central/Eastern Europe is catching up to western Europe.

Global sourcing panel @ supply chain conference

I caught this panel Global Sourcing Panel: Making It Happen at the Council of Supply Chain Management Professionals (CSCMP) Global Conference:

James Lewis, EVP/Chief Supply Chain Office, Fellowes Inc (F) led off.  Fellowes has offices in 15 countries, works with 130 customer countries, 500 supply chain partners, & $500M spend.  Their keys are total cost management & supplier risk assessment.

Gregory Rake, Sr VP, SC-Pier 1 Imports (P1)was 1 of the world’s 1st global importers…it’s in their name.  Their international buying department is 1st in class.  90% of Pier 1 product is imported with a $200M spend.  Importing with secure social responsiblity is a core competency for them.  Cottage industry sourcing, flexibility, & security are keys for them.

Farzad Khaledan, Director, ITW works in 2000 locations in 52 countries.  50% of their revenues come from outside of the US.  They started an international sourcing team in 2007 based in Europe.  They implemented small parcel & fleet management programs world-wide.    ITW saved $1B by cutting 200 freight forwarders/customs brokers down to 15.

Q&A

What changes have you made in reaction to changes in the economy, fuel prices, & financing?

• P1-terminate @ the coasts & ship own inland, waiting until Walmart & Target set rates for marine
• F-this is our biggest opportunity ever-challenge everything
• ITW-acquisitions are dead, so they are focusing on driving operations costs down

How do you conduct supplier risk management?

• ITW-rely on local management & intuition
• P1-65 factories closed in China resulting in unemployment of 1M.  They are building the equivalent of the US highway system every 5 years.
• F-use KPI’s to monitor & track local employees

Have you used international procurement organizations?

• F-a few in Asia didn’t work, so F had to build own (1 ex-pat out of 2000 employees in China)

Has nearshoring resulted in lower total costs?

• ITW-buy closest to the customer, ex. Vietnam & India are now viable markets & Africa is coming, but there are infrastructure issues

What modeling/analysis do you use?

• ITW-scanalytics
• F-global data warehouse & Oracle TMS
• P1-interns crunch supply chain data

How are you dealing with the 10+2 requirements/ensure CTPat compliance?

• P1-we’ll be OK by 2010.  It’s easy to get the information, except they have 5000 vendors.  Use buying agents.

What new approaches are you using to work with partners?

• F-qualify them
• P1-negotiate sustainable business relationships
• ITW-can’t change often-take a long-term partnership approach

How fully automated are your organizations?

• P1-use own internal systems
• F-use own operating platform with standards of expectations
• ITW-focus on 10+2 standards

How are you reducing your carbon footprints?

• F-recycle packaging
• ITW-focus on more efficient operations & curtail energy use in the summer

managing intercultural negotiations

I walked in on the end of this presentation by Dalip Raheja, Pres./CEO of the MPower Group, on international negotiations@ the Council of Supply Chain Management Professionals (CSCMP) Global Conference. It’s really a primer on considering cultural context in international negotiations & does a good job at that.  Her’s his presentation CSCMP 2009 – International Negotiation Issues in Challenging Times – DR

Because I walked in late, I wasn’t able to take notes so I’ll just give my take:  on the 1 hand, many consultants make too much of cultural differences.  I think it’s been very rare that a deal has blown up because someone used the wrong fork at dinner.  It’s great if you can learn all you can about foreigners with whom you’re working, but not all of it is relevant.

On the other hand, there are a couple of cultural variables that are vitally important in international business that are under-appreciated & not studied enough, & they are business values & decision-making structures.  The former is less researched than the latter, but we still have a lot to learn in these areas.  Both determine how things are sold & generally how business is conducted, but most Americans are more concerned with etiquette lessons than getting inside the heads of their customers/partners/counterparts.  Business values aren’t always necessarily apparent in the general cultural setting, & thus need to be uncovered.  Decision-making structures generally have been documented throughout the world, but there are many refinements which have not been uncovered.  These 2 items are vastly different everywhere you go, & can vary subtly between supposedly similar countries.   While the Austrians, Germans, & Swiss all speak German, there are distinct differences between each of these cultures, & you risk falling on your face if you don’t recognize them.  Many assume Scandanavians are similar to the German-speakers because they share many cultural origins, but they are just as vastly different.  Dig deeper-you’ll benefit from what you find.

4th generation telecom networks in Europe

I checked out 4G World, the successor to Wimax World telecom show in the past @ McCormick Place.  The 1st panel I attended 4G Network Deployments in Americas was very disappointing because the only panelist from outside of the United States was from Jamaica, not necessarily a good representation of Latin America.  Needless to say, there’s not much to note there.

I also attended the panel on 4G Network Deployments in Europe:

Spain just got digital TV last summer.

From Maravedis, there are 500 wimax deployments world-wide & 10 in Europe.  Europe is biggest in fixed wimax:  fixed 49; mobile 28; i6e 21.

Here are growth projections for Europe:

• LTE trials/Metro coverage
• 2010-18%/2%
• 2012-47%/14%
• 2014-55%/38%
• 2016-?%/69%

Spectrum in Europe is allocated like so:

• 21-42 MHz 63%
• 42+ MHz 34%
• <21 MHz 3%

Check 4G counts for more data.

Average Revenue per User worldwide breaks down like this:

• Europe $47
• US-$40
• Latin America-$36
• Asia-$35

From Yota, why are operators installing LTE in Russia?

• 37%-bandwidth capacity
• 26%-leverage 3G
• 15%-flexibility to use different spectrum
• 15%-declining capacity expectations & operations expenditures

Norway is sparsely populated so coverage is expensive.  There are 2 mobile players with national GSM networks.  LTE is coming next year.  Wimax is replacing rural coverage.  All bands of spectrum are available for 3G & Wimax.

France is a mature fixed & mobile market.  30 Euro bundles are good for consumers but bad for network operators.  Conversely, high prices for mobile are good for operators but bad for consumers.  Consumption has changed in a move to fully-enabled internet.  Operators focus on densely populated urban areas.

Q&A:

• The biggest issue is capacity:  there is a difference between 2.5 & 3.5 ghz.  Lower frequencies (700 MHz) are better in rural areas.
• Wimax operators do work together on roaming.
• Wimax does play a role in M2M communications, but it’s quite different from residential service.
• 60% of consumers have access in Russia.
• Differentiation from the big operators in France is bringing fixed to mobile.  They’ll either work with or against them.  VOIP is coming to rural areas.