Archive for October, 2008

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Foreign Policy mag’s Global Cities Index event-we’re #8!

Friday 31 October, 2008

Last week I attended the unveiling of the Global Cities Index, which was created by Foreign Policy magazine,  the Chicago Council on Global Affairs, & A.T. Kearney Management Consultants.  What’s novel is including criteria beyond population & business activity to create the index.  Adding human capital, information exchange, cultural experience, & political engagement alter the rankings somewhat.

CCGA President Marshall Bouton opened the luncheon by noting
1-populations in cities exceeded those outside of cities for the 1st time in the world in 2008 (urban>rural)
2-cities are nodes of globalization
3-Chicago is 1 of the most dynamic global cities in the world

Paul Laudicina of A.T. Kearney made a presentation on where the Global Cities Index & where Chicago fits within it.  Here it is: globalcitiesindex

Richard Longworth subbed for Saskia Sasken who was marooned in Singapore & couldn’t return in time to make the luncheon.  He questioned, why is globalization so urban?  Because we (headquarters as nerve centers) have a tendency to concentrate & not scatter (like tasks do).  Technology hasn’t freed us from our sense of place.  We still need face time to connect.  There is no 1 global economy-it’s simply a sum of many interconnected circuits.  People are still required & Chicago is a magnet for 50,000 college graduates every year.  Rather than the city of big shoulders, Chicago is now the city of high foreheads.

Q&A answered:

-Chicago still has obstacles to moving up the rankings.  Media coverage of world events is an issue.  The Chicago Tribune was ranked #23 in this category.  Chicago has a miniscule tourism budget.  We need to get over our inferiority complex & pull locals into the global economy.  Public education & transportation are problems many large cities face.

-given the recent financial crisis, New York will probably fall in the rankings in the future

-Chicago will move up in cultural exchange & political engagement will come by advertising to international travelers who pass through Chicago but seldom stay here.  Providing more foreign language signage for them @ O’Hare would help.

-Chicago needs to develop a personality in the media to present a memorable face to the world.

My $.02:  a friend from Boston was surprised Chicago ranked so high.  My response is these things are calibrated to achieve desired results.  The speakers noted that on an early draft of the index, Paris was ranked low in culture because it had relatively few foreign restaurants.  It was rejiggered to reflect Paris’ higher status in culture.  My point is, these things can be changed to reflect the creators perception of reality.  If this were done by a European organization, I suspect it would have come up with different results.  What is reality?  Take your pick.  Another component to add would be foreign language capability, a reflection of ability to engage with the rest of the world.  American cities would fall, but I think that’s an appropriate reflection of reality.  On the whole, this is a valuable exercise.  It will be interesting to see how this evolves in the future.

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invest in japan/jetro event

Thursday 30 October, 2008

I attended this event recently Invest Japan which was sponsored by Jetro the Japan External Trade Organization.  Patricia Haslach, US ambassador to Asia-Pacific Economic Cooperation (APEC) started of by saying the midwest leads in foreign direct investment from Japan, (Illinois gets 36%) which creates 103,000 jobs with 1100 companies.  The Chairman & CEO of Jetro Yasuo Hayashi flew all the way over from Japan for this event & spoke about the Japanese-US relationship.  Jetro has brought 600 foreign companies to Japan since 2003 & consults with 1000 companies each year.  Stanley Roth, VP-International Government Relations with Boeing International, gave the morning keynote address about leveraging Japan’s corporate resources.  He broke down Boeing’s success in Japan into 4 phases:
1-sales, hired 1st international sales guy in 1953, opened 1st office in Japan in 1956, & made1st sale in Japan in 1963-lesson is be persistent & think long-term.  Boeing now has an 86% share in Japan.
2-making a good offer-be competitive on price, etc.
3-tend to relationships over time-don’t just parachute in & expect to get business.  Keep in touch locally on a regular basis
4-individual cooperation/collaboration-many trusted 747 subcontractors have come out of Japan

Dave Baeckelandt, a former interviewee of mine, next moderated a panel on regional opportunities & business strategy.  Dave Johnson, CFO @ Molex made a presentation on Japan’s central role in their changing business.  Here it is: japanscriticalrole Masachika Suzuki, Chairman of the Board of Directors of the Shizouka Prefectural University Corp. & former Lt. Gov. of Shisouka Prefecture made a presentation on the dynamics of a growth economy with his home as an example.  170 foreign companies are located there-95 of them are from the US.  Toyota, Yamaha, & Honda are based there.  Q&A explored:  Molex has been in Japan since 1983 & has dispersed locations to mitigate earthquake risk.  Johnson & Roth recommend using several Japanese trading companies to get started in the Japanese markets.

Drew Edwards, VP @ Advisory Research moderated a panel on Corporate Governance & M&A in Japan featuring Hiroaki Niihara, Dire., Corporate System Division, Economic & Industrial Policy Bureau, Ministry of Ecoonomy, Trade, & Industry (METI), Kazunari Tomita, Chief Rep. & GM NY Rep. office, Tokyo Stock Exchange (TSE), & David Makman, Counsel, Howrey, LLP.  The major topics of discussion were:  Pension Fund Assn., takeover defense measures, the Bull Dog Sauce case, & the role of outside board members.  While there are few hostile takeovers in Japan, acquisitions of Japanese companies is up 38%.  Enhanced disclosure has helped.  The TSE is #2 to the NYSE in capitalization with 2400 companies.  Reform is coming-2009 may be the year of the independent director.

Ken Kabira, EVP & Chief Marketing Officer (CMO), Chicago Transit Authority, former CMO of McDonald’s Japan made a great presentation on big company global branding:  here it is:  kenkabiraglobalbranding In Q&A, we found the CTA is a retail business, so not that different from McDonald’s & Kelloggs.  Medium-sized companies can do much of what McDonald’s & Kellogg’s have done by working together closely with their partners & distributors, listening to specific factual details without opinion.  Also recognize that Japan is not a small country & it’s not all the same everywhere.

Yasushi Akahoshi, Dir. Americas Div., Trade Policy Bureau, METI offered a few perspectives on the US & Japan. George Hisaeda, Consul General of Japan in Chicago  made closing remarks.

Muth’s take-giving the recent crash of the financial markets, the timing of this event is unfortunate, especially for a country like Japan which is probably not inexpensive to enter.  Their goal is to reach 5% FDI by 2010.  Depending on how the exchanges react between now & then will go a long way in determining whether or not they reach that goal.

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Austrian weftec reception

Wednesday 29 October, 2008

Franz Roessler, Trade Commissioner for Austria, hosted a reception for Austrian exhibiting companies @ weftec (water environment federation annual technical exhibition & conference).  There were 11 Austrian companies exhibiting/attending Weftec-their contact information & profiles are attached here austrianparticipantsweftec2008 Although it’s no indicator of size, most firms seemed to be from smaller towns in Austria.  Only 1 was from Wien/Vienna & 1 from Graz.  Size does not appear to be an impediment to operating globally-a number of them seemed to already have a world-wide presence.  I wasn’t able to attend the weftec conference, but it is remarkable how much higher profile environmental technologies are becoming.  Weftec moves around each year, so it doesn’t appear that this conference will be coming back to Chicago in the next few years.  At the reception, I met & spoke with 1 of the principals of Cosmic, which has repair robots for pipe & sewage systems, which sounded like a pretty cool solution.  They have a US office in California, & consequently have more business on the west coast.  In many ways, my impression is the Europeans in general & German speakers specifically (Germans, Austrians, & Swiss) are ahead of Americans in many environmental technologies.

The Germans were at the reception as well.  When I lived in Europe the 1st time, I lived in the south in Muenchen/Munich, which is the largest city near Austria in Germany.  When I visited Salzburg & Innsbruck, which I did often, I found the Bavarians have a typical brother-like love/hate relationship with the Austrians.  While there are many similarities (greet 1 another with “Gruss Gott”  rather than “Guten Tag” used in most of Deutschland & are more catholic than the rest of Germany), there are still many of the little brother (Austria) vs. big brother (Germany) rivalries.  The Austrians seem to be a little sensitive about these differences, so if you’re doing business there, it would be wise to pay attention to them.  In comparison, in many ways the Austrians are far more open, as evidenced by being the gateway to eastern Europe.  The Germans, as a result of their larger population, tend to look more inward.  I’m a fan of both, but tend to root for the underdog.

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Discover Osaka

Tuesday 28 October, 2008

I attended this event to promote investment in the city of Osaka Japan, which was sponsored by the city of osaka chicago office.

Vice Mayor of Osaka Takashi Kashiwagi made a presentation vicemayorosakapresentation on the revitalization of an energetic city.    Osaka office of urban revitalization & promotion Osaka was a candidate city for the 2008 Olympics.  The city/Kansai region comprises 1/6 of Japan’s GDP.  They are strengthening resources to promote intellectual businesses, such as robotics, IT & ubiquitous networking, & health care/preventative medicines.

Isao Obayashi of Digital Concept Partners made this presentation   osakaitclusterexchangeprogram which offers opportunties to integrate technology with some of Japan’s biggest technoloyg companies.  61 applications came from abroad.  3 of 33 made it to the final stage.

Officials from  Kansai International Airport (alt site) made a presentation as Japan’s 1st 24 hour & international cargo airport.  They are encouraging United to resume O’Hare-Kix services which was suspended last year.

Rebecca Lombardi of the Entertainment Technology Center @ Carnegie Mellon spoke about their experience opening a satellite campus in Osaka.  The program was up & running in just over 1 year, with 5 US students working on 2 projects sponsored by Sharp in Osaka.  60% of students in other international programs are ex.-US, i.e. from Taiwan, Korea, & India who want internships with US companies.

Q&A responses

-on comparing CMU’s experiences in other places, not all departments go to every country, they haven’t been in Osaka a year yet, they’re a little disappointed there are not more students studying in Japan, Sharp has been great, keeping the lawyers busy, as students @ CMU own their own intellectual property.

-on 2008 Olympic bid, their goal was to promote health/sports in everyday life, which resulted in more local pools & gyms for the elderly, (70+ run 100m in 11 seconds) , the infrastructure was not promoted well, so they will bid again.

-re: Osaka/Kix comparing with Rockford’s relationship with O’Hare, UPS has direct flights between Osaka & Rockford for cargo traffic, & FedEx, DHL, AllNippon & UPS are all targets for cargo hub carriers

-on IT cluster exchange program requirements, they are only 3 years old, so they are eager to work with small venture-backed companies, gave an example of 3D mouse application which came from Sililcon Valley-they’ve only received proposals from the West Coast & would like more from all of America, midwest included

Here are a couple of other resources Osaka Investment Promotion CenterCity of Osaka Economic Affairs Bureau

My take is Osaka has a lot of similarities with Chicago as Japan’s 2nd city.  It’s an important city in the world’s 2nd largest economy.  If you’re thinking of building in Asia, Osaka is a good place to start.

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British American Business Council awards dinner

Monday 27 October, 2008

I attended the British American Business Council’s 3rd annual British Consul General Awards Dinner George W. Buckley, Chairman, President, CEO of 3M was honored as an individual award winner.  George is an engineer who is a passionate advocate of manufacturing & research & development.  He invoked Lewis Carroll, author of “Alice in Wonderland,” satirist, & little known mathematician in his address. He likened hockey-stick forecasts to the Mad Hatter’s tea party.  Like Alice, we have choices @ a fork in the road.  Crime & extremism can be solved by economic growth & manufacturing.  Security can be assured by prosperity, not the reverse.  He criticized the service economy for only redistributing wealth rather than creating it.  America needs tort reform to restrict class action suits & liability suits.  Higher taxes reduce income as a pass through system which makes corporations tax collectors rather than payers.  You can’t tax to prosperity, especially @ 41.4% in Minnesota.  He brought up the point that Europe’s swing toward labor resulting in making costs to close factories huge creates barriers to EXIT which make it difficult to make changes.  In the global competitive war, governments don’t help.  Using the “baby bear strategy-”  not too hot & not too cold, allows companies to achieve balance.  In closing he noted that opportunities are born in troubled times.

Sponsor Baker McKenzie partner Ed West became a US citizen 1 week before the event, so now there is no taxation without representation for him.  London is now Baker’s largest office in the world.

Marc Halpin, CEO of awardee Trading Partners noted that the language gap between the company’s origins in London & US office in Chicago is not signficant, aside from pronunciations of words like aluminium & tomato.

Manpower received an award as well.  80% of its revenues are generated outside of the US in 80 countries with 30,000 employees in 300 offices with 5000 clients.  Manpower has had on 3 CEO’s in 60 years-the founder still has an office there @ 97 years old.

Wm. Wrigley Jr. Co. was a winner too.  Wrigley has 22 manufacturing facilities in 14 countries & sells Wrigley products in 180 of the 220 countries of the world.  They’ve been successful by simply following the trail of the British commonwealth.

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acg inbound investment presentations

Tuesday 21 October, 2008

I attended this breakfast panel discussion organized by the Association for Corporate Growth on how inbound investment from outside of the United States into the US is affecting middle-market mergers & acquisitions deal flow.

Steve Brady of Grant Thornton revealed this distribution of inbound buyers:
40%-China
17%-UK
14%-India
10%-UAE
Cross-border accounts for 48% of world-wide M&A activity.  Europe still leads the # & value of transactions with 62% & 71%.  Inbound investment is still relatively small @ 8-10%.  95% of transactions are middle-market, with 83% <$100M.  While 50% transactions values are “undisclosed” in Europe & Asia, those that are are named <$100M are 32% & 35% respectively.  The most active industries are as follows:
Industrial      426  21%
IT                  396  23%
Consumer     346  17%
Health Care  209  11%
The biggest trend is the emergence of Asia buyers.  They are seeking to buy
customers or suppliers
new market opportunities
new product applications
new management talent
strategic footholds-(it’s tough to grow organically)
image/market perception-(raise share prices)

Thomas Williams of Lincoln International summed up his observations of acquirers from different countries:
Germany-active
UK-has a large private equity community affected by the credit crunch
France-fallen off more than 37%
Spain-seeking US beachheads
India-optimistic, very active
Japan-less active, starting to look outside (when correlating GDP & # of deals, Japan is underinvested)
He found 29% of cross-border transactions are strategic.  Globally m&a is down as the business is more cautious & looking for long term values.

Tariq Malhance, Pres. of UIB Capital-North America made this interesting presentation on investing in US companies while still adhering to the Shariah investment philosophy governed by Islamic law, i.e. common stock only, no leverage, dividends, & management fees  uib-capitalacgbreakfastpanelpresentation

Q&A brought out:

part of Japan’s reluctance is because they’ve made a lot of mistakes in the past

top notch legal assistance is necessary for foreigners to navigate the litigious US market

Russians & Brazilians are sitting on the sidelines, due to lack of confidence in the system

high net worth institutions are sources for sovereign wealth funds

debt sources for foreigners are usually from US mezannine players leveraging assets @ home

the level of sophistication of the players is the same wherever you go-most are western-educated & fluent in international business & western style transactions

changes in currency values, a long term view, focus on the fundamentals & productivity allow others to better compete with the Chinese

I requested the other presentations but have yet to receive them.

My take is:  it was good to bring up this topic.  I think it’s going to become more important at least over the short term while the $ is weak.  I’m surprised it hasn’t come up more often, but I think the Arabian acquisition of ports sparked a lot of anti-foreign acquisition sentiment, so many of these acquisitions are a lot more under the radar now.  Integration of US companies is just as difficult for foreigners as it is for us.  I wonder if foreign companies are able to a better job of due diligence so that they know what they’re getting into when they buy American companies.  We’d better get used to being owned by foreigners & giving up some of our sovereignty because I think it’s inevitable.

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European & Asian presentations @ Wimax World

Friday 17 October, 2008

I attended Wimax World where they hosted a series of seminars on Global Deployment Strategies.  I was only able to attend those on Europe & Asia They also have sessions on Central America, Caribbean, & Mexico, South America, & Emerging Markets.  Many of the same presenters made presentations at multiple sessions, so I’m not sure how much I really missed.

Fonow of Trivon related that internet access in emerging markets is strong @ 15-40%, but broadband penetration is low @ <10%.  They like implementing Virgin’s go-to-market strategy by keeping it simple, customer-centric, fast & smooth sign-up, & no hidden charges.  The ministry of communications is very stringent on the direction of antennae.  Ziegelwanger of Wimax Telecom focuses on central Europe because it’s not as competitive as Western Europe.  Their advantage is in small devices.  The panelist from Freedom 4 in the UK admitted it’s competitive there,  but even more so in Ireland.  He also gave up that there is never enough spectrum downstream & there are big differences between rural & urban coverage.  Q&A revealed vendors in the UK & Ireland are bundling & using VOIP.  Revenue per user is about 20 euros in Ireland & 10 euros in Austria.  Costs have been driven down by 1/2 in the last year, which requires volume & depends on what happens in India, etc.

Lai of PacketOne offered their deployment strategy in Malaysia, which is to use their DNA (devices, network, applications) to strategically deploy capital to the states, then the rural areas in 3 steps:  1.  fixed mobile, 2.  communications/connectivity 3.  content.  Apps included e-learning, telemedicine, e-commerce, e-government.  Quershi of A-Infiniti informed that spectrum costs are up 10-50X in the last 4 years.   In Asia, they have 4 licenses where you have to use it or lose it in 2 years.  In India & Pakistan, targetted youth groups are 60% & 70% of the population respecitvely.  Success factors are demand, government regulation, how underserved the market is, & localized applications.

My take is:  some good information was presented, but definitely not commercial free.  They weren’t that well-attended with only a few dozen attendees, but that could be because the rooms were hard to find.