Free They Met Han Reyo, A Trading Company Critical Thinking Sample
Q1. How long do you think China can maintain its superpower of manufacturing and why do you think so? Which country would be the next nation to take over China’s position and why?
For more than three decades of reform the problem of improving the competitiveness of China’s economy has not lost its relevance for the government. Escalated in recent years, the global economic competition, and considerably complicated financial and economic situation in the global economy have pushed China to seek a stable economic development with its economic and geographic advantages, as well as to find ways to attract foreign investment and technology to modernize production and release more competitive in the world market. The country has created an infrastructure that allows producing virtually all kinds of goods. The labor force in China is still one of the cheapest in the world. Production technology in China is constantly growing, and the product quality is getting higher and higher. The country has a wealth of experience in logistics, and also scheme of exports to other countries work great. China is a factory of the OEM production for any new brand. It is artificially low prices for the only resource in China – food – has enabled the country to roll out completely from scratch global competitive advantage.
Therefore, China will continue to occupy leading positions in economy till its trade will bring benefits. Trade flows and capital flows between China and the rest of the world affect economic growth in other countries through several channels. Imports of commodities, inputs and, increasingly, final products directly to China increase exports and GDP of partners.
The next nation to take over China’s position can be Japan. Despite its negative growth in Q2 2014 that formally means immersing the country into recession, Japan’s economy is the third largest economy in the world. Banking, insurance, real estate, retail, transportation and telecommunications are the main industries of the Japanese economy. Japan has a large industrial capacity and is home to some of the largest and most advanced from a technical point of view, car manufacturers, electronic equipment, machine tools, steel and nonferrous metals, ships, chemicals, textiles and food. Construction has long been one of the largest sectors of the Japanese industry, thanks to the multi-billion dollar government contracts in the private sector. The world is going to turn into highly technological and the progress is constant, while Japan shows great results in this sphere. Now the country has a labor force with a high level of training, work culture and professional mobility. The level of productivity is one of the highest in the world.
The current level of development of the Japanese economy allows the country to pursue a policy of almost complete liberalization of foreign trade. Naturally, the traditional methods of protection of the internal market (customs duties, quantitative restrictions and quotas) in these conditions fade into the background, and on the scene other instruments of international competition appear, namely non-tariff barriers. In addition, there are barriers to entry of foreign goods and entrepreneurs in the formal and informal institutions that reduce the level of competition. They include the sales system (Law on major retailers blocks access to the Japanese market); “Keiretsu” – corporate group companies to participate in the share capital, which are kind of holding groups and which does not allow foreign companies to intra-group transactions; and long-term trade relations between suppliers and buyers, hindering the market penetration of foreign companies.
Riley, J. (2014). 10 Features of the Chinese Economy You Could Use in a BUSS4 Essay. Retrieved from http://beta.tutor2u.net/business/blog/10-features-of-the-chinese-economy-you-could-use-in-a-buss4-essay
Index Mundi (2014). Japan Economy Profile 2014, Retrieved from http://www.indexmundi.com/japan/economy_profile.html
Q2. Imagine that you have just graduated from Kingston University with a business degree and you see an advertisement from Embraer, the Brazilian aircraft manufacturer, looking for recent graduates with business skills for a three year assignment in Brazil. What are the cultural problems that you would expect to meet if you took that job? You should illustrate your answer with reference to established theories of cultural dimensions. How would you seek to overcome those difficulties?
Brazilian culture was strongly influenced by the Portuguese, African and Asian traditions, making Brazil stands out among the other countries of the continent. The first European set foot on the land of Brazil, was not Spanish, but Portuguese. Brazilian national character can be described as follows: sentimental, warm-heartedness, poetry, delicacy. Brazilians are overly talkative and actively use gestures and facial expressions to express their point of view. Emotional state manner of speaking serves as a means to convince the interlocutor in their sincerity. By long speeches they try to gain the trust, then to build long-term business relationship. Very often feelings prevail over facts, hiding the bad news, reasonable skepticism may be welcome.
Symbols, or signs, are so significant in the management and marketing that there is a special sphere of knowledge – a character management. Different cultures have different symbols for the communication of values. Mistakes in identifying values assigned color or other symbols can cause serious problems. For example, in the United States the deer means speed and grace, while in Brazil it is the sign of homosexuality.
Hofstede’s theory has become widely popular due to the fact that it has found support among the personnel departments of various corporations, and came home to various researchers of values. Thus, for example, Power Distance Index: Brazil respects authority. Continuous supervision and control is evaluated by subordinate positively. Managers prefer to consider them generous people taking responsibility for decisions themselves. Preferences of subordinates in terms of style of decision-making manager are polarized between authoritarian and paternalistic style of rule and majority rule. The United States have lower index because it culture expects and accepts democratic relations with the authorities and members of the public are treated as equal. However, concerning Individualism Brazil has a low level of individualism, while the USA – very high. It is characterized by the priority of the employee’s privacy (cost-free time), emotional independence from the company; managers aspire to leadership and diversity and assess their position, putting in the first place their independence; individual solutions are more attractive than group ones; individual initiative is encouraged by society; and people feel the need for personal friendships.
Another indicator is that American anthropologist Hall compares the cultures depending on their relationship to the context, which is understood as information, environmental and accompanying event, i. e. what is woven into the significance of what is happening. Thus, Brazil is high-context culture. Brazilians are emotional, cheerful, smiling and helpful people. Foreigner is immediately taken kindly by the company as own. Perhaps this is because the Brazilian nation was formed from many nationalities and races, who emigrated here from Europe and Asia. High-context culture requires considerable time before the start of the business relationship, since it is necessary to know better the future partner in the joint business. Brazilians do business on a personal basis and expect long mutually advantageous relations.
However, the USA is low-context culture. It is less homogeneous culture, where interpersonal contacts are strictly separated; the representatives of these cultures do not mix personal relationships with work and other aspects of daily life. The consequences of this feature are a little awareness and a great need for more information for the understanding of other cultures while communicating.
Adekola, A. and Sergi, B. S. (2007). Global Business Management: A Cross-Cultural Perspective. Aldershot, UK: Ashgate Publishing.
Gesteland, R. R. (2002). Cross-Cultural Business Behavior: Marketing, Negotiating, Sourcing and Managing Across Cultures. Copenhagen Business School Press.
Hofstede, G. (2001). Culture’s Consequences: comparing values, behaviors, institutions, and organizations across nations, 2nd ed. Thousand Oaks, CA: SAGE Publications.
Novais, A. (2012). Brazilian Organization Culture in a Nutshell. Retrieved from http://thebrazilbusiness.com/article/brazilian-organization-culture-in-a-nutshell
Q3. This question is based on the case study discussed in tutorial - Ahlstrom Korea. What would you have done if you were Meinander and the Ahlstrom management in the Autumn of 1986 and in the Spring of 1987? Your decision must be either “entering Korean market” or “not entering”. You need to fully justify your decision.
Asian filter market is 24,000 tonnes per year 23% of world market. Ahlstrom sells only 8% of its filters in Asia Pacific area. Company is active in North America and Brazil as well as Europe. Korean opportunities were seen in automobile industry growing at 30% per annum; absence of modern filter manufacturer installed and market was not big enough for two companies: first mover advantage.
1986 – Meinander visited Korea with no preparation
In December during visit Mrs Choi signs Letter of Intent
1987 – Meinander and Rantala visited Korea again
They met Mr Lee of On Yang Pulp Company
Next day they sign a LoI drawn up by Ahlstrom’s adviser
Despite unknown business culture, technology leakage, retaliation and unfair practices by big Chaebol and plant overcapacity if forecast wrong, the main opportunities in the Korean market were in market growth, absence of competitor, regional export base, platform for learning Asia and good partners available. In the late seventies in the country the movement for the transition to democracy began, in which a crucial role was played by the emerged during the reign of warlords and middle class students (so that we can say that the military regime had created their own gravediggers). In 1986-1987 demonstrations were active, when the streets of Seoul went up to half a million people. The military was removed from power and Korea went on to political democracy. Between 1982 and 1987 the economy grew by an average of 9.2% per year, and between 1986 and 1988 – by 12.5%. Seoul has made substantial additions of balance of payments in 1986, and the balance of payments in 1987 and 1988 were $ 7.7 billion and $11.4 billion respectively. This rapid development has helped South Korea to reduce its foreign debt. On the part of other countries, especially the US, this has caused the need for greater openness of the Korean market to foreign goods. In the period of dynamic growth the domestic life increased attention to social aspects of development. Therefore, requirements for social support to low-income groups, rural development, improvement of social security systems and more were strengthened.
Thus, the company should enter Korean market.
Probert, J. & Lasserre, P. (1995) Ahlstrom Korea, Insead Euro-Asia Centre.
Yi, H. (1996). The Korean Economy: Perspectives for the 21st Century, SUNY Press.
Q4. A multi-national company headquartered in Shanghai, China is a relatively new entrant to highly competitive automobile industry. The CEO of this company now plans to build a new manufacturing factory to produce a newly developed car after years of R&D efforts. Assuming yourself to be the CEO of the company, explain and justify your decision on where to locate this factory. Please note that the potential candidates for the location are Belgium, Hungary, and Turkey and also bear in mind that your target market is the European Union only. You will have to select ONE location only and provide an argument why you think the chosen location is the most suitable.
It is better to locate car manufacturing factory in Hungary. Being a member of the European Union, Hungary is a country with a booming economy and almost completed market reforms. Advantages of the economy are in the openness to foreign direct investment; efficient tax system; reduction of bureaucracy; stable growth based on exports; industrial production, especially in the new modernized firms; fully convertible currency; and declining inflation. Also, its location is very convenient in Central Europe. The most important economic partners of Hungary are the countries of the European Union, they sent about 80% of Hungarian exports. The biggest trade partners of Hungary are Germany (more than a quarter of turnover Hungary), Austria, France, Italy and the United Kingdom. The international tourism is of great importance. Stable position in the economy and society has made Hungary in recent years one of the most attractive for foreign investment in Eastern Europe. The country is attractive to leading automakers due to cheap labor. Hungary has organized the production of some auto brands, in particular, premium cars. For Hungary the appearance of automakers will only give a great advantage due to the provided work for hundreds of people. It is better to build global operations network presented below on the Figure 1:
Figure 1. Global Operations Network
Despite the extremely advantageous geographical location, high industrialization, attractive investment climate and highly educated and highly motivated multilingual workforce with high productivity, Belgium is considered to be the next Greece or Ireland, standing in the sad turn to default. Its state debt amounted to 96%, far exceeding the maximum permissible level of the EU 60%. It has insufficient development of “new economy” industries (biotechnology, telecommunications, software, microelectronics, etc.), high unemployment rate (8.5%), absence of taxation reform, and the level of shadow economy is assessed as “high enough” for developed countries.
Concerning Turkey, it is an Asian country with its customers, however, currently being implemented structural reforms aimed at increasing the role of private sector in the Turkish economy, efficiency and viability of the financial system, as well as the translation of the social security system on a more solid foundation. Due to these reforms over the past few years the Turkish economy has become one of the fastest growing economies in the world. International rating agency Moody’s in May 2013 estimated Turkey as a country favorable for investment with a rating of “Baa3” and stable outlook.
Trading economics (2015). Retrieved from http://www.tradingeconomics.com/
U.S. Department of State (2014). Investment Climate Statement. Retrieved from http://www.state.gov/documents/organization/227351.pdf
Q5. Nowadays, corporate social responsibility (CSR) and business ethics have received much more attention from the international business world. Choose any multinational company which has recently been criticized by the media and general public due to its unethical or socially irresponsible business activity, describe of what they are accused and the pressures on the company and its managers that led to the criticized action. Critically discuss strategies by which the company can recover its reputation and avoid similar problems in the future. Please note that in terms of timing, as far back as 1990s would be accepted.
McDonalds Corporation is a leading American chain of hamburger fast food restaurants, providing approximately 69 million clients with delicious meal in more than 100 countries every day. The success of McDonald’s was not just within the USA, but also globally, which became important when the US market became saturated. One of the main ethical criticisms consistently faced by McDonald’s over the last 30 years relates to the food offered in its stores. As doctors say the food at fast food restaurants has special additives that enhance the aroma, taste, improves the appearance of the products that attract customers. Food from McDonald’s is hardly to call a healthy diet, because in addition to supplements, foods contain a lot of sugar, fat, and carbohydrates. Meanwhile, the company claim that cooking using only natural products of high quality. McDonald’s popularity doesn’t fall.
So, the company should pay more attention to this issue because it supports children with life threatening illnesses, but at the same time critics claim that McDonald’s is a major contributing factor to the ever-increasing levels of obesity in the U.S. and other developed countries. Medical studies show that “waistlines are expanding faster in the UK than in any other European countrywith 1 in 5 adults dangerously overweight”, while within the period from 1990 through 2010, an intense growth of obesity in the U.S. and statistics continue to be impressive. Country dominance of obesity keeps going to stay great over the state in 2012, with no country with a dominance of obesity below 20%. It is worth to mention that in 2012, 41 countries documented a dominance of 25% or even higher and 13 of these countries documented a dominance of 30% or above. McDonald’s contribution is a result of the unhealthy nature of fast food. Therefore, it should provide its customers with clear message about the food composition in order to ensure them in safety as well as introduce more, for example, vegetarian or low-caloric food in order to give more options for customers, who want McDonald’s, but are afraid of obesity accusations.
Walsh, C. (2003). Big Problems for Big Food as courts reach bursting point, The Guardian, Retrieved July 13, 2003, from http://www.theguardian.com/business/2003/jul/13/medicineandhealth.food
McDonalds (2015). Our Story, Retrieved from http://www.mcdonalds.com/us/en/our_story.html