Holidays and International Business

Yesterday, my eastern European friend mentioned that the Americans working for multinational corporations in his country were on holiday (July 3rd was reserved). However, the Europeans had to go to work, of course, as they had no reason to celebrate. Maybe some of the British had reason to be morose, but they don’t let you go on holiday to sulk, do they?

I find it interesting that Europeans would let Americans celebrate their holidays while working abroad. I’m not so sure that Americans, with our tenacious “time is money” mentality, would allow expatriates to celebrate their home country holidays without requiring them to use personal vacation time. For example, every year we see celebrations of the Chinese New Year or Cinco de Mayo in the U.S., but how many Chinese or Mexicans living in America get to take off from work for their respective holidays without using their allotted vacation days?

Maybe this concept is just part of the European culture as a whole. They seem to work fewer hours than Americans and even entry-level positions start out with at least four weeks of paid vacation. Also, Europeans spend less money on healthcare than Americans. In general, they seem to be happier than Americans and they definitely live longer (if only by a few years). So is this the key?

The impact of the global economic crisis has made me reevaluate the best places to live and work. In many cases, emerging markets are recovering faster than developed markets. While Europe is far from perfect, their socialized system does more to protect European citizens than America’s broken system.

Recent issues of the Economist discuss Obama’s challenges with reforming healthcare as well as how the developed world will deal with aging populations. At least two more years of work, anyone? Maybe the European system is not the answer, but more vacation and living longer sure seems nice to me. Happy Independence Day!

International Business: Importance of Trade Missions

A trade mission in economic terms refers to meeting with the target market by business representatives in efforts to promote trade. Although the internet has reinvented B2B activity making it much more efficient as well as effective in terms of speed and cost of electronic transactions, some things cannot be attained by sitting behind a desk. It is critical to dedicate the time to travel to different parts of the globe to meet with business executives. Trade missions are a great way to get exposure and become noticed in the community to executives that are distanced. It also exhibits a firm’s commitment to its business partners overseas and sets it apart from those that fail to participate in trade missions. Such gesture may appear insignificant but the economic impact could be substantial. Essentially, to ensure the production of favorable results cultivate relationships and make efforts to enhance the relationship building process between existing business partners.

Beyond China: The Current Debate on Globalization

Lately, globalization has been a hot button among US manufacturing managers. While there is currently much debate about creating production centers in China to lower costs, I propose that you look past China. Although China does offer cheap labor and materials, quality control is still a major issue. In addition, while government crack-downs are improving, Intellectual Property Rights (IPR) violations can found in every major city and they are much more difficult to control in a country as large as China. Then there is also the high level of corruption: you may need to pay manufacturers just to maintain quality levels. What manager wants to worry about these issues?

There are two other Asian countries that also offer cheaper labor solutions, without as many IPR and corruption headaches. One of these countries is Vietnam, specifically Ho Chi Minh City. Known as the “Pearl of the Orient”, this city is growing at a rapid rate and it desires to “become a hub of industry, services, science and technology in Southeast Asia” according to city officials. Vietnam has the fastest growing economy in Southeast Asia, with a recorded growth of 8.4% in 2005 and a GDP growth of almost 50% over the last 5 years.

The opening of the Vietnamese economy, through accession to the World Trade Organization (WTO), will create extensive opportunities for US companies. WTO accession requires the Vietnamese government to promote transparency and eliminate corrupt practices in its effort to participate in the global rules-based system, effectively reducing your investment risk. Some people might argue that Vietnam is even more corrupt than China, but this is incorrect – Vietnam is a smaller country, less isolated from the West, and is taking the WTO much more seriously than China. In addition, Vietnam has finalized intellectual property regulations and legislation that is concurrent with the TRIPs (Trade and Related aspects of Intellectual Property Rights) agreement administered by the WTO – thereby safeguarding foreign companies from IP violations. These are only some of the implications of Vietnam’s accession to the WTO that could tremendously benefit your organization.

Another country that is receiving increased Foreign Direct Investment is Thailand. As a creation of the Thai Ministry of Commerce, the Department of Export Promotion (DEP) plays an essential role in the promotion of international trade with Thailand. The DEP seeks to boost exports in an effort to grow their national economy. To achieve its goals, the DEP is focused on developing the country’s core competencies to add value to locally produced goods and services. Additionally, the application of new approaches to international trade including the DEP’s 53 Overseas Trade Promotion Offices, have facilitated the growth of Thailand’s international trading network.

What could the DEP’s strategy mean for your company? First, by employing superior technology in manufacturing, product quality levels will increase. Global sourcing for raw materials, machinery, and other inputs will allow the maintenance of competitive production costs. Thai manufacturers will receive assistance from the DEP to raise product quality to international standards. And the elimination of trade barriers through numerous free trade agreements is streamlining all business activities. These are just few of the benefits arising from trade in Thailand.

While there are benefits to producing and sourcing in China, it is important to evaluate other viable alternatives. Vietnam and Thailand offer many benefits to foreign manufacturers and welcome foreign direct investment.
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For additional information, contact Kelly Kasic, President of GLOBAL ID, LLC. – a Management Consulting and International Market Research Company. http://www.identifyglobal.com/ (720) 334-6982

Beijing Travel Tips

Whether traveling to China for business or pleasure, it is helpful to know what to expect when you hit the ground. Starbucks is the first thing that you will see upon leaving Customs in Beijing. This capital city is growing and updating rapidly as they prepare for the 2008 Summer Olympics; construction cranes decorate the horizon. Yet, red and pink roses beautify street medians, while trees line the immaculate sidewalks. The skies are clear and blue as the government has stepped up pollution control tactics.

As I traveled from one cultural icon to the next (don’t miss the Great Wall), I had no problem locating a good restaurant. While I preferred to avoid the Bat on a Stick (seriously), I did make my way into several local restaurants. Many offer pictures or English on their menus, but for those that didn’t, communication was not too difficult and I was always able to order a delicious meal – often for less than $8. For those visitors that must have “American Food” while traveling abroad – McDonalds, KFC, Pizza Hut, Taco Bell, and Starbucks are everywhere.

The people of Beijing were very friendly, curious, and polite. The taxis were not – be careful as you walk down the street, taxis do not always obey road rules.

Written by Kelly Kasic, President of GLOBAL ID LLC

Visit Our Website! www.identifyglobal.com

Collecting International Research and Data

Companies conduct research when selecting a country that is appropriate for international business. This research is then used to narrow the alternatives in the country evaluation process. International research is also used to reduce uncertainties by answering the following questions:

“Can qualified personnel be hired?”
“Will the economic and political climate allow for a reasonable certainty of operations?”
“Where are possible new sources of funds or sales?”

Unfortunately, the inaccuracies of data on many countries sometimes create more uncertainties about location decisions. This inaccurate data comes from an inability of many governments to collect and publish the data. These governments have limited funds, and need to spend this money on fixing problems rather than reporting on them. Other inaccuracies form due to cultural differences and the government purposely publishing misleading data. Companies need to be careful when researching location to conduct foreign business, particularly when they are developing countries.

Written by Carl Phelps, Research Associate, GLOBAL ID LLC

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The Textile Industry of Vietnam

The largest sector in Vietnam is industry, accounting for 41.8% of GDP. One of the top industries in Vietnam is the textile industry. Vietnam exported $5.8 billion worth of textiles in 2006, and expects to reach $7 billion in 2007. This industry is Vietnam’s second biggest exporter, behind crude oil, and accounts for about 15% of the country’s export value in merchandise. Over 50% of Vietnam’s textile exports go to the U.S., and over 15% to the EU.

A drastic increase in U.S. textile imports from Vietnam occurred in 2001, after the U.S.-Vietnam Bilateral Trade Agreement was signed. In 2003, however, a U.S.-Vietnam Textile Agreement was put into place. This agreement set base quotas for 26 different categories of U.S. imports of Vietnamese textiles and garments, increasing at a rate of 7% annually. The Vietnam Textile and Apparel Association works to keep the Vietnamese textile industry expanding by aiding its member companies. The association supports its members by promoting their trademarks both domestically and in foreign markets. Diversification of products to meet specific markets as well as expansion into Africa and Eastern Europe is also being encouraged by the Vietnam Textile and Apparel Association.

Written by Carl Phelps, Research Associate, GLOBAL ID LLC

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Minimizing Risk by Engaging In International Business

One reason why companies engage in international business is to minimize risk. In particular, companies decide that it will be beneficial to go into foreign markets to minimize swings in sales and profits. This has to do with smoothing sales and profits, as a company will try to take advantage of a business cycle in another country that differs with their own. Sales will tend to increase or grow more quickly during an economic upswing and decrease or grow more slowly during a recession. It makes sense then for companies to expand to other countries with business cycles opposite that of their domestic country, in order to counteract slower sales during a recession in the domestic country. One example of this is when Nestlé experienced slower growth in Western Europe and the United States in the early twenty-first century, but this was offset by higher growth in Asia, Eastern Europe, and Latin America.

Also, by purchasing the same products, services, or components from different countries, a company can avoid being affected by price swings and shortages from one particular country. Companies will also do international business to defend themselves against competitors. They might need to counter an advantage that a competitor is getting from going global. These are all ways to minimize risk and some reasons why companies will decide to conduct international business.

Written by Carl Phelps, Research Associate for GLOBAL ID, LLC

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Government Regulations of U.S. Business in Thailand

Before companies decide to do business in any country, especially Thailand, they need to be aware of the government regulations. There are three basic laws in Thailand that restrict foreign business. Together, these laws state that business in Thailand is closed to foreigners except in a few industries and unless promoted by the Board of Investment. If a foreign business is promoted, its performance of certain business functions is still restricted by the Alien Business Act.

All U.S. businesses, however, are exempt from these Thai laws due to the Amity and Economic Relations Treaty signed in 1968. All American companies are allowed to maintain a majority shareholding in their investments in Thailand with few restrictions. There are strict limitations on inland communications and transportation, banking, and land ownership for U.S. companies in Thailand. The Amity Treaty provides international law protection for U.S. firms, not allowing Thai government to discriminate against them. U.S. firms in Thailand are protected against Thai expropriation and are allowed to return all profits to the U.S. without delay. These laws are reciprocated for Thai firms in the U.S. The Treaty of Amity has been successful in promoting investment between Thailand and the U.S. by creating a hospitable environment for foreign business.

Written by Carl Phelps, Research Associate for GLOBAL ID, LLC

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“Vietnam enters the WTO” – What could this mean for Your Company?

· Vietnam has the fastest growing economy in Southeast Asia, with a recorded growth of 8.4% in 2005 and a GDP growth of almost 50% over the last 5 years. The opening of the Vietnamese economy will create extensive opportunities for US companies.
· WTO accession requires the Vietnamese government to promote transparency and eliminate corrupt practices in its effort to participate in the global rules-based system – effectively reducing your investment risk.
· Vietnam has finalized intellectual property regulations and legislation that is concurrent with the TRIPs (Trade and Related aspects of Intellectual Property Rights) agreement administered by the WTO – safeguarding foreign companies from IP violations
· US companies will be able to pursue their rights through WTO dispute settlement and other WTO operations – promoting accountability and efficient dispute resolution process.
These are only some of the implications of Vietnam's accession to the WTO that could tremendously benefit your organization.

Written by Yeukayi Nenjerama - Facilitator of Sales and Marketing in Asian Cultures for Study Aboard.

Visit Our Website! www.identifyglobal.com

Trade Adjustment Assistance

There is much debate about the benefits and disadvantages of globalization. The main issue of concern is that many low-skilled workers in developed countries lose their jobs due to cheaper imports from low-wage countries. What alternatives do the displaced workers in the developed countries have when they are terminated?

In the United States there is one potential solution called the Trade Adjustment Assistance (TAA) Program. According to the US Department of Labor "The TAA Program provides aid to workers who lose their jobs or whose hours of work and wages are reduced as a result of increased imports. Workers whose employment is adversely affected by increased imports may apply for TAA. TAA offers a variety of benefits and reemployment services to assist unemployed workers prepare for and obtain suitable employment. Workers may be eligible for training, job search and relocation allowances, income support and other reemployment services."

When the Democrats recently took control of congress, they proposed an amendment to the TAA Program to assist both manufacturing workers as well as service workers whose jobs have been off shored. The amendment would also offer assistance to whole industries instead of just individual factories.

At GLOBAL ID, we believe that it is the ethical responsibility of companies that transfer production abroad to assist their displaced, domestic employees. Programs such as TAA allow companies to receive free assistance for the retraining of their displaced employees. We will continue to provide additional information about this topic in future articles. In the meantime, additional information can be found on the TAA Program at the following sites:
http://www.whitehouse.gov/infocus/internationaltrade/taapager.html
http://www.doleta.gov/programs/factsht/taa.htm

Written by Kelly Kasic, President of GLOBAL ID, LLC
Visit Our Website! http://www.identifyglobal.com/

The Vietnamese Economy

The countries of Eastern Asia are some of the most exciting economies in today's world. Businesses around the world are looking towards this area for new growth opportunities. Vietnam has one of the leading economies of the Southeast Asia area, and one of the fastest growing economies in all of Asia. The country boasts a GDP growth rate of 8.2%, exceeding all other ASEAN nations (see chart). This is very impressive, as only China has a higher GDP growth rate in all of Asia. Vietnam has the lowest unemployment out of all the ASEAN nations, at 2%. This, however, is offset by the relatively high inflation rate of 7.5%. The high inflation rate is the weakest element of Vietnam's economy, and is the result of the political practices in the country.

Vietnam also has an industrial production growth rate of 11.3%, which is the third highest among all ASEAN nations, and higher than the industrial growth rate of the United States or Japan. Developing countries typically desire industrial growth as it helps stimulate the economy and leads to improvements in country infrastructure. Some of Vietnam's major exporting industries are Crude Oil, Electronics, Plastics, and Footwear. The United States is the biggest importer of Vietnamese products, followed by Japan, China, Australia, and Singapore. Vietnam is one of the most prominent emerging markets in the world, however, its citizens have very few political rights and the country is ranked 109th in the world in terms of Human Development.

Written by Carl Phelps, Research Associate for GLOBAL ID
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Shanghai’s Gem of the French Concession

A visit to Shanghai would not be complete without dinner at "1931" – a famous Bar and Restaurant in the French Concession area, approximately 15 minutes away from the Bund. Without reservations, tables are usually not available until after 10 p.m., which is about the time that this bustling city starts to come alive. I was seated around 10:30 p.m. on a Thursday night in late May with a group of 5 others. Instantly, I fell back in time.

Our waitress wore a royal blue qipao dress (a high necked, traditional piece typically worn in Shanghai during the 1930s). Her hair was pulled back in a tight braid that seemed to match her stern expression. The tables were very small and the wooden chairs were adorned with velvet cushions. The walls were decorated with pictures from the 1930's era set on top of flowed wallpaper. A wooden curio cabinet was backed against one wall holding dishes made of china along with various pieces of art.

The food was as amazing as the ambiance. We decided to sample and share many dishes, as is customary when eating with a group in China. While everything was delicious, I particularly enjoyed the thin wraps that were called pancakes which we stuffed with delicious duck and finely chopped vegetables in a soy-like sauce. I was not disappointed with any of the dishes and was surprised when the bill came to only 600 Yuan (about $78 US) which included several pints of beer for all of us.Brushing past the long curtains to leave, I collected a "souvenir" – a business card for "1931" with a picture on one side and a map and phone number on the other. This marketing tool is creatively used by restaurants and hotels so customers can show to cab drivers when they want to return.

You will feel incredibly safe in the French Concession section, as you should in most areas of Shanghai – disturbing foreigners is a crime! After leaving "1931" finish the night by walking down the cobble stone streets to the Ruijin hotel – an old colonial mansion. Inside building 4 you will find a unique bar called "Face". This is the perfect location to have an after dinner cappuccino while seated on the spacious patio or enjoy a slightly-above-average-price martini while relaxing on one of the plush couches.

For additional information on Shanghai travel, contact Kelly Kasic, President of GLOBAL ID, LLC. – a Management Consulting and International Market Research Company.
http://www.identifyglobal.com/

How to Cope With Import Competition

Governments impose policies that affect trade between to countries, sometimes resulting in an increase of import competition. Companies have several options when faced with government influences on trade that increase import competition. One option is to move operations to a lower-cost country. This will allow companies to produce more cheaply, however many companies lack the proper resources to exercise this option. A second option is for the company to shift focus to specific market niches that attract less international competition. However, in many industries, a problem arises with identifying profitable market niches. A third option is for companies to innovate internally, in order to make domestic output more competitive. This will usually include trying to create greater efficiencies or products that are superior to the international competition. The problem is that the foreign companies usually will quickly copy any internal efficiency that is developed.

If a company cannot successfully combat import competition caused by foreign government's subsidies, they often ask their own governments for help. Companies request that their government restrict imports in their industry or open up export markets for them to compete. However, governments cannot help every company that faces competition from foreign imports. Companies stand the best chance of receiving help from their government if they ally with the other domestic companies in their industry. The government still might not be willing to help, as in most cases helping one industry will end up hurting another.

Written by Carl Phelps, Research Associate for GLOBAL ID, LLC
Visit Our Website! www.identifyglobal.com

The Department of Export Promotion (DEP)

As a creation of the (Thai) Ministry of Commerce, the DEP plays an essential role in the promotion of international trade with Thailand. The DEP seeks to boost exports in an effort to grow the national economy and eventually overcome Thailand's trade deficit. To achieve its goals, the DEP is focused on developing the country's core competencies to add value to locally produced goods and services. Additionally, the application of new approaches to international trade including the DEP's 53 Overseas Trade Promotion Offices, have facilitated the growth of Thailand's international trading network.

What could the DEP's strategy mean for your company?
· Employing superior technology in manufacturing will increase product quality.
· Global sourcing for raw materials, machinery, and other inputs will allow the maintenance of competitive production costs.
· Thai manufacturers will receive assistance from the DEP to raise product quality to international standards.
· The elimination of trade barriers through numerous free trade agreements, streamlining business activities.

These are just few of the benefits arising from trade in Thailand.

Written by Yeukayi Nenjerama - Facilitator of Sales and Marketing in Asian Cultures for Study Aboard Cruises

Visit Our Website! www.identifyglobal.com

A Common Misconception

There is a common misconception by U.S. companies that lower wage countries are less productive when in reality the opposite is true. The higher rate of unemployment in many low-wage Asian countries, as compared to the U.S. rate of unemployment, means that manufacturing companies can be more selective about who they choose to hire. The higher rate of unemployment leads to a genuinely lower turnover rate. Therefore, companies can spend more money on training and development in their Asian subsidiaries and production facilities. The end result is not just lower wages, but also higher productivity than in the U.S.

Written by Kelly Kasic, President of GLOBAL ID, LLC

Visit Our Website! www.identifyglobal.com

Summer Palace Pleasure

There are many cultural sites that make Beijing a vacation destination; the Great Wall, the Forbidden City, Linggu Temple, Dr. Sun Yat-sen’s Mausoleum, the Temple of Heaven, and Tiananmen Square to name a few. A month ago I traveled to all of these sites, but none of them impressed me as much as the Summer Palace. Don’t get me wrong, the Great Wall is certainly impressive and not to be missed, but after about an hour of walking you still are looking at a lot of bricks.

The Summer Palace is located about 9 miles northwest from the heart of Beijing. This imperial palace sits atop a lush, green hill overlooking the large, blue Kunming Lake. Originally built in 1153 under the Jin Dynasty, the palace received its name in 1888 when Empress Dowager Cixi used silver to repair and restore it. Walking through the palace you are instantly taken back in time.

In order to tour the Summer Palace, you must climb several small stairs that wind and cut through large boulders – but this cultural tour is not dangerous nor is it strenuous (there were even women performing Tai-Chi in a stone courtyard midway up the hill). When you reach the top there is a breathtaking, nearly panoramic view of the Lake and the land. But, your tour is not complete. Next you must walk through the vibrantly painted rooms and halls, past the towering pagoda, to the lakeshore. There you will take a dragon-shaped boat across the Lake to an island. The neatly manicured island is attached to the 17-Arch Bridge. Cross over this magnificent bridge to a vendor-lined, cobblestone street. Make sure to enjoy an ice cream treat before riding another dragon boat back to the entrance of the remarkable Summer Palace.

You will want to have an empty memory card to take several pictures of this brightly painted Palace set atop a hill.

­­­­­­For additional information on Beijing travel, contact Kelly Kasic, President of GLOBAL ID, LLC. – A Management Consulting and International Market Research Company. http://www.identifyglobal.com/

Exporting May Not be the Best Option

There are several situations in which exporting may not be the most feasible form of entering a foreign market. If it is cheaper to produce the product abroad then it is more cost-effective to establish a manufacturing facility in the foreign market. This will be a more productive way to serve that market and its surrounding export markets. If the transportation costs of exporting to the foreign market are a high percentage of the manufacturing costs, then exporting won’t be very efficient. Keep in mind that the farther the market is from the home country, the higher the transportation costs and transportation costs can vary a lot depending on the product. If the product needs to be altered to better serve this foreign market, an additional investment might be needed. It may be more efficient to make this investment in the foreign market to save on transportation costs. Also, trade barriers play a huge role in deterring exports to foreign markets. If the market is large enough, it might be worthwhile to invest directly in these countries in order to bypass the trade restrictions. These are several situations in which exporting may not be the appropriate option for pursuing international business, however there are many factors that go into such an important decision.

Written by Carl Phelps, Research Associate for GLOBAL ID

To Learn More About Exporting and Other Options For Expanding Overseas, Visit Our Website: http://www.identifyglobal.com/