INTERNATIONAL BUSINESS: An introduction from an African perspective by Chanpraneth Duong

Part I Acknowledgements

Dedication

Acronyms

List of appendices

Preface

Introduction

Situational analysis/Overview

Importance of study

International Business Defined

Studying International Business Challenges

Cardinal prior data

Established Regional Economic groupings

Essential marks of an international merchant

Direct Foreign investment investigated

Hurdles faced by International individuals

Types of international workers

International Business, present and in future

Chapter 8 Chapter 9 International Business

Part II

89 102 Billy C Sichone

Chapter 10 Chapter 11 Chapter 12

106 110 115

Bibliography

124

Appendix B

140

Appendix C

174

International Business

Billy C Sichone

If I were to list all the people that helped in generating this work, I would need many volumes to do so but suffice it to say that I am indebted to all those that toiled with me either physically or emotionally during those long, weary, sweaty and lonely hours as I plucked information from the â&#x20AC;&#x153;Data treeâ&#x20AC;?. Many times, I felt like giving up but the gentle whisper of encouragement kept me going. Special thanks Chikondi & Anne Phiri and Marlon & Bupe Banda who have always believed that I could make it even when the chips were down. It goes with out saying that the backbone of my studies has been the shining one, Jane Msimuko... As I have grown older, I have become increasingly aware that my parents have played a major role in spurring me on in my quest to reach the highest orbs, I salute them uniquely. Others too numerous to mention are equally saluted. On then academic front, it would be unjust to claim originality in many assertions and conclusions I have drawn in this work as many of the initial thoughts are derived and triggered from various sources such as books and individuals. I must also state that all the errors in this book remain mine. To all those people and sources, I say thank you. Billy C Sichone

International Business

Billy C Sichone

To the apex of my joy-Jane and Zevyanji I cherish you very much &

To my parents, who impressed upon me from youth that this dark world only applauds winners and afflicts losers

International Business

Billy C Sichone

1. AIDS

Acquired Immunal Deficiency Syndrome

2. AU

African Union

3. CIDA

Canadian International Dev. Agency

4. COMESA

Common Market for East and South Africa

5. CSO

Central statistics office

6. DRC

Democratic Republic of Congo

7. FDI

Foreign Direct Investment

8. ECOWAS

Economic Community of West African States

9. GIS

Geographical information systems

10. GRZ

Government of the Republic of Zambia

11. GMO

Genetically modified organism

12. HIV

Human Immune deficiency Virus

13. IGO

Inter-Governmental Organization

14. IT

Information Technology

15. IB

International Business

16. MIS

Management Information System

17. NGO

Non-Government Organization

18. NEPAD

New partnership in African development

19. OAU

International Business

Organization of African Unity Billy C Sichone

20. PhD

Doctor of Philosophy

21. SADC

South African Development Community

22. SWOT

Strengths, weaknesses, opportunities, Threats

23. SRC

Self reference Criterion

24. WVI

World Vision International

25. WVZ

World Vision Zambia

26. WVC

World Vision Canada

International Business

Billy C Sichone

!! "

Appendix B Case studies a. The Mongu rice & fish b. The race to Mongu-Buses c. etc Appendix C Other case studies

International Business

Billy C Sichone

! '

$$% # &

(

Charles Hill, International Business, 2001

International Business

Billy C Sichone

digital, mechanical, photocopying, recording, or otherwise, without prior written permission of the copyright owner.

The paper upon which your eyes now peer results from the

resilient and relentless labours of an ant like cohesive team that diligently laboured to produce it. In many senses, it is a synthesis of the plethora of books already dealing with the subject of International Business (IB). International business is impossible to ignore any more as every one is affected, from the peasant farmer in Shangombo district (Rural Western Zambia) who hardly has any tangible wealth to the bwanaℵ whose neck can hardly be differentiated from the head due to the countless fat folds on the neck! Some people spend half their lives on the surfing, buying and selling on the Internet while others tread the deadly path of crossing rivers while balancing in a canoe all night! All these are in some way involved in International business because the product of their labours affect some sector of the world economy in one way or other, no matter how insignificant. Thus, this research paper seeks to bring together the various facets connected in carrying out IB so as to finally fetch a good price leading to economic development. In coming up with this volume, the author has traversed far and wide in search of valuable data. In doing this, various methods were employed but the chief of them was reference to the countless parchments out lying out there. This work is divided into two parts with various chapters and then crowned with a number of case studies largely generated by the author to further consolidate the work. It is the hearty prayer of this writer that the work will prove ℵ

“Bwana”- refers to a Wealthy comfortable person

International Business

Billy C Sichone

a tangible reference manual for pilgrims yet to come along this path that we now tread, although the business conditions and context will have tremendously altered by then. Now unto Him that called us be eternal praise, Amen! Billy Chilongo Sichone 21/01/2003

Mongu -Zambia

International Business

Billy C Sichone

The imperative need to study international business hardly needs any introduction. This volume puts together some aspects that compound to make up the successful contemporary international businessperson regardless of gender, location or status. A complete mental paradigm shift is inevitable. It is hoped that this will be a worthwhile study. In this book, International Business (IB) and globalisation are used inter changeably though strictly speaking, a distinction can be drawn. For us to appreciate the issue at hand, i.e. the alleged marginalisation of Africa in IB, it is prudent to expound IB to some degree so as to give a good background upon which to handle various issues emanating from there. The issue at hand can no better be described than in the words that are quoted below from some Business authority: â&#x20AC;&#x153;Rapid technology change and the increasing global nature of competition are forcing South African International Business

Billy C Sichone

firms to distribute their products more widely and quickly, cope with environmental change, and reduce costs…” Indeed, future successful businesses will treat the entire world as their domain in terms of meeting their supply and demand requirements. In such a globalised market, the domestic company will need to be sustainably competitive. Globalization is not a new concept, but there are relatively new factors that have contributed to its recent prominence, such as the opening of new markets for South African businesses and new communication and transport technology, resulting in a major expansion of International trade and investment. “The 1997,1998 and 1999 world competitiveness reports by the World Economic Forum in Switzerland show a decline in South Africa’s competitive position (relative to other newly industrialized nations), especially in the area of internationalization. Internationalization is measured in terms of trade, exports, imports, cross border investment flows (e.g. FDI),international alliances and partnerships with foreign firms, protectionism and export/import diversification. South Africa’s level of internationalization has declined since 1992, while in terms of partnerships with foreign firms, the country occupies the penultimate competitive position among newly industrialized nations. Although South Africa’s relative position has declined, the country is still rated among the top five emerging markets in the World…with Hong Kong, Malaysia, India, South Korea”Θ Many people have made assertions in different forums that Africa stands to universally lose despite being the major global primary raw material source. Among the giants of our day is Dr Kaunda of Zambia who has asserted repeatedly that Africa has been left on the fringes as globalisation takes root on the planet. The venerable Kenneth Kaunda asserts that Africa stands in peculiarly vulnerable Θ

Global Business pp 4& 5. Source of comparative data: Morgan Stanley, Business report January 15,1999. We may add China in 2008.

International Business

Billy C Sichone

dire straits, as it does not have the capacity to handle the dynamic technologically accelerated business whirl winds. Others have flatly and consistently rejected these claims and advanced contra opinions. In the book, we set out to contrast these conflicting assertions and in the process offering a position based on our findings. Thus, the questions that beg answering are: 1. Is Africa really left on the margins by globalisation? 2. If so, why? Varying views advanced. 3. How? 4. To what extent? 5. The effect of Globalisation on Africa 6. What options are left for Africa? 7. What does the future of Africa look like in tomorrowâ&#x20AC;&#x2122;s global village, Africaâ&#x20AC;&#x2122;s role and position. For our study to be meaningful, we shall first give the background, and then narrow our discussion on the questions raised above.

International Business

Billy C Sichone

International business in perspective International business is taking different shades and is in many senses unavoidable todayΝ. This dynamic world is rapidly mutating to the extent that it has been reduced to a “Global village”. This assertion is true in every sense because what happens in one part of the world has a rippling effect on some business transaction thousands of kilometres away. Many a nation that was firmly gripped in one ideological clutches and wedded to poverty are now bursting out of the repressive cocoons and making strides to claim a place among the world’s great economic trading giants. For Instance, Zambia has been under going rapid transformation from a command economy to a vibrant market economyΛ. No longer will people have to queue up to buy essential commodities but will simply walk into a shop and purchase whatever they wish at will. Unfortunately, the infant local industries have suffocated in the process as a result of the unprecedented fierce competition exacerbated by inescapable FDI. In real terms, Zambia is a mere trading country (1992-2002 and beyond) that exists as a consumer market rather than a producer. At best, it can be viewed as an extended province of the Herculean South African economy. Be that as it may, it is in a way unavoidable as trade is no longer localized but goes far and wide. It defies trade barriers or country boundaries. Ten years down the line after the privatisation act of 1992, the majority of Zambians do not know what is going on and are still looking back to “Egypt” like the Children of Israel did after departing from bondage when things got tough. (Exodus 16:2-3, Holy Bible). In a sense, the cross roads are confusing to the unschooled mind. As such, it is critical to have well informed as well as correctly position the right people in the right places at the right time to lead the multinational companies. We are now experiencing the first generation of global managers Ν

Refer to The Post news paper of Tuesday 10th December, 2002 pp 2. Article entitled “Globalization is here and there is nothing we can do to stop it-Mfula” check also the Editorial comment for the same day. Λ Refer to Zambia-A review of commerce, industry & tourism millennium edition “foreword” pp3 2000

International Business

Billy C Sichone

whose mettle is tested on international assignments, where they manage organizations with a diverse work force and perceive things in different ways due to the script inscribed on their souls. It is to this end that this book was written, so that the international managerâ&#x20AC;&#x2122;s role in the rapidly mutating business environment can be fully appreciated and understood. In other words, this volume is a synthesis of many of the extant books on the academic business market today. Thus, we seek to outline the changing function of the International business Manager and also hope to answer one question whether Africa has really been marginalized by globalisation. The latter part is dealt with in the second part of this book. The work is monumental in that it covers all aspects of the International Manager albeit in a veiled form sometimes. To do this, the work is divided into several parts, each focusing on various aspects such as the over view of international business, the cultural environmental aspects, the techniques to assess the market opportunities, ways to develop strategies, the corporate context of Marketing in financial terms, the effect of globalisation on Africaâ&#x20AC;&#x2122;s marginalisation and finally the supplement which among many things contains a mini bank of case studies wrapping up the various sections listed above. !

The study at hand is one that demands clear thinking and a high analytical

prowess on the part of the researcher. As such, it is equally very critical to mark well the parameters of the study as well as the limitations that might affect the results.

With respect to scope and in view of the vastness of the subject, we shall first give general definitions and then zero in on the international business scenario as it affects the Nations. In other words, this is a comparative study of what obtained yesterday and what is will be the case in the not too distant future. The ideal would have been to concentrate on a locality and do a detailed scan but the nature of the subject at hand forbids that to some extent. That not withstanding, we have did a general over view, drew principles that we applied. Put differently, we limited ourselves to the changing nature of business and role of an international individual. This approach thus highlighted the important features and considerations to be taken before hand. International Business

Billy C Sichone

To that end then, we visited many websites, books and consulted some leading business leaders. By that token the major limitations revolved around the lack of visiting many sites mentioned in the study as well as the inability to carry out some kind of verification or scientific sampling method. The impact on the study is that the bulk of the conclusions result from a wide scope of reading, which might lead to subjectivity on the part of the researcher, the Self Reference Criterion (SRC), may rear its head once in a while. In a nutshell, this study is limited to a literature review. &

As earlier intimated, the bulk of the data portrayed in this work is basically

on the readings gathered over time either through the internet, TV, hard copies or even through various discussion forums informally and other wise. Thus, as the research went on, documentation took place as the bibliography/references will ably attest. Where possible, actual verification took place to ascertain the assertions.

' ! % From the above painted scenario (Situational analysis) it is therefore

extremely critical to embark on the study of international business. But why bother our selves in the study of International business; after all, the vast majority of people spend their lives hardly going beyond the borders of their countries. In attempting to answer that question, it is necessary to state that such gross ignorance catches many a soul unaware making them wonder at what has hit them when business calamity strikes. The problem at hand is that International business affects all of us regardless of where we live in one-way or the other. The other secondary reason is that ignorance hinders diligence, enterprise and proactivity. In point form, the critical importance of this study is given below: 1. The rapid globalization of world business. 2. The emergence of economic blocks e.g. NAFTA, EU SADC etc 3. The proliferation of â&#x20AC;&#x153;United Statesâ&#x20AC;? e.g. European Union, USA, African Union etc 4. The Changing face of international politics, law, trade etc 5. The impact of Information Technology on trade 6. The rise of the international employee and employer International Business

Billy C Sichone

7. The rise and fall of the huge multinational companies in relation to the virtual companies. 8. The transition to the brand name rather than to assets, factories or plants 9. The impact of Environmentalism on international business. 10. The accelerated rate of business and its impact on world, nations and people. 11. The rise and fall of economic giants today and tomorrow. 12. Further, international business conditions are having an increasingly significant impact on organization in the following ways: a. They affect the nature of the industry, b. They affect the various positions of different countries, the size and wealth of their markets and prosperity and efficiency of their productive bases, c. They affect the management, by governments or international institutional distributions, of the frame work in which business is done and the nature of international relations. 13. Available investment opportunities-Investment has been loosely defined as “the sacrifice of something now for the prospect of something later. This means that either individually, as a company or as a country, we forgo the consumption of goods today in order to achieve greater consumption in future. The essence of investment is time and also risk"Ν 14. The impact of world problems on business such as terrorism and its repercussions (Remember the September 11 2001 attack on the New York World trade tower buildings? How has it affected trade and investment?), natural disasters and war.Ν 15. The recent winds of change politically and otherwise e.g. the demise of apartheid, the collapse of Communism, the proliferation of democracy and the rapid transition from Command to Market economies, the world population exponential explosion, the outsourcing trend as well as the coming to age of once insignificant trade players like China in to world trade markets etc. All these have to be studied and meticulously grasped in order to eke a clear path to success. Ν

Success in Investment 3rd Edition pp1 1987 by R.G Winfield & S.J.Curry Personally, I am beginning to rank the USA as a kind of terrorist that bashes and bullies other countries around in the name of fighting terrorism. A case in point is the recent harassment of Iraq totally over looking the UN inspection team report. The UN is toothless against the States, for they cannot control this eccentric giant run out of its cage. In principle, the USA concerns are fine and justifiable, which I would support but to over look protocal and laid down procedure amounts to terrorism. That not with standing, the new terrorism must be checked and regulated lest it induces the third World war. π

International Business

Billy C Sichone

16. The impact of HIV/AIDS on International business, trade and security×. At one time, Aids was ignored as a small controllable problem but in the past decade or so, the ravaging effects are beginning to bite. Many a development agent is beginning to pay more particular attention to this scourge as it threatens to wipe out all developmental strides hither to achieved. This issue has been noted by some of the leading transformational developmental agencies in the World, the World Vision International. Most of the strategies are now designed with the pandemic in view. 17. The effect of Africa’s marginalisation in a global economy. Going by the above points, it is very clear that the study of the subject at hand goes without saying, it is cardinal. With a good appreciation of the above highlighted facts, it would avert many a business shipwreck that attends many an initially grand and successful enterprise. The objective then of this study is to expose people to factors that affect international business if they are to venture out there successfully, for many a ship runs aground among the rocks for want of light about the high seas of international business.

Check Dr Kaunda’s assertions in the Post newspaper dated 28th July 2002 pp 1 “HIV is becoming a threat to Security-KK” issue # 2111SU34.Read the Editorial comment as well.

International Business

Billy C Sichone

(

In progressing to study international business it is fitting for us to define

terms so that we have a common understanding. What is International Business? How does it impact on our every day lives? What is the history and future of International business? Admittedly, the precise definition for IB is elusive and difficult to elaborate in capsule form but one person has defined it as “The carrying out of business transactions in either service, import or export trade terms from one country to another”ϒ. Dr Bennett has the following to say: “International business involves commercial activities that cross national frontiers. It concerns the international movement of goods, capital, services, employees and technology; importing and exporting; cross-border transactions in intellectual property (patents, trade marks, know-how, copyright materials, etc) via licensing and franchising; investments in physical and financial assets in foreign countries…”Φ This elaborate definition is comprehensive but not quite precise. The question there fore still lingers, What exactly is International business? Cateora has given a more precise definition as “the performance of business activities that direct the flow of a country’s goods and services to consumers or users in more than one nation for a profit.”ε The profit motive is paramount. Cleary, from this definition, we can see that IB transcends traditional political boundaries and affects all people everywhere regardless of their location. To amplify the definition further, IB is that combination of business transactions across countries regardless of their geographical locations or political boundaries. The major catalysts to this kind of trade development are technology, money, knowledge, time and demand. The nature of International business is a complex web constituted of various different disciplines. For instance, International relations, Marketing, Finance, Information Technology, Management, quality and myriad other areas are all intertwined and locked up in the phrase “International Business” and as such makes it difficult to come up with one ϒ

Definition supplied by the author Roger Bennett PhD, International Business 2nd edition 2000 pp1 ε Philip Cateora International marketing 9th edition pp 6-This is the definition for “International Marketing” Φ

International Business

Billy C Sichone

simple definition without doing injustice to the other elements of the compound word “International Business”. A fourth definition from Daniel J.D & Radebaugh L.H attempts to put it more succinctly as follows: “Global1 business involves all those commercial activities between two or more countries. These commercial activities may be under taken by private companies with a view to profit-making, or Government organizations in which case there is a generally no profit motive” further still, Czinkota R says “ Global commercial activities are defined as the movement of resources, goods, services and skills over international borders. The resources involved are raw materials, capital, people, and technology, while goods refer to half finished and finished products. Services include accounting, advertising, communications, computer services, advisory services, education and training, legal opinions and banking activities, while skills cover management and technical skills”ιA short history of International business is handy at this stage. Business transactions have been going on for many generations dating back to pre historic times albeit in a different format. Before money was established as the universal medium of exchange, people used to trade locally and abroad, though modern political boundaries not there. Never the less, akin to Hyenas, people knew by instinct the stretches of their boundaries. In Southern province of Zambia, a place called the “Ngombe illede” has been excavated and evidence exists that foreign trade took place there. Among the merchandise that was traded was salt, guns and probably slaves. Another Baobab tree in Southern Province still where slave trade flourished can be found in Livingstone. In Biblical times, Athens, Greece was a centre of international trade and learning (Acts 17). Jerusalem must have been another trading centre in ancient times (Acts 2:5). For now, we progress highlight the various types of businesses and the players there in. All these were focal points for trading in the various localities. Modern international trade follows the same principles though on a higher and more complex level.

) ! 1. 2. 3. 4.

Merchandise exports and imports Service exports and imports Tourism and Transportation Use of assets;

Note that “Global” is different from “International” business J.D & Radebaugh .L.H 1998 International business: environments and Operations 8th edition ι Czinkota R C Ronkainen as quaoted in Global business pp5

International Business

Billy C Sichone

5. Investments, including direct and portfolio investments, licensing, concessions and turn key investments, cooperative agreements; 6. Multi national enterprise Trends in later nationalization of business: some mega trends influencing International Business include: 1. Technological renewal (Reinforcing the importance.) 2. The rediscovery of capitalism. 3. The development of the services industry. 4. The development of regional trading blocs 5. Increasing ties between different economics; 6. The fact that the U.S.A is currently the #1 economic force in the world. 7. Increasing competition among the international industries. 8. The unstable international political climate; 9. Changing demographic patterns and the impact of AIDS; 10. Outsourcing 11. Privatisation 12. Changing value systems & * !

The international business industry has many players but for now, we synthesize two major classes)

+,This is where the entity exists primarily to make profit and will do anything to remain competitive as long as possible profitably regardless of what happens to the competitors. This is where the vast majority of businesses fall especially the large Multinational Corporation∞ that operate in the international business environment. Usually, the direct investment strategy has been used hither to by the MNC rather than exporting from the country of origin. ∞

Daniel Papp states that Globally, there are at least 7,500 privately owned corporations operating at least 27,000 subsidiaries in other countries pp 80 2nd edition “contemporary international relations”

International Business

Billy C Sichone

The profit making entities (Direct investors or mere exporters/ importers) are by far the most influential players in the International environment in that they have been around for a longer time than the non-profit making organizations. Even in Biblical times, the profit motive was emphasized except that certain ethics were observed. A case in point is the story of the shrewd manager in Luke 16 & 19. For any business to survive today, they have to be ready to change and watch the environment meticulously. The business entity seeks to cut a niche that is far above all other competitors. For a number of years in the 20th Century, the command economies apparently succeeded by creating the huge monopolies that tended to distort the world economy. For instance, in Zambia at one time, one could not get essential commodities easily even though they had cash because the prices and production were centrally controlled and determined by the state. This went on for over two decades until 1991 when the country switched to a free market economy. Although the sudden transition was drastic, painful and hasty, the potential benefits are great. As these words are typed, one can go into almost any shop and get goods that were once a pipe dream years ago. The issues at play are that the government has with drawn from active control of business but plays the role of facilitator by creating a conducive environment. Thus, we have witnessed an upsurge of many entrepreneurs in the last decade (from 1991) and this is likely to increase. By that token, we have also seen an upswing of many businesses from all angles of the globe placing their bait on the Zambian market. Most of these, as earlier intimated are profit driven and will do any and every thing to get as much profit as possible, some times at the expense of the native. In this selfsame setting, what ultimately sells is the good that is timely, convenient, the right price, place and high quality. By that token, the international business entity must satisfy customers in the far-flung areas of the world. A homogeneous taste of goods is envisioned as the market becomes global, with the aid of the already powerful marketing machinery. Although most of the traditional monopolies are paralysed in the business bone yard, some modern monopolies have arisen. A case in point is the Microsoft company run by the famous Bill Gates. Almost all the operating systems in the world today are based on this companyâ&#x20AC;&#x2122;s genius. Other competitors are in danger of extinction unless they come up with a magic formula to dislodge Gates. International business, with its sharp profit motive how ever brings problems for the poorer nation as their market is limited or manipulated International Business

Billy C Sichone

by the richer nationsÂľ. For instance, the Genetically Modified Organism (GMO) saga that has buffeted Zambia lately (2002) has to do with international trade at the back of the curtains (behind the scenes). Principally, to accept GMO is potentially to close the naturally grown species market of the European Union. Thus, to preserve the little that remains, the country decided to reject GMO maize, at least for a season so as to still command some European market. Unfortunately for Zambia, all its neighbours have accepted the self same GMO effectively making Zambia look the odd one out. With the human eye, the refusal looks barbaric but in the long run may be a strength for generations yet to step this way. There are other areas at hand such as the tax rebates, the foreign exchange controls and the employment of expatriates as well as the externalization of cash. But what are the characteristics of the normal profit making organization? The following come to mind: 1. They are more focused on the profit and loss account as well as the balance sheet. Unlike the non-profit making organizations, these organizations are only interested in a person as long as they add value to the organization and able to perform, the absence of which spells doom for the same. Should there be any indication of losses, then the witch hunting begins and not a few heads roll. The organization hardly bothers about staff welfare, community benefit or the conditions in which people work. What counts is raking in millions of cash. 2. The financial portfolios/offices are usually very important comparatively. In this we mean that because the profit making organizations are keener to reap as much cash as possible, the people that take care of the self same cash take a prominent place in decision making at the expense of other equally critical staff. Where the Accountant is the final decision maker, just know that the organization places high value on cash. Although this is the case, many non-profit making organizations are beginning to veer towards this extreme, as the budget is a key component of the proposal success. 3. The workers employed are only those that are critical and add value to the organization. Closely connected to # 1 above, the people Âľ

Refer to Dr Kenneth Kaundaâ&#x20AC;&#x2122;s aasertion in the Post news paper dated 29th September 2002 pp1 & 4

International Business

Billy C Sichone

employed are either the needful professionals or cheap labour, depending on what is at stake. Should one be found wanting or redundant, they are pruned off without much ado. This is the ugly face of the profit making organization. The company is only perceived to be meeting its objectives when it continues to make roaring profits regardless of the social obligations, although this assertion is debatable today. Again this is related to # 1 above but the thrust here is the aspect of the heartlessness of the traditional profit making organization. The progressive ones are slowly becoming holistic in approach and will go beyond the pay cheque to look after their employees much better. This modern approach is viewed as critical because a well-supported staff with the right environment will perform wonders the next time they step into the office. Basically, a troubled mind will hardly maximise the latent potential. The profit making organization changes more radically and frequently than the non-profit making organization although this may not be entirely true in the near future. Since the profit making organization is all about cash, it must needs be in touch with the changing world so as to keep in step with the times. As such, re engineering and mutations are the order of the day without due regard to the players or the employees. If it means laying off any number of workers so as to remain competitive and profitable, the organization will do just that immediately. The profit making organization will use any lawful means no matter what it costs to get a competitive edge over others. This goes without saying, as â&#x20AC;&#x153;survival of the fittestâ&#x20AC;? is the game rule, much like atheistic Darwin used to proclaim. The profit making organization usually is top down in management approach although this is slowly changing as more companies adopt the modern progressive styles. This is the usual trend in ancient organization where the top brass is viewed as the infallibles in all decision-making issues. This approach, as has been portrayed in modern management studies is hardly helpful but sadly true. The view of this type of structure is that the strategic planners know better what is at stake and thus are better positioned to show the direction of the wind. In the profit making organization, the customer is king, quality is paramount and time is another dimension to success. Today, unlike in the past, the customer is the one that calls the shots. All products

International Business

Billy C Sichone

worth their salt will be customer taste driven and will be of the highest quality standards. In the past, the customer had no say and bought what was available but today, prior market research is critical in ascertaining what the customer wants and needs not what the company perceives the customer might or will need. 9. Company image is guarded jealously because this has an effect on future sales. Closely connected to # 8 above, the quest to maintain a high profile and image, organizations will do every thing to satisfy the customer, knowing that these same people are the ones who will market the products to other people. Hence, the “bending backwards” syndrome to please the king (customer) 10. Brand name is key to many businesses and when a company sale is taking place, this intangible asset value is factored into the price as the good will. This explains why some names are protected from all angles from Pirates. A classic example is the Microsoft XP program that can only be installed once. This is a bid to clamp down on plagiarism and piracy that damages the product/brand image. From the above mentioned points, we can safely assert that the only way to succeed is to have the right acumen, information, financial muscle and team to achieve maximum success in a given time frame and locality

This is where the entity functions on the income and expenditure basis. The non-profit making organization receives, spends and reports on the cash received from a donor. Most of the NGOs, Societies, clubs and research institutes fall in to this category. The NGO industry begun as a small insignificant player in world business and was largely ignored but as the decades have gone by, the position has radically altered. The once little stream is now a flood of activity. In his book “contemporary International relations”Β, Daniel Papp traces the development of the NGO world into a formidable force in world business. Papp devotes an entire chapter and shows that the world cannot avoid this new trend. Among the reasons that have made NGOs flourish is the confidence, principles and the relative lack of bureaucracy and red tape that characterizes the world’s governments although non profit making themselves. The Β

Refer to Chapter 5 of the book where he highlights the International Governmental organizations (IGO) and other significant players. He further states that at the publishing time of edition, that the NGO influence has risen drastically since the second world war.

International Business

Billy C Sichone

following points give in capsule form, the fertile ground for NGO sprouting: 1. The NGOs are usually freer from Bureaucracy than other government or quasi government institutions. In the early stages of organizational development, the NGOs, like any other organism, tend to be very fluid, agile, lean and proactive in many senses compared to the slothful gigantic structures common to us. An issue that would ordinarily take a year to decide upon the traditional setting would hardly take a day or week to be responded to and action taken. Thus, many donors would naturally opt to work with such progressive, accountable and responsive organizations. Another feature tied to fluidity is accountability that is further elaborated upon in point (4) below. 2. The NGOs are usually agile and ready to change. Apart from fluidity, the said NGOs are always interacting with the environment and by that token mutate more frequently and easily. The lead NGOs of today are ever learning and continuously improving on the quality delivery systems that may not be so for the complex government. To capture attention in this fast changing world, one must be ahead of rivals, in this case the rival are the governments and other bureaucratic entities. 3. The NGOs move by principle and by that token are usually nonpartisan in approach. This is one of the greatest hallmarks of NGOs that has put them on the horizon. Most of the other entities are either partisan or not objective in their approach to issues whereas the NGOs maintain a clear stand and seek to toll that line to the very end. For instance, when a political party ascends to power, it rarely maintains the objectivity it claims to have during the run up to the elections. This stance is hardly surprising especially in the African setting but as for the NGOs, most of them are not tied to governments or other related agencies that hijack objectivity. 4. The NGOs are usually very strict with accountability and will ensure a task is done timorously and according to plan. This is another plus that accrues to NGOs as they are usually very strict and will always account for cash to the last coin, unlike many a government that will seize every opportunity to divert funds either in cash form or by having endless workshops and planning meetings. In the end, the intended beneficiaries hardly see any thing of the so much publicized grants or loans. The picture is different for the NGO world that justifies every expense.

International Business

Billy C Sichone

5. The NGOs are the vehicle for modern human rights advocacy for the voiceless in the world. In this, most NGOs ensure that they seek to bring about equity in all areas and go beyond lip service in what they pledge themselves to. 6. Unlike many a poor government, many NGOs never divert funds but stick to budget and goals. This is closely connected to# 4 above except that the thrust lies on the strictness to budget and goals. The activities to be done are usually specific and well planned to the finer details thereby leaving no room for diversion of funds. The said NGOs go by benchmarks and plan of action. Constant review is the order of the day. This may not necessarily hold true in other entities. 7. NGOs usually relocate from place to place depending on the need in a particular area and thus cannot be tied to a place forever unless they are relevant. The traditional institutions are usually static, and permanently stationed in one place but the NGOs usually run by projects that have a definite life span after which they either relocate or renew the mandate so as to record the intended impact. This “pilgrim” status makes NGOs go focused and less expensive to run in the long term. This assertion is strengthened by the way in which people can be safely laid off without much ado, in terms of paying them their terminal dues. The contract arrangement ties in well with NGOs though this may be a booby trap to settle old scores. In any case, many donors pledge funds yearly. 8. Tied to (7) above, most of the huge NGOs are international in out look and presence thus have the ability to handle the global dynamics and easily adapt. By that token, the NGOs are in one sense local but also international in influence. 9. Usually, many NGOs although neither partisan nor antagonistic, will usually work with the Government of the day. Their role is usually complementary, depending on its mandate. For instance, the World Vision International adopts the local country nomenclature such as “World Vision Zambia” so that the indigenous face might be maintained and yet in the same breath is a partnership of Christians in over 95 countries. Same goes for CARE international. 10. Usually, most NGOs are implementing agencies and as such source funds from various donors. Some of the donors are individuals, Governments, religious organizations or indeed other institutions. The task for many an NGO is to ensure the maximum benefit reaches the targeted beneficiaries. 11. Agents of change e.g. transformational development… International Business

Billy C Sichone

There could be other latent strengths that NGOs have over the traditional Governments but they too have clay feet such as: 1. When they become too big, they tend to be bureaucratic and less effective. 2. They become too many for the available cash market and thus are too fragmented and their net impact is almost zero. It is harder now to get a dollar from a donor than it was 50 years ago due to the proliferation of NGO chasing the same static market. 3. Unfortunately, we have noted an upsurge of phoney NGOs that have appeared on the horizon akin to a meteorite and have either fizzled out or vanished with donor cash. This has created doubt and reluctance from the would be cash givers. 4. The nature of world business is that approaches and preferences are constantly changing and many an NGO have remained stuck to ancient strategies that won battles in yester years but are now obsolete. They are too slow to move with the times 5. In some cases, the donor requirements and demands may be contrary to the NGO objectives and thus hinder any collaboration. For instance, the World Vision International is Christian in essence and as such some donor demands are not compatible with the ethics. This leads to not a few dollars lost. Apostatic and atheistic donors cannot freely give their hard earned cash without injuring their consciences. 6. The International perspective of these self same organizations some times raises problems for some quarters within the same fold. For instance, if the organizational ethics forbid bribery but if in one country, one cannot get help unless a tip is given, this has brought about misunderstanding. The SRC often takes the centre stage and a judgmental spirit crops up. Thus, we have briefly glanced at another type of international business player, we now proceed to briefly outline the conditions favouring International business before we later venture to consider some problems encountered in the study of the subject at hand. Let us keep the objective eye sharp in focus as we hurtle along.

International Business

Billy C Sichone

1. Stable Economy i.e. inflation manageableϒ 2. Stable political climate 3. Free & open market i.e. major players are private enterprises, Market forces are determine the prices (by supply and demand) 4. Good communication network and data base 5. Favourable legal environment encouraging free trade 6. Incentives such as tax rebates Having shown the conditions needed for a sustained thriving international business environment, we now proceed to briefly lay down the stages leading to the ideal business environment.

International trade does not pop up suddenly from nowhere but has stages that it goes through as it evolves. As intimated later, these are not hard and fast rules but for the purposes of our study, the stages are used. Arthur Lewis, lists a number of stages that we out line below: 1. Exports- “A country cannot begin development from a subsistence level by producing for the home market only. An increase in per capita income increases demand for nearly everything, but no country can produce nearly everything…self-sustaining progress can continue only if the increase in imports is matched by an increase in exports…thus, if an increase in out put increases imports, there is a deficit of home spending. This releases goods that are automatically exported…”κ 2. Import substitution-The second stage of economic development is import substitution, producing for the home market. According to Lewis, a country cannot start its development by producing for the home market, but given export production, can generate further progress by substituting home production for imports….import substitution is not confined to manufactured goods and industrial equipment but includes the stimulation of raw materials production also. 3. Structural inflation- “Apart from technical factors, which determine which manufactures to make at home and which to import, the market for manufactures as a whole (domestic and imported) is limited by the ϒ

For example, Zambia has managed to arrest the uncontrollable inflationary trends to around 18% in 2002, though it should have reduced to 13% but due to the drought and other natural disasters, this has retarded progress. κ A Lewis, Development Planning 1979 pp38,39

International Business

Billy C Sichone

standard of living…the essence of structural inflation is that a more rapid growth of the economy is prevented by the low growth rate of exports and a too high propensity for import” 3. Breaking bottle necks that prevent domestic supplies from increasing in response to domestic demands, or else to increase the rate of growth of exports to what ever level would be consistent with the growth of out put and the propensity to import taken over. When the fourth stage is completed, elasticities of supply will be fairly high, but the country will still not be able to produce everything it consumes… Some of the bottle necks will be dealt with by implanting a farm policy, export promotion and balanced growth in all sectors.ϑ

(

If international development is ever going to take place effectively, a

number of issues must be addressed so that the right remedy is prescribed. For instance, it is very clear that there is a wide trade imbalance between nations and this definitely affects the levels of trade development. It would interest you to know that Africa’s trade size is just about 1% of the total world trade. To diagnose the root problem, we must first trace the stages of development and then ascertain the magnitude of the variance and the map out a way forward. Cateora, in his monumental work has this to say: The nations go through “5 economic stages and each stage is a function of the cost of labour, technological capability of buyers, scale of operation, interest rates and the level of production sophistication. Growth is the movement from one stage to another and countries in the first three stages are considered economically under developed… Stages: 1. Traditional society- this is composed of the least development where the literacy levels are very low. 2. The preconditions for take off- this is the process of transition to take off stage…advances of modern science are beginning to be applied in ϑ

Lewis pp 44-54 Some people like Dr KD Kaunda of Zambia strongly feel the policies employed by world bodies like the IMF are retrogressive rather than constructive. For instance, in the Post News paper of 17th Nov 2002 pp1 & 4, Kaunda asserts that IMF policies have reduced African countries to their weakest levels. In response, Dr Mark Ellyne representing the IMF rejects that view in the Post News paper of 20th November 2002 on page 8 ϒ

International Business

Billy C Sichone

trade & production. Development of transportation, communication, power, education, health and other public under takings are begun I a small but important way. 3. The take off. Countries achieve a growth pattern that becomes a normal condition. 4. The drive to maturity- after take off, sustained progress is maintained and economy seeks to extend modern technology to all fronts of economic activity. The economy takes on international involvement in this stage. The economy demonstrates that it has the technical & entrepreneurial skills to produce not every thing, but choose to produce.

5. The age of high mass production-leads to the leading economic

sectors toward durable consumers’ goods and services. Real income per capita rises to the point where very large number of people have significant amounts of discretionary income.”ι

Though well thought out and neatly laid out, the above stages are criticized as being impossible to categorically follow in the real world because countries have a mixture of issues at one and the same time. For instance, Zambia is a country that hardly has all the stage two features but has begun transacting on the international trade level. This is due to the liberalized economy and the advent of globalisation. As such, it is difficult to “box” a country into the neat break down. The next indicator to use in determining the trade imbalance levels is the Gross domestic product and Gross National product (GDP & GNP) although mentioned later on in the paper.

+, "- /

.-ƒ

Defined as two measures of a country’s economic activity. GDP is a measure of the market value of all goods and services produced within the boundaries of a nation, regardless of asset ownership. Unlike GNP, GDP excludes receipts from that nation’s business operations in foreign ι

Cateora P International Marketing 9th edition pp226. Stages first proposed by Walt W Rostow, the five stages of eceonomic growth 2nd edition (London: Cambridge University press 1971) p10 ƒ It may interest you that Zambia’s GDP rate has fluctuated over the years for instance the following statistics were recorded for the period 1987 to 1991 respectively: (%) 2.7,6.3,0.1,-0.5 & -1.8. Source: Profit magazine, April 1993 # 1/11 pp48

International Business

Billy C Sichone

countries, as well as the share of reinvested earnings in foreign facilities of domestic corporations. In other words, economic growth is generally understood to mean an increase in national production that results in a increase in average per capita GDP. When these indicators are compared from country to country, it becomes apparent which nation is doing better and thus a better investment destination. As an example, consider the table below showing the differences among four countries, USA, Zambia, Japan and the UK. The differences are so wide to the extent that Zambia’s economy would take over 200 years to grow to the levels of the USA: Table as at 1996 Country

Population (Millions)

Zambia USA UK JAPAN

9 255 57.9 124.3

GDP per capita 492√ 23,680 18,403 29,516

Cars in use (000) NA 142,956 22,744 37,076

TVs in use (000) NA 215,000 20,000 100,000

Tel in use (000) NA 144,056 26,084 57,657

Trucks in use (000) NA 45,416 3,685 22,839

Source:Table largely from Cateora’s international Marketing pp 265 exhibit 9-12 except the statistic on Zambia. NA= Not available at research time.

Cross border monitor August 31,1994, international trade statistics year book (New York United Nations, 1994)

The above data shows that Japan is fast catching up relative to the previous giants such as the UK.

0% Apart from the economic indicators as listed above, the availability of liquid cash in the hands of genuine investors will help enhance development. These selfsame investors will ordinarily build capacity and the industrial fabric of the economy leading to more generation of cash. As we know, excess cash in the economy will lead to inflation, yea, and hyperinflation unless meticulously handled. Another pit fall to be avoided is to allow limitless restrictions to remittance of the hard earned forex to other countries. Although this assertion may sound plausible, it is not √

Source: African Connexion international 1994 pp15

International Business

Billy C Sichone

exactly in keeping with the ethics of international borderless trade. Cash is the lubricant of economic development and must be present in the right proportions in a nation. Thus, a cash budget is ideal unless the economy has grown to high stable levels to reasonably cushion the effects of credit transactions. The liquidity ratio is critical.

In the modern world, one ignores Technology at their own peril as tool helps to accelerate economic development. Technology should be viewed in its widest and general sense, from Electronics to heavy-duty industrial machinery. For instance, in this information age, wider area networks (WAN) and databases are essential to timely responsive strategic action.

4. &

Going by the GDP/GNP as well as the stages high lighted earlier on, those nations at similar stages of development will experience better and more fair trade as they will be able to bargain. But if two countries at widely different levels of development trade, there is likely to be some trade imbalance and usually in favour of the economic giant.

When the world trade nerve centre was destroyed on September 11 2001, the world held its breathe because the New York stock exchange is by far the most lucrative and advanced in the World and to halt business for a while is extremely costly. The basic function of the stock exchange is to float, and trade in shares of different entities listed on the stock exchange. As such, only those companies with high profiles will generally list their company shares relative to the development stage of the exchange market. In Zambia for example, the stock exchange market (Lusaka stock exchange LUSE) is hardly a decade old, having begun in 1994•. Although stock exchange is gambling in principle, it never the less help to improve the economy in that

This aspect has turbid the developed economies into even higher orbs leaving the less developed nations wallowing in poverty. It is a good thing for the developed world but can be a nightmare for the poor nations. Dr Kaunda has asserted thus,”Globalisation has left Africa on the margins”-The post News paper, Sunday 29th September, 2002 pp 1 & 4 Issue # 2174SU43 • Refer to Zamba-a review of commerce, industry & tourism millennium edition pp14 2000

International Business

Billy C Sichone

company share/stocks either rise of fall depending on the performance of each individual entity as well as the economic conditions. Another critical aspect that must never be over looked in looking at the factors is the intertwining effects of the economic climate at which the IB activity finds itself. It should be noted that all economies, no matter how potent, goes through the following cycle: Upswing/recovery: This is when the economy begins to show some signs of life towards recovery. Some of these are: Businesses building up their inventories in reaction to rising sales, Investment in capital goods rises, and employment created. Then the economy is beginning to be ripe for more IB activities. Boom: As the upswing gathers momentum, hurdles begin to appear in the economy such as a shortage of skilled labour and raw materials due to the rising demand. Thus, the companies are forced to improve their capacities to reach optimum economies of scale. Optimism is at its height at this stage. Downswing/recession: After enjoying the euphoria of a recovered economy, and when people least expect, some thing just triggers another negative motion-the recession! This is to be most dreaded and in a way, planners ought to store up for the rainy day akin to what Joseph of Egypt centuries ago (Genesis 41, Holy Bible). What happens when a recession sets in is there is a sudden slow down in economic growth resulting in low sales and demand, increased bankruptcies and liquidations, high inflation, rapid currency power erosion and falling living standards. Depression: This is the advanced and severe form of a recession where a condition is created after the economic nose-diving. The Economy lies in that depression for a while before it begins to show signs of life signalling an upswing again. Some of the signs of the depression is lack of tangible economic activity such as production, high un employment, reduced spending, reduced profits and a weak currency. Thus, depending at what stage one embarks on the IB activity, this will affect the portability and viability of the business.

International Business

Billy C Sichone

It is remarkable that despite the studies over the years, a recession is to some extent unpredictableΜ in its magnitude and effects but one thing is sure, there will be a slow down in economic growth and business. A classic example is the one that took place in South East Asia a few years ago, after a powerful unprecedented economic boom followed by a steep slump due to the severe recession. The ripples of this went far a field not sparing even the perceived developed and stable economies. Thus we have shown that the trade imbalances and the conditions of the economy are critical for a thriving international business environment to evolve or else every attempt will be thwarted by the very factors thus mentioned above.

Although some signs can be identified. Refer to Andre Roux’s book “Everyone’s guide to the south African Economy” pp27

International Business

Billy C Sichone

(

n over view of the current business scenario reveals that people from different places look at one and the same issue and react differently. What may seem right to one person may not necessarily be so to the next due to our perceptions and values. As such, the International merchant must aware before hand that interpretations of similar events will vary significantly from place to place. This view of things is our Self-reference criterion (SRC) In business, care must be taken not to react by SRC as various different customs; tastes and cultures exist in the international business. The following are some of the problems encountered: 1. Differing ethicsι at varying locations but the same organization. Circumstances, perceptions and reactions differ radically from place to place. 2. The relativity of many issues. Closely connected to (1) above but slightly different in that this point emphasises the difficulty one has to come out dogmatically on issues at different points of the same organization as people and systems interpret issues variously. It is difficult to have one uniform standard. 3. The different cultures. The cultures play a major role in our accepting or rejecting new issues. Thus, if one does not imbibe the local culture well, it may hinder progress and in some cases block it all together. Thus the cultures must be handled meticulously lest we offend or send a wrong signal. For instance, the colour white means different things from place to place. In the Far Eastern Asia, white means death while in the west it means purity. 4. The different laws embraced and tolerated by the state. Some adopt the Roman law, while others favour the English law while other still favour the Islamic law. Incase of disputes, which law should be summoned? This is connected to the political environment.

Ethics are “enquiry into the nature and grounds of morality where the term morality is taken to mean moral judgements, standards and rules of conduct” Business ethics. Ferrel, Fraedrich, Ferrel pp 5

International Business

Billy C Sichone

5. The different country policies and rules. Some countries follow their own laws and rules that would be favourable to them and disregard other players in the environment. These rules could either foster or hinder international business. For instance, at the time of writing this thesis, the Zimbabwean government is bickering with the British, the former colonial master over the land reforms. As a result, Zimbabwe has applied policies and rules that will favour it (Zimbabwe) so as to hit back at Britain. 6. The attitude of the natives from different parts of the world. Some are very progressive and open while others are too conservative. This point largely explains why some parts of the world are more developed than others, including certain provinces of the same country. This last assertion is highly debatable though. 7. The religious inclinations especially where fundamentalism exists. When we talk about the religious inclinations, one cannot divorce these from the people themselves. For instance, in states that have declared themselves Moslem, Christian or Hindu, there is a strong emphasis placed on the interpretation of issues on the bedrock of religion. Whilst certain advertisement may be acceptable to certain religious sections, this is highly offensive to others. A point in case is the “Satanic Verses” by Salmon Rushdie in 1989/90. This raised untold uproar from the Moslem world while the Christian world wondered where the problem actually lay! Another case in point is the loss of a prominent World Vision International staff in Sudan recently↵ to suspected Moslem fundamentalist extremists. We could further stretch this further to the Miss World contest due to be held in Nigeria but abandoned and shifted to London after an advert considered offensive to the Moslem community relating to the contest. The advert suggested that the Prophet Mohammed if was alive today would have lusted after the beauty pageants! This insinuation left over 100 dead in the blood bath that ensuedκ. In a nutshell, where fundamentalism reigns supreme, certain places are no go areas for certain sectors of society.Τ Without this hindsight, a business can run aground sooner than it realizes. 8. The language barrier. This point goes without saying as language is an effective barrier to all and sundry. There is a way in which an ↵

September 2002,World Vision Zambia daily Vision Miss World Beauty Contest move to London, 2002. Refer to the Sunday Post newspaper of 24th November 2002. pp 10 Τ Refer to African connexion magazine volume 9 2nd qtr 1994 pp5 to read on threatening fundamentalism. κ

International Business

Billy C Sichone

excellent command of a native language, despite being a foreigner, posses a hidden prowess to unlock many an iron curtain. Long before venturing into a new area, it is advisable to get some basics about a particular lingua. 9. The different tastes of food clothing etc. This issue is relative from place to place. For instance, the Americans might be crazy about Kentucky fried Chickens≡ but when the same chickens are taken to Japan, they will not sale. No only in the area of food but in dress as well. The British worker will emphasise on formal dressing while the American will appear for a board meeting in Jeans! This is an example of tastes and attitudes. 10. The history of the places. Always, it is wise to enquire into the past of a given locality as this plays a major part in the way people react. If the place for instance is known to be highly superstitious, mystical and many ritual murders, it would help to introduce products that will not make people’s hair stand on end or ridicule the local traditions. 11. The topography and political boundaries. To some extent connected to (10) above, the area might have been locked up for ages from outside influence on account of the remoteness or landscape. Further, the political boundaries also have a way in which they either shield from outside influential winds or foster the same. Thus, it is critical to know before hand the accessibility of the areas in question. For instance, some parts of Canada are practically closed to certain activities during winter while some areas in Brazil are practically impossible to access due to the poor communication network. 12. The economic environment- In a way, this has to do with the above mentioned issues but here we are talking about the Gross domestic product, the economic growth3 rate and other related economic status key indicators. For instance, it is highly unwise to trade in a country whose inflation rate is way out of this world as losses would be the order of the day and the return un predictable. A case in point was the Brazil situation recently fanned by inflation. 13. The international policies of the countries. Depending on the party in power at a given point, parties tend to have different perspectives towards their international policies. For Instance, the Democrats in ≡

refer to case study attached in appendix C Economic growth is the rate of growth measured by the Gross domestic product. For example, if the economy produced 1,000 units of item X in 2002 and then produced 1,001 units of the same in 2003, then the economy would have grown by 0.1%. See “Everyone’s guide to the South African Economy” by Andre Roux pp33

International Business

Billy C Sichone

The USA have favourable domestic policies as they focus on the home economy while the Republicans tend to focus on the foreign policy aspect to make USA more and more powerful, almost at the expense of the Citizens. This is not only unique to the States but everywhere. 14. The degree of influence of environmentalism. In recent years, Environmentalism is not a simple push over as it used to be because NGOs like Green peace will give no peace to any Government that either neglects or destroys the environment. In some countries, if the Environmental policy is suspect, not a few votes are lost. As such, one has to tread carefully in what they seek to trade as well as their social policy. In times to come, businesses may be required to state exactly their position on certain issues and based on that, they will either be given a green light or ejected forthwith. 15. The scarcity and accessibilities of resources such as a good transport network, e-mail facilities etc. This is connected to (11) and (12) above but emphasizes the various networks in a certain area. If the basic facilities are there, then it may be possible to operate effectively but if not, reconsider carefully by applying opportunity cost principles. 16. The stability of the countries- this has to do with the political activity alluded to in (4) above except that this point is the outworking of the various players in a given environment. Politics has a way of either stabilizing or wrecking an economy. In politically turbulent areas, it is clearly unwise to trade there. This has been the case in Angola, Congo DR, Rwanda and for many years in the past, in South Africa and Zimbabwe. A number of these are peace havens though the crime wave in countries like South Africa makes one think thrice before venturing over with â&#x20AC;&#x153;hot cake contrabandsâ&#x20AC;?. 17. The climate- this affects many areas of the economy as highlighted in (11) above. Some climates expressly forbid certain activities taking place while others invite those selfsame issues. Prior to going out, enquire on the suitability of the climate to your line of trade. 18. The legal and social environment. The legal environment strictly has to do with the laws adopted as the basis for regulating and settling international legal disputes. This aspect, although earlier on alluded to is extremely important to consider separately because upon this rock rests progress or failure of a particular venture. Some legal frame works are very hostile to international trade while others offer tremendous potential opportunities provided one pulls the strings and codes. International Business

Billy C Sichone

19. Differing ethics and values. This is connected to # 1 & 2 above though this focuses on the whole area of morality defining what is wrong and right in the international business scenario (for our purposes). This is increasingly becoming a big and separate area of study as more entities drift into the international business waters. A perusal through literature relating to this is a must. For instance, Ferrell, Fraedrich and Ferrell have produced a monumental work that deserves everybody’s attention. 20. The advent of e-business. In as much as the above challenges have to be encountered, another problem has arisen, atleast to the huge multinational companies that believe in a large human presence abroad. The trend today is that a company needs not have a workforce as a person can successfully run a multi billion dollar company from their living room via the internet. In short, the virtual company is turning the tables upside down. Now, all a company needs is an updated well designed website and the company will sell itself far and wide without much ado. Infact, it will be the clients visiting the website to enquire and place orders. This arrangement is an advantage to modern companies because it cuts costs, removes barriers, no tax, minimal ethical problems to manoeuvre and has a lower failure rate of expatriates returning home without a heroes’ welcome nor are they disorientated at their return. In the same breathe, this development spells doom for the ancient companies that glory in size and the financial muscle, for they are outwitted. Unless they move swiftly, their markets will be eroded. This new arrangement just needs a terminal and a screen for all the transactions to take place unlike the elaborate processes of the past. Ironically, IT encompasses all areas of the globe regardless of the national development stage though the least developed are disadvantaged in a sense as they do not have critical services of the credit cards or the e-banking that takes seconds to transact regardless of ones’ location in the world. In addition, since e-business is in its infancy, barely over a decade old (At Thesis time), it is in some respects difficult to quantify or measure accurately as billions of transaction take place, either by way of placing orders or merely just visiting the website. Steven Sleight’s book “Moving to ebusiness” is an excellent starting point in investigating this new phenomenon. Indeed, John Naisbit has aptly quipped when he wrote

International Business

Billy C Sichone

“The revolution in telecommunications is creating the global, singlemarket economy while making the parts smaller and more powerful”Π There could be other problems but the above mentioned suffice for now. Let us quickly then hurry along as we look at the cardinal elements that must be noted before venturing into new business territory.

Now, international trade is a necessity if any 21st Century company or individual is to succeed. There are certain key factors to be grasped before venturing into a new market and these are the controllable factors (4 Ps, Product, Price, Promotion, and Place) and the uncontrollable factors such as the Political, Legal, and the cultural environment. There are 3 ways of Marketing: 1. Ethocentric where goods are produced for one domestic market but the goods go “International” as a “by the way” due to surplus. 2. Polycentric where subsidiaries are located in different countries and each operates almost independently in that they set up their own marketing strategies etc. 3. Regiocentric/ Geocentric where marketing is on a global scale. In the quest to penetrate and capture more market, the Merchant must develop a global perspective in him/her self as well as those he/she will work with. The orientation of International business hinges on the ability to assess and adjust properly to impact strange environment. It also rests on the environmental approach to international strategic marketing that differs from domestic marketing that deals with one homogeneous market. The homogeneous market serves people with similar tastes, cultures and habits where as the international scene has to deal with multiple markets with various shades of taste and likes. Study and travel unravels the meaning of global business how that the world has been reduced to a small place where transactions done in a remote part of the world may have an effect on the business at another part of the world. The trend today is that World Trade is going “Global” and as such, the Marketer should think globally. The World economy has gone through Π

Source: Executive Excellence “ Multinational networks” Vol 17 # 4, April 2000 pp5

International Business

Billy C Sichone

different cycles and phases. At one time, The USA Multinational Corporations (MNC) reigned supreme and unrivalled. It is on record that the 20th century saw the world go into at least two economic depressions between the World wars. After the wars and eventual recovery of some poor economies, the USA & other countries started thinking “Global” in terms of trade. The weapons that had strategically fought the trade wars in the past were obsolete and to remain obstinate would have spelt total doom. We are into the era of interdependence, which in effect is the most dangerous stage.

To curb abuse of power, various instruments were set in place to guarantee “free and fair trade” by different countries. An association was set up to monitor and ensure fairness in trade, and thus the first General Agreement on Tariffs & Trade (GATT) was set up and later (1994) the World Trade organisation (WTO). All countries that signed the GATT agreement were expected to adhere to the rules. The decision was arrived at because Member States used all manner of ways to protect their economies while expecting others to open up theirs. The following were some of the barriers to trade: 1. Protectionism: through (a) Unrealistic standards: where countries set unreasonably strict quality standards. (b) Tariffs: To protect the domestic infant industry from external competition, tariffs are imposed. (c) Quotas: When Governments impose restrictions as to the quantity of goods to be imported for a given period. (d) Voluntary export restraints (VER): where a country just decides out of its own free volition, to restrain exports in order to deal with a problem. (e) Boycott: where goods are not bought for a specific reason or to press a certain demand to be met. (f) Monetary barriers-Either by restricting access to foreign exchange or refusing foreign transactions like drafts. These protectionist stands have hindered much trade. When a country is in international trade, certain key indicators will tell whether the economy is growing or not. The following are the key indicators:

International Business

Billy C Sichone

1. Balance of trade-“ a component of the balance of payments, the surplus or deficit that results from comparing a country’s expenditures, merchandise imports with the receipts derived from it’s merchandise” ℑ ‘The tabulation of a country’s credit and debit transactions with other countries and international institutions. These transactions are divided into two broad groups: Current account and capital account. The main items included are exports and imports and services (the balance of trade), foreign direct investments, intergovernmental loans, transfer payment, capital inflows and out flows, and changes in official gold holdings and foreign exchange reserves’ℵthe variance between the income and expenditure. 2. In the past, the poorer nations could not enter the International Trade scenario because of various adverse conditions such as war, poor infrastructure, weak currencies, and political instability. This caused inflation to soar out of control. Thus, the IMF was set up to stabilize foreign exchange rates and establish freely convertible currencies. 3. Keiretsu- Found in Japan and are huge companies with numerous associating companies. In other words, one core company at the helm with hundreds of other associated companies like the Mitsubishi group (Involves 160 companies, of which 124 are listed the Tokyo stock exchange.). Each is entirely independent with its own board of Directors. Companies today are seeking longer and more stable relationships between vendor & supplier. The International merchant is confronted with many parameters before he / she ventures into a given market. A number of points must be borne in mind as one goes about work and among these is the knowledge of the factors that will influence the success of trade in that particular area. It is important to know the geography of a place and how it is likely to affect the effectiveness of trade. Some places are located in mountainous terrain while others are in valleys were there is little or no infrastructure to support trade. The international marketer must curve a route to overcome these hurdles and emerge profitable. On the other hand, the marketer must study the history of the place, the people, the culture, and how the topography has affected their perceptions of outside influence as well as how they do things. History will give clues as to why people behave in a particular way and how they have ℑ

The Language of Trade: A glossary of International trade terms, p30. The language of trade: A glossary of International trade terms Page 30 by office of International Information programs, U.S. Department of State

ℵ

International Business

Billy C Sichone

developed. In a nutshell, when about to embark on International Marketing, it is crucial to: 1. Know the Topography and climate of the World’s nations. 2. The History of the people as to why they have developed thus and why they react the way they do. 3. The Histories have affected international marketing, trade links/routes as well. 4. Environmental issues more than ever before are now paramount in today’s discussions of business. Issues such as waste disposal have taken the centre stage. 5. The World’s non-renewable resources are fast being depleted and must thus be carefully handled. 6. So far the United States has had the most powerful economy in the world and as such, has abused its potency sometimes. It is hardly surprising that the Monroe’s doctrine has been popularized in Panama. It states that “The west must keeps its hands off Latin America” referring to meddling Europe. Once the history and geography has been thoroughly imbibed, it is time to study the cultural dynamics, which is the topic of consideration in the 4th chapter. It goes without saying that cultural knowledge is crucial if one is going to market successfully. What is Culture? We can safely say that these are the accepted norms of practice among a local people. Each group of people has it’s own code of conduct from which it judges things. Usually, Culture is not written but inscribed on people’s hearts and minds. Thus, Culture is relative and may not be the same in all the places. The Cultural aspect has various elements that must be addressed before venturing into a given market: 1. The Language – the language must be mastered so that negotiation is made easier. Generally people loosen up their guards and relax when they realize that you have made an effort to know their language. 2. Material /technological – this has to do with the level of technological and material advancements of people and how they view change in terms of the fast changing world. The manager must be aware of the pace in order to plan well. 3. Social Institutions – Social organizations, Education, Political structures all these border on human relations and activities. 4. Humans & the Universe (religion etc) – Each culture has certain things that influence their view of the world. One of the major influences is religion. International Business

Billy C Sichone

5. Aesthetics (Folklore, Music etc) – This refers to the arts, the music and all the cultural ceremonies that affect the people in their setting. The merchant must have “Factual Knowledge” as well as “interpretive knowledge” of a culture if are to excel. He/she must also possess cultural sensitivity & Tolerance of the varying shades of culture and nuances that are salient in each unique culture. This calls for an anthropologist to decipher, which the marketer should be. An anthropologist is one who studies human behavior, reaction as well as the impact the environment has on his/her habits. The business leaders’ task is to introduce a new product on the market. Three reactions result when marketing internationally. The first is resistance because something is new and strange. The second is outright rejection because something does not relate to the culture. The third is acceptance because the product is viewed as useful and palatable. On the American continent, there is a mixture of cultures and this must be taken into account when attempting to market. The services of a cultural translator are critical as a cultural translator is one who knows more than factual translation but interpretive as well as insight into the cues, and nuances of a culture. As the marketer penetrates a market, a change takes place in people’s minds due to the frequent adverts, which influence people’s tastes and attitudes by and by. Could But we need to go into more detail, and the fifth chapter opens that door… One international shock a person encounters is the amount of relativity of many things. As one ascends the international ladder, absolutes become less pronounced and among them is the view of things, which are clearly wrong in the one country as well as the corporate ethics. For instance, we note that people view the commodity “time” differently due to hind cultural orientation. The people from the Middle East and Asia are not really “time bound” i.e. time conscious whereas the people from the west are “Timebound” and really precise on time. In short, Monochromic time (M-time) are time bound and emphasise on time keeping, appointments and punctuality while Polychronic (P-time), are not time bound. In a Low context culture, verbal interaction is explicit and easy to communicate and get down to business almost immediately. On the other hand, in a High context culture, prior interaction is implicit with too many rules and ‘ceremonies’ to be performed before you get to the issue at hand. We must go further to say that, in some cultures, presents and gifts are not only allowed but expected. While in the country of origin the certain practices such as tips are forbidden, the same company that has a presence in International Business

Billy C Sichone

another country with the opposite view over tips, it would be difficult to do business. The following must be taken into consideration in international Marketing: (1) Cultural imperative-These are the non-negotiables in trade and must be known by those who are to venture into business in a foreign land. (2) Cultural adiophora-These are optional nuances, cues and modes of behaviour which could either be ignored or imbibed. One would not be ostracized for not grasping these practices. (3) Cultural exclusive-These are practices and ways that are strictly and exclusively for the natives which a foreigner dares not learn or copy as to do so will be viewed as an insult. As one continues to work in a foreign country, there are certain initiatives that they may employ and get away with as long as they are not arrested. Some of these could be subornation (where one pays someone to do the wrong thing that is not in line with his or her job) or Lubrication (Where tokens are given to encourage someone do their job more efficiently). Another aspect that must be watched is the political environment, to which we now turn our attention. A modern business leader must take into account the political environment in which one intends to work because this variable is very critical in determining which way to go. By and large, the Political environment ranks among the highest variables before one gets bogged down with other â&#x20AC;&#x2DC;knitty grittiesâ&#x20AC;&#x2122; such as the culture and legal aspects. The following factors will influence international investment: 1. Stability of Government policies and how they will affect trade liberty. 2. Number of Political parties and their Policies. 3. Nationalism, what the government policy is on international ownership of businesses. At some point, there was a drive by many governments to forcibly turn all multinational companies into the hands of the nationals. This may not necessarily mean taking over title of the said companies but all the positions are taken over by the natives. There are a number of ways the government can react to international investors. The following are some of them: 1. Confiscation- This is where the government simply takes over without compensating the international investors. 2. Exporiation- Where there is a take over by the state but compensating the Investor for the loss incurred.

International Business

Billy C Sichone

3. Domestication: Where all companies are nationalised and become parastatal with the natives at the helm. Venezuela and Zimbabwe are contemporary examples. When venturing in a new market, a number of political risks must be expected such as: 1. Economic risks- How sound is the economy or will it collapse any time? Is it a sustainable one? Is it growing and can our business blossom in that setting? 2. Exchange controls-What exchange controls on cash are there? Are we going to be allowed to externalise our cash to our head office without much ado? 3. local content laws- What are the local content of law? How secure is our investment when we take it there? Is there any possibility of our losing our property? 4. Import restrictions- Are there political restrictions on what is to be imported and how much of it? Is there strict censuring or quotas imposed. 5. Tax controls-How high are the taxes on foreign goods? Are there any tax rebates and for how long? 6. Price controls-Are prices freely determined by the law of demand and supply or are they state controlled? 7. Labour problems-Is labour readily available? How cheap or expensive is it? 8. Sanctions- Are there any international pressures laid against the state? What type are they? Are our goods going to flow freely? In the past, Governments were hostile to foreign investors but in the last decade or so, the situation has changed. The following Strategies will lessen political risk: 1. When entering a country, it may well mean that Joint ventures with the natives are entered into or 2. Expanding the investment base by joining with banks who are owed a lot of cash by the Government so that the Government will be disarmed from wrecking havoc as they will be interested parties, for how can you bite the finger that feeds you? 3. Marketing & Distribution- Ensuring that the company holds the controlling power over the distribution world wide so that should the Government cannot be â&#x20AC;&#x153;funnyâ&#x20AC;?, or else risk losing Market for their products too. International Business

Billy C Sichone

4. Licensing-Intellectual property & Technology. This licensing limits usage and is for a specific period. It may be good to register the patent both within that country and abroad. 5. Planned Domestication-This is a Systematic withdrawal because the Government is going to decree thus â&#x20AC;&#x153;any wayâ&#x20AC;?. Government-MNC relations are generally positive if certain conditions are voluntarily and naturally met. Some of these are: 1. Improves the balance of payments- The country befits economically. 2. Uses locally produced resources-The use of local resources is preferred and encouraged as it is cheaper, creates employment and brings about development. 3. Transfers capital and technology to the locals- although the benefit may not be seen immediately, the process brings about transference of technology, and capital to the natives, as they earn and reinvest in their locality. 4. Creates Jobs- Unemployment is at its height so any initiative to create job opportunity is welcome. 5. Makes tax contributions- the government smiles if it can get something out of the multinationals. What other thing ought we to mind? Let as wait and see as we peer into the next hurdle. The legal system position renders it difficult for a company that has its tentacles in various countries at one and the same time. The various legal systems that do exist are: 1. Code law/civil from the ancient Roman empire. 2. English law (Common law)- This was derived from the decisions that were passed in local courts set by the English King. 3. Islamic law-Based and derived on from the Koran. 4. Socialist law- Developed by Carl Marx who believed that all men should be equal and as such championed the socialist movement. All these are some of the hurdles that the multi country corporations have to face. Thus, companies must agree before hand which law is going to be used in settling any potential dispute. The following ways could be used to settle international disputes: International Business

Billy C Sichone

1. Arbitration- where two disputing parties agree on an impartial person to stand between and solve the problem without going into court. 2. Litigation- Simply having recourse to the law and settling the matter in court. This is the least desirable because it has complications such as which law to use and also dents the image of the warring parties. 3. Conciliation-a non-binding agreement where two disputing parties agree to ask a third party to mediate the differences. Market research is equally crucial in international business for information gathering prior to decision-making. What is Market research? Simply defined, it is ‘the systematic gathering, recording and analysing of data to provide information useful in marketing decision-making.’Ω To arrive at tangible useful information, the following research process will occur: First, we define the problem, what sort it is. Thereafter, determine the sources of information and then proceed to gather the relevant data from secondary and/or primary sources. Finally, analyse and interpret the data then present the results. On the international scenario, a number of problems are encountered. International Market research is principally similar to domestic Marketing though it differs in scope, information collected, information systems and the setting up of the Multinational Marketing information Systems (MMISS). Among the many options available for data collection methods is that of questionnaires. A good questionnaire has a number of attributes such as being brief, with ‘Yes’ or ‘No’ answers. Accurate and relevant information is key or else large sums of cash will be wasted in the wrong direction. Today, it is not only enough to have a huge capital base but there must be correspondingly relevant, timely and accurate information to hand. With the research done and out of the way, we next think about the opportunities that avail themselves. Trade is slowly shifting from the highly industrialised nations to the lesserdeveloped countries. Consider the emergence of China and India. What is a Ω

Definition is from “International Marketing” by Cateora, page191

International Business

Billy C Sichone

good market? Cateora simply states that it is an area where a target group of customers are found that are willing and ready to buy the products. A market has segments that must be treated differently depending on what the goal is. A market segment then has four components that make it up: 1. It must be identifiable- can be clearly seen and picked out. 2. It must be economically reliable- stable and counted upon to work for our purposes. 3. It must be economically reachable-must be accessible all the time. 4. It must be more homogeneous in its characteristics than the market as a whole. 5. It is large enough to be profitable-Other wise it would defeat the purpose to cut it out. The international business guru views a country as one uniform market while the next country is unique and so on. How ever, there are limitations of viewing a country as â&#x20AC;&#x153;one uniform marketâ&#x20AC;? because: 1. The assumption is based on country variables and not on consumer behaviour patterns. 2. It assumes total homogeneity of the country segment. 3. It over looks the existence of homogenous consumer segments that exist across national boundaries. Whatever the case in the above situations, in the quest to identify new markets, the following are the means of identifying market segments: 1. Age groups- Is this our target group? 2. Income classes-Do they earn enough to buy our goods? 3. Polychographic measures. Let it be constantly be borne in mind that markets differ widely but some of the hurdles and challenges a marketer might anticipate when eyeing a socialist-communist country as a market for example, are: 1. The quotas- How big are the quotas and the restrictions there of? International Business

Billy C Sichone

2. Closed doors-This may well mean the way a country seeks to isolate itself from foreign forces even economically. The emphasis is to use local resources or to restrict imports from countries with similar political systems. 3. State owned businesses- the extent and number of the parastatal companies. 4. Corruption- The level of corruption and what is being done about it. Can we handle such levels of corruption? 5. Instability- How politically stable is the place? 6. Resistance- what is the orientation of the natives towards foreign investment, are they favourably disposed or not? 7. Bureaucracy- How easy is it to get a small transaction done, especially in those key government offices? 8. Poor infrastructure- How accessible is the most remote area where we want to reach? What about the general road network? 9. Bad or no distribution network.- Is there a systematic distribution net work for our goods? What about the transference of our marketing messages across the country? How long will an advert take to permeate around the country? It must be noted that the less developed countries are fast becoming important potential markets (BEM)η. These include Poland, China and India, among many others. The least developed countries (LDC) are found in central Africa while the newly industrialized countries include Mexico, Chile, Brazil, and South Korea, though still among the LDC. The other important grouping is the ‘4 tigers’ of Southeast Asia. They are economic giants led by Japan and are composed of Taiwan, Hong Kong, Singapore and South Korea.

Big emerging markets

International Business

Billy C Sichone

Countries need infrastructure if they are to develop and attract international investment. What is the use of investing in a country that will not allow your goods to flow quickly and profitably? In an age of international trade, a country cannot afford to be averse to the MNC unlike the well-known CocaCola case in India. At one time India was so hostile that Coca-Cola pulled out of the country but now, India has had to woe Coca-Cola back. Akin to domestic marketing, there are different segments in the world through the eyes of the International Marketer, though the global marketer holds a contra view. We are no witnessing the first “Global generation” of consumers who do their shopping on the internet and from global TV net works like CNNϒ. Let us patiently tarry and see what is in store as we see the attempted regional groupings that have coloured the international business horizon take shape and begin to work. Subsequent chapters give insight into this aspect.

CNN= Cable News Network

International Business

Billy C Sichone

2 '

This Chapter basically deals with the regional trade groupings littered all over the globe. These groups come about as countries in a region try to coordinate activities in terms of trade so as to reap the best mutual benefits from within the region. Usually these groupings come up with standards and terms of reference to which all the member countries must subscribe such as reducing tariffs on goods from within the grouping but raising them on foreign goods from outside the catchment area. A number of International agreements have been entered into which address different aspects of international trade. The GATT↵ (WTO) is a case in point. Most of the groupings are localised whilst being regulated by international principle laws such as the fair trade law. This law seeks ensure that fair trade practices are observed in international trade. Some of these groupings are: (g) The USA/Canada Free trade area. (h) COMECON- Council for mutual Economic Assistance, by the USSR council for mutual economic assistance of socialist countries. (i) NAFTA- North American Free trade area (j) Mercosur- Southern Cone common market found in Latin America (k) AFTA-ASEAN Free trade area-found in the Asia Pacific Rim (l) CEA-Chinese economic area (m) EU- European Union (n) CEFTA- Central European Free trade area. (o) ASEAN-Asia Pacific rim including Japan, Taiwan, south Korea. Recently, China has linked up the grouping making this the largest economic grouping housing a 1.7 billion people market- BBC news 5th November 2002. (p) SADC-Southern African coordination conferenceϒ (q) COMESA-common market for East and Southern Africa (r) NEPAD- New partnership for African Development (s) PTA-Preferential trade area (now defunct) (t) ECOWAS-Economic community of West African States ↵ ϒ

GATT= General agreement on trade and tariffs: WTO= World Trade organization Refer to the Africa Connexion magazine Volume 9 2nd qtr 1994-very insightful for the African groupings.

International Business

Billy C Sichone

It is believed that in Future, Multinational markets are likely to increase. How ever, two views have been advanced 1. Regional economic Blocks will dominate the world trade scene. 2. New markets of developing countries will be key such as China. The future economic groupings must harmonise if their efforts are to give dividends. Harmonisation is the mutual recognition, to work together, on some set standards. Not only should there be harmonisation but reciprocity. Reciprocity is simply the condition of being reciprocal, mutual action, a ‘give and take’ situation. A third postulation about the future trade is that it will be region less, as people advance to use e-commerce and the advent of virtual corporations. What are the strategic implications on marketing, yea, the International Marketer? Despite all the potential advancement and the increased ease of communication and interdependence, we think that the problem of language will still linger. Also, the one global market concept if realised, will lessen the barriers as well as blocking those out side the regional block. The latter implication is rather negative some what but it is one of the ramifications never the less. Having seen the frantic effort people have made and we now consider some marketing strategies to help us in our quest to penetrate and capture those markets. In attempting to develop global marketing strategies, the potential investor must carry out a SWOT analysis where there is a deliberate move to ‘count our men’, as it were. Inherent strengths, weaknesses, opportunities and the threats that might come as a result of attempting to penetrate the target market. With that out of the way, the strategic planner must define what their goal is whether domestic, international or global marketing. Once agreed, the marketer proceeds to formulate the strategies that will cover the whole world as one market for example. In the case of International Marketing that is based on the premise that each foreign market requires its own culturally adapted strategy, appropriate methods will be employed. The primary difference between global and international business is orientation. Among the ways of penetrating a market is by partnership, Joint ventures, part ownership and franchising. Franchising provides a standard package of products, systems, and Management services, and the franchisee provides market knowledge, capital and personal involvement in Management. International Business

Billy C Sichone

Franchises include soft drinks, motels, retailing, fast foods, car rentals, automotive services, recreational services, and a variety of business services from print shops to sign shops. Franchising is the fastest growing market entry strategy. There are three types of franchise agreements extant: 1. Master franchise. 2. Joint venture. 3. Licensing Since the customer demands high quality standard goods, total quality management (TQM) is essential. In addition to the quality standards, there is need to establish local relationships that focus on the marketing process (Relationship marketing), strategic business alliances, partnership and joint ventures. Where Joint Ventures are preferred, it is prudent to know the four factors associated to this mode. These are: 1. That Joint Ventures are established, separate, legal entities. 2.They acknowledge intent by the partners to share in the management of the JV 3. They are partnerships between legally incorporated entities such as companies, chartered organisation, or Governments, and not between individuals. Another key thing in joint ventures is that there must be equity positions held by each of the partners. Unfortunately, these strategic alliances fail half the time. Among the major causes of this is the lack of perceived benefit by some partner. The second is differences in management style or differences in goals. This has happened often as was the case in the VW & Ford case where they differed on strategic plans. If you will recall, TQM is a must in the global competition because quality carries with it a competitive advantage where a company can eke out a niche that takes time to dislodge. The benefits of TQM lies in the fact that: 1. It helps the firms produce goods and services that more than meet customer expectation and continuous satisfaction. 2. It is a corporate strategy that focuses total company efforts on manufacturing superior products with continuous technological improvement and zero defects that satisfy customer needs. The customerâ&#x20AC;&#x2122;s changing needs are identified through market research. This emphasizes the real rather than the imagined customer expectations. Further more, formulated quality control systems for all functions are International Business

Billy C Sichone

everywhere not just in the manufacturing sector. The goal is to have quality in built within the system. Needless to say, the customer defines quality. He or she is enthroned and dictates what and how it is to be produced. Further more, Total quality management has worked wonders in Japan by reducing costs. This is the silver bullet sought by everyone in the world. TQM has also some how contributed to the successful procession to globalization. What, after all are the benefits of globalization? These are few and soon told. 1. Economies of scale and Marketing are achieved. 2. Transfer of experience and know how across countries. 3. Uniform global image e.g. Coca-Cola or Colgate. 4. Control & coordination of operations easier, cheaper and less complex. Quality is a must and can only be ignored at oneâ&#x20AC;&#x2122;s own peril. Chapter 12 takes us to the export trade mechanics and logistics. Today, the regulations and restrictions of exporting and importing are very, much around, even in the world leaders of trade like the USA. The major goal of these regulations is to watch what is exported and imported. This is especially true of the strategic goods to certain countries and also from there. The major reason for this is basically to protect the domestic industry from unfair external competition as well as to conserve foreign exchange. In many countries, the economy is both extremely weak and fragile where poor quality and expensive goods are produced. These mediocre goods stand no chance of competing with the cheaper and higher quality foreign products. In a country therefore, there are certain ways to get things done. This is by logistics. Logistics are a total systems approach to management of the distribution process that includes all activities involved in physically moving raw materials. For example, in terms of transferring goods by either sea or land, the foreign freight forwarder is licensed by the federal maritime commission. The said freight forwarder arranges for the shipment of goods while acting as the agent for an exporter. In this case, an exporter, instead of transporting the goods him/her self in the international environment would use the services of a foreign freight forwarder because of the following reasons: 1. It is cheaper in the long run. 2. The forwarder knows the local â&#x20AC;&#x153;rulesâ&#x20AC;? and would easily manoeuvre around where the exporter would falter and lose time in the process. International Business

Billy C Sichone

3. It is also less cumber some to the exporter- the agent manages the daily hustle and bustle that goes with the transference of goods. 4. It gives a strategic out look to the exporter because the forwarder will be swift to deliver while the exporter will invest energies in other on coming worthy causes. That not with standing, the International Marketer will encounter a lot of restrictions and hurdles as he/she seeks to plough through the maze of the international market. Among the major import restrictions will be the following: 1.Tarrifs- The charges on imports so that the local industry is protected 2.Exchange permits-Permits allowing the exchange of goods 3. Quotas-The restricted amount of imports allowed within a country. 4. Import licenses-Licenses to allow one to import certain goods only. This restricts trade. 5. Boycott-The deliberate decision not to buy certain goods in order to press certain demands to be met by the other party. 6. Standards- Set standards, which must be, met failure to which foreign goods are rejected. 7. Voluntary agreements- non-binding agreement between parties over goods. Despite all the hustle and bustle, the day is coming when most of these hindrances will be past and forgotten. For now, we content our selves and hope for the best. A product is more than a physical item; it is a bundle of satisfactions (Utilities) the buyer receives. As such, when attempting to sell internationally, the seller must make sure that the products are savoured with all the desirable traits, are acceptable universally and viewed as helpful and desirable by the consumers. Stress must be given here because Global goods must be made to a certain quality, cost, and culturally acceptable universally. This calls for hard work diligence, open mindedness and a willingness to watch the market meticulously to establish exactly what the consumers want and need, not merely what we ourselves perceive to be the need. This may well not be the case! As such, the following factors must be taken into consideration as they influence the acceptance and diffusion of goods: (a) Newness of innovation. Generally, people are cautious initially until all fears and suspicions are allayed. International Business

Billy C Sichone

(b) Complexity of use. Is it user friendly? The more easier to use, the better. ÂŠ Usefulness/attributes. How useful is this compared to the last thing? (d) Brand name, country of origin. How well established and reliable is this brand internationally? (e) Life cycle of a product is the level at which the product is in terms of quality and consumer acceptance level etc. Today, as earlier intimated, green marketing must be taken into consideration especially in Europe. The global market is dynamic, thus the marketer must ensure that the exact needs of customers are known before goods can be produced in mass. Notable also is the growth of the service industry where products are not tangible physical goods. The fundamental characteristics of services are: they are intangible products whose intrinsic value is the result of performance, or an occurrence that only exists while it is being created. Characteristics of services are that: 1. They may be perishable-once created, it cannot be stored but must be consumed simultaneously with its creation. 2. Not transferable 3. Heterogeneous-individually produced. 4. Inseparable from its consumption. 5. Services are either consumer or industrial. This type of marketing must also meet certain international standards as laid out by the ISO 9,000. ISO is an internationally accepted standard for quality of goods, processes and services. When a product or company is ISO certified, then it is assumed that the goods are without defect and can be relied on. To be certified, the processes must guarantee the highest quality out put. This shows security and guarantee of good quality goods. The modern trend is to trade only with ISO certified clients because the certification acts somewhat as an assurance that the products are of the highest quality standards. Industrial products are items/machines used for mass production-the aim is profit (service industry). Products must satisfy the buyer so that the quality goods are produced- Total quality management (TQM) also comes into play here as it is integrated into all products and services. We must however bear in mind that countries are at different stages of development and thus the level of standards of goods will equally vary by the same token. There are stages of development in countries. The first International Business

Billy C Sichone

stage-is the Pre industrial where the country does not have any basic foundation and infrastructure to support any meaningful development due to poverty, policy and culture. Examples are the least developed countries (LDC) where debt and poverty have ravaged the economy so badly. The second stage is the industrial level, where the country moves to the stage where it begins to develop the primary manufacturing industries. It is from these that the building blocks of the economy are formed, and usually at this stage, the product quality is poor and begins to improve in the next stage. The third stage results from having slowly built enough muscle to accelerate in the growth of the manufacturing industry. This stage witnesses the rapid proliferation of multiple varied industries that specialize in different economic goods. The fourth follows the third stage that translates into the well-industrialised economy where goods are produced on a large scale with economies of scale reached. It is at this stage that the country begins to have surpluses and also the problem of disposal becomes evident a major concern. This is the stage where many countries in Europe have reached. The fifth and final stage where the apex or complete industrialization is reached and is the desired goal for many a country. Very few countries have reached this stage where every thing is in its perfect state. It must be highlighted however, that there is always room for improvement, in the area of having minimal pollution effluents discharged to the environment. Japan, USA and Germany are some of the countries that are approaching these stages. But how does a LDC sell and market goods to a completely Industrialised country which has high quality standards that are well above the mediocre quality goods that are churned out from the wheels of a non ISO company? How can this hurdle be surmounted? In Marketing to any of the countries at various stages of industrialization, the Countries use any opportunities that avail themselves. Some of the avenues where goods are marketed are through trade shows to exhibit and demonstrate to potential users. It must be noted that the trade shows attract high-level decision-makers who ultimately influence the buying trends of countries. When all the marketing and net working is done, we move over to the distribution channels that will be vehicles for our goods. There are many channels of distribution that are employed from place to place to ensure the safe and speedy passage of goods across the world. For instance, in Japan, the channels are multi layered while in America, the structures are simple. On the side of the company, this is a good avenue for getting prompt feed back. These agents come in various shades and International Business

Billy C Sichone

contractual agreements entered into. The said agents can either have no title to goods or operate as merchants who have title of goods. Agents use parent name and are not independent while merchants use their own name and have title to goods. How ever, control is important for parent company in the foreign country for effectiveness. Clear agreements must be entered into prior to commencing to implement the deal. Note that the Japanese believe in many middle men and the choices of the said middle men depends on company policy either to: 1. Establish own subsidiaries or 2. Appoint some agents, one for the home country and another for the â&#x20AC;&#x153;abroad oneâ&#x20AC;?, whether to take title to goods or not. In some countries like the Nether lands, the Middlemen are Government affiliated where 90% share ownership is by the Government unlike in places like the USA where there are no merchant middlemen used. This is a sharp contrast considering that both are capitalist countries. We hurtle to other aspects of the distribution channels-What must be looked at when choosing agents and merchants. When locating, selecting and motivating channel members, the following are looked at: 1. Locating- this involves a general look 2. Selecting-This entails picking the best from among many questions such, as â&#x20AC;&#x2DC;Are they cheaper, the best, interested and loyal? 3. Motivating- We should always be looking for ways and means to motivate our net workers and consistently so. A motivated workforce can unleash more than we would ordinarily expect. This could be by magazines, newsletters, encouraging them to visit the Head office, advertising etc. The customers can be reached in various ways such as: 1. The use of direct mail distribution has several advantages over the indirect because: (a) It is cheaper (b) Cuts bureaucracy (c) Challenges old paths. (d) Cuts down on work force (e) Successful way of entering a market. Having asserted the above, we hasten to say that middlemen are needed in certain markets because: (a). There is minimum investment on the part of the company some times.

International Business

Billy C Sichone

(b) No company personnel or major expense of managerial effort utilized. The disadvantages are equally many such as: (a)The Export Management Company (EMC) seldom affords to make the kind of market investment needed to establish deep distribution for products. (b)Commission drive is so costly some times that people rush for the extra buck at the expense of doing a good job. (c)Cannot operate short term but on a long-term basis. The factors affecting choice of channels of distribution are: (a)Identify specific target markets within and across countries. (b)Specify marketing goals, in terms of volume for example. (c)Specify financial and personnel commitments (d)Identify control, length of channels etc. To be successful in a chosen distribution channel, the following â&#x20AC;&#x2DC;6 Câ&#x20AC;&#x2122;sâ&#x20AC;&#x2122; must hold true: 1. Channel- Is the channel ideal? 2. Cost- Is it cost effective? 3. Capital- Do we have the financial muscle to set up and sustain such a chosen route? 4. Control- Can this framework be effectively controlled? 5. Coverage-How much of our desired market catchment area is covered? 6. Character and continuity- Is the character of channel favourable? Is it in keeping with our goals? Are there any potential threats that might cripple our operations? The difficult parts that must be addressed by the Norazi agent. A Norazi agent is one who specialises in shady or difficult transactions such as contrabands. The effectiveness is directly dependent on the selection of middlemen and on the degree of control the manufacturer can and/or will exert. But how then can a marketer go about advertising goods in a global market? Another volume effectively deals with this question.

International Business

Billy C Sichone

When it comes to advertising, many variables come into sharp focus. The International advertising tailors its adverts uniquely different in each market, Global advertising has to do with advertising in the same way across the world. Other wise, the product is advertised as one uniform brand, assuming that the world is one huge market. In the international market pattern advertising is employed because: (a) Each region is regarded as unique at least culturally. (b) There is a move towards homogenous tastes but not yet. (c) Some products have â&#x20AC;&#x153;uniform applicationâ&#x20AC;?- similar tastes and needs. (d) Apart from advertising, there is the sales promotion. This is a shortterm effort directed at the consumer such as Price cuts and raffles to create more sales. The sales promotion is designed to achieve such special objectives as: 1. Consumer- product trial and/ or immediate purchase. 2. Consumer introduction to store. 3. Gaining retail point of purchase display. 4. Encouraging stores to stock the product. 5. Supporting and advertising & personal sales efforts. However, the communication process and advertising sometimes misfires due to misunderstandings. Advisors can over come the problems highlighted above by engaging interpreters/translators living in that foreign land. Alternatively, the local people can be used or those that know the cultural cues and diversity. The local market characteristics, which affect the advertising and sales promotion of products, are: (a) Culture-The orientation and the set norms in a particular region. (b)Tastes- what people like and approve of. (c)Perception/decoding- How well exposed and developed their minds are to accept foreign and new views/products. (d)With the advent of the Satellite TV, the Marketer is able to reach many countries since the world is viewed as one market. Thus, the goods are standardised, using the same Logo. As a result, it is hoped that slowly, the media is creating a uniform perception of standard products. It is believed that the global consumer generation has already budded. For example, when the youths in Japan watch TV about what the Youths in the States wear, and next time you see them wearing the same! International Business

Billy C Sichone

A number of critical steps in International marketing must be observed and the following six steps involved are: (a) Study the target market and see where one may need to modify things. (b) Determine the extent of worldwide standardization. (c) Determine the promotional mix-by the national or global markets. (d) Develop the most effective message(s) that will carry the word around. (e) Select effective media. For example, such international media as the CNN may be ideal because it is live and has a global coverage 24 hours a day! (f) Establish the necessary controls to assist in monitoring and achieving worldwide marketing objectives. The Marketer must be aware that there are two extremes that must be loathed in the advertising debate: (a) The International Marketer argues that every country/region is unique and deserves a unique type of advertising while (b) The global Marketer holds that there should be one standardised way of advertising, over looking regional differences altogether. Global brands generally are the result of a company that elects to be guided by a global marketing strategy. Global brands carry the same name, design, and the creative strategy everywhere in the world; Coca cola, Pepsi-Cola, McDonalds, and Revlon are but a few of the global brands. Further assertions are that: (c) “Companies have discovered that the idea of complete global standardisation is more myth than reality” (d) An important reason for uniform promotional packaging across country markets is cost savings. (e) Standardisation does require advertisements to be country or culture neutral, other wise they do not work… With the advertising hurdle out of the way, the international Manager must now take an internal look so that the manpower within is in place and his/her expanding and diverse work force is well catered for. The ensuing chapter handles this aspect. Let it be noted that for our present purposes, this is the heart of the research at hand. Therefore, we ought to move slowly here, for we are about to ‘walk on hallowed ground’. Let us therefore remove our sandals!

International Business

Billy C Sichone

The International Management practice radiates the brightest when we look at the subject in more detail. All along, the Management of personnel and work has been latently alluded to but here, it is transfigured as it were, for our peering into. As you will notice, the profile of the global Manager is interesting because the said manager could be recruited from any point of the terrestrial ball. Gone are the days when only local staff could be the ones recruited for a job. Now, any one can take up the job as long as they have the right qualifications and the acumen to feature on the international scene. In that case, the Manager must be very versatile, active and multitalented to fit in well in varying environments. As such, there is need to be multilingual by mastering more than one language as well as they unspoken cues that go along with the local culture. In addition to the aforementioned point, the International Manager can lead from any country and base. Thus, International experience is crucial for the present and future global manager having a wide mind and rich exposure internationally so as to objectively handle staff problems of various shades. For example, the need to empathise and understand the local situation yet to keep a global focus is key to the success of manager of a diverse work force. Closely tied to what has been mentioned is the need to learn to motivate staff. How can one discern the aches and needs without empathizing with the workers? Were we to use Standard American motivation practices, they will most probably be out of taste with the local scenario. Thus, there is a way in which one must know the best way to reward and motivate a diverse cultured work force, although still keeping within the corporate culture and goals. The person who will be an excellent international beacon must possess the following cultural skills: 1. Maturity- One who is wise and able to handle diverse and sometimes radically different cultures competently. 2. Emotional stability-The person must not be moody and unpredictable. In one moment, very warm, friendly and sociable but in the next hostile, argumentative, bigoted and throwing tantrums all over the place! The Manager must hold him/herself in all situations whilst keeping his/her head in all situations. 3. Considerable breadth of knowledge- It is not enough to have the financial backing or the acumen, but rather, knowledge must be first resident in the brain and from that platform then launch to deal with each case as it rears its multicoloured head! The Manager must have a broad knowledge in terms of geography, history, culture, local politics, policies and the possible strategic routes to employ. He/she must also know the International Business

Billy C Sichone

strengths, weaknesses, opportunities and threats that confront the fate of the organization. 4. Adaptability-Having acquired the knowledge and acumen, the manager must also have an ability to adapt to the circumstances prevailing so as not to appear out of step with the times. In other words, the understanding must trickle down to the heart where it will affect the will to accept the situation and do the best to reap maximum benefits both for the organization, employees and the local community. Half the time, the will revolts to stay in a given place and thus, the manager, though knowledgeable and apt will pack his/her bags and return home as a failure. 5. Good attitude and effort- this aspect is closely connected to the above-mentioned point but has more to do with the mindset and the inward disposition that one has towards life. If one is strictly ruled by his/her SRC, they will display a bad attitude and thus put in very little effort. Usually, such have a defeatist attitude to a point where even their minds cannot think objectively or strategically. 6. Positive out look- having said the above, the good manager then must cultivate and have a positive out look to whatever situation that confronts him. Optimism should be the hallmark of a good International Manager. But that is not all, some further traits are: (i) Communication- Our lot falls in an interdependent world as well as an information age. It is therefore not advisable to keep to oneself and only release ‘Press statements’ at irregular intervals while the rest of the time, pitch darkness reigns within the organization. Clandestine, authoritarian and ‘commando-like’ managers are out of step with the modern management trends. Effective communication is the key to every thing today. (ii) Respect-The manger must have due regard for others and not ‘ride a high horse’ where no one is viewed as important as the self. Many an international manager has wrecked their potentially glittering career by arrogance and pride, although they had unrivalled plans. (iii) Tolerate ambiguity- The Manager must have a high tolerance level of uncertainty because of the dynamic nature of the international scenario. Some people cannot stand being in limbo for long and easily get frustrated, but not so the good manager. Instead, he/she watches the motions of the market and comes up with a pattern over time and yet always giving allowance for sudden change. This calls for patient endurance and resilience. Analytical and logical people are the most in need of this grace of patience. International Business

Billy C Sichone

(iv) Display empathy-Must be able to feel and imagine oneself in the shoes of the person needing help. Without empathy, it is impossible to appreciate and rightly apply the correct remedy in a given situation. (v) Non judgmental- half the time, without our consciousness, our SRC affects the way we judge things and situations. Our prior training, orientation and culture have a more potent influence than we realize. For instance, what we have termed as â&#x20AC;&#x2DC;moral and rightâ&#x20AC;&#x2122; may not necessarily be the same elsewhere. Thus, the manager must not be dogmatic nor condemn others for holding on to a contra opinion and practice. (vi) Recognise and control the situation aptly and quickly. The astute Managerâ&#x20AC;&#x2122;s sharp eagle eye must see things and quickly devise a solution long before it happens. This is a rare strength but the good International Manager possesses that discernment and uses it appropriately to handle issues. (vii) A good sense of humour- Laugh off things and not take things too personal. Care of course must be taken not to trivialise even important and critical issues. (viii) The right business acumen and tact. This should be one of the overriding traits for one to strike deals and get things going. Many people have the cash, information and brains but lack this charisma to articulate issues well. This is especially helpful in areas where a lot of prior negotiation has to take place before hitting gold. The work of the international Manager who leads people has to contend with various attitudes, beliefs, cultures, and values of the local condition. For instance, in the United States, the company business takes precedence over family and relations where loyalty is given to the entity. In Latin America, the opposite is true. Further more, in the USA, the entity concept of the organisation is espoused strongly while in other places, the entity cannot be separated from the people. Another difference is the way people view their jobs in a particular organisation. In the West, working for a particular organisation is not viewed as life long while in places like Japan, people devote themselves to one for life along side other relatives and friends. The work relationships are more personal and founded from culture and family while in the States, the grounds of hiring some one is not family attachment or prior knowledge but largely on merit. We may even add the attitude towards working hours as a difference! A Japanese worker will toil tirelessly until the work is complete everyday without minding the knocking off time while an American will content him/herself with the 8 hour schedule, pack bags and go home, whether the work has been accomplished or not! All the International Business

Billy C Sichone

above attitudes influence out put and reactions of people towards their vocation. The international businessperson must contend with and contain all these variations. %

$ %

4 In global management and business, expatriates are an integral part though this trend is changing. Now locals or third country nationals can act as managers because they are sometimes better emissaries and will know the way better. Although an international career is plausible and admirable, ironically, many would-be Expatriates are reluctant to leave their countries because of the following undesirable traits that go along an international assignment: 1. The “out of sight out of mind” syndrome seems to grip the sending company head office. There is a sense in which the person on an international assignment is “forgotten” about as soon as they leave the head office doors. For instance, the expatriates do not get information on time, are treated, as not part of the “home team” and neither are they consulted on major decisions, even on ones that affect the very stations they lead. In short, there is an absence of that sensible feeling of belonging but rather replaced by the feeling of alienation. 2. Lack of career development. It seems that those that remain at base get preference treatment in terms of training, have better access to resources, are in constant touch with the “known quantities” at head office and thus develop rapport, network as well as friendships to the end that they are naturally recommended to higher tasks while the expatriates in the fringes of civilisation are relegated to the promotional terraces. When the said expatriate returns home from abroad, this discrepancy is so vivid as one compares with peers. Obviously, one feels “robbed”, cheated and demotivated. 3. Another hair-raising issue is the re-entry “inconveniences” that accompany settling back home. When the expatriate family has been away from home for a number of years, many variables will have changed and as such, there is need to prepare for another “culture shock”. Some of the inconveniences faced will be the change of status, earning power, new job descriptions or unpredictable and ambiguous challenges daily, the change of station for the family in terms of friends, pace of life, school, food, dress codes, liberties and even attention given. Sometimes International Business

Billy C Sichone

the expatriates may not have had an opportunity to own property whilst away from home due to restrictions. In some cases, they may not have saved up to buy a house and when they return to base, they feel as though they have “crash landed” thus shooting up the stress levels. Relocation can be traumatic and stressful if not prepared for psychologically way before. Obviously, no one wants to be or feel disoriented or stranded! We all want to be in control of our destiny. 4. Further still, the Lack of adaptation by family to a strange environment is an issue to be pondered upon long before venturing out on an international assignment or else the sending company stands to lose a lot of money as the expatriate family abandons ship for home. In such times, the family completely fails to adapt and as such the family must get back to base where the entire family feels comfortable. This is a very painful decision for the head of the family because whilst he/she can cope, the others will not be able to stand the stress thus contributing to the morbidity rate of the said family. This aspect cannot be over looked, as the family is an integral part of ones’ livelihood and team. It is therefore recommended that the family under go adaptation-training sessions long before the shift takes place. As we all know, people naturally have an inborn “inertia-meter” to change but if sweetly and meticulously handled, the family might just buy the same lenses and begin to view things in the same light. Although we have already alluded to it above, we must stress that the business leader of tomorrow must be at least multilingual. The process of learning another language apart from the mother tongue can be quite unsettling for many a person, especially for the American who assumes every one somehow knows or should know English. The natives equally expect the same of the expatriate at hand. The dictates of learning a new dialect shuts many a door of prospective expatriates because taking up the job may entail the family radically switching to another language. Further more, it may be that the success of the job hinges on the mastering of a foreign language as well as the cues thereof. Some one must learn languages such as French, Spanish, Chinese or Italian to succeed. This is an insurmountable task for some. The precipice is too steep. As though the aforementioned points were not enough, the Manager must learn the culture, values and attitudes of the locals if to be effective. The cultural aspects cannot be dispensed with that easily because for many an entity, success rests on the cultural, dialect and cue knowledge. It is International Business

Billy C Sichone

interesting that the natives are very keen observers of anything new. If it is a person from another cultural setting, somehow, unconsciously, they feel that person must know their expectations in terms of their own culture. As such, if the international manager does not display any knowledge of the local values, the natives feel threatened, insulted, belittled, despised and thus develop animosity towards the marketer although he/she might be the herald of good tidings. As a result, the locals will not look at the products objectively and not be responsive towards the marketed goods. They will, as it were, keep an “arms’ length”. Thus, the product may turn out a dismal failure as very few will buy or market the product to others. Keep in touch with expatriates so that they do not feel “left out”. As was intimated in (3) and (4) above, the expatriate families feel cut off from the base, much like how an astronaut would feel without either the lifeline or the Space Manoeuvring backpack. They feel unsafe, unimportant, irrelevant and without assurance as to whether what they are achieving is plausible. Naturally, we all need some commendation or a pat on the back. Further more, people feel encouraged when they are urged on or consulted on some seemingly trivial matters. The fact that they know something about what is going on will settle many a hiccup. Having asserted the above from the perspective of the expatriate, we now proceed to state that it is costly to maintain an international sales force as well. The following reasons come to the fore: 1. Cost of living allowances are high: To send some one on an international assignment is costly business because you pluck them out their “natural habitat” and plant them in a foreign environment. As such, that loss of home creature comforts must be atoned for by ensuring that the new setting is as close to and as comfortable as the home country. For example, the children of the said expatriates may have to attend the international school as well as provide incentive allowances for being away from home. In the distant past, the author of this review perceived an international assignment as a great privilege above all else. The present mindset is that not all is rosy when one considers all the parameters and the opportunity cost attendant to the international job. In as much as it is more lucrative, there is the emotional cost and family ties that must be dealt with rather ruthlessly for a while. But that not with standing, the well adjusted International Marketer will brave the “weather” and stand firm against all odds, all things being constant and equal. The International manager must be ready for change at all times. International Business

Billy C Sichone

As some one has aptly quipped, “the only thing that is constant is change”Π- Not even much money can replace the home serenity. Yet maintaining an expatriate abroad is expensive business, akin to sending the Space Shuttle for six months in space. 2. Salaries in “Dollars” and higher than average: As earlier intimated, to post some one on an international assignment means what they get is more attractive than at home. If there is no incentive, many would opt to remain home or quit all together. Let it be known also, that the higher pay acts as a potent motivator making it worthwhile to remain abroad. As will be noted, those that earn much on their eight-hour job will rarely look for another job in their free time but those who get very little will scrounge for as many jobs as they can to survive, all the while disillusioned and discouraged. By that token, it is justifiable to pay in an international currency such as the Dollars and at a higher rate, depending on the cost of living. For example, if one lived in the Nether lands, they would need to earn a lot to be comfortable because of the high cost of living. Were we to convert the same to our local currency such as the kwacha, it would shock many of us at the multi figured salary! 3. Transport, lodging of expatriate to and from country of origin as well as locally: Obviously, the expatriate family must be well catered for during the transition period, whilst abroad and on the way back home. All these are huge costs but necessary. One has to bear in mind that these selfsame people are the ones carrying the company flag and image wherever they lodge. Naturally, we all like keeping up good appearances wherever we lodge and so, will do our utmost to provide a conducive environment. Underlying this whole process is the motivation of the potential expatriate family so that the impact is minimised.

In the ensuing chapter, we digress briefly to consider DFI in the context of IB. We resume our regular discussion there after.

Author of saying unknown to this article writer.

International Business

Billy C Sichone

any of us wonder what Foreign Direct Investment (FDI or DFI for short) is. What is it, where is it found and how does it affect all of us? For many a Zambian, FDI sounds a totally distant concept far out there with no direct bearing over our lives at all. Thus, many ignore it but suddenly wake up in a mad frenzy when it touches their pockets and then return to sleep shortly afterwards. In recent days however, especially after controversial privatization process and sudden discovery of China, many of us are quickly coming out of our wood works trying to get to grips with things so that the new dealers’ government should not out wit us once again after “swindling” the nation of the mineral royalties, senseless tax holidays and the apparently clandestine sale of the ever vibrant ZANACO in the name of “investment”. Indeed, the 1992 Zambian privatization act # 21 triggered a spiral that we shall live to grapple with for many generations hence. The ZPA website (www.zpa.zm) offers deeper insight into this animal called “Privatisation” and to some extent, DFI. Perhaps, it would be fitting to commence by defining what basically “Investment” is before we consider it from an international perspective for to assume that we are on the same page in terms of understanding constitutes a serious error. Investment is defined variously among scholars but in capsule form, it can be loosely defined as “a deliberate delay in consumption of resources to a future date so that the resources ferment, thus paying back higher returns”. This definition presupposes certain things such as the availability of resources, a willingness to sacrifice immediate selfgratification/ consumption, a risk factor as well as a profit motive that accrues at a future stage. Winfield and Curry have defined it as when “either individually, as a company or as a country, we forgo the consumption of goods today in order to achieve greater consumption”. They go further to state that time and risk are of essence in investment. A more thorough and scholarly definition by Reilly and Brown reads “ An investment is the current commitment of dollars for a period of time to derive future payments that will compensate the investor for (1) the time the funds are committed, (2) the expected rate of inflation, and (3) the uncertainty of the future payments. The investor can be an individual, a government, a pension fund,

International Business

Billy C Sichone

or a corporation.” Clearly, we can safely deduce that investment is a day to day activity that we engage in though at different degrees and expectations. The principle is a higher future return on present investment. But as it relates to business, as the quoted definitions have shown, it is usually a financial commitment with a calculated risk to foster a better future outcome. Thus, if you deposit money in a fixed deposit account for a period of time, or buy treasury bills and bonds or indeed you invest some financial capital (although other resources like fixed assets are allowable) in a ‘ka ntemba’ you are an investor because you fore go an immediate gratification. The essence of investment is profit, a better future, higher dividends, power, influence or status. The motives vary from entity to entity. Thus, when a person comes to town, takes over a business, puts in a capital injection to kick start or revamp an ailing business concern, property or improve the environment, they are investors. If a Tonga man from the Southern province acquires and develops a farm in the Northern Province, s/he is a “local investor”, local in the sense that s/he is a Zambian investing within Zambia. If a Chinese traverses the terrestrial ball to start or buy a mine, in Zambia, that is a different ball game as we shall see later on in this write up. When we consider foreign direct investment, our focus shifts slightly to the international plane where we talk about multi national investments from individuals or concerns that would like to reap from or change the face of a particular place, people or landscape by pumping in resources (usually finance) from abroad. This is direct foreign investment in the simplest terms. In other words, we can say that direct foreign investment refers to the direct infusion of resources from one country to another by an entity or concern usually with a profit motive. Roger Bennet does not specifically define it in capsule form but does a good job highlighting that DFI has been around for over 150 years but interest grew when the large US multinationals begun to cross the Atlantic into western Europe after 1946. Charles Hill on the other hand defines it in passing in his book “International Business” when he states “FDI occurs when a firm invests directly in facilities to produce and/or market a product in a foreign country”. Hills’ brisk definition broadens the investment scope beyond just the financial aspects that most of us are accustomed to but includes investing in (1) a foreign country (2) in facilities (3) direct investment and (4) production/service with a profit motive. Thus, when the crippled Zambian economy finally ground to a halt as far back as 1985, the only recommended option was change the laws that paved way for DFI as well as privatisation. As we all know, this did not actually take place until the turn of the next decade when the Dr Chiluba led team bravely and International Business

Billy C Sichone

radically turned the tide by unblocking all the valves that had hitherto kept away investors. The floodgates attracted many characters of all sorts of shapes and sizes who poured into our richly endowed nation that virtually did not have intrinsic capacity to exploit the vast resources at the time to thereby changing our fortunes. In principle we can say that it was a brave day when the MMD government led the way to changing the law from a socialist to capitalist leaning economy. With all their faults, the initial MMD team is to be commended and only posterity will condemn or acquit them. Having briefly defined terms, we venture to ask why FDI should be espoused and whether it has any tangible benefits. The first question is simpler in that from the scenario earlier painted about the stagnant Zambian economy of the second republic, it became evident that the only remedy was a direct infusion of resources from other potent partners given that the majority of Zambians are serious paupers despite having some of the best qualified people in the world at the time. The Nation had a great natural resource base, a whole load of unprofitable companies and a crippling unsustainable debt burden. As though that were not bad enough, the command economy inhibited realistic economic indicators that would have rendered many businesses unprofitable given adverse practices such as price controls, government interference, prohibitive laws and a failed or weak entrepreneurial spirit among the nationsâ&#x20AC;&#x2122; citizens. The Zambianisation policy, although well meant, led to bloated corporations, bloated bureaucratic public service, subsidies, and low quality out put. The preference given to nationals over foreigners as well as the protectionist policies virtually killed all form of competition from abroad. The twenty or so years of such a regime robbed many Zambians of a sharp competitive, entrepreneurial spirit that resulted in a dependence syndrome on the state as well as a failure to promptly adjust when the protectionist economic dam wall crumbled in 1992. As an off shoot of the liberalization policy, privatisation took root in the ensuing years, the fastest on record in the world at the time and since. There fore we can say that FDI should be espoused because the global trends dictate that and secondly, that is the only way development is going to be fostered if and when the local capacities cannot effectively and profitably exploit their resources. Globalisation entails the integration and uniformity of global business transactions as a result of reduced distances in the world due to advanced technologies, multinational investments and the homogeneity of tastes propelled by the potent modern machinery such as the electronic media. Thus, the world is viewed as one village because what ever happens at one end of the village has a rippling International Business

Billy C Sichone

effect on the other end. Thus, globalisation transcends political, national or country boundaries. What were stringent boundaries inhibiting international trade have given way to a more harmonious world with similar tastes, perceptions and desires. In addition to globalization, international trade today defies political and cultural boundaries breeding a global cadre that freely float around any part of the world. Thus, financier is at liberty to invest their resources in any country of their choice where they perceive that they will reap as much profit as possible. Thus, an investor will never put a coin where their profit motive is either threatened or not maximized. If that investment destination offers all the basic requisites attractive to the investor, they swiftly set up camp and get busy siphoning as much as they can. If they feel insecure and the threats out weigh investment gain, they either delay investing or in worst case scenarios, pull out altogether. By that token, the hosting countryâ&#x20AC;&#x2122;s image hangs in the balance. Thus, we can see that every country that hopes to woo, as many foreign investors must ensure it makes their country as attractively competitive as they can relative to their competitors. FDI is without doubt necessary and desirable. What are the benefits of DFI to the country, individual and investor? This is a broad and deep question but we shall answer it in general terms as relates to the three entities mentioned above. The first benefit of FDI is that it brings about development in a given locality. The much-needed massive investment from abroad brings with it the necessary capacities that accelerate development. Check any place where genuine investment has taken root, what do you see? The place has changed record short time! Imagine if that investment had not come, things would pretty much be the same despite our boasting of having huge latent potential of untapped resources. Apart from the financial muscle, DFI brings with it new technologies, skills, competencies and in the process, these trickle down to the natives, if they are wise to appropriate these and improve on them. That is partly how the Japanese changed their fortunes from rags to riches in less than fifty years. Secondly, DFI brings about the transference of competencies and skills cheaply as alluded to in the previous point. The locals imbibe new ways of doing things more efficiently, cost effectively and profitably. Long after the investors have left the country with their investment, these rubbed on skills remain with the natives. In other words, they do not carry with them the mental capacities that can be used to develop the individual and nation. Thirdly, DFI brings about hard work. Where people were indifferent, laid International Business

Billy C Sichone

back and lazy, DFI compels them to work for their money and casts away the laissez faire mentality. For far too long, the Zambian Government literally spoon fed the citizens but the third republic suddenly removed that golden spoon,and guess what, the children mourned! To date many are still lamenting and are yet to recover. The sooner they get themselves together and settle to some real hard work, the better. This resolve (to work hard) will by and large terminate the much murmuring that characterizes many Zambians against any foreign investor today. Compare Zambia with our neighbour Tanzania, what a vast difference! I am sure Julius Nyerere avoided spoon feeding, knowing its backlashes. The only way to take charge of our destiny is hard work period! But fourthly, DFI changes the working culture, mindsets and attitude towards life. Although closely connected to the previous point, the point here is that the average lazy Zambian soon realizes that they must work with their hands to generate wealth. They read the times, yea, redeem the time and know how to or what to act on. The high urbanization trend in Zambia would be reversed in record time as people realize that the major factor of production, land is abundantly at their disposal (assuming corruption and other vices do not interfere!). As I move around Zambia, I often wonder why we rush to live in the city to be packed like sardines when the large landscape goes begging from generation to generation. When an investor buys large tracks of land for investment, everyone is up in arms, what a paradox! Granted, the strategic eye sees the future implications once our people realize. A land crisis might ensue in the not too distant future. Another school of thought positively propagates that as much land as possible be given out to people serious to productively develop the land regardless of where they come from. This is a plausible idea, provided the right safe guards are taken care of to avoid serious blunders that Zambia has faced with respect to the mining and trading companies thus far. We have spent much time around this hill, let us consider the fifth benefit of DFI and it is this: DFI contributes to Gross Domestic Product, GDP for short. Among many things, GDP refers to the sum of all the transactions relating to the income and expenditures of a country in a given time period say one year. If the country received more income than it spent, then that country is said to be developing or experiencing a growing economy. Any positive GDP is desirable and indicates that the productive capacities are being effectively and efficiently utilized to generate wealth. The goal is to achieve as high GDP as possible, say 10-12% as China has been experiencing lately. Other more mature and developed economies such as International Business

Billy C Sichone

the USA have a 4 to 5% GDP which is fine but not good enough for pauper countries like Zambia. You will recall that as late as 2000, Zambia’s economy was in negative growth but this turned around 2003 when the Mwanawasa regime sacrificially applied the World Bank recommended remedial measures. Where Kaunda reluctantly tread, Mwanawasa shut his eyes and ‘heartlessly held the bull by the horns’, though only for a season. Although politicians trumpet their achievements, the tangible results are yet to be seen and felt by the common man on the ground. Be that as it may, DFI is changing the tide. As we speak, inflation is down to around 8% , interest rates are down, the kwacha relatively stable (though sometimes suspected politically manipulated e.g. before the 2006 elections, look at where it is now, barely 5 months later!). In the sixth place, DFI means more development, resources, higher standard of living and an opportunity for Zambians to invest freely in their own country and abroad. As foreign investors carry out their businesses, making their work easier, some of them are cognizant of the social responsibility that goes along with their resource exploitation. In other words, investors, in addition to their marketing ploy, wish to thank the community in one way or the other by paying back in kind or cash. That explains why some companies like Celtel (now Zain) would go out of their way to promote the famous “Star Search” because they are essentially saying, “Thank you Zambia for what you have done by making us rich, we pay back some how by promoting this contest”. Or take for example, KCM paying the national soccer team coach. These are but examples. In the cases mentioned above, the corporate image is built as well as lengthening the “acceptability of the product/service/company”. Seventhly, DFI frees the government from involving itself in business thereby allowing it to focus on creating “an enabling environment” as Chiluba often used to say years ago. In such a scenario, the government cuts down on public expenditure as other players take over the running and initiation of some activities such as building schools, private colleges, stadiums, businesses etc. Thus, the government limits itself, and conveniently so to a regulatory entity that facilitates a working framework in which everything fits together like hand in glove.

As at Oct/Nov 2006

International Business

Billy C Sichone

Eighthly, if prudently handled, DFI brings about job creation and economic expansion. As more investors pour in resources into a country, different industries, traditional and new, cause an expansion in the economy thereby creating more jobs for the natives. This significantly contributes to the reduction in unemployment levels. Ninthly, DFI fosters better international relations between countries as the political boundaries are bust and peoples interact, initially on business premise but later on cordial friendly relations level. Tenthly, the perceived job creation expands the tax base for the government that in turn translates into better social amenities and services. Eleventh, in a perfect world, DFI and privatisation allows more of the locals to be serious stakeholders in many resources provided they have the money as opposed to a command (e.g. socialist or communist etc) setting. In addition, a free investment climate fosters entrepreneurial ship among the natives, having opened their eyes to exploit the available resources and markets at home and abroad. Twelfth and lastly for our purposes, DFI brings about efficiency, raises competition thereby improving product and service delivery quality. Thus, people have a wider choice, higher consumer power and in time, make it cheaper to do business in that country. That said, the glowing picture painted above seems to show a near impeccable ideal world which presupposes that every factor will be in place, static and maximize good for all concerned. For a moment, it looks like a “win-win” scenario but sadly, DFI does have the down side as well, especially if the playing field is not level. If one side is desperately poor while the other is filthy rich, exploitation of man by man results. The different development paces and levels between the nations also play a major role as those from developed nations will have refined systems that cheaply “grab” the raw materials from the less developed, process them and return them to those countries at double or triple the value. Value added goods are good but the inequalities rub off the benefits and it becomes a unidirectional affair. It is like a “rat versus elephant” tag of war or a “speed boat versus canoe” race. At times, the stakeholder /trading nations are worlds apart. What are the real tangible negatives of DFI as experienced in countries like Zambia? Many come to mind but a few will suffice and we rest our case there after.

International Business

Billy C Sichone

Firstly, the DFI advent often results in massive job cuts (or losses) depending on what economic philosophy is being changed from. If, as was the case for Zambia, the economy mutates from a command to a pure capitalist economy, many uncompetitive entities either fold up or are privatized. Thousands of perceived “excess staff” are shed off in a bid to reorganize the entities into profitable ventures as dictated by the new owners. Let it always be remembered that the profit motive is paramount in the investors’ mind. That is what happened in Zambia after 1992 and continues to. Watch the ZANACO saga repercussions begin to unfold. Job losses are inevitable. Secondly, the hard earned and developed companies are surrendered into foreign hands that seem to “reap where they did not sow”. Many times, it appears a rip off. Take the painful example of the ZANACO privatisation, a profitable indigenous multinational company sold off by the stroke of the pen! This transaction makes one feel hot under the collar. Consider the ZCCM arrangement (although initially nationalized in 1981 from private hands). The massive government investment, though not profitable at the time, was sold off at ridiculous prices! Thirdly, DFI withdraws services from places where the Government once serviced. If a place or investment area is not profitable to the investor, they swiftly close off their investment and relocate to a place where they think they will benefit. For instance, many Banks closed their branches from the rural areas and only concentrated in the profitable urban centres. The UBZ serviced all the routes, no matter how bad but the modern investor shuns these and cannot be compelled to go there. Though it is an opportunity, it is not attractive enough. Fourthly, DFI, if corruptly and hurriedly done, results in frustration, loss, disillusionment, theft, and untold scandals. The nation (Zambia) is still licking the MMD regime wounds after they recklessly privatized everything without due regards to what their actions entailed. Very little or no safety nets were provided for the redundant. For instance, people strongly think that the Zambia Airways should not have folded its wings had reorganization been allowed to take place. Corruption surrounds itself with clandestine manoeuvres that only profits a small click of fellows, male or female. It is a tragedy when unprincipled men and women are at the helm of such a sensitive exercise. For some time now, Zambia has seriously lacked politicians of valour laced with high integrity, strategic foresight, great International Business

Billy C Sichone

mental aptitude and disinterested professionalism. Unfortunately, they (politicians) are in the driving seat not the citizens at large. Myriads of Zambians will still bear the repercussions of some of those thoughtless mistakes for generations to come. The new dealers are not any better, especially after the ZANACO and mineral royalty scams. Corruption is now more entrenched, complex, invisible but highly present, deep-rooted than ever before. At face value, the corruption fight by the government of Zambia seems to be but a smokescreen or at best, a political gimmick. In the mean time, spurious transactions continue to take place in the back ground, leaving no fingerprints or audit trail! In a nutshell, in many deeply corruption infested countries, all the grand perceived benefits of DFI do more harm than good because the rich and powerful grab almost everything to themselves leaving the vulnerable poor (who are in the majority) permanently wedded to poverty. Fifthly, DFI sometimes robs people of their identity. Granted, we are in a global world but the self-identity and esteem is lowered especially if the nationsâ&#x20AC;&#x2122; population critical mass is illiterate as the case is in Zambia today. Because people do not fully understand the issues, they feel robbed and dribbled at the same time. A total dependence on DFI makes a statement to the world that the locals have totally failed to manage their own resources and are now mortgaging their country to others from abroad. This hits hard on the peopleâ&#x20AC;&#x2122;s pride, esteem, aspirations and resolve to develop their lot. It is painful to note how Zambia has thoughtlessly given away its sovereignty at the mercy of DFI. People paid with their lives to redeem the country from foreign control but today, barely 43 years down the line, we are crying for the same exploiters to return and control factors of production and thereby de facto rulers. That explains why KK and others constantly grieve when present politicians sale the nation to get a kick back for them selves. This is a bitter pill to swallow that no one wants to talk about. But in the sixth place, DFI defies local rules and regulations once the investors are entrenched and in control of all the key productive assets. The powerful multinationals call the shots in many countries and get away with many atrocities ranging from breach of labour laws, pollution, unfair competition, clandestine dealings and out right disregard for the powers that be. We see that in Zambia repeatedly, such as the BGRIMM explosion and KCM pollution sagas of 2005 and 2006 respectively.

International Business

Billy C Sichone

Seventhly, DFI does not really bring about home grown sustainable development but rather what is visible are but crumbs falling from the mastersâ&#x20AC;&#x2122; table. If those are but tips in the iceberg, then what about the huge hidden mass from public view, under the water? Presently, an investor can bring in and take out 100% of their investment. Further, it appears that when they invest say $ 100,000, they reap a million times more and quickly siphon it away to their off shore accounts or develop their home countries (which is reasonable any way!). Once they donate a paltry $ 100,000 as social responsibility, every body goes into a celebration frenzy, but what is $ 100,000 compared to a billion dollars they have remitted abroad? What is 250 housing units built compared to $ 1 million equivalent of cash siphoned out? Eighthly, in a bid to attract DFI, many countries steep so low as to literary give away all their resources by offering unbelievable tax holidays and concessions. These investors come and do business for the period that they have a tax holiday and suddenly fold up when that ends. They vanish, liquidate or return using another business name and again we give them another 50 year tax holiday! This is not strange in Zambia, one wonders whether the powers that be are involved in these scums! Ninthly, DFI, leaves poor people poorer as the rich-poor gap widens. The state is more interested in over taxing the already squeezed citizens while the foreigners go scot-free for many years, yea, they go laughing all the way to the bank. In a capitalist arrangement, the rich and famous are powerful often having the law on their side. I am yet to see a poor person easily get solid and expeditious justice in our land compared to the rich. â&#x20AC;&#x153;Money talksâ&#x20AC;?, as they say. Look at the KCM pollution saga of 2006, had it been a local company which had polluted the Kafue river, all the government organs and powers could have clamped down on them. Tenthly, DFI, depending on government policy, often favours the foreigner rather than the native. In a bid to attract investment, sometimes ridiculous provisions in the law make one wish they were foreigners because then, more attention and support is diligently offered by the government. If a Zambian ventures to enter a similar business as the multinational, all the laws seem against them and eventually choke them out of business. If that does not, red tape does the trick. I often wonder how the government offered large tracks of land to the Libyans while thousands are languishing across the country for want of land. International Business

Billy C Sichone

Eleventh, if not well handled, DFI destroys the spirit of national hood, aspirations and loyalty. People lose their unique identity and have no real patriotic spirit to their country. Twelfth, if the laws are bad, expect continued exploitation of man by man as in the case of the privatisation laws of Zambia. They give the investor too much bargaining and leverage power compared to the citizens. Unless and until it is changed, DFI will continually appear a terrible monster. Thirteen, Globalisation blizzards bring about fundamental changes on the business scene. It some times kills local competition and reduces diversity in other cases. An example will do. Remember the once famous Chilanga cement brand? This brand made Zambians proud as it was used to build many world class structures including the mighty Kariba dam wall. Well, that brand in now gone. An international investor bought off the company and changed the name to LarFarge from Chilanga in 2007. After hapless attempts by some proud Zambians to preserve the name, they were overruled by the powerful investors who care less about anything that militates against their desires. That signalled the end of the powerful brand name but certainly a gain for the foreign investor whose primary motive is profit. Fourteenth, Investors take advantage of weak laws in a host country and change their identity often as a tax avoidance trick. This has happened very often though unnoticed in Zambia. People think it is mere â&#x20AC;&#x153;re-brandingâ&#x20AC;? when actually it is a ploy to avoid or even evade tax. At other times, they have feigned departure or change of management when actually the aim is to evade some obligation to the state. In that way, the nation losses out one way or the other as they claim to be new entities needing another five or ten year tax holiday Fifteenth and probably lastly for now, DFI promotes wanton exploitation of natural resources. The Foreigners have a clear head start and advantage compared to their counterparts. The archaic laws promote exotic investment as it easily facilitates their paper work and builds their cartel network. Look at the Lake Kariba arrangement, who exploits the Kapenta business the most? Further than that, DFI promotes pollution too. The multinationals sometimes flee their countries to invest at places where weaker pollution laws exist. While the desperate poor countries rejoice that a Saviour has come to town, in actual fact the enterprise could just be transferring the International Business

Billy C Sichone

pollution point and get away with it for many years hence. Once confronted, they revert to the porous, ambiguous agreements or threaten to leave. At that point, the pauper countryâ&#x20AC;&#x2122;s hands are tied and thus stand aloof helpless but painfully watching like a statue while exploitation continues. Cheap labour is another area worth pursuing and looking at. We have thus crystallized only twelve of the many evils connected to DFI, we leave it to others to delve into other details but for now we run to a conclusion. It is now clear from the above point that DFI does have pros and cons which every entity should carefully consider before any firm commitments can be entered into. One would ask, do the benefits outweigh the demerits of DFI? Not necessarily. Depending on the context and extant investment policies, DFI can be a blessing or a curse. It is however advisable to avoid all extremes which may lead to acrimony or capital flight. There is need to move out of our time honoured enclaves and see what the global economy offers. The five imperatives of economic development: Market led, Knowledge based, Entrepreneurial, Regionally integrated and globally connected need to be vigorously pursued. Needless Xenophobia ought to be exorcised. This author holds strong personal opinions about this matter but he leaves it for you to make informed decisions. Further, he appeals to you to read various literatures on this subject so that you comment intelligently the next time the subject comes up in your discussions with colleagues.

Xenophobia= strong dislike of foreigners, intolerance, racism etc. This was clearly manifested in South Africa in 2008.

International Business

Billy C Sichone

) !

In trhe previous chapter, we briefly defined and examined DFI, as relates to International Business but we now proceed to say that there are three major sources of multinational personnel. In relation to International Human Resource Management (IHRM), we briefly discuss them in this chapter, though a detailed treatment of this subject is in my other book, ‘The Strategic Horizon’. In this global world, human resource can come from any place and perform very well. Others plummet who have been star performers as home probably due to contextual matters. Pay particular keen interest in the categories below: 1. Natives- There is an increase in the appreciation of employing natives in certain sensitive positions because of the acumen of the people who know all the inroads to success in that particular setting. It is also cheaper to hire locals as opposed to expatriates, thus saving on the over-heads. 2. Expatriates-For a long time, this has been the practice of many a Multi national organisation because of the feeling that “our own is better”, knows the corporate goals, will be objective and socially intelligent to read the times. The expatriate is expected to know the critical aspects of the business and will thus more easily represent the organisation. In a nutshell, the expatriate sent on an international assignment for a number of years from the head office and will most likely be a native of that country where the head quarters are placed. The trend of hiring expatriates is steadily on the decline although still very prevalent. With the advent of the virtual organisation, it would be difficult to have expatriates in the sense we have described. 3. Third-country nationals- another option is to transfer some one from one branch/division to another to head another place within the network. That person is not usually from the head office nor is he/she a native of the country of origin of the organisation but another third country e.g. from India or Pakistan. This practice is on a lesser scale than the expatriate option but equally works well.

International Business

Billy C Sichone

4. Knowledge workers-This is the type of resource is on the rise rather than the specifically stationed person. This type of worker is the sort that has no fixed abode but is stationed at the Head office and travels around the various subsidiaries around the globe using the specialized knowledge he/she possesses. In the short run, this mode might seem too costly and inconvenient but is cheaper in the long run depending on the geographical location of the said person. The idea is to have a regional facilitator whose overheads are apportioned among the various sub stations. World Vision International has used this mode very successfully. In a nutshell then, International business is complex and needs someone who is well-adjusted, objective, wise and with the right acumen to fight the battles that lie ahead. Having brightly illustrated the International management aspects, we now cruise to the next item where we encounter the pricing aspects of products internationally. Even after producing the best quality goods, the manager must ensure that the goods are successfully sold. Selling involves getting customers to buy the products. As will be noted, customers are willing and ready to buy goods that are fairly priced and equal to the satisfaction they derive. As such, if there are too many middlemen in the process of distribution, chances are that the prices will shoot up and thus reduce the sales. Therefore, in the present chapter, an attempt is made to establish prices for an entire market, as opposed to different prices that are pegged in different market segments. Recall that products are produced with a particular market in view as well so much that the price, in a way is determined by the goal. But recall also that the Global Marketer has to have a uniform brand and uniform price if going to market goods on a global scale. Should the prices vary, this could harm the sales and the goodwill of the company. Thus before prices are fixed, certain questions must be answered such as: 1. Is the price right and fair? 2. Does the price take into consideration factors such as inflation? 3. Is the price competitive and profitable enough? 4. Does the price match the bundle of utilities and satisfactions in the product? 5. Will all people regardless of culture and location accept the price? International Business

Billy C Sichone

& ) 4 If the above are adequately addressed, then the marketer can safely venture on. However, there are situations in a country where foreign exchange is hard to get due to restrictions or the Dollar is simply scarce. In such circumstances, (and where allowable) the barter system can be used. In general, counter trade is an option, which is defined as the ‘arrangement under which the sale of goods or services from one country to another are linked to sales in the opposite direction. Counter trade arrangements frequently characterize East-West trade.’≈ There are at least 4 types of counter trades 1. Barter- where there is an exchange of goods for goods. 2. Compensation- This involves the payment of a mixture of goods and cash. 3. Counter purchase- Where a contract is signed to the effect that the seller agrees to sell a product at a set price and receives payment in cash and vice versa. 4. Buy-back-‘This agreement is made when the sale involves goods or services that produce other goods and service, that is, production plant, production equipment, or technology.’ƒ Companies must also take into account other avenues such as transfer pricing, intensity of competition, the commercial as well as political risks and also the hedging options that are available. Hedging has to do with shifting the risk to a third party. These gadgets should inoculate the international marketer from the price escalations that occur as a result. This price escalation can be further minimized in three ways: Lower the cost of goods- Build quality in the production process to avoid re working as well as adopt the best practice methods. Lower the tariffs- The Government should reduce or remove tariffs. Lower the distribution costs-Reduce on the number of middlemen such as agents and merchants. There are many other factors to be considered but suffice it to say that the above are the most critical and ought never to be ignored. Finally, we are about to enter the final lap of our book review of this excellent book. Thus far, it has been an exhilarating journey, how we long to go further! ≈ ƒ

The Language of Trade: A glossary of international trade terms, Page 48. International Marketing, Philip Cateora, page 575.

International Business

Billy C Sichone

We wrap up with a consideration of the capital needs that will confront the prospecting multinational company. As usual, a number of variables will come into play. Firstly, the company must assess its ability to generate funds from within and then outside the firm. A critical internal scan is crucial to determine whether the local resources are enough, appropriate and cheaper. Generally, this is the case in the event where this where this situation fails, the option available is to approach financial bodies such as the Export and Import bank (EXIM) for cash. This body is set up by the government to facilitate and promote trade within for local companies. The said body also issues loans and guarantee to potential creditors so that international trade may be enhanced. In other words, the EXIM supports among other major things, capital investments, guarantees risk, and supports American companies to go international. As intimated, the EXIM Bank is American but has tentacles in other parts of the World as well, working on the same principles. But what are the ways in which finance can be gotten? What arrangements avail themselves? For an international transaction to take place, a number of sureties are needed and a number of ways have been devised such as the following five basic payment arrangements: 1. Letters of credit-This is a letter opened in favour of the seller by the buyer. The said letter shifts the buyerâ&#x20AC;&#x2122;s credit risk to the bank so that in the event of failing to pay, the bank takes up the responsibility. 2. Bills of exchange-This is a time draft where one promises to pay at a future date whilst taking possession of the goods now. In other words, the bank issues that bill but will only make actual payment when the agreed date arrives. In that case, the seller pays a small charge if he/she cashes the bill before the agreed date. In this case, the seller assumes all risk until the actual dollars are received. 3. Cash in advance- in this scenario, the seller demands that cash be paid in advance before shipment of goods can commence. 4. Open accounts-Sales take place but only with long standing trading partners whose credibility is worth resting on. In this case, the seller is in a position trusting that the other parties will automatically honour their parts. 5. Forfaiting- this is a one time arrangement with the bank by the seller to buy a specific accounts receivable. Usually an institution will act as the forfeiting party, assuming all political risks as well. In other words, â&#x20AC;&#x153;Forfaiting is a long term financing technique which is available for the seller to make a one time arrangement with a Bank or other financial International Business

Billy C Sichone

institution to take over responsibility for collecting the account receivableâ&#x20AC;&#x2122;. The exporter offers a long financing term to its buyer, but intends to sell this account receivable, at a discount for immediate cash. The forfaiter buys the debt, typically a promissory not or bill of exchange, on a none recourse basis. Once the exporter sells the paper, the forfaiter assumes the risk of collecting the importerâ&#x20AC;&#x2122;s payment. A number of financial institutions other than the EXIM bank are available in the USA. Two of them are the Agency for International Development (AID) and the Overseas private investment corporation (OPIC). Happily, we have safely manoeuvred our ship among the rocks without running aground; we now hurtle along to the close of the work!

From what has been highlighted so far, we have no telling where the IB lot may fall tomorrow but we can safely assert that IB will become more complex and yet user friendly as long as the present trends continue. The present indications seem to suggest that IT will continue to impact the traditional trends for a long time to come. It is possible that e-commerce will be the main avenue for IB as it is faster and far much cheaper in the long run. Today, an order can be placed from one end of the terrestrial ball and at the click of the finger on the key board, an order is made triggering an online just in time process at the other end of the globe. This means that companies will be more agile, leaner and smaller, offices paperless, brand names proliferated, outsourcing commonplace and product quality higher. Decision-making will be faster due to the availability of strategic information. Much, much more remains veiled to the human eye at this stage but suffice it to say that IB will be catapulted into more dynamic arenas. Let the reader keep a keen meticulous eagleâ&#x20AC;&#x2122;s eye to what lies in store.

International Business

Billy C Sichone

“

$-.

Thus far we have sought to describe what ‘International Business’ is but our

question has hardly been tackled, has globalization really left Africa on the margins? Is Africa thrown to the fringes of civilization and relegated to the pauper’s den forever?

In attempting to answer this million-dollar question, we purpose to divide our discussion into a number of sections akin to the first part. We shall commence by stating two radically opposing views and then proceed to prove our case. The two major views are that globalization is further weakening African position in many respects while the other holds that Africa itself stands responsible for this apparent marginalisation. The first view, tenaciously held by people like Dr Kaunda and Dame Judith Hart asserts that Africa has been wrecked: 1. Economically-The first world Countries have built a curtail calculated to cripple Africa. This has systematically been done economically by attaching egocentric conditions to aid. This aid, although appearing in good faith is actually deadly bait once taken hooks the throat forever. As we write, Africa is like a caricature that moves at the bidding of the manipulator. The economies have shrunk with no hope of recovery.

International Business

Billy C Sichone

2. in its Sovereignty-As a result of being a puppet, the Africans have more than one loyalty and have lost all bargaining power. The African voice is fragmented and enshrouded in debt. Once one of those donors decree, the African have little or no option but to obeyΤ. One of the Zambian Parliamentarians has spoken prophetically when he asserted that the colonialists would take over Africa again. In a sense they have already as the economic landmines detonate randomly. 3. in its bargaining power-This is connected to sovereignty above but thrust here is on the ability to negotiate or suggest ways that might be suitable for the country. The fact that the Structural Adjustment program succeeded in Ghana for instance is no guarantee that this selfsame plan will work elsewhere. But being beggars, the African’s voice cannot be heard. 4. …and has weak infrastructure i.e. IT etc. This is the major basic component that is missing in Africa. The Countries are so dilapidated and do not have the basic infrastructure to facilitate development. The Africans are too poor to finance and develop these much-needed structures. The advent of Information Technology for example is critical if Africa is to develop. The continent ignores IT at its own peril but sadly, the capital over heads to set up such structures is simply not there. The bulk of the generated cash goes to the never-ending debt servicing. 5. The loss of independence and objectivity of the World Bodies like the United Nations. The UN is perceived as a US baby with only milk teeth. The attached Boutros Ghali Case shows to what extent the UN has been “Americanised”. In every sense, today, the UN is synonymous to the USA. One does not need to be a genius to see that the UN is selective in its care and concern for the nations. If the USA has an interest in that particular country, then speedy attention will be given to that particular nation but other wise nothing will happen. Recollect the Rwanda and Bosnia cases, which war received better attention and coverage? Today, there is conflict generated by poverty and thus no peace. Look at the case of Zambia for instance, the nation has never been to war yet it is classified with the countries whose economies have been ravaged as a result of war. Conflict resolution and prevention appears to be the private preserve of a Τ

Refer to Taylor’s book “Development from within” pp 219

International Business

Billy C Sichone

few and directed to the richer nations or where the USA has interests, as earlier intimated. 6. By the crippling debts and the unwillingness of the developed countries to write off the same. The debt hardly needs elaborating over but the African continent is entangled by the crippling complex web of debt and cannot possibly make headway. Try as it might, it is incapable as long as this burden remains fastened to its back. 7. By the unfavorable dictates of from global bodies like the IMF and the World Bank. Recently, poor Zambia has been trying to defy the IMF imposed rules and regulations. Such retorts cannot possibly move the cold-blooded capitalists but still demand their cash. In a sense they have a right to their cash but to decree and coerce Governments into terrible policies is not helpful. Sadly, The Africans have to bow to pressure in the fullness of time. The above have effectively contributed to Africa’s marginalisation. A careful analysis of the factors above clearly shows that Africa has been paralysed and condemned to the economic bone yard. The other school of thought, advanced by people like Dr Mark Ellyne holds that Africans cannot claim to be disadvantaged because: 1. Africans themselves are the problem. Generally, they themselves are to blame because they do not work hard but love ease. They would like to live like kings minus working like slaves for themselves and theirs. The developed world film star mentality has captivated many like a virus. Further more, the Africans are indifferent and not proud of where they hail from. Given an opportunity, they would prefer talking about the United States, Japan or Europe rather than promote their own roots. Talking about Africa in a developed world context is like throwing a wet blanket on the discussants. As one e-mail attachment has quaintly put it “Only in Africa”. The lay out in that document depicts the stark difference between Africa and the Western World. 

Research reveals that the IMF and World Bank are excellent and well meaning bodies but in practice, their policies are awful. Refer to the UN hand book and the booklet on the IMF, its structure and purpose. Reading through the literature makes one feel that some criticism on the institutions is really not fair and unwarranted.

International Business

Billy C Sichone

The average African will just laugh off the differences instead of being challenged to do something to improve their lot. By and large, as shall be seen, the Africans themselves have wrecked their economies and remain ironically indifferent about critical issues. For instance, the ravaging effects of the AIDS pandemic ought not to be if Governments and people themselves were more serious than they have hither to been. Denial is no solution to problems. 2. It is more of attitude problem than anything. Closely connected to the point above, indifference and lack of will power has crippled the Africans. The laissez faire attitude towards work, relations, social issues and plans are in the main extremely bad. The dependence syndrome seems very deep-rooted and will take a long time to change peopleâ&#x20AC;&#x2122;s perceptions. To disinfect such polluted minds will take more than just better perks but a radical paradigm mindset shift. For instance, set appointments to a typical African are not big issues when they abscond or arrive late, after all, they never used watches from the womb but by instinct used the sun to tell their time! An African can watch a problem develop from bad to worse and still remain sited on his/her frail laurels! Many economic indicators have been seen afar off but procrastination and lack of patriotism is what has cost the continent millions of dollars. I once heard of a person that saw a growth appear on their body and did not bother going to hospital despite clear signs and warnings that it was a cancerous growth. Until the same spread across the body and that person was bedridden did they think of actually going for a check up. It was too late. Attitude, attitude, attitude is all that it takes to develop. 3. Reluctance to change with the times e.g. privatization. Africans by nature are generally reluctant to change with the seasons and to keep in step with the times. As a matter of fact, the average African is very suspicious and lazy to apply themselves to new things unless that issue immediately threatens their very lives. Take for instance the advent of IT, many African nations, until recently were very casual about this matter. Mean while, the world moved on and now, when Africa is years behind, International Business

Billy C Sichone

they wake up to blame the west! In addition, the corrupt leaders have their own personal agendas to fulfil and will fight or block any new innovation that will threaten to derail their plans. For instance, it is believed that in Zambia, there has been a curtail, though undocumented, over the cell phone business. It is believed that the rates charged in Zambia are among the highest in the region but when another firm, Vodacom decided to invest at a far much cheaper rate, they were blocked! Why? The grape vine has it that the “big fish” in the Government are share holders in the present curtail and fear losing their income should Vodacom come in. Having made enough cash, news reaching our desk is that Vodacom can now come if it wills, having tangented to Mozambique recently. That is a one off case that involves corruption and abuse of office but the systems and ways of doing things are also archaic. For instance, most of the Government buildings in Africa are the slowest in data processing, manual systems and obsolete work structures that stifle innovation or initiative. 4. Rampant institutionalized corruption and theft. This is the characteristic black mark of the African government. Corruption is a way of life as blood is to the body. If one has to get things done, they have to “oil the fingers” of some one. This vice is so rife that the State police are viewed as the most corrupt on this terrestrial ball. Until recently for example, when the Police officers wanted to fund raise for personal use, they would stage a roadblock at any and every turn. You could be assured that of the thousands netted for “offences”, only a handful would actually reach the police station and pay the state, the rest would oil their way out of trouble. In Zambia, the word “Nchekelako” has become a household name. This Nchekelako business has spread all over the systems beginning from the Plot one right down to the common man on the street. The second republican President of Zambia made corruption so entrenched to the extent that he himself was the very epitome of corruption. Indeed, he is rightly called the “political engineer” who dribbles every one including himself! He is a Doctor of corruption International Business

Billy C Sichone

of the highest degree. But the said Doctor is only but a tip in the iceberg of the corrupt leadership Africa habours. Kenya, for example, with a much stronger economy has not been spared from the Moi led corrupt legacy built and refined over 23 years or so. Thankfully, the new Kenyan President (Kibaki) did not get there through a corrupt electoral process unlike in some countries, though his second term election was highly controversial (2008). That not withstanding, the new Kenyan leader still has the mammoth task of undoing all the mess and creating a new approach altogether. That undoing aspect will slow down development somewhat. In Africa, a minister has the audacity of awarding himself huge multimillion dollar contracts to carry out works and no one talks about it. Systems corruption sticks like algae on the wall in Africa. Closely connected to corruption is a rampant unchecked level of theft either within the system or just simply pilfering, and no one bothers to follow up. The recently liberalized press pursues a story for a season and abandons it altogether. Thus, the educated thieves escape unscathed. Ironically, thieves in Africa are viewed as heroes! Indeed white-collar crime and other wise are here to stay for a long time. Now, how on earth does a country expect to develop when entangled in such a negative complex web? 5. No accountability or transparency. The African person generally takes offence to be asked to account how they have spent their money or used assets. This suggestion borders on lack of respect and mistrust for the person. And yet much dirt goes under the carpet in that way unchecked. Accountability to the people or to have onesâ&#x20AC;&#x2122; records straight is one of the sure ways to development without which, Africa will forever remain on the apparent fringes of globalisation. Corruption thrives in the dump gloomy clandestine environment where the rules are not to enquire into issues too much or elseâ&#x20AC;Ś 6. No plans and goals. The attitude problem permeates to all levels and results in a blurred vision or simply the lack of it. Many leaders and private citizens have no plans, strategies or goals to improve their lot but look out for International Business

Billy C Sichone

free hand outs from the west. This has to do much with the spirit of the nation as led by the leaders. What has made Japan what it is today? It is determination, hard work and the will to improve. They have followed a plan all along that has been a guiding principle all the while. For instance, Zambia has had no clear plan in the last 11 years and has been free for all regardless. What Africa needs are leaders not bosses whose major agenda in public office is to alleviate poverty on the masses rather than create a conducive atmosphere for themselves only to thrive thereby weakening the economy further. 7. Not cost consciousness. This comes out in many ways such as the desire to live a luxurious and flamboyant life style that is way above the means. Unfortunately, the problem starts with the top government officials and trickles down through the system to as many as have access to resources. It is amazing how the poorest countries in African have the most luxurious cars, mansions, cell phones and the endless planning workshops that do not seem to lead to implementation. In all these areas, allowances are an extra income generating activity (IGA). For instance, it has been said that Zambian Ministers have a minimum of two Porsche vehicles and cell phones that they use at will with no regulations. Millions of kwachas are thus wasted in useless trips and phone calls probably to girlfriends. In some cases, the Ministersâ&#x20AC;&#x2122; children recklessly drive state property, crash them and escape unscathed. This is the African way generally. 8. Weird policies adopted by governments. Some governments choose policies that go against the grain of modern development all for the sake of gaining political mileage. Some of these policies are so unwise that they actually cut off the material countries from globalisation. A case in point is what has happened in Zimbabwe. Although in principle, the land sharing issue is correct, the manner in which it has been done is wrong and militates against the current trends to globalisation. The once strong economy of Zimbabwe is slowly disintegrating to tatters as time goes by due to the idle International Business

Billy C Sichone

economy. By that token, IB activities in Zimbabwe have slowed down and thus causing the economy to contract. The Politician does not care about all the consequences as long as they can hang on to power, peradventure die while still in office. The African leader is keener to keep the Presidential office vow than the marriage vows! And now they are talking about third terms and all the retrogressive issues. 9. Misplaced priorities. This point is seen everywhere by the way money is spent and on what. Many African States are prone to crisis management and would not think strategically in the long run. For instance, They spend over K 14 billion (About $ 311 million) on Parliamentariansâ&#x20AC;&#x2122; luxury cars and leave thousands to languish in the streets for want of food! Why allow the hospitals run months on end without essential drugs while the president galavants aimlessly all over the World? Globetrotting will not feed people. As though that were not bad enough, the countries over spend by billions of kwacha just to protect a puny mere mortal! What is the justification of having a motorcade a kilometre long and all economic comes to a stand still when one fellow is passing through town? For all we know, before one of those aimless globetrotting errands takes place, an advance party goes ahead using taxpayersâ&#x20AC;&#x2122; money! 10. Religion and culture. The other aspect that cripples is Africa allowing itself to be a play ground for fundamentalism of all sorts that leads to a stand still. If two opposing religions dominate, rivalry results where there are constant frictions leading to wars. Apart from the strong religious problems, there are values and cultures that are at variance with the modern trends of business and these need changing over time via frequent vigorous campaigns. The ethical problem that confronts the campaigner is whether that activity is in keeping with the religious and cultural norms or else risk losing his/her head! To some extent also, religious fanaticism is not realistic and will not bother itself to ensure that bench

International Business

Billy C Sichone

marks are achieved as the means of verification and measurement are extremely blurred, if not nonexistent. 11. Lack of will power- The Africans spend all their life times complaining rather than setting goals for themselves and endeavouring to achieve them. For Instance, they should have the will power to succeed in all areas such as agriculture, Engineering and business. They should will to succeed like any other. The saying, “Where there is a will, there is a way” sound so true! 12. No determination and patriotism-Many are slothful and die while entertaining wishes. Were we to sample up many brains in the grave yards, many would have grand plans but no determination to implement. The vast majority of Africans apply them selves in other developed countries but will never do the same at home. In fact, they disgust the thought of coming back to Africa! But look at an average Dutch person, how so devoted they are to their country! How so patriotic! How so determined even to reclaim land from the sea! How so proud of their country! Look at the Japanese, how so determined to rebuild their country from the atomic ashes of 1945! Africa suffers from a strategic and visionary leadership crisis that trickles down to the average person on the streets. Gone are the days when our national leaders were our heroes and mentors… For instance, I am yet to hear a child who would say, “When I grow up, I want to be like Dr X, the former President of Zambia” Those days have receded into the irretrievable past. 13. Weak and shrinking/contracting economies. This is the bottom line why Africa as a whole is seemingly marginalized. A quick scan will reveal that nothing much is happening on the continent that would capture the World’s attention. Remember that the World is very fast and will only be captivated if something is really worth pausing a while otherwise, the issue will be ignored. By that token, if no interest is shown, the international business prospects are reduced. In African, usually the economy depends on one major issue as the main stay of the economy and once that is removed, the country simply nose dives. Zambia, for instance depends on International Business

Billy C Sichone

Copper as the main international trade commodity but once the prices plummet, the country’s economy is impacted badly. But in a strong economy, one sector alone should not dictate the economic climate but many . If the mining sector fails, the service industry should compensate and absorb the negative shocks resulting from another sector. Further more, a well-developed industrial base is critical or else the Gross domestic product will not improve. In Africa, what has been happening by and large is that the economies have either been static or shrinking. The picture is different for well built symmetrical economies. 14. High unemployment due to rapid privatization. This trend, though good in itself once carelessly handled has left scores of people jobless and on the street. Having worked all ones’ life and then suddenly hounded out has led many to an early grave. The problem is that the agencies appointed to supervise the privatization process are not independent and are equally interested parties. For instance, Zambia has on record, the most rapid privatization process÷ but this was done hurriedly without due regard to the repercussions and no safety net to cushion the impact on the people and economy. Further more, the greedy politician would not for a moment let the agencies operate professionally but would interfere at will. When we scan where the proceeds from the privatization process in Zambia went, we cannot trace it! Where is the money? Who took it away? When the trail is followed meticulously, it will not shock us to discover that millions of cash stashed away in private individuals’ accounts. As a result of the rapid privatization rate, thousands are unemployed while those churned out of school have no hope of being absorbed by the industry. The shrank economy cannot take in more people no create conditions for more employment much like how a person feels when they are in the process of vomiting. If the African leaders had followed the prescription laid down carefully and with the safety guards, most of the ÷

Refer to attachment on this in appendix C downloaded from the internet in November 2007

International Business

Billy C Sichone

mess evidenced today would have been averted. Further more, if corruption had been kept at bay, better results would have been seen. In a sense, it is impossible to carry out the twin process of privatization and reengineering without having some casualties in terms job losses but if properly done, the economy would absorb them by either creating more formal jobs or encouraging entrepreneurship. Look at Ghana for instance, the structural adjustment program is a success story because certain issues were taken heed to. 15. Poor quality standards- Resulting from the weak economies and the inability to invest in research development, the African countries usually produce substandard mediocre goods and services. These do not meet the high ISO standards and thus cannot be relied on. If this trend were to alter radically, much like what Japan did, the face of Africa would change. It would now probably be called the â&#x20AC;&#x153;Shining continentâ&#x20AC;? because it will not be possible to ignore it. 16. Core competencies ignored- Half the time, African countries imitate the West and do not carry out a Self SWOT analysis to determine what the major strength could be of the country. Want of this crucial exercise has resulted in spreading resources thinly all over the place and there by having a zero if not negative net effect on the economy. If the strength lies in the Mining sector, the by all means strengthen that area. If it be in the Service industry, then throw in your lot in that area, while of course building other core competencies. The problem how ever has been that people want to advance their own ends at the cost of national development. 17. Diversion of funds. The African governments are good at diversion of funds and window dressing without leaving any fingerprints, yet the cash has been rechannelled to fund a senseless Presidential trip for example or some uncalled for workshop. The diversion of funds in the end hampers development, thus, donors are now prefer to deal with NGOs rather than with the bureaucratic governments.

International Business

Billy C Sichone

18. Africa did not start industrialization fast enough and has shown little or no pulse in that areaλ. The blamed western World started hundreds of years ago and have frantically been perfecting their skills. The famed Japan for instance, started its industrialization as early as the 1820’s and when the Atomic bombs flattened two cities, lives were lost but not the knowledge. Hence they were able to recover, catch the ropes of the quality movement advocated by the great Deming, and then develop their own indigenous technologies uniquely theirs that the world has bought in. Recollect that Japan went through three phases of development: the Agriculture, the light industry, the heavy and the Technology phases. Further, it has diversified its economy galore giving a firm economic base. Now Africa has hardly gone through any of those phases with the exception of a few. 19. Drought, famine and other natural disaster making it practically impossible to neither predict nor manage. Africa has suffered s many natural disasters. 20. Autocratic leadership styles. Despite their high learning, many African leaders are still haunted by the autocratic, royal and totalitarian kind of rule that was accorded to the Kings of the past. Once one is propelled to the highest office in the land, they want to assert themselves, and settle old scores using state machinery and taxpayer’s money instead of focusing on developmental issues. This kind of leadership is detrimental and antagonistic to innovation, enterprise or initiative. This terrible attitude was depicted in Zambia recently when one of the chiefs asserted that a President could not be charged with theft “since he only makes small mistakes and these are allowable…” A summary statement of the above would be as Brett has asserted that “ ! λ

A development MA Japanese colleague, Masaki Miyoshi, holds this view. When analytically thought through, Masaki is right.

International Business

Billy C Sichone

100

#$%

" &

' ( ”Χ Brett thinks the Post colonial African Governments have gone too far.

Brett as quoted by Taylor and Mackenzie in “Development from within” pp 218 1992 edition.

International Business

Billy C Sichone

101

But is Africa really left on the margins by globalisation?

This million dollar question raised hardly needs any further argument as the stark reality on the wall is as clear as the noon day sun. If we trace the roots of development through the corridors of the centuries, Africa has always been marginalized and neglected at all forums.ϒ It is only viewed as a raw material source and no further. Reading the journals of the ancient explorers and sea farers, one cannot fail to pick that their main aim for venturing beyond the borders of their countries was to generate wealth and then bring it back to their countries. There are few exceptions to the rule though. Recollect that Africa was once known as the “dark continent” and people flocked to find out what was inside it leading to extensive plunder that has left the continent reeking with abject poverty. As though that were not bad enough, the explorers opened the door for the colonialist Governments that flocked to ransack the land. Vast stretches of land with trees were felled or cleared for timber and development. Apart from that, the natives were caged and sold as slaves while others were used as cheap labour to till the land. Thinking about the great Cecil Rhodes with his British South Africa Company (BSA), it is difficult to imagine that his grand dream to build a railway from Cape to Cairo was planned in good faith, or whether it was with egocentric motives at heart. That not with standing, the interior of Africa was explored and opened up for what it really is while, truckloads of precious minerals and raw materials were siphoned out to develop the now prosperous first world countries. As long as there was room for wanton plunder, this scourge continued. When the

Refer to the Preface addressed to the reader in the booklet “A NEW INTERNATIONAL ECONOMIC ORDER” by Valentin Shcetinin et al pp5

International Business

Billy C Sichone

102

Liberation winds begun to blow across the continent, the Colonialist begun to with draw while leaving economic landmines so that the newly independent states remained dependant on them. That withdrawal was not with a little struggle, hardly thinking about the welfare of the remnants. As swiftly as they came in, so they left. Now, the African continent is by and large independent but a new form of colonialism has arisen, from those detonating landmines of yester years. Imperialism and the crippling debts now clutch the nations in the developed World’s grip. To day, Africa is called “the forgotten continent”. That assertion is not far from the truth because most of the World events and businesses revolve away from the continent as though there was nothing to talk about regarding Africa, nor due consideration is given to the Continent. At this rate, nobody is interested in Africa any more, for it is perceived a land of excruciating poverty and pain. The best that the first world does is to pull a few destabilizing strings when an African nation or a group of them begins to make strides to economic recovery. Now that affluent have gotten what they want, they have abandoned Africa and do not want to have anything with it. Ironically, even the United Nations is not really interested in African affairs despite having an African at the helm. Kofi Annan is but a smart American puppet that has no teeth to bite, so it is perceived. Boutros Ghali of Egypt was different, no wonder he was hounded out of the 38th floor of the UN building at the end of 1996!÷. For instance, if there is a war in Africa, the a UN stands by the ring side and watches as people haplessly hack each other to death but notice when another country probably in Europe erupts in war, the whole world is kept on its toes until the issue is resolved. The African turf and people are used as scientific experimental guinea pigs to test the latest arsenals to see how lethal the same could be. One would not be far from the ÷

Check write up in appendix C for a full write up on Ghali’s ordeal with the Americans.

International Business

Billy C Sichone

103

truth to believe that the richer nations in some instances actually deliberately trigger wars so that the demand for their products could grow by that same token. To some extent, the richer nations are content to maintain a total control on the African continent in some way, no matter how remotely so that they can keep them under subjection. If Africa is really marginalized as suggested above, why is that the case? Varying views have been advanced but supposing that were the case, the question that begs answering squarely in the face is why the marginalisation? Popular opinion among lay people is that the richer states still depend on the under developed nations for raw materials and also for cheap labour. The following are the reasons why Africa is marginalized: 1. The continent is a potential economic power due to the huge untapped mineral and cheap human resource. 2. Potential significant market. Recall that Africa has a potential market of over 480 million people. 3. The desire to control and dominate others, as evidenced by the USA over Iraq, Iran and North Korea (November and December 2002). 4. The devastated weak economies that cannot compete favourably on the international markets. 5. Regional groupings- these have effectively blocked any form of market penetration to the place where the goods would fetch a good price. Thus, the goods are either more expensive to produce or have no market leading to a cancellation. 6. Un realistic standards that block Africa. The developed world, although working at a different wavelength, has deliberately set up standards far out of the poor African nationsâ&#x20AC;&#x2122; grasp. Minute things disqualify African goods from penetrating the richer and affluent markets but the reverse is true when things are being sent to Africa from the developed world. The only way to get over this International Business

Billy C Sichone

104

hurdle is to scale up on quality and specification, of course at the bidding of powers that be. 7. Many of the countries in Africa do not have a productive base upon which to lean. Most of them are slowly becoming consumer destinations where relatively cheaper goods are dumped. With such a scenario, a nation courts danger if it closes off the outside world or influence.

International Business

Billy C Sichone

105

ut how is the above scheme been concocted? The basic formula to systematically cripple Africa from the fast developing World market is by insisting that the debt burden remains un removed so that the countries in question are for ever using every dollar to service the selfsame debt. The other way is to make the Nations dependant by either not helping them in times of crisis until they are reduced to their knees there by developing a dependence syndrome that sticks like algae to the victim countries. Further, the powerful nations impose harsh unproductive economic survival plans that are deliberately tailored to create more dependence or simply not ideal with the actual problem that faces the continent. Half the time, the prescriptions are suspect as they only result in untold suffering. Further still, the stronger economies, in extreme cases move in to topple governments they perceive to be standing in their way. The zeal with which the USA wants to over throw Saddam Hussein in the name of terrorism and weapons inspection is a case in point. I suspect their interests are the oil fields, which Saddam has on his turf. In these days of geographical information systems (GIS), remote sensing techniques are used for mineral prospecting*. As such, the richer nations prospect from space and then move into a given area, buy off the land and initially clandestinely begin to tap the minerals. By the time the landowners discover, it is too late, people displaced and firm land tenure contracts in favour of the plunderers (or investors) have taken root. In times when these people get what they want, they suddenly drop everything and leave the place even worse than before. A case in point is the Anglo American saga that occurred in Zambia in 2002.Another example is the panic that surrounded Dr Mwanwasaâ&#x20AC;&#x2122;s fake death announcement in June 2008. Many of the investors nearly took off leaving Zambia empty handed! Copper, the main stay of the Zambian economy, International Business

Billy C Sichone

106

has lately fetched very little per metric ton (2002) and yet it remains the backbone of the economy without which the economy crumbles badly. The recent high base metal prices have only benefited the investor more than the indigenous Zambian. Such circumstances are fertile grounds for economic blackmail but unfortunately, many pauper nations oblige. Some vital statistics and information will be handy at this stage to strengthen the assertion that Africa has indeed been outwitted in some subtle way. The Valentin Shchetinin led team rightly asserted in the book “A new international Economic order: its advocates and opponents” that “ /

0 ”(pp65). The following statistics are even more startling: “#

) ! ) * $ ) *

International Business

Billy C Sichone

107

+ * ) )

, )

) -

. )

! +

) )

) / 12!!3.4356ι .

Of course people with a contra opinion may dismiss the socialist’s view (Valentin) point as mere propaganda since the cold war was at its height at the time of writing but methinks, the data carries a lot of truth and weight. In a nutshell then, this marginalisation is achieved advertently or inadvertently by: 1. Having closed markets to African products. The Economic groupings like the European Union, USA have effectively blocked African products. The GMO controversy threatens to further block the African products from Europe. 2. The high and unrealistic standards set up by the groupings. Some standards are so ridiculous that ι

this data was correct as at 1983 *Refer to a book called “Outer Space: compiled by the CRS pursuant to public law 88-246” 1990 edition pp 198

International Business

Billy C Sichone

108

one hardly needs to be hyper intelligent to discern the motive behind the standards. The crippling conditional aid given to the African nations. The GMO saga of 2002 again emanates from the free aid offered by the USA. Usually, whenever a powerful country gives aid liberally, there is usually a catch behind the bait. For how can you stand against the person that feeds you? The high debt burden inherited from the past much weakens the positions of many nations. The little that is generated is all sent to service the never-ending debt. This position in turn compromises the country’s prowess to bargain let alone re-invest to build the economy. Unfortunately, the negative reporting by the world’s press has built such a terrible reputation for the African continent that by and large, the forgotten continent is viewed as having nothing to offer but death, hunger, war and never ending decay. This has led to a high bad will, if ever such a word exists. Thus, any thing hailing from Africa is treated with contempt, suspicion or of less value than any thing say from China or the far East. The IMF/World Bank interventions are only short term and thereby cosmetic in effect.ℵ

ℵ

Infact, D.R.F Taylor has asserted that here ever these bodies have gone, there is either nil growth or negative growth. Where growth has been recorded as a result of their intervention, the parameters are questioned. Refer to “Development from within” by Taylor & Mackenzie 1992 edition pp 217-20.

International Business

Billy C Sichone

109

f the alleged marginalisation is indeed real, to what extent then has this situation affected Africa? In generally, we can safely assert that Africa has been marginalized in all areas and as far as possible but the following points immediately come to the fore: 1. The African continent is left out in the major decisions that affect global trade/economics. For instance, no African country is represented on the G8 while Russia, with a weak economy is considered when it coughs. 2. The poor infrastructure forbids the African continent to contribute meaningfully as it is too weak to have a significant punch or voice. It is reported that African business accounts for just about 1% of the total global business. 3. In addition to the poor infrastructure, the poor communication and road network forbids speedy development thereby making Africa less attractive for foreign investment. As a result of 3 above, many investors do not invest much on the continent but externalize all profits to their countries. The feeble economies means that the nationsâ&#x20AC;&#x2122; politically powers are easily influenced to bow to international pressure. A case in point is the policies imposed by bodies like the IMF and other Herculean financial institutions. Refer to the effectual call to the Zambian Government to privatize the remaining critical Parastatals. Although the Government seems for a while to with stand the pressure, it knows where the finger that feeds is and dares not disobey too much. In all cases, the dictates cannot be questioned. As earlier intimated, in extreme cases, these

International Business

Billy C Sichone

110

selfsame powers can even dictate who becomes president or not. That is the price of poverty, it is a crime. ) he actual extent of the impact of Globalisation on poor Africa cannot be fully determined but suffice it to say that that effect is so devastating and crippling that it would take many generations to rectify the problem, given the present snailsâ&#x20AC;&#x2122; pace of development. The following points attempt to point out some of the salient effects that have resulted in these dynamic changes:

1. The African nations are fast losing their sovereignty. 2. The African nations are disintegrating further economically due to the weak base. The GDP keeps falling and sliding helplessly into the poverty miry bog. 3. The nations, due to poverty, engage in endless civil wars to their own detriment. This results from the fight to control sections of the country that harbour rich mineral deposits. 4. If there are two major tribes, they engage in Shaka like civil wars to gain supremacy. This again is detrimental. 5. Africa has remained in the ring fighting for the floating trophy with itself while the developed countries snatch their goods unawares. The saying â&#x20AC;&#x153; When elephants fight, it is the grass that suffersâ&#x20AC;? holds true. In this case, the grass is the economy and the elephants are the politicians. Interestingly, while the giants are in combat, the monkeys watch excitedly while pelting the fighters and munching the fruit. This is what the rest of the World is doing to Africa. While the battles rage on, globalization is gaining momentum and hurtles along.

International Business

Billy C Sichone

111

ϒ $ ! The only options left for Africa are the following:

1. Scale up and strengthen on regional grouping like NEPAD, SADC, ECOWAS or the AU. This is the only way that countries on the same footing in terms of development will improve. The African market is large and will be enough to generate economic development. A start is needed somewhere. Hannou has made a terrific comparative study on this in his 2006 PhD thesis, worth consulting. 2. Strengthen the economies by investing in the production base. This is the only way to stand on own feet. Libya is a shining example of a country striving to stand on its own feet. In that way, Libya is not a push over nor can it be ignored. The strengthening of the economies is the only key to recognition. 3. Investing in research and development is another way to keep abreast with the times. Hitherto, the Africans have been made to believe that only what comes from the rich is good enough while what is made locally is archaic, substandard or obsolete. Granted that that may be true in many instances, but this should make the Africans ϒ

It would be worthwhile reading the excellent article by Professor Anthony Hawkins that appeared in the Southern African Economist issue of Feb/March 1995 pp24. In the said article, the Professor asserts that there is a missing link even in the most renowned countries like Ghana and Thailand that have had an annual growth rate averaging above 5%. He points out that in carrying out remedial repairs on a crippled economy, two stages or gears have to be engaged: 1. The first phase is on adjustment and stabilization of the economy in areas such as arresting the sky rocketing inflation. The second and crucial stage includes institutional and structural reforms such as privatization, reengineering etc. Many nations more easily pass the first stage but the cracks of the matter are at the second stage where non profitable institutions are privatized and in the process, job losses take place resulting in immense suffering. This second stage is equally critical in establishing investor confidence as international and local players fill up the gap left by the government. The problem in many African countries is that the gap remains yawning despite the recorded growth. In the words of the professor, “Several African countries have got the fundamentals right in their SAPs, but the supply response is not forth coming”

International Business

Billy C Sichone

112

determined to improve. This approach may take many years but is necessary. 4. Franchising many of the big names in business like Coca cola may be the way forward if # 3 above is not feasible. The World will know that Africa can handle certain issues well. In the process, Africa will learn the ropes, much like what Japan did. 5. Fight corruption at all fronts no matter what the cost. Perfect hatred for corruption must be emphasized at all forums. For this to be appreciated, campaigns are needed by credible people, not the calibre of those Zambia has known in the 10 years from 1991. Such fragile economies can be further crippled just by one signature of a Doctor of Corruption, as was the case in Zambia. If South Africa does not watch carefully, it too will slide into the same slough of despond. 6. Elect Visionary and strategic leaders. This is the need of the times. The times demand that Africa has leaders rather than bosses or clowns to grace those lofty offices. By and large, most of the African politicians run for public office as a fund raising venture. No wonder they forget their obligation to the electorate the moment they get those Porsche vehicles using the hard earned taxpayer’s money. 7. Priotise issues rightly. The cancer that has bugged Africa is lack of vision and the ‘inclined plane stone rolling’ into the future with no specific objectives or benchmarks. This scenario clearly shows that the people are not serious or have o goal at all.

International Business

Billy C Sichone

113

8. Reward innovation. There should be a deliberate effort to recognize and encourage innovation and entrepreneurship in the region. For instance, local inventors must be promoted and their inventions carried forward far and wide. Some how, Africans feel inferior to the rest of the World. This rewarding should also trickle down to rewarding labour as well. As opposed to giving slave wages, people will feel valued and appreciated. Slave wages are the breeding ground for theft, anarchy, slothfulness and low self-esteem. Many other options remain open to mother Africa but the desperate need of the times remains strategic visionary leadership. Are you that long sought after leader? In the ensuing Chapter, we consider the future of Africa in this highly dynamic global context.

International Business

Billy C Sichone

114

)

! n future, Africa is likely to arise, given the present realization that it is lagging behind. The increased use of pervasive technology (such as IT) in many countries is commendable because this leads to quicker decisionmaking, planning and development. How ever, let it be known that competing with the USA for example is like a rat playing a tag of war match with an elephant, it just won’t work! The best Africa can do for now is to work with the USA, learn the ropes and improve on those. Further, Africa holds a lot of promise for service industry such as tourism. The vast stretches of land with it unique species of animals should attract scores of tourists. On the other hand, a great wealth of raw materials still lies untapped or disturbed in the African soils. Everyday, the African child treads around on untapped wealth. In coming days, these should be exploited and used. In that way, Africa will be engrafted into the global village. Although Africa is called the “forgotten continent”, all covetous eyes are upon it, meticulously watching all its movements. The continent holds promise but all this will not be unless Africa discards all the impediments that have been highlighted in the earlier sections. From a strategic perspective then, Africa still holds promise and will be a powerful voice in the not too distant future, perhaps one or two of the African states will be numbered among the G9! In concluding this part and having taken deep thought over this matter, we would like to submit that we can safely agree with and assert that the first school of thought is indeed right for Africa has actually been marginalized hitherto. It has not been viewed as an equal partner but as a “by the way”. That not with standing, Africa has to some extent contributed to the dismal view and must needs wake up to the current and future realities. The World is too fast to wait for lingerers. As some one has quaintly quipped “The World loves winners and has no time for losers”. African must aspire to be a winner so as to be heard.

International Business

Billy C Sichone

115

#$ 8 Our literature review and study has been long and protracted but fruitful

having ploughed through this avalanche of books, what have we yielded? What conclusions have we safely arrived at? From what has been researched so far, we can safely assert the following findings: 1. That international business is getting more complex every day. 2. That global business is dynamic and complex relative to yesterday. 3. That the advent of IT has enabled quicker decision making to take place and thus increased the pace of business transactions. 4. The international business person must be aware of the differences in perception of different issues from place to place e.g. time, taste, dress, moral ethics etc. 5. That one transaction in one part of the world has a rippling effect on another many thousands of kilometres away. 6. That although capitalism seems to have triumphed, it also has major pitfalls that need to be watched and managed meticulously. 7. That even the most developed countries like the USA also fall into the trap of unfair trading habits that are meant to protect the home market. 8. That other once insignificant trading entities have now taken over some areas of business in World trade due to their high quality and customer focused products e.g. Japanese cars have robbed the USA of a lot of market. 9. The giant economy countries like the USA need other players to survive, hence the forming of economic blocks. We have arrived at a stage of interdependence rather than independence. 10. Half the time, the expatriate is at a loss when they return home to the country of origin, as many things will have changed, especially in places like the USA.

International Business

Billy C Sichone

116

11. The advent of e-commerce is slowly forcing the large multinational corporations out of business as only one person can do much of the work that previously need an army of workers to accomplish. The paperless virtual office is at last in sight.ϕ 12. The brand name is what matters most rather then having huge manufacturing complexes and assets e.g. Coca cola has sold out most of its assets not the brand name. 13. Increasingly, we are heading towards the paperless virtual office where people will not need to leave their homes to work, as IT will have enabled them to work from any location in the World. This includes travel to attend conferences etc. The video conferencing facility will take care of that. 14. Companies and individuals must be dynamic and be ready to be constantly changing frequently. 15. The commodity today is slowly shifting from physical asset based to knowledge based. In the past, what mattered was how long one took to accomplish a task rather than the skill used. 16. With the advent of high tech, the world in indeed is turned into a global village where information exchange is high thus leading to faster and quicker decisionmaking. To keep afloat, one has to be ahead of competitors. 17. Closely connected to 16 above, cutting edge technology is changing the way business is done henceforth. The virtual company is fast taking over with most of the jobs outsourced rather then made by the brand name owner. Bill gates gives insight into that arena in his article “The price of the future”ϒ 18. The International business leader has to have a thorough orientation of different scenarios so as to clinch the best deals world over. For example, it may be inappropriate to send a woman delegation leader in some countries especially in the Middle east as opposed to the west ϕ

Refer to “The B2B All about IT & Telecommunications hand book 2002” annual book let stipulating all vital information ranging from the history and development of IT including e-commerce. ϒ Executive Excellence Vol 16 # 3 March 1999 pp 8

International Business

Billy C Sichone

117

where women have been known to clinch high profile deals. 19. The business leader of tomorrow will need far less material resources than the leader of yester years. Armed with a laptop and connected to a WAN, the modern business leader can transact business at any point of the terrestrial ball, assuming the place has telephone lines and an Internet provider. 20. Decision-making is going to get ever so faster, complex and critical. Teamwork will remain the buzzword for a long time to come. Unfortunately, when too many people are involved in the decision and team networking, slothfulness, conflict of interests and bickering usually erupt leading to dismal performanceâ&#x20AC;ŚOrganisational politics begins to take its destructive toll. Many a company has crumbled not for want of resources but tear work rather than teamwork! 21. Resources will get scarcer by the year as world population rises. By the same token, the business climate will get more difficult to operate in as opposed to yester years. 22. High quality products are key to success. 23. Modern business, no matter how simple is demand driven and customer focused. 24. Outsourcing is increasingly becoming a viable option to run businesses rather than becoming a â&#x20AC;&#x153;jack of all tradesâ&#x20AC;?. It is far cheaper to outsource aspects that are not core competences. 25. Many countries and Individuals fail miserably on the International market because of poor quality substandard goods, the failure to acknowledge other players in the Environment and the rigid adherence to obsolete old strategies. In the average African home for example cannot imagine a business that is separate from the daily family activities, issues and mixed and intertwined with personal presences and needs. Thus the businesses do not prosper. 26. The business profitability much depends on the conditions prevailing in the economy and at what stage of the economic grid i.e. recession, depression, upswing etc, International Business

Billy C Sichone

118

the particular countries could be. For instance, the global economic growth rate slowed in 2002 from the targeted 4% to 3.7%. The expected growth rate rested finally at 2.8%â&#x201E;Ś 27. The sudden emergence of major global players like China and India will drastically affect the business balance in the world. No longer will the USA or EU dominate world business agendas unchallenged. This is a time of opportunity for the poorer developing nations.

Having gone thoroughly and meticulously perused through this book, it now remains for us to offer some recommendations for future use: 1. The Business leader of tomorrow must be far more multi talented than that of yester years. The said leader must know more languages, cues, culture, objective SRC, etc 2. The leader of tomorrow needs to be taken care of before, during and after an international assignment. 3. The international Business leader should be ready to settle and operate from any part of the world, as the world is now a global village. 4. Tomorrowâ&#x20AC;&#x2122;s companies must be agile and ready to mutate at any time and consistently so. 5. The quality of goods must be high, at the right price and place. 6. The present bureaucratic, rigid and inflexible multinational corporation must be ready to mutate constantly in the light of the varying changing scenes in the environment. 7. The business leaders of today must be ready for the imminent shift towards the virtual company and the rise of e-commerce. 8. Companies and individuals must ensure they have access to the right, relevant and useful information timorously for strategic decision-making. â&#x201E;Ś

Source: The Sunday Post newspaper, 17th November,2002 pp7 # 2223SU50

International Business

Billy C Sichone

119

9. This is an age of interdependenceϕ rather than independence. Gone are the days when entities existed solitarily in a “vacuum”. There is need for collaboration, networking and establishing databases. 10. People should watch against adopting management fadsΘ as these have led to untold disasters on the international scenario. 11. To be more attractive investment points, nations should handle the inflation well and increase investor confidence via good liberal favourable laws that foster an enabling environment for all and sundry. For instance, the Zambian Inflation rate stood at 18% most of 2002 but the aim had been to stabilize it at 13%. Similarly, the GDP was targeted to have been raised to 4.2% but stood at 3.7% as at 18th November 2002γ 12. Businesses must concentrate on core competencies and outsource or buy the rest. For Example, Zambia’s core competence lies in the service industry such as tourismη and Agriculture.λ Although the nation can equally perform well in the mining sector but the high capital investments forbid this. I would recommend privatizing the mines and but holding some interests by way of share holding while buying franchises and strengthening the tourism and agriculture sectors by the same token. This, in the long run will bring about stability and economic development rather than competing with the world’s super economies, for they have been at it for over 300 years! 13. A thorough study of the impact of e-business on the conventional International business is recommended. Areas ϕ

Although Valetin et al dismiss the concept of “interdependence” as another Western ploy to paralyze the poorer countries further so that they could reap more at a lesser cost. Θ Fad: This is “a practice or interest followed for a time with aggregated zeal” Webster’s new collegiate dictionary (Springfield, mass.: Merriam, 1976) p410. γ Sources: Workshop addressed by the Bank Governor on TV as well as the post Newspaper of 18th of November 2002. η A case in point is the opening of Africa’s biggest game park in Mozambique recently linking three National parks in three different countries, Mozambique, Zimbabwe and South Africa. Refer to the Post newspaper of 10th December, 2002 pp14. λ Dr Kaunda, in his tenure advocated a change from Copper to Agriculture and as such pumped in K 400,000 million when the rate was K1.2 to US$ 1. This was perceived as the only way to achieve economic independence. From “A new international economic order” pp 68

International Business

Billy C Sichone

120

such as the magnitude of, the history and future of ebusiness needs to be more meticulously documented. 14. African countries, being poor and backward should franchise the world business like the Mc Donald’s and thereby develop quickly. They cannot compete with the economically advanced nations. 15. For Africa to blast itself out of the economic quagmire, there is urgent need to move from crisis management to Strategic futures thinking as suggested the Africa Recovery magazine Volume 9 # 3 of November 1995.Σ 16. For Africa to be effectively heard in the World today, there is need to promote a shared passion where the Africans begin to view themselves as potential equal partners with other nations. There is need to long for a time to take charge of its own destiny, much like the pulse Pan Africanism carried about the liberation struggles of the 1960s and 70s.∗ Africans should share the same dreams and fears not with the present distorted and divided loyalty that exists. The African Union launched in South Africa in 2002 is bound to failure because the individual African leaders would never for a moment actually entertain the idea of relinquishing power, perhaps their successor, not them! Fundamentalism, although apparently full of passion, is half the time irrational, misguided, unmethodical and stifles innovation. It will not do for us. What is needed in an internalized passion that will be passed on as a value from generation to generation akin to a relay race. We need to arrive at a time when leaving the continent will be the last thing one will entertain or once beyond the borders will long to get back home. 17. For those wishing to do business with African states, a condition must be set up prior to any engagement where the prospecting profit reaper is required to set up base in that particular country and start producing locally rather then importing across borders. In that way, jobs are created and the image of the country is uplifted as people sample products made from Africa. Σ

Africa recovery magazine November 1995 pp 1 Pascal Lissouba has written an excellent article on this in the Africa Recovery magazine of November 1995 pp 24.

∗

International Business

Billy C Sichone

121

18. If it is possible, African Nations should delink themselves from the IMF and World Bank if possible. At least they should be working towards that goal because continuing in this marriage will render them life long slavery to the developed world. As at now, poor counties are clutched in the firm grip of the imperial agencies such as the IMF and World Bank. It may interest you to know that the USA alone holds over 19.83% Ρof the voting power in the IMF while the poor countries combined hold less than 36%♣, meaning that each country holds less than 1%. From this statistic alone, we can tell who calls the shots. 19. Economic co-operation amongst developing countries must be enhanced further than hitherto fore. This calls for collective self-reliance and deliberate preference of trading amongst themselves, much like what the richer countries do. Of course a lot of issues might be compromised such as quality but there is always a starting point. In that way, there will be fair trade terms and mutual development. Imagine for a moment, a pauper competing with Bill Gates at an auction sale to purchase an item it is a non-starter! Ankie’s insight into this approach is commendable. Refer to page 86 of the book “The Third World in Global Development” for a clearer exposition of this point. 20. Poorer Nations should avoid getting into those enslaving conditions that comes as a result of borrowing more than the Special Drawing Rights (SDR) from the IMF. Some of those conditions are ridiculous and antagonistic to the present progressive global economic climate. This calls for strategic thinking on the part of the borrowers lest they drink in sink and hook, to their detriment and utter destruction. 21. Poor nations should make effective use of the potentially powerful social fabric and network as they mutate to a more developed setting. The wealthy countries, especially the West have fragmented, egocentric, individualistic family structures and have Ρ

Source: The International Monetary Fund, purpose, structure and activities book let pp 8 for April 1980. Refer also to Ankie Hoogvelt’s book, “The Third World in Global Development” pp 84 ♣ Source: Ankie Hoogvelt, “The third World in Global Development” pp 84. Ankie asserts that of the 141 member countries, 114 are third world Countries that constitute the 36%. This position makes the USA single handedly able to block or veto any major proposal for change or reform in the IMF.

International Business

Billy C Sichone

122

developed a system that can handle such. The Japanese on the other hand have developed their own unique system that works well. The complex company structures have little to do with the US systems↵. Thus, Africans in particular need to discover the strengths within our framework and implement to strengthen the same. In fact, Africa has great learning points as it stands at the cross roads as it were, to “cut and paste” best practices from various players on the international scenario, albeit in a modified form.

22. The poorer nations should be wary of receiving aid that becomes the mainstay of the economy rather than a mere supplement to what is already being done. In that way, dependence will be minimized and the nations will safe guard their sovereignty.

t last this legendary work finally closes its pages having most ably dealt with the vast subject of International business! I would therefore strongly urge any one intending to work in an international environment to avail them selves to these selfsame resources and “soak” in the classical monumental works until they have “sucked out all the juices”. It has been mesmerizing globe trotting across this terrestrial ball within the confines of web pages and otherwise. This scan is non negotiable for the potential international business player. With my mission now completed, I now rest my case here!

↵

One Japanese Development professional, Masaki Miyoshi strongly believes that among the many things Africa needs is to discover its own strengths, and turn them into strengths. He thinks that has partly contributed to Japan’s success story, although he also thinks that Japan’s long history of industrialization, though latent and unnoticed for many years has helped to propel Japan to higher orbs but working within the Japanese unique context of the complex communal and extended family system, unlike in the Western World where each individual is like a “stand alone computer” that periodically connects to the website and shuts off the rest of the time.

International Business

Billy C Sichone

123

Bibliography

International Business

Billy C Sichone

124

)

( 7+ "

7=( (

7 <

: $$9

;

$$%

$$$ 7

$A .;

+ $$5

B 7

@ = $$5

$$9 :

;

3 A $ 7!># 7

7, $

African Review of Business Technology, Attracting the foreign investment, April 1998 issue pp17 ( // D

(

" > E

A E,

( <

( " ; >

$-%

(

$$E

! G

8D # & =' , / C # F

!/ B

E /

)( (

)# #

D <

( ; #

H -

(

;

$$9

Brake Terence, Managing Globally, Dorling Kindersley limited, 2002, London, New York, Munich, Melbourne, & Delhi. ( (

& # I#

8< &

, >' /

< (

8 # !

( / ( >

><4(

$$ 8G

E 2D '? , 6 ' 2, (!7 D

6& ' (

(

+ !

3A E,

( # ! (

, = !

$$$

$$3 (

! 6!

' # #

: 7

$$5

! ?@

2 $-$6'

: ;4:;>!4D D F2 $$ 6

$$ " )# D

# ( " ;

$ F

$$% # & , / C <

$$ =

$$% Union Bank goes under

Billy Sichone

>? (

8 B! ! <

)

( # @

#7 #

#7 @ (!!

7 . > $$9

$$5

# $$-

-A 3

$$% : / 7

!/ (

# ,

& / E E

" 8! # & K' <, / C 7#

7" 8 3

(

$-5

: 7+ (

(

B 47

" / 8< # & ='

Union Bank goes under

# $$5

2> E ED

6(E(7 / /

( > D ; H " /

(

( F

" #

$$ 4$ ;

Billy Sichone

(

> 7&>

/ <

7 =

;

E !(

$-. #

( L

,& ! /

$$3

!/ ,

/ ; # D

7 8 $$5

! /

, / >

$$.

)(

$$9

B7 F

) (

)

# (7

8 , E

A 7 #

$$5 G

7, .

< :

; /

/ )

" ?@ =<

8> L & ;H

$$% /

47L

K $$$=E !/

; B

Union Bank goes under

$$$ K 7 / $$-

Billy Sichone

( E

5 (

;

? 2

8 ) / K :;

6 J

>F4:;>

Fifth National Development plan (Zambia) 2006 (www.cspr.org.zm) F

( ( ,

# ;

' !

> &

# & 7

# @

' ;

2 $-56#

> /

$-.

;

$$F

D ! 7

& &

K> <8 =' $-$ #

'( !

Union Bank goes under

E ,

$$5

# D > 8 (: 5 > ><(

& / #

B ? ;

)> D

! /

/ A E

Billy Sichone

# #

! &

/ J

7 &

" ;

" /

/ )

# $$. ;

! 9 > &

D # (

$33

2 $$%6' ! 7

# !

' / /

$$%

(: !

2 $- 6

7 &

' >

D # # ><(

$$$ 7

' < '

" / H

" /

) :

;

" 7

*) ( N

> E %

;

" / # & ='

2 $$-6 , #

H 7 9

Union Bank goes under

F $$-

Billy Sichone

D < (

(

;

# # $-E

# '

/ <, / C

B :

8> =# !

D ; E

& / / & / 7 7

> B D $%% $3

;

: </

(

E ;

$$9

A $5 B

$$5

# 8>

# 4!

;

& $-

)

/ 8

L B? #

# & =' E .

K (/ D

B : <

5 7#

;

# (

$-$ G

4 B

" / !/

( G G

( G

8# ?1 $$5

: ;

@& /

=' "

Union Bank goes under

> $$-

= /

Billy Sichone

, !/

2 $$$6OD G " H G ,

8# #

8B 5 > !/

, /

!/ <

" / 87 G 2 $$-6 # & , / C F ?

)? K' ( # D < #

; !/

;

( ;

8 '

(

& / /

" (

H $-$

! < $$, #

/ #

,="?# & /

)

# <

D 7

, $3$ &

) 8:

(

2 $3E6+

< </ < #

7 7'

> 8D

/ F7 ' N , # D ! = = G " B , /

L ;

/ '?!>

$3E D ' 7

? K7

$$9 ,

Union Bank goes under

Billy Sichone

! N <

/ B

F G

! <

McIntyre Chris, Zambia: The Bradt travel guide, 2nd edition, Bradt publications, UK, 1999 #

7 &

)7 ?

$$.

8 8 J

)J / K 6, !/

/ 2

MISA/PANA, Tanzaniaâ&#x20AC;&#x2122;s land bill stirring up controversy, The Post, June 11, 1997 # / #

7 H

L $$-

F #

(

;

# 7" >

><(

$$5

Myers, Bryant L, Walking with the poor: Principles & practices of transformational development, ;

$-9 D

, );

& Ndulo Muna, Chinese Investment in Zambia, post, Thursday, August 21, 2007. Ndulo Muna, Mining rights in Zambia, Kenneth Kaunda Foundation, 1987 ; 7 A .3- ? / $$$ ! /

Union Bank goes under

Billy Sichone

;

(

I# (

$$5

8B E >

) 2 $-$6!

8 ;N

359Orbis books/world vision, Mary knoll, New York 10545, 7th printing March 2004 ?

# @ (!!34$9

G 7 <7 2 $$96<

/ 8;

8( /

< !

< '

8D ( <% 5. (

D '

) #7 E %

! #

;

$--

" (

G ;

B( H

2 $$.6

% >

$-5

$$$

(

E !

A 4

Union Bank goes under

$$. 7

! Billy Sichone

A .-

$$9=

7 # Reilly K. Frank and Brown C. Keith, Investment Analysis and Portfolio Management, 5th edition, The Dryden Press, Harcourt Brace College publishers, Fort Worth, Philadelphia, San Diego, New York, Orlando, Austin, San Antonio, Toronto, Montreal, London, Sydney, Tokyo " / 23 & 6 5 9 , / "

(

/ +

> J/ !

1 $$$

" PG /

/ '+ (

" / 8# K <, / C 7# ( ( # ; , >7" ' !

$$5 # 1

5 D ; H < / <

B 4F / $$E F

$$- ( ( " F < # # @

+, : # # (

/ L

$$$ !

$-%

D /

Union Bank goes under

F /

L $-% # 7 Billy Sichone

?" / +

)

)D :G= F

# H

;

>=/ ,

!B8 7 !,

17 $$, !

G #

/ /

$$5 B

E 8

, #

)

! >

7 7, !

$-3

> ?;?#

- A F /4#

)F /

$$9

K 2>

$$L

# & (

D =' (

A B =

# $$% 2"D ;6 < #

7 9 >

$$9

7 $$9

( # @

/ /

$-9 ," F "

8F 7

Union Bank goes under

# "

L , $$E

Billy Sichone

;

2FH $-6K >

2FH $36K J / /

#7 # $--

/ 7

D JJ

$$$

> '

(/ ) ; $-5

# #F $-

: 77 ! J

; /

E 55.

) E E4 . F

.A E 7

$$#

$$7 87 ) 3 > $$. "D ; ( 7

B ;

< 8'

Union Bank goes under

# "

# : # /

K (

K 8! #

) <

2 $$ 6

Billy Sichone

>F)

8 87

' 2 $$-6

), '

United Nations, FINANCING FOR DEVELOPMENT: Monterrey consensus, Mexico March 2002 :

)< L

)

Vision Korea Execution Committee, Revitalising the Korean Economy toward the 21st century, Business Times, December 1997 pp 27 +

(

+ #

8F + $-%

D / G

E E= 5

2:;6& P!

' !/

' F

$$% !

D 7 ,

# B

> $$E

$$ D

+ I #

'8+ < , "D ; $$5 / 7

? (

E E

Union Bank goes under

Billy Sichone

Winfield R.G & Curry S.J., Success in Investment, 3rd edition, John Murray Publishers ltd, 1987 D

+ F

=D +

" ,

/ D

$$$

$$3 J

E DDD D+ ? J

' +

/ ,

/ K

KD /

J7;&? A E 7 J 4:;F!7 !

Union Bank goes under

/ K7

94 .4 $$$ $33 : 7

J KB

E E

Billy Sichone

Appendix B Case study 2-The Mongu scenario-Rice≈ and Fish⊗

In the early and late 1990’s whenever one announced that they were making

a journey to Mongu, they would instantly raise eyebrows and queries as to why they dared and bothered to go there. The image then was that the west was the worst in terms of livelihood and activity. The place was perceived as full of nothing but sand and a desert climate. Little did they know that this once despised place is potentially the hub of Zambia’s prosperity because the place has more than meets the eye. Today, one just needs to stand by the roadside and observe how many buses that stream into and out of Mongu day and night to see the increase in traffic. No less than three buses arrive and leave the Mongu every day because of the newly discovered trade from this once despised place. What really caused such an attitude and what has caused the sudden upsurge of traffic to this place? With the human eye, it seems for many years the picture portrayed was that the natives are too sectarianistically conservative and a repulsive lot who jealously guarded their wealth regardless. At one time it was said of the place that if one did not know the Royal Lozi dialect, there was no chance of succeeding in the place. There may be a grain of truth in the accusations but the Lozi, like any other value their culture and will do any and every thing to defend and promote it. As a matter of fact, they are actually a very friendly lot when given the due regard and one sincerely shows that what they are interested in is not theirs but them. In that way, one will worm their way to success and comfort among these lovely people. That besides, as the throne changed hands, and as more and more people got exposed, the foretaste of the Bulozi beauty begun to show to the outside world. The first was the Fish then followed by rice, cashew nuts, meat and many other rare goodies. Infact, the sand is excellent for glass making and other related activities. As such, people started to trickle to Mongu in the late nineties but today, this tiny trickle is now a flood. People literally pour in from all corners of the ≈

Although still a minor crop in 1994 (only 7% of the total cultivated area), rice production has known an upswing since 1994 when World Vision and other developmental organizations have undertaken to promote it. Opportunities for western province pp42 ⊗ According to research conducted in 1995 by Mulwanda and team, 333 tones are caught every year from the lower Zambezi. Roughly 75 % is consumed locally while the rest is exported to Lusaka and beyondOpportunities for western Province Maimbo,Huijsman,Mulwand and Lof pp50

Union Bank goes under

Billy Sichone

globe to have a taste of the rice, fish and mineral prospecting. These people are all littered around Mongu and beyond and in some cases, business people actually camp in the areas of business! This is unprecedented. But what are the factors that have led to this four-fold increase? Many answers could be given but from a layman’s perspective, it is because people have suddenly awoken from the long slumber of considering Western province of no economic value. They have discovered among many things that the area produces world-class rice that is of atleast four grades, Supa (the finest), Burma, Angola and Blue bonnet. This high quality rice competes with the best brands on the World Market. In addition, it has been discovered that the Barotse plains have a potential of feeding the whole of central Africa with grain but for the land tenure politics that linger in the background. The other attractive feature about Western province is the reported presence of diamonds at Shangombo, the rumoured presence of Gold, oil and other relatively undisturbed natural resources such as timber, river sand and patches of potential arable land. Cattle rearing is another industry the West boasts of and infact, it is believed that Western province has more lives stock than any other province. Tourist attractions such as the Sioma falls, the Liuwa and Siomangwezi National parks, the beautiful scenary and indeed the natives that add to the incredible profile of the Western province. The road to Kalabo now under construction will open another route to Angola× and beyond. Now that war is ended, trade can begin in earnest. As such, Kalabo, with its potential Iron ore mine is slowly becoming a spot light. We hardly need to mention the planned road bridge at Katima Mulilo to link Namibia, Zambia and the Congo DRθ. All in all, the potential is great and only needs to be tapped. What are the fears? The obvious fear is the plunder that has ensued and continues to as people come and go out of the province with one single purpose, to profit. This is always done at the expense of the locals. For instance, Shangombo, a little district in the remote corner of the country was until recently hardly heard of but today, due to the “diamond rush”, the place habours all sorts of characters lingering there! You will find people from all parts of the World, including prominent international business there. All ×

Incidentally, Angola is potentially the richest country in the SADC region but for the civil war that raged for over 24 years. Refer to Africa connexion International Magazine pp 23 Volume 9 second qtr 1994. This type of carnage has distorted the economy not only of Angola itself but other regional countries as well. The demise of terrorist leader Jonas Savimbi gives hope that the Kalabo road will be useful, apart from the long abandoned Benguela railway. θ Refer to The Zambian Farmer Magazine Vol 3# 2 of April 1998 pp16, 17 as reprinted from the African review of business and Technology.

Union Bank goes under

Billy Sichone

rank and file are found there. When asked, they simply reply, â&#x20AC;&#x153;There is potential business hereâ&#x20AC;? Looking ahead, one anticipates more and more influx of business people flocking to Western Province and there by lifting the Economic status of the town. Checks and balances must quickly be introduced to avoid degradation and plunder of the grand resources that western Province is endowed with. The Politics and conflicting policies between the State and the Royal establishment must be amicably and quickly resolve issues lest the area loses too much through plunder before it is realized. For instance, as at now, the Sesheke/ Senanga stretch can make one weep when they consider the wanton destruction that has occurred on the forests in the last decade or so and that largely by foreigners! These people take the rare high-grade timber across the Zambezi to build beautiful towns and cities, out of Zambian raw materials! An appeal to the powers that be is that remaining at daggers drawn will not curb the degrading anthropogenic activities. That not with standing, let us watch and see what lies in store for Mongu and the rest of the country as international trade makes its maiden voyage here wards. Questions for Consideration What do you think is the single cause for the upswing in trade in western province? Do you think Mongu in particular will develop as a town or remain static? What, in your own opinion, could be done to resolve the conflict between the State and the Royal Establishment, not only in Western Province but else where? What economic benefits will accrue to Kalabo after the road is complete 4 years hence (from 2002)? Would you be willing to invest in Mongu and why?

Union Bank goes under

Billy Sichone

Case study 3-The race to Mongu route superiority (CR, RPS, JR, GK, Euro Africa) At one time a trip to Mongu was the most dreadful of journeys to undertake. Not only was the journey long, strenuous and sweaty, but also it was one that a person had to physically and emotionally prepare for long before hand. The road was as bad as the vehicles that would be used. A single one-way trip would take no less than three days! As though that were not bad enough, the route was serviced by one fleet of state owned buses the famous United Bus Company (UBZ)!Îš Today, the picture is completely different, as one can manage to travel to and from Mongu in a single day! How so different a scenario! What has caused this and what has been the impact? As you might be aware, the number of buses servicing this route has increased from one to about four! When the UBZ folded in 1994, at the liberalization of the economy, other transporters sprouted and started to service the selfsame route though they were more unreliable and unpredictable than the UBZ that had fixed and confirmed times. As these initial transporters took on the route, a bus popularly known as Time bus or JR came on the scene. This proved to be more agile, comparatively customer friendly and had more capacity. This move caused others to fizzle out, as they could not compete. But just when JR was becoming the established route leader, RPS made a sudden appearance on the horizon, this time even more efficient than JR! There were reported fights and violent instances between the rivals. In no time, RPS robbed the market though JR still remained a formidable force, in the peripherals though. RPS then became the upper class market bus while JR serviced the poorer sort of travelers. As a result of the near monopoly on the route, RPS became too comfortable, obstinate and less customer focused. There were instances when the RPS crew would violently hound out or insult customers and still get away with it. Alas, in 2000, CR smelt the profit on the Mongu route and were irresistibly drawn to the route. This move shook RPS not a little as they had not expected any other competitor. CR came with modern marketing strategies that completely out witted RPS. Some of the weapons used were introducing a customer friendly service and at times even offer drinks or fruits free of charge! Another avenue was the introduction of good quality, timely buses fitted with Video/TV. This was too good for a Mongu bus by then!! In addition, the service ensured all the buses were never overloaded and Îš

The UBZ & Zambia Airways closed in 1994. See the Southern African Economist Magazine of Feb/Mar 1995 pp23.

Union Bank goes under

Billy Sichone

initially begun with a lower price so as to capture the market. In n o time, people were won over enmass and what people were waiting for was the funeral procession to the bus graveyard for the once potent RPS and JR. As providence would have it, in 2001 after reigning unrivalled on the route for over a year, Euro Africa heard about the fame and richness of the western province route and joined the race. Determined not to be out done, Euro begun with similar strategies that CR had employed except that they emphasized on timeliness on all routes. This has worked well and potentially dislodged the undisputed Mongu route heavy weight champion-CR. For a season, RPS and CR were paralysed because they were in the same market niche with Euro. JR still limped along but better than the other two as it serviced the poorer sort who would be packed like sardines in the buses, with luggage clamouring all over the place. As this case study is being is being written, the battle has become hotter as the buses now start off as early as 04:00 in the morning and arrive at their destinations at about 10hrs and then make a return trip at 14 hrs, all in a quest to get that extra buck! Thus, the battle for route superiority rages onâ&#x20AC;Ś

Questions arising from the case study above.

What principles are behind the success of every new bus fleet that takes the route? What, in your opinion is the ultimate solution to constant loss of market by the buses? What things do you think has caused the sudden increase of human traffic to Mongu? Do you think the happening on the Mongu route reflect the happenings on the international scenario? Prove.

Do you think, the economic activity at Mongu impacts on another town, say Harare in Zimbabwe? If so could you give an explanation?

Union Bank goes under

Billy Sichone

Marks and Spencer profits continue to slide

Billy Sichone

MARKS & SPENCER PROFITS CONTINUE TO SLIDE Very few have not heard about the successful Marks & Spencer chain store of the UK. It

is by far the number one clothing retailer having experiencing phenomenal growth for many years until 1998 when it bagged an unprecedented profit of £ 1.2bn. But now, like many other businesses, the growth and profits have eluded the chain retailer lately. The company appears to be buffeted by disappointing results from every front to the extent that it has had to shut down a number of strategically placed stores in mainland Europe as well as sell its US business outlet. These developments signal a drastic reversal in the hither to prosperous company. What is happening? Are things well with Marks & Spencer?

In the article, “Marks & Spencer profits continue to slide” which appeared in the Wednesday May 23rd 2001 Post Issue, we see the company experiencing turbulent times. It is still viable and is making strides to address the adverse situation. Marks & Spencer has had problems for some time now, and as such, it has embarked on a restructuring program, so far having cost a whooping £ 335.4 million. The goal is to make the said company, agile, profitable and more customers focused again, thus returning to profitability. In order to carry out this mammoth task, Mr, Vendvelde, the M & S Chairman, has put a number of strategies in place. These strategies will ensure that sources of finance are identified and utilized accordingly. Largely, the cash will come from sales, disposal of assets, closing of non–profitable centres; job cuts as well as relocating from the expensive & luxurious Banker street headquarters office to the cheaper Paddington Basin new head office. The pending job cuts for instance; will reduce the work force from the present 3,500 to 1600 in 2003. Having sourced the funds, the company intends to address the problem areas such as the adult clothing division where the problem specifically lies in the women’s wear section. Once the exact problem root cause is diagnosed, appropriate steps will be taken to reactivate that area and any other. Furthermore, the retail chain store plans to invest more in the food and services areas. Other possibilities exist but in all there areas, greater quality and appeal in a better store environment will be the hall mark. All these strategies look fantastic but as Vandevelde quips, “The results will not be seen over night, but our customers will see a gradual and progressive improvement as changes take place”. The risks associated with the raising of funds from within is that the various stake holders such as share holders may not be entirely pleased because the company will appear to be shrinking instead of expanding. Furthermore, the company may not declare big enough dividends and thus lose stockholder confidence other disadvantages could be the job losses as well as a potential major shift from the traditional strength of retailing into the service industry.

Marks and Spencer profits continue to slide

Billy Sichone

On the other hand, advantages come with raising cash from within one of them is the minimizing of debt costs as well as not changing the capital structure fundamentally. In the long run, when the company is viably profitable once again, the chain store will declare more and bigger dividends. This is a survival time and the times demand that the company mutates swiftly or risk tumbling to the ground, like many others have done. The Dynamic competitive business environment forbids M & S to stand at ease but must of necessity act swiftly and drastically. Personally, I agree with the M & S strategy as long as a proper SWOT and environmental analysis has been done. Also, I will vouch for the M & S mores if appropriate contingency measures are put in place in the event of the worst coming to pass. Issues such as a superb cash flow must be guaranteed after the restructure. Further, I strongly feel that these reforms must be implemented diligently, prudently, slowly and cautiously. There must be a continual reading of the environment to make sure that M & S ekes out the best route. After all is said and done, I have no doubt that we shall continue to enjoy the high quality goods from Marks & Spencer many years hence. Bibliography: 9. The Post newspaper, Wednesday March 23, 2001. Issue No 1738, page 8.

Smith and Wesson to change hands

Billy Sichone

147

Smith & Wesson to change hands When Greg Hutchings took over the reigns of the Tomkins Company as Chief executive, he immediately went full throttle to turn around the company. From a mere £ 17 million puny engineering firm to a global giant turning over £ 5 billion a year, Hutchins had reaped off the impossible pending to be listed among the management legends. The once simple engineering firm begun to change as from 1983 when Hutchins commenced implementing his mammoth development drive which among many things, included acquisition, expansion and diversification of the company business. As such, the Tomkins bought many companies such as the Smith & Wesson, the Baker Rank Hovis Mc Dougall, Lawn mower makers, Murray and Hayter, and grocery products manufacturer Red wing. It was a bold and risky investment venture but Hutchins undauntedly went ahead. For a while, all went well but slowly, change and decay begun to set in resulting from myriad problems rocking the company. But what went wrong? Why did the company begin to decay after glittering so brightly? A number of problems are highlighted in the article “Smith and Wesson to change hands” that appeared in The Post issue number 1732 of Tuesday 15th May 2001. The said article begins with the sentence that Smith & Wesson was to return into US hands having been owned for 14 years by the UK company, Tomkins. The article highlights the fact that as the Tomkins begun to expand in to a conglomerate, it became too large bureaucratic rigid unresponsive, complex and too diverse. As a result it was neither as focused nor strategically responsive to the rapid business environmental changes. In addition to the complexity and bureaucracy, a chain of lawsuits trailed around the company. Sadly, the maverick chief executive also contributed by abusing office that led to his resignation in October 2000. All these problems then, caused all the subsidiaries not to thrive as expected. The only way forward then was to reduce the probability of totally running bankrupt by a change in strategy. The only option available at the time was to be begin shedding off the non-essential & non – core businesses. Hence, the selling spree that ensued. These changes, although necessary, were costly in that many issues had to be addressed such as reorganisation & restructuring costs. To date, all the earlier mentioned companies have been sold off with Smith & Wesson as the latest. The said latter company was purchased at $ 112m in Marks and Spencer profits continue to slide

Billy Sichone

1987 but sold 14 years later at only $ 15m. Sources say that it is even a wonder that S & W managed to sell at all, since the company is battling to survive due to law suits as well as its shaky image back home having displeased certain quarter about fire arms sales. The Tomkins financial crisis was so critical that the very existence of the company was threatened and needed drastic solutions to rectify problem. As earlier intimated, this came through restructuring and selling off all the non â&#x20AC;&#x201C; core companies, thus saving Tomkins. To day, it is slowly returning to its directed goal of engineering. But why did Tomkins land in this mess in the first place? In my thinking, perhaps the company initially had too much excess cash and decided to invest at any & every opportunity. It seems that no proper risk analysis was taken in terms of the company sensitivity, return on equity, net present value, capital structure and the cash flows that would ensue. Ideally, before embarking on any project, there is need to carry out a detailed cash flow analysis to predict how viable a business could be in the short or long run e.g. 5 years hence. Thus, we can see that human factors of personal preference or the unguided quest to achieve and conquer were at play. In the end, the company is at the brink of collapse. We clearly see that the fact that we have excess cash flow is no guarantee that the same favourable providence will continue, hence the need to be meticulously watchful. With the sales gone and investment risk minimised, Tomkins can now shift its focus to its core â&#x20AC;&#x201C; competences that will ultimately carry the day for it.

Bibliography

1. The Post Newspaper, Tuesday May 15th 2001. Issue No 1732 page 14

International Business

Billy C Sichone

149

Adam Opel AG (A) On November 9th 1989, an epoch making event occurred between the West and East German border. After 28 years, the dividing wall of hostility obeyed gravity by falling to the ground, amidst much jubilation. There had been a world of differences between the Capitalist west and the Communist East Germany for many years. Now the time had arrived when least expected especially following affirmation pronouncements of Honecker (77) for the wall to crumble. Following the events of November 1989 things begun to drastically change in East Germany as the border was opened to the rest of the world like opening the flood gates, people poured into west Germany to look for employment and also to experience their new found liberty. Those were turbulent times indeed for the political and economic scenario. Politically, people were tired of many years of inhuman tyrannical dictatorial leadership and were calling for a change of Government rule. The communists whilst still in power at the time, had ruled with an Iron fist, treating people like mere â&#x20AC;&#x153;thingsâ&#x20AC;?. They did not allow other political parties nor any opposing views to theirs. As such, any dissent was drastically and firmly dealt with. Usually, it was violently crushed so that others would be deterred. But in those turbulent times of January 1990, a new political breeze was blowing with people freely hoisting West German flags, clearly stating their preference of German unification. By the same token, the stubborn communist Government remained obstinately and tightly in control but of course with lost ground, times had changed drastically in the revolution. On the economic front, East Germany, although believed to be the most prosperous among the eastern States lay in ruins. The economy was in tatters, a weak currency, poor and obsolete products that were neither competitive nor desirable. Essential commodities were neither competitive nor desirable. Essential commodities were chronic short supply and very expensive by the same token. The manufacturing industries were over staffed and operating on huge losses. The people employed were largely on family lines and thus resistant to change. Due to poor circumstances and polices, the economy was state controlled and as such the market forces could not freely reduce the prices

International Business

Billy C Sichone

150

by supply and demand. In addition, the state had all hierarchical structures; sentencing decisions to long wait before approval or rejection. No innovation or quality improvements were allowed. Many a brilliant project died on the drawing board because some political figures did not fancy the idea. Worst of all was the rampant corruption that gripped all sectors of the economy. This crippled any further advancement. As such, in January 1990, after the revolution had swept across Eastern Germany, it brought about lasting changes. A number of challenges and implications therefore confronted Louis R Hughes, the Opel chief, as he attempted to market survey with a possibility to investment. Among the implications of the revolution was he had to tread most circumspectly, read the political scenario, build relationship and attempt to strike deals for investment. Obviously, the developments in East Germany attracted scores of other investors to the country, much like a moth to a flame. In the motor industry, renowned companies such as the Ford, Peugeot and Volkswagen were all clamouring to strike some deal for either partnerships or buyouts. This meant that Hugh had to act swiftly to out wit the others. Although the economy had been state controlled with a record of over employment with poor dilapidated infrastructure, the future potential of reaping benefits were immense. Louis envisioned using the “native” nature of Opel as a competitive advantage in the quest for market presentation. In future, it would mean replacing the obsolete machinery, raising the quality re–engineering as well as establishing a manufacturing presence of international standards. All these thoughts must have raced through Hugh’s mind as he took steps to meet the Kombinat leaders in East Germany. Obviously, one might have the financial resources but lack information and the acumen to network the business is perilous. Therefore, Opel had to overcome some hurdles and grasp opportunities that came their way. Some of the problems faced were largely political. The East regime still wanted to hold back but the people on the ground wanted a change. The top brass was highly corrupt, uncompromising and refused to change with the times. Thus, to get things done, one had to carry a bribe then things could be swiftly and diligently attended to. But as at January 1990, things were slowly beginning to change though bureaucracy and ceremony still held sway. Another problem Hughes faced was language. He overcame this

International Business

Billy C Sichone

151

by hiring the right people to assist him. In terms of opportunities, they were vast. The East Germany company leaders seemed enthusiastic to have a change of products. It was simply amazing to notice their honest object and willingness to collaborate so as to change things for the better. One would have thought that they would have stubbornly remained proud to defend their obsolete and poor quality products, but not so. This was a grand window of opportunity. Another window was the abundant cheap labour nearer to Western Europe. Hither to Korea and China had been viewed as the cheapest but they were far flung nations. The East Germans were not only cheaper but honest and well educated too. Thus, we can see that the labour market was large. Another opportunity was the potential 17 Million market for the high quality â&#x20AC;&#x153;East Germanâ&#x20AC;? cars which would be churned out by Opel (Opel was considered a German Company though wholly owned by General Motors of the USA). The options that Hughes had then were three fold. Firstly, he had the option to concentrate on the western market and not bother about the east; after all, Opel could hardly satisfy the demands in West Germany. The second option was to come to the east through the west. This was advantageous because East Germans preferred and believed that West German cars were better. The third option was to simply go to other third countries where labour was even cheaper than east especially so that if Germany was to reunite, the expenses would dramatically rise to match international standards, thus eroding the current advantages. All these three options lingered in his mind as he tabled his case to other board members. If I were Hughes, my arguments would be that we go ahead and invest in East Germany for a number of reasons. Firstly, the proposed investment, in my own view, is viable because the industrial sites are already in place just needing changes. The complex designs are already in place and once the modern technology is installed, it would be cost effective. Besides, the labour market is plentiful. Secondly, we have established good relations and rapport with both the natives and the key decision makers. They prefer us as opposed to other potential investors because they feel we are indigenous and therefore known. This is a huge opportunity for effective market penetration. Thirdly, there is a lot of enthusiasm from their side and ours to get to work together to improve the present chaotic status. Willingness is the key to International Business

Billy C Sichone

152

international trade. Lastly, the potential market is vast. A population of 17 million should speak a great market for us. Besides, the East Germans are educated and would willingly put in their lot to design, market and sell the product. I am aware that after I present my arguments at the February7, 1990 GME strategy board meeting. Bob Eaton would not let Hughes go unscathed, most probably, he would want to know what the chances of success for Opel are, how ahead of the other competitors Opel is, how fast Opel is and what the over head costs would be. Armed with my data “pack” I would answer all the queries giving him statistical data as well as other relevant information such as the accrued good will as we are viewed as an indigenous company, which others do not have, our swift movements, network established, prior meetings with the Kombinant and also the fact that we have the right people on our side, happen to be “known qualities” in East Germany. I think my arguments should put to rest all anxiety. In my estimation, Hughes goal to become number one in the GDR is a possibility only if he comes up with a sustain ably good strategy. Presently, Volkswagen carries the day but a good strategy could dislodge them. The said strategy, among other things should address quality and customer issues. There is need to rise the quality to high international standards to the extent that the customer must be king, treated well and served well. In addition, the strategy should include the setting up servicing and repair stations all over the country. Apart from carrying out frequent market research to establish the customer needs and wants, the cars churned out must be low cost and the right price for customers. Further more, the strategy must address the networking framework, which should involve befriending the key decision makers as well as being community conscious. This may well mean producing cars that do minimum harm to the environment as well as our contributing to social needs and causes. In addition, our marketing must be consistently aggressive and relevant. Hughes’ two-step multifaceted proposal seems superb because it will ensure that 10,000 Opels are assembled and serviced as well. The second aspect or stage of bodybuilding is equally good provided this is done at the optimum time and with the right infrastructure. If Hughes presents his case well in the Norstand and at GME or OPG, I am optimistic that they will fully rally behind him, though some might initially have some reservations. The issues of Political instability, labour market, infrastructure would beg answering to clear some minds. Hughes should convince them of the potential growth market value, the willingness of their International Business

Billy C Sichone

153

counterparts, the cheap labour and the envisioned political stability. Other issues such as eventual labour costs and absenteeism could easily be dealt with by introducing modern Management methods of teamwork, which are not only cheaper but motivating as well. The poor work ethics, unstable exchange rates and poor infrastructure are part of the package, which can be worked on with time. He would have to show them the long-term goal and benefits. Despite all the hurdles that confronted the possible investment. Hughes stuck to his Eisenach plan because of the aforementioned reasons of potential growth, niche potential, cheap labour and the potential 17 million market representing 25% of the population. Having assessed Hughesâ&#x20AC;&#x2122; capabilities and insight into the East German market amidst turbulent times, I think he is potentially good. It seems his financial and MBA backgrounds have shaped him well for the task. some of the pluses to his credit are his ability to appoint and use German nationals to achieve his goals. He created a team culture and built excellent relations by the same token. His insight into the advantages Opel has such as being indigenous, consciousness of a moving target, contacting top business and Government leaders as well as the focus on a market niche were all excellent ideas deserving applaud. Having said the above about Hughes, we draw a few lessons for application. If a foreign investment is to be undertaken successfully, the following points must be taken into consideration. Firstly, the political environment must be assessed; Is it right, conclusive and stable? What are the Government policies and how will they affect our business? Secondly, the social environment must be assessed. Is there appropriate infrastructure? Do we have the right distribution channels? Is there enough and cheap manpower? Thirdly, the cultural environment and attitude must be taken care of. Are the people open to investment? How do they view us, as foreigners or indigenous? Fourthly, the legal environment must be looked at prior to launching out. What law will be asked in the event of a dispute etc? All these must be will grasped and then applied appropriately as the case may be. These were the issues at play when Hughes was surveying East Germany in January 1990. By that token, Opel achieved an early market leadership in East Germany, having applied the right principles mentioned above (i.e. political, social, culture and legal assessment). In particular, Opel sold used Opels, serviced and repaired them. It marketed well, did a market survey as well as networked with the key decision markers in the East whereas Volkswagen may have over looked these and went ahead to use their good will only. It International Business

Billy C Sichone

154

could be that Opel was swifter in response relative to Volkswagen. I think that Opel will retain its number one slot because of the cheap labour, because it is â&#x20AC;&#x153;Germanâ&#x20AC;? and thus part of the German landscape, and because the right people with the right acumen have been employed. The goal of becoming global in approach is another competitive advantage for Opel. Being global entails implementing and maintaining the best standards that are ISO certified (international standards of quality). It means total quality management, teamwork and modern management practices come into play. This takes time but armed with a visionary leadership and determination, it is an achievable feat for Opel. In my opinion, the chances of success for this complete overhaul are high provided the right parameters are put in place such as continuous training, reduced costs, de staffing and opening up management for innovation and creativity. Admittedly, this is a lot of work but necessary if Opel is to remain competitive in the 21st century. It may seem an insurmountable task but I am confident that the Hughes led team will steer Opel to success, let us seat tight and watch them perform!

Bibliography

1. Bower, Bartlett, Uyter Hoeven, and Walton. Business Policy: Managing Strategic process, 8th Edition, [ISBN: 0-256-1159-5] Richard D Irwin 2. Phillip Coteora: International Marketing, 9th edition, McGraw Hill, Boston, Massachusetts Burr Ridge, Illinois Dubugue, Iowa Madison, Wiscosin New York, New York San Francisco, California St Louis, Missouri.

International Business

Billy C Sichone

155

RHL international Gurcharan Das took over the reigns of the Richardson Hindustan Ltd (RHL) in January 1981 after an Illustrious International career with the Richardson Vicks International (Mexico) & General foods. Relinquishing an international job was a major decision as this was the second time he was returning to RHL, only that this time as its President. RHL had been a subsidiary of the RVI for a long time until Indian government pressure forced it to change share-holding ratio from 55% to 40%. Despite the changes, the RVI still maintained an influential position because it had its main decision makers stationed there. The forced change in share holding by the Government had forced other equally renowned companies such as the Coca cola and IBM to leave the country because they refused to compromise or dilute their share holding. Not so RVI. As earlier Intimated, RHL is part of the Richardson Inc of the USA whose main product and strength lies in producing cold alleviating â&#x20AC;&#x153;vicksâ&#x20AC;? and other related products to deal with the skin. RHL itself was originally formed as an engineering / building firm to construct a chemical plant for RVI but eventually took over the marketing of the RVI products from the local RVI branch. This holding presence went on until the aforementioned changed RHL went through different Managements and eventually proposed despite many hurdles from the natives and Government who viewed it as a foreign and exploitative company. In an attempt to overcome these challenges, the RHL Management had tried to please the local conditions by participating in social activities and attempting to invest in the community pleasing projects. In that way, the company avoided some tax. As time went on however, problem after problem began to buffet the organisation as people tried to clamour for positions of influence and build personal empires. It was at this critical time that Das was hired. He found a divided house. The company was cash strapped, morale was low, labour was hostile, labour management relations were adversarial, and turnover in management ranks was very high. Because of governmental price controls, Management for years had stressed volume, selling at any price and producing at any cost. Furthermore, there was jockeying for power, functional empires, international conflicts, legalistic management style and low mutual trust. Phew! What a time to take over! But this was his inheritance and thus

International Business

Billy C Sichone

156

determined to iron out the problems and burn the dross in the process. The first thing he did was to assure RVI that all would be well and then went ahead to hire the right staff while keeping the marketing goal in mind. With the right people on board, he ensured that they were continuously trained until a team spirit began to take root. Having changed the attitude, his next task was to pacify the local conditions while maintaining good relations with the holding company. Parts of the local stakeholders were the shareholders, customers and the Government. To do this, he embarked on product quality improvements; open participative innovation management style, customer focus as well as aggressive marketing campaigns. It was whilst trying to please all stakeholders that he entangled the campaigns into producing ayurvelic, a product that though socially helpful, was not in line with the RVI corporate products. To produce this would have meant diverting from the original strong marketing bias to manufacturing. This would potentially put him at variance with the RVI, and yet it was critical for RHL to receive preference treatment from the Indian Government. No doubt, this initiative was viewed as Palatable and constructive to the local community. The second thing, which was potentially controversial, was his proposal to sanction the production of dextro be supplied to the RVI, which is the largest consumer in the world. Both these ideas were superb but would put him at daggers drawn with the RVI. This was a risky step but evitable in the circumstances and would only be justified if Das convinced them (RVI) that both these would keep the international standards as well as the RVI regulations. These were bold steps marking out Das from other illustrious managers like Koerber or Bartlett. The advantages of the two major products (Ayurvelis and Dextro) were that these would firstly not only rake in a lot of profits but also boost the company image in that both the Government and community would be satisfied. If I were Das, I would seek to present all my facts to headquarters, statistical and otherwise. Having shown them, I would highlight the advantages such as profits and corporate image. I would point out the problems such as tax that could be significantly reduced. I would also show them the team I lead as well as their determination to succeed. All these persuasive arguments should carry the day, I hope. If others argued on policy and organisational international standards, I would show them that our situation is a unique case and thus merited to be treated as an exception to rule. I would show them that this is part of marketing and the winning of local goodwill for future days. International Business

Billy C Sichone

157

For Das, the appointment meant being a leader, a mentor, facilitator, and coach. He had to be visionary and determined to succeed while keeping within the limits delimitated to him. Having been exposed widely, he thought he could summon all his experience, exposure and proven to lead an organisation so that it would ultimately come up as the best subsidiary to RVI. This was his goal and passion, evidenced by the changes that occurred shortly after his taking over as RHL manager. In the twinkling of an eye, the once potentially defunct RHL was soon full of life and making headway. He viewed himself as one who motivated people whether they be marketers or not, so that they have customer satisfaction uppermost of their minds. Despite his excellent efforts, complaints still lingered from certain quarters, which is part of management. His was to lead RHL to conquer more market while maintaining a high goodwill from all stakeholders. Looking at Das’ prowess, he strikes me as close to Loy Weston except that Das has acumen to articulate things and the patience to consult and negotiate. Weston, on the other hand, has no time because he views himself as the decider on the ground. Once he sees a goal, he will go right ahead without consulting the head office and offers no apologies for his actions. Das is very calm attentive and prudent but equally decisive too, after wide consultations. Having surveyed Das’ situation, I can safely assert that Das’ career options are many. He could choose to remain in RHL, or rejoin RVI and indeed go in to writing. Furthermore, he could also take up a political career as he has a heart for mother India as well as his strong benevolent pulse – In my view, I see a great leader in Das, slowly but surely budding and will soon blossom at noonday. His vision, strategic eye and focus merit out emulation.

International Business

Billy C Sichone

158

Asahi Breweries, Ltd

In 1949 when Dai Nippon broke up, it signalled a new era for the brewery industry in Japan in that the once dominating giant snapped into two regional companies, Asahi in the west and Sapporo in the east. This breakage, seemingly insignificant at the time, was a landmark because it was perfect fertile ground for the Kirin company, once an under dog, to flourish as it remained the only national player worth its salt. The ensuing months and years saw Kirin emerge from oblivion to become a major player. This was because the dismantled Nippon became regional and thus the two companies had to start all over again establishing them selves as separate entities. This is the most difficult part in brand establishment. Further more, Kirin was strategic in its approach as “it read the times”, and moved with the trends in terms of marketing and customer approach. For another reason, the Kirin brand was better placed and tasted better given the contemporary scene. Kirin’s brand was of superb quality, which quality propelled Kirin to the top of the market. Product loyalty naturally followed. In the third place, the lean companies also contributed further to this battering as they made certain serious blunders. For example, Asahi made two near fatal mistakes by firstly, allowing its distributors be used by another company-Suntory. This led to a situation where the Asahi brand being laid aside in favour of the other brand. The second mistake was their continued focus on a stagnant market. Over the years the market tastes and preferences had been changing while the company remained insensitive, neither customer focused nor strategic in approach. Rivals went ahead and made strides towards meeting customer desires by changing products, packaging, new aggressive marketing methods and market/product research. These innovations were taking place on the same customers, though in a different generation. In short, the market remained stagnant while the Asahi market share slipped from minor to insignificant. As the years rolled on, it was a matter of time, Asahi was on the on the way to the company abattoir. This gloomy picture thus far painted persisted for a years, all the while loudly proclaiming the imminent Asahi demise. But just at the brink of death that is when things turned right round. Asahi, under new management, made radical decisions which begun to steer the old ship back to safety again. The process was initially slow but certain. Fatally wounded, the organisation needed drastic surgery to put it back on the rails. The Higuchi led management embarked on a number of modern “Life saving measures” as follows. Firstly, the company carried out a self-audit to find out the root causes for the decline. It was discovered that the company did not have a International Business

Billy C Sichone

159

specific goal or corporate strategy. This goal needs to be an internalised passion in every employee. Granted, a company can do all the frantic maneuvers under the sun but without a strategy, all these efforts are wasted, if in the wrong direction. In a nutshell, there was need to do a corporate identity, to trace clearly where the company had been, where it was and where it was going. In what industry was it and what were the competitors like? In addition to writing a mission statement, these were some of the questions that Asahi tackled before it begun to shake off the death shackles that had stuck to the company “good will” like algae. This pivotal selfintrospection and retrospection was crucial in the turn around. The findings were that there was a lot of bureaucracy, inflexibility, low morale, distrust, evil suspicions and neither initiative nor risk was allowed. The “naked King” syndrome rested securely on the company’s laps. Having established the pit falls, the company then went on to check the attitude towards customers as well as the corporate agility. It was noted that Asahi had stuck to the old traditional tastes, values and attitudes that had become obsolete. The beer taste for example had changed and needed to be revisited. Furthermore, the company had not moved with the times to ensure that it was a learning organisation, forever sensing the rapid taste changes in the environment. Although the traditional brand name and logo were important, it was time to change these to fit the contemporary tastes. The company made frantic efforts to conduct frequent market research so that the company remained “on line” with trends. Also, the packaging and top quality products had to be changed. In the end, the customer was king who called the “shots”. Having implemented all these strategies, the giant begun to show some signs of life again! Asahi begun to flex its muscles once more and moved to reclaim some of the lost market. As such, the Asahi market share grew from 10% to 29%! This, by all standards is a feat! It was wrought by a new strategy establishing a niche, which even the rivals found difficult to copy. Thanks to the corporate identity and Total quality control exercises! Now the above “success story” seems to suggest that Asahi has arrived forever, nothing could be further from the truth! The fact that it has begun to expand sales means more work, watchfulness, and always reading the times. Quality must continue to be at the heart of the products. The customer must set the pace and innovative aggressive marketing should continue. In our view, Higuchi must increase company capacity, while remaining contemporary to meet customer demands. Further innovations and brands must be launched knowing that rivals are busy etching inroads into the beer market through new products, still believing that the Asahi brand was a mere

International Business

Billy C Sichone

160

improvement to Kirin brand. In addition, product differentiation is crucial now more than ever before. Although the future for Asahi seems threatened, we have reason to be confident that given the new management style and the continued efforts to ensure a competitively strategic position, we have no fear that Asahi will be numbered among great revived giants, if not the greatest!

International Business

Billy C Sichone

161

Ben and Jerry’s Homemade Ice Cream Inc: Keeping the mission(s) alive If one has heard of the Body shop’s strong social change goal, then, the Ben and Jerry’s Homemade Ice cream Inc. will be a good reminder. The company was incorporated a partnership comprising two long time friends, Ben Cohen and Jerry Greenfield in 1977. It was an immediate success and has advanced to be a powerful No.2 on the ice cream market (as at 1990). The success story is attributed to a number of factors, which we endeavour to unravel. From the outset, the founders did not design the company primarily for profit making but rather with a strong thrust towards social change. Their aim was to bring about as much Community change and thus their policies and values thus far has been directed towards that goal. Since we know that the destiny of any entity is not entirely in our hands, the Ice cream business blossomed and has been moving from strength to strength as more consumers get captivated by the delicious multiple flavours on offer. The Company rests on very strong principles that are worth noting. Firstly, the company has a strong belief that the yawning earnings gap between the top executives and a new entrant is immoral. This is a sad but common phenomenon in America, and as such, the company has endeavoured to minimise the discrepancy by imbibing a “5 to 1” wage condition. This means that the highest paid employee does not get more than five times the lowest paid, thus minimising the disparity. Secondly, the company has from the beginning emphasised quality and timeliness of service. By this, the company endeavours to continuously improve its Ice cream quality, flavour and packaging while in the same breathe ensuring that the customer is treated as king, with maximum satisfaction. As such, all the employees take it as priority to serve the customer first and also keep true to their word. Thirdly, this high quality and speedy service hallmark has turbid the company to a strong unique position where all other imitators find difficult to copy. Further more, the strong social change outlook of the company marks it further from the rest. In a nutshell then, the company has beaten out a clear path all these years having upheld its social obligations as well as the internal ethics such as the “5-1” wage condition as a beacon. In this two fold thrust, the company has prided itself. Having laboured to show that the company built by the duo is very strong, we hasten to say that not all has been rosy lately. Like any other growing International Business

Billy C Sichone

162

company, the entity has been encountering hurdles. The first has been that as more people have been hired over time, not every one espouses the ancient core values. Since the company is now more complex, profit making and possesses a powerful presence on the market, the new employees possibly do not whole-heartedly imbibe the values. While some appreciate the said values, others question their relevance and usefulness. Secondly, many, including the out going CEO, Chico Lager, feel that the company must throw off some “obsolete” relics which tie down the company and impede further development. They argue that the company is past the napkin stage and must modernise some values, especially the “5-1” wage condition. They (opponents) argue that the company can neither retain nor attract professionals due to the unattractive pay and compensation. Why should one sacrifice a better wage for a lesser paying job where one is even over worked? Thirdly, the “5-1” condition opponents further argue that the company is in a competitive environment where only the best must be hired or else the company sinks. From these views, we can clearly see that the company was divided into two camps, one with Cohen (adherent to) and Lager (opposer of) on the other. This was the turbulent atmosphere in the company that Chuck lacey was soon to take over in the ensuing few months following the September 1990 final decision making meeting. His interest lay in the fact that he was the one to steer the ship henceforth. As such, he had to be most objective and not appear partisan. But does that mean all the “obsolete” values of the past have been overly and pointlessly imposed? Nothing could be further from the truth! To the contrary, these values are the ones that have won battles for Ben & Jerry all these years. For instance, the company has been powerful and competitive from the beginning because of its unique social change policies. By that token, some people have been buying and popularising their products. We must go further to assert that the non profit ethic in those earlier days was excellent in that the employees knew fully well that theirs was more of a service than a wealth amassing venture. Thus, this has meant less pay, fewer over head costs and lower price but high quality products to the customer. The consumers have not only been continuously satisfied but have also felt they were contributing to a worthy cause. But like they say, “what goes up must come down”, Ben & Jerry’s Inc’s weapons of yesterday are blunt and must constantly be revised ensuring that they remain current and strategically relevant. This may mean modifying some traditions or discarding some practices as the case may be. The difficulty with the present crisis at Ben & Jerry is that the points of contention lie at the very heart of the company, without which, one of its distinctives will be lost. This will International Business

Billy C Sichone

163

weaken the company â&#x20AC;&#x153;punchâ&#x20AC;? and become like the rest. In our view, Chuck Lacey must approach this scenario very cautiously, taking to heart the pros and cons. He must be seen to be objective, though forward looking. If it means changing the points of contention, the reasons must be fully furnished and the history books re-written. If the present status quo is maintained, then alternative ways must be found which will attract and retain staff because a high employee turn over in itself reflects badly on the company. In a nutshell, Chuck lacey must be objective, strategic and wise. When the decision is made, he must be ready to go full throttle in implementing the decisions, all the time keeping an eye on the market. A divided house is a sure recipe for disaster but also, we must acknowledge that change is resisted at all costs, especially if it impinges on time honoured hallmark values. That not with standing, we are confident that the Ben & Jerry will surmount all these hurdles with agility and hurtle towards a brighter tomorrow!

Bibliography Bower et al, Business Policy

International Business

Billy C Sichone

164

With the rapid re-engineering that has been sweeping across the world’s businesses, one hardly finds it difficult to stumble across literature that deals with the said changes. The media is also replete with reports of company reorganizations every day. Indeed, these inevitable changes are sweeping across the world like a typhoon and there seems to be no panacea to this traumatic tide. What is really happening? Why this seemingly mindless closure of companies and the shift towards diverse corporate companies? These and many other questions, the Organisational Behaviour course seeks to unveil. One aspect dealt with is that of nurturing and maintaining a diverse workforce in this competitive environment. But why should we bother ourselves with diversity? Why the countless studies? An article by two excellent authors, Caela Farren and Bob Nelson entitled “Retaining Diversity” is a brisk but clear article that high lights the necessity of a diverse work force and how to retain the same. The said article opens by stating that although recruiting a diverse workforce can be challenging, retaining the same is even more dicey. Reading the article further reveals four best practice methods to be imbibed so as to minimise the employee turnover. The retaining of a diverse workforce is crucial because of the obvious advantages that accrue to the company. Firstly, people from different backgrounds and races come up with different ways of carrying out a procedure as well as new and cheaper ways of producing a product. Closely akin to the first reason is the fact that a rich diverse company will help the multinational corporation to sail more easily on “foreign waters”markets because valuable insights and connections are within the corporate ranks. Thirdly, in keeping with the affirmative action, where minorities are given an equal chance of employment, advancement will ultimately bring about more production and harmony. Hitherto, the top jobs have been the private preserves of a few elite men. In the past, women and people of colour have been relegated to the terraces. With the aforementioned culture, a company risks missing out on excellent the contributions from the said minorities. As such the article furnishes us with four ways to best retain the diversity in the company. In the first place, open communication is highlighted, and rightly so. Communication is crucial if any institution is to survive in any circumstance. Even marriage, to a greater extent, hinges on effective communication. By this is meant that every one has a right to information at the right time and must keep abreast with the current happenings within the firm. This entails International Business

Billy C Sichone

165

talking over issues, having access to the top executives and liberty to suggest innovations. Every one, despite their colour, sex and creed must have a fair hearing. For example, at Pacific Enterprises, one or two top ranking employees sit before an audience and describe how they moved through the corporate ranks. This offers tremendous encouragement to those beginning the corporate ladder ascent. Berlinda Fontenot-Jamerson, who heads the Pacific Enterprise Diversity Program and is herself an African American woman, testifies to the usefulness of this approach. The second suggested best practice is that of training and education. All employees must be given some form of training to sensitise them of the potential dangers of discrimination and also about other cultures. Gross ignorance accounts for some of the discriminatory attitudes such as ethnocentrism where one feels their colour, sex and race are superior to others. Thus, the training and education will go a long way to clear defective stereotypes and prejudices. Furthermore, all staff must be given similar opportunities and leeway to express themself. At Microsoft for example, two programs are in place to tackle the diversity issue. The first is an awareness program designed to limit the influence of stereotypes while the second is a “business program to provide real-life situations, challenges, and solutions to diversity issues”Γ. In addition to the aforementioned training, the companies should embark on staff career development that will make them self reliant, thus building capacity. The third best practice method is that of deliberately providing mentors to new employees. The said mentor should be attached to a new team member and should meet at regular intervals to exchange notes on the progress. A period of one year is recommended. In this way, the new people will feel welcome and not lost. Digital Equipment has reduced minority turnover as a result of the mentor program introduced into the company. The idea of mentors was nearly a forgotten art until the world woke up a few years ago. Most of the world’s great personalities have had mentors to whom they looked for inspiration, much like the ‘management gurus’ we read about in our courses! The fourth and last best practice is to make managers accountable. Far too many pay lip service to the importance of diversity than they practice. Once given a platform to present a paper, they give heart rending, tear evoking and moving speeches but as soon as they turn round to leave, they discard Γ

Retaining Diversity, Excellence magazine-May 1999 issue page 7

International Business

Billy C Sichone

166

everything! There is need to put parameters in place to ensure that minorities are not only represented but are appreciated, as Roosevelt Thomas, Jr.Ď&#x2019; would advocate. Top management must be seen to tangibly and pragmatically support the diversity program. We learn many valuable lessons from each other and ultimately the organisation benefits once the right attitudes are internalised into the company culture. Having outlined the best methods, the article hurtles to give some guidelines for a strong foundation. To build a powerful superstructure, there is need to foster understanding on key concepts, address all representation and diversity issues regularly. With these and other practices such as cultivating team spirit, mutual trust, effective communication, we have no reason to believe that a company will continue crawling in the dust of competitive disadvantage!

Bibliography Executive Excellence 1999

Ď&#x2019;

Diversity management, Excellence magazine-May 1999 issue page 8

International Business

Billy C Sichone

167

A response to Larry Diamond's “Debt for Democracy”

Reading Larry Diamond’s “Debt or Democracy” article evoked a lot of sad emotions

and thoughts. Many scenarios flushed through my mind as I read the article, point after point. I could not help but agree with him on most of the points save a few. In principle, I heartily support the views advanced in the said article. By and large the article was well written, researched, argued, largely consistent with deep insight summoned to potently present the issues at hand. For instance, his introductory paragraph could not have been written any better than he has. It presents an accurate summary of what obtains on the ground here in third world Africa where the politician has taken over the scenario and recklessly ruins every thing at the cost of the powerless poor and disadvantaged. Indeed, wantonness is the modern clown Politicians’ trade mark. The crippling external and unsustainable debt levels, absence of social amenities and services, near homogeneous abject poverty, shortened life expectancy and the ravaging effects of the HIV/AIDS pandemic among other things are well analyzed. This and many other aspects of the article are simply superb and I wish he had written more than he has. I wish however to comment on some of the sweeping statements and remedial propositions he advanced regarding the mode and conditions of debt cancellation for the corruption ridden third world nations. First and foremost, it is important to note that not all the pauper countries are as corrupt as portrayed in the said article. Some are as clean as any other nation can ever be, perhaps even better than some of the purportedly developed countries of the world. While it is true to say that most are corrupt, not all are. I wish there fore to raise my finger in protest over that assertion.

Secondly, Mr. Diamond makes another assertion that there is “global prosperity” I thought that statement was not entirely accurate unless he was using it as a figure of speech or referring to the affluent society primarily. That not with standing, It is probable that he meant that the first world by and large is technologically advanced and able to generate much more than ever to the extent that it is inconceivable to stumble across extremely poor nations in this global village. If that is he meant, then I have no quarrel, but if he meant that the whole world is in prosperity, I beg to differ. That may imply that every country on this terrestrial ball is in a measure as advanced with all their resources and potentials fully harnessed. I tend to think that the statement is far too wide and relative. Care must be taken so that our Self Reference Criterion (SRC)¬ does not influence our perception. Objectivity must reign at all times. From my stand point, I tend to think the affluent societies have historically significantly contributed to the vices (e.g. corruption, dependence syndrome, indifference, power jostling etc) we see today. For one ¬

SRC has to do with our world view and how we interpret things. Usually this is influenced by many things such as up bringing, training and exposure.

International Business

Billy C Sichone

168

thing, they disturbed the once harmonious social fiber when they brought their own definition of governance and development. No wonder, very few countries have pulled out of the poverty quagmire! Further more, one gets the gut feeling that the pauper countries are used as guinea pigs to test various economic theories thrown around over the corridors of time. With all due regard, the IMF and World bank seem to be at the fore front of this. How can a nation develop with over 5 development plans being pursued simultaneously? The developed world must also own up in some of their past follies. Thirdly, the article at hand places the root cause of the problem as a purely political one. I understood him to mean that the unjust systems and weak mechanisms thus far instituted in the said countries do not address or have the capacity to guarantee proper administration of justice, fair play and focus in a country. I agree with that but what I would like to add is that the root cause really lies with the respective natives of the countries at hand. My diagnosis is that the third world citizens by and large suffer from a naïve ATTITUDE problem that makes them laissez faire, complacent, indifferent to the point of docility and generally laid back while their wealth and tax money is misapplied. The tax payer is often too busy toiling trying to make ends meet while the appointed authority is busy siphoning the wealth or lavishly spending it on egocentric politically motivated worthless issues. The corrupt leaders really ensure they nearly over draw on the patience account of the led to the extent that they get away with it without leaving any finger prints behind them after they have left office. The immediate solution to this defect is sensitization (i.e. activating/ charging/ awareness rather than “pumping sense into their damn heads!” which the word “sensitization” seems to suggest at first sight) on a massive level scaling up what some NGOs are already doing. In Zambia, the Women for Change is one such potent NGO that has contributed greatly to this noble agenda. Fourthly and closely connected to the point above, most of these poor countries still harbour archaic constitutions that are oppressive and herald the President as a “know it all” super person. What these so called leaders do when they get into power is to defend the defective constitution as much as possible so that they prolong their hold on power. For instance, in Zambia, the government has tenaciously held on to the ancient defective constitution so that they can easily surmount the next elections slated for 2006. Basically, the said Zambian constitution is based on the obsolete autocratic system where the Chief assumed all powers regardless. What he or she said was unquestionable law. Similarly, the President is addressed as “Your Excellency” meaning that that they are infallible and neither can they be queried on anything, what a fallacy! By that token, they can commit some heinous crimes and still escape unscathed due to the immunity embedded in the law. The President has powers to decree anything, sometimes ultra vires, after all, the separation of powers between the judiciary, legislature and executive are merely on paper. As such, the President can prevail over court decisions leaving no room for contra opinions to be given an objective hearing. Thus, it boils down to attitude because if people had the right attitude and were aware of the cracks of the matter, they would have long dealt with the constitution issue ages ago. Note that not all leaders are corrupt. I used this blanket statement for convenience and specifically for the actually corrupt.

International Business

Billy C Sichone

169

Fifthly, apart from the citizensâ&#x20AC;&#x2122; slothfully indifferent attitude is the scarcity of leaders equal to the task. It is true to say as Mr. Diamond rightly pointed out that plans are worthless without implementation. I heartily agree and would add that there is a serious dearth of nationalistic, patriotic leaders that will sincerely, resiliently, diligently and unreservedly give themselves to the task of implementing the agreed remedial strategies. Gone are the days when people assumed political office to solely contribute to the national development. Today, in poor third world nations, people generally jump on the political band wagon to alleviate poverty on themselves rather than the nation! As the excruciating poverty levels demand immediate relief before talking about sustainable development, the cunning politicians take advantage, appear on the scene, lavish temporal goodies and slickly buy the vote to Parliament and then desert the electorate for five years. I tend to think that leaving people to wallow in abject poverty is a strategic political ploy so that people remain perpetually dependant and vulnerable to manipulation. Further, these politicians know too well that they cannot be summoned from Parliament until the five year tenure is over. Perhaps a decentralized system would be better where the Member of Parliament, and indeed the President, is held accountable directly to the electorate. In keeping with the proposed electoral reforms implied in Mr. Diamondâ&#x20AC;&#x2122;s article, the electorate must be empowered to recall some one from office and debug them after a case is established against them. In a nutshell, highly indebted countries have the wrong people running the show who have no iota of fidelity or patriotism to their country except enriching themselves and along side their clandestine allies around them. Sixthly, poor countries are infested with short term thinkers that only look at issues subjectively and conveniently. They masquerade as excellent planners but deliberately fail to implement, choosing only what will suite them. If any thing threatens their hold on power, they quickly adjust as via an emergent strategy that never appears when it has to do with good national issues. Having been around for some time now, I have observed that the short term mind set is effectively at work where people deliberately refuse to see what may befall the nation in the near future but choose to bag an extra coin! This is an extremely costly way to run a country. The nations need more than mere planners but implementers equal to the task. These strategies must be shared with the donors who should track every move along the way, depending on the government in question, for notoriety varies. In the seventh place, the countries at hand should ensure that proper mechanisms are put in place that will ensure that the now endemic corruption is systematically, consistently and effectively eradicated or reduced in a given country. In the case of Zambia for instance, the corruption fight appears to be a mere smoke screen because no tangible mechanisms exist to independently sustain the corruption fight, neither are there extant law enforcement agencies free from external political interference. There is mere rhetorical talk rather than action. Sadly, this talk is equated to commitment to the fight by the donor community who naively buy into the meticulously crafted political ploy. In

International Business

Billy C Sichone

170

such a scenario, we are bound to see many lost cases⊃, selective prosecution, political interference, suspicious acquittals of clear criminals, senseless nolle prosequis and an increase in corruption sophistry. What has been observed in Zambia is that corruption is more sophisticated and systemic than before. There is less clear cut public corruption but the silent subterranean filthy stream runs deep with no audit trail for the present tools to detect. People are smart enough to know where the live wire cable passes. Eighthly, I wish to agree in part about the recommendation for the donor agencies to demand democracy for aid or debt relief but I wish to add further that the top down arrangement should be revisited. What tends to happen is that the said countries may observe the conditionalities but the quality of work output on the ground remains questionable, in many instances far below standard due to the hustle and bustle about targets and deadlines. A case in point is the USAID run programs. Most of these are high profile, well meant but fall short in that they tend to emphasize numbers rather than quality. This means that the top down approach is bossy and does not encourage owning of the goal by the stakeholders who break their backs to meet the requirements. I would therefore recommend that the relevant donor agencies critically look into the matter and ensure that quality is in built within the system where both the implementing partners and other stakeholders internalize the essence of quality programming. As at now, it remains a far fetched wish. In the ninth place, I have serious reservations advocating for the United States being the watch dog over other countries’ human rights record. I say this because I see glaring inconsistencies in the USA. Examples abound which show a questionable record and motives by the USA. One example is the Iraq fiasco where the USA, in the pretext of promoting democracy is after the regions’ oil reserves. USA must first remove the log in its eyes before it spots the speck in the other’s eye. Granted, the nation (USA) has the financial muscle and is probably the foremost super power of the day, but it is none the less subject to the same parameters that measure the human rights record. The American pride is simply amazingly blinding! I recommend that we use a more neutral country as an ideal example not the United States. Tenthly, Mr. Diamond seems to assume that once the pauper governments are pressurized to bow to donor demands, the respective citizens will rise in uproar as a result. This is an unverifiable assumption as it does not apply universally. Granted, there will certainly be some internal upheavals but not always to the extent suggested. Further, the people that are hurt the most are the common people on the ground. The governments the donors target to destabilize will for a long time ignore the top down decrees and simply pass on the buck to the hapless ordinary people who ultimately bear the brunt. In the process, myriads perish while the survivors are reduced to less than the scum of the earth. In the last place under observations, I tend to have problems with the definition of the term “National security” as proposed by Mr. Diamond. Methinks it is a cover up for evil by the bully nations. The USA has in the past abused this term to justify its crimes against ⊃

In Zambia, we have observed an increase in the court gymnastics where the amount spent on court witch hunting costs more than what was actually stolen, its just a circus out here!

International Business

Billy C Sichone

171

humanity. If it is used objectively properly and meant to the further universal freedoms, then I have no quarrel with Mr. Diamond’s recommendation. Same goes for the NGO world at large whose agenda we often question. What then is the way forward? I simply wish to strongly advise that a new workable and sustainable mechanism be devised to refine the present systems. Further, I wish to advise that the egocentric interests of the USA be checked by other equally potent nations. In the post cold war era, the USA is having a field day harassing all and sundry in the name of fostering freedom and “national security”. The present trend must be reversed if we are to see a changed world. Further, the United Nations also needs to be liberated from the firm American clutches that have hijacked it. We are aware that many hands are involved in this global body but we assert that the entity has no teeth to bite the USA because of the dollar that the latter dangles. Another aspect worth exploring is to scale up on the gender equity in the less developed nations as that will act as a check and balance measure within the system. By and large, the female folk are deprived of decision making prowess, no wonder the AIDS pandemic runs rampage. Finally, the poor countries desperately need the donor aid cancellation. If that were done today, that would be the greatest news. Whether it is done piecemeal or in one whole is immaterial for now, though the piecemeal arrangement is favoured by this author⇔. Debt for Democracy is heralded but modalities questioned.

⇔

Thinking outside the box a little, imagine for a moment the whole debt was instantly written off in one batch rather than piecemeal, there would be chaos in the pauper countries! Most likely, the politicians will loosen the tight fiscal controls, divert funds and open a Pandora box for theft as there will probably be more disposable funds. Plunder would ensue once again unless safety gadgets are proactively put in place to guarantee potent internal controls. Another possibility is that they will use the debt relief as a political mileage tool to lengthen their hold on the mantle.

International Business

Billy C Sichone

172

In this global world, the genius will come from any point rather than the renowned worldâ&#x20AC;&#x2122;s Universities and institutions. Examples abound, for instance the Woman Commander of the Space shuttle Discovery which soared to the skies (13th July 2005) after almost 2.5 years after the last catastrophe of Feb 2003 (The Columbia Space shuttle disintegration on re-entry of the earthâ&#x20AC;&#x2122;s atmosphere) Eileen Collins, 48, is from some obscure Syracuse University, USA. Others to be added to this unique list are our own world class Kalusha Bwalya, Collins Mbesuma, Clive Chirwa, Mutembo Nchito, Christopher Kangwa, Samuel Matete, Esther Phiri, Amon Simutowe (Chess GM) and a whole host of other athletes. It is reported that some of the leading scientists at NASA are from UNZA. From the foregoing, it is therefore folly to believe that only the Worldâ&#x20AC;&#x2122;s elite universities will produce the all stars team. Take a look at the Real Madrid team. This team, by all standards is the dream team but look at their dismal performance season after season. I am convinced it is not a question of capacity as much as pride. After all, they all have made it! In this global world then, people must learn to think outside the box of course whilst meticulously maintaining the standards. Like once successful but obsolete strategies, standards may also stifle initiative, creativity and development of thought. With all due respect to those upon whose shoulders we now stand, there is an urgent need to constantly re-examine the changes in the environment. This should be a universal principle to operate with. Care however must be taken not to hurl out time tasted principles but the methods and approaches are the ones that are variable. The same goes for many once popular churches in Europe that are by and large deserted today. What about the Cinemas, Post offices and Discos? With the human eye, all these failed to mutate with the times and have thus remained white elephants. That does not mean in and of themselves these are useless, far from it! But rather, they needed to read the times, anticipate environmental changes and proactively position themselves at places where the target populations are.

International Business

Billy C Sichone

173

APPENDIX C

1. 2. 3. 4. 5. 6.

! " Merchandise exports and imports Service exports and imports Tourism and Transportation Asset use Investments, including direct and portfolio investments, licensing, concessions and turn key investments, cooperative agreements; Multi National Enterprise/Corporation (MNC)

Trends in later nationalization of business: some mega trends influencing International Business include: 1. Technological renewal (Reinforcing the importance.) 2. The rediscovery of capitalism. 3. The development of the services industry. 4. The development of regional trading blocs 5. Increasing ties between different economics; 6. The fact that the U.S.A is currently the #1 economic force in the world. 7. Increasing competition among the international industries. 8. The unstable international political climate; 9. Changing demographic patterns and the impact of AIDS; 10. Outsourcing 11. Privatisation E Changing value systems

International Business

Billy C Sichone

174

Findings reports on ongoing operational, economic and sector work carried out by the World Bank and its member governments in the Africa Region. It is published periodically by the Knowledge Networks, Information and Technology Center on behalf of the Region

Privatization in Africa : the Zambian Example

A recent report on the progress of privatization in Sub-Saharan Africa concludes that the response to and the results of privatization have been mixed. But the report shows that there is a success story. Zambia has the most successful privatization program to date and the experience there offers many examples of best practice ( Commitment is what counts : The Progress of Privatization in Africa by O. Campbell White and A. Bhatia , in press ). Like many countries in the region, Zambia embarked on privatization with, among other objectives, a desire to broaden ownership and develop the capital market. The Securities Act was enacted on 19 December 1993. It established the Securities and Exchange Commission (SEC) to regulate all participants in the stock market with the prime purpose of protecting investors. The Lusaka Stock Exchange began operations in January 1994 and was formally opened for business on 21 February 1994 after only twelve months of concerted effort on the part of the government, the private financial sector and World Bank project team. As an integral part of the privatization program, the Privatization Trust Fund was established in June 1994 to temporarily warehouse shares which are later to be sold through public flotations. After what many observers perceived as a slow start, Zambia's program has really taken off over the twelve months from June 1995 to June 1996. As the following table shows, not only has the number of concluded deals risen sharply, but ZPA's scope of work has also expanded.

International Business

Billy C Sichone

175

The 97 deals concluded to end June 1996 have been worth some $119 million in divestiture proceeds.

International Business

Billy C Sichone

176

Factors for success What are the measures and the reasons for the success of Zambia's program? The report uses 8 indicators for assessing the performance of divestiture programs in Africa. These are: the extent of divestiture (i.e. government's willingness to exit totally from equity ownership of enterprises), fiscal impact, the efforts made and achievement in broadening ownership, the level of foreign direct investment attracted, enterprise post-privatization performance, the depth and quality of program design and management, transparency and government commitment. Zambia rates medium to high on all 8 indicators.

International Business

Billy C Sichone

177

Government commitment is both a measure of and the most important factor in the success of Zambia's program. Commitment is what gave prominence to the private sector's role in the process and is reflected in : • • • • •

the resources invested in careful program design and preparation, appropriate legislation (the Privatization Act), the legal authority vested in ZPA which enables it to undertake its work with minimum political interference, transparency- the steps taken to inform the public about the program and to encourage maximum Zambian participation in the process, and the decisive steps to deal with constraints, notably by addressing the weak capital market and eliminating the influence of holding companies.

Zambia's program is managed by the Zambia Privatization Agency (ZPA). A noteworthy feature and one of the key factors in the program's success - is the involvement of the private sector in the management and oversight of the divestiture process. This takes two forms. First, ZPA is private sector-led. It has a board of 12 directors but only 3 are appointed by the government. Nine of the directors are selected by representative private sector groups such as the Zambia Confederation of Chambers of Commerce and Industry, the Zambia Congress of Trade Unions, the Zambia Federation of Employers, the Law Association of Zambia, the Zambia Institute of Certified Accountants and the Bankers Association of Zambia. ZPA's chief executive, recruited and appointed by the ZPA Board, is also from the private sector. Second, much of the preparatory work is contracted out to professional firms and all negotiations with bidders are conducted by small teams of professionally qualified individuals selected for each transaction. In this way, not only is the private sector heavily involved, the government is twice removed from deals. Through ZPA's professional approach (the Bank project team's field work in Zambia last year revealed not a single complaint about lack of transparency) and the results it has achieved, the government has had the confidence to broaden the Agency's scope of work to include all parastatals. Hence, ZPA is now responsible for handling the privatization of the major utilities and Zambia's largest public enterprise, Zambia Consolidated Copper Mines Limited. In no other country in the Africa region has a government had the confidence to place complete responsibility for privatization in the hands of one entity. Finally, donors, including the Bank, have played an important role too in the success of Zambia's program. Their level of support has been greater than in any other country in the region and that support has been very well coordinated. Donor cooperation and coordination in support of privatization also provides a good example for other countries in the region.

Correcting negative public perceptions However, the program has not been without its problems. The major state holding company (ZIMCO) was a source of hindrance until its closure in March 1995. Several major public enterprises, including the United Bus Company and Zambia Airways, were put into liquidation in late 1994/early 1995 and ZPA was, shortly after, made responsible for overseeing those liquidations. In the minds of many ordinary people, "privatization" became synonymous with "liquidation". ZPA has had to work hard to correct that popular misconception. Also, because of its fragile economic situation, Zambia was not readily attractive to foreign investors. However, multinational companies who have invested in Zambia are impressed with the way the program is being managed. As a result, the country is now one of the most attractive in Africa to investors.

International Business

Billy C Sichone

178

For further information on Zambia's privatization program contact Emile Sawaya, Tel. no.:(202) 4732612; for information on privatization in general in Africa and on the recent report on the privatization study findings, contact Oliver Campbell White, Tel. no. (202) 4737952 or Anita Bhatia, Tel. no. (202) 4734294. Internet enquiries to pmohan@worldbank.org

Down but not out!

Much dust and speculation has surrounded the unceremonious departure of

Boutros Ghali, that great Egyptian, from the United Nations Secretariat office at the end of 1996. Whatever the case, his ordeal has been one worth picking a few lessons from so that we are not caught napping by recurrent historical pitfalls. As earlier intimated, Ghali was hounded out of office having accomplished much though his illustrious career has been deliberately marred by his critics. Who is Boutros Boutros Ghali, if we care to ask? What did he do or not do that caused him to appear a dismal failure at that top job? For one thing, we do not have much information about him from the article “Why Boutros fell from grace”, which appeared in the magazine “New African” of October 1999. The said article is more focused on what happened at the UN secretariat rather than his genealogy or profile. It deals with the causes that led to Ghali’s ouster and replacement by Koffi Annan from Ghana. For all we know, Ghali is an Egyptian and seems to have worked tirelessly at the UN for many years before he was elected into office in 1991. He is a highly principled man and possesses all the traits of a great statesman and not easily shaken off his principles. Also, he seems to posses a very crystal clear mind that is both strategic and objectively analytical as evidenced by his seasoned comments. He stepped into the UN offices shortly after election with a burning passion to restructure the UN into a more agile and relevant organisation, in keeping with the original San Francisco goals of 1945. As we know, the UN ideally is there to preserve World peace, prevent wars, alleviate poverty, improve global health, and fight exploitative labour practices as well as resolve regional conflicts. This is achieved through many interventions, such as negotiations with Governments and using its own military force, derived from the UN member countries to quell crimes against humanity. When the International Business

Billy C Sichone

179

World body commenced its work many decades ago, all these goals were very fresh and justified the existence of the said body. But alas, with time, it has turned out to be a US tool to advance America’s global dominance political agenda under the guise of being a “world peace watch dog”, when the UN is supposed to be independent and objective, detached from any single Government manipulation. The advent of the cold war made the UN further lose its sovereign identity and to this day, it still is firmly clutched in US hands. This is what Ghali set out to change, and as it were, touched an American “naked live wire” instantly electrocuting himself! But then, the man was prompted to institute these drastic manoeuvres because of the organisational state of the outwardly sparkling entity. When Ghali took over the mantle, he found a desperately weak entity literary struggling to keep alive. What were the root causes, one may be prompted to ask? For a long time, the UN has been owed billions of dollars in unpaid subscriptions by member countries, chiefest of whom is the USA. As a result, the world body has operationally been crippled. The only way to get round this hurdle is to restructure, cut down on staff, limit travels and initiate controls on the use of resources. Therefore, when Ghali stepped into office, his keen eagle’s eye diagnosed the problem and immediately prescribed a remedy, but ironically, the proposed solutions greatly infuriated some power mongers. These were but the first straws that lashed out at the US Government and from then on, he was a marked man. Further more, he begun to advocate objectivity and fairness in treating conflicts around the world. What was evident was that the US could pick and choose at will whom to help, when and where. Hitherto, no one had dared question such hypocrisy but when Ghali raised his finger in protest, further irking some quarters. But what exactly was the problem root cause? As earlier intimated, Ghali was firmly convinced that the UN was unnecessarily too huge, complex and unresponsive, and as such, he sought to awaken the world about the need to restructure so that the UN be transformed into an agile, fluid, relevant, responsive and environmentally conscious body. The operations of yester years were obsolete and needed revisiting. This called for drastic cost cutting measures and the instillation of greater stewardship of resources. In a nutshell, this was Boutros’ pulse for which he fought valiantly to the bitter end, squashed but unvanguished. The problems really begun at that point of attempting to restructure the UN towards a meaningful role in a post Cold war era. He wanted the world focus to shift away from the US to the UN. Having made some initial changes, as highlighted earlier on, he finally broke the camels’ back when he jokingly International Business

Billy C Sichone

180

remarked after his leave, saying “I am happy to be back here blocking more reform, flying my black helicopters, imposing global taxes and demoralising my staff.” Unknowingly, this was a suicidal joke because the same got the greatest malicious publicity ever. From that point, the US, through that villain, Madeleine Albright, begun to fire their arsenals at Ghali. They coaxed him (Ghali) not to go for the second term. After all sinister persuasions failed, the Americans offered another luxurious job to silence him but alas, not even money could silence that principled Sphinx, much like what was said about the Reformer, Martin Luther, when the corrupt powers of the day exclaimed, “This fool does not even accept gold!” Ghali too was far above bribes! In the long run, after much frustration, anger and nausea, the US went full throttle to oust the man using the vote, simply for not pledging allegiance to the “finger that fed him”. The Americans campaigned against and voted Ghali out in 1996, and placed their pawn on the chessboard. It is now many years after that horrendous episode, we have no telling how plain sailing it has been for Annan but for all we know, Boutros Ghali fought a good fight and never forgot mother Africa! Having analysed the scenario, it now remains for us to draw a few lessons and conclusions. Firstly, we note that Ghali was probably naïve about many things when he stepped onto the 38th floor of the UN Secretariat. He assumed too much thinking all were friends when viper tongued politicians were lurking in the corridors to strike him! Secondly, he seems to have been unconcerned about the immediate impact of his reforms. For all we know, change is always resisted, especially when it threatens peoples’ status. America is in its declining stages as a world power, and the kicks of a dying horse can be deadly. Thirdly, although his reforms and strategies were excellent, it seems to me that he had worked on the flawless ideas with a small click of friends, to the exclusion of all others. As such, his ideas appeared to be shoved top-down rather than participative. In the fourth place, He seemed to have been in a hurry to implement the reforms and did not make a proper internal situational analysis of the HQ. Although he did a good overall operational analysis of the organisation, as International Business

Billy C Sichone

181

evidenced by his apt conclusion that the world body was too bulky and over weight, it seems he was unaware of “who is who” at HQ. Naïve about UN organisational politics, he bashed some folks on the head while he spat others in the face. How they gnashed their teeth! I am one who supports originality in a leader and would have applauded his brave assertions but it is more prudent to know your enemy before you act. Fifthly, organisational reforms take time, especially the complex UN having tentacles all over the globe. Ghali, should have first looked for ways to curb the off shoots of the changes by preparing people through training. In addition, he should have been more careful to motivate his staff in various ways, such as capacity building and the need for organisational mutation. As the momentous event recedes into the irretrievable past, we can only salute Boutros Ghali for the resilience he displayed in attempting to steer the titanic UN back to sanity. As he himself aptly concludes, “I believe that such a transformation is still possible and will succeed-if the United States allows it to do so.” we trust that the petty politics will be surmounted and the metamorphosis realised. Bibliography New African, October 1999 issue No. 378

International Business

Billy C Sichone

182

Billy Sichone trained as an Accountant and worked as a Program Accountant at one of World Vision Zambiaâ&#x20AC;&#x2122;s large scale Area Development Programs for seven years. He studied the Zambia Diploma in Accountancy (ZDA), is a Fellow of the Institute of Financial Accountants of the UK, holds an MBA (Preston University, USA) and is a doctorate candidate. He is married to Jane and now works as Program Manager at a large scale World Vision Zambia project. Among his interests are studies, reading, studying, research, writing, meeting people, astronomy and adventure.

International Business

Billy C Sichone

183