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Gilbert Chen


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Founding World Enterprise Organization: to Achieve Unity of Global Business World

Gilbert Chen

Introduction We live in an era of very low predictability but full of uncertainty. In early October, Thorunn, a sporting goods company in Reykjavik, suddenly found that the cash deposited in the bank had a huge one-fourth loss since the Icelandic Krona depreciated 23% overnight. What’s worse was that it became almost impossible to cash large amount of money, and just after several days, lack of liquidity has already made an influence on its business. Certainly, the number of the victims of the crisis should not only be modified as “a bunch of”, rather, it nearly led to a national bankruptcy. The aftermath of this disaster then soon spread to U.K. and others European countries… Southampton Café is a famous gathering place for foreign tourists in Mumbai. A group of terrorists with AK-47 and grenades attacked several transportation stations and hotels on 26 Nov 2008. After that, few tourists from western countries still went to Southampton to enjoy the relaxing atmosphere of it. However, the major concern of the nation about that astonishing attack seems to be the nationality of the terrorists rather than how to revitalize the tourism and catering industry as well as how to reconstruct the confidence of its people. In Caucasia, Chinese businessman Mao Wenqi witnessed the T-90 tank entering South Ossetia with MI-35 helicopter circling over, where is only less than 100 miles away from Tbilisi. He once thought here is a virgin soil where the products of his shoe factory are to be easily produced and then be sold to the much larger neighbor market. In remote Arctic, several hunters no longer hide their desire for the cold continent which might be an unexploited treasury and claim the sovereignty and territorial rights while a similar race is taking place in Somali waters that batches of warships are sent to the small area, it seems that nobody can afford to lose the race at the starting line. However, how can business world cope with this situation? Who can be relied on to go through it?

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Gilbert Chen

The necessity for the business world to unite My answer is – business can only be dependent on itself. The solution to this situation is– to unite. Firstly, the situation that there are more conflicts which trigger sharper economic and political division around the world and the conflicts are more intensified and destructive is to some extent reasonable. The world pattern quietly changes over the past decade, the main players in the world economic and political stage are no longer those familiar names who have been played with each other in the past half century and the G7 dialogue already became G8 and now it is a G20 time. The emerging countries’ claim for power is absolutely natural while the established capitalist countries are struggling not to be on the way downhill, these two main forces together make the increase of the worldwide uncertainty, volatility and low predictability an irreversible trend. The business world can not self-righteously assume these uncertainties and therefore the boundaries a flash in the pan. Secondly, the behavior of government often adds to the uncertainty. Too many examples have already showed us that when government needs to make compromise and concession, whatever the occasion, the first that can be sacrificed must not be political interests. In numerous cases, business sector is always the victim. Furthermore, government, out of instinct, tends to set barriers and high thresholds to (and it is equivalent to a protection of its own industry) when faced with crisis or even worse conditions, which hinders cooperation and specialization, also poses a obstacle to the development of global business and influences the endeavors of them to prosper in a larger market. That is a bigger threat to business world. Hence, government won’t be a reliable and omnipotent firefighter in light of the uncertainties and correspondingly barriers.

To realize the unity: Founding World Enterprise Organization (WEO) To achieve the global unity and cooperation, my proposal is to found the World Enterprise Organization. It is composed of the various global Industry Associations such as OICA (The International Organization of Motor Vehicle Manufacturers), The Textile Institute, World Steel Association and ICCTA (International Council of Chemical Trade Associations). Dozens of global industry association have already played pivotal roles in helping enterprises cope with those uncertainties. For example, the World Steel Association coordinated the position of several large iron and steel enterprises in handling the request of the iron ire enterprises to raise price and helped most iron and steel enterprises go through these incidents. However, there’s no link and communication among these associations and societies, the estrangement results in a lack of resultant force of business world when the exterior crisis occurs and produce negative effects, the cost of which is an unnecessary waste of resources. The founding of World Enterprise Organization will solve this problem – it is based on the core interest and common concern of business, unites the associations of different industries and represents the business world in the world stage. 2

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Why is WEO? Under current world political and economic system, no entity or organization directly speaks for the business sector. All the architectures, facilities and organizations which aims to deal with international disputes are composed of countries, which unavoidably makes business a counter of exchange and tradeoff of political interests. An enterprise may benefit from one treaty but at the same time, be the loser or victim in other dozens of treaties and agreements. Some powerful political leaders have already realized the world need changes especially when the biggest, most complex and most delicate economic challenge burst out. Not long ago, Sarkozy, Merkel and Blair convened in Paris discussing “New World, New Capitalism”, and propose a new institutional arrangement for economic activities – global 'economic security' council – a attempt to challenge the status quo that the global economy is dominated by U.S1. However, they once again follow the hackneyed way of thinking. Within the framework of an architecture in which the state interest is still the top priority, the economic council can not get rid of the lack of efficiency and expertise. Actually, what is really in need is an effective, efficient and powerful organization which puts emphasis on the core interest of business and is able to make the voice of business world heard. On the basis that it holds a most comprehensive, accurate and latest understanding of the global business world, WEO will speak with one uniform voice and strive for the best interests.

What does WEO do? I. Provide Information: To Help Enterprises Integrate Resources and Facilitate Technological Progress Haier, the biggest Chinese appliance manufacturer, once was not able to enter North America market due to its poor brand popularity, the high tariff and other regulations of U.S. Meanwhile, though keeping far ahead of its rivals in domestic market share, it faces a problem of surplus production capacity. The management of Haier timely decided to establish a factory in U.S. and this strategy brought Haier Group closer to its potential customers and avoided the cost of shipping bulky appliances from China. Haier’s development clearly shows that making quick analyses, judgment and adjustment of production and operation according to the change of market condition and policy is crucial in modern times. For the multinational corporations, enhancing or even rebuilding their ability of swiftly adjusting their production distribution and structure is a must. That is to say, to survive a world full of certainty, the adaptable capacity and especially, an awareness of building and forming adaptable capacity is a key, just like the ability of U.S. military force to put troops anywhere in the world and to adjust the deployment of troops, which is the most effective means ensuring that the interests of U.S. and its citizens are not infringed. And the specific industry association of WEO will provide professional information for the enterprises, help the 1

See Speech by Chancellor Angela Merkel at the Paris conference: “New World, New Capitalism”. Jan 2009. Pairs

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global headquarters and regional headquarters of them have a better command of the development trend of the industry and the conditions of their branches and the area in which the branch is located, thus better integrating their resources. Also, the associations of WEO will help identify and close technology gaps at different levels – within single enterprise, among upstream and downstream industries and among different industries, which will further accelerate the rational allocation of resources. II. Give Guidance and Support: To Help Enterprises Achieve Internationalization Shelley said: “if winter comes, can spring be far behind?” Spring is exactly not that far behind, but what if finding a spring elsewhere in face of a chilly water here? Definitely, What I want to put emphasis on here is the importance of internationalization. Just like the old saying goes, never put all eggs in the same basket, it is the same principle in business as dispersing risks. In this sense, companies and enterprises should be determined to explore and utilize the opportunities globally, and that is the very solution in dealing with the global uncertainty. As is explicitly shown by a map in 2009 World Development Report, the thicker the economic boundaries of countries, the lower degree of development and internationalization of its enterprises. On the contrary, the internationalization of the business will be conducive to dissolve economic boundaries.

Fig. Market access distinguishes world regions2

The WEO will give guidance to the enterprises in the investment, procurement and production – the whole process of internationalization and provide the most professional information, which is the most valuable to the enterprises. In the past two centuries, trade and migration is the most effective catalyst for the progress and maintaining of prosperity of developed countries3. Today, be it capital, people or even idea, the 2 3

World Development Report 2009. “Reshaping Economic Geography” L.S. Stavrianos (1998). A Global History: From Prehistory to the 21st Century. New Jersey: Prentice Hall.

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flow of all kinds of production factors plays a central role in economic development. The state, however, is now more inclined to extend its protecting hand over national concerns, secures their profits with public funds, protects its industries against takeovers by foreign companies and strengthens them in their struggle against international competitors. The WEO, in this respect, as a representative for the business world, will no doubt offer support. Currently, a debate over the Iceland crisis attracts much attention. In my opinion, however, the debate should be concentrated on when the new regulation is to be issued and will take effect instead of whether the deposit-taking business of the banks of some small European countries should be reevaluated or reconsidered since the problem of the game lies in the rule and supervision, not the player. So, the first thing to do should be revising the rules, but not dispelling the players. The professional suggestions given by WEO as a result of an evaluation of the condition will help those involved nations make decision in a more rational way, thus facilitating the dissolution of the economic boundaries.

III. Avoid the Intervention of Political Forces in Business Due to the close interlinking of the state and corporate interests, every economic conflict threatens to expand into a political conflict. The Russia-Ukraine gas conflict not only scrambles the strategic map of Europe but also had a symbolic consequence on the future development of world economy. However, were there such an international organization as a mediator, it would not be so easily for the political power to be involved. The argument will only focus on the gas deal and it won’t evolve to such a national dispute. In fact, the problem could not be simpler – Did Ukraine really touch Russia’s gas? An absence of related international mechanism provided the chance and room for intervention of political will. Obviously, a group of experts of gas association of WEO will give definite answer in several days. WEO will play its role in such cases.

Conclusion The world is at the crossroad now and it is impossible to go back4. What is plain is that the world has altered in its fundamentals and can never be the same again5. The U.S. financial system, once considered advanced and solid, may finally go to an end. At this crucial moment, we can only choose to unite to survive. It is no longer correct and reasonable for business world to always expect external aid in face of the ubiquitous uncertainties. Life-saving straws are not all the time there for you, and it might not be you who luckily get the straws even when it is available, which can be best illustrated by the example of Lehman Brother. As a result, a new and higher level of unity will pave the way for the business world to achieve sustainable development and to go through the uncertainties.

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Based on Martin Wolf (2009, Jan 7). Choices made in 2009 will shape the globe's destiny. Financial Times Inspired by Tony Blair’s speech at the 'New world, new capitalism' conference. 2009. Pairs.

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Gilbert Chen

Reference: 1.

Carmen Reinhart & Kenneth Rogoff (2008). The Aftermath of Financial Crises. Retrieved Jan 8, 2009, from http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf

2.

Thomas Friedman (2009, January 20). Radical in the White House. New York Times.

3.

Martin Wolf (2009, Jan 7). Choices Made in 2009 will Shape the Globe's Destiny. Financial Times.

4.

L. S. Stavrianos (1998). A Global History: From Prehistory to the 21st Century. New Jersey: Prentice Hall.

5.

Joseph Stiglitz (2002). Globalization and Its Discontents. New York: W. W. Norton & Company.

6.

Francis Fukuyama (1993). The End of History and the Last Man. London: Harper Perennial.

7.

Speech by Chancellor Angela Merkel at the Paris conference: “New World, New Capitalism”. Jan 8, 2009.

8.

World Development Report 2009. “Reshaping Economic Geography”.

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Gilbert Chen