ARKANSAS BUSINESS ON THE INTERNATIONAL STAGE - Anna McDonald Capstone Project

A RK AN S A S B U S I N E SS

O N THE INTERNATIONAL STAGE

C O N T EN T S 4-7 Globalization

8-9 Stephens

10-11 Walmart

12-13 Tyson

14-15 Riceland

16-17 French Hill Feature

18-19 The Future of Arkansas Business

O V ER V I EW When people think of Arkansas businesses, they often neglect the extent to which these groups impact the global economy. Arkansas is home to 6 Fortune 500 companies that champion the economic growth of their home state.

Beyond these, smaller corporations are actively working to mold the international trade network within their individual sectors. Arkansas offers an abundance of natural resources that is met with a talented group of leaders seeking opportunity. When capitalized on correctly, a unique platform for success can be created. I am passionate about learning about the way that leaders and organizations from my home state chose to navigate the business world. In an effort to explore this, this thesis will be an analysis of how Arkansas corporations extend their influence on the global trade network.

FOUNDATIONS OF GLOBALIZATION

Globalization is the growing interdependence of nations on one another. The purpose of it is to promote a more universally involved world and to allow countries to rely on the exports of each other so that not every nation has to produce every good that its residents demand. Simply put, the goal of the nations involved in globalization is to export the most goods so that they have the most profitable trade experiences. They can also leverage these trade agreements for political gain and an upper hand in international conflicts.

Most historians date globalization back to 1492 which was shortly after Columbus’ exploration of the Americans.

The largest world actors decided that they would trade with one another in order to achieve their individual economic goals and promote material success for each of their homelands. The trend stands today as modern authorities are continuing to assert their dominance through the development of strong economic entities that can fortify nations’ security and growth. In order for globalization to work correctly in the free market economy that Americans enjoy, individual corporations have to expand to serve not only domestic but also international customers. The expansion of local companies can contribute to the creation of new job opportunities both at home and abroad. Another point to consider is the idea that globalization is fostered through free trade. With political conflict bringing the introduction of trade agreements and restrictions, globalization gets entirely more complex. Because national leaders have to prioritize security and peace, they are often forced to make economic sacrifices to gain the protection of larger nations and world powers. In addition to this dilemma, critics of globalization often illuminate the depravity that globalization creates. In most instances, the larger nations benefit from globalization while the less developed countries are left providing cheap labor and being excluded from the profits that the large international corporations turn. Simply put, the wealth that

is created and achieved is not spread equally among the nations. This means that countries like the United States, Russia, and China are able to successfully trade while smaller countries like Comoros or Cambodia suffer exploitation of labor and less accessible trade opportunities. The less developed countries and corporations lack the resources to compete with the large nations making it almost impossible to close the gap. Generally speaking, small or family owned businesses suffer while large western companies flourish in the process of globalization. Another facet economists often bring up is how increased competition within global markets has put several nations out of the ability to market certain products. This is not limited to less developed countries.

Rather, it bleeds into even the most wealthy nations.

For example, United States textile mills went virtually extinct when Americans were able to outsource textile production from nations that could produce these items at a fraction of the domestic cost. Mexico also lost most of its corn industry due to the ability to trade with the United States, China and Brazil. This facet is not innately positive or negative. Instead, it is more of a give and take where countries and corporations have to decide where they will profit the most and also how important it is to produce and purchase goods domestically (Fernando).

When analyzing international business, trade, or politics, it is important to consider the governing bodies that mandate these affairs. Actors are entities that are involved in international relations. They can be state or non-state actors and these entities enact the change that is necessary to keep the world moving forward. This change, however, is not always towards a more peaceful and egalitarian world. The change can be to push one actor’s agenda or to maintain temporary peace. This change can be used to leverage groups of people or to harm one’s enemies. One of the largest and most influential groups that works towards

Globalization is the growing interdependence of nations on one another. The purpose of it is to promote a more universally involved world and to allow countries to rely on the exports of each other so that not every nation has to produce every good that its residents demand.

maintaining and stabilizing peace across many of the world’s divisions is the World Trade Organization (WTO). The World Trade Organization describes themselves as “a place where member governments try to sort out the trade problems they face with each other” (What is the WTO). They are a group started in Geneva, Switzerland in 1995. The organization facilitates trade and economic growth. They are a key player in the process of globalization because they encourage free trade between countries and they are motivated by making nations more interdependent on one another. They are committed to service through the administration of trade agreements and the handling of trade disputes. The WTO is responsible for representing 98 percent of the world’s trade activity. This makes them essential to the development of interdependence of world nations through the increase of trade networks (What is the WTO).

In their thesis entitled, Power in International Politics, authors Michael Barnett and Raymond Duvall explore the nuances of influence and control in world events. The scholars contend that the best approach to holding power on the international playing field is by building a “framework.”

They chose this word to illustrate the complex facets of international power. In order to maximize influence, actors must consider the diverse forms of power. Barnett and Duvall define power as “the production, in and through social relations, of effects that shape the capacities of actors to determine their circumstances and fate.” Power can be used to negotiate agreements and push the agendas of the nations that hold it. This process is performed by national leaders, politicians and lawmakers. Barnett and Duvall explain that there are four types of power: “compulsory, institutional, structural, and productive.” Compulsory power is an actor’s direct control over a person or group of people. As a result of the one-to-one approach, compulsory power is arguably the most accessible of the four power distinctions. Institutional power uses an actor’s influence to affect another person or group of people through societal changes. Because of this, institutional power can be an extremely useful tool because of the relatively permanent change it can bring. Structural power is similar to institutional because it employs societal changes, usually through legislature, to bring about desired change.

Structural power often requires the backing of community members so that legislature can be passed. Lastly, productive power is the use of changing social constructs to enact change. It draws upon individuals who feel morally aligned with the issue at hand to rise up and call for community change. I would argue that the most important piece to note is that while the four types are competing, they are also intricately intertwined in the most successful power ventures.

In a productive and successful extension of power, one of the four pillars can not stand without the other three (Barnett

and Duvall). Understanding power and its complexities is essential to having a holistic understanding of Arkansas’ influence on the international economy. It also adds a greater appreciation for the work Arkansans are able to do because they can extend such a large spectrum of control relative to the size and physical restrictions of the state.

In an article written for Forbes Magazine, author Mike Collins addresses the pros and cons of globalization. Because understanding the drawbacks and positives of globalization is essential for considering the role of Arkansas businesses in the international realm, one must first research a more concrete perspective on who the process helps and who suffers from world interdependence. Broadly speaking, large corporations such as Apple, Google, and Amazon thrive in the sphere of globalization. Publicly traded, wall street companies benefit from the exposure and diversity that world interdependence offers. They are able to market their products across the globe and outsource labor. They make their products at a lower cost and can sell them at a higher price because of the increase in demand worldwide. Their numbers climb annually, but this could be because of the decline of small businesses within each country around the world. Developing nations see larger numbers of employment opportunities, but their citizens often face tragic workplace standards and exploitation. Some scholars, including Collins, argue that globalization brought industrialization out of America. They support this by speaking on the American car factories that are now in Mexico, the textile industry that has moved out of the Northeast United States and into China, and numerous other factories that disappeared after the Free Trade Agreement. Because labor was cheaper to outsource, American business owners scrambled to find places where they could find laborers that would turn them the largest profit margins. This was detrimental to many blue collar workers in America and other nations around the world. One development that sprung out of globalization is the increased fluidity of cultures and values we can now experience. With the increased interdependence of groups through trade came the sharing of ideals, fashion, literature, art, and so many other cultural facets. I would contend that this was a step in the right direction towards a more peaceful world.

Because the best and most productive conversations and relationships stem from a genuine investment in the values and understandings of the other participant, the influx in this should continue to move the world in a more peacefully progresssive direction. Collins argues that we are moving towards a system of world power where countries have similar goals and interests. He says that in the future, people will be more inclined to work together to achieve those goals and pursue their similar interests. The world is always changing, but it remains imperfect and its citizens remain imperfect. This

will stand in the way of a “one-world” type of society. In theory, free trade was designed to support people of all nationalities and ethnicities because of the accessibility to employment as well as goods from a diverse range of distributors. However, the UN Development Program reports that the most wealthy 20 percent of the world’s population consume 86 percent of the world’s resources. This means that the poorest 80 percent of the world’s population consume merely 14 percent of the

world’s resources. This wealth disparity is a humanitarian tragedy. This issue can be viewed two ways. Either the process of globalization prolongs this wealth disparity and contributes to a greater surplus for the richest 20 percent of the world, or it is a useful tool for closing this gap that has not yet been able to reach its maximum potential. In a recent study done where the Gini coefficient, which measures income disparity, was plotted against the KOF index, which measures the rate of globalization for various countries, it was found that globalization contributes to the world’s overall income inequality. Because of the growing rate of globalization, the income disparity rate within the involved countries was increasing rapidly (Muhammed, Syed, et al).

World economists should consider this research as they make decisions regarding the trend towards globalization. These world leaders hold the authority to alter the course of history and the distribution of wealth across several world nations.

An additional danger of globalization is the increased spread of diseases that free trade has brought. Collins argues that HIV and AIDS could have been better contained if trade would have been minimized. I can see where this could be true in part, however, travel was still present and there is no true way to isolate nations from one another. There was also a lag in the spread of information surrounding the HIV and AIDS crisis. As a whole, I think that the spread of

diseases is not distinctly a result of trade or travel. People are always going to interact with others and there is no way to contain a disease to one location with the presence of so many transportational and technological advancements. A major moral crisis found when evaluating globalization is the presence of labor exploitation. With an outsourcing of labor available to large companies such as Apple or Microsoft comes an opportunity to employ children or other people that they can underpay because of their immediate needs.

The people working under these conditions suffer increased health issues without any insurance or employee benefits.

The employees are often overworked without proper access to nutritional meals or meals at all. Pregnant women are forced to work long hours which have proven to both lead to increased stress levels and health risks for their unborn children. This creates extremely large profit margins for large companies, while individuals suffer greatly. American globalization advocates and nonsupporters alike are able to agree on the corruption that several nations are conducting.

Politicians, business leaders, and citizens are all calling for the correction of these issues. Collins says that as many as seven of the United States’ trade partners manipulate their local currency in order to gain economic power. He argues that this is a danger to both the security of American currency and American trade policy. The most effective way to ensure that all International trade transactions are secure and fair is through the trade laws established by the World Trade Organization. Collins contends that the proof of China’s disobedience of several trade laws has been one of the largest issues economists have found within the current international market. These regulations need to be implemented so that individuals and businesses feel confident in the agreements they take part in. Without being enforced, these laws and restrictions will lose their authority and credibility. The importance of this authority goes beyond clout and esteem because of the World Trade Organization’s involvement in keeping peace between nations. They are an essential world entity that has proven their worth in the world of trade and negotiation (Collins).

In order to understand the proceedings of globalization, one must consider how international law is upheld. One of the most important pieces to note is how different international law is from American domestic law. This is mostly because of the way they are enforced. For example, in the United States, we have both the federal government and the state government to preside over American law and see to it that laws are enforced properly. In contrast to this, international law lacks a supreme governing authority or international organization that can enforce it. There have been several instances where individual nations have passed plans or laws that pertain to the rest of the world, yet they never see

these come to fruition because they have no way to enforce them in other parts of the world. They are left to force or intimidation factors to try and show their world dominance which can be problematic or most of the time ineffective. An example of an unsuccessful international venture of this type would be when the United Nations Security Council passes legislation allowing the enforcement of one entity’s agenda, but the entity lacks the financial resources (such as troops or weapons) to implement this enforcement (International Law).

Within the sphere International trade, politics, and power, there is a balance to maintain to promote freedom and fairness. Because there is no overarching body that enforces the laws made in treaties, nations experience the freedom to handle matters in the way that they best see fit. On the other hand, they have to provide their own protection and economic plans in order to ensure that their goals are met and their citizens are safe. These state and non state actors are given the responsibility to take measures upon themselves and achieve the change they desire. In order for this to happen, they are required to prioritize the things that are essential to their group and think creatively to see these happen. For example, there are three primary tactics that actors, both state and non state, use in order to accomplish their group’s goals: reciprocity, collective action, and shaming.

Reciprocity makes nations fear that if they act in a certain way that the other nation will do the same. The reverse is also true meaning that if a nation fails to do something the other entity will omit the same actions causing a possible lag in productivity. This is possibly the greatest tactic because of how effective it has proven to be. An example of this would be the tension between Russia, the United States, and China with the introduction of nuclear weapons. Arguably the reason none of these nations have used their nuclear weapons is for fear that they would receive the same deadly attacks. Another more common example of reciprocity is how in war, if one nation kills the other’s prisoners, the opposing nation will also kill that nation’s prisoners. As a result, both parties refrain. Collective action, however, is where multiple actors that agree on the same issue band together to make sure that their agenda is enforced. This group mentality can be effective in intimidating smaller groups or individual countries. An example of collective action in the real world would be when the United Nations imposed joint sanctions on South Africa in order to stop the apartheid. The issue that resides with collective action is that it requires several nations to agree on the importance and implementation of the same issues. This has proven to be a stumbling block on several occasions. Another tactic nations have adopted is shaming.

Shaming is particularly useful when it is employed surrounding an issue of human rights. It is where nations threaten to call others out on their behavior publically. Shaming can threaten

the reputation of state and non state actors to the watching world. All three of these tactics are used differently and to serve different purposes (How is International Law Enforced).

An important group to follow is the International Court of Justice. They are a division of the United Nations that helps mediate legal conflicts between states. There are fifteen justices that serve on the International Court of Justice. They work through the legal conflicts from a moral and just point of view. Their work is to promote peace and the welfare of world citizens which charges them to eliminate the biases of any national agenda they may be inclined to promote. While this seems like an impossible task, it is essential to preserving justice amongst large world powers. The UN charter set a precedent to “establish conditions under which justice and respect for the obligations arising from treaties and other sources of international law can be maintained” (Uphold International Law). They hold a unique position of authority because they are not affiliated with any state or non state actors outside of the United Nations. They are called to a different kind of service because the council is designed to serve a larger world and not just a single nation. Smaller courts and tribunals within the International Court of Justice can be held for smaller issues, while larger world trade issues are brought to the court in its entirety (Uphold International Law).

In conclusion, the world of international relations is extremely complex. The facets are endless, but they each used to leverage the agendas of individual nations.

When considering the economic involvement of a nation, it is important to understand the global picture. I hope that this thesis will increase your understanding of global issues within Arkansas economics and broaden your horizons to consider a diverse world around you.

STEPHENS INC.

S

tephens Inc. is a privately held financial services firm that works in the spheres of investment banking, research, wealth management, public finance, and insurance brokerage. They are headquartered in Little Rock, Arkansas. In addition to their headquarters, they have 28 offices across the United States and branches in London, UK and Frankfurt, DE. Their influence has been recognized across the world because of their involvement in trade and financial services in the United States and beyond.

This year, I interviewed Stan Payne, the Senior Vice President of the insurance division at Stephens. He works to help ensure large corporate customers have access to proper insurance representation. He spoke to the idea that Arkansas is a largely rural state meaning that it has a multitude of natural resources, but it is limited in the business realm by the lack of urban development. Payne argued that Stephens is unique because they are not limited to the borders of the state of Arkansas. Instead, executives at Stephens have leveraged their connections across the United States and overseas to reach critical mass. This allows the company to work within the benefits of Arkansas while reaching a more broad client base.

The future of Stephens Inc. according to Payne is bright. He says that the company has continuous plans for growth and investment in its home state. He says that Stephens will continue to foster economic development within Arkansas and internationally.

AT A GLANCE:

$120

Billion in investment banking transactions

50 400

Companies covered by research

1,200 28

Portfollio Companies

Locations

Employees

B U S INESS I N B EN T O N V IL L E

T

he first Walmart store was opened by Sam Walton on July 2, 1962, in Rogers, Arkansas. Shortly after, in 1970, the company went national. At the same time, Walmart became publicly traded. Distribution centers were set up around the country with the first one being in Bentonville, Arkansas in 1971. In 1991, Walmart went global by opening its first Sam’s Club in Mexico City. In just 29 years, the company went from a small single location to a global, publicly-traded company. Just six years later, Walmart saw its first $100 billion sales year. Walmart, Sam’s Club, and the Walmart Foundation continue to expand international horizons for Arkansas. Walmart requires each retailer they do business with to hold a headquarters in Arkansas. This has helped the development of Northwest Arkansas and has allowed Arkansas business to expand.

AT A GLANCE:

2.2

265

Million Customers Worldwide

11,400 55

Stores Worldwide

Store Names

$524 26

Million Employed Worldwide

Countries

Billion in 2020

T

TYS O N F O O D S

yson Foods was started in the 1930s in Springdale, Arkansas by John W. Tyson. The company grew as the consumer demand grew in WWII when there were no rations placed on poultry. The real change, however, happened in 1963 when John’s son, Don Tyson, took the company public.

By 1989, Tyson Foods became the largest producer, processor, and marketer of poultry-based foods in the world. Since then, they have continued to expand both within Arkansas and beyond in order to reach an entire world of consumers.

They now have operations in four countries worldwide and have reached hundreds of communities within the foodservice industry. Tyson is a great example of a familyowned and operated Arkansas business that has capitalized on both the resources and community within the state.

AT A GLANCE:

$43.2 1/5

of US poultry is supplied by Tyson Foods

141,000 $6

Billion in sales in 2019

Employees

Billion in international sales

90

Million pounds of protein donated to local food banks

R

RIC ELA N D FO O D S

iceland Foods was started in 1921 with its headquarters in Stuttgart, Arkansas. The company was started by a collection of farmers following World War I. When the market price of rice dropped drastically, the group banded together to get the highest prices for their labor and increase the consumer demand for rice both in Arkansas and beyond.

Now, Riceland is the world’s largest miller and marketer of rice and one of the MidSouth’s major soybean processors. Generations of Riceland farmers have planted, cultivated, and harvested rice that continues to support the Arkansas economy.

The company and its farmers continue to innovate ways to grow and produce rice more efficiently. Riceland also markets ways that rice can be used in order to promote healthy living for their customers. Riceland has also been included in several international trade agreements. For example, Iraq imports 90% of its rice from out of the country. Much of that rice is from Riceland Foods in Arkansas.

The United States government uses these trade agreements to leverage other deals and specifically oil trade agreements in the Middle East. Riceland Foods is a prime example of how Arkansas Business does not stop at the state’s borders. The extension of influence the company has is a result of the lush natural resources in the Arkansas Delta paired with the grit and determination of countless Arkansas farmers and economists.

AT A GLANCE:

5,500

Farmers in Arkansas and Missouri

60 $1.3

Billion in Annual Revenue

1,500 125

Foreign Countries Reached

Employees

Million Bushels of Grain Per Year

F U TURE OF B US IN ES S W ITH FRE N CH H IL L

S

hortly after his election in 2021, I spoke with Congressman French Hill. We talked about the way his career as both a small business employee and Arkansas Congressman has shaped his perspective on the involvement of Arkansas business in the international economy. Hill spoke about the natural resources the state has to offer and how those have “shaped the industries that successful ventures have taken place in.” He mentioned that Arkansas is the largest producer of both poultry and rice in the country. Another business the congressman highlighted was Fidelity Information Systems. He explained that FIS is the largest financial technology company in the world. As a result of their growth, thousands of jobs have come available in the state. In his words, the primary goal of Hill’s work in the sector of Arkansas economic development is to “grow local businesses with the resources and people we have within the state so that more people will be attracted to what the state has to offer.”

TH E FUTURE O F ARKANSAS B U SINESS

A

s Arkansans look to the future of Arkansas Business both within the state’s borders and beyond, they can be confident that growth is ahead.

With the combination of the state’s natural resources, strong community, and driven individuals, Arkansas Business is on the rise. Industry leaders like Tyson, Riceland, Stephens, and Walmart only scratch the surface of the economic growth happening right now in Arkansas. The opportunities for Arkansans in the world of business and technology are growing daily. With access to lush farmland, rich natural resources, rushing rivers, and a temperate climate, Arkansas is a center for exportation and production.

After spending a year studying the opportunities Arkansas has to offer, I am convinced that we have a state that is ready to be capitalized on. I hope that the next generation of Arkansans will be able to foster change and growth like so many before us.

Sam Walton, John W. Tyson, Jack Stephens, and the hardworking founding farmers of Riceland Foods all set a precedent for Arkansans. These brave people showed us that we can create success from the comfort of Arkansas and that we should be investing in the state that has invested in us. The future of Arkansas Business lies in our generation’s hands now.