America, Germany, and Hungary: A New Relationship

With the US Presidential Election coming up, along with so many other uncertainties, it is important now more than ever to look to what the future may hold. Those with insight towards a future that is still internationally connected increasingly important.

Interesting times bring continuous changes which in turn affect national linkages and alliances. A pre-eminent example is the relationship between the U.S., Germany, and Hungary.

Take the German domestic diversity. By comparison with the United States, Germans have had very limited exposure to Africans. Only after major migration waves does diversity permeate society more – yet there is very little official activity providing support to People of Color.

Take the use of words: the term ‘race’ in the German Constitution is seen, after more than 70 years, as troublesome, since it tends to imply discrimination. A substitution of the term is part of a major national debate instead of an ongoing threat from the Coronavirus. 

Of concern to the reader is the lack of public German encouragement for the “pursuit of happiness.” This admonition which is so aptly reflected in the American Declaration of Independence is of major significance. Citizens of Germany should acknowledge and accept   that directions for a citizen’s life path should not only consist of admonitions to work, but also include the opportunity for enjoyment, which the U.S. has in its “pursuit of happiness,” encoded in its Declaration of Independence. 

The U.S. has problems, some of them major ones. In consequence, Europeans, particularly Germans, hasten to draw conclusions about European superiority. The jocular aspects are so profound that, as one can discover, there is not even room for debate. The U.S. (and its President, government, policies, and ambassador) are said to be just plain wrong, that’s all there is to it – from a European, and particularly German perspective.

Statements about U.S. policy makes life disconcerted. For example,  President Trump announced the withdrawal of U.S. troops from Germany. Why exuberantly protect Germany with U.S. forces when a long promised 2 percent German contribution to its military budgets had not been delivered? There was an uproar in Germany designating Americans as derogatory merchants only preoccupied with money. No comparison was made to much earlier visits by  Ronald Reagan’s Secretary of the Treasury Jim Baker who, tin cup in hand traversed Europe with the slogan “feed, fund or fight,” thus stressing participation while giving every ally viable options. Even less was mentioned about commitments made and or kept. Nothing was heard about the fact that military payment of 2 percent of GDP represents an investment, not some wild and senseless expenditure.    

Fascinating are the intra-European comparisons of nations, many of which have found their orbit around Germany. Concessions in one field then trigger sacrifices in another. For example, in many German rankings, Poland is relatively low. However, their help in bringing in the German asparagus harvest works as an important redeeming factor. For many Germans the import of agricultural products has tended to be unimportant. However, after the renewed Covid-19 outburst in their key domestic butchering plant, procurement from abroad suddenly gained important priority. 

How do  these changes refurbish internal alliances? My bets are on Hungary. That country has, more often than not, hit rock bottom due to invasions but has always recouped, even though it sometimes did take much time. Some controversies surrounding Hungary exist.  Just the other day I overheard a German parliamentarian comment,  warning that some legislation would lead to Hungarian conditions in Germany. That did not appear in the friendly way of consuming kolbasz, Tokaji wine, or palinka, but rather a derogatory statement. Amazing it is, in light of many Hungarian Nobel prizes, toy, and machinery production. Also, one might not forget the 1989 opening of the Hungarian border to Germans by the Hungarian Foreign Secretary Gyula Horn who effectively set the stage for German unification.       

Hungarians have always in history experienced the friction of being caught  between East and West. Going back to the hordes of Mongols,  Huns, and even Austrians, the country has been decimated. Nonetheless, there was consistency in Hungary’s desire to adhere to the West of Europe. Nowadays, Hungary takes on repeated leadership positions when it comes to policy design and implementation. Itss management of immigration flows has, over time, been adapted by other European nations. Its acceptance of marketing principles for its society leaves much  room for other Europeans to learn. The pricing policies of stores and services continue to be reasonable. But whenever Hungary initiates an innovation, the rest of Europe claims to suffer. Credit for Hungarian progress is only rarely given. Almost similar to the United States now. 

 Over time, relationships change for both internal and external easons. Take the US/UK relations which were always categorized as a special linkage between the two countries. Yet, the relationship is not quite the same anymore, particularly since Britain has left the European Union. Germany has its own set of problems. Many of its policies no longer reflect a firm economic and policy friendship with the U.S. If Trump wins the upcoming election, and it results in a restructuring of U.S. alliances, my conclusion for Europe is a special relationship between the U.S. and Hungary. When relationships between nations have more to offer each other, they will result in actions that strengthen each nation’s competitiveness. 

This article was featured in the Sri Lanka Guardian and the Voice of Vienna.

Professor Michael Czinkota teaches International Business and Trade at Georgetown University. He has served as the U.S. Deputy Assistant Secretary of Commerce. His most recent textbook is International Business 9th edition. Professor Czinkota can be reached at czinkotm@georgetown.edu

Spargelzeit

In Germany, there is now an important season highlighting the special value of white asparagus. Anyone who visits Germany between April and June will certainly remember a truly national food specialty: white asparagus together with melted butter and ham.

German food culture is quite precise when it comes to timing. The Spargel season has been long established as a seasonal spring product from April to June. This is the framework outside of which it is considered inappropriate to consume white asparagus. One famous example is the consumption of white sausage (weißwurst) in Bavaria. Whether eaten at home or in a restaurant, a consumer of this sausage will be looked down upon for eating it once the noon Church bell has rung. 

One important deadline issue often surrounds the harvesting of asparagus. In the 2020 asparagus season, the white gold must be harvested, distributed, and consumed. All prepare for the season, but circumstances like healthcare problems can severely disrupt the harvest. The product was there, but the harvesters were not. To outrace the time of product availability, many efforts were undertaken. Since the season ends on June 24th, and all consumers and producers say goodbye to their favorite stalks, it is crucial to do the digging when the timing is good. This time around, the federal government was implored by asparagus farmers to help with the harvest. A major effort was made to attract volunteers among students and teachers to dig up the asparagus (which is why the vegetable is white rather than green). Alas, no success. In spite of good pay and substantial enthusiasm for agricultural processes, many of the “volunteers” did not return on day two of the exercise. The strain on the lower back was just too great. I sensed a major culinary conflict coming about: would good Germans miss out on one of their favorite foods just because academics were incapable servants of agriculture? What would come next in the cultural loss – perhaps the abandonment of the Leberknoedelsuppe (liver dumpling soup)? Or might it even be the sacrosanct Schweinshaxe (pork shank with Kraut)? For a time, German (particularly Bavarian) culinary choice was downtrodden. But the cuisine of asparagi was saved by the bell. 

In spite of overarching migration, of which one might have expected limits to the inflow of agricultural workers, a solution was found. 40,000 special work visas were issued for Polish workers. It is simply too risky to leave asparagus harvesting to the asparagus growers. We know the task must be completed. Politically, the issue is a crucial one because asparagus appears to contribute remarkably to German contentment. Let us not run afoul of national expectations, particularly since in Poland itself, domestic harvesters were standing ready and able to distribute the goods. Bureaucratic flexibility brought on the visitor visas. This year’s harvest of asparagus is again secure. If a country needs a helping hand, it can often be found outstretched in the international market. 

Polish workers are encouraged to use their forte while critical for the agricultural impact. Already at this time, new technologies like those produced in California and Hungary, may very well take over for harvesting by hand. But then, German asparagus may be too sacred to be conducted by machines. Time will tell.

This article was featured in Voice of Vienna.

Keywords: asparagus, weisswurst, leberknoedelsuppe, schweinshaxe, Bavaria, Hungary, California, harvest, agricultural technology, Poland

Cross-Cultural Markets and Market Research

This abstract is from the 15th chapter of the Handbook of Cross-Cultural Marketing, which is coauthored by Camille Schuster. It covers the importance of international market research and the extent to which markets should be studied prior to international expansion.

Managers and researchers often fail to comprehend cultural disparities, that customers differ between and within countries, or investigate whether or not a market exists prior to market entry. Insufficient preparation makes cross-cultural business a high-risk activity (Ricks, 2000). However challenging, cross-cultural market understanding is instrumental to success since it permits the firm to benefit from different environments, attitudes, and market conditions. Many firms do little research before entering a foreign market or pay little attention to the diversity of consumers in their home market. Managers often assume that the current methods used in their domestic market are both best and appropriate for all other markets and consumers. Major reasons why managers are reluctant to engage in cross-cultural research are the time, effort, and money required to understand market demand, differences in culture, and consumer tastes (Craig and Douglas, 1999). Despite such reservations, research is as important when doing business internationally as it is in the domestic market. Firms need to learn what consumers want, why they want it, and how they satisfy their wants and needs. Knowing who to ask, what to ask, and selecting the appropriate methodology to the task at hand are critical steps. Developing an understanding of international markets, consumers, competitors, and governments paves the way to success.

Dealing with Disruptive Dislocations

The third installment of pieces focusing on Coronavirus and its effects on international business, this piece compares currency risk sharing with Covid-19, offering a unique and interesting comparison to be found. Here we go:

The coronavirus disruption intensifies. Questions of human safety and business continuity reach far beyond lock-down orders. What can be done to manage the unexpected? Are there analogue situations of help, recourse and guidance? This commentary is based on some well-developed theories of international business, which might be usefully applied to COVID-19 transmissions. 

One virus comparison can come from currency risk management. COVID-19 is more deadly, but its frequency and strength vary at different times and locations. For currencies, companies share and trade off risk with their partners to reduce the effects of dislocations. A similar approach works for health care. Ventilators and testing capabilities may at one time be needed more in one region than in another. Together with hospital beds they can be shipped to hot spots. Even medical personnel can be transferred around the globe to cope with imbalances. When needs shift, return shipments can be administered fairly. 

Firms that continuously trade have ongoing economic currency exposure. Typically, such firms wish to maintain good relationships with their business partners. Good partners between suppliers and customers do not force all the currency risk of international transactions onto the business partner. Both currency and viral risks have a good portion of randomness to them. In the finance sector, risk-sharing agreements have proven to be useful under such conditions. 

Here is an example with companies A (American) and B (Israeli), both multinationals. If A continuously trades with B and pays in New Shekel, then major swings in currency values may cause one party to benefit at the expense of the other. Firms can address such a problem with currency management. 

Both companies could agree that all purchases by A will be made in Israeli New Shekel, as long as the currency value on the payment date (spot rate) remains between 0.25-0.3 New Shekel/$. Such range lets A agree to accept any currency exposure because it is paying in the foreign currency. If, however, the exchange rate falls outside of this range on the payment date, A and B will “share” the difference. If the spot rate is 0.35 New Shekel/$, then the Israeli currency would have depreciated. Because this rate would fall outside of the contractual range, a sharing arrangement would divide up the shift between the parties. Therefore, B loses 0.05 New Shekel/$, and A gains 0.05 New Shekel/$. Not ideal, but long-term preferable to each party absorbing its own full exchange rate impact. 

Such risk-sharing agreements have been in use for nearly 50 years in modern world markets. They became something of a rarity during the 1950s and 1960s when exchange rates were relatively stable under the Bretton-Woods Agreement. Firms with long term customer/supplier relationships across borders can now return to some old ways of keeping old friends. Since it synchronizes imbalances and eases adjustment intensities.

This article is featured in Voice of Vienna, Ovi Magazine, Sri Lanka Guardian, Korea Times, CEOWORLD Magazine, and New Straits Times.

International Data Need to Add Up

A useful analysis requires the understanding of data and a belief both in the data and their issuer. Companies, organizations, and scholars wary widely in their interpretation and use. International comparisons often differ substantially in data collection and quality control. This commentary eases comparisons of research across national borders. Here is an international perspective on research numbers, going beyond quantitative data aspects and embedding human warmth and insights. 

In an era of lengthy and diverse supply chains, investors need to transparently identify corporate action and its effect on the market place. Clear rules of origin are just like license plates. They identify ownership and assign responsibility. Labels cannot simply state “manufactured in the European Union.”

Information needs to be compatible across domains. For example, to compare medical information across nations, one has to segment patient differences by age, country, health patterns, variations in the access to medical care, prophylactic treatment, and pharmaceuticals.

Culture affects personal behavior. For example, research identified the wearing of face masks helpful to viral containment. In Asia, there was ongoing and rapid use of breathing masks. Particularly in wintertime, masks were encouraged both to protect oneself and others from contamination. No negative connotation is associated with the use of a mask. By contrast, in the United States, a mask reflects for many the existence of a medical problem by the wearer. In consequence, masks are not seen as protective but rather as an announcer of risk, which in turn negates their use. 

Social structure matters, particularly as it reflects differences in infrastructure and trust. Not all countries have the capability to fund and collect data within short time spans. The need to save face can then lead to the furnishing of poor data, delivered with elan. In consequence, ‘current’ information may really be old and may not even begin to alert users to important changes in one’s society or social conditions. 

Data work needs to recognize the emotional component of information. How will people feel about their direct exposure to hard and cold numbers alone? How can one systematically but honestly include emotions into one’s analysis? How to cope with self-fulfilling prophecies? What are the short –and long-term effects of optimism with data – particularly when insights can cover the entire range of a scale. For most people numbers are mere indicators of opportunities for action and change. 

Analyses and forecasts need to consider change. An evaluation based on the next quarter may reflect the next 25 years. Insufficient or incorrect reflection of change and innovation may lead to precariously wrong decisions. Imagine the decision-making process for countertrade, where the outcome and conclusion of an agreement may take decades.

Synchronicity is another important dimension. I am reminded of Ludwig Erhard, the second chancellor of the Federal Republic of Germany who was credited with Germany’s postwar “Wirtschaftswunder” or economic miracle. When Erhard concentrated expenditures on some sectors and called for a ‘tightening of belts’ for others, these steps were rapidly and fully implemented by government, firms, and society, leading to a powerful impact. The players actually cared.

On this dimension, President Trump will find his largest risk and opportunity. The coordinated development of a restructured economy accompanied by a synchronous response of all participants with their resources can turn into a wonderful economy that shakes off the problems of post coronavirus rebuilding like a duck shakes off water.   

Apart from human emotions, economic re-emergence requires measurement scales benefiting from recalibration and new benchmarks. For example, a scale measuring export controls which ranges from “no controls” to “tight controls” is only in part complete since it omits policy resulting from subsidies and voluntary restraints. Numbers are only snapshots of a current condition. These conditions are not frozen in salt, but they will change and with them their impact. In a dynamic and complex environment, even the efficacy of Aspirin benefits from review. 

Professor Michael Czinkota teaches International Marketing and Trade at the McDonough School of Business of Georgetown University. He served as Deputy Assistant Secretary for Trade Information and Analysis in the U.S. Department of Commerce in the Reagan and Bush Administrations.