How should we measure the winners?

The recent Olympics presented some interesting perspectives on competition: How do we find out who is actually winning? Is performance to be measured by wealth (medals), by leadership (Gold only) or by industry competitiveness (e.g. gymnastics)? Should the progress over time play a major role, or the number of winners as a proportion of population?

In business terms, the expression ‘competitiveness’ is viewed differently by different parties.  For example, for a firm, competitiveness means expansion, growth and profits. Whether any of these originate in or outside of a ‘home’ country plays a secondary role. When governments assess the competitiveness issue, the search is for employment growth, wide income distribution and tax revenue, and location is important for all of them. Individuals, in turn, think mainly about whether or not they will keep their jobs and have their standard of living increase. For them, location is not just one thing, it is the only thing.

Sport contests reflect capability, enjoyment and the creation of goodwill, but there are other facets as well. Performance on the sports field can affect and even transform the national spirit. It is hard to forget the national triumphant feeling in the United States in 1980 when the U.S. ice hockey team beat the Soviet Union in the same year the Soviets invaded Afghanistan.

International sports performance can also be a political gesture and a test of national virtue. For example, four decades ago when President Richard Nixon and the U.S. ping pong team visited China, the US-Sino relationship was officially established. At that time, China was considered an emerging economy and a Chinese excellence in a rather narrow sport was not seen as significant.  Now, although the U.S. is still the largest economy in the world, China is catching up and China’s teams receive global attention.  Its economy is the second largest in the world and its market is the U.S.’s third largest export destination, after Canada and Mexico.

The composition of trade between the two countries, just like the composition of the winning teams at the Olympics, has changed and demonstrated that the two economies have become more integrated than expected.  In fact, China is the only nation which imports U.S. products at the level President Obama envisioned in 2009 when he postulated that U.S. exports should double in five years. U.S. top exports to China are some agricultural crops, but also electronic and mechanical appliances, chemicals, and transportation equipment such as automobiles and airplanes. China is now General Motors’ most important market.

When China imports those manufactured goods, it assembles them and then ships them to other markets around the world, including to the U.S. market. If China’s exports drop, the demand for U.S. goods will also drop, leading to a slower growth of U.S. exports (just like the participation of fewer athletes in the Olympics makes for less interesting games).

Rule changes also have a great effect on competition. In the Olympics, the definition of what constitutes an ‘amateur’ has changed over time and has led to an increase in the number of full time athletes and to an improvement in individual performance. Similarly, what counts as a performance enhancing drug matters a lot and can lead to the disqualification of athletes. The business equivalent here is the value of the Chinese currency. Even though the Renminbi has depreciated in the last few months, many see the currency value as a determinant of Chinese competitiveness and therefore a primary issue that needs to be changed.  Similarly, export control systems in both countries take on a growing role and sometimes even appear to play out in a “tit-for-tat” game. For example, when the U.S. curbs high-tech product exports to China, China limits its rare earth exports in return. Just when the two economies are becoming deeply integrated, the US-China relationship is fraying, says former secretary of the treasury Henry Paulson, Jr.

It seems that policy decisions were more easily made when China was still a third-world country and the U.S.’s leading position was not challenged. With China moving up the scale economically and politically, there is the temptation to view China as a potential threat and adversary. However, just like the Olympic rivalry for medals, the issue to argue over should not be who has the largest overall GDP, or who exports more to whom. The world economy is becoming increasingly integrated, and we should not look for development and leadership in all fields, but rather in fields of specific capabilities and advantages.  Just as with the Olympic Games, it doesn’t matter who wins the largest number of medals; what matters is that preparation and training, competitive encounters, and excellence can lead to a more inspired and better world.

 

*by Professor Michael Czinkota and Eva Y. Tang from Georgetown University.

 

 

Economic Lessons from the Olympics

As the Olympics deliver another sports highlight to the world, some Americans remain highly irate with the uniforms worn by the U.S. team. The reason: the team uniforms are made in China. One senior U.S. senator suggested piling up the uniforms and burning them. Some are even trying to use this controversy against presidential candidate Mitt Romney, due to his leadership of the 2002 Winter Olympics. In response to this public relations debacle, Ralph Lauren, a design icon in the U.S., has already firmly committed that uniform production for the 2014 Winter Olympic game will take place on U.S. soil. Before we sweep this controversy under the rug, however, here are a few thoughts on the importance of the Olympics for economic thinking.

First off, there are also others who voice discontent about their national Olympic outfits. The British public, host of the games, complains about its uniforms designed by Stella MaCartney. They believe that there is not enough red in the uniforms, which therefore do not seem to sufficiently reflect the national colors of the U.K. Second, it almost seems as if the debate over the labels on the uniforms draws more attention than the actual preparation of team USA or the London games themselves. Shouldn’t the essence of the Olympics lie in the performance of the athletes from around the world competing with each other to excel by fulfilling the Olympic motto: “Citius, Altius, Fortius” (Faster, Higher, and Stronger). There is no part of the motto calling for ‘domesticus’ or ‘pulcher’. One could well argue that attention should mainly be focused on the performance of the athletes, rather than how they look during the opening ceremony. Furthermore, the real performance is not delivered in dress uniforms, but rather in the swim suits or leotards made wet and sweaty by competition.

If there were to be a debate, the quality of the uniforms rather than the source of production should receive public attention. The Olympics are all about effectiveness and efficiency. The economic argument should focus on a cost benefit analysis of those uniforms. Does the outsourcing of stitching tasks to China lower the costs, and how does such international procurement affect quality?  There is no need for a patriotic argument here, but rather the simple exploration of whether the team gets what has been paid for. If there has to be some flag waiving about Olympic clothes, then it might be during the entrance of the Chinese team,  since  its national basketball team and six other Chinese sports teams will compete in outfits featuring the swoosh of Nike, a U.S. owned-brand.

The current debate over the Olympic clothes reflects much bigger issues such as the upcoming U.S. presidential campaign and the subsequent formulation of national policy, but also the future direction of all major economies around the world. How should one deal with and respond to international competition both in terms of process and activity? We all like to win, but the Olympics indicate that we should be willing to let everyone put up their best efforts and honor the highest performers. Typically, we prefer that participants on national teams are domestic citizens. But for special athletes (or products), outsourcing seems to be acceptable, yet touches a nerve if domestic conditions are problematic.

Comments made by some politicians about the Olympics and about the economy may sound silly and outrageous; but just like other outsourcing kerfuffles in the past, their true meaning ought to be taken with a grain of salt, and seen as the vote catching lamentations which they are. For both an economy and the Olympics, it seems unlikely that thoughtful leaders would ignore the value of designs and innovations in favor of low-value added sewing and stitching. After all, outsourcing low value manufacturing provides consumers in wealthy nations with low price products, particularly valuable to low income segments. We should also remember that as originators of the Games, (and of the word ‘economy’) the Greeks get to be first in presenting their flag during the opening march, but when it comes to performance, they are on equal footing with all other nations.  Economies also need to refresh their innovation every day.

Right after the opening ceremony, the impact of the dress uniform’s origin will begin to fade. It deserves perhaps mention that the Olympic Game athletes of yore were competing in the buff, which reinforces that it is the context and performance that matter, rather than the clothes. With the athletic performances the Olympic athletes do set an economic example for all of us: We need to embrace change, observe the best, and learn from all for future improvements.  The clothes may differ, but the competition continues.

By Michael Czinkota and Jiashan Cui

Professor Czinkota and research assistant Cui work at Georgetown University, McDonough School of Business. Blog: michaelczinkota.com

What Would Obama Do?


As mentioned in What Democrats and Republicans are Forgetting in 2012, there is a key issue that seems to be on the back burner in the current presidential election.

President Obama’s initiative to reorganize the government’s trade functions seems like a good first step. The Objective is to “streamline” government services by merging several agencies under a new department charged with overseeing trade and investment, and economic development.

Three of the agencies targeted were created a half century ago with distinct mandates.
1. The Export-Import Bank –
2. The Overseas Private Investment Corporation (OPIC)
3. U.S. Trade and Development Administration (TDA)
The Export-Import Bank was established in 1952 to help Russia enter U.S. markets, has evolved as a mmajor provider of financial assistance (mostly loan guarantees) to American companies exporting goods and services.Both the OPIC and TDA were set up withing the State Department to leverage U.S. investments to help the economies of developing countries.

For U. S. exporters, these are the critical agencies.  They provide the financial assistance, loan guarantees, risk insurance, feasibility studies and other services that are essential. Other countries are far more generous in supporting their industries in pursuit of foreign markets, often placing U. S. companies at a disadvantage.

The two other agencies to be merged are:
1. The Small Business Administration (SBA)
2. U. S. Trade Representative (USTR).
The SBA brings value in that it has regional offices that could more readily make available export services to U. S. companies. Yet, the idea of merging USTR with other agencies has already drawn heavy criticism from the trade community and Capitol Hill, and for good reason.  USTRs activity is international in its outlook and mission.  Its mandate is to conduct trade negotiations and convince trading partners to comply with laws and preferences, and represent the U. S. at the World Trade Organization.  This relatively small office should not be bureaucratized if it is to maintain its independence and credibility, domestically and internationally.

From “Don’t Kill Commerce”
By Don Bonker and Michael Czinkota

What are Republicans and Democrats Forgetting in 2012?

2012 Presidential Election
Dominant Issue: Creating jobs and growing the economy
Republican party stance: Championing tax cuts, deregulation and elimination of
government agencies
Democratic party stance: More Federal spending, as highlighted by Obama
Administration’s stimulus package

What Are They Forgetting?

They are forgetting that the determinants of our economic well-being today are as much international as they are domestic. 

“Neither side is addressing the key issue, the formidable challenges confronting America in today’s global economy. If candidates continue to ignore this reality, it is unlikely we will find our way out of this economic slump and create those jobs being touted by all the candidates running for president.”

From “Don’t Kill Commerce”
By Don Bonker and Michael Czinkota

American Marketing Association (AMA) Global Marketing Special Interest Group 2012 Conference Program

  Conference Co-Chairs and Program Co-Editors:

      Michael R. Czinkota        and       Andreas Pinkwart

Georgetown University                      HHL Leipzig

Here’s the Program for the American Marketing Association (AMA) Global Marketing Special Interest Group (SIG) 2012 Conference at Cancun, Mexico from March 29 to April 1, 2012. The conference theme is: “International Marketing and Entrepreneurship: From Theory to Practice”

Click Here to View- AMA SIG 2012 Conference Program

For more information about the conference, kindly visit: www.amaglobalsig.msu.edu